Legal Profession Board of Tasmania v A Legal Practitioner

[2023] TASSC 34

[2023] TASSC 34

COURT:	SUPREME COURT OF TASMANIA
CITATION:	Legal Profession Board of Tasmania v A Legal Practitioner [2023] TASSC 34
PARTIES:	LEGAL PROFESSION BOARD OF TASMANIA
v
A LEGAL PRACTITIONER
FILE NO:	3399/2022
DELIVERED ON:	20 September 2023
DELIVERED AT:	Hobart
HEARING DATE:	15 September 2023
JUDGMENT OF:	Estcourt J
CATCHWORDS:

Professions and Trades – Lawyers – Complaints and discipline – Disciplinary proceedings – Tasmania – Application by the Legal Profession Board to hear and determine complaint against practitioner who acted for both vendors and purchasers in sale of oyster farm – Allegations that practitioner acted in breach of the fiduciary duties he owed to his clients and in breach of r 12 of the Rules of Practice 1994 – No relevant conflict between duty owed to vendor and duty owed to purchaser identified – No matter identified which required practitioner to cease acting – Practitioner obtained informed consent – Application dismissed.

Legal Profession Act 2007 (Tas), s 486.
Rules of Practice 1994 (Tas), r 12.
Aust Dig Professions and Trades [1274]

Professions and Trades – Lawyers – Duties and liabilities – Retainer – Extent of retainer – Practitioner acting for vendor received heads of agreement whereby salient aspects of the transaction had been resolved – Practitioner instructed by vendor to amend draft contract with a view to achieve completion – Practitioner started acting for purchaser as well as vendor – Retainers consisted of written and oral elements – General commercial written retainers provided to vendor and purchaser did not identify the work to be performed by practitioner – Sophisticated clients – Retainer deemed to be largely limited to mechanics of transaction.

Aust Dig Profession and Trades [1161]

REPRESENTATION:

Counsel:

Applicant:	Kate Cuthbertson SC
Respondent:	Bruce McTaggart SC

Solicitors:

Applicant:	Tremayne Fay Rheinberger
Respondent:	Ogilvie Jennings

Judgment Number:	[2023] TASSC
Number of paragraphs:	86

Serial No 34/2023 File No 3399/2022

LEGAL PROFESSION BOARD OF TASMANIA v A LEGAL PRACTITIONER

REASONS FOR JUDGMENT ESTCOURT J

20 September 2023

The application and the allegations

1 The applicant, the Legal Profession Board of Tasmania, has applied to the Court pursuant to s 486 of the Legal Profession Act 2007 (the Act) to hear and determine a complaint made under Ch 4 of the Act, against the respondent, an Australian legal practitioner, and by Ms Rochelle Davenport and Mr Csaba Hopp (the complainants), dated 15 August 2019 and/or pursuant to the inherent jurisdiction of the Court to hear and determine matters arising out of the investigation of that complaint by the applicant.

2   The applicant alleges that the respondent engaged in the following conduct:

(a)  Breached the fiduciary duty he owed to the complainants by acting in a manner contrary to their interests, in that:

(i)          Between February 2017 and May 2017, he acted for the complainants, the vendor, the vendor's guarantor, and the lessor in a transaction involving the sale of an oyster farm business and assignment of a marine lease in Tasmania (the transaction);

(ii)         As an Australian legal practitioner acting for the complainants in relation to the transaction, he owed the complainants a duty of undivided loyalty which he did not discharge;

(iii)        In acting in relation to the transaction, he made amendments, sought instructions, and provided advice in relation to various iterations of a draft business sale agreement intended to be signed by the parties to the transaction, which had the effect of benefiting the vendor and/or the vendor's guarantor and causing detriment to the complainants;

(iv)        In acting in relation to the transaction in the manner particularised at (a)(iii), he acted in conflict for the benefit of the vendor and/or the vendor's guarantor and to the detriment of the complainants.

(b)

Breached the fiduciary duty he owed to one or more parties to the transaction by acting in a manner contrary to their interests, in that:

(i)	Between February 2017 and May 2017 he acted for the complainants, the vendor, the vendor's guarantor, and the lessor in the transaction;
(ii)	As an Australian legal practitioner acting for the vendor and/or the vendor's guarantor in relation to the transaction, he owed the vendor and/or the vendor's guarantor a duty of undivided loyalty which he did not discharge;
(iii)	In acting in relation to the transaction, he made amendments, sought instructions, and provided advice in relation to various iterations of a

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draft business sale agreement intended to be signed by the parties to the transaction, which had the effect of benefiting the complainants and causing detriment to the vendor and/or the vendor's guarantor;

(iv)        In acting in relation to the transaction in the manner particularised at (b)(iii), acted in conflict for the benefit of the complainants and to the detriment of the vendor and/or the vendor's guarantor;

(c)	Contrary to r 12 of the Rules of Practice 1994 (Tas) failed to immediately cease acting for all parties to the transaction in circumstances where he was unable to continue to act for all parties to the transaction without acting in a manner contrary to the interests of the complainants;
(d)	Contrary to r 12 of the Rules of Practice failed to immediately cease acting for all parties to the transaction in circumstances where he was unable to continue to act for all parties to the transaction without acting in a manner contrary to the interests of the vendor and/or the vendor's guarantor.

3             The applicant says that the respondent's conduct involved a substantial and/or consistent failure to reach or maintain a reasonable standard of competence and diligence or, in the alternative, fell below the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner. On that basis, the applicant seeks, primarily, a declaration that the respondent is guilty of professional misconduct, or alternatively, of unsatisfactory professional conduct and that he be reprimanded.

The facts and their context

4             In early 2017, Mr Benjamin Hugo Dreimann, the sole director of Dreimann Enterprises Pty decided to sell an oyster farm business operated at 1735 Main Road, Bruny Island in Tasmania. The sale was to include the operation trading under the name of Dreimann Enterprises, leasehold land, freehold water, stock at value and certain specified equipment (the business). Mr Dreimann had engaged Mr Quinten Villanueva of Sydney Brokerage Pty Ltd trading as LINK, a business broker located in New South Wales, to market and procure the sale of the business.

5             The marine farm on which the business operated was let by the Department of Primary Industries to Mr Jeffrey Whayman and Mr Christopher Whayman by way of a lease dated 4 October 2004 (the marine lease). Mr Dreimann and Ms Kaysha Jane Pike were sub-lessees of the marine lease and Dreimann Enterprises was a further sub-lessee from Mr Dreimann.

6             It was a condition precedent to the completion of the sale of the business that, for a consideration of $100,000, Messrs Whayman agreed to transfer their interest in the marine lease to the purchaser and that Mr Dreimann and Ms Pike's sub-lease would be deemed to have been surrendered.

7             The land on which the business operated was owned by Ms Suzanne Lee Macefield and Mr Lee Macefield and was leased to Mr Dreimann as sub-landlord with Dreimann Enterprises as sub- tenant. It was a condition precedent to the completion of the sale of the business that the Macefields consent for the assignment of the lease by Mr Dreimann to a purchaser.

8             Mr Casaba Hopp, also known as Steven Hopp, and Ms Rochelle Davenport, agreed in principle to purchase the business and signed a non-binding "heads of agreement" document, referred to as an "Offer Acceptance/Sales Advice", which was drafted by LINK and/or Mr Villanueva.

9 The heads of agreement was provided to the respondent by email dated 16 February 2017,
together with the current lease for the land and equipment list. The respondent was named as the

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vendor's solicitor in the heads of agreement. That was the first time that he had received instructions
from any party to the transaction.

10           At an unknown time, but presumably between 16 and 21 February 2017, the respondent agreed to act for Mr Dreimann, Dreimann Enterprises and Messrs Whayman. On about 21 February 2017 the respondent was approached by Mr Villanueva to see whether the respondent would also act on behalf of the complainants in the transaction.

11           I interpolate here, (as I will frequently as I enumerate the facts, by referencing matters the respondent raises as to his conduct), that the respondent states that he does not act readily for both a vendor and purchaser at "the best of times" and was "quite sure this was the first time I even entertained doing so in a sale of going concern." He states that he reserved his decision about acting for the complainants until he had a chance to assess the matter and assess the parties.

