New South Wales Court of Appeal CITATION: Ibrahim v Pham [2007] NSWCA 215 HEARING DATE(S): 5, 6, & 7 June 2007 JUDGMENT DATE: 21 August 2007 JUDGMENT OF: Hodgson JA at 1; Santow JA at 2; Campbell JA at 3 DECISION: Appeal dismissed with costs. CATCHWORDS: LEGAL PROFESSION – negligence – where solicitor retained to advise on mortgage and loan contract – where solicitor not retained to provide advice on proposed investment – whether solicitor had knowledge of unique risks posed by investment – where investment subsequently failed – whether solicitor liable for failure to advise on investment - EQUITY – fiduciary obligations – solicitor-client relationship – conflict of interest – whether conflict between solicitor's duty and interest – where solicitor had prior business dealings with other party to investment contract – whether solicitor dissuaded client from seeking independent legal advice – whether solicitor ought to have refused to act for client - EQUITY – fiduciary obligations – solicitor-client relationship – conflict of interest – reference for independent legal advice – whether reference for independent legal advice adequate – whether independent legal adviser independent - TORTS – negligence – duty of care – scope of duty of care – solicitor-client relationship – whether retainer limited or general - TORTS – negligence – essentials of action for negligence – causation – where solicitor failed to advise on investment – where investment subsequently failed – whether solicitor's failure to advise caused loss – whether client relied on solicitor's advice – where investor so highly keen to invest that investment was inevitable - CORPORATIONS – managed investment schemes – requirement for registration – where scheme not registered – whether investment contracts in unregistered scheme illegal – consequences of operating unregistered scheme – exemptions from registration requirements – Corporations Law, Ch 5C - EVIDENCE – admissibility and relevance – tendency evidence – where trial Judge rejected tendency evidence – whether trial Judge erred in rejecting evidence – whether evidence was "tendency evidence" – whether evidence provided evidence of "any relevant or material tendency" – whether evidence had "significant probative value" – whether admission of evidence would result in "undue waste of time" – notice of intention to adduce tendency evidence – Evidence Act 1995, ss 97, 99, 135 - EVIDENCE – witnesses – expert witness – solicitor expert witness – where expert witness's report based on erroneous assumptions – failure of trial judge to accept expert witness's evidence – whether trial judge erred in failing to accept expert witness's evidence - EVIDENCE – witnesses – failure to call witness – whether witness one expected to be called by one party rather than the other – adverse inferences – Jones v Dunkel (1959) 101 CLR 298 - APPEAL AND NEW TRIAL – appeal – appeal by way of rehearing – interference with Judge's findings of facts – credit findings – whether findings "glaringly improbable" or "contrary to compelling inferences" – Fox v Percy (2003) 214 CLR 118 - APPEAL AND NEW TRIAL – appeal – appeal by way of rehearing – insufficiency of reasons – whether trial Judge's reasons insufficient – whether appellant denied procedural fairness - APPEAL AND NEW TRIAL – appeal – appeal by way of rehearing – admission of fresh evidence – whether fresh evidence should be admitted on appeal - APPEAL AND NEW TRIAL – appeal – appeal by way of rehearing – points and objections not taken below – where appellant failed to put point below – whether point able to be put on appeal - PROCEDURE – courts and judges generally – delay in delivery of judgment – whether delay in delivery of judgment occasioned a miscarriage of justice – where delay between hearing and delivery of judgment less than eight months – whether error in judgment manifest - TRADE AND COMMERCE – definitions and general – solicitors – whether solicitor engaged in "trade or commerce" – Fair Trading Act 1987, Trade Practices Act 1975 (Cth) - TRADE PRACTICES – consumer protection – misleading and deceptive conduct – solicitor-client relationship – representation by silence – where solicitor not under duty to advise on investment contract – whether solicitor's silence on investment amounted to representation about investment - GUARANTEE AND INDEMNITY – contract of guarantee – guarantee for investment – where same solicitor acted for guarantor and borrower – where solicitor advised both guarantor and borrower in same room Companies Act 1936 (NSW) Companies Act 1961 (NSW) Companies Act 1981 (Cth) Corporations Act 2001 (Cth) LEGISLATION CITED: Corporations Law Evidence Act 1995 Evidence Regulation 2000 Fair Trading Act 1987 Managed Investments Act 1998 (Cth) ASIC v Vines [2003] NSWSC 1237 Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491 Australian Securities and Investments Commission v Karl Suleman Enterprizes Pty Ltd (in liq) [2003] NSWSC 400; (2003) 45 ACSR 401 Australian Softwood Forests Pty Ltd v Attorney General for the State of NSW (1982) 148 CLR 121 Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 Cousins v Cousins (Court of Appeal, 18 December 1990, unreported) De Winter v De Winter (1979) 23 ALR 211 Fox v Percy (2003) 214 CLR 118 Hawkins v Clayton (1988) 164 CLR 539 Ibrahim & Ors v Pham & Ors [2004] NSWSC 650 Ibrahim v Pham [2005] NSWSC 246 CASES CITED: Jacara Pty Ltd v Perpetual Trustees WA Ltd [2000] FCA 1886; (2000) 106 FCR 51 Jones v Dunkel (1959) 101 CLR 298 Karl Suleman Enterprizes Pty Ltd (in liq) (ACN 090 895 364) v Babanour [2004] NSWCA 214; (2004) 49 ACSR 612 Kinnell v Connelly [2007] NSWCA 17 Manly Council v Byrne [2004] NSWCA 123 Mier v FN Management Pty Ltd [2005] QCA 408; [2006] 1 QdR 339 Monie v Commonwealth of Australia (2005) 63 NSWLR 729 Payne v Parker [1976] 1 NSWLR 191 Perre v Apand Pty Ltd (1999) 198 CLR 180 Pilmer v Duke Group Limited (in liquidation) (2001) 207 CLR 165 Regina v Ellis [2003] NSWCCA 319; (2003) 58 NSWLR 700 Trylow v Commissioner of Taxation [2004] FCA 446; (2004) 55 ATR 408 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 Rima Ibrahim - First Appellant Sargon Najorian Badal - Second Appellant Badal Investments Pty Limited - Third Appellant Philip Pham - First Respondent PARTIES: Pham Atic Pty Limited - Second Respondent Fred David - Third Respondent Suzy David - Fourth Respondent Paul Manuelpillai Dominic - Fifth Respondent Linda Joan Gloria Romano - Sixth Respondent FILE NUMBER(S): CA 40305/05 DE Baran - Appellants COUNSEL: DR Pritchard - First and Second Respondents R Darke SC; M Dicker - Third to Sixth Respondents Barclay Benson Solicitors - Appellants SOLICITORS: Ebsworth & Ebsworth Lawyers - First and Second Respondents Middletons Lawyers - Third to Sixth Respondents LOWER COURT JURISDICTION: Supreme Court - Common Law Division LOWER COURT FILE NUMBER(S): 20483/02 LOWER COURT JUDICIAL OFFICER: Levine J LOWER COURT DATE OF DECISION: 30 March 2005 LOWER COURT MEDIUM NEUTRAL CITATION: Ibrahim v Pham [2005] NSWSC 246 HEADNOTE FACTS The first and second appellants were members of the tight-knit Assyrian community in Western Sydney. After hearing a radio advertisement in mid-2000, they became interested in investing in Karl Suleman Enterprizes ("KSE"), which was operated by another member of the Assyrian community. The first and second appellants made enquiries about investing in KSE, and were informed by a representative of KSE that they would receive a fortnightly return of $1,350 for ten years on a $50,000 investment in a trolley collection business. The first and second appellants decided that, if they could raise the finance, they would invest $50,000 in KSE. Accompanied by the KSE representative, the first and second appellants consulted the first respondent, who was a solicitor and mortgage broker, for assistance in raising finance to invest in KSE. The first respondent informed the first and second appellants that, because he acted for Karl Suleman, he would not be able to provide advice on the mortgage or the investment, but that he could assist the first and second appellants with their loan application. The first respondent advised the first and second appellants to seek independent legal advice in relation to the mortgage and investment before they entered into any agreements. The first respondent assisted the first and second appellants with their loan application and referred them to Mr Nguyen, who was also a solicitor, to obtain independent legal advice about the mortgage and investment. The first and second appellants were successful in raising $70,000 finance, with the loan being issued in the second appellant's name and secured against a home unit owned by the first appellant. The first and second appellants consulted Mr Nguyen for independent legal advice. Mr Nguyen provided advice about the loan and mortgage documentation, but did not advise on the proposed investment in KSE. Mr Nguyen advised the first and second appellants that they risked losing the home unit if the business failed and they were not able to meet their loan repayment obligations. The first and second appellants, being willing to accept this risk, subsequently invested $50,000 of their borrowings, through the third appellant company, in the KSE trolley collection business in September 2000. Between September 2000 and May 2001, the first and second appellants found their investment with KSE most satisfactory, and received the promised fortnightly payments of $1,350 on time. In late May 2001, they discussed making a further investment in KSE and made an appointment with Quick Loan Services to arrange refinancing the existing loan to make an additional investment in KSE. The first and second appellants made an application for finance to Quick Loan Services, and were successful in raising $120,000, which was to be borrowed from Perpetual Trustees Australia Limited. Quick Loan Services directed the first and second appellants to Dominic David Stamford ("DDS"), a law firm in which the third to sixth respondents practised, for DDS to act for the first and second appellants in connection with the second borrowing. The first appellant contacted DDS, and spoke with Ms Jajoo, an employee of the firm. The first and second appellants retained DDS to act for them as borrowers and mortgagor in respect of the loan and mortgage transaction with Perpetual Trustees. DDS did not expressly accept a retainer to act or advise in relation to the proposed investment, nor did it assume any such responsibility. Ms Jajoo acted for the first and second appellants in relation to the refinancing and arranged for the discharge of the existing mortgage. At a meeting in early July 2001, she explained the mortgage document to the first and second appellants, informing them that the mortgagee had a power to sell the property if they fell behind even once in making a payment, and that they would be personally liable if there were a shortfall on the mortgagee's sale. Ms Jajoo also explained that the first and second appellants were being charged for mortgage insurance, but that that insurance was for the lender's benefit, rather than for their own benefit. She advised the first and second appellants to take out mortgage insurance that would cover them. Ms Jajoo also explained to the first and second appellants that she was providing advice only in relation to the legal effects of the mortgage and loan, and that she was not giving any financial advice. Towards the end of the meeting, Ms Jajoo became aware that the first and second appellants intended to use the money borrowed to invest in KSE. Ms Jajoo informed the first and second appellants that DDS had referred Mr Suleman to another firm of lawyers to arrange a complete restructure of his business interests, but that DDS had not heard whether that restructure had been finalised. Ms Jajoo then advised the first and second appellants to see an independent lawyer and financial adviser for advice about the investment. The first appellant responded by saying that she and the second appellant had done business with Mr Suleman before, and that she did not care if she was gambling, because she knew Mr Suleman well. By mid-July 2001, DDS staff had completed the mechanics of settling the mortgage transaction. The first and second appellants subsequently invested a further $45,555.39 with KSE. In December 2001, KSE went into liquidation. It seems likely that a large part of the money invested has been lost. The appellants commenced negligence proceedings against the six respondents; Fair Trading Act 1987 claims against the first, third, fourth, fifth and sixth respondents; a Trade Practices Act 1975 (Cth) claim against the second respondent (which was a solicitor corporation through which the first respondent later came to conduct his practice); and proceedings for breach of fiduciary duty against the six respondents. The appellants claimed, inter alia, that the first respondent failed to provide proper legal advice as to the nature and effect of the investment; that the first respondent had a conflict between the duty he owed the appellants and the interest he had as Mr Suleman's solicitor; that the first respondent failed to disclose his conflict of interest and ensure that the appellants seek independent legal advice; and that the first respondent, in trade or commerce, made representations by silence as to the proposed investment being a good investment, upon which the appellants relied. Further, the appellants claimed, inter alia, that the third to sixth defendants failed to provide proper advice about the investment contract; negligently failed to disclose a conflict of interest; misrepresented that the investment was a good investment; and failed to ensure that the first appellant, as guarantor, seek independent legal advice. One element of the claims in negligence was that the respondents failed to provide proper legal advice as to the nature and effect of the proposed investments. The appellants contend the proposed investment was one to which Chapter 5C of the Corporations Law applied because the proposed investment was an investment in a managed investment scheme ("MIS"). Section 601ED(1) of the Corporations Law required a MIS to be registered if it satisfied one or more of a number of criteria, including that the MIS had more than 20 members; an unregistered MIS that was required to be registered was liable to be wound up under section 601EE of the Corporations Law upon the application of the Australian Securities and Investments Commission ("ASIC"), a person operating the scheme, or a member of the scheme. The scheme in which the appellants invested was not registered. The appellants claimed that the first respondent knew that the proposed investment was one that fell within Chapter 5C of the Corporations Law, and that the scheme was not registered. They claimed that the first respondent failed to advise them on the risk of the scheme being wound up, and that this constituted a breach of the first respondent's duty of care and fiduciary duty. Mr Suleman, however, had informed the first respondent, incorrectly, on a number of occasions, that the registration had been taken care of by another firm of solicitors, and that the first respondent need not concern himself with the registration. The trial judge found that, at the time of the first respondent's dealings with the appellants, the first respondent had an honest and reasonable belief that any scheme was registered. Accordingly, the trial judge held that the first respondent did not breach the duties he owed the appellants in this regard. The trial judge found that none of the defendants had breached their tortious or fiduciary duties, and that the claims under the Fair Trading Act 1987 and the Trade Practices Act 1975 (Cth) also failed. The appellants appealed against the trial judge's decision on a number of grounds, including that: 1. the trial judge erred in holding that the investor contracts did not contravene the Corporations Law; 2. the trial judge made determinations of the credit of the first and second appellant that were contrary to independent, incontrovertible and incontestable facts such that the determinations were glaringly improbable; 3. the trial judge erred in drawing an adverse inference against the appellants because of the appellant's failure to call the KSE representative who introduced them to the first respondent to give evidence; 4. the trial judge erred in dismissing the negligence claim and the claim for breach of fiduciary duty against the first respondent because the trial judge erred: i. in finding that Mr Nguyen was independent; ii. in finding that the first respondent had an honest and reasonable belief that the scheme was registered; iii. in finding that the first respondent was retained under a limited retainer that did not involve the provision of advice on the proposed investment; iv. in rejecting evidence given by an expert witness as to the practice of solicitors in situations of the general type with which this litigation is concerned; v. in failing to hold that there was a breach of duty occasioned by the conflict between the first respondent's self interest and his duty to the appellants; and vi. in determining causation adverse to the appellants; 5. the trial judge erred in rejecting the claim under the Fair Trading Act 1987 by: i. failing to hold that the first respondent made a representation by silence that the investment was a good investment; and ii. holding that the first respondent's conduct was not in "trade or commerce"; and iii. holding that the appellants did not rely on any representation made by the first respondent; 6. the trial judge erred in dismissing the negligence claim and the claim for breach of fiduciary duty against the third to sixth respondents because the trial judge erred: i. in determining that no conflict existed between the duties DDS owed to the appellants and the duties DDS owed to Mr Suleman; and ii. in determining causation adverse to the appellants; 7. the trial judge erred in rejecting certain tendency evidence that the appellants sought to adduce; and 8. the inordinate and unacceptable delay between the hearing and the delivery of judgment resulted in a denial of procedural fairness and a miscarriage of justice. HELD (per Campbell JA; Hodgson and Santow JJA agreeing): 1. As to the legal effect of an unregistered managed investment scheme (where registration of that managed investment scheme was required): a. Contracts for investment in an unregistered managed investment scheme are not invalid or illegal; they are voidable at the option of the investor or operator. Karl Suleman Enterprizes Pty Ltd (in liq) (ACN 090 895 364) v Babanour [2004] NSWCA 214; (2004) 49 ACSR 612, applied. b. Whether the contract is lawful is a different question to whether the operator has committed a criminal offence under section 601ED(5) of the Corporations Law by operating a managed investment scheme that the section requires to be registered. c. The investment contracts in issue here were not illegal contracts. 2. As to the trial judge's finding concerning the appellants' credit: a. An appellate court can overturn a factual finding of a trial judge that is influenced by the trial judge having had the advantage of seeing the witnesses only in circumstances where the judge has " failed to use or palpably misused his advantage ", or where " incontrovertible facts or uncontested testimony " demonstrate the findings to be erroneous, or where they are " glaringly improbable " and " contrary to compelling inferences ". Fox v Percy (2003) 214 CLR 118, followed. b. The trial judge was not mistaken in the view that he took concerning the credit of the appellants. 3. As to the Jones v Dunkel ruling the trial judge made against the appellants: a. Before Jones v Dunkel (1959) 101 CLR 298 can be used as the basis for drawing an inference unfavourable to a party in litigation, the missing witness must be one who would be expected to be called by one party rather than the other. Payne v Parker [1976] 1 NSWLR 191; Manly Council v Byrne [2004] NSWCA 123, applied. b. The missing witness in this case was not one who would be expected to be called by one party rather than the other. c. Even if the trial judge were in error in drawing a Jones v Dunkel inference, no error was thereby produced, because there was sufficient other evidence on which the trial judge based his finding as to the unsatisfactoriness of the appellants' evidence. De Winter v De Winter (1979) 23 ALR 211, followed. Kinnell v Connelly [2007] NSWCA 17, applied. 4. As to whether the first respondent was in breach of his tortious or fiduciary duties: a. The first respondent's retainer was a limited one that did not involve advising on the investment contract, but rather involved acting (in his capacity as a mortgage broker) as a procurer of finance, and (as a solicitor) in the comparatively mechanical tasks involved in settling the mortgage transaction. b. The trial judge was not in error in drawing the conclusion that the first respondent, at the time of his dealings with the appellants, had a reasonable and honest belief that the managed investment scheme was registered. c. The trial judge was not in error in finding that the first respondent took adequate steps to refer the appellants for independent legal advice, and that the solicitor to whom the first respondent had referred the appellants was independent of Mr Suleman and the first respondent. d. The trial judge was not in error in rejecting the evidence of an expert witness who gave evidence of the practice of solicitors in situations of the general type with this litigation is concerned, because the expert evidence was based on incorrect assumptions. e. The first respondent's prior business dealings with Mr Suleman did not create a conflict between the first's respondent's duty to the appellants and his own self interest. f. In these circumstances, the first respondent was neither negligent nor in breach of his fiduciary duties. g. The trial judge's findings (based on the hypothetical that the first respondent had breached a duty owed to the appellants) that there was no causative link between the first respondent's conduct and the appellants loss was not erroneous, because of the appellants' enthusiasm to invest and willingness to accept the risk of losing property. 