New South Wales Court of Appeal CITATION : Rexstraw v Johnson [2003] NSWCA 287 revised - 26/02/2004 HEARING DATE(S) : 11-13 August 2003 JUDGMENT DATE : 9 October 2003 JUDGMENT OF : Sheller JA at 1; Tobias JA at 2; Foster AJA at 148 DECISION : a) In CA 4093/02 appeal allowed, Johnsons to pay the costs of that appeal; b) In CA 40975/02 appeal dismissed with costs; c) In CA 40944/02 appeal on liability dismissed, but appeal as to contribution allowed in part. Provident and O'Sullivan to pay the investor's costs of this appeal but no order as to costs as between Provident/O'Sullivan and Rexstraw; d) Parties to be required within 14 days of the date of this judgment to bring in short minutes of order to reflect the findings in [146]. Parties at liberty to apply on 48 hours notice for further directions in the event of disagreement; e) The Registrar of the Court of Appeal to forward a copy of this judgment to the Law Society of New South Wales and the Legal Services Commissioner.; 4. Apportionment of responsibility as follows: Provident/O'Sullivan - 42.5%; Rexstraw - 33.5%; Johnsons - 24%. CATCHWORDS : NEGLIGENCE - Professional responsibility - Scope of duty - Whether duty of care of mortgage broker coextensive with solicitor's duty of care - Whether director of company responsible for tortious acts of company - Apportionment of liability - FIDUCIARY DUTY - Scope of solicitor's fiduciary duty - Whether includes a duty to exercise reasonable care and skill - Whether a duty owed to principal solicitor by agent - TRADE PRACTICES - Whether statement that the valuation was "independent" was misleading - Trade Practices Act, s52. - ND Trade Practices Act, s52 LEGISLATION CITED : Copyright Act 1968 (Cth), s37 Law Reform (Miscellaneous Provisions) Act 1946, s5 Smith v Eric S Bush Ms Harris v Wyre Forrest District Council (1990) 1 AC 831 In re O'Brien deceased, (1971) 2 SASR 9 King V Milpurrurru (1996) 66 FCR 474 Microsoft Corporation v Auschina Polaris Pty Limited (1996) 71 FCR 231 Henley Arch Pty Limited v Clarendon Homes (Aust) Pty Limited (1998) 41 IPR 443 Microsoft Corporation v Goodview Electronics Pty Limited (2000) 49 IPR 578 McCallum & Co Pty Limited v Allen Manufacturing Co Pty Limited (2001) 52 IPR 550 Mortgage Express Limited v Bowerman & Partners (1996) 2 ALL ER 836 C A & M E C McInally Nominees Pty Limited v HTW Valuers (Brisbane) Pty Limited (2001) 188 ALR 439 Maguire v Makaronis (1997) 188 CLR 449 CASES CITED : O'Halloran v R T Thomas & Family Pty Limited (1998) 45 NSWLR 262 Target Holdings Limited v Redferns (1996) 1 AC 421 Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 68 Breen v Williams (1996) 186 CLR 71 McInerney v MacDonald (1992) 93 DLR (4th) 415 Chan v Zacharia (1984) 154 CLR 178 James v Mortgage Acceptance Nominees Limited (1996) 142 ALR 561 Podrebersek v Australian Iron & Steel (1985) 59 ALJR 492 Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited (2001) 53 NSWLR 626 Amaca Pty Limited v The State of New South Wales (2003) HCA 44 Westcoast Clothing Company Pty Limited v Freehill Hollingdale & Page (1999) Aust. Torts Reports 81-518 Hawkins v Clayton (1988) 164 CLR 539 PARTIES : Bruce Richard Rexstraw Raymond Keith Johnson FILE NUMBER(S) : CA 40975/02; 40944/02; 40943/02 For Johnson - Mr M McCulloch/Mr D F Villa COUNSEL : For O'Sullivan and Provident - Mr F Douglas QC/Ms R Sofroniov For Rexstraw - Mr D R Conti For Thirkettle & Ors - Mr I E Davidson For Johnson - P W Turk & Associates SOLICITORS : For O'Sullivan - The Argyle Partnership For Rexstraw - Phillips Fox For Thirkettle - Emil Ford & Co LOWER COURT District Court JURISDICTION : LOWER COURT DC 865/00 FILE NUMBER(S) : LOWER COURT Hogan AJ JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40975/02 CA 40944/02 CA 40943/02 SHELLER JA TOBIAS JA FOSTER AJA Thursday 9 October 2003 BRUCE RICHARD REXSTRAW & ORS –v- JOHNSON & ORS CATCHWORDS NEGLIGENCE – Professional responsibility – Scope of duty – Whether duty of care of mortgage broker coextensive with solicitor's duty of care – Whether director of company responsible for tortious acts of company – Apportionment of liability. FIDUCIARY DUTY – Scope of solicitor's fiduciary duty – Whether includes a duty to exercise reasonable care and skill – Whether a duty owed to principal solicitor by agent. TRADE PRACTICES – Whether statement that the valuation was "independent" was misleading – Trade Practices Act, s52. FACTS Bruce Rexstraw, a solicitor, and Michael O'Sullivan, the managing director of the Provident Group, devised a contributory mortgage scheme. To this end, they prepared promotional material containing information about mortgage investments. Relevantly, the material stated the following: "…risks are minimised by the Mortgage Manager's conservative lending practices, careful analysis of all borrowing proposals, and the loan maximum of 66% of the property value." It also stated that there would be an "independent valuation of the real property by a qualified Property Valuer". Vorona Pty Limited, whose managing director and sole shareholder was Mr Adrian Hodgson, applied to Provident for a loan, offering as security a property in south-western Queensland. The contract of sale for the property, which identified the vendor as Queensland Mortgagee Sales Pty Limited and the purchaser as Vorona, stated the purchase price as $695,000. Provident offered to lend Vorona the lesser of either $450 000 or 66% of the valuation of the purchase price, which was to be secured by a first mortgage over the property. The letter of offer sent by Provident to Vorona referred to valuation carried out by Jacksons International in May 1996, in which Jacksons concluded that the current market value of the property was $795,000. In November 1996, Jacksons sent a letter to Provident stating that the current market value of the property was unchanged (citing it however as $695,000) and that they could rely on the report for mortgage purposes. The Jacksons report was prepared for Mr Adrian Hodgson of Hobar Pty Limited, a company of which Hodgson was a shareholder and director. This was a fact known to O'Sullivan at the time. In December 1996, O'Sullivan prepared a document entitled "Investor Summary", containing information about the Vorona loan. Relevantly, the document stated that the valuation was "$750,000 confirmed by independent valuation". One of the proposed lenders was lending in its capacity as trustee of the Biermann Superannuation Fund. Rexstraw had a copy of the trust deed, however Johnsons did not request a copy until it was required to be provided to the Queensland Department of Natural Resources (DNR) to enable registration of the mortgage. Neither of the solicitors checked the trust deed to ensure that the Biermanns as trustees had the power to enter into a contributory mortgage. Vorona's solicitors faxed to Johnsons, Rexstraw's Queensland agent, a copy of the proposed transfer document, which revealed that QMS had purchased the property in question from a Mr and Mrs Bartucz for $250,000. When Mr Johnson noticed the disparity in the consideration being paid, he contacted Rexstraw and informed him that it was his responsibility to advise the investors of the information contained in the transfer document and obtain their instructions as to whether they wished to proceed with the transaction. Rexstraw did not do as requested by Mr Johnson, but instead faxed a copy of the transfer document to O'Sullivan and a copy of the Jacksons valuation to Johnsons. The investors were not informed of the information in the transfer document, however the matter proceeded to settlement. In February 1997, the mortgage was lodged with the DNR for registration. In March of that year, the DNR issued two requisition notices in relation to the Biermann Trust Deed. Johnsons sought instructions from Rexstraw on the matter, however he failed to comply with the requisitions. As at November 1997, the requisitions had still not been complied with, and the DNR issued a rejection notice in respect of the investors' mortgage. Consequently, another mortgage (Vorona had used the property to secure a second loan from IBEX) was registered as first mortgage over the property. The investors' mortgage was eventually registered as a second mortgage in October 1998. Vorona defaulted under both mortgages. IBEX sold the property at a mortgage sale in December 1998 for $117,000. Hence, the investors lost their money. The investors brought an action in the District Court against Provident for breach of section 52 of the Trade Practices Act (alleging that the representations in the brochure and Investor summary were misleading) and for breach of obligations in tort and contract. The primary judge entered judgment for the investors against Provident for the full amount claimed. The investors brought an action against O'Sullivan for breach of s52 of the Trade Practices Act on the basis that he was knowingly concerned within the meaning of s75B in the contraventions of s52 by Provident. They also sued him on basis that he was a joint tortfeasor with Provident in its actionable negligence. The primary judge held that O'Sullivan was so liable and entered judgment against him for the full amount claimed. Finally, the investors brought actions against Rexstraw and Johnsons for breach of duty of care. The primary judge found that Rexstraw breached his duty of care and entered judgment against him for the full amount claimed. He also found that Johnsons had breached its duty of care and entered judgment against it for the full amount claimed. In the above proceedings, Provident/O'Sullivan, Rexstraw and Johnsons cross-claimed against each other for contribution, and the primary judge apportioned responsibility accordingly. O'Sullivan and Johnsons appealed against primary judge's finding of liability, whilst O'Sullivan and Rexstraw appealed on the issue of apportionment. HELD (per Tobias JA, Sheller JA and Foster AJA agreeing) (1) The statement in the Investor Pack that the valuation had been confirmed by "independent valuation" was a representation that it was one obtained independently of the borrower or any person associated with the borrower. The statement was therefore misleading and in contravention of s 52 of the Trade Practices Act. Smith v Eric S Bush; Ms Harris v Wyre Forrest District Council (1990) 1 AC 831, Ex Re O'Brien, deceased (1971) 2 SASR 9, Dist (2) Provident was more than just a mortgage broker. It held itself out to the investors as being a "mortgage manager" whose duty and obligation was to minimise risks to investors, and those duties did not cease when Provident engaged Rexstraw to act on behalf of the investors. The engagement of Rexstraw was not sufficient to satisfy the duty of care owed by Provident to investors. The duties owed by Provident and Rexstraw were in some respects coextensive. Provident/O'Sullivan failed to minimise the risks to the investors by carefully analysing the valuation in light of the information contained in the transfer document and therefore breached their respective duties of care to the investors. (3) O'Sullivan was liable to the investors for the negligent conduct of Provident as he either conducted himself so as to "make the tortious conduct his own" or "directed or procured" the tortious conduct for which Provident was found liable. King v Milpurrurru (1996) 66 FCR 474, Cons Microsoft Corporation v Auschina Polaris Pty Limited (1996) 71 FCR 231, Refd (4) Mr Johnson breached his duty of care in proceeding to settlement without satisfying himself that Rexstraw had advised the investors of the relevant information and obtained instructions to proceed with the transaction. It was not enough that he obtained a copy of the Jacksons valuation. The form of the valuation that he received should have raised questions in his mind as to whether the valuation was independent and satisfactory as regards the investors. Mortgage Express Limited v Bowerman & Partners (1996) 2 All ER 836, Foll CA & MEC McInally Nominees Pty Limited v HTW Valuers (Brisbane) Pty Limited (2001) 188 ALR 439, Appl (5) The mortgage was not registrable until Johnsons had satisfied itself that the trustee investor had the power under the terms of the trust deed to enter into a contributory mortgage. Johnsons had a duty of care to protect the interests of the non-trustee investors by verifying that the trustee investor did in fact have the power to enter into the mortgage, so that no requisitions which might not be able to be complied with would be generated. (6) If a solicitor is in breach of duty of care to his or her client, it does not necessarily follow that she or he is in breach of any fiduciary duty owed to the client. The fiduciary duties of a solicitor are more limited in scope, and do not include a duty to exercise reasonable care and skill, as such duty is essentially tortious. There was no obligation of a fiduciary nature to inform the investors of anything, and any such duty arose not from a fiduciary duty but a duty of care owed in tort. Target Holdings Limited v Redferns (1996) 1AC 421, Foll . Johnsons did not owe any relevant fiduciary duty to Rexstraw which would entitle the latter to seek equitable compensation from it with respect to the loss sustained as a consequence of being ordered to pay damages to the investors as a result of his own negligence. Breen v Williams (1996) 186 CLR 71, Appl (7) The trial judge erred in his determination of the appropriate apportionment of liability between the defendants. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40975/02 CA 40944/02 CA 40943/02 SHELLER JA TOBIAS JA FOSTER AJA Thursday 9 October 2003 BRUCE RICHARD REXSTRAW & ORS –v- JOHNSON & ORS Judgment 1 SHELLER JA: I agree. 2 TOBIAS JA: The sorry events constituting the subject of this appeal are as follows. A group of innocent and apparently unsophisticated persons (the investors) were enticed to invest their savings (totalling $450,000) in a contributory mortgage scheme, and subsequently lost those funds due to the incompetence of the promoter of the scheme and of the two solicitors who were retained ostensibly to protect the investors' interests. What happened was in many respects disturbing. Not only did the promoter callously disregard the interests of the investors, he also disregarded the conduct of the solicitors (one of them in particular) who did nothing to enhance the maintenance of proper standards of professional competence which the public is entitled to expect from members of the legal profession. The background facts 3 The facts of the matter as found by the primary judge are not in dispute. It is necessary to record them in some detail in order to explain how the investors came to lose their money and to provide the necessary context for the arguments of the appellants advanced before this Court. The scheme 4 Prior to 1995, Mr Bruce Rexstraw (Rexstraw), a solicitor practising under the firm name of Bruce R Rexstraw & Associates of Sydney, had acted for Provident Capital (Australia) Limited (now Provident Holdings Pty Limited) and other companies in the Provident Group (Provident) in a number of commercial and conveyancing transactions. The managing director of these companies at all material times was Mr Michael Roger O'Sullivan (O'Sullivan). During 1995, O'Sullivan discussed with Rexstraw a proposal whereby they would both become involved in the business of arranging mortgage investments. O'Sullivan was to prepare the necessary promotional material which would then be submitted to Rexstraw for vetting. 5 The proposal in its original form did not proceed. However, in early 1996 O'Sullivan developed a system or scheme whereby the need to issue a prospectus in respect of loan investments from the public would be obviated by involving a solicitor in the transaction. O'Sullivan revised the promotional material which he had prepared for the original proposal and in June 1996 sent a draft to Rexstraw of what he called "an investor pack", inviting him to study the documents and advise of any errors. The promotional material 6 The investor pack consisted of a number of documents. The first was a three page summary of the advantages said to be derived from investing in first mortgages (the brochure). It was headed "Investing in First Mortgages". The layout of the brochure consisted of a series of questions and answers. Relevant for present purposes are the following questions and answers: "Q. WHAT IS THE SECURITY OF A FIRST MORTGAGE INVESTMENT? A. Investing in First Mortgages has a high level of security and safety for the following reasons: 1. The Mortgage Manager will only allow lending to a maximum amount of 66% of the property value; 2. The property value is determined by an appropriately qualified, independent Registered Property Valuer; Q. WHAT ARE THE RISKS? A. There are risks attached to any form of investment. The risks are that the borrower does not repay the loan, or in the event of a forced sale, the sale proceeds are insufficient to repay the Mortgage Investment. These risks are minimised by the Mortgage Manager's conservative lending practices, careful analysis of all borrowing proposals, and the loan maximum of 66% of the property value. Q. WHAT IS THE MAXIMUM ADVANCE (LOAN) THAT WILL BE MADE ON A PROPERTY? A. The Manager will only allow lending to a maximum of 66% of the property value. Q. DOES PROVIDENT CAPITAL (AUSTRALIA) LIMITED RECEIVE MY INVESTMENT OR THE MONTHLY INTEREST REPAYMENTS? A. NO! All monies are paid via the solicitor's trust account. Your investment cheque should be in favour of Bruce Rexstraw & Associates Trust Account. 7 The second document in the investor pack consisted of a one page summary (the summary) headed "Private Mortgage Security", which listed a number of matters in a series of dot points including the following: · Registered First Mortgage Security · Independent valuation of the real property by a qualified Property Valuer. 