12           By 23 February 2017 the respondent had formalised the heads of agreement into a draft contract which comprised a "Table of Particulars" and an "Agreement Document" (collectively the sale agreement).

13          The respondent states that he drafted the sale agreement in a "balanced" way, including vendor warranties with a personal guarantee by Mr Dreimann as to their accuracy.

14          On about 23 February 2017 the respondent telephoned Mr Dreimann to introduce himself and to advise that he had been asked to act for the complainants. The respondent stated:

"I explained at length the complications of acting for the purchaser as well. I explained particularly that I would invariably have to recommend to the purchaser asking for warranties/conditions which would delay the (sic) achieving an unconditional contract. I explained that there was a real risk in me having to send all clients away at some point.

Mr Dreimann's attitude was that he would not consider the deal as done until he received the cheque, was not inclined to force an unwilling purchaser, was prepared to give warranties and would entertain other conditions which I would recommend to the purchaser. On that understanding, I said I would be comfortable in accommodating the purchaser's interests and prepared to act for them."

15           The respondent says that he explained different approaches to achieving completion, including a "hard-nosed" approach and a more conciliatory approach and that he advised that any purchaser's solicitor, whether it was him or someone else, would insist on terms such as vendor's guarantees, finance conditions, due diligence verification, independent verification, inspection of records, sharing of costs on assignment and such like. He says that Mr Dreimann gave him instructions to include terms in the draft agreement that the respondent "considered to be reasonably required to promote confidence, which (sic) a view to ultimate completion".

16           The respondent says that, in the event that he decided to act for both parties, Mr Dreimann consented to him providing advice to the complainants in relation to the terms to be included, as a consequence of Mr Dreimann "concluding that to be in his interests".

17           On that same day the respondent sent Mr Dreimann an email attaching the draft sale agreement and a "Short Form Costs Disclosure Statement". In relation to the draft sale agreement the email noted that the respondent had "included various vendor warranties etc on the basis that any purchaser's solicitor would want some warranties". The email further stated:

"I note that you are content if I act for the Purchaser. I am yet to confirm that I am
content to do so. If I do then I note:

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We may be prevented from disclosing to either of the parties the full knowledge that we have of any matters relevant to the transaction;

We may be prevented from giving advice to either of the parties if the advice is contrary to the interests of the other party; and

We may cease to act for both parties if we determine that we cannot continue to act for both parties, without acting in a manner contrary to the interests of one or both parties."

18           On 3 March 2017 the respondent sent a further email to Mr Dreimann containing similar observations and seeking his consent to act for both parties. Mr Dreimann did not respond in writing but the respondent says that subsequent discussions confirmed that he had received such consent.

19           As to the complainants, the respondent sent them an email on about 28 February, copying in Mr Villanueva, agreeing to act on their behalf and forwarding amongst other things, the draft sale agreement. In part the email read:

"Given the transaction appears to be relatively uncontroversial, and I understand most of the details have already been negotiated, I am content to act for you in these circumstances. Please find attached my terms of retainer.

As a result of acting for both parties I note:

i	I may be prevented from disclosing to either of the parties the full knowledge that I have of any matters relevant to the transaction;
ii	I may be prevented from giving advice to either of the parties if the advice is contrary to the interests of the other party; and
iii	I may cease to act for both parties if we determine that I cannot continue to act for both parties, without acting in a manner contrary to the interests of one or both parties.

In order for us to continue to act in the matter, I must obtain your consent on the basis of the information we have set out in this correspondence. Please countersign a copy of this email and return.

In the event I have to cease to act for you, you will nonetheless remain responsible to discharge my account.

Please find attached a draft sale of business agreement for your consideration. I understand you have already received and considered the marine lease and land based lease.

Please advise a suitable time to work through the draft document with you."

20           By email dated 1 March 2017 the complainants raised a query about cl 10.5 of the draft sale agreement which section was entitled "Purchaser's Warranty" and which stated that they had not physically inspected the premises or stock and equipment and did not require an inspection.

21           The respondent states that on or about 2 March 2017 he had formed the view that he was not prepared to "acquiesce" when the complainants advised that they wished to sign a contract "sight unseen" and that he wanted to be sure that they verified the business and in particular, that they had properly inspected the farm. He wished to be "completely satisfied" that they understood the contract, noting the content of cl 10.5 of the draft sale agreement.

22          The respondent provided verbal advice on about 2 March 2017 to Ms Davenport when he "walked through the contract" with her and, amongst other things:

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• confirmed the assets listed as part of the sale included all assets needed to run the farm and that no further plant and equipment requiring capital expenditure was required;

• advised the complainants to obtain harvest records to verify the historical operation,

• sought instructions as to additional disclosure documents/representations that the complainants were relying on;

• discussed the draft vendor warranties and other potential warranties;

• noted the due diligence period and further advised the prudence of an unrestricted due diligence period and verification inspection before the contract became unconditional;

• advised that inspection after the contract had become unconditional was not sufficient;

• advised a proper due diligence period would give enough time for the complainants to have the assets verified, to verify the disclosure documents properly reflected the business and its profitability and engage third party expertise to assist in aspects the complainants were unable to verify themselves,

• reiterated advice that a third party farm expert should be engaged;

• advised that discovering problems or concerns pre-confirmation and either resolving them or electing not to proceed was always preferable.

23           The respondent says that during this telephone conversation with Ms Davenport he said that he could not give advice in relation to the determination of both value and apportionment of the purchase price. He also advised her that a third party with relevant expertise should be engaged to undertake due diligence with respect to environmental risks, stock levels and the current books of account. He says that the advice set out above was accepted by the complainants and that they were to decide what third party expertise was required and to arrange it.

24           The respondent confirmed the amendments required by amending the draft sale agreement and providing a copy of the further draft (version 4 dated 3 March 2017) to the complainants by email dated 3 March 2017. The amendments were as follow;

• an addition of a condition precedent in cl 18 of the table of particulars "for the benefit of the purchaser: that they are satisfied with due diligence enquiries by 15 March 2017." (This amendment is said by the applicant to be in favour of the complainants who received the benefit of undertaking due diligence and maintained a conditional contract.)

• an amendment to cl 10.1 of the agreement, removing the words "to the knowledge of the Vendor" in the vendor's warranties. (This amendment is said by the applicant to be in favour of the complainants as it removed the limitation on the scope of the vendor's warranty.)

• an amendment to cl 10.4 of the agreement to extend the vendor's maximum liability for certain claims by the purchaser. (This amendment is said by the applicant to be in favour of the complainants.)

• an amendment to cl 15.3 of the agreement to add that the vendor was to share the costs of the lessor on the assignment of the land based lease. (This amendment is said by the applicant to be in favour of the complainants as the vendor became liable for certain costs.)

25           The respondent says that the making of these amendments were within the ambit of Mr Dreimann's previous instructions to him and he had a conversation with him where he went through

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the amendments specifically and Mr Dreimann raised no objection "primarily because they reflected
his expectations and instructions".

26   The respondent spoke to Mr Dreimann on about 3 March 2017 and he notes:

"I called Mr Dreimann to discuss accommodating a due diligence period and inspection for the purchaser/consultant and explained that would delay any unconditional contract. Mr Dreimann was accommodating and understood that had risk but would mean purchaser's concerns could be ironed out early. When/if purchaser confirmed DD, the chances of proceeding through to completion would be much higher. I walked through the disclosure document list and Mr Dreimann confirmed he was prepared to warrant the accuracy of those."

27   The respondent states:

"I recall Mr Villanueva calling me subsequently concerned that the draft v4 contract was not unconditional and due diligence would put the deal at risk. I said that was too bad and asked whether he would arrange the inspection for the purchaser/consultants. I explained that putting my purchaser solicitor hat on, that was clearly prudent. I explained that putting my vendor solicitor's hat on, early identification of problems was preferable and assuming DD confirmed, more confidence that the transaction would proceed to completion."

