Watkins & 6 Ors T/as Watkins Tapsell v De Varda

LOWER COURT Supreme Court JURISDICTION : LOWER COURT SC 20246/99 FILE NUMBER(S) : LOWER COURT Davies AJ JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40034/03 SC 20246/99 SHELLER JA IPP JA FOSTER AJA Friday 12 September 2003 BERT WATKINS & 6 ORS T/AS WATKINS TAPSELL V JOSEPH de VARDA FACTS

In 1997, the respondent agreed to acquire half of Mr Foch's interest in a Cambodian property for US$195,000. The appellant, through Mr Coates, was Foch's solicitor. Foch's interest in the property was contained in an agreement between himself (described as the "Owner") and two Cambodian residents, Mr and Mrs Sum (described as "the Agent"). The agreement did not provide for the sale of the Cambodian property, as only Cambodian residents can own land in Cambodia. The main purpose of the agreement was to provide that Mr and Mrs Sum would hold the property on Foch's behalf as agents.

Foch informed the respondent that Coates had the title deeds in his office and could prepare the necessary legal documents to transfer the 50% interest in the Cambodian property. Foch sent the respondent a letter stating that Coates had informed him that it was unnecessary for the respondent to appoint another solicitor, as Coates could act for them both. The respondent, Coates and Foch met on 19 January 1998. According to Coates, he informed the respondent that he was acting for Foch, that he had no knowledge of Cambodian law and that he was merely reproducing documents as requested by Foch. According to the respondent, Coates informed him that he was acting for both Foch and the respondent.

Mr Coates drew up two so-called agreements on 19 January 1998. Foch signed one, and the respondent signed the other. The respondent then delivered to Foch the US$195,000 by way of gold bullion and cash. On 22 January 1998, the respondent agreed to acquire Foch's remaining 50% interest in the Cambodian property. On 23 January 1998, Coates drew a further agreement, which the respondent (but not Foch) signed. The respondent delivered a further US$195,000 by way of gold bullion and cash to Foch.

None of the agreements drawn by Coates was effective. Foch was unable to repay any part of the $390,000 gold bullion and cash that the respondent had given him. The Cambodian owners of the property denied that the respondent or Foch had any rights to the property. The respondent sued the appellants claiming that an express retainer existed between the appellant and himself.

At trial, Davies AJ rejected this contention, but upheld the respondent's alternative argument that the appellant owed the respondent a duty of care in the absence of a retainer, which it had breached. His Honour also held that Coates was guilty of misleading conduct pursuant to s 42 of the Fair Trading Act 1987. Judgment was awarded in favour of the respondent in the sum of $872,081. The appellants appeal his Honours findings. In the course of the appeal, the appellants sought to add two additional grounds of appeal.

I. The appellant is permitted to add the first additional ground of appeal; that his Honour erred in holding that a genuine transfer of gold bullion and cash occurred. The respondent received ample notice of the appellant's intention of making the amendment and would suffer no prejudice.

II. The appellant is not entitled to add the second additional ground of appeal; that there was no evidence or finding supporting the establishment of causation. The issue was not raised at trial and there existed evidence and findings based on the evidence that the appellant's breaches of duty were causative of the respondent's loss.

III. The appellant owed the respondent a duty of care:

a. The mere absence of a retainer does not mean that the appellant could not owe the respondent a duty of care: Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1. The respondent had established and identified factors of significance, in addition to the foreseeability of harm, which gave rise to a duty of care in the absence of a retainer.

b. The contractual limitations that defined the legal relationship between the appellant and Foch did not exclude or restrict the scope of any duty that was owed by the appellant to the respondent. c. The purported disclaimer of responsibility by Coates, that he was not an expert in Cambodian law and was unable to advise the respondent whether the prepared document would effectively transfer the rights in the property under Cambodian law, was not effective and did not exculpate Coates. One did not need to be an expert in Cambodian law to realise that the documents prepared by Coates did not and could not effectively transfer rights to the Cambodian property. d. Coates was not merely performing a limited task, namely, reproducing an "earlier document". His task was not simple or so limited. In any event, the documents prepared by Coates did not reproduce the original agreement.

e. The respondent's reliance on Coates was reasonable and foreseeable.

IV. The appellant breached its duty of care. While the respondent was not contractually a client of the appellant, Coates knew that the respondent was relying on him to proceed in accordance with the respondent's interests. Once that situation arose, Coates was in a position of conflict. He did nothing to alleviate that position. The remarks of Davies AJA in Alexander v Perpetual Trustees WA Limited [2001] NSWCA 240 are endorsed. Coates should have expressly said that he could not protect the respondent's interests and the respondent should obtain independent legal advice: Waimond Pty limited v Byrne (1989) 18 NSWLR 642 at 643. Breach of s 42 of the Fair Trading Act

V. His Honour did not err in finding that there was a misrepresentation by the appellant constituting a breach of s 42 of the Fair Trading Act.

VI. Dean v Allin and Watts [2001] 2 Lloyds Rep 249 at 257 does not apply, as Coates went further than the mere drafting and presentation of documents.

VII. Yorke v Lucas (1985) 158 CLR 661 does not apply, as this is not a case where a person, Coates, simply passed on information, disclaiming any belief in its truth or falsity. Rather, Coates prepared the documents and passed them over as having a quality which they did not possess, namely as documents on the faith of which the respondent should pay the purchase price of the property he sought to purchase. VIII. The trial judge did not err in his factual findings.

IX. The trial judge did not err in holding that the documents signed on 19 and 23 January 1998 were of no legal effect whatsoever. Even were a constructive trust able to be proved after difficult and unpredictable litigation, this is not to the point as the documents were hopelessly drawn and of no practical assistance to the respondent.

X. His Honour's statement that the conduct of Coates "bordered on the dishonest" was inappropriate and the evidence did not justify it. However, the error had no effect on his Honour's conclusion.

XI. The respondent was not guilty of contributory negligence. The respondent was not negligent in not obtaining independent legal advice when the solicitor he trusted, Coates, did not advise him to do so. He was not negligent in acting on the faith of the documents prepared by Coates when the documents were prepared for that purpose.

XII. There was no design on the part of the respondent to defraud the appellant. His Honour was entitled to hold that a genuine transfer of gold bullion and cash took place. ORDER

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40034/03 SC 20246/99

SHELLER JA IPP JA FOSTER AJA

Friday 12 September 2003 BERT WATKINS & 6 ORS T/AS WATKINS TAPSELL v JOSEPH de VARDA

Judgment 1 SHELLER JA: I agree with Ipp JA. 2 IPP JA:

De Varda's claim against Watkins Tapsell 3 This case turns substantially on the question whether the appellants, a firm of solicitors (Watkins Tapsell), owed a duty of care at common law to the respondent (De Varda). 4 De Varda claimed that an express retainer existed between Watkins Tapsell and himself, but the trial judge, Davies AJ, rejected this contention. His Honour, however, upheld De Varda's alternative argument that Watkins Tapsell owed him a duty of care even in the absence of a retainer. 5 His Honour also held that a partner of Watkins Tapsell, Mr Matthew Coates, had been guilty of misleading conduct in terms of s 42 of the Fair Trading Act 1987. 6 Davies AJ awarded judgment against Watkins Tapsell in the sum of $872,081. This was made up of a sum of US$390,000 worth of gold bullion and cash which De Varda had handed over to Mr Charles Foch on 19 and 23 January 1998 in the erroneous belief that he was acquiring interests in certain property in Cambodia (the "Cambodian property") from Foch, together with interest on that amount calculated in accordance with Schedule J to the Supreme Court Rules. 7 Watkins Tapsell appeal on several grounds relating to his Honour's findings as to their liability to De Varda.

Foch, De Varda, Charnay and Verren 8 The case as I have described it is not particularly unusual, but there were certainly remarkable aspects about it. One is the character and background of Foch, De Varda and De Varda's witnesses. 9 Mr Foch, who was of French descent, held himself out to be a descendant of Marshal Foch, of World War I fame. He had a history of dealings in arms and other unusual commodities in several countries and with organisations that could fairly be described as shady. He apparently had had transactions with Colonel Rambuka at the time of the first coup in Fiji, was said to have been involved in transactions with the OAS, a secret French military organisation, and with Sandline, a London-based supplier of mercenaries and arms to various entities. 10 De Varda had a long history of dealings with Foch, with whom he was personally friendly. These included dealings in foreign investments of an unconventional kind and in gold bullion and jewellery. As a result of these transactions Foch had been indebted to De Varda in large sums of money that had never been repaid. It appears that at the time of the transaction, the subject of the present litigation, Foch's debts to De Varda had become time barred or had been forgiven. Despite this history, De Varda said that it was "very hard" for him not to trust Foch. Davies AJ observed that Foch seemed to have been a person of considerable charm and persuasiveness. His Honour remarked that both De Varda and Coates appeared to have allowed Foch "to encourage them into actions which on their part were foolish". 11 De Varda described himself as a writer, an artist and a businessman. He has had many occupations. He grew up in Egypt and in 1962 undertook a course of study in biochemistry at Cairo University. He said that before the age of 20 he had invented a rocket which he had launched in Egypt and this had resulted in a lot of publicity in the local newspapers, which he offered to produce. He said that he had conducted research into cancer and Mrs Indira Ghandi had offered him land and funding to build a cancer hospital in India. Articles in Indian newspapers about this matter were put into evidence. He said that he had discovered a cure for baldness but had lost the formula. He appears for many years to have been a dealer in gold bullion and gemstones. He kept gold and gemstones in various safes over which he had control. He said that he was writing a literary work which was extremely confidential and which in some way was concerned with religious matters, the details of which he refused to disclose. 12 Two witnesses called by De Varda, Mr Patrice Charnay and Mr John Verren, appeared to be personalities as unusual as Foch and De Varda. They also had a history of unconventional occupations and dealings, but it is unnecessary to elaborate further in this regard.

Foch's proposal 13 A second remarkable feature of the case was the background to the transaction, the subject of the litigation. 14 In 1997 Foch owned property and other assets in Cambodia but became concerned about his personal safety there. He decided to liquidate and remove all his assets that were located in that country. 15 By late 1997 or early 1998, Foch was in urgent need of money to pay some members of the OAS. He seems, at that stage, to have decided to attempt to defraud De Varda so as to obtain the money that he needed. 16 In about September 1997 Foch and De Varda had discussions about the establishment of a bamboo based paper mill at the borders of Cambodia, Vietnam and Laos. This was to involve the conversion of bamboo pulp into paper at a mill in the north of Cambodia. De Varda became interested in this venture and began spending a large amount of money in obtaining a feasibility study and blueprints for the proposed plant. The feasibility study showed that the mill would employ 4,000 Cambodians and could produce US$50,000,000 a year worth of paper. 17 Foch proposed a plan whereby De Varda would acquire a 51% interest in the whole enterprise and Foch 49%. By 19 January 1998 De Varda had invested $2,800,000 in the enterprise. This was the cost of blueprints and a feasibility study as well as reports from architects and other consultants. He appeared to have expended this money without having any firm rights to the project, but simply trusted Mr Foch. 18 In December 1997 Foch informed De Varda that he had decided to sell 50% of his interest in the Cambodian property for US$225,000. This was a four-storey office/residential building and land known as 16A Street 360 Phnom Penh, Cambodia. This building was to be the headquarters for the proposed paper mill venture. De Varda was interested in purchasing the Cambodian property and negotiations commenced.