8 The third document consisted of one page headed "How to Get Started" (the directions) and contained the following: "The Documenting Solicitors are instructed to prepare all security documents, and carry out all necessary searches and enquiries into the borrower's security to effect a First Registered Mortgage. The solicitors certify the transaction and effect the settlement. Security documents are stamped and registered." 9 There was also a document addressed to investors referred to as "The Investors Details" inviting them to complete two forms and return them to Provident. One of these was an Investment Proposal Form addressed to Rexstraw, in which investors were to provide some personal details and nominate the amount they wished to invest. 10 Provident proceeded to place advertisements in newspapers and to distribute a newsletter setting out details of mortgage proposals available to potential investors on its mailing list. Potential investors who contacted Provident were usually sent an "Information Pack" consisting of the brochure, the summary and the directions. The loan 11 O'Sullivan became aware of the possibility of arranging a loan secured on land at 300 San Fernando Drive, Mudgeeraba in south-western Queensland (the property). The proposed borrower was Vorona Pty Limited (Vorona), whose managing director and sole shareholder was Mr Adrian Hodgson (Hodgson). Provident duly received an application for loan dated 12 September 1996, signed by Hodgson on behalf of Vorona providing details of the property and of the company's assets and liabilities. 12 Thereafter Provident received a copy of the contract for sale of the property dated 20 November 1996, which identified the vendor as Queensland Mortgagee Sales Pty Limited (QMS) and the purchaser as Vorona. There was no reference in the contract to the vendor's solicitor but the purchaser's solicitor was identified as Diamonds Solicitors (Diamonds). The purchase price of the property was stated to be $695,000, of which $1,000 was payable as deposit upon the signing of the contract. 13 On 26 November 1996, Provident sent to Vorona an offer to lend either $450,000 or 66% of the valuation or the purchase price of the property, whichever was the lesser. This was to be secured by a first mortgage security over the property and a guarantee of the loan by Hodgson. This letter of offer referred to a valuation of the property which had been carried out by Jacksons International Pty Limited, Valuers (Jacksons) dated 13 May 1996 (Jackson's valuation). The letter of offer stipulated that Jacksons was required to revisit the property to update its valuation. This updated valuation was to be addressed to Provident on behalf of an intending mortgagee and to confirm that the property and the valuation were acceptable for mortgage security purposes. It further stated that the valuation was to be to the complete satisfaction of Provident. The valuation 14 Jackson's valuation was, as revealed by its title page, provided "under instructions from Mr Adrian Hodgson of HOBAR PTY LIMITED for MORTGAGE PURPOSES". Hobar Pty Limited was a company of which Hodgson was a director and shareholder, a fact known to O'Sullivan. The valuation referred to the sale of three properties in San Fernando Drive of comparable size to the property which, according to the report, had been analysed for the purposes of determining value. Jacksons concluded that the current market value of the property was $795,000. It was not disputed that Mr Russell Jackson, who prepared the valuation, was a Registered Valuer in Queensland. 15 Around the same time that he received a copy of the contract between QMS and Vorona for the sale of the property, O'Sullivan also received a copy of an "Off-set Agreement" between QMS and Vorona, also dated 20 November 1996, which provided that $300,000 then owing by QMS to Vorona was to be off-set against the purchase price payable under the contract. 16 Shortly thereafter Jacksons forwarded to Provident a letter dated 28 November 1996 which was headed "ASSIGNMENT OF VALUATION ON 300 SAN FERNANDO DRIVE, WORONGAR QLD 4213". The letter contained the follow statement: "We hereby assign and authorise your firm to rely on the above property valuation dated 16 April 1996 for mortgage purposes. We have re-inspected the property and believe that the market value remains unchanged and we note that the adjoining property to the west appears to have been partially cleared for subdivision purposes." There followed a description of the property and a statement of its the market value in the amount of $695,000. In evidence, O'Sullivan acknowledged that he was aware of the difference between the value of $795,000 stated in Jackson's valuation and the value of $695,000 set out in the letter of 28 November 1996, but stated that he did not notice the differential in the date of the original valuation. He explained however that he was not concerned about the discrepancy between the two values as 66% of the lower value was still more than the proposed loan of $450,000. Promotion of the loan 17 In early December 1996, O'Sullivan prepared a document called an "Investor Summary" and began to advertise the Vorona loan, principally in Provident's newsletter. The Investor Summary was a three page document on Provident letterhead dated 12 December 1996, and was addressed to prospective investors. It set out the following details of the transaction with Vorona: the name of the borrower, the guarantor, the loan amount, the interest rate, the proposed term of 1 year, the fact that security was to be a first registered mortgage over the property, that the loan to purchase price ratio was to be 64.47% and that the loan to valuation ratio was to be 56.96%. It stated that security documentation was to be prepared by Bruce Rexstraw & Associates. It also contained the following further information for the benefit of prospective investors: "Valuation: $795,000 confirmed by independent valuation Valuer: Jacksons International, Russell Jackson Security Documentation: All documentation to be prepared by Bruce Rexstraw & Associates (Solicitors on behalf of the lender/investor) and to contain such covenants, terms and conditions as the lender may reasonably require." Under the heading "Comments" the following appeared: "Ideal opportunity to secure high yielding investment secured by residential property on conservative loan to valuation and purchase ratios." 18 The third page of this document provided space for the investors to write in their respective names and the amount they wished to invest. This page was then to be dated and signed. The document stated that the investors accepted the terms and conditions as set out in the Investor Summary, confirmed their interest in investing by way of first mortgage for the sum nominated and provided that they: "…..accordingly instruct Bruce R Rexstraw (solicitor) to commence on my behalf but to the account of the borrower all necessary documentation as required to complete and register the mortgage." 19 A copy of the Investor Summary was sent by O'Sullivan to Rexstraw. The latter, noting that the land was in Queensland, discussed with O'Sullivan the necessity to appoint a Queensland solicitor to perform the necessary legal work (Johnsons) in that state. They ultimately agreed that a legal firm known as Johnsons would be appointed to act as Rexstraw's Queensland agent. The events leading up to settlement 20 On 12 December 1996, O'Sullivan faxed to Rexstraw a copy of Provident's letter of 26 November 1996 containing the offer to Vorona. He noted in the fax that, as prompt settlement was required, Rexstraw should instruct Johnsons to inform the borrower's (Vorona) solicitors as to their requirements. It was indicated that O'Sullivan anticipated that the loan would be fully subscribed by 23 December 1996. 21 On 13 December 1996, Vorona's solicitors (Diamonds) faxed to Johnsons copies of the contract between QMS and Vorona, together with title and other property searches which identified the owners of the property as at 6 December 1996 (being the date of the title search) as Gisela Bartucz and Zoltan Bartucz (Mr and Mrs Bartucz). The person in Johnsons in charge of the day to day conduct of the transaction was Ms. Sharon Harris (Ms Harris), who was then an articled clerk due to be admitted to practice as a solicitor in June 1997. Her supervising partner was Mr Raymond Keith Johnson (Mr Johnson). 22 On 19 December 1996, Johnsons faxed to Rexstraw seeking instructions as to whether Jacksons' valuation had been updated to the satisfaction of the mortgagee. On 7 January 1997, Rexstraw forwarded a fax to O'Sullivan seeking a copy of that valuation. O'Sullivan provided it to Rexstraw on 31 January 1997, but a copy was not forwarded to Johnsons until 13 February 1997 in circumstances to which I will return. 23 In the meantime (around 20 December 1996), Diamonds had faxed Johnsons advising that "both parties are now ready for immediate settlement" and that settlement was to be effected at the offices of Reynolds & Associates, Solicitors. Those solicitors apparently acted for Mr and Mrs Bartucz. On the same date, Diamonds faxed to Johnsons a copy of the proposed transfer of the property (the transfer document). As the primary judge correctly observed, that transfer was the central document in the case. It revealed that the transferors were Zoltan Bartucz and Gisela Bartucz and stated the following: " Consideration The sum of $250,000 paid to Zoltan Bartucz and Gisela Bartucz by Queensland Mortgagee Sales Pty Limited ACN 066 221 592 the receipt of which sum is hereby acknowledged and in further consideration of the sum of $695,000 paid to the said Queensland Mortgagee Sales Pty Limited CAN 066 221 592 by Vorona Pty Limited ACN 069 406 864 the receipt of which sum is hereby acknowledged and with the consent and direction of the said Queensland Mortgagee Sales Pty Limited ACN 066 221 592." The transfer document had been executed by Mr and Mrs Bartucz and by QMS as the "C onsenting Party ". It was dated 17 December 1996. 24 Mr Johnson gave evidence that he had no recollection of having read the transfer document when it was received in his office on 20 December 1996 as he thought that he was on holidays at the time. The significant disparity between the purchase price of the property being paid by QMS to Mr and Mrs Bartucz and that paid by Vorona to QMS went unnoticed by Ms Harris, but was later noticed by Mr Johnson in circumstances to which I shall also return. 25 Between December 1996 and February 1997, the various investors contacted O'Sullivan to confirm their investment. A document referred to as a "Specific Lending Authority" was first prepared on 3 February 1997, and later amended on 7 February 1997. It was not until this last-mentioned date that the identity of the actual investors and the amounts that each was prepared to contribute towards the loan of $450,000 was finally determined. 26 Accordingly, O'Sullivan was unable to confirm to Vorona that Providence had raised the full amount of the loan until this date. Because of the delay in finalising the matter, Diamonds informed Ms Harris on or about 29 January 1997 that Vorona had rescinded the contract, but that there was a possibility of resurrecting the deal if the funds the subject of the proposed loan were deposited to Johnsons' Trust Account no later than 30 January 1998. This information was passed on to O'Sullivan by Ms Harris on the same date. 27 The Specific Lending Authority was prepared by Rexstraw and a copy was sent to each of the investors for their signature and return. In its final form it was addressed to Bruce R Rexstraw & Associates and set out the nine groups of investors. The first of these was "Dieter Biermann and Ursula Charlotte Biermann as Trustee of Biermann Superannuation Fund". The document authorised and instructed Rexstraw: "to invest on my/our behalf the sum of $450,000 on the conditions and subject to its being secured by the mortgage described below." After setting out details of the lenders and the borrower it provided as follows: "VALUE OF SECURITY 3. The estimated value of the security at the date of the loan will be at least $695,000. The value will be evidenced by Russell Jackson of Jacksons International Pty Limited. 4. Total principal sum to be lent under the mortgage: $450,000. DETAILS OF SECURITY 5. The total principal sum shall be secured by way of a first registered mortgage over the security described in this Authority." Thereafter were set out details of the security and the contribution of each of the lenders. A copy of the Specific Lending Authority was faxed by Rexstraw to Johnsons on 7 February 1997, showing the complete list of investors together with the amounts each was contributing. 28 On 6 February 1997, Ms Harris telephoned Mr Diamond to inform him that "he may be losing the clients" (meaning Vorona). Ms Harris then telephoned O'Sullivan and told him that "Diamonds had been chasing her as they may lose the deal". On 7 February 1997, O'Sullivan telephoned Ms Harris asking her to tell Diamonds that "they should be able to settle today". This, however, did not occur. On or about 11 February 1997, Rexstraw arranged for the transfer of $209,982 (being $210,000 less bank charges) from his trust account to that of Johnsons, being funds deposited to Rexstraw's trust account by some of the investors. The balance of $240,000 was deposited by those investors (who had not forwarded their share of the loan to Rexstraw) direct into Johnsons' trust account with the consequence that the total sum of $450,000 had been deposited into Johnsons' trust account by 14 February 1997. 29 It was clear, and the primary judge so found, that O'Sullivan was pressing both Rexstraw and Johnsons for the matter to be settled. On 12 February 1997, O'Sullivan forwarded a fax to Ms Harris advising that Vorona had informed him (O'Sullivan) that they were now prepared to wait for settlement until 13 February 1997, when all funds had been cleared and requesting her to advise a time for settlement "ASAP". On the same day, O'Sullivan faxed Rexstraw requesting him to ensure that the mortgage documents had been delivered to Vorona's solicitor and that settlement was to be scheduled for the earliest opportunity. He then added the following: "I have been advised in no uncertain terms that should there be any delays tomorrow the transaction will be withdrawn and all our work will have been to no avail ." (emphasis added) 30 In cross-examination O'Sullivan agreed that the words in his fax to Rexstraw which I have emphasised referred to his fee of $7,500 which he was to receive on settlement of the loan. The following exchange took place: "Q. You were worried that you'd lose – you'd at least agree that you were very worried you'd lose your $7,500 fee? A. Yes." Provident's fee for arranging the loan was 2% of the funds lent. It had already received $2,000 from Vorona and had directed Johnsons that the balance of $7,500 was to be paid on settlement from the proceeds of the loan. Johnsons was authorised by Diamonds on 14 February 1997 to withdraw that amount from their trust account. 31 The primary judge found that by 13 February 1997 considerable pressure was being brought to bear by both Diamonds and O'Sullivan upon Johnsons and Rexstraw to have the matter settled urgently. On the morning of 13 February Ms Harris faxed to Rexstraw a letter advising that the security documents had been delivered to Diamonds and that she was awaiting settlement figures. Notwithstanding that she had been aware since 7 February that one of the proposed mortgagees (the Biermanns) were lending in their capacity as trustees of the Biermann Superannuation Fund, it was not until 13 February that she requested the original Biermann Superannuation Trust Deed from Rexstraw (which was required to be provided to the Queensland Department of Natural Resources (the DNR) to enable registration of the mortgage). I will need to return in more detail to this matter, as the failure to obtain the Trust Deed prior to settlement so as to ensure that the Biermanns as trustees had the necessary power to enter into a contributory mortgage forms one of the bases upon which the primary judge found that Johnsons had breached their duty of care to the investors. 32 At about 2.20 pm on 13 February 1997, the contents of the transfer document, in particular the entry under the heading "Consideration", had come to Mr Johnson's attention. He rang Rexstraw and informed him that he had noticed the disparity between the consideration of $250,000 being paid by QMS to Mr and Mrs Bartucz on the one hand and the $695,000 being paid by Vorona to QMS on the other. He noted that Rexstraw had a valuation of the property, whereas he did not, and informed Rexstraw that it was his (Rexstraw's) responsibility to advise the investors of the disparity between the two purchase prices and to obtain their instructions as to whether the matters recorded as consideration on the transfer form were acceptable to them. At 3.55 pm on the same day, he faxed to Rexstraw a copy of the transfer document and wrote the following upon the fax in his own hand: "PLEASE ADVISE YOUR INSTRUCTIONS" 33 For reasons that will become apparent, Rexstraw did not do as Mr Johnson had suggested and neglected to communicate the disparity between the purchase prices disclosed in the transfer document to the investors. He did two things however. The first was to fax to O'Sullivan a copy of Johnsons' fax to him including the transfer document. The second was to fax to Johnsons, attention Ms Harris and marked "URGENT!!", a copy of Jacksons' valuation as well as a copy of Jacksons' letter to Provident dated 28 November 1996 for Ms Harris' "information". As will become evident, O'Sullivan ignored the contents of the transfer document. Rexstraw considered that whatever he was requested to do by Mr Johnson was satisfied by his forwarding a copy of the valuation to him. I shall return in more detail to this matter when considering the primary judge's finding that Johnsons was in breach of its duty of care to the investors by settling the transaction without first receiving a more appropriate response from Rexstraw. Suffice it to say that neither Rexstraw nor O'Sullivan contacted the investors to advise them of the contents of the transfer document and, in particular, of the disparity between the purchase price being paid by QMS to Mr and Mrs Bartucz and that by Vorona to QMS. 34 By mid-morning on 14 February 1997, all the funds which had been transferred or deposited into Johnsons' trust account in respect of the proposed loan had been cleared. Final settlement figures were obtained and the transaction was settled that afternoon. The investor's funds were duly advanced and dispersed. Events subsequent to settlement 35 On 17 February 1997, the mortgage was lodged with the DNR for registration. On 5 March 1997, the DNR issued its first requisition notice which stipulated that the original stamped Biermann Superannuation Trust Deed together with a certified copy was required to be lodged with it as the mortgage was a contributory mortgage. The requisition was required to be complied with by 2 April 1997: otherwise, the mortgage would be rejected. 