Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) - [2016] FCA 430

FEDERAL COURT OF AUSTRALIA
Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430

File number: VID 230 of 2014

Judge: BROMBERG J

Date of judgment: 27 April 2016

Catchwords:
TRADE PRACTICES – misleading or deceptive conduct – representations made by prospective employer (respondent) to induce applicant to enter into contract of employment – representations as to future matters being that profits and sales in 2013 financial year were likely to meet or exceed profits and sales in 2012 and 2011 financial years, and that it was likely that for twelve months after March 2013 respondent would remain as profitable as previous two years – further representation as to respondent’s lack of knowledge of matters rendering predictions unlikely – whether representations made – whether representations in trade or commerce – consideration of relevance of non-disclosure to establishment of pleaded case – whether reasonable grounds for predictions as to future matters – consideration of whose grounds need be reasonable in the context of representations made by a corporation – whether representation as to state of respondent’s knowledge misleading or deceptive – no reasonable grounds for predictive representations – predictions misleading – representation as to state of respondent’s knowledge not misleading or deceptive – representations relied upon by applicant and induced entry into contract of employment – consideration of correct approach to calculation of damages given multiple hypotheticals

CONTRACTS – whether contract of employment entered into on 8 April 2013 included oral term that respondent would meet cost of applicant’s motor vehicle lease in addition to salary set out in written contract – proper interpretation of clause entitling applicant to 2.5 per cent of net profit of respondent – contract of employment did not include putative oral term – interpretation of net profit clause that applicant entitled to proportion of profit in 2013 financial year corresponding with length of her service in that year

Legislation:
Competition and Consumer Act 2010 (Cth), Sch 2 cll 4, 18, 31, 236

Fair Trading Act 1987 (WA) ss 9, 14

Trade Practices Act 1974 (Cth) ss 52, 53B

Cases cited:
Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570

Aussie Home Security Pty Ltd v Sales Systems Australia Pty Ltd [1999] FCA 1458

Australian Competition & Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114

Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640

Australian Education Union v State of Victoria (Department of Education and Early Childhood Development) [2015] FCA 1196

Barnes v Forty Two International Pty Ltd (2014) 316 ALR 408

Blake v Norris (Hulme J, NSWSC, 5 December 1995, unreported)

Bonham v Iluka Resources Ltd (2015) 107 ACSR 75

Commonwealth of Australia v Ryan [2002] NSWCA 372

Cummings v Lewis (1993) 41 FCR 559

Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471

Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2005) 218 CLR 471

Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82

Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120

Gould v Vaggelas (1984) 157 CLR 215

Hatt v Magro (2007) 34 WAR 256

Holz v Lane [2005] WASCA 40

Jones v Dunkel (1959) 101 CLR 298

Jones v Schiffmann (1971) 124 CLR 303

Keays v J P Morgan Administrative Services Australia Limited [2011] FCA 358

Keays v JP Morgan Administrative Services Australia Ltd (2012) 224 IR 406

La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299

Malec v J C Hutton Proprietary Limited (1990) 169 CLR 638

Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120

Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357

Moss v Lowe Hunt & Partners Pty Ltd [2010] FCA 1181

Murphy v Westpac Banking Corporation [2014] FCA 1104

Norris v Blake (No 2) (1997) 41 NSWLR 49

North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262

North East Equity Pty Ltd v Proud Nominees Pty Ltd (2012) 285 ALR 217

O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455

Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1997) ATPR (Digest) ¶46-179

Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338

Rosebanner Pty Ltd v EnergyAustralia (2009) 223 FLR 406

RT & YE Falls Investments Pty Ltd v the State of New South Wales [2001] NSWSC 1027

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332

SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (2014) 314 ALR 35

SPAR Licensing Pty Ltd v MIS QLD Pty Ltd (No 2) (2012) 298 ALR 69

Sykes v Reserve Bank of Australia (1998) 88 FCR 511

Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165

Walker v Salomon Smith Barney Securities Pty Ltd (2003) 140 IR 433

Westpac Banking Corporation v Wittenberg [2016] FCAFC 33

Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1

Date of hearing: 15, 16, 17, and 18 September 2015

Registry: Victoria

Division: General Division

National Practice Area: Employment and Industrial Relations

Category: Catchwords

Number of paragraphs: 287

Counsel for the Applicant: Mr M A Irving

Solicitor for the Applicant: McDonald Murholme, Barristers and Solicitors

Counsel for the Respondent: Mr M G McKenney

Solicitor for the Respondent: Kliger Partners, Lawyers

ORDERS

VID 230 of 2014

BETWEEN:
SVETLANA RAKIC

Applicant

AND:
JOHNS LYNG INSURANCE BUILDING SOLUTIONS (VICTORIA) PTY LTD AS TRUSTEE FOR THE JOHNS LYNG INSURANCE BUILDING SOLUTIONS (VICTORIA) UNIT TRUST

Respondent

JUDGE:

BROMBERG J

DATE OF ORDER:

27 APRIL 2016

THE COURT ORDERS THAT:
1.On or before 11 May 2016, the Applicant file and serve:
(a)any written submissions concerning costs and interest; and
(b)a minute of proposed orders for the disposition of the application.

2.On or before 18 May 2016, the Respondent file and serve:
(a)any written submissions concerning costs and interest; and
(b)a minute of proposed orders for the disposition of the application.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
BROMBERG J:

Insurance building is a subset of the insurance industry. When insured property is damaged and a claim made on the insurer, the insurer might arrange to have the property repaired and draw upon the insurance builder market. It would seek quotes from insurance builders for the repair of the property. Persons employed by insurance builders would visit the property and prepare estimates for the repair. Quotes or tenders, based on estimates, would be given to the insurer. The insurer would accept one such quote, whereupon the relevant insurance builder would either repair the property or engage subcontractors to do so. The amount by which the quote exceeds the actual cost to the insurance builder of repairing the property is its gross profit on the engagement.
The respondent (Johns Lyng) is a proprietary limited company and the trustee of a unit trust. It is an insurance builder. The applicant (Ms Rakic) has been employed in the insurance industry since 1988. Between around 8 April 2013 and 24 February 2014, Ms Rakic was employed by Johns Lyng as a General Manager. Ms Rakic alleges that, through its conduct between 20 March 2013 and 3 April 2013 (that is, in the course of discussions concerning her potential employment by Johns Lyng), it made certain representations to her concerning its profitability. This was of interest to her because the terms on which she was offered employment included that her remuneration would be partly by way of a percentage of net profit.
The representations, so it was alleged, were misleading or deceptive within the meaning of cll 18 and 31 of the Australian Consumer Law forming Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL). Relying on the representations, Ms Rakic says, she left her job at Pattersons Insurerbuild Pty Ltd (Pattersons) and accepted employment with Johns Lyng. Ms Rakic alleges that, had she not relied upon the representations, she would have continued in her employment at Pattersons, or she would have become employed elsewhere on terms that were as remunerative as her terms at Pattersons, or more so. She seeks compensation under cl 236 of the ACL. I will call that the ACL claim.
Ms Rakic seeks relief in two other forms. The first arises out her contractual entitlement to “2.5% of the Insurance Building Solutions (Victoria) Pty Ltd net profit,” in respect of the 2012/13 financial year (FY13). Ms Rakic’s employment with Johns Lyng commenced fairly late in FY13, but she claims that she is entitled to 2.5 per cent of the net profit for the entire year. Johns Lyng contends that she has no entitlement. Its case was that the clause has the effect that Ms Rakic was entitled to 2.5 per cent of net profit made during her employment, and that during that period Johns Lyng made a loss. I will call this the Debt claim.
The final issue arises from Johns Lyng having paid $20,343.63 in lease payments, during the term of Ms Rakic’s employment, under a novated lease in respect of Ms Rakic’s vehicle. In March 2014, Johns Lyng demanded of Ms Rakic that she pay to it that sum. Ms Rakic declined to do so. She alleges that it was an oral term of her contract of employment with Johns Lyng that it would assume responsibility for payments for the lease of her vehicle. Ms Rakic seeks a declaration that she does not owe Johns Lyng any sum in respect of the novated lease arrangement. This is the Lease issue.
For reasons that follow, I have decided that the ACL claim is established, and that Ms Rakic has suffered $333,422 of compensable loss or damage. I have decided the Debt claim in Ms Rakic’s favour and found that Johns Lyng is indebted to Ms Rakic in the amount of $16,529, and I have decided the Lease issue against Ms Rakic.
THE ACL CLAIM
Clauses 18 and 31 of the ACL provide as follows:
18       Misleading or deceptive conduct
(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2)Nothing in Part 3‑1 (which is about unfair practices) limits by implication subsection (1).
Note:For rules relating to representations as to the country of origin of goods, see Part 5‑3.
31       Misleading conduct relating to employment
A person must not, in relation to employment that is to be, or may be, offered by the person or by another person, engage in conduct that is liable to mislead persons seeking the employment as to:
(a)the availability, nature, terms or conditions of the employment; or
(b)any other matter relating to the employment.
Note:    A pecuniary penalty may be imposed for a contravention of this section.
Clause 236 provides as follows:
236 Actions for damages
(1)If:
(a)a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b)the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
(2)An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.
Ms Rakic relied upon representations as constituting the “conduct” for the purposes of cll 18, 31 and 236. The representations made by Johns Lyng were said to be as follows:
(a) As at mid to late March 2013, [Johns Lyng] was a highly profitable business.
(b)[Johns Lyng’s] profits and sales in the 2013 financial year were likely to meet or exceed its profits and sales in the 2011 and 2012 financial years.
(c)It was probable that after late March 2013, for at least the next 12 months, [Johns Lyng] would remain as profitable as it had been in the previous 2 years.
(d)As at mid to late March 2013 there was no reason of which [Johns Lyng] was aware for [Johns Lyng] not to meet its sales and profitability budgets and forecasts for the 2012 [sic] financial year.
I assume that the reference to the 2012 financial year in (d) was intended to be to FY13. In oral submissions, Ms Rakic confirmed that representation (a) was not pressed.
The ACL claim raises these questions:
(1)Were any of the representations made, and made in trade and commerce?
(2)If yes to (1), was Johns Lyng’s conduct, including the making of any such representations, misleading or deceptive?
(3)If yes to (1) and (2), did Ms Rakic suffer any loss or damage because of Johns Lyng’s conduct?
(4)If yes to (1), (2), and (3), what quantum of loss and damage did Ms Rakic suffer because of Johns Lyng’s conduct?
Were the representations made?
Ms Rakic relied on three events as establishing the making of the representations: a conversation that she had with Mr Scott Didier (a director of Johns Lyng) on 20 March 2013, an email that she received from Mr David Cameron (another director of Johns Lyng) on 21 March 2013, and a failure by Johns Lyng to inform Ms Rakic prior to mid-April 2013 of any deterioration in sales and profits. There was an evidential contest as to the conversation with Mr Didier, but not as to the other two events: the email speaks for itself and, though Johns Lyng denied (under cover of an objection) that it did not inform Ms Rakic of any deterioration in sales and profits, there was nothing in evidence to contradict the proposition that it did not do anything to correct Ms Rakic’s misapprehensions—if any—prior to mid‑April 2013.
Before Ms Rakic’s employment with Pattersons, she was employed by QBE. As at September 2012, when she left for Pattersons, she was QBE’s National Claims Manager. In her capacity as National Claims Manager, she had interactions with representatives of the various insurance builders on QBE’s “panel” of such builders. That included Mr Stuart Patterson of Pattersons, whom she had known for around eight years. It included Ms Christie Lutze of Johns Lyng, whom Ms Rakic had known since around 2005, and with whom she had become friendly.
In August 2012, Ms Rakic was still at QBE but was in discussions with Pattersons concerning employment with Pattersons. In late August 2012, an in-principle agreement was reached and later that month Ms Rakic executed a contract of employment. In October 2012 Ms Rakic commenced employment with Pattersons. Around five months later, in March 2013, Ms Rakic spoke on the telephone with Ms Lutze. There are minor evidential disputes concerning the circumstances of that conversation, including whether it was followed by a lunch, but those are not necessary to resolve. It is uncontroversial that, thereafter, Ms Lutze arranged for Mr Didier to contact Ms Rakic. On 20 March 2013 at around 3:00 pm, Ms Rakic met with Mr Didier at Brunetti café in Carlton, Victoria and they had a conversation of around one hour (Brunetti meeting).
The conversation with Mr Didier
According to Ms Rakic, Mr Didier told her that her base salary would be $115,000, plus standard superannuation. He told her that she would receive 2.5 per cent profit share. Ms Rakic gave evidence that she and Mr Didier discussed that Johns Lyng’s offer was around $100,000 less remunerative in terms of base salary than her Pattersons salary. He said that the “profit share would make up the difference for the gap.” He spoke about equity and directorship, and said that five per cent equity would be offered to her after six months of employment. She had not been exposed to equity before, and did not understand how that would work. Mr Didier said that, once she started with Johns Lyng, she could get assistance from Mr John McPhee, the chief financial officer. Mr Didier said that the equity and profit share system was “quite a successful model,” which had been in place for a number of years and had been very successful for him.
In cross-examination, Ms Rakic said that Mr Didier started the conversation by speaking about Johns Lyng’s insurance builders business and said that it was one of the bigger companies within the Johns Lyng group of companies. He “talked about how successful it [had] been.” She denied that Mr Didier made reference to the profits of Johns Lyng, in the following exchange:
MR McKENNEY:       All right. And indeed, Mr Didier made reference to the profits of the insurance builders at the meeting, didn’t he?
MS RAKIC:No.
MR McKENNEY:       And, in fact, he made reference to the company being in profit?
MS RAKIC:He made mention that the company was very successful.
MR McKENNEY:       All right. You see, Ms Rakic, as I understand it the claim that you’ve made in this court, you’ve indicated in your statement of claim that you were told that insurance builders had made a profit, as I understand it?
MS RAKIC:No. I was told that insurance builders was a successful company.
MR McKENNEY:       …You say he talked about success of the company ..... profits ..... company at the time you accept, don’t you, that it was in profit at the time he spoke to you?
MS RAKIC:I wasn’t aware if the company was in profit. I was aware that Scott said that the company was very successful.
Ms Rakic similarly said, later, that “we never discussed about the company making a profit or not. We only discussed that the company was successful.” It was put to her that Mr Didier had not said that profit share would make up the “gap” between her Pattersons salary and the salary offered by Johns Lyng. Ms Rakic answered as follows:
He said – when I said to him that I was concerned about the hundred thousand dollar difference in salary, he said to me that the – that that gap would be made up with the profit share.
There followed questions concerning whether Ms Rakic understood that receiving money pursuant to a profit share entitlement required that a profit actually be made. This continued for around three pages of transcript, the length of the exchange was caused by two separate but similar issues being addressed, one of which Ms Rakic substantially accepted and the other of which she rejected.
Ms Rakic accepted was that she knew that receipt of monies pursuant to a profit share arrangement required there to be profits. That is an obvious proposition, which Ms Rakic must reasonably have accepted. I think that she did, in the following exchange:
MS RAKIC:There needs to be a profit. Is that what you’re saying?
MR McKENNEY: Yes. That’s all I’m - - -?
MS RAKIC:Yes. Yes.
MR McKENNEY: That’s all contingent on there being a profit?
MS RAKIC:Yes.
Earlier and later, Ms Rakic was somewhat obstinate in refusing to accept similarly-worded propositions. The below is an example:
MR McKENNEY: And as far as a profit share is concerned, you would understand that would depend upon the profit continuing?
MS RAKIC:Well, it was dependent on the profit share.
MR McKENNEY: Yes. But in terms of – in terms of any share of a profit, obviously was contingent upon there being a profit?
MS RAKIC:Well, as Scott explained it to me, the 2.5 per cent is part of profit share. … So when I said to him there’s a – pardon me – there’s a hundred thousand dollar difference, when he said to me the gap would be up by the profit share, I assumed that the profit share would be the equivalent or – and/or near the hundred thousand dollar gap.

