Badeley v Consolidated Bank

However, Mr Heap's evidence shows that he, for his part, was chary of incurring legal expenses. He made his own decisions and generally did not turn to a solicitor for advice. Mr Heap preferred that others pay legal costs and he raised with both Noyce Olliver and Michell Sillar, another firm which had given him advice, the point that he was not responsible for certain costs. Moreover, although Mr Olliver wrote to Mr Heap on one occasion recommending that he "immediately obtain independent legal advice and representation regarding this matter (the bankruptcy notice).", Mr Olliver wrote to Michell Sillar the following day to say that "John [Mr Heap] has chosen to deal directly with Messrs Hodson and Merton rather than seek independent legal advice." Moreover, Mr Noyce does not appear to have been the prime mover in the Blue Dolphin Group. Mr Heap conceded that the person who did most of the talking was a Mr Les Merton. Mr Merton was a real estate agent with whom Mr Heap and his companies had had dealings over the years. The other persons involved in the Blue Dolphin Group were also persons whom Mr Heap had encountered in business. On the whole of the evidence, I have concluded that there was no general relationship between Mr Noyce and Mr Heap which involved the relationship of solicitor and client. I accept that, whenever legal documents had to be prepared, Mr Heap relied upon Mr Noyce as a solicitor to prepare them properly and that Mr Noyce would have understood that Mr Heap relied upon him to do so, notwith-standing that there may have been no such engagement of Mr Noyce which would have justified Noyce Olliver in charging Mr Heap. For that matter, Mr Noyce often drew documents and had them engrossed in the office of Noyce Olliver without opening a file or rendering an account, conduct of which Mr Olliver did not approve. The point which I am discussing is crucial in these proceedings, for, as I shall set out in more detail, the claims made in relation to two of the transactions turn not so much on the documents themselves as on the allegation that Mr Noyce was under an obligation to give to Mr Heap advice of the kind which an independent solicitor may have given. Yet, Mr Heap knew that Mr Noyce was not an independent solicitor but an involved business associate. Mr Heap dealt with Mr Noyce on that basis. Mr Heap did not seek from Mr Noyce general advice of the type for which an independent solicitor would have expected to charge. At least, no such advice was sought in respect of the transactions which are the subject of these proceedings. Mr Noyce did not give evidence, although he was represented throughout the trial by counsel. Over the period of the subject transactions, Mr Heap and Heap Constructions lost a substantial amount of money. I am prepared to assume that, had Mr Heap and Heap Constructions brought proceedings against Mr Noyce, some liability on the part of Mr Noyce would have been established. The events which occurred in relation to the subject transactions lead me to the inference that Mr Noyce and others connected with the Blue Dolphin Group saw Mr Heap, who had moneys available for investment, as a source from which they could extract the funds necessary for their projects. As Mr Olliver's note of 1 February 1989, which I shall later mention, shows, Mr Noyce took active steps with others to slowly involve Mr Heap in the Blue Dolphin Group's activities with the intent that he would become "locked into us." Mr Olliver Noyce Olliver was a firm of solicitors carrying on practice at Parramatta. Mr Olliver and Mr Noyce first entered into partnership together as Noyce Olliver in April 1980. The practice continued in that form until 23 November 1987 when by deed made between Mr Noyce and Mr Olliver, the partnership was dissolved and Mr Noyce accepted a position as an employee of firm. The reason for the rearrangement of the relationship was that Mr Noyce's interests had diversified from traditional legal practice into property development. It is regrettable that Mr Olliver permitted Mr Noyce to continue his personal involvement in property development. It is out of the combining of property development with legal work that allegations of negligence, breach of fiduciary duty, conflict of interest and so on arise. Mr Olliver was unwise to allow the situation to occur. Moreover, he not only did so but had an arrangement with Mr Noyce whereby he would share in Mr Noyce's profits from the development activities. In November 1987, Mr Olliver and Mr Noyce agreed that Mr Noyce would be paid a salary by Noyce Olliver and would be entitled to further remuneration dependent on the actual profitability of the work he did for the firm. Mr Noyce was given the option of buying back into the partnership at a later date, but in the meantime he was to share any profits he made through his external business ventures. Clause 14 of the deed provided: "Noyce hereby covenants and agrees with Olliver: (a) ... (b) that Noyce shall share with Olliver or his nominees equally any nett before tax profits, gains, income or other financial reward, advantage, or benefit which Noyce, any corporation of which Noyce is a Shareholder or is otherwise associated or any member of Noyce's family receive or are entitled to receive (whether before or after the expiration or sooner determination of this Agreement) with respect to any real estate, share or other business transaction in respect of which Noyce personally acts, engages or is otherwise involved in or associated with during the normal business hours of the Firm during the term of Noyce's employment hereunder excluding the purchase and resale of land at Glenhaven in the said State presently owned by Edgeworth Developments Pty. Ltd. and the purchase and resale by Marsalin Pty. Ltd, of the land known as 3 Blacks Road, West Pennant Hills in the said State Provided if at the time that Olliver received or obtains an equal share of any such profit gains income or other financial reward advantage or benefit any part of the Noyce Debt, the Olliver Liability or the Funding Facilities Deficiency as is then owing by Noyce to Olliver then Olliver shall allow to Noyce as a credit against the Noyce Debt the Olliver Liability and the Funding Facilities Deficiency or so much thereof as shall then remain unpaid a sum equivalent to one-half (1/2) of any such profit, gain, or income or other financial reward, advantage or benefit received or obtained by Olliver." Clause 15 provided:- "Noyce and Olliver each hereby covenant and agree that in the event that Noyce and Olliver enter into a new partnership with respect to any legal practice conducted by them then they shall, inter alia, each covenant with the other that they shall share equally any nett before tax, profit, gain, income or other financial reward, advantage or benefit which they or any corporations of which they or a member of their family is a director or shareholder or is otherwise associated is entitled to receive with respect to any real estate, share or other business transaction in respect of which either personally acts, engages or is otherwise involved or associated with during the normal business hours of the Firm of which they are partners excluding any real estate, share, or other business transaction which was acquired or entered into prior to commencement of any new partnership between Noyce and Olliver." The agreement also contained a clause that, if Mr Olliver sold the practice or joined the practice with another, the transferee would enter into an agreement with Noyce which included a profit-sharing clause similar to cl 14(b).