36 On a number of occasions during March and early April, Ms Harris faxed or telephoned Rexstraw seeking the original trust deed and certified copies thereof, also making clear that unless the documents were provided to the Registrar of the DNR for sighting, the investors' interests in the mortgage could not be registered. She referred Rexstraw to the relevant provisions of the Land Titles Act 1994 (Qld). Shortly after 14 April 1997, the Biermanns forwarded the original trust deed direct to Johnsons. Johnsons then lodged it with the DNR on 18 April 1997 but under a dealing number other than that applicable to the subject mortgage. In the meantime Ms Harris had successfully sought from the DNR an extension of time to comply with the requisition. 37 Having considered the terms of the Biermann trust deed, the DNR issued a second requisition notice on 28 May 1997, drawing attention to the two issues: firstly, that the terms of the deed did not empower the Biermanns as trustees to enter into a contributory mortgage, and secondly that one of the names of the trustees on the mortgage differed from that shown on the trust deed. Thereafter, Ms Harris sought instructions from Rexstraw with respect to these issues, requesting in particular that authority be provided for the trustees of the Biermann Superannuation Trust to enter into a contributory mortgage. Suffice it to say that, inexplicably, Rexstraw never complied with the requisition notwithstanding that he was requested to do so by Johnsons on numerous occasions. 38 Towards the end of July, Rexstraw's instructions to act for the investors were withdrawn by Provident (apparently without any reference to the investors), who thereafter advised Johnsons that a Ms Gazzard of the firm Provident & Legal (a firm of solicitors of which O'Sullivan was a non-solicitor partner) would act for the investors from then on. On 14 August 1997, Provident & Legal wrote to the investors informing them of this change of "management" and sent authorities to be signed to require Rexstraw to deliver their files to Provident & Legal. On 27 August 1997, Johnsons faxed to Provident a copy of the second requisition notice of 28 May 1997, advising that the DNR would not continue to grant extensions for compliance. 39 On 3 September 1997, Ms Gazzard faxed Ms Harris requesting confirmation as to her understanding of what was required to comply with the DNR's requisition. This was confirmed by return fax. On 9 October 1997, Provident & Legal sent a fax to Johnsons noting that Provident had requested Johnsons to cease acting and to deliver all documents in relation to the matter. On 10 October 1997, Johnsons sent a letter to Provident informing them of advice received from the DNR that the mortgage would be rejected if the outstanding requisition was not complied with within 7 days and confirming that "over a period of months we have continuously requested your clients' advices to enable compliance with such requisitions but to date have received no instructions". 40 On 14 October 1997, the DNR issued a further notice of requisition stipulating 11 November 1997 as the deadline for compliance. It repeated the previous request for the authority for the Biermann trustees to be parties to a contributory mortgage. The notice stated that if the requisition was not complied with, the DNR intended to register the IBEX mortgage, a matter to which I shall shortly refer. On 14 November 1997, Provident & Legal sent a letter to Rexstraw confirming the transfer of the investors' files and requesting Rexstraw to instruct Johnsons to deliver their files to Provident & Legal as well. 41 On 24 November 1997, Johnsons sent a letter to Provident & Legal advising that they were unable to comply with the requisition and that the investors mortgage remained unregistered despite numerous requests made by Johnsons for instructions to enable compliance therewith. 42 Finally, on 26 November 1997, the DNR issued a rejection notice in respect of the investors' mortgage upon the ground that the requisition notice issued by it on 14 October 1997 had not been complied with. Thereafter on 10 December 1997 the IBEX mortgage was registered as a first mortgage upon the property. The IBEX mortgage 43 The IBEX mortgage arose out of an application to IBEX in early 1997 by Vorona for an advance of trade dollars to be secured by a second mortgage over the property. As the investors' mortgage contained a provision that Vorona could only grant a second mortgage with the consent of the investors as first mortgagees, it was necessary, as Rexstraw appreciated, that their written consent be obtained. On 25 February 1997, Hodgson wrote to O'Sullivan advising that it would be necessary to instruct Rexstraw to draw up documentation to evidence the amount of the priority secured by the investors' first mortgage. O'Sullivan then faxed Rexstraw indicating that Provident had no objection to the second mortgage or to a Deed of Priority. Of course, whether Provident or O'Sullivan had an objection to a second mortgage was irrelevant. 44 Realising that he should obtain their written consent as first mortgagees, Rexstraw wrote to the investors on 10 March 1997, enclosing a consent form for execution and requesting each investor to advise him if they did not approve of the proposed second mortgage. All of the investors bar one gave their consent. This notwithstanding, on 27 March 1997, without seeking or receiving any instructions from the investors, Rexstraw wrote to IBEX advising that he acted for the first mortgagees in relation to the registered first mortgage held over the property. This letter also contained an irrevocable undertaking that, upon an application by Vorona for an advance of further funds under the first mortgage, Rexstraw would not make such an advance without advising IBEX of such within a period of seven days. 45 Meanwhile, Johnsons had distributed an epitome of the mortgage to each of the investors, other than one which was sent to Rexstraw accompanied by a request to forward it to that particular investor whose address Johnsons did not have. The epitome was inaccurate in that it stated that the security documents were held by Rexstraw whereas in fact the mortgage had not been registered. 46 Of course, Rexstraw had no instructions from the investors to give the undertaking referred to in his letter to IBEX of 27 March 1997. The assertion in that letter that his firm acted for the first mortgagees was nothing short of extraordinary in light of the fact (which will later become apparent) that Rexstraw, at all materials times, denied that he was acting for the investors as their solicitor. 47 Notwithstanding that not all the investors had consented to the granting of a second mortgage over the property by Vorona to IBEX, that transaction proceeded. The mortgage was entered into and was lodged with the DNR for registration on 15 May 1997. By force of ss 177(1) and 178(1) of the Land Titles Act 1994 (Qld), instruments must be registered in the order in which they are lodged and have priority according to when they were lodged. Accordingly, the investors' mortgage was entitled to be registered and have priority over the IBEX mortgage, provided that it was not rejected by the DNR. As the mortgage was in fact, on 10 December 1997, rejected for non-compliance with the DNR's requisitions, the IBEX mortgage was registered as a first mortgage on 26 November 1997. Ultimately, on or about 27 October 1998, the investors' mortgage was registered as a second mortgage ranking behind the IBEX mortgage. There was no apparent explanation in the evidence as to how this occurred but it can be inferred that Provident & Legal were eventually able to comply with the DNR requisition. This delay was never explained, but its consequences were catastrophic so far as the investors were concerned. 48 Inevitably, Vorona defaulted under both mortgages. IBEX sold the property at a mortgagee sale in December 1998 for $117,000. This was insufficient to repay even the IBEX loan, let alone that of the investors. Hence, the latter lost their money. The proceedings 49 The investors were the plaintiffs in the court below. They instituted proceedings in the District Court against a number of parties, of which only four are presently relevant. They sued Provident for breach of s 52 of the Trade Practices Act 1974 (the Act), alleging that the representations contained in the brochure and the Investor Summary were misleading. They also sued Provident, alleging that it owed and had breached its obligations in both tort and contract. 50 The primary judge held that the Investor Summary did contain misleading representations with respect to the independence of the Jacksons' valuation. He further held that in failing to ensure that that valuation was in fact an independent valuation, Provident had breached both its duty of care and contractual obligations. Accordingly, the primary judge entered judgment for the investors against Provident for the full amount claimed. 51 The investors sued O'Sullivan as being knowingly concerned within the meaning of s 75B of the Act in the contraventions by Provident of s 52. They also sued him on the basis that he was a joint tortfeasor with Provident in its actionable negligence. The primary judge found that O'Sullivan was so liable as alleged and therefore entered judgment against him for the full amount claimed. 52 The investors sued Rexstraw for breach of his duty of care. The primary judge found that Rexstraw breached that duty by failing to seek instructions from his clients concerning the doubts raised as to the independence of Jacksons' valuation and as to the matters disclosed in the transfer document (which had been brought to his attention by Mr Johnson on 13 February 1997). Having found that that breach caused the investors to lose their investment, the primary judge entered judgment against Rexstraw for the full amount claimed. He also found that Rexstraw breached his duty of care to the investors by failing to respond promptly to the requisitions raised by the DNR and referred to him by Johnsons for the purpose of complying therewith. He found consequently that it was Rexstraw's negligence in that respect which had caused the investors to lose the benefit of the amount of $117,000 realised on the sale of the property in December 1998. 53 The investors also sued Johnsons in negligence. The primary judge held that Mr Johnson, and therefore, Johnsons (through the conduct of Mr Johnson) had breached its duty in two respects. The first was Mr Johnson's failure, before proceeding to settlement, to confirm that Rexstraw had obtained instructions from the investors to proceed with the loan notwithstanding the disparity in the purchase prices of the two sales referred to in the transfer document. The second was the failure, before proceeding to settlement, to obtain the documentation relating to the Biermanns Superannuation Trust so as to enable the mortgage to proceed to registration without risk of a requisition being raised by the DNR that might not be able to be complied with in due time. However, the primary judge found that once settlement had taken place and requisitions began to be issued, Johnsons had acted properly and promptly in referring them to Rexstraw and were not required, notwithstanding Rexstraw's failure to respond to constant requests to comply with the requisitions, to contact the Biermanns directly or otherwise to protect the interests of the investors by lodging a caveat against the title of the property. His Honour accordingly entered judgment in favour of the investors against Johnsons for the full amount claimed. 54 Provident/O'Sullivan, Rexstraw and Johnsons cross-claimed against each other for contribution pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (the Law Reform Act). In the matter between Provident/O'Sullivan and Rexstraw, the primary judge apportioned responsibility 65% to 35% respectively. As between Rexstraw and Johnsons, he apportioned liability 90% 10% respectively. As between Johnsons and Provident/O'Sullivan, he apportioned liability 10% to 90% respectively. It was agreed that the effect of this apportionment on the overall liability to the investors was that Provident and O'Sullivan would bear 58.5%, Rexstraw 31.5% and Johnsons 10%. The appeal 55 Provident, O'Sullivan, Rexstraw and Johnsons appealed to this Court against all or part of the primary judge's decision with respect to each of them. However, senior counsel for Provident confirmed that its appeal was not being pressed with the consequence that the primary judge's decision with respect to Provident remains unchallenged. However, O'Sullivan has pressed his appeal with respect to the finding by the primary judge of his liability to the investors as well as to his Honour's findings with respect to the extent to which O'Sullivan was entitled to contribution from Rexstraw and Johnsons. 56 Johnsons has pressed its appeal against the primary judge's finding that it was liable to the investors in negligence. It did not seek to contest the primary judge's finding that its share of responsibility should be apportioned at 10% but it resisted the appeals of Rexstraw and O'Sullivan that it should be required to contribute a greater percentage. 57 Rexstraw accepted the primary judge's finding as to his liability in negligence to the investors but appealed against the finding that, as between Rexstraw and Johnsons, Rexstraw should bear 90% and Johnsons only 10%. Rexstraw further submitted that Johnsons should in effect completely indemnify him either pursuant to s 5 of the Law Reform Act or by way of equitable compensation for breach of fiduciary duties allegedly owed to him by Johnsons. 58 I propose to deal firstly with the appeal of O'Sullivan against the investors with respect to liability; then to deal with Johnsons' appeal on liability and, finally, to deal with the claims of all three appellants on the issue of apportionment. The appeal of O'Sullivan on liability 59 O'Sullivan's appeal on liability has two elements. The first is that he has appealed against the primary judge's finding that, pursuant to s 75B of the Act, he was knowingly concerned in Provident's contravention of s 52. In this regard, O'Sullivan has not sought to contend, if there was a contravention of s 52, that he was not knowingly concerned therein: he has submitted that no contravention by Provident took place. The second element concerned the primary judge's finding that O'Sullivan was a joint tortfeasor with Provident and was in breach of a duty of care to the investors. No contravention by Provident of s 52 of the Trade Practices Act 60 As noted in [17] above, the Investor Summary dated 12 December 1996, received by each investor Provident, contained the following statement: "Valuation: $795,000 confirmed by independent valuation." The primary judge held that the above statement contained a representation which was untrue in two respects, one of which was that the valuation, so confirmed, was not independent. His Honour further held that all of the investors noticed or were influenced by the statement that the value of the property would be confirmed by "independent valuation" and that they each relied upon it in investing their funds. 61 The actual lack of independence of Jacksons' valuation is what rendered the statement in the Investors Summary misleading, therefore contravening s 52 of the Act. Provident and O'Sullivan were aware that the valuation had been obtained "under instructions from Mr Adrian Hodgson of Hobar Pty Limited" in circumstances where they also knew that Hodgson was the managing director and sole shareholder of the proposed borrower, Vorona. Although not admitted as against Provident/O'Sullivan, the investors called evidence from Mr Peter Cornelius, an expert New South Wales conveyancing solicitor, who in his report said: "In the present case if the solicitor was aware of the fact that the client was expecting an 'independent valuation' then the solicitor would not certify the transaction without directing the client's attention to the fact that the valuation proffered was not by an appropriately qualified independent registered property valuer: that is to say, it was not a valuation from a valuer commissioned independently of the borrower or any associate of the borrower." 