Plaintiff v Defendants

LEGAL PRACTITIONERS - SOLICITORS - Negligence - Causation - Whether client would have signed letter of offer irrespective of any advice from solicitor.

TRADE PRACTICES - MISLEADING OR DECEPTIVE CONDUCT - Claim that solicitor's advice contained multiple misrepresentations - Fair Trading Act 1999 (Vic).

1 This case concerns the adequacy and extent of legal advice given to the plaintiff ("Dr Kermani") by the tenth defendant, Richard Flory ("Mr Flory"), on the night of 22 November 2001. The subject of the advice was a letter dated 21 November 2001 by which St George Bank Limited ("St George Bank") offered a fully drawn advance facility in the sum of $1,880,000 to Pinnacle Investments Pty Ltd ("Pinnacle") ("November 01 Letter of Offer").

2 By the November 01 Letter of Offer Dr Kermani acknowledged that security she had previously provided to St George Bank to secure Pinnacle's other facilities would remain as security for the new fully drawn advance facility.

3 The November 01 Letter of Offer arose in the context of a number of other transactions involving Pinnacle, St George Bank, Dr Kermani, her husband and others. Consequently, in order to properly understand the dispute between the parties, it is necessary to set out in detail the events leading up to Dr Kermani receiving advice about the November 01 Letter of Offer.

B. Background - Pinnacle and the purchase of the Bulla quarry

4 Dr Kermani is a highly educated woman. She practises as an anaesthetist. Her husband, Mr Irani, is an ear, nose and throat specialist. He is also highly educated and has, for many years (with the knowledge, consent and involvement of Dr Kermani) engaged in property development, mainly through company and trust structures and on occasion, with joint venturers. I will collectively, and for convenience, refer to the family as the Iranis' and their companies as the Irani group.

5 Shalridge Pty Ltd ("Shalridge") is an Irani group company. It took a majority interest in Pinnacle when Pinnacle was incorporated in February 2000.

6 On 23 February 2000 Pinnacle entered into a contract to buy a landfill site at 600 Bulla Road, Sunbury, Victoria ("the Bulla quarry"). Mr Irani arranged for Pinnacle to borrow funds from Dr Kermani and from St George Bank to finance the acquisition.

7 By letter dated 15 June 2000 ("June 2000 Letter of Offer"), St George Bank offered Pinnacle a facility of $3,575,000 to enable it to complete the acquisition of the Bulla quarry. The June 2000 Letter of Offer was sent to Pinnacle care of its director, Mr Irani, at his home address, namely, 10 Marshall Avenue, Kew ("the Marshall Avenue property").

8 The June 2000 Letter of Offer included, amongst others, the following terms:

(a) That the facility would comprise a bill acceptance facility with a term of six years ("the Bill Facility").

(b) That principal and interest repayments totalling $45,000 per month were to be made.

(c) That as and by way of security for the Bill Facility:

• various companies including Pinnacle and Shalridge (and other Irani group companies) execute first registered fixed and floating charges over their assets in favour of St George Bank;
  • various entities and individuals including Dr Kermani and Mr Irani execute guarantees in favour of St George Bank; and
  • Dr Kermani execute a first registered mortgage over the Marshall Avenue property and an equitable mortgage over various shares held by her, with a value of not less than $1,000,000 ("Share Portfolio").

9 The June 2000 Letter of Offer (together with the security documents) was executed by Pinnacle and all of the security providers including Shalridge, Dr Kermani and Mr Irani. Pinnacle drew down on the Bill Facility and settlement of the Bulla quarry took place on 16 June 2000.

10 As part of the loan transaction, St George Bank required Dr Kermani to sign an acknowledgment stating that she understood the effect of the various securities executed by her. In this regard and as required by the bank, a solicitor's certificate was executed by Mr Flory confirming such understanding.

11 In evidence, Dr Kermani accepted that she intended to encumber her assets comprising the Marshall Avenue property and her Share Portfolio as security for the Bill Facility. She also agreed that she fully understood the consequences of providing such security, as set out and recorded in the certificate.

12 During the course of the next year, that is the period June 2000 to June 2001, various problems associated with Pinnacle and the acquisition of the Bulla quarry emerged. First, there was an ongoing shareholders' dispute between Shalridge and the minority shareholders of Pinnacle. Secondly, it became apparent that Pinnacle required substantial financial resources for various reasons, including principal and interest payments in respect of the Bill Facility and the requirements under a licence from the Environmental Protection Authority ("EPA").

13 The third major obstacle for Pinnacle concerned the management and operation of the Bulla quarry. Prior to settlement of the property, Pinnacle had entered into an agreement with EM Mactec Pty Ltd ("EM Mactec"), under which EM Mactec assumed responsibility for conducting the landfill operations at the Bulla site. However, on the day of settlement of the Bulla quarry, EM Mactec entered into administration.

14 Pinnacle needed a replacement operator. On 25 October 2000, it entered into a Landfill Operations Agreement with Soiltech Australia Pty Ltd ("the Soiltech Agreement" and "Soiltech" respectively). The agreement was executed by Mr Irani "for and on behalf of" Pinnacle. In evidence, Mr Irani admitted that he executed the Soiltech Agreement in this way even though he was not the sole director of the company. He did so because Pinnacle's other director did not want to sign the agreement.

15 Under the Soiltech Agreement, Soiltech was appointed to conduct the landfill operations at the Bulla quarry. It was responsible for operations, repairs and maintenance of the facility.

16 The Soiltech Agreement also provided that revenue generated from the landfill operations was to be distributed between the parties in the following order of precedence:

(a) from the first day of the month of the Commercial Operation Date (as defined), Pinnacle would be paid an Annual Minimum Payment of $540,000, which would be paid monthly in advance in 12 equal instalments of $45,000;

(b) Soiltech would receive an Annual Operator's Fee of $280,000, paid monthly in arrears in 12 equal instalments from the last day of the month of the Commercial Operation Date; and

(c) in any month where the available revenue exceeded the requirements of (a) and (b), Soiltech would receive the first $4.00 per tonne for every tonne of waste received in the landfill facility for that month. Any amount received above $4.00 per tonne would be apportioned equally between the parties.

17 Clause 13.4 provided that Soiltech was to obtain a bank guarantee acceptable to Pinnacle to secure payment of the Annual Minimum Payment for the first five years of the term of the agreement.

18 Soiltech was due to commence making the monthly payments to Pinnacle on the Commercial Operation Date, defined as "the date of the commissioning of the Facility, which is the issuing date of the EPA licence".[1] This event occurred on 9 May 2001. Mr Irani gave evidence that Soiltech began making payments in June 2001 however, it did not continue to pay Pinnacle consistently. This caused substantial difficulties for Pinnacle as it had no source of income, but was still liable to make monthly payments of $45,000 to St George Bank, pursuant to the terms of the June 2000 Letter of Offer.

