Marron v Charham Daunt Pty Ltd [1998] VSC 110

6. The story begins earlier in 1992. Mr Bernard Marron had spent many years working in the liquor industry. From 1967 to 1971 or thereabouts he had been the licensee of a hotel in Skipton in Western Victoria. He was then employed at the Bentleigh Club until 11 January 1992, for the last 11 or 12 years as its manager and licensee. For the balance of 1992 he was employed at the St. Kilda Football Club Social Club and the Edithvale-Aspendale Club until about November. He was then aged 58 years and he decided to purchase a hotel in partnership with his son, John. The son was a serving member of the Victoria Police holding the rank of Senior Constable stationed at Ballarat. The two men decided that John would resign from the police force and that they would pool their resources. With their wives, they would purchase and conduct a hotel together for about five years until Mr Bernard Marron was ready for retirement. Thereafter, it should be conducted by Mr John Marron and his wife alone.

9. The resources available to them for this purpose were not considerable. Mr Bernard Marron and his wife Colleen Roslyn Marron owned a holiday house at 37 Mathis Avenue, Tootgarook which he thought was worth $90,000. On 3 December 1992 this property was placed with an agent for private sale for a sum not less than $89,950 to $92,500 on 60 or 90 days terms. Mr John Marron expected to receive upon his retirement from the police force about $50,000. The two men said that they approached the project, therefore, expecting to have available in cash some $140,000.

12. They decided that Ballarat was a suitable place for their venture because John and his family lived there and Bernard and his wife liked the district. And so they approached Chatham Daunt which was known to them as a major hotel broker in the area and were shown by the broker four hotels, all held on lease. The Black Hill Hotel was of interest to them but was on offer for $220,000. Nothing they were shown could be purchased for the cash they thought they had available, and so it was necessary for them to obtain finance. Michael Hugh Cecil Daunt of Chatham Daunt, therefore, introduced them to Byrne Jones & Torney where they saw Richard Owen Devine, an employee of that firm. Mr Devine is not a legal practitioner; he had been employed by Byrne Jones & Torney for 29 years as a law clerk, specialising for the last 23 years in licensing work. Although he is not qualified, he was described by a local solicitor, Michael Fraser Morrow, as "an excellent mechanic" and a person who is very experienced and competent in putting together licensing transactions. I accept this assessment, not only by my acceptance of Mr Morrow's evidence but from my observations of the file and of Mr Daunt in the witness box. Without dwelling on the detail at this stage, Mr Devine proposed that, through Yarrmu Pty Ltd, a company associated with the firm, Byrne Jones & Torney would lend $50,000 on the security of the hotel business and, through Ballarat Securities Corporation, a contributing mortgage company which they managed, a further $50,000 on the security of a first mortgage over a property at 16 Maxwell Court, Bentleigh. This property was owned by Mr Bernard Marron's daughter, Bernardine and her husband Kurt Krause.

15. Armed now with $100,000 in addition to their own $140,000, the two men returned to Chatham Daunt where on 18 December 1992 they entered into a contract to purchase the Black Hill Hotel for $180,000 plus stock and adjustments upon a deposit of $18,000, payable as to $2,000 on signing and the balance upon the fulfilment of two conditions to which the contract was subject. The residue was payable on completion and upon the giving of possession on 5 April 1993. Stock and adjustments were to be paid for 60 days later, on 3 June 1993. The two conditions, which were inserted on Mr Devine's recommendation, were expressed as follows:

"This sale is subject to and conditional upon the following: 1. The purchasers receiving satisfactory finance by the 13th January 1993. 2. The purchasers obtaining an unconditional contract on their house at 13 Mathis Street, Tootgarook by the 2nd day of February 1993."

19. It is necessary to pause at this stage to remark upon a number of things. First, it was suggested by no party or witness before me that the business was not a viable one or that the price was not, broadly speaking, appropriate. Mr Daunt said that the purchasers were provided with financial statements for at least the two preceding financial years, that is the years ending June 1991 and June 1992. He was uncertain, however, whether the figures for the months from 1 July 1992 were also provided. None of this financial information was in evidence. He told the Marrons that the current owners were suffering from some marital disharmony and it was thought that this had adversely affected the turnover, especially in the bar. The Marrons, therefore, expected to do better than their predecessors. Second, the two Marrons, notwithstanding their experience and background appear to have made no assessment of the likely profit of the business they were buying. They had prepared no budget. They appear to have had no understanding of the extent of the commitment they were entering into. They said they had $140,000 to spend but this turned out in many respects to be optimistic. They said that they expected to pay $140,000 cash for a hotel business without giving any regard to the extra expenses which such a purchase necessarily involved. For example, a purchaser in their position would, in addition to the agreed price, have to pay for the stock and adjustments, a month's rent in advance, a deposit to the landlord and legal costs and fees. In the case of the purchase of the Black Hill Hotel for $180,000, these were estimated by Mr Daunt in December 1992 to amount in total to $45,000. This meant that their expressed expectation of purchasing a hotel for $140,000 cash without need for borrowing was entirely unrealistic. It is apparent, from the properties which Mr Daunt showed them and from the amount of the finance which Mr Devine offered them, that these two men were well aware that the Marrons must supplement their resources by borrowing. And yet, both Mr Bernard Marron and his son, John, told me that this came as a surprise to them.

22. What is particularly surprising to me is that Mr Bernard Marron, as a man of long experience in the liquor trade, professed to be unaware of these realities. His son, John, whose experience may have been rather different, appeared to approach the venture in the same unworldly way. It was put by counsel on their behalf that I should assess them as naive and even somewhat gullible. I must say that this is how they appeared to me in the witness box. Mr Bernard Marron in particular struck me on many occasions as a man who agreed with matters put to him for no better reason than they were put by counsel whom he regarded as an authority figure. I am not, therefore, prepared in every case to act upon concessions made by him in these circumstances. What I find puzzling in such a case is that they, and particularly Mr Bernard Marron, were seen by hard-headed business people with whom they dealt, as sufficiently sound to be accepted as borrowers of a large sum of money and as fit to take on the tenancy of a hotel business. It may be that Mr Bernard Marron who impressed me as not a well man, has been to some extent reduced by the events of the past six years.

25. As things stood on 18 December 1992, when the two men signed the contract to purchase the hotel, they saw themselves as having funds in the order of $240,000 which were adequate for the purchase and for further working capital when they took possession in April some three months away. But things did not work out that way.

28. First, the settlement date, within days, was moved forward one month to 3 March. It is not altogether clear at whose instance this was done and perhaps this does not matter. It had, as things turned out, a number of consequences. It meant that Mr John Marron had to expedite his retirement from the police force and he sought to do this by application dated 23 December 1992. This application was granted and he received by 11 February 1993 his $50,000 entitlement which he invested in the project. It meant, too, that since the funds from the sale of Tootgarook were required to settle the hotel purchase, the time for settlement of the sale was reduced and, assuming a 60 day contract, that a buyer had to be found immediately. It meant, too, that only one month remained between the time of fulfilment of the second condition and settlement. Finally, it meant that Mr Devine had one less month to attend to the task of preparing documentation and obtaining the necessary permits and licence transfer to complete the purchase.

31. Second, the Tootgarook property was never to realise $90,000. There was a mortgage over the title to secure a loan to the National Australia Bank of some $7,000 which Mr Bernard Marron had overlooked. Moreover, the expenses of the sale were not included in his expectations. For a reason which was never entirely explained, three days after the contract was signed he changed his mind with respect to this source of funds. On 21 December he went to a friend, Ron Mifsud, who was manager of the Melbourne University branch of the Commonwealth Bank and borrowed $7,000 on a personal loan to discharge the National Australia Bank mortgage in order to release the title to obtain bridging finance. This is what he told his solicitors, Messrs Pearn & Cooke who were acting on the sale of the property and, in the witness box, he accepted that this was correct. He said that he then decided to complete the hotel purchase by obtaining this bridging finance even if the Tootgarook property was not sold. Mr John Marron said he was unaware of this change of intention; he thought the $7,000 personal loan was to cover his father's incidental expenses of travelling to and from Ballarat. In due course, on 22 January 1993, the Commonwealth Bank formally offered to lend $63,000 for the purchase of the hotel on the security of the Tootgarook property. But it was not bridging finance; the term of the loan was 15 years. The financial consequence of this was that $27,000 less than the sum originally expected was available from the Tootgarook property for the hotel venture and, further, the Commonwealth Bank required fees and expenses of over $1,500 and monthly payments of $717.

