De Varda Joseph v Foch Charles - [2002] NSWSC 1216

No judgment structure available for this case.

CITATION: DE VARDA Joseph v FOCH Charles and Others [2002] NSWSC 1216

FILE NUMBER(S): SC 20246/99

HEARING DATE(S): 25,26,27,28,29 November 2002

JUDGMENT DATE: 19 December 2002

PARTIES :

JOSEPH DE VARDA v CHARLES FOCH & OTHERS

JUDGMENT OF: Davies AJ

COUNSEL : Plaintiff: Person
Defendants: Mr M Pembroke SC
Mr D Williams

SOLICITORS: Plaintiff: Person
Defendants: Ebsworth & Ebsworth

CATCHWORDS: PROFESSIONAL NEGLIGENCE - whether solicitor negligent in transaction involving Cambodian land - whether conflict of interest - whether sufficient for solicitor to say that he asked for one party only - whether solicitor had duty of care to other party with whom he dealt

LEGISLATION CITED: Fair Trading Act 1987 - s 42, s 68

CASES CITED: Hill v Van Erp (197) 188 CLR 159
Perre v Apand Pty Ltd (1999) 198 CLR 180
Hawkins v Clayton (1988) 164 CLR 539
Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642
Astley v Austrust Limited (1999) 197 CLR 1
Alexander v Perpetual Trustees WA Limited [2001] NSWCA 240
Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch. 560, 574

DECISION: See Paragraph 126

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
Professional Negligence List

DAVIES AJ

19 DECEMBER 2002

20246/99 Joseph DE VARDA v Charles FOCH and Others
JUDGMENT

1 DAVIES AJ: In these proceedings, the plaintiff, Joseph de Varda, seeks damages for alleged professional negligence on the part of the second defendants, the partners of Watkins Tapsell, Solicitors. The first defendant Charles Foch has died since the institution of the proceedings and no order is sought against him.

2 The case is an unusual one, not least because the conduct of Mr Matthew Coates, the partner of Watkins Tapsell with whom Mr de Varda had contact, was conduct which I would not have expected of a competent and honest solicitor. Whatever he thought he was doing, Mr Coates assisted Mr Foch to extract US $390,000 in gold bullion and cash from Mr de Varda.

3 The apparent villain was Mr Charles Foch, the first defendant. As he died after the commencement of the proceedings and his version of events is unknown, no firm determination can be made as to the extent to which he may have acted in good faith although recklessly, on the one hand, or fraudulently, on the other. Mr Foch, who was of French descent and held himself out to be a descendent of General Foch, seems to have been a person of considerable charm and persuasiveness. He was a long term friend of Mr de Varda and both Mr de Varda and Mr Coates appear to have allowed Mr Foch to encourage them into actions which on their part were foolish. Mr Foch had a history of dealings in other countries. In particular he was a dealer in arms. He boasted of transactions with Colonel Rambuka at the time of the first coup in Fiji. He had property and assets in Cambodia.

4 In 1997, Mr Foch became concerned about his personal safety if he went to Cambodia. He was concerned to liquidate and remove whatever assets he had in that country. On 10 April 1997, Mr Coates wrote on Mr Foch’s behalf to the Department of Foreign Affairs seeking advice, which was not forthcoming. The subject transaction in these proceedings was part of the liquidation.

5 The plaintiff, Mr Joseph de Varda, described himself as a writer, an artist and a businessman. He grew up in Egypt where he studied biochemistry. Subsequently in his career, he undertook research into cancer and, in particular, sought to interest the Prime Minister of India into promoting a cancer cure which Mr de Varda had developed. In evidence are copies of articles in Indian newspapers discussing Mr de Varda’s views. Mr de Varda has been in Australia for many years and has principally been a dealer in gem stones and gold bullion. He also claims to have developed a cure for baldness, although he apparently lost the formula as a result of ill health brought about by the transaction with which this case is concerned.

6 It is difficult to form a firm view as to Mr de Varda’s activities. If he has ever had any useful records of his gem stone and bullion dealings, he has not produced them. He gave evidence that many of his documents were lost when in the possession of an elderly barrister, Mr Partridge. He said that he has not lodged a tax return in recent years because of losses, but he did not produce any tax returns. According to his oral evidence, he kept gold bullion and gemstones not only in a safe at his home, but also in a safe elsewhere. He declined to answer questions, which might disclose the whereabouts of a literary work that he was writing, a work that was extremely confidential.

7 Notwithstanding the difficulties presented by Mr de Varda’s evidence, I gained the impression after listening to him, and seeing him in the witness box, that he was a basically honest person. I am satisfied that he believed at least the essential evidence that he gave to the Court. Mr de Varda is an intelligent although volatile and emotional person. My impression of him is that he was not making an exaggerated or false claim. In his conduct in court he was restrained. He withdrew claims for damages, which I suggested, were too remote. Although his statement of claim and the affidavits filed on his behalf suggested fraud on the part of Mr Coates, when asked by me as to whether he was pursuing those claims, he said that he was not, as he would claim fraud only if he had personal knowledge of it. This was a significant concession on Mr de Varda’s part, particularly as the defendants themselves alleged that Mr de Varda’s claim against them was a fraudulent claim. Mr M Pembroke SC, with whom Mr D Williams of Counsel appeared for the Watkins Tapsell submitted that Mr de Varda was a very intelligent man, somewhat erudite, very, very cunning. I did not gain the impression that Mr de Varda was cunning. My impression was that he was genuine. I do not believe that he would have entered into the transaction which he did had he been cunning.

8 That is not to say that I accept all of Mr de Varda’s evidence. I consider that Mr de Varda’s recollection of detail was somewhat deficient and, in weighing up the probabilities of the case, I have taken into account the whole of the evidence.

9 Mr de Varda’s first witness, Mr Patrice Charnay, is of French descent. He was excitable and emotional at times when giving his evidence. However, Mr Charnay had a good appearance and nothing in his evidence suggested to me that he was not telling the truth to the best of his ability. There were strange aspects of his evidence. At the relevant time, 1998, he appears to have been unemployed. His evidence was that, early in 1998, he agreed with Mr de Varda to go Cambodia, which he had never previously visited, and to establish a mill to produce paper from bamboo. He said that he agreed to pay Mr de Varda $1.4 million for the rights to do this and for certain boxes of plans. He also agreed to take a lease from Mr de Varda on the property in Cambodia with which this case is concerned and to do so at a rental of $54,000 per year. As Mr Charnay had no significant funds, it is difficult to see how he expected to be successful in the enterprise. However, allowance has to be made for the fact that Mr Foch took an active part in the discussions which occurred. As I have said, he appears to have been a persuasive person. Mr Charnay executed the lease, dated 5 February, 1998 which was drawn by Mr Coates. There is also in evidence a document entitled “Assignment of Designs”, drawn by another solicitor and dated 27 February 1998, under which Mr Charnay agreed to acquire from Mr de Varda plans and blueprints for the paper mill in Cambodia for the consideration of $600,000. Mr Charnay’s prospects of success in the establishment and running of the paper mill may have been delusional but I am satisfied that the basic story which Mr Charnay told was truthful.

10 The second witness called by Mr de Varda was Mr John Verren. Mr Verren is now an invalid pensioner. He appears to have led an exciting life. He knew many distinguished people including a general who was advisor to the Sultan of Brunei. Mr Verren gave his evidence well but I had the impression when listening to him that he was not always speaking from honest recollection. I gained the impression, which may have little foundation, that Mr Verren was inclined to improve a story. However, he gave evidence that he saw Mr Foch hand over 37 bars of gold to two men, Claude and Michel. I see no sufficient reason to reject that evidence.

11 Both Mr Charnay and Mr Verren acknowledged a financial obligation to Mr de Varda, Mr Verren because in late 1998 he took a parcel of diamonds worth $230,00 overseas on behalf of Mr de Varda and lost the diamonds whilst suffering from an attack of food poisoning. However, notwithstanding this financial obligation, I conclude that their basic evidence, insofar as it relates to Mr de Varda, should be accepted.

12 Although the evidence regarding the proposed paper mill in Cambodia stretches the imagination, it was no more extraordinary than the evidence given in cross-examination with respect to a foundry in the Philippines. Mr Foch, Mr de Varda and Mr Verren have led extraordinary lives. One may puzzle over their activities but there is no sufficient ground to reject the evidence that they engaged in the curious transactions, which were described.

13 The only evidence called on behalf of the defendants was that of Mr Matthew Coates, the partner who dealt with Mr de Varda. Mr Coates’ affidavit evidence was clear and so also was his oral evidence. I consider that, on matters of detail, his evidence is more reliable than that of Mr de Varda. However, aspects of his evidence have led me to conclude that Mr Coates has not faced up to the full truth of the matter and that he has slanted his evidence in his own best interests. One is that, during his cross-examination by Mr de Varda, Mr Coates said that he did not know that foreigners could not own property in Cambodia. Indeed, paragraph 150 of his affidavit said, “I deny that I had knowledge that foreigners are not allowed to own any property in Cambodia”. Yet, right at the start of the subject events, Mr Coates was informed by Mr Foch that only residents of Cambodia could be registered as owners of land in Cambodia. The evidence of Mr Coates to which I have referred was not truthful, at least in the sense of disclosing the whole truth.