19 By further letter of offer dated 15 June 2001, St George Bank provided Pinnacle with a further facility in the sum of $500,000 and an overdraft facility with a limit of $60,000 ("the June 01 Facilities"). The June 01 Facilities were secured by the same securities provided in respect of the Bill Facility.

20 In evidence, Dr Kermani agreed that she was aware of the increase in the facilities provided by St George Bank to Pinnacle. She also gave evidence that she was content for her assets to be further encumbered as security for the June 01 Facilities.

21 By further letter of offer dated 18 August 2001, St George Bank increased Pinnacle's temporary overdraft limited to $80,000 ("the August 01 Facility"). Dr Kermani gave evidence that she was aware of the increased facilities and was content for her assets to be used as security for the August 01 Facility.

22 By November 2001, Pinnacle's financial position was critical. In addition to the commitment of $45,000 per month in relation to the Bill Facility, Pinnacle had other immediate financial commitments. It needed substantial funds in order to continue operating and those funds were required as a matter of urgency.

23 There was a lot of activity during the period September to November 2001, largely directed at raising further capital through various means to enable Pinnacle to continue operating.

24 By Deed dated 25 September 2001 between Shalridge as grantor, Hallinans Pty Limited ("Hallinans") as grantee, Pinnacle and Soiltech, Shalridge granted an option to Hallinans to acquire 25 percent of the issued share capital of Pinnacle ("Option Deed").

25 Recital G to the Option Deed was in the following terms:

"The Grantee will procure a bank guarantee of two million Australian dollars (AUD $2,000,000.00) ('the Bank Guarantee') for the benefit of Soiltech and Grantor on the terms of this agreement, including certain securities and undertakings to be given by the Grantor, such bank guarantee at the direction and control of the Grantor."

26 The Option Deed provided for various other terms and conditions. The further main terms and conditions are set out below:

In consideration of the sum of ten dollars ($10.00) paid by the Grantee to the Grantor, and of the provision of the Bank Guarantee by the Grantee to the Grantor and Soiltech (the receipt of which is acknowledged by the Grantor and Soiltech), the Grantor grants to the Grantee or its nominee an option to purchase the Subject Shares from the Grantor for the sum of two million Australian dollars (AUD $2,000,000.00) upon and subject to the terms and conditions set out in this Deed.

3.1 The Grantor shall provide to the Grantee by way of security for the Bank Guarantee a signed share transfer to be held by the Grantee's solicitors in escrow.

3.2 The Grantee shall be entitled to date and sign the share transfer and lodge it with Pinnacle for registration of the transfer on the exercise of this option, and in the event that the Grantee has requested the return of the Bank Guarantee on the expiration of this option, and the Grantor and Soiltech have not returned the Bank Guarantee within 120 days of the Grantee making a demand for its return.

The Option may only be exercised during the Exercise Period.

The Grantee may exercise the Option by delivering to the Grantor a Notice of Exercise duly completed and executed by the Grantee and accompanied by payment of the share price or alternatively by giving authority to the Grantor or Soiltech or the Grantor's nominee to draw on the two million Australian dollars (AUD $2,000,000.00) Guarantee held by Soiltech and Grantor pursuant to this Agreement ('the Authority')."

27 By further agreement executed on the morning of 21 November 2001 between Soiltech, Shalridge, Pinnacle, Tranteret Pty Limited ("Tranteret") and Hi-Quality Quarry Products Pty Limited ("HQQ"), the parties agreed that Pinnacle and Soiltech would grant a mining lease to HQQ on certain terms ("Heads of Agreement").

28 The terms and conditions of the Heads of Agreement included the following:

1. Tranteret has entered into a Deed of Option, dated 26 [sic] September 2001 with Soiltech, Shalridge, and Pinnacle to purchase 25% of the issued share capital in Pinnacle ('the Option'), held by Shalridge.
2. Pursuant to the Option Tranteret has paid consideration of $10.00 and provided an unconditional Bank Guarantee ('the Guarantee') in favour of Shalridge (or as Shalridge may direct) on the condition that the Bank Guarantee only be called upon on Tranteret's exercise of the Option.
3. Soiltech and Quarry have agreed to enter into a Quarry Sub Licence, and Soiltech and Tranteret have entered into a Joint Venture Agreement, in relation to the Land Fill property at 600 Bulla Road, Sunbury, Victoria ('the Property') owned by Pinnacle.
4. Pinnacle is the owner of the Property and has entered into a Land Fill Management Agreement ('LMA') with Soiltech.
5. Soiltech and Pinnacle have agreed to grant to Quarry a mining Lease for all quarry products at or in the property.
6. Subject to a request in writing Shalridge has requested Tranteret to provide an unconditional Bank Guarantee in favour of a Third Party or bank to be notified in writing.

5.1 Pinnacle shall grant a mining Lease to Quarry on the minimum terms set out in Annexure 'A' hereto.

9(c) The first $2,000,000.00 of royalty payments are to be placed into a trust account in the name of the Lessee. The Lessee shall be entitled pro rata to the trust monies and any interest if the Bank Guarantee referred to in the Option Deed ('Option Deed'), dated 25 September, 2001 to which the Lessor is a party is called upon in breach of the Option Deed. If the Lessee takes the trust moneys, it will not be entitled to the Shalridge shares."

29 By the November 01 Letter of Offer, St George Bank offered Pinnacle a further much needed facility. The facility was to comprise, in effect, a fully drawn advance ("the FDA Facility") in the sum of $1,880,000. It was for a period of one year. The amount available for drawdown was $1,750,000. Interest was to be capitalised for the year.

30 The November 01 Letter of Offer was sent by St George Bank to Mr Irani, as a director of Pinnacle, at the Marshall Avenue property. It was signed by Mr Irani and Dr Kermani[2] as individual guarantors. Mr Irani and Dr Kermani also signed as directors of some corporate guarantors.

31 Given that this case centres on advice given to Dr Kermani in respect of the November 01 Letter of Offer, it is necessary to set out the terms of the letter in detail.

32 The first page of the November 01 Letter of Offer specified the securities required by the St George Bank for the FDA Facility. The following words appeared:

"Please note that it is a condition of the facility that the following new securities are provided to St. George:

• Bank Guarantee of $2,000,000 (Two Million Dollars) in favour of St George Bank Limited, issued by the Westpac Banking Corporation on behalf of Tranternet Pty Limited."[3]

33 The first page of the November 01 Letter of Offer also expressly stated that it was a condition of the facility that specified existing securities would continue to be available to St George Bank. The existing securities included:

• a first registered mortgage over the Marshall Avenue property;

• a first registered mortgage over the Bulla quarry;

• a first registered fixed and floating company charge over the assets of Shalridge, Pinnacle and other Irani Group companies;

• guarantees provided by Dr Kermani and Mr Irani (among others); and

• an equitable mortgage over the Share Portfolio held in the name of Dr Kermani.

34 It is relevant to note that despite the reference to the existing securities, being securities provided in respect of the Bill Facility, the June 01 Facilities and the August 01 Facility, the FDA Facility was the only facility the subject of the November 01 Letter of Offer.