28           The respondent says that physical inspection and independent verification was part of managing the complainant's expectations and part of obtaining genuine legal and emotional commitment which was what Mr Dreimann wanted to achieve. The respondent says "[t]he unrestricted due diligence condition was the legal incarnation of that, and squarely as instructed, as well as commercially usual." He says that Mr Dreimann instructed him to accommodate the inspection. He states that he "could comfortably recommend to Mr Dreimann the amendments required, particularly an unrestricted due diligence period and a physical visit to the site even though this operated as an effective cooling off period……Mr Dreimann appreciated the long-term objective of a confident and willing purchaser and embraced the due diligence period/inspection." He says that increasing the limit of the vendor's guarantees, represented a small risk to Mr Dreimann, based on Mr Dreimann's representations that the financial statements were in order, and that any risk was outweighed by the benefit to Mr Dreimann of engendering trust and confidence in the complainants.

29          The respondent advised that the due diligence period could be extended "for the period until finance is due", in an email to the complainants dated 6 March 2017.

30           On or about 9 March 2017 Mr Villanueva emailed the respondent advising that a vendor finance arrangement had been reached but no detail was provided. This caused the respondent to feel "alarmed because the Agent's email did not, on its face, suggest security had even been mooted, lest resolved and thus sending the clients away was on the horizon."

31           The respondent says that his concerns were allayed because Mr Villanueva rang shortly after the email and advised that the parties had been in discussions with each other directly and requested information as to the costs of drawing security documentation in relation to the following agreement between them, whereby;

• vendor finance was to be provided by Mr Dreimann of $70,000;

• the finance was to be secured, the debt would be paid from the proceeds of fish and formally secured over the asset;

• the complainants were to pay costs of the mortgage documentation;

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• there was to be a limited interest free period limited to 16 April 2018, being when the principal was due for repayment. Interest was to be payable for any period thereafter.

32          The respondent amended the sale agreement accordingly and provided a copy (version 5 dated 9 March 2017) to the parties by email dated 9 March 2017.

33          In that email of 9 March 2017, the respondent set out the amendments to the sale agreement and explained them as follows:

• interest on the vendor finance was specified at 5% but reduced to nil if paid on time because "there needs to be a proper legal incentive to repay the debt";

• the due diligence period was extended to 20 March 2017 to give the complainants time to inspect the premises;

• it was recommended that Mr Dreimann, require "proper security" being the first charge on the proceeds of fish sales, noting that the security needed to be registered and the complainants would pay the costs of registration of approximately $1,000;

34   Specifically, the amendments consisted of the following:

• amendment to cl 11 of the table of particulars to allow provision of "Vendor Finance" – terms of finance and with security for Mr Dreimann. (This amendment is said by the applicant to have given the complainants the benefit of the vendor finance and a conditional interest free period and benefited Mr Dreimann in that he retained security over assets.)

• amendment to cl 19 of the table of particulars – extending the period for satisfaction of due diligence by 5 days to 20 March 2017. (This amendment is said by the applicant to have been to the benefit of the complainants.)

• amendment to cl 15.2 of the agreement to allow for Mr Dreimann's costs of obtaining security to be paid by Davenport/Hopp, to the benefit of Dreimann. (This amendment is said by the applicant to have been to the benefit of Mr Dreimann.)

35          The respondent says that his email of 9 March 2017 represented a "confirmation email" of the joint agreement and instruction. He says that the contents of his email and the amendments resulting in version 5 of the sale agreement reflected usual and proper drafting of what had already been agreed and also confirmed, where appropriate, that these were terms that he would have ordinarily recommended, meaning that there was no reason to disrupt the parties agreement.

36          The respondent had a conversation with Mr Villanueva in relation to the nature of further amendments required to the sale agreement which Mr Villanueva detailed in an email dated 17 March 2017 to the respondent, Mr Dreimann and the complainants, which read, in part:

"Upon having a conversation with [the respondent] today, the contract of sale will be updated to state; Benjamin Dreimann to retain ownership of the barge and the grader until which point the vendor financed amount for $70,000.00 is paid in full. (or something along those lines) This is to ensure that Ben has some sort of security in place for the outstanding amount".

37          The respondent says that in a discussion prior to this email, Mr Villanueva had told him that the parties had resolved that items of equipment would be split out from completion to avoid a PPSR (personal property securities register) mortgage, and that the purchaser would be entitled to use the equipment in the meantime. Mr Villanueva said that Mr Dreimann did not want to put the complainants to the expense of a PPSR mortgage. The grader was not a registered vehicle and

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therefore would have had to have been the subject of a PPSR mortgage and it was therefore
substituted for the barge in the final version of the sale agreement.

38           On or about 18 March 2017 Mr Villanueva sent the respondent a handwritten document entitled "Benjamin Dreimann Employment Contract Terms 18/03/2017". The respondent says that he was advised that the terms had been resolved between the parties and the complainants expressly advised that a formal employment contract between the parties was not required.

39           The respondent says that he "double checked" with Mr Dreimann that an agreement had been reached and that he was told that Mr Dreimann was not relying on employment or profit share, was content to take the risk that he was dismissed in a short time and did not want anything formal as far as an employment contract was concerned.

40          On about 18 March 2017, the complainants advised the respondent that they had inspected the premises, equipment and stock and were satisfied that they had completed their due diligence.

41           After communications between himself and the parties, the respondent produced a draft circular note which confirmed the required extensions to condition precedents, the security to be taken by the Mr Dreimann, details of equipment leases and interest on the vendor finance. The draft circular was sent by email dated 11 April 2017.

42           In about late April 2017 Mr Dreimann asked the respondent if he could reapportion the purchase price (ultimately to $65,000 on the land lease, $130,000 on the marine lease, $500 on a Corolla motor vehicle and $65,000 on the barge). And, to maintain internal accounting consistency it was necessary that Mr Dreimann and Ms Pike were listed as vendors in the sale agreement. The respondent had various communications with Dreimann's accountants with respect to these issues and ultimately drafted amendments to accommodate the accountant's recommendations to minimise CGT consequences for Mr Dreimann.

43   The respondent notes as to this:

"The reapportionment issue could have had knock on duty consequences for the Complainants, potentially changing the transaction from nominal duty to ad valorum on account of the value of 'interests in lan'". Mr Dreimann's CGT taxation benefits outweighed the potential duty liability by some margin….The Complainants had no obligation, and little motivation, to accede to the amendments at that point (ie post contract). I told Mr Dreimann that I could not ask the Complainants to accede to the reapportionment without telling the Complainants that there may well be duty implications for them. The alternative was the parties get advice on this issue elsewhere. As I would recommend to any client asking for an amendment post contract-offer to ensure there is no detriment to the other side and they will often agree. Mr Dreimann so instructed….

I confirmed the instructions on both issues specifically by email 1 May 2017 3.25pm to Dreimann. I reminded Dreimann of further personal exposure in that email. Mr Dreimann confirmed by return email on 2 May 2017 at 4.57pm. The Complainants did agree to the amendments. The contract was so amended."

44           The respondent amended the sale agreement and provided a copy of the draft (version 6 dated 1 May 2017) to the complainants by email dated 1 May 2017. In that email, amongst other things, the respondent, gave advice as to the apportionment of plant if the contract was not amended and stated that Mr Dreimann should agree and had agreed, to pay any duty levied on the goods and assignment of leases on account of the re-apportionment.

45   The amendments consisted of the following:

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• amendment to cl 11 of the table of particulars to change the security from "something agreed by the Vendor" to specifying a motor vehicle and a barge (farm equipment). (This amendment is said by the applicant to the benefit of Mr Dreimann.)

• amendment to cl 2 of the table of particulars adding Mr Dreimann and Ms Pike as vendors. (This amendment is said by the applicant to be to the benefit of the complainants as it expanded the number of parties who may be held to account in prosecuting the terms of the sale agreement.)

• amendment to cl 19 of the table of particulars and clause 7 of the agreement to change the terms of employment of Mr Dreimann by the complainants from $100,000 pa plus a 10% profit share to no stated salary, working hours of 38 hours per week and providing for 4 weeks annual leave and regular entitlement to sick leave. (This amendment is said by the applicant to have benefited the complainant to the extent that their wages liability appeared to become non-existent and they did not have to share the profits of the business. It is said also to have benefited Mr Dreimann to the extent that he became entitled to four weeks and other leave.)

