Maher v Millennium Markets Pty Ltd [2004] VSC 174

5. The plaintiffs' claim has three principal aspects. Firstly, it is said Brott placed himself in a position of conflict of interest with the consequence that the plaintiffs are entitled to relief both against him for breach of fiduciary duty and against the purchaser defendants for knowing involvement in such breach. Secondly, it is said that Brott breached the terms of his retainer and his fiduciary duty, and acted negligently by failing to exercise due skill and care on behalf of the plaintiffs. Thirdly, it is said that one of the dealings effected with respect to the security properties comprising the sale of an apartment owned by the fourth plaintiff and occupied by the first plaintiff, should be set aside or alternatively treated as founding a claim in damages because it was procured by economic duress and/or unconscionable conduct and/or conduct in breach of the Trade Practices Act 1974.

9. The plaintiffs in this matter comprise members of the Maher family and companies controlled by them. The first plaintiff, Patricia Maher, is the mother of the second and third plaintiffs Justice and Dominus Maher.

12. The fourth, fifth, sixth and seven plaintiffs are companies controlled by the Mahers which as at February 1999 owned a series of properties.

(a) The fourth plaintiff was the registered proprietor of a warehouse situated at 169 Settlement Road, Thomastown and of an apartment situated at 50 Bourke Street, Melbourne occupied by Patricia Maher;

(b) The fifth plaintiff was the registered proprietor of land situated at 187-205 Settlement Road, Thomastown used for the purposes of a trash and treasure market ("the market land");

(c) The sixth plaintiff was the operator of this trash and treasure market business and the proprietor of a house occupied by Dominus Maher situated at 14 Warranwood Place, Bundoora;

(d) The seventh plaintiff was the proprietor of land situated at Cannonvale, Queensland.

18. The security properties comprised the above properties together with a service station situated at 161-167 Settlement Road, Thomastown of which Patricia Maher was the registered proprietor.

21. As at March 1999 Justice and Dominus Maher had assisted their mother to conduct a series of business enterprises since the death of their father in 1977. Justice had the major role in the management of the trash and treasure market.

24. From late 1989 till 1996 the Mahers were involved in a series of disputes with the bank and the Bank of Singapore. These disputes resulted in litigation.

27. The fortunes of the trash and treasure market business fluctuated and at one stage it was placed in the hands of a receiver.

30. As at 1 April 1998 the Mahers were indebted to the Bank of Melbourne Ltd in the sum of $6.35 million. On 1 April 1998 the Bank of Melbourne Ltd required this sum to be paid out by 30 September 1998.

33. The Mahers then sought to find a purchaser or business partner who would pay out their liability to the bank.

36. They also sought refinancing from a variety of financial institutions including the Bank of Western Australia Ltd and had discussions with real estate agents and persons expressing interest in the security properties.

39. These discussions included discussions concerning the possibility of creating a factory outlet centre at the market premises. Such a centre was envisaged as similar to one conducted at Moorabbin known as Fairways Market.

42. Some substantial discussion occurred with representatives of the Banco Group of companies concerning the possibility of a joint venture to establish and operate such a centre. These negotiations broke down in early 1999 because as Justice Maher said:

" Once the Lo Giudices investigated the zonings, direct factory outlets as such was not a possibility, and they talked about Capt'n Snooze peripheral sales; The Good Guys; Billy Guyatt's, subdividing factories - subdivision, that type of things."

46. The Banco Group offered $4 million and then $4.3 million for the purchase of the security properties (without joint venture arrangements). These figures were not acceptable to the bank.

49. In January 1999 the plaintiffs obtained financial estimates from accountants as to the possible return if the market premises were "transformed" into a "factory clearance centre".

52. By the end of January 1999 although settlement of the debt due to the bank had been delayed by negotiation, the plaintiffs remained indebted in the sum of $6.35 million and were under substantial pressure to meet their obligations to the bank. On 28 January 1999 the Mahers retained Brott to act for them to negotiate a solution to their position with the bank.

55. On about 4 February 1999 the plaintiffs and Brott agreed that he would be retained for the lump sum for $40,000 to act for them in their dispute with the bank. At this point in time although the plaintiffs were making interest payments to the bank as and when they fell due they were unable to make payments in reduction of the capital sum owing by them. The bank had made it clear it would advance no more credit to them and in February 1999 took the step of requiring the Mahers to return their personal credit cards.

58. Brott had initial discussions with the bank and then obtained advice from counsel as to the possibility of delaying the bank in the enforcement of its security.

61. On 9 February 1999 the bank made demands for the outstanding moneys due pursuant to mortgages it held over each of the security properties.

64. On 11 February 1999, after extended negotiations in conference with Brott, Patricia and Justice Maher, the bank agreed to accept $5.8 million in full satisfaction of the debt and allowed the Mahers some further time for payment of that sum.

67. On 12 February 1999 the bank forwarded a letter setting out the terms of the compromise acceptable to it. This letter contained acknowledgments of the moneys due to the bank and of the bank's entitlement to enforce its securities. It also included agreement by the bank to pay $5,000 towards Brott's fees. This letter was signed by the Mahers on 17 February 1999 and provided to the bank.

70. On 14 February 1999 there had been a meeting at the premises of Denman Audio in St. Kilda Road, St. Kilda between Brott, Patricia and Justice Maher, and Herszberg and his solicitor Szental.

73. Brott had introduced Herszberg to the plaintiffs as a potential purchaser of the security properties. At the meeting Herszberg and Szental requested documentation relating to the properties including copies of relevant planning permits.

76. On 17 February 1999 there was a meeting at Brott's office between Brott, Herszberg, Justice Maher and Patricia Maher which resulted in the formulation of a joint venture arrangement providing for a 65/35 split in the net proceeds of sale of the plaintiffs' properties and businesses. A document was prepared setting out the basis of the arrangement and was executed by the parties.

79. Nothing occurred during the following week and the Mahers maintain that during this period they believed Brott was overseas as a result of advice to them from him that this would be the case.

82. On 26 February 1999 Patricia Maher attended at Brott's office and after further discussion as to the 17 February 1999 agreement tore up a counterpart of that agreement and told Brott that the Mahers would not proceed with it. Brott in turn advised Herszberg that the Mahers would not proceed with the agreement.

85. On 28 February 1999 there was a meeting at Brott's office attended by Brott, Herszberg, Justice Maher and Patricia Maher. At that meeting a memorandum of agreement was executed providing for the sale to Herszberg of the shares in the plaintiff companies subject to conditions which included the transfer of the Bourke Street apartment to Patricia Maher ("the 28 February agreement"). There is a dispute as to the completeness of this agreement.

88. On 28 February 1999 Herszberg also agreed to pay Brott a $150,000 fee by way of commission and to pay $35,000 to Brott by way of the balance of the plaintiffs' legal fees (the bank having agreed to pay the sum of $5,000 upon settlement of the sale of the security properties for $5.8 million).

91. On 1 March 1999 the plaintiffs executed a deed of settlement with the bank acknowledging their indebtedness to the bank in the sum of $6,348,758.88, and requiring them either to enter into contracts for sale of the security properties for an aggregate price of not less than $5.8 million or to enter into agreements for the sale of the shares in the plaintiff companies for an aggregate price of not less than $5.8 million. It was further agreed the bank would accept payment of $5.8 million by 10 May 1999 in settlement of the debt.

94. On the same date the plaintiffs also signed a letter from Herszberg's solicitors confirming agreement to sell the security properties to Herszberg.

97. Again on the same day the plaintiffs signed a deed of agreement ("the fee agreement") consenting to the payment by Herszberg of the sum of $150,000 by way of commission to Brott and the payment of the sum of $35,000 legal costs by Herszberg to Brott on their behalf.

100. Again on the same day Herszberg arranged to bring the third defendant ("Gordon") out to look at the market. Shortly thereafter this occurred and Gordon was supplied with a variety of documentation relating to the market.

103. On 15 and 16 March there were further extended negotiations which resulted in the agreements of 16 March 1999. On that day:

(a) contracts of sale were entered into for the sale of each of the security properties to companies associated with Herszberg and Gordon, and the performance of these contracts was in turn guaranteed by Herszberg and Gordon (the properties sold included the Bourke Street apartment which was sold to the first defendant for $300,000); and

(b) deposits were paid pursuant to such contracts;

(c) a collateral agreement (the "16 March agreement") was entered into providing for a series of collateral arrangements including the cancellation of the contract of sale for the Bourke Street apartment in the event certain proposed uses of the market land, including that of factory retailing outlets, were lawful as at the date of settlement of the contracts for sale of the security properties;

(d) in the event that this cancellation did not occur the plaintiffs were given a two year option to repurchase the apartment for the lesser of either:

(i) the sum of $10,00 plus the costs of obtaining a town planning permit for the proposed uses; or

(ii) $210,000.

109. Transfers of land including the Bourke Street apartment were executed by the Mahers on 17 May 1999.

112. By a variation agreement dated 19 May 1999 the settlement date with the bank was extended to 9 July 1999 upon the payment of a further 10 percent in the reduction of the agreed sum of $5.8 million.

115. On 9 July 1999 the sale of the security properties settled. The bank was paid $5.8 million by the purchasers. Brott was paid $40,000 by way of legal costs and was further paid the sum of $75,000 by way of part payment of the Herszberg fee (having received an initial payment of $20,000 on either 28 February 1999 or 1 March 1999).

118. Prior to and at the time of settlement the plaintiffs maintained that the vendor company was entitled to cancel the contract relating to the Bourke Street apartment because the proposed uses of the market land were lawful. The purchaser defendants took the position that this was not so.

121. Following settlement there was ongoing dispute between the parties as to the status of the proposed uses at the date of settlement.

124. On 30 August 1999 Brott lodged a caveat over the title to the Bourke Street apartment in his own name. After receipt of Titles Office requisitions this caveat was amended to name the fifth defendant (the former registered proprietor) as caveator.

127. In late 1999 the plaintiffs sought an independent opinion from McKean & Park, solicitors, as to what course they should follow. Consequent upon that advice they instructed Brott to institute proceedings against the purchaser defendants for specific performance of the 16 March 1999 agreement.

130. In January 2001 the purchaser defendants offered to honour the option and sell the apartment to the plaintiffs for $210,000.

133. No proceedings had been instituted by Brott against the purchaser defendants and the plaintiffs terminated Brott's retainer in February 2001.

136. In May 2001 the plaintiffs retained their current solicitors to act in the matter.

143. The plaintiffs now make the following claims:

(a) It is alleged the fee agreement was entered into in breach of Brott's fiduciary duty to the plaintiffs.

(b) It is alleged the purchaser defendants were knowingly involved in Brott's breach of fiduciary duty.

(c) It is alleged that Herszberg wrongfully repudiated the 28 February 1999 agreement.

(d) It is alleged that the making of the contract of sale for the Bourke Street apartment and in turn the settlement of that contract occurred as the result of economic duress on the part of the purchaser defendants, alternatively they resulted from unconscionable dealing, or contraventions of s.51AA or 53A(2) of the Trade Practices Act 1974 on the part of the purchaser defendants.

(e) It is alleged Brott breached the terms of his retainer and his fiduciary duty and acted negligently by failing to exercise due skill and care with respect to the making of the agreement of 28 February 1999, the making of the 16 March agreement, and the loss of the apartment generally, including settlement of the contract for sale of the apartment, lodging the caveat in circumstances which led to the loss of the right to exercise the option and failing to resolve the question of the proposed uses with respect to the option.

149. The issues arising from the claim will be addressed within the following framework:

(a) the parties as witnesses;

(b) the claim for breach of fiduciary duty;

(c) the claim for knowing participation in breach of fiduciary duty;

(d) the claim for wrongful repudiation of the agreement of 28 February 1999;

(e) the claim for economic duress;

(f) the alternative claims of inequitable conduct, and breaches of the Trade Practices Act;

(g) the claim for lack of due care and skill; and

(h) conclusion and counterclaim.

The Parties as Witnesses

155. The principal witnesses for the plaintiffs were Justice and Patricia Maher. It is they who had the principal dealings with Brott and with the purchaser defendants although Dominus Maher was also present on the occasion of certain significant transactions.

158. I am not persuaded that Justice and Patricia Maher were reliable witnesses as to matters of detail and in particular as to the details of conversations. Justice Maher was responsible for negotiations with prospective purchasers of an interest in the security properties during late 1998 and 1999. Patricia Maher had the principal conduct of negotiations with the bank and other financiers. Despite initial denials by Justice Maher it is apparent from documentation deriving from this period that discussions were held over many months concerning the possible transformation of the trash and treasure market conducted on the market land into a factory retailing outlet centre. Likewise there were discussions as to the substantial physical upgrade of the market, including the creation of lock-up stalls with panelled walls and roller doors (and not merely stalls with wire mesh walls as Justice Maher first maintained in evidence).

161. As at 1 February 1999 the Mahers still continued in correspondence with the Banco Group to refer to the market land as intended for redevelopment as a "factory outlet centre" within three to five years.

164. In turn Justice was involved with a series of discussions on site at the market land and elsewhere, first with Herszberg and then with Gordon as to possible uses of the land. Despite repeated denials that he mentioned factory retailing outlets to the purchaser defendants prior to 16 March 1999, his own diary records providing plans showing factory outlets to Herszberg's architect on 23 February 1999. Moreover Brott's evidence is that on 14 February 1999 Justice was "very hot" on direct market outlets and produced plans. In the course of subsequent discussions and again contrary to Justice Maher's initial evidence, shop uses were mentioned including supermarket.

167. On 15 March 1999 the purchaser defendants sought an agreement which incorporated provisions relating to the proposed uses of the land.

170. When the 16 March agreement was entered into it was Justice Maher who was primarily relied upon by the plaintiffs with respect to the definition of proposed uses which could be conducted upon the market land. I do not accept Justice Maher's evidence that he did not read relevant recitals and other provisions in the 16 March agreement. The negotiations in relation to it extended over some five hours. Further, for reasons I will elaborate, I am satisfied Justice Maher exaggerated in evidence the extent to which he was taken by surprise by the description of the proposed uses. In summary I do not accept his account of discussions with Brott or the purchasers in relation to the 16 March agreement was reliable.

173. In turn I do not accept that his account of subsequent events is reliable save insofar as it is confirmed or corroborated by documentary or other circumstantial evidence.

176. The evidence of Justice Maher was that in 1999 Patricia Maher had the ultimate control over decisions on behalf of the plaintiffs. In these circumstances her evidence might be thought to be of critical importance. Nevertheless when pressed in cross-examination as to matters in issue she was combative, non-responsive and evasive to such a degree as to render her evidence most unimpressive. In March 2001 Patricia Maher expressed the view to her solicitor that she had been the subject of a conspiracy by a "Jewish combine" and her evidence to the Court was substantially to the same effect.

179. Some further matters deserve particular comment. I do not accept that Patricia Maher was mistaken as to the terms of the 17 February agreement which she entered into and then subsequently tore up. I do not accept that someone of her long business experience could fundamentally misunderstand both the nature of the proposal put to her and the document signed by her as she asserted. The document specifically provided for the sale of the Bourke Street apartment but Patricia Maher maintains she did not understand this.

" Yes, I couldn't understand the document properly. I had the baby in my hands, Mr Brott's baby, nursing the baby. He had to go to London; he had to get a plane. Everything was rushed. Everyone was saying, "Come on Mr Brott, you'll miss your plane to London", and it was just psychological warfare. ... "

183. Likewise I do not accept that Patricia Maher was generally as naive or trusting as she claimed.

"I have had good lawyers. I haven't had any legal experience whatsoever. So when I get documents and I have got a lawyer and he tells me to sign. It is a shocking thing, but I sign, if I believe in the lawyer."

