Takla v Nasr

Elizabeth Takla - Appellant Joe Nasr - Respondent Representation: Counsel: B M Toomey QC and T J Morahan - Appellant G A Sirtes SC - Respondent Solicitors: Lang Noonan Legal - Appellant Wotton & Kearney - Respondent File Number(s): 2012/35905 Publication restriction: No Decision under appeal Citation: [2011] NSWDC 169 Date of Decision: 2011-11-07 00:00:00 Before: Walmsley DCJ File Number(s): 2009/00336297

Judgment 1McCOLL JA: The appellant, Elizabeth Takla, wished to purchase a townhouse in Oatlands which she was then occupying as a lessee pursuant to a lease from a development company, MTK Corporation Pty Ltd ("MTK"). MTK offered to sell the property to her for $500,000 on the basis that 80 per cent ($400,000) of the purchase price would form the deposit and would be released to MTK on exchange of contracts. The appellant was also to have a rent free period for a year and, on settlement, have returned to her the bond money and all rent she had paid to date. The directors of MTK agreed to provide personal guarantees in relation to the monies the appellant paid on exchange. 2The appellant retained the respondent, Joe Nasr, as her solicitor in respect of the purchase. The contract for the sale of land was exchanged on 4 October 2005. The $400,000 deposit was paid and released to MTK as agreed. The personal guarantees were not obtained. On 3 March 2006 MTK went into receivership. The contract for sale had not been completed and the receiver refused to do so. The townhouse was sold by a mortgagee, who appears to have had security over the whole development. 3The appellant lost the $400,000 deposit. She sued the respondent contending that he had been negligent in acting on her behalf in respect of the purchase. Her case was that she would not have entered into the contract if the risks had been properly explained to her and it had been pointed out that the guarantees were not in place. Judge Walmsley SC rejected her claim holding that she had not established that the respondent had breached the duty of care he owed her or that, even if he had, any such breach had caused her loss. He ordered that there be judgment for the defendant with costs: Takla v Nasr [2011] NSWDC 169. 4The appellant appeals from that decision. 5In my opinion for the reasons that follow, the appeal should be dismissed with costs.

Issues at trial 6The appellant's case at trial as pleaded was that the respondent owed her "a duty to act carefully and competently as [her] solicitor and/or a duty to act in accordance with the standards of skill and competency that might reasonably be expected of a qualified practicing solicitor." The particulars of breach of duty pleaded that the respondent: "(a) Failed to warn or advise the plaintiff of the risk in paying in a real estate transaction a deposit of 80% of the purchase price. (b) Failed to warn or advise the plaintiff of the risk in agreeing to the deposit of 80% of the purchase price being paid to the vendor of the property on exchange of contracts. (c) Failed to warn or advise the plaintiff of the risk in agreeing not to lodge a caveat against the title to the property after contracts were exchanged. (d) Failed to take any action or to warn or advise the plaintiff of the effect of being served with a notice to caveator of proposed lapsing of caveat. (e) Failed generally to protect and safeguard the plaintiff's interest in respect of the purchase." 7The appellant's case under particular (e) expanded in the course of the trial. Thus, the primary judge observed (at [42]) that during submissions "it became apparent that under particular (e), the plaintiff, as part of the failure to "protect and safeguard the plaintiff's interest", included a "failure to have guarantees executed by the directors of MTK" and (at [65]) that the appellant's case included the allegation that the respondent had taken no proper steps to ensure there were guarantees in place, or to enquire into the financial situation of those who offered guarantees.

Statement of the case 8The essential facts of the transaction as drawn from the primary judgment and otherwise unchallenged evidence were as follows. 9The appellant and her husband divorced. As a result, I assume, of the division of the matrimonial property she was left with a sum of just over $450,000: primary judgment (at [4]). In July 2005 she rented the townhouse in Oatlands to which she moved with her young son. The townhouse was near the school he was attending. Soon after she moved in, she was approached by a director of MTK, Mr Rizk, who asked whether she was interested in buying the townhouse for $500,000. 10As I have outlined, the terms Mr Rizk proposed required the appellant to pay 80 per cent of the purchase price as the deposit ($400,000), to permit MTK to have access to the deposit on exchange and to pay the remainder after a delayed settlement of 12 months. She was entitled to a rent-free period for a year and to have the amount she had paid in rent and her bond money returned on settlement. The primary judge (at [4]) described the terms as "unusual". It is also convenient to record at this point that the appellant considered the townhouse's purchase price to be below market value, describing it as a "special price", having compared the price with two other owners in the same complex with similar units for which they had paid $580,000 and $625,000 respectively. 11The appellant agreed to purchase the townhouse on that basis as was apparent from a sales advice dated 18 July 2005 Mr Younis, a director of MTK, sent to that company's solicitors on 18 July 2005. The respondent had acted for the appellant's husband in the divorce and, as he held monies in trust for her, she decided to retain him to act on the purchase: primary judgment (at [5]). 12On 18 July 2005, MTK's solicitors wrote to the respondent enclosing a draft contract for sale. Pursuant to cl 10, completion was to be on the later of twelve months from the date of contract or twenty-one days after receipt of the vendor's advice in writing that the Strata Plan had been registered at the Land Titles Office. The contract showed the deposit as $400,000. Clause 30 relevantly provided: "The Purchaser confirms their [sic, as in original] agreement to release the deposit to the vendor on exchange of contracts herein and acknowledges that the definition of 'depositholder' stated on page 3 of the pre-printed form of contract is hereby amended to read 'the Vendor' in lieu of the words 'Vendor's agent (or if no vendor's agent is named in this contract, the vendor's solicitor)'." 13The respondent opened a file for the transaction on 22 July 2005. Ms Johnson, the respondent's conveyancer, handled the transaction. 14Ms Johnson met the appellant on 22 July 2005. There were competing versions of the conversations at that meeting. Ultimately the primary judge preferred Ms Johnson's version as will be apparent from the account of the primary judgment which appears later in these reasons. 15The appellant signed a costs agreement which acknowledged her instructions to the respondent as: "(i) Taking instructions, advising on Contract for Sale of Land, attending to exchange (if required) obtaining all pre-exchange and post-exchange enquiries (if required) stamping all documents, organising and attending settlement and all incidental work in relation thereto; and (ii) Advising in relation to your mortgage in respect of the property being purchased, satisfying mortgagee's requirements and attending settlement (if required);" The place on the agreement in which "special instructions" could be recorded was left blank. 16The respondent entered into correspondence with MTK's solicitors to finalise the transaction. On 16 August 2005 he wrote a letter to MTK's solicitors which said the appellant would be willing to pay "a $400,000 deposit" on exchange with a delayed settlement of up to 12 months provided: "1. That the directors of the vendor provide personal guarantees to our client in relation to the monies paid. 2. Once the property has been registered our client is to be allowed to lodge a caveat over the property to protect her interests. 3. That the parties enter into a license [sic, as in original] agreement which confirms that our client is not required to pay any rental from date of exchange. We note it is in our client's interests to seek in particular the directors' guarantee [sic, as in original] as in the event that the vendor should become insolvent then any potential liquidator may consider payments made by our client as a preferential payment. We note that our client needs some protection in the event that this may occur in the future. Subject to the above we note that our client would be in a position to exchange." 