Mr Olliver gave evidence that he insisted upon cl 14(b) with a view to encouraging Mr Noyce to attend to his legal work and not to engage in extraneous activities. If that was the end sought to be achieved, it was not successful in achieving it or even well calculated to do so. In May 1988, Mr Olliver received $12,713 from Mr Noyce under this provision. Relying upon the profit sharing agreement, a submission has been put on behalf of the applicants that Mr Olliver and Mr Noyce were partners in real estate development, including in the subject developments. In my opinion, that is not so. Mr Noyce and Mr Olliver did not agree to and did not carry on real estate development in common. Nor did Mr Olliver authorise Mr Noyce to conduct real estate transactions on his behalf. The provision for the division of Mr Noyce's profits was simply one of the many provisions which governed the employment of and remuneration of Mr Noyce as a solicitor. Because he was permitted to undertake extraneous activities during working hours if he chose to do so, clause 14(b) provided for a form of compensation to Mr Olliver for the time which was lost to legal work. Cf. Badeley v Consolidated Bank (1888) 38 Ch D 238 at 258-9 per Lord Lindley. Mr Olliver gave his evidence clearly but tended to describe all events in their best light so far as he was concerned. The evidence that the profit sharing clause in Mr Noyce's employment agreement was designed to encourage Mr Noyce to attend to legal work is one such example. It plainly did more than that and was part of the financial arrangements into which the two men entered. Clause 14(b) authorised Mr Noyce to undertake real estate development activities if he wished to do so, and provided for the sharing of any profits therefrom. Another example of Mr Olliver's evidence which did not appear to convey the whole truth was this. On 1 February 1989, Mr Olliver recorded the following point, inter alia, among matters of which he was informed by Mr Noyce on that day:- "MJN [Noyce] said he has been trying to get John Heap slowly involved `so that he is locked in to us'. He has money & he is 100% on side. Everything is fine. John has never lost money on any deal with me." When questioned, Mr Olliver gave this evidence:- "What did you understand the word, slowly, to mean?---I didn't turn my mind to it. I mean, I wasn't interested. It had nothing to do with me or my firm." Clearly, at the time, Mr Olliver made the note because he thought it was of some significance. He even used inverted commas. I have treated Mr Olliver's evidence with caution. Blue Dolphin Group The Blue Dolphin Group comprised companies associated with the Blue Dolphin Corporation Pty Ltd ("Blue Dolphin") including Barnspine Pty Limited ("Barnspine"), Abulla Pty Limited ("Abulla"), Bepuri Pty Limited ("Bepuri"), Adamont Pty Limited ("Adamont") and others. Ablego Pty Limited ("Ablego") was controlled by persons involved with Blue Dolphin but was not in fact a Blue Dolphin Group company. The Blue Dolphin Group had an office adjacent to that occupied by Noyce Olliver. Mr Merton, Mr Peter Turnbull, Mr Tom Manassa and Mr Larry Cunningham were the prime movers in the Blue Dolphin Group. Mr Heap knew these persons. In particular, he had had business associations with Mr Merton, who was a real estate agent, for some years. In his evidence, Mr Heap said that Mr Merton was the leader of the group and spoke the most. By December 1988, the Blue Dolphin Group was short of money. Mr Olliver was more involved with the affairs of the Blue Dolphin Group than he was prepared to admit in his evidence. Mr Merton and Mr Turnbull were clients. Noyce Olliver acted for a number of the companies in the Blue Dolphin Group, including Barnspine which was proposing to sell lots in a large development known as Fitzroy Gardens. Mr Olliver kept quite lengthy, though succinct notes of what he was informed by Mr Noyce and others as to the affairs with which we are concerned. Thus, on 9 January 1989 he recorded:- "1. MJN [Noyce] & John Heap went to Coffs Thursday after Xmas. JSH [Heap] impressed & will do a j.v. He has lent 300,000 which is secured by sale of land." On 31 January 1989, eg., Mr Olliver recorded, having been informed by Mr Noyce:- "John Heap has agreed to do a J.V. on 4 of the cluster homesites in Fitzroy. JSH [Heap] has lent 300,000 for Friday Creek" Mr Olliver recorded these matters partly because he was concerned that Mr Noyce's involvement might lead Mr Noyce into more financial difficulties. On 31 January 1989, he recorded informing Mr Noyce:-

"BSO [Olliver] again expressed concern that Group had taken on too much, that it had no income to service commitment, it hasn't sold land as well as it should & MJN [Noyce] exposed on Guarantees." Mr Olliver was concerned about his practice and with the profits in which he was to share. His notes record dissatisfaction at the financial cost to him of Mr Noyce's activities and also possible or potential areas of profit-sharing. The main significance of the notes for present purposes is that they show that Mr Olliver kept himself reasonably abreast with the activities of the Blue Dolphin Group and of Mr Noyce and therefore of the transactions with which we are concerned and with Mr Heap's involvement in them. Mr Olliver was aware of how Mr Heap lost his money. His note of 31 January 1989 records his view that the "Group had taken on too much." On 21 February, he noted his view that Mr Noyce was "wasting his time on Blue Dolphin matter where we may not get paid". In between, he noted on 1 February that Mr Heap was being "slowly involved" and "locked in" and, on 17 February, he noted that "John Heap has put in 1m. $500,000 for Bepuri, 300,000 already ..., 45,000 for Rent on MJN's [Noyce's] house & 105,000 working capital." I turn now to examine the individual transactions. Fitzroy Gardens In late December 1988, Fitzroy Gardens was a parcel of land near Coffs Harbour which Barnspine had contracted to purchase. The intent of the Blue Dolphin Group was to subdivide the land and to resell the developed lots. Mr Heap was invited by some of those associated with the Blue Dolphin group, including Mr Noyce, Mr Manassa and Mr Merton, to provide a report on the feasibility of the development. Mr Heap understood that his expertise and experience in property development were sought. Mr Heap was promised $2,000 or thereabouts for his work. I think we may assume that the real purpose of the invitation was to interest Mr Heap in the developments. Mr Heap and Mr Noyce flew to Coffs Harbour on 29 December 1988. Mr Heap viewed the Fitzroy Gardens land. Mr Heap had been aware of the proposal for the development for some time prior to the visit. He had in fact visited the land earlier in 1988. Mr Heap was asked to contribute $300,000 towards the development by way of a loan to Barnspine. Barnspine required funds in order for it to obtain a partial release of an existing encumbrance over the land, thus enabling it to sell off certain of the lots and to raise further capital. Mr Heap obtained a cheque for $300,000 from his bank in Coffs Harbour payable to Barnspine and handed it over. Mr Heap was aware as he did so that the loan was at that point of time unsecured. Security for the loan was nevertheless an issue for Mr Heap and it was discussed. A first registered mortgage was not available. An offer was made to Mr Heap of what were termed "back to back contracts" for the purchase and resale of lots 992 to 994 on the plan of subdivision, which would crystallise a profit to Heap Constructions of $75,000 on the transaction. Such back to back contracts were eventually exchanged, but not until 1 February 1989. Heap Constructions obtained a contract for the purchase of the lots in the subdivision from Barnspine for $300,000 and exchanged a contract for the sale by Heap Constructions