Negligence

• contributory negligence - failure of solicitor to advise trustee of danger of personal liability - trial judge found contributory negligence on the part of the trustee in entering into business transactions without proper care - duty owed to beneficiaries of trust distinguished from duty to take care of one's own interests - trustee's conduct did not constitute a failure to take proper care of its own interests, or those of a defendant - breach of duty owed to a third person cannot give rise to contributory negligence
• further, risk of exposure to personal liability was the very matter against which the solicitor should have guarded - no rule of law preventing a claim of contributory negligence by a professional adviser against a client - no contributory negligence - appeal allowed. Daniels v Anderson (1995) 37 NSWLR 438, applied. Pennington v Norris [1956] HCA 26; (1956) 96 CLR 10; Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446; Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271, considered.

Damages - measure and remoteness of damages in actions for tort - remoteness and causation - costs incurred in litigation with third party - trial judge allowed costs up to date where appellant considered not to have been justified in continuing to litigate

• trial judge entitled to so find. Monies gained from sale of assets used to pay litigation costs - trial judge abated appellant's claim by this sum - trial judge was only correct to abate the amount to the extent that the money was used to pay litigation costs unreasonably incurred - appeal allowed in part on this point - further submissions necessary. Damages for loss of use of money - "Hungerfords v Walker" interest allowed on payments which appellant was required to make as a result of the breach until 1 March 1990 - after that date, payments made by associated companies in group - judge correct in allowing damages for loss of use of money only until 1 March 1990 - appeal dismissed on this point.

HRNG ADELAIDE, 8-10 May 1996 (hearing), 1 July 1996 (decision) #DATE 1:7:1996 #ADD 19:2:1997

Counsel for appellant: Mr F Mcalary QC with Mr G Colyer

Counsel for respondent: Mr D Quick QC with Mr B Beasley

In this matter the Full Court is called upon to consider both an appeal and a cross-appeal in relation to a judgment entered by Mullighan J against the respondents in favour of the appellant.

The appellant sued the respondents, legal practitioners practising in partnership, for damages for breach of contract and negligence. The appellant based its claim upon a claimed failure by the respondents to provide proper and appropriate legal advice to the appellant.

The case resulted from the appellant, as trustee of a trading trust, having to discharge the obligations it incurred as trustee, when the trust became insolvent.

The appellant said that the respondent failed to warn it, when it was considering accepting an appointment as trustee of the trading trust, that it would be personally liable in respect of obligations incurred as trustee, and that the respondent was in breach of the duty it owed as a solicitor. The respondent said that its retainer was limited to the giving of advice on limited aspects of the matter, not including that about which the appellant complained, and that it owed no duty to advise about personal liability. The respondent also said that the appellant knew or should have known that it was personally liable. The respondent said further that the appellant was guilty of contributory negligence, because it accepted an appointment and incurred obligations without giving proper consideration to the financial affairs of the trust. Had it done so, it would have seen that the trust was unable to meet the obligations which the appellant incurred. There were also issues as to the damages which were claimed.

In order to understand the issues arising on these appeals, and to consider them in their proper context, it is necessary to appreciate the facts in relation to which they arise.

It is appropriate to commence, as did the trial judge, with a consideration of the parties and main witnesses.

The appellant was incorporated in 1910. Its original name was Elders Trustee and Executor Company Limited and it was associated with the well known pastoral group stemming from Elder Smith and Company Limited. The appellant's name was changed to 'Austrust Limited' late in 1990.

Following a corporate merger or takeover in the 1980's the appellant, under its original name, became part of the Elders IXL Group. As the trial judge pointed out, this gave rise to changes in the structure of its management and, to some extent, the work which it was prepared to undertake.

Under its new management the appellant was, among other things, looking to broaden and expand the nature and extent of its work.

Traditionally, in its role as a corporate trustee, the appellant had accepted appointments as trustee of deceased estates, settlements, protected estates, moneys to which infants and other persons under disability were entitled and the like. All of these were 'conventional' trusts, in relation to which assets were held, invested and managed pursuant to non trading trusts - although, no doubt, in the administration of some trusts, the management of pastoral properties and businesses was necessarily involved from time to time. The scope of the appellant's activities (including a property management role) is more extensively referred to in the copy brochure reproduced in the appeal books at pp2149-2159.

The trial judge found that in mid-1983, by reason of what were then new management policies, the appellant was anxious to become involved in work as trustee of commercial trading trusts, a field into which it had, prior to that time, not ventured.

The Chairman of the Board of the appellant was a Mr Peter Wells ("Wells"), who was an experienced chartered accountant in private practice.

At the relevant times the witness Wood ("Wood") was general manager of the appellant. Prior to October 1983, when he came to the appellant, he had been general manager for the southern division of Beneficial Finance Corporation. His experience, immediately prior to the events relevant to these proceedings, had been in the commercial finance sphere; and not in areas germane to what had been the core activities of the appellant. Wood succeeded the witness Oakeshott, who retired as general manager in September 1983. The latter had had prior long service as a senior trust officer. During his tour of duty the company had some developing experience as trustee of debenture trusts and the routine administration associated with borrowings on securities of that type. However, he testified that, during the time that he had been general manager of the appellant, he had never been aware of the company borrowing moneys in its capacity as a trustee.

A person called Brian Lamshed ("Lamshed") was initially employed by the appellant as a staff legal officer. He was a qualified legal practitioner. Although he was a key participant in events relevant to these proceedings he was not called as a witness. No doubt that was due to the fact that he had been named as a defendant in separate proceedings initiated by the appellant against him. For that reason the trial judge was not disposed to draw any adverse inference from a failure to present him as a witness.

It is not clear when Lamshed was first employed, but Oakeshott thought that it would probably have been prior to 1980. The evidence of the latter as to Lamshed's role as legal officer is recorded in the transcript in these terms: "HIS HONOUR Q. What is your understanding of Mr Lamshed's duties as a legal officer in your company during the time that you were the manager.

A. It was to assist officers of the company on matters, legal matters, on which they were not clear: Wills, taxation, anything else that came up in the company that had some legal implications. In no way did he give formal advice to the management. It was merely an initial interpretation as to whether we were hitting our heads against a brick wall, or whether it was something we should really get some qualified advice."

The trial judge obviously accepted that evidence. He found - "... The plaintiff employed Mr Lamshed who is a solicitor. He held various positions but worked closely with senior management and also in the administration of trusts. His duties included advising staff on legal matters relating to wills, income taxation and, according to Mr. Oakeshott, the former general manager, 'anything else that came up in the company that had some legal implications', but he did not give formal legal advice to management."

There was no material before the trial judge which indicated the breadth of professional experience of Lamshed. There was certainly no evidence that he had any particular expertise or knowledge in the fields of commercial or corporate law, or in relation to trading trusts.

The defendant Astley ("Astley") was a highly experienced legal practitioner having expertise in the commercial and corporate law areas. In 1983 he was the senior partner of Messrs Finlaysons, a large firm of solicitors practising in Adelaide. He was also a director of various public companies. His firm had been the corporate solicitors for the appellant for many years and he, personally, had attended to a good deal of legal work for it. He was well known to the senior staff of the appellant and quite familiar with its structure and the type of work traditionally undertaken by it. He said that he knew that the appellant was - "... a specialised trustee company which acted as trustee of various wills and ... estates and also trustee for inter vivos trusts"

He was of opinion that the senior staff of the company were well trained and mentioned that his own firm had participated in "in house" training programmes for them. From time to time he received instructions direct from the trust officers. He was acquainted with Lamshed and knew him to be employed by the appellant as a professionally qualified legal officer.

The next person to be noted for present purposes is one Hunt ("Hunt"), who was a legal practitioner on the staff of Messrs MacGillivray and Co, a firm of solicitors practising in Brisbane. Hunt acted for a person named O'Dea, who was, in essence, the promoter of the undertaking which was to become the subject of a trading trust, to which reference will be made in due course.

Finally, it is necessary to identify the witness James ("James"). This witness was a chartered accountant who was a senior consultancy partner with a major national accountancy firm. He specialised in bankruptcy and insolvency administrations.The facts relevant to the issue of negligence and breach of contract and the trial judge's findings on those facts

The events begin with the receipt by Finlaysons of a letter in the following terms: "ELDERS TRUSTEE ELDERS TRUSTEE AND EXECUTOR COMPANY LIMITED (INCORPORATED IN SOUTH AUSTRALIA) 27-39 CURRIE STREET, ADELAIDE, SOUTH AUSTRALIA POSTAL ADDRESS: G.P.O. BOX 546, ADELAIDE, SOUTH AUSTRALIA TELEPHONE: 218 4911 WHEN CALLING OR TELEPHONING PLEASE ASK FOR Mr. Lamshed Ph. 218 4990 AND QUOTE REFERENCE No 31st August, 1983

Messrs. Finlaysons, DX 152, ADELAIDE,South Australia, 5000. Attention: Mr. Gerlach Dear Sirs,

Re: G G I Rural Income Trust We have been approached by the principals of Golden Grove Industries Ltd. to act as the Trustee for the unit holders of the above Trust. A draft copy of the proposed Deed of Trust has been forwarded to us for our perusal. We would be obliged if you could examine the Deed and let us have your comments on it in due course. We understand that discussions have been held with the Corporate Affairs Commission in Brisbane, but that the Deed has not been submitted to the Commission yet.The aim of the Trust, briefly is to set up an intensive piggery on land at Young in New South Wales. The land is presently owned by Golden Grove, and, in fact, is part of a larger holding upon which Golden Grove have already established (using private funds) a piggery of a similar but smaller nature to the proposed for the Trust. It is proposed

that the Trust should also become involved in the slaughter and processing of pigs later.If you require any further information please let us know. Yours faithfully, 23. Lamshed) Legal Officer."

Within Finlaysons, that letter was assigned to Astley for his attention.

As the trial judge pointed out, this letter disclosed the product of various prior negotiations which had been conducted between O'Dea and the appellant. Astley had not been privy to those negotiations and, prior to receipt of the letter of 31 August 1983, knew nothing of them. The trial judge summarised the situation thus - - O'Dea was the principal of a Brisbane based company known as Queensland Financial Planning Pty Ltd ("QFP"), which carried on business as a financial and investment adviser. QFP was associated with a separate entity known as QFP Properties Pty Ltd ("QFP Properties").

• On 30 July 1982 O'Dea established a unit trust known as the GGI Pig Trust, of which QFP Properties was trustee and another company, Golden Grove Industries Pty Ltd ("Golden Grove"), was manager. This provided the administrative structure for the conduct of a piggery conducted at Young (in New South Wales) on land owned by O'Dea and his family, but acquired by QFP Properties on 30 August

• O'Dea proposed a substantial increase in the size of the piggery operation. To that end, on 9 June 1983, he obtained an option to purchase a property of some 1028 hectares (referred to during the trial by a shortened name "Booka") near Tenterfield in northern New South Wales. Much of that property was utilised to grow soya beans, but it was proposed to set up a further piggery on it and some additional land.

