Supreme Court New South Wales Medium Neutral Citation: Jeandin v Tzovaras [2011] NSWSC 1254 Hearing dates: 04/10/2011 and 05/10/2011 Decision date: 04 November 2011 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Judgment for plaintiff against first and second defendants for $1,890,575.31 including interest. Judgment for plaintiff against third defendant for $1,500,000.00 with interest to be assessed. Plaintiff to have charge over LawCover policy. Defendants to pay plaintiff's costs. Catchwords: CONTRACT - formation - whether oral retainer for provision of legal services - DUTY OF CARE - duty of solicitor to client in contract, at common law and as fiduciary - breach of duty - conflict of interest - failure to advise - DAMAGES - causation - whether, but for the failure to advise, plaintiff would have made unsecured financial investment. Legislation Cited: Civil Liability Act 2002 (NSW) Civil Procedure Act 2005 (NSW) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) Cases Cited: Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420 Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 Carr trading as Forshaws Neill v Swart [2007] NSWCA 337 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Hendriks v McGeoch [2008] NSWCA 53 Solicitors' Liability Committee v Gray (1997) 77 FCR 1 Category: Principal judgment Parties: Jean-Pierre Louis Paul Jeandin (Plaintiff) Ted Dorotheos Tzovaras (First Defendant) George Tzovaras (Second Defendant) Tzovaras Legal Pty Limited (ACN 092 725 829) (Third Defendant) LawCover Insurance Pty Limited (ACN 095 082 509) (Fourth Defendant) Representation: Counsel: RJH Darke SC / M J Dawson (Plaintiff) G Curtin SC / P W Arblaster (Fourth Defendant) Solicitors: Argyle Lawyers (Plaintiff) No appearance (First, Second and Third Defendants) HWL Ebsworth (Fourth Defendant) File Number(s): 2009/322343 Judgment 1HIS HONOUR: The plaintiff (Mr Jeandin) lent $1,500,000.00 to Country Landmark Pty Limited (the company), a company controlled by the first and second defendants (collectively "the brothers"). The brothers guaranteed the loan. The company has defaulted. Mr Jeandin sues the brothers pursuant to their guarantees. 2In addition, Mr Jeandin says that he retained the first defendant (Mr Tzovaras), a solicitor, or his incorporated legal practice (the third defendant, Tzovaras Legal) to act for him in connection with the loan. In those circumstances, he says, Mr Tzovaras and Tzovaras Legal owed, and breached, fiduciary duties because Mr Tzovaras was personally interested in the loan both through his shareholding in the company and because he was a guarantor of the company's obligations. In addition, Mr Jeandin says, Mr Tzovaras and Tzovaras Legal breached their contractual and common law duties of care in various respects. 3The brothers and Tzovaras Legal did not appear at the hearing. They terminated their solicitor's retainer shortly before the hearing. There is no doubt that the company has defaulted under the loan and that the brothers are liable on their guarantees. They alleged an estoppel defence, but (since they did not appear) there was no evidence to support it. 4In addition, Mr Jeandin claims against the fourth defendant (LawCover) pursuant to a professional indemnity policy that it issued in favour of Mr Tzovaras and Tzovaras Legal. He seeks a charge pursuant to s 6(1) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), and payment pursuant to s 6(4) of that Act. The issues 5The issues as between Mr Jeandin and LawCover are as follows: (1) was a contract of retainer made between Mr Jeandin and Mr Tzovaras or Tzovaras Legal, that Mr Tzovaras would act for Mr Jeandin by preparing the documents necessary to give effect to the transaction between Mr Jeandin and the company? (2) If there were a contract of retainer: (a) what was its scope? and (b) did Mr Tzovaras or Tzovaras Legal breach their contractual (implied) or common law duties of care owed to Mr Jeandin? (3) Again if there were such a contract of retainer, did Mr Tzovaras and Tzovaras Legal breach their fiduciary duty owed to Mr Jeandin? (4) If there were a contract of retainer and a breach of duty (contractual, common law or fiduciary), did any such breach cause the loss of which Mr Jeandin complains? (5) If there were such a contract of retainer and breach, and if Mr Jeandin suffered loss thereby, was that a loss that arose "from the provision of legal services" so as to come within the insuring clause (cl 4(a)) of the LawCover policy? 6By the time Counsel came to final submissions, it was accepted that if there were a contract of retainer, Mr Tzovaras and Tzovaras Legal had breached their contractual, common law and fiduciary duties to Mr Jeandin. The argument as to the scope of any retainer fell away (see T65.30). Further, Mr Curtin of Senior Counsel, who appeared with Mr Arblaster of Counsel for LawCover, accepted that in those circumstances, and if I were to conclude (against his client's contention) that Mr Jeandin had suffered loss as a result of any of those breaches, then the loss arose from the provision of legal services, so as to come within the insuring clause. 7Thus, effectively, the real issues between Mr Jeandin and LawCover are retainer and causation. 8Before I proceed to the factual background and then to a consideration of real issues, I should note two things. The first is that all counsel worked hard to focus the debate on the real issues in dispute, and to limit those issues as much as properly they could, having regard to their clients' respective interests. The second matter is that, since it was not suggested that there was any relevant distinction between Mr Tzovaras and Tzovaras Legal for the purposes of the claim against LawCover, I shall hereon refer only to Mr Tzovaras. The findings that I make, and the conclusions that I reach, against Mr Tzovaras on this aspect of the case will apply equally to the case against Tzovaras Legal. Background to the loan to the company; previous retainers 9Mr Jeandin is a French national. He resides in Noumea, although he has a house at Sanctuary Cove in Queensland. Mr Jeandin said in his affidavit that he and Mr Tzovaras had been introduced, in about 2004, by a mutual friend. That friend was Mr Patrick Jean, who Mr Jeandin described in his affidavit as "a business associate of mine and a friend of Ted Tzovaras... [and] also a resident of New Caledonia". 10Mr Tzovaras first acted for Mr Jeandin when Mr Jeandin bought the Sanctuary Cove property. That happened in March 2006. It may be noted that the contract refers to both Mr and Mrs Jeandin as purchasers, but does not separately name Mrs Jeandin. Nothing turns on this. In the course of acting for Mr (and perhaps Mrs) Jeandin on the purchase, Mr Tzovaras did what one would expect a solicitor to do. 11In early 2008, Mr Jeandin considered the purchase of a unit in a development at Surfers Paradise. The developer was Raptis Group Limited. Raptis Group was building what seemed to have been an apartment block to be managed by the Hilton Hotel Group. Mr Jeandin retained Mr Tzovaras to act for him. 12Mr Jeandin raised various questions with Mr Tzovaras in relation to the proposed purchase from Raptis Group, seeking his advice. Mr Tzovaras in turn took those questions up with Raptis Group. He did not receive satisfactory answers, and communicated that fact to Mr Jeandin. Mr Jeandin decided not to proceed. The refundable deposit that Mr Jeandin had paid was refunded in mid February 2008, and effectively work under the retainer then ended. 13In the meantime, the brothers, through the company, had been undertaking a development at Bredbo known as the "Silver Brumby Riverside Country Estate". The company had acquired a parcel of land near Bredbo which it wished to subdivide into residential allotments. The company obtained a valuation from Mr Jeff Whitman, of Jeff Whitman & Associates Pty Limited, dated 15 July 2006. The valuation disclosed that the total area of land was a little over 1000 hectares, and that it was proposed to be subdivided into 64 individual residential allotments. Mr Whitman valued the property, "by residual land analysis taking into account the finished sale price of the individually prepared blocks, supported by a cash flow analysis", at $5,775,000.00. 