Spiteri v Roccisano [2009] VSC 132

1 In late July 2003, the plaintiff, Roger Spiteri, agreed to lend to Maribyrnong Road Developments Pty Ltd the sum of $350,000 in respect of a development then being planned by that company at 41 Maribyrnong Road, Ascot Vale. The development was known as "The Mansion". Pursuant to that agreement, Mr Spiteri advanced $350,000, in two instalments, to Maribyrnong Road Developments, in September 2003. Subsequently, the development failed. The plaintiff has not recovered any of the funds advanced by him to the project. Before he entered into the loan agreement, he had retained the defendant, Vince Roccisano, to act on his behalf as his solicitor in respect of the loan agreement. In this proceeding, the plaintiff claims damages from the defendant, alleging breach of retainer and negligence by the defendant in acting on his behalf in respect of the loan to Maribyrnong Road Developments. The defendant has joined, as third parties to the action, Maribyrnong Road Developments and its two directors, Peter Agushi ("Agushi") and Dominic Calabro ("Calabro").

2 Since 1994, the plaintiff has conducted business as a nurseryman. In 2002, he met Agushi when he was delivering a plant to a building site in Jolimont. The plaintiff and Agushi had attended the same school in the 1970s. Agushi told the plaintiff that he and Calabro were project developers involved in building residential apartments. Subsequently, the plaintiff delivered plants to another project in which Calabro and Agushi were involved. The plaintiff and Agushi became reacquainted, and he and his wife met Agushi and his wife on a number of occasions socially. During those meetings, Agushi discussed with the plaintiff the developments which Agushi and Calabro were then undertaking.

3 In July 2003, Agushi requested the plaintiff to attend a meeting at his offices in Chetwynd Street, North Melbourne. When the plaintiff attended there, Agushi and Calabro made him a proposal that he invest the sum of $350,000 in the Maribyrnong Road project. Subsequent to that meeting, on 25 July 2003 the plaintiff contacted the defendant, and engaged him to act on his behalf in respect of the proposed investment. The defendant had previously acted as the plaintiff's solicitor for approximately 20 years. In the course of the next five days, a number of negotiations took place concerning the proposed investment by the plaintiff in the Maribyrnong Road project. Ultimately, on 31 July 2003, a meeting took place between the plaintiff, the defendant, Calabro and Agushi at the offices of the defendant. At the conclusion of that meeting, the plaintiff signed a "deed of joint venture agreement" dated 31 July 2003.

4 The agreement (clause 2(a)) provided that the plaintiff would advance to Maribyrnong Road Developments the sum of $350,000, by a first advance of $100,000 within seven days of the agreement, and a further advance of $250,000 within 21 days of the agreement. It further provided (clause 2(b)) that Maribyrnong Road Developments would pay the plaintiff a "premium" of ten percent per annum on the advance to be paid on completion of the project, and would also pay twenty percent of the net profits of the project on its completion. Clause 2(d) and clause 10 each provided that the sum advanced, the "premium" and the profit would be paid to the plaintiff in one lump sum on completion of the project.

5 By clause 5.2(a) of the agreement, Maribyrnong Road Developments agreed to transfer to the plaintiff twenty percent of its issued capital within seven days of the plaintiff advancing the sum of $350,000 to it. Maribyrnong Road Developments also agreed (clause 5.2(b)) not to issue any further shares to any other person without the plaintiff's prior consent. Clause 6 of the agreement provided that Agushi and Calabro, as guarantors of the agreement, would each execute transfers of shares owned by them in Park West Developments Pty Ltd (which was then undertaking another development in North Melbourne), such transfer to be held in escrow by the defendant as security for the due and punctual payment by Maribyrnong Road Developments to the plaintiff under the agreement. Clause 9 of the agreement further provided that the plaintiff would have a first option to enter into a contract to purchase one or more of the proposed residential apartments to be constructed by Maribyrnong Road Developments. Attached to the deed (as Schedule E) was a deed of guarantee executed by Agushi and Calabro, by which they each guaranteed due payment by Maribyrnong Road Developments under the agreement.

6 Subsequent to the agreement, the plaintiff advanced to the project $100,000 on 1 September 2003, and $250,000 on 12 September 2003. He borrowed those funds from the Commonwealth Bank, and secured that loan by a mortgage to the bank. On 4 March 2004, the plaintiff and his wife, Saverone Spiteri, entered into a contract to purchase a unit at the development from Maribyrnong Road Developments Pty Ltd for $595,000. However, the project stagnated from the outset. In the first half of 2005, the plaintiff became concerned about the lack of progress in the project. In May 2005, he contacted the defendant, and had some discussions with the defendant concerning his right to withdraw his funds from the project. On 23 May 2005, he noticed a mortgagee's auction sale on the Maribyrnong Road property, and contacted the defendant. In the months which followed, it was ascertained that the value of the Maribyrnong Road property did not exceed the amount of debt owed to the mortgagee, the Macquarie Bank. In the meantime, it was ascertained that Park West Developments Pty Ltd had been placed in voluntary liquidation in July 2004. For some months, the plaintiff and the defendant had contact with the manager of the liquidator of that company. Ultimately it emerged that there were no funds left in the liquidation, after payment to the secured creditors of the company.

7 In April 2006, the plaintiff engaged his current solicitors, Lewenberg & Lewenberg. They issued County Court proceedings on his behalf against Calabro and Agushi based on their guarantees of the joint venture agreement. The proceedings were defended on the grounds that the agreement between Maribyrnong Road Developments and the plaintiff was a joint venture agreement, and not a loan agreement. The plaintiff succeeded at the trial of those proceedings. The defendant then unsuccessfully appealed to the Court of Appeal. The plaintiff's solicitors then served bankruptcy notices, and, subsequently, creditors' petitions, on Agushi and Calabro. They each entered into an arrangement under Part X of the Bankruptcy Act. The plaintiff commenced proceedings in the Federal Magistrates' Court to set aside the Part X agreements, but those proceedings were not successful. He has also unsuccessfully sued Agushi's wife in relation to the transfer by Agushi of the family home to her. In the upshot, the plaintiff has not received repayment to him of any of the monies which he advanced to Maribyrnong Road Developments. In these proceedings, he claims damages, consisting of: the principal sum advanced to Maribyrnong Road Developments; interest on that sum (consisting of the interest incurred by the plaintiff on the loan which he took from the Commonwealth Bank to fund the advance to Maribyrnong Road Developments); his costs of the various proceedings against Agushi and Calabro in the County Court, the Court of Appeal and the Federal Court; and his costs in the proceeding which he instituted to set aside the disposition of property by Agushi to his wife.

8 The principal issues in the case concern the terms of the retainer by the plaintiff of the defendant, and whether there was any breach by the defendant of that retainer. In his original statement of claim, the plaintiff pleaded that he retained the defendant in late July 2003 to act as his solicitor in relation to the proposed investment and to: review, and advise the plaintiff in relation to, a draft agreement prepared by Maribyrnong Road Developments; advise the plaintiff whether his investment was "adequately secured" pursuant to the terms of the draft agreement; and conduct negotiations in relation to the terms of the proposed investment. By an amendment to his pleading, made four days before the commencement of the trial, the plaintiff also added an allegation that he had retained the defendant to "conduct a check to ascertain whether either of the directors of Maribyrnong Road Developments being Peter Agushi or Dominic Calabro had ever been bankrupt".

9 In his statement of claim, the plaintiff pleaded that on or about 26 July 2003 the defendant advised him that the draft agreement, then put forward by Maribyrnong Road Developments, was unsatisfactory because it did not provide adequate security for the plaintiff. In paragraph 7 of the statement of claim it is pleaded that on 31 July 2003 the defendant requested Maribyrnong Road Developments to provide security for the proposed investment by the personal guarantee of the obligations of Maribyrnong Road Developments by Calabro and Agushi, and by Agushi and Calabro providing the plaintiff with executed transfers of shares in Park West Development, to be held in escrow by the defendant. The plaintiff alleges that the defendant subsequently advised him: that Park West Developments had assets, being equity in real property, to the value of $4,000,000; that the security offered by Calabro and Agushi would be more than sufficient security for the proposed investment by the plaintiff; and that if the plaintiff entered into the investment agreement and advanced $350,000 to Maribyrnong Road Developments, his investment would be more than adequately secured.

10 Pausing there, in his defence the defendant denied the breadth of the retainer alleged by the plaintiff. The defence alleged that, in late July 2003, the defendant was retained by the plaintiff to provide legal advice concerning the terms of the joint venture agreement to be entered into between the plaintiff and Maribyrnong Road Developments. The defence stated that, by letter dated 28 July 2003, the defendant expressly stipulated that he would not be able to provide financial advice to the plaintiff concerning the viability of the project. On the same date, he advised the plaintiff that there were two terms of the joint venture agreement which might be of concern. Ultimately, after further negotiations, the meeting was held at the defendant's office on 31 July 2003. The defence denied that the defendant told the plaintiff, at that meeting, that Park West Developments had assets to the value of $4,000,000, that the security offered by Calabro and Agushi would be more than sufficient security for the proposed investment, and that his investment would be more than adequately secured. The defence stated that, at the meeting on 31 July 2003, the plaintiff told him that he (the plaintiff) had already been informed by Calabro or Agushi that there was $4,000,000 of equity in the Park West Developments project. At that meeting, Calabro and Agushi confirmed to the plaintiff that the Park West Developments had assets, being equity in real estate, to the value of $4,000,000.

11 In the statement of claim, the plaintiff further alleged that in January 2005 he retained the defendant to act for him to attempt to recover the amount advanced by him to Maribyrnong Road Developments. He alleged that in breach of that retainer the defendant failed to advise him as to his rights against Calabro and Agushi under the guarantees, and failed to commence proceedings against Calabro and Agushi claiming monies owed by them pursuant to those guarantees. In response, the defendant pleaded that the existence of the personal guarantees was discussed between the plaintiff and the defendant, and that the defendant advised the plaintiff of the need to commence proceedings against Calabro and Agushi.

12 With that background, I turn to the evidence of the parties. I shall deal initially with the evidence relating to the question of the retainer by the plaintiff of the defendant, and the alleged breaches of the defendant of that retainer, in July 2003.

13 I commence with the plaintiff's evidence. The plaintiff described how, since about 1986, the defendant had acted for him as his solicitor in a number of transactions. In 1986, the plaintiff purchased a vacant block in North Melbourne, on which he subsequently built a fish and chip shop and a factory warehouse. The defendant acted for him in the purchase of the property, and in respect of the later lease of the warehouse after it was constructed. Subsequently, the plaintiff sold the fish and chip business, and the defendant acted for him in that transaction. In 1995, the defendant sold the fish and chip shop premises, and purchased the five acre property at Greenvale at which he now conducts his nursery. In 1997, the plaintiff also sold the warehouse property which was next to the fish and chip shop. The defendant acted for the plaintiff in each of those transactions.

14 The plaintiff then described the circumstances in which he met, and became reacquainted with, Agushi in 2002. He described how, in July 2003, he went to Agushi's offices in North Melbourne at the request of Agushi. Calabro also attended that meeting. Calabro and Agushi showed him photographs of the developments, which they had previously undertaken. Calabro told the plaintiff that Agushi and he had a property in Maribyrnong Road, at which they were going to build apartments. Calabro offered the plaintiff twenty percent of the shares in the project. The plaintiff said he was not interested. Calabro then proposed that the plaintiff lend to Agushi and Calabro $350,000 to be used for the project. He stated that the plaintiff would be entitled to ten per cent interest on that loan, together with twenty percent of the profits on the completion of the project. Calabro then handed the plaintiff a contract to sign. The plaintiff said that he wished to have his solicitor check the contract, and mentioned the defendant's name. Mr Calabro stated that he knew the defendant well, and that he was a good solicitor.

