120 The starting point in putting the case of alleged breaches of fiduciary duty was that ATRK were retained to advise the IRL group (some members of which were in severe financial difficulties) about restructuring and refinancing. The issue was the extent of ATRK's retainers, from which companies they were received, and, if they were received from the group, whether Beach was part of it. Rolfe J said that it was very difficult, in his opinion, to conclude that Beach was not part of the group. ATRK admitted that they advised IRL in relation to proposals to rationalise cross shareholdings between it and related companies and from time to time in relation to various proposals for rationalising the structure "of the so called IRL group". ATRK denied that they were retained to give advice in respect of the refinancing of the IRL group, or in regard to the proposed restructuring and refinancing of the IRL group.
121 The case for Beach was that ATRK acted for various companies in the group, including Beach, on at least three significant occasions where there were conflicting interests between those companies and Beach. This was said to be under the general retainer of ATRK to act for the group in the restructuring and refinancing, once ATRK became aware that Beach's acquisition of the Burbank interest had become, and was recognised by them as having become, a central part of the restructuring and refinancing. Although the proposed takeover did not go forward, the acquisition by Beach of the share in Mazeley did and in this way Beach was deprived of assets and money. Beach submitted that had ATRK not breached its fiduciary duty to it, the existence of the fraud would have been disclosed, or the proper activities of ATRK would have precluded the perpetrators of the fraud from proceeding with it, with the consequence that Beach would not have suffered financial loss. Beach submitted that it was sufficient that this breach was a cause of the loss.
122 The significance of the position at R & B, which was concealed not only by the fraudsters but also by officers of R & B, was that notwithstanding that the moneys could not be used, Spargos, Enterprise and Jingellic acted as if they were free to draw upon them. Beach's case was that ATRK acted not only for Spargos on the currency swap but also for Beach and, at the very least, owed it a duty to ensure that it received value for the assignment in the form of valuable consideration in Switzerland. Beach submitted that there was a clear conflict of interest between Beach and Spargos in the sense that the asset of Beach was being paid to Spargos and a proper consideration of the position of Beach necessitated ATRK's being satisfied that Spargos gave value to Beach for that assignment. But for this breach of fiduciary duty it would have ascertained that there was no money available to Spargos in Switzerland to enable it to make the assignment to Beach and that the rest of the scheme which involved the utilisation of the funds of Spargos, Enterprise and Jingellic in Switzerland, would not have been implemented.
123 As to the Charge and Option Agreement, Beach's case was that at the meeting of 2 May 1989 the focus was not on what Beach was acquiring or whether it was obtaining value for money, but upon other aspects of the transaction, mainly funding, which paid little, if any, regard to the position of Beach. Beach submitted that in these circumstances there was an obligation on ATRK to advise Beach fully in relation to the proposed acquisition.
124 Alternatively, had Mr Bateman made himself aware of the nature of the transaction he must have advised that, in the interests of Beach, it could not go ahead. Rolfe J acknowledged that a difficult point arose. Had Mr Bateman become aware of all relevant facts in relation to the Burbank transaction and advised Beach on them, and had the directors simply refused to accept that advice and ceased to instruct Mr Bateman, his advice would have been beside the point. The directors would have perpetuated the fraudulent scheme, irrespective of it. A further complication was that the evidence suggested that if it came to the notice of Mr Bateman that the directors were not acting in the best interests of Beach there was an obligation on him to inform Beach, that is by writing to all the directors of Beach and also to the company secretary and/or the chief executive officer.
125 Beach submitted that the position in relation to the Charge and Option Agreement changed on or about 21 July 1989 when it was placed before Mr Bateman and he gave extensive legal advice about amendments which he considered should be made. These amendments were communicated to Mr Cordell and, essentially, incorporated in the agreement.
126 Beach submitted that the s12 notices directed to it raised immediately the question as to the nature of the Burbank acquisition transaction. ATRK had instructions from Beach to attack the notices. Beach claimed that ATRK should have ensured that the notices were complied with. Beach further claimed that there was a conflict of interest in ATRK acting both for Beach and Claremont in response to the notices.
127 Finally, there was the SCAFA prepared by Mr Thomas. Beach pleaded that ATRK was retained by it to act on its behalf or assumed duties to it in respect of the SCAFA and in breach of those duties, inter alia, did not advise Beach that they had a conflict of duty and did not disclose to Beach all the facts in their possession concerning the SCAFA.
128 As appears from the fate of the proceedings, Rolfe J found against Beach. Beach had disclaimed any allegation that Mr Bateman was a fraudster. Rolfe J was "totally satisfied" that none of Mr Bateman, Mr Ferguson or Mr Thomas was guilty of objective dishonesty and accordingly ATRK were not. Rolfe J described Mr Ferguson's evidence as vague, stemming from his lack of recollection in so far as he was not assisted by notes. He formed the impression that Mr Ferguson was giving truthful evidence to the extent his memory allowed, and that his stated lack of recall of events some eight years previously was genuine.
129 Rolfe J said there was no doubt that Mr Johnson, Mr Fuller, Mr Cummings and Mr Main were determined to deprive Beach of its substantial assets by a totally fraudulent scheme. Moreover, Rolfe J was satisfied that irrespective of any legal advice Mr Bateman gave or may have given, the directors would have pursued the proposed fraudulent course to ensure that moneys were removed from Beach and used for purposes they had in mind.
