Rohde v SA Asset Management Corp No. DCCIV-96-443 Judgment No. D3804

[1998] SADC 4010

Glenda Faylene ROHDE

v
South Australian Asset Management Corporation

CIVIL
JUDGE KITCHEN
DCCIV-96-443

The defendant was known as the State Bank of South Australia until, in 1994, its name was changed to its present name, South Australian Asset Management Corporation.  In these reasons I will refer to it as "the Bank".

In May 1998 and on later occasions to in the month of January 1989 the plaintiff spoke with Mr. John Mr. Connolly ("Mr. Connolly"), who was employed by the Bank as a senior investment adviser, seeking and obtaining from him advice concerning the investment of a sum of money, part of an agreed amount the plaintiff received by way of damages in respect of injuries she suffered in a motor vehicular accident which occurred in 1983.

As at January 1989 the liabilities of the Bank were guaranteed by the Treasurer to be satisfied out of the general revenue of the State (State Bank of South Australia Act 1983, Section 21).

In this action the plaintiff claims that she relied on the advice given to her by Mr. Connolly, whom the Bank admits was its agent, to invest in January 1989 two amounts each of $15,000 in a Capita Capital Guarantee Bond and in Growth Equities Mutual Property Trust ("G.E.M.").

The plaintiff’s case is that she told Mr. Connolly she wanted her money to be safe and invested in a "government backed guaranteed investment", that the investment in G.E.M. (the subject of her claim against the Bank) was not such an investment, that the Bank failed to manage the investment as it had agreed to do and the plaintiff thereby lost all but $7,169.18 of the capital sum invested in G.E.M.  The plaintiff claims the sum lost and other consequential losses.

I note for completeness that the Capita Capital Guaranteed Bond in which the plaintiff invested was also not a government backed guaranteed investment.  However the plaintiff makes no claim against the Bank concerning that investment.

In paragraph 5(c) of the statement of claim the plaintiff alleged

1. During the course of three conversations she had with Mr. Connolly as part of and in connection with her seeking the said advice the plaintiff informed Mr. Connolly (sometimes more than once) that
            (a)     ...
            (b)     ...
   (c)     she wanted the money to be safe and invested in an investment which was government backed guaranteed,
            ..."

By paragraph 4 of its defence the Bank denied that allegation.  However in paragraphs 5A (5)(6) and (7) of the statement of claim the plaintiff alleged, seriatim, the effect of each of the three conversations asserted in paragraph 5.  Paragraph 5A alleged, and the defendant admitted, that the conversations between the plaintiff and Mr. Connolly occurred in about May 1988, November 1988 and January 1989.

Paragraph 5A(5) of the statement of claim alleges that the effect of the first conversation between the plaintiff and Mr. Connolly was that, inter alia,

"(a)(iv)       (the plaintiff) wanted to invest the money in a safe place that was government backed guaranteed and she wouldn’t lose any of it, she preferred it to be put into two things so she had emergency access to one lot and that she had promised to take her children to Disneyland, hoped to do that in the following year and wanted the money tied up till then,"

The Bank, in paragraph 5 of its defence, admitted that allegation but denied the allegations in 5A(6) and (7) which claimed that statements were made by the plaintiff to Mr. Connolly on the same topic in the second and third conversations between them.

After I reserved judgment following Counsels’ addresses, Counsel for the Bank applied (initially orally a few days later and subsequently by written application) for leave to amend the defence by deleting the admission as to paragraph 5A(5)(a)(iv) of the Statement of Claim and substituting a denial of the allegations in that paragraph.  I heard the application on 5 February 1998.  The fact of  the admission was adverted to by Counsel for the plaintiff at the outset of the trial, it was confirmed by Counsel for the Bank (transcript pp.4-5), the trial was conducted on that basis and the admission was canvassed again by both counsel in addresses.  Having heard counsel for the parties, I refused the application.

The plaintiff is 41 years of age.  She was schooled to intermediate level.  After leaving school she undertook an industrial sewing course and more recently she studied for but did not take the final examination to qualify as a nurse.

The plaintiff has two children by her marriage to Garry Rohde.  The marriage was dissolved in 1992.

In 1983 the plaintiff was injured in a motor vehicle accident.  She described that injuries to her right eye, her right ear and to her back affected her memory, her powers of concentration and her senses of smell and taste.  She said her ability to concentrate is about ten percent of what it was before the accident.  She believes she is "a bit dyslexic" and says she also has "visual memory problems because of the car accident" and suffers with chronic fatigue syndrome which affects her memory and concentration.  In my opinion, her evidence of these matters was not shaken.

The plaintiff said that in 1988, anticipating she would receive a substantial sum of money by way of damages for her injuries, she spoke to a young lady, Amanda, at the Salisbury branch of the Bank, where she maintained an account, on the topic of interest rates.  She was given a pamphlet.  She said she has since mislaid the pamphlet but it included words to the effect of "Government backed guarantee" or "State Government backed guarantee", the same words she said she had previously heard or seen in television advertising by the Bank.

