General Employment: Moss v. Lowe Hunt & Partners Pty Ltd [2010] FCA1181

Specifically, Katzmann J. in Moss v. Lowe Hunt & Partners Pty Ltd [2010] FCA1181, found that the employer, Lowe Hunt & Partners had engaged in a systemic pattern of misleading and deceptive conduct in its attempts to procure the services of Mr Moss, a successful advertising planning director. In so doing, the Court determined that by representing an advertising agency as “successful”, when but for the financial support of its parent company, it would be insolvent constituted misleading and deceptive conduct, under the terms of the Trade Practices Act 1974 (Cth)and the Fair Trading Act 1987 (NSW).

Facts

  • Mr Moss was the principal and sole director of the second plaintiff, Pegasus Strategic Planning Pty Limited (“Pegasus”). Both Mr Moss and Pegasus are principally concerned with the provision of independent advertising and research consultancy services.
  •  The two respondents are also involved in the advertising industry and were formed by a partnership of Lowe Hunt & Partners and Lowe Sydney Pty Limited.
  • Mr Moss first did work for the respondents in 2004, but found himself courted by Lowe Hunt, by the “promise of an attractive salary package, leave entitlements, and repeated assurances about the success of Lowe Hunt, which he (Mr Moss), took to involve its financial success.
  •  However, it was commonplace that the business of the respondents was not a financial success. The business endured a series of employee redundancies and office closures; whilst the parent company of the respondent, IPG based in the United States, was plagued with its own weaknesses in financial reporting, higher than projected compliance costs, a long term debt and trading losses for the years 2003, 2004 and 2005.
  • Mr Moss and Pegasus, argued that but for the representations of the Group Managing director of Lowe Hunt, Pegasus would not have incurred losses arising from the resignation of Mr Moss.
  •   Pegasus argued that Lowe Hunt had made four separate representations to Mr Moss, which were in breach of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW). These representations which commenced in April 2005 and concluded in October 2005, were made with the sole intention of procuring Mr Moss to the employ of the respondents; notwithstanding the precarious financial position of the respondents; a fact which representatives of the respondents remained tight lipped about, throughout this period.
  •  As his Honour opined, Lowe Hunt did not enjoy financial success, as it relied upon the parent company’s (IPG) financial support, to continue trading, as there was an excess of liabilities over assets.
  • Commenting on the inherent requirement for Lowe Hunt to exercise a greater level of transparency and honesty to Mr Moss, His Honour opined:

The representation was not made directly to Mr. Moss but it was made in his presence, at a time when Mr. Colman was courting him to come and work for Lowe Hunt. To make glowing statements of this kind without qualification at any stage in this process was misleading, especially when one of them was admittedly false. This was a situation in which silence was apt to mislead. The circumstances here called for disclosure. This does not necessarily mean that Lowe Hunt had to open its books to Mr Moss for inspection. But it should have been candid with him before he entered into a contract of employment..... [at 63]

The Law

  • Section 52 of the Trade Practices Act 1974 (Cth) provides:
    1.   A corporation shall not, in trade or commerce, engage in conduct that is:
      1.      misleading or deceptive or is likely to mislead or deceive
      2.      Nothing in the succeeding provisions of this Division will be taken as limiting by implication the generality of subsection (1).
  •  Section 42 of the Fair Trading Act 1987 (NSW) is in essentially the same terms.

In deciding upon a formulation as to whether the conduct of Lowe Hunt was misleading or deceptive or likely (or liable) to mislead or deceive, His Honour commented at 46: “the question is not what the respondents intended but what were the consequences of their conduct ... the test of whether conduct is misleading or deceptive or likely to be such is entirely objective.”

The Decision

Finding that the conduct and representations of the respondents led to a positive inducement for Mr Moss to commence in the employ of the respondents, coupled with the finding that the representations of the two respondents were found to be false and misleading, His Honour entered judgment in the favour of the second applicant (Pegasus), in the sum of $306,740.00.

Implications for Employers

  • Employing organisations must exercise extreme caution when making external representations to potential employees, particularly at the executive or senior management level.
  • Corporations must educate directors on their fiduciary responsibilities as regards to their capacity to make representations regarding employment opportunities to external third parties.

Readers seeking further advice should not hesitate to contact PCC Lawyers on 9965 7260.