14In August 2006, the company obtained an offer of finance from Grenfell Securities Limited (Grenfell). The principal sum was $3.6 million, on which (at the indicative lower rate of 10.25% per annum) interest would accrue at $30,750.00 per month. The loan was repayable within 12 months after "the First Interest Payment Due Date", which was in effect the 15 th day of the month following drawdown of the loan. (The offer provided that the loan was to be drawn down entirely in one instalment.) 15Grenfell required by way of security a registered first mortgage over the Silver Brumby Estate, guarantees and indemnities from Mr Tzovaras and the corporate vehicles through which the brothers held their interests in the company, and fixed and floating charges over the assets and undertakings of the company and its corporate shareholders. The offer of loan was accepted within a day or so of its being made on 16 August, and the company gave Grenfell a mortgage over the Silver Brumby Estate dated 1 September 2006. Presumably, the other securities required by Grenfell were given at or about that time (it appears that settlement took place on 8 September 2006). 16In April 2007, Grenfell agreed to vary the loan. First, it agreed to increase the principal sum from $3.6 million to $4.1 million. Second, it agreed to extend the repayment date to "12 months from the First Varied Interest Payment Due Date" (which appears to have been the 15 th day of the month following draw down of the amount of the principal increase). Interest on the increased principal sum at the lower rate (11.25%) would run at $38,437.50 per month. A variation of mortgage was executed on 11 May 2007. Presumably, the additional amount of principal was drawn down at about that time. 17Progress on the Silver Brumby Estate development was relatively slow. A lot of time was taken to get the approval of the relevant council. In about March 2008, Mr Tzovaras realised that more money was required. He approached Mr Jean, sending him an email dated 16 March 2008. Mr Jean passed that email on to Mr Jeandin on the following day. 18I interrupt the narrative for a moment to note that, by and large, Mr Tzovaras communicated with Mr Jeandin in French. The evidence included both the French version of documents exchanged between Messrs Tzovaras and Jeandin (where the originals of those documents were in French) and certified English translations. There was no challenge to the accuracy of the translations. In what follows, I rely, for all documents not originally written in English, on those English translations. 19However, the email sent to Mr Jean was not in French. It was in English. It attached a number of documents, including what were described as a feasibility study and a draft valuation. The feasibility study disclosed estimated gross realisations and development costs, and projected a net profit of $5,017,517.00. The so-called draft valuation (which appears to have been someone's estimate of gross realisations and development costs, and which made an allowance for acquisition costs) asserted a residual land value, rounded off, of $6,675,000.00. 20The email observed that the valuation had been prepared on the basis of realisable prices for each lot which were less than the prices for which they would be sold, and noted that "recent discussions with the valuer" suggested that the value could "be well above $7 million". 21The email then stated: Our proposal is based on the September 2007 valuation giving the property a value of $6,675,000 on the assumption then made that Cooma-Monaro Shire Council would be approving the DA, which it did on 10 March. On that valuation we should be able to borrow a minimum of $4,338,750 being 65% of the value of the property (that is at a loan to value ratio or "LVR" of 65%) and up to $4,672,500 (on a 70% LVR). Assuming the lower LVR being applied, we would require from the investor approximately $1.5 million which would applied as follows: $625,000 to repay a private loan secured with a second mortgage over the property $150,000 to outstanding creditors (mostly consultants that worked on completing all studies in support of the DA) $140,000 towards interest and refinancing expenses and the balance of $585,000 to be applied towards working capital that would be required before we obtain construction finance for the development of the subdivision (including roads, water and power reticulation, fencing, etc), engineering, surveyors and other consultants, and marketing and advertising expenses. The time for the payment of the amount of $1.5 million is likely to be as follows: With the provision by the investor of approximately $1.5 million, we will comfortably be able to borrow all other required funds from a bank or other financial institution at commercial interest rate of about 10% per year. Our proposal to the investor for the provision of the required capital of $1.5 is a 25% share of the total net profit that would be derived from the project. Based on our feasibility, we estimate the total net profit to be $7 million of which, the investor's share would be $1.75 million after approximately 1 year which is the estimated time that it would take us to complete the project and the sales of the 65 lots. The loan by the investor will be repaid immediately after the loan from the bank or other financial institution is repaid. Let me know if you need any further information before we meet in Noumea. One final point, namely that George and I need to move very quickly as interest on the current loans on the property is being incurred at the rate of almost $40,000 per month. 22Later on 16 March 2008, Mr Tzovaras sent a further email to Mr Jean in which he revised the proposal. That further email makes it clear that Mr Tzovaras intended the proposal to be put before Mr Jeandin. Omitting formal parts, the second email reads: I have tried to phone on you mobile this morning without success, to tell that I have reviewed and changed the investment proposal. I hope that you haven't yet discussed it in detail with JP. I have decided that a 25% share of the net profit is much too generous for a loan of $1.5 million that will be secured (by a 2 nd mortgage over the property) and on the basis that the investor having not participated in the risk of the project. I have decided that a more reasonable proposal, and still one that is generous, is 15% of the net profit or minimum of $750,000 which represents a 50% return on investment or more if the net profit exceeds $5 million. I have also reformulated the calculation of the estimated profit by deducting $7 million as the estimated value of the land, rather than $5 million being the acquisition and pre-development costs. The result is that the estimated profit is just over $5 million, 15% of which is $750,000. I am sending you separately a revised email explaining the proposal with the revised feasibility study. 23On 17 March 2008, Mr Jean sent an email to Mr Jeandin enclosing the feasibility study, and said that he would "leave it to [Mr Tzovaras] to call you in order to give you all of the information that you might need and brief you". 24Mr Jean continued: ... As I already mentioned, I am personally involved in two other investments for which I need to fund important sums, therefore I cannot involve myself in this project which is very interesting and which we have been following for a few years with Ted and Georges, as Georges, Ted and I have invested in this property in the past. If you are interested, do not hesitate, it is secure and serious, minimal [sic] required capital is $1.5M, return on investment from 1 year after the sale of the blocks of land, CAPITAL +15% of the total net profit that would be derived from the project, estimated to be $5 million net. Here you go, catch your phone and call him on 0061416000416. 25Mr Tzovaras sent an email to Mr Jeandin on 20 March 2008. It said that Mr Tzovaras had booked a flight to Noumea for 22 March, and requested Mr Jeandin to call "as I need to confirm and pay for my flight...". On the same day, Mr Tzovaras sent to Mr Jeandin a translation into French of the email that had been sent to Mr Jean, but with the return and fee modified in accordance with the second email from Mr Tzovaras to Mr Jean of 16 March 2008. 26Also on 20 March 2008, Mr Tzovaras attempted to send an email to Grenfell. It appears that the email did not transmit, and Mr Tzovaras printed it out and faxed it without its attachments. Relevantly, the email stated that the company was "in the process of refinancing on the basis of a fresh valuation" and requested a deferral of interest for the current and next months: 3) Due to our current cash constraints and so as to avoid stretching our cash flow unduly, we would appreciate the deferral of the current and next months interest payments without invoking the higher interest rate. Our refinancing is in principle in place and I expect to settle the refinancing and discharge the existing debt within approximately 6 weeks. 