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Ryan Wealth Holdings Pty Ltd v Baumgartner

Ryan Wealth Holdings Pty Ltd v Baumgartner

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Case Copied 8 October 2018 52 min read

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Ryan Wealth Holdings Pty Ltd v Baumgartner [2018] NSWSC 1502
Hearing dates: 28-31 August; 12 October 2017
Date of orders: 08 October 2018
Decision date: 08 October 2018
Jurisdiction: Common Law
Before: Walton J
Decision:
The Court makes the following directions:

(1) The plaintiff shall file and serve within 14 days of the date of this judgment short minutes of order reflecting this judgment.

(2) The plaintiff shall file and serve within 28 days of this judgment a submission as to any disputed questions as to the short minutes of order, interest and costs together with the terms of any orders proposed with respect to costs.
(3) The defendants shall file and serve a submission in reply as to any disputed questions as to the short minutes of order, interest and costs together with the terms of any proposed orders in that respect, within 14 days after being served with the submissions in (2) above.
Catchwords:
AUDIT of a self-managed superannuation fund – Superannuation Industry (Supervision) Act 1993 (SIS Act) – auditing standards framework – construction of audit contracts – parties to the audit contracts

EVIDENCE – expert witness – weight attached to expert opinion

BREACH OF DUTY AND CONTRACT– admitted breach of contract and duty – non-admitted breaches of contract and duty – failure to enquire into and report on compliance with investment strategy – reg 4.09 – failure to bring serious misdescriptions, misstatements and other factors (including conflict of interest of accountant) to the plaintiff’s attention – failure to form and express certain opinions – failure to exercise reasonable care and skill – the defendants breached retainers and common law duties owed to the plaintiff

SIS ACT – contravention of the SIS Act – obligations under the Act – whether damages available under the Act

MISLEADING AND DECEPTIVE CONDUCT – representations – s 42 of the Fair Trading Act (NSW) – s 52 of the Trade Practices Act – representations within audit reports – representations by silence – representations by auditor constituted misleading and deceptive conduct

CAUSATION – causation as a result of admitted breaches, non-admitted breaches and misleading and deceptive conduct –

LOSS AND DAMAGES – loss of the chance or opportunity – additional recoveries – exercise of rights under facility agreement – claims against insured parties – exclusion clauses within insurance policies – conflict of interest exclusion clauses – dishonesty and fraud exclusion clauses – insurance policy would have responded to one of plaintiff’s claims – partial recovery of some investments not proved – loss of the chance or opportunity to make recoveries earlier in time – defendant failed to adduce evidence that parties from whom recoveries were made had inferior financial capacity in 2008 than at time recoveries were made – damages – plaintiff entitled to damages for loss of a chance or opportunity to make recoveries beyond recoveries actually made – plaintiff entitled to lost interest on amounts already recovered

AFFIRMATIVE DEFENCES…

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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Details

Case: [2018] NSWSC 1502
Decision Date: 08 October 2018

CaseChat Overview and Summary

In the matter of Ryan Wealth Holdings Pty Ltd v Baumgartner, the plaintiff sought damages from the defendants for alleged breaches of contract and duty, as well as for misleading and deceptive conduct. The case was heard by the Supreme Court of New South Wales. The plaintiff alleged that the defendants, who were auditors, failed to exercise reasonable care and skill in conducting an audit of a self-managed superannuation fund, leading to losses for the plaintiff. The defendants admitted to some breaches of contract and duty but denied others.

The court was required to determine whether the defendants breached their contractual and common law duties by failing to report on compliance with the investment strategy, failing to bring serious misdescriptions and misstatements to the plaintiff's attention, and failing to form and express certain opinions. The court also needed to decide whether the defendants contravened the Superannuation Industry (Supervision) Act 1993 (SIS Act) and whether damages were available under that Act. Furthermore, the court had to consider whether the representations within the audit reports and by silence constituted misleading and deceptive conduct.

The court found that the defendants breached their retainers and common law duties owed to the plaintiff. They failed to bring serious misdescriptions, misstatements, and other factors to the plaintiff’s attention, including the conflict of interest of one of the defendants. The court held that the defendants contravened the SIS Act and that damages were available under that Act. The court also found that the representations by the auditors constituted misleading and deceptive conduct. The court held that causation was established through the admitted breaches, non-admitted breaches, and the misleading and deceptive conduct. The plaintiff was awarded damages for the loss of a chance or opportunity to make recoveries earlier in time, lost interest on amounts already recovered, and other additional recoveries, subject to certain exclusions in the insurance policies. The court reduced the plaintiff's damages for contributory negligence and apportioned the plaintiff's loss between the defendants and an accounting firm. The court dismissed claims against the previous auditor and rejected the defendants' affirmative defences based on professional standards legislation, limitation of damages, and proportionate liability.

The court ordered the defendants to pay the plaintiff damages, interest, and costs. The court held that the plaintiff's claim in negligence was governed by the law of Victoria, and the contract was governed by the law of Victoria. The court also held that the choice of law rules for tort applied to contravention of s 52 of the Trade Practices Act and that there was no jurisdiction of a court exercising federal jurisdiction in NSW to award damages under the Fair Trading Act (Vic).

Orders