Carr v Fischer - [2004] NSWSC 1079

CITATION: CARR & ANOR v FISCHER & ORS [2004] NSWSC 1079

HEARING DATE(S): 2nd, 4th, 5th and 6th December 2002; 3rd, 4th and 5th February 2003

JUDGMENT DATE:
16 November 2004

JUDGMENT OF: Levine J

DECISION: 1 I enter a verdict and judgment for the defendants; 2 The plaintiffs are to pay the defendants' costs; 3 The exhibits are to be retained for 28 days; in the event that an appeal is lodged in accordance with the Rules of Court, thereafter the exhibits will continue to be retained pending an order of the Court of Appeal or of this Court.

CATCHWORDS: Professional negligence - legal practitioners - terms of retainer - breach - causation - proof of loss - action fails

CASES CITED: Cadoks Pty Ltd v Wallace Westley & Vigar Pty Ltd [2000] VSC 167
Chappel v Hart (1998) 195 CLR 232
Commonwealth of Australia v Amann Aviation Pty Ltd (1992) 174 CLR 64
Hawkins v Clayton (1988) 164 CLR 539
Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR 41-687
Henville v Walker (2001) 206 CLR 459
Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 147 ALR 568
Mallesons Stephen Jaques v Trenorth Ltd [1999] 1 VR 727
March v Stramare Pty. Limited (1991) 171 CLR 506
Medlin v The State Government Insurance Commission (1995) 182 CLR 1
Trust Co of Australia v The Perpetual Trustees WA Ltd & Ors (1997) 42 NSWLR 237

PARTIES :

PETER JOSEPH CARR
(First plaintiff)
BOSTON HOLDINGS PTY LTD
ACN 056 658 934
(Second plaintiff)
v
JOHN HOWARD FISCHER,
NEIL JAMIESON,
JOHN DAVID WATTS,
GEOFFREY MARK ROBERSON
& JOHN JOSEPH COTTER
(Defendants)

FILE NUMBER(S): SC 20004 OF 2001

COUNSEL:
M Williams SC / P Maguire
(Plaintiffs)
P Greenwood SC / K Richardson
(Defendants)

SOLICITORS:
Wight & Strickland
(Plaintiffs)
Colin Biggers & Paisley
(Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

JUSTICE DAVID LEVINE

TUESDAY 16 NOVEMBER 2004
20004 OF 2001

PETER JOSEPH CARR
(First plaintiff)

BOSTON HOLDINGS PTY LTD
ACN 056 658 934
(Second plaintiff)

v
JOHN HOWARD FISCHER,
NEIL JAMIESON,
JOHN DAVID WATTS,
GEOFFREY MARK ROBERSON
& JOHN JOSEPH COTTER
(Defendants)

JUDGMENT (Professional negligence – legal practitioners – terms of retainer – breach – causation – proof of loss – action fails)

1 The plaintiffs claim damages from the defendants (a firm of solicitors) on the basis, so it is contended, that in carrying out work pursuant to a retainer they did so in breach thereof and negligently, causing substantial loss.

2 The theme of the litigation was exposed by Mr M L Williams SC for the plaintiffs on the first day when he opened in the following terms:

“Your Honour, this is a claim for damages by Mr Carr and his company against his former solicitors. There are three players, firstly, Mr Peter Carr who is a butcher by trade; secondly, Mr Jack Roberts, a bankrupt and a scoundrel; and thirdly, Mr Brian Hor, a solicitor employed by the defendants.”

3 It will be seen that essentially this case is about “people”. The person whom plaintiffs’ counsel asserted to be a scoundrel, Mr Jack Roberts, was called in that party’s case.

4 His evidence in chief was constituted by an affidavit, exhibit E, sworn 25 November 2002, about a week before the commencement of the hearing. Mr Roberts deposed to having been declared a bankrupt on 11 March 1993 and that he resided during the period of his bankruptcy, from which he was discharged on 20 May 1996, in Curl Curl. For the period 1996 to 1999 he describes himself as the “promoter” of the Fairfield Medical Arcade Pty Ltd Unit Trust, the Crescent Medical Centre Unit Trust and the Penrith Plaza Medical Centre Unit Trust. It was his ordinary business that he promoted these and “similar schemes”. He dealt with the first plaintiff and arranged for him through his company, the second plaintiff, to make various investments including investments in the Fairfield Medical Arcade Pty Ltd Unit Trust, the Crescent Medical Centre Unit Trust, Crescent Medical Centre Pty Ltd, the Penrith Plaza Medical Centre Unit Trust, South Western Sydney Day Surgery Centre Pty Ltd, Rapid Detox Centre Australasia Pty Ltd and the Private Health Group Pty Ltd.

5 At no time did he inform the first plaintiff that he had been bankrupt.

6 It became evident in cross-examination that Mr Roberts had been affected by a stroke he had recently suffered. He denied in cross-examination that he was a “scoundrel” as he had been described by Mr Williams SC for the plaintiffs. He was able to recognise exhibit 10, being the advertisement to which the first plaintiff responded and which he, Mr Roberts, had placed in the “Sydney Morning Herald” calling for investments. He remembered getting a call from Mr Carr but not what was discussed; he could not recall the first meeting but he did recall having dropped something off at Mr Carr’s home. His quality as a witness was exemplified by his inability to read the writing on what was exhibit 1.3, being a letter on Fairfield Medical Arcade Pty Ltd letterhead. He could not recall introducing his son, Russell, to Mr Carr.

7 He agreed that in 1999 he established a company called Private Health Group Pty Ltd and that the company was extensively involved in the medical centres at Fairfield and Penrith. He thought it was also involved with the Rapid Detox Centre. It was his intention to float that company (Private Health Group) on the stock exchange, though he could not recall any discussion he had on that subject with Mr Carr.

8 He could not assist the Court by agreeing that the Private Health Group had never gone into receivership nor into liquidation. He seemed to recall that Rapid Detox Centre Australasia Pty Ltd went into receivership and then into liquidation but that South Western Day Surgery Pty Ltd did not.

9 Up to the beginning of 2000 the Rapid Detox Centre had been a very prosperous business as had the Penrith Plaza Medical Centre and the Crescent Medical Centre at Fairfield. In June of 2000 receivers and managers were appointed in relation to the Crescent Medical Centre, Coastline Medical Pty Ltd, Fairfield Alternative Medicine Pty Ltd, Rapid Detox Centre Australasia Pty Ltd and Fairfield Medical Arcade Pty Ltd. Coastline Medical Pty Ltd was the trustee of the Penrith Plaza Medical Centre Unit Trust and Fairfield Alternative Medicine Pty Ltd was the owner of property utilised by the Rapid Detox Centre. As to this latter proposition the witness was uncertain and stated that he was getting confused at that point in his cross-examination. It became clear however that he was dissatisfied with steps taken, particularly by the National Australia Bank, in relation to the sale of certain properties and is participating in litigation against the bank and the receivers, Deloittes.

10 Mr Roberts agreed (in relation to what is disclosed in exhibit 5.5.6) that Private Health Group Pty Ltd entered into an agreement with a number of people who agreed to lend money to a company, Senbond, to purchase a property at Rose Tree, Eastwood. Private Health Group Pty Ltd agreed to provide a charge over its assets in return for those people having a mortgage over the property as well as the charge: this he could not recall. He could recall establishing Senbond in 1999. He agreed with matters of history, that he was a director of Senbond, had purchased property at Rose Tree, Eastwood and that Senbond went into receivership. He asserted in cross-examination by Mr Greenwood SC that he would have made every attempt to try to ensure that people were paid moneys that they were owed by way of deeds of arrangement. He agreed that he was determined not to continue to trade, after the five companies had gone into receivership, through Private Health Group; it was unable to trade because of the problem that cash flow had dried up completely. He could not recall the details of why it was that the National Australia Bank arranged for the appointment of receivers.

11 In the end I can say that Mr Roberts did not present, taking into account his recovery from a stroke, as the “scoundrel” as he was described in the opening address. He was unable to prove anything as between himself and Mr Carr, that is, on a basis of personal recollection and connection, and the other matters of history will attain whatever status is appropriate to them in the overall canvas of the evidence in this case.

12 There is no issue between the parties that from about 1967 the first plaintiff had retained and employed the defendants (hereinafter referred to as “Champions) as his solicitors for conveyancing transactions, the sale of his butchery business, the sale of an investment property at Parramatta and in relation to a franchise agreement with McDonalds Australia Pty Ltd. The last mentioned gave rise to litigation against McDonalds which was dealt with in the Federal Court of Australia. Burchett J, I assume by reason of agreement between the parties, considered the issue of liability as between the plaintiffs and McDonalds and resolved that in favour of the plaintiffs. Thereupon, the quantum of damages was the subject of a negotiated settlement which produced for the plaintiffs $2.2 million. It is the disposal of a substantial part of that amount that is the subject of these proceedings.

13 Exhibit A is made up of three statements made by Mr Carr, the first dated 17 July 2001, the second dated 15 May 2002 and the third, 2 December 2002, the first day of the hearing of the action.

14 The first statement deals with general background information, not least in some detail of the resolution of the litigation against McDonalds. On receipt of the settlement monies Mr Carr said that he had a conversation with Mr Roberson of the defendants, in relation to the investment of monies through an entity with which the defendants were apparently connected, namely IPAC. Certain information was given to the plaintiff about a possible return on an amount to be invested about which he was “not very excited”. He decided to take a year off and let his money sit in the St George Bank. In cross-examination the plaintiff struck me as being deficient in his recollection and indifferent as to substance if not detail when he was cross-examined on what became exhibit 1, namely what I will describe as the IPAC recommendations.

