Lowy v Alexander

Supreme Court of NSW|2000-06-16|Before: Windeyer J

CITATION : Lowy v Alexander [2000] NSWSC 661 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3888 of 1997 HEARING DATE(S) : 15 and 16 June 2000 JUDGMENT DATE : 12 July 2000

PARTIES : Peter Lowy (Plaintiff) David Alexander (Defendant) JUDGMENT OF : Windeyer J at 1

COUNSEL : Mr G.K. Burton (Plaintiff) Mr M. Dempsey (Defendant) SOLICITORS : K.M. Harkness & Co (Plaintiff) Mallesons Stephen Jaques (Defendant) CATCHWORDS : EQUITY - fiduciary obligations - solicitor and client - solicitor acting for two parties entering into a loan agreement where only one provided security - duty to advise client giving security to obtain independent advice - whether duty not to act - TORTS - negligence - solicitor acting for joint borrowers - one giving security - limit of retainer - informed consent to acting for both parties Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1 Brickenden v London Loan & Savings Co [1934] 3 NZLR 465 Browne v Dunn [1894] 6R 67 Clark Boyce v Mouat [1994] 1 AC 428 Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 CASES CITED : Fitzpatrick v Waterstreet [2000] ANZConvR 15 Gilbert v Shanahan [1998] NZLR 528 Maguire v Makaronis (1997) 188 CLR 449 Moody v Cox & Hatt [1917] 2 Ch 71 O'Halloran v R.T. Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Target Holdings Ltd v Redferns [1996] 1 AC 421 DECISION : See paragraph 30

1 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

JUDGMENT 1 The plaintiff, Mr Lowy, claims that he sustained loss through breach of fiduciary duty or breach of retainer by the defendant solicitor, Mr Alexander. The question is whether there was a breach and if so whether any loss flowed from it. Facts 2 Lowy was a real estate agent at Gladesville, controlling a company, Pedaglow Pty Ltd. It ran a small agency at Gladesville from 1965 to 1984 when Lowy sold the business. He worked at home for a few years and for another agent for some time, but in 1991 decided to reactivate Pedaglow Real Estate. His home, 3 Small Road, Ryde, was mortgaged to the National Australia Bank with about $15,000 owing on the loan and he wished to double that loan to obtain funds needed to get his business going again. 3 The National Australia Bank refused to advance further funds. Lowy told a Mr John Maggio, the proprietor of a supermarket at Ryde, about this. There were some discussions over a few days, after which Maggio said that he and a friend, a David Mansfield had a scheme to make millions, but they were short of cash. Maggio put a proposal that Lowy would mortgage his home, that they would split the money, that Maggio would pay all interest and fees for a while and that the loan would be repaid from the million dollars which Maggio and Mansfield would make. After considering this Lowy said that he would go ahead. On 3 December 1991 an employee of Mansfield wrote to Lowy, setting out a synopsis of the proposed arrangement which at that time was based upon a proposed borrowing of $160,000. The letter stated that Lowy's property would be used to borrow $160,000, that Mansfield would be the borrower "due to the obvious details discussed, i.e. your age and the fact that this would be a new business venture", that Lowy would not have to pay interest for the first six months and thereafter it would be necessary to come to an arrangement, but "once your business is established you will be compelled to pay interest at 12% on $60,000." Mansfield was to be the borrower and to on-lend to Lowy by separate contract. According to the evidence of Lowy, which is probably correct, he did not see this letter until 3 January 1992, at which time he deleted the figure $160,000 and inserted the figure $135,000. That is probably because it was known by then that the property would not support a loan of $160,000. 4 An application for finance was made to Howard Funds Management Limited (Howard), the trustee for which was Permanent Trustee Australia Limited, for a loan of $160,000, this being later altered to the reduced figure. Lowy left arrangements to Maggio. This was unfortunate as Maggio and Mansfield apparently turned out to be worthless rogues. 5 As I have said, Lowy was shown the Mansfield letter on 3 January 1992. On that day, he and Maggio signed a letter to Howard accepting the mortgage loan "in accordance with the terms and conditions set out in the letter of approval to us from Howards Funds Management Limited dated 3 January 1992." That letter is in evidence, although Lowy said that he had not seen it until shown it in the witness box. It was addressed to Lowy and Maggio care of Paul Singer at Mansfield & Company, sent by fax on that day. That was the date, of course, on which Lowy said that he thought he had seen the letter from Mansfield & Company and the date on which the acceptance of the offer was signed by Lowy and Maggio. The first sentence in the letter is of significance as it is as follows: I refer to your loan application received 20 December, 1991, for mortgage finance to pay out National Australia Bank and to purchase a real estate agency."