14 Another aspect of Mr Coates’ evidence which troubles me is that his affidavit evidence did not include any statement by Mr de Varda as to why he attended Mr Coates' office or as to the nature of the transaction, which Mr Coates was to document. Mr de Varda for his part said that he had spoken to Mr Coates on the previous day by telephone. Mr Coates denied this but did not include in his affidavit any statement by Mr de Varda explaining his presence in the office and what he sought to achieve. I consider that Mr Coates’ evidence on this point was unduly simplistic and that he put out of his mind matters which would favour Mr de Varda’s case.

15 Another aspect of Mr Coates’ evidence which is unsatisfactory is that Mr Coates has not clarified what occurred to the agreement which he has described as “the original title deed”. In a letter of 20 April 1998, he said that he had delivered it to be Mr Foch at his request. If Mr Coates regarded the document as a “title deed”, it is inexplicable that he did not hold it for Mr de Varda, who had purchased the property. There are other unsatisfactory aspects of Mr Coates’ evidence which will be mentioned in the course of these reasons.

16 In my opinion, Mr de Varda’s affidavit and oral evidence presents a plausible and probably story. Mr Coates’ affidavit and oral evidence do not satisfy me as to why Mr de Varda acted as he did or why Mr Coates acted as he did. I would not have expected Mr Varda to act as he did unless the general picture which his evidence conveyed was correct. I would not have expected Mr Coates to have acted as he did, whichever version be correct.

17 Relevant facts began in October 1997 when Mr Coates had a conference with Mr Foch. Mr Coates gave this evidence:

“My first involvement with the property in Cambodia, the property the subject of these proceedings (the “Cambodian Property”), was on 24 October 1997, when I attended Foch in conference. During the course of the conference, Foch said to me words to the following effect:

“I own a property in Cambodia and this is the agreement which I signed when I bought it. I need you to prepare for me an agreement to transfer one-half of my interest in this property in Cambodia to Nick Van de Borgh.”

18 The agreement referred to read as follows:

“AGREEMENT

THIS AGREEMENT made the 10th day of November, 1992

Between :

No

103, Rue 105 Phnom Penh, Cambodia

(the “Agent”), and

(2) Mr Charles FOCH of 96 Siandra Drive, Kareela
N.S.W. 2232 - AUSTRALIA
(the ‘Owner’).

WHEREAS, the Owner and the Agent wish to enter into this Agreement for the purposes of recording the transactions between them as hereinafter set forth concerning the holding of the title of certain property (‘the Property‘).

NOW, IT IS HEREBY AGREED as follows:

1. INTERPRETATION.

‘Property’ means The land plot situated at No 16 A Street 360 Phnom Penh Kingdom of Cambodia as represented by the title deeds and/or documents as officially or duly registered with the Government Authority, together with the building No. G.35 which is constructed thereon, including without limitation all the decoration, furniture, equipment affixed or placed therein, presently or in the future, and which title deeds or title documents are represented in the documents attached hereto and made a part hereof.

‘Title Document’ means The documents of ownership of the title representing the Property as herein defined.

‘Government Authority’ means Any body or agency or entity of the government of Cambodia empowered to effect or grant the registration of the title to the Property and/or recognition of the holding of the Property as herein defined.

2. APPOINTMENT OF AGENT AS TITLE HOLDER .

2.1 The Owner hereby appoints the Agent to hold the Property on the Owner’s behalf and the Agent accepts the appointment thereof.

2.2 It is agreed by the Agent that no consideration shall be paid to the Agent in relation to the appointment hereunder and this Agreement shall not be terminated or assigned to any other person without the approval of the Owner.

3. OWNERSHIP OF THE PROPERTY .

It is hereby acknowledged that the owner is the true owner of the Property and has already paid the sum of US $ _____ ( 45,015.00 United States Dollars ) to the Seller of the Property to acquire it and the Owner is in the process of making alteration and additions to the Property at the estimated sum of US $ 20,881 ( 20,881.00 United States Dollars); being the value at the time of acquisition of the Property.

4. COVENANTS OF THE AGENT .

The Agent hereby covenants with the Owner and the Owner’s executor, administrator, successors and assigns as follows :

4.1 The Agent shall (at all times and from time to time hereafter) deal with the transfer and disposal of the property, any proceeds or gains thereof, and any rights or privileges now or hereafter appertaining thereto in accordance in all respects with the instructions given to the Agent by the Owner and not otherwise.

4.2 The Agent shall (at all times and from time to time) hereafter, whenever requested by the Owner, sign, execute, and deliver any transfer documents or any other instruments or documents relating to the Property or any such proceeds, gains rights, privileges as submitted to the Agent by the Owner.

4.3 The Agent shall only by instrument in writing alter or vary all or any of the trusts and powers herein declared whenever the Owner directs the Agent to do so in writing.

5. DURATION OF AGREEMENT .

The term of this Agreement shall continue to apply to the parties hereto until the following :

(a) The transfer of title to the Property to the Owner or any other person designated by the owner

6. MISCELLANEOUS .

6.1 This Agreement shall be binding upon and inure to the benefit of the Owner and his respective successor and assigns. The Agent shall not assign this Agreement or any rights or obligations hereunder without the express written consent of the Owner.
6.2 The Agent warrants and represents to the Owner that he/she is legally free to enter into this Agreement, that the execution hereof has been duly authorized by the Government Authority and that the terms and conditions of this Agreement and each party’s obligations hereunder do not conflict with or violate any terms or conditions of any other agreements to which such party is bound.”

19 That document was executed by the parties and their thumb prints affixed.

20 Mr Coates gave evidence that his conversation with Mr Foch proceeded as follows:

MGC8

“I don’t know anything about Cambodian law”

Foch replied in words to the following effect:

“All I need you to do is to make changes to the existing agreement. I had it prepared by an expert in Cambodia when I bought it. It is prepared in this way because foreigners cannot own an interest in property in Cambodia directly. This is the way they structure their land ownership where foreigners are involved. It is held in the name of a local citizen on the foreigner’s behalf, and this is the accepted practice.”

I said words to the following effect:

I can prepare the document but I have no knowledge of Cambodian law and have no idea whether this document achieves what you want.”

Foch said words to the following effect:

I understand but I would still ask you to prepare the document.”

21 One can see that the agreement was drawn in the circumstance that only a resident could own land in Cambodia. It may be assumed that the subject property was registered in the names of Cambodian residents, presumably Mr and Mrs Sum. The agreement described the property as the land plot represented by “the title deeds and/or documents as officially or duly registered with the Government Authority.” The agreement itself was an agency agreement imposing personal obligations on Mr and Mrs Sum to hold the property on behalf of “the Owner”, as Mr Foch was described.

22 Provided that the Cambodian legislation dealt merely with ownership of land and not with the holding of interests in land in Cambodia, there would be reason to think that the agreement could impose personal obligations upon Mr and Mrs Sum which could be enforced in the courts of Cambodia. Such concepts are familiar concepts in Australian law.

23 The transaction with Mr Van de Borgh did not proceed.

24 During early January 1998, Mr Foch and Mr de Varda discussed the purchase by Mr de Varda of a 50 percent interest in the subject property. Mr de Varda agreed to purchase the interest for the equivalent of US $195,000. Mr Foch informed Mr de Varda that “Mathew has the title deeds in his office and can prepare the legal documents”. That was satisfactory to Mr de Varda as Watkins Tapsell acted for him in respect of a claim arising from a motor vehicle accident.

25 On 18 January 1998, Mr de Varda received this letter from Mr Foch:

He said it is not necessary for you to appoint another solicitor, he can handle the whole matter and act for you too, it will be quicker this way.

26 On 19 January 1998, Mr Foch and Mr de Varda attended at Mr Coates' office. Mr Coates’ affidavit evidence stated, inter alia:

“When Foch and de Varda attended my office on 19 January 1998, I met with both of them together. Foch said words to the following effect:

“We really need to have it all done today. It shouldn’t be too difficult to change the old document, should it?”

I then said words to the following effect:

“Why do you need it today?”

Foch replied in words to the following effect:

we can go down and transfer over the gold which Joseph is paying, this afternoon.”

I then said words to the following effect:

I can make the amendments to the agreement now but I want to clear up my role. Joseph, you understand that I act for Charles and not you in this transaction. Do you understand that?”

De Varda then said words to the following effect:

“Yes, but Charles has told me you would protect my interests.”

I said to de Varda words to the following effect:

“Joseph, I have no knowledge of Cambodian law. All I am doing is reproducing this document as Charles has requested. I have no idea whether it will achieve the result you want and transfer ownership to you. I do not know if it is enforceable under Cambodian law. I am looking after Charles’ interests. Do you understand that?”

De Varda then said to me words to the following effect:

“Yes, but it is very simple and we have agreed we don’t need another lawyer.”

I said words to the following effect:

“I will go and get my secretary to type up the agreements and the letters you want straight away.”

MGC19

MGC20

MGC19

MGC20

Given to client 19/1/98”

“If you give me the originals I will send them off. I want this to happen straight away.”

De Varda said words to the following effect:

We are going down to the bank to transfer the gold over straight away. But I have nothing confirming I have handed it over. Can you prepare a receipt and give it to Charles so that when I hand over the gold I can take the receipt from Charles.”

I said words to the following effect:

“Certainly. I’ll just need the particulars of what you want on it.”

