FEDERAL COURT OF AUSTRALIA
Moss v Lowe Hunt & Partners Pty Ltd [2010] FCA 1181
Citation: Andrew Moss v Lowe Hunt & Partners Pty Ltd [2010] FCA 1181 Parties: ANDREW MOSS and PEGASUS STRATEGIC PLANNING PTY LTD v LOWE HUNT & PARTNERS PTY LTD and LOWE SYDNEY PTY LTD File number: NSD 873 of 2008 Judge: KATZMANN J Date of judgment: 1 November 2010 Catchwords: TRADE PRACTICES – misleading or deceptive conduct – representations made by prospective employer to induce consultant to cease operating his own business and enter into contract of employment – consultant made redundant after sixteen months – failure to disclose employer’s financial affairs – whether consultant’s lost opportunity to continue to grow his business an actionable loss – assessment of damages by reference to the hypothetical state of affairs where the consultant continued in business - Trade Practices Act 1974 (Cth), ss 51A, 52, 53B, 82 – Fair Trading Act 1987 (NSW), ss 42, 46 Legislation: Trade Practices Act 1974 (Cth) ss 52, 53B
Fair Trading Act 1987 (NSW) ss 42, 46
Federal Court of Australia Act 1976 (Cth) s 51ACases cited: Bennett v Jones (1977) 2 NSWLR 355 applied
Capital Brake Service Pty Ltd v Meagher [2003] NSWCA 225 cited
Commonwealth of Australia v Mehta (1991) 23 NSWLR 84 cited
Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) ATPR ¶41-550 applied
Concrete Constructions Pty Ltd v Nelson (1990) 169 CLR 594 cited
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 applied
Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58, 62 IPR 184 applied
Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 cited
Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 cited
Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 applied
Equity Access Pty Ltd v Westpac Banking Corporation & Westpac Savings Bank Ltd (1990) ATPR ¶40-994 applied
Fink v Fink (1946) 74 CLR 127 applied
Finucane v New South Wales Egg Corporation (1988) 80 ALR 486 applied
Gillette Australia Pty Ltd v Energizer Australia Pty Ltd, [2002] FCAFC 223, 193 ALR 629 applied
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 applied
Hellyer Drilling Co v MacDonald Hamilton & Co Pty Ltd (1983-84) 41 ALR 177 applied
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 applied
Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) ¶53,193 cited
Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458 cited
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305, 52 NSWLR 705 applied
Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 applied
March v E & M H Stramare Pty Ltd (1990-91) 171 CLR 506 cited
Medlin v State Government Insurance Commission (1994-95) 182 CLR 1 cited
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 cited
New South Wales…
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Details
- Case
- [2010] FCA 1181
- Decision Date
CaseChat Overview and Summary
The case of Moss v Lowe Hunt & Partners Pty Ltd involved Mr Moss, the sole director of Pegasus, who was employed by Lowe Hunt, a company for which he had previously provided services through his company, Pegasus. The primary dispute was whether Lowe Hunt's misleading conduct about its financial position caused Mr Moss to lose the opportunity to earn more income through his consultancy business, Pegasus. The court had to determine if this loss of opportunity constituted compensable economic loss under the Trade Practices Act and the Fair Trading Act.
The key legal issues before the court were whether Lowe Hunt's misleading conduct about its financial stability constituted misleading or deceptive conduct under the Trade Practices Act and the Fair Trading Act, and if so, whether this conduct led to a loss of opportunity for Mr Moss to earn more income through his consultancy, Pegasus. The court had to decide if the loss of such an opportunity amounted to compensable economic loss. The court also needed to assess the credibility of Mr Moss and Mr Colman, as their testimonies were central to resolving the factual disputes.