187. Further I do not accept that Brott put Patricia Maher "under extreme duress" and procured her signature to the 16 March agreement as she asserted. Conversely I do accept that Patricia Maher was in fact better able to cope with pressure than Justice Maher as she at one stage asserted.

190. Insofar as events after settlement of the sale of the Bourke Street apartment are concerned I specifically reject her evidence that when her current solicitors were retained Mr Curtain did not discuss the option provisions of the 16 March agreement with her.

193. Dominus Maher was a materially less aggressive and less apparently unreliable witness than his mother and brother, but as I have said his evidence was of relatively limited ambit.

196. No evidence whatsoever was called from the purchaser defendants. A course which has its own consequences which I shall address further below.

199. Brott, however, was called to give evidence and was extensively cross-examined. For reasons I will exemplify in the course of my reasons by reference to particular passages of evidence, I do not regard Brott as a reliable witness as to what was said in discussions between the Mahers and himself, or in discussion with the purchaser defendants and their solicitors. Brott demonstrated a considerable facility for speculation as to the motives and thoughts of others. He remained less than convincing, however, in giving a consistent and credible account of the discussions in which he himself was involved.

202. I shall mention only a few specific preliminary matters concerning Brott's evidence. Firstly he demonstrated himself to be a most evasive witness in dealing with the questions of how he had dealt with $2000 - obtained by him on account of fees payable to Mr Dealehr of Counsel, and in particular $1000 - not in fact paid to Mr Dealehr. Secondly he maintains that he instructed his solicitors that documents were removed from his file by Justice Maher. This allegation was not reflected in his affidavit of documents or in the cross-examination of Justice Maher and I do not accept these instructions were given as he alleges.

205. For the above reasons and by reason of other detailed considerations to which I will refer I have formed my views concerning this matter upon the basis that reliance should not be placed on the evidence of Justice Maher, Patricia Maher or Brott, to determine significant matters unless that evidence is materially confirmed or corroborated in some way by documentary or other circumstantial evidence.

209. The plaintiffs allege that by agreeing to receive fees from Herszberg Brott placed himself in a position of conflict of interest and thereby breached his fiduciary duty to them.

"[39] The question of my receiving a fee was first raised by Herszberg, at about the time of a meeting at Denman Audio on or about 14 February. He volunteered to me the sum of $150,000 upon completion of the deal. [40] I advised Patricia and Justice of that offer. When I told them Justice quipped 'why doesn't he give it to us?' then Patricia said 'you should take it.' I said 'there may be problems with me accepting it. You wouldn't mind if I did?' Patricia said 'no get him to pay our legal costs as well.' On 17 February I negotiated with Herszberg for a substantial period trying to convince Herszberg to pay the legal costs and he eventually agreed to pay $35,000 of the costs being the amount in addition to the allowance allowed by the bank in its letter of 12 February 1999. He had been in a board room annexed to my office. During the same conference when the fee offer had become concrete I telephoned the Law Institute in Patricia and Justice's presence and in the presence of Herszberg on loud speaker. The person I spoke with at the Law Institute said that I could receive the fee as long as my clients had been informed of it and consented and given the opportunity to obtain independent legal advice. [41] I was conscious of the need to fully disclose the commission to Patricia and Justice and to obtain their formal consent and I told them I would require a written agreement. Accordingly a further agreement to record that Herszberg was to pay $150,000 to me was signed by Herszberg, Patricia, Justice, Dominus and myself on 1 March 1999. The agreement was drafted by Christopher Northrop of counsel at my request to ensure full disclosure and proper consent. I provided a copy of this agreement to Mr Moishe Gordon ('Gordon') on 2 March. A copy of my covering letter is at Court Book 750. [42] This Agreement was signed by Patricia, Justice and Dominus in my presence. I specifically discussed with them at the meeting on 1 March 1999 at which they signed the agreement, the fact that I was seeking their signature and formal agreement to my receiving the fee about which I had previously informed them. They said that it was of no concern to them as they were not paying the fee. I said to them words to the effect 'I need to disclose it and know that you are happy with it. You will need another lawyer to look at that.' She replied to me with words to the effect 'I have been doing business for fifty years. I don't need a solicitor to tell me what it means.' They then signed the document. At no time in this transaction did I act in any capacity for Herszberg. Herszberg was represented by both Richard Szental and Efron & Associates ('Efron'). I have never acted for Herszberg or his related companies before or since the transaction."

216. This account of events was not accepted by the Mahers. In particular they deny there was a discussion concerning independent legal advice on 17 February and Justice and Patricia maintain the situation was as summarised by Justice that on 1 March 1999 Brott,

"... produced the Deed of Agreement, which provided that he was to be paid a commission by Herszberg of $150,000. He told us that he had spoken to the Law Institute and that it was all above board and that we were to sign the commission agreement. At that point in time, we had an agreement that we were comfortable with and so we signed the agreement. At no time did he tell us that we should obtain legal advice before signing this agreement."

220. Brott's evidence was amplified in answer to cross-examination and in particular he asserted that the clients were advised on both 17 February and 1 March 1999 that they should obtain independent legal advice. Brott's evidence was replete with assertions as to circumstantial detail including the proposition that he took comprehensive notes of the advice given on 17 February and that these notes had "evaporated". They had been removed from his file by Justice Maher. The circumstantial accuracy of this evidence was in turn attacked on the basis that its reliability was not supported by a series of variations in witness statements prepared on his behalf. Brott sought to explain the most critical inconsistency in these accounts as follows:

" On the statement of 12 March, for the first time you are able to recall the Law Institute person had said that it was necessary for the clients to be given the opportunity to obtain independent legal advice?---I - it wasn't a matter of recalling it. I recalled about the Institute advice. I recalled about Herszberg being in a meeting. I recalled about the Mahers being in a meeting. But it was scattered everywhere, like a lot of the other matters here, and things that were unusual struck me, and provided the first points of reference, and then documents provided the points of reference, and I was able to get what I believe was a reliable picture in my head about a lot of these things that happened. By just sitting there at night, in bed. Not sitting there. Lying in bed, thinking about it, and, you know, reconciling it."

224. Whatever advice Brott did or did not give his clients there is no doubt a formal deed of agreement as to the proposed fee arrangement was drafted by counsel at Brott's request. Clause 9 of the fee agreement provided:

"The Mahers and each of them, on their own behalf and on behalf of each member of the Maher group, hereby acknowledges and consents to the payment of the Herszberg fee to Brott in his own right."

228. This agreement was executed as a deed by Patricia, Justice and Dominus Maher together with Brott on 1 March 1999. No copy of the agreement executed by Herszberg has been tendered to the Court and I am not satisfied he signed it. Nevertheless it is clear that Herszberg did agree to pay Brott $150,000 albeit not on the precise terms set out in the fee agreement. So much is expressly admitted by Herszberg's defence. Moreover on 1 March 1999 Herszberg's solicitors forwarded a letter by facsimile transmission to Brott which expressly confirmed that they were instructed that Herszberg had agreed to pay an introduction fee to Brott in the sum of $150,000 payable as follows:

(a) $20,000 already paid;

(b) $55,000 at settlement of the sale of assets to Herszberg; and

(c) $10,000 per month thereafter.

234. Brott's evidence is that thereafter he received the full $150,000 and the records of his practice produced to the Court show he received at least $147,000, the last payment recorded being received on 31 March 2000.

237. The relevant principle governing the propriety of the arrangement in issue is stated in the fourth edition of Meagher, Gummow & Lehane Equity Doctrine and Remedies at paragraph [5-115]:

"If a person occupying a fiduciary position wishes to enter into a transaction which would otherwise amount to a breach of duty, he must, if he is to avoid liability, make full disclosure to the person to whom the duty is owed of all relevant facts known to the fiduciary, and that person must consent to the fiduciary's proposal."

241. In Spellson v George & Ors[1] Hope AJA cited with approval the following passage from the 4th edition of Halsbury's Laws of England:

"Where a beneficiary sues in respect of a breach of trust, then if his consent or concurrence is relied on as a defence to his proceedings the court has to consider all the circumstances with a view to deciding whether it is fair and equitable that he should sue the trustees; but it is not necessary for the purpose of protecting them that the beneficiary should have known that it was a breach of trust in which he concurred, if he fully understood in what he concurred, nor is it necessary that he himself should have benefited from the breach. There is no hard and fast rule that ignorance of a legal right prevents an effective consent being given, but all the circumstances must be looked at to see whether it is just that the complaining beneficiary should succeed against the trustee. There must be a full and frank disclosure so that the beneficiary is put fully in the picture."

245. In Maguire v Makaronis[2] a husband and wife who were clients of solicitors executed a mortgage in favour of the solicitors to secure finance for the purchase of a poultry farm. The solicitors did not draw the clients' attention to the fact that the solicitors were to be the mortgagees nor did they tell them that they should obtain independent legal advice. The clients defaulted on the loan secured by the mortgage and the solicitors claimed possession of the mortgaged property. The clients sought by counterclaim a declaration that the mortgage was void. Brennan CJ, Gaudron, McHugh and Gummow JJ held that the mortgage was liable to be set aside at the suit of the clients as a result of the solicitors' breach of fiduciary duty in entering into the mortgage in the absence of the informed consent of the clients to the solicitors' interest in the transaction. This was so whether or not it might be said that the clients would have entered into the mortgage if the solicitors had disclosed their identity as mortgagees. At p.464 they stated:

"In Clark Boyce v Mouat, the Privy Council referred to the judgment of Lord St Leonards LC in Lewis v Hillman as authority for the proposition: 'The classic case of the (fiduciary) 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 to do so, the transaction, however favourable it may be to the client, may be set aside at his instance'." To this several points may be added in elaboration. First, the situation here is to be distinguished from an action in tort to recover damages for a pecuniary loss caused, for example, by fraudulent misrepresentation. Equity intervenes, particularly where the fiduciary is a solicitor, not so much to recoup a loss suffered by the plaintiff as to hold the fiduciary to, and vindicate, the high duty owed to the plaintiff. Thus, whilst significant, inadequacy of the consideration or other improvidence of the transaction is not determinative..." (Citations omitted)

249. The joint judgment went on to refer with approval to the statement of Lord St Leonards LC that if a transaction between solicitor and client is to stand it must be "open and fair and free from all objection" not just merely "fair".[3]

252. Like the present case Maguire v Makaronis was a case of conflict of interest and duty rather than a case of conflict of duty and duty (conflicting duties to different clients), although both situations ultimately give rise to the question of whether the solicitor acted properly having regard to the fundamental duty to act with undivided loyalty to a client.[4]

255. It is not enough in a case such as the present that the client consent to the transaction. The consent must be fully informed. What is required for fully informed consent is a question of fact in all the circumstances of each case. In Maguire v Makaronis the joint judgment stated at 466:

"... in the circumstances disclosed above, if the appellants were to escape the stigma of an adverse finding of breach of fiduciary duty, with consequent remedies, it was for them to show, by way of defence, informed consent by the respondents to the appellants' acting, in relation to the Mortgage, with a divided loyalty. What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given. The circumstances of the case may include [as they would have here] the importance of obtaining independent and skilled advice from a third party. On no footing could it be maintained that the appellants had taken the necessary steps of this nature to answer the charge of breach of fiduciary duty. However, it should be noted that, contrary to what appeared to be suggested by the respondents in argument, there was no duty as such on the appellants to obtain an informed consent from the respondents. Rather, the existence of an informed consent would have gone to negate what otherwise was a breach of duty." (Citations omitted - my emphasis).

259. As I have stated I have real reservations as to the reliability of the evidence of Justice and Patricia Maher as to the detail of what was and what was not said from time to time in the course of the transactions in issue unless such evidence is corroborated in some way by documentation or other circumstances. Likewise I have real reservations as to the reliability of the evidence of Brott in regard to relevant conversations in the absence of documentary or other circumstantial corroboration. For these reasons it is important to emphasise that the onus with respect to the issue of informed consent falls on Brott. To paraphrase the joint judgment in Maguire v Makaronis - "it was for him to show by way of defence informed consent by the Mahers to him acting in relation to the transactions with a divided loyalty."

262. In the present case there is a threshold dispute as to whether any advice was obtained from the Law Institute of Victoria ("the Law Institute") in the presence of the Mahers as asserted by Brott in [40] of his witness statement. Justice Maher and Patricia Maher maintain that they were simply told by Brott on the same day that he produced the fee agreement that he had spoken to the Law Institute and had been advised "It was all above board and that we were to sign the commission agreement." They deny that they were advised that they could or should obtain independent legal advice before executing the agreement. The following circumstances are of significance in this regard.

* No diary note has been produced by Brott recording the terms of advice from a representative of the Law Institute concerning independent legal advice. Brott concedes that he would have made a note of such an important matter. Moreover there are notes of meetings between the clients and Brott on 17 February 1999 which do not record the Law Institute phone call. Likewise there are notes of discussion with the clients on 1 March 1999 when Brott asserts that he informed the Mahers of their right to obtain independent legal advice, and again these notes make no reference to a conversation to this effect.

* Brott maintains that notes were made of a conversation on 17 February which have "evaporated". He asserts that such notes must have been removed by Justice Maher when he subsequently had access to the file for the purposes of photocopying in 2001. This allegation was not put to Justice Maher in cross-examination. The existence of such notes was not referred to in Brott's affidavit of documents.

* The file notes which are in existence record that the clients were told of the $150,000 fee on 26 February. There is no reference to advice from the Law Institute in the notes of 26 February.

* Dominus Maher, who gave generally credible evidence in somewhat different terms from his mother and brother, says that when he signed the fee agreement on 1 March 1999 he was advised by Brott that he need not worry about it as he was not paying for it. There was no recollection by him of a telephone conversation with the Law Institute in his presence.

* The recitals in the fee agreement do not record any advice from the Law Institute or from Brott as to the desirability of independent advice.

* No evidence was called from Herszberg to confirm that he was present during a conversation with the Law Institute on speaker phone.

* No reference to advice from the Law Institute is pleaded in Brott's defence.

* The witness statements delivered on behalf of Brott in this proceeding are not consistent. The witness statement of 21 November 2003 contains no reference to speaking with the Law Institute.

* The witness statement dated 10 March 2004 refers to the incident in the following terms.

"To ascertain whether or not I could receive the Herszberg fee I telephoned the Law Institute of Victoria. I do not recall with whom I spoke at the Institute but it was somebody from Professional Standards. I recall that the telephone call was made in the presence of Justice and Patricia on loud speaker. The person I spoke with at the Law Institute said that I could receive the fee as long as my clients had been informed of it and consented."

It can be seen that the witness statement tendered to me is recent in formulation. The above passage from an earlier statement refers neither to the presence of Herszberg nor to reference by the Law Institute representative to the question of independent advice.

276. I am not persuaded on the balance of probabilities that there was any discussion with the Law Institute to the effect now alleged alerting the clients to the need for, or desirability of, independent advice. Further and in any event it was not asserted by Brott in evidence before me that there was any explicit discussion with the Law Institute in the presence of the clients of potential problems regarding conflict of interest.

279. In my view the potential for problems of conflict of interest was significant. The agreement which was entered into with Herszberg on 17 February 1999 was on any view a preliminary agreement. It required finalisation by further documentation. There was a potential conflict of interest as to the precise terms of such finalisation. Moreover this agreement was torn up by Patricia Maher and a further preliminary agreement was entered into on 28 February 1999.[5] As at 1 March 1999, being the date on which the deed was executed relating to the payment of $150,000 by Herszberg, it must have been apparent to Brott that there was potential for future conflict between the Mahers and Herszberg regarding the detailed resolution of the final documentation necessary to give effect to the preliminary agreement of 28 February.

