Tomasetti v Brailey [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 1936 (Cth) Income Tax Assessment Act 1997 (Cth) Limitation Act 1969 Partnership Act 1892 Trade Practices Act 1974 (Cth) Cases Cited: Allsop v Federal Commissioner of Taxation [1965] HCA 48; (1965) 113 CLR 341 Amcus Pty Ltd v Hurst Rentals Pty Ltd [2009] NSWSC 1016 Arthur Robinson (Grafton) Pty Ltd v Carter [1968] HCA 9; (1968) 122 CLR 649 Australian Securities and Investments Commission v Vines [2003] NSWSC 1095; (2003) 48 ACSR 291 Brodie v Singleton Shire Council [2001] HCA 29; (2001) 206 CLR 512 Brooker v Friend & Brooker [2006] NSWCA 385 Burmah Steamship Co v Inland Revenue Commissioners [1931] SC 156; 16 TC 67 Californian Oil Products Ltd (In Liq) v Federal Commissioner of Taxation [1934] HCA 35; (1934) 52 CLR 28 Christie v Purves [2007] NSWCA 182; (2007) Aust Torts Reports 81-899 Commissioner of Taxation v CSR Ltd [2000] FCA 1513; (2000) 104 FCR 44 Commissioners of Taxation (NSW) v Meeks (Public Officer of the Sulphide Corporation Limited) [1915] HCA 34; (1915) 19 CLR 568 Commissioner of Taxes (Vic) v Phillips [1936] HCA 11; (1936) 55 CLR 144 Daly v The Sydney Stock Exchange Limited [1986] HCA 25; (1986) 160 CLR 371 Federal Commissioner of Taxation v Rowe [1997] HCA 16; (1997) 187 CLR 266 Federal Commissioner of Taxation v Wade [1951] HCA 66; (1951) 84 CLR 105 Forster v Outred & Co [1982] 1 WLR 86; [1982] 2 All ER 753 Goldsbrough Mort & Co Ltd v Federal Commissioner of Taxation (1976) 14 SASR 591 GP International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25; (1990) 170 CLR 124 Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540 Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 HTW Valuers v Astonland [2004] HCA 54; (2004) 217 CLR 640 Jobbins v Capel Court Corporation Ltd (1989) 25 FCR 226 Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 Lloyds Bank v Bundy [1975] QB 326 M Young Legal Associates Ltd v Zahid [2006] EWCA Civ 613; [2006] 1 WLR 2562 Magman International Pty Ltd v Westpac Banking Corporation (1991) 32 FCR 1 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 McLaurin v Federal Commissioner of Taxation [1961] HCA 9; (1961) 104 CLR 381 Melbourne Saw Manufacturing Co Pty Ltd v Melbourne and Metropolitan Board of Works [1970] VR 394 Metropolitan Gas Co v Melbourne Corporation [1924] HCA 46; (1924) 35 CLR 186 Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388 National Commercial Banking Corporation of Australia Ltd v Batty [1986] HCA 21; (1986) 160 CLR 251 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 Salib v Gakas [2010] NSWSC 505 Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240; (2009) 75 NSWLR 74 Sweetman v Bradfield Management Services Pty Ltd [1993] FCA 598; (1994) ATPR 41-290 Sydney Refractive Surgery Centre Pty Ltd v Commissioner of Taxation [2007] FCA 1544; (2008) 172 FCR 557 Wardley Australia Limited v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 Watson v Foxman (1995) 49 NSWLR 315 Whitaker v Commissioner of Taxation (1996) 63 FCR 1 Williamson v Commissioner for Railways [1960] SR (NSW) 252 Wilson v Rigg [2002] NSWCA 246; (2002) 36 MVR 451 Texts Cited: Keith L Fletcher, The Law of Partnership in Australia, 9th ed (2007) Lawbook Co R C I'Anson Banks, Lindley & Banks on Partnership, 18th ed (2002) Sweet & Maxwell Category: Principal judgment Parties: Peter Charles Tomasetti (First plaintiff) Sandra Cordony (Second plaintiff) Tomasetti Investments Pty Limited as trustee for the Tomasetti Superannuation Fund (Third plaintiff) Edmund Francis Brailey (First defendant) John Clifford Fenton (Second defendant) Christopher Campbell Lane (Third defendant) TJC Financial Planning Pty Limited (Fourth defendant) Representation: Counsel: Mr AH Slater QC, Mr ID Faulkner SC and Mr A Maroya (Plaintiffs) Mr TGR Parker SC, Mr JB Conomy and Mr C Carroll (Defendants) Solicitors: Heckenberg & Koops (Plaintiffs) Holman Webb Lawyers (Defendants) File Number(s): 2009/297599