Laro-Bashford v Mihos
[2015] VCC 755
•10 June 2015
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISION
GENERAL CASES LIST
Case No. CI-14-00145
| ADAM LARO-BASHFORD & ANOR | Plaintiff |
| v | |
| GEORGE MIHOS | Defendant |
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JUDGE: | His Honour Judge Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 May 2015 | |
DATE OF JUDGMENT: | 10 June 2015 | |
CASE MAY BE CITED AS: | Laro-Bashford & Anor v Mihos | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 755 | |
REASONS FOR JUDGMENT
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Subject: TRADE PRACTICES; NEGLIGENCE
Catchwords: TRADE PRACTICES - misleading and deceptive conduct under Fair Trading Act 1999 (Vic) – representations made regarding investment – representations made regarding return on investment
NEGLIGENCE – whether defendant owed plaintiffs duty of care – whether breached duty of care – whether plaintiffs contributed to their own loss
Legislation Cited: Fair Trading Act 1999 (Vic); Wrongs Act 1958 (Vic)
Cases Cited:BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338; Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649
Judgment: Judgment for the plaintiffs for the sum of $87,185.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr B Ryde | MST Lawyers |
| For the Defendant | In person |
HIS HONOUR:
1 This case arises out of a dispute between Mr and Mrs Laro-Bashford (“the plaintiffs”) and George Mihos (“Mihos”), a financial coach and entrepreneur. In particular, the dispute concerns an investment made by the plaintiffs in the SNGC Unit Trust (“the Trust”) of $100,000 in four payments over the course of approximately 6 months.
2 The plaintiffs allege that they invested this money in the Trust based on misrepresentations and advice from the defendant.
3 The defendant denies making several of the representations and giving financial advice to the plaintiffs. He further contends that, if the plaintiffs suffered any compensable financial loss (which he denies), they partly caused, or contributed to, that loss by their own negligence.
Background
4 In April 2008, the plaintiffs were seeking to increase their knowledge in relation to finance and investing. They met Mihos through a mutual friend. He offered them a complimentary financial coaching session. Mihos advised the plaintiffs that, before the meeting, he wanted them to complete a ‘Personal Questionnaire’. The questionnaire included questions regarding their investment experience, current financial position and future financial goals, including their appetite for risk. The plaintiffs were instructed to return this questionnaire no later than five days before their initial meeting with Mihos. The plaintiffs indicated in the questionnaire that: their risk profile regarding property investing was “low risk”; they had neither the confidence nor desire to take high risk; they had never been involved in a risky investment; and had not yet made a property investment.
5 The plaintiffs first met with the defendant on 28 April 2008 at his offices in South Yarra. Mihos introduced himself as a financial coach, and told the plaintiffs his life story, including how he managed to establish himself as a successful businessman. The plaintiffs told Mihos about themselves, how their financial goal was to purchase a hobby farm, and to create passive income for their family in order to enable Mrs Laro-Bashford to stay at home with the children that the couple planned to have in the near future. Mihos told the plaintiffs that they were ‘coachable’ and offered them a discounted rate of $5,750 to enter into his VIP financial coaching program for 12 months if they paid that day. This coaching program consisted of monthly meetings for approximately an hour for financial coaching, as well as various homework tasks in between the sessions. The plaintiffs agreed to sign up to the VIP coaching program, paid the $5,750 fee on the first plaintiff’s credit card and signed a VIP coaching agreement (“the coaching agreement”) at that first meeting.
6 After signing the coaching agreement, Mihos advised the plaintiffs that, in order for him to be able to assist them in achieving their financial goals, the plaintiffs needed to “get liquid”. “Getting liquid” consisted of setting up a line of credit, which would be secured against the equity in the plaintiffs’ home in Altona Meadows, and setting up a self-managed superannuation fund. Over the course of the next few months, the plaintiffs established a line of credit for approximately $120,000 and a self-managed superannuation fund (“the Super Fund”). They rolled over approximately $140,000 in superannuation into the Super Fund.
7 The financial coaching meetings took place mostly each month. Between the meetings, the plaintiffs were set homework by Mihos and their evidence was that they largely completed these tasks. As part of the meetings, the plaintiffs and Mihos discussed where the plaintiffs could invest the funds that had been “made liquid”.
8 At the scheduled meeting on 15 October 2008, Mihos presented the plaintiffs with an investment opportunity in SNGC Investments Pty Ltd (“SNGC”). This was the trustee of the Trust . Mihos said that SNGC was an investment vehicle which would allow investors to invest a certain sum of money, between $20,000 and $100,000, in return for a percentage share in the Trust. SNGC would then seek out investment opportunities on behalf of SNGC unit holders. Unit holders would receive payment of any profits made by the Trust in proportion to their percentage share in the Trust. The plaintiffs allege that, during the course of this meeting, Mihos made certain representations which they relied upon to invest money in the Trust both personally and from the Super Fund. The plaintiffs claim that representations were misleading and deceptive and, as a result, they have lost the funds which they invested.
9 On 9 December 2008, Mrs Laro-Bashford invested $20,000 from the line of credit moneys in the Trust. On the same day, the Super Fund also invested $20,000.
10 In February 2009, Mihos met the plaintiffs at their home. He allegedly told them some investors had pulled out and that they had the opportunity to make a further investment in the Trust. On 12 February 2009, Mrs Laro-Bashford invested an additional $40,000 in the Trust from the line of credit.
11 On 19 May 2009, as a result of more representations made in a meeting at Mihos’ office the day before, the Super Fund invested another $20,000 in the Trust.
12 In about October 2013, the plaintiffs received statements which showed that they owned 106,795 shares in a company called Creative Water Technology Ltd (“Creative Water”). They were not aware of how they became shareholders in this company. The value of the shares at the time (and very likely since then) did not exceed about $12,815.
13 When the proceedings began in January 2014, neither the plaintiffs nor the Super Fund had recovered any of the moneys invested in the Trust. Nor had they received any dividends, distributions, interest or other payment from the investment in the Trust.
Credibility of witnesses
Mr Laro-Bashford
14 Mr Laro-Bashford presented as a careful witness who generally gave considered and responsive answers. On occasion he became a little agitated and seemed determined not to be intimidated or overborne by Mihos. He seemed keen to have his day in court and present his case alleging that Mihos was responsible for the family’s present plight in which the plaintiffs had invested $100,000 and had nothing to show for that investment except some shares in Creative Water. Mr Laro‑Bashford had a better grasp of parts of the case than his wife and his recollection of events usually appeared to fit quite well with various facts which were either agreed or not seriously contested. Generally, I regarded him as an honest witness.
