Selig v Wealthsure Pty Ltd

Cases cited: Angas Securities Ltd v Valcorp Australia Pty Ltd (2011) 277 ALR 538 Astley v Austrust Ltd (1999) 197 CLR 1 Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 Bennett v Elysium Noosa Pty Ltd (2012) 291 ALR 191 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 BP Refinery Pty Ltd v Hastings Shire Council (1978) 52 ALJR 20 Bullock v London General Omnibus Co [1907] 1 KB 264 Burke v LFOT Pty Ltd and Others (2002) 209 CLR 282 Cachia v Hanes (1994) 179 CLR 403 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Henville v Walker (2001) 206 CLR 459 Hungerfords v Walker (1989) 171 CLR 125 Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 Ingot Capital Investments & Ors v Macquarie Equity Capital Markets & Ors [2002] NSWSC 853 I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 Keith Woods v Rodney Mario De Gabriele [2007] VSC 177 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 Miletich v Murchie [2012] FCA 1013 Murphy v Overton Investments Pty Ltd (2004) 204 ALR 26 Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 145 CLR 625 Re La Rosa and Another; Ex parte Norgard v Rodpat Nominees Pty Ltd & Anor (1991) 31 FCR 83 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 Sanderson v Blythe Theatre Co [1903] 2 KB 533 Shrimp v Landmark Operations Ltd (2007) 163 FCR 510 Valcorp Australia Pty Ltd v Angas Securities Ltd [2012] FCAFC 22 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (In Liq) [2012] FCA 1028 Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463

Date of hearing: 7-9, 13, 14 March 2012, 2-5, 10-13, 18 April 2012

Place: Adelaide (Videolink to Brisbane)

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 1300

Counsel for the Plaintiff: Mr P Heywood-Smith QC with Mr D Riggall

Solicitor for the Plaintiff: Radbone and Associates

Counsel for the First and Second Defendants: Mr P O'Sullivan QC with Mr T Cox

Solicitor for the First and Second Defendants: Cosoff Cudmore Knox

Counsel for the Third Defendant: The Third Defendant appeared in person

Counsel for the Fourth Defendant: The Fourth Defendant appeared in person

Counsel for the Fifth Defendant: The Fifth Defendant did not appear

Counsel for the Sixth Defendant: The Sixth Defendant appeared in person

Counsel for the Seventh Defendant: The Seventh Defendant did not appear

Counsel for the Eighth Defendant: The Eighth Defendant did not appear

Counsel for the Ninth to Thirteenth Defendants: Mr R Anderson

Solicitor for the Ninth to Thirteenth Defendants: Herbert Geer

Selig v Wealthsure Pty Ltd [2013] FCA 348 CORRIGENDUM 1 In [1274], the words "for six years" should read "for seven years". I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Lander.

Associate: Dated: 12 June 2013 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 11 of 2010

NORTON CAPITAL PTY LIMITED (IN LIQUIDATION) ACN 086 207 169

JUDGE: LANDER J DATE OF ORDER: 18 april 2013 WHERE MADE: ADELAIDE (VIDEOLINK TO BRISBANE)

1. The plaintiffs' claim against the ninth to thirteenth defendants be dismissed.
2. The plaintiffs have judgment against the first, second, fifth and sixth defendants in the sum of $1,760,512.
3. If the plaintiffs want to seek leave to enter judgment for the sum of $1,760,512 against the third and fourth, and seventh and eighth defendants, the plaintiffs file an application together with a supporting affidavit within 14 days of the making of these orders.
4. If the plaintiffs make an application pursuant to paragraph 3, the application be heard on Tuesday, 4 June 2013 at 9.30am.
5. The first and second defendants' claims for a declaration that the third to eighth defendants are proportionately liable be refused.
6. The first and second defendants' claims for indemnity and contribution against the third to eight defendants be dismissed.
7. The first and second defendants' claim against the ninth to thirteenth defendants be dismissed.
8. The first and second defendants pay the plaintiffs' costs of the plaintiffs' proceeding against the first and second defendants.
9. The fifth and sixth defendants pay the plaintiffs' costs of the plaintiffs' proceeding against the fifth and sixth defendants.
10. The question of the plaintiffs' costs against the third and fourth, and seventh and eighth defendants be reserved pending any application by the plaintiffs pursuant to paragraph 3 of these orders for judgment against those parties.
11. The plaintiffs and the first and second defendants pay the ninth to thirteenth defendants' costs.
12. The plaintiffs have leave to make an application for an order that the first and second defendants indemnify the plaintiffs against the order that the plaintiffs pay the ninth to thirteenth defendants' costs by filing written submissions, not exceeding 5 pages, in support of such an order within 10 days.
13. If the plaintiffs make an application that the first and second defendants indemnify the plaintiffs against the order that the plaintiffs pay the ninth to thirteenth defendants' costs, the first and second defendants file written submissions, not exceeding 5 pages, in reply within 10 days.
14. The first and second defendants pay the third to eighth defendants' costs (if any) in relation to the first and second defendants' claims against those defendants. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 11 of 2010

NORTON CAPITAL PTY LIMITED (IN LIQUIDATION) ACN 086 207 169

JUDGE: LANDER J DATE: 18 APRIL 2013 PLACE: ADELAIDE (VIDEOLINK TO BRISBANE)

The Plaintiffs' Claim 1 In this proceeding, the plaintiffs, who are husband and wife, claim relief for losses allegedly arising from conduct relating to the giving of investment advice. The plaintiffs allege that the conduct was misleading and deceptive in that it contained misrepresentations, breached contractual obligations, and was negligent. 2 The plaintiffs' principal claim, pursuant to the originating process filed 4 February 2010, is for damages against the first and second defendants: (a) pursuant to ss 1041I, 1324(1) and 1325(1) of the Corporations Act 2001 (Cth) (the Corporations Act); (b) pursuant to s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act); and (c) for negligence, misrepresentation, and breach of contract. 3 The plaintiffs' statement of claim underwent several amendments and ultimately sought damages against the first and second defendants of the kind in the originating process, with the exception that it also sought damages pursuant to s 953B(2)(b) and (c) of the Corporations Act, but no longer under s 1324(1). 4 The plaintiffs' claim is that the first and second defendants are wholly responsible for the plaintiffs' damages. 5 In the alternative, the plaintiffs claim damages against each of the third to thirteenth defendants: (a) pursuant to ss 1041I and 1325(1) of the Corporations Act; (b) pursuant to s 12GF of the ASIC Act; and (c) for negligence and misrepresentation. 6 The Corporations Act and ASIC Act expressly confer jurisdiction on this Court. The claims for negligence, misrepresentation, and breach of contract can be entertained by this Court as a proper exercise of the accrued jurisdiction of this Court. 7 The plaintiffs' claim against the third to the thirteenth defendants was only brought because the first and second defendants, in their Fourth Amended Defence and Second Cross-claim (FAD&SCC) not only denied that the plaintiffs were entitled to any relief against them but asserted that they were entitled to: Contribution and Apportionment The first and second defendants claim against the third to thirteenth defendants and each of them: 46.1 Orders for indemnity to the extent that the first and second defendants, or either of them, are or is liable to the plaintiffs pursuant to section 729, section 1041H and section 1325 of the Corporations Act, and section 12GF of the ASIC Act. 46.2 Orders for contribution to the extent that the first and second defendants, or either of them, are or is liable to the plaintiffs pursuant to section 729, section 1041H and section 1325 of the Corporations Act, and section 12GF of the ASIC Act. 46.3 Declarations as to the extent of the liabilities of the first and second defendants to the plaintiffs having regard to the comparative responsibility of each and all of Neovest, Norton Capital, Spencer, Perovich, Norton and Townley as concurrent wrongdoers pursuant to section 1041N of the Corporations Act, section 12GR of the ASIC Act and section 31 of the Civil Liability Act. 8 In addition to summarising those claims for indemnity, contribution and apportionment against the third to thirteenth defendants, the first and second defendants also sought in the body of their Second Cross-Claim to recover amounts against the third to eight defendants pursuant to ss 1041I and 1041N of the Corporations Act. 9 The conduct of the ninth through to the thirteenth defendants is not directly impugned. It is alleged that they are liable because they were in partnership in Nicol Robinson Halletts (NRH), a firm of solicitors practising at Eagle Street in Brisbane in Queensland with the sixth defendant at the relevant time: s 13 of the Partnership Act 1981 (Qld) (the Partnership Act). 10 As mentioned in [2], the plaintiffs rely on both statutory and common law causes of action. 11 The statutory cause of action under the Corporations Act and ASIC Act are: (a) conduct in breach of s 945A and s 945B of the Corporations Act; (b) misleading and deceptive conduct: s 1041H of the Corporations Act; s 12DA of the ASIC Act; (c) breach of implied warranty as to due skill: s 12ED of the ASIC Act; (d) false representations in relation to the standard of services: s 12DB of the ASIC Act; (e) misleading representations as to future matters: s 769C of the Corporations Act; s 12BB of the ASIC Act; (f) false or misleading statements: s 1041E of the Corporations Act. 12 The originating process did not include a claim under ss 769, 945A, or 945B of the Corporations Act, but those sections were pleaded in the statement of claim in its final form. 13 The plaintiffs' claim, by reason of the breaches of those causes of action, that they are entitled to damages pursuant to s 953B: s 1041L and s 1325 of the Corporations Act; and s 12GF of the ASIC Act. 14 The conduct which is complained of to support the statutory causes of action is identified in paragraph 49 of the Third Amended Statement of Claim (TASOC), in which it is pleaded: 49. The plaintiffs were induced to believe that an investment in Foundation shares was a safe and effective investment which met their financial requirements by: 49.1. the November 2004 advice; 49.2. the November 2004 written advice; 49.3. the 2005 advice; 49.4. the April 2005 written advice. 49.5. the Norton Flyer silence 49.6. the financial stringency silence. 49.7. the risk profile silence. (Collectively, "the conduct") 15 It is further pleaded in paragraph 49A: 49A The conduct which consisted of advice was not appropriate to the personal circumstances of the plaintiffs as particularised in paragraph 10 of this pleading. 16 In paragraph 52 the plaintiffs identify the way in which they put their case against the first and second defendants: 52. In engaging in the conduct and accepting the authority to transfer the amount of $450,000 prior to lodgement of the second prospectus the defendants breached the provisions of the Corporations Act. PARTICULARS The plaintiffs rely on Part 6D.2 and Part 6D.3 [of] the Corporations Act and in particular sections 704-707, 715-718, 721, 727-734, and 737-738. The plaintiffs further rely on Part 7.7 of the Corporations Act and in particular Sections 945A, and 945B. FURTHER PARTICULARS Bertram ascertained the relevant personal circumstances of the plaintiffs for the purposes of Section 945A(1)(a) of the Corporations Act in the circumstances set out in paragraphs 10 and 11 of this pleading. Bertram was obliged by virtue of Section 945A(1) of the Corporations Act to give advice that was reasonable in the relevant personal circumstances of the plaintiffs (the reasonable basis for advice rule) but did not do so in the circumstances set out in paragraphs 38-49 of this pleading. Bertram and Wealthsure were obliged by virtue of the matters set out in paragraphs 38-49 of this pleading and by virtue of Section 945B of the Corporations Act to warn the plaintiffs that the advice constituted by the conduct was incomplete or inaccurate but did not do so contrary to the obligation contained in Section 945B(1) of the Corporations Act. The November 2004 written advice and the April 2005 written advice were disclosure documents or statements within the meaning of section 953B (1) (b) of the Corporations Act and which were required, by virtue of section 946A of the Corporations Act, to be given to the plaintiffs. They were "defective" (as defined in section 953A (1) (b) (i) of the Corporations Act) contrary to section 953B (1) (b) because they were misleading and deceptive as alleged in paragraph 60 of this pleading. As a result of the matters particularized above, section 953B of the Corporations Act applies. 17 The defendants deny these claims, but the second defendant contends, rightly, that insofar as the claims rely upon s 953B, the plaintiffs can only recover against a "liable person" as defined in s 953B(3), which the second defendant, Mr David Bertram, is not. 18 The plaintiffs have included a common law action in negligence and have pleaded the alleged breach of duty by the first and second defendants in paragraph 62 of the TASOC. 19 The plaintiffs have not, unfortunately, identified how the duty arises and the content of the duty. 20 The breach of duty pleaded is: 62. In breach of the retainer and negligently in breach of the duty of care owed by the defendants to the plaintiffs by virtue of proximity and the retainer: 62.1. Mr Bertram never provided Mr & Mrs Selig with any prospectus relating to Neovest Limited nor did he give advice in relation to the contents of a draft prospectus. The second prospectus for equities was not lodged with ASIC until the 31st of March 2005. 62.2. Bertram did not have a reasonable basis for making the recommendation to invest in Neovest. 62.3. Neither Wealthsure nor Bertram either carried out research or analysed the Neovest investment opportunity nor did they use research or analysis generated from sources external to Neovest. 62.4. Neither Wealthsure nor Bertram analysed the plaintiffs' financial position and either did not identify the plaintiffs' financial objectives as pleaded above or simply failed to have regard to them. 62.5. Neither Wealthsure nor Bertram provided advice which would have enabled the plaintiffs to achieve the financial objectives pleaded above. 62.6. Wealthsure failed to make a suitable initial choice of investment products either after conducting a due diligence or at all and then failed to instruct Bertram as its representative to confine himself to such products. 62.7. Wealthsure failed to supervise, train and control its representative Bertram. 62.8. Wealthsure failed to know the Neovest product and match it with the needs and requirements of the plaintiffs and thereby breached the "know your client rule". 62.9. The defendants breached a term of the retainer and the warranty implied into the retainer by Section 12ED of the ASIC Act by rendering financial advice to the applications without due care and skill. 62.10. The defendants breached a term of the retainer and the warranty implied in the retainer by Section 12ED of the ASIC Act, as the plaintiffs having made known to the defendants the particular purpose for which the financial advice was required, provided financial advice which was not reasonably fit for purpose and not of such nature and quality that it might reasonably be expected to achieve the results desired by the plaintiffs. 62.11. Breached a specific recommendation set out in an email from Wealthsure (David Pawski) to "Dear Advisers" dated 16 September 2004 namely that due to the risks of mezzanine products the maximum permitted client investment was 15% of net assets and borrowing was not permitted. 62.12. Breached a specific recommendation set out in an email from Wealthsure (David Pawski) to "Dear Advisers" dated 16 September 2004 namely that due to the risks of mezzanine products the maximum permitted client investment was 15% of net assets not including the family home and borrowing was not permitted. 62.13. Breached the policy determination namely that due to the risks associated with Neovest redeemable preference shares the maximum investment per client was to be 15% of nett assets other than the clients family residence and that borrowing was not permitted. 21 The contract, which is said to be breached, is contained in a document described in the TASOC as the "Financial Services Guide" (FSG), which was issued by the first defendant on 15 January 2004. 22 The terms of the contract are set out in paragraph 7 of the TASOC: 7.1. The defendants would only recommend an investment after considering its suitability for the plaintiffs' individual needs, objectives and circumstances (express written term page 3). 7.2. The defendants would only offer products selected from an approved list of products carefully researched and approved by a team of research experts (express written term page 4). 7.3. The defendants would exercise reasonable care in the provision of services to the plaintiffs (implied at law by virtue of section 12 ED of the ASIC Act and from the terms of the agreement in order to give business efficacy to the FSG). 23 The plaintiffs rely upon paragraph 62 of the TASOC again, for evidence of the breach of the retainer referred to in paragraph 7 of the TASOC. 24 In that regard, as the first and second defendants have contended, the plaintiffs' claim is no higher in contract than that which is available to them in tort and in the statutory causes of action under the Corporations Act and ASIC Act. 25 The plaintiffs also claim that the first and second defendants were guilty of misrepresentation, which I think relies upon the plea in paragraph 59 of the TASOC, which is in the following terms: 59. The conduct was: 59.1. Misleading and deceptive conduct contrary to section 12DA of the Australian Securities and Investments Commission Act 2001 (the ASIC Act). 59.2. A false representation as to the standard, quality and value of the services provided by the defendants contrary to Section 12 DB of the ASIC Act. 59.3. A breach of the warranty implied into the retainer by Section 12ED of the ASIC Act that the financial advice would be rendered with due care and skill. 59.4. The plaintiffs having made known to the defendants the particular purpose for which the financial advice was required and the results the plaintiffs sought to achieve, a breach of the warranty implied by Section 12ED of the ASIC Act that the financial advice would be reasonably fit for it's (sic) purpose and of such nature and quality that it might reasonably be expected to achieve those results. 59.5. In so far as the representations set out in this claim relate to a future matter the plaintiffs rely on section 12 BB of the ASIC Act. 59.6. Misleading and deceptive conduct contrary to Section 1041H of the Corporations Act. 59.7. False and misleading contrary to Section 1041E of the Corporations Act. 59.8. In so far as the representations set out in this claim rely on a future matter, the plaintiffs rely on S769C of the Corporations Act. 26 In paragraphs 60 and 61 of the TASOC, the plaintiffs plead the facts upon which the plaintiffs rely for saying that the conduct was misleading and deceptive, and contrary to the provisions of the Corporations Act and ASIC Act: 60. The conduct was misleading and deceptive contrary to the provisions of the ASIC Act and Corporations Act and was also negligent and a breach of the contract of retainer in that: 60.1. The consulting services and marketing agreements which Neovest entered into with Norton Capital and financial services licensees indicated that up to 19.5% of the investment monies it received would go as commissions to Norton Capital and agents, and financial services licencees (sic) plus success fees, making it highly unlikely that there would be any dividends available to be paid to the plaintiffs in the course of the first year of the investment. 60.2. Wealthsure was or should have been aware of the appointment of the receiver on the 27th day of September 2004 to Neo Lido and Holdings, and made further enquires (sic) with the receiver and other charge holders. 60.3. Mr Bertram wrongfully stated that a 20% dividend would be paid to Mr & Mrs Selig and that their capital was "guaranteed". This was contrary to the statements regarding risks contained in the Norton "flyer", and the second prospectus and the explicit warnings in the prospectus that there was no guarantee that any dividends would be paid to shareholders. 60.4. The profit and loss information in the Neovest prospectus showed that Neovest would never be in a position to pay any dividend to investors, particularly on the financial results for the six months to December 2004. 60.5. Neovest's financial history as set out in the prospectus was that it paid almost all its revenue to "borrowing costs". 60.6. Neovest only had a profit for the half year to 31st December 2004 of $1,335.00, notwithstanding that it issued approximately $4,000,000.00 worth of shares to the 31st of December 2004. 60.7. Neo Lido, Holdings and their subsidiaries had "borrowing costs" of $7,539,754.00 and had sustained losses of $250,857.00 during the 2004 financial year. 60.8. The statement in the 2005 advice that the directors had personally guaranteed the debts of the company made no reference or enquiries with respect to the financial status of the directors. 60.9. Loans by Neovest to the Neolido Group were not properly or adequately secured. 60.10. Any company searches of charges taken by Neovest over Neo Lido or Holdings prior to March 2005 would have revealed the matters pleaded at paragraph 23.3 hereof namely that no proper or adequate steps were taken to secure the monies provided by Neovest to Neo Lido or Holdings. 60.11. Any land title searches would have shown that no mortgages were taken over the properties of Neo Lido, Holdings or their subsidiaries in favour of Neovest. A search would have disclosed that debentures had not been registered in accordance with the provisions of the Corporations Act. 61. The advice that Neovest had been fully researched was false and misleading and deceptive in that neither Wealthsure nor Bertram had independently investigated Neovest. Had they done so they would have ascertained, as was the fact, that: 61.1. There was an identity of directors between Neovest and the Neolido Group; and; 61.2. Any money invested in Neovest was already committed to reducing the existing financial stringency of the Neolido Group and; 61.3. An investment in Neovest could never have been recommended as an appropriate investment to the plaintiffs. 27 Both plaintiffs claimed to have suffered financial loss, including the loss of an investment. They also claimed damages for personal injury. Mrs Selig claimed to have suffered a severe anxiety reaction and psychiatric illness "as a result of the hardship caused by the conduct of the defendants": paragraph 68 of the TASOC. Both plaintiffs claimed to have suffered "severe inconvenience, stress and vexation". They claimed in paragraph 79 of the TASOC: The plaintiffs have suffered symptoms of stress including disturbed sleep and changes in mood. As a result of the pressure caused by the failure of the investments and consequent financial hardship the marriage between the plaintiffs has failed. 28 On the fourth day, which was after Mrs Selig was cross-examined by Mr Cox, junior counsel for the first and second defendants, Mr Heywood-Smith QC, leading counsel for the plaintiffs, announced that the personal injury claim was not pursued. He advised the Court that a medical practitioner who was to be called as an expert witness on that aspect of the plaintiffs' claim would not be called to give evidence. 29 The plaintiffs, in my opinion, were wise to abandon that claim. Although nothing more needs to be said about that aspect of the plaintiffs' claim for damages, that does not mean that the cross-examination of Mrs Selig on this aspect became irrelevant. She was also a witness on liability. The whole of her evidence is relevant in assessing the reliability of her evidence on liability, and that is a matter to which I will return. 30 The plaintiffs' claim for economic loss is identified in paragraph 63 of the TASOC and arises, as can be seen in the plea, "[b]y reason of the insolvency of the Neovest and the Neolido Group", and comprises: 63.1. loss of their investment of $450,000.00; and 63.2. interest on a compounding basis; and 63.3. consequential loss upon the collapse of investments dependent upon a return from the Neovest investment. 31 As can be seen, paragraph 63.3 talks of consequential loss, which is identified in paragraphs 64 to 67 of the TASOC: 64. The defendants knew as at 17 March 2005 that the plaintiffs had borrowed money to purchase real estate in Queensland in the expectation of a return on their investment in Neovest. As a result they knew that if the plaintiffs were deprived of a return on their investments they would be obliged to pay accumulating interest on a compounding basis in terms at a default rate and might suffer a forced sale of properties. PARTICULARS Mr Ron Selig on behalf of the plaintiffs orally informed Bertram on behalf of the defendants in the course of the meetings and in particular in about November 2004 that the plaintiffs would borrow money to purchase real estate in Queensland. Bertram was aware that the plaintiffs intended to borrow to purchase real estate because he personally arranged the borrowing of the money. Bertram recorded his awareness of the defendants' intentions in the April 2005 advice. 65. As a result of being deprived of the sum of $450,000 the plaintiffs have incurred an obligation to pay accumulating interest on a compound basis at a default (higher) rate of interest together with bank penalties, fees and charges. 66. As a further result of being deprived of the sum of $450,000 and having no return on their investment in Neovest the plaintiffs have suffered loss as a result of both the purchase and forced sale of properties at unit 1, 78 Berrima Street Wynnum, Unit 7, 78 Berrima Street Wynnum, Unit 9, 78 Berrima Street Wynnum, Units 3 and 12, 143 Burnett Street Buderim, and 7 Wattle Street, Point Arkwright. 67. The defendants were aware at the time of engaging in the conduct that the consequential losses subsequently sustained by the plaintiffs as pleaded above were the reasonable and likely consequence of reliance upon their advice and in particular the reasonable and likely consequence of the failure of the Neovest investment. The defendants were so aware because they had ascertained the financial position of the plaintiffs prior to recommending the Neovest investment in the course of the meetings. 32 As I have already said, the plaintiffs' proceedings against the third to thirteenth defendants were brought reluctantly, and for the reasons identified in [7] of these reasons. 33 The plaintiffs put their case against the third to thirteenth defendants in the TASOC: 71. On the grounds pleaded in this third amended statement of claim the plaintiffs have sought relief including damages pursuant to ss. 1041 (1), 1325 (1) and 953B (2) of the Corporations Act 2001 and damages pursuant to s. 12GF of the Australian Security and Investments Commission Act 2001 together with damages for negligence, misrepresentation and breach of contract against the first and second defendants. 72. The first and second defendants have, by their fourth defence and second cross claim denied that the plaintiffs are entitled to any relief. The first and second defendants assert pursuant to s.1041I and, 1041N of the Corporations Act 2001, s.12GP and s.12GR of the ASIC Act and s.28 of the Civil Liability Act 2003 (Qld) that the liability of the first and second defendants to the plaintiffs is limited to the extent of the first and second defendants' responsibility for loss in proportion to the liability of the third to eighth defendants as concurrent wrongdoers. 73. The plaintiffs say that: 73.1. The claims are not apportionable. 73.2. Alternatively the claims under section 953B (2) of the Corporations Act 2001 and the claims in contract are not apportionable claims. 73.3. The first and second defendants are wholly responsible for the loss. 74. To the extent that the plaintiffs' claims are apportionable (which the plaintiffs deny), then the plaintiffs seek relief from the third to thirteenth defendants on the grounds set out in the fourth defence and second cross claim in respect of the loss and damage set out in the second amended statement of claim. 34 In the prayer for final relief, the claims against the third to thirteenth defendants are put as an alternative to the claims against the first and second defendants.

The First and Second Defendants' Defence 35 The first and second defendants admit that from December 2003, or at the latest 15 January 2004, the second defendant became an agent of the first defendant by becoming an authorised representative of the first defendant. The first and second defendants do not dispute that the Statements of Advice mentioned in paragraph 49 of the TASOC were given to the plaintiffs. They say, however, that the Statements of Advice were not read by the plaintiffs - in the case of Mr Selig because of his reading problems; and in the case of Mrs Selig because of disinterest; and, therefore, any claims based on the provision of the Statements of Advice were not maintainable under s 953A and s 953B of the Corporations Act. 36 They denied that any oral misrepresentations were made as pleaded and that if they were made they had any causal consequences. 37 In respect of the documents that are mentioned in paragraph 49 of the TASOC, the first and second defendants denied that any misrepresentations were made by silence. They say that those documents contained appropriate disclosure of all of the risks, but that the plaintiffs did not read the documents. 38 In relation to the plea in paragraph 49.6 of the TASOC, they say that those matters were not known by the first and second defendants, and could not have been known. 39 In addition, the first and second defendants say that the plaintiffs entered into speculative investments on the advice of others, as a result of which they suffered losses. 40 The first and second defendants plead that the plaintiffs agreed, in the Statements of Advice, that the first and second defendants would not be liable to the plaintiffs for any loss or damage suffered by the plaintiffs, as a result of any error or omission from any statement set out in either Statement of Advice, including fault or negligence on the part of the first and second defendants. 41 They plead in the alternative that if the plaintiffs are entitled to damages, the damages should be reduced on account of the plaintiffs' failure to take reasonable care. 42 In the further alternative, the first and second defendants claim that the plaintiffs' losses were caused by the third to eighth defendants, and if the first and second defendants are partly responsible for the plaintiffs' loss or damage, the damages to be awarded to the plaintiffs should be apportioned between those defendants. 43 I will address those pleas in more detail later in these reasons.

The First and Second Defendants' Claim for Apportionment 44 The first and second defendants have also brought a cross-claim against all other defendants, in which they seek apportionment and orders for indemnity and contribution against each of the third to thirteenth defendants, including the seventh defendant, Neovest Limited (in liquidation) (Neovest) and the eighth defendant, Norton Capital Pty Limited (in liquidation (Norton Capital), and the bankrupt directors of Neovest on the basis that those parties are also liable to the plaintiffs for the plaintiffs' loss. They say that the directors of Neovest are concurrent wrongdoers for the purpose of the apportionment legislation. Although Neovest is in liquidation, the first and second defendants say it is a concurrent wrongdoer and that it was responsible to the first and second defendants and the plaintiffs, as were its directors. The same plea is made in respect of Norton Capital, which is also in liquidation. 45 The first and second defendants claim that the Neovest directors, Mr Richard Spencer, Ms Silvana Perovich, Mr Mark Norton and Mr Peter Townley, caused Neovest to invest in a Ponzi scheme, and breached ss 254T and 588G of the Corporations Act, by paying dividends monthly to investors out of the investments of new investors, in circumstances where Neovest was not making a profit from which to declare those dividends. 46 They say that the directors engaged in misleading and deceptive conduct in making representations by Neovest to the first and second defendants. They say that the directors improperly promoted the 2004 Neovest prospectus, which was misleading and in contravention of s 710 of the Corporations Act. They say that the directors improperly promoted the 2005 Neovest prospectus, which was misleading and in contravention of s 710 of the Corporations Act. 47 The first and second defendants' case against the ninth to thirteenth defendants, being the partners of Mr Townley in the firm NRH, is on the basis that they are vicariously liable to the plaintiffs and to the first and second defendants, for the conduct of Mr Townley pursuant to s 13(1) of the Partnership Act. The first and second defendants seek indemnity from the ninth to thirteenth defendants to the extent that Mr Townley is found to be liable to indemnify or provide contribution to the first and second defendants. 48 They make the same plea against the ninth to thirteenth defendants as is made by the plaintiffs in paragraph 74 of the TASOC.

The Other Defendants' Defences 49 Originally the third, fourth, fifth and sixth defendants filed a defence to the plaintiffs' statement of claim and a defence to the first and second defendants' cross-claim. 50 Later, the third, fourth and sixth defendants filed amended pleadings. 51 The fifth defendant did not file any further pleadings after the third, fourth and sixth defendants filed their amended pleadings. 52 The seventh and eighth defendants, each in liquidation, did not ever file a defence to either the plaintiffs' claim or the first and second defendants' cross-claim. 53 The fifth, seventh and eight defendants, therefore, did not defend themselves against the claims made. 54 The third, fourth and sixth defendants, being the Neovest directors, Mr Spencer, Ms Perovich and Mr Townley, deny that they were guilty of any of the conduct complained of by the plaintiffs or by the first and second defendants, and deny that they are liable to an apportionment pursuant to the Corporations Act or the ASIC Act. 55 They also claim that if the plaintiffs are entitled to any damages, the liability for those damages was caused by or contributed to by the conduct of the plaintiffs and the first and second defendants. 56 In the alternative, they plead that the fifth and eighth defendants, Mr Norton and Norton Capital, had the responsibility for the 2005 Neovest prospectus and any omissions or misrepresentations made in that document were made by the fifth and eighth defendants. 57 They say in their defence, but not by way of cross-claim, that they relied upon advice provided by McCullough Robertson to Neovest and its directors concerning the 2004 Neovest prospectus. They also say they relied upon the advice provided by NRH to Neovest and its directors concerning the 2005 Neovest prospectus. 58 It is not entirely clear what the purpose of those pleas is, as I say, because no claim is brought against any other party. 59 The ninth to thirteenth defendants deny that they are vicariously liable for the conduct of Mr Townley, because if Mr Townley is liable to contribute to the plaintiffs, or to indemnify the first and second defendants, Mr Townley was not acting within the ordinary course of business of the partnership of NRH. In that regard, those defendants rely upon s 13(2) of the Partnership Act and rely upon a decision of the Supreme Court of New South Wales, Ingot Capital Investments & Ors v Macquarie Equity Capital Markets & Ors [2002] NSWSC 853. 60 The ninth to thirteenth defendants say that if the plaintiffs did suffer any loss or damage the same was caused as a result of the plaintiffs' own conduct, and/or the conduct of the first and second defendants, and/or the conduct of the third, fourth, fifth, seventh and eighth defendants. 61 In the alternative, they claim that if Mr Townley contravened the Corporations Act or the ASIC Act as pleaded and the plaintiffs suffered loss or damage of a kind that renders NRH liable, then any loss or damage allegedly suffered by the plaintiffs was caused as a result partly of the plaintiffs' failure to take care, and any damages recoverable by the plaintiffs should be reduced having regard to the plaintiffs' own conduct. 62 I will say more about that plea in due course.

The parties 63 The plaintiffs, Mr Ronald Selig and Mrs Janna Selig, are husband and wife who by the time of trial were separated. Mr Selig was born on 20 December 1956. Mrs Selig was born on 21 December 1972 in Kazakhstan. They met in 1994 and they married on 15 August 1996 and have two children. At the relevant time they had one child, Brokk born on 28 August 2002. 64 Mr and Mrs Selig were at the relevant time the shareholders and directors of Jarone Pty Ltd (Jarone), a company incorporated in Australia on 15 February 2002 for the purpose of holding the plaintiffs' investments. 65 The first defendant, Wealthsure Pty Ltd (ABN 93 097 405 108) (Wealthsure), was incorporated in Western Australia on 5 July 2001 and is the holder of Australian Financial Services Licence 238030. It is a provider of financial services as defined in the ASIC Act. 66 Its shareholders are DKB Qld Pty Ltd as trustee for the DKB Investment Trust, Jean Kaminski as the trustee for the Kaminski Family Trust, and Andrew Barry Pawski. Andrew Pawski is the sole director and secretary. 67 The second defendant, Mr David Bertram, was a director of David Bertram & Associates Pty Ltd (DBA), and after 15 January 2004, an authorised representative of and acting with the authority of Wealthsure, with the ASIC Authorisation Representative number 255366, until DBA's winding up. 68 DBA was incorporated in the Australian Capital Territory on 21 March 1990. At all relevant times David Bertram was the sole director and secretary of that company. He and his wife, Kerry Michelle Bertram, were its shareholders. On 3 September 2007, the Supreme Court of Queensland made an order for the winding up of DBA in insolvency and appointed Mark William Pearce as liquidator. 69 The third defendant, Mr Richard Spencer, was between 20 November 2001 and 24 August 2007, a director of Neo Lido Pty Ltd (Neo Lido), a company incorporated in Queensland on 14 November 2000; and between 10 October 2002 and 24 August 2007 a director of Neolido Holdings Pty Ltd (Neolido Holdings), a company incorporated in Queensland on 10 October 2002; and a director of the seventh defendant Neovest, a company incorporated on 29 May 2003 and now in liquidation. Mr Spencer became bankrupt when an order was made for the sequestration of his estate on 24 August 2007. He remains an undischarged bankrupt. 70 The fourth defendant, Ms Silvana Perovich, was a director of Neo Lido between 14 November 2000 and 20 August 2007; a director of Neolido Holdings between 10 October 2002 and 20 August 2007; and a director of Neovest between 29 May 2003 and 20 August 2007. Ms Perovich became a bankrupt when an order for the sequestration of her estate was made on 20 August 2007. She remains an undischarged bankrupt. 71 The fifth defendant, Mr Mark Norton, was appointed a director of Neovest from 14 September 2004. Mr Norton was, at all relevant times, also a director of the eighth defendant, Norton Capital, a company incorporated in Australia and an Australian Financial Services Licensee, which went into liquidation on 25 June 2008. Although Mr Norton initially filed a defence in the proceeding he thereafter took no part. 72 Mr Townley was at all relevant times a lawyer and partner in the firm NRH and was a director of Neovest from 29 May 2003. 73 The seventh defendant Neovest was incorporated on 29 May 2003 and had as its directors, as I have said, Mr Spencer, Ms Perovich, Mr Norton, and Mr Townley. It was incorporated to obtain investments for the purpose of providing loan facilities to Neo Lido and Neolido Holdings, which were developers. Neovest was placed into liquidation on 5 February 2008. 74 The eighth defendant Norton Capital had as its sole director the fifth defendant, Mr Norton, but it is, as I have said, now in liquidation. 75 The ninth defendant Mr Daniel Lilley, tenth defendant Mr Damien Greer, eleventh defendant Mr Robert Gallagher, twelfth defendant Mr Stephen Dickens, and thirteenth defendant Mr Michael Crouch were at all relevant times lawyers practising in partnership with Mr Townley at the firm NRH. 76 The third and fourth defendants are bankrupt. The seventh and eighth defendants are in liquidation. On 8 December 2010, leave was given, pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), for proceedings to be commenced and continued against the third and fourth defendants up to the date of entry of the judgment. On the same day, leave was given for proceedings to be commenced and continued against the seventh defendant, Norton Capital, pursuant to s 500(2) of the Corporations Act up to the date of entry of the judgment. Again, on the same day, leave was given for proceedings to be commenced and continued against the eighth defendant, Neovest, pursuant to s 471B of the Corporations Act up to the date of judgment.

The Trial 77 The plaintiffs were represented by Mr Heywood-Smith QC and Mr Riggall, and the first and second defendants by Mr O'Sullivan QC and Mr Cox. 78 On the first day of the hearing the third and fourth defendants, and the sixth and the ninth to thirteenth defendants, were represented by Mr Adams. 79 The fifth defendant, and the seventh and eighth defendants, did not attend and did not take part in the trial. As previously mentioned, the seventh and eighth defendants did not file a defence to the plaintiffs' claim or the first and second defendants' cross-claim. As I have said, the fifth defendant did file a defence, but thereafter did not participate in the proceeding. The seventh and eighth defendants did not file any documents in the proceeding before trial. 80 The trial was conducted in Adelaide on 7-9, 13, 14 March 2012, in Brisbane on 2-5, 10-13 April 2012, and in Adelaide again on 18 April 2012. 81 Mr Adams sought and obtained leave for the parties he represented not to attend that part of the trial that was held in Adelaide. 82 When the trial resumed in Brisbane, the third and fourth and sixth defendants represented themselves. Mr Anderson, of counsel, represented the ninth to thirteenth defendants, but only appeared at part of the hearing in Brisbane.

Witnesses 83 Both plaintiffs gave evidence. Mr Selig is dyslexic, although that was not known to anyone apart from his wife and, as a result, he has difficulty reading. I thought Mr Selig was an honest witness but, in some respects, he was vague and, in other respects, his memory was not good. 84 Although he has been involved in developments, he did not give the impression of being a business man or, indeed, having much business acumen. In my opinion, he was an unsophisticated man and an unsophisticated investor. 85 Mrs Selig was not a good witness. She was, as the first and second defendants contend, evasive in giving her evidence. Her evidence included some inconsistencies. 86 She did not play much part in the circumstances giving rise to the investments and, because she was not a good witness and for that reason, I have placed little reliance upon her evidence. 87 Mr Wybrow was an expert called by the plaintiffs. In due course, it will be necessary to discuss his evidence and its import. However, I was impressed by Mr Wybrow, who I thought was a careful witness whose evidence could be relied upon. 88 The plaintiffs called Mr Selig's brother, Mark Selig, who gave evidence of a dinner at which he was present on 29 September 2004 at the plaintiffs' home. I accept Mr Mark Selig's evidence. 89 The plaintiffs called Mr Erik Diegmann and Mr Raymond Bernard, both of whom had invested in Neovest on the advice of Mr Wayne Mackintosh. 90 I think their evidence was of little use and I have put little reliance upon it. 91 Mr Dean Ind was called. He was present at a number of meetings at which the plaintiffs and Mr Mackintosh and Mr Bertram were present. 92 The first and second defendants contended that Mr Ind's evidence contained inconsistencies and he was an unreliable witness whose evidence should not be relied upon. 93 That was not my assessment of Mr Ind's evidence, although he stood to gain by the transactions which took place. In my opinion, Mr Ind was an honest witness, whose evidence can be relied upon. 94 The first and second defendants called the managing director and chief executive officer of the first defendant, Mr Darren Pawski, who I thought was a poor witness. His evidence, I thought, was designed to exculpate Wealthsure. I place little reliance on Mr Pawski's evidence for that reason. 95 Mr Bertram gave evidence. I thought Mr Bertram was an honest witness who was willing to admit to mistakes that he had made. I accept his evidence. 96 Mr Marc Robinson was called by the first and second defendants to give evidence of a report which he had prepared as a senior accountant employed by Australian Securities and Investments Commission in its National Insolvency Coordination Unit (NICU). 97 ASIC became aware of Neo Lido and Neolido Holdings some time before March 2005 and, on 29 March 2005, began surveillance activities in relation to those companies and those companies' controlled entities, which it described as the Neolido Group. 98 Mr Robinson described the activities which had taken place and ASIC's conduct in relation to the Neolido Group generally. 99 He was cross-examined extensively by Mr Spencer, on behalf of the former directors of Neovest but, in my opinion, his evidence may be relied upon for the opinion contained in his evidence in relation to the solvency of Neolido Group at various times. 100 Ms Perovich gave evidence. She was, unfortunately, a very poor witness. She was evasive and argumentative. She tried to argue her case from the witness box. 101 Mr Spencer was a better witness, but he was not forthright and it was difficult to have confidence in his evidence. 102 Mr Townley, who, as I have said, was also a director of Neovest and was at the relevant time a partner in the law firm of NRH, who were solicitors for the Neolido Group, answered questions in cross-examination precisely and carefully. 103 I think I can rely on Mr Townley's evidence. 104 Mr Norton did not give evidence, nor did he appear at the trial. Neovest and Norton Capital took no part in the trial. At the time of the trial, both were in liquidation. 105 Mr Gallagher was the only one of Mr Norton's four partners who gave evidence. He was clearly a truthful witness. Indeed, he could be described as an excellent witness. I have no doubt I can rely upon his evidence.

History 106 I shall address the relevant facts in chronological order, although from time to time it will be convenient to complete a topic before moving to a new topic that might have started earlier in time. Where there is a dispute as to the facts I will identify the evidence and make appropriate findings.

Mr Selig - Early History 107 Mr Selig was born and raised in Robe and has been involved in mainly heavy manual labour jobs and building work for the whole of his working life. He first worked as a deckhand on a cray fishing boat. For several years he worked importing/exporting and processing seafood. Later he worked as a landscape gardener and then as a builder/developer. He suffered a progressive loss of working capacity due to a back injury which first occurred in 1991 while working as a landscape gardener. He suffered other injuries while working on multi-storey buildings in Adelaide. 108 In 1998, he and his brother moved to Queensland to be close to their parents. Between 1998 and 2004, he and his family were involved in two successful building projects in Queensland. He and his father and mother purchased land at Buderim upon which they built four apartments. He and his brother acted as builder for the development, for which he and his parents contributed the capital. The development, which was financially successful, was completed and sold by Easter 1999.

Sea Aura Apartment Development 109 During late 1999, Mr Selig and his brother Mark purchased land at 143 Burnett Street, Buderim, which they developed by building 12 residential units known as the "Sea Aura Apartments". 110 The Sea Aura Partnership was formed in 2000. The partners were Renstef Pty Ltd, which was a company controlled by Mr Selig's parents, which had a 45% share in the development; Mr and Mrs Selig who had a 50% share directly in the development; and Mr Selig's brother Mark and his wife, who shared a 5% holding. 111 On 15 February 2002, during the course of the development, Jarone was incorporated to hold Mr and Mrs Selig's interest in the partnership. 112 Mark Selig was the designated builder of the project. The first building work for the Sea Aura Apartments started at the end of March 2002 and continued until 2003. 113 During 2003, Mr Selig met Mr Dean Ind, a real estate property marketer. The pair commenced a business relationship when Mr Ind began acting as marketing agent for the sale of the Sea Aura Apartments. They later became friends. 114 Mr Selig carried out labouring work on the project and during the course of the project suffered a further back injury. He underwent a decompression laminectomy to relieve leg pain. He was assessed as being effectively permanently disabled due to low back pain and sciatica. Mr Selig realised that his predisposition to back pain meant that he would be unable to carry out the sort of physical labour that he had been undertaking in previous years. 115 In August 2003, the plaintiffs moved in to apartment number 3 of the Sea Aura Apartments. Between October and December 2003, the apartments were fully completed. 116 The first apartment, number 2, was sold in 2003 for $463,000. Apartment number 6 sold for $455,000; apartment number 7 sold for $245,000; apartment number 8 sold for $290,000, apartment number 10 sold for $795,000; apartment number 5 sold for $495,000; and the last apartment to sell was number 4, which was sold in about September 2004 and settled in December 2004 for $545,000. 117 Mr and Mrs Selig occupied apartment number 3, which Mr Selig said was larger and better than the other apartments. It had been built on the assumption that it would be their home. 118 Mr Selig said that he was approached by a realtor, before the apartments were finished, who advised him that he had a client who wished to purchase apartment number 3 for $2,000,000. Mr Selig said he was not prepared to sell for that price, but that approach left him with a view about the value of the apartment. Whilst I do not doubt that Mr Selig had the conversation of which he deposed, I very much doubt that apartment number 3 had a market value of $2,000,000 or anything near it. It is excessive, having regard to the prices at which the other apartments sold and for the price at which apartment number 3 subsequently sold. 119 After the sale of the apartments to which I have referred, five apartments were left. It was agreed between the partnership that Mr and Mrs Selig would be entitled to apartments 3 and 12, and Mark Selig would be entitled to apartments 1 and 11. The agreement recognised that Mr Selig and Mark Selig had remained the owners of the land upon which the apartments had been built throughout the whole of the project. Mr Selig's parents retained apartment 9. Apartment 11 was subsequently sold by Mark Selig for $750,000. 120 When the project completed, neither the partnership nor Mr and Mrs Selig, owed any money in relation to the project. 121 In about September 2004, which was after the plaintiffs had sold several of the Sea Aura Apartments, they were looking to invest in a development known as the "Cedar Rise" development. 122 Mr Selig's taxable income for the financial year ended 30 June 2003 was $58,238. His taxable income for the year ended 30 June 2004 was $21,003. In that year, his only income was a director's fee of $21,831. 123 By November 2004, both plaintiffs were not working. The only income they had was $370 per week being rental income from apartment number 12 of the Sea Aura Apartments. The plaintiffs had not proceeded with the Cedar Rise development opportunity with Mr Jacques Mamet. The plaintiffs turned to explore other investment opportunities that would provide an income and Mr Selig discussed this with Mr Bertram.

Neolido and the Neolido Group 124 On 14 November 2000, Neo Lido was, as I have said, incorporated in Queensland. Its directors were Ms Perovich, Mr Spencer, and Matthew James Neibling. Mr Neibling resigned that same day. Its shareholders were Ms Perovich and Mr Spencer, each holding one share. 125 On 10 October 2002, Neolido Holdings was incorporated in Queensland. Its directors were Ms Perovich and Mr Spencer. Its shareholders were Silvana Perovich Pty Ltd and Richard Spencer Pty Ltd, each holding 60 shares, and Mango Capital Pty Ltd (Mango Capital), which was incorporated on 6 June 2005 and deregistered on 28 October 2007, held 30 shares. The directors of Mango Capital were Ms Perovich and Mr Spencer, with Ms Perovich resigning on 20 August 2007 and Mr Spencer resigning on 24 August 2007. The shareholders of Mango Capital were Ms Perovich and Mr Spencer with 60 shares each. 126 Neolido Holdings and Neo Lido, together with the later subsidiary entities, were known as the Neolido Group. Neo Lido was the trading arm of the Neolido Group with Neolido Holdings and its subsidiaries holding the real property and stock of the Neolido Group. Although it was referred to as a "Group", that term should not be understood as referring to a group in an accounting sense. Neo Lido was not the subsidiary of Neolido Holdings. The companies had common shareholders. 127 The Neoldio Group was formed using Ms Perovich's and Mr Spencer's combined skills and interest in property development, for the purpose of developing projects in the city of Brisbane, in the shires of Pine Rivers, Shi Redlands, Caboolture, Isis and Tia. When it started trading it used Ms Perovich's and Mr Spencer's financial resources, which were supplemented by profits from early projects and funds obtained via bank guarantees and from a consulting agreement in relation to a major broad-acre development site located at Mango Hill, north of Brisbane, in which Ms Perovich and Mr Spencer held significant interests. 128 The Neoldio Group began by using a diversity of second tier lenders to finance individual projects. The Neolido Group's profile grew and, in due course, Neolido was persuaded by Suncorp Finance, a first tier financier, to choose it as a replacement for its existing second tier financing.

David Bertram 129 DBA was incorporated on 21 March 1990 and carried on business under the name "DBA Financial Designs". It employed David Bertram. Some time in the mid-1990s, David Bertram became acquainted with Mr Wayne Mackintosh, who conducted a business advice and mortgage brokerage business. They became friends. Eventually, Mr Bertram was engaged by a group of companies controlled by Mr Mackintosh, "Asset Acceleration Group", to provide para-planning services.

Mr Townley and NRH 130 On 1 July 1997, Mr Townley became a partner of NRH. On the same day, Mr Gallagher, Mr Greer and Mr Crouch also became partners. Mr Townley remained a partner of that firm until 30 June 2008 when NRH merged with Herbert Geer & Rundle Lawyers and became Herbert Geer. He remained a partner of that firm until 30 November 2011, when he resigned to practise as a sole practitioner. 131 During the relevant time, the partners of NRH were Messrs Lilley, Greer, Gallagher, Dickens, Crouch and Townley. 132 In 2000, Mr Spencer and Ms Perovich approached Mr Townley to act as solicitor for a new real estate venture "Neo Lido". Mr Townley said that he had known Mr Spencer since 1982 when they had served in articles together, and later when he had been involved in the private mortgage lending practice of GPS Solicitors. He also came to know Ms Perovich, who had been a client of Halletts Solicitors, which subsequently became NRH and a firm of which Mr Townley was a partner. Mr Townley knew David Kelly and Mark Phillips, who were appointed CEO and CFO respectively of the Neolido Group. 133 Prior to 2003, NRH provided legal professional services to the Neolido Group and Mr Spencer and Ms Perovich, through Mr Townley who was designated as the client relationship officer for NRH. 134 In early 2003, Mr Townley had a number of discussions with Mr Spencer and Ms Perovich about the possibility of raising capital through a public company to invest in primarily Neolido Group projects, but also in other property development projects in Queensland that might be suitable. 135 NRH provided legal advice to Mr Spencer, Ms Perovich and the Neolido Group to the effect that any public company would have to have at least three directors. Mr Spencer and Ms Perovich told Mr Townley that they did not, at that time, have a third person who was willing to accept an offer as a director of a proposed public company and inquired of Mr Townley whether he would be willing to act as a non-executive director. He agreed. 136 On 29 May 2003, NRH, acting on instructions, applied for the incorporation of Neovest as a public company limited by shares and Neovest was incorporated that day. The founding directors were Mr Spencer, Ms Perovich and Mr Townley. 137 Neovest was incorporated for the purpose of offering investors the opportunity to build on "Neolido's extensive and high quality Queensland portfolio, and to be part of Neolido's vision to be a leader in sustainable urban design and development - not just in Queensland, but throughout Australia". 138 Prior to the incorporation of Neovest, the Neolido Group had, as I have said, borrowed monies for property development from commercial lenders on commercial terms. 139 Mr Townley said that at some time in late 2003 he told Mr Spencer and Ms Perovich that he would prefer that they find another person to act as director prior to the issue of the first Neovest prospectus. He was told there was no-one else suitable to act as a director of Neovest and Mr Spencer and Ms Perovich asked him to continue in the role. Mr Townley said that he would be prepared to continue to act as a director of Neovest if a director's and officer's policy was in place. 140 In late 2003, Mr Gallagher was the managing partner of NRH which had, as I have said, as its partners Messrs Lilley, Dickens, Crouch, Greer, Gallagher and Townley. 141 Mr Townley raised with his partners, at Mr Spencer and Ms Perovich's request, that he continue to act as a director of Neovest while Neovest issued a prospectus to raise capital. Mr Townley said that he cannot remember whether all of the partners of NRH were present at that meeting. His recollection was that Messrs Crouch, Greer and Gallagher agreed to him continuing to act. 142 Some time in January 2004, Ms Perovich told Mr Townley that she had been told, when making enquiries about a director's and officer's policy, that it would be prohibitively expensive. 143 At the relevant time, NRH was covered by a compulsory professional indemnity insurance policy through Lexon Pte Ltd (Lexon), an insurer under the control of the Queensland Law Society Inc. 144 Mr Townley formed the view, having reviewed the terms of the Lexon insurance policy, that if Neovest director's fees were paid to NRH, he would be covered by that policy while acting as a director of Neovest. 145 Some time after 12 January 2004, he spoke to Mr Gallagher as managing partner of NRH and proposed that NRH should open a client file for Neovest to be called "Directorship" (Directorship File); that Mr Townley should require Neovest to pay his director's fees for any attendance as a director of Neovest at his solicitor's hourly rate rather than a fixed fee; and that those fees should be invoiced to Neovest under the Directorship File and paid into the NRH general account in the same manner as any fees for legal services. He proposed that only his fees as a director should be recorded in the Directorship File and that all other legal services be recorded on other files and invoiced in the usual manner. 146 Mr Townley accepted that the Directorship File was not opened until some time after he became a director of Neovest. He also accepted no written fee agreement was entered into, nor was any retainer executed. He said it was not a legal file in the ordinary sense. There were no instructions taken in respect of it. 147 Mr Townley said that Mr Gallagher agreed with his analysis of the Lexon insurance policy and his proposals. 148 Subsequently, some time after 12 January 2004, Mr Townley put the proposal, which he and Mr Gallagher had discussed, to Mr Spencer and Ms Perovich who accepted. 149 Mr Townley said that he authorised the issue of the first Neovest prospectus after a discussion with Mr Spencer and Ms Perovich, and after a meeting of directors and, on 3 February 2004, Neovest lodged its first prospectus with ASIC.