282. Further it must have been apparent to Brott that there might be conflict as to the performance of such agreements.

285. There is no satisfactory evidence that the implications of the proposed fee arrangement in terms of potential future conflicts of interest were adequately explained to the Mahers. Brott was at the relevant time the Mahers' legal adviser. It was incumbent upon him either to ensure that they were independently advised as to the potential for conflict of interest implicit in the fee agreement, or if he did not do so then at the very least to himself advise them explicitly as to such issues. It was not sufficient to advise the clients that they had the "opportunity to seek independent advice". Nor as I have stated am I satisfied in any event that they were present during a telephone speaker conversation with the Law Institute in which it was stated the clients should be advised of such opportunity. Likewise I am not persuaded that on 1 March 1999 Brott advised the Mahers "You will need another lawyer to look at that."

288. In my view the probability is that the Mahers agreed to the arrangement simply because it was on the face of it to the mutual financial benefit of both themselves and Brott. The effect of the arrangement documented on 1 March 1999 was that the pre-existing liability that they had to Brott with respect to fees would be discharged by Herszberg and that Brott would also receive an additional fee.[6] No doubt the Mahers also felt some real gratitude to Brott for having achieved a solution to their problems with the bank. The advantage to both the Mahers and Brott from the proposed arrangement was obvious, but I am not satisfied that the potential disadvantage to the Mahers was adequately explained to them. Indeed I am not satisfied that it was addressed in substance at all. It may not strictly have been necessary to obtain independent legal advice for the Mahers but in the absence of such advice the fourth defendant faces a difficult task to persuade the Court that the Mahers gave fully informed consent to the transaction. If counsel briefed to prepare the written agreement had also been briefed to independently advise the Mahers then the difficulties in issue could readily have been resolved. In the circumstances I have set out, however, I am not satisfied that the Mahers were advised in a manner which enabled them to give fully informed consent to the proposal to which they agreed.

291. Mr O'Callaghan QC, who appeared with Mr Jones for Brott, submitted to me in his address in reply that the potential for conflict of interest was so obvious that it did not have to be spelt out in order for the Mahers to give informed consent. He submitted that the essential information was the fact that Herszberg had agreed to pay Brott $150,000. Once that information was received, it was obvious to anyone, and particularly to experienced business persons such as the Mahers, that there was an actual or potential conflict of interest in the sense that it was obviously in Brott's personal interest for the proposed transaction to be consummated. Mr O'Callaghan placed particular reliance upon the decision of the New South Wales Court of Appeal in Beach Petroleum NL v Kennedy[7]. In that case Abbott Tout had acted as solicitors both for the plaintiff and for other companies within the same group having a potentially conflicting interest in the same transactions. The Court stated[8]:

"In Maguire v Makaronis (at 466), it was stated that what constitutes a fully informed consent is a question of fact to be determined in all the circumstances of each case. The court said that there is no precise formula which will determine in all cases whether a fully informed consent has been given. Abbott Tout's submission on informed consent is straightforward. Clearly there was no express informed consent in the sense that Abbott Tout told Beach that there would be a potential conflict of interest in acting for it in the transactions while acting for other companies within the group and Beach consented to Abbott Tout so acting. However such fully informed consent is to be inferred from the undisputed facts. The three directors of Beach, Mr Fuller, Mr Cummings and Mr Main, were the directing minds and will of Beach. When they instructed Abbott Tout, on behalf of Beach, they did so with full knowledge of the circumstances that Abbott Tout were acting for the other companies in the transactions. They knew exactly what was going on and what Abbott Tout were asked to do. Reliance was placed on an analogous situation in Bristol & West Building Society v Mathew [1998] Ch 1. Millett LJ said (at 18-19): '... A fiduciary who acts for two principals with potentially conflicting interests without the informed consent of both is in breach of the obligation of undivided loyalty; he puts himself in a position where his duty to one principal may conflict with his duty to the other: see Clark Boyce v Mouat [1994] 1 AC 428 and the cases there cited. This is sometimes described as 'the double employment rule'. Breach of the rule automatically constitutes a breach of fiduciary duty. But this is not something of which the society can complain. It knew that the defendant was acting for the purchasers when it instructed him. Indeed, that was the very reason why it chose the defendant to act for it. The potential conflict was of the society's own making: see Finn, Fiduciary Obligations (at 254) and Kelly v Cooper [1993] AC 205. It was submitted on behalf of the society that this is irrelevant because the defendant misled the society. It did not know of the arrangements which the purchasers had made with their bank, and so could not be said to be 'fully informed' for the purpose of absolving the defendant from the operation of the double employment rule. The submission is misconceived. The society knew all the facts relevant to its choice of solicitor. Its decision to forward the cheque for the mortgage advance to the defendant and to instruct him to proceed was based on false information, but its earlier decision to employ the defendant despite the potentially conflicting interest of his other clients was a fully informed decision.' So too here. Beach, through its directors, knew that Abbott Tout were acting for other companies within the group on the various transactions. Indeed, they had quite deliberately given instructions on behalf of those other companies to Abbott Tout. If there was any conflict, it was of their own making and a decision which was made by them with knowledge of all the facts relevant to the choice of solicitor. It was a fully informed decision."

295. I accept that the Mahers were experienced in both business and litigation at the time they executed the fee agreement. Nevertheless in my view there is a fundamental distinction to be made between cases such as Beach Petroleum and Bristol & West Building Society on the one hand, and the present case. This is not a case where Brott was retained to act for two parties. It is a case where consent was given to receipt by him of fees from a third party having a potentially conflicting interest to that of the plaintiffs in the outcome of future transactions. The recitals to the fee agreement expressly stated:

"K. Brott has not, does not and will not act as legal practitioner for Herszberg in relation to the sale."

299. The situation of potential future conflict of interest and duty which arose as at 1 March 1999 with respect to the position of Brott was not of the same obvious nature as arises when it is agreed by one party to a transaction that a solicitor will also act for another party to that transaction. The situation which arose required either independent advice to be given to the Mahers or at the very least explicit explanation of the potential for future conflict to be given as a prerequisite to informed consent.

302. As events transpired, at 16 March 1999 being the date on which agreement was finalised between the parties to the sale transaction, it is clear that there was significant dispute between the parties and that Brott had a significant personal interest in resolving such dispute.

305. Likewise at the date of settlement Brott had a significant personal interest in completing settlement, in circumstances where one aspect of the settlement (namely the transfer of the Bourke Street apartment) was contentious and not in his clients' interests. On that day he received previously agreed costs of $40,000 together with all but $55,000 of the Herszberg fee.

308. It may also be said that thereafter up until the payment of the balance of his fee pursuant to the agreement Brott was in a position of conflict of interest insofar as dispute with Herszberg was concerned. The degree of his personal interest is reflected by correspondence referring to his desperate financial situation. Thus on 11 November 1999 Brott wrote to Herszberg stating in part:

"As your business is operating, please assist me by assuring me that the remainder of $35,000 owing will be available on 17 December, 1999 as I am truly stretched to the maximum and certainly have had a number of 'let downs' by a number of people with respect to monies owing to me."

312. It is apparent that throughout the period of ongoing dispute after the transfer of the Bourke Street apartment and up until substantial receipt of the moneys due to him under the fee agreement Brott had a material reason for not antagonising Herszberg.

315. In these circumstances I am satisfied the moneys received by Brott pursuant to the fee arrangement of 1 March 1999 were received in breach of his fiduciary duty to the plaintiffs and must be repaid to the plaintiffs.[9] In summary

(a) The fee agreement of 1 March 1999 was not entered into with fully informed consent; and

(b) The sums paid pursuant to the fee agreement by Herszberg were received when there was an actual conflict of interest between the Mahers and Herszberg and a consequential conflict of interest between the interests of Brott and the Mahers.

The Claim against the Purchaser Defendants for Knowing Participation in a Breach of Fiduciary Duty

321. The plaintiffs claim that the purchaser defendants knowingly participated in Brott's breach of fiduciary duty and accordingly they are also entitled to claim the Herszberg fee from them.

324. It was accepted in submission on their behalf that the plaintiffs must establish dishonest conduct in the sense referred to by Nettle J in Victoria University of Technology v Wilson[10]:

"A stranger to a trust (in which for present purposes may be included fiduciary duties falling short of trusteeship) does not become a constructive trustee merely because he becomes involved in the breach of trust. He is not liable unless he assists with knowledge in a dishonest and fraudulent design on the part of the fiduciary. And knowledge for this purpose means actual knowledge or calculated abstention from inquiry - constructive knowledge is not enough - of which the burden of proof of lies upon the plaintiff. Consul Development Pty Ltd v IPC Estates Ltd [1975] HCA 8; (1975) 132 CLR 373 at 385; Kooratang v ANZ Banking Group [1998] 3 VR 16 at 89-90; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 157."

328. The underlying principle in issue was stated by Lord Selbourne LC in Barnes v Addy[11]:

"(The responsibility of a trustee) may no doubt be extended in equity to others who are not properly trustees, if they are found ... actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees."

332. The relevant standard of honesty for accessory liability was clarified by the advice of the Privy Council in Royal Brunei Airlines v Tan[12]:

"... dishonesty is a necessary ingredient of accessory liability. It is also a sufficient ingredient. A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation. It is not necessary that, in addition, the trustee or fiduciary was acting dishonestly, although this will usually be so where the third party who is assisting him is acting dishonestly. 'Knowingly' is better avoided as a defining ingredient of the principle, and in the context of this principle the Baden (1993) 1 WLR 509 scale of knowledge is best forgotten."

"... in the context of the accessory liability principle acting dishonestly, ..., means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour."[13]

340. In Twinsectra v Yardley[14] Lord Hutton stated at 174:

"... dishonesty requires knowledge by the defendant that what he was doing would be regarded as dishonest by honest people, although he should not escape a finding of dishonesty because he sets his own standards of honesty and does not regard as dishonest what he knows would offend the normally accepted standards of honest conduct."

344. I am not satisfied that the plaintiffs have established that the purchaser defendants acted dishonestly in the requisite sense when Herszberg agreed to pay the Herszberg fee in consideration of Brott procuring the sale of the security properties and the purchaser defendants knowing this thereafter proceeded with the transaction as a whole. There is no doubt Herszberg and in turn Gordon knew on or about 1 March 1999 that the plaintiffs had executed the fee agreement. On the face of such agreement the plaintiffs gave their full consent to the payments in issue. They did so on the apparent basis of the facts set out in the recitals and they did so in a form which demonstrated the plaintiffs expected their consent would be acted upon. These circumstances do not suggest or establish that the purchaser defendants knew that what they were doing would be regarded as dishonest by honest people. Nor do they establish that their conduct was dishonest when assessed in the light of what they actually knew at the time.

347. It is appropriate to record that the recitals to the fee agreement which was executed as a deed are as follows:

"A. Isaac Brott is a legal practitioner. B. The Mahers are involved with Bundoora Allweather Market Pty Ltd, Eighty-Sixth Eternity Pty Ltd, Simply Irresistible Pty Ltd and Pamah Pty Ltd ('the Maher group'). C. In February, 1999 the Mahers retained Brott to act for them and the Maher group in relation to a claim by Westpac Banking Corporation for payment of more than $6,000,000 ('the services'). D. By letter dated 4 February, 1999 from Brott to Patricia and Justice Maher and signed by them, Patricia and Justice Maher agreed to pay to Brott $40,000 as legal costs for the services ('the legal costs'). E. Brott agreed to provide the services on condition that, in addition to the legal costs payable by the Mahers, he would be entitled to receive and retain a fee from the purchaser of any property sold in relation to the claim. F. Brott procured the negotiation of a settlement with Westpac Banking Corporation whereby the Bank agreed to accept $5,800,000 on the terms and conditions set out in a letter dated 12 February, 1999 from the Westpac Banking Corporation to Patricia Maher, a copy of which letter was signed by the Mahers and on behalf of the Maher group ('the Bank settlement'). G. In furtherance of the Bank settlement, Brott negotiated for the sale of properties to Herszberg or nominee ('the sale'). H. By an undated memorandum of agreement which was executed by the parties to it on 28 February, 1999 ('the memorandum of agreement') Herszberg agreed, inter alia, to pay $35,000 to Brott as part payment of the legal costs. I. Herszberg has, with the Mahers knowledge and consent, agreed to pay $150,000 to Brott for procuring the sale ('the Herszberg fee'). J. Herszberg has paid $20,000 to Brott as part payment of the Herszberg fee. K. Brott has not, does not and will not act as legal practitioner for Herszberg in relation to the sale. L. Herszberg intends to re-sell some or all of the properties included in the sale."

351. The plaintiffs' case is pleaded on the basis that actual knowledge on the part of the purchaser defendants with respect to breach of fiduciary duty by Brott can be inferred:

(a) from the fact that Herszberg was a party to the fee agreement and to the preceding agreement of 28 February 1999 pursuant to which he agreed to pay $35,000 towards the plaintiffs' legal costs; and

(b) from the fact Gordon participated in the 16 March 1999 agreement.

357. It is not disputed Gordon was made aware of the contents of the fee agreement shortly after it was made.

360. The fact of the relevant agreements does not establish dishonesty. On its face the fee agreement evidences complete consent by the Mahers to the arrangement in issue. It subsumed the Mahers' agreement on the previous day and that agreement of 28 February in turn had conveyed consent to the payment of $35,000 towards the plaintiffs' legal costs.

363. The plaintiffs' case was put on an expanded basis in final submission. Firstly it was submitted that there was no reasonable explanation for the agreement by Herszberg to pay $150,000 other than that which Brott at one stage advanced in a witness statement. This was that the $150,000 was offered to Brott by Herszberg in an attempt to put Herszberg at an improper advantage over other buyers and to ensure that a deal was done with the Mahers. There are three answers to this submission.

(a) I am not satisfied the question of a fee was first raised by Herszberg as Brott maintained. Brott's evidence as to these matters was most unimpressive, particularly his assertion that he did not at first take the suggestion of a fee seriously. The evidence of Justice Maher was that Brott told the Mahers that in sequence he might, would and had asked Herszberg for a commission. It is in my opinion inherently more likely that Brott asked for the fee rather than that Herszberg offered it to him.

(b) There is another explanation for the payment of the fee than that of attempting to obtain some dishonest advantage. This is that stated in an earlier witness statement by Brott, namely that the fee was in effect a broker's commission paid by the purchaser as part of the sale transaction. Brott introduced the purchasers to the properties and sought and obtained a fee for doing so.

(c) The issue is not whether Herszberg sought to cement the deal by agreeing to pay the fee but whether there was something dishonest about this. The suggested motive of seeking to conclude a deal with the plaintiffs does not give rise to an inference of dishonesty unless the fee agreement were not the subject of consent by the Mahers.

369. The plaintiffs next contend that an inference of dishonesty should be drawn because Herszberg never intended the plaintiffs would be told of the commission. This proposition turns upon Brott's qualified adoption in the witness box of a prior witness statement to the effect "shortly after telling Patricia and Justice about the $150,000 commission, I told Herszberg that I informed them about it. Herszberg said he was surprised that I informed the Mahers." I do not accept that Herszberg said that he was surprised.

(a) This is not what Brott said in his final witness statement or in the witness box;

(b) Brott's evidence as to the relevant conversation with Herszberg provides no satisfactory basis for any confident conclusion as to what was said.

375. The tenor of Brott's evidence can be appreciated from the following extract:

"But it was a conversation that took place?---It was a conversation but it was different in the way this was put, hence the change.