to Barnspine of the same lots for $375,000. The contracts indicated that Noyce Olliver acted for Barnspine and that Heap Constructions acted for itself. Mr Heap signed the contracts on behalf of his company. The contracts were prepared in the offices of Noyce Olliver using Noyce Olliver facilities, but no file was opened or fees rendered in respect of them. Clause 11 of the Special Conditions nominated a completion date of 30 June 1989 but the contracts were never completed. The National Mutual Royal Bank Ltd held security over the land and later, on 18 August 1989, the lots were sold in a mortgagee's sale. Mr Heap's complaint in relation to the transaction is that, at the time the loan was made, 29 or 30 December 1988, the lots the subject of the proposed contracts did not in fact exist. The sub-division had not been approved by the Council and was not so approved until 24 February 1989. The plan was lodged at the Land Titles Office on 1 March 1989. As a consequence, it was not, as at the date the loan was made, possible for the proposed back to back contracts to constitute any form of security for Mr Heap's loan. Mr Heap claimed that, if he had known that the plan was not then registered, he would not have advanced the money. I do not accept this evidence. If Mr Heap did not know at the time the money was advanced that the plan of subdivision had not been registered, he knew shortly thereafter, for he was asked by Mr Manassa to lend a further sum of $25,000 so as to enable the plan of subdivision to be approved and he did so. I also reject a contention that Mr Heap was informed that the Fitzroy Gardens land was available to be mortgaged and that Mr Heap would be granted a mortgage over it. The contention is inconsistent with the agreement which was reached. The evidence establishes that the security agreed upon was that there would be the back to back contracts on lots 992 - 994. Those back to back contracts were drawn up and executed. It has not been submitted that they were invalid or that there was any deficiency in them. No reliance has been placed upon the fact that a bank held security over the land and that the lots were ultimately sold in a mortgagee's sale. Had there been a deficiency in the contracts which caused loss to Mr Heap and Heap Constructions, I would have held Mr Olliver vicariously liable for Mr Noyce's actions. The contracts were prepared by the firm of Noyce Olliver. I am satisfied that Mr Noyce, when preparing the contracts, had a responsibility to both parties to ensure that they adequately implemented the agreement which had been reached. Mr Noyce's responsibility to Mr Heap and Heap Constructions arose from the past history of dealings between them and from the fact that he, Mr Noyce, knew that Mr Heap would rely upon him to prepare the contracts properly. Such a finding is not counteracted by the fact that Noyce Olliver was not expressed to be the solicitor for Heap Constructions. Mr Heap preferred to avoid having himself named as a client in circumstances which would justify the charging of legal fees. Mr Noyce would have understood that Mr Heap, as the lender, expected Barnspine to be solely responsible for the legal costs. This circumstance did not diminish the duty of care which Mr Noyce owed to Mr Heap in the preparation of the contracts. However, as I have said, no deficiency in the contracts is relied upon. There are two small matters I should mention to complete the picture. The first is that, early in 1989, Mr Heap lent a further $300,000 with respect to the Fitzroy Gardens development, which is another indication that he was not dissatisfied at the time with the arrangement that he should receive the back to back contracts. The other is that, although no caveat was lodged on behalf of Heap Constructions, it appears from Mr Heap's evidence that he was satisfied in relation to this transaction, and also with respect to the other transactions with which we are concerned, that no caveat should be lodged. I am satisfied, in relation to this transaction, that Mr Noyce was under no obligation to give Mr Heap such advice as he would have given had Mr Noyce been acting as an independent solicitor engaged by Mr Heap. Mr Heap did not engage Mr Noyce as an independent solicitor. Mr Heap dealt with Mr Noyce as a person involved in the Blue Dolphin Group. He did not look to Mr Noyce for ongoing legal advice. Mr Olliver is not responsible vicariously or otherwise for Mr Heap's loss in the Fitzroy Gardens transaction. In this transaction, Mr Olliver was not personally involved. His recording in his notes of the principal steps which occurred in the lead up to Mr Heap's loss was not a fact which of itself gave rise to any duty of care, or fiduciary duty on the part of Mr Olliver to Mr Heap. Marlin Advance On 2 February 1989, Abulla entered into an agreement with Bepuri for the purchase of one of two parcels of land abutting the Pacific Highway at Coffs Harbour known as the Marlin development. Noyce Olliver acted for Abulla on the purchase. At the time, the property was subject to mortgages to the Newcastle Permanent Building Society Limited. Abulla's purchase price, stipulated in special condition 1, was $6,000,000 plus all amounts owing under the mortgages. A deposit of $600,000 was payable, as to $100,000 as at the date of the contract and as to $500,000 on or before 15 February 1989. The sum due on 15 February 1989 was made an essential term of the contract. A separate deed made on 2 February 1989 provided for the payment by Abulla of $359,806.50 to Bepuri for the purchase of the registered business name, the "Marlin Resort", on or before 15 February 1989. This was also deemed to be an essential term. Abulla was unable to secure the funds to meet those two payments by 15 February 1989. There were negotiations between the parties in which Mr Olliver was involved. On 16 February 1989, for example, he rang the vendor's solicitor, Mr Birch, to discuss the matter of the defaults. It was not until 6 March 1989 that Bepuri and Abulla entered into deeds which had the effect of waiving all existing rights of Bepuri in respect of the defaults under both agreements. Whilst he had been in Coffs Harbour viewing the Fitzroy Gardens development, Mr Heap had also been shown the Marlin land. In Mr Heap's view, the proposed development of that land was likely to yield a large profit. He gave this evidence:- "I see. In any event, you carried out some inquiries to satisfy yourself about the likely achievable sale value obtainable upon disposal of Marlin?--I investigated the feasibility of the venture, yes. And by mid-February 1989 you had formed the opinion, had you not, that the Marlin project was a feasible one?---Yes. That is, that it could be carried out in anticipated profit?---Oh, yes, yes, cause. A very sizeable profit, based upon you inquiries?---Large profit" It was the size of the potential profit on Marlin and Mr Heap's potential involvement in the project which I think was the operative factor in his decision to lend money to the project. He gave this evidence:- "The fact was, was it not, that a matter which was influential in your decision to advance the $646,000 was a prospect of a 10 per cent profit in Marlin at least?---Yes, it was helping, yes. What sort of profit did you envisage the result of your feasibility assessments Marlin was likely to generate?---If I did it myself, somewhere about 12 million plus. Am I correct in understanding then that you anticipated that you, if your feasibility assessment was right, could expect ultimately to receive about $1.2 million?---I was to be the developer. Yes. ... HIS HONOUR: What was 10 per cent of the Marlin profit estimated to be worth?---Had it been between $10 million and $12 million worth of profits, somewhere like that, it would have been $1.2 million, wouldn't it, your Honour?"