62 The primary judge noted that Rexstraw appeared to accept this definition of "independent" in its context although Provident/O'Sullivan contended for a different meaning. The primary judge's findings on this issue were stated in the following terms: "It is true that, in ordinary speech, a professional adviser, such as a lawyer or a valuer, should aim to give impartial and accurate advice, no matter who is paying their fee. In that sense they may be said to be independent. The source of their emoluments does not finally determine the class or classes of people to whom they owe an actionable duty of care, as is illustrated by Smith v Bush [1990] 1 AC 831. Sometimes the word independent may mean that the subject is in practice professionally on their own account as distinct from being employed in-house by a particular party. But it all depends upon the context, as it did in Potato Marketing Board v Merricks [1958] 2 QB 316. In the context of these documents, the prospective lenders would obtain the advantage of having a right to sue the valuer for negligence if the valuer was an appropriately qualified registered property valuer, whether independent or not, as indeed happened in this very case. The word "independent" has been added, for additional comfort to them. As Mr Cornelius pointed out, there had been some publicity about unreliable valuers. Requiring the absence of any connection with the borrower would afford that comfort. In my opinion, no matter what many of the plaintiffs may have conceded in cross-examination, the word, judged objectively in its context, had the meaning given to it by Mr Cornelius, and at least should have been so understood by Rexstraw, had he adverted to it." 63 O'Sullivan submitted that the Jacksons' valuation satisfied the description "independent" as used in the investor summary, because an independent judgment was used in the determination of the actual value of the property by the author of the report and also because it was free of 'graft and other such influences'. The fact that it had been prepared on the instructions of the party seeking to depend upon it did not detract from its independent status in the relevant context. 64 Support for this submission was sought by reference to two authorities. The first (also referred to by the primary judge) was the decision of the House of Lords in Smith v Eric S Bush; Ms Harris v Wyre Forrest District Council (1990) 1 AC 831. In that case their Lordships considered inter alia whether a valuer who had been instructed by the mortgagee to prepare a valuation of the security for mortgage purposes, owed a duty of care in tort to the mortgagor being the prospective purchaser of the property valued. Their Lordships held that he did. Lord Templeman (with whose speech Lords Keith and Brandon concurred) said (at 848): "…..the valuer who values a house for the purpose of a mortgage, knowing that the mortgagee will rely and the mortgagor will probably rely on the valuation, knowing that the purchaser mortgagor has in effect paid for the valuation, is under a duty to exercise reasonable care and skill and that duty is owed to both parties to the mortgage for which the valuation is made." It was submitted that it is unlikely that such co-ordinate and equivalent duties would have been held to exist had his Lordship considered that the valuer was not independent because he was retained by one party rather than the other. With respect, I disagree. The issue of whether the valuer was retained independently by one party rather than the other could have no bearing upon whether the valuer owed a duty of care to the party who had retained him as against the party who had not or vice versa. Irrespective of who had retained or, for that matter, paid the valuer, he would clearly owe duties to those parties who he knew or ought to have known would rely upon his valuation. 65 Although Lord Griffiths in the same case used the phrase "independent firm of surveyors" to distinguish such a valuer from a mortgagee's own employee and assessed the duty of the valuer regardless of who retained him or her, the passage below from his Lordship's speech relied on by O'Sullivan does not, in my opinion, assist his case. His Lordship said (at 865): "The valuer is discharging the duties of a professional man whether he is employed by the mortgagee or acting on his own account or is employed by a firm of independent surveyors. The essence of the case against him is that he as a professional man realised that the purchaser was relying on him to exercise proper skill and judgment in his profession and that it was reasonable and fair that the purchaser should do so." In my opinion this passage, in its context, is not authority for the view that in some other context the expression " independent valuation " is referrable only to a valuation by a valuer who is not an employee of the party seeking the valuation. 66 Reliance was also placed upon the decision of Wells J in In re O'Brien, deceased (1971) 2 SASR 9. That case involved a will pursuant to which the testatrix provided that her trustees, before proceeding to realisation of her house property, would offer to B, one of her executors, the right to purchase the property at a price equivalent to its value at the date of her death "as certified by an independent valuer to be appointed by my trustees". The trustees (which included B) obtained a valuation of the property from a valuer for probate purposes in the sum of $10,000. They then, for the purpose of making the offer in accordance with the will, obtained a valuation of the property from a second valuer, who valued it at $6,131. The trustees offered the property to B at the price of $8,000 and B accepted the offer. 67 Wells J held that the trustees were required by the will to offer the property to B at the amount of the second valuation, but, as B was prepared to pay without protest a higher price the sale of the property at that figure was a valid and proper exercise of the power of sale to B given by the will. The issue in the case did not revolve around whether any of the valuations obtained by the trustees was the valuation of an "independent valuer". However, his Honour was required to determine whether the price at which the property was offered to B fell within the description "equivalent to its value at the date of (the testatrix's) death as certified by an independent valuer to be appointed by (the testatrix's) trustees." As to this question his Honour said this: "It was not disputed by counsel, and I hold, that all three valuers, whose valuations are potentially relevant, were 'independent' and that they gave 'certified' valuations. It seems to me that the word 'independent' in this context denotes a valuer who has no recognisable interest that could be served by failing to give a valuation that, according to his best skill and knowledge, represented the true value of the subject land at the material date." 68 It was submitted on behalf of O'Sullivan that the word "independent" as it appears in the Investor Summary should be given a similar meaning. I disagree. The context within which the word "independent" appeared in the will in O'Brien is quite different to that in the present case. The will specifically provided that the independent valuer was to be appointed by the testatrix's trustees of which one was the party to whom the property was to be offered for purchase. In these circumstances, it was clear that the reference by the testatrix in her will to "an independent valuer to be appointed by her trustees" was not intended to refer to a valuer appointed by the trustees other than the trustee to whom the property was to be offered. 69 In the present case, the context in which the word "independent" appeared to a valuation of the security proffered by the borrower for the proposed advance. Clearly, the borrower had an interest in obtaining a more robust valuation that would justify a loan of $450,000 in circumstances where the amount lent could not exceed 66% of the purchase price of the property valued. On the other hand, the investors would be looking for a more conservative valuation so as to ensure that their interests were fully protected. 70 I am therefore of the opinion that the primary judge was correct when he held that the statement in the Investor Summary that the valuation of $795,000 had been confirmed by "independent valuation" was a representation that it was one obtained independently of the borrower or any person associated with the borrower. That was not, in fact, the case. Accordingly, the statement in the Investor Summary complained of was misleading and, therefore, contravened s 52 of the Act. This challenge to the primary judge's finding of liability on the part of O'Sullivan must therefore be rejected. 71 The primary judge held that Provident represented to investors in the brochure that it would be the "Mortgage Manager" and that the risks would be minimised by its "conservative lending practices, careful analysis of all borrowing proposals, and the loan maximum of 66% of the property value". He continued in these terms: "It was entirely within the control of Provident to ensure that the obvious stated risks were so minimised. This was a situation where Provident was so placed that the investors were actually invited to rely upon its skill and judgment and ability to make careful enquiries. Provident took it upon itself to give information about the Vorona proposal to the investors, knowing full well that they would place reliance upon it." 72 The primary judge then held that Provident owed to the investors a duty to take reasonable care to ensure that its lending practices were in fact conservative, that all borrowing proposals had been carefully analysed and that the loan would not exceed 66% of the property value. In order to ensure the loan to valuation ratio did not exceed 66% Provident proposed to the investors that there would be an "independent valuation by a qualified property valuer". Accordingly, his Honour found that Provident owed a duty to the investors to take reasonable care to ensure that the valuation on which the proposal was based would be independent. 73 The primary judge also held that O'Sullivan was the controlling and directing mind of Provident in relation to the carrying out of the relevant duty of care. Their responsibilities in tort were, according to his Honour, co-extensive. He continued in these terms: "When O'Sullivan received the Jackson valuation he had no reason to suspect that it might be negligently wrong. But he was well aware that it had been obtained, initially for Hodgson, and then for Vorona. He should have realised that the mere assignment of it to Provident did not make it an independent valuation. His duty of care operated at the stage when he distributed the Investor Proposal to the plaintiffs. But it was not then fully discharged. When he became aware, on 13 February of the discrepancies in consideration disclosed by the transfer document, especially when combined with what he already knew about the provenance of the valuation, he was still under a duty to take care that the loan would not exceed 66% of the property value. It was incumbent upon him at least to ensure that the investors were contacted and given that new information, whether by himself or by Rexstraw. Even if his version of the conversation were accepted, his action in merely ringing up Rexstraw and accepting as sufficient the incredible explanation that he says he was given was a failure to exercise reasonable care to carefully analyse the borrowing proposal and to ensure that the load did not exceed 66% of the property value. The result of that breach was that the advance was made and the plaintiffs lost their investment". 74 The reference in the above passage to O'Sullivan's version of the conversation between him and Rexstraw is a reference to O'Sullivan's evidence that when he received the fax from Mr Johnson at about 3.55 pm on 13 February 1997, he rang Rexstraw and asked, "Bruce, what does all this mean?". Rexstraw said "It looks like they are avoiding stamp duty". O'Sullivan said "Will this have any effect on the mortgage"? Rexstraw replied "No". Rexstraw denied that he had a conversation with O'Sullivan in these terms and the primary judge accepted Rexstraw's evidence on this issue. He held that O'Sullivan was quite capable of knowing precisely what the disparity in the purchase prices shown on the transfer document meant and that Rexstraw was correct when he said in his evidence that the suggestion about stamp duty was obviously a nonsense. 75 In essence, the primary judge found that both Provident and O'Sullivan had breached their duty of care to the investors in two respects. The first was in their failure to realise that the Jacksons' valuation was not "independent" and was therefore unreliable. The second was in the failure of O'Sullivan, once he had become aware on 13 February 1997 of the discrepancies in the consideration disclosed by the transfer document, especially when combined with what he already knew about the provenance of the valuation, to contact the investors to provide them with the new information and to seek their instructions as to whether they wished to proceed with the loan. As his Honour observed, on O'Sullivan's version of the conversation he had with Rexstraw at the time, it was a nonsense to believe that the two sale transactions revealed in the transfer document was an attempt to avoid stamp duty and had no bearing upon whether the purchase price of $695,000 which Vorona was prepared to pay QMS reflected the true value of the property. 76 It was submitted on behalf of O'Sullivan that his and/or Provident's duty of care to the investors was discharged when they engaged Rexstraw as solicitor on behalf of the investors to protect their interests. As there was no finding that O'Sullivan was or ought to have been aware of any shortcomings on the part of Rexstraw, it followed that his engagement of Rexstraw was sufficient to discharge his duty of care. After all, Provident was only a mortgage broker. If anything, it was the agent of the borrower - not of the investors. 77 I am not persuaded by the above assertion. Provident was more than just a mortgage broker. Through O'Sullivan it held itself out to the investors as being the "Mortgage Manager" whose duty and obligation was to minimise risks to the investors. In my opinion, those duties of Provident did not cease when they engaged Rexstraw as the investors' solicitor. No doubt Rexstraw owed a duty of care to the investors which was, in relevant respects, co-extensive with that owed by Provident/O'Sullivan. On 13 February 1997, Rexstraw faxed a copy of the transfer document to O'Sullivan. As the primary judge found, O'Sullivan would have been fully aware of the disparity in the sale prices of the two transactions referred to in that document and of the significance of that disparity in relation to the reliability of the valuation. This is particularly so given that the valuation did not refer to the sale from Mr and Mrs Bartucz to QMS. Mr O'Sullivan should, as the primary judge found, have contacted the investors or have had Rexstraw contact them in order to bring this new and important information to their attention and to seek their instructions with respect thereto. 78 It was suggested by O'Sullivan that as settlement was imminent there was no time for this to be done. O'Sullivan was pressing for settlement for two reasons. The first was that the borrower itself was pressing for settlement and threatened to withdraw from the transaction. The second, which would be a consequence of the first, was that if the transaction did not proceed Provident would lose its commission. In my opinion, it was pure self-interest on the part of Provident/O'Sullivan which led O'Sullivan to take no action whatsoever once a matter so critical to the reliability of the valuation and hence to the true value of the property was brought to his attention. Provident/O'Sullivan failed to minimise the risks to the investors by carefully analysing the valuation (which was part of the borrowing proposal) in the light of this new information. The primary judge was therefore correct to hold that there was a clear breach of Provident/O'Sullivan's duty of care to the investors. Accordingly, O'Sullivan's challenge to the primary judge's finding on this issue should be rejected. 79 The primary judge held that O'Sullivan was a joint tortfeasor with Provident. To the extent to which any duty of care to the investors was owed only by Provident and not personally by O'Sullivan, the question arose as to whether O'Sullivan, as the managing director of Provident, was liable for that company's tortious acts. The primary judge was obviously of the view that he was. He found that O'Sullivan was the controlling and directing mind of Provident in the performance by the latter of its duty to take reasonable care. He said that, overall: "the guiding hand, the deciding mind, in the whole business venture was O'Sullivan's." 80 Counsel for the investors referred the Court to the cases dealing with the personal liability of a director for corporate torts. There appear to be two lines of authority. The first was that adopted by Beazley J, when sitting as a member of a Full Court of the Federal Court, in King v Milpurrurru (1996) 66 FCR 474, where her Honour formulated the test of directorial liability in the context of s 37 of the Copyright Act 1968 (Cth) as follows (at [500]): "A director will be liable if, having the requisite mental element prescribed by section 37, he commits or directs the commission of the tort, deliberately or recklessly, so as to make the tortious conduct his own ." (emphasis added) 81 As was pointed out by Lindgren J in Microsoft Corporation v Auschina Polaris Pty Limited (1996) 71 FCR 231 at 239, although this test has been consistently followed in Canada, it has not received universal support in England, Australia or New Zealand. An "alternative" and less demanding test which was accepted as correct by Lee J in King v Milpurrurru, is that the director must have expressly or impliedly "directed or procured" the tortious conduct for which the company is liable. It was this "alternative" test that Lindgren J adopted in Microsoft. That test has been followed by Merkel J in Henley Arch Pty Limited v Clarendon Homes (Aust) Pty Limited (1998) 41 IPR 443 at 463-465 and by Branson J in Microsoft Corporation v Goodview Electronics Pty Limited (2000) 49 IPR 578. 