Newman v Financial Wisdom Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

LONG CASES LIST

No. 2066 of 2000

DALE NEWMAN & ORS	Plaintiffs
v
FINANCIAL WISDOM LIMITED	First Defendant
and
TWENTY FIRST AUSTRALIA INC	Second Defendant

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

LONG CASES LIST

No. 7702 of 2001

DALE NEWMAN & ORS	Plaintiffs
v
HOLD PTY LTD	First Defendant
and
PAMACORP SECURITIES LIMITED	Second Defendant

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	5–6, 11–14, 18–21 August, 3–4 September 2003
DATE OF JUDGMENT:	29 June 2004
CASE MAY BE CITED AS:	Newman v Financial Wisdom Limited; Newman v Hold Pty Ltd
MEDIUM NEUTRAL CITATION:	[2004] VSC 216

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CORPORATIONS – whether holder of dealers licence liable in the circumstances for conduct of persons with proper authority from dealer in the absence of actual or ostensible agency – proper construction of s.819 of the Corporations Law as in force from 1991–1997 – whether various investments constituted “prescribed interests”

NEGLIGENCE – whether investment advisers negligent in making recommendations to clients to invest in various forms of investments including “tax effective” schemes

DAMAGES – damages of investors for loss of opportunity and for anxiety and stress in addition to actual pecuniary losses

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Dr C Pannam QC with Mr B Quinn of Counsel	Corrs Chambers Westgarth
For Financial Wisdom Limited	Mr M Sifris SC with Ms C Mavroudis of Counsel	Ryrie Bridges

CONTENTS

A. PRELIMINARY............................................................................................................................. 1

B. FACTUAL INTRODUCTION.................................................................................................... 5

C. THE STATEMENT OF CLAIM IN THE FINANCIAL WISDOM PROCEEDING....... 15

D. THE CORPORATIONS LAW.................................................................................................. 38

E. THE CLAIMS OF ROGER DUNCAN..................................................................................... 47

Introduction................................................................................................................................. 47

Mr Duncan: the Lucky Country Film Fund............................................................................ 49

Mr Duncan: the Bearfire Film Fund......................................................................................... 54

Mr Duncan: the Bolshoi Ballet Scheme.................................................................................... 56

Mr Duncan: the Sentinel Group................................................................................................ 58

Mr Duncan: the Ostrich Schemes............................................................................................. 59

Mr Duncan: the Copperfield Investment................................................................................ 61

Mr Duncan: the Book Publishing Partnerships...................................................................... 63

Mr Duncan: the Video Documentary Partnerships............................................................... 65

Mr Duncan: the aftermath......................................................................................................... 67

Mr Duncan: Conduct of the representatives........................................................................... 68

Lucky Country Film Fund....................................................................................................... 74
Bearfire Film Fund................................................................................................................... 76
Bolshoi Ballet Scheme.............................................................................................................. 79
Ostrich Schemes....................................................................................................................... 79
Copperfield Investment............................................................................................................ 80
Book Publishing Partnerships................................................................................................. 81
Video Documentary Partnerships........................................................................................... 82

Mr Duncan: Liability of Financial Wisdom............................................................................. 83

Liability of principals for representatives’ conduct................................................................. 84
Submissions of Financial Wisdom 87

Mr Duncan: Liability of Twenty-First...................................................................................... 93

Mr Duncan: Liability of Pamacorp Holdings......................................................................... 93

Mr Duncan: Liability of Pamacorp Securities......................................................................... 94

Mr Duncan: Representative capacity....................................................................................... 94

Mr Duncan: Damages................................................................................................................. 94

F. THE CLAIMS OF ALLAN COLLINS...................................................................................... 95

Introduction................................................................................................................................. 95

Mr Collins: the Grand Hotel Film Fund.................................................................................. 98

Mr Collins: the Bolshoi Ballet Scheme................................................................................... 102

Mr Collins: the Sentinel Group............................................................................................... 102

Mr Collins: the Me and My Girl Scheme............................................................................... 104

Mr Collins: the DCL Shares Investment................................................................................ 106

Mr Collins: the Copperfield Investment................................................................................ 109

Mr Collins: the Book Publishing Partnerships...................................................................... 111

Mr Collins: the Video Documentary Partnerships............................................................... 113

Mr Collins: the Guard Finance Investment........................................................................... 115

Mr Collins: Conduct of the representatives.......................................................................... 117

Grand Hotel Film Fund......................................................................................................... 117
Bolshoi Ballet Scheme............................................................................................................ 118
Me and My Girl Scheme........................................................................................................ 118
DCL Shares Investment......................................................................................................... 119
Copperfield Investment.......................................................................................................... 120
Book Publishing Partnerships............................................................................................... 120
Video Documentary Partnerships......................................................................................... 120
Guard Finance Investment.................................................................................................... 121

Mr Collins: Liability of Financial Wisdom............................................................................ 121

Mr Collins: Liability of Twenty-First..................................................................................... 122

Mr Collins: Liability of Pamacorp Holdings......................................................................... 122

Mr Collins: Liability of Pamacorp Securities........................................................................ 122

Mr Collins: Representative capacity....................................................................................... 122

Mr Collins: Damages................................................................................................................ 123

G. THE CLAIMS OF EDWARD BULLOCK............................................................................. 123

Introduction............................................................................................................................... 123

Mr Bullock: the Me and My Girl Scheme.............................................................................. 124

Mr Bullock: the Copperfield Investment............................................................................... 126

Mr Bullock: the Book Publishing Partnerships..................................................................... 127

Mr Bullock: the Botanical Script Book Publishing Partnership.......................................... 128

Mr Bullock: Conduct of the representatives......................................................................... 129

Me and My Girl Scheme........................................................................................................ 129
Copperfield Investment.......................................................................................................... 130
Book Publishing Partnerships............................................................................................... 131
Botanical Script Book Publishing Partnership...................................................................... 131

Mr Bullock: Liability of Financial Wisdom........................................................................... 132

Mr Bullock: Liability of Twenty-First..................................................................................... 133

Mr Bullock: Damages............................................................................................................... 133

H. THE CLAIMS OF DALE NEWMAN.................................................................................... 133

Introduction............................................................................................................................... 133

Mr Newman: the Cabaret Scheme.......................................................................................... 136

Mr Newman: the Bolshoi Ballet Scheme................................................................................ 138

Mr Newman: the Sentinel Group........................................................................................... 139

Mr Newman: the Book Publishing Partnerships.................................................................. 140

Mr Newman: the Video Documentary Partnerships........................................................... 140

Mr Newman: the aftermath..................................................................................................... 141

Mr Newman: Conduct of the representatives...................................................................... 142

Cabaret Scheme...................................................................................................................... 142
Bolshoi Ballet Scheme............................................................................................................ 143
Book Publishing Partnerships............................................................................................... 143
Video Documentary Partnerships......................................................................................... 144

Mr Newman: Liability of Financial Wisdom........................................................................ 144

Mr Newman: Liability of Twenty-First.................................................................................. 145

Mr Newman: Liability of Pamacorp Holdings..................................................................... 145

Mr Newman: Liability of Pamacorp Securities.................................................................... 145

Mr Newman: Damages............................................................................................................ 146

I. THE CLAIMS OF NEVILLE AND LORIS BALDING........................................................ 146

Introduction............................................................................................................................... 146

Mr and Mrs Balding: the Guard Finance Investments........................................................ 147

Mr and Mrs Balding: the Video Documentary Partnerships.............................................. 151

Mr and Mrs Balding: the Clendon Street Unit Trust........................................................... 152

Mr and Mrs Balding: Conduct of the representatives......................................................... 153

Guard Finance Investment.................................................................................................... 153
Video Documentary Partnership........................................................................................... 154
Clendon Street Unit Trust..................................................................................................... 154

Mr and Mrs Balding: Liability of Financial Wisdom........................................................... 155

Mr and Mrs Balding: Liability of Twenty-First.................................................................... 156

Mr and Mrs Balding: Representative capacity...................................................................... 156

Mr and Mrs Balding: Damages............................................................................................... 156

J. THE CLAIMS OF THOMAS AND JEAN GRAY................................................................ 157

Introduction............................................................................................................................... 157

Mr and Mrs Gray: the Guard Finance Investments............................................................. 160

Mr and Mrs Gray: the Stanley Street Unit Trust.................................................................. 161

Mr and Mrs Gray: the aftermath............................................................................................. 163

Mr and Mrs Gray: Conduct of the representatives.............................................................. 163

Guard Finance Investment.................................................................................................... 164
Stanley Street Unit Trust...................................................................................................... 164

Mr and Mrs Gray: Liability of Financial Wisdom................................................................ 165

Mr and Mrs Gray: Liability of Twenty-First......................................................................... 166

Mr and Mrs Gray: Representative capacity.......................................................................... 166

Mr and Mrs Gray: Damages.................................................................................................... 166

K. THE CLAIMS OF CARMELO GIUFFRIDA........................................................................ 166

Introduction............................................................................................................................... 166

Mr Giuffrida: the Timber Investment.................................................................................... 168

Mr Giuffrida: the Video Documentary Partnerships........................................................... 172

Mr Giuffrida: the aftermath..................................................................................................... 174

Mr Giuffrida: Conduct of the representatives...................................................................... 176

Timber Investment................................................................................................................. 176
Video Documentary Partnership........................................................................................... 177

Mr Giuffrida: Liability of Financial Wisdom........................................................................ 177

Mr Giuffrida: Liability of Twenty-First................................................................................. 178

Mr Giuffrida: Damages............................................................................................................ 178

L. THE CLAIMS OF FRANK AND YVONNE NOBLE.......................................................... 178

Introduction............................................................................................................................... 178

Mr and Mrs Noble: the Ostrich Schemes............................................................................... 185

Mr and Mrs Noble: the Guard Finance Investments........................................................... 186