So far as Ms Rakic sought, thereby, to suggest that she understood that she had received a guarantee, or that she thought profit could not ever fall, I would not accept that evidence. But, as I explain below, neither of those propositions was essential to Ms Rakic’s case.
I turn to Mr Didier’s evidence. Mr Didier agreed that he met with Ms Rakic on 20 March 2013, and said that his purpose was to see if she would like to join Johns Lyng, in the role of co-General Manager. Mr Didier accepted that Johns Lyng had been having difficulties with the insurer Suncorp for the best part of six months. He accepted that the relationship with Suncorp was not in the healthiest position, but said that it was not in dire straits. He accepted that, on Suncorp’s panel of insurance builders, Johns Lyng was ranked seventeenth out of seventeen—the “worst of the worst position”. He was aware that the board of Johns Lyng had been told that Johns Lyng was likely to be “delisted” by Suncorp (the consequence of which was that it would not get further work from Suncorp unless re-listed). However, Mr Didier characterised that as a “process that … can go on for three and six months” and said that “you’ve got to remove yourself from 17^th position, which we did.”
Mr Didier accepted that he knew, at the time of meeting Ms Rakic, that she had been working with Pattersons for around six months. He knew that Ms Rakic had caused the Suncorp rating for Pattersons to move from the middle of the table to a position near the top—the first one or two. He knew that, for a company the size of Pattersons, that would translate into around a 25 per cent increase in revenue. He accepted that part of the reason he wanted to hire Ms Rakic was so that she would do for Johns Lyng what she had done for Pattersons.
In that context, and importantly, Mr Didier agreed that he wanted to induce Ms Rakic to come to work for Johns Lyng. He agreed that he saw the 20 March meeting as involving the setting out of terms that were going to induce her to come over. He baulked at the suggestion that he knew that the terms he offered were going to have to be substantially the same as Ms Rakic’s Pattersons terms or better. He allowed instead that he could “only put forward what … we can do.” He said, “I didn’t know what [Ms Rakic’s] salary was at Pattersons. I can only put forward our structure and what we do,” and that he was hoping it would be appealing to her.
Mr Didier said that he and Ms Rakic had discussed salary and that the content of the discussion was what the “TFR”—Total Fixed Remuneration—would be:
MR DIDIER:              I said that it was a TFR, which is total fixed remuneration. … It’s a lump sum and you can package it however you like, but the TFR is what we use to budget as a cost to the business.
…
MR McKENNEY:       And what did you say about profit share?
MR DIDIER:              I explained our structure on how profit share works and how profit share – we look at - - -
HIS HONOUR:          Can you tell me what you actually said?
MR DIDIER:              So it would start with a TFR and a profit share; that would be the arrangement.
MR McKENNEY:       Did you discuss the arrangement in any detail with her?
MR DIDIER:              I discussed the structure of how we structure up incoming potential partners.
MR McKENNEY:       Right. And are you able to tell the court what you said about that matter?
MR DIDIER:              Yes. I explained – and it’s a generic explanation that we explain to all incoming partners – that we have a – you become an employee of your business and you also become a potential partner in your business. And how we introduce potential partners is you come in first as a – on a profit share, [we] work together for a period of six months, and after that six month period we review it, and if everyone is getting along well and it’s a good healthy relationship, we then move the person from profit share into a partnership.
MR McKENNEY:       Did you discuss the issue of the profit of Insurance Builders with Ms Rakic?
MR DIDIER:              I discussed the history of Insurance Builders, how it had been a good business and probably the foundation business of our company.
MR McKENNEY:       Right. Did you say anything specific about profits?
MR DIDIER:              Not dollar-wise, no.
…
MR McKENNEY:       Did you discuss or – did you discuss with Ms Rakic, either through you raising the matter or her raising the matter, about the gap in the salary she was earning at Pattersons as opposed to what you would propose at Johns Lyng?
MR DIDIER:              No. Not in dollars. I explained the structure … of how our partnerships work and how people – you become an employee and a business owner.
MR McKENNEY:       Did you make any reference to the applicant being out of pocket?
MR DIDIER:              No.
MR McKENNEY:       Did she – you don’t – did you say any words to that effect at all?
MR DIDIER:              No. I wasn’t – I can’t be specific on dollars. … I can only explain the structure, and that’s what I do.
Mr Didier said that he would have described the Insurance Builders business as the “jewel in the crown,” the “founding business,” and as a “strong and respected business for many years.” In cross-examination, Mr Didier agreed that he offered Ms Rakic a base salary of $115,000. His evidence was that the figure offered was inclusive of superannuation: “… I explained the TFR. … inclusive of superannuation, inclusive of everything. You can take – your TFR is your lump sum and the cost of the business, inclusive of everything. That’s how I explained it.” He said that, when an offer was put to Ms Rakic around a week later, the TFR had been increased by $15,000 to $130,000.
Mr Didier accepted that Ms Rakic had said the Johns Lyng offer was a lot less than what she was currently on, in terms of base salary, and accepted that she may have mentioned that it was $100,000 less. The next answer was important and will be set out in full:
MR IRVING:             And what was going to make up the gap between what she was getting and what the – what you were offering was going to be the profit share, effectively, wasn’t it?
MR DIDIER:              I explained our structure and how that could be potentially – correct.
Mr Didier accepted that he knew Johns Lyng’s then-current profit. He had been at a board meeting three weeks before in which projections were put forward about where profit was going to end up. However, he denied having been at “GO” meetings (the nature of which I will shortly explain), and also denied calculating or explaining to Ms Rakic that if she received a 2.5 per cent profit share it would amount to around $100,000. The evidence continued:
MR IRVING:             Okay. Without breaking down the sums as to what the 2.5 per cent of X is, you did explain to her that the profit – the net profit she was going to get was going to make up the gap that she was going to lose as a result of - - -?
MR DIDIER:              No. I said it – I said it could. If your business is profitable, this could be what you achieve.
Mr Didier accepted that the Johns Lyng business had been very successful for the past few years and that he had told Ms Rakic that. He accepted that it had been profitable—indeed, very profitable—for the past few years, and that he had told Ms Rakic that.
The email from Mr Cameron
Ms Rakic’s evidence was that, at the time of her meeting with Mr Didier, she did not really understand how profit share or equity worked. She said that after the Brunetti meeting she spoke with Mr Cameron and said, “If I could have something to at least try and turn my head around it, I really – I don’t – I’m just not understanding the concept of what was being put forward. And 100K difference in salary is far too much for me to not understand what I’m getting into.”
Mr McPhee, Johns Lyng’s chief financial officer, accepted that he had been asked by Mr Cameron to prepare an email containing information as to the profit of Johns Lyng’s insurance builders business. Mr McPhee suspected, from looking at the email, that Mr Cameron had asked him to give the “figures for the last three years and to note what dividend someone that held a 2.5 per cent share would achieve in that year or would have achieved in that year … .” Mr McPhee sent such an email to Mr Cameron on 21 March 2013 at 1:23 pm. Mr Cameron forwarded the email to Ms Rakic at 1:26 pm on the same day, saying (relevantly), “[t]hese are the actual figures from our CFO.” The content of the forwarded email, excluding formal parts, was as follows (21 March email):

