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[2018] WASC 61
Supreme Court of WA
2018-02-26
Tottle J
Original judgment source is linked above.
For the reasons I have already given I consider it was appropriate for Mr Lockyer's losses to be calculated on the basis that the investments would not otherwise have been made. There is no evidentiary foundation for the conclusion that the investments would have been made but not in Mr Lockyer's name.
(ii) The Pollock report does not provided any commentary regarding how the losses have arisen but has merely focused on 'losses' incurred in relation to specific investments.
This observation is accurate but it does no more than reflect the limitation in Mr Pollock's instructions.
(iii) The Pollock report does not appear to take into consideration well performing assets (not just the JBM shares/options but other assets held by the Plaintiff).
Mr Green has not identified the 'well performing assets' so I cannot accord any weight to this criticism.
(iv) The 2007 Advice recommended considering agribusiness investments, however these were not included in the 2007 Advice and it was stated in the 2007 Advice that these investments would be covered by an additional SoA.
I have found that Mr Lockyer made the agribusiness investments in Willmotts, TFS Sandalwood and BioForest in reliance on the 2007 Advice.
(v) The $77,200 for the Willmott Forests appears to relate to Forestry Management Costs and not establishment costs, indicating that these costs related to previous agricultural investments made in Willmott Forests, not investments recommended in the 2007 Advice (for which there were none - refer to paragraph 3.1.2(vi) above);
I am satisfied that the $77,200 was the price or establishment cost of the investment in Willmott Forests. That is how the figure is referred to in Mr and Mrs Lockyer's Portfolio Valuation prepared by the defendants.[189]
(vi) I have been unable to identify any documents where the Defendants specifically provided advice to purchase BioForest Sustainable Timber of $49,500 (inclusive of GST) during the year ended 30 June 2007;
I have found that this investment was made in reliance on the 2007 Advice.
(vii) I note that the Plaintiff's 2007 income tax return also shows an investment of $115,5000 (inclusive of GST) for the TFS Sandalwood Project 2007. I have been unable to identify any documents where the Defendants specifically provided advice to make this purchase nor has Pollock considered this investment when undertaking his assessment of losses.
I am satisfied that this investment was made in reliance on the 2007 Advice. The expenditure on the investment is not the subject of the claim which suggests that no loss was made. Mr Green does not identify any benefit being received by Mr Lockyer which should be set off against the losses that are claimed.
(viii) It is my opinion that the Plaintiff, based upon his history, would have made agricultural investments of some degree in any event. This is not addressed by Pollock.
(ix) Mr Pollock provides no commentary in relation to the following:
(a) That in the 2008 Advice the Defendants recommended lower levels of agricultural investments to the Plaintiff as follows:
• The purchase of 4 units in TFS Sandalwood with a cost of $50,600 to be owned in joint venture between the Plaintiff and the Trust; and
• The purchase of 2 woodlots in the 2007 Premium Forestry Blend with a cost of $84,480 to be owned by the Plaintiff personally ...
(b) Why he has included agricultural investments of approximately $633,600 in his loss calculations (with respect to the 2008 financial year) or why the 'losses' suffered by making these investments specifically related to the 2008 Advice provided by the Defendants, when the Defendants (in the 2008 Advice) only recommended investments totalling $135,080 for the Plaintiff;
(c) Why he has included some (ie, the $633,600 above) and excluded other agricultural investments detailed in the Plaintiff's 2008 income tax return which total $1,114,300 for the year ended 30 June 2008 (variance of $480,700);
(d) Mr Pollock provides no reconciliation between the difference of the agricultural investments included in his report to the agricultural investments included in the Plaintiff's 2008 income tax return and why each specific investment chosen for his calculations specifically related to the 2008 Advice.
I have found that Ms Richardson advised Mr Lockyer to invest in agribusiness investments on the scale in which he did in June 2008. In the joint memorandum of conferral Mr Pollock explains the variance of $480,700 referred to in (c) above as relating to agribusiness investments that were not the subject of the 2008 Advice or for which no losses are claimed. I infer the issue referred to in (d) is that Mr Pollock has taken into account some agribusiness investments, Willmotts and BioForest, and not the TFS Sandalwood investments but the difficulty is that Mr Green does not expand on his observation or identify any financial consequences said to flow from it.