Mr and Mrs Noble: the aftermath........................................................................................... 189

Mr and Mrs Noble: Conduct of the representatives............................................................ 189

Ostrich Scheme...................................................................................................................... 189
Guard Finance Investment.................................................................................................... 190

Mr and Mrs Noble: Liability of Financial Wisdom.............................................................. 190

Mr and Mrs Noble: Liability of Twenty-First....................................................................... 190

Mr and Mrs Noble: Representative capacity......................................................................... 191

Mr and Mrs Noble: Damages.................................................................................................. 191

M. THE CLAIMS OF JILLIAN ANNE SMITH AS EXECUTRIX OF THE ESTATE OF ERIC SMITH............................................................................................................................................................ 191

Introduction............................................................................................................................... 191

Mr Smith: the Cabaret Scheme................................................................................................ 193

Mr Smith: the Guard Finance Investments........................................................................... 194

Mr Smith: the DCL Shares Investment and the Superannuation Schemes...................... 194

Mr Smith: the aftermath........................................................................................................... 195

Mr Smith: Conduct of the representatives............................................................................ 195

Cabaret Scheme...................................................................................................................... 195
Guard Finance Investment.................................................................................................... 196
DCL Shares Investment......................................................................................................... 196
Superannuation Scheme........................................................................................................ 196

Mr Smith: Liability of Financial Wisdom.............................................................................. 197

Mr Smith: Liability of Twenty-First........................................................................................ 197

Mrs Smith: Representative capacity....................................................................................... 197

Mr Smith: Damages.................................................................................................................. 198

N. PRESCRIBED INTERESTS.................................................................................................... 198

O. DAMAGES................................................................................................................................ 201

Evidence of Mr Sincock............................................................................................................ 201

Actual pecuniary losses............................................................................................................ 203

Loss of opportunity damages.................................................................................................. 203

General damages....................................................................................................................... 209

Mr Duncan: Damages............................................................................................................... 210

Cash losses.............................................................................................................................. 210
Loss of opportunity................................................................................................................ 211
General damages................................................................................................................... 212

Mr Collins: Damages................................................................................................................ 213

Cash losses.............................................................................................................................. 213
Loss of opportunity................................................................................................................ 214
General damages.................................................................................................................... 216

Mr Bullock: Damages............................................................................................................... 217

Cash losses.............................................................................................................................. 217
Loss of opportunity................................................................................................................ 218
General damages.................................................................................................................... 218

Mr Newman: Damages............................................................................................................ 219

Cash losses.............................................................................................................................. 219
Loss of opportunity................................................................................................................ 219
General damages.................................................................................................................... 221

Mr and Mrs Balding: Damages............................................................................................... 223

Cash losses.............................................................................................................................. 223
Loss of opportunity................................................................................................................ 223
General damages.................................................................................................................... 224

Mr and Mrs Gray: Damages.................................................................................................... 227

Cash losses.............................................................................................................................. 227
Loss of opportunity................................................................................................................ 227
General damages.................................................................................................................... 228

Mr Giuffrida: Damages............................................................................................................ 229

Cash losses.............................................................................................................................. 229
Loss of opportunity................................................................................................................ 229
General damages.................................................................................................................... 230

Mr and Mrs Noble: Damages.................................................................................................. 230

Cash losses.............................................................................................................................. 230
Farm losses............................................................................................................................. 231
Loss of opportunity................................................................................................................ 233
General damages.................................................................................................................... 234

Mr Smith: Damages.................................................................................................................. 240

Cash losses.............................................................................................................................. 240
Loss of opportunity................................................................................................................ 240
General damages.................................................................................................................... 242

P. CONCLUSION........................................................................................................................... 242

HIS HONOUR:

A. PRELIMINARY

There are before the Court two proceedings in which the plaintiffs claim damages allegedly suffered by them as a result of negligent and misleading investment advice. One proceeding, No. 7702 of 2001, (“the Pamacorp proceeding”) was commenced by writ dated 24 September 2001. The other proceeding, No. 2066 of 2000 (“the Financial Wisdom proceeding”) was commenced by writ dated 26 June 2000.

It will be convenient to use the following abbreviations.

Parties

Mr Newman

Dale Newman, a selected plaintiff in both proceedings

Mr Duncan

Roger Lee Duncan, a selected plaintiff in both proceedings

Mr Collins

Allan Collins, a selected plaintiff in both proceedings

Mr Balding

Neville Balding, a selected plaintiff in the Financial Wisdom proceeding

Mrs Balding

Loris Balding, a selected plaintiff in the Financial Wisdom proceeding

Mr Bullock

Edward Bullock, a selected plaintiff in the Financial Wisdom proceeding

Mr Noble

Frank Noble, a selected plaintiff in the Financial Wisdom proceeding

Mrs Noble

Yvonne Noble, a selected plaintiff in the Financial Wisdom proceeding

Mr Giuffrida

Carmelo Giuffrida, a selected plaintiff in the Financial Wisdom proceeding

Mr Gray

Thomas Gray, a selected plaintiff in the Financial Wisdom proceeding

Mrs Gray

Jean Gray, a selected plaintiff in the Financial Wisdom proceeding

Mrs Smith

Jillian Smith, a selected plaintiff in the Financial Wisdom proceeding, in her capacity as executrix of the will of Eric Smith, deceased (“Mr Smith”)

Pamacorp Holdings

Hold Pty Ltd (formerly Pamacorp Holdings Pty Ltd), the first defendant in the Pamacorp proceeding

Pamacorp Securities

Ambridge Securities Ltd (formerly Pamacorp Securities Ltd), the second defendant in the Pamacorp proceeding

Pamacorp

Pamacorp Holdings and Pamacorp Securities collectively

Financial Wisdom

Financial Wisdom Ltd, the first defendant in the Financial Wisdom proceeding

Twenty-First

Twenty-First Australia Inc, the second defendant in the Financial Wisdom proceeding

Other persons and bodies

AS Nominees

Australian Superannuation Nominees Limited

ASC

Australian Securities Commission

ATO

Australian Taxation Office

DCL

Development Corporation Limited

Entercorp

Entercorp Finance Pty Ltd

Guard Finance

Guard Finance Pty Ltd and/or Guard Finance (Vic) Pty Ltd

Healy

Alan McDonald Healy

Hemming

Gary Hemming

Hughes

Jarrod Hughes

Lye

Byron Lye

Mr McMaster

Wesley Andrew McMaster, Adjunct Professor (Financial Planning), RMIT University

Quarrell

Colin Frederick Quarrell

Schimana

Peter Schimana

Sentinel

Sentinel Financial Management Pty Ltd

Sentinel Group

Sentinel and the group of companies associated with it, which included Sentinel Accounting Services Pty Ltd, Kantell Pty Ltd, Development Corporation Ltd, Bond Pty Ltd, First Finance Ltd, Guard Finance Pty Ltd, Guard Finance (Vic) Pty Ltd and Sentinel Management Services Pty Ltd

the Sentinel promoters OR the Sentinel advisers OR the representatives

One or more of Quarrell, Healy, Schimana, Hughes and Lye

Wallco Ostrich

Wallco Ostrich Corporation Limited

Other abbreviations

the Sentinel Program

Sentinel Professionals’ Management Program

the Pamacorp brochure

Brochure entitled “Sentinel Professionals Management” and subtitled “A Pamacorp programme”

the Sentinel brochure

Brochure issued by Sentinel

The investments which are the subject of these proceedings may be conveniently listed as follows:

Lucky Country Film Fund

Bearfire Film Fund

Grand Hotel Film Fund

Cabaret Scheme

Bolshoi Ballet Scheme

Me and My Girl Scheme

Copperfield Investment

Book Publishing Partnerships

Botanical Script Book Publishing Partnership

Timber Investment

Video Documentary Partnerships

Ostrich Schemes

Superannuation Schemes

DCL Shares Investment

Stanley Street Unit Trust

Clendon Street Unit Trust

Guard Finance Investments

The plaintiffs in the Pamacorp proceeding number some 49 individuals, but by an order dated 21 March 2003, three of those plaintiffs were selected for the purpose of having their cases heard and determined prior to the hearing and determination of the cases of any of the other plaintiffs. The three selected plaintiffs are Mr Newman, Mr Duncan and Mr Collins. The first defendant in the Pamacorp proceeding is Hold Pty Ltd, known as Pamacorp Holdings Pty Ltd between 26 February 1991 and 21 October 1997. The second defendant is Ambridge Securities Limited, known as Pamacorp Securities Limited between 2 June 1994 and 23 October 2001 (and as Pamacorp Financial Planning Pty Ltd between 17 November 1993 and 1 June 1994). At all relevant times, Pamacorp Securities held a dealers licence.

Hold Pty Ltd (Pamacorp Holdings) was represented and defended the proceeding at all times prior to the commencement of the trial on 5 August 2003, but was unrepresented at the trial. The solicitor for Hold Pty Ltd attended on the first day and informed the Court that administrators had been appointed by the company. Those administrators were Simon Wallace-Smith and Salvatore Algeri. The plaintiffs, by summons dated 7 August 2003, sought leave pursuant to s.440D(1) of the Corporations Act 2001 (Cth) for the plaintiffs to proceed against Hold Pty Ltd (Pamacorp Holdings). The application was served on the administrators who advised that they neither consented to nor opposed the application and did not intend to appear. By order made 11 August 2003, leave was granted to the plaintiffs to proceed with this proceeding until further order. There was no representation of Ambridge Securities Ltd (Pamacorp Securities) during the trial. On 14 August 2003, the solicitors for the plaintiffs were informed that Ambridge Securities Ltd (Pamacorp Securities) had gone into a members’ voluntary liquidation on 8 August 2003 and that John Adams, a partner at Horwarths, Accountants, had been appointed the liquidator.