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”.

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 Limited 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 Limited 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.

31 Mr Carr swears as to reliance on the advice of Champions of 29 August 1996. In October 1996 Boston Holdings invested $200,000 into the Crescent Medical Centre to acquire a one third interest in the business of that Medical Centre which was operated by the Fairfield Medical Arcade Unit Trust.

32 In December 1996 Mr Carr said he was told by Mr Roberts that the property was valued at $1.2 million and on 11 December Boston Holdings invested another $100,000 into the Trust which took Boston Holdings’ total investment in the Trust to $400,000. It was Mr Carr’s belief that that amount amounted to one third of the value of the Trust property. He was provided with a document from Mr Roberts to that effect and that is annexure “H” to his first statement. That document is on Fairfield Medical Arcade Pty Ltd Unit Trust letterhead and states, “Received $100,000 from Boston Holdings bringing total share value to 33 1/3%”, signed J Roberts and is dated 11 December 1996.

33 In December 1996 Mr Carr said that he was receiving $5,000 approximately per month from the property.

34 In June of 1997 Jack Roberts asked the Mr Carr if he wanted to invest in the Penrith Plaza Medical Centre, Jack Roberts purportedly saying, “This is identical to the Fairfield Arcade Unit Trust, except that the property is leasehold, owned by Lend Lease, and the Penrith Plaza Medical Centre Unit Trust only runs the business of the Penrith Plaza Medical Centre”. Boston Holdings paid $150,000 to the Penrith Plaza Medical Centre Unit Trust in June, $150,000 on 1 July, and eventually received $9,000 per month in respect of the investments in the Penrith Plaza Medical Centre Unit Trust.

35 From 23 July 1997 Boston Holdings received approximately $4,400 per month and from 1 September 1997 this had increased to approximately $9,000 per month.

36 In February 1998 Jack Roberts informed Mr Carr, according to Mr Carr, that he had been approached by a doctor to establish a day surgery centre being the South Western Day Surgery Centre and had also been approached to establish a Rapid Detox Centre at Liverpool. Mr Roberts offered him ten per cent in both these Centres; they were two different entities. Boston Holdings invested $200,000 at the request of Jack Roberts on 3 December 1998 and a receipt is appended as annexure “A” to Mr Carr’s first statement.

37 In 1999, in August, as a result of conversations between Mr Roberts and Mr Carr in relation to the Big Bear Medical Centre at Neutral Bay and the flotation of an entity called the Private Health Group Pty Ltd, Boston Holdings paid $100,000 on 16 August.

38 In December 1999 monthly cheques due to Boston Holdings were not paid on presentation. An excuse given by Mr Roberts was to the effect that the money was placed in the wrong account and would be available soon. After December 1999 payments fell behind. A cheque for $40,000 was received in or about March 2000 with a request that it not be banked until he, Mr Roberts, had come to some arrangements.

39 On 3 June 2000 Mr Roberts telephoned Mr Carr to arrange a meeting at the Eastern Creek Raceway on which occasion Mr Roberts told Mr Carr that Receivers had been appointed to all the companies and “we have to sort out some way of getting them out”. An explanation given by Mr Roberts to Mr Carr for this situation was that he had had bank bills and the bank had always just rolled them over, but for some reason they had stopped.

40 Mr Carr then states that receivers and managers were appointed to the Crescent Medical Centre Pty Ltd, Coastline Medical Pty Ltd, Fairfield Alternative Medicine Pty Ltd, Rapid Detox Centre Australasia Pty Ltd and Fairfield Medical Arcade Pty Ltd. A report in relation thereto is attached to his statement.

41 Mr Carr then goes on to state all that he would have done or not done had the defendants complied with what is asserted to be the terms of their retainer.

42 In his second statement dated 15 May 2002 Mr Carr recalls a conversation some time in July in 1996 with Mr Hor to the effect that Mr Hor asked Mr Carr, “How old would you say Jack Roberts is?” to which the reply was, “He is an old man. I’d say he’s in his sixties”. Additionally he states further matters he would have done or would have done had there been compliance with the asserted retainer.

43 In his third statement dated 17 July 2001, prepared on the first day of the hearing, Mr Carr corrects some earlier statements, stating that upon his initial approach to Mr Roberts, Mr Roberts had said words to the effect that, “the guaranteed return is about 12% per annum”. He also states, on the first day of the hearing, 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”. Further, in the third statement, in relation to the meeting at the Eastern Creek Raceway, Mr Carr says that Jack Roberts gave him $10,000 in cash.

44 In paragraph 12 of his third statement Mr Carr states the following:

“I then spent some time trying to deal with the receivers of the various properties. In about August 2000 I went to see Geoffrey Roberson, of Champion Legal, at his office and I said to him words to the following effect:

‘Roberts has gone into receivership. I’ve since found out by reading the Trust Deed that my money was not protected and I suspect, although I’m not sure, that Jack Roberts was a bankrupt’.

I then showed Geoffrey Roberson the letter from Champion & Partners dated 29 August 1996. He appeared to read that letter and then said words to me to the following effect:

‘We’re gone. You’ll have to get another lawyer’

I said: ‘I’ve never dealt with another law firm. I don’t know any other lawyer’.

He said: ‘I recommend Matthews Folbigg’.”

45 The cross-examination of Mr Carr commenced:

“Q. Mr Carr, last week when a process server came to your home, did you tell him that if he came back you would blow his head off with a shotgun?

A. Yes”.

46 This and other matters of cognate character were in due course resolved by explanation as to fears of home invasion by reason of recent events in Mr Carr’s neighbourhood and the proffering of apologies if there had been any misunderstanding between Mr Carr and the solicitors for the defendants.

47 Mr Carr was cross-examined at some length in relation to IPAC (see exhibit 1.2), the investment advisory body with which the defendants were connected. In this regard I have no hesitation in finding that his rejection of the recommendation was informed and complete. The fact that he had received some information from that organisation plays no role in the case in terms of any perception that Mr Carr reasonably could have as to the expertise of the defendants as business advisers. On the contrary, in view of the steps taken by Mr Carr to leave the money in a bank and then make his first investment of $150,000 in response to a newspaper advertisement, it is eloquent of the reliance Mr Carr placed upon himself.

48 As to the first contact he had with Mr Roberts, Mr Carr remembered nothing, that is, the first telephone contact in answer to the advertisement. His memory then improved and the substance of the conversation was apparently that what was involved was a property for a medical centre, and Mr Roberts told Mr Carr about the sort of rents he would get from doctors and pathology companies and “things like this”. Mr Roberts apparently dropped a package off to Mr Carr’s home, the details of which were beyond Mr Carr’s recollection. He did recall “checking the property out”, making sure that it was the right property; he went there and saw that it was being fitted out and he was quite satisfied that it was going to become a medical centre and that it was not just a vacant property. As far as Mr Carr was able to give any evidence that purported to be in any way reliable on historical matters, he proceeded to inform me that he decided to buy $100,000 worth in the end so he bought four of the shares for $25,000 each; before that he had been told in a conversation that it was a unit trust and “my money was secured”. Again, he had seen the building and had seen the construction starting to happen in about April, he thought. He used to go down to the building “all the time” and have a look at it.

49 As I understand his testimony, the first time he met Mr Roberts was at a coffee shop in Penrith Plaza. Mr Roberts probably gave him some figures at the meeting; no other meetings could be recalled apart from one at the site and one at the coffee shop. There would have been others, however, according to Mr Carr because he was “investing some money in the property, and I was very interested in it”. As far as he could recall, the conversation about likely return was that Roberts had said, “you will be guaranteed probably a minimum of twelve per cent on it, maybe more, but that depends on the tenants”.

50 Interestingly, Mr Carr gave Mr Roberts $100,000 as a sign of his, that is, Mr Carr’s, good faith and to show Roberts that he was financially capable. He could not remember precisely the mechanism by which he gave the $100,000 to Mr Roberts. In any event, he did keep a document, setting out some months and sums, which became exhibit 9, which says something of Mr Carr’s record keeping, as to the amounts he paid over.

51 Mr Carr did however remember speaking to his accountant, Mr Yu, who had been his accountant since commencing in the butchery business twenty-five or so years previously, about the investment but before paying over in April the first $100,000. It appears that the second payment of $50,000 was made without further enquiry by Mr Carr about the investment and was made shortly before he went overseas. This was in May of 1996. It was his anticipation after making payments to Mr Roberts that the Fairfield Medical Arcade Unit Trust would be making payments by way of income thirty days after he gave him the money. How was the money to be paid? Mr Carr gave to Mr Roberts a deposit book for the banking account of Boston Holdings.

52 Mr Carr was cross-examined on the first contact he had with Mr Hor of the defendants, which was by telephone. He agreed that he had told Mr Hor, in this first contact by telephone, that he had invested money in the Fairfield Medical Arcade Unit Trust which was at 103 The Crescent, Fairfield, which was believed to be the address at the time. He had received certificates for his investments and had prior to 11 July received certificates relating to the investments of $100,000 and $50,000. He was asked whether he told Mr Hor that he put in sixteen per cent; there was a dispute about his recalling whether he told him that because in fact the correct figure was twelve per cent. He agreed that he had been offered the opportunity to make a larger investment and that he had been offered a position of director.

