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Cite as: [2002] ScotCS 257

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OUTER HOUSE, COURT OF SESSION

CA149/00

OPINION OF LORD MACFADYEN

in the cause

MURRAY KEITH

Pursuer;

against

DAVIDSON CHALMERS and OTHERS

Defenders:

________________

Pursuer: Sandison; Boyds

Defenders: Williamson, Solicitor-Advocate; Brodies, W.S.

11 September 2002

Introduction

This is an action of damages for professional negligence against a firm of solicitors. The pursuer was in 1997 a director and employee of Argyll Property Asset Managers Limited ("Argyll"). The business of Argyll involved the acquisition, management and disposal of heritable properties on behalf of clients such as pension funds. In the spring of 1997 the pursuer was considering leaving Argyll and setting up a company of his own to carry on business of a broadly similar nature. In that connection, he sought certain advice from the defenders, and in particular from Stuart Duncan, a partner in the defenders. In the event, a new company, Leven Properties Limited ("Leven") was set up, and through it the pursuer carried into effect a transaction which resulted in a substantial profit, which was channelled through another company formed by him, namely Talisker Properties Limited ("Talisker"). That transaction was completed while the pursuer was still a director and employee of Argyll. When Argyll learned of the transaction, they raised proceedings against the pursuer, his co-director in Leven (namely Stephen Doyle, who was also at the date of the transaction still an employee of Argyll) and Talisker. In those proceedings Argyll claimed (1) damages from the pursuer and Mr Doyle on the ground of breach of their contracts of employment, and (2) an accounting for profit from the pursuer and Talisker on the ground that the pursuer had acted in breach of his fiduciary duties as a director. That action was settled for payment to Argyll of £100,000. That sum was actually paid by Talisker, but the pursuer avers that he is obliged to reimburse Talisker in respect of that sum together with certain related legal fees. In this action the pursuer alleges that the defenders negligently failed to advise him properly about the fiduciary duties incumbent on him as a director of Argyll, and that his loss, in the form of his liability to reimburse Talisker, was caused by that failure on the defenders' part.

The whole issues in the action were originally remitted to proof before answer. As matters developed, however, a question emerged as to the impact of tax liability on the computation of any loss suffered by the pursuer. It became apparent that parties would not be ready to address that aspect of the matter at the diet of proof that had been fixed for 21 to 29 August 2001. Accordingly, of consent, the taxation issue was excluded from the scope of the proof.

The facts

It is clear from the evidence that by early 1997 the pursuer had come to be dissatisfied with his position with Argyll. There was in particular tension between him and the managing director, David Hunter. The pursuer decided to explore the possibility of setting up a business of his own, to carry on business of the same general nature as that carried on by Argyll. He approached Mr Doyle, who was a fund manager employed by Argyll, and invited him to join the projected new business, to which the pursuer thought that he and Mr Doyle would bring complementary qualities and skills. Mr Doyle agreed to become involved.

At the material time the pursuer was a director of Argyll. He had been a director of Argyll since it had been set up. Before that, he had been a director of Scottish Amicable Investment Managers from 1995. He had been a director of Baring Advisors in New York, and of Baring, Houston & Saunders, London. He had first become a company director - with Fletcher King, Chartered Surveyors, London - in 1985. He had thus held directorships in various companies over a period of about twelve years. He was an experienced businessman.

Having decided to explore the possibility of setting up his own business, the pursuer then set about obtaining professional advice in that connection. In the first instance he approached Anthony Barber-Fleming, of Borland Montgomerie Keyden, Solicitors, Glasgow, who had acted on his behalf in purchasing his house and setting up a family trust. Mr Barber-Fleming took the view that he did not have the requisite expertise to advise the pursuer in relation to the setting up of the projected business. He therefore contacted Mr Duncan, who did have such experience, and arranged for him to meet the pursuer. The initial contact between the two solicitors was by telephone on 13 March 1997. Mr Duncan's manuscript file note (along with the other documents from his file) is contained in No. 7/4 of process, and a transcript of it is No. 7/6 of process. The proposed meeting with the pursuer was confirmed by letter dated 17 March 1997. In that letter Mr Duncan was informed that the new company which the pursuer proposed to incorporate was provisionally called Leven Properties Ltd. With the letter he was sent a copy of the business plan (No. 6/4 of process, pages 141 et seq.) which the pursuer had prepared in February 1997. In the event the meeting was postponed, and did not take place until 18 April 1997. The position adopted in Article 3 of the condescendence, that Mr Duncan initially gave oral advice in February or March 1997, was not maintained in evidence or in submission.

Before embarking on an examination of the evidence about the dealings between the pursuer and Mr Duncan, it is convenient to note their respective positions about documentation of those dealings. The pursuer apparently kept no records of his own, and certainly none kept by him have been produced. He explained that he was "not keeping an open diary, for reasons of discretion". I understand his reluctance to keep a diary or other records relating to his projected business in his office at Argyll, but I do not follow why he did not keep appropriate records at home. I do not disbelieve his evidence that he kept no records, but the result is that he is unable to support his recollection by reference to contemporaneous written records. Mr Duncan's practice was very different. He explained that it was his invariable practice to make and keep a file note recording every meeting or telephone call in the course of which information of materiality was provided or advice sought or given. He indicated that if there was no record on file of advice having been given, none had been given. I accept Mr Duncan's evidence that such was the practice to which he adhered. The possibility of occasional failure of that system is not absolutely ruled out, but I take the view that cross-reference to Mr Duncan's file can be taken as a valuable check on the accuracy of his recollection.

The typed version of Mr Duncan's file note in relation to the meeting on 18 April is No. 7/7 of process (the manuscript version being part of No. 7/4). The meeting was attended by Mr Barber-Fleming (who is now deceased), the pursuer and Mr Duncan. Mr Duncan recorded that he was to form "Newco" (i.e. the company that became Leven) "using nominees, so that identity can be kept secret". He also recorded that he was to draft "(i) heads for service agreement; (ii) classes of shares; (iii) subscription option terms; (iv) article terms". That was said to be with a view to "agreeing headings for inclusion under business plan to be 'fleshed' out". Various other details discussed and steps to be taken were noted. A query as to possible breach of the pursuer's service contract with Argyll was noted, and annotated "to send to TBF [Mr Barber-Fleming] for checking on position". Towards the end of the note a line in the following terms appears: "* From funding to acquisition say gap of 6 months".

The pursuer's recollection was that the meeting on 18 April involved general discussion of why Mr Duncan was present, and about the pursuer's background. It was agreed that Mr Barber-Fleming would "back out" and the pursuer would be advised by Mr Duncan. There was no definitive discussion, but it was made clear that the pursuer was going to leave Argyll at some stage. No other option than setting up his own company was discussed. His purpose in consulting Mr Duncan was in connection with his contract of employment with Argyll. He was concerned about the restrictions it might impose on his setting up in business in competition with Argyll. If he did set up his own company, what might happen to him? He did not want to put his personal assets at risk. He had never set up a company before. He was looking for general advice, "wholesale advice". He had no list of specific concerns. He understood that as an employee of Argyll, if he "overstepped the mark", he "could be fired". He claimed not to have understood that breach of his employment contract might result in an action of damages. He wanted to find out whether Argyll could prevent him from doing as he proposed. The pursuer was introduced to Mr Duncan at the meeting as a director of Argyll. He said that he was aware that a director owed certain obligations to his company, but that he did not realise that directorship carried the possibility of liability to the company. He said that he had not heard of the fiduciary duties of a director, or of the fact that breach of those duties might render him liable to give an accounting for profits. The pursuer's position, reiterated several times in the course of his evidence, was that Mr Duncan gave him no advice at the meeting on 18 April. He instructed Mr Duncan to set up the company that became Leven. There was discussion of Leven's business plan, and Mr Duncan was to prepare a brief to be used in approaching potential investors in Leven (i.e. what became the Information Memorandum). The pursuer said: "He (Mr Duncan) knew we were going out to raise capital".

Under cross-examination the pursuer agreed that he was anxious that Argyll should not know what he was seeking to do (c.f. the reference in No. 7/7 of process to keeping his involvement in Leven secret). He was anxious not to jeopardise what he was hoping to do. At one stage in his evidence he said that he had indicated that his intention was to seek funding, and then, when it was in place, to resign from Argyll, but he very quickly retreated to the position that he had not been as definite as that about the order of events. He was seeking advice about the restrictive covenants in his service contract. The specific instructions given to Mr Duncan were (i) to look at the service contract, (ii) to incorporate Leven, and (iii) to provide draft documentation about Leven to be shown to potential investors. Although in evidence in chief the pursuer had spoken about receiving advice from Mr Duncan that he could proceed with his plans, provided he was cautious, he had not attributed that to the meeting of 18 April. In the course of cross-examination, however, he did so attribute it. Shortly afterwards, however, he reverted to the position that he had received no advice at the April meeting, and that he did not know when the advice about caution was given. He acknowledged that it was possible that the line in No. 7/7 of process about a gap of six months between funding and acquisition was based on something he told Mr Duncan at the meeting, but said in re-examination that he could not be sure, and that if that period was mentioned it was illustrative rather than specific.

