Leda Pty Ltd v Weerden (No 2)

Leda Pty Ltd, a company, sought damages from Weerden, a tax adviser, following a transaction involving the purchase of shares in a unitholder and trustee of a trust. The trust held carry-forward tax losses and a capital profit on the sale of a hotel. The dispute centred on whether Weerden's letter constituted advice that the carry-forward losses were available to offset future assessable income in the trust and whether this advice, given without qualification, was negligent. Additionally, the court needed to determine whether Leda, as a sophisticated client, was aware of the risk that the future offset could be set aside under the Income Tax Assessment Act 1936 (Cth), Pt IVA. The purchase of the tax losses was at a rate of 6 cents on the dollar, when the tax rate was 39%. The vendors had warranted that the tax losses were available to offset future income, and the solicitor had advised that Weerden and the tax adviser could be sued if the losses were not available for offset. Subsequently, the Commissioner of Taxation assessed the capital gain on the sale of the hotel as on revenue account, absorbing the tax losses. The central issue was whether Weerden's negligence was a material cause of the loss or damage, and whether Weerden was liable for damages in negligence or under the Fair Trading Act 1987, s 68.

The court addressed whether Weerden's advice was negligent by considering the context and the information available to both parties. It held that Weerden's advice did not amount to a negligent misstatement because the client was a sophisticated entity and aware of the risk that the future offset might be set aside. Furthermore, the court found that Leda was not relying on Weerden's advice when purchasing the shares but rather on the vendors' warranty and the solicitor's advice. Consequently, Weerden's advice, even if negligent, was not a material cause of the loss or damage. The court also considered whether Weerden was liable under the Fair Trading Act 1987, s 68 but found that the claim failed as it was based on the same negligent advice which was not the cause of the loss.

In conclusion, the court dismissed Leda's claims against Weerden. The court held that Weerden's advice was not negligent as Leda was a sophisticated client aware of the risks involved, and the advice did not materially contribute to the loss. Additionally, the claim under the Fair Trading Act 1987, s 68 was also dismissed. The court found no basis for liability under either negligence or the statute, affirming the robustness of the advice given within the context of the transaction.