David v David [2009] NSWCA 8 (12 February 2009)

Last Updated: 16 February 2009

NEW SOUTH WALES COURT OF APPEAL

CITATION:
David v David [2009] NSWCA 8


FILE NUMBER(S):
40019/08

HEARING DATE(S):
9 December 2008

JUDGMENT DATE:
12 February 2009

PARTIES:
First Appellant - Eddy David
Second Appellant - Grace David
First Respondent - Fred David
Second Respondent - Suzie David
Third Respondent - Pual Manuelpilla Dominic
Fourth Respondent - Linda Joan Romano
Fifth Respondent - Andy Isho

JUDGMENT OF:
Allsop P Hodgson JA Handley AJA

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
SC 3844/02, 11832/03

LOWER COURT JUDICIAL OFFICER:
Patten AJ



COUNSEL:
Appellants: D E Baran
First - Fourth Respondents: R J H Darke SC, M C L Dicker
Fifth Respopndent: G Curtin

SOLICITORS:
Appellants: Barclay Benson
First - Fourth Respondents: Middleton Lawyers
Fifth Respondent: Henry Davis York

CATCHWORDS:
LEGAL PRACTITIONERS – Solicitors – duty to clients – asserted breach of retainer– fiduciary duty – conflict of interest - retainer for refinancing mortgage documents – whether solicitor should decline to act when become aware of destination of funds
TORTS – NEGLIGENCE – duty of care – whether solicitor has duty of care to third persons not clients of the solicitor to undertake steps contrary to the interests of the solicitor’s client
MISLEADING AND DECEPTIVE CONDUCT - Fair Trading Act 1987 (NSW) – Solicitor distributing investments contracts under instructions of client – nature representations made in investment contract – s 42

LEGISLATION CITED:
Corporations Law
Fair Trading Act 1987 (NSW)
Trade Practices Act 1974 (Cth)

CATEGORY:
Principal judgment

CASES CITED:
Al-Kandari v J R Brown & Co [1988] EWCA Civ 13; [1988] 1 All ER 833
Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1
Beach Petroleum NL v Kennedy & Ors (1999) 48 NSWSLR 1
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424
Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398
Clark Boyce v Mouat [1994] 1 AC 428
Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1
Heydon v NRMA Ltd [2000] NSWCA 374; 51 NSWLR 1
Hill v Van Erp (1997) 188 CLR 159
Karl Suleman Enterprizes Pty Ltd (In Liq) v Babanour [2004] NSWCA 214; 49 ACSR 612
Kowalczuk v Accom Finance Pty Limited [2008] NSWCA 343
Perre v Apand [1999] HCA 36; 198 CLR 180
Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642

TEXTS CITED:


DECISION:
Appeal dismissed with costs.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

40019/2008

ALLSOP P

HODGSON JA

HANDLEY AJA

12 February 2009

DAVID v DAVID

Headnote

The appellants retained the first to fourth respondents as solicitors to advise on refinancing of their existing borrowings to raise funds for an investment. The respondents were not retained to provide financial advice in relation to the investment and became aware of the proposed destinations of the funds part way through completing the retainer.

The firm of the first to fourth respondents also acted for the companies into which the funds raised by the refinancing transactions were to be invested in an investment scheme and they knew that there was a question as to whether the investment scheme was being conducted contrary to Corporations Law. Solicitors at the firm had also undertaken transactions with the relevant companies.

The companies into which the funds were invested later had administrators appointed and the appellants lost all of their investment money, save an initial small return.

The appellants (plaintiffs below) sued their solicitors alleging breach of retainer and breach of fiduciary obligation. The appellants also sued the solicitor retained by the companies into which the funds were invested and who provided the contracts for the investment in the relevant companies (fifth respondent) alleging breach of duty of care and misleading and deceptive conduct.

The claims were heard before Patten AJ in the Supreme Court of NSW and the claims against all of the respondents failed at first instance.

The issues on appeal were:

whether the first to fourth respondents had a duty to cease to act for the appellant when they became aware of the proposed use of the funds raised under the refinancing agreement for which they had been retained to provide advice;
if the solicitors did not have a duty to cease to act, whether the need to get independent advice in relation to the investment of the funds adequately expressed to the appellants;

whether the fifth respondent, who acted for companies into which the funds were invested and who provided the contracts for investment, breached a duty of care given he was on notice of potential violations of Corporations Law by the proposed investment scheme;

whether by providing the investment contracts for an investment scheme that was later found to be contrary to Corporations Law the solicitor has participated in misleading or deceptive conduct under the Fair Trading Act 1987 (NSW) or the Trade Practices Act 1974 (Cth).

Held dismissing the appeal:

Allsop P (Hodgson JA and Handley AJA agreeing):

There was no obligation for the solicitors, who were only retained to give advice on a refinancing transaction to obtain funds, to cease to act when they learned of the proposed destination of the funds. There was no conflict of interest when the firm also acted for the receiver of the investment funds or members of the firm had done transactions with the investment companies if the firm was only retained to give advice on the refinancing transaction to raise funds.

The need to obtain independent advice on the financial investments was expressed sufficiently clearly by the solicitor advising the appellants to discharge any duty owed to the client in the circumstances.
The solicitor retained by the investment companies did not have a duty of care to third parties who are not clients of the solicitor to undertake steps contrary to the interests of the solicitor’s client.

The provision of investment contracts by the solicitor retained by the investment companies did not constitute misleading and deceptive conduct under s42 of the Fair Trading Act 1987(NSW).




IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

40019/2008

ALLSOP P

HODGSON JA

HANDLEY AJA

12 February 2009

DAVID v DAVID

Judgment

1 ALLSOP P: The appellants are husband and wife who in March and August 2001 invested the sums of $150,000 and $48,000 with Karl Suleman in one of his companies. From March to October the appellants received sums each in the order of $3,750 by way of apparent return on the investment. In November 2001, an administrator was appointed to two apparently relevant companies, Karl Suleman Enterprizes Pty Limited (“KSE”) and a related company, Suleman Investments Pty Limited (“SI”). In December 2001, orders were made in the Equity Division of the Supreme Court at the suit of the Australian Securities and Investments Commission (“ASIC”) winding up the fund represented by the moneys and assets of KSE, SI and Mr and Mrs Suleman derived from the business as undertaken by them through the kind of arrangements entered by the appellants.

2 Apart from the returns between March and October 2001, the appellants have lost their money. They are not alone in this predicament. Many in the Australian Assyrian community likewise lost money invested with Mr Suleman, who has been convicted of, and sentenced for, various offences.