Mr Duncan confirmed that, as his file note recorded, one of the matters touched upon in the course of the meeting on 18 April was the pursuer's service contract, and a concern as to whether what he was proposing to do might involve breach of a restrictive covenant. It was arranged that the contract should be sent to him with a view to his advising subsequently in light of its terms. At the meeting, Mr Duncan's understanding was that the pursuer and Mr Doyle were considering leaving Argyll at some stage in the future to pursue a business similar to that of Argyll. He (Mr Duncan) was instructed to prepare a document which could be used as a means of providing information to potential investors. His understanding was that what he was to prepare was only a discussion document to be reviewed by the pursuer. In addition, he was instructed to incorporate Leven using nominees. Mr Duncan's understanding was that the plans under discussion were at only a preliminary stage, and that if they were to proceed, that would happen only after the pursuer had resigned his position with Argyll. Under cross-examination, however, he accepted that the pursuer did not expressly tell him that he would resign before commencing trading through Leven. The pursuer made it clear that he did not want to resign yet. The sentence in the file note marked with the asterisk reflected the fact that the proposals involved two stages, namely (i) obtaining a commitment from investors to provide funding, and (ii) taking up the offer of funding and using it to acquire properties. Mr Duncan's understanding was that the pursuer intended a six-month gap between those stages. If he decided to proceed, he would resign from Argyll before going on to the second stage. There was at the meeting no suggestion of an intention to acquire property in the near future. Nor was there any suggestion of an intention to do so while the pursuer was still an employee of Argyll. Mr Duncan surmised that the pursuer had not at the stage of the meeting really tested the viability of the project. Debt funding was to be obtained from a bank, and equity funding from investors. The document which he was to draft was relevant to the latter, providing investors with material by which to judge whether they wanted to invest. It was to be an important part of the process, and regulatory considerations required to be taken into account in its preparation. Mr Duncan's evidence was that at the meeting the pursuer did not mention a concern to protect his personal assets from exposure to claims. No instructions were given to Mr Duncan to advise whether, if he proceeded as contemplated, the pursuer would expose himself to a risk of liability. Although Mr Duncan was not able to give advice about the pursuer's service contract at the meeting on 18 April, because he did not then have the contract to hand, he accepted that he did make reference to it in general terms, and in that context mentioned the need for the pursuer to be careful in what he did.

Under cross-examination Mr Duncan acknowledged that there was nothing in his file note to suggest that there had been any discussion at the meeting on 18 April about the fiduciary duties of a company director. He confirmed that fiduciary duties were not mentioned. He said that he did mention that the pursuer was under certain obligations as a director of Argyle, but that there was no discussion of what they were, and the expression "fiduciary duties" was not used. So far as the mention of being "careful" or "cautious" was concerned, Mr Duncan said that what he indicated was that, because the pursuer was an employee and director of Argyll, he would have to be careful in what he did; he did not say that so long as the pursuer was careful all would be well.

Before coming to any conclusion on the conflicting evidence about what was discussed at the meeting on 18 April, it is convenient to consider the evidence about what happened after that meeting.

On 22 April the pursuer wrote to Mr Duncan sending him material relating to his service contract. The material sent included (i) the Argyll Staff Handbook, and a letter of 7 February 1997 from Mr Hunter under cover of which it had been sent to the pursuer, and (ii) a contract between Argyll and a Mr Speedie, apparently because the pursuer had lost his own and Mr Speedie's was in the same terms. The letter of 7 February referred to terms and conditions set out in Mr Hunter's letter of 20 December 1996, but the latter document was not sent to Mr Duncan. Mr Duncan replied to the pursuer on 5 May asking for sight of Mr Hunter's letter of 20 December, and offering a provisional view that the restrictive covenants set out in the Handbook, if incorporated into the pursuer's contract, "do not appear to be particularly relevant to your proposals". The pursuer never responded to the request for the letter of 20 December.
Mr Duncan proceeded with the drafting of information for investors. In a separate letter, also dated 5 May, he reported to the pursuer that he had come to the conclusion that the best way of proceeding was by reflecting the arrangements in an "Information Memorandum". He enclosed with the letter what he described as "a first draft for your careful consideration". He continued: "I envisage the final form of this document being something which you can use and issue to a prospective equity investor". He explained that he had incorporated as much as possible of the pursuer's business plan, and added: "There are clearly a number of issues which we need to discuss in connection with the Information Memorandum, and I think it would be helpful for us to have a meeting at your convenience." After discussing certain regulatory matters, he concluded: "I look forward to hearing from you." The pursuer never contacted Mr Duncan further about the Information Memorandum. In evidence he said that he did not think the Information Memorandum was ever used. He also said that it was the draft document that would be shown to investors. That was, in my view, quite inconsistent with what was said by Mr Duncan in his letter of 5 May to the pursuer, and appeared quite implausible. I prefer Mr Duncan's evidence that the original intention was that Mr Duncan's draft would be revised by and discussed in consultation with the pursuer, before reaching the final form in which it would be shown to investors. Paragraph 3 of Part VIII of the draft Information Memorandum is in the following terms:

"Both Directors are currently employed by [Argyll] under Contracts of Employment. Both Directors have given notice of termination which expires on [ ] 1997."

That seems to me to support the reliability of Mr Duncan's evidence that his understanding derived from the meeting on 18 April was that the pursuer would resign from Argyll before Leven commenced operation. The pursuer's interpretation was different: namely that the date was left blank to allow him to approach investors before he had resigned, but I was not convinced by that evidence.

Leven was incorporated on 8 May. That fact was reported by Mr Duncan to the pursuer by letter dated 12 May.

There was a serious conflict of evidence between the pursuer and Mr Duncan as to whether there were further meetings between them after 18 April. In Mr Duncan's file there is no written record of further contact between them, after the letters of 5 and 12 May from Mr Duncan to the pursuer mentioned in paragraph [12] above, until 11 June, when Mr Duncan wrote to the pursuer, referring to his letter of 5 May and asking the pursuer to telephone him at his earliest convenience. There then follows a file note of a telephone conversation which took place on 19 June. I shall return to that in due course. There is, however, in Mr Duncan's file no record of any meeting between him and the pursuer after 18 April, or of any telephone conversation between them between 18 April and 19 June. In examination in chief the pursuer, having said that he received no advice from Mr Duncan at the 18 April meeting, went on to say that "later" there had been discussion of the impact of his proposed course of action - "could I do it legally?" In such discussion there was no mention of the fiduciary duties of a director, or of the possibility of a claim for an accounting for profit. In evidence in chief and again in cross examination the pursuer said that after 18 April there were two further meetings, which took place in Mr Duncan's office in Edinburgh. He could not identify their dates. He said that Mr Duncan's advice that he could proceed with his plans provided he was cautious was given at one such meeting. So far as the date of that meeting was concerned, the pursuer could only say that it took place after he sent the employment contract material to Mr Duncan (22 April) and before Mr Duncan wrote "chasing him up" (11 June). The advice which he claimed to have been given on that occasion was that he could proceed with his plans, provided he was careful. He explained that he inferred that that meant that he could be dismissed if he was "caught". Mr Duncan, on the other hand, was adamant that no further meetings took place after 18 April, and that he provided no further oral advice. Had he done so, he would have recorded it in writing (as he did when later contacted by the pursuer on 21 August). He refused to accept that he could be mistaken on the point. The next telephone contact after 18 April was that to which the file note of 19 June referred. He did not meet the pursuer in person again until 5 November.

On the question of whether further meetings (or, for that matter, discussions by telephone) took place between the pursuer and Mr Duncan between 18 April and 19 June, I prefer the evidence of Mr Duncan. That evidence was quite unequivocal, and I found Mr Duncan, who gave his evidence carefully, a credible and reliable witness. His recollection that there was no further meeting is supported by the absence from his file of any record of such a meeting. As I have said already, without going so far as to hold that Mr Duncan's practice of recording meetings was infallible, I consider that the absence of a record of further meetings after 18 April affords valuable support for Mr Duncan's direct evidence. Moreover, the letters of 5 May refer only to the 18 April meeting, and the terms of the letter of 11 June suggest an absence of communication between 5 May and 11 June. In contrast, the pursuer's evidence was extremely vague. In evidence in chief he did not attempt to identify when or in what circumstances he had received advice from Mr Duncan after 18 April, beyond saying that there was further discussion "later", and that he recalled two (or perhaps three) meetings at Mr Duncan's office. In cross-examination, he said that he recalled two meetings, but not when they were. He wavered between saying that the advice to be "cautious" was given at the 18 April meeting, and saying that no advice was given at that meeting and that the advice came "later". In my view the proper conclusion is that the pursuer is, at best for him, mistaken in thinking that he received advice from Mr Duncan at further meetings in Mr Duncan's office after 18 April and before 19 June. I hold that there were no such meetings. Nor am I persuaded that there were telephone conversations between the pursuer and Mr Duncan during that period.

I revert therefore to the meeting of 18 April. It is clear that Mr Duncan was made aware on that occasion of the general outline of the pursuer's proposed course of action. He was made aware that the pursuer was a director of Argyll, and that he was also employed by that company under a service contract. Mr Duncan was aware of the general nature of Argyll's business, and was made aware that what the pursuer had in contemplation was the setting up of a company to carry on business of the same general sort as that carried on by Argyll. It was made clear that the pursuer intended to resign from Argyll in order to do so, but that he did not intend to resign just yet. It was made clear to Mr Duncan that Mr Barber-Fleming was not to have continuing involvement in the matter, and that it was to him (Mr Duncan) that the pursuer was looking for advice. By the end of the meeting, the pursuer had instructions from the pursuer to do three things. First, he was to see to the incorporation of Leven. Secondly, there having been some discussion as to whether the pursuer's service contract might contain provisions of which the proposed course of action might constitute breach, and which might enable Argyll to prevent the pursuer from proceeding as he proposed, Mr Duncan was to receive a copy of the pursuer's service contract and advise on the implications of its terms. Thirdly, he was to prepare material to be used in presenting the project to potential investors. What he did prepare in that connection was the Information Memorandum. It is clear that Mr Duncan was aware that Leven was to be financed in part by loan capital obtained from a bank or banks, and in part by equity capital provided by investors. It was for the purpose of enabling an approach to be made to potential equity investors that the work which resulted in the Information Memorandum was to be undertaken by Mr Duncan. It is, in my view, reasonably clear that the understanding on which the discussion between the pursuer and Mr Duncan proceeded was that there were, in effect, two stages in the intended progress towards Leven setting up in business. The first involved ensuring the necessary commitment to provide working capital, both in the form of loan finance from the bank and in the form of equity finance from investors. The second involved taking up the offers of funding and using that capital to acquire property. It was not until later, on the pursuer's own evidence, that it became clear that investors would not commit themselves to invest without knowing what property was to be acquired. The discussions between the pursuer and Mr Duncan on 18 April proceeded on the basis that there would be a lapse of time between the first and second stages. It is in my view clear that Mr Duncan's note about a gap of six months between the first and second stages was based on something said by the pursuer at the meeting. The pursuer accepted that as a possibility, and it seems to me that there is no other plausible source. The pursuer said that the period was only illustrative, and I accept that. It is evident, however, in my view, that as at 18 April it was contemplated that some appreciable time would pass before any question would arise of Leven acquiring property. It is also evident that, although there was no clear identification of when the pursuer would resign from Argyll, he would in due course do so.

