Casaclang v WealthSure Pty Ltd

Case [2015] FCA 761

FEDERAL COURT OF AUSTRALIA

Casaclang v WealthSure Pty Ltd [2015] FCA 761

Citation: Casaclang v WealthSure Pty Ltd [2015] FCA 761
Parties: CAMILO CASACLANG, KATRINA CASACLANG, ANDREW GIBSON, JACQUELINE GIBSON, HETTIGE DON ROVILLE GOONASEKERA, MARIE ANTOINETTE KANTHI GOONASEKERA and TONI HEMMING IN HER CAPACITY AS EXECUTRIX OF THE ESTATE OF ALDEMIRA LUCEY v WEALTHSURE PTY LTD ACN 097 405 108
File number(s): NSD 169 of 2013
Judge(s): BUCHANAN J
Date of judgment: 27 July 2015
Catchwords: CORPORATIONS – financial services and markets – holder of an Australian financial services licence (“licensee”) – authorised representative of a licensee – where authorised representative alleged to have contravened provisions in Parts 7.7, 7.9 and 7.10 of Chapter 7 of the Corporations Act 2001 (Cth) – where authorised representative alleged to have caused loss and damage to clients in negligence and breach of contract – whether conduct of authorised representative related to a “financial product” – whether investment by clients was provision of a “credit facility” within the definition of reg 7.1.06(1) of the Corporations Regulations 2001 (Cth) – whether licensee liable for conduct of authorised representative under Division 6 of Part 7.6 of the Corporations Act – whether licensee liable under s 769B of the Corporations Act for conduct of authorised representative having actual or apparent authority – whether licensee liable in negligence for conduct of former authorised representative after revocation of authorised status
Legislation:

Australian Securities and Investments Commission Act 2001 (Cth)
Competition and Consumer Act 2010 (Cth), Sch 2
Corporations Act 2001 (Cth), ss 79, 760A, 760B, 761A, 761E, 761E(1), 761G, 761G(1), 761G(9), 762C, 762C(b), 762C(c), 763A, 763A(1), 763A(1)(a), 763A(1)(c), 763B, 763B(a), 763B(a)(ii), 763B(b), 764A, 765A, 765A(1)(h)(i), 766A, 766A(1)(a), 766A(1)(b), 766B, 766B(1), 766B(3), 766C, 766C(1)(a), 766C(1)(b), 766C(1)(d), 766C(1)(e), 766C(2), 769B, 769B(1), 769B(2), 769B(3), 769B(7), 769B(10)(b), 769B(10)(c), 769C, 910A, 911A, 911A(1), 911B, 911C, 912A, 912A(1)(a), 912A(1)(aa), 912A(1)(c), 912A(1)(ca), 912A(1)(d), 912A(1)(h), 912B, 912B(1), 916A, 916A(1), 916A(4), 916F, 916F(1), 916F(3), 917A, 917A(1), 917A(1)(a), 917A(1)(b), 917A(1)(c), 917B , 917E, 917F, 917F(1), 917F(2), 917F(3), 917F(4), 944A, 944A(a)(ii), 944A(b), 945A, 945A(1), 947C, 947C(6), 947D, 952C, 952D, 952E, 953B, 953B(1)(a), 953B(2)(a), 953B(2)(c), 953B(3)(b), 1011A, 1011A(1), 1011B, 1012A, 1012A(1), 1013D, 1013E, 1022B, 1022B(1)(a), 1022B(2)(a), 1022B(4)(a), 1041E, 1041E(1)(a), 1041E(1)(b)(i), 1041E(1)(b)(ii), 1041E(1)(c), 1041E(1)(c)(i), 1041E(1)(c)(ii), 1041F, 1041F(1)(a), 1041F(1)(b), 1041F(2), 1041H, 1041H(1), 1041H(2)(a), 1041H(2)(b)(i), 1041I, 1041I(1), 1041I(1B)(a), 1041J, 1041L, 1041L(1), 1041L(2), 1041L(4), 1041S, 1041S(a), 1311(1)
Corporations Regulations 2001 (Cth), regs 7.1.06(1)(a), 7.6.02AAA(1)
Evidence Act 1995 (Cth), ss 55, 56, 97, 100, 135
Federal Court of Australia Act 1976 (Cth), s 33C
Limitation Act 1969 (NSW), ss 14, 55(1), 55(3)

LexisNexis Butterworths, Australian Corporations Legislation, 2010 edition  
Cases cited: Astley v Austrust Ltd (1999) 197 CLR 1
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Gray v Motor Accident Commission (1998) 196 CLR 1
Hunter Grain Pty Ltd v Hyundai Merchant Marine Co Ltd and Malaysian International Shipping Corporation Bhd (1993) 117 ALR 507; [1993] FCA 133
Joel v Morison (1834) 6 C & P 501; 172 ER 1338; [1834] EWHC KB J39
Josephson v Walker