34. Third, on 24 December 1992 Ballarat Securities wrote to the Marrons approving the loan of $50,000. It seems, however, that the title to the security property at Maxwell Court was not unencumbered. Mr Bernard Marron had failed to tell this to Mr Devine. Whether he did not know about this, or had merely forgotten, is of no consequence. Ballarat Securities was unaware of the difficulty and remained in this state of ignorance until shortly before 5 February 1993 when Mr Devine wrote to the Marrons to the effect that the loan could not be made until the encumbrances had been removed. This was not possible, so that the amount available for the purchase decreased by another $50,000. This discovery led to the introduction of another of Bernard's sons, Richard Marron, into the venture. Mr Richard Marron agreed to resign from his position as a manager with Coles-Myer and to contribute his long-service and other entitlements totalling $35,000 to the purchase. The shortfall of $15,000 was obtained by increasing the Yarrmu loan from $50,000 to $65,000 and this was done. The financial consequence of this was that, although the interest payable on the sum to have been borrowed from Ballarat Securities was thereby reduced, and although another pair of hands, or perhaps two pairs including those of Richard's wife, Nikki, were available for the work of running the Hotel, the business now had to support three families rather than two. It may be, too, that a further consequence of this was the decision of Mr Bernard Marron, implemented on 12 February, to put the Tootgarook property up for sale by auction so as to reduce the burden of the Commonwealth Bank loan. The reserve on the sale was now fixed at only $83,500.

37. Fourth, the Marrons, at the suggestion of Mr Devine, decided to complete the purchase of the hotel and conduct the business using a discretionary trust and corporate trustee. For this purpose they were referred by Mr Daunt to William G. Cluff Pty Ltd, a firm of accountants practising in Ballarat. Mr Cluff apparently recommended that this be done and Byrne Jones & Torney were duly instructed to prepare the necessary documents. No criticism of this advice was made at trial nor was there any criticism of Byrne Jones & Torney's performance of these instructions. The trustee, B.J. Marron & Son Pty Ltd ("the Marron Company"), was incorporated in January 1993. It was nominated as the purchaser of the hotel and it became the tenant of the hotel. As will be seen, the interposition of the Marron company into the venture causes difficulties in analysing the nature of the obligations owed by Byrne Jones & Torney to the Marrons and in approaching the consequence of a breach of these obligations, if it be found to exist.

40. On 1 March 1993 the purchase was completed and the Marron company went into possession of the hotel. Stock was taken and valued at $16,260.62, and the adjustments were calculated at $7,677.12, a total of $23,937.74 which was now payable by 30 April 1993. When that date arrived the Marrons were unable to pay it. The vendor accepted $4,000 on account and agreed to receive the balance by weekly instalments of $4,000 plus interest.

43. It was apparent from the outset that the business was short of working capital. The position was not made easier by the fact that it was required to support three families. Meantime, the auction of Tootgarook which was fixed for 20 March 1993 had not been a success. It appears from the settlement statement of 19 July 1993 that the property was sold for only $68,000 and that this was almost wholly used in discharging the Commonwealth Bank mortgage.

46. By 30 June 1993 the business had traded at a net loss of $25,993 for the four month period. The accounts show that stock had been reduced by 25% to $12,035 and that current assets were $16,967 as against current liabilities (not including loans to the venturers) of $48,142. Of these liabilities, trade creditors represented $44,441. Wages were running at over $10,000 per month, a little less than 50% of gross profit.

49. On 27 July 1993 Mr Bernard Marron returned to Byrne Jones & Torney to ask Mr Devine for a loan increase of $20,000. This was refused. Mr Devine's file note, however, shows that the business was in considerable difficulties only five months after it had commenced. The rent of $5,915 per month was two months in arrears with another payment due within days. Payments under the Yarrmu loan of $1,546.35 were one month behind with, again, another due within days. Suppliers were owed $14,500 and monthly sales had fallen from $61,767 for March to $46,574 for June. And things did not improve. It appears from a letter from the landlord dated 6 September 1993 that the May rental had been paid but nothing since then. The rental then outstanding was $23,660. Little money, too, had been paid to Yarrmu. No instalments after June were paid by 12 October 1993 and the total then due including penalty interest stood at over $7,000. On 8 October 1993 Mr Bernard Marron and his son, John, were able to borrow $30,000 from friends, William John Giani and Maureen Elaine Giani, but it was to no avail. The business steadily declined and it became increasingly apparent that it was doomed.

52. Richard left the hotel in October or November 1993 and returned to retailing. He obtained a position at Tuckerbag Supermarkets, returning to assist at the hotel on Saturday nights or other busy periods. He rejoined Coles-Myer in September 1994.

55. On 12 January 1994 Mr John Marron applied to rejoin the Victoria Police and he was accepted. He commenced as a probationary constable in October of that year.

58. Mr Bernard Marron and his wife stayed on at the hotel throughout 1994. On 18 May, without any instruction to do so, Byrne Jones & Torney on behalf of the Marron Company exercised its right of option for a further 364 days. In September of that year the landlord, being concerned about a lack of reduction in rental arrears, requested Mr Marron on 14 September 1994 to place the hotel on the market. On the following day the Marron Company instructed Chatham Daunt to find a purchaser at a price of $220,000. The broker was not immediately successful and on 27 October Byrne Jones & Torney, acting on behalf of the landlord, gave to the Marron Company a notice of breach of covenant under the terms of the lease and warned of the prospect of eviction. On 14 March 1995, acting on behalf of the same client, Byrne Jones & Torney informed the Marron Company that its right of possession of the hotel was determined and on the following day, acting on behalf of Yarrmu they gave notice of default under the mortgage. The Marrons vacated the hotel soon after and the business was sold on 26 May 1995 to Bandanna Holdings Pty Ltd for $115,000.

61. Sometime prior to 1 June 1995 a provisional liquidator of the Marron Company was appointed and on 20 July 1995 a liquidator was appointed by the court.

65. Against this background, two proceedings have been brought in this court against Byrne Jones & Torney. The first, No. 4592 of 1996, in which the Marron Company was plaintiff, has been settled by agreement reached by the parties on 29 September 1998. The second, this proceeding, has been brought by the two original venturers, Bernard Marron and John Marron, and by Richard Marron who joined them in February 1993. In this proceeding the three plaintiffs each seeks to recover from Byrne Jones & Torney damages representing his capital investment in the venture, his loss of income during the period of his involvement and, where appropriate, the loss of opportunity in his future career. Mr Bernard Marron and Mr John Marron seek similar damages against Chatham Daunt. Mr Richard Marron does not pursue his claim against this defendant.

69. The cause of action of the first and secondnamed plaintiffs against Chatham Daunt is negligent misstatement. They allege that Chatham Daunt represented to them that the lease which was available over the Black Hill Hotel was suitable for their purpose. In particular, Mr Daunt is said to have told them that the lease offered by the landlord was "the best you can get" and that they could stay as tenants forever. Mr Daunt does not dispute the thrust of this. He agreed that he described the lease on offer as one of the better quality leases available in the industry and that he recommended it to them. He agreed that he told them that this lease was on-going indefinitely. He nevertheless maintained that these were accurate statements.