The plaintiff said, that some time after she spoke to Amanda, she again visited the Salisbury branch of the Bank and on that occasion spoke to a young man, Darren, and informed him she was looking to put her expected compensation into a high interest earning account.  The young man enquired of her approximately how much the compensation might be and when she informed him of a "ball-park" figure he gave her a business card for the Bank’s investment service located in Gawler Place, Adelaide.  The card included Mr. Connolly’s name and telephone number.  The plaintiff related that she telephoned Mr. Connolly, made an appointment to see him and met him in his office in about May 1988 at what I will refer to as the first meeting.

It is agreed as a fact (Exhibit D19) that Exhibit D21 lists the video advertising produced by Clemenger for the Bank for broadcast on commercial television between 25/11/83 and 11/6/92, only two of which, (those reproduced in the video recording Exhibit D20), advertised the Bank’s investment services; all the others listed advertisements concerned with the Bank’s other services.  D20 was played to the plaintiff.  She said she had vague recollection of a scene depicted in D20.  In no part of D20 are there words, or other things, referring to "Government guaranteed". 

However, the plaintiff spoke in general terms of advertising by the Bank and not particularly of advertising concerning the Bank’s investment services; in cross-examination she was asked if she recalled whether the television advertisement she had seen "related to investment in any way" to which she answered "I do recall seeing and hearing a male’s voice particularly talking about the savings bank and State Bank Government backed guarantee" and possibly the advertisement did not relate to investment services (154).  I see no reason to reject the plaintiff’s evidence that words to the effect she related were used in television advertising by the Bank.  That words concerning a "Government backed guarantee" do not occur in D20 does not, in my opinion, impugn her evidence - I infer the plaintiff was not aware, or at least only dimly aware, of the Bank’s investment services before, as I accept, the Bank’s officer Darren gave her the business card which included Mr. Connolly’s name.  That the plaintiff had heard or seen words to the effect of a Government guarantee is implicit in paragraph 5A(5)(a)(iv) of her statement of claim and it is admitted by the Bank in its defence that the plaintiff told Mr. Connolly at the first meeting that she wanted to invest money in a place "that was Government backed guaranteed".

I interpolate here that Mr. Connolly was not called to give evidence.  Counsel for the Bank tendered a report (Exhibit D23) from Dr Sam Hall, a consultant gastroenterologist, that Mr. Connolly was "unfit to act as any kind of a witness in Court proceedings".  Although at the commencement of the trial, counsel for the Bank was optimistic Mr. Connolly may become well enough to give evidence, that did not eventuate.  Dr Hall’s report was admitted without objection by the plaintiff.  That being the case I do not draw any inference adverse to the Bank for its failure to call Mr. Connolly in the trial.

Also without objection, the Bank tendered (Exhibit D30) extracts from Mr.  Connolly’s business diary in which Mr. Connolly recorded appointments to see the plaintiff on 6th May 1988, 30th June 1988, and 24th October 1988.  The appointment on 30th June 1988 was not kept by the plaintiff.  The appointment on 6th May 1988 is recorded to be with the plaintiff and her husband; the plaintiff denied her husband was present at that meeting.  The plaintiff accepted that her meetings with Mr. Connolly were probably in May and October 1988 and in January 1989.

The plaintiff’s evidence is that, from the pamphlet given to her by Amanda, she expected her money would be "going into a super-duper type bank account" at a "large interest".

The plaintiff said that at the first meeting with Mr. Connolly, which she asserted she attended alone and not with her husband, she told him about her car accident, that she expected to receive between $75,000 and $100,000 damages and:-

"A     I said I was looking at putting it into something that’s got high interest, and preferably to put it into two sections of interest so that I can have access to one lot.
Q Did you say anything to him about your ability to understand things.
A Yes.
Q What did you say about that.
A I told him that this was all new to me and that none of my family or anyone I knew of had anything to do with investments, and because of my medical problems, I don’t understand them.
Q What did he say in response to that.
A He said that he was prepared to help me, but he couldn’t do much until after I received the moneys.
Q Did you tell him anything about the effect of the accident upon you.
A Yes, I did.
Q What did you tell him about the effect of the accident upon you.
A I told him that I had memory loss and I lacked concentration.  I told him about the other injuries as well.
Q Did you tell him anything about the way in which your family’s finances were run.
A I told him that I’d had some experience with a term deposit in the high interest, but that was basically all, and I also did tell him that my husband did the finances and everything, and that this was all new to me and it was something that I wanted to do by myself without my husband’s help.
Q Did you say anything to him about filling in forms.
A Yes.
Q What did you say about filling in forms.
A I said I had difficulty in filling out forms and could he please help me if I had to do any.
Q Did you say anything arising out of the advertisement that you had seen.
A I kept insisting that whatever happens with the money, it must be put into a Government backed guarantee bank account.
Q Did you mention the words ‘bank account’.
A I think I did.
Q When you insisted that it had to be in a Government backed guarantee bank account, did Mr. Connolly say anything.
A His words were ‘Don’t worry.  It will be all right’."