De Varda agrees to acquire Foch's interest in the Cambodian property 19 Eventually, Foch persuaded De Varda to acquire half of his interest in the Cambodian property for US$195,000. Watkins Tapsell, through Coates, had long been Foch's solicitor. Davies AJ found that, at the time, Watkins Tapsell were also De Varda's solicitors. At the suggestion of Foch, he and De Varda saw Coates about the proposed transaction and, on 19 January 1998, Coates drew up two so-called agreements, and, on that date, Foch signed one and De Varda signed the other. On the same day De Varda delivered to Foch the US$195,000 by way of gold bullion and cash. 20 On 22 January 1998, Foch told De Varda that he feared for his life in Cambodia and was compelled to sell his remaining half interest in the Cambodian property. De Varda agreed to acquire that half as well. On 23 January 1998, Coates drew a further agreement which De Varda (but not Foch) signed and De Varda handed over another US$195,000 by way of gold bullion and cash to Foch. 21 Neither one of the agreements drawn by Coates on 19 and 23 January was legally effective. Foch immediately disposed of the US$390,000 gold bullion and cash that De Varda had given him (he handed it over to two men who, it was said, were members of the OAS). It appears to have been accepted at trial that Foch was not able to repay any part of the US$390,000 to De Varda. The Cambodian owners of the Cambodian property denied that Foch or De Varda had any rights to that property. De Varda was left with having given Foch US$390,000 worth of gold bullion and cash and having received nothing in return.

Watkins Tapsell held liable; they appeal; the grounds of appeal 22 Davies AJ held that, in regard to the transaction involving the Cambodian property and the handing over of the US$390,000, Watkins Tapsell owed De Varda a tortious duty of care that they, through Coates, had breached in various respects. As mentioned, his Honour held that these breaches had caused De Varda to sustain damage, which led to an award of judgment against Watkins Tapsell in the sum of $872,081. 23 Watkins Tapsell appeal against his Honour's decision on various grounds. I shall set out the grounds of appeal in summary form. They are as follows:

(1) The judge erred in holding that Watkins Tapsell owed and breached a duty of care to De Varda in circumstances where: (a) There was no retainer between Watkins Tapsell and De Varda.

(b) There was an express disclaimer of responsibility by Watkins Tapsell to De Varda. (c) De Varda was informed that Watkins Tapsell were acting for the other party in the transaction (Foch) and not for De Varda. (d) Any reliance by De Varda on Watkins Tapsell, so as to give rise to a legal duty owed to De Varda, was neither reasonable in fact nor anticipated by Watkins Tapsell.

(2) The judge erred in holding that there was a misrepresentation constituting a breach of s 42 of the Fair Trading Act 1987 by Watkins Tapsell in circumstances where;

(a) De Varda was expressly informed that: (i) Watkins Tapsell were merely reproducing a document and making appropriate consequential changes, as their client (Foch) had requested. (ii) Watkins Tapsell had no knowledge of Cambodian law and no idea whether the document and the letters would achieve the result that De Varda wanted. (iii) Watkins Tapsell were looking after Foch's interests. (b) De Varda was aware that the documents required the signature of the Cambodian title-holders (Mr and Mrs Sum) who were resident in Cambodia.

(3) The judge erred in law in holding that Coates should have informed De Varda, not only that he, Coates, was acting for Foch, but also that De Varda should obtain independent legal advice and that he, Coates, would not proceed in the transaction unless he did.

(4) The judge made several errors in drawing inferences from established facts that were neither supportable nor probable when compared with the known facts. I shall not at this stage set out all the errors asserted, but shall deal with each one later in these reasons.

(5) The judge erred in holding that De Varda was not guilty of contributory negligence. 24 Watkins Tapsell sought to add two further grounds of appeal. Firstly, they sought to argue that his Honour erred in holding that a genuine transaction occurred involving the transfer of gold bullion worth approximately US$390,000. Secondly, they sought to argue that the judge erred in ordering judgment against Watkins Tapsell in the absence of any finding or any evidence capable of supporting such a finding that the breaches of duty (as found by his Honour) were causative of De Varda's loss. 25 During the course of argument the Court indicated to the parties that it would deal with the application to add the ground that his Honour erred in holding that a genuine transaction occurred when handing down its reasons for judgment. For my part, I would allow the amendment in respect of this ground. I do so as De Varda received ample notice of Watkins Tapsell's intention to make the amendment in question and I do not think that he would be prejudiced if the amendment were to be allowed. I shall deal with the merits of this ground later. 26 As regards the ground relating to causation, the Court dismissed the application made by Watkins Tapsell to introduce this ground and stated that it would give reasons for its decision when delivering its reasons for judgment. I shall give my reasons for joining in that decision in the course of these reasons.

The judge's views as to credibility 27 Davies AJ gained the impression that De Varda was genuine (and not a cunning person, as submitted on Watkins Tapsell's behalf). His Honour said that De Varda was "a basically honest person", and was not making an exaggerated or false claim. 28 Nevertheless, his Honour did not accept all of De Varda's evidence. He observed: "I consider that Mr De Varda's recollection of detail was somewhat deficient and, in weighing up the probabilities of the case, I have taken into account the whole of the evidence". 29 Davies AJ commented on two other witnesses called by De Varda, namely, Charnay and Verren. His Honour accepted that Charnay was telling the truth to the best of his ability and "the basic story which Mr Charnay told was truthful". Verren gave his Honour the impression that he was not always speaking from honest recollection and was "inclined to improve a story". The learned judge saw no sufficient reason however to reject certain critical evidence that Verren gave about the handing over of several bars of gold by De Varda to Foch. Davies AJ concluded that the basic evidence of Charnay and Verren, insofar as it related to De Varda, should be accepted. 30 His Honour noted that the evidence regarding the proposed paper mill in Cambodia "stretches the imagination". Nevertheless, he said: "Mr Foch, Mr De Varda and Mr Verren have led extraordinary lives. One may puzzle over their activities but there is no sufficient ground to reject the evidence that they engaged in the curious transactions, which were described". 31 In an important passage his Honour commented on the evidence of Coates, who was the only witness called on Watkins Tapsell's behalf. His Honour said: "Mr Coates' affidavit evidence was clear and so also was his oral evidence. I consider that, on matters of detail, his evidence is more reliable than that of Mr de Varda. However, aspects of his evidence have led me to conclude that Mr Coates has not faced up to the full truth of the matter and that he has slanted his evidence in his own best interests". 32 His Honour gave three examples of aspects of Mr Coates' evidence that troubled him, and Mr Pembroke SC, senior counsel for Watkins Tapsell, submitted that his Honour misunderstood these matters and erred in considering that they reflected adversely on Mr Coates. 33 The first aspect of Coates' evidence that concerned Davies AJ was described by his Honour as follows: "[D]uring his cross examination by Mr De Varda, Mr Coates said that he did not know that foreigners could not own property in Cambodia. Indeed, paragraph 150 of his affidavit said, 'I deny that I had knowledge that foreigners are not allowed to own any property in Cambodia'. Yet, right at the start of the subject events, Mr Coates was informed by Mr Foch that only residents could be registered as owners of land in Cambodia. The evidence of Mr Coates to which I have referred was not truthful, at least in the sense of disclosing the whole truth". 34 When Foch initially instructed Coates, he said (according to Coates): "All I need you to do is to make changes to the existing agreement. I had it prepared by an expert in Cambodia when I bought it. It is prepared in this way because foreigners cannot own an interest in property in Cambodia directly. This is the way they structure their land ownership where foreigners are involved. It is held in the name of a local citizen on the foreigner's behalf, and this is the accepted practice". 35 Later in his affidavit, Coates said: "I deny that I had knowledge that foreigners are not allowed to own property in Cambodia as alleged in paragraph 46 of de Varda's first affidavit and paragraph 65 and 66 of de Varda's second affidavit". 36 De Varda asserted in his affidavits that in mid-1998 Foch told him that Coates knew, prior to the preparation of the agreements, that foreigners were not allowed to own property in Cambodia. 37 Mr Pembroke submitted that Davies AJ should not have characterised Coates as slanting the evidence in his own best interests when he had stated earlier in his affidavit that Foch had told him in October 1997 that foreigners could not own property in Cambodia. 38 Coates was cross-examined by De Varda about this issue as follows: "Q. Isn't it true that you knew there would be no title transfer because foreigners could not own property in Cambodia? A. No that is not true".

The following exchange occurred: "Q. Did you know that foreigners cannot own property in Cambodia. A. No I didn't know that. Q. And yet in your affidavit it states in black and white that Foch told you, and this is why you had written to the Department of Foreign Affairs, didn't you? A. No, the paragraph 17 in my affidavit says that I was informed by Foch that foreigners cannot own an interest in property in Cambodia directly the way they structure their own land where foreigners are involved it is held in the name of a local citizen on the foreigner's behalf and this is the accepted practice. I assume that that was an appropriate and authorised manner for foreigners to hold investment in Cambodian property. Q. On the 19th of January did you mention to me that foreigners cannot own properties in Cambodia. 39 Davies AJ then questioned Coates. HIS HONOUR: Q. You were asked by Mr De Varda whether foreigners - you knew that foreigners could own property in Cambodia or could not own property in Cambodia. Why did you say 'no' you didn't know that? A. I thought I was saying that I felt that foreigners could own property in Cambodia using the mechanism that Mr Foch had used. Q. You knew at least that they couldn't own property directly? A. Yes. Q. They couldn't be registered as the holder of real estate in Cambodia? A. Yes. Q. Well never mind - I don't know that your answer was the truth the whole truth and nothing but the truth? A. The way I interpreted the agreement". 40 The cross-examination proceeded: "Q. So you knew that foreigners could not own properties in - a property in Cambodia, didn't you? A. Directly, yes, that is correct. Q. But you have not mentioned that to me on the 19th of January 1998 when I entered into the agreement? A. That is correct. Q. So you kept me in the dark regarding that information, didn't you? A. No I didn't keep you in the dark. That implies that I deliberately refrained from telling you something. What I did was, was, I prepared a document as instructed and I understood that you and Mr Foch had had discussions in relation to the transfer of this property and that I was merely preparing a document to put into effect those agreements subject to the overriding disclaimer that I gave. Q. Mr Coates, you said in your affidavit that you told me will that on that day that you mentioned to me - Joseph - those are your words, which I denied hearing them in my affidavit - you said Joseph I have know [sic - no] knowledge of Cambodian law". So, why didn't you mention to me as - or warning me or alerting me that foreigners cannot own properties and the title deed that you will be relying on will be this agreement, that you signed on the 19th of January, and yet, all the time when I was asking you regarding title deed you said to me. It is in storage, and, after the 19th of January, and after the 23rd of January, when I asked you to prepare a lease agreement and I asked you, have you registered the property under my name you said 'yes', didn't you? A. No I did not. Q. And why did you continue and represented me to prepare a lease agreement? A. Because you instructed me to, subject to the overriding disclaimers that I had given to you". 41 The fact is that, to Coates' knowledge, foreigners could not be the legal owners of property in Cambodia. Whether they could be equitable owners is not known; it is not even known whether the concept of equitable ownership exists under Cambodian law. Accordingly, Coates' denial that he knew that foreigners could not own property in Cambodia was disingenuous. Moreover, his denial that he knew that there would be no title transfer was false. He knew that foreigners could not own property in Cambodia; therefore, he knew that there could be no title transfer to De Varda. 42 In my view, the statement by Davies AJ that Coates, in giving the evidence that he did, was not truthful in the sense that he did not always disclose the whole truth was justified. 43 The next aspect of Coates' evidence that troubled Davies AJ was that Coates' affidavit evidence (which constituted in effect his evidence in chief) did not include any statement by De Varda as to why he attended Coates' office or as to the nature of the transaction which Coates was to document. Davies AJ said that Coates' evidence on this point was "unduly simplistic" and "he put out of his mind matters which would favour Mr De Varda's case". In making these observations, Davies AJ had in mind, it seems to me, Coates' evidence that on 19 January 1998 one or other of Foch or De Varda told him that, by the agreements that they wished him to draft, they were seeking to achieve "a transfer of a 50% interest in the property in Cambodia from Mr Foch to Mr De Varda". Coates accepted instructions on that basis, subject to a warning by him that he had no knowledge of Cambodian law and, for that reason, did not know whether the agreements he drew would achieve that end. 44 In my respectful view, Davies AJ was right to have reservations about Coates' omission to mention the full basis on which he was instructed. The part that was omitted was important indeed. 45 The third aspect of Coates' evidence which Davies AJ regarded as unsatisfactory was that: "Mr Coates has not clarified what occurred to the agreement which he has described as 'the original title deed'. In a letter of 20 April 1998, he said that he had delivered it to … Mr Foch at his request. If Mr Coates regarded the document as a 'title deed', it is inexplicable that he did not hold it for Mr De Varda, who had purchased the property". 46 Coates' evidence regarding his references to the title deed was obscure and at times incomprehensible. I refer to these below. In my view, his Honour's criticism of this part of Coates' evidence was entirely justified. 47 I therefore reject the submission that his Honour was in error when referring to the aspects of Coates' evidence that led him to an unfavourable view of Coates' credibility. 48 His Honour concluded, in regard to credibility, as follows: "In my opinion, Mr De Varda's affidavit and oral evidence presents a plausible and probable story. Mr Coates' affidavit and oral evidence do not satisfy me as to why Mr De Varda acted as he did or why Mr Coates acted as he did".