5. As to whether the first respondent was in breach of the Fair Trading Act 1987 : a. The first respondent, having excluded from the retainer any duty to advise about the investment and having a reasonable and honest belief that the managed investment scheme was registered and that Karl Suleman Enterprizes was in a solid financial state (and, hence, having no reason to suspect that the investment was not good), was under no duty to speak about the investment. b. Accordingly, the first respondent did not make a representation (by silence) that the investment was a good investment. c. Additionally, the first respondent did not, by any other means, make a representation that the investment was a good investment. d. There being no representation, the claim under the Fair Trading Act 1987 must fail. e. Because there was no representation made by the first respondent, there is no need to determine whether the first respondent was engaged in "trade or commerce" for the purposes of the Fair Trading Act 1987 . 6. As to whether the third to sixth respondents were in breach of their tortious or fiduciary duties: a. DDS was retained only to provide advice on the loan and mortgage; it did not undertake to advise on the investment contract. b. Ms Jajoo advised the appellants to seek independent legal advice on the investment contract; however, Ms Jajoo's advice was emphatically rejected by the appellants. c. Before it can be said that there is a conflict between a fiduciary's duty and their own personal interest, the conflict must be identified. Pilmer v Duke Group Limited (in liquidation) (2001) 207 CLR 165, followed. d. DDS's past dealings with Mr Suleman were not enough to constitute a conflict between the fiduciary duties it owed the appellants and its own self interest (of expecting further work from Mr Suleman). e. In these circumstances, the third to sixth respondents were neither negligent nor in breach of their fiduciary duties. f. The trial judge's findings that even if the third to sixth respondents had have been in breach of their duties, there was no causative link between the breach and the loss was not erroneous, because the appellants' were so willing to make the second investment that the investment was inevitable. 7. As to whether the trial judge erred in rejecting certain tendency evidence: a. An appellate court is able to set aside a trial judge's admission or rejection of evidence under section 97 of the Evidence Act 1995 where the opinion that the trial judge formed was not an opinion that a reasonable judge properly instructed could have formed. b. The trial judge was not in error in rejecting the alleged tendency evidence under section 97 of the Evidence Act 1995 because, even if the evidence did provide evidence of a " relevant or material tendency ", the general nature of the evidence was a handicap to the evidence having " significant probative value ". c. Additionally, it was open to the trial judge to conclude, in accordance with section 135 of the Evidence Act 1995 , that admitting the evidence would result in an undue waste of time. 8. As to the trial judge's delay in delivering judgment: a. Delay in delivery of a judgment, while never to be encouraged, does not, of itself, justify upholding an appeal against the judgment; it is necessary to establish an error in the judgment before an appellate court will intervene. Monie v Commonwealth of Australia (2005) 63 NSWLR 729, applied. b. No error in the trial judge's judgment has been established. Appeal dismissed with costs . ********** PART A – FACTUAL BACKGROUND Para No Introduction 4 Facts as Found by the Trial Judge Concerning the Borrowings 12 Background to the Borrowings 13 Making of the First Borrowing and Investment 19 Findings Concerning Causation of Damage – Mr Pham 44 Making of the Second Borrowing and Investment 48 Findings Concerning Causation of Damage – DDS 68 PART B – MANAGED INVESTMENT SCHEMES Background 69 The Need for Registration 76 Consequences of Operating a MIS Without Registration 83 Other Requirements Relating to MISs 88 Exemptions 89 Application to the Contracts in this Case 90 PART C – GROUNDS OF APPEAL Grounds of Appeal Generally 93 The Trial Judge's Finding Concerning the Appellants' Credit 95 Jones v Dunkel and Mr Varda 101 Grounds of Appeal Re: Mr Pham Scope of Mr Pham's Retainer 108 Mr Pham's Belief About Compliance of the Investment 111 Adequacy of Mr Pham's Reference for Independent Advice 145 Mr Pham's Representation by Silence? 147 Prior Commercial Dealings of Mrs Ibrahim and Mr Badal 156 Independence of Mr Nguyen 158 Mr Cornelius's Evidence 162 Alleged Conflict of Interest by Mr Pham 166 Wrong Finding Concerning Illegality of the Investment Contracts and Scheme 173 "In Trade or Commerce" 177 Reliance and Causation Concerning Mr Pham 179 Grounds Of Appeal Re: DDS Failure of Ms Jajoo to Refer for Independent Advice 184 DDS Alleged Preference of Interest Over Duty 210 Insufficiency of Reasons/Denial of Procedural Fairness 223 Causation Re: DDS 225 PART D – ADDITIONAL GENERAL GROUNDS OF APPEAL Tendency Evidence 229 The Legislation 230 The Tendency Notice Against Mr Pham 235 The "Tendency" Evidence Against Mr Pham 237 The Tendency Notice Against DDS 244 The "Tendency" Evidence Against DDS 248 Respondents' Voir Dire Evidence 256 The Trial Judge's Decision 258 Did the Trial Judge Err? 261 Fresh Evidence 268 Delay in Delivery of Judgment 269 Order 275 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40305/05 SC 20483/02 HODGSON JA SANTOW JA CAMPBELL JA 21 August 2007 RIMA IBRAHIM & ORS v PHILIP PHAM & ORS Judgment 1 HODGSON JA: I agree with Campbell JA. 2 SANTOW JA: I agree with Campbell JA. 3 CAMPBELL JA: PART A – FACTUAL BACKGROUND Introduction 4 The First Appellant, Mrs Rima Ibrahim, and the Second Appellant, Mr Sargon Badal, borrowed money on two separate occasions, in 2000 and 2001. The first borrowing was of $70,000. Most of it was used to fund an investment that came to be in the name of the Third Appellant, Badal Investments Pty Limited ("Badal Investments"), in Karl Suleman Enterprizes Pty Ltd ("KSE"). The second borrowing was of $120,000. Most of it was used to pay out the first borrowing, and to fund the making of a further investment of $50,000 by Mr Badal in KSE. Both borrowings were secured by a mortgage over a home unit that Mrs Ibrahim owned in Fairfield. 5 The First Respondent, Mr Philip Pham, is a solicitor who carried on his practice in Fairfield. He acted for Mrs Ibrahim and Mr Badal in connection with the first borrowing. As well as being a solicitor, he operated a mortgage broking business. He had an agreement with a financier under which his tasks were to complete the loan application for the applicant, collate the required paperwork, and send the completed application to the bank from which the loan was being sought. He received brokerage fees from financiers and mortgage managers for performing this work. 6 After all dealings between Mrs Ibrahim, Mr Badal and Mr Pham had concluded, Mr Pham entered partnership with another solicitor. The Second Respondent is a corporation, and also a solicitor corporation, through which Mr Pham and that partner then came to conduct their practice. Counsel for the Appellants accepts that the Second Respondent has no legal liability to any of the Appellants. 7 The Third to Sixth Respondents are solicitors who conducted practice in Fairfield under the name of Dominic David Stamfords ("DDS"). Their employee, Ms Sabrina Jajoo, acted for Mrs Ibrahim and Mr Badal in connection with the second borrowing. While Ms Jajoo was not a defendant in the litigation, she is married to Mr Fred David, one of the DDS Respondents. 8 At the times that Badal Investments and Mr Badal made their investments in KSE, KSE was also receiving money for investment from other people. KSE was placed in liquidation on 7 December 2001. An order was made in the Equity Division of the Supreme Court on 10 December 2001 that the fund resulting from investments made in KSE and various associated entities should be wound up. The final outcome of those windings up is not yet known. However, it seems likely that a large part of the money that Badal Investments and Mr Badal invested in KSE has been lost, and Badal Investments and Mr Badal have not received the returns on their investments that Mrs Ibrahim and Mr Badal expected. 9 Badal Investments was never a client of Mr Pham, nor an entity that he had any reason to believe might be affected by the way he acted for Mrs Ibrahim and Mr Badal. The case on damages was presented, both to the trial judge and to this Court, on the basis that Badal Investments was a mere conduit, and that all the loss arising from both investments had been suffered by Mrs Ibrahim and Mr Badal personally. Thus, while Badal Investments is an Appellant, it claims no order in its favour. In those circumstances, I shall henceforth refer to Mrs Ibrahim and Mr Badal as "the Appellants", and shall refer to Badal Investments by name. 10 The Appellants allege that each of the Respondents breached duties owed to the Appellants. Those duties are, in summary, a common law duty of care, an obligation under the Fair Trading Act 1987 not to engage in misleading and deceptive conduct, and a fiduciary duty. 11 The trial judge rejected all those claims: Ibrahim v Pham [2005] NSWSC 246. The Appellants appeal against the trial judge's order dismissing their claim. Facts as Found by the Trial Judge Concerning the Borrowings 12 In this section of the judgment I will set out a summary of some of the facts as found by the trial judge. Background to the Borrowings 13 At the time of the events in question, Mrs Ibrahim and Mr Badal had lived together for ten or eleven years, in Mrs Ibrahim's home unit. They were members of the Assyrian community who believed in, and were proud of, Mr Suleman. The Assyrian community in Australia is largely in New South Wales, and predominantly around the Fairfield area of Sydney. The community has its own churches and radio and newspaper in the Assyrian language. The community is tight-knit, loyal and supportive of one another. The Assyrian community is proud of any member of the community who succeeds in the wider Australian community. Most of Mrs Ibrahim's friends and acquaintances are within the Assyrian community. 14 Before seeing any of the Respondents, the Appellants had "a degree" of relevant prior commercial dealings and experience. Mrs Ibrahim had executed a loan document with Esanda in April 2000, and used the proceeds to purchase a vehicle that was registered in her name. She had made applications, in May 2000, to the Community First Credit Union, and to St George Bank, for loans. In 1997 she had applied for and obtained finance from Bing Lee Finance and AGC Credit. 15 She had received some money from litigation in 1986, 1988, and 1992. She was represented by solicitors in those proceedings. She had purchased her home unit in 1988, and had engaged a solicitor for that task. 16 Mr Badal had been employed by Plastyne Projects. There, he had been a union representative, and had negotiated on behalf of union members with the management in relation to salary and working conditions. He had been involved in formulating how the conditions of enterprise bargaining agreements should be improved. 17 Mrs Ibrahim first became aware of Mr Suleman in around 2000. She understood that he was a member of the Assyrian community, who was doing some sort of business. As she understood it, everyone in the Assyrian community was speaking very highly of Mr Suleman, and the "whole of the Assyrian community" had invested with him. She had heard that some people had invested $500,000 or $1,000,000. As she understood it, numerous members of the community had invested significant sums of money with Mr Suleman, and many people who were investing with Mr Suleman borrowed money to do so. 18 Mr Badal had also heard of Mr Suleman before he first saw Mr Pham. He had heard about Mr Suleman at work, at the shopping centre, and on the radio. He had heard that a lot of people had invested with Mr Suleman, and were succeeding in their lives. Making of the First Borrowing and Investment 19 The immediate trigger for Mrs Ibrahim and Mr Badal taking steps towards an investment in KSE was that Mrs Ibrahim heard a radio advertisement. The next day, she rang a telephone number that she had obtained from the advertisement. She spoke to Mr David Varda. Mr Varda told her that the amount of return on an investment depended on how much was invested, and that on a $50,000 investment the return would be $1,350 every two weeks for 10 years. 20 At this time, Mrs Ibrahim was in receipt of a pension. She did not want to receive income from any investment, because it would affect her pension. Mr Badal did not have $50,000 to invest, so if such an investment were to be made, there would have to be a borrowing of $50,000, and it would be necessary for Mrs Ibrahim to put her unit up to support the borrowing. 21 Mrs Ibrahim told Mr Badal about her telephone call with Mr Varda. Mr Badal had heard about other people investing amounts from $50,000 to $1,000,000 with Mr Suleman. He had spoken to four or five people about the investment. He told Mrs Ibrahim that he wished he had some money to invest with Mr Suleman, and she offered to help him get the $50,000. She said to him, "we go see and talk first, see if we can get some loan and see what we can do and I will help you" to borrow some money. 22 Next, Mr Badal and Mrs Ibrahim went to see Mr Varda. Mr Badal said to Mr Varda, "I want to invest with Karl Suleman but I don't have any money but Rima has a house. We need to obtain finance, I am just here to make enquiries." Mr Badal said to Mrs Ibrahim, "I want you to be a guarantor for me so I can get the $50,000 loan and to put up your house". Mr Varda told Mrs Ibrahim that she could be a guarantor both on the telephone, and when she went to see him. 23 Mr Varda told Mrs Ibrahim that she should invest, that it was a very good business, that she would not be sorry, and that she would get a good amount of income from it. Mrs Ibrahim believed Mr Varda. 24 Mr Varda went with Mrs Ibrahim and Mr Badal to Mr Pham's office. They spoke further outside Mr Pham's office. 25 When Mrs Ibrahim went into Mr Pham's office she believed, because of what Mr Varda had told her outside, that there would be a return of $1,350 per fortnight. She believed, from what she had heard in the Assyrian community, from what she had heard on the radio, and from what she had heard from Mr Varda, that it was a good investment to invest with Mr Suleman. She had decided that if a loan could be obtained, then she would go ahead with the investment. Before seeing Mr Pham, Mrs Ibrahim and Mr Badal had already decided to invest $50,000 with Mr Suleman, and had decided that Mrs Ibrahim would put up her unit to obtain the necessary loan to invest. 26 The trial judge found, at [75], that Mrs Ibrahim and Mr Badal "only ever went to see Pham for his assistance in raising finance for the investment which they had already decided to make." 27 Mrs Ibrahim and Mr Badal met Mr Pham on three separate occasions. The first was in late July or early August 2000. The second was on 9 August 2000. The third was on 30 August 2000. 28 At the first meeting between Mrs Ibrahim, Mr Badal, Mr Varda and Mr Pham, Mr Pham was told that the Appellants wanted his assistance in raising finance. Mr Pham understood that they both wanted to invest with Mr Suleman. The trial judge, at [138], accepted Mr Pham's evidence as follows: "Mr Varda said: "Philip can [you] help these people obtain finance to invest with KSE? I said : " I will try. I'll talk to them and find out whether they qualify. How much do you want to borrow?" Badal said : "$70,000." I said : "Do you have a house?" Ibrahim said : "No, I have a unit which I have paid off." I said : "You probably can borrow money from the bank using your unit as security." Pham asked Ibrahim and Badal about their financial position, whether they were working, what other assets or liabilities they had and other details of the loan they wanted. Badal said : "I also have a car loan that Rima is going to help me out with because the interest repayments are very high. We want to borrow money to invest with Karl Suleman and also pay off my car loan." I said : "I can assist you in obtaining finance, but I can't act for you in terms of providing independent legal advice about your mortgage or your investment with Karl. I am acting for Karl. I strongly advise you to seek independent legal advice in relation to the mortgage and your investment before you enter into any agreements. If you agree that I can help you on that basis, we can proceed." Either one of them said: "Yes, that's fine. " Ibrahim said : "How much will it cost to arrange the loan?" I said : " To arrange your loan I will charge nothing because the bank pays me a commission of about $350 but you have to pay the bank application fee plus disbursements on top of that. I will charge you for the time I spent settling the loan and this involves liaising with the bank, signing the mortgage documents, attending on settlement and all of that sort of thing. This will be around $500 plus disbursements." Ibrahim said : "All right." I Said : "Well, if you want to proceed then this is what you have to bring in." At this time, Pham provided a list of the documents they needed to provide for the loan application such as the certificate of title, council rate notices, 100 points of identification, employment details and details of Badal's loan with Esanda. Pham also provided them with a blank loan application form. I said : "Fill in what you can and bring it back to me and I will help you complete it. " " (emphases added by trial judge) 29 The Appellants gathered together the information needed to make the loan application, and took it to Mr Pham's office on 9 August 2000. They completed the loan application, and on the same day Mr Pham made the application for finance on their behalf. 30 At some time between the first and last times the Appellants saw Mr Pham, they went to see an accountant, Mr El-Gamal. A card with Mr El-Gamal's details had been given to them by Mr Varda. They discussed the proposed investment with Mr El-Gamal, and talked about acquiring a company. Mr Varda had told Mrs Ibrahim that the money she would get would cost her a lot in tax, and she would need to go to an accountant in order to set up a company to minimise the tax. At Mr El-Gamal's office, she decided on the company name "Rima Investments Pty Ltd". 31 The plaintiffs received the loan documents at their home on 29 August 2000 from the solicitors for the lender, the Adelaide Bank. They attended Mr Pham's office on 30 August 2000. 32 At the meeting on 30 August 2000, the Appellants brought in the loan documentation that they had obtained from the solicitors for the lender. They executed some of it, including the mortgage, in front of Mr Pham. A conversation occurred: PHAM: "I believe it is to the best of your interest that you go and obtain independent legal advice about the loan and your investment with Karl." IBRAHIM: "I have spoken to a lot of people in the community and we believe in Karl. I don't need to talk to anyone else. Beside that, I don't want to spend any more money unnecessarily." PHAM: "You will find that the money is well spent if you go and seek independent legal advice. Please go and seek advice." BADAL: "All right, we will go. Do you have a solicitor who you can introduce?" PHAM: "Yes, I will check to see who is available." 33 Mr Pham then telephoned Mr Thuan Nguyen, a solicitor from the Fairfield office of Teakle Ormsby George. He told Mr Nguyen he had two clients who needed independent legal advice, and arranged an appointment for them. That was the only occasion that Mr Nguyen could recall when Mr Pham had referred clients to him for independent advice. 34 Mrs Ibrahim and Mr Badal saw Mr Nguyen on 31 August 2000. The meeting lasted forty-five minutes to an hour. The trial judge found, at para [103], that: "The plaintiffs had all the loan and mortgage documentation. Even on their case … they had a copy of the investment contract. It had been given to them and explained to them by Mr Varda ... . Pham, I find, told the plaintiffs to seek advice about the loan and investment with Karl, that is, " everything " ... . The plaintiffs were to talk about whatever they wished with their independent legal adviser. Pham believed that Mr Nguyen could give advice about the investment to the plaintiffs; he expected Mr Nguyen to do his job and that he could ask the plaintiffs about the investment …". 35 Mr Nguyen made a handwritten file note the same day, as follows: " She owns the above unit, now obtaining $70K loan thu Adelaide [Bank] with Sargon Badal to do business. Terms: 25 years Repayments: $523 p.c.m. I've gone thu the [contract] (loan), and explained to her why it is required for her to obtain independent legal advice and there are risk factors involved. She may lose the [property] if the business fails, could not be able to make loan payment to [bank] – Client said Ok." 36 The trial judge found that there was a conversation materially identical to that recorded in the file note. The only advice he gave related to the loan and mortgage documentation. In other words, he gave no advice about the proposed investment in KSE. 37 One of the documents signed by Mrs Ibrahim at Mr Nguyen's office was an acknowledgment relating to the legal advice she had received from Mr Nguyen. Part of it was acknowledging that he had advised her that: " [he] … does not profess any qualification to give financial (as distinct from legal) advice; and · if I have any questions about any financial aspect of the transaction or the documents, I should consult an accountant or other financial counsellor of my choice before signing the documents." 38 On 7 September 2000, Mr Pham sent to the lender's solicitors an authority to pay. It directed that payment of the advance be made as follows: 1. Esanda $15,125.19 2. Karl Suleman $50,000.00 3. Pham & Associates $838.00 4. S. Badal $ 2,723.86 $68,687.05 39 The difference between the total directed to be paid and $70,000 arose from fees and expenses associated with the lender. 40 On 11 September 2000, Mr Pham forwarded cheques in favour of Esanda and Mr Badal to Mrs Ibrahim and Mr Badal by post. The cheque for the investment in KSE was provided to KSE by someone in Mr Pham's office. 