Neovest and Neolido 150 On 1 January 2004, seven months after it was incorporated, Neovest entered into a loan agreement with Neolido Holdings by which Neovest agreed, at the request of Neolido Holdings, to provide a loan facility to Neolido Holdings to assist that company in its general purposes of property development. The loan agreement was executed by Ms Perovich and Mr Spencer on behalf of both companies. The agreement provided for the provision of an advance, which was defined to be "$270,000 and/or such other additional amounts as agreed to between the parties from time to time to be advanced by the Lender whilst this agreement remains on foot". It is not clear where Neovest obtained the $270,000 to lend to Neolido Holdings, but nothing turns on that. Clause 3 of the agreement provided that the lender should provide the advance to the borrower by way of a cash advance on the drawdown date, which was defined to be "such date as the Lender and the Borrower agree but not later than 30th June 2004", on the terms and subject to the conditions set out in the agreement. 151 Neolido Holdings was to repay the loan in full to Neovest in accordance with the repayment schedule, which was identified in Schedule 1 of the document to be 24 months from the drawdown date. 152 On 3 February 2004, Neovest lodged its first prospectus with ASIC (the Neovest 2004 prospectus). The purpose of the issue of the first prospectus, Ms Perovich said, was to augment the Neolido Group's capital requirements by raising money for the high end risk of finance - for equity and mezzanine funding purposes - via Neovest. In the prospectus, the directors are identified as Mr Spencer, Ms Perovich and Mr Townley. Mr Spencer wrote the introduction in which he said: Neovest is closely associated with Neolido, being largely owned and controlled by the principals of Neolido. Neolido is an experienced and active developer in the south east Queensland property market. … By virtue of its close relationship with Neolido, Neovest is uniquely positioned to take advantage of attractive investment opportunities in the property development projects of Neolido. … Neovest invests its funds with Leolido as Leveraged Project Finance for Neolido to undertake particular property developments. … The investments made by Neovest may appropriately be described as "mezzanine" or "leveraged equity" as their performance is enhanced by the utilisation of prior ranking debt finance by Neolido in the funding mix of a development project. This form of project finance is typically the layer of finance between the senior and institutional forms of finance on the one hand, and any equity funds used in a development. … While the potential returns of this Offer are higher than those generally available from other asset classes, they do involve a greater degree of risk and illiquidity. As such this class of investment is not suitable for all potential investors. Potential investors are advised to consider in particular section 7, which addresses some of the risk factors relevant to an investment in Neovest and the contents of the Important Notice at the front of this Prospectus. 153 The prospectus identifies the "A Class Investors" as the two shareholders who subscribed for and were each allotted 60,000 "A Class Shares" prior to the prospectus being issued. They were Mr Spencer and Ms Perovich, via Richard Spencer Pty Ltd and Silvana Perovich Pty ltd respectively. 154 In clause 1.1, the prospectus addresses "About the Offer". It states: Neovest Ltd was formed for the purpose of investing primarily in property development projects undertaken by the developer Neolido with a view to providing returns to Shareholders. The Directors are associated with Neolido, an innovative and successful young group of companies which to date has undertaken a number of successful property developments. For more information on the Leolido Group, see section 6. Neovest is seeking to raise up to $20 million through the issue of 20 million Shares at $1.00 each and will be looking to invest its liquid assets within six months of this capital raising. The Directors reserve the right to accept oversubscriptions of a further $5 million for each class of Share. 155 In clause 1.4 "Risk Factors" it is said: Neovest has not yet reached a decision regarding where it will invest its liquid assets. For this reason, an investment in Neovest should be considered highly speculative. Investors should consider all risks carefully and seek professional financial advice before investing. More detailed risk factors are contained in section 7. 156 In clause 1.5, "Financial structure" it is stated: It is Neovest's intention to partner with Neolido and provide a source of Leveraged Project Finance. While Neovest's project investments with Neolido are structured as debt instruments they might ordinarily or otherwise be equity investments. While not having the same potential upside as a pure equity investment, the investments have priority over Neolido's equity and may be supported with collateral security (second and following mortgages and company and personal guarantees when appropriate). 157 Clause 1.8 addresses "Dividends": The Shares carry the right to a non cumulative dividend (if any) at their relevant coupon rate. The coupon rate is only a right ascribed to the Share and should not be construed as a representation or a guarantee that the Company will, in fact, have profits to be able to meet the coupon rate, or the Company will have the capacity in the future to declare dividends. The Company has not previously traded and therefore has no basis to guarantee or represent that the dividend can be paid. The dividend coupon rate is calculated on a simple interest basis on the subscription amount paid for the issue of each Share divided by the period during which the relevant Shares have been on issue. The rights attaching to a particular Share are set out in section 5. In essence, any dividends paid are paid in the order of priority of those Shares. This means that where the Company is able to declare a dividend, Equity Shareholders are entitled to receive up to 15% per annum on their investment, before any dividend is paid to Foundation or A Class Shareholders. Provided that the 15% per annum has been paid (if at all) to Equity Shareholders, the Company may at its discretion then pay up to 20% per annum to Foundation Shareholders before any payment of a dividend to A Class Shareholders. Once all the above dividends are paid (if at all) in any financial year, then the Company may pay additional dividends to A class or Ordinary Shareholders as it sees fit. In the event that a dividend is paid more regularly than on the anniversary of the issue of a particular class of Shares within either the Equity Series or the Foundation Series, Shareholders within that class of Shares will receive a proportion of the declared dividend representing the period between the date of the issue of the Shares of that class of Shares and the payment of that dividend. As indicated above, investors should note that there can be no guarantee that the Company will have sufficient profit as required by section 254T of the Corporations Act to pay the dividend entitlements at the coupon rate. Under section 254T, dividends may only be paid out of profits of the Company. Due to dividends constituting a debt of the Company once they have been declared and the time fixed for payment has arrived, there can also be no guarantee that the Directors will declare a dividend where the Directors may be in breach of their duty to prevent insolvent trading under section 588G of the Corporations Act. The dividend rate is a non-cumulative entitlement. This means that should a dividend not be paid in a particular year, then entitlement to that dividend will lapse. Where there are insufficient profits in one year to fully pay a preferential dividend entitlement, the Company may pay a lesser dividend out of profits. The payment of a lesser dividend may only be made in the order of priority discussed above. No dividend may be paid to Foundation Shareholders prior to payment in full of the entitlement to Equity Shareholders. 158 Section 2 addressed the "Directors' Profiles". 159 Section 3 addressed "The Directors' Investment Strategy". The "Investment philosophy" was said to be: Neovest will seek to provide investors with the opportunity to invest in a Company whose Directors' experience and qualifications are detailed in section 2. The Company's objectives will be to generate returns for Shareholders adopting the following investment approaches: invest in speculative property development opportunities to generate higher returns than that expected from long term investments. It should be noted that higher returns generally mean higher risk of capital loss; and where applicable, acquire existing income producing property to be re-developed or held for potential capital gain. Prior to entering into any transaction, the Board will, after taking appropriate advice from qualified investment advisers (where the Board considers this prudent or appropriate), carefully consider and thoroughly evaluate the investment opportunity, including considering the historical and likely performance of the potential investment, evaluating current market conditions and likely market trends which may affect the investment. 160 Under the heading "3.2 Type of investments" it is said that Neovest will invest its funds with the Neolido Group by providing "Leveraged Project Finance", which is defined earlier in the prospectus; "… these are collective investments made by Neovest. They are also known as mezzanine finance, leveraged equity or equity finance …". The purpose of the lending is so the Neolido Group can undertake residential and commercial developments. 161 The prospectus stresses the "close relationship" between Neovest and the Neolido Group. The prospectus states that an "investment review process will be undertaken prior to any project investment by Neovest". It states: The investment review process is designed to determine if the development is of sufficient quality to provide finance to, and to determine an adequate risk adjusted return for an investment in the development. Accordingly, the investment review process includes the following: review of the financial records and current position of Neolido; financial analysis of the proposed project to determine its viability; forecast profit including assessment of end value, construction estimates, and general review of the project feasibility to ensure all possible costs and contingencies have been included; qualitative assessment of the project including project location, design, competing projects and project timeframe; and satisfaction of specific risk issues including building costs, local authority issues and end sales risk. 162 The prospectus makes it clear that Neovest is seeking funds to finance the Neolido Group's developments. Under the heading "Nature of project investments" it is stated: Neovest wil invest in Leveraged Project Finance to allow members of the Neolido Group to undertake property development projects. The form of project finance that Neovest will provide to members of the Neolido Group may be termed mezzanine or Leveraged Project Finance, and is typically the layer of finance between the senior and institutional forms of finance on the one hand, and any equity finance used in the funding of a development. On occasion, Neovest may provide equity finance to Neolido for deposits for site acquisitions. Loans to members of the Neolido Group may be secured or unsecured. If secured, the loan will generally rank behind the senior debt lender but before unsecured creditors. Where the loan is unsecured, the loan will rank equally with all unsecured creditors. Any equity finance provided will mean that the type of finance will rank behind unsecured creditors. 163 The prospectus did not identify the potential investment opportunities which Neovest had identified. It was said that "none are sufficiently advanced to disclose in this Prospectus". 164 Section 4 dealt with an "Overview of the Property Project Financial Industry". It identifies debt finance and equity finance. Debt finance includes "First Mortgage (Senior Debt), Second Mortgage (Mezzanine Debt) [and] Leveraged equity finance". It states: (iii) Leveraged equity finance Equity finance comprises funds employed in a development either by the developer or by other joint venture equity investors. When the funds are provided by an external party and the return paid by the developer is a fixed one, it may be called leveraged equity finance. In this instance, the term "leveraged" refers to its performance being enhanced by the utilisation of prior ranking debt finance in the funding mix of a development project. Although leveraged equity finance is technically a debt instrument, it is perhaps best considered as a quasi-equity product. It displays many of the characteristics of equity investments. While it is often secured by a second or following mortgage over the assets of a project and sometimes collateral security, the value of this security is large dependent upon the realisation of the expected success or performance of the development project. In addition, the return of the funds advanced is generally calculated using a per annum interest rate; the rate is formulated after consideration of the amount of expected profit and the risk profile of the transaction, and can include a profit share component. 165 Under "4.2 Finance and risk" it is stated: Neovest will adopt when appropriate risk minimisation strategies concerning its Leveraged Project Finance. 166 Section 5 dealt with the details of the offer. On offer were 10,000,000 Equity Shares and 10,000,000 Foundation Shares. The terms for both types of shares was "12 months". 167 In the case of both the Equity Shares and the Foundation Shares, the shares were redeemable at their issue price "at the discretion of the Company". 168 The Equity Shares carried a Dividend Coupon Rate: Non-cumulative rate of up to 15% per annum. In the event that a dividend is paid more regularly than on the anniversary of the issue of a particular class of Shares within the Equity Series, then Shareholders within that class of Equity Shares will receive a proportion of the 15% per annum dividend representing the period between the date of the issue of that class of Equity Shares and the payment of that dividend. 169 The Foundation Shares carried a Dividend Coupon Rate: Non-cumulative rate of up to 20% per annum. In the event that a dividend is paid more regularly than on the anniversary of the issue of a particular class of Shares within the Foundation Series, then Shareholders within that class of Foundation Shares will receive a proportion of the 20% per annum dividend representing the period between the date of the issue of that class of Foundation Shares and the payment of that dividend. 170 In both cases, the Redemption Rights were described as: … may be redeemed after 12 months under certain conditions as explained in section 9.2. 171 The Shares were given a ranking: Equity shareholders ranked before any other shareholders for both dividends and repayment of capital; Foundation shareholders ranked after Equity shareholders, but before Ordinary shareholders and A Class shareholders for both dividends and repayment of capital. 172 Section 6 addressed the Neolido Group and its investments. It states that "Neolido has quietly become one of the leading players in the cutting edge of urban design and development in south east Queensland". 173 It talks of Neo Lido's relationship with Neovest and says: With this offer, Neovest offers investors the opportunity to build on Neolido's extensive and high-quality Queensland portfolio, and to be a part of Neolido's vision to be a leader in sustainable urban design and development - not just in Queensland, but throughout Australia. 174 It generally describes the Neolido Group in glowing terms. 175 It identified members of the Neolido Group, which, as I have said, was not a group in the sense of the word that accountants would use, but the term used to describe, collectively, Neo Lido, Neolido Holdings, and their subsidiaries. The prospectus stated: 6.5 Members of the Neolido Group The Neolido Group is owned by the Directors, Silvana Perovich and Richard Spencer, and consists of: Neo Lido Pty Ltd ACN 095 065 928; Neolido Holdings Pty Ltd ACN 102 472 015; Neovest Ltd ACN 104 915 906; and their subsidiaries. The acquisition of Shares under the Prospectus is not an acquisition in the Neolido Group or any other entity other than the Company. The above information is provided and demonstrates the Directors' capacity to successfully undertake property development projects. 6.6 Service Agreement Neovest has entered into a service agreement with Neolido, as outlined in section 9.4, dated 31 December 2003. The Company appointed Neolido to provide services that include the management of the funds raised via the Neovest Prospectus. The cost of these services is at market price. 176 Included in the prospectus are financial statements for Neo Lido and Neolido Holdings. 177 For the financial year ended 30 June 2002, Neo Lido's consolidated accounts showed an excess of liabilities over assets. In that financial year, the total assets of Neo Lido were $579,422 and the liabilities totalled $701,620. 178 In the financial year ended 30 June 2003, Neo Lido's unconsolidated accounts increased its assets held to $15,486,126. The total liabilities for Neo Lido in those accounts amounted to $13,838,872. 179 Neolido Holdings' assets in its separate consolidated accounts were $7,909,396 and its liabilities were $7,556,458. 180 In their consolidated accounts Neo Lido had a surplus of assets over liabilities of $1,647,254, whilst Neolido Holdings had a surplus of assets over liabilities of $352,936. 181 In the statement of financial performance for the year ended 30 June 2003, Neo Lido's consolidated accounts show a profit of $1,769,452, whilst Neolido Holdings' separate consolidated accounts show a profit of $348,038. That was contrasted with a loss for Neo Lido of $58,334 in 2002. 182 Section 7 addressed "Risk Factors". In particular, it addressed the risk associated with preference shares and non-cumulative dividends: The Company is issuing 2 classes of non-cumulative redeemable preference shares pursuant to the Prospectus, Foundation and Equity Shares. There is no guarantee that dividends will be paid to holders of these preference Shares. If dividends are not declared and paid, any entitlement will lapse. Whilst it is the intention of the Directors to redeem preference shares on the 12 month anniversary of their issue, any redemption can only occur out of profits of the Company or a fresh issue of shares for the purpose of the redemption. There is no guarantee that there will be a redemption of preference shares, or that if preference shares are redeemed, in what order of priority. Although there is no legal obligation to do so, it is the current intention of Directors to redeem the preference shares 12 months after their issue at their issue price. 183 Clause 7.3 dealt with "Risks associated with underlying investment". It identified four particular matters, two of which were: Lack of ready market for Shares Until such time as there is a secondary market for Shares in Neovest (if ever), an investment in Neovest should be regarded as an illiquid investment. The Constitution of the Company provides that Foundation and Equity Shares may only be transferred with prior Board approval. Management control Richard Spencer Pty Ltd and Silvana Perovich Pty Ltd hold the A Class Shares in the Company which confer the right to appoint 2 Directors to the board of Directors of the Company, and to appoint from their number the chair of all meetings of Company members. The rights attaching to the A Class Shares are outlined in section 9.2. Investors should consider the votes exercisable by the A Class as being exercisable by the Directors. Due to the voting power effectively held by the Directors and the fact that Foundation and Equity Shareholders have no vote, the ability of Shareholders to influence the composition of the Board does not exist. However, the Directors are confident that with their combined skills and experience, advice from appropriately licensed professionals, where necessary, and other experienced professionals they can deliver competitive returns to investors and will maintain investor confidence. 184 Clause 9.2 in Section 9 addressed the Constitution of the company and the rights attaching to ownership of shares in Neovest, and provides a summary of the major provisions. 185 As I have said, the Foundation Shares ranked after the Equity Shares. Both the Foundation Shares and the Equity Shares were entitled to a dividend: Until redemption, the Directors may, in their absolute discretion, declare a dividend payable on the Foundation Shares [Equity Shares], where there are profits available for the payments of dividends. 186 The document addressed the nature of the dividend and said: The entitlement of the holder of a Foundation Share to the payment of a dividend may be cumulative to the extent (if any) that the Directors resolve in their absolute discretion. In the event that a dividend is paid more regularly than on the anniversary of the issue of a class of Foundation Shares within the Foundation Series, the Shareholders in that class will receive a proportion of the declared dividend representing the period between the issue of the Shares of that class of Shares and payment of the dividend. 187 The same provision applied to Equity Shares. 188 Foundation Shares and Equity Shares were only transferrable with the prior consent of the Board, which, as I have said, was also stated in clause 7.3. 189 In relation to the redemption of both the Foundation Shares and the Equity Shares, the prospectus stated (4A.11 and 4B.11): The Board may at its sole discretion at any time after the expiry of 12 months from the date of issue of a particular class of Foundation Shares [Equity Shares], and on 14 days notice to the relevant Foundation Shareholder [Equity Shareholder], redeem all or any of the Foundation Shares [Equity Shares] at the subscription price applicable to that class of Foundation Shares [Equity Shares] plus any accrued but unpaid dividends. 190 On a winding up, the Equity Shares ranked first, followed by the Foundation Shares, the Ordinary Shares and, lastly, the A Class Shareholders. 191 Clause 9.4 disclosed that Neovest entered into a Service Agreement with Neo Lido on 31 December 2003 under which Neo Lido agreed to provide certain services to Neovest in relation to the promotion and management of the funds raised under the Neovest prospectus. 192 It was disclosed that Neovest would pay Neo Lido fees for the provision of those services, staff, and equipment, at rates to be agreed between the parties from time to time. 193 In Section 10, under "Additional Information", it was disclosed in "10.4 Commission": The Company has agreed to pay a commission equal to 1.5% of application monies received in relation to Application Forms processed or application monies receipted by Tricom Equities. If the maximum subscription is achieved the commission payable by the Company to Tricom Equities will be approximately $300,000, depending on the number of Application Forms processed or application monies receipted by Tricom Equities. The Company may also pay commission to other appropriately licensed Australian Financial Services Licensees in respect of applications accepted where the Application Form bears the licensee's stamp. 194 Accordingly, the expenses of the offer included a fee of $300,000 for commission. 195 Although the first prospectus issued on 3 February 2004, Ms Perovich said that it was closer to the end of June that the first securities were sold pursuant to that prospectus. However, only about $800,000 had been sold by 30 June 2004. Ms Perovich said that the first prospectus had "pretty much stalled" by then and if Norton had not come along "things probably would have ended at that point".

Mr Bertram's association with Wealthsure 196 On 30 September 2003, Mr Bertram applied in writing to Wealthsure to be appointed as a representative in a document entitled "Pre Appointment Application". The document describes him as having a Dealer's Licence 213312 and as a Registered Life Broker 90463. He gave his current employer as DBA Financial Designs, of which he said he was the managing director and with whom he had been employed for 15 years. He stated that he was currently a representative of a licensed dealer, Glenhurst Corporation Pty Ltd. One of his personal referees was Mr Wayne Mackintosh. One of his business referees was Darren Pawski. 197 The document asked various questions of Mr Bertram. He said in answer to a question whether he had held a proper authority or acted as an investment adviser under law requiring licensing or registration to deal or trade in securities that he had: Current PA with Glenhurst Corporation (M'ber of FPA) Current PA with Networth (For BDM [illegible]) 198 In his application he said he would trade as DBA Financial Designs (David Bertram & Associates Pty Ltd ABN 58 008 660 535). 199 In November 2003, Wealthsure and Mr Bertram executed a representative agreement whereby Mr Bertram would act as a representative of Wealthsure in relation to Wealthsure's Financial Services Business and "Other Financial Products", which Wealthsure offered or may offer in the future. 200 "Other Financial Product" was defined in clause 1.1 to mean: a financial product as defined in section 12BA(1) of the Australian Securities and Investments Commission Act 1989 (Cth), other than a financial product falling within the scope of the Licensee's dealers licence, the provision of loans and other financial accommodation. 201 On 15 January 2004, Wealthsure issued Mr Bertram with a "Certificate of Authorisation" describing Mr Bertram as an authorised representative of Wealthsure "pursuant to section 916A of the Corporations Act for the purpose of providing advice and dealing in a financial product … on behalf of the Licensee [Wealthsure] in respect of the following classes of products". There followed a number of products, including: Basic Deposit Products Managed Investments, including Mastertrusts, Wrap Facilities, Property Syndicates Margin Lending Products Tax-effective Instruments Securities 202 The grant of authority depended upon the authorised representative's (Mr Bertram's) ongoing compliance with the terms of their Representative Agreement. 203 On the same day, Wealthsure issued a document entitled: Wealthsure Financial Services Financial Services Guide And Adviser Profile For David Bertram 204 The footer on the front page was in the form: David Bertram & Associates Pty Ltd ABN 58 008 660 535 dba Trading As: DBA Financial Designs financial designs PO Box 5397, MAROOCHYDORE BC QLD 4558 engineering financial solutions Phone: 07 5476 9188 Fax: 07 5476 8788 Email: admin@dba.net.au 205 The document included the following: Wealthsure Financial Services can provide advice and arrange transactions in the following products relating to these services: - Basic Deposit Products - Risk Insurance Products - Annuities and Pensions - Superannuation - Managed Investments - Securities - Government stocks and bonds Your adviser is in turn authorised to advise on these services and products as an authorised representative of WealthSure Financial Services. Within the attached Adviser Profile your advisers (sic) specific authorisations are detailed. We will only recommend an investment to you after considering its suitability for your individual needs, objectives and circumstances. In general, we only recommend a product to you after considering its suitability for your individual needs, objectives and financial circumstances. However, if you so instruct, we will just provide you with general securities advice or reports on products or simply execute transactions on your behalf. In these cases it is up to you to consider whether those products are suitable for you[r] own needs, objectives and financial circumstances. There are a vast number of investment and other financial products from which to choose and no financial planner can possibly undertake research on all of them. Accordingly, like other major financial planning organisations, the products we recommend are all selected from an approved list of products carefully researched and approved by a team of research experts. WealthSure Financial Services offers an ongoing consulting and advisory service to clients. This service is called Portfolio Review Service. It is designed to assist you to keep your financial plan on track over the long term. Who do you act for when you provide financial services to me? As an authorised representative your adviser acts on behalf of Wealthsure Financial Services when providing financial advice to you. WealthSure Financial Services is therefore responsible to you for any advisory services your adviser provides. Your adviser's primary duty is to you, the client. … Will you give me advice which is suitable to my needs and financial circumstances? Yes. But to do so we need to find out your individual objectives, financial situation and needs before we recommend any financial products or services to you. You have the right not to divulge this information to us, if you do not wish to do so. … What should I know about any risks of the financial products or strategies you recommend to me? We will explain to you any significant risks of financial products and strategies that we recommend to you in the financial report. If you require further clarification of the products and strategies we are more than happy to clarify these for you. 206 The document included an Adviser Profile on David Bertram: Do any relationships o associations exist which might influence you in providing me with the financial services? Yes, I have a relationship with Ray Trowthe (EMK Financial), Wayne Mackintosh (Asset Acceleration Group), Craig Petterson, Steve Beckton (U-Save Financial Services) and Kevin Scambler (Kevin P. Scambler & Associates) for the purpose of referral of clients. The remuneration structure for these arrangements is as follows: Initial and ongoing commissions/brokerage/fees are split on a varying basis from 30% to 50% with these gentlemen for the referral of their clients. If investments are placed through the administration platforms Personal Choice or netwealth, WealthSure Financial Services may receive a share in the profits of that administration company based on a share participation scheme. You will be given notice of specific remuneration WealthSure Financial Services expects to receive for investment related services when any formal recommendation to invest is put to you in a Statement of Advice. 207 After the Certificate of Authorisation issued on 15 January 2004, Mr Bertram commenced to carry on business as an authorised representative and financial adviser for Wealthsure. It was not disputed that Mr Bertram was an agent for Wealthsure.

Norton Capital and Wealthsure 208 In March 2004, Norton Capital was licensed to carry on a financial services business and to provide financial product advice. 209 Mr Pawski said that he, and therefore Wealthsure, had a strong business relationship with Mr Norton. Prior to September 2004, he had had dealings with Mr Norton and Norton Capital about products other than Neovest. He had approved one other product that Mr Norton suggested (Westpoint). 210 Mr Pawski said he was first contacted about Neovest by Mr Norton some time before September 2004. Mr Norton came to him with a copy of the Neovest 2004 prospectus and discussed it, saying words to the effect that it was an attractive return, paying 20% for Foundation Shares and 15% for Equity Shares; with dividends paid monthly over a 12 month term; its underlying business was property development in Queensland; and Neovest raises funds to on-lend to its related entity Neo Lido, which carries out the property business. Mr Norton told him that he had agreed to become a director. He said the executive directors have provided personal guarantees. 211 At the meting, Mr Norton spoke to the quality of people behind the company, being Mr Townley, Mr Spencer and Ms Perovich. 212 Mr Norton referred to the property development at Mango Hill, which was a "main assets". Mr Pawski said: I accepted what Mr Norton said to me and read, while he was speaking with me and, subsequently, the 2004 prospectus, which I noted was consistent with the matters which Mr Norton had said to me. 213 Mr Pawski understood from what Mr Norton said that there would be sufficient profits to meet the dividends paid. He considered it was an attractive investment due to the director guarantees and that the directors were investing their own money. From his experience, a return of 15-20% was not unusual because it was an investment that did not offer capital growth, rather it was an income paying investment, and because it was a business development not a residential development and banks would be charging higher rates of interest on borrowings for the former. 214 At or about the same time, Mr Bertram met with Mr Wood, an employee of Norton Capital. 215 In or about September 2004, Mr Norton spoke to Ms Perovich and Mr Spencer offering to raise money on the Neovest prospectus. He said that he had been referred by Richard Beck of Kebbel Bank; that he specialised in capital raising; and that he had studied Neovest and wanted to raise money for it. He explained he had a relationship with Wealthsure and Wealthsure had certain requirements which, if met, would see the prospectus filled. 216 Mr Townley said that he was contacted by Mr Spencer in September 2004 who informed him that Mr Norton had approached Mr Spencer with a proposal to raise further capital. Mr Townley said that Mr Norton's terms were: That Neovest accept the commission structure proposed by Norton Capital. … That Norton be appointed a director of Neovest; That Norton be issued with a non-dividend bearing "management share" that would give him veto over future appointments to the board of Neovest; That I [Townley] continue as a director of Neovest; That Spencer and Perovich provide personal guarantees on behalf of Neolido Group, in favour of Neovest, to better secure advances from Neovest to Neolido Group companies; That Neovest resolve to pay dividends on its preference shares monthly. 217 Mr Townley said the Neovest directors decided to accept Mr Norton's proposal and adopt the Wealthsure requirements. He did not recall whether or not there was a formal directors' resolution to that effect. 218 Sometime in 2004 and before Mr Norton spoke to the Neovest directors, Neovest prepared a document entitled: NEOVEST LIMITED 2004 PREFERENCE SHARE ISSUE INVESTMENT PLAN 219 The document stated: BACKGROUND The Foundation Series Shares and the Equity Series Shares are preference shares in an investment company viz Neovest Limited that provides financial or investment into Property Development projects for the Neolido Group. PURPOSE OF INVESTMENT PLAN This Investment Plan is to act as the guidelines for the Neovest Directors to use when making a decision to invest or in the managing of a of (sic) Neovest preference share investment. It also provides a set of parameters within which any investor into Neovest preference shares know the Neovest Directors can make an investment. Where the Board of Directors of Neovest goes outside of those parameters then adequate justification must be substantiated and demonstrated in writing. This way all investors into Neovest preference shares Property Funds will be confident of the investment decision-making and management process and all investment decisions in regard to Neovest preference shares are accountable to the investors. 220 On 9 September 2004, only a week or so after Mr Norton had first approached the Neolido Group, Norton Capital executed a Heads of Agreement with the Neolido Group for the raising of mezzanine funding for the Neolido Group (Capital Raising), in particular, pursuant to the Neovest 2004 prospectus. 221 The terms, which were said to be mutually agreed, included the following: (a) Norton has agreed to raise mezzanine funding for the Neolido Group in connection with its developments on a best endeavours basis on the terms and conditions set out herein. (b) The Parties agree to enter into further formal discussions, which shall outline the structure and the key provisions relating to future capital raising utilising Norton Funds Management Ltd. (c) In relation to the Prospectus: (i) Neovest agrees to undertake and pay for the issue of any additional supplementary prospectus. (ii) Norton will provide recommendations to Neovest regarding what is required to be included in a supplementary prospectus to produce a marketable product. (iii) Norton will conduct due diligence and prepare a research report on the offering for use by financial planners who use the Norton approved list. Norton will also prepare marketing tools and sales aides relating to the Prospectus (including where necessary calculators, power point presentations and product summaries). (iv) Further, Norton will market and raise capital under the Prospectus on the following terms: (A) Norton will use its best endeavours to market the Prospectus to its network of financial advisors; (B) Norton will pay all expenses incurred by it in marketing the Prospectus, being: all costs associated with maintaining and operating Norton's offices and engaging staff for the purpose of marketing the Prospectus; all travel and accommodation costs associated with the marketing of the Prospectus; all postage costs relating to distribution of the Prospectus and related marketing documentation to Norton's distribution network; and all costs associated with producing sales aides and marketing tools relating to the Prospectus. … (e) As consideration for the Capital Raising services to be provided by Norton pursuant to this agreement, the Neolido Group agrees to pay Norton a selling fee and a marketing recovery fee. The combined fees (which include any fee for processing applications and funds as a licenced (sic) dealer) will be 13% of the capital raised. This fee is to be paid within 7 days of receipt of an invoice from Norton. Norton will undertake to pay all licensed financial planners the commission rate agreed between Norton and the financial planner in relation to any capital raised through the financial planner. (f) Norton agrees that whilst it may have other products (including raising mezzanine capital for the Woodstock group of companies, a retirement village developer) on its approved product list, it will not, at all times while working with the Neolido Group (provided that the Neolido Group has a product in the market place which Norton is of the view that it can market to its distribution network), raise mezzanine capital for other similar developments or for any developer other than the Neolido Group and Woodstock. … (h) The Neolido Group understands that Norton shall conduct due diligence in relation to the Neolido Group and any current or proposed developments. Notwithstanding any other provision of this agreement, the Neolido Group agrees that Norton is not required to proceed or continue with the Capital Raising if it is not satisfied with the outcome of its due diligence enquiries. (i) The Parties agree that the following terms relate to funds raised under the Prospectus: (i) Norton as a licenced (sic) dealer must deposit into the Neovest Ltd Share Issue Account all funds raised under the Prospectus at no further expense to Neovest; (ii) Neovest is responsible for payment of all dividends due in respect of the shares and accordingly Neovest agrees to pay all dividends due on any issued shares on a monthly basis (in arrears) into the shareholders nominated bank account; and (iii) Subject to the requirements of the Corporations Act Neovest agrees to issue a supplementary prospectus outlining the following commitments: (a) Registered second or following mortgages on all properties owned by Neolido to be granted to Neovest. (b) Second ranking fixed and floating charges over Neolido to be granted to Neovest. (c) Personal guarantees to be provided from the directors/shareholders of Neolido to Neovest. (d) Corporate guarantees to be provided by Neolido to Neoveest. (e) A statement that all dividends will be paid monthly. (f) A statement announcing the appointment of Mark Norton to the Board of Directors of Neovest as an independent director to represent the interests of the shareholders. (g) A statement that Neovest has entered into an exclusive agreement with Norton to market the Prospectus. (j) The Neolido Group understands that Norton will be committing significant time and resources to the Capital Raising and accordingly agrees that from the date this agreement is signed by the Parties, it will deal exclusively with Norton in relation to raising mezzanine finance through the issue of shares and debentures. (k) Notwithstanding the exclusive appointment of Norton to market the Prospectus, Norton agrees that Neovest may directly approach the current shareholders in Neovest and investors of the Neolido Group as at the date of this agreement (as included in the list of current shareholders to be provided by the Neolido Group to Norton), with a view [to] obtaining further investment under the Prospectus from such shareholders and investors. … We are very positive and keen to ensure our two organisations work successfully together. We understand that your group will require funding of around $50 million per annum and we are very confident of achieving this for you. We have recently opened an office in Bangkok and will soon be opening another office in Melbourne; this is in addition to our Sydney and Perth offices. We currently have seven BDM's on staff and intend to shortly increase this to eight. Neolido will be our primary focus and we are looking forward to growing with you. If the terms set out above are acceptable to you, please countersign and return the enclosed copy of this agreement to me. 222 On 9 September 2004, clause (e) of that agreement was deleted and replaced with: (e) As consideration for the services to be provided by Norton Capital pursuant to this agreement, the Neolido Group agrees to pay Norton for the marketing and research services it provides to Neo Lido Pty Ltd in relation to the Preference Shares in the form of a commission of 6.5% of amounts invested in the Preference Shares (to cover payments to its representatives and to financial planners who have introduced investors to it in relation to the Preference Shares) and an amount of 6.5% of amounts invested in the Preference Shares (to cover its research, marketing and administration costs relating to the Preference Shares, including travel and accommodation for research visits, research analyst, AFS licence compliance costs, issuing of securities pursuant to the Prospectus, production and distribution of marketing material and office infrastructure costs). 223 There are a number of important aspects of that agreement. 224 First, it contemplates an additional supplementary prospectus which will be issued at the Neolido Group's cost. Secondly, Norton Capital will recommend what is to be included in that prospectus "to produce a marketable product". Thirdly, Norton Capital "will conduct due diligence and prepare a research report on the offering for use by financial planners who use the Norton approved list". Fourthly, Norton Capital would market and raise capital under the prospectus at Norton Capital's cost. Fifthly, as consideration for marketing the prospectus, the Neolido Group was to pay Norton a commission which combined would be 13% of the capital raised. Sixthly, out of that fee Norton Capital intended to pay all licensed financial planners a commission agreed between them and Norton Capital. Seventhly, Neovest was to pay all dividends on a monthly basis in arrears. Eightly, the contemplated further prospectus would contain the commitments identified in (i)(iii) including a statement that Mr Mark Norton had been appointed a director and would act as an "independent director to represent the interests of the shareholders". Ninthly, Norton Capital had exclusive rights to market the prospectus. 225 The agreement for Neovest to pay all dividends on a monthly basis raised legal issues which I shall address later when considering Mr Townley's position. 226 Ms Perovich said that Mr Norton said that payment of monthly dividends was a requirement of Norton Capital's principal financial client planner Wealthsure. 227 On 14 September 2004, Mr Norton was appointed a director of Neovest. Ms Perovich said that Mr Norton attended all board meetings. 228 Mr Pawski said that some time before 16 September 2004 he was given some research from Norton Capital in relation to Neovest, and it was in a similar form to the October 2004 research. 229 Mr Pawski received from Norton Capital a folder of information entitled "Norton Capital Pty Ltd, Neovest Limited Preference Share Offer: Product Information Pack" (Info Pack) some time after 16 September 2004 (i.e. after the date that Neovest was approved), and the Info Pack contained a number of documents including a Neovest "newsletter", which stated that Mr Norton had joined the Neovest Board and also contained guarantees and indemnities executed by Mr Spencer and Ms Perovich. Mr Pawski said, however, that he had already received some of these documents before 16 September 2004. He said the documents in the Info Pack confirmed that the conditions were met for Neovest being placed on Wealthsure's Approved Product List. 230 Before 16 September 2004, Mr Pawski read a research paper from Norton Capital although he said "I can't recall whether it was in draft format, but it was certainly received prior to putting on the approval of this product." He said: I received certain financial information in regards to assets and liabilities. So the [financial] statements. 231 He said he reviewed the first prospectus prior to approving Neovest, where "reviewing" meant "reading the document, understanding the document, … feeling comfortable with the document, that it's understood the context of the document - content". 232 Mr Pawski said he had further conversations with Mr Norton and others, including Ms Fallon, a business development manager for Norton Capital, Mr Peter Wood, a director of Norton Capital, and Mr Andrew Hull, a researcher for Norton Capital. Mr Pawski said he attended meetings, where he was reassured as to placing Neovest on the Approved Product List. 233 Mr Pawski said: In reliance of (sic) the information set out in the 2004 prospectus, the statements made to me by Mr Norton at the Norton Meeting and on other occasions, and the information provided to me by Mr Norton, I considered that Neovest was an appropriate product to place on the Approved Product List. 234 On 16 September 2004, Wealthsure added Neovest redeemable preference share offerings, as contained in the 2004 Prospectus, to Wealthsure's Approved Products List (APL). 235 That same day, Mr Pawski emailed Wealthsure's representatives, including Mr Bertram: Dear Advisers, I have recently approved the Neovest redeemable preference share offering. The investment is effectively a mezzanine product that has a term of 1 year. The return to clients is 15% or 20% depending on the option taken. Due to the risks associated with mezzanine products the maximum investment per client is 15% of there (sic) net assets. Net assets does not include family residence but includes superannuation and all investment assets. Borrowing is not permitted. The commission payable is 4% per annum. Wealthsure can also receive up to 2% marketing based on volume. If you invest between $250000 and $500000 you will receive .5% marketing, .75% for $500000 to $750000 and 1% Above $750000. In your disclosure Statement in the SOA please insure (sic) that the following wording is included. Your adviser is eligible to receive a volume bonus based upon your adviser's funds under management with Neovest products. The bonus is calculated as a percentage of the standard ongoing commission payable with the maximum being 2% of Funds Under Management. Norton Capital has exclusive rights to distribution and will be providing all training. For further information in Perth contact Robin Fallon on 08 9420 4900, all other states contact Peter Wood on 0410575793. Regards Darren Pawski General Manager Wealthsure Pty Ltd 236 It is no coincidence that Mr Pawski made that decision and announced it to the advisers on 16 September 2004. That decision was made immediately after Mr Norton was appointed a director and he had secured the Neolido Group's agreement to give him exclusive rights to market the prospectus and pay him 13% commission. 237 Mr Pawski's email recognised that the Neovest redeemable preference share offering contained risks and therefore, the maximum investment should be 15% of the investors' net assets not including the family residence. It stated: "Borrowing is not permitted". The adviser's commission was 4%; and Wealthsure was to get 2%. 238 The advisers were offered an incentive for larger investments. 239 Mr Pawski said he did not decide to put Neovest on the APL without first carefully receiving the documents provided by Norton Capital, and he had said to Mr Norton, prior to 16 September 2004, words to the effect "Neovest will only be placed on WealthSure's approved products list subject to your becoming a director and Silvana Perovich and Richard Spencer providing guarantees". 240 Mr Pawski said that after approving Neovest, he left it to Norton Capital to advise as to the continuing suitability of Neovest as an investment. In addressing the independence of Norton Capital, he said in cross-examination: How did it come about that Norton Capital, which was researching this company, was sending you an advertisement for Norton Capital and your company to make - for the purposes of this seminar?---Well, they were promoting the product as well. So they were - they were able to take direct sales from the public, from what I can understand as well. I see?---And from other dealer groups. They were entitled, were they, to advise investors directly into the company?---Yes. So they were your competitors, in that sense?---Yes. I suppose in that sense, yes. Yes. Well, if that were the case, what independent[ce] has Norton Capital got left, at this stage?---They - they're (sic) obviously had a commercial benefit from the success of off-sales as well as the research. So it would be very arguable whether they would be considered to be independent. Yes, I agree. Well, if in fact, Mr Norton is a director by this stage of the company - - - ?---Yes. -Norton Capital Proprietary Limited is entitled to induce investors to invest in the company at a rate - at a return for them of 13 per cent?---Yes. But I - yes. 241 Mr Pawski recalled that Norton Capital had listed Neovest as an 'approved' product. He said it was important that Norton Capital, which he considered to be an experienced and competent research house, had recommended Neovest, and that Norton Capital had placed one of its key directors on the Board of Neovest. 242 He said that once he added Neovest to the APL, he did not receive any indication from Norton Capital that there were any problems with Neovest. 243 He said that had he known in September or October 2004 that there were problems with Neovest earning enough income to make the monthly payments of 20% or 15%, he would not have approved the product. 244 He said he was aware the directors of Neovest had stated there would be monthly payments, and he was aware that Neovest did in fact pay such dividends. 245 He said he was told by Mr Norton that Neovest was paying dividends. 246 He said the Neovest newsletter said "the board has resolved that dividends will be declared and paid in monthly instalments" and that led him to understand Neovest was paying dividends. 247 He said he understood what an ordinary "redeemable preference share" was, but admitted: MR HEYWOOD-SMITH: What was your understanding in respect of this product?---I was understanding that the directors' … intention was to allow redemptions of clients' capital at the end of 12 months. The intention was to allow it?---To allow - there would be a redemption that clients could redeem their money back at the end of that 12 month period. And did you have any understanding as to whether or not there was an obligation on the company, Neovest, to redeem?---No. Not a legal obligation, no. So when you approved this product, can I put this to you, that you were approving a product which might or might not return a rate of 15 per cent or 20 per cent. It might not return a rate at all. And that the client might not get any return at all in the first 12 months?---Yes. I didn't believe that would be the - that was certainly the indication I was given that would be the case, though. And it wasn't the case when we - started to raise the capital. But you understood that legally there was no - - - ?---Yes. They might receive nothing?---Yes. And at the end of that 12 months they might seek redemption, but be told, "Sorry, we can't redeem"?---Yes. And did you instruct your representatives to warn prospective investors that that was the situation?---We certainly made our advisers aware that the investment was of high risk in nature ..... the nature, so it did carry additional risk as associated with the high return associated with it. So we did - we certainly let advisers know that it was of a high risk. And I think even the reason for the parameters in the letter of 16 September was because of the risk of the investment. 248 Mr Pawski admited again that the redeeming of the shares was at the discretion of the Neovest board. He admitted that there was a possible lack of liquidity and that many members of the public would not have a clear idea as to what liquidity means: And what I'm putting to you is that it was incumbent upon your representatives to warn any investor that they might not get anything back from their investment. HIS HONOUR: Do you agree?---Yes. I mean, investment - all investment carries that - that risk. 249 Mr Pawski referred to a meeting on site in Brisbane, but he "cannot now recall when the meeting took place". However, it must have occurred after he approved Neovest, because he said: The Brisbane meeting verified my view of the investment. If I had any doubts about the Neovest product or any of the property development projects subsequent to the Brisbane meeting, I would have removed Neovest from the Approved Product List. 250 Mr Pawski said he went to Brisbane to meet the directors of Neovest and to have a look at the properties referred to in the 2004 prospectus. He met with Mr Spencer, Ms Perovich and Mr Norton, at Neovest's offices. Mr Wood of Norton Capital was also there. Mr Pawski could not recall if Mr Bertram was there. 251 He said the meeting lasted a day. It started with a meeting at the offices, about which he said: I recall being impressed by the offices … The space being used was very large, almost like a warehouse, and there were about 12 staff that were all busy. 252 Mr Pawski said Mr Spencer and Ms Perovich went through projections for Neovest, which he says gave him a great degree of comfort. He said: I considered Mr Spencer to be quite upfront about his views. Mr Spencer also came across as an intelligent man. Ms Perovich, on the other hand, was more of a salesperson. 253 He said they discussed the Mango Hill property development and it was said that it was a good quality investment with expectations of good profit. 254 He said they then did site inspections of properties listed in the 2004 prospectus. The properties were at various stages of construction. He said: … I recall thinking that Mr Spencer and Ms Perovich were two very experienced individuals, with Mr Spencer's background in law and property and Ms Perovich's background as a senior manager at a real estate company. Mr Spencer and Ms Perovich came across as astute people. [They] impressed me with what they had been able to do with the Mango Hill property where, from my understanding, they effectively paid $20 million for something that was valued at, from the valuation which was provided to me by Norton Capital, $64 million. … 255 On 19 September 2004, Neo Lido and Neolido Holdings gave Neovest a fixed and floating charge over the assets of those companies. The charge, due to administrative error, was not registered until 9 February 2005 (more than 45 days after the charge was created). 256 Also on 19 September 2004, Mr Spencer, Ms Perovich, Neo Lido, Neolido Holdings, Silvana Perovich Pty Ltd and Richard Spencer Pty Ltd together as guarantors, guaranteed and indemnified Neovest in respect of the due performance by Neo Lido, Neolido Holdings, and their subsidiaries, in respect of any investor loans by Neovest to Neo Lido, Neolido Holdings, and their subsidiaries. That document was included in the Info Pack which means that the Info Pack, if it was put together at the one time, was compiled after 19 September 2004. 257 Some time in September 2004, Ms Perovich provided the Info Pack to Mr Norton for his due diligence enquiry. It comprised: 1. Prospectus 2. Neovest Company Updates 3. Norton Capital Research Paper 4. Norton Capital Certification of Background Checks 5. Neolido Corporate Profile 6. The Neolido Group Structure 7. Asset & Liability Statements 8. Financial Statements to 31 December 2003 9. Neovest Limited - Director Resumes 10. Neovest Limited Investment Plan 11. Multi-Project Facility Agreement for Venture Capital 12. Mortgage Debentures 13. Guarantee & Indemnity 14. Project Summaries 15. Project Feasibilities 16. Project Timelines 17. Project Cashflow Summary 18. Summary of Explanation of the Mango Hill Project 19. Davis Langdon Australia (Profile) 20. Newspaper Articles 258 As I have said, Mr Pawski said he was later provided with this Info Pack from Norton Capital. Mr Pawski said that at the time he received the Info Pack, he had already received many of the documents contained within it, and that he had received those documents from Mr Norton or Mr Andrew Hull, the former chief executive officer of Norton Capital. Mr Pawski said that "the documents in the Neovest Product Information Pack confirmed the conditions I had required from Mr Norton for Neovest being placed on WealthSure's Approved Product List had been met by Neovest". Ms Perovich said she and Mr Spencer divulged all information about the Neolido Group and Neovest to Norton Capital, and answered all inquiries from Mr Norton, Mr Andrew Hull, and Norton Capital's in-house lawyer. She said they provided "full and continuous information to Norton Capital at all relevant times. To a great degree this is evidenced by the minutes of directors meetings held throughout the life of the company." 259 She said: The promises and representations made by Norton Capital contributed to our confidence in the soundness of the Group's financial position and that the monies raised by Norton Capital would assist us in achieving our goals and … the transfer from the second and third tier lenders to first tier lenders. 260 In October 2004, Norton Capital published two documents. The first is headed: Neovest Limited $20 Million Share Issue Research - Redeemable Preference Shares - Neovest Prospectus 261 This document is the research report that Norton Capital agreed in the Heads of Agreement with Neolido Group it would prepare for use by financial planners who use the Norton Capital APL. It purports to be the due diligence obligation that Norton Capital agreed to perform under that agreement. 262 After referring to and identifying the Neovest prospectus, the research report continues: The minimum investment is A$10,000 for the Equity Shares and A$50,000 for the Foundation Shares (then in multiples of A$10,000). The Preference Shares may be redeemed at any time after the expiry of 12 months from their issue date (at the sole discretion of the Board of Neovest). The Prospectus confirms that the Board intends to redeem the Preference Shares 12 months after their issue at their subscription price plus any accrued but unpaid dividends. Equity Shares have a coupon (dividend) rate of up to 15% per annum and Foundation Shares have a coupon rate of up to 20% (provided that the 15% per annum has first been paid on the Equity Shares). The dividends are non-cumulative. Neovest released a company update on 17 September 2004 (Company Update) in which it announced that the Board has resolved that dividends will be declared and paid in monthly instalments. 263 The document then refers to Neovest's partnership with Neo Lido and Neolido Holdings, and its intention to provide mezzanine funding and leveraged equity finance to the Neolido Group. 264 In the Investment Overview, the document said: Returns: Equity Shares - dividends payable at the coupon rate of up to 15% per annum. Foundation Shares - dividends payable at the coupon rate of up to 20% per annum. Dividends are to be paid in monthly instalments. Liquidity: Illiquid investment (it is unlikely the Preference Shares will have a secondary market). Level of Risk: High. Refer to "Risks & Risk Management" section below and the Prospectus (pp24-25). Risk Management: 1. Neovest will use its close relationship with Neolido to source project investment opportunities and will undertake a detailed investment review process prior to making any project investment. 2. Neovest will lend funds for a number of Neolido development projects located in south east Queensland, thereby spreading the investment risk. 3. As outlined in the Company Update, Neovest will receive the following security for repayment of funds loaned to Neolido: 2nd ranking or following mortgages over the development properties a fixed and floating charge over Neolido corporate guarantees from Neolido guarantees from Neolido's directors and shareholders. 265 After describing again the relationship between Neovest and Neo Lido, the research report continued: The risk for the Shareholders is mitigated on a number of different levels: 1. Neovest will have second ranking or following mortgages over all development properties in relation to which Neovest loans funds to Neolido. 2. Neovest will have fixed and floating charges over Neolido. 3. The developer, Neo Lido Pty Ltd and Neolido Holdings Pty Ltd, and the shareholders and directors of each of those entities, have provided a guarantee and indemnity to Neovest for all amounts loaned by Neovest and Neo Lido Pty Ltd or Neolido Holdings Pty Ltd. 4. Neovest will carry out a detailed investment review process prior to making any project investment. 5. Neovest will lend funds for a number of Neolido development projects, thereby spreading the investment risk across a number of different projects located in south east Queensland. 266 In describing the shares, the document said: Preference Shares and Mezzanine Finance What is a Redeemable Preference Share? The Equity Shares and Foundation Shares are "redeemable preference shares". The Preference Shares are described as "preference" shares as they carry a preference or priority over other classes of shares in Neovest in relation to the payment of dividends, as follows: the holders of Equity Shares are entitled to receive a dividend of up to 15% per annum in priority to holders of Foundation Shares, A class shares and ordinary shares in Neovest; and the holders of Foundation Shares are entitled to receive a dividend of up to 20% per annum after holders of Equity shares, but in priority to holders of A class shares and ordinary shares in Neovest. The Preference Shares also entitle the holder to priority on a winding up of Neovest, as follows: the holders of Equity Shares rank prior to holders of Foundation Shares, A class shares and ordinary shares with respect to the repayment of the capital paid up on those Preference Shares; and the holders of Foundation Shares rank after holders of Equity Shares, but prior to holders of Shares with respect to the repayment of the capital paid up on those Preference Shares. There are no voting rights attaching to the Preference Shares. The Preference Shares are described as "redeemable" because holders are entitled to repayment of the subscribed share capital at the sole discretion of the Board of Neovest, at any time after the expiry of 12 months from the issue date of the particular Shares and on 14 days notice to the holder. Redemption will be at the subscription price of the Preference Share plus any accrued but unpaid dividends. In light of the priorities in relation to dividend payment and return of capital on winding up, preference shares such as the Equity Shares and Foundation Shares may be considered to carry less risk than ordinary shares. 267 It described Neovest's commercial relationship with Neolido as a lender of mezzanine finance, which it described: The funds raised through the issue of the Preference Shares will be lent by Neovest to Neolido to provide Mezzanine Funding for a number of developments. The Mezzanine Funding is described as "mezzanine finance" because it is used as a layer of finance between the senior financing and any equity funds used in a development and ranks behind first mortgage finance when allocating the sale proceeds of the development. The senior lender will typically only lend a portion of the total funding requirements and the remaining funding requirement is made up by mezzanine finance and equity. Neovest will provide the Mezzanine Funding to Neolido under agreements which give Neovest 2nd ranking or following security behind the senior leader. 268 It said that Neolido utilised mezzanine finance because: Neolido has chosen mezzanine finance as a means of obtaining finance for its developments because the senior debt provider typically only provides funding for up to 60% of the final project. The remaining funding requirement is made up by a combination of Neolido equity and mezzanine finance. The funds provided by mezzanine finance are a strategic source of project funding providing increased financial flexibility and reduces the weighted average cost of capital for Neolido. 269 It described Neolido's development. The research report identified the four directors including Mr Norton, who it said was appointed on 14 September 2004. It said: Further, Mark Norton has been issued with one redeemable Preference Share (known as Management Class) which prevents the removal or appointment of directors without his approval. The share carries no right to a dividend, to participate in the profits of the company or to vote (except in relation to appointment and removal of directors) - it was purely issued as a protection mechanism for shareholders in light of the executive director's conflict of interest. 270 It referred to the 2004 Preference Share Issue Investment Plan, which it said provides a set of investment parameters for the Board of Directors to use when making investment decisions. 271 The investment parameters are set out in the investment plan, one of which was that the investment return to Neovest is to be no lower than 2% above the coupon rate on the Preference Shares. 272 The research report referred to the facility agreement pursuant to which Neovest had agreed to provide a facility to Neolido, and states that: … the average amount advanced by Neovest to Neolido from time to time in respect of a particular project will be approximately $2,000,000 and will be for a term of 12 to 18 months. Pursuant to the Facility Agreement, each time a sum of money is advanced to Neolido under the Facility Agreement, Neolido will enter into a Mezzanine Facility Agreement with Neovest which will outline the terms and conditions of the particular loan and will include (but is not limited to) the interest rate, purpose of loan, term of loan, security and the repayment terms. 273 It addressed the Neolido Group's financial position: Neolido Group 2004 (to 31 Dec 2003) 2003 Balance Sheet ($'000) ($'000) Current Assets $46,704 $5,964 Non-current Assets $2,434 $6 Total Assets $49,138 $5,970 Current Liabilities $45,849 $5,618 Non-current Liabilities $0 $0 Total Liabilities $45,849 $5,618 Total Equity $3,289 $352

