Dennis v Chambers Investment Planners Pty Ltd (Administrators Appointed) (No 3)
[2014] FCA 648
FEDERAL COURT OF AUSTRALIA
Dennis v Chambers Investment Planners Pty Ltd (Administrators Appointed) (No 3) [2014] FCA 648
Citation: Dennis v Chambers Investment Planners Pty Ltd (Administrators Appointed) (No 3) [2014] FCA 648 Parties: JOHN STRICKLAND DENNIS v CHAMBERS INVESTMENT PLANNERS PTY LTD (ACN 009 294 606) (ADMINISTRATORS APPOINTED) and GEORGE KAMEL TAKLA File number: WAD 292 of 2010 Judge: BARKER J Date of judgment: 20 June 2014 Catchwords: CORPORATIONS – claim for breach of duties under financial services legislation as it applied at material times – whether respondents had reasonable basis for financial advice given – whether respondents made representations concerning appropriateness of advice or accuracy of finance applications that were misleading or deceptive or likely to mislead or deceive
CONTRACTS – whether respondents breached contractual duty to exercise reasonable care and skill in provision of financial advice – whether respondents owed duty to provide advice “as to the most suitable financial investments”
NEGLIGENCE – whether respondents breached duty to exercise reasonable care and skill in provision of financial advice
EQUITY – whether respondents obtained unauthorised benefit from financial advice relationship – whether respondents breached any contractual, tortious or equitable duty in connection with advice given or involvement in applicant’s purchase of property
EVIDENCE – expert opinion evidence – whether financial planner qualified to give expert evidence concerning duty of care issues and loss – relevance of expert evidence to matters in issue
DAMAGES – whether applicant is entitled to damages – extent to which any claimed loss and damages are attributable to respondents’ conduct – loss of opportunity claim – whether some claimed losses are outside statutory limitation period or otherwise affected by Civil Liability Act 2002 (WA)
Legislation: Australian Securities and Investments Commission Act 1989 (Cth)
Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 1989 (Cth) s 851, s 851(1)
Corporations Act 2001 (Cth) s 440D(1)(a), s 945A, s 945A(1), s 945B, s 946A
Evidence Act 1995 (Cth) s 76, s 79, s 135Civil Liability Act 2002 (WA) s 3A, s 4A, s 5A(1), s 5B, s 5C, s 5C(1)(b), s 5C(3), s 5C(4), s 5D, s 5N
Cases cited: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79
Australian Securities and Investments Commission v Vines [2003] NSWSC 1095; (2003) 48 ACSR 291
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Maronis Holdings Ltd v Nippon Credit Australia Ltd [2001] NSWSC 448; (2001) 38 ACSR 404
Morellini v Adams [2011] WASCA 84
O’Brien v Gillespie (1997) 41 NSWLR 549
Polkinghorne v Holland [1934] HCA 28; (1934) 51 CLR 143
Reardon Smith Line Limited v Yngvar Hansen-Tangen [1976] 1 WLR 989
Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1Date of hearing: 29, 30, 31 January 2013; 1, 4, 5, 6, 7, 8 February 2013; 12 July 2013 Date of last submissions: 27 August 2013 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 823 Counsel for the Applicant: Mr C Slater Solicitor for the Applicant: Kott Gunning Counsel for the Respondents: Dr JT Schoombee, Ms C Horwood Solicitor for the Respondents: HWL Ebsworth Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 292 of 2010
BETWEEN: JOHN STRICKLAND DENNIS
ApplicantAND: CHAMBERS INVESTMENT PLANNERS PTY LTD (ACN 009 294 606) (ADMINISTRATORS APPOINTED)
First RespondentGEORGE KAMEL TAKLA
Second Respondent
JUDGE:
BARKER J
DATE OF ORDER:
20 JUNE 2014
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.Parties to bring forward a minute reflecting the Court’s judgment and on costs.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 292 of 2010
BETWEEN: JOHN STRICKLAND DENNIS
ApplicantAND: CHAMBERS INVESTMENT PLANNERS PTY LTD (ACN 009 294 606) (ADMINISTRATORS APPOINTED)
First RespondentGEORGE KAMEL TAKLA
Second Respondent
JUDGE:
BARKER J
DATE:
20 JUNE 2014
PLACE:
PERTH
REASONS FOR JUDGMENT
On 30 March 1999, Mr Dennis consulted Mr Takla of Chambers Investment Planners Pty Ltd for financial planning advice.
Following an initial consultation with Mr Takla on that date and his filling out of a Fact Find document, Mr Dennis received a written wealth creation program or initial plan from Chambers under cover of a letter dated 2 June 1999.
From that point until the time of the global financial crisis (GFC), triggered by the collapse of Lehmann Brothers Holding Inc investment bank in the United States in September 2008, Mr Dennis, on the advice of Chambers and Mr Takla, made a number of investments that were substantially financed by debt. The principal investments were made in managed investments schemes (MISs) of an agribusiness nature, as well as in general equity investments (GEIs). Mr Dennis also says that a residential unit in South Perth purchased by him in late 2007 (South Perth unit), was purchased on Mr Takla’s recommendation in the course of his professional relationship with Chambers, something the respondents deny.
Following the GFC, Mr Dennis suffered investment losses. In this proceeding, Mr Dennis claims that Chambers and Mr Takla are liable to him for them. The primary questions are whether the respondents are so liable and, if they are, the extent to which the loss and damage claimed by Mr Dennis is attributable to the respondents’ conduct or is otherwise claimable.
Mr Dennis puts his case this way. He says Chambers and Mr Takla agreed to provide financial advice to him; that Mr Takla took instructions on his objectives and his tolerance to taking risks to achieve those objectives; that he gave instructions to Chambers and Mr Takla to build an investment portfolio to supplement his retirement resources in a way that reasonably preserved the investments, but also provided growth for them; however, that did not occur by reason of breaches of contractual and other duties owed to him by Chambers and Mr Takla.
So far as loss and damage is concerned, Mr Dennis, relying on an analysis provided at trial by Mr David Barber, an expert witness called by him, submits that damages should be assessed in the sum of $1,338,284.66, calculated on the following basis:
(1)That he, Mr Dennis, sought advice to manage medium and long term needs.
