Neel v Blake [2003] VUSC 3; Civil Case 073 of 2002 (3 October 2003)

IN THE SUPREME COURT
OF THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Case No. 73 of 2002

BETWEEN:

TROY NEEL
First Claimant

AND:

JASMINE NEEL
Second Claimant

AND:

ERAKOR ISLAND RESORT LIMITED
Third Claimant

AND:

GARRY BLAKE
First Defendant

AND:

NIGEL MORRISON
Second Defendant

AND:

EDWARD NALIAL
Third Defendant

Claimants: Mr. Malcolm
Defendants: Mr. Williams & Ms. Osborne

Hearing: 1, 2, 3, 4, 5 September 2003

JUDGMENT

CLAIM

The Claimants' claim against the Defendants in an amended Statement of Claim, damages for breach of contract, for negligence, for equitable damages, and for equitable compensation together with interest and costs. The amount of claim is quantified as the difference at the time of the cause of action between USD$1.5 million and AUD$1.5 million. It was agreed between the parties that certain parts of the Amended Statement of Claim would not be pursued particularly in relation to a claim for warranty breaches meaning that paragraph 21(5), paragraph 25(e) to (h) paragraph 26(c), and paragraph 28(b) and (d) were deleted.

The Defendants and in particular Garry Blake contended in a defence to the Amended Statement of Claim that there were no breaches of any contract of retainer as Solicitors, that there was no negligence and that there was no breach of any fiduciary relationship and in particular that there was no loss or damage suffered by the Plaintiffs.

FACTS

Erakor Island Resort is situated at the mouth of Erakor Lagoon some 500 metres off shore from the mainland near Port Vila, which is the capital of the Republic of Vanuatu. It is linked to the mainland by a courtesy ferry service which operates 24 hours a day. The island comprises some 6.5 hectares upon which, at the time of these events, there were located the resort with its associated facilities and a private residence. The Resort had been owned by Mr. and Mrs. Michael Nicholas from 1982 down to the time of sale to the Claimants in 2000.

It was in 1982 that Mr. Michael Nicholas and his wife Diana purchased the leasehold of Erakor Island and the shares of Erakor Island Limited. From the time the Nicholases purchased the Resort until they sold it to the Claimants in 2000 they resided in Australia and employed staff to manage the Resort, themselves staying on site for two to three months each year in periods of two to three weeks at a time. Over the years and in particular in 1982 and 1986 Mr. and Mrs. Nicholas had improved the Resort facilities and spent money on marketing it as a tourist destination. In 1986, in consultation together, the Nicholases decided to place the leasehold and the Resort on the market for sale. According to a valuation in early 1986 the leasehold and Resort were then valued at AUD$1.965 million.

Unfortunately, in February 1987, the island suffered a cyclone and the accommodation and facilities suffered significant structural damage and a proposed auction was cancelled. The Resort was closed down until December 1997 while the accommodation and office facilities were rebuilt.

In November 1990 Mr. Nicholas was diagnosed with lung cancer and found it increasingly difficult to breathe during the wet season months from December to April in Vanuatu. In October 1991 Mr. Nicholas advised Island Property Consultants Ltd that the asking price was USD$1.5 million. At that time he became aware of Ms. Karen Jeffery of Pacific Island Investments Ltd and in 1992 authorised her to market the Resort on his behalf.

Because of the economic position in Australia during the early 1990's the Resort was not actively marketed for sale between 1993 and mid 1997 when Mr. Nicholas engaged a few property consultants to market the Resort for sale at the price of USD$1.6 million. Some interest was shown in 1997 when the price was still USD$1.5 million.

For a short period during mid 1999 Mr. Nicholas offered the Resort for sale through a New Zealand agent for USD$1.3 million and an enquiry was received from a Charles de Montesquieu.

On 27 September 1999 Mr. Nicholas received an offer of USD$1.3 million for the Resort from a Mr. Rick Van Vleet. That offer involved payment of the purchase price over the period of two years and was declined.

In or about October 1999, when Mr. Nicholas was extremely debilitated by cancer and was physically and emotionally drained by his ill health and his wife was diagnosed as suffering from a neurological disorder, they decided that they wanted to end their involvement with the Resort and return to Australia. Accordingly they accepted an offer of AUD$1.5 million from Mr. Thies and Ms. Elder with whom they had negotiated since February 1999. An earlier offer had been rejected but this one was accepted because the arrangement was that the deposit would be paid within fourteen days of the contract, and the sale would be completed by 1 December 1999.

Also in October 1999 Mr. Nicholas received an email from Ms. Jeffery indicating that the Claimants were interested in purchasing the Resort and would be visiting Vanuatu that month. However, Mr. and Ms. Nicholas had already signed the contract to sell the Resort to Mr. Thies and Ms. Elder for AUD$1.5 million by the time Plaintiffs arrived later in October.

By 25 October 1999 Mr. Thies and Ms. Elder had not paid the full deposit and it became apparent to Mr. Nicholas that they were not able or ready to perform the contract and he instructed Ms. Jeffery to negotiate a sale of the Resort to Mr. and Mrs. Neel for USD$1.5 million, and an agreement was executed by Mr. Neel on 1 October 1999. Mr. Neel paid a deposit of USD$150,000.

Mr. Nicholas said he would not have been willing to sell the Resort to the Claimants for less than that figure because they were not able to settle the purchase by 1 December 1999 and he had earlier rejected the offer of USD$1.3 million from Mr. Rick Van Vleet when payment was to be over two years.

Mr. Neel subsequently asked for cancellation of that first contract and for refund of the deposit of USD$150,000, because in late November 1999 Mr. Thies and Ms. Elder lodged a caution on the title of Erakor Island. That caution was subsequently removed when the Defendants' firm acted as agents for the Australian firm of Tress Cox & Maddox. Mr. Ridgway an earlier Defendant, who was ultimately discharged as a party, had joined Tress Cox & Maddox as a partner and was acting for the vendors in relation to the sale to Mr. Thies and Ms. Elder.

After the removal of the caution the Claimants renewed their offer of USD$1.5 million for the island and a contract was signed for that amount on 25 July 2000. In late October 2000, prior to the settlement the Nicholases agreed to leave in the sum of US$220,000 for the purchase of the leasehold and resort and finance was also obtained from the Westpac Banking Corporation. Mr. Blake also acted for the Bank, and the Settlement was completed on 21 November 2000.

The Claimants said that Mr. Ridgway had acted for them in relation to the first contract and then Mr. Blake acted for them in relation to the second contract. Their complaint was that Mr. Blake failed to advise them that he had acted as the agent for the vendors Mr. and Mrs. Nicholas in the removal of the caution and had failed to advise them of the lesser offer made by Mr. Thies and Ms. Elder and that, had they known of that lesser offer, they would have been prompted to negotiate a sale price for less than USD$1.5 million and closer to the AUD$1.5 million offered by Mr. Thies and Ms. Elder. The Claimants claimed that their loss was the difference between the two sums and that the Defendants should be liable to reimburse them for their loss accordingly.

