Accountant’s advice, related party fund and $10million loss: misleading conduct, fiduciary breach and personal exposure

The court addressed the following legal issues: 

• misleading or deceptive conduct by Mr Hunt, Hunt & Co, Hunt Prosperity and Stonepoint under the Australian Consumer Law, Corporations Act 2001 (Cth) and Australian Securities and Investments Commission Act 2001 (Cth);

• negligence by Mr Hunt and Hunt & Co;

• breach of fiduciary duty by Mr Hunt and Hunt & Co; 

• breach of contract by Stonepoint;

• breach of trust by Stonepoint;

• third-party claims against Mr Hunt, Hunt Prosperity and Fortico (knowing receipt and knowing assistance); 

• compound interest in light of finding of dishonesty and knowing receipt and assistance; 

• relief to trace trust funds for funds transferred improperly to related entities; and

• director’s liability under s 197 of the Corporations Act. 

Applying the four-step approach in Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 277 CLR 186, the court found the information memorandum (IM) provided to Mr McIntosh, as well as emails, texts and oral assurances from Mr Hunt, conveyed that the Fund was diversified, secure, relatively safe, produced stable 1-2 per cent monthly returns and allowed investors to redeem investments within seven days. These representations were false and misleading when compared with the Fund’s actual structure and operations. Mr McIntosh trusted Mr Hunt and acted in accordance with his representations.

The court found that, if Mr Hunt’s representations, as accountant and financial advisor, about the qualities of the investment in a fund of which he was a director of the trustee and manager, expressed opinion rather than present facts, those representations carried implied representations that Mr Hunt had a reasonable basis for the opinion. Mr Hunt had no reasonable basis for the opinion in circumstances where he ought to have known the risk of capital loss was high.

Risk warnings and detailed disclaimers in the IM did not 'erase or dispel' the misleading impression of the opinion, in light of the stark divergence between the promised investment strategy and reality. The court followed several authorities to confirm that professional advisors such as accountants or financial advisors cannot rely on disclaimer and exclusion clauses to exclude liability for contraventions of the statutory provisions relating to misleading or deceptive conduct. A disclaimer must be ‘very clear’ to remove the misleading or deceptive effect of the conduct.

In terms of who was liable, Stonepoint owned and was liable for the misrepresentations in the IM. Mr Hunt was liable for the representations he made on behalf of Stonepoint, including the IM that he sent to Mr McIntosh. Mr Hunt’s conduct in making further representations was also that of Hunt & Co and Hunt Prosperity. Furthermore, Stonepoint and Mr Hunt were authorised representatives of Hunt Prosperity and were therefore liable for Hunt Prosperity’s conduct under Part 7.6 Div 6.150 of the Corporations Act.

Hunt Prosperity was otherwise jointly and severally liable with Mr Hunt and Stonepoint (and the plaintiffs were entitled to a declaration that Hunt Prosperity was liable for any amounts required to be paid by Stonepoint or Mr Hunt) for the misleading and deceptive conduct because:

• Hunt Prosperity (as financial services licensee) was liable to the client for any loss or damage the client suffered because of the representatives’ conduct under s 917B of the Corporations Act; and
• the plaintiffs had the same remedies against the licensee as against the representative, and the licensee and representative are all jointly and severally liable to the plaintiffs under s 917F of the Corporations Act.^[1]  

The court found that Mr Hunt and Hunt & Co owed a duty of care when advising on investments, given Mr McIntosh’s limited investment experience, vulnerability, and trust in Mr Hunt as his accountant and financial advisor.

Mr Hunt and Hunt & Co breached that duty under s 5B of the Civil Liability Act 2002 (NSW) in circumstances where: 

• the risk of harm to the plaintiffs as a result of reliance on Mr Hunt’s advice and representations was foreseeable and Mr Hunt and Hunt & Co knew or ought to have known of this risk;
• the risk of harm was not insignificant as the plaintiffs’ stood to lose the sums invested, the ability to withdraw investments to pursue valuable business opportunities and opportunity to earn a reasonable sum on the sums invested;^[2] and
• Mr Hunt and Hunt & Co failed to take precautions against the risk of harm by exercising reasonable care in providing their advice or representations about the investment and correcting representations before receiving investment funds.

Accountants and advisors do not necessarily owe their clients fiduciary duties. With respect to financial advisors, Justice Halley held in R and N Hunter Pty Ltd (atf The Hunter Family Superannuation Fund) v Court Financial Ltd [2025] FCA 544 at [217], that courts find fiduciary obligations on a case-by-case basis, depending on specific factors that may include: 

• the specific nature of the advice sought by the client and provided by the advisor; 

• specific contractual terms; 

• the existence and scope of assumptions of responsibility, trust and confidence by the advisor; and 

• the extent of reliance by, and vulnerability of, the client, in the sense of dependence. 