(2)The approach of a reasonable financial planner would be to manage long term needs. In those circumstances his position at the time of trial, if that approach had been followed and the opportunity had not been lost, would have resulted in a net positive position of $437,118.
(3)The sum at trial, to put him in the position he would have been in if the contract had been performed, to compensate him for the breaches suffered, would require payment of the sum of:
(a) his current debt on key investments referred to in the following paragraph, of: $745,615.40
(b) the net lost opportunity claim referred to in sub‑paragraph (2) above: $437,118.00
(c) the return of fees and other payments made on the investments that should not have been made, of: $105,157.00
(d) break costs on ending the GEI investments he made: $50,394.26
As to the claimed debt on key investments of $745,615.40, Mr Dennis presents the following loss table:
1999, AGL timber project 2 1999: investment cost $100,000, fully borrowed, last balance
$123,349.33
2000, Australian Blue Gums 2000: investment cost $82,400, fully borrowed, last balance:
Nil
2001, AGL timber project 4 Plan B 2001: investment cost $22,000, fully borrowed, last balance:
Nil
2003, AGL timber project 4 Plan C 2002: investment cost $25,000, fully borrowed, last balance:
Nil
2003, Sylvatech 2003: investment cost $20,000, fully borrowed, last balance:
Nil
2005, Great Southern Plantations 2005: investment cost $99,000, fully borrowed, last balance:
$83,485.54
2006, Great Southern Beef 2006: investment cost $65,000, fully borrowed, last balance:
$27,563.34
2006, Great Southern Olives 2006: investment cost $72,000, fully borrowed, last balance:
$90,384.21
2006, Great Southern Vineyards 2006: investment cost $66,300, fully borrowed, last balance:
$79,421.04
2007, Great Southern Olives 2007: investment cost $72,000, fully borrowed, last balance:
$99,398.06
2007, Great Southern Vineyards 2007: investment cost $62,400, fully borrowed, last balance:
$84,382.51
2008, Gunns Plantation 2008: investment cost $62,000, fully borrowed, last balance:
$57,140.93
2008, Willmotts 2008: investment cost $74,100, fully borrowed, last balance:
$95,446.24
National Australia Bank, investment (buffer) account, last balance:
$242,696.78
National Australia Bank, South Perth residential unit loan, last balance:
$184,717.60
Mr Takla, loan: last balance:
$178,118.58
$1,346,104.16
Credit 70% of $800,000 value of the South Perth residential unit:
$560,000.00
Credit return paid on Australian Blue Gums:
$40,488.76
TOTAL:
$745,615.40
It will be noticed that nine MISs figure predominantly in the loss table as productive of loss, as well as an investment or buffer account maintained with the National Australia Bank (NAB) and the South Perth unit.
Mr Dennis pleads that Chambers and Mr Takla are liable to him for the loss and damage claimed on the following bases:
(1)Breach of a duty owed under the contract of advice between them, but also at common law and equity, to provide advice “as to the most suitable financial investments”.
(2)Alternatively, breach of a duty to exercise due care and skill throughout in the provision of financial services advice that arose under the contract and at law and equity.
(3)Alternatively, or additionally, breach of a number of similar duties owed under financial services legislation as it applied at material times, both before and after the financial services reform period (FSR period) introduced by amendments to the Corporations Act 2001 (Cth) in 2002.
(4)Misleading or deceptive conduct in that:
(a)the advice they gave him at various times conveyed the representations that his position was appropriately considered and the advice or recommendations made were rational and reasonable for him, which he relied upon, and which were not so; and
(b)they misrepresented to him that various applications for finance made on his behalf were correct when in fact they were not.
(5)Breach of a fiduciary duty owed by Mr Takla to him as a result of which Chambers and Mr Takla received benefits from Mr Dennis entering into investments; and also in relation to the investment made in the South Perth unit.
The alleged breaches in sub-paragraphs (2), (3) and (4)(a) of the preceding paragraph overlap.
So far as the particulars of loss and damage pleaded in the statement of claim are concerned, Mr Dennis provided particulars of debt and interest obligations he had incurred, particulars of lost value of investments that he alleged, particulars of Macquarie Bank GEI break costs incurred, particulars of fees and commissions paid to the respondents, and particulars of lost opportunity to invest and receive returns.
In his particulars of lost value of investments, Mr Dennis stated that he had acquired investments – particularly those in MISs – which “are either worthless, near worthless or illiquid meaning that they could not be realised at all or realised in sufficient time to meet the requirements of the financiers for repayment as to capital or interest on borrowed funds for those investments or management fees or costs related to the projects”.
The defence of Chambers and Mr Takla is essentially that:
(1)They owed Mr Dennis a duty to exercise reasonable care and skill in the provision of financial services advice under the contract and at common law, but no more. Thus, they deny that there was any contractual, tortious or equitable duty to provide advice “as to the most suitable financial investments”.
(2)They deny any breach of a contractual or tortious duty to exercise reasonable care and skill in the provision of financial services advice and say that they discharged their duty by providing the advice which included, in the pre‑FSR period, letters of advice, and in the post‑FSR period, statements of advice (SOAs) and statements of additional advice (SOAAs), including:
(a)advices as to the relevant risks of investing in recommended products; and
(b)recommending Mr Dennis seek further advice where appropriate, for example, with respect to taxation implications of the advice.
(3)With respect to the applications for finance, they say they completed the applications in accordance with Mr Dennis’ instructions, or using information provided by him and further that he checked the applications and signed off on them before they were sent off.
(4)They also say that any loss or damage suffered by Mr Dennis is due to a number of factors outside any relevant sphere of responsibility that they had, including:
(a)incorrect information provided to them by Mr Dennis;
(b)Mr Dennis’ failure to make regular payments towards his investments, as he was required to do, and as he had expressly agreed to do, prior to Chambers or Mr Takla implementing the advice;
(c)third parties who provided research and information to Chambers and Mr Takla when they conducted due diligence on the suitability of the products generally – if it were to be found that any recommended product was defective or unsuitable, which they deny and in respect of which Mr Dennis has produced no evidence;
(d)the advent of unforeseeable events and consequences, notably:
(i)the GFC and the resultant unprecedented unfavourable market conditions and a high Australian dollar; and
(ii)the compulsory conversion by Great Southern of Mr Dennis’ investment in Great Southern Beef into shares in Great Southern Pty Ltd after the commencement of Mr Dennis’ investment.
