1. Executive Summary
In HAP2 Pty Ltd v Bankier [2020] QCA 152, the Queensland Court of Appeal upheld, subject to a limited reduction in damages, findings that a financial adviser had negligently failed to warn a young and financially inexperienced client about material risks to the capital she needed to support herself for the rest of her life.
The respondent, Michelle Bankier, had suffered serious injuries in a motor vehicle accident at age 16 and later received almost $2 million in damages. She had substantially impaired earning capacity, significant medical expenses and a need for the damages to provide financial support over her lifetime. Her adviser, Mr Anthony Avery, knew those circumstances from the commencement of the relationship. [1]–[7], [53]–[54].
The Court rejected the adviser’s attempt to characterise his obligation as merely providing a portfolio review service or as requiring him to “monitor” the client’s spending. The relevant obligation was narrower but more significant: where proposed withdrawals, borrowings, or business expenditure created a material risk that the financial plan would fail and essential capital would be depleted, the adviser had to explain that risk clearly to a client who did not appreciate it. [75]–[82].
Sofronoff P held that the scope of an adviser’s duty depends on the client’s experience and expertise. An adviser may reasonably assume that a sophisticated client understands some risks, but that assumption may be unreasonable for an inexperienced client. In such circumstances, the scope of the duty may be “much wider”. [65].
The adviser also could not avoid responsibility for advice about an investment merely because the investment idea originated with the client. When Ms Bankier asked whether a property purchase using borrowed funds was viable, and the adviser analysed the proposal and arranged finance, he assumed a duty to exercise reasonable care and skill in giving that advice. [83]–[94].
The appeal against liability was dismissed. A separate appeal concerning quantum succeeded only to the extent that damages were reduced by $36,075.25 because the trial judge had not been justified in applying a second tax gross-up. The appellant was ordered to pay Ms Bankier’s costs of both appeals. [146]–[154], [180]–[183].
For financial advice businesses, the decision strongly reminds them that the content of advice duties depends on the client’s actual circumstances, objectives, knowledge, and vulnerability—not merely on labels applied to the service. Ongoing advice arrangements require advisers to connect financial decisions to their effect on the client’s stated objectives and to communicate material risks in terms the particular client can understand.
2. Citation & Context
| Item | Detail |
|---|---|
| Case | HAP2 Pty Ltd v Bankier [2020] QCA 152 |
| Court | Supreme Court of Queensland, Court of Appeal |
| Judges | Sofronoff P, Morrison JA and Philippides JA |
| Decision | 21 July 2020 |
| Hearing | 11 November 2019 |
| Originating decisions | Bankier proceedings before Martin J, including [2019] QSC 101 |
| Appellant | HAP2 Pty Ltd |
| Respondent | Michelle Ann Bankier |
| Principal issues | Scope of financial adviser’s duty of care, material-risk warnings, borrowing, business expenditure, causation, contributory negligence, limitations and damages |
| Outcome | Liability appeal dismissed; quantum appeal allowed only to reduce damages by $36,075.25; appellant to pay costs |
The proceeding arose from financial advice given over an extended period after Ms Bankier entrusted substantial personal-injury damages to the adviser’s management.
The Court’s analysis focused principally on common law negligence. The underlying proceeding also included claims under former ss 945A and 945B of the Corporations Act 2001 (Cth), which the judgment refers to in historical context. [51], [57], [124]–[125].
3. Material Facts and Advisory Relationship
Ms Bankier suffered major injuries in a car accident in 1997. When she later received her damages, she was young, had limited financial experience, could work only casually and expected significant medical expenses. Mr Avery recorded that:
“this money has to last her the rest of her life” — [3], [6].
The initial advice contemplated investing approximately $1 million to generate income to meet estimated living expenses of about $54,000 per year while preserving capital growth. [3]–[14].
Importantly, the relationship was not documented as a single transaction and then brought to an end. The Statement of Financial Advice contemplated an “ongoing business relationship” designed to ensure that the investment strategy continued to meet Ms Bankier’s needs over time. [12].
The portfolio review service also expressly contemplated the adviser raising issues of concern, identifying opportunities and recommending changes arising from altered personal or economic circumstances. [18].
Over subsequent years Ms Bankier withdrew substantial amounts, travelled in connection with her photography work, acquired an investment property using borrowed funds and established a photography business.
The trial judge found that Mr Avery did not explicitly connect those activities to the potentially devastating consequence of exhausting the capital required to meet Ms Bankier’s lifelong needs until October 2008. [47]–[50].
