Swan & Baker Pty Limited v Marando

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.