(x) Pollock provides no commentary on the reasonableness of the advice, or in fact any commentary on whether the advice was inappropriate for the Plaintiff and by default, there is an assumption that all the specific losses are from inappropriate advice.
This observation reflects the limited nature of Mr Pollock's instructions.
(xi) Pollock does not consider that the Defendant's advice surrounded a three to five year investment plan, which was severely affected when the Xstrata takeover was implemented within the first 2 years of providing the advice.
This was irrelevant to Mr Pollock's instructions and in my view it is irrelevant to the losses suffered by Mr Lockyer. Those losses were suffered as a result of making investments 'to manage' a tax liability that did not exist. They had nothing to do with a three to five year investment plan. Moreover, the Xstrata takeover had occurred by the time of the 2008 Advice.
(xii) Pollock does not consider any of the benefits the Plaintiff, Mrs Lockyer and Blueblaze received as a result of retaining the JBM shares until the Xstrata takeover.
The benefits were received by Mrs Lockyer. Importantly these benefits were not received as a result of Mr Lockyer relying upon the 2007 Advice. I deal with this point more fully below.
Mr Green's primary criticism - Mr Pollock failed to take into account other benefits
309 Mr Green's primary criticism of Mr Pollock's approach to Mr Lockyer's losses was that he did not take into account benefits received by Mr Lockyer, Mrs Lockyer and Blueblaze that should have been brought to account.
310 In the conferral memorandum Mr Green's position was expressed as follows:
3.1.2(i)
Under this alternative, and isolated of other factors referred to below, the losses to the family group, which the Plaintiff benefits from, would be the difference between the tax benefits that presented to Mrs Lockyer less the tax benefits actually received by Mr Lockyer.
Mr Green's preliminary review indicates that:
311 In the course of cross-examination Mr Green expanded on his views as follows:
Your Honour, there are a range of other benefits that - that came from the overall advice, that needed to be considered, the information for which I didn't have and the complexities of which, I believe, would be left in - in your hands to make a decision on. None of those factors were obviously addressed in Mr Pollock's report. I believe they're significant and I believe that they would take a significant amount of time to - to do.
...
By the time I had obtained the information, there was inadequate time to do the work before the trial commenced.[190]
[G]oing back to the 2005 advice - so the advice is a continuum, starting in 2005. And it became apparent from all the advice and repeated as they went through that the key objectives of the advice which was written to both the plaintiff and Mrs Lockyer, together, was that it was necessary to do a number of things. The options needed to be capable of being exercised and retained. They needed to be capital secured and they needed to be funded in a manner that didn't affect their personal lifestyle or living requirements.
And as the advice transpired it became very apparent that it was a conjoined advice in that the purpose of the advice to invest in the agricultural investments at all was part of a rationale. Now, Mr Pollock mentioned earlier that there were about a million dollars worth of tax refunds that the plaintiff received. Those moneys, combined with margin loans, combined with a dividend paid from the company, combined with some shares being sold into a super fund and money coming out of the super fund, that collective or potpourri of funding was critical to the purchase of the - exercise of the options and the retention of the options and, obviously, the wealth that flowed on from that.
Now, any of those pieces, if you take them out, means that at the strategic point when the advice is given you wouldn't have been able to exercise the options, wouldn't have been able to retain them, wouldn't have been able to profit in the manner that Mrs Lockyer did. So what that means is if the investments weren't made in Mr Lockyer's name, either we wouldn't have had enough money to do those things or Mrs Lockyer would have had to make those investments.
So that's a conclusion that I've drawn and I think that's fairly evident from the statements of advice that I've looked at which are the '05, '07 and '08 advices.[191]
So the whole thing is - in many ways it's like putting different cordials into the water. Once it's in there, it's very difficult to disentangle it. But the thrust of the advice was primarily focussed around overall funding, the overall strategy
...
of which the tax refunds were fairly - or from the theme of the advices was pretty critical to that overall funding issue. So once the money is going in to the
But by 2008 the money was in the bank, though. So from the 2008 advice, as I understand, it was really directed to mitigating tax consequences, because the options have been exercised by them.