41 Mr Pham sent a tax invoice on 11 September 2000 relating to his fees and disbursements. It totalled $838 being $400 fees and the balance for disbursements, which were primarily stamp duty. 42 A contract dated 11 September 2000 exists between Badal Investments and KSE. However, at that date, no company called "Badal Investments Pty Ltd" existed. On 19 September 2000 a company with a different name resolved to change its name to Badal Investments Pty Ltd. The "start date" of that change of name was 2 October 2000. Mr Badal was appointed its director and secretary on 10 October 2000. On or about 11 September 2000 a contract of some sort had been signed, but Mr Varda later provided a replacement contract, which was executed by Badal Investments (on a date that is uncertain), and backdated to 11 September 2000. It is that replacement contract which is the document now in existence. 43 The contract dated 11 September 2000 contains no reference to Mr Pham. The space at the foot of its coversheet, where the name of a solicitor who has drafted a contract frequently appears, contains the name and address of KSE. I consider the terms of the contract at para [90] below. Findings Concerning Causation of Damage – Mr Pham 44 Even though the trial judge found that Mr Pham had engaged in no breach of duty, he went on to consider, on a hypothetical basis, causation of damage. 45 The only specific evidence of causation of damage presented by the Appellants was evidence from Mrs Ibrahim that if she was aware of the slightest risk, she would not have put the unit up to enable the investment with KSE to take place. That evidence provides an insufficient basis for a finding of causation of damage, given that the trial judge records, at [9], that he "quickly formed the view that neither Ibrahim nor Badal was a reliable or credible witness". As well, Mrs Ibrahim was told both by Mr Nguyen, and later by Ms Jajoo, of the risk that she could lose her home unit in certain circumstances, yet she proceeded with both loans, and both mortgages. The advice that Mr Nguyen gave dealt with risk connected with KSE in only the most general terms, that "she may lose the property if the business fails", without purporting to give any advice about what might be the chances of the business failing, or circumstances in which the business might fail. The advice that Ms Jajoo gave was directed to areas of risk other than that the investment in KSE might be risky. Even so, Mrs Ibrahim's extravagant statement of total aversion to any risk of losing her home unit is falsified by those facts. 46 One type of breach of duty that the Appellants had argued for at the trial consisted not of a failure to advise, but of a failure to cease acting once the solicitor in question knew that the investment that was proposed was in KSE. The appellant's case was presented on the basis that, if a solicitor declines to act because confidential information that the solicitor had received from another client made it impossible for the solicitor to embark on or continue with the retainer, it was not necessary for the solicitor to provide reasons – all the solicitor need say was "I cannot act for you". One submission that the Appellants made was that, because of various dealings that Mr Pham had, and continued to have, with Mr Suleman and companies associated with Mr Suleman, Mr Pham should not have acted for them at all. The trial judge considered what was likely to happen if Mr Pham declined to act, without providing any reason for declining: 217 "… the plaintiffs would have been none the wiser in relation to the status of any scheme. On the basis of the evidence set out in detail above, presumably, they still would have been very keen to invest. 218 The Pham defendants postulate four scenarios. First, they could have done nothing and forgot about the whole thing. This is most unlikely having regard to their keenness and the enthusiasm within the Assyrian community. Secondly, they could have proceeded with the investment without the intervention of any solicitors. From mid 2000, investment contracts were being issued directly by Mr Suleman. Presumably, if this had occurred, they still would not have learnt about the status of any scheme. 219 Thirdly, they could have gone to another solicitor who did not advise on the status of the scheme. After all, that is exactly what happened with Mr Nguyen and Ms Jajoo. 220 Fourthly, they could have gone to another solicitor who could have ascertained the status of the scheme (just how it would have been ascertained is not articulated by the plaintiffs) and who was able to advise on the status of the scheme. What would the advice have been? Would the plaintiffs have still invested? The plaintiffs need to establish (if I were to find that this is the most likely scenario) that they would not have proceeded in any event. The starting point to this analysis is, of course, that, if Ibrahim had been told that there was a risk of her losing her unit, that of itself and alone would not have caused the plaintiffs not to proceed. 221 As to the fourth scenario, what first must be identified is what would the advice have been. Mr Cornelius [an expert witness] was not asked to express any views about what advice a solicitor in common practice (that is, a solicitor without any prior dealings with Karl Suleman and/or the scheme) would have given in those circumstances. For the sake of this analysis only the advice may well be …: "You are considering investing in an unregistered management investment scheme. It appears to have been operating for a short period. It appears to be profitable and has significant community support. An investment contract with Karl Suleman would still be a binding legal contract. The scheme itself is not illegal but those promoting it are liable for an offence under the Corporations Act. If the scheme is not registered, a number of people could apply to the Court to have the scheme wound up. It is not possible to tell, if the scheme is wound up, whether you will have all or any part of your initial investment return and although you may be able to retain the benefit of moneys received by you prior to it being wound up. The returns are high, you may well be able to recover your initial investment and more before the scheme is wound up. The scheme may still be able to be registered but it may not. If it is not, you have an election to void the investment contract before any winding up occurs. What do you want to do?" 222 On the evidence before me, I simply cannot be satisfied that the plaintiffs (even if the fourth scenario applied) would not have proceeded with the investment in any event, either before or after attempting to negotiate different terms with KSE. The whole Assyrian community believed in Karl Suleman. A large number of people in that tight knit community had made significant investments and achieved significant returns. Badal knew that there was a risk of Ibrahim losing her property because of the transaction with the Bank and he knew that at September of 2000. He knew that a business failing was the possibility of Karl Suleman's business failing …. Badal believed that, if he was still working, he would be able to make the repayments if Mr Suleman's business collapsed …. 223 Further, as to the $50,000 investment, Ibrahim thought Mr Suleman would use it how he thought best in any business provided she got and Mr Sargon got $1,350 every 2 weeks … . Ibrahim wouldn't have minded what was going to happen with the money provided she got her $1,350 every 2 weeks … . Badal did not mind how Mr Suleman used the money invested for his business purposes … . 224 Finally, Ibrahim was anxious to assist Badal in the investment … She could not participate in the investment because of her pension but I infer she would be pleased to enjoy the fruits of the investment. 225 In respect of the claims based on breach of retainer/duty, even if a client/plaintiff has been able to establish that a defendant/solicitor has breached his or her retainer/duty (which I have found not to be the case), the client/plaintiff must establish what the plaintiff would have done, if he had been given the proper advice that he alleges should have been given by the defendant/solicitor, and that the breach has caused the plaintiff particular loss or damage. See generally Gore v Montague Mining Pty Limited [2000] FCA 1214 (Full Court of Federal Court of Australia, unreported, 30 August 2000). The concept also applies in respect of misleading and deceptive conduct: March v Stramare (E & MH) Pty Limited (1991) 171 CLR 506; Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 525; Henville v Walker (2001) 206 CLR 459 at [136]." 47 His Honour concluded that at best he could only speculate, and hence that the plaintiffs had not discharged the onus upon them to prove causation of damage so far as Mr Pham was concerned. Making of the Second Borrowing and Investment 48 The trial judge found: "235 By late May 2001 the experience of investing with KSE had proved to be most satisfactory, in that the fortnightly payments of $1,350.00 received in full and on time greatly exceeded the amount necessary to make the monthly payments to the Adelaide Bank. The plaintiffs were aware of other investors who were similarly well pleased with their investments with Mr Suleman who enjoyed a very good reputation in the community, including that of a highly successful businessman … . The opportunity to invest a further amount with KSE was received by both Badal and Ibrahim with some enthusiasm ... . Neither Badal nor Ibrahim obtained further information concerning Mr Suleman or KSE, or even to speak to their accountant Mr El Gamal ... . It seems that Badal spoke only with Mr Varda before discussing the matter with Ibrahim ... . 236 I am satisfied that Ibrahim was happy to assist in the making of the further investment by way of using her property to support the loan … and that she understood that her property was to be used as a security and that if the loan could not be repaid the property may be lost to the lender." 49 In late May 2001 – which was within about two days of their discussion of the proposal – Mrs Ibrahim and Mr Badal went to the office of Quick Loan Services, and met with Mr Jesse George. This happened because Mrs Ibrahim had made an appointment. 50 They obtained overnight the documents that were necessary for a loan application, and went back to Quick Loan Services the following morning. On that occasion they met Mr Zia George, and completed an application for finance. That application was approved unconditionally on the same day. This time the lender was Perpetual Trustees Australia Limited, and the proposed manager of the loan on the lender's behalf was Royal Guardian Mortgage Corporation. Mr Zia George told Mrs Ibrahim and Mr Badal to contact DDS, and told them that documents would be sent by Quick Loan Services to DDS. 51 Mrs Ibrahim telephoned the office of DDS late in the afternoon of 1 June 2001 and spoke with Ms Jajoo. Mrs Ibrahim explained that she was refinancing her existing loan, and enquired whether DDS had received any paperwork. 52 The trial judge found, at [240], that Mrs Ibrahim and Mr Badal retained DDS to act for them as borrowers and mortgagor in respect of a loan and mortgage transaction proposed to be entered into with Perpetual Trustees. DDS did not expressly accept a retainer to act or advise concerning any proposed investment, nor did it assume any responsibility to so act or advise. 53 The approval of the loan to Mrs Ibrahim and Mr Badal was not forwarded to DDS until the afternoon of 4 June 2001. On 5 June 2001 Ms Jajoo telephoned Mrs Ibrahim and informed her that DDS had received the unconditional loan approval letter. She also requested that Mrs Ibrahim bring in a current loan statement so that the discharge of the existing mortgage could be organised. 54 On 19 June 2001, Mrs Ibrahim telephoned Ms Jajoo, and said that the loan papers had still not been received and that she had been telephoning Quick Loan Services about them. Ms Jajoo reminded Mrs Ibrahim to bring in a loan statement so that the discharge of the existing mortgage could be organised. 55 There were various contacts between Mrs Ibrahim, Mr Badal, and various staff members of DDS concerning advancing the refinance. One of them was on 25 June 2001, when Mrs Ibrahim telephoned Ms Vivian Joseph and enquired about the whereabouts of the mortgage documents. On that occasion the matter was left on the basis that telephone contact would be made by DDS once the documents had arrived there. On 27 June 2001, Mrs Ibrahim telephoned DDS again, and spoke to Ms Lena Moward. Mrs Ibrahim was told that the lender's solicitors were sending the documents in the next few days. 56 At that time, an appointment was made for the only meeting that occurred with Ms Jajoo. That meeting occurred on 2 July 2001. The trial judge accepted Ms Jajoo's account of that meeting, which was based upon a contemporaneous file note that she made. 57 This meeting was the first time Mrs Ibrahim had met Ms Jajoo in Ms Jajoo's adult life. The discussion took place in the Assyrian language. In the course of the discussion about refinancing it, emerged that Mrs Ibrahim wanted loan repayments to be debited to the credit union account of Badal Investments, and that Mr El-Gamal was their accountant. Ms Jajoo telephoned Mr El-Gamal in the course of the conference with the Appellants, and discussed with him the mechanics of debiting that credit union account. 58 Ms Jajoo explained the loan contract to Mrs Ibrahim and Mr Badal, and the declaration, attached to that contract, whereby they acknowledge that a solicitor had explained the terms to them. At that stage, Mrs Ibrahim said: "They really make you sign in blood, don't they? But don't worry, this is not the first time we've taken out a loan, all the banks are the same. They all have the same requirements in one form or another." 59 Ms Jajoo went on to explain the mortgage document, in the course of which Mrs Ibrahim said: "We've always borrowed against this property. We've been together for a long time. That's not a problem. This is not our first time. All of this has been explained to me before." 60 Part of Ms Jajoo's explanation of the mortgage included the power of the bank to make the whole balance outstanding, and sell the property, if they fell behind even once in making a payment. She explained the extra fees and charges that the bank could charge if it needed to exercise its power of sale, and that if there was a shortfall from sale, the bank could sue them personally for the difference and even bankrupt them. 61 Ms Jajoo explained that they were being charged for mortgage insurance, because they had borrowed more than eighty percent of the value of the property, but that that insurance was to protect the bank, not to protect them. Ms Jajoo explained that if they did not make their repayments, the bank could recover its losses from the insurer, but the insurance company would then sue them. She advised them about the availability of mortgage insurance that they could take out for themselves so that if "you can't work for a while then you have insurance to protect you". 62 In the course of explaining another of the documents connected with the borrowing, Ms Jajoo said: "Also you understand that my only obligations to you are in relation to explaining the legal effects of the mortgage and the loan contract relating to the mortgage and all these other documents sent by the bank's solicitors and that I have explained them to you and you understand them all. You do understand that I am not giving you any financial advice and for that you obviously need to see a financial advisor or your accountant." 63 Towards the end of this conference was the first time Ms Jajoo became aware that they were proposing to invest the proceeds of the loan with KSE. The conversation concerning that topic was: "IBRAHIM: "… Our balance to Adelaide Bank is about $70,000.00, so we'll be left with about $60,000.00, I want that cheque drawn to Karl Suleman Enterprizes." JAJOO: "Rima, I don't know much about Karl's business structure so I don't advise and I am not in a position to approve or disapprove (the Assyrian phrase I used was 'le masyan makhshekhan' the literal meaning of which is 'I can not recommend/advise in favour of or not/approve or disapprove of') of his business transactions (the Assyrian word I used was 'mumla' the literal meaning of which is 'commercial dealing/investment'). Suzy had referred him to a firm of lawyers in the city who were looking at a complete restructure of all his businesses as they believed that the structure was not set up properly, but Karl then went back to his own lawyer a couple of months ago and we don't know if he's finalised anything and in what way." IBRAHIM: "Yes, we know his lawyer, it's Phillip Pham. He's been our lawyer as well. We know it's a big risk." JAJOO: "Well, then you should see an independent lawyer and financial advisor to advise you on your investment and explain properly such risks to you." IBRAHIM: "Sabrina, you don't know Karl as well as I do. God give him anything he desires. We love him. We're very close to him. I've even asked him for extra money before and he's given it to me without any questions. Don't worry about us and Karl – we've been in business with Karl before. This is not our first time investing with him. We've made a lot of money and if it wasn't for all the fun we've been having because of this silly man's influence [Ms Ebrahim then pointed to Mr Najarian-Badal], we would have lots of money now. Sabrina, even if we're gambling we don't care." JAJOO: "Well, I'm only advising you on the loan documentation and your obligations under the terms and conditions of the loan." 64 Even though the conversation was in the Assyrian language, Ms Jajoo's file note, made as the conference proceeded, was in English. The portion relating to the conversation just set out is: "we don't approve – don't believe its done properly – big risk should see o/lawyers/finan. adviser client ♡ Karl !! Not 1st time – invested before + made money even if gamble don't care !!!". 65 The trial judge, at [57] and [259] of his judgment, expressly considered and accepted the evidence I have set out at paras [58], [59] and [63] above, as well as stating in general terms that he accepted Ms Jajoo's account of the meeting. 66 There was no evidence that Ms Jajoo ever saw an investment contract involving KSE, let alone one proposed to be entered into by any of the Appellants. 67 After 2 July 2001, unidentified people at DDS carried through the mechanics of settling the mortgage transaction. That included giving instructions to the lender's solicitor concerning the manner in which the net amount available from the borrowing was to be applied. Part of those instructions was that there should be a cheque for $45,555.39 in favour of KSE. On or about 11 July 2001, Mrs Ibrahim attended the office of DDS, and collected the cheque in favour of KSE. An investment contract dated 9 July 2001 was entered by Mr Badal and KSE, without any further involvement by DDS. I consider the terms of that contract at para [92] below. Findings Concerning Causation of Damage - DDS 68 Even though the trial judge found no breach of duty on the part of DDS, he considered causation of damage on a hypothetical basis. His findings concerning causation of damage in the DDS claim are as follows: "291 As I have earlier said, by the time contact was made with DDS on 1 June 2001, Ibrahim and Badal had already decided upon a course of conduct, namely, the borrowing of further funds secured over Ibrahim's property so as to enable a further investment to be made with KSE. Moreover, they were approaching the proposed further investment with enthusiasm. Ibrahim in particular exhibited keenness for the matter to proceed quickly, and in fact showed signs of impatience as opposed to there being "no rush" … . 292 Even if, contrary to my findings, the position was that Ms Jajoo made positive recommendations concerning investing with Karl Suleman, the plaintiffs have not established that had such statements not been made, they would not have proceeded with the investment. Neither Ibrahim nor Badal gave any evidence to that effect. The only evidence of such character is contained in paragraph 59 of Ibrahim's affidavit where she deposes that she would not have borrowed the funds if she knew that she risked losing the property. That evidence was supplemented in cross examination by evidence to the effect that she would not have proceeded with the transaction if she had known there was even "a slight risk in investing" … . That evidence, together with her evidence generally to the effect that she was unaware of any risk to her property in the event that the loan could not be repaid, totally lacked credibility. 293 Upon the obtaining of the unconditional loan approval from Royal Guardian Mortgage Corporation, the second investment with KSE was inevitable. Neither Badal nor Ibrahim saw any need to obtain further information concerning Mr Suleman or KSE, or even to speak to their accountant Mr El Gamal … . They went to DDS so that the legal formalities involved in the refinancing transaction would be dealt with. Their attitude is clearly illustrated by the fact that, having received a recommendation from Ms Jajoo to obtain independent legal advice and financial advice concerning the proposed investment, neither of those steps was taken. Instead, the cheque made out in favour of KSE was immediately taken to Mr Suleman's office where arrangements were made for a further investment contract to be entered into. There was no evidence adduced by the plaintiffs that, had they been given any advice about an unregistered managed investment scheme, they would have changed course. The plaintiffs' submission that it was up to the defendants to put such matters to the plaintiffs in cross-examination is incorrect and amounts to an attempt to reverse the onus of proof. 294 There is no evidence that, had DDS declined to act in relation to the refinancing transaction, that the outcome would have been any different. No evidence was adduced to the effect that had Ibrahim and Badal gone to another solicitor they would have obtained advice of a different character which would have caused them to decide not to proceed after all." PART B – MANAGED INVESTMENT SCHEMES Background 69 To follow some of the allegations of breach of duty that the Appellants make, it is necessary to understand the legislative provisions that governed managed investment schemes ("MISs") at the time of the events with which this judgment is concerned. 70 Provisions for the regulation of MISs were first introduced to the Corporations Law by the Managed Investments Act 1998 (Cth), which commenced on 1 July 1998. The form of the legislation that is relevant to these proceedings is the form that the legislation had from the beginning of 2000 until 11 July 2001. The Corporations Act 2001 (Cth) commenced operation on 15 July 2001, too late to be relevant to the facts of this case. 71 The provisions regulating MISs replaced the provisions regulating the offering of "interests" or "prescribed interests" that had evolved from section 173A ff Companies Act 1936 (NSW) through section 76 Companies Act 1961 (NSW), and section 164 ff Companies Act 1981 (Cth). 