It is reasonably clear from this that a written loan application was made, which unfortunately is not in evidence. Lowy said there was such an application. 6 Alexander had acted for Maggio on a personal injuries claim which apparently did not get very far. He or his firm had acted for Mansfield on a number of matters and he had acted for or advised other members of the Maggio family, at least to the extent of giving certificates of independent advice to them on their entry into mortgage transactions with which Mansfield was concerned. He had not acted for Lowy before. His original instructions came from Maggio and were received on 13 January 1992. In brief he said those instructions were to discharge the National Australia Bank mortgage, obtain a new loan, at that stage for $140,000 from Howard, to be secured on the Gladesville property with Maggio and Lowy to be the debtors. 7 It seems that Maggio impressed Alexander with the urgency of the transaction. In any event he acted with considerable speed, contacting the National Australia Bank on the same day, obtaining particulars of title on the next day, organising searches and attempting to speak to Mr Sunman, the solicitor for Howard who seems to have been prepared to take risks to assist in early completion of the transaction. On 15 January Alexander made personal contact with Mr Sunman. He gave the necessary details for the mortgage documents, discussed the requirements for insurance and made some other arrangements about finalising the matter without any up to date survey being obtained. Later that day he again spoke to Mr Sunman's office, making tentative arrangements for settlement two days later on 17 January and he was told that the mortgage documents would be sent to his office by express courier and should arrive there at 5.30 p.m. that day. He also obtained the pay-out figure from the National Australia Bank for settlement on the Friday and later made an appointment with Maggio to meet at his, Alexander's, home at 7.30 to 8.00 p.m. to sign the documents. 8 On 15 January, Maggio told Lowy that his solicitor had the mortgage documents and that he would pick him up and that they would go to see Alexander at his home at Turramurra that evening. Alexander's office was in Chatswood. In his affidavit, sworn 18 May 1999, Lowy said they arrived at the house and he was introduced to Alexander. In paragraph 7 of that affidavit he then deposed as to what took place follows: (Maggio) said to Mr Alexander, "Hello David, this is Peter Lowy." Mr Maggio and I sat down at Mr Alexander's desk. He sat on the other side. Mr Alexander showed me a document headed "mortgage" and said to me words to the effect, "This is a normal mortgage document. Do you understand this?" Mr Maggio then cut in and said to me "If you want to know anything about this then ask me when we're finished". Mr Alexander said nothing to this and then proceeded to show me where I had to sign the papers. I do not recall how many papers I signed although it was more than one. I was not asked to and did not read any of the documents. Mr Alexander did not discuss the documents with me or their meaning or content. Mr Alexander did not ask any questions about what I knew about Mr Maggio's financial position and ability to meet interest and principal payments and to give security to the lender or to me. Mr Alexander did not point out to me the risks I was exposed to when I mortgaged my house to the lender without Mr Maggio also giving the lender security or giving me security and without knowing Mr Maggio's financial position and ability to pay principal and interest on the loan I did not understand at the time these risks. Mr Alexander did not suggest a written agreement between Mr Maggio and me about our respective rights and obligations to each other.