Yes. So it's primarily the 2007 refund that we're talking about.[192]
314 I do not accept that Mr Green's observations are valid for the following reasons.
(i) As I have stated earlier the 2007 Advice did not contain advice about funding the exercise of the Options and by the time of the 2008 Advice the Options had been exercised and the Jubilee shares acquired thereby had been sold. The overriding purpose of both Advices was to address Mr Lockyer's significant tax liabilities as assessed by Ms Richardson. The object of the recommendations contained in the 2007 Advice was not the funding of the exercise of the Options.
(ii) Further, the argument that the tax refunds or deductions secured by Mr Lockyer by making the 2007 and 2008 Investments were a necessary element of funding the exercise of the Options falls away upon appreciation of the true tax position, namely that Mr Lockyer's tax liability generated by the issue of the Options to Mrs Lockyer in 2004 was a comparatively modest $83,175 in the 2005 tax year and no liability in either the 2006 or 2007 tax years. If there was no tax liability it follows that there was no point in borrowing very significant amounts of money to make investments to create tax deductions.
(iii) The argument that the advices were 'conjoint' or that some benefits received by Mrs Lockyer or by Blueblaze as a result of other advice should be set off against Mr Lockyer's losses is factually and conceptually flawed. Mr Lockyer was misled into making the investments in order to mitigate the consequences of non-existent tax liabilities. At the risk of unnecessary repetition that advice had nothing to do with funding the exercise of the Options or the benefits that flowed to Mrs Lockyer. Conceptually the 'conjoint advice' argument ignores the obvious point that each of Mr and Mrs Lockyer and Blueblaze are separate legal entities. The other fundamental difficulty is that the 'benefits' are referred to in general terms but they have not been quantified.
(iv) The fact that Mr and Mrs Lockyer operated a CMT account into which money from various sources was paid and various expenses were paid does not make good the lacuna in the defendants' evidence constituted by the failure to identify with precision any benefits received by Mr Lockyer as a result of making the 2007 or 2008 Investments that they contend should be set off against Mr Lockyer's claim. Further the fact that Mrs Lockyer made substantial profits on the sale of the Jubilee shares acquired by exercising the Options and may have used those profits in a way that benefitted Mr Lockyer or other family members is not a basis for reducing Mr Lockyer's losses by the amount of any such benefits.
315 For the reasons I have already given the correct approach to Mr Lockyer's claim is to treat it as a 'no transaction' case and the task Mr Green undertook to compare the position Mrs Lockyer would have been in had she funded the exercise of the Options and consequential tax liabilities by selling Jubilee shares is not relevant.
316 Mr Lockyer's evidence was to the effect that his investments in the Willmotts and BioForest projects were lost because the companies went into 'some form of receivership'.[193] There was no connection between the failures of those companies and the advice provided by Ms Richardson. In those circumstances the defendants contended that there was no casual connection between the loss of those investments and their advice. The defendants contend that the loss of the value of the Willmotts and BioForest investments was due to extraneous circumstances and thus they are not liable for those losses.
317 As Ms Richardson observed in the 2007 Advice agribusiness investments are generally illiquid, long term (10 to 30 years) investments. I am satisfied that Mr Lockyer would not have invested in either Willmotts or BioForest, both agribusiness investments, had he not been misled as to the size of his tax liabilities. He was induced to make very substantial illiquid investments and he was 'locked into' those investments. To apply the limitations on the recovery of damages in the rule in Potts v Miller would deny Mr Lockyer fair compensation for the loss he suffered. In my view Mr Lockyer is entitled to recover the full extent of the losses suffered by him on the Willmotts and BioForest investments and taking this approach is consistent with the observations of the House of Lords in Smith New Court Securities Ltd on the circumstances in which the general rule (the comparison between price and value) will not apply.