It was not disputed that there was no discussion on 18 April about the fiduciary duties incumbent on a company director, or the remedies available to the company in the event that a director acted in breach of those duties. The pursuer, for his part, did not expressly seek advice on the relevance of his position as a director (as distinct from an employee) of Argyll to his proposal for setting up Leven. My impression is that the pursuer sought in his evidence to minimise his understanding of his obligations as a director. He acknowledged that as a director he owed some duties to the company, but was very vague as to what the content of those duties was. I found the extent of that vagueness (and his declared unfamiliarity with the terms "fiduciary duty") surprising in the light of the length of his experience as a director. It seemed to me, at all events, to be implicit in the pursuer's intention to resign in due course from Argyll that he was at least aware that he could not, consistently with his position so long as he remained as a director of Argyll, carry on through another company operations of the same general type as those carried on by Argyll. On the other hand, I accept that he did not have a clear understanding of the precise scope of his fiduciary duty in the events which subsequently happened, and had no understanding that one remedy available to Argyll in the event of breach of his fiduciary duty might be a claim for an accounting for any secret profit he had made. Although Mr Duncan agreed that there had been no express mention on 18 April of a director's fiduciary duties eo nomine, and no discussion of them, he did say that he had mentioned, without elaboration, that a director owed certain duties to his company. I am inclined to accept that he did make a passing reference of that sort, but I also accept that it made little or no impression on the pursuer. It does not seem to me to be surprising, in light of the view I have taken of what passed at the meeting and of the understanding on which the participants in the discussion proceeded, that Mr Duncan did not embark on a fuller discussion of the implications of the fiduciary duties owed by the pursuer to Argyll. While the proposal that Leven should set up in business of the same broad nature as Argyll's would, if it had not been the pursuer's intention to resign his position at Argyll, have been one which would have involved breach of the pursuer's fiduciary duties, Mr Duncan's reasonable understanding as at 18 April was (i) that the pursuer did intend to resign from Argyll before Leven began to trade, and (ii) that much remained to be done, and a considerable period of time remained to pass, before there was any question of Leven acquiring property. During that period, Mr Duncan was to advise (when more fully informed) on the related question of the restrictive covenants in the pursuer's service contract, and was to be involved in what he expected to be detailed discussion with the pursuer about the Information Memorandum and the approach to equity investors. There was thus ample opportunity for the question of the steps necessary to avoid breach of the pursuer's fiduciary duties to Argyll to be discussed at an appropriate future date if the point ever appeared to be a live one.

As I have already mentioned, the pursuer's evidence was that Mr Duncan advised him that he could proceed as he intended provided he was "careful" or "cautious". The pursuer said that that advice was given at a meeting subsequent to 18 April. I have held that no such meeting took place. There remains the possibility, however, that Mr Duncan said something of the sort on 18 April. Mr Duncan's own evidence was that he did counsel caution, but he put that in the context of the (then unresolved) question of the possible relevance of restrictive covenants in the pursuer's service contract. It seems to me that Mr Duncan was right to draw the distinction between counselling caution (which he accepts that he did in that context), and advising that the project could be carried through provided caution was observed. As the pursuer acknowledged in the course of his evidence, the need for caution was to avoid premature discovery of the project by Argyll, leading to his dismissal or to other steps taken by Argyll that might have obstructed the project. In so far as the pursuer sought to suggest that he took Mr Duncan's reference to caution as amounting to generally favourable advice on the project as a whole, or to an opinion that he could safely acquire property through Leven while still a director of Argyll, he was in my view being disingenuous.

The result is that I hold that, by the end of the meeting on 18 April, Mr Duncan had been instructed by the pursuer to undertake three pieces of work. These were (i) the incorporation of Leven, (ii) the giving of advice (once he had the necessary materials to hand) on the effect of any restrictive covenants in the pursuer's service contract, and (iii) the preparation of a draft of the Information Memorandum. He had given no advice on the fiduciary duties incumbent on the pursuer in his capacity as a director of Argyll, or on the impact that such duties might have on the proposed course of action, or on the remedies that might be available to Argyll if the pursuer were to act in breach of his fiduciary duties. He had said that the pursuer should be cautious, meaning no more than that the pursuer should take care to avoid premature disclosure of his plans to Argyll. Between then and 11 June all that took place was what is summarised in paragraph [12] above. There were no further meetings or telephone calls between Mr Duncan and the pursuer.

In response to Mr Duncan's reminder letter of 11 June, the pursuer telephoned him on 19 June. Mr Duncan's file note (In No. 7/4 of process) records that the pursuer:

"informed us that he had been having discussions with Bankers Trust, Lazards and G E Capital who had in principle agreed to provide equity funding to acquire a property portfolio. A syndicate involving the Royal Bank of Scotland and the Bank of Scotland had also in principle agreed to provide debt funding to the company. All finance would be subject to [the pursuer] identifying a suitable portfolio, which he would then bring to them for formal consideration. He is to telephone on 27 June with an update of the position."

Mr Duncan, in evidence, had no particular recollection of that conversation. Nor did the pursuer in evidence place any stress on it. The pursuer did not telephone Mr Duncan on 27 June with an update.

I turn, therefore, to examine the evidence about the identification of investors and of a portfolio of property for acquisition. The pursuer had, as he indicated to Mr Duncan on 19 June, approached a number of potential investors. He obtained, in particular from Lazard Brothers & Co Ltd ("Lazards"), the response that they were not prepared to commit themselves to providing equity funding to Leven in the abstract, but would consider Leven's proposals if and when a particular portfolio of property had been identified for acquisition. He accepted in evidence that he did not, prior to August 1997, make that position clear to Mr Duncan, although it seems to me that there is a hint of at least part of it in the note of the telephone conversation on 19 June. The pursuer explained that he did not regard Mr Duncan as involved in the property transaction. Through contact with various intermediaries, Mr Doyle and the pursuer became aware, in about mid-June, of a portfolio of properties which was being offered for sale by the Representative Body of the Church in Wales ("the Church in Wales"). The portfolio, for which the price was eventually determined to be £27,625,000, satisfied Leven's criteria. Both the pursuer and Mr Doyle formed the view, having regard on the one hand to the nature of the properties in the Church in Wales portfolio, and on the other hand to their knowledge of the business of Argyll and the requirements of its clients, that the Church in Wales portfolio would be of no interest to Argyll or its clients. I accept that the pursuer and Mr Doyle were genuinely of that view and I have no reason to think that they were wrong in taking that view. Proposals were therefore developed for Leven to acquire the Church in Wales portfolio, with equity finance provided through Lazards. In the course of developing those proposals various other solicitors became involved; in particular Martin Grabiner of Dibb Lupton Alsop was instructed by the pursuer, and Mr Doyle also approached Mr Hibbert-Smith of Nabarro Nathanson on one particular aspect of the matter. The evidence of Mr Doyle and the pursuer was that those solicitors raised the question of whether the pursuer had obtained professional advice about his position with Argyll if Leven were to make such an acquisition. Mr Doyle taxed the pursuer on that subject. The pursuer said that he had favourable advice from the defenders. Mr Doyle pressed the pursuer to obtain that advice in writing.

The result was that the pursuer contacted Mr Duncan by telephone on 21 August 1997. Mr Duncan's manuscript note of the telephone conversation is in No. 7/4 of process, and a typed transcript is No. 7/8. The terms of the note were as follows:

"Telephone call from Murray Keith.

Currently having discussions with Lazards in London - Heads of Terms will be prepared.

Lazards would wish to form limited partnership with Leven Properties (JV).

Property portfolio identified - may be acquired by partnership. Nabarro Nathanson in London would act.

Will Lazards lend funds to the limited partnership?

Completion - if deal goes ahead, would be two months.

SD [Mr Duncan] to check MK's [the pursuer's] contract of employment for restrictions - he needs to give 3 months' notice - does not want to give notice yet as no formal arrangements in place with Lazards.

S Doyle will become involved as soon as possible as he only needs to give one month's notice to Argyll.

What if Argyll find out about MK's activities - concerned about them being able to fire him. SD to check.

MK would like meeting with his accountant, Nick Murray of RMD in Glasgow week beginning 18/9 - will contact later."

The pursuer, in his evidence, presented that approach (somewhat unfairly, given his failure to respond to Mr Duncan's letter of 5 May on the subject) as his having to "chase" Mr Duncan for written advice on the effect of the provisions of his service contract. He maintained that he was seeking written confirmation of advice already given orally. The pursuer accepted in evidence that Mr Duncan was not aware of the projected Church in Wales transaction until that date, and indeed according to Mr Duncan's evidence, confirmed by the terms of his file note, the pursuer did not identify the seller to him even then. The pursuer said nothing to Mr Duncan about his judgment that the portfolio was not one in which Argyll would have had any interest. He also accepted that the express focus of his concern remained whether Argyll might dismiss him. Mr Duncan's evidence was that the written response which he made to the pursuer's telephone call of 21 August was the first occasion on which he had given advice about the pursuer's service contract. Following receipt of the material which the pursuer sent him after the meeting on 18 April, he had requested further information in his letter of 5 May, and had had no response. He had gone no further at that stage than the brief general and conditional comment quoted in paragraph [12](1) above from his letter of 5 May. He had not subsequently given any oral advice on the matter. As I have already indicated, I prefer Mr Duncan's evidence that he had given no oral advice to the pursuer after the meeting on 18 April, and take the view that in counselling the pursuer that he ought to be cautious (as I have held he probably did at that meeting) he had not given the pursuer positive advice that the course he had in mind could be pursued with safety, provided only that care was taken. I take the view, therefore, that in requesting written advice from Mr Duncan on 21 August the pursuer was resuscitating (in changed circumstances which he disclosed only in outline to Mr Duncan) a request that he had originally made in the course of the meeting on 18 April, and that had not been pursued to a conclusion in May because of his own failure to provide Mr Duncan with the information that the latter considered necessary to enable him to advise properly. The focus of the pursuer's request on 21 August was firmly on his service contract.

