Duxbury v Pierce [2009] FCA 367 | Case summary

Duxbury v Pierce [2009] FCA 367 | Case summary | Zoe

[7]

14 It is unclear from the amended statement of claim to whom each representation in [11] of the pleading is said to have been directed; which representations are alleged to have been made by the first respondent; which misrepresentations are alleged to have been made by the second respondent; and which representations are said to have been made by EVP Holdings or EVP Recruitment for which the respondents may be liable as accessories. In relation to the alleged breaches of s 52 of the Act by the second respondent identified in [11] of the amended statement of claim, the elements of the wrongs cannot be said to have been "properly and discretely pleaded". 15 The amended statement of claim also identifies seven further representations which are said to have been made by each of the respondents, EVP Holdings and EVP Recruitment. Paragraph 15 of the amended statement of claim pleads: Further and in the alternative, in the course of the conduct of the joint venture businesses and the affairs of the EVP Group, each of Holdings, Recruitment, Pierce and Hughey engaged in misleading and deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 (as made applicable to the respondents in accordance with sections 6(1)(h) and/or 6(3) of the Trade Practices Act), further or alternatively section 9 of the Fair Trading Act 1999 (Vic) in so far as they misrepresented the facts of the situation when they or either of them: (a) represented throughout 2004 and 2005 that the on-going financial position of Holdings and/or Recruitment was sound; (b) failed to disclose throughout 2004 and 2005 the imminent or likely insolvency of Holdings and/or Recruitment; (c) represented that Hughey was in sound financial position and qualified on an on-going basis to be involved in the management of a corporation; (d) failed to disclose the imminent or likely bankruptcy of Hughey; (e) failed to disclose the fact of the sequestration of Hughey's estate at the time it occurred or reasonably promptly thereafter; (f) on 31 December 2004 altered the financial accounts and records of Holdings and/or EVP so as to create the impression of an improved asset position by treating capital and other payments made by each of the Applicants as debts owing by them; (g) in March 2005 presented the said altered accounts to the external administrator of Recruitment as being true and accurate financial records of that company. The particulars to [15] detail the conduct alleged to constitute the representations. Paragraph [16] of the amended statement of claim indicates why the representations as to future matters in [15] are said to have been misleading or deceptive. 16 In relation to the second respondent, the allegations in [15] of the amended statement of claim meet the requirements of O 35A r 3(2) as discussed in Macquarie Bank Ltd v Seagle at [24]. Consequently, the power to give relief concerning contraventions of s 52 of the Act is within the Court's powers. Given the second respondent's failure to participate in any way in the proceeding, it is appropriate to exercise the Court's discretion to order relief against the second respondent, for breaches of s 52 identified in [15] of the amended statement of claim.

[8]

The first respondent 17 The position of the first respondent in relation to the application for default judgment pursuant to O 35A is in contrast to that of the second respondent. The first respondent filed a notice of appearance, a defence to the amended statement of claim and participated in the proceeding through his solicitors until 1 December 2008. 18 No prior notice of the applicants' intention to seek default judgment was given to the first respondent. No motion was filed with the Court that would have alerted the first respondent to the applicants' intentions. As Wilcox and Gummow JJ observed in Lenjimar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388 at 400 in relation to the discretion to dismiss a proceeding for default: it is important that an applicant whose proceeding is under threat of dismissal be made aware of the nature of the alleged default and that there be a finding on that matter. That did not occur in this case. As we have said, the notice of motion failed to state any ground for the proposed order. The appellants were left to divine that from the evidence. 19 Another relevant factor in determining whether to grant default judgment is whether, despite the default, the party "genuinely wishes the matter to go to trial" (see Lenjimar per Wilcox and Gummow JJ at 396). 20 On 25 February 2009, the first respondent informed the Court by email that he would not appear at the trial of the proceedings on 2 March 2009. Nevertheless, the first respondent said that: The purpose of this letter is to advise that I do not have the financial resources to attend the hearing or brief counsel. However, I maintain my defence and if the matter proceeds in my absence as I expect, I request the Plaintiffs be obliged to prove their case against me to the required burden of proof. These statements evince an intention on the part of the first respondent to defend the applicants' claims and for the trial to proceed. 21 In light of the relief sought by the applicants, the lack of notice to the first respondent of the applicants' intention to seek default judgment and the reasons given by the first respondent for the default, I am not satisfied that it is appropriate to give default judgment against the first respondent. It is more appropriate to test whether the evidence supports the claims made by the applicants against the first respondent.