As I have said, at the time that the Claimants purchased Erakor Resort they raised a loan not only through the vendors but also through Westpac Banking Corporation who obtained a valuation of the Resort and leasehold from Mr. Brian William Cox of Brisbane for mortgage security purposes. Mr. Cox at the time of the sale valued the market value of the leasehold interest at USD$1.5 million and on completion of proposed refurbishment and expansion in the sum of USD$2.65 million.

EVIDENCE

Mrs. Jasmine Neel said that she is one of the owners of Erakor Island Resort. Prior to November 1999 she said she was a model and an actress. Her husband Troy had been a professional baseball player in Japan and they both become aware that he was reaching the time when his usefulness as a professional sportsman would cease. In about January 1999 she and her future husband decided to use the funds that they had accumulated for the purchase of an island resort to provide them with an ongoing income and lifestyle they desired. On searching the web they were attracted to Erakor Island Resort and contacted Ms. Jeffrey to register their interest. She said that Ms. Jeffrey advised her that the advertised price of USD$1.5 million was not really negotiable and another party was negotiating.

The Neels married in late 1999 and decided to visit Vanuatu on a late honeymoon and in November 1999 they offered to purchase the Resort for USD$1.5 million and paid the deposit of USD$150,000. She said that Ms. Jeffrey advised them to use Ridgway Blake, the Defendants, as solicitors. Mrs. Neel said that either Mr. Ridgway or Ms. Jeffrey had advised her and her husband that a contract had been entered into one week before but that the vendors were not happy with the purchaser Mr. Thies for personal reasons and did not believe that he would be able to complete his contract. She said that they were not advised that the earlier offer was for AUD$1.5 million. Mrs. Neel said that in January 2000 the first contract was cancelled and the deposit was ultimately refunded.

Between March and June 2000 Mrs. Neel said that she and her husband were not involved in anything to do with Erakor but on 10 June Mr. Blake faxed her advising that the caution was removed and asking whether she wished to proceed to negotiation and be represented by Ridgway Blake. Thereafter the second contract was completed and signed on 25 July 2000.

She said that Ridgway Blake attended to the financing based on a due diligence package prepared by Ms. Jeffrey who also put together a loan request. She said she left it to those whom they were paying to organise the details and the valuation was requested by Westpac in association with Ms. Jeffrey. She said she was unaware that Mr. Blake was acting for Westpac in drafting up documents for the mortgage and that she was never told either in orally or writing that Ridgway Blake had acted as agents for the solicitors for the Vendors in relation to Thies caution case nor that the earlier offer had been at half of what they offered nor that Ridgway Blake were acting for Westpac.

She said that she and her husband had no complaint in respect of the first contract except as to costs and the lack of advice as to the real purchase price and had no complaint as to the technical manner in which Ridgway Blake completed the second contract. She said that in October she and her husband were forced to sign a mortgage of USD$200,000 to Mr. and Mrs. Nicholas as part of vendor finance and they did not appreciate how strong their negotiating position was. She said that had they known of the history of the island they would have offered less than AUD$1.5 million and said that they first become aware that the Nicholases were prepared to sell the property for AUD$1.5 million in or about February 2002 at the offices of Geoffrey Gee & Partners solicitors of Vanuatu.

Under cross-examination Mrs. Neel agreed that she had neither sought nor obtained advice from Mr. Ridgway or Mr. Blake as to the reasonableness of the purchase price and agreed that they had already signed the first agreement to pay USD$1.5 million for the resort before they had even heard of the firm of Ridgway Blake. She said that they had never been advised by Ridgway Blake that USD$1.5 million was a realistic and reasonable price despite that phrase being referred to by her lawyer Mr. Malcolm from Geoffrey Gee & Partners in a letter dated 8 February 2002 (see bundle A page 290 A). Mrs. Neel was somewhat evasive responding to the suggestion that she had instructed her lawyer in that way. She said that Ms. Jeffrey had said that and that she thought that the letter had said that she and her husband were not properly advised in regard to the negotiations. She also said that her husband had told her that he had been advised as to that by Ridgway Blake.

Mrs. Neel agreed that she and her husband had originally offered USD1.5 million before that they had even met anyone from Ridgway Blake and had never made any other offer and had simply renewed that offer the second time, that being the asking price. She conceded that they never effectively attempted to negotiate the price except by asking Ms. Jeffrey about it and being told that there was no room for negotiation.

Mrs. Neel said that Ms. Jeffrey had arranged to obtain development plans for the resort through an architect and that they had provided the background information contained in the loan request to Ms. Jeffrey (see pages 8-9 exhibit to affidavit of Garry Blake). She agreed that she had in fact been activities director for Bust Loose Holidays in Canada and not Senior Director.

As to the letter from Geoffrey Gee & Partners to Ridgway Blake dated 17 November 1999 (TAB 11 Ridgway affidavit) where it was stated: -

"Finally and in the same point we have heard suggestions that the property had already been sold to another party in Australia (sic) for a greater sum",

Mrs. Neel said first she had never seen the letter "as of yet", then she said she saw the letter in the beginning of 2000 then she said she saw the letter only recently. She did say that if they had read the letter in 1999 they would not have paid USD$1.5 million for the resort. She said that she was aware that someone else had entered into an agreement but did not know it was for a lesser sum nor had she made any enquiry about it. Mrs. Neel agreed that they had received a letter from John Ridgway dated 17 November 1999 (TAB 12 Ridgway Affidavit) which included a copy of TAB 11 but she said that she didn't recall having seen the copy letter although it was said to be enclosed. Then Mrs. Neel agreed that she had seen TAB 11 but disagreed that that it was an inconvenient letter for the Claimants' case.

Mrs. Neel agreed that she followed the advice given by Mr. Ridgway as to the termination of the first contract and, not withstanding that, wanted to proceed with the deal with the assistance of a lawyer. Mrs. Neel agreed that they had received the due diligence package before they entered the second contract and although they had sought some assistance from a Canadian accountant earlier they had not had any contact with him after 18 November 1999 and that after looking at the due diligence package they did not seek any other financial advice because they had instructed a solicitor. She said that in fact after receiving the package they did not discuss anything about it either with their lawyer or with a local accountant because she did not know she had to.

By early 2000 Mrs. Neel said that she knew that there was still a caution registered over the property and that she knew it would be unwise to proceed and that it would be better to have the money in the bank earning interest for them.

In late 1999 until the first half of 2000 Mrs. Neel said that she and her husband wanted to purchase the property but wanted to wait until the caution had been removed and an application to the Vanuatu Foreign Investment Board had been completed by Mr. Blake. She agreed that it was in their interests to have the caution removed from the title so that they could proceed with the purchase and by March 2000 they decided to resubmit their offer to the vendors and told Ms. Jeffrey accordingly. The offer was resubmitted to the vendors in the sum of USD$1.5 million and that time they did not seek advice from any lawyer or anyone concerning submitting a different price. She said she did not recall that when Mr. Blake spoke to her husband in March 2000 whether anything was said by Mr. Blake about Mr. Ridgway acting for Mr. and Mrs. Nicholas and she said that they had already submitted their offer for the Resort and that they had planned to expand the restaurant and bar and add ten new bungalows. She said that Karen Jeffrey told them that the Resort was making USD$10,000 to $15,000 per month and that those figures were discussed with Mr. Blake the week before they purchased the island. On being challenged she said that that was not a lie but that they had instructed their legal representative to withdraw that allegation.