In that context Mr Duncan wrote to the pursuer on 22 August. The letter is No. 6/1 of process. In it Mr Duncan set out the basis of the advice he was about to give as follows:

"Further to our telephone conversation yesterday I am writing to you in connection with the restrictions placed upon you in terms of your contract of employment. What I have on file is a copy of Argyll's handbook which was given to you with their letter of 7 February together with a copy of a Service Agreement between Argyll and Andy Speedie. I am assuming that the Service Contract is a standard form of service contract and a contract in precise terms has been given to you and you have signed it."

On that hypothesis Mr Duncan went on to discuss various restrictions contained in Clause 3 of the service contract which applied during the currency of the employment. He observed:

"I mention these restrictions as potential grounds for dismissal although I have reservations about their enforceability on the basis of the present circumstances. As matters progress with Leven Properties however these restrictions and obligations will become more relevant."

He also mentioned restrictive covenants in Clause 8 affecting periods after termination of the contract, and observed:

"These covenants are not as widely drawn as they might be and provided you tread carefully, you should be able to operate Leven Properties without interference by Argyll."

He then reiterated that he had not seen the letter of 20 December and that it might alter the position. He concluded by dealing with the separate matter of the pursuer's and Mr Doyle's appointment as directors of Leven. There was no mention in the letter of the pursuer's position as a director of Argyll, or of his fiduciary duties as such, or of the possible consequences of breach of those duties.

By the beginning of August it had been agreed in principle that Leven would acquire the Church in Wales portfolio at a price of £27,625,000. Time was, however, required to enable their advisers to do due diligence in respect of the titles to the properties in the portfolio, before funding could be finally secured and a formal contract of sale could be concluded. Accordingly, in order to protect Leven's position while due diligence was done, negotiations were entered into in early August for an agreement between the Church in Wales and Leven in terms of which, on the narrative that Leven had made an offer subject to contract to purchase the portfolio at that price, it would be agreed that for a fixed period the Church in Wales would not conduct negotiations for sale of the portfolio or enter into any agreement or option with any other party relating to the sale or disposal of the portfolio, or allow any such party to view or survey the portfolio. In effect, it was to be an agreement on the part of the Church in Wales to deal exclusively with Leven for the specified period. As that agreement ("the exclusivity agreement") was eventually concluded, the agreed period during which Leven were to have the exclusive right to negotiate for purchase of the portfolio was to expire at the end of October 1997.

In the event, the proposed arrangements with Lazards fell through, and Leven were left in the position in which they had the benefit of the exclusivity agreement, but had no funding in place to enable them to complete the purchase of the portfolio. What happened then is described in the pursuer's averments in the following terms:

"In October 1997, Mr Martin Clarke acquired the interests of the pursuer and Mr Doyle in Leven. Thereafter Mr Clarke sold his interest in Leven to Helical Bar Limited, who later sold the properties. The consideration paid by Mr Clarke for the pursuer's interest and Mr Doyle's interest in Leven (which interests were of value solely because of Leven's option on the properties) was paid to [Talisker]. Talisker is a company owned and managed by the pursuer and Mr Stephen Doyle" (emphasis added).

In practical terms the sentence which I have highlighted is a not-unrealistic summary of the net effect of a series of transactions. It appears that in fact three transactions all took place on 17 October. (1) Mr Clarke acquired the share capital of Leven from the pursuer and Mr Doyle for the nominal sum of £2. (2) Leven completed the purchase of the Church in Wales portfolio. (3) A Commission Agreement was entered into between Leven (by then owned by Mr Clarke) and Talisker (then called Drillweld Limited, and owned by the pursuer and Mr Doyle). The Commission Agreement, proceeding on the (perhaps somewhat fictitious) narrative that Drillweld had "facilitated the purchase by Leven" of the Church in Wales portfolio, made provision for payment by Leven to Talisker of (i) an "initial commission" of £320,000 and (ii) a "fixed additional commission" of £185,000, and (iii) a "variable additional commission" of 15% of the amount by which the price at which Leven sold the properties exceeded £32,500,000. In the event, the properties were sold by Leven for £35,050,000. As a result the variable additional commission came to be £567,500 (from which a deduction of £15,000 was agreed), and the total sum paid by Leven to Talisker came to £872,500. The pursuer and Mr Doyle resigned from Argyll on 21 October.

In November it became publicly known that Leven had bought the Church in Wales portfolio for under £28 million and resold it for over £35 million. The involvement of the pursuer and Mr Doyle in Leven also became known. Argyll in due course raised an action in this Court, calling as defenders (1) Mr Doyle, (2) the present pursuer and (3) Talisker. They concluded (1) for payment by the present pursuer and Mr Doyle jointly and severally of the sum of £800,000 as damages for breach of their respective contracts of employment, and (2) for count and reckoning with the present pursuer and Talisker for the profits made by the present pursuer in connection with the disposal of the Church in Wales portfolio, on the basis that they constituted a secret profit made by the present pursuer in breach of the fiduciary duties which he owed to Argyll. At first the pursuer took the view that Argyll's claim was ill founded, because he was confident that Argyll had suffered no loss since they would not have been interested in acquiring the Church in Wales portfolio if they had known about it. At a meeting between representatives of Argyll on the one hand and the pursuer and Mr Doyle on the other, however, Mr Hunter made it clear that he was aware of authority in support of Argyll's claim for an accounting (Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443). In the course of further discussion Mr Hunter also made it clear that the minimum sum which Argyll would accept in settlement of their claim was £100,000. The pursuer and Mr Doyle were subsequently advised by senior counsel that they should settle the action for that sum, and they therefore did so. The terms of the settlement were recorded in an Agreement dated 3 March 1999 between Argyll (therein referred to as "the Company") on the one hand and Mr Doyle, the present pursuer and Talisker (therein referred to as "the Defenders") on the other hand (No. 7/11 of process). Clause 1 recorded that it was agreed that:

"The Defenders will pay to the Company per their Solicitors, Messrs McGrigor Donald, and the Company accepts, the sum of ONE HUNDRED THOUSAND POUNDS (£100,000) in full and final settlement of (i) the Court action and (ii) all and any claims, present, future or contingent competent to the Company against the Defenders, any successor or predecessor of the Defenders, and any subsidiary or associated company of the Defenders, any Officers, Directors or employees or former employees of the Defenders arising out of or in connection with the contracts of employment or fiduciary relationship between the Company and the Defenders with the Company (sic) or the termination thereof."

The remainder of the Agreement was concerned with confidentiality.

The pursuer's evidence was that it was patently clear that he was the person who had been in breach of his fiduciary duty. The sum to be paid to Argyll in terms of the Agreement was therefore his responsibility. At the time of the settlement, however, he did not have the necessary sum to hand. It was therefore paid by Talisker, but on the basis that he would in due course make reimbursement. There was, however, no formal agreement recording his obligation to reimburse Talisker. He acknowledged that Talisker's accounts did not reflect any such obligation, and explained that he and Mr Doyle had not told Talisker's accountants about it - they did not know they had to. He denied that the purpose of the agreement to reimburse Talisker was to create a personal loss suffered by him in order to enable him to pursue this action against the defenders. He said that he was obliged to reimburse Talisker whether he succeeded in recovering damages from the defenders in this action or not. Mr Doyle gave a slightly more detailed account of how the matter of the pursuer reimbursing Talisker developed. He said that following the negotiation meeting with Argyll, in which Mr Hunter had acknowledged that Argyll would probably not have been interested in acquiring the Church in Wales portfolio but had cited authority in support of the claim based on breach of the pursuer's fiduciary duty, he told the pursuer that he (the pursuer) had a problem, but he (Mr Doyle) was safe. That was on the basis that, since Argyll would not have been interested in the portfolio, they would be unable to establish that they had suffered loss through breach of the pursuer's and Mr Doyle's service contracts; whereas the claim based on the pursuer's breach of fiduciary duty appeared to be well founded. Mr Doyle also indicated that counsel had recommended acceptance of the settlement terms because of the breach of fiduciary duty aspect of the case. In these circumstances he had indicated to the pursuer, and the pursuer had accepted, that it was for him to settle with Argyll. Talisker had then paid the sum due to Argyll in respect of the settlement. The agreement that the pursuer should reimburse Talisker was independent of whether the pursuer obtained an award of damages against the defenders, although Mr Doyle was prepared to wait to see if the pursuer succeeded in this action before insisting on reimbursement to Talisker. When asked who the parties to the reimbursement agreement were, Mr Doyle at first said "Murray Keith and I", then apparently as an afterthought added "as directors of Talisker".