[10]

THE ALLEGED MISREPRESENTATIONS AND DECEPTIVE CONDUCT 27 The applicants claim that the first respondent made the representations described in [15] of these reasons in contravention of s 52 of the Act (the "Further Conduct"). 28 In addition, [11] of the amended statement of claim alleges that the first respondent made a further 21 misrepresentations that: (a) the EVP group and business model had a solid and successful trading history behind it; (b) the previous joint-venture businesses commenced with EVP of the type advertised had all, alternatively, been largely successful and/or that 10 or more EVP offices (including a Perth office) were established and operating at the time; (c) a new joint venture business commenced by any of the first, second, third, fourth or sixth applicants (hereafter 'the Applicants') would enjoy the benefit of the proven EVP business model; (d) a new joint venture business commenced by the Applicants would enjoy the benefit of access to EVP's established and commercially proven infrastructure and/or office systems and/or centralized administrative, clerical and accounting support and/or training and/or management and business advice from experienced operators; (e) a new joint venture business commenced by the Applicants would enjoy the benefit of access to and use of proven and functional EVP developed software which could track and report on consultant activity, work in progress and key performance business indicators in an accurate, efficient and effective manner including standard labour hire functions such as payroll, accrual, timesheet entry and rostering functions and/or that EVP would provide ongoing IT systems and support; (f) EVP had a detailed and sound business plan for the establishment of such a joint venture business; (g) EVP would prepare and provide a specific and detailed business plan for the respective joint-venture business; (h) financial projections provided to the Applicants in each case, being budgets and cash-flows, were based on other EVP joint venture businesses and/or were based in fact and/or gave a genuine indication of earnings and returns which could be reasonably expected to be enjoyed by the business; (i) financial data provided to the Applicants or any of them as being derived from an EVP joint venture business in Perth was based in fact and/or reasonably indicative of the level of earnings and profit the proposed joint venture business might reasonably expect to enjoy in each case; (j) on the basis of their experience, projections and the established business mode, the joint-venture business would only require working capital of $80,000.00; (k) the Applicant/investor would only be required to contribute up to $40,000.00 to working capital with that sum to be matched by Holdings and/or Recruitment and/or the EVP group; (l) any further capital required to fund the business would be provided by Holdings and/or Recruitment and/or the EVP group; (m) investors would operate the business as partners/managers and would receive a salary of $100,000.00 per annum; (n) the joint venture business, funded as aforesaid, with the financial support of Holdings and/or Recruitment and/or the EVP group would be able to pay the said salary and meet its outgoings from inception, alternatively within months of commencement; (o) the financial projections provided were conservative and valid and it could reasonably be expected that the initial investment, including the cost of purchase of the investor share in the joint-venture and associated licences from EVP would be fully recouped within 18 months of commencement; (p) the joint venture business would receive the benefit of EVP group branding and marketing as well as specifically targeted marketing campaigns and strategies provided by Holdings and EVP; (q) the financial position of Holdings and/or Recruitment and/or Hughey and/or Pierce was sound and solvent; (r) that the EVP group and its predecessors as managed by Hughey and or Pierce had sound financial and/or trading history; (s) the Applicant/investor would benefit from the services of the respondents' factoring company, Scottish Pacific, needed to establish the business; (t) the Applicant/investor would have the opportunity to earn income from the additional revenue streams that the EVP Group was developing; (u) the joint venture business would leverage off an existing database developed by EVP Recruitment ("the Initial Representations"). 29 The Initial Representations and Further Conduct occurred while the applicants were engaged in investment decisions and the purchase of businesses. Accordingly, apart from the salary representation which counsel for the applicants abandoned during the hearing, each of the representations can be said to have been made in trade or commerce.

