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[2012] NSWSC 565
Supreme Court of NSW
2012-05-09
Hammerschlag J
Original judgment source is linked above.
INTRODUCTION 1HIS 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. 2The 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. 3Section 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. 4Section 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 or damage by action against that other person. 5Section 12GM(7) of the Act provides, relevantly, that in addition to orders compensating a person for loss or damage, the court may make an order varying a contract and declaring the contract or arrangement to have had effect as so varied. 6The plaintiff claims that the Bank's conduct was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA(1) of the Act and he sues for damages and ancillary orders. It is not in dispute that the Bank's conduct was in trade or commerce and in relation to financial services. 7The proceedings occupied three hearing days. Over 1,300 pages of documents were tendered. Evidence-in-chief was given by written statement. The principal witnesses were cross-examined extensively. The plaintiff's witnesses were the plaintiff himself; his personal assistant, Ms Rachael Duncan; his accountant, Mr Samuel Galluzzo; and Mr Nathan Hardman, a solicitor who advised him at the time. The defendant's witnesses were Mr Trent Daly, who was the bank officer principally responsible for selling the GPS to the plaintiff, and Mr Moghseen Jadwat, who, in 2007, was employed by the Bank as a product expert. 8Each party relied on an expert accountant's report with respect to the quantification of damage. The experts reached agreement on certain matters and filed a joint report. Neither was cross-examined. 9 I have had regard to all of the evidence and to all of the arguments of counsel. Documentary and evidentiary references are limited to those necessary to facilitate a proper understanding of these reasons. I have had regard to all of the arguments but do not propose to restate them. 10For the reasons which follow, the plaintiff is entitled to relief.
THE GPS 11The terms of the GPS are embodied in written instruments described respectively as a Loan & Security Agreement and an Asset Allocation Advisory Agreement. The structure and effect of the GPS are not in issue. The construction and operation of one of the complex definitions within those instruments has been the subject of separate determination in these proceedings; see Coco v Westpac Banking Corporation [2010] NSWSC 457 and Coco v Westpac Banking Corporation [2010] NSWCA 305. . 12The initial step is that the Bank lent $10 M to the plaintiff, at a commercial rate of interest to be paid periodically, to invest in units in six managed funds managed by BT Funds Management for the period of the investment, a maximum of five years. In this case the investment period was for the five years to 25 June 2012 ("the Maturity Date"). The plaintiff made an initial interest payment in advance to obtain a tax deduction in the 2007 financial year. 13The Bank has the ability (in response to movements in the market) to switch or re-allocate the investment in the managed funds between units in them and fixed income investments in the form of zero coupon bonds ("Westpac Bonds") (which in effect are a cash investment with an interest return). 14If the value of the units decreases, a sell trigger mechanism causes the investment to be progressively switched into Westpac Bonds. If the value increases, a buy trigger causes the investment to be progressively switched from Westpac Bonds back into units in the managed funds. 15If the entirety of the investment in the managed funds is switched to Westpac Bonds, it remains in that form until the end of the investment period. 16If distributions in respect of the managed funds are made, they are reinvested in the managed funds. 17The GPS has a capital protection mechanism, described in the marketing material as a guarantee that the initial investment amount would be 100 percent protected at maturity. The Bank guarantees the investor that he or she will receive at least the value of his or her initial investment back at the end of the investment period. If, at the end of the investment period there is a shortfall between the value of the investment at the beginning and at the end, the Bank undertakes to pay this shortfall to the investor. 18The GPS has a "profit lock-in" feature under which, when, and only when, the funds' performance reaches a pre-defined level or profit trigger, the capital protected amount automatically increases by 20 percent of the initial investment. 19The investment will thus yield a mixture of distributions from the units and interest accrued on any Westpac Bonds into which the original investment may be switched. 20For present purposes, the centrally relevant aspect of these arrangements is what the capital guarantee covers, more particularly, the way in which a shortfall between the value of the investment at the start and its value at the end of the investment period is determined. 21The shortfall is determined by including in the capital value of the investment at maturity, the value of distributions received on units acquired as well as any interest earned on any Westpac Bonds into which funds initially invested in units are converted. In other words, the amount of any shortfall (or loss) covered by the capital guarantee is reduced to the extent of these returns. The capital guarantee accordingly does not cover the full extent of any loss on the initial investment standing alone. 22Although the investor benefits from the returns in the sense that any loss of value of his original investment is reduced, so too is the amount of the Bank's exposure under the capital guarantee reduced. In this sense too, the investor receives the value of any distributions and interest, but it is not separately accounted for and independently paid to him at the end of the investment period.