Mrs Laro-Bashford
15 Mrs Laro-Bashford came across as a forthright witness. She gave clear evidence of the major meetings with the defendant. She relied to a large degree upon the notes which she had taken during those meetings. However, aspects of her evidence, especially regarding the plan to retain 90% of the funds raised for equity, were puzzling and confusing. She recognised this when on the day after giving this evidence, she sought to revisit the topic and give another account. Unfortunately, Mihos did not question Mrs Laro-Bashford about the change in her evidence and whether she spoke to anyone overnight which caused her to alter her evidence in the way she did. In her evidence, Mrs Laro-Bashford said that she had found Mihos and his manner striking and somewhat charismatic. She paid attention to his various suggestions and was an enthusiastic supporter and follower during the early period of their professional relationship. On her own admission, she was not very familiar with the details of the Super Fund and left that aspect primarily to her husband. Generally, I regarded Mrs Laro-Bashford as an honest witness, although, like her husband, she was prone to exaggerate from time to time and in my view, overstated her reliance upon Mihos.
16 As Mihos pointed out, each of the plaintiffs was articulate, intelligent, and had worked in managerial positions. Even if they were not experienced in the financial world, they were not uneducated or stupid. This point was strengthened by the plaintiffs’ insistence in dealing with Westpac through Mrs Laro-Bashford, rather than Mihos’ contact, in relation to the line of credit. On that point, the plaintiffs were sufficiently independent and decisive to act in what they regarded as their own best financial interests. Even though it was apparent to them that Mihos was angry with them when they told him they would not use his contact, they nonetheless refused to be cowed and do as he wished.
George Mihos
17 Mihos presented as a confident, self-assured witness. He had a tendency to give long answers and easily strayed into areas of little or no relevance to the issues in dispute. This was especially so in his evidence-in-chief where he gave sworn evidence in the form of a lengthy narrative.
18 Under cross-examination, Mihos was quite often evasive and would not give direct answers to simple questions. Sometimes he was prone to either dispute or not accept certain propositions which seemed to be clear on the written record. Mihos was a person with considerable experience in public speaking and was adept at marketing himself, his story and his views. As a result, he was willing to answer questions at length if he perceived an opportunity to self-promote or justify his actions. But if it was against his interests or he felt he was under attack in some way, he could adopt a different approach which was significantly less expansive and less inclined to acknowledge the obvious.
19 Because the major conversations in issue took place in the latter part of 2008 and the first half of 2009, I give greater weight to those allegations which have some contemporaneous written support. The plaintiffs’ notes are of importance in this context. The plaintiffs said that they made the notes during the meetings with Mihos. Mihos agreed that the plaintiffs had made some notes at their meetings with him but he was not privy to their details. The plaintiffs’ notes were usually a record of what Mihos said at the meetings. But on one occasion, the notes included what Mihos had written on a whiteboard during a meeting at his premises. On balance, I think it appropriate to give significant weight to the notes as a contemporary record of the gist of what Mihos said.
20 A major disadvantage in Mihos acting for himself was that the plaintiffs were not subjected to a proper cross-examination. In cases where there is a clash of sworn evidence between opposing witnesses, it is often valuable to see how a person copes with cross-examination. The court was denied the opportunity in this case. For example, there was no detailed exploration by Mihos of the notes taken by the plaintiffs, the similarities and differences between them, and the discussions which the plaintiffs might have had about the claim against Mihos. There were strong similarities in the evidence given by the plaintiffs. A well-executed cross-examination might well have helped determine whether that resulted from the plaintiffs recalling the same things or from discussion (or even collusion) between them. The lack of legal representation for Mihos also meant that the court did not hear the plaintiffs’ version of all the factual matters which Mihos relied upon because he did not put all this material to them.
21 Generally, where there is a clash evidence between the plaintiffs and Mihos, I would favour the plaintiffs’ version of events for several reasons. First, broadly speaking, the plaintiffs’ notes support important aspects of their evidence and their case.
22 Secondly, because of the significance of the relationship in the quest for financial and investment knowledge which would enable the plaintiffs to achieve the lifestyle they wanted, it is likely that the plaintiffs would have paid keen attention to, and been more likely to remember, the details of their experience with Mihos. For Mihos, the plaintiffs were simply clients (and friends) who came to him for coaching on financial and investment related issues. Mihos did not suggest that they were especially memorable.
23 Thirdly, Mihos was a more polished and sophisticated public performer than the plaintiffs. He was an experienced salesman who exuded charm. However, his answers to questions did not always have substance and directly address the point raised by the question.
24 Fourthly, from around April 2008, Mihos said he was coaching approximately six people as well as being heavily engaged in pursuing opportunities for the Trust. He said that this involved countless hours of work and took up a large amount of time, effort and energy. A person with such busy and varied work commitments could not be expected to remember accurately all the conversations and dealings he had with clients and third parties. Nor did Mihos maintain any contemporary notes to record the details of his actions.
Issues
25 The issues to be decided at trial were as follows:
(a) What representations were made by the defendant and did the plaintiffs rely on any such representations in making the investment in the Trust?
(b) If made, were the representations misleading or deceptive?
(c) Did the defendant advise the plaintiffs to make the investments in the Trust and, if so, did the plaintiffs rely on his advice?
(d) Did the defendant owe the plaintiffs a duty of care to exercise all due skill and care in providing such advice?
(e) Did the defendant breach his duty of care in advising the plaintiffs to invest in the Trust?
(f) What value should be attributed to the CWT shares currently held by the plaintiffs?
(g) Were the plaintiffs themselves negligent in making the investment in the Trust?
(a)What representations were made by the defendant and did the plaintiffs rely on such representations in making the investment in the Trust?
26 As I understand the plaintiffs’ case, the initial investment was induced by representations allegedly made in October 2008 and the later investments were made partly in reliance upon the initial representations, and partly upon additional representations made by Mihos.