FY11 Sales $35.9million Profit $2.967 2.5% = $74175

FY12 Sales $35.7million Profit $3.672 2.5% = $91800

FY13 forecast Sales $35.8million Profit $4.270 2.5% = $106750

Discussion

The representations, as pressed, were these:
(1)Johns Lyng’s profits and sales in FY13 were likely to meet or exceed its profits and sales in FY11 and FY12; and
(2)It was probable that, after March 2013, for at least the next 12 months, Johns Lyng would remain as profitable as it had been in the previous two years; and
(3)As at mid-to-late March 2013 there was no reason, of which Johns Lyng was aware, for Johns Lyng not to meet its sales and profitability budgets and forecasts for FY13.
What conduct conveys is a question of fact to be determined having regard to all of the contextual circumstances in which something was said or done: Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 at [108] (Greenwood, Logan and Yates JJ).
Representation 1
I find that representation (1) was made. Mr Didier accepted that he told Ms Rakic that Johns Lyng had been very profitable for the past few years. The 21 March email showed substantial profits in FY11 and FY12, and forecasted even greater profit for FY13—around 116 per cent of the FY12 profit. The forecasted figure for sales is nearly identical to the actual figure for the previous two years, and the forecasted figure for profit is substantially greater than the previous two years. The forecast was given nearly three-quarters of the way through the financial year, and had been prepared by Johns Lyng’s CFO. It was forwarded to Ms Rakic by a director of Johns Lyng who referred to the figures as the “actual figures.” Nothing in what Mr Didier said to Ms Rakic, on his own evidence, was inconsistent with the 21 March email. To the contrary, Mr Didier had said that the insurance building business was the “jewel in the crown,” and that it had been very successful and very profitable.
I accept that the email contained a forecast and not a guarantee or warranty, and therefore that it was attended by some doubt. But an important contextual consideration is that the email was sent three-quarters of the way through the financial year. Had it been sent on 1 July 2012 I would be far slower to find that the pleaded representation was conveyed. A forecast at that time would have been understood as being attended with significant doubt. It may not go as high as conveying that it was likely that the forecast would be met.
Here, however, three quarters of the financial year had passed. Predictions as to financial performance three months into the future are far more likely to be accurate than those made twelve months into the future. Any reasonable representee would understand that unexpected events might intervene, but with most of the financial year in the past I consider that a forecast would convey that the stipulated outcome was likely.
Also relevant is that both Ms Rakic and Johns Lyng knew, when the 21 March email was sent, that Ms Rakic was seeking reassurance concerning the difference between her remuneration at Pattersons and what was offered by Johns Lyng. A forecast of profit, in that circumstance, accompanied by a figure equalling 2.5 per cent of that profit, being the percentage offered to Ms Rakic, would reasonably be understood as intended to provide such reassurance. If the email did not convey the FY13 prediction as being a likelihood, it would not have been of any real reassurance to Ms Rakic. There would have been little point in sending it.
Ms Rakic pleaded particular statements said to have been made by Mr Didier in the course of the Brunetti meeting. It seems to me that Mr Didier’s own evidence, to which I have referred above, and leaving aside the contested statements, is sufficient to establish that representation (1) was made. Contested statements included (1) that if Ms Rakic accepted the position with Johns Lyng she would not be out of pocket, (2) that after six months of employment with Johns Lyng she would be offered 5 per cent equity in Johns Lyng, (3) that the equity system had been very successful for a number of years, and (4) that directors of Johns Lyng received significant dividends. Ms Rakic’s evidence did not support the latter two statements, and I do not find that they were made. The second statement is supported by Mr Didier’s evidence and Ms Rakic’s and I would find that it was made.
Probably the most-significant contest was as to whether Mr Didier told Ms Rakic she would not be “out of pocket”. Ms Rakic’s evidence was that when she mentioned to Mr Didier the difference in salary, he “said to [her] that the – that that gap would be made up with the profit share.” Mr Didier denied saying anything about Ms Rakic not being “out of pocket” but accepted in cross examination (in the passage set out under [25]) that he told Ms Rakic that profit share would potentially make up the gap between her salary at Pattersons and the Johns Lyng offer.
It is not necessary to resolve that dispute. Representation (1) was made by the combination of what Mr Didier uncontroversially did say in combination with the 21 March email. Even if, as Mr Didier said, he said only words to the effect of “the gap between your Pattersons salary and what Johns Lyng is offering could potentially be made up by your profit share,” I think a reasonable person would understand that, in the light of the subsequent 21 March email and statements concerning Johns Lyng’s profitability, as conveying a likelihood of Johns Lyng maintaining profitability over at least the period covered by the forecast.
I am satisfied that Johns Lyng’s conduct conveyed the pleaded representation, and I so find.
Representation 3
With greater hesitation, I find that representation (3) was conveyed by Johns Lyng’s conduct, but not precisely as pleaded. There was no evidence that words to the effect of representation (3) were said. However, representations can be made by implication, including in the archetypal case whereby “[a] statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or by implication) that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, that there was basis for that state of mind”: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88 (Bowen CJ, Lockhart and Fitzgerald JJ).
An express representation, “X is likely,” ordinarily would carry with it the implied representation, “I believe that X is likely.” That is in substance not dissimilar to a representation to the effect, “I do not know of any facts that cause me to believe that X is otherwise than likely”: if the representor did know of facts that led him or her to believe that X was otherwise than likely, it would no longer be correct to say that he or she believed that X was likely.
Three matters require notice in respect of representation (3). The first is that it is expressed in terms of there being “no reason … for Johns Lyng not to meet etc.” That might be read as alleging not a statement of belief in the likelihood of a future event, but instead of belief as to the certainty of that event. I would not accept that Johns Lyng’s conduct conveyed that meaning. Equally, I do not think that Ms Rakic intended that meaning. More likely is that Ms Rakic intended to plead something like an implied negative of representation (1): “As at mid-to-late March 2013 there was no reason, of which Johns Lyng was aware, why it was otherwise than likely that Johns Lyng would meet its sales and profitability budgets and forecasts for FY13.”
The second is that, unlike the other pleaded representations, pleaded representation (3) refers to budgets in addition to forecasts. There is nothing in the evidence to suggest that anything was said to Ms Rakic about budgets, or that she had any idea what the budgets were. I do not accept that any representation concerning budgets was made.
The third is that is that representation (3) relates purely to Johns Lyng’s state of mind as at the time of making the representation, rather than (as in the case of the other two representations) whether there were reasonable grounds for the representation. Assuming the representation was made, the issue would be whether Johns Lyng had subjective knowledge of matters that it knew (again subjectively) made it unlikely that its sales and profit forecasts for FY13 would be met.
This issue again turns mainly on the content of the 21 March email, though Mr Didier’s statements in the Brunetti meeting are relevant. For the same reasons as given above at [32]–[33], it is important that the 21 March email was sent with only three months remaining in the financial year. A reasonable representee would understand that unexpected events might intervene in the final months, but with most of the financial year in the past, a forecast would convey that the representor had a positive belief in the likelihood of the predicted result. Here, representation (3) was conveyed by the making of positive statements as to FY13 sales and profit forecasts in the 21 March email, in combination with Mr Didier’s statements as to the success of the Johns Lyng business and the lack of any qualification as to the accuracy of the FY13 forecasts (beyond, of course, the qualification that they were forecasts and not guarantees or warranties).
By Mr Didier’s own evidence, he was by the Brunetti meeting hoping to induce Ms Rakic to take up employment with Johns Lyng, and he knew that a potential sticking-point was that Johns Lyng was offering less by way of salary. Ms Rakic had told Mr Didier that she was concerned about the gap between salaries. He said, I consider with a view to reassuring Ms Rakic or assuaging her concerns, “If your business is profitable, this could be what you achieve.” He praised the profitability and solidity of the business. She thereafter received an email from another director, Mr Cameron, containing a forecast that that the business would, in fact, be profitable.
It is natural, in those circumstances, for a person in Ms Rakic’s position to take Johns Lyng to be conveying that it is not aware of any matters that would render the forecasted result as otherwise than likely. It would be unusual for a person who makes a prediction without qualification to be understood as having grounds for believing the contrary to be true or likely.
I am persuaded that representation (3) was made.
Representation 2
In two ways, representation (2) was the crux of Ms Rakic’s case. First, and simply, it was her focus in terms of evidence and submissions. Second, because of the way I have decided the issues, it assumes critical importance. I hold below that representations (1) and (2) were misleading, but that representation (3) was not. If representation (1) was the only representation that I found was made, I doubt that I would have held that Ms Rakic relied upon that representation in leaving her Pattersons job and taking up employment with Johns Lyng. I think I would have been unpersuaded by a submission that Ms Rakic left Pattersons on the basis of a representation extending only a few months into the future (as representation (1) did). Representation (2) extended twelve months forward, and, if made and if misleading or deceptive, would constitute a much firmer platform for a submission that Ms Rakic did rely upon the representations made to her in leaving her Pattersons job and taking up employment with Johns Lyng.