72 The following provisions of the Corporations Law are relevant: " Managed investment scheme " means: (a) a scheme that has the following features: (i) people contribute money or money's worth as consideration to acquire rights ( interests ) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not) (ii) any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members ) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders) (iii) the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions); or (b) a time-sharing scheme". 73 The definition went on to provide certain exceptions from the definition, but none of them is relevant for present purposes. 74 There was no definition in the Corporations Law of what counted as a "scheme". However, section 76(1) Companies Act 1961 had defined "interest" by words that included "any right to participate … in any … scheme …". In Australian Softwood Forests Pty Ltd v Attorney General for the State of NSW (1982) 148 CLR 121, Mason J (with whom Gibbs CJ and Stephen J agreed in this respect) said, at 129: "… all that the word "scheme" requires is that there should be "some programme, or plan of action" … . It is not material that the person who offers the "interests" to the public does not himself carry on the undertaking or scheme. Nor does it matter that by subscribing for an interest a member of the public will constitute himself as one who is engaged in carrying on the enterprise. Nor again does it matter that the subscriber by accepting the offer constitutes himself as one who executes some elements of the scheme and derives from so doing a financial advantage which is not earned by other participants whose activities relate to other elements in the scheme. It is not an objection to an enterprise qualifying as an undertaking or scheme that it consists of a number of parts or elements, the participation of individual parties being limited to one of these parts or elements, their profit or remuneration being derived from the particular activities in which they engage. There is nothing in the notion of an undertaking or scheme that requires or implies that there is joint participation in everything comprised in the plan or that there must be a share or pooling of profits or receipts." 75 Most of the substantive provisions relating to MISs were contained in Chapter 5C of the Corporations Law, which ran from section 601EA to 601QB. The Need for Registration 76 Section 601EB Corporations Law obliged the Australian Securities and Investments Commission ("ASIC") to register a scheme, unless it appeared to ASIC that certain identified provisions of Chapter 5C were not complied with. 77 Section 601ED Corporations Law provided: "(1) Subject to subsection (2), a managed investment scheme must be registered under section 601EB if: (a) it has more than 20 members; or (b) it was promoted by a person, or an associate of a person, who was, when the scheme was promoted, in the business of promoting managed investment schemes; or (c) a determination under subsection (3) is in force in relation to the scheme and the total number of members of all of the schemes to which the determination relates exceeds 20. (2) A managed investment scheme does not have to be registered if all the issues of interests in the scheme that have been made did not need disclosure to investors under Part 6D.2 (see sections 706 and 708) when they were made." 78 Section 701 Corporations Law made the provisions of Chapter 6D (sections 700-741) applicable to offers of interests in managed investment schemes. Generally, Chapter 6D imposed restrictions on fundraising through the offering of the securities to which it applies. Section 706 provided that an offer of securities for issue needs disclosure to investors under Part 6D.2 unless section 708 said otherwise. 79 Section 708 Corporations Law identified various categories of offers that did not need disclosure. One such exception related to personal offers of a body's securities as a result of which not more than twenty investors have securities issued to them in any twelve month period, and not more than $2m is raised by issuing securities in any twelve month period. 80 Another category of exception under section 708(8) Corporations Law concerned an offer made to a sophisticated investor. Section 708(8) provided three different ways in which a person might be a sophisticated investor: (a) the minimum amount payable for the securities on acceptance of the offer by the person to whom the offer is made is at least $500,000; or (b) the amount payable for the securities on acceptance by the person to whom the offer is made and the amounts previously paid by the person for the body's securities of the same class are held by the person add up to at least $500,000; or (c) it appears from a certificate given by a qualified accountant no more than 6 months before the offer is made that the person to whom the offer is made: (i) has net assets of at least $2.5 million; or (ii) has a gross income for each of the last 2 financial years of at least $250,000 a year." 81 Another category of exemption arose under section 708(11) Corporations Law concerning various people or bodies that are classified as professional investors. There were some additional exceptions as well that are not necessary to detail. 82 It follows from section 601ED(2) Corporations Law that a MIS did not need to be registered if exceptions in section 708 applied to all the interests in that scheme. Consequences of Operating a MIS Without Registration 83 Section 601ED(5) Corporations Law said that a person must not operate a MIS that is required to be registered unless the scheme is registered. Section 1311 had the effect that anyone who contravened section 601ED(5) committed a criminal offence. 84 Under section 601EE Corporations Law, if a person operated a MIS in contravention of section 601ED(5), ASIC, or a person operating the scheme, or a member of the scheme, could apply to the Court to have the scheme wound up. There was a discretion for the Court to exercise in deciding whether the scheme ought be wound up if such an application was made to it. Section 601EE(2) empowered the Court to make any orders it considered appropriate for the winding up of the scheme. 85 Pursuant to section 601MB(1)(a) Corporations Law, if a MIS was being operated in contravention of section 601ED(5) and a person (the offeror) offered an interest in the scheme for subscription, or issued an invitation to subscribe for an interest in the scheme, a contract entered into by a person (other than the offeror) to subscribe for the interest was voidable at the option of that person. The same consequence applied under section 601MB(1) if a MIS was registered, but a person offered an interest in the scheme for subscription in circumstances that contravened the fundraising provisions of Chapter 6D. 86 As Beazley JA (with whom Spigelman CJ and Santow JA agreed) said in Karl Suleman Enterprizes Pty Ltd (in liq) (ACN 090 895 364) v Babanour [2004] NSWCA 214; (2004) 49 ACSR 612 (at [51], 621): "The legislation does not expressly make an unregistered scheme unlawful. Rather it impugns the conduct of the entity responsible for registration by imposing a penal sanction for a contravention of the registration provisions. The members of an unregistered scheme are protected by the provisions whereby the scheme may be compulsorily wound up." That passage was quoted and applied by the Queensland Court of Appeal in Mier v FN Management Pty Ltd [2005] QCA 408; [2006] 1 QdR 339 (at [10], 345-346). 87 The provision in section 601MB(1) Corporations Law whereby an investment contract in a MIS was voidable at the option of the investor of itself shows that it was not the legislative intention that such contract be invalid or illegal in the circumstance with which section 601MB(1) was concerned. If on analysis a particular contract whereby someone invested in a scheme was found not to be within the ambit of section 601MB (as, for example, Barrett J advised the liquidator of KSE was the case in Australian Securities and Investments Commission v Karl Suleman Enterprizes Pty Ltd (in liq) [2003] NSWSC 400; (2003) 45 ACSR 401 (at [12], 405-406)), the application of the principles in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 may well lead to the conclusion that that particular contract was not impliedly treated by the legislature as unlawful (cf Australian Securities and Investments Commission v Karl Suleman Enterprizes Pty Ltd (in liq) (at [14]-[15], 406); Karl Suleman Enterprizes Pty Ltd (in liq) (ACN 090 895 364) v Babanour [2004] NSWCA 214; (2004) 49 ACSR 612 (at [41]-[51], 619-621)). Other Requirements Relating to MISs 88 Chapter 5C Corporations Law imposed various other requirements on a MIS. The entity that operated it had to be a public company, and had to hold a dealer's licence that authorised it to operate a MIS (section 601FA). There were various standards of behaviour imposed on those who operated the scheme. Its constitution had to contain certain provisions, and had to be legally enforceable. There were numerous other provisions dealing with the practical operation of the scheme. Exemptions 89 Section 601QA Corporations Law entitled ASIC to exempt a person from a provision of Chapter 5C, or declare that Chapter 5C applied to a person as if specific provisions were omitted, modified or varied as specified in the declaration. While that power related to all of the provisions in Chapter 5C, of particular relevance for present purposes is that it conferred on ASIC a power to exempt from the requirement that a MIS be registered at all. Application to the Contracts in this Case 90 The investment contract dated 11 September 2000 was between KSE (called the "Manager") and Badal Investments (called the "Investor"). It recited that the Manager was carrying on the business of trolley collection services ("Business") in Australia, that the Investor had agreed to invest in the Business, and that the Investor would pay the Manager $50,000. The Investor acknowledged that the Manager would continue to run the business on a day-to-day basis. The agreement was to commence on 11 September 2000 and expire on 11 September 2010. There was a covenant for the Manager to pay to the Investor "from the business income, every fortnight a guaranteed net amount" of $1,350. That amount was "guaranteed" until 11 September 2010. Apart from that amount of $1,350 per fortnight, the Investor would not be entitled to any further incomes. 91 I see no intention in the legislative provisions I have set out for that contract to be an unlawful contract. Whether the contract is unlawful is, of course, a different question to whether Mr Suleman or KSE might have contravened section 601ED(5) by operating a MIS in the course of which such contracts are offered or entered. 92 The second investment contract, dated 9 July 2001, was between KSE and Mr Badal. The form is not materially different to the form of the first investment contract, save only that its term was five years (expiring on 8 July 2006), and the guaranteed fortnightly payment was $2,500. That contract is likewise not made an illegal contract by virtue of the MIS provisions that I have quoted. PART C – GROUNDS OF APPEAL Grounds of Appeal Generally 93 The Appellants' Notice of Appeal contains what are said to be fifty grounds of appeal. An additional ground was added at the hearing of the appeal. Some grounds were not pressed, and some were argued in groups. Even so, the miscellaneous nature of the grounds means that these reasons are also, to some extent, a heterogeneous collection of points, some of which are related. 94 The focus of submissions at the hearing of the appeal was on questions of fact, not on matters of legal principle. These reasons likewise focus on matters of fact. The Trial Judge's Finding Concerning the Appellants' Credit 95 One general ground of appeal, applicable to all Respondents, arises from the fact that the trial judge regarded both Mrs Ibrahim and Mr Badal as extremely unsatisfactory witnesses. That view influenced many of the factual findings the trial judge made. The Appellants contend that this Court should take a different view of their credit. In so doing, they recognise that a Court of Appeal can overturn a factual finding of a trial judge that is influenced by the trial judge having had the advantage of seeing the witnesses only in circumstances where the judge has "failed to use or palpably misused his advantage", or where "incontrovertible facts or uncontested testimony" demonstrate the findings to be erroneous, or where they are "glaringly improbable" and "contrary to compelling inferences": Fox v Percy (2003) 214 CLR 118 at [28]-[29], 128 (per Gleeson CJ, Gummow and Kirby J), [66], 139 (per McHugh J), and [148], 165-166 (per Callinan J). 96 The facts the Appellants identify as meeting these criteria are: "a. That the investment fell within the ambit of the Corporations Act dealing with managed investment schemes; b. That the investment required a Dealers Licence, disclosure, the issuing of a Prospectus and registration; c. That during the material times involving Pham and DDS, no such licence was obtained and to the knowledge of Pham and DDS had not been obtained, thus placing the appellants at risk; d. That Mallesons had specifically advised that the scheme in its present structure, namely as at late 2000, contravened the Corporations Act ; e. That Ms Robinson of Counsel in early 2000 specifically advised Pham that the scheme in its structure contravened the Corporations Act." 97 Even as stated, these contentions provide no reason for believing that the trial judge was mistaken in the view that he took concerning the credit of the Appellants. 98 As well, there were many examples given by the trial judge in the course of his judgment of instances where the evidence of the Appellants was unsatisfactory. Reading the evidence for the purpose of this appeal has demonstrated that there were many more instances of the evidence of the Appellants being unreliable that the trial judge did not specifically mention. 99 This ground of appeal is not made out. 100 The Appellants had made allegations of misrepresentation against both Mr Pham and the DDS Respondents. The trial judge rejected their evidence concerning the making of the representations on which they sued. All the evidence supporting their case of misrepresentation was oral evidence from the Appellants themselves. When no error is shown in the trial judge's rejection of the Appellants as credible witnesses, their appeal must fail to the extent that it is based on alleging error in the trial judge's finding that the express representations sued on were not made. Jones v Dunkel and Mr Varda 101 The trial judge took into account the fact that Mr Varda had not been called by the Appellants. It is important that the case that the Appellants presented, concerning their first meeting with Mr Pham, was vastly different to what the trial judge found had in fact transpired. The case of the Appellants was that at the first meeting with Mr Pham, Mr Badal alone wanted to invest in the trolley business, and Mr Varda proposed that Mrs Ibrahim could become a guarantor for him. The meeting, they said, took place at Mr Suleman's office. At the end of it, Mr Badal specifically asked Mr Pham "is this investment good", to which Mr Pham replied "yes, I'm a solicitor. I am involved in the investment. This is a good investment. Read the contract and there is a guarantee." 102 Mr Pham's affidavit evidence gave a quite different account to this, which the trial judge eventually accepted. 103 When Mr Varda had, on the accounts of both the Appellants and Mr Pham, been present throughout the conversation, he was in a position to give evidence about which of the competing versions was correct. 104 Before Jones v Dunkel (1959) 101 CLR 298 can be used as the basis for drawing an inference unfavourable to a party in litigation, the missing witness must be one who would be expected to be called by one party rather than the other: Payne v Parker [1976] 1 NSWLR 191 at 201; Manly Council v Byrne [2004] NSWCA 123 at [53]. I doubt that Mr Varda satisfied that requirement, so far as either the Appellants or Mr Pham was concerned. Mr Varda was, it seems, some sort of an assistant to Mr Suleman. There was no evidence of contact between the Appellants and Mr Varda prior to this transaction. However, even though the trial judge held that Mr Varda should have been called by the Appellants, and said "That is the Jones v Dunkel ruling I make", he did not identify what, if any, inference he drew more strongly by reason of the absence of Mr Varda. 105 However, even if the trial judge was in error in thinking this was a case in which it was appropriate to draw a Jones v Dunkel inference, I am not persuaded that any error has thereby been produced. There are a very large number of examples that the trial judge gives of the unsatisfactoriness of the evidence given by Mrs Ibrahim and Mr Badal. Many others, to which he did not specifically refer, can be found in the evidence. 106 I agree, with respect, with the remarks of Mason P (with whom Bryson JA and Gzell J agreed) in Kinnell v Connelly [2007] NSWCA 17 at [37]-[38]: "It is not the law as I understand it that a credibility-based finding is dragged down by the mere presence of error. As in all matters, an appellate court looks for what the Americans call dispositive error. I think the principles are clearly stated in Rosenberg v Percival (2001) 205 CLR 434 at [43] in the judgment of McHugh J, [166] in the judgment of Kirby J and at [222]–[223] in the judgment of Callinan J. There is also a reference to them in Fox v Percy itself in McHugh J's reasons at [90]. The basic principle as I understand it is that the so called Abalos or Fox v Percy principles do not cease to be applicable simply because some error is established, even as occurred in those cases, an error going to the very matter at issue in the relevant part of the trial that attracted the relevant credibility findings. As McHugh J put it in Rosenberg at [43] referring to the facts of that case: No doubt the trial judge erred in one respect … but it is impossible to conclude that this issue played a decisive part in the judge's assessment of the patient's credibility." 107 Those remarks are in accord with the statement of Mason J (with whom Barwick CJ agreed) in De Winter v De Winter (1979) 23 ALR 211 at 225 that: "… where an adverse conclusion as to the credit of a witness is based … upon a number of considerations, it is not enough to show that the primary judge was mistaken in one of the considerations upon which his conclusion as to credit is based." Grounds Of Appeal Re: Mr Pham Scope of Mr Pham's Retainer 108 The Appellants submit that the trial judge erred in deciding that Mr Pham's retainer was, from the outset, a limited one. 109 The evidence about the retainer was oral. The trial judge accepted Mr Pham's evidence, which I have set out at para [28] above. There was some support for that evidence in the fact that Mr Pham sent the Appellants to Mr Nguyen for advice, and in his practice (about which there was evidence from both Mr Pham and Ms Deborah Locke, who, at the relevant time, was employed as Mr Pham's secretary) of not giving advice about KSE investment contracts. 110 In my view, the trial judge was justified in concluding that the retainer that Mr Pham accepted was a limited retainer that did not involve advising on the investment contract, but rather involved acting (in his capacity as mortgage broker) as a procurer of finance, and (as a solicitor) in the comparatively mechanical tasks involved in seeing through the settlement of the mortgage transaction. Mr Pham's Belief About Compliance of the Investment 111 The Appellants submit that the trial judge should have concluded that at the time Mr Pham met with the Appellants he had every reason to believe that: (a) the investment was an investment that fell within the MIS provisions of the Corporations Law ; (b) that it was unregistered; (c) that no licence existed; and (d) that the proposed investment by Mrs Ibrahim and Mr Badal was not an exempt transaction. 112 Examination of that submission requires an account of Mr Pham's knowledge concerning KSE's investment contracts, and how they fitted in with the requirements of the Corporations Law concerning MISs. 113 Mr Pham had been carrying out various tasks for Mr Suleman since late August or early September of 1998. When Mr Pham started acting as solicitor for Mr Suleman, he was working as an employed solicitor, with effective control of the Fairfield office of Borak & Co. The first transactions he did for Mr Suleman were conveyancing transactions. 114 In early to mid-1999, Mr Suleman explained to Mr Pham that he had contracts with various supermarkets to collect their shopping trolleys and deliver them back to the shops, in return for which the stores made him a weekly payment. He explained that his contracts with the supermarkets were not written, and that he would like to sell the businesses. 115 Soon after, when Mr Suleman had found a purchaser for one such business, Mr Pham drew a contract for sale of business, using a standard form Law Society of New South Wales and Real Estate Institute of New South Wales agreement. It related to the business of collecting trolleys at a particular named supermarket. Up to mid-2000, Mr Pham estimates that he had prepared fifteen to twenty contracts of that kind. 116 Around late 1999, Mr Suleman saw Mr Pham at Borak & Co and said: "Some of the purchasers are complaining now. They did not make that much money. Of course, they could not make a lot of money because they don't know how to run the business and have high overheads. I must help them. I would like you to prepare a sub-contract agreement whereby in future sales I will be sub-contracted by them and run the business on their behalf. I will deduct my expenses and guarantee them a minimum income. They can take back the business at any time because the business is theirs, but as long as I run it I will guarantee them a minimum payment." 117 Mr Pham then drafted a form of contract in which the vendor was Yasmin Trolley Services Pty Ltd. It included provisions of the following type: "RECITALS 1. The purchaser has agreed to purchase from the vendor the business of trolley collection services at Coles and Kmart, Chatswood Chase, Chatswood. 