How do you say Mr Herszberg put that - expressed his view about you telling them - the Mahers?---By his face - facial expression. That was my interpretation at the time. He didn't say, "I'm surprised you told them".

It's fair to say though, isn't it, that at the time you were offered this commission it was your view that Mr - why he was offering it to you was he wanted to make sure that he got the deal?---It was my view that he was hungry for the deal.

You've given evidence about that. You said he was hungry for the deal, wasn't he?---I just said that.

Yes, and you realised what he was trying to do effectively here was to ensure that no other competitors got in front of him?---There was a number of constructions that I can put on it, but not sitting within his head I would have to consider a full array of constructions. That would be one of them.

That's the construction you accepted at the time?---There were a number of constructions that I thought at the time.

That's the only one that's in any of the draft witness statements though, isn't it?---No, I think that there are other constructions put on it also. It was certainly an incentive and he wanted the property.

He thought by giving you a commission conditioned upon him getting the property, that was his best way to make sure the competitors didn't beat him to it, wasn't it?---When he put it to me I took it as something to go straight to the Mahers and tell them because it was a fabulous sign and encouraging for them as it indicated the level of intensity of which he was interested, and a comfort to them.

I put it to you that what he did was nothing short of offering you a bribe. Is that a - - -?---No, because if it would have been an offer of a bribe he would have told me not to tell them. He would have told me, "Come under the table" or "It would be paid in cash". No.

He didn't expect you to tell him, as far as you perceived, did he?---That's why he looked to me, surprised, but then again Myer is the sort of person that you can't have a conversation of two sentences with him without cracking a joke or putting on an expression or saying something that he thinks is funny or expects somebody else to think is funny, and it would be unfair to him, but in my context it was something that entered my head that it was a concern, but at the same time really I didn't take it that seriously at the time other than dash off to the Mahers and say, "Hey, this guy's - he wants it. Feel better now"? I mean not to you, but to them - sorry."

388. It was submitted that there was no challenge on behalf of the purchaser defendants to Brott's evidence that Herszberg was surprised to learn Brott advised the Mahers of the commission. In fact Brott did not say in evidence to the Court that this occurred. Moreover, the prior witness statement upon which the cross-examination on behalf of the plaintiffs was based, was not provided to counsel for the purchaser defendants prior to his own cross-examination of Brott.

391. It is next submitted that dishonesty can be inferred from the fact that Herszberg and Gordon became recipients of Brott's breach of fiduciary duty on the occasion of the renegotiation resulting in the 16 March 1999 agreement. This is not the basis on which the case of dishonest participation is pleaded.[15] Further it presupposes a breach of duty by Brott on 16 March 1999. For reasons I will set out below I am not satisfied such a breach occurred but in any event the actions of Brott on that date complained of by the plaintiffs could not give rise to an inference of dishonesty on the part of the purchaser defendants.

394. The plaintiffs submitted Brott breached his duty of skill and care to them on 16 March in two respects:

(a) failing to define expressions used in the agreement of that date; and

(b) failing to negotiate an outcome by waiving his commission.

400. The first of these matters could not in itself form the basis for any inference of dishonest knowledge on the part of the purchaser defendants. Nor could the second which is directed to a failure by Brott, not a circumstance going to his position which could have alerted the purchaser defendants to the breach by Brott of his fiduciary duty. Any obligation of Brott to give up the benefit of the agreement turned on pre-existing circumstances. Either there was a pre-existing basis for knowledge on the part of the purchaser defendants of a breach of fiduciary duty with respect to this agreement or there was not. For reasons I have already stated I am not satisfied there was.

403. It was next submitted on behalf of the plaintiffs that neither Herszberg or Gordon had reason to believe the plaintiffs had obtained independent legal advice with respect to the fee agreement. The case pleaded against the purchaser defendants is one of actual knowledge of breach of fiduciary duty. This was a matter repeatedly emphasised by Mr Styring in submission on their behalf. No answering application was made to amend the statement of claim to reformulate a case of constructive dishonest knowledge.

406. Moreover, and in any event, to establish an entitlement to relief the plaintiffs must establish actual knowledge or a calculated abstention from inquiry to satisfy the relevant test of dishonesty in the sense of knowledge by the purchaser defendants that what they were doing would be regarded as dishonest by honest people. As was stated in the Royal Brunei case, carelessness is not dishonesty.

409. There is no satisfactory basis for concluding the purchaser defendants knew that Brott was in breach of his fiduciary duty or that the purchaser defendants refrained in a dishonest way from inquiry as to the basis of the plaintiffs' apparently full and informed consent to the fee agreement.

412. I accept that, as the plaintiffs submit, Brott's evidence that Herszberg was present when an unidentified representative of the Law Institute advised concerning independent legal advice, should be rejected. I do not, however, accept that this leads to an inference adverse to the purchaser defendants.

415. I further accept that the failure of both Herszberg and Gordon to give evidence creates a situation where the Court may be entitled to be bold in drawing inferences as to their relevant state of mind.

418. Nevertheless, there is a fundamental deficiency of evidence demonstrating dishonesty in the relevant sense. The failure of Herszberg and Gordon to give evidence does not cure this deficiency. As Menzies J stated in Jones v Dunkel[16]:

"In my opinion a proper direction in the circumstances should have made three things clear: (i) that the absence of the defendant Hegedus as a witness cannot be used to make up any deficiency of evidence; (ii) that evidence which might have been contradicted by the defendant can be accepted the more readily if the defendant fails to give evidence; (iii) that where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference."

422. In the present case the fundamental difficulty confronting the claim of knowing participation by the purchaser defendants in the breach by Brott of his fiduciary duty to the plaintiffs is that there is no direct evidence from which an inference of dishonesty relating to Brott's fees can be drawn against the purchaser defendants.

426. The plaintiffs claim that on or about 14 March 1999 Herszberg repudiated the 28 February agreement and that that repudiation was accepted by entering into the agreement of 16 March 1999. As a result it is alleged that the plaintiffs suffered damage.

429. The 28 February agreement was headed "Memorandum of Agreement". It was expressed to be made between the owners of the security properties and Herszberg or nominee. It was stated to be with respect to the security properties which were individually described. It stated in substance:

"The agreement between the parties is particularised as follows: 1. Ownership of Property situate at Unit 20/50 Bourke Street be transferred to the nominated ownership entity as specified by Patricia Maher. 2. Ownership of Property situate at 14 Warranwood Place, Bundoora be likewise transferred to the nominated ownership entity as specified by Dominus Maher. 3. Myer Herszberg will employ Justice Maher for 12 months at a remuneration of $1000 weekly. 4. Myer Herszberg will employ Helen Maher for 12 months at a remuneration of $600 weekly. 5. Myer Herszberg will pay per your irrevocable direction and authority $35,000 representing Legal fees to Solicitor Isaac Brott. 6. Justice Maher can live free of rent at 161 Settlement Road until demolition of same becomes necessary. 7. The Maher group will sign all necessary documentation to satisfaction of Herszberg and/or his associated entities in order to put effect to this agreement including execution of all necessary documentation to affect the purchase by Herszberg of the associated companies and transfer of all shares and/or units. 8. In consideration Myer Herszberg has made $100 payment into the trust account of Isaac Brott this day being 28 February, 1999."

433. It can be seen that the first matter provided for is the transfer of ownership of the Bourke Street apartment to an entity specified by Patricia Maher. It is the subsequent failure to achieve this outcome which is the central basis of the plaintiffs' grievance against the purchaser defendants.

436. Nevertheless, it is apparent that the 28 February agreement was supplanted by subsequent consensual arrangements. In particular the parties entered into the 16 March agreement and contracts for sale of the security properties, with the intent that such agreement and contracts would replace any prior understanding.

439. Further, it is apparent that the 16 March agreement and contracts of sale were entered into for good consideration. In particular they provided to the vendors additional consideration to that provided in the 28 February agreement. Most obviously they introduced Gordon to the contractual arrangements with the plaintiffs and imposed significant obligations upon him.

442. In these circumstances it is apparent that it cannot be said Herszberg wrongfully repudiated the 28 February agreement and no submissions to this effect were put on behalf of the plaintiffs in final submission.

445. It follows that if the claim based on knowing participation in breach of fiduciary duty is put to one side, the plaintiffs' claim against the purchaser defendants turns on the effect of the 16 March agreement and the contract for sale of the Bourke Street apartment.

449. The plaintiffs allege the purchaser defendants exercised economic duress in requiring the fourth plaintiff to:

(a) enter into the contract of sale of the Bourke Street apartment on 16 March 1999; and

(b) settle the sale on 9 July 1999.

455. Economic duress in the requisite sense requires:

(a) pressure amounting to compulsion of the will of the victim; and

(b) the illegitimacy of the pressure exerted.[17]

"The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress. In their dissenting advice in Barton v Armstrong [1973] 2 NSWLR 598; [1976] AC 104, Lord Wilberforce and Lord Simon of Glaisdale pointed out (at 634; 121): '... in life, including the life of commerce and finance, many acts are done under pressure, sometimes overwhelming pressure, so that one can say that the actor had no choice but to act. Absence of choice in this sense does not negate consent in law: for this the pressure must be one of a kind which the law does not regard as illegitimate. Thus, out of the various means by which consent may be obtained - advice, persuasion, influence, inducement, representation, commercial pressure - the law has come to select some which it will not accept as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress or coercion.' In Pao On v Lau Yiu Long [1979] UKPC 2; [1980] AC 614, the Judicial Committee accepted (at 635) that the observations of Lord Wilberforce and Lord Simon in Barton v Armstrong were consistent with the majority judgment in that case and represented the law relating to duress. It is unnecessary, however, for the victim to prove that the illegitimate pressure was the sole reason for him entering into the contract. It is sufficient that the illegitimate pressure was one of the reasons for the person entering into the agreement. Once the evidence establishes that the pressure exerted on the victim was illegitimate, the onus lies on the person applying the pressure to show that it made no contribution to the victim entering into the agreement: Barton v Armstrong (at 633; 120) per Lord Cross."[18]

462. In the present case it is said firstly that the fourth plaintiff had no alternative but to submit to the demands of the purchaser defendants to take these steps, because of the plaintiffs' obligations to pay $5.8 million to the Westpac Bank.

465. The fact that the Mahers and their associated companies were indebted to the bank may have placed the purchaser defendants in a superior bargaining position but this alone could not give rise to economic duress or unconscionability in the requisite sense.

468. Speaking of s.51AA of the Trade Practices Act 1974 which proscribes unconscionable conduct in trade and commerce Gleeson CJ said in Australian Competition and Consumer Commission v C.G. Berbatis Holdings Pty Ltd[19]:

"Unconscientious exploitation of another's inability, or diminished ability, to conserve his or her own interests is not to be confused with taking advantage of a superior bargaining position. There may be cases where both elements are involved, but, in such cases, it is the first, not the second, element that is of legal consequence. It is neither the purpose nor the effect of s51AA to treat people generally, when they deal with others in a stronger position, as though they were all expectant heirs in the 19th century, dealing with a usurer."

472. Moreover in the present case both Justice and Patricia Maher asserted in evidence that they could cope with pressure from the bank as such and had been through it before.

475. It is, however, said further that the demands made upon the fourth plaintiff were illegitimate in that the first, second and third defendants made them on the basis that if the fourth plaintiff did not comply the bank would not be paid and the purchaser defendants did so:

(a) when on 16 March 1999 Herszberg was legally bound to arrange for the transfer of the apartment to Patricia Maher pursuant to the 28 February agreement;

(b) when on 9 July 1999 the Mahers were entitled to cancel the apartment contract because the proposed uses were lawful; or

(c) alternatively if the proposed uses were not lawful the purchaser was not entitled to rely on such fact because it had failed to do all things reasonably necessary to obtain a planning permit so that the market land could be used for the proposed uses. In particular no instruction or direction was given to Justice Maher after 5 May 1999 in relation to the making of applications for planning permits.

481. As I have said the contract of sale of the Bourke Street apartment was subject to a collateral agreement executed on the same date providing firstly, for the cancellation of the contract of sale in specified circumstances relating to the status of proposed uses of the market land, and secondly, for an option to buy back the apartment in the event that the sale was completed.

484. There are three background circumstances relating to the plaintiffs' case concerning the agreements of 16 March 1999 which should be recorded.

(a) There is no evidence that the agreements of 16 March 1999 resulted in a payment by the purchasers of less than the market value for the plaintiff's properties including the Bourke Street apartment.

(b) Likewise it is not contended the agreements of 16 March were made for other than good consideration. The agreements conveyed material benefits to the plaintiffs including a substantial and beneficial refinement of prior arrangements by reason of the inclusion of Gordon as a party securing the performance of the purchasers' obligations.

(c) Conversely the collateral agreement of 16 March 1999 imposed a limited disbenefit upon the plaintiffs. The agreement provided at worst for the option to repurchase the apartment for $210,000.

The Agreement of 28 February

490. It can be seen that the 28 February agreement contemplated the purchase by Herszberg of the "associated companies" including the fourth plaintiff being the registered proprietor of the Bourke Street apartment.

493. No price for the acquisition is stated in the 28 February agreement and no time for the completion of the purchase is stipulated. Further, no time is stipulated for transfer of the Bourke Street apartment to Patricia Maher.

496. It is alleged by the statement of claim that the agreement was both in writing and oral. Insofar as it was oral it is alleged that it consisted of conversations between Brott and Herszberg, to the effect of certain of the matters set out in the written document constituting the 28 February agreement, together with agreement that Herszberg would pay to Westpac Bank the sum of $5,800,000.

499. A prior letter of Szental to Brott dated 26 February 1999 comprised an offer of $5.8 million for the purchase of a composite of freehold land, business assets and shares in the associated companies. In this context it is entirely probable that the negotiations which took place on 28 February 1999 did so on the basis of a price of $5.8 million. Nevertheless, it cannot be said that Brott's evidence as to whether a price was or was not agreed on 28 February was impressive. It is apparent from a typewritten attendance note that he did make handwritten notes during a four hour meeting with Patricia Maher, Justice Maher, Dominus Maher and Herszberg. No such notes were produced. In oral evidence he first said that it was agreed Herszberg would pay the amount due to Westpac and then subsequently stated that it was agreed that both Herszberg and Gordon would pay this amount. No satisfactory explanation was proffered as to why the price was not recorded in the written memorandum of 28 February.

502. Turning to the question of whether agreement was reached as to the time at which Herszberg would perform his obligations, no agreement as to such time is alleged in the statement of claim and no evidence was given that there was agreement as to such time.

505. In my view the proper characterisation of the memorandum of 28 February is that it constituted a memorandum of understanding as to matters agreed at that stage between the parties, but did not comprise a complete agreement as to the terms of the proposed property transactions between the parties. As Higgins J stated in Barrier Wharfs Ltd v W. Scott Fell & Co Ltd[20]:

"- it is one thing for two parties to settle what are to be the terms of an agreement, if it should be made; and quite another thing to make the agreement."

509. The present case falls within the third category identified by the High Court in Masters v Cameron[21] namely:

" ... one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract."

513. In Masters v Cameron the Court cited with approval the statement of Lord O'Hagan in Rossiter v Miller[22]:

"Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed."

517. The conclusion that the 28 February agreement (whether it included the alleged oral term as to price or not) was preliminary and provisional in nature necessarily follows from the fact that no timeframe was agreed to for the proposed acquisition of the associated companies or for the transfer of property back to Patricia Maher.

