Professions and Trades - Lawyers - Duties and liabilities - Solicitor and client - Negligence - Generally - What constitutes negligence - Failure to advise about entirety of capacity to avoid obligations to third party.

Shirley Dawn Hutt v Piggott Wood and Baker [1993] TASSC 58 referred to.

Judgment Number: [2009] TASSC 86

ROSS AMBROSE GROUP PTY LTD (ACN 009 501 759) v RENKON PTY LTD (ACN 009 581 622), SUZANNE REES, PETER JOHN SHIPTON, RODNEY PLUNKETT, SUSAN ELAINE PLUNKETT

BRUCE RICHARD DOOLAN, TIMOTHY JAMES ELLIS, PHILLIP ANDREW WELCH, DAVID ANTHONY SMITH

1 The proceedings the subject of these reasons are what may loosely be described as third party proceedings. In the course of the substantive proceedings, Renkon Pty Ltd (therein described as the Firstnamed Defendant), and its directors (therein described as the Secondnamed to Fifthnamed Defendants), sued their former solicitors (therein together described as the Fifth Party) in negligence and for a breach of a contractual duty, arising out of what is alleged to have been a failure by the solicitors to give appropriate advice in or about May 1991.

2 The parties agreed that, given that a particular witness was not available to give evidence, I should initially only determine the issue of liability. The witnesses, who gave evidence in relation to that issue, were Ms Suzanne Rees, a director of Renkon Pty Ltd, two former employees of Renkon Pty Ltd, Ms Gayle Murray and Ms Heather Dubbeld, Mr Bruce Doolan and Mr Timothy Ellis.

3 The claim by Renkon Pty Ltd and its directors against their former solicitors was against the partners of the firm of Clarke & Gee, as it was constituted at the time the cause of action was said to have arisen. These were named as Bruce Richard Doolan, Timothy James Ellis, Philip Andrew Welch, David Anthony Smith and Raymond Frederick Bailey. At the commencement of the hearing, the title to the proceedings was amended to delete the name of Raymond Frederick Bailey. Shortly prior to the hearing, the Court was provided with judge's papers. They contained an amended statement of claim dated 26 March 2004 and a defence to that claim dated 14 July 2006. The statement of claim was amended further in writing at the commencement of the hearing and again by oral application after the hearing commenced. No further amended defence was delivered and nothing turns on the failure to do so. The defence filed in 2006 remains relevant to the further amended statement of claim. The final amended statement of claim and the 2006 defence are set out below.

"1 At all material times the Fifth Party was a legal firm styled Clarke & Gee, the partners of which were set forth in the title hereto.

"1 Save that it says that Raymond Frederick Bailey ceased to be a partner in May, 1990, the third party admits the allegations contained in paragraph 1 of the statement of claim.

2 In or about the month of May 1989 the Firstnamed Defendant requested the Fifth Party to act as solicitors for it for the purposes of representing it in the negotiations and the completion of an Agreement of Sale whereby it purchased and acquired certain plant and equipment and the business known as 'The Olde Tudor Motor Inn' (hereinafter referred to as 'the Business') which business was situated and carried on at premises at Launceston in Tasmania; and in the negotiation and completion of a Lease of the land upon which the Business was established; and the giving of legal advice and the carrying out from time to time of all necessary further instructions for the purposes of protecting the interests of the Firstnamed Defendant in respect to the Business and the said Lease.

2 The third party says that it was instructed by the second to fifth-named defendants inclusive to incorporate the first-named defendant and then to act as its solicitor in the negotiation and completion of an agreement for sale and lease, as pleaded in paragraph 2 of the statement of claim, but denies each other allegation contained in the said paragraph.

3 At all material times subsequent to the request referred to in paragraph 2 above the Fifth Party acted on behalf of the Firstnamed Defendant as its solicitors and purported to act in accordance with the said request.

3 The third party admits that it acted as solicitors for the defendants in negotiating and completing the agreement for sale and lease pleaded in paragraph 2 of the statement of claim, but otherwise denies each allegation contained in paragraph 3 of the statement of claim.

4 It was an implied term of the contract constituted by the request referred to in paragraph 2 above and of the acceptance thereof referred to in paragraph 3 above (hereinafter referred to as 'the Retainer') that the Fifth Party would represent the interests of the Firstnamed Defendant and would undertake all work arising therefrom with due care and skill and that the Fifth Party would not act negligently.

4 The third party does not admit any of the allegations contained in paragraph 4 of the statement of claim.

5 Further, or in the alternative, and by reason of the relationship of commercial proximity, the Fifth Party owed to the Firstnamed Defendant a duty of care to exercise reasonable skill and care and not to act negligently.

5 The third party does not admit any of the allegations contained in paragraph 5 of the statement of claim.

6 In the course of undertaking work pursuant to the Retainer the Fifth Party, inter alia, negotiated and prepared for the Firstnamed Defendant certain contracts, namely:-

(a) a written agreement dated the 29th June 1989 between the Firstnamed Defendant of one part and the Plaintiff and the Defendant to the Counterclaim of the other part wherein the terms upon which the sale and purchase of the Business were expressed hereinafter referred to as 'the Sale Agreement' and a supplementary written agreement dated 30th June 1989 between the same parties wherein additional terms in respect of the sale and purchase of the Business were expressed (hereinafter referred to as 'the Covenant Agreement');

(b) A Memorandum of Lease dated the 11th day of July 1989 whereby the Plaintiff leased to the Firstnamed Defendant land comprised in Certificates of Title Volume 4207 Folio 64, Volume 4030 Folio 5 and Volume 4080 Folio 4, being the land upon which the Business was conducted (such Lease to hereinafter be referred to as 'the Lease').

6 The third party admits that it negotiated and settled on behalf of the first-named defendant a written agreement between the first-named defendant and the plaintiff and the defendant to the counter-claim dated 30 June 1989 and the memorandum of lease pleaded in paragraph 6 of the statement of claim, but otherwise denies each allegation contained in the said paragraph. It says that the agreement dated 30 June 1989 was supplemental to an agreement for sale dated 29 June 1989 which contained the terms of sale and purchase.

7 The Firstnamed Defendant in reliance upon the advice of the Fifth Party, given pursuant to the Retainer, entered into the Sale Agreement, the Covenant Agreement and the Lease.

7 The third party admits that the first-named defendant entered into the First Agreement and the Lease, but otherwise denies each allegation contained in paragraph 7 of the statement of claim.

8 The Firstnamed Defendant will rely upon the full text of each of the Sale Agreement, the Covenant Agreement and the Lease at the trial of this action for their full and true meaning and effect and says that to plead the full text of each document herein would be prolix.

8 The third party does not plead to paragraph 8 of the statement of claim.

9 Part of the land referred to in the Lease was at the date of the Lease subject to certain restrictive covenants, such covenants being set forth in Sealed Plan 12691 (hereafter referred to as 'the Sealed Plan').

9 The third party admits the allegations contained in paragraph 9 of the statement of claim.

10 The purchase of the Business was completed on the 30th day of June 1989, subject inter alia to the following provision contained in the Covenant Agreement:

(a) the Recorder of Titles has not within two (2) years of the date of completion of the said Agreement for Sale or within such longer period as the parties may agree upon accepted a Petition to amend Sealed Plan 12691 so as to except the land comprised in the said Lease from the operation of Covenant B7 of the Schedule of Easements to that Sealed Plan; or

(b) as a result of the enforcement of that Covenant B7 the Purchasers are by order of Court restrained from carrying on the business of a licensed hotel upon the land comprised in the Lease;

THEN Ambrose (the Plaintiff) and Deming (the Defendant to the Counterclaim) will forthwith perform the obligations set forth in Clause 2 hereof.