318 In their closing written submissions the defendants submitted that they are not liable for capital losses incurred on the sale of shares when the sale was not the subject of advice from the defendants.[194] This submission was not supported by any detail. I take the submission to refer to the shares purchased by Mr Lockyer using the Geared Equity Investment facility and the Tailored Portfolio Collar facility and to the sale of those shares when the facilities were terminated by Mr Lockyer before their respective maturity dates. In my assessment the termination of those facilities involving the consequent sale of the shares held by Mr Lockyer pursuant to them was a step taken by Mr Lockyer to mitigate his loss. Mr Lockyer was in a difficult position. Had he not terminated the facilities he would have been exposed to the ongoing interest costs on these facilities and would have been exposed to many millions of dollars of debt that he did not require. Mr Lockyer acted reasonably and losses on the sale of the shares are a direct consequence of the impugned conduct.
319 I am satisfied that the losses claimed by Mr Lockyer and quantified in Mr Pollock's report arise directly from Mr Lockyer's reliance on Ms Richardson's misleading conduct.
Ms Richardson and Bepad's liability for the loss and damage
320 As the person who engaged in the contravening conduct Ms Richardson is liable for the damage suffered by Mr Lockyer. At all times Ms Richardson was acting in her capacity as a director of Bepad and accordingly Bepad is vicariously liable.[195]
Mr Lockyer did not suffer loss as a result of his failure to take reasonable care
321 In my view there is no basis for finding that the losses suffered by Mr Lockyer were suffered partly as a result of a failure on his part to take reasonable care. There was no such failure on Mr Lockyer's part.
322 On the basis of the factual findings there is no basis for reducing the defendants' liability on the grounds that Mr Lee or Ms Oliver was a concurrent wrongdoer. My reasons for reaching this conclusion can be stated quite shortly.
323 First, assuming in the defendants' favour that Mr Lee was negligent in failing to include the discount amount in Mr Lockyer's 2005 tax return the compensable loss that would flow would be the penalties payable by Mr Lockyer for failing to declare assessable income. This is not the same loss as the loss suffered by Mr Lockyer by the contravening conduct and thus Mr Lee and Ms Richardson would not be concurrent wrongdoers within the meaning of s 12GP(3) of the ASIC Act.
324 Second, I have found that Ms Richardson did not rely on the tax returns prepared by Mr Lee for the purposes of formulating her views on Mr Lockyer's tax liability for the purposes of the 2007 Advice and thus there is no basis for any finding of fault on his part in relation to the 2007 Advice or (indirectly) the 2008 Advice. Mr Lee did not give Mr Lockyer any advice in relation to the subject matter of the 2007 and 2008 Advices and there is no basis for making a finding of proportionate liability on the basis of his conduct.
325 Third, there was no basis for suggesting that Ms Oliver was a concurrent wrongdoer. The 2007 Investments had been made before she became Mr Lockyer's tax agent. There was no conduct on the part of Ms Oliver or anyone at Forum Accounting that could possibly be said to have caused the loss for which I have held the defendants liable as a result of Mr Lockyer making the 2008 Investments or indeed any loss.
326 In the light of my decision on Mr Lockyer's claim for damages for misleading or deceptive conduct under the ASIC Act it is unnecessary for me to determine his claim for damages at common law for negligent misstatement. The common law claim provides no benefits beyond those conferred by the statutory claim.
327 In deference to the attention devoted to the common law claim by counsel in their submissions I will state my conclusions in relation to that claim in summary form.
328 For present purposes it is sufficient to refer to the summary of the applicable principles referred to in ABN Amro Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 224 FCR 1 [573] - [575]:
[The] applicable principles may be summarised as follows. First, for there to be a duty to exercise reasonable care in making a statement or giving advice:
(1) The speaker must realise, or the circumstances must be such that the speaker ought to have realised, that the recipient of the information or advice intends to act on that information or advice in connexion with some matter of business or serious consequence; and
(2) The circumstances must be such that it is reasonable in all the circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker.
In respect of the second limb, the nature of the subject matter, the occasion of the interchange, and the identity and relative position of the parties as regards knowledge (actual or potential) and relevant capacity to form or exercise judgment will all be included in the factors which will determine the reasonableness of the acceptance of, and of the reliance by the recipient upon, the words of the speaker. It is important to recognise that the list is not exhaustive.