In my view, these findings were open to the learned judge.

The events leading to the drafting of the 19 January 1998 documents 49 Another remarkable aspect of the case concerns the documents that Coates drafted pursuant to his instructions to enable Foch and De Varda to achieve "a transfer of a 50% interest in the property in Cambodia" from the one to the other. The relevant facts were hotly disputed and it will be necessary for me to set them out in detail. Unless otherwise indicated, the facts set out below were common ground, or are based on Coates' evidence. 50 In September 1997 Foch and De Varda discussed setting up the paper mill in Cambodia. Thereafter, Foch showed De Varda a feasibility study concerning the mill and the two had discussions with Charnay who was also to be involved in the project (Charnay had been a friend of Foch's for some time). 51 On 24 October 1997 Foch consulted Coates about the Cambodian property. He showed Coates an agreement that he had signed when buying the property on 10 November 1992 (the "1992 Agreement"). It is to be noted that the 1992 Agreement did not provide for the sale of the Cambodian property. The main purpose of the agreement was to provide that Mr and Mrs Sum would hold the property on Foch's behalf. Foch instructed Coates to prepare a new agreement to transfer one-half of his interest in the property to a South African named Van der Bergh, basing the new agreement on the 1992 Agreement. Foch told Coates that Van der Bergh was buying 50% of the Cambodian property for $225,000. 52 In the course of this discussion Foch said to Coates: "All I need you to do is to make changes to the existing agreement. I had it prepared by an expert in Cambodia when I bought it. It is prepared in this way because foreigners cannot own an interest in property in Cambodia directly. This is the way they structure their land ownership where foreigners are involved. It is held in the name of a local citizen on a foreigner's behalf and this is the accepted practice".

Coates replied: "I can prepare the document but I have no knowledge of Cambodian law and have no idea whether this document achieves what you want".

Foch said that he understood this but still asked Coates to prepare the document. 53 The 1992 Agreement was expressed to be between Mr Chan Sum and Mrs Chan Sum of Cambodia who were described as "the Agent" and Foch who is described as the "Owner". The agreement was expressed to record the transactions between the Agent and the Owner "concerning the holding of the title of [the Cambodian property]" (described in the agreement as "the property"). 54 Clause 1 of the 1992 Agreement provided: "1. INTERPRETATION In this Agreement, the following words shall have the following meanings: 'Property' means the land plot situated at No 16A Street 360 Phnom Penh Kingdom of Cambodia as represented by the title deeds and/or documents as officially or duly registered with the Government Authority, together with the building No G35 which is constructed thereon, including without limitation all the decoration, furniture, equipment affixed or placed therein, presently or in the future, and which title deeds or title documents are represented in the documents attached hereto and made a part hereof. 'Title Document' means the documents of ownership of the title representing the Property as herein defined. 'Government Authority' means any body or agency or entity of the government of Cambodia empowered to effect or grant the registration of the title to the Property and/or recognition of the holding of the Property as herein defined". 55 Clause 2 provided that the 1992 Agreement "shall not be terminated or assigned to any other person without the approval of the Owner". Clause 3 provided an acknowledgment that the Owner was the true owner of the property and that he had paid US$45,015 to acquire the property and was in the process of making alterations and additions to it at the estimated sum of US$20,881. By clause 4.1 the Agent undertook to deal with the transfer and disposal of the property and "any rights … appertaining thereto" in accordance with the Owner's instructions. Clause 4.2 provided: "The Agent shall … whenever requested by the Owner, sign, execute, and deliver any transfer documents or any other instruments or documents relating to the Property … as submitted to the Agent by the Owner".

Clause 6.2 contained a warranty by the Agent that the execution of the 1992 Agreement "has been duly authorised by the Government Authority". The parties thereto executed the 1992 Agreement and their thumb prints were affixed to it. 56 Davies AJ commented in regard to the 1992 Agreement: "One can see that the agreement was drawn in a circumstance that only a resident could own land in Cambodia. It may be assumed that the subject property was registered in the names of Cambodian residents, presumably Mr and Mrs Sum. The agreement described the property as the land plot represented by 'the title deeds and/or documents as officially or duly registered with a Government Authority'. The agreement itself was an agency agreement imposing personal obligations on Mr and Mrs Sum to hold the property on behalf of 'the owner', as Mr Foch was described. Provided that the Cambodian legislation dealt with merely ownership of land and not with the holding of interests in land in Cambodia, there would be reason to think that the agreement could impose personal obligations upon Mr and Mrs Sum which could be enforced in the courts of Cambodia. Such concepts are familiar concepts in Australian law". 57 On 12 November 1997 Coates sent a draft agreement to Foch under cover of a letter of that date. The letter stated: "Your instructions were for us to use the existing agreement between yourself and Mr and Mrs Sum as the basis of a new agreement incorporating Nick van de [sic] Borgh [sic] as a half owner of the Property. We have merely reproduced the documents, as you instructed, from the precedent you provided. We do not have any knowledge of Cambodian law. You should seek legal advice from a lawyer familiar with Cambodian law to confirm that the agreements are satisfactory and enforceable under Cambodian law". 58 The transaction with Van der Bergh did not proceed and in early January 1998 Foch and De Varda discussed the purchase by De Varda of a 50% interest in the Cambodian property. De Varda agreed to purchase that interest for the equivalent of US$195,000. Foch informed De Varda that Coates had the title deeds in his office and could prepare the legal documents. According to De Varda, that was satisfactory to him as Watkins Tapsell acted for him in respect of a claim arising from a motor vehicle accident. 59 Davies AJ accepted that when De Varda first saw Coates he was a client of Watkins Tapsell. Mr Pembroke submitted that there was no evidentiary basis for this finding, and it was contrary to affidavit evidence given by Coates. 60 His Honour asked Coates, when he was giving oral evidence, whether De Varda had been a client of Watkins Tapsell. Coates replied, "He had been previously in relation to a motor vehicle accident claim". His Honour then said: "So he came - he who is a client, who was a client of your firm, came in with Mr Foch who was also a client?"

Coates replied: "That's correct". 61 Coates' reply is open to the construction that he agreed that, when De Varda came in to see Coates, he "also" - like Foch - was a client of Watkins Tapsell. Davies AJ, as the trial judge, was best placed to infer the correct meaning of the passage I have quoted. The finding that De Varda was a client of Watkins Tapsell at the relevant time was open to his Honour. 62 On 16 January 1998, during a telephone conversation, Foch gave instructions to Coates about amendments that he needed to make to the agreement Coates had prepared for use in the proposed transaction with Van der Bergh. The Van der Bergh agreement was to be used as a model for the new agreement involving Foch and De Varda. According to Coates, he said to Foch: "I can draft the document but it would be on the same terms as the first agreement I prepared for you late last year and on the same basis as I explained to you that I have no knowledge of Cambodian law". 63 On 18 January 1998, De Varda received a letter from Foch in the following terms: "I came several times in the first two days to discuss the sale of my building in Phnom Penh but you are hard to get. Spoke to Matthew Coates. He said it is not necessary for you to appoint another solicitor, he can handle the whole matter and act for you too, it will be quicker this way. He has already prepared the document. I will ring him tomorrow to arrange a meeting". 64 Davies AJ found that Coates said to Foch on 18 January 1998 that it was not necessary for De Varda to appoint another solicitor. In the circumstances, at that stage, as his Honour found, De Varda was content to leave the matter with Coates.

The conversation of 19 January 1998 65 On 19 January 1998 a meeting took place at Coates' office between Foch and De Varda. In response to a question from his Honour, Coates said that when Foch and De Varda came to see him on that date one or other of them told him what they were seeking to achieve by the agreements that they wished him to draft. According to Coates, they were seeking to achieve "a transfer of a 50% interest in the property in Cambodia from Mr Foch to Mr De Varda". 66 Coates' affidavit evidence stated: "When Foch and De Varda attended my office on 19 January 1998, I met with both of them together. Foch said words to the following effect: 'We really need to have it all done today. It shouldn't be too difficult to change the old document, should it?' I then said words to the following effect: "Why do you need it today?' Foch replied in words to the following effect: 'So we can go down and transfer over the gold which Joseph is paying, this afternoon'. I then said words to the following effect: 'I can make the amendments to the agreement now but I want to clear up my role. Joseph, you understand that I act for Charles and not you in this transaction. Do you understand that?" De Varda then said words to the following effect: 'Yes, but Charles has told me you would protect my interests'. I said to De Varda words to the following effect: 'Joseph, I have no knowledge of Cambodian law. All I am doing is reproducing this document as Charles has requested. I have no idea whether it will achieve the result you want and transfer ownership to you. I do not know if it is enforceable under Cambodian law. I am looking after Charles' interests. Do you understand that?' De Varda then said to me words to the following effect: 'Yes, but it is very simple and we have agreed we don't need another lawyer'. I said words to the following effect: 'I will go and get my secretary to type up the agreements and the letters you want straight away'. I arranged for letters to be typed by my secretary to respectively Mr and Mrs Sum and the Australian Embassy, Cambodia. … My secretary brought the two amended agreements into the room. Foch and De Varda then proceeded to execute them. I witnessed their execution. After the parties had executed the amended agreements, I handed those documents to Foch with the two letters [to the Sums and the Australian Embassy]. I wrote the words ' Given to client 19/1/98 ' on each of the copies of those letters on my file. Foch said to me words to the effect: 'If you give me the originals I will send them off. I want this to happen straight away'. De Varda said words to the following effect: 'We are going down to the bank to transfer the gold over straight away. But I have nothing confirming I have handed it over. Can you prepare a receipt and give it to Charles so that when I hand over the gold I can take the receipt from Charles'. I said words to the following effect: 'Certainly. I'll just need the particulars of what you want on it'. I was then told the particulars and I had my secretary type out the receipt. I witnessed Foch's signature and handed him the original. I did not retain a copy of that signed receipt. It is annexed to De Varda's affidavit sworn 18 October 1999 and marked 'D'". 67 This evidence was disputed by De Varda. He gave a different version of the conversation that occurred on 19 January 1998 between him and Coates. De Varda asserted that Coates had said that he could act for both Foch and De Varda, and De Varda denied that Coates had said that he had no knowledge of Cambodian law and that all he was doing was reproducing the document as Foch had requested. 68 Davies AJ accepted that during the conversation on 19 January 1998 Coates said to De Varda that he was not familiar with Cambodian law and could not guarantee the result. 69 His Honour also said: "I accept Mr Coates' evidence that he stated that he acted for Mr Foch. The letters written by Mr Coates and the manner in which the account records were prepared confirm that Mr Coates intended to act only for Mr Foch and that he conveyed that point to Mr De Varda". 70 But Davies AJ did not accept the entirety of Coates' version of the conversation. He found that, on 19 January 1998, Coates either expressly agreed that it was not necessary for De Varda to appoint another solicitor or impliedly approved of De Varda's statement to that effect. His Honour said the "course of events" supported this inference. 71 Davies AJ proceeded to say: Mr Coates gave evidence that Mr De Varda elected not to have another lawyer: 'Q. When Mr De Varda responded with the words which you have recorded in these terms, 'Yes but it is very simple and we have agreed that we do not need another lawyer', how did you understand that response? A. I understood him to be saying that the document I had prepared and the role I was playing was simple, but I also understood him to be saying again without my prompting that he understood that there was a possible solution to a conflict position of obtaining the advice of a separate lawyer and that he had elected not to Q. Did you form the view at all that he was the sort of person who I am sure you have come across in your practice who didn't want to understand or didn't want to accept your explanation? A. I certainly did not'. However, if Mr Coates had been a competent lawyer exercising reasonable care and skill he would have known that the task was not a simple one and that Mr De Varda did need an independent lawyer to act for him. In my opinion, Mr Coates did know, in relation to the purchase of an interest in land in Cambodia, that Mr De Varda needed independent legal advice and that the matter was not simple. He had earlier been informed that foreigners could not own land in Cambodia and he had before him the agreement or a copy of the agreement of 10 November 1992, which was an agency agreement between Mr Foch and Mr and Mrs Sum. That is not a context which a New South Wales lawyer would regard as simple". 72 His Honour found that Coates understood that De Varda and Foch had come to see him in his capacity as a solicitor. He said: "Mr Coates was aware that Mr De Varda had interests that needed to be protected. Mr Coates gave this evidence … A: In response to a question that I put to [Coates] which was, 'Do you understand that I am acting for Charles and not you', he said, 'yes but Charles said that you would protect my interests' and I interpreted from that response that he understood that his interests were at risk and need to be protected". 73 Davies AJ concluded that, by continuing to deal with De Varda, Coates conveyed the impression that, while Foch was his client, he was nevertheless serving the respondent's interests. The learned judge observed: "Having been informed that Mr Coates was acting only for Mr Foch, Mr De Varda accepted that situation but only, on Mr Coates' evidence, after saying 'we don't need another lawyer'. That statement was indicative that Mr De Varda relied upon Mr Coates as a solicitor do to the right thing, even if formally Mr Coates acted only for Mr Foch". 74 Mr Pembroke submitted that these findings were inconsistent with the finding that Coates said to De Varda that he was acting for Foch alone. He submitted: "There is a logical inconsistency in the judge's reasoning: It cannot reasonably be inferred that Coates 'conveyed to the respondent that he would act in his interests' when at the same time he said he would act for Foch alone and that he was "looking after Charles' interests".