THE FACTS 23The plaintiff was a successful businessman over many years, having had different business interests. He is now essentially retired. As at 2007 he had been a customer of the Bank for many years. His bank and relationship manager was Mr Peter Carlson. 24In early 2007 it appeared that the plaintiff would have a substantial tax liability for the financial year ending 30 June that year as a result of selling property and from share trading. 25He was discussing with Macquarie Bank and Citigroup the possibility of making a managed investment through one of them. He discussed this with Mr Carlson, who told him that he thought that the Bank had a similar managed investment product and would like the opportunity to introduce the plaintiff to one of the Bank's financial advisors. The plaintiff gave Mr Carlson information from those other institutions. Mr Carlson thereafter introduced the plaintiff to Mr Daly, who was then employed by the Bank as an Executive Business Financial Planner. 26The plaintiff met with Mr Daly and Mr Carlson in late April or early May 2007 in the plaintiff's office in South Brisbane, at which a preliminary discussion occurred about a competitive managed investment product which the Bank could sell to the plaintiff, which turned out to be the GPS. At the time the GPS was still in the process of development by the Bank but was about to be perfected to be sold to customers. 27The plaintiff met Mr Daly a second time on 22 May 2007. This time Mr Daly was in the company of Mr Jadwat. There is some factual dispute about precisely what was said at the meeting and as to who, between Mr Daly and Mr Jadwat, talked the most. Mr Daly and Mr Jadwat had with them what might fairly be described as marketing material about the GPS. They made a presentation to the plaintiff. There may have been a computer display. A printed colour copy of the material, which included graphs, was handed over to the plaintiff. The plaintiff made it clear that he wanted his professional advisors to advise him and that he wanted them to be present at a meeting to consider the proposed investment. 28On 29 May 2007 the plaintiff again met with Mr Daly at the plaintiff's office. The plaintiff says the conversation included the following: Daly: As you know, this is capital guaranteed. The dividends are accumulated and they are given to you at the end. They would be multiplying each year, and it would be added to the value. Plaintiff: That sounds great. Daly: They are reinvested. Plaintiff: What are the downsides Daly: If in 12 months you want to get out, you would have to pay 1%. If it's over 12 months, and over $10 million and you break the contract, you would have to pay the difference, between the $10 million and the dividends. The good thing about this, is that there are trigger points, so if the market went down 25%, then it would be up to Westpac to go in and out of the market, and there are certain trigger points, and that way, you get the benefit of this protection and the guarantee, and the benefit of the cash or interest on the Bonds in due course. Plaintiff: That sounds fabulous. Look, can we discuss it at the meeting. I really want my accountant and Peter with me to discuss this. 29At this meeting Mr Daly gave the plaintiff a document entitled "Statement of Advice". In it Mr Daly recommended that the plaintiff invest in a capital protected managed fund through a lending facility, that he borrow $20 M under the Westpac GPS Loan Facility for a term of five years and that he prepay interest for 12 months in advance to gain tax deductions in the 2007 financial year. Under the heading "Other Factors" the following, relevantly, appears in the Statement of Advice: In providing the capital protection at Maturity, there is a risk that the investment in the underlying BT Fund could be substantially or completely switched into an allocation to the passive asset, being Westpac Bonds. This may occur if the value of the investment in the underlying BT Fund falls, or interest rates rise. Should you be allocated substantially to Westpac Bonds, and then participation in any subsequent increase in the value of the underlying BT Fund will be significantly reduced, compared to a direct investment in the BT Fund. If your portfolio is completely allocated to Westpac Bonds, then there is no opportunity for further participation in the BT Fund, and you will remain invested in the Westpac Bonds until Maturity-providing for only the return of the Initial investment value at Maturity. 30The plaintiff gave evidence that, when Mr Daly referred to the Statement of Advice, he said to Mr Daly that he did not like to read anything as he had difficulty comprehending things that he reads, especially complicated documents. 