The plaintiff said that Mr. Connolly handed to her two prospectus one of which was that entitled "Growth Equity Mutual Property Trust, 12th Prospectus", Exhibit P2.

The plaintiff said that when Mr. Connolly handed the prospectus to her she told him "I wouldn’t be able to read them, that I wouldn’t be able to understand them.  I said I would probably get someone to read them to me and try and explain it and he said "Don’t worry.  It will be okay", that he would help me next time I see him to understand it if I couldn’t find anyone" (page 37).

Mr. Connolly wrote to the plaintiff on 23rd May 1988 (Exhibit D18).  His letter states, inter alia, that he had "examined the information contained in your Personal Statement".  The plaintiff identified Exhibit P8 as the "Personal Statement".  In cross-examination the plaintiff agreed that her signature appears on the last page below which is the date 6th May 1988 and that the document includes the handwriting of each of the plaintiff, her husband and Mr. Connolly.  The note in Mr. Connolly’s diary, Exhibit D30, for 6th May 1988 as best I can decipher the handwriting is "Glenda and Gary Rohde ([indecipherable] manage)!"  The plaintiff maintained that her husband was not present at the first meeting.  She said her memory is that her husband attended the second meeting with Mr. Connolly, the Personal Statement was partly filled in during that meeting and her husband then took it home to complete it.

In her statement of claim the plaintiff alleged and the defendant admitted that the first and third meetings were between her and Mr. Connolly, and the second meeting was between her, her husband and Mr. Connolly.  That admission and the absence of any oral evidence from Mr. Connolly means that it is quite possible the plaintiff’s husband did not attend the first meeting but the form was taken by the plaintiff for completion by her husband and returned to Mr. Connolly before the date of D18.  Some of the contents of the personal statement are in considerable detail and some have a comment in what I infer to be the handwriting of Mr. Connolly.

The plaintiff said that about one month after the first meeting with Mr. Connolly she received from her solicitors a sum of about $50,400 in respect of her claim for damages which she paid into her account with the Bank.  The plaintiff identified Exhibit D19 to be her deposit/withdrawal book relating to her account which records a deposit of $50,411.99 on 27th June 1988.

The plaintiff’s evidence is that she and her husband then went to see Mr. Connolly.  The plaintiff says she was unwell on that day because of a migraine and on several occasions she had to leave Mr. Connolly’s office to go to the toilet, on one of which occasions when she returned to Mr. Connolly’s office Mr. Connolly and her husband were discussing a superannuation scheme for her husband and life insurance for him and the children, which angered her because her husband was "treading on my territory".

The plaintiff related that at the second meeting she told Mr. Connolly that she would like to put her money "into two different lots, one for emergency and one to be put away for at least 12 months so that we could take the children to Disneyland".  She said Mr. Connolly told her he thought it was a good idea that she not put all her eggs in one basket.  He raised with her the topic of interest to be paid to her, to which she said she would like one part of her investment to accumulate and also she would like to earn a small income "to be able to take the money out, you know sort of emergency case".  The plaintiff said she also asked Mr. Connolly "if it would be State Bank guaranteed that I’d seen and heard", that he responded "It will be alright.  It will be safe" and during the meeting he handed her two forms and

"Q     What did you do with them when you got them.
A I took one look and slid them across to Gary.
Q What did Gary do when you slid them across to him.
A He had a look at them, and I think that was one of the times I had to quickly go out.
Q Did Mr. Connolly say anything about the forms to either you or to Gary.
A That they had to be filled in - no, he said to read them through first, and that if it was A-okay, to fill them out.
Q Did you make any comment in response to that.
A I said that ‘I wouldn’t be able to do them, could you help me with them’.
Q Did he say anything in answer to that.
A He said ‘Well, your husband can start filling them out’, of which Gary did start doing that.
Q Did Gary complete the filling in of this form.
A Because I wasn’t well, it was pushed through because I needed to get home.  Gary filled in part of it, then Mr. Connolly filled in some of it, and the other one.
Q In the course of filling in part of one form or the other form, did Mr. Connolly say anything which sticks in your memory.
A No.
Q Did he say anything about your name.
A Yes.  He commented about my middle name, how unusual it was.
Q Can you remember whether you signed any of the forms that were presented at this meeting.
A No, I don’t think I did.
Q At this meeting, did Mr. Connolly say anything to you about a fee.
A Yes.
Q What did he say.
A He talked about five per cent of something, I’m not sure what it was about, and he estimated there’d be a fee of approximately $200.
Q Do you remember what the fee was for.
A No.
Q You can’t remember what the 5 per cent was for.
A No."

Following the second meeting the plaintiff received a letter from Mr. Connolly.  It is Exhibit P1 dated 17th November 1988.  It reads:

"At last the revised recommendations you have been waiting for.

