LEGAL PRACTITIONERS - Solicitor acted for multiple parties with common interests - Whether solicitor's retainer letter extended to certain parties - Whether solicitor owed duties of loyalty and good faith independently of contractual retainer because of fiduciary relationship or implied retainer - Meerkin & Apel v Rossett Pty Ltd [1998] 4 VR 54, distinguished - Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1, applied - Adequate disclosure of conflict of interest to former client - Duties not breached by continuing to act for current client as matters not sufficiently related - Bolkiah v KPMG [1998] UKHL 52; [1999] 2 AC 222; McVeigh v Linen House Pty Ltd [1999] VSCA 138; [1999] 3 VR 394; Wan v McDonald [1991] FCA 344; (1992) 30 FCR 491; Spincode Pty Ltd v Look Software Pty Ltd [2001] VSCA 248; (2001) 4 VR 501, considered - Whether loss caused by solicitor continuing to act for client - Brickenden v London Loan & Savings Co [1934] 3 DLR 465, considered - Appeal dismissed.

1 This is an appeal from the decision of a Trial Division judge, holding that the first respondent, the law firm Ebsworth & Ebsworth ('Ebsworths'), and the second respondent, a partner in the firm, Mr Phillip Battye, are not liable to the first, second, third and fourth appellants (the plaintiffs in the proceedings below),[1] for economic losses suffered as the result of alleged breaches of fiduciary duties.

2 The first and second appellants are Messrs Robert Watson and Frederick Gibson. Their associated companies, Gibson Motorsport Merchandise Pty Ltd ('GMM') and F C Gibson Pty Ltd ('FCG') are, respectively, the third and fourth appellants.[2]

3 The breaches of fiduciary duty allegedly occurred while Mr Battye was acting as a solicitor for Mr Craig Lowndes, a race-car driver, and his company Craig Lowndes Pty Ltd (together, the 'Lowndes interests'), and for Mr Robert Forbes, and his company, Racecar Preparation and Management Pty Ltd ('RPM') (together, the 'Forbes interests') in 2000-1. It is alleged that at the same time as Mr Battye acted as a solicitor for the Lowndes interests and the Forbes interests, he also acted as a solicitor for the appellants, by advising them on matters relating to the establishment of a new car racing team to participate in the V8 Supercar Racing Championship series (the 'Championship Series') and, in late 2001, on proposals to buy-out the Forbes interests. In so doing Mr Battye is said to have breached the fiduciary duties of loyalty and good faith which he owed to the appellants and, in particular, his duty to avoid a conflict between the interests of the appellants and the Forbes interests.

4 His Honour described the structure of the Championship Series as follows:

Australian Vee Eight Supercar Company Pty Limited ('AVESCO') markets and manages V8 supercar racing championships. This company was established as a joint venture with Touring Car Entrants Group Australia Pty Ltd ('TEGA') to run the V8 Supercar Racing Championship. AVESCO is responsible for marketing and managing the Championship and TEGA is responsible for determining issues of technical parity between V8 supercars, licensing teams to race in the V8 Championship (formerly called franchises) and ensuring that only licensed teams compete in race meetings authorised by AVESCO.[3]

5 In May 2000, Mr Lowndes, a successful race-car driver and member of the Holden Racing Team ('HRT'), was looking for a new manager and someone who could help him find a new team and personal sponsors. His driver's agreement with Holden was due to expire at the end of 2000. Tom Walkinshaw Racing ('TWR') owned the team and managed Mr Lowndes under a contract which did not expire until 2007. Mr Lowndes approached Mr Watson, a founding director of AVESCO, for assistance in moving from HRT to a new team and finding new sponsors.

6 Mr Watson contacted Mr Battye, of Ebsworths, to ask if he would accept instructions to act for Mr Lowndes and Mr Battye agreed to act as Mr Lowndes' solicitor after a meeting with Messrs Lowndes and Watson. Thereafter Mr Watson was involved in various discussions with Mr Gibson, and later with Mr Forbes, about the establishment of a new team to be sponsored by Ford and managed by Mr Gibson, who had previously managed a successful team under the name of Gibson Motorsport.

7 Mr Gibson had sold his race car equipment and the TEGA franchise required to compete in the Championship Series, to Bronzco Pty Ltd, a company owned by Mr Garry Dumbrell. There were discussions about the possibility of Mr Gibson re-purchasing his TEGA franchise and equipment from Mr Dumbrell, with Mr Forbes providing finance for that purpose, and about the establishment of a new entity to be run by Mr Watson to exploit team merchandising opportunities. His Honour found that:

Matters progressed (about which I will say more below) and on 4 January 2001, there was a press conference announcing that Mr Lowndes would be driving in the 2001 season as a Ford driver as part of a team managed by Mr Gibson. In early 2001, whilst Mr Watson and Mr Gibson thought there were in principle agreements between various parties and whilst Mr Lowndes had signed driver agreements, much of what had supposedly been arranged and agreed in principle had not been formally documented. Nevertheless, the elements of what was needed to form a new team appeared to be in place and the company contemplated by Mr Watson and Mr Gibson as being incorporated to exploit team merchandise and intellectual property was incorporated on 6 February 2001, being Gibson Motorsport Merchandise Pty Ltd ('GMM'), the third plaintiff. F.C. Gibson Pty Limited ('FCG'), the fourth plaintiff, ultimately became the company that held the level one TEGA franchise which Mr Watson and Mr Gibson say was contemplated in the meeting of 7 December between Mr Watson, Mr Forbes and Mr Gibson.[4]

8 The events which occurred subsequently were described by his Honour as follows:

On 2 February 2001, Mr Watson contacted Mr Battye and asked him if he would be prepared to act for 'the team'. Mr Battye was concerned about the possibility of a conflict of interest between acting for the team and being Mr Lowndes' lawyer. Mr Battye needed to discuss the issue with Mr Lowndes. Ultimately, on 9 February 2001, Mr Battye agreed to accept a retainer. The circumstances surrounding the acceptance of this retainer and the terms and parties to the retainer are issues in this proceeding. In essence, the plaintiffs contend that this retainer was a retainer to act for each of them. Whereas the defendants contend that the retainer was limited to a retainer for Gibson Motorsport, being the entity with whom Mr Lowndes had entered into a driver's agreement on 4 January 2001. That is, the company originally known as ACN 095 359 041 Pty Limited which later changed its name to Racecar Preparation and Management Pty Ltd ('RPM'). This is a central issue to the resolution of this proceeding.[5]

9 GMM was incorporated on 6 February 2001 to undertake merchandising activities associated with the new team. FCG ultimately acquired the franchise from Mr Dumbrell which was required for a new Ford team to compete in the six remaining races in the Championship Series.

10 By early March 2001, difficulties were developing in the relationship between Messrs Gibson and Forbes. Messrs Watson and Gibson began to consider buying out the Forbes interests. Mr Lowndes initially supported these efforts, but later decided to stay with Mr Forbes, who succeeded in attracting Ford sponsorship for the team. In October 2001, Messrs Watson and Gibson and their companies were excluded, but Mr Lowndes stayed with the team, which by then was 'owned' by Mr Forbes and sponsored by Ford. At the end of the 2002 season, Mr Lowndes moved to another team.

11 After Messrs Watson and Gibson and their companies were excluded, they had no ongoing role in the management of the team or the associated merchandising opportunities. They issued proceedings in the Federal Court claiming they suffered consequential economic loss and seeking relief against Mr Forbes, RPM and another Forbes company, the Bob Forbes Corporation Pty Ltd. As the trial judge explained[6] in his reasons, in the Federal Court proceedings:

judgment was given ... in which it was held that the applicants were not entitled to the relief sought, other than some relief in respect of specified agreements.[7] In this proceeding, the plaintiffs contend that in the Federal Court proceeding, whilst they recovered some moneys, they suffered a net loss of $1,079,721.14.

The appellants subsequently issued proceedings against the respondents in the trial division of this Court seeking damages for economic loss said to have been caused by the respondents' conduct.

12 In their third amended statement of claim, the appellants alleged that, on or about 9 February 2001, Ebsworths was retained to act generally on behalf of the 'Gibson Motorsport interests', which included GMM and FCG, and consequently to act generally in relation to the conduct by those entities of the business of selling merchandise associated with the team (in the case of GMM) and of conducting the Gibson Motorsport team (in the case of FCG). The general retainers by GMM and FCG were said to arise out of the retainer letter dated 9 February 2001 sent by Ebsworths to Mr Gibson (the '9 February letter'), out of conversations between relevant parties (some of which occurred after 9 February) and by implication from the conduct of the parties relating to instructions given and work done from 14 February 2001.

13 It was also pleaded that, on 7 September 2001, Ebsworths were retained to act on behalf of Messrs Watson and Gibson and to advise them in connection with their dispute with Mr Forbes and RPM (the 'disputation advice retainer'). The particulars alleged that this retainer partly arose out of a telephone conversation between Messrs Watson, Gibson and Battye on 7 September 2001 and was partly to be implied from instructions given by Messrs Watson and Gibson to Mr Battye on that date, when they provided him with a letter from Mr Forbes.

14 The appellants sought damages from the respondents for breach of contract and negligence in exercising the duties of care and skill owed to GMM and FCG under the alleged general retainers, damages for breach of a duty of care owed to Messrs Watson and Gibson between March and October 2001 and damages for breach of contract and negligence in relation to the disputation advice retainer.

15 In paragraph 33 of the appellants' third amended statement of claim, it was further alleged that:

during the period from March to October 2001, Ebsworth and Ebsworth were in a fiduciary relationship with the plaintiffs and owed them fiduciary duties:

(a) of loyalty and good faith;

(b) to disclose any personal interest, whether actual or contemplated, which may conflict with the interests of any of the plaintiffs;

(c) to avoid a conflict between the interests of the plaintiffs and the interests of other clients of Ebsworth and Ebsworth, in particular Craig Lowndes, Craig Lowndes Pty Ltd, Racecar Preparation and Management Pty Ltd Pty Ltd [sic] and Mr Forbes;

(d) to avoid a conflict between the interests of the plaintiffs and Ebsworth and Ebsworth's own interests.

16 The details of the events on which the appellants relied were further set out in the appellants' response, dated 7 September 2005, to a request for further and better particulars, which said that:

(b) Ebsworth and Ebsworth assumed responsibility toward Gibson Motorsport Merchandise and F C Gibson by, inter alia, maintaining a Gibson Motorsport Merchandise client file opened in July 2001 as a general advice file, holding more than 90 telephone discussions with one or other of Mr Watson, Mr Gibson and Mr Hall in the period early February 2001 to early December 2001, attending approximately eight conferences with one or other or some of them and sending or receiving more than 60 pieces of written correspondence or documents in the same period referable to the conduct of the team.

Further, and in any event, given the collaborative manner in which RPM, Gibson Motorsport Merchandise and F C Gibson conducted the race team in the 2001 race season, the fact that Ebsworth and Ebsworth knew themselves to be and were known by Gibson Motorsport Merchandise and F C Gibson to be the team's solicitor, the fact that Gibson Motorsport Merchandise and F C Gibson did not have other lawyers representing their interests, the fact that Ebsworth and Ebsworth were prepared to act as lawyers for both parties to a transaction involving team or related issues (as exemplified by Ebsworth and Ebsworth acting for the sixth plaintiff[8] and Craig Lowndes Promotions Pty Ltd in drawing an agreement between them dated 20 June 2001 and Ebsworth and Ebsworth's preparedness to act for Mr Watson, Mr Gibson and Mr Forbes in drawing the agreement referred to in Mr Watson's letter to Mr Forbes dated 6 September 2001, as settled by Mr Battye) the plaintiffs are not obliged to give further particularity as to each occasion on which Ebsworth and Ebsworth assumed responsibility toward Gibson Motorsport Merchandise and F C Gibson by separately or solely acting for or advising them, as distinct from RPM;

(c) the word contemplation is used in its legal sense to describe Ebsworth and Ebsworth's knowledge that at all material times F C Gibson and Gibson Motorsport Merchandise were and would be so closely and directly affected by Ebsworth and Ebsworth's failure to advise them in the manner set out in paragraphs 32 to 36 [these were particulars of various breaches of fiduciary duties] of the amended statement of claim that they did or ought reasonably to have had the interests of Gibson Motorsport Merchandise and F C Gibson in their contemplation as being likely to be injured by any failure to act on their behalf in a manner which a reasonably skilled and diligent firm of solicitors would have acted.[9]

17 The loss consequent on the appellants' failure in the Federal Court, combined with the other heads of loss to which we refer below, was alleged to have resulted in total losses to the appellants of more than $24 million.

18 In the proceedings below, the claims for damages for breach of contract and negligence were abandoned, and ultimately the appellants relied on the claims of breach of fiduciary duty alone. Nevertheless the pleaded particulars of the claims in contract and tort remained relevant, because the appellants relied on them in support of the claim that Ebsworths and Mr Battye owed them fiduciary duties.

19 In their defence, Ebsworths and Mr Battye denied that they owed fiduciary duties to all or any of the appellants and further said that even if they owed such duties they had not breached them.

20 On the second day of the trial, the learned judge asked the parties to summarise the issues to be decided. So far as the question of duty was concerned, the appellants stated the relevant issues very broadly.[10] Their trial counsel submitted that the questions to be determined included whether, during the periods from about 20 March 2001 to the end of 2001, and from the period 30 August 2001 to the end of 2001, the respondents owed the appellants a duty of loyalty and good faith and a duty to avoid a conflict between their interests and the interests of other clients including Messrs Lowndes and Forbes.[11] The appellants' statement of issues made no specific reference to the 9 February letter, which was relied upon in the pleadings as the basis for the express retainer.

21 The respondents summarised the duty issues more narrowly. They formulated them as follows:

1. Was there a retainer of Mr Battye by GMM or FCG on 9 February 2001, or was the retainer limited to RPM?

1. Did Mr Watson and Mr Gibson retain Mr Battye to act for them personally on 7 September 2001 in relation to the dispute with Mr Forbes, or was Mr Battye retained to act for Mr Lowndes only?
2. Did Mr Battye owe the plaintiffs, or any of them, the fiduciary duties as alleged, in or about September and October 2001, in connection with the dispute with Mr Forbes?[12]

22 His Honour said that while some of the issues in the plaintiffs' list were stated too broadly, they provided a useful framework. The central issues for determination were whether:

(a) On or about 9 February 2001, Ebsworths were retained to act generally on behalf of GMM (described by the plaintiffs as 'the Gibson Motorsport Merchandise retainer').

(b) On or about 9 February 2001, Ebsworths were retained to act generally on behalf of FCG (described by the plaintiffs as 'the FC Gibson retainer').

(c) On 7 September 2001, Ebsworths were retained to act on behalf of Mr Watson and Mr Gibson in connection with a dispute between them and Mr Forbes and RPM (described by the plaintiffs as 'the disputation advice retainer').

(d) During the period from March to October 2001, Ebsworths knew or ought to have known that the plaintiffs were relying and would rely upon advice given to them and their legal expertise generally so as to give rise to tortious duties of care.[13]

(e) During the period from March to October 2001, Ebsworths were in a fiduciary relationship with the plaintiffs and owed them fiduciary duties.[14]

23 It will be noted that the issues as formulated by his Honour concerned both the alleged retainer created by the 9 February letter and the alleged fiduciary relationship which was said to have existed between March and October 2001.

24 As we explain below, the different ways in which the appellants and respondents summarised the basis for the duty of loyalty allegedly owed by Ebsworths and Mr Battye to some or all of the appellants was also reflected in the submissions made at the hearing of the appeal.

25 The trial judge found that Messrs Watson, Gibson and Battye were honest witnesses who were doing their best to recall events which had occurred more than seven years previously. Consequently some of their evidence (and in particular that of Mr Watson) appeared to be a reconstruction. Mr Battye had the benefit of a number of contemporaneous file notes, although his evidence also necessarily involved some reconstruction of past events. Messrs Watson and Gibson were forced to recollect and reconstruct events by reference to documents discovered in the Federal Court proceedings. His Honour concluded that the evidence of both Messrs Watson and Gibson involved a greater amount of reconstruction than that of Mr Battye. He gave a number of examples of evidence given by Mr Watson that were clearly wrong or improbable, though he accepted that Mr Watson believed his evidence to be accurate.[15] He said that, by contrast, Mr Battye conceded matters about which he had no recollection, made appropriate concessions and did not avail himself of opportunities to give answers that would have been more favourable to his case.