53 It was put to Mr Carr that he told Mr Hor on the telephone that he wanted him to undertake some work in relation to checking out the investment, “yes”; Jack Roberts was the “promoter” who had put in the same amount of money as Mr Carr. This was agreed to. Mr Carr gave Mr Hor details of Jack Roberts’ solicitors. In the telephone conversation Mr Carr agreed that he told Mr Hor that the opening date of the Centre was 29 July.

“to check out everything about the Trust, everything you possibly can”

“check the whole thing out”

“need to check (a) trust or not? (b) any searches can be done?”

“It is a bit hard to remember back over six years ago what happened at a fairly insignificant event, a telephone call”.

54 There then took place on the same day the interview between Mr Hor and Mr Carr. Mr Hor’s notes of that interview are exhibit 1.11. I turn now to the cross-examination of Mr Carr on this critical meeting with Mr Hor in the offices of the defendant on 11 July 1996.

55 Mr Carr agreed that he told Mr Hor that Boston Holdings Pty Ltd was his company; he did not remember telling him that the company held twelve per cent of the units in the Trust to the value of $150,000. He told him that the building was opposite the Fairfield railway station, was a two storey strata building, but did not remember telling him that the day before it had all been fitted out. He might have told Mr Hor that he had been overseas for the last two months. He did remember telling him that “The Crescent Medical Centre” was the business name. There was a dispute between the witness and counsel as to what Mr Carr told Mr Hor as to the rental situation. It was put to Mr Carr that he told Mr Hor that there were eight doctors paying a base rent of $60,000 each plus fifty per cent of gross turnover. Mr Carr did not think that that was right, proffering that it was a combined rent of $60,000. Mr Carr was trying to remember figures given to him by Mr Roberts and recorded on a piece of paper which he no longer had.

56 In any event, Mr Carr agreed telling Mr Hor about a doctor up the street moving into the Centre; that there was going to be manager running the whole show; that the total cost of buying and fitting out the building was $1.2 million; that the figure had been supplied to him by Mr Roberts; Mr Carr had seen no documentation to check that, “How could there have been any, it had not opened”, was his reaction to the proposition.

57 He agreed that he told Mr Hor that Jack Roberts had proposed to him, Mr Carr, that just the two of them would own the whole Trust, $650,000 each. He agreed that he asked Mr Hor to investigate whether Jack Roberts was a bankrupt. When asked whether he had asked Mr Hor to arrange for a company search to be done Mr Carr responded, and persisted in this kind of response, that it was not so much Mr Carr asking Mr Hor to do certain specified things, as was set out, as it turns out, in exhibit 1.11, but rather Mr Carr agreeing to Mr Hor suggesting that certain things be done. All that Mr Carr in effect asked Mr Hor to do was “everything that you need to do”, within which rubric, Mr Carr would have the Court believe, everything Mr Hor offered to do, fell.

58 Mr Carr insisted that one of the things he asked Mr Hor to do was to find out everything that Mr Roberts had ever done before. When tested on this in relation to the letter of 29 August 1996 (exhibit 1.38) which sets out the results of the investigation, that letter was silent as to the history of anything Mr Roberts had done. When it was put to Mr Carr that he never went back and asked or complained that Mr Hor did not do what Mr Carr had asked him to do, the response was “No, why should I?” It was totally wrong to suggest that Mr Carr had never asked Mr Hor to check out everything that Jack Roberts had ever done, according to Mr Carr.

59 After the meeting of 11 July, the next occasion he had any contact with Champions was when he received a letter from Mr Hor (exhibit 1.13). That letter enclosed a copy of a letter of the same date addressed to the solicitors for Mr Roberts (exhibit 1.12).

60 It is appropriate that its contents be set out (relevantly) because of the part this letter plays and the response to it in the resolution of this case.

61 Mr Hor asked of Cara & Co the following:

“Our client has therefore instructed us to request from you the following documents or information to enable us to assist him in making a decision regarding these invitations:

1. Copy of the stamped, original Trust Deed for the Trust, together with any amendments;

2. Copy of the Memorandum and Articles of the Corporate Trustee of the Trust;

3. Copy of the latest balance sheet and other financial statements in relation to the Trust and/or the Corporate Trustee;

4. Confirmation of whom the current unitholders in the Trust are and their respective unit holdings;

5. Copy of the Register of Unitholders of the Trust;

6. Details of any mortgages and/or charges given over the assets and undertaking of the Trust and/or the Corporate Trustee;

We are instructed by our client that the Crescent Medical Centre which is to be the main business of the Trust is expected to open to the public on 29 July 1996 and that Mr Roberts has requested that our client have subscribed to the additional units before that date. Therefore, we request that you attend to this matter urgently”.

62 Mr Carr did not keep a copy of the letter apparently, at least not a copy of the letter Mr Hor wrote to Mr Cara.

63 The following day, namely 17 July 1996, Mr Carr had gone skiing and Mr Hor left a message with his son-in-law, Craig Schofield. The next dealing between Mr Carr, and Mr Hor was on 22 July 1996 when the former returned the latter’s call. Mr Carr did not remember the conversation at all.

64 Mr Hor’s notes are exhibit 1.22. Mr Carr could not remember Mr Hor informing him that he was waiting for the Trust accountants to provide the information requested. Mr Hor also in this conversation told Mr Carr that the Council said that there was no number 103 The Crescent, and that Bruno Cara had informed Mr Hor that the contract said number 101, and thought Peter (Carr) was not certain himself. He did concede in evidence that he did remember there was a bit of a mix up over what the actual street number of the building was. Mr Hor said that he had not been able to verify whether the Company or the Trust owned the property; Mr Carr was prepared to accept that, and he was also prepared to accept that as at 22 July 1996 Mr Hor had said that he would keep him, Mr Carr, posted. Mr Carr’s position was that he had no recollection, but would accept most of what had been put to him.

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 exhibit 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 percent 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.

67 It was then put to Mr Carr that in the same conversation he had told Mr Hor that he was going to be a director of both the business entity and the Trust, but had decided that he was not going to do so, at least not for this venture. Mr Carr insisted that Mr Hor had previously given him advice about becoming a director and told him how that would expose him to further risk. It was Mr Carr’s position that after speaking with his wife he decided that “we took his advice” and did not become a director.

68 It seems to me that there is no question that Mr Hor did give some advice about the directorship, because exhibit 1.29 is a contemporaneous note of Mr Hor’s of his having called Mr Carr (he was out). Mrs Carr had “confirmed” to Mr Hor in that phone call that Mr Carr had put in another $150,000 and was still invited to be a director, and Mr Hor told Mrs Carr that that provides a measure of control but also “opens to liability”. It seems to me, there being no record of the subject matter of the directorship being raised when Mr Carr returned Mr Hor’s call, that Mr Carr was confusing the situation and in fact his decision not to become a director was indirectly based upon what Mr Hor had said to Mrs Carr. Otherwise it appears that Mr Carr agreed with certain other matters that he told Mr Hor and were recorded by Mr Hor in the notes of the conversation of 1 August.

69 He agreed that the next communication he had was a letter dated 29 August 1996 (exhibit 1.38).

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.

73 Mr Carr denied making it up that sometime in July Mr Hor had asked him how old Jack Roberts was and that his response was that he was in his sixties. This becomes significant in the context of the bankruptcy search to which I will come in due course.

74 The assertion that the conversation had taken place was made in para 2 of the statement dated 15 May 2002, about a week or so before the hearing of this action when it was first fixed (part of exhibit A).

75 Mr Carr was cross-examined at length on exhibit 1.38, the letter dated 29 August 1996 to him from Mr Hor.

76 Prior to sending that letter Mr Hor had taken various steps. It is desirable to set out the substance of these steps. First, a company search had been done against Fairfield Medical Arcade Pty Ltd disclosing Russell John Roberts as Director and Secretary. A bankruptcy search had been conducted on “Jack Roberts” with a response thereto indicating a “John Edward Roberts”, date of birth 15 January 1929 had been bankrupted on 11 March 1993 and automatically discharged on 21 May 1996. A bankruptcy search against the name of Russell John Roberts was “clear”.

77 On 24 July Mr Roberts’ solicitors had replied to the letter of 16 July in the following terms (exhibit 1.23):

“We refer to your letter of the 16th July, 1996 and now enclose the following:

1. Memorandum and Articles of Association of Fairfield Medical Arcade Pty Limited.

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

78 On 1 August 1996 Mr Hor had called the Mr Lamb referred to in the Cara letter requesting the Register of the Unit Holders to be faxed; had called Bruno Cara to have a copy of the first page of the contract faxed, and had had the telephone conversation with Mr Carr to which reference has already been made (see exhibit 1.29). Searches had been requested of the Titles disclosed in the first page of the contract. There then took place the telephone conversation with Mr Carr on 1 August (exhibit 1.32); the title searches and plans had been received. As at 27 August Mr Hor had called David Lamb again, who had to get some things signed before sending them. A bill was prepared on 26 August; on 27 August Mr Lamb faxed the Register of Unit Holders, and on 29 August Mr Hor reported to Mr Carr in the following terms:

“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 Medial 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 19 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, whilst at the same date, your company, Boston Holdings Pty Limited, had subscribed for units to the value of $150,000.00. 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.

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 (02) 9262 4388) 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.”