72. In fact, the lease which is a standard form of lease offered by the Ballarat Brewing Company Ltd, the landlord in this case, is for a term of 364 days with one option of a like term. Accordingly, the tenant has no security of tenure beyond this to support its capital investment. In this respect it is to be contrasted with the longer term customarily offered by private landlords of hotels, which may be five years with two options of a like term. The plaintiffs put it that the lease was not appropriate for their requirements which were disclosed to Mr Daunt. These were that it should give them a secure term for five years until Mr Bernard Marron retired.

75. The first and second plaintiffs' claims against Chatham Daunt face a number of difficulties which were never overcome. I am not satisfied that the two Marrons communicated to Mr Daunt that they wanted a fixed term of five years. In any event, as Mr Devine pointed out, such a term would be entirely inappropriate for hotel premises, for it was insufficiently long to support the lessee's investment in goodwill. In the Marrons' case, such a term would have the added difficulty of providing no firm tenure for John to continue the business after his father's retirement. The evidence shows that it has been the practice of the Brewery to renew its leases as they fall due. And, since 1972 when it began a sell-down program of some of its hotel properties, the brewery, where it determines to sell the freehold, first offers it to the tenant and, if the tenant is not prepared to purchase, it offers the tenant a 15 years lease. The reference in the transcript at p.684 to a 50 year lease is, I think, an error. The brewery lease in this and in other respects was described by the solicitor, Mr Morrow, as "a very paternalistic lease". He said that some tenants object to this style of operation while others appreciate it; it depends very much on the tenant. Mr Devine said that the brewery lease is seen by hotel brokers generally in terms of its value as the equivalent of 15 year lease. I accept this evidence. I conclude that the representations were not false.

78. In any event, there is no evidence that anybody suffered any loss as a consequence of Mr Daunt's statement, even if it be erroneous and negligently so. By the time the Marrons saw the lease they had already signed the contract and it is unlikely that they could then have withdrawn on account of some deficiency in the leasehold. They say that they entered into possession without knowing the limited term of the lease they had executed. Let this be assumed. Their inability to pay their way was not caused by any deficiency in their tenure. Having persistently defaulted, their tenure under any lease would have been precarious. Finally, there is no evidence that the sale price of the hotel to Bandanna was affected by the type of lease offered. The claims against Chatham Daunt must therefore be dismissed.

82. The plaintiffs' claims against Byrne Jones & Torney are for the same losses but their causes of action are different. They abandoned at trial the negligent misstatement claims which were made in paragraphs 19-23 of the amended statement of claim. Those remaining are claims for breach of retainer, negligent performance of the retainer and for breach of fiduciary duty.

86. Fundamental to all of these claims lay the undisputed fact that Byrne Jones & Torney had multiple interests in the transaction. It will be recalled that the Marrons and the Marron Company purchased the hotel business from Billru Pty Ltd. They were financed by Yarrmu and were to be financed by Ballarat Securities. The landlord was the Ballarat Brewery. The interests of Byrne Jones & Torney in this transaction were as follows:

1. Billru Pty Ltd. Byrne Jones & Torney acted for this party, the vendor.

2. Yarrmu Pty Ltd. Byrne Jones & Torney acted for this party which was a company established in 1954 by Murray Byrne, a partner in the firm, for the purposes of lending money on the security of hotel leaseholds. Its name is an anagram of his Christian name. Yarrmu is run by its majority shareholder and director, Thomas John (Tim) Byrne a son of Murray Byrne who was engaged by Byrne Jones & Torney since 1954 as law clerk, managing clerk and, since 1991, as consultant. References in this judgment to Mr Byrne are to Mr Tim Byrne. He is not a lawyer, but through his family members, he has a connection with Byrne Jones & Torney. Through Mr Byrne, Byrne Jones & Torney, also, had therefore a financial interest in the Yarrmu loan.

3. Ballarat Securities. Byrne Jones & Torney acted for this party which offered finance to the Marrons. Ballarat Securities is a solicitors' investment company operated by members of the Byrne family. Byrne Jones & Torney, therefore, had also a financial interest in its loan to the Marrons although it is not clear whether the firm or its members were to provide the loan money. In any event, this loan did not proceed to settlement.

4. Ballarat Brewing Company. Byrne Jones & Torney acted for this party as lessor. The brewery is a public company which in 1958 sold off its brewing interests and thereafter conducted the business of investor. It owned and leased out some 68 hotels for the most part in Western Victoria. Mr Tim Byrne became a director of the Brewery in 1974 or 1975 and its chairman in 1991. The Brewery is a public company but members of the Byrne family had a substantial holding of its shares and, until latter years, they ran its operations. Byrne Jones & Torney, therefore, had also a financial interest in its lease to the Marrons.

93. The Marrons were introduced to Byrne Jones & Torney as prospective purchasers of a brewery hotel with a need for finance. The witnesses said that there was never a formal retainer of the solicitors to act for them. It just developed. Mr Devine said that this was natural; if they had not retained Byrne Jones & Torney they would not have been offered finance.

96. It is convenient that I set out at this stage my findings as to the knowledge of the Marrons of these multiple interests at the time of the retainer. They were given a brochure by Chatham Daunt at the time they first saw the Black Hill Hotel. This document describes the property and, on the back, contains information as to the turnover, rates, rental and the like, and the following:

This would show to the reader that the firm was acting as solicitors for the vendor. The Marrons read the brochure and I find that they were aware of this involvement by Byrne Jones & Torney in the transaction from the outset. I find, too, that the Marrons knew, before they first went to the office of Byrne Jones & Torney, that that firm might offer them finance and, indeed, they were introduced to Mr Devine for that express purpose. I find, too, that on the first occasion that they attended the office of Byrne Jones & Torney they met Mr Byrne and that he made it clear that he was involved in providing finance and further that he was the chairman of the brewery, their prospective landlord. Although he said nothing of this, it is likely that the Marrons inferred from his conduct that he, too, was associated with the firm that bore his name. It would not be difficult for them to infer from this as I find they did, that Byrne Jones & Torney also had an interest in the brewery. I am satisfied, therefore, that at this time the two Marrons were aware of these matters and that they were aware of them at the time that Byrne Jones & Torney commenced to act as their solicitors.

101. It is well established by high authority that the mere fact that the solicitor acts for more than one party in a non-contentious transaction is not a breach of any duty owed to any one of the clients or an impropriety: Clarke Boyce v Mouat [1994] 1 AC 428 at 435. Nevertheless, the law frowns on the practice which has been referred to rather colourfully as "a solicitor's double dealing as between one client and another": Council for the Law Institute of Victoria v A Solicitor [1993] VicRp 26; [1993] 1 VR 361 at 366, per Tadgell J. The attitude of the law to this practice and the reasons for it are, if I may say so, well expressed in a passage from an unreported judgment of Wootten J in Thompson v Mikkelsen (Supreme Court New South Wales, 3 October 1974):

"It seems to me that the practice of a solicitor acting for both parties cannot be too strongly deprecated. It is only because of the possibility that something may be wrong in a transaction, or may go wrong during its implementation, that the employment of highly trained professional people at professional scales of remuneration can be justified. To scrutinise a transaction to discover whether something is wrong in a way that may affect his interests, or to notice and deal with something that goes wrong during the transaction, is what a party employs such a person for. He is entitled to assume that that person will be in a position to approach the matter concerned with nothing [in mind] but the protection of his client's interests against [those] of the other party. He should not have to depend on a person who has conflicting allegiances and who may be tempted either consciously or unconsciously to favour the other client, or simply to seek a resolution of the matter in a way which is least embarrassing to himself."