• The GGI Pig Trust was a private trust. It was ultimately proposed to create a new public trust to subsume the private trust. The funds required to extend the operations of the GGI Pig Trust would be raised by public subscription. O'Dea approached the appellant, in about March or April 1983, to act as trustee of the proposed public trust. On 13 May 1983 Oakeshott wrote to him saying that the appellant was prepared to act as trustee of the proposed public trust.

Mullighan J made the following express finding in relation to the situation, as it then stood -

"It appears that the responsibility for handling this proposal must have been entrusted to Mr. Lamshed at this time. The proposal represented a new type of venture for the plaintiff as it had never before been involved as trustee of a trust of this nature, i.e. a trust which conducted a business and traded in livestock. Mr. Oakeshott regarded that sort of business as risky ..."

The draft deed which is referred to in the letter written by Lamshed to Finlaysons on 31 August 1983 was that which related to the proposed new public trust.

It will be seen that the instructions given in the letter were somewhat vaguely expressed and Astley sought no further clarification of them. In the course of his evidence Astley said that he could not recollect whether what was said in the letter from Lamshed was amplified by the latter verbally. When asked what the letter meant to him, he responded - "A. It meant, to me, to go through the deed, as I did, and then, having been through the deed, discuss any comments or otherwise that I had with Mr Lamshed, which I also did.

On 9 September 1983 Hunt telephoned Astley (whose name must, presumably, have been given to him by the appellant) and enquired where matters stood. According to his costs entries Astley told him that the documentation had only been received on the preceding Monday and that he would look at it as soon as possible.

It is relevant to record that Astley's costs entries in relation to the period immediately thereafter read in these terms - "1983 Sep 23 Attending Lamshead [sic] of Elders telephone discussing shortly with him. Further engaged on perusal of draft Deed. 1 3/4 hours.

27 Further engaged in checking draft deed and in particular checking it against the Companies Act. 1.5 hours

Attending Hunt on phone and requesting further information concerning some of the clauses which he would put on telex.

28 Attending Lamshed telephone arranging for discussion with him tomorrow. Also perusing telex from John Hunt with further details of their clauses and their cross reference to Companies Code.

29 Attending Lamshed when he called going through draft deed with him. Subsequent letter advising we approved of same and that it conformed with the Act.

Attending Mr Hunt telephone discussing with him some of our amendments. Agreeing them with him and also asking him to let us have a draft of the prospectus as soon as available. Letter to him confirming."

Mullighan J found that Astley's primary focus on the trust deed was in relation to compliance with the relevant Companies Code and regulations. It apparently did not enter his mind to discuss with either Lamshed or any officer of the appellant, the potential legal implications related to acting as trustee of a trading trust, notwithstanding that, based on his past experience of acting for the appellant, the relevant transaction was, for it, a venture into a new type of business. He was not made aware at that stage that it was likely that the appellant would be requested, as trustee, to borrow money for the purposes of the new unit trust.

The draft trust deed did, in the body of it, contain a provision to the effect that the trustee was empowered to borrow money, with or without security, within prescribed limits "PROVIDED THAT the Trustee shall not be required to accept any personal liability for such borrowing". There is no suggestion that Astley discussed with Lamshed or any other officer of the appellant the meaning and legal significance of that proviso. Nor is there any suggestion that he advised that it had no potential operation, in itself, in relation to (or as against) any potential lender of money. This is an important consideration because, to the inexperienced reader, such a clause may have misled the reader into believing that, so far as third party lenders were concerned, no personal liability would arise.

Following his discussion with Lamshed on 29 September 1983 Astley wrote him a letter as follows - "29th September, 1983 Mr. B.A. Lamshed, Legal Officer, Elders Trustee & Executor Co. Ltd., 27 Currie Street, ADELAIDE. S.A. 5000

We refer to the writer's discussion with Mr. Lamshed on 29th September concerning the draft Trust Deed forwarded by Messrs. MacGillivray & Co. solicitors of Brisbane.

We confirm that we have read the draft and checked it against the provisions of the Companies Code and it conforms with those provisions. We have spoken to Mr. Hunt of Brisbane regarding drafting amendments which we discussed with you and he will incorporate them.

We have asked Mr. Hunt to let us see a draft of the proposed

prospectus as soon as possible. However he is not sure when that will be available as he has not yet received instructions from his client as to the contents of that document. As soon as we hear any further we will let you know."

Mr Quick QC, for the respondents, argued that Astley's activities during September 1983 were in the course of a limited set of instructions, completed either by his letter of 29 September 1983 or when he later perused the associated draft prospectus. He went so far as to suggest that, in relation to the mortgage security documents, to which reference will shortly be made, "Mr Astley acts more or less as a post office, sending them on very politely and promptly without too much by way of advice at all".

All that need be said concerning that argument is that it conflicts with the evidence placed before the trial judge.

In the first place, Astley's letter of 29 September 1983 clearly contemplates an ongoing need to consider the contents of a prospectus in due course. Moreover, his file memoranda and cost entries disclose that he acted and charged for work done on the basis of a single, ongoing retainer from the appellant, not limited to initial advice concerning the draft trust deed. So much will clearly emerge in due course.

On the last mentioned date Astley also wrote to Hunt in these terms

"29th September, 1983

Messrs. MacGillivray & Co., Solicitors, 180 Queen Street, BRISBANE, QLD. 4000 Attention: Mr. J.B. Hunt

We refer to our several telephone conversations concerning the draft Trust Deed and in particular to our discussion on 29th September. We confirm that we have discussed the draft with our client company and subject to the several aspects which we have discussed it is in order.

We look forward to receiving a draft of the prospectus from you as soon as it is available."

Nothing further seems to have transpired until, on 26 October 1983, Hunt telephoned Astley to discuss certain audit requirements concerning the proposed trust. At that time he intimated that he hoped to send a copy of the prospectus soon. By this time Oakeshott had retired as general manager of the appellant and Wood had succeeded him.

Under cover of a letter dated 30 November 1983 Lamshed sent Astley a copy of the draft prospectus, which he must have received from Hunt. In that letter he said "We would appreciate your comments on the prospectus in due course". On 8 December 1983 Hunt told Astley that the matter was not said to be urgent.

There is something of a gap in Astley's cost entries related to this period. However, his file indicated that, on 13 December 1983, he received a letter from Hunt enclosing copies of the amended draft trust deed, a draft prospectus and what was described as a statutory compliance checklist. The letter indicated that there had been some direct discussions between O'Dea and the appellant. It sought comments on the drafts. This was followed by a letter from Hunt to Astley, dated 15 February 1984, seeking comments concerning a matter raised by the Corporate Affairs Commission.

Astley's evidence was to the effect that (for some reason which is not apparent) he did nothing about this correspondence until, on 5 April 1984, he telephoned Hunt enquiring about the situation. He was told that some difficulty was being experienced in obtaining subscriptions, that consideration was being given to converting the private GGI Pig Trust into a public trust, and that nothing further needed to be done for the moment.

Lamshed's status within the appellant changed as of 1 March 1984. He ceased being a salaried employee of the company and commenced private legal practice.

However, he conducted his practice under an unusual arrangement with the appellant. He operated from accommodation provided by the appellant, for which he paid a rental. He was assisted by a staff member allocated to him by the company, but who remained an employee of the company.

Lamshed thereafter attended to conveyancing and probate work for the appellant, but not to its general corporate work. Wood testified that, as at the time of the change, he made an oral arrangement with Lamshed that - " ... as there was no person on the staff to carry the conduct of ... [the GGI unit trust] ... file, he was prepared to carry it out in a personal capacity until the point when there was somebody to manage that department." The file was eventually taken over from Lamshed, by an employee of the appellant called Bacon, in either October or early November 1984, on the return of the latter from long service leave.

In the course of his submissions Mr Quick QC argued that the inference arising on the evidence was that, as from 1 March 1984, any exchanges between Lamshed and Astley took place on the basis that the former was then acting as an independent solicitor for the appellant and dealing with the latter on that basis. The argument was that Lamshed's role was to provide any general advice required by the appellant, and that Astley's role was a subsidiary one.

In our opinion such a contention must be rejected.

In his evidence in chief Wood testified that, from 1 March 1984 until Bacon eventually took over the file, Lamshed was not paid anything by the appellant for whatever he might have done for the Company on the matter.

Later, in cross-examination, he had this to say - "Q. ... Was there a system whereby correspondence addressed to Mr Lamshed at Elders was brought to your attention.

Q. In relation to this trust, was it a matter for his discretion about whether it came to your attention or not.

Q. Even those that were addressed in the sense of physically to the premises of Elders, if his name was on it, whoever opened the mail would give it to him.

Q. And it was up to him to decide what to do about it.

Q. The arrangement with Mr Lamshed, which you orally arranged, was that he would continue to handle the business on behalf of Elders arising out of Mr O'Dea's proposal for Elders to become the trustee, wasn't it.

Q. In fact, he did that between March and September 1984.

Q. In fact, he did that and you, during that period, were relying upon him to use care, skill and judgment in the work that he did.

Q. What I suggest to you is that the arrangement with Mr Lamshed was that you had retained him to act for Elders from time to time and as necessary in his judgment to engage other solicitors. That's right, isn't it.

A. I'd find the word 'retained' to be a little strong. He, in this particular matter, acted as if he were an employee. In this particular matter, the solicitor had already been engaged and he continued to conduct the operation as it was before he ceased being an employee.

Q. It was part of his process to decide when and to what extent to involve other solicitors, wasn't it.

He went on to make these statements - "Q. Putting aside the question of fee or reward in terms of doing the work, he was retained by Elders to act for Elders from time to time in conjunction with other solicitors in relation to Mr O'Dea's proposal, wasn't he.

Q. Do you positively assert now that the arrangement with Mr Lamshed excluded him having a responsibility to do legal work in relation to this proposal.

A. I would disavow there was a brief to advise on legal matters in this instance.

Q. Is it the position, that you assert that Mr Lamshed was subject to the ordinary duty of a solicitor owed to Elders as his client to use reasonable care, skill and judgment in doing the work he did in relation to Mr O'Dea's proposal.

A. I find it difficult to give a precise answer to that. But I would say, that I expected him to behave as if he was an employee of the company. Those were the terms on which the arrangement was made. I would have expected his legal knowledge to be of use, but not to be relied upon. His duty, as a solicitor, was not in question, in my mind, in this particular arrangement.

Q. If your solicitors were to assert that Mr Lamshed, in doing what he did in relation to this proposal, was subject to the duty of a solicitor, to use reasonable care, skill and judgment in relation to Elders as a client, do you disavow that.

Mullighan J did not specifically refer to this evidence in the course of his reasons for decision, but the tenor of them suggests that he accepted it.

Moreover, it is not without significance that, in the correspondence which was subsequently sent by Astley to the appellant in relation to the GGI unit trust matter, he almost invariably addressed letters to - "Mr B A Lamshed Legal Officer, Elder's Trustee and Executor Co Ltd, 27 Currie Street, Adelaide, SA 5000" (or to the appellant, for attention of "Mr B A Lamshed"), this being the same mode of address as had been employed by him prior to 1 March 1984. This indicates Astley's view of Lamshed's role at the time.

Both Astley and Wood agreed that, on the afternoon of 11 April 1984 (at the direction of the Board of the appellant) the latter called on the former, informed him of the change of status of Lamshed, and reassured him "that Finlaysons remained our principal solicitors".