3 The appellants sued (a) the solicitors (the first to fourth defendants) who gave them advice about the borrowing and security transaction by way of refinancing of existing borrowings to raise the funds to invest; (b) the solicitor retained by the Suleman interests who provided the contract in question (the fifth defendant); (c) the mortgage broker who arranged the loan (the sixth defendant); and (d) the lender (the seventh defendant).

4 The appellants settled with the sixth and seventh defendants shortly before the commencement of the trial, leaving their claims and complaints only against the solicitors. The claims against the first to fourth defendants (who were the first to fourth respondents on the appeal), on the one hand, and the fifth defendant (who was the fifth respondent on the appeal), on the other, must be examined separately as they were founded on different asserted responsibilities.

5 The proceedings were heard by a Judge of the Court (Patten AJ) over nine days in May and June 2007. His Honour delivered judgment on 9 August 2007. It is important to understand that the nature of the contest at first instance involved a fundamental clash of assertion and evidence in the claims made by the appellants and the defences of the respondents.

6 The claims of the appellants were based on the assertion that the appellants retained the first to fourth respondents to advise and act for them in respect of a proposed investment by them in a scheme conducted by Mr Suleman and KSE. It was asserted that in this retainer, the first respondent advised the appellants expressly to the effect that the scheme was secure and profitable, that earnings were the legitimate product of businesses conducted by Mr Suleman and that it would be prudent for the appellants to invest in the scheme. The claims were legally founded in breach of the retainer, breach of fiduciary obligation and misleading or deceptive conduct.

7 The first to fourth respondents denied that the retainer was as wide as alleged by the appellants and denied any advice to the effect alleged by the appellants. This denial threw up a fundamental question as to the accuracy and truthfulness the evidence of respective witnesses. This conflict of credibility and reliability was resolved by the primary judge’s comprehensive findings of the lack of credibility and reliability of the appellants in their evidence and the reliability and accuracy of the evidence of the first to fourth respondents and those who gave evidence in their case.

8 There was no attempt on the appeal to challenge any of these primary findings of fact based on credibility and reliability of the respondents and their witnesses. Rather, the appellants sought to mould their arguments to the body of actual findings made by the primary judge and demonstrate in argument that his Honour’s conclusions that there were not breaches of duty on the basis of his findings were incorrect.

9 It is therefore necessary to examine the factual matrix of the events by reference primarily to the unchallenged conclusions of the primary judge. It will only be necessary to examine the full scope of the controversy before the primary judge in order to examine the arguments of the respondents on appeal that aspects of the appellants’ case on appeal were not run below.

The appeal against the first to fourth respondents

10 The following factual outline is derived from the unchallenged factual findings of the primary judge and evidence of the appellants that can be taken to be unchallenged or unrejected by the primary judge.

11 The first to four respondents were the partners of a firm of solicitors known as Dominic David Stamfords (“DDS”).

12 The first appellant (Mr David), who was born in 1956, is a plumber by trade, having been self-employed since 1978. The second appellant, the wife of the first appellant had worked as a process worker until 1984 when she married the first appellant. Since their marriage, she has acted as homemaker and parent in the marriage. The primary judge found that she acted in matters of business on the advice and views of her husband. The appeal was not conducted otherwise.

13 In late 2000 or early 2001, the first appellant became interested in investing in Mr Suleman’s businesses. He was introduced to a company called Quick Loan Services (“QLS”) and there met a Mr Zia George. The first question deposed to by Mr David that he asked Mr George was “How can I go about investing in the trolley business with Karl Suleman?” He was told: “If you own your own house it is easy.”

14 The appellants owned their own home, mortgaged to the extent of $55,000 owed to Westpac.

15 Mr George undertook to arrange finance to invest. The appellants thereafter agreed to participate. Documents were drawn up to establish the loan and security to raise $250,000 to pay out Westpac and to invest $150,000 with Mr Suleman’s company.

16 In the appellants’ case at trial, the decision to participate was said to have been preceded by the need to obtain professional advice which was said to have been in the form of a conversation between the first appellant and the first respondent in which the latter was said to have lauded the wisdom and commercial advisability of participating in the investment. All this evidence was rejected. It can be concluded (and it was not in dispute on the appeal) that the appellants came to DDS having obtained all the relevant borrowing documentation from QLS and having already decided to invest in KSE or one of Mr Suleman’s companies or businesses.

17 The circumstances and contents of the advice that DDS gave the appellants were found by the primary judge to be reliably recorded in the evidence of Ms Jajoo an employed solicitor of DDS and the wife of the first respondent.

18 Ms Jajoo had a telephone conversation with the first appellant on about 9 February 2001. The first appellant rang her. After introducing himself, the first appellant said that he and his wife were refinancing with QLS and QLS had told him that they would forward the unconditional loan approval to DDS because DDS would be their (the appellants’) solicitor.

19 Some days later, on 14 February 2001, Ms Jajoo had a meeting with the first appellant and Mr George from QLS. Ms Jajoo was given a facsimile from the sixth defendant and then a conversation took place. In this conversation, the first appellant said that he and his wife were refinancing their existing loan and that Mr George had organised the unconditional loan approval. He asked as to the cost and expenses involved in the refinance. He indicated that QLS, through Mr George, had agreed to cover all the costs and that Mr George was his friend. He indicated that he and Mr George would sort out the costs in due course. Ms Jajoo said that she was not in a position to advise the appellants on exactly what expenses would be incurred as they had not provided to her the loan agreement. However, she gave an indication from her experience of usual costs associated with the mortgage broker in question and gave the estimate of those costs. After further discussion about the deduction of any fees from the sum derived from the mortgage, Ms Jajoo said that there was little more that she could do at that stage until the mortgage documents had been issued. She did raise the question of discharge of any existing loan. The first appellant indicated that he had a loan with Westpac that needed to be discharged. Ms Jajoo told the first appellant of the documentation and information that she needed to effect that discharge. This meeting lasted somewhat over half an hour and was noted by Ms Jajoo in a file note.

20 On 5 March 2001, Ms Jajoo received a letter from solicitors acting for Macquarie Bank Limited and Macquarie Mortgages Pty Limited addressed to the appellants. The letter enclosed documentation regarding a proposed loan of $250,000 secured over the appellants’ home. Ms Jajoo then arranged a meeting with the appellants which took place on 6 March 2001. The appellants attended the meeting and brought in documents at or prior to the meeting, being Westpac bank account statements, council and water rates notices, passports and drivers licences. The conversation between the appellants and Ms Jajoo at this meeting on 6 March 2001 was accepted by the primary judge. At the meeting, there was a discussion as to their various accounts at Westpac and the securities presently in place to secure the existing borrowing. Further information was acquired from Westpac by telephone call during the meeting. After obtaining all relevant information from Westpac, Ms Jajoo discussed the necessary administrative steps to discharge the Westpac mortgage. Ms Jajoo then prepared a discharge authority and gave it to the appellants.