27Grenfell agreed to meet that request, on the basis that if the payment was not received within 7 days of its due date then the higher rate would apply. Mr Tzovaras agreed to that. 28Mr Tzovaras did go to Noumea, but a week later, on 28 March. 29According to Mr Jeandin, he discussed the Silver Brumby development with Mr Tzovaras, and Mr Jean was present for part of that meeting. In the course of the discussions, according to Mr Jeandin, the following was said: Ted Tzovaras: I will prepare the loan documentation for your investment. Jeandin: Yes I agree. 30Although Mr Tzovaras did not appear, and his affidavit was not read, portions of it were admitted into evidence. That happened because in cross-examination, Mr Jeandin said in substance that he had only replied to the affidavit of Mr Tzovaras to the extent that he thought it was incorrect. 31Thus, to the extent that Mr Jeandin had not replied, it could be inferred that he accepted that what Mr Tzovaras had said was correct. The relevant passages of Mr Tzovaras' affidavit (i.e., those to which Mr Jeandin had not replied) were admitted, without objection, on this basis. (Mr Jeandin's affidavit in reply, which had not been read, was admitted for the purposes of showing the extent to which Mr Jeandin had not taken issue with Mr Tzovaras, and that, in some cases, there were limitations on the inferences that might otherwise be drawn from the failure to reply directly.) 32Mr Tzovaras gave a more detailed account of events leading up to the meeting on about 29 March and the meeting itself. He said that he had had two telephone conversations with Mr Jeandin before the meeting. In the first of those conversations, they talked about commercial aspects of the development and Mr Jeandin asked for a French translation of the material that had been given to Mr Jean. As I have noted, this was supplied. 33In the second of those conversations, Mr Tzovaras confirmed that he was flying to Noumea and Mr Jeandin agreed to pick him up from the airport. 34Again according to Mr Tzovaras, the discussions with Mr Jeandin in Noumea, in particular on 29 March 2008, focused on the detail of the Silver Brumby investment. Mr Tzovaras said that he had taken documents with him, including a plan of the approved subdivision and a feasibility study and valuation, and that he went through all these documents in detail with Mr Jeandin. 35According to Mr Tzovaras, Mr Jeandin did not agree to make the loan at this time. That happened later, Mr Tzovaras said, after he had returned to Sydney. Mr Tzovaras said that Mr Jeandin called and said he would provide the loan, and asked for the documents to review. 36Mr Jeandin said that he had a further meeting with Mr Tzovaras, in late April 2008. This happened at Mr Jeandin's residence in Sanctuary Cove. Mr Tzovaras brought with him a draft loan deed. According to Mr Jeandin, Mr Tzovaras "read through the draft loan deed summarising the main clauses... [and]... spoke about the progress and likely timing of local and state authorisations in relation to water and the subdivision of the land, and the prices to be achieved at each stage of development". 37Mr Jeandin said that, in the course of this meeting, there was a discussion to the following effect (affidavit sworn 15 April 2011, para 25): [25] I do recall that during the meeting, our conversation continued to the following effect: Ted Tzovaras: "This is a good project to invest in." Jeandin: "It is very important that if I loan the $1.5 million there will be a mortgage in my favour and it will be secured. I will not loan the sum unless it is adequately secured." Ted Tzovaras: "In exchange for the $1.5 million, you will get a mortgage over the property. It will be a second ranking mortgage after Grenfell Securities, but your loan will be fully secured." At the end of the meeting, we had a conversation to the following effect: Ted Tzovaras: "I will send the final documents by express courier for you to sign and return as soon as possible." Jeandin: "Ok, I will then sign them and send them back." 38Further, Mr Jeandin said (same affidavit, para 27): [27] At no time during this meeting, or at any other time (either in conversation or writing) did Ted Tzovaras, Tzovaras Legal or any other person: (a) recommend that I obtain independent legal advice in respect of the proposed loan; (b) recommend that I obtain independent financial advice in respect of the proposed loan; (c) recommend that I obtain a valuation of the land and to have the feasibility study verified; (d) explain the nature and value of the securities being provided by the borrower, Country Landmark 39Mr Tzovaras sent revised documents to Mr Jeandin on 22 April 2008. They included the final versions of the loan deed, in English and in French; three copies of a mortgage; and three copies of a caveat. There were "sign here" notes attached to those documents in various places. There was a covering letter, in French. The English translation reads (omitting formal parts): As agreed during our conversation yesterday, I modified the loan contract which is enclosed in this letter (French and English versions). I have also attached three copies of the mortgage and the caveat. I invite you to sign each document where indicated with the yellow label and also you need to sign (with your initials) each page of the loan deed. Could you please give me a call once you received the documents so I can guide you. First issue: retainer The parties' submissions 40Mr Darke of Senior Counsel, who appeared with Mr Dawson of Counsel for Mr Jeandin, submitted that it was relevant that Mr Tzovaras had acted for Mr Jeandin in two previous transactions, and that the second of those retainers had terminated only shortly before the events of March 2008. Mr Darke submitted that a contract of retainer was made during the discussions on 29 March 2008, when Mr Tzovaras said that he would prepare the loan documentation for Mr Jeandin, and Mr Jeandin agreed that this should be done. 41Further, Mr Darke submitted, Mr Tzovaras thereafter: (1) did prepare the necessary documents, in draft; (2) read through the documents with Mr Jeandin and explained them to him; (3) prepared the documents in final form and sent them to Mr Jeandin for execution (offering to "guide" him); and (4) lodged the caveat to protect Mr Jeandin's interest under the mortgage; the caveat specified the office of Tzovaras Legal as Mr Jeandin's address for service in New South Wales. 42Those facts, Mr Darke submitted, were consistent with a contract of retainer having been made. 43I interpose to note that the contract of retainer that was "pleaded" was one made orally, on about 29 March 2008, containing both express oral terms and terms implied by law. It is necessary to bear this in mind, because in submissions Mr Darke appeared to go further, and to submit that the making of a contract or retainer could be inferred, independently of the conversation of 29 March 2008, from the events that happened afterwards. No such contract was pleaded. 44Mr Curtin submitted that even taken at face value, the conversation of 29 March 2008 was not sufficient to establish a retainer. Mr Curtin laid stress on the expanded account of the meeting (and what had led up to it) given by Mr Tzovaras, and submitted that the court should infer that the discussions were concerned entirely and exclusively with commercial aspects of the transaction. 45In those circumstances, Mr Curtin submitted, the conversation amounted to no more than one party to a commercial transaction undertaking to prepare the documents by which it would be consummated. 46Further, Mr Curtin submitted, the events that happened after the conversation of 29 March 2008 were of limited significance, and in any event neutral. He submitted that, since no implied retainer had been pleaded, the events could be looked at, at most, to see whether they were consistent with there having been some antecedent contract. But in any event, Mr Curtin submitted, those events were not consistent only with there having been made a contract of retainer. In particular, as to the fact that Mr Tzovaras had lodged the mortgage and the caveat (with the address for service in the latter stated as I have indicated), Mr Curtin had submitted that this was a matter of convenience rather than the performance of an incident of a retainer. 