17MTK's solicitors agreed to the guarantee and caveat proposal. The following clauses were added to the draft contract: "31. The Vendor consents to the Purchaser lodging a Caveat over the subject lot following registration of the proposed strata plan of subdivision. 32. Edmond Charles Younis, Anthony Khalil and Bassam Wehbe, being the directors of the vendor company personally guarantee the performance of the vendor under this contract." 18Contracts were exchanged between the appellant and MTK on 4 October 2005. None of the proposed guarantors referred to in cl 32 executed the contract in their own right nor did they execute any other document to provide the guarantees referred to in cl 32. The case was conducted at trial and on appeal on the basis that the effect of the absence of the directors' signatures was that no guarantees were obtained from the directors. It was apparent from exchanges at trial that the appellant had never taken any steps to seek to enforce cl 32. The respondent had pleaded the appellant's failure to enforce the personal guarantees in cl 32, among his particulars of failure to mitigate her loss, but that case does not appear to have been pursued at trial. 19MTK went into receivership on 3 March 2006. On 4 April 2006 MTK's solicitors wrote to the respondent advising of that fact. On 21 April 2006, the respondent wrote to the receiver asking that settlement of the appellant's purchase proceed as soon as possible. Ms Johnson said she was unable to get any information from the receiver as to whether the purchase could be completed. 20In April 2006 Mr Younis told the appellant that no caveat had been lodged on her behalf. She contacted Ms Johnson. The respondent lodged a caveat on the title on 20 April 2006, claiming an equitable interest pursuant to the Contract for Sale. On 24 December 2007, a mortgagee served a lapsing notice in respect of the caveat. The appellant took no action to extend it and, accordingly, it lapsed. 21The appellant claimed that she telephoned Ms Johnson frequently for advice on completing the purchase. Ultimately, when she was unable to get any information, she changed solicitors. 22The mortgagee exercised its power of sale on 29 January 2008 and, as I have said, the appellant lost the $400,000 "deposit". The appellant remained a tenant in the property paying rent to the new owner, until she vacated on 31 October 2008: primary judgment (at [34]).

The primary judgment 23The primary judge identified (at [2]) the issues to be determined as: "(a) Whether the solicitor was negligent in 2005-6 when acting for the plaintiff, Ms Elizabeth Takla, on the purchase of a townhouse at Oatlands; (b) If so, whether the negligence led to any loss; (c) If so, what that loss was; (d) If the plaintiff suffered loss, whether she was guilty of any and if so what contributory negligence; (e) If the plaintiff suffered loss, whether any and if so which part of her loss was brought about by her failure to mitigate her loss; (f) If the plaintiff suffered loss, whether I should hold the vendor of the townhouse responsible for any and if so what proportion of that loss." 24His Honour observed (at [5]) that a significant issue before him was the "extent of the [appellant's] knowledge of MTK's financial problems at the time she agreed to buy the townhouse and whether the [respondent] could have done more, such as by giving her strong warnings, to protect her". As to causation, the fundamental issue "was whether the [appellant] would have bought the townhouse anyway, regardless of what advice the defendant gave her." 25The appellant had given several versions of the circumstances in which she had retained the respondent. The primary judge considered those accounts (at [10] ff). This consideration clearly informed his Honour's views about the causation issue. The versions relevantly included the following: (1)A letter of instructions the appellant sent to a firm of solicitors in 2006 (Exhibit D2) that included statements about what occurred when Mr Rizk first spoke to her about her buying the townhouse (primary judgment (at [11] - [12])): "I moved in 12 July, 2005 [sic, as in original]. There was still work being done in most of the townhouses, mine included. A week or two after I had moved in Louis Rizk (Ed Younis's brother in law) ask me [sic, as in original] if I was interested in buying the townhouse for $500,000. Several people had bought off the plan but the building construction had taken longer tha[n] planned, the #9 purchaser wanted to bail out and was threatening Ed's life if he didn't get his money back. I was suspicious but Ed and Louis explained that there was not enough cash flow to pay this person back because their money was tied up with several buildings that were being constructed; namely Terrigal, Salamander Bay and Cronulla. I [k]new some of the men that work with Ed as acquaintances, either from school, church or the Lebanese community. Ed had also contracted another guy to do repairs on the properties and he confirmed that Ed did have a number of buildings. This guy was working on Cronulla, Terrigal and Oatlands repairs. ... Ed had personally spoken to me, he swore on the lives of his children and wife to ensure me [sic, as in original] that my money and my house were secure, and that he would not let Antony or I endure any more hardship than what we had been through in the marriage." (Emphasis added) (2)The appellant's affidavit sworn on 21 September 2010, four years after she had sent Exhibit D2 included the following (primary judgment (at [13])): "5. A few months after I moved in I was contacted by Louis Rizk who was working for the owner/developer. Mr Rizk said to me 'Would you be interested in buying this townhouse for $500,000?' A short time later Mr Risk introduced me to Ed Younis whom he described as the developer/owner. Both Mr Rizk and Mr Younis explained to me that the building work was taking longer than expected and that this caused cash flow problems which made it difficult to meet obligations. 6. I was interested in buying the townhouse as the price was affordable to me and the location suited my then needs as it was close to my son's school which meant that he would not have to change schools at that time. I intended to keep the townhouse for about three years until my son was to enter Year 5 or Year 6 at which time I intended to move to the inner western suburbs as I was interested in sending my son to a school in that area. I was counting on the value of the townhouse increasing significantly as I believed I was paying below market value." (Emphasis added) (3)The primary judge's summary (at [14]) of a portion of the appellant's cross-examination: "In cross-examination the plaintiff told me that she regarded the $500,000 as a special price: she had spoken to two owners in the complex with similar units to hers and one had paid $580,000, another $625,000. It was part of the arrangement with the vendor that she be permitted to live rent-free and licence free in the unit, until settlement. At that stage settlement was up to 12 months away. So the arrangement saved her $1600 per month." (4)The appellant telephoning Ms Johnson in April 2006 after she learned that a receiver had been appointed to MTK and saying (primary judgment (at [32])): "Our worst fears have happened. Ed is in financial difficulties." 26The primary judge found (at [20]) that the appellant's version in her affidavit of her first conference with Ms Johnson was "to a degree a reconstruction rather than a recollection of what exactly occurred." He observed that Ms Johnson had taken notes which were in evidence, and it was not suggested by Mr Morahan, the appellant's counsel at trial, that the notes had been fabricated or had not been made at the time of the conference or immediately after. 27The primary judge recounted the following aspects of Ms Johnson's evidence: (1)First, that "it was extremely unusual ... for a contract of sale to require payment of a deposit of more than ten per cent and for it to be released to the vendor, and that she had discussed this issue in some detail with the [appellant]", including having the following exchange (primary judgment (at [21])): "[Ms Johnson] 'It is not in your best interests to agree to release a deposit of 80% of the purchase price as this would, in effect, be an interest-free loan to the vendor and if something goes wrong with the sale and you are entitled to recover the deposit, it may be difficult for you to get it back, particularly if the vendor has spent it or becomes insolvent.' The plaintiff: 'That was what I agreed with Ed and that is why the property is so cheap. I trust him and he has offered to personally guarantee the sale'." (Emphasis added) The primary judge accepted (at [26]) Ms Johnson's evidence that she had this conversation at the first conference with the appellant. (2)Secondly, Ms Johnson said (primary judgment (at [22])): "... [D]espite her advice that special condition 30 (setting out the unusual terms) should be deleted from the contract, the plaintiff was quite insistent on proceeding. She said she recalled in the course of dealing with the matter that the plaintiff told her on a number of occasions she had had direct discussions with Mr Younis concerning it, and she had the impression the plaintiff knew Mr Younis. But she did not know the nature of the relationship." (Emphasis added) 28The primary judge concluded (at [25]) that he preferred and accepted Ms Johnson's evidence where it conflicted with that of the appellant. 