Former Chambers client John Dennis initiated proceedings against the firm and its principal George Takla after sustaining losses from geared investments – largely in agribusiness managed investment schemes, such as Willmotts, Great Southern and Australian Blue Gums – during the GFC off the back of Mr Takla’s advice.
Mr Dennis and his legal representation pleaded that Mr Takla was liable for the losses on the basis of a perceived breach of duty under the contract of advice, as well as a breach of common law and equity, “misleading and deceptive conduct”, breach of fiduciary duty and breach of duty of care.
However, Justice Barker of the Federal Court in Perth ruled on Friday that the proceeding should be dismissed, having failed to be convinced of the stated breaches.
“In my view, having regard to the evidence and findings made in dealing with the issue whether Chambers breached its duty under the contract or at common law to exercise reasonable care and skill in providing financial advice to Mr Dennis, Mr Dennis has not established that Mr Takla obtained any unauthorised benefit from his relationship with Mr Dennis,” said Justice Barker in his judgment.
“In those circumstances the question of what fiduciary duties were owed does not require attention as, in my view, there was no breach of any such duty.”
However, ifa understands that at least one other legal action is still pending against the liquidated firm, as well as a number of matters before the Financial Ombudsman Service – one of which has resulted in a FOS determination being handed down against the company.
In August 2013, ifa spoke to former clients of Chambers who said they had been left financially devastated after investing in funds recommended by Mr Takla and his staff, alleging a “one size fits all approach” to investment advice and inadequate risk profiling.
ASIC cancelled Chambers’ AFSL in October 2013 after it had discovered the firm was in liquidation and did not have adequate PI insurance in place.
There are some very good tax effective MIS schemes in Australia that have survived and continue to serve there investors well. (TFS Indian Sandalwood project comes to mind. Look at http://www.tfsltd.com.au)
What is extremely interesting here is the finding that even though the projects them self failed the adviser continued to fulfill his fiduciary duty.
I might go a step further. I think our industry “best practice” needs to be revamped. Advisers need better training and tools on explaining investment risk and potential for loss…and I don’t mean training on how to fill out risk profile documents, as they are largely to blame for the level of complaints. Advice documents are huge…but the substance poor.
ASIC says we can’t rely on external research houses solely and even the research houses agree…and yet our compliance teams enforce the requirement to be bound by their preferred research house.
How true, John…and if I may add 2 other issues:
All advisers should be independent. Any adviser “linked” to a product provider cannot possibly be considered has having a client’s best interests at heart.
Research houses should also be held accountable if a complaint about a product. Ignoring Research houses is like suing a tobacconist for lung cancer and not the manufacturer.
J
This is a demonstration that the legal system works particularity when the adviser abides by his/her fiduciary duties.
All adviser should take comfort that if you abide by your fiduciary duties then the court will support you. Additional legislation via FOFA is not required. Another point is How can advisers by blamed for product failure when they are not managers of the product? How can you know a product will fail in advance???