I find that representation (2) was conveyed. Ms Rakic was given a forecast that covered the next three months and that showed an increase of profits as compared with FY11 and FY12. As I have found, that implied that Johns Lyng had no reason to believe that it was otherwise than likely that its forecast would be met. Mr Didier described Johns Lyng as the “foundation business of [the] company,” the “jewel in the crown business,” the “founding business,” and a “very strong and respected business for many years.” He told Ms Rakic that Johns Lyng had been very successful and profitable for the past few years.
The context of those statements included, as Mr Didier agreed, that the purpose of the meeting was to induce Ms Rakic to come over to Johns Lyng. Ms Rakic would have understood that to have been Mr Didier’s purpose, as would a reasonable person in the circumstances. While I would accept that Mr Didier’s pitch may have involved inducements beyond remunerative ones (perhaps concerning corporate culture, or more-fulfilling work, etc.), the Brunetti conversation was concerned to a substantial degree with remuneration. Mr Didier accepted that Ms Rakic raised the issue of the large difference between her Pattersons salary and what Johns Lyng was offering in terms of salary. The issue of profit share was discussed. An email followed in which figures for a 2.5 per cent share of profit—being the percentage offered to Ms Rakic—were provided for the previous two years and were forecasted for FY13. What is more, the email showed a strongly-positive trend in profits: from $2.967 million in FY11, to $3.672 million in FY12, to a forecast of $4.270 million in FY13.
A reasonable person would have understood, and it appears that Johns Lyng did in fact understand, that Ms Rakic was concerned to ensure that she would not be worse off (or at least not substantially worse off) if she were to accept employment with Johns Lyng. It would have been abundantly clear that Ms Rakic was concerned with the issue of whether employment with Johns Lyng would be more or less remunerative than employment with Pattersons. I think it was also apparent that, unless Ms Rakic was given some comfort, Johns Lyng’s attempt to induce her to take up employment was likely to be ineffective.
In that context, statements extolling the virtues of the business and magnifying its solidity and strength, its profits and success, cannot have been understood by a reasonable person otherwise than as suggesting that those conditions were likely to continue into the foreseeable future. Else, why would Mr Didier say them? Why would Ms Rakic care? The effect of those statements would, of course, have been underpinned and strengthened by the email showing (amongst other things) a strong positive trend in profits and a forecast of the continuance of that trend.
I accept that Mr Didier did not guarantee, and would not have been understood to have guaranteed, the future success of the business. I also accept that Ms Rakic was not an unsophisticated representee. Quite the reverse: her professional success entails that she must have had significant commercial aptitude. She would have known that success cannot be guaranteed. However, she (and any reasonable person) would also have known that predictions can be and often are made as to the future prospects of a business, and would have assumed that Johns Lyng’s directors and CFO were in a good position to make such predictions.
I accept that Johns Lyng’s conduct (through Mr Didier’s statements and the 21 March email) did convey a prediction that it was likely that the profits Johns Lyng had recorded in FY11 and FY12 would continue for the reasonably foreseeable future. I accept that the “reasonably foreseeable future” extended twelve months from the relevant conduct in March 2013, and thus that representation (2) was made.
The issue of non-disclosure
In closing submissions, Counsel for Johns Lyng took me to cases standing broadly for the principle that in arm’s-length negotiations parties are not under a duty of disclosure. I think that he did so labouring under a misapprehension as to how Ms Rakic advanced her case. The authorities to which I was referred would have been relevant if Ms Rakic had advanced silence or non-disclosure as being misleading in its own right. In truth, however, she advanced silence as an element of conduct said collectively to have constituted a representation. The following passage from Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357 at [5] (French CJ and Kiefel J) exposes the difference (emphasis added):
The cause of action for contravention of statutory prohibitions against conduct in trade or commerce that is misleading or deceptive or is likely to mislead or deceive has become a staple of civil litigation in Australian courts at all levels. Its frequent invocation, in cases to which it is applicable, reflects its simplicity relative to the torts of negligence, deceit and passing off. Its pleading, however, requires consideration of the words of the relevant statute and their judicial exposition since the cause of action first entered Australian law in 1974. It requires a clear identification of the conduct said to be misleading or deceptive. Where silence or non-disclosure is relied upon, the pleading should identify whether it is alleged of itself to be, in the circumstances of the case, misleading or deceptive conduct or whether it is an element of conduct, including other acts or omissions, said to be misleading or deceptive.
This case is pleaded such that what is said to be misleading is not silence, but conduct being the making of representations (see [12]–[15] of Ms Rakic’s amended statement of claim). Silence is pleaded not as being itself misleading but as a fact going to establishing that positive representations were made (see [6(c)] and [11]). It seems to me that, by [6(c)], Ms Rakic pleads nothing more than that there was no qualification or correction of anything conveyed by the making of statements by Mr Didier (orally) and by Mr Cameron (by email). The lack of subsequent qualification or correction is a circumstance to be taken into account in assessing whether the representations pleaded at [11] were made. I have found that they were made, by the statements of Mr Didier and in the 21 March email, in context. The fact of silence thereafter does not either strengthen or weaken the allegation that the representations were made.
Were the representations in trade and commerce?
Johns Lyng denied that any of its conduct was in trade or commerce. Though, it made no submissions in relation to that issue and it seems to me that the point was not really in contest. Johns Lyng further denied the allegation that its conduct was in relation to employment to be offered to Ms Rakic (which seems to go to cl 31 of the ACL). Johns Lyng particularised the latter denial as follows:
The meeting of 20 March 2013 between [Mr Didier] and [Ms Rakic] was exploratory in nature to ascertain the possibility of [Ms Rakic] working for [Johns Lyng] and whether this suited [Johns Lyng] and [Ms Rakic]. It did not involve a detailed discussion of [Johns Lyng’s] financials. The contact between [Mr Didier] and [Ms Rakic] had been arranged through [Ms Lutze], who at all material times was the Group Director, Business Development for New South Wales for [Johns Lyng].
As to the trade or commerce point, in closing submissions counsel for Ms Rakic referred me to Walker v Salomon Smith Barney Securities Pty Ltd (2003) 140 IR 433. Therein, Kenny J summarised (from [174]–[185]) the authorities dealing with whether conduct in relation to employment was in trade or commerce. At [185], after consideration of the authorities, her Honour concluded that misleading or deceptive conduct in the course of negotiations for employment may support a cause of action under s 52 of the Trade Practices Act 1974 (Cth). I am not aware of any reason why the same principle would not apply to cl 18 of the ACL.
As to the “conduct in relation to employment” point, Johns Lyng’s particulars are not supported by the evidence. Mr Didier accepted that his purpose was to induce Ms Rakic to accept a job with Johns Lyng. He had a specific reason to do so, namely, Johns Lyng’s travails with Suncorp. The purpose of the meeting was the setting out of terms that Mr Didier hoped would induce Ms Rakic to accept employment. There was discussion of those terms. An offer was put. An email followed the next day providing further information relevant to the offer. A letter was sent two days later “confirming [Johns Lyng’s] offer” (emphasis added). I hold below that the representations induced Ms Rakic into the employment. I find that the meeting between Ms Rakic and Mr Didier was part of the course of negotiation of a contract of employment, and was in relation to employment that was to be, or may have been, offered by Johns Lyng.
After judgment was reserved, a Full Court of this Court delivered judgment in Westpac Banking Corporation v Wittenberg [2016] FCAFC 33. Wittenberg concerned claims arising out of the termination of employment and redundancies following the merger of two banks. One of the claims was that certain representations made to extant employees were misleading or deceptive within the meaning of s 52 of the Trade Practices Act 1974 (Cth). The primary judge accepted the bank’s submission that no loss had been suffered by the relevant employees (Murphy v Westpac Banking Corporation [2014] FCA 1104 at [899] (Griffiths J). His Honour also held that s 52 did not provide a cause of action because the representations, made as they were to extant employees, were not in trade or commerce (at [903]–[905]).
On appeal Buchanan J agreed with the primary judge’s conclusions that the employees had failed to prove loss (Wittenberg at [197]) and that s 52 did not, on those facts, provide a cause of action (at [196]). After noting that it was not necessary to do so, his Honour further expressed a view that “s 53B of the TP Act did all the work that was necessary with respect to pre-employment negotiations and … the more limited view of the reach of s 52 was the correct one” (at [195]). McKerracher J relevantly agreed with Buchanan J. White J preferred not to consider the question whether “an employer’s statements made to a prospective employee in relation to contemplated employment, or to an existing employee with a view to retaining the services of that employee,” may be in trade or commerce. His Honour observed (at [347]):
I would not wish presently to preclude the possibility that an employer’s statements of those kinds may be characterised differently from statements made by an employer in the context of an existing employment relationship concerning the place, manner or circumstances of an employee’s work, which are generally thought not to have a commercial character. It may also be that misleading or deceptive statements to prospective or existing employees about future employment are analogous to misleading or deceptive statements to prospective or existing suppliers or goods or services about future supply arrangements. Conduct of the latter kind is commonly regarded as having a trading or commercial character.
With respect to the obiter views expressed in Wittenberg, it seems to me that I should follow the judgment of Kenny J in Walker. Her Honour’s holding that representations in pre-employment negotiations were capable of sustaining a s 52 action is directly on point and forms part of the ratio of the case. I echo the reservations of White J in Wittenberg.
If, on the other hand, cl 18 does not apply to pre-employment negotiations, then there is authority for the proposition that the deeming effect of cl 4 operates for cl 31 as well as for cl 18: Keays v J P Morgan Administrative Services Australia Limited [2011] FCA 358 at [79] (Buchanan J). His Honour’s approach was not disturbed on appeal (Keays v JP Morgan Administrative Services Australia Ltd (2012) 224 IR 406 (Gray, North and Besanko JJ)). And, in Holz v Lane [2005] WASCA 40, it was accepted by the parties that a comparable deeming provision in the state law (Fair Trading Act 1987 (WA) s 9) applied to the equivalent of cl 31 (s 14 of the Western Australian law), and Murray J (with whom Templeman and Miller JJ agreed) said at [12] that the parties were right to accept the application of s 9 to s 14. It follows that, if I were to hold that reasonable grounds were lacking for the making of representations (1) and (2), then those representations would by force of cl 4 have been “liable to mislead” for the purposes of cl 31, which does not have a “trade or commerce” limitation.
In short, if pre-employment negotiations are in “trade or commerce”, then any representations made by Johns Lyng in such negotiations (as were the subject representations), and made without reasonable grounds, contravene cl 18 (by force of cl 4). Or, if representations were made in relation to employment that was to be, or may have been, offered by Johns Lyng (as were the subject representations), then any representations made without reasonable grounds contravene cl 31 (again by force of cl 4). Representations (1) and (2), if made without reasonable grounds, would contravene cl 18, cl 31, or both. The same liability to damages would arise in either case.
Were the representations misleading or deceptive?
The following is an extract from principles set out in Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [10] (Gordon J) (citations removed):
1.A contravention of s 52(1) of the TPA is established by “conduct” which is misleading or deceptive or likely to mislead or deceive. The “conduct”, in the circumstances, must lead, or be capable of leading, a person into error and the error or misconception must result from “conduct” of the corporation and not from other circumstances for which the corporation is not responsible. “Conduct” is likely to mislead or deceive if there is a “real or not remote chance or possibility regardless of whether it is less or more than fifty per cent”.
2.Section 52(1) is concerned with the effect or likely effect of “conduct” upon the minds of that person or those persons in relation to whom the question of whether the “conduct” is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself. Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests. Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context.
3.“Conduct” can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive.
…
5.Precisely the same principles control the operation of s 52(1) to statements involving the state of mind of the maker when the statement was made (e.g. promises, predictions and opinions). A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or impliedly) that the maker of the statement had a particular state of mind when the statement was made and, commonly, that there was a basis for that state of mind.
6.A statement of opinion will not be misleading or deceptive or likely to mislead or deceive merely because it turns out to be incorrect, misinforms or is likely to do so. An incorrect opinion does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any or any adequate foundation. An expression of an opinion which is identifiable as an expression of opinion conveys no more than that the opinion is held and perhaps that there is a basis for the opinion. If that is so, an expression of opinion however erroneous misrepresents nothing.
7.However, an opinion may convey that there is a basis for it, that it is honestly held and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise. If the evidence shows that the opinion was not held or that it lacked any or any adequate foundation, particularly if the opinion was expressed as an expert, a statement of opinion may contravene s 52 of the TPA.
That statement was recently quoted with approval in Australian Competition & Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114 at [179] (Gilmour, McKerracher and Gleeson JJ).
Johns Lyng made three representations. First, that its profits and sales in FY13 were likely to meet or exceed FY11 and FY12 profits and sales. Ms Rakic said that this representation was misleading or deceptive or likely to mislead or deceive (which I will refer to compendiously as “misleading”) in that Johns Lyng knew that its profits and sales in FY13 were not, in fact, likely to meet or exceed FY11 and FY12 profits and sales, because Johns Lyng did not have reasonable grounds for the representation, or both.
Second, that it was probable that, after March 2013 and for at least the next twelve months, Johns Lyng would remain as profitable as it had been in the previous two years. Ms Rakic said that this representation was misleading in that Johns Lyng knew that it would not remain as profitable as it had been, because it did not have reasonable grounds for the representation, or both.
Third, that, as at mid-to-late March 2013 there was no reason, of which Johns Lyng was aware, for Johns Lyng not to meet its sales and profitability forecasts for FY13. Ms Rakic said that this representation was misleading in that Johns Lyng knew that “there were reasons for [Johns Lyng] not to meet its sales and profitability … forecasts for [FY13],” because it did not have reasonable grounds for the representation, or both.
In each case, the pleadings dealing with how representations were misleading go beyond the way in which the representations are themselves pleaded. The first and second representations concerned the likelihood of the occurrence of a future event. Ms Rakic did not plead that the predictive representations implied further representations as to contemporaneous belief in the predictions. Accordingly, in relation to representations (1) and (2), a presence or absence of contemporaneous belief is irrelevant. The only question in relation to representations (1) or (2) is whether there were reasonable grounds for their making within the meaning of cl 4(2) of the ACL.
Conversely, as I noted above, representation (3) raises only the state of Johns Lyng’s mind at the time of making the representation. It does not raise any issue concerning reasonable grounds. The allegation that the representation was misleading or deceptive because Johns Lyng lacked reasonable grounds for it goes beyond the scope of the representation, and the issue of reasonable grounds is, in relation to this representation, irrelevant.
Pleading issues of this kind have been discussed in, for example, Aussie Home Security Pty Ltd v Sales Systems Australia Pty Ltd [1999] FCA 1458 at [19] (Katz J), Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1997) ATPR (Digest) ¶46-179 at 54,431–2 (Goldberg J), and Hatt v Magro (2007) 34 WAR 256 at [33] (Steytler P, with whom Wheeler and Pullin JJA agreed).
Summarising, in relation to representations (1) and (2), the issue is whether there were reasonable grounds for the representations. In relation to representation (3), the issue is whether Johns Lyng was aware of matters that it knew made it otherwise than likely that it would meet its FY13 forecasts.
Representation 1—reasonable grounds
Section 4 of the ACL is as follows:
4        Misleading representations with respect to future matters
(1)       If:
(a)a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b)the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
(2)For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a)       a party to the proceeding; or
(b)       any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
(3)       To avoid doubt, subsection (2) does not:
(a)have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or
(b)have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.
(4)Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:
(a)       a misleading representation; or
(b)       a representation that is misleading in a material particular; or
(c)       conduct that is misleading or is likely or liable to mislead;
and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

