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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Keith v. Chalmers & Ors [2003] ScotCS 232 (21 August 2003) URL: http://www.bailii.org/scot/cases/ScotCS/2003/232.html Cite as: 2003 SCLR 941, [2003] ScotCS 232 |
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION |
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Lord Justice Clerk Lady Cosgrove Lord Wheatley
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OPINION OF THE COURT delivered by LORD WHEATLEY in RECLAIMING MOTION by MURRAY KEITH Pursuer and Reclaimer; against DAVIDSON CHALMERS and OTHERS Defenders and Respondents: _______ |
Act: Sandison; Boyds (Pursuer and Reclaimer)
Alt: Williamson Q.C., Solicitor Advocate; Brodies, W.S. (Defenders and Respondents)
21 August 2003
[1] In this action the pursuer seeks damages for financial loss said to have been caused by the professional negligence of the defenders, who are a firm of solicitors. The pursuer was a director and employee of a company called Argyll Property Assets Managers Ltd ("Argyll") which is in the business of dealing in property assets for various clients. In the early part of 1997, the pursuer wished to leave his employment and set up a similar business of his own. In anticipation of this step, he sought professional advice from the defenders and in particular from Stuart Duncan, one of the partners at the defenders' firm. The details of the advice sought by the pursuer, and the occasions when he did so, lie at the heart of this present dispute. In particular, the basis of the pursuer's present claim is that the defenders were professionally negligent in that they failed to advise the pursuer of the nature and extent of the fiduciary duties incumbent upon him as a director and employee of Argyll, and as a consequence of that failure he embarked upon a course of action which led him to suffer financial loss. [2] A summary of the detailed history of events as found by the Lord Ordinary is as follows. A meeting between the pursuer and Mr Duncan was proposed by a letter from the pursuer of 17 March 1997, which also advised the defenders of the provisional name of the company which the pursuer proposed to set up, and provided a copy of the pursuer's business plan. The meeting took place on 18 April 1997. The Lord Ordinary has made specific findings in fact in respect of what was discussed between the pursuer and Mr Duncan at that meeting, preferring in general terms the recollection of Mr Duncan to that of the pursuer. The pursuer made Mr Duncan aware of the general outline of what he proposed to do, that he was a director of Argyll, and that he did not at that time intend to resign from that position. In particular, the pursuer indicated that, together with another of Argyll's employees named Steven Doyle, he intended to set up a new company to be called Leven Properties Ltd ("Leven") as the corporate vehicle for his new venture. Mr Duncan was therefore instructed to see to the incorporation of Leven, to investigate the pursuer's service contract agreement with Argyll (which the pursuer was to send him), and to prepare material for potential investors in the new company. The discussions between the pursuer and Mr Duncan at this meeting envisaged a lapse of time of perhaps six months between the stage when the pursuer would find the necessary commitment by financial investors to provide working capital on the one hand, and the stage when Leven would then take up the offer of funding and acquire property on the other. There was no discussion on 18 April about the fiduciary duties that might be incumbent upon the pursuer as a director of Argyll in relation to setting up what was in effect a rival company, or about the consequences to the pursuer of any breach of such duties. All that Mr Duncan provided by way of advice was that the pursuer should be careful about disclosing his plans to Argyll. However, the Lord Ordinary also concluded that Mr Duncan reasonably understood at this time that the pursuer intended to resign from Argyll before he started trading in his new company. [3] The next contact between the pursuer and Mr Duncan was on 19 June 1997. In the course of a telephone conversation, the pursuer reported to Mr Duncan on the progress he was making with his attempts to arrange funding in principle for the new venture (the first part of the two stages contemplated at the meeting of 11 April), and indicated that such funding had now been secured. The Lord Ordinary notes that neither the pursuer nor Mr Duncan had much recollection of this telephone conversation, nor did they place any emphasis or significance on it either at the time or at proof. However, also at or about that time, in the middle of June 1997, the pursuer and Steven Doyle had identified a significant property portfolio which they understood was being offered for sale by the representative body of the Church in Wales, the purchase price for which was eventually settled at £27,625,000. These negotiations had proceeded outwith the knowledge of the pursuer's employers, and also outwith the knowledge of Mr Duncan and the defenders. At that time, the Lord Ordinary found that Mr Duncan was still reasonably of the view that there would be a considerable period of time between the identification by the pursuer of the source of funds for his new venture, and the presentation by the new company of concrete proposals to purchase a property portfolio with the aid of potential investors. [4] The next and final contact between the pursuer and the defenders was on 21 August 1997, when the pursuer telephoned Mr Duncan and asked him for written confirmation of advice already tendered in respect of his service contract. Mr Duncan then wrote to the pursuer on 22 August giving him detailed advice on his service contract with Argyll, and on whether that agreement would present the pursuer with any problems should be proceed with his new venture. Again, no advice was given in respect of any fiduciary duties of care which