2 Upon the happening of either of the events referred to in Clause 1 hereof:-

(a) Ambrose (the Plaintiff) will accept a surrender of the said Lease;

(b) Deming (the Defendant to the Counterclaim) shall perform the obligations imposed by Clause 3(l) of the Lease;

10 The third party admits the allegations contained in paragraph 10 of the statement of claim.

(c) Ambrose (the Plaintiff) and Deming (the Defendant to the Counterclaim) or one of them or in such proportions as they consider (but to the intent that their liability to the Purchaser is joint and several) will pay by way of consideration for the surrender of the said Lease a sum being in the sum of ONE MILLION DOLLARS ($1,000,000.00) less the amount payable under subclause (b) hereof (other than any amount relating to the purchase of stock in trade).'

11 At all material times the Fifth Party had actual knowledge of the nature and implication of all and any restrictive covenants to which land comprised in the Lease was subject.

11 The third party admits the allegations contained in paragraph 11 of the statement of claim.

12 The sale and purchase of the Business was completed and the Lease was entered into on or about the 30th June 1989 and the consideration there provided for was paid by the Firstnamed Defendant to the Plaintiff and the Defendant to the Counterclaim.

12 The third party admits the allegations contained in paragraph 12 of the statement of claim.

13 In or about the month of May 1991 Suzanne Rees acting then and there on behalf of the Firstnamed Defendant and pursuant to the Retainer orally requested that Bruce Richard Doolan on behalf of the Fifth Party advise her of the Firstnamed Defendant's rights and obligations against and to the Plaintiff and the Defendant to the Counterclaim arising from its purchase of the Business and the Lease and if there was any potential that the purchase of the Business and the Lease could be negated and the Firstnamed Defendant returned to its position prior to such purchase and lease.

13 The third party denies each allegation contained in paragraph 13 of the statement of claim.

14 Further or alternatively the Retainer was in or about the month of May 1991 varied to the extent alternatively pursuant to the request for advice referred to in paragraph 13 a fresh Retainer was created whereby the Fifth Party was required to provide legal advice in response to the request for advice referred to in paragraph 13 hereof.

14 The third party denies each allegation contained in paragraph 14 of the statement of claim.

15 The Fifth Party accepted the Retainer alternatively the Retainer as varied alternatively the Fresh Retainer and pursuant thereto and in response to the request for advice referred to in paragraph 13 hereof Bruce Richard Doolan on behalf of the Fifth Party advised:

(a) that there was no general relief or remedy available to the Firstnamed Defendant; and

(b) that the purchase of the Business or the Lease could not be negated and the purchaser be returned to its original position.

15 The third party denies each allegation contained in paragraph 15 of the statement of claim.

16 In reliance upon the advice referred to in paragraph 15 above the Firstnamed Defendant prior to 30th September 1992 took no action to surrender the Lease and continued to meet its obligations thereunder.

16 The third party does not admit that the first-named defendant acted as pleaded in paragraph 16 of the statement of claim, but, to the extent that it may be found to have done so, denies that this was done in reliance upon advice from it in the terms pleaded in paragraph 15 of the statement of claim or at all.

17 The Recorder of Titles did not within a period of two (2) years of the date of completion of the First Agreement accept a Petition to amend the Sealed Plan so as to except the land comprised in the Lease from the operation of Covenant B7 of the Sealed Plan.

17 The third party admits the allegations contained in paragraph 17 of the statement of claim.

18 The expiry of two years from the date of completion for the purposes of paragraph 1(a) of the Covenant Agreement occurred on the 1st day of July 1991 as the parties had not agreed upon any longer period.

18 The third party admits the allegations contained in paragraph 18 of the statement of claim.

19 In or about the month of September 1992 Suzanne Rees acting then and there on behalf of the Firstnamed Defendant consulted a Solicitor independent of the Fifth Party seeking advice in connection with the rights and obligations of the Firstnamed Defendant against and to the Plaintiff and the Defendant to the Counterclaim arising from its purchase of the Business and the Lease.

19 The third party admits the allegations contained in paragraph 19 of the statement of claim.

20 Subsequent to the receipt of advices from the said independent Solicitor and the relay of those advices by Suzanne Rees to Bruce Richard Doolan, Mr Doolan revised his advice referred to in paragraph 15 above and by his letter dated the 30th day of September 1992 to the Plaintiff, the Fifth Party on behalf of the of the Firstnamed Defendant inter alia purported to surrender the Lease and demanded the Plaintiff pay the amount referred to in Clause 2(c) of the Covenant Agreement in consequence of the Recorder of Titles not having accepted to that date a Petition for the removal of the said Covenant B7 of the Schedule of Easements of the Sealed Plan.

20 The third party admits that it was requested to review its file by Mr Peter Manser, a solicitor, and that it subsequently wrote and sent the letter pleaded in paragraph 20 of the statement of claim, but otherwise denies each allegation contained in the said paragraph.

21 The Plaintiff refused to accept a Surrender of the Lease.

21 The third party admits the allegations contained in paragraph 21 of the statement of claim.

22 On or about the 7th October 1992 the Recorder of Titles accepted a Petition to amend the Sealed Plan so as to except the land comprised in the Lease from the operation of Covenant B7 of the Schedule of Easements to the Sealed Plan.

22 The third party does not admit any of the allegations contained in paragraph 22 of the statement of claim.

23 The Firstnamed Defendant in its counterclaim alleges it has suffered loss and damage and has been put to expense attributable to the refusal of the Defendant to the Counterclaim and the Plaintiff to accept a Surrender of the Lease and to otherwise perform the obligations set out in paragraph 2 of the Covenant Agreement.

23 The third party admits the allegations contained in paragraph 23 of the statement of claim.

24 In the Reply and Defence to the Counterclaim of the Firstnamed Defendant herein, the Plaintiff and the Defendant to the Counterclaim deny that they are liable to perform the First Agreement and deny that they are liable to the Firstnamed Defendant as alleged in the Counterclaim or at all, and in particular allege that:

(a) the seeking of a Surrender immediately or within the expiry of the said two (2) year period was of the essence to the First Agreement and the obligations of the Plaintiff and the Defendant to the Counterclaim consequent upon a Surrender were to arise if at all on or about the 1st day of July 1991;

24 The third party admits the allegations contained in paragraph 24 of the statement of claim.

(b) in the premises the Firstnamed Defendant waived its entitlement to require the Plaintiff to effect a Surrender of the Lease;

(c) in the premises, the Firstnamed Defendant is estopped from asserting its entitlement to require a Surrender of the Lease.

(d) the obligation to pay monies consequent upon a Surrender of the Lease was not a true assessment of the loss to the Firstnamed Defendant but was a penalty to secure the due performance of obligations provided for within the Covenant Agreement.

(e) in the premises the failure of the Firstnamed Defendant to seek a Surrender of the Lease amounted to an abandonment or abrogation of the Covenant Agreement.

(f) in the premises the actions of the Firstnamed Defendant amounted to an election not to hold the Plaintiff or the Defendant to the Counterclaim to the requirements of the Covenant Agreement.

25 Should this Honourable Court adjudge the aforesaid defences or any of them to apply then the Firstnamed Defendant will suffer loss and damage and is at risk of suffering further damages which are attributable to the breach of contract and/or negligence of the Fifth Party.

PARTICULARS OF BREACH OF CONTRACT/AND OR NEGLIGENCE

(a) Failed to properly advise the Firstnamed Defendant in that the advice referred to in paragraph 15 hereof was wrong as by virtue of the matters referred to in paragraph 17 hereof, the Firstnamed Defendant had as of 1st July 1991 a legal right to surrender the Lease pursuant to the terms of the Covenant Agreement and to seek payment of monies from the Plaintiff and the Defendant to the Counterclaim as a consequence thereof;

(b) Failed to properly advise or advise at all the Firstnamed Defendant that Clause 2(c) of the First Agreement had no legal force or effect.