15 The plaintiff stated that on the next day he contacted the defendant, and made an appointment to see him. According to the plaintiff, he first saw the defendant one week later. At that meeting, he told the defendant of the proposal, which had been made to him by Calabro and Agushi. The plaintiff said that although he was not interested in investing in the project, he was interested in the proposal that he lend Calabro and Agushi $350,000, that he be paid ten percent interest, and that he was entitled to a further 20 percent of the net profits on completion of the project. In his evidence, the plaintiff stated that when he mentioned Calabro's name, the defendant said: "We had better watch him, I think he was bankrupt, don't quote me on it, I'm not sure". The plaintiff, in his evidence, stated that that "hit my alarm bells straight away". The plaintiff said to the defendant that he wanted Agushi and Calabro checked. He said "I want you to check them one hundred percent because I don't want to lose my money". According to the plaintiff, the defendant had a quick look at the agreement, which the plaintiff had handed to him, and stated that there was not much security in that agreement to protect the plaintiff's interest. The plaintiff asked the defendant to prepare a new contract to protect him more. In his evidence, the plaintiff stated that he said, "you know what I'm like Vince, I want to be protected".

16 After the meeting, the defendant then sent to the plaintiff a facsimile letter dated 28 July 2003. In that letter, the defendant stated that he had spoken to Mr Calabro. The letter said that the defendant had perused the joint venture agreement and " ... although I cannot provide you financial advice in relation to the viability of the project, I can provide you legal advice in relation to the Joint Venture Agreement". The defendant then pointed out two areas which were of concern to him. First, the agreement, which the defendant had perused, provided that the only security which the plaintiff had in the project would be a 20 percent shareholding in Maribyrnong Road Developments. The defendant noted that the agreement did not preclude the dilution of that shareholding by the issue of further shares in the company. Secondly, the agreement perused by the defendant provided that Maribyrnong Road Developments had an absolute discretion, in lieu of the payment to the plaintiff in money, to make a distribution to the plaintiff by way of an apartment rather than cash.

17 The plaintiff stated that between the date on which he received that letter and 31 July, he had two conversations with the defendant. First, he telephoned the defendant to let him know that he did not wish to proceed with the proposal, because there was no approval of it by the Victorian Civil and Administrative Tribunal ("VCAT"). Subsequently, the defendant telephoned the plaintiff back, and stated that Calabro wished to have a meeting the next morning. The defendant said that Calabro was offering security on Maribyrnong Road Developments, and that he had told Calabro that that was not sufficient security for the plaintiff's investment.

18 The plaintiff then attended the meeting with the defendant, Calabro and Agushi at the defendant's offices on 31 July 2003. The plaintiff stated that, at that meeting, the defendant asked Calabro whether he had any properties with clear titles to protect the plaintiff's money. Calabro said "we haven't, what we can offer is $4,000,000 of equity in Park West Developments which have built 65 apartments, 59 of which have already sold". The plaintiff, in his evidence, then stated that the defendant then turned to his computer and started typing. He asked Calabro for some numbers. Calabro gave him the numbers. The defendant returned to his computer and started typing numbers. The defendant said, "I've got them, everything's good". The defendant then obtained some papers from Calabro and Agushi to sign, and they signed the documents. The defendant then went through the agreement with the plaintiff, explaining some aspects of it. In particular, he explained that the plaintiff would be lending $350,000 to Maribyrnong Road Developments, that they would pay him ten percent interest on his money, and a further twenty percent of the profits on completion of the project. He said that if the plaintiff could not get bank finance, the agreement might not go ahead. Further, if Maribyrnong Road Developments could not obtain VCAT approval, the monies paid to it by the plaintiff would be re-funded. The defendant then handed the plaintiff the contract to sign. The plaintiff said to the defendant, "Have you protected me?". The defendant said, "I have, I have got you four million dollars security on your investment with Park West". He also mentioned some shares, and personal guarantees. The plaintiff signed the documents, and Calabro and Agushi departed. The plaintiff then said to the defendant "Have you protected me?". The defendant responded "Roger, better than the banks". The plaintiff said "That's good", to which the defendant responded "No, that's very good".

19 In his evidence, the plaintiff stated that the defendant did not speak to him separately on 31 July, before Agushi and Calabro attended at the meeting. The defendant did not discuss title search documents with the plaintiff. The defendant did not suggest that the plaintiff conduct a due diligence inquiry on the project, or obtain a valuation of the lands owned by Maribyrnong Road and Park West Developments. Nor did the defendant ask Calabro to explain how he calculated that Park West Developments had $4,000,000 worth of equity in its land. The defendant did not say anything to him about mortgages over the Maribyrnong Road Developments or Park West Developments land, or about charges over those companies. He did not ask Calabro whether Park West Developments had any creditors. The defendant did not suggest that there might be any problem with the security over Park West Developments. The plaintiff stated that if the defendant had done so, he would not have signed the contract.

20 The plaintiff was cross-examined as to his acquisition and development of the property at North Melbourne, his lease of the fish and chip business and warehouse, and his subsequent sale of those properties. He agreed that, in effect, he had managed the development of the property, so that he had been involved in obtaining a building permit, supervising the construction of the property, and arranging, subsequently, for the lease of the premises. He also agreed that when he used the services of the defendant to prepare the relevant documentation for a transaction, the defendant always took him through the contracts and lease agreements in some detail, explaining the terms of those documents to him.

21 In cross-examination about the meeting with Calabro and Agushi, at Chetwynd Street, North Melbourne, the plaintiff maintained that he paid little attention to the feasibility study shown to him by Agushi and Calabro in respect of the Maribyrnong Road project. He said he was not interested in it, and particularly was not interested in becoming a partner in the joint venture. He claimed that he had put the feasibility report, which was given to him, into his cupboard at home and ignored it.

22 The plaintiff was then cross-examined concerning his evidence that, in his first discussion with the defendant concerning the proposed venture, the defendant told him that Calabro might have been bankrupt. The plaintiff denied that that allegation was a recent invention by him, notwithstanding that the statement of claim in the proceeding was amended, four days before trial, to allege (for the first time) that the defendant had been retained by him to conduct a check as to whether Agushi or Calabro had previously been bankrupt. The plaintiff agreed that he had not referred to any such issue in the affidavits which he swore in the County Court proceedings against Calabro and Agushi. In cross-examination, he initially claimed that he had told his present solicitors that he had instructed the defendant to check whether Agushi and Calabro had been made bankrupt, but, subsequently, he conceded that he had not given that instruction to his present solicitors.

23 The plaintiff also accepted that, in the documents given to him by Calabro at North Melbourne, there was included a copy of a Title search of the property at Maribyrnong Road. He maintained, however, that he did not know that that property, or that the Park West Developments property, were subject to mortgages. The plaintiff denied that, before the meeting of 31 July 2003, he was aware that he was being offered twenty percent of the shares in Maribyrnong Road Developments. He said that in telephone conversations with the defendant, he had discussed the security which he wanted for the advance that he was to make to Maribyrnong Road Developments, and he asked the defendant to get the best possible security to protect his loan. He maintained that before 31 July 2003, he did not know that Maribyrnong Road Developments could not offer him, as security, a mortgage or charge over the property at Maribyrnong Road.

24 The plaintiff denied that, on 31 July, he first spoke to the defendant alone, before Agushi and Calabro came into the defendant's office. He denied that the defendant went through the joint venture agreement with him before Calabro and Agushi arrived. He further denied that in the course of the meeting with Agushi and Calabro, the defendant explained the agreement to him. He reiterated that he asked the defendant if he was protected, and the defendant said that he had "got me $4 million of equity in Park West, some shares and some personal guarantees". He denied that he had earlier told Roccisano that there was $4 million equity in Park West Developments. However, he did agree that the defendant asked Calabro and Agushi whether there was $4 million equity in the development, and they agreed.

25 The defendant gave evidence concerning the events leading up to the execution of the Deed of Joint Venture agreement on 31 July 2003. He also called Agushi and Calabro to give evidence, in particular in relation to their meeting with the plaintiff at North Melbourne, and in relation to the meeting at the defendant's offices on 31 July 2003. As I stated, a number of matters were explored with the defendant and his two witnesses, in evidence in chief and cross-examination, particularly relating to which documents were produced at particular meetings. It is not necessary to recite that evidence, in view of the concession by counsel in this case that such issues are only relevant, at most, to questions of credibility and reliability.

26 The defendant stated that he first heard from the plaintiff in relation to the Maribyrnong Road project on 25 July 2003. The plaintiff telephoned the defendant, and said that he was interested in the project, and that Calabro would be providing some documentation in relation to it. He asked the defendant to have a look at the documentation. The defendant stated that the plaintiff did attend at his office to discuss the matter at that stage. However, subsequently, on the same day, Calabro telephoned him, and, later, attended at his offices to give him a document which was called a joint venture agreement. The defendant understood that the parties had agreed that the plaintiff would receive twenty percent of his shares in Maribyrnong Road Developments, notwithstanding that the version of the joint venture agreement, which was then produced to the defendant, did not contain a provision to that effect. The defendant stated to Calabro that the agreement would also need to contain a provision that the shareholding, to be received by the plaintiff in Maribyrnong Road Developments, could not be diluted by a subsequent issue of shares by that company. At the end of the meeting, it was agreed that Calabro would prepare another document to incorporate that term.

27 The defendant stated that, at that time, he was not aware that Calabro had been the subject of bankruptcy proceedings. The defendant said that he had known Calabro socially, particularly because the defendant's late wife and Calabro's wife had been friendly for some period during the 1990s.

28 After that meeting, the defendant sent to the plaintiff the letter dated 28 July 2003, to which I have already referred. In a telephone conversation with the defendant on the same date, the plaintiff stated that the agreement was not good enough, and he did not wish to proceed with the transaction. The defendant stated that he would check the new contract, which Calabro was to produce, and he would then contact the plaintiff. Subsequently, on the same day, the defendant received a further telephone call from the plaintiff, stating that he did not want to proceed with the project, unless town planning approval was granted. The defendant undertook to communicate that matter to Calabro.

29 On 30 July 2003, the defendant received a message that Calabro had telephoned his office, and wished to make an appointment. The defendant telephoned the plaintiff to arrange that appointment. The plaintiff stated that he did not wish to proceed with the matter, and that he would not attend the appointment. He stated that he himself would contact Calabro, and cancel the appointment.

30 Later on the same day, the plaintiff telephoned the defendant again. He stated to the defendant that he did not want shares in Maribyrnong Road Developments, because there was not enough "equity" in it. The defendant stated that his then impression was, at that time, there were ongoing discussions taking place between the plaintiff, Calabro and Agushi. The plaintiff wished to make sure that if there were any monies to be available in the project, he would receive them. The defendant stated that he and the plaintiff discussed the Maribyrnong Road property, and in particular they were concerned that because the property was mortgaged, there might not be enough equity in it to provide adequate security to the plaintiff.

31 The defendant then spoke to Calabro on the telephone on 30 July. The defendant stated the plaintiff wanted a twenty percent share of Maribyrnong Road Developments, and also other shares "in escrow" in another property with equity. Subsequently, on the same day, Calabro again telephoned the defendant. He said that he would provide a transfer of shares in another project to the plaintiff to be held in escrow, and that he would also pay the plaintiff's costs relating to the joint venture agreement.

32 Ultimately, it was arranged that a meeting would be held at the offices of the defendant on the morning of 31 July 2003. The defendant stated that the plaintiff arrived before Calabro and Agushi. By that time, Calabro had sent to the defendant, by facsimile, a new agreement, which was identical to the agreement ultimately signed on that day. The defendant conferred with the plaintiff in his office. They went through the agreement. The defendant identified to the plaintiff the parts of the agreement which were the same as the previous version, and the parts which had been changed. The defendant also undertook a Title search of the Maribyrnong Road property, to ensure that there were no further encumbrances placed on the Title. In particular, the defendant discussed clause 6 of the agreement with the plaintiff, relating to the transfer of shares in Park West Developments to be held in escrow. The plaintiff remarked that he had heard from Agushi that that company had $4 million "equity" in it. Agushi and Calabro then entered the room. The parties discussed Park West Developments. The defendant said to Agushi and Calabro: "I understand there's $4 million in Park West, is that correct?", and they replied: "Yes". The defendant then asked Calabro to give him some details of the Park West properties, so he could undertake Title searches. The defendant undertook a search of the Titles of the properties held by Park West, and he also did an ASIC search of Park West. He stated that he gave one of the copy Title searches to the plaintiff. The parties then executed the joint venture agreement. Calabro and Agushi each signed transfers of their shares in Park West Developments, and handed those transfers to the defendant. They also signed the guarantee annexed to the joint venture agreement. Agushi and Calabro then left, and the plaintiff stayed for a short time. The plaintiff stated that he was very happy that he was going into the joint venture agreement, and he believed he was going to make a lot of money. He then departed.

