"The action Writ 2747 of 1989 which prevented the Caveat

from lapsing on 15 October, 1989 as from the time of the

Order of 26th September, 1990 is now at an end, saving only

the aspects of the counterclaim (sic) (sine die) and that is

a matter for the Defendant Caveator (sic), if even

continued, has no relevance to the Caveat.

It is absolutely clear cut that the Plaintiff's claims in

the action as Plaintiff is (sic) at an end. The payment of

costs the (sic) by the Plaintiff (Caveator) and perhaps a

need to meet or counterclaim (if carried on and that aspect

is adjourned) does not change the facts.

The action which supported the Caveat has been discontinued

by the Plaintiff (Caveator) following on a summons taken out

by the Plaintiff (Caveator) seeking to do so. ...

Therefore, we ask that the Caveat be marked as LAPSED, and

any lapsing fee required will be paid. Once the supporting

action is discontinued or disposal of the lapse applies, and

if the lapse has run out, which it has, it would be

illogical to rule otherwise, as it would create confusion.

. . .

A person could lodge a caveat, start proceedings and give

notice to you and then disappear or go overseas. Surely

your belief is that such a person must be found and forced

(to) withdraw the Caveat, or be served with a Summons to

remove a Caveat which depended on a discontinued or struck

out action. Service could be difficult, have overseas

delays or be impossible.

. . ."

36. Surprising though it may seem, this ex parte application was acceded to by the Registrar of Titles, without reference to Messrs Marrinan and Allen. Dotwell proceeded to complete a sale of the property (with Mr Donald McDonald acting as vendor's solicitor) and pocket the proceeds. Counsel for Mrs Wan rely on the manner of removal of the caveat in two ways. They contend that it involved a breach of fiduciary duty on the part of Mr Donald McDonald, who had acted for both parties in the very transaction that led to the lodgement of the caveat. They also rely on the terms of Mr Donald McDonald's letter as annihilating his credit.

37. In my opinion, the very severe submissions made about the letter are fully justified. By its emphasis on the discontinuance of Mrs Wan's action in the Supreme Court, while at the same time totally suppressing the existence of the proceedings in this court and the necessity for that discontinuance, once the proceedings covering the same ground (and additional grounds as well) had been launched in this court, Mr Donald McDonald succeeded in conveying an impression which was the precise opposite of the truth. The Registrar of Titles was given to understand that Mrs Wan's claim had been withdrawn, and in such complete defeat that she had had to pay the costs. The statement: "It is absolutely clear cut that the Plaintiff's claims in the action as Plaintiff is at an end" could only convey a straight out lie; unless the reader was aware of the proceedings in this court, he could not be expected to give the words "in the action" the unnatural emphasis necessary to make the statement true. In fact, the plaintiff's claims were not at an end, but were being continued in a court of competent jurisdiction, together with additional claims capable of supporting the same relief. The reference to possible difficulties of service overseas was inexcusable, unless unintentional as regards its most likely effect - to suggest subtly a reason for ex parte action.

38. A public official, such as the Registrar of Titles, must often act upon the representations of solicitors. He is justified in expecting frankness and honesty. In this instance, the solicitor abused his privileged position in order to mislead. And he did so in the interests of a company with which, at the least, he had a close family association, so as to enable it to evade its obligations under an equitable lien towards a former client, on whose behalf he should long ago have at least secured possession of the title deed. If he did not thoroughly understand the law of equitable liens, he knew the facts which made Dotwell's conduct dishonest. And he participated in that dishonesty, both by his deceit in obtaining removal of the caveat, and by carrying through the sale of the property and disbursement of the proceeds. I have not thought it relevant to explore the respondents' contention that the caveat was, for technical reasons, vulnerable to removal; if true, this could not change the fact that its actual removal was engineered by deception, and that Mrs Wan was denied by concealment the opportunity to replace it with injunctive relief.

39. Mr Donald McDonald was cross-examined about these matters. He claimed that a lien would not support a caveat, and appeared to suggest it was the obligation of Mrs Wan's solicitor to inform the Registrar of Titles of the Federal Court action. He said it was not his duty to do so, and suggested it would be "to do the work of the other solicitors". Pressed as to whether he should have notified Messrs Marrinan and Allen, he said: "I dislike Marrinan and Allen. I wouldn't willingly tell them anything. I dislike them excessively." Asked: "Oh, is that the true story, is it?" he replied: "Oh, yes. I hate them." Further comment is not required.

40. In respect of a number of other matters, Mr Donald McDonald's credit suffered during cross-examination. A particularly serious question was raised in respect of a document prepared for lodgement under the Stamp Act 1894-1987 (Queensland), on a form known as Form Q. Completion of this form is required to obtain the concessional rate of duty previously mentioned. The document was filled out with Mrs Wan's full name and address in Hong Kong. It contains an acknowledgment of an obligation to notify the Commissioner of Stamp Duties in certain events, including failure to remain in continuous occupation of the property, as a principal place of residence, for a period of not less than six months, and two forms of statutory declaration "by virtue of the provisions of the Oaths Act 1867-1981". The document has been completed to show McDonald Partners solicitors as Mrs Wan's solicitors, and bears what purports to be her signature, in four places, as well as her initialling, in three other places. It is dated 8 May 1989 against each of the signatures. Two of the signatures purport to be Mrs Wan's signatures as declarant of statutory declarations. In each of those cases, the justice of the peace purporting to witness the statutory declaration is Mr Donald McDonald, who has signed as such. Mr Donald McDonald acknowledged in cross-examination, of each of these two signatures, "(T)hat would be my signature, yes." And he acknowledged that the document was lodged, through his office, "on Mrs Wan's behalf with the Stamps Office". He also agreed that Mrs Wan, who was in Hong Kong at the date of the document, had never signed anything in his presence. The inevitable question was then put to him: "That signature (i.e. Mrs Wan's signature to each declaration), I put to you, is a forgery?" He replied: "Oh, I wouldn't say it's a forgery." Relying on the fact that Mrs Wan's Chinese surname is Leung, he pointed out that "the Chinese share a very small number of surnames for such a large population", which, of course, is true. He then suggested some other Leung may have called to sign a document at his office, and signed this document in his presence by mistake.