25 The third party denies each allegation contained in paragraph 25 of the statement of claim.

(c) Negotiated and settled on behalf of the Firstnamed Defendant and put before the Firstnamed Defendant for its due execution the First Agreement containing Clause 2(c) when such terms carried no legal force or effect.

Please refer to Particulars of Damage of Firstnamed Defendant dated 16th July 2009.

26 Further, by reason of the matters aforesaid the Firstnamed Defendant has since 30 September 1992 been deprived of the receipt and use of the said sum of $820,505.

26 The third party denies each allegation contained in paragraph 26 of the statement of claim.

27 Had the Firstnamed Defendant not been so deprived of the said sum of $820,505 it would have applied the same in reduction of its borrowings in respect of which it was obliged to pay interest whereof the Firstnamed Defendant has suffered loss and damage.

The Firstnamed Defendant refers to particulars set forth in paragraph 3 of the Particulars of Damage of the Firstnamed Defendant herein and dated the 16th July 20092.

AND the Firstnamed Defendant claims against the Fifth Party:

(a) Damages for breach of contract and/or negligence;

(b) Damages in the nature of interest (Hungerfords v Walker).

(c) Costs, including all costs that the Firstnamed Defendant may be ordered to pay in respect of any proceedings herein;

(d) Such further or other orders as the Court deems appropriate.

27 The third party denies each allegation contained in paragraph 27 of the statement of claim.

28 Further, or alternatively, the third party says that, if the first-named defendant suffers damage or is at risk of suffering damage, as pleaded in paragraphs 25 and 27 of the statement of claim, such damage and/or the risk thereof will have been caused or contributed to by the negligence of the first-named defendant.

(a) Entering the agreements dated 29 and 30 June 1989 and the lease pleaded in the statement of claim, although it had been advised by the third party that it was not in its interests to do so.

(b) Failing to take any step between 1 July 1991 and 30 September 1992 to enforce the rights given to it pursuant to the clause pleaded in paragraph 10 of the statement of claim."

4 To avoid confusion and, where possible, to bring terminology in these reasons into line with that in the pleadings set out above, I have adopted the following definitions:

"Ambrose" Ross Ambrose Group Pty Ltd (ACN 009 501 759)

"the Covenant Agreement" Agreement dated 30 June 1989 pursuant to which the purchasers and Renkon agreed to complete the purchase absent the removal of the covenant

"the defendants" Bruce Richard Doolan, Timothy James Ellis, Philip Andrew Welch and David Anthony Smith

"the lease" The lease entered into by Renkon and guaranteed by the purchasers relating to the freehold upon which the business operated

"the purchasers" Suzanne Rees, Peter John Shipton, Rodney Plunkett and Susan Elaine Plunkett

"the Sale Agreement" Agreement dated 29 June 1989 pursuant to which the purchasers agreed to buy the business

5 As at May 1989, Suzanne Rees, Rodney Plunkett and Susan Elaine Plunkett were all employed in different capacities in the business. They had all worked there over the two or three years before that. Peter John Shipton was in a relationship with Suzanne Rees. The business was then owned by Deming. Ambrose owned some of the plant and equipment used in the business and the freehold of the property upon which it operated. The purchasers made a decision to buy the business. It is clear from the evidence of Ms Rees that the purchasers thought the business had great potential and that the purchase was a very good one for them to be involved in. She acknowledged that she had a good knowledge of the business at that time.

6 The purchasers entered into negotiations for the purchase of the business and for a lease of the freehold. In May 1989, they instructed the legal firm, Clarke & Gee, more particularly a partner in that firm, Mr Bruce Doolan, to act for them in the transaction. The negotiations resulted in the Sale Agreement which was ultimately signed on 29 June 1989, with completion due to take place on 30 June. The Sale Agreement provided for the purchasers to nominate another purchaser in their place. The purchasers instructed Mr Doolan to incorporate Renkon, which was then nominated as the purchaser.

7 The purchase price provided for in the Sale Agreement was $1,000,000 plus an amount for stock at valuation. The Sale Agreement provided for Ambrose to grant a lease of the freehold to the purchasers on completion. A draft of the proposed lease was attached to the Sale Agreement. At the time the Sale Agreement was being negotiated, the title to the freehold was subject to a covenant which prevented the sale of alcohol upon the land. The covenant had been there for some years and, indeed, it seems that the business, which of course included the sale of alcohol, had been operating in defiance of the covenant for some time. The Sale Agreement provided that it was a condition precedent to completion that the Recorder of Titles accept a petition to amend a sealed plan, excepting the land to be leased from the operation of that covenant. Shortly prior to completion, it was realised that it would not be possible to have the covenant removed from the title in time.

8 The terms of the proposed lease were unusually onerous. Mr Doolan discussed these with his clients and attempted to negotiate with the solicitors for Ambrose to ameliorate what he perceived was their harshness. He was unsuccessful.

9 Prior to settlement, Mr Doolan wrote a lengthy memorandum of advice to the plaintiffs relating to the proposed transactions. At the time he wrote that, it is clear it was realised the covenant could not be removed from the freehold title prior to the anticipated date of completion, and that there was a proposal on the table to settle the purchase regardless. While all the detailed advice itself is not particularly relevant to the matters in issue, it underscores the inevitable conclusion that the purchasers wanted to proceed with this deal at just about any cost. The memorandum recorded:

"MEMO OF ADVICE TO CLIENTS

RE AGREEMENT FOR SALE

1 That of the $1,000,000.00 purchase price you have attributed approx $650,000.00 to the value of the plant and equipment and $350,000.00 to the goodwill. You are aware that in accordance with the agreement the value that has been attributed to the plant and equipment is the depreciated value of Ross Ambrose which is very much less than $650,000.00 (I think less than $100,000.00). You have been advised that if the plant and equipment were re-purchased by Ross under the lease or by anyone else at the market valuation then you will incur a taxation problem.

2 That there are outstanding company charges over the assets of Ross Ambrose Group Pty Ltd which are unlikely to be satisfied at the date of settlement. Mr Zeeman advises that he had carriage of the payment of all moneys secured by the charges. At the time the payment was made he was unaware of the existence of the charges and accordingly they were overlooked. It is possible that the satisfaction of these charges can be dealt with in the same manner as the amendment to the sealed plan mentioned hereinafter but they do, in fact, prevent the company from passing good title

3 No allowance is to be made for long service leave for employees with less than seven years service and no warranty is given as to the accuracy of the commencement date of employment of the employees.

4 No warranty is given as to the accuracy of the information given in relation to the contracts you are obliged to take over. In respect of this item and the previous item, it is recorded that you are content to rely on your knowledge of the business.

5 The restrictive covenants given are less than might ordinarily be expected and are of doubtful value. He has given you warning that he is a developer.

6 You have been advised that it will not be possible to have the sealed plan amended by the due date of settlement. Your proposal is that settlement take place on the basis that he will have two years (or such longer period as you see fit to grant) within which to amend the sealed plan and if he has not obtained the amendment within that time, he will refund your money. It should be mentioned that two years is a fairly long time and those companies may become insolvent at any time. There are no half measures with the covenant. If the covenant is not removed it is theoretically possible you could be forced to not operate as a hotel.