the pursuer might currently have in respect of his position with Argyll, or of the consequences of any breach of those duties. [5] By the beginning of August it had been agreed in principle that Leven would acquire the Church in Wales property portfolio at the settled price. Leven also obtained from the sellers of the portfolio an exclusivity agreement until the end of October 1997. In the event Leven was unable to fund the purchase of the portfolio and in the course of October a third party acquired the interest of the pursuer and Mr Doyle in Leven, including the exclusivity agreement, and subsequently the property portfolio itself. The third party then sold on the portfolio at a significant profit. For various reasons described by the Lord Ordinary in his opinion, the purchase price in the transaction in which their interest in Leven was sold by the pursuer and Steven Doyle to the third party was eventually calculated at £872,500. In the course of these various dealings, the pursuer and Steven Doyle had set up another company called Talisker Properties Ltd ("Talisker") in circumstances and for reasons which are not particularly clear. The purchase price for Leven was paid to Talisker. Throughout this course of dealing the pursuer and Doyle remained employees of Argyll, and kept all knowledge of what they were doing in respect of the purchase of the property portfolio from their employers. [6] In November 1997, Argyll became aware of the full circumstances of the acquisition of the Church in Wales portfolio and raised an action against the pursuer and Mr Doyle, jointly and severally, for the sum of £800,000 for breach of their contracts of employment, and also for count and reckoning with the pursuer, Mr Doyle and Talisker on the basis inter alia that the profits made in the deal constituted a secret profit made by the pursuer in breach of the fiduciary duties he owed to Argyll. In the course of this action, the pursuer acknowledged that he was in breach of these fiduciary duties and the action was then settled in the sum of £100,000. This sum was in fact paid by Talisker. The pursuer appears to have entered into an undertaking to repay that sum to Talisker. [7] It was in these circumstances that the pursuer raised the present action against the defenders. The pursuer's case was that he had instructed Mr Duncan in early 1997 to give advice in respect of whether the proposal to carry on his own business in the way he intended would expose him to the risk of any liability to Argyll. The pursuer averred that the defenders knew or ought to have known that they were being asked by the pursuer for legal advice on any liability to Argyll on his part, and on any other consequences which might flow from his proposal. This should have included the question of his fiduciary duties to Argyll as a director and employee of that company. The pursuer, in short, alleged that the defenders had been professionally negligent in that they failed to advise him of the nature and extent of these duties, and as a consequence of that failure the pursuer fell into breach of his obligations and required to compensate Argyll in the sum of £100,000. [8] Against that background, the Lord Ordinary addressed the question of whether Mr Duncan had been guilty of professional negligence. He considered that the essence of the pursuer's case was that the defenders knew or ought to have known that the pursuer was looking for legal advice on any question of liability to Argyll on his part in view of what he proposed to do, and any other adverse consequences that might flow from his current and planned activities. In the light of that knowledge, the Lord Ordinary concluded that Mr Duncan should have been aware throughout of the need to draw the attention of the pursuer to the existence and incidents of the fiduciary duties owed by him as a director and employee of Argyll. However, having considered the evidence and submissions, the Lord Ordinary decided that the defenders were not guilty of professional negligence in respect of any failure to tender such advice to the pursuer on 18 April and 19 June 1997; and further concluded that while there was a failure to tender appropriate advice on 21 August 1997, that did not in the event lead to the pursuer suffering any loss. [9] Firstly, the Lord Ordinary defined the relevant duties of care which he considered should apply. It was not in dispute that there was a solicitor - client relationship between Mr Duncan and the pursuer as from 18 April 1997. Parties were further agreed that it was an implied term of the contractual relationship between them that Mr Duncan, in rendering legal services to the pursuer, would exercise the degree of care and skill reasonably to be expected of a solicitor of ordinary competence. The Lord Ordinary concluded that the relevant authorities showed that if a director of a property investment company acquired information about a property portfolio available for purchase, and made use of that information to acquire that property for another company in which he had a personal interest without informing the company for which he worked, then he acted in breach of his fiduciary duty to his employer and was liable to account for any profit which he made through that purchase. The principles upon which this duty rests were found by the Lord Ordinary in the speech of Lord Upjohn in Phipps v Boardman [1967] 2 AC 46 at 123-124, from which he quoted the following passages:"The relevant rule for the decision of this case is the fundamental rule of equity that a person in a fiduciary capacity must not take a profit out of his trust which is part of the wider rule that a trustee must not place himself in a position where his duty and his interest may conflict. I believe the rule is best stated in Bray v Ford [1896] AC 44, 51 by Lord Herschell, who plainly recognised its limitations:
'It is an inflexible rule of court of equity that a person in a fiduciary position ... is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. ...'.