Second, proof of the criteria at [573] and [574] above establishes an assumption of responsibility or known reliance (or the converse, vulnerability) sufficient for a duty to be imposed. (citations omitted)
Ms Richardson and Bepad owed Mr Lockyer a duty of care
329 There was no serious dispute about the existence of a duty of care and I find that Ms Richardson and Bepad owed Mr Lockyer a duty to take reasonable care in giving advice to him. In such a case as this where the existence of a duty of care has been recognised in many analogous fact situations it does not appear to me that much is gained by defining the content of the duty with greater specificity, (and it is somewhat artificial to do so), but I accept that Ms Richardson owed the separate duties identified by Mr Lockyer in the statement of claim, that is:
(i) a duty to utilise with reasonable care the information and sources of information at Ms Richardson's disposal;
(ii) a duty to employ with reasonable care what capacity Ms Richardson had for judgment in relation to a matter under consideration; and
(iii) a duty to exercise reasonable care in the expression of what Ms Richardson was prepared to convey by way of information or advice to Mr Lockyer.
330 I would add that I consider Ms Richardson owed a duty not to provide advice on matters beyond her competence and expertise.
331 The existence of the duty of care was not negated by the statements in the 2007 and 2008 Advices relied upon as disclaimers.
332 As noted earlier both parties adduced opinion evidence on the issues of the scope of the duty of care and whether there had been a breach of duty. The essential point made on Mr Lockyer's behalf by Mr Canion was that a reasonable financial planner who was not also qualified as a taxation adviser should ensure that a financial planning client obtained tax advice from a suitably qualified tax adviser. Conformably with that view, Mr Canion's opinion was that the 2007 and 2008 Advices contained tax advice, which was central to the financial advice provided, that was beyond the competence of a reasonable financial planner and a reasonable financial planner would not have provided the advice contained in either the 2007 or 2008 Advices without first obtaining written tax advice from a suitably qualified tax adviser.[196] Mr Green agreed that options granted to employees as part of their remuneration gave rise to complex tax issues that fell outside the scope of the day to day practice of most financial planners.[197] The 2007 and 2008 Advices recommended investments that required Mr Lockyer to borrow more than $15 million. The expense, the risks and the potential for losses were significant. Against that background I have no difficulty in accepting Mr Canion's evidence. It encapsulates a central principle of professional practice that professionals should not give advice on matters that fall outside their areas of competence.
333 In my view Ms Richardson (and through her, Bepad) breached the duty of care owed to Mr Lockyer. She provided tax advice on a matter that was relatively complex and fell outside her area of expertise and competence. She made an error in the interpretation and application of the ITAA. Although I have expressed the breach of duty in different terms from those pleaded by Mr Lockyer I find that the breaches of duty alleged by him are established. I would add that in my view the misleading conduct that established the defendants' liability under the statute constituted a breach of duty.
334 Mr Lockyer relied upon the 2007 and 2008 Advice and suffered loss as a result. I am satisfied that factual causation has been established and that it is appropriated for the defendants' liability to extend to those losses.[198]
335 The approach to the assessment and quantification of damages under the statutory claim is open at common law and I am satisfied that Mr Lockyer suffered the losses claimed by him as a result of the defendants' negligence.
336 My conclusions in relation to the contributory negligence submissions and proportionate liability submissions are the same as those reached by me in the context of the statutory claim.
337 Judgment should be entered in Mr Lockyer's favour in the sum of $2,900,853. I will hear the parties in relation to interest and costs.
[1] Although in the title of these proceedings the first defendant's surname is 'Bermingham', by the time of the trial the first defendant had changed her surname to Richardson. I will refer to her as such in these reasons.
[2] ASIC Act s 12GP, s 12GR; CLA s 5AI, s 5AK.
[14] These were identified in the further amended statement of claim at par 4.
[15] There was no dispute that the advice provided by Ms Richardson included tax planning advice.
[21] Notes recorded in the Doc File notes suggest that Mr Lockyer may have first discussed the topic of the Options with one or more of Ms Richardson's colleagues but whether he did so or not is of no consequence.
[31] Further re re amended defence 11 November 2016 [5(f)] - for brevity I refer to the pleading as 'the defence'.
[43] Exhibit P1, 216, although the document was dated 13 October 2005 it was not finalised until some days later.