41. I found Mr Donald McDonald's explanation, and his demeanour in giving it, most unsatisfactory. But, in any case, it simply cannot be true. For a comparison of the purported signatures, which Mr Donald McDonald has witnessed, with genuine signatures of Mrs Wan, which are in evidence, shows very clearly that the purported signatures are quite close copies of actual signatures. It is beyond controversy that, as she has sworn and Mr Donald McDonald acknowledged in cross-examination, they were not written by Mrs Wan. But, equally, they purport to be her signatures, and therefore must be forgeries. It seems the reasonable inference that the purpose of the forgeries was to overcome a difficulty with the concessional rate of stamp duty at a time when Mrs Wan was becoming suspicious, and therefore less co-operative, by reason of the inordinate delay in obtaining title to land for which she had made full payment. In the light of Mr Donald McDonald's own evidence, it is extremely difficult to believe that he placed his personal signature on the document honestly, as a justice of the peace witnessing a statutory declaration. I am unable to accept this view of what happened. There is, in my opinion, no escaping the fact that Mr Donald McDonald arranged for the lodging with the Stamps Office of a document which he knew contained a false representation, namely, that he as a justice of the peace had attested the signature of Mrs Wan to each of two statutory declarations made by her before him. That was a fraudulent act: Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561. I should also observe that, if Mr Donald McDonald was previously unaware of what had happened to the bank draft for $165,000, there is little doubt he must have become aware when this problem about the concessional rate of stamp duty emerged. He could hardly have considered the matter without asking what had happened to the purchase price. There was, after all, an established practice followed in quite a number of transactions, and it is the respondents' evidence that this matter broke the pattern.

42. I am regretfully driven to the conclusion that I ought not to accept the evidence of Mr Donald McDonald, where it is not confirmed by other evidence or in accordance with what I find to be the probabilities. Neither do I accept the evidence of Mr Ranald McDonald, where it conflicts with the evidence called for the applicant, nor particularly in respect of the draft for $165,000. I think the probability is that Mr Ranald McDonald instructed Miss Shaw to lodge the draft in Dotwell's account, and that Mr Donald McDonald, if not then aware of his action, became aware of it within a very short time, most likely the next day. Having regard to the admitted practice, the closeness of the relationship between Dotwell and McDonald Partners, and the need of Mr Donald McDonald's firm to know the facts of the matter in order to perform their function as conveyancers, this conclusion seems to me to follow naturally. Had the rest of the evidence suggested that Mr Donald McDonald paid meticulous regard to the obligations he owed as a solicitor, a conflicting probability of regular conduct of his affairs might have had to be considered. However, he had already demonstrated, in respect of the $30,000, that he was not meticulous, and that he was prepared to see trust moneys paid out when he had not checked whether an authorizing contract had been signed, and when none had in fact been signed. The statutory declarations for the Stamp Office and the letter to the Registrar of Titles need no further comment. I am satisfied the situation was as I have stated it.

43. I do not accept Mr Donald McDonald's construction of the contract of 19 December 1988. It is clumsily drawn, but I see no reason to construe it as meaning that the full price had to be paid before title was obtained in Mrs Wan's name. It does not say so. Unless compelled by intractable language, a court would normally construe a contract for the sale of land as contemplating that the price would be paid over upon delivery of an appropriate transfer or conveyance and other documents of title. The evidence of the respondents was that Dotwell was liquid, and there is no evidence to the contrary in respect of the period prior to the sale that was completed in evasion of Mrs Wan's equitable lien. Accordingly, if Mr Donald McDonald had performed his duty as a solicitor acting for Mrs Wan, and had taken prompt steps to recover the draft which had been wrongfully paid into Dotwell's account, it is probable the whole sum of $165,000 would have been recovered and paid into his solicitor's trust account. Likewise, the sum of $30,000 wrongfully paid out of the trust account would probably have been recovered, if prompt action had been taken, as was Mr Donald McDonald's duty.

44. I do not think the authorities require Mrs Wan to prove any more than that, in order to be entitled to a decision in her favour on the ground of breach of Mr Donald McDonald's fiduciary duty to her as her solicitor. Mr Donald McDonald failed to disclose to his client that his other client had, as a result, at least, of his negligence, obtained $30,000 in advance of the signing of any contract; and, as a result of the conversion of her bank draft, had obtained the whole balance of the purchase money in advance of showing any title or executing any transfer, or even obtaining title. A more material non disclosure it would be very difficult to imagine in relation to a conveyancing matter. As was pointed out in Farrington v Rowe McBride and Partners (supra, at 92-93, 97-99), where a situation of that kind arose, the solicitor had a responsibility, at the least, to explain to Mrs Wan the nature of his dual responsibilities in order to obtain her informed consent to his continuing to act for both clients. And she should have been advised that because of his professional commitment to his other client, and his close personal association with it, and because too of the demonstrated reality that her interests and its interests would not necessarily coincide in the particular transaction, she should consider taking independent advice. I shall return to the law on this topic; for the present it is enough to say it was stated in Farrington v Rowe McBride and Partners at 99 (and see also 93) that in such a situation

"(E)quity gives a remedy for the loss suffered ... . ...

Once the Court has determined that the non-disclosed facts

were material, speculation as to what course the aggrieved

party, on disclosure, would have taken is not relevant

(Brickenden v London Loan and Savings Co. (1934) 3 DLR 465,

469)."