D”.

27 The two agreements which were executed were based on the agreement which I have set out above. One was an agreement between Mr Foch and Mr and Mrs Sum. The other was an agreement between Mr de Varda and Mr and Mrs Sum. Mr Foch signed the one and Mr de Varda signed the other. However, in Mr de Varda’s agreement, details of Mr Foch were set out in the first paragraph and paragraph 3 read:

“3 OWNERSHIP OF THE PROPERTY

3.1 It is hereby acknowledged that the Agent holds de Varda’s interest in the Property on behalf of de Varda.

3.2 It is hereby acknowledged that de Varda and Foch are the true owners of the property as joint owners in equal shares.

3.3 de Varda agreed to pay Foch, upon the execution of this agreement the sum equivalent to US $195,000.00 in Gold Bullion to acquire a one half interest in the Property, being the value of a one half interest in the Property at the time of acquisition by de Varda.”

28 Two letters were drafted and signed by Mr Coates. One was a letter to Mr and Mrs Sum enclosing copies of the agreements between themselves and Mr de Varda and Mr Foch. The other was a letter to the Australian Embassy in Cambodia to say that Watkins Tapsell had arranged for Mr and Mrs Sum to contact the Embassy to arrange a convenient time to sign and have witnessed the enclosed agreements.

29 The respective agreements drawn up by Mr Coates were signed by Mr Foch or Mr de Varda, their signatures being witnessed by Mr Coates. However, they were not at that stage signed by Mr and Mrs Sum. Mr Coates drew up no document which was an agreement between Mr Foch and Mr de Varda. He drew up no document which constituted a declaration of trust by Mr Foch in favour of Mr de Varda. And he drew up no document which was intended to be a transfer of land from Mr Foch to Mr de Varda. Mr Coates did not intend to create any such document and no document was submitted for stamping.

30 In his evidence Mr de Varda gave a different version of the conversation with Mr Coates. For example Mr de Varda deposed

“I said to Coates ‘Do I need another solicitor to act for me?’ He said ‘No, I can act for both of you.’

I then proceeded to scan through the document and I said to Coates ‘Why do I have to enter into an Agreement with agents?’ Coates replied ‘You need an agent to handle your interest in the property there.’ I then said ‘Well, you are the solicitor, I’ll leave it to you.’ I then proceeded to commence reading through the agreement and after I had finished reading the first page I said to Coates ‘You have mentioned here that the title deeds are attached to this agreement. I can’t see any annexures.’ He then said ‘We have the title deeds and documents in storage.’ I replied ‘What about the searches?’ Coates said ‘Everything is in order’.”

31 I accept Mr Coates’ evidence that he stated that he acted for Mr Foch. The letters written by Mr Coates and the manner in which the account records were prepared confirm that Mr Coates intended to act only for Mr Foch and that he conveyed that point to Mr de Varda. However, there is no reason to doubt the conversation relating to title deeds. Mr Coates apparently considered that the agreement of 2 November 1997 was an original title deed. It seems that, at that stage, he had the agreement in his possession.

32 Later on the same day, 19 January 1998, Mr de Varda handed over to Mr Foch twenty-one 1 kg bars of gold bullion and $1,260, the total being the equivalent of US $195,000.

33 On 21 January 1998, after making enquiries, Mr de Varda wrote to the Australian Embassy a letter which read, inter alia:

“In due course you will receive by priority mail documents from my solicitor Mr. Matthew Coates of Watkins Tapsell who represents my interests in the acquisition of property in Cambodia.

I spoke with the Foreign Affairs Department and have been advised to seek the Australian Consul’s assistance in the verification of the signatories of two Cambodian citizens.

I require the witnessing of the signing of the documents and the necessary implementation of the thumb prints by the signing parties to ensure a bona fide execution of the agreements.

Mr Chan Sum, the Vice President of the Taxation Department at the Ministry of Economics & finance and his wife Mrs. Sum have been duly notified that their signatures are required for the execution of the documents.

After the signing of the documents by Mr. and Mrs Sum, I respectfully request a facsimile of the signed agreements to be sent to the Sydney fax number (02) 9744 6747 and the return of the originals to Watkins Tapsell as soon as possible.

You assistance in the execution of the documents is greatly appreciated. Thanking you for your cooperation in this matter.”

34 On 22 January 1998, Mr Foch persuaded Mr de Varda to purchase the remaining 50 percent interest in the property. Mr Foch and Mr de Varda saw Mr Coates again on 23 January 1998. Mr Coates’ affidavit stated inter alia:

“Foch and de Varda attended my office on 23 January 1998. At the meeting, as I reviewed the documents I realised that in fact there was no need for Foch to be a party. On that basis I said to de Varda and Foch when we had sat down to sign the document, words to the following effect:

I think that we don’t need Charles to be a party because it is an agency agreement between the Sums and Joseph only, and Charles no long has any interest in the property. I think I should redraft this to make it simpler, consistent with the original agreement. Is that alright?”

Neither de Varda nor Foch had any objection.

I prepared an agency agreement between Mr and Mrs Sum and de Varda in accordance with the instructions I had received from my client Foch. The document was in the form of an acknowledgment of ownership and not a form of transfer. Based on what Foch had instructed me, Foch was no longer holding any interest in the land. This is the format adopted from the original precedent.”

35 In his affidavit, Mr de Varda, said inter alia:

“I said to Coates ‘as I don’t know the Cambodian agents personally, are they still willing to do the work for me, now that Charles is no longer involved with the property or do I have to find other agents?’ He said ‘they will still be the agents.’ I said ‘if I’m not happy with them can I dismiss them?.’. He said ‘Yes.’ I then proceeded to commence reading through the agreement and after I had finished reading Clause 2.2 I said to Coates ‘you have here that no consideration shall be paid to the agent.’ He said ‘you can pay them a minimal fee.’ When I had finished reading I said to Coates ‘Don’t I have to sign a sale agreement with Charles?’ He hesitated and then looked at the documents and said ‘I’ll amend that now.’ He left the conference room with the two sets of the agreements. After a short while Coates returned with only one set of the agreements and handed it to me. The agreement was between Mr Chan Sum and Mrs. Chan Sum and myself and Coates said to me ‘You’ll see I have included Charles’ name in your agreement. It is not necessary for Charles to have a separate agreement’.”

36 The agreement which Mr Coates prepared was one which was expressed to be between Mr and Mrs Sum and Mr de Varda. Under the terms of the agreement, the agents were to hold the property on behalf of Mr de Varda. However, the agreement commenced with a recital that Mr Foch, Mr de Varda and the agents wished to enter into an agreement for the purpose of recording the transactions between them. Clause 1 described Mr Foch and clause 3 included the following paragraphs:

“3.3 Foch paid an undisclosed sum to the seller of the Property, being the value at the time of such acquisition.

3.4 de Varda paid Foch the sum equivalent to US $195,000.00 in Gold Bullion to acquire one half interest in the property on 19 January 1998.

3.5 de Varda agreed to pay Foch, upon the execution of this agreement the sum equivalent to US $195,000.00 in Gold Bullion to acquire the remaining one half interest of Foch in the Property, being the value of a one half interest in the Property at the time of acquisition by de Varda”.

37 This agreement was executed by Mr de Varda, and witnessed by Mr Coates. A copy was handed to Mr de Varda together with a short letter to Mr and Mrs Sum and a letter to the Australian Embassy in Cambodia. If the document was intended to be an agreement between Mr Foch and Mr de Varda, it was in ineffective for that purpose.

38 On the faith of that document, Mr de Varda handed to Mr Foch twenty-one bars of gold bullion and $2,258, the equivalent of $US195,000.

39 On 28 January Mr Coates wrote to Mr de Varda a letter in which he said,

“YOUR AGREEMENT WITH SUM AND FOCH

We refer to the above agreement and advise that in relation to the transfer of the Cambodian property we understand that the transfer is now completed.”

40 On the same day, 28 January 1998, Mr Coates prepared an agreement between Mr Foch and Mr Verren which, unbeknown to Mr Coates, recorded a sham transaction. Mr Verren purported to transfer a 24 percent interest in a syndicate with salvage rights to a sunken vessel to the north of the Philippines to Mr Foch in consideration of Mr Foch releasing and transferring forty-two 1 kg bars of gold to the syndicate. The agreement referred to “42 bars of gold in 1 kilogram batches, 99.99 pure, with certificates and access authority … already established”. The forty-two bars of gold represented the gold which Mr de Varda had handed over to Mr Foch, twenty-one bars for each 50 percent of the Cambodian property. The agreement was intended to be used to dissuade Mr de Varda from seeking to recover the gold.

41 On 30 January 1999, Mr de Varda rang Mr Coates to say that Mr Charnay was going to Cambodia and would take a lease of the property. Mr Coates was instructed to prepare a lease showing a rent of $54,000 payable monthly in advance at $4,500 per month. Mr Coates prepared such a lease in accordance with New South Wales practice although he said that the lease may not be enforceable in Cambodia. The lease was signed by Mr de Varda and Mr Charnay. Stamp duty and professional costs of $850 were paid.

42 As a result of telephone calls made by Mr Charnay to Cambodia early in March 1998 it was ascertained that the property had tenants in it. On 5 March 1998, Mr de Varda rang Mr Coates about the problem and Mr Coates suggested that Mr Charnay should chase up the documents with the Australian Consulate. On about 15 March 1998, it was ascertained by Mr de Varda that Mr and Mrs Sum disputed Mr Foch’s interest in the property.