Chambers and Mr Takla further deny Mr Dennis’ allegations that:
(1)He did not rely upon or have regard to a number of warnings and qualifications set out in the advices, namely:
(a)the express requirement that he inform Chambers and Mr Takla if he believed that they had misinterpreted or overlooked relevant information;
(b)the warnings given by Chambers and Mr Takla to seek independent advice on the taxation implications of investments; and
(c)the delivery of the product disclosure statement (PDS) documents provided to him by them,
as
(d)the warnings were given to him in the body of lengthy documents, and Mr Dennis’ attention was not drawn to those sections containing the warnings and discussing the risks. The respondents say that does not avail Mr Dennis in law even if established in fact, which is also denied;
(e)the PDS documents were provided some time after Mr Dennis had already agreed to implement the advice, which the respondents say is simply incorrect; and
(2)The GFC was a reasonably contemplated event, which the respondents ought to have considered when providing each of the advices – contrary to the evidence of Mr Dennis’ own expert, Mr Barber.
The issues in the proceeding may therefore be stated as follows:
(1)Whether Chambers was required to provide financial advice to Mr Dennis “as to the most suitable financial investments” under the contract between them or at common law or equity; and if so, whether the duty was breached;
(2)Whether Chambers breached its duty under the contract or at common law to exercise reasonable care and skill in providing financial advice to Mr Dennis;
(3)Whether Chambers breached s 851 of the Corporations Law, in the pre‑FSR period, or s 945A and s 945B of the Corporations Act 2001 (Cth), in the relevant post‑FSR period, by giving advice to Mr Dennis that, in short, did not have a reasonable basis;
(4)Whether Chambers made representations to Mr Dennis concerning:
(a)the appropriateness of the advice given and recommendations made, and
(b)the accuracy of finance applications
that were misleading or deceptive or likely to mislead or deceive; and if so, whether Mr Dennis suffered any loss as a result;
(5)Whether Mr Takla owed Mr Dennis a fiduciary duty to the effect that he would not obtain any unauthorised benefit from his relationship with Mr Dennis; and, if so, whether the duty was breached;
(6)Whether Chambers and Mr Takla provided advice in relation to the purchase of the South Perth unit in the course of the professional relationship and, if so, whether any contractual, tortious or equitable duty was breached;
(7)If there is any relevant breach, whether Mr Dennis has suffered any relevant loss by reason of that breach; including whether some claimed losses are outside the statutory limitation period.
PRECIS OF DEALINGS, ADVICE AND INVESTMENTS
Before considering the issues, it is useful to provide a précis of the principal dealings between the parties and the advice given and investments made by Mr Dennis between 1999 and 2008, and the fate of some of those investments after 2008. This will serve not only to provide some general context in relation to the nature of the relationship between Mr Dennis and Mr Takla, but also to identify the specific context in which Mr Dennis alleges the recommendations to invest in the MIS products, in particular, were inappropriate and in which losses were suffered.
In the financial year ending 30 June 1999, on 30 March 1999, Mr Dennis and his then wife visited Mr Takla at the offices of Chambers where each completed a Fact Find or needs analysis questionnaire form and had an initial consultation with Mr Takla, who was then an employee of Chambers.
On 2 June 1999, Chambers, by Mr Takla, provided a letter of advice to Mr Dennis (and a separate one to Mrs Dennis, who later chose not to proceed with Chambers) enclosing the initial plan. In particular, as part of a plan to purchase a home, Chambers recommended that Mr Dennis invest $200,000 in a Macquarie Bank GEI by the purchase of shares financed with a Macquarie Bank GEI investment loan.
In June 1999, following the issuing of a prospectus in about the middle of that month, Chambers held an investment seminar in relation to Plantation Hardwood Project No 2, a MIS (which was later renamed and is referred to in Mr Dennis’ loss table above, and elsewhere in these reasons as AGL timber project 2 1999).
On 24 June 1999, Mr Dennis signed a client authority and acknowledgement for AGL timber project 2 1999, completed an application to purchase a $100,000 interest in it and soon after applied for finance in respect of the project. On 30 June 1999, he was accepted into the project.
In the financial year ending 30 June 2000, in late July 1999 Mr Dennis applied to NAB for a loan of $90,000 to partly fund the purchase of the interest in the first MIS project, AGL timber project 2 1999.
On 8 September 1999, Chambers wrote to Mr Dennis confirming documents provided to him prior to his entering into the investment in AGL timber project 2 1999.
In September/October 1999, Mr Dennis and his then wife completed the purchase of the Ardross home, as joint tenants.
On 11 October 1999, Mr Dennis signed instructions to proceed in accordance with the initial plan and covering letter of advice dated 2 June 1999.
Also in October 1999, Mr Dennis applied to Macquarie Bank in order to fund a $200,000 investment in the initial GEI – GEI No 1. Later in 1999 the investment was purchased.
Also late in 1999, the investment in AGL timber project 2 1999 was placed in part.
In February 2000, Mr Takla was appointed as a director of Chambers, when he and his wife became part owners of the business.
In March 2000, Mr Dennis applied to invest $10,000 in shares in Australian Plantation Resources Limited.
In April 2000, Mr Dennis attended an investment seminar at the invitation of Chambers regarding Australian Blue Gums 2000 (as it is referred to in the above loss table) and signed a disclosure statement for that investment and applied for finance of $82,400 to partly fund investments of $82,500 in Australian Blue Gums 2000 and $2,250 in related Norgard Clohessy Equity Options.
In May 2000, Mr Dennis obtained the shares in Australian Plantation Resources and signed a disclosure statement and an investor’s declaration regarding that investment. A share certificate was issued in about August 2000.
In the financial year ending 30 June 2001, in about May 2001 Mr Dennis signed a disclosure statement in respect of an investment in woodlots managed by AGL Eucalyptus Timber and AGL Radiata Pine (collectively referred to as AGL timber project 4 Plan B 2001 in the above loss table).
Mr Dennis applied at about that time to Australian Growth Finance for a loan of $20,000 to fund the investments in AGL timber project 4 Plan B 2001.
In June 2001, Mr Dennis applied to NAB for a loan restructure of $160,000.
In June 2001, he was accepted into AGL timber project 4 Plan B 2001.
