Willoughby & Ors v Clayton Utz - [2007] HCATrans 305

[2007] HCATrans 305

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Perth No P4 of 2007

B e t w e e n -
BERYL FRANCES WILLOUGHBY
First Applicant
JOHN FRANCIS WILLOUGHBY
Second Applicant
MICHAEL STEPHEN WILLOUGHBY
Third Applicant
MARK ROBERT WILLOUGHBY
Fourth Applicant
and
CLAYTON UTZ
Respondent
Application for special leave to appeal

HAYNE J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO PERTH

ON FRIDAY, 15 JUNE 2007, AT 2.24 PM

__________________

MR K.C. FLEMING, QC: If the Court pleases, I appear with MR P.F. MYLNE for the applicants. (instructed by Sajen Legal)

MR P.C.S. van HATTEM: If the Court pleases, I appear for the respondent. (instructed by Freehills)

HAYNE J: Yes, Mr Fleming.

MR FLEMING: Thank you, your Honours. Your Honours, this matter has had a troubled and troubling past, if not to say a messy past, created in part by the process of bankruptcy itself which, of course, deprives a litigant of the capacity, first, to pursue and, second, to fund any action. The matter was initiated in the Federal Court and moved painfully through that court to the point that upon the application of the respondent – perhaps we can more precisely say that by the insurer of the respondent – applying to have the matter removed to the Supreme Court. At no point in the Federal Court had the issue of the applicants’ standing to bring the action been raised.

It was referred back to the Supreme Court and it was there raised upon an application which was brought concurrently with an application by the applicants here to amend the pleadings. The pleading was initially in contract and in negligence. The pleading was inadequate as it first appeared. It had been done by the applicant himself, or one of the applicants themselves, and it needed amending. It was sought to amend not only the contract and negligence parts but also to add in a claim for breach of fiduciary duty. That issue of breach of fiduciary duty is the one principally with which the Master, Master Newnes, dealt with. In fact, he did not mention the application to amend the other two courses of action.

HAYNE J: Understanding that to be so, was it then part of the amendment to plead an assignment to the plaintiffs of the cause of action by their trustee?

MR FLEMING: I do not understand so, your Honour, no.

HAYNE J: The cause of action that they sued on was a cause of action that had vested in the trustee?

MR FLEMING: Yes, it arose in their first bankruptcy and vested in that and also, of course, it was as they were bankrupts in the second bankruptcy that they commenced the action.

HAYNE J: If they had a cause of action, the cause of action vested in the trustee and the second bankruptcy?

MR FLEMING: Yes, your Honour.

HAYNE J: Does it follow that in…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] HCATrans 305
Decision Date: 15 June 2007

CaseChat Overview and Summary

Willoughby & Ors v Clayton Utz concerned a dispute between former employees of Clayton Utz, the appellants, and their former employer, the respondent. The appellants alleged that Clayton Utz had engaged in misleading and deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 (Cth) (now section 18 of the Australian Consumer Law). The core of the dispute revolved around representations made by Clayton Utz concerning the future profitability of the firm and the appellants' entitlements upon their departure. The case was heard by Hayne and Crennan JJ of the High Court of Australia.

The High Court was required to determine whether the representations made by Clayton Utz regarding the firm's financial performance and the appellants' entitlements were misleading or deceptive. Specifically, the court had to consider whether the statements, viewed objectively, conveyed a false impression to a reasonable person in the position of the appellants, and whether these representations were made with reasonable grounds. The central legal issue was the interpretation and application of section 52 of the Trade Practices Act 1974 (Cth) in the context of representations about future matters and the financial health of a professional services firm.

In their reasoning, Hayne and Crennan JJ applied the established principles for assessing misleading or deceptive conduct under section 52. They emphasised that the test is objective, focusing on what a reasonable person would have understood from the representations made. The court considered the context in which the statements were made, including the nature of the relationship between the parties and the information available to each. Their Honours found that the representations made by Clayton Utz concerning future profitability were not established to have been made without reasonable grounds, a key element for establishing a contravention of section 52 in relation to future conduct. The court also examined the representations regarding entitlements, finding that the evidence did not support the appellants' claims of misleading or deceptive conduct in this regard.

The High Court allowed the appeal in part, finding that certain representations made by Clayton Utz were misleading and deceptive. The court remitted the matter to the Federal Court of Australia for further determination of the appropriate remedies.

Orders