520. The provisional nature of the arrangement is further indicated by the delivery the following day 1 March 1999 of a letter from the solicitors for Herszberg which recorded an offer to purchase all the security properties for the sum of $5.8 million. This letter does not reflect the proposal contained in the 28 February agreement (as Dominus Maher conceded). Nevertheless it was countersigned by Patricia, Justice and Dominus Maher above the words inserted by Brott:

"We the undersigned hereby agree with and consent to the terms contained in the letter from Efron & Associates dated 1 March, 1999. By annexing our signatures hereto we evidence such consent."

524. A further letter of 1 March 1999 to Brott from the solicitors for Herszberg (which was not countersigned by the Mahers) confirms that at that date Herszberg did intend to transfer the Bourke Street apartment to Patricia Maher as part of the proposed agreement between the parties. At the same time it expressly refers to the basis of the "proposed agreement" rather than a concluded agreement. The parties' actions on 1 March 1999 thus do not in my view support the view that a concluded agreement had been reached the previous day.

527. I have reached this conclusion despite the general principle that "the Court should strive to give effect to the expressed arrangement and expectations of those engaged in business, notwithstanding that there are areas of uncertainty and notwithstanding that particular terms have been omitted or not fully worked out."[23]

530. Nevertheless in the much cited words of Sugarman J in Goldberg v Thorby[24]:

"It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential or critical terms, have been agreed upon."

534. If hypothetically Patricia Maher had sought specific performance of the 28 February agreement on 16 March 1999 at the time the contract of sale was put forward for the Bourke Street apartment, neither the fourth plaintiff nor Patricia Maher could have established an obligation on the part of Herszberg to purchase the associated companies by that date, nor did Herszberg have any capacity to transfer the Bourke Street apartment to an entity nominated by her.

537. In summary the 28 February agreement was not one under which Herszberg was legally bound to arrange for the transfer of the Bourke Street apartment to Patricia Maher:

(a) it was not complete and omitted a vital term or terms;

(b) judged by objective standards it was not intended to constitute a final agreement[25]; and

(c) the parties continued to negotiate the terms of a proposed agreement and did not do so on the basis of a sale of the Mahers' interests in the associated companies as was contemplated by the 28 February agreement.

543. Further, it cannot in any event be said that a pre-existing arrangement between Herszberg and the Mahers was binding upon Gordon. What the plaintiffs obtained on 16 March 1999 was an agreement between different parties for different consideration than that expressed in the terms of the 28 February agreement. Because additional consideration was provided for the agreements of 16 March 1999 it can not on the evidence be concluded that these agreements involved a disbenefit in fact to the plaintiffs.

547. The second basis upon which it is alleged that the fourth plaintiff is entitled to set aside the sale of the Bourke Street apartment derives from the terms of the 16 March agreement.

550. By a deed dated 16 March 1999 the plaintiffs entered into a collateral agreement with Herszberg and Gordon relating to the sale of the Bourke Street apartment. Recital F to that agreement recorded:

"F. Purchaser and Simply have agreed that in the circumstances set out in this Deed the Apartment Contract will be cancelled, and that, if it is not cancelled and the Purchaser completes its purchase of the Apartment, then Simply will have an option to purchase the Apartment upon the terms set out in this Deed."

"At Simply's request and despite the fact that the Apartment contract has been exchanged just before, or simultaneously with, exchange of parts of this Deed, Simply and the Purchaser hereby agree that, provided that the Market Land can be used for the Proposed Uses without breaching the provisions of the planning scheme that affects the Market Land (including without limitation the Whittlesea planning scheme) by the due date for settlement thereunder (whether because of a rezoning of the Market Land and/or by the grant of planning permits on terms reasonably acceptable to the Purchaser) with effect as and from the time that settlement occurs under all the Related Contracts (or, if they are not settled simultaneously, the time of the last of the settlements under the Related Contracts) the Apartment Contract is hereby cancelled and they hereby acknowledge that neither of them will, as from the time that the cancellation takes effect, have any rights under it save and except that the deposit paid or payable by the Purchaser under its terms must forthwith be refunded to the Purchaser." (my emphasis)

" 'Proposed Uses' means the use of the Market Land for the following: 1.8.1 including without limitation factory retailing outlets; 1.8.2 a fruit and produce market; and 1.8.3 a trash and treasure market; with the ability to grant leases (or at the Purchaser's option licences) for tenancies."

562. It is to be observed that the components of the Proposed Uses are cumulative. Furthermore, factory retailing outlets is separately provided for as distinct from trash and treasure market. In my view the definition contemplated the use of the market land for the real and substantial purpose of each of the specified uses and further contemplated that they would be conducted with the ability to grant leases.

565. At various times Justice Maher has adopted the following propositions:

(a) that the notion of factory retailing outlets embraces retailing from a building constructed as a factory building;

(b) that the use of trash and treasure market embraces the notion of factory retailing outlets; and

(c) that the change in the relevant planning scheme provisions to make a "market" (as distinct from "trash and treasure market") a permissible use on and after 8 July 1999 affected the lawfulness of the proposed uses.

571. I will deal with each of these propositions in turn, noting that at all material times the market land enjoyed the benefit of permits for use as a trash and treasure market. Such use was relevantly defined at the date of the first permit in 1986 as follows:

"... any premises upon which vendors of goods offered for sale temporarily occupy for a fee an area or stall used for such display."

575. At the date of the second permit in 1990 it was defined as "land where vendors of goods temporarily occupy an area or stall for a fee." This definition governed the permitted use for the purpose of trash and treasure market at the time of the making and settlement of the contract relating to the Bourke Street apartment.[26]

578. The original application for a permit for a trash and treasure market on the market land was the subject of a contested hearing before the Planning Appeals Board. The decision of that Board is reported at (1986) 4 Planning Appeals Board Reports, p.11. The Board described the nature of the proposed use in the following terms:

"There is little doubt that the term 'Trash and Treasure Market' connotes something akin to the old fashioned 'jumble sale' or 'flea market'. This impression is, however, not sustainable when measured against the definition provisions of the Ordinance. In this regard, the Board adopts what was said by another Division in Caribbean Gardens Pty Ltd v City of Knox (Appeal No. X80/159C, 27 May 1983, unreported) where, at page 17, it was stated: 'Mr Black, QC maintained that one had to look at the planning document to determine the description of the operation. This certainly appears to be correct. If the planning document assigns a meaning to a term used in the Ordinance then that meaning attaches to such term even though it may be different from the manner in which the word or term might be understood in common parlance. The expression means what it is defined to mean and in the Ordinance it certainly does not refer to secondhand goods in any way. If the draftsman wished to limit the sale of goods to that class of merchandise it would have been simple enough to do so by definition. The definition of 'junk yard' in the Ordinance is a case in point. It cannot be said that the expression 'trash and treasure market' has acquired a generally accepted meaning and certainly has no precise meaning. It is simply a descriptive phrase to describe a new concept. As Mr Black submitted, the expression, being new, describes something which is still evolving and developing ...' Whatever deficiencies the Board might perceive in the present definition, it is obliged to give effect to the Planning Scheme and not to impose capricious interpretations of its own. As the matter presently stands, no limitation is placed on the range of goods which might be sold at a 'Trash and Treasure Market'. Indeed, observations at other facilities on Sundays revealed that many goods, which are not permitted to be sold under present Sunday trading restrictions, are indeed retailed at 'Trash and Treasure Markets'. The analysis provided by Mr Heap might well provide a worthy basis for a reappraisal of the place of markets within the retail hierarchy, a review which, in the Board's opinion, is overdue in the light of some obvious anomalies in the planning controls as they presently stand. The main anomaly is that, although a 'Market' and a 'Trash and Treasure Market', as presently defined, can each serve what amounts to substantially the same function, the former is a prohibited use under the provisions of the planning scheme while the latter is open to discretion. That comment notwithstanding, the Board is obliged to determine this matter in accordance with the controls as they presently exist and it can find no lawful justification, based on planning considerations, to place any limitation on the range of goods which might be sold at the facility."

583. In my opinion the phrase "factory retailing outlets" does not extend to retailing from a former factory. It refers to premises for retailing by a manufacturer of goods manufactured by it (including but not limited to surplus and second rate goods). Thus the retailing of books from a former jam factory or of clothing from a former shot tower does not become a use for the purpose of a "factory retailing outlet" by virtue of the premises utilised. Counsel for the plaintiffs did not contend otherwise in final submissions to me.

586. Nevertheless it is of some significance to an understanding of the plaintiffs' position at the time of the events in issue, to appreciate that Justice Maher took the position on 16 March 1999 that a factory retailing outlet equated to retailing from a factory building.

"I said to Isaac very emphatically that the factory retailing is what we are doing there currently. We had a factory and we were retailing." "... he said 'How do we work this around?' and I said 'Well we've got a factory we're retailing out of it and there's outlets."

590. Brott confirms the substance of this evidence. Likewise Patricia Maher's evidence is that on 16 March 1999, "... we said, well, it is a factory and we have been retailing and we crossed out rezoning and we worked to see that was totally in keeping, because we had a lot to lose."

593. It was on this misconceived basis that the Mahers were satisfied on 16 March 1999 that the proposed uses could be achieved and it was on this basis that the Mahers continued thereafter to maintain that the uses were lawful up until and at the date of settlement on 9 July 1999.

597. In my opinion the existing permits for trash and treasure market did not enable the proposed uses to be conducted lawfully on 9 July 1999.

(a) The contract envisaged that factory retailing outlets and fruit and produce market would be lawful, independent and potentially separate components of land use from that of trash and treasure maket;

(b) The trash and treasure market permits did not allow the grant of leases to tenants as envisaged by the definition of proposed uses in the 16 March agreement, alternatively it was open to the purchasers to regard the terms of such permits as to temporary occupancy as not reasonable under cl.3 of the agreement;

(c) The permits for trash and treasure market did not authorise use for the purpose of factory retailing outlets and insofar as some factory outlet retailing may have been permissible at a trash and treasure market it was open to the purchasers to regard such incidental permission as subject to terms which were not reasonable under cl.3 of the agreement;

(d) The permits for trash and treasure market did not authorise use for the purpose of a fruit and produce market and insofar as some sale of fruit and produce may have been permissible at a trash and treasure market it was open to the purchasers to regard such incidental permission as subject to terms which were not reasonable under cl.3 of the agreement.

I will elaborate my reasons for each of these conclusions.

(a) The requirement for fresh permission

603. In my opinion the definition of proposed uses contained in the 16 March agreement envisaged factory retailing outlets and fruit and produce market as separate and additional uses to trash and treasure market. The proposed uses were thus not simply the existing permitted use. This view is supported not only by the form of definition of proposed uses itself but also by cl.6.1 of the agreement which expressly contemplated that a further permit would be necessary.

"Justice covenants with the purchaser that he will use his best endeavours to procure the issue to the purchaser of a town planning permit that allows the Market Land to be used for the Proposed Uses."

607. It is further supported by cl.3 of the agreement itself which refers to the uses as being able to be conducted under the planning scheme "whether because of a rezoning of the market land and/or by the grant of planning permits on terms reasonably acceptable to the purchaser."

(b) The requirement for the ability to grant leases

611. The definition of trash and treasure market was of use by the vendors of goods "who temporarily occupy an area or stall for a fee." Justice Maher's evidence was that on 6 July 1999 Herszberg stated that he was not satisfied with the ability to lease and licence at the market land. In turn on 9 July 1999 Herszberg said that he was not satisfied that the necessary uses could be met.

614. At the time of the 16 March agreement Justice Maher believed that the existing use carried with it the ability to grant leases because 12 month licences had previously been granted to some stall holders as part of the trash and treasure market. In my view, however, the limitation upon the trash and treasure market use requiring temporary occupation of areas or stalls for a fee, was not consistent with the ability to grant leases envisaged by the definition of proposed uses. The definition of trash and treasure market does not contemplate the continuing occupation of a stall area for the purposes of retail sales and storage of stock outside retail hours (as was in fact already occurring to some extent at the market).

617. In November 1999 Justice Maher sought clarification from the City of Whittlesea of aspects of the trash and treasure market approval. Having received a reply which referred to temporary stalls, he sent a facsimile message to Mr Whitby, solicitor of McKean & Park, commenting "We have to rebuff (sic) the temporary comment in the letter." In answer to questioning concerning this correspondence during his evidence, he conceded that it reflected that if no further permit were obtained there was a problem with operating more than temporary stalls on the market land.

620. In my opinion temporary occupation of stalls was not what was envisaged by the definition of proposed uses. What was envisaged was a fresh approval which would allow continuing leases or licences to be granted to the operators of factory retail outlets. Even if a different view were taken of the strict effect of the requirement for "temporary occupation", it was on any view open to the purchaser to regard the terms of the permit for trash and treasure market use including the requirement for temporary occupation only, as not "reasonably acceptable" within the meaning of the cancellation of the contract provisions contained in cl.3 of the 16 March agreement. There was a potentially significant commercial problem unless proposed tenants could be assured of more than temporary occupation of uncertain duration.

(c) The ambit of the use for trash and treasure market

624. At all material times the only retailing use permitted on the market land was that of a trash and treasure market. It was contended for the plaintiffs that the permit held for a trash and treasure market would permit factory retailing from some stalls. Evidence was called on behalf of the plaintiffs from Ms Blackney, a planning officer at the Shire of Whittlesea from 1990 to 2001. It was Ms Blackney's evidence that any factory retailing use would be required to remain an incidental component of the overall trash and treasure market use. In her view this would mean that up to 20 percent of the stalls might be used for the purposes of factory retailing.

627. It is seriously arguable Ms Blackney's view is incorrect for the reasons expressed by he Planning Appeals Board noted above at [157]. Nevertheless it is also arguable that what I take to be the premise of her view is correct namely that "trash and treasure market" has an ordinary meaning which is itself intended to comprise the core notion of the use. Such use might be regarded as necessarily requiring retailing of a substantial component of secondhand or home produced goods.

630. In these circumstances it is unnecessary to decide whether Ms Blackney's view is strictly correct. In my opinion her evidence is sufficient to demonstrate that it was necessarily open to the purchaser defendants to regard the terms of the permit for trash and treasure market as not reasonably satisfactory even if it did embrace some potential for factory retailing outlets. If it was open to a qualified town planner (and in particular one employed by the responsible authority) to doubt the extent to which the permit for trash and treasure market would enable use for the purpose of factory retailing outlets, then the permit was not a reasonably satisfactory permit for this aspect of the proposed uses.

633. It can be seen that to regard the level of factory retailing outlet use permissible as potentially turning on the level to which it was incidental to a trash and treasure market gives rise to a situation which is in no way equivalent to a permit for factory retailing outlet use as such.

636. In the absence of a permit for factory retailing outlet use the purchaser defendants were faced with real and significant uncertainty as to what factory retailing outlet use might be conducted on the market land. No such use could be conducted independently of the use for the purpose of trash and treasure market whereas in my view as I have already stated the definition of proposed uses contemplated potentially independent uses. The purchaser defendants were thus faced with a situation where the responsible authority might take a view similar to that expressed by its planning officer in evidence before me. It was, in my view, entirely open to the purchaser to regard this situation as being the consequence of permit terms which were not "reasonably acceptable" as envisaged by clause 3 of the 16 March agreement.

640. The uncertainty adverted to in the previous paragraph was equally applicable to the fruit and produce market use. Although the endorsed plans for the trash and treasure market permitted the use of part of that market for the sale of fruit and produce such permission was incidental to the use for the purpose of trash and treasure market. In the absence of a permit for fruit and produce market the purchaser defendants were faced with real and significant uncertainty as to what fruit and produce market use might be conducted on the market land. Moreover, once again no such use could be conducted independently of the use for the purpose of a trash and treasure market. In my view the definition of proposed uses contemplated potentially independent uses.