[117] In paragraph 5(x) of the defence the defendants plead: 'The plaintiff indicated in substance that Ms Richardson could seek a second opinion on the correct treatment of the Options exercised in the year ending 30 June 2007.'
[120] Exhibit P24; Exhibit P1, 613-615.
[129] Exhibit P1, 620-719; Plaintiff's SOAF [14].
[132] The reference to EQN options is a typographical error - ts 1159.5
[143] ts 649.8; Exhibit D3, 4275 and 4279.
[159] Further amended statement of claim par 7.
[160] The $5 million protected lending facility, agribusiness investments of approximately $250,000 and a margin loan facility of $850,000 - pre-paying interest on the facilities.
[161] References to sections within the ASIC Act are references to those sections as they stood at the time of the 2007 and 2008 Advices.
[162] Defendants' closing submissions 1 March 2017 [85].
[163] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [102] citing Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60;; (2004) 218 CLR 59 [200].
[164] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [30].
[165] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [27].
[166] Google Inc v Australian Competition and Consumer Commission (ACCC) [2013] HCA 1; (2013) 249 CLR 435 [9].
[167] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [39].
[168] Tobacco Institute (Aust) Ltd v Australian Federation of Consumer Organisations Inc [1992] FCA 962; (1992) 38 FCR 1 [42].
[169] Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 [33].
[170] Sykes v Reserve Bank of Australia [1998] FCA 1405; (1998) 88 FCR 511, 513 (Heerey J).
[171] Plaintiff's closing submissions for trial - 9 February 2017 [144]; Defendants' closing submissions for trial - 1 March 2017 [97].
[172] Defendants' closing submissions for trial - 1 March 2017 [96].
[173] Gould v Vaggelas (1985) 157 CLR 215, 236.
[174] Lockhart C, The Law of Misleading and Deceptive Conduct (4, 2015) 10.9 and 10.23 and the cases there cited.
[175] Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 [42] (McHugh, Hayne & Callinan JJ).
[176] Potts v Miller [1940] HCA 43; (1940) 64 CLR 282, 298 (Dixon J); HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 [34] - [40].
[177] HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 [64] - [65].
[178] Smith New Court Securities Ltd v Scrimgeour Vickers Asset Management Ltd [1996] UKHL 3; [1997] AC 254, 266 and 277.
[179] ABN Amro Bank NV v Bathurst Regional Council and Others [2014] FCAFC 65; (2014) 309 ALR 445, 963 and the cases there cited.
[180] North East Equity Pty Ltd v Proud Nominees [2010] FCAFC 60 [125] - [129].
[181] Jamieson v Westpac Banking Corporation [2014] QSC 32 [202].
[182] HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 [64] - [65].
[186] These were specified in the 'Amended particulars as to the plaintiff's after tax loss and damage' filed 4 November 2016.
[194] Defendants' written closing submissions 1 March 2017 [161].
Damages - General principles applicable to claims under s 12GF of the Australian Securities and Investment Act 2001 (Cth) - Net gains and losses approach to measure of damages - The rule in Potts
Miller - Damages awarded - No contribution by plaintiff to loss - Proportionate liability not established.