7 It has been agreed that rent will be adjusted in accordance with CPI save and except that every four years there will be a market valuation and, if that is higher that [sic] CPI, the rent will be adjusted upwards in accordance with that market value. Generally speaking CPI adjustments only work in favour of Lessors although you have advised me that the AHA usually adjusts price in accordance with CPI and this gives you some protection in this regard. Whilst this is better that [sic] automatic CPI, market or 7.5% whichever is greater, CPI may take rents above level of rents in Launceston and those of your competitors and the market rent adjustment can only work in favour of the Lessor. In this latter regard and generally, it should be mentioned that you are aware of the fact that the rental figure you have agreed to pay initially cannot be justified on the figures of the hotel as produced.

8 The Lease remains an all repairing Lease still requiring you to carry out all statutory requirements structural or otherwise. Whilst the property is fairly free of maintenance, this is still an unusual lease and you are undertaking responsibilities not usually undertaken. The Lease allows you to recover nothing of any monies spent on structural additions required during term of Lease and may require you to spend large sums in the last year of your lease. There is no suspension of the rent in the case of fire. You are required to insure against loss of profits in the latter event.

9 Assignment provisions have been modified and are not now as onerous. It should be remembered however that you are not entitled to a release from your covenants on an assignment and that, even though you are prepared to accept the terms of the agreement and the lease because of your knowledge of the business, it may not be as easy to find a potential purchaser similarly prepared.

10 Provisions for Lessor to buy back plant and equipment are still of doubtful value. I have expressed the view that I would like to know the amount which would be payable by Ross if he was obliged to buy back the plant and equipment under the terms of the lease the day after the commencement of the lease. I suspect that the price would be nothing like the $650,000.00 value which you have placed on the plant. It should also be remembered in the light of the assurances given to you by Ross in relation to this matter and in relation to other matters under the lease, that he may turn around and sell the property at any time after completion and you could be dealing with a different Landlord with different attitudes and different financial resources. It should also be remembered that the Lessor is Ross Ambrose Group Pty Ltd. I am not aware as to whether or not this is a trustee company with no assets in its own right or whether, if a Trustee, whether it has the power to give such undertakings.

11 You have been made aware that I have not attempted to amend or advise you in relation to the provisions relating to receivers or guarantors. It was thought that this would only create further arguments about matters which are matters of very last resort.

12 You are aware that the car park in front of the supermarket is in fact a right of way which is the antithesis of a car park.

13 It should be noted that the initial proposal submitted by Mr Ambrose was very one-sided in his favour. Whilst some progress has been made in redressing the imbalance, the agreement and the lease remain very much in his favour. It is my view that you have been prepared to agree to some mattes which are to your disadvantage because of your considerable desire to have a go at the business. It is my further view that this attitude is borne of your knowledge of the business and your views as to its potential. I do not believe that any stranger to the business applying normal commercial principles would have been prepared to accept these terms.

For this reason and without wishing to be a pessimist, I have a distinctly uneasy feeling about the transaction. Whilst this feeling has moved me to record this advice for you, there have been many other matters discussed as potential difficulties under the lease and which are not recorded here.

The very onerous terms of the lease can only enhance the market value of the property (thereby affecting the viability of your first right of refusal) and act as a deterrent to any potential assignee.

It should also be recorded that you have taken the final draft of the agreement and the lease for perusal overnight before you signed the same."

10 Notwithstanding that advice, the plaintiffs still wished to proceed with the purchase and lease. As a consequence, the Covenant Agreement was prepared and signed on 30 June 1989. The Sale Agreement was completed on the same day and the lease was entered into such that the plaintiffs took over the running of the business from the next day. The lease was for an initial period of four years commencing 1 July 1989. There were options for renewal which might have allowed the lease to run for 20 years.

11 The operative parts of the Covenant Agreement were as follows:

(a) the Recorder of Titles has not within two (2) years of the date of completion of the said agreement for sale or within such longer period as the parties may agree upon accepted a petition to amend Sealed Plan 12691 so as to except the land comprised in the said lease from the operation of covenant B7 of the Schedule of Easements to that Sealed Plan; or

(b) as a result of the enforcement of that covenant B7 the Purchaser are by order of a court restrained from carrying on the business of a licenced [sic] hotel upon the land comprised in the lease;

THEN Ambrose and Deming will forthwith perform the obligations set forth in clause 2 hereof.

2 Upon the happening of either of the events referred to in clause 1 hereof:-

(a) Ambrose will accept a surrender of the said lease;

(b) Deming shall perform the obligations imposed by clause 3(1) of the lease;

(c) Ambrose and Deming or one of them or in such proportions as they consider (but to the intent that their liability to the Purchaser is joint and several) will pay by way of consideration for the surrender of the said lease a sum being the sum of ONE MILLION DOLLARS ($1,000,000.00) less the amount payable under subclause (b) hereof (other than any amount relating to the purchase of stock in trade)."

12 There is some dispute as to when the issue of the covenant was raised. However, there can be no doubt that the plaintiffs were advised of its existence and were party to discussions which resulted in the Covenant Agreement. Indeed, Ms Rees, the only director to give evidence, agreed that, at a meeting which had taken place at the office of Ambrose's solicitors prior to settlement, she had been told that the business had been operating for years with the covenant in place and that Ambrose would fix it within the two years proposed following completion.

13 Mr Doolan dealt with completion and, after tidying up registration of dealings and the like, he closed his file and rendered an account. There was no evidence that he had any further relevant dealings with either Renkon or any one of the purchasers between late 1989 and May 1991, or that he, or any other member of his firm, was asked to do anything until that later date by Renkon or any one of the purchasers. There was no evidence of any request by Renkon or any of the purchasers to any of the defendants to advise the plaintiffs on an ongoing basis, after completion of their purchase, in relation to their rights and obligations under the Sale Agreement, the Covenant Agreement or the lease. I am satisfied that, while a retainer was created for the purpose of the negotiation and completion of the Sale Agreement, the Covenant Agreement and the lease, once the purchase was completed and the lease in place, the retainer ended.

14 Ms Rees described the business as performing very well. She knew that, over the time she had worked in the business, there had had to be a number of repairs to the buildings, but she thought that they had all been attended to prior to the purchase. However, when describing the period when she said she dealt with Mr Doolan in 1991, she said that she was having structural problems with the buildings. She described the place as "falling down around my ears". She said:

"I had problems with the tarmac, I continually had to fill potholes and they were very big potholes outside the bottle shop. I had structural damage that there were no footings. I had an order put on me from the Licensing Board where there were a lot of orders that had to be taken care of."

She went on to say:

"In the motel section, and they - from one to twenty eight, there was structural damage there, in one, out two and three bedroom section. There were definitely no footings there. I had baths collapsing, I even had a person that was actually standing in the bath because the shower was over the top and it collapsed while the gentleman was in it ... It collapsed off the wall, the bath."

15 The orders, to which Ms Rees referred, were two notices, both dated 13 May1991, from the Commissioner for Licensing, addressed to her as the licensee of the Olde Tudor Motor Inn. They required her to undertake certain work on the premises. The first notice contained five pages. The work was identified by reference to where it was required namely, in the accommodation, in particular bars or in the convention area. There were 39 requirements in the accommodation area. In 15 rooms, Ms Rees was required to replace the mattresses and the bath. In another 21 rooms, mattresses had to be replaced. The requirements in the bars and convention area related to the replacement of carpet, the sanding back and refinishing of timber sections of bars, and the replacement of bar servery surfaces. None of the requisitions appeared to relate to any major structural repairs, a fact which Ms Rees confirmed.

16 Ms Rees said that she contacted Mr Doolan in May 1991 after she got the list of orders from the Licensing Commissioner. She spoke to him twice. She told the Court:

"I then phoned Mr Doolan and said 'the place is falling down around my ears, would he please go through the lease to see if Mr Ambrose had breached in any way and there was a way out of the lease for me'. He said that yes he would look into it for me and ... he said yes he would and he would get back to me ... After a few days, I can't remember, it's so long ago but it was only a few days; I was very anxious so I phoned Mr Doolan back and asked him had he had a chance to go through the lease and to see if Ambrose had breached and did he find anything and his reply to me, no he didn't find anything."