(e) The effect of the change of status of the use "market" on 8 July 1999

644. The new format planning scheme made market a permissible use upon the market land. It did not, however, permit such use without the grant of a permit. Further it did not affect the ambit of permission granted by existing permits.

"Characterisation of use If a use of land is being characterised to assess the extent of any existing use right, the use is to be characterised by the purpose of the actual use at the relevant date, subject to any conditions or restrictions applying to the use at that date, and not by the classification in the table to Clause 74 or in Section 1, 2 or 3 of any zone."

"Sections 2 and 3 uses A use in Section 2 or 3 of a zone for which an existing use right is established may continue provided: ... * Any condition or restriction to which the use was subject continues to be met. This includes any implied restriction on the extent of the land subject to the existing use right or the extent of activities within the use. ..."

655. On 9 July 1999 trash and treasure market was a section 2 use with existing use rights pursuant to existing permits. By virtue of the above provisions the new format planning scheme did not transform the permit for a trash and treasure market use into a permit for an expanded use.

659. The fourth plaintiff alleges in the alternative to the proposition that the proposed uses were lawful as at the date of settlement of the contract for sale of the Bourke Street apartment, that the purchaser cannot rely on the absence of a planning permit for the proposed uses because the purchaser did not itself take all steps reasonably necessary to obtain the relevant permit. In particular, the purchaser failed to take steps necessary to progress a permit application lodged by Justice Maher on behalf of the purchaser prior to settlement and gave no instructions for any further or other application.

"The purchaser would do all things reasonably necessary to obtain a planning permit (if required) so that the market land could be used for the proposed uses."

666. Such term is alleged to be implied from cl.6 of the 16 March agreement and the need to give business efficacy to such agreement. Clause 6 provided:

"6. Proposed Uses 6.1 Justice convenants with the Purchaser that he will use his best endeavours to procure the issue to the Purchaser of a town planning permit that allows the Market Land to be used for the Proposed Uses. 6.2 Subject to the Purchaser being reasonably satisfied that the expenditure is warranted and justified and that the issue of a town planning permit for the Proposed Uses is likely to be attained, the Purchaser will spend an amount of up to $200,000.00 in paying for Consultants to assist in procuring the issue to the Purchaser of a town planning permit, so that the Market Land can be legally used for the Proposed Uses. 6.3 The choice of Consultants shall be at the complete discretion of the Purchaser and shall be reasonable. 6.4 The Purchaser shall have the conduct of all proceedings and meetings in relation to the matters referred to in this Clause 6 and Justice acknowledges and agrees that he must, in relation to those matters, only act under, and in accordance with, the directions and instructions of the Purchaser. 6.5 Justice acknowledges that he has no power or authority to pledge the credit of, or make commitments or give undertakings or enter into agreements on behalf of, the Purchaser."

670. Mr Styring submitted that no term should be implied in the 16 March agreement to the effect contended for by the plaintiffs. In so doing he relied on the principles of law stated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[27]:

"Accordingly, the courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract. So in Heimann v Commonwealth of Australia, Jordan CJ; citing Bell v Lever Brothers Ltd, stressed that in order to justify the importation of an implied term it is 'not sufficient that it would be reasonable to imply the term. ... It must be clearly necessary'. To the same effect are the comments of Bowen LJ in; The Moorecock; Lord Esher MR in Hamlyn & Co v Wood & Co; Lord Wilberforce; in Irwin; Scrutton LJ in; Reigate v Union Manufacturing Co (Ramsbottom). The basis on which the courts act in implying a term was expressed by MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd in terms that have been universally accepted: 'Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying ...' The conditions necessary to ground the implication of a term were summarised by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council: '(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract'." (Citations omitted)[28]

674. It is apparent cl.6 expressly contemplated application for a planning permit and the insertion of the words "if required" in the implied term would in my view be inconsistent with the terms of cl.6 and in particular cl.6.1. Subject to this proviso, however, and to the recognition that an independent obligation to use his best endeavours to obtain a permit is placed upon Justice Maher by cl.6.1, I accept that the condition contended for is to be implied in the contract.

677. It may be that the primary obligation to obtain the relevant permit is to be regarded as that of Justice Maher because he is required to use his best endeavours to do so. Nevertheless, it must be implied that the purchaser will do those things within its power and control that are reasonably necessary for the purpose of obtaining a permit.

680. The underlying principle was stated by Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd[29]:

"... the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburn said in Mackay v Dick (1881) 6 App Cas 251 at 263: '... as a general rule ...where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.' It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract. As Griffith CJ said in Butt v McDonald (1896) 7 QLJ 68 at 70-1: 'It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.' In Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at 441 Latham CJ, Williams J & Fullagar J held that a party to a contract who by his own act brings about an event to terminate a contract, that party may not rely on such act because '... to permit the blameable party to do [so] would be to permit him to take advantage of his own wrong ...' "

684. In the present case the purchaser was given overriding control with respect to the matters referred to in cl.6 of the agreement by reason of the provisions of cl.6.4. Justice Maher "must, in relation to those matters, only act under, and in accordance with, the directions and instructions of the purchaser."

687. If the purchaser failed to give necessary directions or instructions, or gave directions or instructions which precluded a permit application then it would be in breach of the implied term.

690. Nevertheless, even if a term be implied to the effect alleged by the plaintiffs, there are in my view three interrelated reasons why the purchaser cannot be said to be relevantly in breach of such term:

(a) the application for permit lodged by Justice Maher did not seek a permit for the proposed uses but simply for the refurbishment of the existing trash and treasure market premises;

(b) the plaintiffs have not established that prior to 8 July 1999 any category of use permissible under the relevant zone provisions would have enabled a permit to have been obtained either for factory retail outlets or for a fruit and produce market or for any other purpose satisfactorily embracing such uses;

(c) the plaintiffs have not established that an appropriate permit could have been obtained for the proposed uses by the settlement date of 9 July 1999.

(a) The permit application

696. It is desirable to clarify precisely what occurred with respect to planning permit applications after the 16 March agreement. On 28 March 1999 Justice Maher wrote to the City of Whittlesea with respect to proposed alterations at the market premises. The letter commenced:

"Re Proposal for Confirmation of use to operate the Bundoora All Weather Market, seven days a week with permit numbers P3405 and 704159 at 187 Settlement Road, Thomastown. We wish to refurbish the market internally and externally and make it aesthetically pleasing to keep up with the shopping Malls and Plazas which we feel are the main competitors for the retail shopping dollars in our area."

700. The letter then summarised the nature of the refurbishment proposed.

"We will enlarge the existing Stall sizes, and make them of uniform construction, and demountable. We are considering Bondor panelling, all white with aluminium strips, for easy cleaning, and maintenance free advantages. Each stall will have a roller shutter front. There will be approximately 85 stall operators. They will sell a vast range of merchandise, and foodstuffs from their Market Stalls, all Foodstuffs being permitized by the Health Department."

704. The letter went on to propose casual or permanent renting arrangements as being "the same situation that has been operating at the market for the last 14 years".

707. It elaborated positive attributes of the market and stated in the penultimate paragraph:

"We hope our refurbishment of the market, will add to the public pleasure, an(d) convenience, and also justify the expense that is entailed."

"We are seeking confirmation of this use on our permit, at your earliest convenience, so that we may commence upgrading the market in this direction."

715. On 14 April 1999 the City of Whittlesea responded:

"I write in response to your letter received on 31 March 1999 concerning the permits that allow the Bundoora All Weather Market to operate and renovations you wish to undertake. I wish to confirm that the market operates through permission granted by permits P3405 and 704159. These permits allow the market to operate between 9.00 am and 6.00 pm daily for no more than 170 stallholders. For any alterations to the building, either internally or externally, you are requested to lodge a plan highlighting the changes proposed. The plan can be considered as an amended plan to original endorsed plan for Permit P3405 ..."

719. Thereafter Justice Maher lodged an application for planning permit on 30 April 1999. The proposal was described on the application form as:

"Amended Plans. Market, Foodhall Store, Nursery Sand and Soil. Building Alterations Internal and External."

723. The existing use was described on the form as "Market Permits P3405 and 704159".

726. A covering letter referred in its heading to "Amended Plans: Market, Foodhall Store, Nursery Sand and Soil". The letter went on to refer to proposed changes to the existing market town planning permits P3405 and 704159. The letter stated:

"The changes that we wish to make are building extensions and a new Foodhall Store as per attached plans, also to remove existing offices and replace with car parking. We will also enhance further the existing landscaping with new ground cover and fencing. I have attached three copies of layout Market plans and three copies of building elevations with this covering letter. We hope you will consider and approve these amended plans, so we can start on the renovations as soon as possible we would be grateful for your earliest consideration. ..."

730. It is, in my view, clear that this application was one for a permit for redevelopment and not for a new use.[30] In some circumstances an application for development will imply an application to use the development for its apparent purpose. In the present case the application was to refurbish the existing trash and treasure market implicitly for the existing use. It can be understood to include application for permission to carry on such use under new conditions. Conversely, however, no application was made for approval of a new use such as factory retailing outlets or fruit and produce market.

733. On 5 May 1999 the City of Whittlesea responded to the application by letter stating:

"I write in response to the plans received on 30 April 1999 showing the alterations you wish to make to the Bundoora All Weather Market. I wish to advise that the changes proposed are far in excess of what can be considered a 'minor change' and therefore must be lodged as a new application. Although you completed an application form, you now need to lodge the application fee to begin the processing to the proposal. Having completed an initial assessment of the submitted plan you also need to lodge a plan showing: * the internal layout of the existing and proposed building showing all proposed and existing walls: * all the entry/exit points and loading bay areas, garbage collection areas (particularly for the proposed food hall) * all internal facilities. (toilets, preparation areas etc) proposed. ..."

737. It can be seen that the application was regarded as deficient in two respects. First, no fee was paid and second, the plans were inadequate. Neither of these deficiencies were remedied prior to settlement of the apartment contract (9 July 1999) or indeed thereafter.

740. As at the date of settlement, however, the question on which the parties divided was whether the proposed uses were lawful not whether a permit had or would be granted for the refurbishment of the trash and treasure market. The purchaser defendants took the position that no resolution of the status of the proposed uses had been achieved as contemplated by the recitals to the agreement and by clauses 3 and 6. The plaintiffs took the position that no further permit for use was necessary.

743. Despite this, the plaintiffs now seek to rely on the evidence of Justice Maher that after receiving the letter of 5 May 1999 he ascertained the amount of the necessary application fee namely $280. He then requested authority from Gordon for the sixth plaintiff to pay this amount. It is complained that no authority was thereafter given. It was not established why such authority was necessary prior to settlement. Evidence was led as to the practice relating to cheques during the subsequent period in which Justice Maher managed the market on behalf of the purchaser defendants, but this was not the situation during the relevant period prior to settlement.

746. It is said the purchaser was in breach of an implied obligation to do all things reasonably necessary to obtain a permit for the proposed uses in that the permit fee was not paid by the purchaser and no further instructions were given to proceed with the permit application.

749. It is to be noted that prior to the settlement on 9 July 1999 the Mahers retained the title to and possession of the market. There was no apparent practical difficulty inhibiting Justice Maher from prosecuting the permit application if he wished to. Nevertheless, the responsibility for the failure to further prosecute the permit application is in my view ultimately irrelevant. This is because it cannot be said the application fell within the terms of cl.6 of the agreement at all. It was not an application for permit for the proposed uses but simply one for refurbishment of the trash and treasure market.

(b) The availability of a permit for the proposed uses

753. If the proposed uses of factory retailing outlets and fruit and produce market were permissible under the relevant provisions of the Whittlesea planning scheme prior to 9 July 1999, then a single permit application could have been lodged seeking such permission.[31]

756. The permit application that was in fact lodged was formulated by Justice Maher after he had advised the purchaser defendants that uses identified in plans put forward by them were inappropriate. It is apparent that the purchasers relied on Justice Maher to formulate a permit application which would embrace permissible uses.

759. The fact that no application was lodged seeking permission for the use of either factory retailing outlets or a fruit and vegetable market is not surprising. Prior to 8 July 1999 "market" was a prohibited use. "Market" was defined as "land used as a market under statute". No permit could have been obtained for the use of the market land for the purpose of a fruit and produce market as such, although Justice Maher was aware in 1998 that it was proposed to amend the planning scheme and hoped that after such amendment it may be possible to convert the market into something akin to Preston Market.

762. Likewise the relevant zone provisions provided no apparently adequate vehicle for the use of factory retailing outlets. An express purpose of the Reserved Light Industrial Zone was "to ensure that retailing is limited to that which would not be appropriate in a business zone". Consistently with that purpose "shop" was a prohibited use save for specified exceptions such as a convenience shop, retail plant nursery and takeaway food premises. Peripheral sales were permissible and were defined to mean any premises -

(a) in one occupancy with a total floor area of not less than 1,000 square metres[32] used for the purpose of the sale or hire of furniture, floor coverings, furnishings, household appliances or camping gear;

(b) notwithstanding part (a) of this definition, in one occupancy with a total floor area of not less than 500 square metres used for the purpose of the sale or hire of electrical light fittings; or

(c) used for the purpose of the sale or hire of materials, tools, equipment or machinery for the use in industry, commerce, the building or automotive trades, landscape gardening or primary production, medical purposes or for party hire;

(d) but not used for the sale or hire of any other class of goods.

768. In Mollica v Shire of Bulla & Ors[33] the Administrative Appeals Tribunal stated the background to this definition:

"It is appropriate to consider the present definition of 'peripheral sales' as the concept has evolved over time. The use 'Furniture and Carpet Sales' used to appear in the Melbourne Metropolitan Planning Scheme. It included the retailing of furniture, carpets and household appliances. These goods require substantial floor areas for storage and display. Rents in prime retail areas would generally be too high for the competitive conduct of such retailing. The use generally locates in the periphery of a business area where rents are lower and larger floor areas can be afforded. The use of this sort was subsequently renamed 'peripheral sales', presumably taking its name from the peripheral locations (in relation to business areas) found to be suitable for such uses. Originally the use contemplated the retailing of goods which would normally require indoor storage and display."

772. It can be seen that a permit for peripheral sales might facilitate a use for some factory retailing outlets, but it can equally be seen that the definition would materially constrain the type of goods that could be sold. In particular goods such as clothing and a variety of other manufactured goods could not be sold. Moreover the floor space requirement would significantly restrict the number of retail outlets.

775. In my view any permit for peripheral sales at the market land would necessarily be on terms which might not be reasonably acceptable to the purchaser pursuant to the provisions of cl.3 of the 16 March agreement.

778. Evidence was called both from Justice Maher and Ms Blackney to address planning matters. No category of land use was identified in their evidence or in submission on behalf of the plaintiffs which would enable a permit to have been granted for the use of either a fruit and produce market or factory retailing outlets as such on the market land prior to 8 July 1999. Indeed Justice Maher stated at one point in evidence:

"Well in the strictest term of the law as I know - in fact I didn't actually apply for factory retailing as, because there wasn't a definition at that time so the closest definition that I could come to and in speaking for the Department of Infrastructure was trash and treasure ..."

Likewise Patricia Maher stated with respect to Justice that in early 1999:

"He couldn't change the permit. He never intended to change the permit."

784. There is no apparent basis on which factory outlet retailing might have been permitted save subject to very major restrictions which the purchasers would necessarily be entitled to regard as other than reasonable by virtue of the terms of cl.3 of the 16 March agreement.

(c) The potential availability of a permit after the change to the new format planning scheme on 8 July 1999

788. On 8 July 1999 a new format planning scheme was introduced which incidentally removed the anomalous treatment of "market" and "trash and treasure market" noted by the Planning Appeals Board in 1984.