• amendment to cl 15.3 of the table of particulars to allow Mr Dreimann to be responsible for an increase in the purchaser's stamp duty liability in certain circumstances. (This amendment is said by the applicant to be for the benefit of the complainants, as the stamp duty obligation was limited by the commitment made by Mr Dreimann.)

46           On 2 May 2017 the respondent provided the complainants with a final version of the agreement (version 7) for them to sign. This they did on 5 May 2017 when settlement occurred. The final version of the agreement was identical in terms to the sale agreement version 6 dated 1 May 2017.

The respective arguments

47 The applicant submits that the respondent's conduct in agreeing to act, and then continuing to act, for the complainants, Mr Dreimann and Dreimann Enterprises was in breach of his fiduciary duty to conduct himself with undivided loyalty to each of those parties and in breach of his statutory duty pursuant to r 12 of the Rules of Practice.

48           As uncontroversially submitted on behalf of the applicant by its counsel, Ms Cuthbertson SC, the lawyer-client relationship has long been recognised as a relationship which attracts fiduciary duties, relevantly, the fiduciary duty of loyalty. This duty creates a proscription against legal practitioners acting for more than one party to a transaction or matter if to do so places that practitioner in a position where there is or may be a conflict between his or her duty as a fiduciary to one principal (a client) and his or her duty as a fiduciary to another principal (another client). Counsel for the applicant submits, again, uncontroversially, in her written outline:

"A practitioner cannot serve two clients with competing interests, however, there is no general rule against acting for different parties in the one transaction because there may be circumstances where separate clients may be willing or prefer to look after their own interests, or there may be no actual conflict between the clients' interests.[1]

[1] Legal Services Commissioner v Reid (No 3) [2017] QCAT 471 at [96].

Whether or not a conflict exists is to be determined by adopting the standard of a reasonable man looking at the relevant facts and circumstances of the particular case and considering whether there was a real sensible possibility of conflict.[2]

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The extent, content of (and potential breach) of any fiduciary duty will be determined by the terms, ambit and scope of the lawyer-client retainer.[3] The existence and terms of the retainer, is to be determined objectively having regard to the surrounding facts, matters and circumstances. The uncommunicated subjective intention or belief of the parties is irrelevant to that determination. This is a function of the retainer being a contract which must be proved like any other. [4]

The principle qualification to the fiduciary duty, both at common law and pursuant to Rule 12 is the consent of the client, who can dictate the objectives of their representation and their best interests and authorise or consent to conduct by the practitioner which would otherwise substantiate a breach of fiduciary duty.[5]"

[2] Boardman v Phipps [1967] 2 AC 46 at 124 per Lord Upjohn.

[3] Ibrahim and Ors v Pham and Ors [2005] NSWSC 246 at [134] per Levine J.

[4] Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 at 48 [208].

[5] G E Dal Pont, Lawyers' Professional Responsibility, Thompson Reuters 5th ed 2013 113 [6.45] cited in Legal Services Commissioner

49 The standard required of a legal practitioner, when discharging the fiduciary duty of loyalty, is that of undivided loyalty to his or her client or clients in any matter within the scope of the retainer agreement. That proscription currently finds voice in r 15(1) of the Legal Profession (Solicitors' Conduct) Rules 2020. At the time when the conduct complained of in this matter occurred (February to May 2017), the relevant legislation was, as already alluded to, r 12 of the Rules of Practice.

50 Rule 12 of the Rules of Practice provides as follows:

"12	Acting for more than one party
(1)	A practitioner may act for more than one party to any proceedings or

transaction.

(2) A practitioner must not accept instructions from more than one party to any proceedings or transaction unless the practitioner is satisfied on reasonable grounds that–

(a)

each of the parties is aware that the practitioner intends to act for another party or parties; and

(b)

each of the parties is aware that as a result of acting for more than one party–

(i)	the practitioner may be prevented from disclosing to any one of those parties the full knowledge that the practitioner has of matters relevant to the proceedings or transaction; and
(ii)	the practitioner may be prevented from giving advice to any one of those parties if that advice is contrary to the interest of any other party; and
(iii)	he practitioner must cease to act for all parties if the practitioner determines that he or she is not able to continue to act for all parties without acting in a manner contrary to the interests of one or more of those parties; and

(c)

each of the parties, with full knowledge of the matters referred to in paragraph (b), has consented to the practitioner acting for more than one party.

(3) A practitioner who is acting for more than one party to any proceedings or transaction must immediately cease to act for all parties if that practitioner determines that he or she is not able to continue to act for all parties without acting in a manner contrary to the interests of one or more of those parties."

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51   Counsel for the applicant submits as to informed consent:

"A useful summary of the legal principles in relation to consent are set out in the New South Wales Court of Appeal decision of Atanaskovic Hartnell v Birketu Pty Ltd6 as follows:

"46 Informed consent is a defence. There is no duty on a fiduciary to obtain the informed consent of the principal, '[r]ather, the existence of an informed consent [will go] to negate what otherwise was a breach of duty': Maguire v Makaronis (1997) 188 CLR 449 at 467; [1997] HCA 23.

47 Accordingly, it is for the fiduciary to make out the

defence: Maguire at 466; Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1; [2011] FCAFC 24 at [108] (Besanko J, Finkelstein and Jacobson JJ agreeing); Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 at [135] (Leeming JA, Barrett and Gleeson JJA agreeing).

48 The consent must be 'fully informed' and what is required 'is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given': Maguire at 466. In Harvey, Street CJ said at 170 that there must be:

… a conscientious disclosure of all material circumstances, and everything known to him relating to the proposed transaction which might influence the conduct of the client or anybody from whom he might seek advice.

49 The question is whether the client has been 'fully informed of his rights "and of all the material facts and circumstances of the case"': Rahme v Benjamin & Khoury Pty Ltd (2019) 100 NSWLR 550; [2019] NSWCA 211 at [100] (Macfarlan JA, Bathurst CJ and McCallum JA agreeing), citing Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 at 393.

50 Consent can be established 'at different times and in different ways', and sufficiency of disclosure can depend on the sophistication and intelligence of the persons to whom disclosure must be made: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [107].[7]"

[7] Also see Xiao v BCEG International (Australia) Pty Ltd7 re the issue of "No positive duty to obtain informed consent" and the

52   As to that, counsel for the respondent, Mr McTaggart SC, submits in his written outline that:

"The authorities cited by the Board are mostly in respect to such private suits (primarily confined to: foreclosure by solicitors as mortgagee; or recovery of substantial legal fees). It is in these private suits that informed consent must be established by way of defence.[8] In any event and for the reasons which follow informed consent was obtained by the Practitioner."

[8] Maguire v Makaronis ibid at 466

53          As will be seen I do not need to address the question of whether or not it is correct to refer to informed consent as a defence in disciplinary proceedings.

54           The respondent's counsel argues that the parties gave informed consent, were astute and were more than capable of resolving proposed amendments to the draft agreement in their respective interests. He submits that the respondent's task was functionary, limited to including the agreed terms in the contract whilst attending to the amendments that followed.

55           The applicant responds to that by submitting that, "in effect", the respondent took it upon himself to resolve any points of conflict, as they arose by determining the mutual best interests of both

12   No 34/2023

clients, as he considered them to be. Counsel for the applicant submits that the respondent's determination appeared to rest on the course of action which he considered represented a reasonable compromise by both clients. Counsel for the applicant submits that it is apparent that the respondent determined whether he could continue to act for both sides based on whether both clients would consent to his mutual recommendations and advice.

56   Counsel for the applicant submits in her written outline of contentions:

"It may be true that a balanced set of terms represents the best way of achieving the transaction end required by each client, however, each client is still entitled to be fully informed of their options and the ramifications of exercising each or any of those options by receiving advice from a practitioner who is acting in that client's best interests, with undivided loyalty. The client is then fully informed and free to instruct the practitioner accordingly. That was the Respondent's duty which, in the circumstances, could not be discharged for both clients concurrently."

57   To that, counsel for the respondent contends in his written outline:

"The Practitioner did not take 'it upon himself to resolve any points of conflict' as suggested by the Applicant. There has been no material conflict identified by the Applicant that would engage the Practitioner in such a consideration.

