Tomasetti v Brailey [2011] NSWSC 1446


The NSW Supreme Court has held that an accountant was not liable for investment losses suffered by its client.


The plaintiffs are Mr Tomasetti SC, a barrister who practices commercial law, property, equity, and in the Land and Environment Court, his partner, and the corporate trustee of their superannuation fund. Tomasetti sought advice from Brailey, his accountant, as to how to reduce his taxation burden.

In 2000, Brailey recommended Tomasetti invest in four agricultural managed investment schemes which provided deductions which operated to reduce his liability to pay income taxation. Tomasetti accepted the recommendation / advice and caused each plaintiff to invest in the schemes between 2000 and 2005. Brailey provided Tomasetti with prospectuses each year prior to Tomasetti investing. Brailey specifically directed Tomasetti to the provisions within each prospectus which detailed the ongoing financial obligations of the investor. Tomasetti conceded that he did not read the prospectuses in any detail.

The global financial crisis of 2009 caused the schemes to progressively fail. The plaintiffs were unable to afford the ongoing costs of the investments. The plaintiffs collectively claimed to have sustained losses of around $4 million.

In 2009, the plaintiffs commenced proceedings against Brailey alleging:

  • Negligence
  • Breach of contract
  • Breach of the Corporations Act for failing to provide a Statement of Advice
  • Breach of fiduciary duty on the basis that Brailey had a significant personal interest in recommending investing in the schemes as he derived ongoing commissions.

The crux of Tomasetti's argument was that Brailey had failed to properly and adequately identify the potential risks arising from the investments when providing the advice and / or the advice provided was flavoured by Brailey's self interest.


The court found against the plaintiffs on each claim.

In relation to the claim in negligence the court:

  • Held that there was no evidence that the prospectuses or Brailey's personal research which led to recommending the investments was misleading, inaccurate or incomplete
  • Found that Brailey's duty did not require him to carry out any further research
  • Held that there was no evidence that the investments were not sound, prudent and sensible in the circumstances
  • Accepted that the investments did carry risk but they also brought specific advantages capable of meeting Tomasetti's needs and desires, namely tax minimisation. The court considered the significant tax advantages which were derived from the investments
  • Was not convinced that Tomasetti was unaware of the risks arising from the investments and found that Brailey was entitled to expect that a person of Tomasetti's sophistication would be aware of the risks or at least make enquiries of him after reading the information to which Tomasetti was referred. In short it was not Brailey's fault if Tomasetti did not read the prospectuses.

The court held that because of the finding in the negligence claim, the breach of contract claim must also fail.

The court dismissed the claim based on breach of the Corporations Act on causation grounds. The court held that although a Statement of Advice had not been provided it was unlikely, given that Tomasetti had not read the prospectuses, that he would have read and relied on the Statement of Advice either. Tomasetti failed on this point because he did not satisfy his onus of proof that Brailey's breach was causative of the plaintiffs' loss.

The breach of fiduciary duty claim also failed. The court held that there was no evidence that that any 'personal interest' that Brailey derived from the investments was 'significant'.

Whilst contributory negligence was ultimately not an issue, the court held that Tomasetti's negligence was 'manifest'. The court noted Tomasetti was an intelligent man with experience in commercial and financial matters and because he made substantial financial investments without reading key documents, his conduct was tantamount to 'an almost complete abrogation of any prudent care for his own financial affairs'.


The decision is useful for financial lines insurers. An investor's failure (or at least a sophisticated investor's failure) to read documents which highlight the risk of a particular investment may prove fatal in a claim for negligence against the investor's financial planner or accountant. A plaintiff experienced in financial matters may face difficulty in succeeding in a claim against his / her advisor in circumstances where it is asserted that the plaintiff relied completely on the financial advisor.

The case also highlights the importance of establishing that the breach of duty caused the loss sustained. A plaintiff must adduce evidence not only what the defendant ought to have done to satisfy the duty owed, but also that had that action been taken, the loss would have been prevented.

An appeal is anticipated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.