Ritchie v Woodward (Executor of the Estate of the late Brian Patrick Woodward); Rujo Pty Ltd v Woodward (Executor of the Estate of the late Brian Patrick Woodward); Barona Group Pty Ltd v Woodward (Executor of the Estate of the late Brian Patrick Woodward) [2016] NSWSC 1715
Direct that no later than 16 December 2016 the defendants bring in short minutes of order giving effect to my conclusions and, if there is any dispute as to costs, providing a timetable for submissions on all outstanding questions of costs.
Catchwords:
CONTRACTS – plaintiffs invested in series of hotel businesses due to advice from their accountant and subsequently lost entire investment – accountant allegedly promised to secure loans that the plaintiffs had made to the businesses but did not – plaintiffs allege that if they had been told that loans weren’t secured that they could have taken steps to recover their investment – implied terms – whether contract of retainer with accountant contained certain implied terms about plaintiffs being informed about all financial matters relevant to financial affairs of plaintiff and conflicts of interest – contractual promise of degree of care, skill and diligence – whether accountant breached contractual promise in retainer to exercise degree of care, skill and diligence that it was reasonable to expect of a competent chartered accountant in performing such a retainer – whether there was a promise to secure loans – whether there was failure to secure loans – in what capacity was accountant acting when loans were made and promise to secure the loans was made – whether failure to secure loans and failure to inform plaintiffs constituted contractual breach – causation – whether accountant’s actions caused financial loss to the plaintiffs – whether investment and/or loans could have been recovered in any case – whether cross-collateralisation of hotels caused any financial loss – breach – whether advice to invest constituted breach of contractual promise in retainer to exercise degree of care, skill and diligence – whether accountant should have performed due diligence – whether accountant should have relied on valuations of hotel – whether accountant should have shown plaintiffs business plan for the hotels – whether fourth and fifth defendants breached their contract of retainer for failing to provide ongoing monitoring services to plaintiffs
PROFESSIONAL NEGLIGENCE – torts – whether accountant owed the plaintiffs duty of care in advising to invest – in what capacity did accountant provide advice – whether accountant’s advice to invest constituted breach of duty – whether accountant had duty to show plaintiffs business plan for the hotels – whether failure to perform due diligence constituted breach of duty – whether alleged failure to advise plaintiffs to seek independent legal or accounting advice constituted breach of duty – whether existence…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Ritchie v Woodward (Executor of the Estate of the late Brian Patrick Woodward); Rujo Pty Ltd v Woodward (Executor of the Estate of the late Brian Patrick Woodward); Barona Group Pty Ltd v Woodward (Executor of the.. [2016] NSWSC 1715
Case
[2016] NSWSC 1715
Decision Date
CaseChat Overview and Summary
Ritchie and others sued Woodward and others over investments in hotel businesses that resulted in financial loss. The plaintiffs claimed the accountant, Woodward, failed to secure loans they had made to the businesses and did not inform them, causing them to lose their entire investment. They sought damages for professional negligence, misleading and deceptive conduct under the Fair Trading Act 1987 (NSW), and other claims. The court had to decide whether there were implied terms in the retainer contract about informing the plaintiffs of all relevant financial matters and conflicts of interest, and whether Woodward breached the contractual promise of care, skill, and diligence. The court also needed to determine if Woodward's advice to invest constituted a breach of duty and if there was misleading and deceptive conduct under the Fair Trading Act.
The court found that there were implied terms in the retainer contract for Woodward to inform the plaintiffs of all relevant financial matters and conflicts of interest. However, Woodward did not breach the contractual promise of care, skill, and diligence because the plaintiffs did not prove that a competent chartered accountant would have taken specific steps. The court also found that Woodward did not breach his duty of care in advising the plaintiffs to invest, and there was no misleading or deceptive conduct under the Fair Trading Act. The court held that the plaintiffs' investment and/or loans could not have been recovered in any case, and the cross-collateralisation of hotels did not cause any financial loss. The court also found that the other defendants were not vicariously liable for Woodward's actions.
The court determined that the accountant's bankruptcy did not release him from liability for the claims in professional negligence and under the Fair Trading Act because those liabilities were provable debts in bankruptcy. The court held that the insurer was not liable for the defendants' impugned conduct because it did not constitute "investment advice" under the insurance policy. The court also found that the statutory professional schemes did not limit the plaintiffs' liability where the defendants were covered by an insurance policy.
The court ordered that the plaintiffs take nothing by their claims and that the defendants pay the plaintiffs' costs. The court also ordered that the insurer pay the defendants' costs of the cross-claim.