Based on the fact that you do not require any income, yet some money will be required in 2-3 years time for a holiday the following steps are recommended.

1. Gary should implement a Life Insurance policy in the sum of $125,000, attracting a first year premium of $186.88.

1. $15,000 be invested in Capita Capital Guaranteed Bond.

1. $15,000 be invested in Growth Equities Mutual Property Trust.  The growth units being chosen.

A prospectus is enclosed and should be read before completing and signing the application forms.

As stated previously these units attract a fee of 6% (taken out of the application money) and this is inclusive of a 5% brokerage payable to State Bank.

Kindly complete and sign the Capita and G.E.M. application forms and have Garry complete and sign the insurance application together with the personal statement.

Return these in the envelope provided together with the signed withdrawal slip and I will have the transactions processed.

I look forward to seeing you all again."

The plaintiff said that after she received the letter Exhibit P1 Mr. Connolly telephoned her to arrange a further meeting.  She went to his office where he told her that everything was ready for her to sign.  She related

"A     He said to me that he’s put one lot into an investment thing that I’d receive some moneys occasionally, and he also said he’s put another lot where it would stay there, and he’d keep me informed as to what was happening with it.  I also asked him again if it was safe, a government backed guarantee and his words were - he was a bit peeved off at that meeting and he said ‘It’s safe, it will be alright.’
Q What happened then.
A As far as I remember at that stage it was pretty well the end of the meeting, I signed -
Q Did you sign anything.
A Yes, I did.
Q What did you sign.
A I signed two forms, one of which came out of the back of one of the prospectus - and there was another form; I can definitely remember two."

The documents the plaintiff signed are Exhibits P6 and P7.  Both are dated 13th January 1989.  Exhibit P6 is an application to invest $15,000 in growth units of the Growth Equity Mutual Property Trust.  Exhibit P7 is an application to Capita Financial group to invest $15,000 in a capital guaranteed insurance bond.  The plaintiff said and I accept that the person who signed his name under the word "witness" in P7 was a man whom Mr. Connolly brought into his office for that purpose.

The plaintiff said that at the third meeting she told Mr. Connolly she had not been able to read the books he had handed to her at the second meeting and her husband had not had the time to read them or explain them to her, to which she said Mr. Connolly replied "that’s alright".  She said she also asked Mr. Connolly to "look after my money and inform me as to what is going on" and he answered that he would look after it (page 63).

On 17th January 1989 the Bank wrote to the plaintiff confirming that the investments in Capita and G.E.M. had been made, informing her the documents would be sent to her by the fund managers and suggesting that she should contact Mr. Connolly if the documents were not received after one month.  The plaintiff said she received documents from G.E.M. but not from Capita and she telephoned Mr. Connolly who said he would look into the matter.  The plaintiff apparently did not pursue Mr. Connolly but in early 1990 on an occasion when the plaintiff was at the Salisbury branch of the Bank in relation to her sister’s affairs, she learned from Mr. Reynolds, an officer of the Bank, that the Bank had no record of the investments Mr. Connolly had made on her behalf.  She said she asked Mr. Reynolds to "retrieve" her money and credit it to her bank account.  There was correspondence between the plaintiff and the Bank culminating in a long letter from the Bank dated 4th May 1990 (Exhibit P13).  From that letter, and an earlier letter dated 12th April 1990 (Exhibit P11), it appears that Mr. Connolly had left the Bank’s employment (I infer in February 1989) to work for REI Building Society and took the plaintiff’s files with him, an action which the Bank described as "a most serious breach of accepted bank practice".  The Bank was profuse in its apologies to the plaintiff for what had occurred.  The Bank retrieved the plaintiff’s file from Mr. Connolly in April 1990 and assured the plaintiff that her investment had "at all times remained safe and intact".

The plaintiff said that, concerning her request that the Bank retrieve her money, she was told by Mr. Reynolds or others in the Bank that she would have to do that herself.  In cross-examination she was asked why in her letter to the Bank in April 1990 (Exhibit P12) she did not request her money.  She responded to the effect that it looked to her as though the "bottom" of the letter had been cut off, a suggestion which in my view was specious and did the plaintiff no credit.

The plaintiff related that in the period between about May 1990 and April 1992 she took steps to try to retrieve her money by contacting Capita and G.E.M. but her efforts in that regard were punctuated by periods of inactivity on her part because of ill-health.  In April 1992 the plaintiff received a letter from G.E.M. (Exhibit P14) which informed her that her application to redeem her units could not be accepted because redemptions had been suspended, which the plaintiff understood to mean "frozen".  It appears from Exhibit P15 that on 16th November 1990 redemption of G.E.M. units was suspended pending a meeting of unit holders and at a vote taken at a meeting of unit-holders in G.E.M. held in December 1990 it was decided that redemptions by unit-holders be suspended for up to 12 months to enable the trustee to consider a restructuring of the trust.  A restructuring proposal was considered and voted on by unit-holders in September 1991 in consequence of which the plaintiff’s then 8,241 growth units, valued at $10,633.36, were cancelled and she was allocated units in three new funds, 1785 units of $1.00 in Gemcol, 2,731 units of $1.00 in Gemgeo and 3,058 units of $2.00 in Gempro.  In August 1996 following a unit-holders meeting in July 1996 the plaintiff’s units were acquired by G.E.M. Commercial Property Trust.  She received $6,939.55 on 28th August 1996 and a further $229.63 in September 1996 (Exhibit P15).