2. The purchase has agreed to pay the vendor $100,000.00 for the purchase. 3. The purchaser acknowledges that the vendor will continue to run the business on a day to day basis, being responsible for all costs associated with such business, including however not limited to, wages, insurances and all associated costs. NOW THIS DEED WITNESSETH: 1. The vendor shall sign all interlocutory documents to effect the transfer of the shares from the business to the purchaser. 2. The Vendor shall pay to the purchaser, from the business income, every fortnight a guaranteed net amount of FIVE THOUSAND AND SIX HUNDRED DOLLARS ($5,600.00) to the purchaser by cheque. This amount will be guaranteed for a period of 5 years form the date of this Deed which will end on 17th October, 2004. 3. Apart from the amount of $5,600 per fortnight the purchaser will not entitle [sic] to any further incomes including but not limited to the profit of business. … 5. The vendor warrants that it will comply with all State, Federal and Local laws and regulations which apply to the operation and administration of the business of trolley collection services. 6. The vendor indemnifies the purchaser in respect of any claims suites [sic], actions, liability, losses, damages, costs and/or expenses that the purchaser may sustain as a result of any claims being made against the purchaser as a result of the vendor breaching the warranties and terms of this Deed. … 9. The vendor and purchaser acknowledge that at the expiration of this deed which will be on 17th October, 2004, the vendor will no longer [sic] under the obligation to pay the purchaser any money, and/or profits from the business. 10. The vendor and purchaser acknowledge that at the expiration of this deed which will be on 17th October, 2004, the purchaser will be responsible for the running and operation of the business." 118 Mr Pham referred to these as "subcontract agreements" as opposed to the "purchase agreements" that he had earlier drafted. He estimates that from late 1999 to approximately mid-2000 he prepared about thirty subcontract agreements for Mr Suleman. It is not established how many of those agreements that were prepared resulted in a contract actually entered between an investor and Mr Suleman or any entity associated with Mr Suleman. He agreed, however, (T 500) that around the time he contacted Ms Robinson in early 2000 there were about twenty people who were purchasers of trolley businesses. 119 In November 1999 Mr Pham himself entered such a subcontract agreement with Mr Suleman. Under it he purchased the business of trolley collection at K-Mart, St Marys, for $10,000 with an income of $400 per fortnight guaranteed for ten years. Mr Pham intended to use the income for his daughter's education. 120 On 17 December 1999, Mr Pham caused KSE to be incorporated. He did this after Mr Suleman told him he was "going national" with trolley businesses, and would like to venture into different businesses. 121 In February 2000, Mr Suleman told Mr Pham he had people who were prepared to give him money for contracts without any involvement in the particular business at all. He said he wanted to sell contracts to these people and use the money to buy more trolley businesses and invest in other businesses. Mr Pham was unsure how to proceed, and recommended obtaining a barrister's advice. Mr Pham understood Mr Suleman's proposal to be in the nature of an investment in KSE, rather than purchase of a business outright. 122 In early to mid-February 2000 Mr Pham retained Dr Ludmilla Robinson, barrister. Dr Robinson provided a written advice on 27 February 2000. That advice referred to the provisions dealing with the operation of a MIS that are found in Chapter 5C Corporations Law. It advised (correctly): "… it is clear from case law that a 'scheme' may be held to consist of a number of separate arrangements with different parties ( Australian Securities Commission v Su (1995) 13 ACLC 770). Commercial reality rather than legal form will determine whether the arrangements are a "scheme" for the purposes of Ch 5C." 123 That advice also drew attention to ASIC's power of exemption from compliance under section 601QA. Though section 601QA confers a power of exemption on ASIC in totally unconfined terms, Dr Robinson chose to give her advice in a way that pointed out the limited circumstances in which there was any practical likelihood of ASIC granting an exemption. She said: "… ASIC may grant an exemption from compliance with Ch 5C where (inter alia): 1. the schemes are small scale and private; 2. members of the schemes are in a position where they do not require regulatory protection. ASIC has, to date, granted exemptions to a number of schemes including private ostrich schemes, small property syndicates, film and theatre investment schemes and horse-racing syndicates." 124 Her advice stated that the proposed business arrangements may come within the definition of a MIS. The conclusion to her advice included: "3. The consequences of being found to be operating an MIS contrary to Ch 5C of the Corporations Law could be commercially disastrous for the Company. If ASIC applied to the Court to have the arrangements of our client wound-up, the Company could be held to be liable to both the Retailer and the purchasers for breach of contract. Further, the damage to our client's commercial reputation could be extreme. 4. However, the process of achieving registration under Ch 5C of an MIS can be fairly lengthy and expensive. 5. Further, it is by no means certain (although it is, I believe very likely) that our client's operations would be regarded as an MIS by ASIC. 6. Accordingly, I would strongly recommend the following: a) My instructing solicitor should request from ASIC a determination as to whether it will regard our client's operations as an MIS. b) If ASIC responds that the operations are NOT an MIS, then the current documentation used by our client should be reviewed and amended to achieve maximum protection for the Company and the purchasers. c) If ASIC determines that the operations do constitute an MIS, then an exemption under s601QA should be applied for. d) If ASIC refuses to grant an exemption, an application for registration will have to be made. Whilst, as noted above, registration can be expensive, it is by no means impossible." 125 As well as that written advice, Dr Robinson gave advice orally. The trial judge's summary of her advice, at [166], was: "… that a scheme (if implemented in accordance with draft documentation) may contravene the managed investment scheme provisions of the Corporations Law if more than 20 members were involved, if sophisticated investors were not involved, if an exemption was not obtained or if registration was not obtained." 126 Mr Pham explained Dr Robinson's advice to Mr Suleman. In the first half of March 2000, Mr Pham and Mr Suleman both had a conference with Dr Robinson, in which she repeated the substance of her advice, including that "he could be ruined if he did not register the scheme". 127 Mr Suleman, soon after, asked Mr Pham to make the necessary arrangements for registration. 128 On 21 March 2000, Mr Pham telephoned Mr Graham Plath, an ASIC officer in Canberra, and sought his advice about whether the investment would fall within the MIS provisions. Mr Plath said that ASIC did not provide legal advice or rulings, but that "your client's scheme does not seem to be within the definition of a prescribed transaction", because "where the income depends on the success of the business, it would be caught but in your case, despite the outcome of your client's business, the income is guaranteed". 129 Mr Plath referred to a particular reported case as the basis for his view. Mr Pham told Dr Robinson about that case. She advised Mr Pham that the case did not clarify the situation, because it related to previous legislation, which differed from the MIS provisions. She reiterated her advice that an application should be made to ASIC for an exemption, and that if that was not done an application for registration would need to be made, which could take up to twelve months. 130 In late March 2000 Mr Pham told Mr Suleman about this conversation, referring to registration as "asking ASIC for a licence". 131 Mr Suleman said, "I'll get a licence." Mr Pham said, "How?" Mr Suleman said, "Don't worry. I'll get my boys in town to take care of this. Rabbi Pinchus knows a retired solicitor who used to work for Kerry Packer and he will get a licence for us." Pham said, "Fine, but you better hurry up and get on top of the matter". 132 In March 2000, Mr Pham provided one contract to Wilkinson Throsby & Edwards, for an investment. It related to a proposed investment of $1m. As Mr Pham understood it, such a contract was exempted from the MIS provisions. The trial judge also found that Mr Pham "110 … provided some contracts from May onwards on the instructions of Mr Suleman that he had attended to obtaining the licence …. Those instructions were received first in early April 2000 …. Pham confirmed that up to mid 2000 he estimated he prepared 15 to 20 purchase (that is, not investment) contracts for Mr Suleman ... 111 In April/May 2000, Mr Suleman gave Pham plausible explanations as to the circumstances surrounding the obtaining of the licence/registration (using a large firm in town) and Mr Suleman's continuing desire to use the services of Pham to prepare contracts notwithstanding another firm had obtained the registration/licensing .…" 133 In early April 2000, a couple of weeks after 22 March 2000, Mr Pham and Mr Suleman had a conversation. Mr Pham said, "How did you go with getting a licence?" Mr Suleman said, "Don't worry about the licence". Mr Pham said, "But you need to get the licence if you want to operate the scheme because it falls within the MIS provisions of the Corporations Law". Mr Suleman said, "Everything is taken care of. Rabbi Pinchus referred me to some big boys in town to care of it. It is not your concern anymore. You suburban lawyers would not know what to do. Just do what I have instructed you to do. Just prepare the contracts". Mr Pham could not recall but agreed that Mr Suleman probably said words to the effect "I want to make sure that everything is according to the law and above board and that people putting money in are protected". 134 At some stage – the evidence is not clear when – Mr Suleman showed Mr Pham a business card of the partner at Mallesons who he said was looking after the obtaining of the registration. 135 The trial judge accepted that in May 2000 Mr Pham's secretary, Ms Locke, heard Mr Suleman telling Mr Pham that the licence "is all taken care of", and Mr Pham requesting a copy of the licence for the file. Ms Locke was not in a position to give evidence about any earlier events, because she was absent on maternity leave until May 2000. 136 The trial judge also accepted that after May 2000 Mr Pham asked Ms Locke to ask Mr Suleman for a copy of the licence. She told Mr Pham that Mr Suleman had said everything was okay, that he did have the licence, and that he would provide a copy. 137 In about July 2000 Mr Pham had a conference with Dr Robinson, in which the following conversation occurred: PHAM: "Karl has told me that he doesn't require me to take care of getting his licence. He says he's got a boy in town to set everything up for him." ROBINSON: "Ok" PHAM: "My instructions are not to worry about the licence but to prepare the agreements and that everything will be taken care of. What do you think?" ROBINSON: "If that's your client's instructions, you can't go behind them." 138 The trial judge accepted that Mr Pham was told by Mr Suleman on a number of occasions that the "licence" had been obtained. The trial judge found that Mr Pham had an honest and reasonable belief that any scheme was registered. 139 In these circumstances, the trial judge found, at [167], that Mr Pham had acted on Dr Robinson's advice: "… by providing it to Mr Suleman and seeking his instructions; arranging for a conference between Ms Robinson and Mr Suleman; contacting ASIC and ascertaining their attitude, namely, that they did not give advice … conferring again with Ms Robinson … and not issuing any relevant contracts (that is, to more than 20 members or to other than sophisticated investors) until he had been informed by Mr Suleman in April 2000 and honestly and reasonably believed that the scheme was registered." 140 In the early part of 2000, Mr Pham saw a bank statement of Mr Suleman with a balance of millions of dollars in it. Mr Pham was also shown Mr Suleman's personal tax return, which showed an income of about $250,000 per year. Mr Pham saw lists that purported to show various locations at which the trolley collection service was conducted, and the weekly income obtained from each site. He gave evidence that it was untrue that "in the lists which you saw there were many shopping supermarkets which did not return anything like the sort of returns Mr Suleman was promising to other people". 141 The trial judge found, at [124]: "I have no reason to believe that as at August/September 2000 Pham did not have an honest and reasonable belief as to the solid financial circumstances of Karl Suleman Enterprises." 142 It was not until November 2001 that Mr Pham became aware that the investment operations were not registered and no application had been made to ASIC for an exemption. 143 The Appellant's submission in para [111] above would require the Court to reject the trial judge's finding that, at the time of Mr Pham's dealings with the Appellants, Mr Pham had an honest and reasonable belief that the scheme was registered. 144 While the Appellants submit that it was "glaringly improbable" that Mr Pham could have believed the assurance that was given to him about Mr Suleman having a "licence" and complying with the Act, I am not persuaded that the trial judge was in error in drawing this conclusion. The trial judge accepted that Mr Pham was a witness of credit. Mr Pham believed in, and trusted, Mr Suleman just as Mrs Ibrahim and Mr Badal did. While Mr Pham had reason to believe that the investment activities of Mr Suleman may well not have complied with the MIS provisions in the period immediately after he sought advice from Dr Robinson, registration would cure that lack of compliance, at least so far as new contracts were concerned, and, by the time of his dealings with the Appellants, Mr Pham believed the scheme was registered. Adequacy of Mr Pham's Reference for Independent Advice 145 Another submission that the Appellants make is that Mr Pham could not have adequately referred Mrs Ibrahim and Mr Badal for independent advice unless he ensured that Mr Nguyen had not only the documentation relating to the loan from, and mortgage to, Adelaide Bank, but also the investment contract that was proposed to be entered with KSE. The Appellants submit that, while a solicitor in the course of giving legal advice about a transaction might not be obliged to give advice about the commercial wisdom of entering the transaction (Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 at 418), a solicitor can be obliged to ensure that a client proposing to enter a particular commercial transaction is aware of legal constraints that touch upon that transaction. The Appellants submit that such legal constraints would include, in the present case, the legal restrictions on the operation of a MIS, and the prospect that a MIS that did not comply with those requirements might be wound up at any time that ASIC chose to take action against it. They submit that, unless Mr Pham took steps to ensure that Mr Nguyen had the investment contract that was proposed to be entered with KSE, Mr Nguyen would not be in a position to give the full range of independent advice that was appropriate in the circumstances, and that Mr Pham would be in breach of his duty in allowing that situation to arise. 146 No such submission as this was made in the court below. It is a submission that could be affected by evidence on topics that were not explored in the court below. Such topics include whether Mr Pham knew that the Appellants had a copy of the investment contract, knew they did not have a copy of the investment contract, or had no knowledge one way or the other. In those circumstances, the submission cannot be raised on appeal. Mr Pham's Representation by Silence? 147 One of the allegations that the Appellants brought against Mr Pham was that he had made a representation by silence. The Fourth Further Amended Statement of Claim identified particular matters concerning which it is alleged Mr Pham remained silent: i. The scheme was illegal. ii. The first defendant was a director, officer and shareholder of Pal Holdings which was receiving a 2% management fee on each and every Investor Contract whereby returns would be paid back through his corporation Pal Holdings which would receive the 2% management fee. iii. That he was Karl Suleman's lawyer. iv. That he was the lawyer for Karl Suleman Enterprises Pty Ltd. v. That he had received $100,000.00 for work in respect of the Froggy group of companies. vi. That he continued to provide legal services to Karl Suleman Enterprises Pty Ltd, Karl Suleman and the related entities. vii. That the Investor Contracts he had drafted contravened the Corporations Law. viii. That he had received advice from a barrister, Ms Lucy Robinson, that the Investor Contracts contravened the Corporations Law or were Contracts falling within a managed investment scheme such that the scheme in its present state contravened the legislation. ix. That he did not have any information before him to show that Karl Suleman or any of his related entities held a dealer's licence for the purposes of the managed investment scheme provisions of the Corporations Law and was thus illegal." 148 Of these, item (ii) was not made out – PAL Holdings was not incorporated until 14 September 2001, long after Mr Pham had ceased dealing with Mrs Ibrahim and Mr Badal. As to item (iii), Mr Pham specifically stated that he was acting for Mr Suleman. In the context of the present case, there was little material difference between item (iii) and items (iv) and (vi). 149 Concerning the other matters about which Mr Pham is alleged to have remained silent, items (i) and (vii) are (as I have held) incorrect statements. As to item (viii), if, as he believed, Mr Suleman had obtained registration for the investments that were being offered, any advice he had received from Dr Robinson earlier in the year concerning possible contravention of the MIS requirements at that time would not be of any current relevance. 150 In those circumstances, the basis for the alleged representation by silence could only be items (v) and (ix). 151 The representation that is alleged to have been made by Mr Pham's silence is that "objectively that the scheme was a good investment scheme and would offer high returns". 152 The trial judge dealt with this allegation of a representation by silence as follows: "192 To the extent that silence alone is relied upon, it is not disputed that silence may sometimes constitute or convey a representation or be misleading or deceptive when the circumstances are such that either there is a duty to speak or a reasonable expectation that another will speak: Demagogue Pty Limited v Ramensky (1992) 39 FCR 31 at 41 per Gummow J at 32 per Black CJ; Brophy v NIAA Corporation Limited (in liq) (1995) ATPR 41-399 at 40,410 per Handley JA; Metcash Trading Limited v Hourigan's IGA Umina Pty Limited [2003] NSWSC 683, at para [60] per Young CJ in Eq. 193 I have concluded that there was no duty to speak because any information would have been confidential to Karl Suleman: Brophy v NIAA Corporation (supra). There was no reasonable expectation that another will speak in circumstances where the plaintiffs were of some relevant prior commercial experience having retained solicitors and made finance applications previously; where Pham did not know of their personal circumstances other than as investors … where Pham was not a member of the Assyrian community (a factor relied upon heavily by the plaintiffs in the case against DDS … where the plaintiffs had already decided to invest when they saw Pham; where the plaintiffs had already decided to borrow money to invest when they saw Pham; where the plaintiffs had already decided to put up Ibrahim's unit as security for the loan whey they saw Pham; and where the plaintiffs already had the existing Esanda loan which they wished to repay when they saw Pham." 153 The Appellants attack the trial judge's reliance upon any information having been confidential to Mr Suleman. They assert that when there is an illegality, of the type that is involved in the operation of a MIS that contravenes the Corporations Law, legal professional privilege cannot provide a reason for non-disclosure of knowledge of the illegality. 154 In my view, it is not necessary to decide whether that contention is correct. That is because, even if Mr Pham were not bound by confidentiality in relation to the advice he had received from Dr Robinson, he would still not have been, in all the circumstances, under a duty to the Appellants to disclose information that, as he understood it, and so far as they were concerned, had been overtaken by events when Mr Suleman had obtained registration. 155 Further, I simply do not accept that Mr Pham's words or conduct, taken as a whole, conveyed any representation that the scheme was a good investment that would offer high returns. When he had specifically excluded from his retainer any giving of advice about the investment contract, and in any event had no reason to believe that the operation of the scheme involved any illegality or that there was any question about the solid financial circumstances of KSE, he had no duty to speak. Clearly, the Appellants could not have had a reasonable expectation that he would speak up if the investment was actually not a good one, unless he had a reason to believe that it was not good. From their knowledge that he was Mr Suleman's solicitor, they could not reasonably expect that he would know commercial matters about the desirability of the investment. Even if they had a reasonable expectation that Mr Pham would speak up if he had reason to believe the investment was not good, Mr Pham did not have reason to believe the investment was not good. (He had, after all, invested his own money in it.) In considering this last reasonable expectation possibility, I am not making a finding that the Appellants actually had any such reasonable expectation. Prior Commercial Dealings of Mrs Ibrahim and Mr Badal 156 The Appellants criticise the trial judge for having referred to the prior commercial dealings of Mrs Ibrahim and Mr Badal. They submit (correctly) that the credit obtained from Bing Lee Finance and AGC Credit was comparatively small, totalling $1,390, and that the loans for which they applied to Community First Credit Union and St George Bank were each only for $3,000. They submit that those dealings "could only go to a matter that was in issue if it was raised as against the existence of a duty of care". 