Jackson v Abram

Case [2015] SASCFC 175

Supreme Court of South Australia

(Full Court: Civil)

JACKSON & ANOR v ABRAM & ANOR

[2015] SASCFC 175

Judgment of The Full Court

(The Honourable Justice Peek, The Honourable Justice Stanley and The Honourable Justice Lovell)

4 December 2015

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES

TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - WHERE ECONOMIC OR FINANCIAL LOSS - CARELESS ADVICE, STATEMENTS AND NON-DISCLOSURE - PARTICULAR PERSONS AND SITUATIONS - PROFESSIONAL ADVISERS

PROCEDURE - COSTS - APPEALS AS TO COSTS - WRONG EXERCISE OF DISCRETION

Appeal from a judgment in which a Judge of the District Court awarded Mr Jackson damages against Mr Abram in the sum of $288,240. At trial the appellants alleged that they had suffered losses in the vicinity of $3.9 million as a result of negligent advice and breaches of statutory duty. The appellants engaged the respondents to perform accounting and taxation services. The case for the appellants was that, in reliance on advice given by the respondents, they had invested in a number of agricultural managed investment schemes. These schemes were promoted and managed by the Great Southern Group (“Great Southern”). All of these schemes ultimately failed. The judge dismissed the claim by the second appellant. The judge dismissed most of Mr Jackson’s claims. However, the judge found that Mr Abram had negligently failed to advise Mr Jackson of the need to diversify his investments so that he did not have such a large capital sum invested exclusively in managed agricultural investments generally and Great Southern schemes particularly.

Whether the trial judge erred in finding that Mr Abram had given a Financial Services Guide (FSG) to Mr Jackson in November 2004; in dismissing the appellants’ claim in relation to the 2005 plantations project; in finding that Mr Abram was not liable for the full value of the appellants’ loss in relation to the 2006 cattle project; in finding that Mr Abram was not liable for the full value of the appellants’ loss in relation to the 2007 cattle project; in dismissing the appellants’ claim in relation to the 2008 wine grape project; in failing to find Mr Abram was negligent in not following mandatory requirements set out in the Great Southern Authorised Representative Compliance Manual and the Corporations Act 2001 (Cth); in finding that the award of damages had to be reduced by the amount of the taxation deductions enjoyed from the relevant investments; in failing to award punitive or exemplary damages; and in the exercise of his discretion by awarding costs against the appellants.

Held per Stanley J (Peek J and Lovell J agreeing) allowing the appeal:

1. The judge’s finding that Mr Abram gave Mr Jackson a copy of the FSG has not been shown to be contrary to incontrovertible fact or uncontested testimony. It is not a finding with which I would interfere. This ground must fail (at [37] and [39]).

2. The judge found that the advice to invest the sum of $15,000 in the plantations…

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Jackson v Abram [2015] SASCFC 175
Case
[2015] SASCFC 175
Decision Date

CaseChat Overview and Summary

This case concerned an appeal by Mr Jackson and Arian Systems Pty Ltd (the appellants) against a decision of a lower court. Mr Jackson had sought advice from Mr Abram, an authorised financial services representative, regarding the incorporation of Arian Systems and his tax affairs. Mr Abram also introduced Mr Jackson to agricultural investment schemes offered by Great Southern, in which Mr Jackson subsequently invested. The dispute arose from Mr Jackson's assertion that he only sought accounting services and denied seeking financial or investment advice from Mr Abram, while Mr Abram facilitated these investments.

The central legal issues before the appellate court were whether the primary judge erred in their assessment of damages and pre-judgment interest, and whether the primary judge wrongly exercised their discretion in awarding costs against the appellants. Specifically, the court had to determine the correct calculation of losses suffered by Mr Jackson from his investments and the appropriate quantum of pre-judgment interest on those losses, as well as the validity of the cost order made against the appellants based on a failure to better a filed offer.

The appellate court found that the primary judge should have calculated pre-judgment interest on a higher amount of loss than originally determined. This adjustment was based on a re-evaluation of the financial losses incurred by Mr Jackson in the 2005/06 and 2006/07 financial years. The court also considered the grossing up of the award for taxation and the calculation of post-judgment interest. Regarding costs, the court upheld the primary judge's decision, finding that the judgment amount did not better the filed offer made by Mr Abram, and therefore the discretion to award costs against the appellants was not wrongly exercised.

Consequently, the court ordered an increase in the pre-judgment interest awarded to Mr Jackson by an additional $45,000, and an additional sum of $11,466 to account for taxation on the increased interest. Mr Jackson was also awarded $11,000 by way of post-judgment interest on the increased damages. The order for costs against the appellants was affirmed.