The effect of subsection (2) is to cast an evidential burden on the respondent to adduce evidence of reasonable grounds for making the representation, failing which the deeming effect is engaged. Once evidence is adduced by a respondent in discharge of the evidential burden, the applicant must satisfy the dispositive burden of showing that the respondent did not have reasonable grounds for making the representation: North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 at [35] (Sundberg, Siopis and Greenwood JJ); North East Equity Pty Ltd v Proud Nominees Pty Ltd (2012) 285 ALR 217 at [30] (Mansfield, Greenwood and Barker JJ); see also Bonham v Iluka Resources Ltd (2015) 107 ACSR 75 at [88] (Kerr J), SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (2014) 314 ALR 35 at [72]–[74] (Foster J), and Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1 at [954] (Rares J).
Heerey J analysed the issue thus in Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513 (see also Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158 at [189] per Gleeson JA, with whom Ward and Emmett JJA agreed):
If there was a representation as to a future matter, s 51A requires the representor to show:
Ÿsome facts or circumstances
Ÿexisting at the time of the representation
Ÿon which the representor in fact relied
Ÿwhich are objectively reasonable and
Ÿwhich support the representation made.
Johns Lyng’s denial of a lack of reasonable grounds provided the following particular:
The reasonable grounds referred to above are John McPhee’s reliance on the Go Meeting material prepared for the 20 February 2013 Go Meeting by managers of the Respondent and the spreadsheet headed Sales/Profit Forecast FY13, January 2013, prepared by John McPhee in February 2013.
It is necessary to divert into the question of whose knowledge is relevant, and whose grounds need be reasonable.
Whose grounds need be reasonable?
In some of its submissions, Johns Lyng’s submissions proceeded effectively in these terms: Mr Didier did not make any representations at the Brunetti meeting; such representations as made were made by the 21 March email; the content of that email was prepared by Mr McPhee; it was reasonable for Mr Cameron to accept information that came from Mr McPhee, Johns Lyng’s CFO; Mr McPhee took the information in his email from forecasts that had been prepared by Johns Lyng’s forecasters, in consultation with Mr McPhee; it was reasonable for Mr McPhee to take his information from the forecasts; therefore there were reasonable grounds for the statements in the 21 March email.
This assumes that the question is whether Mr McPhee or Mr Cameron had reasonable grounds for making any representations that they made. That seems to me to involve a misunderstanding of Ms Rakic’s case. The only respondent to the action is Johns Lyng. The pleading is that Johns Lyng made representations, and that those representations were made by Johns Lyng’s conduct—conduct that was necessarily through its human agents, but was nevertheless Johns Lyng’s conduct. It was not alleged, for example, that Mr Didier had made representations at the Brunetti meeting; it was alleged that Johns Lyng had made representations including by the statements made by Mr Didier at the Brunetti meeting.
For the purposes of cl 18(1) of the ACL, the “person” who is alleged to have engaged in misleading or deceptive conduct is Johns Lyng. For cl 4, the “person” who made a representation with respect to a future matter is Johns Lyng. If Johns Lyng did not have reasonable grounds for making the representation, it is taken to be misleading. The relevant question is whether Johns Lyng had reasonable grounds for making the representations that it made.
The matter of personal as against corporate knowledge has arisen on a few occasions in decided cases. The clearest example is in RT & YE Falls Investments Pty Ltd v the State of New South Wales [2001] NSWSC 1027 at [115]–[117] per Palmer J:
[115]Because of my finding in the previous paragraph, Dr Salmon’s representations on behalf of NSWAg are to be taken as misleading or likely to mislead unless NSWAg discharges its onus of establishing that it had reasonable grounds for making the representations: s.41(2) FTA.
[116]Clearly enough, Dr Salmon himself had reasonable grounds for making the representations as at 28 August. The evidence is uncontradicted that he made those representations honestly and on the basis of what he had been told by his superior, Mr Roe. Mr Roe was the person properly authorised to convey to Dr Salmon the Department’s attitude to the Plaintiff’s proposal.
[117]But Dr Salmon was not NSWAg. He made the representations on behalf of NSWAg, as NSWAg concedes. He was its mouthpiece as far as the Plaintiff was concerned. NSWAg was, in law, making the representations and it must show that it, not Dr Salmon, had reasonable grounds for the representations which Dr Salmon made.
It was assumed by both parties, I think, or in any event was not in issue, that corporate knowledge not available to the natural person through whom a corporation acts can provide reasonable grounds for a representation: c.f. Rosebanner Pty Ltd v EnergyAustralia (2009) 223 FLR 406 at [435] (Ward J); Doppstadt at [191]–[192] (Gleeson JA, with whom Ward and Emmett JJA agreed); Cummings v Lewis (1993) 41 FCR 559 at 566 (Sheppard and Neave JJ).
I reject Johns Lyng’s submission that it escapes liability if it shows that Mr Cameron acted reasonably in passing on information that he had been given by his CFO, or that Mr McPhee acted reasonably in drawing information from the forecasts. The question is whether there was an objectively reasonable basis for the subject matter of the representations: whether there were facts within Johns Lyng’s knowledge that were objectively reasonable and supported the prediction that profits in FY13 would meet or exceed those in FY11 and FY12 and the prediction that Johns Lyng would remain for the next twelve months as profitable as it had been for the previous two years. Ultimately, counsel for Johns Lyng seemed to accept that proposition.
Johns Lyng’s case as to reasonable grounds
The figures conveyed to Ms Rakic by the 21 March email came from various sources. The figures for profits for FY11 and FY12 came from what Mr McPhee referred to as the “management report profit and loss” statements (P&Ls). The P&L for the month ending 30 June 2011 contained year-to-date figures in various categories, including profits and sales. The year-to-date figure for sales was just over $35.8 million. The figure Mr McPhee gave for sales in the 21 March email was $35.9 million, but it was not suggested that anything turns on that difference. The figure for net income was $2,966,934, or $2.967 million, aligning with the 21 March email. Year-to-date figures for sales and profit in the month ending 30 June 2012 were $35.7 million and $3.672 million respectively, aligning with the 21 March email.
Taking the comparable figures from the 30 June 2013 P&L, sales were $32,752,956 and profit was $2,875,112. Clearly, the prediction that profit and sales for FY13 would meet or exceed FY11 and FY12 figures was not borne out. Sales were around 91 per cent of the forecast of $35.8 million, and profits around 67.3 per cent of the estimate of $4.27 million.
Mr McPhee said he took the FY13 forecast figures from “GO meeting” reports. GO (group operational) meetings were monthly management meetings of each of the companies in the Johns Lyng group. Johns Lyng insurance builders was one such company. Mr McPhee’s evidence as to his involvement in GO meetings included the following:
So we go through a process of what we call accounting close off in accordance with our calendar. Once we’ve closed off accounts for a particular month, my staff prepare these along with some other financial reports that we give to the managers of each of our individual companies. They include the profit and loss statement, the balance sheet and some other cash management tools that we give them. And they are given to the managers of each of the business units prior to our monthly management meeting by email from either myself or my financial controller.
…
In terms of preparation of material, I think at this point in time I was probably preparing these, either myself or my financial controller, Rob. So I would be involved in the preparation of all of the numbers on this, which includes reviewing every project that we have on at the time and making sure that these are accurate and make sense and then distributing them to the managers. At the GO meetings, I sit and we have about – at this stage we had about 30 companies in the group. We would have the meetings over a two, two and a half day period. And I would sit in each of the meetings with each of the businesses while they presented their monthly report to management.
In GO meeting reports were figures identified as forecasts. Mr McPhee’s evidence was that those forecasts were prepared by “business unit managers.” As at around February 2013, the relevant business unit managers were Ms Kelly Allen, Mr Glenn Edbrooke and Mr Andy Pereira. The forecasts were predominantly prepared by Ms Allen. She was then the “general manager of insurance builders Victoria.” She had been in that position for around one year prior. She was not called to give evidence. Mr McPhee’s evidence as to how forecasts were prepared, as a matter of general practice, was as follows:
The – the managers – we’ve got a number of methods for helping them with their forecast. The starting point is to look at what level of work they have, because everything pretty much hinges off the sales levels. So managers will go through, look at the work in hand, indication of insurance builders – which is predominantly larger jobs. They will look at the schedule of what they expect to be doing on those jobs over the next six, seven months. Kelly [Allen] used to schedule out what work she had, try and put it into the months when that work would – would be done, and she would schedule out her expectation of what new work we might win, which would give us a – a 12-month forecast of sales, and then we would apply – as a general rule, somewhere around eight, nine, 10 per cent of that sales level is the profit to be made in individual months unless we knew of an extraordinary event such as – twice a year, we have two three-pay-period months where overheads are higher, so we will forecast a little bit lower.
Mr McPhee’s evidence was that Ms Allen took preparation of forecasts seriously, and that she spent a “fair amount of time” with him making sure that he thought she was “on the right track.” He said that that process entailed the following:
We would discuss what we – a lot of jobs, when we win them, they don’t start straight away. They – they sit waiting for permits, plans, documents being signed. We would discuss what we thought was the lead time on projects at that point in time. Size of the project dictates how quickly it would be [built], so we would try and come up with a rule of thumb for how long jobs would take and what would – how long into the future we would schedule them out. So we would spend a fair amount of time trying to get our sales forecasts correct.
The forecasts in GO meeting reports were tabular. They gave actual monthly results for sales and net profit, as available at the dates of GO meetings. They forecasted figures for months remaining in the financial year (including the month of the relevant GO meeting). So, in the case of the February 2013 GO meeting, from which Mr McPhee took the figures for the 21 March email, actual figures for sales and net profit were available to January 2013; forecasted figures were included for February–June 2013. The sum of the actual figures and forecasts for sales was $35.822 million; the sum of actual figures and forecasts for profits was $4.330 million. The figure for profit in the 21 March email was $4.270 million, but nothing was said to turn on that difference. Mr McPhee had no involvement in the preparation of the $4.270 million figure.
Johns Lyng relied upon a number of matters that it said demonstrated reasonable grounds, but which do not, in my opinion, advance its case. I will quickly address those matters before moving on to what I perceive to be the heart of Johns Lyng’s case.
Johns Lyng submitted that it did in fact make a profit in FY13, albeit not one as substantial as that forecasted. That cannot assist, because the representations were to the effect that profits would be greater than in FY11 and in FY12, not merely that some profit would be made.
Johns Lyng relied upon board meeting minutes dated 7 May 2013 wherein Mr McPhee is recorded as saying that “[t]he end of year forecast should be pretty right”. Mr McPhee said in evidence that, as at 7 May, that statement would have been based on actual figures to March 2013 and forecasted figures for April–June 2013. His basis was, he imagined, that he had “spent some time with the managers reviewing the forecast that was presented, and [he] had confidence that they had sufficient work and sufficient control to meet that forecast.” But Mr McPhee’s view in May 2013 as to whether end-of-year forecasts would be correct can be of no assistance in determining whether, in March 2013, reasonable grounds existed for the making of the impugned representations.
Johns Lyng relied upon Mr McPhee having said that he had no reason to question the February 2013 GO meeting forecasts, as they were “fairly representative” of where the company had been over a long period, back to around 2008. This does not go beyond saying that the company had been historically profitable, which I accept is relevant, and which I discuss below.
Putting those matters aside, I think that there were three main limbs to Johns Lyng’s case:
(1)First, that Johns Lyng had historically been a profitable company. Johns Lyng had made profits in previous years that were comparable to that forecasted for FY13. Fifty-eight of the previous sixty months had been profitable months. The months July 2012–January 2013 were profitable months. As at the time of the sending of the 21 March email, net profit was (on a year-to-date basis) ahead of the budget and sales were not substantially behind budget.
(2)The second limb is that actual sales for FY13 were 91 per cent of those forecasted in the 21 March email. That, it was said, demonstrated that the diminishment in profit as against the 21 March forecast must have had a cause other than diminished sales, which, it was argued, was against Ms Rakic’s case that foreseeable diminished sales were the cause of Johns Lyng’s financial woes.
(3)Third, and relatedly, Johns Lyng submitted that the true cause of Johns Lyng’s diminished net profit was unforeseen, and unforeseeable, expenditure. In particular, Johns Lyng relied upon the following matters:
(a)margin write-backs of around $174,000 and defect rectification costs of $80,000 in July 2013, as evidenced by an email dated 17 August 2013 from Mr McPhee to Ms Allen. Mr McPhee’s evidence was that the margin write-backs and defect rectification costs were consequences of defective work. He explained that a margin write-back occurred where it became apparent that profit on a job would be less than earlier estimated; That, it was said, had the further consequence that Johns Lyng’s reputation was diminished and it was given fewer opportunities to price work
(b)the same email wherein it was stated that the average mark-up of jobs during the month of July 2013 was 26 per cent, which was lower than the budgeted figure of 33 per cent. This was a consequence of a number of larger jobs, including one involving a church, the tender for which had been won on a 15 per cent margin; Relatedly, Mr McPhee said that there had been insufficient control of supervisors, with the consequence that contracts were let for too much money without due regard to budget.
(c)board meeting minutes dated 26 June 2013 that recorded $80,000 in defect rectification costs in respect of the month of May 2013, and referred to “4 or 5 of the largest jobs … recording very low markups”, which Mr McPhee said was a reference to the church roof job referred to above, and other jobs.
The argument was also put that a three-pay-period month in June 2013 was unforeseen. I reject the submission. It would be an inept forecaster who failed to foresee the number of pay periods falling in a month. In any event, Mr McPhee’s evidence, quoted above at [86], is directly against the proposition that the number of paydays in a month was lost on Johns Lyng’s forecasters.
A similar argument was put concerning the paying of $108,000 in bonuses in March 2013. While Mr McPhee referred to that sum having been paid, I do not think he advanced it as something that was unforeseen in general, only that the manager of Johns Lyng would not have known in advance that bonuses that were to be paid would be paid all at once, and all in March 2013. He said, “I allowed to pay some profit share bonuses of $108,000 in that month that clearly was for the whole year. And I probably didn’t tell the managers that I was going to do it in that month.” Later, he said, “that should have been spread evenly amongst the months prior.” It seems to me that Mr McPhee was not saying anything more than that, while it was known that an expense for profit share bonuses would be incurred, it was not known that it would be incurred all at once and all in March 2013. The fact that it was incurred in that way does not affect the reasonableness of grounds for any predictions concerning sales and profits at the end of the financial year.
Moving to Johns Lyng’s substantive argument, I accept that past performance can provide a reasonable basis for predicting future performance. All else being equal, that Johns Lyng had been profitable in the months and years preceding March 2013 tends in favour of a conclusion that reasonable grounds existed for predicting future profitability. However, as I explain below at [124] and subsequently, past profitability creates (in my view) a prima facie basis for predicting future profitability and can be displaced by other considerations. And it does not provide a basis for inferring, as I was asked to do, that earlier forecasting must have been accurate. Here, as I will come to explain, the diminished figures in regard to the winning of new work displace the prima facie effect of past profitability.
That leaves Johns Lyng’s submission that the decline in profits was caused not by a decrease in sales but instead by unforeseeable expenditure. The lynchpin is that FY13 sales were 91 per cent of those forecasted by Mr McPhee. Ms Rakic said that the figure of 91 per cent was a “red herring.” She said that whereas sales forecasts had been amended throughout FY13 to take account of actual results, profit forecasts had not and the failure to so adjust the profit forecast was unreasonable.
The GO meeting report for August 2012—the earliest available, and showing actual figures for July 2012 and forecasted figures for the balance of FY13—gives $39.9 million as the figure for forecast sales. It gives $4.403 million as the forecast for profit. The February 2012 GO meeting report, from which the 21 March email drew its forecast figures, recorded $35.822 million for forecasted sales, and $4.330 million for forecasted profit. Whereas forecasted sales had diminished by around $4 million, forecasted profits had diminished by only around $73,000.
Ms Rakic’s case as to reasonable grounds
Ms Rakic’s case was that a significant decline in sales and profits from earlier-forecasted figures was likely and foreseeable. She said, accordingly, that there were not reasonable grounds for making such predictive representations as were made.

