A court has ruled that an accountant who encouraged his client to buy his own vacant Broadbeach Waters allotment misled him on the prospect of a $2 million resale and was in breach of his fiduciary duty.
Barry Evans’ first mistake was to provide erroneous tax advice to injury victim Terry Adkins in relation to his $500k motor accident compensation payout.
According to Adkins – the accountant who doubled as a financial adviser – treated accident insurance payments as income, overlooking the fact that the income protection insurer had remitted periodic PAYG tax on income protection payments.
That error resulted in the client being assessed with annual tax of $43k on $52k of insurer-paid income with the mistaken assessments totaling $130k.
Those clangers were however potentially reversible by lodging amended tax returns.
Not so Evans’ advice as to the effective investment of Adkins’ compensation payout. That proposal was for Adkins to buy a $580k vacant lot from his company Darling Downs Developments Pty Ltd, at Cyprus Drive.
The financial adviser would for just $20k, do all the running around – arrange finance, obtain building approvals and architects’ plans – for a spec home to be built on the site that would sell at up to $2.1 mil.
Underscoring the money pot that the deal would produce for the client, Evans claimed he had just sold his spec project on the adjoining lot for $2.1 million!
Adkins went along with the plan.
But when it came time to sign up for the buy in March 2017, the lot price had escalated to $695k.
And he later discovered that neither Evans nor any of his companies had ever owned the next-door block that had fetched just $725k when it was sold.
As Adkins’ finances began to turn sour, Evans enticed him to open a bank account with a $45k deposit “to establish a history of savings” so that he could arrange a further loan – that never eventuated.
Adkins resold the property in August 2018 at $620k and sued asking for the deal to be un-wound so that his cash outlays could be returned.
Had he known the truth as to the vacant lot buy price and the actual resale amount of the adjoining sale – he swore in the District Court at Mackay – he would never have made the deal.
Evans could not be located to be personally served with the court proceedings. An order was made that the process be left at his Hooker Boulevard residence and that he be advised by text message of the hearing date and from where the documents could be obtained.
Judge Paul Smith had no hesitation in holding Evans in breach of ACL sections 18 and 30 which prohibits misleading or deceptive conduct in trade or commerce and in breach of his fiduciary duty to his client for having sold his own company’s property to him for profit.
But because of the passage of time – and given Evans’ nonappearance at the trial – the transaction could not be unwound.
Evans was ordered to pay damages in the sum of $205k being the $75k loss on resale plus holding and transaction costs.
Evans was also ordered to repay the $45k bank deposit.
Mr Adkins would appear to still have some work ahead of him to get the money he is owed by the accountant returned.