Moss v Lowe Hunt & Partners Pty Ltd

Counsel for the Respondents: Mr N Rochow SC and Ms R Gray

1. There will be judgment in favour of the second applicant in the sum of $306,740. 2. Costs are reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

Introduction 1 This case is all about adjectives. More particularly, it is about the meaning of one adjective. At its heart is the question of whether it is misleading or deceptive (or likely to be such) to describe a business as successful when, but for the continued support of its parent company (itself not without difficulties), it would be insolvent. 2 The first applicant, Andrew Didsbury Moss, is the principal and sole director of the second applicant, Pegasus Strategic Planning Pty Limited ("Pegasus"), an independent advertising and research consultancy Mr Moss incorporated and began offering his services through it in late 2004 or early 2005. Lowe Hunt is an advertising agency formed from a partnership of the two respondents, both trading corporations. Mr Moss first did work for Lowe Hunt in 2004 through one of Pegasus's predecessors. Gradually the amount of work Mr Moss (through Pegasus) was doing for Lowe Hunt increased and he was courted by its Group Managing Director, Benjamin Colman, to accept a position as an employee of the business, working as its Strategic Planning Director. For some time Mr Moss rebuffed Mr Colman's overtures, but in October 2005 he claims he was finally lured away from his own business by the promise of an attractive salary package, leave entitlements and repeated assurances about the success of Lowe Hunt, which he took to involve its financial success. Yet, it was common ground that the business was not a financial success. Redundancies that were made shortly before Mr Moss was hired were followed within 18 months by his own. He has since returned to running his own business; however Pegasus contends that it has suffered financially because of his ill-fated decision to join the staff of Lowe Hunt.

The claim 3 Pegasus alleges that Mr Moss was misled, if not deceived, into entering the contract of employment and remaining an employee in contravention of ss 52 and 53B of the Trade Practices Act 1974 (Cth)("TPA") and/or ss 42 and 46 of the Fair Trading Act 1987 (NSW)("FTA"). The offending conduct was said to consist of both a number of representations (both express and implied) made by Mr Colman on Lowe Hunt's behalf and a failure to disclose information that affected Lowe Hunt's attractiveness as an employer. Pegasus maintains that, as a result of being induced to enter into the contract, it lost the opportunity to continue, develop and grow its business. 4 Pegasus claims damages under s 82 of the TPA or s 68 of the FTA. Mr Moss's personal dispute with the respondents has been resolved. The only relief he sought in the amended application was an order for costs up until 23 July 2008 when Lowe Hunt agreed to pay his claim. On 25 March 2010 I made an order in those terms. Thus, this judgment is concerned only with the claim brought by his company.

The representations 5 Pegasus pleads that there were four representations made by Mr Colman on Lowe Hunt's behalf before and around the time he entered into the contract of employment, each of which constituted misleading or deceptive conduct or conduct that was likely (or liable, in the words of s 53B of the TPA and 46 of the FTA) to mislead or deceive. Pegasus also pleads that there was a failure to disclose information bearing on whether Lowe Hunt's financial position made it an attractive employer and that, in the circumstances, this also constituted misleading or deceptive conduct. In its submissions and in the conduct of the case, however, Pegasus made it plain that its case based on non-disclosure was not confined to the post-contractual period. 6 The first representation is said to have been made by Mr Colman in April 2005 in a presentation to prospective clients of Lowe Hunt. It is a representation that Lowe Hunt was a financially successful agency in Australian advertising at the time. 7 The second representation is said to have been made in the period April to June 2005, again by Mr Colman, and to have comprised a representation that Lowe Hunt was in a great position during that period (making it a desirable employer) and was likely to be successful financially in the future. 8 The third representation is said to have been made on 13 October 2005, just before Mr Moss started work at Lowe Hunt and consisted of Mr Colman's assurance (in response to an inquiry from Mr Moss about Lowe Hunt's financial position) that "[t]he redundancies place Lowe Hunt in a very healthy financial position", a position he conceded in cross-examination was quite untrue. 9 The fourth representation was allegedly made the next day and to have consisted of Mr Colman's words: The savings made will translate the balance sheet from a $1 million plus loss to a $1 million operating profit. 10 Pegasus claims that each of the representations was contrary to the fact. 11 Moreover, Pegasus alleges that by 13 October 2005 Mr Colman was aware of Mr Moss's background, the impact that working exclusively for Lowe Hunt would have on his own business and that Mr Moss was likely to rely on him, so there was a reasonable expectation that he would be informed if Lowe Hunt was not in a sufficiently strong position financially to make the prospect of entering into an employment contract a desirable one for him. Pegasus relies on this circumstance to complain that the failure to disclose information showing that Lowe Hunt was not in a sufficiently strong position to be a desirable employer from 13 October 2005 until November 2006 amounted to breaches of the statutory norms in the TPA and the FTA. 12 Mr Colman did not dispute that he made the first two representations but he denied making the third and fourth representations. He claimed that at the time the third and fourth representations were allegedly made he would not have used the language attributed to him to describe the financial position of the agency as he was aware that the agency was making continuing losses and was dependent on its US parent, the Interpublic Group of Companies ("IPG") to remain solvent and he conceded that at the time Mr Moss accepted his job offer, IPG, itself, was undergoing very serious financial problems. He specifically denied that Mr Moss even inquired about the financial position of Lowe Hunt on 13 October.