That submission does not avoid corollary absurdities. Ms Rakic’s interpretation has the consequence that she could be terminated on 29 June and have no entitlement to net profit for that financial year notwithstanding having worked all of it except a day. And if the answer to that is that, if one actually does work for a period of time, then the entitlement arises notwithstanding not being in employment on 30 June itself, then that admits of a proportional approach, inconsistently with Ms Rakic’s main submission.
I do not think that any reasonable person would ascribe that meaning to the subject clause. The lack of specific reference to the net profit entitlement being calculated on a pro rata basis does not alter my view: it is inherent in the nature of an entitlement to salary and remuneration that it accrues pro rata. It is true, as counsel for Ms Rakic submitted, that other entitlements such as annual leave were specifically stated to accrue pro rata, whereas the net profit clause contained no such express stipulation. Neither, though, did the clause appearing immediately above, stating that salary was $130,000 per annum paid fortnightly, but I do not think any submission could seriously be put that a yearly entitlement accrued on the first day of the year, to be thereafter paid fortnightly irrespective of whether Ms Rakic remained an employee. The absurdity of the result of an immediate-accrual argument, and the context of the net profit clause, convince me that a reasonable person would understand from the language in which the parties expressed their agreement that they intended a proportional relationship between net profit entitlement and work.
I raised in argument with both counsel whether—assuming the entitlement to 2.5 per cent profit is proportional to time worked—an entitlement to a percentage of profit arises in relation to any net income or profit earned in the period actually worked (actual pro rata), or whether instead it is worked out as a simple fraction of the annual net profit, the fraction being the equivalent to the fraction of the year worked by Ms Rakic (fractional pro rata). Johns Lyng argued for the former. No party argued for the latter, and even though counsel for Ms Rakic described a fractional pro rata clause as being “perfectly sensible, rational, and fair,” Ms Rakic expressly disowned the argument that it was the right interpretation. Johns Lyng said that the actual pro rata interpretation should be preferred to the fractional pro rata interpretation because “that’s the period she has worked for us, when she started to earn remuneration and, presumably, gets access to a potential net profit … .”
I reject Johns Lyng’s submission. While I consider that Johns Lyng’s actual pro rata approach is far more likely than Ms Rakic’s approach to have been the parties’ intent, I am persuaded that the parties intended that a fractional pro rata approach apply. A reference to “net profit” would, in my opinion, ordinarily be understood as referring to net profit over the course of an accounting year. For one thing, while interim accounts are often prepared, and were by Johns Lyng, a company’s definitive accounts are its year-end accounts. Certain expenses or income may be brought to account only at the end of an accounting year. If Ms Rakic worked for a full financial year, I do not think there would be any issue that her entitlement would, under the subject clause, be calculated by reference to the year-end accounts rather than by reference to the sum of the monthly P&Ls that Johns Lyng prepared.
Starting from the proposition that “net profit” means, effectively, “annual net profit”, or “net profit over the accounting period,” an approach that requires analysis of profit in particular months is unpersuasive. It would require that the parties intended “net profit” to refer to “annual net profit” in the case of an employee that works for an entire accounting period, but “monthly net profit during the months of the employee’s employment” in the case of an employee that works for part only of an accounting period. By analogy Johns Lyng’s submission would appear to contemplate that if an employee left six weeks into the year it would be necessary to ascertain the net profit attributable to the first month of the financial year and also to the first fortnight of the next month (or, in different factual circumstances, the first week, or the first few days). That would be an unwieldy clause.
Mr Didier’s evidence was that the 2.5 per cent net profit entitlement was a “pre-partnership” or “probation” period, prior to its recipient taking equity in Johns Lyng. While an entitlement to net profit is not, of course, the same thing as holding units in a unit trust, it seems to me that Johns Lyng viewed a net profit share as being an interim step toward taking equity. A person who has equity in an enterprise when a profit dividend is declared is ordinarily entitled to participate. Ordinarily, it would not be relevant whether a shareholder (for example) had held his or her shares for a week or a month. Ms Rakic’s position was not the same as a holder of equity, and so I would not directly analogise her position with that of an equity-holder. However, a net profit entitlement has at least the flavour of a dividend. I would not accept, for reasons given above, that Ms Rakic was entitled to participate in the full year’s profit even though she was there only for part of it. But I would accept that she was entitled to participate in that proportion of the full year’s profit that was commensurate with her length of service.
FY13 was a profitable year; FY14 was not. Ms Rakic worked at Johns Lyng from 8 April 2013 to (and after) the end of FY13. She worked at Johns Lyng for two months and 23 days, or 23 per cent, of FY13. In my judgment, she was entitled to 2.5 per cent of 23 per cent of the FY13 profit. That profit was $2,874,537. Ms Rakic’s entitlement is therefore $16,529.
As I have said, that sum must be deducted from Ms Rakic’s damages under cl 236 of the ACL so as to avoid double compensation.
THE LEASE ISSUE
Ms Rakic pleaded that it was a term of her contract of employment with Johns Lyng that it would assume responsibility for payments under the novated lease agreement for her vehicle. The particulars given in relation to that term were that it was oral and that it was agreed in a conversation between Ms Rakic and Mr McPhee at Johns Lyng’s premises. A date was not specifically particularised, but paragraph 8 of the pleading pleads that the entire agreement (including the alleged lease payment term) was entered into on or about 8 April 2013.
Johns Lyng denied the existence of the term and said that it was agreed that payments under the novated lease agreement would be deducted from the salary package defined in Schedule 1 of Ms Rakic’s employment agreement. The relevant clause is set out under [249] above, and Johns Lyng in particular relies upon the phrase “Total Fixed Remuneration” as indicating that the cost to it of Ms Rakic’s employment would not be more than the amounts therein set out.
A number of facts were not in dispute: Ms Rakic’s contract contained no reference to a vehicle; amounts were not deducted from her wages in respect of a vehicle during her employment by Johns Lyng; she was contacted by ORIX (the lessor) providing “follow-up lease options” (an email that she forwarded to Mr McPhee); Mr McPhee executed a novation agreement; after Ms Rakic’s employment ended Johns Lyng sent her a letter of demand requiring her to pay the amount paid by Johns Lyng to ORIX; Ms Rakic declined to pay.
The controversial aspects of Ms Rakic’s case were whether Mr Didier said in the Brunetti meeting that he was “going to … take care of the car payments,” and whether she raised the issue with Mr McPhee, who gave her certain assurances. The allegation concerning Mr Didier was not in Ms Rakic’s pleadings, but no objection was made to this departure from the pleaded case and Johns Lyng met it with evidence of Mr Didier.
Relevant principles
I refer again to the principles of interpretation I set out above at [250]. The allegation by Ms Rakic must be that the alleged lease term was an actual term of an employment agreement between she and Johns Lyng, which agreement was partly oral and partly in writing. In particular, I note that no allegation was made of a promissory or equitable estoppel, or of a collateral contract. There was no suggestion that a wholly-written contract was made and later varied.
The following is relevant from the decision of the High Court in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2005) 218 CLR 471 at [36] (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ) (citations omitted):
The conclusion that the respondents are bound by the written loan agreements may leave open the possibility that an earlier consensus reached by the parties was in each case a collateral agreement (made in consideration of the parties later executing the written agreement), but that has never been the respondents’ case. In another case it may leave open the possibility that the contract is partly oral and partly in writing. But that cannot be so here. The oral limited recourse terms alleged by the respondents contradict the terms of the written loan agreement. If there was an earlier, oral, consensus, it was discharged and the parties’ agreement recorded in the writing they executed.
I take the following to be an accurate statement of how it is determined whether a contract is wholly in writing, or partly oral and partly in writing, from Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382 at [90] (Campbell JA, with whom Allsop P and Basten JA agreed) (citations omitted):
(1)When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties.
(2)It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing. Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them.
(3)The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing.
(4)Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact.
(5)In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are. If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in light of the surrounding circumstances. If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed.
(6)A quite separate type of contractual arrangement to a contract that is partly written and partly oral is where there is a contract wholly in writing and an oral collateral contract.
The evidence
The starting point is the written contract. It contains no reference to a novated lease. As I have set out above at [249], it provides for Johns Lyng to pay Ms Rakic a particular salary, set out in the schedule, called “Total Fixed Remuneration.” On its face, the contract appears to be complete. That provides a basis for inferring that it contains the whole of the express contractual terms binding the parties (point (1) of Masterton).
Consistently with Masterton, to avoid the parol evidence rule Ms Rakic would have to show that, contrary to the inference drawn on the basis of the face of the written contract, her agreement with Johns Lyng was not wholly in writing. She sought to establish that by evidence of conversations she had with Mr Didier and Mr McPhee.
Ms Rakic’s evidence was that she mentioned her car to Mr Didier in the Brunetti meeting, that he asked whether she had a vehicle, that she replied that she did and that Pattersons were paying for the novated lease, and that Mr Didier said that he would take care of it. In cross-examination it was put to Ms Rakic that instead Mr Didier said that she could package up any arrangement that she wanted within the context of a “total fixed remuneration.” Ms Rakic did not accept that: she re-iterated her evidence in chief and said that he “spoke about basically taking care of it.” Later it was again put to her that Mr Didier said that she could “package up any arrangements [she wants] as long as it’s within the TFR,” which Ms Rakic again rejected.
Mr Didier denied that there was any discussion of a novated lease at the Brunetti meeting, and denied being aware that Ms Rakic was receiving a car at Pattersons. He said, “[w]e didn’t discuss the car, because I don’t do that. I say, ‘That’s your TFR’, and then I say, ‘You can package it up any way you like’, and I refer people to HR to package up their TFR however they like. I don’t get involved in that.” He agreed that he would, however, have mentioned cars in the conversation—“I would have used an example that you could have three cars if you want or you can have five cars if you want, as long as it’s inside your TFR.” I will return to this evidential contest later.
Ms Rakic described a meeting with Mr McPhee in these terms:
So when – on my first day I was with Mr Mudd and we were going through the contract. And I said to him, “Who do I need to take the paperwork to get signed for ORIX once it arrives?” He said, “You will need to take that to John and he’s upstairs. Once Claire takes you around the building, you can go and meet him. She can show you where your car park is. So that will happen throughout the day.” I think it was just before lunch we went up to see Mr McPhee. And I asked John throughout the conversation, “Hello, how are you? Welcome aboard.” And I asked him about the novated lease and the paperwork and who I should direct it to. And he told me to direct it to himself
Noteworthy in that is that Mr McPhee is not described as having said anything more than that paperwork should be directed to him. That point was pursued in cross-examination. It was put to Ms Rakic that she had not met with Mr McPhee on her first day of employment, which she rejected. Her evidence was that she and Mr McPhee had a “meet and greet” and that she asked him about documents for a novated lease. She recalled a Ms McMillan of Johns Lyng being present at the time. It was put to Ms Rakic that Mr McPhee never promised to pay car lease payments over and above TFR, to which she responded by saying that “Mr McPhee said that he would take care of it once the documentation was submitted to him.” The proposition was put again and Ms Rakic accepted it:
MR McKENNEY: He never promised – Mr McPhee never promised to pay your car lease payments over and above your total fixed remuneration, did he?
MS RAKIC:Mr McPhee said that he would take care of it once the documentation was submitted to him.
MR McKENNEY: Yes. But my question is he never said to you that the payments on the car lease would be paid over and above your total fixed remuneration?
MS RAKIC:Not – well, no, he didn’t say that to me. No. He just told me to direct the documents to him when they arrived.
In light of that concession, it is not necessary that I go to Mr McPhee’s evidence in any detail. A statement that Ms Rakic should direct lease documentation to Mr McPhee when it arrived could not give rise to the pleaded lease term. But, I should mention that Mr McPhee adamantly denied meeting Ms Rakic on her first day, attested to a clear recollection of not meeting her for three weeks after she commenced, denied having any conversation concerning novated leases, and said that he had only received an email from Ms Rakic asking what the process was for setting up a novated lease. Mr McPhee also gave evidence as to Johns Lyng’s practice in dealing with novated leases:
The practice is that people were given a TFR which stands for total fixed remuneration and they’re able to take that in a more tax effective means if they choose to and many people go and get a novated lease so if you’re on 100,000 [a] year and your novated lease is costing 15, you’re paid 85 in salary and 15 in car payments.
Johns Lyng pointed to a letter to Ms Rakic dated 23 March 2013 “confirming [Johns Lyng’s] offer” for Ms Rakic to join Johns Lyng, signed by her on the same day. That letter contained this passage:
Your remuneration has been set at a TFR (Total Fixed Remuneration) of $130,000.00pa. Your TFR is inclusive of the legislated Super Guarantee (SG) may be structured to include a car allowance at your request.
For completeness, I note that on 13 May 2013 Mr McPhee (for Johns Lyng Group Pty Ltd) and Ms Rakic signed a Novation Agreement having the consequence that Johns Lyng Group Pty Ltd became liable to make payments in respect of Ms Rakic’s vehicle.
Discussion
A few matters can be set to the side as being no more than equivocal. The first is that, in May 2013, Johns Lyng Group Pty Ltd executed a Novation Agreement. Entrance into a novation agreement would have been necessary whether the agreement was for $130,000 inclusive of vehicle or $130,000 exclusive of vehicle. Its existence does not make either interpretation more likely, assuming for the sake of the argument that it is admissible as evidence (c.f., Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [35] (Gummow, Hayne and Kiefel JJ)).
In a similar category is the evidence of and concerning Mr McPhee. That evidence does not rise higher than that Mr McPhee invited Ms Rakic to forward novation documents to him. Ms Rakic agreed that he had made no promises concerning payment over and above TFR. That is consistent either with Johns Lyng having an obligation to meet Ms Rakic’s lease payments in addition to her salary, or having the ability to deduct payments from her salary. It would not create a contractual term where one did not previously exist.
Ms Rakic’s case thus rises or falls on the conversation with Mr Didier. That conversation pre-dated the written contract of employment. The problem for Ms Rakic is that, if Mr Didier did convey that Johns Lyng would pay Ms Rakic’s salary and cover her novated lease payments, the contract ultimately entered into is inconsistent therewith. I accept Johns Lyng’s submission that the meaning of “Total Fixed Remuneration” is that Johns Lyng has those remuneration obligations, and no others. The term for which Ms Rakic militates is inconsistent with the written contract and the latter discharges the former (Equuscorp at [36]).
For me to accept that an oral term came about as a consequence of Mr Didier’s statements, I would have to accept one of three things: first, that the term was offered to Ms Rakic on that date and accepted by her when the contract was formed on or around 8 April 2013; second, the term was agreed in-principle on that date and then agreed in a binding fashion on around 8 April 2013; third, the term was agreed in a binding fashion on 20 March 2013 and not superseded by the parties’ entrance into a written contract in April 2013.
None of those can be accepted. The first and second seem to me to be irreconcilable with the failure to include a term to that effect, along with other terms of the offer or in-principle agreement, in the written contract. They are also inconsistent with the written confirmation of offer dated 23 March 2013 which contains the passage quoted above at [277]. Counsel for Ms Rakic argued that the quoted passage was a nonsense and had no meaning. While I accept that the sentence is infelicitously drafted, insertion of the word “and” after the abbreviation (“SG”) gives the sentence meaning and avoids having to ignore the words “may be structured to include … .” The meaning of the sentence is fairly plain, notwithstanding the syntactic error, and it is contrary to Ms Rakic’s argument. The third cannot be accepted because that would involve two contracts and Ms Rakic did not plead two contracts.

