Westpac liable for bad advice and poor investment performance 14 April 2015 2:53PM John Kavanagh Westpac has been held liable for the poor performance of an investment trust a client invested in as a result of negligent financial advice.The Queensland Court of Appeal has ruled against Westpac's appeal over an earlier finding that it provided negligent and misleading investment advice to customers Mark and Loretta Jamieson. Mark Jamieson is mayor of Sunshine Coast in Queensland and a former chief executive of APN News and Media's regional newspaper division.In 2007 the Jamiesons were advised by a Westpac planner, Robert Tindall. They acted on the advice and borrowed A$5 million (a three-year Macquarie Structured Investment Loan) and invested the money in a managed investment scheme, MQ Gateway Trust. They also borrowed $600,000 to invest in their newly established self-managed superannuation fund, using the money to buy shares.Mark Jamieson had been a Westpac customer for many years and had a private banker.Following the financial crisis, both investment strategies became unprofitable and the Jamiesons suffered "significant losses".In the original judgment the Queensland Supreme Court found that Westpac was negligent and in breach of contract, as well as in breach of its statutory obligations under the ASIC Act. The court awarded the Jamiesons more than $1 million.In the appeal judgment handed down on Friday, the judges agreed with the original finding that Westpac had not spelled out the financial risk in clear terms. It said the real message was hidden in a "puzzle of references".Westpac was found to have understated the risk involved in the strategy and the court accepted that the amount at risk was more than the Jamiesons had said they were prepared to lose. The court also found that Westpac did not give an adequate explanation of the complex loan structure that the Jamiesons were entering into. The original finding was that the Jamiesons would not have made the investment if they had full details. Westpac challenged this finding on appeal.The appeal judges said: "The primary judge's finding that this breach caused Mr Jamieson to enter the transaction when he probably would not have done so was correct."The bank also argued on appeal that some of the losses were due to poor performance of the investment trust and this was unrelated to any breach by the bank.The judges said: "The risk of loss was one of the things the Jamiesons engaged the bank to advise them about. The ultimate loss which resulted from a fall in the market over a three-year period should not be described as 'unrelated' to the bank's breaches."The loss that arose from a fall in the market and the poor performance of the investment was related to the bank's breach because the breaches caused Mr Jamieson to enter a loss-making transaction in circumstances in which he would not have done so if the bank had acted with reasonable care."The court dismissed a cross-appeal by the Jamiesons on the method used in the original case for calculating damages.