105. This passage has been cited with approval by Burchett J in Wan v McDonald [1992] FCA 4; (1992) 33 FCR 491 at 511, by Foster J in Stewart v Layton [1992] FCA 618; (1992) 111 ALR 687 at 709 and by Rolfe J in Beach Petroleum NL v Abbott Tout Russell Kennedy (1997) 26 ACSR 114 at 256, although in the last case his Honour doubted the general application of the first sentence. The entitlement of the client to the undivided attention and interest of the solicitor is put in jeopardy in two separate situations at least. See O'Reilly v Law Society of New South Wales (1988) 24 NSWLR 204 at 213, per Mahoney JA. First, where there is either a conflict of allegiance leading to a conflict between the solicitor's duty to the client and the solicitor's personal interest or where such a conflict exists between the separate duties of the solicitor to two clients or where both such conflicts exist at the same time. Second, where the solicitor has information from a confidential source which may be relevant to the interests of the client and the question then arises whether the solicitor, owing allegiance to the source and to the client, should disclose it. The principle with which I am concerned imposes a duty in each case upon a solicitor. I observe at this stage that, although the persons involved were not qualified solicitors, it was not suggested on behalf of Byrne Jones & Torney that the principle had any different application to the firm by reason of that fact.

109. I have used the expression "conflict of allegiance" which was adopted by Wootten J in the passage quoted above in deference to the distinction which might exist between actual conflicts of interest and potential conflicts of interest. See Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 92, per Richardson J; Beach Petroleum NL v Abbott Tout Russell Kennedy (1997) 26 ACSR 114. In a sense, any transaction contains within it the potential for conflict, and it may be said that breaches of fiduciary duty or of ethical standards occur only where this potential becomes a reality. I am not at all certain, however, that the distinction is always available or helpful. A solicitor retained to act in a transaction who fails to disclose to the client a personal interest in that transaction is in breach of fiduciary duty and the transaction, however favourable to the client, may be set aside at the instance of the client; Clarke Boyce v Mouat [1994] 1 AC 428 at 437. In Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, solicitors were held to be in breach of fiduciary duty where they have failed to bring to their client mortgagors' attention that the mortgage that they were handling was in fact granted to the solicitors as mortgagees. Where an agent fails to disclose to a principal that he or she is acting as agent for another in the same transaction, the agent is presumed to act corruptly or fraudulently unless this is disproved: Lintrose Nominees Pty Ltd v King [1995] VicRp 35; [1995] 1 VR 574 at 577, per Tadgell J, Fullagar J concurring.

112. The issue of multiple engagement has long exercised the minds of those who have been concerned with the ethical obligations and practices of solicitors. The history of this debate is to be read, not only in the judgment of Tadgell J in Council for the Law Institute of Victoria v A Solicitor [1993] VicRp 26; [1993] 1 VR 361, but in the pages of the Law Institute Journal. I refer to the anonymous article "Country Practitioners say conflict of interest change would put all dealings on an adversarial basis" (1984) 58 LIJ 48; Lewis, "Solicitors in Conflict" (1984) 58 LIJ 558; Mainwaring, "Conflict of Interest Revisited" (1985) 59 LIJ 570; and to the anonymous article "Clearing the Air on Conflict" (1986) 60 LIJ 780. The problem is particularly acute in regional or country towns where the number of firms of solicitors may be few. This is not the case in Ballarat. It is tempting to remind oneself that in most conveyancing matters the parties share the common objective of completing the transaction and that the documents are often so standard in form that the question of conflict does not arise. It may be acknowledged too that one cannot speak in the same terms of all types of conveyancing transactions. The difficulty, however, which must be acknowledged is that where a party is contemplating retaining a solicitor who acts for another, even in these circumstances, the party will often not recognise a conflict which is possible, pending or even then existing. It is the solicitor who should in the normal course be the first to apprehend this. And so the parties rely upon the solicitor, not only to have the integrity to withdraw when conflict arises, but also the perception to sense its pendency before it arises in fact. The solicitor, then, must be constantly vigilant and alert to perceive the possible emergence of a conflict of interest, not only between the clients but between the client and the solicitor. What is involved here is that the solicitor is entrusted by the client with the task of acting as a lookout for and then as an arbiter of this conflict and, where this does or is likely to arise, perhaps to act in a way which may be contrary to the solicitor's own interest: Council for the Law Institute of Victoria v A Solicitor [1993] VicRp 26; [1993] 1 VR 361 at 367, per Tadgell J. This is a trust which not every client would be content to confer upon another person, even a solicitor. It is one which a client should not be expected to give without a proper understanding of its implications. To take as an example the situation which counsel for the plaintiffs said arose in this case. Having entered into a conditional contract of sale, circumstances changed which made it expedient for the Marrons to withdraw if that were possible. It was submitted that the solicitor, having only their interests as heart, might have been able to extricate them on the ground of non-fulfilment of a condition, or at least have advised them that such a course was possible. Such a solicitor would not be distracted from this task by any concern that the interests of other parties would thereby be disadvantaged.

115. A further consideration which is mentioned in the debates is that the public expectation of the solicitor's function may be diminished where they are seen to accept substantial fees for applying professional skills to protect the interests of conveyancing clients and yet, by accepting multiple employment, they belie the need for such protection.

118. In any event, the concern of the law to protect the client as beneficiary of the fiduciary duty owed by solicitors, must accommodate the fact that, in some cases, the fiduciary is content to have their solicitor act for another party to the transaction and may even require this. And so the law, being unwilling to impose duties where they are not required, admits the possibility that the client may consent to the existence of the potential conflict. But this consent must be an informed consent. This requires the solicitor to disclose to the client who is in full command of their faculties, not only the circumstances which do or may give rise to the conflict, but also the fact of existing conflict or the risk of future conflict and the implications of and the risks to which these circumstances may give rise: Clarke Boyce v Mouat [1994] 1 AC 428 at 435. Where the parties to a transaction are, nevertheless, content to proceed on this basis, the solicitor may properly act. I place to one side those cases where, notwithstanding such consent, the circumstances are such that it would be impossible for the solicitor to act fairly and adequately for both parties: Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 90, per Richardson J.

121. I return to the facts of this case. It was said that the fact that Byrne Jones & Torney acted for all parties was brought to the attention of the Marrons before they signed the contract and engaged the solicitors to act. I have found this to be the case. It is said that they, therefore, acquiesced in this. It is clear enough that on the one, or perhaps two, occasions that they attended the office of Byrne Jones & Torney they saw no solicitor. Mr Devine and Mr Byrne did not explain to them any more than the fact that they acted for all parties. The Marrons can hardly be said to have exercised an informed consent at this time to retain Byrne Jones & Torney in the face of potential conflict when the fact of this and the risks and implications of it were never explained to them; when they were never told to seek independent representation or advice; when, to the contrary, the retainer was obtained as a condition of their obtaining a loan which they sought; and, finally, when they presented, as I find, as commercially naive persons.

124. I should not leave this topic without making mention of the acknowledgement which was later obtained in this case pursuant to the Solicitors (Professional Conduct and Practice) Rules 1984 R.10. As the High Court observed in Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 466, the rule prohibits a solicitor from acting for multiple parties in certain transactions unless and until a written acknowledgement is obtained. The mere execution of such a document, however, does not satisfy the requirements of the fiduciary obligation. In this case, Byrne Jones & Torney accepted the multiple retainer on or about 18 December 1992 without first having obtained any written acknowledgement. An acknowledgement in the prescribed form was presented to Mr Bernard Marron by Mr Devine on 8 January and signed by him on behalf of the Marron Company which had yet to be incorporated. He signed this acknowledgement at the same time that he signed the documents for the incorporation of that company, documents for the transfer of the liquor license and when he paid $1,000 on account of costs. It was suggested by counsel on behalf of Byrne Jones & Torney that, given the knowledge of the multiple interests of his client in the transaction, the signing of this document is of little significance. Since its purpose in the present circumstances was to bring to the attention of the client the fact that the solicitor was acting for other parties, the document had no role to play except to remove any doubt that the Marrons were aware of the true state of affairs. I find myself unable to agree with this. The mere execution of the document does not discharge a solicitor's obligations as a fiduciary because the solicitor must do more than disclose the multiple interest. The cases to which I have referred make it clear that a solicitor must inform and advise the client of the implications of the multiple retainer.