I therefore find that the contract entered into by Ms Rakic on or about 8 April 2013 did not include a term to the effect that Johns Lyng would pay for Ms Rakic’s vehicle. I decline to make the declaration sought.
CONCLUSIONS
I have found that the ACL claim is established, and that Ms Rakic has suffered $333,422 of compensable loss or damage. I would order that Johns Lyng pay Ms Rakic damages in that sum pursuant to s 236 of the ACL. I have found that Johns Lyng is indebted to Ms Rakic in the sum of $16,529 by reason of the net profit clause of her contract of employment, and I would make the declaration that Ms Rakic seeks in that connection. However, I have found against Ms Rakic in relation to the Lease issue..
Ms Rakic also seeks interest and costs. I will receive submissions as to interest and costs before making any order in that connection. That should be done by way of the exchange of short written submissions. I will order that Ms Rakic file any submissions within 14 days after the date of this judgment. I will order that Johns Lyng file any submissions in reply within 7 days thereafter. I expect that any submissions concerning costs take account of Ms Rakic having succeeded on two of her claims but failed on one. Submissions should also take into account that the claims in respect of which Ms Rakic succeeded were, collectively, by far the most significant claims and occupied the lion’s share of the litigation. The parties should also prepare proposed minutes of orders giving effect to these reasons and lodge them at the same time as their submissions.
If the parties are able to come to agreement as to appropriate orders, consent orders may be proposed.

