Macdonald v Australian Wool Innovation Ltd

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FEDERAL COURT OF AUSTRALIA

Macdonald v Australian Wool Innovation Ltd [2005] FCA 105

CONTRACT – applicants left secure employment after being offered opportunity to engage in research and development venture – respondent subsequently withdrew from arrangement – whether parties had reached concluded agreement – whether agreement reached on all essential terms – whether contract, if any, uncertain – whether contract, if any, repudiated – measure of damages

TRADE PRACTICES – misleading or deceptive conduct in trade or commerce –representations with respect to future matters – respondent corporation bears evidential onus of proof – whether at time representations made, respondent had reasonable grounds for making them – unconscionable conduct in business transactions – matters to be taken into account in determining whether conduct unconscionable – relevance of fact that applicants not under special disability or in position of special disadvantage

Trade Practices Act 1974 (Cth) ss 51AC, 51A, 52, 82 and 87

Pagnan SpA v Feed Products Limited [1987] 2 Lloyd’s Rep 601 at 619 referred to
Storer v Manchester City Council [1974] 1 WLR 1403 at 1408 referred to
Manatee Towing Co v Oceanbulk Maritime SA (The Bay Ridge) [1999] 2 Lloyd’s Rep 227 at 240-1 referred to
Pacific Carriers Limited v BNP Paribas (2004) 208 ALR 213 at [22] referred to
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 211 ALR 101 at [34] referred to
Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-6 discussed
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 350 referred to
Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 334 and 337 referred to
Harvey v Pratt [1965] 1 WLR 1025 discussed
Masters v Cameron (1954) 91 CLR 353 at 360-3 applied
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548 discussed
Sinclair, Scott and Co Ltd v Naughton (1929) 43 CLR 310 at 316-7 and 332 referred to
Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 131 discussed
Seven Cable Television Pty Ltd v Telstra Corporation Ltd (2000) 171 ALR 89 referred to
Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 628 referred to
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436-7 referred to
Thorby v Goldberg (1964) 112 CLR 597 at 607 discussed
G Scammell and Nephew Ltd v H C and J G Ouston [1941] AC 251 at 268 discussed
Ipex Software Services Pty Ltd v Hosking [2000] VSCA 239 at [56] considered
York Air Conditioning and Refrigeration (A/sia.) Pty Ltd v The Commonwealth (1949) 80 CLR 11 at 53 referred to
Branir Pty Ltd v Owston Nominees (No. 2) Pty Ltd (2001) 117 FCR 424 at 525 discussed
The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92 and 99 applied
Sunbird Plaza Pty…

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Details
Case
[2005] FCA 105
Decision Date

CaseChat Overview and Summary

In Macdonald v Australian Wool Innovation Ltd, the applicants, Ian Macdonald and Russell Allan, sought declaratory relief and damages from the respondent, Australian Wool Innovation Ltd (AWI), for breach of contract, misleading and deceptive conduct, and unconscionable conduct. The applicants, both of whom had lengthy employment histories with Amcor, a subsidiary of Amcor Ltd, claimed that they had been promised equity in a new entity, Imaginate Pty Ltd, as part of a collaborative research and development initiative. AWI, on the other hand, denied entering into any binding agreement and asserted that the applicants had left their employment prematurely and at their own risk. The court was tasked with determining whether an enforceable contract existed between the parties and, if so, whether AWI had breached it, engaged in misleading or deceptive conduct, or acted unconscionably.

The court examined the communications between the parties, particularly the email from AWI’s Managing Director, Col Dorber, and the subsequent letter to the applicants, to ascertain the existence and terms of any agreement. The court found that there was no concluded contract as the terms had not been finalised and the applicants had not received formal approval from AWI’s Board. The court also concluded that there was no misleading or deceptive conduct or unconscionable conduct on the part of AWI. The applicants’ claims were dismissed.

The court ordered that by 11 March 2005, the parties file and serve draft orders reflecting the judgment, along with an outline of their submissions regarding costs. The parties were also granted liberty to apply for further orders if necessary. This decision underscored the necessity of formal agreements and the importance of Board approval in the establishment of new business entities.