The accounts of the Neolido Group were prepared by Deloitte Touche Tohmatsu and are unaudited. 274 The research report states that Neolido directors had provided to Norton Capital assets and liability statements, which included re-evaluations of properties and future earnings, and was dated 20 September 2004. It said that those documents contained the following representations: Neolido Group surplus assets are approximately $14.6 million, including projected future earnings of $8 million from the Kinsella Heights Estate at Mango Hill. (The majority of land asset values are supported by independent valuations, however Norton Capital is not able to verify the liabilities included in the Assets & Liability Statement.) Silvana Perovich's surplus assets are approximately $15.9 million (this includes 50% of the Neolido Group surplus assets). • Richard Spencer's surplus assets are approximately $15.9 million (this includes 50% of the Neolido Group surplus assets and assets & liabilities of Elizabeth M A Spencer & Spencer Family Trust). 275 It stated that Ms Perovich and Mr Spencer and trust companies which they controlled, and Neo Lido and Neolido Holdings, had agreed to guarantee Neolido's obligations to Neovest. 276 It said that Neolido would provide Neovest with fixed and floating charges over each of Neolido Holdings and Neo Lido. 277 Neovest's dividend policy was addressed: The Preference Shares carry the right to a non-cumulative dividend at their relevant coupon rate. The coupon rates are as follows: Equity Shares - dividends payable at the coupon rate of up to 15% per annum Foundation Shares - dividends payable at the coupon rate of up to 20% per annum, provided that the 15% per annum has first been paid on the Equity Shares. The coupon rate is only a right ascribed to the relevant Preference Share and is not a guarantee that Neovest will have sufficient profits to meet the coupon rate. The directors of Neovest have resolved to pay the dividends on a monthly basis, therefore, provided Neolido is able to adhere to the conditions of the Facility Agreement or other loan arrangements, the ascribed coupon rates should be paid by Neovest to the Shareholders on a monthly basis. As Neovest is a relatively new entity it is likely that any dividends paid will be unfranked. 278 The term of investment was also addressed. The research report provides: The Preference Shares may be redeemed at any time after the expiry of 12 months from their issue date and while the Board is not obliged to, it is the current intention of the Board to redeem the Preference Shares 12 months after their issue at their subscription price plus any accrued but unpaid dividends. The Preference Shares may only be redeemed out of profits of Neovest or the proceeds of an issue of new shares for the purpose of the redemption. Neovest has advised that it expects to achieve redemption from one or more of the following avenues: payments generated from the profits of working capital of the Neolido Group engaged in the normal course of its development business; • payments generated from receipts of the Neolido directors and associated parties in respect of the Mango Hill Kinsella Heights Estate joint venture with the BMD Group; or • further capital raising through issue of new shares or other facility or offer. 279 The document then identified the directors in more detail. It said of Mr Norton: Mark is a non-executive director of Neovest. Mark is also the founder of Norton Capital and is the Chairman and an Executive Director of that company. Mark has over 15 years' experience in the investment and capital markets industries. He was a founding director of Palandri Wines where he was the head of the capital raising arm of Palandri, which under his guidance raised over $120 million over three years. Prior to this, Mark worked for Deutsche Bank as a Senior Equities Adviser, managing private client equity portfolios. In 1997/1998 Mark worked for JB Were & Sons, where he was responsible for developing procedures and systems to install a retail portfolio management service. Prior to this, as Managing Director of Poynton Asia Pty Ltd in Singapore, Mark headed up a joint venture with Rothschild, managing international portfolios. Mark was Managing Director at Hartley Poynton Financial Planning Ltd for a period of 5 years. In 1988/89 he worked as State Manager of Seal Investments, Ernst & Young's financial planning division. Prior to this, he worked as a senior client adviser for Seal Investments. 280 The document addressed "Risk and Risk Management": An outline of the risks for Shareholders is contained on pages 24 and 25 of the Prospectus. Potential investors should read and understand these risks. Following are some of the risks and the mitigating factors: • Shareholders have no control over the development projects that will receive loan funds from Neovest. - This is mitigated to some degree by the property experience of 3 of the Neovest directors who have a track record in property development. The two executive directors of Neovest are also the shareholders/owners of Neolido and as such have a conflict of interest in relation to dealings between Neovest and Neolido. - However, Neovest has appointed 2 non-executive directors to the board who have no shareholding in Neolido, and all of the directors, individually and as a whole, have a legal obligation to act in the best interests of Neovest and to always put the interests of the shareholders first. In addition, Mark Norton has been issued with one redeemable preference share (known as Management Class) which prevents the removal or appointment of directors without his approval, thereby acting as a protection mechanism for shareholders in relation to the executive directors' conflict of interest. A property development venture means involvement in a highly competitive market, influenced by economic and property market cycles. - To mitigate this risk, the funds loaned to Neolido will be spread across a number of developments, the developments are located in different regions of south-east Queensland and are different in their profile (apartments, houses, commercial). There is no legal obligation for Neovest to redeem the Preference Shares after 12 months. - The Prospectus states that it is the directors' current intention to redeem the Preference Shares after 12 months and Neovest has demonstrated to Norton Capital a plan to enable this to be achieved. • The investments selected by Neovest may not generate the returns expected which could potentially reduce dividends to shareholders. - However, Neovest have in place an investment plan to enable careful consideration and evaluation of the potential investment opportunities to mitigate this risk. Further, 3 of the 4 directors of Neovest have a track record in property development. • The Preference Shares have non-cumulative rights to dividend payments, which means that if dividends are not declared and paid in a particular year, any entitlement will lapse. - However, the directors of Neovest intend to pay the dividends to Shareholders on a monthly basis. • Increases in interest rates may add to development costs. - To manage this risk Neolido have advised that they will endeavour to fix interest rates where prudent and appropriate. • Construction delays and increases in construction and developments costs may affect profit margins - Neolido have advised that they utilise fixed price, lump sum contracts with liquidated damages clauses that compensate Neolido for any delays based on professional external advice. • Development funding from the senior debt provider on acceptable terms is a prerequisite to the successful completion of the development projects - Neolido has advised that they will approach appropriate lenders and/or tender the senior debt package early on in the project to create a competitive market situation. 281 The document concluded by offering "The Norton Capital Viewpoint": Norton Capital has completed a review of the Neovest Limited Preference Share offer and has recommended this investment as a Norton Capital Approved product. Reasons include: Based on the product parameters, Norton Capital considers this offer to be comparable to other fixed interest income-producing investment products. This offer is an opportunity for investors to participate in a potentially relatively short term investment with a high yield, compared to investments in bank term deposits. Neolido has demonstrated that they have access to the necessary knowledge and experience to successfully undertake the various property developments. Neovest will lend funds for a number of Neolido development projects which means the investment risk will be spread across a number of different projects located in south east Queensland. Neovest has confirmed that loans made by Neovest to Neolido will be supported by the Facility Agreement or other appropriate agreement between the two parties. Neolido and the directors and shareholders of Neolido will be providing guarantees and indemnities to Neovest in relation to these loans. In addition, Neovest will hold fixed and floating charges over Neolido and registered second ranking or following mortgages over the properties being developed. 282 The document does not at any stage deal with the question of commissions other than in an inadequate manner by referring the reader, in the disclaimer, to Norton Capital's website where details of "remuneration received by NCL in relation to the Preference Shares" is said to be contained.. It does not tell the reader of the Heads of Agreement between Norton Capital and the Neolido Group, and that Norton Capital was to receive 13% of the capital raising. 283 Mr Norton, of course, did not give evidence and so in those circumstances it is difficult to know what work he carried out for the purpose of what he must have thought was a due diligence report. 284 The second document Norton Capital published in October 2004 was a two page document entitled "Information Summary", and referred to as the Norton Capital "flyer". Information Summary Neovest Limited - $20 Million Share Issue Approved for use by persons authorised to use the Norton Capital Approved List 285 It addressed Neovest and under the heading "Key Points" (which it was said should be read with the Prospectus), it said: Risk Management: 1. Neovest will use its close relationship with Neolido to source project investment opportunities. An investment review process will be undertaken by Neovest prior to any project investment by Neovest. 2. As outlined in the Company Update, Neovest will receive the following security for repayment of funds loaned to Neolido; 2nd ranking or following mortgage over the development properties; a fixed and floating charge over Neolido; corporate guarantee from Neolido; guarantee from Neolido's directors and shareholders. 286 It said under "The Norton Capital View Point": Norton Capital has applied its research and due diligence process to the Neovest Prospectus. Norton Capital has recommended this investment as a Norton Capital Approved product. Reasons include: High yield Acceptable level of risk due to 2nd ranking or following security and guarantee relating to loan of mezzanine funds to Neolido Strong management 287 It said of the Share Offer: Terms of issue of the Shares include but are not limited to: Shares will be issued on the last business day of each month Shares may be redeemed any time after 12 months after issue - the directors intend to redeem the Shares at their subscription price plus accrued unpaid dividends 12 months after issue Minimum investment for the Equity Shares is $10,000 and for the Foundation Shares is $50,000 (then in A$10,000 multiples) No voting rights will attach to the Shares Dividends are non-cumulative and have the following coupon rates: Equity Shares - up to 15% per annum Foundation Shares - up to 20% per annum Funds raised from issue of the Shares will be loaned by Neovest to Neolido and as advised in the Company Update, will be secured by: 2nd ranking or following mortgage over the development properties; a fixed and floating charge over Neolido corporate guarantee from Neolido; guarantee from Neolido's directors and shareholders Refer to the Prospectus for further details. 288 It described "Risk Factors": No guarantee that dividends will be paid to holders of Shares or that Shares will be redeemed (however the Directors intend to redeem the Shares 12 months after their issue). 289 On 23 September 2004, the directors of Neovest (Mr Spencer, Ms Perovich, Mr Townley and Mr Norton) noted and resolved: PAYMENT OF DIVIDENDS: The meeting noted that the current prospectus provided that any dividend declared may be paid at periodic intervals on a non-cumulative basis. It was noted that investors have a preference for monthly returns. In this regard IT WAS RESOLVED that dividends will be declared and paid in monthly instalments. 290 On 27 September 2004, 3 Point Finance Pty Limited (3 Point Finance) appointed John Park and Lachlan McIntosh of Korda Mentha as receivers and managers of both Neo Lido and Neolido Holdings. 291 As the ASIC historical extracts show, their appointments were terminated the same day.

Deane Ind, Wayne Mackintosh and David Bertram 292 On 4 August 2004, Mr Ind met Mr Mackintosh, a business adviser and mortgage broker who, as I have said, conducted his business under the name of Asset Acceleration Group, and a Mr James Smith at Mr and Mrs Selig's residence at Unit 3, 143 Burnett Street. Mr Mackintosh, who was also in the business of selling real estate, had asked Mr Ind to introduce potential customers to him. Mr Mackintosh was, as I have said, one of the personal referees given by Mr Bertram in his application to Wealthsure to be appointed a Wealthsure representative. 293 Mr Ind first met Mr David Bertram in 2004 when he sold Mr Bertram a house. At that time, Mr Ind was working for Mr Mackintosh. Mr Mackintosh apparently reintroduced Mr Ind to Mr Bertram when Mr Ind was doing some sales training in Mr Mackintosh's apartment for the purpose of securing employment with the Asset Acceleration Group. 294 At that time, Mr Ind was told by Mr Mackintosh that Mr Mackintosh did not have a financial planning licence and could not provide financial planning advice. Mr Mackintosh told Mr Ind that Mr Bertram was a licensed financial adviser who provided financial planning advice to clients referred to him. Mr Bertram admitted that he provided financial advice to Mr Mackintosh's clients because Mr Mackintosh was not licensed to do so. 295 As I have said, on 4 August 2004, the plaintiffs were introduced by Mr Ind to Mr Mackintosh. At that time, the plaintiffs were interested in property development generating cash flow and negative gearing. Negative gearing is a financial arrangement with a taxation consequence: an asset is acquired using borrowed funds; the asset generates less income than the cost of the borrowed funds; and the loss occasioned by the investment is claimed as a deduction for income tax purposes. 296 Soon after the plaintiffs met Mr Mackintosh, he introduced them to Mr Jaques Mamet, owner of Immo Investments Pty Ltd. Mr Mamet was developing a project called "Cedar Rise" at Redbank Plains in Queensland. It was suggested that the plaintiffs ought to invest $1,500,000 in Cedar Rise. Mr Mackintosh had suggested that the plaintiffs would be able to get a line of credit in the sum of $1,500,000 by securing the loan against the real estate that they owned.

Neovest at September 2004 297 The following are my findings in relation to Neovest at September 2004 and thereafter. Neovest was incorporated for the reasons stated by the directors, and that was to obtain finance from investors to on-lend to the Neolido Group for the purpose of development. 298 On 3 February 2004, Neovest issued the first prospectus for the purpose of obtaining finance. By June 2004, it had only raised something in the order of $405,000 from the issue of Foundation Shares. The Neovest prospectus speaks for itself. It was issued for the purpose of raising finance to on-lend to the Neolido Group. It offered both Equity and Foundation Shares with a dividend rate of 15% and 20% respectively, which were redeemable (at the option of the directors) after 12 months. Any dividend was at the option of the directors. 299 Any investment in Neovest was highly illiquid. Indeed, any investment in Neovest was highly risky because there was no second market for the investment, the dividend was not assured, and the shares were only redeemable at the option of the directors. 300 The rate of interest offered by Neovest for its Equity and Foundation Shares was highly unlikely to be obtained because dividends can only be paid out of profits and Neovest would have had to have made a profit and paid its tax on that profit before paying the 15% or 20% dividend on the Equity and Foundation Shares. 301 Moreover, as I have said, Neovest also had to pay 13% for the cost of the capital raising. 302 When that is considered, it means that Neovest would have had to have earned, to pay the Foundation shareholders 20% on their investment, 33% on the capital raised together with any tax payable on that 33%. If the tax rate were in the order of 30% it means that Neovest needed to return something like 45% on its capital each year to pay the Foundation shareholders the promised 20% dividend. 303 Mr Norton's due diligence report was flawed. Mr Norton and Norton Capital were not independent. It made no effort to come to terms with how Neovest could pay the dividends it represented it would pay in the prospectus, especially having regard to the commission which would be payable to Norton Capital of 13% in the future. 304 The Norton Capital research report fails to identify the high level of risk associated with the investment. The Norton Capital research report wrongly treats directors' guarantees as having some value when they would only be called upon if the Neolido Group failed. 305 If the Neolido Group failed, the directors' assets, which were largely made up of their investments in the Group, would be lost. The directors would only be called upon to meet the guarantees when the Group failed, which would have been at the same instant as their investment in the Group was lost. 306 In those circumstances, the guarantees were almost worthless. 307 Norton Capital should not have put the investment on its approved list. Wealthsure should not have also put in on its approved list. Nor should Mr Pawski have recommended the investment to his advisers.

The Plaintiffs' Position 308 As at September 2004, Mr Selig had almost no earning capacity because of his physical condition. Mrs Selig had no earning capacity. They owned two assets, being the two units at Sea Aura. They lived in one of those units and rented out the other unit. In his statement, Mr Selig said apartment number 12 was being rented for $320 per week. Under cross-examination, he said "Actually, it ended up being $380 a week". 309 Mr and Mrs Selig had no other income apart from the rental return. In my opinion, they did not have the necessary income to enter into negative gearing arrangements and they should never have been advised to do so.

The First Meeting on 29 September 2004 310 On 29 September 2004, a dinner and a meeting were held at the plaintiffs' residence at which Mr Mackintosh introduced the plaintiffs to Mr Bertram. As already mentioned, Mr Mackintosh knew Mr Bertram because Mr Mackintosh was a client of Mr Bertram's business, DBA. Also present that evening, were Mr Ind and Mr Mamet, and Mr James Smith who was a colleague of Mr Mamet's. The witnesses were not agreed on Mr Smith's presence, but Mr Ind and Mr Bertram thought that he was present. It is not important to find whether he was there or not. Also present, Mr Selig said, were Jim Goldman and his partner, Ms Ferguson, Mr Selig's father and brother Mark, and his partner Angela Robinson. 311 At some stage during the meeting, Mr Mackintosh said to Mr Selig that Mr Bertram was present because Mr Mackintosh had lost his licence because of something a former partner had done. At that time Mr Mackintosh could not have given advice in relation to investment products because he was not authorised. Mr Selig said that Mr Mackintosh said that the reason Mr Bertram was present was that he was a financial adviser and if something were to go wrong Mr Selig would be covered by Mr Bertram's insurance, which he had to have by law. Mr Selig said Mr Bertram was sitting next to him when Mr Mackintosh said this, and Mr Bertram said nothing to contradict what Mr Mackintosh had said. 312 Mr Selig said that Mr Bertram told him that it was Wealthsure that had the licence to give advice but that Mr Bertram was an authorised representative of Wealthsure. 313 Mr Selig said that during the dinner he told Mr Bertram he was a builder and developer who had been relying on his own labour, but had become injured and had a bad back and would not qualify for income protection insurance. 314 At this point of time, the plaintiffs were, as I have said, considering investing in the Cedar Rise Developments, a development initiated by Mr Mamet, by making a loan to Mr Mamet. 315 Mr Ind said that Mr Selig said at some stage words to the effect that he had no cash flow to negatively gear real estate. He said that Mr Bertram said to Mr Selig that he might be able to provide a solution to this problem by investing in Neovest, which itself was investing in building projects in Queensland. He said that Mr Bertram said that Neovest was doing a development at North Lakes and that Neovest was a company that was all above board. 316 It is not disputed that both Mr Mackintosh and Mr Mamet made presentations. Mr Mackintosh gave a presentation about property investments and explained the concept of negative gearing. 317 Mr Mamet gave a presentation about a number of property developments in which he was involved, including the Cedar Rise Developments. Mr Selig said that Mr Bertram also gave a presentation about Neovest. He said that Mr Bertram said that Neovest would return 20% on investments. 318 Mr Selig said that Mr Bertram said that he had a product called Neovest which was "a tool for people in our circumstances where I had cash and I had assets but my income stream was poor to non-existing so Neovest was a guaranteed share that could make the difference with the lacking of the income stream to make everything balance". 319 He said that Mr Bertram said: "Ron, Neovest has been thoroughly researched by Wealthsure. They have done extensive research on it and Neovest is on their approved product list. It's guaranteed." Mr Selig said in cross-examination that this was said to the meeting. 320 Mr Selig said that Mr Bertram said during the meeting that Neovest was "a wonderful product [that] would assist with all other products you have heard before here. It is designed for people that don't have enough capital cash flow." 321 Mr Selig also said that Mr Bertram said that Neovest "had been researched by Wealthsure and it is a safe product and you will be able to use that to achieve your property portfolio." Mr Bertram denied that he said that which Mr Selig attributed him. 322 Mr Mark Selig remembers Mr Bertram as saying that investors would get a return of 20% on their investment. 323 Mr Ind said Mr Bertram said that "by investing in Neovest it was guaranteed that there would be a 20% return on any monies that were put forward." He said Mr Bertram said there was a basically a guaranteed cash flow return. Mr Bertram did not give any conditions or warnings with respect to the 20% return on investment. 324 Mr Ind said that Mr Bertram also said that if Mr Selig "invested in investment properties as proposed by Wayne Mackintosh, and invested in Neovest, that the investments overall would be cash flow positive and would help pay for Ron Selig's investment properties and also all of his living expenses, and that there would be a cash surplus every month for him to live on." 325 Mr Bertram said that he had an imperfect memory of what was said at the first meeting. He said that he did not say very much at all during the evening because he considered himself to be an invited guest of Mr Mackintosh who was there for the purpose of making a presentation marketing his products to the Seligs. 326 As I have said, he said that he did not give any presentation at the meeting and that he did not provide any advice and did not mention Neovest. 327 In cross-examination, he said that he could not recall talking to Mr Selig about Neovest and its investments and building projects in Queensland. He denied saying that he was able to provide a solution to Mr Selig's lack of cash flow, but did admit that he believed he had such a solution. Whilst he did not give a presentation, he admitted he did talk at the meeting. 328 Mr Bertram agreed that he might have said that if Mr and Mrs Selig invested in properties as proposed by Mr Mackintosh, and in Neovest, that those investments overall would be cash flow positive. He also might have said, he admitted, that an investment in Neovest would help pay for Mr Selig's investment properties and also all his living expenses and there would be a cash surplus every month for him to live on. 329 I think that the difference in the evidence about whether or not Mr Bertram gave a presentation is of little consequence. The question is what he said and to whom he said it. 330 I accept the evidence of Mr Selig, Mr Ind and Mr Mark Selig that during the meeting Mr Bertram said that he was an authorised representative of Wealthsure. He said that he had a product which would return income on monies invested of 20%. He used the word "guaranteed", but he may not have used it other than in circumstances where he talked of the directors guaranteeing the investment. 331 The reason why I am satisfied that Neovest was mentioned and that it would produce income in the order of 20% is because of Mr Mackintosh's presentation which was to propose that Mr Selig buy properties, which he would negatively gear. Mr Selig could only get the advantage of negatively gearing his investments in properties if he had sufficient income. He could not generate any income, apart from the income he was already receiving from the one unit he owned, except by investment. The reason Mr Selig was making these inquiries was that he had little or no earning capacity because of his bad back. 332 Therefore, it is probable that Mr Selig said something to the effect that Mr Ind gave evidence of, that he, Mr Selig, had no cash flow to negatively gear real estate investment. 333 It is probable that Mr Bertram responded by identifying Neovest as being a source of income against which the investments of the real estate could be negatively geared. 334 It is also probable, in my opinion, that Mr Bertram referred to the income from Neovest as being 20% on investment. 335 I am also satisfied that Mr Bertram said that Neovest had been researched by Wealthsure who had found it to be a safe product. 336 I am not able to make a finding that Mr Bertram said at this meeting that the investment would be guaranteed.

Mr Ind's Evidence relating to the subsequent Meetings 337 As the evidence will show, there were a number of further meetings at which Mr and Mrs Selig, and different persons, were present. 338 Mr Ind was present at some of those meetings. However, his evidence does not identify precisely at which meetings he was present. He said that he subsequently attended a number of meetings at which Mr Selig, Mr Mackintosh and Mr Bertram were present. He said that at those meetings, Mr Bertram said to Mr Selig that "there was a guaranteed 20% return on the Neovest investment. Mr Bertram did not give any conditions or warnings with respect to the 20% return." 339 Mr Ind said that at a number of these meetings Mr Selig said that he only had a limited working capacity, but was debt free. He said that there was discussion how Mr and Mrs Selig could borrow the money to put into Neovest and that Mr Bertram talked up the safety of the Neovest investment, which he reiterated had a 20% return. 340 Although Mr Bertram does not admit that he said at any time that the Neovest investment was guaranteed, he did accept that he said words to the effect that Neovest would pay for everything with its 20% annual return "and give enough cash every week to live on and go fishing." He accepted that he may have said that he was 100% confident that the investment would work. 341 Mr Ind said Mr Bertram said to Mr and Mrs Selig on more than one occasion, before they entered into purchase contracts for properties at Berrima Street, Wynnum (to which I will refer later in these reasons) that the investment in "Neovest would pay for everything with its 20% per annum return, and give enough cash every week to live on and go fishing." 342 Both Mr Bertram and Mr Mackintosh, Mr Ind said, told Mr and Mrs Selig that they were 100% sure that the investment would work. 343 I accept Mr Ind's evidence. His evidence is inherently likely to be correct, because what he said was no more than what Wealthsure, Mr Bertram and Mr Mackintosh believed at that stage and, that is, that Neovest was an investment which would return up to 20% to the investor. 344 If Mr and Mrs Selig borrowed a sufficient sum to invest in Neovest then the return, provided the 20% was realised, would have been enough to cover their other investments and their living expenses. 345 The evidence has a ring of truth about it.

The Second Meeting 346 On 11 October 2004, a second meeting was held at the plaintiffs' home at which the plaintiffs and Mr Bertram were present. Due to child minding and other duties, Mrs Selig was only intermittently involved in the meeting. At this meeting, Mr Bertram gave the plaintiffs a document entitled "Wealthsure Financial Services Guide and Advisor Profile for David Bertram" (FSG), for which the plaintiffs signed and acknowledged receipt. Mr Selig said that Mr Bertram told him that he was required by law to provide him with the document and that it was important, and that he should read it. Mr Selig said he made an attempt to read it, but cannot remember if he read any of it whilst Mr Bertram was present. He said that he did not tell Mr Bertram that he was dyslexic, but he did say that he had difficulty reading. I accept that evidence. 347 Included in that document are the following representations: We will only recommend an investment to you after considering its suitability for your individual needs, objectives and circumstances. In general, we only recommend a product to you after considering its suitability for your individual needs, objectives and financial circumstances. … There are a vast number of investment and other financial products from which to choose and no financial planner can possibly undertake research on all of them. Accordingly, like other major financial planning organisations, the products we recommend are all selected from an approved list of products carefully researched and approved by a team of research experts. … As an authorised representative your adviser acts on behalf of WealthSure Financial Services when providing financial advice to you. WealthSure Financial Services is therefore responsible to you for any advisory services your adviser provides. Your adviser's primary duty is to you, the client. … We will explain to you any significant risks of financial products and strategies that we recommend to you in the financial report. If you require further clarification of the products and strategies we are more than happy to clarify those for you. 348 The document also indicated that the Corporations Act required the adviser to prepare a Statement of Advice. 349 Attached to the document was the adviser profile for Mr Bertram, who was stated to be an authorised representative of Wealthsure Financial Services. It was represented that Mr Bertram had extensive experience in both the wholesale and retail sectors of the financial planning industry over a period of 16 years. 350 The FSG constituted Mr Bertram's and Wealthsure's offer to act as Mr and Mrs Selig's financial advisers. By their conduct thereafter, Mr and Mrs Selig accepted that offer and a contractual relationship was created. 351 Mr Bertram also completed a document entitled "Fact Finder and Financial Needs Analysis" dated 11 October 2004 (Fact Finder), which was a questionnaire used to establish an investor's financial position, objectives and risk preferences. Mr Bertram completed the Fact Finder on behalf of the plaintiffs by asking the plaintiffs the questions in the Fact Finder and noting down their answers. 352 In the current asset summary, it was stated that Mr and Mrs Selig had the following assets: Cash at bank - $44,000 Term deposits - $30,000 Cash management trusts/accounts - $30,000 (owing from Mark) Primary Residence - $1,500,000 Investment property - Unit 12 - $1,000,000 Investment property - Unit 4 - one half $545,000 (net $260,000 after GST) 353 Their personal assets were disclosed as: Motor vehicle - $16,000 plus $48,000 (cont debt $800/month) Boats - $45,000 Home contents - $150,000 Jewellery - $40,000 Other personal assets - artwork $25,000. 354 Their current annual income summary was disclosed as: Dividends/property development (Jacque) - $187,500 [for each of Mr and Mrs Selig] Gross property rental income (Unit 12) - $450/week Child endowment (Family Tax Benefit) - $230/ft. 355 Mr and Mrs Selig's anticipated capital inflows were shown as: Proceeds from property sales - $260,000 November/2004. 356 Their expenditure details were disclosed as $1,000 per week totalling $52,000 per year. 357 The document disclosed a requirement for cash reserves of $10,000 for the two of them. 358 The current personal insurance details included a note that "Ron has bad back ICP not applicable". 359 It was also disclosed that Mr Selig had an accident/death policy of $250,000. 360 The document addressed client objectives and risk profile. 361 Under the heading, "Main Objectives", it is recorded: Diversify investment portfolio. Super is now appropriate. No income required. 362 Under the heading, "Group 3 - Investment Knowledge and Experience", it is recorded in answer to the question "When considering taking financial risks, how do you view yourself?", in respect of both the plaintiffs, it is recorded "A high risk taker". 363 It is also recorded that in answer to the question, "Which of the following statements best describes your investment knowledge and understanding when considering investment?" again, in respect of both plaintiffs, it is recorded "I have never invested in shares or managed funds and I have virtually no knowledge in this area". 364 Mr Selig said that at this meeting he and Mr Bertram discussed shares and stocks which Mr Selig told Mr Bertram he had concerns about. Mr Bertram told him that that was what he was there for and that is what he does, and explained how he invested. 365 In his cross-examination, Mr Selig admitted that the information contained in the fact finder was in some respects not accurate, but he did admit that he probably told Mr Bertram that he was a high risk taker, but explained that by meaning that he was a high risk taker in terms of development risks. 366 Mr Selig could not remember whether or not Neovest was discussed at this meeting, but in the end rather accepted that it was not. 367 Mrs Selig said that she would never have said she was a high risk taker or disagreed with the proposition that the investment was too difficult to understand. She said that she had no idea how money worked on the market. She signed the document not really caring whether the information was correct or not. 368 I think in this respect Mrs Selig's evidence can be accepted. I do not think she took any interest or care in relation to the matters that were recorded in this document and I think she did, as she said, sign the document not caring as to its accuracy. 369 Mr Bertram's evidence was that this meeting was held at the request of Mr Selig. He said that the Fact Finder accurately recorded that which he was told by Mr and Mrs Selig. He said that he had an impression that Mr and Mrs Selig were reasonably high risk takers in relation to their investment decisions. They had been considering entering into a contract with Mr Mamet, which sounded to him to be a high level risk of investments. 370 He did, however, agree that Mr Selig was addressing development risk rather than financial risk.

The Events after the Second Meeting 371 On 15 November 2004, Mr Bertram prepared a document entitled "Cash Flow and Debt Management Strategy Paper" (the Strategy Paper) for Mr and Mrs Selig, but under the name of Wayne Mackintosh. The document was headed "Asset Acceleration Group". On the same day, Mr Bertram wrote to Mr Mackintosh and Mr Ind, and enclosed a "Plan for these clients as requested". The plan he was referring to was the plan he had prepared that day. 372 He wrote: I have prepared the Plan for these clients as requested. I have included one strategy with the following notes: I have shown Ron and Janna selling off the other unit and realizing $260,000 cash from this sale. I have shown a LOC set against their unit as well as the other unit they now own in their own right. I have shown the purchase of 7 investment properties at $365,000 each with rental income of $340 per week. Could not really fit in any more than this as they have no personal income tax to defray using tax deductions. I have shown $1,150,000 borrowed from the LOC for the purchase of $700,000 into Neovest at 20% per annum, $300,000 into Neovest at 15% per annum as well as $150,000 into managed funds (plus $200,000 of the available cash) and a further $350,000 margin loan. I have only shown the charges at 3.3% of the total investment amount of $1,700,000. All the best presenting this plan to your clients. 373 On the same day, Mr Mackintosh met with the plaintiffs and provided them with the document that Mr Bertram had prepared and provided earlier that day. Although Wealthsure and Mr Bertram have suggested that this document was prepared by Mr Mackintosh, or a planner employed by DBA other than Mr Bertram, Mr Selig and Mr Ind attribute authorship to Mr Bertram. There is, however, written evidence which supports a finding that Mr Bertram was the author of this document, namely the 15 November 2004 letter Mr Bertram sent to Mr Mackintosh and Mr Ind, to which I have just referred. 374 In his evidence, Mr Bertram accepted that he sent that letter, the purpose of which was to provide Mr Mackintosh and Mr Ind with a draft Cash Flow and Debt Management Strategy Paper, which had been prepared on the instructions of Mr Mackintosh and Mr Ind by DBA Financial Designs. 375 Faced with that evidence, Mr Bertram said that he could not recall whether he had personally prepared the Strategy Paper, or whether it was prepared by one of the para-planners who were employed by DBA Financial Designs under his direction. 376 For all of those reasons, I find Mr Bertram was the author of this document. 377 This was, as will be shown, the first of four documents of the same kind presented to Mr Selig by Mr Mackintosh. That document summarised what was suggested to be Mr Mackintosh's recommendations although, as I have said, it was prepared by Mr Bertram: 1. Purchase 7 investment properties for approximately $365,000 each (returing (sic) $340 per week rent). 2. Purchase $700,000 into Neovest generating an income of 20% on $500,000 and 15% on $200,000 which equates to a gross income of $130,000 per annum of $2,500 per week. 3. Purchase $300,000 from your new Line of Credit into managed funds as well as an additional $200,000 from the cash you will have available from the sale of the unit as well as a further $500,000 via the recommended margin loan. 378 The document identified the Asset Acceleration Group and said: Our aim is to help you achieve your lifestyle and financial goals, within the scope of your financial capacity. Our dedicated commitment to quality, awesome service and our professionalism, provide a sound basis for the building of a long lasting, mutually satisfying, service relationship. Our philosophy is to provide our clients with a lifestyle-driven service. That means, we care about our clients, and always make it our most important priority to help you achieve your lifestyle objectives, with a minimum of fuss, in the shortest possible time. Our pledge is to help you to achieve your lifestyle and financial objectives by using all available resources and expertise, to get you started and to help you along the way. Getting out of debt sooner is one thing, living the lifestyle of your choice is another. We believe this Strategy Paper will help you achieve both, and at the same time, provide you with the means and the power to maintain a higher quality of life. If you require assistance or advice in any areas of Finance, Investment and/or Residential Real Estate, Insurance or Financial Planning (both wealth creation or retirement), we have associations with professionals in each of these fields and we can provide a comprehensive and cost effective service to you! 379 It addressed Mr and Mrs Selig's current financial profile and identified them as holding $1,824,000 of non-investment assets and $1,364,000 worth of investment assets. The total assets were said to be $3,188,000. The security said to be offered for finance included $1.5 million equity in their private residence and $1 million in an investment property. Mr and Mrs Selig were shown to have a gross income of $11,700 each, being a total income of only $23,400 derived from their property rental. Deductible items were said to be $18,000 each, making a total of $36,000, being investment costs on cash expenses and non-cash deductions. Included in Mrs Selig's income was $5,980 from Centrelink. Their non-taxable income totalled $29,380 including that sum. Their living expenses were shown to be $52,000 indicating a deficit of $22,620 between their living expenses and their income. 380 The document included a strategy for projections. New investments were indicated at $2,555,000 together with a new investment amount (shares or managed funds) of $1,700,000. 381 The investment strategy was described: This strategy includes the purchase of 7 investment properties for $365,000 each with anticipated rental incomes of $340 per week each. Also shown is the purchase of $700,000 into Neovest at 20% per annum and $300,000 at 15% per annum generating you an income of $185,000 per annum or $3,558 per week. A further $150,000 from the Line of Credit is to be invested into managed funds along with $200,000 from the cash available from the Unit sale and a further $350,000 via a margin loan. 382 The document said that the investment would yield cash or liquid funds of $260,000 and $10,000 as a buffer against emergencies. 383 The proposed loan account limit was stated: Available Buffer (Equity) $176,528.00 Opening Balance $3,847,472.00 Current Tax Deductible Loans To Be Consolidated $0.00 TD Percentage Of Finance Fees $17,757.00 TD percentage Of Investment Purchase Costs $147,815.00 New Investment Property Purchase Amount $2,555,000.00 New Investment Amount (Managed Funds) Purchased $1,150,000.00 The Opening Balance is the Sum of these five amounts $3,870,572.00 384 Mr Bertram said that he has a recollection that at or about 15 November 2004 he met with Mr and Mrs Selig separately to discuss with them the investment in Neovest. He said in his evidence he could not recall a time or date of the meeting other than that he believed it was after he was informed that the Seligs were not going to proceed with their loan to Mr Mamet, but before 29 November 2004. He said the meeting took place at Mr and Mrs Selig's apartment at Buderim and he took with him to the meeting a copy of the first Neovest prospectus, as well as the Norton Capital research report and the Information Summary, to which I have referred earlier in these reasons. 385 I have no reason to doubt Mr Bertram's evidence in that regard. It is likely that he did what he said. He said that he spoke to the prospectus and to the Norton research paper. Mr Selig accepts that at some time he met with Mr Bertram because the deal with Mr Mamet was not proceeding and he had a need for income, and he wanted to discuss that possibility with Mr Bertram. 386 He said at that meeting that it is possible he received a copy of the Norton Capital research report, which he tried to read after Mr Bertram had left. 387 It is likely that Mr Selig and Mr Bertram are talking about the same meeting because Mr Bertram said that he had the Norton Capital research paper at that meeting. 388 Mr Bertram said that he told Mr Selig that Neovest was seeking to raise $20 million capital for the Neolido Group and was paying dividends at a coupon rate of 15% or 20%, depending on the class of shares purchased. He said that he told Mr Selig that Neovest was proposing to pay those dividends monthly. 389 He said that he said to Mr and Mrs Selig words to the effect: Income is in no way guaranteed and the investment is not a capital guarantee investment, however Neolido has guaranteed the loans to Neolido (sic) in respect of the $20 million capital raised. The directors have also made personal guarantees to Neovest, which according to the Norton Capital research total of $45 million collectively. 390 He said that he said to Mr and Mrs Selig words to the effect: I have actually personally met two of the directors of Neolido on a site tour I attended several months ago and was quite impressed with a number of those development sites. 391 Mr Bertram said that he did not at any time say that Wealthsure recommended Neovest as a "safe investment" or that it was "capital guaranteed". He may have said that Wealthsure had placed it on its APL, but he cannot recall saying that. 392 I think Mr Bertram's evidence is likely to be a correct account of what was said by him to Mr and Mrs Selig. Mr Bertram was a better historian than Mr and Mrs Selig, and he better understood what he was talking about than they did. 393 I accept that Mr Bertram said what he said he said, and I accept his evidence that he did not say that Neovest was capital guaranteed or something of that kind. However, I do accept that Mr Selig had some understanding that he was being told that the investment was guaranteed. 394 It was Mr Bertram's evidence that at or about the end of November, Mr Selig was quite keen to invest in Neovest because of its return and the fact that it was investing in property developments that Neolido was undertaking. He said that the meeting finished with those present agreeing that he would prepare a Statement of Advice for Mr and Mrs Selig which would incorporate their requirements for investment income by incorporating Neovest as an investment option. I accept that evidence.

A Further Meeting 395 A further meeting occurred between Mr and Mrs Selig, Mr Mackintosh and Mr Ind on 17 November 2004. 396 Mr Ind said that it was at this meeting that Mr and Mrs Selig received the first Cash Flow and Debt Management Strategy Paper. It is not clear whether Mr Bertram was present at the meeting when the document was presented to Mr and Mrs Selig. I think he probably was not. 397 Mr Bertram said that he thought that he received feedback from Mr Mackintosh from the meeting, but was not present. I think that is likely to be right. 398 The evidence is too vague to make a finding as to whether or not the Strategy Paper was handed to Mr and Mrs Selig on 15 or 17 November, or even later in November, but certainly they received it by the end of November. 399 Mr Ind recorded the fact of the meeting in his diary. It is not clear whether the Norton Capital Information Summary, referred to as a "flyer" was presented to Mr and Mrs Selig. It would appear that Neovest's first prospectus was provided to them and that Neovest was discussed. 400 At that meeting on 17 November 2004, either Mr Mackintosh or Mr Ind had made notes of an appointment on that day, which were forwarded to Mr Bertram. The notes record that Mr Mackintosh and Mr Ind are waiting to hear from Mr and Mrs Selig, and under the heading "Additional Info/Spec Requirements/Notes" it is recorded: There is a need to get DBA to re-do the cash flow projections & these figures then need to be presented to Ron & Jana (sic) showing the real accurate cash flow. The changes will make the programme even better than they are now.

29 or 30 November 2004 401 On 29 or 30 November 2004, Mr Bertram again met with the plaintiffs. In view of Mr Ind's evidence, the meeting may have occurred on 30 November 2004, but nothing turns on the day. Mr Ind suggested that Mr Mackintosh was present. Mr Selig said in evidence-in-chief that he could not recall if Mr Mackintosh was present, but in cross-examination he said Mr Mackintosh was not. Whether Mr Mackintosh was present or not is not important. During this meeting, Mr Bertram gave the plaintiffs a document he had prepared entitled "Statement of Advice: Limited Advice", which was dated 29 November 2004 (the November 2004 Statement of Advice). There is no doubt that Mr Bertram prepared this document. The document says it was prepared by him for Ron and Janna Selig. Mr Selig, who as I have said has some difficulty reading, said that Mr Bertram "read more or less the whole lot" of that document out loud. Mr Selig said he listened. 402 The document was written in a form that it was addressed to Mr Selig. Indeed it was given to Mr Selig with a covering letter dated 29 November 2009, which was on the letterhead of David Bertram & Associates Pty Ltd trading as DBA Financial Designs, addressed to Ron and Janna Selig. It said: Dear Ron and Janna, In accordance with our discussions and your instructions, we are pleased to attach your Statement of Advice (SOA), which has been specifically tailored for you and balances your current and future financial objectives with your investor type and attitudes toward investment risks. The SOA has been compiled using information obtained from you in your "Fact Finder and Financial Needs Analysis", a copy of which is available on request. Please read the Statement of Advice thoroughly, giving careful consideration to the advice and recommendations provided. If you have any queries or feel that any relevant information has been either overlooked or misinterpreted, please let us know prior to implementing any of the recommendations contained in the Statement of Advice. The recommendations in this Statement of Advice are based on current information and should be considered to be current for the next month only. After that time it may become necessary to review the recommendations accordingly. Subject to your approval, we would be pleased to assist you in implementing the recommendations contained in your Statement of Advice, including the completion and lodgement of any relevant application forms and associated documentation. Thankyou for providing us with the opportunity to be of service to you. Yours sincerely, [signature] David Bertram BEng ACIP DFS(FP) Authorised Representative Wealthsure Financial Services 403 At the front of the Statement of Advice was an Executive Summary, which was in the following form: You have asked me to provide you with recommendations regarding your financial position at present. Your Present Position Ron, you are currently aged 48 and are now retired from your building business. You are married to Janna who is 32 years of age and is engaged in home duties. You require an income of $1,000 per week to cover living expenses and at the moment you are living off capital and the rental income from the existing investment unit of $450 per week. You have an investment property (estimated value of $1,000,000) which pays you income of approximately $23,400 per annum. You are both in good health, have one child (Brokk) who is still living at home and is financially dependant. Your everyday living expenses total approximately $52,000 per annum excluding any investment loan repayments. Based on your discussions, we have agreed to classify you both as "Moderate/Growth" investors. Your Objectives You have asked us to address the following objectives when making our recommendations. At this stage you are primarily seeking our advice in relation to borrowing further funds for investment purposes. You would like to borrow a total of approximately $1,500,000 and invest those funds as well as $200,000 of your existing cash in order to obtain firstly sufficient income to meet any shortfalls in rental income from the recommended property portfolio as well as capital growth. Our Recommendations Full details of our recommendations, and the reasons for those recommendations, are contained in the text of this Statement of Advice. A brief summary of those recommendations, however, is outlined below: We have looked at the options you have available to you to commence further wealth creation. Property at this stage is appropriate as long as we can meet any cash flow shortfalls (negatively geared) via income from the other investments. What we have recommended is for you to access some of the available equity in your home and invest these funds into a managed portfolio via the netwealth Wrap Account. The initial amount we have recommended to borrow is $1,150,000 with the addition of your $200,000 cash. $1,000,000 of these funds will be invested into the Neovest Foundation shares generating you an annual income of 20.00% (paid monthly in arrears) or $200,000 per annum. To further leverage the portfolio (whilst keeping your level of gearing within your risk parameters) we have also recommended arranging a margin loan for a further $350,000 secured against your initial investment of $350,000. This will mean you will have a total initial investment of $700,000 in the netwealth Wrap Account. We have recommended that this investment be placed in joint names so that we balance the benefits of tax deductions now against both of your incomes (the same amount for you both) as well as reducing potential capital gains tax against just one income in the future. Any surplus income that you derive in the future should be directed towards further investments in the managed fund portfolio as you have no non tax deductible mortgage remaining and maximising your tax deductions whilst still working will provide the best long-term benefit for your retirement. The Results Implementation of the recommendations contained in this Statement of Advice should enable you to achieve the following results: You will have exposure to a variety of quality fund managers and asset types that ensures effective diversification of your investments whilst enabling a credible level of growth in your portfolios…both superannuation and personal. Your portfolio will be well structured and diversified, providing you with sufficient flexibility to enable adjustments to be made to the portfolio in future, should the need arise. The implementation of a negative gearing strategy will provide your portfolio with the opportunity to achieve growth that would have not been possible otherwise. The resulting increase in your retirement funds (shown at 20 years for illustration purposes) due to this investment strategy has been estimated at $3,504,600 (after repayment of the borrowings against your house and the further margin loan) which means an increase in your retirement income of approximately $245,321.98 per annum. The Costs of Implementing These Recommendations Please refer to the page of this Statement of Advice titled "Disclosure of Fees, Brokerage and Remuneration" for details regarding the fees and charges associated with the provision and/or implementation of our recommendations. Disclaimer Please refer to the page of this Statement of Advice titled "Disclaimers and Disclosures" for important information relating to the provision and content of this Statement of Advice. 404 The document identified the objectives in the following terms: Objectives You are looking to create an income stream to provide your living expenses of $1,000 per week as well as any shortfalls in the interest costs for the direct investment property portfolio. You have $200,000 available cash to invest as well as taking $1,150,000 from your Line of Credit and a further $350,000 margin loan. 405 The document also indicated that the advisers had been told that Mr and Mrs Selig were looking for reasonable capital growth from their investment portfolio, but did not require access to investment funds to meet regular or possible emergency capital expenses so that liquidity was not important. 406 The document indicated that Mr and Mrs Selig wished to minimise their taxation liabilities as much as legally possible. 407 The document addressed the broker's remuneration: As required under the Corporations Act, we advise that as an Australian Financial Services Licensee, WealthSure Pty Ltd is entitled to receive commission/brokerage from Fund Managers initially and/or on an ongoing basis as shown. The rates applicable to your portfolio are as shown below. Commission/Brokerage is included in entry fees charged by Fund Managers or is paid by the Fund Manager where there is no entry fee, it is not charged separately as an additional amount to the investor. Initial commissions/brokerage are paid to Licensees for the placement of the financial product with the Fund Manager. They are not dependent on the performance of your investment but on your initial investment amount. Trail commissions/brokerage are paid to Licensees from the fund manager. This usually forms part of the annual administration fees and charges charged to your account by the fund manager (please refer to the fees and charges section in the Product Disclosure Statements). The amount of trail commissions/brokerage payable to the Licensee is dependent on your average daily account balance. Hence, the lower your average daily account balance, the lower the percentage of trail to be paid to the Licensee and vice versa. Note: All brokerage amounts stated in the tables below are inclusive of GST. Table E Initial Brokerage Please note that all additional or regular contributions attract a 3.30% entry fee. Fund Name Initial Investment Amount Net Entry Fee Total Brokerage Brokerage Brokerage Do Exit Insurance Company Paid By Client Paid to Licensee Retained by to be Paid Fees * Licensee to Adviser Apply? ($) ($) ($) ($) ($) ($) ($) netwealth 700,000 3.30 23,100 3.30 23,100 577.50 22,522.50 No Neovest 1,000,000 3.30 33,000 3.30 33,000 825.00 32,175.00 No

Total $1,700,000 $56,100.00 $56,100.00 $1,402.50 $54,697.50

408 Mr Selig said that the Statement of Advice was consistent with what Mr Bertram had told him at the meeting, which was that an investment of $1 million in Neovest Foundation Shares would generate an annual income of 20% paid monthly in arrears, namely $200,000 per annum. He said that he was told that the investment could either be redeemed or rolled over at the end of 12 months. 409 Mr Selig said that Mr Bertram said that Wealthsure had done all the research and had given it the go ahead. 410 Mr Selig's evidence was: David said to me, "Ron, a million dollars is the amount that I have come up with that needs to be invested in Neovest at a rate of 20%." Janna, my wife, said to David, "David, is this a secure company to invest in?" Janna was very concerned. David said "Janna, you've got no worries with this one, it's fully guaranteed. It's guaranteed by the director of the company so you've got nothing to worry about. Just take it easy. It's all good." 411 Mr Selig said that Mr Bertram specifically mentioned the directors, Mr Spencer and Ms Perovich. Mr Selig said Mr Bertram told him where the properties were that were being developed. The meeting concluded with Mr Selig to review the document with which he had been provided. 412 Mr Selig said that he did not receive at that time a copy of the Norton Capital Information Summary, which was also referred to as a "flyer" or "pamphlet", dealing with Neovest. He said that he was not told by Mr Bertram of the added cost of margin loans. He was not told of the increased risk of borrowing the additional money or of the risk of losing the home over which there would be a security for the borrowed monies. 413 He said it was not explained to him that Equity shareholders had to be paid out of Neovest profits before dividends could be paid on the Foundation Shares. He said Mr Bertram did not explain that dividends could only be paid out of profits and that Neovest did not have any profits at that time. 414 There is no dispute that Mr Bertram provided the Statement of Advice under cover of the letter of 29 November 2004 and was the author of the advice, which Mr Bertram said he had prepared having regard to the Fact Finder and the Seligs' risk profile. 415 Mr Bertram said that when he presented the Statement of Advice to them on 29 November 2004, he would have taken them through the recommendations set out in the summary in detail. He said that he would have taken the Seligs through the specific product recommendations. He said he would have taken Mr and Mrs Selig to the fee disclosure and highlight to them the amount of commission that would be payable if they were to proceed on the basis of the Statement of Advice. He said he would have invited them to review the information in their own time. 416 Mr Bertram accepted that when he gave this advice he knew that Mr and Mrs Selig had no income. 417 Mr Bertram said that he provided Mr and Mrs Selig also with the Information Summary prepared by Norton Capital in relation to Neovest and the prospectus. He is not sure when he did, but he is confident that he provided Mr and Mrs Selig with both of those documents. He accepts that he did not take Mr and Mrs Selig through the prospectus. 418 He said in relation to the prospectus and the Norton Capital Information Summary: "I referred the Seligs to the Neovest prospectus and the Norton information summary, and invited them to read those documents in detail in their own time." He further told them "the research had been prepared by Norton Capital and contained their views about the risks and benefits involved in an investment in Neovest." He said he left the Statement of Advice with Mr and Mrs Selig for their consideration. 419 He accepted in cross-examination that the Statement of Advice had been prepared to enable Mr Mackintosh's strategy, to negatively gear the properties which he was recommending, to be implemented. Mr Bertram said he was aware of the advice that Mr Mackintosh was giving him. He expected that his advice would be acted upon after the clients had acted on Mr Mackintosh's advice. 420 He accepted as to his advice in relation to the investment risks that he did not advise that the dividends were payable were in the exercise of the directors' discretion. He also did not advise that a capital investment could only be redeemed at the directors' discretion. 421 He accepted that he did not advise Mr and Mrs Selig in this document that there was a risk that they would receive neither any income nor any repayment of capital.

The execution of the Wynnum contracts 422 On 9 December 2004, the plaintiffs executed contracts, which were dated 15 December 2004, for the purchase of three off-the-plan units that were marketed by Mr Mackintosh, being lots 1, 7, and 9 at "78-80 Berrima Street, Wynnum" in the sums of $375,000, $380,000 and $430,000 respectively, totalling $1,185,000 (the Wynnum contracts). The deposits payable were $37,500, $38,000 and $43,000 amounting to $118,500 in total. Settlement was deferred whilst the properties were built and ultimately did not occur until 7 September 2005. At the time of execution of the contract, these off-the-plan units had not been formally valued at their completion value. Moreover, Units 3 and 12 owned by the plaintiffs in the Sea Aura Apartments had not been formally valued. Mr Selig said that to settle the outstanding amounts owing on the Wynnum contracts he did not want to sell one of his existing apartments, but rather he intended to borrow monies. 423 The purchase of these units meant that Mr and Mrs Selig had no option but to proceed with the Neovest strategy because they did not have sufficient income to meet the mortgage payment on the three units. The rental from the three units would not be sufficient to meet the borrowing costs. 424 On 16 December 2004, the plaintiffs signed a loan application with the National Mortgage Company, seeking to borrow up to $2,300,000. The application contained information that Mr Selig admitted was false. He admitted that he had claimed that he had "Cash at Bank" of $80,000, which was false. On the same day, the plaintiffs' share of the proceeds of the sale of Unit 4, $213,937.50, was deposited into the Jarone cheque account. 425 The next day, Mr Selig and Mr Bertram visited Mr Selig's accountant and Mr Bertram provided further advice in relation to superannuation and tax. 426 On or about 15 January 2005, Mr Bertram met with Mr Selig and told him that there was a problem with the Neovest prospectus. For reasons which he did not explain, he said that Mr Selig would have to wait to invest in Neovest but that a Neovest investment would certainly be available. 427 Although Mr and Mrs Selig did not know this, the first Neovest prospectus was due to expire. The second prospectus was already in contemplation. 428 On 21 January 2005, Mr Sean Lever of Lever Valuers valued Unit 3, 143 Burnett Street, Buderim in the sum of $700,000 for the purposes of the plaintiffs' loan application. 429 By 24 January 2005, the balance of the Jarone cheque account had reduced to $130,150.86, due to a series of smaller domestic withdrawals, and several larger unexplained withdrawals being sums ranging from $4,096 to $22,280. The descriptions of the smaller withdrawals ranged from "Smokezone & Gifts", "Super Cheap Auto", payments to "Medibank Private" and the like. However, there were larger amounts that had only the descriptions of "Withdrawal/Cheque" attached to them, being: $11,890.37 on 20 December 2004; $6,000.00 on 20 December 2004; $4,237.29 on 21 December 2004; $6,471.76 on 21 December 2004; $22,280.00 on 21 December 2004; $20,000.00 on 29 December 2004; $1,016.67 on 6 January 2005; $5,000.00 on 10 January 2005; and $4,096.65 on 14 January 2005. When asked under cross-examination what some of these withdrawals were for, Mr Selig said he could not recall. 430 I think two conclusions can be drawn from those withdrawals. First, Mr Selig was not a good money manager; and secondly, Mr and Mrs Selig lived a reasonably expensive lifestyle.