47More fundamentally, Mr Curtin submitted, the events leading up to the alleged retainer were quite different to the events leading up to the earlier retainers. For each of those earlier retainers, Mr Jeandin had expressly asked Mr Tzovaras to perform legal services. There was no such request made on or around 29 March 2008. 48In any event, Mr Curtin submitted, the submissions for Mr Jeandin were circular, because in essence they said no more than that: (1) solicitors who are retained to document loan transactions will prepare and explain the relevant documents, and then attend to execution, registration and the like; (2) Mr Tzovaras prepared relevant documents, explained them, and attended to execution and registration; (3) therefore, Mr Tzovaras did so pursuant to a contract of retainer. 49In reply, Mr Darke pointed to the facts that: Mr Jeandin did not speak English; his only previous experience with the Australian legal system was through his earlier retainers of Mr Tzovaras; and Mr Jeandin did not retain anyone else (either in Noumea or in Australia) to advise him or to assist with the legal aspects of the transaction. The principles 50The parties referred me to a number of decisions. I do not think that it is necessary to do more than to say that those decisions show that the relevant question is whether, on the evidence as a whole, the contract of retainer has been established. See Hendriks v McGeoch [2008] NSWCA 53 at [39], where Basten JA cited Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 in support of this, relatively uncontroversial, proposition. 51Of course, when persons who happen to be solicitors engage in commercial transactions, they may do so other than in their capacity as solicitors. It is necessary to consider the facts overall to see in what capacity, in a particular case, such a person is acting. See, for example, Carr v Swart [2007] NSWCA 337 at [53], where Hodgson JA cited Solicitors' Liability Committee v Gray (1997) 77 FCR 1 as supporting that proposition. 52The particular question in Carr was whether the solicitor, Mr Carr, entered into a joint venture agreement as a solicitor, or in an entrepreneurial or managerial capacity. In the present case, there is no doubt that Mr Tzovaras was engaged in an entrepreneurial and managerial capacity, in relation to the Silver Brumby development. The question is whether, in undertaking to prepare the loan documentation for Mr Jeandin's investment, he was acting in his capacity as a solicitor. 53Further, in Carr , the work that was to be done by the solicitor, Mr Carr, was not work of a legal nature. Thus, the fact that he was described as being the parties' solicitor was not determinative of the question of whether or not, in relation to particular tasks, he was acting as a solicitor. 54In support of the submission referred to at [48] above, Mr Curtin relied on the decision of the Court of Appeal in Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at [288] - [290]. Beach had retained its own legal advisers in relation to a syndicated cash facility advance. The firm of Abbott Tout was acting in that advance, not for Beach, but for the lenders. Nonetheless, from time to time, Abbot Tout performed items of work which would, or could have been performed by a solicitor acting for Beach. Beach relied on those matters to suggest that there was a retainer between it and Abbott Tout. The Court of Appeal said at [288] that this reasoning was "to a large extent circular". But the significance of their Honours' observation requires attention to two matters. The first is that, on any view, Abbott Tout were acting in the transaction, but for the other side - the lenders. The second is that, as apparently the evidence in that case showed, the items of work on which Beach placed reliance were items of work that in any event would be carried by a solicitor acting for the lenders. Thus, the fact that they involved Beach was neither here nor there. 55Of course, from time to time Abbott Tout had been retained to give advice to Beach or its associated companies. Indeed, it was the existence of that antecedent relationship that led Beach to submit that the items of work to which the Court of Appeal referred at [288] to [290] showed the existence of a retainer in relation to the syndicated loan facility advance. To that extent, there is some similarity between the basic facts in Beach and the basic facts of this case. But there is a sharp, and in my view crucial, distinction. In this case, it has not been suggested that anyone else was retained to look after Mr Jeandin's interests as lender. The only offer to perform the necessary legal work (of drafting the loan agreement, mortgage and caveat) was that made by Mr Tzovaras. Decision 56I start with the proposition that Mr Jeandin's account of the conversation, in which Mr Tzovaras undertook to prepare the documents, was uncontroverted (because Mr Tzovaras did not give evidence) and unchallenged. I therefore accept that, during the conversations in Noumea on and around 29 March 2008, Mr Tzovaras did say that he would prepare the loan documentation, and that Mr Jeandin did agree to Mr Tzovaras' doing so. The question is whether, in all the circumstances, that amounted to the creation of a contract of retainer. 57Undoubtedly, many of the normal (and legally appropriate) indicia of retainer are absent. In particular, there was no written description of the work to be done, and no fee proposal or estimate of fees. The latter, perhaps, may be explicable because (as one would expect) Mr Jeandin's legal costs were to be met by the company. Clause 7 of the deed of loan provided as follows: 7. Costs and fees The Borrower must bear the Lender's legal costs of and incidental to the preparation of this Deed of Loan, the Mortgage and the Caveat. 58Clause 7 could be taken to show that, objectively, the parties intended that Mr Jeandin as "Lender" would incur legal costs of the kind described, but that the company would bear those costs. Clearly enough, Mr Jeandin could not be liable for any legal costs, in relation to the work described in cl 7, unless that work were done by Mr Tzovaras as Mr Jeandin's solicitor. Thus, cl 7 could be taken as suggesting that Mr Tzovaras (because it was he who prepared the deed of loan) understood that he was acting as Mr Jeandin's solicitor, but at the company's expense, when he prepared the documents, and did the work, referred to in cl 7. 59Further, I think, the factual background is consistent with the creation of a contract of retainer. As Mr Tzovaras must have known, Mr Jeandin was unfamiliar with the Australian legal system; and indeed, Mr Jeandin did not speak or read (except to a very limited extent) English. Again as Mr Tzovaras must have known, when in the past Mr Jeandin had considered undertaking property transactions in Australia, he had required the assistance of a solicitor to perform the necessary work for him. I have no doubt that Mr Jeandin was more than capable of understanding and assessing the commercial aspects of the proposed loan transaction. But it does not follow that he was capable of understanding and assessing what legal steps should be taken to protect, so far as possible, his interests. 60In this context, it is significant, I think, that Mr Jeandin had made it clear that he required adequate security for his loan, and that Mr Tzovaras had assured him that his loan would be fully secured. Again, Mr Jeandin's evidence of this conversation was not controverted and was not challenged, and I accept it. Mr Tzovaras must have understood, from that conversation, that Mr Jeandin required the documents to be prepared in such a way as to give him adequate security. Mr Tzovaras could hardly have thought that Mr Jeandin was capable of assessing for himself whether the documents were prepared were sufficient to achieve that. 61I accept of course, that this conversation took place after the critical conversation of 29 March 2008. Nonetheless, it took place before the loan documents were prepared, and I think it is capable of giving colour and content to what, objectively, is to be inferred from the conversation on 29 March 2008. 