In the light of that evidence I am prepared to accept that the claim advanced by Argyll was settled because the fiduciary duty aspect of it was perceived to be well founded. I accept that the view taken was that the claim for damages for breach of the pursuer's and Mr Doyle's service contracts was unlikely to succeed, because Argyll would not have been interested in the Church in Wales portfolio, and therefore could not be said to have suffered loss through being deprived of the opportunity to consider acquiring it. I accept that these were realistic assessments of the likely outcome of the action at Argyll's instance if it had proceeded to a judicial determination. I accept that Talisker was better placed than the pursuer to make the initial payment due under the Agreement with Argyll, and did make that payment. There is, in my view, in that situation an understandable basis for an agreement that the pursuer should reimburse Talisker. It would, in my view, have been wiser on the part of the pursuer, Mr Doyle and Talisker to enter into a formal agreement constituting and explaining the basis of the reimbursement obligation undertaken by the pursuer. Indeed by failing to procure that the obligation was reflected in Talisker's account, they raised legitimate doubts as to whether any such obligation had genuinely been undertaken. I am, however, satisfied that such an obligation has been entered into by agreement between the pursuer and Mr Doyle. In so finding, I rely in particular on the evidence of Mr Doyle, which was given in a forthright and convincing manner. I do not consider that, taking the view he did of the ground on which liability was incurred to Argyll, he would have been content to allow the cost of the settlement to be borne ultimately by Talisker, and thus to diminish the value of his interest in that company.

Negligence

In these circumstances the first issue that requires to be considered is whether the pursuer has established that Mr Duncan was guilty of professional negligence, and, if so, when and in what respect. It was not disputed by the defenders that a solicitor-client relationship came into existence between Mr Duncan and the pursuer on 18 April 1997. Nor was it disputed that it was an implied term of the contract between Mr Duncan and the pursuer 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 pursuer avers (in article 3 of the condescendence) that Mr Duncan:

"knew or ought to have known ... that he was being looked to by the pursuer for legal advice on any liability to Argyll on the part of the pursuer, and on any other adverse consequences for him which might in law flow from his activities and planned activities."

In article 6, the particular respect in which, in the light of that knowledge, Mr Duncan is said to have failed in his duty of care is formulated as follows:

"He failed to draw the attention of the pursuer to the existence and incidents of the fiduciary duty owed by him to Argyll."

It is then averred that no solicitor of ordinary competence exercising reasonable skill and care would have been guilty of that failure. It is less than clear on the face of the pursuer's pleadings when Mr Duncan is said to have possessed the knowledge averred, and when he is said to have come under a duty to advise the pursuer of the existence and incidents of his fiduciary duty. It is therefore necessary to consider the position at various stages in the development of events.

Before doing that, however, it is convenient to mention a number of points that arose in the course of the submissions made by Mr Sandison for the pursuer and Mr Williamson for the defenders. The first point is that although in general the scope of a solicitor's duty to his client will be to exercise reasonable care in doing what he has been instructed to do and advising on what he has been instructed to advise on, and the court "must beware of imposing upon solicitors ... duties which go beyond the scope of what they are requested and undertake to do" (Midland Bank v Hett, Stubbs & Kemp [1979] Ch 384 per Oliver J at 402), that approach does not necessarily define exhaustively what the reasonably careful solicitor would do. The point is encapsulated very briefly in the judgment of Lawton LJ in Boyce v Rendells (1983) 268 EG 278 where (at 272) he accepted the proposition that:

"if, in the course of taking instructions, a professional man like a ... solicitor learns of facts which reveal to him as a professional man the existence of obvious risks, then he should do more than merely advise within the strict limits of his retainer. He should call attention to and advise upon the risks."

I too accept that proposition, although with the comment that its application in any given case will require close attention to the facts and circumstances of the case. One circumstance which is, in my opinion, relevant in that connection is the extent of the relevant knowledge and experience possessed by the client, at least so far as the solicitor is aware of it (Carradine Properties Ltd v D J Freeman & Co (1985) 1 PN 41, per Donaldson LJ:

"An inexperienced client will need and will be entitled to expect the solicitor to take a much broader view of the scope of his retainer and of his duties than will be the case with an experienced client").

It is also necessary, before going on to consider whether Mr Duncan came under a duty to advise the pursuer about the existence and consequences of the fiduciary duties he owed to Argyll, to identify what the latter duties, so far as relevant to the course which the pursuer intended to follow and the events which subsequently happened, were. Mr Sandison relied upon Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 in which Roskill J held that the defendant, the managing director of the plaintiffs, could not be permitted to place himself in a position in which his fiduciary duty to the plaintiffs and his personal interests conflicted; that when information came to him which was of concern to the plaintiffs and relevant for them to know, it was his duty to pass it on to them; that when instead he made use of the information himself he was in breach of his fiduciary duty; and that he was therefore liable to account to them for the profit which he had made, irrespective of whether the plaintiffs would have benefited from the information if it had been passed to them (see page 453B, F and H). In reaching that conclusion Roskill J relied on a passage in the speech of Lord Upjohn in Phipps v Boardman [1967] 2 AC 46 at 123 from which it is sufficient to quote the following parts:

"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 a 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."

In my opinion those authorities show that, if a director of a property investment company acquires information about a portfolio of property available for purchase, and then, without informing the company, makes use of that information in his own interest to procure the purchase of the property by another company in which he has a personal interest, he acts in breach of his fiduciary duty, and is liable to account to the first-mentioned company for any profit which he made through the purchase. That is, in essence, what Argyll accused the pursuer of doing. Given that that was part of the basis of the case which the pursuer, Mr Doyle and Talisker settled, and the part that was considered to be well founded, it is not in my view necessary for the purpose of the present case to examine whether the pursuer acted in breach of his fiduciary duty at some stage earlier than that at which he proceeded, without telling Argyll, to take steps through Leven which led to acquisition of the Church in Wales portfolio, and to his deriving personal profit from that acquisition.

In his submissions, Mr Sandison contended that in the circumstances that prevailed at the meeting on 18 April Mr Duncan came under a duty there and then to advise the pursuer about his fiduciary duty to Argyll, and about the risk of incurring a liability to account to Argyll for any profit he made if he acted in breach of that duty. That was not a position addressed in the report originally provided by Dr Kenneth Chrystie, the expert witness led for the pursuer (No. 6/2 of process). Dr Chrystie's report, like the pursuer's pleadings, did not examine the issue of negligence at separate stages in the development of events. In his evidence, however, he eventually offered the view that in light of what Mr Duncan then knew about the pursuer's plans, he ought in the exercise of reasonable care to have advised the pursuer at the outset as to his fiduciary duties to Argyll, and as to the nature of the remedies that Argyll might seek in the event of breach of those duties. That view, as I understood it, proceeded on Dr Chrystie's appreciation of what the pursuer was at that stage doing. He had expressed that earlier in his evidence in some such terms as these: that what the pursuer was doing was actively preparing, while a director of Argyll, to enter into a transaction which he should not enter into because it would be in breach of his fiduciary duty. A different view was taken by Mr John Rafferty, the expert witness led for the defenders. His view, if I may summarise it without doing it injustice, was that it was not necessary for such advice to be given at the stage of the 18 April meeting, because at that stage there was no specific project for the acquisition of property through Leven yet in contemplation, and there was expected to be a considerable lapse of time before any question of acquisition of property arose. He also took into account in expressing that view the level of the pursuer's experience as it was understood by Mr Duncan.

As is common in matters of professional judgment, there is room for more than one view about how best to approach the task of advising a client in the position in which the pursuer was on 18 April. The issue which I must determine, however, is whether it has been proved that no solicitor of ordinary competence in the relevant field, exercising reasonable care, would have failed to give the advice desiderated (Hunter v Hanley 1955 SC 200). I have come to the conclusion, on a close examination of the circumstances disclosed in the evidence, that I cannot hold that Mr Duncan was guilty of professional negligence as at 18 April 1997. He was at that date made aware that the pursuer was a director of Argyll. He was made aware that the pursuer intended to set up a company to carry on business of the same general nature as that carried on by Argyll. He was given to understand that in due course, but not yet, the pursuer intended to resign his position at Argyll. There was no indication, however, that the pursuer contemplated attempting to operate an independent business through Leven while still remaining as a director of Argyll. He was therefore entitled to understand, at least in general terms, that the pursuer was aware that carrying on business through Leven was inconsistent with his continuing in office as a director of Argyll. In the context of those broad plans, Mr Duncan was given a number of specific instructions. First, he was asked to consider the effects of the terms of the pursuer's contract of employment. The relevance of that is clear: not only might there be provisions which stood in the way of the pursuer taking even preparatory steps to implement his plans while an employee of Argyll; there might also be restrictive covenants which enabled Argyll to prevent him from being involved in a competing business for a period after he left their employment. The point was therefore one which required to be addressed at an early stage. Secondly, he was instructed to carry out the routine task of incorporating Leven as the vehicle for the pursuer's plans. Thirdly, he was instructed to prepare a document for use in making approaches to potential investors in Leven. The development of that document was expected by Mr Duncan to involve detailed discussion of his original draft with the pursuer (the reasonableness of which expectation was supported by Dr Chrystie). As I have already held, it was in my view clear that Mr Duncan's reasonable understanding of the pursuer's plans was that the process of finding investors willing in principle to invest in Leven was to be the first stage, and that once that was achieved there would be a material lapse of time (although not necessarily the six months mentioned in No. 7/7 of process) before the stage was reached at which Leven would acquire property. Although the specific instructions given by the pursuer to Mr Duncan on 18 April were, on the view I have taken of the evidence, confined to the three matters which I have identified, I am of opinion that the question of avoiding a breach of the pursuer's fiduciary duties to Argyll was a matter which would have occurred to a reasonably competent solicitor acting with reasonable care as one which might require to be addressed as the pursuer's plans developed. That was so, in my view, because of the lack of clarity about when the pursuer intended to resign his directorship. I accept Dr Chrystie's view that the mere fact that the pursuer was an experienced businessman and company director could not have been taken as eliding the need for advice on the point, because even a director aware, as he should have been, of the existence of his fiduciary duty would be entitled to expect guidance as to whether anything in the specific circumstances in contemplation would constitute a breach of that duty. I also accept Dr Chrystie's point that a director might well not be aware of the availability of the remedy of an accounting for profit. The fact that the potential need for advice on fiduciary duty would occur to the careful solicitor in the circumstances in which Mr Duncan found himself on 18 April does not, however, lead to the conclusion that he ought there and then to have tendered advice on that point. Breach of fiduciary duty was not inherent in what the pursuer was planning; it was something that might arise if he timed his intended resignation from Argyll wrongly. I am of opinion that a competent and careful solicitor was entitled to take the view in the circumstances that there was ample time in the development of the project, and ample opportunity in the further discussions which were expected to take place, in particular in connection with revisal of the Information Memorandum, to clarify how the pursuer intended to time his resignation. It would then be possible, if it appeared that breach of fiduciary duty was a real risk, to give timeous advice to the pursuer as to how to avoid placing himself in breach of his fiduciary duty. Mr Duncan was not, in my view, reasonably to be expected to foresee on 18 April that the pursuer would fail to respond to his request for further information about the service contract, fail to respond to his request for discussion of the Information Memorandum, and, without further reference to him, (i) press on to recruit investors in a manner different from that which had been discussed (i.e. without use of the Information Memorandum), and (ii) identify, and take initial steps towards acquiring, a specific portfolio of property. I therefore hold that Mr Duncan was not negligent in failing to give the pursuer advice about his fiduciary duty to Argyll, and the consequences of the breach of that duty, immediately at their first meeting on 18 April 1997.