It is perhaps stated most highly against trustees and directors in the celebrated speech of Lord Cranworth LC in Aberdeen Railway v Blaikie (1854) 1 Macq 461, 471, where he said:
'And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.'
The phrase 'possibly may conflict' requires consideration. In my view it means that the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict."
This citation of authority was also adopted by Roskill J in Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 433 at p 449D-450A. The Lord Ordinary also accepted that a competent solicitor, exercising the appropriate degree of care and skill, would not confine himself to the strict letter of his instructions in any request for advice sought by a client in that situation, but might also require to advise on the existence of any obvious risks which might arise from the circumstances surrounding such a request (Boyce v Rendells (1983) 268 EG 268, per Lawton LJ at 272; see also Midland Bank v Hett, Stubbs and Kemp [1979] Ch 384 per Oliver J at 402H-403B). While this citation of authorities by the Lord Ordinary and the conclusions which he drew from them were not in essence disputed in this appeal, there was a difference between the parties as to how the legal principles underlying these duties of care should be applied to the circumstances of the present case. In particular, the issue which divided the parties both at proof and in the appeal was concerned with determining when the duties of care incumbent upon Mr Duncan in respect of the advice he should have given to the pursuer could properly be said to have arisen.
[10] In considering the facts and circumstances of the present case to ascertain whether the defenders were in breach of these various professional duties on 18 April 1997, the Lord Ordinary had the benefit of expert evidence from each side in the form of opinion evidence given by two experienced solicitors. For the pursuer, Dr Chrystie considered that as soon as the pursuer began actively to prepare, while a director of Argyll, to enter into a transaction which would be in breach of his fiduciary duty, the defenders, in the exercise of their duties to take reasonable care to instruct the pursuer on such matters, ought to have advised the pursuer at that time of the nature and extent of his fiduciary duties to Argyll, and the nature of the remedies which might be available to Argyll for any breach of those duties. For the defenders, Mr Rafferty's opinion was that no duty of care to give such advice would arise prior to the stage where the pursuer's new company began to contemplate the acquisition of specific property. Because in Mr Duncan's understanding of what the pursuer proposed there was to be a considerable lapse of time before the acquisition of any property actually took place, it was Mr Rafferty's opinion that there would be at that time no duty on Mr Duncan to give such advice. The Lord Ordinary, in preferring the expert testimony of Mr Rafferty, concluded that it had not been proved as at 18 April 1997 that no solicitor of ordinary competence in the relevant field, exercising reasonable care, would have failed to give the advice now desiderated by the pursuer, and that therefore Mr Duncan had not been guilty of professional negligence at that time. [11] The Lord Ordinary considered the relevant features which led to his conclusion to be that there was no indication in April 1997 that the pursuer was going to operate his company while still a director of Argyll; that the defender had been given a number of specific instructions by the pursuer which did not include any request for advice on the nature of his responsibilities to his employer, and that there might still be obstacles in the way of the pursuer realising his proposals. The Lord Ordinary therefore considered that while the question of giving advice on fiduciary duties would be required of a reasonably competent solicitor acting with reasonable care at some point as the pursuer's plans developed, the duty to impart that advice did not arise in the circumstances prevailing at 18 April 1997. A breach of the fiduciary duties owed by the pursuer to his employers was not, insofar as Mr Duncan had been made aware by the pursuer, in any way imminent in respect of what the pursuer was planning, and there was therefore ample time for a competent and careful solicitor to consider giving appropriate advice at the appropriate time. Accordingly, the Lord Ordinary rejected the pursuer's claim that the defenders had been guilty of professional negligence in the course of advising him on 18 April 1997. [12] The Lord Ordinary further concluded that no duty of care arose as a result of the contact between the pursuer and the defenders on 19 June, which neither party particularly had relied on at the proof nor had considered to be of any particular significance at the time. Although at that time the pursuer indicated that funding for the new venture was now in principle available, Mr Duncan's understanding was that the new company still had to identify a suitable property portfolio. The Lord Ordinary therefore