31The Statement of Advice provided for the plaintiff to sign an authorisation allowing the Bank to proceed with implementing its advice and acknowledging that it had been explained to him. He signed it on 19 June 2007. He says, and I accept, that he did not read it. He says, and I also accept, that he looked at it but could not make head nor tail of it. 32On 6 June 2007, a meeting took place at which were present the plaintiff, Ms Duncan, Mr Carlson, Mr Galluzzo and Mr Daly. The plaintiff's evidence was that a conversation to the following effect took place: Plaintiff: If things go wrong, how does the guarantee work? Are dividends included? Daly: The dividends always form part of the distribution and they are not part of the Guarantee, so you will get the $10 million guarantee back, plus any dividends paid. Plaintiff: Well that's not so bad, if I get a tax deduction on the interest I pay, and get all the dividends back, or any interest on the Bonds, then the loss would not be so bad. Plaintiff: As I said to you Trent, I don't want a $20 million Contract. I would only be prepared to take one for $10 million. Daly:Don't worry. We can easily adjust these figures. The Contract will be for a period of five years, and the interest rate would be 7.9%. If the Contract term is reduced after 12 months, there would be no penalty, provided that the agreed amount remained at $10 million or above. If it was closed out prior to the 12 month and 1 day, then it would still need to be over the $10 million, but a 1% rate cost would be charged. As I've pointed out to Sam, the capital guarantee of $10 million, is always guaranteed, provided the Contract runs for its full term. Interest payments would be made over 12 months in advance, dividends would be accumulated over the 5 years, but would not be part of the Guarantee of $10 million. If the investment goes into Bonds, then the interest would be part of the same, as getting the interest. It would not form part of the Guarantee. Plaintiff: So what you're saying Trent, so that I understand this clearly, is that I get the dividends, plus the interest at the end of the term and the guaranteed amount. Daly: Yes, that's right, but if the capital drops by 25%, they can take it in and out of the investment and put it into bonds. They would enter and exit the market as they choose, as there are different trigger points for buying and selling but the capital guarantee of $10,000,000, if that is what you take, is always guaranteed provided the contract runs the full term of 5 years. Plaintiff: I think that's quite a bonus, because it sounds good to me, that someone's managing it and helps get the emotion out of trading, if the market goes down. The downside is really, the difference between the interest that I am paying and the value of the guaranteed amount and the dividends at the end. So this could be something like 2% or 3%. Daly: That's right. It is a great product. 33The plaintiff gave evidence that Mr Daly suggested he make a $20 M investment, but that he said that he was only prepared to put in $10 M. 34Ms Duncan gave evidence that a number of points were discussed, including that Mr Daly said that dividends and income would not form part of the guarantee, but would be invested into the portfolio until maturity. She was not cross-examined on this. 35Mr Galluzzo, who was principally concerned with the tax implications of the proposed transaction, gave evidence that Mr Daly said words to the effect: The Westpac Product has an income stream, namely dividends, which will be paid on the investment. Those dividends are not paid to Sam but reinvested in managed funds on his behalf and are guaranteed together with the capital. 36He also recalled Mr Daly saying words to the effect, "the guarantee is $20 M plus the dividends earned on the investment". He says that he understood, from what Mr Daly said, that at the end of the investment, the plaintiff would receive $20 M, which was guaranteed, plus any income on that investment, which was also guaranteed. 37Mr Galluzzo made a hand-written note following the meeting, which included the words "Reinvestment is also capital guaranteed", upon which he was cross-examined. He agreed that the profit lock-in feature was the only way in which the capital guarantee could increase above the original investment, although he did not understand what "profit lock-in" meant as such. His understanding was that once any profit was earned, it was set in concrete and whatever was earned in a year was guaranteed because they were under the obligation to declare it for taxation purposes at the end of the financial year. He gave evidence that he came away from the meeting thinking that "whatever income came off the product, that belonged to Sam Coco and it was guaranteed by Westpac". 