Australia: Damages on "no-transaction" basis


In our August publication we discussed the case of Wealthsure Pty Ltd v Selig27in the context of the Federal Court's application of the proportionate liability regime.28 We now take a look at how the approach adopted by the Federal Court in that case and the approach adopted by the Supreme Court of Queensland in the case of Jamieson & Ors v Westpac Banking Corporation29 provide some useful guidance on claims for damages made on a 'no-transaction' basis.

Judgment in Wealthsure

In 2004 and 2005 Mr and Mrs Selig (the Seligs) invested $450,000 in Neovest Ltd. This was on the financial advice of Mr Bertram, who was the authorised representative of Wealthsure Pty Ltd (Wealthsure). The investment was part of a negative gearing strategy concerned with the purchase of three properties in the suburb of Wynnum (the Wynnum units).

The investment failed and the Seligs commenced Federal Court proceedings against Mr Bertram and Wealthsure (among others) seeking damages arising from, and as a consequence of, the lost investment.

At first instance judgment was entered in the Seligs' favour and damages were assessed in the sum of $1.7 million. The basis of this assessment was to return the Seligs to the financial position they would have been in had they not proceeded with the investment, ie a 'no-transaction basis'.

The award of $1.7 million comprised the initial investment, transaction costs, borrowing costs, refinancing costs and loss of equity and capital arising from the purchase of the Wynnum units and the forced sale of properties owned by the Seligs prior to receiving the investment advice. The award also included an interest component in the approximate sum of $750,000.

Wealthsure and Mr Bertram appealed against the decision at first instance. Of most relevance was the appellants' assertion that the judge at first instance should have found that the Seligs had not established any loss as a result of the investment advice because they did not prove what they would have done in the absence of the proven breaches. They submitted that the Seligs were not entitled to damages on a no-transaction basis because the evidence indicated that once the Seligs entered into contracts to purchase the Wynnum units they had no option other than to proceed with the investment because no alternative investment strategy would have earned sufficient income to meet the mortgage payments on the Wynnum units.

The appellants referred to the cases of BHP Billiton (Olympic Dam) Corporation Pty Ltd v Steuler Industriewerke GmbH (No 2)30 and Copping v ANZ McCaughan31 in support of their appeal. In the former case the Victorian Supreme Court declined to award damages to the applicant because the applicant had not proved what it would have done had it not contracted with the respondent as a result of the respondent's misrepresentation. In the latter case the Full Court of the Supreme Court of South Australia upheld the trial judge's finding that the plaintiffs were only entitled to nominal damages in consequence of their reliance on the defendant's misrepresentation. This was on the basis that, even in the absence of the misrepresentation, the plaintiff would still have borrowed money offshore in the same way and suffered the same losses.

The Federal Court of Appeal consisting of Mansfield, Besanko and White JJ did not agree with the appellants' submissions on this issue and instead found that the judge at first instance did turn his mind to what the Seligs would have done had it not been for the appellants' breaches of duty. That is, "if the plaintiffs had been properly advised, they would not have engaged in negative gearing". Besanko J stated at [230]:

" is in my opinion incongruous for Wealthsure and Mr Bertram to content that, had they not breached their duties by the advice which they gave with respect to the investment in Neovest, the Seligs would still have embarked on some other high risk and inappropriate investment".

Aside from finding that the judge at first instance had erred in his calculation of compound interest, the appeal was dismissed.

Judgment in Jamieson

In May 2007 Mr and Mrs Jamieson (the Jamiesons) made investments based on a written statement of financial advice prepared by Mr Tindall, a financial planner with Westpac Bank (Westpac). The first recommended strategy involved the Jamiesons borrowing $5 million from Macquarie Bank for a 3 year term to be invested in a managed investment fund. The second recommended strategy involved the Jamiesons borrowing a further $600,000 from Westpac to make contributions to a self-managed superfund which would invest the funds in self-funding instalment warrants.

Both strategies failed and the Jamiesons commenced proceedings against Westpac alleging breach of contract, negligence and contraventions of the Australian Securities and Investments Act 2011 (Cth) (the ASIC Act). The Jamiesons claimed damages on a no-transaction basis, alleging that, but for Westpac's misleading conduct, they would not have made the investments.

Although Jackson J did not consider that the ASIC Act had been contravened, he did find that Mr Tindall acted in breach of contract and was negligent in several respects.

On the issue of causation Jackson J acknowledged that the claim was brought on a 'no-transaction' basis and identified that the relevant question was whether the Jamiesons would not have made the recommended investments if they had not been given the negligent advice. Interestingly, Jackson J rejected Mr Jamieson's evidence as to his intentions at the time of receiving Mr Tindall's advice as being "completely unbelievable".32 Nonetheless, Jackson J found that the Jamiesons would not have made the investments had they been fully informed and he concluded that "the found breaches of contract and negligence in relation to the [investments] constituted a necessary condition of the harm alleged".33

On the issue of the measure of damages Westpac contended that the Jamiesons did not prove any recoverable loss because:

  1. the applicable measure of loss is calculated in accordance with the rule in 'Potts v Miller'34 as the difference between the price paid and the value of what was acquired at the time of making the investments, and that loss was nil;
  2. Mr Jamieson would have entered into some other similar transaction in any event and he was required to prove what that the alternative transaction was.

Jackson J rejected both of these propositions.