17 That was the entirety of the contact which Ms Rees says she had with Mr Doolan at that time. She acknowledged that she made no attempt to make an appointment to see Mr Doolan to discuss the issues which were concerning her. She said she was too busy to do so. She also said that she did not tell Mr Doolan about the requisitions from the Commissioner for Licensing, even though they were a major concern for her.

18 Mr Doolan did not dispute that Ms Rees telephoned him in or about May 1991. However, he had no file note relating to any telephone discussion with her at or around that time. By that date, the file which he had maintained for his dealings with the plaintiffs' affairs had been archived, and he did not access that file for the purpose of whatever discussion did take place with Ms Rees. He says that Ms Rees told him of the requisitions from the Licensing Commission, and asked if there was any way she could avoid paying for them. He told her no, unless Ambrose had breached the lease. She did not pursue the matter, and did not ask for advice about a way in which to terminate the lease altogether.

19 At that point in time, the two year period provided for in the Covenant Agreement was about to expire. There is no dispute that the covenant on the title had not then been removed. If that situation remained until 30 June 1991, the purchasers would have then been able, had they wished to do so, to seek a surrender of their lease with Ambrose, and possibly get out of the business and get back the bulk of the price they had paid for it.

20 It is the plaintiffs' case that Ms Rees told Mr Doolan words to the effect that the plaintiffs were looking for a way out of the lease, and that, had he gone to the file and investigated the matter, as Ms Rees says Mr Doolan said he would do, he would have been aware of the plaintiffs' rights under the Covenant Agreement and advised them of what steps they could take to end the lease in the very near future. In failing to go to his file and investigate the matter, and in advising Ms Rees, as a consequence, that she could not get out of her obligations under the lease unless Ambrose had breached it, he was negligent.

The telephone call or calls by Ms Rees to Mr Doolan in or about May 1991

21 It is the plaintiffs' case that there were two telephone calls. It is the defendants' case that there was only one. I am satisfied that in or about May 1991, Ms Rees telephoned Mr Doolan. Since taking over the business and entering into the lease, she had had to pay for repairs to be carried out on the leased premises. She described pot holes needing to be fixed and damage as a consequence of there being no footings on some of the buildings. On or about 13 May 1991, she received two notices from the Licensing Commission by which she was required to undertake, not structural repairs, but work in the nature of renovation and maintenance. While there was no evidence as to the estimated cost of the work, I accept simply from the nature of it, that it might have cost some thousands of dollars. Ms Rees told the Court that she had been negotiating with Mr Ross Ambrose over a period of time to have him contribute to some of the repair costs she had been required to meet. Those negotiations had been unsuccessful.

22 Ms Dubbeld, a former employee of the business, said that when Ms Rees received the orders from the Licensing Commission, she was appalled at the amount of things which needed to be fixed. Ms Dubbeld told the Court that Ms Rees said she was going to see her lawyer or ring him and find out if there was any way they could actually get out of the lease because of the things which had been happening. Ms Dubbeld did not see or hear any consequent telephone call being made. The next thing Ms Dubbeld recalled was that Ms Rees said she had not heard from her lawyer and she was going to get in touch with him again to find out whether anything could be done. She then found Ms Rees in tears. Ms Rees told her she had just spoken to her lawyer and he had said there was nothing that could be done. Ms Dubbeld did not see or hear that telephone call being made. She was adamant there were two telephone calls, and that Ms Rees was in tears after the second. She recalled, after having found Ms Rees in tears, asking another employee, Gayle Murray, to go in and see Ms Rees because she had to do something else.

23 Ms Murray told the Court that, in response to Ms Rees receiving the Licensing Commission orders, she had said to Ms Murray that she was going to ring her solicitor because she was sick and tired of the place falling down around her ears, and she wanted to find if the solicitors could get her out of the lease. Ms Rees told her that she had spoken to the solicitor who was going to look into it and get back to her. A few days, later Ms Rees had told her she was sick of waiting and was going to ring Bruce Doolan again. Ms Murray did not see or hear either telephone call. She said, however, that shortly after the last conversation she had with Ms Rees, Ms Dubbeld came to her and asked her to go to Ms Rees. She found her in tears and she told Ms Murray that they (the solicitors) could not do anything for her.

24 Neither Ms Dubbeld nor Ms Murray remained in regular contact with Ms Rees up to the time of trial. Ms Dubbeld made a statement about the matter to Ms Rees' solicitor in 2006 and had not apparently been asked to recall the circumstances until then. Ms Murray was only asked about six months prior to trial. Both were recalling events from over 15 years before.

25 It is logical to accept that Ms Rees may have become frustrated with what she perceived to be the lack of co-operation from Mr Ambrose and that, on receipt of the Licensing Commission orders, had telephoned Mr Doolan to get some advice. The issue is what advice she sought. Bound up with that issue is whether or not there was a second telephone call.

26 There is no evidence to suggest that when Ms Rees initially telephoned Mr Doolan, the call was a lengthy one. On the evidence of both Ms Rees and Mr Doolan as to what transpired, the call was a short one. Both were trying to recall events which occurred over 18 years before and clearly their recollections are different. To determine what occurred, it is useful to look at what is undisputed about the initial call and the asserted second one, and the surrounding circumstances.

27 Save that she told Mr Doolan that the place was falling down around her ears, Ms Rees provided no information to Mr Doolan about what had been occurring in relation to the business over the nearly two years since completion. She did not tell him of the repairs she had had to pay for, she did not tell him about the Licensing Commission orders, she did not tell him about her unsuccessful negotiations with Mr Ambrose, and she did not mention the Covenant Agreement. Ms Rees did not make an appointment to see Mr Doolan to bring him up to date on events which might have affected the plaintiffs' situation, with which he had had no contact for almost two years. On her evidence, Ms Rees asked Mr Doolan for advice as to whether Ambrose had breached the lease and whether the plaintiffs could get out of the lease.

28 Mr Doolan denies that advice was sought. He says that Ms Rees rang him, told him about the Licensing Commission orders, and wanted to know if she could avoid having to pay for the work to be done. He said that he told her, without reference to the original file, because he remembered the lease, that there was no way to avoid that obligation unless Ambrose had breached the lease. He denied that Ms Rees gave any indication the plaintiffs wanted out of the lease. He disputed there was a second call, and that he told Ms Rees he would look into something and get back to her. It was clear from Mr Doolan's evidence that he had little or no real recall of the events of 1991 and that he was, where memory failed him, attempting to reconstruct what may have occurred. His logic, to a degree, was that there were no file notes, and therefore there could not have been any conversation or conversations of any significance.

29 At the time this conversation occurred, the plaintiffs had been running the business as owners for less than two years. They had entered into the Sale Agreement, the Covenant Agreement and the lease, effectively against Mr Doolan's advice because they believed that the business was such a good one. They knew that the terms of the lease were unusual and very much in favour of Ambrose. In particular, they knew the rental was high and that they were to be responsible for all repairs, structural or otherwise. They could not have been unaware of the nature of their obligations. Unless he was specifically told that the plaintiffs now realised they had perhaps misjudged the situation and wanted out, there is no reason why Mr Doolan might have expected that is what they wanted.

30 There is no evidence Ms Rees made any further contact with Mr Doolan after May 1991. The next contact he had relating to the plaintiffs' involvement in the business was a telephone call from Mr Peter Manser, a Hobart commercial solicitor who was Ms Rees' cousin. Ms Rees had contacted Mr Manser. She said she explained her situation to him, including about the ongoing expenses she was having with her business. He said he would get a copy of the lease, go through it and get back to her.