38The plaintiff was attracted to the investment. He says that he believed, as a result of what Mr Daly told him, that the guarantee to be given by Westpac was a guarantee of capital and that any income that he earned from the investment, including the yield from any bonds into which the investment had been placed, would be returned to him. He says that he believed that he would be paying tax on the income earned by him during the five years but that income would be paid to him at the end of that period along with the guaranteed capital sum of $10 M. 39At or about this time, contract documents were delivered to the plaintiff. He had decided to go ahead with the investment unless he was advised against it after a review of the legal documentation. The documents were circulated to his solicitors and to Mr Galluzzo. 40On 13 June 2007, on the plaintiff's instructions, Ms Duncan sent an email to his solicitor, Mr Ian Neil, asking a number of questions arising from his discussions with Mr Daly. Amongst others, he asked Mr Neil to confirm that the capital of $10 M was always guaranteed, provided the contract ran to term, and that if the contract was broken, profit would be taken and loss would be paid out. He also asked him to confirm that dividend income would be reinvested into the portfolio. He received confirmation of these matters from Mr Hardman, who was an associate of Mr Neil's firm, by letter dated 18 June 2007. Mr Hardman confirmed that, pursuant to the Asset Allocation Advisory Agreement and the Loan & Security Agreement, investors undertake that all income in respect of the units of the managed fund is to be reinvested into that managed fund. 41On 19 June 2007, on the plaintiff's instructions, Ms Duncan sent the following email to Mr Hardman: Dear Nathan, Please find attached Application Form, which has been signed by Sam. Sam has asked me to have you check over it before I forward it to Westpac. I have two more questions.
67The question for determination is whether, having regard to all the relevant circumstances, there has been conduct by the Bank which is misleading or deceptive or likely to mislead or deceive: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32. 68The misleading conduct alleged is that the Bank, through Mr Daly, conveyed to the plaintiff by various oral statements and by the information which he conveyed to Mr Hardman, that the GPS operated in a way in which, in a material respect, it did not and does not. 69The plaintiff contends that Mr Daly conveyed to him that the guarantee given by the Bank under the GPS would cover the difference between the original $10 M investment and any loss of value on it, without taking into account the value of any distributions received on any units or any interest received on any fixed interest investments, both of which would be paid to him at the end (whereas, in fact, the GPS operates differently, as is set out above). 70It is clearly the case, in my view, that Mr Daly not only conveyed this, as the plaintiff contends, but that the plaintiff, Mr Galluzzo, Mr Hardman and Mr Daly himself so understood it. I do not consider that Mr Daly deliberately misled the plaintiff. Indeed, in my view the explanation for his repeated but incorrect statements as to how the GPS worked lies in his own understanding. As I have said earlier, his attempt in these proceedings to distance himself both from what he had said and from the suggestion that he had, at the time, understood that the GPS worked that way, is where he and candour departed company. 71The Bank's own marketing material describes the Capital protection being offered as a guarantee "that your initial investment amount will be 100 percent protected at maturity". An understanding that the initial investment covered was the original $10 M, not $10 M supplemented by distributions and dividends is hardly eccentric. 72During his evidence the plaintiff repeatedly made reference to the fact that the capital investment was different from the earnings. For example, he gave evidence as follows: I'm sorry but I have to explain to you, once again, that it was explained to me that the 10 million was protected and guaranteed by Westpac, and any profit during the course of that time, by yield or by interest or by dividends, would accumulate each year and would be paid at the end. ... Well, again, I think you need to understand that the capital was totally separate from the earnings. I was paying interest and fees on my capital, and that was guaranteed and protected by Westpac, and then the profits, the tax was paid, and carried forth. 73Moreover, in the case of Mr Daly, in his written statement he gave evidence that he was accredited to promote the GPS following completion of an online course. Mr Daly was cross-examined on the source of his knowledge of how the GPS worked. He gave evidence that there would have been training presentations from the Bank but appeared to have no recollection of any. His evidence was that "it could have been a phone conference, it could have been anything". He referred to the possibility that a training presentation might have taken place via a phone conference through a dial-in session. Given the level of training as described by him, it is hardly surprising that Mr Daly's understanding of the GPS was imperfect. 