45. So far as concerns the matter of disclosure to Mrs Wan of the misapplications of her funds which had occurred, I do not think there can be any doubt of Mr Donald McDonald's duty. It is not for a solicitor to hide such matters from his client. As Megarry J. said in Spector v Ageda (1973) 1 Ch 30 at 48:

"A solicitor must put at his client's disposal not only his

skill but also his knowledge, so far as is relevant; and if

he is unwilling to reveal his knowledge to his client, he

should not act for him. What he cannot do is to act for the

client and at the same time withhold from him any relevant

knowledge that he has".

46. I have already referred to the passage in Farrington v Rowe McBride and Partners (at 90) in which Richardson J. warned of the risks involved in a solicitor acting for both parties in a conveyancing transaction. That learned judge cited some of the leading cases in England, Australia and Canada in a passage which continued onto the next page of his judgment. A particularly strong warning was also given by Wootten J. in Thompson v Mikkelsen (Supreme Court of New South Wales, unreported, 3 October 1974), where he said:

"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 scrutinize 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.

In the present case I have no doubt that the solicitor

acted with complete integrity and with the utmost good

faith. Equally, I have no doubt that his position as

solicitor for both parties, one of whom was a long-standing

client, placed him in a position of conflict, in which the

defendant did not at any stage of the transaction, from

beginning to end, receive the concerned interest and advice

that a client is entitled to expect from a solicitor. ...

I say all this not because I take any joy in criticising a

member of the legal profession, but because I think it is

important to draw to the notice of other practitioners the

great undesirability of a solicitor acting for both parties

to a transaction."

In Commonwealth Bank of Australia v Smith [1991] FCA 375; (1991) 102 ALR 453 at 478, a full court of this court also went out of its way to reassert that the practice of one solicitor acting for both vendor and purchaser "is an undesirable practice and it ought not to be permitted".

47. Where, as here, the solicitor who acts for both parties has close family and commercial ties with one of them, his conflict of duty and interest is obvious. Nothing short of a truly informed consent can justify his position: cf. Commonwealth Bank of Australia v Smith (at 477-478), where it was said "(t)here is no precise formula which will determine in all cases if fully informed consent has been given; it is a question of fact in all the circumstances of each case". In this case, I am satisfied that informed consent was never given.

48. The obligation of a solicitor, who has a personal interest, to advise his client to obtain independent advice has also recently been reasserted in the Canadian case Garofoli v Kohm and Raimondi (1989) 77 CBR 84 at 98, where it was said "failure to do this is a ... breach of (the solicitor's) fiduciary duty". What is required, in the way of full disclosure, in order to obtain a fully informed consent is well indicated by Dr Paul Finn in his paper Conflicts of Interest and Professionals, published by the Legal Research Foundation Inc. in Professional Responsibility (1987) at 25-29.

49. As has already been made clear, the facts proved in this case raise questions of breach of fiduciary duty on the part of Mr Donald McDonald in a number of respects. He failed to obtain the informed consent of Mrs Wan to his acting for her when he had a plain conflict of interest; he failed to advise her that, in the circumstances, she should obtain independent advice; he dealt with trust moneys in a manner inconsistent with his duty, and he failed to recover trust moneys misapplied, when it was his plain duty to do so; he also failed to give his client, Mrs Wan, the benefit of his knowledge of what had transpired, which was directly relevant to a matter in which he was acting on her behalf; he failed to advise her of the further facts that he had taken no steps to ensure that her equitable lien, as a purchaser who had paid the whole of the purchase money, could not be defeated, and that he had not taken title, nor even retained the certificate of title, on her behalf; and he advised Dotwell, and acted on its behalf in relation to the removal of the caveat, in respect of the very transaction in which he had been acting for Mrs Wan, his former client. I have already made findings about these matters, but I should make further reference to the law relevant to the last.

50. Counsel for Mr Donald McDonald placed reliance upon Australian Commercial Research and Development Limited v Hampson (1991) 1 Qd R 508, in which Mackenzie J. followed the well known decision Rakusen v Ellis, Munday and Clarke (1912) 1 Ch 831 and the decision of Bryson J. in D and J Constructions Pty Ltd v Head (1987) 9 NSWLR 118. Rakusen and D and J Constructions were both cases where one partner in a firm of solicitors had acted for a party to litigation in the past, and another partner desired to act for the other side, there being no reason shown to believe that in fact information confidential to the former client would become available in the litigation to the later. The emphasis in the judgments was placed on the solicitor's duty to safeguard confidential information of his client. But there are at least two other aspects of the problem to which attention has more recently been drawn; a solicitor's duty of loyalty, which cannot be treated as extinguished by the mere termination of the period of his retainer, and the important consideration of public policy which gives a special quality to the relationship of solicitor and client that the law will not generally permit to be stained by the appearance of disloyalty.

51. It is obvious that, at least in the application of these principles to particular circumstances, there is likely to be a great difference between cases such as Rakusen and D and J Constructions, on the one hand, and cases, on the other, where the one solicitor, having acted for both parties, seeks to act against one of his former clients, and in the interest of a preferred client, in litigation arising out of the very matter in which he himself acted for both. In my opinion, it could only be in a rare and very special case of this latter kind that a solicitor could properly be permitted to act against his former client, whether or not any real question of the use of confidential information could arise. As Gummow J. said in National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 87 ALR 539 at 559: "(E)ven among fiduciaries, solicitors stand in a special position." Sir Owen Dixon explained why all professional persons stand, in a sense, in such a position in Jesting Pilate at 192, a passage quoted by Dr Finn in the paper already cited, when he wrote: "Unless high standards of conduct are maintained ... the trust and confidence of the very community that is to be served is lost and thus the function itself of the profession is frustrated."

52. Dr Finn, having drawn attention to the traditional concentration upon the lawyer's duty to preserve his client's confidentiality, adds (at 16, footnote 23):

"An aspect of the fiduciary's duty of loyalty would seem to

have some part to play where a solicitor discharges himself

from a retainer and then acts against his former client: see

Cholmondeley v Lord Clinton [1815] EngR 511; (1815) 19 Ves 261; 34 ER 515."

