the explanation leaves me with too many unanswered questions. It seems you're saying the true corner post hole, #2 (according to your diagram) doesn't exist in its proper location. But you're proposing attaching boards to it as an alternate solution....?Your links to pictures do not work. It would be better to embed them into the thread. Maybe you could deal with hole location first, and later the elevation issues, in order to keep it simple.

I have updated the first post to attach an image of the current situation - and the link at the bottom shows proposed solutions.

The true corner post #2 does exist - but because of it's location I can either only attach one walls boards to it - unless I alternate or notch the boards?

Or place another post @ proposed location #3 - But you will be able to tell I stuffed up then!

I understand better now. I don't know if this will help, but the only quick solution I can come up with is cutting of the corner of the retained area and spanning the two end posts with diagonal horizontal members, attached in some suitable way on the back side .... with possibly another post centered on that span. (I don't use wood retaining walls so I'm not commenting on the durability or suitability of your scheme. You be the judge.) I think you'll understand my sketch.

Thanks for your reply Yardvaark, that solution could work but means I sort of have the same problem at each end of that new piece of timber, with no posts supporting each end of it.

Another solution which I think could work is attached. Essentially attaching a 150x75 square post through both the retaining boards of one wall and post #2 with some m16 350mm coach bolts.

What do you think?

What do I think? I think that you need to remember that the forces behind the wall will be trying to push the wall forward and over. In your scenario the only thing keeping that from happening are your posts, and I'm not seeing where you mention how deep they're set. That depth is going to be determined by a number of factors, including local soils and the grading above and below the wall. Also keep in mind that by having your fenceposts extend behind the wall, the fence will act on the wall during windy periods.

So I think a local engineer is your best bet for building a wall that will last, not the internet. No one around here builds walls like what you're showing without an engineer because the longevity of the wall depends on a few posts resisting all those forces and that's it.

I thought I saw that the posts were going to be buried and set in concrete to a depth greater than their exposed height above grade. The terminology of parts used is foreign to me and since I don't do wood walls, I'm not offering a professional opinion of how sound I think the wall will be. My gut says the posts will be sturdy enough, but that the horizontal wood members are too thin and will bulge after not too much time. Double that thickness, at least, seems more appropriate.

Insofar as having "no posts supporting each end of it" [per my suggestion] I don't think that's the case as there is a post supporting the end of each primary wall. That support carries through from the primary wall to the diagonal piece, which is "keyed in" as well as being attached by a spike and held in place by earth pressure. However, if the posts eased out of position over time (which, of course, would never happen!) then the corner intersection of the wall could split apart. As I said, however, I think the horizontal pieces (which we would basically call 2 x 4's -- I think -- are too thin and weak for building a retaining wall. I've seen such used before and they bulge. Using them requires a much tighter post spacing. Being thin, they are also likely to succumb to rot much earlier than a stout member.)

Regarding the latest proposal, I think appearance would be the problem. The rectangular milled lumber profile introduced where all other vertical members are round posts ... well, it would look like a band-aid from the start. I think doing the same thing with just another post like you are already using would look much better. I don't even think people would say you messed up. If you are concerned about symmetry, you could even add a third post (on the other side of the corner post, placed around corner at 90*) in order to have is seem like a planned design detail. It wouldn't seem strange, I don't think, to have it look like you are beefing up the corner.

You might look at changing the corner post to a square one with angle brackets on the inside corner to support the retaining boards. Rip a second post to add a decorative hide to the metal brackets.
See detail below ....

Thanks everyone - given me plenty to think about and decide upon which is the best solution to the problem.

Just to mention - posts will be in the ground (with concrete) deeper than they are exposed +8 inches.

Much appreciated.