'Ponzi scheme’ investors to pay portion of Wealthsure’s appeal costs
Investors who were encouraged to invest in what a Federal Court judge called “a Ponzi scheme” will have to pay 30 per cent of the costs of their financial adviser’s appeal against an initial ruling.
Wealthsure Pty Ltd was initially ordered to pay the full costs of a claim by a South Australian couple, who lost “a considerable amount of money” after being advised by a Wealthsure adviser to invest in financial products issued by Neovest - which has since gone into liquidation - even though other parties had also had a significant role in causing the same harm.
However, Wealthsure’s appeal to the Federal Court of Australia ruled that the couple’s claim should be apportioned, with the couple ordered to pay 30 per cent of Wealthsure’s appeal.
Lawyers, Halsey Legal Services, claimed the ruling had “very important implications” for financial advisers with professional indemnity insurance and their insurers.
“The consequence of this judgment is that liability between defendants under the Corporations Act 2001 will be apportioned based on the relative degree of responsibility, even if only one cause of action for the same loss or damage is apportionable,” a spokesperson for Halsey Legal Services said.
“It can be argued that the court has sought to implement the legislative intention behind proportionate liability. When the proportionate liability regimes were introduced, it was said that part of the rationale for the introduction was to prevent so-called 'deep pocket syndrome’ - i.e. circumstances in which the plaintiff lawyers targeted the more substantial defendants, or the defendants that had substantial professional indemnity insurance.
“Professionals with professional indemnity insurance, and their insurers, can have greater certainty about more realistically scoping the potential extent of their liability in court cases involving misleading and deceptive conduct, or breaches of the duty of care (apportionable matters).”
AUTHOR
Nicholas O'Donoghue
Recommended for you
ASIC has launched court proceedings against the responsible entity of three managed investment schemes with around 600 retail investors.
There is a gap in the market for Australian advisers to help individuals with succession planning as the country has been noted by Capital Group for being overly “hands off” around inheritances.
ASIC has cancelled the AFSL of an advice firm associated with Shield and First Guardian collapses, and permanently banned its responsible manager.
Having peaked at more than 40 per cent growth since the first M&A bid, Insignia Financial shares have returned to earth six months later as the company awaits a final decision from CC Capital.