Mr Heap was asked to contribute funds to enable Abulla to meet its obligations under the purchase agreements. In return, Mr Heap was offered various securities and 10% of the profits from the eventual sale of the lots in the subdivision. On 17 February 1989, Mr Heap entered into a deed which provided for a loan to Abulla of $646,000. The deed of 17 February 1989 contained the following recitals, inter alia:- "1. Abulla has requested the Lender to advance to Abulla the sum of six hundred and forty six thousand dollars ($646,000.00) (hereinafter called the Advance'). ... 4. Merton is indebted to the Lender for the sum of three hundred thousand dollars ($300,000.00) (hereinafter called the Merton Debt'). 5. Adamont is indebted to the Lender for the sum of three hundred thousand dollars ($300,000.00) pursuant to Memorandum of Mortgage dated 1st February, 1989 between Adamont as Mortgagor and the Lender as Mortgagee (hereinafter called the Adamont Mortgage'). ... 8. Noyce is indebted to Marsalin for an amount of fifty four thousand dollars ($54,000.00) pursuant to the Marsalin Agreement, for interest payable on the balance of purchase monies, up until the 1st September, 1989 (hereinafter called the Noyce Debt'). 9. The Lender has agreed to made the Advance to Abulla provided the Advance, the Merton Debt and the Noyce Debt (hereinafter collectively called `the Total Debt'), are secured to the Lender by way of unregistered Mortgages over the Abulla Property and the Barnspine Property, provided such Mortgages are collateral to each other and to the Adamont Mortgage, and provided further that the Lender acknowledges that there are prior advances secured on the Abulla Property and the Barnspine Property." The deed provided, inter alia: "6. Abulla FURTHER COVENANTS AND AGREES with the Lender to execute a Mortgage in registrable form over the Abulla Properties so as to secure the Total Debt to the Lender, and Abulla covenants to obtain all such consents and do all things necessary to enable registration of this mortgage. 7. Barnspine FURTHER COVENANTS AND AGREES with the Lender to execute a mortgage in registrable form over the Barnspine Property to secure the Total Debt to the Lender and Barnspine covenants to obtain all such consents and do all things necessary to enable registration of this mortgage." 8. Adamont FURTHER COVENANTS AND AGREES with the Lender that the principal sum secured by the Adamont Mortgage shall be deemed to include the Total Debt. ... 11(c) Abulla, Adamont and Barnspine hereby further covenant with the lender that they will not further encumber the Abulla property, the Barnspine properties or the property on which the Adamont mortgage is registered without the prior written consent of the lender first had and obtained. 12 Abulla covenants to pay to the lender on the site of the Abulla properties, any one of them or of the project known as Marlin Resort, ten per cent (10%) of the pre tax profits arising from such sale, in addition to the repayment of the Total Debt." The deed of 17 February made provision for securities in respect of $1,246,000, which was described as the "Total Debt". The deed did not provide any further security in respect of the initial advances which had been made by Heap Constructions on or about 30 December 1988 and early January 1989 amounting to $325,000 in respect of Fitzroy Gardens. Heap Constructions received joint personal guarantees from Mr Merton, Mr Noyce, Mr Manassa, Mr Turnbull and a company called Idolpoint Pty Ltd. The guarantees were prepared by Noyce Olliver, apparently by Mr Noyce. Mortgages by Abulla and Barnspine were also prepared and executed. The mortgages were not registered. I assume that Abulla and Barnspine were never in a position to register the mortgages. However, on 17 February 1989, Mr Heap would have understood that registered mortgages were not then possible.

It was said on behalf of the applicants that Mr Heap was not informed that, as at 17 February 1989, Abulla was in default under its agreements for the purchase of the Marlin development. That may have been so, but I am satisfied that Abulla and Bepuri both expected the defaults to be remedied. They were so remedied on 6 March 1989. The borrowing from Heap Constructions allowed this to occur. No loss flowed from the non-disclosure. Moreover, Mr Heap would not have been troubled by the fact that a default had occurred. He agreed to the loan because of the development profit potential. Misrepresentation was alleged. Mr Heap gave evidence that, before agreeing to make the additional loan of $646,000, he saw a valuation of the Adamont land of $1.2 million. The existence of a formal valuation of $1.2 million of the Adamont land is improbable. An expert valuer called on behalf of the applicants, Mr Kent of Kent Wood & Associates Pty Ltd, put a value on the land as at 9 August 1989 with development consent of $400,000 and without approval of $200,000. For his part, the respondent's valuer, Mr Patrick Magann, valued the land at about $190,000. It seems to me unlikely that Mr Heap was shown such a valuation. Mr Heap may have seen something in the nature of a draft feasibility study for a development on the Adamont land and perhaps that feasibility study gave a value to the land after development of $1.2 million. But this is only speculation. No such document has been discovered. Moreover, I am not satisfied that Mr Noyce was in any way involved in this incident, if it occurred. Although early in his evidence Mr Heap said that the valuation was shown to him by Mr Noyce, he later resiled from this evidence and said that he could not recall the circumstances under which he saw the valuation. If Mr Noyce was involved in this incident, it was not as solicitor for Mr Heap. The deed of 17 February 1989 itself acknowledged in clause 10:- "(iii) That in entering into this Deed, no party hereto has relied on any representations or advice of Noyce, Noyce Olliver or any employee or partner thereof. (iv) Notwithstanding that Noyce Olliver act for various parties hereto from time to time that no party to this Deed has engaged Noyce Olliver, or any employee or partner thereof to act on its behalf in respect to this Deed, or any matters relating thereto. (v) Noyce Olliver have recommended that each party to this Deed obtain independent legal advice and representation regarding the matters referred to in this Deed, including the Advance, the securities and that notwithstanding such recommendation, such parties to this Deed have elected not to obtain such advice or representation." Mr Heap had his own adviser at the conference that considered the deed. His accountant, Mr Alan Ross, was present. At the conference, a number of significant amendments were made to the deed, including the insertion in handwriting of cl. 11(c) and cl. 12. In my opinion, cl. 10 of the agreement made it clear that Mr Noyce was not acting as a solicitor for Mr Heap and Heap Constructions, or for that matter for any of the other parties. Mr Heap accepted that position. In the preparation of the Abulla and Barnspine mortgages and of the guarantees, Mr Noyce did, in my opinion, have a responsibility and duty of care to Mr Heap and Heap Constructions. However, it has not been submitted on behalf of the applicants that there was any defect in the guarantees or in the mortgages. Nor has any reliance been placed upon the fact that the mortgages were not registered. Presumably this is because Mr Heap understood the mortgages that he was obtaining were unregistered. This conclusion is confirmed by a letter which Mr Noyce wrote to Mr Heap on 29 June 1989, after Mr Noyce had ceased his association with the Blue Dolphin Group. The letter read, inter alia:- "The Group's present position with you is as follows: 1. The principal advance by you is $1.496m which includes the further $250,000 advanced in March, 1989. 