[11]

Initial representations made to the first applicant 30 The first applicant invested in the EVP Windsor Pty Ltd ("EVP Windsor") joint venture with EVP Recruitment. The evidence establishes that the Initial Representations identified in [28] of these reasons as (a)-(f), (h), (j), (k), (n)-(q), (s) and (t) were made to the first applicant. 31 The first applicant's evidence establishes that Initial Representations (a)-(f), (h), (j), (n)-(q), (s) and (t) were misleading or deceptive conduct in contravention of s 52 as: · EVP Holdings and EVP Recruitment had only been operating for a short period and were not operating profitably; · the existing EVP joint ventures were not operating profitably and the business model used by the joint ventures could not be said to be "proven"; · no centralised administrative, clerical and accounting support was available to the first applicant's business; · the EVP developed software was not proven and was unable to perform the functions as represented; · the EVP Recruitment business plan was unsound as the company was placed in liquidation; · the financial projections did not give a genuine indication of the returns and earnings which the joint venture could expect to generate; · the extent of working capital was "grossly underestimated" and a correct assessment of the extent of working capital required was closer to $300,000; · the financial projections were unrealistic; · no specifically targeted marketing campaigns were undertaken and EVP Windsor did not receive "the advantage of EVP group branding"; · the financial positions of EVP Holdings and EVP Recruitment were neither sound nor solvent; · no factoring service was available or made available to EVP Windsor by EVP Holdings or EVP Recruitment; and · the first applicant was unable to earn income from other revenue streams developed by the EVP group as no such revenue streams were developed or made available. 32 The Initial Representations were made by EVP Recruitment and EVP Holdings, rather than by the first respondent in a personal capacity. The representations outlined in [30] were made on documents which bore a prominent EVP logo and at meetings at EVP offices which the respondents attended in their capacity as representatives of the companies. Even the meetings held outside EVP offices, which the first applicant and the first respondent attended at the Hilton Hotel in Brisbane on 1 February 2004 and at a solicitor's office on 25 May 2004, were meetings which were attended by the first respondent as a representative of EVP Holdings and EVP Recruitment. The statements made at those two meetings are also to be attributed to EVP Recruitment and EVP Holdings, rather than to the individuals present. Accordingly, it is necessary to consider whether the first respondent is liable as a party to a contravention for the Initial Representations made to the first applicant. 33 In relation to representation (k), EVP Recruitment made the representation in relation to a future matter. Section 51A of the Act creates a presumption that the representation was misleading, unless EVP Recruitment demonstrates that it had reasonable grounds for making the representation. As the respondents did not adduce any evidence in the proceeding, the presumption in s 51A is not displaced.

[12]

Liability for the Initial Representations made to the first applicant 34 The first applicant seeks relief under s 82 for the contraventions of s 52 of the Act identified above. Section 75B of the Act enables persons, such as the first applicant, who have suffered loss or damage as a result of a contravention to recover the loss or damage from other persons who were involved in the contravention. 35 Section 75B(1) of the Act states: a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC or of section 75AU, 75AYA or 95AZN, shall be read as a reference to a person who: (a) has aided, abetted, counselled or procured the contravention; (b) has induced, whether by threats or otherwise, the contravention; (c) has been in any way, indirectly or directly, involved knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention. 36 The High Court has noted that s 75B(1)(a) requires that a person said to be involved in a contravention of s 52 is shown to have actual knowledge of the falsity of the representations; see Yorke v Lucas (1985) 158 CLR 661 at 666-69 per Mason ACJ, Wilson, Deane and Dawson JJ. 37 Their Honours went on to say (at 670) that: There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention … a person could only properly be said to be a "party to" a contravention if his participation was in the context of knowledge of the essential facts constituting the particular contravention in question. Whilst it is not a contradiction in terms to speak of a person being "party to" something of which he is unaware, some indication is needed to convey such a meaning. There is nothing in the paragraph itself which would point to any conclusion other than that the words "party to" are sued to refer to a participant in the nature of an accessory. Moreover, the wider context of the whole section leads to the same conclusion. We have already indicated why para. (a) requires knowledge. Paragraph (b), which speaks of inducing a contravention by threats, promises or otherwise, and par. (d) which speaks of conspiring with others to effect a contravention, both clearly require intent based upon knowledge … In our view the proper construction of par. (c) requires a party to a contravention to be an intentional participate, the necessary intent being based upon knowledge of the essential elements of the contravention.