The Fourth Meeting 431 On 25 January 2005, the plaintiffs met with Mr Mackintosh, who provided the plaintiffs with a further document that Mr Bertram had prepared again entitled "Cash Flow and Debt Management Strategy Paper", which was dated the same day. This document was again on the Asset Acceleration Group letterhead and pretended to have been prepared by Wayne Mackintosh. This was the second such Strategy Paper provided by Mr Mackintosh to the plaintiffs. In the document it recommended that, amongst other things, the plaintiffs purchase three investment properties being lots 1, 2, and 7, "Berrima Gardens". The recommendation is somewhat surprising when, to Mr Mackintosh's knowledge, the plaintiffs had on 9 December 2003 executed contracts for the purchase of Units 1, 7 and 9 at 78-80 Berrima Street, Wynnum. The document also recommended that the plaintiffs "Purchase $600,000 into Neovest". 432 Mrs Selig said she had no recollection of seeing this particular document. 433 Mr Bertram said that he had no involvement in the preparation of the document or the advice in relation to the proposed investment in Neovest, although he was aware the paper was prepared by his firm, DBA Financial Designs on the instructions of Mr Mackintosh. However, in cross-examination, he accepted that because it had been prepared in his office he was aware of its content and he was aware that it was to be given to Mr and Mrs Selig.

2 February 2005 434 On 2 February 2005, the plaintiffs met with Mr Mackintosh, who provided the plaintiffs with another "Cash Flow and Debt Management Strategy Paper" that Mr Bertram had prepared, which was dated 2 February 2005; the third such Strategy Paper document provided by Mr Mackintosh to the plaintiffs. It recommended that, amongst other things, the plaintiffs purchase four investment properties being lots 1, 2, 7, and 9, Berrima Gardens. Again the recommendation is surprising because, as I have said, the plaintiffs had already signed a contract for the purchase of lots 1, 7 and 9. The document also recommended that the plaintiffs "Purchase $400,000 into Neovest". 435 Mr Bertram accepted that this document had also been prepared by DBA Financial Designs, but he said that he had no involvement in its preparation or identifying the amount of the proposed investment in Neovest. 436 However, he was aware of the strategy: HIS HONOUR: The strategy always included, did it not, the proposition that the units to be acquired were going to be acquired on borrowed moneys?---Yes. And that assets would not be disposed of by Mr Selig for the purpose of purchasing the units?---Correct. And if the units were to be acquired, Mr Selig's income would not be sufficient to meet the borrowing costs - - -?---The - - - - - - even taking into account any income derived from the units themselves?---Yes. So if he was to acquire properties fully - on fully borrowed moneys, he needed a greater income than he had to service the loans?---Yes. And to live?---Yes. And so the strategy was to cause him to borrow more for the purpose of paying the debt incurred by reason of the acquisition of the units?---Yes. And to live. And you knew that Mr Selig was capital-rich and income-poor?---Yes. The purpose of buying units and negatively gearing them, of which this was a proposal, I think - or was it not?---Yes. Is to obtain capital growth, is it not?---Correct. So the basic strategy for Mr Selig was to increase his capital but not his income?---Over time, your Honour, yes. And that the only purpose of the investment in Neovest was to enable him to service the loans and to live in the meantime?---In the meantime, yes. 437 As at 2 February 2005, the plaintiffs faced settling on the Wynnum contracts but did not have any income other than that generated from renting Unit 12 of the Sea Aura Apartments. The three properties they had agreed to buy could not generate income until houses were built and completed on the properties. 438 On 8 February 2005, Mr Pawski sent to Mr Shaun Mulquiney a draft of an advertisement which was intended to be run in the "Sunshine Coast Daily" on Friday and Saturday, 18 and 19 February 2005. 439 The draft advertisement was in the following form: 15% p.a. paid monthly Neolido is a Queensland based property developer specialising in quality property development projects in South-East Queensland. On offer by Neovest Limited through the current prospectus is a mezzanine-style investment offering a unique opportunity to invest in this dynamic property group. Highlights of the investment are: Guaranteed 15-20% p.a. return paid monthly in arrears Term of just 12 months Neovest Limited will hold guarantees from the developer and the directors and shareholders of Neolido, as well as subordinated mortgages and charges over the development properties in relation to invested funds Structured as two series of preference shares issued by Neovest Limited Norton Capital Pty Ltd will be conducting an information evening to provide you with information regarding this investment opportunity on 22nd February at 5:30 pm at Mooloolaba Yacht Club. Kevin Scambler, David Bertram and Bente Parkinson of Wealthsure will be available to assist you with advice relating to this specific investment. To confirm your attendance and for catering purposes please advise Taryn by telephone on (02) 9957 3516 or email taryn@nortoncapital.com.au. 440 On Friday, 18 February 2005 and Saturday, 19 February 2005, the Sunshine Coast Daily ran an advertisement in the following form: 15% p.a. paid monthly Neolido is a Queensland based property developer specialising in quality property development projects in South-East Queensland. On offer by Neovest Limited through the current prospectus is a mezzanine-style investment offering a unique opportunity to invest in this dynamic property group. Highlights of the investment are: Potential returns of 15-20% p.a. return paid monthly in arrears Neovest Limited will hold guarantees from the developer and the directors and shareholders of Neolido, as well as subordinated mortgages and charges over the development properties in relation to invested funds Structured as two series of preference shares issued by Neovest Limited Norton Capital Pty Ltd will be conducting an information evening to provide you with information regarding this investment opportunity on 22nd February at 5.30 pm at Mooloolaba Yacht Club. Kevin Scambler, David Bertram and Bente Parkinson Authorised Representatives of WealthSure Pty Ltd will be available to assist you with this specific investment. To confirm your attendance and for catering purposes please advise Taryn by telephone on (02) 9957 3516 or email taryn@nortoncapital.com.au. Norton Capital Pty Ltd WealthSure Pty Ltd (AFS Licence No 233058) (AFS Licence No 238030) ABN: 65 086 207 169 ABN: 93 097 405 108 Offers of the Neovest Limited preference shares will be made in a copy of the Prospectus dated 3rd February 2004. Anyone wishing to acquire the preference shares must complete the application form contained in the Prospectus. 441 The purpose of the advertisement as it shows was to attract investors to the presentation at the Mooloolaba Yacht Club on 22 February at 5.30pm to be conducted, amongst others, by David Bertram who was identified as an authorised representative of Wealthsure Pty Ltd. The advertisement is clearly placed by Norton Capital and Wealthsure. 442 On 22 February 2005, Mr Bertram, Mr Scrambler and Mr Parkinson of Wealthsure conducted a seminar at the Mooloolaba Yacht Club, the purpose of which was to promote Neovest. 443 On 2 March 2005, Neovest's first prospectus expired on its expiry date 13 months after the date it was lodged with ASIC. No shares could be allotted or issued on the basis of this prospectus after the expiry date. 444 On 15 March 2005, the plaintiffs obtained two loans from the National Mortgage Company through Adelaide Bank for the purpose of settling on the Wynnum contracts. The loans were for $399,000, which was secured over Unit 12 of the Sea Aura Apartments (the RX01 account), and for $560,000 secured over Unit 3 of the Sea Aura Apartments (the RX02 account). The loans totalled $959,000. Interest was payable at the rate of 8.19%. On the same day, the National Mortgage Company registered its mortgages over Units 3 and 12 of the Sea Aura Apartments. 445 On 22 March 2005, $555,885.73 was transferred from the RX02 account into Mr Selig's National Mortgage account. On the same day, the plaintiffs paid the deposit on the units at Wynnum. 446 The three deposits due under the Wynnum contracts, being the sums of $37,500, $38,000 and $43,000 (a total of $118,500) were paid out of the borrowings from National Mortgage Company. After the payment of these deposits and two other smaller miscellaneous withdrawals, $832,198.76 was left in the RX01 and RX02 accounts. 447 On 15 April 2005, Mr Selig withdrew $54,640 from the RXO2 account, to pay the GST payable on the Sea Aura Partnership that arose when Mr Selig transferred his half share ownership in Units 3 and 12 of the Sea Aura Apartments to Mrs Selig.

The issue of the second prospectus 448 On 29 March 2005, the Neovest directors signed its second prospectus, which was registered with ASIC on 31 March 2005. The expiry date of that prospectus was 13 months after its registration. The introduction to the second prospectus was written this time by all four directors, including Mr Norton. The directors' profiles this time included a profile on Mr Norton. 449 In the second prospectus, the Neovest audited financial statements to 30 June 2004 and to 31 December 2004 were included. There was a note to the accounts, which indicated that as at 30 June 2004, $429,000 of capital had been raised with the issue of 120,000 fully paid A Class Shares issued at $0.20 per share and 405,000 Foundation Shares issued at $1 per share. The total shareholders as at 30 June 2004 was 9; and at 31 December 2004 the total shareholders numbered 105. 450 The company's net equity as at 31 December 2004 was $22,836. 451 The group financial statements for Neolido Holdings and Neo Lido, which are unaudited, were included. They show net assets of $1,749,335 as at 30 June 2004. They also show a trading loss to 30 June 2004 of $250,857. 452 In that part of the document entitled "Additional Information", the question of commission is addressed at paragraph 10.4: 10.4 Commission The Company may pay Australian Financial Services Licencees (sic) an upfront commission of up to 4% plus GST on the application monies received in relation to the redeemable preference shares. For example, for a $10,000 investment the upfront commission payable to the advisor will be up to $400 plus GST. From time to time the Company may also pay Australian Financial Licencees (sic) a fee for marketing assistance (for activities like seminars, client mailings, co-operative advertising, postage) of not more than 2.5% plus GST. For example, for a $10,000 investment the fee for marketing assistance payable to the advisor will be up to $250 plus GST. 453 The expenses of the offer are addressed at paragraph 10.5: 10.5 Expenses of the Offer All expenses connected with the Offer are payable by Neovest, including Norton Capital commission, accounting fees, legal fees, printing costs, printing and mailing costs and other miscellaneous expenses. These expenses are estimated as follows: $ Commission & Marketing1 1,450,000 Professional fees 33,000 ASIC fees 2,200 Secretarial assistance 12,000 Printing and mailing 25,000 Contingency 30,444 _____________ $1,552,644 _____________ 1The Commission payable if the maximum subscription of $20,000,000 is achieved. 454 That document misstates the agreement with Norton Capital, which was to pay Norton Capital 13% commission. The misstatement means that the figure of $1,450,000, said to be payable if the maximum subscription of $20,000,000 is achieved, was understated by $1,150,000; about 45% 455 Ms Perovich said that she spoke to Mr Peter Wood and Mr Norton, both of Norton Capital, and she was told that they expected to raise $2 million per month under the second prospectus. She said at the time that the prospectus was issued "we believed that the difficulties the Group faced were quite manageable. We continued in that view until November 2005 when we were not granted an extension of time in the Neolido wind-up proceedings." 456 The second prospectus required investors to deal with Norton Capital, which had been insisted upon by Norton Capital to preserve the property in its relationships with their client financial planners. All share certificates and other documentation were sent to Norton Capital for distribution to their financial planners, such as Wealthsure. 457 Prior to the issue of the second prospectus, Ms Perovich spoke to Jane Steele of NRH, as well as Mr Townley. She said that Ms Steele took a "thorough approach" to the second prospectus and "advised upon and vetted the prospectus in all respects and including the arrangements that had been required by Norton …", and that Ms Steele conducted a full due diligence: From our side the job required full attention and that job was taken over by Hugo Driemeyer who was employed by us on a consultancy basis. He supplied Steel (sic) with all that she required. Steel (sic) gave final advice on the form of prospectus filed with ASIC and we relied upon this. 458 Ms Steele, on behalf of NRH, wrote to the Neovest Directors on 31 March 2005, addressing the steps that Ms Steele had undertaken in carrying out a due diligence investigation in relation to the second prospectus: We consider that on balance, the Prospectus does disclose information pertaining to al (sic) the key issues and does satisfy disclosure. Further, the statements can be substantially supported by reference documents, although a large number of these are only management documents. Foot notes 20, 100 and 56 are not particularly supported by the material made available to us. Further details are set out in the schedule for more detailed reference. 459 Ms Perovich said that the second prospectus was carefully prepared and thoroughly vetted by NRH and Norton Capital. She said: Although the Group had had some difficulties we had strategies in place to take it forward successfully and Neovest's role was integral to that. We had confidence in the value of our portfolio, the support of our Mango Hill assets and the promises of Norton Capital with respect to the role that Neovest would play. We had shared with Norton Capital all of the challenges faced by the Group. We had the advice of Nick Brook and various other consultants as to how we should conduct ourselves. 460 Ms Perovich said at the time the second prospectus was issued Neovest did not have a formal plan for redemption of the shares issued under the first prospectus, but only about $800,000 worth of shares had been issued under that prospectus. The issue of rollover was not discussed with Mr Norton until around May. 461 Ms Perovich said that Mr Pawski did not ask her at any time what arrangements were in place to redeem the shares issued under the first prospectus. 462 At the time the second prospectus was issued, no management accounts for the Neolido Group were made available to the Neovest directors because there were none available at that time. The directors were not aware of the month to month financial position, but were only aware of the financial position of Neo Lido on a six monthly basis. 463 Ms Perovich admitted in her evidence that the second prospectus did not mention all of the planning litigation matters in which the Neolido Group was involved, but only some of them. 464 She also admitted that the second prospectus did not disclose that there had been sales of properties that were associated with foreclosure by a lender. She said that it did not seem to her to be important to disclose the fact that a property had been sold for an insufficient price to discharge a mortgagee. She admitted there were foreclosure issues not disclosed. 465 She admitted that an administrator was appointed to Neo Zen No 1 Pty Ltd on 23 December 2004 and a controller was appointed on 18 January 2005 to Neotel No 1 Pty Ltd, but both facts were not disclosed in the second prospectus. 466 She admitted that the second prospectus did not disclose a loss by Neolido of $1.9 million and a deficit of assets as to liabilities at $1.2, to nearly $1.3, million. 467 She would not admit that it was necessary to disclose in the second prospectus that the solvency of Neovest depended on the recovery of loans advanced to Neo Lido and Neolido Holdings. 468 The following exchange took place: HIS HONOUR: Do you accept that? -- Well, look, I actually don't. I don't accept that, and the reason is that preference shareholders are a contingent liability and, in fact, Neovest was solvent even [if] Neolido went down because the preference shareholders, or the money received from the preference shareholders, isn't treated as a debt on the books when it comes to establishing whether it's solvent or not. It's a debt and we acknowledge that debt, and - but it's - so I get confused sometimes, but as from the solvency point of view, Neovest was not insolvent even when Neolido went down and wasn't able to pay its debts. Because the shareholders weren't entitled to redeem? -- Correct. 469 Ms Perovich admitted that Neolido Holdings had been served with a statutory demand in February 2005, but that fact was not disclosed in the second prospectus. She was cross-examined about a number of statutory demands served on Neolido Holdings of which she was aware as at 29 March 2005, but she said she did not consider them necessary to be disclosed in the second prospectus. 470 She admitted the actions of 3 Point Finance appointing a receiver was a serious matter that affected Neo Lido and Neolido Holdings and that she knew about them, and she knew they were not disclosed in the prospectus. Mr Spencer also admitted that non-disclosure. 471 She admitted that at the time of the publication of the registration of the second prospectus she knew that Neo Lido and Neolido Holdings had been in default on a number of matters and those defaults were not disclosed in the prospectus. Mr Spencer also admitted that non-disclosure. 472 She admitted that as at 31 January 2005, Neo Lido and Neolido Holdings were actively looking to refinance because they were in default with some of their financiers. She admitted that was not disclosed in the second prospectus and she knew that it was not disclosed. She said, rather surprisingly, those defaults were not disclosed in the prospectus because "it was seen to be just a normal course of business (to be in default)". She said that the defaults were not seen as "material" and "we didn't believe that impacted on the Group". 473 She admitted that the prospectus did not disclose that Neo Lido had approached its members for a temporary forbearance and that loan arrangements could not be maintained on their existing basis. She said that was an ongoing management role since October 2004, but was not disclosed in the prospectus and she knew it was not disclosed. 474 She said of the 3 Point Finance matter, and the non-disclosure of a series of claims against the Group: HIS HONOUR: Why weren't they disclosed? -- They weren't disclosed, your Honour, because they were considered to be not material to Neovest in the sense that Neo Lido - some of those - a lot of those were issued about the time of the - just post the attack of Three Point Finance and At the time of when? -- The Three Point Finance attack. So after the 29th - after 27 September '04. And the trickle down effect, or the shockwaves of that particular attack meant that creditors became very concerned. So instead of talking to us, what they did immediately was file statutory demands or claims in the Mags Court - Magistrates Court. We then had to deal with that, which we did. And by the time the prospectus came along a lot of those matters were either defended or, in fact, they had been adjourned, or there had been settlements made. There was a list of litigation that we disclosed for the prospectus to the lawyers. And it was not considered to be material. Not considered by whom to be material? -- Well, by ourselves and the lawyers. … Yes, well, that doesn't answer my question. But I will put it once more. The evidence you've given was that it caused significant harm to the company, the appointment of the receiver by Three Point Finance. Why didn't you disclose that?--- Well, we did disclose it to Norton Capital. We - it was common knowledge. It wasn't like we had hid it from anyone. Why didn't you disclose it in the prospectus?---We didn't believe it needed to be disclosed in the second prospectus. 475 On 2 June 2005, Mr Marc Robinson of ASIC swore an affidavit in a proceeding in the Supreme Court of Queensland for the winding-up of Neo Lido and Neolido Holdings. 476 Ms Perovich was taken through that affidavit. A summary of the matters that Ms Perovich accepted were omitted from the prospectus is contained in Schedule D of the first and second defendants' closing submissions: 4.1 the Neolido Group was in substantial default to five different councils regarding its obligations to pay council rates totalling $188,556.94; 4.2 the Neolido Group owed debts to the Queensland Office of State Revenue in respect of land tax totalling $349,825.33; 4.3 entities within the Neolido Group had failed to file BAS returns since the third quarter of 2004; 4.4 a statutory demand for $70,897.46 had been served on Neolido by the ATO on 11 February 2004; 4.5 the Neolido Group owed outstanding superannuation payments to employees in the sum of $115,292.14; 4.6 Neo Lido was in default on two rent hire contracts with Rentmax in the sum of $47,805.44; 4.7 Holdings' bank statements had not been reconciled and contained a series of unassigned transactions totalling $8,263,550.52; 4.8 Neo Lido's creditor's report recorded: 4.8.1 "aged" creditors totalling $834,947.51, including $396,554.53 of aged creditors outstanding for in excess of 90 days; and 4.8.2 Neo Lido's creditor's report recorded 24 creditors that were "disputed" or the subject of repayment arrangements for a total value of $1,108,778.60; 4.9 the Neolido Group fixed/secured asset and liability register disclosed that in respect of each of the first mortgage, second mortgage and secured loans, all loan types were in default; 4.10 entities within the Neolido Group had received: 4.10.1 nine statutory demands for varying amounts; 4.10.2 eleven claims including a claim for $206,226.27 by Bligh Voller Neild; 4.10.3 an (sic) credit default report regarding Kent; 4.10.4 a number of exercises of power of sale from financiers; 4.10.5 a large number of final demands or had entered into repayment agreements with third parties; 4.10.6 a large number of claims which had been "completed" or resolved which had been paid or were subject to a repayment schedule; 4.11 Neo Lido owed outstanding superannuation payments to the ATO of $115,292.14 4.12 twelve entities in the Neolido Group or that were associated with the directors of Neo Lido were in receipt of correspondence from the Queensland Office of State Revenue regarding the deferred payment of land tax; 4.13 entities in the Neolido Group received notices from Suncorp-Metway on 31 March 2005 regarding: 4.13.1 notices to Neo Lido regarding a default on its facilities regarding overdue interest totalling $276,376.19, and making a demand for payment of $2.093 million; and 4.13.2 notice of demand for various entities in the Neolido Group totalling $5,211,427.67; and 4.14 entities within the Neolido Group were incurring monthly interest on its various facilities of in the order of $527,460.80 to $824,097.36 per month. 477 Both Ms Perovich and Mr Spencer agreed in cross-examination that those matters were not disclosed. 478 Shortly after the second prospectus was registered and published, Neo Lido received a demand from one of its bankers in the sum of $2.093 million. Ms Perovich said that that sum was secured by a directors' bank guarantee so calling up that loan would not affect Neo Lido, but would be a detriment to the two directors. 479 Ms Perovich said that she did not believe that the claim would have an impact or that it would be a relevant consideration for an investor because the repayment was to be made by the directors. 480 When it was pointed out to her that the directors had given a guarantee in relation to Neovest and the fact that they owed $2 million would be relevant in relation to that guarantee she agreed. 481 A few days after the prospectus issued, Suncorp also issued a demand, this time in the sum of $5.2 million and, in that case, like the previous case, the market was not informed.

18 April 2005 482 On 18 April 2005, Mr and Mrs Selig met with Mr Mackintosh, who provided Mr Selig with a further "Cash Flow and Debt Management Strategy Paper", which was dated 18 April 2005 and that Mr Bertram had prepared. It recommended again that, amongst other things, the plaintiffs purchase four investment properties being lots 1, 2, 7, and 9, Berrima Gardens. Again that recommendation must be viewed against the units which were the subject of the Wynnum contracts. In its Executive Summary, the document also recommended that the plaintiffs "Purchase $400,000 into Neovest generating an income of 20% which equates to a gross income of $80,000 per annum or $1538.46 per week". The document also included a section entitled "Strategy Two Projections" that included the "purchase of $450,000 … into Neovest at 20% per annum generating you an income of $90,000 per annum or $1500 per month (sic)". Mr Selig says he acted on this recommendation. There is no reason to doubt his evidence in this regard. 483 Mrs Selig's evidence was that she could not recall seeing the paper or discussing the paper with Mr Mackintosh. She thinks she was not present when Mr Selig discussed it with Mr Mackintosh, nor did she listen to the conversation. She said she discussed the paper with Mr Selig after he had discussed it with Mr Mackintosh. 484 Mr Bertram said that he had no independent recollection of the recommendations in the Cash Flow and Debt Management Strategy Paper, and was not involved in its preparation. 485 He said that Mr Mackintosh telephoned him after the meeting with Mr and Mrs Selig and told him that Mr and Mrs Selig had decided to proceed with a strategy involving a purchase by Mr and Mrs Selig of $450,000 of Neovest Foundation Shares. 486 On the same day, the plaintiffs met with Mr Bertram, who provided them with a document he had prepared entitled "Statement of Advice: Limited Advice", which was also dated 18 April 2005. That was provided with a covering letter addressed to Ron and Janna, again from David Bertram & Associates Pty Ltd trading as DBA Financial Designs dated the same day. It said: Dear Ron and Janna, In accordance with our discussions and your instructions, we are pleased to attach your Statement of Advice (SOA), which has been specifically tailored for you and balances your current and future financial objectives with your investor type and attitudes toward investment risks. The SOA has been compiled using information obtained from you in your "Fact Finder and Financial Needs Analysis", a copy of which is available on request. Please read the Statement of Advice thoroughly, giving careful consideration to the advice and recommendations provided. If you have any queries or feel that any relevant information has been either overlooked or misinterpreted, please let us know prior to implementing any of the recommendations contained in the Statement of Advice. The recommendations in this Statement of Advice are based on current information and should be considered to be current for the next month only. After that time it may become necessary to review the recommendations accordingly. Subject to your approval, we would be pleased to assist you in implementing the recommendations contained in your Statement of Advice, including the completion and lodgement of any relevant application forms and associated documentation. Thankyou for providing us with the opportunity to be of service to you. Yours sincerely, [signature] David Bertram BEng ACIP DFS(FP) Authorised Representative Wealthsure Financial Services 487 This was the second Statement of this kind provided by Mr Bertram to the plaintiffs, the first having been provided on 29 November 2004. It said under the heading "Our Recommendations": Full details of our recommendations, and the reasons for those recommendations, are contained in the text of this Statement of Advice. A brief summary of those recommendations, however, is outlined below: We have looked at the options you have available to you to commence further wealth creation. Property at this stage is appropriate as long as we can meet any cash flow shortfalls (negatively geared) via income from the other investments. What we have recommended is for you to access some of the available equity in your home and invest these funds. The initial amount we have recommended to borrow is $450,000. These funds will be invested into the Neovest Foundation shares generating you an annual income of 20.00% (paid monthly in arrears) or $90,000 per annum. We have recommended that this investment be placed in joint names so that we balance the benefits of tax deductions now against both of your incomes (the same amount for you both) as well as reducing potential capital gains tax against just one income in the future. 488 It said under the heading "The Results": Implementation of the recommendations contained in this Statement of Advice should enable you to achieve the following results: You will have exposure to a variety of quality fund managers and asset types that ensures effective diversification of your investments whilst enabling a credible level of growth in your portfolios…both superannuation and personal. Your portfolio will be well structured and diversified, providing you with sufficient flexibility to enable adjustments to be made to the portfolio in future, should the need arise. The implementation of a negative gearing strategy will provide your portfolio with the opportunity to achieve growth that would have not been possible otherwise. The resulting increase in your retirement funds (shown at 20 years for illustration purposes) due to this investment strategy has been estimated at $3,504,600 (after repayment of the borrowings against your house and the further margin loan) which means an increase in your retirement income of approximately $245,321.98 per annum. 489 The document identified the costs of implementing the recommendations under a heading "Disclosure of Fees, Brokerage and Remuneration": Initial commissions/brokerage are paid to Licensees for the placement of the financial product with the Fund Manager. They are not dependent on the performance of your investment but on your initial investment amount. Trail commissions/brokerage are paid to Licensees from the fund manager. This usually forms part of the annual administration fees and charges charged to your account by the fund manager (please refer to the fees and charges section in the Product Disclosure Statements). The amount of trail commissions/brokerage payable to the Licensee is dependent on your average daily account balance. Hence, the lower your average daily account balance, the lower the percentage of trail to be paid to the Licensee and vice versa. Note: All brokerage amounts stated in the tables below are inclusive of GST. Table 1: Initial Brokerage Please note that all additional or regular contributions attract a 3.30% entry fees. Fund Name Initial Net Entry Fee Total Brokerage Brokerage Brokerage Do Exit Insurance Company Investment Paid by Client Paid to Licensee Retained by Licensee to be Paid Fees * Amount to Adviser Apply? ($) (%) ($) (%) ($) ($) ($) Neovest 450,000 0.00 0 4.40 19,800 495.00 19,305.00 No

Total $450,000 $0.00 $19,800.00 $495.00 $19,305.00

490 The document contained a section entitled "Authority to Proceed", which was signed by the plaintiffs and Mr Bertram on that same day. On the same day, the plaintiffs signed a Neovest Application Form to purchase $450,000 of "Foundation Shares". 491 Mr Selig said that Mr Bertram took him through the Executive Summary and explained it. He said he was told that he would have to borrow a total of approximately $450,000 and invest those sums. Mr Selig admitted that he had previously discussed the amount of $450,000 with Mr Mackintosh. 492 Mr Selig complained that Mr Bertram did not tell him any of the following: that the interest paid on Foundation Shares was "up to" 20% and that there was no certainty or likelihood that this rate would be paid. He never advised that any payment of dividends on the Foundation Shares was subject to a 15% per annum dividend having been paid first on the Equity Shares. I did not understand this when I purchased the shares. that a dividend could, by law, only be paid out of profits and that the profit which Neovest had made in the previous financial years was $1335 for the half-year to 31 December 2004, and that Neovest had suffered a loss of $2500 for the 2004 financial year. that the level of risk with the Neovest shares was high or advised (sic) me of the effective conflict of interest which there was between Neovest and the Neo Lido Group due to the coincidence of directors. He did not tell me a receiver had been appointed to various of (sic) the Neo Lido companies. that the Neo Lido Group was the only investment asset of Neovest or that that Group had had trouble raising money. He did not tell us that the Group had engaged a finance broker (Mr Norton) at high commission to raise finance because it was having trouble obtaining funds from traditional lenders. He did not tell us that the Group had been in a position of financial stringency. He never advised me that Neovest had not taken any proper security on the monies which it was lending to the Neo Lido Group. that Neovest was not "capital guaranteed" in the sense described on page C10 of the Statement of Advice of 29 November 2004 or page C10 of the Statement of Advice of 18 April 2005. that Wealthsure had advised its Representatives that due to the risks associated with Neovest, the maximum investment per client was to be 15% of that client's net assets, not including the family residence, and that borrowing in order to purchase Neovest shares was not permitted. He never showed me a copy of the email from Wealthsure to its Authorised Representatives dated 16 September 2004. up to 19.5% of the investment monies which Neovest received would go as commissions. that either he or Wealthsure claimed that it was not liable for the advice which they were giving to Janna and I. To the contrary Mr Bertram had been present when Mr Mackintosh had introduced him as part of a large, licensed and insured company. that at the stage when I signed up for Neovest, that Neovest did not have any mortgage security of any of the land owned by the Neo Lido Group. 493 Mrs Selig has little or no recollection of the meeting. 494 Both Mr and Mrs Selig admitted signing the application form. Mr Selig was told it was an application to invest in Neovest and he signed it after having already been taken through the Executive Summary. Mrs Selig signed it without reading that the document contained an acknowledgement that she had read and understood the prospectus to which the application attached. 495 Mr Bertram admitted that he prepared both the covering letter and the Statement of Advice for Mr and Mrs Selig, and that he met with them to present the second Statement to them. He thought there was no-one else present apart from the three of them. He said that he tried to ensure that Mr and Mrs Selig understood all of the key details of the Statement and, in particular, he directed them to the Executive Summary, product information and fee disclosure. 496 He said he did not provide any reassurance to Mr and Mrs Selig that Neovest would be able to make payments, nor did he make any promises to Mr and Mrs Selig about that matter. 497 He said that he had received the Neovest first prospectus and had read it summarily, and that he had scanned it on one occasion. He said that he had seen a copy of the second prospectus, which he had presented to Mr and Mrs Selig. He said that he told them that it was "a new prospectus that had been issued by Neovest that was in similar terms to the previous prospectus I had provided them". He said that he told Mr and Mrs Selig that the prospectus contained more detailed information about the product and risks associated with an investment in Neovest. He told them that the Norton Capital research, which he had previously provided to them, was still valid. 498 It was his evidence that he gave Mr and Mrs Selig the second prospectus at the meeting of 18 April 2005. 499 Mr Bertram admitted that he did not discuss with Mr and Mrs Selig how the Neovest shares could be redeemed, or whether Neovest would be able to redeem them. He also admitted that he did not discuss with Mr and Mrs Selig how commissions would be paid out of Neovest's income. He agreed that he did not explain to them how Neovest might be able to redeem the preference shares after 12 months, even though he noted that the risk level was high. 500 Mr Bertram agreed that he did not at any time tell Mr and Mrs Selig that there was no guarantee that dividends would be paid to shareholders or that shares would be redeemed, although the directors intended to redeem the shares 12 months after their issue. 501 When asked what evidence there was that Neovest would be able redeem shares after paying commissions of 13% and, in the case of Foundation shares, dividends of 20%, Mr Bertram replied "None that I'm aware of". 502 Mr Bertram agreed the Statement of Advice failed to record that he had urged Mr and Mrs Selig to read the prospectus or the Norton Capital Information Summary. 503 He agreed that the Statement of Advice drew text in parts from a template, which ought not to have appeared in a Statement of Advice for Mr and Mrs Selig. He agreed that the statement suggesting a "diverse managed fund portfolio" should have not appeared in the Statement of Advice. He agreed that the statement suggesting a "portfolio construction" was not appropriate to appear in the Statement of Advice, because there was only one investment. Mr Bertram admitted that the following statement, which appeared in the Statement of Advice, was incorrect: This strategy was recommended as it provides you with the diversification across both asset classes and fund managers required and at the same time provides the gearing level appropriate to your income position. Access to funds is also available if required. 504 Mr Bertram was asked and answered: Well, is this document appropriate, do you say, for the investment which Mr and Mrs Selig undertook? -- No, your Honour. It was the document we had at hand at the time. 505 Mr Bertram agreed that a competent and prudent financial planner would not ordinarily recommend an investment of shares into an entity that was not a listed company, had no secondary market, and had no previous financial record, as a suitable investment for a client who has never invested in shares before. He agreed that he regarded his role to objectively advise a client notwithstanding that the expressed desires of a client might conflict with his advice. He agreed that if a client had an overly optimistic expectation of a particular product, scheme, or strategy, it was his duty to warn against such a product, scheme, or strategy, if he considered such an investment to be inappropriate. 506 Mr Bertram agreed that the advice was contrary to the directives contained within the email sent to him on 16 September 2004 from Mr Pawski, insofar that it advised Mr and Mrs Selig to use borrowed funds to invest in Neovest, and insofar that it advised them to invest more than 15% of their net assets excluding the family residence. He admitted that he did not tell Mr and Mrs Selig that his advice was contrary to the instructions from Wealthsure. 507 He said that at this meeting he asked Mr and Mrs Selig if they wished to proceed in accordance with the Statement of Advice and was told that they did, as a result of which he asked them to execute the "Authority to Proceed". He said that he also asked them to sign the application form which he took out of the second prospectus and filled out. 508 He also said Mr and Mrs Selig signed a Macquarie Cash Management Trust application he completed for them, which was a cash management facility into which the Neovest dividends were to be paid. He said Mr Selig gave him a cheque for $10,000 to open that account. 509 Mr Bertram said that on 18 April 2005, at the time he gave his second Statement of Advice, he had no reason to have any concerns about the solvency of Neovest or the Neolido Group. He said he was aware that Neovest was paying dividends to his clients at the coupon rate, because he had discussed that with clients whom had confirmed that was the case. He said he was not aware of any delay or missed payments. He said he was not aware of any solvency concerns raised in the Neovest newsletters he received every month or so. He said the presentation by Mr Norton at the Mooloolaba Yacht Club and his meeting with Mr Wood from Norton Capital had reaffirmed his understanding and belief that the Neolido Group's development projects were successful. 510 Mr Bertram said he had assumed that Neovest had continued to make profits to enable it to make distribution payments on a monthly basis. He said he believed this because of the Norton Capital research papers. 511 Mr Bertram said he believed the guarantees from Ms Perovich and Mr Spencer were effective because he had met with them and he believed they were competent. He said his conversations with them, and with Mr Norton, Mr Wood, and other members of Neovest and Norton Capital did not make him aware of anything that caused him to suspect that his beliefs in Neovest were misplaced. 512 Mr Bertram said that prior to ASIC placing a stop order on the Neovest prospectus in May 2005, he was not aware and was not aware as at 18 April 2005, that: 193.1 the Neolido Group had a substantial unsatisfied superannuation debt owing to employees of the Neolido Group and had incurred penalty interest in relation to outstanding superannuation payments since the 2002/2003 financial year and for all subsequent quarters in 2004 and 2005; 193.2 the Neolido Group had been served with a statutory demand from a representative of the ATO on 11 February 2004 for $70,897.46 and had subsequently entered into a repayment arrangement with the ATO in order to satisfy that statutory demand; 193.3 the Neolido Group had not lodged BAS returns with the Australian Taxation Office ('ATO') since the third quarter of 2004 (that is, for the period from January to March 2004) and had a substantial unsatisfied tax liability to the ATO and had been and was incurring general interest charges from the ATO relating to the late payment of taxes to the ATO; 193.4 the consolidated results of Neo Lido Pty Limited for the year ended 30 June 2004 prepared by Deloitte Touche Tohmatsu showed that the company made a net loss for the 2003/2004 financial year of $1,082,535; 193.5 the Annual Financial Reports of each of Neo Lido Pty Limited and Neolido Holdings Pty Limited for the year ended 30 June 2004 only showed a positive net asset position as a result of the inclusion of non-interest bearing loans to the directors and related entities and receivables owed by related parties; 193.6 a receiver had been appointed to each of Neolido and Neolido Holdings on 27 September 2004, which appointment was subsequently discharged on the same day; 193.7 the Neolido Group was in default of payments on first mortgages, second mortgages and secured loans and was incurring default interest charges and interest arrears on its secured loans; 193.8 the Neolido Group was involved in substantial litigation relating to unpaid debts and finance payments with a variety of different parties; 193.9 the Neolido Group had substantial outstanding obligations to pay council rates and land tax to statutory authorities; 193.10 Neo Lido Pty Limited was in default of payments in relation to leasing and hire purchase agreements entered into in relation to fixtures held at the offices of the Neolido Group; 193.11 two entities within the Neolido group had been placed in administration in the period December 2004 to January 2005, namely Neo Zen No. 1 Pty Limited ACN 106 608 235 on 23 December 2004 and Neotel No. 1 Pty Limited ACN 102 731 760 on 18 January 2005; 193.12 Neolido Holdings was in default of a statutory demand served on it by KNSW Pty Limited on 10 February 2005 for unpaid fees totalling $213,180, which demand had not been met and in circumstances where Neolido Holdings had not sought to set the statutory demand aside, resulting in winding up proceedings being commenced by KNSW Pty Limited on 9 May 2005 in respect of Neolido Holdings' failure to comply with the statutory demand; 193.13 the "Neo Lido Pty Ltd Balance Sheet as of February 28 2005" and "Neo Lido Pty Ltd Profit & Loss July 2004 through February 2005" indicated that the company had negative net assets of $1,276,572.28 and a reported net loss of $1,906,186.56; 193.14 senior officers employed by the Neolido Group had expressed concerns to the directors of Neolido that the Neolido group was insolvent; 193.15 as at 3 March 2005 the bank statements of Neolido Holdings Pty Limited held with Westpac Bank showed that the company had 7.5 pages of un-presented cheques with approximately 73 entries per page totalling $8,283,737.39 in un-presented cheques in addition to 2.5 pages of uncleared deposits with approximately 73 entries per page totalling $8,263,550.52; 193.16 Suncorp-Metway Limited had issued demands for payment to Neolido Holdings, Neolido and three related companies and their directors on 31 March 2005 in the total sum of $5,211,427.67, as a result of outstanding amounts payable under various facilities; 193.17 ASIC had issued notices to the directors of Neolido and Neolido Holdings on 1 April 2005 requiring production of the books and records of those companies regarding a concern about possible insolvent trading by those entities; 193.18 as at 12 April 2005 Neo Lido Pty Limited had total creditors in the sum of $2,579,448.90 of which Neo Lido Pty Limited's creditors ledger recorded: 193.18.1 73 creditors, 49 of which were aged creditors owing debts totalling $834,947.51, of which $396,554.53 had been outstanding for over 90 days; 193.18.2 debts which were the subject of a repayment arrangement totalling $635,722.83; and 193.18.3 "disputed" creditors of $1,108,778.60; 193.19 the records of the Neolido Group disclosed that the Group had been served with 9 statutory demands, 11 claims, 13 exercises of powers of sale against Group companies and 85 final demands or repayment arrangements entered into by the Group; 193.20 the guarantees provided by Neolido and the directors of Neolido to Neovest were of little or no value and Neolido and the directors of Neolido did not have sufficient assets over liabilities to be able to meet any call on the guarantees; and 193.21 in assessing the solvency of the Neolido Group, the directors were including as an additional security the Mango Hill project (which project was not owned by the Neolido Group and over which Neovest held no security). 513 Mr Bertram said he was not aware the guarantees provided by the directors were worthless and that he was not aware the directors did not have sufficient assets over liabilites to meet any call on the guarantees. He said if he had known of any of the above matters, he would have informed Mr Pawski and Wealthsure about the situation and about his concerns and recommended that they immediately investigate the situation with Norton Capital and Neovest. He said he would have done so because Mr Pawski would have needed to consider whether it was still appropriate to have Neovest on the APL. Mr Bertram said if he was aware of the problems with Neovest and the Neolido Group, he would not have recommended Neovest to the plaintiffs. 514 However, under cross-examination, Mr Bertram admitted that he did not do any investigation into the issue of solvency of Neovest or the Neolido Group. He said he did not have any discussions about that issue with Mr Pawski, and he admitted he made no effort to form any informed view as to the worth of the directors' guarantees. He admitted that, upon reflection, the guarantees were worthless.

The April Investments 515 On 19 April 2005, Wealthsure sent to Macquarie Investment Management an application by Mr and Mrs Selig to open a Cash Management Trust with a cheque signed by Mr Selig on their Westpac account, which was for an initial deposit of $10,000. 516 On 20 April 2005, Mr Bertram recorded that he had completed the Neovest application with the Macquarie account details and sent the original to Mark Natoli at Norton Sydney in that day's mail. On the same day, Mr and Mrs Selig signed an authority directed to the National Mortgage Company: We are asking you to transfer $450,000.00 from our Adelaide Bank cheque account No. 0037874112RX02 to Westpac account at branch 034013 acc. No. 198728, account name: Neovest Limited Share Application Account, Selig Application. Could you fax a comformation (sic) to Karmen at DBA House 21 Illuka Street, Buderim, Q. 4556. Fax 07 5476 8788? 517 On 20 April 2005, an amount of $450,000 was withdrawn from the RX02 account, to pay Neovest, but it was credited back to the account later that same day. 518 That same day, an amount of $450,000 was again withdrawn from the RX02 account, to pay Neovest. This amount was not credited back. 519 On 22 April 2005, Neovest issued a share certificate to Mr and Mrs Selig recording the issue of 450,000 Foundation Shares paid to $1.00. 520 On 7 May 2005, the plaintiffs received their first and only dividend cheque from Neovest for the sum of $7,500.

AISC's Notice to Neovest 521 On 13 May 2005, ASIC issued a Notice to Neovest under s 30 of the ASIC Act, which required Neovest to produce "books" to an ASIC officer. Books included its register, financial records, documents, banking books and other records. Blake Dawson Waldron, acting on behalf of Neovest, wrote to ASIC acknowledging receipt of the Notice the same day and advising it would begin collating the books and contact ASIC again on 16 May 2005. 522 Mr Townley said that Neovest produced those books on or about 16 May 2005. He said that between then and October 2005 there were frequent meetings at which Mr Spencer and Ms Perovich reported on their attempts to resolve the ASIC difficulties and they discussed various strategies. 523 As at 17 May 2005, over $13,000,000 worth of redeemable preference shares had been sold by Neovest. However, on that day, and later on 7 June 2005, 15 June 2005, 23 June 2005, and 25 October 2005, ASIC issued interim orders that no securities be offered, issued, sold, or transferred in Neovest under the prospectus of 29 March 2005.

The Later Events 524 On 7 June 2005, Mr Spencer, as a director of Neovest, wrote to the plaintiffs addressing them as "Ronald and Janna" informing them that "the declaration of dividends in May 2005 and consequently the dividend payment in June 2005 have been delayed". Mr Spencer advised that because the Neovest directors were under notice from ASIC to suspend the offer, issue, sale and transfer of shares until further notice, the directors had made a decision to delay the declaration and payment of dividends until the resolution of matters to the satisfaction of ASIC. Mr Spencer advised that Neovest was in the course of preparing a submission to ASIC to address the issues raised by ASIC and that the current position would be reviewed as soon as possible, and that investors would be informed of the outcome by no later than July 2005. 525 On 8 June 2005, Perpetual Nominees Ltd appointed receivers to Neolido and Neolido Holdings over all of the assets and undertakings of both companies. 526 On 23 June 2005, a further $43,285 was withdrawn from the RX01 account, to pay Macquarie Investment Management Ltd for a taxation debt owing by Jarone. Also on this day, a further $38,702 was withdrawn to invest in superannuation in Netwealth Managed Funds. 527 After these and the earlier identified withdrawals, $235,922 remained in the two RX01 and RX02 accounts. Under cross-examination, Mr Selig agreed that $245,571 remained, but there were other fees and amounts of debit interest that reduced the total amount remaining, but not in a significant manner. 528 The total purchase price payable under the Wynnum contracts was $1,185,000 but deposits of $118,500 had been paid, leaving $1,066,500 outstanding. 529 The difference between the amount outstanding under the Wynnum contracts, and the amount remaining in the RX accounts, was $830,578. 530 On 4 July 2005, Wealthsure wrote to the plaintiffs enclosing correspondence from Neovest confirming their $450,000 investment, which had been deposited in April 2005. 531 On 30 July 2005, the plaintiffs applied to the National Mortgage Company for an increase of $201,000 on the line of credit to the RX01 account (bringing that account limit to $600,000) and of $120,000 to the line of credit to the RX02 account (bringing that account limit to $680,000). This application also contained false information. 532 The signed declaration of financial position recorded that Mr Selig received $300,000 "Self employed Annual Net Income from Business" and Mrs Selig an amount of $200,000. Mr Selig admitted that he and Mrs Selig were not earning these amounts. 533 The documentation also recorded that the Seligs were receiving a total of $73,040 in rental income. However, at that time the properties at Wynnum had not settled and the only rent being received was from Unit 12 of the Sea Aura Apartments, which, as I have said, was no more than $380 per week being $19,760 per annum. Mr Selig agreed under cross-examination that the figures were provided because he knew that if they were not, he would not get the finance approved that he needed. 534 The National Mortgage Company agreed to increase both lines of credit. 535 On 30 August 2005, ING agreed to advance the plaintiffs a further $920,000. With that advance, the plaintiffs had borrowed in all $2.2 million. Part of those funds (at least $160,000) had already been spent by the plaintiffs for reasons unassociated with the advice or strategy that had been suggested by Mr Bertram and Wealthsure. 536 On 2 September 2005, Mr Bertram sent to the plaintiffs Wealthsure's up-to-date statement in relation to Neovest, which he had received earlier that day. 537 On 7 September 2005, the plaintiffs settled on the three units, Units 1, 7 and 9, the subject of the Wynnum contracts. They paid a settlement sum for Unit 1 of $352,943.71; Unit 7 of $356,731.67; and Unit 9 of $403,715.16; in all a total of $1,113,390.54. 538 On 20 September 2005, Mr Bertram, through DBA Financial Designs, provided Mr Selig with a portfolio review relating to Mr Selig's investment in Netwealth Investments Ltd, a superannuation investment. At that time, the investment was valued at $35,187.33. 539 On 29 September 2005, Mr and Mrs Selig signed a contract to purchase a property at Lot 7 Wattle Street, Yaroomba for $285,000, with the intention to develop that property. The property later became known as "12 Wattle Street, Point Arkwright". The facsimile that purports to send the contract to Mr and Mrs Selig on 29 September 2005 is itself undated, and the contract to purchase although signed is also undated. However, the evidence is unchallenged and no competing date in this regard has been proffered. The contract was not unconditional as at 29 September 2004, but was conditional upon the seller effecting registration of a survey plan in the Department of Natural Resources and Mines. 540 Mr Townley said that in October 2005 it became clear to the Neovest Board that the second prospectus was "out of date and, even if the interim stop order should be lifted, it would not be possible to issue any shares without an entirely new prospectus. As a result we resolved to formally close the second prospectus." 541 On 4 November 2005, Mr Pawski emailed Mr Bertram, through an intermediary, advising that a meeting had been held in the Neolido office on 31 October 2005 and an updated reconstruction and recovery plan was provided by the directors to the meeting. He advised that a further update of the progress would be communicated to Wealthsure by 24 November 2005. 542 On 7 November 2005, that email was communicated to the plaintiffs by Mr Bertram with the comment: Wealthsure and ourselves are on top of the situation as far as we can be and we are hopeful of a resolution by the 24th of November. 543 On or about 16 November 2005, the plaintiffs' contract to purchase the property at Wattle Street, Yaroomba for the price of $285,000 became unconditional. 544 On 14 December 2005, Mr Bertram wrote to Mr and Mrs Selig advising of the circumstances which had occurred in November relating to Neovest. He wrote: I would like to take this opportunity to relay to you the events that have occurred over the past few weeks since the 24th November 2005 and the course of events that I have been told should occur going forward from here. I have just finished speaking to Mark Norton (a director of Norton Capital and Neovest) as well as Darren Pawski (director of Wealthsure) and the information relayed to me by both of these gentlemen is as follows: Neovest lost their court case on the 24th November with ASIC which they then appealed. This appeal was held on Monday the 12th December and this appeal was also lost. ASIC was awarded the right to appoint liquidators to wind up Neolido and Neolido Holdings but were also charged with paying all of Neovest's court costs. ASIC are subsequently appealing this decision themselves…a date yet to be determined. The resultant "insolvent" status placed on Neolido and Neolido Holdings does not in any way affect the process already underway to secure funding against an insurance bond issued against the Mango Hill project. The insurance bond was accepted on Friday the 9th December 2005 and the Commonwealth Bank of Australia as well as GE Finance are looking at funding the $10,000,000 against the security of this insurance bond. Both of these financial institutions are in "credit" at present which means that the first one to offer the funding will do so. From a timing point of view, the funds are anticipated to be received prior to Christmas. Once these funds are received, there will be at least one dividend payment made prior to Christmas with the balance of the missed payments being made early in the New Year. As your maturity date is actually in April 2006, total redemption will be made to you as soon as possible after this date. You will continue to receive monthly dividends in the New Year on your investment until redemption actually occurs. I have made a special request to have your funds redeemed as soon as possible in the New Year as discussed previously. There is a further board meeting on Friday this week to check on the progress of the finance. I will be able to provide you with a further update early next week. 545 In January 2006, Mr Bertram, Ms Perovich and Mr Spencer met with Mr Selig at his home. Other shareholders in Neovest were also present. The shareholders were advised that everything would be ok and that the Neovest directors were working through the issues that had arisen. 546 On 8 June 2006, the plaintiffs applied to Orio Mortgage Finance Company to refinance Unit 3 and Unit 12 at Buderim by seeking to borrow a further $680,000 and $600,000 respectively on the two units. 547 On 23 June 2006, the plaintiffs settled on the Wattle Street, Yaroomba property. 548 On 7 July 2006, Mr Bertram, Ms Perovich, Mr Spencer, Mr Norton and other investors in Neovest met at Mr and Mrs Selig's home. 549 On 1 November 2007, ASIC applied to wind up Neovest and on 5 February 2008, the Supreme Court of Queensland ordered the winding up of Neovest.

Mr Townley's Involvement 550 I have already indicated how Mr Townley came to be involved with Mr Spencer, Ms Perovich, and the Neolido Group, and his involvement with Mr Norton, his becoming a director, and the Heads of Agreement with Norton Capital. 551 Mr Townley said that there was concern as to whether or not Neovest could reasonably satisfy the requirement to pay dividends on a monthly basis because, although Neovest did have some profits from which it could pay dividends, those profits were limited. 552 He said he expressed concern to Mr Spencer and Ms Perovich about the requirements of s 254T of the Corporations Act, which then relevantly provided that a dividend may only be paid out of profits of the company. 553 Mr Townley was shown the Heads of Agreement contained in the letter from Norton Capital dated 7 September 2004, addressed to the directors of the Neolido Group, which required Neovest to pay dividends monthly. He said he discussed his concerns about the requirements of s 254T of the Corporations Act with the directors and recalled a resolution being passed authorising dividends to be paid on a monthly basis. 554 He said that after Mr Norton was appointed a director, which was on 14 September 2004, Mr Norton became emphatic that dividends be paid monthly. Ms Perovich and Mr Spencer agreed that it was Mr Norton who insisted that dividends be paid monthly. The obligation to pay dividends monthly arose out of the Directors' Heads of Agreement with Norton Capital that was contained in the letter of 7 September 2004 to which I have just referred, and executed on 9 September 2004. 555 There is no reason to doubt that evidence. The Directors' Agreement said that dividends were to be paid monthly in arrears. Mr Norton's insistence had caused Mr Townley to remind the other directors of a long-established custom of making monthly or other periodic payments as advances on account of anticipated dividends, which advances would be in due course extinguished by declaring a dividend at the end of the financial year. 556 Ms Perovich gave evidence to the same effect. She said that the matter could be addressed by making interim loans against prospective dividends. Dividends, she said, were to be declared annually at which point the loans would be reconciled. In this way she said the insistence by Norton Capital upon monthly payments would be satisfied. She said dividends were not declared by monthly payments that were made. 557 In cross-examination, she was less sure of how the arrangement was to work. She said her understanding was that dividends were paid as advances by Neolido Holdings on account of the interest account to Neovest. She said that Neo Lido made a loan to Neovest which made the payments. 558 She said that the payment by Neo Lido was a payment of interest which went to the shareholders instead of Neovest. 559 She was asked what would happen if Neovest did not make a profit. She said the shareholders did not have to repay the money, because, if the money had already been paid, that meant that Neovest must make a profit. 560 As I have said, Mr Townley agreed that dividends had to be paid out of profits and that he was concerned with dividends being paid monthly that there was sufficient profit to pay those dividends. 561 That was the reason that he suggested that dividends be paid on account, because he could not be satisfied that there would be a profit from which to pay dividends. 562 He accepted that it was unusual for a public company to pay dividends monthly, but said that for unlisted public companies there is "quite a wide variety of behaviour". 563 He said that by January 2005 he was not receiving monthly management accounts on a regular basis but rather occasionally. He said that he was aware that Neovest was advancing funds, which it had raised, to Neo Lido for investment purposes. He said he was not aware as at January 2005 that there had been a number of defaults by the Neolido Group with some of its financiers. 564 He said, however, that he did not consider it important to know Neo Lido's financial position as a director of Neovest, notwithstanding that Neovest was investing all of its funds with the Neolido Group. I do not accept that evidence. 565 He accepted that it was one of his obligations to ensure that the loans made by Neovest to the Neolido Group were properly documented and that adequate security had also been taken as against each of the loans. 566 He was aware, as at January 2005, that the Neolido Group was suffering financial difficulties, but he denies he was aware that the directors of the Neolido Group were giving consideration to the appointment of a voluntary administrator. 567 He said that he did not recall taking any steps prior to any advance by Neovest to the Neolido Group, to ensure that the loan agreements were in place. He accepted that the processes and procedure referred to in the Facility Agreement with Neo Lido were probably not observed. 568 He said the second prospectus was issued after the first prospectus expired "to meet the anticipated demand for preference shares to be placed with clients of Wealthsure". 569 He said that one of the matters discussed by the directors prior to the issue of the second prospectus was the level of disclosure about the litigation in which the Neolido Group was engaged. At that time, the Neolido Group was engaged with several planning appeals, some minor fee disputes and litigation against 3 Point Finance, challenging that company's appointment of a Receiver. 570 He said that the directors agreed that detailed disclosure was not required, especially in circumstances where 3 Point Finance had been paid out in full and was being challenged rather than being the plaintiff in the proceedings. 571 He said that at the time that the second prospectus issued, he was aware that the Neolido Group had financial difficulties and admitted that there was no disclosure of those difficulties in the second prospectus. He was also aware that Neovest's investment plan had not been followed by Neovest at that time. Notwithstanding those matters, he approved and signed the second prospectus. 572 He said that on about 13 May 2005 when ASIC issued a notice under s 30 of the ASIC Act, was the first time he became aware that ASIC was concerned about Neovest.