21 Ms Jajoo then dealt with the credit contract, being the primary loan documentation, to the appellants. It is unnecessary to set out in extenso everything that was said by Ms Jajoo. It is sufficient to say that she comprehensively and competently explained the contents of the loan documentation. It was quite apparent that the first appellant understood the explanation (all of which was conducted in English, in which all parties were fluent) because the first appellant disagreed with one aspect of the documentation and called QLS in the presence of Ms Jajoo to correct this aspect of the transaction. After the full and complete explanation of the contents of the loan documentation, the appellants signed the credit contract. At this point, Ms Jajoo said that the contract documentation asked whether the appellants had obtained legal advice regarding the mortgage documents. She then undertook the task of explaining the mortgage documentation to the appellants. In her evidence, Ms Jajoo set out extensively all her explanation about this document. Once again, the explanation was comprehensive and competent. No complaint was made about that aspect of the performance of the retainer. It should be noted that Ms Jajoo said that the appellants did not at that time sign the relevant box indicating receipt of that advice because of an interruption to the conference caused by the first appellant taking a mobile phone call.

22 Ms Jajoo then explained a document entitled “Warranty” in a manner that was once again competent and comprehensive.

23 In the light of all these explanations all documentation was signed. She then turned to a document entitled “Direction to Pay – DMS Equity Plus Revolving Line of Credit”. She explained that this was a direction to pay which was a written expression of direction as to the dealing with the proceeds of the loan. At this stage, with the appellants’ consent, this aspect of the documentation was completed “to be advised by [DDS]”.

24 Ms Jajoo then completed her explanation of the documents by dealing with an explanation of the “Declaration by Borrower” to the effect that the appellants declared that they were the borrowers; that they were giving to the bank their house as security; that they had seen Ms Jajoo as their solicitor; and that she had explained to them the legal effect of the mortgage of their house, the credit contract relating to the mortgage and other documents; and that after receiving that advice from Ms Jajoo they were freely and voluntarily signing the documents. The appellants agreed to that declaration. In the explanation of this declaration Ms Jajoo said to the appellants the following:

“You understand that I am not giving you any advice regarding the financial effects of the loan such as your affordability of the loan and that the bank and I strongly recommend you to go and see an accountant or a financial advisor for that. This recommendation by the bank is on page 11 of your credit contract.”

25 In the presence of Ms Jajoo, the appellants then completed statutory declarations in identical terms which stated that they had received independent legal advice regarding the loan and security documents.

26 Ms Jajoo’s diary note of a meeting indicated that it lasted one and a half hours.

27 From the above outline of events involving Ms Jajoo and DDS on the one hand and appellants on the other, up to this point, it can be accepted that the retainer of DDS as performed by Ms Jajoo was, and was only, to effect the refinancing of the Westpac loan with Macquarie Bank, effecting any necessary discharges of mortgage and explaining the loan contract and documentation, the mortgage and security documentation and all documentation attendant thereto. Plainly at this point the retainer did not involve any advice, legal or otherwise, in relation to the decision to borrow, the prudence of otherwise of borrowing this much money, bearing in mind their personal circumstances, or as to the purpose or aim of the investment. At this point, no mention had been made of Karl Suleman or any of his companies. Further, Ms Jajoo had indicated clearly to the appellants, who had accepted the position, that she was not advising in any way on the prudence or wisdom of borrowing of this size given the personal circumstances of the appellants and that they should obtain financial advice about that.

28 On 16 March 2001, Ms Jajoo had a telephone conversation with the first appellant. The circumstances of the telephone call were that settlement had been arranged for the following Monday (20 March 2001). The conversation was conducted in the Assyrian language. Ms Jajoo told the first appellant this and gave him the relevant settlement figures including DDS’ fees and disbursements of $822. At this point Ms Jajoo asked for the detail of the direction of the funds. In answer to this question the first appellant told Ms Jajoo that $150,000 was to be drawn in the name of KSE and the balance was for himself and his wife. Upon being told this Ms Jajoo stated the following:

“Have you obtained independent legal and financial advice on whatever contract it is that you’re planning to enter with Karl Suleman? Because we don’t advise on matters involving Karl Suleman. We don’t know the status of Karl Suleman’s current business structure and are not in a position to approve or disapprove [the words used in Assyria were ‘le masyan makhshekhan’ meaning ‘I can not recommend/advise in favour of or not/approve or disapprove’] of any of his business deals [with the word used in Assyrian was ‘Mumla’ meaning ‘commercial dealing”]. Suzy David from our office has referred Karl Suleman to another firm of lawyers, who are trying to work out how restructure the whole thing. Apparently the way that the structure is currently it doesn’t look to be right and it could have problems with certain laws and regulation. So it may be that the present set up must be changed so it does comply with the law. At the moment we don’t know the extent nor as a matter of fact any of the details of Karl Suleman, you should wait for a while to see what will happen.”

29 To this expression of view, which implicitly contained advice that the appellants obtain independent legal and financial advice on whatever contract they were planning to enter, the first appellant said the following:

“Look, I know many people who are in business with Karl. Some of my cousins have invested with him more than once and they’re all making a lot of money. We’re in business and we don’t care about taking risks. Anyway, my first cousin is one of the best financial advisors in Australia, so we just want you to finalise the mortgage documents for us for the loan. Also, I need to collect the breakdown of the expenses before settlement.”

30 To this Ms Jajoo said the following:

“That’s fine. I’ll have a letter ready for your collection at the reception together with a copy of the fax from Westpac stating that the E-G Plumbing’s overdraft must be paid out on settlement, so you need to put some money in that account if you have direct debits attached to it, or you must cancel all the direct debitings with your suppliers.”

31 The mortgage transaction was completed on 20 March and cheques were made available as requested.

32 The primary judge found, after examining and weighing the evidence all the witnesses, that Ms Jajoo was not told of the proposed investment with Suleman Enterprises until 16 March, that she was not retained to give, nor did she give, any advice about any of Mr Suleman’s schemes, that she carefully explained the loan and securities documents to the appellants and that she told the first appellant on the telephone in clear terms that he should take independent legal and financial advice before investing with Mr Suleman or his companies. None of these findings was challenged with the exception of the last. It was challenged in only one sense in that it was said that a more robust and clearer statement of advice should have been given. It was also said that Ms Jajoo should have refused to complete the retainer that had been undertaken to effect the loan refinancing, any mortgage discharge and advice thereon.