31 Mr Manser appears to have obtained certain documents from the plaintiffs' accountants at the beginning of September 1992. These included a copy of the Sale Agreement with a copy of a draft lease attached, letters dated 31 August and 1 September 1992 from Mr Bruce Walker to the accountants, trading figures for the business for the year ended 30 June 1992 and various company and title searches. Mr Walker was a valuer and his report or reports were referred to in the minutes of a meeting of Renkon held later in September. By letter dated 9 September 1992, Mr Manser wrote back to the plaintiffs' accountants. In pars3 - 11 of that letter, he advised:

"3 Assuming that no material change has been made between the covenants recorded in the pro forma Lease and the Lease which was executed at settlement, we note the following particular provisions -

(a) Clause 1(d) imposes on the Company exclusively the obligation to keep both the exterior and the interior of the demised premises (including buildings, roadways, grounds and gardens) in 'as good and tenantable state of repair and condition as the same are at the commencement of the initial term of this Lease'. The poor condition of the improvements is not therefore in our view likely to be a matter of successful claim by the Company against the Landlord, as foreshadowed in the comments of Mr Walker on pages 4 and 5 of his letter of 31st August.

(b) Clauses 5(a) and 5(b) provide that, during the total leasehold term of twenty years which comprise the initial four year term and the four subsequent terms of four years for which options to renew are conferred by the Lease -

(i) The rent for each year after the first (and excluding years five, nine, thirteen and seventeen) shall be varied to an amount calculated by reference to movements in the Consumer Price Index - under this method of variation, it is possible but in view of the past history of the Index unlikely, that a reduction in rental could apply from one year to the next; and

(ii) the rent for each of years five, nine, thirteen and seventeen shall be varied to market rental or the rental produced by the method described in sub-paragraph (i), whichever is the higher.

4 While the arrangement of the variation of rental which we have described in paragraph 3 is not in itself illegal, and may be perfectly well enforceable between parties who have negotiated at arms length, each of whom has been fully and separately advised of, and accepts, its tenor and implications, we believe that the following collateral issues may be worthy of further examination:-

(a) In relation to the Landlord and its representatives, the circumstances surrounding the negotiation of the Sale Agreement and the form of the Lease - we note in particular that the Sale Agreement is dated 29th June 1989, and under clause 7 calls for completion on 30th June 1989, the following day. While it may well be that the signature of the Sale Agreement was preceded by negotiations and enquiries extending over several months, we would appreciate instructions as to the content and manner of those negotiations. Essentially this head of enquiry is directed to ascertain whether it could be said that the Vendor/Landlord or its representatives have involved themselves in conduct which might constitute -

(i) misleading or deceptive conduct within the meaning of the Trade Practices Act; or

(ii) representations establishing an estoppel as to the way in which future rental variations might be fixed or enforced

each of which could amount to grounds for an adjustment of the terms of the Lease.

(b) What financial or legal advice did the Purchasers receive in connection with the transaction: To what extent were the arrangements as to rental variations, and the future implications of that arrangement, discussed with or explained to any of the Purchasers before signature of the Sale Agreement? The purpose of these queries is to ascertain whether the Purchasers may have an entitlement to compensation by way of damages arising from negligent advice in connection with the transaction.

5 (a) We enclose a plan which we have compiled from title search, on which the land which is the subject of the Lease is shown surrounded by a red line.

(b) Clause 30(c) of the Sale Agreement made completion conditional upon -

'The acceptance by the Recorder of Titles of a petition to amend Sealed Plan 12691 thereby excepting the land to be leased from operation of covenant B7of the Schedule of Easements to that Sealed Plan ...'

(c) The only land in the Lease which is included in Sealed Plan 12691 is lot 12 on the enclosed plan.

6 Covenant B7 to which clause 30(c) of the Sale Agreement refers provides as follows:-

'(a) That no intoxicating liquor of any description shall be sold or offered exposed or displayed for sale or advertised or notified as being available for sale to the public or for purchase by the public or for consumption by the public on or from or within the said lot.

(b) Subject to the provisions of the next succeeding clause hereof nothing in this clause shall be construed to prohibit 'the owner of the lot 'from storing intoxicating liquor on the said lot provided that such storage is only for storage purposes and for storage purposes only pending distribution by 'the owner of the lot' to premises licensed under the Licensing Act 1967 (or any statutory re-enactment or modification thereof) to deal in intoxicating liquor.'

7 Covenant B8 (which is 'the next succeeding clause' referred to in covenant B7 (b)) provides that the owner of the lot -

'shall not use the said lot or any part thereof for any purpose for which a licence (whether provisional or otherwise) or permit or approval or consent is required under:-

or any statutory re-enactment or modification or variation of either of the said Acts or under any Act now in force or to be enacted in the future which controls the sale or offering or exposing or displaying for sale or the supply disposal or consumption of intoxicating liquor, or which controls the provision of accommodation for the pubic whether within the meaning of "accommodation house" (as that term is defined by Section 3 of the said Tourism Act) or otherwise'.

8 Under a subsequent Subdivision Plan, Sealed Plan 20556, the following restrictive covenants were also recorded against lot 10 on the enclosed plan:-

'3 that no intoxicating liquor of any description shall be sold or offered exposed or displayed for sale or advertised or notified as being available for sale to the public or for purchase by the public or for consumption by the public on or from or within the said lot.

4 That the Covenantor shall not without the consent in writing of the Vendor' (Ross Ambrose Group Pty Ltd) 'use the said lot or any part thereof -

(a) for any purpose for which a licence (whether provisional or otherwise) or permit or approval or consent is required under -

or any statutory re-enactment or modification or variation of either of the said Acts or under any Act now in force or to be enacted in the future which controls the sale or offering or exposing or displaying for sale or the supply disposal or consumption of intoxicating liquor, or which controls the provision of accommodation for the public whether within the meaning of "accommodation house" (as that term is defined by Section 3 of the said Tourism Act) or otherwise;

9 Although our searches are inconclusive on this aspect, it appears very likely that -

(a) clause 30(c) of the Sale Agreement was never satisfied; and

(b) of the land included in the Lease, only lots 2 and 8 on the enclosed plan are not affected by covenants which in our view directly forbid the conduct of exactly the business which is presently conducted on the demised premises.

10 Other covenants are also registered on various of the titles, of which we presume the Purchasers were advised before settlement. We can provide complete copies of those covenants if required.

11 We would appreciate instructions as to the advice which the Purchasers received before completion as to the import of the covenants on the title, particularly those which we describe in paragraphs 6 to 8, and as to whether the Purchasers agreed to waive the requirements of clause 30(c) of the Sale Agreement."

Mr Manser seemed unaware, at that point, of the existence of the Covenant Agreement although he commented that the condition precedent in the Sale Agreement relating to the covenant appeared not to have been fulfilled. The accountant in turn sent a copy of that letter to Mr Doolan under cover of a letter of 16 September.

32 On 24 September 1992, Mr Doolan replied to the accountants. In that reply, Mr Doolan commented upon the letter Mr Manser had written by reference to the numbered paragraphs in it. In par5, he said:

"In relation to Mr Manser's comments in Item 4(b), we refer to our aforementioned memorandum of Advice which averted to all the matters mentioned by Mr Manser. If, however, our mutual clients have any doubts as to the adequacy of their legal or financial advice, perhaps it is appropriate they take advice in that regard before we proceed any further."

33 Shortly after Mr Doolan wrote that letter, a meeting of Renkon was held at the offices of its accountants in Launceston. That meeting, held on 29 September 1992, was attended by all of the directors of the company, Mr Doolan and the accountant, Mr Millar. Ms Rees chaired the meeting. The minutes which she signed were prepared by Mr Doolan. The minutes relevantly recorded the following:

"SPECIAL BUSINESS

IT WAS FURTHER RESOLVED that this was an extraordinary general meeting of the members.