It is appropriate at this stage to deal with this submission. In some respects it is critical to the disposition of the appeal. 75 Coates did say that he would act for Foch and not De Varda "in this transaction", but I have referred to the subsequent exchange between Coates and De Varda on which his Honour relied for concluding that, by continuing to deal with De Varda, Coates conveyed the impression that, while Foch was his client, he was nevertheless serving De Varda's interests. In my view, that inference was open to his Honour. 76 The "course of events" on which Davies AJ relied were as follows:

(a) On 18 January 1998, Foch wrote to De Varda saying that Coates had said that it was not necessary for De Varda to "appoint another solicitor". According to Foch, Coates had said "he can handle the whole matter and act for you too, it will be quicker this way".

(b) On 19 January 1998, when De Varda and Foch attended on Coates, both were clients of Watkins Tapsell.

(c) On 19 January 1998, Foch and De Varda told Coates what they were seeking to achieve, namely, "a transfer of a 50% interest in the property in Cambodia from Mr Foch to Mr de Varda"; Coates accepted instructions in this knowledge.

(d) Coates understood that De Varda and Foch had come to see him in his capacity as a solicitor. The nature of the transaction was such that legal assistance was required.

(e) Coates was aware that De Varda had interests that needed to be protected (this being Coates' own testimony).

(f) Coates told De Varda that he was acting for Foch and not De Varda.

(g) De Varda accepted that situation, but only (on Coates' evidence) after saying that "we don't need another lawyer" and that the transaction was "very simple". (As Davies AJ pointed out, these remarks were indicative that De Varda relied upon Coates as a solicitor to do the right thing, even if, formally, Coates acted only for Foch).

(h) De Varda told Coates, in effect, that he was looking to him as a solicitor to protect his own interests; Coates did not demur.

(i) Coates did not assert that it was necessary for De Varda to appoint another solicitor. He did not advise De Varda to obtain independent advice; he did not send De Varda away, but continued to deal with him.

(j) De Varda was content to leave the matter with Coates. 77 On these facts, and those to which his Honour expressly referred (in his remarks that I have quoted above), I am not persuaded that his Honour was wrong in the inference that he drew. In my view, Davies AJ was entitled to find that Coates said that he would act for Foch and that he would look after Foch's interests, on the one hand, and that Coates conveyed to De Varda that he would also "act in his interests", on the other. By this conduct, Coates put himself into a position of conflict of interest, but that did not preclude his Honour from making the findings that he did. 78 I shall proceed further with the conversation of 19 January 1998. According to De Varda, while reading through the agreement that Coates had prepared, he said to Coates: "You have mentioned here that the title deeds are attached to this agreement. I can't see any annexures".

Coates replied: "We have the title deeds and documents in storage".

De Varda said: "What about the searches?"

Coates answered: "Everything is in order". 79 Davies AJ observed, in this regard: However, there is no reason to doubt the conversation relating to title deeds. Mr Coates apparently considered that the agreement of 2 November 1997 was an original title deed. It seems that, at that stage, he had the agreement in his possession". 80 Thus, his Honour found that Coates had said that the title deeds were in storage and that "everything was in order" (including the searches).

The agreements of 19 January 1998 and the delivery of gold and money 81 The two agreements drawn up by Coates and executed by Foch and De Varda, respectively, on 19 January 1998, were modelled on the Van der Bergh Agreement and were derived, originally, from the 1992 Agreement. Both of the 19 January 1998 agreements had the same clause 1 as was contained in the 1992 Agreement (see paragraph 53 above). 82 Clause 2 of the 19 January 1998 agreement, involving De Varda, provided that De Varda appointed the "Agent" (the Sums) to hold De Varda's interest in the property on his behalf. Clause 3.3 provided that De Varda agreed to pay Foch, upon the execution of the agreement, the sum equivalent to US$195,000 in gold bullion to acquire a one-half interest in the Cambodian property. Otherwise, this agreement was in like terms as the 1992 Agreement. 83 The 19 January 1998 agreement involving Foch was in similar terms to that to which De Varda was a party, save that it recorded, in addition, that De Varda had paid US$195,000 to Foch "to acquire a one-half interest in the property", and also acknowledged that De Varda and Foch "are the true owners of the property as tenants in common in equal shares". 84 On 19 January 1998, Coates witnessed the execution of the two agreements by Foch and De Varda. At De Varda's request he prepared a receipt for the transfer of the gold by De Varda to Foch. Coates witnessed Foch's signature on the agreement and handed him the original receipt that he had drafted. 85 Coates drafted two letters which he signed. One was a letter to the Sums enclosing copies of the agreements between themselves and De Varda and themselves and Foch. The letter requested the Sums to contact the Australian Embassy to make an appointment to have the original agreements signed and witnessed. The second letter was to the Australian Embassy enclosing the two agreements and stating that Watkins Tapsell had arranged for Mr and Mrs Sum to contact the Embassy to arrange a time to have the agreement signed. Foch said that he would post the letters. 86 Davies AJ commented that at this stage of the transaction: "The respective agreements drawn up by Mr Coates were signed by Mr Foch or Mr De Varda, their signatures being witnessed by Mr Coates. However, they were not at that stage signed by Mr and Mrs Sum. Mr Coates drew up no document which was an agreement between Mr Foch and Mr De Varda. He drew up no document which constituted a declaration of trust by Mr Foch in favour of Mr De Varda. And he drew up no document which was intended to be a transfer of land from Mr Foch to Mr De Varda. Mr Coates did not intend to create any such document and no document was submitted for stamping". 87 Coates accepted that had he been De Varda's solicitor at the time he would have told De Varda "to make sure that he was getting good title before he paid over the money". He also accepted that had De Varda been his client he would have told De Varda that he "couldn't possibly pay over the money just on that document". In fact he said nothing of the sort. 88 On 19 January 1998, as found by Davies AJ, De Varda delivered 21 bars of gold bullion and cash in the amount of $1,260 to Foch at Foch's home. This was equivalent to US$195,000.

Events leading to the 23 January Agreement 89 On 20 January 1998, De Varda telephoned the Department of Foreign Affairs and inquired about the formalities involved in the witnessing of signatures in Cambodia. He then telephoned Coates and told him that, according to the Department of Foreign Affairs, documents executed in Cambodia should have the thumb prints of the signatories imprinted on them. 90 On 21 January 1998. De Varda sent a fax to the Australian Embassy in Cambodia requesting that they arrange for the Sums to place their thumbprints on the agreements that had been sent to the Embassy when signing them. In this fax he said that Watkins Tapsell were representing his interests and asked the Embassy to return the original documents signed by Mr and Mrs Sum "to Watkins Tapsell as soon as possible". 91 On 21 January 1998, Foch told De Varda that he (that is, Foch), would endanger his life if he returned to Cambodia and, for that reason, he had decided to sell his other 50% interest in the Cambodian property. De Varda was concerned that Foch would sell his 50% interest to some unknown person, and, after several further discussions, came to the realisation that he had no choice but to purchase it himself. On 22 January 1998 he agreed to do so. Foch said that he would take the price in gold bullion and would contact Coates to make the necessary arrangements. 92 On 22 January 1998, Foch telephoned Coates and told him that he intended to transfer the remaining 50% of the Cambodian property to De Varda at the same price. He asked Coates to "do the same document again". Coates agreed.

The 23 January 1998 meeting 93 On 23 January 1998, a meeting took place between De Varda, Coates and Foch at Coates' office. Coates' evidence was to the following effect: "At the meeting, as I reviewed the documents I realised that in fact there was no need for Foch to be a party. On that basis I said to De Varda and Foch when we had sat down to sign the document, words to the following effect: 'I think that we don't need Charles to be a party because it is an agency agreement between the Sums and Joseph only, and Charles no long has any interest in the property. I think I should redraft this to make it simpler, consistent with the original agreement. Is that alright?' Neither de Varda nor Foch had any objection. I prepared an agency agreement between Mr and Mrs Sum and De Varda in accordance with the instructions I had received from my client Foch. The document was in the form of an acknowledgment of ownership and not a form of transfer. Based on what Foch had instructed me, Foch was no longer holding any interest in the land. This is the format adopted from the original precedent". 94 In his affidavit, De Varda testified, on the other hand: "I said to Coates 'as I don't know the Cambodian agents personally, are they still willing to do the work for me, now that Charles is no longer involved with the property or do I have to find other agents?' He said 'they will still be the agents'. I said 'if I'm not happy with them can I dismiss them?' He said 'Yes'. I then proceeded to commence reading through the agreement and after I had finished reading Clause 2.2 I said to Coates 'you have here that no consideration shall be paid to the agent'. He said 'you can pay them a minimal fee'. When I had finished reading I said to Coates 'Don't I have to sign a sale agreement with Charles?' He hesitated and then looked at the documents and said 'I'll amend that now'. He left the conference room with the two sets of agreements. After a short while Coates returned with only one set of the agreements and handed it to me. The agreement was between Mr Chan Sum and Mrs Chan Sum and myself and Coates said to me 'You'll see I have included Charles' name in your agreement. It is not necessary for Charles to have a separate agreement'". 95 Davies AJ said of this evidence, which was not referred to in Coates' affidavit, that it carried with it "a degree of inherent probability". Thus, I proceed on the basis that Coates said to De Varda that the Sums would still be the agents, that De Varda could dismiss them if he wished, and it was not necessary for there to be a separate agreement between De Varda and Foch. 96 The agreement drafted by Coates on 23 January 1998 was in similar form to the agreements prepared by him on 19 January 1998. The recital provided that the agreement was to be between De Varda, Foch and the Sums. Coates, however, deliberately drew the document on the basis that, despite the recital, the only parties to the agreement would be De Varda and the Sums. The agreement provided that De Varda appointed the Sums to hold his interest in the Cambodian property on his behalf. Clause 3 provided: "3. OWNERSHIP OF THE PROPERTY 3.1 It is hereby acknowledge that the Agent holds De Varda's interest in the Property on behalf of De Varda. 3.2 It is hereby acknowledge that De Varda is the true owner of the Property. 3.3 Foch paid an undisclosed sum to the seller of the Property, being the value at the time of such acquisition. 3.4 De Varda paid Foch the sum equivalent to US $195,000.00 in Gold Bullion to acquire one half interest in the property on 19 January 1998. 3.5 De Varda agreed to pay Foch, upon the execution of this agreement the sum equivalent to US $195,000.00 in Gold Bullion to acquire the remaining one half interest of Foch in the Property, being the value of a one half interest in the Property at the time of acquisition by De Varda." 97 Coates and De Varda gave conflicting evidence as to what was said at the meeting of 23 January 1998. Coates said that when he gave the agreement to De Varda to sign he (Coates) said: "As you requested this document is a reproduction of the earlier document. You should both read it. Joseph [De Varda] should sign it. I am doing this on the same basis as I did with the last document. As I said before, I have no idea whether it achieves the result that you want to achieve as I know nothing about Cambodian law". 98 De Varda in effect denied Coates' version and said that Coates told him that he did not need another solicitor now that he was buying the whole property. 99 Davies AJ made no express finding as to what was said on 23 January 1998 save for his remarks, to which I have referred above, that part of De Varda's evidence "carries with it a degree of inherent probability". The questions that arise in this context are whether Coates repeated that he knew nothing about Cambodian law and whether he said to De Varda that it was not necessary for De Varda to get another lawyer. I understand his Honour to have found, generally, that Coates told De Varda that he knew nothing about Cambodian law and he led De Varda to believe it was not necessary for De Varda to get another lawyer. 100 De Varda executed the agreement prepared by Coates and Coates witnessed it. Coates handed a copy to De Varda together with letters to the Sums and to the Australian Embassy in Cambodia. 101 Foch asked Coates to prepare a receipt recording the receipt by Foch of the payment by De Varda for the remaining 50% interest. Coates did so on the basis that Foch would hand the receipt to De Varda once he, Foch, had received payment. 102 At Foch's residence, in the presence of Charnay, De Varda handed over to Foch 21 bars of gold bullion and $2,258 in cash, the equivalent of US$195,000.