The ambit of the dispute 13 Until after the evidence closed, Lowe Hunt denied that it made any of the representations alleged against it, denied that its conduct was misleading or deceptive or likely to mislead or deceive, denied that it was engaged in trade or commerce when the conduct occurred and also denied that Pegasus suffered any loss or damage as a result of it. 14 Despite these denials and the sworn evidence of its primary witness, in final submissions Lowe Hunt conceded that the third and fourth representations were in fact made and that in making them Lowe Hunt (through Mr Colman in his capacity as Managing Director) had engaged in conduct that contravened s 53B of the TPA. With respect to the claim of non-disclosure after entry into the contract, Lowe Hunt apparently conceded that the true financial position was not disclosed to Mr Moss and Pegasus, but submitted that there was no obligation of disclosure, any misleading and deceptive conduct was not "in trade or commerce" (and was, thus, not caught by the TPA) and, in any case, did not cause any further loss than was caused by the third and fourth representations. 15 Lowe Hunt also maintained its denial that the representations about the financial position of the business caused Mr Moss's company any loss. 16 In view of its admissions Lowe Hunt submitted it was not necessary to determine whether the first or second representations were made or were misleading. Yet, as causation and damage remain in dispute, Pegasus urged that findings on the other representations also be made. 17 The resolution of the remaining factual issues on liability turns on the credit of the two protagonists, Mr Moss and Mr Colman. At all material times Mr Colman was an employee of Lowe Hunt. The effect of s 84(2) of the TPA and s 70(2) of the FTA is that his conduct on behalf of Lowe Hunt is deemed to be conduct in which Lowe Hunt also engaged.

Uncontested facts 18 The following recitation of the facts is either admitted or undisputed. 19 Mr Moss was at all relevant times the sole director of Pegasus. The income of Pegasus was derived solely from his labour. 20 In 2004 Mr Moss's services were first contracted to Lowe Hunt and in the period 1 February 2005 to 13 October 2005 Lowe Hunt became Pegasus's main client. 21 Mr Colman had a very high regard for Mr Moss's skills. In December 2004 and a number of times in 2005 he approached him in an effort to persuade him to join the staff of Lowe Hunt as its Strategic Planning Director. Until September 2005 Mr Moss indicated he was not interested but in September he indicated otherwise and discussions then ensued about the terms of a contract of employment. 22 During the week commencing 10 October 2005 Mr Colman told Mr Moss that "several people" were being made redundant. On 13 October 2005 Mr Moss understood that the redundancies affected at least ten people, including some in senior positions. The following day Mr Colman announced the redundancies of 20% of the agency's staff. 23 Although the evidence is not clear about this, it would seem that Mr Moss started working full-time for Lowe Hunt around 14 October, but certainly after 13 October, 2005. It was not until 9 December 2005, however, that he signed a contract of employment. The contract provided for a remuneration package of $330,000 gross, including compulsory superannuation contributions and four weeks annual leave. It also provided that, while he was employed by Lowe Hunt, Mr Moss was not permitted to undertake any work, "directly or indirectly", in any capacity for any business which was similar to or competed with Lowe Hunt or its associated companies, without its consent. Clause 7 provided for a right of termination on three months' notice or summarily for serious and wilful misconduct. 24 Clause 9 was in the following terms: This letter supersedes all previous agreements, arrangements and understandings. No amendment or variation of this agreement is valid or binding on either party unless made in writing and executed by both parties. 25 Notwithstanding this clause, however, Mr Colman had verbally agreed that the deal was for six weeks leave and the case was conducted on the basis that the parties had agreed that Mr Moss was entitled to six weeks annual leave. 26 On 23 February 2007 - within fifteen months of signing the contract - Mr Moss was made redundant.