33 Before examining the asserted inadequacies of these conversations to protect the position of the appellants, in particular the inadequacies asserted once it became apparent to Ms Jajoo that the appellants were to invest with a company controlled by Karl Suleman, it is necessary to identify what relationship Karl Suleman or any of his companies had with DDS and what Ms Jajoo’s knowledge about those matters was.

34 Before doing that, however, it should be noted that Ms Jajoo was not aware of what aspect of Mr Suleman’s business interests the appellants were intending to invest in. This is important because it was not proven that, nor was it asserted in the appeal that, all Mr Suleman’s enterprises had the particular difficulty, upon which some attention had been focused by his advisors, of being subject to the managed investment scheme provisions of the Corporations Law.

35 The primary judge made certain findings as to the relationship that had existed between a Mr Suleman and his entities, on the one hand, and the first and second respondents, on the other.

36 This relationship can first be understood through the eyes of Ms Jajoo. Her knowledge of relevant matters is not the only source of relevance of any such relationship. She was an employed solicitor of DDS. To the extent that she had knowledge of an existing relationship between Mr Suleman and the first and second respondents, that was or would be relevant to what she personally should have said. If, however, the first and second respondents had relations with Mr Suleman of which Ms Jajoo was unaware that would not mean that the firm would not have been under some obligation either to speak or to take relevant steps if those were required by law based on such information.

37 Ms Jajoo said that she was aware the first and second respondents were involved with Mr Suleman towards the end of 2000 in a transaction involving the purchase and resale of some scooter wheels which returned them a profit. She was also aware that Mr Suleman used the name “Froggy” in connection with his business interests and that in early 2001, a company was incorporated as Froggy Music Pty Limited, the registered address of which was the office of DDS at Fairfield. Ms Jajoo said that she understood that the first and second respondents were to take a financial interest in the company which was intended to operate music stores.

38 Ms Jajoo also said that she first met Mr Suleman in September 2000. Sometime later, she became aware that he was conducting a trolley collection business. She was aware also that from about December 2000 he attended the offices of DDS from time to time as a client. She did not do any professional work for him. She did, however, act for a number of clients in the refinancing of their properties in order to invest all or part of the proceeds of such refinancings with Suleman businesses. She said that she knew that questions as to the legality of the investment scheme had been referred by DDS to Messrs Mallesons Stephen Jacques (“Mallesons”). The second respondent was primarily involved in this legal work and had told Ms Jajoo in about December 2000 that Mr Suleman’s business “set-up” was being restructured. The second respondent also told Ms Jajoo that she knew at the time from conversations with members of Ayssrian community, of which Mr Suleman, the first and second respondents and Ms Jajoo were part, that people appeared to be making a lot of money by investing in Mr Suleman’s business schemes, but she did not know any details about this.

39 The evidence also revealed that the first and second respondents, or at least the second respondent, understood that Ms Jajoo was, in or about February, involved with refinancing advice to clients who were investing with Suleman businesses.

40 The primary judge found that by March 2001, Ms Jajoo knew that there was a question as to whether the investment scheme being conducted by Mr Suleman through KSE was contrary to law, even if she was not aware of any details. The primary judge also found that by February 2001 Ms Jajoo knew that Mr Suleman had become a substantial client of DDS. Neither of these findings was challenged by the respondents.

41 The evidence of the first and second respondents dealt with their relationship with Mr Suleman. It was apparent that towards the end of 2000 the first and second respondents (who were brother and sister) participated, through Mr Suleman, in what was said to be the purchase of some scooter wheels which were subsequently sold at a profit. This transaction returned a profit to the first and second respondents of some $70,000 on an investment of $170,000, over a very short period.

42 Also, the first respondent said that in February 2001 he and the second respondent discussed with Mr Suleman a proposal to involve them in a music shop retail business. Discussion about this proposal continued for some time while the company, Froggy Music Pty Ltd, was incorporated.

43 The primary judge found that throughout the period leading up to March 2001 DDS was acting professionally for Mr Suleman and his companies and the first and second respondents were engaged in discussions with him regarding a commercial transaction in which they had a personal interest. The primary judge also concluded that he had no doubt that the first and second respondents regarded Mr Suleman as a very important connection and client of the firm.

44 The primary judge also dealt with the evidence as to what was known by the first and second respondents as to the status of the investment contracts employed by Mr Suleman by reference to the then Corporations Law. The primary judge found that the first respondent must have suspected that the investment contracts employed by Mr Suleman constituted, or may have constituted, an unauthorised managed investment scheme contrary to the Corporations Law. There was no challenge by the respondents to this finding.

45 The primary judge also accepted the first respondent’s evidence that he had no knowledge about the way returns were made or calculated by Mr Suleman’s businesses.

46 The evidence of the second respondent, through her affidavit, set out in some detail the consultation which DDS and Mr Suleman had with Mallesons about the question of the managed investment scheme. It is unnecessary to recount the detail of this. It is sufficient to understand that the second respondent and DDS were, on behalf of Mr Suleman and his entities, involved in obtaining advice from Mallesons from late 2000 as to the possible application of the provisions of the Corporations Law to the raising of money by Mr Suleman through investment contracts.

47 On 30 January 2001, the second respondent, in company with Mr Suleman, attended a conference with Mr Fleming of Mallesons in which Mr Fleming said the following:

“These activities attract the managed investment provisions. The existing structure is not good. A new company ought to be set up and the existing investment contracts assigned to the new company.

We will need to get you a dealer’s licence, which may take 10 weeks to complete. We will then assign all the existing contract into the new structure. In the meantime Karl, it is better if you do not issue investment contracts.”

48 Following this meeting, Mr Suleman assured the second respondent that he had given an instruction to the effect that no more investment contracts would be issued.

49 On 1 March 2001, the second respondent had a telephone conversation with two other persons from Mallesons. In this advice, the second respondent was told that the contracts should not have been structured the way that they had been; as they were structured, they may be a managed investment scheme, although in one sense they were not if recognised as a debenture or straight out loan. However, difficulties were expressed in relation to the lack of approval from ASIC. Mallesons were said to have severe concerns as to how ASIC would react to an application for a managed investment scheme. Mallesons agreed to redraft the contracts as loan agreements. It was stated that there were other issues as to dealer and investment advisor licences.

50 The second respondent also agreed in cross-examination that she had received advice in February 2000 from a barrister, Ms Robinson, that Ms Robinson had concluded that it was open to ASIC to deem the investment scheme conducted by Mr Suleman a managed investment scheme and that the consequences of such a situation were “potentially commercially disastrous for Suleman Enterprises”.