26 His Honour summarised his views of the witnesses as follows:

Whilst there are many differences between the account of Mr Watson and the account of Mr Battye in respect of individual meetings and conversations, a possible explanation for some of the differences is the different backgrounds of the two parties. Central to Mr Battye's evidence (and the defendants' case) is that when acting for 'the team' or 'Gibson Motorsport', Mr Battye contends that he was acting for one entity, RPM. Central to Mr Watson's evidence (and the plaintiffs' case) is that references to 'the team' are (as he has always understood them for many years in the motor racing industry) references to all of the entities involved in racing the race cars, including their employees. Thus, Mr Watson's evidence as to his meetings and conversations with Mr Battye start from the premise that everything being said about the team is being said about a group of entities and people, whereas Mr Battye's recollections of the various conversations and meetings starts from the proposition that he was first Mr Lowndes' lawyer and then (subject to any conflict that might arise) RPM's lawyer. Having made these points, for the reasons given above, where there is a dispute between Mr Battye on the one hand and Mr Watson and Mr Gibson on the other hand concerning what was said in conversations or at meetings, I prefer the evidence of Mr Battye.[16]

27 His Honour said that while there was dispute between the parties as to the details of the various conversations and meetings between them, much of that dispute fell away when the meaning of the words the 'team' was ascertained.[17] He concluded that:

(a) the references in the 9 February letter to 'Gibson Motorsport' and the 'team' meant RPM. Thus the letter did not retain Mr Battye to act on behalf of GMM and/or FCG from February 2001;[18]

(b) no contractual retainer came into existence between Mr Battye and the appellants as a result of Mr Battye's dealings with Messrs Watson and Gibson or their companies after 9 February 2001. Although Mr Battye gave Messrs Watson and Gibson 'advice concerning legal matters from time to time', in doing so he was acting for either Mr Lowndes and his company, or RPM. Mr Battye was retained to act for the Lowndes interests and RPM and 'it was reasonable for him not to regard himself as acting independently for [the appellants]'.[19] The fact that Messrs Watson and Gibson sought advice from their own lawyers during that period showed that Mr Battye was not acting for them;[20]

(c) although Mr Battye gave legal advice to GMM on matters in which GMM had an interest and billed GMM separately, in doing so he was acting on the instructions of RPM, in order to advance the interests of the team. Whatever instructions Mr Battye may have had to act for GMM in relation to specific matters, Mr Battye did not act as a lawyer for GMM in relation to the buy-out issue or the structure of the team.[21] It followed that '[t]here was no assumption of responsibility on the part of the [respondents] to look after the interests of the [appellants], nor was there any known reliance';[22]

(d) Mr Battye acted primarily for Mr Lowndes throughout 2001, but took on RPM as a client with Mr Lowndes' permission, on the basis that there was no conflict of interest at that time. He ceased to act for RPM at the end of August 2001, when such a conflict arose;[23]

(e) there was no communication between Mr Battye and Mr Watson or Mr Gibson on 7 September 2001 which gave rise to a retainer of Ebsworths to act on behalf of Messrs Watson and Gibson in connection with the dispute between them and the Forbes interests;[24]

(f) Mr Battye and Ebsworths owed duties of care or fiduciary duties to one or some (and perhaps on some occasions, all) of the appellants in relation to specific transactions. For example in advising GMM in relation to the terms of an agreement with a third party, the defendants had a duty to take reasonable care. They also owed duties of care and fiduciary duties to Mr Lowndes and RPM. However '[n]o duty that conflicts with [the duties owed to Mr Lowndes and RPM] can, in the circumstances of this case be owed by the defendants to the plaintiffs'.[25] Further, even if any conflict did arise, that conflict was of the appellants' own making and they could not complain about it;[26]

(g) even if Mr Battye and Ebsworths owed a fiduciary duty to some or all of the appellants, they did not breach it by: (i) failing to inform the appellants of the vulnerability of their interests arising from the lack of contracts between RPM, GMM, FCG and Ford; (ii) failing to advise them that Ebsworths could not act for them and that they should obtain separate representation; (iii) acting against the interests of the appellants; or (iv) failing to tell them that Mr Forbes was not proposing to sell his interest to them;[27] and

(h) even if any breach of duty by the respondents was established, it did not cause the losses claimed to have been suffered by the appellants.[28]

28 The grounds of appeal, which are set out below, challenge all of these findings other than finding (e) which relates to the disputation advice retainer. It is also alleged that the trial judge erred in assessing the quantum of the loss which would have been suffered by the appellants, if he had held that they had established a breach of fiduciary duty. We note that the losses that the appellants alleged that they had suffered as a result of the respondents' breaches of fiduciary duty were summarised in the particulars to para 36 of the third amended statement of claim under three heads. The first head was the loss by GMM of the opportunity to earn income from the business of selling team merchandise and apparel in the sum of some $21 million. The second head was the incurring by the appellants in certain Federal Court proceedings of legal costs (net of recoveries) in a sum of about $1 million. The third head was the loss by FCG of the value of its TEGA franchise in a sum in excess of $2 million.

Did the respondents owe the appellants fiduciary duties of loyalty and good faith?

Grounds of appeal 1 and 3: did the respondents, FCG and/or GMM enter into a contractual retainer on 9 February 2001?

29 It is convenient to turn first to grounds 1 and 3, which are as follows:

1. The learned trial judge erred in concluding that there was not a contractual retainer as alleged between the respondents and GMM.
2. The learned trial judge erred in concluding that on and from 9 February 2001 the respondents were retained to act generally for RPM only and that there was no contractual retainer as alleged between the respondents and RPM, FC Gibson Pty Ltd (FCG) and GMM.

30 Ground 3 challenges his Honour's finding that no contractual retainer between the respondents, GMM and FCG, was created by the 9 February letter. Ground 1 relates only to GMM, but appears to challenge both his Honour's finding that the 9 February letter did not create a contractual retainer with GMM and his finding that no retainer came into existence subsequently. At this point we deal only with his Honour's findings relating to the 9 February letter.

31 At the hearing of the appeal, counsel for the appellants said that he would be relying primarily on an analysis of the events which occurred after the 9 February letter and between May and September 2001, to establish that the respondents owed fiduciary duties to GMM and were therefore precluded from acting against its interests. In particular, counsel said that his main challenge was to his Honour's finding that Mr Battye acted for GMM only in relation to discrete matters and that he did so on the instructions of RPM in order to advance RPM's interests.[29]

32 In response to a question from the Court as to the relevance of the 9 February letter, counsel submitted that:

We say that the clearest fiduciary duty ... was owed to [GMM] because [Mr Battye] commenced acting for them in April or thereabouts, during May and then he ... opened a file for [GMM] at the start of June. He did substantial work ... over the next three months or so.

33 Although that was the way in which the appellants' case was put at the hearing of the appeal, ground 3, which challenged his Honour's findings on the effect of the 9 February letter, was not abandoned.

34 Counsel for the respondents submitted that the appellants' third amended statement of claim relied on the 9 February letter to establish a contractual retainer with GMM and that his Honour had correctly found that it did not do so. Counsel also submitted that, insofar as the pleadings relied on an implied retainer, this was also said to have arisen in February 2001.

35 We therefore consider ground 3 (and ground 1 to the extent that it relates to the 9 February letter) before turning to the other bases on which it is said that his Honour erred in finding that the respondents did not owe the appellants a duty of loyalty, and a consequent duty to avoid a conflict between their interests and those of Mr Lowndes, Mr Forbes and RPM.

36 The alleged 9 February 2001 retainer was said to be partly written, partly oral and partly implied from the conduct between the respondents, GMM and FCG. So far as it was oral, the appellants, in the particulars to their third amended statement of claim, relied on a phone conversation between Messrs Battye and Watson in early February, in which Mr Battye was asked to act for the team, and on a meeting said to have occurred on 14 February 2001, between Messrs Battye, Watson and Gibson, in which Mr Battye was allegedly told about the entities which constituted the Gibson Motorsport team.

37 So far as the alleged contractual retainer was said to be implied, the particulars in support of the pleading alleged that:

1. Mr Watson and Mr Gibson (as directors of Gibson Motorsport Merchandise) and Mr Hall (as general manager of Gibson Motorsport Merchandise) gave oral and written instructions to Ebsworth and Ebsworth on behalf of Gibson Motorsport Merchandise from 14 February 2001 in numerous matters arising in the course of the conduct of its business;
2. Ebsworth and Ebsworth acted on the instructions referred to in (i) above by providing legal advice to Gibson Motorsport Merchandise both orally and in writing and sent correspondence to third parties in relation to the protection and preservation of the rights of Gibson Motorsport Merchandise;
3. Ebsworth and Ebsworth rendered bill number 10868 on file PEB/10104 dated 31 May 2001 to Gibson Motorsport, which included charges made in relation to the activities of Ebsworth and Ebsworth set out in (i) and (ii) above;
4. Ebsworth and Ebsworth rendered bill number 11371 on file PEB/10104 dated 31 May 2001 to Gibson Motorsport, which included charges made in relation to the activities of Ebsworth and Ebsworth set out in (i) and (ii) above;
5. Ebsworth and Ebsworth withdrew bill number 11371 and replaced it with a bill to Gibson Motorsport Merchandise, being bill number 11745 on file PEB/10709 dated 12 July 2001 which was paid by Gibson Motorsport Merchandise on 9 August 2001;
6. Ebsworth and Ebsworth created a new client file number (being PEB/10709 and new client cost centre for Gibson Motorsport Merchandise on about 7 July 2001, which file related to the giving of general advice to Gibson Motorsport Merchandise; [and]
7. Ebsworth and Ebsworth maintained client file PEB/10709 for Gibson Motorsport Merchandise from 7 July 2001 to 10 October 2001 made up of time sheets, ledgers, file notes, memoranda, letters, correspondence and copies created by Ebsworth and Ebsworth or passing between Gibson Motorsport Merchandise and/or third parties and Ebsworth and Ebsworth.

38 Conduct occurring after 9 February 2001 cannot support the implication of a contractual retainer on that earlier date. Subsequent conduct could, however, be relied on as evidence supporting the appellants' claim that there was already a contractual retainer in existence. We refer to his Honour's factual findings about the post-9 February conduct, in the context of our later discussion of grounds 2 and 3A.

39 His Honour made the following factual findings about the events which preceded the sending of the 9 February letter:

(a) from 24 May 2000, Mr Battye accepted instructions to act for Mr Lowndes and his companies. In that capacity he gave legal advice to Mr Lowndes about the TWR management agreement and his arrangements with HRT throughout 2000. Mr Watson often relayed instructions to Mr Battye from Mr Lowndes;[30]

(b) in late 2000, Mr Battye referred Mr Watson to another firm of solicitors to act for him in relation to threatened proceedings against him by TWR, with whom Mr Lowndes had a management agreement. He never acted for Mr Watson in relation to this dispute;[31]

(c) Mr Battye had met Mr Gibson by late November 2000;[32]

(d) in November 2000, Mr Battye had a meeting with Mr Watson and executives from Ford, during which there was discussion about the terms on which Mr Lowndes might enter into an agreement with Ford to drive a racing car during the 2001 season;[33]

(e) on 5 December 2000, Messrs Battye, Gibson and Watson met and discussed the possibility of Mr Lowndes driving a team managed by Mr Gibson. Mr Battye asked who would be handling the purchase of the team and to whom he would need to speak about Mr Lowndes' drivers' agreement. Mr Battye was told that Neil Falconer of White Cleland would be acting on Mr Gibson's behalf in relation to the purchase from Mr Dumbrell;[34]

(f) on 7 December 2000, there was a meeting between Messrs Watson, Forbes and Gibson at which arrangements for the establishment of the new team were discussed, though Mr Forbes had a different recollection from Mr Watson as to what was said at the meeting;[35]

(g) on 8 December 2000, Messrs Forbes and Dumbrell signed Heads of Agreement for the sale and purchase of the business of 'Gibson Motorsport' for $2.7 million. The Heads of Agreement was drafted by Mr Falconer. Under that agreement, the business name of Gibson Motorsport, the plant, stock and equipment of Gibson Motorsport, and Mr Dumbrell's franchise in TEGA were to be sold to Mr Forbes or his nominee;[36]

(h) on 12 December 2000, ACN 095 359 041 Pty Ltd, which later changed its name to RPM,[37] was incorporated. Messrs Forbes and Gibson were listed as directors and Mr Forbes as the sole shareholder. Mr Gibson resigned as director in a letter of the same date,[38] but Mr Forbes gave evidence he did not know that this had occurred until sometime in early January 2001;[39]

(i) according to his witness statement, as at 18 December 2000, Mr Battye believed that RPM was controlled by Mr Gibson, having conducted a company search that revealed Mr Gibson to be a director. Mr Battye conducted the company search of RPM after being told by Mr Falconer that the entity purchasing the team from Mr Dumbrell was RPM. His Honour found that it was not until 11 December 2000 that Mr Battye first heard of Mr Forbes;[40]

(j) by letter dated 14 December 2000, TEGA wrote to Mr Gibson confirming that the TEGA board had agreed to Mr Dumbrell's franchise being transferred to him. This was in response to a letter from Mr Gibson to TEGA indicating that his company, FCG, would assume all of the obligations and responsibilities of the team under the franchise previously held by Mr Dumbrell's company;[41]

(k) Mr Battye prepared a draft of a driver agreement between Mr Lowndes, Mr Lowndes' company and RPM in December 2000. On 18 December 2000, Mr Battye was told by Mr Falconer of White Cleland that the entity purchasing the racing team from Mr Dumbrell was RPM. Mr Battye believed at that time that RPM was a company controlled by Mr Gibson. At some time after 19 December 2000, Mr Battye was told that the sole director of RPM was now Mr Forbes, but that Mr Gibson would continue to act as team principal;[42]

(l) on the same date (ie, 18 December 2000), Gibson Motorsport Pty Ltd (formerly Bronzco Pty Ltd) sold the business it conducted at Kitchen Road, Dandenong and its plant, stock and equipment to RPM for $2.25 million.[43] Its TEGA franchise and the Gibson Motorsport business name were transferred to FCG, Mr Gibson's company. Mr Dumbrell signed the transfers on behalf of the vendor and Mr Gibson on behalf of the purchaser. (The transfer of the business name and TEGA franchise to FCG was inconsistent with the terms of Heads of Agreement entered into between Messrs Forbes and Dumbrell on 8 December 2000, for the sale and purchase of Gibson Motorsport for $2.7 million.);[44]

(m) on the same day, Mr Gibson received a letter from Ford confirming Ford's agreement to sponsor the 'Fred Gibson racing team'. He counter-signed the letter and sent it back to Ford after crossing out the team name and replacing it with 'Gibson Motorsport'.[45] The sponsorship money was initially paid to Mr Gibson on the basis that he would apply it to the benefit of RPM. Eventually Mr Gibson instructed Ford to pay the money directly to RPM;

(n) on 20 December 2000, Mr Lowndes and his company entered into a racing agreement with Ford (the 'Ford driver agreement') which provided that Craig Lowndes Pty Ltd 'will procure for Ford and Ford agrees to engage [Craig Lowndes Pty Ltd] to procure the services of [Mr Lowndes] as a motor racing driver to the Team in consideration of the Payment for the Term in accordance with the provisions of this Agreement'. The word 'Team' was defined to mean 'a Team which operates the Racing Car in the Championship';[46]

(o) by 4 January 2001, Mr Battye knew that Mr Forbes was providing financial backing to allow the team to be purchased from Mr Dumbrell;

(p) on 4 January 2001, Mr Lowndes and his company made an agreement with RPM providing that Craig Lowndes Pty Ltd 'will procure for [RPM] the services of [Mr Lowndes] as a motor racing driver to the Team' for three years (the 'RPM driver agreement'). 'Team' was defined as 'Gibson Motorsport ... or [RPM] as may be appropriate'. A press conference was held immediately afterwards in which it was announced that Mr Lowndes would compete as a Ford driver in the upcoming season in a team managed by Mr Gibson;[47]

(q) on 24 January 2001, GMM was incorporated as the merchandising company, with Messrs Forbes, Watson and Gibson as directors and equal shareholders; and

(r) on 30 January 2001, Mr Gibson consented to RPM using the name 'Gibson Motorsport'. This consent was replaced by a second consent given in March 2001.

40 Mr Watson contacted Mr Battye in February 2001 to ask him if he would be prepared to act for the 'team'. His Honour's findings about the conversation which occurred at this time were as follows:

Whilst it is common ground that this conversation occurred, there is a dispute between Mr Battye and Mr Watson as to its ambit and, specifically, what was meant by the expression 'the team'. Both Mr Watson and Mr Battye agree that the possibility of a conflict of interest was raised by Mr Battye, being a conflict because of his position as Mr Lowndes' lawyer. Mr Battye's evidence is that he did not ask Mr Watson what he meant by 'the team'. The only company that he was aware of that was 'the team' was RPM (a matter about which I will say more below). Mr Battye's evidence was that he had not heard of GMM at this time and that, by referring to 'the team', he understood this to be a request that he act on behalf of RPM.

Mr Watson's evidence was that, during this conversation, he asked 'Philip, would it be appropriate if you represented us so you could put it all together?' and that in his discussion with Mr Battye 'us' was 'the whole consortium'. Mr Watson's recollection is that he asked Mr Battye to deal with all the contracts that were necessary for the different components that made up the team and that contracts needed to be developed for sponsors going forward. There was discussion about the Ford contract and that 'sponsor templates' were needed before negotiations with sponsors could be concluded. Mr Watson's evidence was 'I spoke about a myriad of things that we needed to do at that point in time'. Mr Watson recollects that he told Mr Battye that GMM had been incorporated. However, at best, Mr Watson can only have told Mr Battye that he had given instructions on 24 January 2001 to incorporate GMM as GMM was not incorporated until 6 February 2001. This evidence was given orally by Mr Watson in substitution for paragraphs 88 and 89 of his principal witness statement. It may be that Mr Watson's evidence concerning telling Mr Battye about the incorporation of GMM was meant to refer to a conversation that occurred on 6 February. Equally, it may refer to a conversation held subsequently at the workshop. In any event, if Mr Watson did say on 2 February that GMM had been incorporated, this was wrong.