79 After the receipt of this latter Mr Carr did nothing further by way of approaching the defendants in relation to the string of further investments he made that led to the ultimate catastrophe. In relation to the letter itself, having initially doubted whether in fact there were enclosures, he agreed that he thought there was a copy of the Strata Plan, for example.

80 He agreed that the letter told him that the original unit holder was Russell John Roberts. As at 29 August Mr Carr had never heard of Russell Roberts, though in 1998 he met a Russell Roberts on the introduction by Jack Roberts to him as his son. In any event, he agreed that he read that Russell John Roberts was the original unit holder, that the ASC company search showed that the single director of the company was Mr Roberts and when asked whether it was plain that what he was being told was that the single director of the Trustee company was Mr Russell John Roberts, Mr Carr answered, in my view typically and disingenuously, “No, the only Mr Roberts I knew was Jack Roberts”.

81 With respect to that part of the letter which said “We were unable to confirm…”, it was put to Mr Carr that he knew that the solicitors had been unable to confirm whether in fact the Trustee of the property on behalf of the Trust was the registered proprietor. Astutely, Mr Carr pointed to the continuation of the correspondence commencing, “However, we…” . It was put to him that he was being clearly told, and he understood, that his solicitors had been unable to confirm that the property was held on trust, but rather they had been told that by Mr Cara, to which the response was, “So, what you’re saying? I shouldn’t trust solicitors?” His position was that if the solicitor thought it was all right, he thought it was all right.

82 When asked whether he checked with Mr Lamb in relation to the balance sheet, Mr Carr’s response was that he did not, “Because previously it was a brand new company. How could they have a balance sheet? They haven’t done anything”. Question, “Is that the reason you didn’t check?”; answer, “Yes”.

83 For the balance of his cross-examination, day after day, I found Mr Carr to be defensive and frequently to have recourse to the usual line that he had left it all to his solicitors. In “reliance” on what he had learned from the one transaction he had with the defendants he embarked upon the course of the investments thereafter.

84 Mr Hor’s statement is exhibit 19.

85 I found Mr Hor to be essentially an honest and reliable witness, the more so when he conceded a tendency to “ramble”. I was invited by the plaintiffs to resolve any inconsistencies between Mr Hor’s evidence and Mr Carr’s evidence in favour of Mr Carr. This I am not prepared to do. However some fundamental matters do attend the testimony of Mr Hor.

86 There seems to me to have been three areas of particular attention. First, the bankruptcy search; secondly the non-responsive answer from Cara & Co to the last question in Mr Hor’s letter, and third, whether or not Mr Hor knew prior to 29 July 1996 that Mr Carr was going to invest $150,000.

87 As to the last, I will let the evidence speak for itself (at T266):

“Q. That you knew, before 1 August, that Mr Carr was going to put in another 150,000 and this phonecall with her was going to take place had, in fact, taken place?

A. If you mean to say that I thought he was going to put another 150,000 in on 1 August, I don’t think that was my understanding. My understanding was that he said he was going to put 150,000 more in but I would have expected that that was as a result of or following the result of the searches that I was doing for him.

Q. When did you first form the understand [sic] that you have just told his Honour about, that you knew he was going to put in another 150,000?

A. That was (referred to notes) – I think I know what you are getting at. You are saying that by my writing, because I just had a look at my previous file notes, I can’t see from my previous file notes where I have said or written down, like, I went basically back to the original file note of my initial conversation with Peter Carr on 11th July which is annexure B and also had a look at the actual interview file note that I had with him on the same day, which is annexure C. But where I have written, “She confirmed he has put another 150 K in”, it is possible in that particular case I have used the word “confirmed” to say, well, not in a sense I have used the word “confirmed”, not in a sense that it is a confirmation of something I was previously told. And before you go back to the sentence or the remark I made previously, where you were saying it was my understanding that he was going to put 150,000 in and then I said, I think I said “yes”, then you are wondering where the understanding came from, then just having looked through my notes and I guess probably having been put in the frame of mind where you were discussing you would normally use the word “confirmed” to confirm something you were previously told, I think that I have used the word “confirmed” here to say, well, she has confirmed he is putting another 150,000 in but not in the sense or not necessarily in the sense that she is confirming something I was previously told.

Having said that, I can’t confirm exactly, I can’t confirm whether or not, from the file notes, in using this word, whether or not I was previously told that figure was going to go into the Trust, but I did know that some further amount was going to go in to the Trust. So I am sorry if I have confused you in that sense”.

88 This did not elucidate matters in favour of the plaintiffs and I, taking into account the file note references to 29 June, am still not persuaded that more probably than not Mr Hor knew what was being put to him by the plaintiffs’ counsel. I have not overlooked evidence upon which the plaintiffs rely (at T 271-272):

“Q. …Do you accept that as at 16 July you understood that a part of your retainer was to give him an answer by 29 July?
A. I guess you would imply that from the file up to that point. I mean, I can’t inadvertently recall.

Q. It’s the clearest possible indication, isn’t it?

A. I’ll let you draw what conclusions you want to.

Q. If your supervising partner had asked you as at 16 July, look, I see you’re doing a case for Mr Cara, when have you got an answer to him, right, you would have said 29 July, wouldn’t you, no doubt about it?
A. I certainly wouldn’t have said that’s when the other fellow wanted the money from him.

Q. And the other fellow getting the money was dependent upon Mr Carr giving an answer to you, wasn’t it?
A. Yes, that’s true.

Q. So the answer to my question is yes, isn’t it, you understood that you had to give him an answer by 29 July as part of the retainer?

A. If you put it that way, yes.

Q. And you didn’t give him a yes or no answer by 29 July, did you?
A. No, that’s correct.

Q. You didn’t say to him at any time before 29 July, I can’t give you an answer yet, you should not put in any money until I give you the go ahead?
A. Not unless my file notes say otherwise.

Q. Are you able to tell from your file notes or your statement why nothing appears to have been done on the matter between 1 August and 26 August with the exception of perusing a title search on 5 August. You may need to have a look at a copy of Exhibit 20 to answer that. I’ll provide a copy for you, Mr Hor?

A. I’m just having a look at my statement to look and see what I’ve said about that period. I won’t be a moment.

Just looking at my statement para 35 where I’m talking about the annexure P file note which is a file note of telephone conversation with Peter Carr on 1 August and at 35 it says, “The file note annexure P hereto also records that I undertook to send Mr Carr a letter confirming all the legal matters I have been able to ascertain”.

Q. You didn’t do that until 29 August, did you?
A. That’s right. If you look at para 37 through to 39 inclusive of my statement that details what happened in that period so looking at those paragraphs it indicates to me that I was in correspondence with David Lamb and – David Lamb regarding details of the unit register which he faxed to me on 27 August. Yes, so that’s what occurred in that period”.

89 True it is that Mr Hor was dependent upon his contemporaneous notes. To the extent that by relying on them he was, in the witness box, purporting to recall matters not otherwise recorded, I find no inconsistency or unacceptability in such conduct. Mr Hor was a witness who was doing his best under intense forensic scrutiny. And in the end, in relation to this aspect, I am more comfortable with his explanation and testimony generally that I am, to the extent that there is any to the contrary proffered by Mr Carr.

90 As to the Cara response and the bankruptcy search, this is really quite odd. One would not need any expert evidence to come to the view that to be asked to a bankruptcy search against the name of “Jack Roberts” would, one would think, in the normal course, provoke further enquiry, by reason of the commonness of the name. Whilst I reject the suggestion that Mr Hor asked Mr Carr how old Mr Roberts was, I am still puzzled by the simplistic approach to this task. However, in the end I accept Mr Hor’s position that really he believed that Mr Carr was dealing with Russell John Roberts, the person disclosed in the company search; the person confirmed by Cara & Co as being the sole shareholder and director of the company. As the defendants suggest, Mr Hor was effectively misled by the response from Cara & Co which was constituted by the statement, “We confirm the sole shareholder and director of Fairfield Medical Arcade Pty Limited is Mr Russell Roberts” (exhibit 1.23). Bearing in mind that the plaintiffs have to persuade me, I am unpersuaded, although a little puzzled; but the coincidence between the company search and the information from Roberts’ solicitors was such that it was reasonable that no further enquiry be made.

91 One other matter that now conveniently can be dealt with is that referred to in para [44] of these reasons, namely the meeting between Mr Carr and Mr Roberson at Champion Legal on 23 August 2000. Exhibit 21 is the statement of Mr Roberson prepared in reply to para 12 set out in Mr Carr’s statement and to his evidence.

92 At the outset, I accept without reservation the denials in the following exchanges between Mr Roberson and cross-examining counsel (at T 315):

“Q. Notwithstanding strict terms of Law Cover policy it is likely you would have said to him there is a claim here, go to our insurers?
A. No.

Q. Are you saying that Mr Carr made up that evidence?

A. Mistakes can be made. I mean he has given a version. I am saying what I said in my statement obviously foreshadowing a claim against the firm. I suggested that he see someone else as indeed I think most prudent solicitors would do at that point.

Q. To someone well known you would have said the insurers look after this?
A. I didn’t say that.

Q. It is likely?

A. No, it is not, no”.

93 I accept entirely Mr Roberson’s account of the conversation, reinforced as it is by the file notes attached to his statement. He was not shaken in any respect in this regard in cross-examination. Again, I am not prepared to accept Mr Carr’s testimony in this regard: I simply do not believe him. I add that I find nothing suspicious in there being material in the typed up file note additional to the handwritten file note which formed the basis for dictating what was annexure B to exhibit 21, Mr Roberson’s statement. This relates to Mr Carr having told Mr Roberson that he had been receiving $26,000 per month, $16,000 of which was in cash. Mr Roberson, I add, was frank in changing his position as to recommending a particular firm to the plaintiff.