The court found that Lowe Hunt's misleading conduct about its financial position was indeed misleading or deceptive. Despite Mr Colman's high regard for Mr Moss's skills and his efforts to recruit Mr Moss, the court accepted Mr Moss's evidence as credible and found that the misleading conduct did cause him to lose the opportunity to earn more through his consultancy. The court concluded that the loss of this opportunity amounted to compensable economic loss under the Trade Practices Act and the Fair Trading Act. Consequently, Pegasus was entitled to damages for the lost income and benefits.
The court ordered Lowe Hunt to pay damages to Pegasus for the loss of income and benefits that Mr Moss would have earned had he not been misled about the company's financial position. The exact amount of damages was to be determined based on the lost income and benefits during the relevant period.
The key legal issues before the court were whether Lowe Hunt's misleading conduct about its financial stability constituted misleading or deceptive conduct under the Trade Practices Act and the Fair Trading Act, and if so, whether this conduct led to a loss of opportunity for Mr Moss to earn more income through his consultancy, Pegasus. The court had to decide if the loss of such an opportunity amounted to compensable economic loss. The court also needed to assess the credibility of Mr Moss and Mr Colman, as their testimonies were central to resolving the factual disputes.
The court found that Lowe Hunt's misleading conduct about its financial position was indeed misleading or deceptive. Despite Mr Colman's high regard for Mr Moss's skills and his efforts to recruit Mr Moss, the court accepted Mr Moss's evidence as credible and found that the misleading conduct did cause him to lose the opportunity to earn more through his consultancy. The court concluded that the loss of this opportunity amounted to compensable economic loss under the Trade Practices Act and the Fair Trading Act. Consequently, Pegasus was entitled to damages for the lost income and benefits.
The court ordered Lowe Hunt to pay damages to Pegasus for the loss of income and benefits that Mr Moss would have earned had he not been misled about the company's financial position. The exact amount of damages was to be determined based on the lost income and benefits during the relevant period.
Orders
Orders of the court
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Background
Background to the litigation
The resolution of the remaining factual issues on liability turns on the credit of the two protagonists, Mr Moss and Mr Colman. At all material times Mr Colman was an employee of Lowe Hunt. The effect of s 84(2) of the TPA and s 70(2) of the FTA is that his conduct on behalf of Lowe Hunt is deemed to be conduct in which Lowe Hunt also engaged. Uncontested facts The following recitation of the facts is either admitted or undisputed. Mr Moss was at all relevant times the sole director of Pegasus. The income of Pegasus was derived solely from his labour. In 2004 Mr Moss’s services were first contracted to Lowe Hunt and in the period 1 February 2005 to 13 October 2005 Lowe Hunt became Pegasus’s main client. Mr Colman had a very high regard for Mr Moss’s skills. In December 2004 and a number of times in 2005 he approached him in an effort to persuade him to join the staff of Lowe Hunt as its Strategic Planning Director. Until September 2005 Mr Moss indicated he was not interested but in September he indicated otherwise and discussions then ensued about the terms of a contract of employment. During the week commencing 10 October 2005 Mr Colman told Mr Moss that “several people” were being made redundant. On 13 October 2005 Mr Moss understood that the redundancies affected at least ten people, including some in senior positions. The following day Mr Colman announced the redundancies of 20% of the agency’s staff. Although the evidence is not clear about this, it would seem that Mr Moss started working full-time for Lowe Hunt around 14 October, but certainly after 13 October, 2005. It was not until 9 December 2005, however, that he signed a contract of employment. The contract provided for a remuneration package of $330,000 gross, including compulsory superannuation contributions and four weeks annual leave. It also provided that, while he was employed by Lowe Hunt, Mr Moss was not permitted to undertake any work, “directly or indirectly”, in any capacity for any business which was similar to or competed with Lowe Hunt or its associated companies, without its consent. Clause 7 provided for a right of termination on three months’ notice or summarily for serious and wilful misconduct. Clause 9 was in the following terms:This letter supersedes all previous agreements, arrangements and understandings. No amendment or variation of this agreement is valid or binding on either party unless made in writing and executed by both parties. Notwithstanding this clause, however, Mr Colman had verbally agreed that the deal was for six weeks leave and the case was conducted on the basis that the parties had agreed that Mr Moss was entitled to six weeks annual leave. On 23 February 2007 – within fifteen months of signing the contract – Mr Moss was made redundant. The question of credit Before I turn to the dispute it is necessary to say something about the credibility of the two protagonists. Whilst at times Mr Moss gave discursive answers to questions that might be thought to have warranted briefer responses, he never struck me as evasive. Rather, I formed the strong impression that he was a careful and thoughtful witness, who was trying to give considered and truthful answers to the questions asked of him. That presentation is consistent with the way he said he behaved in the relevant period and lends credence to his claims. Although he was challenged on many key points, his credit was never undermined. He is also supported in material respects by other evidence to which I will come later.