35 The specific terms of the FDA Facility were listed in a schedule to the letter and included the following:

Interest only, with interest to be capitalised for the initial twelve months, within the overall limit. Alternatively interest can be met from other sources.[4]

At the completion of the Interest Capitalisation period, the full debt is to be cleared by way of St George Bank calling on the Bank Guarantee for $2,000,000.00 provided by the Westpac Banking Corporation."[5]

36 The purpose of the FDA Facility was stated as follows:

St.George will make the Advance available for the following purpose:

• Reimbursement to Civil Construction Corporation of $1,100,000.00 for the infrastructure works already completed at the landfill;
• Clearance of temporary overdraft of $100,000.00;
• Construction of soil remediation plant of $300,000.00;
• Working capital facility of $250,000.00,
• For capitalisation of interest; and
• For any other purpose approved by St.George (in its discretion) at any time."

37 The FDA Facility remained subject to St George Bank's standard terms and conditions, as well as the special conditions of the other facilities. Various ongoing conditions were also set out in the Schedule to the November 01 Letter of Offer including ongoing condition 1, which stated:

1. Written confirmation from Hallinans Pty Ltd that they are aware and acknowledge that the Bank Guarantee of $2,000,000.00 will be called on by St George Bank Limited in 12 months time, to clear the Fully Drawn Advance Facility provided to Pinnacle Investments Pty Ltd."

38 I have already made reference to the terms and conditions of the November 01 Letter of Offer relating to the FDA Facility. That document, the Option Deed and the Heads of Agreement each referred to a Bank Guarantee provided by Westpac Banking Corporation ("Westpac") at the request of Tranteret.

39 Originally, the Westpac guarantee was in favour of Shalridge. However, at the last minute and for reasons that are not important at this stage, the favouree was changed to St George Bank.

40 The guarantee was in the form of a bankers undertaking and is best referred to as the "Westpac undertaking". It was in the usual form. It was an unconditional and irrevocable undertaking to pay to St George Bank the sum of $2,000,000 upon request.

41 It is a feature of these sorts of undertakings that the amount is usually payable without regard to the underlying contractual obligations of the parties. The Westpac undertaking was firmly in the hands of St George Bank, and no doubt relied upon by St George Bank, prior to permitting any drawdown of the FDA Facility.

42 Accordingly, the position as at 21 November 2001 may be summarised as follows:

(a) Pinnacle was in urgent need of funds in order to enable the quarry operations to continue.

(b) Pinnacle had arranged for further funding from St George Bank by way of the FDA Facility on the terms and conditions set out in the November 01 Letter of Offer.

(c) St George Bank relied on the Westpac undertaking and expected the FDA Facility - if not repaid by Pinnacle in the ordinary course as principal debtor - to be repaid by way of calling in the Westpac undertaking. However, despite such expectation, the other securities remained valid and enforceable (a position confirmed by the Court of Appeal[6]).

(d) As between the parties, that is Pinnacle, Shalridge and the Hallinan Interests (comprising Tranteret, HQQ and Hallinans), the Westpac undertaking provided at the instance of Tranteret (or more particularly, the provision of $2 million by the Hallinan Interests) assumed that by the time the undertaking was called on - if indeed it was - the Hallinan Interests would at the very least have a mining lease and, if they so desired and presumably in addition to the mining lease, a 25% stake in Pinnacle. In other words, whatever the legal position and risk allocation in relation to the Westpac undertaking, the receipt and retention of the $2 million depended on the Hallinan Interests getting what they bargained for.

43 Dr Kermani gave evidence that as at November 2001 she did not wish to provide any further security for any further financial accommodation provided by St George Bank to Pinnacle. She said she had simply had enough and was reluctant to agree to her assets being further encumbered.

44 Dr Kermani gave evidence that Mr Flory told her that there was absolutely no risk at all in agreeing to the arrangements proposed by St George Bank and that "it was very safe to sign". She said Mr Flory told her that the FDA Facility would be repaid from the Westpac undertaking referred to on the first page of the letter and that her assets would not be at risk insofar as this further loan was concerned. She gave evidence that she relied on this advice and executed the November 01 Letter of Offer.

45 Mr Flory's version of events is different. According to Mr Flory, and in summary, he told Dr Kermani that her assets were and continued to be available to St George Bank as security for the FDA Facility. He gave evidence that his advice was to the effect that the Westpac undertaking in the sum of $2,000,000 was merely further security provided to St George Bank. He was emphatic that at no stage did he tell Dr Kermani that she was not at risk because the FDA Facility would be cleared from the proceeds of the Westpac undertaking.

46 Accordingly, there is a dispute between the version of events and the nature, content and extent of any explanation or advice given by Mr Flory to Dr Kermani on the night of 22 November 2001. That dispute is at the centre of the present case. I return to this matter later. At this stage, it is simply relevant to note that after receiving advice from Mr Flory, Dr Kermani signed the November 01 Letter of Offer and St George Bank then made the FDA facility available to Pinnacle.

47 The FDA facility was due to expire on 21 November 2002. On 18 September 2002, St George Bank, through its solicitors, served a notice of demand on Pinnacle. It required immediate payment of $5,305,595.79 owing under the various facilities provided to Pinnacle. Pinnacle did not comply with the demand.

48 On 8 October 2002, St George Bank issued notices of demand for the outstanding amount on Pinnacle's guarantors, including Mr Irani and Dr Kermani. The demands were not complied with.

49 On 4 November 2002, St George Bank's solicitors wrote to Tranteret's solicitors to inform them of the bank's intention to call upon the Westpac undertaking to pay out the FDA facility when it expired. According to the letter, at that time the facility was drawn to the limit of $1,864,405.56.

50 Tranteret disputed St George Bank's right to call on the Westpac undertaking. On 18 November 2002, Tranteret commenced proceedings in this Court seeking to restrain St George Bank from making any demand under the Westpac undertaking. Tranteret asserted, among other things, that it had been induced to provide the undertaking by false representations made by St George Bank as to the status of Pinnacle's existing facilities and the purpose for which the Westpac undertaking would be used.

51 On 3 March 2003, Ashley J (as his Honour then was) delivered judgment and found in favour of Tranteret.[7] In response to the decision, St George Bank gave an undertaking that it would not make any demand under the Westpac undertaking until the final hearing of the matter or further order.

52 Following this decision, St George Bank sought to recoup the money it had loaned to Pinnacle by realising other securities. On 23 May 2003, it sold the Bulla quarry and certain equipment to HQQ for $6.5 million. It was a condition of the sale that St George Bank either:

(a) return the Westpac undertaking to Tranteret; or

(b) allow the proceeds from calling on the Westpac undertaking to be utilised as part payment of the balance on the settlement date.

53 St George Bank elected to return the Westpac undertaking. It applied the proceeds from the sale of the Bulla quarry to the amount owed by Pinnacle, but this did not fully discharge the debt.