The plaintiffs in the Financial Wisdom proceeding are numerous, but by an order dated 21 March 2003, twelve of those plaintiffs were selected for the purpose of having their cases determined prior to the hearing and determination of the cases of any of the other plaintiffs. The twelve selected plaintiffs are Mr Newman, Mr Duncan, Mr Collins, Mr and Mrs Balding, Mr Bullock, Mr and Mrs Noble, Mr Giuffrida, Mr and Mrs Gray and Mrs Smith.

The defendants in the Financial Wisdom proceeding are Financial Wisdom and Twenty-First Australia.

Financial Wisdom conducts a financial planning business. It is the holder of a dealers licence and was, at all relevant times, a licensed securities dealer pursuant to the former Corporations Law. Its ultimate holding company is Commonwealth Bank of Australia Limited, and its previous ultimate holding company was Colonial Limited.

Twenty-First Australia was represented until shortly before the commencement of the trial, but its solicitors sought leave to file a notice of ceasing to act in circumstances described in an affidavit of Andrew Collis Blogg sworn 27 June 2003 and leave was obtained by order of that date. A notice that the solicitor had ceased to act was filed on 30 June 2003 and Twenty-First Australia was not represented at the trial. As a result, Financial Wisdom was the only defendant left standing, as it were, and it was represented throughout the trial by Mr M Sifris SC and Ms C Mavroudis of Counsel.

B.FACTUAL INTRODUCTION

At the commencement of his opening, Dr Pannam QC, who appeared with Mr B Quinn of Counsel for the plaintiffs, said that the volume of paper which had been generated by these proceedings was awesome and forbidding. He was referring to the large number of lengthy witness statements and the vast collection of documents filed with them. It is neither necessary nor possible, in what follows, to refer to or even summarise all of the evidence. The substance of the factual material will however be found in this introduction and in the accounts of each of the selected plaintiffs’ claims. There is a substantial body of evidence in relation to the structure of the various investment schemes. It is unnecessary to refer to that evidence which was not controverted, although it underlies a number of the legal conclusions reached. There is also a good deal of evidence in relation to the outcomes of the various investment schemes. Again, it is unnecessary to refer to that evidence although it underlies many of the factual findings as to damages.

The particular individuals who advised the plaintiffs in relation to their various investments[1] are not defendants but the plaintiffs contend that the defendants are in various ways liable for the conduct of those individuals. The individuals are: Quarrell, Healy, Schimana, Hughes and Lye. Healy was called as a witness for the plaintiffs and the following account of the development of investment advice businesses of which the plaintiffs were clients is derived from his affidavit sworn 9 June 2003. Healy had worked in the banking and insurance field for about 10 years until, in about March 1991, he was approached by the principals of Pamacorp, who told him that the group was in the process of hiring consultants and agents to promote and sell investment and accounting services to potential clients.
[1]See the list of investments in paragraph [3].

Healy joined Pamacorp as a financial consultant and, when he joined, Quarrell was also working for Pamacorp in the same capacity. Pamacorp had created a special program or package of services for its clients, the Sentinel Program. Each client would pay a fixed monthly subscription fee and Pamacorp would provide comprehensive investment and financial management advice and services, supposedly tailored to the needs of each client. As part of the Sentinel Program, Pamacorp also offered all of the incidental services required to completely manage each client’s financial affairs, including insurance packages, superannuation fund management services and the preparation of annual income tax returns.

The job of each of Quarrell and Healy was to sell Pamacorp’s Sentinel program to “high income individuals” and advise on the management of the investment portfolios and financial affairs of those clients who subscribed. The job involved the following main tasks:

·     contacting potential clients or speaking to new clients who approached them;
·     interviewing clients to ascertain their current income and assets, their financial commitments and their taxation position;
·     creating a profile of each client’s investment history, current financial position and short, medium and long term financial goals;
·     providing advice to each client about how to achieve identified financial goals including how each client could reduce his or her non-tax-deductible debt;
·     promoting the particular types of tax effective and income producing investments which Pamacorp was endorsing and which it could offer to those clients.

Quarrell and Healy worked independently of each other, with their own clients, but were regularly in contact with each other and with the principals of Pamacorp.

Pamacorp provided each of its consultants with a copy of a brochure, the Pamacorp brochure. That brochure set out the key features of the Sentinel program and the nature and standard of the services which Pamacorp was to provide. Every new client subscribing to the Sentinel program was given a copy of the Pamacorp brochure by their consultant and usually taken through it at an initial meeting.

The Pamacorp brochure informed the reader that Pamacorp worked under a concept of total business management and that its professional staff encompassed trained and experienced accountants, tax specialists, merchant and investment bankers, financial analysts, insurance and superannuation advisers and a marketing division, and announced that the interaction between these departments meant that Pamacorp could provide professional advice from a total financial management perspective. The brochure stated that Pamacorp’s corporate philosophy was to provide a fully integrated financial services facility to clients, to provide an uncompromised level of technical skill, knowledge and creative application and to respond rapidly and effectively to clients’ needs and so on. The brochure pointed out that clients did not have time, inter alia, “to wade through the entire tax code, individually assess the inherent strengths and weaknesses of Australia’s blue chip companies or compare the performances of the multitude of fund managers over the last five years.” The brochure asked whether the clients’ accountant had been “working with you to structure your salary in such a way as to minimise tax” and “assisting you in making informed and timely decisions on investment planning”. The brochure said that Pamacorp had developed a comprehensive service tailored to clients’ individual needs and that the “Sentinel package” would effectively and efficiently work with the client to “create worth by maximising…disposable income with…tax planning”, “build your net worth within informed investment advice and solid financial planning using the best information and software applications, and our active experience in this field” and “reduce tax with effective planning” and so on.

The Pamacorp brochure further said that the Sentinel package would consist of the following basic features and elements, inter alia:

·     detailed initial assessment and report on your financial status;
·     your annual tax return;
·     meeting to review, discuss and advise on your tax position and tax plan;
·     investment advice and wealth creation – ie, financial planning.

Under the heading “Investment”, the brochure stated that Pamacorp’s investment philosophy was “focussed on quality and unbiased assessment of all the available opportunities in the market-place at any particular time” and that “Pamacorp advocated a policy of quality income producing investments”. The brochure then described the kinds of investments of various classes which Pamacorp would recommend. It is sufficient to say that each class of investment as described was in the nature of a blue chip investment. The single annual fee for the package was specified.[2]
[2]An original brochure supplied to the Court specified a fee of $1085.

Notwithstanding the conservative tone of its brochure, Pamacorp over a number of years offered clients the opportunity to invest in various “Division 10BA” films. The Pamacorp consultants were required to provide to their clients an information sheet about the film with a cash-flow sheet demonstrating the benefits of an investment in the film scheme.

During the financial years ending 30 June 1992 and 30 June 1993, Pamacorp was promoting investments in the Lucky Country Film Fund. During the financial year ending 30 June 1994, Pamacorp was promoting investments in the Bearfire and Grand Hotel Film Funds.

In early 1994, Pamacorp became interested in the investment opportunities presented by a number of stage show productions proposed by one Peter Boyle, a producer with considerable experience in the film industry. A number of clients of Pamacorp invested in the Cabaret scheme promoted by Boyle.

In or about May and June 1994, the principals of Pamacorp decided that they wanted to focus on its accounting business and to divest the Sentinel program business. According to Healy, most of Pamacorp’s Sentinel program clients at that time were dealing either with him or with Quarrell and they had between them about 80 – 100 clients. The Pamacorp principals suggested that Quarrell and Healy take over that part of Pamacorp’s business and run it as a business in their own right. Quarrell and Healy discussed the matter and agreed to set up their own business for this purpose:

“We decided to utilise the key concept behind the Sentinel program which we believed in and which had proved so popular with the Pamacorp client base. That was to provide a “total financial management” package. We wanted to offer our clients a “one stop shop” of financial and investment advice. We intended to offer a comprehensive range of investment opportunities and also take care of all of our clients’ tax planning and accounting needs.”

Quarrell and Healy informed the Sentinel clients of their intentions and spoke to them in person or by telephone.

Sentinel was incorporated on 28 July 1994, and over time, Quarrell and Healy caused a number of other companies to be incorporated for the purposes of the business. These included: Sentinel Accounting Services Pty Ltd (for the provision of accounting services to clients); Kantell Pty Ltd (for the development of tax effective investments); Development Corporation Limited (“DCL”) (to conduct property development and investment activities); First Finance Limited Guard Finance Pty Ltd and Guard Finance (Vic) Pty Ltd (to provide finance for the purposes of property developments engaged in by DCL and to provide cashflow to Sentinel) and Sentinel Management Services Pty Ltd (to be the administration company for clients’ superannuation funds).

In June 1994, Quarrell and Healy informed Boyle that they were leaving Pamacorp and starting Sentinel and he introduced them to the Bolshoi Ballet Scheme, which involved an Australian tour of the Bolshoi ballet. At this time, Sentinel did not have its own office space, and Boyle informed Quarrell and Healy that there were vacant floors in an office building in Hobson Street, South Yarra, in which he was renting premises. As a result, Sentinel rented offices on the floor above Boyle’s offices in Hobson Street, South Yarra.