The Applicant contents itself with pointing to amendments suggesting they cast a burden on one party, the flip side being of some benefit to the other party. The incidence of burden does not, ipso facto, render an amendment detrimental to the burdened parties' interests. By that measure almost every conceivable contract would be contrary to a client's interests to some extent even with fully independent representation. It is insufficient for the Applicant to rely on conjecture and supposition as to what advice might have been required, or otherwise what may have been averse to either party. There is nothing material identified by the Board that establishes conflict which required the Practitioner to cease to act in accordance with Rule 12(3)." (My emphasis.)

Discussion

58           It is apparent from the foregoing competing contentions, that in order to determine whether there was a breach of fiduciary duty which required the respondent to cease to act, it is necessary to seek to identify the nature and scope of his retainer or retainers and the context and effect of the amendments to the draft agreement as they materialised.

59   Counsel for the respondent outlines the circumstances of the retainer with Mr Dreimann as

follows:

"The Respondent's Retainer with Dreimann

18 The Practitioner was retained by, and advised, Mr Dreimann before the Practitioner was retained by the Complainants.

19 On 16 February 2017 the Practitioner received the Heads of Agreement

(HOA) for the sale of an oyster farm operated by Dreimann Enterprises Pty Ltd/Ben
Dreimann (Dreimann). In relation to that HOA:

a	the salient aspects of the transaction had been resolved;
b	Keith Wager, of Bolster Wager Solicitors, was nominated as the Complainants' solicitor; and

13   No 34/2023

c the assets the subject of sale were confined - fish stock, equipment, and leasehold/license interests, sold as a going concern for GST purposes.

20 The Practitioner engrossed a standard formal contract for sale, accommodating the terms of the HOA, in draft form on the 21 February 2017. The draft formal contract reflected the HOA and was otherwise a relatively standard set of terms.

21 Mr Villanueva, the agent, emailed the Practitioner noting that the Complainants requested dual representation, in lieu of their then solicitor Keith Wager. The Practitioner reserved his decision on the matter pending further enquiries, noting he did not readily act for multiple parties, and this would be the first occasion he did so in such a matter.

22 On 23 February 2017 the Practitioner explained to Mr Dreimann via telephone in following terms :

'I explained at length the complications of acting for the purchaser as well. I explained particularly that I would invariably have to recommend to the purchaser asking for warranties/conditions which would delay the (sic) achieving an unconditional contract. I explained that there was a real risk in me having to send all clients away at some point. Mr Dreimann's attitude was that he would not consider the deal as done until he received the cheque, was not inclined to force an unwilling purchaser, was prepared to give warranties and would entertain other conditions which I would recommend to the purchaser. On that understanding, I said I would be comfortable in accommodating the purchaser's interests and prepared to act for them.'

23 The Practitioner followed that up in an email 23 February 2017 , attaching the draft contract. The email said:

'I note that you are content if I act for the Purchaser. I am yet to confirm that I am content to do so. If I do then I note… [recited rule 12(2) and (3) verbatim].'

24 The Practitioner assessed Dreimann as a sophisticated client who could weigh his business and legal interests.

25 The Practitioner was then in receipt of instructions to amend the draft contract as the Practitioner considered was reasonably required to promote transparency and the confidence of the Complainants, with a view to achieve completion of the sale with a willing purchaser . At this time the Practitioner was not retained by the Complainants, and thus advice given to Dreimann, and instructions obtained, were unconstrained by a competing duty.

26          The Practitioner was in receipt of consent from Dreimann within the meaning

of rule 12(2)."

60          Counsel for the respondent outlines the content of the retainer with the complainants to relevant events as follows:

"The Respondent's Retainer with the Complainants

27 Notwithstanding the Complainants had engaged a solicitor, Keith Wager,

they requested that the Practitioner act for them also, ostensibly because Mr Wager
was resident interstate.

28 On 28 February 2017 the Practitioner had a telephone call with Mr Hopp at which point the Practitioner:

a explained the issues acting for multiple parties; and

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b

recommended the Complainants:

i	engage someone with local expertise on oyster farming;
ii	speak to wholesalers to verify sales rates; and
iii	inspect the farm/equipment before contracting.

29 The Practitioner followed that up in an email 28 February 2017 attaching contract version 3, which said :

'…Given the transaction appears to be relatively uncontroversial, and I understand most of the details have already been negotiated, I am content to act for you in these circumstances. Please find attached my terms of retainer. As a result of acting for both parties I note [recited rule 12(2) and (3) verbatim]… In order for us to continue to act in the matter, I must obtain your consent on the basis of the information we have set out in this correspondence.

Please countersign a copy of this email and return.'

30 The Complainants replied to the 'conflict advice email' (which enclosed the draft contract v3) by email 1 March 2017:

a	advising 'That all looks good';
b	advising satisfaction with the disclosure documentation;
c	raising a query as to clause 10.5 and wishing to accommodate a 'site unseen provision'; and
d	expressing a desire to avoid unnecessary delays to settlement.

31 The Practitioner spoke with Ms Davenport for 57 minutes on the 2 March 2017, including explaining the terms of the draft contract v3, and advising her, inter alia, that he could not advise as to value, and recommended due diligence with independent advice in respect to harvest records, environmental risk, stock levels and books of account . The Practitioner stepped through the contract clause by clause. That was squarely within the ambit of what Mr Dreimann had expected and consented (as above)

32 By email 5 March 2017 the Complainants again replied to the 'conflict advice' email expressly consenting that the Practitioner act for multiple parties. From 5 March 2017 (28 February at the earliest) the Practitioner was retained by multiple parties which included the Complainants.

33 Ms Davenport was highly sophisticated. She held herself out as a CPA

accountant with both private and corporate commercial transaction experience at the
time of engaging the Practitioner. The Practitioner was otherwise:

'…satisfied that she was capable of assessing risk and value, was cognisant of the terms of the contract and their import, was realistic in her expectations of the protection afforded by warranties and was capable of deciding what third- party consultation was necessary'.

34 Given the discussions with the Complainants and emailed instructions, the Practitioner considered his scope to be limited to progression of the contract to completion without delay.

35 The Practitioner was in receipt of informed consent and was entitled to be reasonably satisfied of the matters described in Rule 12(2). The advice which the Complainants could therefore subsequently reasonably expect to receive was limited by the terms of the conflict advice email of 28 February 2017 and Rule 12(3)."

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61          No issue is taken by the applicant as to the accuracy of the factual matters set out above, however, counsel for the applicant sets out the following submissions in her written outline:

"71 In the case of both Davenport/Hopp and Dreimann, the written retainers were identified as a 'Short Form Costs Disclosure Statement' being a general commercial retainer. Identical versions were sent to both Dreimann and Davenport/Hopp.

72 The documents did not contain any identification of the work to be performed or the likely cost of the work.

73 The Respondent states that he had a 'restricted retainer to progress the pre-

agreed terms to final contract terms and completion of the transaction' with
Davenport/Hopp. He relies on the following as evidence of the retainer:

a)	Ms Davenport's email to him of 1 March 2017 to him which he says constituted 'express written instructions to progress to settlement without delay;'
b)	the fact that all salient aspects of the sale had already been negotiated when the retainer was entered into; and
c)	the conversation that he had with Ms Davenport on 2 March 2017.

74 On 28 February 2018 the Respondent had a telephone conversation with Hopp where he had explicitly advised Hopp that Davenport/Hopp should not rely on the vendor/salesman and should:

a)	engage someone with local expertise on oyster farming;
b)	speak to wholesalers to verify sales rates;
c)	inspect the farm/equipment before contracting.

75 It is accepted that the retainer with Davenport/Hopp did not extend to the provision of advice with respect to the merits of the purchase of the business as these matters were expressly excluded by virtue of the Respondent's conversations with Hopp on 28 February 2017 and with Davenport on 2 March 2017. The Applicant accepts that the Respondent had no duty to advise Davenport/Hopp about the financial prospects of the transaction.

76 The Respondent seemingly suggests that his retainer was limited in the case of both of his clients because they were willing or capable of looking after their own interests. He points out that the 'salient matters' of the contract had been negotiated prior to his involvement and later, in matters such as Dreimann's employment terms and the vendor finance negotiations, the clients directly interacted with each other or with Villanueva as the intermediary to negotiate broad terms.