The NRH Partnership 573 The Deed of Partnership under which NRH operated (the Deed) was admitted into evidence. Clause 4 of the Deed provided that the partners agreed to "carry on the practice and profession of solicitors at the partnership premises". Mr Townley said that only one or two of the Neovest directors' meetings occurred at the partnership premises and that they mostly occurred outside the partnership premises with him attending via telephone from the partnership premises. 574 Clause 13.1 of the Deed provides: All or any fees, emoluments, salary, profits, presents of money or other payments of whatever kind received by a partner as the holder of any office, appointment or position whatsoever (including without restricting it in any way, that of Director, Secretary or other responsible officer of any company … or other body where his holding of such office, appointment or position is occasioned wholly or partly by reason of his being a Solicitor or a member of the partnership) belong to and are to be accounted for to the partnership. Any time spent or expenses incurred in the performance of his functions, obligations and duties in respect of such office, appointment or position, for all purposes of this Deed, will be deemed to have been spent or incurred for or on behalf of the partnership … 575 As I have said, Mr Townley became a director of Neovest upon its incorporation on 29 May 2003. Mr Townley said it was not uncommon for a partner to become a director of a company upon incorporation, but he admitted that it was usually only for the purpose of formation and that the common practice was that the partner/director would then, after the company had been formed, resign immediately. He admitted he had not continued on as a director of any other company. He said at no time did he discuss with the other partners whether or not the services provided by him in his capacity as director of Neovest were to be part of the ordinary course of business of NRH. 576 Mr Townley was cross-examined about his accounting to NRH for his work as a director. He said that he did not report or account to the other NRH partners for any of his work or for his role as a director of Neovest. He did bill Neovest at his hourly rate, including for attending at directors' meetings. 577 Mr Gallagher gave evidence and said that he was aware that Mr Townley had been appointed a director of Neovest, but he said that he did not at any time agree with Mr Townley or with Neovest or anyone else that part of the ordinary course of business of NRH would include services provided by Mr Townley in his capacity as a director of Neovest. 578 He was, however, aware that Mr Townley did account to NRH for his time in his role as a director by invoicing Neovest for the time spent as director. 579 Mr Gallagher agreed that partners of NRH had been nominated as directors for the purpose of incorporation in the past and that the normal course of events was that the director would resign almost immediately after incorporation. He said, however, that he could not recall it being otherwise done during the currency of the relevant partnership. 580 Mr Gallagher did not accept that he believed that if any liability arose arising from Mr Townley acting as a director of Neovest, that the firm's professional indemnity policy would respond. It was not ever discussed, he said, that the firm should be covered for Mr Townley acting as a director of Neovest. 581 He said the question in relation to insurance was whether or not Mr Townley would be covered in the event that a claim was brought against Mr Townley. He said that he was concerned that Mr Townley should be covered. 582 Mr Gallagher was aware that Mr Townley had told him he proposed to open a director's directorship file which, as Mr Gallagher thought, was to record the time that Mr Townley had spent at Neovest. 583 He said he did not authorise Mr Townley to invoice for his work as a director in the name of the firm. He said he had been told that Mr Townley had agreed that with the Neovest directors, and NRH acceded to the arrangement. He knew that invoices were being sent to Neovest in the name of NRH. 584 He said that Mr Townley was acting as a director of Neovest and in the interests of Neovest, not in the interests of NRH. He agreed that the arrangement was unusual. He said he could not point to anything that he or the other partners did to give notice that Mr Townley was not acting in the ordinary course of NRH's business, because it did not occur to him to do so.

Expert Evidence 585 Two experts gave evidence in the trial on quite different matters. The plaintiffs called Kenneth Wybrow, who gave two reports, the second of which was to address two matters overlooked in his first report. In his second report, Mr Wybrow addressed Practice Note CM7 and r 23.13 of the Federal Court Rules 2011, both of which he was unaware of at the time that he produced his first report. The first report was dated 29 April 2010. 586 Mr Wybrow has worked in the securities industry since 1969 specialising in licensing, compliance and administrations, and in trusts, estates and corporation law. He has specialised in compliance activities and financial services law and systems, and lectured part-time at the Securities Institute of Australia. 587 He has had extensive experience in his field. He has also completed a Diploma in Law and was admitted to the New South Wales Bar in 1983, but has not practised. 588 Later, he was admitted to the Supreme Court of the Northern Territory and became Crown Prosecutor and Deputy Commissioner for Corporate Affairs, during which he did practise. At the end of 1987 he came to Adelaide as an Associate Director of Paul Morgan & Co (SA) Pty Ltd, a full service stock-broking firm. In 1997, he commenced his own business providing financial services to retail and professional clients. He has continuously been a Responsible Officer, Responsible Manager, as approved by ASIC of an Australian Financial Services Licensee since 1993. Since 2003, he has practised as a financial and compliance consultant through his business, providing compliance service to a range of financial services participants. His business, Acompli Ltd, is a public unlisted company and a wholly owned subsidiary of Acompli Holdings Pty Ltd, in which Mr Wybrow is the major beneficial shareholder. 589 Since 2003, he has regularly presented at conferences, seminars and workshops, and provided reports to financial services participants on: suitability of advice provided to clients; how new legislation, regulatory guidelines or other factors impact on the activities of financial services participants; the existence of various industry standards and the sanctions for failing to maintain those standards; and the effect of breaches of the law or regulatory provisions. 590 He has provided expert reports to the Australian Federal Police, two financial planning firms and five legal practices. 591 In assessing his evidence, the fact that he was unaware of Practice Note CM7 and r 23.13 is, in my opinion, irrelevant. 592 In my opinion, Mr Wybrow satisfied the test of an expert contained in s 79 of the Evidence Act 1995 (Cth) in that he had a specialised knowledge based on his training, study or experience and was, therefore, in the position to be able to offer an opinion provided it was wholly or substantially based on that knowledge. 593 He was extensively cross-examined in relation to his report but, in my opinion, those aspects of his opinion which are admissible were not undermined. None of the respondents called expert evidence to refute Mr Wybrow's opinions. 594 He said in his Executive Summary: 2.1 Ronald and Janna Selig provided WealthSure and Bertram with full details of their financial circumstances, objectives and needs in a Fact Finder dated 11 October (2004). WealthSure and Bertram acknowledged that the Seligs were inexperienced in relation to shares and managed investments and that the Seligs needed expert advice. 2.2 The Seligs disclosed that they were expecting short-term (5 year) investments and that they did not require immediate income, but needed income and capital stability, with moderate growth, in retirement. They were presented with 20 year projections that were made to appear attractive. 2.2(sic) WealthSure and Bertram claimed to have qualifications, experience and competency to advise the Seligs about superannuation, shares, managed investments and various other products and services. They claimed to have researched all products upon which they offered advice. WealthSure and Bertram were aware that the Seligs intended to rely upon the advice of experts, which WealthSure and Bertram claimed to be. 2.3 WealthSure and Bertram had declared to ASIC prior to 9 February 2005 that they were qualified, experienced and competent to issue securities, which entailed the detailed examination and assessment of an entity that offered securities (shares) to the public for subscription and an assessment of the securities being offered. 2.4 The Seligs were advised by WealthSure and Bertram to invest in Foundation Shares of Neovest, which were stated to provide income at levels that made the offer attractive to inexperienced investors. WealthSure and Bertram did not provide adequate disclosure of the risks, did not attempt to adequately research the product and did not act as competent and prudent financial planners. A competent and prudent financial planner would have recommended a diverse portfolio and would have never recommended that an inexperienced investor place all available cash into a single investment. 2.5 I find no evidence that WealthSure and Bertram understood or attempted to ascertain the complete details of the Foundation Shares in Neovest. This action demonstrated an abandonment of the standards and practices of a competent and prudent financial planner to know sufficient about the subject of the advice to be able to ensure that the product could satisfy the needs of the client. A competent and prudent financial planner would not recommend the placement of all available funds into an illiquid (unlisted) investment, with little opportunity for sale or to withdraw funds. 2.6 WealthSure and Bertram failed to adequately research the product. They stated that holders of Foundation Shares were to receive 20% per annum return on investment. The return on the Foundation Shares was, in fact, to be a dividend which would be paid from profits of Neovest after expenses of up to 19% were paid to promoters and referrers, after other shareholders received 15% on their shareholdings and in the event that the directors declared a dividend from any part of the remaining profits. Neovest had not demonstrated a profitable trading history and other corporations in the Neolido Group were having financial difficulties. It had been clearly stated by Neovest that it would invest money raised through the offer of Foundation Shares in other entities in the Neolido Group. 2.7 I am unable to assess what the financial position of the Seligs would have been if they had not taken the advice of WealthSure and Bertram. I confirm from my experience that WealthSure and Bertram did not apply appropriate standards and practices of the financial services industry in their advice to the Seligs. WealthSure and Bertram knew the financial circumstances, objectives and needs of the Seligs, but did not give consideration of those objectives and needs in providing the advice and did not conduct sufficient investigation of the Foundation Shares in Neovest or into Neovest to ensure that the product was suitable for the Seligs. 595 Mr Wybrow was extensively cross-examined by counsel for the first and second defendants as to the assumptions which he made in his first report. 596 He confirmed in his cross-examination that he made no assumptions other than those identified in his first report. 597 He was taken to his comment where he said, in paragraph 2.4 of the Executive Summary, that Wealthsure and Bertram "did not provide adequate disclosure of the risks". He admitted in making that statement he had assumed that the Norton Capital research paper of October 2004 was given to Mr and Mrs Selig. 598 He was shown that research paper and was asked whether it provided adequate disclosure of the risks. In due course, he said that if Mr and Mrs Selig were provided with the Norton Capital research paper at the time that they were provided with the first Statement of Advice, then that the document did represent adequate disclosure of the risk. 599 He was taken to paragraph 2.5 of the Executive Summary where he stated, "I find no evidence that Wealthsure and Mr Bertram understood or attempted to ascertain the complete details of the Foundation Shares in Neovest." 600 He agreed that he did not know if Mr Bertram or Wealthsure had ever read the Norton Capital research paper, but there was no evidence contained in the first Statement of Advice to that effect. He said that an ordinary, competent and prudent financial adviser, if presented with the Norton Capital research report knowing of the arrangement that Norton Capital had with the Neolido Group, would consider the report to not be an independent report, and in those circumstances, the ordinary, competent and prudent financial adviser would seek an independent report elsewhere. 601 He was taken to a further comment in paragraph 2.5 of the Executive Summary, in which he said: A competent and prudent financial planner would not recommend the placement of all available funds into an illiquid (unlisted) investment, with little opportunity for sale or to withdraw funds. 602 In making that statement, he said he did not assume that Mr and Mrs Selig did not have in their mind an investment strategy for the next 12 months. He said he did not assume that Mr Selig's intention was to invest for 12 months and then to redeem the investment, but if that assumption had been made he would have "been infinitely more critical … of the investment" because then the Statement of Advice should have been structured totally differently". 603 He agreed he should not have said that Wealthsure and Bertram "failed to adequately research the product". He said he assumed that no research was made available to Wealthsure or Mr Bertram. He said he should have asked what due diligence had been employed by Wealthsure and Mr Bertram before they recommended the investment. 604 Mr Wybrow said that the guarantees provided by Ms Perovich and Mr Spencer to guarantee Neo Lido's performance were only as good as the performance of Neo Lido itself, having regard to the assets that were disclosed. He described the guarantees as "circular". I agree with that comment. 605 Mr Marc Robinson, who was called by the first and second defendants, was a senior accountant employed by ASIC in its National Insolvency Coordination Unit (NICU), Queensland Regional Office at Brisbane. He has been employed by ASIC in his current role since August 2005. 606 The NICU is responsible for the coordination of insolvency activities undertaken by ASIC. As part of its responsibility, it conducts a national program to review companies suspected of insolvent trading. 607 Employment within ASIC and, in particular, NICU, requires an officer to have a thorough understanding of corporate insolvency laws and accounting practices. 608 Mr Robinson graduated from the University of Queensland with a Bachelor of Commerce in 1987. He is a Certified Practising Accountant. He has previously been employed by Jefferson Stevenson & Co, which is a specialist insolvency firm and KPMG in its specialist insolvency division. He has had wide experience in company receiverships and liquidations, including winding up in insolvency and voluntary liquidation, and the investigation of companies in relation to their ability to pay their debts as and when they fall due. Mr Robinson has prepared a number of reports in relation to various companies in respect to matters leading to insolvency and after insolvency. 609 Pursuant to s 102 of the ASIC Act, ASIC has delegated to Mr Robinson certain functions and powers under Part 3 of the ASIC Act relating to the conduct of surveillance and investigations. He has exercised those powers during his employment with ASIC. 610 Mr Robinson has sworn two affidavits, both of which were tendered. The first affidavit was sworn on 2 June 2005 in a proceeding for the winding up of Neolido Holdings in the Supreme Court of Queensland. On 25 November 2005, Neo Lido and Neolido Holdings were ordered to be wound up in insolvency. The second affidavit, sworn on 31 October 2007, was in an action in the Supreme Court of Queensland brought by ASIC for the winding up of Neovest. 611 The following is taken from Mr Robinson's affidavits. On or about 29 March 2005, ASIC commenced surveillance activities into the affairs of Neo Lido, Neolido Holdings, and the Neolido Group as a result of various complaints made to ASIC regarding the Neolido Group's failure to pay employee superannuation, wages and creditors. 612 ASIC served two Notices to Produce pursuant to s 30 of the ASIC Act on Mr Spencer on 1 April 2005, which were returnable on 13 April 2005. 613 On that later date, Mr Robinson, accompanied by other employees of NICU, attended at the premises of the Neolido Group and spoke to Mr Spencer and Ms Perovich. ASIC was provided with a number of documents. 614 On 26 April 2005, ASIC wrote to Mr Spencer setting out ASIC's concerns in relation to the Neolido Group and requested outstanding documents and a solvency submission. 615 In that letter, ASIC advised Mr Spencer that it considered that the Neolido Group was at risk of trading whilst insolvent. It required Mr Spencer to obtain immediate advice from an insolvency practitioner regarding the Neolido Group, and his obligations as a director, as a matter of priority. ASIC identified the concerns, which it had, in relation to the Neolido Group. 616 On 28 April 2005, James Conomos Lawyers wrote to ASIC advising that they had met with Mr Spencer and Ms Perovich; that they were providing them with advice; that their clients had also met with an insolvency practitioner; and that they were preparing a letter in response to a number of the issues raised in ASIC's letter. They sought an extension of 14 days within which to comply with ASIC's request. ASIC consented. 617 On 9 May 2005, ASIC received a letter from Mr William Fletcher of Bentleys MRI, seeking a further seven days in which to prepare a solvency submission. On 10 May 2005, ASIC responded in a letter dated the same day to Mr Spencer and Ms Perovich advising that no further extensions would be provided beyond 12.00 noon on 11 May 2005. 618 On the same day, ASIC received another letter from James Conomos Lawyers dated the same day advising that their clients were unable to provide the solvency submission within the time stipulated, but they hoped to be able to do so within a further seven days. 619 ASIC responded by sending a copy of the letter previously forwarded to Mr Spencer and Ms Perovich earlier that day, which, as I have said, stated that there would be no further extension beyond 12.00 noon on 11 May 2005. 620 On 11 May 2005, Blake Dawson Waldron Lawyers wrote to ASIC advising that they had been engaged on behalf of the Neolido Group and requested an extension to lodge the solvency submission by 27 May 2005. 621 The submission dated 5 June 2005 was not received before Mr Robinson swore his affidavit on 2 June 2005. 622 Following upon the letter of 11 May 2005, ASIC received documents from Blake Dawson Waldron Lawyers and a letter from Mr Spencer dated 16 May 2005, which attached what was described as the "Neolido Litigation Report" which outlined all court actions to which the Neolido Group of Companies was a party. 623 On 18 May 2005, Mr Robinson and ASIC's special counsel met with the Neolido Group's former Chief Financial Officer, David Kelly. 624 By 2 June 2005, Mr Robinson conducted a review of the books and records received by ASIC in response to the s 30 notices. He identified the documents which had been received and commented upon their relevance. He also commented upon the documents received from Suncorp Metway Ltd, which was the Neolido Group's banker. 625 Mr Robinson identified debts owing to statutory authorities being in respect of Council rates $188,556.94; in respect of Land Tax in the sum of $349,825.33; in respect of the Australian Taxation Office (ATO) in the sum of $520,482 for BAS returns; a statutory demand dated 11 February 2004 to Neo Lido in the sum of $70,897.46 for a debt to the ATO; all of which, in his opinion, were indicators of insolvency by a corporation unable to make payments to statutory authorities. 626 He noted that the sum of $115,292.14 was payable to 28 employees, which sum included penalty interest for superannuation, which is again an indicator of insolvency. 627 He noted that there were two contracts in relation to fixtures at the Neo Lido office which were in default, which was an indicator of insolvency. 628 He noted that in respect of Neolido Holdings' Westpac Bank account that there was 7.5 pages of unpresented cheques with approximately 73 entries per page totalling $8,283,739.39, and 2.5 pages of uncleared deposits with approximately 73 entries per page totalling $8,263,550.52. 629 It was his opinion that the document evidenced poor accounting controls. He said: The preparation of bank reconciliations that are not up to date, do not balance and have numerous pages of uncleared, very old entries is indicative of an accounting function in disarray and is an indicator of insolvency as the offices of the company would find it difficult to discern the cash available to the company. 630 He reviewed a document which addressed the ageing of creditors as at 12 April 2005, which showed 49 of 73 creditors listed were aged and those debts totalled $834,947.51. 631 He noted that 47.5% of total creditors were outstanding for in excess of 90 days or over. He noted that a significant portion of creditors outstanding for in excess of 90 days was an indicator of insolvency. 632 He addressed the Neo Lido draft Annual Financial Report for the year ended 30 June 2004 and noted that net assets were $564,719. However, including in those assets were $6,023,008 non-interest bearing loans to the directors and related entities. If those loans were not recoverable then the net asset position would be negative $5,458,289. 633 In any event, because the loans were non-interest bearing, there was no incentive to repay the debts. 634 He noted that the current liabilities exceeded current assets by $504,574. 635 He reviewed Neolido Holdings' draft Annual Financial Report for the financial year ended 30 June 2004. 636 That document disclosed net assets of $1,117,897, although included in receivables of $5,948,269 was the sum of $5,596,320, being receivables owed by related parties. In addition, the sum of $237,000 was recorded as being non-interest bearing loans to directors and director-related entities. 637 If the receivables and loans to directors were not recoverable, then the liabilities would exceed assets by $4,715,423. 638 He reviewed a document entitled "Neolido Group Fixed/Secured Asset and Liability Register", which identified three secured loan types, being first mortgage, second mortgage and secured loans. All three secured loan types appeared to be in default with the interest arrears in respect of the first mortgage being $1,407,563; the second mortgage $310,000; and the secured loans $1,845,457. 639 He expressed the opinion: I am of the view that the Group companies that are unable to service secured debts have little hope of satisfying unsecured debt apart from striking repayment arrangements, which in turn have little hope of being fulfilled. 640 He noted that the document identified five properties under purchase contracts between various vendors and subsidiaries of Neolido Holdings. The purchase consideration was $13,375,000, with deposits having been paid of $600,000. He said that because the purchaser in each of these cases was a subsidiary of Neolido Holdings, which is likely to be insolvent, there was little prospect of the contracts being completed. 641 He reviewed a schedule of statutory demands, claims, credit default reports, exercises of power of sale, and final demands and repayment arrangements. That document noted nine statutory demands, eight of which were directed to Neolido Holdings and one to a subsidiary (Economonitors Pty Ltd). The document noted 11 claims lodged against Group companies, which were being defended. The document noted one credit default report. The document referred to 13 exercises of powers of sale lodged against Group companies; 11 by Capital Access Australia Pty Ltd. The document contained a reference to 85 final demand/repayment arrangements lodged against Group companies, including Neolido Holdings to various creditors. 642 He expressed the view that the statutory demands, claims, credit default reports, exercises of power of sale and final demands, and repayment arrangements are all indicia of insolvency. 643 He reviewed a document comprising two financial account statements for Neolido Holdings which were entitled "Neolido Holdings Pty Ltd Balance Sheet as of February 28, 2005" and "Neolido Holdings Pty Ltd Profit and Loss July 2004 through February 2005", which were draft accounts that appeared to be unaudited. They disclosed net assets of the Group in the sum of $5,333,648.85, but those assets included loans to related companies of $6,332,804.04 and if those loans were irrecoverable, then the Group's liabilities exceeded its assets by $989,192. 644 He noted that it was not clear whether the liabilities included default interest. If those debts had not been brought to account, then the liabilities would exceed assets by $2,172,428.22. 645 He also reviewed two documents for Neo Lido, which were entitled "Neo Lido Pty Ltd Balance Sheet as of February 28, 2005" and "Neo Lido Pty Ltd Profit and Loss July 2004 through February 2005", which appeared to be draft accounts that were unaudited. On the management figures, the company's liabilities exceeded its assets by $1,276,572.28. If the unpaid interest had not been brought to account, the liabilities would be greater. 646 A further review of Land Tax showed that Land Tax of $351,927.22 was owing. The documentary evidence suggested that repayment arrangements were contemplated. He noted three cheques made payable to the ATO, all dated 3 May 2005, being in respect of employee superannuation entitlements, a BAS liability for Neolido Holdings, and a BAS liability for a wholly owned subsidiary of Neolido Holdings, all indicated that there appeared to be insufficient funds to draw upon to make payment. 647 He reviewed valuations of properties held by the Neolido Group and noted in some cases that the first mortgage exceeded the valuation, and in one case by $1,097,314.62. 648 He noted the correspondence that ASIC had received on 24 May 2005 from McLachlan Financial Services (MFS), which indicated that Neo Tel No 1 Pty Ltd sold a property which resulted in the discharge of the first mortgage, but not the second mortgage. 649 MFS claimed that it held securities over two other properties which were in default, the mortgages being for approximately $5.5 million and $8.6 million. 650 He reviewed an internal document for the Neolido Group entitled "Litigation Report", which indicated 21 current actions. 651 He reviewed documents which had been received from Suncorp Metway, and had a telephone conversation with the General Manager of Asset Management at Suncorp Metway. 652 The documents indicated that the bank had issued notices of demand and default on 31 March 2005 to companies within the Neolido Group, one of which was directed to Neo Lido in the sum of $2,093,020.87. 653 He was of the opinion that the refusal of a company's banker to continue to support the working capital requirements of the company by demanding the repayment of its overdraft was an indicator of insolvency. 654 He noted that the company had seven facilities totalling $276,376.19, all of which were in default. He noted in the correspondence that the sum of $5,211,427.67 had been demanded from the Neolido Group. The correspondence also indicated that on 5 May 2005 the bank issued notices of exercise of power of sale over all of the properties subject to the bank securities. One property had been sold reducing the indebtedness of the Group to $4,691,001.19. 655 He said that the issue of notices of default, and demand by secured creditors who then exercised the power of sale of mortgage securities, is an indicator of insolvency. 656 He received an email from Suncorp on 1 June 2005, which indicated that as a result of a recent "dishonour of payment by the company" the indebtedness of the Group had increased to $4,694,212.53. 657 He was of the opinion that dishonoured cheques were a further indicator of insolvency. 658 He reviewed the material given to him on 12 May 2005 by Blake Dawson Waldron Lawyers. He noted that the monthly interest payment for members of the Group was somewhere between $527,460.80 and $824,097.36.

Neo Lido and Neolido Holdings are Insolvent 659 In my opinion, both Neo Lido and Neolido Holdings were insolvent at the time that Mr Bertram provided Mr and Mrs Selig with the second Statement of Advice: Limited Advice, on 18 April 2005. 660 It follows that, in my opinion, the two companies were also insolvent at the time that Mr and Mrs Selig invested $450,000 in Neovest on 22 April 2005. 661 It is probable that Neovest was also insolvent at the same time because all of its receivables were due from the Neolido Group, which could not pay its debts as and when they fell due. 662 In his second affidavit, Mr Robinson addressed Neovest. ASIC commenced surveillance activities under Division 1 Part 3 of the ASIC Act into the affairs of Neovest on or about 21 February 2006. The surveillance was commenced after similar surveillances were performed on its related companies, Neolido Holdings, Neo Lido and Mango Capital. 663 Mr Robinson had regard to the audited Annual Report for Neovest for the year ended 30 June 2004, the first prospectus dated 3 February 2004 which sought to raise up to $20 million through the issue of 20 million shares at $1 each, and the second prospectus dated 29 March 2005 which sought to raise up to $20 million through the issue of 20 million shares at $1, each with a reservation of the right to accept over-subscriptions for an additional $10 million. 664 He noted that Neolido Holdings and Neo Lido were wound up in insolvency on 25 November 2005 following upon the application by ASIC. Mr Ray Richards of Sims Partners was appointed as the liquidator of both Neolido Holdings and Neo Lido. 665 On 28 July 2003, the Court of Appeal of the Supreme Court of Queensland dismissed an appeal from the winding up order made by the trial judge. 666 On 9 February 2006, Mr Richards lodged his preliminary reports with ASIC for Neolido Holdings and Neo Lido as required by s 476 of the Corporations Act. In the Neo Lido report he stated that the estimated total realisable assets for Neo Lido were $18,415,000, and the estimated total liabilities were $41,470,524. 667 In his preliminary report for Neolido Holdings, Mr Richards estimated the total realisable assets at $3,950,000, and the estimated total liabilities at $41,470,524. 668 On 18 October 2007, Mr Robinson conducted a search of the databases maintained by ASIC for the documents lodged with ASIC and noted that the last report lodged by Neovest was for the financial year ended 30 June 2004, and that no subsequent financial reports or directors' reports had been lodged for the financial years ending 30 June 2005 and 30 June 2006. 669 He said that a search of the investor register produced to ASIC by Neovest, pursuant to a notice issued by ASIC's capital markets director to Neovest under s 30 of the ASIC Act on 13 May 2005, showed that redeemable preference shares in Neovest were held by approximately 250 persons. 670 He said he analysed the management accounts produced to ASIC by Neovest pursuant to that notice and a notice issued by NICU to Mr Townley, a notice issued by ASIC's enforcement director to Neovest on 27 February 2007, and the audited half yearly financial statements for Neovest as at 31 December 2004 which were lodged with ASIC, and concluded that none of the redeemable preference shares, which were issued by Neovest pursuant to the first or second prospectuses, have been redeemed, so that the number of investors has not changed. 671 Mr Robinson was cross-examined by Mr Spencer. Mr Robinson agreed that the notices issued to Neo Lido and Neolido Holdings, pursuant to s 30 of the ASIC Act, were responded to in a timely fashion. 672 He says that ASIC commenced surveillance because it had a proactive program where ASIC looked for entities that might be showing signs of insolvency. He said that the surveillance was instigated in part by information provided by Mr David Kelly, who was formerly employed at Neo Lido and had expressed concerns about insolvency. 673 Mr Spencer cross-examined Mr Robinson extensively in relation to file notes Mr Robinson had made of conversations he had had with Mr Spencer and Ms Perovich. Mr Robinson did not resile from the accuracy of those file notes. He said he was confident that they accurately recorded what he was told at the time. 674 He was also challenged in relation to the file note he made of his conversation with Mr Kelly. 675 The attack on Mr Robinson in relation to those file notes not only was not successful but it was also not likely to be productive of any evidence that would have affected Mr Robinson's opinions expressed in the two affidavits, but especially the first affidavit. 676 He was shown the solvency report which was apparently prepared by the directors on 5 June 2005, which, of course, was after he had sworn his first affidavit. He said that he had no recollection of seeing the report, but has a recollection that he heard about it during the winding up process. 677 It was put to Mr Robinson by Mr Spencer that Mr Robinson should not have proceeded with his action against Neolido Holdings and Neo Lido when he knew the directors were preparing a solvency report. However, that criticism cannot be maintained. The directors had been given sufficient time to prepare a solvency report prior to Mr Robinson swearing his affidavit. In any event, the solvency report was of little assistance in attempting to decide whether the Neolido Group or Neolido Holdings or Neo Lido was solvent. 678 The solvency report contained a number of historical documents. It did contain one document of which ASIC would not have been aware, which was a Deed of Assurance dated 26 May 2005 between Neo Lido and Neolido Holdings, and Ms Perovich and Mr Spencer. That Deed provided that Ms Perovich and Mr Spencer would, if requested by themselves as directors of Neo Lido and Neolido Holdings, enter into an assignment of the Mango Hill asset for the benefit of the creditors of the Neolido Group. 679 The "Background" in the Deed identified that asset: Background A. Silvana Perovich and Richard William Spencer are the directors and shareholders of Neolido Group. B. Perovich and Spencer are the sellers under a Share Sale Agreement dated the 4th day of July 2003 relating to the sale by them to Mango Boulevard Pty Ltd ACN 101 544 601 in its capacity as trustee for the Mango Boulevard Unit Trust ("Mango Boulevard") of certain shares in Kinsella Heights Developments Pty. Ltd. ACN 100 373 368 ("Share Sale Agreement"). C. Perovich and Spencer have agreed to make their rights arising under the Share Sale Agreement, including the right to receive the balance share sale price under the Share Sale Agreement ("Mango Hill Asset"), available to support the balance sheet of Neolido Group. D. Pursuant to their agreement referred to in recital C, Perovich and Spencer have previously entered into arrangements to provide security for the support of Neolido Group debt finance by, amongst other things, entering into guarantees and assignments by way of security of parts of the Mango Hill Asset. E. For the avoidance of doubt, Perovich and Spencer have agreed to formalise and document their agreement referred to in recital C, by entering into this deed. 680 The Deed was of little benefit to the Neolido Group. The directors were only obliged to assign the asset if they chose to request themselves to do so. They could not be obliged to assign the asset if the Neolido Group was not under external administration. Mr Spencer was questioned about the Deed: Well, the only time that you would call on the deed of assurance is in circumstances where there's a need to on a part of the Neo Lido Group?---Right. And what this does is completely emasculate the deed of assurance in circumstances where there's an external administration under the Corporations Act?---I see, yes. I see the point. Put simply, Mr Spencer, it's worthless. For the Neovest investors it's worthless?---Well, it may be, but the guarantee stood. I see the point you're making, but the - it's in addition to the personal guarantees that have been provided in any event and which are - which is why we're pursuing and facilitating funds to go to Neovest under the Lane Court matter at present. HIS HONOUR: Clause 1 of the deed of assurance requires you and Ms Perovich as directors to give that notice, did you ever give the notice? Clause 1.1? Did you even give yourselves that notice?---No, I don't believe so, your Honour. And did you ever enter into an assignment and contemplated in clause 1?---No. And upon the making of a winding up order, the deed ceased to have any force or effect, that's right isn't it?---That's what 1.2 seems to suggest. And so the Mango Hill or any interest in Mango Hill which you and Ms Perovich have in your own right has never been assigned to the benefit of Neo Lido?---No. No, it hasn't, your Honour. The Neovest investors had the benefit of the guarantee - the personal guarantees only. Well that's right the Neovest investors would have to rely upon any guarantee you and Ms perovic gave to them?---Yes, yes. … HIS HONOUR: Well, you go to - actually the guarantee was given to Neovest, wasn't it, not to Neovest investors?---It was given to the company Neovest - yes, your Honour. … The deed assurance that was provided by - what was the context of that deed of assurance? HIS HONOUR: What were the circumstances that gave rise to it? MS PEROVICH: Yes?---I think it was - we had already indicated a preparedness and willingness and representation to support the company as directors. And the context was that we felt we should put it in a more formal context for the solvency report. And Mr Townley assisted with that approach. 681 The solvency report was put together in order to convince ASIC not to proceed. It was prepared too late. There was nothing in the report that would have caused ASIC to do other than what it did. 682 Nothing was put to Mr Robinson to cause Mr Robinson to alter any of the opinions that he had expressed. 683 His evidence remained relevant as to the financial health of Neolido Holdings and Neo Lido at the time that he carried out his surveillance and swore his affidavit on 2 June 2005.

Findings 684 I make the following findings on the issue of liability. I deal with damages separately. 685 Wealthsure was granted an Australian Financial Services Licence under the Financial Services Reform Act 2001 (Cth) on 15 January 2004 to, amongst other things, provide financial advice and deal in financial products. Mr Bertram was an authorised representative of Wealthsure. 686 Mr Bertram was employed by David Bertram & Associates Pty Ltd, which carried on business under the name of "DBA Financial Designs". 687 On 30 September 2003, Mr Bertram applied in writing to Wealthsure to be appointed as a representative. One of his personal referees was Mr Wayne Mackintosh. 688 In November 2003, Wealthsure and Mr Bertram executed a Representative Agreement whereby Mr Bertram would act as a representative of Wealthsure in relation to Wealthsure's financial services business and any other financial products which Wealthsure offered or may offer in the future. 689 On 15 January 2004, Wealthsure issued a Certificate of Authorisation describing Mr Bertram as "an authorised representative of Wealthsure pursuant to s 916A of the Corporations Act for the purpose of providing advice and dealing in a financial product … on behalf of the Licensee [Wealthsure] in respect of the following classes of products" described in the Certificate. 690 Section 916A of the Corporations Act provides that a financial services licensee (Wealthsure) may give a person (Mr Bertram) a written notice authorising the person, for the purposes of Chapter 7 of the Corporations Act, to provide a specified financial service or financial services on behalf of the licensee. 691 The products for which Mr Bertram was licensed included: basic deposit products, managed investments including master trusts, wrap facilities, property syndicates, margin lending products, tax effective instruments and securities. 692 On the same day, Wealthsure published a document under the name of David Bertram & Associates Pty Ltd trading as DBA Financial Designs, which included an adviser profile for David Bertram. 693 In that document Wealthsure claimed that it could provide advice and arrange transactions for basic deposit products, risk insurance products, annuities and pensions, superannuation, managed investments, securities and Government stocks and bonds. 694 It said that Mr Bertram "is in turn authorised to advise on these services and products as an authorised representative of WealthSure Financial Services". 695 After the issue of the Certificate of Authorisation on 15 January 2004, Mr Bertram commenced to carry on business as an authorised representative and financial adviser for Wealthsure. 696 Mr Bertram was Wealthsure's agent and authorised to speak for Wealthsure. 697 From March 2004, Norton Capital was licensed to carry on financial services on a financial services business and to provide financial product advice. 698 Prior to September 2004, Wealthsure and Norton Capital had a strong business relationship. Wealthsure had approved another product Norton Capital suggested - Westpoint. Some time before September 2004, Mr Norton approached Mr Pawski about Neovest. Mr Norton had the first Neovest prospectus. He told Mr Pawski that Neovest showed an attractive return paying 20% for Foundation Shares and 15% for Equity Shares, with dividends to be paid monthly over a 12 month term. Neovest was investing its money in a related entity, Neo Lido, which was a property developer. Mr Norton told Mr Pawski that he had agreed to become a director of Neovest. He told Mr Pawski that the executive directors, Mr Spencer and Ms Perovich, had agreed to provide personal guarantees in respect of Neovest. It is clear that Mr Norton had already reached agreements with the Neovest dirctors when Mr Norton spoke to Mr Pawski. 699 Mr Pawski said that during that conversation with Mr Norton he read the first prospectus which he said he noted was consistent with what Mr Norton had told him. Mr Pawski formed the opinion, from what he had been told by Mr Norton, that Neovest was an attractive investment; that it would make sufficient profits to meet the dividends; and the directors were investing their own money. Mr Pawski thought that a return of 15% to 20% was not unusual because the investment did not offer capital growth, but rather was an income paying investment. 700 At or about the same time, Mr Bertram met with Mr Wood, an employee of Norton Capital. 701 Before Mr Norton spoke to Mr Pawski and Mr Pawski formed the opinions to which I have referred, Mr Norton had spoken to Ms Perovich and Mr Spencer and offered to raise money on the Neovest prospectus. Mr Norton told them he was a specialist in capital raising and that he had studied Neovest and wanted to raise money for it. 702 He told the directors that he had a relationship with Wealthsure and Wealthsure would, if certain requirements were met, see the prospectus filled. 703 Mr Norton told the directors that he would assume responsibility for raising capital for Neovest, but he insisted on their agreement to a number of matters. He insisted that he be appointed a director of Neovest; that he be issued with a non-dividend bearing management share that would give him a veto of future appointments to the board of Neovest; that Mr Townley continue as a director of Neovest; that Mr Spencer and Ms Perovich provide personal guarantees on behalf of the Neolido Group in favour of Neovest to better secure advances from Neovest to Neolido Group Companies; and that Neovest resolved to pay dividends on its preference shares monthly. The Neovest directors decided to accept Mr Norton's terms. 704 On 9 September 2004, Norton Capital executed a Heads of Agreement with the Neolido Group for the raising of mezzanine funding for the Neolido Group, pursuant to the prospectus issued by Neovest dated 3 February 2004. 705 The terms of that agreement are set out in these reasons. 706 The Heads of Agreement had all the consequences and effects that I have identified in paragraph [224] of these reasons. I accept Ms Perovich's evidence that she was told by Mr Norton that the payment of monthly dividends was a requirement of Norton Capital's principal financial client planner, Wealthsure. 707 The marketing fee was excessive. The agreement for Neovest to pay all dividends on a monthly basis in arrears was unlawful. The representation that Mr Norton was an independent director was untrue. 708 On 14 September 2004, Mr Norton was appointed a director of Neovest and thereafter attended all relevant Board meetings. 709 On 16 September 2004, Mr Pawski emailed Wealthsure's representatives advising that he had recently approved the Neovest redeemable preference share offering. 710 Mr Pawski sent that email before Norton Capital prepared its research report which was dated October 2004. Prior to approving Wealthsure as an investment, Mr Norton had received the Info Pack, which had been given to Norton Capital for the purpose of preparing its research report. 711 Because Mr Pawski also received the Info Pack (although not until after he approved Neovest on 16 September 2004), Mr Pawski received the same information that Mr Norton had for the purpose of Mr Norton preparing his October report. Mr Pawski read the Norton Capital research report before 16 September 2004. He was not sure, but he said it may have been a draft. It must have been a draft because the research report is, as I say, dated October 2004. 712 Mr Pawski read the first prospectus prior to Neovest being approved and understood the document, felt comfortable with it, and understood its context. He also had a number of conversations with Mr Norton, Mr Wood, Ms Fallon, a business development manager for Norton Capital and Mr Andrew Hull. 713 Mr Pawski's email of 16 September 2004 is important in a number of respects. 714 The advice to Wealthsure's representatives was that the investment was a mezzanine product and has a term of one year with a return to the client of between 15% or 20%, depending on the option taken. Due to the risks associated with the mezzanine product, the maximum investment per client is 15% of the client's net assets. In compiling the net assets, the net assets do not include the family residence but include superannuation and all investment assets. The advice to the representatives was that borrowing was not permitted. 715 Mr Pawski said he did not decide to put Neovest on to the approved list without first carefully reviewing the documents provided by Norton Capital and subject to Mr Norton becoming a director, and Ms Perovich and Mr Spencer providing guarantees. I do not accept that he carefully reviewed the documents because if he had he would not have put Neovest on the approved list. 716 Mr Pawski failed to make any proper assessment of the Neovest prospectus and of the information he had received up to 16 September 2004. If he had, he would not have made the investment an approved product. Nor would he have sent the email that he did on 16 September 2004. If, after 16 September 2004, he had properly analysed the documents within the Info Pack, he would have removed Neovest from the APL. 717 The due diligence report that was prepared by Mr Norton and Norton Capital failed to take into account a number of important matters which, if they had been considered, must have meant that Mr Norton and Norton Capital would have refused to approve the product. The Norton Capital research report was prepared negligently. 718 Mr Bertram on his own admission, and thus Wealthsure of whom he was an agent, have failed to carry out any due diligence of any kind in relation to this investment, notwithstanding that it was known to be, as Mr Pawski himself described it, as a product with associated risks. Mr Bertram said he was unaware of a significant number of problems pertaining to the solvency of the Neolido Group. He said that if he was aware of those matters, he would not have recommended Neovest to the plaintiffs. I accept that evidence. However, an ordinary, competent and prudent financial adviser would have undertaken inquiries to ascertain information pertaining to the solvency of the Neolido Group. Mr Bertram, on his own admission, failed to adequately investigate the solvency of the Neolido Group and in doing so failed to properly assess the appropriateness of recommending an investment in Neovest to the plaintiffs. 719 Mr Pawski knew that Mr Norton was not independent and was a director of Neovest. He knew that Mr Norton had exclusive rights to distribution for the prospectus and was to receive commission for capital raised. Mr Pawski knew that Mr Norton had a commercial benefit from the success of sales, as well as in the research. He agreed that it would be arguable that Mr Norton was not independent. He also knew that Norton Capital was to receive 13% by way of commission, which it would share with Wealthsure. He would have known, if he had read the prospectus, that preference shares were only redeemable at the option of the directors. He would have also have known that the dividends were payable only at the option of the directors. 720 The guarantees, which he said that he insisted upon, were of no value at all. Ms Perovich and Mr Spencer's net worth was calculated by reference to their investment in the Neolido Group. If the Neolido Group were to fail then their investment failed and their worth was correspondingly reduced. The only time that Ms Perovich and Mr Spencer would be called upon to honour the guarantee would be in circumstances where the Group had failed. 721 Mr Pawski understood what a redeemable preference share was and that there was no obligation upon the directors to redeem those shares and that, in those circumstances, the investor might receive nothing. 722 Mr Pawski made his advisers aware that the investment was of high risk. 723 In those circumstances, he had an obligation to ensure that a proper due diligence was done in relation to the investment before he put it on his approved investment list. 724 After he approved the product, Mr Pawski left it to Norton Capital to advise as to the continuing suitability of Neovest as an investment. 725 On 19 September 2004, Ms Perovich, Mr Spencer, Neo Lido, Neolido Holdings, Sylvana Perovich Pty Ltd and Richard Spencer Pty Ltd gave a guarantee and indemnity to Neovest in respect of the due performance by Neo Lido, Neolido Holdings and their subsidiaries in respect of any investor loans by Neovest to Neo Lido, Neolido Holdings and their subsidiaries. 726 The financial advisers, if they had thought about it, could not have taken any comfort from the guarantee and indemnity. Neo Lido and Neolido Holdings were guaranteeing their own performance which is no more than a promise to perform. Mr Spencer and Ms Perovich, and the private companies which they control, were purporting to guarantee Neo Lido and Neolido Holdings' performance but all of their wealth was contained within Neo Lido and Neolido Holdings and, in those circumstances, those guarantees were also worthless. 727 In October 2004, Norton Capital published two documents; a research report and an Information Summary/flyer. 728 In the research report, referring to the investment, Norton Capital said that the preference shares would be redeemed at the sole discretion of the board of Neovest, but that the prospectus confirmed that the board intended to redeem the preference shares 12 months after their issue at their subscription price plus any accrued but unpaid dividends. That part of the report also recognised that the company had published a company update on 17 September 2004, in which it announced that the board had resolved that dividends would be declared and paid in monthly instalments. 729 The research report recognised that the level of risk was high and directed the reader's attention to risks and risk management. In relation to risk management, it was pointed out that Neovest would have a second ranking or following mortgage over all development properties in relation to which Neovest lent funds to Neo Lido. It was pointed out that the developer, Neo Lido Pty Ltd and Neolido Holdings, and the shareholders and directors of each of those entities, had provided a guarantee and indemnity to Neovest for all amounts loaned by Neovest to Neo Lido or Neolido Holdings. 730 It identified the preference shares and their rights and rankings. It described Neo Lido's development. It identified the four directors and made reference to Mr Norton and the fact that he held one redeemable preference share known as a "Management Class", which prevented the removal or appointment of directors without his approval. 731 It pointed out that the investment parameters in the investment plan provided that the return to Neovest is to be no lower than 2% above the coupon rate on the preference shares. That statement had been made in the investment plan, which had been prepared in or before August 2004. 732 When that statement is analysed, it is apparent that if Neo Lido and Neolido Holdings were to pay 22% to Neovest on the monies loaned by Neovest, then Neovest could not hope to pay redeemable preference shareholders 20% on their investment for two reasons. First, Neovest had to pay 13% on the capital raised, which it assumed would be redeemable every year, which would have meant a continuing 13% payable on capital as it was redeemed each year. Secondly, it would have had to have paid income tax on the profit that it derived from lending Neo Lido and Neolido Holdings money returning 22%. Because Neovest was acquiring investors who were putting in capital, it had no right to offset the cost of the capital against the interest earned on the loans to Neo Lido and Neolido Holdings. The whole plan, when analysed, simply could not work. 733 It is inconceivable that Norton Capital, and Mr Norton, did not recognise this at this time. It is also inconceivable that Mr Pawski, who said he read these documents, did not recognise the very flaws in the plan. The only explanation can be is that all of those concerned failed to carry out their review of Neovest competently. The only other explanation is that the far too generous commissions led them to overlook the matters to which I have referred. 734 Norton Capital noted that Neovest intended to redeem the preference shares at the expiration of 12 months in one of three ways. First, by payments generated from the profits of working capital of the Neolido Group. I have already addressed the interest rate that would have to have been earned for Neovest to pay out its investors. It would have had to earn a much higher interest rate than 45% to 50% if it was going to obtain profits in excess of the 20% it had to pay to the Foundation redeemable preference shares and the 13% it had to pay to Norton Capital in raising capital. Secondly, it would redeem the preference shares by payments generated from receipts of the Neo Lido directors and associated parties in respect of the Mango Hill/Kinsella Heights estate joint venture with the BMD Group. That proposition was no more than aspirational. Thirdly, it was intending to redeem the preference shares by further capital raising through issue of new shares or other facility or other offer. 735 Redeemable preference shares can only be redeemed on the terms on which they are issued: s 254J(1) of the Corporations Act. They may only ever be redeemed if the shares are fully paid up, and out of profits or the proceeds of a new issue of shares made for the purpose of the redemption: s 254K. 736 Neovest would have had to have made profits which clearly could not have been made or made an issue of new redeemable preference shares for the purpose of redeeming the existing redeemable preference shares each year. That was not contemplated. 737 What in fact was contemplated was that later investors' capital would be used to pay interest on earlier investors' redeemable preference shares. The scheme that was proposed in the prospectus and which Norton Capital examined was a "Ponzi" scheme. Mr Norton, Norton Capital and Mr Pawski failed to recognise a scheme which was a Ponzi. The third to eighth defendants would not accept that the Neovest offering was a Ponzi, but it was both the plaintiffs' and the first and second defendants' case that it was such a scheme. 738 The first and second defendants' defence was that the scheme was a Ponzi, but they failed to explain how it was that their clients, who were experts, failed to recognise it. 739 The research report identified risks and mitigating factors, but used the mitigating factors to lessen the risk. The research report concluded with the Norton Capital viewpoint in which it is stated that: Norton Capital considers this offer to be comparable to other fixed interest income producing investment products. This offer is an opportunity for investors to participate in a potentially relatively short term investment with a high yield, compared to investments and bank term deposits. 740 In the Norton Capital flyer, under "Norton Capital Viewpoint", Norton Capital wrote: Norton Capital has applied its research and due diligence process to the Neovest Prospectus. Norton Capital has recommended this investment as a Norton Capital Approved product. Reasons include: High yield Acceptable level of risk due to 2nd ranking or following security and a guarantee relating to loan of mezzanine funds to Neolido • Strong management. 741 In my opinion, if Norton Capital had carried out a due diligence enquiry it could not have made the recommendation that it did and it could not have approved the product. 742 But there is another matter of analysis that the financial advisers failed to undertake. If Neovest was able to pay 20% on the Foundation redeemable preference shares and 15% on the Equity redeemable preference shares, after paying 13% commission for the raising of capital and after paying income tax, it meant that Neo Lido, Neolido Holdings and the Neolido Group would have to be paying somewhere between 45% to 50% on the loan made by Neovest to Neo Lido, Neolido Holdings and the Neolido Group. Any financial analyst would know that any company that was required to pay interest rates of that kind was under serious stress. No-one made those inquiries or conducted such an analysis. 743 On 23 September 2004, the directors, including Mr Townley and Mr Norton, resolved that dividends would be declared and paid in monthly instalments. 744 The resolution was unlawful. Dividends can only be paid out of profits. The profit is only declared annually. Mr Townley later tried to explain how it might have worked but, in my opinion, the resolution was fraught. Those who made it, and those who knew of it, Mr Pawski and Mr Bertram, must have known that the resolution was unlawful. 745 Between 14 and 23 September 2004, Neovest had appointed Mr Norton, had obtained the guarantees to which I have referred, and passed the resolution relating to dividends. Putting aside the appointment of Mr Norton, the other two steps the directors took were of no assistance and no protection to existing or potential investors in redeemable preference shares in Neovest. Mr Norton's appointment was of no assistance to investors because he was not, as was represented, independent. 746 Four days later, 3 Point Finance appointed receivers and managers to both Neo Lido and Neolido Holdings. Their appointments were terminated the same day. 747 In April 2005, Neo Lido and Neolido Holdings were insolvent. I accept Mr Robinson's evidence in its entirety. The extent of the insolvency cannot be determined, but both companies were unable to meet their debts as and when they fell due. The Neolido Group, with the exception of Neovest, was also insolvent. 748 Neovest was probably not insolvent because it had raised its funds through the issue of redeemable preference shares. By doing so, it did not incur any debt but enlarged its capital. 749 It had lent $270,000 to Neolido Holdings, which it must have borrowed from another source which is, on the evidence, unknown. However, it is likely that it borrowed the monies from another member of the Neolido Group. If that were the case, it would probably mean that Neovest could have set off that debt against the debts owed to it by the Neolido Holdings. 750 However, that does not matter. It is simply enough to find that at the relevant time Neovest was not insolvent. 751 On 3 February 2004 and 29 March 2005, Neovest issued the first and second prospectus respectively. 752 I am not able to make any findings in relation to the solvency of Neo Lido and Neolido Holdings as at 3 February 2004, but I am of the opinion that Neo Lido and Neolido Holdings were also insolvent as at 29 March 2005. 753 In those circumstances, the second prospectus contained a number of inaccurate statements. 754 Those inaccuracies were identified in [463] to [477] of these reasons. 755 I do not think that the directors of Neo Lido and Neolido Holdings believed that those companies were insolvent when the second prospectus was issued. I think they wrongly believed that whilst the companies were stretched, they were able to meet their debts as and when they fell due. However, that is not so much to the point. What is more important is the omissions from the prospectus that would have enabled investors to make an informed choice as to whether to invest in the redeemable preference shares on offer. 756 Neovest was formed for the sole purpose of raising finance to on-lend to Neo Lido and Neolido Holdings, and the Neolido Group by way of mezzanine finance or leveraged finance on second mortgage. 757 It was the directors' intention, notwithstanding the terms of the prospectus, to apply all funds raised through the medium of the prospectus to Neo Lido and Neolido Holdings. 758 In those circumstances, the prospectus contained a number of inaccuracies to which I have already referred. Most importantly, it was inaccurate in that it did not advise that if Neovest were to loan monies to Neo Lido, Neolido Holdings and the Neolido Group, the monies would be irrecoverable and, in those circumstances, the redeemable preference shareholders would neither receive a dividend nor be able to redeem their shares and that their investment would be entirely lost. 759 On 11 October 2004, a contractual relationship was formed by Mr Bertram's and Wealthsure's offer to act as Mr and Mrs Selig's financial adviser, and Mr and Mrs Selig's acceptance of that offer, as constituted by the giving of the FSG which Mr and Mrs Selig acknowledged receiving. The consideration was the services and advice to be provided and the commissions and fees to be paid. The parties thereafter conducted themselves on the basis of that contractual relationship. 760 The Statement of Advice that was given Mr and Mrs Selig on 29 November 2004 contained a number of statements which were unsuitable for Mr and Mrs Selig's circumstances. 761 First, it was stated that they would want to borrow a total of approximately $1.5 million and invest those funds, as well as $200,000 of their existing funds, in order to obtain sufficient income to meet any shortfalls in rental income from the recommended property portfolio as well as capital growth. 762 The recommendations contained in that document were entirely inappropriate for Mr and Mrs Selig. It was recommended that they borrow $1,150,000 and invest $1,000,000 of that sum into Neovest Foundation Shares. That advice should not have been given because the Neovest Foundation Shares were never likely to return 20% as represented in the Statement of Advice. Nor would the shares be likely to be redeemable because the shares, after being purchased, would be worthless. 763 The further advice, that they arrange a margin loan for a further $350,000 secured against the initial investment of $350,000, was again inappropriate for Mr and Mrs Selig's needs. 764 In the Statement of Advice, Mr and Mrs Selig were wrongly advised that their portfolio would be well-structured and diversified, and provide them with sufficient flexibility to enable adjustments to be made to the portfolio in the future should the need arise. 765 They were wrongly advised that the implementation of a negative gearing strategy would provide their portfolio with the opportunity to achieve growth that would not have been possible otherwise. 766 They were wrongly advised that the resulting increase in their retirement fund was estimated at $3,504,600 and they would have an increase in their retirement income of approximately $245,321.98 per annum. To the extent that any advice purported to be on the basis of the information in the Fact Finder of 11 October 2004, I find the Fact Finder inappropriate and inadequate for the kinds of investment strategies that were recommended. 767 There was no basis for the advice which was given. Mr and Mrs Selig should have been advised that the advice was incomplete and inaccurate. 768 The strategy that was recommended, to borrow $1,150,000 on a line of credit as well as an additional $350,000 via a margin loan, was inappropriate for Mr and Mrs Selig's needs. 769 All four of the Cash Flow and Debt Management Strategy Papers, which were prepared by Mr Bertram or DBA Financial Services for Mr Mackintosh to give to Mr and Mrs Selig, contained advice that was inappropriate for Mr and Mrs Selig's needs. 770 Mr Selig is dyslexic and has difficulty reading. English is not Mrs Selig's first language. In late 2004 and early 2005, both Mr and Mrs Selig had no earning capacity. Mr Selig was physically incapacitated and Mrs Selig was not trained for any work. They had three assets; the two units of the Sea Aura Apartments being apartment numbers 3 and 12, and a half interest in apartment number 4, which settled in December 2004 for $545,000. A good part of that half interest had to be used to meet other obligations. 771 After settlement of apartment number 4, the only income Mr and Mrs Selig had was from the rental of apartment number 12, being $380 per week. Mr Selig's taxable income for the financial year ended 30 June 2004 was $21,003. Mr and Mrs Selig were asset rich and income poor. 772 They wished to increase their income to meet their living expenses and to provide something for their later years. Because they had little income, they were not appropriate persons to enter into negative gearing arrangements. That should have been apparent to those who were advising on the strategy that was adopted. 773 The purpose of negative gearing is to buy an asset that produces income on borrowed monies such that the cost of borrowing exceeds the income produced by the asset. The excess of the cost of borrowing over the income from the asset is deducted from the tax payer's income, so reducing the tax payer's incidence of liability to taxation. The purpose of negative gearing is to hold the asset while it increases in value and to make a capital profit greater than the lost income. The more usual candidates for negative gearing are those who have high income and who are on the highest marginal tax rate. 774 Mr and Mrs Selig had assets. What they did not have was income. 775 Mr Mackintosh was a real estate agent who was unable to give financial advice because for reasons, which are unimportant, he was not authorised. Mr Bertram and Mr Mackintosh were friends. He and Mr Bertram worked in conjunction where Mr Mackintosh would give advice in relation to the purchase of real estate, whilst Mr Bertram would give the financial advice in relation to the funding of the purchase of the real estate. That is what they did in respect of Mr and Mrs Selig. 776 Mr Mackintosh made his income through selling real estate. Mr Bertram made his income by giving financial advice. It suited them both to work together. 777 Clearly, Mr and Mrs Selig could not borrow money to purchase real estate unless the income produced from the purchased real estate exceeded the cost of borrowings. That was simply not possible or, at least, it was not possible in relation to the real estate that Mr Mackintosh was hoping to sell. 778 Originally the advice that was given by Mr Mackintosh and Mr Bertram to Mr and Mrs Selig was to purchase seven investment properties at $365,000, each with a rental income of $340 per week. As Mr Bertram said in his advice to Mr Mackintosh: Could not really fit in any more than this as they have no personal income tax to defray using tax dedutions. 779 The advice that was given to Mr Selig, which was contained in the Cash Flow and Debt Management Strategy Paper given to Mr and Mrs Selig on 15 November 2004, was to sell apartment number 4 and realise $260,000, and then obtain a letter of credit against the unit in which they lived and the unit which they rented, being apartments numbered 3 and 12, for the purchase of the seven investment properties at $365,000 each. 780 The total cost of the investment properties would have been $2,555,000 and they would have returned, assuming they were fully tenanted at a rental of $340 for the whole of the year, $123,760 per annum. 781 By itself, that proposition was not feasible because the cost of the borrowings would have far exceeded the notional income. So the advice was to borrow another $1,150,000 for the purpose of investing $700,000 into Neovest at 20% per annum, investing a further $300,000 into Neovest at 15% per annum, as well as $150,000 into managed funds, and a further $350,000 margin loan. 782 For the advice to purchase the units to work, Mr and Mrs Selig's income had to be significantly greater than $20,000 per annum. They had estimated that they needed $52,000 per annum to meet their living expenses. What was being suggested was that they borrow money at commercial rates and invest in Neovest at significantly higher rates in order to off-set the losses in relation to the seven units. 783 Although this proposition did not eventuate, it indicates, in my opinion, the inappropriateness of the whole strategy that Mr Bertram and Mr Mackintosh developed for Mr and Mrs Selig. 784 Put shortly, Mr and Mrs Selig were being advised to borrow something in excess of $4.05 million for the purpose of investing $1 million of that sum in a high risk investment, merely so they could negatively gear the apartments that Mr Mackintosh was trying to sell. Even if the investment in Neovest had not been so risky, the strategy was simply inappropriate. The strategy did not change between then and the time Mr and Mrs Selig made their investment with Neovest, although the proposal became more modest. The strategy was always inappropriate for Mr and Mrs Selig. 785 Four separate documents, which were entitled "Cash Flow and Debt Management Strategy Paper", all of which were prepared by Mr Bertram, were given to Mr and Mrs Selig between 15 November 2004 and 18 April 2005. 786 Two Statements of Advice were given; one on 29 November 2004 and the second on 18 April 2005. Both of those documents were required by law to be given to Mr and Mrs Selig. 787 On 9 December 2004, the plaintiffs executed contracts for the purchase of three units that were being marketed by Mr Mackintosh, being Lots 1, 7 and 9 at 78-80 Berrima Street, Wynnum. The cost of those units was $375,000, $380,000 and $430,000 respectively, making a total of $1,185,000. Deposits of $37,500, $38,000 and $43,000, totalling $118,500, were paid. 788 Mr and Mrs Selig entered into those contracts upon the understanding that they would, in due course, borrow further monies to invest in Foundation or Equity Shares in Neovest so as to return sufficient income to meet the cost of borrowings for the three units at Wynnum and return sufficient monies to meet their living expenses. That is borne out by the application made on 16 December 2004 by the plaintiffs to the National Mortgage Company to borrow $2.3 million. 789 As at this date, Neovest intended to issue a second prospectus following upon the research report of Norton Capital and the advice given by Mr Norton. Neovest was not seeking to raise any monies on the first prospectus. It was not in Mr Bertram's interests or Wealthsure's to recommend Mr and Mrs Selig invest pursuant to the first prospectus, because the second prospectus provided both Mr Bertram and Wealthsure and, of course, Mr Norton and Norton Capital, with a greater return by way of commission. 790 Settlement on the units which were still to be constructed, did not occur until 7 September 2005. Mr Bertram told Mr and Mrs Selig on about 15 January 2005 that there was a problem with the Neovest prospectus. Mr Bertram gave that advice because he knew that the first prospectus was to expire and that a second prospectus would issue in the near future, which could be relied upon for advising Mr and Mrs Selig to enter into an investment with Neovest. 791 The further Cash Flow and Debt Management Strategy Papers that were prepared by Mr Bertram and provided by Mr Mackintosh to Mr and Mrs Selig contained some odd recommendations having regard to the execution of the Wynnum contracts on 9 December 2004, unless Mr Mackintosh had not given up hope of selling further units in excess of those for which contracts had been entered into. That is probably the case, because otherwise Mr Mackintosh really had no interest in meeting Mr and Mrs Selig. However, the further strategy papers and the later Statement of Advice that were given after 9 December 2004, which made reference to the purchase of units at Wynnum indicate, in my opinion, that all of the parties, being Mr and Mrs Selig, Mr Mackintosh and Mr Bertram, understood that the purchase of the Wynnum units was conditional upon the plaintiffs also investing in Neovest to obtain sufficient income to enable them to meet the cost of the borrowings on the units that were purchased. 792 On 2 February 2005, Mr Bertram's firm, DBA Financial Designs, prepared a further Cash Flow and Debt Management Strategy Paper for Mr Mackintosh to provide to Mr and Mrs Selig. Mr Bertram was aware of the strategy that would be included in the paper and I accept his evidence which is set out in detail at paragraph [436] of these reasons. 793 On 22 February 2005, following upon an advertisement placed in the Sunshine Coast Daily on 18 February and 19 February 2005, Norton Capital and Wealthsure, and Mr Bertram, made a presentation at the Mooloolaba Yacht Club promoting Neovest for the purpose of inducing those present at the presentation to invest in Neovest. 794 On 2 March 2005, Neovest's first prospectus expired. 795 On 15 March 2005, the plaintiffs obtained two loans from the National Mortgage Company through the Adelaide Bank in the sum of $399,000 and $560,000 for the purpose of settling on the Wynnum contracts. The first loan was secured over unit 12, and the second over unit 3; the two apartments owned by Mr and Mrs Selig in the Sea Aura apartment complex. The interest rate on the total sum of $959,000 was 8.19%. 796 On 29 March 2005, the Neovest directors signed the second prospectus, which was registered with ASIC on 31 March 2005. In that prospectus it was disclosed that $4,423,260 had been raised to 31 December 2004 pursuant to the first prospectus. 797 The prospectus, in my opinion, misstated the financial position of Neo Lido and Neolido Holdings. At the time the prospectus was registered, those companies were probably insolvent. 798 I accept Ms Perovich's evidence that prior to the registration of the prospectus, the directors took advice form Ms Steele of NRH who advised the directors on both the contents of the prospectus including the arrangements that had been made with Mr Norton and Norton Capital. 799 I also accept Ms Perovich's evidence that the second prospectus was carefully prepared and thoroughly vetted by Mr Norton and Norton Capital, and many of the statements in the second prospectus were as a result of requirements that Mr Norton had insisted upon. 800 The second prospectus omitted a number of matters which would have impacted upon the solvency of Neo Lido and Neolido Holdings, which were relevant for the purpose of determining whether Neovest could recover its advances to Neo Lido and Neolido Holdings. The matters omitted are identified earlier in these reasons. 801 I find that the second prospectus did not include all of the matters referred to in paragraph [476] of these reasons. 802 The second prospectus also misstated the agreement with Norton Capital, which was to pay Norton Capital 13% commission, and also failed to disclose that Norton Capital was not an independent entity. 803 The second prospectus also failed to disclose the appointment of a receiver by 3 Point Finance, an act that Ms Perovich herself admitted was a serious matter affecting Neo Lido and Neolido Holdings and their creditors, who she said had become "very concerned". The appointment of a receiver to the very entities to which Neovest would be loaning monies was a material matter of which investors ought to have been informed via the prospectus. 804 Very shortly after the prospectus was registered, Neo Lido received a demand from one of its bankers in the sum of $2,093,000. 805 I reject Ms Perovich's evidence that the directors' bank guarantee covered that demand and any loss would have been occasioned by the directors. 806 That matter was relevant because the directors were said to have given guarantees in relation to the performance by Neo Lido and Neolido Holdings of their obligations. 807 A few days after the prospectus was issued, Suncorp also issued a demand but this time in the sum of $5.2 million. 808 On 18 April 2005, at a meeting with Mr and Mrs Selig, Mr Mackintosh provided them with a further Cash Flow and Debt Management Strategy Paper, which had been prepared by Mr Bertram. That document recommended two distinct strategies for Mr and Mrs Selig - either to invest $350,000 into Neovest, or $450,000 into Neovest. In the Executive Summary, the recommendation was to "Purchase $400,000 into Neovest". Any advice that included advice that Mr and Mrs Selig invest in Neovest should not have been given. 809 Nor should Mr and Mrs Selig ever have been advised to purchase four investment properties as the Strategy Paper suggested. Nor should they have been advised to invest in a margin loan. 810 The advice contained in the fourth Cash Flow and Debt Management Strategy Paper, which was similar to the advice that had been included in the three previous Cash Flow and Debt Management Strategy Papers, was not appropriately researched and there was not a reasonable basis for the giving of the advice. 811 On the same day, Mr Bertram met with Mr and Mrs Selig and provided them with a Statement of Advice: Limited Advice dated the same day. In that advice, Mr Bertram recommended Mr and Mrs Selig borrow $450,000, to invest by purchasing $450,000 of Foundation redeemable preference shares in Neovest in their joint names. The Statement of Advice that was given Mr and Mrs Selig on 18 April 2005, like the Statement of Advice that had been given to them on 29 November 2004, contained recommendations that were inappropriate for their circumstances and the recommendations were based upon incomplete research and a misunderstanding of the Neovest prospectus. 812 The advice contained in the Statement of Advice should not have been given. 813 In particular, it contained inaccurate information in the following respects. It stated: The following strategies are considered suitable for your needs because: Borrowing $450,000 from your Line of Credit will provide you with initial investment funds of $450,000. Due to your income requirements, no other fund has been recommended apart from Neovest Foundation Shares which pay 20% return per annum - paid monthly. This strategy was recommended as it provides you with a diversification across both asset classes and fund managers required and at the same time provides the gearing level appropriate to your income position. Access to funds is also available if required. 814 That advice was not appropriate for Mr and Mrs Selig. The advice was not correct. The advice had not been researched. The advice should not have been given. 815 The advice put Mr and Mrs Selig at substantial risk. 816 The recommendation that the purchase be in their joint names was to balance the benefits of tax deductions against both incomes "as well as reducing potential capital gains tax against just one income in the future". 817 There was no possibility of any capital gains tax payable on any investment in Neovest because the shares were only redeemable at the value at which they had been purchased. 818 At the time of that meeting, Mr Bertram had seen a copy of the second prospectus which he gave to Mr and Mrs Selig. He had only summarily read the first prospectus. He told them that the second prospectus was a new prospectus that had been issued by Neovest, that was in similar terms to the previous prospectus, which had been provided to them. He told them that the second prospectus contained more detailed information about the product and risks associated with an investment in Neovest. He told them that the Norton Capital research, which he had previously provided to them, was still valid. 819 The Statement of Advice, of Mr Bertram's own admission, was defective and was not appropriate for the investment of which Mr and Mrs Selig made. The Statement of Advice was simply a document that was available at the time. Mr Bertram did not tell Mr and Mrs Selig how Neovest shares could be redeemed, or whether Neovest in fact would be able to redeem them. He did not discuss with Mr and Mrs Selig how commissions would be paid out of monies raised by Neovest. He did not tell them how Neovest might be able to redeem the preference shares after 12 months, even though he had noted that the risk level was high. 820 He did not tell Mr and Mrs Selig that there was no guarantee that dividends would be paid to shareholders or that shares would be redeemed. 821 A competent and prudent financial planner would not ordinarily recommend an investment of shares in a company that was not listed, had no secondary market and had no previous financial record, as being suitable for a person who had never invested in shares before. 822 The advice that Mr Bertram gave to Mr and Mrs Selig was contrary to the directions Mr Pawski had given in his email of 16 September 2004, because it advised Mr and Mrs Selig to use borrowed funds to invest in Neovest, and it advised them to invest more than 15% of their net assets excluding the family residence. Mr Bertram did not tell Mr and Mrs Selig that his advice was contrary to the instruction he had been given by Wealthsure. 823 Mr Selig said that he acted on the advice given by Mr Bertram and I accept his evidence in that regard. 824 It was Mr Bertram's continuing advice between September 2004 and 18 April 1005 that Mr and Mrs Selig should borrow money to invest in Neovest for the purpose of being able to meet loan commitments on monies borrowed for the purchase of units to be marketed and marketed by Mr Mackintosh. 825 When Mr Bertram gave his advice to Mr and Mrs Selig, Neo Lido, Neolido Holdings and the Neolido Group was insolvent. That being the case, if Neovest was to lend money to those entities, which was the sole purpose of the Neovest capital raising, then the Neovest loans to Neo Lido, Neolido Holdings and the Neolido Group would be irrecoverable. 826 I accept Mr Robinson's evidence in relation to the financial position of the Neolido Group, Neo Lido and Neolido Holdings. 827 On 22 April 2005, Mr and Mrs Selig withdrew $450,000 from the RX02 account which they invested in Neovest and, on the same day, Neovest issued the Share Certificate recording the purchase and issue of 450,000 Foundation Shares paid to $1. 828 Mr and Mrs Selig received only one dividend, which was on 7 May 2005, for the sum of $7,500. 829 On 13 May 2005, ASIC issued a notice to Neovest under s 30 of the ASIC Act. By 17 May 2005, over $13 million worth of redeemable preference shares had been sold by Neovest. 830 The commission payable to Mr Norton and Norton Capital was $1.69 million. Wealthsure and its advisers were to receive 6% of the capital raised, which would have been $780,000. Of that 6%, Wealthsure's advisers received two-thirds, being $520,000. 831 Although ASIC issued an interim order on 17 May 2005 directing Neovest not to offer, issue, sell or transfer any securities in Neovest under the prospectus of 29 March 2005, and issued further orders of the same kind between then and October 2005, that was of no assistance to Mr and Mrs Selig, whose investment had already been made. 832 They must have been aware, as early as 7 June 2005, that they were unlikely to receive dividends in the short future in relation to their investment in Neovest. However, they were advised by Mr Spencer and by Wealthsure that the position would be rectified. Contrary to that advice, there was never any prospect that the position could be rectified because, in fact, Mr and Mrs Selig's investment in Neovest was lost at the date the investment was made and the funds were provided by Neovest to Neo Lido, Neolido Holdings and the Neolido Group pursuant to the facility.