127. It is common ground that neither Mr Devine nor Mr Byrne touched upon this matter in December 1992. Mr Devine said that, at the time of the execution of the acknowledgement in January, he explained to Mr Marron that it was a document to notify him that Byrne Jones & Torney was acting for other parties in the transaction and "if we perceive a conflict of interest that can't be resolved between the parties, he should get independent advice". Mr Marron says no such explanation was given. Accepting, however, Mr Devine's version, the acknowledgement was too late to satisfy R.10 and the advice given, likewise, too late and, in any event, inadequate to satisfy the obligation of a solicitor towards one of multiple clients.

130. It must be acknowledged that solicitors do not carry on practice solely as legal advisers. They have, traditionally, provided other services, such as the procuring of finance. Recent changes to the profession have extended these activities and are likely to do so in the future. The inclusion of these non-legal services may create a difficulty in the application of the high standard and duties owed by solicitors as fiduciaries to their clients; it should not, however, be permitted to dilute them. But this is not the present case, where the functions performed by Byrne Jones & Torney for the Marrons and the Marron Company were, for the most part, legal services in the traditional sense of that term. In addition, they procured finance. Where solicitors procure finance for a client, it may happen that they act, in addition, for the financier and sometimes they will even have a personal interest in the loan. Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 was such a case. In O'Reilly v Law Society of New South Wales (1988) 24 NSWLR 204 at 213, the Court of Appeal warned of the dangers of even this practice and counselled caution. Mahoney JA at 24 NSWLR 216 quoted with approval the following passage from the judgment of Street CJ in Law Society of New South Wales v Harvey [1976] 2 NSWLR 154 at 171 in these terms:

"A conflict of interest which is avoidable, and ought to be avoided, is that which arises from a deliberate proposal of the solicitor that his client deal with him.... In varying degrees the trust of and reliance upon the solicitor to act fairly and independently arising from the initial preparedness of the solicitor and client to trade may remain as the reason why the client ultimately deals with the solicitor and not someone else. It is difficult to be sure that it does not. In the absence of very special circumstances, a solicitor who promotes himself as the dealer with his client misuses his position. A solicitor who constantly promotes dealings with various clients clearly misuses his position, and puts it beyond his capacity to observe his primary duty to his clients. The price of being a member of an honourable profession, whose duty to his client ought not to be prejudiced in any degree, is that a solicitor is denied the freedom to take the benefit of any opportunity to deal with persons whom he has accepted as clients. Therefore, he ought neither to promote, suggest nor encourage a client to deal him, but rather should take all reasonable steps positively to avoid dealing directly, or indirectly, with his client. There are of course exceptional cases where the transaction may be in the special interest of a particular client, but such cases will be isolated and need to be dealt with [sic] conscientious regard for the procedures already referred to."

134. Mahoney JA then made the following further observation:

"The role of the solicitor qua the seeking and providing of finance has, at least in this country, a long history. A person may come to a solicitor seeking to borrow on the security of his real estate: another person may come to the solicitor for the purpose of lending on such security. It is common experience that a solicitor brings them together and has the advantage of acting as solicitor on the mortgage transaction. I would not wish to suggest that the conventional transaction involves professional misconduct. Nor is there necessarily misconduct in a solicitor acting habitually in transactions of this kind. There will be the usual problems where he acts for both parties. But there will not, of necessity, be misconduct in such a case."

138. Kirby P in the O'Reilly case approved these passages and at 24 NSWLR 209-10, added this:

"I should not, for my part, wish this decision of the Court to be seen as any relaxation of the stringent obligation on solicitors which is there set out. It is not an obligation in every case to avoid links with finance companies or mortgage brokers because such links may inescapably involve the solicitor in the appearance of a conflict of interest and duty. Searching out and providing finance, particularly for land title conveyancing, has long been a function of solicitors in our community. That function can be beneficial to clients, especially those inexperienced in financial matters who look to the solicitor for guidance. Access to finance in such circumstances may be in the best interests of the client. But where the solicitor has an interest in the finance provided, however indirect, there is an inevitable risk of the reality, or appearance, of a conflict of interest and duty. That risk can only be avoided by the most scrupulous conduct on the part of the solicitor. Depending upon any special terms of the retainer, such conduct will oblige him or her to do at least the following:

(a) to disclose the interest fully and candidly to the client, preferably confirmed in writing in case of later disputes or inquiries;

(b) to advise and facilitate the provision of independent advice where that is appropriate and to do so in more than a perfunctory way; and

(c) to advise on, and facilitate access to, alternative sources of funds, particularly where these may be to the client's advantage, being more beneficial than those which the solicitor can provide directly or through any associated company in which he or she has an interest, however indirect.

By these stringent standards, I am not convinced that the appellant met his obligations to all of his clients. I regard departure from the stringent requirements as a very serious infraction of the solicitor's duty as a member of an honourable profession. Quite apart from the ethical reasons for candour, full disclosure and the provision of the best possible advice to clients, uncontaminated by the risk of personal interest, there are practical reasons which support what I have said. Clients trust solicitors to provide them with neutral and beneficial advice. They do so because it is the requirement of the law and the rule of the profession that the solicitor must not put himself or herself into a position where any lesser standard is observed. If it became common, or even regularly the case, that solicitors made undisclosed private gains, directly or indirectly, from finance companies or other sources with which they were associated, the faith of the community in the integrity and trustworthiness of solicitors would be seriously shaken. That would affect adversely honourable members of the profession. It would reflect adversely upon the profession's reputation for integrity. It will therefore not be tolerated by the court."

146. Two things must immediately be said about these passages. First, they are found in a judgment which was concerned with professional misconduct in the context of a disciplinary proceeding, and not, as in a case like the present, a breach of fiduciary or other duty. See O'Reilly v Law Society of New South Wales (1988) 24 NSWLR 204 at 219-20, per Clarke JA. Second, the application of these observations to a case such as this must have regard to the actual relationship between the Marrons and the solicitors: Beach Petroleum NL v Abbott Tout Russell Kennedy (1997) 26 ACSR 114 at 255, per Rolfe J; Clarke Boyce v Mouat [1994] 1 AC 428 at 436. It is to this that I now turn.

149. I have already set out in summary my findings as to the circumstances which brought the Marrons to the office of Byrne Jones & Torney. Mr Devine and Mr Byrne were introduced to them as persons who were able to lend them money or who could procure loans for them. It was only later that the relationship of solicitor and client arose. It may have already been in existence at the time of the completion of this first meeting some days before the contract was signed for Mr Devine suggested the insertion of the two special conditions. I think, however, that the true position is that it came into existence on 18 December when the Marrons went to the solicitor's office after signing the contract. As to the terms of the retainer, I was told by counsel that the Marrons do not contend that Byrne Jones & Torney "had a duty to advise [them] as to the commercial efficacy of the transaction", so I am not concerned with this aspect of the relationship which may arise between a solicitor and a conveyancing client. Byrne Jones & Torney were retained by the Marrons, and afterwards by the Marron Company, merely to give effect to the transaction which they had previously entered into.

153. Clients are entitled to expect that solicitors will exert themselves single-mindedly in their interests and to make available any knowledge which they have which is material to the client's interests. A solicitor with multiple retainers may be in breach of fiduciary duty by withholding such information from one of its clients. As the analysis of Rolfe J in Beach Petroleum NL v Abbott Tout Russell Kennedy (1997) 26 ACSR 114 at 256, makes clear, this last proposition is not an unqualified one. The requirement of materiality involves an examination of the relationship between the non-disclosed information and the interests of the client and also of the terms of the solicitors' retainer. Furthermore, the non-disclosure must be intentional. This means that solicitors must, first, have the knowledge in question; and, second, have withheld it as "an intentional act based on the desire to prefer the interests of one client to another": 26 ACSR at 264. "An unconscious omission which happens to benefit one principal at the expense of the other does not constitute a breach of fiduciary duty, though it may constitute a breach of skill and care": Bristol and West Building Society v Mothew [1998] Ch 1 at 19, per Millett LJ.