74What was conveyed by Mr Daly can, having regard to the nature of the concepts involved, be articulated in a number of different ways. It is therefore unsurprising that the same thing was conveyed by Mr Daly at different times in different ways. 75One such articulation is that at the end of the investment period the value of distributions and interest would be physically paid to the plaintiff, not accounted for by the Bank by reducing any shortfall between the amount of the original investment and the value of that investment at the Maturity Date. Another is that the Bank was to guarantee the shortfall between the amount of the original investment and the value of that investment at the Maturity Date, not taking into account distributions and interest received. Yet another is that the guarantee was for the original $10 M and that dividends and interest are not part of the guaranteed amount. 76This idea is encapsulated in Mr Daly's statement at the 29 May 2007 meeting, as recounted by the plaintiff, that dividends are accumulated and are given to the plaintiff at the end, that dividends would be multiplying each year and would be added to the value; his statement at the 6 June 2007 meeting, as recounted by the plaintiff, that dividends would be accumulated over the five years but would not form part of the guarantee and his confirmation that the plaintiff would get the dividends plus the interest at the end of the term and the guaranteed amount; his statement at the 6 June 2007 meeting, as recounted by Ms Duncan, that dividends and income would not form part of the guarantee but would be invested into the portfolio until maturity; and his statement at the 6 June 2007 meeting, as recounted by Mr Galluzzo, that the dividends are not given to the plaintiff but are reinvested in managed funds on his behalf and are guaranteed together with the capital. 77It is also reflected in the question posed by the plaintiff in the 19 June 2007 fax, conveyed by Mr Hardman to, and answered by Mr Daly, as recorded by Mr Hardman's letter dated 19 June 2007. The plaintiff sought confirmation that dividends paid and reinvested would not be used as part of the original capital guaranteed amount, illustrated by the example that the amount guaranteed would be $10 M plus any dividends. The response which Mr Daly gave, and which Mr Hardman faithfully conveyed, was that the dividends reinvested would not be used as part of the original capital guaranteed amount if the guaranteed amount was ever called on. 78It is reflected, yet again, in Mr Daly's acceptance at the meeting on 11 February 2009 (after telling the plaintiff that the Bank keeps the interest and that forms part of the guaranteed capital at the end of the term) of the plaintiff's assertion that Mr Daly had, to the contrary of this, told him that he gets the dividends and the interest on the bonds. 79Finally, it is reflected in the plaintiff's email of 12 February 2009, to which there was no response from Mr Daly other than to say that he had escalated the complaint higher. 80What Mr Daly conveyed by his conduct in each of the conversations on 29 May 2007 and 6 June 2007 and in the conversation with Mr Hardman on 19 June 2007 diverts from the true operation of the GPS in a material respect and on its own is misleading and deceptive. The cumulative effect approaches the overwhelming. 81It was put on behalf of the Bank that, notwithstanding anything said by Mr Daly, it should not be found to have engaged in misleading or deceptive conduct because: (a)nothing in the written material which the Bank had given to the plaintiff suggested that the GPS would operate in the way the plaintiff says he was given to believe it would. The Statement of Advice which had been given to and signed by the plaintiff made it clear that if the portfolio was completely allocated to Westpac Bonds the investor would remain invested in those bonds until Maturity providing for only the return of the initial investment value at maturity. This made it clear that dividends and interest on any fixed income investment would not be coming back to the investor and the clarity of this communication "trumped" anything differently which Mr Daly may have conveyed; (b)Mr Hardman's answer on 19 June 2007 made it clear that the only time the guaranteed amount would increase was if the profit lock-in operated and that the feature did not include dividends paid on the shares. This made it clear that dividends would not be paid to the plaintiff in the way in which he contends was conveyed to him and is consistent with the way in which Mr Galluzzo understood the operation of the guarantee. (Attention was drawn to the fact that Mr Hardman's answer made no reference to yield on the bonds); (c)the plaintiff's position involved an obvious inconsistency in that on the one hand he accepted that dividends would be reinvested into units, the value of which could fluctuate, and on the other, he wanted payment of those dividends to him. His position amounted in effect to a contention that the dividends should be paid to him twice; and (d)that the plaintiff had been paid the dividends (because they were invested into the portfolio, which is his) and will receive the interest on the bonds at Maturity. 