The aftermath 103 On 28 January 1998, Coates wrote De Varda a letter in the following terms: "We refer to the above agreement and advise that in relation to the transfer of the Cambodian property we understand that the transfer is now completed. We presume you and Charles are agreeable to us holding the original documents when they are returned from the Australian Embassy in Cambodia. You might advise us if this is not the case. As you will recall we confirmed with you that although we were prepared to assist you in the preparation of the documents relating to the transfer of the Cambodian property we were acting for Charles as our client. In addition we confirmed that as we were not expert in Cambodian Property Law we were unable to advise either you or Charles whether the document we had prepared effectively transferred the rights in the property. We note that in spite of this, you felt confident that the document achieved the result you wished and you instructed us to proceed. We have confirmed these matters with Charles as well". 104 There are a number of features of this letter worthy of comment. 105 The first is that it records that, "in relation to the transfer of the Cambodian property … the transfer is now completed". That was an extraordinary statement to make. On 23 January 1998, De Varda had alone signed the agreement. Foch was not a party to that agreement. No written agreement had been entered into between Foch and De Varda. Mr and Mrs Sum had not signed the 23 January 1998 agreement and had not agreed to recognise De Varda as the beneficial owner of the property. Foch had not acknowledged in writing that he had transferred his remaining 50% interest in the property to De Varda. The agreement referred to the title deeds for the property being registered with the Cambodian Government Authority. No attempt had been made to ascertain whether it was necessary to make any changes to those title deeds to reflect the interest of De Varda. 106 Moreover, one may ask, if Coates was not acting for De Varda, why did he, in that letter, request De Varda to agree to the "original documents" being held by Watkins Tapsell when they were returned from the Australian Embassy in Cambodia? 107 I would also comment that the second paragraph of the letter seems nothing more than a self-serving statement by Coates. It is curious that it was written at that late stage. 108 Importantly, the letter confirmed that Coates was "prepared to assist [De Varda] in the preparation of the documents relating to the transfer of the Cambodian property". 109 The next event, as his Honour observed, was as follows: "On the same day, 28 January 1998, Mr Coates prepared an agreement between Mr Foch and Mr Verren which, unbeknown to Mr Coates, recorded a sham transaction. Mr Verren purported to transfer a 24 percent interest in a syndicate with salvage rights to a sunken vessel to the north of the Philippines to Mr Foch in consideration of Mr Foch releasing and transferring forty-two 1 kg bars of gold to the syndicate. The agreement referred to '42 bars of gold in 1 kilogram batches, 99.99 pure, with certificates and access authority … already established'. The forty-two bars of gold represented the gold which Mr De Varda had handed over to Mr Foch, twenty-one bars for each 50 percent of the Cambodian property. The agreement was intended to be used to dissuade Mr De Varda from seeking to recover the gold." 110 The transaction between Foch and De Varda had been a sham and a fraud, designed to persuade De Varda to hand over to Foch US$390,000 for a property without obtaining in return any interest therein. 111 On 30 January 1999, Coates agreed to prepare a lease of the Cambodian property on De Varda's behalf with Charnay as lessee. The lease was signed by De Varda and Charnay and De Varda paid Coates his fees for this work. 112 Early in March 1998 Charnay ascertained that the Cambodian property had tenants in it. On 5 March 1998, De Varda telephoned Coates about the problem and Coates suggested that Charnay should make inquiries with the Australian Consulate. On about 15 March 1998, De Varda ascertained that Mr and Mrs Sum disputed Foch's interest in the property. 113 De Varda then sought the title deed that he understood Coates to be holding in storage. On 2 April 1998, Coates wrote to De Varda stating: "AGREEMENT WITH SUM We are the solicitors for Charles Foch who was the previous owner of the property known as 16A Street 360 Phnom Penh, Kingdom of Cambodia together with building No.52A G.35. I previously held in my possession the title deed evidencing the ownership of this property by my client. I have searched my premises, file and safe custody records and am unable to locate the said title deed. Our client has indicated that he also cannot located the said title deed. We believe the title deed has been lost". 114 The statement by Coates that he previously held in his possession the original title deed evidencing the ownership of the property by Foch is difficult to understand. The agreements themselves, as I have mentioned, refer to the title deed as being registered with the Government Authority in Cambodia. 115 The matter became even more confused on 3 April 1998 when Mr Coates wrote to De Varda as follows: "AGREEMENT WITH SUM As far as I am aware the title deeds for the property at 16A Street 360 Phnom Penh, Kingdom of Cambodia are registered in accordance with the Land Titles Office registration procedures of the Government Authority in Cambodia". 116 Confusion was compounded when, on 6 April 1998, Mr Coates wrote to De Varda saying: "AGREEMENT WITH SUM We are instructed that the original title deed of the property at 16A Street 360 Phnom Penh, Kingdom of Cambodia was registered in the name of Charles Foch as owner". 117 On 20 April 1998, Coates wrote to De Varda stating, amongst other things: "As I have indicated to you previously I have always acted for Charles in relation to this transaction and not for yourself. Also, as I explained to Charles and yourself, my retainer was limited to the preparation of a document based on the original document provided to me by my client. As I have stated, I had no knowledge of Cambodian Law and could not give advice as to whether the document achieved the result that was intended". 118 Foch has since died. De Varda was not able to recover the US$390,000 which he paid to Foch. De Varda has apparently no right whatever to the Cambodian property and Watkins Tapsell do not suggest otherwise.

The findings of the trial judge: reliance 119 Davies AJ said: "I am satisfied that Mr Coates said words to the effect that he would assist Mr De Varda and Mr Foch. Mr De Varda continued to rely upon and trust Mr Coates and acted on the faith of the documents which Mr Coates produced". 120 Davies AJ found that De Varda relied on Coates "to use his legal skill and ability in preparing whatever document was appropriate". His Honour observed that: "It was on the faith of that document that Mr De Varda paid over the purchase price to Mr Foch". His Honour said: "According to Mr De Varda's evidence, Mr Coates expressly said that it was appropriate for him at that stage to pay over the purchase price. Whether or not the words were said, it is clear that, by the preparation of the receipts of 19 January 1998 and 23 January 1998, Mr Coates approved of the payment of the purchase price on those days. As I have said, Mr Coates understood his instructions to be that an interest in the Cambodian property was to be transferred from Mr Foch to Mr De Varda. I am satisfied that Mr De Varda and Mr Foch acted in the belief that the documents prepared by Mr Coates effected such a transfer". 121 His Honour commented further in this regard: "In his affidavit of 18 October 1999, Mr De Varda deposed: '15. A short time later Coates returned and showed a typed document to me headed 'RECEIPT'. I looked at the document and said 'Yes, that will do'. Coates then turned to Foch and said 'I can witness your signature on this receipt now and you can give this receipt to Joseph when he pays over the gold'. Foch signed the receipt and Coates witnessed his signature and gave the receipt to Foch. 16. At that time I said 'I don't have any documents to prove that I bought the property'. Coates then gave me a copy of the Agreement I had signed and said to me 'We will keep the title deeds and hold them on your behalf'. Coates then wished us good day and showed us out of the firm's premises'. I think it is clear that, when Mr De Varda left Mr Coates' office on 19 January 1998 and again on 23 January 1998, he was under the impression that documents or a document had been signed that constituted a transfer of title, documents on the faith of which he was justified in paying over the substantial purchase price". 122 Watkins Tapsell submitted to his Honour that De Varda had made an informed decision about his own interests. There was evidence that De Varda was an intelligent man who was experienced in a wide range of business affairs. His Honour observed in this connection: "However, there was no information before Mr Coates which ought to have suggested to Mr Coates that Mr De Varda was making an informed decision in relation to the protection of his own interests. Mr Coates does not appear to have made any inquiry as to what Mr De Varda knew about the matter. There is totally missing from Mr Coates' affidavit and his evidence in chief any inquiry by him as to what Mr De Varda understood about the transaction or intended it to be". 123 The learned judge pointed out: "There is nothing in Mr Coates' affidavit or evidence in chief which amounts to an explanation to Mr De Varda of the risks involved. The only explanation of risk that was given by Mr Coates was summarised in the letter of 28 January 1998 from Mr Coates to Mr De Varda. The warning was that as Mr Coates was not familiar with Cambodian law, he could not say the documents he drew ' effectively transferred the rights in the property '. What he did not warn was that the documents did not transfer any rights or purport to do so and that they did not provide a basis on which the purchase price should be paid". 124 His Honour observed: "No doubt Mr De Varda and Mr Foch should have realised that the documents which they received achieved nothing, for they were not signed by Mr and Mrs Sum. However they did not". 125 In my view, the findings made by Davies AJ in regard to reliance are soundly based. They should not be interfered with.

The findings of the trial judge: the duty of care 126 Davies AJ held that Coates and Watkins Tapsell owed a tortious duty of care to De Varda. His Honour said: "When he came to Mr Coates' office on 19 January 1998, Mr De Varda was a client of the firm and he had a problem that needed the attention of a solicitor. In agreeing to act in the matter knowing that Mr De Varda was relying upon his skill and expertise, Mr Coates had a duty to Mr De Varda to ensure that he exercised such skill and care. A relationship of proximity, reasonable reliance and assumption of responsibility were present. Mr Coates undertook to prepare documents exercising his skills as a solicitor knowing that, on the faith of the documents, Mr De Varda was to pay over the purchase price. Although he said that he was not familiar with Cambodian law and could not guarantee the result, Mr Coates did not indicate that he would not perform the work to the best of his skill and ability". 127 His Honour said further: "In the present case, Mr Coates and Watkins Tapsell had a tortious duty of care which extended beyond the terms of the contractual duty which they owed to Mr Foch. That is because Mr De Varda and Mr Foch had different interests and Mr Coates, in dealing with both of them, had a clear conflict of interest".