In our opinion that, also, is a significant matter.

The next relevant development was the receipt by Astley, on 24 July 1984, of a letter from Hunt transmitting the final version of the trust deed and some associated documentation. In the course of that letter Hunt said

"We understand that our respective clients have agreed that your
client will forthwith accept appointment as Trustee, and

that the Trust Deed, in its finally accepted form, will forthwith be adopted as the Trust Deed of the existing 'private' trust, so that your client as trustee may, on 31st instant, complete the purchase of a large grazing and soya bean property at Tenterfield, New South Wales."

Hunt went on to request Astley's "urgent comments as to the acceptability of the" documents forwarded by him.

This was followed by a further letter from Hunt on the following day which said - "24th July, 1984

Messrs. Finlaysons, Barristers and Solicitors, 211 Victoria Square, ADELAIDE. S. A.

We refer to our letter of yesterday's date and now enclose herewith form of New South Wales transfer in respect of the property "Bookookoorara" Tenterfield which, as indicated in our earlier letter we understand that your client has agreed to purchase as trustee of the abovenamed trust.

We understand that our client has furnished all relevant

documentation relating to the purchase to your client, but in case this is not so, we are enclosing herewith a copy of the relevant contract of purchase.

We should be pleased if you would arrange for your client to execute under seal, urgently, the transfer and if you would then return same to us.

We have not inserted an attestation clause and trust that you will

do so. The clause should be somewhere in the area which we have marked with a pencilled cross.

In addition to the attesting signatories a witness should witness the attestation and should, in addition to his or her signature, insert his or her full name, address and occupation, as provided.

You will no doubt appreciate that the vendor must execute the transfer prior to settlement which we are informed is to take place on 31st instant, and we should therefore greatly appreciate the return of the transfer at the earliest possible date.

Should you require any further information please do not hesitate to telephone or telex the writer.

The contract of purchase disclosed that the consideration to be paid to the vendor (which was the trustee of the "Ted Reeves Family Trust") was $1m, of which $490,000 was to be secured by a second mortgage over Booka, a bill of sale over all plant, machinery and chattels at Booka and a second mortgage over the piggery property at Young. Each of these was to be granted by the appellant.

Astley's file notes reveal that, on 25 July 1984, he went through the Trust Deed documentation in detail and also examined the documentation related to the sale of Booka. He telephoned Hunt and ascertained that $1m was to be paid for the Booka land and $200,000 for the plant and equipment at that property. Hunt then expressed the view that it was unlikely that settlement would actually occur on 31 July, as originally contemplated.

On this occasion Astley passed on the instrument of transfer of Booka to Lamshed for execution by the appellant, in anticipation of settlement. It was found by the trial judge that Astley understood that Lamshed would be attending to the actual conveyance of Booka.

It is instructive to consider Astley's cost entries made at that time. On 25 July he noted - "July 25 Perusing letter from John Hunt with further draft trust deed, checking same, subsequently attending Lamshed, going thru the amendments with him, satisfying ourselves on same, (it appeared he knew very little about proposal for company to become trustee of the private trust which would then be converted to public trust), arranging for him to come again tomorrow with Brenton Wood, attending Hunt telephone re several matters, see notes on file."

Astley's file notes, made at the time, record - "Brian Lamshed He seems to know very little - spoke to Brenton Wood & to discuss w/- him tomorrow 0930."

The file notes for 25 July 1984 also contain these entries - "John Hunt ( ) 1615 Told him seeing Wood tomorrow. Vendors solrs now want to settle on 31/7 also talking about an advance to one of O'Dea's coy. w/- gntee from Elders - sd that not on. Reported same to Brian Lamshed."

These notes reveal that, in relation to the sale transaction, Astley was not acting as a "mere post office box" as Mr Quick QC argued. The tenor of the notes is that he regarded himself as acting fairly generally in the matter and protecting the interests of the appellant in the matter. The notes are also inconsistent with an argument that Lamshed was playing the principal part and Astley a subsidiary part.

On the following day Astley had a conference with Wood and Lamshed. His contemporaneous notes indicate that, at that point, he was told - - the overall transaction included giving a first mortgage of $813,000 (including in respect of the plant) and a second mortgage of $490,000 plus stamp duty.

• the overall concept was satisfactory to the appellant, including cash flow and getting investors.

• the appellant was, to employ Wood's expression - "Happy to go into this as trustee even if no public investors come for. Satisfied as to security. We have seen all books of A/C up to a couple of months ago. So happy about assets we are taking over and the books of a/c."

• Wood was recorded as also commenting - "We were always ready to come in as trustee of existing trust."The words emphasised are important because they emphasise the proposed role of the appellant as trustee and imply that it was not, in any sense, proposing to enter into the transaction as a financier."

Once again, it is instructive to record the cost entries made by Astley in relation to the conference. They are expressed as follows

"Discussions with Wood and Lamshed when Wood satisfied us that
they were aware of what was happening, (they) had seen the

books of account up to 2 months ago, they were satisfied about the assets that were being taken over from the private trust, auditors were auditing the a/cs to 30th June and they expected to get report shortly. See notes on file.

Attending Hunt telephone re same in the presence of Wood and Lamshed, suggesting that conf. next Thursday may not be essential and we would leave it open for the moment. He still had not seen the mortgage documents and would forward them to us as soon as they became available."

The material to which we have referred does not support the submission made by Mr Quick QC that Astley had no significant, ongoing role in relation to the property transactions or any retainer to advise or look after the appellant's interests in relation to them.

It is not disputed that Astley did not, at any stage, even after he became aware of the projected mortgage transactions at his conference with Wood and Lamshed, raise with either Wood or Lamshed the issue of the need to exclude any personal liability of the appellant under any relevant securities executed by it. The information imparted by them to him of the proposed mortgage loans should have alerted him to a need to consider such an aspect and to point out the legal implications to them.

In this regard Mullighan J found, as he was clearly justified in doing, that Oakeshott, Wells and Wood did not, at any relevant stage, ever appreciate that a trustee is personally liable for debts incurred in that capacity, unless personal liability is, in clear and unambiguous terms, excluded by the relevant loan agreement or security. He also inferred, despite the submission by Mr Quick QC that he was not justified in so doing, that it is probable that, despite his legal qualifications, Lamshed also did not appreciate that point. There was no evidence put before the trial judge to suggest that any other officer of the appellant appreciated it. In our opinion there is no reason to assume that they did.

In the lastmentioned regard Mullighan J particularly made reference to the contents of a memorandum written by Lamshed to Wells on 7 August 1984 as being strongly suggestive of such a situation - which he was fairly entitled to do.

Astley did not give any specific legal advice to Wood or Lamshed at all on 26 July 1984 and nothing was said at the time, one way or another, as to the nature of his further involvement. On the other hand, that he would continue to be involved on behalf of the appellant in a general way was implicit both from the prior correspondence with Hunt and his dealing with both Wood and Lamshed. If, as he inferred in his evidence, he had received no instructions at all, either express or implied, to do other than peruse and comment on the original draft deed, and if his role was limited to that, then it is inexplicable that Wood and Lamshed would not have made this clear to him, in relation to his continuing involvement. There is also the fact that the appellant eventually paid for the work done by him at all stages without demur.

Be that as it may, on 31 July 1984, Astley received a further letter from Hunt. The letter enclosed a series of three deeds related to the unit trust transactions for execution by the appellant. These were perused and checked by Astley, who telephoned Hunt concerning some errors detected in them. It is important to observe that, in his file note of the conversation had by him with Hunt, Astley recorded - "Are we to sign these documents w/out seeing the mtges? He does not have mtge yet." This is a clear indication that Astley then appreciated that execution of the proposed securities was part and parcel of the overall transaction, in the form in which the appellant was being invited to embark on it.

By letter dated 2 August 1984, addressed to Lamshed in the form earlier described, Astley forwarded the trust documentation received from Hunt, for execution by the appellant. His letter concludes with this paragraph - "We assume from our discussion last week that your company is probably willing to execute these deeds now notwithstanding that completion of the purchase of the New South Wales property has not been completed and we still await the forms of mortgage."

On 7 August 1984 Astley received a letter from Hunt which forwarded the various security documents for execution by the appellant. Hunt stated that the mortgages were in abbreviated form which referred to standard conditions as lodged in the Lands Titles Office. A copy of those would be forwarded to Astley direct by the solicitors for the mortgagees. They were sent to Astley from Brisbane on 7 August 1984. Those documents did not contain any provisions exempting the appellant, as trustee, from personal liability for the moneys secured.

On 9 August 1984 (prior to the receipt by him of the standard conditions later the same day) Astley telephoned Lamshed and informed him of the receipt of the security documents. He told Lamshed that he did not yet have the standard mortgage conditions and that the appellant should await their receipt before executing the documentation. Astley then wrote the following letter to Lamshed - "9th August, 1984 Mr. B.A. Lamshed, Legal Officer, Elders Trustee & Executor Co. Ltd., 27 Currie Street, ADELAIDE. S.A. 5000.

We refer to previous correspondence and enclose a copy of a letter of 6th August which we have received from Mr. Hunt of Messrs MacGillivray & Co., together with a copy of a letter from the vendor's solicitors dated 30th July, 1984.

We think the letter from Mr. Hunt is self explanatory and sets out the manner in which the documents are to be executed. We might add that the set of standard mortgage conditions referred to in the second paragraph of Mr. Hunt's letter has not yet arrived.

We are unable to check the title references as you have the Memorandum of Transfer and Contract.

So far as the forms of mortgage, stock mortgage and bill of sale

are concerned, they appear to be in a standard form. Presumably the amounts are correct but you will have particular knowledge of this and likewise we assume that the number of pigs in the stock mortgage and the plant and equipment referred to in the bill of sale are accurate.

If you have any queries regarding the documents, please let the writer know."

It is to be noted that this letter merely states that the security documents appear to be in a standard form, but makes no mention of any issue of personal liability. It was Wood's evidence, apparently accepted by the trial judge, that he took the statement that the documents were in a standard form to constitute advice from Astley that it was in order to execute them.

Despite the receipt of the standard conditions on 9 August, Astley appears to have done nothing about them until 13 August. His cost entries for that date reveal that he then considered them and related stamp duties aspects. (Those actions on his part belie the present contention that he had no retainer to consider or advise as to the security documentation.)

On the following day he telephoned Lamshed and, according to his file note "Told him mtge conditions looked quite normal Prospectus yet to be approved". Lamshed informed Astley that the security documents had been executed and sent back to Hunt. On 15 August Astley confirmed with Hunt by telephone that the security documents had in fact arrived.

Hunt telephoned Astley on 17 August and said that the solicitors for one of the mortgagees had requested certain amendments to the security documentation. The text of the desired amendments was telexed to Astley on 20 August. Astley perused and discussed them with Hunt on the telephone. He then wrote to Lamshed in these terms -

"20th August, 1984 Mr. B.A. Lamshed, Legal Officer, Elders Trustee & Executor Co. Ltd., 27 Currie Street, ADELAIDE. S.A. 5000.