77 He noted that Davenport presented as highly sophisticated, being a CPA accountant and familiar with the types of clauses that a business sale contract might contain. He considered Dreimann to be a sophisticated client, who could weigh business and legal risk.

78 Limiting the retainer to the progression of pre-agreed terms to final contract terms on the basis that the parties wished to look after their own interests, would, it is submitted, require a specifically crafted written retainer which clearly specified the practitioner's role.

79 A conflict may be avoided altogether if the scope of the retainer is carefully

limited, but this is not a situation where the Respondent's retainer was limited to
simply giving effect to the transaction.

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80 It is the Applicant's submission that there was no limitation on the retainer between the Respondent and his clients in the way described by the Respondent.

81 The Respondent was not just engaged to progress pre-agreed terms to final contract terms and take other ancillary steps to achieve completion of the transaction. He was retained by both parties to provide legal advice on the ramifications of the contractual terms and the inclusion or omission of terms relevant to the best interests of each of his clients. He maintained duties to both parties to act with undivided loyalty."

62           Counsel for the respondent has also sought to demonstrate the scope of the retainers by distilling the relevant parts of the lengthy factual matrix I have set out earlier in these reasons and overlaying them with a template of legal principles. As to version 4 of the draft agreement – 3 March 2017, he submits:

"Amendments to draft contract, reflected in v4, 3 March 2017

38          The Practitioner attended various amendments to the contract v3, as reflected

in v4 – 3 March 2017.

39          The amendments to version 3, as reflected in version 4, consisted of the

following amendments:

a	an addition of a condition precedent in item 18 of the Table '…for the benefit of the purchaser: that they are satisfied with due diligence enquiries by 15 March 2017' – coupled with advice to the Complainants to engage independent experts;
b	amend clause 10.1 by removing the qualifying words 'to the knowledge of the Vendor', in respect to the accuracy of the facts recited in the Table;
c	amend cause 10.4 to remove the cap on Dreimann's maximum liability for representations; and
d	amend clause 15.3 to add that Dreimann was to share the costs of the lessor on the assignment of the land-based lease.

40          With respect to the amendments described in the preceding paragraph:

a	The amendments suggested by the Practitioner to the Complainants on 2 March 2017 (reflected in contract v4), together with recommendation as to independent consultants, were squarely within the preceding instructions of Mr Dreimann of 23 February 2017. The receipt of these instructions preceded the Practitioner being retained by the Complainants.
b	As regards Dreimann, and to the extent that there was a burden placed on Dreimann by the amendments:

i

The amendments were plain on their face, and no more than within the usual parameters of amendments required by a purchaser's solicitor in the finalisation of terms in any event.

ii

As to the potential manifestation of issues arising from due diligence inspection/enquiries, ironing out any issues with the purchaser's assessment of the business early was far preferable than an objection raised on the eve of completion. This amendment was squarely within Mr Dreimann's preceding instructions to engender confidence of transparency, and Mr Dreimann's objective of completing with a willing purchaser – instructions obtained by the

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Practitioner in advance of the existence of a competing duty of the Practitioner to the Complainants."

63 As to version 5 of the draft agreement – 9 March 2017, counsel for the respondent submits:
"Amendments reflected in draft contract v5, 9 March 2017

40 At this point the contract had not been signed. The amendments to v4, as reflected in v5 consisted of:

a	Vendor Finance: insert item 11 of the Table to allow for deferred payment of $70, 000.00, and security yet to be resolved; and insert into item 19 of the Table as a 'condition precedent for the benefit of both parties' – that vendor be satisfied with the security yet to be offered; consequential amendment to clause 15.2 of the contract proper; and
b	Extend the Due Diligence Date – amend the date for due diligence to 20th March 2017 in item 19 of the Table.

Vendor Finance

41          The circumstances were:

a	On 9 March 2017, the agent (Mr Villanueva) emailed the Practitioner noting a vendor finance arrangement had been reached, without further detail. The Practitioner was 'alarmed because the agent's email did not, on its face, suggest security had even been mooted, lest resolved and thus sending the clients away was on the horizon'.
b	The agent then confirmed that both parties had in fact agreed a deferred price of $70, 000.00, secured by over proceeds of fish sales, an interest free period, and the costs of security documentation to be paid by the Complainants. The matter had been presented to the Practitioner as a fait accompli.
c	The Practitioner was being asked to attend to functionary tasks:

i	to give an estimate the costs to have a PPSR mortgage drafted (but not draft the mortgage yet); and
ii	to engross the agreement in the form of a condition precedent, the terms of mortgage yet to be resolved (item 11 and 19 of the Table).

d

No advice was sought from the Practitioner by either party, and no relevant advice was given. The Practitioner did not consider that either party needed further advice on the subject because:

i	both parties were astute enough to ask for advice if they needed it (advice which the Practitioner may have had to tell them to get elsewhere in the event they had of asked);
ii	it involved a small proportion of the price (12% +/-); and
iii	the Complainants had agreed to give proper security and bear the costs – that being the norm.

Extend Date for Due Diligence

42 As to the extension of the due diligence period, the parties had been arranging an inspection date between themselves, which ultimately was rescheduled for 18

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March 2017. The time for confirmation of the due diligence condition was amended to accommodate that date. The Practitioner's task was functionary."

64          As to the amendments to the draft contract effected by version 6 dated 1 May 2017, counsel for the respondent submits:

"Amendments to signed contract, reflected in v6, 1 May 2017

43 The contract v5 had been signed on or about 17 March 2017, but remained

conditional. That signed contract was the subject of further amendments leading up to
completion as reflected in version 6, 1 May 2017 as follows:

a	Employment Terms - Delete that part of the condition precedent in existing item 19 of the Table regarding resolution of Mr Dreimann and employment terms and insert clause 7 in the contract terms proper reflecting employment terms resolved.
b	Split out title to the 1988 Carolla and The Kannoo – in item 11 of the Table insert a retention of title to the 1988 Corolla and 'The Kannoo' (barge) on account of the deferred price of $70, 000.00.
c	Change to Parties - amend item 2 of the Table by adding Mr Dreimann and Kaysha Jane Pike as joint vendors proper, further reflected, and explained item 8 of the Table, whereas previously Dreimann was simply a vendor's guarantor.
d	Re-apportionment of the Price – item 9 of the Table to reapportion the price, and clause 15.3 of the contract proper for the vendor to indemnify the purchaser for any increase in duty consequential on the price reapportionment.

Employment Terms

44          The circumstances were:

a	The existing item 19 of the Table had reflected the contract as conditional on the parties reaching an agreement as to the finer details of an employment contract in principle at $100,000 per annum salary and 10% profit share (as provided in the HOA).
b	By email on 18 March 2017 the agent provided details of the employment terms had been resolved by the parties directly.
c	Neither party sought advice from the Practitioner on the subject and he gave none. The Practitioner's task was limited to amending item 19 of the Table and clause 7 of the contract proper to reflect the newly agreed terms.
d	The Practitioner checked with Mr Dreimann that he had agreed – he had .
e	The Practitioner checked with the Complainants that they had agreed- they had.
f	The parties were astute and were more than capable of resolving these types of things in their respective interests. The Practitioner's task was functionary, limited to including the agreed terms in the contract whilst attending to the following amendments.

Split out title to the 1988 Corolla and The Kanoo (barge)

45          The circumstances were:

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a	The parties had resolved between themselves that in lieu of a mortgage on fish sales, Dreimann would retain title to the 1988 Corolla and The Kanoo (barge). It was presented to the Practitioner as a fait accompli.
b	The Practitioner checked with Mr Dreimann to see that he had agreed, (particularly that he was satisfied with the security) – he had.
c	The Practitioner checked the Complainants had they so resolved - they had.
d	Neither party sought advice from the Practitioner on the subject and he gave none. The reapportionments reflected a total value of title to the retained equipment at $65,500 ($500 for the 1988 Corolla, and $65,000 for the Kanoo barge). That was commensurate with the $70, 000.00 deferred price. On that basis, the Practitioner saw no need to give unsolicited advice on the matter. Had the security being disproportional one way or the other, that may have warranted asking the parties to get separate advice. That was not, however, the case. The parties were astute and more than capable of resolving these things in their respective interests and to ask for advice if required.
e	The Practitioner's task was functionary, limited to amending the contract accordingly – namely item 11 and 19 of the Table.