First Representations – October 2008
27 In their claim, the plaintiffs alleged that on about 15 October 2008 at their meeting with Mihos, he made the following representations:
(i) Mihos was setting up the Trust for the purpose of investments in selected companies and was in the process of raising approximately $200,000 to $400,000 as capital;
(ii) the minimum investment permitted was $20,000 and the maximum investment was $100,000;
(iii) Mihos would control the Trust, applying his skill, knowledge and expertise to the selection and management of the Trust’s investments and would only “present to the plaintiffs what would work”;
(iv) the Trust was already looking at investments in a company which would return 45% of the total money invested in 6 months, and another company which would return 50% of the total money invested in 6 months;
(v) Mihos was going to invest a substantial sum of his own money in the Trust;
(vi) the plaintiffs would receive full repayment of their initial investment in the Trust within 12 months;
(vii) Mihos was offering the opportunity to invest only to a select group of individuals undertaking his VIP coaching course;
(viii) Mihos would issue appropriate share certificates; and
(ix) the transfer of funds should be sent to SNGC’s bank account.
Of these representations, the plaintiffs said that they placed greatest reliance upon representations (iii) and (iv) and another representation to the effect that 90% of the funds invested in the Trust were to be kept ‘in equity’, and only the remaining 10% would be used for investment. I note that this last alleged misrepresentation was not pleaded in the Further Amended Statement of Claim. The plaintiffs gave evidence about it. Mihos did not seem surprised by the allegation. He had the chance to cross-examine about the evidence and did not raise any objection to it or ask for any special consideration to enable him to address the point raised.
Meeting Notes
28 In her notes of the meeting held on 15 October 2008, Mrs Laro-Bashford referred to two possible investments which the Trust might make:
(a)a food manufacturing investment where 45% of the investment would be returned in six months; and
(b)a publishing investment where there would be a 50% return in six months.
29 She recorded that Mihos was looking for equity investors to contribute between $200,000 and $400,000 with a minimum contribution of $20,000 and a maximum contribution of $100,000. There would be a full return to the plaintiffs of their investment in 12 months. Mihos would keep 90% of the money raised as equity. She recorded Mihos as recommending that the plaintiffs invest $20,000 from the Super Fund and $20,000 from the line of credit.
30 Mr Laro-Bashford’s notes were similar. He recorded the potential food and publishing investments and the anticipated returns in the six month period. He referred to the Trust raising between $200,000 and $400,000, the $20,000 minimum and $100,000 maximum investments and holding 90% of the money as equity. His notes said that a $20,000 investment gave a 0.5% interest in the Trust. His notes also recorded the two sources of funds for the plaintiff, the line of credit and the Super Fund.
Oral evidence
Representation (iii)
31 Mrs Laro-Bashford said that at the meeting on 20 May 2008, Mihos said to them that he was ethical, only worked with trusted people and was only interested in long term relationships. He said that he was in it with them and would only bring to the plaintiffs what was going to work. Such positive statements by Mihos were a fairly constant theme.
32 Mr Laro-Bashford said that Mihos said to them at one of the meetings that the plaintiffs would get his advice and Mihos would guide them through what worked for him and what would work for them.
33 In his evidence, Mihos said that what he spoke of to people like the plaintiffs was based on his results and experience. He would tell them what he had done and suggest that the plaintiffs might wish to consider doing something similar. However, he said that his terms and conditions highlighted that there were no promises or guarantees. He said that he did not guarantee anything, whether it be investment opportunities, opportunities to participate, returns or anything else.
34 It appears that the plaintiffs did not directly put to Mihos that he would only present to the plaintiffs opportunities in connection with the Trust which would work. At one point, I invited Mihos in his evidence-in-chief to comment upon the allegations made in paragraphs 3, 6 and 9 of the plaintiffs’ Further Amended Statement of Claim. These were the paragraphs referrable to the representations alleged against him. The direct evidence he gave in response to my invitation was not especially detailed or illuminating.
35 I find on the balance of probabilities that Mihos did represent that he would control the Trust applying his skill and knowledge to the selection and management of the Trust’s investments and that he would present to the plaintiffs only what would work. I believe the plaintiffs’ evidence on this issue. Mihos’ evidence was tantamount to accepting the allegation. While he denied making promises or giving guarantees, he shared his past experience with the plaintiffs on the basis that those receiving his coaching could do something the same or similar. Mihos told his pupils things that he thought would work for them.
Representation (v)
36 According to Mrs Laro-Bashford, Mihos said he was going to invest a substantial amount of his own money in the Trust so that he and the plaintiffs were in it together. He did not say precisely how much, only that it would be a substantial amount. She regarded this as positive in the context because Mihos was not only presenting it to them as an opportunity but in effect, endorsing it by saying he was going to invest his own money. This was one of three factors which made Mrs Laro-Bashford think that the proposed investment was low risk. Why would Mihos contribute a substantial amount of his own money to the Trust unless he was confident about its prospects? Mrs Laro-Bashford said the other two factors which were influential for her were firstly, Mihos’ comment that the plaintiffs would get their money back within 12 months; and secondly, that 90% of the money raised was to be kept as equity and, therefore, not available for investment.
37 Mr Laro-Bashford also said that Mihos commented to them that he was going to put a substantial amount of his own money into the Trust.
38 Mihos said that he clearly stated from day one that he was not investing his own money in the Trust but only thousands of countless hours of research and relationships and network building. The plaintiffs’ counsel did not challenge this assertion or put to him that he said he was contributing a substantial amount of his own money to the Trust.
39 I find on the balance of probabilities that Mihos said he was contributing a substantial amount of his own money to the Trust. I accept the plaintiffs’ evidence on the point and do not accept Mihos’ denial. I have referred to my concerns about the credibility of Mihos. In addition, I am not satisfied that he told the plaintiffs about either the commissions he received or the unit holders in the Trust who received units notwithstanding they paid nothing. In my view, Mihos was astute and managed his business interests carefully to obtain maximum benefit for himself. It suited him for the plaintiffs to contribute moneys to the Trust and one could readily imagine it would be encouraging for the plaintiffs to have Mihos supporting the Trust in this way.
Representation (vi)
40 Mrs Laro-Bashford said that after Mihos explained what the Trust was and his role with respect to it, he said that the plaintiffs needed to be party to it. When she asked what he would recommend, Mihos said to use $20,000 from the Super Fund and $20,000 from the line of credit to invest in the Trust. She then asked when the money would be returned and Mihos said, “You’ll have your money within 12 months.” On one occasion, she said that she immediately asked him again or responded to his comment by saying something to the effect of , “Really, the money we invested within 12 months?” And Mihos replied “Yes, 12 months you would have your investment money back.” On the basis of his comments, she expected to get back the investment money within 12 months of transferring it to the Trust.