2. Your security is as follows:- (a) Registered first Mortgage to Adamont Pty Limited on the Fridays Creek land (b) Unregistered Mortgages to Barnspine over Fitzroy Gardens and Abulla over east side of Marlin Resort (c) Exchanged contracts to purchase lots 992, 993 & 994 medium density lots in Fitzroy Gardens (d) Personal Guarantees (e) Agreement for 10% of profits (if any) in the Marlin Resort (f) All the above securities are collateralised for the total indebtedness." This letter would not have referred to unregistered mortgages unless they had been agreed to by Mr Heap. It was contended on behalf of the applicants that Mr Heap was informed that $600,000 was required for the balance of the deposit, whereas the balance due was only $500,000. Having regard, however, to Mr Heap's loss of memory and to the note taken by Mr Olliver on 17 February 1989, which I have set out above, I am not satisfied that there was a misrepresentation made to Mr Heap in this respect. It is indeed improbable that there would have been any misrepresentation about this matter when it could so easily have been checked. For reasons similar to those given in relation to Fitzroy Garden, I am not satisfied that Mr Noyce breached any duty of care or fiduciary duty to the applicants in relation to the Marlin land or that Mr Olliver had any responsibility in relation to the Marlin advance. There was no default for which he was vicariously liable and he had no personal involvement in the matter. Discharge of Mortgage over the Adamont Land A loan of $300,000 by Heap Constructions had been secured by a mortgage over the Adamont land at Friday's Creek. The memorandum of mortgage bears a date of 1 February 1989 and it was registered on 24 February 1989. Noyce Olliver retained the security documents and certificate of title in its safe custody pending the repayment of the loan. Shortly afterwards, on 17 February 1989, Heap Constructions made the further loan of $646,000 the subject of the Marlin development which has already been discussed. The deed of 17 February 1989 acknowledged in the recitals, inter alia, the following debt already owed to Heap Constructions: "Adamont is indebted to the lender for the sum of ...($300,000) pursuant to Memorandum of Mortgage [over the Adamont land]." The deed provided that:- 8. Adamont FURTHER COVENANTS AND AGREES with the Lender that the principal sum secured by the Adamont Mortgage shall be deemed to include the Total Debt. The total debts, as defined, amounted to $1,246,000. In the ensuing months, the Blue Dolphin Group experienced serious financial difficulties. In early April, Mr Noyce left the group. He took shares in Optbase Pty Ltd and Idolpoint Pty Ltd in exchange for his shares in the Blue Dolphin Group companies. The registered mortgagee of Fitzroy gardens entered into possession and an auction sale of the land was set down for 19 August. On 26 July 1989, Mr Olliver recorded in a file note that the liquidator of Origami Nominees was shortly to issue a bankruptcy petition against Mr Noyce. It became convenient to seek a discharge of Heap Constructions' registered first mortgage over the Adamont land. Further moneys were required. A Mr G.R. Greig agreed to lend $550,000 on the security of a first mortgage over the land. Mr Merton, Mr Noyce and Mr Olliver all expected to benefit from Mr Greig's $550,000. I need not deal with Mr Merton's position. Mr Noyce had owed moneys to Mr Olliver for some years. Mr Olliver had been awaiting payment for a long time and had allowed the account which he had with his bank to remain outstanding accruing interest. The bank was seeking repayment. Mr Olliver and his wife had been served with s.57(2)(b) notices under the Real Property Act 1900 (NSW) notifying them of their default and requiring that the default be remedied. These notices placed the secured property, the Olliver's family home in Thompson Street, Clifton Gardens, at risk, a matter which did not please Mrs Olliver. Mr Olliver wrote to Mr Noyce stating that he was "unable to pay" the debt of $115,000 which he owed to the bank, describing the situation as "perilous" and "extremely stressful for myself and Cherie." I accept Mr Olliver's evidence that the position was not in fact "perilous". Plainly, the $115,000 would have been a small sum in relation to the value of the home. However, Mr Olliver sought to pressure Mr Noyce. In a file note of a conversation with Mr Noyce dated 21 July 1989, Mr Olliver recorded that he said to Mr Noyce: "My own financial position is very precarious. I have not succeeded in putting off the CW Bank. The section 57 Notices expire early week after next - I can't afford to get into litigation with the Bank. On other hand I can't raise the 115,000 I owe them. I have to protect myself. ... I must make some arrangement to at least secure the monies which you owe me." By 24 July 1989, a solution to the matter of the debts appeared to be emerging. One of Mr Olliver's notes recorded Mr Noyce as saying to Mr Olliver that "[i]f there is a `backdoor' way of sorting it out he [Noyce would] help BSO [Olliver] with CW Bank." In the event, an arrangement was made to repay the debt. Heap Constructions was asked to and agreed to release the mortgage over the Adamont land in order that further amounts could be raised by way of a further mortgage over it. Mr Greig lent Adamont $550,000 on 9 August 1989 following the discharge of Heap Constructions' mortgage. From the settlement, $124,000 was paid to Mr Olliver and, with it, he discharged his indebtedness to his bank. Mr Heap had a conference with Mr Olliver on 8 August 1989 in which he instructed Mr Olliver in relation to the discharge. The next day, Mr Heap gave to Mr Olliver an authority, which had been written out by Mr Noyce and which Mr Heap had signed, in the following terms: "You are authorised to release the title deeds & discharge of my mortgage on Fridays Creek Land to Les Merton or as he directs on following basis: (1) To raise funds for purchase of shares in Abelgo Pty Ltd so as to enable Mr Merton or his nominee to acquire control of 1/2 Oasis Shopping Centre; and (2) To pay me sum of $40,000 [later amended by Mr Heap to $30,000] for strata title construction - (on account); and (3) Security satisfactory to me for $300,000 or exchanged contract to me for Shop 30 (Golden Dragon) Oasis Shopping Centre to be provided to me." Mr Olliver checked these requirements with Mr Merton and they were approved, save that the $40,000 was reduced to $30,000. The effect of the authority was that Mr Heap agreed to the release of the certificate of title and the discharge, both of which were then held by Noyce Olliver. The conditions which Mr Heap placed upon their release were that the new funds raised were to be used by Mr Merton to acquire control of Ablego, which held a 1/2 interest in a property known as the Oasis Shopping Centre, that Mr Heap be paid $30,000 on account of building work which he had done at the shopping centre and that he receive security for $300,000 or an exchanged contract for the purchase of Shop 30 in the shopping centre. The price for Shop 30 was to be $600,000, of which the discharge of the Adamont mortgage was to be taken as a payment of $300,000. Mr Heap had it in mind to resell the property to Mr Ray White, a real estate agent, at a profit. He believed that Mr White would be prepared to purchase the shop at a price in excess of $600,000. Mr Noyce prepared a discharge of the mortgage and had it executed by Heap Constructions on or about 8 August. On the same day, he prepared a contract for the sale by Ablego to Heap Constructions of Shop 30, for the price of $600,000, of which a deposit of $300,000 was deemed to have been paid. The contract was executed by Ablego. The contract of sale as executed was in a usual form and contained a provision for the repayment of the deposit in the event of rescission pursuant to a right to rescind, as distinct from a right to terminate. Mr Olliver drew up and had