82It may be accepted that the documentation given by the Bank to the plaintiff does not evince operation of the GPS in the manner the plaintiff says was conveyed to him. 83As to the Statement of Advice, firstly, it is to be observed (as counsel for the Bank accepted) that the statement in that document that if the investment is entirely in Westpac Bonds, the only return will be the value of the initial investment at Maturity is inaccurate. It is inaccurate because part of the fixed interest investment can come back to an investor (and will, to the extent of $24,567, come back to the plaintiff on Maturity). After taking into account all distributions and interest received, there is no shortfall to be guaranteed by the Bank and there is in fact an excess in the amount referred to which is for the plaintiff. Secondly, it may on examination carry with it the implication that the GPS operates with respect to dividends and interest in the way it in fact does, but it hardly makes the point with clarity. 84Far from the written material trumping anything Mr Daly said, Mr Daly's statements were directed at how the arrangements described in that written material worked. The statements qualified that which the written material contained. It was open to Mr Daly, particularly in response to the specific inquiries made of him, to tell the plaintiff that the answer was to be found in the written and legal material. This he did not do. 85Mr Hardman's answer encapsulates two distinct aspects: first, that dividends would be reinvested and not be used as part of the original capital guaranteed amount and second, that the capital guaranteed amount would increase by means of the profit lock-in feature. Nothing in his answer undermines the plaintiff's case. 86The fact that dividends were to be reinvested in units which could fluctuate in value also does not undermine the plaintiff's position. The plaintiff accepted that dividends would be reinvested and that their value could fall. His position is that, at Maturity, he would be paid the value of those units at that time if they were still held, or as at the date they were converted into bonds. Indeed, as appears below, there was no dispute between the parties as to the monetary value of the units bought with the proceeds of distributions and later switched into Westpac Bonds. Plainly, the plaintiff cannot be paid twice, but he is not. 87When the plaintiff, Mr Daly and others made reference to receiving payment of dividends and interest or that such amounts would be given to the plaintiff at the end, they undoubtedly had in contemplation, in lay fashion, actual payment and receipt, not payment in the sense of the plaintiff being credited with the amounts against loss in value on his original investment.
RELIEF 88Whether relief is available to the plaintiff depends on whether he has suffered loss or damage by the conduct of the Bank. This is to be understood as taking up the common law practical or common sense concept of causation: Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 at 525. The onus is on the plaintiff to prove loss and to establish the extent of the loss he suffered. It is sufficient that the conduct complained of be identified as one factual cause for an event which is the subject of litigation, in this case the plaintiff's loss. The conduct complained of does not have to be the only cause. It is sufficient if it plays a part in the plaintiff's loss or damage, even if only a minor part: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 128. 89The loss or damage necessary for a claim under s 12GF(1) of the Act is actual loss or damage. Commonly, the tortious measure is applied, that is, the amount required to place the plaintiff in the position he would have been had the conduct complained of not occurred. The section does not, however, in terms require this approach to be taken and the court is not bound to approach the matter by analogy, either with the law of contract or the law of tort. Where the conduct complained of is a misrepresentation it is ordinarily necessary to determine what the plaintiff would have done had the plaintiff not relied on the misrepresentation; see Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 13. 