The Supreme Court of New South Wales has ordered Westpac to compensate two investors who claim they were misled over the nature of their investment in a structured product called the Guaranteed Portfolio Service.Michael Lee and Majeed Hawatt were business partners in a development and construction business. Lee invested funds from the business in the share market, and, from 2004, used a Westpac protected equity loan as part of his strategy.The protected equity loan he used had options providing a 100 per cent guarantee of the capital invested.Lee took out a A$3.8 million protected equity loan in June 2004 and a $1.5 million loan in 2006. Overall, he made a profit on the investments.In June 2007, Lee had a meeting with a Westpac consultant who advised him that the GPS product had similar characteristics to a protected equity loan. Both provided protection from market risk.The consultant said the GPS was superior to a protected equity loan because a fund manager would choose the stocks in the investment portfolio.Lee and Hawatt invested a total of $3 million in various GPS funds, using Westpac investment loans to fund their investments.Lee claimed that it was not until a year after investing that he was informed he could not get out of the GPS before its five-year term expired without incurring a penalty.By the end of 2008, the protection mechanism of the GPS had been triggered by equity market falls. The funds were converted to zero coupon bonds that would pay back the capital at the end of the term. In the meantime, Lee and Hawatt would have to continue to pay interest on their loans, which would add up to about $440,000.Lee and Hawatt pulled out of their GPS agreements and started court proceedings, claiming "misleading and deceptive conduct". The basis of their claim was that their adviser had told them the GPS product was similar to a protected equity loan.The court found that there were critical differences. A protected equity loan was capable of yielding a benefit to the investor in the event of early termination, but there was no such mechanism in the GPS product.Also, with a protected equity loan, the investor's money stays invested in the original securities and there is capacity to recover value. With the GPS product, the investment can be converted to a zero coupon bond, which would not be tradeable.The court found the consultant had made misrepresentations and that Lee and Hawatt had suffered damage as a result of his conduct. It declared the GPS loans void and awarded damages of $380,000.One of the questions the court considered was whether Lee, an experienced investor, should have done more to inform himself about the nature of the investment. But it ruled that consumer protection in trade practices and corporate law was there to protect "the imprudent as well as the prudent, the trusting as well as the suspicious."