[13]

38 The Initial Representations were made in documents provided by the second respondent and others to the first applicant. There is no evidence to show the first respondent prepared or authorised these documents. The Initial Representations were also made during meetings which the first respondent did not attend. There is no evidence to suggest that the first respondent directed or knew what was said at these meetings. No liability on the part of the first respondent under s 75B of the Act arises in relation to these aspects of the Initial Representations. 39 The first respondent attended a meeting with the first applicant on 1 February 2004. None of the Initial Representations were made during this meeting. The first respondent also attended a meeting of "EVP managers and partners" on 3 April 2004. Initial Representation (a) was made during the April 2004 meeting. The evidence, in particular that of Trudee Maxine Mashlan, shows that EVP Holdings and EVP Recruitment at that time were in what can best be described as a precarious financial position and at worst were a short step from insolvency. The first respondent was aware of these facts which rendered the representation that the group has a successful business model and history misleading and deceptive. Accordingly, the first respondent is liable under s 75B of the Act with respect to representation (a) of the Initial Representations. 40 Section 82 of the Act requires the first applicant to have suffered loss caused by the first respondent's conduct in order to receive compensation for loss or damage. 41 The first applicant's evidence is that if he had known representation (a) was untrue he would not have invested in EVP Windsor. However, the representations made at the 3 April 2004 meeting were made after the first applicant had entered into the Heads of Agreement and had paid $50,000 to EVP Recruitment as the first instalment for share capital in EVP Windsor. Significantly, the first applicant also admits that he received an email from Donna Kilpatrick of EVP on 30 January 2004 which: makes an admission that the EVP business plan is poor … this was said in the context of discussions about the office fit out and the need for an office template that all new EVP offices could follow. This suggested to me that Holdings and Recruitment were not 'established' as represented by Pierce and Hughey.

[15]

Further representations made to the first applicant 43 The evidence of the applicants establishes that the first applicant was the subject of the Further Conduct identified as items (a), (b) and (e)-(g) in [15] of these reasons. The conduct included both positive representations by the first respondent and representations implied by the first respondent's silence. 44 For the reasons discussed in relation to the Initial Representations, the first respondent engaged in the Further Conduct in his capacity as a representative of EVP Holdings and EVP Recruitment. 45 Further Conduct (a) and (b) was misleading and deceptive conduct in contravention of s 52 of the Act. The ongoing financial position of EVP Holdings and EVP Recruitment was not sound. Through the first respondent, EVP Holdings and EVP Recruitment were aware of the importance of the matters in (b) to the first applicant, but nevertheless failed to disclose these matters. 46 The first respondent is a party involved in these contraventions of the Act in accordance with s 75B of the Act. There is sufficient evidence to show that the first respondent was aware when making the representations or refraining from correcting the representations that Further Conduct (a) and (b) was misleading or deceptive. The first respondent was aware by at least December 2004 that EVP Holdings and EVP Recruitment were not in a sound financial position and failed to disclose their "imminent or likely insolvency". The conduct was misleading and deceptive as it created the impression that the relevant companies were financially viable. The first respondent is liable in accordance with ss 75B and 82 for loss suffered as a result of Further Conduct (a) and (b). 47 In relation to the failure to disclose the matters in (e), the evidence of Ms Mashlan indicates that the first respondent was aware as early as at least 8 July 2004 of the second respondent's bankruptcy. Despite this knowledge, the first respondent refrained from advising the first applicant of the matters in [15(e)]. The relationship between the first respondent and the first applicant was such that it is reasonable to infer that the first respondent would have known the importance of those issues to the first applicant but nevertheless chose not to inform the first applicant. This knowledge is to be imputed to EVP Recruitment and EVP Holdings in accordance with s 84 of the Act. The failure of EVP Holdings and EVP Recruitment to disclose the sequestration of the second respondent's estate at the time it occurred, or within a reasonably prompt time, was conduct in breach of s 52 of the Act. In light of his involvement in the failure to inform the first applicant of the matters in (e), the first respondent is liable pursuant to ss 75B and 82 for loss suffered by the first applicant as a result of this conduct. 48 Conduct (f) and (g) was not directed at the first applicant. Nevertheless, it was misleading and deceptive conduct in contravention of s 52 of the Act as it induced in the administrator of EVP Recruitment the belief that the altered financial records were accurate financial records. The first applicant is eligible for compensation pursuant to s 82 for any loss or damage which he suffered by conduct the breach of s 52 of the Act.