In late 1992 after searching for about 12 months the plaintiff determined to purchase a house.  She realised on her investment in Capita, receiving about $27,000.  She said she was hopeful she would be able to redeem her G.E.M. investment which together with the moneys received on redeeming her Capita investment and a property settlement in the sum of about $40,000 obtained in her divorce settlement and other funds would enable her to pay cash for a house.  The redemption of the G.E.M. investment did not eventuate.  The purchase price of the house was approximately $87,000.  The plaintiff borrowed $46,545 from the Co-operative Building Society secured by a mortgage over the house after, she said, deciding to spend some $17,000 of the moneys received from Capita on repairs and other things in relation to the house and retaining the balance, $10,000, for other emergency purposes.

The plaintiff said that if Mr. Connolly had told her that the G.E.M. investment was not or may not be safe, or it was not "Government guaranteed or government backed guaranteed" or she would not have had access to an investment in it whenever she wanted to she would not have made that investment.  She said she believed from the pamphlet given to her by "Amanda" and her previous experience as a customer of the Bank that her money was being invested within the Bank’s system in a higher interest bearing account "a super-duper type account".

During her cross-examination the plaintiff evinced some tiredness and on occasions complained of reduced concentration.  Both in examination but more often in cross-examination the Court adjourned for short periods so the plaintiff might rest from questioning.

In cross-examination the plaintiff identified the handwriting and marks on Exhibit D18 as hers.  Some of the markings highlight the rate of interest on the investments proposed by Mr. Connolly in that letter from which I infer that the plaintiff read the letter with some care.  However, she said she does not recall her husband reading to her or explaining the prospectus Mr. Connolly gave to her at the first meeting, and nobody else did.  Her attention was drawn by defence counsel to the G.E.M. prospectus Exhibit P2 on page 2 of which there is a note that an investment in G.E.M. may be redeemed at any time, that the manager of the Trust must repurchase within 60 days and that currently redemptions are paid within seven business days of the request to redeem.  The plaintiff said she did not understand what that meant and if it meant that she could have access to her money only after seven days, that might be too long for her purposes - she might have required access on a day’s notice and, she said, Mr. Connolly knew she was still having medical treatment and was aware she might need access to the money "straight away if needed".  The plaintiff said she continued to have chiropractic treatment regularly until about six months prior to a second motor vehicle accident which occurred in August 1990.

Exhibit P15 includes copies of a number of letters, circulars or documents from G.E.M. addressed to the plaintiff by name or as a unit-holder, which "trace" the plaintiff’s investment in G.E.M.  The plaintiff was questioned as to which of them she had read.  She agreed she read some but not others.  She was uncertain whether or not in relation to some of them she sought advice from Mr. Connolly.  If, as I infer, Mr. Connolly ceased his employment with the Bank in about February 1989, then it is unlikely the plaintiff spoke to him after about that month.  However, the plaintiff in cross-examination agreed that there was an occasion, the date of which she did not remember but it might have been in April 1989, when by chance she met Mr. Connolly in Rundle Mall.  She said it is possible that she told him on that occasion that she wanted him to continue to manage her file.  She also spoke of a vague recollection of an occasion when she was in hospital, and Mr. Connolly telephoned and spoke to her the topic being something to do with her ex-husband.

The plaintiff said she does not remember contacting anyone else at the Bank’s investment service in relation to the letters and documents received from G.E.M.  She explained, concerning documents notifying her of meetings of G.E.M. "I wouldn’t even read them, I just see what the heading was about and I think ‘Well Mr. Connolly’s handling it, I don’t have to worry about it, so I put it aside".  I was unable to read most of it anyway’" (page 182), but she agreed that there was an occasion when she signed and despatched a proxy for one such meeting.

The plaintiff said that although she received letters and documents from G.E.M. and not from the Bank "as far as I knew it was related, in conjunction with the State Bank".