43 Affairs became even more confused when Mr de Varda sought the title deed which he understood Mr Coates to be holding. Mr Coates wrote to Mr de Varda on 2 April 1998:

“AGREEMENT WITH SUM

We are the Solicitors for Charles Foch who was the previous owner of the property known as 16A Street 360 Phnom Penh, Kingdom of Cambodia together with building No.52A G.35.

I previously held in my possession the original title deed evidencing the ownership of this property by my client. I have searched my premises, file and safe custody records and am unable to locate the said title deed. Our client has indicated that he also cannot locate the said title deed. We believe the title deed has been lost”.

44 On 3 April 1998, Mr Coates wrote a letter as follows:

“AGREEMENT WITH SUM

As far as I am aware the title documents for the property at 16A Street 360 Phnom Penh, Kingdom of Cambodia are registered in accordance with the Land Titles Office registration procedures of the Government Authority in Cambodia”.

45 On 6 April 1998, Mr Coates wrote the following letter:

“AGREEMENT WITH SUM

We are instructed that the original title deed of the property at 16A Street 360 Phnom Penh, Kingdom of Cambodia was registered in the name of Charles Foch as owner”.

46 On 15 April 1998, there was a telephone call from Mr de Varda to Mr Coates. Mr Coates said that, given his lack of knowledge Cambodian law, he could not apply for a replacement title deed.

47 On 20 April 1998 Mr Coates wrote to Mr de Varda stating, inter alia:

“As I have indicated to you previously I have always acted for Charles in relation to this transaction and not for yourself. Also, as I explained to Charles and yourself, my retainer was limited to the preparation of a document based on the original document provided to me by my client. As I stated, I had no knowledge of Cambodian Law and could not give advice as to whether the document achieved the result that was intended.”

48 Although Mr de Varda did not proceed with any allegation of fraud against Mr Coates, the defendants, the partners in Watkins Tapsell, contend that Mr de Varda’s allegation that he paid to Mr Foch twenty-one 1 kg bars of gold and $1,260 on 19 January 1998 and on 23 January 1998, another twenty-one bars of gold and $2,258, in each case the consideration being the equivalent of $US195,000, was fraudulent and that the whole series of transactions, meetings, agreements etc, to which I have referred, occurred as a result of a conspiracy by Mr Foch, Mr de Varda, and Mr Verren to defraud Watkins Tapsell. Presumably, Mr Charnay’s name must be added by implication to the list of conspirators.

49 I do not propose to recite the evidence concerning the payment of the gold bullion. It is complex and it is set out in the transcript. The story was made more confused than it ought to have been by the fact that Mr de Varda had more than one safe and did not wish to disclose the whereabouts of the safe from which he obtained the gold bullion. He feared that disclosure of addresses and names would result in the disclosure of the whereabouts of the extremely confidential writings on which he says he is engaged. Nor was the story clarified by the fact that a relative who died recently assisted Mr de Varda in obtaining the gold from the safe.

50 The ultimate story that emerged was a complicated one but it does not seem to me to be improbable.

51 Mr de Varda kept no records. He said that he acquired the bars of gold many years ago and that the dealer who sold the gold, Australian Bullion Company (NSW) Pty Limited, no longer had records going back to that time. Mr de Varda gave evidence that, after leaving Mr Coates office on 19 January, 1998, he drove Mr Foch to the home of Mr Charnay, where Mr Foch was then living. Mr de Varda then went to his own home where he picked up the relative. They both went elsewhere and collected twenty-one 1 kg bars of gold. They then drove to Mr Charnay’s house. Mr de Varda handed over the gold plus gold certificates. Mr Charnay was present. Mr Charnay gave evidence that he saw the gold in the bag and, while the transaction was occurring, saw a gold certificate or gold certificates. Mr de Varda later drove Mr Foch to other premises where he wished to leave the gold. On 23 January 1998, the procedure was a little different, but again Mr de Varda and the relative collected the gold and it was handed to Mr Foch at Mr Charnay’s home in Mr Charnay’s presence.

52 This story is unusual but it is not inherently improbable. I am satisfied that the facts were substantially as Mr de Varda and Mr Charnay described them. The story is confirmed by the receipts signed by Mr Foch. In each transaction, a receipt was prepared by Mr Coates. The receipt of 19 January 1998 read as follows:

“RECEIPT

I Charles Foch of 30/78 Albert Road, Strathfield, NSW, 2135, Australia hereby acknowledge receipt from Mr Joseph de Varda the amount of US $195,000.00 (one hundred and ninety five thousand US dollars) made up as follows:

1. 21 bars of 1 (one) kilogram of pure bullion gold

2. Cash: $1,260.00 (one thousand two hundred and twenty six Australian dollars).”

53 The receipt was signed by Mr Foch and Mr Coates signed as witness. It was dated 19 January 1998. The receipt was handed to Mr de Varda by Mr Foch when the gold and cash had been handed over. However, it was then perceived that the typed words were incorrect, the words “twenty six” being inserted instead of the word “sixty”. Mr Foch and Mr de Varda therefore went to a Justice of the Peace who drew up a new receipt. The receipt was signed by Mr Foch and the Justice of the Peace affixed her signature as witness. It was given to Mr de Varda. On 23 January, 1998, Mr Coates drew up a receipt for 21 bars of gold and cash of $2,258, the equivalent of US$195,000. The receipt was signed by Mr Foch and witnessed by Mr Coates. It was handed to Mr de Varda on payment of the purchase price.

54 Mr Verren gave evidence that, on 29 January 1998, he drove Mr Foch to meet two people, Michel and Claude, who had served with Mr Foch in L'Organisation Armee Secrete. Mr Foch gave them a large quantity of gold bars and gold certificates and a letter, a copy of which, translated by an accredited translator, was attached to Mr Verren’s affidavit. Mr Verren said that he saw the two men examining the gold and the gold certificates in the back seat of his car and that they took the gold bars and the certificates with them after having a discussion in French with Mr Foch which Mr Verren did not understand. Subsequently, Mr Verren found the letter while he was cleaning out his car. He showed it to Mr de Varda who could read French. The letter was typed in the French language with, perhaps, the graves, acutes and circumflexes added by hand. It was signed by Mr Foch. The translation included the following passages:

“You have already seized most of my assets and all I have left to give you is the price fetched for my building and land. You have accused me of refusing to give you the original title deeds and to have been stalling for time; in fact, these title deeds were never in my name, nor even pursuant to Cambodian Law. In this compromising situation, I heeded the advice of the lawyer you sent me, but, after a while, he refused to handle the case. I then turned to my Australian lawyer who accepted to draft a (phoney) contract of sale. With his help, I proceeded without any difficulty in selling the building for the value of 42 (forty-two) gold bars. I am giving you thirty-seven of them, and the balance, representing 60,000 Australian dollars, was used to bribe the lawyer.

To my surprise, I have just discovered that the holder of the title deeds betrayed me, raising a mortgage on the building without my knowledge and selling the building and the land last year, not forwarding any payment”.

55 The $60,000 mentioned in the letter was also the subject of evidence by Mr Verren who said that he had seen Mr Foch hand over a packet of money to Mr Coates. Mr de Varda has, very properly, not relied upon that evidence.

56 Whether the letter of 29 January 1998 written in French, was, like the salvage agreement, designed to mislead may be debatable. If it was designed to mislead, it remains unclear whether it was intended to deceive Claude and Michel or Mr de Varda.

57 As I mentioned, a principal contention put on behalf of Watkins Tapsell is that the whole set of transactions was designed to defraud Watkins Tapsell. I regard this contention as being as large a delusion as any of the delusions which were suggested by Mr Pembroke on behalf of the defendants during the course of the proceedings. The subject transactions commenced with the production by Mr Foch of the agreement of 10 November 1992 which held the signatures of Mr and Mrs Sum and Mr Foch and their thumb prints. It has not been suggested that there was not a property in Cambodia in which Mr and Mrs Sum and Mr Foch had some involvement or that Mr and Mrs Chan Sum are not genuine persons. Mr de Varda indeed intended to call Mr Chan Sum as a witness until I persuaded him that, for reasons of cost and delay, he should not do so. The defendants did not seek to call Mr Sum to say that the signatures of Mr and Mrs Sum did not appear on the original agreement of 10 November 1992. Mr de Varda was persuaded first, to acquire a fifty percent interest in and later the totality of the property. There was the letter of 18 January 1998 from Mr Foch to Mr de Varda. Mr Coates was asked to and drew the agreements to which I have referred. There were the letters to the Australian Embassy and communications with the Australian Embassy. There was the lease from Mr de Varda to Mr Charnay. There was the assignment of design rights prepared by another solicitor and executed by Mr Charnay and Mr de Varda. There were letters from Mr de Varda and telephone messages which, on their face, appear genuine. There was the agreement between Mr Foch and Mr Verren which Mr Verren explained as being a sham designed to assist Mr Foch to defraud Mr de Varda. There was the letter written by Mr Foch on 29 January 1998. It appears to me that the facts are much too complex to be the subject of a conspiracy by Mr Foch, Mr de Varda, Mr Verren and Mr Charnay to defraud Watkins Tapsell. Amongst other factors, if Watkins Tapsell were to be defrauded, the fraud would only have worked if Mr Coates was negligent.