33 In cross-examination, the defendant stated that he first saw the plaintiff, face-to-face, concerning the Maribyrnong Road Developments project, on 31 July 2003. He stated that after receiving the first draft of the agreement from Calabro, he spoke on the telephone with the plaintiff in the following week. The defendant agreed, in cross-examination, that the plaintiff had been concerned because no planning permit had been obtained in respect of the proposed development, and also because there was insufficient equity in the project at Maribyrnong Road, since the land was already the subject of mortgages. He agreed that, in his first telephone conversation with the plaintiff about the proposed project, the plaintiff told him that he wanted the defendant to ensure that he (the plaintiff) would be able to recover from the project the money which he was entitled to. He agreed that his instructions were to review the draft agreement, and to negotiate it, in order to ensure, as best he could, that the plaintiff could recover the money from the project to which he was entitled. He further agreed that in the course of negotiations between 25 July and 30 July, the plaintiff twice told him that he did not wish to proceed with the transaction. The first occasion was when the plaintiff raised the absence of a planning permit for the development. The second occasion was when the plaintiff and the defendant discussed the amount of equity in the land held by Maribyrnong Road Developments.

34 The defendant stated that on 31 July, there was no discussion about the Maribyrnong Road Developments mortgages. The only discussion about the Park West Developments project related to the fact that there was $4 million "equity" in it. The defendant did not discuss with the plaintiff the existence of any encumbrances on the Park West Developments land on 31 July. The defendant stated that the first reference to Park West Developments in the negotiations was when the defendant saw the fax copy agreement on the morning of 31 July 2003. In cross-examination, the defendant initially suggested that the plaintiff had told him that Agushi had said to him (the plaintiff) that Park West Developments had $4 million. However, he qualified that evidence, by stating that he assumed that it was Agushi who had told that to the plaintiff. When the defendant was speaking to the plaintiff before Calabro and Agushi came into the office, the plaintiff mentioned that he had "heard" that there was $4 million equity in Park West Developments. After Agushi and Calabro had come into the office, the defendant asked them "Is there $4 million in this project?", and they said: "Yes". The defendant then stated to the plaintiff: "Yes, you are correct Roger, there is $4 million". The defendant stated that he believed that there was $4 million in the project, and he understood that the plaintiff also believed it. Shortly after that conversation, the parties executed the agreement, and Agushi and Calabro left. The defendant agreed that he had been in a hurry to conclude the meeting, because he had to attend a meeting with a bank in the city at 11.00am. After the contracts were signed, the plaintiff stated: "Am I all right, am I protected?", and the defendant confirmed that he was.

35 Agushi gave evidence on behalf of the defendant. He stated that at the meeting at Chetwynd Street, North Melbourne, Calabro and he gave the plaintiff an outline of the project, and handed the plaintiff a feasibility study for it. Calabro and Agushi described the project to the plaintiff, and explained the feasibility study to him. The plaintiff was given two options. The first option was to invest in the project by way of a loan. The second option was for the plaintiff to become a joint venture partner, and thus become entitled to a percentage of the profits. The plaintiff was interested in the project, but he was undecided as to which option he would select.

36 Agushi further stated that, when Calabro and he arrived at the defendant's offices on 31 July 2003, the plaintiff was already inside the defendant's office. The defendant spoke to Agushi and Calabro in the foyer of the office, and told them that the plaintiff was a bit uncomfortable about the "security" contained in the agreement. He said to them that the plaintiff wished also to have security over the home properties of Calabro and Agushi. Agushi replied that his house was mortgaged, and that the equity in it was minimal. Calabro only had a one per cent share in his own house. The only security, which would be offered, was the shares in Park West Developments. When Calabro and Agushi entered the defendant's office, Spiteri remained a bit uncomfortable, because he wanted better security to ensure that he would be able to recover his money. At the meeting, there was some discussion about the amount of the "equity" in Park West Developments. Agushi and Calabro estimated a figure of about $2 million equity in the Park West Developments project, and also in the Maribyrnong Road Developments project. In his evidence, Agushi agreed that a figure of $4 million equity could have been discussed, taking into account the two projects.

37 In cross-examination, Agushi confirmed that when the defendant came out to the foyer of his offices on 31 July, he stated that the plaintiff was uncomfortable about the security being offered. At the meeting that followed, there was a discussion about the Park West Developments project and the Maribyrnong Road project having $4 million equity. He agreed that at that time the Maribyrnong Road Developments project had little equity.

38 Calabro also gave evidence on behalf of the defendant. He confirmed that, at the initial meeting which he had with the plaintiff and Agushi at Chetwynd Street, North Melbourne, the feasibility study for the Maribyrnong Road Developments project was discussed. Calabro did not recall a copy of the study being given to the plaintiff. However his evidence, in that respect, is contrary to that of both the plaintiff and Agushi. He confirmed that he gave a copy of a proforma agreement (with the plaintiff's name added) to the plaintiff to take to his solicitor for further negotiation. The plaintiff said to Calabro and Agushi that he would think about the proposed development, but he was more inclined to invest the money and be entitled to a percentage of the profits, rather than enter into a loan transaction.

39 Calabro stated that, between 25 July and 31 July, he communicated with the defendant, and not the plaintiff, concerning the proposed project. In the course of those discussions, the defendant had said to Calabro that the plaintiff wanted mortgages over Agushi's and Calabro's houses. Calabro told the defendant that he did not have any property he could mortgage, and that, in any event, it was contrary to a joint venture for one partner to be given a mortgage over the other partner's properties. Instead, Calabro offered alternative "security", comprising shares in a company which had completed a development at that time.

40 Mr Calabro, in his evidence, stated that, when Agushi and he arrived at the defendant's offices on 31 July 2003, they waited in the foyer outside the defendant's room for between 10 and 20 minutes. The defendant came out of his room, and said that the plaintiff was in his room. After Agushi and Calabro went into the defendant's room, there was discussion about the equity in Park West Developments. In that discussion, Calabro stated to the defendant and the plaintiff that there was $4 million equity in the Park West Developments project and the Maribyrnong Road Developments project.

41 Before determining the question of the ambit of the retainer of the defendant by the plaintiff, it is useful, first, to make some general observations about the credibility of the plaintiff and the defendant. In general, I consider that the plaintiff, on a number of occasions, was inclined to exaggerate and overstate his case. For example, he was at pains to emphasise, to an unrealistic degree, his ignorance and lack of understanding of the financial feasibility study of the Maribyrnong Road Developments project given to him by Calabro and Agushi. That ignorance is at odds with the plaintiff's previous experience in developing a property at North Melbourne. Furthermore, although the plaintiff protested, on a number of occasions, that he was not interested in the potential profitability of the Maribyrnong Road Developments project, that assertion is both unrealistic and difficult to understand, given the basis upon which the plaintiff chose to enter into the project. The plaintiff was intending to borrow all the funds required to invest in the Maribyrnong Road Developments project. Clearly, the ten percent interest return to him, from the project, would be an insufficient incentive for him to enter into the project. He agreed, when I asked him, that the real potential benefit to him from the transaction consisted of his interest in the profits of the project. In a similar vein, I consider that the plaintiff, as a witness, exaggerated his ignorance of aspects of the transactions, in order to give the impression of his reliance on the defendant. He was given to explaining his dependence on the defendant, sometimes gratuitously. While I accept that he was reliant on the defendant for advice within the retainer, I found his evidence on that aspect to be over-stated and tendentious.

42 On the other hand, I found the defendant to be a truthful and frank witness. From time to time he had some difficulty remembering parts of the transaction, but was assisted by his diary notes. He was careful and considered in his evidence, and did not attempt to argue his case. On a number of occasions, he made concessions, notwithstanding that they were contrary to the interests of his case.

43 In the end, there was one major difference, between the evidence of the plaintiff and the evidence of the defendant, on the ambit of the defendant's retainer. That difference concerned the evidence by the plaintiff that, in their initial conversation, the defendant had stated that Calabro might have been bankrupt previously, and that the plaintiff had, accordingly, instructed the defendant to undertake a bankruptcy search of both Agushi and Calabro. I do not accept the plaintiff's evidence in that regard. In his letter to the plaintiff dated 28 July 2003, the defendant referred to the retainer of him by the plaintiff, but did not refer, at all, to the question whether Calabro or Agushi had previously been bankrupt. The plaintiff agreed that he did not contact the defendant to raise with him the omission, from that letter, of any reference to the question whether Calabro or Agushi had previously been bankrupt. He agreed that that matter was not discussed with the defendant again before the execution of the joint venture agreement of 31 July 2003. The plaintiff's failure to raise that matter with the defendant during that period of time is inconsistent with the emphasis which the plaintiff stated he gave to that aspect of the matter in his initial contact with the defendant about the proposed investment.

44 Furthermore, it is significant that it was not until some five days before the trial of this action that the plaintiff pleaded, for the first time, that as part of his retainer, the defendant was required to conduct bankruptcy searches of Agushi and Calabro. By contrast, that aspect of the alleged retainer had not been referred to in the initial letter of demand sent by the plaintiff's solicitor to the defendant in April 2006. Nor had the plaintiff referred to it in his affidavits in the County Court proceedings brought by him against Calabro and Agushi. Initially, in cross-examination, the plaintiff claimed that he had told his present solicitors that he had retained the defendant to conduct bankruptcy searches on Agushi and Calabro. Later, after further cross-examination, he accepted that he had not told his solicitors about that aspect of the retainer. In my view, the allegation by the plaintiff that the defendant was retained to conduct the bankruptcy searches of Agushi and Calabro has all the hallmarks of a recent invention by the plaintiff, designed to bolster his case. I found the plaintiff's evidence on that aspect of the case to be particularly unconvincing. I am not satisfied that the plaintiff retained the defendant to conduct bankruptcy searches of Agushi and Calabro. On the contrary, I am satisfied that he was not instructed or retained to carry out that inquiry on behalf of the plaintiff. I also accept the defendant's evidence that he did not have any previous knowledge that Calabro (or Agushi) had previously been involved in bankruptcy proceedings, or had previously been bankrupt.

45 In the upshot, apart from the matter to which I have just referred, there was little difference between the evidence of the plaintiff and the defendant as to the ambit of the retainer of the defendant by the plaintiff. There was a dispute as to whether the initial contact between the plaintiff and the defendant occurred face-to-face at the offices of the defendant, or whether it was on the telephone. It is not necessary to resolve that issue, other than that it may reflect on the reliability of either witnesses to what was stated in that contact. Nevertheless, given my reservations about the reliability of the plaintiff, I accept the defendant's evidence that he first spoke to the plaintiff on the telephone. The defendant was in the habit of making file notes of all relevant attendances, and there was no such note on his file. Rather, the note which he made of the attendance by Calabro on him on the same date, does suggest that his initial face-to-face contact with any of the parties to the proposed transaction was with Calabro, and not the plaintiff.

46 On the other hand, the parties are, to a large extent, ad idem as to the ambit of the retainer of the defendant by the plaintiff. In cross-examination, the defendant, candidly, accepted that he had been instructed by the plaintiff to review the agreement which was to be provided by Calabro to him, and to negotiate on his behalf, in order to ensure, as best he could, that the plaintiff would be able to recover his entitlements from the project. He agreed, in cross-examination, that, as part of that retainer, he had to form an opinion as to the value of the security which was being offered.

47 Further, it is clear that, in their telephone discussions in the period between 25 July and 31 July 2003, the plaintiff and the defendant focused on the question as to what "security" could be obtained by the plaintiff to ensure that he be repaid the money which he was to invest in the project, together with his other entitlements. Thus, on 30 July, when the plaintiff and the defendant were concerned about the lack of "equity" in the land held by Maribyrnong Road Developments, the plaintiff mentioned to the defendant that Calabro and Agushi had other developments and accordingly the defendant requested Calabro to provide security in one of those projects. As a consequence of that request, Calabro and Agushi agreed to execute transfers of their shares in Park West Developments, to be held in escrow as "security" for the plaintiff's rights under the joint venture agreement. Further, the evidence of Agushi and Calabro supports the evidence of the plaintiff (and indeed the defendant) that, on 31 July, the plaintiff was still concerned as to the quality of the security being provided to him under the proposed agreement.