The plaintiff was taxed about her evidence concerning the moneys she had available at the time she purchased a house in December 1992.  Her evidence is that because she was not able to retrieve her investment in G.E.M. she was obliged to borrow more money than she otherwise would.  In her evidence she spoke of having approximately $40,000 from her divorce settlement and $27,000 from the realisation of the investment in Capita, a total of approximately $67,000.  In cross-examination she said she also had other moneys which could have been as much as $30,000, partly in a bank account and partly in cash but it could have been as little as $15,000.  She was asked why she did not apply that money toward the purchase of the house.  She, in various and not always consistent ways, explained, in passages I found difficult to follow, that there needed to be significant expenditure to make the house "safe" and she wanted to allow for the installation of a swimming pool.  In the course of questioning about those matters it emerged the plaintiff had been concerned to keep to herself the true state of her means in her dealings to obtain a divorce settlement, particularly so it seems, substantial sums of money she received on the sale of a collection of coins and antique jewellery.  The plaintiff changed her evidence to say that the other money she had available was only about $15,000, made up of about $4,000 in a bank account and about $10,000 in cash.  It was put to her that she told her solicitor she had about $28,000 in "other" funds when she purchased the house.  She agreed she had said that but explained she had misunderstood; $28,000 was indeed a sum she had had but that was when she moved into Housing Trust accommodation on leaving her husband and by the time of the purchase of the house in December 1992 that fund had reduced to about $15,000.

I have reflected upon these shifts in, and other aspects of, her evidence in weighing her credibility.  I have come to the view, giving due weight to her stated and uncontradicted health problems and my own assessment of her whilst being questioned, that the plaintiff is a witness whose evidence on the matters crucial to her case should be accepted to make findings of fact on the balance of probabilities.  This assessment of the plaintiff is fortified by the fact that, critically, she was not challenged on what she said she told Mr. Connolly concerning the "Government backed guaranteed" investment she wanted; in fact the Bank admitted that is what the plaintiff said she wanted in the first meeting with Mr. Connolly - I refer again to paragraph 5A(5)(a)(vi) of the Statement of Claim and the Bank’s admission.

Counsel for the Bank was critical of the plaintiff’s failure to call her husband. There was no explanation on the plaintiff’s part why he was not called, other than her evidence that their marriage had been dissolved. However, there being no suggestion to the plaintiff that her husband had explained the two prospectus to her (she said she could not remember) or that Mr. Connolly had done so, or that she knew the G.E.M. investment was not Government guaranteed the absence of Mr. Rohde as a witness does not lead me to an adverse view of the plaintiff’s evidence or even to infer that his evidence would not have assisted the plaintiff (Jones v Dunkel [1959] 101 CLR 298).

The plaintiff said and I accept she told Mr. Connolly she would not be able to read and understand the prospectus he gave her, informing him of the accident she had had and its consequences upon her memory and concentration.  That a person in the position of the plaintiff might tell his or her financial adviser of such things is entirely plausible.  The Prospectus P2 is a thirty-five page document, many pages of which are in small closely spaced type-face.  I accept the plaintiff’s evidence that her previous experience in investing money had been in term deposits.  My assessment of the plaintiff is that she is not, and was not in 1988, a sophisticated person educated in the myriad forms of available investments.  It is entirely understandable that she would ask Mr. Connolly, who quite obviously assumed the role as her financial adviser, to explain the essential features of that into which he advised her to place her money.  Mr. Connolly, I find, told the plaintiff to take the Prospectus away and read it or have her husband read it and explain it to her.  In my opinion that was an abrogation of his position, representing the Bank, as her financial adviser.  Significantly in his letter to the plaintiff dated 23rd May 1988 (D18) Mr. Connolly wrote in relation to the investments he first proposed "All the above investments will be discussed at our next meeting as it is essential that the Prospectuses be read and understood before any action is taken".

The plaintiff, I find, at the outset told Mr. Connolly she wanted her money placed at high interest in a Government guaranteed investment.  That which Mr. Connolly ultimately recommended to her, and she accepted, was not a Government guaranteed investment.  The Bank submitted that a person reading the G.E.M. prospectus would clearly understand the offered investment was not so guaranteed and therefore the plaintiff cannot complain that no such guarantee was obtained.  The plaintiff it was submitted must have changed her mind, or it should be inferred she did or Mr. Connolly reasonably believed she had changed her mind, as to the guarantee being a critical feature of any investment.  In my opinion that submission is unsustainable, even if I were to reject (and I do not) the plaintiff’s evidence that in the second and third meetings with Mr. Connolly she reiterated that her investment must be Government guaranteed.  I accept the plaintiff’s evidence that she did not read the Prospectus and I find Mr. Connolly was aware of that.  In my judgment a financial adviser whose instruction is to propose investments that are Government guaranteed but who recommends, to an unsophisticated person like this plaintiff, investments which do not have such a guarantee has a duty to inform that person of that fact.  It was not suggested to the plaintiff that Mr. Connolly told her that the investments he recommended were not Government guaranteed, and the two letters he wrote to the plaintiff, Exhibits P2 and D18, contain no such advice.