In MacDonald Estate v Martin (Martin v Gray) (1990) 77 DLR (4th) 249, the Supreme Court of Canada was unanimous in rejecting Rakusen, and emphasizing the importance of "the confidence of the public in the integrity of the profession and in the administration of justice" (per Sopinka J. at 270), although the court was divided upon the question how stringent a test this consideration required it to apply. A bare majority supported the view of Sopinka J. (at 268) that:

"(O)nce it is shown by the client that there existed a

previous relationship which is sufficiently related to the

retainer from which it is sought to remove the solicitor,

the court should infer that confidential information was

imparted unless the solicitor satisfies the court that no

information was imparted which could be relevant. This will

be a difficult burden to discharge. ... None the less, I

am of the opinion that the door should not be shut

completely on a solicitor who wishes to discharge this heavy

burden."

The minority supported the view of Cory J., who held (at 271) that "the most important and compelling" consideration "is the preservation of the integrity of our system of justice". He also said (at 273): "It is the appearance of fairness in the eyes of the public that is fundamentally important." His conclusion (at 276) was:

"Where a lawyer who has had a substantial involvement with a

client in an ongoing contentious matter joins another law

firm which is acting for an opposing party, there is an

irrebutable presumption that the knowledge of such lawyer,

including confidential information disclosed to him or her

by the former client, has become the knowledge of the new

firm. Such an irrebutable presumption is essential to

preserve public confidence in the administration of justice."

This approach seems to me to be consistent with the emphasis placed by Deane J. in Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 at 113-115 upon the great importance of the role played by the lawyer in the administration of justice.

53. In David Lee and Co. (Lincoln) Ltd v Coward Chance (1991) Ch 259 at 268, Sir Nicolas Browne-Wilkinson v C. (as he then was), to whom Canadian and American authority in conflict with Rakusen had been cited, said: "It may well be that it will be desirable, in the light of 1990, to rethink what was laid down as the law in 1912. But that is for some other court, not for me. I must apply the Rakusen test as best I can." However, he did state that test in its broadest form, saying:

"As it seems to me, what I have to do is to look at the

particular circumstances of the case to see whether there is

or is not a reasonable anticipation of mischief flowing from

the continued provision of legal services by the combined

firm ... ."

(The solicitors for the liquidators had amalgamated with a firm which included partners who had advised the other side.) In the circumstances, he concluded (at 270) that "it would not be lawful for the new amalgamated firm to continue to act for the liquidators."

54. In Australia, the authorities are not unanimous. As against the decisions relied on by counsel for Mr Donald McDonald, a strict approach, similar to that adopted in the United States, was taken by the Queensland full court in Mills v Day Dawn Block Gold Mining Company Limited (1882) 1 QLJ 62, a decision which has received some academic approval, as was noted by Gummow J. in National Mutual Holdings (supra, at 560). Gummow J. was dealing with a question of the appropriate forum for the determination whether a solicitor should be restrained from acting for a client on the basis that a merger of legal firms had resulted in a party being represented by a firm members of which had previously represented the other side. It was submitted the law of New York would raise an irrebutable presumption of a conflict of interest. Gummow J. (at 561) said: "It is sufficient to say that there is a real possibility that the law in this country is no less stringent than that which Sentry submitted to be the law to be applied in the New York proceedings."

55. It is apparent from this brief survey of recent decisions that the application of Rakusen to any particular case to which it is said to apply may, in the current state of the authorities, be subject to some debate. As Sir Nicolas Browne-Wilkinson vC. pointed out in David Lee and Co. (supra, at 267), the tests laid down by the Court of Appeal in Rakusen are not all consistent with each other and, while the case has been rejected elsewhere, in England it has been followed by the adoption of the least precise of its formulations, that stated by Fletcher Moulton L.J. (at 841), who thought: "As a general rule the Court will not interfere unless there be a case where mischief is rightly anticipated". (Emphasis added.) A helpful recent discussion of the authorities by M.R. Dean and C.F. Finlayson in Conflicts of Interest: When May a Lawyer Act against a Former Client? (1990) NZLJ 43 does not favour a lax application of the rules designed to avoid a conflict of interest or duty.

56. If the focus of attention is shifted, from the case of an amalgamation of firms or other change in a partnership (where the question of conflict arises out of the relationship, but the solicitor actually handling the matter has never acted for the other party), to the case of a solicitor who has acted for both parties continuing to act for one of them after a conflict has arisen, the issues of loyalty and propriety seem to me to loom more largely. The practice of the profession in many places insists upon a solicitor, in such a case, ceasing to act for either side. My own impression of the approach generally adopted in Australia is reflected in the comment of Wootten J. in Thompson v Mikkelsen (supra), which was a case where a solicitor acting for both vendor and purchaser in a conveyancing transaction discovered that the vendor wished to withdraw from the contract: "(O)ne might have thought that at this stage a solicitor, faced with an obvious conflict of interest between the parties, would have felt it proper to cease to act for both parties" (emphasis added). In England, the Law Society has laid it down, in terms which were summarized in argument in David Lee and Co. (supra, at 262): "If a solicitor has already accepted instructions from two clients and a conflict subsequently arises between the interests of those two clients, the solicitor must cease to act for both clients." In Canada, the Law Society of Manitoba and the Law Societies of other provinces have adopted a Code of Professional Conduct which is cited in MacDonald Estate (supra, at 256): "A lawyer who has acted for a client in a matter should not thereafter act against him (or against persons who were involved in or associated with him in that matter) in the same or any related matter ... ." The same obligation applies under the rules of professional conduct of the Law Society of Upper Canada, as appears from an illuminating article on the whole topic, Acting Against Former Clients - a Matter of Dollars and Common Sense by P.W. Kryworuk (1984) 45 CPC 1 at 3. In the United States, the same rule was laid down in Gesellschaft Fur Drahtlose Telegraphie M.B.H. v Brown (1935) 78 F 2d 410, where the court referred (at 412) to "the well-established rule of public policy that where an attorney has acted for a client he cannot thereafter assume a position hostile to the client concerning the same matter, or (emphasis added) use against the client knowledge or information obtained from him while the relation existed."