58 Mr Pembroke submitted that there was evidence of conspiracy in the fact that, after the transactions occurred, Mr de Varda sought from Mr Coates a bill for the work done. Mr Pembroke submitted that Mr de Varda would only have sought such an account for the purpose of obtaining an admission on the part of Mr Coates that he had acted as solicitor for Mr de Varda.

59 This aspect of the case was confused by the fact that Mr de Varda’s evidence was that Mr Coates said he would act for Mr de Varda. I reject that evidence. I also reject Mr de Varda’s evidence that he was charged $300 on account at each of the conferences. Certainly Mr de Varda paid $300 on account at each conference. However, the receipts that were given to him were consistent with Mr Coate’s contention that his client was Mr Foch. Thus the receipt of 19 January 1998 described the subject of the payment as “Re: Costs Agreement with Charles Foch”.

60 Mr Coates did not keep diary notes of the two conferences of 19 and 23 January 1998. An accounting record notes “Discussion with clients on 19 January 1998.” However Mr Coates said that notation was an error and I accept his evidence in that respect. All the other accounting entries are consistent with the client being Mr Foch. Mr de Varda was of course the client so far as the lease to Mr Charnay was concerned.

61 There were a number of telephone calls which are relevant. I shall only set out two. On 18 March 1998, an employee of Watkins Tapsell recorded:

“18/3/98

Joseph de Varda telephoned.

He has paid $600. Can we send final account which will include searches etc & then he is under the impression that he will not have to pay any further costs & it was not his fault”.

62 On the same day, Mr Coates made the following note of a telephone call from Mr Varda:

“18/3

Tel. From Joseph de Varda

Send a bill for the work that was done in preparing the documents. But doesn’t want to pay for the new documents that are to be prepared. I explained to him I acted for Charles in this transaction so Bill will be addressed to Charles. He said Charles told me you would look after both our interests I said Charles was my client, and I confirmed that with you at the time and explained I knew nothing of Cambodian law and merely prepared document as Charles requested. He said send me a bill for work you did for me & I’ll pay for it, as I won’t pay for work you did for Charles. I said I’d look at it & let him know”.

63 Mr Pembroke’s submission was that Mr de Varda was seeking final bills so that he could implicate Watkins Tapsell in his fraudulent claim for damages by having Watkins Tapsell admit that they had acted for him, Mr de Varda. I do not read the notes of telephone calls in that way. It seems to me that the telephone calls occurred at a time when Mr de Varda was not clear as to what had gone wrong with his purchase of the Cambodian property. Indeed, the underlying cause of the problem was never the subject of evidence before the Court. Mr de Varda, at that time, regarded himself as under an obligation to pay the Watkins Tapsell for work. By seeking a final bill, he was making it clear that, as the transaction had fallen through, he did want to be charged for matters that ought not to be billed to his account. I see no evidence of fraud in these telephone conversations.

64 In this circumstance, there is no adequate reason to reject the evidence given as to the payment of the gold bullion and cash, the equivalent of US$390,000. And there is no adequate reason to reject Mr de Varda’s evidence that he was a purchaser of Mr Foch’s interest in the Cambodian property and that he relied upon Mr Coates to exercise proper care and skill as a solicitor.

65 On 19 January 1998, when Mr de Varda and Mr Foch attended on Mr Coates, both were clients of Watkins Tapsell. They had orally agreed between them that Mr de Varda would purchase and Mr Foch would sell a 50% interest in the Cambodian property. There is missing from Mr Coates’ affidavit, and from his oral evidence in chief, any description as to what Mr de Varda and Mr Coates said they wished to achieve. However, Mr Coates gave this answer in answer to a question from the Bench:

“Q. I just want to ask you a little bit more about what happened when they came in to see you on the 19th. I think I asked you a little more about this earlier, but Mr Foch and Mr de Varda came in to see you, and presumably they told you, Mr Foch or Mr de Varda came in and told you what they were seeking to achieve?

A. Yes, your Honour.

Q. And what was that?

A. On the 19th it was a transfer of a 50 per cent interest in the property in Cambodia from Mr Foch to Mr de Varda”.

66 Needless to say, Mr Coates understood that Mr de Varda and Mr Foch had come to see him as his capacity as a solicitor. Mr Coates was aware that Mr de Varda had interests that needed to be protected. Mr Coates gave this evidence:

“A. In response to a question that I put to him which was, ‘Do you understand that I am acting for Charles and not you”, he said, “yes but Charles said that you would protect my interests” and I interpreted from that response that he understood that his interests were at risk and need to be protected”.

67 Mr de Varda and Mr Foch both understood and Mr Coates, being a solicitor, must have understood that the nature of the transaction between Mr de Varda and Mr Foch was such that legal assistance was required.

68 Mr de Varda’s statement indicated that he was looking to Mr Coates as a solicitor to protect his interests. Having been informed that Mr Coates was acting only for Mr Foch, Mr de Varda accepted that situation but only, on Mr Coates' evidence, after saying “we don’t need another lawyer”. That statement was indicative that Mr de Varda relied upon Mr Coates as a solicitor to do the right thing, even if formally Mr Coates acted only for Mr Foch.

69 Mr Pembroke submitted that, when Mr Coates said that he was acting for Mr Foch, he thereby conveyed to Mr de Varda that he was not looking after Mr de Varda’s interests. I do not draw that inference. It appears to me that, by continuing to deal with Mr de Varda, Mr Coates conveyed the impression that, while Mr Foch was his client, he was nevertheless serving Mr de Varda’s interests.

70 The course of events supports the inference that Mr Coates said to Mr Foch on 18 January 1998 that is was not necessary for Mr de Varda to appoint another solicitor, for that point was made in Mr Foch’s letter to Mr de Varda of 18 January 1998 and Mr de Varda was content to leave the matter with Mr Coates.

71 The course of events supports the inference that, on 19 January 1998, Mr Coates either expressly agreed that it was not necessary to appoint another solicitor or impliedly approved of Mr de Varda’s statement to that effect. Mr Coates did not assert the contrary. He did not advise Mr de Varda to obtain independent advice. He did not send Mr de Varda away. He continued to deal with him.

72 Mr Coates gave evidence that Mr de Varda elected not to have another lawyer:

“Q. When Mr de Varda responded with the word which you have recorded in these terms, ‘Yes but it is very simple and we have agreed that we do not need another lawyer’, how did you understand that response?

A. I understood him to be saying that the document I had prepare and the role I was playing was simple, but I also understood him to be saying again without my prompting that he understood that there was a possible solution to a conflict position of obtaining the advice of a separate lawyer and that he had elected not to.

Q. Did you form the view at all that he was the sort of person who I am sure you have come across in your practice who didn’t want to understand or didn’t want to accept your explanation?

A. I certainly did not”

73 However, if Mr Coates had been a competent lawyer exercising reasonable care and skill he would have known that the task was not a simple one and that Mr de Varda did need an independent lawyer to act for him. In my opinion, Mr Coates did know, in relation to the purchase of an interest in land in Cambodia, that Mr de Varda needed independent legal advice and that the matter was not simple. He had earlier been informed that foreigners could not own land in Cambodia and he had before him the agreement or a copy of the agreement of 10 November 1992, which was an agency agreement between Mr Foch and Mr and Mrs Sum. That is not a context which a New South Wales lawyer would regard as simple.

74 It was suggested by Mr Pembroke that Mr de Varda made an informed decision about his own interests. Mr Coates gave this evidence in answer to a question from his Counsel:

“Q. Did you think in any respect that he was incapable of making an informed decision in relation to the protection of his own interests?

A. No I did not”.

75 However, there was no information before Mr Coates which ought to have suggested to Mr Coates that Mr de Varda was making an informed decision in relation to the protection of his own interests. Mr Coates does not appear to have made any inquiry as to what Mr de Varda knew about the matter. There is totally missing from Mr Coates’ affidavit and his evidence in chief any inquiry by him as to what Mr de Varda understood about the transaction or intended it to be.

76 Mr de Varda gave evidence that he expected that Mr Coates would have searched the title. There are confirmatory indications that Mr de Varda expected that searches would have been done. For example, there is a note taken by an employee of Watkins Tapsell which records Mr de Varda saying by telephone on 18 March 1998 “Can we send final account which will include searches etc.” Searches were also mentioned by Mr de Varda in a conversation he had with Mr Coates’ secretary, Natalie, on 2 April, 1998. Natalie was not called to deny Mr de Varda’s evidence. Mr Coates’ evidence was that he did not make a title search.

77 I am satisfied that that, notwithstanding that Mr Coates said that he was acting for Mr Foch alone, he conveyed to Mr de Varda that he would act in his interests. This conclusion arises from the probability of what occurred and from the sequence of events. It is confirmed by Mr Coates’ letter to Mr de Varda of 28 January 1988 which said, inter alia:

“As you will recall we confirmed with you that although we were prepared to assist you in the preparation of the documents relating to the transfer of the Cambodian property we were acting for Charles as our client. In addition we confirmed that as we were not expert in Cambodian Property Law we were unable to advise either you or Charles whether the document we had prepared effectively transferred the rights in the property. We note that in spite of this, you felt confident that the document achieved the result you wished and you instructed us to proceed. We have confirmed these matters with Charles as well.