On the application of the rule in Potts v Miller, Jackson J rejected Westpac's submission that the price paid by the Jamiesons for the investments was equal to the value of the investments. Since the Jamiesons would not have made the investments but for the breaches of contract and negligence, it was open to the Court to assess the measure of the Jamiesons' losses by reference to a comparison between the actual losses suffered by the Jamiesons and the past hypothetical case had they not made the investments. Jackson J opined that this was not necessarily inconsistent with the rule in Potts v Miller, which was "intended to operate as a methodology to assess compensation on the principle of restoring the plaintiff to the equivalent economic position they would have been in if they had not acted on the fraudulent inducement".35

With regard to Wespac's contention that the Jamiesons would have entered into an alternative transaction and had failed to prove the alternative investment, Jackson J resolved this issue by reference to the case of Kenny & Good Pty Ltd v MGICA (1992).36 In that case Kirby and Callinan JJ rejected the submission that the application of the rule in Potts v Miller had the effect that the plaintiff could not recover the losses it sustained when security received by it in respect of a mortgage proved to be inadequate some years after it had advanced the loan. Jackson J considered that the analogy between the Jamieson's position and the case of Kenny & Good was "sufficient to conclude that the claimed loss could be recoverable, as a matter of principle".37

Turning to the issue of quantum, Jackson J drew a distinction between a claim for damages based on a loss of opportunity to make a profit and a no-transaction claim. In the case of a lost opportunity claim the assessment of the past hypothetical scenario to be compared with the actual facts takes account of various contingencies and risks that may affect the quantification of damages. That is, the amount of damages is discounted depending on the degree of the likelihood of the past hypothetical scenario.

In the case of a no-transaction claim Jackson J stated that a plaintiff who can prove that the defendant's wrong caused loss of money invested will usually receive an award of damages measured by the full amount of the difference between the hypothetical scenario and the actual facts.

In terms of the actual facts pertaining to the Jamiesons, Jackson J formed the view that had Mr Jamieson not invested in the strategies recommended by Wespac it is more likely than not that he would have made an agribusiness investment similar to those he had made in previous years. The evidence was that this alternative investment would have been unprofitable and there would have been a loss. Accordingly, Jackson J considered that the Jamieson's claim for damages should be reduced to reflect the outcome of that hypothetical alternative investment.


The judgments in Wealthsure and Jamieson demonstrate that when a claim is made on a no-transaction basis the success or failure of that claim is influenced by the plaintiff's ability to demonstrate that they would not have entered into the unsuccessful transaction, but for the defendant's actionable conduct.

Further, where the plaintiff is able to overcome that hurdle the claim will not be defeated solely by reference to the rule in Potts v Miller. To the contrary, the judgment in Jamison demonstrates that the courts may be willing to interpret the rule in Potts v Miller in such a way as to encompass claims made on a no-transaction basis.

However, when contrasting the economic position that the plaintiff is faced with against the hypothetical position the plaintiff would have been in the absence of the defendant's wrongful conduct, the courts may factor in hypothetical alternative investments as a means of off-setting the losses claimed.

Finally, the Wealthsure decision demonstrates that once a plaintiff establishes that it is entitled to damages on a no-transaction basis, the award can not only encompass the lost investment itself, but also the consequential losses flowing from the lost investment.


1[2013] NSWCA 476, per Macfarlan JA at [108]
2See [2013] NSWCA 476, per Beazley P at [2] for her Honour's characterisation of the duty of care
3[2013] NSWCA 476, per Macfarlan JA at [104]
4[2013] NSWCA 476, per Macfarlan JA at [104]
5[2013] NSWCA 476, per Garling J at [255]
6[2013] NSWCA 476, per Garling J at [242]
7[2013] NSWCA 476, per Macfarlan JA at [110] and Beazley P at [1]
8[2013] NSWCA 476, per Macfarlan JA at [115] and [146] citing Rosenberg v Percival [2001] HCA 18; 205 CLR 434 per Gummow J at [64] with approval
9[2013] NSWCA 476, per Macfarlan JA at [154]
10[2013] NSWCA 476, per Macfarlan JA at [187]-[188] and Beazley P at [1
11[2013] NSWCA 476, per Macfarlan JA at [160] and Beazley P at [1]
12[2013] NSWCA 476, per Macfarlan JA at [179] and Beazley P at [1]
13(2001) 207 CLR 562 at 579-580
14Hunter and New England Local Health District v McKenna; Hunter and New England Local Health District v Simon [2014] HCA 44 at [29]-[32]
15See Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582 per Mason CJ and Dawson, Toohey and Gaudron JJ.
16In Anjin No. 13 Pty Ltd v Allianz Australian Insurance Limited [2009] VSC 371 Vickery J summarised the relevant cases and said (by way of obiter dictum) that he preferred the reasoning in Ashmere and other cases
17[2014] NSWCA 276
18Cross claim heard as part of BlueScope Steel Ltd v Allianz Australia Ltd [2013] NSWDDT 3
19s9(1) Insurance Contracts Act 1984 (Cth)
20[2013] NSWDDT 3 at 15-16, 26
21[2014] NSWCA 276 at 56, 59, 73, 216, 326
22Supreme Court (NSW), Wood J 26 June 1986 Unrep
23[2014] NSWCA 276 at 67
24[2014] NSWCA 276 at 229
25(1974) 130 CLR 1
26[1954] HCA 25
27[2014] FCAFC 64
28State of play: Proportionate Liability under Federal legislation (Nicole Wearne and Joshua Carton)
29[2014] QSC 32
30[2011] VSC 659
31(1997) SASR 525
32At [116]
33At [124]
34(1940) 64 CLR 282.
35At [136].
36(1999) 199 CLR 413.
37At [147].

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Edward O'Brien
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.