Marko and Lauren have worked very hard for the last five years and have built a successful business, M&L Greenherbs Pty Ltd, supplying rare herbs and greens to cafes and restaurants. They are the first in Melbourne to grow Komatsuma, Kang Kong, and Perilla, and demand has been high. Demand from chefs outpaced their ability to supply the herbs. Marko and Lauren have used every square centimetre of their current plot of land to grow the produce. They would like to buy a second plot of land and expand their production. Marko and Lauren are currently 32 and 34 years old respectively.

Marko and Lauren talk to their accountant, Gina, about their business, including their plans to expand to satisfy the increasing demand from chefs for their produce. Gina is a senior accountant at the accounting firm Spellingen, Tourne, and Davros. Marko and Lauren also tell Gina of their wish to work hard for another 5 years and then "sell everything" and "travel the world" and "never work again".

Gina advises Marko and Lauren that they should purchase the second plot of land in their personal names rather than in the name of their business entity, M&L Greenherbs Pty Ltd. Their first plot of land is owned by their business entity, M&L Greenherbs Pty Ltd. Gina advises Marko and Lauren that purchasing the second plot of land in their personal names will have a number of benefits, the most important benefit being that no tax will be payable on any increase in value of the plot of land when they sell it as "individuals do not need to pay capital gains tax".

Marko and Lauren follow Gina's advice. They purchase their second plot of land for $2m in their personal names.

Marko and Lauren work hard for the next five years and very successfully expand their business. One morning, Lauren turns to Marko and says "It's time. We have worked hard enough for long enough and it is time to cash in enjoy ourselves". Marko agrees, and they go through the process of selling their business, M&L Greenherbs Pty Ltd, as a going concern including the first plot of land that is owned by the business.

Their next step is to sell the second plot of land which is owned in their personal names. Because the second plot of land is in an area that has been rezoned for high density residential use, they achieve a very good sale price of $10m for that parcel of land. Marko and Lauren are ecstatic that they have made a tax fee profit of $8m on the second plot of land!

Gina, the accountant, advises Marko and Lauren that they should get some investment advice about how to invest their cash and she tells them that her friend, Hieu, is a well-respected and very successful financial adviser.

Hieu advises Marko and Lauren to invest in Tilinas Ltd, a company that mines rare earth minerals, including yttrium, scandium, and europiun. Hieu says that the shares in Tilinas Ltd are an excellent investment and they are "bound to make a massive capital gain because the shares are currently trading for $0.10 each, but Hieu says "the Tilinas Ltd share price will hit upwards of $10 per share as rare earth minerals are critical to electric batteries for cars and that is the future."

Hieu has not checked the latest developments in electric car manufacturing and battery technology and so he is unaware of the new developments in battery technology mean that far lower quantities of rare earth minerals are required to manufacture new style batteries, and the prediction is that even lower quantities will be required in future.

Marko and Lauren think Hieu is "pretty switched on" and so they follow his advice and invest the $8m in Tilinas Ltd shares based on his advice.

Marko and Luaren watch the share price of Tilinas Pty Ltd. The next end of month comes and goes, however Tilinas Pty Ltd share price dropped and was then trading at $0.09 per share. After three months Markus and Lauren are distraught to see that the share price has fallen even further to $0.03 per share.

Marko and Lauren seek the advice of a major firm of accountants and financial advisers, Alphington and Crosswell, established 1976. They meet with a senior partner of Alphington and Crosswell, Farhad, and he explains to them that:

• The $8m that they made as a profit on the sale of the second plot of land is not a tax free and is in fact taxable as a capital gain, and
• Shares in companies that mine rare earth minerals have been decreasing in value for over 9 nine months because less of the minerals are needed due to new battery technology and that this was widely reported in the media. Farhad tells them "everyone knows the Tilinas Ltd shares are going down in value. You can kiss goodbye to your investment."

Marko and Lauren tell Farhad that Hieu "never told us about the chance the share price of Tilinas Ltd could go down. He only told us the shares "would hit above $10".

Marko and Lauren seek your legal advice on the following questions.

Q1. Is Gina liable in negligence for the tax advice she gave to Marko and Lauren? Include an explanation of what category of negligence applies. Include case authorities. Do not discuss other legal options that Marko and Lauren may have against Gina. 14 MARKS