48 In those circumstances, I consider that the evidence does establish that it was a term of the retainer of the defendant by the plaintiff, as pleaded in the amended statement of claim, that the defendant would advise the plaintiff as to whether the plaintiff's investment was adequately secured by the proposed joint venture agreement. On the other hand, as pleaded by the defendant, it was clearly not a term of the agreement that the defendant provide any financial advice to the plaintiff in relation to the viability of the proposed Maribyrnong Road Developments project. The letter of the defendant to the plaintiff dated 28 July 2003 made it plain that the defendant was not undertaking to provide such advice to the plaintiff. Mr S. Palmer, who appeared for the plaintiff, did not contend to the contrary.

49 It is useful to set out the legal principles relating to the obligations of the defendant under the retainer of him by the plaintiff. It is, of course, trite law that there was an implied term of that retainer that the defendant exercise reasonable care and skill in performing the tasks defined by the retainer.[1] Accordingly, the defendant was required to exercise reasonable care and skill in advising the plaintiff as to the adequacy of the security contained in the joint venture agreement which was to be executed by the plaintiff.

50 It is important to bear in mind that the obligation of the defendant was to exercise reasonable care and skill. The law does not expect of solicitors a standard of perfection. Further, in determining whether the defendant discharged that duty, it is important to avoid the wisdom of hindsight. The relevant standard of care imposed by the implied term is the reasonable care and skill which might be expected from a normally competent and careful practitioner.[2] In general, unless the retainer expressly, or by implication, requires him to do so, the solicitor is not expected, nor required, to advise the client about the financial or commercial viability of, or risks associated with, the transaction which is under consideration by the client.[3] In the present case, the retainer of the defendant by the plaintiff contained an express term, specified in the letter of the defendant to the plaintiff of 28 July 2003, that the defendant would not advise the plaintiff in respect of the financial viability of the proposed Maribyrnong Road Developments project.

51 On the other hand, in some cases there may be no bright line of distinction between legal and commercial advice where a solicitor is acting for a client in a proposed commercial transaction. For example, in Amadio Pty Ltd & Anor v Henderson,[4] the Full Court of the Federal Court upheld the decision of Heerey J[5] at trial that the defendant solicitors had been negligent in failing to advise the plaintiff investors, for whom the defendant had been acting in the proposed purchase of a commercial property which was subject to a lease, that the lease did not contain a "ratchet" clause which might ensure that the rental income from the property did not decline during the period of the lease. The Full Court held that the commercial and legal aspects of that aspect of the proposed transaction were "inextricably interwoven" with the professional legal aspects of the advice to be provided by the defendant to the plaintiff, so that the failure of the defendant to advise the plaintiff about the absence of that clause constituted a breach of the contractual duty of care imposed on the defendant.

52 In addition to the contractual obligation, there is also a concurrent tortious duty of care assumed by a solicitor to the client to exercise reasonable care and skill in the performance by the solicitor of the retainer.[6] There is a difference of opinion in the authorities as to whether the content of the tortious duty of care might, in an appropriate case, require that the solicitor give advice on matters which are outside the strict terms of the solicitor's retainer. In Sali & Anor v Metzke and Allen,[7] Whelan J expressed the view that tort law does not place any additional duty upon the professional to give advice beyond the scope of the particular retainer. On the other hand, in Riz & Anor v Perpetual Trustee Australia Limited & Ors,[8] Brereton J, having considered the relevant authorities in some detail, expressed the view that:

"... The prevailing position is that the scope of a solicitor's duty of care is not limited to the terms of the retainer but, depending upon the circumstances of the particular case, may require the taking of positive steps beyond the specifically agreed professional task or function, where these are necessary to avoid a real and foreseeable risk of economic loss being sustained by the plaintiff."

53 In that case, the defendant solicitor was engaged to act on behalf of the plaintiffs in respect of a secured loan by them from the Perpetual Trustee Australia Limited. The plaintiffs proposed to invest $150,000 from the proceeds of that loan with a particular enterprise. In the course of consultations with the defendant, the plaintiffs made it clear that they expected to receive a return of $275,000 per annum from that investment. Brereton J held that, notwithstanding that the retainer by the plaintiff of the solicitors was restricted to acting for the plaintiff on the loan and mortgage transaction, the solicitor nonetheless, as part of its duty of care to the client, was obliged to caution the client against the extraordinarily unrealistic rate of return which they expected on their proposed investment, and from which they intended to service the loan from Perpetual Trustee.

54 It would seem, then, that although the retainer would ordinarily define the ambit of the tortious duty of care, cases such as Riz illustrate that that may not be universally the position. Although the question was argued before me, it is not necessary for me to resolve the differences of opinion in the authorities as to the breadth of the tortious duty of care. It is sufficient, for the purposes of this case, for me to assume that the duty of care of the defendant to the plaintiff did not involve any obligation of the defendant beyond that imposed under the implied contractual term to exercise reasonable care and skill in acting for the plaintiff.

55 The critical question, then, is whether the defendant discharged his contractual (and tortious) duty to exercise reasonable care and skill in advising the plaintiff as to the adequacy of the security contained in the proposed joint venture agreement with Maribyrnong Road Developments.

56 Mr N. Pane, who acted for the defendant, submitted that the defendant did not breach the terms of his retainer by the plaintiff. He submitted that the plaintiff's principal concern was to ensure that he would be repaid his entitlements, under the joint venture agreement, upon the successful completion of the Maribyrnong Road Developments project. The plaintiff well knew and understood that the property at Maribyrnong Road was the subject of mortgages. In particular, he had been handed a document at the initial meeting with Agushi and Calabro which contained a Title search of Maribyrnong Road Developments. Thus, to secure the proposed developments, the defendant, on the instruction of the plaintiff, sought alternative security from Calabro and Agushi. He succeeded in obtaining that security, comprising, first, the transfer of twenty percent of the issued share capital in Maribyrnong Road Developments to the plaintiff, secondly, personal guarantees by Calabro and Agushi, and, thirdly, the executed transfers of shares in Park West Developments, to be held in escrow by the defendant. Mr Pane focused principally on the guarantees, submitting that they were an important element of the security gained by the plaintiff. He submitted that the shares in Park West Developments would have been available to the plaintiff in any event, if he had sued Agushi and Calabro under the guarantees. The real significance of those shares was that they provided additional "leverage" to ensure that Agushi and Calabro would repay the plaintiff on the completion of the project. Mr Pane submitted that the essential task of the defendant, under the retainer, was to negotiate and obtain the best available security for the plaintiff, and that the defendant had performed that task with due care and skill.

57 Mr Pane submitted that the defendant was not negligent, or in breach of his contractual duty to the plaintiff, in failing to give him any caution concerning the representation made by Calabro and Agushi, in the meeting of 31 July 2003, that there was $4 million "equity" in the Park West Developments project. Mr Pane submitted that any caution given by the defendant to the plaintiff about that representation would constitute commercial, and not legal, advice, which would be outside the scope of the defendant's retainer. Further, it would be advice about a matter which would be ordinary commercial commonsense. He submitted that it would be plain to the plaintiff that if he accepted the estimate given by Calabro and Agushi, he would, in essence, be accepting the estimate given by them on trust. Further, Mr Pane submitted that if the defendant had given to the plaintiff a caution at the meeting as to the estimate given by Calabro and Agushi of the "equity" in the Park West Developments project, that such a caution would not have perturbed the plaintiff from executing the joint venture agreement. The plaintiff had been content to accept the information contained in the feasibility report provided by Agushi and Calabro relating to the Maribyrnong Road Developments project. He trusted Calabro and Agushi. Thus, equally, he would have trusted them when they made the representation as to the amount of "equity" in the Park West Developments project.

58 In response, Mr Palmer submitted that the defendant breached his contractual, and tortious, duty of care, in failing to give proper advice to the plaintiff as to the nature of the "security" constituted by the provision by Calabro and Agushi of the transfers of shares in Park West Developments, to be held in escrow by the defendant. Mr Palmer submitted that, from a legal point of view, any "security" provided by the transfer of the shares was illusory. First, the only documentation to be provided to the defendant was signed transfers of shares by Calabro and Agushi. The defendant did not know, nor had he inquired, whether share certificates had been issued in respect of the shares which were the subject of the transfers, and, if so, in whose possession the certificates were. Thus, if the plaintiff had found it necessary to enforce the "security" constituted by the transfers, he would have been required to sue, on the joint venture agreement, to enforce that security. Secondly, the joint venture agreement did not contain any restriction on Park West Developments issuing further shares, thus diluting the "security" afforded by the share transfers. Thirdly, insofar as the share transfers provided to the plaintiff any rights to the shares held by Agushi and Calabro in Park West Developments, the defendant failed to advise the plaintiff, or to take properly into account, that, in a winding up of Park West Developments, as shareholder, the plaintiff would rank last in priority behind all secured and unsecured creditors. In addition, the agreement did not contain any restriction preventing Park West Developments from executing further securities over its property or over its assets. Mr Palmer submitted that, in advising the plaintiff as to the adequacy of the "security" afforded by the transfer of shares in Park West Developments, the defendant should, in performance of his retainer, have warned the plaintiff that the "quality" of that security was highly suspect. Mr Palmer submitted that that advice was of particular importance to the plaintiff, given his concern, expressed as recently as 30 July, that Maribyrnong Road Developments was not proffering sufficient security for him to wish to proceed with the transaction. Mr Palmer submitted that it was clear to the defendant that the plaintiff was seeking to obtain further, and better, security, before he entered into the joint venture agreement.

59 Mr Palmer further submitted that the defendant acted in breach of his duty of care to the plaintiff. Mr Palmer emphasised that, as at 31 July 2003, the plaintiff was still concerned as to the adequacy of the security which was being offered to him in exchange for his investment in the Maribyrnong Road Developments project. Mr Palmer submitted that, on the evidence, the defendant not only failed to give a caution to the plaintiff about the estimate of $4 million equity in Park West Developments stated by Calabro, but that he also added his imprimatur to it. In that respect, Mr Palmer referred to the evidence by the defendant that, after Calabro and Agushi had stated that Park West Developments had "equity" of $4 million, the defendant then stated to the plaintiff that he had been right. When asked by me whether he was thereby communicating some confidence in what he had been told by Agushi and Calabro about the existence of the $4 million equity, the defendant responded:

"Yes. It could look like that because you know I was told it was $4 million. I confirmed it. Then I went back and said (to the plaintiff) 'Yes, you are correct Roger. There is 4 million' and I just - I believed that and Roger believed that as well."

60 In addition, Mr Palmer criticised the defendant for failing to properly clarify just what Agushi and Calabro meant when they represented that Park West Developments had "equity" of $4 million. In particular, the defendant failed to ascertain whether that referred to the then current position of the land owned by Park West Developments, whether it referred to an excess of the assets of Park West Developments over its overall liabilities, or whether it was, at that time, no more than the expression by Calabro and Agushi that they expected to make $4 million profit out of the Park West Developments project.

61 In determining this issue, it is necessary, first, to make some findings of fact concerning the events of 31 July 2003. First, I accept the evidence of the defendant that, on that day, he first spoke to the plaintiff, in the absence of Calabro and Agushi, and gave him advice as to the terms of the joint venture agreement which had been sent to him by facsimile by Calabro at 9.39am that morning. The defendant's evidence to that effect is supported, to some extent, by the evidence of Agushi and Calabro, that when they arrived, the defendant was already in conference with the plaintiff. Further, the plaintiff, in cross-examination, accepted that it had been common practice for the defendant, in previous transactions, to carefully take the plaintiff through the relevant terms of the proposed transaction, before he signed contracts or leases then under consideration. Further, as I have already stated, I consider that the defendant was an honest and reliable witness, and I prefer his evidence to that of the plaintiff in this respect.

62 Further, I accept the defendant's evidence as to the meeting which then followed between Calabro, Agushi, the plaintiff and himself. Thus, I accept that, before that meeting occurred, the plaintiff had already mentioned to the defendant that he had heard that there was $4 million "equity" in Park West Developments, when the defendant drew to the plaintiff's attention clause 6 of the proposed joint venture agreement, which required Calabro and Agushi to execute transfers of shares in that company. I also accept that at the meeting with Calabro and Agushi, the defendant asked them to confirm what he had been told, namely that there was $4 million equity in the Park West Development project. When Agushi and Calabro gave that confirmation, the defendant told the plaintiff that he was correct, and "there is $4 million" equity in the project.

