Swart v Carr; Swart v LawCover Pty Ltd [2006] NSWSC 1302 | Case summary

Swart v Carr; Swart v LawCover Pty Ltd [2006] NSWSC 1302 | Case summary | Zoe

1 Mr Malcolm Carr carries on a modest sole practice as a suburban solicitor. In 1997 he came to believe that he could become rich very quickly by investing in highly lucrative international investment schemes which he had heard were being promoted in London. He knew nothing about international investment schemes. 2 In early 1998, Mr Carr went to London to look for opportunities to invest. He soon fell into the hands of swindlers. Within a matter of days, all his money was lost. Unfortunately, so also was USD4 million of the money which other people had entrusted to him to go into these investment schemes under his management. 3 Mr and Mrs Swart lost USD500,000, which they now seek to recover from Mr Carr and his professional indemnity insurer, LawCover Pty Ltd ("LawCover"). They have commenced two proceedings, one in which Mr Carr alone is defendant, and one in which LawCover is the defendant. The allegations against Mr Carr are the same in both proceedings, and both proceedings have been heard together, evidence in one being evidence in the other. 4 By the second proceedings ("the LawCover proceedings") Mr and Mrs Swart seek to recover from LawCover the amount for which Mr Carr may be found liable, on the ground that in undertaking his duties in managing their investment, Mr Carr was acting in his capacity as their solicitor, so that his professional indemnity policy responds to their claim. 5 By their Amended Statement of Claim, Mr and Mrs Swart raise several causes of action against Mr Carr, in contract, tort, trust and breach of fiduciary duty. However, in his final submissions, Mr Glissan QC, who appears with Mr S. Barnes of Counsel for Mr and Mrs Swart, commendably and with the proper courage of true advocacy, relied upon only one cause of action - a claim in contract. As Mr Glissan recognised, if Mr and Mrs Swart succeeded on that cause of action, they would recover the full measure of their damages; if they failed on that cause of action, they would fail on all. 6 The claim which Mr and Mrs Swart now press is that, in breach of the contract under which Mr Carr undertook to manage their investment, he disposed of their money without taking the security which the contract required. 7 By his Defence, Mr Carr denies liability to Mr and Mrs Swart. He says that:

13 Much of the evidence in this case is undisputed and appears from documents. A great deal of evidence given in the affidavits and in the witness box was irrelevant. The facts upon which this case must be decided are relatively few and may be stated shortly. 14 At all material times Mr Carr carried on a sole practice as a solicitor under the name "Forshaws Neill" at Sutherland, a southern suburb of Sydney. 15 Mr and Mrs Swart and their family migrated to Australia from South Africa in early January 1998 with the intention of becoming permanent residents. Mr and Mrs Swart had carried on a number of businesses in South Africa, which they had sold prior to migrating. The proceeds of sale were deposited at the ANZ Grindleys Bank in Jersey. 16 Mr Swart wished to invest the money from the sale of the South African businesses. In late January 1998, he went to see a Mr Greg Williamson, who told him about certain investment proposals which he was investigating. 17 On or about 12 February 1998, Mr Williamson gave Mr Swart a copy of a Joint Venture Funds Management Agreement which had been signed by Mr Carr. Neither Mr Swart nor Mrs Swart had ever previously met Mr Carr or had any dealings with him. Mr Swart inserted his name, but not the name of Mrs Swart, in the Agreement as an Investor, inserted the amount which he wished to invest and made some further amendments to the document. 18 Why Mr Swart, shown in evidence to be an exceptionally shrewd and calculating person in money matters, was willing to invest a large amount of money in a scheme about which he knew nothing, involving people with whom he had had no previous dealings, and with such haste, is difficult to understand but need not be investigated further because of the sole ground upon which Mr Glissan now rests his case against Mr Carr. 19 On 13 February 1998, Mr Swart instructed his bank in Jersey to transfer USD500,000 into an account of Mr Carr at the Yorkshire Bank in London. That account had been identified by Mr Carr for the purpose of receiving funds from investors pursuant to the Joint Venture Funds Management Agreement. The account was not a solicitor's trust account and Mr Carr was not entitled at any relevant time to practise as a solicitor in England. 