She agreed that they had been advised by Mr. Blake that they needed to involve an auditor and had been pointed in the direction of Jonathan Law of KPMG but she said that they subsequently indicated to Mr. Blake that they had decided to stay with Mark Stafford of BDO chartered accountants. She said that they did not discuss with either of those accountant the accounts of the resort and simply restricted their dealings to who would carry on the role of acting as accountant for the island.

Mrs. Neel agreed that Mr. Blake had negotiated various changes to the formal content of the agreement.

In relation to finding out about the amount of the previous contract with Mr. Thies and Ms. Elder, Mrs. Neel said that she and her husband were first told that there had been a contract for AUD$1.5 million early in mid 2001 but agreed that she said in her affidavit paragraph 44 that it was not until February 2002 that she found out about that.

She agreed that she had never asked for advice about the development plans from Ridgway Blake and sought no advice about the due diligence package although she had read through it.

She agreed that she and her husband had fallen in love with the island on their honeymoon and that after the purchase they began to think that they might sue Ms. Jeffrey when they looked around for someone to blame for false advertising on the web site. She agreed that she had not followed the advice of her lawyers to get someone independent to look at the accounts. She considered that they were not properly advised and that Mr. Blake should have set up a meeting with accountants but in summary agreed that the situation arose because they failed to follow their solicitor's fundamental advice to get independent accounting advice. She agreed that they had not negotiated the price because they thought they were not able to.

Mr. Troy Neel said that he was never advised by Mr. Blake that his firm was acting as agents for the vendors' solicitors in the Thies case, and that the vendors were agreeable to a sale price at half of what they paid, namely AUD$1.5 million. He said that Mr. Blake had never advised him that he was also acting for Westpac nor that there were no other prospective purchasers nor that the property had been for sale for ten years nor that a previous had been accepted in 1998 for AUD$800,000. He said that had they had that knowledge, they would have put in a lesser offer and had been deprived of the opportunity to negotiate on a commercial basis due to the performance of Mr. Blake and the preferment of Mr. and Mrs. Nicholas's interests over and above their own. He agreed that he had never asked Ridgway Blake to advise him on sale price or value.

Under cross-examination Mr. Neel said that they never had any discussion with Mr. Blake about Mr. Blake acting for the vendors in the Thies caution case. He said that he had asked Mr. Blake whether the island was making USD$10,000 to $15,000 per month and that Mr. Blake said that he did not know but I have a friend down below, Jonathan Law, who you should see.

He said that they were not looking at the island with a view to redeveloping it and that he had first contacted Mr. Ridgway after he had signed the first contract. He conceded that he did not fully understand the confidentiality agreement with Ms. Jeffrey and that he did not get any advice on it and was wrong about Mr. Ridgway acting for him in that confidentiality agreement. He conceded that Mr. Ridgway gave him clear advice that he should terminate the first contract and agreed that when he signed that contract he was bound to purchase the resort if the vendors agreed to sell it to him for USD$1.5 million as there was no finance clause. He said that the suggestion made to him about the income from the resort and its turnover was what induced him to buy the resort but he did not look for something in the agreement to confirm that. He was not sure whether he had told Mr. Ridgway that he understood that the resort made a certain amount of money per month and agreed that he was sent to see an accountant on Mr. Blake's recommendation but denied that Mr. Blake said anything about getting the accounts checked over. He said he did not know why the allegations about Mr. Blake being asked about the income of the island had not been included in the claim.

He agreed that they were actively seeking to market villa sites and then said that they did not want to develop the island but had to do so to get lending finance.

He said that he wasn't actually receiving USD$800,000 per annum for 1999 in his baseball contract and was not representing that that was the case but Ms. Jeffrey said so with his knowledge and approval. He agreed that he had read the information that Ms. Jeffrey had sent to financial institutions on his behalf and knew the bank would rely on the information in assessing the viability of him obtaining a loan.

Mr. Neel agreed that in relation to the first contract he was content to sign up to buy the Resort for USD$1.5 million and paid the deposit of USD$150,000 without making investigation as to the value of the Resort. He conceded that he was reasonably wealthy at the time and was content to buy the Resort without enquiring about its value on 1 November 1999 because he thought that it would be a "ma and pa" operation returning USD$10,000 to $15,000 per month but now it had turned into a big mortgage.

He said that he did not recollect at all the document referred to as TAB 11 (above) but knew at the time that there was another buyer before him but said he did not know his contract was for a greater a sum. Mr. and Mrs. Nicolas had told him that the Neels were more suitable for the island than the other buyer. He said he could not remember receiving TAB 12 but had no reason to doubt that he had received it and generally read the letter but conceded that he had signed the notice terminating the first agreement that was enclosed with it. He said he just remembered getting his deposit back.

Mr. Neel conceded that he did not remember the contents of any conversation that he had with Mr. Blake except to do with the papers and how the baseball season was going. He could not remember specific details of any conversation particularly about the caution over the property and although he was sure Mr. Blake had said that Tress Cox & Maddox acted for the vendors, he wasn't sure whether he had the conversation with Mr. Blake about the caution.

Mr. Neel started off saying that he could not remember whether he had seen TAB 11 but then firmed up to say that he had never seen it, although he said he wasn't sure which letters he had received. He said he knew the first contract had been terminated once he received the deposit back but was still thinking of buying the resort once the other interested party had gone from the scene. He then said that he knew that the other contract was for a lower price than theirs but did not bother to ask anyone including Ms. Jeffrey, Mr. Ridgway or Mr. Blake what that price was, because he considered that quite irrelevant.

Mr. Neel conceded that he was still keen to buy the property at USD$1.5 million even though the other price was less. Once he was told that the caution was removed, he talked with Mr. Blake in March 2000. Mr. Blake told him he had taken over from Mr. Ridgway but he said that Mr. Blake did not say that Mr. Ridgway was acting for the vendors. He conceded that he and the vendor wanted the caution removed so that they could deal one with the other. He agreed that he did not ask anyone including Mr. Blake about the value of the property or the sale price. He went ahead and resubmitted the offer through Ms. Jeffrey who said that the vendor had accepted that second offer. It was clear he conceded, that he was a keen buyer. He conceded that he had not given Mr. Blake a copy of the web site of the USD$10,000 or $15,000 per month profit shown. He said he knew it was in his own interests to have the papers checked out and he had shown them to the self employed accountant chartered who was a family friend of his wife and he sought no other advice. He was not sure whether the figures on the web site were borne out by the due diligence package. He said they had run out of time and they were running out of money. They had to sell his Mercedes and half of his investments. He agreed that he was sent down to an accountant by Mr. Blake to check the accounts but had not done so because Ms. Jeffery had taken over that meeting. He said that he was so keen to buy the island that he did not bother to check the figures and did not try to negotiate the price because he had been told by Ms. Jeffrey that it was not negotiable.