4. Issues and Findings
| Issue | Appellant’s position | Court of Appeal finding | Pinpoint |
|---|---|---|---|
| Scope of duty | Adviser was essentially providing portfolio review services | Relationship required advice about material risks threatening the financial plan | [58]–[65], [75]–[82] |
| Excess withdrawals | Risk of spending capital was obvious to client | Relevant practical consequences were not obvious to a reasonable person in Ms Bankier’s position | [67]–[79] |
| Ongoing advice | No duty to monitor client spending | Duty was not to police expenditure, but to warn of material risks that proposed withdrawals posed to the plan | [75]–[81] |
| Palm Beach property | Property was client’s idea and outside advice scope | Adviser assumed responsibility when asked to assess viability and arranged borrowing | [83]–[94] |
| Photography business | Adviser had warned that business was not “viable” | Warning did not adequately explain that failure could compromise ability to fund essential future needs | [101]–[107] |
| Causation | Client would have proceeded regardless | Trial judge entitled to find she would have heeded an adequate warning | [108]–[112] |
| Contributory negligence | Client caused or contributed to losses | Rejected in the particular circumstances | [115]–[120] |
| Limitation defence | Claims were out of time | Grounds rejected; defence had not been properly litigated below | [121]–[135] |
| Tax gross-up | Trial judge applied excessive gross-up | Appeal succeeded; damages reduced by $36,075.25 | [146]–[154] |
5. Key Legal Principles
Financial advisers must warn about material risks
The Court confirmed that a financial adviser exercising professional skill may owe a duty to warn a client of material risks that the adviser knows, or ought to know, about and that the client does not understand.
A material risk was described as one to which a reasonable person in the client’s position would attach significance if warned of it. [62]–[64].
The consequences of the risk are relevant. A comparatively modest probability may still require a clear warning where the consequences of the risk occurring are serious.
Client sophistication affects the content of the duty
The judgment is particularly significant for how it treats client capability.
Sofronoff P observed:
“a professional adviser must approach the advice given to an inexperienced client in a different way from the approach taken with a sophisticated client” — [65].
An adviser may reasonably leave some matters unstated when advising an experienced client who can be expected to understand them. The same assumption may be unreasonable where the client lacks experience.
The practical implication is that client knowledge is not merely a fact-find field. It influences what must actually be explained and how expressly a risk must be communicated.
The duty was not to control the client’s spending
The Court rejected the appellant’s characterisation of the judgment as imposing a general “watching brief” over clients’ expenditure.
The obligation was more specific. Mr Avery had designed an investment strategy intended to preserve enough capital to meet Ms Bankier’s lifelong needs. When her proposed withdrawals created a material risk that the strategy would fail, he was required to warn her of that risk. [75]–[82].
Sofronoff P explained that the duty concerned:
“the imminent dangers that would be caused by the client’s proposed interference in the adviser’s investment plan” — [77].
This distinction matters. Advisers are not generally personal expenditure controllers. But they cannot ignore client decisions that they know materially undermine the objectives underpinning their advice.
Scope is determined by substance, not service labels
The appellant relied heavily on the description “Portfolio Review Service”.
The Court instead examined what the adviser actually promised and did. Mr Avery described an ongoing relationship, undertook to keep the strategy aligned with Ms Bankier’s needs, advised on further investments and controlled the practical process for releasing funds from the portfolio. [18], [28], [61], [80].
Accordingly, the relationship could not be reduced to the narrow description advanced in the litigation.
For advice practices, scope-of-advice documents remain important, but they must correspond with the service actually delivered.
Client-initiated proposals can still attract an advice duty
Ms Bankier identified the Palm Beach property herself. That did not resolve the duty question.
She asked Mr Avery to assess whether the investment was viable. He or his staff analysed borrowing costs, discussed the transaction and arranged finance. The Court held that, by undertaking that task, he assumed the obligation to use reasonable care and skill. [83]–[94].
A proposal does not become execution-only merely because the client thought of it first.
Warnings must address the real consequence
Mr Avery had told Ms Bankier that her proposed photography business was not viable.
That was insufficient.
The relevant warning was not simply that the business might fail. It was that losses from the business could materially reduce the capital required to fund Ms Bankier’s necessary living and medical expenses over her lifetime. [101]–[107].
Likewise, general comments about avoiding erosion of capital were inadequate where other advice and portfolio reporting continued to reinforce the client’s confidence in her financial position. [113]–[114].
The compliance lesson is that a warning should identify the risk, mechanism and consequence.
6. Damages and Appeal Outcome
At first instance, Martin J entered judgment for Ms Bankier in the amount of $1,139,178.45, which included interest and a tax gross-up. [161].
Most challenges to the damages assessment failed.
The Court rejected attempts to reopen issues concerning the date of loss and alleged post-retainer losses where those matters had not been properly advanced at trial. [136]–[145].
The appellant succeeded on one issue. The trial judge had effectively applied a second tax gross-up without sufficient legal foundation. The respondent bore the onus of establishing entitlement to that additional amount and had not done so.
The damages award was therefore reduced by $36,075.25. [146]–[154].
The appellant’s limited success did not alter the costs outcome. It was ordered to pay Ms Bankier’s costs of both appeals. [180]–[183].
7. Relevance for Licensees, Advisers and Responsible Managers
The decision supports several important operational propositions.
A statement of advice does not necessarily define the entire relationship. Subsequent communications, services and representations about ongoing monitoring can influence the scope of professional obligations.