57. It is true, as was pointed out in MacDonald Estate (at 257), that not every rule of professional conduct adopted by a law society will be reflected in a rule of law. However, I think the wide acceptance of this particular rule supports the view of the United States court, in the case last cited, that this is not merely a matter of a code of professional ethics.

58. In the particular circumstances of this case, Mr Donald McDonald knew from his previous involvement in the matter as Mrs Wan's solicitor that, at any rate during the period when he had been acting, there had been no approach to the Registrar of Titles which might have alerted him or his officers to the true nature of Mrs Wan's claim to an equitable lien, or might in some way have led to a revelation of the deceitfulness of what Mr Donald McDonald proposed to write. He also had an intimate knowledge of Mrs Wan's personal affairs, having been informed of them in detail for the purposes of the intended business migration application in pursuit of which the purchase had been made. I do not think I can discount the possibility that Mr Donald McDonald was assisted by his knowledge of what had happened, and of Mrs Wan's affairs, when he engaged in the delicate process of balancing the risks and advantages of putting to the Registrar of Titles the particular submissions which he set forth in his letter. One factor he must have considered, I infer, was the likelihood of his being found out, which his knowledge must have assisted him to assess. The fact is that no copy of his letter to the Registrar of Titles was ever discovered or produced. Furthermore, Mr Donald McDonald had obtained while he was Mrs Wan's solicitor, although not from her, confidential information about what had happened to her draft for $165,000. In my opinion, the effect of a solicitor having confidential information relating to the affairs of a client does not depend on the source of the information. I think Mr Donald McDonald accepted Dotwell's instructions to act upon the removal of the caveat, and upon the sale of the land, in breach of his fiduciary duty to Mrs Wan.

59. So far, I have found that Dotwell was guilty of contraventions of s. 52 of the Trade Practices Act, in which Mr Donald McDonald was involved within the meaning of s. 75B, being knowingly concerned. On the facts of this case, the misrepresentations concerning the application of the Business Migration Policy, and the role of the solicitor, Mr Donald McDonald, and his trust account, were important factors in inducing Mrs Wan to deal at all with Dotwell. She relied on the representations. I have also found that Mr Donald McDonald was guilty of significant breaches of his fiduciary duty owed to Mrs Wan. I now turn to the question whether Mr Ranald McDonald too was involved in the contraventions of s. 52. He was a member and director of Dotwell, and described himself as its managing director. He took a personal role in dealing with Mrs Wan on each of her visits to Australia. He personally received the draft for $165,000 which was misapplied, and I am satisfied that he was well aware of what happened to the two earlier amounts totalling $30,000, and the single payment of $1,000. I have found that he made one of the representations, on the occasion of Mrs Wan's first visit to Australia, that his father would be her solicitor and would "check everything for a clear title and will transfer the land to your name". He was, of course, also present at the restaurant when his father stated he would attend to the documents for the house and act as Mrs Wan's solicitor. From his knowledge of the manner in which Dotwell and his father carried out the transactions involving business migrants, he must have been aware that the represented handling of the matter by a solicitor was a quite illusory protection for Mrs Wan. In his position in the company, he must also have been aware of the modus operandi by which it was represented to intending business migrants that moneys transmitted by them to Australia would go into a solicitor's trust account, and by which the documentation I have already described was utilized. I am satisfied Mr Ranald McDonald was well aware that his company was engaging in a course of conduct calculated to mislead an intending business migrant into the belief that the transaction would involve his having the protection of a solicitor acting for him and the protection of that solicitor's trust account. Mr Ranald McDonald knew there was no real protection of that kind at all.

60. Mr Ranald McDonald was also aware, on the evidence, of the fact that more than a third of the money supposedly invested in Australia in the purchase of a house and land would in fact be remitted to Hong Kong within days of its receipt, and before the purchase had even been completed. The evidence of Mr Aho leaves no doubt that this money could not count towards Mrs Wan's business migration application. There is, however, a question whether Mr Ranald McDonald understood the Business Migration Policy sufficiently to make him knowingly concerned in the misrepresentation of it to Mrs Wan. The policy was in fact misrepresented to her in at least two other material respects: in so far as, apart from the remission of a large part of the money, only $100,000 of the amount utilized in the purchase of a home could be counted, contrary to what she was told; and in so far as it was represented to her that she need only invest in Australia, under Dotwell's scheme, less than the total amount required by the Business Migration Policy. Both of these were intended to influence Mrs Wan, and, applying what was said by Wilson J. in Gould v Vaggelas (1985) 157 CLR 215 at 238, I find they did contribute to her decision to contract with Dotwell. Mr Ranald McDonald said in cross-examination that he personally, although he was not a solicitor, made alterations to the form of contract used for business migrants which had originally been settled in his father's office. It was also said in cross-examination that he told Mrs Wan "so long as her boss was prepared to certify that she acted on behalf of the company like a director of the company or an owner and he was prepared to certify that, that she stood a reasonably good chance of migrating." This evidence suggests some knowledge of the requirements. He conceded, too, in cross-examination that at the time the contracts were signed he told Mrs Wan "you will be required to transfer another amount of $150,000 to us for investment." And that he said, with respect to the two contracts, "One's for the house, the other's for the application". He also conceded that he said to her, on this occasion, that "the house will be treated as part of your assets if you apply for migration under the B.M.P."

