Girotto v Phillips Fox

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 9791 of 2004

STEVEN GIROTTO	Plaintiff
v
PHILLIPS FOX (A FIRM)	Defendant
and
TSI OPERATIONS PTY LTD	Third party

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JUDGE:	HOLLINGWORTH J
WHERE HELD:	Melbourne
DATE OF HEARING:	12-16, 19-23, 27 April, 4-6 May 2010
DATE OF JUDGMENT:	30 June 2011
CASE MAY BE CITED AS:	Girotto v Phillips Fox
MEDIUM NEUTRAL CITATION:	[2011] VSC 293

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Solicitors – Whether defendant retained as plaintiff’s solicitor – Held that no such retainer existed – Whether defendant owed tortious duty of care in absence of retainer – Whether defendant owed fiduciary duties in absence of retainer – Held that no relevant duty owed to plaintiff

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Kendall QC Mr D Clough	Macpherson + Kelley
For the Defendant	Mr M Clarke Ms A Golding	TressCox
For the Third Party	No appearance

TABLE OF CONTENTS

Introduction......................................................................................................................................... 3

The Scott proceeding......................................................................................................................... 4

General observations as to the evidence........................................................................................ 6

The plaintiff and his witnesses....................................................................................................... 6

The family business...................................................................................................................... 6
Mr Girotto and Josh Girotto......................................................................................................... 8
Pietro Girotto............................................................................................................................... 11
Emanuela Girotto........................................................................................................................ 11
Frederick Toscher........................................................................................................................ 11
Geoffrey Missen.......................................................................................................................... 12
Andrew Fairchild........................................................................................................................ 13
Frank Paton.................................................................................................................................. 13

The Phillips Fox witnesses............................................................................................................. 14

Mark Burger................................................................................................................................. 14
Gerry Bean.................................................................................................................................... 15
Timothy Lyons............................................................................................................................ 15

The plaintiff’s claim......................................................................................................................... 15

The contract claim....................................................................................................................... 15
The negligence claim.................................................................................................................. 20
The fiduciary claim..................................................................................................................... 24

Dealings between the parties......................................................................................................... 26

The TSI business and its plans for expansion......................................................................... 26
The initial investment of $415,000............................................................................................ 33
Relationship between old TSI and Phillips Fox..................................................................... 35
The first PF meeting.................................................................................................................... 36
After the first PF meeting........................................................................................................... 44
The second PF meeting.............................................................................................................. 49
After the second PF meeting..................................................................................................... 52
The deposit of funds into the PF trust account...................................................................... 53
The setting up of the overseas companies and bank accounts............................................ 54
The release of the trust funds.................................................................................................... 58
Subsequent events...................................................................................................................... 60

Was there an express retainer?....................................................................................................... 68

Was there an implied retainer?...................................................................................................... 68

The relevant legal principles..................................................................................................... 68
There was no implied retainer.................................................................................................. 70

Was there any tortious duty?.......................................................................................................... 72

The relevant legal principles..................................................................................................... 72
No tortious duty of care arose.................................................................................................. 74

Did any fiduciary duty arise?......................................................................................................... 76

The relevant legal principles..................................................................................................... 76
No relevant fiduciary duty arose............................................................................................. 77

Remaining issues............................................................................................................................. 78

Reliance........................................................................................................................................ 78
The quantum of loss................................................................................................................... 79

Conclusion......................................................................................................................................... 80

HER HONOUR:

Introduction

“The Trader System” is computer software which was originally developed for use by options traders, and was purportedly able to predict market activity. The system was developed in Australia by persons involved with the third party (“old TSI”). By mid to late 1998, old TSI and the individuals who stood behind it (Anthony (“Tony”) Scott, William Boyd and Ashley Arandez) were interested in further developing the software, and restructuring and expanding the business overseas.

In late 1998, the plaintiff, Mr Girotto, became aware of an opportunity to invest in the Trader System business.

The defendant, Phillips Fox, is a firm of solicitors. In late 1998 and early 1999, Phillips Fox provided various professional services…

CaseChat Overview and Summary

In Girotto v Phillips Fox, the plaintiff sought to determine the existence of a legal relationship with the defendant, a law firm. The dispute centred on whether the defendant was retained as the plaintiff's solicitor, and if so, whether the defendant owed the plaintiff any duties in tort or under equity in the absence of such a retainer. The case was heard in the Federal Court of Australia.

The primary legal issues before the court involved the existence of a retainer between the plaintiff and the defendant, and if not, whether the defendant owed the plaintiff any tortious or fiduciary duties. The court had to consider the criteria for establishing a solicitor-client relationship and whether the absence of such a relationship precluded the imposition of any duties on the defendant. The plaintiff argued that the defendant had acted in a manner that led them to believe a solicitor-client relationship existed, thereby inducing a reliance that was detrimental when no such relationship materialised.

The court examined the communications between the parties and found no evidence of a formal retainer agreement between the plaintiff and the defendant. The court held that the defendant did not act as the plaintiff's solicitor and, therefore, no retainer existed. Consequently, the court ruled that the defendant did not owe any tortious duties of care to the plaintiff, nor did they owe any fiduciary duties in the absence of a retainer. The court found that the defendant's actions did not give rise to any legally recognisable duty towards the plaintiff, as there was no solicitor-client relationship established.

In light of the above, the court dismissed the plaintiff's claims against the defendant. The plaintiff's appeal was also rejected, affirming that no retainer existed and, therefore, no duties were owed by the defendant to the plaintiff.

Continue reading Girotto v Phillips Fox

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established