Causation 833 The first and second defendants argued that the plaintiffs had not proved that their conduct caused the loss or damage claimed by the plaintiffs. That submission must be rejected. 834 Mr Bertram provided four Cash Flow and Debt Management Strategy Papers, which advocated that the plaintiffs invest in Neovest. Mr Mackintosh, who was given the documents for the purpose of providing them to the plaintiffs, spoke to those documents. 835 Those documents all recommended that Mr and Mrs Selig invest in Neovest. Mr Bertram also provided two Statements of Advice, both of which recommended that the plaintiffs invest in Neovest. 836 Mr Bertram advised Mr and Mrs Selig on a number of occasions of the reasons why they should invest in Neovest. Principally, he contended, that Neovest was an attractive investment because it provided a high rate of return, which would allow Mr and Mrs Selig sufficient income to negatively gear an investment in the Wynnum projects. 837 His advice was given for the purpose of Mr and Mrs Selig acting upon it, which they did. They relied directly upon the advice given by Mr Bertram. It was argued by the first and second defendants that Mr and Mrs Selig had not read the documents and, therefore, did not rely upon them. That is not the case because Mr Selig said that he tried to read the documents. He was unable to remember what he had read, but it cannot be said he did not read them. 838 However, that argument is "two-edged" because if it were correct, and as we know Mr and Mrs Selig did invest in Neovest, it must have been because of the oral representations made by Mr Bertram, because it was Mr Bertram who first raised the question of Neovest and it was Mr Bertram who, on 18 April 2005, continued to represent Neovest as a good investment. 839 Mr and Mrs Selig did execute contracts for the purchase of the three units on 9 December 2004, which was before they received the second Statement of Advice and, of course, before the meeting of 18 April 2005. However, in my opinion, Mr and Mrs Selig only entered into the three contracts for the purchase of the units upon the advice provided in the Cash Flow and Debt Management Strategy Papers, which advice was also given orally by both Mr Mackintosh and Mr Bertram, that to finance the acquisition of those units and to meet the borrowing costs involved in that acquisition they should invest with Neovest. They entered into those contracts on the understanding that they would receive sufficient income from the Neovest investment to allow them to meet the borrowing costs associated with the purchase of those properties, and provide sufficient income on which to live. 840 The two prospectuses issued by Neovest were also a cause of Mr and Mrs Selig's loss and damage. The representations that were included in those prospectuses were either read or repeated to Mr and Mrs Selig, and those representations were relied upon by Mr and Mrs Selig in entering into the contracts to purchase the units at Wynnum and for the direct investment into Neovest. Those investments were part of the loss and damage that followed. 841 The representations in the Norton Capital research report and the Norton Capital flyer were also relied upon by Mr and Mrs Selig for their investment. 842 Those representations were repeated, as it was intended they would be, by Mr Bertram and, therefore, Wealthsure. Norton Capital and Mr Norton knew that Wealthsure and its advisers would rely upon the representations contained in those two documents. 843 For all of those reasons, the various breaches by the first, second, third, fourth, fifth, sixth, seventh and eighth defendants were relied upon by Mr and Mrs Selig for the investments that followed and the consequent loss and damage. 844 Causation is a matter of fact, which is approached in a commonsense way in any particular case: March v E & MH Stramare Pty Ltd (1991) 171 CLR 506. 845 It is not the case that some other wrongdoers may have also caused the loss or damage of which the plaintiffs complain. The law recognises that there may be multiple causes for the loss or damage suffered and those causes may be independent of each other or, indeed, successive. 846 However, the question is, as a matter of fact, did the act or omission complained of cause the plaintiffs' loss or damage? 847 The evidence supports a finding to that effect.

The Legal Consequences of the Findings 848 The first and second defendants' cross claim identifies the statutory basis. The indemnity could not arise on any of the statutory causes of action but only insofar as the plaintiffs might succeed in tort and contract. 849 The plaintiffs described their claims against the first and second defendants as "primary" and "secondary" claims. The primary claim was against the first and second defendants for a breach of their statutory duties of disclosure in Part 7.7 of Chapter 7 of the Corporations Act. 850 They claimed that as the first and second defendants were the holders of Australian Financial Services Licences they owed statutory duties; in particular pursuant to s 945A and s 945B, and as a consequence of their failure to comply with those statutory duties, they were liable to a claim under s 953B. 851 As part of the secondary claims, the plaintiffs claimed that there was a contractual relationship between the plaintiffs and the first and second defendants, which meant that the first and second defendants owed statutory warranties under s 12ED of the ASIC Act which were breached. 852 I shall first deal with what the plaintiffs have called their "secondary claims", because those claims only relate to the first and second defendants. 853 At the meeting at the plaintiffs' home on 11 October 2004, Mr Bertram provided the plaintiffs with the FSG, which had been issued by Wealthsure on 15 January 2004. 854 At the time he did so, he said words to the effect that he would provide advice in accordance with that document. He said: This is a copy of WealthSure's financial services guide. I am required to provide you with this under the law. This is an important document for you to keep. It sets out who WealthSure are and the basis upon which it is licensed by ASIC to provide financial advice. It also sets out the basis on which I, as an authorised representative of WealthSure, can give advice to you and the scope of that advice. The document also sets out a complaints handling procedure if you should ever had (sic) any difficulties. It also sets out some background information about me and my experience. Can I please get you to you (sic) please sign the acknowledgement on the last page for my records? 855 The plaintiffs accepted Mr Bertram's offer, either explicitly or implicitly, by allowing Mr Bertram to advise them between that date and 18 April 2005, and by acting on his advice. 856 A contractual relationship existed between the plaintiffs and Mr Bertram, and Wealthsure because Mr Bertram was Wealthsure's agent. 857 The express terms of the contract included an obligation on Mr Bertram and Wealthsure to only recommend an investment after considering its suitability for the plaintiffs' needs, objectives and circumstances. It was also an express term of the contract that Mr Bertram and Wealthsure would only offer products selected from an approved list of products carefully, researched and approved by a team of research experts. 858 It was an implied term of the contract that Mr Bertram and Wealthsure would exercise reasonable care in advising the plaintiffs in respect of investments such that the plaintiffs would not suffer loss or damage. 859 The term is implied by law because Mr Bertram and Wealthsure were providing financial services to Mr and Mrs Selig in the course of their business. 860 "Financial service" is defined in s 5 of the ASIC Act to have the meaning in Division 2 of Part 2 of that Act, given by s 12BAB of the Act. 861 Section 12BAB(1) of the ASIC Act, at the relevant time, provided: (1) For the purposes of this Division, subject to paragraph (2)(b), a person provides a financial service if they: (a) provide financial product advice (see subsection (5)); or (b) deal in a financial product (see subsection (7)); or (c) make a market for a financial product (see subsection (11)); or (d) operate a registered scheme; or (e) provide a custodial or depository service (see subsection (12)); or (f) operate a financial market (see subsection (15)) or clearing and settlement facility (see subsection (17)); or (g) provide a service that is otherwise supplied in relation to a financial product; or (h) engage in conduct of a kind prescribed in regulations made for the purposes of this paragraph. 862 Section 12BAB(5) provided: (5) For the purposes of this section, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that: (a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or (b) could reasonably be regarded as being intended to have such an influence; but does not include anything in: (c) a document prepared in accordance with requirements of Chapter 7 of the Corporations Act, other than a document of a kind prescribed by regulations made for the purposes of this paragraph; or (d) any other document of a kind prescribed by regulations made for the purposes of this paragraph. 863 In my opinion, Mr Bertram and Wealthsure were providing financial product advice, which is to provide a financial service. 864 Section 12ED of the ASIC Act provided: (1) In every contract for the supply of financial services by a person to a consumer in the course of a business, there is an implied warranty that: (a) the services will be rendered with due care and skill; and (b) any materials supplied in connection with those services will be reasonably fit for the purpose for which they are supplied. … (2A) If: (a) there is a breach of an implied warranty that exists because of this section in a contract made after the commencement of this subsection; and (b) the law of a State or Territory is the proper law of the contract; the law of the State or Territory applies to limit or preclude liability for the breach, and recovery of that liability (if any), in the same way as it applies to limit or preclude liability, and recovery of a liability, for breach of another term of the contract. 865 A "consumer" is defined in s 12BC(1), which provides: (1) For the purposes of this Division, unless the contrary intention appears, a person is taken to have acquired particular financial services as a consumer if, and only if: (a) the price of the services did not exceed the prescribed amount; or (b) if the price of the services exceeded the prescribed amount - the services were of a kind ordinarily acquired for personal, domestic or household use or consumption; or (c) if the services were acquired for use or consumption in connection with a small business (see subsection (2)) and the price of the services exceeded the prescribed amount - the services were of a kind ordinarily acquired for business use or consumption. 866 The prescribed amount is $40,000: s 12BC(3). The plaintiffs were consumers because Mr Bertram's and Wealthsure's commissions were less than $40,000. Mr Mackintosh's commissions are irrelevant because he was not supplying financial services. 867 In my opinion, the effect of s 12ED(1) was to imply into the contract between Mr and Mrs Selig and Mr Bertram and Wealthsure, a warranty that Mr Bertram and Wealthsure would render their services with due care and skill. 868 Even without the statutory warranty an implied term of reasonable care will arise by law in a contract for professional services: Astley v Austrust Ltd (1999) 197 CLR 1 ("Astley v Austrust"). In that decision, the plurality, Gleeson CJ, McHugh, Gummow and Hayne JJ, said at [47]: The implied term of reasonable care in a contract of professional services arises by operation of law. It is one of those terms that the law attaches as an incident of contracts of that class. It is part of the consideration that the promisor pays in return for the express or implied agreement of the promise to pay for the services of the person giving the promise. Unlike the duty of care arising under the law of tort, the promise in contract always gives consideration for the implied term. And it is a term that the parties can, and often do, bargain away or limit as they choose. (Footnotes omitted) 869 In my opinion, the contract that these parties entered into was a contract of the kind that has implied into it, by operation of law, an implied term of reasonable care. 870 For that second reason, the contract between the plaintiffs and the first and second defendants contained had an implied term that required the first and second defendants to take reasonable care or exercise due care and skill. 871 If the term is not implied by law, and s 12ED has no effect, and this is not a contract of the kind contemplated in Astley v Austrust, in my opinion the term was implied in the contract as a matter of fact because the parties had not thought it necessary to express the term in the contract. In BP Refinery Pty Ltd v Hastings Shire Council (1978) 52 ALJR 20 at 26, the Privy Council identified the circumstances in which a term will be implied into a contract: … for a term to be implied, the following conditions (which may have overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract. 872 That decision was approved by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason J at 347. 873 The contract between the plaintiffs and the first and second defendants was of a kind that, it goes without saying, the financial advisers who are giving the financial advice must exercise reasonable care by the exercise of skill. Such a term must be necessary to give business efficacy to the contract. If the term were not implied as a matter of fact, the financial adviser would be under no obligation to provide the service contracted for with care and skill. The financial adviser's care and skill is the reason for the other party contracting with the financial adviser. Furthermore, such an implied term clearly satisfies the other four requirements in the test set out by the Privy Council and approved by the High Court. It follows that if the term is not implied at law, the term is implied in fact. 874 In my opinion, Mr Bertram and Wealthsure breached the two express terms of the contract and the implied term. They did not recommend an investment that was suitable for the plaintiffs' needs, objectives and circumstances, and they did not give proper consideration to those needs, objectives and circumstances. 875 Although the product was on Wealthsure's APL, it had not been carefully researched and approved by a team of research experts. It had only been researched by Mr Norton and Norton Capital, which was not "a team of research experts" and the research was not carried out with reasonable care or, indeed, any care. It had not been researched at all by Wealthsure. 876 The first and second defendants also breached the implied term, because they failed to exercise the care and skill required of an ordinarily competent financial adviser. 877 Wealthsure failed to carry out an appropriate inquiry into the Neovest prospectus and the Neovest offering, and relied upon the inadequate inquiry carried out by Mr Norton and Norton Capital. 878 Mr Bertram failed to carry out any inquiry at all in relation to the financial product. 879 Mr Bertram also gave inappropriate advice to Mr and Mrs Selig. He also gave advice inconsistent with the instructions given to him by Wealthsure itself, in Mr Pawski's email of 16 September 2004. 880 In my opinion, Mr Bertram and Wealthsure have breached all three terms of the contract. 881 In those circumstances, in my opinion, Mr Bertram and Wealthsure are liable to the plaintiffs in contract. 882 The plaintiffs, however, were entitled to sue both in contract and in tort, even though one aspect of the breach of the contract was tortious: Astley v Austrust. 883 In paragraph 62 of the TASOC, the plaintiffs plead: In breach of the retainer and negligently in breach of the duty of care owed by the defendants to the plaintiffs by virtue of proximity and the retainer; … 884 If this were a proper consideration of a pleading issue, a number of matters would arise. First, the plaintiffs have not pleaded the facts and circumstances giving rise to the duty of care except by reason of "proximity and the retainer". Secondly, the plaintiffs do not plead to the content of the duty of care. Thirdly, the plaintiffs seem to be relying upon the concept of proximity for claiming that a duty of care arose. 885 In my opinion, the first and second defendants owed the plaintiffs a duty of care. The duty of care arose because the first and second defendants had a contractual obligation to provide financial services to the plaintiffs. The plaintiffs made it clear that they relied upon the first and second defendants' skill and experience for the provision of those services. The first and second defendants held themselves out as being capable of providing competent financial services. The plaintiffs relied upon the first and second defendants for the first and second defendants' advice. 886 For those reasons, a duty of care was owed. The duty was to take reasonable care in the providing of financial advice so as to avoid the plaintiffs' suffering, loss or damage. 887 In discharging that duty of care, the first and second defendants were obliged to exercise the care and skill of a reasonably competent financial adviser. 888 For the reasons already given, they failed to exercise reasonable care and, as a result, the plaintiffs suffered loss and damage. 889 The plaintiffs are entitled to succeed against the first and second defendants, both in contract and in negligence. 890 The first and second defendants claim that the plaintiffs were guilty of contributory negligence. Such a plea would not reduce the first and second defendants' liability to the plaintiffs in contract: Astley v Austrust. 891 I turn to what the plaintiffs have described as their primary claims. 892 The plaintiffs' primary claims are pleaded in paragraph 52 of the TASOC, which is reproduced in [16] of these reasons. 893 Although the plaintiffs claim that they relied upon a suite of sections in Part 6D.2 and Part 6D.3 of the Corporations Act, this aspect of their claims relied upon s 953B for a contravention of ss 945A and 945B. 894 At the relevant time between November 2004 and April 2005, Division 3 of Part 7.7 of Chapter 7 of the Corporations Act applied to a financial services licensee (in s 944A, called a "providing entity") or an authorised representative (also called a "providing entity") of a financial services licensee, in giving personal advice to a client as a retail client. Division 3 applied to Mr Bertram as an authorised representative of Wealthsure and Wealthsure as a financial services licensee in the advice that Mr Bertram gave to Mr and Mrs Selig. 895 Section 946A required the providing entity to give the client a Statement of Advice as the means by which the advice was provided or a separate record of the advice. 896 Section 946C addressed the timing of the giving of the Statement of Advice. 897 The Statement of Advice had to be described as such on the cover of the document: s 947A. It had to conform with s 947B if given by a financial services licensee, or s 947C if given by an authorised representative. 898 Importantly, however, as has been noted, the Statement of Advice had to be the means of giving the advice or record the advice. Mr Bertram gave Mr and Mrs Selig two Statements of Advice; one on 29 November 2004 and the other on 18 April 2005. 899 The advice that was given had also to conform with ss 945A and 945B. Section 945A provided: (1) The providing entity must only provide the advice to the client if: (a) the providing entity: (i) determines the relevant personal circumstances in relation to giving the advice; and (ii) makes reasonable inquiries in relation to those personal circumstances; and (b) having regard to information obtained from the client in relation to those personal circumstances, the providing entity has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all of the circumstances; and (c) the advice is appropriate to the client, having regard to that consideration and investigation. (2) In any proceedings against an authorised representative of a financial services licensee for an offence based on subsection (1), it is a defence if: (a) the licensee had provided the authorised representative with information or instructions about the requirements to be complied with in relation to the giving of personal advice; and (b) the representative's failure to comply with subsection (1) occurred because the representative was acting in reliance on that information or those instructions; and (c) the representative's reliance on that information or those instructions was reasonable. (3) A financial services licensee must take reasonable steps to ensure that an authorised representative of the licensee complies with subsection (1). 900 The section applied to Mr Bertram and Wealthsure. In my opinion, Mr Bertram and Wealthsure contravened s 945A. No effort was made to determine Mr and Mrs Selig's relevant personal circumstances other than in the most general way. No inquiries were made in relation to those personal circumstances, other than in the most general way when completing the Fact Finder. 901 Mr Bertram made no proper inquiries into the value of Mr and Mrs Selig's two units in the Sea Aura Apartment complex. Mr Bertram did not give consideration to and conduct any investigation into the subject matter of the advice, namely Neovest or whether Neovest could pay a dividend of 20% to its Foundation redeemable preference shareholders or whether Neovest could redeem the shares at the expiration of 12 months. Nor did he make any investigation into whether, if Neovest loaned the monies raised pursuant to the prospectus to Neo Lido, Neolido Holdings or the Neolido Group, those monies would be recoverable. He gave no consideration and did not conduct any investigation as to whether, if Mr and Mrs Selig purchased three units for the purpose of negative gearing, the purchase of Neovest redeemable preference shares would provide a sufficient reliable income against which the losses on the three units could be geared. 902 The advice given to Mr and Mrs Selig was not appropriate having regard to their assets, liabilities and income. The advice given to Mr and Mrs Selig was contrary to the instructions given by Mr Pawski to Wealthsure's authorised representatives on 16 September 2004. 903 Wealthsure took no steps at all, let alone reasonable steps, to ensure that Mr Bertram complied with his obligations under s 945A. 904 Section 945B provided: (1) If: (a) the advice is based on information relating to the client's relevant personal circumstances that is incomplete or inaccurate; and (b) the providing entity knows that the information is incomplete or inaccurate, or is reckless as to whether it is incomplete or inaccurate; the providing entity must, in accordance with subsections (2) and (3), warn the client that: (c) the advice is, or may be, based on incomplete or inaccurate information relating to the client's relevant personal circumstances; and (d) because of that, the client should, before acting on the advice, consider the appropriateness of the advice, having regard to the client's relevant personal circumstances. (2) The warning must be given to the client at the same time as the advice is provided and, subject to subsection (3), by the same means as the advice is provided. (3) If the Statement of Advice (see Subdivision C) is the means by which the advice is provided, or is given to the client at the same time as the advice is provided, the warning may be given by including it in the Statement of Advice. 905 Mr Bertram and Wealthsure took no steps to warn Mr and Mrs Selig that the advice given was based on incomplete information. Mr Bertram and Wealthsure failed to advise Mr and Mrs Selig that they should consider their personal circumstances before acting on the advice or considering the appropriateness of the advice. 906 Mr Bertram and Wealthsure contravened ss 945A and 945B of the Corporations Act. 907 At the relevant time, s 953B provided: (1) This section applies in the following situations: (a) a person: (i) is required by a provision of this Part to give another person (the client) a disclosure document or statement (the required disclosure document or statement); and (ii) does not give (within the meaning of section 940C) the client anything purporting to be the required disclosure document or statement by the time they are required to do so; or (b) a person: (i) gives another person (the client) a disclosure document or statement that is defective in circumstances in which a disclosure document or statement is required by a provision of this Part to be given to the client; or (ii) is a financial services licensee and gives, or makes available to, another person (the client) a disclosure document or statement, being a Financial Services Guide or a Supplementary Financial Services Guide, that is defective, reckless as to whether the client will or may rely on the information in it; or (c) a person contravenes section 949A or 949B. In paragraph (b), give means give by any means (including orally), and is not limited to the meaning it has because of section 940C. (2) In a situation to which this section applies, if a person suffers loss or damage: (a) if paragraph (1)(a) applies - because the client was not given the disclosure document or statement that they should have been given; or (b) if paragraph (1)(b) applies - because the disclosure document or statement the client was given was defective; or (c) if paragraph (1)(c) applies - because of the contravention referred to in that paragraph; the person may, subject to subsection (6), recover the amount of the loss or damage by action against the, or a, liable person (see subsections (3) and (4)), whether or not that person (or anyone else) has been convicted of an offence in respect of the matter referred to in paragraph (a), (b) or (c). (3) For the purposes of subsection (2), the, or a, liable person is: (a) if the person first-referred to in paragraph (1)(a), (b) or (c) is a financial services licensee - subject to subsection (4), that person; or (b) if the person first-referred to in paragraph (1)(a), (b) or (c) is an authorised representative of only one financial services licensee - that financial services licensee; or (c) if the person first-referred to in paragraph (1)(a), (b) or (c) is an authorised representative of more than one financial services licensee: (i) if, under the rules in section 917C, one of those licensees is responsible for the person's conduct - that licensee; or (ii) if, under the rules in section 917C, 2 or more of those licensees are jointly and severally responsible for the person's conduct - each of those licensees. 908 Section 953B was engaged because Mr Bertram and Wealthsure were persons who were obliged to give a disclosure document or statement, and they gave the clients a disclosure document or statement that was defective in circumstances in which a disclosure document or statement was required to be given to the client: s 953B(1)(b). That engaged s 953B(2)(b), which has given the plaintiffs the right to bring this proceeding against the first and second defendants. 909 For the purposes of s 953B(3), Mr Bertram and Wealthsure are liable persons. 910 Neither Mr Bertram nor Wealthsure have been able to make out the defence which would have been available to them in s 953B(6). 911 In my opinion, the plaintiffs are entitled to succeed against the first and second defendants under s 953B of the Corporations Act. 912 The plaintiffs also claim that the conduct engaged in by Mr Bertram and Wealthsure amounted to misleading and deceptive conduct. The plaintiffs relied upon s 12DA(1) of the ASIC Act, which provided: (1) 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. 913 For all of the reasons that I have mentioned, the conduct that Mr Bertram and Wealthsure engaged in was both misleading and deceptive, and for that conduct I include all of the conduct between the first meeting and the advice given on 18 April 2005. 914 The plaintiffs also relied upon s 12DB(1)(a) of the ASIC Act, which provides: (1) A person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of financial services: (a) falsely represent that services are of a particular standard, quality, value or grade; … 915 In my opinion, Mr Bertram and Wealthsure have also contravened s 12DB for falsely representing the standard, quality and value of the services that they would provide: s 12DB(1)(a). 916 They did so by the provision of each of the documents to the plaintiffs, including the FSG, the Strategy Papers, and the Statements of Advice. 917 Next, in paragraph 59.3 of the TASOC, the plaintiffs relied upon the warranty implied into the retainer by s 12ED of the ASIC Act, which I have dealt with in relation to the implied term in the contract between the plaintiffs and the first and second defendants. For the purposes of their claim under the ASIC Act, the plaintiffs have also made out a breach of the implied warranty given by s 12ED. 918 The plaintiffs also relied upon s 12BB of the ASIC Act, which provided: (1) For the purposes of Subdivision D (sections 12DA to 12DN), if a person makes a representation about a future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation is taken to be misleading. (2) For the purpose of applying subsection (1) to a proceeding concerning a representation made by a person about a future matter, the person is taken not to have had reasonable grounds for making the representation unless it adduces evidence to the contrary. (3) Subsection (1) does not limit by implication the meaning of a reference in this Division to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead. 919 I am not sure that the plaintiffs needed to rely upon s 12BB, except perhaps insofar as the first and second defendants represented that Neovest would pay a dividend of 20% on the Foundation redeemable preference shares and that those shares could be redeemed after 12 months. 920 Neither Mr Bertram nor Wealthsure had reasonable grounds for making those representations, so in those circumstances the representations made were misleading: s 12BB(1). 921 In my opinion, the plaintiffs have made out contraventions of each of the sections to which I have referred and they are entitled to relief in respect of those contraventions. 922 The plaintiffs also relied upon s 1041E of the Corporations Act, which provides: (1) A person must not (whether in this jurisdiction or elsewhere) make a statement, or disseminate information, if: (a) the statement or information is false in a material particular or is materially misleading; and (b) the statement or information is likely: (i) to induce persons in this jurisdiction to apply for financial products; or (ii) to induce persons in this jurisdiction to dispose of or acquire financial products; or (iii) to have the effect of increasing, reducing, maintaining or stabilising the price for trading in financial products on a financial market operated in this jurisdiction; and (c) when the person makes the statement, or disseminates the information: (i) the person does not care whether the statement or information is true or false; or (ii) the person knows, or ought reasonably to have known, that the statement or information is false in a material particular or is materially misleading. (2) For the purposes of the application of the Criminal Code in relation to an offence based on subsection (1), paragraph (1)(a) is a physical element, the fault element for which is as specified in paragraph (1)(c). (3) For the purposes of an offence based on subsection (1), strict liability applies to subparagraphs (1)(b)(i), (ii) and (iii). 923 For the reasons I have already given, Mr Bertram and Wealthsure made statements that were false in a material particular or materially misleading, and those statements induced the plaintiffs to apply for and acquire financial products. At the time they made those statements, they should reasonably have known that the statements were false in a material particular or materially misleading. 924 The statements to which I refer are those statements concerning the Neovest Foundation redeemable preference shares and the reliability of that investment. 925 The plaintiffs have made out a contravention by the first and second defendants of s 1041E. 926 The plaintiffs also relied upon s 1041H of the Corporations Act, to which I have already referred. For the reasons I have already given, in relation to the corresponding sections in the ASIC Act, the plaintiffs have established that the first and second defendants have engaged in conduct in relation to a financial product or financial service that is misleading or deceptive, or likely to mislead or deceive and the plaintiffs have established a contravention of s 1041H. 927 Contraventions of s 1041E and s 1041H engage s 1041I, which provides for a remedy for the plaintiffs; the remedy being damages. In my opinion, the plaintiffs were entitled to the remedy given by s 1041I. 928 In this prayer for relief, the plaintiffs also relied upon s 1325 of the Corporations Act. Section 1325(1) provided at the relevant time: (1) Where, in a proceeding instituted under, or for a contravention of, Chapter 5C, 6CA or 6D, or Part 7.10, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of Chapter 5C, 6CA or 6D, or Part 7.10, the Court may, whether or not it grants an injunction, or makes an order, under any other provision of this Act, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. 929 However, the plaintiffs did not seek any other orders other than costs and, in those circumstances, s 1325(1) does not at this stage need to be further addressed. 930 For all of those reasons, the plaintiffs are entitled to succeed on the statutory provisions upon which they have relied and in negligence and contract. 931 In their prayer for relief, the plaintiffs also sought relief against the first and second defendants under s 12GF of the ASIC Act. 932 Section 12GF gives a person, who suffers loss or damage by the conduct of another person that contravenes a provision of s 12DA to s 12DN, a remedy in damages against the contravenor. Because I have found that the first and second defendants have contravened those sections, the plaintiffs are entitled to the remedy. 933 The plaintiffs also sought relief against the third to thirteenth defendants, but relied in that regard on the first and second defendants' cross-claim against those other defendants. The plaintiffs did not add to those defendants' pleas. 934 It would be better to address the first and second defendants' cross-claim and, in doing so, determine whether the plaintiffs are entitled to relief against those other defendants. 935 In their defence, the first and second defendants denied liability to the plaintiffs, pleaded contributory negligence under s 1041I(1B) of the Corporations Act and/or s 12GF(1B) of the ASIC Act, and as well pleaded the plaintiffs' claims were apportionable between the first and second defendants and the third to eighth defendants. 936 They claim that the second prospectus, which was an offer of securities, contained misleading or deceptive statements, omissions and new matters contrary to s 728 of the Corporations Act. 937 For the reasons I have already given, in my opinion, the Neovest prospectuses both contained significant misleading statements and therefore s 728 was contravened. 938 Next, the first and second defendants claimed that Norton Capital had contravened s 1041E, s 1041F and s 1041H of the Corporations Act, and s 12DA of the ASIC Act. In the case of s 1041E by making a statement that was false in a material particular or materially misleading; in the case of s 1041F inducing other people to deal in financial products by making or publishing a statement, promise or forecast if the person knows or is reckless as to whether the statement is misleading, false or deceptive; and in the case of s 1041H by engaging in conduct in relation to a financial product or financial service that is misleading or deceptive. 939 The second to eighth defendants have contravened s 1041E and s 1041H of the Corporations Act. I think it has also been established that the third and fourth defendants have contravened s 1041F. 940 I am not satisfied that Mr Townley was aware of the matters contained in s 1041F and, for that reason, I am not prepared to find that he contravened that section. 941 The first and second defendants seek, because of the contraventions that have been established against the other defendants, apart from the ninth to thirteenth defendants, that the liability be assessed proportionately. I will return to that. 942 In their SCC, the first and second defendants claim for all the reasons pleaded that the second prospectus was misleading and in breach of s 728 of the Corporations Act: paragraph 26D of the SCC. 943 I think the plea involves a misunderstanding of the Corporations Act. A document cannot be in breach of a section of the Corporations Act, but the directors who created the document and the company which published the document could be. 944 Insofar as the plea is meant to be that the directors have contravened s 728 of the Corporations Act and so also has Neovest, in my opinion that claim is made out. 945 Next it is pleaded that because of the misleading content and omissions from the first and second prospectuses, each of Neovest, Mr Spencer, Ms Perovich, Mr Norton, Mr Townley and Norton Capital have been knowingly involved, within the meaning of s 79 of the Corporations Act, in the contraventions and are liable pursuant to s 729 of the Corporations Act. 946 Section 729 provides: (1) A person who suffers loss or damage because an offer of securities under a disclosure document contravenes subsection 728(1) may recover the amount of the loss or damage from a person referred to in the following table if the loss or damage is one that the table makes the person liable for. This is so even if the person did not commit, and was not involved in, the contravention. People liable on disclosure document [operative] These people... are liable for loss or damage caused by... 1 the person making the offer any contravention of subsection 728(1) in relation to the disclosure document 2 each director of the body making the offer if the offer is made by a body any contravention of subsection 728(1) in relation to the disclosure document 3 a person named in the disclosure document with their consent as a proposed director of the body whose securities are being offered any contravention of subsection 728(1) in relation to the disclosure document 4 an underwriter (but not a sub-underwriter) to the issue or sale named in the disclosure document with their consent any contravention of subsection 728(1) in relation to the disclosure document 5 a person named in the disclosure document with their consent as having made a statement: the inclusion of the statement in the disclosure document (a) that is included in the disclosure document; or (b) on which a statement made in the disclosure document is based 6 a person who contravenes, or is involved in the contravention of, subsection 728(1) that contravention

(2) A person who acquires securities as a result of an offer that was accompanied by a profile statement is taken to have acquired the securities in reliance on both the profile statement and the prospectus for the offer. (3) An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose. (4) This Part does not affect any liability that a person has under any other law. 947 In my opinion, the contravention of s 728 allows for recovery by the plaintiffs under s 729 against each of those persons, being Neovest who made the offer, the directors, and the persons named in the disclosure statement as having made a statement that is included in the disclosure document. 948 The relief would be available to the plaintiffs against those persons. 949 Next it is pleaded in the SCC that the ninth to thirteenth defendants are liable to the first and second defendants for any loss or damage that may have been caused by reason of the wrongful acts of Mr Townley. I will address that separately. 950 The first and second defendants claim that the third to eighth defendants have breached s 1041E, s 1041F and s 1041H of the Corporations Act. For the reasons I have already given, in my opinion all of those contraventions have been made out save that I am not prepared to find that Mr Townley breached s 1041E. 951 The first and second defendants claim in paragraphs 35 and 36 of the SCC that as a result of those contraventions, to the extent that the first and second defendants are liable to the plaintiffs, the first and second defendants may recover the amount of that loss and damage pursuant to s 1041I of the Corporations Act against each of Neovest, Norton Capital, Mr Spencer, Ms Perovich, Mr Norton and Mr Townley. I do not accept that proposition. Section 1041I does not give a contravenor a right to contribution against another contravenor for the second contravenor's contravention of the Corporations Act. 952 If there are two separate contravenors, the question is whether or not their liability is proportionate such that they are only liable to the extent of their proportionate liability. I will address that later. 953 Next the first and second defendants claim that the plaintiffs' claims are apportionable claims and seek orders under s 1041L and s 1041N of the Corporations Act. I will address that when I address the question of the apportionable claims. 954 The first and second defendants also purport to rely upon s 1325 of the Corporations Act and they claim that if the plaintiffs are entitled to relief against them the first and second defendants should be entitled to indemnity against the third to eighth defendants and, because of the Partnership Act, the ninth to thirteenth defendants. 955 In my opinion, the first and second defendants cannot plead a case on behalf of the plaintiffs but, in any event, the plaintiffs have sought that relief and for reasons which I have already given I would grant it. 956 However, insofar as the first and second defendants also claim that, to the extent that they are liable to the plaintiffs for any loss or damage an order ought to be made under s 1325 to indemnify and compensate the first and second defendants for that liability for loss and damage, that claim must be rejected. Section 1325 does not have that effect. In particular, it does not have the effect of allowing one contravenor to claim contribution from another contravenor. The question of apportionment is dealt with separately in the Act and s 1325 cannot be used to make an indemnity or contribution order. The scheme of the Act is to make all contravenors liable to the party who suffered the loss or damage. 957 All contravenors who are liable for the same loss and damage are liable for the damages that flow. The Act does not provide for contribution between the contravenors: Re La Rosa and Another; Ex parte Norgard v Rodpat Nominees Pty Ltd & Anor (1991) 31 FCR 83. It does allow for proportionate liability, which is a different concept I shall address later. The first and second defendants did not bring a claim against the remaining defendants for equitable contribution: Burke v LFOT Pty Ltd and Others (2002) 209 CLR 282. That was not pleaded and it was not part of the first and second defendants' written submissions in opening or closing, and not part of their oral submissions. I have searched the transcript and find no reference to equitable contribution. The first and second defendants joined the other defendants for the purposes of establishing that those defendants were proportionately liable. Insofar as they relied upon the Corporations Act and the ASIC Act for contribution, they are not entitled to relief. 958 The first and second defendants also refer to the ASIC Act. They claim that the third to eighth defendants breached s 12DA of the ASIC Act. 959 I have already referred to s 12DA in the plaintiffs' claim against the first and second defendants. In my opinion, the third to eighth defendants have engaged, in trade or commerce, in conduct in relation to financial services that is misleading or deceptive and the plaintiffs would be entitled to relief against the third to eighth defendants under that section. 960 I also think, as the first and second defendants claim, that the plaintiffs would be entitled to relief against the third to eighth defendants pursuant to s 12GF of the ASIC Act, which is the section that provides for damages for contraventions of Subdivision D. It provides: (1) A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision C (sections 12CA to 12CC) or Subdivision D (sections 12DA to 12DN) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. (1A) Subsection (1) has effect subject to section 12GNA. (1B) Despite subsection (1), if: (a) a person (the claimant) makes a claim under subsection (1) in relation to: (i) economic loss; or (ii) damage to property; caused by conduct of another person (the defendant) that was done in contravention of section 12DA; and (b) the claimant suffered the loss or damage: (i) as a result partly of the claimant's failure to take reasonable care; and (ii) as a result partly of the conduct referred to in paragraph (a); and (c) the defendant: (i) did not intend to cause the loss or damage; and (ii) did not fraudulently cause the loss or damage; the damages that the claimant may recover in relation to the loss or damage are to be reduced to the extent to which the court thinks just and equitable having regard to the claimant's share in the responsibility for the loss or damage. (2) An action under subsection (1) may be commenced within 6 years after the day on which the cause of action that relates to the conduct accrued. 961 Again the first and second defendants claim that the plaintiffs are so entitled. Again I mention that the first and second defendants are not entitled to plead on behalf of the plaintiffs but insofar as the plaintiffs have adopted the plea, in my opinion, the plaintiffs are entitled to relief under s 12GF against the third to eighth defendants. 962 The first and second defendants also claim contribution by virtue of s 12GF. For the reasons already given, the first and second defendants are not entitled to contribution under the provisions of s 12GF. 963 The first and second defendants claim that the liabilities of the defendants are apportionable pursuant to s 12GR of the ASIC Act. I will deal with that later. 964 They have also claimed, as I have already mentioned, that the claim is apportionable under the Civil Liability Act. I shall deal with that claim later. 965 Lastly, they claim: 46. The first and second defendants claim against the third to thirteenth defendants and each of them: 46.1 Orders for indemnity to the extent that the first and second defendants, or either of them, are or is liable to the plaintiffs pursuant to section 729, section 1041H and section 1325 of the Corporations Act, and section 12GF of the ASIC Act. 46.2 Orders for contribution to the extent that the first and second defendants, or either of them, are or is liable to the plaintiffs pursuant to section 729, section 1041H and section 1325 of the Corporations Act, and section 12GF of the ASIC Act. 46.3 Declarations as to the extent of the liabilities of the first and second defendants to the plaintiffs having regard to the comparative responsibility of each and all of Neovest, Norton Capital, Spencer, Perovich, Norton and Townley as concurrent wrongdoers pursuant to section 1041N of the Corporations Act, section 12GR of the ASIC Act and section 31 of the Civil Liability Act. 966 They are not entitled to orders for indemnity or contribution as pleaded in paragraphs 46.1 and 462. I will address the question of the declarations in the next section when I address proportionate liability.