61. When, to such evidence of personal involvement, there is added the probability that the managing director of this small company would be in constant touch with its activities, it would be natural to infer a knowledge of what was being represented on behalf of the company by its agents in Hong Kong. After all, Mr Ranald McDonald could hardly have the discussions with Mrs Wan which are in evidence without knowing what she had already been told, unless he were to run a severe risk of serious inconsistencies becoming apparent. Since the truth was not being told in Hong Kong, if he did not know what was being told this problem would have been acute. In cross-examination, Mr Ranald McDonald attempted to distance himself from his agents in Hong Kong, asserting, in the teeth of the evidence, that they were not Dotwell's agents but acting independently. The inference seems available that he spoke out of a guilty knowledge of their misrepresentations of the position. I did not find Mr Ranald McDonald's evidence persuasive. It is extremely unlikely, having regard to the number of cases handled by Dotwell, that none of the intending migrants said anything to Mr Ranald McDonald that alerted him to the nature of the representations being made in Hong Kong.

62. In February 1988 Mr Ranald McDonald gave notice to the Department of Immigration, Local Government and Ethnic Affairs of his intention to act as a migration agent. He signed a statement under the letterhead of McDonald Partners, in which he claimed to have gained "NOT ONLY A THROUGH (sic) UNDERSTANDING OF THE AUSTRALIAN IMMIGRATION LAWS BUT A PRACTICAL WORKING KNOWLEDGE OF THE CONDITIONS AND ASSISTANCE THAT MUST BE GIVEN TO BUSINESS MIGRANTS TO ENSURE THE SUCCESS OF THEIR AUSTRALIAN RESIDENCY." In the same document, he referred to "OUR ONLY ASSOCIATED COMPANY KAWANA WATER PROPERTY AGENCY LTD OF HONG KONG". The document was accompanied by a notice of the same date signed by Mr Donald McDonald.

63. In his affidavit, Mr Ranald McDonald swore that he told the applicant that the $195,000 "would be counted in part towards the resettlement costs and in part towards the eventual transfer of funds to Australia". This, of course, was misleading in two ways: the excess over $100,000 could not be counted towards resettlement costs, and it could not be counted as part of a business investment in Australia because it was not a business investment; and furthermore, about $70,000 was being remitted by Mr Ranald McDonald's own direction, within two or three days of receipt, to Hong Kong for payment to the Hong Kong companies involved in the scheme, so that in no way could it be counted towards either resettlement or transfer of funds to Australia. In that affidavit, Mr Ranald McDonald does not suggest that he was unaware of the requirements of the Business Migration Policy, which he expressly concedes would not be complied with only by the buying of a house for $195,000 and the investing of $150,000 in a business. He states: "There was a basis for BMP entry into Australia upon the investment of ... $600,000". And: "I did explain in some detail the way that the BMP worked. ... I did explain that further sums would be required." I reject this evidence in so far as it suggests that a complete and truthful explanation was given, and in particular in so far as it asserts that anything was said about further sums being required; but the evidence plainly concedes that Mr Ranald McDonald was aware of the true position.

64. A good example of the complete unreliability of the evidence of both Mr Donald McDonald and Mr Ranald McDonald is provided by the banking of the draft for $165,000. I have already dealt with this in some detail, but there are aspects of the circumstances which ought to be mentioned here, while I am discussing the conclusions to be drawn about the role of Mr Ranald McDonald. It was suggested by Mr Ranald McDonald in evidence that the draft was banked to Dotwell's account by "an oversight on behalf (sic - scil. on the part) of my secretary", and that it was transferred to an account "opened up in the name of Miss (sic) Wan". But if such an error had occurred, it would certainly have been discovered the very next morning, because Mr Ranald McDonald signed, on 20 December 1988, a request to the bank relating to this particular deposit. Yet his secretary, who was finally subpoenaed upon the matter being pressed during the hearing, had no recollection of any incident when she was blamed for a mistake in respect of what was by far Dotwell's largest banking during a period of more than six months covered by the bank deposit book. That book also gives the lie to evidence furnished by Mr Donald McDonald, and not corrected by Mr Ranald McDonald, that Miss Shaw had already been sacked, at the time of the receipt of the $165,000, on some other ground. The book contains her signature on the very great majority of deposits made on behalf of Dotwell during the ensuing six months, up to and including 22 June 1989. Even more importantly, the request to the bank signed by Mr Ranald McDonald on 20 December 1988 expressly asks the bank to "deposit $165,000.00 received on behalf of Wendy Leung to bank into our 11AM Account under the name Dotwell Investment Pty Ltd". It was not an account "in the name of" Mrs Wan, and there is no suggestion, on the face of the request, that an error had occurred. If there had been any intention to give Mrs Wan real protection by the deposit of her money into a solicitor's trust account, it would have been easy to vary the terms of the request. On all the evidence, I find Mr Ranald McDonald was involved in Dotwell's contraventions of s. 52, of which he had the necessary knowledge.

65. In view of my finding that Mr Donald McDonald was actively involved in the affairs of Dotwell, it is perhaps unnecessary to pursue the question of the effect of his 50% shareholding, which he claims he held in trust. However, I shall say something about it. The documents show that Mr Donald McDonald was one of two subscribers, each of whom took up one share in Dotwell upon its incorporation on 8 December 1987, the other subscriber being Mr Ranald McDonald. The first indication of a change of shareholding, to be found in any documentary evidence, is in an annual return filed by the company bearing the date 11 September 1990, signed by Mr Ranald McDonald, which shows the members as Mr Ranald McDonald and Mr Jackson Cheng. How Mr Jackson Cheng was said to have come to be a member was not disclosed by any evidence, and it would have been easy for Mr Donald McDonald to have produced a transfer, or evidence of the existence and terms of a transfer, including its date, if any existed and was effective at any time prior to the events with which this case is concerned. The matter is one peculiarly within the knowledge of the respondents, and particularly of Mr Donald McDonald, whose affidavit sworn 18 July 1991 acknowledges he "held one subscriber's share" and that he was a director until June 1988, but does not claim that he had transferred his share to Mr Jackson Cheng. In the circumstances, I think the failure to produce any transfer, or to explain its absence, or to produce any other contemporary record of a transfer, raises a case for the application of the principle stated in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. I reject the bare statement of Mr Ranald McDonald that his father "ceased to be a director and shareholder of Dotwell on 30 June 1988", which echoed a similarly bare assertion by Mr Donald McDonald in his oral evidence, but not in his affidavit.