In the financial year ending 30 June 2002, the Australian Securities and Investments Commission Act1989 (Cth) was repealed and the Australian Securities and Investments Commission Act 2001 (Cth) was enacted.
In December 2001, Mr Dennis and Mr Takla met to discuss Mr Dennis’ financial planning needs at a six-monthly review.
In March 2002, significant amendments were also made to the Corporations Act, ending the pre-FSR period of the Corporations Act’s operation (which subsequently affected Chambers directly when it obtained an Australian Financial Services Licence (AFSL) under the Corporations Act on 10 March 2004).
In May 2002, Mr Dennis and Mr Takla met again to discuss financial planning needs, at which time Mr Dennis was advised about the availability of woodlots managed in accordance with AGL timber project 4 Plan C 2002, as it is referred to in the above loss table. He then signed a disclosure statement in respect of that MIS and applied to Australia Growth Finance for a loan of $25,000 to partly fund an investment of $30,000 in it.
In May 2002, Mr Dennis discharged his proportion of the mortgage securing his home loan over the Ardross home that was jointly owned with his then wife.
Also in May 2002, on 31 May, Chambers wrote to Mr Dennis regarding documents provided to him prior to his investment in AGL timber project 4 Plan C 2002.
In June 2002, Mr Dennis applied to Macquarie Bank to fund $100,000 of investments in a second Macquarie Bank GEI – GEI No 2.
The GEI No 2 recommendation was recorded in a letter of advice from Chambers dated 10 July 2002. The investment was subsequently made when the loan was drawn down.
In the financial year ending 30 June 2003, on 17 June 2003 Mr Dennis and Mr Takla met to discuss financial planning needs at which time Mr Takla advised on the availability of woodlots managed by Sylvatech Tropical Timbers, referred to as Sylvatech 2003 in the above loss table. At that time Mr Dennis signed a disclosure statement in respect of this investment and applied to United Pacific Finance for a loan of $20,000 to partly fund its purchase, which investment was subsequently made.
In the financial year ending 30 June 2004, Mr Dennis and Mr Takla met to discuss Mr Dennis’ investments on 14 December 2003 and again in relation to financial planning matters on 18 February 2004.
On 10 March 2004, Chambers commenced holding an AFSL under the post‑FSR regulatory regime.
In the financial year ending 30 June 2005, on 30 September 2004 Mr Dennis applied to Macquarie Bank to fund a $200,000 investment in a third Macquarie GEI – GEI No 3.
In October 2004, GEI No 1 was partially unwound.
On 6 October 2004, Chambers recorded its recommendations under cover of a SOA concerning GEI No 3 and soon after Mr Dennis signed an agreement to proceed with the recommendations in it. Not long after that the loan for GEI No 3 was drawn down.
In November 2004, Chambers provided an SOAA to Mr Dennis concerning its recommendations that he invest $200,000 in shares in Equinox, financed by Macquarie Bank, $200,000 in the Fusion Fund, financed by Macquarie Bank, and $200,000 in Rubicon, financed by Rubicon Capital.
Also in November 2004, Mr Dennis signed an agreement to proceed with recommendations contained in the SOAA and Mr Dennis applied to Macquarie Bank for a loan of $200,000 for investment in Equinox, and soon after in November for a loan of $200,000 for investment in Fusion. He also applied to Macquarie Bank for a loan of $200,000 for investment in Rubicon.
In December 2004, GEI No 1 was partially unwound.
On 16 February 2005, Mr Dennis and Mr Takla met again to discuss financial planning needs. Mr Takla recommended amongst other things an investment in Great Southern Plantations 2005 – as it is referred to in the above loss table, to be financed by Great Southern Finance in the sum of $99,000. The loan was applied for and later granted.
On 6 March 2005, Chambers recorded its recommendation in an SOAA that Mr Dennis invest in Great Southern Plantations 2005.
On 22 April 2005, Mr Dennis and Mr Takla met again at Mr Dennis’ request, to discuss how Mr Dennis could restructure his finances to accommodate his upcoming divorce and financial settlement with his then wife.
In May 2005, Mr Dennis and his then wife met with Mr Takla to discuss financial obligations arising from the settlement between Mr and Mrs Dennis.
In the financial year ending 30 June 2006, in July 2005 Mr Dennis was advised by State West Credit Society that his Australian Blue Gums 2000 investment loan had been paid out.
Around this same time Mr Dennis accepted a voluntary redundancy in relation to his employment by Woodside and commenced a private consultancy business whereafter he was employed by his wholly owned company, Gigajoule Pty Ltd, and also commenced project management consultancy work on engineering projects.
On 27 February 2006, Mr Dennis and Mr Takla met to discuss financial planning needs.
In May 2006, they met again to discuss financial planning needs.
On 14 June 2006, Mr Dennis and Mr Takla met again and Mr Takla recommended investment in the MISs of Great Southern Beef 2006, Great Southern Vineyards 2006 and Great Southern Olives 2006, as each is referred to in the above loss table, and Mr Dennis applied to invest in each of these.
On 20 June 2006, Chambers recorded its recommendations in that regard in an SOAA whereby $65,000 was to be invested in Great Southern Beef 2006, $66,300 in Great Southern Wine 2006 and $72,000 in Great Southern Olives 2006.
In the financial year ending 30 June 2007, in August 2006 the Rubicon investment was unwound.
In March 2007, Mr Dennis and Mr Takla met for an annual review concerning financial planning needs. At that time Mr Dennis applied to Great Southern Finance for a loan of $130,000 to fund further investments including a loan of $79,200 to fund an investment in Great Southern Olives 2007, as it is referred to in the above loss table.
On 23 April 2007, Chambers recorded its recommendations in that regard in an SOAA concerning investments of $72,000 in Great Southern Olives 2007, $62,400 in Great Southern Vineyards 2007 (as it is referred to in the above loss table), the selling of the Fusion investment and the selling of GEI No 2.
In June 2007, the Fusion investment was unwound and Mr Dennis signed an authority to proceed to implement the investment set out in the SOAA of 23 April 2007. Soon after the investment in GEI No 2 was unwound.
In the financial year ending 30 June 2008, in early September 2007 Mr Dennis and his then wife completed a financial settlement that included Mr Dennis transferring his share of the jointly owned Ardross home to his former wife, unencumbered, together with about $100,000 cash.