By letter dated 19 October 1994 (or thereabouts), Quarrell and Healy also wrote on behalf of their new company, Sentinel, to each of their Sentinel clients about their new business. The letter read as follows:

“…
We take this opportunity to welcome you to Sentinel Financial Management. Although our structure has changed, our commitment to you remains as strong as ever. Our aim is to help you optimise your personal financial position in both the long and the short term.
Enclosed is a brief profile of the key members of our team, who between the four of us have had more than 80 years experience in financial services. We would like to stress that one of the major benefits available to you at Sentinel, is continuing access to our wide range of technical and professional resources.
To reinforce our commitment to you, we have listed below the eight major areas of our service that we believe will continue to set us apart from any other financial services group:-
·     We specialise in looking after the individual. This means that our service and ideas are tailored to your own needs.
·     Our service is independent. We provide you with personal financial and accounting advice which is not based on selling financial products.
·     The use of effective tax planning to suit the individual is an integral part of our service.
·     We are able to provide you with prompt and efficient access to first class technical and professional resources.
·     We can offer you creation and administration of business structures, including Discretionary Trusts, Unit Trusts, Companies and Partnerships.
·     Independent structuring is available which will maximise the benefits of Superannuation and Roll-over Funds.
·     We will assist you to create wealth and enhance your net-worth, including continuous review of strategies which have been implemented.
·     Professional preparation of all your personal, business and investment Taxation Returns is assured.
…”

Enclosed with the letter was a description of “THE TEAM” which included a description of the experience and qualifications of Healy, Quarrell and Schimana and, in relation to Quarrell, stated that he was: “a licensed Proper Holder Authority [sic] and as such is able to advise in securities.”

The clients who wished to retain Sentinel filled out a subscription form and a direct debit authority for the fixed fee of $70 per month. Sentinel created a file for each client in which was placed a financial profile of the client, compiled during the initial interview held with each client.

Schimana had been an accountant employed by Pamacorp to look after clients’ tax returns and affairs and he was given a one-third share in Sentinel Accounting Services Pty Ltd and allocated primary responsibility for the management of that company’s opportunities. However, Quarrell, Schimana and Healy agreed that they would all have contact with the clients and provide investment advice to them, and that there would not be any rigid demarcation of tasks within Sentinel.

After Sentinel commenced business, Quarrell and Healy continued to rely on Boyle to provide investment propositions. The Cabaret Scheme, to which later reference will be made, was an investment promoted to clients of Pamacorp and later promoted to clients of Sentinel. Boyle had told Healy that the Cabaret Scheme involved a partnership and did not require a prospectus. A later scheme promoted by Boyle was the Bolshoi Ballet Scheme. Again, Boyle told Healy and Quarrell that no prospectus was needed. Sentinel received a 5% commission on investments procured by them. The next scheme introduced by Boyle was the Me and My Girl Scheme. Again, Sentinel was to receive 5% commission. Healy began to think that a prospectus was required, but Boyle insisted that it was not. Healy asked Boyle to get independent legal advice on this question but, although no such advice was provided, Sentinel continued to accept investments. Healy was told of rumours that Boyle was using investors’ moneys for private expenditure on luxury items. Quarrell, Schimana and Healy agreed not to inform their clients of their concerns, but put the rumours to Boyle, who denied them. They accepted Boyle’s assertions that no prospectus was required. The next investment introduced by Boyle was the Copperfield Investment. Again, Sentinel was to receive a 5% commission and again, Boyle said that a prospectus was not required. In about September 1995, Healy told Boyle to provide either a prospectus or independent legal advice that one was not required. Boyle undertook to do so, but provided neither.

As the business grew, other members of staff were employed. In about April 1995, Sentinel employed Hughes, an accountant who also provided investment advice and promoted Sentinel investment schemes although his main function was to work as an accountant and complete tax returns.

Hemming was a person previously known to Healy. In early 1994, Hemming had told Healy that he had been involved in property development on the Gold Coast but a project had failed and he had lost everything. Healy discussed with Hemming the possibility of working together on small boutique property development projects such as units and houses. Healy and Hemming agreed that he would provide his property market knowledge to identify good potential projects in Queensland and that Healy would raise finance from investors for the projects. They decided to form a company (“Bond Pty Ltd”) as the vehicle for their property developments. Quarrell and Healy decided to offer property development to Sentinel clients as an investment. They invited Hemming to join Sentinel and to do what he had been doing at Bond Pty Ltd for Sentinel. They set up DCL and Hemming became responsible for planning and managing Sentinel’s property development activities through it.

In due course, Sentinel also retained Lye. Although Lye was retained initially to undertake Sentinel’s real estate sales in Queensland, he also became a general financial adviser to Sentinel clients and promoted all of Sentinel’s investments.

Sentinel produced a brochure, the form, subjects and text of which was heavily based upon the Pamacorp brochure. It was usual practice that a new client was given a copy of the Sentinel brochure at the initial interview. They would be taken through it, and the main points of it were explained.

In about March 1996, Healy became concerned about Boyle’s capacity to pay Sentinel its commission when he heard that Boyle was desperately searching for money at moneylender rates from one Davis. In April 1996, Healy learned that Capital Investments Corporation Pty Ltd had purchased the Copperfield Investment loan book from Boyle’s company. In early May 1996, Quarrell, Healy and Schimana got oral legal advice from a tax lawyer that the Copperfield Investment documentation was inadequate and that there may not be a basis for a tax deduction.

At about this time, Healy met Davis. Davis (who turned out to be no better) told Healy that Boyle was a crook and that Park of Capital Investments was also a crook. Davis said he would save the day with a quality investment scheme and would guarantee that Sentinel’s clients received their tax deductions. Davis said that his schemes were different (but it transpired that they were not). Davis said that no prospectus was required because the partnerships were all less than 20 people and therefore there was not a prescribed interest. Healy accepted Davis’ sales pitch without any independent advice or analysis of the investments recommended, the first of which was the Book Publishing Partnerships.

It is convenient here to mention how Twenty-First became involved. Twenty-First was a United States securities investment company. A representative of Twenty-First (Ben Adler) contacted Healy, hawking tax-effective investments called securities lending arrangements which involved franking credits. The investment involved a form of security and a securities dealers’ licence was required. The Twenty-First representative that said Twenty-First would provide each of the Sentinel representatives with a proper authority. Twenty-First provided proper authorities for Quarrell, Schimana, Hughes and Lye in June 1996. Due to an adverse tax ruling from the ATO, the securities lending arrangements were not proceeded with and Sentinel found alternative investments for its clients. Although there was no further involvement with Twenty-First, the proper authorities were not revoked.

I will refer further to the particular investment schemes promoted by the advisers in the course of outlining the evidence concerning the investments of the selected plaintiffs in the period from about February 1992 to June 1997. During that period, some of the advisers held proper authorities from some defendants. Quarrell held a proper authority from Financial Wisdom from 31 March 1992 until 18 December 1996. Healy never held a proper authority from Financial Wisdom. Schimana and Hughes each held a proper authority from Financial Wisdom from 19 April 1995 until 18 December 1996. Quarrell, Healy, Schimana, Hughes and Lye all held a proper authority from Twenty-First Australia from 4 June 1996 until 30 June 1997.

In or about late June 1997, Sentinel’s business “collapsed”.[3] From that time onwards, the “bad news” progressively came in to the plaintiffs and their fellow investors concerning the fate of their investments and the stance of the ATO in relation to their claimed deductions. The plaintiffs and many of their fellow investors cooperated in taking a variety of steps and proceedings, and in obtaining advice and representation where appropriate, and various expenses were incurred in doing so.

C.THE STATEMENT OF CLAIM IN THE FINANCIAL WISDOM PROCEEDING

[3]On 26 June 1997, Michael James Humphris and David Neil Lockwood were appointed as administrators of 15 Sentinel companies, including Sentinel Financial Management Pty Ltd, Guard Finance Pty Ltd and Guard Finance (Vic) Pty Ltd. They were shortly thereafter appointed as administrators of a number of other Sentinel companies. They were also appointed as administrators of a number of companies associated with Quarrell and Healy personally. In September 1997, creditors resolved to wind up many of the Sentinel companies, including Sentinel Financial Management Pty Ltd. Later in 1998, Quarrell and Healy were each bankrupted.

The principal issues to be decided by the Court arise in the Financial Wisdom proceeding. The Further Amended Statement of Claim dated 18 October 2002 (“Statement of Claim”) comprises some 454 pages. There are a series of claims in relation to a number of different investments, but most of the claims take the same form and raise similar issues. Financial Wisdom’s Defence to the Statement of Claim is dated 21 November 2002 and Twenty-First Australia’s Defence is dated 19 November 2002. It is not necessary to refer in detail to the Statement of Claim in the Pamacorp proceeding, which is concerned with the liability of the Pamacorp companies for the conduct of servants and agents of Pamacorp Holdings in relation to five investments.[4] It will be sufficient to deal with the relevant causes of action, so far as necessary, when coming to the claims of the selected plaintiffs.
[4]The Pamacorp proceeding is concerned with investments by three of the selected plaintiffs (Mr Duncan, Mr Collins and Mr Newman). The investments covered are the Lucky Country Film Fund, the Bearfire Film Fund, the Grand Hotel Film Fund, the Cabaret Scheme and the Bolshoi Ballet Scheme.

Paragraph 1 of the Statement of Claim in the Financial Wisdom proceeding alleges that Financial Wisdom was at all relevant times a company carrying on a securities and investment advice business and holding a dealers licence pursuant to Part 7.3 Division 1 of the Corporations Law. Paragraph 1 further alleges that, pursuant to Part 7.3 Division 3 of the Corporations Law, Financial Wisdom provided proper authority to the following persons to act as its representative:

·     Quarrell, from 31 March 1992 until 18 December 1996
·     Hughes, from 19 April 1995 until 18 December 1996
·     Schimana, from 19 April 1995 until 18 December 1996

Paragraph 2 of the Statement of Claim alleges that Twenty-First was at all relevant times a company carrying on a securities and investment advice business and holding a dealers licence pursuant to Part 7.3 Division 1 of the Corporations Law. Paragraph 2 further alleges that, pursuant to Part 7.3 Division 3 of the Corporations Law, Twenty-First provided proper authority to the following persons to act as its representative from 4 June 1996 until 30 June 1997:- Quarrell, Healy, Hughes, Schimana and Lye.