He said that he was only with Alexander for a short time, being ten or fifteen minutes at the most. He said that Alexander did not advise him to seek independent advice and that when the signing of the documents was concluded Alexander had said that he would let them know when he had the money. 9 On 16 January Alexander sent the executed documents to the solicitor for Howard, together with answers to requisitions on title and a direction as to payment of the loan moneys. This provided for payment to the National Australia Bank of the amount required to discharge its mortgage, a cheque to both solicitors for costs and the balance of $115,287.50 to J Maggio and P Lowy. Lowy denied that he gave any instructions for answers to the requisitions and in fact said that these were answered subsequently. Although it may not be of great significance I find as a fact that the answers to the requisitions were written in the handwriting of Alexander on the night in question, as that is far more likely than not in view of the fact that the answers to requisitions were sent on with the executed documents the next morning. 10 Settlement was effected on 17 January. In an unexplained way the sum of $115,287.50, being the bank cheque made out to Maggio and Lowy, was paid into the trust account of Mansfield. From that $20,829.50 was paid to Lowy's then fiancee, Heather Pearce, and $4,000 was paid into Lowy's business account. Those two sums together with the sum of $15,170.50 paid to the National Australia Bank amounted to the $40,000 which Lowy was expecting to obtain from the transaction. What happened to the remaining $95,000 is unknown, but presumably it went to the benefit of Maggio or Mansfield or both. 11 Maggio did make five monthly payments of mortgage interest. Default then occurred and possession proceedings eventually commenced. Lowy took out a further loan to pay the arrears. Ultimately he was forced to sell his home to repay the loan moneys outstanding and secured over his home. In 1995 he took proceedings in the District Court against Maggio, claiming damages for breach of an oral agreement, pursuant to which $135,000 was to be borrowed on the security of his home, which agreement was pleaded to contain terms that of that amount Lowy would apply $35,000 for his own purposes, that Maggio would apply the balance for his purposes, that Maggio would pay interest for six months and thereafter interest would be paid in proportion to the shares in the principal sum borrowed. Lowy said in evidence that the statement of claim was prepared in accordance with his instructions. Apart from the $5,000 difference the agreement is not very different from that suggested by the letter of 3 December 1991. The District Court action came to an end because Maggio was declared bankrupt and disappeared overseas. It has been agreed between the parties that no point will be taken by either side about his not being called to give evidence, as his whereabouts is unknown. That does not of course mean that his evidence would not have been helpful; all it means is that no Browne v Dunn [1894] 6 R 67 point would be taken by either side. 12 Alexander said that his first instructions came from Maggio on 13 January 1992 when Maggio said he was entering into a joint borrowing with Lowy to be secured on Lowy's property. Otherwise he gave evidence in accordance with the facts which I have set out up to the time of the meeting at his home at Turramurra. He said that he would have perused the security documents after they had been received in his office by courier, probably in his office, rather than at home and that this would have taken about thirty minutes. 13 The loan documents are significant. Under the deed of loan Lowy and Maggio were borrowers. Clause 3 head "Purpose" provided "The borrower shall use the net proceeds of the facility for the purpose set out in item 2 of the First Schedule". That item 2 headed "Purpose of Facility" was "repay existing secured debt to National Australia Bank and to provide funds for acquisition of real estate agency". The deed was quite a long one, comprising twenty three pages, but did not contain any other provisions much out of the ordinary. The mortgage from Lowy to Permanent Trustee Australia Limited, in its form as registered, is not in evidence, although that is probably not significant as a copy of that signed document was put in evidence. While in form it acknowledges receipt of the sum of $135,000 paid to Lowy, in the Schedule it is expressed to be in consideration of the mortgagee entering into the deed of loan and making the advances under it. Lowy and Maggio also signed a letter of acknowledgment addressed to Howard, which included a certificate that the mortgage and the terms of the transaction had been explained to them by their solicitor and they understood and accepted them. There was a subsequent mortgage entered into by Lowy in favour of Permanent Trustee Australia Limited over some land which it appears Lowy acquired from the New South Wales Department of Schools and Education, although all of this is unexplained. 14 Alexander remembers the meeting at his home taking place, but he has no memory of the events at his home. He has, however, a note which reads as follows: Attending on John Maggio and Peter Lowy in consultation at home 8.00 - 9.15 p.m. 1. Mortgage and loan agreement read and explained.