Orders

Orders of the court

1. On or before 11 March 2005, each party file and serve draft orders giving effect to these reasons for judgment.

2. On or before 11 March 2005, each party file and serve an outline of submissions regarding the matter of costs.

3. The parties be granted liberty to apply.

Background

Background to the litigation

The respondent denies having entered into any concluded agreement as alleged. It claims that the applicants left their employ prematurely, and at their own risk. It denies any liability for breach of contract, or any of the alternative claims made against it. BACKGROUND TO THE APPLICATION On 16 April 2003, Ian Macdonald and Russell Allan both filed applications in this Court claiming declaratory relief and damages for breach of contract, misleading and deceptive conduct, and unconscionable conduct, in relation to their dealings with Australian Wool Innovation Ltd (“AWI”), the respondent. By consent, the proceedings were heard together, and evidence in each treated as evidence in the other. Mr Macdonald is fifty-seven years of age. He has qualifications from RMIT in applied science and post-graduate management. In 1971, he commenced employment in the research department of Amcor Australasia Pty Ltd, a subsidiary of Amcor Ltd (“Amcor”) (then known as Containers Ltd). In 1976, he was appointed Product Manager of the General Line group at Amcor. In 1980, he became Divisional Sales Manager. In 1985, he became Commercial Manager of the Southern Region, and the following year, General Manager of Hoehn Systems, another Amcor business. In 1994, he was appointed Product Manager of Amcor Beverage Cans. In 1997, he took up the position of Metals Technology Manager of Amcor’s Research and Technology (“R&T”) Division, and was also appointed its Business Development Manager. He represented Amcor on the Board of a body known as the Beverage Industry Environment Council (“BIEC”). On 1 October 2002, after more than thirty years’ employment with Amcor, he left the company. However, he has continued to serve as Amcor’s representative on the Board of BIEC. Mr Allan is forty-eight years of age. In 1975-76, he studied electrical engineering at Monash University. He commenced employment with Amcor in 1977 as a Technical Assistant in its Research department. From 1978 to 1982, he enrolled at Swinburne Institute of Technology for a diploma of chemical engineering. From 1979 to 1986, he enrolled for the degree of Bachelor of Electrical Engineering at that same institution. He satisfied the requirements for the degree of Master of Electrical Engineering from Victoria University of Technology, but was never awarded that degree because his thesis could not be put out for peer review on the basis that its contents were commercially sensitive. Prior to his resignation from Amcor in 2002, he was employed as the Secondary Packaging Technology Manager in the R&T Division. He was responsible for four divisions within the company, namely cartons, sacks, paper and corrugated products. He was also responsible for dealing with an external customer, Paperlinx, for which Amcor provided research and development. On 6 September 2002, after having been with the company for approximately twenty-five years, he left Amcor. AWI’s position is both complex and somewhat unusual. On 1 January 2001, pursuant to the Wool Services Privatisation Act 2000 (Cth), Australian Wool Services Limited (“AWS”) replaced the Australian Wool Research and Promotion Organisation, which had been operating since 1993. Two AWS subsidiaries, AWI and the Woolmark Company, were also established. On 30 April 2002, AWI separated from AWS to become a fully independent public company, limited by shares. Under this stage of the privatisation process, all “A” class AWS shares were cancelled in consideration for the issue of new fully paid voting shares in AWI. Those shares entitled holders to exercise voting rights in relation to AWI in proportion to the amount of Wool Levy paid. AWI also receives some funds directly from government.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

WEINBERG J
On 31 July 2002, Mr Dorber emailed Mr Macdonald:“Dear Ian,Thank you for the comprehensive proposal concerning the key issues of OFFM, Pack Opportunities and Supply Logistics. I have formally advised the AWI Board that I am investigating the setting up of an RDI cell, located in Victoria at the Monash University consisting of a group of 3-5 expert providers and operating as an AWI owned entity.The Board has noted in principle the action being taken. It will now be necessary to develop up a formal Board Minute and seek approval at the Board meeting of 16 September 2002, for the establishment of the entity.Between now and then a small AWI team (myself, Phillip Lee, Chief Financial Officer, or Nathan Ly and Dr Paul Swan) will work with you and your team to get the necessary structures, funding model and program objectives in place.I look forward to the implementation of this initiative. I will be in contact with you early next week to set up a formal meeting. I propose at that meeting that an MOU between us be signed, that will allow you and your colleagues to make the necessary decisions to allow you to commence this process.Kind regardsCol DorberManaging Director.” (emphasis added) On 2 August 2002, Dr Swan, who was AWI’s most highly qualified scientific expert in the field, prepared a briefing note to Mr Dorber in which he considered the Imaginate proposal. His conclusion was:“Overall, I am very impressed, and feel that we should get into detailed negotiation with them, and think seriously about what additional resources they may require to facilitate their efforts.” (emphasis added) On 6 August 2002, there was an internal meeting at AWI to discuss the Imaginate proposal. That day, Mr Dorber sent the following letter to the applicants:“Dear ColleaguesRe: Establishment of Imaginate Pty LtdI am pleased to inform you that the Board of Australian Wool Innovation Limited has given in principle approval for the establishment of an AWI owned entity to provide leading edge research and development innovation for the Australian wool industry.It is intended that this entity will be known as “Imaginate Pty Ltd” and that it will be a wholly owned subsidiary of AWI Limited.AWI also proposes that equity in the company will be provided to each of you proportionate to the skills and/or intellectual product and patents you bring to the business.As Managing Director of AWI, I have had a review conducted of the three definitive projects proposed by Messrs Allan and Macdonald and the further initiative proposed by Dr Viviane Buzzi. I have given in principle approval to each of those initiatives and intend that they be conducted under the “Imaginate” banner.It is now necessary to proceed to seek formal AWI Board approval for the establishment of “Imaginate Pty Ltd”. In order that the Board proposal can be finalised and that the logistics concerning establishment and commencement of work can be agreed, I have appointed an AWI management team to progress this issue.…AWI proposes that the solicitors to “Imaginate Pty Ltd” will be Allens Arthur Robinson and that the auditors will be PricewaterhouseCoopers. Both these companies have been involved extensively with AWI in setting up subsidiary businesses and will be able to fast track this matter for us.I look forward to finalising this matter and achieving major change to the Australian wool industry through the conduct and study of the research development, innovation and logistical supply chain review.Yours sincerely,[signed]COL DORBERManaging Director” (emphasis added)

Ratio Decidendi

Legal Principle Established

Established by: WEINBERG J

Full text does not contain this section.