66. Once it is accepted that Mr Donald McDonald was a shareholder in Dotwell at the time he accepted Mrs Wan's retainer as her solicitor, it is irrelevant whether or not he held his 50% shareholding in trust. As Deane J. said in Palmisano v Hyman (unreported, 30 March 1977, Supreme Court of New South Wales), a case where the defendant acted as solicitor for the plaintiffs and also for a company in which he held shares as a trustee:

"It is hardly to the point that the defendant's

shareholding in Deep Hills Corporation Pty. Limited was that

of a trustee. That fact, indeed, left him with less

discretion to prefer the interests of the plaintiffs than he

would have had if he (had) owned the share in his own right.

The plain fact is that, as shareholder, director, manager

and secretary of Deep Hills Corporation Pty. Limited, the

defendant himself had an interest in the terms of any

arrangement reached between the plaintiffs, on the one hand,

and Deep Hills Corporation Pty. Limited ... on the other

hand, which was in direct conflict with the interests of the

plaintiffs. As trustee shareholder, director, manager and

secretary of Deep Hills Corporation Pty. Limited he owed, in

relation to the overall transaction, duties to his ultimate

cestui que trust ... and to Deep Hills Corporation Pty.

Limited which were in conflict with his duty to the

plaintiffs as his clients. The defendant does not suggest

that he informed any of the plaintiffs other than Palmisano

of the existence of this conflict of interest. On my

finding, he did nothing to inform Palmisano of it. ...

The defendant did not, at any time, suggest to any of

the plaintiffs the desirability of seeking independent legal

advice. ...

... In a situation where he was acting as the

plaintiffs' solicitor, his failure to advert to the

existence of the conflicts both of interest and duty or even

to raise the possibility of the plaintiffs seeking

independent legal advice not only constituted a flagrant

breach of his fiduciary duty to the plaintiffs. It tainted

whatever advice he gave to the plaintiffs or actions he

performed for them, as a solicitor, in relation to the

overall transaction.

The duty of a solicitor to bring to the attention of

his client the existence of any conflict of interest between

the client and another client or between the client and

himself is not based upon any presumption that the solicitor

will, in dereliction of his duty to his client, prefer the

interest of the other client or himself. It is based on the

clear recognition by the Courts that such a conflict of

interest or duty should simply not be permitted to exist

without the client being fully appraised of it. The

solicitor who fails to inform his client of the existence of

such a conflict of interest or duty and to explain fully its

implications is in breach of his fiduciary duty to his

client even if he prefers the interests of that client over

the interests of his other client or himself."

67. I have concluded that Dotwell contravened s. 52 of the Trade Practices Act in the respects I have mentioned, and that Mr Donald McDonald and Mr Ranald McDonald were both involved in the contraventions within the meaning of that Act. I have also found that Mr Donald McDonald committed a number of breaches of his fiduciary duty towards Mrs Wan. It was suggested in his defence that the misapplications of trust moneys which occurred did not give rise to any right to compensation because, if they had not occurred, Mrs Wan would still have paid away these moneys through Mr McDonald, acting properly, and the ultimate consequences would have been the same; and that had a full disclosure been made, and had she been advised to seek independent advice, she would or might still have pursued the transaction with Dotwell. This argument ignores the possibility that Mrs Wan, if properly advised, would have insisted upon changes in the arrangements. It also ignores the possibility that Mr Donald McDonald, acting properly, might himself have protected Mrs Wan, his client. But it is unnecessary to pursue these objections. For the authorities are clear that the whole question is irrelevant. Once a breach of fiduciary duty is shown, the beneficiary's right to compensation does not depend upon the answer to questions of this kind. In Commonwealth Bank v Smith (supra, at 479), the full court cited the statement of Lord Thankerton in Brickenden v London Loan and Savings Co. (1934) 3 DLR 465 at 469:

"When a party, holding a fiduciary relationship, commits a

breach of his duty by non-disclosure of material facts,

which his constituent is entitled to know in connection with

the transaction, he cannot be heard to maintain that

disclosure would not have altered the decision to proceed

with the transaction, because the constituent's action would

be solely determined by some other factor, such as the

valuation by another party of the property proposed to be

mortgaged. Once the Court has determined that the

non-disclosed facts were material, speculation as to what course

the constituent, on disclosure, would have taken is not

relevant."

As the full court pointed out, Lord Radcliffe made a similar statement in Gray v New Augarita Porcupine Mines Ltd (1952) 3 DLR 1 at 15. In Palmisano v Hyman (supra) Deane J. said:

"It is a matter of speculation whether or not, any

arrangements between the plaintiffs and the Resources Group

would, if the plaintiffs had been in receipt of untainted

advice, have included effective guarantees ... or security

... . ... I do not consider it any part of my function in

the present matter to engage in any such speculation.

On my findings, the defendant has, in breach of his

fiduciary duty to the plaintiffs applied the money and

property of the plaintiffs in a manner which has resulted in

that money and property being completely lost. ...

... They (i.e. the plaintiffs) have lost all their

investment. The defendant is, in the circumstances, under a

liability to make good that loss ... ."

Similarly here, Mr Donald McDonald's breach of fiduciary duty has caused loss which he is bound to make good. It is not open to him to evade that responsibility upon the basis of any speculation about what might afterwards have been done with the money if it had not been lost by reason of his breach of fiduciary duty.