281 In many cases the measure of damages for misleading or deceptive conduct is the same as that applied in the tort of deceit when the acquisition of an asset is induced by a fraudulent misrepresentation, that is, the primary measure is the difference between the price paid by the plaintiff and the real value of the asset at the time of transaction. This measure is often referred to as the rule in Potts v Miller [1940] HCA 43; (1940) 64 CLR 282. In the present case, in the circumstances referred to in more detail below, the defendants invoke an aspect of the rule in Potts v Miller which excludes from compensable losses a loss in the value of an asset resulting from extraneous circumstances because such a loss is not a reasonable consequence of the impugned conduct. The effect of this aspect of the rule is that losses in the value of an asset due to 'independent', 'extrinsic', 'supervening' or accidental causes are not compensable. [176]
282 The overriding compensatory purpose of damages means that the rule in Potts v Miller is not applied inflexibly. In HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 the High Court (Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ) was asked to consider an alternative approach to the assessment of damages where a plaintiff had acquired a shopping arcade on the basis of misleading advice and was unable to sell it.[177] The plaintiff sought damages under s 82 of the TPA. The alternative approach, that the court considered was open, was to assess damages on the basis of the purchase price of the relevant asset less whatever was left in the purchaser's hands. In this context at [63] the court referred with approval to what was said by Lord Steyn about the assessment of value approach to the assessment of damages in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996] UKHL 3; [1997] AC 254 stating:
284 As is apparent from the judgment in HTW Valuers the assessment of damages under s 12GF of the ASIC Act is not confined by common law principles. The approach to the assessment must be flexible and be the one 'best adapted to give the injured claimant an amount which will most fairly compensate for the wrong suffered' provided it works no injustice.[179] The necessity for such an approach was emphasised by the Full Court of the Federal Court in North East Equity Pty Ltd v Proud Nominees [2010] FCAFC 60. The Court's review of the relevant case law is instructive:
[125] McHugh J observed in Henville at [132] that the general principles for assessing damages may have to give way altogether in particular cases to solutions best adapted to give the injured claimant an amount which will most fairly compensate for the wrong suffered. The court must, in particular cases, configure solutions best adapted to giving a claimant that amount in damages which will most fairly compensate for the wrong suffered. The appropriate approach is to identify what loss or damage the appellant has suffered by way of prejudice or disadvantage in consequence of altering its position in reliance upon the contravening conduct. In Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647 in the context of the assessment of damages in an action of deceit at common law, which provides some useful assistance, Dixon J at 650 observed that a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he or she has suffered in consequence of altering his or her position under the inducement of the fraudulent misrepresentations and what is recoverable is the difference between the real value of the property [acquired] and the sum which the plaintiff was induced to give for it. His Honour approved the formulation of Sir James Hannen P in Peek v Derry (1887) 37 Ch D 541 at 594 , that the question is how much worse off is the plaintiff than if he or she had not entered into the transaction. The general principle is that the plaintiff is to be put, so far as possible, in the position he or she would have been in if he or she had not acted on the inducement.
[126] The measure of damages in such an action consists in the loss or expenditure incurred by the plaintiff in consequence of the inducement on which he or she relied diminished by the corresponding advantage in money or moneys worth obtained by him or her on the other side: Potts v Miller [1940] HCA 43; (1940) 64 CLR 282 at 297 (Potts). The loss a claimant can recover includes consequential losses flowing directly from the misrepresentation.
285 In Jamieson v Westpac Banking Corporation [2014] QSC 32 Jackson J contrasted the Potts v Miller approach to the assessment of damages with the alternative 'net gains and losses' approach and said:
(1940) 64 CLR 282
(2004) 217 CLR 640
(1952) 87 CLR 647
(2014) 224 FCR 1
(2009) 238 CLR 304
(1992) 38 FCR 1
(2012) 247 CLR 486
(1985) 157 CLR 215
(2014) 309 ALR 445
(2004) 218 CLR 59
(2013) 249 CLR 435
(1998) 88 FCR 511
(1998) 196 CLR 494
[127] In Henville at [135] McHugh J concluded, in the context of the circumstances of the particular case, that he could see no reason why these principles applicable in an action for deceit at common law should not be applied in the assessment of damages under s 82 of the Act, particularly having regard to the purposes of the Act which include promoting fair trading and protecting consumers from contraventions of the Act which, in his Honour's view, are more readily achieved by ensuring that consumers recover the actual losses they have suffered as a result of contraventions of the Act. His Honour observed (at [135]): Where a person contravenes the Act and induces a person to enter upon a course of conduct that results in loss or damage, an award of damages that compensates for the actual losses incurred in embarking on that course of conduct best serves the purposes of the Act and should ordinarily be awarded.
[128] Gummow J at [152] agreed with these observations of McHugh J, and Hayne J at [167] concluded, for the reasons his Honour advanced (agreeing with McHugh J in the outcome), that the claimants were entitled to recover the whole of the amount lost on the footing that the loss claimed was caused by the conduct in question in contravention of s 52 of the Act.
[129] If the respondents in this case had not made the representations, the appellant would not have entered into the contract or the lease and none of its loss would have occurred. The loss suffered is directly attributable to the contravening representations.[180] (citations omitted)