41 Because of Mihos’ comments regarding the 12 months return of the investment money, Mrs Laro-Bashford said she laughed and noted the inconsistency between that comment and the disclaimer which appeared in the email which he sent to the plaintiffs on 8 December 2008. The email related to a transfer of funds into the Trust. In the body of the email, after Mihos provided certain details and sought to confirm details regarding the plaintiffs, he said:
“Obviously, I have not made any promises or guarantees of any returns in relation to such investment and once I have verified the transfer has been received, I will be issuing appropriate share certificates et cetera for your retention.”
42 Mr Laro-Bashford supported his wife’s evidence regarding the full return of the investment moneys within 12 months. He also gave evidence about the occasion upon which Mihos, having initially made the statement, responded in the same terms when Mrs Laro-Bashford immediately queried him. Mr Laro-Bashford said the 12 month return was important to the plaintiffs from the security point of view. He said if they had not been told in October 2008 that they would receive back the investment money within 12 months, they would not have invested money from the Super Fund in the Trust but would have left it in the cash account at Macquarie Bank.
43 For his part, Mihos noted in the evidence that the plaintiffs could not refer to any documents where the return of the investment moneys was referred to. He denied telling the plaintiffs that if they made an investment in the Trust, they would see the return of that investment in 12 months. He said that he would not have made such a statement because, having regard to the nature of the investment, namely an equity investment in start-up businesses, there would have never been any expectation that the money would have been returned in 12 months. He said that it was ludicrous for anybody to contemplate such an outcome and there would have been no basis to make such a statement.
44 The 12 month period was of some importance to the plaintiffs and was especially influential for Mrs Laro-Bashford. Notwithstanding the logic behind Mihos’ denial that he made this representation to the plaintiffs, I accept the evidence that he did so.
Representation (x)
45 Mrs Laro-Bashford said that Mihos explained to the plaintiffs that 90% of the equity raised for the Trust would be held by SNGC and that would allow him to go to other companies and prove that the investment vehicle was stable. The Trust was going to keep 90% of the money raised and it would only ever invest the balance of 10%.
46 Mr Laro-Bashford’s evidence was to similar effect. He said that Mihos told them he was going to put a substantial amount of his own money into the Trust and 90% of the moneys would be kept as equity so that Mihos could show third parties with whom he dealt that the Trust had over a $1,000,000 cash in the bank.
47 Mihos denied that he told the plaintiffs in October 2008 that the Trust would have 90% of its money in a cash account and would only ever invest the remaining 10%.
48 The plaintiffs’ evidence about this representation was confusing. In particular, Mrs Laro-Bashford gave evidence one day and on the following day, sought to re-explain her evidence on the point. While I accept that Mihos said something about not investing in businesses all the money raised for the Trust because he wanted to have substantial capital in the company’s bank account, I am not satisfied by the plaintiffs’ evidence that this representation is made out.
Second Representations – February 2009
49 The plaintiffs claimed in the Further Amended Statement of Claim that on 3 February 2009 Mihos represented that:
(i)he had not been able to raise enough capital in the Trust for investment as a number of other potential investors had pulled out;
(ii)it was a great opportunity for the plaintiffs to invest money in the Trust; and
(iii)the plaintiffs would still receive full return of the money they invested in the Trust in 12 months.
Meeting Notes
50 In her notes of the meeting on 3 February 2009, Mrs Laro-Bashford noted that in his update, Mihos said that the Trust did not have enough capital because other investors had pulled out. Mihos needed or wanted extra money which created more opportunity for the plaintiffs. The notes recorded that they should still expect a full return of the investment moneys in 12 months. She also made reference to an increased bonus share in the Trust if the plaintiffs contributed $40,000.
51 Mr Laro-Bashford had very sketchy notes of this meeting. However, he had recorded that the seed money would be returned in one year.
Oral Evidence
Representations (i) and (ii)
52 In her evidence, Mrs Laro-Bashford said that at the meeting with Mihos on 3 February 2009, Mihos said that other investors had pulled out of the Trust and he was approaching the plaintiffs for further funds because it was a great opportunity for them to make an additional investment in the Trust.
53 Mr Laro-Bashford said that Mihos explained at the meeting that he had not raised enough money but this shortfall presented a fantastic opportunity for the plaintiffs to further invest in the Trust. Mihos said that he was $40,000 short.
54 In his cross-examination, Mihos did not disagree that there was a meeting with the plaintiffs in early February at which the Trust was discussed and as a result, the plaintiffs made a further investment in it. However, he denied saying at a meeting with the plaintiffs in early February 2009 that an investor had pulled out and that he needed $40,000. Apart from this, Mihos in answer to an invitation from the Court, made a general denial of the allegations against him in paragraph 6 of the Further Amended Statement of Claim.
55 I find the representations alleged in paragraph 49(i) and (ii) above were made out: the plaintiffs’ evidence was persuasive. It provided a coherent explanation for what happened; Mihos offered only a blanket denial about the allegations in paragraph 6 of the claim but nonetheless admitted the meeting with the plaintiffs’ in early February 2009 at which the Trust was discussed, and after which the plaintiffs contributed more money. Mihos offered no alternative explanation.
Representation (iii)
56 Mrs Laro-Bashford said that at the meeting, when Mihos said to her and her husband that he was looking for $40,000, her husband asked where he would recommend getting that money. Mihos said that he would use the line of credit and leave the Super Fund moneys for other things. Mrs Laro-Bashford was concerned that taking $40,000 from the line of credit limited the plaintiffs in purchasing an investment property. It appears that purchasing an investment property was their initial ambition before meeting Mihos. At this, Mihos said that they were going to get their money back within 12 months and that was not a long time to wait. Mrs Laro-Bashford said that if she had not been told that the plaintiffs would get back their money within 12 months, she would not have invested the extra funds. She said the plaintiffs did so because they trusted Mihos and believed him when he said that they would get back their money in 12 months.
57 In his evidence, Mr Laro-Bashford commented that, at the meeting with Mihos, his wife raised the point that if the plaintiffs used $40,000 from the line of credit, they would not be able to purchase an investment property. He said that Mihos reminded the plaintiffs that their investment would be returned in full and they would only have to wait 12 months for this. He said that the plaintiffs needed to remember that the investment would be returned in full within that period and that the investment would then become a positive income stream so that the plaintiffs would be ahead of the game. Mr Laro-Bashford also said that if they had not been told in February 2009 that the investment would be returned within 12 months, they would not have invested the extra money but would have left it in the line of credit so it was available for other use.