62To my mind, when one looks at all the circumstances, it is unlikely that Mr Jeandin and Mr Tzovaras had in mind, on 29 March 2008 or thereafter, that Mr Jeandin would undertake and complete the proposed transaction without the benefit of legal assistance. In circumstances where, on two previous occasions, Mr Jeandin had relied on Mr Tzovaras for legal assistance in relation to proposed property investments, I think that, viewed objectively, Mr Jeandin and Mr Tzovaras intended, by the conversation of 29 March 2008, to bring into place a contract of retainer. 63Accordingly, I think, when (as I find he did) Mr Tzovaras undertook to prepare the necessary documentation to give effect to the transaction, he undertook to do so as Mr Jeandin's solicitor. 64It is inherently improbable that Mr Jeandin would have agreed to make an investment of $1.5 million without having the benefit of legal advice, to assure himself that the documentation was appropriate and that, from a legal perspective, his interests were properly secured. It is equally improbable that Mr Tzovaras could have thought otherwise. In those circumstances, I think, the objective characterisation of the conversation is that Mr Tzovaras undertook to act as Mr Jeandin's solicitor in preparing the necessary documentation. 65In essence, there are two competing implausibilities. One is that Mr Jeandin would have agreed to proceed, unfamiliar with both the English language and the Australian legal system, to make a substantial investment without the benefit of any legal advice. The other is that Mr Tozovaras would have placed himself in the position where, as he must have appreciated, there was an acute breach of duty and duty, and indeed of duty and interest. I accept that the court should be slow to infer that a solicitor would knowingly put himself in such a position. But in this case, as I have said, there are competing implausibilities. In circumstances where Mr Tzovaras has not given evidence, I feel more comfortable in drawing the inference that, by the conversation of 29 March 2008, the parties intended objectively to bring into existence a contract of retainer. 66I accept of course that the fact that the work undertaken by Mr Tzovaras was work of a kind ordinarily done by solicitors pursuant to a retainer does not, of itself, established that Mr Tzovaras was acting pursuant to a retainer. But equally, it cannot be said to be inconsistent with the conclusion that there was a retainer. For the reasons given at [55] above, I do not regard the decision in Beach as requiring the conclusion that this aspect of Mr Jeandin's case suffers from the fallacy of circularity. 67Accordingly, I conclude that there was a contract of retainer. Second issue: breach 68At the end of the day, there was no dispute. If Mr Tzovaras had been retained as a solicitor (and I have concluded that he was) to prepare the documentation, he placed himself in a position of conflict. The unchallenged expert evidence (of Mr Neville Moses) was that, in those circumstances, it was incumbent on Mr Tzovaras to advise Mr Jeandin to seek independent legal advice, and not to continue to act for Mr Jeandin unless and until satisfied that Mr Jeandin had given his informed consent to that. 69Mr Tzovaras did not suggest that Mr Jeandin should seek independent legal advice, and in fact Mr Jeandin did not do so. 70The expert evidence was also clear as to what a solicitor, to whom Mr Jeandin had been sent for independent advice, should have done. I shall turn to this aspect of the expert evidence in considering the question of causation. 71Finally, the expert evidence established that Mr Tzovaras had breached his contractual (implied) and common law duties of care in a number of respects. He failed to advise Mr Jeandin: (1) that he should require an up to date valuation of the subject property by an independent valuer; (2) on matters arising under or in relation to the first mortgage, including the requirement for Grenfell's consent to subsequent mortgages, the state of the account and the complicating factor that the first mortgage was due for repayment before the proposed second mortgage; (3) that he should not proceed without negotiating a satisfactory priority agreement with Grenfell; and (4) that he should not proceed merely on the basis of protection through a caveat, and that he should require his mortgage to be registered. 72By the time of final submissions, it was, as I have indicated, effectively common ground that if there were a contract of retainer, Mr Tzovaras had breached his duties under it in the various ways that I have indicated. Third issue: causation 73It was common ground that, if Mr Tzovaras had advised Mr Jeandin to seek independent legal advice, and Mr Jeandin had done so, the independent lawyer consulted by Mr Jeandin, acting reasonably and with proper care, would have given advice on the lines of that summarised at [71] above. It was also common ground, that if Mr Tzovaras had been retained, he should have advised Mr Jeandin to the same effect. 74The real issue, as to causation, was whether Mr Jeandin, if given the advice that he should have been given (either by an independent solicitor or by Mr Tzovaras) would nonetheless have made the loan. The parties' submissions 75Mr Darke accepted that the issue of causation was to be determined by reference to ss 5D and 5E of the Civil Liability Act 2002 (NSW). Those sections read as follows: 5D General principles (1) A determination that negligence caused particular harm comprises the following elements: (a) that the negligence was a necessary condition of the occurrence of the harm ("factual causation"), and (b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused ("scope of liability"). (2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. (3) If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent: (a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and (b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest. (4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. 5E Onus of proof In determining liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation. 76As to s 5D(1)(a), Mr Darke submitted that Mr Tzovaras' negligence was a necessary condition of the occurrence of harm. He submitted, correctly, that s 5D(1)(a) embodied the "but for" test: see Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420 at [45]. 77In this case, Mr Darke submitted, the question of causation depended on what Mr Jeandin would have done if Mr Tzovaras had not been negligent (s 5D(3)). In this case, he submitted, one way or another Mr Jeandin would have been given advice along the lines set out at [71] above. Had that happened, Mr Darke submitted, Mr Jeandin would not have entered into the transaction. He submitted that the following factors justified attributing that state of mind to Mr Jeandin: (1) it was of prime concern to Mr Jeandin, as indeed he had made known to Mr Tzovaras, that the loan be adequately secured; (2) in circumstances where there was no priority agreement, so that the amount secured by the first mortgage in priority to Mr Jeandin's (unregistered) second mortgage might increase and consume the entire value of the mortgaged property, Mr Jeandin could not be said to be adequately secured; (3) there was a real risk that Grenfell might take action under its mortgage, to the detriment of Mr Jeandin's interest, because the company was not paying interest under the Grenfell mortgage (and, further, the amount secured by that mortgage was thus increasing in any event); (4) the Grenfell mortgage was due to expire well before the loan to be made by Mr Jeandin was due to be repaid; in those circumstances, there was a real risk that, if the company could not obtain an extension of the Grenfell loan or refinance it, Grenfell might sell in any event, again to the detriment of Mr Jeandin's interest; (5) without an independent valuation of the property, and a limitation on the amount that Grenfell might recover in priority, Mr Jeandin could have no idea whether the value of the property (after taking into account the amount for which Grenfell would have priority) was sufficient to secure the loan proposed to be made by him; and (6) in relation to the proposed transaction with Raptis Group (which had occurred very shortly before the loan to the company was discussed and made), Mr Jeandin had shown himself to be cautious, and had decided not to proceed because Mr Tzovaras clearly had, and expressed, reservations about the proposed investment. 