The findings of the trial judge: breaches of the duty of care 128 As regards the agreements drafted by Coates and his views as to the registration of title in Cambodia, his Honour said: "Mr Coates misunderstood the nature of the agency agreement. Mr Coates gave these answers when questioned by Mr De Varda: 'Q. What about the registration of a title deed here. You would have on the front of the cover 'title deed', instead of 'agreement', correct? A. You would have a word like 'certificate of title' or folio identified' … Q. And yet there was no folio, no certificate of title, nothing and yet you accepted this document, the document of the 10 November 1992, as a title deed? A. I accepted my client's instructions that it was a title deed and I assumed it was'. In re-examination Mr Coates said: 'Q. What was the concept of registration to which you were there referring? A. It was my understanding that the document that was registered was the agreement which was the so called agency agreement of November 1992. … A. The reason that I understood that is because throughout this transaction I had always approached this document as being the title document. And it contain (sic) a statement at clause 6.2 which indicated to me that it was a document that the government authority, whatever that was, had authorised. Q. And how did you come to understand and record in the letter, that the original title deed was registered in the name of Charles Foch as owner? A. My assumption was that this document was the title deed and it referred to Charles Foch as the owner and was stated to be, there is a warranty by the agent that the agent was authorised to execute this, was authorised by the government authority to execute it'. In my opinion, a competent solicitor in New South Wales exercising due care and skill, who had been informed that foreigners could not own land in Cambodia, would have concluded that the title to the Cambodian property resided in a resident or residents of Cambodia, presumably Mr and Mrs Sum, and that the agency agreement was what it purported to be, an agreement creating personal obligations as between the agents Mr and Mrs Sum and the principal, Mr Foch. In my opinion, the words of the agency agreement are plain. The view which Mr Coates took of the agreement and of the nature of registration in Cambodia was fanciful. In coming to the view which he did, Mr Coates failed to exercise the skill and care that could reasonably be expected of a solicitor in New South Wales". 129 His Honour observed: "Mr Coates knew that he had not prepared or had signed any agreement between Mr De Varda and Mr Foch or any declaration of trust by Mr Foch in favour of Mr De Varda or any transfer of land by Mr Foch to Mr De Varda. He knew that the documents that he prepared were not documents on the faith of which a purchaser should pay purchase money for the purchase of an interest in land. If he had been asked, Mr Coates undoubtedly would have said that Mr De Varda should not do so. Mr Coates gave this evidence: 'Q. If you had been his solicitor, what would you have advised him? A. If I had been his solicitor? Q. Yes. A. I would have said to him to make sure that he was getting good title before he paid over the money. Q. Yes. You would have told him that he couldn't possibly pay over the money just on that document wouldn't you? A. Yes I would have told him that'. Notwithstanding this, Mr Coates, having received the instructions that there was to be a transfer of land and knowing that the agreements which he prepared did not achieve any legal effect, went ahead and had them signed by Mr Foch and Mr De Varda on 19 January and by Mr De Varda on 23 January and had receipts for the purchase price signed by Mr Foch and handed these documents over, knowing that, on the faith of them, Mr De Varda and Mr Foch were to go off and attend to the payment and receipt of the purchase price". 130 His Honour accepted the evidence of an expert witness who said: "In my view no solicitor acting for [the respondent] would have countenanced the situation whereby monies were handed over until such time as it had been established that the ownership of the property under Cambodian law was held by the Sums, that the agreement of 1992 was valid to acknowledge the beneficial ownership of Mr Foch, that that agreement was still current and that the Sums had signed the necessary documents to acknowledge the [respondent] as the beneficial owner of the land in place of Mr Foch". 131 Davies AJ accepted that Coates had said to De Varda that the title deeds were in storage and that "everything was in order" (including the searches). His Honour found, in effect, that De Varda expected that Coates would have searched the title, but Coates did not make any such search. Coates allowed De Varda to leave his office under the mistaken impression that Coates had given him a document or documents on the basis of which it was appropriate to pay the purchase price. Coates was aware that the documents, of themselves, achieved nothing and did not provide any basis for the payment of the purchase price. 132 His Honour considered, further, that, in breach of the duty of care, Coates did not advise De Varda to obtain independent advice and did not send De Varda away but continued to deal with him. His Honour said: "The principal deficiency in Mr Coates conduct was that he failed to realise that the interests of Mr De Varda were different from those of Mr Foch and that Mr De Varda needed a solicitor to protect his interests. There could not have been a clearer case for independent legal advice. Mr Coates knew that his limitations were such that he could not act for or assist the purchaser, Mr De Varda. He should have informed Mr De Varda not only that he Mr Coates was acting for Mr Foch but also that Mr De Varda must obtain independent legal advice and that he, Mr Coates would not proceed in the transaction unless he did". 133 His Honour said that Coates did not follow the precept of Kirby P in Waimond Pty Limited v Byrne (1989) 18 NSWLR 642 at 643. He said that it was not sufficient for Coates to say that he acted for Foch. Coates should have said expressly that he could not protect De Varda's interests and should have told De Varda to obtain other legal advice.

134 I respectfully agree with all the comments and findings of his Honour made in respect of the breaches of Watkins Tapsell's duty of care. I would merely, for emphasis, make the following points. A major factor that Coates did not make clear to De Varda was that the documents had no legal effect and would have no legal effect until Mr and Mrs Sum signed them. The documents did not purport to effect any transfer of interests, contrary to the position that Coates knew De Varda (and Foch) wished to achieve. Coates gave De Varda no warning of the risks involved in handing over the gold and money. His confusing references to the title deeds misled De Varda. He placed himself in a serious conflict of interest and did not advise De Varda to get independent advice

The findings of the trial judge: s 42 of the Fair Trading Act 135 Davies AJ held that Watkins Tapsell had breached s 42 of the Fair Trading Act. He said that Coates had prepared documents and passed them over as having a quality which they did not possess, namely as documents on the faith of which De Varda should pay the purchase price of the property he sought to purchase.

The findings of the trial judge: contributory negligence 136 His Honour dealt with contributory negligence as follows: "The defendants allege contributory negligence on the part of Mr De Varda and seek to reduce the damages awards accordingly. This defence will not, of course, prevail against the claim based on ss 42 and 68 of the Fair Trading Act 1987. In any event, Mr De Varda's loss arose entirely from his reliance on Mr Coates and Watkins Tapsell. It ill-behoves Mr Coates and Watkins Tapsell to say that Mr De Varda, a client of Watkins Tapsell, was negligent in coming to them and requesting that they undertake the legal work that was required. And it ill-behoves Mr Coates and Watkins Tapsell to say that Mr De Varda was negligent in paying money on the faith of the documents which they prepared, when they knew that that is what he was intending to do and when that is what Mr Coates intended he do. In Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560 Sir Donald Nicholls V-C pointed out, at 574: 'In principle, carelessness in not making other inquiries provides no answer to a claim when the plaintiff has done that which the representor intended he should do'. Mr De Varda was not negligent in not obtaining other legal advice when the solicitor he trusted did not advise him to do so. And he was not negligent in acting on the faith of the documents which Mr Coates and Watkins Tapsell prepared when the documents were prepared and produced for that purpose. No doubt Mr De Varda was careless in having any dealing with Mr Foch but he was not warned by Mr Coates not to do so. He was not warned of the difficulties of purchasing land in Cambodia. Rather, any fears he may have had were quelled by the fact that Mr Coates was acting in the transaction. Mr De Varda lost his money because the documents on the faith of which he paid over the purchase price had no legal effect a fact of which Mr Coates was or ought to have been aware but of which Mr De Varda was unaware. In my opinion, Mr De Varda was not guilty of contributory negligence".

The first ground of appeal: the duty of care and the retainer argument 137 De Varda contended at trial that there was an express retainer between Watkins Tapsell and himself. Davies AJ rejected this claim. 138 It appears that De Varda did not argue that there was an implied retainer. For this reason I shall not examine this question, although it seems to me that on his Honour's findings it is arguable that there was an implied retainer: Pegrum v Fatharly (1996) 14 WAR 92. 139 It was submitted on behalf of Watkins Tapsell that the judge erred in holding that Watkins Tapsell owed and breached a duty of care to De Varda in circumstances where there was no retainer between Watkins Tapsell and De Varda. 140 The mere absence of a retainer does not mean that Watkins Tapsell could not have owed De Varda a duty of care. In Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 this Court, differently constituted (Spigelman CJ, Sheller JA and Stein JA), said at 78: "In order to show that advice or the failure to give advice or warn amounted a breach of a duty of care owed by Abbott Tout, [solicitors to Beach Petroleum NL], for reasons which the High Court re-stated in Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241, Beach had to establish that a relationship of proximity between the parties existed, that is to say had to identify a factor or factors of special significance in addition to the foreseeability of harm, when Abbott Tout acted or failed to act in the manner alleged. Foreseeability of harm alone was not enough to give rise to the necessary assumption of responsibility by Abbott Tout. To do this, in the context of this case, Beach had to show that Abbott Tout gave advice or failed to give advice or warn in circumstances where Abbott Tout realised or ought to have realised that they were being trusted to give their advice as a basis for action on the part of Beach: Mutual Life and Citizens' Assurance Company Limited v Evatt (1968) 122 CLR 556 at 572". 141 Davies AJ held that Coates agreed that it was not necessary for De Varda to appoint another solicitor or impliedly approved of De Varda's statement to that effect. His Honour held that De Varda was looking to Coates as a solicitor to protect his interests even if, formally, Coates acted only for Foch and, by continuing to deal with De Varda, Coates gave De Varda the impression that, while Foch was his client, he was nevertheless serving De Varda's interests. Davies AJ held that De Varda relied on and trusted Coates and acted on the faith of the documents that Coates produced. His Honour held that De Varda relied on Coates to use his legal skill and ability in preparing whatever document was appropriate and it was on the faith of that document that De Varda paid over the purchase price to Foch. 142 His Honour held that, in the circumstances, Coates had a duty to De Varda to exercise skill and care in serving his interests. His Honour pointed out that a relationship of proximity, reasonable reliance and assumption of responsibility were present. Thus, he held, Coates and Watkins Tapsell owed a duty of care to De Varda that extended beyond the terms of the contractual duty they owed Foch. 143 On the factual findings his Honour made, De Varda had established and identified factors of special significance, in addition to the foreseeability of harm, which gave rise to a duty of care in the manner explained in Beach Petroleum NL v Kennedy. In the circumstances, the absence of a contractual retainer did not impinge upon that duty of care. 144 It was then submitted on Watkin Tapsell's behalf that the contractual limitations that defined the legal relationship between Coates and Foch excluded or restricted the scope of any duty that Coates might otherwise have owed De Varda. 145 In Heydon v NRMA Limited (2000) 51 NSWLR 1, McPherson AJA said [at 118] that, by reason of Astley v Austrust Limited (1999) 197 CLR 1 (which followed the reasoning in Henderson v Merrett Syndicates Limited [1995] 2 AC 145 (at 193 to 194)): "It is no longer possible to say that there is a 'penumbral' duty in tort requiring a solicitor to advise on matters going beyond the limits of his or her retainer. On that aspect, the decision in Waimond Pty Limited v Byrne [(1989) 18 NSWLR 642] is inconsistent with the reasoning in Astley v Austrust Limited , and should, in my opinion, no longer be followed".

See also Malcolm AJA at 103. 146 McPherson AJA at 118 explained that the reasoning of the House of Lords in Henderson v Merrett Syndicates Limited, followed by the High Court in Astley v Austrust Limited, was that: "It was the contract that defines the relationship of the parties, so that ordinarily 'the parties must be taken to have agreed that the tortious remedy is to be limited or excluded'". 147 In the present case, it is common ground that there was no contract between Watkins Tapsell and De Varda. There was therefore no relevant contract that limited or excluded the tortious remedy. I am unable to comprehend how a contract between Watkins Tapsell and Foch could define the relationship between Watkins Tapsell and De Varda.