58 Mihos denies making any comment to the plaintiffs to the effect that they would recover their investment moneys in full within 12 months. This comment was applicable whether the 12 months was interpreted as 12 months from the initial transfer of funds or 12 months from February 2009. In effect, for the reasons already given relating to the nature of an equity investment in a start-up company, Mihos said it would have made no sense for him to have made such a comment to the plaintiffs.
59 Again, I find that Mihos made the representation alleged. In the context, I consider that this is the more likely scenario and I do not accept his denial.
Third representations – May 2009
60 In the Further Amended Statement of Claim the plaintiffs allege that between 18 and 19 May 2009, Mihos represented that:
(i)the plaintiffs should use $20,000 of the funds available from the Super Fund to invest in the Trust.
(ii)the Trust was still on track to return the plaintiffs’ investment within 12 months and there was great momentum in the investment.
(iii)the plaintiffs would receive bonus incentive shares if they made a further investment of funds with the Trust.
(iv)the plaintiffs as trustees of the Super Fund would have a total investment of $40,000 for 2%; and
(v)the second plaintiff would have a direct investment of $60,000 for 3% plus a 1.5% bonus in the name of the second plaintiff.
Meeting Notes
61 In her notes of the meeting, Mrs Laro-Bashford records various comments made by, or in connection with, Mihos at the meeting on 18 May 2009. Of the $70,000 available from the Super Fund, the suggestion appears to be that $30,000 be used in consultation with Garth McLardie for warrants, $20,000 be used in the Trust and the remaining $20,000 be left for Mr Laro-Bashford to deploy as he wished. A $20,000 investment would secure a 2% interest in the Trust. The notes query whether there would be a bonus incentive for the plaintiffs on top of the cash investment. The notes state that, in general, all is good with the investment and the return is still on track. The investment has great momentum.
62 The notes of Mr Laro-Bashford are the same inasmuch as he refers to the Super Fund having $70,000 at its disposal. The moneys are to be used as follows: $20,000 for trading; $30,000 for warrants; and $20,000 for the Trust. This final item of expenditure would give the Super Fund a 2% interest in the Trust.
Representation (i)
63 Mrs Laro-Bashford in her evidence said that at the meeting, Mihos gave them a demonstration of the product “Streets Online” by Browsing Media Group on his laptop. He spoke of how fantastic the program was and the massive interest shown in the program from other businesses. It was gaining great momentum. Mihos said that everything was still on track with the Trust and was looking very positive. There was some discussion of the $70,000 of remaining funds in the Super Fund; $20,000 was allocated to her husband to invest as he wished and $30,000 was allocated to obtain warrants. Mihos said that if they agreed to invest the remaining $20,000 that day in the Trust, the plaintiffs would get an additional 1% bonus interest in the trust.
64 Mr Laro-Bashford’s evidence was to similar effect with respect to the moneys in the Super Fund. At the time, these funds were in the Macquarie Bank cash account. $20,000 was going to be used for shares through eTrade. $30,000 was set aside for a warrant product which Garth McLardie was responsible for. Mihos said that the remaining $20,000 should be invested in the Trust.
65 Mihos agreed that he had a discussion with the plaintiffs on 18 May 2009 and that, on the following day, the plaintiffs made a further transfer of funds to the Trust. However, the plaintiffs appear not to have put to him that he specifically suggested that they should use $20,000 from the Super Fund to invest in the Trust.
Representation (ii)
66 Mrs Laro-Bashford said her understanding from what Mihos said was that the money would be returned within 12 months from October 2008. She said if they had not been told there would be a full return of the investment moneys within 12 months, they would not have invested additional funds in May 2009.
67 Mr Laro-Bashford said that, at the meeting on 18 May 2009, Mihos said the plaintiffs’ investment would be returned in full in 12 months. Mihos said that because of the interest in the products being offered by the Browsing Media Group, there would be a quick return to the fund and he confirmed that the plaintiffs’ investment would be returned in full with the other investment money. In reliance on what Mihos said, Mr Laro-Bashford expected the money to be repaid by December 2009.
68 Mihos denied that he said anything to the plaintiffs at the meeting on 18 May to the effect that by investing the additional $20,000 in the Trust, that money would be returned to them within the same 12 month period as the earlier investments.
Representation (iii)
69 Ms Laro-Bashford said that Mihos told them if the plaintiffs agreed on 18 May 2009 to invest $20,000 in the trust, they would get an additional 1% bonus on top of the 1% which they would normally receive for a $20,000.
70 The issue of bonus shares or interest in Trust does not seem to have been addressed with Mihos.
Representation (iv) and (v)
71 The plaintiffs said that at the meeting in May 2009, Mihos said that because he needed a decision at the time, he would offer the plaintiffs a bonus for making a further investment in the Trust. In this case, a contribution of $20,000 would secure an interest of 2%. This came as a result of Mihos saying that the plaintiffs would get a 1% share in the Trust for every $20,000 invested plus an additional bonus 1%.
72 Mihos recalled having general discussions about how the Trust was progressing at the time but did not recall discussions about bonus shares.
(b)If made, were the misrepresentations misleading or deceptive?
73 By reason of the contemporaneous notes of the meeting, the credibility of the plaintiffs and my concerns about the credibility of the defendant, I think it is more likely that the alleged representations were made and I so find.
74 The first representations allegedly made by Mihos were almost wholly representations as to the future. The representations upon which the plaintiffs placed greatest reliance were of this nature. The plaintiffs rely upon sections 4 and 9 of the Fair Trading Act 1999 (Vic) (“the Act”). Pursuant to section 4 of the Act, Mihos bears the statutory burden of proving that he had reasonable grounds for making the representation as to the future matter. Unless this burden is discharged, any representation as to the future which does not come to pass is deemed to be misleading and deceptive.
75 In relation to the first representations, those in paragraph 27(v) and (vii) did not eventuate.[1] Representation (iii) of the second series of representations likewise did not eventuate.[2]
[1]Nor did the representation in paragraph 27(iii) insofar as it related to presenting only proposals which would work.
[2]At paragraph 49 hereof.