82 Like Giles J in McCallum & Co Pty Limited v Allen Manufacturing Co Pty Limited (2001) 52 IPR 550 at [30-32], I find it unnecessary to choose between the "procured or directed" test adopted by Lindgren J and the somewhat higher standard adopted by Beazley J that the director has made the tortious act his own because, in my opinion, both tests are satisfied in the present case. In fact, I did not understand senior counsel for O'Sullivan to seriously contend the contrary. In my opinion the primary judge was correct in finding that O'Sullivan was liable to the investors for the negligent conduct of Provident. Accordingly, O'Sullivan's challenge to his liability due to the negligence of Provident and/or himself fails. The appeal of Johnsons on liability 83 The primary judge found that Johnsons had breached its duty of care to the investors in two respects. The first was in proceeding to settlement of the transaction on 14 February 1997 in the absence of express instructions from Rexstraw that he had obtained instructions from the investors to proceed. The second was in proceeding to settlement prior to obtaining the documentation in relation to the Biermann Superannuation Fund. Both of these findings are the subject of challenge. 84 The primary judge found that as soon as Mr Johnson saw the transfer document he realised that settlement should not take place without instructions from the investors. He contacted Rexstraw whose responsibility it was, according to Mr Johnson, to obtain instructions. Having found that at that time Johnsons had no responsibility or right to contact the investors directly, his Honour proceeded in the following terms: "However, perceiving as he did that the mortgagees' instructions were necessary, he should not have allowed settlement to take place without being sure that Rexstraw had sought and obtained them. He would, in my opinion, have been entitled to rely, without further inquiry or investigation, on what Rexstraw told him if Rexstraw had contacted him and told him to proceed. But he was not entitled, without more, to infer that instructions had been sought and given from the mere receipt by him of a copy of the valuation and an amended statement of Rexstraw's costs to be deducted at settlement. The disparity in the considerations was so great, and the magnitude of the potential losses to the plaintiffs was such as to require more than an inference from such scanty evidence. In addition, the form of the valuation which he then received in answer to his phone conversation with Rexstraw should have raised in his mind the question whether it was independent, or at least whether the plaintiffs would consider it satisfactory for their purposes. Again, it was not therefore incumbent upon him to investigate the valuation. He was entitled to rely on Rexstraw. But he should not have proceeded to settlement without explicit instructions from Rexstraw to do so. 85 Having said that the above finding was one to which he would have been prepared to come unaided by any expert opinion, the primary judge then referred to the opinion of Mr McGillivray, a Queensland conveyancing solicitor, who opined that a reasonably competent solicitor would have regarded the non-receipt of a specific signal from Rexstraw to proceed "as being sufficient warrant not to proceed to settlement and to advise Rexstraw accordingly". His Honour then found that had Mr Johnson complied with the duty imposed on him the advance would not have been made and the investors would not have lost their investment. 86 The primary judge further found that Johnsons had failed to exercise reasonable care and skill by proceeding to settle without the document needed from the Biermanns to enable the mortgage to proceed to registration without the risk of there being raised a requisition that might not be able to be complied with in due time. He noted that Mr Johnson had agreed in cross-examination that the disclosure of a trust in the mortgage documents required not only the production of the trust deed but also an analysis of it to ensure that the deed would not generate a requisition. He accordingly found that Johnsons had breached its duty of care to the investors by settling without the necessary documents which, had it required their production prior to before settlement, would have caused settlement to be deferred until the necessary evidence was supplied, in which event the transaction would have been cancelled by the borrower, the advance would not have been made and the investors would not have lost their investment. These further findings with respect to Johnsons' breach of its duty of care to the investors were also the subject of challenge. 87 Johnsons submitted that the primary judge erred in holding that it had breached its duty of care in proceeding to settle the transaction without ensuring that Rexstraw had sought and obtained instructions from the investors to do so. It contended that, given that his Honour had found that there was no obligation on Johnsons to directly seek the investors' instructions, it was entitled to leave that task to Rexstraw. Johnsons further argued that, having adverted to the disparity in the purchase price of the two sales disclosed in the transfer document and having referred that matter to Rexstraw, it was entitled, upon receipt of a copy of the valuation from Rexstraw, to be satisfied that any concern as to the adequacy of the security had been dispelled by two things: firstly that Johnsons' valuation on its face revealed the market value of the property; secondly that Rexstraw had referred the valuation to Johnsons without further comment which apparently indicated his own satisfaction with its reliability. 88 Johnsons further argued that the fact that it had received an amended memorandum of costs from Rexstraw with implicit instructions to pay those costs from the proceeds of the loan was another indication that Rexstraw was satisfied that it was appropriate for the settlement to proceed. It submitted that it was unnecessary and even bordering on discourteous to confirm with Rexstraw that specific instructions had been obtained from the investors, given that this was Rexstraw's responsibility and that Johnsons took its instructions from him. Accordingly, Johnsons' response in considering itself instructed to proceed to settlement on 14 February 1997 was, in all the circumstances, reasonable. 89 I have already referred to the sequence of events which occurred on 13 February 1997. Without doubt, Mr Johnson acted properly in noticing the disparity in the purchase prices being paid pursuant to the sales by Mr and Mrs Bartucz to QMS on the one hand and Vorona to QMS on the other. Equally, his conduct in bringing this important matter to the attention of Rexstraw and seeking further instructions was, so far as it went, an appropriate response to his realisation of the importance of the information that he had discovered. 90 It is, however, important to understand that, according to Mr Johnson's evidence in chief, he wished to draw the disparity in the purchase prices to the attention of Rexstraw as he had no instructions from either the investors or Rexstraw as to whether the matters recorded as consideration in the transfer document were acceptable. In cross-examination he acknowledged that the disparity had the potential for real concern. He said, with respect to the contents of the transfer document, that the $250,000 being paid by QMS to Mr and Mrs Bartucz could well have been an undervalue as much as the $695,000 being paid by Vorona to QMS could have been an overvalue. Having acknowledged that it was a matter of potential concern, given that he did not have a registered valuation in his possession, the following exchange took place: "Q. Are you saying to the court that the only thing you needed to satisfy your concern would be the receipt of a registered valuation? A. Yes, that would satisfy the concerns about the price differential, or the consideration being shown on the document, yes. His Honour: Q. Or instructions from the lenders to go ahead, not withstanding? A. Yes, that as well. Yes, your Honour." 91 He was then referred to his conversation with Rexstraw and agreed that the advice he was giving the latter at the time was that he should contact the investors about the matter. Having agreed that he had no specific recollection of studying the valuation which he had received by fax from Rexstraw, but stating that he had looked at it such that he was aware that it was a valuation of the property at $695,000 from a valuer unknown to him the following exchange occurred: "Q. Having received the valuation, did that entirely satisfy the concerns that you had raised with Mr Rexstraw, or were you requiring Mr Rexstraw to advise the plaintiffs and obtain instructions from the plaintiffs? A. I wasn't requiring Mr Rexstraw to do anything, Mr Davidson. I advised him that he should inform the investors with regard to the consideration stated in the transfer by direction. Q. What I want to clarify with you though, Mr Johnson, was, after you received this valuation, was it still your expectation that Mr Rexstraw would follow your suggestion to contact the investors? Was that still your expectation? A. I think that, I do, yeah. Q. So you didn't see the receipt of the valuation as taking away the force of any of your comments that Mr Rexstraw should advise the investors of the two prices? A. Mr Davidson, in my experience one gives advice on a daily basis to any number of clients, be they solicitors or lay people. What they do with the advice is a matter for them. My expectation I guess was, having brought the matter to Mr Rexstraw's attention, advising him that in my opinion I thought the investors were entitled to be informed, and that in my opinion it was his responsibility to inform them, what he did with that advice was up to him. Q. You're saying that in terms of your practice, if you hadn't been acting on a retainer from a solicitor, that you'd been acting directly for the clients, this is the sort of matter you would have contacted the clients about directly yourself? A. I'd feel duty-bound." 92 Mr Johnson's concerns and his acknowledgment that it was necessary that Rexstraw bring the information concerning the sub-sale to the notice of the investors and obtain their instructions with respect thereto is clearly consistent with authority. In Mortgage Express Limited v Bowerman & Partners (1996) 2 All ER 836, a Mr Gilroy, a partner in the defendant firm of solicitors, was instructed to act on behalf of the plaintiff mortgage lending company in respect of an application for a loan of £180,150 by one Mr Hadi, who wished to purchase the property. Mr Gilroy was also instructed to act for Mr Hadi. Enclosed with the plaintiff's letter of instruction was a professional valuation of the property at £199,000. Mr Gilroy became aware that the vendor (Mr Arrach) was himself purchasing the property for £150,000 and was on-selling simultaneously to Mr Hadi. Mr Gilroy drew Mr Hadi's attention to the discrepancies between the two purchase prices and the valuation figure but failed to refer the information to the plaintiff. The plaintiff duly advanced the loan to Mr Hadi, the sales were completed, Mr Hadi defaulted and the property was repossessed and sold for £96,000. Thereafter the plaintiff issued proceedings against the solicitors. 93 It was held by the Court of Appeal that a solicitor who, in the course of investigating title, discovered facts which a reasonably competent solicitor would have realised might bear materially on the valuation of the lender's security or some other ingredient of the lending decision, had a duty to point that out to the client. Although it was a question of fact and degree, in the present case it is impossible to escape the conclusion that, had Mr Gilroy applied his mind to the facts, he would have appreciated that the information in question might have caused the plaintiff to doubt the valuation of the property as security for its loan, and hence his failure to pass the information to the plaintiff was negligent. 94 In the course of his judgment, Sir Thomas Bingham MR said this (at 841-842): "Mr Gilroy acknowledged that matters might come to the notice of a solicitor in his position which he would be under a professional duty to report to the lender. For example, such a solicitor was not retained to second-guess the valuation on which the vendor was relying, but if he received information of previous transactions so apparently inconsistent with that valuation as to give possible reasons for doubting its reliability that might be something which he should report. Thus, Mr Gilroy accepted that questions of fact and degree would affect the solicitor's duty……. I would accordingly reject the submission originally made on behalf of the solicitors as to the narrow ambit of the duty, as the judge did, and accept, as I understand her to have done, the submission of Mortgage Express . This was that if, in the course of investigating title, a solicitor discovers facts which a reasonably competent solicitor would realise might have a material bearing on the valuation of the lender's security or some other ingredient of the lending decision, then it is duty to point this out." 95 Having noted that Mr Hadi was proposing to buy the property for £220,000, and that the amount of the valuation was £199,000 but that the sub-sale was at a price of £150,000, his Lordship continued (at 843): "It seems to me clear beyond argument that Mr Gilroy would have failed in his duty to Mr Hadi had he not alerted Mr Hadi to these new facts which had come to his attention, so that Mr Hadi could take such action, if any, as he wished. It does not follow from that conclusion that it was necessarily Mr Gilroy's duty to pass the information to Mortgage Express . But I think any lender in Mortgage Express ' position would have been greatly concerned to learn of a simultaneous sale at a figure of £50,000 below the valuation on which it was relying and £30,000 below its proposed advance. The transaction might, of course, be explained by special circumstances, but an obvious alternative explanation was that the flat had been significantly over-valued. A moment's reflection would, I think, have alerted Mr Gilroy to this second possibility and to the need to give Mortgage Express the opportunity to review it. In fact, it is clear this second possibility did not occur to Mr Gilroy………I find it impossible to escape the conclusion that if he had applied his mind to these facts he would have appreciated that they might have caused Mortgage Express to doubt the valuation. The contemporary sale at a much lower value is itself evidence of value for Mortgage Express to assess. He should not be too harshly judged for this oversight in the course of a busy and, no doubt, pressured professional life, but if his only client had been Mortgage Express and his only duty had been to them, I find it very hard to think he would not have recognised the need to alert it to these potentially significant facts." 96 After referring to Mr Gilroy's evidence in cross-examination that he should have passed it on had he perceived any cause to doubt the valuation, even if he did not in fact doubt the valuation, Millett LJ said this (at 845): "It might be thought from that answer that the question which the judge should have asked herself was: 'Would a solicitor of ordinary competence have regarded the information that Mr Arrich was paying only £150,000 for the flat as throwing doubt on the valuation of £199,000?'. That, however, would not, in my opinion, be an accurate formulation of the question. Mr Gilroy was not a valuer and it was not his responsibility to doubt a professional valuation. The question which the judge had to ask herself was whether a solicitor of ordinary competence would have regarded the information in question as information which might cause the plaintiffs to doubt the correctness of the valuation which they had obtained. The judge, in effect, answered this question in the affirmative. In my judgment, her conclusion is unassailable." 97 It should be noted that Mr Johnson denied in evidence that he had any cause to doubt the valuation. As he had the valuation in his possession (having received a copy from Rexstraw), he considered that he could proceed to settlement. But as Millett LJ pointed out, Mr Johnson was asking himself the wrong question. It was not for him to determine whether the disparity in the purchase price being paid on the sub-sale was such as to throw doubt on Jacksons' valuation. As he acknowledged, it was his intent that Rexstraw would advise the investors of the disparity and would seek their instructions as to whether or not they wished to proceed with the transaction based on, or notwithstanding, the valuation. That was a matter for the investors, with regards to which instructions were required. 98 The difficulty which Johnsons faces on its appeal is that, although Mr Johnson proceeded in accordance with his duty to the investors to require Rexstraw to bring the information to their notice and to seek instructions with respect thereto, he proceeded to settlement without satisfying himself that Rexstraw had done what he had intended him to do. In my opinion, the primary judge was correct in finding that it was a breach of Mr Johnson's duty of care to the investors to proceed to settlement merely on the basis that he had received Jacksons' valuation, without satisfying himself that Rexstraw had provided the information to the investors and that the latter, notwithstanding that information, had instructed Rexstraw that the loan transaction was to proceed. Certainly, it was not open to him to infer that Rexstraw had the relevant instructions simply because he had received from Rexstraw the valuation (in response to his advising Rexstraw that he did not have it) and his amended memorandum of costs. 