Client vulnerability affects advice delivery. Age, experience, earning capacity, financial literacy and dependence on invested capital can determine how explicitly risks must be explained.
Advice should connect transactions to objectives. It is insufficient to assess a withdrawal, gearing strategy or business proposal in isolation where the adviser knows that the decision could compromise the client’s overarching financial objective.
Warnings should be outcome-based. “This will require a capital withdrawal” is different from “this withdrawal materially increases the risk that your remaining capital will not fund your future medical and living costs.”
Client-initiated transactions still require care when advice is sought. Advisers should identify whether they are merely executing an instruction or assessing, recommending or facilitating the merits of the proposal.
Contemporaneous file notes matter. Much of the Court’s reconstruction of the advisory relationship relied on emails, statements of advice and Mr Avery’s own file notes.
8. Risk Management & Compliance Recommendations
| Audience | Control Type | Legal Rationale | Risk Indicator | Practical Control |
|---|---|---|---|---|
| Advisers | Preventative | Material-risk duty | Client depends on portfolio for essential lifetime expenses | Record critical objectives and capital-preservation thresholds |
| Advisers | Preventative | Client sophistication affects warning duty | Young or financially inexperienced client | Tailored risk explanation and documented comprehension |
| Advice Governance | Governance | Scope determined by real relationship | “Limited” service with extensive ongoing interaction | Reconcile engagement documents with actual service model |
| Compliance | Detective | Withdrawals may defeat strategy | Repeated capital withdrawals | Trigger review when drawings exceed agreed assumptions |
| Responsible Managers | Governance | Systemic advice-quality risk | Vulnerable-client cohorts | Enhanced supervision standards for vulnerable or inexperienced clients |
| Advisers | Preventative | Client-initiated proposals can become advice | Client asks “is this viable?” | Clarify scope before analysis and document recommendation |
| File Review | Detective | Generic warnings may be ineffective | Boilerplate risk language | Test whether warning states specific financial consequence |
| Advice Practice | Corrective | Changed circumstances alter advice basis | Business venture, borrowing or material spending | Reassess strategy and document whether objectives remain achievable |
9. Governance Significance
HAP2 v Bankier is particularly useful because it avoids imposing an unlimited supervisory obligation on advisers while still requiring meaningful professional intervention.
The Court did not say that an adviser must approve every client expenditure.
It said that where an adviser knows:
- the purpose for which capital must be preserved;
- the client’s limited capacity to replace that capital;
- the client’s lack of financial experience;
- the effect that proposed withdrawals or borrowing may have on the strategy; and
- that the client does not appreciate that effect,
the adviser cannot remain silent or rely on generic statements about budgeting.
The case therefore illustrates the difference between providing information and giving effective professional advice.
An adviser who says that money must be sold from the portfolio has provided information about mechanics. An adviser who explains that continued withdrawals may leave the client unable to pay future medical and living expenses has addressed the material financial risk.
For advice licensees, this distinction should influence file-review methodology. Compliance testing should not merely ask whether a risk warning appears somewhere in the file. It should ask whether the warning addressed the actual risk arising from the client’s circumstances and proposed conduct.
10. Recommended Next Steps
Financial advice practices should consider the following controls:
- Identify critical client dependencies. Clearly record when invested assets must fund long-term living, disability, medical or retirement needs.
- Establish capital-preservation triggers. Where advice depends on maintaining a minimum capital base, define thresholds that require reassessment.
- Review material withdrawals. Require advisers to assess whether withdrawals remain consistent with the financial strategy rather than processing them administratively.
- Strengthen vulnerable-client standards. Require more explicit explanations where clients have limited financial experience or unusually serious consequences from loss.
- Test advice scope against actual conduct. Periodically assess whether ongoing contact has expanded beyond the service described in the original engagement.
- Improve warning documentation. Record the specific risk, its likely mechanism, the potential consequence and the client’s response.
- Control client-initiated investments. Where advisers analyse or facilitate a client’s proposal, clearly document whether advice is being provided and, if so, assess the proposal against the client’s broader objectives.
- Use cumulative-risk reviews. A series of individually manageable withdrawals may collectively undermine a strategy. Monitoring should address cumulative effects.
11. Referenced Cases
ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 — material risks in financial advice and the need to warn clients about investment risk — applied at [63]–[64].
NMFM Property Pty Ltd v Citibank Ltd (No 10) (2000) 107 FCR 270; [2000] FCA 1558 — adviser duty to warn about risks associated with geared investment strategies — applied at [63]–[64].
Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1970) 122 CLR 628 — duty arising from holding oneself out as possessing professional skill and competence — applied at [62], [91].
Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6 — professional advice and contributory negligence principles — considered at [65], [116].
Hawkins v Clayton (1988) 164 CLR 539; [1988] HCA 15 — scope of duty determined by the nature and circumstances of the relationship — cited at [58].
Keeley v Horton [2016] QCA 253 — approach to interest under s 58 of the Civil Proceedings Act 2011 (Qld) — approved at [173]–[177].