In December 2007, Mr Dennis met with Mr Takla, following which Mr Dennis applied to NAB for a loan of $550,000 to partly fund the purchase of the South Perth unit in Mr Dennis’ name and for his use.
Soon after, Mr Dennis also applied to Macquarie Bank for a loan of $500,000 to fund a fourth Macquarie Bank GEI, as recommended by Chambers – GEI No 4. The application to Macquarie Bank was not actually sent until 31 January 2008. Macquarie Bank confirmed the loan approval for GEI No 4 in March 2008, which was then taken up.
On 20 March 2008, Mr Dennis and Mr Takla met to discuss financial planning needs, at which time Mr Takla recommended an investment of $88,660 in woodlots managed by Gunns Limited and a $500,000 investment in a further Macquarie GEI. On 9 April 2008, Chambers recorded its recommendations in a SOAA. In the event, this SOAA was not acted upon and these two further recommended investments were not made.
On 28 May 2008, Mr Dennis and Mr Takla met to discuss changes to tax deductibility of capital protected investments, such as the GEIs.
On 11 June 2008, Chambers recorded its recommendations concerning a $200,000 investment in another GEI with Macquarie Bank – GEI No 5, $68,200 in Gunns Plantation (referred to in the above loss table as Gunns Plantation 2008) and $74,100 in Willmott Premium Forestry Blend (referred to in the above loss table as Willmotts 2008).
On 6 July 2008, Mr Dennis signed an agreement to proceed with the recommendations in the SOAA of 11 June 2008.
In the financial year ending 30 June 2009, from 10 July 2008 GEI No 4 was partially drawn down.
On 10 September 2008, Mr Dennis and Mr Takla met to discuss Mr Dennis’ investments.
On 15 September 2008, Lehmann Brothers sought bankruptcy protection in the United States of America, an event the parties agree marked a sharp drop in the All Ordinaries Index on the Australian Stock Exchange.
Soon after, on 18 September 2008, the remainder of GEI No 4 was drawn down.
On 12 December 2008, Mr Dennis and Mr Takla again met to discuss financial planning needs.
On 16 February 2009, Chambers recorded its recommendation in a SOAA that Mr Dennis sell some shares in the Macquarie GEI portfolios.
On 30 March 2009, Mr Dennis and Mr Takla again met to discuss investments.
On 3 April 2009, Mr Dennis’ existing GEI No 3 and GEI No 4 were completely unwound, at his request.
On 14 July 2009, a Form 507 Notice of Affairs regarding Great Southern Ltd (Administrators Appointed) (Receivers and Managers Appointed) was filed with the Australian Securities and Investment Commission (ASIC).
In the financial year ending 30 June 2010, on 28 November 2009 Mr Takla sent Mr Dennis an email concerning the South Perth unit, to which Mr Dennis replied on 9 December 2009.
On 9 December 2009, Mr Dennis and Mr Takla met for coffee.
In the financial year ending 30 June 2011, on 5 October 2010 a Form 507 Statement of Affairs was filed with ASIC concerning Willmott Forests Limited.
The next day, 6 October 2010, Mr Dennis commenced proceedings which became this proceeding, WAD 292 of 2010.
In the financial year ending 30 June 2012, following the cessation of the relationship between the parties, on 20 June 2012 Willmott Forests Limited (in liquidation) advised distributions from sale of assets by liquidators was not expected before 2013.
In the financial year ending 30 June 2013, on 28 August 2012 Mr Dennis received an interim return of $41,237.03 less outstanding fees for the Australian Blue Gums 2000 investment.
On 25 September 2012, administrators were appointed to Gunns Limited.
On 29 November 2012, the growers in AGL timber project 4 voted to terminate the project, as did growers in AGL timber project 2 1999.
In December 2012, a Form 507 Notice of Affairs was filed with ASIC in relation to Gunns Limited.
The parties thus agree that the status of the following MISs as at the end of January 2013 and before trial was that:
(1)the Great Southern Group, including subsidiaries is in liquidation and is subject to litigation;
(2)Willmott Forests Limited is in liquidation;
(3)Gunns Limited is in administration;
(4)part of the Australian Growth Limited project No 4, being plan B of Scheme 4 was terminated by grower vote on 29 November 2012.
WAS CHAMBERS REQUIRED TO PROVIDE FINANCIAL ADVICE “AS TO THE MOST SUITABLE FINANCIAL INVESTMENTS”?
It is common ground between the parties that the contract by which Chambers provided financial services advice to Mr Dennis at material times contained a term that Chambers would exercise reasonable care and skill throughout the period of the relationship in the provision of that advice. It is also common ground between the parties that Chambers owed Mr Dennis a similar duty not to be negligent in that regard at common law.
It is not agreed by the respondents, however, that any such duty was owed in equity. I doubt that any such duty was owed in equity and counsel for Mr Dennis was unable to provide any analysis or identify any authority that supported the proposition. The question of such a duty in equity may therefore be put to one side. In any event, it is not suggested on behalf of Mr Dennis that breach of any such equitable duty would add anything to the claims based on the agreed contractual and tortious duties of care.
Mr Dennis further contends, however, that it was an implied term of the contract that in providing advice Chambers would advise him not just as to suitable investments for him, but “as to the most suitable financial investments” (emphasis added).
As to the implied term contended for, Mr Dennis submits it may be drawn from the evidence as to the negotiation of the contract, having regard to the factual matrix and discussions between the parties leading up to the conclusion of the contract. By reference to Reardon Smith Line Limited v Yngvar Hansen‑Tangen [1976] 1 WLR 989 at 997, he submits evidence of the surrounding commercial circumstances may be relied on to give context to the agreement and that, despite the suggestion that evidence is only admissible where there is ambiguity, that requirement is a flexible concept in practice when one has regard to Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (Codelfa). I should say, at the outset, that in light of what was said by members of the High Court on the special leave application considered in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 86 ALJR 1 at [1]‑[5], the last proposition must be seriously doubted.
More directly, Mr Dennis says that the term of the contract contended for may be considered to arise from the following:
·The Fact Find document completed by Mr Dennis on 30 March 1999, which identified that he sought comprehensive advice which would arise from a process of collection and analysis of client information, identification of problems, identification of goals, objectives and priorities, written report with recommendations and solutions and implementation and periodic review.