Subsequently, Mr Battye discussed the matter with Mr Lowndes and Mr Battye was able to accept a retainer for 'the team'. The February 2001 retainer letter was then sent on 9 February.[48]

41 After seeking Mr Lowndes' approval, Mr Battye informed Mr Watson on 5 February 2001 that he would only act for the 'team' if he would not be precluded from acting for Mr Lowndes, in the event of a conflict of interest. He sent the letter accepting the retainer to act for 'Gibson Motorsport' on 9 February 2001.

42 The retainer letter was addressed to 'Mr F Gibson, Gibson Motorsport' and was sent to Mr Gibson. He counter-signed it, acknowledging that he agreed to its terms and to the 'wavier [sic] of solicitor/client privilege' and 'the conflict issues in respect of the firm's retainer by Craig Lowndes and his entities'. Copies of the letter were sent by Ebsworths to Messrs Watson and Lowndes, but not to Mr Forbes or RPM.

43 The relevant parts of the letter were as follows:

We confirm our retainer by Gibson Motorsport to act generally on its behalf for which we thank you.

As you are aware we also act as solicitors on behalf of Craig Lowndes and his various corporate entities. Whilst this currently presents no actual conflict of interest we advise that our retainer by Mr Lowndes and his entities may potentially give rise to a conflict of interest in the future. The most obvious potential source of conflict arises in the context of the driving contract entered into between Craig Lowndes Pty Ltd and Mr Lowndes with Gibson Motorsport. Conceivably there could also be potential conflict in respect of sponsorship arrangements between third parties, the team and Mr Lowndes and his entities.

Notwithstanding the potential conflict including those detailed above as illustrations we confirm our retainer by you. We advise that we are prepared to accept your retainer on condition that in the event of any actual conflict between Mr Lowndes and his entities and Gibson Motorsport we will be free to cease our retainer by you in respect of the particular matter which gives rise to the conflict. In so doing, you agree that we are able to continue acting on behalf of Mr Lowndes and his entities in that particular matter notwithstanding any information, documents or otherwise with which we may have been instructed by you in the course of our retainer by you. You also agree to waive any solicitor client privilege in respect of any such documents and/or communications or instructions.

It will be noted that the letter did not refer to RPM or to the companies associated with Mr Watson or Mr Gibson, but only to 'Gibson Motorsport'.

44 The appellants' case below was that by agreeing to act for the 'team' in response to Mr Watson's request, Mr Battye had been retained by (at least) GMM and FCG. The respondents claimed that they were retained by RPM only. His Honour said that while there was dispute between the parties as to the detail of meetings and conversations between the parties, 'a great deal of this falls away when the meaning of "the team" is resolved'.[49] The judge said that that this expression was used in Ford's letter to Mr Gibson of 18 December 2000, in the Ford driver agreement and in the RPM driver agreement, but that its meaning in these documents was ambiguous.

45 In particular, his Honour noted that the RPM driver agreement was made on 4 January 2001 and that it defined 'Team' to mean 'Gibson Motorsport ... or [RPM] as may be appropriate'.[50] At that time, the business name Gibson Motorsport was owned by FCG and consent to RPM using that name had not yet been executed. This meant that the expression the 'team' could encompass either RPM or whoever was entitled to use the business name, but it could not cover GMM, which at that stage was not yet incorporated.

46 His Honour then went on to consider the 9 February letter and referred to Messrs Watson and Gibson's evidence about what was meant by the expression the 'team'. He said:

Mr Watson was cross-examined about the use of the expression 'the team' in some of the documents. From time to time he appeared to be conceding that on some occasions a reference to the team was a reference to RPM. For example, in the letter of 1 March 2001, which he sent to Mr Gibson, there is a reference to 'sponsorship income generated for the Team'. Mr Watson was asked whether the reference to 'team' was to the body that received the sponsorship income, to which he answered yes. He was then asked: 'That was RPM?', to which he answered 'Yes. All funds went to RPM'. Finally on that issue he was asked the following question and gave the following answer:

'That's what you meant by "the team" in that sentence?---It was a word that embraced our whole thing but in this instance it was talking about "the team", where the money was going to fund the building of the race cars.'

Whilst Mr Watson and Mr Gibson may have meant to encompass various entities and people from time to time when they used the word 'team' - and in particular in day-to-day conversations, there is nothing in the written material to suggest that Mr Battye understood that their references to 'the team' encompassed more than RPM in a way that made him the lawyer for entities and people additional to RPM. The plaintiffs' case on this issue was not assisted by the lack of precision the use of the word 'team' involved. Specifically, at one point in his evidence Mr Watson appeared to limit the team to the three companies FCG, RPM and GMM. However, at other times Mr Watson said that the team was a six person entity (three companies and three individuals) together with all the staff. It cannot be realistically suggested (and it was not suggested) that in acting for the team Mr Battye undertook to act for all of the employees of FCG, GMM and RPM. Further, it is not immediately apparent why, if the team encompasses all the employees, Mr Battye should (in the absence of an express arrangement) have regarded himself as acting for only some parts of the team, being either the three companies or the three companies together with the three principals. Whilst the meaning of the expression 'the team' as at February 2001 might not be governed by what was said later in the year, it is relevant to note that the plaintiffs' case was not assisted by later communications from Mr Watson to Mr Battye in which the team was referred to separately from GMM. For example, in Mr Watson's email to Mr Battye of 18 October 2001 Mr Watson states: 'I want the best for Craig and the best for Ford, the Team, the merchandising company and my people'. There being no written retainer stating that Mr Battye acted for the plaintiffs in this case (my conclusion in respect of the February 2001 retainer letter being that it was a retainer letter in respect of RPM only), it will be necessary to look at the conversations and conduct of Mr Battye that the plaintiffs say demonstrates he was in any event acting for them. Before dealing with those matters, I need to deal with the meaning of 'Gibson Motorsport'.

Meaning of 'Gibson Motorsport'

Whilst being cross-examined about the February 2001 retainer letter, Mr Watson was asked the question 'There is no question that you treated Gibson Motorsport as the trading name for RPM?'. Mr Watson answered: 'I treated it as the trading name for RPM and others, yes'. As at 9 February 2001, RPM was the entity trading as Gibson Motorsport pursuant to the consent executed on 30 January 2001. References at and about that time to Gibson Motorsport in the relevant documents were (for the reasons given above) references to RPM.

Conversations with Mr Battye about acting for the team

Once it is accepted that Mr Watson may well have used the expression 'the team' to encompass a wider group of entities than RPM but that this was never expressly conveyed to Mr Battye, who assumed that references to the team were references to RPM, much of the differences between the parties as to the precise terms of conversations falls away and does not require further resolution. In paragraph 55 of his principal witness statement Mr Gibson stated:

'In late January 2001, Mr Watson, Mr Forbes and I discussed the need for the entities within the team to appoint a solicitor. It was agreed that due to Mr Battye's knowledge of the operation that he would be the most suitable person to act as the solicitor for the team and the entities that made up the team. Mr Watson was to contact Mr Battye to discuss his appointment.'

Mr Battye's evidence is that he was not asked to act for 'the team and the entities that made up the team' and that had he been asked to do so, he would have immediately asked for the entities concerned to be identified. I accept Mr Battye's evidence. Further, it is notable that if references to the team were indeed references to the entities that were said to make up the team, then why would the principals talk in terms of Mr Battye acting for 'the team and the entities that made up the team.'[51]

47 On the basis of that reasoning, his Honour concluded that the 9 February letter did not create a retainer between Ebsworths and either FCG or GMM.

48 Although counsel for the appellants relied mainly on a fiduciary relationship between the respondents and GMM which was said to have come into existence from about April 2001, he also submitted that his Honour had erred in concluding that the 9 February letter created a retainer by RPM only and not by FCG and GMM. The arrangements for the retainer were made by Mr Watson, who was neither a director of, nor employed by, RPM. As at 9 February 2001, Mr Battye knew that the business name Gibson Motorsport was owned by FCG, and did not then know that RPM had a non-exclusive licence to use the business name. In cross-examination, Mr Battye said that it was reasonable to assume that he did not know that RPM was licensed to trade as Gibson Motorsport until 14 February 2001 (ie, after the date of the 9 February letter).

49 Further, no copy of the 9 February letter was sent to Mr Forbes or RPM although it was sent to Mr Gibson and copied to Messrs Watson and Lowndes. Mr Forbes' evidence was that he was not aware Mr Battye had acted for RPM until late August 2001.

50 At the time the letter was sent, Mr Battye did not know how the responsibility of each of the appellants for the workings of the new 'team' was to be divided. It was not until a meeting on 14 February 2001 between Messrs Battye, Watson and Gibson, that the operations of Gibson Motorsport were fully explained to Mr Battye.

51 Further, counsel submitted that, if the retainer in the 9 February letter was confined to RPM, the solicitor had an obligation to make this clear to Messrs Watson and Gibson and their companies.[52] Mr Battye had accepted instructions to do work on GMM matters in May 2001 and had billed them to the Gibson Motorsport file, until he was instructed by Mr Watson to bill GMM separately. This was not consistent with a belief on his part that he was acting for RPM only.

52 The respondents' counsel submitted that the appellants had abandoned the allegation that Messrs Watson and Gibson had retained Mr Battye in their personal capacity in its third amended statement of claim. His Honour had found that they did not retain Mr Battye and there was no appeal from that factual finding. Thus the appellants could only challenge the finding that there was no contractual retainer by GMM and FCG.

53 Evidence of the circumstances existing before 9 February 2001 supported his Honour's finding that the reference to the 'team' in the 9 February letter meant RPM. As his Honour had noted, the driver agreement drafted by Mr Battye shortly before the 9 February letter was with RPM.[53]

54 The 9 February letter specifically referred to the RPM driver agreement and was sent to Mr Gibson and copied to Mr Watson in the capacity in which they were associated with the team. Mr Battye had been told that the entity buying the team was RPM and at that time, Mr Gibson was a director of RPM. Mr Battye had been told that Mr Gibson had authority to act on behalf of RPM[54] and Mr Forbes had agreed that Mr Watson could arrange for the appointment of Mr Battye.[55]

55 The 9 February letter was addressed to 'Gibson Motorsport'. As at 31 January 2001, the RPM letterhead displayed the Gibson Motorsport name and logos. There was no evidence that FCG traded under this name in 2001.[56] Mr Forbes' evidence was that he did not give instructions for the business name Gibson Motorsport to be transferred to FCG and was disappointed when he discovered that had occurred. GMM was not incorporated until 6 February 2001, did not trade at all until April 2001[57] and never traded under the name Gibson Motorsport.[58] Mr Watson himself gave evidence that, at the end of February 2001, Gibson Motorsport was the trading name for RPM.[59]

56 Further, even if the retainer was not confined to RPM, the 9 February letter specifically referred to the possibility that a conflict of interest might arise between Mr Battye acting for Mr Lowndes and for 'the team or Gibson Motorsport'. In those circumstances, the terms of the contract modified any duty owed to GMM or FCG to avoid a conflict of interest which might otherwise exist.[60]

57 Counsel for the respondents also submitted that the work which Mr Battye was instructed to undertake for GMM after he sent the 9 February letter was performed for, invoiced to and paid for by RPM. Because the appellants relied on the work done for GMM from about April 2001 as the basis for the claim that the respondents owed GMM a fiduciary duty, we discuss that work in more detail in relation to grounds of appeal 2, 3A and 4 to 6.

Conclusion on the effect of the 9 February letter (grounds 1 and 3)

58 The terms of the retainer letter must be construed objectively, in light of the surrounding circumstances known to the parties.[61] The fact that Mr Battye had previously drafted a driver agreement between Mr Lowndes and RPM (ie, the RPM driver agreement), and had expressed concern about a possible conflict arising between Mr Lowndes and the other party to the driver's contract, supports the view that the retainer was for RPM and that neither FCG or GMM were parties to the retainer. Further, as his Honour said, in cross-examination Mr Watson appeared to concede that 'on some occasions a reference to the team' was a reference to RPM only.[62]

by 4 January 2001, Mr Battye had been told that Mr Forbes was providing financial backing to allow the team to be purchased from Mr Dumbrell. At some time after 19 December 2000, Mr Battye was told that the sole director of RPM was now Mr Forbes, but that Mr Gibson would nonetheless act as team principal. [63]

60 Thus the fact that Mr Battye did not have the structure of the various entities making up the team explained to him until after 9 February 2001 and said he did not know until 14 February 2001 that RPM had a licence to trade as Gibson Motorsport did not preclude a finding that the retainer was for Mr Forbes' company RPM.

61 On the other hand, the retainer letter also referred to a potential conflict between 'third parties, the team and Mr Lowndes and his entities'. This provides some support for the view that the 9 February letter was a retainer to act as a solicitor for the 'team' including the appellants.

62 If Mr Battye assumed that any reference to the team was to RPM,[64] and the appellants believed that the term had a wider meaning, it may be that the parties were not ad idem as to the extent of the retainer created by the 9 February letter. In such circumstances there would be no enforceable contract of retainer.[65] However since this was not argued in the proceedings below, the Court cannot proceed on that basis.

63 The objective circumstances were that by the time the 9 February letter was sent to Mr Gibson, RPM was licensed to trade as Gibson Motorsport, and Lowndes' driver's agreement was with RPM. At the end of February 2001, Gibson Motorsport was the trading name for RPM.[66] Further, his Honour accepted Mr Battye's evidence that he was not explicitly asked to act for the team and 'the entities that made up the team', and that had he been asked to do so he would have asked that those entities be identified.[67] There is no basis for disregarding that factual finding and indeed the appellants did not ask the Court to set it aside.

64 For these reasons we consider that ground of appeal 3 (and ground of appeal 1, to the extent that it is based on the 9 February letter) is not made out.

Grounds of appeal 2 and 3A to 6: did a fiduciary relationship come into existence between the parties during 2001?

65 We now turn to grounds of appeal 2 and 3A to 6, which allege, in broad terms, that his Honour should have found that the respondents owed the appellants (or specified appellants) duties of loyalty and good faith, arising either under an implied retainer, or by virtue of a fiduciary relationship arising independently of a retainer.

1. The learned trial judge erred in concluding that the respondents did not owe GMM fiduciary duties of loyalty and good faith, and duties to avoid a conflict between their interests and the interests of Mr Lowndes and Racecar Preparation and Management Pty Ltd (RPM), which arose out of the relationship between the respondents and GMM.

3A. The learned trial judge erred in finding that the respondents only acted for GMM on discrete matters and only on the instructions of RPM in order to advance the interests of the team.

1. The learned trial judge erred in finding that the respondents did not owe FCG and GMM fiduciary duties of loyalty and good faith, and duties to avoid a conflict between their interests and the interests of Mr Lowndes and RPM, arising out of the relationship between the respondents and FCG and GMM that commenced on or about 9 February 2001.

Duties owed independent of contractual relationship

5. On the evidence and the findings that:

(a) the respondents from time to time owed duties of care and fiduciary duties to one or some of (and perhaps on some occasions, all of) the appellants (par 120); and

(b) the respondents owed duties of care and fiduciary duties to Mr Lowndes and RPM (paras 120);

the learned trial judge erred in concluding that the respondents could not owe duties to the appellants that would conflict with the duties owed to Mr Lowndes and RPM (par 120).

1. The learned trial judge erred in finding that independent of any contractual relationship the respondents did not owe the appellants fiduciary duties of loyalty and good faith, and duties to avoid a conflict between their interests and the interests of Mr Lowndes and RPM (par 120).

67 All of these grounds of appeal relate to his Honour's findings that no fiduciary relationship existed between the respondents and all or any of the appellants. As we have explained, the alleged fiduciary relationship was pleaded in paragraph 33 of the third amended statement of claim, which alleged that Ebsworths 'were in a fiduciary relationship with the plaintiffs during the period from March to October 1999 and owed them fiduciary duties'.

68 Somewhat confusingly, the particulars to paragraph 33 of the third amended statement of claim referred to paragraphs 6 (the alleged contractual retainer of 9 February between the 'team' and the respondents), 8 (the alleged contractual retainer of 9 February between FCG and the respondents), 10 (the alleged disputation advice retainer by Messrs Watson and Gibson) and 12 (the alleged tortious duty which came into existence because the respondents knew that GMM and FCG were relying on them for legal advice) of the same document.

69 As the respondents' counsel pointed out in his submission, the pleadings did not explicitly allege that an implied retainer came into existence between the respondents and GMM and FCG after the 9 February letter. The cross-reference to the particulars to paragraphs 6 and 8 refers only to the pleaded contractual retainer created by the 9 February letter. Nevertheless, we take it that the appellants' case at trial was that, regardless of whether the 9 February letter was an express retainer, a fiduciary duty arose after that date either as a consequence of, or independently of, any implied contract between the relevant parties. As counsel for the respondents conceded, this was the way in which the matter was dealt with in his Honour's reasons.[68]

70 His Honour also said that, although the objective facts did not establish the existence of the GMM retainer, the FCG retainer or the disputation advice retainer,

that is not the end of the plaintiffs' case. The plaintiffs allege that certain tortious and fiduciary duties were owed to them. Originally, these duties were predicated upon the existence of the retainers alleged by the plaintiffs. However, as I have noted above, during the course of the trial, amendments were made to the plaintiffs' pleadings so as to permit them to rely upon the duties they alleged even if the retainers did not exist.[69]

71 Grounds 3A and 4 challenge his Honour's conclusion that there was no implied contractual retainer with GMM and FCG, but do not cover his Honour's findings that there was no implied retainer by Messrs Watson and Gibson. We note also that there is an overlap between ground 1, which has already been discussed in relation to his Honour's finding that the 9 February letter did not create a contractual retainer between Ebsworths and GMM, and grounds 2 and 3A, and ground 4 (to the extent that ground 4 relates to GMM). As these grounds raise the question whether the dealings between GMM and Mr Battye, after the sending of the 9 February letter, should have been held to create an implicit contractual retainer between them after that date, it is unnecessary to consider that aspect of ground 1 separately.