29There was no evidence, and no positive assertion from Ms Johnson, that she had sent a letter to the appellant confirming the content of her advice at the first conference. In particular, her handwritten notes of the conference did not include a reference to MTK's possible insolvency. However the primary judge accepted (at [26]) that Ms Johnson had warned the appellant about this risk, saying: "I accept she mentioned insolvency in that context. It is consistent with the instructions the plaintiff gave the defendant as to what she knew of the vendor's financial problems at the time, as well as the tenor of the advice the note shows she was given, and with a letter the defendant wrote to the vendor's solicitors before exchange (see below) concerning the giving of guarantees, and in which the possibility 'the vendor should become insolvent', was referred to." The letter to which the primary judge referred (at [26]) is set out above (at [16]). 30The primary judge observed (at [39]) that the contents of Exhibit D2 (see ): "... suggest strongly to me that the plaintiff was aware before exchange how bad MTK's financial position was. For example, she said she had been suspicious. She told me that in saying she had been suspicious concerning the deal, she had meant she had been suspicious concerning the cash flow problem and the circumstances in which a purchaser had been wanting to 'bail out'. She said her suspicions had caused her to question Mr Rizk and Mr Younis concerning the purchase of unit nine. But she considered, having discussed matters with them, that they were being frank with her. She agreed that some of her suspicions had been allayed by the time she had gone to see Ms Johnson. She agreed she had also spoken to three people who had worked for MTK. She said her purpose in speaking with them had been to be reassured MTK was genuine, and that the other developments were in fact proceeding." 31The primary judge said (at [54]) he treated the appellant's evidence with some reserve. He took into account (at ) that "she had had a very unhappy experience with the [respondent] and lost $400,000 and in these proceedings blames [him] for what happened to her". He also assessed (at ) her as: "... an intelligent, shrewd, and worldly wise woman, who, of course, engaged in wide ranging investigations about MTK, and conducted the initial negotiations to buy the town house from MTK;" 32His Honour regarded Ms Johnson as "honest, and reasonably accurate" and accepted her evidence that she told the appellant that entering into this transaction was not in her best interests: primary judgment (at [55]). In particular he said: "... I take into account that Ms Johnson did say to me that she did not know if she had told the plaintiff she should not enter the contract. But I have no doubt she told her it was not in her best interests to do so. I find the plaintiff understood full well by, at the latest, the time she left the defendant's office on 22 July 2005, that by entering the contract she was at risk of losing her deposit if MTK became insolvent. I find further that she also knew at that time that MTK was in significant financial difficulties." (Emphasis added) 33The appellant called evidence from Mr Bluth, a conveyancing solicitor. He accepted that the "one risk" in the transaction was that the appellant would not get back her deposit: primary judgment (at 52]). He said it was "common practice for solicitors advising a purchaser in the [appellant's] position who faces a significant commercial risk of losing such a significant sum, for the advice to be confirmed in writing", such advice to include explicit warning of each aspect of the risk, and to take an acknowledgment that the client was proceeding with full knowledge of the risks: primary judgment (at [45] - [46]). He also proffered an opinion the primary judge regarded (at [48]) as "somewhat unusual", that "if a client refuses to accept a solicitor's advice not to enter a transaction as risky as this one, he/she should cease to act for the client." 34After referring (at [57]) to authorities supporting the proposition that a solicitor does not owe a client a duty to warn about whether or not a transaction is prudent, the primary judge said: "I do not consider, on the facts as I have found them to be, that the defendant's retainer extended to giving business advice, or of advising on the business sense of buying the townhouse on the terms the plaintiff herself had negotiated with MTK. Further, a defendant owes no duty to warn of obvious risks in a transaction: s 5H(1) Civil Liability Act, 2002 (NSW) (CLA). The very thing which occurred, namely MTK's insolvency, preventing her from getting her money back was a risk of which I am satisfied she was warned, by Ms Johnson. 58 Before me the plaintiff accepted the transaction had contained a risk. It was put to her the risk had been acceptable to her because of the benefits the contract brought her: free rent for a year, return of her bond and past rent paid. She said: 'I don't know if they outweighed the risk of losing $400,000.' Mr Sirtes submitted that the risk from releasing an eighty per cent deposit was or ought to have been obvious to her. I consider the risk was obvious to her." 35The primary judge dealt with the individual allegations of negligence as follows. 36First, his Honour rejected the claim that the respondent failed to warn or advise the appellant of the risk in paying a deposit of 80 per cent of the purchase price. He observed (at [59]), that the appellant's case as ultimately put by Mr Morahan was not that the appellant had not been warned she might lose her money, but, particularly based on Mr Bluth's evidence, that the respondent should have confirmed the advice about that risk in writing, and then have declined to act for her if she insisted on proceeding. 37The primary judge did not accept (at [60]) that failing to confirm in writing advice given orally in conference necessarily indicated a breach of a solicitor's duty to take reasonable care. Rather, he observed that the particular circumstances of the transaction, particularly the personality of the client, are matters to be taken into account. He repeated his assessment of the appellant as "an intelligent and shrewd woman, of worldly wisdom" and was "satisfied she thought this a very good deal at the time, and receiving a written advice warning she might lose her money on MTK's insolvency would not ... have changed her mind." 38The primary judge also did not accept (at [61]) Mr Bluth's evidence that a solicitor should refuse to act for a client who declines to take advice. He considered this was a point of law concerning legal practice where a court was "sufficiently equipped to form an opinion unaided by or different from expert opinion", referring to Lucantonio v Kleinert [2009] NSWSC 853 at [8], (6) (per Brereton J). There is no challenge to this conclusion. 39Next, his Honour held (at [62]) that the allegation regarding the failure to warn or advise the plaintiff of the risk in agreeing to the deposit of 80% of the purchase price being paid to the vendor or the property on exchange of contracts did not add anything to the first allegation and repeated his reasons for rejecting that aspect of the appellant's case. 40The primary judge observed (at [63]) that ultimately he did not understand Mr Morahan relied on the particular of negligence that the respondent failed to warn or advise the appellant of the risk in agreeing not to lodge a caveat on the title to the property after contracts were exchanged. In any event, his Honour held that the failure to advise the appellant of the risk in failing to lodge a caveat after contracts were exchanged and before the strata plan was registered made no difference. His Honour relied on Mr Bluth's evidence that such a caveat would not have afforded the appellant any additional protection against the registered mortgages. There is no challenge to this finding. 