All documents completed and signed. 3. Cheques - NAB Solicitors Balance to them both (1.25 HRS) 15 In an affidavit sworn 23 June 1999, Alexander gave evidence of his practice when acting in matters involving a joint borrowing secured by only one party. He said that the practice was at the beginning of any meeting to say to the sole security provider "As it is your property at risk and not the other borrower I suggest you obtain independent advice". He said that the strength of the suggestion varied with his perception of the sophistication of the mortgagor and that, because he perceived Lowy to be a reasonably sophisticated client, he probably said nothing further. If the client declined to act on his suggestion, then he proceeded to act for the parties jointly. He said that he was experienced in explaining mortgage security documents. He said that his practice was to ask the parties to explain the purpose of the borrowing, or if he was aware of that, to confirm that with them at the beginning of the meeting. He said that in the transaction under consideration he believed that he understood the purpose of the borrowing was to fund a joint real estate venture. He said that he would have noted the schedule to the deed providing for that. He said that it was his practice when acting for business purposes on a transaction to ask whether he could provide any advice on the arrangements between them. As he had made no note he considered he was not asked to give advice. He said that his practice was then to read through the document and paraphrase its clauses and explain the documents in fairly simple English and that at the end he would ask the client whether or not the document was understood. He said that in the case of a sole security provider, but a joint borrowing, his usual practice was to say words to the effect, "Do you understand that it is your property that is at risk for the loan you are both borrowing? Do you understand that if either of you fail to make payments on the loan, or fail to make payment on the due date, the bank will be entitled to sell your property?" He said that when acting for joint borrowers, his practice was to obtain written authority if the balance of the loan was to be paid in any fashion other than to them jointly and that no authority was obtained in this case because the balance proceeds were in fact paid to them jointly. 16 Alexander denied the conversation alleged by Lowy. He denied that the meeting lasted no more than fifteen minutes, he denied that he failed to discuss or explain the documents to Mr Lowy and that he failed to suggest that he obtain independent advice. He said that he completed the requisitions on title on information provided to him by Lowy. 17 In his affidavit, Lowy said that had he been advised or warned by Alexander or by an independent adviser, that the transaction did not protect him if Maggio failed to pay principal and interest and did not give him security from Maggio nor define the arrangements between Maggio and himself, then he would not have proceeded with the transaction. He was not cross-examined on this evidence, which of course went to causation. 18 Although Lowy was not altogether inexperienced in financial matters, he certainly had no real knowledge of any complicated borrowing transactions. His real estate agency business had been a small business, involved with selling residential real estate, so that he knew that purchasers obtained mortgages on the security of the houses they purchased to enable them to finance the purchase, he did not make these arrangements for the purchasers. He had, however, had his own residential mortgage loans. After a great deal of cross-examination he eventually conceded that he understood that if such a loan went into default then the mortgagee could sell the secured property. He eventually agreed that it was plain from the documents which he signed before signing the security documents, that the only security was to be provided over his property and that no security was to be provided by Maggio. He maintained, nevertheless, that he did not understand that the effect of the agreement was that if the loan got into default, he could lose his house. He agreed that he had made the loan application, but he said it had nothing whatever to do with purchasing a real estate agency and there was no agreement between himself and Maggio as to that. This latter statement is undoubtedly correct. It does not, however, explain what was said to the lender. In any event, Lowy agreed that prior to seeing Alexander he had made an agreement with Maggio and also he had reached agreement with Howard. Lowy did not tell Alexander about his agreement with Maggio. He said he did not think that was necessary. The purpose of the meeting at Alexander's house was to sign documents to let the transaction go ahead. 