Paragraph 3 of the Statement of Claim alleges that between about 31 March 1992 and about 9 September 1994, those of the plaintiffs named in Schedule A[5] (“the Pamacorp clients”) subscribed to and entered an investment and financial advice program called the “Sentinel Professionals Management Program”, by which each retained Pamacorp Holdings to provide, in return for an annual subscription fee, investment, financial and taxation advice and management services (“the Pamacorp retainer”).
[5]There is no Schedule A to the Further Statement of Claim; however, Schedule A can be found by referring to the original writ and the amended writ which predate the Further Amended Statement of Claim.

Paragraph 4 of the Statement of Claim alleges that Quarrell represented and warranted (“the Pamacorp representations”) to each of the Pamacorp clients that:

“(a)Pamacorp Holdings provided, intended to provide and would provide a fully integrated financial services facility to its clients;
(b)Pamacorp Holdings provided, intended to provide and would provide an uncompromised level of technical skill, knowledge and creative application;
(c)Pamacorp Holdings responded, intended to respond and would respond rapidly and effectively to its clients’ needs;
(d)Pamacorp Holdings presented, intended to present and would present only the highest standard of work at all times;
(e)Pamacorp Holdings provided, intended to provide and would provide professional advice from a total financial management perspective;
(f)Pamacorp Holdings through the Sentinel Professionals’ Management Program, created and would create wealth by maximising clients’ disposable income with salary packaging and tax planning;
(g)Pamacorp Holdings through the Sentinel Professionals’ Management Program, built and would build its clients’ net worth with informed investment advice and solid financial planning using the best information and software applications and its active experience in that field;
(h)Pamacorp Holdings through the Sentinel Professionals Management Program, protected and would protect its clients’ assets and lifestyle;
(i)Pamacorp Holdings through the Sentinel Professionals’ Management Program, reduced and would reduce its clients’ tax with effective planning;
(j)Pamacorp Holdings informed, intended to inform and would inform its clients about legislative and economic changes that could affect the clients’ financial position;
(k)Pamacorp Holdings provided, intended to provide and would provide the Sentinel Professionals’ Management Program at a fixed subscription fee and guarantee to save each client that fee in tax savings or refund the subscription fee;
(l)Pamacorp Holdings recommended, intended to recommend and would recommend quality income producing investments that would compensate for a slow rate of capital growth;

(m)all real estate investments recommended by Pamacorp Holdings had and would have:
(i)secure, quality cash flow; and
(ii)blue chip tenants or occupants.

(n)all equities investments recommended by Pamacorp Holdings involved and would involve:
(i)companies with strong balance sheets;
(ii)companies in mainstream industries;
(iii)strong net asset backing; and
(iv)a strong dividend stream.

(o)all institutional investments recommended by Pamacorp Holdings showed and would show:
(i)AAA rating;
(ii)balance of Australian and offshore investments;
(iii)an emphasis on South East Asian portfolio investments; and
(iv)a strong 5 year performance record;

(p)fixed interest funds recommended by Pamacorp Holdings were and would be:
(i)Commonwealth or semi-Commonwealth paper; or
(ii)Bank-backed securities or issues;

(q)Pamacorp Holdings strived and would strive to achieve the greatest possible taxation reductions for its clients in accordance with the spirit and intention of the law;
(r)Pamacorp Holdings provided, intended to provide and would provide an overall approach to investment and financial planning and offer informed advice taking into account all aspects and components of a client’s financial affairs;
(s)the investments recommended to clients by Pamacorp Holdings were and would be secure and carry a low financial risk for clients;
(t)the investments recommended to clients by Pamacorp Holdings were and would be guaranteed to produce a sound return for clients;
(u)the investments recommended to clients by Pamacorp Holdings did and would minimise and defer payment of income tax.”

Paragraph 5 of the Statement of Claim alleges that each of the Pamacorp clients, in reliance upon and induced by the Pamacorp representations, subscribed to, participated in and paid the annual subscription fee for, the Sentinel program and thenceforth accepted and acted upon investment, financial and taxation advice and recommendations provided by Quarrell (as thereafter pleaded).

The Statement of Claim is then divided into a number of sections in relation to each of the investments.

The first investment dealt with by the Statement of Claim is the Lucky Country Film Fund and this may be usefully regarded as giving rise to a set of claims which is typical of many of the claims contained in the pleading. Paragraphs 6, 7 and 8 of the Statement of Claim refer to the deeds and agreements setting up the Lucky Country Film Fund. Paragraph 9 of the Statement of Claim refers to the issuing of a prospectus for each of the financial years ending 30 June 1992 and 30 June 1993 inviting investment in the Lucky Country Film Fund by subscribing for units. Paragraph 10 of the Statement of Claim alleges that, between about 31 March 1992 and 13 October 1993, those of the plaintiffs named in Schedule B[6] invested in units in the Lucky Country Film Fund, executed loan and other agreements, borrowed finance for the purpose and paid interest on the loan moneys.
[6]There is no Schedule B to the Further Amended Statement of Claim; however, Schedule B can also be found by referring to the original writ and the amended writ which predate the Further Amended Statement of Claim.

Paragraph 11 of the Statement of Claim alleges that, prior to each of the Lucky Country investors making their investments, Quarrell recommended the investment (“the Lucky Country recommendations”) and represented and warranted (“the Lucky Country representations”) to each of the Lucky Country investors as follows:

“(i)The Lucky Country Film Fund was, was intended to be and would be a quality income-producing investment;
(ii)The Lucky Country Film Fund was, was intended to be and would be guaranteed to produce a sound return for investors;
(iii)The Lucky Country Investors were, were intended to be and would be guaranteed to receive a return of 100% of the moneys which they invested in the Lucky Country Film Fund;
(iv)The Lucky Country Film Fund was, was intended to be and would be a secure investment which carried a low financial risk for clients;
(v)All moneys invested in the Lucky Country Film Fund were, were intended to be and would be 100% tax deductible;
(vi)The interest repayments on all loan moneys invested by the Lucky Country Investors in the Lucky Country Film Fund were, were intended to be and would be 100% tax deductible;
(vii)The persons responsible for the promotion and management of the Lucky Country Film Fund and the production and distribution of the Lucky Country film were, were intended to be and would be sufficiently skilled, expert and experienced to carry out their respective tasks to ensure that the Lucky Country would be produced without placing investors’ funds at risk…”

The Lucky Country representations are particularised as being made orally by Quarrell in discussions with the various investors and to be implied from his recommendation and from “the fact that each Lucky Country Investor was a Pamacorp client subscribing to the Sentinel…program seeking low-risk, secure, income producing and tax deductible investments in accordance with the Pamacorp Representations.”

Paragraphs 12 and 12A of the Statement of Claim allege that, at the time that Quarrell made the Lucky Country recommendations and the Lucky Country representations, Quarrell was a representative of Financial Wisdom within the meaning of s.820(1) of the Corporations Law and, in effect, that Financial Wisdom was therefore liable for Quarrell’s conduct pursuant to s.817 of the Corporations Law, in the same manner and to the same extent as if the conduct was that of Financial Wisdom (a claim now abandoned).

Of particular importance in this proceeding, paragraph 13 of the Statement of Claim pleads further, or in the alternative, to the previous paragraph that:

“(a)the Lucky Country Recommendations and Lucky Country Representations were made by Quarrell at a time when he was a representative of Financial Wisdom within the meaning of s.819(1)(a) of the Corporations Law;
(b)each of the Lucky Country Investors made the Lucky Country Subscriptions and entered the Lucky Country Loans because they believed in good faith that Quarrell made the Lucky Country Recommendations and Lucky Country Representations:
(i)on behalf of Financial Wisdom or some other principal; and
(ii)in connection with a securities business or investment advice business carried on by Financial Wisdom or some other principal.

(c)in the premises, pursuant to s.819 of the Corporations Law, Financial Wisdom is liable in respect of the Lucky Country Recommendations and Lucky Country Representations in the same manner and to the same extent as if Financial Wisdom had made them.”

Paragraphs 15 to 20 of the Statement of Claim plead, in relation to the Lucky Country recommendations and the Lucky Country representations, and also in relation to the Pamacorp representations, that Quarrell engaged in misleading and deceptive conduct in contravention of s.52 of the Trade Practices Act 1974 (Cth) and s.11 of the Fair Trading Act 1985 (Vic).

Paragraph 16 of the Statement of Claim alleges that the Lucky Country recommendations and Lucky Country representations were false or misleading in that:

“(a)the Lucky Country Film Fund was not and was not intended to be a quality income-producing investment;
(b)the Lucky Country Film Fund did not and was not intended to produce a sound return for investors;
(c)the Lucky Country Investors did not and were not intended to receive a return of 100% of the moneys which they invested in the Lucky Country Film Fund;
(d)the Lucky Country Film Fund was not and was not intended to be a secure investment that carried a low financial risk for investors;
(e)the moneys invested in the Lucky Country Film Fund were not and were not intended to be tax deductible;
(f)the interest payments on moneys invested by the Lucky Country Investors in the Lucky Country Film Fund were not and were not intended to be tax deductible;
(g) the persons responsible for promotion and management of the Lucky Country Film Fund and production and distribution of the Lucky Country were not and were not intended to be sufficiently skilled, expert and experienced to carry out their respective tasks to ensure that the Lucky Country would be produced without placing investors’ funds at risk.
PARTICULARS
(a)The film The Lucky Country was never completed and produced no return for the Lucky Country Investors whatsoever.
(b)The Lucky Country Film Fund was wound up by order of the Federal Court of Australia of 25 October 1996. Subsequent to the winding up only some of the Lucky Country Investors received a distribution of only some of the funds which they had invested in the Lucky Country Film Fund. Further particulars of the proportion of moneys invested retrieved by each Lucky Country Investor will be provided at trial.
(c)The Lucky Country Film Fund was not secure and carried a high financial risk for the Lucky Country Investors and such risk was realised by the non-completion of the film.
(d)The Australian Taxation Office conducted an investigation into the Lucky Country Film Fund and, in about November 1996, disallowed any tax deductions claimed by Lucky Country Investors on the moneys invested in the Lucky Country Film Fund or the interest payments on moneys borrowed for those purposes.”