99 Furthermore, the significant discrepancy between the price being paid pursuant to the sub-sale and that being paid by Vorona, coupled with the fact that the amount being lent by the investors was nearly twice what the purchase price was, in my opinion, so significant that Mr Johnson's precipitous settlement (as I would regard it) of the transaction the following day ought to be judged as bordering on irresponsible, compared to the oversight which the Court of Appeal attributed to Mr Gilroy in Mortgage Express. 100 Even accepting that Mr Johnson was also engaged in "a busy and, no doubt, pressured professional life", the discrepancy in question ought to have caused him to doubt the reliability of the valuation (knowing, as he did, that it was obtained by Hodgson who was the proposed guarantor of the loan) which made it more imperative that he not proceed to settlement without the specific instructions from the investors so to do. In my opinion, his failure in this regard was serious, a matter to which I shall return when dealing with the issue of contribution or apportionment. As Chesterman J observed in C A & M E C McInally Nominees Pty Limited v HTW Valuers (Brisbane) Pty Limited (2001) 188 ALR 439, a case involving a solicitor acting for a lender who had received a valuation which was held to have been prepared negligently and which was misleading and deceptive, (at 454 [60]): "The solicitor's retainer was to locate safe opportunities for the plaintiff to lend money. Obtaining a valuation of the property to be taken as security was only a part of their obligation under the retainer. The solicitors had a more extensive duty to enquire whether a particular transaction was provident. The valuation obtained was carelessly put together, but the solicitors did not attempt to verify the particular assumptions on which the valuations depending and to which HTW drew attention. Moreover the valuations had been obtained by the vendors of the property which was to be taken as security. One does not need much experience in the law to know that such valuations are likely to inflated and should be scrutinised with particular care ." (emphasis added) 101 It is true that Johnsons' retainer was narrower than that of the solicitors in the abovementioned decision. Nevertheless, his Honour's observations which I have emphasised are, in my opinion, applicable to Mr Johnson given that, erroneously, he considered that he could proceed to settlement merely because he had received a valuation from a valuer unheard of by him and who valued the property at a figure greater than the amount of the loan. It follows that the primary judge was correct in his conclusion that the form of the valuation, which Mr Johnson then received in answer to his phone conversation with Rexstraw, should have raised in his mind the question not only as to whether the valuation was independent but whether the investors would consider it satisfactory for their purposes. 102 It was further submitted by Johnsons that the breach of duty to which I have referred was not causative in any relevant sense, as it was clear from the Rexstraw's evidence that he considered that he had satisfied Mr Johnson's enquiries so that, had the latter sought an express confirmation of instructions to proceed to settlement, those instructions would have been forthcoming. In this regard, the primary judge had said this: "He, (Johnson) would, in my opinion, have been entitled to rely, without further enquiry or investigation, on what Rexstraw told him if Rexstraw had contacted him and told him to proceed." 103 In my opinion, the primary judge erred in the above passage insofar as he intended to hold that Mr Johnson could have properly proceeded to settlement if Rexstraw had instructed him to do so. One can accept for the purpose of the argument that, had he contacted Rexstraw and asked whether he could proceed to settlement, Rexstraw would have told him to do so. However, in my opinion the obtaining of instructions in those terms would not have discharged of Mr Johnson's duty of care to the investors. He was required to do more than simply ascertain from Rexstraw whether he could proceed to settlement. He was, in my view, required to ascertain from Rexstraw whether he had communicated to the investors the information relating to the disparity of the purchase prices of the sale and sub-sale. Clearly, had he specifically questioned Rexstraw as to whether he had disclosed the discrepancy to the investors and sought the necessary instructions, he would have been informed that he had not. In these circumstances, Mr Johnson would have been in breach of his duty of care to the investors if he had proceeded to settlement simply because he was instructed by Rexstraw to do so. Accordingly, Johnsons' submissions on causation should be rejected. 104 Johnsons further submitted that the primary judge erred in finding that they had failed to exercise reasonable care by proceeding to settle the transaction without the documents needed from the Biermanns to enable the mortgage to proceed to registration without the risk of raising a requisition that might not be able to be complied with in due time. 105 It was submitted that, in the present case, the mortgage was in registrable form, the primary judge having found that there was no defect in the mortgage document itself to impede registration. It was further argued that the fact that the mortgage did not satisfy the DNR requirements in relation to production of the Biermann trust deed or the lodgement of an authority from the beneficiaries authorising the trustees to enter into a contributory mortgage, did not affect the priority of registration of the dealing. There was no reason why the requisition could not be complied with as it eventually was. Accordingly, in the circumstances, it was reasonable for Johnsons to have proceeded to settlement without the documents relating to the trust deed. 106 It was also submitted as a subsidiary argument that as Johnsons (albeit in relation to a different matter) had on 3 February 1997 advised Rexstraw that: "(w)e are required to advise the Department of Natural Resources of the clauses in the Trust Deed which sanction the Trustees entering into a contributory mortgage", Johnsons was entitled to assume that Rexstraw had satisfied himself that the Biermann trust deed did empower Mr and Mrs Biermann as trustees to enter into a contributory mortgage. The problem with this submission is that no evidence was led from Mr Johnson or Ms Harris that either of them had made any such assumption. Accordingly, I am not prepared to accede to that submission. 107 It was not suggested that Johnsons was not aware of the following provisions of the Land Title Practice Manual of Queensland relating to a trustee entering into a contributory mortgage: " Joint Accounts ………..A contributory mortgage is a mortgage where the mortgage money is advanced by two or more persons separately. A trustee may not be a contributory mortgagee, as the trustee would thereby relinquish exclusive control of the trust property. Therefore, where there is more than one mortgagee and one or more of them are trustees, the mortgage will not be registered unless the trust instrument specifically authorises the investment of trust funds in a contributory mortgage or unless the consents of all the beneficiaries to a contributory mortgage are deposited with the mortgage. Otherwise, separate mortgages must be prepared and lodged for the amount advanced by the trustee/s and the amount advanced by the other mortgagees. Such mortgages may be pari passu. Mortgage of Land ………. As Mortgagee …….A mortgage to a trustee is registered with reference to the trust. The instrument of trust must be deposited with or exhibited against the mortgage. A trustee may not enter into a contributory mortgage unless: a) there is specific provision to do so in the trust instrument; or b) all beneficiaries (being sui juris, ie not under any disability) give their consent in writing. A contributory mortgage situation would arise if a trustee contributed trust money with other money belonging to another person, trustee or himself/herself in his own right to comprise the principal for a mortgage". 108 What Johnsons did not know (and did not enquire about) was whether there was a specific provision in the Biermann Superannuation Trust Deed empowering Mr and Mrs Biermann as trustees to enter into a contributory mortgage. Further, if there was no such provision, it was unaware as to whether all the beneficiaries under that trust were sui juris, let alone, whether they were prepared to give their consent to the entering into of the mortgage. If settlement had taken place and the monies disbursed, but the requisition had not been able to be complied with because, for instance, all beneficiaries were not sui juris or some would not consent, then the mortgage could not have been registered. This may not have mattered had the mortgage not been a contributory mortgage but as it was, it followed that Johnsons had a duty to protect the interests of the non-trustee investors who would be seriously prejudiced in the event that the trustee investor had no power to enter into the mortgage. 109 Unless and until Johnsons had satisfied itself that the Biermanns as trustees had power to enter into the mortgage, it was not registrable. It may have been in registrable form, but that was insufficient. In my opinion, the primary judge was correct in finding that it was not prudent for Johnsons to have settled the transaction without evidence that the Biermanns as trustee were empowered to enter into the mortgage. Although Johnsons submitted that "prudence" was not the test for breach of duty and negligence, I am satisfied that the primary judge was using the expression in the sense that Johnsons were in breach of their duty of care to the investors by settling without satisfying themselves, once the trust was disclosed, that the trust deed, upon analysis, contained the relevant power and would not generate a requisition which may not be able to be complied with. In my opinion, therefore, no error on the part of the primary judge with respect to this issue has been demonstrated. 110 For the foregoing reasons, therefore, Johnsons' challenge to the finding of the primary judge that they were liable in negligence to the investors fails. Contribution 111 As I have already noted, Rexstraw did not seek to challenge the primary judge's finding that he had breached his duty of care to the investors in the respects found by his Honour. He submitted, however, that the primary judge erred in requiring Johnsons to contribute only 10% of the judgment. In this respect, the primary judge's findings on apportionment were made upon the basis that Provident/O'Sullivan, Johnsons and Rexstraw were all joint tortfeasors so that s 5 of the Law Reform Act applied to the exercise he was required thereby to undertake. 112 Before dealing with the issues relating to the primary judge's findings on this issue it is necessary to refer to a submission by Rexstraw to the effect that Johnsons owed Rexstraw a fiduciary duty which it breached as a consequence whereof Rexstraw suffered loss and in respect of which he is entitled to equitable compensation in the full amount of that loss. The practical effect of this submission, if accepted, would be that Johnsons would be required to indemnify Rexstraw in respect of the judgment obtained by the investors against him. I turn therefore to that argument. 113 Rexstraw submitted that Johnsons owed a fiduciary duty to him not to permit settlement of the loan without ensuring that the investors were fully informed of the material facts relevant to the value of the security and without ensuring that the mortgage was capable of registration. Accordingly, in its role as a fiduciary, Johnsons should not have proceeded to settlement without the express instructions and authority of Rexstraw. It was further submitted that the special circumstances of Johnsons' position and its control over the funds of the investors held in its trust account meant that, by electing to proceed to settlement without obtaining the informed consent of the investors and otherwise being in possession of a registrable mortgage, Johnsons breached its fiduciary duties to Rexstraw (in addition to its duties to the investors). Reliance was placed upon the decisions in Maguire v Makaronis (1997) 188 CLR 449; O'Halloran v R T Thomas & Family Pty Limited (1998) 45 NSWLR 262 and Target Holdings Limited v Redferns (1996) 1 AC 421. 114 In Maguire v Makaronis, the clients of the solicitors unwittingly executed a mortgage in the solicitors' favour to secure bridging finance for the purchase of a poultry farm. The trial judge found that the solicitors did not draw the clients' attention to the fact that they were to be the mortgagees or advise them to obtain independent legal advice. The clients defaulted on the loan secured by the mortgage and the solicitors claimed possession of the mortgaged property. The clients counter-claimed for a declaration that the mortgage was void. 115 It was held by Brennan CJ, Gaudron, McHugh and Gummow JJ that the mortgage was liable to be set aside at the suit of the clients as a result of the solicitor's breach of fiduciary duty in entering into the mortgage in the absence of the informed consent of the clients to the solicitors' interest in the transaction. Reference was made in the joint judgment to the following statement of Gibbs CJ in Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 68: "The archetype of a fiduciary is of course the trustee, but it is recognised by the decision of the courts that there are other classes of persons who normally stand in a fiduciary relationship to one another – eg, partners, principal and agent, director and company, master and servant, solicitor and client, tenant-for-life and remaindermen. There is no reason to suppose that these categories are closed." 116 It was thus accepted that a fiduciary relationship arose between the clients and the solicitors, but the real issue was to ascertain the particular obligations that were owed by the solicitors to those clients. What was at the heart of that particular solicitor/client relationship was the provision by the solicitors of the bridging finance secured by the mortgage. In these circumstances, the duty of the solicitors as fiduciaries arose out of the fact that they acted for the clients in a matter in which they had a personal interest. As a consequence, they were obliged to disclose that interest to their clients upon pain of the transaction, irrespective of how favourable it was to the client, being set aside if they failed to do so. Accordingly, the case was one whereby a person who was in a fiduciary position entered into a transaction with those to whom they owed fiduciary duties, those duties being owed because there was a conflict between the duty of the solicitors to the clients and their personal interest in the transaction as mortgagee under the subject mortgage. Thus their Honours concluded in these terms (at 465): "The conflict meant that the loyalty of the appellants to their clients had not remained undivided, with the result that they could not properly discharge their duties to their clients." 117 O'Halloran v R.T. Thomas & Family Pty Limited concerned the fiduciary relationship which arose between a company and its managing director. It is unnecessary to recite the facts of the case. Suffice it to say that it related to the breach by the director of his fiduciary duty not to place himself in a position where his duties as director and his own personal interests conflicted and/or not to make improper use of his position to cause detriment to the company or to gain an advantage for himself or another. The trial judge had found that the director had breached a number of duties, including his fiduciary duties to the company, and the substantive issue on appeal was only one of causation. It was accepted on appeal that the trial judge's factual findings had made it clear that the director's powers had been exercised for an improper purpose in that he had caused to be transferred certain assets of the company in order for him and his allies to retain control of another company. 118 Reference was also made to the decision of the House of Lords in Target Holdings Limited v Redferns. That case concerned the liability of a trustee solicitor for breach of trust and related, in particular, to the basis upon which the beneficiaries were entitled to be compensated for that breach. However, it is noteworthy that Lord Browne-Wilkinson (with whom the other Law Lords agreed) observed (at 436): " In the case of moneys paid to a solicitor by a client as part of a conveyancing transaction, the purpose of that transaction is to achieve the commercial objective of the client, be it the acquisition of property or the lending of money on security. The depositing of money with the solicitor is but one aspect of the arrangements between the parties, such arrangements being for the most part contractual. Thus, the circumstances under which the solicitor can part with the money from the client account are regulated by the instructions given by the client: they are not part of the trusts on which the property is held…….I have no doubt that, until the underlying commercial transaction has been completed, the solicitor can be required to restore to the client account moneys wrongly paid away. But to import into such trust an obligation to restore the trust fund once the transaction has been completed would be entirely artificial." The point of the foregoing is the necessity, particularly in the present case, to distinguish between the fiduciary duties of a solicitor on the one hand and his or her common law duty of care on the other. If a solicitor is in breach of his or her duty of care to his/her client, it does not necessarily follow that he or she is also in breach of any fiduciary duty owed to that client. The fiduciary duties of the solicitor are, in my opinion, far more constrained in their scope. They do not include a duty to exercise reasonable care and skill as such a duty is essentially tortious. 