agreed with the expert testimony of Mr Rafferty that it would be imposing too high a standard to hold that Mr Duncan should at that stage have appreciated the pursuer's need for unsought advice about his fiduciary duty to Argyll. The pursuer had failed to respond to requests for information, and had not contacted Mr Duncan since April. Further, the pursuer was not seeking advice on 19 June, but had promised to contact Mr Duncan with further information in eight days time. The Lord Ordinary therefore considered that it could not be said in those circumstances that no solicitor exercising reasonable care would have failed to tender the appropriate advice. [13] However, the Lord Ordinary came to the view that by 22 August 1997 Mr Duncan should have advised the pursuer about the fiduciary duties incumbent upon him in respect of his employment with Argyll and the consequences of a breach of those duties. By that time the pursuer was actively pursuing the acquisition of the Church of Wales property portfolio while he was still a director of Argyll. The situation had therefore changed significantly and this was first brought to Mr Duncan's attention on 22 August. The pursuer was no longer merely contemplating the securing of investment funds with which to acquire a property portfolio; he was in the process of negotiating a property deal even although he was not yet (and proved not in the event to be) in possession of adequate funding. We do not understand it to be disputed at the appeal that at that point Mr Duncan should have advised the pursuer of the nature of the duties which he owed to Argyll, and that by not doing so he failed to exercise the degree of care and skill reasonably to be expected of a solicitor of ordinary competence. [14] However, the Lord Ordinary further concluded that while the defenders had been guilty of professional negligence in August 1997, there resulted no loss to the pursuer from that breach of professional duty. Having considered carefully the evidence of the pursuer and Mr Doyle, the Lord Ordinary was satisfied that had Mr Duncan tendered the appropriate advice to the pursuer on 22 August in respect of his fiduciary duties, and in particular had he advised the pursuer that to continue as he proposed would have constituted a breach of his fiduciary duties as a director of Argyll and might lead him to be subject to legal action by Argyll as a result, then the pursuer would not have proceeded with the Church of Wales transaction. There is no doubt that the Lord Ordinary was fully entitled on the evidence to reach this crucial conclusion, which was not challenged in the appeal. Accordingly the direct consequence of the defenders' breach of their professional duty was that the pursuer would not have suffered any loss. The Lord Ordinary considered that the loss which the pursuer now sought to recover arose directly and exclusively out of the transaction which he would have abandoned had he been given appropriate advice. In the event, as a result of the defenders' failure to tender the appropriate advice at the time, the pursuer had in fact secured a significant financial benefit. The Lord Ordinary further found that the responsibility said to attach to the pursuer to reimburse Talisker for paying the sum of £100,000 to Argyll as a result of the action raised by Argyll simply had no direct bearing on this issue, and certainly did not establish the existence of any independent loss suffered by the pursuer. The Lord Ordinary also concluded that, as the pursuer had only a half share in Talisker, his liability for the £100,000 paid by Talisker to Argyll in settlement of the court action raised by Argyll could, so far as the pursuer was concerned, only be for half of that sum. In all the circumstances, the Lord Ordinary rejected the pursuer's claim. [15] At the appeal, Mr Sandison counsel for the pursuer, argued firstly that the Lord Ordinary should have held on the basis of the facts established that the defenders were in breach of their duty to the pursuer either in April 1997 or, at the latest, in June 1997, and that had the pursuer been properly advised on the nature of his fiduciary duties at that time, he would have avoided the liability he subsequently incurred to Argyll. Implicit in this submission was that had the pursuer received the appropriate advice at those times, he would have resigned from Argyll before he began negotiations to acquire any property portfolio for Leven. Secondly, the Lord Ordinary was further at fault, it was said, by requiring that if he was to recover any damages, the pursuer had to demonstrate what he would have done at any of the material stages had he been given such advice; and in particular that he required to show whether he would or would not have proceeded with his proposal to acquire the Church in Wales property portfolio. It would have been sufficient for the pursuer to establish a causative link between the defenders' breach of duty, whenever it occurred, and the subsequent loss which he incurred as a result of court proceedings against him arising out of that breach of duty. The Lord