Change to parties & Re-apportionment of the Price

46          The circumstances of the Change to Parties & Re-apportionment of the Price

were as follows:

a	It had become apparent in late April 2017 that Dreimann and Pike (personally) were interposed as sub lessors - with Dreimann Enterprises Pty Ltd as their sub lessee. That was not apparent on the face of the lease and license documents at the outset of the transaction. The structure had been one of tax effective accounting in Dreimann's books – not apparent from the record.
b	On the advice of Dreimann's accountant, Elizebeth Hay of Crowe Howarth, in late April 2017, Mr Dreimann asked the Practitioner to add Dreimann and Pike personally as joint vendors and sub - lessors and reapportion the price. That would result in a net capital gains tax advantage for Dreimann.
c	The reapportionment had the potential to have a knock-on-duty liability consequence for the Complainants. Naturally, as the reapportionment was to benefit Mr Dreimann, he agreed to bear any increase in duty. The net cost benefit warranted a request to the Complainants to reapportion the price according to the accountant. Adding joint vendors/ sub - lessors altered the legal structure, but with no net effect given the existing director's guarantees.
d	The Practitioner asked if the Complainants were agreeable - they were. Any tax consequences to the Complainants, if any, were within Ms Davenport's field of expertise as a CPA accountant.
e	The Practitioner's role in this issue was functionary – to engross the consequential amendments.
f	No additional duty liability was occasioned as it transpired."

65           I accept those submissions. The applicant does not take issue with the factual basis of the distillation so that the argument revolves around what I regard as the central issues of whether the

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respondent was in breach of r 12 of the Rules of Practice in acting as he did in those circumstances or, alternatively, whether his conduct otherwise amounts to unsatisfactory professional conduct, or unprofessional conduct within the meaning of the Act as constituting a breach of the fiduciary duty he owed to the complainants and/or Mr Dreimann and/or Dreimann Enterprises and/or their guarantors, or otherwise.

66          For the reasons that follow, I am of the view that he was not, that it does not, and that the application should be dismissed.

67           It is opportune to here mention that the applicant notes that the complainant's complaint details serious consequences of the transaction for them, including considerable financial loss but that the applicant acknowledges that complex matters of causation arise in relation to the assessment of that loss which are outside the scope of this application. Notwithstanding that however, counsel for the applicant submits in her written outline:

"Nonetheless, the Respondent has, by commencing and continuing to act for both parties, put himself in a position where he cannot command confidence in his competence and diligence, having left Davenport/Hopp in a compromised position vis-à-vis Dreimann and Villanueva who were united in their motivations." (My emphasis.)

68           I do not accept the factual accuracy or the legal validity of that submission. Sympathy for the complainants with respect to the outcome of the transaction is a natural response, but it is necessary for the applicant to identify the information in the respondent's possession that could not be disclosed, or the advice that he was required to, or ought to have provided, but could not or did not.

69   Counsel for the applicant also submits:

"The Respondent has not demonstrated any insight into his conduct. He continues to maintain that it was at or above standard. His continued assertion that he has done nothing wrong is inconsistent with his acceptance of and contrition for his wrongdoing and contributes to the seriousness of his actions."

70           I cannot accept the factual accuracy or the legal validity of that submission either. As counsel for the respondent notes in his written outline, the respondent's defence of the allegations against him is not a proper matter to support a finding against him, (to which I add), particularly where, as here, I am of the view that such defence was justified. It is also relevant to this issue that the respondent has fulfilled his duty of candour in disciplinary proceedings by fully cooperating with the applicant at all times since he was first informed of the complaint against him some four years ago on 9 September 2019.

71 The applicant correctly submits that both at common law and as a consequence of r 12(3) of the Rules of Practice, a practitioner must cease to act once he or she finds that there is a real and sensible possibility of conflict, whether or not consent had been given to act by the clients in the knowledge that such a real and sensible possibility of conflict might arise.

72           However, the burden of proving misconduct lies on the applicant, to the Briginshaw standard and I am unable to see, even viewed in a wholly objective fashion that any matter has been established that would have required the respondent to cease to act pursuant to r 12(3). I accept the submission made by counsel for the respondent that:

"The Applicant contents itself with pointing to amendments suggesting they cast a burden on one party, the flip side being of some benefit to the other party. The incidence of burden does not, ipso facto, render an amendment detrimental to the burdened parties' interests. By that measure almost every conceivable contract would be contrary to a client's interests to some extent even with fully independent

21   No 34/2023

representation. It is insufficient for the Applicant to rely on conjecture and supposition as to what advice might have been required, or otherwise what may have been averse to either party. There is nothing material identified by the Board that establishes conflict which required the Practitioner to cease to act in accordance with Rule 12(3)." (My emphasis.)

73 The remaining question is whether there was conduct amounting to a conflict between duty and duty which, whilst not amounting to a breach of r 12, might nonetheless be a breach of the respondent's fiduciary duty to any party or even amounting discretely to unsatisfactory professional conduct or professional misconduct under the Act.

74 I have difficulty in accepting that conduct which does not offend r 12 could amount to unsatisfactory professional conduct or professional misconduct in disciplinary proceedings, however I have considered the question of breach of fiduciary duty in light of the possibility that it may have an independent role to play. As will be seen, I am satisfied that there was no relevant breach of duty and that the respondent's conduct does not amount to unsatisfactory professional conduct or professional misconduct in law or under the Act independently of r 12.

75   Counsel for the applicant submits as follows in her written outline:

"The Respondent contends that there was no conflict between the parties during the
course of the retainer.

The Respondent suggests that because acting for more than one party to a transaction is permissible, it must be the case that there is room for reconciliation of respective clients' interests and the measure of the client's interest must be looked at holistically. He states:

'Two things can be true at once. An obligation cast upon a client can be in that client's interests to the extent that it is a part of a balanced set of terms which achieves the transaction end required by that client. That can apply to equally a purchaser and a vendor, and both at the same time.

What is in a client's interests is to be measured against instructions, provided such are properly informed at the time.'

It is submitted that the Respondent has conflated the client's interests with the content of his duty to them. The error is illustrated in the following analysis:

'The duty of a fiduciary toward a principal may be identified or assessed, in part, by reference to the interests of the principal. Similarly, an alleged conflict between the duties of a fiduciary towards two principals may be identified or assessed, in part, by reference to the conflicting nature of the different interests of the different principals.

But the interest of the principal is not a proxy for the duty of the fiduciary. In other words, the interest of the principal does not of itself identify or define the scope of a duty owed by the fiduciary to the principal, nor do the conflicting interests of those principals necessarily identify or define the scope of any conflict between the duties owed to them by the fiduciary.'9

The Respondent, in effect, took it upon himself to resolve any points of conflict, as they arose by determining the mutual best interests of both clients, as he considered it to be. His determination appeared to rest on the course of action which he considered represented a reasonable compromise by both clients. It is apparent that he determined whether he could continue to act for both sides based on whether both clients would consent to his mutual recommendations and advice.

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It may be true that a balanced set of terms represents the best way of achieving the transaction end required by each client, however, each client is still entitled to be fully informed of their options and the ramifications of exercising each or any of those options by receiving advice from a practitioner who is acting in that client's best interests, with undivided loyalty. The client is then fully informed and free to instruct the practitioner accordingly. That was the Respondent's duty which, in the circumstances, could not be discharged for both clients concurrently.

When the Respondent commenced to act for both parties there was a real and sensible possibility of conflict between the two parties meaning that he was in a clear duty and duty conflict10 at the time that he entered the retainer with Davenport/Hopp and it continued for the duration of the retainers.