51 The second respondent also said in cross-examination that she had discussed these matters with Ms Jajoo in February 2001 and that Ms Jajoo had wanted to know how “the Mallesons thing was going”. She told Ms Jajoo that Mallesons had asked for quite a lot of information to put the restructure in order and that there seemed to be deficiencies that needed to be fixed, but Mallesons were waiting on information from Mr Suleman so after which they (Mallesons) would proceed with a restructure in order to deal with the managed investment provisions.

52 The second respondent said that by 16 March 2001 she was only aware of one more client who was seeking to refinance their properties with the whole or part of the proceeds being invested in KSE.

53 There was also some evidence given by the second respondent in cross-examination to the effect that she relied upon the assurance by

Mr Suleman that he was not issuing anymore contracts, although she was aware that there was one refinancing in February 2000 in which there was an investment in KSE.

54 The evidence of the second respondent was to the effect that she took no steps to ensure Ms Jajoo declined to act completely in relation to any transaction that involved the provision of funds for later investment in any of Mr Suleman’s businesses.

55 The primary judge found that the second respondent’s evidence should be accepted. He also found that by the end of February 2001, the second respondent undoubtedly knew that there were grave questions as to whether KSE was accepting investments for the purposes of its trolley collection business in a manner which contravened the Corporations Law. The primary judge said that he was satisfied that the substance of the advice received by the second respondent from Mallesons was probably conveyed to Ms Jajoo and that it is probable that the second respondent knew or suspected that despite his undertaking to her,

Mr Suleman was continuing to encourage investment in KSE for the purposes of its trolley collection business. There was no challenge by the respondents to these findings.

56 It was against this factual background that the primary judge resolved the controversy.

57 The primary judge first considered the retainer of DDS and Ms Jajoo. He concluded at [133] that the retainer “did not go beyond acting for the [appellants] in the refinancing of their mortgage and, in particular, did not extend to advising the [appellants] as to the commercial, financial or legal implications of their proposed investment with Mr Suleman’s company.” This conclusion was not challenged on appeal. It was plainly correct.

58 The primary judge said that it followed from that finding that the retainer of DDS was limited to the refinancing documents, that the action for breach of contract against the first to fourth defendants could not succeed. He said that although it had been established that there was a contract or retainer, it had not been established that there was any breach of its terms by the first to fourth respondents.

59 His Honour was undoubtedly correct to conclude that the retainer pleaded was not found. The retainer that had been pleaded was to advise the appellants in relation to the proposed investment by them in the scheme as discussed above. In one sense, this was the end of the case against the first to fourth respondents. However, the primary judge proceeded to deal with the case on the basis as to whether the retainer that he had found had been breached. The appeal proceeded on the basis that this was a legitimate approach.

60 In the pleading, there had been an assertion that there was a breach of retainer, a breach of fiduciary duty and/or duty of care by the first to fourth respondents in failing to advise the appellants of certain matters of which they were aware or ought to have been aware. A number of these matters presupposed the knowledge by the first to fourth respondents of the business of Mr Suleman which was not proved. It is convenient at this point to set out paras 2, 9 and 10 of the pleading as against the first to fourth respondents:

“2. In February 2001, the plaintiffs retained the first to fourth defendants to advise and act for them in their professional capacity as their solicitor in respect of a proposed investment by them in a scheme [hereafter referred to as ‘the scheme’) conducted by Karl Suleman Enterprises Pty Limited, its associated entities and agents [hereafter referred to as ‘KSE’], and a loan to be secured by a mortgage by the plaintiffs to fund that investment.

....

9. In breach of their retainer, fiduciary duty and/or duty of care the first to fourth defendants failed to advise the plaintiffs of the following matters, of which they were aware or ought reasonably to have been aware:

(a) they were in a position of conflict of interest, in that they stood to benefit financially from the promotion of the scheme and the plaintiffs’ entry into the scheme from KS and possessed the following relevant information in their capacity as solicitors retained from time to time by KSE, its officers and/or associates;

(b) they were in truth acting in their own interests and those of KSE in advising and acting upon their retainer by the plaintiffs;

(c) the investment or loan agreement was a sham, in that:

(i) the money to be lent or invested was not intended by KSE and could not be used by KSE to produce the interest and principal repayments agreed upon;

(ii) the business, in which it was represented to the plaintiffs the money would be used, either did not exist or could not possibly fund the repayments agreed upon;

(iii) the money was in fact to be used by KSE to pay other ‘investors’ or ‘lenders’ interest and principal on similar agreements and to pay commissions to interested parties;

(d) the scheme was not a legitimate business venture, but was illegal, constituting either or both an unlicensed managed investment scheme in breach of s 601ED of the Corporations Law and/or a pyramid scheme in breach of s 61 of the Trade Practices Act 1974;

(e) the capacity of KSE to make payments to the plaintiffs under the scheme depended upon the entry by other persons into the scheme and could not be sustained in the long term;

(f) the scheme was highly speculative and likely to result in loss of some or all of the first plaintiffs’ money.

10. In the circumstances each of the first to four defendants’ conduct was negligent in and about the performance of the plaintiffs’ instructions and the rendering of advice to them concerning the scheme.

Particulars of Negligence

(a) Failure to advise the plaintiffs of the matters stated above.

(b) Failure to make enquiries or seek and provide to the first plaintiff particulars of the scheme, the creditworthiness of KSE and its source of funds.

(c) Failure to scrutinise the loan agreement proffered by KSE to discern the fact or likelihood of the matters state above.

(d) Failure to decline to act on behalf of the plaintiffs.”

61 It was in the context of these pleadings that the primary judge made some further findings that were relevant to his conclusions. His Honour found at [137] of his reasons that as at February 2001 the first to fourth respondents were “in a position of conflict of interest in relation to any transaction involving Mr Suleman or his companies”. By the expression “conflict of interest” it is unclear whether the primary judge was referring to a conflict of duty and duty (being duties to the appellants and Mr Suleman and his companies) or a conflict of personal interest of the solicitors with duty to the appellants. The appeal proceeded on the basis that both notions were encompassed.

62 The primary judge then found that not only was Mr Suleman a client of the firm and potentially at least, a large one, but also both the first and second respondents were, or thought they were, involved in commercial transactions with him, one of which transactions had led to a significant profit in 2000. Also, the primary judge found that the first and second respondent and Ms Jajoo knew that Mr Suleman’s investment schemes were probably being conduct contrary to the Corporations Law.