Mr. Neel then said that he asked Mr. Blake about whether they had a good deal with the USD$1.5 million but did not get a reply from Mr. Blake. He conceded that he had not put that in his affidavit.

He conceded when he was referred to the copy of the web site (Exhibit F) that it was clear that his evidence about the income range being shown as between USD$10,000 to $15,000 per month was wrong because USD$10,000 was not contained in the web site. He said that he made no enquiry as to the date of which those net profit were being made and could not say why he did not do so. He agreed that the due diligence package had actual figures that did not show net profits anywhere near that, and that he kept asking people why not but received no response.

He said that after the sale in November 2000 he was concerned about the level of takings made by the Resort and spoke to Mr. Thies indicating that he wanted to bring a case against Mr. and Mrs. Nicholas and Ms. Jeffrey and BDO for false representation of the trading figures but he was not sure exactly what he had said to Mr. Thies. He said that in February 2001 he was not told by Mr. Thies that his contract with Mr. Nicholas had been for AUD$1.5 million. He conceded that they had never taken proceedings against Ms. Jeffrey or Mr. and Mrs Nicholas for false representation of the trading figures. Any action related to breach of warranty.

Mr. Neel agreed that Erakor was their dream island and that at that time they thought there would be a substantial income from it but when he lost his income from his baseball contract their plans were unable to be fulfilled completely as they could not afford as much as they originally planned and they were looking around for someone to blame. Mr. Neel again confirmed that he agreed to pay the contractual amount for the resort after he was told by Ms. Jeffrey that there was no room for negotiation but said that any information about the other contract price would have made a difference. He conceded that he had been told that the other contract price was lower but did not make any enquiry about the exact amount. He denied that he was attempting to blame Mr. Blake simply in hindsight.

Mr. Garry Blake confirmed that he is a partner of Ridgway Blake in Port Vila, Vanuatu, and that Mr. Ridgway had acted for the Claimants in relation to the first agreement and its termination. He said that after Mr. Ridgway left the partnership on 1 February 2000 Mr. and Mrs. Neel were not able to purchase the Resort because of the caution lodged by Mr. Thies and Ms. Elder in relation to the contract which they had had with Mr. and Mrs. Nicholas. He agreed that Ridgway Blake had acted as agents for Tress Cox & Maddox in the caution proceeding.

He said that between 10 June 2000 and the exchange of contracts on 25 July 2000 he acted for the Claimants in negotiating and finalising the structure and terms of the contractual documents. He said that that did not include negotiation of, or advice upon the purchase price which was a matter which had previously been agreed upon between the Claimants and the vendors either directly or through Ms. Jeffrey. He said that at no stage was Ridgway Blake retained to advice the Claimants on the price or value of the Resort.

He said that he acted, with the consent of the Claimants, for Westpac Banking Corporation on the preparation of security documentation for the loan to the Claimants but was not retained to provide any financial advice to the them.

He said that he was also retained to attend to miscellaneous matters including the incorporation of the Claimants' company and the changing of the name of the company.

He said that the vendor's solicitors were based in Sydney and that from time to time Mr. or Mrs. Nicholas would communicate with him directly to inform him of the state of the matter and thereafter he would obtain instructions from the Claimants sometimes directly and sometimes through Ms. Jeffrey.

He said that after speaking to Mr. Ridgway he agreed to act for Tress Cox & Maddox as agent in the removal of the caution taking into account that the agreement between Mr. Thies and Ms. Elder and Mr. and Mrs. Nicholas had been terminated, and that Mr. and Mrs. Neel could not proceed with the purchase of the Resort until the caution was removed, and that the Claimants and the Nicholases and the company had a common interest in having the caution removed and once that caution was removed the Claimants and the Nicholases could proceed with an agreement in the same or similar terms as the first agreement, if they still wished.

Mr. Blake agreed that he had sworn an affidavit annexing a copy of the agreement between Mr. Thies and Ms. Elder and Mr. and Mrs. Nicholas but had not particularly turned his mind to the contents of the agreement and thereafter his partner Mr. Morrison had largely dealt with the Court in the proceedings.

Mr. Blake said that it was not until 21 March 2000 that he spoke to Mr. Neel for the first time and told him that he had taken over the conduct of the matter from Mr. Ridgway who had joined Tress Cox & Maddox and that firm acted for Mr. and Mrs. Nicholas that he could not be certain that he discussed the instructions from Tress Cox & Maddox to act on the caution removal with Mr. Neel at that time although he believed that he did but certainly he did not seek to keep any information from the Claimants.

Mr. Blake said that Mr. Neel had replied to a fax sent to him saying that he was glad the caution had been removed and they were still keen buyers and that they would be grateful if he could proceed with the negotiation of the agreement and please forward any paper work to Ms. Jeffrey. (See Exhibit GB18)

Mr. Blake said that at no time did he regard his retainer as extending to include negotiation of the purchase price and that at no time did either Claimants ask him for advice about the purchase price of the lease and business assets of the Resort or about the value of those assets. He said he did not advise the Plaintiffs about the value of those assets or the price they should offer to purchase them.

During a July 2000 meeting between him and the Claimants Mr. Blake said that the Claimants told him that they thought the Resort had a lot of potential for Japanese Tourists and they planned to refurbish it and make it more up-market to cater for Japanese tourists and perhaps strata some of the bungalows and sell them to Japanese investors. Mr. Blake said that there were subsequent discussions about the warranties and he suggested to the Claimants that perhaps they would like to meet someone independent to look at the accounts and provide them with accountancy services. He said he recommended Jonathan Law and said that you can take the draft agreement away with you to read it if you like but that Mr. Neel replied to the effect that "no this is what we've got you for". He said that when the Claimants subsequently talked about retaining Mr. Stafford of BDO Chartered Accountant he said that he told the Claimants that he thought they might want to go with someone independent who had had no prior connection with the vendors or the Resort but the Plaintiffs told him they had decided to use Mr. Stafford.

Mr. Blake said again that the Claimants did not seek nor would he have given any advice on the value of the resort or the purchase price they offered for the resort neither in November 1999 nor again in June 2000. He said the first offer was made before Ridgway Blake were retained and the second offer, which in substance repeated the first offer was not made by Ridgway Blake nor was their advice sought as to the amount of the offer.

Mr. Blake said further that in July 2000 Mr. Neel said words to the effect that they were going to renovate the whole Resort and built a new spa and sports bar. He said they were going to built more bungalows because there was so much land that had not been used and that it had the potential for expansion and that they would be making the Resort more exclusive and focusing on Japanese tourists.