In this case, the court followed Daly v Sydney Stock Exchange Ltd (1985) 160 CLR 371 at [377] to find that Mr Hunt and Hunt & Co owed fiduciary duties to the plaintiffs in circumstances where:

• Mr Hunt was providing advice about investments in the Fund in which he was the director of the trustee; 

• Mr McIntoch told Mr Hunt that he was relying on him for investment advice; and 

• Mr Hunt assured Mr McIntosh that he would act in the plaintiffs’ best interests and knew that the plaintiffs were vulnerable to his integrity in operating the Stonepoint trust.

Mr Hunt breached his fiduciary duty by placing himself in a position of conflict and failing to obtain informed consent when he and his entities ultimately benefited from fees and distributions funded by the investment. Mr Hunt did not disclose these interests when recommending the Fund to the plaintiffs.

The plaintiffs entered into a contract with Stonepoint when they signed the Fund application form and agreed to its terms, which referenced agreement to the IM and a Trust Deed. The court accepted that the statements in the IM about how Stonepoint would invest the Fund money formed a term of the contract and Stonepoint breached that term. Stonepoint also breached the following terms:

• a term in the IM to the effect that the plaintiffs would receive a 1 per cent distribution per month. Mr Hunt’s subsequent oral statements or written representations that there would be a 2 per cent distribution per month did not vary this term; and

• a term in the Trust Deed to the effect that the plaintiffs were entitled to redemption at the original unit price. Similarly, Mr Hunt’s subsequent representations that the plaintiffs could redeem the investment in seven days did not vary this term.

The court found that the Trust Deed’s broad investment powers had to be read with the IM and the irreducible duties of a trustee to act honestly, in good faith and in beneficiaries’ interests.

Stonepoint lent virtually all assets of the Fund to Fortico for highly risky foreign exchange trading, with no clear repayment term and no real security, which was inconsistent with the IM and these duties. The Court found Stonepoint’s conduct dishonest and for an improper purpose – enriching the founders and funding non-investment spending – amounting to a 'fraud on a power'.

Mr Hunt and Fortico were liable as knowing assistants in Stonepoint’s breach of trust in circumstances where Mr Hunt established Stonepoint and Fortico. Fortico and Mr Hunt assisted in Stonepoint’s breaches by procuring investors, orchestrating transfers, operating accounts and concealing losses, with at least actual knowledge or wilful blindness to the breaches.^[3]

Fortico and Hunt Prosperity (through Mr Hunt) were also liable as knowing recipients of misapplied trust funds, having received millions from the Fund with actual knowledge of, or wilful blindness to, the obvious breach of trust.^[4]

The court held the plaintiffs were entitled to the following relief: 

• Equitable compensation against Stonepoint, Mr Hunt and Fortico for breach of trust/knowing assistance/knowing receipt, including the value of unredeemed units ($10.646 million) and consequential loss ($4.725 million) for costs associated with delays and additional debt on a major property development and diminished profits.^[5] The court found that the plaintiffs were additionally entitled to compound interest from those defendants, following the decision in Chu v Lin [2024] FCA 766 at [251] per Justice Hackman and Herrod v Johnston [2012] QCA 360 at [25]-[50] (Justices Muir, Gotterson and Applegarth agreeing).^[6]
• Damages for breach of contract for underpaid distributions, calculated at 1 per cent per month to the date of judgment. The court did not award the plaintiffs damages for unpaid redemptions and consequential loss because the plaintiffs were not entitled to double recovery on those sums.
• With respect to misleading or deceptive conduct:
  • declarations of contravention by Mr Hunt, Hunt & Co, Stonepoint and Hunt Prosperity, of ss 18 or 29 of the Australian Consumer Law, ss 1041E or 1041H of the Corporations Act, and ss 12DA or 12DB of the ASIC Act; and
  • damages under s 236(1) of the Australian Consumer Law in the sum of $4,257,325.83 plus interest, being the plaintiffs’ net direct loss and consequential loss. That loss was the amount invested, less the distributions received and the amount of the redeemed units, plus the cost of a loan required to meet the Group’s business obligations generally and lost deposit to purchase an aircraft. The plaintiffs were not entitled to double recovery for these damages in negligence and breach of fiduciary duty.
• A declaration that the funds Hunt Prosperity received from Fortico totalling $2,210,722.89, or their traceable proceeds, are held on trust for the Fund. The plaintiffs agreed that any traced funds ought to be paid into court for further consideration of how they ought to be distributed.

The court accepted the plaintiffs’ submission that it was appropriate to declare that Stonepoint was not entitled to be reimbursed or indemnified out of the assets of the Fund for any costs or expenses incurred in relation to the defence of, or relief ordered in, these proceedings. Stonepoint’s right to be indemnified would only arise if the trustee had properly performed its duties, which was not the case in this instance.

Under s 197(1) of the Corporations Act, Mr Hunt, as director of the corporate trustee, was liable individually and jointly with Stonepoint to discharge any unpaid liabilities to the plaintiffs in circumstances where: 

• Mr Hunt was a director of Stonepoint at the time it incurred a liability, and Stonepoint incurred the liability while it acted as trustee of the Fund;

• Stonepoint breached its trust duties to the plaintiffs;

• Stonepoint did not, and cannot, discharge its liability to the plaintiffs; and

• Stonepoint was not entitled to an indemnity against the liability out of the trust assets.