19 Lowy agreed that he did not tell Alexander how the moneys obtained from the mortgage were to be divided between him and Maggio. Lowy said that he did not tell either Maggio or Mansfield how to split up the moneys received from the loan. I do not consider that evidence can possibly be accepted. There is no way the two cheques would have been made payable to Lowy and Miss Pearce unless instructions were given as to how they were to be drawn. They could not have come out of the blue. 20 On the first day of the hearing a considerable body of evidence was given by Alexander during cross-examination as to another dealing involving a company Twoems Pty Limited of which Maggio and Mansfield were directors. While this evidence appeared significant at the time, in that left as it was, it might have shown that Alexander was aware at the time of the transaction involving Lowy that security providers had suffered as a result of default on another loan with which Maggio and Mansfield were involved, it turned out during re-examination that Maggio was not involved, although some members of his family were; also the problems appeared to have arisen, or become apparent, after the transaction in question here. Pleaded claim 21 The claim of the plaintiff is that Alexander was under a fiduciary duty not to be or continue to be, without the fully informed consent of the plaintiff at all times, in a position where there was a conflict or significant possibility of conflict between his duty to the plaintiff and his duty to Maggio and was under a duty to take reasonable care in respect of the type and content of advice given or which ought to have been given in respect of the plaintiff's entry into the mortgage and loan agreement. This latter duty is said to arise both under the contract of retainer and under the general law. The defendant admitted these duties to the extent they arose under the retainer. In the way in which the case has been presented and on the particular facts of this case, it is not necessary to consider whether some general duty of care exists outside the duty which arises under the retainer contract. That is partly so because if Alexander was operating under a misapprehension as to the purpose of the loan which misapprehension arose as a result of conduct of the plaintiff, then it is difficult to see how any additional responsibility could arise. So far as breach of fiduciary duty is concerned, the plaintiff says that there was breach because Alexander failed to inform him of the actual or potential conflict of duties; that he failed to obtain his informed consent to his continuing to act for either or both of them; that he failed to warn the plaintiff to seek independent advice; that he failed to advise the plaintiff separately from Maggio; and that he failed to ascertain the relationship between the two parties. 22 So far as the breach of duty of care is concerned, the plaintiff says that in addition Alexander gave no proper explanation of the documents, failed to point out the risk of a sole security provider, failed to point out the difficulties which could arise through the absence of a written agreement between the parties as to their responsibilities, failed to explore or suggest the plaintiff explore the financial resources of Maggio and ability to give security; and failed to give any proper explanation of the loan documents. Decisions on factual matters 23 I find that Lowy was aware in general terms prior to seeing Alexander of the risk that his property offered as security might be sold by the mortgagee if there were default by the borrowers under the terms of any loan. His reluctance to answer questions on this directly reinforces my view on this. 24 The more important matter to determine is whether or not the evidence of Lowy should be accepted when he says that the meeting with Alexander, which was the only time they met, was for a period of less than fifteen minutes. On this matter there is the positive evidence of Lowy and there is the evidence of the diary note of Alexander. It was not suggested by counsel that the diary note was a fabrication in that it was made well after the event in question. On its face it seems clear that it was made either on the evening of 15 January or on the next morning as on the same sheet of paper below it there is a note dated 16 January of an attendance in the matter which must have taken place in the morning of 16 January. The evidence of Alexander, borne out by other notes, is that he was in the habit of writing down the time spent on various activities. There would have been no reason for him to insert a false figure so far as the time taken at the signing of documents was concerned. He said that it would have made no difference at that time to the amount which he charged, but he did it out of habit; and there would have been no reason to insert a false figure unless for some reason he was of the view that he had not spent sufficient time and wished somehow to hide this. There was no suggestion of that. If the plaintiff's version of the time taken is accepted then it is almost certain he would be entitled to succeed in this action. Ten to fifteen minutes including introductions and civilities would not be a sufficient time in which to give a proper explanation. That was, I think, accepted on all sides. While there may have been some faults with the evidence of Mr Alexander, I accept that Maggio did not make the statement he is claimed to have made that he would answer any questions after the documents were signed. Such a statement would have rung warning bells with any reasonably competent solicitor, which Alexander gave the impression of being. I accept his denial that the statement was made. I accept that the diary note he made as to the time taken was accurate. If the time