Ablego execute the following acknowledgment which Mr Olliver attached to the contract:- "The Agreement for Sale herein refers to a deposit of $300,000.00 to be paid upon exchange of the Agreement for Sale. Ablego Pty. Limited hereby acknowledges that for the purpose of the Agreement for Sale herein such deposit is hereby deemed to have been paid and Ablego Pty. Limited hereby acknowledges that such deposit has been paid by virtue of and in consideration of you discharging Mortgage Y197378 granted by Adamont Pty. Limited over Lot 41 in Deposited Plan 773579 without payment of any part of the monies secured by such Mortgage PROVIDED THAT in the event that the said Agreement for Sale is rescinded the provisions of paragraph 19(a) of the Said Agreement for Sale shall not apply." The term which was excluded was the term which provided that, in the event of a vendor's rescission of the contract pursuant to a right to rescind, "The deposit and any other money paid by the Purchaser pursuant to this agreements shall be refunded". The acknowledgment was prepared after Mr Olliver discussed the point with Mr Merton, though not with Mr Heap. On 9 August, settlement took place. On 11 August, Mr Olliver wrote to Mr Heap stating:-

"We confirm that in accordance with your instructions on 9th instant we released to Adamont Pty. Limited the Certificate of Title, Mortgage and Discharge of Mortgage. We confirm that we hold an executed Agreement for Sale with respect to Lot 30, Carlingford Oasis Home Fair. We also note that on 9th instant a cheque for $30,000.00 was paid to your Company on account of the cost of the works to be effected by your Company at the Centre." I am satisfied Mr Olliver had a duty of care to the applicants as a solicitor. Mr Heap had, over very many years, engaged Noyce Olliver to undertake legal work for him or his companies and indeed continued to do so after this period. Mr Olliver knew that Mr Heap would rely upon him to handle properly all the legal work that had to be done. Noyce Olliver were holding the title on behalf of Heap Constructions and, after Heap Constructions had executed the discharge of mortgage, it was understood that it and the title were not to be handed over until the matters specified by Mr Heap were attended to. As one of those matters was a contract of sale, it was necessarily to be implied that Mr Heap relied upon Noyce Olliver to ensure that the contract was a satisfactory one from the point of view of the applicants. By executing the written authority, Mr Heap expressly authorised Noyce Olliver to act in the settlement on behalf of the applicants. Noyce Olliver did so. The letter from Mr Olliver to Mr Heap of 11 August which referred to "your instructions" shows that Mr Olliver was under no misapprehension about the matter. The fact that the contract did not name Noyce Olliver as the solicitor for Heap Constructions is of no significance. Heap Constructions had been a lender of $300,000 under the Adamont mortgage. The rearrangement of that loan was not undertaken for the benefit of the applicants but, so far as Mr Heap was aware, for the benefit of MrMerton. Mr Heap would have expected Mr Merton or Ablego to pay the costs of the transaction. In my opinion, there was an express engagement of Noyce Olliver to act on behalf of the applicants in the transaction. If, however, I am wrong about that, I would nevertheless find that there was a duty of care imposed upon Noyce Olliver in accordance with the principles enunciated in Hawkins v Clayton (1988) 164 CLR 539. There was a relevant relationship of proximity between the applicants and Mr Olliver. Mr Olliver knew that he was the person with the legal skills and that the applicants would rely upon him to ensure that the contract was properly prepared having regard to their interests. The applicants relied upon him in this respect. To use the words of Deane J at 578, there was "an assumption of responsibility and reliance." In his evidence, Mr Olliver denied that he had any responsibility for the applicants. He said in evidence:- "I was simply told an arrangement had been made and I was asked to document it for Ablego." Mr Olliver went so far as to say:- "I deny that my firm acted on the behalf of either Mr Heap or J S Heap Constructions Pty Limited in respect of the mortgage over Friday's Creek, the Deed of Loan dated 17 February 1989 or the Discharge of the Mortgage and the obtaining of an executed Agreement for Sale in relation to Lot 30." However, the position was much more complex than that. Mr Olliver did not receive instructions just from Ablego. Mr Olliver received express instructions from Mr Heap. Noyce Olliver acted on behalf of Heap Constructions on the settlement, when it passed over the discharge of mortgage and the certificate of title. One of the instructions given to Mr Olliver was that Heap Constructions was to receive a contract as specified by the written authority. By acting on the authority, Mr Olliver undertook that his firm would exercise due skill and care to ensure that the contract met the requirements of the applicants. Mr Olliver's denial of responsibility makes it easier to conclude that he did not in fact give the attention to the transaction which he ought to have done in the applicants' interests. There were several problems with the contract. One was that the vendor, Ablego, was the owner of only a 1/2 interest in the Oasis Shopping Centre. It seems from Mr Olliver's evidence that there was also in existence a contract between the other 1/2 owner and Ablego for the purchase by Ablego of the 1/2 interest. But, nevertheless, the arrangement did not meet the applicants' requirements. Not all of the owners of the property were tied in to accept that $300,000 had been paid towards the purchase of the whole of the property. Secondly, the provision as to non-payment of the deposit on rescission was unsuitable from the applicants' point of view for, in the event of a rescission, Heap Constructions would lose its right to recover $300,000 out of the property. Mr Olliver, who considered his clients to be Ablego and Mr Merton, seems to have raised the matter with Mr Merton. He said that he discussed the contract with Mr Merton and raised with Mr Merton the circumstance which appeared on the front page of the contracts, namely the price of $300,000. According to Mr Olliver, he was instructed that the $300,000 deposit was not to be repayable in the event of a rescission and that that was the arrangement. Mr Olliver said that he believed that he also spoke to Mr Heap about the matter. I reject Mr Olliver's evidence that he spoke to Mr Heap on that point. It is not referred to in Mr Olliver's written statement although the statement sets out at length a telephone conversation about the change made to the written authority from $40,000 to $30,000 in respect of payment for the building works. Moreover, I consider it to be highly improbable that, as was suggested, Mr Merton had any discussion with Mr Heap about the operation of clause 19(a) of the contract of sale or that he informed Mr Olliver that he had done so. Only a lawyer would have been likely to have thought that the operation of clause 19(a) of the contract, which was a printed provision, should be amended by a written acknowledgment. In my opinion, the matter was raised by Mr Olliver with Mr Merton because he considered it desirable to change the operation of paragraph 19(a) in Ablego's interests. Presumably, Mr Merton agreed with his view. In my opinion, the matter should not have gone ahead without the point being brought expressly to the attention of Mr Heap. Mr Olliver conceded in cross-examination that it was apparent to him that the contract was subject to conditions that might well lead to the contract being rescinded. In such an event, Heap Constructions would not merely lose its security but also its entitlement to restitution of the deemed deposit of $300,000.