41The primary judge observed that the complaint about the failure to take any action or to warn or advise the plaintiff of the effect of being served with a notice to caveator of proposed lapsing of caveat was not strongly pressed and, in any event, his Honour held (at [64]) that such failure could not have caused any loss. There is no challenge to this finding. 42As to the complaint that the respondent had taken no proper steps to ensure there were guarantees in place, or to enquire into the financial situation of those who offered guarantees, the primary judge observed (at [65]) that there was no doubt Ms Johnson had not taken any of those steps. His Honour held (at [66]) that even if such steps had been taken, that would not have affected the outcome. In this respect, his Honour said: "66 Having in mind the appointment of a receiver to MTK some months after exchange and the problems MTK was to the plaintiff's knowledge having with cash flow at the time of exchange, I am not persuaded that conducting investigations of the type Mr Bluth said should have been done, or having the guarantors sign the contract, would have affected the outcome. It is clear that MTK was in severe financial difficulties at the time of exchange. It is clear the position of the directors was also parlous. I conclude the latter from MTK's insolvency, the fact that one of them is now bankrupt, and the threats to Mr Younis when MTK was apparently unable to repay a deposit. In the absence of any evidence on this issue I infer the mortgagees would not if asked have permitted registration of a partial discharge of mortgage. It is possible that ensuring MTK's directors executed the guarantee of MTK's performance at the time of exchange might have assisted the plaintiff. Given the directors agreed to the unusual form of guarantee being in the agreement, I infer they would if asked have executed it in their personal capacities. But Mr Morahan did not in the end submit that the plaintiff had lost anything as a result of the failure to have the guarantee signed. There was no evidence the directors ever had the ability to honour the guarantee, and that, I conclude, was the reason for Mr Morahan's position on that issue. Mr Morahan submitted the defendant should have warned the plaintiff that Mr Younis' swearing on the lives of his wife and children was worthless. However, even if that were so, I am not persuaded saying that to her, either orally or in writing, would have dissuaded her from proceeding." (Emphasis added) 43Accordingly, his Honour held (at [67]) that "there was no breach of duty, but even if there was, it had no impact on the outcome for the [appellant]." 44Notwithstanding his finding on breach of duty his Honour considered the causation issue. His Honour held (at [71]) that even if the respondent had confirmed in writing the oral warning of the danger the appellant might lose the deposit and that the directors might have no assets to back the guarantee, she would still have entered into the contract. The matters his Honour relied on to reach this conclusion included that: (1)the appellant had reached agreement on all significant matters before seeing the respondent for advice; (2)the townhouse was the type of place she wanted to live in and was close to her son's school from which she did not wish to move him; (3)the appellant believed that she was paying below market value for the townhouse and hoped to make a capital gain; (4)the appellant knew there was a risk that she would lose her deposit if MTK became insolvent, but took the risk and made a number of inquiries on her own behalf; (5)from when she first agreed on the deal with MTK, a period of about three months went by before exchange: she had that time to reflect on the advice she had been given by Ms Johnson and whether or not to accept it; and (6)she was aware of the unusual nature of the terms of the contract concerning the deposit. 45His Honour accepted (at [73]) that the appellant "had limited business experience, and that most of her career has been in the fashion industry." However he concluded that she nevertheless "regarded the deal as a very good one, and knowingly took the risk of losing her deposit." In his Honour's view (at [74]) from his assessment of the appellant, on the assumption she bought the property at $100,000 below market value, and received a year's free rent, she was prepared to risk losing $400,000 to save $117,500, being the combined total of the savings on the purchase price and on rent. 46While his Honour accepted that Mr Bluth's advice was not contradicted by expert testimony, his Honour held (at [75]), that it was a matter for him to decide, based on the evidence, assisted by his expert evidence, as to what, on the probabilities, would have occurred had the defendant exercised its obligations properly as the appellant's solicitor. While he also accepted that Mr Bluth's evidence was "significant on the content of the duty of care owed to [the appellant] by the [respondent], and, to some extent on the causation issue", he held that it was not decisive on any issue. There is no challenge to this proposition. 47Finally, the primary judge emphasised (at [76]) that he was "quite satisfied" that no failure on the part of the respondent to give the appellant written advice "don't do this" or "advice of that nature or any other nature concerning guarantees made any difference or would have made any difference to her decision." 48In case it was found he was in error on liability, his Honour assessed the damages he would have awarded had the claim succeeded at $540,000 (the principal sum of $400,000 plus $140,000 for the capital gain). The respondent criticises one aspect of this notional finding.

Issues on appeal 49The appellant relied on numerous grounds of appeal which can be shortly stated as follows. 50First, the appellant complained that the primary judge should have found the respondent had breached his duty of care in failing to give her formal written advice as to the financial risks of the transaction and in failing to procure guarantees from MTK's directors which were correct in form and effective in substance. "Effective in substance" meant that the respondent should have ascertained by reasonable diligence that those offering the guarantees had the financial wherewithal to pay on demand. 51Secondly, the appellant raised a number of matters going to causation. She challenged the primary judge's finding that there was no causal nexus between any breach and the loss of the deposit paid in circumstances where she contended: (a)she had no information at any time establishing a particular risk of default by MTK and its directors; (b)it was likely that proper investigations would have disclosed such a risk, since MTK went into receivership less than four months after the exchange of contracts; (c)it was unlikely that in the light of proper informed warning before entering the contract, she would have proceeded with the transaction at the risk of "all the money she owned"; and (d)the loss flowed naturally from the breach of failing to procure adequate guarantees. 52Next, the appellant complained that the primary judge erred in finding that she had "engaged in wide ranging investigations about MTK" and in finding she was "aware before exchange how bad MTK's financial position was". In this context she also complained that the primary judge erred in using those findings in the respondent's favour, in circumstances where: (a)the respondent knew that her knowledge of the financial position of MTK and its directors was inadequate to support a prudent decision to continue with the transaction; (b)he still had a duty to investigate the financial position of MTK and its directors so as to properly advise and protect her; (c)if the results of this investigation were unsatisfactory, he should have attempted to arrange alternative security for the funds; (d)if other security could not be arranged, he should have informed her of the actual risk to her funds and strongly advised against exchanging contracts; and (e)in any event, he had a duty to put into place the directors' guarantees which were available. 53Finally, the appellant complained that the primary judge erred in finding that at the time of exchange that it was "clear that the position of the directors was ... parlous" on the inadequate and inaccurate basis that: MTK was insolvent; there were some ill-defined threats to a director because MTK "was apparently unable to repay a deposit"; and one director was bankrupt six years after the exchange of contracts.