76 While Mihos did not explicitly refer to the legal burden of proof he had to discharge, he sought to avoid a finding against him by drawing attention to his disclaimers of liability. These appeared in the questionnaire, the coaching form signed in April 2008 and the email to Mrs Laro-Bashford dated 8 December 2008. In effect, Mihos sought to disclaim liability for providing financial advice or providing the plaintiffs with any particular return on their investments.
77 The case law is clear that such disclaimers are not determinative of a party’s liability. They are matters which the court can take into account when determining whether there has been misleading or deceptive conduct in contravention of the Act. However, a person cannot escape liability under the Act simply by virtue of the existence of such a disclaimer.
78 In this case, I note that:
(a) to the extent there is reliance placed upon the coaching document disclaimer, this document was seen and hurriedly signed by the plaintiffs at the meeting with Mihos in April 2008. The plaintiffs struggled to read the document and Mr Laro-Bashford possibly did not even finish completing the document when Mihos returned to the room and required it to be signed before continuing the meeting; and
(b) the December email was sent after the plaintiffs had already decided to invest in the Trust and had been meeting with Mihos for more than six months. With some justification, they did not treat that part of the email seriously because it was markedly inconsistent with Mihos’ conduct to that point.
79 Mihos did not provide evidence to establish that he had reasonable grounds for making the representations as to the future. Indeed, in relation to representations regarding the full repayment of the plaintiffs’ initial investment moneys within 12 months, he expressly said there was no basis for any such representation – having regard to the nature of the investment, it was ludicrous to make such a suggestion. Accordingly, those representations were misleading or deceptive and in contravention of the Act.
80 On the evidence, I also find that the representation in paragraph 27(iv) was made, did not come to pass and was made without reasonable grounds. Hence, it is deemed misleading and deceptive.
81 I do not propose to address all the representations made. The plaintiffs have established that several of those made to them, and upon which they relied, were misleading or deceptive in contravention of the Act. Success with every representation alleged is not necessary.
(c)Did the defendant advise the plaintiffs to make the investments in the Trust and, if so, did the plaintiffs rely on his advice?
82 In the Further Amended Statement of Claim, the plaintiffs allege that:
(a)On or about 15 October 2008 and 3 February 2009, Mihos, in the course of providing financial coaching to the plaintiffs, advised the plaintiffs in relation to investing money in the Trust.
(b)Mihos owed the plaintiffs a duty of care to exercise all due skill and care in providing them with the investment advice regarding the Trust.
(c)In reliance upon the investment advice, the plaintiffs transferred both personal funds and moneys from the Super Fund into the Trust.
(d)The defendant negligently:
(i)gave investment advice without a licence to do so;
(ii)advised the plaintiffs to invest in the Trust, which was a high risk investment;
(iii)failed to advise the plaintiffs that the investment in the Trust was high risk;
(iv)failed to advise the plaintiffs that the investment in the Trust was not consistent with their risk profile as set out in the personal questionnaire which they completed.
83 Mihos agreed that he provided financial coaching to the plaintiffs. He tried to educate them regarding financial matters both through the monthly meetings and discussions they had, and also by the homework exercises which he got them to do and the tapes and materials which he provided.
84 The plaintiffs contend that Mihos gave investment advice by encouraging, directing or advising them to invest in the Trust.
85 Mihos denied giving any financial advice. He was aware that he required, but did not have, an appropriate licence to dispense financial advice. Mihos pointed to various disclaimers in the documents which he created and used in his financial coaching activities where he either denied giving financial advice or directed people to obtain professional advice before undertaking financial activities. For example, on the front page of the personal questionnaire which he required the plaintiffs to complete, it said:
“The destination for financial intelligence, investment education, mentorship and peer support for ordinary people determined to achieve extraordinary financial freedom …
And before I go on as always, I am not offering financial advice; you should always get qualified professional advice when making financial decisions. What I am doing is letting you know what has worked for me and giving you the opportunity to check it out for yourself.”
86 Mihos also made several other observations:
·persons such as the plaintiffs needed to take professional advice from experts about investing;
·people needed to use the knowledge obtained from the financial education which Mihos gave and to accept personal responsibility for their own financial decision making;
·there were no guarantees or promises with respect to the matters Mihos discussed with his coaching clients. He could relay his experience and what worked for him, but there were no guarantees that it would suit everyone or that the outcome would be the same for other people.
87 Whether or not Mihos provided “financial advice” as defined in the Australian Securities and Investments Commission Act 2001 (Cth), I am satisfied that he gave investment advice to the plaintiffs in relation to the Trust.
88 In my view, the context is important. Mihos portrayed himself as a successful self-made businessman who, through self-education and diligence, had gained substantial knowledge of investing and business affairs. For a fee, he was happy to coach or instruct interested people in the path that he had taken and provide them with opportunities to learn and to exercise their newly acquired knowledge. The latter was evident in speaking of opportunities like that offered by the Trust. The plaintiffs were novices in the field of investing. Mrs Laro-Bashford was especially taken with aura and personality of Mihos. He exuded confidence and assuredness and she appeared to trust him implicitly. Both plaintiffs were heavily influenced by Mihos.
89 In saying this, I acknowledge that on the topic of the line of credit, Mrs Laro-Bashford did not follow the recommendation Mihos made to use one of his contacts to arrange the facility. Instead, she made her own arrangements through the plaintiffs’ existing bankers, Westpac Banking Corporation. Although Mihos said in his materials that people should get independent advice when making financial decisions, Mihos must have expected that people would attach significance to what he said – he was an expert they were paying over $5,000 to learn from.
90 When Mihos arranged for others within his circle of trusted contacts to assist people in the position of the plaintiffs, it would be rather surprising if a contact like Garth McLardie gave radically different advice from that proffered by Mihos. It was not clear exactly what McLardie thought or how he analysed the plaintiffs’ position. What is clear is that he set up the Super Fund as Mihos suggested and arranged for some investments for the Super Fund. There is no basis for saying that he counselled the plaintiffs against investing in the Trust. It is not apparent how much he knew. But as the Super Fund adviser, one might have expected him to know how the cash in the Super Fund was being employed.
Loss and Damage
91 The law on loss and damage arising from misleading conduct has been usefully summarised by the Victorian Court of Appeal in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG[3]. Applying the principles there set out, I am satisfied on the evidence that the plaintiffs relied upon representations by Mihos to make the investment in the Trust. To that extent, the contravention of the Act contributed materially to the loss suffered by the plaintiffs. Accordingly, the plaintiffs are entitled to recover the funds which they would otherwise have not invested in the Trust if they had not been induced by the representations to do so. These amounts represent the extent to which the plaintiffs were worse off for having so relied on the representations.