If you require any further assistance please do not hesitate to contact the writer.” (emphasis added)

78 In that letter, Mr Coates acknowledged that he had confirmed with Mr de Varda that he was prepared to assist him. I am satisfied that Mr Coates said words to the effect that he would assist Mr de Varda and Mr Foch. Mr de Varda continued to rely upon and trust Mr Coates and acted on the faith of the documents which Mr Coates produced. Indeed, Mr de Varda’s present recollection is that Mr Coates said that he would act for him:

79 In the light of the agreement of 23 January 1998, Mr Coates' contention that he was acting solely in the interests of Mr Foch reaches the implausible. Notwithstanding the recital, the agreement drawn was not an agreement between Mr Foch, Mr de Varda and Mr and Mrs Sum. It was an agreement between Mr de Varda and Mr and Mrs Sum. Never at any stage was a document drawn up which purported to be an agreement between Mr Foch and Mr de Varda. Mr Foch did not sign a declaration of trust, nor did he sign a transfer of any interest which he had in the land. Mr Coates drew up an agreement between Mr de Varda and Mr and Mrs Sum and Mr de Varda relied upon him to use his legal skill and ability in preparing whatever document was appropriate. It was on the faith of that document that Mr de Varda paid over the purchase price to Mr Foch.

80 In cross-examination by Mr de Varda, Mr Coates said:

“HIS HONOUR: You have fairly put the point but you just want to ask him whether he advised you to obtain independent legal advice.

Q. Did you?

A. No I didn’t advise you to obtain any legal advice.

De VARDA: Why didn’t you?

A. Because I formed the opinion that you were aware of the risks of this transaction and that I explained those risks to you and that you as a commercially aware person“.

81 There is nothing in Mr Coates’ affidavit or evidence in chief which amounts to an explanation to Mr de Varda of the risks involved. The only explanation of risk that was given by Mr Coates was summarised in the letter of 28 January 1998 from Mr Coates to Mr de Varda. The warning was that as Mr Coates was not familiar with Cambodian law, he could not say the documents he drew “effectively transferred the rights in the property”. What he did not warn was that the documents did not transfer any rights or purport to do so and that they did not provide a basis on which the purchase price should be paid.

82 In a letter to Mr Foch of 12 November 1997, in relation to the proposed transaction between Mr Foch and Mr Van De Borgh, Mr Coates wrote:

“We have merely reproduced the documents, as you instructed, from the precedent you provided. We do not have any knowledge of Cambodian law. You should seek legal advice from a lawyer familiar with Cambodian law to confirm that the agreements are satisfactory and enforceable under Cambodian law”.

83 In his evidence in chief, Mr Coates gave this evidence:

“Q. What did you intend to convey by your statement that you have ‘merely reproduced the documents’?

A. That I haven’t applied my mind to the value as a legal service to the document and I merely copied the document from a precedent.

…

Q. What was the sense in which you used the expression ‘reproducing this document’ on that occasion?

A. I was merely copying the document and I used that in the same that I had used it in the previous correspondence”.

84 However, Mr Coates did not merely reproduce the agreement of 10 November 1992. In the first instance, the agreement of 10 November 1992 was an agreement duly executed by all parties. The documents which Mr Coates handed over were not agreements, for they were signed by one party only. Secondly, with the two documents of 19 January 1998, a member of Watkins Tapsell exercised his or her legal skills in expressing the concept of a fifty percent interest. That interest was expressed by the paragraph which acknowledged that “de Varda and Foch are the two owners of the Property as tenants in common in equal shares”. How the draftsman expected that that concept of English land law would be enforced in the courts of Cambodia is hard to imagine. And how an agency agreement expressing personal obligations by Mr and Mrs Sum to the owner of the property could be divided into two agreements each with the owner being a tenant in common in equal shares is equally difficult to imagine.

85 The agreement of 23 November 1998 was also incompetently drawn for it recited that Mr Foch, Mr de Varda and Mr and Mrs Sum wish to enter into the agreement for the purposes of recording the transactions between them. Yet Mr Foch was not a party to the document. Other paragraphs such as paragraphs 3.3, 3.4 and 3.5 of the agreement refer to Mr Foch but Mr Foch was not asked on 23 January 1998 to sign a document which acknowledged anything. It is difficult to understand what the draftsman of the document was seeking to achieve by the inclusion of the references to Mr Foch. None of the references to Mr Foch would have assisted enforcement of the agreement in Cambodia, had Mr and Mrs Sum ever signed it. Nor was the document intended to be an agreement between Mr Foch and Mr de Varda enforceable as such in New South Wales.

86 However, the principal point that I am now making is not that the work was done incompetently, which was the case, but that the exercise of legal skill was involved. Neither Mr de Varda nor Mr Foch had the legal ability to document the transfer an interest in the Cambodian property from Mr Foch to Mr de Varda. Nor did Mr Foch have any knowledge about the matter other than that conveyed by his statement to Mr Coates in November 1997, “This is the way they structure their land ownership where foreigners are involved. It is held in the name of a local citizen on the foreigner’s behalf and this is the accepted practice”.

87 The task of Mr Coates was never that of merely copying a document. I do not accept that that was his instruction in the transactions between Mr Foch and Mr de Varda. Nor did Watkins Tapsell ever set out to merely to copy the agreement of 10 November 1992.

88 The instructions given to Mr Coates were that Mr de Varda was purchasing an interest in the Cambodian property from Mr Foch. Watkins Tapsell exercised their legal skills as solicitors and drew up the two agreements of 19 January 1998 and one agreement of 23 January 1998. Mr Coates, having seen to the signing and witnessing of the documents, handed them over knowing that, on each day, Mr de Varda and Mr Foch were to go away and attend to the payment of the price, which they did.

89 The documents signed on 19 January 1998 and on 23 January 1998 were not the equivalent of the agreement 10 November 1992 for they were not signed by the agents Mr and Mrs Sum. They had no legal effect whatever. Mr Coates gave this evidence in answer to questions from the Bench:

“Q. So when Mr de Varda left your office to pay over the gold bullion he had with him no document having any legal effect?

A. That’s correct your Honour, to my knowledge, I didn’t know the effect of that document in Cambodia.

Q. But you did know something didn’t you? You knew this document had no effect whatever? How could a document signed by Mr de Varda have any effect whatever?

A. That’s correct your Honour.

Q. So you knew that when he left the office, he didn’t have any document having legal effect?

A. That’s correct.

Q. And the difference between, a major difference between, this document that he left your office with (and) the agreement of 10 November was (that the) agreement of 10 November was signed by Mr and Mrs Sum?

A. That’s correct”.

90 Mr Coates knew that he had not prepared or had signed any agreement between Mr de Varda and Mr Foch or any declaration of trust by Mr Foch in favour of Mr de Varda or any transfer of land by Mr Foch to Mr de Varda.

91 He knew that the documents that he prepared were not documents on the faith of which a purchaser should pay purchase money for the purchase of an interest in land. If he had been asked, Mr Coates undoubtedly would have said that Mr de Varda should not do so. Mr Coates gave this evidence:

“Q. If you had been his solicitor, what would you have advised him?

A. If I had been his solicitor?

Q. Yes.

A. I would have said to him to make sure that he was getting good title before he paid over the money.

Q. Yes. You would have told him that he couldn’t possibly pay over the money just on that document wouldn’t you?

A. Yes I would have told him that”.

92 Notwithstanding this, Mr Coates, having received the instructions that there was to be a transfer of land and knowing that the agreements which he prepared did not achieve any legal effect, went ahead and had them signed by Mr Foch and Mr de Varda on 19 January and by Mr de Varda on 23 January and had receipts for the purchase price signed by Mr Foch and handed these documents over, knowing that, on the faith of them, Mr de Varda and Mr Foch were to go off and attend to the payment and receipt of the purchase price.

93 I would not have expected an honest and competent solicitor to have acted as Mr Coates did. In particular, although he said that he was not an expert in Cambodian property law and could not say that the document he had prepared “effectively transferred the rights in the property,” Mr Coates did not tell Mr de Varda that the documents which he prepared did not transfer or purport to transfer rights in the property or, indeed have any legal appeal.The agreements had no effect under New South Wales law for they did not express an agreement between Mr Foch and Mr de Varda nor a declaration of trust by Mr Foch nor a transfer of property by Mr Foch.

94 In my view, the conduct of Mr Coates in permitting Mr de Varda to pay over the equivalent of $US390,000 on the faith of the documents which Mr Coates prepared bordered on the dishonest. I cannot comprehend how Mr Coates acted as he did unless he was dishonest or hopelessly confused. It is not alleged that he was dishonest. I cannot conceive that a competent solicitor exercising due care and skill would have acted as Mr Coates did. I agree with the following evidence given by Mr N J Moses, an experienced expert witness who was called by Mr de Varda:

“9. In my experience it is unusual for a solicitor practising in New South Wales to endeavour to prepare documents which have the effect of transferring title to land in another State of Australia let alone in a foreign country unless that solicitor has special knowledge in relation to the system of title involved.

…

13. The solicitor appears to have regarded the document of 10 November 1992 as a ‘title deed’ hence in correspondence which took placed (sic) after the events which are the focus of my report he makes statements about the ‘title deeds’ when he is apparently speaking of the November 1992 agreement.