Professor Dal Pont's comments are apt, expressing how the duty and duty conflict here is inherent to the transaction itself:

'Conflicts between the interests of multiple (prospective) clients in non-contentious work are most commonly discerned where the clients' respective positions are ostensibly incompatible. For example, the interests of vendor and purchaser, lessor and lessee, and lender and borrower, on their face appear to diverge. Whereas each may have an interest in the transaction proceeding, the terms upon which it is to proceed, although the subject of agreement, cannot be assumed to reflect the same interests; the terms most favourable to the vendor, lessor or lender will not reflect those most favourable to the purchaser, lessee or borrower. For this reason, concurrent representation in these types of cases should, in order to avoid potential conflict, be limited to the bare mechanics of the transaction, and not in any way settling its terms.'[11]"

[11] Dal Pont, G. E. Lawyers' Professional Responsibility, (Law Book Co – Thomson Reuters), 7th Ed, page 279 at [7.125] citing

76 While there is much in those submissions with which I agree, I do not accept their underlying premise. I do not accept that when the respondent commenced to act for both parties there was a real and sensible possibility of conflict meaning that he was in a clear duty and duty conflict at the time that he entered the retainer with the complainants. There is a relevant distinction to be made between a "potential conflict" and a "real and sensible possibility of a conflict". That Professor Dal Pont's note of advice is sound is undoubted, however the force and effect of r 12 of the Rules of Practice must be acknowledged.

77           Moreover, I do not accept the submission that the respondent took it upon himself to resolve points of conflict as they arose by determining the mutual best interests of both clients, as he considered them to be. Proof of that to the requisite standard is entirely lacking on the applicant's case. In any event to adopt Professor Dal Pont's terminology, it is my view that the respondent's representation in the factual circumstances that existed, was very largely limited to "the mechanics of the transaction".

78           The applicant's allegations set out in the originating application are that the respondent made amendments, sought instructions, and provided advice in relation to various iterations of a draft business sale agreement intended to be signed by the parties to the transaction, which had the effect of benefiting the vendor and/or the vendor's guarantor and causing detriment to the complainants (and vice versa in the case of the vendor parties). Those allegations have not been made out by reference to any particular advice or any particular amendment to the agreement. All the applicant has been able to say is that a particular amendment favoured one or other of the parties to the transaction. It has not thereby been demonstrated that anything the respondent did was done in breach of r 12 of the Rules of Practice or amounted to a breach of the fiduciary duty owed to each of the parties. Moreover the allegations of detriment to a relevant interest are unproven and in the case of the complainants are

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inconsistent with the applicant's acknowledgment that complex matters of causation arise in relation to
the assessment of the complainant's loss which are outside the scope of this application.

79           Even if I preferred the applicant's submission that the respondent's retainer was not limited in any way and that the respondent's task was not merely functionary, but rather, that he was retained by the parties to the transaction to "provide legal advice on the ramifications of the contractual terms and the inclusion or omission of terms relevant to the best interests" of each of his clients, the applicant has failed to point to any specific instance of a relevant failure to do so. (My emphasis)

80 The applicant has also failed to substantiate the assertion that the respondent was required to cease to act by virtue of r 12(3) by reason of his acting in any particular instance in a manner contrary to any identified interest of one or more of the parties. I am not satisfied that unsatisfactory professional conduct or professional misconduct can somehow be implied from "the vibe" of an apparently ill-fated transaction and the fact that a legal practitioner acted for all parties to the transaction.

81 Finally, the applicant submits that the onus is on the respondent to prove, on the balance of probabilities, that he fully informed both clients of their rights and of all the material facts and circumstances of the case, if he wishes to rely on "the defence of consent" to either a breach of fiduciary duty or a breach of r 12.

82   Counsel for the applicant submits in her written outline:

"The onus is on the Respondent to prove, on the balance of probabilities, that he fully informed both clients of their rights and of all the material facts and circumstances of the case, if he wishes to rely on the defence of consent to either a breach of fiduciary duty or a breach of Rule 12.

It is accepted that there was disclosure and purported consent but the Applicant submits that this was a matter where it was not practically possible for the Respondent to obtain fully informed consent given the high standard of disclosure required. Only a client who fully understands the nature and existence of the conflict and its potential consequences can give consent. In most, if not all, circumstances, it will be necessary for such a client to obtain independent legal advice in order to give informed consent to joint representation with another party who has potentially opposing interests.12

The burden is a heavy one, as noted in Break Fast Investments v Rigby Cooke, at first instance:

'A solicitor placing a client in a situation of such potential risk must ensure that the client is in a position to make a free and informed decision about the matter that is the subject of the retainer. If in those circumstances, the solicitor does not recommend independent legal advice, a heavy burden lies upon the solicitor to demonstrate that he or she has done everything to protect the interests of the client and to ensure that the client is aware of every circumstance that might be relevant to making choices on the matter at hand.'13"

83   Counsel for the respondent in turn submits in his written outline:

"A practitioner has a duty to avoid a 'real and sensible possibility' of conflict of duties, whether duty - duty, or duty - self interest.14 However, a conflict of a practitioner's duties is curable by the informed consent of the parties15

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Informed consent means 'consent given in the knowledge that there is a conflict between the parties and that as a result the solicitor may be disabled from disclosing to the other party the full knowledge which he possesses as to the transaction or may be disabled from giving advice to one party which conflicts with the interests of the other.'16 A client may surrender the right to a practitioner acting without a conflict of duties17.

The sufficiency of informed consent is to be determined on the circumstances of each matter.18 Considerations as to the sufficiency of consent which are relevant to the current matter include:

a the sophistication of the client19;

b any benefit for the client arising from the relevant transaction20;

c the apprehension of the conflict of duty by the practitioner, being necessary for a proper explanation of the consequences to the client21;

d any inequality of bargaining position as between client and client22".

84           Whether or not it is correct to speak of "the defence of consent", I am satisfied, having regard to the relevant considerations, whatever the requisite onus may be, that on the facts as they have been set out earlier in these reasons, and the unchallenged evidence and explanations of the respondent, that he was acutely aware of the need for informed consent and obtained it to the fullest extent required. Indeed he went to considerable lengths to do so. I have also accepted the submission made by counsel for the respondent that the parties were astute and were more than capable of resolving proposed amendments to the draft agreement in their respective interests.

85 I do not accept the submission of counsel for the applicant that while it accepts that there was disclosure and "purported consent", this was nonetheless a case where it was not practically possible for the respondent to obtain fully informed consent given the "high standard of disclosure required". That argument is circular and would suggest, at odds with r 12 of the Rules of Practice, that a legal practitioner can never act for both parties to a business transaction. As submitted on behalf of the respondent, informed consent means consent given in the knowledge that there is always a potential conflict between the parties and that as a result the legal practitioner may be disabled from disclosing to the other party the full knowledge which he or she possesses as to the transaction or may be disabled from giving advice to one party which conflicts with the interests of the other. . Implicit in this is that I do not accept the applicant’s submission that the respondent could never have properly embarked upon the retainer to act for the complainants.

Disposition

86   The application is dismissed

v Reid (No 3) [2017] QCAT 471 at [40].

relevant authorities were discussed at [126] to [143] before the conclusion was stated at [144] that "there is no reason to doubt
Maguire v Makaronis or the subsequent intermediate appellate decisions, including of this court, that disclosure by a fiduciary of a
conflict or interest (or duty) is not a positive obligation, but rather a defence to what would otherwise be a breach of duty.

Rigby Cooke
Marron

[2021] VSC 398 per Macauley J.

6 [2021] NSWCA 201, per Gleeson JA at [46] to [50] (Basten and McCallum JJA agreeing).

9 Break Fast Investments v Rigby Cooke [2021] VSC 398 at [106] to [107] per Macaulay J.	10 Break Fast Investments v Rigby Cooke Lawyers [2022] VSCA 3118, approving analysis at first instance Break Fast Investments v
v J Chatham Daunt Pty Ltd [1998] VSC 110 at [33] per Byrne J	12 Legal Minds Pty Ltd t/as Legal Minds v Ebsworth [2022] NSWSC [146] per Adamson J 13 Break Fast Investments v Rigby Cooke [2021] VSC 398 at [220] per Macaulay J citing Fitzpatrick v Waterstreet [2000] ANZ

ConvR 15, 28 quoting Hope JA in Law Society of New South Wales v Moulton [1981] 2 NSWLR 736, 739-80
14 Break Fast Investments v Rigby Cooke (2021) VSC 398 [120 - 121] citing Lord Upjohn in Boardman v Phipps [1967] 2 AC 46, 124

[appeal from judgment of Macaulay J dismissed in Break Fast Investments v Rigby Cooke [2022] VSCA 118]