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Polkinghorne v Holland
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Citation:

51 CLR 143

Court:

High Court of Australia (AUS)

Judges:

Rich, Starke, Dixon, Evatt, McTiernan

Judgment Date:

7/8/1934

, [1934] SASR 475, [1934] ALR 353, [1934] HCA 28, 8 ALJ 140

Digest | Top
Professions and trades > Lawyers > Duties and liabilities > Solicitor and client > Liability of partners
Transactions entered into on advice of partner - Investment of money in shares - Guarantee of overdraft of company - Knowledge of partner that
companies unsound - Liability of other partners - Duty of solicitor to advise client regarding investments
The plaintiff entered into three transactions on the advice of H, a member of a firm of solicitors. The transactions were, first, the sale of 4,000
worth of Government stock and the investment of the proceeds in the shares of a company; second, the sale of 1,000 worth of Government
stock and the loan of the proceeds to another company, S Ltd; third, a guarantee by the plaintiff of the bank overdraft of S Ltd. The third
transaction was the result of an agreement whereby the plaintiff became a member of S Ltd, and H, who was a director of that company,
undertook to pay half of any loss the plaintiff might suffer under the guarantee. Each of the companies was, to H's knowledge, financially
unsound when the advice was given, and the plaintiff lost the sums of 4,000 and 1,000 and was obliged to make payments under the
guarantee. Held:
(1)

As to the investments of 4,000 and 1,000, it was H's duty to inform the plaintiff what steps should be taken to investigate the financial
stability of the companies and to disclose the facts within his knowledge. This duty was owed by H on the ordinary course of the
business of his firm, and its breach therefore involved his innocent partners in legal responsibility for the loss of the money.

(2)

As to the money lost under the guarantee, H in this transaction had not acted within the scope of his authority as a partner or within the
ordinary course of business as a solicitor, and therefore the innocent partners were not responsible for the loss incurred.

Professions and trades > Lawyers > Duties and liabilities > Solicitor and client > Advising client
Financial advice - As to proposed investments
Per Rich, Dixon, Evatt and McTiernan JJ Solicitors possess, in virtue of their profession, no special skill in the valuation of real property, of
shares, or of marketable securities. It is not in the course of their professional duty to advise upon such matters. But it is one thing to say that a
valuation or expression of his own judgment upon a commercial or financial question is not within the scope of a solicitor's duties, and another
to say that when he is consulted upon the wisdom of investing in the shares of a company of which his client knows nothing, it is outside his
province as a solicitor to inquire into the matter and to furnish his client with the information and assistance which the facts upon the register
will give, to point out what inquiries may be made, and if required to undertake them or invoke the aid of those who will. Per Starke J It is no
part of the duty of solicitors, in ordinary cases, to act as valuers, or as advisers upon investments. If an investment has been resolved upon,
the solicitor's ordinary professional duty is to satisfy himself of the validity or legal sufficiency of the security. Solicitors may undertake further
duties, such as that of advising upon investments, and if they do, then they must perform those duties with due care and skill. But one partner
cannot undertake such further duties except within the limits set by his authority as a partner, and the fact that he is himself, as one of the firm, a
principal, does not warrant him in extending those limits save on his own responsibility. The liability of his co-partners can only be established on
the ground of agency. Solicitors, however, who act for clients, are morally, and, in my opinion legally, bound to inform a client of any facts within
their knowledge affecting the sufficiency and character of an investment or security upon which the client is entering. That is part of the ordinary
course of a solicitor's business.

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Applied by | Top
- Capricorn Financial Planners Pty Ltd v Australian Securities and Investments Commission (1999) 31 ACSR 46, 17 ACLC 855, [1999] FCA
558

Considered by | Top
- Seiwa Australia Pty Ltd v Beard (2009) 75 NSWLR 74[PDF], [2009] NSWCA 240[RTF], [2010] ALMD 5930
- Critchley v Collins [2004] SASC 10[HTML][RTF]
- Olympic Holdings Pty Ltd v Lochel [2004] WASC 61[HTML][DOC]

Referred to by | Top
- National Commercial Banking Corporation of Australia Ltd. v Batty (1986) 160 CLR 251[PDF], 60 ALJR 379, 65 ALR 385, [1986] HCA 21

Copyright 2011 Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668

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