Another problem with the contract was that, at the date of the contract, lot 30 of the Oasis Shopping Centre was a unit on an as yet unregistered strata plan. The plan was not approved by the Council until a later time, 15 November 1989, and was not registered until 18 June 1990, which was 10 months after the execution of the contract. Mr Heap, who had intended to resell the property to a real estate agent whom he knew to be interested in the Oasis Shopping Centre, would not have been able to deal with the property until the strata plan was registered. Mr Olliver conceded in evidence that he was aware at the time of the transaction, that the strata plan had not been approved. It seems probable, moreover, that the Oasis Shopping Centre was the subject of a mortgage. The purchase by Heap Constructions of Shop 30 was never concluded. The evidence is not clear as to what occurred. Indeed, the evidence in the case concentrated upon the four transactions and gave very little attention to the actual losses sustained by Mr Heap and Heap Constructions or as to how those losses came about. In respect of this transaction, it could be that, by June of 1990, Mr Heap was not in a financial position to pay the balance of the purchase price or that, by that time, values had slumped to such an extent that it was not worthwhile doing so. Or it may be that Ablego did not complete its purchase of the other half-interest. But it is more likely that there was a mortgage over the whole of the Oasis Shopping Centre which prevented the sale to Heap Constructions from going ahead. The intervention of a mortgagee and a mortgagee's sale is indeed the probable scenario. Evidence given in relation to the fourth transaction, that relating to Alpha House, shows that, in January 1990, before the strata plan was registered, that Farrow Mortgage Corporation held a "huge mortgage" over the Oasis Shopping Centre and that Ablego became in arrears in the payment of interest. As the case was conducted, it was not in dispute that Heap Constructions had lent $300,000 under the security of the mortgage over the Adamont land and that it did not recover its money. I think that I should draw the inference that, for one reason or another, and probably because of a mortgagee's sale, the contract which Mr Noyce prepared and had executed and to which Mr Olliver attached the executed acknowledgment was worthless. The parties chose to deal with this matter by leading evidence as to the value of the mortgage over the Adamont land. In my opinion, that was a fallacious way to approach the matter as the principal claim was against Noyce Olliver for breach of the duty of care as a solicitor. However, as the evidence was called, I should deal with it. Evidence was given by two valuers as to the value of the Adamont property over which the mortgage had been held. Mr Kent of Kent Wood & Associates, valued the property at $200,000 without a development consent but at $400,000 with a development consent. The development approval was to expire and did expire on 11 October 1989. As a development approval had been granted but being in force, there seems to have been a probability that it could have been renewed or that a new approval could have been obtained. Mr Patrick Magann, who was called on behalf of the respondent, put the value of the land at $190,000 with or without development consent. In Mr Magann's view, the property was not well suited to the use for which development consent had been obtained. For my own part, I think the parties agreed to put a value on the mortgage of $300,000, and that it should be given that value. It will be recalled that clause 8 of the deed of 17 February 1989 had provided that the principal sum secured by the Adamont mortgage should be deemed to include the "Total Debt" of $1,246,000. However, the parties agreed that the mortgage should be discharged and a deposit of $300,000 deemed to have been paid under the contract for the purchase of unit 41. Accordingly, I would put the loss of Mr Heap and Heap Constructions at $300,000. But, as I have said, I think that the correct way to approach the matter is to consider what was the loss arising from the breach of duty, which was the loss of the $300,000 deemed to have been received by way of deposit under the contract. In my opinion, Noyce Olliver failed in the performance of its duty to Mr Heap and Heap Constructions. By accepting instructions from Mr Heap to handle the discharge of the mortgage on behalf of Heap Constructions and by accepting Mr Heap's instructions in writing as to the terms on which the discharge should be effected, Mr Olliver, as a solicitor, came under the ordinary duty of care of a solicitor to a client and was bound to exercise proper care and skill and to give all such advice as may have been required by the nature and circumstances of the transaction. Although we do not know precisely what later occurred with the Oasis Shopping Centre, I think it is clear that the contract was an unsatisfactory one from the point of view of Heap Constructions and that an independent solicitor would have advised Mr Heap against entering into the transaction at that time and in that form. I have already dealt with the deficiencies of the contract and I need not repeat them. It is also clear that Mr Olliver did not face up to the obligations which he had to the applicants. He regarded his clients to be Ablego and Mr Merton and did not consider the interests of the applicants. Counsel for the applicants submitted that, as the written contract was not executed by Heap Constructions, but only by Ablego, Heap Constructions never embraced the contract and later disavowed it. The transaction, however, plainly gave rise to a binding agreement between the parties. There is no evidence that Heap Constructions ever disavowed or rescinded it. Counsel said that the institution of the proceedings operated to bring the contract to an end. That may be so in a formal sense, but I am satisfied that the contract had ceased to have any substance to it before that. From the $550,000 lent by Mr Greig, a sum of $124,000 was paid to Mr Olliver. As Mr Olliver intended to benefit personally from the discharge of the mortgage, Mr Olliver came under a duty of fiduciary relationship to the applicants. By not disclosing his interest and by not ensuring that the terms which Mr Heap had specified were complied with, he breached that duty. Accordingly, if no other order were made, Mr Olliver would be ordered to pay the benefit he received to the applicants. However, to make such an order in addition to an order for the payment of $300,000 would be to make orders on inconsistent and alternative bases. It is sufficient that Mr Olliver be ordered to pay to Mr Heap and Heap Constructions the sum of $300,000. The statement of claim raised a number of other contentions in relation to this transaction, some of which were not pursued. I need not discuss them. Alpha House - Newtown Ablego, which was the vendor to Heap Constructions in the previous transaction, and which owed money to the financier, Farrow, in respect of interest payments on the Oasis Shopping Centre, contracted to purchase Alpha House, Newtown for $4,175,000 and paid a deposit of $460,000. It made application to Farrow to provide 100% finance for the purchase price on completion. Ablego expected that this finance would be forthcoming and expected to recover the deposit of $460,000 from the 100% finance it would receive from Farrow. In the meantime, Ablego sought a loan of $149,000 from Avocado Pacific Properties Pty Ltd ("Avocado"), of which Mr Heap was a director, to enable Ablego to pay the interest due to Farrow on the Oasis Shopping Centre. Avocado, which had been set up by Mr Heap and a Mr Bruce Hodson, was a client of Noyce Olliver. Mr Heap arranged for Avocado to borrow $149,000 from his bank and guaranteed to the bank repayment of that loan. Mr Heap believed that the settlement of Ablego's purchase was imminent.

It appears that Avocado handed over a cheque on 10 January 1990, and it was credited to Ablego on that day. However, the entry was reversed on 11 January 1990 and the money was not finally paid over until 29 January 1990. In the meantime, on 12 January 1990, Mr Olliver had had a conference with Mr Hodson. He was advised that Avocado had agreed to advance $149,000 to Ablego, which would be repaid at bank overdraft rates when the deposit on Alpha House was received from Farrow. Mr Hodson informed Mr Olliver that Mr Merton and Mr Turnbull would guarantee the payment and that there should be a charge over Alpha House and the Oasis Shopping Centre. Mr Olliver was instructed to prepare the appropriate documents. Notes made by Mr Olliver of the conference record that he pointed out that, as he did not act on the purchase by Ablego, he could not confirm Avocado's entitlement to receive the moneys from Farrow or whether the moneys would be paid to Ablego. On the same day, Mr Olliver prepared a four page agreement as between Avocado and Ablego, setting out the terms of the arrangement. The agreement in evidence is executed by Ablego, Mr Merton and Mr Turnbull. Perhaps another part of it was executed by Avocado. The agreement provided for certain irrevocable authorities and for charges over Alpha House and the Oasis Shopping Centre which Mr Olliver also prepared. I assume there was no deficiency in them. On 12 January 1990, Mr Olliver forwarded the deed to Avocado with a letter which included the following:- "We note that you have instructed us that your Company has agreed to advance the sum of $149,000.00 to Ablego Pty Limited (`Ablego') pursuant to the provisions of the enclosed Deed.