Mr. Blake said that the Westpac loan application had been made without his involvement but that on the arrival of the Claimants on 15 November 2000 he said to them words to the effect that Ridgway Blake did the majority of work for Westpac Bank in Vanuatu. He said he told them that the Bank had asked them to prepare the security documents for their loan transactions and enquired whether they had a problem if his firm acted for the Claimants and the bank and that the Claimants had said words to the effect that no that was not a problem to them.

Mr. Blake said that that was in the context that Mr. and Mrs. Neel did not seek nor did he offer them assistance in applying to Westpac for the loan or negotiating its terms. Mr. Blake said he did not see a copy of the valuation report, which had been prepared for Westpac by Mr. Cox.

Mr. Blake further said that in acting for the Claimants Ridgway Blake did not provide them with any advice about the accounts received from Erakor Island Limited and he was not qualified to provide the Claimants with any advice about those financial records in any event, and did not do so.

He said that prior to November 1990 he had never met Ms. Jeffrey nor had he had any dealing with her or with Pacific Island Investments Ltd. He said that his role was solely to negotiate the terms of the contract to acquire the assets for the negotiated price and he was not retained to advise the Neels about the amount to offer to the vendors to purchase Erakor Island Limited and they did not ask him for advice about the amount they should offer.

Mr. Blake said that he had no experience in managing or operating a hotel or resort either, and he did not hold out to the Neels that he had. He understood that the Neels had retained Ridgway Blake to document their purchase of Erakor Island Limited not to advise them on the wisdom of their purchase or how to operate a resort.

He had been unaware that Erakor Island resort had been on the market for ten years and did not know any price which the resort had been offered for sale in earlier years. He denied that he preferred the interests of Mr. and Mrs. Nicholas or Erakor Island Limited over the interests of the Neels.

Mr. Blake denied ever having been asked whether he thought that the purchase of the island was a good deal or a good price. He said he had been aware that the background of the Neels was as a baseball player and a model but also that they had had real estate investments and that comments from Ms. Jeffery about "putting you on the team" and "bring the baby home" did not pressure him at all. He said that his clients were Mr. and Mrs. Neel and not Mr. and Mrs. Nicholas.

He said that at all times before settlement the contract was conditional upon finance. If the Bank and the vendors had not been prepared to finance the Neels they could have got out of the deal, as finance was a precondition.

He said that he had not personally had much to do with Mr. and Mrs Nicholas at all during the removal of the caution action and that most of the Court appearances had been done by his partner Mr. Morrison.

Mr. Nicholas gave evidence and said that because of his health situation and that of his wife they entered into the agreement with Mr. Thies and Ms. Elder to obtain a quick sale of the resort on the basis that the whole agreement could be completed on 1 December 1999. When it became apparent that the contract could not be completed, they entered into the fresh agreement with the Neels but clearly that was not a quick settlement prospect.

As to the valuation evidence, Mr. Dakuidreketi's evidence for the Claimants was that his retrospective valuation was that as at 21 November 2000 the current value of the leasehold interest in the property was AUD$1.25 million. Mr. Cox for the Defendants said that his actual valuation as at that date was for USD$1.5 million and on an improved basis USD$2.65. I shall have more to say about those valuations in due course.

SUBMISSIONS

The Claimants submitted that there was a duty on the Defendants as their solicitors to advise on the commercial viabilities of the contracts and in particular it was submitted that the First Defendant was negligent in failing to advise the Claimants as to that and committed a wrong in continuing to act in a situation where he possessed confidential information which was material to his clients, the Claimants, but failed to provide that information to them. It was submitted that the loss that the Claimants suffered was the difference between the contract price of USD$1.5 million and the price which Mr. and Mrs. Nicholas agreed to sell the resort to Mr. Thies and Ms. Elder in the sum of AUD$1.5 million.

It was submitted that the valuation by Mr. Cox for Westpac was defective that Mr. Cox had a mind-set because he knew the purchase price that the Claimants were prepared to pay and was not advised of the amount that Mr. and Mrs. Nicholas were prepared to sell to Mr. Thies and Ms. Elder. It was submitted that Mr. Cox was not provided with appropriate sets of accounts and did not consider losses in previous years or problem with the jetties. It was submitted that the Claimants' valuer should be preferred.

The Claimant submitted that the relationship between lawyer and clients automatically gave rise to a fiduciary duty and that this duty was breached by Mr. Blake. It was submitted that a solicitor such as Mr. Blake was under a duty to pass on to his clients all information which was material to his clients' business regardless of the source of information and that exceptions to the rule do not include confidential information obtained from a former client. The Claimants submitted that a solicitor has a strict obligation to further his clients' interest and that a duty may exist to advise a client who is plainly rushing into an unwise venture. More than mute advice is required and if conflict is identified then a solicitor must discontinue from acting in the absence of informed consent by the parties.

The Claimants submitted that at no stage were they advised of the amount of the Thies/Elder contract and that they could negotiate the entire contract including price and that the Defendants had confidential information and that there was clearly a conflict of interest. There was an opportunity to cancel or negotiate a better price but the Claimants were not given the opportunity of so doing.

The Defendants submitted that the Claimants had failed to properly address and prove damages. It was submitted that the Claimants had failed to prove that they had purchased for less than the market value and that the Court should prefer the defence evidence as to value.

The Defendants submitted that it must be demonstrated that the Claimant paid more for the resort than that it was worth and in the absence of proper proof as to that it meant that there was no loss. In short, it was submitted that the Claimant must prove that the asset that they purchased was not worth what they had paid for it and the basis on which the Claimants assessed their lost as the difference between the two contract prices was flawed. In addition there was no plea as to loss of opportunity and the amount of loss was incapable of being supported on the evidence.

It was submitted that it could not be assumed that Mr. and Mrs. Nicholas would have agreed to sell the resort to the Claimants at the same price as they had agreed to sell to Mr. Thies and Ms. Elder when at that time they were in distressed circumstances and required settlement in a short time. It was submitted that in fact Mr. Nicholas's evidence as to those matters was unchallenged and in fact Mr. Nicholas had said that he would not have sold the resort to the Claimants at the lower sum.

In addition the defence submitted that causation by the Defendants as to any loss suffered by the Claimants had not been established and, as to the duty of care, it was submitted that Ms. Jeffrey was engaged to employ architects and to arrange the loan and saw her role as a broker. It was submitted that those roles could not be placed at the feet of the First Defendant. It was submitted that the Court should not speculate as to the causation and the evidence clearly established that Mr. Nicholas had not been challenged about never selling the property to the Neels at the lesser amount and even in accepting what the Neels might have done, it was clear that Mr. Nicholas would not have given the same special deal to the Neels because they could never have achieved settlement by 1 December 1999 as the Claimant could not have entered into a contract without a finance clause.

The Defendants submitted that as to credibility the Court should prefer the evidence of Mr. Blake to that of the Claimants on a number grounds of demonstrated inconsistency and unreliability.

The Defendants submitted that any retainer did not extend to advice as to financial matters and while the Court could accept that in the performance of the retainer solicitors owed their client a duty to exercise reasonable skill and care typically with inherent duties owed in tort, it must be accepted that such duties may involve different remedial consequences in the event of a breach. It was submitted that the retainer, rather than tort, is the primary source of a solicitor's obligation to his client and a retainer does not generally extend to giving advice of a commercial nature particularly where a client has been advised to obtain independent financial advice.