68. Furthermore, I think it is plain that, in these circumstances, Mr Donald McDonald was also guilty of negligence in the performance of his duties as Mrs Wan's solicitor. He took no care whatever to ensure that she was protected in the transaction in which he was retained to act on her behalf. Not only did he fail to exercise care in relation to the payments out of his trust account, and in relation to the recovery of the very large sum diverted from his trust account, the diversion of which I have concluded on the probabilities came to his notice within a day of its occurrence, but also he failed to take any steps to protect the equitable lien which Mrs Wan undoubtedly had over the property the subject of the contract of purchase. His negligence caused foreseeable loss. It is unnecessary to consider the further case made by Mrs Wan in fraud. So far as the representations made by Mrs Cheung are concerned, however, I should note that she was not called as a witness, and it would be difficult to infer with any confidence that she personally was aware of the falsity of the representations she made. There is a real possibility that she was acting on information which she believed to be genuine, emanating from Mr Jackson Cheng, Mr Donald McDonald or Mr Ranald McDonald.

69. I turn to the question of relief. The contractual arrangements made between Mrs Wan and Dotwell, including both the agreement of purchase and the migration agreement, were induced by misrepresentations, and must be declared void. Whether or not my findings justify that order on any other basis, I think it is clearly the appropriate order to make under s. 87 of the Trade Practices Act. Dotwell's counter-claim, which is based on the migration agreement, must be dismissed with costs, to include any costs of the proceedings in the Supreme Court of Queensland the subject of the reservation to the Federal Court of Australia contained in the order of Ambrose J., made 22 November 1990, when he transferred the counter-claim to this court. In addition, Mrs Wan is entitled to an award of damages or compensation in respect of the moneys paid away by her and the loss of the use of those moneys. As was the case in Commonwealth Bank v Smith (supra, at 479- 480), I think the measure is the same, in relation to the major losses sustained, under each of the causes of action I have found established. I think Mrs Wan is entitled to recover the whole of the sum of $196,000 that she paid upon the misrepresentations of Dotwell, in which the other respondents were involved, and that was also lost, or substantially lost, to her by reason of the negligence and breach of fiduciary duty of which Mr Donald McDonald was guilty.

70. But the mere award of the sum of $196,000 would not restore Mrs Wan to the position in which she was before she paid away the moneys. She must also be compensated for the loss of the use of the money, to the extent that it would have been productive of benefits to her. In Commonwealth Bank v Smith (at 457) it appears the trial judge, whose decision was affirmed, allowed compound interest pursuant to the principles stated by the High Court in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125. But in Commonwealth Bank v Smith, as the full court stated at the same page, compound interest was calculated at rates in line with those actually charged by the bank. In Hungerfords v Walker, the position was less clear. Although a calculation of compound interest was made, the resulting figure was substantially reduced on the basis of doubts as to the use which would have been made of the money. King C.J. had stated in the Supreme Court (in a passage quoted by Mason C.J. and Wilson J. at 151): "There is no firm basis for arriving at the amount of the adjustment. It is a matter of judgment on the sparse material available." Mason C.J. and Wilson J. added the comment: "In the light of these observations, the Chief Justice adopted a broad-brush approach and adjusted downward the amount assessed for the loss of the use of the money."

71. In the present case I find myself in the position described by King C.J. Mrs Wan was planning, at the relevant time, to migrate to Australia under the Business Migration Policy. In fact, she was eventually successful in achieving acceptance under that policy. The evidence condescends to few details of the steps taken by her, presumably on the advice of the different agent to whom she went after she became dissatisfied with the respondents. Although there was some evidence of the high return which could have been achieved from investments in Hong Kong, it is not clear whether the money would have been committed to those investments, or to investments in Australia. I think it is very difficult for Mrs Wan to place herself in a hypothetical situation, which did not in fact exist, of having this money available to her during the critical period when she was attempting to secure admittance to Australia. I willingly accept, on the basis of Hungerfords v Walker and Commonwealth Bank v Smith, the availability of compound interest as a measure of damages in such a case; however, I think in the particular circumstances of the present matter the best I can do is to take a broad-brush approach to the question of interest. The money, or much of it, may very well have been invested in Australia, and Mrs Wan's unfamiliarity with the commercial conditions here may have affected the net result. On the whole, I think it would be appropriate in this case to award, in respect of the loss of the use of the money, a rounded amount assessed at the approximate figure which would be produced by adding together the following:

1. The amount of interest in fact earned by the deposit of Mrs Wan's

$30,000 with Chase AMP Bank Limited up until 9 November 1988, i.e.

$214.74;

2. Interest on the sum of $31,000 (being the $30,000 plus the sum of

$1,000 received from Mrs Wan on 11 October 1988) from 9 November

1988 to the date of judgment at the rates applicable during that

period in accordance with the practice of the Supreme Court of New

South Wales;

3. Interest upon the further sum of $165,000 from 16 December 1988 to

the date of judgment at the rates applicable during that period

according to the practice of the Supreme Court of New South Wales.

I calculate that these figures add up to an amount close to $110,000.

72. On this basis, the total sum which each of the respondents is ordered to pay to the applicant is $306,000. The respondents must pay the applicant's costs.

73. There is one further matter. As Megarry J. pointed out in Spector v Ageda (supra, at 50),

"I need hardly say that I have been concerned merely to

decide this case as between (applicant) and (respondents)

... : I have not been conducting any inquiry in the

appropriate manner into whether a solicitor has acted in

accordance with the high standards of an honourable

profession."

However, like Megarry J. in that case, I have been left with no doubt that the protection of the public and of the legal profession requires such an inquiry to be made in accordance with the proper procedure. Accordingly, I direct the Registrar to forward copies of these reasons to the Queensland Law Society and to the Registrar of the Supreme Court of Queensland.