Ordinary should not have held that the pursuer suffered no loss because the transaction he entered into in ignorance of his fiduciary duties ultimately produced a profit for him. He should also have accepted that the pursuer was in fact responsible for meeting the liability which had accrued to Argyll and which was met by Talisker; and that his loss should not have been restricted to the sum of £50,000, being the amount by which the value of his holding in Talisker had diminished as a result of this liability. The Lord Ordinary should have concluded in short that the pursuer had in the event suffered a direct and personal loss in the sum of £100,000 as a consequence of the defenders' breach of their professional responsibilities. [16] In supplement of these various grounds of appeal, counsel for the pursuer put forward a number of submissions. He agreed that in April 1997 the pursuer was looking to Mr Duncan to do three things, namely to incorporate Leven, to check on the pursuer's service contract with Argyll, and to present material to attract potential investors. It was also accepted that originally it was envisaged by the pursuer that between the stage of obtaining funding and the acquisition of property, there would be a period of about six months. However, Mr Sandison submitted that it was significant that at that stage Mr Duncan was already being asked to set up a specific corporate vehicle to compete with Argyll. In these circumstances the Lord Ordinary should have concluded that the defenders' duty was to advise the pursuer that his fiduciary responsibilities to Argyll came into being during those preliminary stages. Mr Duncan knew that, although much remained to be done, the pursuer did intend to resign from his employment in order to pursue his own business venture. In these circumstances the Lord Ordinary was wrong to conclude that in April 1997 there was still ample opportunity for the steps necessary to avoid a breach of the pursuer's fiduciary duties to Argyll to be discussed at a later and more appropriate time. The Lord Ordinary was also wrong to conclude that the pursuer's fiduciary duties could not be breached before he began actively acquiring property. By merely taking steps to set up a venture in competition with the company which employed him, the pursuer immediately ran the risk of breaching the fiduciary duties which he owed to his employers. [17] Counsel for the pursuer therefore submitted that the Lord Ordinary had made a fundamental error in deciding that it was not necessary to examine whether the pursuer could be in breach of his fiduciary duty before he acquired the property portfolio. The duty on the part of the defenders to advise the pursuer in those terms arose, in counsel's submission, as soon as the pursuer took clear and definite steps to set up in competition with Argyll, when, as a result, the reasonable possibility of a conflict of interest could be identified. Counsel for the pursuer relied on the case of Industrial Developments Consultants Ltd v Cooley where it was held that the defendant, who was the managing director of the plaintiffs, was in breach of his fiduciary duty as an employee when information came to him which was of concern to his employers and relevant to their interests, and he made use of that information himself. Counsel also relied on the passage from the speech of Lord Upjohn in Phipps v Boardman referred to above, and suggested the relevant test in the present circumstances was whether a reasonable man would consider that the circumstances disclosed the possibility of a real sensible risk of conflict of interest. Counsel also maintained that it would not alter the position if, as here, the employer's company would not have received any benefit from the information withheld by the employee (Regal (Hastings) Ltd v Gulliver (Note)) [1967] 2 AC 134; [1942] 1 All ER 378, H.L.(E)). Accordingly, the Lord Ordinary, it was submitted, was wrong to find that the defender was entitled to withhold advice on the fiduciary duties owed by the pursuer to Argyll in April 1997 when, in terms of what was said in Phipps v Boardman, a reasonable man would have looked at the facts and circumstances of what the pursuer proposed to do and concluded that there was a real possibility of conflict between that and the interests of his employers. [18] Counsel for the pursuer also criticised the Lord Ordinary's reasoning that because the pursuer had made it clear that he intended to resign from Argyll before starting up Leven, and because there was no indication that he would not in fact do so, the defenders were entitled to understand that the pursuer was aware that carrying on business through Leven was inconsistent with continuing to work for Argyll. The Lord Ordinary was wrong to relate the emergence of the risk that the pursuer would be in breach of his fiduciary duties to his resignation from Argyll. The preparations being made by the pursuer to set up his company involved the possibility of a conflict of interest at that stage. The three things that the defenders were to do on the instructions of the pursuer