157 I do not agree with that second submission. That the Esanda car loan had been taken out was a relevant matter to mention for understanding to where the money obtained from the first loan went. Further, the prior dealings were relevant to credit. As the trial judge records: "16 Initially, Ibrahim said that before the events involving Pham she had not borrowed any money with Badal (with whom she had been residing since widowhood), that she did not provide any assistance to Badal in respect of the loan from the bank (Esanda Finance) for the purchase of the motor vehicle; that she did not sign any loan contract in respect of the motor vehicle in her own name as a borrower. When confronted with the loan document (exhibit 1), Ibrahim agreed that she was described as a borrower in that document, but she could not remember what happened when she signed the April 1999 loan document with Esanda because " It's a long time ago, 99 ". Notwithstanding that it was only 16 months prior to the events concerning Pham, Ibrahim said in respect of the Esanda loan (exhibit 3) that she could not remember properly. Ibrahim understood that she was signing the loan document with Esanda because she was actually sharing the motor vehicle with Badal; yet said that she did not know what the word " borrower " means now, notwithstanding that in these proceedings the words were being translated to her in her own language ... 17 Further, before seeing Pham in August 2000, and with the exception of the Esanda loan document, she had made no applications for finance in her own name. Despite initially agreeing that she had made an application on 29 May 2000 to Community First Credit Union for a loan, Ibrahim then said that she had not placed an application. She said that she thought that she was being asked about the loan the subject of these proceedings. Ultimately, she agreed that she did make an application in May 2000 and on 25 May 2000 and also made an application to St George Bank ...". Independence of Mr Nguyen 158 I am in some doubt about whether the grounds of appeal relating to the independence of Mr Nguyen are pressed or not. Ground number eleven alleged that the trial judge erred in failing to hold that Mr Nguyen was not an independent solicitor and that the obligation to refer the Appellants to an independent solicitor had not been discharged. That ground was not pressed. However, another ground – that "His Honour erred in holding that there was no suggestion that Mr Nguyen (the alleged independent solicitor) was not independent – remained. Concerning it, the Appellants submitted that the trial judge should not have found that Mr Nguyen was independent when Mr Pham was paying his fees. 159 There is a conflict in the evidence of Mr Pham and Mr Nguyen, in that Mr Nguyen says that at one stage he asked Mr Pham to pay his fee. Mr Nguyen was not sure whether that was during the meeting with the Appellants, or afterwards. The trial judge did not resolve that conflict in evidence. Mr Nguyen sent a memorandum of fees to Mrs Ibrahim and Mr Badal after his meeting with them, but never sent a memorandum of fees to Mr Pham. Mr Nguyen has never been paid those fees by anyone. 160 There is nothing in these circumstances that casts any doubt upon the independence of Mr Nguyen in giving his advice. Further, it was not put to Mr Nguyen in cross-examination that he lacked independence, or that the advice he gave (which in any event was unremarkable advice concerning a routine type of transaction) was in any way affected or compromised by any belief he had that Mr Pham would or might pay his fees. 161 When the trial judge was justified in regarding Mr Nguyen as independent, there is no error disclosed in the rhetorical question the trial judge asked in his judgment, at [122]: "If Pham had any belief or even concern that the scheme was not registered, why would he have a practice of recommending independent legal advice or, as is here, virtually insist on independent legal advice?" Mr Cornelius's Evidence 162 The Appellants called expert evidence from a solicitor, Mr Peter Cornelius. That evidence related to the practice of solicitors in situations that were of the general type with which this litigation is concerned. The Appellants submit that the trial judge was in error in failing to accept Mr Cornelius's evidence. 163 However, Mr Cornelius's evidence suffered a fatal weakness. It assumed the correctness of affidavit evidence contained in the affidavits of Mrs Ibrahim and Mr Badal, and of large parts of the Further Amended Statement of Claim. The trial judge did not accept the correctness of much of the evidence of Mrs Ibrahim and Mr Badal. 164 As well, while the trial judge accepted that the opinions expressed by Mr Cornelius were genuinely held, after hearing Mr Cornelius cross-examined he formed the view that "36 … they really only reflected his views as to what he would have done in precisely the same circumstances as the circumstances he believed confronted Pham … 141 Probably inadvertently and/or subconsciously, Mr Cornelius crossed the 'fine line between evidence by a professional of what a reasonably competent and careful professional would do in specified circumstances and evidence of what the witness would do in those circumstances': ASIC v Vines [2003] NSWSC 1095 at para [32] per Austin J. Mr Cornelius put nothing before the Court, other than himself, (for example journals, articles, texts or the like) to confirm or add any weight to his personal and obviously strongly felt views." 165 In those circumstances, the trial judge was justified in holding that the Appellants had failed to discharge the onus of proving that there was a common practice amongst solicitors, of the type to which Mr Cornelius deposed. Alleged Conflict of Interest by Mr Pham 166 In March or April 2000, Mr Suleman put to Mr Pham a proposal to be a partner with him in a telecommunications business. Mr Pham told Mr Suleman that, while he was responsive to the idea, he had no money to put into it. 167 Shortly thereafter, Mr Suleman acquired the business of an internet service provider. It was after that, around April 2000, that Mr Pham left Borak & Co and commenced practicing as a sole practitioner. 168 Mr Pham assisted Mr Suleman to establish Froggy Holdings Pty Ltd and Froggy (Western Sydney) Pty Ltd. Mr Suleman allotted Mr Pham, at no cost, thirty-five percent of the shares in Froggy Holdings Pty Ltd and fifteen percent of the shares in Froggy (Western Sydney) Pty Ltd, in exchange for Mr Pham setting up and assisting him to run the businesses of those companies. Froggy Holdings Pty Ltd ran the business of the Internet service provider. In the period April 2000 to September/October 2000 that company had a staff of approximately five people, and set up four mobile phone shops. Mr Pham carried out work connected with dealing with customers and various technical aspects of obtaining and providing the telecommunications services. He estimates that, at that time, approximately twenty percent of his working time was spent in his legal practice. Mr Pham received a payment of $75,000 for setting up and running the two Froggy companies, and may also have received an additional $25,000. He ceased active management in any of the companies in the Froggy group in or about September/October 2000. He transferred the shares he had been allotted back to Mr Suleman, without consideration. 169 The trial judge, at [130], accepted that Mr Pham's move into his own office was not very much influenced by the amount of work that Mr Suleman was providing him. While he wanted to keep Mr Suleman's work if he could, he had enough income to maintain his office without that work. Putting aside the $75,000 (or possibly $100,000) that he received in respect of Froggy, in the calendar year 2000 Mr Suleman and his companies only accounted for ten to fifteen percent of Mr Pham's income in his practice. 170 The Appellants point to the income that Mr Pham was earning, both as a solicitor and in other capacities, from his association with Mr Suleman. They submit that this Court should draw an inference that this created a conflict of interest that led Mr Pham to ensure that independent legal advice was not given in respect of the investment contract. 171 I decline to drawn any such inference. It does not sit well with the overall favourable view of Mr Pham's credit that the trial judge took, and that has not been shown to be mistaken. As well, no such proposition was put to Mr Pham in cross-examination. 172 In any event, as the trial judge found, Mr Badal would not have been troubled if he had known that Mr Pham had invested with Mr Suleman or had shareholding interests in Mr Suleman's companies, and Mrs Ibrahim would not have been concerned if Mr Pham had held some shares in Mr Suleman's companies as she took the view that that was his personal business. Those findings of his Honour were based upon admissions made by Mr Badal and Mrs Ibrahim in cross-examination. Wrong Finding Concerning Illegality of the Investment Contracts and Scheme 173 When dealing with both the allegations of negligence made against Mr Pham, and the allegation that he had made a representation by silence, the trial judge held that the investor contract did not contravene the Corporations Law, and that the scheme was not illegal. The Appellants submit that those findings were mistaken. I do not agree. The analysis of the MIS provisions at para [69]-[92] above shows that the investment contracts in the present case are not illegal. It also shows that, if it were the case that Mr Suleman or KSE was carrying on a scheme that was required to be registered but was not registered, Mr Suleman or KSE would be engaging in illegal conduct. That is not the same, however, as the scheme being illegal. 174 In any event, the Appellants' allegation of illegality leads nowhere. 175 One role that the allegation of illegality played in the Particulars of Negligence was that it was alleged that Mr Pham was negligent in preparing investor contracts in a fashion that contravened the Corporations Law. But preparation of the investor contracts was no part of any duty that Mr Pham owed to the Appellants. Nor was advising on the investor contracts any part of the retainer to act for the Appellants that Mr Pham undertook. Further, as I have already held at para [154] above, Mr Pham did not make the representation by silence that was pleaded. In those circumstances, even if I were wrong about the legality of the contracts, or the scheme, any such illegality would not matter for the purpose of deciding whether that particular of negligence is made out. 176 The other role that the allegation of illegality played in the Particulars of Negligence was that it was alleged that the trial judge erred by failing to hold that Mr Pham breached his duty of care by continuing to provide investor contracts in circumstances where he had advice from counsel that the documentation presented to her may contravene the MIS provisions of the Corporations Law. This allegation likewise does not bite upon the facts of this case. Mr Pham did not provide any investor contract to the Appellants. Nor is it shown that he provided any investor contracts that Badal Investments ultimately came to execute. "In Trade or Commerce" 177 In connection with the claim under the Fair Trading Act, the trial judge held that he was not satisfied that Mr Pham's conduct was in trade or commerce. The Appellants assert that the trial judge was mistaken in that respect. 178 Whether or not the conduct of Mr Pham was in trade or commerce would matter only if any of the representations alleged by the Appellants had been made. When it is not established that any of those representations have been made, any question of whether Mr Pham's conduct was in trade or commerce is moot. Reliance and Causation Concerning Mr Pham 179 The Appellants complain that it was never put to them in cross-examination that they would still have proceeded with the investment even if they had been told precisely, at the time they were proposing to invest with KSE, that certain requirements of the Corporations Law had not been satisfied, such that ASIC could obtain the winding up of a MIS. It is correct that no such precise proposition was ever put to the Appellants. However, that does not mean that the trial judge's treatment of causation concerning Mr Pham was mistaken. The onus of proof lay upon the Appellants to prove that any breach of duty on the part of Mr Pham had caused them damage. By not putting such a precise proposition to the Appellants, Mr Pham's counsel ran the risk that the trial judge might accept the general proposition put by Mrs Ibrahim that she would not have proceeded if there was the slightest risk to her unit, or the trial judge might have been prepared to draw an inference, on the basis of such evidence as the Appellants had put before him, that causation of damage was adequately proved. But, there was no obligation on Mr Pham's counsel to put the precise proposition to them. In circumstances where the trial judge has, as it eventuated, not accepted Mrs Ibrahim's evidence concerning causation, and declined to draw an inference of causation, the fact that the proposition was not put to the Appellants is of no moment. 180 As well, there was specific evidence that the Appellants were prepared to contemplate the loss of the property. Even though winding up of an MIS might be a particular cause of the enterprise operated by KSE failing financially, Mr Nguyen explained to them the possibility that Mrs Ibrahim may lose the property if "the business" failed. Ms Jajoo explained to them the existence and consequence of exercise of a mortgagee's power of sale, and advised them of the availability of mortgage insurance for their own protection. Notwithstanding the advice they were given, they elected to proceed with both loans, proceeded without any mortgage insurance for their own protection, and (so far as the second borrowing was concerned) proceeded after Mrs Ibrahim made an express acknowledgement that they knew it was a big risk, and even if they were gambling they didn't care. While the circumstances in which they proceeded with the second loan were not identical to those in which they proceeded with the first loan – in particular because they had had nine months experience of the first investment with KSE operating in a reliable way – it still shows that they were prepared to contemplate the loss of the property. 181 Though not directly related to loss of the property, an indication of Mrs Ibrahim's willingness to undertake a financial risk is that on 3 September 2000, a week before the investment contract relating to the first borrowing was entered on 11 September 2000, she entered into a personal guarantee with St George, guaranteeing a loan of $12,423 made to a relative to purchase a car. 182 As well, the probabilities need to be assessed bearing in mind the extraordinary enthusiasm of members of the Assyrian community to invest with Mr Suleman. As counsel for the Appellants put it in argument, at the time Mr Suleman was "the hero of the Assyrian community". 183 I am not persuaded that his Honour's treatment of causation of damage concerning Mr Pham was erroneous. Grounds Of Appeal Re: DDS Failure of Ms Jajoo to Refer for Independent Advice 184 The Appellants submit that DDS was negligent when Ms Jajoo permitted the lending transaction to proceed when the Appellants had not obtained independent advice. They submit that Ms Jajoo's action needs to be evaluated bearing in mind not only her own personal knowledge, but also the knowledge that her employers had that bore upon the situation. That is, they say, because the contract of retainer was with DDS, not with Ms Jajoo personally. 185 The Appellants submit that her employers had significant knowledge concerning how KSE's investment activities related to the MIS provisions. There was a body of evidence on this topic, which the trial judge did not discuss in detail. There was no significant challenge to the evidence on this topic; some of it was documentation, and the balance was given by the solicitors and counsel involved, who the trial judge accepted as credible. I shall consider that evidence now. 186 By October 2000, Mr Suleman was instructing DDS on a variety of matters (including property matters, commercial matters, and litigation) on behalf of himself and various companies including KSE. Mr Fred David and Ms Suzy David, the Third and Fourth Respondents, are a brother and sister who were both partners in DDS. They were both involved in performing this work for Mr Suleman. Ms David accepts that in the course of performing that work she "became aware of opinions to the effect that the way in which Mr Suleman and/or KSE were obtaining investment funds in relation to trolley collection businesses may have constituted a managed investment scheme which was required to be registered and licensed." 187 On 17 October 2000, Ms David received from Dr Robinson a copy of the written advice that Dr Robinson had provided to Mr Pham on 27 February 2000 (para [122] ff above). 188 Soon after, Mr David contacted Mr Anthony Fleming, who describes himself as "Special Counsel – Managed Investments" at Mallesons. Mr Fleming sent a brochure that gave an outline of the legislation governing managed investments. It stated that the new regime came into effect from 1 July 1998. It explained transitional provisions applicable to "any scheme governed by a deed approved prior to 1 July 1998". It included the following: "New schemes have no choice but to comply with the new regime. Prospectuses and other disclosure documentation will need review. A scheme is required to be registered unless it does not come within the definition of "managed investment scheme" or one of the exceptions from registration applies. Careful consideration must be given to whether each new or existing scheme is required to be registered. The definition of "managed investment scheme" has 3 essential elements: people contributing money or money's worth to acquire interests in the scheme; at least some of the contributions being pooled or used in a common enterprise to produce financial benefits or rights or interests in property for the members of the scheme; and the members of the scheme not having day to day control over its operation. Some arrangements such as life policies and superannuation interests are specifically excluded from the definition and so the new regime does not apply to them. Specific registration exceptions apply to schemes with up to 20 members not promoted by a person in the business of promoting schemes and to wholesale schemes – ones where all the interests in existence were the subject of excluded issues when they were made. If registration is required, an application must be lodged with ASIC, together with the constitution and compliance plan. ASIC must register the scheme within 28 days unless it considers relevant requirements of the Corporations Law have not been met. A prospectus is not required for schemes which are not required to be registered. ASIC requires as a prerequisite to lodgement of an application for registration that the applicant holds a suitable dealers licence (granted since 1 July 1998) or an offer of such a licence. … The responsible entity of a scheme must be a public company. … … Each responsible entity must have either a board of directors at least half of which are "external" directors, or establish a compliance committee (the majority of membership must be external) for each scheme which it operates. Generally speaking, a director or compliance committee member is "external" if in the past 2 years they have not been an employee or executive officer of the responsible entity or a related body corporate, have not been substantially involved in business dealings or in a professional capacity with it, and do not hold a material interest in the responsible entity or a related body corporate. The responsible entity must have minimum net tangible assets of $50,000, or where scheme property exceeds $10 million, 0.5% of scheme assets up to a maximum of $5 million. … … The constitution must make adequate provision for certain matters, including the consideration for interests in the scheme, investment powers, complaints procedures, winding up, fees and indemnification rights, borrowing powers and any right to withdraw from the scheme. ASIC may assess the adequacy of such provisions during the scheme registration process. … The responsible entity must prepare a compliance plan which sets out the measures that the responsible entity will apply in operating the scheme to ensure compliance with the Corporations Law and the constitution. … Responsible entities must hold a dealers licence which authorises them to operate the relevant schemes or types of scheme – there are 8 ASIC categories. … ASIC policy indicates that licence conditions will require the responsible entity to maintain appropriate professional indemnity and fraud insurance, have access to sufficient financial resources to meet ongoing scheme related cash needs and have a complaints handling procedure which complies with the Australian standards." 189 That brochure was seen by Ms David. It provided her with quite a full outline of the requirements concerning MISs. 190 On 22 November 2000 Ms David attended a conference with Dr Robinson, Mr Suleman and Rabbi Pinchus. At that time, Mr Suleman was planning to set up various shops that would sell Orange mobile phone contracts. He planned to permit people to invest in those shops in a broadly similar way to the way in which they invested in the trolley collection business. There was discussion at that conference about the possibility of the MIS provisions applying to both the arrangements concerning the trolley collection business, and the proposed Orange mobile phone businesses. While there are some differences of detail between the accounts of the conference given by Ms David and by Dr Robinson that were not resolved by the trial judge, those differences do not seem to me to be material, and the trial judge regarded both Ms David and Dr Robinson as credible witnesses. What matters is that, by the end of the conference, the risk that the arrangements might be in breach of the MIS provisions had been considered, the advice of both Dr Robinson and Ms David was that if Mr Suleman's activities were a MIS, steps would need to be taken to ensure the law was complied with, but that further investigation was needed before a final decision could be made about whether the arrangements were in breach, or what additional steps might be needed. 