I certify that the preceding two hundred and eighty-seven (287) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg.
Associate:
Dated: 27 April 2016

File number:	VID 230 of 2014
Judge:	BROMBERG J
Date of judgment:	27 April 2016
Catchwords:	TRADE PRACTICES – misleading or deceptive conduct – representations made by prospective employer (respondent) to induce applicant to enter into contract of employment – representations as to future matters being that profits and sales in 2013 financial year were likely to meet or exceed profits and sales in 2012 and 2011 financial years, and that it was likely that for twelve months after March 2013 respondent would remain as profitable as previous two years – further representation as to respondent’s lack of knowledge of matters rendering predictions unlikely – whether representations made – whether representations in trade or commerce – consideration of relevance of non-disclosure to establishment of pleaded case – whether reasonable grounds for predictions as to future matters – consideration of whose grounds need be reasonable in the context of representations made by a corporation – whether representation as to state of respondent’s knowledge misleading or deceptive – no reasonable grounds for predictive representations – predictions misleading – representation as to state of respondent’s knowledge not misleading or deceptive – representations relied upon by applicant and induced entry into contract of employment – consideration of correct approach to calculation of damages given multiple hypotheticals CONTRACTS – whether contract of employment entered into on 8 April 2013 included oral term that respondent would meet cost of applicant’s motor vehicle lease in addition to salary set out in written contract – proper interpretation of clause entitling applicant to 2.5 per cent of net profit of respondent – contract of employment did not include putative oral term – interpretation of net profit clause that applicant entitled to proportion of profit in 2013 financial year corresponding with length of her service in that year
Legislation:	Competition and Consumer Act 2010 (Cth), Sch 2 cll 4, 18, 31, 236 Fair Trading Act 1987 (WA) ss 9, 14 Trade Practices Act 1974 (Cth) ss 52, 53B
Cases cited:	Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 Aussie Home Security Pty Ltd v Sales Systems Australia Pty Ltd [1999] FCA 1458 Australian Competition & Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114 Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 Australian Education Union v State of Victoria (Department of Education and Early Childhood Development) [2015] FCA 1196 Barnes v Forty Two International Pty Ltd (2014) 316 ALR 408 Blake v Norris (Hulme J, NSWSC, 5 December 1995, unreported) Bonham v Iluka Resources Ltd (2015) 107 ACSR 75 Commonwealth of Australia v Ryan [2002] NSWCA 372 Cummings v Lewis (1993) 41 FCR 559 Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2005) 218 CLR 471 Global One Mobile Entertainment Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 134 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120 Gould v Vaggelas (1984) 157 CLR 215 Hatt v Magro (2007) 34 WAR 256 Holz v Lane [2005] WASCA 40 Jones v Dunkel (1959) 101 CLR 298 Jones v Schiffmann (1971) 124 CLR 303 Keays v J P Morgan Administrative Services Australia Limited [2011] FCA 358 Keays v JP Morgan Administrative Services Australia Ltd (2012) 224 IR 406 La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299 Malec v J C Hutton Proprietary Limited (1990) 169 CLR 638 Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120 Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357 Moss v Lowe Hunt & Partners Pty Ltd [2010] FCA 1181 Murphy v Westpac Banking Corporation [2014] FCA 1104 Norris v Blake (No 2) (1997) 41 NSWLR 49 North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 North East Equity Pty Ltd v Proud Nominees Pty Ltd (2012) 285 ALR 217 O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1997) ATPR (Digest) ¶46-179 Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338 Rosebanner Pty Ltd v EnergyAustralia (2009) 223 FLR 406 RT & YE Falls Investments Pty Ltd v the State of New South Wales [2001] NSWSC 1027 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (2014) 314 ALR 35 SPAR Licensing Pty Ltd v MIS QLD Pty Ltd (No 2) (2012) 298 ALR 69 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 Walker v Salomon Smith Barney Securities Pty Ltd (2003) 140 IR 433 Westpac Banking Corporation v Wittenberg [2016] FCAFC 33 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1
Date of hearing:	15, 16, 17, and 18 September 2015
Registry:	Victoria
Division:	General Division
National Practice Area:	Employment and Industrial Relations
Category:	Catchwords
Number of paragraphs:	287
Counsel for the Applicant:	Mr M A Irving
Solicitor for the Applicant:	McDonald Murholme, Barristers and Solicitors
Counsel for the Respondent:	Mr M G McKenney
Solicitor for the Respondent:	Kliger Partners, Lawyers

FY11	Sales $35.9million	Profit $2.967	2.5% = $74175
FY12	Sales $35.7million	Profit $3.672	2.5% = $91800
FY13 forecast	Sales $35.8million	Profit $4.270	2.5% = $106750