Paragraph 17 of the Statement of Claim alleges that the Pamacorp representations were misleading and deceptive in that, in making the Lucky Country representations and recommendation, Pamacorp Holdings did not and did not intend to:

“(a)provide a fully integrated financial services facility to its clients;
(b)provide an uncompromised level of technical skill, knowledge and creative application;
(c)respond rapidly and effectively to its clients’ needs;
(d)present only the highest standard of work;
(e)provide professional advice from a total financial management perspective;
(f)create wealth by maximising clients’ disposable income with salary packaging and tax planning;
(g)build its clients’ net worth with informed investment advice and solid financial planning using the best information and software applications and active experience in that field;
(h)protect its clients’ assets and lifestyle;
(i)reduce its clients’ tax with effective planning;
(j)inform its clients about legislative and economic changes that could affect the clients’ financial position;
(k)save each client the Pamacorp subscription fee in tax savings;
(l)recommend quality income producing investments that would compensate for a slow rate of capital growth;
(m)strive to achieve the greatest possible taxation reductions for its clients in accordance with the spirit and intention of the law;
(n)pursue an overall approach to investment and financial planning or offer informed advice taking into account all aspects and components of a client’s financial affairs;
(o)recommend a secure investment carrying low financial risk;
(p)recommend an investment guaranteed to produce a sound return for clients;
(q)recommend an investment which would minimise and defer payment of income tax.”

Paragraph 20 alleges that as a consequence of Quarrell’s said conduct, each of the Lucky Country investors had suffered loss and damage, which is particularised as follows:

“(a)The annual subscription fee for the Sentinel Professionals Management program.
(b)Each of the Lucky Country Investors has lost all or part of the moneys which each invested in the Lucky Country Film Fund.
(c)Each of the Lucky Country Investors has suffered loss of the interest paid at commercial rates under the Lucky Country Loans.
(d)Each of the Lucky Country Investors lost the use of that part of the moneys which they invested not derived from a Lucky Country Loan from the time of the investment until such moneys were recovered, if at all.
(e)Each of the Lucky Country Investors has paid or is liable to pay statutory interest to the Australian Tax Office on unpaid tax as a result of the disallowance by the Australian Tax Office of tax deductions claimed by each.
(f)Further, each Lucky Country Investor has expended significant time and resources in investigating the outcome of, and rectifying the damage caused by, their investment and in assisting various statutory authorities such as the Australian Tax Office and the Australian Securities Commission (now the Australian Securities and Investment Commission) in their investigations of the investment, including:
(i)holiday and other leave taken from usual paid employment;
(ii)professional accounting, legal and taxation advice and assistance.

(g)Further, each Lucky Country Investor has suffered severe emotional stress and trauma as a consequence of the financial pressures placed upon them and their families by the financial losses which they have sustained.”

The particulars of loss and damage claimed in relation to the Lucky Country Film Fund are in substance repeated, with appropriate amendments, in the case of each investment subsequently dealt with in the Statement of Claim. The damages claimed cover losses of moneys invested, loss of interest and/or loss of use of moneys invested, interest and other payments to the ATO, other expenses in time or money and “severe emotional stress and trauma as a consequence of the financial pressures placed upon them and their families by the financial losses which they have sustained”.

Paragraphs 21 to 23 of the Statement of Claim make alternative claims based upon the alleged negligence of Quarrell in making the Lucky Country recommendations and the Lucky Country representations. Paragraphs 24 to 28 of the Statement of Claim make alternative claims based upon alleged contraventions by Quarrell of s.851 of the Corporations Law. Paragraphs 29 to 32 of the Statement of Claim make alternative claims based upon alleged contraventions by Quarrell of s.995 of the Corporations Law. Paragraphs 33 to 37 of the Statement of Claim make alternative claims based upon alleged contraventions by Quarrell of s.999 of the Corporations Law. Paragraphs 41 to 44 of the Statement of Claim make alternative claims based upon an alleged breach of fiduciary duty owed to each of the Lucky Country investors by Quarrell.

Paragraphs 46 to 48 of the Statement of Claim plead that Financial Wisdom is liable pursuant to s.817 of the Corporations Law, alternatively s.819 of the Corporations Law, for all loss and damage suffered by the Lucky Country investors in the same manner and to the same extent as if Financial Wisdom had engaged in the alleged conduct of Quarrell as pleaded in all of paragraphs 15 to 44 of the Statement of Claim.

The Statement of Claim then proceeds to make substantially the same allegations and claims in relation to further investments, namely the Bearfire Film Fund (paragraphs 53–95) and the Grand Hotel Film Fund (paragraphs 100–143).

Paragraphs 148 to 194 of the Statement of Claim contain somewhat similar allegations in relation to the Cabaret Scheme. In addition, there are claims as to alleged negligence and alleged contraventions of the Corporations Law by Quarrell, based upon an allegation that the Cabaret Scheme was a “prescribed interest” and no prospectus or Approved Deed had been lodged with ASC.[7] Substantially similar claims and allegations as are made in relation to the Cabaret Scheme are made in relation to the Bolshoi Ballet Scheme (paragraphs 199–245).
[7]See paragraphs 163(e) and 182–186 of the Statement of Claim.

Paragraphs 250 to 259 of the Statement of Claim deal with the commencement of the Sentinel Group. Paragraph 251 alleges that from about early September 1994, the Sentinel promoters commenced conducting a business of providing financial and investment and securities advice and management through the Sentinel Group. Paragraph 252 alleges that Sentinel was the controlling entity in the Sentinel Group, and that Quarrell and Healy were its directors. Paragraph 254 alleges that, on or about 14 September 1994, each of the Pamacorp clients were informed by Pamacorp Holdings of the formation of the Sentinel Group and that the principals of the Sentinel Group were Healy and Quarrell, who had a combined experience in banking, accounting and financial service totalling more than 50 years and who would continue to provide excellence in advice (“the endorsement”). Paragraph 255 alleges that, between about September and late October 1994, Sentinel, through Quarrell and Healy, confirmed the endorsement and made further representations to the Pamacorp clients, which are pleaded as follows:

“(a)the endorsement was true;
(b)Quarrell and Healy, through the Sentinel Group intended to and would strive to help each Pamacorp Client optimise their personal financial position in the long and short term;
(c)between the members of the Sentinel Group’s team, including Quarrell, Healy and Schimana there was over 80 years of experience in financial services;
(d)the Sentinel Group specialised in and would specialise in looking after the individual such that its services and ideas would be tailored to client’s needs;
(e)the Sentinel Group’s service was and would be independent;
(f)the Sentinel Group would provide and intended to provide clients with personal financial and accounting advice which was not based upon selling financial products;
(g)the use of effective tax planning to suit the individual was and would be an integral part of the Sentinel Group’s service;
(h)the Sentinel Group would and intended to provide clients with prompt and efficient access to first class technical and professional resources;
(i)the Sentinel Group would offer creation and administration of business structures, including discretionary trusts, unit trusts, companies and partnerships;
(j)independent structuring was available which would maximise the benefits of superannuation and roll-over funds;
(k)the Sentinel Group would and intended to assist clients to create wealth and enhance net worth including continuous review of strategies which had been implemented;
(l)professional preparation of all personal, business and investment taxation returns was assured;
(m)the Sentinel Promoters were extremely well qualified, experienced, competent and trustworthy professionals

(“the transfer representations”).
PARTICULARS

The transfer representations were made by Quarrell and Healy in a letter in identical terms sent to each of the Pamacorp Clients during September or October 1994. A copy of the letter is in the possession of the Plaintiff’s solicitors and may be inspected by prior appointment.
Further, the transfer representations were repeated by Quarrell and Healy in discussions with each Pamacorp Client during September or October 1994.”

Paragraph 256 of the Statement of Claim alleges that each of the Pamacorp clients, in reliance upon and induced by the endorsement and the transfer representations, became a client of Sentinel and continued to seek, receive and rely upon financial and investment advice and management services from the Sentinel promoters.

Paragraph 257 of the Statement of Claim alleges that between about September 1994 and July 1997, each of the plaintiffs named in Schedule G thereto (including all of the Pamacorp clients) became clients of Sentinel (“the Sentinel clients”) and retained Sentinel to provide, in return for a subscription fee, investment, financial, taxation and securities advice and management services (“the Sentinel Package”).

Mr Noble testified that, as a result of their investment losses, they did not have the funds to engage contractors to undertake the pruning and thinning of the trees. Mrs Noble testified that if they had have had those funds, they would have engaged contractors for a first thinning, which would have been completed by April 2001 and a second thinning, which would have been completed by mid-2003. The work involved heavy physical labour, and the cost of contractors would have been about $6,100. The evidence, although not entirely clear, appears to convey that the Nobles were unable to prune and thin the trees themselves at the times when contractors would have done so, and the expert evidence is, as I have said, that many trees died as a result. Mr Boord estimated that Mr and Mrs Noble had lost an expected net return of $77,554 from their forestry project as a result of tree death.