·The information actually sought in the Fact Find.
·The goals and objectives and strategies sought for the immediate term, 1‑3 years and in the longer term.
·The terms of the client statement/authorisation in the Fact Find.
·The initial plan dated 2 June 1999 by references to “wealth creation”, provision of a “comprehensive and all-embracing report” and providing “well founded advice” taking into account Mr Dennis’ risk/return profile.
·The initial plan incorporating the obligations of the Corporations Law, as it then applied, and the need for the advice to have a reasonable basis.
·The initial plan incorporating the obligation on Chambers and Mr Takla to observe the Code of Ethics of the Financial Planning Association of Australia Limited.
·The final report of Mr Barber, dated 29 February 2012, containing a copy of the Code of Ethics of that Association applicable from 1 May 1997 and the Code adopted in November 2008, the latter stating as Principle 1, the requirement to place the client’s interests first.
·The initial plan incorporating the obligation on Chambers and Mr Takla to put the interests of Mr Dennis above their own.
·The initial plan incorporating the obligation on Chambers and Mr Takla to address the full scope of Chambers’ specialised areas which included retirement planning and superannuation.
·The initial plan incorporating the obligation on Chambers and Mr Takla to consider the resources available to them which the initial plan indicated were “two of Australia’s leading research houses” and to access the “top quality research and technical support”.
·The initial plan incorporating the knowledge that Chambers and Mr Takla were creating a plan that was a “comprehensive personal financial plan for [Mr Dennis’] immediate and long‑term future” and to “accumulate wealth to supplement any superannuation entitlements on retirement”.
Mr Dennis also relies on what his counsel describes as an admission made by Mr Takla in cross‑examination at trial, that he was required as a professional to apply the best of his ability to the tasks required; and the evidence of Mr Barber that a reasonable financial planner would ensure plans created for Mr Dennis provided “the greatest probability of reaching [his] needs and objectives with the lowest amount of risk” (see exhibit 8 at [77b]).
I am not satisfied, however, having regard to Codelfa, that there is any need to imply into the contract an implied term of the kind contended for, for reasons of business efficacy. Nor is such a term by any means “obvious”. Nothing in the materials relied on suggests that any term, other than the duty implied as a legal incident of this class of contract, to exercise due care and skill when advising, is required to make the contract effectual.
Indeed, the way in which Mr Dennis finally advances his case for the implication of the pleaded term suggests that he is not in fact pressing for the implication of a term to that effect, but is contending that, upon a proper construction of statements made in the initial plan that forms part of the contractual documentation and related documents, such a term arises. I am equally not satisfied that that is so. All the statements relied upon support the view that the respondents understood they were required under the contract to exercise due care and skill throughout the provision of financial services and advice. They also reflect the obligations, imposed by the relevant financial services regulation at material times, to have a reasonable basis for advice given. In that regard, they reflected the “Know your client/know your product” rule that was widely espoused in the financial planning industry at material times, and to which the respondents subscribed. To suggest there was an additional obligation to advise as to the most suitable financial investments, among suitable investments, adds a level of obligation not evident in the materials relied upon by Mr Dennis. I do not consider there was any such contractual duty. Nor, for the sake of completeness, do I consider any such duty arose in tort or equity so far as dealings between Mr Dennis and either Chambers or Mr Takla are concerned.
When opening Mr Dennis’ case counsel was pressed by the Court to explain whether the pleaded expression, “the most suitable investments”, was a synonym for “appropriate investments”. While counsel did not accede to that proposition, he suggested that the expression meant that in practice the respondents would provide “the best of Mr Takla’s and his firm’s work”. When further pressed, counsel said there might be a range of suitable investments and the pleading was intended to encapsulate the duty to do more than recommend what was merely “just suitable”. He added that it was the “professionalism” of the respondents that was in issue – that they would help Mr Dennis “to the best of their abilities” and in that sense to give him the most suitable for him of the investments.
When put this way, it is difficult to see how what Mr Dennis intended to encapsulate in the pleaded phrase, “the most suitable investments”, would produce, in the circumstances, any different requirement from that otherwise acknowledged by the respondents, to exercise due care and skill in the provision of financial advice throughout the relationship. The concept of “professionalism” does not, in my view, at least in the circumstances of this case, create some higher duty than the agreed duty to exercise due care and skill.
In light of this finding, the question of breach of the pleaded term does not arise for consideration.
DID CHAMBERS AND MR TAKLA BREACH THEIR DUTY TO EXERCISE REASONABLE CARE AND SKILL?
Mr Dennis’ primary breach allegations: Mr Dennis claims that, in substance, the duty to exercise reasonable care and skill when providing financial services and advice was breached by reason of the following primary failures of the respondents:
(1)The failure to complete a sufficient Fact Find:
(a)that enabled an accurate assessment of Mr Dennis’ personal expenses, as they encroached on the ability of Mr Dennis to fund investments;
(b)to enable a comprehensive view of Mr Dennis’ goals and objectives.
(2)The failure to note and bear in mind or address Mr Dennis’ circumstances, goals and objectives when making recommendations, particularly in light of his stated and repeated goals to retire debt and to provide for retirement by supplementing superannuation.
(3)The failure to consider Mr Dennis’ cashflow obligations by always recommending that investments be acquired by finance, without considering the impact of the accumulation of debt at material times.
(4)The failure to consider the concentration of investment recommendations in MISs which, by their inflexible nature, could not be sold prior to the completion of the subject project, and in the interim would not provide returns that helped to pay the debt associated with that investment, or any other investment.
(5)The failure to address the risk to Mr Dennis in holding the investments recommended, in the light of his circumstances, and how having to hold that investment would (or was reasonably likely to) have an impact on the goals and objectives of Mr Dennis. Mr Dennis says this is a failure to address the structure of a MIS, a scheme which is not capable of being sold if needed to retire debt. There was also no analysis of the expected returns from that or any sort of investment. The only outcome canvassed was linear growth but not, as was required and reasonable, the range of outcomes. Some of those outcomes would be adverse to the goals and objectives of Mr Dennis, but he was never advised of them.
(6)The failure to consider the goal of capital protection, as offered by the scheme financed by Macquarie Bank as a GEI. Mr Dennis says this was materially different to the MISs, which offered no capital protection. Chambers and Mr Takla failed to state how the absence of that protection (which was an objective of Mr Dennis) was nonetheless consistent with the overall objectives.