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AGLC
Casaclang v WealthSure Pty Ltd [2015] FCA 761
Case
[2015] FCA 761
Decision Date

CaseChat Overview and Summary

In the case of Casaclang v WealthSure Pty Ltd, the applicants, the Casaclangs and the Gibsons, sought compensation from the respondent, WealthSure, for losses they incurred as a result of the alleged negligence and breaches of contract by Mr. Oberg, an authorised representative of WealthSure. The case involved complex financial transactions and the adequacy of Product Disclosure Statements and Statements of Advice provided to the applicants. The court had to decide whether WealthSure was liable for the conduct of Mr. Oberg under the Corporations Act 2001 and the Corporations Regulations 2001, and whether WealthSure was liable for the actions of Mr. Oberg under s 769B of the Corporations Act for conduct having actual or apparent authority, as well as any negligence after the revocation of Mr. Oberg’s authorised status.

The court found that Mr. Oberg failed to provide the necessary Product Disclosure Statements and Statements of Advice as required by the Corporations Act, which directly contributed to the applicants' losses. WealthSure was held liable for these failures under s 1022B(1)(a), (2)(a), (4)(a) of the Act, which mandates WealthSure to compensate the applicants for their losses. The court rejected the argument that the transactions involved credit facilities rather than financial products, as this would have exempted them from certain regulatory requirements. Furthermore, the court dismissed the applicants' contractual claims, finding no evidence of a binding contract to repay investments with interest.

The court ordered that WealthSure compensate the applicants for their losses. The specific amounts for compensation were detailed in the judgment, with the Casaclangs and the Gibsons to be compensated for the losses sustained, and the Goonasekeras to be compensated for certain losses flowing from Mr. Oberg’s advice. The applicants were directed to bring in short minutes of order within 14 days to give effect to the conclusions in the judgment.

Orders

Orders of the court

1. The applicants bring in short minutes of order within 14 days to give effect to the conclusions in this judgment.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The main requirements for a Product Disclosure Statement are set out in s 1013D. Section 1013E provides: 1013EGeneral obligation to include other information that might influence a decision to acquireSubject to subsection 1013C(2) and sections 1013F and 1013FA, a Product Disclosure Statement must also contain any other information that might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client, whether to acquire the product. It is an offence to fail to provide a Product Disclosure Statement when it is required, or to give a defective Product Disclosure Statement. For similar reasons to the Statement of Advice, I am satisfied that if a Product Disclosure Statement had been given as required the relevant transactions would not have been made, and the loss has flowed sufficiently directly from Mr Oberg’s failure to comply with those obligations. Like Part 7.10, Part 7.9 contains its own mechanisms and methods for attributing responsibility for a relevant failure. WealthSure is made liable for Mr Oberg’s failures instead of him (s 1022B(1)(a), (2)(a), (4)(a)). That liability, I am satisfied, requires WealthSure to compensate the Casaclangs and the Gibsons for their losses. I am satisfied that I should infer that no Product Disclosure Statement was given to Mrs Lucey for the same reasons I gave about the Statement of Advice. Her estate must, therefore, be compensated for the $150,000 loss she sustained. I accept Mr Goonasekera’s evidence that he was not ever given a Product Disclosure Statement. The Goonasekeras are entitled to compensation under this head of $215,500 flowing from the advice in June 2009, and $100,000 of the losses flowing from Mr Oberg’s advice from time to time after January 2009 while he was an authorised representative. Of course, those findings only supplement, in various ways, earlier conclusions about liability and do not add to the relief already assessed. 8.6 The ASIC Act To meet the allegation that various transactions involved the provision of credit facilities, rather than financial products, the applicants relied on various provisions of the ASIC Act where the asserted limitation or exclusion does not apply. It is not necessary for me to deal with this alternative. 8.7 Contract There were two elements to the pleaded case in contract. One was, by a late amendment, that promises to repay and about rates of return on their investments to the Casaclangs and the Gibsons were contractual, so that Mr Oberg was liable to repay the investments plus 10% and WealthSure was liable under Part 7.6. This case does not sit very comfortably with the proposition that the arrangements with Mr Oberg did not involve the provision of credit to him personally, which I have accepted. In any event, I am not satisfied that there was any contract of the kind suggested. The evidence does not support any proposition of a promise to repay with interest come what may and it does not identify any consideration which might support a contract. No liability arises in this way.

Ratio Decidendi

Legal Principle Established

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