following the meeting in April 1997 clearly anticipated the possibility of such conflict. Accordingly, the duty of care to give appropriate advice on the part of the defenders to the pursuer on his position with Argyll emerged in April 1997 and should have been the subject of appropriate advice at that time. [19] As far as the position as at 19 June 1997 was concerned, counsel for the pursuer argued that the test as to whether the defenders had been guilty of professional negligence at that time remained the same as it had been in April. However, the facts and circumstances were different. Following the telephone conversation on that day, Mr Duncan was aware that the position of the pursuer had changed; while the pursuer was still a director of Argyll, he had apparently secured investment sources and all that he now required to do was to obtain a property portfolio. The possibility of a conflict of interest was therefore even more clear. At that time, it was submitted, the Lord Ordinary should not therefore have reached the conclusion that no competent solicitor exercising reasonable care could have failed to tender such advice at that stage. [20] In reply, Mr David Williamson, Q.C., solicitor advocate for the defenders, submitted that before the Lord Ordinary the pursuer had wholly failed to prove his case. His core complaint was that he had instructed the defenders in April 1997 to give advice as to whether in the circumstances he would be exposed to any risk of liability to Argyll should he proceed to set up his own company and he had not established this. The factual findings made by the Lord Ordinary in respect of the contact between the pursuer and the defenders in April disclosed no request on the part of the pursuer to provide advice concerning any fiduciary duty. The defenders could not in any event have given such advice, at that time or later, because the pursuer had not provided them with his contract of employment with Argyll. The process of setting up the pursuer's new company was to be in two stages, and the defenders' duty was to give advice appropriate to the stage which the pursuer had reached. At the preliminary stage in April 1997, the possibility of the pursuer setting up business in competition with Argyll was remote and dependent on other matters happening. Consequently, it was submitted, the duty to give that kind of advice did not arise at that time. The Lord Ordinary had found that there was no further meeting between the pursuer and the defenders after April 1997 and before the telephone call of 19 June. The pursuer's principal case before the Lord Ordinary, which was that on the basis of advice given by the defenders in April, the pursuer was given the green light to proceed with all of his proposals, had completely failed. The Lord Ordinary at the proof had the benefit of two experts who gave evidence relevant to the crucial question as to whether in the circumstances prevailing at the material time, a reasonably competent solicitor would have advised someone in the pursuer's position that he owed fiduciary duties to his current employers, in terms of the test laid down in Hunter v Hanley 1950 SC 200. The Lord Ordinary, as he was clearly entitled to do, accepted the evidence of the defenders' expert that no such duty arose in the circumstances of the present case. Reference was made to Midland Bank v Hett, Stubbs and Kemp 402 C-E; 403 B; Moyes v Lothian Health Board 1990 SLT 444 at 449 D-H; and Gordon v Wilson 1992 SLT 849 at 851L-852A. In April the pursuer's project was at a preliminary stage and the pursuer, though asked to do so, had made no report to the defenders on his progress as he had promised. Instead he had entered negotiations to acquire property without telling the defenders, and he had not intimated his approach to potential investors to Mr Duncan. Accordingly, it was entirely reasonable for the Lord Ordinary to conclude that the pursuer had not been guilty of professional negligence at that stage, and that it would be imposing too high a standard or burden on the defenders to require them to discharge such a duty at that time. In Balston Ltd v Headline Filters Ltd [1990] FSR 385, it was held that an intention by a director of a company to set up business in competition with that company after his directorship had ceased, was not to be regarded as an interest which conflicted with his fiduciary duty to that company; nor was the taking of any preliminary steps to investigate or forward that intention, so long as there was no actual competitive activity while he remained a director. Mr Williamson submitted that the telephone conversation between the pursuer and Mr Duncan in June was therefore insignificant, and did not advance the pursuer's case in any way. [21] The defenders' solicitor advocate further argued that there was clearly room for more than one view on professional negligence in any given set of circumstances. It was therefore perfectly legitimate for the Lord Ordinary to take the view that in April and June there was ample time to give the pursuer advice on the fiduciary duties he owed to Argyll, in