72 Grounds 5 and 6 allege that his Honour should have found that the respondents owed fiduciary duties to some or all of the appellants, independently of any contractual relationship. At the hearing of the appeal, counsel for the appellants submitted that:

The clearest fiduciary duty which we say should be beyond dispute, was owed to [GMM] because [Mr Battye] commenced acting for them in April or thereabouts ... and then he ... opened a file for GMM at the start of June. He did substantial work, about eight and a half thousand dollars in value, over the next three months or so.

73 In his reasons, his Honour discussed the evidence as to the conversations and meetings which occurred between Mr Battye and the appellants in 2001[70] and noted that no less than 175 file notes of conversations and meetings involving Mr Battye and one or more of the appellants were made between the start of February 2001 and 10 October 2001.

74 His Honour also noted that during 2001, Mr Battye had given legal advice to GMM on a number of matters. These were as follows:

(a) on 1 May 2001, Mr Anthony Hall, the general manager of GMM, instructed Mr Battye to prepare contracts for GMM in relation to the development of a merchandising website. A draft agreement was prepared by Mr Battye and sent to Mr Hall and Mr Battye discussed it with the lawyers for the group developing the website;

(b) between 11 June and 8 August 2001, Mr Battye was involved in discussions about a draft agreement between GMM and eBay. On 17 July 2001, he sent a letter to Mr Watson addressed to GMM, referring to the draft agreement. In that letter he noted that 'presumably the contract will be with GMM rather than RPM'. On 8 August 2001, he told Mr Hall that he had no difficulties with the contract, as amended, being executed by GMM;

(c) on 28 June 2001, Mr Watson referred a trademark dispute between GMM and 'Posterguys' to Mr Battye. On 15 August 2001, Mr Battye emailed Mr Watson asking 'am I instructed on behalf of you and GMM to write to [Posterguys] explaining his breach of the team's IP, breach of the Trade Practices Act etc or would you like me to simply ignore him'. Mr Watson replied '[g]ive him both barrels'. In August 2001, Mr Battye sent letters of demand relating to these breaches to Posterguys and to the company which supplied it with images. On 11 September 2001, he wrote to Mr Watson enclosing correspondence on this matter and later emailed him to say that an agreement would be required with the company supplying the images and requesting instructions;

(d) on 2 August 2001, Mr Battye advised GMM on the use of the name 'GForce' to describe 'the official fan club of Gibson Motorsport Merchandise';

(e) Mr Battye advised GMM on privacy issues relevant to the establishment of an on-line store for sale of official merchandise via its website; and

(f) in September 2001, Mr Battye advised GMM on the terms and conditions for a voice alert system to be used in merchandising through the website.[71]

75 Until 11 July 2001, Ebsworths billed 'Gibson Motorsport' for legal work done for GMM. After discussion with Mr Watson (the date on which this occurred is contested), Mr Battye instructed that the Gibson Motorsport's bill dated 31 May 2001 be withdrawn, so that separate bills could be sent for work done for GMM and Gibson Motorsport. As his Honour noted:

The new bill for GMM (dated 12 July 2001) related to the website and attendances on Mr Hall. This bill and the file to which it related are relied upon by the plaintiffs as showing that Mr Battye was retained on behalf of GMM. The plaintiffs point to a number of occasions when Mr Battye gave advice concerning agreements to which GMM was or would be a party as establishing the fact that GMM was his client.[72]

76 After reviewing the evidence of the various conversations and meetings between Mr Battye and the appellants during 2001, his Honour said that while it was possible to identify individual documents or transactions which appeared to show that Mr Battye was retained on behalf of one or some of the appellants, Mr Battye did not act for Mr Watson or Mr Gibson or (except to a limited extent) for GMM. He found that:

Mr Battye was retained by RPM in February 2001 and ... in the course of the performance of that retainer, he was required to do work in which GMM had an interest and then to bill GMM separately in respect of that work. Mr Battye was careful to explain conflict issues, commencing when he was first asked to act for the team on 2 February 2001. Mr Watson and Mr Gibson chose to ask Mr Battye for advice from time to time in respect of matters which involved the team and in which they also had interests, which may or may not have diverged from the interests of the team from time to time. Whilst Mr Watson and Mr Gibson had their own lawyers who acted for them from time to time (Mr Daniel Butler in the case of Mr Watson and Mr Falconer of White Cleland in the case of Mr Gibson) and from whom they would seek advice in relation to their own specific interests whenever the need arose, they were prepared to obtain as much advice as they could from Mr Battye (probably in the knowledge that they were not likely to receive an account for which they would be personally responsible). The very fact that they sought advice from their own lawyers and their own accountants on specific relevant matters during 2001 shows that Mr Battye was not acting for them during this period.[73]

77 His Honour also considered that the fact that Messrs Watson and Gibson sent drafts of letters which they proposed to send to others to Mr Battye for comment, in circumstances where Mr Battye was likely to have sent the letters himself if he had been acting for the men, also suggested that Mr Battye was not acting for them.[74] The respondents' position was also said to be corroborated to some extent by the evidence of Mr Forbes that neither Mr Watson nor Mr Gibson ever referred to Mr Battye as 'their lawyer'.

78 His Honour then referred to cross-examination of Mr Battye, in which it was put to him that he had given legal advice to Messrs Watson and Gibson, on which they had relied and was therefore acting as their lawyer and owed them fiduciary duties.[75] He found that, although Mr Battye gave Messrs Watson and Gibson advice concerning legal matters from time to time,

such advice that Mr Battye gave the plaintiffs in 2001 was given to them either in his capacity as acting for Mr Lowndes and his companies or RPM. Ultimately, whatever may have been in the minds of Mr Gibson and Mr Watson, Mr Battye was retained to act in the interests of the Lowndes entities and RPM and it was reasonable for him not to regard himself as acting independently for the plaintiffs. Specifically, insofar as Mr Battye acted for GMM in the discrete matters identified above, this was on the instructions of RPM in order to advance the interests of the team. Whatever instructions Mr Battye had to act for GMM in respect of specific matters, they were not instructions to act on behalf of GMM in relation to the buy-out issue or in relation to the structure of the team. It is not to the point that the work done involving GMM was done in a file headed or entitled or designated 'general advice' or that that description was the same in respect of the files opened for Gibson Motorsport and Mr Lowndes. The administrative naming of the GMM file in this case sheds no light on the terms upon which Mr Battye and Ebsworths were retained. Further, the fact that Mr Battye may have been a 'hub' through which messages were conveyed between the parties does not alter this position. Properly characterised, what occurred during 2001 was that from time to time Mr Watson would tell Mr Battye what he was going to do in respect of a particular matter, Mr Watson having a common goal with the goals of Mr Battye's clients. Mr Watson did this in the same way that different parties with common interests often run ideas and proposals past each other with a view to seeing whether the other has a different view. In such circumstances, each might expect the other to rely on what the other is saying. However, this does not translate into a relationship of solicitor and client.[76]

79 His Honour noted that Mr Battye could have emphasised to Messrs Watson and Gibson that he was not acting for them or their entities. However, he said that:

as matters unfolded throughout 2001, there was no doubt in Mr Battye's mind who he acted for (primarily Mr Lowndes and RPM) and that his thought processes in this regard were not unreasonable. It is, of course, important to remember that events such as these should not be viewed with hindsight.[77] In any event, it is to be remembered that Mr Battye did have communications with Mr Watson and Mr Gibson concerning the taking of their own legal advice.[78]

80 For these reasons his Honour held that no GMM retainer or FCG retainer came into existence as a result of dealings between the parties after 9 February 2001. He also rejected the allegation that, on 7 September 2001, Ebsworths were retained to act on behalf of Messrs Watson and Gibson in connection with the dispute between them, and Mr Forbes and RPM.[79] The grounds of appeal do not challenge the latter conclusion.

81 His Honour then went on to consider, and reject, the claim that Mr Battye owed a duty of loyalty to some or all of the appellants independently of the existence of a solicitor/client relationship. He said:

There can be no doubt that from time to time (and with respect to specific transactions) the defendants owed duties of care and fiduciary duties to one or some of (and perhaps on some occasions, all of) the plaintiffs. For example, in performing discrete work for GMM in advising about the terms of a particular agreement with a third party, the defendants owed GMM a duty to take reasonable care in relation to the provision of that advice. However, the claim here is that the defendants owed duties of loyalty and good faith to the exclusion of those entities that I have found to be their clients and duties to avoid conflicts of interests, being conflicts between the interests of the plaintiffs and the interests of the defendants' actual clients. The defendants owed duties of care and fiduciary duties to their clients, Mr Lowndes and RPM. No duty that conflicts with these duties can, in the circumstances of this case, be owed by the defendants to the plaintiffs. Even in circumstances where there is a conflict between the interests of two clients, one of them may be unable to complain about it. In related circumstances, the issue was dealt with in Finn, Fiduciary Obligations (1977)[80] in the following terms:

'But notwithstanding that there is such a conflict, one of two beneficiaries may be unable to complain of it. This will be so where he alone gave an informed consent to the double employment; or where he knew of the fiduciary's other engagement at the time he engaged him - in which case the resulting conflict is regarded as being of that beneficiary's own making.'[81]

This is enough to dispose of the duty questions as articulated in the plaintiffs' summary of issues set out above.

To the extent that the plaintiffs' case is also founded upon an assertion that duties were owed from time to time by the defendants to the plaintiffs to either remind them that the defendants were not acting for them or that the plaintiffs should seek independent advice, such claims are artificial in the circumstances of this case. Mr Battye had no doubt who he was acting for (the Lowndes interests and RPM). A complete review of the contemporaneous documents supports Mr Battye's view. Mr Watson and Mr Gibson were experienced businessmen who were able to (and did) seek professional and independent advice as and when they required it.

...

The short answer to the plaintiffs' allegations that tortious and fiduciary duties were owed is that for the reasons I have given with respect to the retainer issues, there was no assumption of responsibility by the defendants to advise or act for the plaintiffs. Further, Mr Battye did not give advice or fail to give advice in circumstances where he knew or ought to have known that he was being trusted to look after the interests of the plaintiffs. The transactions between Mr Battye on the one hand and Mr Gibson and Mr Watson (and GMM) on the other hand were not such as to repose trust and confidence in Mr Battye in the relevant sense and in respect of the buy-out and ownership issues concerning RPM so as to give rise to the fiduciary duties alleged by the plaintiffs.[82]

82 In essence counsel for the appellants submitted that the factual findings made by his Honour required the conclusion that a solicitor/client relationship existed between Ebsworths and GMM, which imposed a duty of loyalty on the respondents. Even if the 9 February letter was not a retainer for all members of the 'team', the legal work subsequently done by Mr Battye for GMM created an implied retainer between GMM and the respondents.

83 In the alternative, counsel for the appellants submitted that, even if the events occurring after the 9 February letter did not give rise to a retainer between GMM (or FCG and the other appellants), the dealings between the appellants and Mr Battye which began in late 2000 and continued throughout most of 2001 meant that the respondents owed fiduciary duties to the appellants (or some of them) independently of any solicitor/client relationship.[83]

84 In his written outline of submissions, counsel for the appellants put the argument in this way:

If one accepts that no appellant was covered by 'any relevant' contractual retainer, any analysis of the respondents' own evidence demonstrates a vulnerability on the part of the appellants of the type which will result in equity imposing of fiduciary obligations. Mr Battye's own evidence shows trust, dependence and reliance, and the indicia of vulnerability that is the hallmark of fiduciary relations, in that he continued to give them advice with respect to their dealings with Forbes while:

(a) he knew he was giving legal advice that was being relied upon;

(b) he knew no other lawyer was involved;

(c) he knew all of the strategies (and therefore confidential information) the appellants were employing in relation to the conflict with Forbes;

(d) he did not tell them that they needed to get their own lawyer;

(e) he did not confirm orally or in writing that the respondents were acting in the interests of Forbes or that Lowndes interests were in conflict with theirs; [and]

(f) he deliberately did not advise them that he was acting against their interests and did advise them to take no further action until the matter of dispute was in his own words 'substantially resolved ...' against their interests.[84]

85 In response to a question from the Court about the appellants to whom it was said the fiduciary duty was owed, counsel said that the 'most relevant fiduciary duty' for the purposes of the appeal was owed to GMM, because 'that is where the loss [was] suffered'. The equitable compensation claim was largely based on the economic loss suffered by GMM as a result of it being shut out of the team's merchandising opportunities.[85] Nevertheless counsel contended that the respondents also owed a fiduciary duty to some or all of the other appellants.[86]

86 In relation to the fiduciary duty said to be owed to GMM, counsel for the appellants submitted that his Honour was wrong to find that, when Mr Battye acted for GMM on discrete matters, this was on the instructions of RPM to advance the interests of the team.[87] His Honour had also erred in finding that '[w]hatever instructions Mr Battye had to act for GMM in respect of specific matters, they were not instructions to act on behalf of GMM in relation to the buy-out issue or in relation to the structure of the team'.[88] Counsel contended that the solicitor/client relationship which existed between Ebsworths and GMM was not confined to the advice Mr Battye gave on specific matters. As a consequence of that relationship, he owed a duty of loyalty to GMM (and possibly some of the other appellants) in advising them on the buy-out of the Forbes interests during 2001. His Honour had erred in holding that no duty of loyalty arose because Mr Battye subjectively believed that he was acting only for RPM.

87 Prior to the hearing of the appeal, the parties filed an agreed chronology of the conversations and meetings which took place between the parties in 2000 to 2001. At the hearing of the appeal, counsel for the appellants sought to provide the Court with an amended chronology. He was permitted to do so, subject to the respondents having the opportunity to identify any contentious matters in the amended chronology. We draw on the chronology in the discussion which follows.

88 Counsel for the appellants relied on his Honour's findings about the conversations and meetings which occurred between the parties in 2000 and 2001, and other evidence, to establish the existence of an implied retainer between the respondents, GMM and FCG and/or a fiduciary relationship between the respondents and the appellants. The most significant matters were as follows:

(a) on 12 February 2001, Mr Gibson received a draft sponsorship agreement to be made between Ford and FCG.[89] He sent a copy of the agreement on to Messrs Forbes and Watson. Mr Watson then faxed a copy to Mr Battye, annotating it to the effect that FCG was the wrong party;

(b) on 14 February 2001, Mr Battye met with Messrs Gibson and Watson at the workshop premises in Dandenong and was given an explanation of the operations of Gibson Motorsport. Mr Battye recommended that there should be employment contracts with members of staff and described the information he would require to draft them. His Honour found that there may also have been discussion of the need to draft or finalise agreements between RPM and Messrs Gibson and Watson, between RPM and GMM and various sponsorship agreements. These instructions were never provided.[90] Mr Battye followed up on his request for instructions in a telephone conversation on 20 February 2001;[91]

(c) on 20 March 2001, Messrs Battye, Watson and Gibson met at the team workshop and Mr Gibson told Mr Battye he was considering buying out the Forbes interests. Mr Battye said the Ford Sponsorship agreement and employment contracts with staff should not be finalised until these issues were resolved;[92]

(d) on 7 April 2001, while Mr Battye was on holidays, he went to the Clipsal 500 race meeting in South Australia, and had a conversation with Mr Forbes in which Mr Forbes told him he was concerned about Mr Gibson's management of the team. According to Mr Battye, he expressed concern that Ford did not know that Mr Forbes had any involvement with the team;[93]

(e) during May 2001, Mr Watson kept Mr Battye informed about meetings that were being held between himself and Messrs Gibson and Forbes to discuss the proposed buy-out. On 11 July 2001, Mr Battye phoned Mr Watson and discussed the proposed buy-out. Mr Battye's file note said that he was to 'consider and advise'. He recorded the time taken in this conversation on the 'Gibson Motorsport' file;

(f) On 13 July 2001, Mr Watson forwarded a draft copy of the letter he proposed to send to Mr Forbes to Mr Battye, and Mr Battye proposed a change to the letter which was sent off with that amendment. On 29 August 2001, Mr Battye told Mr Watson in a telephone conversation that Mr Forbes was being represented by another law firm. The next day, Mr Watson asked Mr Battye to phone Mr Forbes and find out what was causing the delay. Mr Battye had a conversation with Mr Forbes shortly afterwards and later told Mr Watson that Mr Forbes had asked him not to disclose the content of the conversation;

(g) on 31 August 2001, Mr Battye told Mr Watson that 'there was now a conflict of interest with Ebsworths acting on behalf of Mr Lowndes and the team, and that he was therefore unable to advise Mr Watson or Mr Gibson concerning the buy-out. Mr Battye said that he must now act solely for Mr Lowndes'.[94] Nevertheless, Mr Watson sent a draft letter to Mr Forbes to Mr Battye for comment on 6 September 2001 and Mr Battye revised the letter and recorded his time on the 'Gibson Motorsport' file. Mr Forbes rejected the buy-out offer made to him in a fax sent to Mr Battye on 7 September 2001. Mr Watson then had a conversation with Mr Battye about the ownership and use of the Gibson Motorsport name;

(h) despite the conversation of 31 August 2001, there was continued contact between Mr Battye and Mr Watson on how he and Mr Gibson should proceed. In particular:

(i) on 14 September 2001, Mr Watson emailed Mr Battye a copy of the letter they proposed to send to Mr Forbes, 'seeking your counsel as to whether it is appropriate or not'. Mr Battye advised them that he had '[n]o difficulties with the letter to be sent by Fred';

(ii) on 18 September 2001, Mr Battye wrote to Mr Gibson about the possibility of putting pressure on Mr Forbes by terminating the lease of the workshop to RPM;[95]

(iii) on 24 and 25 September 2001, Mr Watson sent draft letters to Mr Battye which he proposed to send to Mr Forbes' solicitors. Mr Battye made suggestions about these letters;

(iv) on 27 and 28 September 2001, at Mr Lowndes' request, Mr Battye attended a meeting at Mr Lowndes' home in Queensland, which Mr Forbes also attended. Messrs Watson and Gibson were not told about this meeting. On 1 October 2001, Mr Battye met with Mr Geoffrey Polites, President of Ford, to discuss sponsorship and it was agreed that Messrs Watson and Gibson would not be told about the meeting; and

(v) on 10 October 2001, Mr Battye had a conference with Mr Lowndes in which he told him that he would need to consider both Mr Forbes' and Messrs Watson and Gibson's proposals and make a decision as to what he should do. Later that day there was a meeting between Messrs Gibson, Watson, Forbes, Lowndes and Battye in Mr Battye's office. Mr Forbes said he no longer wanted Mr Gibson to manage the team and Mr Lowndes said he would stay with the team. The final time and cost entry was recorded by Mr Battye in the GMM file on that day. Mr Gibson resigned as team principal and Mr Watson resigned in November.