157. In their amended statement of claim the plaintiffs rely upon much the same facts as constituting breaches by Byrne Jones & Torney of the terms of its retainer, breaches of its fiduciary duty and breaches of duty of care. Before I turn to these it is necessary to underline that the clients on 18 December 1992 were Mr Bernard Marron and Mr John Marron. On or shortly after 8 January 1993 the Marron Company was incorporated and became the client. The evidence does not show that, thereupon, the Marrons ceased to be the clients of Byrne Jones & Torney and I find that they remained clients after that date. In February 1993 Mr Richard Marron joined the venture at a time when the purchase in the name of the Marron Company was about to be completed. I find that he never became a client of Byrne Jones & Torney.

160. The allegations of breach in each case were factually similar. I shall deal with them under four general headings:

164. Under this heading I have gathered a number of allegations. First, that Byrne Jones & Torney acted for all of the parties to the transaction and that its members were associated with Yarrmu: statement of claim, paragraph 26(a)(i)(ii)(iii)(iv), (c)(i)(ii); paragraph 28(a)(i)(ii)(iii)(iv), (b)(i)(ii); paragraph 32(a). I have found these allegations to be factually correct.

167. Second, that Byrne Jones & Torney failed to advise Mr Bernard Marron and Mr John Marron to instruct other solicitors or to obtain independent advice: statement of claim, paragraph (26)(a)(x); paragraph (28)(a)(x); paragraph (32(f). This also is factually correct.

170. Third, that Byrne Jones & Torney failed to make full disclosure of the interests of the firm in the transaction. In particular it failed to disclose that its members had an interest and a conflicting interest in the mortgagee, that it had a conflict of interest in acting for the vendor, the mortgagee and the lessor of the hotel business: statement of claim, paragraph 28(c)(i)(ii); paragraph 33(a)(d). I have found that the multiple interests of Byrne Jones & Torney were disclosed, but that they were not fully explained.

173. Fourth, that Byrne Jones & Torney failed to advise the two Marrons as to the merits of the Marron Company executing the lease from the brewery and the mortgage to Yarrmu and completing the purchase, given the existence of these conflicts: statement of claim, paragraph 26(a)(viii)(b); paragraph 28(a)(viii); paragraph 32(g). It is not altogether clear what is intended by these allegations. It is certainly correct to say that no advice as to the merits of those things was given. None was sought and no complaint is made about any failure to advise upon the viability of the transaction.

176. Fifth, Byrne Jones & Torney procured the execution by the two Marrons as directors of the Marron Company of the lease of the hotel from the brewery and a mortgage to Yarrmu: statement of claim, paragraph 26(a)(ix); paragraph 28(a)(ix). This is also factually correct.

179. Bearing in mind that the only relief sought is damages, it is necessary to return to the concession which the plaintiffs made by their solicitors' letter dated 15 August 1998. It is in these terms:

"We confirm... in relation to the objected amendment to the statement of claim that we do not contend,

(1) that the loss for a breach of contract is to be determined by reference to the difference in value of what was paid for the hotel and what it was truly worth; and

(2) having advised us of the facts, that the solicitors then had a duty to advise us as to the commercial efficacy of the transaction."

I have found that the Marrons had bound themselves to purchase the Black Hill Hotel before they retained Byrne Jones & Torney as their solicitors to complete the purchase. I am satisfied, too, that no act or omission performed by Byrne Jones & Torney in the performance of their retainer about which complaint was made under this heading was performed in the furtherance of or influenced by the interest of any of its clients in the transaction other than that of the Marrons or the Marron Company. The difficulty with the allegations which I have grouped under this heading is that none of them, of itself, actually harmed any interest of the plaintiffs. The mere fact that Byrne Jones & Torney performed the tasks it was retained to perform cannot, in my view, amount to a breach of fiduciary duty. Even more so, it cannot amount to a breach of that retainer or a breach of a duty of care.

187. When the case was opened a great deal was made of the fact that the lease which was offered to the Marrons by the brewery was for a term of 364 days only with one non-assignable option for a similar term. It is alleged that this fact was not disclosed to the two Marrons by Byrne Jones & Torney: statement of claim, paragraph 26(a)(vii); paragraph 28(a)(vii), (d)(iii); paragraph 32(d); paragraph 33(b).

190. Mr Devine told me that at the first meeting with the two Marrons he explained the nature of the brewery lease including its term and its option. Mr Bernard Marron said he was told nothing about this and he expected to receive a long lease. Mr John Marron said that he first became aware of the term of the lease when he consulted his present solicitors in October or November 1994. Mr Devine said that this matter was specifically brought to their attention again at the time they signed the lease when they were taken through the document by him on 16 February 1993. On this occasion they signed a number of documents for the transfer of the licence, the mortgage documents and a number of promissory notes. The lease itself on p.23 contains an acknowledgement in the following terms.

"We appreciate that notwithstanding anything that may have been told to us by any Vendor Salesman or other person the term of our Lease if we exercise the option herein contained is two years and no more and that we have no right to any further renewal of the Lease or extension of its terms. This has been explained to us by [Mr R. Devine] who will witness our signature to this Statement and who stressed the fact that whatever the experience of the previous Lessee or of ourselves as a previous tenant of the Lessor we take a grave risk in paying to the outgoing Lessee any sum that we cannot reasonably expect to recover during the two year term of this Lease."

Under this acknowledgement, in the space provided, appear the signatures of the two Marrons. They said that the acknowledgement was not brought to their attention; they were simply presented with a pile of documents which they were asked to sign, where indicated by tags, and that they were left alone to do this. Mr Devine strongly denied this. There was no signature of a witness to this statement. In the place provided in the first line of the second paragraph there is inserted in handwriting: "Mr R. Devine". It appears that this is not his writing. Indeed, the writing appears to be similar to that of the person who inserted the date, 3 March, on the document. It may, therefore, be that Mr Devine's name was inserted sometime after 16 February 1993 when the statement was signed by the Marrons. But it is not necessary for me to determine this.

195. Insofar as it is necessary for me to resolve this conflict as to the knowledge of the Marrons of the term of the lease at the time of settlement, I was pressed by counsel for Byrne Jones & Torney with the fact of the signing by them of this acknowledgement and with the fact that they made no complaint after receiving a letter from Byrne Jones & Torney dated 10 March 1993 in which this was clearly set out. Against this, I was reminded of their naiveté. The fact that they exercised their option within the first year is of no significance because it appears that Byrne Jones & Torney did this on their behalf without any specific instructions to do so. Ultimately, I am driven to make a comparative assessment of the witnesses. Mr Devine struck me as an intelligent man of considerable experience. I have already set out my assessment of the two Marrons.

198. My attention was drawn to a subsequent incident regarding the sale to Bandanna in 1995 as indicating the attitude of Mr Devine to his various clients, as indicating his lack of competence and, ultimately, as indicating his lack of credit. By contract of sale dated 26 May 1995 the brewery sold the hotel business to Bandanna Holdings Pty Ltd. The contract shows that Byrne Jones & Torney again acted as solicitors for both the vendor and the purchaser. On 1 June 1990 Messrs Hall & Wilcox the solicitors for the provisional liquidator of the Marron Company wrote to Mr Devine enquiring how it was that the brewery sold the business and asking if it had taken a transfer of the security from Yarrmu. The brewery, of course, had no right under the lease to sell the business. Mr Devine then prepared an agreement whereby Yarrmu sold to the brewery for $58,500 the furniture plant and equipment of the hotel and on 15 June 1995 sent it to the brewery for execution. On 23 June Byrne Jones & Torney wrote to Hall & Wilcox advising them that the plant and equipment of the hotel had been sold to the brewery by agreement dated 21 April 1995. This assertion is false and, indeed, the sale document appears to have been brought into existence to deceive the liquidator and to conceal Mr Devine's error in preparing the contract of sale. Mr Devine was asked about this. He said that he did not write the letter of 23 June. The following exchange then took place between counsel for the plaintiff and Mr Devine:

"Q. Well, I appreciate that. But what has happened of course, when the brewing company sold the plant and equipment to Bandanna Holdings in May of 95, it actually didn't have any entitlement to the plant and equipment, did it? A. I am not sure if that agreement wasn't reached before that. It may not have been put in writing. Q. Okay. So you would say that the subsequent signing of the agreement was merely to give effect to something that has transpired by Mr Tim Byrne in his Yarrmu hat and Mr Tim Byrne in his Ballarat Brewing Company hat? A. I would think with Mr Griffin from the Ballarat Brewing Company."