63 The primary judge then concluded that nobody in DDS could properly act for a client in relation to any transaction with Mr Suleman or his companies. He said that it was apparent that otherwise an immediate “conflict of interest” would arise. No argument was placed before the Court to the contrary these propositions. It is unnecessary to explore their accuracy in circumstances if disclosure were to be made as to any relationship with Mr Suleman or his companies and how such disclosure would operate in respect of any potential conflict of interest with duty, as opposed to any conflict of duty with duty.

64 The judge then dealt (at [138]) with what he saw as the more difficult question, that is: “What should have been done by Ms Jajoo in the situation in which she found herself?”. The primary judge then examined this question by reference to the particulars set out in [9] and [10] recited above.

65 Many of these particulars required Ms Jajoo, as the primary judge pointed out, to breach the firm’s duty to existing clients, Mr Suleman and his companies. Particulars (a), (b), (c) under paragraph 10 required the disclosure the affairs of Mr Suleman or KSE. It may be that particular (c) on its own did not require such, but any useful consequence of it in terms of (a) would have required such breach of duty.

66 It was the primary judge’s dealing with the fourth particular under paragraph 10 that lay at the centre of the appeal. Under this particular, it was asserted that Ms Jajoo should have declined to act further on behalf of the appellants after she became aware of the destination of the funds to Mr Suleman’s interests. The essence of the primary judge’s approach was contained in [138] of his Honour’s reasons as follows:

“... I was initially attracted to the proposition that a solicitor in Ms Jajoo’s position should have declined to act at all upon finding out that the client proposed to invest in a scheme possibly conducted contrary to the Corporations Law. Upon reflection, I have decided that such a proposition should be rejected. In my opinion, the solicitor, by acting only in the refinancing of the plaintiff’s mortgage, was not lending herself to any legal act, which may have constituted a reason for her not having anything to do with the transaction once she found out the purpose or one of the purposes of the refinance. Nor was there any conflict of interest.”

67 The primary judge elaborated upon these propositions. He referred to Karl Suleman Enterprizes Pty Ltd (In Liq) v Babanour [2004] NSWCA 214; 49 ACSR 612 and the conclusion of the Court of Appeal in that case (Beazley JA with whom Spigelman CJ and Santow JA agreed) that the investment in Mr Suleman’s business was not illegal. At [51] in Babanour, Beazley JA said the following:

“The registration requirement for the operation of a Managed Investment scheme is for the protection of investors. The legislation does not expressly make an unregistered scheme unlawful. Rather it impugns the conduct of the entity responsible for registration by imposing a penal sanction for a contravention of the registration provisions. The members of an unregistered scheme are protected by the provisions whereby the scheme may be compulsorily wound up. There is nothing, therefore, in the scheme of the legislation whereby an implication of an illegality would arise, nor is there anything that points to a legislative intention that contracts entered into as part of an unregistered scheme are illegal.”

68 Thus, it was not illegal for the appellants to enter the investment contracts and no occasion arose for Ms Jajoo to contemplate whether or not she would, by completing the refinancing transaction and putting the appellants in the position to invest, be lending herself to an illegal activity. These conclusions of the primary judge were correct.

69 His Honour then turned to the question of the effect of the knowledge of the direction of the funds had upon the obligations of the solicitor, confined as they were to that point by the limited terms of the retainer. His Honour referred to the decision of the Court of Appeal in Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398. His Honour accepted that upon learning of the direction of the funds produced by the refinancing some obligation may have arisen upon Ms Jajoo to speak beyond anything she would otherwise have been required to say consistent with the discharge of her obligations in the limited retainer to effect, and advise upon, the refinancing. This conclusion was not challenged on appeal by the respondents.

70 As to any such duty to speak, the primary judge concluded that Ms Jajoo had amply discharged it, in that she advised the appellants in clear terms (on 6 March) to both appellants that they should obtain financial advice about any investment and (on 16 March to the first appellant) that he and the second appellant should obtain independent legal and financial advice before investing in Mr Suleman’s enterprises.

71 His Honour then turned to the question of asserted breach of fiduciary duty.

72 His Honour, correctly, said that the first question was to define the scope of the retainer. His Honour referred to what had been said in Beach Petroleum NL v Kennedy & Ors [1999] NSWCA 408; (1999) 48 NSWLR 1 at [188] by the Court (Spigelman CJ, Sheller JA and Stein JA) as follows:

“Even in the case of a solicitor client relationship, long accepted as a status based fiduciary relationship, the duty is not derived from the status. As in all such cases, the duty is derived from what the solicitor undertakes, or is deemed to have undertaken, to do in the particular circumstances. Not every aspect of a solicitor client relationship is fiduciary. Conduct which may fall within the fiduciary component of the relationship of solicitor and client in one case, may not fall within the fiduciary component in another.”

73 At this point, the primary judge made clear his views as to the limit of the original retainer. It was not to provide any advice or services in respect of the proposed investment with Mr Suleman’s companies; rather, it was to effect, and advise upon, the refinancing. Thus, the primary judge concluded that DDS had “no conflict of interest”. He said at [150]:

“... They, accordingly, could not be said to be acting in their own interests if it be the case that the proposed investment was a sham because they had no conflicting interest and they had no obligation to give advice. Indeed, as I have said, to do so would be a clear breach of their obligations to Mr Suleman, as would the advice that his scheme was being conducted in breach of the Corporations Law. Nor were they entitled, let alone obliged by fiduciary obligation, to proffer advice as to the wisdom of the proposed investment or as to the viability of the scheme upon which incidentally, so far as the evidence relates they had no knowledge.”

74 These conclusions are attacked by the appellants. Two fundamental propositions were put on appeal. The first was that even if Ms Jajoo was entitled to continue to act on the refinancing she should have expressed herself far more robustly and more clearly in relation to the need for independent legal advice. Thus, it was said that when she was speaking to the first appellant on the telephone on 16 March and he indicated, after she had effectively raised the need for obtaining legal and financial advice, that he proposed to go ahead, she should have reiterated her statement and been robust in her expression of her advice about the appellants seeking independent advice. The second way of putting the matter was that Ms Jajoo (a) should have immediately ceased to act and informed the first appellant that the firm could not act; and (b) should have advised the first appellant in the strongest possible terms to seek independent legal advice and that she could not disclose the reason for this position because of legal professional privilege.

75 In support of these propositions it was said that because of the involvement of the first and second respondents with Mr Suleman and in the light of the knowledge that the first and second respondents and Ms Jajoo had about the issues upon which they were advising Mr Suleman DDS could not act in any transaction whatsoever that had any connection with his affairs. Also, it was said that even if, theoretically, Ms Jajoo was entitled to continue with performance of the retainer in respect of the refinancing, it was apparent to her that the first appellant was so determined to go ahead that she should, in the appellants’ interests have taken the step of ceasing to act in order to ensure, as far as could be ensured, that another solicitor advised the appellants in circumstances where that solicitor was likely to come to know of the connection of DDS with Mr Suleman as the reason for the referral of the partly completed work on the refinancing.