54 Significantly, during this period while the dispute between Tranteret and St George Bank was being determined, Pinnacle was placed into administration and on 30 July 2003 it went into liquidation.

The Iranis issue proceedings against St George Bank

55 On 3 June 2003, Mr Irani, Dr Kermani and a number of Pinnacle's other guarantors, commenced proceedings against St George Bank. Their claims fell into two categories, which were dealt with in separate trials. The first trial before Byrne J primarily concerned allegations that the bank breached the terms of its arrangements with Pinnacle and the plaintiffs by returning the Westpac undertaking to Tranteret as part of the sale of the Bulla quarry. The plaintiffs alleged, among other things, that on the proper construction of the repayment terms contained in the November 01 Letter of Offer:

"(i) the Bank Guarantee was the only method by which [St George Bank] was to be repaid the FDA facility;

(ii) the [St George Bank] could not return or deal with the Bank Guarantee without the FDA facility being paid, alternatively, being treated by the [St George Bank] as fully repaid;

(iii) the [St George Bank] had no recourse to Pinnacle and the Plaintiffs under the Securities for repayment of the FDA facility."[8]

56 Justice Byrne held that St George Bank did not breach its contract with Pinnacle or the guarantors by virtue of its dealing with the Westpac undertaking. [9] His Honour rejected the plaintiff's construction argument, which was to the effect that St George Bank could only realise the Westpac undertaking by calling on it. His Honour held that the bank was entitled to realise the security by selling it and that recourse to the Westpac undertaking was not the only method by which the FDA facility could be repaid. His Honour also concluded that the bank obtained some value for the security when it returned it to Tranteret as part of the sale of the Bulla quarry. The plaintiffs' other claims before Byrne J, which included estoppel, mistake and election, also failed.

57 The second trial, which was heard by Whelan J, related to the conduct of the bank and its agents in respect of the sale of the Bulla quarry and the landfill business. The plaintiffs asserted that the bank breached various statutory and common law duties, as well as the terms of its mortgage, by failing to take reasonable care to sell the land:

(c) for the best price that was reasonably obtainable having regard to the circumstances existing when the property was sold.[10]

58 The plaintiffs also contended that St George Bank had appropriated funds from the proceeds of sale for charges and expenses which were improperly incurred. The bank counterclaimed for a debt allegedly owed to it by Pinnacle.

59 Justice Whelan found in favour of St George Bank.[11] His Honour held that the bank did not breach its duties as mortgagee in selling the Bulla quarry. His Honour also held that it did not breach its duties as mortgagee as a result of liabilities incurred by the receivers and managers it had appointed, who were later appointed agents for the mortgagee in possession. Finally, his Honour determined that the plaintiffs had failed to establish that there were costs, charges and expenses which were improperly incurred.

60 The plaintiffs appealed both decisions, but the appeals were dismissed by the Court of Appeal.[12]

61 The Court of Appeal held that Byrne J's construction of the repayment terms of the FDA facility was correct. It held that the terms could not be construed as meaning that the FDA facility could only be met by calling upon the Westpac undertaking. The Court stated that the construction proposed by the plaintiffs:

(a) was at odds with the terms and basic structure of the FDA facility;

(b) nullified the bank's standard terms and the special conditions of the other facilities which were expressly incorporated into the FDA facility; and

(c) involved denying any obligation on the part of Pinnacle to repay the debt.[13]

"The FDA facility was the last facility in a series, which was clearly intended to constitute a composite facility. When the FDA facility was granted, the Bulla project was in a parlous financial state. It was burdened by significant debts and had yet to produce any return. In that context there appears to us to be substance in the respondent's contention that the sentence in the provisions in the details sheet upon which the appellants founded their case amounted to no more than a statement of the respondent's then intention to wind up the facility at the expiration of 12 months from its commencement. At all events, in our view the sentence did not constitute a promise that the respondent would not enforce any obligation or security other than the bank guarantee."[14]

63 The Court of Appeal concluded that St George Bank had not breached the terms of its contract and the plaintiffs were not released from their liability under the FDA. [15] It also confirmed that Whelan J had not erred in finding that the plaintiffs had failed to show that the bank did not to take reasonable care to sell the land for the best price reasonably obtainable in the circumstances. [16]

64 On 18 November 2005, Dr Kermani commenced the present proceeding against the solicitors whom she alleges acted for her in respect of the November 01 Letter of Offer. Dr Kermani initially claimed against ten defendants; nine members of the now defunct law firm Rogers & Gaylard and Mr Flory, an employee or consultant of that firm. She has discontinued her case against all but the first, fourth and tenth defendants.

65 The first defendant, Michael Gaylard, was a partner of the firm Rogers & Gaylard and provided advice to the Irani group on a number of occasions. The fourth defendant, Michael Houston, was the Managing Partner of Rogers & Gaylard at the relevant times between 2000 and 2002. He did not personally act on any of the Iranis' files. For convenience, I shall refer to the first and fourth defendants collectively as the "Rogers & Gaylard defendants".

66 The tenth defendant, Mr Flory, had a longer and more established relationship with the Iranis. He first met Mr Irani sometime in the 1990s and provided legal advice to the Iranis and the Irani group over several years. The Iranis followed Mr Flory when he moved between law firms and in particular, took some of their business to Rogers & Gaylard when Mr Flory began working with that firm.

67 The precise relationship between Mr Flory and Rogers & Gaylard is somewhat obscure and is an issue in this case. Evidence was given by Mr Houston that although Mr Flory was retained as a consultant of Rogers & Gaylard, the arrangement specifically contemplated him continuing to do some work as a sole practitioner. It is sufficient at this stage to say that the confusion about Mr Flory's role lead Dr Kermani to plead allegations against Mr Flory and the Rogers & Gaylard defendants in the alternative.

68 Dr Kermani alleged that on 22 November 2001, Mr Flory, either acting as a sole practitioner or as a representative of Rogers & Gaylard, gave her negligent advice in respect of the November 01 Letter of Offer and the consequences of signing it. She contended that this conduct constituted a breach of the duty of care owed to her, a breach of retainer and caused significant loss. Dr Kermani also contended that prior to her signing the November 01 Letter of Offer, Mr Flory made a number of misrepresentations regarding the effect of the letter. She said these representations induced her to sign the November 01 Letter of Offer, caused her significant loss and were made in breach of the Fair Trading Act 1999 (Vic).

69 The claims for breach of retainer and negligence were the focus of Dr Kermani's case. Consequently, I will deal with them first.

70 In order to succeed against Mr Flory or the Rogers & Gaylard defendants for breach of retainer or breach of duty of care, Dr Kermani must establish:

(a) that she had a retainer with the relevant defendant or was owed a duty of care;

(b) that in breach of the retainer or duty, Mr Flory failed to properly advise her;

(c) that if she was properly advised, she would not have signed the November 01 Letter of Offer and a particular series of events would have followed, such that she would not have suffered the losses that eventuated; and

71 In essence, Dr Kermani contends that Mr Flory (or Rogers & Gaylard) was subject to concurrent contractual and tortious obligations to exercise reasonable care and skill. The crux of this case is whether Mr Flory discharged his obligations and in this case it matters not whether the claim arises in contract or tort. The duty is the same, namely to act with reasonable care and skill.