…

14. To do so, in my view, involves a failure to comprehend the significance of the words in the document which I have mentioned and which clearly implies that there was in fact a ‘title deed’ to the land independent of the November 1992 agreement. The words further suggest that a copy of that title deed was to be attached to the agreement as evidence of the ownership of the property.

…

23. While it seems to me that it was open to the solicitor to accept a limited retainer in relation to the preparation of the document intended to be submitted to the purchaser in England the position changed when it became apparent that it was now intended to sell a half share of Mr Foch’s interest to the Plaintiff who was known to the solicitor and who would be attending at the solicitor’s office to sign the documents and who would be paying a substantial sum of money at that time to Mr Foch in consideration of the ‘transfer’.

…

25. In my opinion the fact that the solicitor was now aware not merely that there was a prospective purchaser of Mr Foch’s interest in the property but that that purchaser was in Australia and was about to enter into the agreement and pay a large sum of money required the solicitor as a matter of usual practice to take certain steps to ensure that the purchaser has an opportunity to obtain independent legal and financial advice in respect of the document and the matter generally.

…

32. Again the documents prepared by the solicitor clearly required the signature of the Sums (and perhaps their thumb prints) to give it any legal effect and this was confirmed by the fact that Mr Foch had given instructions to the solicitor as to how they were to be contacted and the way in which they were to sign the documents. In my view no solicitor acting for the Plaintiff would have countenanced the situation whereby monies were handed over until such time as it had been established that the ownership of the property under Cambodian law was held by the Sums, that the agreement of 1992 was valid to acknowledge the beneficial ownership of Mr Foch, that that agreement was still current and that the sums had signed the necessary documents to acknowledge the Plaintiff as the beneficial owner of the land in place of Mr Foch.

…

34. Accordingly when confronted with the Plaintiff and Mr Foch on 19 January I would have expected the solicitor in the circumstances which arose to have indicated to Mr Foch and the Plaintiff:

a. That he could not act for the Plaintiff in the matter;

b. That he was not prepared to draft documents or assist in the consummation of the transaction unless the Plaintiff was independently advised and that taking this attitude was as much for the protection of Mr Foch as it was for the Plaintiff;

c. That the Law Society of New South Wales or the official Cambodian government representative in New South Wales should be contacted with a view to recommending a lawyer who could act for the Plaintiff (or indeed both parties in the transaction).

…

95 The principal deficiency in Mr Coates conduct was that he failed to realise that the interests of Mr de Varda were different from those of Mr Foch and that Mr de Varda needed a solicitor to protect his interests. There could not have been a clearer case for independent legal advice. Mr Coates knew that his limitations were such that he could not act for or assist the purchaser, Mr de Varda. He should have informed Mr de Varda not only that he Mr Coates was acting for Mr Foch but also that Mr de Varda must obtain independent legal advice and that he, Mr Coates would not proceed in the transaction unless he did.

96 No doubt Mr de Varda and Mr Foch should have realised that the documents which they received achieved nothing, for they were not signed by Mr and Mrs Sum. However they did not. They had formally signed the documents which Mr Coates produced and each signature had been witnessed by Mr Coates. Mr Coates also drew up the receipts for the payment of the price and dated those receipts 19 January 1998 and 23 January 1999. He handed over all the documents on the basis that Mr de Varda would act on the faith of those documents and would pay the purchase price, which Mr de Varda did. According to Mr de Varda’s evidence, Mr Coates expressly said that it was appropriate for him at that stage to pay over the purchase price. Whether or not the words were said, it is clear that, by the preparation of the receipts of 19 January 1998 and 23 January 1998, Mr Coates approved of the payment of the purchase price on those days.

97 As I have said, Mr Coates understood his instructions to be that an interest in the Cambodian property was to be transferred from Mr Foch to Mr de Varda. I am satisfied that Mr de Varda and Mr Foch acted in the belief that the documents prepared by Mr Coates effected such a transfer.

98 Mr de Varda gave evidence that he believed that to be so. In his affidavit of 18 October 1999, Mr de Varda deposed:

“15. A short time later Coates returned and showed a typed document to me headed ‘RECEIPT’. I looked at the document and said ‘Yes, that will do’. Coates then turned to Foch and said ‘I can witness your signature on this receipt now and you can give this receipt to Joseph when he pays over the gold’. Foch signed the receipt and Coates witnessed his signature and gave the receipt to Foch.

16. At that time I said ‘I don’t have any documents to prove that I bought the property’. Coates then gave me a copy of the Agreement I had signed and said to me ‘We will keep the title deeds and hold them on your behalf’. Coates then wished us good day and showed us out of the firm’s premises”.

99 I think it is clear that, when Mr de Varda left Mr Coates’ office on 19 January 1998 and again on 23 January 1998, he was under the impression that documents or a document had been signed that constituted a transfer of title, documents on the faith of which he was justified in paying over the substantial purchase price.

100 It is to be noted that, on 28 January, 1998, Mr Coates wrote to Mr de Varda, in relation to the document of 23 January, 1998 that, “we understand that the transfer is now completed”. The letter is confirmatory with other evidence of with the point that, when Mr Coates handed the two documents called agreements to Mr Foch on 19 January 1998 and the one document on 25 January 1998, he considered that he was achieving something on the faith of which Mr de Varda could act.

101 Mr Coates gave the following evidence:

“44. Foch and de Varda attended my office on 23 January 1998. At the meeting, as I reviewed the documents I realised that in fact there was no need for Foch to be a party. On that basis I said to de Varda and Foch when we had sat down to sign the document, words to the following effect:

I think that we don’t need Charles to be a party because it is an agency agreement between the Sums and Joseph only, and

Charles no

longer has any interest in the property

. I think I should redraft this to make it simpler, consistent with the original agreement. Is that alright?’ (emphasis added).

Neither de Varda nor Foch had any objection.

102 It is difficult to understand what Mr Coates meant by paragraph 45. However, the significant point is that he expressly said to Mr de Varda and Mr Foch that “Charles no longer has any interest in the property”. Mr de Varda would have understood that, on payment of the purchase price, there would be a transfer to him of Mr Foch’s interest in the property.

103 If Mr Coates had at the back of his mind that, on payment of the purchase price, equity may have imposed an obligation on Mr Foch to hold his interest for Mr de Varda, he did not explain that to Mr de Varda.

104 Mr Coates misunderstood the nature of the agency agreement. Mr Coates gave these answers when questioned by Mr de Varda:

“Q. What about the registration of a title deed here. You would have on the front of the cover ‘title deed’, instead of ‘agreement’, correct?

A. You would have a word like ‘certificate of title’ or ‘folio identifier’..

Q. And yet there was no folio, no certificate of title, nothing and yet you accepted this document, the document of the 10 November 1992, as a title deed?

A. I accepted my client’s instructions that it was a title deed and I assumed it was”.

105 In re-examination Mr Coates said:

“Q. What was the concept of registration to which you were there referring?

A. It was my understanding that the document that was registered was the agreement which was the so called agency agreement of November 1992.

…

(sic)

Q. And how did you come to understand and record in the letter, that the original title deed was registered in the name of Charles Foch as owner?

A. My assumption was that this document was the title deed and it referred to Charles Foch as the owner and was stated to be, there is a warranty by the agent that the agent was authorised to execute this, was authorised by the government authority to execute it”.

106 In my opinion, a competent solicitor in New South Wales exercising due care and skill, who had been informed that foreigners could not own land in Cambodia, would have concluded that the title to the Cambodian property resided in a resident or residents of Cambodia, presumably Mr and Mrs Sum, and that the agency agreement was what it purported to be, an agreement creating personal obligations as between the agents Mr and Mrs Sum and the principal, Mr Foch. In my opinion, the words of the agency agreement are plain. The view which Mr Coates took of the agreement and of the nature of registration in Cambodia was fanciful.

107 In coming to the view which he did, Mr Coates failed to exercise the skill and care that could reasonably be expected of a solicitor in New South Wales.

108 I turn now to the legal issues.

109 I reject Mr de Varda’s claim that Watkins Tapsell owed a contractual duty to him to exercise reasonable skill and care. On that issue I accept the evidence by Mr Coates, confirmed as it is by the several letters written by Mr Coates at the time.

110 I need not discuss the doctrinal basis for the existence of a duty of care for the purposes of the tort of Negligence. This has been sufficiently discussed in relation to economic loss in the cases of Hill v Van Erp (1997) 188 CLR 159; Perre v Apand Pty Limited(1999) 198 CLR 180.

111 I am satisfied that Mr Coates and Watkins Tapsell owed a tortious duty of care to Mr de Varda. When he came to Mr Coates’ office on 19 June 1998, Mr de Varda was a client of the firm and he had a problem that needed the attention of a solicitor. In agreeing to act in the matter knowing that Mr de Varda was relying upon his skill and expertise, Mr Coates had a duty to Mr de Varda to ensure that he exercised such skill and care. A relationship of proximity, reasonable reliance and assumption of responsibility were present. Mr Coates undertook to prepare documents exercising his skills as a solicitor knowing that, on the faith of the documents, Mr de Varda was to pay over the purchase price. Although he said that he was not familiar with Cambodian law and could not guarantee the result, Mr Coates did not indicate that he would not perform the work to the best of his skill and ability.