89 In relation to the implied retainer to GMM counsel for the appellants relied particularly on the following matters:[96]

(a) from May until July 2001, Mr Battye accepted instructions from Mr Hall, the general manager of GMM.[97] Although this work was initially billed to the Gibson Motorsport file, the respondents opened a GMM file labelled 'General Advice' and performed legal work which was billed to GMM. In July 2001, legal work to the value of $5,227.50 was billed to GMM and the balance of work recorded as $3,282.50 was performed up to September 2001 but was written off as a result of a memorandum dated 10 May 2002 from Mr Battye to the 'Management Committee' at Ebsworths, in which Mr Battye acknowledged the possibility of a conflict of interest;

(b) from February onwards there were discussions between Messrs Battye and Watson involving various issues relevant to RPM, GMM and FCG. Between 1 May and 30 August there were some 54 communications between Mr Watson or Mr Gibson and Mr Battye, of which 29 related to GMM, 12 related to the buy-out, three related to a personal matter on which Mr Watson sought advice, five related to Gibson Motorsport and five related to the Lowndes Management Agreement;

(c) while Mr Battye was advising GMM on specific matters, he was also advising Mr Watson on the proposed buy-out of Mr Forbes interests. Although Mr Battye knew that the appellants were relying on him, up until 31 August 2001 he said nothing to indicate to Mr Watson that he was acting only for Mr Forbes and RPM or that they should seek independent legal advice; and

(d) on 30 March 2001, Mr Watson told Mr Battye that there had been a clash between Messrs Forbes and Gibson and that Messrs Forbes and Watson were considering an offer to buy-out Mr Forbes. Mr Battye later contacted Mr Watson to discuss the price that Messrs Watson and Gibson would be prepared to pay to purchase RPM. Mr Battye gave evidence that, if Mr Gibson reached an agreement with Mr Forbes to buy the team, he expected to be instructed to act on behalf of all parties in documenting the transaction.

90 Counsel submitted that Mr Battye had advised Messrs Watson and Gibson (and through them, their companies) on the proposed buy-out and on other matters relating to the 'team' until 31 August 2001, when he told them he could not continue to do so, because there was a conflict of interest between Ebsworths acting for them and for the Lowndes interests.[98]

91 Counsel submitted that Mr Battye could not satisfy the fiduciary duty of loyalty, which he then owed to the appellants (and particularly to GMM), by telling them that he was no longer able to advise Mr Watson or Mr Gibson on the buy-out and that he must now act solely for Mr Lowndes. When the conflict of interest arose, Mr Battye should have ceased to act for both the appellants, and for Mr Lowndes and RPM.[99]

92 Counsel for the appellants also submitted that, despite telling the respondents he could no longer act for them on 31 August 2001, Mr Battye continued to advise Messrs Watson and Gibson on aspects of the buy-out until October 2001, and they relied upon that advice. Further, in October 2001, there was contact between Messrs Watson and Battye on sponsorship issues and on 4 October 2001, one of Mr Battye's partners did some work for GMM on a privacy issue. In his reasons, his Honour noted that, in cross-examination, Mr Battye said that he still considered GMM a client as at that date.[100]

93 Counsel for the respondents submitted that it was not open to the appellants to argue that there was an implied contractual retainer between the respondents and Messrs Watson and Gibson, as that claim was abandoned in the third amended statement of claim. In any case, his Honour had found that there was no retainer[101] of the respondents by Messrs Watson and Gibson and there was no appeal from that finding. As we explained above (at [67]-[69]), the question whether an implied contractual retainer came into existence between Messrs Watson and Gibson and the respondents after 9 February 2001, appears to have been agitated at the trial. However, because it was not the subject of appeal it is unnecessary to consider it further.

94 Counsel for the respondents submitted that the inferences drawn by his Honour relating to the implication of retainers between the respondents, GMM and FCG arose out of factual findings which were primarily based on his Honour's view of the credibility of witnesses. Thus the judge's conclusions should only be set aside if he had taken a view of the evidence which was inconsistent with incontrovertible facts or otherwise 'glaringly improbable'.[102] Such was not the case here.

95 It was said that the conduct of the parties on which the appellants relied did not require the judge to infer that there was an implied retainer between the respondents, GMM and/or FCG on or after 9 February 2001, or to hold that Mr Battye owed GMM, FCG or Messrs Watson and Gibson any fiduciary duties arising independently of any retainer.

96 The relationship between the parties after 9 February 2001 had to be determined against the background of his Honour's findings that the 9 February letter created a retainer only between the respondents and RPM. No implied retainer came into existence between the respondents and GMM or FCG thereafter. The legal work which Mr Battye did for GMM was done either on instructions from Mr Watson (who was a conduit for instructions for RPM) or from Mr Hall, who was acting under the direction of Mr Watson. His Honour had correctly found that that advice related only to discrete matters and was provided on the instructions of RPM to advance the interests of the team. It related only to merchandising matters in which RPM had an interest and therefore did not create any conflict of interest between GMM and the Forbes interests or Mr Lowndes and his company.

97 In addition to the fact that the 9 February letter was a retainer by RPM only, counsel submitted that the following evidence indicated that Mr Battye only had a general retainer from RPM (although he did work on specific matters for GMM):

(a) Mr Battye understood that he was acting for Gibson Motorsport. At the meeting of 14 February 2001 with Mr Gibson and Mr Watson, Mr Battye was given an explanation of the operations of Gibson Motorsport. His Honour found that 'neither at this meeting nor any other meeting was he told that "the team" included FCG or GMM'.[103] That factual finding was not challenged on appeal;

(b) when Mr Hall gave instructions for work to be done for GMM there was no discussion about Mr Battye's retainer. Mr Battye had understood that he was doing work for RPM until instructions were given to him to separate out invoices for work done for GMM and work done for RPM. This was not done until either 6 June 2001 (as Mr Watson claimed) or 6 July 2001 (as Mr Battye claimed) when Mr Watson told Mr Battye to bill GMM separately for legal advice relating to merchandising issues given to GMM;

(c) other work done by Mr Battye between 9 February 2001 and 6 July 2001 was done for RPM rather than for GMM, or FCG. The respondents relied on the following:

(i) a schedule on RPM letterhead provided to Mr Battye on 15 February 2001, setting out Ford's proposed sponsorship arrangements;

(ii) a letter to Mr Battye on RPM letterhead dated 15 February 2001 forwarding a letter from Greg Murphy Racing Ltd addressed to Fred Gibson, Gibson Motorsport, indicating acceptance of the fact that Greg Murphy would not be racing with the team;

(iii) instructions given to Mr Battye on 19 and 20 February 2001, to draft a driver's agreement for Neil Crompton. The covering letter was sent to Mr Battye by Fred Gibson on a fax sheet labelled Gibson Motorsport, with a footer referring to RPM. The parties to the draft agreement were Mr Crompton, Navaction Investments Pty Ltd and RPM (trading as Gibson Motorsport);

(iv) instructions given to Mr Battye on RPM letterhead on 27 February 2001 to advise on insurance matters;

(v) a conference held between Messrs Battye and Forbes on 5 March 2001 in relation to the RPM driver agreement;

(vi) a copy of the lease of the workshop from Mr Gibson's company, Angora Tower, to RPM, was sent on 6 March 2001 from Mr Battye to Mr F Gibson, Gibson Motorsport;

(vii) Mr Battye issued an invoice to 'Gibson Motorsport' for the above work on 30 March 2001. Gibson Motorsport meant RPM; and

(viii) on 31 May 2001, Ebsworths' invoice to Gibson Motorsport was paid by RPM. This was before Mr Watson asked Mr Battye to separate out work done on merchandising issues for GMM from work done for RPM.

98 Counsel for the respondents submitted that his Honour had not incorrectly determined the nature of the relationship between Mr Battye, GMM and FCG, by reference to Mr Battye's subjective state of mind. His Honour's reference to what Mr Battye knew was relevant to the question whether he had assumed responsibility for these appellants and realised that they were relying on him.

99 Further, even if Mr Battye had acted as a solicitor for GMM on specific matters, any fiduciary duty which Mr Battye owed GMM was limited by the nature of the work undertaken or deemed to have been undertaken by the solicitor.[104] None of the work Mr Battye did for GMM impinged on the later buy-out by Mr Forbes.

100 In addition, any conflict of loyalty which did arise was of GMM's making, because work done on GMM's account was done with Mr Watson's knowledge that Ebsworths were acting for RPM and Mr Lowndes. Since GMM (through its controller, Mr Watson) was fully aware that Mr Battye was acting for these other clients, it could not complain of any breach of fiduciary duty.

101 Next, counsel for the respondents submitted that his Honour had correctly concluded that there was no relationship of trust or reliance between the respondents, Messrs Watson and Gibson, such as to give rise to a fiduciary relationship arising independently of any implied retainer. As his Honour had pointed out, Messrs Gibson and Watson were men of considerable business experience who were accustomed to representing themselves in commercial negotiations and frequently ignored advice provided to them if it did not suit their commercial interests or priorities.

102 He further submitted that they had sought advice from other solicitors or accountants on the issues on which Mr Battye had advised RPM. In particular:

(a) Mr Falconer of White Cleland was retained by Mr Gibson to undertake the lease of the workshop owned by Mr Gibson's company, Angora Tower, and also to draft the consent to use the Gibson Motorsport business name;[105]

(b) as at 26 February, Mr Gibson was receiving advice from his accountant, Mr Kinchington, in relation to his and FCG's relationship with Mr Forbes and RPM; he gave evidence in the Federal Court proceedings that, at that stage, he was not being advised by Mr Battye;

(c) Mr Watson was advised by a solicitor and accountant (respectively, Daniel and Damien Butler) in respect of the arrangements between Messrs Watson, Gibson and Forbes and their interests in GMM;[106] and

(d) on 10 July 2001, Mr Watson retained his accountant Damien Butler for advice in relation to Mr Watson's interest in buying the team from the Forbes interests.

103 Counsel further submitted that, although Mr Battye was involved in various discussions with Messrs Gibson and Watson during 2001, he did so in his capacity as legal representative of RPM. On 30 March 2001, when Mr Watson told Mr Battye that he was prepared to buy-out Mr Forbes, he did not disclose confidential information to Mr Battye, or seek advice from Mr Battye on the buy-out, but simply told Mr Battye about the discussion on price which he had previously had with Messrs Gibson and Forbes. In that respect, counsel relied on Mr Battye's evidence that '[i]t's possible that [Mr Watson] was telling me that this is what they were going to do but I think it was on the basis that they had already had a discussion and these were the figures that were being discussed'.

104 Mr Battye gave evidence that, if an agreement was reached with Mr Forbes about the buy-out, he 'would expect that he would be given instructions to document the sale' on behalf of all the parties because 'it would be a waste of time bringing another lawyer up to speed with everything that had happened'. However counsel for the respondents submitted that he did not in fact receive instructions to prepare documentation or to act for GMM or FCG in relation to the negotiations with Mr Forbes. When Mr Battye discussed these matters with Mr Watson he was doing so in his capacity as the solicitor for RPM.[107]

105 Counsel for the respondents submitted that, even if his Honour should have found that there was an implied retainer from GMM or FCG, that retainer was terminated on 31 August 2001, as a consequence of a conversation between Messrs Battye and Watson.[108] Counsel submitted that there was no appeal from the judge's finding that after that date Mr Battye was acting solely for Mr Lowndes and his entities.[109] Mr Battye's communications with Messrs Watson and Forbes between 31 August and the end of September were made in furtherance of Mr Lowndes' interests, at a time when the parties were acting to further their common interest in buying Mr Forbes out. There was no conflict between the interests of Messrs Watson and Gibson and the interests of Mr Lowndes until the latter decided to stay with the existing team and the other men decided to establish a new team.

106 Mr Battye did not undertake to act on behalf of either GMM or FCG in relation to the buy-out and indeed it was never proposed that these companies (as opposed to Messrs Gibson and Watson) would buy-out the Forbes interests. Thus, even if, contrary to the respondents' primary submission, a fiduciary duty was owed to GMM and/or FCG, it had not been breached.

107 The resolution of this appeal has been made particularly difficult because of imprecision in the pleadings, the changes which were made to the appellants' case during the trial and the overlapping nature of the grounds of appeal. The respondents' submissions on appeal relied on the third amended statement of claim to narrow the questions for resolution on appeal, whilst the appellants sought to broaden those issues.

108 We have accepted the respondents' submission that the grounds of appeal did not allege that his Honour should have found there was an implied contractual retainer between Messrs Watson and Gibson and the respondents after 9 February 2001. It therefore follows that, to the extent that the alleged fiduciary relationship owed by the respondents to Messrs Watson and Gibson depends on the existence of a contractual retainer, that issue is not before this court.

109 The questions which must be resolved are therefore:

(a) whether his Honour erred in holding that the respondents did not owe a fiduciary duty to:

under an implied contract arising after 9 February or as a result of GMM and FCG's reliance on Mr Battye's advice; and

(b) whether his Honour erred in holding that the respondents did not owe any fiduciary duty to Messrs Watson and Gibson arising independently of any implied retainer.

As we have said, the appellants' oral submissions focused on the position of the respondents vis-à-vis GMM.

Grounds 2, 3A and 4: was there an implied retainer between the respondents and GMM or FCG?

110 In our view the factual findings made by his Honour required the conclusion that there was an implied contract of retainer between GMM and the respondents from the time that Mr Battye accepted instructions from Mr Hall to do legal work for GMM.

111 A solicitor and client relationship arises, if, on the balance of probabilities, the conduct of the parties shows that such a relationship has come into existence.[110] In his book Lawyers' Professional Responsibility,[111] Professor G E Dal Pont summarises the law on implied retainers as follows:

Retainers, like other contracts, need not be created by express words, whether written or oral; their existence can be inferred or implied from the circumstances. In this context it is the existence of the retainer that is implied, not its terms ...

Proof of an implied retainer rests on proof of facts and circumstances sufficient to establish a tacit agreement to provide legal services. Its existence is determined by inference from objective facts, not merely by the lawyer's belief as to which clients he or she was acting for. The reasonable expectations of the alleged client carry significant weight here, as the lawyer may always take steps to dissuade any person from a belief that the lawyer acts for that person.

The lawyer's file (including letters and other correspondence) and diary notes, specifically regarding how he or she has referred to and dealt with the claimant, may prove useful. Aspects that may impact upon a client's reasonable expectations of a retainer include the capacity in which the lawyer acted (say, giving advice in a non-legal capacity), who instructed the lawyer, who is liable for the lawyer's charges, and whether a contractual relationship existed with the claimant in the past (as the court may be readier to assume that the parties intended to resume that relationship in such a case).[112]

112 In Meerkin &Apel v Rossett Pty Ltd,[113] a contract of sale required the vendor to use its best endeavours to find tenants for the units sold to the purchaser and to cause the tenants to enter into leases on terms and conditions satisfactory to the vendor's and purchaser's solicitors. The question to be decided was whether the solicitors for the vendor, who had drafted the leases, had an implied retainer from the purchaser.[114] This Court, differently constituted, held that the trial judge had erred in holding that the purchaser had impliedly retained the vendor's solicitors. In reaching that conclusion, the Court referred to the well-established solicitor and client relationship existing between the solicitors and vendor when the implied retainer by the purchaser was said to have arisen, the fact that the purchaser had its own solicitor for the purchase of the units, whom it had retained on a continuing basis, and the fact that the controlling officer of the purchaser had not met the solicitors or had any written communication with them and gave no evidence that it had relied on them. The letter from the vendor to its solicitors asking them to prepare leases reflected its obligation under the contract of sale of the units and did not give rise to any implied retainer by the purchaser.