We enclose a copy of a telex which we received last Friday from Messrs Ellison Hewison & Whitehead, solicitors for Invia Pty. Ltd., one of the mortgagees.

We have discussed the suggested amendments to the mortgage with John Hunt, as set out in paragraphs (A), (B) and (C) of that telex. We do not see any problem with the suggested variations and we believe Mr. Hunt is now incorporating them in the document.

With regard to the penultimate paragraph of that telex, we have asked Mr. Hunt whether the assets are sufficient to ensure the ratio is not breached and he has told us he has been so assured.

On that basis, Mr. Hunt has drafted a form of certificate to be given under the common seal of your company, as set out in a telex which we received this morning.

Assuming you are content with this situation, we enclose three copies of the form of certificate to be given under the common seal of your company. Could you please execute two of them and return them to us immediately as Mr. Hunt wishes to settle tomorrow. The third copy is for your file.

Referring to the last paragraph of the telex of 17th August, Mr. Hunt has explained to Margaret Campbell that her reading of the deed is not correct. The quarterly valuation, under Clause 15, is a book entry exercised by the Manager. An actual valuation takes place only every three years."

Astley received the form of certificate back, duly completed on the same day. On 21 August he telephoned Hunt advising of that situation and faxed a copy to the solicitor for the mortgagee. He sent original executed copies to both that solicitor and Hunt by courier that day.

Apart from receiving copies of the finally amended securities after settlement (which occurred on 22 August), nothing further appears to have happened until, on 14 September, Astley received a letter from Hunt concerning a proposed variation of the Trust Deed. Having considered the proposal Astley wrote to Lamshed advising that the variation should be agreed to. He received this back, duly executed, on 24 September and despatched it to Hunt that day.

Some further work was done by Astley in relation to the prospectus and transfer of the Young property in late September and October, but the details of this are not of significance. What is, however, of importance is that on 25 September Hunt wrote to Astley forwarding a loan agreement, memorandum of mortgage proposed to be executed by QFP Properties and other ancillary documentation in relation to a loan of $400,000 to be made by Eagle Star Nominees Ltd to the appellant as trustee of the unit trust. This loan related to the Young piggery operation and was required to discharge some existing loans of the Trust and to provide working capital.

Mullighan J found, on the evidence, that Astley had not been aware of the proposed loan until Hunt contacted him about it. When Astley spoke to Lamshed the latter asked him "to have a look at them [ie the documents related to the loan]".

All of this material was considered by Astley in detail on 2 October and certain aspects were discussed by him on the telephone with both Hunt and Lamshed. On 3 October Astley wrote a lengthy letter to the appellant (for attention of Lamshed) in which he discussed various provisions of the Loan Agreement in considerable detail. Once again, no reference was made to the need to exclude personal liability, although he did suggest various amendments to it. This is consistent with the fact that he, himself, does not seem to have directed his attention to that aspect at any stage.

It is of importance to note the express findings of the trial judge concerning the events of early October. In the course of his reasons he said - "According to Mr. Astley he examined these documents carefully because he had been asked by Mr. Lamshed to do so.

Mr. Astley gave advice, in some detail, in his letter of 3rd October 1984 about each of the documents. Of particular significance is advice which he gave about the obligations of the plaintiff under the proposed loan agreement. He gave detailed advice about most clauses including that the plaintiff was the borrower as trustee of the Trust and suggested that there be an amendment to one of the clauses, cl.16. He also advised that there should be amendments to the statutory declaration required to be executed by one of the directors of the plaintiff. Both Mr. Wells and Mr. Wood saw this letter and the suggested amendments to the documents were made. The loan agreement was executed by the plaintiff on 4th October 1984. The loan to the plaintiff was

secured by a mortgage over the Young property by QFP Properties Pty. Ltd. which was still the owner of that property.

The documentation with respect to the Eagle Star loan included a bill of sale which was again sent by Mr. Hunt to Mr. Astley on 5th October 1984 for re-execution and the completion of a statutory declaration and an affidavit by one of the authorized officers of the plaintiff. Mr. Astley presented the bill of sale to Mr. Lamshed and requested him to attend to Mr. Hunt's request and return the documents to him promptly. Upon receiving them, Mr. Astley forwarded them to Mr. Hunt."

Once again, one finds Astley playing a significant part and advising the appellant generally. Once again, there is no reference in that advice to the issue of the appellant's own liability.

On 23 October Hunt sent Astley a memorandum of transfer of the Young property from QFP Properties to the appellant. This was sent by him to Lamshed and duly executed by the company.

The foregoing facts fall to be considered against the background of Astley's evidence at trial as to the nature and extent of his retainer.

He was insistent that he had not been instructed to do other than direct his attention to the trust deed and related matters; and that the appellant itself was attending to the conveyancing aspects, including the mortgages. He asserted that his reference to various security documents being in standard form was intended to indicate that he had not been through them in detail. He testified that, had he been asked to give advice concerning the security documents, he would have sought instructions to include a clause limiting liability to the trust assets and excluding any personal liability. He said that he did not give that advice - "Because it was not part of my job to have anything to do with the mortgages or the transfer or the contract, or the bill of sale or the stock mortgage."

The same situation applied, he testified, to the standard conditions, when they arrived. He further said that he regarded the later, telexed, proposed changes to the mortgages as "quite inconsequential amendments".

Astley agreed that he had been asked to look carefully at the Loan Agreement and had done so. He believed that he would have noticed any omission in it of any limitation of personal liability and would have appreciated the need to exclude it.

In examination-in-chief, counsel for the respondents skirted somewhat gingerly around this topic. However, it was squarely addressed in cross-examination. Astley, in effect, sought to derive comfort from Clause 16 of the Loan Agreement, which, so far as was material, provided as under - "16. (a) The Borrower discloses that it enters into this Deed and the Securities as trustee of The G.G.I. Rural Income and Growth Trust (hereinafter called 'the Trust') being a Trust established by a certain Deed of Trust dated 6th August 1984 and made between Golden Grove Industries Limited as Manager of the first part the Borrower as Trustee of the second part and the several persons therein mentioned of the third part(hereinafter called 'the Trust Deed'). All parties declare that their paramount intention is

that the Borrower enters into this Deed as such trustee to the intent that the Principal Sum should, forthwith upon its being advanced or provided, become part of the assets of the Trust and be applied for the benefit of the Trust and, for that purpose and in consideration of that benefit, that the assets of the Trust should be charged in favour of the Lender with the due payment and performance of all liabilities and obligations imposed on the Borrower by this Deed of Securities."

In the course of his cross-examination Astley seems to suggest that this was adequate to limit liability to the trust assets. However, such a contention cannot withstand scrutiny. On the face of it the clause does no more than ensure that, from the lender's point of view, the loan is to be a charge on trust assets, and facilitates recourse to them. Nowhere is there any express or implied exclusion of liability on the borrower's personal covenant.

At the end of the day the inference, which appears to have been accepted by the trial judge, is that Astley simply overlooked the problem of liability on the covenant.

As to the wider issue of Astley's evidence concerning a lack of instructions when he looked at the earlier security documents, it must be said that this sits uneasily with the events set out above, including the fact that virtually all of his activities were duly recorded in his cost entries, for which appropriate charges were made to the appellant.

In the course of his reasons Mullighan J made the following express findings - "The plaintiff's case is that there was, in effect, one transaction. From the time the defendants were instructed on 31st August 1983 until late in 1984, the plaintiff had retained them as its solicitors in relation to all aspects of the plaintiff's involvement in the Trust and Mr. Astley had a duty to exercise care and skill with respect to each matter which arose over that period and to properly and adequately advise the plaintiff with respect to each of them. The defendants contest that approach. They contend that the terms and limits of the retainer must be considered at each relevant stage over this period and that upon doing so, it may be seen that Mr. Astley had been instructed to do very little.

In considering these matters, it is appropriate to have regard to the experience and expertise of the plaintiff and what action it took independently of the defendants. These matters are also of importance in determining the nature and extent of the duty of care and whether Mr. Astley was in breach of it. If any authority is required for such a common sense proposition, it may be found in Ormindale Holdings Ltd. v. Ray & Ors. (1980) 116 D.L.R.(3d) 346 at p.357 and Carradine Properties Ltd. v. D.J. Freeman & Co. 96. 1 PN 41. The plaintiff had considerable experience as a trustee and in administering trusts in accordance with the instruments creating them. It employed Mr. Lamshed. There was no evidence to suggest that he was not a competent and experienced solicitor in the fields in which he worked. The plaintiff had staff sufficiently competent to undertake conveyancing. Mr. Wood had considerable expertise in commercial matters and expert advice as to financial and rural matters was available to the plaintiff from within the Elders Group.

Also the relationship between the parties in the past is of significance. The defendants regularly acted for the plaintiff. Mr. Astley was aware of the usual business of the plaintiff. The plaintiff had sought and relied upon advice of members of the defendant's firm, including Mr. Astley, for many years which was known to him. He expected that the plaintiff would value and take any advice that he gave.

Having regard to all of these matters, the only sensible

conclusion is that the scope of the duty which Mr. Astley owed to the plaintiff included the duty to give the advice which it appeared to need regardless of whether or not it had been specifically requested: Carradine Properties Ltd. v. D.J. Freeman & Co. (supra) per Donaldson L.J. at p.41. The instruction in the letter of 31st August 1983 to '... examine the Deed and let us have your comments on it ...' obliged Mr. Astley to advise as to all matters which a competent and experienced solicitor of his standing would expect the plaintiff would need to know relative to its obligations as trustee and the liabilities which it could incur if it became the trustee. These matters included whether the plaintiff would be exposed to personal liability for any excess of liabilities over assets of the Trust should it fail, that all relevant documentation should, in the plaintiff's interest, exclude such personal liability and other particular matters relating to that question. This duty also included duty to give advice about the documentation relating to the mortgages with respect to Booka and the Young property and other security documents in the context of the need to exclude personal liability and further to advise as to the need to define the relationship between the plaintiff as trustee and Golden Grove Industries Pty. Ltd. as manager so as to exclude personal liability of the plaintiff for debts incurred by the manager.

It is, and was at the time, well known that a trustee is personally liable for debts which he incurs in that capacity unless personal liability is expressly excluded in the relevant transaction, e.g. a loan agreement or a memorandum of mortgage, and care must be taken to ensure that such exclusion is expressed in clear and unambiguous terms:

In my view, Mr. Astley ... failed to advise the plaintiff of the need to protect itself from personal liability for the debts of the Trust. He knew of the proposal to purchase Booka and to borrow a substantial amount for that purpose before the trust deed was executed. He had perused the trust deed and given some advice about it. He had perused the memoranda of mortgage with respect to Booka and had given some advice, namely that they were in standard form. He continued to act for the plaintiff over the total period. Whilst it must be acknowledged that the plaintiff undertook some tasks independently of the plaintiff and that the instructions of the plaintiff lacked precision, Mr. Astley was sufficiently aware of each transaction to be able to appreciate the need for the plaintiff to be protected against personal liability. He should have appreciated that the plaintiff needed to know that it should be protected from such risks and he was in breach of his duty to the plaintiff in failing to give the appropriate advice. It was a simple matter to draft appropriate amendments to the trust deed so as to make it clear to anyone who intended to deal with the plaintiff and chose to read the deed, that the liability of the plaintiff extended only to the trust assets. It was a simple matter to advise the plaintiff to insist upon appropriate amendments to the mortgage documents and any other security documents to which it might become a party. It was also a simple matter to advise the plaintiff of the need to exclude personal liability with respect to each transaction into which it entered and to adequately and carefully define its relationship with the manager so that it did not become personally liable for any of the trading debts of the Trust incurred by the manager.