While Mr Dennis complains about the adequacy of most, if not all, of the investment advice he received, he particularly complains, as may be seen, about the advice to invest in MISs. In closing oral submissions, counsel for Mr Dennis put the case relating to the MIS investments succinctly. He said Mr Dennis was concerned not with whether advice to invest in MISs disclosed there were agribusiness risks in doing so, but that the advice was inappropriate because it continually recommended the purchase of assets which Mr Dennis could not sell. Accordingly, Mr Dennis argues that it is not enough that he was warned about the risks in the prospectuses and product disclosure information (PDI) for these investments, but that such investments did not meet his goals concerning retirement, superannuation, debt retirement, flexibility and capital protection. This contention is central to Mr Dennis’ case.
Respondents’ position: In response to the allegations set out in [103] above, the respondents say:
(1)There was no contractual, tortious or statutory requirement for them to complete a Fact Find form as asserted in point (1). Instead, the respondents had a duty to ensure that they had sufficient relevant information from Mr Dennis in order to allow them to make appropriate recommendations to him, which duty they discharged on each occasion on which advice was given;
(2)As to point (2), Mr Dennis has not established through evidence that his goals were as there set out. His evidence was in fact quite to the contrary: he did not want to salary sacrifice and plan for his retirement, and was not interested in retiring debt to the sacrifice of his lifestyle and ability to purchase lifestyle assets. Mr Dennis did not give evidence as to his goals throughout the investment period or how they differed from the goals which he discussed with Mr Takla from time to time. The respondents say, however, that they did take into consideration Mr Dennis’ circumstances, goals and objectives as advised to them when making recommendations to him: for example, the invitation to enter into the first MIS in AGL timber project 2 1999, which provided him with a tax refund to use as a deposit on the home later jointly purchased with his then wife; and the SOAA dated 23 April 2007, which provided a way in which Mr Dennis could meet the financial obligations arising from his divorce settlement;
(3)In relation to point (3), Mr Dennis’ cashflow would have been managed by his making the agreed monthly payments into his buffer account, which he manifestly failed to do throughout the period of the investment, and most particularly following his separation from his former wife;
(4)In relation to point (4), the respondents say they did consider the entry by Mr Dennis into MIS investments in comparison to his overall portfolio, referring to the relative proportions of both set out in written submissions upon opening to the effect that Mr Dennis’ total investments placed through the respondents over nine years totalled almost $2.45 million, of which $1.6 million of the investment capital (or 65%) was protected at maturity and approximately $850,000 was not. They say that of the amount which was not protected at maturity, Mr Dennis’ exposure to capital loss was reduced by the amount of $370,000 by the immediate obtaining of a taxation refund (or reduced liability to pay tax in 2008). Taking these immediate returns into consideration Mr Dennis’ exposure to capital loss was $480,000 or 19.5% of his total portfolio. Further, the respondents say Mr Dennis was expressly advised on numerous occasions of the illiquid and the non-transferable nature of the MIS investments prior to his entry into them. Finally, interim returns, some immediately, were expected, in one respect, on all of the MISs, through a sizeable tax refund, which Mr Dennis could have put towards his investments. A good example, they submit, is the first 1999 MIS, and the important tax benefit received in respect of that tax year – which was used by Mr Dennis to buy the Ardross house jointly with his then wife. In addition, distributions (including interim distributions) were expected on most of the MISs from the year 2007 on;
(5)As to point (5), the respondents say this has been addressed above. In addition, they say the effect of any failure of the investments to meet growth expectations was obvious: Mr Dennis would be unable to achieve the anticipated returns and still be required to meet the debt obligations. There was no need to warn of risks which were obvious. But as pointed out above, they say the risks associated with the investments were explained and the PDSs relating to the MISs all contained detailed and explicit warnings about the risk of these types of investments. In fact, some of the risks warned of in the documents came to eventuate, for example, a high Australian dollar which undermined the export market to which the plantation schemes were directed; and
(6)As to point (6), the respondents say Mr Dennis did not adduce evidence (which he could easily have led if available) of the prior existence and expression, during material times, of his now asserted goal of capital protection with respect to all of his investments – referred to in (6) of [103]. Nor was Mr Takla cross‑examined on why this goal was not incorporated in all of the advices given from time to time. The respondents say the goal of capital protection is inconsistent with Mr Dennis’ margin lending account held through ABN AMRO Morgans, his continued investment in MISs, and his apparent failure to take out adequate insurances to protect his income in case of sickness. It is further contradicted by Mr Dennis’ loss of opportunity claim, the first statement of which revolved around further investment in a margin lending share market investment, and the alternative investment posited by Mr Barber. This “goal”, the respondents say, is nothing more than a later construct by Mr Dennis and ought to be seen as such and disregarded.
Focussing on the nine MIS investments identified in the above loss table as productive of loss, the respondents submit that essentially three points are raised against them:
(1)that the MIS investments were contrary to the goal of “flexibility” identified for Mr Dennis as an investment goal;
(2)that Mr Takla advised Mr Dennis to buy into the MISs without a proper assessment of his overall risk exposure and financial ability to keep paying interest and administration fees; and
(3)that some purported 5% - 10% industry standard cap on that type of investment as part of an investment portfolio was exceeded.
Thus, the respondents consider that a further element of the case put by Mr Dennis is that the advice given by the respondents led him to an over-exposure to interest and administration costs associated with the investments; in other words, that Mr Takla had not properly considered Mr Dennis’ financial exposure and risks (such as loss of employment) in giving the investment advice from time to time. The respondents note that this resulted, in accordance with the argument put, in Mr Dennis reaching some point or points in time after June 2008, the date when he received the last advice from the respondents, where he could not keep up with the payments due on the nine MISs. Such defaults, it is said, caused him to be liable for the total debt, including capital and very heavy penalty interest rates which have applied since he stopped paying.
As to the first of the three MIS points, the respondents by way of general response submit that “flexibility” of investment was never a material investment “goal” for Mr Dennis. They note the original Fact Find records that he was “slightly concerned” with the flexibility of investments (or with “current income” from the investments). He wanted to invest for five years or longer and was prepared to borrow funds to do this. The respondents say that the alternative investment strategy suggested by Mr Barber in his expert evidence would also lack “flexibility” in the same way as an investment in a long‑term MIS.