As to the fiduciary's duty, the defence submitted that while the solicitor/client relationship is a well known fiduciary category an analysis of the circumstances in this case would reveal that not every case requires equitable intervention. It was submitted that here the Defendants were not acting for parties with opposing interest in any transaction, for example on the sale transaction Ridgway Blake were acting for the Neels as purchasers and Tress Cox and Maddox were acting for Mr. and Mrs. Nicholas as vendors. Both parties wanted to proceed with a sale of the resort and the caution lodged by Mr. Thies and Ms. Elder provided an impediment to their joint interest in entering into sale contract and there was no conflict in the Defendants acting as agents for the vendors' solicitors in the action to remove that caution.

As to the duty to disclose the Thies/Elder contract purchase price it was submitted that these circumstances were not extreme and in any event it was clear that the Claimants accepted that they knew that the other sale price was less than theirs but failed to make any further enquiry.

For those reasons it was submitted that the Claimants could not succeed.

LAW

The Claimants in this Civil Case must prove their claim on the balance of probabilities which means more likely than not.

Whether or not a solicitor's duty is in contract, tort or arising from a fiduciary relationship the prime basis of the solicitor's duty is his retainer. It was accepted in Beach Petroleum NL v Kennedy and Others [1999] NSWCA 408 that "the solicitor is classically a fiduciary to the client and as such owes certain duties in each particular case".

The case went on to say that an assessment of the particular obligations owed to a client in the particular case and consideration of what acts or omissions amounted to a failure to discharge the obligations is the issue. Simply because a man acts as a fiduciary only begins the analysis. The Court said as follows:

"In Clark Boyce v Mouat [1994] 1 AC 428 at 437, to which the High Court referred in Maguire v Makaronis, Lord Jauncey of Tillichettle, who delivered the judgment of the Privy Council, said:

"Their Lordships are accordingly satisfied that Mrs. Mouat required of Mr. Boyce no more than that he should carry out the necessary conveyancing on her behalf and explain to her the legal implications of the transaction...

When a client in full command of his faculties and apparently aware of what he is doing seeks the assistance of a solicitor in the carrying out of a particular transaction, that solicitor is under no duty, whether before or after accepting instructions to go beyond those instructions by proffering unsought advice on the wisdom of the transaction".

Whether or not there is a duty to advise on the wisdom of a particular transaction depends on the circumstances of the case: see, eg, Haira v Burbery Mortgage Finance & Savings [1995] 3 NZLR 396 at 406.

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

The relationship of solicitor and client has at its core an element of confidence and influence which equity will preserve and protect. Nevertheless, the confidence and influence are not always so pervasive as to require equitable intervention in every facet of the relationship."

As to a conflict of duty and care the Court said this:

"In Maguire v Makaronis (at 465), the High Court referred with approval to the formulation by Richardson J in Farrington v Rowe McBride & Partners [1985] NZCA 21; [1985] 1 NZLR 83 at 90, a conflict of duty and duty case. At the page referred to Richardson J said:

"A solicitor's loyalty to his client must be undivided. He cannot properly discharge his duties to one whose interests are in opposition to those of another client. If there is a conflict in his responsibilities to one or both he must ensure that he fully discloses the material facts to both clients and obtains their informed consent to his so acting .....

and there will be some circumstances in which it is impossible, notwithstanding such disclosure for any solicitor to act fairly and adequately for both.

But the acceptance of multiple engagements is not necessarily fatal. There may be an identity of interests or the separate clients may have unrelated interests. Such cases seem straightforward so long as it is apparent that there is no actual conflict between duties owed in each relationship."

There is a distinction between a case in which a fiduciary acts for separate clients in the one matter and a case in which a fiduciary has, on an earlier occasions, acquired information which is relevant to another matter when he acts for a different client. This distinction has been described as one between "simultaneous" representation and "successive" representation; "Developments in the Law; Conflict of Interest in the Legal Profession" (1980-1981) 94 Harvard Law Review 1244 at 1292 and 1315. Professor Finn as his Honour then was has described the two situations as respectively, "same matter conflicts" and "separate matter conflicts". The former is the "very heartland of fiduciary law". The latter, "in Anglo-Australian law is not seen as involving any question of fiduciary law". Rather, Professor Finn has suggest that such a case falls to be determined under the law of negligence, breach of contract, confidential information, etc: see Finn "Fiduciary Law and the Modern Commercial World" in McKendrick (ed) Commercial Aspects of Trust and Fiduciary Obligations (1992) Clarendon Press, Oxford at 22 and 31."

As to causation the Court said:

"There is a normative aspect to the determination of issues of causation, especially in a developing area of the law, such as equitable compensation. Should the solicitor bear responsibility for losses arising from a transaction in the specific context of the scope of the obligations assumed by the solicitor and the manner in which these obligations were breached? .....

The authorities on this matter have recently been reviewed in O'Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262 at 272-273. The law in Australia was there held to be as stated by Lord Browne-Wilkinson in Target Holdings Ltd v Redferns (1996) 1 CA 421 at 439:

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

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

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

Applying this test to the facts of the case leads to the conclusion that no relevant loss occurred."

The Court went on to say in relation to the fiduciary relationship as to speculation of what might have occurred if not for the breach of fiduciary relationship:

"Beach submitted that in the case of causation of purposes of determining equitable compensation, authority "forbids speculation as to what might have occurred if not for the breach of fiduciary duty". The appellant relied on the judgment of the Privy Council delivered by Lord Thankerton in Brickenden v London Loan & Savings Co [1934] UKPC 25; [1934] 3 DLR 465 at 469, where his Lordship said:

"When a party holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, it cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituent's action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant".

In Brickenden, a solicitor was acting for both the mortgagor and the mortgagee in a land transaction in circumstances in which he had a personal interest in the discharge of existing mortgages, under which the borrower owed him moneys. The existence of these mortgages was not disclosed to the new lender. The principle there stated requires some adjustment to accommodate the case of solicitors failing in their duty to give advice or impart information because of a divided loyalty."

And the Court concluded that "A fiduciary including a solicitor is not an insurer."

In the case of Spector v Ageda (1973) Ch 30 the Court said at page 48:

"A solicitor must put at his client's disposal not only his skill but also his knowledge so far as is relevant, and if he is unwilling to reveal his knowledge to his client he should not act for him. What he can not do is to act for the client and at the same time with hold from hire any relevant information that he has".

In that case the Court said that where a solicitor had altered a document and had a personal interest in the transaction the relevance of the alterations were "obvious and inescapable".

A Solicitor's retainer does not generally extend to giving advice of a commercial nature: Yager v Fishman & Co (1944) 1 All ER 52 (English Court of Appeal). That case is authority for the proposition that the Court would generally require "Unequivocal instructions and an unequivocal acceptance".