76 Some reliance was placed on Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 in argument. In Kowalczuk v Accom Finance Pty Limited [2008] NSWCA 343 at [267]- [294] Campbell JA undertook a detailed analysis of the precedential status of Waimond in particular after Heydon v NRMA Ltd [2000] NSWCA 374; 51 NSWLR 1 and Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1. It is unnecessary to repeat that analysis. It is sufficient to say that the notion that a solicitor may owe a client a “penumbral” duty that extends beyond scope of the retainer is doubtful. If, however, the solicitor during the execution of his or her retainer learns of facts which put him or her on notice that the client’s interests are endangered or at risk unless further steps beyond the limits of the retainer are carried out, depending on the circumstances, the solicitor may be obliged to speak in order to bring to the attention of the client the aspect of concern and to advise of the need for further advice either from the solicitor or from a third party.

77 That is the approach that appears to have been taken by the primary judge at [143] and [144] of his reasons. No challenge was made to it by the respondents.

78 Here, the retainer undertaken by Ms Jajoo and DDS, which was almost complete in its execution, was not apparently contradictory to any personal interest held by members of the firm or employees in relation to Mr Suleman’s business, nor was it contradictory to any duty to Mr Suleman. The advice and actions required of the firm were in relation to a financing transaction. When the retainer was undertaken and through the majority of the time of its execution, there was no knowledge whatsoever of any relationship of the proposed use of the funds in connection with Mr Suleman. When this matter was adverted to by the first appellant, it did not create any inability to continue the retainer. There was no possible conflict between the duty to the appellants and any interests of the respondents. There was no conflict with any duty owed to Mr Suleman in completing the retainer. The funds were being made available by the refinancing. However, the completion of the retainer did not mean that the investment with Mr Suleman must necessarily take place. The cheques were to be made available to be picked up after the refinancing. There was an opportunity for the advice that Ms Jajoo urged in clear terms upon the appellants (on 6 March) and upon the first appellant and thus effectively the second appellant (on 16 March) to be taken. Ms Jajoo made it clear that she could not advise the appellants about Mr Suleman’s business, in respect of which a conflict of duties would arise and perhaps also a conflict between the duty to the appellants and the interests of DDS with such an important client. The first appellant was, however, content with the retainer being completed on that basis: cf Clark Boyce v Mouat [1994] 1 AC 428 at 435.

79 Therefore, I agree with the learned primary judge that there was no obligation to cease to act. That dealt with the pleaded case.

80 The first to fourth respondents complained that aspects of how the appeal was argued went beyond the conduct of the trial. It was submitted that there was no case put below that though Ms Jajoo gave, or might have given, advice to seek independent legal and financial advice, she did not do so in sufficiently clear terms. Also, it was said that there was no case run below that the appellants were apparently so in need of protection that clear advice to see another solicitor or financial advisor was not sufficient, but rather DDS should cease to act, not because it was otherwise necessary to do so, strictly speaking, but because it would maximise the likelihood of the appellants seeing another solicitor to obtain the advice they needed.

81 I think there is force in these complaints of the respondents. The landscape of the controversy fought out before the primary judge was one based on entirely different and competing versions of conversations. The case of the appellants was that they had been advised in clear terms by both the first respondent and Ms Jajoo that this was a good investment and the appellants were wise to be taking the course they were. All of this was rejected by the primary judge who found a clear statement of advice by Ms Jajoo that before the appellants committed themselves to investing they should obtain independent advice. This was ignored. In these circumstances the trial below did not investigate the possibly variegated qualities of robustness of the advice. The appellants complained that they got no proper advice, but rather improperly enthusiastic and supportive encouragement. Similarly, the notion that DDS should cease to act, not because it was legally obliged to do so but because it would maximise the prospect of a second solicitor advising the appellants in circumstances where they appeared intent on going ahead was not investigated below. For these reasons, these ways of putting the matter should not be allowed to be raised on appeal: Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1; and see generally Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424 at 438-440 [34]- [39].

82 If I am wrong in this conclusion, on the facts as found by the primary judge, and which are not in context, I do not think that either way of putting the matter avails the appellants.

83 First, as to the clarity of the advice, the primary judge’s findings have been earlier set out, as has the evidence of Ms Jajoo which was accepted. His Honour’s conclusions as to the clarity of the advice are not merely to be taken from the text of her affidavit evidence. The advice is not merely to be taken from her affidavit, but also from all the evidence. She said that she told the appellants to get independent legal advice after learning of the proposed disposition of the funds. His Honour’s conclusion can be seen as based on his assessment of all the evidence. In all the circumstances, her advice was appropriate, reasonable and clear. Indeed, perhaps, Ms Jajoo went too far in disclosing the affairs of Mr Suleman. However, she made it plain that the appellants should obtain independent legal and financial advice before committing themselves to an investment. The financing, when completed, did not commit them to that investment. It may have committed them to certain fees and charges, but those had been incurred before DDS, through Ms Jajoo, became aware of the disposition of the funds with Mr Suleman.

84 It is unnecessary to set out in detail the aspects of the evidence recounted by the primary judge which reflected the enthusiasm of the appellants to invest in a high return money-making scheme put forward by Mr Suleman and his companies. Given the knowledge Ms Jajoo had as to the potential difficulties of Mr Suleman’s schemes in relation to the managed investment scheme provisions of the Corporations Law, the primary judge approached the matter on the basis that there was or may have been an obligation to advise the appellants to obtain independent advice before committing themselves to the investment. This she did, and so she discharged any such duty. On the primary judge’s findings, the appellants invested in the scheme without seeking any further advice notwithstanding Ms Jajoo’s clear advice to obtain such advice because of their enthusiasm for the benefits anticipated from the investment. Those conclusions were based on an assessment of the witnesses.

85 Thus, even if these different ways of putting the matter were legitimately within the scope of the appeal, I would reject them.

86 Before the primary judge there were claims against the first to fourth respondents under the Trade Practices Act 1974 (Cth), s 52, the Fair Trading Act 1987 (NSW), s 42 and the Corporations Law, ss 995 and 999. These were abandoned on appeal.

The appeal against the fifth respondent

87 It is now necessary to turn to the case against the fifth respondent, Mr Isho. There was no suggestion that Mr Isho was retained by the appellants. Mr Isho did not give evidence before the primary judge, but a transcript of his examination by counsel for the liquidator of KSE was tendered.