119 Johnsons submitted not only that fiduciary duties are proscriptive rather than prescriptive, but also that those proscriptive duties are duties of loyalty, namely, the duty of a fiduciary not to place himself or herself in a position where there may be a conflict between his or her fiduciary duty and his or her own interest (the "no-conflict" duty) and the duty not to make a profit out of the fiduciary relationship (the "no-profit" duty). Accordingly, it was submitted that there was no obligation of a fiduciary nature on Johnsons to inform the investors of anything at all and that any such obligation arose not as a result of any fiduciary duty owed by Johnsons to the investors but rather out of the duty of care owed by it in tort. If this be so, it followed that there could be no greater duty owed by Johnsons to Rexstraw arising out of the relationship between them of principal and agent. 120 In my opinion, Johnsons' submissions should be accepted. In Breen v Williams (1996) 186 CLR 71, it was observed by Brennan CJ (at 82) that although fiduciary duties arose out of the relationship of agency, it would be erroneous to regard the duty owed by a fiduciary to his beneficiary as attaching to every aspect of the fiduciary's conduct. Further, in their joint judgment, Dawson and Toohey JJ described the duties of a doctor to his or her patient in the following terms (at 93, omitting citations): "A doctor is bound to exercise reasonable skill and care in treating and advising a patient, but in doing so is acting, not as a representative of the patient, but simply in the exercise of his or her professional responsibilities. No doubt the patient places trust and confidence in the doctor, but it is not because the doctor acts on behalf of the patient; it is because the patient is entitled to expect the observance of professional standards by the doctor in matters of treatment and advice and is afforded remedies in contract and tort if those standards are not observed and the patient suffers damage. Equity requires that a person under a fiduciary obligation should not put himself or herself in a position where interest and duty conflict or, if conflict is unavoidable, should resolve it in favour of duty and, except by special arrangement, should not make a profit out of the position. The application of that requirement is quite inappropriate in the treatment of a patient by a doctor or in the giving of associated advice. There the duty of the doctor is established both in contract and in tort and it is appropriately described in terms of the observance of a standard of care and skill rather than, inappropriately, in terms of the avoidance of a conflict of interest. It has been observed that what the law exacts in a fiduciary relationship is loyalty, often of an uncompromising kind, but no more than that. The concern of the law in a fiduciary relationship is not negligence or breach of contract. Yet it is the law of negligence and contract which governs the duty of a doctor towards a patient. This leaves no need, or even room, for the imposition of fiduciary obligations. Of course, fiduciary duties may be superimposed upon contractual obligations and it is conceivable that a doctor may place himself in a position with potential for a conflict of interest – if, for example, the doctor has a financial interest in a hospital or a pathology laboratory – so as to give rise to fiduciary obligations." In my opinion, the foregoing observations of their Honours apply equally to the professional relationship between a solicitor and his or her client. 121 Having considered the decision of the Supreme Court of Canada in McInerney v MacDonald (1992) 93 DLR (4th) 415, their Honours observed (at 95) that that case was: "…..perhaps, reflective of a tendency, not found in this country, but to be seen in the United States and to a lesser extent Canada, to view a fiduciary relationship as imposing obligations which go beyond the exaction of loyalty and as displacing the role hitherto played by the law of contract and tort by becoming an independent source of positive obligations and creating new forms of civil wrong." 122 Their Honours concluded that McInerney did not represent the law in Australia. The point was made more colourfully by Gaudron and McHugh JJ in the following terms (at 108, omitting citations): "………The law of fiduciary duty rests not so much on morality or conscience as on the acceptance of the implications of the biblical injunction that '[n]o man can serve two masters'. Duty and self-interest, like God and Mammon, make inconsistent calls on the faithful. Equity solves the problem in a practical way by insisting that fiduciaries give undivided loyalty to the persons to whom they serve. In Bray v Ford , Lord Herschell said: 'It is an inflexible rule of a Court of Equity that a person in a fiduciary position, such as the respondent's, is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded upon principles of morality. I regard it rather as based on the consideration that, human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed expedient to lay down this positive rule.'" 123 After referring to McInerney, their Honours rejected any wider content of the duties of a fiduciary than the no-conflict and no-profit duties in these terms (at 113): "In this country, fiduciary obligations arise because a person has come under an obligation to act in another's interests. As a result, equity imposes on the fiduciary proscriptive obligations – not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict. If these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach. But the law of this country does not otherwise impose positive legal duties on the fiduciary to act in the interests of the person to whom the duty is owed." See also per Gummow J at 135, 137; Chan v Zacharia (1984) 154 CLR 178 at 198-199 per Deane J; Meagher Gummow and Lehane " Equity Doctrines & Remedies ", 4th ed (2002) pp 191-193. 124 In the present case, there was no breach by Johnsons of either a no-conflict duty or a no-profit duty, whether owed to the investors or Rexstraw. Furthermore, the loss suffered by Rexstraw, being the judgment obtained against him by the investors, arose out of breaches by him of his duty of care to the investors. Judgment was entered against him as a consequence of breaches of his own duties, not those of Johnsons. That does not mean that the loss suffered by the investors was not contributed to by Johnsons: only that the loss suffered by Rexstraw was not contributed to by Johnsons. Accordingly, in my opinion Johnsons did not owe any relevant fiduciary duty to Rexstraw which would entitle the latter to seek equitable compensation from it with respect to the loss which he had sustained as a consequence of being ordered to pay damages to the investors as a result of his own negligence. The fiduciary argument of Rexstraw should, therefore, be rejected. Contribution between Provident/O'Sullivan, Rexstraw and Johnsons 125 The primary judge dealt with the question of contribution pleaded in the cross-claims on the basis that Provident/O'Sullivan, Rexstraw and Johnsons were joint tortfeasors, so that liability between them was required to be apportioned in accordance with the provisions of s 5 of the Law Reform Act. It is true that Provident and O'Sullivan were also found liable for the whole of each investor's loss on the basis of non-tortious conduct but that fact does not prevent claims by or against them for contribution under s 5 of the Law Reform Act where each has also been held liable in tort: James v Mortgage Acceptance Nominees Limited (1996) 142 ALR 561. 126 Although Rexstraw, Johnsons and Provident/O'Sullivan all cross-claimed for contribution against each other the primary judge dealt with the issue in three groups: the first between Rexstraw and Provident/O'Sullivan; the second between Rexstraw and Johnsons and the third between Johnsons and Provident/O'Sullivan. 127 As between Rexstraw and Provident/O'Sullivan, the primary judge stated, and in my opinion correctly, that the basic facts which gave rise to the liability of both Rexstraw and Provident/O'Sullivan to the investors were that Jacksons' valuation was not independent and that when Rexstraw informed O'Sullivan about the problem raised by the transfer document, neither did anything to ensure that the investors had the opportunity to consider it. So far as Rexstraw was concerned, although he failed completely to realise what his duties to the investors entailed (he at all times considered that he was a mere conduit and, until the hearing, had maintained that there was no solicitor/client relationship between himself and the investors), he had been explicitly told by Johnsons, and did not demur when told, that instructions were needed from the investors. His response was to do no more than pass the information onto O'Sullivan, neither asking him to do anything about it nor expecting that he would. For reasons which will become apparent, the primary judge seemed to consider that this dereliction of duty on the part of Rexstraw reduced his culpability to the investors significantly below that of Provident/O'Sullivan. 128 As to Provident/O'Sullivan, the primary judge said this: "Provident and O'Sullivan, on the other hand, had been responsible for organising the Vorona transaction, and for making the representations that persuaded the plaintiffs to invest in it. It was O'Sullivan who chose to involve Rexstraw in the project, and it was he who held out to the plaintiffs that they could rely upon Rexstraw's professional ability and trustworthiness. O'Sullivan defined to Rexstraw, in broad terms, the role that Rexstraw was to play in Provident's broking business. It was he who promised the investors that he would make a careful appraisal of the borrower and the security. It was he who decided that the valuation was sufficient, and provided it to Rexstraw. Overall, the guiding hand, the deciding mind, in the whole business venture was O'Sullivan's. Whereas Rexstraw, after receiving advice from the Law Society, had the courage and honesty to acknowledge his shortcomings, O'Sullivan has still not given any credible explanation for so completely abandoning any commitment to the welfare of the investors who had trusted him." As a consequence of the above findings the primary judge apportioned responsibility between Provident and O'Sullivan 65% to 35% respectively. 129 As between Rexstraw and Johnsons, the primary judge found that Johnsons was retained by Rexstraw as his agent for the limited purposes of preparing the security documentation, attending on settlement and obtaining registration of the mortgage. He found that it was not Mr Johnson's responsibility to check that Jacksons' valuation was independent, but that he was entitled to assume that Rexstraw had satisfied himself that it was. Further, when he did contact Rexstraw with respect to the contents of the transfer document, he was entitled to assume that Rexstraw would do as he had explicitly suggested, namely, to obtain the investors' instructions. The primary judge then made the following observations: "Johnson did not proceed to settlement in the knowledge that those instructions had not been sought or obtained. What he received back from Rexstraw was an indication to him that Rexstraw had satisfied himself that it was proper to proceed to settlement. Rexstraw intended that he should draw that inference. He drew it in the context of a busy practice and an obviously urgent transaction. After a lot of persuasive advocacy, and calm and lengthy reflection in my Chambers, I have been persuaded to the view that he should not have drawn it. But it is abundantly clear where the balance of fault lay for what was the main basis of Johnson's liability to the plaintiffs." 130 The primary judge then considered the post-settlement conduct of Johnsons and Rexstraw with respect to complying with the DNR's requisitions concerning the Biermann Superannuation Trust. Having found that it was Rexstraw's task to obtain the necessary documents and that Johnsons had repeatedly requested Rexstraw to provide the necessary information to enable compliance with the requisitions, he concluded as follows: "Had Rexstraw obtained the documents in time the plaintiff would at least have saved their security. The initial error may have been Johnsons but the real blame for not doing what would have prevented that error from having any harmful consequences was Rexstraw's." The primary judge accordingly apportioned liability between Rexstraw and Johnsons 90% and 10% respectively. 131 As between Johnsons and Provident/O'Sullivan, the primary judge noted that Johnsons was retained directly by Rexstraw and had no direct relationship with Provident/O'Sullivan (although it is clear from the evidence that there were many direct communications between O'Sullivan and Johnsons). Having accepted that what must be contrasted was their respective culpabilities in causing harm to the investors, the primary judge apportioned responsibility between Johnsons and Provident/O'Sullivan 10% and 90% respectively. 132 For the sake of completeness I should note that there was also a cross-claim by Johnsons against Jacksons who did not appear at the hearing. Having determined that it was the negligence of Jacksons that lay at the heart of what his Honour referred to as 'this whole sorry tale", he awarded a complete indemnity in favour of Johnsons against Jacksons. 133 The principles guiding the exercise of the discretion to apportion liability under s 5 of The Law Reform Act were authoritatively stated by the High Court of Australia in Podrebersek v Australian Iron & Steel (1985) 59 ALJR 492 where Gibbs CJ, Mason, Wilson, Brennan and Deane JJ said (at 494, omitting citations): "The making of an apportionment as between a plaintiff and a defendant with their respective shares in the responsibility for the damage involves a comparison both of culpability, ie. of the degree of departure from the standard of care of the reasonable man and of the relative importance of the acts of the parties in causing the damage. It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case: for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance." 134 More recently, this Court restated the principles with respect to both the original exercise of the discretion and the review of that discretion on appeal in Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited (2001) 53 NSWLR 626, where Stein JA (with whom Davies AJA agreed) observed (at 637): "It is appropriate to start with the obvious statement that to set aside an apportionment of liability under s 5, it must be shown that the failure to properly exercise the discretion involved an apportionment which was unreasonable or plainly unjust, Oxley County Council v MacDonald [1999] NSWCA 126 at [55] referring to House v The King (1936) 55 CLR 499 at 505. As Hayne J reminded us in Wynbergen v Hoyts Corporation Pty Ltd (1997) 72 ALJR 65 at 68; 149 ALR 25 at 29, the task involves comparison of the culpability of the parties and the relative importance of the acts of the parties in causing the damage. Further, the whole conduct of each negligent party must be subjected to comparison: Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492 at 494; 59 ALR 529 at 532-533." In Podrebersek, the court said (at 493-494; 532): " A finding on a question of apportion(ment) is a finding upon a 'question, not of principle or of positive findings of fact or law, but of proportion, of balance and relative emphasis, and of weighing different considerations. It involves an individual choice or discretion, as to which there may well be differences of opinion by different minds'…" (The decision of this Court in Rolls Royce was the subject of an appeal to the High Court of Australia sub. nom. Amaca Pty Limited v The State of New South Wales (2003) HCA 44 where the appeal was allowed on an issue which, although relevant to the present case, did not touch upon the correctness of the above expression of principle by Stein JA.) 135 It was submitted by Provident/O'Sullivan that the primary judge committed a reviewable error in finding that Rexstraw, after receiving advice from the Law Society, "had the courage and honesty to acknowledge his shortcomings" whereas O'Sullivan had "still not given any credible explanation for so completely abandoning any commitment to the welfare of the investors who had trusted him". It was submitted that, at the very least, Rexstraw's so-called "courage and honesty" in acknowledging his short-comings was an irrelevant consideration in the exercise of the discretion vested in the primary judge by s 5(2) of The Law Reform Act. In light of the recent decision of the High Court in Amaca Pty Limited v The State of New South Wales at [19], it was conceded by Rexstraw that the primary judge had so erred. That concession was properly made. 136 It was submitted by both Provident/O'Sullivan and Rexstraw that the primary judge had also committed a reviewable error in finding that Johnsons' responsibility for the loss sustained by the investors should be determined at only 10%. It was submitted that the culpability of Johnsons and the importance of their conduct in proceeding to settlement in breach of their duty of care to the investors and so disbursing their funds beyond recall, revealed that his Honour's apportionment was either unreasonable or plainly unjust. In my opinion, for the reasons to which I shall now refer, this submission should be accepted. To apportion only 10% of the responsibility for the investors' loss to Johnsons was outside the range of what could legitimately be regarded as a just and equitable contribution to that loss. 137 It is unnecessary to recount the findings of negligence against Johnsons. Suffice it to say that the factors to which I will refer below reveal that Johnsons' culpability, when compared to that of Provident/O'Sullivan and Rexstraw, and the relative importance of their negligent conduct in causing the investors' loss demonstrates a level of responsibility for that loss which substantially exceeds 10%. In my opinion it was therefore not reasonably open to the primary judge to adopt such a low rate of contribution. 