20 A total of USD4 million was transferred from various investors into Mr Carr's account at the Yorkshire Bank. Most, if not all, of those investors had signed a Joint Venture Funds Management Agreement with Mr Carr. 21 Mr Carr caused to be prepared an amended version of the Joint Venture Funds Management Agreement in order to incorporate the amendments made by Mr Swart. The Agreement included the name of Mr Swart alone. Mr Swart was given that agreement and he signed it. It was dated 24 February 1998. Although Mr Carr did not sign that version of the Agreement, it is accepted that that version contains the terms of the agreement between Mr Carr and Mr Swart under which Mr Carr undertook to deal with Mr Swart's investment: T282.33-T283.20. Several other versions of the Joint Venture Funds Management Agreement later came into existence, but they all contain the same material terms upon which the parties now rely. For the sake of convenience, and following the course adopted by the parties in this case, I will take the Joint Venture Funds Management Agreement dated 24 February 1998 as containing the relevant contractual terms between Mr Carr and Mr Swart. I will refer to that Agreement as "the JVA". 22 The JVA provides for a number of investors to pool their funds for investment in a certain type of investment programme or scheme. The investment which had, apparently, been proposed in February 1998 did not proceed and in March Mr Carr began to look for other investment proposals. 23 In April 1998, Mr Carr returned to London where he was introduced to Mr David Adkins and Mr Charles Weaver, who controlled a company called Kelci Management Consultants Ltd. Messrs Adkins and Weaver were fraudsters. Mr Carr was also introduced to a Mr Paul Simms, senior partner of a firm of solicitors in London called Bower Cotton. Mr Simms was probably an accomplice of the fraudsters. He was later struck off the Roll of Solicitors after a finding by the Solicitors' Disciplinary Tribunal that he had been actively involved in making, promoting or facilitating bogus transactions which lacked any honest commercial purpose. 24 Messrs Adkins and Weaver proposed an investment scheme which guaranteed extremely high profits in a short time, with no risk. Mr Carr did not understand what the scheme was but he believed them. 25 On 8 May Mr Carr executed a Limited Power of Attorney in favour of Kelci Management and Messrs Adkins and Weaver, authorising them to deal with the investors' funds in the Yorkshire Bank account in Mr Carr's name, upon certain terms. 26 On 13 May, Mr Carr signed an agreement with Messrs Adkins and Weaver and Kelci Management whereunder Kelci Management was to make available to Mr Carr unspecified investment opportunities ("the Management Agreement"). The Management Agreement, which was also signed by Mr Simms, provided that Mr Carr was to transfer the investors' funds into Mr Simms' trust account to await investment. It further provided that Mr Simms could transfer the funds out of his trust account upon a direction given by Messrs Adkins and Weaver pursuant to the Limited Power of Attorney signed by Mr Carr. 27 On 14 May, Mr Carr transferred to Mr Simms' trust account the investors' funds of USD4 million from his Yorkshire Bank account. 28 On 18 May, Mr Simms sent by facsimile a letter to Mr Carr advising that Messrs Adkins and Weaver intended to exercise their authority under the Limited Power of Attorney to instruct him to transfer the investors' funds from his trust account into an account designated by them. Mr Simms requested written confirmation from Mr Carr that he could act on this direction of Messrs Adkins and Weaver. 29 On 19 May, Mr Carr confirmed his instructions to Mr Simms. Mr Simms transferred the investors' funds of USD4 million out of his trust account and all of the money immediately disappeared, never to be recovered. The JVA