the light of the information he had at that time and in view of the failure by the pursuer to provide, or respond to requests for, information. In that respect also the Lord Ordinary was entitled to reach the factual conclusion that, so far as the defenders were concerned, the pursuer's actions during 1997 in engaging in negotiations to acquire a property portfolio while still a director of Argyll were not foreseeable. The pursuer had failed to establish any evidence to suggest that there was an obvious risk of a conflict of interest between what the pursuer was engaged in doing and the interests of his employers in either April or June of that year. In those circumstances the Lord Ordinary was fully justified in coming to the view that the defenders were not under a duty in either April or June 1997 to provide the pursuer with advice on his current responsibilities to his employers. [22] Having considered these conflicting submissions presented to us, we are of the opinion that this ground of appeal fails. We are satisfied that in the circumstances of the present case the duty on the defenders to provide the pursuer with appropriate advice on the fiduciary duty he owed to Argyll did not arise until August 1997. It did not appear to be disputed in this case that when the director of a property company, such as the pursuer, acquires information about property available for purchase, and makes use of that information to procure the purchase of that property for another company in which he has an interest without informing the company which employs him what he is doing, then he is clearly in breach of the fiduciary duties as a director which he owes to that company. It is also clear that a solicitor of ordinary competence in the relevant field in giving advice to someone in the circumstances of the present pursuer would not necessarily confine himself to giving advice in response to the particular requests which were put to him. It would be appropriate to tender advice on any matters which were brought to his attention and which disclosed the existence of obvious risks to the client (Boyce v Rendells per Lawton LJ at 292). In the present case, for example, the pursuer asked the defenders for advice restricted to questions concerned with his service contract with Argyll, essentially to satisfy himself that there would be no restrictive covenant which would preclude him from setting up in competition with his employers. However, notwithstanding the limited nature of this request, the Lord Ordinary was in our view justified in concluding (at p 59 of his Opinion) that the defenders would be under a duty to advise the pursuer not just on the matters relating to his service contract, but of the issues that would arise in respect of his position as a director of Argyll at a time when he was engaged in setting up a rival company, in terms of the well established rule in Hunter v Hanley. We therefore do not question the conclusions drawn by the Lord Ordinary that a reasonably competent solicitor would be aware at the first meeting between himself and the pursuer that such advice would require to be tendered at some point. [23] However, the issue which lies at the heart of this part of the case is when and in what circumstances that advice should have been tendered by the defenders to the pursuer. Again it did not appear to be in dispute that there can be a range of responsible professional opinion as to whether or not a particular decision to give or to withhold such advice on a particular issue, at any particular stage in any proceedings, involves a breach of professional duties of care; and whether it does or does not depends upon a careful examination of the facts and circumstances of each case. We also accept that it is possible that while a conflict of interest or an actual breach of fiduciary duty may not arise during the period of preparation involved in embarking upon a business venture, the appreciation that a duty to advise on the risks of conflict or breach may emerge during that period. [24] Accordingly, the critical question which the Lord Ordinary had to consider in the present case was not when the defenders ought to have realised that they had a responsibility to advise on a potential conflict of interest or breach of fiduciary duty on the part of the pursuer, but rather when they should have given advice on that matter to the pursuer. The Lord Ordinary, in our view, correctly identified the proper test. He concluded that he required to decide whether it had been proved that as at April 1997, no solicitor of ordinary competence in the relevant field, exercising reasonable care, would have failed to give the advice now argued for by the pursuer. Having closely examined the facts and circumstances, the Lord Ordinary decided that the defenders were not guilty of professional negligence at that time. He notes that Mr Duncan was at that date aware that the pursuer was a director of Argyll, and intended to set up a company to carry on business in competition with Argyll. He also understood that in due course the pursuer intended to resign as a