I accept that the plaintiff did rely upon Mr. Astley and if he had given the advice which he should have given, either the plaintiff would have insisted upon the exclusion of personal liability in all relevant documents or would not have agreed to be the trustee. I accept Mr. Wood's evidence in that respect and I also accept that Mr. Wells would not have permitted the execution of the trust deed and other documents if he had been aware that the plaintiff would be exposed to personal liability. Furthermore, I find that this breach of duty was causative of losses suffered by the plaintiff to the extent which is discussed later in these

It is beyond question that all of these findings (and particularly the findings of fact included in them) were fairly open to the trial judge on the evidence. In our opinion there is nothing which has been put by Mr Quick QC which should be accepted as a basis for impugning them. It is clear that the trial judge accepted the appellant's submission that there was, in effect, one transaction in relation to which Astley had a duty to advise the appellant. In our opinion that finding has not been shown to be wrong.

By the end of December 1984, it became obvious to the appellant that the unit trust was in financial difficulty. Early in 1985, following a conference in Brisbane between Wood, the directors of the manager and the trust auditors, it was apparent to him that the trust could not continue to operate. On 15 March 1985 steps were taken to terminate it. The appellant took over its management and, ultimately, a winding up resolution was confirmed by the Supreme Court of Queensland. A realisation of assets eventually resulted in liabilities exceeding assets by a considerable margin and the appellant was called upon to make good the shortfall by virtue of its personal liability under the relevant security documents executed by it.

Initially, the winding up was handled by Bacon. However, due to problems related to realisation of assets and legal issues concerning the activities of O'Dea, the administration became very complex and embroiled in litigation. James was therefore retained to attend to the work, at a not inconsiderable cost which had to be borne by the appellant.

This result precipitated the present proceedings, in which the appellant claimed its net losses arising from its role as trustee and claimed interest, by way of damages, from the respondents. That claim was based both on alleged breach of contract and professional negligence. Mullighan J upheld that claim, but also found the appellant guilty of contributory negligence. He apportioned liability on the basis that each party was equally negligent and awarded the appellant $718,418.89 by way of damages and interest on that footing.Respondent's appeal against finding of negligence and breach of contract

In the course of dealing with the trial judge's findings we have already indicated our agreement with his conclusions on some points and our agreement with his findings that Astley was in breach of the duty which he owed to the appellant.

It is appropriate to say here that the judge accepted that all witnesses before him were truthful, and did their best to recall accurately the relevant events. We proceed on that basis, and see no reason to doubt that conclusion. In particular, in what follows we see no reason to doubt the truthfulness of the evidence which Astley gave.

We now deal with particular submissions advanced upon the hearing of the appeal.

The respondent argued that Astley was under no duty to advise the respondent in relation to its exposure to personal liability as trustee of the GGI Pig Trust. The submission was that there was no request to advise generally on the Trust deed; that the matter of personal liability was elementary; that Astley had no reason to think that the appellant, employing Lamshed and competent staff, was unaware of its exposure, and that it should have been clear to the appellant that Astley's advice was limited to matters relevant to compliance with the Corporations Law.

In our opinion this submission is, by and large, answered by the findings of the trial judge set out above. In particular, we refer to and adopt the conclusion that "... the duty which Mr Astley owed to the plaintiff included the duty to give the advice which it appeared to need regardless of whether or not it had been specifically requested..."

This conclusion flows from a number of matters.

First of all, there is the fact that the firm of Finlaysons was regarded as the appellant's solicitors, the firm to which it turned regularly for advice, even though the appellant was an experienced and skilled trustee and employed its own solicitor. It seems clear to us that the relationship was one in which the appellant looked to Finlaysons for general advice and, as is not uncommon, for Finlaysons' advice on the matters which it needed to consider. We do not accept, and nor did the trial judge, that the relationship was one in which Finlaysons generally or on this occasion gave advice only on specifically identified matters.

In our opinion the circumstances make it clear that the appellant was relying upon Astley to give it such advice as Astley might consider it required. In that aspect we adopt the trial judge's findings set out above.

In our opinion the very generality of the terms in which the matter was first referred to Astley made it incumbent upon him to limit the scope of the advice which he was to give, if some particular limit was to be set to that advice.

It is also our opinion that the facts indicate that Astley did not regard himself as playing a narrowly confined part in the matter. He did not, of course, deal with all aspects of the appointment of the appellant as trustee of the GGI Pig Trust and of the purchase of land and borrowings. But nor did he act only in response to specific instructions to perform defined tasks. There was a sensible division of labour between Astley and Lamshed, but it was not one which suggests that Astley's duty would be confined to the giving of advice on matters on which his advice was sought in terms.

It is true that the appellant was an experienced corporate trustee, holding itself out as such and willing to act for reward. But, on the judge's findings, this was the first time that the appellant had acted as trustee of a trading trust, and this was known to Astley. There was no evidence led before the trial judge to the effect that a reasonably competent trustee such as the appellant would have been aware of the need to protect itself against personal liability. The judge found in terms that neither Oakeshott, Wells nor Wood were aware of the need, and concluded that Lamshed was unaware of this. While the liability of a trustee for liabilities undertaken by it is well known by experienced solicitors, that fact, and the desirability of excluding personal liability, were not, in our opinion, so obvious and basic that the appellant could be expected to be aware of them and, without any prompting from the solicitor from whom advice was sought, to attend to them adequately.

Granted, the issue of protection against personal liability did not arise when the appellant was appointed trustee. A provision in the trust deed excluding personal liability would not have protected the appellant. But, in our opinion, a proper consideration of the client's interests required of Astley that, at the least, he confirm that the appellant was aware of the issue and would, when the need arose, either itself ensure that liability was excluded or seek further advice from Astley. It is not uncommon for a solicitor to confirm that a client is in fact aware of matters of which the solicitor considers it is or should be aware. It was Astley's duty to go that far at least.

We have already made the point that in our opinion the need for the appellant to protect itself was not so obvious that Astley was entitled to pay no attention to it. As to Lamshed, it is clear in our opinion that he played a role subsidiary to that of Astley, and that his limited involvement did not remove the obligation upon Astley to consider the range of matters which should be brought to the appellant's attention in connection with the proposed assumption of office as trustee.

In our opinion it follows from this that there was no reason why the appellant should have understood Astley's consideration of the matter and advice to be narrowly confined. Quite the contrary, it was entitled to assume that he would bring to its attention any matters of importance. It would, of course, be different if the complaint was that Astley had not given advice on a peripheral matter or on some highly specialised point or some aspect of the matter which would not usually arise.

For those reasons we conclude that it was the duty of Astley to advise the appellant, in connection with its appointment as trustee, of its exposure to personal liability should it undertake liabilities as trustee and to advise it of the need to exclude that liability. He was, in our opinion, under that duty even if his advice was sought only in connection with the trust deed. Had that advice been given, the appellant would have been in a position to protect itself.

In our opinion Astley's involvement in the purchase of Booka and in the security arrangements into which the appellant entered was sufficient, even if his retainer had been limited to advice upon the trust deed, to require him to advise the appellant of the desirability of excluding personal liability. At the least his later involvement in the purchase of Booka, which we have outlined above, should have made it clear to him that as trustee the appellant was about to incur substantial liabilities. In our opinion, bearing in mind that the purchase of Booka was under consideration before the trust deed was executed, the prospective purchase was sufficient, if more was required, to require that Astley advise the appellant about its own exposure.

But we would go further than that. In our opinion Astley's involvement in the purchase and security arrangements was sufficient, in the circumstances of the relationship between the appellant and Finlaysons, to require of Astley that he advise the appellant in relation to the purchase and security documents of the need to protect itself.

It is not necessary to make a precise finding about the scope of Astley's function in relation to the purchase and giving of security. It suffices to say, as we said earlier, that Astley was not a "mere post office box" in relation to these matters and that he was acting fairly generally in relation to these matters. As we understand the facts, Lamshed was playing the subsidiary role, attending to details, and Astley was playing the leading role. In our view the dealings between Astley and the appellant would have led the appellant to conclude, quite reasonably, that if there was an aspect of the purchase to which its attention should be drawn as a matter of importance, as distinct from some detail of the purchase, then Astley would do so.

In that connection we regard the change of Lamshed's status on 1 March 1984 from employee to independent solicitor as immaterial. On the evidence, it had no effect on the manner in which, as between themselves, Lamshed and Astley dealt with the trust deed or the purchase of Booka. The reassurance which Wood gave to Astley on 11 April 1984 that Finlaysons remained the appellant's "principal solicitors", while not apparently directed to these specific transactions, confirms the view that in substance nothing had changed.

The manner in which Astley dealt with Hunt and with the appellant in connection with the purchase of Booka gave every indication that Astley was acting for the appellant quite generally. Indeed, as we have noted, Astley agreed in evidence that if his advice had been sought in connection with the security documents, he would have advised that personal liability should be included. He did not give that advice because, in his view, it was not part of his job to do so. In our opinion it was. We add, that in this context Astley did not suggest that such advice was unnecessary or superfluous having regard to the appellant's own knowledge or its use of Lamshed's services.

In our opinion it matters not how Astley came to be involved in the purchase of Booka, whether at the instance of Hunt or of the appellant. Nor does it matter that the appellant made no specific request for advice in relation to the purchase. The involvement of Astley in the purchase is explicable only on the basis that he was, at least in a general way, acting in the interests of the appellant. In our opinion it was incumbent upon Astley to make clear the limits to his retainer, if there were limits. The issue of personal liability was neither a peripheral matter nor the sort of matter on which one would expect a specific request for advice if it was to be considered. Under the circumstances, the appellant acted reasonably in assuming that Astley would advise it on matters on which it needed advice, such as the issue of personal liability. Even if Astley thought that his retainer did not extend to that matter, as he said in evidence, the manner in which he involved himself gave rise to a reasonable belief by the appellant that he was considering its interests. His involvement was, in our opinion, inconsistent with the limited view of his retainer which he described in evidence.

For those reasons we would dismiss the appeal against the trial judge's finding that Astley was in breach of the duty which he owed to the appellant.The facts and findings on the issue of contributory negligence

Mullighan J concluded that a plea of contributory negligence was available to a defendant to an action based on conduct found to amount both to negligence and breach of contract. He held that consideration of the circumstances as they existed before the appellant became trustee of the unit trust and before each of the securities was executed, led to the conclusion that the company was guilty of negligence also causative of its loss.

In so doing he relied on these factual circumstances and made the following findings:- (1) Wood was a man of considerable knowledge and experience in respect of the financing of business activities.

(2) The appellant was a member of a corporate group which employed senior staff with considerable, relevant expertise in business and rural management and analysis.