94 In this action the defendant does not dispute the owing of a contractual and common law duty of care to the plaintiffs. What they say is that they breached neither. In the instant case the retainer was not written and thus it is for the Court to find the terms and the extent of the retainer: Hawkins v Clayton (1988) 164 CLR 539 at 570 per Deane J.

95 It is clear to me that the subject matter of the “engagement” of the defendants was limited to Mr Carr’s intention to invest in the Fairfield Medical Arcade Unit Trust. The person seeking to engage the firm of solicitors for a purpose to which I will come shortly, is one who declined to contemplate professional commercial advice in relation to his McDonalds settlement; he left it in the bank, went to England, came back and embarked upon his investment exercise by answering a newspaper advertisement. He sought no advice at all from Champions before he first paid Mr Roberts $100,000 in April 1996 or before he paid a further $50,000 on 6 May.

96 The contemporaneous notes of Mr Hor and the letter of 29 August 1996 record the work undertaken and I have concluded that more probably than not the scope of the retainer was to check the validity of the legal structure of the Fairfield Medical Arcade Unit Trust in which Mr Carr had already invested and was proposing further to invest. This retainer was to check the bankruptcy status of Jack Roberts; obtain a company search of the Trustee of the Unit Trust; undertake a title search to determine who owned the property that was purportedly the asset of the Trust; obtain the Trust Deed from Cara & Co; obtain balance sheets of the Trustee Company; obtain the Articles of Association of the Trustee Company; seek confirmation of Jack Roberts’ unit holding, and ascertain whether there were any other unit holders.

97 It is not open to be found on the balance of probabilities that Mr Carr retained Mr Hor and thus the defendants to conduct a general investigation into Mr Roberts, that is, to check out everything that Jack Roberts had ever done, and in effect give a clean bill of health to the enterprise upon which Mr Carr had chosen to embark on his own initiative well beforehand and without advice.

98 The letter of 29 August set out within these reasons in paragraph [78] in summary informed Mr Carr of the result of Champion’s enquiries to the following effect: the Trust is apparently validly constituted; Russell John Roberts is the original unit holder; the Trustee is the Fairfield Medical Arcade Pty Ltd; the single director of the company is Mr Roberts; the Trustee is a two dollar company; bankruptcy searches were obtained for Mr Roberts who does not appear to have been a bankrupt; the Trustee appears to have sufficient powers to act as Trustee of the Trust; the Trustee is the registered proprietor of the property from which the medical centre operates; the Register of Unit Holders shows that as of 31 July 1996 Mr Roberts had subscribed for units to the value of $1,100,000 and Boston Holdings had subscribed for units to the value of $150,000. The Register did not appear to have been updated as yet regarding additional investments.

99 I find within the limits of that retainer that the retainer cannot be characterised as requiring the solicitor to provide views about financial matters (compare Cadoks Pty Ltd v Wallace Westley & Vigar Pty Ltd [2000] VSC 167 per Ashley J at [120]).

100 In Trust Co of Australia v The Perpetual Trustees WA Ltd & Ors (1997) 42 NSWLR 237 at 247C McLelland CJ in Eq observed:

“Not every mistake by a solicitor founds liability in negligence. There are many uncertain or difficult areas of the law and the expression of an opinion by a solicitor does not normally constitute a promise that the opinion is correct. The duty of care owed by a solicitor to his client is to exercise a reasonable skill and care. What is required for the performance of this duty in a particular case depends on the scope of the solicitor’s retainer, the scope of any additional responsibility assumed by the solicitor and relied on by the client, the nature of the task entrusted to, or undertaken by, the solicitor, and the circumstances of the case.

As has been said:

“A solicitor who brings a reasonable degree of skill and knowledge to a task and exercises reasonable care in carrying it…out will not be liable for an error of judgment.”: Ormindale Holdings Ltd v Ray (1982) 36 BCLR 378 at 387, per Taylor J”.

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.

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.

103 Of course, a person in the position of Mr Carr can always with facility, and often with honesty, say that if I had been told “x” I would not have done “y”. That points to the matter of reliance, to which I will come shortly.

104 The second area of breach was that Mr Carr would not have paid over funds if he had been told that there was no limitation in the Trustee’s power to mortgage assets. Of course, Mr Hor was never asked to advise about such discrete matters. In the 29 August letter Mr Carr was informed that there already was an $850,000 mortgage over the property, 101 The Crescent, Fairfield, held by the Unit Trust (exhibit 1.38). Mr Carr admitted that he knew the Trustee could borrow money and mortgage assets of the Trust; he never made any enquiries about the $850,000 mortgage or even found out from whom the money had been borrowed; he never made any request for Champions to make any further enquiries in that regard.

105 In relation to the subject matter of the Unit Holders Agreement, to the extent that it was pressed, in my view the evidence fails to establish that any such advice should have been given, that is, advice that Boston Holdings’ investments were not protected by the Unit Holders Agreement with the Trustee of the Trust. The plaintiffs’ expert witness, Mr Bluth, admitted that he could not hold himself out as a specialist as to the ordinary competent practice in 1996 in relation to what the use of Unit Holders’ Agreements would have been. He agreed that he could not say that a Unit Holders’ Agreement would have made any difference to the factual outcome in this case. I am not persuaded that Mr Hor acted contrary to the standards of an ordinary competent practitioner or otherwise in breach of or beyond the scope of the retainer.

106 The plaintiffs’ junior Counsel was kind enough to provide a most useful summary of the corporations law as at 1996 relating to the promotion of prescribed interests. It does seem to me, however, that it was not unreasonable for the defendants, through Mr Hor, to take the view that the transaction the subject of the retainer did not attract the prescribed interest corporations law provisions.

107 Mr Carr told Mr Hor that he had already invested in the Fairfield Medical Arcade Unit Trust. He did not tell Mr Hor anything about the type of business that Mr Roberts was involved in, and on Mr Hor’s evidence at no point did Mr Carr tell him that he came into contact with Mr Roberts by answering the “Sydney Morning Herald” advertisement. What Mr Carr told Mr Hor, in effect, was that the proposal was that he and Mr Roberts would own the whole Trust on a fifty-fifty basis, and further that Mr Roberts had invited Mr Carr to be a director.

108 Nothing in the evidence in any form of Mr Roberts assists. The plaintiffs would have to prove that the Trust was promoted by a person (i.e., Mr Roberts), “whose ordinary business is or includes the promotion of similar schemes”: reg 7.12.04(c)(i) of the Corporations Regulations. The evidence given by Mr Roberts and referred to in para [4] hereof proves nothing as to knowledge in Mr Hor (or Mr Carr) of these matters at the relevant time, or knowledge that reasonably or remotely could trigger a sensitivity to corporations law requirements. Second, it does seem to me, as the defendants have submitted, that the Trust Deed is not within the ambit of reg 7.12.04(c)(ii), which brings a Trust within the definition of a “prescribed interest” if the rules of the Trust “provide…for more than 15 beneficiaries”. The Fairfield Medical Arcade Unit Trust however does not expressly provide for more than 15 beneficiaries.

109 These in the scheme of this litigation might be regarded as fine points. Thus far I am not persuaded that the plaintiffs have proved the breach of any retainer which I have found.

110 If there is error in that regard then any breach by the defendant was not the cause of any loss that the plaintiffs suffered. It is for the first plaintiff to prove that he relied upon the advice he received, and had the “correct” advice been given, in other words had there been no breach, he would have acted differently: Henville v Walker (2001) 206 CLR 459; Chappel v Hart (1998) 195 CLR 232.

111 Whilst Mr Carr, as to whether he would have gone ahead, said words to the effect, “Not on your Nellie”, had he been told that Jack Roberts had been bankrupt in the past but now everything was OK, I simply do not accept that. Mr Carr would have proceeded in any event. Mr Roberts clearly made an impression upon Mr Carr as a very persuasive type of person. Mr Carr accepted Mr Roberts’ assurances as to the security of his investment. It must be remembered that Mr Carr wanted to establish his own good faith and soundness as an investor with Mr Roberts about whom he knew nothing, and before seeking any legal advice and on almost no information at all. Mr Carr’s conduct prior to approaching the defendants is almost by itself disentitling in this regard. I need hardly repeat the references to the rejection of the professional financial services at the conclusion of the McDonalds case and the way he “met” Mr Roberts and commenced his dealing with him. The conduct of this hearing as far as the plaintiffs were concerned, to a very great extent by reason of the extraordinary difficulty the defendant and indeed the Court had in having brought forth relevant documentation, speaks of a slipshod approach to the management of his financial affairs by Mr Carr to the point almost of indifference. This might explain the indignation with which, from time to time, some of his answers in cross-examination were characterised.

112 After receiving the letter of 29 August Mr Carr continued to invest in the various different entities that were offered to him. It was Mr Carr’s evidence that he in fact believed “everything was going to happen just as he (Mr Roberts) said”. Self-serving statements of the kind that are inevitable in litigation of this nature under the present law should carry little if any weight in the face of objective criteria of the kind to which I have referred: Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR 41-687 at 42,793; Chappel v Hart, supra at 246 per McHugh J.