taken was 1 ¼ hours as I accept it was, then one is left with two stories. The first is that of Lowy that the time was not taken (which I reject) and he was given no advice. The second is the evidence of Alexander as to his practice in such matters. Nobody suggests that much time was spent on idle chatter. Thus it seems to me to be more likely than not, once the plaintiff's story is rejected, that advice was given in accordance with what Alexander said was his practice in such matters. I find that to be the case. On the basis such advice was given I find it to be sufficient and satisfactory, leaving aside the question of independent advice. Without any evidence I would not be prepared to find that it was necessary when giving advice to canvass the question of lack of security from Maggio to Lowy. I do not consider that it would be normal conveyancing practice for a solicitor to advise a sole security giver that he should consider the question of obtaining security for the giving of his security from the borrower not giving security. In very complicated transactions that might be something which could be considered, but I do not consider that such advice would ordinarily be given in a transaction of the type involved here. I would not be prepared to so find without evidence to the contrary and on the basis that one is allowed to take ones own knowledge into account in such matters, then I would come to the same conclusion. In reaching this conclusion it is necessary to bear in mind that Alexander was told the retainer was to act on a joint loan not on a loan for separate borrowers. This in ordinary circumstances limits the duty boundaries: Clark Boyce v Mouat [1994] 1 AC 428; Fitzpatrick v Waterstreet [2000] ANZConvR 15. 25 The more difficult matter in this case is the question of conflict of duty in what is described as party and party conflict and whether or not Alexander should have insisted that separate advice was obtained by one of the parties and if he should not have so insisted, whether he gave sufficient consideration and warning to Lowy of the desirability of obtaining independent advice and whether or not Lowy gave informed consent to his continuing to act. 26 This is a matter which has caused me some difficulty. Both sides in this matter however relied on the decision of the Privy Council in Clark Boyce and in particular the following passages from the judgment of Their Lordships delivered by Lord Jauncey of Tullichettle:

At p435: There is no general rule of law to the effect that a solicitor should never act for both parties in a transaction where their interests may conflict. Rather is the position that he may act provided that he has obtained the informed consent of both to his acting. Informed consent means consent given in the knowledge that there is a conflict between the parties and that as a result the solicitor may be disabled from disclosing to each party the full knowledge which he possesses as to the transaction or may be disabled from giving advice to one party which conflicts with the interests of the other. If the parties are content to proceed upon this basis the solicitor may properly act. In Boulting v. Association of Cinematograph, Television and Allied Technicians [1963] 2 Q.B. 606, 636, Upjohn L.J. said: "the client is entitled to the services of his solicitor who may not charge more than he is legally entitled to, and must not put himself into a position where he may owe conflicting duties to different clients (see, for example, In re Haslam and Hier-Evans [1902] 1 Ch. 765). But the person entitled to the benefit of the rule may relax it, provided he is of full age and sui juris and fully understands not only what he is doing but also what his legal rights are, and that he is in part surrendering them." Farrington v Rowe McBride & Partners [1985] 1 N.Z.L.R. 83 concerned a solicitor who advised a client to invest money in a company which was also a client of his without disclosing that fact to the potential investor. Richardson J. said, at p. 90: "A solicitor's loyalty to his client must be undivided. He cannot properly discharge his duties to one whose interests are in opposition to those of another client. If there is a conflict in his responsibilities to one or both he must ensure that he fully discloses the material facts to both clients and obtains their informed consent to his so acting: 'No agent who has accepted an employment from one principal can in law accept an engagement inconsistent with his duty to the first principal from a second principal, unless he makes the fullest disclosure to each principal of his interest, and obtains the consent of each principal to the double employment' ( Fullwood v Hurley [1928] 1 K.B. 498, 502 per Scrutton L.J.). And there will be some circumstances in which it is impossible, notwithstanding such disclosure, for any solicitor to act fairly and adequately for both. In the last sentence of that dictum Richardson J. no doubt had in mind a situation where one client sought advice on a matter which would involve disclosure of facts detrimental to the interests of the other client. In determining whether a solicitor has obtained informed consent to acting for parties with conflicting interests it is essential to determine precisely what services are required of him by the parties.