Although in my opinion the liability of the Bank to the plaintiff is to be found in its failure, through Mr. Connolly, to explicitly inform the plaintiff that the investments recommended to her were not Government guaranteed,  even if, contrary to my view, Mr. Connolly might have thought that the plaintiff had decided not to invest in a Government guaranteed deposit or the like, still I accept the plaintiff’s evidence that on more than one occasion she asked Mr. Connolly whether her investment in what he was proposing was "safe".  In the admitted context of the plaintiff speaking of a Government guaranteed instrument, or words to that effect, when she first spoke to Mr. Connolly then even if Mr. Connolly considered that the plaintiff’s stated wish to have her money invested in two lots, at high interest at least one of which was to be easily accessible, indicated the investment need not be in Government guaranteed deposits or the like but in the investments he ultimately recommended, his statement that the recommended investment would be safe was negligent; it was tantamount to saying that the investments he proposed would be no less secure than an investment into a Government guaranteed deposit and he either knew or should have known that that was what a person in the position of the plaintiff would infer.

The Bank, through Mr. Connolly, had a duty of care to the plaintiff in the relationship of banker and customer of which existed between them. The Bank by its agent Mr. Connolly, engaged for a fee as it transpired, to provide investment advice to the plaintiff. The plaintiff as I have found told Mr. Connolly to the effect that she wanted an investment which was Government guaranteed. The Bank held out Mr. Connolly to be an investment adviser. That was the import of what the plaintiff described to be in the content of the business card given to her by an officer of the Bank when responding to the plaintiff’s request for advice about the investment of her compensation, her description of which is supported by the position which Mr. Connolly described himself to hold in his letter to the plaintiff dated 23rd May 1988 in which he wrote below his name "Senior Investment Adviser, Investment Services". In my opinion there is no doubt that the Bank carried on the business of giving investment advice and information, or at least held itself out to be in that business, and it knew or ought to have known that the plaintiff would rely (as I find she did) on the skill and judgement of Mr. Connolly in the advice or recommendations given by him concerning the investment of her compensation. Mr. Connolly by not expressly informing the plaintiff that the investment he recommended was not Government guaranteed or, as I find, by informing the plaintiff more than once it would be safe induced the plaintiff to make the investment in G.E.M. which was not Government guaranteed and was not safe, in the sense she would not lose her money, was in breach of the duty he assumed as the plaintiff’s financial adviser and through him the Bank is liable to the plaintiff for the loss and damage she suffered (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; The Mutual Life & Citizens’ Assurance Co Ltd v Evatt [1968] 42 ALJR 316).

Damages

In cross-examination the plaintiff was not able to identify which of the investments in Capita and G.E.M.  was that which had to be "immediately available".  However, the prospectus for G.E.M. (Exhibit P2), which I infer Mr. Connolly read, provided that an investment in that fund could be redeemed and it represented that at the date of the prospectus redemptions were being paid within seven working days.  Therefore I conclude that the G.E.M. investment, at least in Mr. Connolly’s mind, was that which he considered met the plaintiff’s criterion of immediate availability.

The plaintiff’s case is that as a result of investing in G.E.M.:

(a)    she lost a substantial portion of the capital sum invested;

(b)  that she did not have the capital investment available to her when she wished to apply it towards purchasing a house in December 1992 and therefore she borrowed money;

(c)  she did not receive interest on the capital sum she invested, except $228.72, the total of several "dividends" in the period 22 June 1993 to 21 June 1996

none of which would have occurred if her investment had been made in a Government guaranteed investment or account.

By consent the plaintiff tendered a report by way of a letter dated 11th December 1997 from Mr. P. Chisolm of Todd & Partners, sharebrokers and investment advisers (Exhibit P26).  In his opinion investments available in January 1989 in which the money invested was safe, Government guaranteed and accessible in an emergency were Commonwealth Government loans or bonds, semi-Government loans and deposits with the Bank.  Mr. Chisolm  states that, inter alia, Commonwealth Government loans and bonds "were and are readily bought and sold through Australian Stock Exchange members (and) settled within 14 days".

Exhibit P24, also admitted with the Bank’s consent, is a memorandum from the Reserve Bank dated 9th December 1997.  It describes the facilities available for small investors to buy and sell Commonwealth Government bonds through the Reserve Bank in parcels of $1,000 or multiples thereof.  I note Mr. Chisolm’s report indicates there is (and I infer there has been) a market for such bonds in parcels ranging from $100 to $1000.  Sellers of bonds to the Reserve Bank receive payment on the day the transfer is delivered to the Reserve Bank, the price being "based on market prices less an administrative charge of 25 cents per $100 face value".

Before me there was debate whether, the price obtained for a bond being likely to be more or less than the cost of its purchase because the sale price depends on the market at the time of sale, an investment in Commonwealth Government bonds met the plaintiff’s desire that she not "lose her money", that is, any portion of her capital sum whenever she realised the bond before its term expired.  As best as I can judge from the material before the Court such a consideration would not have been decisive and, of course, I have Mr. Chisolm’s opinion that a bond met the criterion that "the money had to be safe".