Mr Sonogan gave evidence that, although the departmental brochure recommended pruning in years 6 and 7, and thinning in year 7, more recent knowledge indicated the value of an early thinning regime based on a tree’s stage of growth and not its age. Thus pruning was recommended to commence when the diameter of the tree is a minimum of 9cm and before it reaches a maximum of 14cm at breast height. Mr Sonogan said that from his observation, the stem diameter of the trees on the Nobles’ property was between 9cm and 14cm in 1999. However, there was no direct evidence from the Nobles that this “recent knowledge” had been conveyed to them, and the only evidence from Mr Sonogan was of general nature, when he said (without objection) that “my colleagues certainly were active in trying to get landholders to prune and thin their trees at the appropriate time”. The evidence on this claim was somewhat confused and confusing. In the end, I am not satisfied that the established impecuniosity of the Nobles was what caused the death of the trees, because it is not satisfactorily shown that they were aware of the “recent knowledge”, or that if the trees had been thinned by contractors in accordance with the Nobles’ plans, that this would have occurred early enough to eliminate or significantly reduce the tree deaths.

Loss of opportunity

I am satisfied that Mr and Mrs Noble, had they not made the recommended investments, would have invested their lost funds in their farm activities and in other forms of investment which were either share or real property based and would have earned income and made capital gains from those investments. Mr Sincock, using indices relating to public company shares and residential real estate, expressed his conclusions as follows:

“The after tax cash loss Mr Noble suffered can be calculated as follows:
$

Cash Loss  216,023.90
Less Net Cash Income Tax Benefit                   0.00
Net Cash Loss  216,023.90
However, when Mr Noble’s loss of opportunity by investing in either public company shares or residential real estate is factored in, his loss can be summarised as follows:
Public Company Shares
$

Cash Loss and Opportunity Loss            288,514.46
Less Income Tax Benefit              0.00
Net Loss   288,514.46
Residential Real Estate
$

Cash Loss and Opportunity Loss           578,332.84
Less Income Tax Benefit            0.00
Net Loss  578,332.84”

Thus, Mr Sincock estimated that an investment of the full amount lost in public company shares would have yielded an additional $72,500 or an investment of the full amount lost in residential real estate would have yielded an additional $362,000. Obviously, there are many contingencies and uncertainties which affect the assessment of a loss such as this. In addition, some of the lost moneys would have been applied to farming activities, and I take into account the evidence as to loss of income from beef production. On the whole of the evidence, and doing the best I can, I assess the damages of Mr and Mrs Noble as a result of their loss of opportunity in the sum of $250,000.

General damages

As to stress and anxiety, Mr Noble said in his first witness statement (without objection):

“148.The loss of our life savings has caused indescribable stress and trauma which has extremely impacted on my life expectancy and future quality of life. I had been looking forward to working part-time on our farm and enjoying my retirement. As a result I have had to return to full time work. My marriage has been under considerable strain. I was advised by our treating general practitioner to seek counselling. I did not pursue this as I could not afford counselling.
149.I work afternoon shift at Schneider Australia so that I am able to work the farm during the morning. Although I had purchased the farm to develop it in order to generate supplementary for my retirement income, but for the collapse of Sentinel I would not have to put in the hours that I do on the farm. I also would also have engaged the services of contractors. For example I have 25 acres of hardwood plantation being grown for high quality sawn timber with the objective to obtain harvest income which would top up our superannuation fund. I established the plantation in 1996. As I do not have the funds to engage contractors, my wife and I now have to undertake the management of the plantation until harvest (in conjunction with Department of Natural Resources and Environment). This involves high pruning the trees to 6 metres and thinning the trees from 12,000 stems per hectare to 200/250.
150.In an effort to provide a small supplementary income to the aged pension, we are endeavouring to establish and develop a small commercial goat meat enterprise.
151.So that we can meet our debts, I work 40 hours a week on afternoon shift and work approximately 18 to 20 hours a week on the farm. The salary I receive barely covers day to day living expenses and does not allow for mortgage repayments, medical and ongoing pharmaceutical expenses or basic private health insurance. My wife’s earnings must meet these expenses. All of this has taken a toll on my health. We had intended to travel regularly in our retirement. Since the collapse of Sentinel we have not been able to achieve this.
152.On 1 May 2002 I underwent major heart surgery called Ross Procedure which was a transplantation of the pulmonary valve to the aortic valve and the insertion of a donor valve to the pulmonary valve. My specialist told me that although this was a genetic defect it can be exacerbated by stress. I was off work for approximately 4 months and returned to work part time for 2 months and did not have sufficient leave/sick entitlements to cover for this period. Annexed to this witness statement and marked “FN-78” is a copy of a letter from Dr. L. Oliver dated 17 February 2003.
“TO WHOM IT MAY CONCERN

RE - MR. FRANK ALBERT NOBLE
D.O.B. 31/12/1941
Mr. Frank Noble suffered major financial losses with the insolvency of his superannuation fund.
This has resulted in increased levels of stress, which have had a negative effect on his health, have retarded his recovery from cardiac surgery, and have contributed to the development of disturbances of cardiac rhythm.”

Mr Noble further said in his third witness statement:

“(a)I moved to Tatong for a change of lifestyle to develop rural pursuits and horticultural interests in my retirement. The rural pursuits were intended to earn a small income to supplement our superannuation investments. Our chosen size of property was designed to allow time to be available for both farm development and leisure activities such as travel - which Quarrell knew and documented as our aim. If necessary I intended to seek part-time work as and when required. Because of our losses I now must work full-time afternoon shift from 2.30 p.m. to midnight off farm in a factory environment and work the farm in the mornings and develop it slowly as finances permit.
(b)The amount of time for off farm work and farming tasks has meant that my leisure time for horticultural and hobby activities is now non-existent. This was a major reason for moving to Tatong to balance more leisure activities.
(c)Another major aim in having a rural property was to develop my interest in animal husbandry, ie cows and calves production. As a result of Sentinel’s failure, lack of money to buy feed and pay debts meant that the herd was sold off.
(d)The collapse of Sentinel and the loss of our superannuation funds has meant that my prime reasons for moving to a rural property have not been fulfilled. This is a bitter disappointment. The need to sell off the cattle has meant that no farm income from this source is achievable as planned with our agricultural consultant.
(e)I have had to seek welfare payments from the Department of Social Security. I found the necessity to disclose personal details of my wife and I humiliating. We had to wait for ‘emergency’ assistance for six weeks and had to exist for that time with the $92 we still had in the bank.
(f)Immediately after Sentinel collapse my wife and I were forced to seek financial assistance from an aid agency. Our friends and children supported us, literally putting food on our table.
(g)My wife in her witness statements has outlined the devastation caused to our tree plantation basically caused by the lack of funds to prune and then the trees in an appropriate management strategy for this asset. This has been a major disappointment to me in view of the time we have already spent on this work and the deterioration of a valuable asset not just for me but also of a timber commodity to the community.
(h)The loss of my superannuation funds has caused me to retain ageing motor vehicles lost past their economic life which now require extensive and expensive mechanical repairs causing a further strain on our limited finances. This same situation also applies to replacement and repair of our farm equipment.
(i)Instead of enjoying a rural retirement lifestyle with a secure future, I now have to live with the stress of juggling finances and time commitments between off farm employment and farming tasks. We are living in a house, which still lacks floor coverings, curtains and other furnishings because of lack of funds. Any money which is available is used to develop our farm enterprise to achieve the objective of an on-farm income to supplement the pension in the years ahead. It is depressing to reach retiring age with a substantial house mortgage still outstanding.
(j)There has been an enormous adverse impact on our marriage due to the stress of this situation. The lack of quality time together has led to misunderstandings and arguments and off farm work requires time spent away from each other. Owing to the shift times of both our work we often seem to pass like ships in the night.
(k)The lack of time to adequately discuss and resolve problems to each other’s satisfaction and constant fatigue often sharpens conflicts because effective listening skills are diminished and empathy cannot develop.
(l)Following my heart surgery last year my doctor has this last week advised me to shorten my work time and ensure more relaxation - by either giving up work or selling the farm. We cannot afford for me to give up work. The thought of selling the property we have struggled so hard to retain makes all our sacrifices over the last seven years, both personal and financial seem worthless. This is the havoc Mr. Quarrell and Sentinel’s failure has wreaked on our lives.”

Mrs Noble said in her witness statement:

“24.The loss of our life savings has caused indescribable stress and trauma. I had been looking forward to retirement with my husband and developing our farm. I have now come out of retirement and have returned to work undertaking shift work. I am also working the farm and there is a constant struggle to meet our financial obligations. Our marriage has been under considerable strain as we are apart for considerable lengths of time, a situation we find very difficult to cope with. My husband and I were advised by our treating general practitioner to seek counselling. I did not pursue this as we could not afford it.
25.In order to pay out our mortgage I will have to work until the age of 72 years with my current employer, the Department of Human Resources. I now work approximately 30 hours per week. I need to travel 132 kilometres round trip to my place of employment. I also assist equally on our property with all farm duties.
26.My husband and I have accepted our loss and we are, of necessity, slowly developing our farm. Any funds that may be awarded from a successful outcome of this proceeding will be a much needed bonus. We may be able to pay out our mortgage, finish building our home which has stopped since June 1997 and retire again to enjoy our life together on our farm.”