63 In determining whether, in those circumstances, the defendant exercised reasonable care and skill in advising the plaintiff as to the adequacy of the security being offered in respect of his investment in Maribyrnong Road Developments project, I bear steadily in mind that it is important that I avoid the wisdom of hindsight. However, I am nevertheless satisfied that, in the circumstances of this case, the defendant did fail to exercise reasonable care and skill in providing advice to the plaintiff as to the adequacy of the security then on offer. It was clear that, by 31 July 2003, the plaintiff was concerned as to the security of his proposed investment in the project. On 28 July 2003, he told the defendant that he did not wish to proceed with the transaction unless town planning approval had been granted. In a separate telephone call on the same day, the plaintiff told the defendant that he did not wish to go ahead with the deal. The defendant responded that he would check the new contract out, and let him know. On 30 July, Calabro made an appointment with the defendant for 3.00pm on the same day. When the defendant telephoned the plaintiff, he said that he did not wish to go ahead with the matter, and that he would telephone Calabro and cancel the appointment. On the same day, at 1.10pm, the plaintiff telephoned the defendant and said he would not attend that meeting. He stated that he did not want to have shares in Maribyrnong Road Developments because there was "not enough equity". It was in response to that telephone call that the defendant telephoned Calabro, and told him that the plaintiff wanted twenty percent (shares) in Maribyrnong Road Developments and other shares "in escrow" in another property with equity.

64 Pausing there, it is clear that, as at that stage, the plaintiff had made it known to the defendant that he was particularly concerned about the security then on offer. He was reluctant to proceed with the transaction, because of his apprehension that there was not enough "equity" in the Maribyrnong Road Developments project, and also because the planning approval had not yet been obtained for the proposed project. It was in those circumstances that the defendant then negotiated the further security for the plaintiff, constituted by the provision of guarantees by Calabro and Agushi, and the provision of shares in another project to be held in escrow by the defendant.

65 It is common ground that neither before, nor on, 31 July 2003, the defendant gave any advice to the plaintiff as to any potential shortcomings of the security which was contained in the joint venture agreement ultimately signed by the plaintiff on that day. In my view, there were clear deficiencies in the security on offer, which an ordinary prudent solicitor, exercising reasonable care and skill, should have brought to the attention of his client, before he signed the agreement. First, I agree with Mr Palmer's submissions that there were inherent legal deficiencies in the proposed "security" constituted by the provision of transfers of shares in Park West Developments. The failure of the defendant to obtain, or caution the plaintiff that he had not obtained, certificates of the shares which were the subject of the transfers, affected the adequacy and enforceability of the security then offered. Further, the defendant failed to take into account or advise the plaintiff that there were other shortcomings in the "security". The defendant failed to advise the plaintiff that, even if he became a shareholder in Park West Developments, as such he would rank last in any liquidation of that company. He failed to ensure that the joint venture agreement contained an inhibition against Park West Developments issuing further shares, or providing further security over its assets or undertaking. The defendant failed to advise the plaintiff that Park West Development might thus dilute the proposed shareholding, by issuing further shares, and also that company might further mortgage its property or charge its assets.

66 In addition, it seems clear, on the evidence of the defendant, that when Calabro and Agushi confirmed that there was "$4 million equity" in Park West Developments, the defendant invested that representation with his own imprimatur, by stating to the plaintiff that he had been "quite right", and that there was $4 million "equity" in that company. Clearly, the defendant had no basis upon which to make that representation to his client, other than by taking Calabro and Agushi entirely on trust. Furthermore, the defendant failed to properly elicit from Calabro and Agushi what they meant by referring to "equity" in Park West Developments, and how they calculated that there was $4 million of such "equity" in Park West Developments. By giving the estimate made by Calabro and Agushi his "blessing", the defendant was expressing some confidence in the "security" comprised in the transfer of shares in Park West Developments, rather than cautioning the plaintiff as to the inherent defects in it. In addition, in my view as an ordinary prudent solicitor, the defendant ought to have cautioned the plaintiff that, to the extent to which the plaintiff was relying on the provision of that "security" to enter into the joint venture agreement, he should first seek expert advice as to whether the estimate made by Calabro and Agushi was realistic. I do not agree with the submission of Mr Pane that that advice would have related to commercial matters. To borrow a phrase from the judgment of the Full Court of the Federal Court in Amadio, that advice was "inextricably intermingled" with the obligation of the defendant to exercise reasonable care to advise the plaintiff as to the adequacy of the security contained in the proposed joint venture agreement.

67 The circumstances of the meeting of 31 July 2003 also have some relevance. It is clear that the defendant had been, and was, on friendly terms with Calabro. They had known each other at school, and had remained in contact over the years. While I consider that the defendant conscientiously bore in mind that his loyalties were owed to the plaintiff as his client, nevertheless it seems clear from the circumstances of the conference that the defendant himself had significant trust in Calabro and Agushi. Indeed, he stated that when Agushi and Calabro said that there was $4 million equity in Park West Developments, he believed them, without more. The defendant also conceded that he was in a hurry to complete the meeting. He was due to attend another meeting in the central business district. On the other hand, there was no imperative for the plaintiff to execute the joint venture agreement on that day. He did not then have available the funds which he needed to invest in Maribyrnong Road Developments but, rather, intended to borrow them, if he signed the agreement. The plaintiff had no reason to rush into the agreement. The urgency to complete the meeting was that of the defendant. That fact, and his then trust in Calabro and Agushi, are, in my view, instructive in assessing what occurred at that meeting. In my view, a more careful and considered approach by the defendant may well have given him time to reflect on the inherent deficiencies contained in the "security" on offer to the plaintiff, and to provide appropriate advice to the plaintiff about them.

68 In those circumstances, I am satisfied the defendant did fail to exercise reasonable care and skill, in providing proper advice to the plaintiff as to the adequacy of the security provided to him by the joint venture agreement which he then signed on 31 July 2003. I am also satisfied that the plaintiff relied on the defendant to give him appropriate advice as to the adequacy of that security. As I have stated, the plaintiff, in the days leading up to 31 July, was reluctant to proceed with the transaction. The defendant, in his evidence, accepted that the plaintiff had been particularly concerned about whether adequate security was being provided to him for his investment. While, no doubt, the plaintiff was interested in investing in the project, I do not accept that he would have signed the joint venture agreement, and entered into the investment, if the plaintiff had exercised reasonable care and skill in advising him as to the inherent inadequacies of the security then on offer to him.

69 In reaching that conclusion, I do take into account the caution which is required when evaluating the evidence of the plaintiff that, if he had been given such advice, he might not have entered into the transaction.[9] However, as I stated, the objective circumstances support the plaintiff's evidence to that effect. The plaintiff's reluctance to enter into the agreement, and his concern about the adequacy of the security, were acknowledged by the defendant in his evidence. The defendant considered it important to raise with Agushi and Calabro whether there was $4 million "equity" in Park West Developments, before the plaintiff executed the joint venture agreement. Clearly, the defendant understood that that aspect of the transaction was of significance to the plaintiff. Almost immediately after the joint venture agreement was signed, the plaintiff asked the defendant: "Am I all right, am I protected?". All those objective circumstances support the evidence of the plaintiff that he did rely on the defendant to give him advice, and, in particular, advice concerning the adequacy of the security comprised in the transfer of shares in Park West Developments. Indeed, in cross-examination the defendant agreed that the plaintiff had been concerned about security, and had been concerned that there was not enough equity in the Maribyrnong Road Developments project. The defendant agreed that the plaintiff took his advice on those matters, that he wanted to make sure he was going to get his money back, and that he relied on the defendant for his advice in that respect.

70 Mr Pane contended that, nevertheless, the loss sustained by the plaintiff from entering into the joint venture agreement was not caused by any breach of retainer by the defendant as alleged by the plaintiff. He made three submissions in support of that proposition. First, Mr Pane contended that, insofar as the plaintiff had been induced to enter into the joint venture agreement by a belief that there was $4,000,000 "equity" in Park West Developments, that belief had been induced by the representation to that effect by Agushi and Calabro, and not by any advice, or lack of advice, in respect of it given to him by the defendant. Secondly, he submitted that, in any event, it had not been proven by the plaintiff that at that time there was not $4,000,000 "equity" in Park West Developments, and therefore any breach of duty by the defendant in that respect had not engendered in the plaintiff a false belief as to the financial state of that project at that time. Thirdly, Mr Pane contended that, if I were to conclude (as I have) that the defendant acted in breach of his retainer by failing to advise the plaintiff as to the legal deficiencies in the "security" constituted by the transfer of the shares in Park West Developments, that breach of duty was not the cause of any loss sustained by the plaintiff. Mr Pane contended that the plaintiff's losses had not been caused by any lack of legal efficacy of the transfer of the shares in Park West Developments. Rather, he submitted that the loss suffered by the plaintiff was caused by the financial failure of Maribyrnong Road Developments and Park West Developments.

71 The first submission made by Mr Pane can be shortly disposed of. As I have found, the representation, that Park West Developments had $4,000,000 "equity", was not just made to the plaintiff by Agushi and Calabro in the meeting at 31 July 2003. In addition, and importantly, the defendant expressly added his imprimatur to it, telling the plaintiff that he was right, and that there was $4,000,000 in equity in Park West Developments. As I stated, I am satisfied that the plaintiff relied on that advice given to him by the defendant, in deciding to execute the joint venture agreement and invest $350,000 into Maribyrnong Road Developments.

72 The evidence as to the financial status of Park West Developments, and the project then undertaken by it at Chetwynd Street, North Melbourne, was quite scant. Ms Kennedy, the manager of the liquidator of Park West Developments, gave brief evidence before me. In the course of it, she was asked whether it would be correct to assert that Park West Developments had $4,000,000 worth of equity at 31 July 2003. Ms Kennedy was hesitant to express a view as to that question, but did state: "I don't think it would. With the amount of liabilities it had at the date of liquidation, it would be difficult to see how it had that much equity".

73 The plaintiff tendered in evidence the verified minutes of creditors' meeting of Park West Developments of 23 August 2004. Those minutes contained a statement by Mr Agushi as director of the company. In his evidence, Mr Agushi affirmed the correctness of what was stated in those minutes. At the creditors' meeting, Mr Agushi referred to difficulties which had been encountered by Park West Developments at the stage at which the property was purchased, requiring Park West Developments to refinance it, and thus to incur more cost. There were difficulties finding a builder to construct the project for the estimated amount, and as a result the construction costs escalated. Mr Agushi stated that, by the time the project started, "building costs had gone up, resulting in a loss and making it necessary to inject personal funds". He said that construction finished in November 2003. Most of the apartments settled in December 2003. All the settlement funds were used to discharge the first and second mortgages to the Macquarie Bank and to the builder respectively.

74 It is important to note that according to the evidence of Agushi, as at 31 July 2003, the construction of the project was almost completed. Calabro in fact gave evidence that by then it had been completed. Thus, in effect, Agushi stated to the creditors (and confirmed in his evidence) that the project was already sustaining a loss well before 31 July 2003. That evidence, together with the fact that Park West Developments went into voluntary liquidation in July 2004, in my view is sufficient to establish, on the balance of probabilities, that it was fundamentally incorrect to assert, as at 31 July 2003, that Park West Developments had a net equity of $4,000,000.