34 As I have mentioned, in his final submissions, Mr Glissan QC relied upon only one duty of care undertaken by Mr Carr in the disposition of Mr Swart's funds: that contained in Clause 4 of the JVA and pleaded in paragraph 8 of the Amended Statement of Claim. 35 Clause 4 requires Mr Carr to ensure that the funds of the investors transferred into "the Program" upon certain conditions. There was no "Program" identified in the JVA, either when Mr Swart first signed the document on 12 February 1998 or when he signed an amended version dated 24 February, after he had already deposited his money in Mr Carr's Yorkshire Bank account. Does the failure to specify a particular "Program" mean that the terms of the JVA were not applicable to Mr Swart's deposit of money with Mr Carr? I do not think so. 36 Mr Swart signed a version of the JVA which referred to, but did not specify, a "Program"; he nevertheless then transferred his money into Mr Carr's account. After receiving that money, Mr Carr sent another version of the JVA for Mr Swart to sign; that version also referred to but did not specify a "Program". Mr Swart signed that document. Clearly, Mr Swart's money already having been received to the knowledge of Mr Carr by the time that the second document was sent and signed, it must have been the common intention of both parties that the terms of that document would govern the investment of the money which had already been sent by Mr Swart to Mr Carr, despite the fact that no particular "Program" had been specified in either of the JVAs which the parties took to represent the terms of their agreement. In those circumstances, "Program", where referred to in the JVA, simply means "the investment into which funds deposited under this agreement are to be placed by Mr Carr". 37 Accordingly, in authorising the disposition of Mr and Mrs Swart's funds as he did, Mr Carr was contractually obliged to adhere to the terms of Clause 4 as to the security upon which the funds could be transferred out of his direct control for investment. Did Mr Carr breach his duty

the investors' funds have been lost through the dishonesty of others, for which Mr Carr cannot be held liable. 44 I am unable to accept any of Mr Carr's submissions. 45 First, for the reasons I have given in paragraphs 35-37 above, the requirements of Clause 4 of the JVA apply to any disposition of the investors' funds pursuant to the JVA whenever the funds are going out of Mr Carr's Yorkshire Bank account into some form of investment. 46 Second, the Limited Power of Attorney does not expressly require that the investors' funds be transferred into the control of Kelci in an account in the name of Mr Carr. Mr Carr places heavy emphasis on the words "by and on behalf of the undersigned to … assign and invest …" . He says that Kelci could only assign "by" Mr Carr if the funds were retained in Mr Carr's name. 47 I do not understand this submission but, in any event, it is not to the point. Whatever the investment into which the investors' funds were to be placed and by whatever means they were to be transferred, whether directly by Mr Carr or through his agents, it was nevertheless Mr Carr's obligation under Clause 4 of the JVA to "ensure" that the funds left his control to go into an investment only in exchange for a verified "bank safekeeping receipt or similar bank guarantee instrument" . Whatever else may be included within these words, they must include a document issued by a bank, duly verified, acknowledging receipt of the funds by the bank and the terms upon which the funds are received. 48 The letters sent by Mr Simms to Mr Carr on 18 and 19 May should have made it clear to Mr Carr that the investors' funds were going to be transferred out of Mr Simms' trust account although Mr Simms would not receive in exchange on Mr Carr's behalf any document of the type required by Clause 4 of the JVA. The letter of 18 May made it clear that the funds would be transferred, at the direction of Messrs Adkins and Weaver, to a Natwest Bank account in Jersey "under their control" . The letter of 19 May made it clear that the account was not in Mr Carr's name or even in the name of Kelci. 49 As to Mr Carr's remaining submissions, there can be no doubt that the investors' funds were lost by reason of the fraud of Messrs Adkins and Weaver, possibly with the connivance of Mr Simms. However, Mr Carr cannot absolve himself from liability for the loss of the funds when his failure to comply with the requirements of Clause 4 permitted rogues to succeed in carrying out the very type of fraud that Clause 4 was intended to prevent. 50 I hold that in transferring and permitting the transfer of Mr Swart's funds as he did on 14, 18 and 19 May 1998, Mr Carr breached his obligations under Clause 4 of the JVA. For what loss is Mr Carr liable