[16]

Initial Representations made to the second applicant 49 The second applicant invested in the EVP IT&T (Sydney) Pty Ltd ("EVP Sydney") joint venture with EVP Recruitment. The evidence establishes that the Initial Representations identified in [28] of these reasons as (a), (b), (d), (e), (g), (k), (l), (o) and (p) were made to the second applicant. 50 Representations (a), (b), (d), (e), (k), (o) and (p) were misleading or deceptive conduct in contravention of s 52 of the Act for the reasons discussed in relation to the first applicant. Representation (g) contravened s 52 of the Act as the second applicant was not provided with a business plan for EVP Sydney and did not receive any input or assistance in developing his own business plan for EVP Sydney and EVP Recruitment did not show that it had reasonable grounds for making the representation. Representation (l) is also misleading or deceptive conduct by virtue of the operation of s 51A of the Act as it is also a representation as to a future matter which EVP Recruitment did not demonstrate it had reasonable grounds to make. 51 The representations made to the second applicant by the first respondent were made by EVP Recruitment and EVP Holdings, rather than the first respondent in a personal capacity. The representations the second applicant relies on include representations in documents entitled "EVP Holdings Limited Manager/Partner Opportunity" and "EVP Manager's Policy Manual and Job Description"; neither of which was provided by the first respondent. Each bears prominent EVP logos. Similarly, the unsigned 10 May 2004 and 19 May 2004 letters to the second applicant are on EVP Holdings letterhead. They were written by the first respondent in his capacity as a director of EVP Holdings. 52 The 31 May 2004 conversation relied upon by the second applicant followed a tour of EVP offices. The first respondent participated in that meeting as a representative of EVP Holdings and EVP Recruitment. The representations made at the 31 May 2004 meeting are to be attributed to EVP Recruitment and EVP Holdings. 53 The first respondent is not primarily liable for the initial representations made to the second applicant. Any liability on the part of the first respondent for the representations can only arise under s 75B of the Act.

[17]