Evidence
Evidence Before The Court
The primary question in Sellars, which the plurality (Mason CJ, Dawson, Toohey and Gaudron JJ) resolved in favour of the respondent, Adelaide Petroleum Ltd, was whether, in the circumstances of that case, loss of opportunity to obtain a commercial advantage or benefit amounts to “loss or damage” within s 82(1). The plurality held (at 348) that, although compensation is payable under s 82 for actual, rather than potential or likely, loss or damage, a loss of an opportunity to acquire a commercial advantage or benefit (assuming it to have value) is a form of economic loss compensable under s 82. Despite their differences, all members of the Court in Sellars agreed that, provided an applicant can establish on the balance of probabilities that it has suffered a loss of a commercial opportunity, it is entitled to damages. In this case that means that Pegasus is entitled to damages if it proves to the requisite standard that the misleading conduct caused it to lose the chance of earning more income and, during the period of employment, more than Mr Moss received in income and benefits from the contract of employment.The evidence relating to damage Mr Moss was last employed in January 2003. A couple of months later he started working as a sole trader. In May 2003 he started trading as Andrew Moss Pty Limited (later as Brandstand Pty Limited) and contracted for work. On 21 December 2004 he incorporated Pegasus and from January 2005 contracted his services through it. His work involved providing strategic advertising, consulting and research services. During the period of his employment with Lowe Hunt he received a remuneration package of $330,000 per year. In the financial year ending 30 June 2007 he earned $348,284 through his employment, comprising salary up to 23 February 2007, the value of accrued leave, redundancy and other termination payments. Between the time of his retrenchment and the end of the 2007 financial year, Pegasus earned only $1,993. Mr Moss resumed full time work for Pegasus in June or July 2007 and he testified that he continues to run the business on a full time basis. After he was retrenched on 23 February 2007 Mr Moss embarked on further studies. They included: §starting a Graduate Certificate of Innovation and Enterprise at the University of Sydney; §upgrading that course to a Master of Commerce degree in March 2008; and§concurrently embarking upon a Graduate Certificate in Applied Science (Psychology of Coaching) in March 2008. In addition, he acted as a project manager on the renovations to his family home in Paddington; and travelled to London to undertake minor maintenance work on his former home and arrange for its sale. His evidence, however, was that he was out of the country for only two weeks. He resumed work for Pegasus on a full-time basis in July 2007 although he did some consulting work for Lowe Hunt on the Football Federation account in April. Mr Moss’s evidence on damage is sparse. In his first affidavit he said, as I have already mentioned, that he would have continued operating his consultancy business if he had been informed that Lowe Hunt had been making losses for some years and was in a “net deficient” position. In his third affidavit he said:I confirm that if I had not received the assurance from Mr Colman on 13 October 2005 about the financial position of the Respondents, I would not have accepted their offer and would have continued my consulting business. Even if the Respondents had ceased giving me and my company their work at that time, that would have enabled me to accept the larger projects from PhD Creative and MercerBell which I had previously indicated in early 2005 that I would not have sufficient capacity to take on....
Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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