57 Clause 7 of the JVA provides: " LIMITATION OF LIABILITY OF SOLICITOR AND INDEMNITY The Parties hereby acknowledge and agree that the Solicitor is acting only in a custodial and account providing capacity. Apart from the responsibilities as set out herein, the Parties acknowledge that the Solicitor shall have no further obligations, either expressed or implied, to perform any function or initiate or conduct any action or legal proceedings, or to make any payment to any third party. Furthermore, the Parties hereby undertake pro-rata to fully indemnify, and maintain the Solicitor fully indemnified, against any action taken by any Party or any third party against the Solicitor in connection with a Program entered into under the auspices of this Agreement, or against any other cost, expense, disbursement or liability incurred by the Solicitor as a result of his carrying out the terms of this Agreement. Save only that this indemnity shall not extend to cover any misappropriation or fraudulent misconduct on behalf of the Solicitor." 58 Mr Carr claims from Mr Swart pro rata contribution to the costs and expenses incurred by him in unsuccessfully prosecuting claims against Bower Cotton in the Courts of England. However, under Clause 7 of the JVA, Mr Carr had no obligation "to conduct any action or legal proceeding" except as provided in Clause 2. Nothing in Clause 2 obliged Mr Carr to prosecute legal proceedings against third parties for the recovery of damages resulting from loss of the invested funds. In prosecuting the English proceedings, therefore, Mr Carr did not incur costs and expenses "as a result of his carrying out the terms of the Agreement" for the purposes of Clause 7 of the JVA so that Mr Swart has no obligation under that clause to contribute to such costs. 59 Additionally, Mr Carr says that, as a trustee for Mr Swart's investment, he is entitled to indemnity from Mr Swart for the costs of litigating to recover the trust fund. I am not able to accept this submission. 60 It may be accepted that Mr Carr was a trustee for Mr Swart of Mr Swart's funds. As a matter of trust law, a trustee is entitled to indemnity, whether out of the trust fund or, in certain circumstances, against the settlor or a beneficiary of the trust, in respect of liabilities incurred in the administration of the trust: Ford & Lee Principles of the Law of Trusts , para 14030, p 14,2053. However, that indemnity is subject to the provisions of the trust instrument. Here, the trust instrument, namely the JVA, is inconsistent with the indemnity claimed by Mr Carr as trustee under general trust law. It provides that Mr Carr, in whatever capacity, is entitled to indemnity only in certain circumstances, none of which are applicable to Mr Swart. 61 For these reasons, Mr Carr's claim to indemnity as a trustee fails. Did Mr Carr incur liability "as a solicitor"

66 The dividing line between a solicitor acting in his or her capacity as a solicitor and a solicitor dealing in some other capacity is sometimes difficult to discern, as many decisions of the Courts attest. The difficulty almost never arises when the solicitor is engaged in contentious business before Courts or Tribunals because that is work immediately recognised as within the exclusive province of lawyers. The difficulty arises in non-contentious work, particularly work of a type which does not necessarily require legal training to perform. 67 With or without justification, lawyers have long been regarded as people not only knowledgeable in the ways of the law but wise also in the ways of the world. Their advice and engagement have been sought in all manner of activities in which worldly wisdom is seen as an advantage. Chaucer's "Sergeant of the Law" is, by specialisation, a "purchasour" , i.e. a conveyancer, but the words first used to describe him generally are "wys" and "discreet" , and only later is his "science" , i.e. technical knowledge, referred to. 68 Solicitors as such are a comparatively recent breed of lawyer. Attorneys were allowed to represent litigants in courts of law by the Statute of Merton in 1235. But "solicitors" first appeared in the 15th Century in business arising in and supervised by the Equity Courts and even then their function was more in the nature of