Court of Appeal
New South Wales
Case Title: Swan & Baker Pty Limited v Marando Medium Neutral Citation: [2013] NSWCA 233 Hearing Date(s): 25 June 2013 Decision Date: 24 July 2013 Before: McColl JA at [1];
Leeming JA at [2];
Sackville AJA [3].Decision: 1. Appeal dismissed.
2. The appellants pay the respondents' costs.[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords: TORTS - professional negligence - accountant's failure to advise of freeze on redemptions from investment fund and expiry of "cooling off" period - loss of opportunity to redeem investment - whether duty of care extended to developments post-dating investment - whether breach of duty - whether evidence of loss Legislation Cited: Corporations Act 2001 (Cth)
Civil Liability Act 2002, s 5BCases Cited: AJH Lawyers Pty Ltd v Hamo [2010] VSCA 222; 29 VR 384
Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1
Brodie v Singleton Shire Council [2001] HCA 29; 206 CLR 512
Citicorp Australian Ltd v O'Brien (1996) 40 NSWLR 398
Craig v Troy (1997) 16 WAR 96
Curnuck v Nitschke [2001] NSWCA 176
David v David [2009] NSWCA 8
Dominic v Riz [2009] NSWCA 216
Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; 211 CLR 540
Hawkins v Clayton [1988] HCA 15; 164 CLR 539
Heydon v NRMA Ltd [2000] NSWCA 374; 51 NSWLR 1
Keddie v Stacks/Goudkamp Pty Ltd [2012] NSWCA 254; 293 ALR 764
Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; 77 NSWLR 205
L Shaddock & Associates Pty Ltd v Parramatta City Council [No.1] [1981] HCA 59; 150 CLR 225
Miller v Miller [2011] HCA 9; 242 CLR 446
Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; 122 CLR 556
Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153
San Sebastian Pty Ltd v Minister for Administering the Environmental Planning and Assessment Act 1979 [1986] HCA 68; 162 CLR 340
Sullivan v Moody [2001] HCA 59; 207 CLR 562
Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642Category: Principal judgment Parties: Swan & Baker Pty Limited (First Appellant)
James Legat (Second Appellant)
Damiano Marando (First Respondent)
Caterina Marando (Second Respondent)Representation - Counsel: Counsel:
Mr PW Gray SC (Appellants)
Mr MB Evans (Respondents)- Solicitors: Solicitors:
All Courts Lawyers (Appellants)
Cohen & Krass Lawyers (Respondents)File Number(s): 2012/296505 Decision Under Appeal - Court / Tribunal: District Court - Before: Mahony SC DCJ - Date of Decision: 30 August 2012 - Citation: [2012] NSWDC 131 - Court File Number(s): 10/298199
JUDGMENT
McCOLL JA: I agree with Sackville…
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Details
- Case
- [2013] NSWCA 233
- Decision Date
CaseChat Overview and Summary
Swan & Baker Pty Limited appealed a decision of the primary judge concerning a claim of professional negligence brought by the Marandos. The dispute arose from the Marandos' investment of $500,000 in a fund, following advice from an accountant, Mr. Legat, employed by Swan & Baker. The Marandos alleged that Mr. Legat failed to advise them of a freeze on redemptions from the fund and the expiry of a "cooling off" period, resulting in their loss of opportunity to withdraw their investment and subsequent economic loss.
The central legal issue before the Court of Appeal was the extent of the duty of care owed by Mr. Legat to the Marandos. Specifically, the court had to determine whether this duty extended to warning and advising the Marandos during the cooling-off period about their entitlement to withdraw their money from the fund, considering Mr. Legat's knowledge and the surrounding circumstances. This involved assessing whether Mr. Legat's actions constituted providing financial advice rather than merely sharing product knowledge, and whether the risk of economic loss due to redemption freezes or delays was foreseeable.
The Court of Appeal, affirming the primary judge's findings, concluded that Mr. Legat owed the Marandos a duty of care that extended to taking reasonable steps to advise them regarding their investment to avoid a real and foreseeable risk of economic loss. The court reasoned that Mr. Legat had crossed the line from providing mere information to offering financial advice, particularly given the Marandos' reliance on his truthful and honest counsel. The court found that Mr. Legat's knowledge of the fund's Product Disclosure Statement (PDS), which he had read and was familiar with, was relevant. Furthermore, the court held that the risk of the fund freezing redemptions or delaying them indefinitely was a significant and foreseeable risk, especially considering the Marandos' stated intention to invest for a maximum of 90 days. The appeal was dismissed, and the appellants were ordered to pay the respondents' costs.