Members were advised on the recent trading situation of the Company and shown a copy of a recent valuation of Mr B S Walker as to a fair market rent for the Olde Tudor Inn. That valuation indicated that $430,000.00 pa plus rates and Land Tax was a fair market rent for the premises whereas, under the terms of the existing lease, the company was obliged to pay $580.000.00 pa. Members were advised that Mr Manser of the legal firm of Simmons Wolfhagen had been asked to comment on the lease and that Mr Doolan had been asked to comment on his remarks.

As a consequence, Mr Doolan had supplied a copy of an agreement between the Company, Ross Ambrose Group Pty Ltd and Deming No 80 Pty Ltd pursuant to which those Companies agreed to effectively re-purchase the business and the Lessor agreed to accept a surrender of the Lease if the Sealed Plan relating to the premises was not amended (within two years) to remove covenants against which the operation of the Company's business was a breach. The members were advised that Mr Manser had conducted a search and ascertained that the Sealed Plan had not been amended.

The following special resolution was passed:

'That Messrs Clarke and Gee be instructed to apply the provisions of the said agreement, seek a surrender of the lease and the payment of the consideration in accordance with the terms thereof.'

It was pointed out that Clarke & Gee could not accept any instructions from the Company which resulted in anything other than the surrender of the lease without the various members of the Company being separately advised. To do so would involve that firm in a conflict of interest.

It was further resolved that Clarke & Gee be instructed notwithstanding this limitation as all parties indicated that they wished to terminate the lease.

The question of the timing of the surrender of the lease was also considered, particularly with reference to the impending obligation to pay liquor tax on the 1st October and further instalments of Rates and Land Tax.

It was agreed that Clarke & Gee should, if legally feasible, give notice of the surrender of the lease as soon as possible but offer to continue to the end of October on the basis that:-

a the rent should be reduced to the rate of $430,000.00 per annum.

b that the liquor tax to 31st December 1992 be paid by the Company and, together with prepaid Rates and advertising, set off against the rent for October.

Mr Doolan mentioned that the lease was probably mortgaged to the Commonwealth Bank and that the Bank's consent would be required. It was resolved that he seek that consent which it was expected would be readily forthcoming.

Ms Rees was to prepare, within the next seven days, if possible, of the plant and equipment purchased other than by way of replacement, ascribe a value thereto and deliver the same to Mr Doolan.

Meeting closed at 5.00pm."

34 There is no suggestion Mr Manser attended that meeting. There is no evidence, contrary to repeated submissions by counsel for the plaintiffs that he did so, that Mr Manser gave any advice to the plaintiffs which resulted in the decisions taken at the meeting.

35 The day after the meeting, Mr Doolan wrote to Ambrose and Deming purporting to take advantage of the terms of the Covenant Agreement on behalf of Renkon. At or around the same time, either Mr Doolan or Mr Ellis, or both, advised the plaintiffs to begin making deductions from the rent it was paying to Ambrose. Approximately two months later, Ambrose initiated proceedings for arrears of rent arising from the shortfall in the payments being made. Ambrose refused to accept a surrender of the lease and did not, when later asked, agree to extend the lease. The business was placed in the hands of receivers in the middle of 1993.

36 Ms Rees, Ms Dubbeld and Ms Murray are all adamant that Ms Rees made two telephone calls to Mr Doolan. The evidence of Ms Dubbeld and Ms Murray is additionally that, after the second call, Ms Rees was upset and in tears. The phrase, "falling down around her ears", in relation to the state of the business premises, occurred with somewhat unsettling frequency in the evidence of all three women. However, there was no evidence they had discussed the matter prior to giving evidence, and the occurrence of the phrase could as easily be explained by the use of it by Ms Rees which both other ladies recalled. The evidence of these witnesses must be viewed against that of Mr Doolan, which was not particularly convincing, the lack of any file notes, and the admission from Mr Doolan that he did not at any point in 1991 access his then archived file.

37 In all the circumstances, I am satisfied that there were two telephone calls made by Ms Rees to Mr Doolan in or about May 1991. However, I am not satisfied that Ms Rees sought the advice she said she sought from Mr Doolan. That she did so is not consistent with other facts, and inferences which can be readily drawn from facts, in this matter taken in combination. Some of these are:

- Ms Rees says she did not tell Mr Doolan about the Licensing Commission orders in circumstances where she had been upset by the orders, was said to be appalled at the extent of what was required to be done, and the receipt of the orders prompted her telephone call,

- Ms Rees said she sought advice about how to avoid the lease altogether. In the context that neither she nor her co-directors had had any contact with Mr Doolan in the period June 1989 to May 1991, the question must be asked, how could Mr Doolan have been expected to give comprehensive advice about such an issue without knowing about what had been happening in that period,

- Mr Manser's letter of 9 September 1992 makes no mention of the asserted advice sought and given in May 1991. It deals with the entering into of the deal back in 1991 and issues of rent. I infer from the tenor of that letter that Ms Rees made no such assertion to Mr Manser,

- Mr Doolan suggested in his letter of 24 September that, if there was any concern about legal or financial advice given, then perhaps other advice should be sought. That provoked no response from any of the plaintiffs in the form of raising the spectre of complaint about advice given in 1991,

- Ms Rees did not raise the issue of the asserted advice sought and given at the company meeting on 29 September 1992,

- Ms Rees did not tell Mr Ellis about what she said was the advice sought from, and given by, Mr Doolan in May 1991,

- Clarke & Gee continued to act for the plaintiffs until 1996. There is no suggestion that, at any time before then, Ms Rees or any other of the plaintiffs raised an issue about advice sought from, and given by, Mr Doolan in 1991,

- The plaintiffs were aware from the memorandum of advice given by Mr Doolan prior to settlement that he thought the deal they were entering into was commercially unwise and that, in particular, the terms of the lease were unusual and onerous. They were also aware of the covenant on the title and that it had the potential to close their business down at any time while it still existed. Notwithstanding that advice, they were keen to proceed. They accepted the assurances from Mr Ambrose that the covenant would be sorted out and clearly believed the business was such a good one that the onerous nature of the lease would not be a problem,

- The impact of the covenant on the ability of the plaintiffs to conduct the business they were buying could have been significant. Although she appears to have told Mr Manser she had forgotten about it, it is hard to accept that she gave it no thought at all as at May 1991.

I am satisfied, in all the circumstances, that there were two telephone calls and that, in the first telephone call, Ms Rees told Mr Doolan about the Licensing Commission orders and asked him if there was any way she could avoid having to comply with them. I am satisfied she did not specifically seek advice about avoiding the lease altogether. I am also satisfied that Mr Doolan agreed to look into the matter and get back to her, and that, when he did talk to her, he told her in effect, without going to his archived file, that there was nothing she could do to avoid complying with the Licensing Commission orders unless Ambrose had breached the lease.

Was there a duty of care? If so, what was the extent of it, and was it breached?

38 There was no dispute, as far as the defendants were concerned, that as legal practitioners, they owed a duty of care to the plaintiffs in respect of the negotiation of the various agreements and completion of the purchase. That duty of care arose both under the general law and pursuant to any retainer found to have been put in place. The issues were, the nature of any retainer as at May 1991 or, from a practical point of view, what occurred between Ms Rees and Mr Doolan in May 1991 and the extent of the duty of care, if any, Mr Doolan owed as a consequence of what occurred.