F. Retainer and duty of care - Broad or limited?

72 It is beyond argument that there was a retainer between Dr Kermani and either Mr Flory or Rogers & Gaylard ("Retainer"). Consequently, the only issue is the scope of the Retainer.

73 Senior Counsel for Dr Kermani contended that the retainer was broad and included an obligation to look after Dr Kermani's interests. In particular, the Fourth Further Amended Statement of Claim pleaded that there were terms of the retainer that Mr Flory (either acting on his own behalf or on behalf of Rogers & Gaylard):

(a) advise Dr Kermani on her rights and obligations in relation to the November 01 Letter of Offer;

(b) advise Dr Kermani to, or undertake responsibility himself to, institute relevant inquiries in relation to the November 01 Letter of Offer;

(c) institute inquiries to protect Dr Kermani from real and foreseeable risks of economic loss consequent upon signing the November 01 Letter of Offer; and

(d) act for Dr Kermani with the skill and diligence reasonably to be expected of a competent lawyer.

74 The defendants admitted a retainer but contended that the scope was much narrower and was to advise on the legal meaning of the November 01 Letter of Offer.

75 In my view, it may not be necessary for Dr Kermani to establish the existence of this broad retainer. The content, scope, nature, context and conditions contained in the November 01 Letter of Offer are such that even a narrower Retainer would necessitate advice as to the impact of the underlying transactions with the Hallinan Interests so far as they have a bearing upon her legal liability under the November 01 Letter of Offer.

76 I have considered all relevant factors, including the nature, extent and duration of the professional relationship between Mr Flory and Dr Kermani, the role, position and influence (specifically not undue on the evidence) of Mr Irani and the factors and events of September to November 2001. I conclude that the Retainer was such that Mr Flory was under no obligation to explain the wisdom, prudence, fairness or reasonableness of the transactions to Dr Kermani. The Retainer was limited to providing advice on the implications and legal effect of the November 01 Letter of Offer in light of the arrangements between the parties, including the Hallinan Interests.

77 As noted above, the duty of care owed to Dr Kermani flows from (among other things) the scope of the Retainer. Senior Counsel for Dr Kermani submitted that Mr Flory or Rogers & Gaylard owed Dr Kermani a duty to act for her with the skill and diligence reasonably to be expected of a competent lawyer. This was not, as such, disputed by the defendants. However, Senior Counsel for Dr Kermani went further and suggested that that there was a broader and extended duty based on Mr Flory's knowledge that - on one view - Dr Kermani's "interest are endangered"[17] as a result of the fragility of the underlying transactions. In particular, Senior Counsel emphasised that Mr Flory was aware (among other things):

(a) that pursuant to the terms of the Option Deed, presentation of the Westpac undertaking was conditional on exercise of the option;

(b) that a letter had be sent from St George Bank to Patrick Hallinan ("Mr Hallinan") on 22 November 2001 which stated that the facilities extended to Pinnacle were not currently in default; and

(c) that there was a high level of interdependence in the arrangements between Pinnacle, the Hallinan Interests and St George Bank.

78 In my opinion, as pointed out, it is not necessary to find a broader and extended duty based on Mr Flory's knowledge of facts, including those noted above. As with the position in respect of the Retainer, I consider that knowledge relating to the underlying arrangements between the parties is inextricably linked to the terms of the November 01 Letter of Offer and accordingly, embraced by the narrower duty to exercise reasonable care and skill.

What advice would a reasonably competent solicitor give?

79 Given the scope of the Retainer, it is necessary to ask what advice a competent solicitor would have given in the circumstances? More specifically, what would a reasonably competent solicitor tell a client about the legal implications of signing the November 01 Letter of Offer?

80 Opinions may vary (to some extent) as to what was required to discharge such an obligation.

81 In the Fourth Further Amended Statement of Claim, Dr Kermani contended that Mr Flory breached his retainer and duty to her, in summary, by:

(a) giving advice to the effect that she was not pledging her existing securities as security for the FDA Facility or that the FDA Facility was repayable only by calling on the Westpac undertaking;

(b) failing to warn her that St George Bank could be prevented from calling on the Westpac undertaking and therefore, may call on other existing securities; and

(c) giving advice that the Hallinan Interests understood that the Westpac undertaking would be called on to repay the FDA Facility and that the Hallinan Interests would provide written confirmation of this.

82 Reading the November 01 Letter of Offer in its proper context, I consider a reasonably competent solicitor exercising the requisite degree of care and skill would be required to:

(a) point out and emphasise that despite the Westpac undertaking being the contemplated repayment method, the existing securities remained "on the hook". The November 01 Letter of Offer said so expressly. The only facility referred to in the November 01 Letter of Offer (by reference to the schedule) was the FDA Facility, yet the existing securities (including the mortgage over the Marshall Avenue property and the equitable mortgage over the Share Portfolio) were specifically referred to and included as security for the FDA Facility; and

(b) point out that as a consequence of the arrangements with the Hallinan Interests (namely the structure of the Option Deed, Heads of Agreement and Westpac undertaking), there was some risk that the Marshall Avenue property and the Share Portfolio could be called upon by St George Bank even though another repayment method was contemplated.

83 It is without question that a solicitor would not discharge the duty by advising Dr Kermani that the transaction was "risk free" so far as concerns the existing securities. Accordingly, if Mr Flory's advice was to the effect that the transaction was "risk free" he will be in breach of the retainer. If however, the substance of his advice was as described above in paragraph 82, in my opinion he would not be in breach of the retainer.

84 Accordingly, the next issue is to determine what advice Mr Flory actually gave Dr Kermani.

85 As pointed out above, Mr Flory's account of what was said on 22 November 2001 differs materially from the account given by Dr Kermani. Mr Irani's version of events is also slightly different.

86 In deciding which version to accept, the following general observations should be made:

(a) there is no contemporaneous or other relevant note;

(c) there has been much activity and hindsight reflection over the years, which makes direct recollection - unencumbered by reassessment and rethinking - unlikely;

(d) the contemporaneous documents, such as they are, and undisputed facts and context provide more reliable evidence as to what was said on a balance of probability than the evidence given by either Dr Kermani, Mr Irani or Mr Flory.

87 In reaching my decision as to what advice Mr Flory gave, I have not accepted the evidence of Dr Kermani, Mr Irani or Mr Flory.

88 I do not accept Dr Kermani's evidence for a variety of reasons. The events of the evening of 22 November 2001 occurred close to 9 years prior to the commencement of this trial. As noted above, Dr Kermani did not make a contemporaneous written record of her discussion with Mr Flory and as such, she purported to relay her independent and unaided recollection of the advice she received.