112 I need not discuss the many cases which have considered the content of a tortious duty of care as distinct from the content of a contractual duty of care. This is sufficiently discussed in Hawkins v Clayton (1988) 164 CLR 539; Waimond Pty Limited v Byrne (1989) 18 NSWLR 642; Astley v Austrust Limited (1999) 197 CLR 1 and Hill v Van Erp (supra).

113 In the present case, Mr Coates and Watkins Tapsell had a tortious duty of care which extended beyond the terms of the contractual duty which they owed to Mr Foch. That is because Mr de Varda and Mr Foch had different interests and Mr Coates, in dealing with both of them, had a clear conflict of interest.

114 Presumably, Mr Coates thought he could do something useful for both parties. Solicitors constantly act in matters thinking that they are achieving a benefit for both parties when the reality is that the interests of the parties are different that and the solicitors, by so acting, act to the benefit of one and to the detriment of the other. In Alexander v Perpetual TrusteesWA Limited [2001] NSWCA 240 I said:

“A conflict of interest is an insidious thing. It clouds the mind. Aspects of a duty of care, which ought to be seen clearly and distinctly, are seen in a hazy light when a solicitor seeks to reconcile the interests of two clients who each have interests which differ from those of the other. Over many years, in judgments which I have written or in which I have joined, the point has been made that solicitors should never allow themselves to have a conflict of interest. Those judgments appear to have had no impact. Too many solicitors continue to act for two or more clients who have conflicting interests. Year after year, cases come before the courts because a solicitor, in such a position, has failed to fulfil his duty to one or more of his or her clients.”

115 In Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642, Kirby P said, at 643:

“This appeal concerns the liability of a solicitor in negligence where one client has suffered damage as a result of a transaction involving other clients. It illustrates once again the dangers which exist when a solicitor acts for more than one client, where the interests of the several clients do not exactly coincide. The only safe course in such circumstances, where pursuit of one client’s interest might result in foreseeable damage to another, is to send the other to another solicitor for independent advice or, at the least, to obtain with scrupulous care the specific instructions of the other in order to ensure the discharge of the duty separately owed to it.”

116 Mr Coates did not follow his Honour’s precept. He did not advise Mr de Varda to obtain independent advice and he did not with scrupulous care obtain Mr de Varda’s precise instructions as to what he was seeking. Although Mr de Varda made it clear that he had interests which needed protection and needed work done which required a solicitor to do it, Mr Coates proceeded as if he was acting in Mr de Varda’s interests. And he proceeded knowing that Mr de Varda would rely upon his work.

117 It was not sufficient for Mr Coates to say that he acted for Mr Foch. He should have said expressly that he could not protect Mr de Varda’s interests and Mr de Varda must obtain other legal advice. Mr Coates should have refused to deal with Mr de Varda for he knew that he could not adequately protect his interests.

118 In so far as the duty of care which Mr Coates and Watkins Tapsell owed to Mr de Varda was comparable with that which they owed to Mr Foch, Mr Coates and Messrs Watkins Tapsell were negligent. The documents which Mr Coates produced and had signed did not achieve what Mr Coates had been instructed to achieve, namely a transfer of an interest in land from Mr Foch to Mr de Varda. I have set out Mr Coates’ evidence in which he stated that, on 19 January 1998, he was informed that Mr de Varda had agreed to purchase a fifty percent interest in the Cambodian property and that Mr Foch and Mr De Varda had both come to Mr Coates for the execution of a document achieving that transfer. It was in relation to that transaction that Mr Coates undertook to act. He undertook to do so in the context that he had before him the agency agreement of 10 November 1992. He undertook to act, although he expressly disclaimed any knowledge of Cambodian law. His duty was to exercise the reasonable skill and care of a solicitor of New South Wales who had no specialist knowledge of Cambodian law.

119 There were many deficiencies in the documents which Watkins Tapsell drew and I have dealt with them above. However the major factor, and one which Mr Coates did not make clear to Mr Foch or to Mr de Varda and which perhaps he himself did not plainly realise, was that the documents which he drew had no legal effect and would have no legal effect until they were signed by Mr and Mrs Sum. They were not the equivalent of the agency agreement of 10 November 1992, for that agreement was executed by all parties. Mr Coates did not produce any document which effected a transfer of an interest in land from Mr Foch to Mr de Varda and he allowed both Mr de Varda and Mr Foch to leave his office under the mistaken impression that Mr Coates had given them a document or documents on the basis of which it was appropriate to pay the purchase price. In my opinion, Mr Coates did not fulfil the instructions which he received on 19 January 1998 or on 23 January 1998.

120 Any experienced solicitor exercising reasonable skill and care would have told Mr de Varda that the agreements that were handed over by Mr Coates were not a sufficient warrant for the payment of the purchase price, indeed, that they achieved nothing.

121 There was also a breach of s 42 of the Fair Trading Act 1987. Mr Coates prepared documents and passed them over as having a quality which they did not possess, namely as documents on the faith of which Mr de Varda should pay the purchase price of the property he sought to purchase. Mr Coates was aware that the documents of them selves achieved nothing and did not provide any basis for the payment of the purchase price. His misrepresentations constituted a breach of s 42 of the Fair TradingAct. Mr de Varda is entitled to damages under s 68 of the Fair Trading Act.

122 The defendants allege contributory negligence on the part of Mr de Varda and seek to reduce the damages awards accordingly. This defence will not, of course, prevail against the claim based on ss 42 and 68 of the Fair TradingAct 1987. In any event, Mr de Varda’s loss arose entirely from his reliance on Mr Coates and Watkins Tapsell. It ill-behoves Mr Coates and Watkins Tapsell to say that Mr de Varda, a client of Watkins Tapsell, was negligent in coming to them and requesting that they undertake the legal work that was required. And it ill-behoves Mr Coates and Watkins Tapsell to say that Mr de Varda was negligent in paying money on the faith of the documents which they prepared, when they knew that that is what he was intending to do and when that is what Mr Coates intended he do.

123 In Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch. 560 Sir Donald Nicholls V-C pointed out, at 574:

“In principle, carelessness in not making other inquiries provides no answer to a claim when the plaintiff has done that which the representor intended he should do”.

124 In my opinion, Mr de Varda was not guilty of contributory negligence.

125 On the issue of damages, Mr de Varda accepted my view that certain matters which he wished to claim were too remote. In the circumstances, he pursued only his claim for loss of the worth of the gold bullion and money he paid over on 19 and 23 January 1998, being $US 390,000. I was informed during the course of the hearing that the conversion rate was $A66.66 to $US100. I requested that a note as to the final calculation be sent up. However I have not received it. On my calculations, Mr de Varda is entitled to damages of $585,058. On my calculations he should receive interest of $287,023 calculated in accordance with Schedule J to the Supreme Court Rules.

126 Accordingly, there will be judgment against the second defendants in the sum of $872,081.00. The second defendants should pay the plaintiff’s costs of the proceedings insofar as the proceedings relate to them.

**********

Last Modified: 11/28/2007

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Citations

De Varda Joseph v Foch Charles [2002] NSWSC 1216

Cases Citing This Decision

0

Cases Cited

6

Statutory Material Cited

1

Hill v Van Erp [1997] HCA 9

Vairy v Wyong Shire Council [2005] HCA 62

Hill v Van Erp [1997] HCA 9

CITATION:	DE VARDA Joseph v FOCH Charles and Others [2002] NSWSC 1216
FILE NUMBER(S):	SC 20246/99
HEARING DATE(S):	25,26,27,28,29 November 2002
JUDGMENT DATE:	19 December 2002
PARTIES :	JOSEPH DE VARDA v CHARLES FOCH & OTHERS
JUDGMENT OF:	Davies AJ

COUNSEL :	Plaintiff: Person Defendants: Mr M Pembroke SC Mr D Williams
SOLICITORS:	Plaintiff: Person Defendants: Ebsworth & Ebsworth
CATCHWORDS:	PROFESSIONAL NEGLIGENCE - whether solicitor negligent in transaction involving Cambodian land - whether conflict of interest - whether sufficient for solicitor to say that he asked for one party only - whether solicitor had duty of care to other party with whom he dealt
LEGISLATION CITED:	Fair Trading Act 1987 - s 42, s 68
CASES CITED:	Hill v Van Erp (197) 188 CLR 159 Perre v Apand Pty Ltd (1999) 198 CLR 180 Hawkins v Clayton (1988) 164 CLR 539 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Astley v Austrust Limited (1999) 197 CLR 1 Alexander v Perpetual Trustees WA Limited [2001] NSWCA 240 Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch. 560, 574
DECISION:	See Paragraph 126

‘Property’	means	The land plot situated at No 16 A Street 360 Phnom Penh Kingdom of Cambodia as represented by the title deeds and/or documents as officially or duly registered with the Government Authority, together with the building No. G.35 which is constructed thereon, including without limitation all the decoration, furniture, equipment affixed or placed therein, presently or in the future, and which title deeds or title documents are represented in the documents attached hereto and made a part hereof.
‘Title Document’	means	The documents of ownership of the title representing the Property as herein defined.
‘Government Authority’	means	Any body or agency or entity of the government of Cambodia empowered to effect or grant the registration of the title to the Property and/or recognition of the holding of the Property as herein defined.