88 Mr Isho acted for Mr Suleman, not the appellants. He had the contracts typed up in his office, provided them to the appellants and arranged for their signature. He gave them no advice. During the months leading up to March 2001, Mr Isho had come to have some suspicions as to the compliance by Mr Suleman and his companies with the Corporations Law and with requirements of ASIC. However, Mr Isho had been assured by Mr Suleman that ASIC had given him approval. Some two weeks after the entry by the appellants into the relevant contract, Mr Isho became aware that the assurances that Mr Suleman had given him as to ASIC approval were false. At that point he ceased to act for Mr Suleman.

89 The pleaded case had two aspects to it. The first was that, in the circumstances, he owed a duty of care to persons who might enter into the form of agreement with KSE that he was aware of. Secondly, it was asserted that by his conduct he engaged in misleading and deceptive conduct contrary to the Trade Practices Act and the Fair Trading Act.

90 It is important to examine the terms of the pleading against Mr Isho which can be found in paragraphs 11, 12, 13 and 14 of the Statement of Claim.

“11. The fifth defendant acted as the solicitor for KSE in the year 2001, during the course of which:

(a) he drafted by himself on behalf of KSE the investment agreement, including the form proffered to the first plaintiff [hereafter referred to as ‘the form of agreement’]; and

(b) he allowed his office to be used by KSE to promote the scheme and have investment agreements executed.

12. In executing instructions on the behalf of KSE, the fifth defendant owed a duty of care to persons, who might enter into the form of agreement with KSE, including the plaintiffs.

13. By his conduct the fifth defendant represented and/or participated in the representation by KSE to members of the public, including the plaintiffs, that:

(a) the funds procured were being invested in a legitimate business(es);

(b) the business(es) of KSE were generating or reasonably expected to generate funds sufficient to meet the obligations under each agreement;

(c) entry into the agreements by KSE was lawful;

(d) the scheme conducted by KSE under the agreements was lawful.

14. In drafting the form of agreement, advising KSE thereon and/or permitting his offices to be used by KSE, the fifth defendant was negligent, grossly negligent, reckless of persons entering the scheme by means of the form of agreement, including the plaintiffs.

91 It was submitted that the circumstances for the creation of a duty of care to third parties were present here. Reliance was placed on Hill v Van Erp (1997) 188 CLR 159, Al-Kandari v J R Brown & Co [1988] EWCA Civ 13; [1988] 1 All ER 833 and Perre v Apand [1999] HCA 36; 198 CLR 180.

92 I reject this proposition. In the circumstances here, there was plainly no duty owed to persons not clients of the solicitor to undertake steps that would have been contrary to the interests of the solicitor’s client. It is unnecessary to discuss the circumstances in which a solicitor may come under a duty of care in the effecting of his or her retainer to his or her client to take into account the interests of third parties. However, save for circumstances of assumption of duty (and leaving to one side knowledge of fraud), it would be an extraordinary development of the law to impose upon the solicitor a duty to take some step or give some advice to a third party that was inconsistent with the interests of his primary client. That is what it was asserted here. It was asserted that Mr Isho was legally obliged not distribute the contract. This would have been entirely contrary to his client’s instructions.

93 The duty of care case fails.

94 The asserted misleading and deceptive conduct was that Mr Isho represented and/or participated in a representation by KSE to the effect set out in paragraph 13 of the pleading.

95 The primary judge dismissed this claim based on the Fair Trading Act in short order. At [167]-[168] his Honour said:

“[167] None of the special considerations adverted to apply here. There is no suggestion that Mr Isho did other than carry out his instructions to the letter and without negligence. There was neither a particular proximity between Mr Isho and the Plaintiffs, nor any reason for Mr Isho to think that the Plaintiffs placed any reliance upon him.

[168] Nor, in my opinion, could the conduct of Mr Isho, in the circumstances of this case, constitute deceptive, misleading, unlawful or dishonest conduct for the purposes of the statutes I have referred to. He like the First to Fourth Defendants was bound by his duty to his client, Mr Suleman, not to disclose his confidences.”

96 Like his Honour, I am of the view that these claims must fail. First, as to particulars (a) and (b) there was no such representation by the conduct of Mr Isho. His Honour found that Mr Isho did not draft the contracts; rather, he acted in a secretarial or executive capacity to have them signed. Although there was some evidence as to the use of an office at his premises by KSE agents, there was no evidence that this played any role in the circumstances of the appellants’ signing of the agreements and the handing over of the moneys. In these circumstances, this use of Mr Isho’s premises by Mr Suleman’s agents was irrelevant.

97 The terms of the contract and Mr Isho’s participation in having it executed did not create a representation, in my view, about the matters referred to paragraphs (a) and (b) of paragraph 13 of the pleading.

98 The terms of the agreement may have carried an implied representation that the entry into the agreements was lawful as asserted in paragraph 13(c). However, there was no falsity in this.

99 It is doubtful whether there was any representation of the kind in paragraph 13(d). However, even if an implied representation of this kind can be gleaned from the contract, for the reasons earlier expressed and discussed in Babanour, the scheme was, in the relevant sense, lawful.

100 There is an air of unreality about these claims against Mr Isho. There was no suggestion whatsoever in the evidence that there was any reliance whatsoever upon Mr Isho for any information or representation about Mr Suleman’s affairs. In circumstances where there was no reliance and no apparent intended reliance, as was clear, it is difficult to see how any conclusion as to misleading of deceptive conduct could be made. This is not merely a question of causation involved in the word “by” in the Trade Practices Act, s 82 or the Fair Trading Act, s 72. Rather, it is also a question of whether there could be said to be anything relevantly misleading or deceptive in circumstances where no party would appear to have intended any aspect of Mr Isho’s conduct to be a matter to be relied upon by the appellants.

101 I am not prepared to conclude that there was any misleading or deceptive conduct or conduct likely to mislead or deceive. This makes it unnecessary to discuss the question as to whether the asserted representations were made in trade or commerce, the question of the relationship between trade and commerce and the undertaking of a profession and the circumstances in which inadvertent conduct might be misleading or deceptive conduct: see Kowalczuk v Accom Finance at [328]-[367].

102 It is also unnecessary to discuss the question as to whether there was any engagement of the Trade Practices Act. Given the substantially similar provisions of the Fair Trading Act, any lack of proper engagement of the Trade Practices Act probably would not matter.

103 For the above reasons, the appeal should be dismissed with costs.

104 HODGSON JA: I agree with Allsop P.

105 HANDLEY AJA: I agree with Allsop P.

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LAST UPDATED:
13 February 2009