89 In my opinion, it is highly unlikely that someone would remember with sufficient precision, the detail of what was said during a meeting that went for (on Dr Kermani's evidence) over an hour and occurred such a long time ago. I accept that Dr Kermani may recall in a most general way what happened at the meeting, for example, that Mr Flory went through the November 01 Letter of Offer with her. I do not however, accept that she remembers the exact advice given by Mr Flory, the words he used or even the substance of the advice.

90 This assessment is supported by the fact that Dr Kermani had difficulty recalling details of other events that took place at a similar time. She could not, for example, recall the circumstances in which she signed the Option Deed in September 2001. She also had difficulty remembering:

(a) the precise sums of money she invested in Pinnacle and when the investments were made;

(b) the extent of her involvement with various Irani group companies (some of which she was a director) and what many of those companies did;

(c) discussions she had with her husband about the charge granted by Pinnacle in her favour in June 2000; and

(d) aspects of the evidence she gave in the proceeding before Byrne J in 2004.

91 Dr Kermani's inability to recall this information indicates that she does not have a particularly exceptional memory. Consequently, it is improbable that she would remember accurately the detail or even the substance of what took place on the evening of 22 November 2001.

92 Dr Kermani suggested that her recollection of the meeting with Mr Flory was stronger than her memory of other events that occurred at the same time because it was a major event in her life. However, in my view, the meeting only became a major event because of the consequences that arose from it some years later. This would not have sharpened Dr Kermani's direct recollection.

93 Dr Kermani also contended that she remembers the meeting and conversation because there was a "big argument". I do not think that this would necessarily improve her recollection.

94 I find that the evidence Dr Kermani gave in this proceeding as to what took place at the meeting with Mr Flory on 22 November 2001 is the product of reconstruction after the event. Dr Kermani admitted having agonised over the events in her mind on numerous occasions, she reviewed all the relevant documents and discussed the events with her husband and lawyers. She admits having undertaken a forensic analysis of the facts and circumstances to determine "what went wrong".

95 The effect of this reconstruction is illustrated by comparing the evidence given by Dr Kermani in 2004 before Byrne J, with evidence she gave in this proceeding. When giving evidence in 2004 about the meeting with Mr Flory, Dr Kermani failed to mention that she had locked herself in her bedroom and refused to come down or that Mr Flory had called each of her and Mr Hallinan "a fool". These were critical parts of the dramatic sequence of events she described when giving evidence in this trial.

96 It is also clear that Dr Kermani studied her outline of evidence prior to the commencement of this trial. She highlighted sections, especially those concerning the events of 22 November 2001, and made several notes. Dr Kermani said she did this to aid her understanding. She also said she was told by her solicitor that it was important that she knew what was in her witness statement and I infer that highlighting the statement was her method of studying it. This suggests that at least to some extent, the evidence that Dr Kermani gave in this proceeding was based on her recollection of her outline, rather than a direct recollection of the events of 22 November 2001.

97 It is clear that Dr Kermani considers signing the November 01 Letter of Offer to have been catastrophic for her family's financial position. The loss of the Marshall Avenue property in particular is an intensely emotional issue for her. She gave evidence that Mr Flory had "ruined [her] life". I consider that the emotive nature of these events has tainted any recollection she did have of the meeting with Mr Flory.

98 In addition to the inadvertent issues with Dr Kermani's evidence discussed above, I consider that there are other significant matters which cast doubt on the reliability of her evidence.

99 In giving evidence, Dr Kermani downplayed her involvement in business affairs and the Irani group and tried to present herself as a novice in this field. For example, she stated that she left the day-to-day running of the business to her husband, yet later acknowledged that her husband kept her informed about matters relating to Pinnacle and they made joint decisions. She also removed references to her experience in share trading from her witness statement. Similarly, Dr Kermani tried to underplay her involvement with Carsten Pty Ltd, a company involved in a development that the Iranis invested in. She initially said that she obtained information about the progress of this development from her husband. When asked whether she obtained a second mortgage over that property her response suggested she had no direct recollection of whether this occurred or not. She later said she could not recall whether she or her husband arranged the mortgage and whether it was taken out sometime before November 1996. Yet Dr Kermani admitted that she personally wrote the cheque advancing money to Carsten and signed the mortgage, which was in her name, herself.

100 No doubt Dr Kermani's evidence in relation to these matters was designed to further her case and to present herself as being wholly dependent on the advice of her lawyers. I do not accept Dr Kermani's evidence in this regard.

101 It is clear that Dr Kermani is a highly educated woman and has been involved in running a medical practice for many years. She also has significant experience investing in shares, has previously personally guaranteed loans and has taken steps to protect her financial interests. Dr Kermani's reluctance to respond to questions about these matters undermined her credibility.

102 Dr Kermani was also evasive in respect of some other matters. For example, she denied recalling that her husband had been involved in a dispute with the Commonwealth Bank of Australia in the early 1990s. However, when pressed she conceded that she "knew there was something to do with Commonwealth Bank and refinancing of Marshall Avenue, but I didn't understand it as a dispute". She later described this incident as a "dispute".

103 Dr Kermani was also extremely reluctant to admit that she had read the November 01 Letter of Offer carefully. She acknowledged that the letter was an "extremely important" document and when asked whether she read it carefully she responded "I went through it depending on my lawyer to advise me. I read it with him." Counsel for the tenth defendant pressed Dr Kermani further and she responded:

"No. Well, yes, then I did not read it carefully... Well, I read the letter. Carefully, I don't know. I did not dissect every word. That's why I had a lawyer there to advise me."

104 Although Dr Kermani may genuinely believe that she has been wronged by Mr Flory, I do not consider her evidence as to what took place on 22 November 2001 to be reliable. Her recollection of the events of 22 November 2001 is the product of reconstruction and developed as a result of her subsequent thinking and discussions. Her recollection is also clearly affected by her strong emotional attachment to the case.

105 That said, I find Mr Flory's account of the events on 22 November 2001 to be equally unreliable and I do not accept it either. Again, the length of time that has elapsed since the events in question occurred is a critical factor. Mr Flory also failed to make a file note or record of what occurred at the meeting, which is somewhat unusual for a solicitor. Consequently, Mr Flory's evidence was based on his direct recollection of the meeting.

106 There is no obvious reason why the meeting on 22 November 2001 would have been particularly significant or memorable for Mr Flory. As a solicitor, he would have regularly had appointments with clients to advise on agreements and transactions and to obtain their signature. Consequently, I consider it is unlikely that he would have a clear recollection of the specifics or substance of what was discussed and what advice he gave, without the benefit of a written record.

107 This is apparent from the lack of precision in evidence given by Mr Flory about the circumstances surrounding the meeting. For example, he said he did "a lot of preparation" before attending the meeting on 22 November 2001, but he could not recall what the preparation entailed beyond ensuring that he had a copy of the November 01 Letter of Offer. He also stated that he was "not quite sure whether there was a letter to be signed by [Dr Kermani] or not, whether the bank require that to be signed or not." When asked about the invoice issued by Flory Partners for the meeting on 22 November 2001, he could not recall whether he gave it to Mr Irani (or Dr Kermani) at the meeting or the following day. Finally, Mr Flory's evidence during the trial differed in some respects from the version given in his outline, which suggests his memory may have faded.