When a client in full command of his faculties and apparently aware of what he is doing seeks the assistance of a solicitor in carrying out of a particular transaction, that solicitor is under no duty whether before or after accepting instructions to go beyond those instructions by proffering unsought advice on the wisdom of the transaction. To hold otherwise could impose intolerable burdens on solicitors.

And at p 437 E: It remains to consider the conclusion of the Court of Appeal that Mr. Boyce was in breach of fiduciary duties. Sir Gordon Bisson's observations on this matter have already been set out. McGechan J. agreed with these observations albeit at somewhat greater length. That a solicitor owes a fiduciary duty to a client is not in doubt. The classic case of the duty arising is where a solicitor acts for a client in a matter in which he has a personal interest. In such a case there is an obligation on the solicitor to disclose his interest and, if he fails so to do, the transaction, however favourable it may be to the client, may be set aside at his instance: Lewis v Hillman (1852) 3 H.L.Cas. 607. Another case of breach is where a solicitor acts for both parties to a transaction without disclosing this to one of them or where having disclosing it he fails, unbeknown to one party, to disclose to that party material facts relative to the other party of which he is aware. A fiduciary duty concerns disclosure of material facts in a situation where the fiduciary has either a personal interest in the matter to which the facts are material or acts for another party who has such an interest. It cannot be prayed in aid to enlarge the scope of contractual duties. Thus, there being no contractual duty on Mr. Boyce to advise Mrs Mouat on the wisdom of entering into the transaction, she cannot claim that he nevertheless owed her a fiduciary duty to give that advice. Furthermore any duty of disclosure can only extend to the solicitor's knowledge of facts and not to his lack of knowledge thereof.

These passages do I think support what I have said about the need to look carefully at the relevant facts and to bear in mind what is generally meant by "both parties to a transaction" rather than decide some overarching duty is applicable as a matter of course. For instance in the case of a solicitor involved personally in a transaction with a client, if this is not disclosed the transaction is almost certain to be set aside subject to the client doing equity by doing what is necessary on his or her part to put the parties back where they would have been had there been no breach: Maguire v Makaronis (1997) 188 CLR 449. The position is probably the same in the case of what is traditionally called conflict of duty and duty. In that type of case the solicitor can be in possession of knowledge of facts about one client which his duty of confidence prevents him disclosing to the other client those which are material considerations so far as concerns the transaction between them. A solicitor with knowledge that client A is guilty of theft or forgery could not act for A and another client B on a proposed partnership agreement as the solicitor could not do his or her duty to B. In such a case duty to one prevents the fulfilment of duty to the other. It is not possible to obtain informed consent in the absence of release of the duty of confidentiality and probably impossible even with such release. Farrington v Rowe McBride & Partners [1985] 1 NZLR 83, referred to with apparent approval in Clark Boyce , was such a case, although the solicitors had an indirect financial interest to satisfy their developer client: see also Moody v Cox & Hatt [1917] 2 Ch 71 and Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1 at 47. There is a world of difference between these types of case, where a conflict exists without question, and the type of case where borrowers for a joint purpose may be subject to unequal risk. Any borrower with more assets than his or her co-borrower is at greater risk than the co-borrower in the event of default, but in general there is no reason why one solicitor should not act for both, explaining to each his or her several risks and it would not be thought that there was an invariable duty to give advice as to the increased risk to one nor as to the advisability of obtaining independent advice. Most judicial pronouncements about acting for both parties to a transaction refer to vendor and purchaser, or mortgagor and mortgagee, or guarantor and lender; rather than the two people on what might be thought to be the same side of the transaction such as joint borrowers. There are cases such as Boyce , where the mother was to receive no benefit, other than the satisfaction of assisting her