The first ground of appeal: the duty of care and the express disclaimers of responsibility 148 It was submitted on behalf of Watkins Tapsell that the judge erred in holding that Watkins Tapsell owed and breached a duty of care to De Varda in circumstances where there was an express disclaimer of responsibility by Watkins Tapsell (through Coates) to De Varda. 149 Mr Pembroke submitted that there were three components to what Coates said when disclaiming liability. These were: "(a) I want to clear up my role; I am looking after Foch's interests, not yours; (b) I have no knowledge of the subject matter ie Cambodian law; (c) I am undertaking a limited task, ie merely reproducing with appropriate changes the document provided by Foch". 150 Under the heading "The conversation of 19 January 1998" I have set out the evidence relating to components (a) and (b). In summary, as to that conversation, Davies AJ found (and in my view those findings must be accepted) that:

(a) Foch and De Varda told Coates what they were seeking to achieve by the agreements that they wished him to draft, namely, "a transfer of a 50% interest in the property in Cambodia from Mr Foch to Mr De Varda".

(b) Coates stated that he acted for Foch and not De Varda in the transaction.

(c) Coates told to De Varda that he was not familiar with Cambodian law and could not guarantee the result.

(d) Coates either expressly agreed that it was not necessary for De Varda to appoint another solicitor or impliedly approved of De Varda's statement to that effect.

(e) Coates conveyed the impression that, while Foch was his client, he was nevertheless serving De Varda's interests.

(f) De Varda relied upon Coates, as a solicitor, to do the right thing, even, if formally, Coates acted only for Foch.

(g) Coates told De Varda that Watkins Tapsell had the title deeds and documents in storage.

(h) Coates told De Varda that everything was in order, including the searches. 151 In my opinion, when regard is had to all the relevant factual material, including the words that were spoken after Coates said words to the effect that he wanted to clear up his role and that he was looking after Foch's interests (and not De Varda's), the purported disclaimer by Coates was not effective. 152 In my opinion, the statement by Coates that he was not an expert in Cambodian property law, and was unable to advise De Varda whether the document he had prepared effectively transferred the rights in the property (under Cambodian law), did not exculpate Coates. Davies AJ tellingly observed that, although Coates warned De Varda about his ignorance of Cambodian law, he did not warn De Varda that the documents he had prepared "did not transfer any rights or purport to do so and … they did not provide a basis on which the purchase price should be paid". 153 One did not need to be a Cambodian lawyer to know that the documents prepared by Coates did not and could not effectively transfer rights to the Cambodian property. The point was, as Davies AJ noted, the documents did not purport to record such a transfer or any means of transferring the rights. The documents did not purport to oblige Foch to transfer rights to De Varda or to oblige the Sums to transfer rights to De Varda. It is difficult to conceive of any country in the world in which the documents prepared by Coates could have resulted in De Varda obtaining rights to the property in question. Nevertheless, Coates knew that De Varda was going to hand over the gold bullion and the money on the strength of the documents he had prepared. One can well understand Coates' agreement to the proposition that, had he been De Varda's solicitor, he would have told him that he could not possibly pay over the money on the strength of the documents he, Coates, had prepared. 154 It follows that components (a) and (b) of Mr Pembroke's submission do not detract from the duty of care found. 155 Component (c) is to the effect that Coates was performing a limited task, namely, "merely reproducing with appropriate changes the document provided by Foch". 156 His Honour said the following in regard to this contention: "However, Mr Coates did not merely reproduce the agreement of 10 November 1992. In the first instance, the agreement of 10 November 1992 was an agreement duly executed by all parties. The documents which Mr Coates handed over were not agreements, for they were signed by one party only. Secondly, with the two documents of 19 January 1998, a member of Watkins Tapsell exercised his or her legal skills in expressing the concept of a fifty percent interest. That interest was expressed by the paragraph which acknowledged that 'De Varda and Foch are the two owners of the Property as tenants in common in equal shares'. How the draftsman expected that that concept of English land law would be enforced in the courts of Cambodia is hard to imagine. And how an agency agreement expressing personal obligations by Mr and Mrs Sum to the owner of the property could be divided into two agreements each with the owner being a tenant in common in equal shares is equally difficult to imagine. The agreement of 23 November 1998 was also incompetently drawn for it recited that Mr Foch, Mr De Varda and Mr and Mrs Sum wish to enter into the agreement for the purposes of recording the transactions between them. Yet Mr Foch was not a party to the document. Other paragraphs such as paragraphs 3.3, 3.4 and 3.5 of the agreement refer to Mr Foch but Mr Foch was not asked on 23 January 1998 to sign a document which acknowledged anything. It is difficult to understand what the draftsman of the document was seeking to achieve by the inclusion of the references to Mr Foch. None of the references to Mr Foch would have assisted enforcement of the agreement in Cambodia, had Mr and Mrs Sum ever signed it. Nor was the document intended to be an agreement between Mr Foch and Mr De Varda enforceable as such in New South Wales". 157 His Honour concluded: "The task of Mr Coates was never that of merely copying a document".

He did not accept that that was the instruction given to Coates. Indeed, as he pointed out, Watkins Tapsell never set out merely to copy the agreement of 10 November 1992. 158 Davies AJ observed that this transaction was not one "which a New South Wales lawyer would regard as simple." I can but agree. 159 I respectfully agree with his Honour's remarks in regard to this issue. I do not accept the submission that he should have accepted Coates' explanation that he was merely reproducing an "earlier document".

The first ground of appeal: the duty of care and the reasonableness of reliance 160 Mr Pembroke submitted that it was neither reasonable in fact nor foreseeable by Watkins Tapsell that De Varda would rely upon them. 161 Once it is accepted that Coates led De Varda to believe that he, Coates, would serve his interests, there was good reason for De Varda to rely on Coates. That is the very reason that De Varda had not sought the services of another solicitor. 162 The other submissions raised on this aspect rested, in substance, upon arguments based on the disclaimers made by Coates. For the reasons I have given I do not consider that the disclaimers have the effect contended for by Watkins Tapsell. I do not accept the submissions in question.

The breach of s 42 of the Fair Trading Act 163 The first argument raised under the ground of appeal that challenges his Honour's finding that there was a misrepresentation constituting a breach of s 42 of the Fair Trading Act rests on the following propositions. De Varda knew that Coates was merely reproducing a document and making appropriate consequential changes. De Varda knew that Coates had no knowledge of Cambodian law and knew that Coates did not know whether the documents would achieve the results that De Varda wanted. Finally, De Varda knew that Coates was looking after Foch's interests. 164 All these matters I have dealt with above. In my view, they are without substance. 165 The remaining argument under this ground is that De Varda was aware that the documents required the signature of Mr and Mrs Sum in Cambodia. 166 De Varda undoubtedly knew, before handing over the gold and the money, that the signatures of the Sums were still to be obtained. That was the purpose of the letters drafted by Coates on 19 January 1998. De Varda, however, did not know that, without the Sums executing the agreements (and without Foch being a party to the agreements binding him to transfer his rights in the Cambodian property to De Varda), he, De Varda, could not obtain any effective rights to the property. 167 Of course, it was entirely uncertain whether, under Cambodian law, De Varda could have obtained rights to the Cambodian property had the agreements been in a form that required Foch and the Sums to confer appropriate rights on him. But, without Foch and the Sums being parties to the agreements, and without appropriate provisions as to the transfer of interests being contained therein, it is reasonable to infer that there was no prospect under any law, whatever, of De Varda obtaining the rights that he believed he was getting. 168 I would not uphold this ground.

The conflict of interest ground 169 Davies AJA held: "The principal deficiency in Mr Coates conduct was that he failed to realise that the interests of Mr De Varda were different from those of Mr Foch and that Mr De Varda needed a solicitor to protect his interests. There could not have been a clearer case for independent legal advice. Mr Coates knew that his limitations were such that he could not act for or assist the purchaser, Mr De Varda. He should have informed Mr De Varda not only that he Mr Coates was acting for Mr Foch but also that Mr De Varda must obtain indepenent legal advice and that he, Mr Coates would not proceed in the transaction unless he did." 170 Watkins Tapsell contend that his Honour erred in holding that Coates should have informed De Varda that he, De Varda, should obtain independent legal advice otherwise he, Coates, would not proceed in the transaction. 171 While De Varda was not contractually a client of Coates, Coates knew that De Varda was relying on him to proceed in accordance with his, De Varda's, interests. Once that situation had arisen, Coates was in a position of conflict. He did nothing to alleviate that position. 172 In Alexander v Perpetual Trustees WA Limited [2001] NSWCA 240 Davies AJA said: "A conflict of interest is an insidious thing. It clouds the mind. Aspects of a duty of care, which ought to be seen clearly and distinctly, are seen in a hazy light when a solicitor seeks to reconcile the interests of two clients who each have interests which differ from those of the other. Over many years, in judgments which I have written or in which I have joined, the point has been made that solicitors should never allow themselves to have a conflict of interest. Those judgments appear to have had no impact. Too many solicitors continue to act for two or more clients who have conflicting interests. Year after year, cases come before the courts because a solicitor, in such a position, has failed to fulfil his duty to one or more of his or her clients".

I endorse these remarks. 173 In the circumstances I think there is no answer to his Honour's conclusion that Coates should have said expressly that he could not protect De Varda's interests and De Varda should obtain other legal advice: see Waimond Pty Limited v Byrne (at 643). 174 I would hesitate in going so far as to say that Coates should have refused to deal with De Varda. It may be that, once De Varda had been fully informed as to the position and had obtained independent legal advice, Coates would still have been entitled to act for him: see Waimond Pty Limited v Byrne (at 643). 175 Notwithstanding these reservations there is nothing in the conflict of interest ground that persuades me that it gives rise to any basis on which his Honour's reasons could be overturned. In my opinion, there was a conflict of interest and Coates did not send De Varda to another solicitor for independent advice. On this ground alone there was a breach of duty on the part of Coates.

The ground based on "subsidiary errors" 176 The fourth ground of appeal asserts very many "subsidiary errors" that, it is said, Davies AJ made. I have dealt with a number of these already. I set out below my comments on the remainder. 177 It was submitted on Watkins Tapsell's behalf that: "The drafting and presentation of documents by a solicitor to a non-client third party does not amount to a representation or advice to that party that the documents are legally effective".

Reliance for this submission was placed on Dean v Allin and Watts [2001] 2 Lloyds Rep 249 at 257. It was said that Davies AJ placed too much reliance on the mere fact that Coates drafted the agreements in question. 178 Davies AJ (rightly, in my view) found that Coates went further than the mere drafting and presentation of documents; accordingly I would not uphold the submission. 179 Mr Pembroke sought to place some reliance on the principle that a person passing on information does not engage in misleading or deceptive conduct if the circumstances are such as to make it apparent that the party is not the source of the information and that the party "expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth": Yorke v Lucas (1985) 158 CLR 661 at 666. 180 This, however, is not a Yorke v Lucas situation. Coates did not simply pass on information, disclaiming any belief in its truth or falsity. He did not merely pass on information for what it was worth. Davies AJ found that Coates prepared documents and passed them over as having a quality which they did not possess, namely as documents on the faith of which De Varda should pay the purchase price of the property he sought to purchase. His Honour pointed out that the documents achieved nothing and did not provide any basis for the payment of the purchase price. This is a situation far removed from that considered in Yorke v Lucas. 181 The next relevant asserted subsidiary error is that Davies AJ held that, in Coates' letter dated 28 January 1998, he acknowledged and confirmed with De Varda that he was prepared to assist him. The letter speaks for itself. In my view his Honour's finding is justified. 182 The next relevant asserted subsidiary error is that Davies AJ found that: "The documents signed on 19 and 23 January 1998 were of no legal effect whatever".