(3) It was anxious to break into the business of acting as trustee of trading trusts.

(4) There were two crucial issues to be resolved prior to accepting such a trusteeship, namely:- (a) the legal implications; (b) the commercial soundness of doing so.

(5) The appellant had accepted sole responsibility for making a judgment as to (b) above.

(6) "Even cursory inspection of the accounts of the GGI Pig Trust by a person with a modicum of business acumen would have revealed that at all material times the Trust was insolvent." There was no prospect of success absent substantial public investment.

(7) The appellant "blindly accepted that there were sufficient investors standing by to purchase units when the new trust was established and the prospectus issued, and that sufficient capital would be obtained to resolve all of the financial ills of the Trust, which was plainly not the case."

(8) No enquiry was made by the appellant of O'Dea or anyone else as to the identity of potential investors, or as to any other matter which might have revealed that the financially hazardous position of the Trust would not be resolved by public subscription. In short, the appellant failed to make appropriate enquiries as to the availability of the funds which the trust required if it was to be viable.

(9) Wood was content to rely upon assurances given by O'Dea without verification, and in particular made no enquiry of the auditors of GGI Pig Trust.

(10) Had appropriate enquiries been made and financial accounts been called for and checked, the appellant would have realised that the Trust was insolvent and likely to remain so.

(11) The appellant failed to inform Astley of the true position and positively assured him that the proposed venture was commercially viable and without financial risk.

On that basis the trial judge concluded that the appellant was exposed to personal liability due to its own failure to assess the "financial worth" of the trust and due to Astley's breach of duty. He found that both defaults were concurrent and successive causes of the loss sustained. He was unable to distinguish between the defaults in terms of share of responsibility. He therefore apportioned the responsibility equally between them.

On the hearing of these appeals Mr McAlary QC, for the appellant, did not challenge the propriety of the findings of fact summarised above. His contention was that even accepting those findings, they are, as a matter of law, incapable of supporting a finding of contributory negligence against the appellant.

There is therefore no need to further discuss the findings of fact. They were, on any view, fairly available on the evidence.Appellant's appeal against finding of contributory negligence

Mr McAlary QC, in a thorough submission, attacked the trial judge's conclusion that, as a matter of law, contributory negligence is a plea "available where the duty of care is the same in contract and in tort and both causes of action are pleaded".

Because we have decided this aspect of the case without having to decide the question of law it is neither necessary nor desirable that we express an opinion on this important issue of law.

We turn to the question of whether, assuming for the moment that the trial judge's conclusion of law was correct, his findings of fact supported a conclusion that the appellant was guilty of contributory negligence.

It is clear, as the trial judge found, that the failure by Astley to give proper advice resulted in the appellant purchasing Booka and incurring liabilities in connection with that sale because it did not include personal liability. That follows from his conclusion that if appropriate advice had been given "... either the plaintiff would have insisted upon the inclusion of personal liability on all relevant documents or would not have agreed to be the trustee".

No authority is needed for the proposition that a trustee is required to exercise the degree of care and prudence which a reasonably business person would exercise in his or her own affairs. That is a duty owed to the beneficiaries. On the judge's findings, the appellant purchased Booka without making appropriate enquiries to satisfy itself that the trust had or would have access to the funds required to meet the obligations incurred on that purchase and, it seems, without satisfying itself by proper enquiries that the purchase was a sound decision.

We reject the attack by Mr McAlary QC upon the trial judge's findings on this issue. He argued that the decision to become trustee was a rational business decision because the appellant was looking to expand its range of business, it took appropriate legal advice, was unaware of its own exposure and relied on the trust manager's assurance that the necessary funds could be raised. In our opinion those points, while valid, do not weaken the force of the judge's findings that the appellant failed to make proper enquiries.

That, however, was not a failure by the appellant to take proper care for itself. It was a breach of the duty which it owed to the beneficiaries. Contributory negligence is usually described as "a plaintiff's failure to meet the standard of care to which he is required to conform for his own protection and which is a legally contributing cause... in bringing about his injury": Fleming, The Law of Torts (8th ed) p268.

The first point to be made is that, as the trial judge found in terms, the appellant believed that it was not exposed to personal liability. Having sought legal advice, and not having been advised otherwise, it was reasonable for it to so believe. It is difficult to describe its conduct as a failure to take proper care for its own protection. In terms of fault its conduct is properly seen as a breach of its duty to the beneficiaries, but no more than that.

The next point which we would make is that the loss which the appellant sustained was the very kind of loss against which Astley's advice should have protected it. It was the loss against which it was Astley's duty to advise the appellant to protect itself. This is not a case in which the client sought from a solicitor advice or assistance on a matter which the client specifically identified. But the appellant, on the findings made, sought advice on its position as trustee, and the matter of personal liability was one of the central matters for such advice. In such a case it could hardly be that the failure to protect itself against personal liability could constitute contributory negligence. That is not the issue here. But is the making of a decision which causes the risk of personal liability to become actuality capable of constituting contributory negligence?

The loss which ultimately materialised, an insufficiency of trust assets to meet the liabilities incurred by the trustee, might have occurred without any default on the appellant's part. It might have resulted from adverse seasonal or market conditions, or from a natural disaster. Presumably there would then be no suggestion of contributory negligence. The cause of the loss would then be seen as an event for which the appellant was not responsible. In the present case the cause of the loss is seen as the making of an improvident purchase - improvident in the sense that it was made without proper enquiry as to the availability of funds to meet the obligations incurred in making the purchase.

Having made those preliminary points, we turn to the question of whether the appellant was guilty of contributory negligence. This requires the court to consider whether, for the purposes of s27A of the Wrongs Act 1936 (SA), the appellant was guilty of "fault" and, if so, whether the damage which the appellant suffered as a result of the respondent's breach of duty was suffered (or caused) partly as a result of the appellant's fault.

As to the first question, we have already made the point that the appellant was guilty of breach of duty as trustee, but not, as we see it, of a failure to take proper care for its own interests. Another aspect of the same point is to say that the appellant had no reason to think that it was exposed to liability, and it is difficult in that setting to regard its decision to make an improvident purchase as demonstrating fault in the relevant sense. We have been unable to find any authoritative consideration of the meaning of fault in this setting. Mr Quick QC referred to Pennington v Norris [1956] HCA 26; (1956) 96 CLR 10, a claim for damages by a pedestrian struck by a motor car. When dealing with the question of contributory negligence by the plaintiff the court said (at 16): "We think too that in this case the very fact that his (the plaintiff's) conduct did not endanger the defendant or anybody else is a material consideration."

He argued that this passage established that fault is not confined to a failure to take care for oneself. But the context in which this statement was made was one in which the court was considering apportionment as between plaintiff and defendant. That requires a qualitative assessment of the respective degrees of culpability or fault, and in that context it is only natural that one would make the remark cited. In that context the passage cited does not imply that in deciding what is fault, one looks beyond a failure by the plaintiff to take reasonable care of himself or herself in the plaintiff's own interest.

In Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 a majority of the High Court took the view that a finding upon plea of contributory negligence determined the question whether the plaintiff had failed to take due care for his own safety but did not determine the question whether the plaintiff was in breach of his duty to take care for some other person: see McTiernan J at 458, Williams J at 461, Webb J at 463. However, Webb J agreed with Latham CJ, who at 455 appears to treat a plea of contributory negligence as raising the question of whether a plaintiff has been careless for his own safety and the question of whether the plaintiff was in breach of a duty to the defendant to take care. In Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271, in discussing Jackson v Goldsmith (supra) three members of the court took the wider view of the effect of a decision upon a plea of contributory negligence: see Barwick CJ at 278, McTiernan J at 284, Windeyer J at 290.

It may well be that the explanation for the taking of the wider view is the fact that, as Barwick CJ said in Ramsay v Pigram (supra) at 278 "the duties of road users in this respect are mutual." In that context, the reference to a duty owed by the plaintiff to the defendant is readily understandable. In the present case, the appellant owed no relevant duty to its solicitors in our opinion; there was no relevant mutual duty as between solicitor and client.

Nevertheless, that being the state of authority we think that it cannot be said with confidence that contributory negligence is limited to conduct amounting to a failure of the plaintiff to take proper care for the plaintiff's own safety or interests. Accordingly, we do not rely upon that approach as a matter of law.

But it is another question whether a breach of duty owed to a third party can give rise to contributory negligence. In principle, it seems to us that it cannot. It seems to us that while a breach of a duty owed to the defendant might suffice, contributory negligence can reach no further than that. Otherwise, in a plaintiff's suit for negligence, a defendant might plead a range of matters raising a variety of duties (in contract, in tort, of a fiduciary nature) owed by the plaintiff to third persons, and claim that those breaches of duty constituted a relevant fault. We are aware of no case where this has been done.

Accordingly, in the present case one must return to the question of whether the plaintiff failed to take proper care for its own interests. That, we suppose, is to be decided objectively. There is no evidence that a reasonably competent trustee would have been aware of the risk of personal liability, although a competent solicitor should be. It follows, as we see it, that the appellant's conduct is to be assessed as the conduct of a person who had no reason to believe that his or her interests were at risk. In that context, was the decision to acquire Booka, without adequate consideration of the ability of the trust to meet the required payments, a failure to consider the appellant's interests? It seems to us that it was not. The appellant had no reason to think that its own interests (other than, perhaps, its ability to collect its remuneration) were at stake.

And there is another aspect to this issue. In our opinion the risk of exposure to personal liability was the very matter which Astley should have identified. His failure to do so meant that the appellant was unaware of the risk. This was not a case in which the appellant, being aware of a particular risk, failed to give any proper consideration to that risk and then asserted that because it had sought professional advice on the risk it was entitled to thereafter ignore the risk. In that setting we consider that the appellant's failure cannot relevantly be regarded as fault, however it may be regarded as between the appellant and the beneficiaries of the trust.

In so concluding we do not proceed on the basis that in an action for professional negligence there is a rule of law that a professional adviser may not claim contributory negligence by the client, even in respect of matters on which the adviser has given or should have given advice. We agree with what was said on this topic in Daniels v Anderson (1995) 37 NSWLR 438 by Clarke JA and by Sheller JA at 564-568. In the end, each case has to be decided on its own facts.

Is it an answer to this that in a general sense, as we accept, the appellant was at fault (in failing to consider the financial position of the trust adequately) and that fault contributed to the loss which the appellant suffered? The fault contributed to the loss because, while Astley's breach of duty exposed the appellant to the risk of personal liability, that liability materialised because of the unwise purchase.

In our opinion this is not an answer. If proper advice had been given it would not have mattered that the appellant made an unwise decision. The very purpose of excluding personal liability is to protect the trustee against liabilities incurred wisely or unwisely. An unwise decision might expose a trustee to liability at the suit of the beneficiaries but that, we think, is another matter.

For those reasons we conclude that the failure by the appellant to give proper consideration to the financial viability of the trust was not failure to meet the standard of care to which it was required to conform for its own protection. We respectfully differ in that respect from the conclusion reached by the trial judge.The trial judge's findings of fact and on issues relevant to the assessment of damages

As was pointed out by the trial judge, the claim by the appellant focused on four primary heads of loss, plus so-called 'Hungerford's' interest. He identified the four primary heads of claim, in shorthand terms, as the 'Reeves' claim', the 'YSF claim', the 'AMIC claim' and a claim related to the costs of winding up the trust. It is convenient to adopt the same terminology.