113 In relation to the corporations law aspects or the Trustee’s power, these in my view would not have impinged upon Mr Carr’s commercial intentions at all.

114 The defendants also contend that when viewed objectively, to the extent that Mr Carr did rely upon the advice given by them, that advice was limited in its terms, and did not go beyond advising in limited respects about the Fairfield Medical Trust. The plaintiffs could not reasonably rely upon that advice when considering other investments, different in nature, months and indeed years later, involving, at the end, a total reconstruction of post-Fairfield Medical Trust entities in the context of the proposed public float.

115 The defendants in their written submissions state their position with some force in relation to the advice that Mr Roberts did not appear to be bankrupt: it is said that this did not give Mr Carr a “licence to abdicate all personal responsibility for evaluating the commercial risks of the venture and to simply assume that any investment suggested by Mr Roberts at any time in the future would therefore be safe”.

116 In any event, the advice drew a number of matters to the Mr Carr’s attention which, it is submitted, and I agree, he ignored at his peril. The first was that it revealed the existence of the mortgage over the property at 101 The Crescent held by the Unit Trust of $850,000. Mr Carr never queried the mortgage held over the property or found out who the mortgagee was. In relation to the matters to be checked with Mr Lamb, Mr Carr never bothered. He asked Jack Roberts about those matters and was told, “just give them a bit of time” (T74.8).

117 The letter of advice revealed that there were two shareholders of the Trustee company (Fairfield Medical Arcade Pty Ltd), Elizabeth Hudson and Walter Hudson. At no point did Mr Carr enquire as to who they were or what their connection to the company was, “Why should I? I had solicitors to check all that out”. … “I asked them to check out everything. This was their answer”. … “No. Why should I?”

118 The letter of advice indicated that Mr Russell Roberts had already taken up $1.1m of units in the Fairfield Medical Arcade Unit Trust in April 1996. Mr Carr was not concerned about that too much. Even though the basis of Mr Roberts’ proposal was that the Trust would not exceed, and was limited to, 1,200,001 units. Mr Carr had already purported to subscribe for 300,000 units which, together with Russell Roberts’ subscription, amounted to 1,400,000 units. On 11 December 1996 Mr Carr made a further payment of $100,000 and assumed that Mr Roberts held the other two thirds of the business, but “did not know” and “was not really concerned”.

119 Thus it is submitted that even if Mr Carr did rely upon the defendants’ advice, when he took no steps himself to assess the commercial risks of the different ventures he did so unreasonably; the defendants’ advice did not speak to those later investments and could not reasonably be regarded as doing so.

120 I am comfortably persuaded by these submissions.

121 The defendants further submit that if I conclude that Mr Carr would not have proceeded, causation is not established: Mallesons Stephen Jaques v Trenorth Ltd [1999] 1 VR 727 at [24]:

“The authorities show that the "but for" test is not an exclusive or exhaustive criterion of causation, especially where a number of acts or events may be said to have led to loss and damage, or where a supervening cause, or novus actus interveniens, may be said to break the chain of causation…”

122 Here, the defendants say, there were supervening events that broke any chain of causation between Champions’ advice and any loss that the plaintiffs have suffered. The first category (in time) was Mr Carr’s entry into the various investments (see below) over several years without, it is said, taking basic precautions. The second was the decision by Mr Carr in August 1999, to exchange all Boston Holdings’ interests in the various companies for 1.2 million convertible notes as part of a proposed float of The Private Health Group Pty Limited, a company into which the other companies were proposed to be consolidated.

123 With respect to the Fairfield Medical Arcade Unit Trust Mr Carr failed to take the steps that a reasonable investor would take, it is submitted. Even if the plaintiffs would not have invested in the Fairfield Medical Arcade Unit Trust had it not been for the advice of Champions:

“The real and effective cause of the loss to [Mr Carr] was [Mr Carr’s] own negligence in making an investment . . . which [Mr Carr] should have known was commercially hazardous and improvident, such negligence being unrelated to the breaches of duty alleged against [the defendant solicitors], who were not asked to concern themselves with . . . the commercial aspects of the proposed acquisition . . . That loss . . . would have occurred even if [Champion’s] mistaken opinions had been correct.”

Trust Co

of Australia

124 In Trust Co the firm retained by a trustee company to advise it as to whether any conflict of duty would arise should it acquire a particular property failed to advise of the existence of a conflict of duty. The claim against the solicitors failed because breach of duty was not proved. McLelland CJ went on to conclude that the claim would have failed in any event because of the absence of the requisite causal connection (at 248B). The Court found that the “real and effective cause of the loss” was the plaintiff’s own negligence in making the investment and that negligence was unrelated to the breaches of duty alleged against the defendant solicitors. In reaching this conclusion, McLelland CJ accepted that if the defendant solicitors had have given the correct advice, the plaintiffs would not have proceeded with the acquisition and therefore would not have the suffered the loss claimed as damages (at 248B).

125 I am of the view that Trust Co applies here. I have found that it was not part of Champions’ retainer to investigate the commercial aspects of the proposed investment. Because Mr Carr failed to take the steps that a reasonable investor would take in evaluating the commercial risks of the proposed venture, there is no causal connection between the Champion advice and any loss the plaintiffs suffered in relation to the Fairfield Medical Arcade Unit Trust.

126 Mr Carr said in his statement of 17 July 2001 (exhibit A) that before handing Mr Roberts a cheque for the first $100,000 on 29 April 1996, he had talked to Mr Roberts once on the phone (when responding to the advertisement), had inspected the property and had read a 2-3 page document provided to him by Mr Roberts. This document contained no photographs, plans or drawings and it contained the wrong address for the property that had been acquired by the Fairfield Medical Arcade Unit Trust. It was after reading this document, that Mr Carr rang Mr Roberts and told him he was interested; he then gave Mr Roberts the $100,000 “as a sign of good faith and in order to show Mr Jack Roberts that [he] was financially capable” (Mr Carr’s statement 17 July 2001, paragraph 7).

127 Before the first payment of $100,000, Mr Roberts did not tell Mr Carr who the other unitholders in the unit trust were nor did Mr Carr did ask. In return for the $100,000 cheque, Mr Roberts gave Mr Carr a hand-written receipt that had been signed by “R. Roberts” and not Jack Roberts (Exhibit 1.37). Mr Carr did not receive a certificate in relation to that investment until a long time later. On or about 6 May 1996, just one week after handing Mr Roberts the cheque for $100,000, Mr Roberts called Mr Carr and told him that he “wanted” another $50,000 for the Fairfield Medical Arcade Unit Trust (Mr Carr’s statement 17 June 01 at paragraph 8). Mr Carr paid Mr Roberts the $50,000 that day (exhibit 3.3), the same day he left for overseas. Mr Roberts “just said he want[ed] it” and Mr Carr responded “I am going overseas, so it had to be organised before I went.” (T41.57). Mr Carr sought no advice from anyone in relation to the further $50,000 that Mr Roberts wanted; nor did he have any idea whether any other units had been taken up in the unit trust at this point. He wasn’t interested. He received a certificate in relation to that investment “a long time” later. Mr Carr never saw any supporting documentation showing the cost of the purchase and fit-out of the Fairfield Medical Arcade building, other than a hand-written price of paper from Mr Roberts.

128 The further $100,000 investment by Mr Carr on 11 December 1996 in the Fairfield Medical Arcade Unit Trust was made in these circumstances:

“Q. What brought about the payment of another $100,000 in December 1996, Mr Carr?

A. Jack Roberts approached me and said, "Would you like to buy more shares into the property?" I said, "I have already got," whatever percentage I had, and I said, "I own a third of the business, so I'm prepared to own a third of the property." So, I said I would take my shareholding up of a third of third holding of each. So I owned a third of the business and a third of the property.”

129 Mr Carr admitted that apart from the handwritten note of Mr Roberts (Exhibit 1.41), he had no other basis for believing that he owned a one third interest in the property. Mr Carr made this further investment in the Fairfield Medical Arcade Unit Trust even though he cannot recall receiving any documentation about the unit trust between August and December. Mr Carr only received a certificate evidencing his increased unitholding a “long time later”. This certificate did not however evidence that Mr Carr indeed own one third of the Fairfield Medical Arcade Unit Trust.

130 Mr Carr admitted that he was aware from the Champions advice that Mr Russell Roberts had taken up $1.1 million of units in the Fairfield Medical Arcade Unit Trust in April 1996 but he “didn't worry too much about that”. Notwithstanding this, when Mr Carr made the payment of $100,000 on 11 December 1996, he assumed Mr Roberts held the other two thirds of the business, but he did not know. He admitted he had “no idea” in December 1996 who else had taken up units in the unit trust. He had made no enquiries because he “wasn’t really concerned”.

“These are matters which [the plaintiff], acting reasonably, should have ascertained before the acquisition, and on the basis of which he, acting reasonably should have declined to proceed with the acquisition”.

Trust Co

131 The defendants submit that there is no causal connection between the their advice and any loss the plaintiffs suffered in relation to the $200,000 the plaintiffs invested in The Crescent Medical Centre Pty Ltd on 29 October 1996. This submission is founded upon the following factors. Mr Carr failed to take the steps that a reasonable investor would take in evaluating the commercial risks of Mr Roberts’ new venture. He did not seek any legal or financial advice. He did not make any checks himself on the Centre. Rather, Mr Carr relied on his own observations – that the Centre was “nice” and “professional” looking and not “dodgy looking” – to satisfy himself that it was a good investment. He also asked Mr Roberts some questions and he was satisfied by Mr Roberts’ answers – none of which he checked. Mr Carr never received any share scrip evidencing this investment.