business agents than lawyers. Because of their experience in non-litigious business they were widely employed in business in which a knowledge and experience of the law might be useful: see generally E.B.V. Christian "A Short History of Solicitors" (1896) pp 70-110; Holdsworth "A History of English Law" Vol VI, pp 448-457; J.H. Baker "The Legal Profession and the Common Law" (1986) p 125ff. 69 So, for example, solicitors have been engaged as stewards of manors: see e.g. Rawes v Rawes (1836) 7 Sim 624 [5 LJ(NS)]; Hughes v Mayre (1789) 3 TR 275 [100 ER 572]; Allen v Aldridge (1843-44) 5 Beav 401 [49 ER 633]. No doubt this was because of their familiarity with matters pertaining to leases and other contracts as well as with matters of financial management generally. 70 So, also, solicitors were frequently engaged as "parliamentary agents" - "lobbyists" in today's parlance - to promote a Bill through Parliament: see e.g. In re Sudlow and Kingdom (1849) 11 Beav 400 [50 ER 871]; In re Baker, Lees & Co [1903] 1 KB 189. Likewise, they were retained as "election agents" , i.e., to organise the election campaigns of candidates for Parliament, to canvass for votes and conduct voters to polling booths: see e.g. In re Osborne (1858) 25 Beav 353 [53 ER 671]; In re Oliver (1867) 36 L.J.(Ch) 261. 71 More pertinently, solicitors have for a long time advised clients on investments generally, as well as transacting the legal business for placing clients' money into investments chosen by the clients. In Dooby v Watson (1888) 39 Ch D 178, at 182-3, Kekewich J gave a useful description of the scope of work done by solicitors in relation to investment: "I apprehend, then, that the cases in which a solicitor acts in his proper character may be divided into three classes, all of common occurrence. In the first case a solicitor receives a certain sum of money in order to invest it in a particular mortgage. His client, either on his own selection, or on the advice of the solicitor, has determined to invest a particular sum on a particular mortgage, and all the solicitor does is the legal business, receiving the money and seeing, when the proper time arrives, that the deeds are executed and the money handed over to the mortgagor. His duty in that case is simple but important, and large sums very often pass in that way. In the second case the solicitor receives money in order that he may himself find mortgages to be approved by the client. He retains the money in the meantime. He from time to time reports to his client what mortgages he has found. I use the word 'mortgages' only, but of course it is applicable to other investments. He does whatever business is necessary - advises his client as to the precautions to be taken, and ultimately sees the money handed over either as a whole or in parts to the mortgagee or mortgagees. Beyond that there is a third case, equally common but distinct from the others, where the solicitor does far more than he does even in the second class - that is to say where the client, for some reason, takes little part, perhaps no part at all, in the investment. He may be abroad, as one of the cases cited here shews, the solicitor acting under a power of attorney. All the client then requires is to know that the money has been invested, and that the interest will be payable and be paid. In that case the solicitor has an onerous duty to perform, because, beyond providing the mortgages, beyond doing the mere legal business, he really undertakes the responsibility to his client of seeing that they are good mortgages, on which the money may be safely invested. That is within the ordinary duty of solicitors according to the practice of the profession, and is a more onerous duty, and one which some solicitors, I believe, decline to take." 72 So wide was the range of affairs upon which solicitors were consulted that, by 1896, it could be said: "The first duty [of a solicitor] is to advise his clients upon all questions of law or business on which he may be consulted, instilling some worldly wisdom into the simple, and stimulating the lethargic consciences of the children of the world; to prepare some classes of commercial contracts; and generally to keep his clients out of trouble, so far as he can, and get them out of it as cheaply as possible when they incur the consequence of disregarding his counsels." : "A Short History of Solicitors" E.B.V. Christian (1896).