[3][2014] VSCA 338 at [540]
92 In reaching this view, I accept the plaintiffs’ evidence that but for Mihos’ contravention of the Act, they would not have used the line of credit or expended cash from the Super Fund to buy units in the Trust. Instead, the plaintiffs:
(a) would not have drawn on the line of credit at that time but waited until they were ready to buy an investment property in the range of $300,000 - $400,000;
(b) would have either left the cash in the Super Fund earning interest through Macquarie Bank or possibly have invested more in the Platinum Asia fund or some other blue chip investment recommended by Garth McLardie.
So, the plaintiffs are entitled to recover the moneys advanced from the line of credit which would not have been expended but for the defendant’s misrepresentation. In relation to the Super Fund moneys, the position is not identical. If some of the moneys committed to the Trust had been invested in the Platinum Asia fund, it appears that some profits would have been made and to that extent, the plaintiffs would have been better off. However, they claim only for the principal advanced and not consequential financial loss.
93 I should note that, were I free to do so, I would have reduced the plaintiffs damages award under the Act by 35%. Section 82(1)(B) of the Trade Practices Act 1974 (Cth) and the successor provision, namely section 137B of the Competition and Consumer Act 2010 (Cth) permit the court to reduce damages awarded to a claimant by reason of the claimant’s failure to take reasonable care in relation to the claim the subject of the particular proceeding. Although generally the Fair Trading Acts of the States, at least in the area of misleading and deceptive conduct and cognate claims usually mirror the Commonwealth provisions, the Victorian Act does not in this respect – there is no equivalent provision. Accordingly, I am not aware of any proper basis upon which I can lawfully reduce the plaintiffs’ damages.
94 If I were able, I would have reduced the damages because I consider that the plaintiffs knew, or should have known, that the Trust investments in which they had an indirect interest were high risk. The plaintiffs held positions in the workforce which reflected their levels of education and intelligence. Mrs Laro-Bashford came from a family where her father had experience as an investor. In my view, even though the plaintiffs were not experienced in financial and investment matters, they knew or should have known enough to have some awareness of the risk they were taking. To a degree, they are blaming Mihos for an investment which they freely entered into (albeit with his support and encouragement) but relying on their own assessment of the position. The evidence did not suggest that they consulted any expert or indeed anyone else.
(d)Did the defendant owe the plaintiffs a duty of care to exercise all due skill and care in providing such advice?
95 From the authorities, it seems that a variety of factors influences whether or not a person owes a duty of care to someone suffering pure financial loss. In Caltex Refineries (Qld) Pty Ltd v Stavar[4], Allsop P said[5] that where the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the claimant and the putative tortfeasor by references to the salient features or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury. The salient features included:
[4](2009) 75 NSWLR 649
[5]Ibid [102] – [103]
·the foreseeability of harm;
·the nature of the harm alleged;
·the degree and nature of control able to be exercised by the defendant to avoid harm;
·the degree of vulnerability of the plaintiff to harm from the defendant’s conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself;
·the degree of reliance by the plaintiff upon the defendant;
·any assumption of responsibility by the defendant;
·the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;
·the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff;
·the nature of the activity undertaken by the defendant;
·the nature or the degree of the hazard or danger liable to be caused by the defendant’s conduct or the activity or substance controlled by the defendant;
·knowledge, either actual or constructive, by the defendant that the conduct will cause harm to the plaintiff;
·any potential indeterminacy of liability;
·the nature and consequences of any action that can be taken to avoid the harm to the plaintiff;
·the extent of imposition on the autonomy or freedom of the individuals including the right to pursue one’s own interests;
·the existence of conflicting duties arising from other principles of law or statute;
·consistency with the terms, scope and purpose of any statute relevant to the existence of a duty;
·the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law.
96 His Honour said that there was no suggestion in the cases that it was compulsory in any given case to make findings about all of these features. He said the list was not exhaustive. Rather, it provided a non-exhaustive universe of considerations of the kind relevant to the evaluative task of imputation of the duty and the identification of its scope and content.
97 Here the plaintiffs were vulnerable in that they were not experienced investors with a sound grasp of business, finance or investment markets. Rather, they were novices who had paid a substantial sum to learn from, and be tutored by, Mihos. It was akin to a teacher/student relationship as the plaintiffs sought to develop their financial and investment knowledge by their association with Mihos, meeting monthly and performing the homework exercises he set.
98 The plaintiffs were heavily reliant upon the guidance of Mihos to develop their knowledge. That was a critical element of the relationship between them. Because the plaintiffs were quite ignorant in a financial sense, they wanted to learn from someone who could teach them useful things about the world of finance and investing. There was no point in seeking to learn from (much less to pay for) someone who was as ignorant as they were.
99 Mihos assumed some responsibility for the deployment of the plaintiffs’ investment funds whether through the line of credit or the Super Fund. Mihos sought to distance himself from the decisions made by the plaintiffs to invest in the Trust. He brought the opportunity to their attention. This opportunity was not just a tale of past activity by Mihos from which the plaintiffs could learn. Rather, it was a current investment opportunity which Mihos hoped would give rise to a substantial future benefit. There was no other reason to bring it to the plaintiffs’ attention.[6]
[6]I accept Mihos’ evidence that he had a realistic expectation at the time that the initial investments of the Trust would be profitable.
100 At the same time, I was troubled by Mihos’ evidence that:
(a)there were unit holders in the Trust, including his wife, who owned units but paid nothing for them; and
(b)Mihos was entitled to receive up to 10% of the moneys raised as capital for the Trust. Mihos acknowledged that he, or an entity associated with him, received approximately $31,900 (and possibly up to about $39,000) in this way.
101 Of greater concern was that Mihos did not persuade me that he informed the plaintiffs of these matters. Had the plaintiffs been aware and proceeded to invest in the Trust nonetheless, then one could not be critical of Mihos. But it is quite different when a party in his position withholds information from inexperienced people like the plaintiffs to obtain both units without payment and commission upon funds raised.
102 It was foreseeable that if Mihos gave the plaintiffs bad advice, then they were likely to suffer a loss in relation to the funds invested. Mihos acknowledged that the potential investments the Trust considered were high risk and speculative as they contributed equity into start-up businesses. This was an inherently risky exercise.