The next witness was Mr Byrne. He was asked no question about the transaction. Mr Griffin, the Chief Executive Officer of the brewery, of whom a witness statement had been provided, was not called. I find that the preparation of the sale agreement was a shabby and dishonourable attempt by Mr Devine to cover his own error. No party invited me to make a finding of fraud and for that reason I do not do so. I regret, however, that any confidence I might have had in Mr Devine as a witness of candour and truth is destroyed by this evidence. I accept the evidence of the two Marrons that the lease and the documents which they signed in February 1993 were not explained to them at the time. They were simply left to execute them. I accept their evidence that they were told nothing of the terms of the lease when they were interviewed by Mr Griffin, on 18 December. I find that the term of the lease was not brought home to them before they took possession of the hotel in March 1993. I am, however, unable to conclude that this failure is a breach of any fiduciary duty, for it was not occasioned by an conflict arising out of the multiple retainer, nor was it influenced by any duty or allegiance owed to another client to the transaction: Bristol and West Building Society v Mothew [1998] Ch 1 at 16-17, per Millett LJ. It may well, however, amount to a breach of a term of the retainer or a breach of duty of care.

203. This does not, however, resolve the matter in favour of the plaintiffs. On 18 December 1992 they had entered into a contract to buy the hotel business which included in General Condition 4, a condition that they should obtain a lease on the terms and conditions set out in the schedule. The only term and condition there to be found was a stipulation that the rental would be "$1300 per week (to be reviewed on approval)". The Marron Company executed the lease for a term of 364 days at a rental of $70,980.00 per annum, that is $1,365 per week. The Marrons entered into possession on 1 March 1993. The difficulty for the plaintiffs is that their inability to make a success of the business thereafter had nothing to do with the term or the terms of the lease. Likewise, the fact that they were obliged to give up possession in 1995; their term of whatever length was liable to be determined as a consequence of their persistent non-payment of rent. They have not contended that the lease which they were offered was less advantageous than any they were entitled to obtain under the contract with Billru. They have not alleged that the value of the business which they bought was greater than the price they paid. There is no evidence that its value would have been greater if their lease had had a longer term. In short, they have shown no loss has having been directly occasioned by the failure of Byrne Jones & Torney to explain to them the term or the terms of the lease which they executed.

207. The evidence showed that, early in 1992, a supermarket conducted by Jewell's Food Stores in Creswick Road applied to the Liquor Control Commission for a take-away liquor licence. Its application was opposed by the local AHA members, they being represented by Byrne Jones & Torney. Notwithstanding these objections, the licence was granted and Byrne Jones & Torney's clients appealed. The appeal was heard in October 1992 but no decision had been given when the Marrons inspected and purchased the Black Hill Hotel which was a little over one kilometre distant from the supermarket. Both Mr Devine and Mr Byrne were aware of this in December. Mr Byrne said that the application was of concern to him as chairman of the brewery because he always opposed any additional outlet in the Ballarat area. Although both he and Mr Devine did not think that the grant of the licence would have a significant impact on existing traders, Mr Byrne said that he was determined to make a stand and resist the application.

210. Against this background it was alleged that Byrne Jones & Torney failed to advise the two Marrons that the licence had been granted to the Jewell Store: statement of claim, paragraph 26(a)(vi), (b); paragraph 28(a)(vi), (d)(ii); paragraph 32(e); paragraph 33(c). Again, the allegation is factually correct but, again, it does not assist the plaintiffs.

213. The obligation of a solicitor to their client is to divulge material information which they possess which the client is entitled to know in connection with the transaction: Beach Petroleum NL v Abbott Tout Russell Kennedy (1997) 26 ACSR 114 at 258, per Rolfe J. The fact of the successful licence application was to my mind not material information. I accept the evidence that the introduction of the bottled liquor outlet might affect competitors in Ballarat but the evidence does not show that it was likely to have a particular impact on the sales of the Black Hill Hotel. Nor does the evidence of the sales in the first few months of the Marrons' operation of that hotel suggest otherwise. It is true that bottle sales were less than expected, but Jewell's store did not commence trade until June 1993 by which time the sales began to increase. I do not find that Byrne Jones & Torney intentionally withheld this information from its client. I accept Mr Devine's evidence that Mr Bernard Marron discussed the matter with him in late January 1993 and that he, Marron, was keen nonetheless to proceed with the purchase. I do not accept that Byrne Jones & Torney is guilty of a breach of any fiduciary or other duty as alleged with respect to the Jewell licence.

217. In the contract for the purchase of the Black Hill Hotel the purchaser is described as "Bernard John Marron and John Marron and or Nominee". It will be recalled, too, that the contract was subject to conditions as to satisfactory finance being obtained by 13 January 1993 and as to the sale of Tootgarook by 2 February 1993. The allegations of breach relating to these matters are that the Marron Company was permitted to complete the contract notwithstanding that it was not obliged to do so, because it was not a party to the contract and because the special conditions had not be fulfilled: statement of claim, paragraph 26(a)(v), (b); paragraph 28(a)(v), (d)(i); paragraph 32(c); paragraph 33(e).

220. I can deal shortly with the first of these allegations. I find that the Marrons, acting on advice, instructed Byrne Jones & Torney to nominate the Marron Company as purchaser in substitution for themselves. Technically, it may be correct to say that, in these circumstances, the contract may not be specifically enforceable against the nominee, but the Marrons remained liable to complete: Tonelli v Komirra Pty Ltd [1972] VicRp 87; [1972] VR 737 at 740, per Smith J. There is no substance in this allegation.

223. As to the non-fulfilment of the finance condition, the evidence showed that on 18 December 1992 the two Marrons were given to believe that finance totalling $100,000 was or would be available. The availability of $50,000 from Yarrmu was confirmed on the spot by Mr Byrne. In due course, an offer to lend $50,000 was made by Ballarat Securities by letter dated 24 December. The condition, however, is in these terms:

"The purchasers receiving satisfactory finance by the 13th January 1993."