Appellant's submissions 54Mr B M Toomey of Queen's Counsel, who appeared for the appellant with Mr T J Morahan on appeal but not at trial, submitted that while the primary judge found against the appellant on both breach of duty and causation, this Court should only concern itself with causation because the finding of no breach of duty was "so plainly wrong" that the Court would immediately set it aside. 55Mr Toomey's written submissions complained that the primary judge ought to have held that the respondent had a duty of care to investigate MTK's financial position, which he breached by failing to take any steps in that regard. As to causation, the written submissions argued that it was probable an investigation would have "revealed matters of concern given that [MTK] went into receivership some months after the exchange" and that such discovery "could also have triggered a demand for security from the vendor's directors as well as a bare guarantee." 56In oral argument, Mr Toomey's submissions on breach of duty primarily focussed on the respondent's failure to obtain effective personal guarantees from the vendor's directors. Such failure, he contended, meant the respondent's breach of duty was manifest. He cavilled with the primary judge's statement (at [66]) that Mr Morahan had not submitted that the plaintiff had lost anything as a result of the failure to have the guarantee signed. He emphasised Mr Bluth's evidence about the inquiries a prudent solicitor should have made about the wherewithal of the directors and about the advice the respondent should have given the appellant depending upon the outcome of those inquiries. 57There was no ground of appeal addressed to the primary judge's statement (at [66]) (see [42] above) that there was "no evidence the directors ever had the ability to honour the guarantee" she contended ought to have been taken. When that statement was drawn to Mr Toomey's attention, he contended that there was evidence which suggested that the directors were not men of straw, relying apparently on the appellant's knowledge that they had "four substantial projects on foot". 58Next, Mr Toomey submitted that the primary judge erred in his findings on causation. First, he argued that his Honour wrongly assessed the appellant as "intelligent, shrewd, and worldly", having earlier noted that she had "limited business experience". Secondly, he complained that his Honour erred in not accepting Mr Bluth's evidence as to the steps a competent solicitor should have taken in these circumstances. He contended that the matters his Honour relied on (at [66]) could not support this approach. This was because there was no foreknowledge that the appointment of a receiver to MTK was imminent, the extent of the appellant's knowledge of MTK's cash flow problems was not ascertained and there was no evidence that MTK was in severe financial difficulties at the time of exchange or that the position of the directors was also parlous. 59Mr Toomey's written submissions contended that the primary judge's conclusion that the appellant would have proceeded with the purchase no matter what the respondent had done was erroneous. He challenged each of the matters the primary judge listed (at [71]) as not capable of supporting this finding. He accepted that the appellant knew there was a risk, but submitted that she did not know MTK would become insolvent and was unaware of the degree of the risk and the extent of the cash flow problems. He submitted that proper investigation by the respondent would probably have revealed matters of concern given that MTK went into receivership some months after contracts were exchanged. 60Ultimately, Mr Toomey contended that the respondent had to protect the appellant from her reluctance to have proper regard to the risks of the purchase. He argued that the respondent was in a position to do things that she was not and as a professional person had a duty to look after her concerns. He accepted the appellant was obviously in a position of risk, but argued that was the very situation which imposed a duty on the solicitor to do such things as could be done to attempt to protect her.

Respondent's submissions 61Mr G A Sirtes of Senior Counsel, who appeared for the respondent on appeal and at trial, submitted that the Court should reject the ground of appeal relating to the allegation that the respondent breached his duty of care because he did not investigate MTK's financial position. He argued that the appellant did not run a case at trial relying on any such breach. He pointed out that that Mr Bluth did not suggest the respondent owed the appellant any such duty. In any event, he argued that there was no substance to the allegation as there was no evidence at trial as to what kind of investigations of MTK's financial position the respondent could have undertaken, no evidence "reasonable enquiries" would have made any difference to the appellant's decision to enter into the contract and, even if reasonable enquiries demonstrated MTK's solvency at the date of exchange, that that could have little bearing on its solvency at the date of settlement or between exchange and settlement. 62Next, Mr Sirtes submitted that the issue about the respondent's failure to obtain guarantees was effectively abandoned when (as the primary judge noted (at [78])) Mr Morahan conceded that "in the event a properly executed guarantee may not have helped either". He argued that this concession was properly made as there was no evidence that, had MTK's directors been personally liable, they (or any one of them) would have had sufficient assets to meet a claim on any such guarantees. 63Mr Sirtes also argued that the appellant failed to establish at trial how the respondent could have discharged the duty for which the appellant contended of exercising "reasonable diligence that those offering the guarantees had the financial wherewithal to make them effective". He pointed out that Mr Bluth did not suggest a solicitor owed any such duty in this context either. In any event, he argued that the appellant had not established what, in the circumstances of the case, the respondent could have done to ensure that the guarantees were "effective in substance", considering that an individual's financial position can change overnight. 64Finally, on the issue of breach, Mr Sirtes contended that the respondent did not breach his duty of care in failing to provide written advice in circumstances where the primary judge found (at [55]) that Ms Johnson had given the appellant blunt advice which brought home to her the risk of entering into the transaction. 65As to causation, Mr Sirtes submitted that the primary judge's findings should not be disturbed both because they turned in part on his Honour's assessment of the appellant's credit and also because they were supported by the 16 matters on which he based his conclusion that the appellant would have proceeded with the transaction no matter what advice she had received. 66Mr Sirtes also complained that the appellant's case that she would not have exchanged contracts if advised as to MTK's potential financial difficulties (presumably after making the inquiries as to its financial situation for which the appellant contended) and the fact that the directors' guarantees had not been obtained was a product of hindsight reasoning and, in any event, lacked any evidentiary foundation. He repeated his submission that there was no evidence about what inquiries the respondent ought to, or could have, made about MTK's financial position. There was also no evidence about what any such inquiries might have revealed whenever they were undertaken about, not only about the current position, but also MTK's foreseeable financial position so as to enable the Court to determine what effect such information could have had on the appellant's decision. 67Mr Sirtes also complained about one aspect of the primary judge's calculation of damages. This complaint was of a precautionary nature, no orders having been made as to damages because of the liability finding. In short, he complained that the primary judge erred in including any amount representing lost capital gain in his notional damages calculation. His primary submission was that no such amount should have been included in that calculation because the appellant did not claim, as part of her damages, the lost opportunity of owning a property in Sydney. Rather, at trial the appellant calculated her damages on the assumption she would not have invested the $400,000 into the property and claimed that amount and lost interest.