103 At the relevant time, there was a relationship of proximity between the plaintiffs and Mihos. The physical proximity stemmed from the series of meetings which the parties had commencing from the initial consultation in April 2008 followed by the subsequent monthly sessions thereafter. The sessions were part of what the plaintiffs signed up for in April 2008 and paid $5,750 to receive. In addition, Mihos gave the plaintiffs other educational and/or promotional materials that he had prepared from public appearances and talks he had given to thousands of people after he had decided to strike out on conducting his own business before the birth of his first child. Further, there was a relational proximity between the parties which originated in the teacher/student relationship which existed between the plaintiffs and Mihos.
104 From the plaintiffs’ perspective, I accept that they trusted Mihos and expected that he would guide and advise them in a way which was most beneficial for their long term interest and the attainment of their family, financial and lifestyle goals.
105 In the circumstances, I consider Mihos owed a duty of care to the plaintiffs to make it plain to them that the proposed investments were high risk and different from the low risk investments for which they expressed a preference in their questionnaire. The proposed investments had an importantly different risk profile from that which the plaintiffs nominated in the questionnaire.
(e)Did the defendant breach his duty of care in advising the plaintiffs to invest in the Trust?
106 Mihos denied breaching any alleged duty of care to the plaintiffs. In doing this, he relied upon several matters.
107 First, he said that given the kinds of potential returns the proposed trust investments would give, especially by comparison with low risk bank deposit returns, it was or should have been obvious to the plaintiffs that the investments under consideration were not low risk. Mihos considered that the plaintiffs were behaving unreasonably to invest in the Trust with hopes of a significant but speculative return and then complain only when the investment was lost. Mihos implied that the plaintiffs would not have complained had the investment in the Trust been successful notwithstanding its high risk nature.
108 Mihos agreed that it was not written anywhere that the investments were high risk. But he said it was made crystal clear through his statements that the proposed investments were high rather than low risk in nature. Mihos acknowledged that the plaintiffs were expected to draw the requisite inference which he considered obvious – namely that a 45-50% return was not a low risk investment.
109 Secondly, Mihos pointed to the disclaimers in the documents which he distributed or sent to the plaintiffs to complete, or for their information. Mihos maintained that he drew the plaintiffs’ attention to investment possibilities, including those in which he himself or his family was interested, and the defendant then left the plaintiffs (and any independent advisers they consulted) to decide whether or not to take up any particular investment opportunity.
110 Given the circumstances of the plaintiffs, their lack of knowledge and experience in the field of investing, and the faith or reliance they placed in Mihos, I consider the failure to advise them explicitly that the investment in the Trust was high risk and different from the risk profile they had previously indicated, constituted a breach of duty.
(f)What value should be attributed to the CWT shares currently held by the plaintiffs?
111 The evidence regarding the value of these shares was limited. The position was that, by letter dated 24 April 2015, the plaintiffs’ solicitor advised Creative Water that they were thinking of selling the 106,795 shares they owned in Creative Water. He asked whether the company would buy the shares or arrange for their sale, and at what price.
112 By email dated 29 April 2015, the CEO of Creative Water, Tony Jones, replied that the company was an unlisted public company. It could not buy back the shares at the time. Nor could it arrange for anyone to buy the shares because it lacked the necessary licence to do so. He said that the company might be able to pass on details to an interested buyer but the company was not aware of any potential buyers. The best way to dispose of the shares was for the plaintiffs to seek out a buyer. The sale price would be arrived at by negotiation. Jones said that the last price marketed by the company was $0.12 per share. Through another email from Jones to Mrs Laro-Bashford dated 25 October 2013, it seems that was the price used in a company offer which closed in March 2012. According to Jones, there had been no further sales since that time.
113 The plaintiffs sought to suggest that the shares in Creative Water were worthless because the most recent valuation was referrable to 2012 - 2013 and was only $0.12. The absence of any later sales implied there was either no, or at least, no liquid market for the shares. However, the plaintiffs did not seek to call any evidence from a broker or other professional person with expertise in the field of share valuation. On the question of damages, the plaintiffs have the onus of proof to adduce the requisite evidence to satisfy the court that they have suffered loss and damage.
114 The plaintiffs appear to accept this position because they obtained the line of credit and created the Super Fund in the period before October 2008 when the first representations were made and the initial acts of alleged negligence took place. They advance no claim in respect of these matters. Hence, the position is to be assessed at the time of breach.
115 The plaintiffs’ position if they had not been affected by the negligence of Mihos on loss is as set out in paragraph 92 above.
116 In circumstances where the evidence regarding the value of the Creative Water shares is very limited and the plaintiffs have not taken any effective steps to adduce any better evidence, I find that the value of the shares is about $12,815. I have arrived at this value by ascribing a notional value of 12 cents per share to each of the 106,795 shares owned by the plaintiffs. Accordingly, this amount is to be deducted from any damages awarded in favour of the plaintiffs
(g)Were the plaintiffs themselves negligent in making the investment in the Trust?
117 Mihos alleged in his further amended defence that:
(a) the plaintiffs were guilty of contributory negligence within the meaning of sections 26, 62 and 63 of the Wrongs Act 1958 (Vic);
(b) the investments were speculative. The risks were obvious. The plaintiffs assumed those risks within the meaning of sections 53 and 54 of the Wrongs Act.
118 The defendant made general allegations and was not specific in his submissions about precisely what constituted the contributory negligence by the plaintiffs. Doing the best I can, Mihos appeared to argue the matters constituting the contributory negligence were:
(a) freely making investments which the plaintiffs knew or should have known were high risk;
(b) failing to consult with independent advisers regarding their investments.
119 Although the plaintiffs were relative novices in the field of investing, I consider there is substance in the allegation that when told the Trust was considering two investments which returned 45-50% of the initial capital within 12 months, the plaintiffs should have realised these were unusual investments. A cursory examination of the interest earned with Macquarie Bank on the funds deposited there would have made that clear. There is a reason for the saying “if something sounds too good to be true, it probably is”.
120 If there were no claim under the Act, I would have held the plaintiffs contributorily negligent for 35% of their loss. However, given the other cause of action, this assessment is of no practical significance.
Conclusion
121 I direct that the parties confer and submit orders giving effect to these reasons. If the orders cannot be agreed, the matter will be listed for further mention.
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