It was said that this condition as to finance was not satisfied because it required the receipt of finance, not an indication that it was available subject to certain conditions. I was referred to two decisions of this Court which held that a condition that a purchaser "obtain" a specified loan is not satisfied by the obtaining from a lender of a mere approval for such a loan: Tait v Bonnice [1975] VicRp 9; [1975] VR 102 at 106, per Menhennitt J, or by the mere acceptance by the purchaser of the terms of a prospective loan: Zieme v Gregory [1963] VicRp 34; [1963] VR 214 at 222, per Lowe, Smith, Gowans JJ. It follows on the authority of these cases that Mr Devine was in error when he concluded that upon the receipt of the letter of offer from Ballarat Securities the condition as to finance had been satisfied. On a proper analysis, if the purchasers had given notice terminating the contract on 13 January 1993, this notice would have been effective provided that the purchasers established that they had taken all reasonable steps to procure the finance but had been unsuccessful: Zieme v Gregory [1963] VicRp 34; [1963] VR 214 at 223. Byrne Jones & Torney gave them no such advice. At this point, however, the analysis parts company with reality. Mr Devine had no reason to give them any such advice. Nobody on 13 January thought that there was any difficulty with the finance and, in any event, the Marrons were then still keen to complete the purchase. The reason the finance became unavailable was due to the erroneous instruction given to Byrne Jones & Torney by Mr Bernard Marron that his daughter's property was available as first mortgage security. It is true that, if Byrne Jones & Torney as solicitors for Ballarat Securities had carried out a title search prior to 13 January, this would have disclosed the existing encumbrances and required Mr Marron to address the problem. It seems that this search was not then carried out and I am satisfied that the difficulty did not become apparent to Mr Devine until after 13 January. This is not a case of his failing to disclose a fact known to him to the detriment of his clients, the Marrons. Nor is it a breach of any duty of care or of any term of the retainer. There was no evidence that it is the duty of the solicitors for a borrower to search their own client's title in order to verify their instructions and I am not prepared to infer the existence of such a duty. When the true position became known to Mr Devine in late January or early February he brought it to the attention of the Marrons but it was then too late for them to withdraw for non-fulfilment of the finance condition.

228. The second condition required a binding contract of sale of the Tootgarook property by 2 February 1993. This condition was not fulfilled. I accept Mr Devine's evidence that he was instructed by Mr Bernard Marron on 4 January 1993 that the condition was no longer a problem because he had obtained bridging finance from the Commonwealth Bank pending sale of the Tootgarook property. I find that he thereby waived the second special condition. The Marrons were no longer thereafter entitled to withdraw on 2 February 1993 for its non-fulfilment had they wanted to do so.

231. Insofar as the plaintiffs rely upon these matters as breaches of fiduciary duty there is no substance to them. The non-disclosure by Mr Devine to the Marrons of their possible right to withdraw for non-fulfilment of the finance condition was not deliberate and was not associated with any conflict of interest. As to the altogether different question whether Mr Devine was in breach of a contractual duty or negligent in failing to advise his clients by 13 January 1993 that they might have the right to withdraw on this ground, I likewise find no breach for the reasons set out above.

235. I have, as far as possible, in this judgment ignored the fact that the nominated purchaser of the business was, not the plaintiffs nor the two Marrons, but the Marron Company. The introduction of this party creates enormous complications for the plaintiffs' claims which I shall mention briefly.

238. First, it was the company which, following incorporation became the client of Byrne Jones & Torney. Duties of a fiduciary nature, however, continued to be owed by the firm to the two Marrons, as well as to the Marron Company. In any event, there is no evidence that any such duties were owed to Mr Richard Marron who came on the scene in February to assist his father and brother. He did not seek or obtain legal advice or other legal services from Byrne Jones & Torney.

241. Second, the plaintiffs seek damages only. The measure of these is said to be loss of their life savings and, in the case of Mr John Marron and Mr Richard Marron, the loss of the income and other benefits which they would have earned had they not decided to abandon their careers and join their father in the hotel venture. In a real sense, any loss that was suffered was that of the company and not that of the venturers. It was the company that would suffer losses by trading or capital loss on the resale of the business. The company sued Byrne Jones & Torney in Proceeding No.4592 of 1996 and this claim was settled on 29 September 1998. Under the settlement agreement Byrne Jones & Torney agreed to pay $130,000 inclusive of costs in exchange for releases, but with a denial of liability.

244. Third, insofar as the plaintiffs seek to recover from Byrne Jones & Torney their capital investment in the hotel these took the form of loans to the company. Their loans were progressively reduced during the period that the company traded and it may be that they proved in the winding up for the balance outstanding upon liquidation. No evidence was led as to this.

248. I find Byrne Jones & Torney to have been in breach of their fiduciary duty owed to the two Marrons when they accepted a retainer to act for them at the time when they acted for and had a personal interest in other parties to the transaction. I so find, notwithstanding that these interests were disclosed, on the basis that no explanation was given of the implications of their multiple allegiance sufficient to render the consent of the Marrons an informed consent. Having accepted such a retainer, Byrne Jones & Torney committed no breach of fiduciary duty in the performance of its obligations to the Marrons or to the Marron Company under that retainer.

251. I find that Byrne Jones & Torney was in breach of its implied contractual obligation to perform its work with due skill and care inasmuch as Mr Devine failed to explain to the two Marrons the terms of the lease which they signed as witnesses to the company seal of the Marron Company. I find no other breach of retainer or breach of duty of care alleged against Byrne Jones & Torney has been established.

255. The plaintiffs seek damages. This is not a claim for rescission of a contract entered into in breach of fiduciary duty or in reliance on some statement made in breach of such a duty. In order to recover damages the plaintiffs must show that they have suffered loss which is directly occasioned by the breach: Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 468, per Brennan CJ, Gaudron, McHugh, Gummow JJ.

258. The first head of damages sought by all three plaintiffs is the recovery of their investment in the failed business. This investment took the form of loans to the Marron Company which in due course lost the funds. I have an immediate difficulty of principle in this part of the claims because they amount to an attempt to restore the plaintiffs to the positions they enjoyed before they or their company entered into the contract or took possession of the hotel. This is neither appropriate nor possible. It is not appropriate because Mr Bernard Marron and Mr John Marron had already entered into a binding contract to purchase the hotel before any breach occurred. The losses they or their company incurred as a consequence of entering into this contract cannot be laid at the feet of the solicitors. It is not possible because the contract has been completed and the company traded for over 12 months before the business collapsed and it went into liquidation. In these circumstances the position as it stood on 18 December 1992 cannot be restored.

261. As a matter of detail, too, their claims as set out in the particulars of loss provided on 5 October 1998 cannot be sustained. Mr Bernard Marron seeks, first, to recover $90,000 which is described as the loss of the Tootgarook property. It will be recalled that this property was not sold until July 1993, sometime after he and his company assumed management of the hotel. Most of its proceeds, after payment of expenses, were applied to pay out the Commonwealth Bank loan of $63,000 which he had obtained in January 1992. He then seeks to recover $30,000 which he borrowed from friends, William Giani and Maureen Giani. This loan was made on 8 October 1993 at a time when the Marron Company was short of working capital. It had nothing to do with the breaches of fiduciary duty or other breaches alleged to have been committed by Byrne Jones & Torney many months before. In any event, assuming, contrary to my view, that these sums are recoverable as damages flowing from some breach, it was conceded at the trial that they must be reduced because Mr Bernard Marron's loan account with the company into which the sums were paid was reduced by drawings made by him during the life of the business.

264. Much the same be said of Mr John Marron's comparable claim of $50,000 loss of life savings. His loan account with the Marron Company as at 30 June 1993 showed the balance to be $42,042, but by the end of the next financial year it had been reduced to $9,505.72. There was some debate as to where this money went but it is absurd to treat this plaintiff as having totally lost his life savings by investing them in the venture.

267. Mr Richard Marron came into the venture after the other plaintiffs. I found that no duty was owed to him by the solicitors. His loss of capital investment in the sum of $39,000 is not sustainable for this further reason.

270. Next, it is said, by Mr John Marron and by his brother, Richard, that the incomes which they derived from the hotel were less than they would have earned had they remained in their previous employment as police officer and supermarket manager respectively. It is wholly untenable, in my view, to say that the losses of Mr John Marron are attributable to the breach of any obligation by Byrne Jones & Torney. His loss of income was the consequence of his decision to buy the hotel and of its poor management. Likewise, his claim for loss of future earnings and superannuation. I leave to one side the serious doubts I have about the figures. Mr Richard Marron's comparable claim suffers from the same infirmities and to the further difficulty arising from his late entry into the venture.

273. I will not lengthen this judgment further by attempting to unravel the complicated accounts which the plaintiffs placed before me. It would be a fruitless task because of the conclusions I have reached on the question of liability and because I am satisfied that the losses claimed are not recoverable as a matter of principle.

276. There will be judgment for each of the defendants.