138 The factors which lead to that result are as follows: a) Mr Johnson was well aware of the ramifications of the revelation contained in the transfer document of the sub-sale from Mr and Mrs Bartucz to QMS at a purchase price of $250,000 when compared to the purchase price of $695,000 being paid by Vorona to QMS; b) Mr Johnson's appreciation of the significance of this disparity and its potential impact upon the investors (who were lending $450,000 which was intended to be not more than 66% of the value of the property or the purchase price being paid therefor whichever was the lesser) was reflected in his acknowledgement that the investors be informed of this new information and that their instructions be obtained before settlement proceeded; c) Mr Johnson properly informed Rexstraw of the disparity referred to and made it clear to him that it was his responsibility to convey the information to the investors and to obtain their instructions; d) Mr Johnson also realised that he could not proceed to settlement without first obtaining the instructions referred to although he relied upon Rexstraw to obtain them; e) The only response Mr Johnson received from Rexstraw was a copy of Jacksons' valuation (having indicated to Rexstraw that he did not have a copy on 13 February) and its letter to Provident of 26 May 1997 and, on 14 February, the receipt of Rexstraw's amended memorandum of costs; f) Mr Johnson could not recollect whether he had studied the valuation which had been forwarded to him by Rexstraw but accepted that he was aware that the value of the property stated therein was $795,000: in particular, it is clear that he did not read it with sufficient care to realise that, firstly, none of the comparable sales relied upon by Jacksons included the sub-sale of Mr and Mrs Bartucz to QMS; secondly, that the value had been reduced by $100,000 in the letter of 26 May 1997 without explanation; and thirdly, the valuation had been prepared under the instructions of Hodgson whom he knew to be the guarantor of the loan and a director of the borrower, and if he had given the matter a moment's thought, would have had an interest in obtaining a more generous or robust valuation from a conservative valuation; g) Given the necessity for Rexstraw to obtain instructions from some nine different groups of investors, Mr Johnson must have realised that those instructions could not have been obtained between the time he referred the matter to Rexstraw and the following day; h) Without further reference to Rexstraw, Mr Johnson proceeded to settle the transaction; i) Mr Johnson was also aware that one of the groups of investors was lending in their capacity as trustees and that, as it was a contributory mortgage, it would be necessary to satisfy the DNR that those trustees had the power to enter into such a mortgage and that that power was either contained in the trust deed or, if not, all beneficiaries were sui juris and consented to the transaction; j) Mr Johnson was also aware that if he settled before satisfying himself as to the power of Mr and Mrs Biermann to enter into a contributory mortgage in their capacity as trustees of the Biermann Superannuation Trust, there would inevitably be a requisition raised by the DNR which may or may not be able to be satisfied with the consequence that, if not satisfied, the mortgage would be rejected and the investors as a whole would lose their security; k) Mr Johnson became aware that IBEX had lodged its mortgage for registration on 15 May 1997 which made it even more imperative that the requisitions raised by the DNR be complied with as soon as possible to avoid the rejection of the investors' mortgage; l) Although Johnsons on a number of occasions sought the necessary information from Rexstraw's to enable them to respond to the requisition, the information was not forthcoming; m) There was no ethical or contractual reason why, in these circumstances and, in particular, when the DNR was resisting further extensions of time to comply with its requisition, Johnsons could not have contacted Mr and Mrs Biermann directly: yet they failed to do so. 139 It should be observed at this point that, with respect to Johnsons' post-settlement conduct in seeking compliance with the requisition raised by the DNR, the primary judge held that it had no obligation or for that matter right to seek the evidence required to comply with that requisition directly from Mr and Mrs Biermann so long as Rexstraw and Provident & Legal (after Rexstraw's retainer was terminated) were acting as its principals. With respect, I consider that in so finding the primary judge erred. The present case is distinguishable from that of Westcoast Clothing Company Pty Limited v Freehill Hollingdale & Page (1999) Aust. Torts Reports 81-518 where Smith J (of the Supreme Court of Victoria) found that Freehills was prevented by the terms of its retainer with its principal from directly communicating with its client unless expressly instructed to do so. Having referred to the analysis of Deane J in Hawkins v Clayton (1988) 164 CLR 539 at 579 as to the extent to which a solicitor's duty of care is constrained by the terms of his retainer, his Honour said this [38]: "The question whether Freehills was in breach of the duty of care it owed to the plaintiff is to be determined in light of the terms of its retainer with Brott (Freehills' principal) and the circumstances as they evolved. A duty of care was not confined in the manner submitted by Freehills. Ultimately, the obligation on the part of Freehills to the plaintiff was to exercise reasonable care and skill in the course of its retainer as agent of Brott to take all reasonable steps to avoid any real and foreseeable risk of economic loss being sustained by Westcoast. I accept, however, that its retainer prevented it initiating direct communication with the plaintiff without the instructions of Brott." 140 As I have observed, Johnsons was not constrained by the terms of its retainer with Rexstraw insofar as direct communication with the investors was concerned. This is hardly surprising given that Rexstraw did not consider that the investors were his clients. He regarded Provident as his only client. On the other hand, it is clear that Mr Johnson did accept that the investors were his clients notwithstanding the agency relationship between Johnsons and Rexstraw. In these circumstances, I am of the opinion that there came a point when, not having received the required information from Rexstraw, it became necessary for Johnsons to communicate with Mr and Mrs Biermann directly to obtain that information, if Johnsons was to exercise reasonable care and skill to avoid any real or foreseeable risk of economic loss being sustained by the investors due to the rejection of the mortgage by the DNR for non-compliance with the requisition. This further breach of duty by Johnsons, which if complied with would have resulted in the investors recovering $117,000 on the sale of the property, was not taken into account by the primary judge. This is another reason why the primary judge's exercise of discretion with respect to the assessment of Johnsons' responsibility to the investors' loss has miscarried. 141 A reference to the respective culpability of Rexstraw and Provident/O'Sullivan and the relative importance of their negligent conduct in causing the investors' loss is also necessary. With respect to Rexstraw, the following factors emerge: a) Rexstraw, until the hearing, had never considered that the investors were his clients. He regarded himself as no more than a conduit between Provident and the investors. This is so notwithstanding the terms of the Specific Lending Authority (which was addressed by each of the investors to Bruce R Rexstraw & Associates), the Investor Summary and the brochure. These three documents, all of which he had assisted in settling, made it abundantly clear on their face and in the case of the Investor Summary this was done so expressly, that Rexstraw was to be instructed to act as the investors' solicitor for the purpose of the mortgage transaction. In these circumstances Rexstraw's denial that he was acting as such was, with respect, nothing short of breathtaking; b) Given Rexstraw's understanding that the investors were not his clients it is probably not surprising that he did nothing to protect their interests apart from engaging Johnsons as his Queensland agent to prepare the necessary documentation. This notwithstanding, it was not in dispute that Mr Johnson had telephoned Rexstraw at 2.20 pm on 13 February 1997 and informed him as to the disparity between the purchase prices referred to in the transfer document, nor was it in dispute that he had been informed that it was his responsibility to advise the investors and to make contact with them. There is no suggestion that Rexstraw informed Mr Johnson at that time that the investors were not his clients. Notwithstanding the fact that it was made clear to him that it was his responsibility to advise the investors, he did no more than fax a copy of Johnsons' fax to him enclosing a copy of the transfer document to O'Sullivan without comment. He did not inform O'Sullivan as to why he was sending him the transfer document; nor whether he ought to seek instructions from the investors with respect to it; c) Accordingly, Rexstraw neither contacted the investors nor gave them any advice nor sought their instructions in light of what the primary judge referred to as " the great disparity in considerations ". As I have already noted, he regarded himself as a mere conduit to pass such information on to O'Sullivan; d) Notwithstanding that Mr Johnson in his fax dated 13 February 1997 had expressly sought Rexstraw's further instructions, Rexstraw's only response was to forward to Johnsons without comment a copy of Jacksons' valuation and, later, his amended statement of costs. If Rexstraw considered that the provision of a copy of the valuation and/or his costs amounted to giving instructions to Johnsons to settle in circumstances where Mr Johnson had made it clear that it was Rexstraw's responsibility to provide the information to the investors and obtain their instructions as to whether they wished to proceed, then he was grossly and inexplicably misguided; e) Post-settlement, Rexstraw, without any proper basis for doing so, in effect informed IBEX that it could proceed with its second mortgage notwithstanding that he was aware that at least one of the investors had refused to consent to the granting of that mortgage. Of course, had no such mortgage been granted and ultimately registered, the investors' loss would have been reduced by the sum of $117,000, being the proceeds of sale of the property in December 1998; f) Finally, for reasons that were never satisfactorily explained, Rexstraw never obtained the required instructions and information necessary to enable the DNR requisitions with respect to the Biermann Superannuation Trust to be complied with. Again, the request for that information was merely passed on to O'Sullivan upon the basis, one presumes, that Rexstraw considered that the investors were not his clients and therefore he could not communicate with them. Yet there was no evidence that, in passing on these requests to O'Sullivan, Rexstraw brought to the former's attention the necessity to promptly comply therewith or and the dire consequences for the investors that would ensue if their mortgage was rejected due to non-compliance with the requisition. 142 As to Provident/O'Sullivan, the following factors are relevant: a) O'Sullivan failed to appreciate, or even consider, whether Jacksons' valuation was, in fact, " independent ". He was aware that it had been represented to the investors in the Investor Summary that the value of the property in the sum of $795,000 had been " confirmed by independent valuation" ; b) Provident/O'Sullivan had represented to the investors that any risks would be minimised by, inter alia, the " Mortgage Manager " (Provident) carrying out a " careful analysis of all borrowing proposals "; this O'Sullivan failed to do when provided with a copy of the transfer document by Rexstraw that revealed the sub-sale of $250,000. The simple fact is that O'Sullivan simply ignored this crucial piece of information in circumstances where his primary concern was that if there was any further delay in the settlement of the transaction the borrower would withdraw and Provident and himself would be faced with a conflict between protecting Provident's personal interests (represented by its commission) and those of the investors: O'Sullivan chose the former; c) Although not referred to by the primary judge, Provident/O'Sullivan failed, post-settlement, to take any action in a timely manner to comply with the DNR requisitions; d) Finally, as the primary judge found, " the guiding hand, the deciding mind, in the whole business venture was O'Sullivan's ". As he also found, O'Sullivan was unable to provide any credible explanation " for so completely abandoning any commitment to the welfare of the investors who had trusted him ". In my opinion, the only explanation that can be inferred from the evidence is that O'Sullivan was interested only in promoting and protecting his own and Provident's financial interest, which was satisfied by the settlement of the transaction and the payment of the balance of Provident's commission ($7,500) from the loan proceeds. This meant that Provident/O'Sullivan would have no concerns about their own interest in any post-settlement issues raised by the DNR's requisitions. 143 It will be seen from a comparison of the factors that I have recorded with respect to the conduct of Provident/O'Sullivan, Rexstraw and Johnsons that each was guilty of a significant departure from the standard of reasonable care required of them. Furthermore, the acts of each were significant causative factors in the investors' loss. As between Rexstraw and Johnsons, I consider that, as solicitors, Rexstraw's share of responsibility to the investors' loss is greater than that of Johnsons. It is true, as the primary judge found, that had Provident/O'Sullivan not accepted Jacksons' valuation as "independent", the loan would not have been advanced and the investors would have suffered no loss. Apart from the negligence of Jacksons, it was that of Provident/O'Sullivan that set in train a course of events which was doomed from the start. I have therefore come to the conclusion that the level of culpability and the importance of the conduct of Provident/O'Sullivan in causing the investors' loss is slightly greater than that of Rexstraw which, in turn, is slightly greater than that of Johnsons. 144 As the primary judge's discretion miscarried to the extent necessary to justify appellate intervention, it becomes necessary in light of the factors referred to above for this Court to re-exercise the discretion conferred on it by s 5(2) of the Law Reform Act . Having regard to the extent of each party's responsibility for the investors' loss, I find it to be just and equitable to apportion that responsibility as follows: Provident/O'Sullivan – 42.5% Rexstraw – 33.5% Johnsons – 24%. 145 The effect of the foregoing is as follows: a) In CA 40943/02 between Rexstraw as appellant and Johnsons as respondent, Rexstraw has succeeded in having Johnsons' percentage contribution increased. Accordingly, that appeal should be allowed, appropriate orders made setting aside the primary judge's orders that relate to Johnsons' contribution and in lieu thereof orders made to reflect Johnsons' contribution of 24%. Johnsons should pay the costs of that appeal. b) In CA 40975/02 between Johnsons as appellant and the investors, Provident, O'Sullivan and Rexstraw as respondent, Johnsons have failed with respect to their appeal on liability as well as contribution. Accordingly, that appeal should be dismissed with costs. c) In CA 40944/02 between Provident and O'Sullivan as appellants and the investors, Johnsons and Rexstraw as respondents, Provident and O'Sullivan have failed on their appeal on liability but have partially succeeded on contribution which has been reduced from 58.5% to 42.5%. Accordingly, that appeal should be allowed in part, appropriate orders made setting aside the orders of the primary judge that relate to Provident/O'Sullivan and Rexstraw's contribution and in lieu thereof orders made that reflect Provident/O'Sullivan's contribution of 42.5% and Rexstraw's contribution of 33.5%. Provident/O'Sullivan should pay the investor's costs of this appeal but as between Provident/O'Sullivan and Rexstraw, there should be no order as to the costs of this appeal. 146 I would therefore propose that the parties be required within 14 days of the date of this judgment to bring in short minutes of order to reflect the findings in [146]. In the event of disagreement, the parties are to have liberty to apply to me on 48 hours notice for further directions. 147 I also propose that the Registrar of the Court of Appeal should forward a copy of this judgment to the Law Society of New South Wales and the Legal Services Commissioner. 148 FOSTER AJA: I agree. ********** Last Modified: 03/19/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.