As we do not act for Ablego with respect to its purchase of Alpha House' we are unable to independently confirm that Ablego has paid the deposit and Farrow has agreed to advance the Farrow Advance as recited in the enclosed Deed. We have been informed by Les Merton that the Agreement for Sale does not provide for the deposit to be refunded to Ablego on completion of the Agreement for Sale but that Ablego shall be entitled to receive upon completion of the Agreement an equivalent amount being the surplus of the Farrow Advance. As we have not inspected the Agreement for Sale we are unable to confirm the date for completion of the Agreement." On 15 January 1990, Mr Olliver was informed by Mr Turnbull that he and Mr Merton were sensitive about Farrow and did not wish a caveat to be lodged to protect Avocado's interests. Mr Hodson said that he thought that Mr Heap would agree not to lodge a caveat. Later in the day, there was a conference between Mr Olliver, Mr Heap and Mr Turnbull. Mr Heap agreed that a caveat not be lodged. In the course of that conference, Mr Heap asked Mr Olliver to ring the solicitor and find out when the money "will come through". Mr Olliver rang Mr Roth of Blake Dawson Waldron. Mr Olliver's note of the conference reads:- "1. Settlement of purchase of Newtown is subject to closure of a laneway. It could take some time. Confirm with Stan Roth 258 6000. Plan has been lodged before Xmas and should be thru. 2. O.K. to send Authorities to Agent & Solicitors. O.K. no Caveat." It seems that Mr Olliver made no enquiry as to whether Farrow had committed itself to providing finance or as to any conditions attached to the finance. On the same day, Mr Olliver wrote to the agent and the solicitors advising that he acted for Avocado and enclosing the irrevocable authority in favour of his client. On 16 January, Mr Olliver wrote to Mr Heap confirming the substance of his instructions of 15 January. As the letter of 12 January 1990 indicated, Mr Olliver had not ascertained whether Farrow had agreed to make the 100% advance to Ablego, or indeed made any enquiries about the purchase. It appears from correspondence that Farrow did not make a formal offer of finance until 24 January 1990 and then on the basis that settlement would occur within 45 days. Settlement did not occur within that time as an easement had to be removed and a new plan altering the dimensions of the property approved. In the middle of May 1990, Farrow withdrew its offer of finance. A letter from the solicitors for Farrow to Blake Dawson Waldron said:- "With respect your client was not ready, willing and able to proceed and still is not. ... ... Settlement ought to have occurred within 45 days of the letter of offer dated 24 January 1990; your client is still not even in a position to provide plan and title particulars for our approval prior to our preparing security documents let alone settle! Clearly the course our client has taken is proper and reasonable." In my opinion, Mr Olliver failed in his duty to Avocado and to Mr Heap whom he knew could be affected if the loan of $149,000 was not properly secured. The problem arose, no doubt, from the common circumstance that the solicitor acted for two parties, the borrower apparently being the client with whom he had most to do. I am satisfied that Noyce Olliver acted for Avocado in the transaction. Mr Olliver was approached first by Mr Hodson who informed Mr Olliver that he and Mr Heap had formed Avocado. Mr Hodson discussed the proposed loan and its terms. Mr Olliver prepared the four page agreement which included charges over Alpha House and the Oasis Shopping Centre, the three irrevocable authorities, and possibly guarantees by Mr Merton and Mr Turnbull. But what he did not do was to make any enquiry from Blake Dawson Waldron or from Farrow as to whether Farrow had committed itself to the 100% loan or as to whether there was likely to be any problem about the matter. Mr Olliver sought to protect himself by informing Avocado in writing that he had not made the enquiry. But as the making of such an enquiry was a task which would more appropriately have been undertaken by a solicitor rather than by the client, Mr Olliver failed in his duty to take reasonable care for the protection of his client. Mr Olliver knew that the position with respect to Farrow was crucial. He had already informed Mr Hodson that guarantees were worthless. In his evidence, Mr Olliver made this statement:- "I said: Bruce you know that guarantees from Les and Peter are worthless. They've given more guarantees than they have had birthdays.'" The charges were also of little value. Mr Olliver gave evidence that he said:- "A caveat on Carlingford [Oasis Shopping Centre] doesn't help you at all. Farrow already has a huge mortgage and so does John Patten." Accordingly, Mr Olliver anticipated that the sum lent would not be likely to be recovered unless Farrow provided the 100% finance. It was no doubt for this reason that he sought to protect himself by noting that he had made no enquiry. A telephone call to Blakes would have been a simple matter. Although, on 15 January 1990, he phoned Blake Dawson Waldron at Mr Heap's request, he made no sufficient enquiries about the matter. Perhaps Mr Olliver considered that by that time the $149,000 had already been lent. But, nevertheless, he was still acting in the transaction. Mr Olliver said in evidence that he did not ring Blake Dawson Waldron on 12 January as, on that day, he was very busy and he did not know which member of Blake Dawson Waldron was acting in the matter. Nevertheless, he knew that the provision of finance was crucial. In my opinion, his duty to his client demanded that he make an enquiry about the matter. Without doing so, he could not give proper advice. In my opinion, this was another matter in which Mr Olliver failed to take sufficient care to protect the interests of Mr Heap. Although Mr Olliver prepared the four page agreement, the irrevocable authorities and other documents, all of which would have seemed impressive to a client, he did not take the simple step of enquiring of Blake Dawson Waldron whether Farrow was committed to providing 100% finance and whether there was any impediment to settlement. In my opinion, Mr Olliver was influenced, once again, by the fact that Ablego, Mr Merton and Mr Turnbull were his clients and the loan was in their interests. In due course, Farrow declined to provide finance. The contract was not settled, Avocado lost its money and Mr Heap was called upon to meet his guarantee to Westpac. In my opinion, Mr Olliver is liable for his negligence not only to Avocado but also to Mr Heap. He had been informed that Mr Heap had arranged the borrowing from a bank in order that the loan could be made to Avocado. In the circumstances, as he conceded in his evidence, it could be inferred that Mr Heap may well have guaranteed the payment to the bank, as in fact he did. I am therefore of the opinion that there should be judgment against Mr Olliver in respect of the $149,000. Mr Heap gave evidence of alleged misrepresentations made by Mr Olliver in the course of this transaction. However, I do not accept Mr Heap's evidence as to the content of these conversations. His recollection of conversations was too unsound to place reliance on. It was put on behalf of Mr Olliver that the $149,000 was lent on 10 January 1990 before Mr Olliver received instructions. It was said that no loss flowed from any failure on his part. However, bank records show that the $149,000 was not finally credited to Ablego until 29 January 1990. Up until that time, the transaction was reversible. Mr Heap has received approximately $77,000 from Mr Noyce's composition, approximately $94,000 from the liquidator of Bepuri and $55,000 or thereabouts from Overbrook. Those recoveries do not, however, seem to have been directly related to the two matters in respect of which I find Mr Olliver to be liable. I think that they should not be taken into account. I shall therefore give judgment in favour of Mr Heap and Heap Constructions for $300,000 and in favour of Mr Heap for $149,000. Pre-judgment interest should be added in accordance with the usual practice, that is to say in accordance with the interest rates specified in the Rules of the Supreme Court of New South Wales. The claims made by Mr Olliver against Mr Noyce will be dismissed, for the matters in respect of which I have held Mr Olliver to be liable are matters for which he is personally liable. I need not discuss the several issues which the cross-claim raised. Counsel may address me on the question of costs. My tentative view is that Mr Noyce should pay his own costs as he was partly responsible for or could have prevented, by giving advice to Mr Heap and others, the circumstances which resulted in the losses to Mr Heap and his companies. I tentatively think that Mr Olliver should pay 50% of the applicants' costs of the proceedings. Counsel should bring in short minutes of the orders which they propose. I certify that this and the 44 preceding pages are a true copy of the reasons for judgment herein of the Honourable Justice Davies. Associate: Date: 12 December 1995 Counsel for the 1st & 2nd applicants: M. Cashion Solicitors for the 1st & 2nd applicants: J.M. Caruana, Kay & Barry Counsel for the respondent/cross-claimant: J.B. Simpkins Solicitors for the respondent/cross-claimant: Phillips Fox Counsel for the cross-respondent: B.A. J. Coles QC D. Walsh Solicitors for the cross-respondent: Noyce & Associates Date of hearing: 1 May 1995 Date of judgment: 12 December 1995