The next stage at which the question of negligence requires to be addressed is at the time of the telephone conversation on 19 June. All that was added to Mr Duncan's knowledge at that stage is set out in the file note quoted in paragraph [19] above. The pursuer, in evidence, placed no emphasis on this episode, and Mr Duncan had no specific recollection of the conversation. Four points were made: (i) parties willing in principle to provide equity funding had been identified, (ii) a source of debt funding had also been agreed in principle; (iii) both categories of finance were contingent on the identification of a suitable portfolio; and (iv) the pursuer was to update Mr Duncan eight days later (albeit, characteristically, he did not do so). With the benefit of hindsight it is possible to identify that telephone conversation as the point in time at which Mr Duncan acquired sufficient knowledge to realise that the pursuer was in danger of acting in breach of his fiduciary duty. The next stage was to be the identification of a portfolio of property for Leven to acquire, yet the pursuer was still a director of Argyll. Dr Chrystie, in re-examination, adopted that view. Mr Rafferty took the contrary view. In the context of a client who had shown himself rather off-hand in his dealings with his solicitor, who had not followed up requests for information or (until then) been in touch at all, who on the specific occasion was clearly not seeking further advice, but who was offering a further update in a week's time, it would in my view be judging Mr Duncan by too rigorous a standard to hold that he should, at that stage, have realised the pursuer's need for unsought advice about his fiduciary duty to Argyll. I do not consider that it can be said that in those circumstances no competent solicitor exercising reasonable care would have failed to tender such advice.

The third point in time at which the issue of negligence requires to be considered is when Mr Duncan wrote the letter of 22 August in response to the information provided by the pursuer by telephone on 21 August. The actual instructions given were to advise on the pursuer's position under his contract of employment. Mr Duncan confined his advice to that aspect of the matter. In my view, however, it was so clear by then that the pursuer, if he proceeded as he was planning to do, was about to act in breach of his fiduciary duty that it can be said that any competent solicitor exercising reasonable care would have alerted the pursuer to that fact and advised him of the consequences. The essential features of the situation, in my view, were (i) that the pursuer was still a director of Argyll, (ii) that a specific portfolio of property had been identified while he was still in that position, and (iii) that through Leven he was about to become involved in the acquisition of that portfolio. Although Mr Duncan, in evidence, did not accept that he had been negligent in not tendering advice about the pursuer's impending breach of fiduciary duty at that stage, both Dr Chrystie and Mr Rafferty took the view that he had. I accept their view of the situation and hold that at that stage it was Mr Duncan's duty to advise the pursuer that his proposed course of action would place him in breach of his fiduciary duty to Argyll, and that he failed to discharge that duty.

Causation and Loss

Mr Sandison recognised in his submissions that although the issues of causation and loss were difficult to separate, it was perhaps illogical to address the former before determining whether the pursuer had suffered any loss; but I agree with him that it is convenient at least to begin consideration of those issues in that order. Mr Sandison's submission was that in order to determine how the issue of causation should be addressed, it was necessary first to identify the nature of the duty of which there had been breach. He submitted that where the duty broken by the defender is a duty to advise, the law allows recovery of all foreseeable loss which is a consequence of taking the course of action taken in reliance on the advice, and that it is not necessary for the pursuer to show that the loss was a consequence of the advice being wrong. In support of those propositions he cited South Australia Asset Management Corporation v York Montague Ltd (otherwise known as the Banque Bruxelles case) [1997] AC 191. In that case, Lord Hoffmann made the following observations (at 214):

"... a person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. A duty of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them.

The principle thus stated distinguishes between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and a duty to advise someone as to what course of action he should take. If the duty is to advise whether or not a course of action should be taken, the adviser must take reasonable care to consider all the potential consequences of that course of action. If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken. If his duty is only to supply information, he must take reasonable care to ensure that the information is correct and, if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong."

I am not convinced that Lord Hoffmann's distinction between the case of providing information to enable a party to decide on a course of action and the case of advising on what course of action the party should take covers all possible situations, or is particularly helpful in the circumstances of this case. Mr Sandison drew a somewhat different distinction between a case of giving negligently wrong advice, and a case of negligent failure to advise. He submitted that since advice was given which did not point out the danger of breach of fiduciary duty, this was a case of wrong advice, not of failure to advise. The liability to account was incurred because the pursuer proceeded with his intended course of action in reliance on the wrong advice that omitted to include reference to the risk of breach of fiduciary duty. In that situation, all the pursuer had to prove in order to recover his loss was that he had entered into the transaction which was productive of the loss in reliance on the wrong advice. He did not have to prove that if the correct advice had been given he would have acted differently, or how he would have acted differently. The onus in such a situation passed to the defender to prove, if he could, that the loss would have been unavoidable, even if correct advice had been given. In that connection Mr Sandison cited Bristol and West Building Society v Mothew [1996] 4 All ER 698, in which Millett 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. This was the position in Downs v Chappell."

Mr Sandison maintained that in that passage Millett LJ overstated the test of reliance. In Downs v Chappell [1996] 3 All ER 344 (a case of fraudulent misrepresentation) Hobhouse LJ said (at 359c):

"In general, it is irrelevant to inquire what the representee would have done if some different representation had been made to him or what other transactions he might have entered into if he had not entered into the transaction in question. Such matters are irrelevant speculations";

and continued (at 361d):

"Causation and the assessment of damages is a matter of fact. In a misrepresentation case, where the plaintiff would not have entered into the transaction, he is entitled to recover all the losses he has suffered, both capital and income, down to the date that he discovers that he had been misled and he has an opportunity to avoid further loss. ... In my judgment it may still be necessary to consider whether it can fairly and properly be said that all the losses flowing from the entry into the transaction in question were caused by the tort of the defendant. ...

In my judgment, having determined what the plaintiffs have lost as a result of entering into the transaction ... it is still appropriate to ask the question whether the loss can properly be treated as having been caused by the defendants' torts, notwithstanding that the torts caused the plaintiffs to enter into the transaction. If one does not ask the additional question there is a risk that the plaintiffs will be overcompensated or enjoy a windfall gain by avoiding a loss which they would probably have suffered even if no tort had been committed. This would offend against the principle upon which damages are awarded."

According to Mr Sandison's submission, the effect of the exception mentioned in the last paragraph quoted from the judgment of Hobhouse LJ was to impose on the defender the onus of proving that application of the general rule would result in overcompensation. Applying the principles derived from the authorities cited to the circumstances of the present case, it was sufficient for the pursuer to establish that he had proceeded with the Church in Wales transaction in reliance on erroneous advice given by Mr Duncan, and that by doing so he had incurred in due course loss in the form of the liability to reimburse Talisker.

Mr Williamson submitted that I should hold that this was a case which fell into the "no advice" rather than the "wrong advice" category. To succeed, the pursuer required to prove what he offered to prove, namely that if he had received the advice which he says he ought to have received, he would have been able to undertake, and would have undertaken, the Church in Wales transaction without incurring the loss he claims to have incurred. That was the case made by the pursuer in article 6 of the condescendence, where the following averments occur:

"Had the pursuer been advised that Argyll would be able to proceed against him for breach of fiduciary duty in the circumstances which were to arise he would have resigned as a director of Argyll prior to setting up any company, or engaging in any business activity, which might have caused him to breach his fiduciary duty to Argyll".

Mr Williamson went on to address the question of causation by reference to the various dates at which the desiderated advice might have been given. He accepted that if the advice had been given in April, it would have been possible for the pursuer to resign his directorship before he acquired knowledge of the Church in Wales portfolio, and it would thus have been possible for him to avoid committing the breach of fiduciary duty on which Argyll ultimately founded. He submitted, however, that in the circumstances it was improbable that, if the pursuer had received advice about his fiduciary duties in April, he would immediately have resigned his directorship. Mr Williamson pointed to the pursuer's reliance on the substantial salary paid by Argyll as the means of supporting his family and other commitments, and to the tentative nature of the Leven project as at April. (On this point, Mr Sandison submitted in response that I should accept the pursuer's evidence that he would have resigned his directorship at Argyll at once if he had been advised about the nature of his fiduciary duty and the possible consequences of breach of it, albeit that might well have led to his dismissal from their employment.) By June, Mr Williamson submitted, the position was less clear. By August, if that had been when the desiderated advice had been received, it would have been too late to do anything which would have allowed the Church in Wales transaction to proceed without breach of fiduciary duty, because the information about the Church in Wales portfolio had been acquired while the pursuer was still a director of Argyll. Resignation after he possessed that information, but before he proceeded with the transaction, would not have avoided liability for breach of fiduciary duty. The courses which would have been available to the pursuer on receipt of the desiderated advice in August would therefore have been (i) to abandon the acquisition of the Church in Wales portfolio, or (ii) to obtain the consent of Argyll to his proceeding with the acquisition, or (iii) to proceed as he in fact did. If the acquisition had been abandoned, the loss claimed would not have been incurred, but nor would the commission on Leven's sale of the portfolio have been received by Talisker. If, as Mr Sandison submitted, this case was one in which the onus passed to the defenders to show that the loss would have been unavoidable even if the desiderated advice had been given, that onus had been discharged. There was clear evidence from Mr Doyle that if, in August, the pursuer had gone to Argyll to disclose his interest in the Church in Wales portfolio, and to ask for their consent to his acquiring it through Leven, such consent would not have been forthcoming. Given the acknowledged background of strained relations between the pursuer and Mr Hunter, that assessment could be accepted as realistic. In response on that point, Mr Sandison submitted that it was not simply a question of whether Argyll would have consented to the acquisition by Leven of the Church in Wales portfolio proceeding. Had the pursuer resigned his directorship at once in August, Argyll might not have enforced the obligation to account. They proceeded as they did in the event because they had been made to look foolish by the pursuer making a large profit from the Church in Wales transaction, carried through while still holding office as a director of Argyll.