director of Argyll. There was therefore no indication that the pursuer considered operating an independent business through Leven while still remaining a director of Argyll. The Lord Ordinary therefore concluded that Mr Duncan was entitled to understand, at least in general terms, that the pursuer was aware that carrying on business though Leven would be inconsistent with continuing as a director of Argyll. In particular, the Lord Ordinary found that Mr Duncan's reasonable understanding of the pursuer's plans at the time of that meeting was that the process of securing financial investors for Leven was to be only the first stage of his proposals, and that thereafter there would be a period of time before Leven would actually begin to acquire property. In these circumstances, the Lord Ordinary was clear that although the potential need to give advice on fiduciary duty would occur to the careful solicitor in the circumstances in which Mr Duncan found himself on 18 April, it did not necessarily follow that he ought to have given that advice at that time. As the Lord Ordinary has noted, a breach of fiduciary duty was not inherent in what the pursuer was planning in April 1997; such a breach would only occur on his resignation from Argyll. In those circumstances the Lord Ordinary considered that a competent and careful solicitor was entitled to take the view in the circumstances that there was ample time during the development of the project, and ample opportunity in the further discussions which were expected to take place, to give advice on potential breaches of fiduciary duty at a time when they were likely to become a real risk. He was clearly of the view, in terms of the tests described by Lord Upjohn in Phipps v Boardman, that looking at the circumstances of the pursuer's proposals as at April 1997 there was not yet a real sensible possible conflict, as opposed to a situation where such a conflict might be unarguable in some conceivable possibility of events. This is a conclusion which on the facts and circumstances of the case the Lord Ordinary was plainly entitled to reach, and no satisfactory arguments were advanced for the pursuer to suggest that this conclusion was wrong. The Lord Ordinary was confirmed in this view by the evidence of an expert witness. In these circumstances the Lord Ordinary's conclusions on this matter cannot be faulted. [25] As far as the position in June 1997 was concerned, the situation was still essentially the same. Although the pursuer now claimed (it appears mistakenly) to have secured financial backing for his proposals, no property portfolios had been identified or were being pursued, certainly so far as Mr Duncan was aware. Mr Duncan was therefore still entitled to assume that there would be some time before a suitable property portfolio could be acquired, and that the need to give the appropriate advice did not arise at that time. In these circumstances, we reject the first ground of appeal by the pursuer. [26] The second ground of appeal argued for the pursuer (which it was accepted is to be considered only if the first ground of appeal fails), concerned the questions of causation and loss arising in the case which, it was said, were closely related. The Lord Ordinary held that in order to establish a sufficient positive relationship between the defenders' actions and the loss ultimately suffered, the pursuer required to show what he would have done had he been given, at any stage, full and proper advice by the defenders on the nature and extent of his fiduciary duties. The Lord Ordinary, Mr Sandison submitted, ought to have held that it was enough for the pursuer to show that he relied on advice given by the defenders in taking the course of action which he did, and that that course of action resulted in him acquiring a liability, which in turn led to a loss. Counsel submitted that in this area there was a difference between a case of negligently giving wrong advice, and a case of a negligent failure to advise. Reference was made to Bristol & West Building Society v Mothew [1996] 4 All ER 698, in which Millet LJ said (at 705g):-"Where a client sues his solicitor for having negligently failed to give him proper advice, he must show what advice should have been given, and (on a balance of probabilities) that if such advice had been given he would not have entered into the relevant transaction or would not have entered into it on the terms he did. The same applies where the client's complaint is that the solicitor failed in his duty to give him material information ...
where, however, a client sues his solicitor for having negligently given him incorrect advice or for having negligently given him incorrect information, the position appears to be different. In such a case it is sufficient for the plaintiff to prove that he relied on the advice or on the information, that is to say that he would not have acted as he did if he had not been given such advice or information. It is not necessary for him to prove that he would not have acted as he did if he had been given the proper advice or the correct information."