130 However, it was necessary to determine what ATRK were retained by Beach to do. In so far as they were retained, they were receiving instructions from those who were perpetrating the fraud. ATRK themselves were unaware of the fraud. Rolfe J did not consider it proper to look at all matters being embraced in what was said to be a general retainer. The evidence made it clear which solicitors were retained and for what purpose in relation to the various transactions. Mr Bateman agreed in evidence that the IRL group was an important group of clients to ATRK and represented his biggest client during 1988 and into 1989. Until late 1989 they were clients he wished to keep and he and Mr Ferguson worked closely together on their matters during 1988 and the first half of 1989.
131 Rolfe J was satisfied that the instructions relating to the restructuring and refinancing of the IRL group were confined to a consideration of various proposals whereby the total number of companies in the group could be reduced to either one or two by a series of takeovers which, in turn, would require the provision of finance. He said that would have been necessary to enable shares to be purchased by the takeover companies from the target companies and that in his opinion the evidence established and, in this respect, he accepted the evidence of Mr Bateman and Mr Ferguson, that it was necessary to look at various proposals, including financing in the context referred to and, in doing so, to look at the relationship of the companies within the group, including Beach, and, to some extent, to consider their internal financial positions. The expression "to some extent" involved accepting the evidence of Mr Bateman as to the limitation on this for his purposes. His Honour did not regard that exercise, even to the extent of a more detailed consideration of the financial positions of companies within the group, as leading to any conflict, which could be described as 'a real sensible possibility of conflict'. Of course, in carrying out this task it was necessary for ATRK to be furnished with certain information about each of the companies in the group. But, in his Honour's opinion, no proposal could have been worked out without such information and without having regard to each company in the group. Rolfe J accepted Mr Bateman's evidence that if a stage was reached where it was decided to go ahead with any particular proposal then the various parties would be separately represented.
132 Rolfe J was not satisfied that any instructions were given by Beach in relation to these proposals. Its position was undoubtedly taken into account, but it was not a party, which sought to give instructions. His Honour was of opinion that the instructions were given either by IRL or by the management company, CMS, to which latter company accounts were rendered. His Honour was satisfied that the currency swap transaction was not, in its original implementation, part of the Burbank acquisition procedure. The Burbank acquisition finance was not connected with it. The amount the subject of the currency swap transaction was only sought to be linked with the Burbank acquisition when it became necessary to disguise the re-arrangement of the deposits on 13 and 14 September 1989 to which we referred in para 88.
133 Rolfe J accepted Mr Bateman's evidence that at the meeting of 22 February 1989 it was not his function to discuss anything other than the bids, the cost of undertaking them and the facilities ELFIC had offered. He was not there to give advice about questions of debts and cash flow, the value of assets and the refinancing options. Nor did he give such advice. Mr Bateman said that Beach did not "really arise in the restructuring at all". It just happened to be an asset of one of the companies, namely Claremont, for which a bid was to be made. He denied he was giving advice to the controllers of Beach as to the effect that it would sell its shares in Spargos at a price to be nominated. He said that all he was doing was setting out a possible scenario based on the instructions he had received "and merely doing a mathematical process in some cases to identify what the effect is of making such theoretical bids" and, if such bids were made, the impact on the person making the bids. He said the exercise was theoretical, to consider what would assist in the restructuring so as to reduce the number of listed companies of fifteen to a smaller number. Rolfe J accepted this evidence which he said was consistent with the ambit of the retainer he was satisfied ATRK had.
134 Mr Bateman said the restructuring he was undertaking did not have to involve regard to the financial position of the companies, as the restructuring considerations were theoretical. He agreed there were types of restructuring where one undertakes such financial consideration, for example where a scheme of arrangement is being undertaken, but he said that the types of restructuring he was considering did not involve that, and that, during the course of his theoretical restructuring analysis, it was irrelevant who ended up controlling the group. Rolfe J said that this evidence was consistent with his instructions and he accepted it.
135 Rolfe J said that whilst at first blush the lack of detailed financial information for the purposes of considering the takeover structure might have seemed strange, Mr Bateman was a solicitor with experience in the field. He gave detailed reasons why he did not require such information. His Honour thought the evidence inherently credible and was convinced that he should accept it.
136 Dealing with Beach's claim that ATRK was in breach of a fiduciary duty owed to it, Rolfe J reviewed the cases and turned to consider the various ways in which Beach alleged the retainer of ARTK gave rise either by its terms or by some assumption of duty to circumstances in which conflicts of duty arose.
137 As to the Charge and Option Agreement, ATRK were not instructed to act for any of the companies in relation to the entry into that agreement and its completion. Rolfe J said (26 ACSR at 275-6):
"The way in which it is sought to embroil ATRK into the entry into this agreement is by virtue of the advice given on 2 May 1989 that there would be no breach of s129. First, it is by no means clear that that advice was related to the acquisition of Burbank. However, even if it was, there is not a skerrick of evidence from which the inference could be drawn that that advice caused the entry into the charge and option agreement. …..
Accordingly I do not consider that ATRK had any retainer to act in respect of the charge and option agreement, nor does the evidence satisfy me that they assumed any responsibility in connection with the entry into that agreement."