It is submitted that the documents would have been sufficient to prove a constructive trust of Foch's interests. This is a matter that is open to argument. Whether a constructive trust could have been proved after a bout of difficult and unpredictable litigation is, however, not to the point. The documents were hopelessly drawn. They were of no practical assistance to De Varda. 183 The next relevant asserted subsidiary error is the statement by his Honour that the conduct of Coates "bordered on the dishonest". I accept that this statement was inappropriate and the evidence did not justify it. This error, however, had no effect on his Honour's conclusion. 184 The next relevant asserted subsidiary error is the finding of Davies AJ that Coates approved of the payment of the purchase price on 19 and 23 January 1998. 185 On 19 January 1998, after Foch and De Varda had executed the agreements to which each was a party, De Varda told Coates that he was going to transfer the gold "straight away" but he had nothing that would confirm the handover. He asked Coates to prepare a receipt and give it to Foch so that when he, De Varda, handed over the gold he could take the receipt from Foch. Coates agreed, drafted the receipt and witnessed Foch's signature to it. He then handed the original receipt to Foch. Coates knew well that the gold was to be handed over on the strength of the agreements he had prepared. He knew that the parties had come to him for the purpose of achieving a transfer of a 50% interest in the Cambodian property from Foch to De Varda. In response to this, Coates had produced the two agreements that had been executed. In these circumstances, in my view, Davies AJ was entitled to hold, irrespective of whether Coates said expressly that it was appropriate for De Varda at that stage to pay over the purchase price (which De Varda, in the course of his evidence, asserted), that Coates had approved of the payment of the purchase price on 19 January 1998. 186 Similar events occurred on 23 January 1998. I would add that on that date, according to De Varda, Coates said to him that he had included Foch's name in the agreement he was to sign and it was not necessary for Foch to have a separate agreement. As I have mentioned, Davies AJ said this evidence carried with it a degree of inherent probability. Again, on 23 January 1998 Coates prepared a receipt recording the receipt by Foch of de Varda's payment for the remaining 50% interest. Coates knew that the balance of the purchase price was to be handed over by De Varda and he would receive the receipt as proof of payment. Again, in my view, Davies AJ was entitled to hold that Coates had approved of the payment of the purchase price on 23 January 1998. 187 The next relevant asserted subsidiary error is that Davies AJ held that De Varda would have understood that on payment of the purchase price there would be a transfer to him of Foch's interest in the property. 188 It was submitted on Watkins Tapsell's behalf that this finding was not justified as De Varda knew that he had to obtain the signature of the Sums. It was also submitted that Coates was not instructed to effect a transfer of the land. He did not know if the documents he prepared would have any legal effect and said so. 189 These submissions overlook the fact that Coates knew that De Varda and Foch had come to see him for the purposes of achieving a transfer of a 50% interest in the Cambodian property from Foch to De Varda. De Varda believed on 19 and 23 January 1998 that once he had signed the agreement Coates prepared, and had received the receipt for the gold and money, the transaction was complete. 190 There was substantial evidence to the effect that De Varda and Foch acted in the belief that the documents prepared by Coates effected a transfer of interests in the property. Davies AJ found that when De Varda left Coates' office on 19 January 1998 and again on 23 January 1998, he was under the impression that documents or a document had been signed that constituted a transfer of title, documents on the faith of which he was justified in paying over the substantial purchase price. The effect of De Varda's evidence in this respect was reinforced by Coates' letter of 28 January 1998 in which he wrote, in relation to the document of 23 January 1998 that, "we understand that the transfer is now completed". 191 Coates' own evidence, given in an affidavit by him, was that, on 23 January 1998, when De Varda and Foch "had sat down to sign the document," it was not necessary for Foch to be a party to the agreement "because it is an agency agreement between the Sums and Joseph only, and Charles no longer has any interest in the property". He said further: "I prepared an agency agreement between Mr and Mrs Sum and De Varda in accordance with the instructions I had received from my client Foch. The document was in the form of an acknowledgment of ownership and not a form of transfer. Based on what Foch had instructed me, Foch was no longer holding any interest in the land … ".

As Davies AJ noted, the significant point is that Coates expressly said to De Varda and Foch that Foch "no longer has any interest in the property". His Honour observed: "Mr De Varda would have understood that, on payment of the purchase price, there would be a transfer to him of Mr Foch's interest in the property".

And: "No doubt Mr De Varda and Mr Foch should have realised that the documents which they received achieved nothing, for they were not signed by Mr and Mrs Sum. However they did not". 192 In these circumstances, I consider that Davies AJ was entitled to hold that De Varda would have understood that, on payment of the purchase price, there would be a transfer to him of Foch's interest in the property. 193 The last asserted subsidiary error is that: "Coates undertook to act on, and 'was instructed to achieve' , the transfer of an interest in land from Foch to [De Varda]". 194 It was submitted that the finding that Coates "was instructed to achieve" the transfer of an interest in land from Foch to De Varda "is insupportable". It is said that Coates was not instructed to achieve a transfer and made clear that he was not in a position to do so. 195 His Honour's reference to Coates having been instructed to achieve a transfer of interest in the Cambodian property from Foch to De Varda was based on Coates' concession that when Foch and De Varda came to see him on 19 January 1998 they told him that by the agreements they wished him to draft they were seeking to achieve a transfer of a 50% interest in the property in Cambodia from Foch to De Varda. In my view, Davies AJ was entitled to find that, subject to Coates' disavowal concerning any knowledge on his part concerning Cambodian law, Coates was instructed to achieve that purpose. At the very least, he should have prepared documents to which Foch, De Varda and the Sums were parties, which provided for a transfer by Foch to De Varda of Foch's interests in the property, and for the Sums' agreement to that transfer.

Contributory negligence 196 It was submitted on Watkins Tapsell's behalf that, given the acceptance of what Coates said to De Varda about his lack of knowledge of Cambodian law, his ignorance as to whether the documents would achieve the result intended, and that he was looking after Foch's interests, "[De Varda's] concession that he would not have entered into any agreements if those things had been said, indicates the highest possible level of contributory negligence". 197 The concession to which reference is made was contained in the following exchange: "Q. Did Mr Coates say to you 'Joseph I have no knowledge of Cambodian law. All that I am doing is reintroducing this document as Charles has requested. I have no idea whether it will achieve the result that you want and transfer ownership to you. I don't know if it is enforceable under Cambodia law I'm looking after Charles interests do you understand that?' A. No, he did not tell me that. And if he would have told me that I would not have entered into any agreements whatsoever". 198 I have already noted that Coates' disclaimers are of little significance in this case. 199 I repeat that Davies AJ dealt with the issue as follows: "In Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560 Sir Donald Nicholls V-C pointed out, at 574: 'In principle, carelessness in not making other inquiries provides no answer to a claim when the plaintiff has done that which the representor intended he should do'. Mr De Varda was not negligent in not obtaining other legal advice when the solicitor he trusted did not advise him to do so. And he was not negligent in acting on the faith of the documents which Mr Coates and Watkins Tapsell prepared when the documents were prepared and produced for that purpose. No doubt Mr De Varda was careless in having any dealing with Mr Foch but he was not warned by Mr Coates not to do so. He was not warned of the difficulties of purchasing land in Cambodia. Rather, any fears he may have had were quelled by the fact that Mr Coates was acting in the transaction. Mr De Varda lost his money because the documents on the faith of which he paid over the purchase price had no legal effect a fact of which Mr Coates was or ought to have been aware but of which Mr De Varda was unaware. In my opinion, Mr De Varda was not guilty of contributory negligence". 200 In my opinion the reasoning of Davies AJ is unimpeachable.

The genuineness of the transaction 201 At the trial Watkins Tapsell contended that the whole set of transactions was designed to defraud Watkins Tapsell. 202 This contention failed when Davies AJ found that De Varda was a basically honest person, that Charnay was telling the truth to the best of his ability, that Verren was to be believed that he saw Foch hand over the bars of gold to two men (which gold Foch had obviously obtained from De Varda). 203 His Honour concluded that the contention of conspiracy on the part of De Varda, Foch and De Varda's witnesses as being "as large a delusion as any of the delusions which were suggested by Mr Pembroke on behalf of the defendants during the course of the proceedings". His Honour gave detailed reasons, in addition to those mentioned, why he considered this argument to be unsustainable. He said: "It appears to me that the facts are much too complex to be the subject of a conspiracy by Mr Foch, Mr De Varda, Mr Verren and Mr Charnay to defraud Watkins Tapsell."

He also observed: "Amongst other factors, if Watkins Tapsell were to be defrauded, the fraud would only have worked if Mr Coates was negligent".

In my view, this point is unanswerable. 204 In my opinion, Davies AJ was justified in coming to the conclusion that he did.

The causation ground 205 On the second day of the hearing of the appeal, Mr Pembroke sought leave to amend the notice of appeal by the insertion of a ground that challenged the finding that the breach of duty on the part of Watkins Tapsell caused De Varda loss. 206 The proposed amendment was in the following terms: "The Judge erred in law in ordering judgment against the Appellants in the absence of any finding or any evidence capable of supporting such a finding, that the breaches of duty (as found by his Honour including at para [95] (Red 70 I-K), para [96] (Red 70M-U), para [117] (Red 76 O-Q), para [118] (Red 76 U-V)) were causative of the Respondent's loss, including that: (a) if Coates had expressly said to the Respondent that he should obtain other legal advice, the Respondent would have done so; or (b) the Respondent would have followed the other legal advice in (a) above; or (c) if Coates had refused to proceed in the transaction, the Respondent would not have proceeded in the transaction by other means; or (d) if Coates had expressly informed the Respondent that the documents created on 19 and on 23 January 1998 were not legally effective until signed by Mr and Mrs Sum, the Respondent would not have handed over gold to Foch until the documents were signed by Mr and Mrs Sum; or (e) if Coates had expressly said to the Respondent that he could not protect his interests, the Respondent would not have entered into the transaction; or (f) if Coates had produced documents that were effective to achieve a transfer of an interest in land from Foch to the Respondent, then the Respondent would not have suffered loss, despite Mr and Mrs Sum's denial of Foch's interest in the property (Red 50 C-D)". 207 As I have mentioned, the Court dismissed this application, saying that it would give reasons for its decision when delivering its reasons for judgment. 208 This proposed ground asserted, firstly, that there was no finding that Watkins Tapsell's breaches of duty were causative of De Varda's loss. I do not agree and shall give examples of statements made by his Honour that are, in effect, findings that causation was established. 209 His Honour stated: "Mr De Varda's loss arose entirely from his reliance on Mr Coates and Watkins Tapsell".

His Honour found that on 19 and 23 January 1998 Coates prepared and handed over the documents in question to De Varda "on the basis that Mr De Varda would act on the faith of those documents and would pay the purchase price which Mr De Varda did".

Later, his Honour stated: "As I have said Mr Coates understood his instructions to be that an interest in the Cambodian property was to be transferred from Mr Foch to Mr De Varda. I am satisfied that Mr De Varda and Mr Foch acted in the belief that the documents prepared by Mr Coates effected a transfer".

His Honour held that: "[Coates] allowed both Mr De Varda and Mr Foch to leave his office under the mistaken impression that Mr Coates had given them a document or documents on the basis of which it was appropriate to pay the purchase price".

His Honour said that: "Mr Coates prepared documents and passed them over as having a quality which they did not possess, namely as documents on the faith of which Mr De Varda should pay the purchase price of the property he sought to purchase".

His Honour observed: "Mr De Varda's loss arose entirely from his reliance on Mr Coates and Watkins Tapsell".

And again, he said: "Mr De Varda lost his money because the documents on the faith of which he paid over the purchase price had no legal effect a fact of which Mr Coates was or ought to have been aware but of which Mr De Varda was unaware". 210 Next, according to the proposed amended ground of appeal, there was no evidence capable of supporting findings of causation. I have elsewhere in these reasons referred to the material on which his Honour was entitled to rely for his finding that De Varda relied on Coates to the extent and degree found. I did not think that this argument has any prospect of success. 211 Thirdly, and importantly, the question of causation was not raised at the trial. The trial was not fought on the basis that causation was an issue. Watkins Tapsell were represented by experienced senior counsel. They sought to raise the proposed ground at a very late stage towards the end of argument on appeal. In all the circumstances, I did not think it fair for this ground to be raised at the stage when it was. 212 I propose that the appeal be dismissed with costs. 213 FOSTER AJA: I agree with Ipp JA. **********

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