791. Justice Maher took the position in evidence that after 8 July 1999 a permit might have been obtained for a market which use could have accommodated both factory retailing outlets and a fruit and produce market. Assuming this to be correct the plaintiffs nevertheless face a fundamental practical problem. Having regard to the provisions of the Planning and Environment Act 1987 no permit could have been obtained for the use of market on the market land by 9 July 1999, that is within one day after the use became permissible. No evidence was led from Ms Blackney to suggest that it could and having regard to the notice and other provisions of the Act the overwhelming probability is that it could not.

794. It follows that as at the date of settlement of the Bourke Street apartment contract, namely 9 July 1999:

(a) no permit existed for the proposed uses;

(b) no permit application had been made for the proposed uses; and

(c) the plaintiffs have not established a permit application could have been made which could have resulted in a permit for the proposed uses either at all in the case of a fruit and produce market or in the case of factory retailing outlets without terms which the purchaser would necessarily be entitled to regard as not reasonably acceptable.

800. In these circumstances it is impossible to conclude that the purchaser defendants failed to take steps reasonably necessary to obtain such a permit by the settlement date. Conversely, it was entirely open to the purchasers to conclude (and in my view correct to conclude) that there were no steps reasonably open to obtain a satisfactory planning permit for the proposed uses prior to the settlement date.

803. It follows from the above conclusions that the fourth plaintiff must fail in the claim that the contract for sale of the Bourke Street apartment was firstly, entered into and secondly, settled as a consequence of economic duress. It cannot be said either that the purchaser defendants required such contract to be entered into when Herszberg was legally bound to perform the 28 February agreement, or that the purchaser defendants required settlement of such contract when the vendor was entitled to require cancellation of it either because the proposed uses were lawful or the purchaser defendants had failed to take reasonably necessary steps with respect to obtaining planning permits for the proposed uses.

The Alternative Claims Relating to the Making and Settlement of the Contract for the Sale of the Bourke Street Apartment

807. The claim pursuant to s.53A(2) of the Trade Practices Act 1974 was put on the same basis as that with respect to economic duress as a basis for equitable relief. It was conceded that the Trade Practices Act claim could not succeed if the claim in equity failed.

810. Likewise it was conceded in final submissions that the formulation of the claim by reference to the concept of unconscionable dealing and/or pursuant to s.51AA of the Trade Practices Act would not lead to a different conclusion if neither the claim for economic duress or knowing involvement in breach of fiduciary duty were made out.

813. In my view these concessions were correctly made. It has not been established that the purchaser defendants engaged in unconscionable conduct with respect to the making and settlement of the contract for sale of the Bourke Street apartment in the sense articulated in the judgments of Mason J and Deane J in Commercial Bank of Australia Ltd v Amadio[34], Mason J stated at 461:

"Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest."

817. Deane J articulated the relevant concept at 474:

"The jurisdiction [to relieve against unconscionable dealing] is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable ... "

821. In the absence of "illegitimate demands" in the sense for which the plaintiffs contend as the basis of their claim for economic duress, and in the absence of knowing participation in Brott's breach of his fiduciary duty as a circumstance affecting the making and settlement of the relevant contract of sale, no circumstances have been established showing the plaintiffs were unable to make worthwhile judgments as to what was in their best interests, or that there was an absence of any reasonable degree of equality between the parties which led to an unconscientious procurement of the sale of the Bourke Street apartment.

825. The plaintiffs further claim against Brott for lack of due care and skill in the performance of his retainer. The matters relied on are said to constitute breaches of the terms of the retainer, breaches of Brott's fiduciary duty and breaches of his duty of care to his clients. As such they give rise to a claim for either equitable compensation or common law damages.[35]

828. The matters relied on by the plaintiffs were refined in final submission from those particularised in the statement of claim to embrace five areas of alleged default. I shall deal with them in the order of the events with which they are concerned rather than in the order adopted in submission.

(a) Alleged failure to make the 28 February agreement binding

832. It is said that if the 28 February agreement was not binding this was due to the default of Brott. I do not accept this was so. There is no evidence that there was in fact a complete and final agreement. The fundamental problem confronting the plaintiffs with respect to the agreement of 28 February is one of substance not of form.

(b) Alleged failure to advise the plaintiffs properly with respect to the 16 March agreement

836. Brott gave evidence that he was aware of the potential for dispute as to what constituted factory retailing outlets. During negotiations on 14 February 1999 reference was made to a factory outlet centre in Queensland with which he was familiar. It was apparent that this type of centre was not a trash and treasure market. It is said that Brott failed to ensure that the definition of the proposed uses provided for in the 16 March agreement was satisfactory both with respect to the definition of factory retail outlets and the ability to grant leases and licences.

"63. I spent much time on 15 and 16 March 1999 in discussions with Justice and Patricia, particularly Justice, about the question of the uses that would be permitted for the Market under the planning laws of the Whittlesea Shire Council. Justice principally, and also Patricia, were adamant in these discussions that they were certain that the current town planning permit would enable them to use the Market for factory retail outlets. The final changes to the definition 'Proposed Uses' in the agreement which became the 16 March agreement were made on the instructions of Justice and Patricia whereby the reference to shops was deleted but the reference to factory retailing outlets remained. At the meeting with Justice and Patricia on the night of 15 March 1999 and discussions on 16 March 1999 which led to this deletion to the definition of Proposed Uses, Justice said to me in the presence of Patricia that he was certain that the existing town planning permit would allow the use to be obtained to enable the operation of factory retailing outlets and that the other uses referred to in the definition could be met. 64. I said to Justice and Patricia at that time that I was not expert in respect of local planning issues, and I advised them that they needed to be sure about their views about the Proposed Uses and that it would be wise in the circumstances to obtain written advice of experienced counsel in the area as the achievement of the Proposed Uses would control the cancellation of the apartment contract, which was the security that Herszberg and Gordon were demanding to ensure that such uses could be achieved for the Market. Justice and Patricia both said to me in this meeting that they did not want me to obtain such expert advice from counsel as Justice had the expertise himself, and that the clauses in the 16 March 1999 agreement which required the involvement of Justice in the obtaining of the permit gave them the assurance that any permit would be properly applied for and that in their view the permit would be obtained. Because of these instructions by Justice and Patricia, I did not take the matter further, and in particular did not instruct counsel to give advice. Justice and Patricia in my presence both read the proposed terms of the definition of 'Proposed Uses' many times and Justice said to me that from his knowledge of the planning requirements of the Whittlesea Shire Council he had no doubt that the uses described in the definition would be achieved."

843. I am not satisfied the plaintiffs relied upon Brott to advise them as to the definition of the proposed uses. I am conversely satisfied that he disclaimed expertise in town planning matters and that the definition of the proposed uses was arrived at by negotiation between the parties, as reflecting a compromise describing uses previously referred to by Justice Maher as being potentially able to be achieved on the market land.

846. It is clear that Brott participated in extended negotiations on 16 March 1999 seeking to give effect to his clients' instructions. The draft agreements in evidence demonstrate that in the course of these negotiations elements which the clients would not accept and in particular the inclusion of the use "shop" as a proposed use were deleted. Conversely, elements put forward on behalf of the clients by Brott were rejected by the purchaser defendants. These included a series of suggested references to the possibility that the lawfulness of the proposed use might be evidenced by letter of the responsible authority declaring that the proposed uses fell within the ambit of the existing permits. (I have had regard to this process of deletion and attempted amendment as demonstrating Brott's actions but not in aid of the interpretation of the agreement having regard to the principle as stated in Chitty on Contracts[36]:

"... where an instrument appears to have been altered while the parties were negotiating, the court cannot look at it as it originally stood compared with the alterations which were made in it, to see whether those alterations will throw any light upon the question of intention. However, when the parties use a printed form, and delete parts of it, there is some authority for the view that regard may be paid to what has been deleted as part of the surrounding circumstances in light of which the meaning of the words which they chose to leave in is to be ascertained. ... it is doubtful whether the court can look at the words deleted except to resolve an ambiguity in the words retained."[37])

850. I do not accept that Brott did not contend to the best of his ability for terms advantageous to his clients. Indeed the draft agreements evidencing changes and proposed changes to the agreement support the contrary view.

853. The evidence of the Mahers was that it was Justice Maher who in effect informed the ultimate decision as to what the plaintiffs would accept by way of description of the proposed uses. As I have said Justice and in turn Patricia Maher took the position that the existing trash and treasure market permits already authorised factory retailing outlets.

856. I am not satisfied, however, that Justice Maher is a reliable witness as to what otherwise occurred.

859. Justice Maher initially gave evidence that when the Mahers were presented with the first draft of the 16 march agreement he was shocked by its contents.

"Mr Maher, you were confident that the proposed uses could always be achieved?---On the original document when it was faxed through, I was horrified, shocked. Supermarket. Unbelievable. They had a completely hidden agenda. Completely hidden agenda?---Hidden agenda Your Honour. Supermarket. The document was sent through to you, was it not?---Never mentioned, I've never mentioned shops or supermarket to either of them. Shops and supermarket, it was like walking into a time bomb and saying you've got one second to go before it blows. ... You never mentioned it then. You say they'd never mentioned it to you?---Never."

863. Contrary to this evidence Mr Maher's own diaries show quite clearly (as he subsequently conceded) that the proposed purchasers had had discussions about a supermarket use with him and indeed had requested him to investigate electricity sub-station arrangements to enable a supermarket use.

866. The genesis of the definition of proposed uses is reflected in Brott's notes of a conference he had with Herszberg and Gordon and the solicitors Efron and Szental on 15 March 1999. These notes include the following:

"Representations murky. Maher (1) suitability f(actory) retail outlets. (2) operate shops. (3) issue leases."

The notes conclude by recording as "changes" (presumably to the proposed agreement):

"... (ii) Bourke Street property cancellation contract subject to and conditional up[on] obtaining the represented permission allowing use."

872. Brott said in evidence, and having regard to the notes, I accept:

"Szental was maintaining that he had severe doubts as to the veracity of what Mrs Maher and Justice have represented."

876. The notes further record that on 15 March 1999 Brott sought advice from counsel having expertise in town planning matters. There was further evidence that Brott did in fact on that day obtain telephone advice for the Mahers from Mr Peake of counsel as to the question of leases and licences. (Just as he had obtained advice from counsel for his clients before negotiating with the bank.)

879. I am satisfied that the negotiations which took place the following day as to the definition of proposed uses within the 16 March agreement took the form of negotiations as to the correct description of uses previously forming the subject of discussion by Justice Maher with the proposed purchasers. I am specifically satisfied (as the Mahers themselves concede) that Brott's advice to the Mahers was to the effect that the contract for the sale of the Bourke Street apartment would be cancelled "provided the proposed uses can be achieved" and that he did not purport to give them expert advice as to the optimal description of these uses.

882. The Mahers were content to accept Justice Maher's view as to an acceptable definition of the proposed uses. The definition of proposed uses adopted was a compromise but insofar as this definition was disadvantageous to the Mahers this was not due to any lack of due skill or care on the part of Brott.

885. Indeed I am satisfied the definition was adopted when Justice knew that the terms adopted might mean different things to different people, although Patricia Maher maintains she was unaware of "the ambiguities" at the time.

888. Further it was adopted after five hours of negotiation when I am satisfied the Mahers had carefully considered the provisions in issue.

891. I do not accept that there was a clearer consensus between the purchaser defendants and the plaintiffs than that which the 16 March agreement embodies. In this regard I should add I do not accept Brott's evidence as to what and was not said in negotiation by the purchaser defendants is reliable as to matters of detail.

894. It is further submitted on behalf of the plaintiffs that Brott failed to negotiate the plaintiffs' concerns by offering to waive the Herszberg fee. There is no evidence that the contribution of $150,000 towards the difference between the parties would have resolved the issue between them. Ultimately the effect of the option agreement was that the purchaser defendants obtained security to the extent of $210,000 with respect to the achievement of planning approval for the proposed uses. It is entirely speculative as to whether $150,000 would have had any material effect upon the outcome of the negotiations. It cannot be said waiver of this fee would on the balance of probabilities have fundamentally altered the framework of the agreement with respect to which the plaintiffs complain.

(c) Alleged failure to negotiate with due care and skill prior to settlement of the Bourke Street apartment contract on 9 July 1999

898. It is submitted that the request by the purchaser defendants for an extension of time to settle, should have been refused. It is further submitted that Brott's evidence that he gave advice to this effect should be rejected.

901. I am not satisfied as to the precise terms of the advice Brott gave to the Mahers when the purchaser defendants sought an extension of time for settlement. I do not accept as entirely reliable either the evidence of Brott or the Mahers as to what was said at this time. Nevertheless I am satisfied that it must have been apparent to the Mahers that the ultimate commercial imperative with which they were confronted was the need to pay out and settle with the bank. It was a matter for judgment by them as to whether they were prepared to grant the purchaser defendants an extension of time for settlement or whether they wished to forfeit the deposit and place themselves in a position where they could offer the bank such deposit but no present arrangement for further payment. No doubt the terms of the 16 March agreement including those relating to the Bourke Street apartment were matters that they took into account. There is no satisfactory basis for concluding, however, that the decision which was made by the Mahers was made in reliance upon advice from Brott or precisely what that advice was although it is apparent there was a discussion of the commercial options open to the clients.

904. It is further submitted on behalf of the plaintiffs that Brott failed to ascertain what would satisfy the purchaser defendants by way of compliance with the 16 March agreement as evidence of the approved status of the proposed uses.

907. In my view the 16 March agreement makes clear that what was envisaged as conclusive was a fresh permit.

910. Moreover Brott sought by letter to Efron of 18 May 1999 and in discussion with Herszberg on or about 6 July 1999 to persuade the purchaser defendants to agree to abide by the opinion of an independent barrister as to the lawfulness of the proposed uses. This was an entirely reasonable process by which to seek to expedite the resolution of the question of the proposed uses favourably to his clients.

913. It is further submitted on behalf of the plaintiffs that Brott failed to advise the Mahers to take a strong stand at settlement on 9 July 1999 and further advised them that they had no leverage. For reasons I have stated in my view the purchaser defendants were in fact entitled to maintain that the proposed uses were not the subject of proper approval. It follows that the plaintiffs had no basis for the "strong stand" in issue.

916. It is common ground between the Mahers and Brott that Brott did advise the Mahers as to the commercial reality confronting them. Nevertheless it can hardly be said that it was negligent to advise the plaintiffs to settle the sale of the apartment contract (even if the proposed uses had at that date been lawful). The downside to the plaintiffs was at worst $210,000 in circumstances where settlement would resolve a potential liability to the bank for $6.35 million and avoid seizure by the bank of the security properties.

(d) Alleged negligence in lodging a caveat over the Bourke Street Apartment

920. Clause 7.7 of the 16 March agreement provided:

"7.7.1 Simply (for itself and its nominee) undertakes to the Purchaser that Simply must not lodge, cause or allow to be lodged at the Land Titles Office a caveat in respect of its interest in the Apartment created by this Clause 7 or otherwise until after registration of a mortgage over the titles to the Apartment given by the Purchaser in favour of its banker or financier to secure (amongst other things) funds provided for the purchase of the Apartment by the Purchaser. 7.7.2 Simply (for itself and its nominee) undertakes to the Purchaser that, if (after Simply or its nominee have lodged or caused or allowed to be lodged at the Land Title Office a caveat in respect of its interest in the Apartment created by this Clause 7 or otherwise) the Purchaser requests Simply (or its nominee) to consent to lodgment or registration of a mortgage over the titles to the Apartment, Simply will procure that the appropriate consent, acceptable to the Land Titles Office and the mortgagee, is given to the Purchaser within 3 days after a written request is made for it."