Mr Williamson presented an array of further submissions on the question of loss. First, he argued that Talisker's liability to account to Argyll may have constituted a loss to Talisker, but did not give rise to a loss on the part of the pursuer. The pursuer had chosen to set up Talisker and to procure that the profit on the resale by Leven of the Church in Wales portfolio was paid to Talisker. Had Argyll's action been litigated to a conclusion, Argyll would have been entitled to trace the profit derived from the pursuer's breach of fiduciary duty into the hands of Talisker, and to demand of that company an accounting for the profit. The liability of the pursuer to Argyll would have been secondary, arising if Argyll could not recover the profit from the party in whose hands it lay. The pursuer was, however, in a position to procure that Talisker did account to Argyll. Because Argyll settled for less than the full amount of the profit, the result was that Talisker, despite making the payment of £100,000 to Argyll, retained a substantial net benefit derived from the transaction which constituted the pursuer's breach of fiduciary duty. Talisker, however, had no legal entitlement to look to the pursuer to relieve it in respect of its obligation to Argyll. The pursuer could not convert the diminution of Talisker's profit into a loss of his own by voluntarily undertaking to reimburse Talisker. Mr Sandison submitted that the interposition of Talisker as the recipient of the profit from the Church in Wales transaction was merely fortuitous, and did not affect the fact that in the events which happened the loss fell on the pursuer.

Alternatively, Mr Williamson submitted, the matter could be viewed as one of remoteness. The type of loss claimed by the pursuer in the present action could not be said to arise naturally and directly from Mr Duncan's breach of contract. The pursuer's undertaking to pay Talisker was a quite different type of loss from that which would have been in the reasonable contemplation of the parties at the time of the contract to provide legal services (Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc 1994 SC (HL) 20). The foreseeable fact that the pursuer might have to give an accounting for any secret profit he earned as a result of breach of fiduciary duty was quite a different matter from his undertaking an obligation to indemnify a company which did not exist at the time the contract was entered into. Mr Sandison submitted that there was no merit in this point. The loss which the pursuer was seeking to recover was of precisely the type which the defenders ought to have had in contemplation, namely loss resulting from an obligation to account for profit made in breach of fiduciary duty.

Mr Williamson's third line of argument was that the pursuer's claim was flawed because it did not derive directly from an obligation to account for profits, but instead from an alleged obligation to relieve Talisker in respect of the payment which it made to Argyll. For the pursuer's contention to succeed, it was necessary (a) that the settlement proceeded on a well-founded acceptance that the only ground on which Argyll could have succeeded in their action was that the pursuer had acted in breach of his fiduciary duty, and (b) that the pursuer was indeed obliged to indemnify Talisker in respect of the payment it made to Argyll. So far as the first of those factors was concerned, the evidence did not exclude the possibility that Argyll had a well-founded claim against the pursuer and Mr Doyle for an accounting in respect of breaches of fiduciary duties arising under their contracts of employment. There could be circumstances in which employees owed such duties and were liable to account for any profit made by breach thereof (Nottingham University v Fishel [2000] IRLR 471; Attorney General v Blake [2001] IRLR 36). No evidence had been led as to the content of the advice received from counsel by the defenders in the Argyll action. All that the evidence showed was that the three defenders in that action entered into an Agreement in which they undertook a joint and several obligation to pay Argyll £100,000. On that point, Mr Sandison submitted that an employee's duty of fidelity was more limited than a director's fiduciary duty, and was broken only if a profit was made by virtue of the employment (Reading v Attorney-General [1951] AC 507). Here the profit was not made by virtue of the pursuer's or Mr Doyle's employment

with Argyll. There was therefore no good claim against them as employees for an accounting for profit. So far as the second factor was concerned, Mr Williamson did not accept that there was a genuine contract binding the pursuer to reimburse Talisker. The alleged agreement had not been reduced to writing. The genuineness of the evidence as to why the supposed obligation had not been reflected in Talisker's accounts was open to question. In any event, what underlying basis was there for the pursuer to undertake an obligation to reimburse Talisker? Talisker was no more than a vehicle for receipt by the pursuer and Mr Doyle of the benefit of the profit from the resale by Leven of the Church in Wales portfolio whatever that profit might turn out to be. Talisker had no right to insist that it receive the profit undiminished by any liability arising from breach of fiduciary duty on the pursuer's part. If the pursuer had indeed undertaken an obligation to reimburse Talisker, he had done so voluntarily, and not in implement of any obligation to Talisker which arose out of his breach of fiduciary duty.

Next, Mr Williamson made the brief point that if the pursuer was held to have suffered any loss as a result of negligence on Mr Duncan's part, there should be offset in assessing the amount of the loss the amount of the pursuer's actual earnings from Argyll from the date at which, with the desiderated advice, he would have terminated his employment (Jackson and Powell on Professional Negligence, 4^th edition, paragraph 4-199; now 5^th edition, paragraph 10-252). Mr Sandison submitted that credit only required to be given for benefit flowing from the breach of duty. The pursuer's earnings while he remained in the employment of Argyll did not flow from Mr Duncan's failure to advise on his fiduciary duty.

In the light of those submissions, I propose to consider first whether the necessary causal connection has been established between negligence on Mr Duncan's part and loss suffered by the pursuer. In my opinion Mr Williamson was correct in his submission that this case falls into the first of the two categories identified by Millett LJ in Bristol and West Building Society v Mothew, namely a case in which the ground of action is that the solicitor has failed to give proper advice. The true gravamen of the pursuer's complaint is that Mr Duncan failed to advise him about the nature and consequences of his fiduciary duty. Although Mr Sandison sought to categorise the case as one of wrong advice, that is not in my view correct. It is not in my opinion a fair or reasonable approach to what Mr Duncan did to treat his passing remark about being cautious or careful as constituting advice giving even a conditional endorsement of the safety of the proposed course of action. He simply failed to address the question of fiduciary duty at all. It follows, in my view, that the pursuer must, if he is to succeed, prove that, if he had been given the advice which he ought to have been given at the time when he ought to have been given it, he would have acted differently, and would have avoided the loss which in the event he suffered.

Since I have held that the fact that Mr Duncan did not advise the pursuer about his fiduciary duties on 18 April did not amount to professional negligence on his part, it is unnecessary for me to address whether the pursuer has proved that, if he had been given such advice at that stage, he would have been able to avoid the loss which he claims to have suffered. Lest my view that there was no negligence on 18 April be subject to review, however, I should indicate the view I would have taken on the factual issue that would have arisen had I held otherwise. The pursuer said that he would, if properly advised, have resigned his directorship at once. Mr Williamson advanced various reasons for not accepting that evidence. I would, if it had been necessary to deal with the point, have taken a middle view. I think that, for the reasons founded on by Mr Williamson, the pursuer overstated his position in saying that he would have resigned at once. On the other hand, I take the view that it is appropriate to accept a modified version of the pursuer's position. If he had understood that a critical factor giving rise to breach of his fiduciary duty was to proceed with the acquisition of a portfolio of property identified while he was still a director of Argyll, I am of opinion that it can be accepted that, while he would probably not have resigned his directorship as soon as he received the advice about fiduciary duties, he would have made sure to do so before turning to the stage of the project at which he sought suitable properties for acquisition.

The live issue, in my view, is how the pursuer could and would have acted if he had been advised of his fiduciary duty and its consequences on 22 August 1997. That is the point in time at which, according to the view I have taken, Mr Duncan was negligent in failing to tender such advice. The pursuer's evidence on the point was somewhat equivocal. When the point was first raised with him in evidence in chief (in a form which was not specific as to the date of the advice), he said that if he had known about his fiduciary duty he would still have proceeded with the Church in Wales transaction, but would have resigned his directorship in advance. By 22 August, however, that was no longer a live option. If he wished to proceed with the acquisition of the Church in Wales portfolio, it was, by then, too late to save himself from breach of fiduciary duty by resigning his directorship. To avoid breach of his fiduciary duty he would have required to inform Argyll of his intentions and seek their consent to his proceeding with the acquisition through Leven. I take the view, however, that the proper conclusion on the evidence (particularly that of Mr Doyle, which I accept) is that, had that been done, such consent would not have been forthcoming. Returning to the pursuer's evidence, when he was asked in cross-examination what he would have done if he had been told on 22 August that if he proceeded with the Church in Wales transaction he was liable to be sued, his initial response was that he would have stopped the transaction. That answer came immediately before the court adjourned for the day, and the following morning he returned immediately to the subject, and said that, having thought about the question, which was hypothetical, he did not know how he would have proceeded. He would have asked many more questions before making a decision. He recognised that the choice lay between (i) proceeding, and taking the risk of being sued, or (ii) deciding that the transaction was too risky, and looking for another portfolio of property. In re-examination, he reiterated that, because by then so many other people were involved, he did not know what he would have done. Mr Doyle's evidence was more robust. When he was asked what his reaction would have been if Mr Duncan had advised on 22 August that he was concerned that the acquisition of the Church in Wales portfolio would constitute a breach of the pursuer's fiduciary duty to Argyll, and that if the transaction proceeded Argyll were likely to sue for any profit made in the transaction, he said: "I would have said I would have nothing to do with the transaction. The deal would have been dead from my point of view." Mr Doyle added that he recognised that if he had pulled out of the project, it would have been open to the pursuer to proceed without him, but that he did not think that he would have done. In light of that evidence, I am satisfied on a balance of probabilities that if the pursuer had been properly advised by Mr Duncan on 22 August about his fiduciary duty and the consequences of breach of it, he would not have proceeded with the Church in Wales transaction. He could not, of course, at that stage have known that Argyll would settle for very much less than the whole profit from the Church in Wales transaction.