78Mr Curtin submitted that Mr Jeandin would have gone ahead in any event, even had he been given (by an independent solicitor or by Mr Tzovaras) advice to the effect of that set out in [71] above. Mr Curtin submitted that Mr Jeandin had reflected carefully on the commercial aspects of the transaction, and had satisfied himself that it was appropriate to proceed. Mr Curtin pointed, in particular, to the very high return that was expected. The amount payable to Mr Jeandin under the deed of loan, in effect by way of, but as a matter of drafting in lieu of, interest was $750,000.00. As Mr Curtin pointed out, this equated to a return of 33 1/3% on an annual basis. Mr Curtin submitted that the attraction of this return was sufficiently great to justify the conclusion that Mr Jeandin would have gone ahead even if given the appropriate advice. 79Further, Mr Curtin submitted, Mr Jeandin knew, from the information that he had been given by Mr Tzovaras, that there was a first mortgage under which $4.1 million was owed. He knew that $625,000.00 of his loan was to be used to pay out another unregistered mortgage, and that $100,000.00 was to be used to pay other creditors. Thus, Mr Curtin submitted, Mr Jeandin should be taken to have known that the company was short of liquid funds, and that, but for the loan, it would not be able to pay pressing debts. 80In this context, Mr Curtin submitted, Mr Jeandin also knew, from the same documents, that the balance of the loan proposed to be made by him would be used as working capital. He submitted that Mr Jeandin should have appreciated from that: first, that it was likely that some of the funds would be used to pay outstanding interest under the Grenfell loan; and, more importantly perhaps, that it was self-evident that the company had no other source of funds. 81In short, Mr Curtin's case on causation was that Mr Jeandin had more than enough information to bring home to him that the there was a substantial element of commercial risk, but that there was a commensurately high commercial return, and that in those circumstances Mr Jeandin would have decided to proceed. Decision 82It is, I think, open to infer that Mr Jeandin is a successful businessman. He had made one substantial investment in real property in Australia, and had contemplated another. He was in a position to lend the sum of $1.5 million to the company. The purchase price of the Sanctuary Cove property was $1.8 million. The purchase price for the unit proposed to be purchase from Raptis Group was in excess of $1 million. 83I have no doubt that Mr Jeandin was in principle able to assess the commercial aspects of the proposed loan to the company, and to satisfy himself on those aspects. However, any assessment of the commercial aspects of the transaction necessarily assumes an adequate understanding of the degree of risk. That is an issue on which Mr Jeandin had little information (apart from the so-called feasibility study and valuation - I will return to those documents). That is an issue on which, had Mr Jeandin had been given the independent advice required, he would have had much more information. 84Thus, I do not regard Mr Jeandin's assumed commercial experience and sophistication as dictating the answer to the question of causation. 85No doubt, the promised return was high. But it was not put to Mr Jeandin that the return was so high that he was prepared to take the risk that he might lose, not only the promised return, but also part or all of his capital. As I have said, it is clear that security was of importance - in my view, of prime importance - to Mr Jeandin. It is equally clear that an understanding of the issue of security would require some knowledge of mortgages, the Torrens system, priorities (including the doctrine of tacking) and other matters relatively familiar to Australian legal practitioners but not, I venture to think, within the general experience of non-lawyers brought up under the French Civil Codes. Since there is no reason to think that Mr Jeandin had any understanding of those matters (it was not put to him that he did), there is no reason to think that his commercial experience enabled him to make any assessment of the legal considerations that would bear upon the question of security. 86I have said that Mr Jeandin was concerned that the loan should be secure. The evidence on that point has two elements. First, there is Mr Jeandin's decision to withdraw from the Raptis Group investment when Mr Tzovaras expressed reservations. It is important to note that the matter of concern to Mr Jeandin was the extent to which the property would return the income that apparently had been represented, and the extent of the outgoings that would be incurred in the course of ownership. It was the failure of Raptis Group to give any information on those matters that led to the reservations. In that case, Mr Jeandin was not able to make an assessment of the commercial merits of the proposed purchase, and thus decided to withdraw. 87The second aspect of the evidence that bears on this is the statement that Mr Jeandin made to Mr Tzovaras in April 2008. I have set that out at [37] above. In essence, Mr Jeandin said that it was very important that he have a mortgage to secure the loan, and that he would not make the loan unless it was adequately secured. According to him, he was assured by Mr Tzovaras "that his loan would be fully secured". That evidence was not controverted and was not challenged. I accept it. 88Each piece of evidence, taken on its own, suggests that Mr Jeandin was a cautious investor. The first suggests that Mr Jeandin required adequate information to enable him to make an assessment whether or not to proceed. The second suggests that, notwithstanding the attractive return proposed, security was of prime importance to him. Taken together, those two pieces of evidence lead, in my view, to the conclusion that Mr Jeandin would not have proceeded unless, had he been given the advice that he should have been given, the answers to the questions that should have been pursued had shown that his loan would be adequately secured. 89I return to the advice that Mr Jeandin should have been given. First, he should have been advised to obtain an up to date valuation of the property. The only valuation (so called) that he was given was the brief summary, based on expected returns, sent to him by Mr Tzovaras. 90Mr Moses gave unchallenged evidence that standard conveyancing practice would have required an up to date valuation from an independent valuer so that the value of the property to be mortgaged could be ascertained and the equity, after allowing for amounts outstanding under any existing mortgages or other encumbrances, could be ascertained. Mr Moses said that an independent legal practitioner acting reasonably "would have advised..." that the feasibility study and valuation "was relatively worthless as an assessment of the value of the development at the time the loan was made unless it was supported by a comprehensive valuation by an independent valuer". Mr Moses said, further, that if the independent valuer could not properly assess the projections in the feasibility study, Mr Jeandin should have been advised "that independent financial advice be obtained as to these matters". The relevant aspects of Mr Moses' reports were admitted without objection and he was not required for cross-examination. 91The loan was required to fund a subdivision of the property. The return that was expected could come only from sale of the lots in the subdivision. The valuation to be ascribed to the property was dependent on the subdivision being carried through to completion. If, for whatever reason, this did not happen then the security of Mr Jeandin's loan would be imperilled. Further, to the extent that any independent valuation involved assumptions as to sale prices of finished lots, and the time required to sell them, those assumptions would need to be tested. 