113 By contrast to the facts of Meerkin, Mr Battye had frequent contact and communications throughout 2001 with Mr Watson, GMM's controller, and received direct communications from Mr Hall, the general manager of GMM. By no later than the meeting between Messrs Battye, Watson and Gibson on 14 February 2001, Mr Battye was aware of the structure of the various entities and knew that Mr Watson was the moving force behind GMM, which was responsible for the merchandising activities associated with Gibson Motorsport. In these circumstances, we consider that his Honour should have held that legal work done on the instructions of Messrs Hall and Watson relating to merchandising issues was being done on behalf of GMM, rather than for RPM. Further, even if Mr Battye was initially instructed by RPM to do legal work for GMM, Mr Watson's instruction to him to separate RPM's and GMM's bills in June or July 2001 made it clear that thereafter he was retained by GMM, as well as by RPM and the Lowndes interests. The same reasoning does not apply to Mr Battye's relationship with FCG. He did not receive instructions to do legal work for that company.

114 His Honour gave five main reasons in support of his conclusion that the respondents did not owe a duty of loyalty to the appellants under a retainer which came into existence after 9 February 2001. We now turn to consider these reasons so far as they relate to the claim that there was an implied retainer by GMM.

115 First, his Honour relied on the fact that the 9 February letter established a retainer for RPM only. He considered that this position continued until 31 August 2001, when Mr Battye reverted to acting solely for the Lowndes interests.[115] As his Honour correctly recognised, the issue was whether Mr Battye's original retainer by RPM, was later expanded to cover GMM (or other members of the team).[116] However, in our opinion his Honour's emphasis on the limitation of the express retainer to RPM as at 9 February 2001, led him to give insufficient weight to the effect of the relationship which developed between Mr Battye and GMM after that date. The ambiguity of the expression Gibson Motorsport in the retainer letter made it particularly important for Mr Battye to make it clear that he did not have a retainer from GMM when he did legal work for that company.

116 Secondly, his Honour said that, as matters unfolded throughout 2001, there was no doubt in Mr Battye's mind that he was acting primarily for Mr Lowndes and RPM. When Mr Battye gave advice to Messrs Watson and Gibson on legal matters from time to time, it was not unreasonable for him to consider that he was doing so in his capacity as the solicitor for Mr Lowndes or as RPM's solicitor.

117 Although there is no basis for disturbing his Honour's finding of fact about Mr Battye's subjective belief, we consider that the excessive weight he gave to that belief was productive of error. In Beach Petroleum NL v Kennedy[117] the New South Wales Court of Appeal considered the relevance of a solicitor's belief as to whether his firm was acting for one company or a number of companies within a group. The Court said:

There was no evidence that Mr Bateman [their solicitor] in considering the restructuring was asked to consider himself as acting only for one particular company or several particular companies. His own understanding of the relationship is not conclusive. The question of a retainer is not determined by the belief of the solicitor as to the company or companies for whom he or she is acting. It is determined by the objective facts. Mr Bateman's evidence of his understanding of the relationship is little more than evidence of inferences he drew from the circumstances. In the absence of plain language from any of the directors of the various companies, the matter remains to be determined by inference.[118]

118 Although Mr Battye's subjective belief was relevant to the existence of an implied retainer, his Honour did not give adequate weight to the fact that Mr Battye did legal work for GMM throughout 2001 and to the impression that his provision of legal advice to GMM would have created in the mind of its controller, Mr Watson.

119 His Honour said that when Mr Battye gave advice to the appellants on legal matters, he was doing so in his capacity as the solicitor for Mr Lowndes or for RPM, in the way that parties with common interests often run ideas past each other.[119] In our opinion the objective circumstances do not indicate that was the case so far as GMM was concerned. The fact that Mr Battye advised GMM that no sponsorship contracts should be drawn until the problems with Mr Forbes were resolved tends to suggest the contrary.

120 Thirdly, his Honour gave weight to the fact that Messrs Watson and Gibson consulted other solicitors and accountants from time to time. This was a relevant consideration in deciding whether a retainer had come into existence between the two men in their personal capacity and the respondents. But even for that purpose it was not decisive. In Beach Petroleum,[120] the New South Wales Court of Appeal accepted that the fact that a person might retain one solicitor for a particular transaction did not preclude a finding that another firm also had an implied retainer.[121] The work which was done by other law firms for Messrs Watson and Gibson was limited[122] and did not involve on-going strategic advice about GMM's relationship with RPM and Mr Forbes.

121 It may have been open to his Honour to conclude that Mr Battye did not have an implied retainer from Mr Watson personally because Mr Watson obtained separate legal advice from time to time. In any case that finding was not challenged on appeal. However, his Honour also appears to have considered that the fact that Mr Watson consulted other solicitors meant that there was no retainer between the respondents and GMM. That finding was not justified in the absence of evidence that Mr Watson or Mr Hall gave instructions to any other law firm to act on behalf of GMM.

122 Fourthly, his Honour said that no duty to avoid a conflict between the interests of the appellants and Mr Lowndes could arise under any implied retainer because conflict of interest issues had been carefully explained in the 9 February letter. The 9 February letter drew attention to potential conflicts of interest between the Lowndes interests and Gibson Motorsport (which his Honour held meant RPM). and said that in that event Ebsworths would be free to cease its retainer 'by you' meaning Gibson Motorsport. But given his Honour's finding that Gibson Motorsport meant RPM, we do not consider that this letter was relevant to any duty of loyalty which might arise under an implied retainer between GMM and the respondents. In that respect we agree with the following comments by Professor Dal Pont:[123]

lawyers should be wary of concurrent representation of clients in non-contentious matters, bearing in mind its drawbacks ...

It follows that a lawyer invited by multiple parties to perform non-contentious (say, transactional) work must determine whether the proposed retainer carries with it the likelihood of a conflict of interest. In so doing the lawyer should enquire into the nature and scope of the retainer and clearly ascertain what he or she had been retained to advise upon. Specific written instructions from the prospective clients regarding their expectations of the representation may prove useful. To this end, a transaction that is complex and or involves large sums and involves arms length parties presents a warning sign. Complex transactions may require retainers of greater duration and lawyer input, and cloud the foreseeability of conflict. Involvement of large sums between arm's length parties may increase the prospect for dispute, even if no conflict is evidenced at the outset.

That no conflict is apparent on the face of the instructions does not absolve lawyers from disclosing to the prospective clients the potential for conflict, and its repercussions were it to arise. This duty is recognised by professional rules in most jurisdictions and reiterated in judicial statements. Client understanding and consent are essential, to this end.[124]

This dispute reinforces the importance of solicitors explaining any conflict of interests to their clients.

123 Apart from the 9 February letter, there is no indication that Mr Battye told GMM that he was acting as its solicitor only on the specific matters on which he gave legal advice.

124 Fifthly, his Honour reasoned that, because the respondents owed duties of care and fiduciary duties to Mr Lowndes and RPM, 'no duty that conflicts with these duties can, in the circumstances of this case, be owed by the defendants to the plaintiffs'.[125] But that reasoning is circular. If there was an implied retainer between the respondents and GMM, the fact that a conflict arose between the duties owed to Mr Lowndes and RPM and the duties owed to GMM, did not negate any duty of loyalty which was owed to GMM under that retainer.

125 Finally we note that his Honour said that 'there can be no doubt that from time to time (and with respect to specific transactions) the defendants owed duties of care and fiduciary duties to one or some of (and perhaps on some occasions, all of) the plaintiffs'.[126] That finding of fact also supports the inference that there was an implied retainer between the respondents and GMM which came into existence some time after the sending of the retainer letter. For these reasons we have concluded that the trial judge erred in finding that no implied retainer came into existence between GMM and the respondents after the 9 February letter was sent.

Grounds of appeal 5 and 6: did a fiduciary relationship arise independently of an implied retainer?

126 Because we have held that there was an implied retainer between Mr Battye and GMM, we deal only briefly with the appellants' submission that Mr Battye owed a duty of loyalty to GMM independently of any implied retainer. Grounds 5 and 6 also allege that his Honour should have found that the respondents owed fiduciary duties to the other appellants.

127 Counsel for the appellants submitted that Mr Battye had taken on the role of a fiduciary by placing himself in a position where he was relied upon by Messrs Watson and Gibson and their companies. That fiduciary relationship gave rise to a duty of loyalty which required Mr Battye to avoid acting in a way which created a conflict of interest between the duties he owed to act in the interests of the appellants and to act in the interests of RPM and Mr Lowndes.

128 In support of that claim, counsel relied on the statement of the New South Wales Court of Appeal in Beach Petroleum[127] that:

It is well-established that a person may take upon herself or himself the role of a fiduciary by a less formal arrangement than contract or by self-appointment: see Lyell v Kennedy (1889) 14 App Cas 437, 456, 459-460; Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46, 100, 118, 126-7; Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815, 833; Meagher, Gummow and Lehane, Equity Doctrines and Remedies (3rd ed, 1992), [505]; Parkinson (ed), The Principles of Equity (1996), 369-370. Ultimately a fiduciary responsibility is an imposed not an accepted one, one concerned with an imposed standard of behaviour; Finn, 'The Fiduciary Principle,' in Youdan (ed), Equity Fiduciaries and Trusts (1989), 54. But whether the relationship derives from retainer, a less formal arrangement or self-appointment, it must be examined to see what duties are thereby imposed on the fiduciary and the scope and ambit of those duties: see Boardman v Phipps (at 127).

[The appellant] relied on the reasoning of Mason J in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96-7:

'The critical feature of these [fiduciary] relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.'

The existence and scope of the duty may derive from a course of dealing. In a passage frequently cited with approval from Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, a partnership dispute, Dixon J, as his Honour then was, said (at 408):

'... The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which partnership exists; and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm.'

Moreover a role which was limited when originally assumed may, by reason of conduct in the performance of the role, be expanded so as to extend the duty: see, eg, Australian Breeders Co-operative Society Ltd v Jones [1997] FCA 1405; (1997) 150 ALR 488 especially at 514-7.[128]

129 In Hospital Products Ltd v United Surgical Corporation,[129] Gibbs CJ said that although the categories of fiduciary relationships were not closed, the authorities did not provide any comprehensive criteria as to when such a relationship came into existence. He referred with approval to the statement of the trial judge in that case, McLelland J, that:

there were two matters of importance in deciding when the court will recognize the existence of the relevant fiduciary duty. First, if one person is obliged, or undertakes, to act in relation to a particular matter in the interests of another and is entrusted with the power to affect those interests in a legal or practical sense, the situation is, in his opinion, analogous to a trust. Secondly, he said that the reason for the principle lies in the special vulnerability of those whose interests are entrusted to the power of another to the abuse of that power. The learned members of the Court of Appeal considered that the first of these statements needed a qualification which McLelland J had intended to suggest, namely that the undertaking to act in the interests of another meant that the fiduciary undertook not to act in his own interests; they said that the principle is that 'a fiduciary relationship exists where the facts of the case in hand establish that in a particular matter a person has undertaken to act in the interests of another and not in his own'. They added that it is not inconsistent with this principle that a fiduciary may retain that character although he is entitled to have regard to his own interest in particular matters ...

I doubt if it is fruitful to attempt to make a general statement of the circumstances in which a fiduciary relationship will be found to exist. Fiduciary relations are of different types, carrying different obligations (see In re Coomber; Coomber v Coomber [1911] 1 Ch 723, 728-9; Jenyns v Public Curator (Qld) [1953] HCA 2; (1953) 90 CLR 113, 132-3 and Phipps v Boardman [1966] UKHL 2; [1967] 2 AC 46, 126-7) and a test which might seem appropriate to determine whether a fiduciary relationship existed for one purpose might be quite inappropriate for another purpose ...

In the decided cases, various circumstances have been relied on as indicating the presence of a fiduciary relationship. One such circumstance is the existence of a relation of confidence, which may be abused: Tate v Williamson (1866) 2 Ch App 55, 61; Coleman v Myers [1976] NZHC 5; [1977] 2 NZLR 225, 325. However, an actual relation of confidence - the fact that one person subjectively trusted another - is neither necessary for nor conclusive of the existence of a fiduciary relationship; on the one hand, a trustee will stand in a fiduciary relationship to a beneficiary notwithstanding that the latter at no time reposed confidence in him, and on the other hand, an ordinary transaction for sale and purchase does not give rise to a fiduciary relationship simply because the purchaser trusted the vendor and the latter defrauded him.

Another circumstance which it is sometimes suggested indicates the existence of a fiduciary relationship is inequality of bargaining power, but it is clear that such inequality alone is not enough to create a fiduciary relationship in every case and for all purposes ...

On the other hand, the fact that the arrangement between the parties was of a purely commercial kind and that they had dealt at arm's length and on an equal footing has consistently been regarded by this Court as important, if not decisive, in indicating that no fiduciary duty arose ...[130]

130 Mason J said that the essence of a fiduciary relationship was that

the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of' and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.[131]

131 In our opinion the factual findings made by his Honour did not require or justify any conclusion that a fiduciary relationship came into existence between the respondents and Messrs Watson and Gibson and/or their entities, independently of any implied retainer. No relationship of dependence or reliance existed between the respondents and the appellants. Messrs Watson and Gibson were experienced business men, who were accustomed to negotiating deals and representing themselves in commercial dealings. They had detailed knowledge of the motor racing industry, and there is no evidence that Mr Battye had similar knowledge. As his Honour recognised, they 'were able to (and did) seek professional and independent advice as and when they required it'.[132] For this reason grounds of appeal 5 and 6 are not made out.

132 We have held that there was an implied retainer between the respondents and GMM. Although Mr Battye told Mr Watson on 31 August 2001 that thereafter he could act only for Mr Lowndes, the respondents continued to give advice to GMM on merchandising matters. In particular, GMM received advice on issues related to the establishment of an online shop on 20 September 2001 and obtained advice on privacy matters from one of Mr Battye's partners on 4 October 2001.

133 As the respondents acknowledged in their outline of submissions, even after the meeting on 10 October 2001 when Mr Forbes said he would not sell RPM to Messrs Watson and Gibson, it was assumed that GMM would continue to take responsibility for marketing activities. It was not until GMM failed to account to Mr Forbes for merchandising activities during 2001, that RPM did not proceed with a proposed arrangement for GMM to continue marketing on behalf of RPM.

134 The question whether the respondents breached any duty of loyalty they owed to GMM depends upon the scope of the retainer they had with the respondents.[133] GMM's role was to undertake merchandising activities relating to Mr Lowndes and his team. The respondents advised GMM on those activities. The appellants did not allege that GMM itself was to be involved in the buy-out of Mr Forbes and RPM. The buy-out proposals were not made by GMM but by Messrs Watson and Gibson. This must be taken into account in determining whether his Honour erred in holding that the respondents did not breach any duty owed to the appellants. We now turn to that issue.

Whether the appellants breached the duties they owed to GMM

135 Given our previous conclusions, grounds of appeal 6A and 7 need only be considered insofar as they relate to GMM. For that purpose, they must be read as follows:

6A. The learned trial judge erred in concluding that the respondents did not breach their fiduciary duties by:

(a) positively acting against the interests of [GMM];

(b) not informing [GMM] that the respondents were unable to act on behalf of [its] interests;

(c) not informing [GMM] that the respondents were not acting in [its] interests and [it] should seek independent advice.

(d) ...

1. The learned trial judge ought to have found that, by reason of the respondents' assumption of responsibility and their knowledge of reliance of [GMM] on their advice, the respondents owed fiduciary duties of loyalty and good faith, and duties to avoid a conflict between [the interests of GMM] and the interests of Mr Lowndes ...

136 The question of the scope of the retainer that GMM had with the respondents needs to be considered, and the analysis of the above grounds of appeal needs to be carried out, in the light of the factual findings of the trial judge concerning what Mr Battye said to Mr Watson on 31 August 2001. The judge found:[134]

Later on the same day [30 August 2001], there was a conversation between Mr Watson and Mr Battye. Mr Battye told Mr Watson that at Mr Forbes' request, the details of his conversation with Mr Forbes were confidential. However, Mr Battye told Mr Watson that Mr Forbes had retained Allens. Whilst Mr Battye believes that he also told Mr Watson that there was now a potential for a conflict of interest to arise between the interests of Mr Lowndes and the interests of the team, this statement is not recorded in Mr Battye's file note of this conversation. In the circumstances I am not prepared to find that Mr Battye said in this conversation that there was a potential for a conflict to arise. Similarly, I reject Mr Watson's evidence that he said any words to the effect 'What is going on, you are our lawyer?'.