It may perhaps, on some occasions, be questionable, whether the business contained in a solicitor's bill be or be not such as to make the bill taxable under the Act; but in the present case I do not see any reason to doubt. The relation of solicitor and client did not subsist between Mr. Ward and the Petitioners, or any of them, or between Mr. Ward and any other person in relation to this matter. He was not employed by the Petitioners because he was a solicitor, but because he was steward of the manor, and he might have been steward of the manor, without being a solicitor . His bill is not as to any part of it a solicitor's bill; it is the bill of charges claimed to be payable to the steward of a manor, and nothing else; and I am of opinion that the statute gives me no jurisdiction over it." (Emphasis added) 77 An instructive contrasting case is In re Osborne (supra). There, three candidates for election to Parliament wrote to a firm of solicitors and engaged them as electioneering agents. The solicitors accepted the retainer and thereafter performed it by attending at the committee rooms for meetings as well as canvassing for votes, acting as booth agents, and bringing in voters to vote. They rendered a memorandum of fees for their services which the candidates then sought to have taxed as a solicitor's bill. The solicitors said that their services had been retained, not as solicitors, but as electioneering agents so that the bill was not taxable. 78 Sir John Romilly MR, holding that the bill was taxable as a solicitor's bill, referred with approval to Allen v Aldridge and said at p.359: "A solicitor may have a legal claim against another person, but it by no means follows that it is in respect to his character of solicitor; there must be established between them, in respect to the business done, the relation of solicitor and client. In the present case there is no question that Messrs. King, Blakemore and Hanbury did employ Edwards & Osborne to act for them in the matter of the county election, in respect of which these two bills were sent in. Therefore, the employment is established. The question is, in what character were they employed? Mr Giffard argued that they were to be considered as acting as mere electioneering agents, in the ordinary way, and not in the character of solicitors. I cannot so treat it. It is not clear that any other person than a solicitor could have performed the duties which the candidates to represent the county required to be performed . These duties required the attendance of these gentlemen at the committee rooms, to see, amongst other things, that nothing should be done contrary to law, or which would infringe any of the provisions in the numerous statues relative to elections; to secure that everything should be done in a legal and proper manner, and to detect the defects of the opposite party. It was therefore necessary for Messrs. Edwards & Osborne to exercise their legal knowledge in the best manner they could for the gentlemen by whom they were employed. I do not, therefore, consider that this was an employment in the same manner as ordinary unprofessional agents, but I think that they were bound to give legal advice and assistance, and which I have no doubt they did. … I cannot consider this otherwise than as an employment in the character of solicitors, and the fact that they acted as agents in other matters does not make their claim less a claim in their character of solicitors ." (Emphasis added) 79 It will be seen that In re Osborne there was an express contract made between the parties. It was made by a letter addressed to the firm of solicitors and the work to be performed included, but was by no means limited to, work which required legal knowledge. Because the contract was with the firm and required legal knowledge, it was held that the work was carried out by the solicitors in their capacity as solicitors, even though much of the work could have been done by a non-lawyer. 80 On the other hand, in Allen v Aldridge , as Lord Langdale said, the steward happened to be a solicitor "but was not employed as such" and as far as the work done was concerned "he might have been a steward of the manor without being a solicitor" , i.e., all of the work done could have been done by a non-lawyer. To the same effect is the reasoning of the Court of Appeal in Re Baker, Lees & Co (supra). 