In Amadio Pty Ltd v Henderson [1998] FCA 823; (1998) 81 FCR 149 the full Court of the Federal Court of Australia said:

"Commercial advice for example as to the market value of a property or the likely profitable of the business is not ordinarily the function of a solicitor".

I am grateful to Counsel for the authorities that have been provided to me and which I have considered in full.

FINDINGS

During the four and a half day hearing I have had the opportunity of seeing and observing the witnesses and assessing their credibility.

The Claimant Mrs. Neel, the first witness, throughout her evidence seemed to find it difficult to directly answer precise questions, particularly questions which seemed difficult for her case. She tendered to prevaricate and obfuscate particularly when it suited her, and at other times I found her to be plainly evasive.

The other Claimant Mr. Neel proved to be vague and unconvincing. He was not sure of contents of various conversations except where it suited his claim.

On the other hand the Defendant Mr. Blake declined to be categorical about whether he had told the Claimants that his firm had acted as agent for the vendor's solicitors in the removal of caution but was under the impression that he had done so. It would have been easy and beneficial to his case for him to have been definite about that but he resisted that obvious temptation. I found him to be fair candid and open.

In particular I find that it was clear that the Claimants saw the Erakor Island Resort on the web site and fell in love with it and decided that they would buy it come what may. On two occasions they agreed to pay the asking price for the property at USD$1.5 million and made no attempt to negotiate a lesser price.

I accept the unchallenged evidence of Mr. Nicholas that the price that he agreed to sell to Mr. Thies and Ms. Elder was a special one due to his distressed circumstances at that time and that he would not have considered selling the resort to the Claimants for the same amount, particularly because they could never have completed the transaction within the time that Mr. Thies and Ms. Elder could have. In any event, it is clear that, as the Claimants were reluctantly drawn to accept, they knew even before the first aborted contract was terminated that there was another contract for a lesser sum than theirs but they chose not to make any enquiries about the precise figure, so besotted were they with their dream. They showed a complete lack of interest in the amount of that sale price even though the fact of the lesser sum was disclosed to them as early as 17 November 1999 when Mr. Ridgway sent them the fax of that date (TAB 12 to Ridgway affidavit) sending a copy of a letter which Ridgway had received from Geoffrey Gee & Partners of the same date. (TAB 11 Ridgway affidavit). I find that the Claimants clearly received the letter TAB 11 and were put on notice at that stage by Ridgway Blake of a lower offer than theirs. The response from Mr. Neel to Mr. Ridgway also dated 17 November 1999 (TAB 13 to Ridgway affidavit) clearly indicated that Mr. Neel had received the letter, considered it and wanted further information about the termination letter for the first contract that Mr. Ridgway had drafted and forwarded to him for approval and execution. Mr. Neel subsequently signed that letter (see TAB 15 Ridgway affidavit). The Claimants initially denied having seen that letter but it was clear from the correspondence and their subsequent evidence that they had seen it. Mrs. Neel also said that if only she had seen the letter from Geoffrey Gee & Partners she would never have gone ahead with the purchase but she was then driven to say that she saw it, read it, but make no further enquiry about the lesser purchase price.

In addition in statements made for the first time in evidence in Court each of the Claimants said they told Mr. Blake about the USD$10,000 to $15,000 net profit per month. A copy of the web site was produced as exhibit "F" and clearly stated:

"The Resort presently enjoys 80 to 90% occupancies and net profits of over USD$15,000 per month"

That was clearly contrary to the evidence given by the Claimants and I accept the evidence of Mr. Blake that those figures were never put to him by the Claimants for comment. However, that situation goes directly to the credibility and credit of the Claimants because neither of them had said anything of that exchange with Mr. Blake in evidence in chief or in their sworn statements and I agree that if that had happened an allegation about it would have been the forefront of the claim and would not have been delivered as an aside, as it were, in cross-examination.

There were a number of other aspects of unreliability that the Claimants demonstrated throughout their testimony such as Mrs. Neel saying in paragraph 44 of her affidavit:

"The first time I became aware the Nicholas's were prepared to sell the property for AUD$1.5 million was on attending the office of Geoffrey Gee & Partners on or about February 2002".

However under cross-examination Mrs. Neel accepted that she and her husband had been told that there had been a contract for AUD$1.5 million in early to mid 2001.

Mrs. Neel said that at the start they wanted to further develop the resort, Mr. Neel said they never wanted to develop the resort.

In summary, I find that the evidence of the Claimants as a whole was unsatisfactory, unreliable and contradictory and I do not accept their evidence in relation to matters of dispute. I find that the Claimants were simply looking around for a scapegoat when they realised that their dreams were unfulfilled and endeavoured to sheet home their perceived loss to the defendants.

As to the duty of care owed by the Defendants, and in particularly Mr. Blake, I find that on the basis of the authorities that there was no duty on Mr. Blake to offer unsought advice on the wisdom of the transaction. I find that this is not a case where equitable intervention on the part of the Court is required because the Claimants clearly knew at an early stage that the other contractual price was less than theirs but chose to make no further enquiry. I find that that was irrelevant to their consideration of the purchase of the resort and in any event they found out about the lesser amount from Ridgway Blake, when Mr. Ridgway was representing them in relation to the cancellation of the first contract, even before they had ever spoken to Mr. Blake.

Thereafter, as far as Mr. Blake is concerned there were two relevant transactions, one when Ridgway Blake acted as agents for Tress Cox & Maddox in the removal of the caution and two the purchase of the resort when Ridgway Blake acted for the Neels in relation the second contract.

As to the first transaction, I find that Mr. Blake approached the question of his firm acting as agent for Tress Cox & Maddox, and inferentially acting for the vendors, in a proper, mature and reasonable fashion and exercised his decision on a proper basis. He said that he took into account that the agreement between Mr. Thies & Ms. Elder and the vendors had been terminated. He considered that the Claimants could not proceed with the purchase of the resort until the caution was removed. He reached the conclusion that there was a common interest in having the caution removed and, once that caution was removed, the Claimants and Mr. and Mrs. Nicholas could proceed with an agreement in the same or similar terms as the initial agreement if they so wished. I find that that was a proper assessment of the circumstances and an appropriate decision to reach and there was no conflict of interest arising, because the vendors and the Claimants had a commonality of interest in having the caution removed, and there was a clear identity of interest in having that result achieved. In any event, I find as a fact that I accept the evidence of Mr. Blake that he advised the Claimants specifically that his firm had acted as agents for the vendors' solicitors, Tress Cox & Maddox in the removal of that caution. In any event, I find that there was simply no conflict of interest.

As to the purchase of the resort, I find that there was no duty on Mr. Blake to offer unsought advice on the wisdom of the transaction even bearing in mind the information which he had come into possession of as to the precise earlier contractual price when the earlier contractual document had formed part of the exhibits to his sworn statement in the caution removal proceedings. Clearly Mr. Blake had no personal interest in the transaction and was, in the words of the authorities, not a party with any adverse interest. The Claimants have accepted that they made no enquiry as to the precise figure of the earlier contractual arrangement with Mr. Thies and Ms. Elder and that they did not ask Mr. Blake to advise them on sale price or value. I accept the evidence of Mr. Blake that he was never asked by Mr. Neel whether they got a good deal with the USD$1.5 million. I find that Mr. Blake did not breach any fiduciary relationship with the Neels in not revealing the specific purchase price of the earlier agreement and I find that he acted efficiently and competently throughout and did not prefer the interests of the vendors over the interests of the Claimants.