132 Mr Carr did receive a profit and loss statement prior to making the investment which showed that the Centre had only made a profit of $918 for that year. Notwithstanding this, he went ahead and invested after the following conversation with Mr Roberts (T82.2):

“Q. When you say, "He might have asked me," what conversation did you have with people in relation to this investment?
A. That was Jack Roberts. I don't know the date of the conversation, but the medical centre was starting to go quite well and he suggested to me that it might be an idea to increase my holding. But, he said "The property is all right, but it will stagnate and you will just collect rent, but there is an opportunity that the business will do a lot better. It would be far more profitable to be in the business." So, I said, "I don't want to borrow too much," and I asked him how much he invested at that stage and he said, "$600,000." So I said, "I'm not prepared it buy any more than one third of it." So I said that I would purchase one third of it and I said, "I want to see profit and loss statements every month”.

133 Further, if, as Mr Carr asserts, he relied on the Champions advice in deciding to invest in The Crescent Medical Centre, then his reliance was unreasonable. There could be no dispute that the terms of the retainer were limited, as I have found, to certain legal matters regarding the Fairfield Medical Arcade Unit Trust. The retainer did not relate to the commercial aspects of that investment, let alone future investments, about which Mr Carr admits Champions had no knowledge. In purported reliance on legal advice about a different venture altogether, Mr Carr did not undertake even a rudimentary assessment of the commercial risks of his investment in The Crescent Medical Centre. It follows that “the real and effective cause of the loss to [Mr. Carr] was [Mr Carr’s] own negligence in making an investment . . . which [he] should have known was commercially hazardous and improvident …”: Trust Co at 249G.

134 Accepting as I do the factual foundations underpinning the defendants’ submissions, I am persuaded to reach their advanced conclusion.

135 For the same reasons as applied to the Crescent Medical Centre, there is no causal connection between the Champions advice and any loss the plaintiffs suffered in relation to the $150,000 the plaintiffs invested in the Penrith Plaza Medical Centre Unit Trust on 19 June 1997 and the further $150,000 invested on 1 July 1997. In making these investments in the Penrith Plaza Medical Centre Unit Trust, Mr Carr relied entirely on what Mr Roberts had told him. Mr Roberts had told him that he would guarantee this return “the same as the Fairfield Medical Arcade. He said you have no worries, your money was safe.” Mr Roberts also told him that he would receive $26,000 a month from the investment. Mr Carr admits he made no investigation as to whether the Unit Trust owned any assets. Mr Carr knew that it did not own any real property. Mr Carr therefore had to and did concede that he understood that the Penrith Plaza Medical Centre Unit Trust was different from Fairfield Medical Arcade Unit Trust in the significant respect that it owned no secured property. Mr Carr only received Certificates for his unitholding a “long time later” after investing. Mr Roberts encouraged Mr Carr in February 1998 to invest in the Rapid Detox Centre, a centre that Mr Roberts said would treat heroin addicts with a new drug, Naltrexone. Mr Roberts told Mr Carr that the Centre would “be a real gold mine”; they had the potential to make “a lot of money”; the Centre had “the potential to make a huge amount of money”; the business would be “extremely profitable” and “the whole thing looked very successful”. Mr Carr then met one of the proposed Centre’s doctors and it all “sounded pretty good” to him. Without having received any documentation about the Centre, Mr Carr handed over $100,000 on 3 February 1998. In doing so, Mr Carr did not understand that he was buying ten per cent of the shares in the Rapid Detox Centre; rather, he thought he was buying “ten per cent of the business”.

136 My findings on these facts lead to the submitted conclusion that there is no causal connection between the defendants’ advice and any loss the plaintiffs suffered in relation to the $100,000 the plaintiffs invested in the Rapid Detox Centre on 3 February 1998.

137 Mr Carr handed over $100,000 to Mr Roberts on 3 February 1998 as an investment in the South Western Day Surgical Centre. He had received no documentation about the Centre. Mr Carr invested in the Centre because “Jack Roberts seemed to have a lot of contacts in the medical industry and it looked like it could be very successful.” In doing so, he did not understand the basic structure of the investment. He thought he was buying “ten per cent of the business” and did not understand that he was in fact buying ten per cent of the shares of the Centre.

138 My findings and conclusions apply here: there is no causal connection between the Champions advice and any loss the plaintiffs suffered in relation to the $100,000 the plaintiffs invested in the South Western Day Surgical Centre on 3 February 1998. Furthermore it appears that this company continues to operate.

139 The defendants submitted that even if I were to find that there was a causal link between the Champions advice and the individual investments that Mr Carr made with Mr Roberts’ various ventures described above, Mr Carr’s “blind participation” in the proposed float was a supervening cause, or novus actus interveniens, that breaks the chain of causation: March v Stramare Pty. Limited (1991) 171 CLR 506, at 508, 515-516 per Mason CJ; 522-3 per Deane J; 524 per Toohey J and 525 per Gaudron J; Medlin v The State Government Insurance Commission (1995) 182 CLR 1 at 6; and Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 147 ALR 568 at 581. I should conclude that the participation in the proposed float must be a supervening cause because when Mr Carr redeemed all of his interests to participate in the float, he admits that all of the Roberts’ businesses were “doing very well” and that he was receiving all of his income payments.

140 I find Mr Carr’s conduct in relation to the proposed float really extraordinary given the scale and implications of this new venture. He conducted no inquiries into the proposed float. Nor did he seek any financial or legal advice about it. When he agreed to the exchange, he did not even know what “convertible notes” were. The only documentation he received prior to exchanging all of his interests in the various companies for the convertible notes was a one-page letter dated 12 July 1999 from Mr Roberts – a letter on a blank piece of paper without letterhead (exhibit 1.48). This letter states, inter alia:

“the convertible notes will provide a return of 10% p.a. payable monthly in arrears (the same as your existing investment).”

141 Finding as I do, the underlying facts, I can only agree with the defendants’ submissions: if, as Mr Carr asserts, he relied on the Champions advice of 29 August 1996 relating only to the legal structure of the Fairfield Medical Arcade Unit Trust, in making his decision to redeem all of his interests in Mr Roberts’ ventures, including four ventures about which Champion had no knowledge, then he relied unreasonably on that advice. He abandoned any personal responsibility for assessing the commercial risks of the float or even gaining an elementary understanding of what the float entailed.

142 On 16 August 1999, Mr Carr paid $60,000 for 60,000 options in the proposed float of The Private Health Group Pty Limited (exhibit 1.51). Mrs Carr did the same. Mr Carr did not seek any financial or legal advice about the float. Moreover, the only documentation he received prior to purchasing the options was the one-page letter dated 12 July 1999 from Mr Roberts (exhibit 1.48).

143 For the same reasons as outlined above, I find there is no causal connection between the Champions advice and any loss Mr Carr suffered in relation to the $60,000 he paid for options on 16 August 1999.

144 The defendants next contend that if I find that Mr Carr’s conduct in relation to the various companies, and the later redemption of all interests in those companies, do not constitute supervening causes, the Champions advice was not in any event the legal cause of any loss the plaintiffs suffered.

145 In Trust Co of Australia, supra, McLelland CJ concluded that the claim against the solicitors would have failed (in addition to failing because breach of duty was not proved) because of the absence of the requisite causal connection (at 248B). In reaching this conclusion, his Honour accepted that the “but for” test was satisfied – finding that if the defendant solicitors had have given the correct advice, the plaintiffs would not have proceeded with the acquisition and therefore would not have the suffered the loss (at 248B). He concluded (at 248C) that:

“This however is not sufficient to establish a legally causative relationship between any breach of duty by [the solicitors] and [the plaintiff’s] loss.”

146 In so concluding, his Honour followed the principles of causation laid down by the High Court in Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 6 per Deane, Dawson, Toohey and Gaudron JJ:

“For the purposes of the law of negligence, the question whether the requisite causal connection exists between a particular breach of duty and particular loss or damage is essentially one of fact to be resolved, on the probabilities,

as a matter of common sense and experience . . .

And that remains so in a case such as the present where the question of the existence of the requisite causal connection is complicated by the intervention of some act or decision of the plaintiff or a third party which constitutes a more immediate cause of the loss or damage.

In such a case, the "but for" test, while retaining an important role as a negative criterion which will commonly (but not always) exclude causation if not satisfied, is inadequate as a comprehensive positive test

. . . If, in such a case, it can be seen that the necessary causal connection would exist if the intervening act or decision be disregarded, the question of causation may often be conveniently expressed in terms of whether the intrusion of that act or decision has had the effect of breaking the chain of causation which would otherwise have existed between the breach of duty and the particular loss or damage. The ultimate question must, however, always be whether, notwithstanding the intervention of the subsequent decision, the defendant's wrongful act or omission is, as between the plaintiff and the defendant and as a matter of common sense and experience, properly to be seen as having caused the relevant loss or damage.”

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.

148 For four years after the advice was given Boston Holdings made money on the investment. Mr Katehos, the plaintiff’s accounting expert, reported that during this period the income Boston Holdings earned “well exceeded” the income it would have received if the money had been invested in a term deposit account.