Orders

Orders of the court

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Background

Background to the litigation

On appeal, as at trial, Mr Jackson appeared in person and by leave of the Court for the second appellant. The appellants filed extensive written submissions of more than 110 pages. Many of these submissions extend beyond the grounds of appeal. To the extent they do so, I have disregarded them. Factual background Mr Jackson worked in the defence industry. He was an employee initially but eventually became an independent contractor. In order to provide contract services he sought advice on incorporation. In about November 2004, Mr Jackson approached Mr Abram at his business premises in Salisbury. Consequently, the second appellant, Arian Systems Pty Ltd (“Arian”), was incorporated. Mr Jackson and his wife were appointed directors of Arian. In addition to the incorporation of Arian, Mr Abram assisted Mr Jackson with his tax affairs and with the establishment of both the G & P Jackson Family Trust[2] and the G & P Jackson Retirement Fund. The G & P Jackson Retirement Fund was a self-managed superannuation fund for Mr Jackson and his wife. Around the time Arian was established, Mr Abram told Mr Jackson about the tax-deductible agricultural investment schemes in Great Southern. Mr Abram was an authorised representative of Great Southern and had an Australian Financial Services Licence. He was paid commission and marketing fees by Great Southern. Mr Abram was required to disclose to a potential investor the fact that he received such remuneration from Great Southern. The judge found that Mr Abram had disclosed to Mr Jackson that he was a representative of Great Southern and that he received payment by way of commissions.[2] This was linked to the company for the purpose of income distribution. See Transcript 357. Mr Jackson gave evidence that he only sought accounting services from Mr Abram in relation to Arian and superannuation. Mr Jackson denied ever seeking financial or investment advice from Mr Abram. It was common ground at the trial that Mr Abram introduced Mr Jackson to the investment opportunities in Great Southern. Eventually Mr Jackson agreed he was interested in reducing his tax liability, which was one of the reasons he chose to invest in Great Southern. Ultimately, Mr Jackson agreed to become an investor in a number of Great Southern investment schemes. Plantations 2005 project[3] [3] This is the only investment project in the name of Arian. See Transcript 925. In about May 2005, Mr Jackson went to see Mr Abram at his office for the purpose of tax and accounting advice.[4] Mr Jackson informed Mr Abram that he was planning to invest about $120,000 into his superannuation.[5] Mr Abram informed Mr Jackson of the Plantations 2005 project. This involved investment in tree farming over a 10-year period. Mr Abram represented that this project was 100 per cent tax-deductible and that the expected return after 10 years would be double the initial investment.[6] Mr Jackson agreed to Arian investing $15,000 in the project and on 20 December 2005 he was issued with five plantation woodlots in the south region of the Tiwi Islands. The balance of $105,000 was paid into the G & P Jackson Retirement Fund. [4] Transcript 48.[5] Transcript 52. [6] Transcript 721.16-18.2006 Beef Cattle project

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In my view this ground must fail.Pre-judgment interest The judge awarded pre-judgment interest in a lump sum of $95,000.[56] That sum was calculated on the loss of $80,000 in the 05/06 financial year[57] and the sum of $128,000 in the 06/07 financial year.[58] The judge adopted an interest rate of six per cent in calculating the lump sum. 14DCSR 208 provides that the appropriate rate for the calculation of pre-judgment interest is a matter for determination by the judge in each case. As a guide, the rule suggests the cash rate set by the Reserve Bank of Australia (“RBA”) plus four per cent. Allowing for the periods since those losses occurred until judgment was entered on 24 September 2014, an average interest rate of six per cent appears low but there is no ground of appeal challenging the interest rate adopted by the judge. For the reasons set out above, I have concluded that the judge should have calculated pre-judgment interest on a loss of $119,000 in the 05/06 financial year and the sum of $188,000 in the 06/07 financial year. That is to say an additional $39,000 in the 05/06 financial year and an additional $60,000 in the 06/07 financial year. As a result, utilising an interest rate of six per cent, Mr Jackson is entitled to an additional $45,000 by way of pre-judgment interest. [56] [2014] SADC 118 at [387]. [57] This is the loss the judge found Mr Jackson suffered from his investment in the 2006 beef cattle project. [58] This is the loss the judge found Mr Jackson suffered from his investment in the 2007 beef cattle project in the amount of $80,000 and the loss suffered in the 2007 olive project in the amount of $48,000. The judge awarded an additional $24,207 to gross up the award of pre-judgment interest of $95,000 to allow for taxation.[59] That figure must also be adjusted for the increase in the loss suffered by Mr Jackson for which Mr Abram is liable. Again, adopting the same methodology as the judge, I would allow an additional sum of $11,466. [59] Jackson & Anor v Abram & Anor, reasons of Judge Clayton, 24 September 2014.Damages and interest In accordance with these reasons, Mr Jackson has an entitlement to damages and interest as follows: For these reasons, Mr Jackson also is entitled to an award of post-judgment interest in respect of the increased amount to which I have found him to be entitled. That increased amount is the difference between $401,242 and $288,240, namely, $113,002. Utilising 14SR 217, post–judgment interest is to be calculated by reference to the cash rate set by the RBA plus six per cent. Post-judgment interest is to be calculated for the period since 24 September 2014. On that basis, Mr Jackson is entitled to an award of $11,000 by way of post-judgment interest. The exercise of his discretion by awarding costs against the appellants The judge ordered that Mr Jackson was to pay the costs of Mr Abram on a party/party basis from 4 July 2013 until 24 September 2014. He did so on the basis that Mr Jackson failed to better a filed offer of 19 June 2013 for $257,000 plus interest and legal costs and disbursements to be agreed or adjudicated. The judge accepted evidence that the filed offer was equivalent to an offer of $427,000 plus costs and disbursements. The evidence consisted of a calculation of the interest payable on the offer of $257,000. Accordingly, the judgment given at trial in the sum of $288,240 did not better the filed offer. The judge’s order relied on 6DCR 187 and 188.

Ratio Decidendi

Legal Principle Established

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