On 31 August 2001, there was a further discussion between Mr Watson and Mr Battye. In this conversation, Mr Battye repeated what he had told Mr Watson the day before, that he could not discuss his conversation with Mr Forbes with him. There was discussion concerning Mr Forbes' agenda. There was discussion concerning the timing of an approach to Mr Forbes. Again, Mr Battye said that he could not comment. Mr Battye then told Mr Watson that there was now a conflict of interest with Ebsworths acting on behalf of Mr Lowndes and the team, and that he was therefore unable to advise Mr Watson or Mr Gibson concerning the buy-out. Mr Battye said that he must now act solely for Mr Lowndes. Mr Battye was cross-examined to the effect that whatever he said about a conflict of interest in his conversation with Mr Watson, he did not have a similar conversation with Mr Gibson. It seemed to be suggested that whatever version of this conversation was to be preferred, Mr Battye had not terminated any retainer with the Gibson interests and that Mr Gibson would have been entitled to continue to view Mr Battye as his solicitor. There are two answers to this proposition:

(a) First, there was a telephone conversation between Mr Watson and Mr Gibson shortly after this conversation and it is very likely that Mr Watson told Mr Gibson what Mr Battye had said to him.

(b) Secondly, it was Mr Gibson's practice to rely on Mr Watson to liaise with Mr Battye on his behalf. As Mr Gibson describes it, 'Mr Watson would inform me on conversations he had with Mr Battye, and advice Mr Battye had given, when this advice would affect me'.

137 We would add that a reading of Mr Watson's version of the conversation on 31 August 2001, under cross-examination, shows not only that it was open to the trial judge to prefer Mr Battye's evidence but that there were strong reasons to prefer Mr Battye's evidence on this point, particularly as it was backed up by the contents of his contemporaneous file note. The appellants did not directly challenge the judge's findings about what was said by Mr Battye to Mr Watson on 31 August 2001. Nor did they contend that this Court should overturn those findings and accept Mr Watson's version instead. However the written submissions on behalf of the appellants appear to ignore those findings and to advance arguments that are not open having regard to those findings. We therefore make it clear that we agree with the judge's findings concerning the relevant contents of the conversation on 31 August 2001.

138 In that conversation, it is apparent that Mr Battye, while saying that he was unable to advise Messrs Watson or Gibson on the issues relating to Mr Forbes and RPM, made it clear that he was thereafter acting solely for Mr Lowndes. It was implicit, if not explicit, from the terms of that conversation, as found by the judge, that the respondents would not be acting for Messrs Watson or Gibson or any of their entities on any issues relating to Mr Forbes and RPM and would be thereafter acting solely for Mr Lowndes in relation to those issues. As a result, it could not be, in our view, open to GMM to contend that it was unaware that the respondents would thereafter be acting only for Mr Lowndes (and thus potentially against the interests of GMM). Nor, in our view, could it be open to GMM, given the business experience of Messrs Watson and Gibson, to contend that they needed to be warned or should have been warned by Mr Battye to obtain independent advice or representation. Insofar as the appellants contend to the contrary, we reject those contentions.

139 For those reasons, we do not think that GMM has succeeded in making out sub-paras (b) and (c) of ground of appeal 6A. It would seem that the appellants appreciated their difficulties with those grounds because, in oral submissions, they placed almost exclusive emphasis on the argument that the respondents had breached their fiduciary duty to GMM by continuing to act for Mr Lowndes after 31 August 2001 instead of ceasing to act for all relevant parties. The appellants said that it was an insufficient discharge of the respondents' fiduciary obligation, in the circumstances, simply to inform GMM (via Messrs Watson and Gibson) of the conflict of interest and of their intention to act solely for Mr Lowndes. At that point, it was the respondents' fiduciary obligation to cease acting for Mr Lowndes as well.[135]

140 This approach by the appellants in their oral submissions to the question of breach of duty by failing to cease to act for Mr Lowndes is not really reflected by their grounds of appeal. Although it literally covers the point, sub-para (a) of ground of appeal 6A was primarily a complaint that the respondents should have been acting in the interests of GMM rather than against those interests, as the appellants' written submissions show.

141 Given that the respondents had acted as solicitor for GMM prior to 31 August 2001 (and indeed to some extent after that date) in relation to certain merchandising matters, the question arises whether, as the appellants in substance submitted, the duty of loyalty owed by the respondents to GMM meant that they could no longer act for Mr Lowndes, notwithstanding that their mandate to act for GMM was not directly related to the sponsorship issues involving Mr Forbes, RPM and Ford that concerned Mr Lowndes and in which Messrs Watson and Gibson on the one hand and Mr Forbes on the other hand came to have conflicting interests (ie, 'the buyout').

142 In support of their argument, the appellants referred, inter alia, to what was said by the Supreme Court of Canada in R v Neil:[136]

it is the firm not just the individual lawyer, that owes a fiduciary duty to its clients, and a bright line is required. The bright line is provided by the general rule that a lawyer may not represent one client whose interests are directly adverse to the immediate interests of another current client - even if the two mandates are unrelated - unless both clients consent after receiving full disclosure (and preferably independent legal advice), and the lawyer reasonably believes that he or she is able to represent each client without adversely affecting the other.[137] [emphasis added]

143 On the other hand, it was submitted on behalf of the respondents that the instructions from GMM to the respondents were confined to the merchandising aspect of GMM's business activities and that there was no conflict arising from the work performed for GMM and the steps Mr Battye was taking on behalf of Mr Lowndes, especially in September - October 2001. The respondents further submitted that the instructions given to them by GMM were given with the full knowledge that they were acting for Mr Lowndes. They referred to the letter from the respondents to Mr Gibson dated 9 February 2001.[138] The respondents submitted that when GMM instructed them to act on the various merchandising matters, it was a 'fully informed decision' such as was referred to in Beach Petroleum.[139] Of course, the respondents also relied on the changed situation as a result of Mr Battye's conversation with Mr Watson on 31 August 2001.

144 As we have indicated, the key issue concerning breach of fiduciary duty that arose during the oral submissions on appeal was whether the respondents breached their fiduciary duty to GMM by continuing to act for Mr Lowndes after 31 August 2001. The appellants based their submissions in this regard solely upon the respondents' duty of loyalty to GMM. It was not contended that the respondents possessed any confidential information or confidential knowledge of a kind that would have put them in breach of any fiduciary duty to GMM by continuing to act for Mr Lowndes.

145 The principal question that thus arises is whether or in what circumstances a solicitor's duty of loyalty to a particular client continues to apply after the retainer has ended so as to prevent the solicitor from acting for some other new or continuing client and against the interests of the former client.

146 In Bolkiah v KPMG,[140] Lord Millett, in a speech agreed in by the other members of the House of Lords, distinguished between the position of a current client and that of a former client of a solicitor. With respect to a current client, he said that a fiduciary could not act at the same time both for and against a current client - a solicitor could not without the consent of both clients act for one client whilst his partner was acting for another in the opposite interest.[141] This flowed from the inescapable conflict of interest that was inherent in the situation. That was not to say that such consent was not sometimes forthcoming, or that in some situations it might not be inferred.[142] In relation to former clients, however, he said:[143]

Where the court's intervention is sought by a former client, however, the position is entirely different. The court's jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence.

147 Bolkiah was decided in December 1998 but was not referred to in a decision of this Court in September 1999 in McVeigh v Linen House Pty Ltd.[144] In that case Batt JA referred to a number of single judge authorities and said that they established that a court would restrain a solicitor from acting for a litigant not only in order to prevent disclosure of confidences of a client or former client, but also to ensure that the solicitor's duty of loyalty to the former client was respected, notwithstanding termination of the retainer, and to uphold as a matter of public policy the special relationship of lawyer and client. In McVeigh, a firm of solicitors had been retained to act as administrators of a company but later began acting for that company in a proceeding in which the administrators subsequently became a party with adverse interests. One of the authorities referred to by Batt JA was Wan v McDonald[145] in which Burchett J drew attention to two matters, one being that a solicitor's duty of loyalty could not be treated as extinguished by the mere termination of the period of his retainer, and the other being that public policy, which gave a special quality to the relationship of solicitor and client, would not generally permit that relationship to be stained by the appearance of disloyalty. Burchett J said that these principles were significant in cases where the one solicitor, having acted for both parties, sought to act against one of his former clients, and in the interests of a preferred client, in litigation arising out of the very matter in which he himself acted for both, and he then said that: 'In my opinion, it could only be in a rare and very special case of this ... kind that a solicitor could properly be permitted to act against his former client ...'.[146]

148 Spincode Pty Ltd v Look Software Pty Ltd[147] was a case (like Bolkiah) turning on the risk of misuse of confidential information. Spincode concerned a firm of solicitors that had acted for a company since its incorporation and then began to advise two of the shareholders of the company and subsequently acted for one of them in proceedings to wind up the company. At first instance and confirmed on appeal, the solicitors were restrained from acting for the shareholder on the basis that there was a real risk of misuse of confidential information obtained while acting for the company. However, in an extensive discussion,[148] Brooking JA considered whether there was a basis for restraining the solicitors apart from the confidentiality ground. He considered whether there was a duty of loyalty continuing beyond the end of the solicitor/client relationship and he also considered whether there was a power in the court (independently of the existence of any equitable or fiduciary obligation) to restrain the solicitors from continuing to act. His Honour considered that Australian law had diverged from that of England and that, apart from the danger of misuse of confidential information, there were other possible bases for intervention where a solicitor acted against a former client. One basis was that it was 'a breach of duty for a solicitor to take up the cudgels against a former client in the same or a closely related matter', such duty arising from 'an equitable obligation of "loyalty", which forbids not only the concurrent holding of two inconsistent engagements by different clients in the same matter but also the holding of two successive inconsistent engagements'.[149]

149 It would seem that the 'divergence' referred to by Brooking JA can now be found in the Australian cases as well. On the one hand, by way of example, there is the decision of the Court of Appeal of New South Wales in Beach Petroleum[150] and the decision of the Federal Court in Photocure ASA v Queen's University at Kingston.[151] On the other hand, decisions in Victoria have tended to approve the formulation by Brooking JA.[152]

150 On this appeal, we do not think that it is necessary to attempt to resolve this divergence. Even accepting the principle as to the obligation of loyalty adumbrated by Brooking JA, it does not, we consider, apply on the facts of the present case. As the trial judge recognised, the respondents acted for GMM in relation to certain merchandising matters including marketing transactions with third parties. The respondents, by deciding to continue to act for Mr Lowndes after 31 August 2001, did not act for him in a matter or matters that could in any way be described as the same matter as any of the matters in respect of which the respondents had acted for GMM (or as a matter closely related thereto).

151 In our view, therefore, if the respondents had a duty of loyalty to GMM which continued after 31 August 2001, it was not a breach of that obligation for the respondents to continue to act for Mr Lowndes.

152 One further factual matter needs to be considered. We mentioned earlier[153] that Mr Battye continued to act for GMM in certain specific matters after 31 August 2001. To that extent, GMM remained a current client of the respondents rather than merely a former client after 31 August 2001. This does not affect our conclusion that there was no breach of fiduciary duty for two reasons. First, the matters in respect of which the respondents advised GMM were not relevantly related to the matters in respect of which Mr Battye was representing and advising Mr Lowndes. Secondly, GMM was fully aware when receiving advice in those matters that Mr Battye was now acting solely for Mr Lowndes in relation to the buyout.

153 We also note that counsel for the appellants submitted that, even though Mr Watson was advised by Mr Battye of a conflict of interest on 31 August 2001, a breach of duty had already occurred and subsequent events could be taken into account in assessing the quantum of damages. The conflict of interest was said to have arisen as early as 4 April 2001, when Mr Battye advised GMM (through Mr Gibson) not to enter into any sponsorship contracts until the ownership dispute was resolved, and on or shortly before 30 August 2001, when Mr Battye met with Mr Forbes and refused to communicate the results of that meeting to Mr Watson. In our opinion, to the extent that the conflict of interest identified by Mr Battye on 31 August 2001 had arisen earlier (and we doubt that it arose much earlier than 30 August 2001), any resulting breach of fiduciary duty by the respondents has not been shown to have caused any loss to GMM for the reasons which we discuss below - in particular because no connection has been established, even with the benefit of hindsight, between any such breach and the losses claimed.

Equitable compensation - did the respondents' breach of fiduciary obligation cause any loss to GMM?

154 We proceed on the basis, contrary to our above conclusion, that the respondents were in breach of their fiduciary obligation to GMM by continuing to act for Mr Lowndes.

155 The specific grounds of appeal relating to causation as regards the alleged loss suffered by GMM are grounds 8, 12 and 13:

1. The learned trial judge erred in finding that breaches of duty by the respondents did not lead to GMM suffering loss through being deprived of an opportunity to earn future income.
2. The learned trial judge erred in finding that the assessment of loss should be calculated by reference to Mr Lowndes and Ford leaving at the end of 2002 and that GMM's loss was therefore the loss of any ability to earn income during 2002 only.
3. The learned trial judge ought to have found that the assessment of loss should be calculated by reference to GMM's loss of opportunity to earn income from the operation of its business until 31 December 2006.

156 The judge found against the appellants on the retainer and duty issues but, in case he was wrong, went on to consider the questions of causation and loss. Ground 8 is concerned with the judge's conclusions as to the loss claimed by GMM and these conclusions were expressed as follows:

I turn now to consider the plaintiffs' claim that GMM lost the opportunity to earn $21,176,000.

...

The real issue is whether or not Mr Watson and Mr Gibson could have changed the outcome of the meeting on 10 October 2001 had they been kept fully informed of Mr Forbes' intentions and activities. The first question to be asked is whether Mr Watson and Mr Gibson had a prospect of staying with Mr Lowndes and Ford as at the 10 October meeting. Mr Lowndes had not finally made up his mind. The question becomes whether Mr Watson's and Mr Gibson's chances would have been enhanced to any and what extent if they were more fully prepared to put their case on 10 October. As I have said above, this assumes that Mr Watson and Mr Gibson did not in fact put their best foot forward on 10 October - a conclusion I have rejected. Neither Mr Watson nor Mr Gibson gave any evidence of a 'better' presentation that could have been made on 10 October had they been better prepared. Indeed, at no time in this trial was it suggested that there was relevant material which could have been put before Mr Lowndes on 10 October 2001 which might have enhanced Mr Watson's and Mr Gibson's case. Further, it is to be remembered that, as at 10 October, Mr Lowndes was contractually bound to RPM under the RPM driver agreement until at least 31 December 2002. Whilst this matter does not appear to have been expressly referred to, it seems likely that, had Mr Lowndes suggested that he would leave RPM, an issue of breach of contract would have been raised. Ordinarily, one would think that a person in Mr Lowndes' position would not take a step (if he did not have to) that would place him in breach of contract. Whilst Mr Lowndes might have taken such steps in relation to TWR in the second half of 2000 and in early 2001, the circumstances were very different and there would have been no up side in Mr Lowndes exposing himself (and his company) to a claim for breach of contract by RPM in October 2001. In the circumstances, and with Mr Forbes maintaining that he would not sell to Mr Watson nor Mr Gibson, there was no realistic prospect of a different outcome in relation to the 10 October meeting and the separation at or shortly after that time of the Watson and Gibson interests from the team.

It follows from what I have said above that, even accepting the plaintiffs' case that there were breaches of duty by the defendants in the period from 31 August to 10 October, any such breaches did not lead to GMM being deprived of an opportunity to earn income. Any such losses were brought about by the fact that Mr Forbes would not sell to Mr Watson and Mr Gibson and that realistically it was too late to set up a new team and that, in any event, Mr Lowndes was contractually bound to stay with RPM for the 2002 season. That is, any loss suffered by GMM of a kind claimed by the plaintiffs would have occurred in any event notwithstanding any breach on Mr Battye's part. However, on the basis that I might be found to be wrong in that conclusion, I should assess the value of the opportunity that GMM alleges it lost. Even if one accepts the plaintiffs' case that the defendants' breaches of duty between 31 August and 10 October 2001 deprived Mr Watson and Mr Gibson of a chance that Mr Lowndes would go with them (rather than Mr Forbes), at best what was lost was a 50/50 chance. For the reasons given above, I have found that no real chance was lost. However, on the assumption that I am wrong, I turn now to value this opportunity.[154]

157 The appellants criticised the judge's findings, contending that his Honour took a too narrow approach to the facts and, in their written submissions, set out in detail a number of reasons as to why the appellants would have retained their connection with Mr Lowndes. However, the appellants' written submissions appear to have been advanced on the basis that the respondents should have continued to act positively in the interests of the appellants (or, for present purposes, GMM). For example, the appellants sought to rely on expert evidence that a solicitor in the position of the respondents should have 'taken positive action to resolve outstanding issues at the earliest opportunity' - this can only be based upon the position that the respondents were obliged to act for GMM. A number of other matters are mentioned and then it is submitted that 'the Trial Judge failed to consider the position of the Appellants had Battye fulfilled his obligations by acting positively in their interests' and further that:

It is submitted that the Respondents fell under a duty to protect and further the interests of the Appellants. Battye could have assured those interests by encouraging Lowndes to stay with the Appellants.

These and similar submissions are inconsistent with the proposition that the respondents should have ceased acting for all parties.

158 Further, in both written and oral submissions, the appellants emphasised that the court should not speculate against the interests of the party in respect of whom there was a breach of fiduciary duty, relying on the line of cases commencing with Brickenden v London Loan & Savings Co.[155]

159 It seems to us that the appellants' arguments paid insufficient attention to the basic question raised by their ultimate submission as to breach of duty, namely, what loss was caused to GMM as a result of the respondents continuing to act for Mr Lowndes? It is important to remember that this was not a case of misappropriation of trust property or non-disclosure of material facts or misuse of confidential information where the question what loss would have been avoided but for the breach of duty or default by the fiduciary might perhaps more readily be answered.

