By GREG ANSLEY IN CANBERRA
Australia's stockbrokers have been jolted by a A$1 million ($1.2 million) award against a broker whose reckless dealings and glib lies stripped an elderly Fijian sugar cane farmer of every cent he had invested.
The ruling by Victorian Supreme Court Justice Tim Smith is considered a landmark decision that opens the gates to similar claims and defines new liabilities for brokers.
These include recommendations on shares and investment strategy made without due consideration to the needs of the client, and to forecasts of expected rates of return.
At the heart of the Victorian case was broker Christopher Martin, of Perth company Hartley Poynton, a man described by a former colleague as a born gambler, a man with a great sense of fun who women flocked around and who loved to make money.
Martin, like many brokers, loved risk, a former Hartley Poynton institutional dealer wrote in The Australian newspaper.
He thrived on the adrenalin of running huge, potentially disastrous, short-term positions.
Justice Smith found that Martin's adrenalin rush had stripped Rahmat Ali of everything he had invested.
He sold 100,000 Telstra shares against instructions, promised returns of 15 to 20 per cent a month and engaged in other reprehensible, unconscionable and deceptive behaviour, the judge said.
The win was as stunning for Ali's lawyers, husband and wife Kimani Adil Boden, 28, and Hina Pasha Adil, 31, as it was for their client.
They had been in business only six months, working out of a cramped Melbourne office without even a photocopier and taking Ali's case on a no-win, no-pay basis.
Justice Smith awarded Ali A$846,818 in compensatory damages and exemplary damages of A$260,000, after finding Martin had manipulated Ali for his own purposes, which he knew were inconsistent with his client's interests and objectives.
Ali's claim against Hartley Poynton alleged that between 1997 and 1999 he gave the company almost A$300,000 to provide for his retirement, and that trading in his accounts reached more than A$39 million on extensive credit.
Trading profits of A$523,000 were wiped out by losses of A$825,000, evaporating Ali's investment within a year and leaving him A$67,000 in debt from brokerage fees.
Justice Smith found Martin had used remarkable persuasive skills to manipulate Ali, and after promising returns of 15 to 20 per cent compound over six to eight months had sold Telstra shares against his client's instructions. He said Martin had consistently deceived his client while engaging in reckless behaviour.
Justice Smith also found that Hartley Poynton's structure had allowed Martin to trade recklessly, and when his actions became known the company had failed to control him, consistently acting contrary to its obligations to act in the interest of its client.
But Justice Smith dismissed Ali's original claim of $A10 million as grossly exaggerated and, finding he was guilty of contributory negligence, ordered him to pay the outstanding brokerage fees from the total compensation.
Outside the court Adil Boden said he hoped the decision would give hope to other people who had suffered similar experiences. "What we're hoping is that mum and dad investors will have the opportunity to get some justice," he said.
By GREG ANSLEY IN CANBERRA