191 Ms David gave evidence as follows: "At the end of the meeting with Dr Robinson, I had a conversation with Mr Suleman in the presence of Rabbi Pinchos in words to the following effect:" MS DAVID: "Karl, I can't really understand what this is all about. There is a firm of lawyers that I know that are experts in this area. I do not practice in this area of law at all. I think you should have a talk to them." SULEMAN: "Ok. Who are they?" MS DAVID: "Mallesons Stephen Jaques. They are a reputable firm. I have spoken to them briefly about this and I think you should see them. They will be able to help you and I think you will be in better hands. This is beyond the scope of my experience and expertise." RABBI: "Karl, I think Suzy is right. You are now at a level that you need a big legal firm to handle your legal matters. I also think that you should try and also find yourself a large accounting firm to handle your matters." MS DAVID: "I agree. I can introduce you to Mallesons and they can take it from there." SULEMAN: "OK." 192 A meeting was arranged for later on 22 November 2000 at the Mallesons office. Ms David and Mr Suleman there met with Mr Fleming and Ms Simone Marshall of Mallesons. Mr Fleming described to them the sort of information he would need to be able to advise. 193 Ms David set about collecting that information, partly by gathering documents and partly by taking instructions from Mr Suleman. On Christmas Day 2000, she typed a letter to Mr Fleming outlining Mr Suleman's instructions about the manner in which investments concerning the trolley collection business occurred, and providing two sample agreements. One of them was a subcontract-style agreement relating to a particular supermarket. The other was one of the type where the "investor" made an investment in the overall business of trolley collection. 194 Ms David was absent overseas between 27 December 2000 and 23 January 2001. 195 On 30 January 2001, Ms David and Mr Suleman attending a meeting with Mr Fleming and Ms Marshall in which Mr Fleming said: "These activities attract the managed investment provisions. The existing structure is not good. A new company ought to be set up and the existing investment contracts assigned to the new company. … We will need to get you a dealer's licence which may take 10 weeks to complete. We will then assign all the existing contracts into the new structure. In the meantime Karl, it is better if you do not issue investment contracts." Mr Suleman gave instructions to proceed with setting up a new company. 196 After the meeting, Ms David reminded Mr Suleman of Mr Fleming's advice not to issue any more investment contracts. Mr Suleman then and there telephoned someone on his mobile phone, and gave an instruction, in Ms David's hearing, not to issue any more contracts for the time being. 197 On 1 March 2001, Ms David had a telephone conference with Ms Marshall and Mr Damien Richard of Mallesons. The following conversation occurred: MARSHALL: "Suzy we have been looking at the funding arrangements again." RICHARD: "The contracts should not have been structured in this way. The way the contracts are drafted they may be a managed investment scheme. But they are not really because they are not related to the income of the business. So they should have been a debenture or straight out loan. Both these structures would be outside the MIS provisions." MARSHALL: "We foresee problems to run it as an MIS. Anyway it is too complicated and expensive to set up as a managed investment scheme especially when it doesn't fit within the categories of a managed investment scheme. This is all unchartered. The other problem is that it has been operating without approval of ASIC and we have severe concerns how ASIC would react to an application for a managed investment scheme. We also don't know how the investors will react to the changes. The agreements are unfortunately drafted. KSE should have got proper legal advice before it set up the agreements. The way that they are now drafted means that they are either within the managed investment scheme or loan agreements. We will draft the correct form of contracts that will need to be used. There are some other issues that we need to consider such as the dealer and investment advisor having the right education and experience. I don't know if Karl can be the applicant for the license. But that's OK someone else can be appointed with the right education and experience, someone who is licensed or a responsible entity. There are plenty of bodies that can be approached to act as trustees and as a responsible entity. That will not be a problem. I'm sure something can be worked out. In the meantime can you give me the name and telephone number of Karl's accountant?" MS DAVID: "Yes it is Roger Hyde. His telephone numbers are ..." 198 Ms David was overseas between 10 May 2001 and 23 May 2001. 199 In late May 2001, Mr Suleman told Ms David he did not want her to be further involved with the restructure, and that Mr Pham was going to look after all of it, consulting Mallesons as he needed to. 200 Thus, in summary, at the time Ms David ceased her active involvement with the structuring of Mr Suleman's affairs, (a) there seemed to be significant problems, arising from the MIS provisions, with continuing to accept investments on the basis of the type of documentation that Mr Suleman had previously used, unless registration or exemption was obtained, but (b) it might have been possible to draft a contract, under which investments could be made in the future, in such a way that the transaction was outside the MIS provisions, and was a loan or debenture. 201 Ms David agreed in cross-examination that she did not tell Ms Jajoo about the advice she received from Mr Fleming in January 2001, and did not convey to other people in the firm that "the scheme might be illegal". 202 The Appellants placed reliance upon the judgment of Deane J in Hawkins v Clayton (1988) 164 CLR 539 at 579: "The relationship of solicitor and client is … a relationship of proximity of a kind which may well give rise to a duty of care on the part of the solicitor which requires the taking of positive steps, beyond the specifically agreed professional task or function, to avoid a real and foreseeable risk of economic loss being sustained by the client. Whether the solicitor-client relationship does give rise to a duty of care requiring the taking of such positive steps will depend upon the nature of the particular professional task or function which is involved and the circumstances of the case." 203 That passage in the judgment of Deane J was not commented on by other members of the majority in Hawkins. It may at some time require reconsideration because it relied upon the notion of proximity, and a majority of the High Court in Perre v Apand Pty Ltd (1999) 198 CLR 180 has now rejected proximity as a test for a duty of care. However, before Perre v Apand was decided, the principle stated by Deane J was accepted by Kirby P in Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 652, though not commented on by other members of the Court in that case. It was also referred to by Sheller JA in Citicorp Australia Ltd v O'Brien at 412-413. There, Sheller JA noted that Priestley JA, in Cousins v Cousins (Court of Appeal, 18 December 1990, unreported) had quoted the passage from Hawkins that I have set out above, and had continued, at 13: " The sentence particularly relevant here is that stating that there may be proximity 'which may well give rise to a duty of care' requiring the solicitor to do something more beyond what he has been specifically retained to do. Deane J was contemplating both that some cases would and other cases would not require a solicitor to do more than he was specifically retained to do." When the authorities are in that state, I shall assume without deciding that the statement of Deane J correctly states the law. 204 It is of some importance that Deane J's statement was made in a case where the task to which the duty in question related was for a solicitor who had custody of a will to seek out the executor once the testatrix had died and inform the executor of the existence of the will. The solicitor who had custody of the will was in a uniquely good position to carry out that task. Indeed, it was foreseeable that if he did not carry out that task, it might not be carried out at all. The risk that the estate would suffer loss if the will was not known to the executor was quite obvious. The only purpose of the solicitor having custody of the will – that it be able to govern the distribution of the estate once the testatrix had died – would be frustrated if the solicitor did not tell the executor of its existence once he knew the testatrix had died. In Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 (at [361], 78-79) this Court (Spigelman CJ, Sheller JA and Stein JA) regarded such factors in Hawkins v Clayton as of considerable importance to the High Court finding that a duty of care bound the solicitor who had custody of the will. 205 By contrast, in the present case Ms Jajoo was in no specially privileged position for being able to provide advice about the investment contract. She specifically made clear that she was not undertaking the task of advising on the investment contract, and recommended that the Appellants seek advice from others on that topic. The task that she undertook, of advising only on the loan contract and mortgage, was a comparatively routine type of legal work, and was accomplished in a single conference. She had no reason to believe there was any unusual financial risk concerning the investment. The purpose of entering the loan and mortgage would not be frustrated if Ms Jajoo did not advise on the investment contract. Thus, if Ms Jajoo had been the only solicitor who owed the duty of care to the Appellants, she would not have breached it. 206 The trial judge considered how the knowledge that DDS as a whole had about KSE's operations affected its duty to the Appellants. He held that: "264 I do not see, myself, that the information which DDS possessed concerning KSE's business operations would, in July 2001, have been material for clients being advised about a proposed investment in KSE to know. Such information as was possessed lacked clarity and was somewhat out of date. Whilst it was known that the way in which investment funds had been obtained in relation to trolley collection businesses may have constituted a managed investment scheme which was required to be registered, DDS and in particular Ms David did not know whether that was the current position. She knew that various proposals were under consideration by Mallesons Stephen Jaques in the period up to the termination of DDS's instructions in late May 2001. She did not know what had occurred since that time, including what structure and what type of contracts Mr Suleman and/or KSE was now employing (It seems that by August 2001 KSE was entering into loan contracts with investors. …) There is no suggestion that she knew that any business or investment scheme conducted by Mr Suleman or KSE might be, or be likely to become, insolvent. 265 In any event, the evidence of Mr Cornelius was to the effect that if the solicitor or the firm possessed knowledge which would be material for the clients to know in being advised about a matter, but the solicitor or firm was unable or unwilling to impart that knowledge to the clients, then it would not have been appropriate for the solicitor or the firm to proceed to advise about that matter … . In those circumstances, the appropriate course for the solicitor to take would be to suggest that the clients obtain advice about the investment elsewhere … . This is what Ms Jajoo did … . 266 Even if the knowledge possessed by the solicitor or the firm is not regarded as material for the clients to know in being advised about a matter, but the solicitor or the firm was otherwise unable to advise about a matter because to do so would involve a breach of fiduciary duty, the appropriate course would be to proceed as outlined above. (It would be the same position if the solicitor or the firm, although not precluded by fiduciary duties or obligations of confidence from advising as to the matter, chose not to do so because, for example, the solicitor or the firm did not consider themselves appropriately qualified.)" 207 I do not see any error in those holdings. In those circumstances, in my view, DDS's obligation did not require either the giving of advice, or the seeing that advice was obtained, concerning the investment contract. 208 The Appellants submitted that it was not enough for Ms Jajoo to advise them to see an independent lawyer and financial advisor for advice on the investment, but that she should have positively insisted that they obtain such advice. 209 When the retainer she was performing was a limited one, and when her advice for them to see an independent lawyer and financial advisor was rejected, as emphatically as Mrs Ibrahim rejected it, I see no reason why Ms Jajoo had any obligation to do more. DDS Alleged Preference of Interest Over Duty 210 There was evidence, that the trial judge did not analyse in detail in his judgment, about there having been various financial dealings between Suzy and Fred David on the one hand, and Mr Suleman and companies connected with him on the other. In substance, that evidence is as follows. 211 In November 2000, Mr Suleman told Ms David that he was proposing to import from Asia some wheels for children's scooters. Those wheels had flashing lights on them, supposedly to make the scooters safer to use at night. He told Ms David that he was planning to get about 25,000 of them, at a cost of $170,000. He offered to arrange another 25,000 for her, and to sell them at the same time as he sold his own scooter wheels. 212 After discussing the matter with her brother, Ms David agreed to Mr Suleman's proposal. KSE issued a tax invoice dated 9 November 2000 to Mr David's family company relating to the sale of 25,000 wheels for $170,000. They arranged for $170,000 to be paid to Mr Suleman on 15 November 2000. 213 About a week later, Mr Suleman showed Mr David some samples of the scooter wheels. 214 In about February 2001, Mr Suleman informed Ms David that he had sold the wheels, and she had made a profit of $70,000. 215 Also in about February 2001, Mr Suleman put to Ms David a proposal that the $240,000 obtained from the sale of the scooter wheels (the $170,000 investment, and $70,000 profit) should be invested in a company he was putting together that would operate record shops and market the work of recording artists. Ms David and her brother decided to subscribe, through their respective family companies, for ninety percent of the issued share capital of Froggy Music Pty Ltd. 216 As well, DDS acted for Mr Suleman and companies associated with him in various legal matters, and earned fees for so doing. 217 The Appellants submit that Suzy and Fred David had either direct or indirect financial interests in the trolley collection business, and that they preferred their own economic interests over those of their client. The economic interests that are referred to arise, it seems, from the scooter wheels transaction, the operations of Froggy Music, and the fact that DDS acted as solicitors for Mr Suleman or companies associated with him from time to time and thereby earned fees. 218 The way in which these financial dealings gave rise to the alleged financial interests in the trolley collection business was not spelled out in submissions. Clearly, Suzy and Fred David had no interest of any legal kind in that business, and no contract that entitled them to any part of the proceeds of that business. If what is being suggested is that they had reason to believe they were likely to gain financially from Mr Suleman continuing to be successful and continuing to provide them with work, that is so. However, in circumstances where they had no reason to suspect any possible insolvency of Mr Suleman or KSE, I do not see how there is any conflict between their desire for Mr Suleman to continue to do well, and the duty of their firm to carry out competently and with undivided loyalty the task that Ms Jajoo undertook to perform for Mrs Ibrahim and Mr Badal. 219 In Pilmer v Duke Group Limited (in liquidation) (2001) 207 CLR 165 (at [78], 199), McHugh, Gummow, Hayne and Callinan JJ stated that: "… the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is 'a conflict or a real or substantial possibility of a conflict' between personal interests of the fiduciary and those to whom the duty is owed … Similar reasoning applies where the alleged conflict is between competing duties …" 220 In Pilmer (at [83], 200-201), McHugh, Gummow, Hayne and Callinan JJ said that before there is a breach of fiduciary duty arising from a conflict of duty or interests, the "… conflicting duty or interests must be identified. Conflict is not shown by simply pointing to the fact that there had been past dealings between [two people]. The fact that dealings are completed will ordinarily demonstrate that any interest or duty associated with those dealings is at an end … Nor is it sufficient to say generally that there was a hope or expectation of future dealings. That will often be so. Most professional advisors would hope that the proper performance of the task at hand will lead the client to retain them again." 221 The trial judge recognised that DDS had retainers from Mr Suleman and various companies associated with him. He found: "276 … None of those retainers concerned KSE or any trolley collection business. As far as any personal interests are concerned, these are essentially confined to the indirect shareholding interests held by Suzy David and Fred David (his interest appears to have been shared with that of his wife, Ms Jajoo) in Froggy Music Pty Ltd. Those interests came about as a consequence of the reinvestment of the proceeds of an earlier investment made with Mr Suleman. There is no evidence that any member or employee of DDS held an interest (whether direct or indirect), in KSE or in any trolley collection business. I agree with this analysis. 277 Further, I see no reason why DDS or Ms Jajoo could not carry out the refinancing retainer with undivided loyalty. No conflict existed between the duties owed to the first and second plaintiffs in carrying out that retainer and any duties owed under any retainer by Karl Suleman or companies associated with him. The duties owed in relation to existing retainers did not conflict in any way with those owed to the first and second plaintiffs under the refinancing retainer. The plaintiffs have failed to establish such conflict. It was not put to any of the DDS witnesses that any conflict of this character existed. Moreover, such personal interests as existed were not such as to give rise to a real or substantial possibility of conflict between those interests and the firm's duties to the first and second plaintiffs under the refinancing retainer: see Pilmer at paragraphs 78 and 79. 278 Accordingly, I hold that there was no breach of fiduciary duty by DDS in accepting and carrying out the refinancing retainer." 222 I see no error in that conclusion. Insufficiency of Reasons/Denial of Procedural Fairness 223 The Appellants submit that they were denied procedural fairness because the trial judge did not specifically address evidence of Suzy and Fred David and evidence concerning the financial interest that Suzy and Fred David or their companies had in entities connected with Mr Suleman. 224 While it is true that the judgment did not subject those topics to detailed examination, it accurately summarised their effect in the passage I have quoted at para [221] above. In any event, I have examined them in this judgment, and come to no different ultimate conclusion to the one at which his Honour arrived. Causation Re: DDS 225 The point the Appellants raise here is that the trial judge was not entitled to reach an adverse view on the question of causation when there was no evidence before him to prove that if the Appellants had known that there was a risk that ASIC would wind up the business if it had a mind to do so, they would have determined to continue in any event. 226 It should be recalled that his Honour's findings concerning causation (set out at para [68] above) were on a hypothetical basis, given that he had found no breach of any duty. Part of what the trial judge has done is, in substance, to decide that even if there had been a breach of any of the duties on which the Appellants relied, he would still decline to draw two inferences. One is that, if the Appellants had been given advice about an unregistered MIS, they would have changed course; the other is that, if DDS had declined to act, the Appellants were likely not to have proceeded. I see no error in the trial judge's declining to draw those inferences. 227 But the trial judge went further than merely declining to draw these two inferences. He made a positive finding, at [293], that once the loan approval had been given, "the second investment with KSE was inevitable". That finding meant that his Honour was doing more than declining to draw an inference, and leaving the question of causation to be decided on the basis that the plaintiffs had failed to discharge their onus of proof of causation. In its context, it was a finding that nothing of the type that the plaintiffs alleged in the proceedings would have stopped the investment being made. It was open to the trial judge to reach that finding though there was no evidence directed to the specific topic of what the Appellants would have done if they had known there was a risk that ASIC could wind up the business if it had a mind to do so. The positive finding that the investment was inevitable is in this respect analogous to a causation finding in Beach Petroleum NL v Kennedy, concerning which the court said, (at [447], 93-94): "His Honour was not concerned with what the directors of Beach would have done if Abbot Tout had declined to act or had given particular advice. Rather, his honour concluded that loss would have occurred irrespective of anything Abbot Tout did. This is not speculating on what the directors would have done if Abbot Tout had performed their alleged duty. It is a finding that loss would have occurred whether or not any such duty as alleged had been performed." 