75 For the purposes of completeness I note that both Agushi and Calabro gave some evidence in relation to this aspect of the case. Their evidence was unsupported by reference to any accounts or documents. It is relevant that, according to both Agushi and Calabro, the majority of the units of the project had already been pre-sold as at 31 July 2003. Thus, it is unlikely that the subsequent failure of Park West Developments was caused by a sudden downturn in the market after that date. Further, as I have stated, the project was almost completed. According to Agushi's statement to the creditors, construction finished in November 2003. Calabro's recollection, in evidence, was that the project had already completed. In his evidence Calabro maintained that the profitability of Park West Developments changed between 31 July 2003 and 31 July 2004. However, it is difficult to understand how that could have affected its fortunes so dramatically. He also referred to the appearance of a major liability to the Australian Taxation Office (of about $1,000,000) which had not been foreseen at 31 July 2004. I have significant doubts about the credibility of either Agushi or Calabro, and would hesitate to rely on their evidence. Even accepting (which I do not) that that liability had not been foreseen, it does not account for the fact that a company, which supposedly had $4,000,000 in equity in July 2003, was placed in liquidation one year later. In those circumstances, I am satisfied that the statement by Agushi and Calabro, and confirmed by the defendant, to the plaintiff, that Park West Developments had $4,000,000 equity, was fundamentally incorrect. It follows that the plaintiff was induced to enter into the transaction, based on negligent advice given to him by his solicitor as to that aspect of the transaction.

76 In view of those conclusions, it is not strictly necessary for me to deal with the third point made by Mr Pane, namely, that any negligence by the defendant in advising the plaintiff as to the legal efficacy of the transfer of the Park West Developments shares did not play a causative role in the loss sustained by the plaintiff. In essence, Mr Pane submitted that the plaintiff sustained his losses because of the financial failure of Maribyrnong Road Developments and Park West Developments. He did not suffer those losses because the "security", comprising the transfer of the shares in Park West Developments, was ineffective or legally defective.

77 In the law of deceit, there is authority for the proposition that it is generally sufficient for a plaintiff to prove that he was induced to enter into a transaction as a result of a misrepresentation, and that the plaintiff suffered losses as a result of entering into that transaction. It is not necessary for the plaintiff also to prove that the failure of the transaction, into which the plaintiff was induced to enter, was a result of the falsity of the representation made to the plaintiff. However, the same principles do not apply, without qualification, to the question of the causation of damage arising from negligent advice[10]. In particular, it has been held, in a number of cases, that it is insufficient for a plaintiff, in a claim based on negligent advice, to establish that, as a consequence of the advice, the plaintiff entered into a transaction, and that as a result of the failure of that transaction, the plaintiff sustained loss. In Trust Co of Australia v Perpetual Trustees WA Ltd & Ors[11] the defendant firm of solicitors failed to advise the trustee company, by whom they were engaged, that the trustee company would be involved in a conflict of duty by purchasing a particular property. The trustee company claimed damages against the firm of solicitors alleging that, if it had been given the correct advice on conflict of duty, it would not have acquired the property. McLelland CJ (in equity) held that it was insufficient for the trustee company to prove that it had entered into the transaction as a result of the negligent advice, and that as a consequence of the transaction, it had suffered loss. His Honour held that the real and effective cause of the loss of the trust was the negligence of the trustee in making an investment which was commercially hazardous and improvident.[12]

78 Similarly, in Deloitte Touche Tohmatsu & Anor v Cridlands Pty Ltd & Ors[13], the respondent solicitors failed to give appropriate advice as to the effect of a clause in a contract of sale to purchase property, which made the contract conditional upon the purchaser obtaining finance. It was contended that if the solicitors had given proper advice, the purchaser would not have obtained finance for the purchase, the sale contract would have been terminated, and the purchaser would not have suffered losses as a result of the purchase of the property. Selway J rejected the factual basis of each of the links in the chain of causation contended for on behalf of the applicant in that case. His Honour further reached the view that, even if those "links" were proven, the purchaser had failed to establish a sufficient causal connection between the losses and the negligence of the solicitor. In reaching that conclusion, his Honour stated:

"The problem is in identifying the criteria by which a legally effective cause can be identified. Traditionally courts have avoided identifying any specific criteria by holding that legally effective causation is to be determined as a matter of applying common sense to the facts of the case. ... The case ... is that, if Mrs Campbell had been properly informed of her options she would not have given her guarantee and therefore the sale contract would have terminated. Assuming for this purpose that that had been established, the breach of duty was not directly related to the sale contract - rather, the duty was directly related to the giving of the guarantee by Mrs Campbell. ... Although the duty of care was one in respect of the sale contract the relevant breach of duty as alleged was a breach relating to the effect of the guarantee. That breach of duty if it had been established would not have caused the losses that are claimed. It would be different if Cridlands (the solicitors) had been engaged to advise on the financial wisdom of the sale contract and had breached their duty of care in that regard. But they were not. Deloitte's were."[14]

79 The principles as to causation have been stated by the High Court in cases such as March v Stramare (E & MH) Pty Ltd[15] and Medlin v State Government Insurance Commission[16]. The question of causation is essentially a question of fact. In determining that question, the "but for" test is useful as a negative criterion. However, it is not necessarily determinative of the issue of causation. In resolving that question, the law avoids agitating the theoretical dilemmas debated by philosophers. Rather, the law approaches the question of causation as an exercise of pragmatic common sense.[17] In Medlin's case[18] the High Court described the relevant question in a case involving a subsequent decision by a plaintiff following a wrongful act or omission by the defendant as follows:

"The ultimate question, however, always must be whether, notwithstanding the intervention of the subsequent decision, the defendant's wrongful act or omission is, as between the plaintiff and the defendant and as a matter of common sense and experience, properly to be seen as having caused the relevant loss or damage."

80 Those principles formed the basis of the decisions in Deloitte Touche Tohmatsu & Anor v Cridlands Pty Ltd & Ors[19] and Trust Co of Australia v Perpetual Trustees WA Ltd & Ors[20]. In each of those cases, the court found that there was no causal connection between the negligence of the solicitor and the loss complained of, because the matter which was the subject of the negligent advice by the solicitor did not bear any relevant relationship to the type of loss alleged by the client. In each case, the only connection between the negligent act of the solicitor, and the loss to the client, was that the client would not have entered into the transaction "but for" the negligence of the solicitor. However, the loss to the client resulted from a feature of the transaction, or a circumstance, which bore no relationship to the subject matter about which the solicitor failed to give appropriate advice.

81 By contrast, in the current case, the defendant failed in his duty of care to the plaintiff because, I have found, he failed to give adequate advice as to the nature and quality of the security afforded to the plaintiff by the provision by Calabro and Agushi of signed transfers of shares in Park West Developments. It is true that, insofar as the breach of duty by the defendant resided in his failure to advise properly as to the legal deficiencies of the security, ultimately it was not those deficiencies which resulted in the loss to the plaintiff. However, the point remains that the plaintiff sought and obtained advice from the defendant as to the quality of the security afforded by the transfer of the shares in Park West Developments. The defendant gave negligent advice to the plaintiff about that aspect of the transaction. The plaintiff suffered loss because of the failure of the Maribyrnong Road Development Project, and also because the security, consisting of the shares which were the subject of the transfers, was valueless. In my view, as a matter of pragmatic common sense, there was a sufficient relationship between the advice (or lack thereof) of the defendant as to the legal deficiencies of the security provided to him, and the loss sustained by him, to constitute a relevant causal connection. In other words, the negligent advice was more than the sine qua non for the entry by the plaintiff into the transaction. It was directed to a particular aspect of the transaction, namely, the quality of the security for the transaction. The failure of that security was a cause of the losses claimed by the plaintiff.

82 Further, and in any event, as I have already found, the defendant also breached his duty to the plaintiff in giving his approbation to the representation made to the plaintiff by Agushi and Calabro that there was $4,000,000 "equity" in Park West Developments. That advice was not only negligent, but, as I have found, fundamentally wrong. Thus, on any view, there was a direct causal connection between that aspect of the defendant's breach of duty of care, and the loss sustained by the plaintiff, to satisfy the common law test of causation enunciated by the High Court.

83 The plaintiff claims that as a result of the breach of duty by the defendant he suffered loss and damage which consisted of some six different heads, namely:

(1) $350,000 advanced by him to Maribyrnong Road Developments.

(2) Interest paid by the plaintiff to the Commonwealth Bank in respect of the loan taken by him from the bank to fund the advance to Maribyrnong Road Developments - $164,791.47.

(3) Costs incurred by the plaintiff in the proceedings in the County Court against Calabro and Agushi - $71,856.15.

(4) Costs incurred by the plaintiff in respect of the appeal by Calabro and Agushi to the Court of Appeal - $35,565.80.

(5) Costs incurred by the plaintiff in proceedings in the Federal Magistrates' Court seeking to set aside the arrangement by Agushi and Calabro under Part X of the Bankruptcy Act - $25,327.69.

(6) Costs incurred by the plaintiff in proceedings in the Federal Magistrates' Court to set aside the transfer by Agushi of his Parkville home to his wife Rosemary Tulloch - $15,690.08.

84 Mr Pane did not contest the first, third and fourth heads of damage claimed by the plaintiff. In respect of the second item, he referred to the evidence of the plaintiff, in cross-examination, that he had structured his income tax returns so as to derive a tax benefit from the interest paid by him to the Commonwealth Bank. Mr Pane submitted that that tax benefit should be offset against the damages awarded to the plaintiff. In support of that submission, he referred to the judgment of the Full Court of the Federal Court in Australian Breeders Cooperative Society Ltd v Jones & Ors[21]. Mr Palmer did not advance any submission to the contrary. After the conclusion of submissions, Mr Palmer brought to my attention (through my Associate) the decision of Byrne J in Equuscorp Pty Ltd v Bassat[22]. However, on my reading of that case, it does not bear on the issue raised by Mr Pane's submission. On the basis of the decision of the Full Court in Australian Breeders Cooperative, I accept the submission by Mr Pane.[23] It was common ground that the tax benefit to the plaintiff from claiming the interest payments to the Commonwealth Bank as a tax deduction amounted to $14,200. Accordingly, the plaintiff's loss and damage, under the second heading, is reduced to the sum of $150,591.47.

85 Mr Pane also argued, albeit faintly, that the plaintiff had not demonstrated that the costs incurred by him in the two sets of proceedings before the Federal Court (headings five and six) were reasonable. The plaintiff gave evidence as to his involvement in those two sets of proceedings. It was not put to him in cross-examination that he had acted unreasonably in instituting, and pursuing, either of those proceedings. Nor has it been suggested that the amount of costs incurred by the plaintiff in either proceeding was excessive. In my view, on the face of the evidence, the plaintiff incurred those costs by acting reasonably in an attempt to mitigate his loss and damage. Accordingly, I uphold the plaintiff's claim for the damages contained in those two headings.

86 The plaintiff additionally relies on a cause of action based on the retainer by him of the defendant in 2005 to act for him to attempt to recover the amount advanced by him to Maribyrnong Road Developments. It is common ground that that retainer occurred in May 2005. The plaintiff alleges, that in breach of the terms of that retainer, the defendant failed to advise the plaintiff of his right to commence proceedings against Calabro and Agushi under the guarantees which they had executed, and failed to commence proceedings against Calabro and Agushi pursuant to those guarantees. The retainer terminated in April 2006 when the plaintiff consulted his present solicitors.

87 By early May 2005, the plaintiff had become concerned with the lack of progress in the Maribyrnong Road development project. On 4 May 2005 he consulted the defendant. In response, the defendant wrote a letter of advice dated 6 May 2005, canvassing the right of the plaintiff to withdraw from the joint venture agreement. On 23 May, the plaintiff noticed that a mortgagee sale sign had been erected on the Maribyrnong Road property as he drove past it. On the same day, Calabro attended the defendant's offices. Calabro confirmed to the defendant that the mortgagee bank had placed a "for sale" sign on the Maribyrnong Road property. He said Park West Development had sold all of its 64 apartments, and that the company was now in liquidation. He advised the defendant of the level of the debts owed by Park West Developments to the first, second and third mortgagees, and to the plaintiff. In effect, Calabro told the defendant that there was no equity in the Maribyrnong Road project, and that he would try to re-finance other properties in order to meet his obligation for the plaintiff under the guarantees.

88 On 14 July 2005, the defendant wrote a letter to the plaintiff, stating that he had spoken to Calabro, who had confirmed that he did not have any moneys available at that stage, but that he would be in a position to make payment to the plaintiff in approximately six months. The defendant advised the plaintiff that the matter had progressed to a stage at which further action might be required against Calabro and Agushi. In accordance with s 86 of the Legal Practice Act, he advised the plaintiff as to the potential costs of any such proceeding. In particular, he stated that, if the matter proceeded to a court hearing, the cost might be as high as $40,000. He confirmed that the plaintiff would only be required to pay those costs, if the defendant was unable to extract them from Calabro and Agushi.