Consideration 68The relationship between solicitor and client is nearly always contractual, and the scope of the solicitor's duties will be set by the terms of the retainer: White v Jones [1995] 2 WLR 187 (at 195); [1995] 2 AC 207 (at 256 - 257) per Lord Goff of Chieveley. That usual relationship does not exclude liability in tort on the part of the solicitor: Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159 (at 172) per Dawson J (Toohey J agreeing); Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 (at [44] - [48]) per Gleeson CJ, McHugh, Gummow and Hayne JJ. However the terms of the retainer determine the work to be done by the solicitor and the scope of the duty in tort as well as in contract: Hill v Van Erp (at 167) per Brennan CJ. As Macfarlan JA (Allsop P and Sackville AJA agreeing) recently observed, "the correctness of the view expressed in Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 that a solicitor may have a duty of care extending beyond the ambit of the solicitor's retainer (a so-called penumbral duty) remains a matter of debate": Provident Capital Ltd v Papa [2013] NSWCA 36 (at [75]); see also Keddie v Stacks/Goudkamp Pty Ltd [2012] NSWCA 254; (2012) 293 ALR 764 (at [86] - [104]) per Beazley JA (Barrett JA agreeing, Sackville AJA not deciding); see also Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 (at [364]) per McPherson AJA; Swan & Baker Pty Ltd v Marando [2013] NSWCA 233 (at [54] - [62]) per Sackville AJA (McColl and Leeming JJA agreeing); AJH Lawyers Pty Ltd v Hamo [2010] VSCA 222; (2010) 29 VR 384 (at [23]) per Nettle JA (Maxwell P agreeing). 69The appellant's claim was framed purely in negligence in the allegations that the respondent breached his "duty to act carefully and competently as the [appellant's] solicitor and/or [his] duty to act in accordance with the standards of skill and competency that might reasonably be expected of a qualified practicing solicitor". This was an orthodox pleading of the ambit of a professional person's duty of care: Astley v Austrust Ltd (at [48]); Heydon v NRMA Ltd (at [143] - [148]) per Malcolm AJA; (at [362] - [363]) per McPherson AJA; Ormiston AJA agreeing with both; see also Ormiston AJA (at [649] - [652]). It was, in essence, an assertion that the respondent failed to exercise the standard of reasonable care and skill that may be reasonably expected of solicitors. As such it was governed by Part 1A of the Civil Liability Act 2002: s 5A(1). There was a tendency in the appellant's submissions, however, to frame the duty the respondent owed as one to "safeguard the appellant". Such language should be avoided. It overstates the duty of care as if it was one to "prevent potentially harmful conduct", whereas, in negligence cases, the duty is to exercise reasonable care to avoid foreseeable risk of injury to a person to whom a duty is owed: Roads & Traffic Authority of NSW v Dederer [2007] HCA 42; (2007) 234 CLR 330 (at [18]) ("Dederer") per Gummow J (Heydon J agreeing); Leighton Contractors Pty Ltd v Fox [2009] HCA 35; (2009) 240 CLR 1 (at [49]). 70The appellant's claimed loss as articulated by Mr Morahan in his opening address was her inability to recover the deposit of $400,000 and interest. It was, accordingly, a claim for recovery of pure economic loss, which fell the definition of "harm" in s 5 of the Civil Liability Act. In that context, "loss or damage may be understood as the harm suffered to [her] economic interests": Hunt & Hunt Lawyers (a firm) v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613 (at [24]) per French CJ, Hayne and Kiefel JJ. 71Whether the respondent breached his duty of care depended upon the matters set out in s 5B of the Civil Liability Act. It was a question which had to be determined prospectively by reference to the evidence: Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 (at [126] ff) per Hayne J; Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Bou Najem [2009] HCA 48; (2009) 239 CLR 420 (at [30] - [31]). 72The breach inquiry required the primary judge to identify accurately the actual risk of injury the appellant faced as it was only through the correct identification of the risk that his Honour could determine what a reasonable response to that risk would be: Dederer (at [18], [59]) per Gummow J; Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540 (at [192]) per Gummow and Hayne JJ. His Honour identified that risk (at [57]) as MTK's insolvency preventing her from getting her money back. The appellant did not cavil with that aspect of his Honour's reasons. 73Section 5B(1) of the Civil Liability Act required the primary judge to consider the issue of whether the respondent had breached his duty of care in failing to take the precautions for which the appellant contended by determining whether the risk was foreseeable, was not insignificant, and was such that in the circumstances, a reasonable person in the person's position would have taken those precautions.

Causation 74In order to establish that any breach of duty on the respondent's part caused her harm, the appellant had to establish in accordance with s 5D(1)(a) of the Civil Liability Act that that negligence was a necessary condition of the occurrence of that harm, an exercise the Act labels "factual causation": s 5D(1)(a). That determination "is entirely factual, turning on proof by the plaintiff of relevant facts on the balance of probabilities in accordance with s 5E": Wallace v Kam [2013] HCA 19; (2013) 87 ALJR 648 (at [14]). It "involves nothing more or less than the application of a 'but for' test of causation": Wallace v Kam (at [16]); Adeels Palace (at [45], [55]); Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182 (at [18]) per French CJ, Gummow, Crennan and Bell JJ. 75The relevant enquiry as to whether a contravention or omission was a "necessary condition of the occurrence of the harm" is whether that contravention or omission caused or materially contributed to the plaintiff's loss or damage: Hunt & Hunt Lawyers (a firm) v Mitchell Morgan Nominees Pty Ltd (at [45]) per French CJ, Hayne and Kiefel JJ; see also Strong v Woolworths Ltd (at [20]). "Proof of the causal link between an omission and an occurrence requires consideration of the probable course of events had the omission not occurred": Strong v Woolworths Ltd (at [32]) per French CJ, Gummow, Crennan and Bell JJ. The issue is "approached by applying common sense to the facts of the particular case": Hunt & Hunt Lawyers (a firm) v Mitchell Morgan Nominees Pty Ltd (at [43]) per French CJ, Hayne and Kiefel JJ. If factual causation is established, the plaintiff must also establish that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused ("scope of liability"): s 5D(1)(b), Civil Liability Act. 76Where it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent, that issue is determined subjectively in the light of all relevant circumstances in accordance with s 5D(3)(a) of the Civil Liability Act, pursuant to which evidence from the plaintiff about what she or he would have done is inadmissible, except to the extent that the evidence is against his or her interest: s 5D(3)(b), Civil Liability Act; Wallace v Kam (at [17]). 77Unlike the issues of duty of care and breach, the causation inquiry "is wholly retrospective [and] ... seeks to identify what happened and why": Vairy v Wyong Shire Council (at [124]) per Hayne J; see also Wallace v Kam (at [26]). Thus "[t]he proper identification of damage should usually point the way to the acts or omissions which were its cause": Hunt & Hunt Lawyers (a firm) v Mitchell Morgan Nominees Pty Ltd (at [43]).