149 Up to the proposed float in 1999, Mr Carr confirmed that the businesses were all “doing very well” ; “everything was going fine” and it was a “good investment”. He was receiving all of his payments. The Crescent Medical Centre was making money after 1 July 1997; Penrith Plaza was a thriving, successful business – “extremely so”. Mr Carr received regular payments. The Rapid Detox Centre was going "very well". Mr Carr chose to redeem all his investments in the different companies in return for the convertible notes in the Private Health Group Pty Limited. The plaintiffs' alleged loss has resulted from the apparent failure of the Private Health Group Pty Limited, the company in which the convertible notes were purchased.

150 Why the Private Health Group Pty Limited failed is not clear. Certainly the evidence cannot rationally or reasonably suggest, I find, that it was caused by Mr Roberts’ earlier bankruptcy, the lack of a prospectus or the use by the Trustee of the Fairfield Medical Arcade Trust of its borrowing power.

151 Further, in the context of remoteness, the time for assessing what consequences of a breach of a contractual term were in the parties’ reasonable contemplation is at the time of the making of the contract (ie. the time of the making of the retainer): The Commonwealth of Australia v Amann Aviation Pty Ltd (1992) 174 CLR 64 at 92. In Amann Aviation at 92, Mason CJ and Dawson J set out the boundary for liability for loss caused by a breach of contract:

“However, the rule that the defendant is not liable in damages for not doing that which he or she has not promised to do is necessarily subject to the rule in

Hadley v. Baxendale.

According to Alderson B.'s renowned formulation, the plaintiff is entitled to recover such damages as arise naturally, that is, according to the usual course of things, from the breach, or such as may

reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach: at p 354 (p 151 of ER). It is now accepted that this is the statement of a single principle and that its application may depend on the degree of relevant knowledge possessed by the defendant in the particular case

C Czarnikow Ltd v Koufos

(1969) 1 AC 350, per Lord Reid at p 385; Lord Upjohn at p 421;

The "Pegase"

(1981) 1 Lloyd's Rep 175, per Robert Goff J. at p 182.”

152 The time at which the reasonable foreseeability test in tort is considered is immediately prior to the alleged breach of duty.

153 Under the test in either tort or contract, the issue is what was in the contemplation of both Mr Carr and the defendants at the time the legal advice was sought from and given. There is no dispute that at this time the only investment in the contemplation of the parties was in the Fairfield Medical Arcade Unit Trust. Because the parties did not have any other investment in their contemplation at that relevant time, the only losses that could be said to be the probable result of a breach of contract or duty by Champions are those relating to the Fairfield Medical Arcade Unit Trust.

154 The next fallback position of the defendants (after the lack of causal nexus) is that the evidence in relation to actual damage is very unsatisfactory. The evidence of amounts received by or on behalf of Boston Holdings is unclear and it is impossible to track the source of the payments.

155 Certainly I was troubled by the dribble of documents, so it seemed to me, produced during the course of the hearing. The banking records provided by the plaintiffs were unsatisfactory. Even though all the plaintiffs’ bank accounts were called on for production, Mr Carr did not produce those which he judged had no relation to the case. Those that were eventually provided were “drip-fed” into court by Mr Carr at the prodding of defendants’ counsel. Mr Carr then professed to finally have produced all bank accounts held in his name, joint names or in the name of Boston Holdings. But a subpoena to the St George Bank for any remaining bank accounts revealed six additional – never before disclosed – bank accounts of the plaintiffs (exhibit 22).

156 There has been no independent verification of the income Boston Holdings apparently received. Mr Katehos confirmed that the banking records of the plaintiffs are impossible to reconcile. In his report dated 12 December 2002 (exhibit J), Mr Katehos noted that (at para 4.2.2.2), “not all statements have been provided”; “there are different accounts for short term deposits”; “It is unclear as to the destination of the balance in the short term deposits at maturity”; and “we are unable to reconcile these statements to the amounts invested based upon the plaintiff’s statement.”

157 Mr Katehos stated that there was difficulty in tracking the money through. He could not determine the actual amount earned by Boston Holdings: “there are missed statements so I cannot say definitively whether all the information is there or not” and “It is difficult for me to unravel all of [the sources of income] so I have just relied on the information presented to me as the income received and adopted that information in my calculations”. Because he could not determine the income earned by Boston Holdings, Mr Katehos therefore simply accepted what the plaintiffs’ solicitors told him to assume was the income earned by the plaintiffs. Accordingly, his report consists merely of calculations he performed based on that assumed information. The defendants point also to the vexing $26,000 per month “receipt” in cash and $10,000 cheque issue as evidence which suggests that the plaintiffs have not disclosed all of the income that they received from the investments.

158 On 23 August 2000, Mr Carr told Mr Roberson that he was receiving a total of $26,000 per month – $16,000 per month in cash and $10,000 by cheque (exhibit 21 at para 7, annexure B). Mr Roberson recorded that Mr Carr had told him this in a file note he prepared that day. Soon afterwards Mr Roberson confirmed the $16,000 per month cash figure, firstly, in a phone conversation with Mr Carr’s solicitor (Mr Zacharatos) on 12 October 2000 (exhibit 21, annexure D), and second, in a letter to Mr Carr’s solicitor on 19 October 2000 (exhibit 21, annexure F).

159 The context of the conversation, the defendants say, makes it unlikely that Mr Carr was merely bragging about the cash payments. He was speaking to his solicitor and had every reason to be frank.

160 Mr Carr denied telling Mr Roberson anything about $26,000. Then in further re-examination, he acknowledged that he did mention $26,000 per month but sought to explain it away that it was an amount he was going to receive.

161 I find that Mr Carr did tell Mr Roberson that he was receiving a total of $26,000 per month in the manner referred to and that more probably than not it was true. Mr Carr’s stance in re-examination was unacceptable. Mr Carr conceded that it was “impossible” to track the source of the income payments he received from various Mr Roberts’ companies because he did not keep a record of the source of payments: “because it didn't matter which, because it was money from the Mr Roberts Group of money coming to us.”

162 Mr Katehos agreed that because of the state of the information provided to him, he was unable to, and so did not attempt to, conduct a tracing exercise of the sources of income apparently received by the plaintiffs.

163 The fact that it is impossible to trace the sources of investment income means that the plaintiffs have not proved the loss they allegedly suffered from particular investments. I have not been persuaded that in respect of the Fairfield Medical Arcade Unit Trust for example, the investment advised upon (assuming some liability), that the plaintiffs can establish on the probabilities the loss they suffered in relation to that particular investment. The same comment applies in relation to each of the investments. However, for the reasons set out above, I need not engage in a consideration of these matters.

164 The defendants did not orally or in writing pursue so much of their case as to voluntary assumption of risk and contributory negligence. I do not see any need to make any findings in regard to those aspects.

165 I have been unpersuaded by the plaintiff’s submissions on both the facts and upon the legal consequences in the event of my finding that their onus had been discharged.

166 The principal finding in addition to the nature and ambit of the retainer is that there was no breach; thereafter I have made what I would describe as the “fallback” findings in respect of the various heads to which the defendants’ submissions were directed.

167 The formal orders are:

1. I enter a verdict and judgment for the defendants;

2. The plaintiffs are to pay the defendants’ costs;

3. The exhibits are to be retained for 28 days; in the event that an appeal is lodged in accordance with the Rules of Court, thereafter the exhibits will continue to be retained pending an order of the Court of Appeal or of this Court.

**********

Last Modified: 11/17/2004

CITATION:	CARR & ANOR v FISCHER & ORS [2004] NSWSC 1079
HEARING DATE(S):	2nd, 4th, 5th and 6th December 2002; 3rd, 4th and 5th February 2003
JUDGMENT DATE:	16 November 2004
JUDGMENT OF:	Levine J
DECISION:	1 I enter a verdict and judgment for the defendants; 2 The plaintiffs are to pay the defendants' costs; 3 The exhibits are to be retained for 28 days; in the event that an appeal is lodged in accordance with the Rules of Court, thereafter the exhibits will continue to be retained pending an order of the Court of Appeal or of this Court.
CATCHWORDS:	Professional negligence - legal practitioners - terms of retainer - breach - causation - proof of loss - action fails
CASES CITED:	Cadoks Pty Ltd v Wallace Westley & Vigar Pty Ltd [2000] VSC 167 Chappel v Hart (1998) 195 CLR 232 Commonwealth of Australia v Amann Aviation Pty Ltd (1992) 174 CLR 64 Hawkins v Clayton (1988) 164 CLR 539 Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR 41-687 Henville v Walker (2001) 206 CLR 459 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 147 ALR 568 Mallesons Stephen Jaques v Trenorth Ltd [1999] 1 VR 727 March v Stramare Pty. Limited (1991) 171 CLR 506 Medlin v The State Government Insurance Commission (1995) 182 CLR 1 Trust Co of Australia v The Perpetual Trustees WA Ltd & Ors (1997) 42 NSWLR 237
PARTIES :	PETER JOSEPH CARR (First plaintiff) BOSTON HOLDINGS PTY LTD ACN 056 658 934 (Second plaintiff) v JOHN HOWARD FISCHER, NEIL JAMIESON, JOHN DAVID WATTS, GEOFFREY MARK ROBERSON & JOHN JOSEPH COTTER (Defendants)
FILE NUMBER(S):	SC 20004 OF 2001
COUNSEL:	M Williams SC / P Maguire (Plaintiffs) P Greenwood SC / K Richardson (Defendants)
SOLICITORS:	Wight & Strickland (Plaintiffs) Colin Biggers & Paisley (Defendants)