No issue was raised on appeal in relation to the YSF claim or the AMIC claim. The former concerns the supply of pig feed used at the Young property between December 1984 and March 1985. The latter claim represents the loss sustained by the mortgage insurer, AMIC, which insured a mortgage over Booka. The loss was sustained by AMIC following the eventual sale of Booka. (No similar loss was sustained in relation to the realisation of the Young property - on the contrary, this produced a modest surplus.)

If there is to be no apportionment of contributory negligence against the appellant then it is common ground that under these heads the quantum of damages properly allowable is:- YSF claim $82,515 AMIC claim $385,000

The Reeves' claim arose as a result of the eventual mortgagee sale of Booka. On sale that property realised only $500,000, settlement being effected on 17 March 1986. That amount was insufficient to discharge the amount owing under a prior mortgage. The loss under that mortgage was the subject of the AMIC claim. That meant that nothing was paid to Mr and Mrs Reeves and Mr Reeves' company with respect to the amount secured by their second mortgage over Booka. The Reeves' interests held other securities granted by the appellant.

This claim was complicated by litigation between the Reeves group ("Reeves") and the appellant.

Reeves instituted various actions in New South Wales to recover monies under its various securities.

One such action claimed $490,000 secured by the Booka mortgage together with accrued interest. The appellant filed a defence and pursued a claim for rectification of the mortgage, so as to exclude its personal liability - it being said that Reeves was in the O'Dea camp and full well understood that the appellant's liability was to be restricted to the trust assets.

The appellant initiated a separate action in the Federal Court asserting breaches of the Trade Practices Act on the part of Reeves - it being said that Reeves had failed to make certain disclosures to the appellant and that Reeves had made representations which were false and misleading. In these proceedings also the appellant sought rectification of the Booka mortgage to limit its liability to the trust assets.

Upon the appellant paying $484,000 (from its own funds) into an interest bearing deposit ('IBD') to abide the order of the court, the New South Wales proceedings were stayed and the Federal Court action went to trial before Gummow J.

By a judgment entered by Gummow J on 12 February 1988 the Federal Court action was dismissed and the appellant became liable to pay Reeves $699,473.75, including accrued interest. This was paid in two tranches, namely - $400,000.00 on 4 November 1987 $299,473.95 on 11 July 1988. The judgment records that the latter sum was satisfied, as to $166,625, from a balance then remaining in the IBD and, as to the remainder, from the appellant's own funds. It seems, by implication, that the first $400,000 must also have come from the IBD, and so all of this money came from the appellant's own funds.

In April 1990, acting on legal advice, the appellant settled the other claims by Reeves and its liability for costs in relation to the New South Wales litigation, for a negotiated sum of $205,646.57. The trial judge refers to a deed of 17 April 1990 which recorded the terms of settlement. That deed refers to amounts totalling $201,119.93. The discrepancy is not referred to in the judgment and was not referred to on the hearing of the appeal and we ignore it.

On sale of the Young property a surplus of $164,967 was achieved. That amount was apparently invested for some time. This, together with accrued interest, satisfied the negotiated settlement figure. The judgment records that an excess amount of about $49,000 was retained by the appellant but also refers to another calculation showing the excess to be $80,748.42 (p57). A little later (p61) the judgment refers to an amount of $200,160 as the proceeds available from the sale of the Young property (presumably, inclusive of interest earned). We have been unable to reconcile these differences.

In the result Reeves was paid a total sum of $905,120.32, of which it seems that the $205,646.57 (being the $164,967 plus accrued interest) was recouped from trust assets. As we have just said, there may have been a further sum derived from trust assets and retained by the appellant, the amount being unclear. Additionally the appellant incurred legal expenses totalling $741,324 in respect of all of the litigation in which it became embroiled. However, it appears that, of that sum, $60,179 was reasonably incurred in bringing about a necessary sale of the Young piggery, when the mortgagee failed to take action.

Had the appellant paid what was found to be due to Reeves by 30 June 1986, the maximum sum then due (inclusive of interest) would have been $487,005.

The trial judge found that the legal costs incurred in relation to litigation up to 1 February 1987 were reasonably incurred, given the advice of counsel.

However, he found that thereafter the appellant was not justified in continuing to litigate with Reeves and ought to have settled the case. He assessed damages on that footing. In his initial findings the trial judge proceeded on the basis that, acting prudently, the appellant should have not disputed liability after 30 June 1986. But in further reasons and findings he treated the relevant date as 1 February 1987.

Mr McAlary QC joined issue with that conclusion.

The evidence reveals that, on a number of occasions, the appellant sought advice from counsel as to the course that it ought to pursue in relation to the Reeves litigation, both before the Supreme Court of New South Wales and also before the Federal Court.

It is not clear, on the evidence, just what advice was given in the early stages, other than that the relevant documentation appeared to give rise to personal liability on the part of the appellant. The advice appears to have suggested that any defence or claim to rectification would require identification of evidence of inappropriate conduct on the part of Reeves, or those representing Reeves. The cross-examination of James is suggestive of the fact that, at the time of filing defences and the claim to rectification in the Supreme Court of New South Wales, there was little in the way of evidence to support such an approach. It was that situation which prompted resort to the Trade Practices Act and the Federal jurisdiction, as being a potentially more fertile area for the appellant.

Mullighan J found that the conduct of the appellant, in resisting the Reeves claim was reasonable in the circumstances. This is not now challenged. The real question is when, if at all, the point was reached at which it was inappropriate for the appellant to proceed further with the litigation in the Federal Court.

A memorandum written by Mr M J Finnane QC and dated 15 October 1986 verified the propriety of continuing with the action which had, by then, been commenced.

As at 16 January 1987, not long before the action in the Federal Court was due to come on for trial, Mr Finnane QC advised that "the present action from the point of view of the Trustee is a very difficult one with no certainty of success but with some prospects ...".

In the course of his evidence James insisted that this was no more than a cautious conclusion to what was otherwise a very positive opinion. However, Mullighan J did not so view it. He formed the view that the appellant ought, by the end of January 1987, to have cut its losses by abandoning the litigation and that its conduct in continuing to prosecute it thereafter was unrealistic and unreasonable.

As we have said, Mr McAlary challenged this finding. His Honour considered the written advice given to the appellant at the time, and had the benefit of hearing the evidence of James, who appears to have been managing the litigation for the appellant. He also considered the judgment of Gummow J given in the Federal Court proceedings. His view was that there was nothing to suggest that the appellant was taken by surprise by anything at the trial, or that there was "some unforeseen circumstance which caused an apparently sound claim to be defeated". He described the action by the appellant as "speculative". He alluded to the "enormous expense" - about $2 million - which the appellant incurred in connection with the Reeves claim (although it seems that not all of that amount was directly related to it).

In argument Mr McAlary QC pointed to a passage of evidence in which, in re-examination, Mr James referred to some more optimistic oral advice given after the written advice referred to. The trial judge did not refer to this, but I do not think that he would have overlooked it.

In our opinion His Honour's conclusion has not been shown to be wrong. There was no doubt about the appellant's liability to Reeves

the only issue was whether it could make an answering case. The advice given to it was cautious, and it does appear that it was incurring an inordinate amount of expense in connection with the claim. This is a matter on which views might differ. It suffices to say, as we have said, that His Honour has not been shown to be wrong.

It follows that the judge was right in disallowing the appellant's claim for costs and expenses incurred by it after 1st February 1987.

A further issue arises in relation to the Reeves claim, concerning which it is necessary to record some additional facts.

In dealing with the Reeves claim Mullighan J abated the monies paid by the appellant to Reeves from its own funds by a sum of $200,160. He did so on the basis that, after sale of the Young piggery, the appellant had in its hands a surplus of $200,160. Although it is not clear, this seems to be the amount of $164,967 previously referred to plus, presumably, interest earned thereon. It was the view of the trial judge that this ought to have been applied to satisfy the Reeves liability - in effect, in reduction of the loss sustained by the appellant.

The evidence reveals that those surplus monies were used by the appellant in paying costs due to Reeves in relation to the litigation in the Federal Court. That is the amount referred to above as $205,646.57. We are, at present, unable to explain the differences between the two amounts.

The calculations made by Mr McAlary QC indicate that, of the total costs paid to Reeves in relation to all litigation, $130,309 relates to the period up to 1 February 1987. Of that $70,010 is attributable to the Federal Court action. To the extent that costs were incurred up to 1 February 1987 then, on the findings of Mullighan J, they were reasonably and properly incurred by the appellant in its capacity as trustee and to be regarded as a proper trust liability. To the extent that they arose in respect of the period after that date they were not properly a trust liability and must, prima facie, be borne by the appellant itself.

Mr McAlary QC contended that, because the appellant had a variety of liabilities to meet in relation to Reeves, and the net trust funds were inadequate to satisfy them all, then it was entitled to elect whether it would pay specific liabilities out of its own funds or out of trust funds, to the extent that these were available; that the respondents had no right to insist that the liabilities be met in a manner most favourable to them. He sought, in this regard, to draw an analogy with the well settled principles of marshalling. There was, he said, to express it in another fashion, no duty to act to the advantage of the respondents and to its own disadvantage.

In terms of general principle he may well be correct. However, in the instant case, the short answer to his submission is that the appellant was not entitled to demand that the respondents bear costs which were unreasonably incurred, any more than such a stance could have been maintained as against the beneficiaries of the Trust.

To the extent that the trial judge denied the right of the appellant to pay costs properly incurred in the Reeves litigation up to 1 February 1987 out of the trust monies, rather than from its own pocket, he fell into error. Had these costs been paid out of the appellant's monies then, as Mr McAlary QC submitted, they would have been claimable against the respondents.

On a proper dissection of costs, the sum of $70,189 incurred up to 1 February 1987 is not deductible from the Reeves claim. $200,160 less that amount, namely $129,971, appears to be deductible from the Reeves claim on the basis that there were trust funds to the extent of $129,971 available to meet the Reeves claim, but in fact used to meet expenses unreasonably incurred by the appellant and not recoverable from the respondent

We have not found it easy to follow what the trial judge did in this respect. We have had, as we have indicated, some difficulty in reconciling the various amounts. Nor were these matters dealt with in detail in the submissions to us - by that we mean the actual calculations that His Honour made. In dealing with this issue he said: "The plaintiff is obliged to prove all facts upon which its claim for damages is based. Having considered the evidence and attempted various calculations, I accept the calculation of the defendants as being probably accurate."

It may be that the judge was not satisfied by the figures put before him, which might not be the same as the calculations made by Mr McAlary QC on appeal. It may be that the discrepancy in amounts to which we have pointed indicates some misunderstanding on our part.

We think that it is appropriate to indicate our view on this point, but to give the parties the opportunity to put further submissions on it.

The remaining matter in contention between the parties concerns a sum of $437,123 paid to James for his work in the management of the winding up of the Trust. He was appointed in November 1985. He was a chartered accountant, company auditor and liquidator.