son, where it has been held to be a duty of the solicitor acting for mother and son to at least bring to the guarantor's notice the advisability of obtaining independent advice; Gilbert v Shanahan [1998] NZLR 528 was to the same effect, albeit that in that case the guarantor had some financial incentive to give the guarantee. In certain cases it might be thought that a solicitor should ask one party, who is at greater risk on default, if that party wishes to obtain independent advice in view of the greater risk. But one must face the reality that the answer to such a question will almost certainly be in the negative. Different facts give rise to different duties; the ordinary duty of a solicitor is to give his client advice and to act competently on the matter for which he is retained. If there are two clients whose interests and liabilities may differ then the solicitor must look after each of them and must do so with the informed consent of each. If he cannot do so then he cannot act for both. But cases differ and I consider the observation of Richard J in Farrington at page 92 needs to be borne in mind that: It may perhaps be going too far to conclude as stated in Finn, Fiduciary Obligations (1977) p 253 that if the same fiduciary acts for two different and unrelated beneficiaries in the same matter or transaction without the informed consent of both to the double employment then this without more is a conflict within the rule (see also Bowstead on Agency (14th ed, 1976) pp 142-143). But certainly, consistent with the underlying principle, it must be sufficient that there be an actual opposition of interests. In that situation for the solicitor to accept the second engagement without the consent of each principal would be inconsistent with his separate duty to each client. 27 The fiduciary duty to the client is to act competently and honestly in the client's interests. If that cannot be done then the duty is to cease to act. In the instant case in the absence of authority I would have had some doubt whether, on the facts as known to the solicitor, there was a duty on him to suggest that Lowy should seek independent advice. The position, in my view, would have been different had he been told the real purposes of the transaction. But a party who makes a deliberate decision to keep that information from the solicitor is not in a position to complain if the solicitor acts on the assumption that what he has been told represents the true transaction. 28 I have, however, come to the view that authority probably does require me to hold that there was an obligation to give some opportunity for advice as to independent advice and I proceed on that basis. I do not think it has been established that what the solicitor said was insufficient. Lowy said nothing was said and I do not accept that to be true. Lowy might not have been experienced in financial matters, but he knew what a guarantee was. He said his interest was to get the documentation fixed so that the funds would become available. I think if perfectly clear that he would have rejected any stronger suggestion. There is no doubt that Lowy wanted the money. There is equally no doubt that Maggio wanted the money. The result is that I think it clear that whatever strength of advice was given the plaintiff would not have availed himself of the opportunity to take independent advice. On the facts presented to the solicitor and accepting that he acted in accordance with his usual practice I consider Lowy consented to his acting for both borrowers and there was no breach of fiduciary duty. 29 If there were any breach of fiduciary duty, and I do not consider there was, the question of loss and causation remains. In New Zealand, there has been what was described in Gilbert v Shanahan at 535 as a "retreat from Brickenden"; see Brickenden v London Loan & Savings Co [1934] 3 NZLR 465. In this State, the view of the Chief Justice as expressed in O'Halloran v R.T. Thomas & Family Pty Ltd (1998) 45 NSWLR 262 was confirmed in the joint judgment of the Court of Appeal in Beach Petroleum v Kennedy, the following paragraph from the judgment of Lord Browne-Wilkington in Target Holdings Ltd v Redferns [1996] 1 AC 421 at 439 being approved as the law in Australia for breach of fiduciary duty: Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and commonsense, can be seen to have been caused by the breach. 30 The loss was really caused by the application for an undisclosed purpose. While I consider there was no breach, if I am wrong the only breach was not pressing on the plaintiff the desirability of obtaining independent advice. As I think it clear no such advice would have been accepted, there was no loss.

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