108 In light of the inexactness of Mr Flory's evidence in relation to the events surrounding the meeting on 22 November 2001, I find it improbable that he could recall the substance of what was said at the meeting. Mr Flory purported to recite a discussion between Dr Kermani, Mr Irani and himself. While he may recall that the November 01 Letter of Offer was discussed, I do not accept that he has a direct recollection of what advice he gave.

109 Further, I was not impressed with Mr Flory as a witness. He was reluctant to answer some questions, for example, concerning whether he had advised Dr Kermani to seek advice from an independent solicitor and the terms of his contract with Rogers & Gaylard. He was guarded, continually referred back to evidence he had given earlier in the trial and although not definitive, there was also an occasion on which he gave inconsistent evidence.[18]

110 Another aspect of Mr Flory's evidence is that he had an interest in ensuring that Dr Kermani signed the November 01 Letter of Offer. Mr Flory and Mr Irani had a long-standing business and social relationship. Mr Flory also had a relationship with Mr Premraj, for whom he had acted in the past. It is clear from the evidence that Mr Irani wanted his wife to sign the November 01 Letter of Offer so that Pinnacle could obtain further funds from St George Bank. Mr Premraj also presumably wanted all necessary steps to be taken to ensure Pinnacle obtained the funds so Soiltech could be paid. Finally, Mr Flory may have known that if the funds were obtained, he and Rogers & Gaylard would be paid money owing to them[19]. It is therefore unlikely that he would have said anything to dissuade Dr Kermani from signing and contrary to the evidence he gave, he may have downplayed the risks.

111 Mr Irani was the last witness to give evidence about the advice given by Mr Flory to Dr Kermani. His evidence suffered from many of the same deficiencies as that of the other witnesses. I find that it was equally unreliable. Mr Irani's memory of the meeting has clearly been diminished by the passage of time. He asserted that the meeting took place on 21 November 2001, which conflicts with the evidence given by both of the other witnesses. Further, even if Mr Irani did have an accurate recollection, he was absent for parts of the meeting and therefore cannot give an accurate account of all that occurred. For these reasons, among others, I reject his evidence of what took place.

112 In light of my concerns about the evidence given by these witnesses, I must rely on contemporaneous written documents and accept only oral evidence where at least Mr Flory and Dr Kermani are in agreement. Both Dr Kermani and Mr Flory agree that they went through the November 01 Letter of Offer at the meeting. It is likely therefore, and I find on a balance of probability, that in going through the letter, Mr Flory did make reference to the existing securities, but emphasised the contemplated repayment method (Westpac undertaking) set out in the November 01 Letter of Offer. Although emphasising the new security, it is unlikely that he made reference to the underlying transactions involving Hallinans and their potential effect on the contemplated repayment method. Consequently, I find on the balance of probability that Mr Flory did not say the transaction was risk free, but equally did not refer to any risks associated with the underlying transactions.

113 It is also likely that in emphasising the new security Mr Flory told Dr Kermani that Mr Hallinan understood that the Westpac undertaking would be called upon to repay the FDA.

114 It is also likely that despite making reference to the existing securities Mr Flory did not tell Dr Kermani that St George Bank could have been prevented from calling on the Westpac undertaking and therefore may call on existing securities.

115 The effect of the advice was that Mr Flory placed much emphasis on the new security comprising the Westpac undertaking and much less emphasis on the existing securities. Although he did not say there was no risk as contended by Dr Kermani, he equally did not engage in any analysis or advice as to the extent of any risk.

Was the advice sufficient to discharge the duty and fulfil the Retainer?

116 Mr Flory was aware of the terms of the FDA Facility and the Westpac undertaking. He had obtained advice from counsel before 21 November 2001 in relation to the ability to enforce the Westpac undertaking unconstrained by any underlying contractual or equitable obligations. The advice was to the effect that the undertaking was so enforceable.

117 I do not doubt that, on the basis of Mr Flory's advice, Dr Kermani thought that the FDA Facility would be repaid from the Westpac undertaking if it had not been repaid by Pinnacle. To that extent, Dr Kermani considered that her assets would not be at risk. I have however, found that Mr Flory did not advise Dr Kermani that the transaction was risk free.

118 Should Mr Flory have emphasised the degree of risk or the likelihood of Dr Kermani's securities being called upon? As pointed out, based on the emphasis placed by Mr Flory on the contemplated repayment method (as appears from the November 01 Letter of Offer) and the advice he received from counsel in relation to the enforceability of the Westpac undertaking, he would have assessed the risk or degree of likelihood as low and probably said so.

119 Advising that Dr Kermani still remained on the hook may not be sufficient to discharge his obligation pursuant to the Retainer and duty of care. The extent of any exposure was an important consideration.

120 Mr Flory did have knowledge of the underlying transactions and the requirements that were necessary to obtain and, more relevantly, retain the Hallinan Interest funds. Should he have said that if the requirements were not met there could be difficulties obtaining or retaining such funds and in such event Dr Kermani's risk would increase accordingly? After all, it is one thing to know you are on the hook, but that there is very little risk and it is another to know that the risk is greater. A proper assessment of the degree of risk may inform what decision a person makes.

121 The matter is not without difficulty. The main difficulty arises from the fact that Mr Irani was clearly aware of the risks associated with the FDA Facility and the underlying transactions. To the knowledge of Mr Flory, Dr Kermani and Mr Irani got on very well. Mr Flory probably assumed, with some justification, full and open discussion between them and therefore that Dr Kermani had been informed of the extent of the risk.

122 In the circumstances and based on the evidence and my assessment of Dr Kermani, Mr Irani and Mr Flory, I find on a balance of probability that it is likely that Dr Kermani was not only aware that she was still on the hook, despite the contemplated repayment method, but was also aware of the extent of the risk. In cross-examination in relation to the clear wording of the November 01 Letter of Offer, Dr Kermani conceded on more than one occasion that she knew "very well" that her assets were at risk. However, despite the clear words which she understood, she contended that Mr Flory told her that the transaction was "risk free". I have rejected this evidence.

123 Further, in evidence Dr Kermani agreed that Mr Hallinan was not making a gift and that if the Hallinan Interests did not get what they had bargained for the Westpac undertaking could not have been used. She knew therefore that she was and would continue to be at risk for so long as the arrangements with the Hallinan Interest were not concluded.[20] The comment of Mr Flory to Dr Kermani at paragraph 113 above must be understood in this context. Dr Kermani may have expected the arrangements to be concluded but that is not to the point. The following evidence given by Dr Kermani is critical.

"If he decided not to go ahead with the shares what were you told, if anything, would happen? - - - Yes, I did say. He says - then, of course, your Honour, the $2 million could not have been used.