The respondents say the initial plan agreed to by Mr Dennis dealt specifically with a Macquarie GEI, and the acquisition of a home for the applicant and his then wife, and recorded (as was true) that the plan involving a GEI was flexible and that its term was flexible, with illustrative figures supplied in the initial plan.
As to the second of the three MIS points, the respondents note the AGL timber project 2 1999 MIS was only released onto the market on 18 June 1999 and it provided an opportunity suited to the needs of the applicant to get a tax benefit in that tax year and so supply the deposit for the required home.
As to MIS investments more generally, the respondents say Mr Dennis laboured under a false impression at material times about an alleged secondary market for MIS products, something they did not induce. They say, however, that in regard to Mr Dennis’ evidence that, when he initially started taking advice from the respondents, he read all documents carefully, it should be inferred that he knew from the outset that there was no secondary market.
The respondents also submit that on the evidence the risk in making these investments was explained to Mr Dennis by Mr Takla both orally and in writing and was contained in the various prospectuses and PDSs, to which the applications for investments were attached.
The respondents further submit that Mr Dennis was advised by the respondents at material times to take precautions such as taking out adequate insurance, income protection insurance and the like.
The respondents say there was no duty to “record”, in writing, the considerations that led to recommendations being made. They say the rules of the Financial Planning Association, to which the respondents belonged, setting out best practice guidelines do not constitute legally binding standards. They say there was no requirement that their inquiries should take the form of a Fact Find document, and that the position at common law in respect of negligence must be the same. Thus, it comes down to what in fact Mr Takla did as to whether he had a reasonable basis for advice given, given Mr Dennis’ investor type and his goals and objectives.
The respondents (correctly) note that s 945A of the Corporations Act, as it applied at material times, while introduced in the post‑FSR period only applied to Chambers when it became the holder of an AFSL on 10 March 2004. Section 945A, the respondents submit, only required that an adviser must make reasonable enquiries of a client of relevant personal circumstances in relation to giving of advice – not to conduct some “investigation”, as Mr Dennis would have it; and any enquiry which must be conducted related to products which are sought to be recommended.
The respondents say that Mr Takla’s evidence was that he made sure he knew and took into account Mr Dennis’ financial position and obligations every time he gave advice. They say it was never put to Mr Takla that he did not have adequate information to advise Mr Dennis. He obtained information from and through Mr Dennis and reasonably relied upon such information.
The respondents say Mr Takla knew exactly what investments Mr Dennis had in the portfolio in respect of which he advised him and that any omission or mistake in recording any such investment does not translate to a lack of a reasonable basis. Further, Mr Takla cannot be found responsible for any advice based on Mr Dennis’ disclosed circumstances if those were ultimately untrue (for example, income estimates provided by Mr Dennis versus the actual income set out in his tax returns).
In so far as the third of the three MIS points is concerned, the respondents contend there is or was no industry standard that can translate to some legal norm that MIS investments should only constitute up to 5% ‑ 10% of an overall portfolio. The respondents (while maintaining a primary objection to Mr Barber’s qualifications to give expert evidence) say Mr Barber was required in cross‑examination to admit that this “rule” was given to him by groups he had worked for and he gave no evidence of its application in the industry more generally. In any event, they submit any such rule would be inherently uncertain and completely unworkable. They submit that the first or series of first investments could never be MISs, on this basis, because they would then form 100% of an investment portfolio. They submit the rule of thumb contended for cannot sensibly be applied across the board without reference to an investor’s risk profile and risk appetite.
They also note that Mr Manoj Pillai, the expert called by them, rejected the suggested rule of thumb and that the issue was highlighted by the disagreement between the experts regarding the investments which should be considered in the context of weighting Mr Dennis’ investment “portfolio”.
The respondents say it should be noted that the final advice given to Mr Dennis on 7 June 2008 provided him with a detailed cashflow projection and that, while the experts were uncertain where the investment cost of $276,231 for the year 2009 was taken from, they did not suggest it was wrong. It showed a high cost for Mr Dennis, so was conservative advice. The respondents say Mr Takla conceded that the other projection on page 3583 of the Trial Book was nonsensical, but he was never cross-examined to the effect that there was anything wrong with the projection. They also say Mr Dennis did not give any evidence of having been misled by the errors or any specific reliance on that projection and Mr Barber dropped his concerns about negative cashflow for 2009 once his attention was drawn to the explanatory footnote on the same page.
The respondents further submit that the submissions made by Mr Dennis in relation to the earlier 9 April 2008 SOA is largely irrelevant given that he did not proceed with the recommendations recorded in the advice, but it does however contain an accurate cashflow.
The respondents observe that Mr Dennis did not consult Mr Takla before stopping his payments. They say he admitted during cross-examination that he only expected the respondents to handle his portfolio and not to manage all of his financial affairs. They point to Mr Takla’s evidence that, if Mr Dennis had consulted him, he would have assisted him to restructure his affairs, as he had done for a number of other clients, but that is not what Mr Dennis wanted.
Objections to expert evidence of Mr Barber: Before proceeding further I should deal with the objection taken by the respondents to Mr Barber’s qualifications to give expert opinion evidence in this proceeding. Chambers and Mr Takla object to the reception into evidence of Mr Barber’s opinions on the grounds that he is not qualified to give opinion evidence concerning breach and loss in the proceeding at all, as well as on grounds concerning the relevance of his opinions to matters in issue if he is so qualified.
While evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion is expressed, as provided for by s 76 of the Evidence Act 1995 (Cth), there are a number of exceptions including, under s 79, where an opinion is based on specialised knowledge. Section 79 provides that if a person has specialised knowledge based on the person’s training, study or experience, the opinion rule does not apply to evidence of an opinion of that person (often called “the expert”) that is wholly or substantially based on that knowledge.
In that regard, it is understood that under s 79 it is not necessary for an expert witness to be formally qualified and relevant experience will suffice. Nor is there any requirement that the knowledge upon which expert opinion evidence is based must relate to a “recognised field of expertise”. In that regard, the relevance discretion in s 135 is considered appropriate to enable courts to exclude expert opinion evidence where its probative value is substantially outweighed by the danger that it might misleading or confusing.
Associate:
Dated: 20 June 2014
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