81 The factual distinction between Allen v Aldridge and In re Osborne , as I have explained it, was the foundation of the decision in In re Oliver (supra). Mr Oliver, a solicitor, was employed by the solicitors of a candidate for election to act as electioneering sub-agent. He sent in a bill claiming to have acted in his capacity as a solicitor and charging a higher rate of remuneration than could have been allowed had he been acting merely as an electioneering agent. Lord Romilly MR held that Mr Oliver had not been acting in his capacity as a solicitor. At p 261 his Lordship said: "The difference between this case and the case of In re Osborne is considerable. In the first place, in the case of In re Osborne , no other person seems to have been employed as solicitor or attorney than Osborne and his partner, and they were expressly retained for the purpose . In the second place, a letter was written to request the solicitor's firm to accept a retainer for their professional services, which does not exist here, and expressly stating that it was to be for their professional services. In the third place, the duties which were done in the present case do not appear to me to have required any professional knowledge of an attorney or the like, but could be performed perfectly by persons who are called lay persons , and accordingly an auctioneer was one of the persons employed." (Emphasis added) 82 I come now to a case much relied upon by both parties, Solicitors' Liability Committee v Gray (supra). There, the question was whether the activities of certain solicitors in carrying on a business of syndicating purchases of commercial property in order to achieve tax advantages for the participants to the scheme fell within the scope of "the private practice of a solicitor" within the firm's professional indemnity policy. 83 The following are, in my view, the critical facts of Gray :

implementing the enforcement of a bank guarantee: Clause 2 (B) (f). 88 All of the other services to be provided by Mr Carr under the JVA are within the scope of services customarily provided by solicitors who advise clients on investments generally and select and manage those investments for the clients: Dooby v Watson (supra); Clauses 2 (B) , 4. 89 In the JVA Mr Carr expressly proffers his services "as solicitor" and thereby, at the very least, acknowledges that his professional capacity is material to his engagement: see the references to "Solicitor" in Clauses 2 (A) , 2 (B) , 4, 7 and 8. 90 All of the above factors point strongly to the conclusion that Mr Carr was engaged to perform the services required of him under the JVA in his capacity as a solicitor. 91 I now turn to Mr Pritchard's submissions that I should hold that Mr Carr did not act as a solicitor for the purposes of the Policy. 92 Mr Pritchard says that Mr Carr's actions, considered as a whole, were those of a entrepreneur not a solicitor: what Mr Carr did in organising investors to contribute pooled funds, in finding an investment, and in transferring funds into that investment could have been done by someone who was not a lawyer. 93 The point, however, is that Mr Carr contracted with Mr Swart that in doing what he was required to do under the JVA he would act "as Solicitor" for Mr Swart. Mr Pritchard says that "Solicitor" is merely a definition which refers to Mr Carr. That construction could work in some clauses but not in the critical clauses. Substituting "Mr Carr" for "Solicitor" in Clause 2(A) makes no sense: how can Mr Carr promise to act "as Mr Carr to the parties" . Similarly, how can one sensibly read Clause 2 (B) as meaning "the function of [Mr Carr] as such Mr Carr shall be to …" ? In truth, the only definition in the JVA which refers to, and is interchangeable with, Mr Carr is "Managing Partner" , as Mr Carr is described at the very commencement of the JVA. Making the necessary substitution, it makes perfect sense to read Clause 2 (A) as "Mr Carr shall act as solicitor to the parties …" and to read Clause 2 (B) as "the function of Mr Carr as such solicitor shall be …" . 94 Further, in promising in Clause 2 (B) that he would act "as such Solicitor" , Mr Carr undertook duties such as are designed to safeguard Mr Swart's interests in a manner consistent with the prudence which a solicitor would advise a client to adopt. Mr Carr did not simply organise the investment and leave it to Mr Swart to get his own legal advice as to how the investment could be prudently administered and supervised, as an entrepreneur might have done. 95 The statement in Clause 7 of the JVA that "the Solicitor" is acting only in a "custodial and account providing capacity" cannot stand alone and out of context. The very next sentence in the clause refers to Mr Carr's "responsibilities as set out herein" and the responsibilities specified in Clause 2 go far beyond mere custodial duties. 96 Mr Pritchard says that the JVA was a "one-off transaction" and, therefore, not part of Mr Carr's continuous stream of activity, so that it could not be part of "the business of practising as a solicitor" . 97 I do not think that this circumstance, if true, is to the point. One might just as well say that the first conveyance undertaken by a neophyte solicitor is not within the cover of the Policy because the solicitor has not already established his or her business as a conveyancer. 