Liability for the Initial Representations made to the second applicant 54 The first respondent is not liable under s 75B of the Act for the representations contained in the "EVP Holdings Limited Manager/Partner Opportunity" and "EVP Manager's Policy Manual and Job Description". There is no evidence that the first respondent was aware of these documents, prepared or authorised them. Therefore the first respondent cannot be said to have been involved in the contraventions of the Act which flow from the content of those documents. 55 The first respondent appears as the author of the unsigned letters of 10 May 2004 and 19 May 2004. The first respondent also participated in the meeting with the second applicant and second respondent on 31 May 2004. The conduct identified as (a), (b), (k), (l) and (p) in [28] above was made in these letters and during the meeting, both as direct representations and as representations by silence. 56 The evidence does not show that the first respondent was aware in May 2004 of facts which made representations (k), (l) and (p) misleading and deceptive. The applicants did not adduce any evidence to show that the first respondent knew that the marketing campaigns would not occur, that the second applicant would be required to contribute more that $40,000 in working capital or that EVP Recruitment would not provide working capital to EVP Sydney as required. The first respondent is not liable pursuant to s 75B of the Act for these representations. 57 There is no evidence which established that the first respondent was aware in May 2004 that the joint venture businesses were not largely successful. The third and sixth applicants gave evidence that the first respondent sent a letter on 12 July 2004 discussing the poor performance of EVP West End Pty Ltd. However, the applicants did not adduce any evidence which indicated when the first respondent acquired this knowledge, and particularly that the first respondent was aware in May 2004 that representation (b) was misleading and deceptive. The first respondent is also not liable pursuant to s 75B of the Act for this representation. 58 The evidence of the applicants indicates that the first respondent was aware of facts which rendered representation (a) misleading and deceptive. For the reasons discussed in relation to the representations made to the first applicant, the first respondent was aware that EVP Holdings and EVP Recruitment did not have "a solid and successful trading history". 59 The second applicant undertook steps to invest in EVP Sydney in the days following the representations, executing the relevant agreements on 3 June 2004. The second applicant would not have invested in EVP Sydney if he had known that representation (a) was misleading and deceptive. The first respondent is liable for any loss or damage caused by representation (a) made to the second applicant pursuant to ss 75B and 82 of the Act.

[18]

The further representations made to the second applicant 60 The second applicant was also the subject of the further conduct identified as (a), (b) and (e)-(g) in [15] of these reasons. This conduct included both positive representations by the first respondent and representations implied by the first respondent's silence. 61 For the reasons discussed in relation to the first applicant, the conduct was attributable to EVP Holdings and EVP Recruitment rather than the first respondent personally. Also for the reasons discussed above, conduct (a), (f) and (g) was misleading and deceptive conduct in contravention of s 52 of the Act. 62 The first respondent was aware of the importance of representations (a) and (b) to the second applicant, but nevertheless failed to correct the representations until 24 January 2005. A letter of that date and an attached "EVP Recruitment Pty Ltd Proforma Balance Sheet as at 31 December 2004" to the second applicant disclosed the true financial position of EVP Holdings and EVP Recruitment. As the second applicant admitted, the letter revealed that "neither company was financially stable". After this date the second applicant cannot be said to have acted in reliance on the representation that the ongoing financial position of either EVP Holdings or EVP Recruitment was sound. 63 For the reasons outlined in relation to the first applicant, conduct (e) towards the second applicant was a contravention of s 52 by EVP Holdings and EVP Recruitment. For those reasons also, the first respondent was a party to this contravention. The second applicant was not advised of the second respondent's bankruptcy until 15 September 2004. The first respondent is only liable for loss or damage suffered by the second applicant as a result of the contravention until this date. 64 The conduct in (f) and (g) was directed at the second applicant. The conduct was misleading and deceptive conduct in contravention of s 52 of the Act as it induced in EVP Recruitment's administrator the belief that the altered financial records were accurate records. The second applicant is eligible for compensation in accordance with s 82 for any loss or damage which he suffered by the contravention of s 52 of the Act.

[20]