89 In the ensuing months, the defendant spoke further to Calabro. In addition, the defendant and the plaintiff had contact with the liquidator of Park West Developments, and, in particular, with Ms Kennedy, the liquidator's manager. On 26 October 2005, a meeting was held at the offices of the defendant, attended by Calabro, Agushi, the plaintiff and his wife, Saverina. Agushi and Calabro stated that they had some apartments in Chetwynd Street, North Melbourne which were the subject of a subdivision. The plaintiff stated that he and his wife wanted their money without delay, and that they did not wish to wait. On 30 November 2005, the defendant again attended on Ms Kennedy with the plaintiff and his wife. On 12 December 2005, the defendant telephoned Dr Sahhar, who was the third mortgagee of the property of Park West Developments at Chetwynd Street, North Melbourne. Dr Sahhar stated that he was owed $3 million. The defendant communicated that information to the plaintiff on the next day.

90 In the meantime, Calabro, who had a one percent interest in his home in Pascoe Vale South, transferred that interest to his wife in October 2005. In November 2005, Agushi transferred his interest in his home in Macarthur Road, Parkville to his wife for "natural love and affection". In the same month, Agushi and Calabro each executed personal insolvency agreements under Part X of the Bankruptcy Act.

91 In his evidence, the plaintiff stated that at no time did the defendant suggest to him that he might be able to issue proceedings against Agushi and Calabro on the guarantees which they had signed in respect of the obligations of Maribyrnong Road Developments under the joint venture agreement. No demands or notices were served by the defendant on Calabro and Agushi under the guarantees. The plaintiff stated that he did give instructions to the defendant to issue proceedings against Calabro and Agushi, based on the misrepresentation they had made concerning the value of the equity of Park West Developments. The plaintiff claimed, in his evidence, that when he and the defendant ascertained that Park West Developments had gone into liquidation, he said to the defendant, "Can't we get their [Calabro and Agushi's] houses?" The defendant responded, "We cannot touch Calabro's house because it's worth a lot of money. I know his wife and she's a lovely lady, we can get the money from elsewhere." On the other hand, in his evidence the defendant gave a different version of that conversation. He stated that when the plaintiff asked about access to the houses of Agushi and Calabro, he told the plaintiff that he believed there was a Family Court dispute between Calabro and his wife, and that the house had been transferred to Calabro's wife in matrimonial proceedings. I found the version of that conversation given by the defendant to be credible, and I accept it.

92 In cross-examination, the defendant stated that he did not give any advice to the plaintiff concerning his right to sue Calabro and Agushi under the guarantees. He confirmed that he did not serve a notice or letter of demand on Agushi or Calabro concerning the guarantees. In February 2006, the defendant sent to Calabro and Agushi a letter alleging that they had misrepresented the value of the equity of Park West Developments. However, he did not send to them a letter of demand in relation to their obligations under the guarantee. He agreed that, in a conversation with the plaintiff on 14 June 2005, the plaintiff instructed him to chase his money as hard as possible. On the next day, the plaintiff and his wife had attended at the defendant's office. They stated that Agushi might have properties and they asked the defendant to conduct a title search. They requested that the defendant lodge a caveat over his properties. The defendant conducted a search of Agushi's property, consisting of a penthouse in MacArthur Road, Parkville. He did not lodge a caveat on that property, because the plaintiff did not have a caveatable interest in it. However he did not suggest that the plaintiff make an application to the Supreme Court to obtain a Mareva injunction. In re-examination, he stated that when the plaintiff asked him to place a caveat on Agushi's property, he did not then have any indication that Agushi was threatening to transfer the property.

93 In his evidence, the defendant was unable to explain why he did not give consideration to suing Agushi and Calabro on the guarantees. In my view, a normally competent and careful practitioner would have given appropriate consideration to issuing proceedings, or at least making a claim, under the guarantees. I consider that the defendant breached his duty to the plaintiff in failing to bring to the attention of the plaintiff his rights under the guarantees. However, the plaintiff has not proven any loss and damage sustained by him as a result of the failure of the defendant to issue proceedings against Agushi and Calabro on their guarantees. Indeed, Mr Palmer did not contend that the plaintiff had suffered any loss and damage as a result of the delay caused by the defendant's failure to institute proceedings, or make a claim, under the guarantees. Thus, the plaintiff is only entitled to nominal damages for the breach of the defendant of his contractual duty to the defendant in that regard.

94 The question whether the defendant ought, at the same time, to have given consideration to obtaining a Mareva injunction against Agushi and Calabro, is more difficult to resolve. Obviously, in hindsight, it would have been prudent for him to do so. Certainly, in June 2005, he had been alerted to the plaintiff's desire that the plaintiff's rights against Agushi be protected by lodging a caveat over the property of Agushi. The defendant correctly rejected that option, because the plaintiff did not have a caveatable interest in the property of Agushi or Calabro.

95 In my view, as a prudent solicitor, the defendant ought to have given proper consideration to whether he should have made an application to the Court for a Mareva injunction in the circumstances which then existed. At that stage, he had learnt, for the first time, that Park West had been placed into voluntary liquidation 12 months earlier. Calabro and Agushi had omitted to advise him of that fact. Further, the liquidation of Park West Developments, one year after it was said by Calabro and Agushi to have $4 million equity, should have removed from the defendant any faith he had in the bona fides of Calabro and Agushi. Accordingly, in my view, he acted in breach of his duty of care in failing to give proper consideration to the question whether a Mareva injunction should have been sought from the Court.

96 However, that failure of the defendant has not been proven to have caused any loss and damage to the plaintiff. First, the question whether, having given the matter consideration, such an application should be made to the Court, was a matter for judgment of the practitioner. If the defendant had given the matter due consideration, as a prudent solicitor, it is feasible that he may have reasonably decided that there were insufficient grounds upon which the plaintiff might succeed in an application for a Mareva injunction. Such a decision would clearly be a matter of judgment.[24] Secondly, as matters then stood, it is problematic whether a court would, in any event, have granted the plaintiff such an injunction. Thirdly, if the defendant had been successful in obtaining a Mareva injunction on behalf of the plaintiff against Calabro and Agushi before October 2005, to restrain them from disposing of their assets, there is insufficient evidence to satisfy me that that would have secured to the plaintiff any assets, against which he might later have executed a judgment on the guarantees against Calabro and Agushi. Before October 2005, Calabro only had a one percent interest in his family home at Pascoe Vale South. No proper evidence was led to prove the value of that interest. In November 2005 he transferred it to his wife. Agushi stated that, before he transferred his fifty percent interest in his Parkville home to his wife in November 2005, the home was worth about $1,000,000. However, Agushi is not a qualified property valuer, and his evidence as to its value was no more than a "guesstimate". At the same time, he said that the mortgage debt secured over the property was approximately $800,000. However, the plaintiff did not lead any proper evidence (such as bank statements) as to the amount of that debt. Further, both Calabro and Agushi had extensive debts. Agushi estimated that, when he executed the Part X arrangement in November 2005, his debts amounted to approximately $9,000,000. Thus, in any event, I am not satisfied that a Mareva injunction against Calabro and Agushi would have secured to the plaintiff any funds against which he might have executed a judgment, subsequently obtained by him against Agushi and Calabro on the guarantees. In all probability, it would not have.

97 Accordingly, the plaintiff has not proven that he suffered any loss and damage as a result of the breaches by the defendant of the second retainer. The plaintiff is therefore only entitled to nominal damages for those breaches, which I fix in the sum of $25.

98 I return, then, to the claim by the plaintiff for damages for breach of the first retainer of the defendant, which I have upheld. There are two remaining issues in relation to that claim. First, in response to the plaintiff's claim, the defendant has pleaded that there was contributory negligence of the plaintiff which caused or contributed to his loss. Secondly, the defendant pleaded that the claim by the plaintiff is an "apportionable" claim under Part IVAA of the Wrongs Act, that Maribyrnong Road Developments, Calabro and Agushi were each concurrent wrongdoers within the meaning of s 24AH(1) of the Act, and that, as a result, the defendant's liability to the plaintiff is limited to the amount reflecting his responsibility for the plaintiff's loss and damage.

99 The defence contained a number of particulars to the plea of contributory negligence. However, in final address, Mr Pane relied on the failure of the plaintiff to obtain investment and accounting advice concerning the Maribyrnong Road Development project, his failure to obtain adequate information as to the viability of that project, and his failure to ascertain the financial positions of Calabro and Agushi. I note that Mr Pane did not seek to contend that the plaintiff had been guilty of contributory negligence in failing to conduct any research or investigation as to the representation to him by Calabro and Agushi that there was $4,000,000 "equity" in Park West Developments. In my view, Mr Pane was correct in not seeking to rely on that aspect of the case as a particular of contributory negligence. In an appropriate case, a court may find that a plaintiff has been guilty of contributory negligence, where it was the duty of the defendant to protect him against the consequences of such negligence of the plaintiff.[25] However, in this case, it was a specific term of the retainer of the defendant by the plaintiff that the defendant would take reasonable care to advise the plaintiff as to the adequacy of the security put forward by Agushi and Calabro in respect of his proposed investment in Maribyrnong Road Developments. The defendant not only failed to caution the plaintiff against accepting, at face value, the representation made by Agushi and Calabro as to the value of the equity in Park West Developments, but he also gave that representation his own approbation, by informing the plaintiff that he was "right", and that there was $4,000,000 equity in Park West Developments.

100 The question, then, which arises is whether the plaintiff was guilty of any contributory negligence in failing to investigate, or further examine, the potential viability of the Maribyrnong Road project. In his evidence, the plaintiff claimed that he did not turn his mind, at all, to the feasibility study showed to him by Calabro and Agushi. However, as already stated, I do not accept the plaintiff's assertion to that effect. I accept the evidence of Calabro and Agushi that they did take the plaintiff through the feasibility study, and that he appeared to understand it. As I have already stated, the real incentive for the plaintiff to participate in the Maribyrnong Road Developments project lay in the opportunity to derive twenty percent of the net profits of that project. The interest return on the amount invested (ten percent) would not have justified such an investment, given that the plaintiff had to borrow the whole of the money, which he was to invest, from the bank. The plaintiff chose not to accept the other option made available to him by Calabro and Agushi, namely, a loan to the joint venture at a higher rate of interest, but without a share in the profits. Those factors satisfy me that that, contrary to the plaintiff's own evidence, the plaintiff did give some consideration to the feasibility study put forward by Calabro and Agushi.

101 In hindsight, it would always be wiser for an investor, such as the plaintiff, to have an independent check conducted on the type of feasibility study which was put forward by Agushi and Calabro. However, the defendant has not pointed to any feature of it which, on its face, should have revealed to the plaintiff that it was inherently flawed or unrealistic. Nor did the plaintiff know anything about Agushi and Calabro, which should have alerted him either that the feasibility study was unrealistic, or that Calabro and Agushi were financially insecure. On the contrary, the plaintiff had observed other projects, in which Calabro and Agushi had been involved, and which, apparently, had been successful. In those circumstances, I do not consider that the defendant has established any basis upon which a finding of contributory negligence might be made against the plaintiff.

Apportionable claim pursuant to Part IVAA of the Wrongs Act

102 The defendant has joined Maribyrnong Road Developments, Calabro and Agushi as third parties to these proceedings. In those proceedings, the defendant claimed that the third parties were "concurrent wrongdoers" pursuant to s 24AH(1) of the Wrongs Act, on the basis that their acts or omissions caused or contributed to the damage claimed by the plaintiff. That proposition is based on the representation made by Calabro and Agushi to the plaintiff, at the meeting of 31 July 2003, that Park West Developments had "equity" to the value of $4,000,000. In the third party notice, the defendant alleges that that representation was misleading and deceptive in breach of s 9 of the Fair Trading Act, and was also made negligently by the third parties to the plaintiff. Accordingly, it was submitted on behalf of the defendant that s 24AI(1)(a) of the Act applies, so as to limit the liability of the defendant to the plaintiff to an amount reflecting the proportion of the loss or damage claimed by the plaintiff which "the court considers having just regard to the extent of the defendant's responsibility for the loss or damage".