The amount paid to James was paid in respect of accounts rendered between 22 July 1986 and 31 August 1992. There is no doubt that the winding up of the trust was a complex task. It is also clear that James was involved in the management of the litigation in which the appellant became embroiled.

His Honour found that of the money paid to James "... a substantial, but unproven, part... was incurred with respect to the proceedings in the Federal Court". On his findings, some of that would have been recoverable from the respondent (if properly proved and if the amount were not excessive) and some would not be recoverable, that is, the fees incurred after 1 February 1987.

His Honour also found that the incurring of the costs of the winding up of the trust was not caused by Astley's breach of duty. He tested the matter by considering what would have happened if the appellant had been trustee but with all relevant personal liability included. He said: "Had that occurred the Trust would still have failed. Whether or not the plaintiff was personally liable, the debts of the Trust had no bearing upon its solvency. Once public subscription did not occur the winding up of the Trust was inevitable regardless of Mr. Astley's breach of duty. In my view the costs of the winding up are not recoverable by way of damages from the defendants."

In our opinion His Honour was correct to so conclude.

The winding up was the result of the insolvency of the trust. That would have occurred even if the appellant was not liable for trust debts. As trustee (even if not liable for debts) it seems to us that the appellant would have been obliged to attend to the winding up. By clause 4(1)(a) of the trust deed the trustee covenanted to act as trustee until the trust determined or until it had retired pursuant to the trust deed. Clause 46, dealing with retirement by a trustee, does not appear to contemplate a unilateral retirement when there is no person to act as trustee in place of the retiring trustee. Nor do the provisions of the Trustee Act (SA). Mr McAlary QC argued that had it not been personally liable, the appellant could have retired as trustee and had nothing to do with the winding up, and that it carried on only because it was personally liable.

We reject that submission. There is no evidence that another trustee could have been found (or, we were referred to none), and in our opinion the appellant, from a practical point of view, was committed to winding up the trust for reasons unrelated to its personal liability

It should be added that the appellant appears to have embarked upon the winding up as soon as it learned of the insolvency of the trust and before the issue of its liability arose. That suggests that it would in any event have attended to the winding up.

It follows, in our opinion, that to the extent that James' fees were attributable to the winding up, they were not recoverable from the respondent.

That means that the appellant was entitled to recover the costs reasonably incurred by it in dealing with the claims against it by Reeves and others, and so such part of James' fees as could be so described.

The first difficulty which confronts the appellant is the trial judge's finding that the rates charged by James were excessive, being "in excess of those recommended by the professional body of insolvency practitioners on the scale approved by the Supreme Court of New South Wales". Mr McAlary QC pointed out that the evidence (T484) was to the contrary. But in our opinion a later passage of transcript (T486-487) indicates that His Honour did not accept that evidence. At best, the position was left unclear. We would not disturb this finding of the trial judge.

The next difficulty is that James agreed in cross-examination that his accounts covered the winding up and the various pieces of litigation (T565-566), and that from the accounts one could not allocate the charges to different matters (T566-567).

It seems to us that the appellant failed to identify for His Honour the charges attributable to the work for which it had a good claim. It appears not to have attempted to provide further clarification.

It was in that setting that the judge reached the following conclusion: "I would have allowed the damages for the reasonable cost of the responding appropriately to the claims fixed upon the basis of the costs set out in Mr. Wood's affidavit. It has not been established to my satisfaction that the engagement of Mr. James was necessary and reasonable. I have no doubt that it was convenient to the plaintiff to pass over the winding up to him, but his costs cannot be recovered from the defendants. No claim has been made for the work done by Mr. Wood, Mr. Bacon or Mr. Ware and there is evidence upon which damages could be calculated for the cost of their work."

The reference to "costs set out in Mr Woods' affidavit" is a reference to a lower rate of charging set out in an affidavit filed by the appellant in the winding up proceedings.

In short, His Honour was not satisfied that it was reasonable to engage Mr James, and the amount recoverable at a proper rate for work done by him in respect of matters recoverable from the respondent was not proved.

In our opinion, the challenge to this part of His Honour's reasoning fails.

There is a further complaint relating to the damages awarded in respect of the Reeves claim.

As has been stated earlier, the judge awarded against the respondent the amount claimed by Reeves (including interest) as at 30 June 1986, and in a later judgment he allowed interest to 31 January 1987. The amount of the judgment which Reeves recovered was paid as follows: $400,000 on 4 November 1987 $299,473.95 on 11 July 1988

The appellant argues that the amount which would have been payable on 1 February 1987 was $521,527.00, and that interest should have been allowed on a deemed payment of that amount on that date, rather than, as apparently was done, from the date of the actual payments.

Interest is allowed to compensate the appellant for being kept out of its money. It paid the principal owing and interest to Reeves at a later date, as a result of its own unreasonable conduct on the judge's findings.

If the claim is presented as a claim for the interest paid to Reeves between 1 February 1987 and the date of actual payment to Reeves, the answer is that the additional interest was paid because the appellant failed to act reasonably.

If, as argued by Mr McAlary QC, it is presented as a claim for interest on a deemed payment on 1 February 1987, we cannot understand how or why the court should deem the money to have been paid then.

Another complaint relates to the claim for legal costs incurred by the appellant and paid to its own solicitors. Those costs amounted to $741,324.00. His Honour found that the appellant was entitled to recover reasonable legal costs in connection with the Reeves claim, certain costs in connection with the YSF claim and the sale of the Young property and the reasonable costs of defending the AMIC claim. There was a dispute as to the reasonableness of some of the amounts charged by the relevant solicitors. The judge said that if the parties could not reach agreement evidence would have to be heard.

His third judgment in the matter records that the parties "had agreed the plaintiff's damages for the legal costs of $118,854".

Mr McAlary QC argued, as we understood him, that the appellant had proved what was recoverable, that His Honour should have decided the matter, that the agreement reached should be disregarded and that the amount claimed should be awarded by us.

In our opinion that submission is untenable. The parties had the choice of reaching agreement or having His Honour determine the matter. Having reached an agreement, that is the end of the matter.

There remains for consideration the issue of damages for loss of use by the appellant of the money which it recovered. Such a claim was made in accordance with Hungerford v Walker [1989] HCA 8; (1988) 171 CLR 125.

The trial judge allowed Hungerford rates, on the relevant figures, up until 1 March 1990. Thereafter he allowed interest at rates applicable under Section 30c of the Supreme Court Act. The appellant contends that Hungerford's rates ought to have been applied up to judgment.

Mullighan J approached the matter on this footing - - The appellant made payments to the relevant claimants from its own monies up to 1 March 1990.

After that date, other companies in the Elders IXL Group (primarily Elders Finance) paid all relevant outgoings. That was

because, as a result of the sale of shares in the appellant, after that date the vendor indemnified the appellant in respect of any liabilities it had to meet, and any moneys recovered by the appellant in connection with the trust were payable to the vendor of the shares.

• The appellant would, prior to 1 March 1990, have invested its monies in associated companies, had they not been paid out to meet liabilities properly said to arise from the respondents' negligence. This therefore attracted the Hungerfords principle.

• However, after 1 March 1990, there were no additional payments by the appellant which denied it the use of its funds. Any additional payments were made by another company, and the appellant was not deprived of the use of its money.

• Section 30c therefore applied in respect of heads of damage which arose subsequently to 1 March 1990.

Mr McAlary QC argued that it was illogical to terminate all Hungerfords' interest as at that date. The rationale for awarding such interest in respect of monies previously disbursed by the appellant continued to operate up to judgment. Furthermore, he drew attention to the fact that, under its contractual arrangements as from 1 March 1990, the appellant was obliged to pay interest on any monies advanced on its behalf.

In considering this argument it is necessary to remind oneself of the basis of the award of damages for loss of use of moneys. In Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 the basis was identified by Mason CJ and Wilson J as follows (at 143): "Judged from a commercial viewpoint, the plaintiff sustains an economic loss if his damages are not paid promptly, just as he sustains such a loss when his debt is not paid on the due date. The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss may arise in the form of the borrowing cost, i.e., interest payable on borrowed money or interest foregone because an existing investment is realized or reduced."

In the present case, as from 1 March 1990, the appellant made no further payments. Any moneys it might have received would have been payable, more or loss forthwith, to another company. Even as to monies paid by the appellant before 1 March 1990, it was no longer deprived of the use of such moneys, because had it received them they too would have been disposed of pursuant to the arrangement under which the shares in the appellant were sold.

In our opinion the trial judge was correct in allowing damages for loss of use of money only until 1 March 1990.Cross Appeal on costs

There was a cross-appeal by the respondent against His Honour's decision on costs.

The appellant had formulated a claim before trial at $5,253,000. It obtained a judgment for $587,687.96. The respondent had, on 3 February 1993, filed an offer to consent to judgment for $500,000.

His Honour declined to deprive the appellant of any part of its costs. He rejected a number of arguments advanced by the appellant.

On appeal the only basis upon which his decision was attacked was that the appellant had advanced an exaggerated or excessive claim. We agree that that is a matter to be considered. We also agree that the formulated claim appears to have been ambitious, and perhaps exaggerated. But this was not a case of exaggeration in the sense in which that term is used of a plaintiff who falsely claims to have suffered injuries or losses which did not occur. The dispute here was over the losses attributable to a breach of duty, and whether the amounts which the appellant had undoubtedly expended were reasonably expended. On a number of matters the appellant failed, but still it recovered more than the respondent's offer.

A decision as to costs involves the exercise of a discretion. In our opinion it cannot be said that a proper exercise of that discretion required the trial judge to disallow some part of the appellant's costs. Nor did he overlook this aspect of the matter, even though he referred to it only in passing.

We would dismiss the cross-appeal against the order for costs.

Our conclusions are as follows: (1) The respondent's appeal against the finding of a breach of duty by the respondent should be dismissed.

(2) The appellant's appeal against the finding of contributory negligence by the appellant should be allowed.

(3) The appellant's appeal against the finding that the appellant acted unreasonably in contesting the Reeves claim after 1 February 1987 should be dismissed.

(4) We are inclined to allow the appeal against the decision of the trial judge to deduct $200,160 from the amount payable in respect of the debt and interest payable to Reeves and to reduce the amount of the deduction to $129,971. We invite the parties to put submissions on the correct amount if they so wish.

(5) The appellant's appeal against the refusal to make any allowance in respect of the work done by Mr James should be dismissed.

(6) The appellant's appeal against the failure to award interest from 1 February 1987 on the amount of $521,527.00 should be dismissed.

(7) The appellant's appeal against the amount awarded by agreement in respect of the legal costs paid by the appellant should be dismissed.

(8) The appellant's appeal against the refusal to award damages for loss of use of money after 1 March 1990 should be dismissed.

(9) The respondent's appeal against the trial judge's decision on costs should be dismissed.

Subject to further submissions on item (4), the parties should submit minutes of order giving effect to our decision. If the resulting calculations, which will implement this decision, cannot be agreed, we will hear the parties.

I agree with the orders proposed by Doyle CJ and Olsson J in their joint judgment and I agree with the reasons they have given in support of their conclusions.