Donald is a financial adviser with Australian Bank. One day as he is coming home from a work party, his neighbour, Patricia, noticed Donald was having trouble walking and asked if he needed help, to which Donald responded by claiming he had too much to drink and not to worry about him. Following a short conversation, Patricia asks him for some advice on superannuation, in particular whether Prime Investa Services Ltd is a 'good' investment. Donald is unsure of the status of Prime Investa Services Ltd, and is unhappy with providing free information outside of work. So he tells Patricia that everything should be all right if she only invests a little sum of money but she should seek professional advise nonetheless as he is not too familiar with Prime Investa. 

Patricia rinvests 75 per cent of her superannuation pay out into Prime Investa Services Ltd. She also tells her sister Jenny, 'My neighbour, who is an investment adviser, says Prime Investa Services Ltd are a solid investment'. Three weeks later, the Prime Investa Services Ltd assets are frozen, pending an investigation. All investors are told that they have probably lost their investments.

 

Advise Donald, (using a minimum of 4 relevant case law) by addressing the following issues:

A. Whether Donad owed a duty of careto Patricia?  

B. Whether Donald owed a duty of careto Jenny?

 

A. Whether Donad owed a *duty of care*to Patricia?

As a financial adviser, Donald's work is to aid the Australian bank with financial services depending on its financial situation. It was unprofessional to tell Patricia that everything would be fine, suppose she invests just a little money. In this case, one could say that Donald owed a duty of care to Patricia. 

A duty of care implies that Donald had an obligation to avoid acts or omissions that cause injury or harm. In Australia, financial advisors practice professional and legal standards stipulated by the Corporations Act that got founded in 2001 and amended in 2017 to raise the education, training, and ethical standards of financial advisers (Australian Securities and Investment Commission, n.d.). For this case, the law compels one to refer to the Corporations Act to understand the difference between personal and general advice. 

B. Whether Donald owed a *duty of care*to Jenny?

The case reveals that Donald was intoxicated coming from a work party. He told this to Patricia but she still went ahead and asked for the information. According to the Corporations Act, Section 766B, personal advice is financial product advice given to a person in circumstances where the advisor is aware of the client's objectives, financial situation, and needs (Parliament of Australia, n.d.). The law adds that a reasonable person should also expect the advisor to consider these matters (Parliament of Australia, n.d). Therefore, one can also argue that Donald did not owe a duty of care to Patricia because the transaction between the two was not official. Donald made it clear that he did not know much about Prime Investor Services Limited. Therefore, Patricia received general advice instead of personal advice. According to the law, general advice does not involve a consideration of the person's circumstances (Parliament of Australia, n.d.). Therefore, in the same sense, one can also argue that Donald does not owe a duty of care to Jenny because the two never even met.