Leda Pty. Limited v Weerden

Case [2007] NSWCA 174
Reported Decision: 63 ACSR 636

New South Wales


Court of Appeal


CITATION: Leda Pty. Limited v. Weerden & Anor. [2007] NSWCA 174
HEARING DATE(S): 19 and 20 June 2007
 
JUDGMENT DATE: 
18 July 2007
JUDGMENT OF: Hodgson JA at 1; McColl JA at 77; Handley AJA at 78
DECISION: 1. Appeal dismissed with costs. 2. Cross-appeal dismissed, with no order as to costs.
CATCHWORDS: TORTS - Negligent advice - Purchase of shares in unitholder and trustee of trust with carry forward tax losses and capital profit on sale of hotel - Purchaser seeks advice from accountant/tax expert - Accountant advises that due diligence required if certain advice is to be given - Subsequent letter gives some advice notwithstanding due diligence not undertaken - How such letter would reasonably have been understood - Whether it gave negligence advice - Whether purchase of shares caused by any such negligent advice - Whether accountant liable under the Fair Trading Act 1987, s.68
LEGISLATION CITED: Income Tax Assessment Act 1936 (Cth), Pt.IVA
Taxation Administration Act 1953 (Cth) ss.8K, 8T
Corporations Act 2001 (Cth) s.1318
CASES CITED: Butcher v. Lachlan Elder Realty Pty. Limited [2004] HCA 60, 218 CLR 592
Commonwealth v. Cornwell [2007] HCA 16, (2007) 81 ALJR 933
Como Investments Pty. Limited v. Yenald Nominees Pty. Limited (1997) ATPR 41-550
Havyn Pty. Limited v. Webster [2005] NSWCA 182
Monroe Schneider Associates (Inc) v. Number 1 Raberem Pty. Limited (1991) 33 FCR 1
Reiffel v. ACN 075 839 266 Limited [2003] FCA 194, 45 ACSR 67
Segal v. Fleming [2002] NSWCA 262
PARTIES: Leda Pty. Limited - appellant
John Weerden - respondent/cross-appellant
Leisure Management Pty. Limited - cross-respondent
FILE NUMBER(S): CA 40231/06
COUNSEL: Mr. F. Douglas QC with Mr. M. Dicker for appellant and cross-respondent
Mr. B. McClintock SC with Mr. R. McHugh SC for the respondent/cross-appellant
SOLICITORS: Paul Bard Lawyers, Sydney for appellant and cross-respondent
Blake Dawson Waldron Lawyers, Sydney for respondent/cross-appellant
LOWER COURT JURISDICTION: Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S): ED 3503/05
LOWER COURT JUDICIAL OFFICER: Gzell J
LOWER COURT DATE OF DECISION: 10 March 2006
LOWER COURT MEDIUM NEUTRAL CITATION: [2006] NSWCA 125




                          CA 40231/06
                          ED 3503/05

                          HODGSON JA
                          McCOLL JA
                          HANDLEY AJA

                          Wednesday 18 July 2007
LEDA PTY. LIMITED V. WEERDEN & ANOR.
Headnote


      FACTS
      The appellant (Leda) proposed to acquire shares in two companies: the cross-respondent (Leisure Management) and Leisure Development (Queensland) Pty. Limited (LDQ), which wholly owned the unit trust Leisure Development Trust (LDT).

      Leda sought advice from the respondent in relation to the impact the acquisition of these shares would have on its income tax. One issue was whether previous losses of $39 million generated by LDT could be carried forward to set off against future assessable income, in circumstances where LDT had also made what was said to be a capital profit of $45 million.

      The respondent informed Leda that in order to give that advice, he would need to carry out a full due diligence review. Subsequent…

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AGLC
Leda Pty. Limited v Weerden [2007] NSWCA 174
Case
[2007] NSWCA 174
Decision Date

CaseChat Overview and Summary

Leda Pty. Limited (the appellant) appealed to the Court of Appeal of New South Wales against a decision of the primary judge concerning a claim for negligent advice against Mr. Weerden, an accountant and tax expert. The dispute arose from Leda's purchase of shares in a company that was a unitholder and trustee of a trust which had carry-forward tax losses and a capital profit on the sale of a hotel. Leda alleged that Mr. Weerden's advice led to its decision to purchase these shares.

The Court of Appeal was required to determine whether Mr. Weerden provided negligent advice to Leda. Specifically, the court had to consider how a letter from Mr. Weerden, sent despite Leda not undertaking the full due diligence he had initially advised was necessary for certain advice to be given, would reasonably have been understood by Leda. The court also had to assess whether the purchase of the shares was caused by any such negligent advice and whether Mr. Weerden was liable under section 68 of the Fair Trading Act 1987 (NSW).

The court reasoned that the letter in question, when read in its context, did not constitute negligent advice. It found that the letter did not give advice that was negligent in the circumstances, nor did it cause Leda to purchase the shares. The judges considered the nature of the advice given and the reasonable understanding of the recipient in light of the preceding communications and the limited due diligence undertaken.

The appeal was dismissed with costs, and the cross-appeal was also dismissed, with no order as to costs.

Orders

Orders of the court

1. Appeal dismissed with costs. 2. Cross-appeal dismissed, with no order as to costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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