I find that the comments of Ms Jeffrey as to joining the team, a team effort, bringing the baby home and staying on the same train did not influence the defendant, Mr. Blake, who at all times acted in a responsible and thorough manner in terms of his retainer. There were no elements of divided loyalty on the part of Mr. Blake.

As to the retainer, I accept that primarily solicitors are retained to deal with legal matters and not commercial or financial matters and that the terms of the retainer were agreed on 16 November 1999 with Ridgway Blake for the provision of legal services for the purchase of Erakor Island Resort (see TABS 5 & 8 Ridgway affidavit Bundle 8 p.64). Thereafter in early June 2001, after the caution had been removed, that retainer referred to "proceedings with negotiations of the agreement" (see TAB 15, 17 and 18 Blake affidavit). Certainly that required the Defendants to perform their retainer on the basis that they owed the Claimants a duty to exercise reasonable skill and care. I find that the Defendants certainly did that. I find that Mr. Blake did not offend the principle in Spector v Ageda (above). He had no personal interest and was never a party with an adverse interest to that of the Claimants.

I find that the Claimants have failed to prove on the balance of probabilities that the Defendants, and in particular Mr. Blake, have breached their contract of retainer or have been negligent or that the Claimants have satisfied the Court that it should intervene by a way of equitable damages or equitable compensation.

In any event, I find that the Claimants have failed to establish on the balance of probabilities that they have suffered any loss. To succeed in their claim they must prove damage and, in particular, must show to the Court that the asset they purchased was not worth USD$1.5 million at the time that they purchased it. They have failed to do so.

I do not accept the evidence of Mr. Dakuidreketi. He approached the question of valuation by retrospectively valuing the resort as at the date of sale, namely 21 November 2000. In cross-examination he was unable to prove the basis of his approach requiring the valuation of an asset to be the "recoverable amount" which is, he said, defined as "the net amount that is expected to be recoverable through the cash in flows and out flows arising from its continued use and subsequent disposal" The witness was unable to source the basis of his valuation definition.

He approached the valuation on three methodologies namely the summation approach, the income (going concern) approach and the sales approach.

Unfortunately Mr. Dakuidreketi took account of events which occurred subsequent to the date of valuation which clearly influenced his valuation figures. Parts of the report even referred to facts which occurred some two and half years after the valuation date and his valuation constantly chronicled events which occurred after the valuation date and which should have had little influence on the valuation figure. I agree with Mr. Cox that the recoverable amount approach is generally not a legitimate method, and is rarely used.

Specific examples of post valuation references related to his use of Vanuatu's economy in 2002, visitor numbers in 2002 to 2003, air services in July 2003, Vanuatu's Hotel room count at the end of 2002, and it seems that the figures as at 2002, which were used, related to declining tourist numbers in Vanuatu which occurred past the valuation date. Throughout the valuation Mr. Dakuidreketi adopted a pessimistic and declining tourism environment which was not the case as at the date of sale of the property, when, it seems, Vanuatu was experiencing encouraging yearly increases in international tourist visitation.

In addition Mr. Dakuidreketi failed to address the "highest and best use" principle when assessing his market value and I agree with Mr. Cox that that is a proper valuation approach. Mr. Dakuidreketi used a totally incorrect figure when referring to the sale of the Le Lagoon Resort in the mid 1990's. The report states that the property sold in 1995 for AUD$5 million but it fact it clearly sold in June 1994 for AUD$12 million. Mr. Dakuidreketi accepted that he had made a mistake in relation to that figure but neglected to say so in his examination in chief.

I found his evidence and his valuation to be inaccurate, unreliable, unconvincing and unhelpful. He clearly had not had experience in valuing such a resort and his "recoverable amount" approach was inappropriate. He did not establish the proper market value and ignored the principle of "highest and best use" despite it being a function of establishing market value. Events well past the date of valuation which were symptomatic of a depressed market were relied upon, rather than events up to the valuation date, which reflected a buoyant market. His sales and marketing information was inaccurate and understated, and his income (going concern) approach relied on trading figures two years before the date of valuation, which did not reflect the trading levels which were achievable upon an upgrade and expansion. He seemed to ignore the unique qualities of the resort which made it ideal for such upgrading and expansion and for additional development sites. Each of his three methods was flawed.

On the other hand, I found the evidence of Mr. Cox to be accurate, reliable and convincing. Mr. Cox had valued the resort at the time using properly sourced material for the appropriate period. His qualifications and experience were exceptional and impressive. He has been a valuer for thirty years he is and was aware of Australian and International standards of valuation. He has been based in Brisbane and in the firm that he was previously a director of, had concentrated on running the hotel and leisure division specialising in the feasibility of hotel resorts. He said that he had valued every hotel and resort in Queensland including 8 - 10 island resorts. He had also carried out valuations in French Polynesia, Vanuatu and Fiji and at one stage for a period of ten years he had been directly responsible for twenty four valuers.

At the time of the valuation here, the latest tourism figures for Vanuatu were available to him and he took into account the other three main competitors to this particular resort in his considerations. He adopted a "highest and best value" approach in accordance with accepted Australian and International standards and he had even valued the Meridian Resort in mid 1993.

Having carefully considered Mr. Cox's report I find that I accept his valuation and note his comment that the valuation on 15 November 2000 was made for mortgage security purposes and not for the purposes of any litigation. The valuation was made in accordance with the international definition of market value as adopted by the Australian Property Institute namely "the estimated amount for which an asset should exchange on the date of valuation a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion".

The code of professional practice as set out in the Australian Property Institute outlines the code of ethics and rules of conduct of valuers. Mr. Cox said that neither Fiji nor Vanuatu had a valuers' code of practice and the Australian Code is insisted upon by Banks and other institutions when instructing valuations of properties in those countries. That code, Mr. Cox said, specifies that when undertaking a valuation for mortgage finance purposes the valuer should consider the "highest and best use" before arriving at the valuation. Mr. Cox said he used that approach. I accept that that was a proper approach and that the appropriate value of the resort as at the date of settlement was USD$1.5 million and on completion of proposed refurbishment and expansion would have been USD$2.65 million.

Having accepted the valuation of Mr. Cox I find that the Claimants suffered no loss or damage because they purchased the resort for its then current market value.

In the circumstances no question of contributory negligence arises.

JUDGMENT

I find that the Claimants have failed to prove their case on the balance of probabilities and I enter judgment for the Defendants against the Claimants and order that the Claimants pay costs to the Defendants on the standard basis.

Dated AT PORT VILA, this 03rd day of October 2003.

BY THE COURT

PI TRESTON
JUDGE