The central legal issue before the Court of Appeal was the extent of the duty of care owed by Mr. Legat to the Marandos. Specifically, the court had to determine whether this duty extended to warning and advising the Marandos during the cooling-off period about their entitlement to withdraw their money from the fund, considering Mr. Legat's knowledge and the surrounding circumstances. This involved assessing whether Mr. Legat's actions constituted providing financial advice rather than merely sharing product knowledge, and whether the risk of economic loss due to redemption freezes or delays was foreseeable.
The Court of Appeal, affirming the primary judge's findings, concluded that Mr. Legat owed the Marandos a duty of care that extended to taking reasonable steps to advise them regarding their investment to avoid a real and foreseeable risk of economic loss. The court reasoned that Mr. Legat had crossed the line from providing mere information to offering financial advice, particularly given the Marandos' reliance on his truthful and honest counsel. The court found that Mr. Legat's knowledge of the fund's Product Disclosure Statement (PDS), which he had read and was familiar with, was relevant. Furthermore, the court held that the risk of the fund freezing redemptions or delaying them indefinitely was a significant and foreseeable risk, especially considering the Marandos' stated intention to invest for a maximum of 90 days. The appeal was dismissed, and the appellants were ordered to pay the respondents' costs.
Orders
Orders of the court
1. Appeal dismissed.
2. The appellants pay the respondents' costs.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
The primary Judge continued as follows: 85 Here, it is clear that Mr Legat owed the Marandos a duty of care. The real issue is, what was the extent of that duty. Did it extend to a duty, having regard to all of the circumstances of the matter and Mr Legat's state of knowledge, to take positive steps to warn and advise the [respondents] during the cooling off period of their entitlement under the PDS to withdraw their money from the Fund? The following are relevant matters that I take into account in determining that matter:(i) The purpose of the [respondents] seeing Mr Legat on 29 January 2008 was clearly to discuss with him how to invest the proceeds of settlement from the sale of their home. That included a discussion about the taxation implications including capital gains tax, together with Mr Marando's superannuation fund. (ii) The meeting held on 18 February 2008 was for a far more specific purpose. That purpose was to discuss where the [respondents] would invest their funds for 90 days. ... [I]t was on the information given to them at that meeting by Mr Legat that the [respondents] decided to invest $500,000 in the Fund. (iii) Mr Legat understood that the [respondents] were relying on what he told them in coming to their decision to invest. (iv) The [respondents] were not sophisticated investors. Rather, they were poorly educated people who understood basic money matters. (v) I do not accept Mr Legat's evidence in cross-examination that he was not giving the [respondents] "financial advice", but was discussing "his knowledge of the product". Mr Legat knew that the [respondents] were relying on his advice which he understood had to be truthful and honest. (vi) Also relevant are the facts as I have found them, that the PDS for the Fund was available in the waiting room of [Swan & Baker]. It had been displayed there for some years, and it was the only PDS for any financial product displayed in that waiting room. (vii) The fact of Mr Swan's non-executive directorship of CPL added weight to the attraction of CPL as an investment vehicle for the [respondents]. (viii) Mr Legat facilitated the [respondents'] investment in the Fund by filling out the application form for them to sign and by forwarding it to the Fund. 86 Having regard to all of those matters, I find that the scope of the duty of care owed by Mr Legat to the [respondents] extended to taking reasonable care in advising the [respondents] in respect of their investment of money into the Fund to avoid a real and foreseeable risk of economic loss. He had crossed the line of merely providing "information" and was in fact, advising the [respondents] in respect of the investment of their money. He knew they were relying on his advice. His duty therefore extended to having knowledge of the PDS, which he had read prior to 18 February 2008, and with which he stated he was familiar ...87 I do not accept the submission made by the [appellants] that the foreseeable risk of loss fell into the two categories outlined in paragraph 82 above. Given the extent of the run on the Fund, there was a real and foreseeable risk of economic loss being sustained by the [respondents], both in terms of the Fund delaying redemptions indefinitely or becoming frozen. Both were significant risks given the [respondents'] insistence on the investment for a period of no longer than 90 days. (Emphasis added.)
Ratio Decidendi
Legal Principle Established
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