92Next, Mr Jeandin should have been advised in relation to the first mortgage. That advice should have encompassed the following: (1) advice on the necessity for Grenfell's consent. Had such advice been given, it would surely have caused Mr Jeandin to give instructions that this consent should be sought. There is no evidence that Mr Tzovaras did so, or that Mr Jeandin was aware of the need to do so. (2) Advice should have been given to ascertain the state of accounts under the first mortgage. The reason for this is obvious. Without knowing both the value of the land and the amount already secured, it is impossible to assess the value of the security accurately. (3) Advice should have been given on the complications that could follow from the fact that the Grenfell loan was repayable well before the proposed loan. 93As to the third of those matters: the Grenfell loan was due for repayment a year before the loan proposed to be made by Mr Jeandin would fall due for repayment. Thus, whilst the company was carrying out the subdivision and selling off the subdivided lots, it would be required either to negotiate an extension of the Grenfell loan or to find alternative first mortgage finance. If neither of those things happened, Grenfell would look to realise its security. That would pose an obvious risk to Mr Jeandin. It would bear directly, and adversely, on the sufficiency of the security given to him for his loan, and thus on the safety of his investment. 94The third aspect of the advice that Mr Jeandin should have been given was that he should negotiate and enter into a priority agreement with the first mortgagee. Again, the reason for that is obvious. Unless the amount owing to the first mortgagee is capped, it is impossible to assess accurately the value of the security for a second mortgage advance. Of course, if the first mortgagee (Grenfell) were not willing to enter into a priority agreement, this would be a clear warning signal to Mr Jeandin. 95The fourth topic for advice related to registration. Since it is not suggested that any loss flowed from the failure to register, this can be put to one side. 96Mr Moses pointed out, further, that there had been no searches or inquiries made on behalf of Mr Jeandin, nor requisitions on title. Again, since no loss is alleged to flow from those failures (except to the extent that the question of inquiries or requisitions may cover the dealings with the first mortgagee, Grenfell), there is no need to give further consideration to these matters. 97In my view, if Mr Jeandin had been given the advice that should have been given, he would not have proceeded to make the loan without taking, or causing to be taken, the actions identified in that advice. That is because he could not have been satisfied that there was adequate security for the proposed loan without: (1) knowing the value of the property, as determined by a valuer independent of the mortgagor; (2) knowing the likely extent of the amounts owing, or to become owing, to Grenfell under its first mortgage; and (3) having in place an appropriate priority agreement with Grenfell. 98Until those steps were taken, and their outcomes were known, Mr Jeandin could not have concluded that he would be adequately secured. Nor is there any reason to think that even if Mr Jeandin had appreciated that he might not be adequately secured, he would have ignored this, blinded by the apparently high return on offer. In those circumstances, I conclude, Mr Jeandin would not have proceeded to make the loan. 99Mr Curtin submitted that although at one stage Mr Jeandin might have regarded security as his primary concern, nonetheless that attitude might have changed once he became apprised of the extent of the promised return (T67.10). The difficulty with this submission is twofold. First, the evidence that Mr Jeandin did regard security as being of prime concern comes from his conversation with Mr Tzovaras set out [37] above. That conversation occurred after Mr Jeandin had received the material sent to him by Mr Tzovaras (both in English, sent indirectly through Mr Jean; and directly, in French). He had discussed the proposal at length with Mr Tzovaras. No doubt, Mr Jeandin was aware of the return. But it was after he had received that material and had those discussions - that is to say, after he must have become aware of the promised return - that he had the conversation with Mr Tzovaras set out at [37] above. 100The other problem with the submission is that the point was not put to Mr Jeandin. Mr Curtin submitted, I think, that it could not have been put bearing in mind s 5D(3)(a) of the Civil Liability Act . I do not agree. That paragraph does not apply to statements against interest. If the proposition had been put to Mr Jeandin and he had agreed with it, his concession could have been taken into account on the question of causation. Had he rejected it, the inference that is presently available would remain available. 101I accept, as Mr Curtin submitted (see at [79] - [80] above), that Mr Jeandin had sufficient information to bring home to him that the company was short of liquid funds, and that it required the loan to pay pressing debts. That does not seem to me to detract from the importance of security, from Mr Jeandin's perspective. On the contrary, I think, it confirms it. The obvious inference to be drawn from the matters to which Mr Curtin referred is that Mr Jeandin's hopes of repayment of his principal (leave aside, for a moment, the profit share that was promised) depended entirely on the value of his security. Those matters indicate clearly that the company itself had no hope of repaying the amount of the loan except through the sale of the mortgaged property. 102In my view, it is more likely than not that, if Mr Jeandin had been given the advice that he should have been given, he would not have proceeded unless the steps that (he should have been advised) were necessary, were taken; and unless the outcomes were satisfactory. I note that the contrary was not put to Mr Jeandin in cross-examination. 103There was relatively little debate as to what might have happened if Mr Jeandin had been given the advice that he should have been given and if the steps, to which that advice should have been directed, had been carried out. 104There is no evidence that could support a finding as to what Grenfell would have done had it been asked to consent to a second mortgage in favour of Mr Jeandin, and to enter into a deed of priority with him. On one view, it might be thought that Grenfell would have agreed to both these things, on the basis that its prospects of recovering its loan from the company were limited unless the company could obtain funding from some source to complete the development. On the other hand, bearing in mind that the company was struggling to meet its interest liabilities, it is unlikely that Grenfell would have agreed to any limitation on its priority that did not include a substantial buffer to cover possible interest defaults in the future. 105Of course, if there were such defaults, then interest would accrue at the higher rate: stated in the revised offer to be 14.25% per annum. On the varied principal sum of $4.1 million, that would mean a monthly accrual of $48,687.50 interest. On the actual loan balance of $4.248 million, interest at the higher rate would accrue at $50,825.00 monthly. 106It may be thought to have been unlikely that an unfinished development, of the kind being undertaken by the company, would sell in a matter of weeks. Accordingly, it might be thought unlikely that, even if Grenfell were prepared to consent to a second mortgage and to enter into a deed of priority with the second mortgagee, it would do so without stipulating for a substantial buffer over the amount of $4.248 million, to cover potential arrears of interest. 107The latest valuation of the Silver Brumby Estate land was that performed by Mr Whitman on 1 May 2008. That is the best evidence of the then value of the land. The valuation was not available for Mr Jeandin to rely on, because it stated expressly that if it were "to be used for the purposes of obtaining finance then it shall be used for a first mortgage only". Thus, it would have been necessary for Mr Jeandin either to have Mr Whitman reissue the valuation in his favour or to procure a valuation from another valuer. The value ascribed to the land by Mr Whitman in his valuation of 1 May 2008 was $6.35 million. Presumably, if he were to reissue the valuation in favour of Mr Jeandin, he would come to the same conclusion. Since, as I have said, that is the only evidence of the land's value at the relevant time, I can infer that another valuer, instructed in Mr Jeandin's interests, would have reached a similar result. 108It is immediately apparent that there was not sufficient equity in the land to secure both the principal sum proposed to be advanced by Mr Jeandin and the promised return of $750,000.00. The total to be repaid to Mr Jeandin under the deed of loan was $2.25 million. The amount owing to Grenfell was $4.248 million. The total of those amounts is $6.498 million. 