Salvatore Coco v Westpac Banking Corporation - [2012] NSWSC 565

Supreme Court

New South Wales

Medium Neutral Citation: Salvatore Coco -v- Westpac Banking Corporation [2012] NSWSC 565
Hearing dates: 7, 8 & 9 May 2012
Decision date: 25 May 2012
Jurisdiction: Equity Division - Commercial List
Before: Hammerschlag J
Decision:
Judgment for the plaintiff for $2,701,238

Catchwords: MISLEADING AND DECEPTIVE CONDUCT - Australian Securities and Investments Commission Act 2001 (Cth) s 12DA(1) - in relation to financial services where bank officer selling a complex financial product conveys to the customer that the product works in a way significantly more advantageous than the way in which it actually works - RELIEF - Australian Securities and Investments Commission Act 2001 (Cth) ss 12GF(1) and 12GM(7) - matter approached on the footing that damages should be assessed as if an order had been made varying the terms of the parties' agreements to reflect how the bank represented they would actually work
Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth)
Cases Cited: Coco v Westpac Banking Corporation [2010] NSWSC 457
Coco v Westpac Banking Corporation [2010] NSWCA 305
Watson v Foxman (1995) 49 NSWLR 315
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109\
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Chappel v Hart (1998) 195 CLR 232
Category: Principal judgment
Parties: Salvatore Coco - Plaintiff
Westpac Banking Corporation - Defendant
Representation: Counsel:
J.C. Kelly SC with E.T. Finnane - Plaintiff
I.M. Jackman SC with C. Colquhoun - Defendant
Solicitors:
Uther Webster & Evans - Plaintiff
King & Wood Mallesons - Defendant

File Number(s): 2009/298753

Judgment

INTRODUCTION

HIS HONOUR:This is a case in which I am satisfied that the defendant bank ("the Bank") misled the plaintiff in a material respect as to how a complex, structured financial product (described as Westpac Guaranteed Portfolio Service or GPS), which the Bank was wishing to sell to him, worked. The plaintiff entered into the GPS with the Bank on 19 June 2007. In fact, the GPS worked in a manner significantly less advantageous to the plaintiff than the bank officer responsible for selling it to the plaintiff had represented to him.

The case illustrates the importance of officers responsible for selling complex financial products on behalf of institutions understanding how such products work and the importance of such officers not conveying incorrect information about such products to buyers.

Section 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) ("the Act"), which is in Subdivision D, provides that a person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.

Section 12GF(1) of the Act provides, relevantly, that a person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision D may recover the amount of the loss…

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: [2012] NSWSC 565
Decision Date: 25 May 2012

CaseChat Overview and Summary

Salvatore Coco sought a declaration from the court that Westpac Banking Corporation engaged in misleading or deceptive conduct, contrary to section 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth). Mr Coco also sought an order for damages, costs, and relief under sections 12GF(1) and 12GM(7) of the same Act. The dispute centred on the sale of a complex financial product by a Westpac officer who conveyed to Mr Coco that the product would operate in a way significantly more advantageous than it actually did. Mr Coco argued that this misrepresentation led him to enter into the contract, and subsequently suffer loss.

The primary legal issues were whether Westpac's conduct amounted to misleading or deceptive conduct under section 12DA(1) of the Act and, if so, what relief Mr Coco was entitled to under sections 12GF(1) and 12GM(7). The court had to determine the nature and scope of the misleading representations, the effect of those representations on Mr Coco's decision to enter into the contract, and the appropriate remedy for the misleading conduct. It was necessary to assess the losses suffered by Mr Coco as if an order had been made varying the terms of the parties' agreements to reflect how the bank represented they would actually work.

The court found that Westpac's conduct did amount to misleading or deceptive conduct under section 12DA(1). The representations made by the Westpac officer were significant and misleading, and they influenced Mr Coco's decision to enter into the contract. The court considered the losses suffered by Mr Coco and ordered Westpac to pay damages to Mr Coco as if an order had been made varying the terms of the parties' agreements. The court also ordered Westpac to pay costs.

Orders