103 On the findings of fact which I have made so far, I am satisfied that the representation made by Calabro and Agushi to the plaintiff, on 31 July 2003, that there was $4,000,000 "equity" in Park West Developments, was fundamentally incorrect. Mr Palmer submitted that the representation was too imprecise and uncertain to constitute a representation for the purposes of s 9 of the Fair Trading Act. In particular, he submitted that it is not clear whether Calabro and Agushi were referring to the position of the project undertaken by Park West Developments at Chetwynd Street, the net equity in the land at Chetwynd Street held by Park West Developments, or to the financial position of Park West Developments as would have appeared in its then balance sheet. In my view, the distinction between those three matters is, on the evidence, somewhat academic. The evidence reveals, as it seems to have been understood by the parties, that each project of Calabro and Agushi was conducted by a separate company controlled by them, as a "stand alone" venture. Essentially, then, the "net equity" referred to by Calabro and Agushi would have been understood by the parties to have related to the financial position both of the project, and also of Park West Developments itself. Essentially, they were one and the same thing. In essence, Calabro and Agushi were representing to the plaintiff (and indeed to the defendant) that the project conducted by Park West Developments (and Park West Developments) had a net excess of assets over liabilities of $4,000,000.

104 Not only was that representation incorrect, but, in my view, the evidence clearly establishes that Agushi and Calabro had no reasonable basis upon which to make that assertion to the plaintiff and the defendant. In doing so Agushi and Calabro, in trade and commerce, engaged in conduct which was misleading or deceptive, pursuant to s 9(1) of the Fair Trading Act 1999. They also were negligent in making that statement, in circumstances in which they owed a duty of care to the plaintiff in making it.[26] I am also satisfied that the plaintiff relevantly relied on that representation in being satisfied that there was sufficient security put forward by Agushi and Calabro that he should execute the joint venture agreement. Accordingly, I am satisfied that Maribyrnong Road Developments, Agushi and Calabro were each "concurrent wrongdoers" in respect of the loss or damage sustained by the plaintiff, for the purposes of s 24AH(1) of the Wrongs Act.

105 The claim by the plaintiff against the defendant was an "apportionable claim" pursuant to s 24AE and s 24AF(1)(a) of the Act. It follows that s 24AI(1)(a) of the Act applies to the claim by the plaintiff against the defendant, so as to limit the liability of the defendant to the plaintiff to an amount reflecting the proportion of the loss or damage which is considered to be "just" having regard to the extent of the defendant's "responsibility" for the loss and damage. In determining that question, Whelan J in Sali & Anor v Metzke & Allen[27] applied the same principles which have been applied by courts in determining questions of apportionment, both in respect of an issue of contributory negligence under s 26 of the Wrongs Act, and contribution between wrongdoers under s 24 of the Wrongs Act, in decisions such as Podrebersek v Australian Iron & Steel Pty Ltd[28] and Alcoa Portland Aluminium Pty Ltd v Husson & Anor[29]. In those cases, in determining apportionment, the courts take into account both a comparison of the culpability of the parties, and also the relative importance of their acts in causing the injury which is the subject of the claim. I respectfully agree with the approach of Whelan J to Part IVAA of the Act. Such an approach is harmonious with the longstanding construction by the courts of the apportionment provisions of Parts III and V of the Act. It also accords with the evident intent of Part IVAA of the Act.

106 In the course of submissions, I was referred to the apportionment by Whelan J in Sali's case, and also to the manner in which Pagone J approached the same issue in the recent case of Solak v Bank of Western Australia Ltd & Ors[30]. I was also referred to the decision of Hoeben J, of the Supreme Court of New South Wales, in Ginelle Finance Pty Ltd v Diakakis[31]. However, as acknowledged by counsel, each case depends on its own individual facts. The approach by courts in other cases is, in general terms, instructive, but the apportionment in a specific case depends, necessarily, on facts which are particular to the individual case.

107 In this case, I consider that the level of culpability of Agushi and Calabro was high. They each knew that the plaintiff was disinclined to enter into the joint venture agreement, unless he was provided with further security of value. The defendant had told Calabro that the plaintiff, in addition to the twenty percent shares in Maribyrnong Road Developments, wanted other shares to be held in escrow in another property "with equity". It was in response to that proposition that Calabro and Agushi put forward the proposal that they transfer their shares in Park West Developments, to be held in escrow to secure the obligations of Maribyrnong Road Developments and themselves under the joint venture agreement. The meeting of the parties on 31 July 2003 was relatively short. Significantly, it was the question of the value of the equity of Park West Developments which was specifically raised, on behalf of the plaintiff, by the defendant with Calabro and Agushi. The plaintiff was on friendly terms with Agushi. It is clear that Calabro and Agushi well knew that the plaintiff and the defendant trusted them. Further, as I have found, the representation that Park West Developments had "equity" of $4,000,000 was fundamentally incorrect. I am satisfied that Agushi and Calabro knew, or at least, had they given the matter one moment's consideration, should have known, that there was no reasonable basis upon which such a representation could have been made to the plaintiff and his solicitor. In those circumstances, I am satisfied that the blameworthiness of Agushi and Calabro was substantial.

108 Further, it is clear from the circumstances of the case that the plaintiff's satisfaction as to the security provided by the shares in Park West Developments played a significant, if not conclusive, role in persuading him to proceed with the joint venture agreement. The representation that the company had equity of $4,000,000 was an integral part of the plaintiff's satisfaction with the security, comprised by the transfer of those shares, proposed by Agushi and Calabro. Thus, the misrepresentation by Calabro and Agushi played an important role in inducing the plaintiff to enter into the joint venture agreement. The falsity of the representation was a direct cause of the loss sustained by the plaintiff.

109 On the other hand, in determining the question of culpability, it must be borne in mind that the plaintiff engaged the defendant as his solicitor to ensure that he had adequate protection for his investment in Maribyrnong Road Developments. The defendant, certainly, could not play any role in ensuring the financial viability of the Maribyrnong Road Developments project. However, given the inherent risks in such a venture, the role undertaken by the defendant was an important and significant role on behalf of the plaintiff. The plaintiff looked to him to exercise reasonable care and skill to ensure that there was adequate security for his investment. It is clear that the plaintiff was significantly reliant on the defendant for that purpose. A substantial part of the negotiations, between 25 July and 30 July 2003, were conducted between Calabro and the defendant. Indeed, I accept the defendant's evidence that he did not see the plaintiff, face to face, about the transaction, until the morning of 31 July 2003. As I have found, the defendant breached his duty of care to the plaintiff, in two fundamental respects. First, he failed to give proper advice to the plaintiff about the legal deficiencies in the security, consisting of the transfer of shares in Park West Developments, proposed by Agushi and Calabro. Further, the defendant breached his duty of care to the plaintiff, both by adding his imprimatur to the representation given by Agushi and Calabro concerning the equity position of Park West Developments, and also by failing to caution the plaintiff properly against accepting that representation at face value.

110 In addition, while I consider that the plaintiff exaggerated the extent of his reliance on the defendant, nevertheless it is clear that he was significantly reliant on the defendant for advice concerning the adequacy of the security consisting of the transfer of shares in Park West Developments. It is clear that he was reliant on the defendant's advice, or lack of it, relating to that matter, in deciding to enter into the joint venture agreement on 31 July 2003. In that way, the breach of duty by the defendant was a significant contributing factor to the plaintiff's loss.

111 Bearing those considerations in mind, I consider that it is just that the liability of the defendant to the plaintiff be limited to sixty percent of the loss and damage claimed by the plaintiff. As I stated, the culpability of Agushi and Calabro was substantial. Their misrepresentation concerning the equity of Park West Developments played a significant role in inducing the plaintiff to enter into the agreement. However, in my view, it is just that the primary burden of the responsibility for the plaintiff's loss and damage should be borne by the defendant. It was his professional duty to exercise reasonable care and skill in respect of the very matter in relation to which Agushi and Calabro made the misrepresentation. In contrast, Agushi and Calabro were not independent of the transaction; they had an interest in inducing the plaintiff to enter into it. It was for that reason that the plaintiff looked to the defendant for objective and independent professional advice and assistance. In those circumstances, in my view, it is "just" that the defendant's liability to the plaintiff should be assessed at sixty percent, for the purposes of s 24AI of the Wrongs Act.

112 Accordingly, for the reasons I have stated, I have reached the following conclusions:

(1) The defendant breached the terms of his first retainer of July 2003, and was negligent, in advising the plaintiff concerning the adequacy of the security for his proposed loan to Maribyrnong Road Developments.

(2) The damages to the plaintiff, as a result of the breach of retainer, and negligence, amount to the sum of $649,031.20.

(3) There was no contributory negligence by the plaintiff.

(4) Pursuant to Part IVAA of the Wrongs Act, the liability of the defendant to the plaintiff is limited to sixty percent of the plaintiff's loss and damage. Accordingly, the defendant is liable to the plaintiff, in respect of the first retainer, for damages in the sum of $389,418.72.

(5) The defendant breached the terms of the second retainer of May 2005, and was negligent in the performance of that retainer. The plaintiff has not proven that he suffered any loss or damage as a result of that breach of retainer and negligence. He is therefore entitled to nominal damages for the breach of the second retainer, fixed in the sum of $25.

113 Accordingly, it follows that there should be judgment for the plaintiff for damages in the sum of $389,443.72. I shall hear counsel on the questions of interest and costs.

[1] Astley & Ors v Austrust Limited (1999) 197 CLR 1, 22 [47]; Carew Counsel Pty Ltd v French [2002] VSCA 1; (2002) 4 VR 172, 184 [29] (Winneke P).

[2] Midland Bank Trust Co Ltd v Hett Stubbs & Kemp [1979] Ch 349, 434-5 (Oliver J).

[3] Citicorp Australia Limited v O'Brien (1996) 40 NSWLR 398, 418 (Sheller JA); Micarone & Ors v Perpetual Trustees Australia Ltd [1999] SASC 265; (1999) 75 SASR 1, 142 [694] (Debelle and Wicks JJ).

[4] [1998] FCA 823; (1998) 81 FCR 149, 215.

[5] Henderson v Amadio (No. 1) [1995] FCA 1300; (1995) 62 FCR 1, 150.

[6] Astley v Austrust Limited (above), 23, [48].

[7] [2009] VSC 49, [14].

[8] [2007] NSWSC 1153, [13].

[9] See Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434, [89] (Gummow J).

[10] See State of South Australia v Johnson (1981) 42 ALR 161, 169-170; Smith New Court Securities Ltd v Citibank NA [1996] UKHL 3; [1996] 3 WLR 1051, 1075 (Lord Steyn); Copping & Ors v ANZ McCaughan Ltd & Ors [1997] SASC 5995; (1996) 67 SASR 525, 534-535, 538 (Doyle CJ); cf 582-591 (Lander J).

[11] (1997) 42 NSWLR 237.

[13] (2003) 204 ALR 281; [2003] FCA 1413.

[14] Ibid, 323 to 325; [177]-[183]; see also Carr v Fischer [2004] NSWSC 1079, [147]-[148].

[15] [1991] HCA 12; (1991) 171 CLR 506.

[16] [1995] HCA 5; (1995) 182 CLR 1.

[17] March v Stramare (E & MH) Pty Ltd (above), 515 to 516 (Mason CJ); Medlin v State Government Insurance Commission (above), 6.

[21] [1997] FCA 1405; (1997) 150 ALR 488, 543.

[22] [2007] VSC 553, [151].

[23] See also Neilsen v Hempston Holdings Pty Ltd & Anor (1986) 65 ALR 302, 314-315 (Pincus J); Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353, 370 (Mason P).

[24] Carew Counsel Pty Ltd v French [2002] VSCA 1; (2002) 4 VR 172, 185 [29] (Winneke P).

[25] Astley & Ors v Austrust Ltd (1999) 197 CLR 1, 14 [38]-[39].

[26] R Lowe Lippmann Figdor & Franck v AGC (Advances) Ltd [1992] VicRp 93; [1992] 2 VR 671; Norris v Siberras [1990] VicRp 15; [1990] VR 161, 172 (Marks J).

[27] [2009] VSC 48, [289] and following.

[28] [1985] HCA 34; (1985) 59 ALR 529, 532-533.

[29] [2007] VSCA 209; (2007) 18 VR 112.

[30] [2009] VSC 82.

[31] [2007] NSWSC 60.