I therefore conclude that Commonwealth Government bonds were an investment vehicle which would have met the plaintiff’s criteria, as a competent investment adviser knew or should have known.

By consent the plaintiff tendered the report of Mr. S. Mules, an actuary, of Buck & Partners, dated 10th December 1997 (Exhibit P22).  On the assumptions stated in his report, substantially an investment of $15,000 in Commonwealth Treasury Bonds on the 17th January 1989, he calculates the value of such an investment by 1 December 1997 to have been (his "Approach 1")  $34,800, the difference between that sum and $15,000 being interest earned including interest earned on interest coupons received in respect of the bond.  Mr. Mules’ report also shows that, upon the same assumptions and approach, the value of the investment at 1 December 1992 would have been $24,500.  The plaintiff purchased her house on 22nd December 1992.

By way of contrast, were the plaintiff to have invested $15,000 in a 30-day call account at the Bank the amount to which the plaintiff would have had access on 1 December 1992 would have been about $20,738 (non-compounding interest [Exhibit P27]) including interest received, or about $22,031 (compounding interest [Exhibit P28]).  In my view such an account would also  have been an appropriate investment to meet the plaintiff’s criteria.

It is clear from Mr. Connolly’s letter to the plaintiff dated 17th November 1988 (Exhibit P1) that Mr. Connolly knew that the plaintiff required access to her investment "in 2-3 years time for a holiday".  The holiday, I find, was that which the plaintiff stated she told Mr. Connolly about namely to take her children and her husband to Disneyland.

In my opinion it was foreseeable, or a likely result, that if the plaintiff’s investment in G.E.M. was lost or not available the plaintiff would need to borrow the money she would otherwise have had for the holiday.  The plaintiff wished to realise on her investment, not admittedly for a holiday but for the purchase of the house in December 1992.  That was within the time frame of 2-3 years mentioned in Mr. Connolly’s letter.

In my judgment the plaintiff is entitled as a head of damage to the cost to her of the amount she borrowed to replace the investment which because of the Bank’s negligence was not available to her from G.E.M., but would have been available to her were the investment to have been into Commonwealth Government bonds or at least into a 30-day call deposit account with the Bank.    Any of those investments would have been an appropriate recommendation to meet the plaintiff’s criteria.  I will therefore take the average of the value of investments in those places by 1st December 1992.  It is $22,423.

The Bank contended that the plaintiff should, reasonably, have paid toward the purchase of her house the approximately $15,000 she had either in a bank account or in cash.  I do not agree.  The plaintiff is entitled to order her affairs as she sees fit, subject to her obligation to take reasonable steps to mitigate her loss.  I accept the plaintiff’s evidence that she habitually kept large sums of cash in her house.  In my opinion she was not obliged, in order to mitigate her loss, to contribute her other funds to the purchase of her house.  She is entitled to be put back into the position she would have occupied if the Bank had not negligently caused the loss of her fund.

I find that the plaintiff borrowed $22,423 more than she would but for the Bank’s negligence.  Exhibit P16, pages 1-11, sets out the interest rate from time to time paid by the plaintiff to the Adelaide Bank, from which she borrowed funds to purchase her house.  After addresses and by agreement counsel for the plaintiff sent to the Court a memorandum with the content of which the Bank agreed.  The memorandum sets out the appropriate multiplier to calculate the interest on $1 paid between 23rd December 1992 and 12th December 1997 at the interest rate applying from time to time in that period.  I note that the multiplier stated at Item 2.3 of the memorandum is incorrect; the period in that item should be 23/12/94 to 22/2/95, a period of 61 days producing a multiplier of 0.017.

Using the various multipliers stated in the memorandum (after the correction I have referred to) I calculate that the plaintiff  paid, to 12 December 1997, $10,049.20 by way of interest upon the sum of $22,422.

Between the 22nd June 1993 and 12th June 1996 the plaintiff received in cash from G.E.M. a total of $228.72 in various small payments.  On 28th August 1996 she received $6,939.55 from G.E.M. and on 30th September 1996 she received from G.E.M. $229.63.  All of those amounts were paid in respect of or in final redemption of her  investment in G.E.M.  In performance of her duty to mitigate, those sums are to be regarded as having been paid to the Adelaide Bank at about the time the plaintiff received them to reduce her liability to that bank and the appropriate multiplier applied to the reduction of the sum of $22,422 (ultimately to $15,025) from the time the payments were made.  I am not able to do the calculation accurately.  I therefore take a broad approach by which I assess the interest paid to 12th December 1997 to be $9,040 to which must be added, using the last interest rate (8.25%) in the memorandum as  the only information available to me, $482 to bring the calculation to the date of judgment, a total of $9,524.

I assess the plaintiff’s damages in the sum of $24,547 being the total of $22,422 less $7,397.90 the plaintiff received or retrieved from her investment in G.E.M., plus interest paid by the plaintiff to the Adelaide Bank on the sum of $22,422 progressively reduced by the payments received from G.E.M., to the date of judgement.