Liability for the initial representations made to the third, fourth and fifth applicants 68 The representations relied upon by the third applicant were made in emails sent by the first respondent to the third applicant on 29 July 2007; emails from the second respondent to the third applicant on 28 July 2004 and 29 July 2004; emails from Mr Smith to the third applicant on 3 August 2004 and 4 August 2004. The third applicant also relied on representations made during telephone conversations with the first respondent on 21 July 2004 and 28 July 2004. 69 For the reasons discussed in relation to the first and second applicants, the relevant representations were made by EVP Holdings and EVP Recruitment rather than by the first respondent in a personal capacity. 70 The first respondent is not liable pursuant to s 75B for the representations made in the emails dated 28 July 2004 and 29 July 2004 from the second respondent to the third applicant. The first respondent is also not liable for the representations made by Mr Smith in his emails to the third applicant dated 3 August 2004 and 4 August 2004. The first respondent was not a party to these communications and there is no evidence that he was aware of the emails or approved of them being sent. 71 The first respondent authored the emails to the third applicant on 29 July 2004 and participated in the relevant telephone conversations with the third applicant. The representations identified in [28] as (a), (b), (h) and (l) were made in these communications. 72 The first respondent was aware of facts which rendered representations (a) and (b) misleading and deceptive. For the reasons discussed in relation to the first and second applicants, the first respondent was aware that EVP Holdings and EVP Recruitment did not have "a solid and successful trading history". Representation (b) to the third applicant was made after the first respondent's letter to Mr Smith of 12 July 2004 which discussed the poor performance of EVP West End Pty Ltd. The letter indicates that by the time the first respondent made representation (b) to the third applicant, he was aware of facts which rendered that representation misleading and deceptive. 73 The third applicant would not have invested in EVP Executive if he had known that representation (a) was misleading and deceptive. The first respondent is liable pursuant to ss 75B and 82 of the Act for loss or damage suffered by the third, fourth and fifth applicants for representations (a) and (b). 74 The applicants did not adduce evidence to show that the first respondent was aware that representation (h), regarding the accuracy of the financial projections provided to the third applicant, was misleading or deceptive. Ms Mashlan said that the first respondent did not request the financial information which would be required to produce a budget for EVP Executive. However, the budget in question was not prepared by the first respondent. Accordingly, the first respondent is not liable pursuant to ss 75B and 82 of the Act for this representation. 75 There is no evidence that the first respondent was aware in July 2004 of facts which made representation (l) misleading and deceptive. The applicants did not prove that the first respondent knew that the third, fourth and fifth applicants would be required to contribute more that $40,000 in working capital or that EVP Recruitment would not provide working capital to EVP Executive as required. The first respondent is not liable pursuant to ss 75B and 82 of the Act for this representation.

[21]

Further representations made to the third, fourth and fifth applicants 76 The third, fourth and fifth applicants were the subject of the conduct identified as (b) and (e)-(g) in [15] of these reasons. This conduct included both positive representations by the first respondent and representations implied by silence. For the reasons discussed in relation to the first and second applicants, the conduct was attributable to EVP Holdings and EVP Recruitment rather than the first respondent personally. 77 Further conduct (f) and (g) was misleading and deceptive conduct in contravention of the Act for the reasons discussed in relation to the first and second applicants. The conduct in (f) and (g) was not directed at the third, fourth and fifth applicants. Nevertheless, the conduct was misleading and deceptive in contravention of s 52 of the Act as it induced EVP Recruitment's administrator to believe that the altered financial records were accurate financial records. The third, fourth and fifth applicants are eligible for compensation for any loss or damage which they suffered by conduct the breach of s 52 of the Act; see s 82 of the Act. 78 Representation (b) was misleading and deceptive conduct as it induced these applicants to believe that the financial position of the companies was sound. The evidence indicates that the first respondent was aware of the importance of representation (b) to the third and fourth applicants, but nevertheless failed to correct the representation until 14 December 2004. In a telephone conversation, the first respondent advised the third applicant on that date that "[EVP] Recruitment anticipated a funding shortfall over the Christmas period". After 14 December 2004, the third, fourth and fifth applicants did not act in reliance on the representation that the ongoing financial position of either EVP Holdings or EVP Recruitment was sound. 79 For the reasons outlined in relation to the first and second applicants, conduct (e) towards the third, fourth and fifth applicants was a contravention of s 52 by EVP Holdings and EVP Recruitment. For those reasons also, the first respondent was a party to this contravention. The third, fourth and fifth applicants were advised of the second respondent's bankruptcy on 14 September 2004. The first respondent is only liable for loss or damage suffered by the third, fourth and fifth applicants as a result of the contravention until 14 September 2004.