109Thus, on any view, the second mortgage (assuming consent) and assuming a deed of priority that limited Grenfell's priority to, (in round figures, $4.25 million) would protect at most the capital to be advanced by Mr Jeandin. And it would only do so if Grenfell required no buffer, or a buffer of no more than about $500,000.00, for contingencies such as arrears of interest until the principal sum, together with arrears of interest, could be repaid. 110I should note that Mr Whitman's valuation expressed the view that, once sales had got to a certain point, the Grenfell loan would be paid out, the interest expense would finish, and the project would become "self-funding". The point at which those things might happen was not identified in the body of the report. It may have been identified, and the underlying reasoning exposed, in the schedules of workings. But those schedules were not in evidence. Thus, the point at which the ongoing interest expense (see at [105] above) might drop is not identified. Of course, if the development were sold incomplete (see at [115] below), this would have no practical consequence in any event. 111I accept that the question of causation is to be determined subjectively, according to what Mr Jeandin himself would or would not have done. But in this case, it is to be determined by reference to his statement, made prior to the events of breach and loss, that he needed to be adequately secured. Whilst he did not say what he meant by adequate security, it seems to me that the foregoing analysis of the figures indicates, objectively, that the proposed second mortgage could not stand as adequate security for the loan and profit share in any event. Nor could it stand as adequate security for the principal to be lent unless Grenfell's priority rights were limited in the way that I have indicated. 112It seems to me that if adequate advice had been given, and followed through, the outcome (in so far as what I have said offers any guide to that outcome) is unlikely to have provided assurance to Mr Jeandin that he would be adequately secured. 113In this context, Mr Darke submitted (T75.40): ... when one starts talking about a selling period of 12 months or 18 months to the, borrower who is unable to pay interest, plus the costs of selling, it would have to be very generous lender to allow any sort of priority to Mr Jeandin which would have adequately secured $1.5 million. 114As will be apparent from what I have said, I think that this submission is correct. It encapsulates, concisely, but accurately, the real difficulty in concluding that Mr Jeandin was offered anything remotely approaching adequate security for the loan that he was asked to make. 115Added to all this is the complication to which I have referred to already: namely, that Grenfell's loan would fall due for repayment before the loan to be made by Mr Jeandin. If Grenfell declined to extend its loan, and realised its security to recover the amount owing to it (by hypothesis, at a time when the development was incomplete or when sales had not progressed), the prospects of the second mortgage security having any value at all were, at best, minimal. That conclusion follows, a fortiori , if there were a premature sale occasioned, prior to the due date for repayment, by some other breach (such as repeated failure to pay interest). 116To some extent, the analysis in the preceding twelve paragraphs may be superfluous. I have found, in substance, that Mr Jeandin would have accepted the advice that should have been given to him, by requiring the steps the subject of that advice to be carried out before he lent any money. He was not given any advice, and thus had no opportunity to require those steps to be carried out. But to the extent that the question is raised of what would have happened had those steps been carried out (and it may be raised at [33] of the outline written submissions provided for LawCover by Mr Curtin and Mr Arblaster at the conclusion of the evidence), those paragraphs go as far, I think, as the evidence permits in establishing what "third parties would probably have done". To explain that somewhat cryptic reference, paragraph [33] reads: 33. That is, assuming Tzovaras was required to give the advice Moses sets out in his reports, there is no evidence as to what the plaintiff or third parties would probably have done. 117I repeat that, by the time Mr Curtin came to address, the assumption with which that paragraph commences had been conceded (see what I have said at [6] above). 118In those circumstances, I conclude that the question of causation should be resolved in favour of Mr Jeandin. Amount of loss 119It is clear that the value of the Silver Brumby Estate is insufficient to satisfy the demands of Grenfell (which is now in receivership) under its first mortgage. Accordingly, Mr Jeandin will recover nothing under his second mortgage. The company has no other assets from which it can repay him. He has thus lost the full value of his investment: $1,500,000.00. The case against the brothers 120Pursuant to the deed of loan, each of the brothers guaranteed the obligations of the company to Mr Jeandin. The company has defaulted. For the reasons I have just given, the whole amount of the investment has been lost. 121I am satisfied that demand was made on the brothers, fixing 29 August 2009 as the date when they should pay the amount due by the company. They did not comply with that demand. 122The defence alleged was one of agreement to vary or estoppel. There is no evidence in support of that defence. 123Accordingly, Mr Jeandin is entitled to judgment against each of the brothers pursuant to his guarantee. Conclusion and orders The brothers 124Mr Jeandin should have judgment against each of the brothers, pursuant to his guarantee, in the sum of $1,500,000.00 together with interest. 125Interest was quantified at $325,674.65 up until 4 October 2011 (in accordance with s 101 of the Civil Procedure Act 2005) (NSW)) and accruing at $441.78 per day thereafter. 126There was an alternative quantification of interest at the rate of 12% per annum (the rate payable pursuant to under cl 4.3 of the deed of loan in the even of default) in the sum of $375,287.66 to 4 October 2011 accruing at $493.15 per day thereafter. 127In my view, interest should accrue up until judgment at the rate fixed by the deed of loan. It follows that Mr Jeandin is entitled to judgment against each of the brothers in the sum of $1,890,575.31 including interest at the contractual rate up to the date of judgment. Tzovaras Legal and LawCover 128I am satisfied that Mr Tzovaras or Tzovaras Legal was retained, and that the duties implied into that retainer or otherwise arising by operation of law were breached. As a result of that breach, Mr Jeandin has lost the amount of his investment. He is entitled to recover judgment for that amount, together with interest. In form, that should be a judgment against Tzovaras Legal, the incorporated entity through with Mr Tzovaras carried on his practice. Since the calculation of interest did not expressly address this aspect of the claim, the parties should bring in short minutes of order to give effect to this aspect of my reasons. 129Since I am satisfied that there was a retainer and that it was breached, Mr Jeandin is entitled to a charge on the LawCover policy for the amount to be calculated in accordance with the previous paragraph of these reasons. Costs 130There seems no reason why costs should follow the event. Accordingly, I will make a costs order, but reserve leave to apply to discharge or vary it if there is some reason shown for doing so. Orders 131I make the following orders: (1) direct entry of judgment for the plaintiff against the first and second defendants in the amount of $1,890,575.31 including interest to today's date. (2) Order the defendants to pay the plaintiff's costs. (3) Direct any party seeking a discharge or variation of order 2 to give notice to the other, with a copy to my Associate, setting out both the orders sought and in brief the reasons why they are sought; any such notice to be given by 14 November 2011. (4) Direct the parties to bring in short minutes of order to give effect otherwise to these reasons. (5) Stand proceedings over to 10:00am on 18 November for final orders. (6) Reserve liberty to apply in chambers if the orders to be made are agreed as to their form. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 November 2011