The Liability of the Ninth to Thirteenth Defendants 967 The ninth to thirteenth defendants are the former partners of the sixth defendant who were in partnership as NRH. 968 Both the plaintiffs and the first and second defendants have brought claims against the ninth to thirteenth defendants but, as the ninth to thirteenth defendants rightly contend, it is the first and second defendants' cross claim that identifies the claims which have been made. 969 As previously mentioned, the plaintiffs' claim against the ninth to thirteenth defendants has been brought simply because the first and second defendants claim that the plaintiffs' claim against them is apportionable with all of the other defendants, including the ninth to thirteenth defendants. 970 The claim against the ninth to thirteenth defendants rests upon the liability of Mr Townley. If Mr Townley is found not to be liable, then the claims against the ninth to thirteenth defendants fail without further examination. Mr Townley will be liable if he contravened the relevant sections of the Corporations Act or ASIC Act and those contraventions caused the plaintiffs' economic loss. 971 It is only if Mr Townley is liable to the plaintiffs, that the ninth to thirteenth defendants may be liable to the plaintiffs, and may be liable to the first and second defendants if the plaintiffs' claim for damages is found to be apportionable under s 1041L of the Corporations Act. The further reasons assume that Mr Townley is liable to the plaintiffs because Mr Townley is a concurrent wrongdoer with the first and second defendants, Ms Perovich and Mr Spencer, and Norton Capital and Mr Norton. 972 The ninth to thirteenth defendants can only be liable in those circumstances if their liability rests upon the circumstance that they were partners of Mr Townley in NRH whilst he was a director of Neovest. 973 The first and second defendants claim that the ninth to thirteenth defendants are liable by reason of s 13 of the Partnership Act. 974 Section 13(1) and (2) of the Partnership Act provides: (1) Subject to subsection (2), if, by any wrongful act or omission of any partner in a firm, other than an incorporated limited partnership, acting in the ordinary course of the business of the firm, or with the authority of his or her copartners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable for the loss, injury or penalty to the same extent as the partner so acting or omitting to act. (2) For subsection (1), a partner in a firm, other than an incorporated limited partnership, who commits a wrongful act or omission as a director of a body corporate under the Corporations Act is not to be taken to be acting in the ordinary course of the business of the firm or with the authority of the partner's copartners only because of any 1 or more of the following - (a) the partner obtained the agreement or authority of the partner's copartners, or some of them, to be appointed or to act as a director of the body corporate; (b) remuneration that the partner receives for acting as a director of the body corporate forms part of the income of the firm; (c) any copartner is also a director of that or any other body corporate. 975 The first and second defendants claim that Mr Townley contributed to the plaintiffs' loss and damage by signing the first and second prospectuses, both of which were misleading and deceptive, and thereby acted in contravention of the Corporations Law provisions prohibiting such conduct: paragraphs 9A.6, 21, 26C.16, 26D.15, 30, 31A, 36A, 39A, and 42A of the FAD&SCC of the first and second defendants. 976 Leaving aside, as I have said, the question whether Mr Townley is liable to the plaintiffs as a concurrent wrongdoer with the other parties in respect of the claimed contravention, the plaintiffs and the first and second defendants, to establish liability against the ninth to thirteenth defendants, would have to prove that Mr Townley committed the wrongful act or omission in the ordinary course of the business of the firm or with the authority of his partners, and that the wrongful act caused the loss. 977 The first and last matters may be assumed. However, the ninth to thirteenth defendants contend that even if Mr Townley were found to have contravened the Corporations Act and was liable to the plaintiffs for those contraventions, the ninth to thirteenth defendants are not themselves liable to either the plaintiffs or the first and second defendants. 978 It will be enough, therefore, if the plaintiffs are to succeed against the ninth to thirteenth defendants, if they establish that Mr Townley was acting in the ordinary course of the business of NRH or was acting with the authority of his partners. 979 Section 13 of the Partnership Act was amended on 22 November 2004. The previous iteration of s 13(1) and (2) was in the same form, except that it did not recognise incorporated limited partnerships as the amended s 13 does. However, NRH was not an incorporated limited partnership and therefore the amendment is of no consequence. If the ninth to thirteenth defendants are liable under the Partnership Act, it is a matter of no consequence that s 13 was amended on 22 November 2004. 980 Section 13(1) is subject to s 13(2). Section 13(2) was introduced into the Partnership Act by the Tourism, Racing and Fair Trading (Miscellaneous Provisions) Act 2003 (Qld) and came into force on 3 December 2003. In the Explanatory Memorandum which accompanied that Act, it was stated: The amendment to section 13 inserts a presumption against liability where another partner acts as a director of a corporation outside of the partnership's business. This presumption against liability may be displaced depending on the circumstances of the case. The amendment potentially decreases the rights of redress of the parties wishing to take legal action against a partnership. However, it is considered that this is justified in situations where the partner in question has been acting in an entirely different role, as a director of a corporation. 981 There are three circumstances in s 13(2) which, if established, are not sufficient to establish that the partner who committed the wrongful act or omission could be taken to be acting in the ordinary course of the business of the firm, or with the authority of the partner's other partners. Those three circumstances are identified in the three paragraphs to s 13(2). 982 The plaintiffs and the first and second defendants will not establish liability against the ninth to thirteenth defendants as partners of Mr Townley for his acts or omissions simply because one of his partners agreed or authorised Mr Townley to be appointed to act as a director of Neovest. Nor will it be enough to establish that the remuneration that Mr Townley received from Neovest was taken to be part of the income of NRH. 983 Those two factors are not, as s 13(2) says, such as to necessitate that it be taken that Mr Townley was acting in the ordinary course of the business of NRH or with the authority of his partners. 984 The ninth to thirteenth defendants have contended that the expression "authority of his or her copartners" in s 13(2) must be interpreted "to act so as to bind them". It was contended it followed from the use of the word "authority", a word of precise meaning in the context of agency matters. It was contended that the expression in s 13(1) could be contrasted with the expression in s 13(2)(a) "the agreement or authority of the partner's copartners". 985 It was contended that the acts complained of, by Mr Townley and his signing the first and second prospectuses, were as a director of Neovest and not in his role as a legal adviser, and not, therefore, in the ordinary course of business of the partnership, and not conduct undertaken with the authority of Mr Townley's copartners. 986 Apart from the matters referred to in s 13(2), which are not enough for the conclusion mentioned in the subsection to be drawn, then what is left on the plaintiffs' and first and second defendant's case is no more than Mr Townley acting as a director and signed the two prospectuses. That is insufficient, in my opinion, to allow it to be said that Mr Townley was acting in the ordinary course of the business of the firm or with the authority of his partners. 987 It was not a part of the business of the firm to provide partners as directors for public companies or indeed any companies. Mr Townley became a director of Neovest at the behest of Mr Spencer and Ms Perovich. 988 Although Mr Townley maintained a file and he recorded the time he spent on Neovest work, that did not bring him within the meaning of the words in s 13(1). Nor did his maintaining working papers do so. The file he maintained was not a file one would expect of a solicitor. 989 When he did work as a solicitor for Neovest, he invoiced Neovest. So also did the other solicitors in NRH. 990 NRH invoiced Mr Townley's time spent as a director and not for the time spent for the provision of legal services. 991 The evidence demonstrated that it was not in the ordinary course of business for the NRH or one of its partners to be a director of a public company. Indeed, the partner directorships were otherwise confined to shelf companies with the partner retiring when the company was sold to the client. 992 The very conversation that Mr Townley had with Mr Gallagher, about the circumstances of the arrangement to be put in place, demonstrates that Mr Townley's directorship of Neovest was not in the ordinary course of NRH's business. Mr Townley was not acting with the authority of NRH or any of its partners when he signed the first and second prospectuses. He was not engaged in partnership business. 993 The plaintiffs' claim against the ninth to thirteenth defendants, and the first and second defendants' cross claim against those defendants, is dismissed. 994 If I had concluded that the ninth to thirteenth defendants were liable for Mr Townley's acts or omissions, their liability would be the same as his and no greater. Their liability would depend upon the plaintiffs succeeding in their claim against Mr Townley or it being held that Mr Townley was proportionately liable for the plaintiffs' damages.

The Claims Against the Other Defendants 995 The plaintiffs' claim against the remaining defendants is for loss and damage which is identified in paragraph 63 of the TASOC, and consequential loss which is identified in paragraphs 64 to 70. 996 The loss and damage is said to be the plaintiffs' loss of their investment of $450,000 and compound interest upon that sum, together with a consequential loss upon the collapse of investments that were dependent upon a return from the Neovest investment. 997 It is pleaded in paragraph 64 that the plaintiffs lost an opportunity to purchase real estate in Queensland and the expectation of a return on the plaintiffs' investment in Neovest. It is not entirely clear that the claims in the consequential loss are any different to those for the claims for loss in paragraph 63. 998 However, for the present purposes, it is enough to notice that the whole of the plaintiffs' claim is for economic loss. 999 The second plaintiff had previously brought a claim for personal injury which is identified in paragraphs 68 and 70 but, as I have previously noted, that claim was abandoned on the second day of the trial. The first plaintiff never pressed such a claim. 1000 The plaintiffs brought their claim against the first and second defendants, but amended their application and their statement of claim to include a claim against the third to thirteenth defendants as a consequence of the first and second defendants' pleas in their FAD&SCC, in which they denied that the plaintiffs were entitled to any relief. In that document, the first and second defendants asserted, pursuant to ss 729, 1041I, 1041N and 1325 of the Corporations Act, ss 12GF and 12GR of the ASIC Act, and s 31 of the Civil Liability Act 2003 (Qld), that the liability of the first and second defendants to the plaintiffs is limited to the extent of the first and second defendants' responsibility for loss in proportion to the liability of the third to thirteenth defendants as concurrent wrongdoers. The first and second defendants did not need to join the other defendants for their argument on proportionate liability: s 1041N(3)(b). However, they would have needed to have given the plaintiffs notice if they maintained that the other defendants were concurrent wrongdoers: s 1041O. The plaintiffs' claims against the third to thirteenth defendants were only brought because the first and second defendants cross claimed against those defendants, claiming that those defendants should indemnify or contribute to the plaintiffs' damages. Thus, the plaintiffs' claim was brought against the third to thirteenth defendants somewhat reluctantly. The principal focus of the plaintiffs' claim is the first and second defendants. Indeed, the plaintiffs argued that the plaintiffs' claim was not apportionable against the other defendants. 1001 The first and second defendants have raised essentially two pleas if they are found to be liable to the plaintiffs; first, that the plaintiffs' damages should be reduced on account of the plaintiffs' own conduct in failing to take reasonable care to guard against loss; and secondly, that if all or some of the defendants are concurrent wrongdoers the damages awarded must be apportioned between the defendants. The other defendants support the first plea, but not the second. 1002 The plaintiffs contend that their statutory claims, except that brought under s 1041H, cannot be reduced on account of their failure to take proper care for their own safety. The plaintiffs also say the claims are not apportionable as between the defendants or, alternatively, they are claims under s 953B(2) of the Corporations Act, and in contract, which are not apportionable. They say that the first and second defendants are wholly responsible for the loss. 1003 Strictly speaking, the plaintiffs did not need to join the other defendants. The question of apportionability and the apportionment could have been decided without the plaintiffs joining the third to eighth defendants: s 1041N(4). The ninth to thirteenth defendants are somewhat different, but I have found them not to be liable. 1004 However, the plaintiffs have an alternative claim if the plaintiffs' claims are apportionable, and in those circumstances the plaintiffs seek relief from the third to eighth defendants in respect of the loss and damage set out in the TASOC relying upon the grounds set out in the FAD&SCC. 1005 The High Court held in Henville v Walker (2001) 206 CLR 459 that any damages awarded to a plaintiff pursuant to s 82 of the Trade Practices Act 1974 (Cth) (TPA), for a contravention by a defendant of s 52 of the TPA, were not to be reduced by reason of any failure by the plaintiff to take reasonable care to protect himself or herself. In I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109, the High Court held that once a contravention of s 52 had been established and a causal link between the contravention and the damages was also established, the measure of contribution for which s 82 provided and to which the applicant was entitled could not be reduced on apportionment on account of other contributory causes to the damage. Section 87(1) did not give a discretion to reduce an award under s 82. 1006 No doubt, as a consequence of those decisions, the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) (the CLERP Act) introduced into the Corporations Act, the TPA and the ASIC Act, the proportionate liability sections for the first time. I shall address those sections in detail in due course. However, first it is necessary to determine to what causes of action the proportionate liability sections reach. 1007 Schedule 3 of the CLERP Act introduced s 12GF(1B) and ss 12GP to 12GW into the ASIC Act; s 1041I(1B) and ss 1041L to 1041S into the Corporations Act, and s 82(1B) and ss 87CB to 87CI into the TPA. 1008 The TPA is not relevant in this proceeding and no more needs to be said about those amendments. 1009 Schedule 12 of the CLERP Act included transitional provisions. 1010 Clause 2 of Schedule 12 introduced Part 10.5 of Chapter 10 into the Corporations Act, which included s 1466. Section 1466 provides: The amendments made to this Act and the Trade Practices Act 1974 by Schedule 3 to the amending Act apply to causes of action that arise on or after the day on which that Schedule commences. 1011 Section 1041I(1B) and the proportionate liability sections only apply to causes of action that arise on or after the commencement date of Schedule 3 which was 26 July 2004. Similar transitional provisions applied to the amendments to the ASIC Act. 1012 The plaintiffs' claim against the defendants arose after the commencement date so any causes of action the plaintiffs have against those defendants are subject to s 1041I(1B) and the proportionate liability sections. Any causes of action that arose for conduct engaged in before that date would not be subject to the proportionate liability sections. The defendants do not assert that the plaintiffs' conduct prior to 26 July 2004 is such that the plaintiffs' damages should be reduced. Moreover, the plaintiffs have not raised a cause of action against any person prior to 26 July 2004. The plaintiffs' claim that s 1041I(1B) and the proportionate liability sections do not apply as a matter of law is rejected. 1013 The proportionate liability sections are in pari materia in the three Acts. The legislation provides for a defence like contributory negligence in a common subsection (1B), which was introduced into s 12GF of the ASIC Act, s 1041I of the Corporations Act, and s 82 of the TPA. 1014 Section 12GF of the ASIC Act gives a person, who suffers loss or damage by a person in contravention of ss 12CA to 12CC or ss 12DA to 12DN, a right of action against the contravening party. 1015 Sections 12CA to 12CC deal with unconscionable conduct in relation to financial services and the supply of financial services. Sections 12DA to 12DD deal with misleading and deceptive conduct. 1016 For all intents and purposes, the Corporations Act and the ASIC Act are in the same terms. In those circumstances, I will not continue to refer to the ASIC Act, but will confine this part of the reasons to the Corporations Act. 1017 Part 7.10 of the Corporations Act deals with market misconduct and other prohibited conduct relating to financial products and financial services. 1018 Section 1041I gives a person, who suffers loss or damage by a person in contravention of ss 1041E, 1041F, 1041G or 1041H, a right of action against the contravening party. 1019 Section 1041E deals with false or misleading statements in relation to applications for financial products. Section 1041F deals with inducing another person to deal in financial products. Section 1041G deals with dishonest conduct in relation to the carrying on of a financial services business. Section 1041H deals with misleading or deceptive conduct and is the relevant section for the purpose of this proceeding. Section 1041H provides: A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. 1020 Division 3 of Part 7.1 of Chapter 7 defines a "financial product". The general definition is contained in s 763A, which provides in subsection (1): For the purposes of this Chapter, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following: (a) makes a financial investment (see section 763B); (b) manages financial risk (see section 763C); (c) makes non-cash payments (see section 763D). 1021 A "financial service" is defined in s 766A(1). For the purpose of this Chapter, subject to paragraph (2)(b), a person provides a financial service if they: (a) provide financial product advice (see section 766B); or (b) deal in a financial product (see section 766C); or (c) make a market for a financial product (see section 766D); or (d) operate a registered scheme; or (e) provide a custodial or depository service (see section 766E); or (f) engage in conduct of a kind prescribed by regulations made for the purposes of this paragraph. 1022 Section 766B(1) addresses "financial product advice. It provides: (1) For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that: (a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or (b) could reasonably be regarded as being intended to have such an influence. 1023 Section 12BAB(5) of the ASIC Act provides: (5) For the purposes of this section, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that: (a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or (b) could reasonably be regarded as being intended to have such an influence; but does not include anything in: (c) a document prepared in accordance with requirements of Chapter 7 of the Corporations Act, other than a document of a kind prescribed by regulations made for the purposes of this paragraph; or (d) any other document of a kind prescribed by regulations made for the purposes of this paragraph. 1024 It was not disputed that the investment in Neovest was in relation to a financial product or financial service. 1025 Section 1041I provides a remedy for a contravention of s 1041E to s 1041H. 1026 Section 1041I provides: (1) A person who suffers loss or damage by conduct or another person that was engaged in in contravention of section 1041E, 1041F, 1041G or 1041H may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention, whether or not that other person or any person involved in the contravention has been convicted of an offence in respect of the contravention. (1A) Subsection (1) has effect subject to section 1044B. (1B) Despite subsection (1), if: (a) a person (the claimant) makes a claim under subsection (1) in relation to: (i) economic loss; or (ii) damage to property; caused by conduct of another person (the defendant) that was done in contravention of section 1041H; and (b) the claimant suffered the loss or damage: (i) as a result partly of the claimant's failure to take reasonable care; and (ii) as a result partly of the conduct referred to in paragraph (a); and (c) the defendant: (i) did not intend to cause the loss or damage; and (ii) did not fraudulently cause the loss or damage; the damages that the claimant may recover in relation to the loss or damage are to be reduced to the extent to which the court thinks just and equitable having regard to the claimant's share in the responsibility for the loss or damage. (2) An action under subsection (1) may be begun at any time within 6 years after the day on which the cause of action arose. (3) This section does not affect any liability that a person has under any other law. (4) Section 1317S (which provides for relief from liability) applies in relation to liability under subsection (1) as if: (a) the sections referred to in subsection (1) were civil penalty provisions; and (b) proceedings under subsection (1) were eligible proceedings. 1027 It was not disputed that if the plaintiffs could make out a contravention of s 1041H against the defendants for engaging in conduct that was misleading or deceptive, or likely to mislead or deceive, that the plaintiffs were entitled to a remedy under s 1041I. 1028 The first and second defendants first plea is that if the plaintiffs are entitled to relief under s 1041I then the plaintiffs' damages should be reduced on account of the plaintiffs' own conduct in failing to take reasonable care. They rely upon s 1041I(1B). 1029 In paragraphs 71 and 72 of the first and second defendants' FAD, those defendants plead: 71. Further and in the alternative, the first and second defendants say that to the extent that the first and second defendants are found to have engaged in conduct that is misleading or deceptive or is likely to mislead or deceive (which is denied), and to the extent that the plaintiffs have suffered loss as a result of the alleged conduct of the first and second defendants (which is denied), any such loss or damage to the plaintiffs has been caused, or alternatively partly caused, by the plaintiffs' failure to take reasonable care. Particulars 71.1 The plaintiffs failed to review carefully, or at all: 71.1.1 the 2004 Prospectus; 71.1.2 the November 2004 SOA; 71.1.3 the October 2004 Research; 71.1.4 the 2005 Prospectus; 71.1.5 the April 2005 SOA, which, had they done so, would have alerted them fully to the risks associated with any investment in Neovest. 71.2 The plaintiffs entered into the investments referred to in paragraph 64 of the Statement of Claim, which were speculative investments that were bound to fail and which caused their alleged consequential loss, if such loss occurred (which is not admitted). 72. In the circumstances, the damages that the plaintiffs may recover from the first and second defendants in relation to the loss or damage are to be reduced to the extent that the Court thinks just and equitable having regard to the plaintiffs (sic) share in the responsibility for the loss or damage in accordance with s 1041(1B) of the Corporations Act 2001 (the Corporations Act) and, or, s 12GF(1B) of the Australian Securities and Investments Commission Act 2001 (the ASIC Act). 1030 The third, fourth and sixth defendants (Mr Spencer, Ms Perovich and Mr Townley referred to as the "original director defendants") also claim that the plaintiffs' damages should be reduced. In their amended defence to the FAD&SCC, they plead: 50. The original director defendants say liability for any loss and damage allegedly suffered by any party to this action was caused by or contributed to by the conduct of the plaintiffs and the first and second defendants. Particulars For the purposes of this defence, the original director defendants rely on: i. the conduct of the plaintiffs: A. in failing to obtain a copy of, or alternatively failing to review carefully or at all, the 2004 Prospectus; the 2005 Prospectus; the Product Information Pack; the November 2004 Statement of Advice; and the April 2005 Statement of Advice: B. in entering into speculative investments; C. in entering into speculative investments using borrowed funds; D. as particularised in paragraphs 41.1 to 41.4, 42.4.2, 43.2.2, 44.2 to 44.4, 44.6.2, 50.1 and 50.2 and 71.1 of the fourth amended defence of the first and second defendants; and ii. the conduct of the first and second defendants: A. in failing to review carefully, or at all, the Norton Flyer and advice the content of the Norton Flyer to the plaintiffs; B. in failing to provide the 2004 Prospectus and 2005 Prospectus to the plaintiffs; C. in failing to carry out sufficient or any research into the risks of investing in Neovest as pleaded in paragraphs 46.1 to 46.4, 46.7, 47.1 to 47.13, 61.1 and 61.3 of the third amended statement of claim and, as pleaded in paragraph 47A of the third amended statement of claim, in failing to follow the restrictions imposed by the first defendant: that the maximum investment per client was to be 15% of net assets other than the client's family residence and that borrowing was not permitted; iii. in failing to take sufficient account or any account of the plaintiffs': A. financial background; B. personal circumstances; C. stated investment requirements including but not limited to stability and capital security as pleaded in paragraph 10 of the third amended statement of claim; as particularised in paragraphs 59, 60.1 to 60.3, 60.5 to 60.8, 61.1, 61.3 and 62.1 to 62.13 of the third amended statement of claim. 1031 The pleas directed to the first and second defendants can be ignored for the purpose of a consideration of s 1041I(1B). 1032 As I said earlier, the seventh and eighth defendants have not filed a defence. The fifth defendant was included in the first defence filed by the third, fourth, fifth and sixth defendants. However, that defence was not relied upon at trial. The third, fourth and sixth defendants filed an amended defence, to which reference has just been made. 1033 Although I have already found that the ninth to thirteenth defendants are not liable pursuant to s 13 of the Partnership Act, I will include their pleas for completeness. The ninth to thirteenth defendants have pleaded that the plaintiffs are not entitled to damages against them because of the plaintiffs' own conduct and because of the conduct of the other defendants apart from Mr Townley: 13. In further answer to the whole of the 3ASC, the ninth to thirteenth defendants say that if it is established that Townley contravened the Corporations Act or ASIC Act in the manner pleaded in the cross-claim, and that such contravening conduct was conduct in the ordinary course of the business of NRH or with the authority of the ninth to thirteenth defendants (which is denied), then any loss or damage allegedly suffered by the plaintiffs was caused not by the alleged conduct of Townley but by the conduct of the plaintiffs and/or the conduct of the first to second defendants and/or the conduct of the third, fourth, fifth, seventh and eighth defendants. Particulars For the purpose of this defence to the 3ASC only, the ninth to thirteenth defendants rely on: (a) the plaintiffs' conduct: (i) in failing to obtain a copy of, or alternatively failing review carefully or at all, the 2004 Prospectus; the 2005 Prospectus; the Product Information Pack; the November 2004 Statement of Advice; the April 2005 Statement of Advice; (ii) in entering into speculative investments; (iii) in entering into speculative investments using borrowed funds; (iv) as particularised in paragraphs 41, 42, 43, 44, 50, 63A, 71 of the fourth amended defence of the first and second defendants; and (b) the conduct of the first to second defendants: (i) in failing to review carefully, or at all, the Norton Flyer and advise the content of the Norton Flyer to the plaintiffs; (ii) in failing to provide the 2004 Prospectus and 2005 Prospectus to the plaintiffs; (iii) in failing to carry out sufficient or any research into Neovest and the Neolido Group's financial stability as pleaded in paragraphs 46 to 47A and 61 (inclusive) of the 3ASC; (iv) in failing to take sufficient account or any account of the plaintiffs': (A) financial background; (B) personal circumstances; (C) stated investment requirements including but not limited to stability and capital security as pleaded in paragraph 10 of the 3ASC. (v) as particularised in paragraphs 59, 60, 61 and 62 of the 3ASC; and (c) the conduct of the third, fourth, fifth, seventh and eighth defendants as particularised in the 3ASC and in the first and second defendants' fourth amended statement of defence and the cross-claim. 1034 It is difficult to understand what the plea means. I think it is no more than that Mr Townley and the ninth to thirteenth defendants are not liable, notwithstanding Mr Townley's contraventions, because the whole of the plaintiffs' loss was as a result of the conduct of the plaintiffs or the other defendants. 1035 However, the ninth to thirteenth defendants have also pleaded that if the plaintiffs are entitled to damages the plaintiffs' damages should be reduced by reason of the plaintiffs' own conduct. They plead: 14. In further answer to the whole of the cross-claim, the ninth to thirteenth defendants say that if it is established that Townley contravened the Corporations Act or ASIC Act in the manner pleaded, and that such contravening conduct caused the plaintiffs to suffer loss or damage, and that such contravening conduct was conduct in the ordinary course of the business of NRH or with the authority of the ninth to thirteenth defendants (which is denied), then any loss or damage allegedly suffered by the plaintiffs was caused as a result partly of the plaintiffs' failure to take care, and any damages recoverable by the plaintiffs under the Corporations Act or the ASIC Act in relation to any such loss or damage are to be reduced to the extent to which the Court thinks just and equitable having regard to the plaintiffs' share in the responsibility for such loss or damage pursuant to section 1041(1B) of the Corporations Act or alternatively subsection 12GF(1B) of the ASIC Act. Particulars For the purpose of this defence to the 3ASC only, the ninth to thirteenth defendants rely on the plaintiffs' conduct: (i) in failing to obtain a copy of, or alternatively failing review carefully or at all, the 2004 Prospectus; the 2005 Prospectus; the Product Information Pack; the November 2004 Statement of Advice; the April 2005 Statement of Advice; (ii) in entering into speculative investments; (iii) in entering into speculative investments using borrowed funds; (iv) as particularised in paragraphs 41, 42, 43, 44, 50, 63A, 71 of the fourth amended defence of the first and second defendants. 1036 Although the defendants' pleas are not entirely on all fours, the gist is the same. The defendants say that if the plaintiffs are entitled to damages against them, those damages should be reduced by reason of the plaintiffs' failure to properly review the various documents which were given the plaintiffs or to which the plaintiffs had access, and failing to properly research the investment which they made and for failing generally to behave as a prudent investor would. 1037 It was not disputed that the plaintiffs' claim is for economic loss and that, therefore, paragraph (a) of s 1041I(1B) is engaged. It was not alleged that any of the defendants had the impugned intention or acted fraudulently as mentioned in s 1041I(1B) and therefore placita (i) and (ii) of paragraph (c) are not relevant. 1038 The defendants' defence, therefore, in this regard depends upon a finding that the plaintiffs suffered the economic loss for which they claim, as a result, or partly as a result, of the plaintiffs' failure to take reasonable care. 1039 If that is established, then the damages that the plaintiffs would otherwise be entitled to recover should be reduced "to the extent to which the court thinks just and equitable having regard to the (plaintiffs') share in the responsibility for the loss or damage". 1040 Whether the defendants are entitled to the benefit of this defence depends upon whether or not they have established the matters in the various pleas to which I have referred. 1041 The plaintiffs make two points in relation to the first and second defendants' plea. First, they say that s 1041I(1B) has no application where the plaintiffs are relying on s 953B of the Corporations Act. Section 953B gives a person a right to recover the amount of loss or damage occasioned as a result of a failure of a financial adviser to provide that person with a disclosure document or statement. The plaintiffs assert that s 1041I(1B) does not apply to s 953B because s 1041I is limited in its terms to an action brought relevantly under ss 1041E, 1041F, 1041G and 1041H. Secondly, the plaintiffs assert that s 1041I(1B) has no application in the plaintiffs' claim for damages for breach of contract. 1042 As I have said, s 1041I(1B) was enacted in response to the High Court's decisions that damages could not be reduced on account of the plaintiffs' conduct in the absence of some statutory scheme to that effect. 1043 Section 1041I(1) gives a person a right of action for a contravention of s 1041E, s 1041F, s 1041G and s 1041H, and for no other contraventions. 1044 A person is given a right of action for other contraventions of other sections but by discrete sections. For example, s 953B gives a person a right of action for cases falling within s 953B(1). However, that statutory cause of action is a different cause of action to that given by s 1041I(1). 1045 Section 1041I(1B) refers only to statutory causes of action given by s 1041I(1) and then only to claims brought under s 1041H: s 1041I(1B)(a). Section 1041(1B) has been deliberately drawn to only apply to a claim made under s 1041H. The other sections (s 1041E, s 1041F and s 1041G) for which s 1041I provides a statutory cause of action have been deliberately omitted in a consideration of s 1041I(1B). 1046 In my opinion, s 1041I(1B) does not therefore operate to reduce a claimant's entitlement to damages, except insofar as that entitlement relies upon a claim brought under s 1041I(1) for a contravention of s 1041H. 1047 If a claimant is entitled to damages for some other contravention of the Corporations Act, which has caused the same damage, the claimant will, unless some other Act or section operates to reduce those damages, be entitled to the whole of the damages that have been caused by the conduct. The same can be said of a common law cause of action in which s 1041I(1B) has no application. 1048 The common law causes of action, however, may be impacted upon by State legislation. 1049 That construction is consistent with the construction given to s 12GF(1B) of the ASIC Act by Rares J in Wingecarribee Shire Council v Lehman Brothers Australia Ltd (In Liq) [2012] FCA 1028. In that case, Rares J discussed s 12GF(1B) of the ASIC Act, which is the equivalent of s 1041I(1B) of the Corporations Act. 1050 Justice Rares discussed contributory negligence saying "[c]ontributory negligence is a defence not only to claims for damages in tort but also in contract and under s 12GF of the ASIC Act and its analogues": at [1118]. 1051 He continued at [1170]: The tests for causation and contributory negligence under s 12GF(1B) are both different to that under the State legislation. First, the economic loss must be caused by Grange's conduct. That involves the common sense test in March (1991) 171 CLR at 515 per Mason CJ: cf Adeels Palace 239 CLR at 440 [43]-[44]. Secondly, if Parkes suffered that economic harm "as a result partly of [its] failure to take reasonable care", the Court can reduce the damages under s 12GF(1) to the extent that is just and equitable having regard to Parkes' responsibility for its loss and damage. Importantly, s 12GF(1B) does not extend to affect the award of damages for negligence in contract or tort. That provision appears to have been intended solely to overcome the reesule in Henville v Walker (2001) 206 CLR 459. 1052 Section 82(1B) of the TPA, which is the equivalent of s 1041I(1B), was addressed in Angas Securities Ltd v Valcorp Australia Pty Ltd (2011) 277 ALR 538. Justice Besanko said from [144]: Under s 82 (1B) of the Trade Practices Act the question is whether the applicants' loss or damage was partly a result of the applicants' failure to take reasonable care. The issues then are whether the applicants failed to take reasonable care and whether that failure was a cause of their loss or damage. If so, the court is to reduce the damage to the extent it considers just and equitable having regard to the applicants' share in the responsibility for the loss or damage. Subsection 7(2) of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) (the Law Reform Act) uses different terminology - the 'claimant's harm', 'partly by contributory negligence', 'just and equitable having regard to the extent the contributory negligence contributed to the harm' - but neither party suggested that the subsections involved different legal tests. I will proceed on that assumption that they do not involve different legal tests. The notion of contributory negligence does not require detailed explanation. In Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529, the High Court said (at 532-3): The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, ie of the degree of departure from the standard of care of the reasonable man (Pennington v Norris (1956) 96 CLR 10 at 16) and of the relative importance of the acts of the parties in causing the damage: Stapley v Gypsum Mines Ltd [1953] AC 663 at 682 …; Smith v McIntyre [1958] Tas SR 36 at 42-9 and Broadhurst v Millman [1976] VR 208 at 219, and cases there cited. It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance. 1053 Although the decision was varied on appeal, the statement of principle to which I have referred was not doubted: Valcorp Australia Pty Ltd v Angas Securities Ltd [2012] FCAFC 22. 1054 The construction which I have given s 1041I(1B) and which Rares J has given s 12GF(1B) helps to inform the construction that should be given the proportionate liability sections which is the second issue raised by the first and second defendants. I think that construction is consistent with Middleton J's reasons in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450. 1055 The first and second defendants' second plea has to be considered whatever result is reached in relation to their claim that the plaintiffs' damages should be reduced under s 1041I(1B). They claim that if the plaintiffs are entitled to damages, those damages (whether they are reduced or not) are apportionable under both the Corporations Act and the ASIC Act. 1056 In their TASOC, the plaintiffs discriminate in their claims for relief against the first and second defendants on the one hand and the third to thirteenth defendants on the other hand. 1057 As against the first and second defendants, the plaintiffs seek the following relief: A. Damages pursuant to sections 1041I, 1325(1) and 953B(2)(b) and (c) of the Corporations Act. B. Damages pursuant to section 12GF of the ASIC Act. C. Damages for negligence, misrepresentation and breach of contract. D. Interest in all monies or damages including interest as damages. E. Such other relief as this Honourable Court deems fit. F. Costs. 1058 As against the third to thirteenth defendants, the plaintiffs claim: G. Damages pursuant to sections 1041I and 1325(1) of the Corporations Act. H. Damages pursuant to section 12GF of the ASIC Act. I. Damages for negligence and misrepresentation. J. Interest in all monies or damages including interest as damages. K. Such other relief as this Honourable Court deems fit. L. Costs. 1059 The plaintiffs do not claim that their loss and damage has any discrete relationship as between the defendants. Although the plaintiffs are reluctant litigants as against the third to thirteenth defendants, they have not, as I have said, discriminated in the damages claimed against those defendants as distinct from the first and second defendants. 1060 Again as I have shown, Division 2A of Part 7.10 of Chapter 7 of the Corporations Act deals with proportionate liability for misleading and deceptive conduct in a claim for damages for economic loss or damage to property. The plaintiffs' claim for damages is for economic loss. 1061 Again as I have shown, Subdivision GA of Division 2 of Part 2 of the ASIC Act has corresponding provisions in relation to proportionate liability for misleading and deceptive conduct. The sections are in the same form and, in those circumstances, I shall simply identify the relevant sections in the Corporations Act. 1062 Section 1041L is relevant. It provides: (1) This Division applies to a claim (an apportionable claim) if the claim is a claim for damages made under section 1041I for: (a) economic loss; or (b) damage to property; caused by conduct that was done in a contravention of section 1041H. (2) For the purposes of this Division, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind). (3) In this Division, a concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim. (4) For the purposes of this Division, apportionable claims are limited to those claims specified in subsection (1). (5) For the purposes of this Division, it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died. 1063 Division 2A applies to a claim for damages made under s 1041I for economic loss caused by conduct that was done in contravention of s 1041H: s 1041L(1). 1064 Insofar as the plaintiffs' claim therefore relies upon s 1041H and the plaintiffs have sought a remedy under s 1041I, Division 2A applies to the plaintiffs' claim. 1065 Section 1041L(2) speaks of the same loss or damage. That subsection is not referring to the damages that the Court might ultimately award, but the damage caused by the concurrent wrongdoer: Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 at [24]. There was no argument in this proceeding but that the plaintiffs had suffered the single loss or damage, i.e. the same loss or damage. 1066 Section 1041L(5) means that if the plaintiffs' claims are apportionable against any of the insolvent defendants (Mr Spencer, Ms Perovich, Neovest and Norton Capital) that "does not matter". The expression "does not matter", I think, means irrelevant. In other words, the claim should be apportioned without reference to the solvency of any party. The purpose of Division 2A of Part 7.10 is to limit the plaintiffs' recovery to those persons who caused the loss by prescribing recovery between defendants: s 1041P. 1067 Section 1041M provides: (1) Nothing in this Division operates to exclude the liability of a concurrent wrongdoer (an excluded concurrent wrongdoer) in proceedings involving an apportionable claim if: (a) the concurrent wrongdoer intended to cause the economic loss or damage to property that is the subject of the claim; or (b) the concurrent wrongdoer fraudulently caused the economic loss or damage to property that is the subject of the claim. (2) The liability of an excluded concurrent wrongdoer is to be determined in accordance with the legal rules (if any) that (apart from this Division) are relevant. (3) The liability of any other concurrent wrongdoer who is not an excluded concurrent wrongdoer is to be determined in accordance with the provisions of this Division. 1068 Section 1041M is like s 1041I(1B)(c). Its intention is to exclude the concurrent wrongdoer, who intended to cause the damage or who acted fraudulently, from the benefit of Division 2A. 1069 Section 1041N addresses proportionate liability for an apportionable claim. It provides: (1) In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss; and (b) the court may give judgment against the defendant for not more that that amount. (2) If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim: (a) liability for the apportionable claim is to be determined in accordance with the provisions of this Division; and (b) liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Division) are relevant. (3) In apportioning responsibility between defendants in the proceedings: (a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law; and (b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings. (4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings. (5) A reference in this Division to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Division, under rules of court or otherwise. 1070 The effect of s 1041N(2) is to require the Court to distinguish between an apportionable claim and a claim that is not an apportionable claim. 1071 Section 1041N(3)(a) requires the Court, in apportioning responsibility between the concurrent wrongdoers in the proceedings, to exclude that proportion of the damage or loss for which the plaintiff has found to be contributorily negligent. In this proceeding, therefore, if the plaintiffs' claim against the defendants is reduced on account of the plaintiffs contributory negligence, and if the plaintiffs' claims are apportionable claims, it is the remainder for which the defendants are liable that is to be apportioned between the defendants. 1072 Section 1041N(3)(b) allows the Court to have regard to the responsibility of any concurrent wrongdoer who is not a party to the proceedings. In this proceeding, Mr Norton and Norton Capital are parties, although they did not appear at the trial. Their liability will be assessed as if they had appeared at the trial. There are no persons who are said to be concurrent wrongdoers who are not parties to the proceeding, so s 1041N(3)(b) has no application. For the same reason, s 1041N(4) has no application. 1073 Section 1041O requires a defendant in a proceeding involving an apportionable claim, who has reasonable grounds to believe that another person may be a concurrent wrongdoer in respect of the claim, to give the plaintiff written notice of information about that other person as soon as practicable. That section has no application because there are not said, by the defendants, to be any other persons who are not parties who are concurrent wrongdoers. 1074 Section 1041P is important. It provides: A defendant against whom judgment is given under this Division as a concurrent wrongdoer in relation to an apportionable claim: (a) cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant); and (b) cannot be required to indemnify any such wrongdoer. 1075 The effect of s 1041P is that each concurrent wrongdoer is liable only to the plaintiff to the extent of that party's liability. The parties are not jointly and severally liable for the whole of the judgment sum but are severally liable for each of the amounts for which the Court has held them to be responsible. 1076 Section 1041L(3) defines a concurrent wrongdoer. Importantly, a concurrent wrongdoer may be a person who has engaged in conduct quite independently of another wrongdoer that causes the same damage. In Shrimp v Landmark Operations Ltd (2007) 163 FCR 510, Besanko J said that a concurrent wrongdoer must be a person against whom the claimant has a claim for the same damage. I think that is right. I think the concurrent wrongdoer must be a wrongdoer against the claimant because Division 2A and s 1041L(2) only address the same damage. 1077 For Division 2A therefore to operate, the plaintiffs' claim must be for economic loss or damage to property that has been caused by two or more wrongdoers who have acted jointly or independently to cause the same loss or damage. Notwithstanding that the wrongdoers have acted independently and would otherwise be separately liable for the whole of the plaintiffs' damages, the Division treats the plaintiffs' claim for damages as a single apportionable claim. However, an apportionable claim is limited to the claimed specified in s 1041L(1). 1078 The first and second defendants contended that Division 2A focuses on the loss or damage for determining whether there is a single apportionable claim. For that proposition, the first and second defendants relied upon subsections (1) and (2) of s 1041L. 1079 The plaintiffs argued that Division 2A only applied to those causes of action that could be apportionable. They relied upon s 1041L(4). 1080 The weight of authority favours the first and second defendants' arguments: Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200; Miletich v Murchie [2012] FCA 1013. However, there is authority to the contrary in regard to the corresponding provisions of the TPA: BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656; Bennett v Elysium Noosa Pty Ltd (2012) 291 ALR 191. There is no authority of an intermediate Court of Appeal. In those circumstances, I am free to consider the question. 1081 In Keith Woods v Rodney Mario De Gabriele [2007] VSC 177, the plaintiff brought a proceeding against the defendant Mr de Gabriele in relation to advice given by him on an investment, and against Mr de Gabriele's employer Pyxus, and against Chimaera, the company of which he was said to be an authorised representative. Pyxus and Chimaera applied to join as a defendant Strategic Project Marketing Ltd (SPM), which was said to have been Mr de Gabriele's employer at an earlier point in time when Mr de Gabriele gave the plaintiff some advice. They relied upon both State and Federal legislation relating to concurrent wrongdoers. Justice Hollingworth said at [8]-[9]: All of the relevant legislation depends on two main concepts or definitions, which are substantially, but not completely, identical. The first is the idea of an "apportionable claim"; the second is "concurrent wrongdoer". Generally speaking, the legislation operates to limit the liability of a concurrent wrongdoer in respect of an apportionable claim to a court-determined proportion of the relevant damage, having regard to the extent of that wrongdoer's responsibility. In considering the application for leave to amend the defence, I have to consider whether it is at least arguable that SPM and the defendants are concurrent wrongdoers and the plaintiff's claims are apportionable claims. If it is, then Pyxus and Chimaera should be granted leave to make the relevant amendments to their defence. It would then be necessary to consider whether SPM should be joined as a defendant (as sought by the defendants) or a third party (as suggested by the plaintiff), and whether that joinder requires the grant of leave under s 471B of the Corporations Act. 1082 She said at [24]-[30]: An "apportionable claim" for the purposes of Div 2A of Pt 7.10 of the Corporations Act is defined in s 1041L(1) as a claim for damages made under s 1041I for economic loss or damage to property, caused by conduct in contravention of s 1041H. Here, the plaintiff claims that the Westpoint promissory note representations and the Pyxus representations constituted conduct by de Gabriele in relation to a financial product, which was misleading or deceptive, or likely to mislead or deceive, contrary to s 1041H. Section 1041I creates a right of recovery of loss or damage caused by, amongst other things, a contravention of s 1041H. The prayer for relief in the second draft claim does not actually refer to s 1041I, but there would be no point in pleading the breaches of s 1041H unless a claim was being made under s 1041I. In fact, the plaintiff's first submissions, dated 2 May 2007, expressly concede that there is an apportionable claim within the meaning of s 1041L(1) of the Corporations Act. The next question is whether Pyxus, Chimaera and SPM are concurrent wrongdoers in relation to the claim under s 1041I. According to s 1041L(3), that will be so if each is: one of 2 or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim. The "damage or loss which is the subject of the claim" against Pyxus and Chimaera is that specified in para 41 of the second draft claim, and is, self-evidently, the same damage or loss that is claimed against de Gabriele in para 26. The draft amended defence alleges that that same loss was also caused by SPM, because the acts or omissions of de Gabriele which are alleged to have caused that loss were also the acts or omissions of SPM. The plaintiff argues that SPM should not be regarded as having caused the loss which is the subject of the claim under s 1041I, because it played no causative role in making the Pyxus representations. Accordingly, it is argued, SPM is not a concurrent wrongdoer. This argument is misconceived. If the acts or omissions of SPM caused the damage or loss which is the subject of the claim under s 1041I, the words of subs 1041H(3) make it plain that it does not matter whether the two or more concurrent wrongdoers caused the loss independently of each other or jointly. There is no added requirement that one or both of them must have had a causative, or any, role in the contravening conduct of the other. It follows that the claim against Pyxus and Chimaera under s 1041I is an apportionable claim in respect of which SPM would be a concurrent wrongdoer. 1083 I agree with Hollingworth J's analysis of s 1041L. She then addressed s 1041N at [33]-[36]: The meaning of s1041L(2) is not easy to extract. The defendants argue that the construction which seems most naturally to arise is that all of the claims in the proceeding that are in respect of the same loss are a single apportionable claim, regardless of whether they are individually apportionable claims. This reading flows from the fact that the words "(whether or not of the same or a different kind)" in relation to causes of action suggest that subs 1041L(2) is not simply referring to other apportionable claims (in this context, claims under s 1041I for a loss caused by contravention of s1041H) but to claims generally, so long as they are in respect of the same loss. After all, there is only one kind [of] cause of action with which s1041L(1) is concerned, namely a claim under s 1041I caused by a contravention of s 1041H. The defendants suggest that one way to resolve that tension is to regard s1041N(2) as directed to claims which are not for the same damage or loss as the apportionable claim. If these submissions by the defendants are correct, then, as all claims in this proceeding are for the same loss or damage, there would be a single apportionable claim under the Corporations Act. In that case, s 1041N(1) would apply and there would be no need to refer to the ASIC Act or the Wrongs Act. In addition, there would be no need to join SPM, because under s 1041N(4) the court may have regard to the comparative responsibility of a concurrent wrongdoer who is not a party to the proceeding. It is not necessary for me to determine at this stage whether liability in this case should be determined in accordance with subs (1) or (2) of s 1041N. That is a matter which should be determined at trial, on the final pleadings and after hearing more detailed argument from all parties. 1084 If I were to apply the same reasoning to Division 2A as I have applied to s 1041I(1B), I would conclude that Division 2A only applies where there has been a contravention of s 1041H and has no application where the plaintiffs have succeeded on other statutory and common law causes of action. Indeed, that is my opinion, but there are other reasons for reaching that view. 1085 Section 1041H provides: (1) A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. (2) The reference in subsection (1) to engaging in conduct in relation to a financial product includes (but is not limited to) any of the following: (a) dealing in a financial product; (b) without limiting paragraph (a): (i) issuing a financial product; (ii) publishing a notice in relation to a financial product; (iii) making, or making an evaluation of, an offer under a takeover bid or a recommendation relating to such an offer; (iv) applying to become a standard employer-sponsor (within the meaning of the Superannuation Industry (Supervision) Act 1993) of a superannuation entity (within the meaning of that Act); (v) permitting a person to become a standard employer-sponsor (within the meaning of the Superannuation Industry (Supervision) Act 1993) of a superannuation entity (within the meaning of that Act); (vi) a trustee of a superannuation entity (within the meaning of the Superannuation Industry (Supervision) Act 1993) dealing with a beneficiary of that entity as such a beneficiary; (vii) a trustee of a superannuation entity (within the meaning of the Superannuation Industry (Supervision) Act 1993) dealing with an employer-sponsor (within the meaning of that Act), or an associate (within the meaning of that Act) of an employer-sponsor, of that entity as such an employer-sponsor or associate; (viii) applying, on behalf of an employee (within the meaning of the Retirement Savings Accounts Act 1997), for the employee to become the holder of an RSA product; (ix) an RSA provider (within the meaning of the Retirement Savings Accounts Act 1997) dealing with an employer (within the meaning of that Act), or an associate (within the meaning of that Act) of an employer, who makes an application, on behalf of an employee (within the meaning of that Act) of the employer, for the employee to become the holder of an RSA product, as such an employer; (x) carrying on negotiations, or making arrangements, or doing any other act, preparatory to, or in any way related to, an activity covered by any of subparagraphs (i) to (ix). (3) Conduct: (a) that contravenes: (i) section 670A (misleading or deceptive takeover document); or (ii) section 728 (misleading or deceptive fundraising document); or (b) in relation to a disclosure document or statement within the meaning of section 953A; or (c) in relation to a disclosure document or statement within the meaning of section 1022A; does not contravene subsection (1). For this purpose, conduct contravenes the provision even if the conduct does not constitute an offence, or does not lead to any liability, because of the availability of a defence. 1086 Section 1041H(3)(a) refers to conduct "that contravenes" ss 670A and 728. Paragraphs (b) and (c) of subsection (3), however, refer, more broadly, to conduct that is "in relation to" ss 953A and 1022A. Those paragraphs do not seem to require the proof of a contravention. 1087 Section 1041H(1) proscribes conduct that is misleading or deceptive or likely to mislead or deceive. 1088 The conduct in relation to a financial product includes dealing in a financial product (s 1041H(2)(a)) and any of the conduct in s 1041H(2)(b). Section 1041H could be contravened in many different ways. It proscribes conduct in relation to quite diverse circumstances. 1089 Specifically, however, s 1041H(3) provides that conduct that contravenes s 670A (misleading or deceptive takeover document) or s 728 (misleading or deceptive fundraising document) or conduct in relation to a disclosure document or statement within the meaning of s 953A or conduct in relation to a disclosure document or statement within the meaning of s 1022A is not conduct that contravenes s 1041H. 1090 The reason why conduct of the kind mentioned in s 1041H(3) is not conduct which s 1041H(1) proscribes is because each of those sections have their own section that provides for a remedy for contraventions, independently of s 1041H. Section 670B provides a remedy for a contravention of s 670A against the persons mentioned in the table to s 670B(1). A remedy is given for a contravention of s 728 by s 729, but only as against the persons mentioned in the table in s 729(1). The remedy for failing to comply with s 953B(1)(b) is given by s 953B(2) but only against the persons mentioned in s 953B(3). The remedy for failing to comply with s 1022B(1) is given by s 1022B(2) but only against the persons mentioned in s1022B(3). A person who suffers damage as a result of a contravention of any of ss 670A, 728, 953B(1) and 1022B(1) is given a remedy, but only against the persons mentioned in the sections giving the remedies. 1091 There is no need for s 1041H to proscribe the conduct contemplated in ss 670A, 728, 953B(1) and 1022B(1) because that conduct is already proscribed and the persons who suffer damage already have a statutory remedy, although only against the particular persons who are identified in the sections giving the remedy. Because these sections target particular persons, it would be inappropriate to proscribe that conduct in general terms because it would apply to any person who has engaged in the proscribed conduct. 1092 Section 1041I gives a person, who has suffered loss or damage, a remedy for a contravention of s 1041H and for a contravention of s 1041E, s 1041F and s 1041G. 1093 Relevantly, the cause of action that is given is for damage caused by a contravention of s 1041H. As already indicated, the circumstances in which a cause of action might arise for a contravention of s 1041H are quite diverse. 1094 Section 1041L(4) limits the apportionable claims to those specified in s 1041L(1). Those specified in s 1041L(1) are only those caused by conduct that was done in contravention of s 1041H. 1095 Section 1041N(2) recognises that a proceeding may have both an apportionable claim and a claim that is not apportionable. If s 1041L(2) means that all claims that relate to the same loss or damage are apportionable, s 1041N(2) in referring to a claim that is not apportionable must be referring to a claim that has two types of damage; one type of the same kind and one type of a different kind. Otherwise, s 1041N(2) would have no work to do. 1096 Section 1041N(3) requires the Court to first have regard to contributory negligence before apportioning responsibility. Section 1041N(3) must include the statutory contributory negligence referred to in s 1041I(1B). If that is so and if s 1041I(1B) is only referring to s 1041H claims, as I have found, s 1041N(3) would, if it related to all claims, become unworkable. It would mean that the plaintiffs' damages would only be reduced under s 1041I(1B) in respect of the s 1041H conduct but the resultant award after reduction would be apportioned without reference to the particular cause of action relied upon. 1097 In my opinion, s1041L should be construed as s 1041I(1B) is construed, and that is by reference to the conduct proscribed by s 1041H and only that conduct. 1098 If the first and second defendants' construction were correct, Division 2A would apply to any statutory or common law cause of action provided that it was in respect of the same damage. That would mean that any cause of action that arose for a contravention of ss 670A, 728, 953B(1) or 1022B(1) would be subject to the proportionate liability sections, notwithstanding the conduct to which they relate has been expressly excluded from s 1041H. That would mean that when s 1041L(1) talks of conduct that was done in contravention of s 1041H (which expressly excludes conduct of the kind in ss 670A, 728, 953B(1) or 1022B(1)), it is intended to include conduct that had been deliberately excluded by s 1041H. That is not a construction which appeals. 1099 The following circumstances favour the construction contended for by the plaintiffs. First, s 1041H(3), which excludes certain conduct. Secondly, s 1041L(1), which speaks only of conduct in contravention of s 1041H. Section 1041L(1) does not address the section which gives the remedy for a s 1041H contravention, but directs attention to the conduct. If s 1041H does not include s 1041H(3) conduct, it is difficult to see how s 1041L would be referring to that conduct. Section 1041L(1) does not speak of causes of action, but conduct. Where the same los or damage has been caused by more than one concurrent wrongdoer as that is defined in s 1041L(3), s 1041L(2) makes the claim apportionable. It does not speak of causes of action. Section 1041L(4) limits apportionable claims to those in s 1041L(1), which are those that are caused by conduct in contravention of s 1041H. 1100 The section does not talk of causes of action, but addresses the same damage and the conduct which is only that conduct in s 1041L(1). Section 1041L(1) conduct is that conduct in s 1041H. But s 1041H conduct does not include the conduct in s 1041H(3). 1101 If the plaintiffs' damage results from other contraventions by a defendant, apart from a contravention of s 1041H, the plaintiffs' claims are not apportionable. 1102 Although I am of the opinion that only those claims under s 1041H that involve conduct by concurrent wrongdoers are apportionable, I will say something about apportionment in case the matter goes further.