[22]

Initial Representations made to the sixth applicant 80 The sixth applicant invested in EVP IT&T (Brisbane) Pty Ltd, later known as EVP Info-Tech (Brisbane) Pty Ltd, ("EVP IT&T") joint venture with EVP Recruitment. 81 The representations identified in [28] of these reasons as (a), (b), (d), (h), (l) and (m) were made to the sixth applicant. 82 Representations (a), (b), (d), (h), (l) and (m) were misleading or deceptive conduct in contravention of s 52 of the Act for the reasons discussed in relation to the first to fifth applicants. The representations made to the sixth applicant were made by EVP Recruitment and EVP Holdings, rather than the first respondent in a personal capacity. The respondent is not primarily liable for the representations. Any liability on the part of the first respondent for the representations made to the second applicant can only arise under s 75B of the Act. 83 Representations (a), (b), (d), (h), (l) and (m) were made in emails from Mr Smith, documents provided by Mr Smith to the sixth applicant and in an advertisement which directed interested persons to contact the second respondent. There is no evidence to show the first respondent prepared or authorised the documents, advertisement and emails. The representations were also made during a meeting which the first respondent did not attend. No liability on the part of the first respondent arises in relation to these representations under ss 75B and 82 of the Act. 84 The sixth applicant also pleads that misleading or deceptive representations were made in two conversations with the first respondent in September 2004 and during a telephone conversation with the first respondent in mid‑November 2004. The sixth applicant did not give any evidence of a conversation with the first respondent in mid‑November 2004. 85 The representation identified as (h) was made during a meeting between the sixth applicant, the first respondent, Mr Smith and Mr David Young, a representative of EVP Recruitment, in September 2004. As discussed in relation to the third to fifth applicants, the applicants failed to prove that the first respondent was aware that the representation regarding the accuracy of the financial projections was misleading or deceptive. The first respondent is not liable in relation to this representation.

[23]

Further representations made to the sixth applicant 86 The sixth applicant was the subject of the conduct identified as items (b), (e)-(g) in [15] of these reasons. This included both positive representations by the first respondent and representations implied by the first respondent's silence. For the reasons discussed in relation to the first and second applicants, the further conduct was attributable to EVP Holdings and EVP Recruitment rather than the first respondent personally. 87 Representation (b) was misleading and deceptive conduct as it induced the belief that the financial position of the companies was sound. The first respondent was aware of the importance of representation (b) to the sixth applicant, but nevertheless failed to correct the representation. The first respondent is liable pursuant to ss 75B and 82 of the Act for loss or damage suffered by the sixth applicant as a result of representation (b). 88 For the reasons outlined in relation to the other applicants, conduct (e) towards the sixth applicant was a contravention of s 52 by EVP Holdings and EVP Recruitment. For those reasons also, the first respondent was a party to this contravention. The evidence of the sixth applicant is: Had I known that Hughey, who had executed the Agreements as a director of [EVP] Recruitment during our meeting on 3 November 2004, had in fact been placed into bankruptcy in New Zealand on 7 July 2004, I would not have executed the Agreements, nor would I have paid the purchase price. 89 The sixth applicant learnt of the second respondent's bankruptcy in a conversation with the second respondent on 24 December 2004. The first respondent is only liable for loss or damage suffered by the third, fourth and fifth applicants as a result of the contravention until 24 December 2004. 90 The conduct identified as (f) and (g) was misleading and deceptive conduct for the reasons discussed in relation to the other applicants. Conduct (f) and (g) was not directed at the sixth applicant. Nevertheless, the conduct was misleading and deceptive conduct in contravention of s 52 of the Act as it induced in EVP Recruitment's administrator the belief that the altered financial records were accurate financial records. The first respondent is also liable under ss 75B and 82 for loss or damage which the sixth applicant suffered by conduct the breach of s 52 of the Act.

Duxbury v Pierce

At a glance

Court

Decision date

Before

Source

Judgment (30 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (3)

Cited By (2)