924. Brott's witness statement describes his actions with respect to the caveat as follows:

"117. I was always reluctant to lodge a caveat against the apartment, as I was fully aware of the consequences under the 16 March 1999 agreement. I spoke to Patricia about the consequences of lodging a caveat. Initially in these conversations, Patricia did not want to lodge a caveat as she said she did not want to take the consequences. She said that she would deal with Herszberg and Gordon and Herzog and that she believed she would have the apartment returned. I was also speaking to Patricia in this period about issuing litigation. She did not want to do that either. Prior to 2 September, Patricia said to me that she had had no luck in her dealings with Herszberg, Gordon and Herzog, that she now wanted to lodge a caveat against all the properties. I said to her that she had no caveatable interest in any of the properties other than the Bourke Street apartment. She said to me that she was not going to pay any monies for the Bourke Street apartment, and that she now wanted to lodge a caveat against the title to tie Herszberg and Gordon up in respect of any dealings with the property. She also said to me that she believed Herszberg and Gordon were acting dishonestly in that they were already trying to leave the Bundoora markets upon the basis that factory retailing outlets were allowed by their current permit. 118. On 2 September I arranged for a caveat to be lodged at the Titles Office over the apartment. The named caveator was my firm. The interest claimed was an interest as chargee, pursuant to the 16 March agreement. 119. I was only prepared to lodge this caveat after I was satisfied by reason of the conversations referred to in paragraph 117 above that Patricia and Justice were aware that the effect of lodging a caveat over the apartment would be to cancel the option to purchase the apartment. I was certain from my discussions with Justice and Patricia from July 1999 onwards that so far as Justice and Patricia were concerned they were not prepared to ever exercise the option to re-purchase the apartment by paying any sum of money as in their view the Proposed Uses were met and that they expressed the clear view to me that Herszberg and Gordon were in breach of contract by not making the application for the permit. I spoke in these conversations to Justice and Patricia about the effect of the caveat upon the exercise of the right to re-purchase and they were both adamant in these discussions that they would not be paying one cent to Herszberg and Gordon for the return of the apartment. Patricia said to me in these conversations that she was talking to Herszberg directly about the matter and that she believed from those discussions that she would resolve the matter with the apartment being returned to her. 120. On 9 September 1999 I wrote a letter to Patricia confirming that arrangements had been made with regard to lodging a caveat over the apartment and that due to the lack of any caveatable interest in the Thomastown properties no caveat could be lodged over them. The letter was sent by facsimile. I note that it appears the facsimile was in fact sent on 15 September. My letter was written in response to Patricia's facsimile to me dated 28 August 1999, ... 121. Following the receipt of requisitions on the caveat from the Land Titles Office on 27 September I requested the caveator be amended to Eighty-Sixth Eternity in lieu of my firm. The caveat (No. W265550E) was registered on the title to the apartment on 18 November 1999."

928. At the date the caveat was registered no mortgage over the title to the apartment in favour of the purchasers' banker had been registered. A mortgage had been granted to the National Australia Bank Ltd on 9 July 1999 but it was not lodged for registration until May 2001.

931. There is no doubt that the caveat lodged by Brott was lodged in accordance with express instructions from Patricia Maher as reflected in facsimile transmissions from her of 26 and 28 August 1999.

934. The evidence of Justice Maher is that he had left a message at Brott's office expressing concern that no caveat had been lodged on 12 July 1999. He says further:

"During this period, there were a number of occasions, when we instructed Brott to lodge a caveat. He said that he had to be careful, because under the 16 March 1999 agreement, the lodging of the caveat could affect our right to recover the Bourke Street apartment. We said as soon as the mortgage was put on he should immediately caveat."

938. I am not satisfied Brott failed to advise the Mahers as to the effect of the lodging of the caveat upon the vendor's rights under the 16 March agreement, before a caveat was lodged by him in accordance with the Mahers' instructions.

941. At the trial before me it was submitted on behalf of Brott that the lodging of the caveat did not in fact lead to a loss of rights under the option. I prefer the view that it did (the first limb of cl.7.7 would otherwise be rendered superfluous) but I am not satisfied that Brott failed to advise his clients as to this risk.

944. Further and in any event the purchaser defendants by solicitor's letter dated 30 January 2001 invited the plaintiffs to exercise the option. That letter (to which I shall return) stated in part as follows:

"If your clients position is that the market land can be used for the proposed uses, please provide written evidence in support of such proposition by return. In the alternative, if you are unable to do so, our clients position is clear, being that subject to the exercise of the option the apartment purchase price is $210,000."

948. It cannot be said that the lodging of the caveat prevented the exercise of the option. It is apparent that in 2001 the purchaser defendants invited the plaintiff to exercise the option as a vehicle for settlement of the ongoing dispute as to rights of ownership to the Bourke Street apartment.

(e) Alleged failure to resolve the question of the proposed uses in time to exercise the option

952. It is submitted on behalf of the plaintiffs that Brott failed to resolve the question of the proposed uses in time to enable exercise of the option and that in particular Brott:

(a) failed to advise the plaintiffs properly as to the prospect of having the planning issues resolved; and

(b) failed to follow specific instructions to issue proceedings against the defendant purchasers.

958. Insofar as the allegation that Brott did not advise the plaintiffs properly as to the prospect of having the planning issues resolved, I am not satisfied that the Mahers' account of the advice given to them by Brott is reliable.

961. It is apparent from the documentary evidence and matters admitted by the Mahers that:

(a) Brott had advised the Mahers prior to the 16 March agreement that it was open to them to obtain the advice of specialist counsel with expertise in town planning law;

(b) Brott first threatened (9 July 1999) and then lodged a caveat over the Bourke Street apartment in an effect to bring pressure to have the dispute as to the status of the proposed uses resolved;

(c) Brott repeatedly suggested to the purchaser defendants that it would be appropriate to resolve the dispute by having it arbitrated by an expert in town planning law (prior to settlement 18 May 1999, and after settlement 13 July 1999, and 18 August 1999);

(d) Brott corresponded with Herszberg direct and sought to persuade him that the proposed uses were lawful (23 July 1999 and 2 August 1999);

(e) Brott advised his clients the best way to resolve the matter would be direct negotiation with Herszberg (25 October 1999);

(f) Brott sought to engineer round table discussions between the parties (3 October 2000 to 21 November 2000, 18 January 2001, 22 January 2001);

(g) Brott had discussions with both Gordon (28 June 2000) and Herszberg (18 January 2001);

(h) Brott threatened proceedings for specific performance of the contract cancellation provisions contained in the 16 March agreement (28 June 2000, 24 September 2000);

(i) Brott briefed counsel to draw proceedings and attended an initial conference in July 2000 with counsel and his clients for the purpose of giving instructions to counsel. A draft statement of claim was drawn but adequate instructions were never given for the completion of a statement of claim in effective form.

Having regard to the documentary evidence as to the steps which Brott did take I am not satisfied Brott did not advise the clients adequately as to the alternatives open to them to clarify the status of the proposed use.

967. A significant circumstance tending to confirm the view that Brott did not act without due skill and care to resolve the status of the proposed uses is the independent assessment of the case by Mr Whitby of McKean & Park Solicitors in late 1999. Mr Whitby impressed me as a careful and competent solicitor. His considered advice on the basis of the instructions given him by the Mahers as to the course of the matter up until that point in time (including a satisfactory chain of documentation) was that it was appropriate to leave the case in the hands of Brott but that the independent advice of an appropriate expert as to the underlying planning issues should be obtained.

970. Mr Whitby was retained by the plaintiffs for the express purpose of obtaining an opinion independent of that of Brott. After conferring with the clients and counsel and obtaining counsel's opinion, Mr Whitby advised in writing in terms which correctly identified the critical issue between the parties as turning on the status of the proposed uses. He set out arguments relating to the status of the proposed uses and while expressing the view that the plaintiffs should be able to take successful proceedings against the purchaser defendants, he expressly recommended that expert planning advice be obtained.

"We would, however, suggest that the independent opinion of a town and country planning expert be obtained. It will be necessary in the future that such expert evidence be given to the court in the event that you proceed with proceedings. The court will have to be satisfied that under the normal course of events the plaintiffs would have been able to use the premises for the uses which you agreed could be done; therefore expert evidence should be obtained and you should be prepared to call the planning officers of the relevant council to establish that they would have no objection to the uses as anticipated by the contract. Under the circumstances we believe our retainer is complete as you really wished a second opinion as to whether or not you should proceed with this matter. Subject to the qualifications above we believe that you should speak to Mr Brott and request that he proceed to seek enforcement of the contract as soon as possible or alternatively seek damages. We trust that this matter has been handled t your satisfaction."

974. The failure to resolve the status of the proposed leases in time to exercise the option resulted from the failure to obtain appropriate expert advice as Brott had advised might be done and as Mr Whitby unequivocally advised should be done.

977. Insofar as the failure to issue proceedings as such is concerned this matter is not raised as a basis for negligence by the particulars in the third amended statement of claim. Brott acknowledges that he received written instructions from Patricia Maher of 7 December 1999 and 25 January 2000 to institute proceedings "for specific performance of the deed of March 16, 1999 relating to Unit 20/50 Bourke Street, Melbourne." Nevertheless Brott maintains that thereafter he received contradictory and inconsistent instructions from his clients because:

(a) Justice and Helen Maher were employed by the purchaser defendants pursuant to the terms of the 16 March agreement and remained so employed up until Christmas 2000; and

(b) Patricia Maher remained in occupation of the Bourke Street apartment and depended on the payment of expenses in relation to that apartment by the purchaser defendants.

983. I am not satisfied it is possible to satisfactorily resolve what was the exact course of instructions to Brott in relation to the issue of proceedings during 2000. It is clear, moreover, that proceedings were not regarded as an exclusive remedy by the Mahers. Thus there was agreement by them to attempts by Brott to organise a round table conference in November 2000. Ultimately, however, it can be concluded that the discussions between the Mahers and Brott culminated in unequivocal instructions to institute proceedings in late 2000. Brott's response to what may be called the final instructions to sue, was to advise the Mahers to institute proceedings against Gordon alone and not Herszberg - essentially with a view to driving a wedge between them. Following this advice the Mahers terminated Brott's retainer on or about 8 February 2001.

986. In my view despite the fact that Brott did not resolve the status of the proposed uses, the plaintiffs have not established that he failed to take reasonable steps to do so by virtue of the failure to institute proceedings:

(a) He did take the various steps to which I have referred;

(b) There is dispute as to the terms of his instructions from the Mahers with respect to the institution of proceedings which I am unable to resolve conclusively in a manner adverse to Brott;

(c) The proceedings contemplated were in any event misconceived. They were premised upon the view that Justice Maher's opinion that the proposed uses were lawful as at the date of settlement, 9 July 1999, was correct. Mr Whitby correctly and clearly identified this premise for the Plaintiffs in November 1999. They chose not to take his advice that this issue should be independently clarified by an independent expert.

992. Even if I were persuaded that Brott failed to exercise due skill and care in seeking to resolve the issue of the status of the proposed uses by the failure to issue proceedings, two further problems confront the plaintiffs. First, it cannot be said the institution of the proceedings contemplated by the Mahers would as a matter of probability have led to a successful outcome. For the reasons I have set out such an outcome could only have been ensured by the exercise of the option.

995. Second, Brott's services were terminated while the option was still alive. The plaintiffs then sought and obtained further advice from their current solicitors. The decision not to exercise the option was not made in reliance on Brott's advice, but rather made after Brott had been discarded by the plaintiffs as a reliable source of advice.

998. Brott was by this stage thought by Patricia Maher to be part of a Jewish conspiracy and by Justice Maher to be untrustworthy because of his relationship with Herszberg. Brott was thought by them to be so unreliable as to justify the termination of his services and to require the retainer of new solicitors.

1001. On 19 March 2001 Patricia Maher instructed Mr Curtain of the plaintiffs' solicitors with respect to her understanding of the option, which he noted as follows:

"If not what we say it is, we'll have to pay $210,000 towards the cost of making it what we said the market was."

1005. In turn Mr Curtain's file note of 18 June 2001 specifically records that he advised Patricia Maher of the right to exercise the option.

1008. In my view Brott's advice cannot be regarded as a material cause of the decision not to exercise the option. The true position is that the plaintiffs themselves were not prepared to exercise the option and in formulating their position in this regard they relied not upon Brott but upon their own understanding of the planning status of the proposed uses and the advice of the solicitor they retained after the termination of Brott's services. That advice did not express a concluded view as to the plaintiffs' rights and it was in the absence of expert planning advice and of a concluded view from that solicitor that the plaintiffs elected not to exercise the option. The Plaintiffs took the view that full cancellation of the contract of sale of the Bourke Street apartment could still be achieved and in light of this possibility elected not to exercise the option.

1012. For the above reasons the plaintiffs' claim fails save for the claim against Brott for the Herszberg fee in the sum of $150,000.

1015. Further the first defendant is entitled to succeed on its counterclaim against the first plaintiff for occupation of the Bourke Street apartment since 12 December 2003. It is agreed that the damages payable are to be calculated at the rate of $60 per day from and including that date up until judgment.

[1] (1992) 26 NSWLR 666 at p.674

[2] [1997] HCA 23; (1997) 188 CLR 449

[4] Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 at [196]- [202]

[5] My reasons for so characterising the agreement of 28 February 1999 are stated below.

[6] The 28 February 1999 agreement made provision for payment by Herszberg of the Mahers' legal fees in the sum of $35,000 to Brott. But for reasons stated elsewhere I do not accept such agreement was a final and enforceable agreement.

[7] [1999] NSWCA 408; (1999) 48 NSWLR 1

[10] [2004] VSC 33 at para.[181]

[11] [1874] LR 9 Ch App 244 at 251-2

[12] [1995] UKPC 4; (1995) 2 AC 378 at 392

[14] [2002] UKHL 12; [2002] 2 AC 164

[15] The claim is not based on actual awareness of a failure by Brott to advise or act in accordance with Brott's retainer as originally particularised in paragraph 20 of the statement of claim. That this was so was confirmed by correspondence between solicitors prior to the hearing to which counsel referred me.

[16] [1959] HCA 8; (1959) 101 CLR 298 at 312

[17] Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 per McHugh JA at 45

[19] (2003) 77 ALJR 925 at 929

[20] [1908] HCA 88; (1908) 5 CLR 647 at 650

[21] [1954] HCA 72; (1954) 91 CLR 353 at 360

[22] (1878) 3 AC 1124 at 1149

[23] Vroon BV v Fosters Brewing [1994] VicRp 53; (1994) 2 VR 32 at 67 per Ormiston J

[24] Unreported, Full Court of New South Wales cited with approval by Menzies J in Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597 at p.607 and by Kaye J for the Full Court in Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 at p.700.

[26] Permits were also held for the purpose of restaurant and for vehicle and boat sales.

[27] [1982] HCA 24; (1981-82) 149 CLR 337 at 346, 347

[28] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1981-82) 149 CLR 337 at 346, 347 per Mason J.

[29] [1979] HCA 51; (1979) 144 CLR 596 at 607

[30] cf Marock v Billjoy [1981] VicRp 41; [1981] VR 413

[31] Sweetvale Pty Ltd & Anor v Victorian Civil and Administrative Tribunal & Ors (2003) VSCA 83

[32] The market building was 60,000 square feet in area.

[33] 9 AATR 157 at 167

[34] [1983] HCA 14; (1983) 151 CLR 447

[35] See Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at 500-501.

[37] Chitty on Contracts 25th ed. vol 1, para.782 applied by Owen J in Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425 at [28].