160 In Beach Petroleum,[156] the New South Wales Court of Appeal said that:

The authorities on this matter have recently been reviewed in O'Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262, 272-3. The law in Australia was there held to be as stated by Lord Browne-Wilkinson in Target Holdings Ltd v Redferns [1995] UKHL 10; [1996] 1 AC 421, 439:

'... Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach';

and by McLachlin J in Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 at 163:

'... it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach.'

161 In G M & A M Pearce & Co Pty Ltd v Australian Tallow Producers,[157] Warren CJ said, citing authority:

that the measure of equitable compensation was that sum which would restore the plaintiff to the position he would have been in had the breach not occurred, having regard to what had actually happened by date of trial. The losses made good were only those which 'on a common sense view of causation, were caused by the breach'. The purpose of equitable compensation is to make good a loss in fact suffered by the plaintiff and which, using hindsight and common sense could be seen as being caused by the breach. The Court was entitled, with the full benefit of hindsight, not to speculate against the interests of the plaintiff.[158]

162 The appellants accepted that the above principles[159] were correct and were applicable but sought to emphasise that the Court was not entitled to speculate against the interests of the plaintiff (whilst recognising that the Court was not entitled to make assumptions against the defendant on issues of causation).

163 Brickenden[160] was an appeal to the Privy Council from a judgment of the Supreme Court of Canada. The appellant was the solicitor to the London Loan & Savings Co who had been the subject of a counterclaim by his client alleging inter alia fraud by him in the procuring and advancing of certain loans to some borrowers. These borrowers had obtained certain loans from the loan company secured by mortgages. When the borrowers sought further loans that were rejected by the loan company they instead obtained advances on mortgage from the appellant, the mortgages including properties previously mortgaged to the loan company. Subsequently the borrowers obtained further advances from the loan company and the appellant acted for the borrowers as well but the appellant did not disclose to the loan company his personal interest in certain of the mortgages or that the proceeds of the further advances were to be utilised in part in the repayment of the loan by the appellant.

164 The Judicial Committee, in affirming the judgment below, in a judgment delivered by Lord Thankerton, said that the appellant's non-disclosure of two mortgages was a breach of his duty as solicitor to the loan company, particularly in view of his personal interest in them. On the question of damages, Lord Thankerton said that when a party, holding a fiduciary relationship, committed a breach of his duty by non-disclosure of material facts which his constituent was entitled to know, he could not be heard to maintain that disclosure would not have altered the decision to proceed with the transaction on the basis that the constituent's action would be solely determined by some other factor, such as a third party valuation of the property to be mortgaged: 'Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant'.[161] The judgment accepted the finding of the trial judge that the security offered for the advance in question was worthless, having regard to the prior equities.

165 It can be seen that Brickenden involved the non-disclosure by the fiduciary of material facts and the statement about impermissible speculation related to the question of the likely conduct of the person to whom the duty was owed had proper disclosure been made. The case does not negative the requirement for some proof of causation and does not, as the appellants verged on contending, reverse the onus of proof in relation to causation.[162] That is not to say that Brickenden has not attracted criticism, as Kirby J recognised in Maguire v Makaronis.[163] But as his Honour also made clear, Brickenden was a case that related to the non-disclosure of material facts.[164]

166 The primary submission of the appellants in the present case did not relate to the non-disclosure of material facts. The submission was concerned with the failure of the respondents to cease acting for Mr Lowndes and what loss was caused by that failure. The appellants bore the onus of showing, on the balance of probabilities, that GMM had suffered a loss as a result of that failure. In our opinion, on a common sense view of causation, and even with the full benefit of hindsight, it cannot be said that the act of the respondents in continuing to advise and represent Mr Lowndes (as Mr Battye told Mr Watson that the firm was going to do) was a cause of the loss of income suffered by GMM as a result of Mr Lowndes severing his commercial connection with the appellants. To say that Mr Lowndes would probably not have severed his commercial connection with the appellants had the respondents not continued to act for him - and that is the essence of the appellants' final position - is mere speculation.

167 It is clear that the contention that the respondents were in breach of their duty of loyalty to GMM (or any other of the appellants) by continuing to act for Mr Lowndes after 31 August 2001 was not a focal point of the submissions to the trial judge, although, in a written submission at trial, it was mentioned. Accordingly, the judge's factual findings and reasoning that led to his conclusion that the appellants (and for present purposes GMM) would have suffered their losses in any event was directed to the wider submissions that were made below concerning breaches of fiduciary duty. For the same reason, his Honour's conclusion that, if there had been a loss of opportunity to earn income suffered by GMM as a result of any breach of fiduciary duty, such loss should be assessed at 50 per cent was not a conclusion related solely to a breach characterised simply as the failure to cease acting for Mr Lowndes or wrongly continuing to act for him. Accordingly, had we been of the view that the appellants had jumped the necessary hurdles as to entitle them to equitable compensation, we would have been minded to remit that assessment to the trial judge in the light of the way in which the breach is now put. However, as we have said, we do not think that the appellants have demonstrated, on the assumption that the particular breach had been established, that any loss flowed therefrom.

168 We have not specifically referred above to the heads of compensation claimed by the appellants other than loss of income (in particular, the legal costs of certain Federal Court proceedings and the loss of the TEGA franchise) but our conclusions are likewise applicable to those claims.

169 For these reasons, the appeal should be dismissed.

[1] Noel Watson (Aust) Pty Ltd, The Watson Group Australia Pty Ltd and Synarby Pty Ltd were also named as plaintiffs but were removed as parties to the proceeding before judgment was handed down.

[2] As explained below, some of the grounds of appeal relate only to some of the appellants. For example ground of appeal 1 alleges only a contractual retainer with GMM.

[3] Watson v Ebsworth & Ebsworth (a firm) [2008] VSC 510 ('Reasons'), [2].

[7] An appeal by the appellants to the Full Court of the Federal Court was dismissed on 31 March 2006.

[8] The sixth plaintiff was The Watson Group Australia Pty Ltd. It had been removed as a party before judgment was handed down.

[9] See also the summary of the appellants' claims at Reasons, [40].

[11] Further issues related to breach, causation and quantum of damages.

[13] His Honour acknowledged that this was no longer a central issue 'having regard to the way in which the plaintiffs ultimately put their case in final address, wherein they stated that the tortious duties were subsumed by the fiduciary claims'.

[14] Reasons, [40]. See also [134] where his Honour summarised the losses which each of the appellants sought to recover.

[16] Reasons, [46] (citations omitted).

[22] Ibid [118], see also [115]-[117].

[23] Ibid [112]-[119] relating to the failure to prove any of the alleged retainers.

[32] Ibid [52]. Mr Battye said he had been introduced to Mr Gibson in August 2000. It is not necessary to decide when the introduction occurred.

[33] Ibid [51]. Mr Watson's assertions about the proposed arrangements are at ibid [8]. Mr Battye and Mr Watson's account of the contents of the meeting differed slightly, but the difference is immaterial.

[34] Ibid [53]. The judge accepted Mr Battye's statement that he was told by Mr Falconer that Mr Falconer was acting for Mr Gibson and Mr Robert Forbes on 11 December 2000.

[35] Ibid [9]. Counsel for the appellants did not contest his Honour's findings on this issue.

[37] ACN 095 359 041 Pty Ltd was the former name of Racecar Preparation and Management Pty Ltd. The company's change in name was not alleged to have been material to any of the issues raised at trial or on appeal. To avoid confusion, all subsequent references will be made to RPM.

[38] Mr Forbes believed that this letter was executed in January 2001 and backdated to his date of appointment: ibid [22], n 15.

[44] The terms of the Heads of Agreement are at ibid [14].

[48] Ibid [56]-[58] (citations omitted).

[51] Ibid [63]-[66] (citations omitted).

[52] Pegrum v Fatharly (1996) 14 WAR 92, 95 (Ipp J).

[53] Mr Lowndes' driver agreement with RPM was executed on 4 January 2001: Reasons, [20].

[54] Counsel relied on the following facts: (1) Mr Watson told Mr Battye that Mr Gibson was the team principal and was a person with authority to act on behalf RPM; and (2) Mr Gibson had authority to sign a similar retainer letter which bound RPM in its arrangements with GMM.

[55] Counsel relied on the following facts: (1) Messrs Forbes, Gibson and Watson discussed Mr Battye acting for the team; (2) Mr Watson was the main contact for communication between Messrs Battye and Gibson; (3) Mr Gibson's evidence was that he relied on Mr Watson to liaise with Mr Battye because he, Mr Gibson, was too busy running the race team, and because Mr Watson was in charge of merchandising.

[56] An invoice issued by FCG dated 14 May 2001 contains no reference to Gibson Motorsport.

[57] Mr Watson's evidence was that he had told Mr Battye on 2 February 2001 that GMM had been incorporated. The judge said that at best Mr Watson could only have told Mr Battye that he had given instructions on 24 January 2001 to incorporate GMM as this did not occur until 6 February. See Reasons, [56]-[57].

[58] Counsel relied upon the statement in Mr Watson's witness statement that the 'GMM merchandising range was launched to the public on Friday 6 April 2001'.

[59] Mr Watson agreed in cross-examination that the racing team purchased by Mr Forbes was 'with all of your consent to trade as Gibson Motorsport'.

[60] Counsel relied on Mason J_'s_ judgment in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 in support of that proposition.

[61] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 176-9. We note that in his Reasons (at [117]), his Honour said that there was no doubt in Mr Battye's mind as to whom he acted for and that his thought processes in this regard were not unreasonable. Standing alone, that statement might indicate that his Honour misdirected himself that the effect of the retainer was to be determined by Mr Battye's subjective belief as to the approach to be taken. We return to that issue at [116]-[119] below.

[63] Cf ibid [55]. In cross-examination Mr Battye also said that he was aware of Mr Forbes from 11 December 2000 onwards and that he was aware of part of the team's structure and Mr Forbes' role as financier from 4 January 2001.

[65] Raffles v Wichelhaus (1864) 159 ER 375; W &J Sharp v Thomson [1915] HCA 37; (1915) 20 CLR 137, 142 (Isaacs J); Scriven Bros & Co v Hindley and Co [1913] 3 KB 564. All of these cases related to mistakes as to the subject matter of, rather than the parties to, the contract.

[66] In cross-examination, Mr Watson agreed that the racing team purchased by Mr Forbes was 'with all of your consent to trade as Gibson Motorsport'.

[70] Ibid [24]-[35], [68]-[73], [82]-[110].

[71] These are referred to by his Honour in Reasons, [74]-[78] and in the witness statement of Mr Hall.

[74] For example, Mr Watson's and Mr Gibson's responses to the letters dated 19 September 2001 addressed to them from Andersen Legal.

[77] See generally Burge v Swarbrick [2007] HCA 17; (2007) 232 CLR 336, 360; Roads and Traffic Authority of New South Wales v Dederer [2007] HCA 42; (2007) 234 CLR 330, 399-400 (Callinan J).

[80] P D Finn, Fiduciary Obligations (1977), [583].

[81] See also Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1, 97-8; UTi (Australia) Pty Ltd v The Partners of Piper Alderman [2008] NSWSC 219, [53]-[55] (Barrett J).

[83] In support of that proposition counsel relied on Birchtnell v Equity Trustees Executors and Agency Company Ltd [1929] HCA 24; (1929) 42 CLR 384, 408; Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1, 45; Australian Breeders Co-Operative Society Ltd v Jones ( [1997] FCA 1405; 1997) 150 ALR 488, 514-7.

[85] The other appellants were said to have a claim for the costs of the Federal Court proceedings.

[95] The workshop, located in Kitchen Road, Dandenong, was owned by Mr Gibson's company, Angora Tower Pty Ltd ('Angora Tower').

[96] We refer in more detail to the conversations and events relied upon by each of the parties in our conclusion below.

[97] Details of these instructions are set out above: see [74].

[99] In support of that submission he relied on Hilton v Barker Booth and Eastwood (a firm) [2005] UKHL 8; [2005] 1 All ER 651.

[102] Fox v Percy [2003] HCA 22; (2003) 214 CLR 118, 127-8.

[104] In support of that proposition counsel for the respondents relied on Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1, where the court held (at 45) that 'the duty is derived from what the solicitor undertakes, or is deemed to have undertaken, to do in the particular circumstances'.

[105] In cross-examination, Mr Gibson said that Mr Forbes had suggested this because Mr Falconer had previously drafted the lease of the workshop to Mr Dumbrell and 'it was convenient for Falconer to deal with these matters because he had done them before'.

[106] See letter dated 9 February 2001 from Butler Pty Ltd Chartered Accountants to Mr B Stanley, a chartered accountant acting for Mr Forbes; enclosing consent to act as a director for GMM, an application for shares in GMM and a copy of a share certificate for shares held. See also Reasons, [114].

[107] Counsel for the respondents also relied on an email from Mr Watson to Mr Forbes dated 6 September 2001 in which he asked Mr Forbes' opinion on the appointment of 'the company's solicitor' to be responsible for the drawing up of the necessary sale documentation. The reference to 'the company's solicitor appears to be ambiguous.

[108] Counsel relied on Reasons, [85], [118], [127].

[110] Meerkin &Apel v Rossett Pty Ltd [1998] 4 VR 54, 62.

[112] Ibid [3.50] (citations omitted). See also Meerkin & Apel v Rossett Pty Ltd [1998] 4 VR 54, 62 (Charles JA).

[113] [1998] 4 VR 54 ('Meerkin').

[114] It was conceded that an express retainer had been established later.

[116] Compare Australian Breeders Co-operative Society v Jones [1997] FCA 1405; (1997) 150 ALR 488.

[117] [1999] NSWCA 408; (1999) 48 NSWLR 1 ('Beach Petroleum').

[118] Ibid 53 (Spigelman CJ, Sheller and Stein JJA). See also 55. Note that in Meerkin [1998] 4 VR 54, this Court regarded the belief of the solicitor that he was not acting for a company as relevant in deciding whether the company had an implied retainer.

[120] [1999] NSWCA 408; (1999) 48 NSWLR 1.

[122] See the respondents' description of the work at [102] above. Mr Watson appears to have sought accounting advice regarding the buy-out from Damien Butler. In addition to the work described above, Mr Falconer also drafted the Contract of Sale of Business entered into between Mr Dumbrell's company and RPM. Daniel Butler incorporated GMM after his accountant brother, Damien Butler, was so instructed by Mr Watson. Daniel Butler also drafted a confidentiality agreement to be signed by Mr Forbes before inspecting the accounts.

[123] Lawyers' Professional Responsibility (4th ed, 2010).

[127] [1999] NSWCA 408; (1999) 48 NSWLR 1.

[129] [1984] HCA 64; (1984) 156 CLR 41.

[130] Ibid 68-70 (some citations omitted).

[133] Beach Petroleum [1999] NSWCA 408; (1999) 48 NSWLR 1, 46.

[135] See [91] above.

[136] [2002] 3 SCR 631.

[137] Ibid [29] (Major, Bastarache, Binnie, Arbour and LeBel JJ).

[138] See [43] above.

[139] [1999] NSWCA 408; (1999) 48 NSWLR 1, 98.

[140] [1998] UKHL 52; [1999] 2 AC 222.

[144] [1999] VSCA 138; [1999] 3 VR 394 ('McVeigh').

[145] [1992] FCA 4; (1992) 33 FCR 491.

[147] [2001] VSCA 248; (2001) 4 VR 501 ('Spincode').

[149] [2001] VSCA 248; (2001) 4 VR 501, 522. Brooking JA explained that by the 'same matter' he comprehended 'a closely related matter'.

[150] [1999] NSWCA 408; (1999) 48 NSWLR 1, 47-8.

[151] [2002] FCA 905; (2002) 56 IPR 86, 95-6 (Goldberg J); see also Cleveland Investments Global Ltd v Evans [2010] NSWSC 567, [40]-[49] and cases therein cited (Ward J).

[152] For example, see Sent v John Fairfax Publications Pty Ltd [2002] VSC 429, [98]-[104] (Nettle J); see also Pinnacle Living Pty Ltd v Elusive Image Pty Ltd [2006] VSC 202 (Whelan J) and the decision of the trial judge set out on appeal in Kyriackou v Commonwealth Bank of Australia [2009] VSCA 241, [22]-[23].

[153] See [74(f)]; [92] above.

[155] [1934] 3 DLR 465 ('Brickenden').

[156] [1999] NSWCA 408; (1999) 48 NSWLR 1, 90.

[157] [2005] VSCA 113.

[159] See too Southern Real Estate Pty Ltd v Dellow [2003] SASC 318; (2003) 87 SASR 1, 11-14 (Debelle J).

[160] [1934] 3 DLR 465.

[162] See Stevens v Premium Real Estate Ltd [2009] NZSC 15; (2009) 2 NZLR 384 (Supreme Court of New Zealand, Elias CJ, Blanchard, Tipping, McGrath and Gault JJ).

[163] [1997] HCA 23; (1997) 188 CLR 449, 492-5.

[164] See also Beach Petroleum [1999] NSWCA 408; (1999) 48 NSWLR 1, 93.