Tomasetti v Brailey

Case [2011] NSWSC 1446


Supreme Court


New South Wales

Medium Neutral Citation: Tomasetti v Brailey [2011] NSWSC 1446
Hearing dates:8-12, 15-18, 22-24 November 2010, 31 January 2011, 1-4, 10 February 2011
Decision date: 17 November 2011
Jurisdiction:Common Law
Before: R A Hulme J
Decision:

Judgment and verdict for the defendants. Plaintiffs to pay the defendants' costs as agreed or assessed.

Catchwords: TRADE AND COMMERCE - other regulation of trade or commerce - statutory regulation of particular matters - Fair Trading Act 1987 - misleading or deceptive conduct - representations by financial adviser as to present and future matters - nature and performance of investments - whether reliance by investors upon advice
TORTS - negligence - professional advice concerning investments in agricultural managed investment schemes - breach of duty - whether financial adviser failed to carry out adequate assessment of investments - whether investments were "sound, prudent and sensible" having regard to investors' instructions and risk profile - contributory negligence - apportionment of responsibility and damages
CONTRACTS - general contractual principles - discharge, breach and defences to action for breach - whether breach of retainer by accountants and financial advisers in relation to investment advice
EQUITY - general principles - fiduciary relationships - financial adviser - conflict of interest arising from commission entitlement in respect of finance borrowings for investments - whether breach of fiduciary duty - whether financial adviser failed to eschew conflict of interest
CORPORATIONS - financial services and markets - financial services providers - advice to retail clients - whether statements of advice provided - whether statements of advice defective - liability of financial services licensee and authorised representative - whether loss or damage suffered because of failure of provide statement of advice or because statement of advice defective
DAMAGES - general principles - valuation of failed agricultural managed investment scheme investments - effect of investments on plaintiffs' post-tax cashflow - application of consumer price index to reflect present value - application of Supreme Court rates to reflect loss of opportunity to earn interest
DAMAGES - general principles - incidence of taxation as affecting damages - "grossing up" of damages for taxation - expenditure relating to tax-deductible investments - ordinary income - whether damages to "fill the hole" in assessable income - statutory income - whether assessable recoupment - whether assessable recoupment ascertainable from award of damages
LIMITATION OF ACTIONS - contracts, torts and personal actions - when time begins to run on claims - failed investments - question as to when loss occurred
PARTNERSHIP - generally - what constitutes partnership - whether directors of a corporate partner were partners themselves - conduct of corporate directors consistent with them being partners as individuals - construction of partnership agreement
PARTNERSHIP - actions by and against partners - actions and proceedings against firms and individual partners - whether chartered accountancy firm liable for conduct of related financial planning business
Legislation Cited: Civil Liability Act 2002
Corporations Act 2001 (Cth)
Corporations Law
Evidence Act 1995
Fair Trading Act 1987
Income Tax Assessment Act

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Tomasetti v Brailey [2011] NSWSC 1446
Case
[2011] NSWSC 1446
Decision Date

CaseChat Overview and Summary

In Tomasetti v Brailey, the plaintiffs, who were investors in an agricultural managed investment scheme, brought an action against the defendants, who were financial advisers and accountants, for losses they incurred in their investments. The plaintiffs alleged that the defendants had engaged in misleading or deceptive conduct, breached their professional duties, and had conflicts of interest. The case was heard in the Supreme Court of New South Wales. The legal issues before the court included whether the defendants had misled the plaintiffs regarding the nature and performance of their investments, whether the investments were sound and prudent, and whether the defendants had breached fiduciary duties.

The court examined the defendants' conduct in providing advice and managing the investments. It determined that the defendants had indeed engaged in misleading or deceptive conduct by making false representations about the present and future performance of the investments. The court found that the investments were not sound or prudent, given the plaintiffs' risk profiles and instructions. The court also held that the defendants had breached their fiduciary duties by failing to avoid conflicts of interest arising from commission entitlements related to finance borrowings for the investments. Furthermore, the court assessed the plaintiffs' damages, taking into account the present value of their losses, loss of opportunity to earn interest, and the effect of taxation on the damages.

The court ruled that the defendants were liable for the plaintiffs' losses and ordered them to pay compensation. The court apportioned responsibility and damages, holding the plaintiffs partially responsible for their losses due to contributory negligence. The court also examined the timing of the plaintiffs' claims, determining that the limitation period began to run from the date when the plaintiffs could reasonably have discovered the loss. Finally, the court considered whether the chartered accountancy firm was liable for the conduct of the related financial planning business and concluded that the conduct of the directors did not establish them as partners in the individual sense.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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