Conclusion 78The appellant did not challenge the primary judge's conclusion (at [57]) that the respondent did not owe her a duty either to warn her about whether the proposed purchase was prudent nor of obvious risks in the transaction. She also did not challenge his Honour's conclusion (also at [57]) that the respondent had, in substance, warned her of the risk that if MTK became insolvent that may prevent her from getting her money back. Rather, the appellant's case on appeal was that the respondent owed her a duty of care to take such steps as were readily available to protect her interests as purchaser in the transaction, which included an obligation to obtain effective (in the sense of providing financial protection) personal guarantees from the vendor's directors, including investigating the directors' financial position to ensure the efficacy of any such guarantees. 79In my view it cannot be doubted that the respondent's duty to the appellant to protect her economic interests extended to ensuring that "valid (in the sense of enforceable) directors' guarantees were taken (Hunt & Hunt Lawyers (a firm) v Mitchell Morgan Nominees Pty Ltd (at [54])), but not, as I explain (see [85]) to investigate the directors' financial position to ensure the efficacy of any such guarantees. The primary judge (at [65] - [66]) appears to have accepted that proposition because, for the purpose of the causation inquiry on which he embarked, (at [68] ff) his Honour considered whether the appellant would have entered the contract if warned "the directors might have no assets to back up the guarantee". Although obtaining such guarantees was not expressly referred to in the costs agreement, the appellant instructed the respondent that MTK's directors had agreed to give them. Ms Johnson took steps to procure them and clearly regarded their provision as part of the conveyancing transaction. 80However, having referred (at [65]) to Mr Morahan's submission that the allegation of negligence in particular (e) included the allegation that the respondent had taken no proper steps to ensure there were guarantees in place, his Honour did not proceed to consider whether this alleged failure constituted a breach of the respondent's duty, merely observing it was possible that might have assisted the appellant. His Honour also assumed, without deciding, that the respondent's duty extended to making inquiries as to the directors' financial situation. His Honour did not explicitly find that the respondent was obliged to take either step and, if so whether that obligation was breached, because he proceeded (at [66], [68] ff) to the issue of causation. However, for that purpose he appears to have assumed that the respondent breached his duty of care in failing to give the appellant written confirmation of Ms Johnson's oral warning of the danger she might lose her deposit and, as I have said, the fact the directors might have no assets to back up the guarantee: see primary judgment (at [71]). 81As I have said, in the course of his initial discussion of the latter issue (at [66]), his Honour noted that Mr Morahan did not submit the appellant had lost anything as a result of either alleged omission, accepting that there was no evidence the directors ever had the ability to honour any guarantee. 82That was, with respect, not a relevant concession in a no transaction case. In such a case the appellant had to establish a breach of duty on the respondent's part and that that breach caused or materially contributed to her decision to exchange contracts. If that was established, then the issue of causation was determined in her favour by the entry into the contract and she was, prima facie, entitled to recover all loss which flowed from that act: Wallace v Kam (at [26]); Henville v Walker [2001] HCA 52; (2001) 206 CLR 459; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109 (at [33]) per Gleeson CJ; (at [57]) per Gaudron, Gummow and Hayne JJ; (at [69]) per McHugh J; Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liquidation) [2011] NSWCA 367 (at [73]) per Macfarlan JA (Campbell and Young JJA agreeing). 83The primary judge thus appears (at [66]) to have elided the issues of breach of duty and causation - his negative finding on the latter issue appears, with respect, to have distracted him from considering the scope of the respondent's duty and, depending upon that finding, whether his failure to take the steps as outlined at [65], constituted a breach of that duty. 84In my view the primary judge should have found that the respondent breached his duty to the appellant, on the assumed basis on which the case was conducted (see [18] above), in failing to obtain the directors' guarantees. Taking those guarantees was the course of action the appellant had identified as potentially protecting her from the risk of loss if MTK became insolvent. The respondent should at least have followed his instructions and procured executed guarantees of the deposit from the directors. His Honour erred (at [67]) in reaching the opposite conclusion. 85However, in my view, the respondent did not have a duty to investigate the directors' financial positions to ensure the efficacy of any directors' guarantees. Such a task would not be within the usual bounds of a conveyancing transaction, nor did the evidence suggest it fell within the "ambit of any additional assumed responsibility relied upon": Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 (at 418) per Sheller JA (Meagher JA and Abadee AJA agreeing); Clark Boyce v Mouat [1993] 3 WLR 1021 (at 1028); [1994] 1 AC 428 (at 437); Beach Petroleum NL v Abbott Tout Russell Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 (at [186] - [188]). Further, as Mr Sirtes pointed out, Mr Bluth did not suggest how practically the respondent could have undertaken such an investigation. Rather his evidence was that the only practical step in such circumstances that could avoid the possibility of the directors' financial positions changing after exchange, was, rather than taking personal guarantees, taking some form of security from the directors. The appellant did not advance a case at trial or on appeal that any such security should be taken. 86The conclusion that the respondent breached his duty to the appellant in failing to procure the directors' guarantees did not conclude the issue of liability in her favour. Rather, that conduct had to be found to have caused or materially contributed to her decision to enter into the contract. The primary judge resolved that issue adversely to the appellant in a manner which, in my view, disclosed no appealable error. 87As the primary judge explained, and the appellant does not dispute, the fundamental issue as to causation (slightly reframed - cf [24] above) was whether the appellant would have proceeded with the purchase if given the advice which she ought to have been given, in accordance with the scope of the solicitor's duty. 88The primary judge concluded (at [71]) that the appellant would have proceeded with the purchase no matter what advice she was given. This was a determination of no factual causation. Leaving aside the possibility of an exceptional case within s 5D(2) (a sub-section the appellant did not invoke), this determination entitled his Honour to conclude that the putative breaches he had assumed for the purpose of the causation inquiry (failure to give written confirmation of Ms Johnson's oral warning of the danger the appellant might lose her deposit and the fact the directors might have no assets to back up the guarantee) had not caused the appellant to suffer harm, that is to say, they were not a "necessary condition of the occurrence of the harm": Wallace v Kam (at [16] - [18]); Adeels Palace (at [53]). Accordingly the scope of liability considerations in s 5D(1)(b) did not arise. 89The primary judge's opinion (at [71]) of what the appellant would have done if she received the advice she contended the respondent ought to have given her turned on his assessment of her state of mind, demeanour and conclusions as to her credit. That assessment is "pre-eminently a matter in which a trial judge has a considerable advantage over an appellate court": Board of Bendigo Regional Institute of Technical and Further Education v Barclay [2012] HCA 32; (2012) 86 ALJR 1044 (at [141]) per Heydon J. In exercising its rehearing function in relation to that issue, the Court must "observe the 'natural limitations' that exist in the case of any appellate court proceeding wholly or substantially on the record, [which] include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses' credibility and of the 'feeling' of a case which an appellate court, reading the transcript, cannot always fully share": Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 (at [23]) per Gleeson CJ, Gummow and Kirby JJ. 90The primary judge's assessment of the appellant's probable reaction if given written confirmation of Ms Johnson's oral warning of the danger she might lose her deposit and of the fact the directors might have no assets to back up the guarantee, was an evaluative determination about which reasonable minds may differ. This Court can only interfere in such an assessment if satisfied it is erroneous. 