Often the calculation of loss resulting from the negligence of advisers can be a difficult exercise. Initially accountants, financial advisers, lawyers and other advisers may not appreciate the full scope of damages they may be liable for should loss be occasioned as a result of deficient advice.

The issues involved are complicated where the loss is exacerbated by general market decline such as that which occurred during the global financial crisis. In circumstances where the claimant would have entered into an alternative harmful transaction to the one they had, so as to suffer detriment irrespective of the negligent advice, the concept of loss becomes even less clear to calculate.

The recent Queensland Supreme Court decision in Jamieson v Westpac Banking Corporation [2014] QSC 32 provides a useful example of the issues involved.


This case concerned the provision of financial advice by an employee the Westpac Bank (Bank) in May 2007 to Mr. Mark Jamieson, his wife and a company controlled by Mr. Jamieson (Jamiesons).

The statement of advice provided by the Bank recommended that the Jamiesons adopt certain investment strategies, including that they borrow $5 million from Macquarie Bank Limited for the purposes of investing in a managed investment scheme called the MQ Gateway Trust.

The Jamiesons acted on the Bank’s advice and invested in the scheme. Ultimately the recommended investment strategies failed. The Jamiesons commenced proceedings against the Bank for breach of contract, negligence and contraventions of the Australian Securities and Investment Commission Act 2011 (Cth).

Please note that we have not addressed certain facts and issues considered in this complex decision which we have regarded as being superfluous to our readers.

Issues Considered

The Court found that the Bank’s advice was negligent, a breach of contract and misleading or deceptive conduct and that the Jamiesons would not have entered into the MQ Gateway investment had the Bank not engaged in such conduct.

As a consequence of these findings his Honour Justice Jackson considered whether the Bank’s conduct caused the Jamiesons’ loss and if so, how the measure of damage was to be calculated.

The Bank’s Contentions

The Bank argued that the Jamiesons had not suffered any recoverable loss caused by its conduct. Two primary arguments were advanced in support of this position:

  • the method for assessing loss in such cases was to apply the rule in Potts v Miller1, being that the amount of loss is equal to the price paid for the asset (in this case the MQ Gateway Trust investment) less its actual value at the time it was acquired. No subsequent market decline caused by the global financial crisis should be included in the assessment of the loss. The Bank alleged that performing such a calculation would result in no loss to the Jamiesons; alternatively,
  • the Jamiesons would have entered into some other similar investment regardless of the Bank’s advice and, because this was the case, the Jamiesons were required to prove what the result of that alternative transaction would have been, to be able to prove loss in this instance.


In rejecting both arguments, the Court made several important points.

His Honour stated that in assessing damage the Plaintiff is to be restored to the equivalent economic position they would have been in had they not acted on the deficient advice. The rule in Potts v Miller is a tool used to apply this general principle but is not appropriate in all cases and ‘consequential’ losses are recoverable.His Honour acknowledged that the Jamiesons were exposed to a contingent loss (the risk of losing money in the future) by entering into the MQ Gateway investment.

Here the interest under consideration was the risk of loss of the monies paid by the Jamiesons for the investment plus any loss of profit that might have otherwise been made with those monies.

His Honour referred to the authority of Kenny & Good Pty Ltd v MGICA (1992) Ltdin concluding that the Potts v Miller principle was not applicable in this instance and that the Bank’s second argument should also be rejected. The Plaintiff should not be required to prove the alternative transaction they would have entered into in order to establish the loss suffered.

Net Gains or Losses Approach

The Court preferred to apply the “net gains or losses approach” in assessing the loss suffered by the Jamiesons. This principle measures the net change in the position of the Plaintiff as at the date of trial. Whilst this approach has not been applied by the High Court, His Honour found through other authorities that the approach was an acceptable alternative to Potts v Miller.

In adopting such an approach it was not necessary to establish what position the Jamiesons would have been in had they entered into an alternative investment.

The Court directed that the parties then make submissions as to the quantum required to restore the Jamiesons to the position they would have been had they not invested in the MQ Gateway Trust.

Of interest for future claims in this area was the extensive consideration given to the High Court’s oft-cited decision in Murphy v Overton Investments Pty Ltd.In particular His Honour concluded that in Murphy the High Court did not restore the Plaintiff to its position before the relevant misleading conduct and accordingly the decision was inconsistent with the general compensatory principle applied in assessing damage in such cases. Whether Murphy remains a useful authority in misrepresentation and misleading or deceptive conduct claims will be dependent on factual similarities for application.


This decision confirms that:

  • The assessment of damages at common law and under statute for negligence and misleading or deceptive conduct claims should be measured in accordance with the general compensatory principle of restoring the Plaintiff to their original position.
  • The rule in Potts v Miller is not always the appropriate method of calculating the measure of loss in such cases. The Plaintiff may be entitled to recover consequential losses which go beyond what is recoverable under Potts v Miller.
  • The “net gains or losses” approach is an acceptable alternative to Potts v Miller in certain circumstances. The application of such approach will necessarily capture losses caused by general market decline and such losses are recoverable.