90The Bank foreshadowed, but abandoned, a contention that the plaintiff's advisors were concurrent wrongdoers with the Bank and that any responsibility on the part of the Bank should be reduced. It also foreshadowed a contention that had the plaintiff not entered into the GPS he would have proceeded with the Citigroup facility. This was not pressed, correctly, in my view, because, amongst others, the plaintiff's evidence was that before committing himself to the GPS he had determined not to go with the Citigroup option. The plaintiff undoubtedly wanted the benefit of a tax deduction but he was also acutely conscious of the investment benefits he was to get under the GPS as represented by Mr Daly. 91The plaintiff gave uncontested evidence that he would not have borrowed $10 M from the Bank or invested that sum in the GPS had he been told that the income from the investment on which he would be paying tax, including the yield from any bonds into which the investment had been placed, would not be paid to him at the end of the five year term along with the guaranteed capital sum of $10 M but would be treated as capital and accounted for in favour of the Bank as part of the fulfilment of its guarantee. This evidence, although not challenged, was given in hindsight and it is safer to rely on objective factors, particularly the plaintiff's own attitude and conduct at the time; see Chappel v Hart (1998) 195 CLR 232 at 246 [32] and fn [64]. 92The conversations reflect that the plaintiff attributed importance to what Mr Daly was saying. More important, however, is the fact that he addressed the specific question to Mr Daly, through Mr Hardman, on the eve of entry into the GPS, and obtained an answer upon which he clearly relied. 93There is sufficient causal connection between the plaintiff's loss and each of Mr Daly's inaccurate statements at the meetings on 29 May 2007 and 6 June 2007 and his conversation with Mr Hardman, let alone the clear connection between his loss and the cumulative effect of those statements. 94Insofar as it is necessary for the plaintiff to establish, on the balance of probabilities, that but for the Bank's misleading conduct he would not have entered into any alternative transaction, I am satisfied that he would not have. 95The plaintiff's primary position is that his damages should be assessed on a no transaction basis, that is, the difference between the position he is now in and the position he would have been in had he not entered into the transaction. 96The experts agreed that before taking into account any tax payable on the verdict, the loss was $3,030,834 and that the tax payable on this amount was $1,441,133, resulting in a figure of $4,471,967. They agreed that court interest on the after tax loss would amount to $699,987 to 1 May 2012, resulting in a total of $5,171,954. 97In my view this measure is not the appropriate one to compensate the plaintiff for his true loss in the present case. 98First, I am by no means satisfied that any verdict on this basis should include any amount in respect of tax payable. The material before the Court did not establish that the plaintiff would be liable for tax and the plaintiff did not press the notion. 99Secondly, and more importantly, this is a case in which I consider that it is appropriate to proceed on the basis that the terms of the GPS be considered to be amended to bring them into line with the Bank's representations. The transaction has proceeded, the plaintiff has obtained certain benefits from it and justice, in the present case, demands no more than that he get the value of the bargain which the Bank held out he would get. 100Neither party pressed for a formal order varying the GPS. The order would be of little utility at this time given the impending termination of the investment. However, the parties agreed that it was open to the Court to assess the damages on the hypothesis that the GPS operated in the manner in which the Court might find the Bank represented. 101On this footing the plaintiff's loss, calculated as at 25 June 2012 (being the termination date of the GPS) amounts to $ 2,701,238 made up as follows: Dividends and income earned by the GPS before the investment was switched into the Westpac Bonds $467,843 Income earned on the zero coupon bonds to maturity $2,233,395
Total $2,701,238
102No question of pre-judgment interest arises. The value of the investment is calculated as at the Maturity Date. 103The orders of the Court are: Judgment for the plaintiff against the defendant for $2,701,238.00. I provisionally order that the defendant is to pay the plaintiff's costs of the proceedings, excluding costs which are the subject of existing orders made in connection with determination of the separate questions. Within seven days any party wishing to motivate a different order as to costs is to notify my associate in writing of that fact and of the order sought. In the absence of any such notification the provisional order for costs will solidify. If any such notification is received I will make further directions with respect to costs. The exhibits are to be returned.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 May 2012
Coco
Westpac Banking Corporation
(1995) 49 NSWLR 315
(1992) 39 FCR 31
(1992) 175 CLR 514
(2002) 210 CLR 109
(1986) 160 CLR 1
(1998) 195 CLR 232