91The appellant challenges each of the primary judge's reasons (at [71]) for concluding that "the [appellant] would have entered the contract even if the defendants had given her a written confirmation of Ms Johnson's oral warning of the danger she might lose her deposit and the fact the directors might have no assets to back up the guarantee" on the basis that none of those matters, taken individually or in total, could "affect the duty to safeguard the appellant". I have already explained why that is not the correct formulation of the respondent's duty to the appellant. 92In my view the matters to which the primary judge referred (at [71]) were capable of supporting his Honour's conclusion as to the appellant's state of mind and determination to proceed with the contract no matter what. It is unnecessary to rehearse each of the matters to which his Honour referred. Nor is it necessary to consider them individually. Although enumerated seriatim, they represented the factors which cumulatively led to his Honour reaching his causation conclusion. None could be suggested to be manifestly irrelevant to his Honour's conclusion such as to cast doubt upon it. They were, too, to be read in the light of the "penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance ... of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation": Biogen Inc v Medeva plc (1996) 36 IPR 438 (at 452) per Lord Hoffmann. 93Given that approach, his Honour's causation conclusion has to be understood in the context of his critical findings that the appellant believed she was getting a very good deal in paying below market value for a property on which she hoped to make a capital gain, that the location and type of property suited her family ( - (f)), that she rejected Ms Johnson's advice to delete cl 30 from the contract, that she exchanged contracts despite Ms Johnson's advice that it was not in her best interests to do so and that she understood by the time she finished the conference with Ms Johnson on 22 July 2005, that "by entering the contract she was at [obvious] risk [of which she was warned] of losing her deposit if MTK became insolvent ... [and] knew at that time that MTK was in significant financial difficulties": primary judgment (at [55]; [57] and [58]). 94Mr Toomey submitted that, even accepting his Honour's finding that the appellant knew there was a risk, she did not know that MTK would become insolvent or know the degree of the risk. Neither I would add did the respondent, nor as Mr Sirtes submitted did the appellant conduct the case at trial on the basis that the respondent was under a duty to investigate MTK's financial position. 95Having reviewed the evidence and submissions at trial, and bearing in mind the advantages the primary judge enjoyed to which I have referred, I can discern no error in his Honour's conclusion at [71]. The appellant has not identified any incontrovertible facts or uncontested testimony which demonstrate that the primary judge's conclusions are erroneous, nor was his Honour's decision "glaringly improbable" or "contrary to compelling inferences": Fox v Percy (at [28] - [29]) per Gleeson CJ, Gummow and Kirby JJ. 96Although it is academic, I should record that the appellant's complaint about the notional assessment of damages should be accepted. In the course of opening the case, Mr Morahan informed the primary judge that the appellant claimed only the loss of the deposit plus interest.

Orders 97I would dismiss the appeal with costs. 98BASTEN JA: This appeal should be dismissed and the appellant ordered to pay the respondent's costs. Subject to what follows, I agree with the reasons of McColl JA. 99I do not join in the statements of general principle. A statement as to the effect of a statutory provision which can gain support from cases under the general law and other statutes is unlikely to assist in the resolution of the particular case. A more nuanced approach may be necessary. For example, it is commonly true to say that the duty of care owed by a solicitor in a conveyancing transaction will not require an investigation of the financial status of the vendor. However, the relevant advice in the present case might have been that the client should take the usual steps adopted by financiers, that is to require directors' guarantees supported by security. A request for security from a director of a company involved in land development may reveal an absence of capacity, because secured guarantees of the company's debts would already have been provided to the company's financier. Accordingly, in one sense, the proper advice and consequent instructions would be calculated to reveal the financial status of the prospective guarantors. 100As noted by Allsop P (with the agreement of Sackville AJA), in Provident Capital Ltd v Papa [2013] NSWCA 36, a case involving the adequacy of independent legal advice as to the effect of a mortgage, at [2]: "The extent of the responsibility of a solicitor in the provision of independent legal advice will depend on the retainer and the circumstances attending the retainer and its execution. It is therefore unwise to be in any way dogmatic in general terms about what needs to be done in fulfilment of the retainer. It is for that reason that any mechanical approach that limits independent advice to explaining the content of the legal obligations in the document in question may lead, in any given circumstances, to the provision of inadequate advice. If the retainer is to give legal advice, depending on the circumstances, that may (as it did here) extend to explaining the practical consequences of the legal obligations arising from the relevant document in the known circumstances. It may be apparent, as it was here, that the legal and practical consequences to a client of entering into a transaction may be significant, but are not such as can be assessed without financial or further financial information or advice. In such circumstances, the solicitor may be obliged to counsel in appropriate terms (perhaps strong terms) about the risks in proceeding without further information or advice. Depending upon the circumstances, such as apparent ties of loyalty, whether of blood or love, the apparent risks may have to be brought home with clarity and force." (Emphasis in original.) 101The risk faced by the appellant was that the vendor would not be able to complete the transaction because it was or would, at the expected time for completion, have become insolvent and would, therefore, also not have been able to refund the "deposit". That risk materialised and thus constituted the harm suffered. The claim required that the Court identify the steps which should have been taken by the solicitor and were not (the "precautions", in the language of s 5B(1) of the Civil Liability Act 2002 (NSW)). As McColl JA explains at [80] above, the relevant precautions relied on were (a) to obtain guarantees from the directors and (b) advise the appellant that the guarantees might not provide useful protection. 102These two steps give rise to different issues with respect to causation. With respect to the failure to advise, it is necessary to ask whether, if properly advised, the appellant would not have entered into the transaction. The trial judge did ask that question and was not persuaded that, had the appropriate advice been given, she would have been dissuaded from the purchase on the terms of the executed contract: at [66] and [71]. 103So far as the failure to obtain guarantees was concerned, a different question must be asked, namely would the guarantees have protected the appellant, in part or in whole from the loss suffered, if obtained? In the same passage - at [66] - the trial judge noted that counsel for the appellant "did not in the end submit that the plaintiff had lost anything as a result of the failure to have the guarantee signed". He was correct, in those circumstances, to find that the breach caused no loss. 104For the reasons given by McColl JA, the challenge to the factual findings has not been made good. 105HOEBEN JA: I agree with McColl JA and the additional reasons of Basten JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 December 2013