If the pursuer had aborted the Church in Wales transaction in August, he would have made no profit through breach of fiduciary duty, and Argyll would have had no claim for an accounting for profits. Leaving aside for the present the various arguments which Mr Williamson put forward against accepting that what the pursuer claims as his loss truly was a loss suffered by him, it might be thought that the pursuer had established a causal connection between Mr Duncan's negligence and his loss by proving (a) that the loss arose because the pursuer proceeded with the Church in Wales transaction, and (b) that if sound advice had been given he would not have proceeded with that transaction and would not have suffered the loss. In my view, however, such reasoning involves too close and exclusive a focus on what is merely one aspect of the consequences for the pursuer of proceeding with the Church in Wales transaction. It is, in my view, necessary to consider whether the pursuer, in addition to suffering what he characterises as a loss, also obtained from proceeding with the transaction a benefit which he would not have obtained if the transaction had not proceeded. The point was recognised in passing by the pursuer himself in the course of his evidence when, at the end of the first day of the proof, his initial reaction to the question of what he would have done if he had been advised that he was liable to be sued if he proceeded with the Church in Wales transaction was to say that he would have stopped the transaction. In a later part of that answer he recognised that in that event he would not have made the profit that Talisker made from proceeding with the transaction. As a result of proceeding with the Church in Wales transaction a liability arose to account to Argyll, which was settled for £100,000. The pursuer claims to be the party on whom that liability ultimately falls. On the other hand, as a result of proceeding with the Church in Wales transaction, the profit made was actually far greater than the sum for which Argyll settled. The sum paid by Leven to Talisker was £872,500. Talisker was acquired by the pursuer and Mr Doyle specifically to be the recipient of that payment, and it was the pursuer (along with Mr Doyle) who procured that that payment of a share of the profit on the resale by Leven of the Church in Wales portfolio was paid to Talisker. Talisker was owned (at the material time) by the pursuer and Mr Doyle equally. The result was that the Church in Wales transaction, assuming, as the pursuer contends, that it brought down on the pursuer a liability to bear the payment of £100,000 to Argyll, also brought to him, through the resultant increase in the value of his shareholding in Talisker, the benefit of one half share of the profit of £872,500. Balancing the liability against the benefit, the net effect for the pursuer of proceeding with the Church in Wales transaction was substantially beneficial. If the pursuer had received the advice he ought to have received from Mr Duncan on 22 August, he would, as I have held, probably have aborted the Church in Wales transaction. He would have avoided the liability for the £100,000 paid to Argyll. But at the same time, the profit channelled through Talisker would not have arisen. When the matter is viewed as a whole, the Church in Wales transaction was to the pursuer's substantial net benefit. It would, in my view, be quite unrealistic to leave out of account the beneficial effect for the pursuer of proceeding with it (which he would not have obtained if he had aborted the transaction on receiving the advice he ought to have received on 22 August), while treating as a loss the pursuer's liability to Argyll. In these circumstances, I am of opinion that the evidence does not establish that the pursuer suffered any loss caused by Mr Duncan's negligent failure to advise him about his fiduciary duty on 22 August 1997.

In reaching that view on causation, I have assumed in the pursuer's favour that he has a liability to reimburse Talisker in respect of the sum of £100,000 which it paid to Argyll and that that liability can properly (if viewed in isolation) be regarded as a loss suffered by the pursuer. I turn now to consider the submissions made by Mr Williamson attacking the proposition that the pursuer suffered any loss. There is, in my view, merit in Mr Williamson's submission (see paragraph [38] above) that once the pursuer and Mr Doyle procured that the profit from the Church in Wales transaction was paid to Talisker, Talisker was the party primarily obliged to account for that profit. The settlement with Argyll was therefore borne by the correct party. If that analysis is correct, the net effect of the Church in Wales transaction and the consequential claim for an accounting by Argyll was that Talisker was left with a substantial profit. The pursuer's beneficial interest in Talisker was the subject of a net increase. The pursuer could not turn that into a personal loss by undertaking voluntarily to bear in Talisker's place liability for the payment to Argyll. Whether that last proposition is correct seems to me to depend on whether Mr Sandison or Mr Williamson was correct in analysing the liability inter se of Talisker (as the party holding the profit obtained by the breach of fiduciary duty) and the pursuer (as the party who had committed the breach of fiduciary duty). Mr Sandison submitted that Talisker was entitled to look to the pursuer, as the actual wrongdoer, for relief. Mr Williamson submitted, on the contrary, that the primary liability lay with Talisker to disgorge the profit, and the pursuer could only be held liable (to Argyll) if Talisker did not do so. In my view, Mr Williamson was correct in saying that in a question with Argyll the primary liability lay upon Talisker. In the absence of some basis on which Talisker could claim, in a question with the pursuer, to be entitled to receive the profit from the Church in Wales transaction undiminished, there would in my view be no right in Talisker to be relieved by the pursuer of the liability to disgorge the profit to Argyll. Although the pursuer had procured that, in a question with Leven, Talisker was entitled to receive the share of profit on resale of the Church in Wales portfolio, that was something that he had procured voluntarily, because it suited his interests, not something that he had been under any obligation to Talisker to do. It follows, in my opinion, that Talisker had no automatic right to be relieved by the pursuer of liability for the payment made to Argyll. It may be in recognition of that fact that so much emphasis was placed in the pursuer's case on the agreement which he and Mr Doyle contended had been entered into in terms of which the pursuer had undertaken to indemnify Talisker. Although the evidence to support the existence of that agreement is unsatisfactory in a number of respects, I do accept that there was such an agreement (see paragraph [28] above). I do not consider, however, that that converts Talisker's liability to account for the profit it derived from the Church in Wales transaction into a loss suffered by the pursuer. The reimbursement agreement was voluntarily undertaken by the pursuer. It reflected no antecedent obligation. It arose, it seems to me, out of nothing more than the pursuer's acceptance of the moral force of Mr Doyle's lay view of who was "to blame" for the payment having to be made to Argyll. I am therefore of opinion that the agreement does not assist to establish the existence of a loss suffered by the pursuer. I accept, of course, that in a different way the payment to Argyll had an adverse interest on the pursuer, by reducing the value of his beneficial interest in Talisker. But that simply leads back to the fact that the overall effect of the Church in Wales transaction on the pursuer (when compared with the effect if that transaction had been aborted) was a substantial net increase in his beneficial interest in Talisker.

I can deal with Mr Williamson's other points relating to loss very briefly, since the issues which they raise are no longer live. First, I do not consider that his remoteness argument was well founded. In whatever form it arises, loss occasioned by having to meet a claim for an accounting for profits is, in my view, the type of loss that would naturally and directly arise from a negligent failure to advise on the nature and consequences of the pursuer's fiduciary duty as a director of Argyll. Nor, secondly, is there any merit, in my view, in the argument that the settlement with Argyll might have been justified on the basis of a liability to account for profit arising out of breach of a duty of fidelity on the part of the pursuer and Mr Doyle as employees of Argyll. That was not pled as a basis of their claim, and the authorities on which Mr Williamson founded do not in my opinion support the existence of a liability of that sort in the circumstances of this case. Thirdly, had loss been established, I do not consider that it would in the circumstances have been appropriate to offset the amount of the pursuer's earnings with Argyll after the date on which he ought to have been advised in relation to his fiduciary duty. Those earnings did not in my opinion flow from Mr Duncan's breach of duty.

There was a suggestion, in the course of argument, that if the pursuer was obliged to reimburse Talisker, and that obligation was to be regarded as giving rise to a loss suffered by the pursuer as a result of Mr Duncan's negligence, the amount of the loss would only be £50,000. The basis of that submission was that if the pursuer had such an obligation and discharged it by paying £100,000 to Talisker, he would thereby suffer loss of only £50,000, because the payment of £100,000 would increase the shareholders' funds pro tanto, and those shareholders' funds belonged to the extent of 50% to the pursuer himself. Only half of the payment to Talisker could thus properly be regarded as lost by the pursuer. Had that been a live issue, I would have been inclined to hold that the submission was well founded.

Finally, the sum sued for is £107, 829.36. The extra £7829.36 represents the expenses incurred in defending the Argyll action. Mr Doyle, however, did not regard the reimbursement agreement as extending to that sum. In light of that evidence, that aspect of the claim was not pressed by Mr Sandison. Had I been awarding damages, therefore, I should have left that element out of account.

Contributory Negligence

The defenders plead that the pursuer was guilty of contributory negligence. The only respect in which that plea was maintained in submission was that it was contended that the pursuer had failed to take reasonable care to protect his own interests by failing to keep Mr Duncan informed of the progress of the project. While I certainly accept that the pursuer was unusually off-hand and uncommunicative in his dealings with Mr Duncan, I would not have been satisfied that the plea had been made out. In the event, however, the point does not arise.

Result

I therefore hold that Mr Duncan was negligent, but only in failing to advise the pursuer in August 1997 about his fiduciary duty to Argyll. I hold that the pursuer has not suffered any loss caused by that negligence. I shall therefore sustain the defenders' second and third pleas-in-law, repel the pursuer's first and second pleas-in-law, and assoilzie the defenders from the first conclusion of the summons. I shall reserve the question of expenses.