Mrs Noble said in her third witness statement:

“I refer to paragraph 24 of my witness statement. In that paragraph I describe the effect which our financial loss arising from our Sentinel investments has had on our lives. I also refer to my further witness statement wherein I describe the problems we have encountered with our Nitens plantation because thinning was not carried out earlier by contractors. As my husband Frank states in his witness statement at paragraph 148, Frank and I have to undertake the management of the whole plantation ourselves as we do not have the funds to engage contractors. Further to these references I state:
(a)At the age of nearly 61 years I expected to be living in modest comfort with my husband on our farm enjoying normal and ordinary pleasures associated with retirement. I had looked forward to developing with my husband our property into a viable enterprise which would provide a supplement to our superannuation investments. Frank and I had spent our whole working lives supporting our children and saving so that we could support ourselves in our retirement.
(b)We shared with love the height of happiness brought by our children as well as the depths of pain and sadness with the loss of our eldest child all of which deepened and strengthened our commitment to our loving relationship.
(c)Never could I have imagined the emotional physical and financial battering we have lived through since Sentinel collapsed. The constant battle to survive both physically and financially, to put food on the table, hold onto our farm and face the crisis of health and drought has been traumatic. The stress of dealing with departments such as Centrelink was humiliating.
(d)The physical limitations of our age and the inability to increase that mental and physical effort to be able to provide basic living and health needs, now and in the years ahead, is not just daunting, it is frightening. The feeling of futility in trying to improve our situation is disempowering and demoralising to say the least. This battle of living hand to mouth has taken a severe toll on our health and our relationship.
(e)We work afternoon and night shifts to enable us to work the mornings on the farm. My night shifts mean long periods apart. Despite our efforts, our income is at minimum wage level and we are always under pressure to meet our financial obligations. We have been driven to the point of exhaustion physically and emotionally.
(f)Our personal relationship has been severely strained and stretched almost to breaking point on several occasions. We used to be a trusting, relaxed, fun-loving couple who enjoyed the company of our friends and simple activities like bushwalking, sailing, the theatre and dancing. Social activities of this type are not even an option to be considered. We have become isolated and trapped by the very effort to survive and retain our farm. Our love has not diminished, just the ability to share even a few hours of relaxed pleasure in each others company.
(g)I was known to optimism, fun, laughter and a lover of life. Now I am deeply depressed by our situation and desperate at being unable to change our predicament.
(h)Most recently, life decisions will now need to be made for my husband’s health, where he may have to give up work in the near future. Yet again, as a direct result of Sentinel’s collapse, we are being thrust back into survival mode.”

Disregarding the direct economic consequences referred to in the above material, I am satisfied that Mr and Mrs Noble have suffered substantial stress and anxiety as a result of their investment losses. The plaintiffs submitted that Mr and Mrs Noble should be awarded $20,000 to $30,000 each in general damages. In my view, Mr and Mrs Noble are entitled to an award in the circumstances in the sum of $25,000 each.

Mr Smith: Damages
Cash losses

Apart from the Cabaret Scheme, Mr Smith’s main losses were of principal rather than interest. The moneys came from his own resources, principally from superannuation and employee entitlements. Mr Smith’s total cash losses from his investments were as follows:

Investment

Amount

Liable Defendant

Cabaret Scheme

$87,291.54

Financial Wisdom

Guard Finance Investments

$21,598.00

Financial Wisdom

DCL Shares Investment

$100,000.00

Financial Wisdom

Superannuation Schemes

$196,900.00

Financial Wisdom

$405,789.54

Mr Smith (unlike other plaintiffs) incurred a net income tax loss totalling $68,646.20.

The net loss of Mr Smith for which Financial Wisdom is liable is prima facie the total of the net cash losses and the net income tax loss, namely $474,435.74.

Loss of opportunity

I am satisfied that, as a result of entering into the recommended investments, Mr Smith lost the opportunity which he would have utilised to make alternative investments. However, the evidence does not indicate what those alternative investments might have been. Given that Mr Smith primarily invested with a view to income rather than capital gain, I consider that his alternative investments would have been of the same nature and therefore the bond index is the most relevant measure. Mr Sincock made estimates on three alternative bases as follows:

“The after tax cash loss Mr Smith suffered can be calculated as follows:
$

Cash Loss  405,789.54
Add Net Cash Income Tax Loss               68,646.20
Net Cash Loss  474,435.74
However, when Mr Smith’s loss of opportunity by investing in either cash investments, public company shares or residential real estate is factored in, his loss can be summarised as follows:
Cash Investments
$

Cash Loss and Opportunity Loss           652,873.90
Add Income Tax Loss    55,485.51
Net Loss  708,359.41
Public Company Shares
$

Cash Loss and Opportunity Loss           620,010.62
Add Income Tax Loss    53,218.56
Net Loss  673,229.18
Residential Real Estate
$

Cash Loss and Opportunity Loss         1,156,208.63
Add Income Tax Loss       35,952.54
Net Loss  1,192,161.17”

These calculations suggest that alternative investments in any of the classes of bonds, shares or real estate would have been profitable, with shares being the least profitable ($200,000 profit), bonds being the next most profitable ($235,000) and residential real estate being the most profitable ($700,000 profit). Obviously, there are many contingencies and uncertainties which affect an assessment of a loss such as this. Doing the best I can and paying primary attention to the bond index, I assess damages as against Financial Wisdom for Mr Smith’s loss of profit as a result of his loss of opportunity in the sum of $200,000.

General damages

As to stress and anxiety, Mrs Smith said in her second witness statement:

“8.After the collapse of the Sentinel Group and the loss of my husband’s superannuation and redundancy funds, he was very upset and concerned.
9.This concern increased during the course of his illness. During the last few months of my husband’s illness he told me on numerous occasions how upset he was that the money had been lost. On many occasions he appeared upset and agitated and commented regularly that the family was left with no financial security. That was true - as a result of our investments through Sentinel we were left with very little financial security.”

I am satisfied that Mr Smith suffered stress and anxiety as a result of the losses from the recommended investments. The plaintiffs submitted that the estate of Mr Smith should be awarded $10,000 to $15,000 in general damages. In my opinion, the estate of Mr Smith is entitled to an award in the circumstances of $10,000 general damages as against Financial Wisdom.

P. CONCLUSION

Each of the defendants is liable to the plaintiffs in damages for the reasons which I have endeavoured to state. It will be necessary to adjourn the further hearing of the proceedings in order to hear final submissions concerning damages to the extent indicated in these reasons and to deal with statutory interest (if any) and costs.

Key Legal Topics

Areas of Law

Corporate Law & Governance
Commercial Law
Tort Law

Legal Concepts

Duty of Care
Negligence
Compensatory Damages
Unconscionable Conduct

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Citations

Newman v Financial Wisdom Ltd [2004] VSC 216

Most Recent Citation

Populus Lawyers P/L v Kennedy & Co P/L [2015] SADC 66

Cases Citing This Decision

10

AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2005] FCAFC 185

Heseltine v Investment Planners Australia Pty Ltd [2008] WASCA 79

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Mr Newman	Dale Newman, a selected plaintiff in both proceedings
Mr Duncan	Roger Lee Duncan, a selected plaintiff in both proceedings
Mr Collins	Allan Collins, a selected plaintiff in both proceedings
Mr Balding	Neville Balding, a selected plaintiff in the Financial Wisdom proceeding
Mrs Balding	Loris Balding, a selected plaintiff in the Financial Wisdom proceeding
Mr Bullock	Edward Bullock, a selected plaintiff in the Financial Wisdom proceeding
Mr Noble	Frank Noble, a selected plaintiff in the Financial Wisdom proceeding
Mrs Noble	Yvonne Noble, a selected plaintiff in the Financial Wisdom proceeding
Mr Giuffrida	Carmelo Giuffrida, a selected plaintiff in the Financial Wisdom proceeding
Mr Gray	Thomas Gray, a selected plaintiff in the Financial Wisdom proceeding
Mrs Gray	Jean Gray, a selected plaintiff in the Financial Wisdom proceeding
Mrs Smith	Jillian Smith, a selected plaintiff in the Financial Wisdom proceeding, in her capacity as executrix of the will of Eric Smith, deceased (“Mr Smith”)
Pamacorp Holdings	Hold Pty Ltd (formerly Pamacorp Holdings Pty Ltd), the first defendant in the Pamacorp proceeding
Pamacorp Securities	Ambridge Securities Ltd (formerly Pamacorp Securities Ltd), the second defendant in the Pamacorp proceeding
Pamacorp	Pamacorp Holdings and Pamacorp Securities collectively
Financial Wisdom	Financial Wisdom Ltd, the first defendant in the Financial Wisdom proceeding
Twenty-First	Twenty-First Australia Inc, the second defendant in the Financial Wisdom proceeding

AS Nominees	Australian Superannuation Nominees Limited
ASC	Australian Securities Commission
ATO	Australian Taxation Office
DCL	Development Corporation Limited
Entercorp	Entercorp Finance Pty Ltd
Guard Finance	Guard Finance Pty Ltd and/or Guard Finance (Vic) Pty Ltd
Healy	Alan McDonald Healy
Hemming	Gary Hemming
Hughes	Jarrod Hughes
Lye	Byron Lye
Mr McMaster	Wesley Andrew McMaster, Adjunct Professor (Financial Planning), RMIT University
Quarrell	Colin Frederick Quarrell
Schimana	Peter Schimana
Sentinel	Sentinel Financial Management Pty Ltd
Sentinel Group	Sentinel and the group of companies associated with it, which included Sentinel Accounting Services Pty Ltd, Kantell Pty Ltd, Development Corporation Ltd, Bond Pty Ltd, First Finance Ltd, Guard Finance Pty Ltd, Guard Finance (Vic) Pty Ltd and Sentinel Management Services Pty Ltd
the Sentinel promoters OR the Sentinel advisers OR the representatives	One or more of Quarrell, Healy, Schimana, Hughes and Lye
Wallco Ostrich	Wallco Ostrich Corporation Limited

the Sentinel Program	Sentinel Professionals’ Management Program
the Pamacorp brochure	Brochure entitled “Sentinel Professionals Management” and subtitled “A Pamacorp programme”
the Sentinel brochure	Brochure issued by Sentinel

Investment	Amount	Liable Defendant
Cabaret Scheme	$87,291.54	Financial Wisdom
Guard Finance Investments	$21,598.00	Financial Wisdom
DCL Shares Investment	$100,000.00	Financial Wisdom
Superannuation Schemes	$196,900.00	Financial Wisdom
$405,789.54

[2004] VSC 216

29 June 2004

Key Legal Topics

Areas of Law

Corporate Law & Governance

Commercial Law

Tort Law

Legal Concepts

Duty of Care

Negligence

Compensatory Damages

Unconscionable Conduct