Who told you that? I want you to think about that. Did somebody tell you that at the time? - - - Well, I had asked Mr Flory that I was going to be in control - the guarantee was going to be made in the name of Shalridge and I would be in control and then, of course, that would be between Mr Hallinan and me because then he would exercise but as soon as it was changed to St George Bank, that was when I was absolutely very, very upset because I knew that I had no control and the bank - Mr Hallinan would have no control and I would endanger my assets so I was a bit worried but I was convinced that it had nothing to do with it. What difference does it make whether it was St George Bank or Shalridge; it was the same.

You were told - and I am not putting words in your mouth, I am asking you were you told that if Mr Hallinan - what would happen if Mr Hallinan decided not to buy the shares? - - - Yes. I think it was like an option, like Mr Hallinan - there was a cooling period and Mr Hallinan would decide whether he wanted the - - - ."

124 In the end it may not matter whether Dr Kermani's knowledge (of the extent of the risk) was based on her reading of the letter of offer dated 21 November 2001, discussions with her husband, discussions with Mr Flory or a combination of some or all of these matters. Either way, she was aware that by signing the November 01 Letter of Offer she would be pledging her securities to support the FDA Facility and that there was a some risk that they could be called on. For this reason, the likely comment by Mr Flory to Dr Kermani set out in paragraph 113 would not have effected Dr Kermani's assessment of the risk.

125 For the above reasons, I am of the opinion that Mr Flory did not breach the Retainer or any duty. To the extent that he did not point out the extent of the risk, Dr Kermani had sufficient knowledge of the extent of the risk and in the circumstances his advice was adequate. In assessing breach or the adequacy of any advice the knowledge, sophistication and experience of the client, in this case Dr Kermani, is a relevant factor. Where the client does have such knowledge the advice need not be as comprehensive.[21]

126 Consequently, the contract claim and the negligence claim have not been made out.

127 In light of my conclusion that there was no breach of retainer or breach of duty, it is strictly not necessary to deal with causation. However, I do wish to deal briefly with the issue.

128 Dr Kermani contended that had she been properly advised:

(a) she would not have signed the November 01 Letter of Offer;

(b) this would have triggered a series of events culminating in the sale of the Bulla quarry within four months and Pinnacle repaying all debts owing to St George Bank; and

(c) she would therefore not have incurred the losses which resulted, including the loss of the Marshall Avenue property and her Share Portfolio.

129 Dr Kermani gave evidence that she would not have signed the November 01 Letter of Offer in relation to the FDA Facility if she was told that the Marshall Avenue property and her Share Portfolio were at risk. She had simply had enough.

130 However, assuming (contrary to her evidence) that Dr Kermani was told or was otherwise aware that there was such a risk, I am of the opinion that she would nonetheless have signed the November 01 Letter of Offer.

131 Other than Dr Kermani's oral evidence which, for the reasons given, I have rejected, there is no evidence that in November 2001 Dr Kermani had indeed had enough. On a balance of probability and for reasons that follow, I have no doubt that she would have signed the November 01 Letter of Offer. It represented the best alternative for Pinnacle and the Iranis. She was on the hook anyway for the other facilities. She expected - as did everyone - based on discussions with Mr Irani and Mr Flory and not unreasonably that although there was some risk, the Westpac undertaking would be called upon if Pinnacle could not repay the FDA Facility. Further, the facility represented an opportunity. It enabled Pinnacle to receive a much needed and critical injection of funds so that it could finally and profitably exploit the opportunity that the Bulla quarry presented.

132 Further, there is no evidence that Mr Irani did not want to continue with the Pinnacle investment. In fact, the evidence is to the contrary. Mr Irani was absolutely determined to proceed with the project. The evidence also confirms that such matters were discussed between the spouses. I find that if requested by Mr Irani (as she no doubt would have been), Dr Kermani would have signed the November 01 Letter of Offer well aware of the risks.

133 Further, it is relevant that Dr Kermani continued to make not insubstantial advances to Pinnacle after November 2001. There is simply no acceptable evidence that Mr Irani and Dr Kermani considered any alternative to the critical borrowing represented by the November 01 Letter of Offer. In fact, Mr Irani was so committed to the borrowing that he pre-committed the funds to be received.

134 In light of my finding that Dr Kermani would have signed the November 01 Letter of Offer, irrespective of what advice she received, it is not necessary to consider what would have transpired in the event that she did not sign. That question brings into play a significant amount of valuation evidence, expert forensic accounting evidence and evidence from the receiver of Pinnacle. It also involves analysis of complex counter-factual theories. In the circumstances, it is not necessary or efficient to deal with this matter and I do not propose to do so. Dr Kermani's claims for breach of retainer and negligence fail on multiple other grounds.

135 Dr Kermani has also failed to make out her claim for misleading or deceptive conduct in breach of the Fair Trading Act 199 (Vic) as that claim is based on the same factual foundations as the negligence and breach of contract claims.

136 Dr Kermani contended that in the course of giving advice at the meeting on 22 November 2001, Mr Flory made a number of misrepresentations, specifically that:

(a) by signing the November 01 Letter of Offer, Dr Kermani was not pledging her existing securities to support the FDA facility;

(b) the FDA facility was specifically covered by and was repayable only out of the proceeds of the Westpac undertaking;

(c) signing the November 01 Letter of Offer was risk-free from Dr Kermani's point of view since it was only the Westpac undertaking that would be used to repay the loan;

(d) Dr Kermani would effectively incur no liability by signing the November 01 Letter of Offer because it was only repayable out of the proceeds of the Westpac undertaking and, as such, could be regarded by her as a 'free loan';

(e) the Westpac undertaking was a security specifically dedicated to cover repayment of the FDA Facility;

(f) the Westpac undertaking was required by the terms of the November 01 Letter of Offer to be used to repay the FDA Facility;

(g) Tranteret understood that the Westpac undertaking would be called up to repay the FDA Facility without recourse first to Pinnacle, or to any other security giver, and that was Pinnacle and St George Bank's intention; and

(h) The Hallinan Interest would provide written confirmation of their understanding to the same effect as required by Ongoing Condition No. 1.

137 It follows from my findings in respect of the 22 November 2001 meeting and in particular, my rejection of Dr Kermani's evidence, that the claim for misleading or deceptive conduct must be dismissed. Dr Kermani has not established, on a balance of probability, that Mr Flory made any of the above representations.[22] Further, even if the alleged representations were made, they did not cause Dr Kermani any loss. I have found that she would have signed the November 01 Letter of Offer irrespective of what she was told by Mr Flory.

138 It follows that Dr Kermani's claims must be dismissed. There was no breach of Retainer, breach of duty or misleading or deceptive conduct. Further, if there was a breach, it did not cause any loss.

139 It is therefore not necessary to, and I do not propose to, deal with the remaining issues, namely quantification of loss and determination of what capacity Mr Flory was acting in when gave the advice to Dr Kermani.

140 I will order that the plaintiff's claim be dismissed. I will hear submissions from the parties as to costs.

[2] After she received advice from Flory.