39 I have found that Ms Rees did not ask for the advice she says she did. I am satisfied that what she asked was simply, was there a way she could avoid having to comply with the Licensing Commission orders. There is no real dispute that, whether it was in the first or in a second call, Mr Doolan told Ms Rees there was nothing she could do to avoid paying for the repair work unless Ambrose had breached the lease. There is also no dispute that he did not refer to his file. It is an inevitable inference to be drawn that, had he done so, if he had no independent memory at the time of the Covenant Agreement, he would have been reminded of it by accessing the file. Had he been so reminded, he would have to have been aware that it possibly provided means, albeit drastic ones, of perhaps avoiding having to comply with the Licensing Commission orders. As to whether Mr Doolan had that independent memory, his evidence can only be described as equivocal.

40 Counsel for the defendants submitted that the extent of the duty of any legal practitioner depended on what he was asked to do. In this case, Mr Doolan was asked a very short and confined question. That related to whether the plaintiffs had to comply with the Licensing Commission orders. His duty of care, it was submitted, did not require him to address means by which the plaintiffs could avoid the lease altogether.

41 Counsel for the plaintiffs ultimately submitted that it did not matter whose version of events about what passed between Ms Rees and Mr Doolan was accepted because, even if the Court accepted Mr Doolan's version, his conduct still amounted to negligence. He had the capacity to access his file. Had he done so, he would have been alerted to the Covenant Agreement and could, and should, have advised Ms Rees there was a potential means of avoiding responsibility for complying with the Licensing Commission orders.

42 In Shirley Dawn Hutt v Piggott Wood and Baker [1993] TASSC 58 Crawford J (as he then was) canvassed the extent of a legal practitioner's duty of care. In pars25 - 29, his Honour said:

"25 The admitted tortious duty of care takes the court only a short way for, as was said by Brennan J in Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 at 549, 'that description is not adequate to bring out the nature of the duty which the plaintiff must establish'. Counsel for the defendant in his closing address submitted that the duties owed by the defendant to the plaintiff in tort and under the contract were identical. I am not convinced that they were, but there is no need to determine that question on this occasion.

26 There is no evidence that the defendant was retained by the plaintiff to advise her of the effect of the receipt of damages on her entitlement to social security, but that consideration alone is not sufficient to defeat her claim. This kind of question was addressed by Deane J in Hawkins v Clayton (supra) at 579:

'The relationship of solicitor and client is, as has been seen, a relationship of proximity which ordinarily involves the combination of those elements with respect to foreseeable loss which may be caused to the client by the performance of professional work. It is a relationship of proximity of a kind which may well give rise to a duty of care on the part of the solicitor which requires the taking of positive steps, beyond the specifically agreed professional task or function, to avoid a real and foreseeable risk of economic loss being sustained by the client. Whether the solicitor-client relationship does give rise to a duty of care requiring the taking of such positive steps will depend upon the nature of the particular professional task or function which is involved and the circumstances of the case.'

In that passage Deane J was referring to a duty which may exist to take positive steps, that is to say a duty not to make omissions so to avoid economic loss to another.

27 In the context of reliance, as a criterion of proximity in the law of negligence, Gaudron J at 596 made the point that although the duty of care had come to be expressed in cases in terms of the exercise of care in the giving of information and the breach had come to be expressed in terms of negligent misstatement, 'the duty which is asserted is, in essence, a duty to exercise reasonable care to give reliable information, information on which the other might rely as the basis for making an informed decision.' Gaudron J was dealing with circumstances involving an omission to give information. She continued:

'Thus a relationship of proximity may be constituted by the reasonable expectation of a person (including a reasonable expectation that would arise if he turned his mind to the subject) that the other person will provide relevant information or give reliable information, if that expectation is known or ought reasonably to be known by the person against whom the duty is asserted. Of course, the foreseeability of the risk of injury is necessarily relevant to a consideration of the reasonableness of expectation.'

28 In an action against a solicitor for negligence resulting in financial loss Ruttan J in Tracy v Atkins (1977) 83 DLR (3d) 46 at 54 considered a submission by the defendant that liability could exist only for an act or statement of commission, but not omission where no advice had been given at all. He rejected this and said that 'failure to give advice or direction when the circumstances called for such, it is as much a breach of duty as when wrong advice is tendered'.

29 The standard of care to be observed by a person with some special skill or competence is that of the ordinary skilled person exercising and professing to have that special skill. Cook v Cook [1986] HCA 73; (1986) 162 CLR 376 at 383-4; Papatonakis v Australian Telecommunications Commission [1985] HCA 3; (1985) 156 CLR 7 at 36; Rogers v Whitaker [1992] HCA 58; (1982) 109 ALR 625 at 631. It is for the courts to adjudicate on what is the appropriate standard of care."

43 I am satisfied that, albeit in a perfunctory manner, Ms Rees, on behalf of the plaintiffs, sought some advice from Mr Doolan by telephone in or about May 1991. As a consequence of that advice being sought, Mr Doolan owed a duty of care. The words of Gaudron J cited by Crawford J above in par27 are apposite to a determination of whether that duty of care encompassed what the plaintiffs claim it should have. The question to be asked is, did Ms Rees, when she contacted Mr Doolan, have a reasonable expectation, including one which would arise if Mr Doolan had turned his mind to the broader issue of any means to avoid the repair obligations, that he would provide relevant or reliable information, if that expectation was known or ought reasonably to have been known by Mr Doolan?

44 In brief, what Ms Rees wanted was not to have to pay for the work required by the Licensing Commission. There were in fact two potential ways in which she might have avoided that obligation. One was that, if Ambrose had breached the lease, that breach might have been used as leverage in negotiations with the company about obligations under the lease or as a means of avoiding it altogether. The other was the Covenant Agreement, even though that would have meant a potential end to involvement in the business altogether. Mr Doolan may very well have still held the view, based on his dealings with the plaintiffs in 1989, that avoidance of the lease altogether and a withdrawal from the business was simply not something they would even contemplate. However, that does not, in my view, absolve him from the obligation to give the plaintiffs advice about potential means of avoiding the obligation to comply with the Licensing Commission orders that might have been available to them.

45 Mr Doolan's advice that the plaintiffs could not avoid the obligations to repair unless Ambrose had breached the lease was no doubt correct. However, it was correct only by reference to the lease itself, and not strictly correct by reference to the broader context of the lease and the Covenant Agreement. It was an answer Mr Doolan apparently felt able to give "off the cuff" because the lease involved may have stuck in his mind given its unusual features. The fact of the matter was, however, that there was another unusual aspect to the dealings Mr Doolan had had with the plaintiffs, and that was the Covenant Agreement. At May 1991, the potential existed under that agreement for the plaintiffs to avoid all their obligations and put themselves largely back where they had been financially. The advice Mr Doolan gave could not have taken into account that second possibility. Either Mr Doolan, if he had an independent memory of the Covenant Agreement at the time, chose to intentionally confine himself to advising in relation to the terms of the lease, or, if he had no such independent memory, simply advised by reference to the lease that he did remember, without considering any broader context.

46 With respect, I do not believe it matters which. Had he gone to his file, he would have been alerted to the Covenant Agreement and the second possibility. I take the view that Mr Doolan's duty of care extended to considering Ms Rees request for advice, limited though that request may have been, in the light of any information given to him by Ms Rees, or reasonably available to him. It would have been a relatively simple matter for Mr Doolan to access his archived file. He either should have done that, or, if he had an independent memory of the terms of the Covenant Agreement at the time of his conversation with Ms Rees, raised with her its potential as a means of meeting her objective.

47 I am satisfied therefore that the defendants owed a duty of care to the plaintiffs which required Mr Doolan to alert the plaintiffs to the possibilities available under the Covenant Agreement, and that he was in breach of that duty of care by failing to do so.

48 Therefore, as to the issue of liability, I find in favour of the plaintiffs.