Case Study: Tort Law Negligence - Financial Planner's Duty of Care

This case study examines a tort law scenario where a financial planner, Bill, is potentially liable for negligence due to financial advice. The client, Steve, lost his job due to COVID-19 and sought Bill's help to restructure his investments. Bill advised investment in a Super Duper Fund and cryptocurrency, the latter without prior experience and proper risk assessment. Steve, influenced by Bill's endorsement, invested in cryptocurrency, which resulted in significant losses, alongside underperforming Super Duper Fund investments. Consequently, Steve faced financial hardship, including the sale of his house. The analysis focuses on whether Bill breached his duty of care, considering the Law of Negligence, the Civil Liability Act, and the professional standards expected of financial planners. The application section discusses the importance of informed consent, risk assessment, and proper portfolio management. The conclusion considers the legal implications of Bill's actions and Steve's potential claim for negligence, highlighting the importance of proving that the losses were directly caused by Bill's negligence.

TORT LAW

TABLE OF CONTENTS
ISSUE .............................................................................................................................................1
RULES ............................................................................................................................................1
APPLICATION ..............................................................................................................................2
CONCLUSION ...............................................................................................................................2
REFERENCES................................................................................................................................3

ISSUE
In the present case Steve who is client of Bill financial planner has lost the job due to
Covid-19. Steve asked the restructure the financial investments for getting better returns. Bill
asked to invest in Super Duper Fund. Steve also asked for the investments in cryptocurrency for
which the Bill has not advised clients previously. Steve decides to invest in the cryptocurrency
taking endorsement of Bill as evidence for healthy returns. After a year investments in
cryptocurrency were all lost and also the investments in super duper funds did not provided the
returns as expected due to investments in portfolio. Due to this reason Steve was not able to
make payments for repayments and house was sold for less than its value. The main issue is:
Whether Bill could be sued for negligence for losses incurred as result of Super Duper
Fund, cryptocurrency advice and sale of house.
RULES
Law of Negligence and Limitation of Liability Act, 2008
Professional is not negligent for providing the professional services if it has been
established that professional have acted in manner widely accept in the Australia by significant
number of the respected practitioners in field as the competent professionals practice in practice.
Section 19 is not applicable to liabilities arising in relation with giving warning or the
other information of risks or other thing to person of where giving of such information or
warning is associated with provisions by professionals of professional service.
Civil Liability Act, 1936
This law is used for assessing negligence of the individuals and liability faced as result of
the negligent act on their part. If person sues other for negligence, that person is often seeking
the financial compensation for damages. Opposite parties seek to be put in position where they
would been if negligence was not occurred (Lunney, 2020). The common situations where the
negligence could be alleged includes car accidents where there is personal injury or property
damage or public land and professional negligence
Duty of Care
Duty of care is the legal obligation for avoiding causing harm and that arises when the
harm is foreseeable reasonably if care has not been taken. There needs to be close relationship
between two parties for duty of care to be there. Under CLA, 1936 some qualifications are
provided for duty of care.
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Breach of Duty
If standards of care are not undertaken by the person providing services than it is
considered as breach of duty (Popa, 2020). Also if the reasonable care is not taken by the person
it is also considered as breach of duty under Civil Liability Act, 2002.
Causation
For person to sue for negligence, harm due to action of such person are required to be
shown. Onus is on plaintiff of proving harm and defendant's breach of the duty has caused harm.
APPLICATION
In the present case Bill should have informed about the risk of investing in
cryptocurrency as asked by the FPA to every client. Also the investments in Super Duper funds
were not made by properly analysing the portfolio. Major part was invested in Airline shares
without knowing the weight-age. Bill should have performed the professional duties for
investments with reasonable care and properly analysing the different sectors before investing.
Also the Bill has not attended any seminar for the cryptocurrency (Kontra, 2019). In defence Bill
is required to prove that all reasonable care was taken in framing the portfolio and also that Steve
has not invested in cryptocurrency because Bill's advice.
Steve can sue Bill for negligence as it professional duty to inform about the risks
associated with the investments. However Steve has invested in cryptocurrency due to own
interest and made the investment without having proper knowledge about that. Further as the
negligence of on the part of Bill for not investing the fund after proper assessment has caused
Steve to suffer the damage of no return (Tort Law, 2020). Due to this fact the repayments for
mortgages were not made. The duty of proving that loss is suffered due to negligence of Bill lies
on Steve.
CONCLUSION
On the basis of Tort law there is professional standard for care on Bill to ensure that
investments are made in funds better returns to investors. Also they are required to inform the
clients about the risk associated with investing in cryptocurrency. Steve can sue Bill for
negligence and is required to prove the loss suffered of house was due to negligence.
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REFERENCES
Books and Journals
Lunney, M., 2020. Common Law Codification: Lessons and Warnings from Twenty-First
Century Australia. Journal of European Tort Law. 10(3). pp.183-206.
Popa, M., 2020. Dont Look for Fault, Find a Remedy! Exploring Alternative Forms of
Compensating Medical Injuries in Australia, New Zealand and Belgium. Tort Law
Review. 27(2). pp.120-136.
Kontra, S., 2019. The Duty of Care in Negligence.
Online
Tort Law. 2020.[Online] Available trough: <https://www.alrc.gov.au/publication/traditional-
rights-and-freedoms-encroachments-by-commonwealth-laws-alrc-interim-report-127/17-
immunity-from-civil-liability/what-is-a-tort/>
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