228 When the causation finding of the trial judge was open to him, and is of this character, causation provides a reason, independent of lack of breach of duty, why the claim against DDS must fail. PART D – ADDITIONAL GENERAL GROUNDS OF APPEAL Tendency Evidence 229 The Appellants assert that the trial judge erred in rejecting certain evidence that they had sought to have admitted on the basis that it was tendency evidence. The trial judge's reasons for rejecting that evidence are contained in an interlocutory judgment that he gave on 29 July 2004: Ibrahim & Ors v Pham & Ors [2004] NSWSC 650. The Legislation 230 Section 97 Evidence Act 1995 provides: "(1) Evidence of the character, reputation or conduct of a person, or a tendency that a person has or had, is not admissible to prove that a person has or had a tendency (whether because of the person's character or otherwise) to act in a particular way, or to have a particular state of mind, if: (a) the party adducing the evidence has not given reasonable notice in writing to each other party of the party's intention to adduce the evidence, or (b) the court thinks that the evidence would not, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value. (2) Subsection (1) (a) does not apply if: (a) the evidence is adduced in accordance with any directions made by the court under section 100, or (b) the evidence is adduced to explain or contradict tendency evidence adduced by another party. Note. The tendency rule is subject to specific exceptions concerning character of and expert opinion about accused persons (sections 110 and 111). Other provisions of this Act, or of other laws, may operate as further exceptions." 231 The Dictionary to the Evidence Act contains a definition: " tendency evidence means evidence of a kind referred to in section 97(1) that a party seeks to have adduced for the purpose referred to in that subsection." 232 The only role that that definition has to play in construing section 97 Evidence Act is in construing section 97(2)(b), because section 97(2)(b) is the only place in section 97 where the expression "tendency evidence" occurs. The definition also applies where the expression "tendency evidence" occurs in section 100 and section 101. 233 Section 99 Evidence Act requires notices given under section 97 to be given in accordance with any regulations or rules of court that are made for the purposes of section 99. 234 Such a regulation has been made. The regulation that was current at the time of the decision was regulation 6 of the Evidence Regulation 2000. So far as relevant, it states: "(1) This clause is made for the purpose of section 99 of the Act. (2) A notice given under section 97 (1) (a) of the Act (relating to the tendency rule) must state: (a) the substance of the evidence of the kind referred to in that subsection that the party giving the notice intends to adduce, and (b) if that evidence consists of, or includes, evidence of the conduct of a person, particulars of: (i) the date, time, place and circumstances at or in which the conduct occurred, and (ii) the name of each person who saw, heard or otherwise perceived the conduct, and (iii) in a civil proceeding—the address of each person so named, so far as they are known to the notifying party." The Tendency Notice Against Mr Pham 235 The notice relied upon so far as admitting evidence under section 97 Evidence Act against Mr Pham is a letter from the solicitors for the Appellants, Barclay Benson, that said: "We hereby notify you that, for the purposes of section 97 & 98 of the Evidence Act (NSW), 1995 ("the Act"), in the event the abovementioned matter proceeds to trial, we will adduce evidence as to the following:- (a) The Defendants in the abovementioned proceedings were of a particular character and/or conducted themselves in such a manner when approached by investors to act on their behalf for refinance, to raise funds to invest in a 'trolley collection business' operated by Karl Suleman Enterprizes Pty Limited, this defendants either encourages [sic] these investors or remained silent about their involvement with Karl Suleman, Karl Suleman Enterprizes Pty Limited and its related entities, the advised [sic] they had received from Counsel, Dr Ludmilla Robinson, and the advise from Mallesons Stephen Jacques Solicitors. In this regard, we enclose , by way of service, a sealed copy of each of the following Affidavits, deposed to by the following:- 1. Joseph Nakad & Tamara Nakad; proceeding number 20486 of 2002 2. Elie Kondrojian, Anahid Kondrojian & Arousik A. Manookian; proceeding number 20484 of 2002 3. Emile Khalil & Theresa Khalil; proceeding number 20491 of 2002 4. Helen Betrayhani & Nikola Betrayhani; proceeding number 20485 of 2002 5. Albert Oram; proceeding number 20482 of 2002 6. Fudor Mansour & Joseph Benjamin; proceeding number 20487 of 2002 We also rely upon the Affidavits, already served upon you, deposed to by the following persons:- 1. Maria Syamando & Olga Grimes; proceeding number 13443 of 2002 The particulars, for the purpose of regulation 6 of the Regulations to the Act, are contained within the contents of each of the Affidavits referred to above. In respect of the contents of this Notice, we advise as follows:- 1. Each of the Affidavits served hereunder are also served in respect of each of the matters to which same specifically relate. 2. In respect of all matters which have become generally known as "the KSE matters", we will seek to adduce the same evidence as to which this Notice relates." 236 The significance of the last paragraph of that letter is that Barclay Benson was acting as solicitors for the plaintiffs in a total of twelve actions apart from the present one, brought against Mr Pham, and relating to investments made by the various plaintiffs in KSE. The "Tendency" Evidence Against Mr Pham 237 Notwithstanding the terms of that notice, the affidavits that were identified as items 3 to 6 inclusive in the list of affidavits were not relied upon against Mr Pham. As well, the affidavit of Arousik Manookian, referred to in item 2 of the list, was not relied on, nor were the affidavits of Maria Symando or Olga Grimes. 238 Elie Kondrojian and Anahid Kondrojian are husband and wife. Each of them swore an affidavit on 19 August 2003. 239 Joseph Nakad and Tamara Nakad are also husband and wife. They each swore an affidavit on 25 August 2003. 240 The affidavits of Mr and Mrs Kondrojian give an account, in virtually identical words, of a meeting in April 2001 attended by themselves, Mr and Mrs Nakad, a Mr Shimon Barkho and Mr Pham. It related to a transaction in which Mr Pham was acting as a finance broker to arrange the borrowing of money that ultimately came to be invested in KSE. One borrowing and investment was made by Mr and Mrs Kondrojian; another was made by Mr and Mrs Nakad. Concerning each of the investments, DDS acted for the solicitors for the borrowers. 241 The affidavits of Mr and Mrs Kondrojian and Mr and Mrs Nakad each attribute to Mr Pham, at that meeting, representations to the effect of that Mr Barkho was going to be a very rich man as a result of his investment with KSE. Mr and Mrs Nakad (but not Mr and Mrs Kondrojian), also attribute to Mr Pham, as they were leaving the conference, a statement that Mr Suleman's business was doing very well. 242 All four affidavits give an account of Mr Pham not giving them any fee disclosure document, but deducting fees from the borrowed amount without authority. 243 If one compares the account given in this "tendency" evidence with the allegations made against Mr Pham in the Fourth Further Amended Statement of Claim, the only similarity is an allegation of a representation on his part that the investment was good. The Tendency Notice Against DDS 244 The notice under section 97 Evidence Act that was relied on in relation to the DDS Respondents was undated. It said that at the trial the plaintiffs "will rely upon tendency and coincidence evidence as set out below", and then identified particular paragraphs of the affidavits of Mr and Mrs Kondrojian, Mr and Mrs Nakad, and of two other people whose affidavits were not, as events turned out, ultimately relied on. 245 In response to a request for particulars, the solicitors for the Appellants identified the tendency relied upon as being: "… for the defendants and their employees and agents named in the paragraphs to deal with members of the public as clients or otherwise for the purpose of arranging loans for investments of funds in projects of Karl Suleman which projects were legal [sic] and prejudicial to the members of the public. The defendants and their respective employees had the tendency to do such acts knowing or suspecting the loans were risky and/or may well not be repaid and they encouraged the borrowers to invest and failed to advise them of the risk and nature of the investments. And further the defendants had a financial interest in and received a benefit from the loan." 246 The persons alleged to have had the tendency were identified as being "All persons named in the paragraphs other than the respective borrowers". 247 Though that notice stated that the affidavit paragraphs were proposed to be relied upon as coincidence evidence, as well as tendency evidence, they were ultimately not sought to be relied upon as coincidence evidence. The "Tendency" Evidence Against DDS 248 The material that was relied upon as tendency evidence against DDS was affidavit evidence relating to five separate meetings. Those present at the meetings were as follows: Meeting No. Date of meeting Deponents present DDS person present 1 Early April 2001 AK, EK, JN, TN Sabrina Jajoo 2 20 April 2001 AK, EK Sabrina Jajoo 3 Early May 2001 AK, EK Sabrina Jajoo 4 Late May 2001 JN, TN Vivian Joseph 5 18 June 2001 JN, TN receptionist AK = Anahid Kondrajian EK = Elie Kondrajian JN = Joseph Nakad TN = Tamara Nakad 249 Concerning meeting 1, Mr and Mrs Kondrojian's evidence was that Ms Jajoo was asked whether it was a good business, and replied that the share market was up and down, but that Mr Suleman's business provided a straight and steady flow of returns. She is alleged to have represented that Mr Suleman's business was flying, and to have talked of a possibility of the deponents investing in apartments that Mr Suleman was building at Darling Harbour. She is said to have said that "we" have hundreds of KSE contracts to change over, because the law had changed, and all the contracts had to be changed over to the new law, but that the contracts of the deponents would be the old contract, and would be changed over at a later date. 250 The evidence of Mr and Mrs Kondrojian concerning meeting 1 was given in identical words. 251 The evidence of Mr and Mrs Nakad concerning meeting number 1 contained the element that when Ms Jajoo was asked whether this was a good business, she said it was not like the share market, up and down, but rather provided regular payment. Another common element was that there was mention of other Assyrian investors purchasing units in Darling Harbour that were built by Mr Suleman. However, Mr Nakad's account of meeting 1 contained some differences from that of Mr and Mrs Kondrojian. Mr Nakad had the meeting taking place in first one room, then another, whereas Mr and Mrs Kondrojian made no mention of a change of location. Mr Nakad deposed to Ms Jajoo telephoning Mr Barkho in the middle of the conference, an event that Mr and Mrs Kondrojian did not mention. 252 Meeting 2 has as its salient features Ms Jajoo saying that her family were going to invest with KSE; that Mr Suleman was doing very well; and that "we must hope and pray that everything will be OK". 253 Meeting 3 involved a handing over of documents, without any conversation deposed to. 254 Meeting 4 involved documents being read, explained and executed, but beyond that nothing materially similar to anything that the Appellants alleged happened at any meeting with Ms Jajoo occurred. 255 Meeting 5 involved a handing over of documents, without any conversation being deposed to. Respondents' Voir Dire Evidence 256 The trial judge received evidence from the Respondents on the voir dire. The solicitor for Mr Pham deposed to the existence of the twelve other sets of proceedings in which the Appellants were acting for the respective plaintiffs. There was an affidavit from Mr Pham that gave his account of meeting number 1, and that denied significant parts of the account given in the affidavits proposed to be tendered as tendency evidence. There was also evidence on the voir dire from Mr Pham's sister, who had worked in the office, about certain aspects of the office practice and procedure. 257 The DDS defendants tendered, on the voir dire, affidavits of Ms Jajoo that gave her versions of the conversations alleged to be "tendency" evidence, and that disputed material portions of the "tendency" evidence. As well, there were eight affidavits that could be described as "counter-tendency" evidence, from investors in KSE who had Ms Jajoo acting for them in 2001, who deposed to her making no recommendation about investing in KSE, and, in at least some cases, making the positive statement that she could not advise them on any investment matters, and that they should get independent advice concerning that. The Trial Judge's Decision 258 The decision of the trial judge referred to the tests for application of section 97 applied in Jacara Pty Ltd v Perpetual Trustees WA Ltd [2000] FCA 1886; (2000) 106 FCR 51 (at [61], 66, [72]-[74], 68-69); ASIC v Vines [2003] NSWSC 1237 at [33]; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491 (at [49]-[50], 502-503); Trylow v Commissioner of Taxation [2004] FCA 446; (2004) 55 ATR 408 (at [114]-[115], 428); and Regina v Ellis [2003] NSWCCA 319; (2003) 58 NSWLR 700. 259 The Appellants do not assert that the trial judge has applied any wrong principle. Rather, they submit that he has misapplied the correct principle. Thus, in this judgment, I shall proceed by assuming, without deciding, that the account of section 97 given in the authorities referred to by the trial judge is correct. 260 The trial judge rejected the application to admit the "tendency" evidence on three separate bases: (1) that it did not provide any evidence of "any relevant or material tendency" at all; (2) that, if contrary to his view it was tendency evidence, it did not have the "significant probative value" that the section requires; and (3) even if he were wrong on both of the previous grounds, he would reject it under section 135 Evidence Act, on the basis of wasting undue time. Concerning that last ground, he noted that the action involved approximately $170,000, and that admitting the "tendency" evidence would extend the proceedings by approximately two weeks. Did the Trial Judge Err? 261 It is not necessary to express any view concerning the first ground upon which the trial judge relied. In my view, he is not shown to be in error, in a way that is capable of correction on appeal, in either his second or his third grounds for rejecting the evidence. 262 Concerning the second ground, it is to be observed that the test the section imposes relates to what "the court thinks". The opinion that the court is required to form is one on the basis of the materials available to the judge at the time of forming his or her view. That opinion must be formed at a time when the evidence in the case is incomplete. 263 An appellate court would be able to set aside a judge's admission or rejection of evidence under section 97 Evidence Act if the opinion that the judge formed about whether the evidence would have significant probative value is one that, on the materials, a reasonable judge properly instructed could not have formed. However, I am not persuaded that this is such a case. 264 The "tendencies" that were alleged, as identified in each of the tendency notices, were of a very general kind. Even assuming, without deciding, that they counted as "tendencies" for the purpose of section 97, their generality provides a handicap to their having "significant probative value". 265 So far as Mr Pham was concerned, the "tendency" that was alleged was exhibited on one occasion only. Meeting number 1, occurring as it did in April 2001, was of the order of eight months after Mr Pham's involvement with the Appellants. It involved Mr Pham acting in the capacity of a mortgage broker alone, not in the dual capacity he had with the Appellants of being both a mortgage broker and the person who carried out mechanical or administrative tasks relating to the granting of the mortgage. While the evidence concerning meeting number 1 showed Mr Pham saying nothing about any advice received from Dr Robinson or Mallesons, it was common ground in the case that he had said nothing to the Appellants about advice he had received from Dr Robinson. By the time the trial judge came to make his decision on the admission of the "tendency" evidence, Mr Pham's affidavit had been filed, and, from reading it, it would have been apparent to the trial judge that Mr Pham was not proposing to give evidence that he had said anything to the Appellants about advice received from Dr Robinson. By the time Mr Pham saw the Appellants, he had received no advice from Mallesons. Indeed, the evidence does not establish that he received advice from Mallesons at any time. Thus his failure to disclose "the advise [sic] from Mallesons…" was of no relevance to the case. It is incorrect that the "tendency" evidence shows that Mr Pham, even at meeting number 1, remained silent about his involvement with Mr Suleman – rather, it attributes to Mr Pham a statement that he could not invest with Mr Suleman because he was Mr Suleman's solicitor. The "tendency" evidence showed Mr Pham, on that occasion, saying nothing about his involvement with Mr Suleman beyond being his solicitor. However, at the time of making his decision, the trial judge would have known that Mr Pham was not asserting he had made any more extensive disclosure of his involvement with Mr Suleman to the Appellants then that he was Mr Suleman's solicitor. Taking all these matters into account, it was (to put it at its lowest) a view that was open to the trial judge to decide that the "tendency" evidence did not have "significant probative value" against Mr Pham. 266 So far as the four meetings relied upon as "tendency" evidence against DDS are concerned, meetings 2, 3 and 4 all occurred while DDS still retained some role relating to the restructure of Mr Suleman's investment contracts, while Ms Jajoo's meeting with the Appellants occurred after DDS had ceased to be involved in that restructuring. Concerning meeting 2, there is a similarity to the evidence of the Appellants about the meeting with Ms Jajoo only in that the Appellants attribute to Ms Jajoo favourable remarks about investment with Mr Suleman. Meetings 3, 4 and 5 did not involve any representation of substance. To the extent that they were relied upon as evidence of a failure to disclose or advise in any respect, the affidavit evidence of Ms Jajoo had already been filed, and was available to be read by the trial judge. From it, he would have seen that she was not planning to give evidence of any advice concerning the risk and nature of the investment. Again, in my view it was (to put it at its lowest) a view that was open to the trial judge to decide that the "tendency" evidence did not have "significant probative value" against the DDS defendants. 267 Further, the view that the judge took concerning the application of section 135 Evidence Act to the evidence, is one that was open to him. The Appellants' attack on the rejection of the "tendency" evidence fails. Fresh Evidence 268 At the hearing of the appeal, the Appellants sought to tender some evidence of events that had occurred since the trial that bore upon their claim for damages. A question of whether that evidence should be admitted was left to be resolved in the judgment. In circumstances where the case on liability fails, it is not necessary to address that question. Delay in Delivery of Judgment 269 As their fiftieth ground of appeal, the Appellants submit that there was an inordinate and excessive delay in handing down the judgment in this case, such that there should be a new trial. 270 Notwithstanding the sums of money that the litigation involved, the hearing lasted approximately sixteen days with six days of oral submissions. Extensive written submissions were also made available. The appeal books fill twenty-two volumes. 271 The trial concluded on 11 August 2004. Judgment was delivered on 30 March 2005. Thus, something less than eight months elapsed between judgment being reserved and judgment being delivered. That period included the Court vacation of six weeks. 272 The judgment, when delivered, was 106 pages long, and contained an extensive examination of the evidence and discussion of the law. 273 Delay in delivery of a judgment, while never to be encouraged, provokes appellate intervention only in accordance with the principles stated by Hunt AJA in Monie v Commonwealth of Australia (2005) 63 NSWLR 729 at 741-744. Particularly important is his Honour's statement at 743-744, [44]: "… delay between taking evidence and the delivery of judgment does not, in itself, justify upholding an appeal against the judgment given. Error must still be established on the part of the trial judge warranting either a reversal of the judgment or the grant of a new trial. Delay may assist an appellant in establishing such error because … the inference will be more readily drawn that a trial judge's failure to deal in a significantly delayed judgment with particular matters on which the appellant relied in contradiction of the findings made in that judgment resulted from those matters being overlooked by the judge." 274 As earlier parts of this judgment show, I am not persuaded that any error on the part of the trial judge that affects the outcome of the case has been established. Order 275 The order I propose is that the appeal be dismissed with costs. ********** 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. 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