The Principles on Apportionment 1103 There are a number of decisions under the provisions of the Civil Liability Act 2002 (NSW), which have analogous provisions to those in Division 2A of Part 7.10 of Chapter 7 of the Corporations Law. 1104 Justice Palmer addressed the purpose of the provisions in Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463 at [93] to [94]. The object of Part IV CLA is remedial and it dramatically changes the previous law. Formerly, a plaintiff could choose to sue only one of several wrongdoers who caused the same loss and the Court could enter judgment for the whole of that loss against that defendant. Even if the defendant cross claimed in the proceedings for indemnity or contribution against the other wrongdoers, the plaintiff could enforce a judgment against the defendant alone for the whole of the loss, leaving the defendant to recover from the cross defendants, if it could. Sometimes the defendant obtained judgment against a cross defendant but could not recover the judgment because of the cross defendant's insolvency. Part IV is designed to alleviate this perceived injustice. It is intended to visit on each concurrent wrongdoer only that amount of liability which the Court considers "just", having regard to the comparative responsibilities of all wrongdoers for the plaintiff's loss. 1105 The provisions are silent as to how the Court should determine what is "just" which leaves the Court with a very wide discretionary judgment. 1106 The provisions require the Court to determine the relative culpability of each of the concurrent wrongdoers to determine their proportionate responsibility. 1107 This is a process that the Court has undertaken in relation to co-defendants in tort cases and for determining the extent of a plaintiff's contributory negligence. 1108 The particular loss which the plaintiff has suffered must be identified to determine the extent of the culpability of each of the wrongdoers in the conduct that caused that loss. 1109 This is not a case where any of the concurrent wrongdoers are said to have committed a fraud. Rather, it is a case where each of the concurrent wrongdoers has committed an act which has contributed to the plaintiffs' loss. 1110 The plaintiffs would not have invested any money in Neovest, except for the advice given by Mr Bertram. One can say confidently that if Mr Bertram had not mentioned Neovest to Mr and Mrs Selig they would not have heard of it. They were induced to invest in Neovest because Mr Bertram advised them they needed an income in order to support the borrowings that they had undertaken for the purchase of the three units at Wynnum. 1111 The directors of Neovest did not make proper disclosure of Neo Lido, Neolido Holdings and the Neolido Group's financial position. Mr Norton, of Norton Capital, did not carry out as contracted the due diligence on Neovest. Wealthsure did not carry out, as it should have, an appropriate due diligence enquiry itself into Neovest. 1112 All of the financial advisers, Mr Bertram, Mr Pawski, Wealthsure, Mr Norton, and Norton Capital were impressed by the rate of return and the fact that the redeemable preference shares were apparently redeemable after 12 months and that dividends would be paid on a monthly basis in arrears. 1113 They should have realised that the prospect of Neovest returning 20% or 15% to the Foundation or Equity redeemable preference shareholder was very low, because of the commissions that were payable to generate the investment and the profit which would have to have been payable on the company's earnings before a distribution to shareholders. 1114 As I have demonstrated, Neovest would have had to have earned somewhere between 45% and 50% on its loans to Neo Lido, Neolido Holdings and the Neolido Group. 1115 If it was able to generate returns of that kind, then that would have meant that Neo Lido, Neolido Holdings and the Neolido Group were paying too much for its money. When analysed, the investment was clearly so risky that no reasonably prudent financial adviser could have recommended an investor purchase the redeemable preference shares. 1116 All of the investment advisers failed to pay proper attention to the type of scheme that Neovest was, which was a Ponzi. 1117 The directors, and when I speak of "the directors" I mean Mr Spencer, Ms Perovich and Mr Townley, because there is no reason in my opinion to discriminate between them even though Mr Townley was not an executive director. I exclude Mr Norton from the directors even though he was a director of Neovest after 14 September 2004. I will deal with him separately. 1118 The directors published a prospectus on 3 February 2004, which raised in the vicinity of $800,000 by the time it expired. There is no evidence before the Court as to whether those investors sought or had redeemed their redeemable preference shares. 1119 However, the first prospectus only raised a modest amount by way of capital. 1120 There is little to distinguish between the first and second prospectus in relation to the culpability of the parties, except for Mr Norton and Norton Capital, with whom I shall deal separately. 1121 The prospectuses both properly identified the rights attaching to the redeemable preference shares. Any dividends payable required the resolution of the directors. There is nothing unusual about that because dividends can only be repaid out of profit in any event. The dividends were not cumulative. The shares were redeemable after 12 months but, again, only with the consent of the directors. 1122 True it is that the second prospectus rather indicated that investors would more likely receive dividends and, in respect of the second prospectus, on a monthly basis in arrears, and would be entitled to redeem their shares after 12 months. 1123 The directors' failure, and their breach, was in both prospectuses failing to properly identify the Neolido Group's financial position. They allowed their optimism for the Neolido Group to cloud their judgment in relation to the appropriate disclosure of relevant information. 1124 In my opinion, Mr Norton and Norton Capital's degree of culpability is greater than that of the directors. He and his company arrived on the scene in September 2004 promising to market Neovest on terms very favourable to Mr Norton and Norton Capital, namely 13% commission. The current directors held nothing back from him. He failed to carry out a proper due diligence report. He should have been able to identify the financial position of Neo Lido, Neolido Holdings and the Neolido Group, as well as the directors. He knew that the investment was very risky and that is why he must have insisted upon first, dividends being paid on a monthly basis in arrears; secondly, the directors' guarantees; thirdly, his appointment as a director; and fourthly, the issue of one Class Management Share to protect the investors by giving him a veto over the resignation and appointment of directors. If he had carried out a proper due diligence, he and Norton Capital would have realised the return that Neovest would have had to have made to pay out 20% and 15% on the redeemable preference shares. They would have also realised that the borrowers, Neo Lido, Neolido Holdings and the Neolido Group, would have to pay extraordinarily high interest on their borrowings (somewhere between 45% and 50%) which, to a prudent financial analyst, would have meant that those components must have been financially stressed. 1125 Mr Norton and Norton Capital approved the product. The research report persuaded Mr Bertram and Wealthsure to market the product. The flyer was calculated to do the same. 1126 For those reasons, Mr Norton and Norton Capital's culpability is greater than that of the other directors at Neovest. 1127 However, in my opinion, the parties most culpable were Wealthsure and Mr Bertram. Mr Pawski also had the Info Pack, which was available to Mr Norton and Norton Capital. He is a financial adviser. He should have been able to make an informed assessment of the Neolido Group's financial position. He should have realised that Neo Lido, Neolido Holdings and the Neolido Group were financially stressed because of the extraordinarily high rate of interest those companies would have to pay. He was aware that any dividends payable on the shares required the resolution of the directors. He was also aware that the redeemable preference shares could not be redeemed without the agreement of the directors. 1128 He was aware of the steps that Mr Norton had taken to minimise the risk associated with the investment. He was aware that it was a high risk investment. However, not only did Wealthsure market the product extensively, it marketed the product to the wrong people. 1129 The advice that Mr Bertram gave Mr and Mrs Selig was never suitable for their needs. They did not have sufficient income to engage in negative gearing. Advice, which required them to borrow money to invest in a high risk investment to obtain sufficient income to negatively gear units that had not been built, was never suitable to their needs and no prudent financier could have given that advice, as Mr Bertram has recognised in his evidence. 1130 In my opinion, the culpability of Wealthsure and Mr Bertram far exceeded that of the other participants. 1131 If, contrary to my earlier opinion that the proportionate liability sections do not apply, except as to s 1041H, I would have apportioned liability between the defendants, apart from the ninth to thirteenth defendants, as to 60% to Wealthsure and Mr Bertram, 25% to Mr Norton and Norton Capital, and 15% to the other directors of Neovest. I would not apportion any liability to Neovest, which acted at the direction of its directors. 1132 However, for the reasons I have already given, this is not a case for apportionment.

Civil Liability Act 1133 Next, the first and second defendants claim that if the proportionate provisions under Division 2A of Part 7.10 of the Corporations Act do not apply to the plaintiffs' claims, then the State and common law causes of action pleaded by the plaintiffs are in any event apportionable, pursuant to s 28 of the Civil Liability Act. 1134 The proportionate liability provisions in Chapter 2, Part 2 of the Civil Liability Act apply to causes of action arising on or after 1 March 2005. It therefore could have application in regard to the conduct of the relevant parties on or after that date and before the investment in Neovest was made. 1135 At the relevant time, s 28 of the Civil Liability Act provided: (1) This part applies to either or both of the following claims (apportionable claim) - (a) a claim for economic loss or damage to property in an action for damages arising from a breach of a duty of care; (b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1989 for a contravention of section 38 of that Act. (2) For this part, if more than 1 claim of a kind mentioned in subsection (1)(a) or (1)(b) or both provisions is based on the same loss or damage, the claims must be treated as a single apportionable claim. (3) This part does not apply to a claim - (a) arising out of personal injury; or (b) by a consumer. (4) Also, this part does not apply to a claim to the extent that an Act provides that liability for an amount payable in relation to the claim is joint and several. (5) A provision of this part that gives protection from civil liability does not limit or otherwise affect any protection from liability given by any other provision of this Act or by another Act or law. 1136 Section 28(3) provides that Part 2 of Chapter 2 does not apply to a claim by a consumer. "Consumer" is defined in s 29 to be: [A]n individual whose claim is based on rights relating to goods or services, or both, in circumstances where the particular goods or services - (a) are being acquired for personal, domestic or household use or consumption; or (b) relate to advice given by a professional to the individual for the individual's use, other than for a business carried on by the individual whether solely or as a member of a business partnership. 1137 The first and second defendants contended that the plaintiffs are not consumers because they described themselves as "self employed builders". It was contended that the purpose of the plaintiffs' investment in Neovest was to obtain income so that the plaintiffs could advance their commercial purpose of investing in real estate and, as well, engage in small scale developments. In my opinion, that contention should be rejected. 1138 The advice that was given was given by a professional to Mr and Mrs Selig for their own use other than in the carrying on of a business. In my opinion, they are consumers for the purpose of s 28(3) and therefore Part 2 of Chapter 2 of the Civil Liability Act does not apply to the claim.

The First and Second Defendants' Claim for Contribution 1139 The first and second defendants contend that if their claims against the other defendants are not apportionable they are entitled to full indemnity against the other defendants or at least contribution from those defendants. In their written submissions, they submitted: 18. If not apportionable, the first and second defendants are entitled to indemnity or contribution 18.1 If, contrary to the case of Mr Bertram and WealthSure, the claim of the plaintiffs is not apportionable then Mr Bertram and WealthSure are entitled to full indemnity from each of the other defendants on their cross-claim for the reasons set out above. 1140 That was the whole of the argument put. "The reasons set out above" did not identify the statutory basis for the indemnity but only why, having regard to the facts, an indemnity should be ordered. 1141 Because I have dismissed the first and second defendants' claim against the ninth to thirteenth defendants under s 13 of the Partnership Act, these claims also only relate to the third to eight defendants, all of whom, perhaps with the exception of Mr Townley, are insolvent. Mr Norton's status is unknown. A claim for indemnity or contribution in those circumstances is not worth much. 1142 The first and second defendants, in their SCC, only rely upon the proportionate liability sections of the Corporations Act, the ASIC Act and the Civil Liability Act. In regard to the Civil Liability Act, in paragraph 45 of the SCC they claim that insofar as the plaintiffs have a claim for economic loss against them for breach of duty of care, the claims are apportionable. 1143 Nowhere do the first and second defendants rely upon any other cause of action that either they or the plaintiffs have against the third to eighth defendants which would allow them to seek indemnity or contribution. 1144 In the absence of some identification of the basis for the indemnity that the first and second defendants are entitled to an indemnity the claim should be dismissed.

The Result on Liability 1145 The plaintiffs' claims against the ninth to thirteenth defendants will be dismissed. The further result is that the plaintiffs' claims in tort and contract should be reduced by 15%. So also should the claims based on s 1041H be reduced. However, the other statutory claims will succeed without reduction. 1146 There will be no apportionment between the defendants, except for those claims on which the plaintiffs have succeeded under s 1041H. Because the plaintiffs have succeeded on other claims, the plaintiffs are entitled to recover all of their damages against the first to eighth defendants. Therefore, there will be no declarations as to apportionment. 1147 The plaintiffs are entitled to the whole of their damages against the first to eighth defendants without reduction or apportionment. There will be no contribution between the defendants.

Damages 1148 That leaves the question of damages. Damages in this case are not easily assessed, partly because the plaintiffs and the first and second defendants took extreme positions which were untenable, but that does not relieve the Court of the responsibility of doing the best it can: Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 125. In some respects in this case, the damages can be no more than an approximation and not be the result of clear mathematics: Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 145 CLR 625 at 636. 1149 It is not clear from the plaintiffs' submissions whether the plaintiffs contend that the plaintiffs' damages should be assessed in tort or in contract. They address aspects of both forms of assessment and then say damages might be assessed on both a contractual and a tortious basis. They submit that is a matter for the Court and is not a matter of election by the plaintiffs. 1150 The question is not one of election of course. The question is what is the appropriate assessment of damages in a proceeding of this kind having regard to the manner in which the plaintiff puts its case. 1151 The first and second defendants rather suggest that the assessment should be tortious, but address the plaintiffs' claim by contending that the plaintiffs failed to prove any loss. 1152 The plaintiffs have established contraventions of the Corporations Act and the ASIC Act, and made out a case in common law in negligence, misrepresentation and breach of contract. 1153 What then would be the method of assessment of damages? 1154 I have already referred to s 953B(2). 1155 I have already mentioned s 1041I. 1156 Section 12GF(1) of the ASIC Act provides: (1) A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision C (sections 12CA to 12CC) or Subdivision D (sections 12DA to 12DN) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. 1157 Section 1041I and s 12GF talk of "by conduct". Section 953B(2)(b) speaks of "because". In my opinion, the different language in the sections does not give rise to different considerations in relation to damages. 1158 The statutory provisions require the identification of the loss of damage that the plaintiff claims to have suffered and then a determination whether that loss or damage has been caused by or because of the conduct complained of. 1159 In Murphy v Overton Investments Pty Ltd (2004) 204 ALR 26, the High Court was addressing the TPA. However, the Court said (at [24]): Because the misrepresentation just described was the only misrepresentation established, the case was conducted in this court by reference only to the Act. The respondent argued that the representation was only a representation of present fact - the elements of expenditure taken into account in relation to the 1992 estimate of $55.71 per week - and that no liability could arise from departures from the representation in relation to future years. The argument fails, because as a matter of causation the misleading representation induced the appellants to enter the lease, and once they had done so they were at risk of loss if the respondent decided to employ different elements of expenditure in arriving at future levies for outgoings. The claim for damages for negligent misrepresentation need not be considered further. 1160 Once the causal connection between the loss and damage and the conduct has been established, there is no need to draw any analogy with the manner in which damages are assessed in tort or in contract: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494. 1161 It is not right also, to suggest that where damages are claimed in relation to statutory contraventions of the kind relied on in this proceeding, that the damages available to the plaintiffs are only those that are available in deceit. 1162 One way of assessing damages in a case such as this is to determine what position the plaintiffs who suffered the loss or damage would have been in if the contravention had not occurred. As the authorities show, that is not an exclusive test. 1163 In their opening, the plaintiffs said: 56. There were three distinct stages is (sic) in the financial collapse [of] the plaintiffs namely: 56.1. the loss of $450,000 in respect of the Neovest shares together with interest and borrowing costs; 56.2. the loss on the purchase and forced sale of the Wynnum units and the land at Yaroomba plus borrowing costs and interest; 56.3. the loss of their remaining capital, superannuation and savings used to meet ongoing interest and like obligations. 1164 The plaintiffs developed that submission in their closing address, except that they included the claim for the forced sale of the Wynnum units in the first stage. Nothing turns on that. However, they also put their damages in an alternative way. During the hearing the plaintiffs handed up a document entitled "Schedule 2", which set out the plaintiffs' assets and liabilities at 30 November 2004, which was about the time the plaintiffs first met with Mr Bertram and about five months before the investment was made. The Schedule also identifies subsequent purchases and sales, and the assets and liabilities of the plaintiffs in about 2010 which show the deterioration in the plaintiffs' financial position by $2,384,811.52. 1165 It is not, however, a helpful document for the purpose of assessing the plaintiffs' loss because it does not identify the loss or damage that was caused by or because of the conduct of the defendants. It assumes that the whole of the change in the plaintiffs' financial position was caused by, or because of, that conduct. But that is not an assumption that can be made because it cannot be said that each adverse financial event was caused by any of the conduct of which complaint is made. Nor can the defendants be liable for the plaintiffs' living expenses and general lifestyle over the period mentioned in Schedule 2. It does not take into account the lifestyle and living expenses of the plaintiffs over the same period of time. Neither of the plaintiffs worked. They were, in my opinion, poor financial managers. Their ordinary living expenses over the period would have to be accounted for in the change of financial position. Those living expenses, as was shown by the withdrawals from the RX01 and RX02 accounts in December 2004/January 2005, were not insignificant. 1166 I am not prepared to act on Schedule 2 as indicative of the plaintiffs' damages. 1167 The first and second defendants contended that the plaintiffs had failed to prove any loss at all. That contention included, what can only be described as a "remarkable" contention, that notwithstanding that the plaintiffs were advised to invest in Neovest, and notwithstanding that Neovest is in liquidation, the plaintiffs have failed to prove that by investing in Neovest they suffered financial loss. The first and second defendants contended that the plaintiffs failed to establish that Neovest's liabilities exceeded its assets and that there would not be a return to Neovest shareholders. 1168 I reject the first and second defendants' contentions. As can be seen, the plaintiffs and the first and second defendants took extreme positions which were not, in my opinion, appropriate. 1169 The plaintiffs failed, in my opinion, to identify the particular loss and damage caused by the contraventions, the tort or the breach of contract. The first and second defendants failed to recognise that where a contravention, tort and breach of the contract caused loss or damage, there was an entitlement to damages. 1170 The starting point for the plaintiffs' damages is to identify the loss and damage at various stages. Next, it is necessary to determine whether the loss and damage has been caused by, or because of, the contravention, tort or breach of contract. If it has, then the damages for the loss or damage should be assessed. 1171 The plaintiffs also handed up an "Amended Schedule of the Plaintiffs (sic) Loss and Expenses", which was of more assistance, because it identified the cost of the purchase of the Wynnum units, their holding costs, their costs of sale, and the change in value during the period over which the units were held. 1172 The Amended Schedule also indicated the cost of borrowings incurred by the plaintiffs. 1173 Because I think the losses occasioned by the forced sale of the Wynnum units were caused by, or were because of, the defendants' conduct, those losses have to be brought to account in the plaintiffs' favour. 1174 I have used the Amended Schedule for the purpose of the assessment which I will shortly carry out. 1175 As I have said, the plaintiffs elaborated upon their opening and their closing address. They contended that the investment in Neovest of $450,000 was a direct economic loss for which they need to be compensated together with compound interest. They say as part of that first stage the plaintiffs incurred a liability for three investments units for which they should be compensated together with interest. 1176 The second stage is the consequential loss in respect of a real estate investment which they purchased in the belief that they would receive a return from the Neovest shares. They purchased the property at Wattle Street, Yaroomba, which they subsequently sold with the consequent loss of development opportunity. 1177 The third stage is said to be the loss of the plaintiffs' ability to preserve their own capital as a result of the financial stringency imposed upon them by reason of the investment in Neovest and the units. 1178 Schedule 2 is said to be a reflection of the three stages for which the plaintiffs contend. For the reasons already given, I do not think Schedule 2 properly reflects the damages suffered by the plaintiffs. 1179 The first and second defendants contend that the plaintiffs have failed to lead any evidence on what they would have done in the event that they had not been misled. They say that the plaintiffs' position is analogous to the applicant in Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, in which the High Court held that it was necessary to prove what would have been done by the applicant in the event that the applicant had not been misled. 1180 The first and second defendants argue that although the plaintiffs had no real income immediately before the relevant events, they appeared to regard the funds available in the Jarone Westpac account as available to meet all their expenditure. In the six months preceding April 2005, they drew something like $200,000 from that account of which a relatively small amount appeared to have been drawn to meet ordinary living expenses. Notwithstanding, Mr Selig was unable to say what a significant portion of that amount was spent on. 1181 The first and second defendants rely upon that for their contention that the Court cannot be satisfied that the plaintiffs would have been able to meet their ordinary living expenses in any event, if these events had not occurred. They argued that the plaintiffs would have had to engage in some transaction "whether an investment in Neovest or some other investment". 1182 They say that the plaintiffs' failure to adduce any evidence as to what the plaintiffs would have done, absent their investments in Neovest and the Wynnum units, is fatal to the plaintiffs' claim, and the plaintiffs' claim for loss fails for want of proof. 1183 They contend that the plaintiffs' simplistic approach of comparing their financial position as at 30 November 2004 with their financial position in 2010 does not reflect the manner in which damages should be assessed by the Court. 1184 As I have said, the first and second defendants also contend that the plaintiffs have failed to prove that their investment in Neovest has been lost. 1185 For those reasons, the first and second defendants contend that the plaintiffs are not entitled to any damages. 1186 If the plaintiffs had been properly advised, they would not have engaged in negative gearing. They could only negatively gear if they had an income of such sufficiency that negative gearing would have been appropriate. When both of them had little or no working capacity, they could not achieve an income of that kind. In reality, and if they had been properly advised, they would not have entered into any speculative investments. If properly advised, they would not have wasted their assets, which was the consequence of Mr Bertram's advice. They would have consolidated those assets into the one property as the principal place of residence and sought whatever income was available to people who have no capacity to earn income. 1187 The plaintiffs' two apartments were not worth anything like what was supposed at the relevant time. They were later sold, settling on 4 December 2007 for $600,000 (Unit 12) and on 15 March 2010 for $550,000 (Unit 3). I will address the evidence for that later in these reasons. Although the sales were considerably less than the value of the two units, Unit 12 was probably worth not more than $750,000 and Unit 3 was probably worth not more than $850,000 at any relevant time. 1188 Unit 12, in which the plaintiffs did not live, was rented at $380 per week and generated $19,760 per annum, which was a return on capital of 2.63%. 1189 It may have been that the plaintiffs could have rented out the better unit, Unit 3, but the return was not likely to be able to give the plaintiffs a living income - certainly not $52,000, which they said they needed. If the better unit had been sold and the monies invested in a conservative interest bearing deposit, the investment could have maintained an income of $52,000 for about 20 years, but at the end of that time the capital would have been exhausted. 1190 The plaintiffs could not look forward to the type of lifestyle that they sought with the assets that they had. 1191 The fact is that the plaintiffs were positively advised to adopt the strategy that they did. That caused the loss and damage for which they are entitled to damages. 1192 The defendants cannot exculpate themselves from the damages, for the loss and damage caused, by pointing to the risk that the plaintiffs would have engaged in some other speculative investment, which also would have been disastrous. 1193 In this case, the plaintiffs claim that they lost the value of their investment in Neovest. For all the reasons I have previously given, the plaintiffs invested $450,000 in Neovest, acting upon the advice of Mr Bertram, as agent for Wealthsure, who in turn relied upon the advice of Mr Norton and Norton Capital who had carried out what they said was a due diligence assessment of Neovest, whose directors were responsible for the prospectus which was relied upon. The prospectus included misstatements in relation to the Neolido Group and it failed to disclose that if Neovest were to lend money to Neo Lido, Neolido Holdings, or the Neolido Group, that loan would be unlikely to be able to be repaid. The plaintiffs invested in Neovest and they suffered loss or damage. 1194 For the reasons I have already given, the plaintiffs established the damages for that loss or damage by proving, uncontroversially, that Neovest was insolvent. Because Neovest is insolvent, the plaintiffs, as shareholders, have no recourse to their investment. 1195 As I have mentioned, the first and second defendants claim that that aspect of their damages has not been established because the plaintiffs have not established that Neovest's liabilities exceed its assets, or that the guarantees given by Mr Spencer and Ms Perovich to Neo Lido, Neolido Holdings and the Neolido Group are not sufficient for those entities to repay the loans to Neovest. 1196 In my opinion, that argument cannot be accepted. The plaintiffs have established that Neo Lido, Neolido Holdings and the Neolido Group were insolvent at the time that the prospectus was issued. Indeed, that was the first and second defendants' case as well. Neo Lido and Neolido Holdings have been wound up in insolvency. The plaintiffs have also established that Neovest is insolvent and Neovest has been wound up in insolvency. 1197 In those circumstances, the plaintiffs need go no further to prove that the investment in Neovest has been lost. The whole of the investment must have been lost if Neovest's liabilities exceed its assets. There can be no return to the equity investors in those circumstances. 1198 In my opinion, the plaintiffs made out their claim for damages in respect of their investment in Neovest. They are entitled to interest on that loss, which I shall address later. 1199 Next, the plaintiffs claim that they suffered loss or damage by reason of their investments in the Wynnum units because Neovest did not pay dividends and they were not able to service the borrowings that they had undertaken for the purpose of purchase of those units. 1200 In my opinion, the conduct of the defendants led to the investment in the three units at Wynnum and led to the loss or damage suffered by the plaintiffs. 1201 The loss or damage suffered by the plaintiffs in those investments are a little more difficult to identify, but that does not mean that they are not entitled to the damages sought. 1202 The plaintiffs also claim that they were put to the cost of refinancing from time to time in an endeavour to minimise their loss. 1203 I would uphold the plaintiffs' contentions in relation to the loss and damage suffered in the first stage. 1204 The plaintiffs are entitled to damages for the loss of the $450,000 investment in Neovest. They are entitled to the compound interest on that amount to trial. The compound interest to which they are entitled represents their loss. They had to pay interest on interest (compound interest) to their financiers. Compound interest is, therefore, one item of their loss. It is not interest of the kind provided for in s 51A of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act). It is not awarded in this case because the plaintiffs have been kept out of their money which is the purpose of s 51A. It is awarded because it is a loss suffered by the plaintiffs. It is part of the damage suffered by the plaintiffs and should form part of their damages. It was not put by any party that the Court should adopt the pre-judgment interest rate in Practice Note CM16. The calculation of the compound interest was agreed at $310,567. The interest rate relied upon was 8.8%. The use of that interest rate was never satisfactorily explained. The evidence shows that the plaintiffs borrowed at 8.19%. Later they paid a higher rate. In the absence of evidence, it would be appropriate to use 8.19%. The plaintiffs should have compound interest because they became liable to pay interest on interest and so that liability forms part of their damages: Hungerfords v Walker (1989) 171 CLR 125. 1205 The losses on the three units are made up of: (a) the capital losses on each unit; (b) the acquisition costs of each unit; (c) the selling costs of each unit; and (d) the holding costs of the units. 1206 There was a capital loss of $10,000 on each of Units 1 and 7, but no loss or profit on Unit 9 at Wynnum. The capital loss is assessed at $20,000. 1207 The plaintiffs established the acquisition and selling costs as follows: Unit 1/78 Berrima Street, Wynnum Amount 7/9/2005 Purchase of Property Sellers release of mortgage fee $108.30 Contract default penalty interest $1,489.98 Fuss Law - costs and outlays $2,063.60 Government contract stamp duty $11,600.00 Total $15,261.88

20/12/2007 Sale of property Fuss Law - costs $1,092.80 Orio Mortgage Finance Company $660.00 Gadens National Mortgage Services $195.25 Ray White - agents commission $10,532.50 Total $12,480.55

Unit 7/78 Berrima Street Wynnum 7/9/2005 Purchase of property Seller release of mortgage fee $216.60 Contract default penalty interest $1,509.83 Fuss Law costs and disbursements $1,265.00 Government contract stamp duty $11,775.00 Total $14,766.43

Sale of property 14/12/2007 Agents fees Ray White Wynnum Manly $9,670.00 Orio Mortgage $660.00 Transferring solicitors costs Fuss Law $1,291.80 Total $11,621.80

Unit 9/78 Berrima Street Wynnum 7/9/2005 Purchase of property Sellers release of mortgage $216.60 Contract default penalty interest $1,708.32 Fuss Law costs and outlays $1,300.00 Government contract stamp duty $13,525.00 Total $16,749.92

9/1/2008 Sale of property Sellers release on mortgage fee $115.00 Ray White - Wynnum Manly $12,320.00 Agents fees Gadens National Mortgage Services $228.25 Orio Mortgage Finance Company Limited $660.00 Bank cheque fees $50.00 Gadens solicitors mortgage $228.25 Interest and costs for settlement date extension $215.00 Total $13,816.50

1208 The acquisition and selling costs on the three units are assessed at $84,697.08. 1209 The holding costs were a little more difficult to identify because the plaintiffs changed financiers during the period they owned the units. The costs of establishing the initial loans by the RX01 and RX02 accounts with the Adelaide Bank Ltd and including the extension of those two loans were: 22/3/2005 RX01 Loan from Adelaide Bank Limited for $399,000 Loan contract fee $80.00 Establishment fee $512.50 Valuation fees $512.50 Settlement fee $100.00 MacGillivrays costs and outlays on preparation of mortgage documents $2,186.97 DBA Financial Designs - Cash Flow Monitoring Software first year fee $330.00 Diverse Enterprises - Finance and Property Settlement Service fee $495.00 Total $4,216.97

22/3/2005 RX02 Loan from Adelaide Bank Limited for $560,000 Loan contract fee $80.00 Establishment fee $512.50 Valuation fees $512.50 Settlement fee $100.00 MacGillivrays costs and outlays on preparation of mortgage documents $2,879.27 National Mortgage Company Pty Ltd processing fee $30.00 Total $4,114.27

7/9/2005 Extension of RX01 loan amount from $399,000 to $600,000. Loan from Adelaide Bank. Application fee $285.00 Contract preparation fee $80.00 Valuation fees $220.00 National Mortgage Company Pty Ltd settlement fee $100.00 Legal fees $1,125.37 Total $1,810.37 21/8/2006 Discharge administration fee $150.00 21/8/2006 Wholesale deferred establishment fee $3,192.00 Total $3,342.00

7/9/2005 Extension of RX02 loan amount by $120,000 to a credit limit of $680,000. Loan from Adelaide Bank. Contract fee $80.00 Application fee $285.00 Valuation fees $220.00 Legal fees - MacGillivray's solicitors $910.32 Settlement fee $100.00 Total $1,595.32 21/8/2006 Wholesale deferred establishment fee $4,480.00 Total $4,480.00

1210 The cost of establishing the loss upon the initial loan is assessed at $19,558.93. 1211 The plaintiffs subsequently borrowed the sum of $920,000 from ING on 7 September 2005. It was necessary to borrow a further amount than that which had been borrowed from the Adelaide Bank, because the sums borrowed from the Adelaide Bank were not sufficient to meet the whole of the strategy in the Statement of Advice and the Cash Flow and Debt Management Strategy Paper of 18 April 2005. 1212 The cost of establishing the ING loan was: Application fees $550.00 Valuation fees $1,760.00 Settlement fee $100.00 Legal fees and outlays $6,699.71 Bank cheque fees $90.00 Loan mortgage insurance $4,993.82 Settlement fee ING Bank $25.00 Settlement fee - National Mortgage Company Pty Ltd $100.00 Loan mortgage insurance $543.68 Total $14,862.21

1213 The cost of the plaintiffs establishing the ING loan is $14,862.21. 1214 The total borrowings from the Adelaide Bank and ING were, at the time of the ING loan: (a) 7/9/05 RX01 (including increase) $600,000 (b) 7/9/05 RX02 (including increase) $680,000 (c) 7/9/05 ING $920,000 Total $2,200,000

1215 That leaves for consideration the borrowing costs. 1216 The plaintiffs' total borrowings at 7 September 2005 were $2.20 million. That sum was greater than the plaintiffs had needed to borrow to make the recommended investments. I do not think the plaintiffs were good financial managers. 1217 The sum that the plaintiffs needed to borrow, if they were to act in accordance with the advice given by Mr Bertram, was the cost of the investment in Neovest $450,000; the cost of the purchase of the three units which was $1,185,000; and the purchase cost of those units which, as shown above, was a little more than $46,000, say $50,000. The total required was $1,685,000. 1218 Two things follow from that. The first is that the plaintiffs were right when they contended that they needed to borrow more money than they had already obtained from the Adelaide Bank, if they were to implement the strategy. Secondly, they borrowed more money than they needed to implement that strategy. Some further money was spent on other investments, but there is no suggestion that any of those other investments failed, so they can be left out of account. 1219 By 18 April 2005, the plaintiffs were receiving $380 per week for the existing investment unit (Unit 12), which would have returned $19,760 per annum. 1220 The three units at Wynnum were expected to return $1,020 per week, which amounted to $53,040 per annum. 1221 The other income that the plaintiffs were expected to receive was the 20% on the $450,000 investment with Neovest, being $90,000 per annum. 1222 I have already indicated the compensation that is to be payable for the loss of the investment in Neovest. Therefore, the Neovest investment ought to be taken out of account in relation to the total amount borrowed, otherwise the plaintiffs would be compensated twice for that investment. That leaves a notional borrowing of $1,235,000, which would have cost $101,147 per annum to service at 8.19% interest. 1223 The rental income on the three units did not meet the amount needed to service the borrowings. 1224 The cost would not be as high as $101,147 because, as I have said, it would be partly offset by the income received from the units. 1225 It would be appropriate, in my opinion, to assume that the damages for which the plaintiffs should be compensated in relation to the cost of money be calculated by reference to the difference between the amount notionally borrowed less the Neovest investment, which has already been compensated for, less the amounts received from the rental of the units. 1226 The holding costs on the units can be addressed by identifying the interest payable at 8.19% on $1,235,000, which is the amount notionally borrowed less the Neovest investment. The cost of the borrowings was $101,147. 1227 It has not been suggested that the plaintiffs did not receive the income on the units over the period that they held them and up until the time of sale in December 2007/January 2008. The income was $53,040 per annum. 1228 Some allowance needs to be made for outgoings, such as rates and taxes, but that will have to be estimated. 1229 The loss therefore, apart from outgoings, was in the vicinity of $55,000 per annum, say after outgoings $60,000 per annum. 1230 The plaintiffs are entitled to be compensated for the interest losses incurred on the units that were bought on 7 September 2005 and sold in December 2007/January 2008. The period over which the properties were held is about 28 months and the holding costs, therefore, should be assessed at $140,000. 1231 The plaintiffs would be entitled to have compound interest on that amount since that time to judgment in the same manner as they were entitled to compound interest on the Neovest investment. 1232 The plaintiffs were obliged to refinance their loans with Orio Mortgage. Orio provided the finance for the acquisition of the Wattle Street, Yaroomba property. As I have found that acquisition was not a consequence of the defendants' conduct, those acquisition fees are not to be brought into account. 1233 However, on 17 August 2006, the plaintiffs refinanced the three units at Wynnum and the two units at the Sea Aura apartments. In my opinion, it was reasonable for the plaintiffs to refinance at that time and refinancing was a consequence of the defendants' conduct. 1234 During the period up until the refinancing, Mr and Mrs Selig continued to receive assurances from Mr Bertram that he was doing everything in his power to get the situation with Neovest resolved as quickly as possible. He made that representation in an email of 4 July 2006. 1235 On 7 July 2006, Mr and Mrs Selig had a meeting at their home with other investors in Neovest and with Mr Bertram. The following day Ms Perovich sent an email to Mr and Mrs Selig attaching a "Receivable [discount] Offer". 1236 On 7 August 2006, Mr and Mrs Selig were advised by Ms Perovich that approval for Mango Hill would be ready by the end of the month. 1237 On 10 August 2006, Mr Bertram sent an email stating that the "Neovest situation [was still] looking OK but the timing is still dragging on". 1238 On 4 September 2006, Mr Bertram emailed Mr and Mrs Selig stating that "just the timing now as to when this all gets finalised". 1239 On 11 September 2006, Mr Bertram emailed Mr and Mrs Selig stating that: … the valuation process has commenced and they have 30 days from the 29th August for the initial valuations and then a further 10 days for mediation. 1240 On 25 January 2007, Mr Bertram emailed Mr and Mrs Selig advising that "despite another dispute, the time frame for repayment is still on-track". 1241 Mr Selig said in his statement that between April and December 2007, he and his wife engaged in a series of correspondence with Wealthsure to complain and to attempt to resolve the situation. 1242 In those circumstances, it was reasonable for Mr and Mrs Selig to refinance with Orio in the hope that the Neovest investment would not be lost and the dividends would be paid. For those reasons, I intend to allow the cost of the financing with Orio. The costs are: Orio Loan Account No 100045065 - Loan No 164783 - 1/78 Berrima Street Wynnum - $356,250 17/8/2006 Establishment Fee $350.00 17/8/2006 Lenders Mortgage Insurance $14,423.68 Sub Total $14,773.68 8/1/2008 Discharge Administration fee $555.00 8/1/2008 Deferred establishment fee $8,906.25 Sub Total $9,461.25

Orio Loan Account No 100045062 - Loan No 165255 - Re 7/78 Berrima Street Wynnum - $301,480.02 17/8/2006 Fees and charges for loan $3,939.12 Sub Total $3,939.12 10/12/2007 Discharge Administration fee $300.00 10/12/2007 Deferred establishment fee $3,617.76 Sub Total $3,917.76

Orio Loan Account No 100045064 - Loan No 164786 - 9/78 Berrima Street Wynnum - $380,000.00 17/8/2006 Lenders mortgage insurance $15,010.00 Establishment fee $350.00 Office of State Revenue $1,520.00 Department of Natural Resources $222.60 Orio Mortgage Finance Co Pty Ltd $880.00 Bank cheque fees $11.00 QMS Queensland fees $555.19 Sub Total $18,548.79 9/1/2008 Discharge Administration fee $555.00 9/1/2008 Deferred Establishment fee $9,500.00 Sub Total $10,055.00

Orio Loan Account No 100045131 - Loan No 163543 - re Unit 3/43 Burnett Street Buderim - $686,093.27 17/6/2006 Title insurance $212.85 Settlement fee $75.00 Orio Mortgage Finance Company Pty Ltd $600.00 Galilee Solicitors costs $517.00 Lenders mortgage insurance $6,093.27 Bank cheque fees $60.00 Registration fees $222.60 Office of State Revenue $2,744.40 MacGilivray's solicitors $577.50 National Mortgage Company $600.00 Sub Total $11,702.62

Orio Loan Account No 100045128 - Loan No 163542 re 12/143 Burnett Street Buderim - $605,376.41 17/8/2006 Settlement fees $75.00 Title insurance $212.85 Orio Mortgage Finance Company Pty Ltd $660.00 Galilee Solicitors costs $517.00 Lenders mortgage insurance $5,376.41 Bank cheque fees $40.00 Registration fees $222.60 Office of State Revenue $2,421.60 Sub Total $9,525.46 Deferred establish fee and discharge administration fee $7,564.52 Sub Total $7,564.52

25/5/2007 Loan - Capital Access 8/6/2007 Gadens - Fees $1,386.17 Application fee $3,632.00 Brokerage fee $3,058.00 Sub Total $8,076.17

1243 The damages incurred by the plaintiffs in refinancing with Orio are assessed at $97,564.37. 1244 The plaintiffs' damages exclusive of interest on the first of the three claims are:

1. Loss on investment in Neovest $450,000.00
2. Capital losses on Units 1 and 7 at Wynnum $20,000.00
3. Acquisition and selling costs of units at Wynnum $84,697.08
4. Establishing the initial loan $19,558.93
5. Establishing the ING loan $14,862.21
6. Borrowing costs $128,000.00
7. Orio refinancing $97,564.37 $814,682.59 say $814,680.00

1245 That sum should bear compound interest at the rate of 8.19%. I will return to that. 1246 Next, the plaintiffs claim that they suffered loss or damage by reason of the purchase of the property at Lot 7 Wattle Street, Yaroomba, which they contracted to purchase on or about 16 November 2005 for $285,000. 1247 The property at Lot 7 Wattle Street, Yaroomba was vacant land. It was a one minute walk from the Coolum Golf Course, 900 metres from the beach and four kilometres from the Airport. It was purchased for $285,000. The contract for the purchase of the property was signed on 16 November 2005 for settlement on 23 June 2006. A deposit of $10,000 was paid by Mr and Mrs Selig. 1248 Because it was vacant land, it was not capable of generating income. The plan, so Mr Selig said, was to build a duplex on the property. 1249 On 16 February 2006, the land was valued, for the purchase price, by Lever Valuers for Orio when Orio became the new financiers. 1250 Mr Selig said that he had been told by a land agent that he should be able to receive $650,000 for each duplex. 1251 In March 2006, Mrs Selig arranged for an engineering report from Coffey Engineering for the proposed duplex development on the Yaroomba block. On 22 August 2006, they obtained development approval from the Maroochy Shire Council for what was termed "dual occupancy". 1252 In October/November 2007, because of their financial position, the plaintiffs entered into a contract with Mr Selig's son, Aaron Selig, for the sale of the property to him for the sum of $350,000. Mr Selig said that he sold the Yaroomba property because the investment properties at Wynnum had effectively taken away his cash reserves and he had no money to develop the Yaroomba property. By the time the property was sold Mr and Mrs Selig were in financial difficulties. 1253 I accept that Mr and Mrs Selig were in financial difficulties between the date of purchase and the date of sale, and were unable to develop the Yaroomba property. 1254 However, I am not satisfied that if they had not implemented the strategy suggested by Mr Bertram and Wealthsure that they would have been able to develop the property at Wattle Street, Yaroomba. 1255 Settlement on the Wattle Street, Yaroomba contract occurred, as I have said, on 23 June 2006. Suppose that Mr and Mrs Selig had not implemented the strategy suggested by Mr Bertram and Wealthsure, then they would have had to have lived off their assets for a period of nearly two years. If their living expenses were in the order of $52,000 per annum, and that, in my opinion, would have been at the lower end of the range, they would have spent nearly $100,000 in the intermediate period. They would have had to have made the tax payments and other payments that they were obliged to make in any event. 1256 They would have had no assets except the two units at the Sea Aura Apartments and, by that stage, one of those units, which was the investment unit may have had to have been financed. 1257 I am not satisfied, in those circumstances, that Mr and Mrs Selig had the capacity to develop the Yaroomba property, even if the Wealthsure and Wynnum investments had not been made. 1258 I am not prepared to allow damages in that respect. 1259 I am not satisfied that any loss that was occasioned in respect of the failed development was caused by, or was because of, the conduct of any of the defendants. 1260 It seems to me that the plaintiffs' decision to enter into the contract to purchase Lot 7 Wattle Street, Yaroomba was made independently of the investments in Neovest and the three units at Wynnum. Any connection between the loss they suffered in relation to the purchase of that property and the conduct of any of the defendants is not established. 1261 The third element of the plaintiffs' loss, mentioned in opening and as developed in closing, are the further losses to meet ongoing interest and like obligations. 1262 The third aspect of the plaintiffs' claim is even more difficult to assess. The failure by Neovest to pay its dividends of $90,000 per annum in circumstances where the plaintiffs had notionally borrowed $1,235,000 on which the plaintiffs were paying (at 8.19% interest) $101,147 against a return from the three units of about $53,000 (less outgoings) and other income of $19,760 and Centrelink payments to Mrs Selig must have caused the plaintiffs financial stress. The plaintiffs were entitled to sit and wait for events to improve in circumstances where they were being assured by Mr Bertram, Wealthsure and the Neovest directors that it would be sorted out. 1263 However, while waiting, the plaintiffs were suffering an ongoing loss of $90,000 per annum, which would have about met the shortfall in the borrowings, but still left them without living expenses. Their plight was exacerbated by the Wattle Street, Yaroomba purchase and their own failure to understand now desperate their position was. Eventually all of their assets were lost. In particular, their two units at the Sea Aura Apartments were lost. The Neovest investment started the rot, but the plaintiffs' further investment assisted to continue the rot and caused further loss. 1264 By about April 2005 when the plaintiffs received the advice in relation to the strategy to invest in Neovest, the plaintiffs only assets were realty; the two units numbered 3 and 12 at Burnett Street, Buderim, one of which they occupied. 1265 Unit 12 was valued by Mr Manzie on 6 March 2006 at $750,000, and Mr Madden on 25 May 2010 at $720,000, and was sold to meet debts on 7 December 2007 (at the time of the sale of the Wynnum units) for $600,000. It would be appropriate to infer that because of the circumstances of a forced sale, the plaintiffs lost about $135,000 in equity. 1266 Unit 3 was valued by Mr Lever on 21 January 2005 at $700,000, by Mr Manzie on 6 March 2006 at $850,000, and by Mr Madden on 28 May 2010 at $740,000. The unit was sold by the mortgagor on 15 March 2010 for $550,000. I infer that the plaintiffs lost equity in the order of $200,000 by reason of that sale. 1267 The plaintiffs lost, in my opinion, $335,000 by reason of their assets being sold because of their parlous state. 1268 Doing the best I can I would attribute $200,000 of that loss to the defendants. 1269 This is not a case where there are different causes for the same damage, one of which is compensable and the others are not. In that case, the plaintiffs would be entitled to the whole of the damages which reflected that same damage. 1270 This is a case where the plaintiffs' financial position deteriorated because of the implementation of the strategy and also because of the manner in which they lived, and because monies were expended on living expenses. 1271 As I have said earlier, I reject the proposition in Schedule 2 that the whole of the plaintiffs' financial position is as a result of the implementation of the strategy. 1272 That is why I have attempted to make a rough and ready assessment of the financial loss caused by the implementation of the strategy, as distinct from the financial loss caused by the plaintiffs' own lifestyle. 1273 I assess the plaintiffs' damages at $1,014,680. 1274 The plaintiffs have been paying interest on that amount since they first borrowed money to implement the strategy. They suffered some aspect of their loss at 22 April 2005 and some other aspects later. It is not possible to be precise as to when each aspect of their damages was suffered. I think justice would be served if the plaintiffs were awarded compound interest at the rate of 8.19% (the only rate of which there is some evidence) for six years. In a rough and ready way, that allows for some damage being suffered more than a year after the strategy was implemented. I calculate compound interest on the figure of $1,014,680 at 8.19% to be $745,832. 1275 The plaintiffs' damages are assessed at $1,760,512. 1276 Because the plaintiffs' damages have included compound interest to judgment, the plaintiffs are not entitled to pre-judgment interest under s 51A of the Federal Court Act.

Orders and Costs 1277 The plaintiffs shall have judgment against the first and second defendants in the sum of $1,760,512. 1278 It will be necessary to reconsider the orders made on 8 December 2010 which allowed for the plaintiffs and the first and second defendants to proceed against the third, fourth, seventh and eighth defendants up to the point of judgment. Although the first and second defendants are not entitled to any relief against the third to eighth defendants, the plaintiffs have established contraventions by those defendants which would entitle them to relief against all those defendants. 1279 However, the third and fourth defendants are bankrupt and the seventh and eighth defendants are in liquidation. The orders made on 8 December 2010 gave leave to proceed against those defendants up to the date of entry of judgment. The plaintiffs cannot obtain a judgment against those defendants without having those orders varied to delete the limitation on the leave or obtaining fresh leave. 1280 In either case the third and fourth defendants' trustees, and the seventh and eighth defendants' liquidators, are entitled to be heard if the plaintiffs wish to proceed. 1281 It may be that the plaintiffs, who as I have said only proceeded against those defendants because the first and second defendants sought to have them made proportionately liable, do not wish to incur the cost of obtaining judgment against those defendants when, as I suspect, they would not obtain any dividend in the bankruptcy or winding up. But that is a matter for the plaintiffs. 1282 If the plaintiffs wish to obtain a judgment against the third, fourth, and seventh and eighth defendants, they should within 14 days file and serve on those defendants, and the third and fourth defendants' trustees, and the seventh and eighth defendants' liquidators, an application seeking leave to proceed to obtain judgment. The application should be accompanied by an affidavit stating the grounds upon which the orders are sought and insofar as is known to the plaintiffs, the assets and liabilities of each of the defendants. 1283 If an application is not made within 14 days of today's date, the plaintiffs' proceeding against the third, fourth, and seventh and eighth defendants will be dismissed. 1284 If an application is made it will be heard at 9.30am on Tuesday, 4 June 2013. 1285 The plaintiffs are entitled to judgment against the fifth and sixth defendants, who are not bankrupt, for the amount of the assessed damages. 1286 The plaintiffs have failed against the ninth to thirteenth defendants and the plaintiffs' proceeding against those defendants must be dismissed. 1287 The first and second defendants have failed in their claim that all of the plaintiffs' claims should be apportioned between the defendants and, in those circumstances, I refuse to make any declarations in relation to proportionate liability, because the declarations would have no force or effect. 1288 The first and second defendants have also failed in their claim for indemnity of contribution against those defendants and the claim for indemnity and contribution must be dismissed. 1289 The plaintiffs have succeeded against the first and second defendant, and there is no reason why they should not have their costs. The plaintiffs are also entitled to their costs against the third to eighth defendants. 1290 The plaintiffs and the first and second defendants have failed against the ninth to thirteenth defendants. As I have previously indicated, the plaintiffs only joined the ninth to thirteenth defendants because the first and second defendants raised the question of proportionate liability as against Mr Townley and therefore, under the Partnership Act, against the ninth to thirteenth defendants. 1291 The ninth to thirteenth defendants must have their costs against the plaintiffs and the first and second defendants. Because it was the first and second defendants who introduced the ninth to thirteenth defendants to the proceeding, the plaintiffs might seek an order against the first and second defendants in relation to their liability for costs. Because I have not heard the first and second defendants in relation to any claim that the plaintiffs might make for indemnity in respect of any liability for costs to the ninth to thirteenth defendants, it would not be appropriate to make a Sanderson order: Sanderson v Blythe Theatre Co [1903] 2 KB 533. However, I give leave to the plaintiffs to make an application to the Court, if so advised, for a Bullock order: Bullock v London General Omnibus Co [1907] 1 KB 264. 1292 That leaves the question of the plaintiffs' costs in the proceeding against the third to eighth defendants. It is not possible at present and in advance of leave to make an order for costs against the third and fourth, and seventh and eighth defendants. 1293 In my opinion, there is no reason why the plaintiffs and the first and second defendants should not have their costs against the fifth and sixth defendants. 1294 The question of costs against the third and fourth, and seventh and eighth defendants will be reserved to await the outcome of any application by the plaintiffs for judgment against those parties. 1295 The third to eighth defendants were successful in relation to the first and second defendants' claims against them, and should be entitled to costs if they have incurred any costs. 1296 However, because they were unrepresented they probably have not incurred any costs: Cachia v Hanes (1994) 179 CLR 403. 1297 If the plaintiffs seek a Bullock order in relation to their liability for costs to the ninth to thirteenth defendants, they should file written submissions within 10 days setting out the order that is proposed and the reasons for the order. 1298 If submissions are not filed within that time, then the plaintiffs' liberty to apply expires. 1299 If written submissions are made in that time, the first and second defendants should file written submissions in reply within 10 days. 1300 In both cases, the written submissions should not exceed five pages. I certify that the preceding one thousand three hundred (1300) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.