98 "The Practice" is defined in the Policy not as "the insured's practice as a solicitor" so that one identifies the scope of cover by examining the types of professional matters actually conducted by the assured in the course of his or her practice at any particular time. The definition is generic. The words "the business of practising as a solicitor" mean "the type of practice carried on by a solicitor as a business", so that indemnity is given in respect of a claim incurred in connection with a practice carried on as a business by an assured which is a practice of the type carried on by a solicitor. 99 As I have held, the finding and implementing of investments is within the type of practice carried on by solicitors. Mr Carr carried on his practice as a solicitor as a business. It does not matter whether, in the course of Mr Carr's particular practice he had previously, on behalf of clients, selected and implemented investments generally or this type of investment in particular. 100 If Mr Carr incurred his liability to Mr Swart in connection with his practice as a solicitor, the exclusion provided in Clause 5(b)(vii) of the Policy cannot apply since it is clear that Mr Carr conducted his practice as a solicitor at Sutherland in Sydney. 101 I will now deal with the points made by Mr Pritchard and set out in paragraph 65 to the extent that those points have not already been discussed. 102 It is of no consequence whether Mr Carr correctly understood the implications of the JVA which he had drafted or regarded himself as acting as solicitor for Mr Swart, if indeed he gave any thought to that matter until a claim against him had been made. The point is that the capacity in which Mr Carr dealt with Mr Swart was spelt out in the contract between them. 103 Mr Pritchard lays heavy emphasis on the fact that Mr Carr was himself an investor in the scheme. He says that this fact indicates that Mr Carr was acting in the capacity of entrepreneur. However, the JVA does not refer to Mr Carr as an investor at all and Mr Swart says that he was not aware at the time that he entered into the JVA that Mr Carr was himself going to be an investor. In any event, whether or not Mr Carr was also an investor does not detract from the terms upon which he engaged to provide services for Mr Swart in the JVA. 104 It is of no consequence that Mr Carr did not issue a fee disclosure and fee agreement to Mr Swart, or open a controlled money account as required under the Legal Profession Regulation , or open a client file or keep file notes or have conferences with Mr Swart in his office, or issue a memorandum of fees at any particular time. If Mr Carr contracted to provide services as a solicitor it was a matter for him as to how he provided those services. It was a matter for him as to whether, in providing those services, he complied with the requirements of the Legal Profession Regulation and with good solicitors' practice. If he did neither, he could be guilty of professional misconduct and of professional negligence, but that circumstance would not mean that the capacity in which he had engaged was changed from a professional capacity to a non-professional capacity. 105 It is of no consequence that the transaction of the investment under the JVA was to be carried out outside Australia and with the assistance of English solicitors. Solicitors in Australia frequently advise on and effect transactions outside Australia with the assistance of foreign lawyers. 106 Clause 8 of the JVA does not indicate that Mr Carr is not to do the work of a solicitor. All that it says is that Mr Carr is entitled to deduct from funds under his control an agreed fee "representing his reasonable time charges to date" in performing his duties under the JVA. If anything, that provision supports the conclusion that Mr Carr was being remunerated for services as a solicitor under the JVA and for his time and efforts as such rather than being given a share of profits as an entrepreneur or investor. 107 Clause 11 does not exclude the relationship of solicitor and client between Mr Carr and Mr Swart. Clearly, the clause is intended to remove the investment scheme from classification as an offer to the public for the purpose of the prospectus requirements of whichever regime regulating corporations might be applicable. Further, the words "a private business transaction" are not inapt to describe the relationship between a solicitor and a client, particularly when the solicitor is investing the client's money on the client's behalf. 108 Clause 20, which provides that the proper law of the JVA is that of England and Wales, governs only the construction and enforcement of the JVA. It does not specify where the contract is to be performed: it does not prevent Mr Carr from performing the services required of him under the JVA in New South Wales in his capacity as a solicitor carrying on practice here. 109 For these reasons, I conclude that:

Swart v Carr; Swart v LawCover Pty Ltd

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