Ritchie v Woodward

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.