The question of credit 27 Before I turn to the dispute it is necessary to say something about the credibility of the two protagonists. 28 Whilst at times Mr Moss gave discursive answers to questions that might be thought to have warranted briefer responses, he never struck me as evasive. Rather, I formed the strong impression that he was a careful and thoughtful witness, who was trying to give considered and truthful answers to the questions asked of him. That presentation is consistent with the way he said he behaved in the relevant period and lends credence to his claims. Although he was challenged on many key points, his credit was never undermined. He is also supported in material respects by other evidence to which I will come later. 29 Mr Colman, on the other hand, presented in an altogether different way. He was given to overstatement. He conceded he had made a number of misleading statements in significant documents and he was quick to shift responsibility to others. At one point in cross-examination he admitted to making a false statement to prospective clients in Mr Moss's presence because he perceived it to be in his employer's interests. Despite what he told the prospective clients on that occasion, he acknowledged that Lowe Hunt did not have 150 offices around the world and his intention in making that statement was to mislead people into thinking that it did. He purported to justify his behaviour by claiming it was "standard business practice within the advertising industry". At another point he admitted that he informed a journalist in March 2006 that Mr Moss was doing "a brilliant job" as Strategic Planning Director but he told the Court the statement was false, once again made to further what he perceived to be his employer's best interests. 30 In a written statement he made in April 2007 in response to Mr Moss's allegations, he declared that discussions concerning the financial position of the agency were "a constant theme" of leadership meetings. Later, however, he deposed that such discussions were "rare", then refused to concede an inconsistency, trying to reconcile the apparently inconsistent statements in a thoroughly unconvincing way. 31 In cross-examination Mr Colman denied he had been a director of either respondent company. He did so despite the fact that he is listed in the financial statements of the second respondent (Lowe Sydney Pty Ltd) as a director for a period of nearly three years, from 12 March 2004 to 6 December 2006, and the minutes of the board of directors of the company show that a meeting held on 6 December 2006 (at which the only persons present were him and Mr Hunt) resolved to accept his resignation as director. His answers in cross-examination to the questions about this matter were troubling. At first he told the Court that the financial statements which showed him to be a director were false and so, too, he said, was the ASIC historical extract that also showed him as a director. It was put to him that there were only two explanations for his conduct - either he was lying to the Court or he was "staggeringly incompetent" for not knowing whether he was a director or not. He replied that there was a third - that someone had processed the documents without his knowledge - a course he conceded would have been scandalous and one I consider extremely improbable. Then the following exchange occurred: MR LEE: And I want to suggest to you it is quite a wicked thing for you to do in the witness box to make an allegation that someone has falsely prepared a document of this nature and presented it to ASIC and presented to the auditors?---I have no other explanation. HER HONOUR: So the conclusion you would urge upon the court is that I find that somebody falsified the records for ASIC; is that correct?---Yes, or, your Honour, I am in error, and I don't recall signing the documentation. 32 Overall, Mr Colman was an unimpressive witness, who presented as one who was inclined to say what he thought at the time might help him or the case he had been called to support. It was difficult to know when he was telling the truth. Where his evidence is in conflict with that of Mr Moss, I prefer the evidence of Mr Moss.

The first representation 33 The first representation is said to have been made on 18 April 2005 in Mr Moss's presence when Mr Colman said words to the effect:

"Lionel Hunt is the creative talent that changed the face of Australian advertising … and is doing it again. Lionel is now the founder of 2 successful agency brands. Lowe have offices in Sydney, Melbourne and Auckland. We have over 200 people and generate $300 million in billings. Our Sydney office is one of the network's 12 lead offices and we have 150 offices around the world." 34 Mr Moss pleaded that by these statements Mr Colman represented (on behalf of Lowe Hunt) that Lowe Hunt was a financially successful agency in Australian advertising as at April 2005. 35 Mr Moss's evidence about the first representation was that he attended a "pitch" on or around 18 April 2005 (the same pitch made on at least three occasions) at which Mr Colman presented Lowe Hunt's credentials to prospective clients. The pitch was presented with the aid of a PowerPoint presentation. Although Mr Moss billed Lowe Hunt for his time, he disavowed any role in developing that presentation and Lowe Hunt called no evidence to the contrary. The PowerPoint presentation corroborated Mr Moss's account. 36 Lowe Hunt contended, in effect, that Mr Colman's representation had nothing to do with financial success. In its written submissions it made the following points: · Mr Moss was unable to say whether or not the PowerPoint presentation evidencing the content of the representation was a draft. · He was unable to say how he came into possession of the PowerPoint presentation. · He was unable to say when precisely the representation was said to have been madebut recognised in any event that it was made in the context of a "pitch" to potential clients, a process in which he himself was engaged on behalf of Lowe Hunt. Accordingly, the emphasis, more likely than not, would have been on creativity rather than profitability. · He agreed that the reference to "billings" is advertising terminology for the amount of media expenditure by clients in relation to the promotion of a creative idea generated by the particularagency and that this is understood by advertising clients. · He could not say that the statement that Sydney, Melbourne and Auckland offices generated $300 million in billings was inaccurate. · As to the balance of the matters contained in the PowerPoint presentation, he knew from his own experience and knowledge that they might be qualified in various ways. · It is not apparent from either his affidavit evidence or his oral testimony that he was misled in any material way. 37 None of these circumstances seems to me to be to the point. It does not matter whether the PowerPoint presentation was a draft or that Mr Moss might have been unable to say how he came into possession of it. Mr Colman admitted he made the representation in the manner in which Mr Moss deposed. Neither does it matter what the emphasis of the presentation might have been. The question concerns whether what was said was misleading or deceptive or likely to be so. The presentation was clearly designed to create the impression that the business was a financial success with a solid base. It was not just focussed on the creative talents of its owner or staff. As for the submission that "it is not apparent" that Mr Moss was misled by it, it is well accepted that there may be a contravention of s 52 although no-one was actually misled. Whether any damage was caused by the conduct is another matter to which I will return later. 38 It is true that Mr Moss agreed in cross-examination that "billings" is "advertising agency terminology for the amount of media expenditure by clients in relation to the promotion of a creative idea generated by the particular agency". But he disputed that the term had nothing to do with revenue or profitability, as Mr Colman had said in his affidavit, insisting that it was "a financial indicator" and that "one would assume, given the size of that billings figure, that it will relate to the profitability based on benchmarks within the industry, for instance". 39 Section 52 of the TPA provides: (1) A corporation will not, in trade or commerce, engage in conduct that is 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). 40 Section 42 of the FTA is in essentially the same terms. 41 Section 53B of the TPA provides: A corporation will not, in relation to employment that is to be, or may be, offered by the corporation or by another person, engage in conduct that is liable to mislead persons seeking the employment as to the availability, nature, terms or conditions of, or any other matter relating to the employment. 42 Section 46 of the FTA is in similar terms. 43 There is no statutory definition of "misleading" or "deceptive". As Gibbs CJ observed in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 the words are tautologous as they can both mean "to lead into error" and it is this sense in which they are used in the legislation. See also Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 ("Miller") at [15]. 44 Heydon J, writing extra-judicially in Trade Practices Law, said of the formulation "liable to mislead" used in s 53B (at [12.940]): "Liable to mislead" will probably be interpreted to mean nothing more than "misleading" (ss 52 and 53-53A) or "likely to mislead" (s 52)… If there is a difference, something "liable to mislead" would seem to be less certain to be so than something "likely to mislead". Plainly no-one need actually be misled. 45 Nonetheless the expression has been held to impose a higher threshold than "likely to mislead": Westpac Banking Corporation v Northern Metals Pty Ltd (1989) 14 IPR 499. Happily, the difference between the two formulations is a matter of academic interest in this case. As long as Pegasus can prove that damage has been caused by a contravention of any of the provisions upon which it relies, it is entitled to the relief it seeks. 46 In deciding whether Lowe Hunt engaged in conduct that is misleading or deceptive or likely (or liable) to mislead or deceive, the question is not what the respondents intended but what were the consequences of their conduct. It does not matter that Mr Colman may not have intended to mislead Mr Moss: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 ("Hornsby") at 228. The test of whether conduct is misleading or deceptive or likely to be such is entirely objective. Moreover, it is not necessary for the applicant to prove that it is more likely than not that he would have been misled or deceived. All that must be shown is the existence of a real or not remote chance that might occur, even if the chance does not rise above 50%: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87; Equity Access Pty Ltd v Westpac Banking Corporation & Westpac Savings Bank Ltd (1990) ATPR ¶40-994 at 50-950. 47 Pegasus argued that the first representation could be characterised as misleading in at least three ways: (a) As a misrepresentation because it is simply false, on any ordinary meaning of the adjective "successful", to describe a business as successful if it is not making money; (b) As a misrepresentation by silence, in the sense that Lowe Hunt failed to make full disclosure of its situation in circumstances where Mr Moss could reasonably expect that its financial situation would be disclosed to him; or (c) As a misrepresentation by half-truth, in the sense that Mr Colman said something that was true, i.e. Lowe Hunt was successful in at least one reasonable meaning of that adjective (e.g. creatively successful as it was winning awards), but was nevertheless misleading because it did not exclude the other more obvious meaning, that it was prosperous. 48 If the representation was made two questions arise. What was to be taken by Mr Colman's conduct (having regard to the fact that he is not said to have made a representation in terms that the business was successful or was financially successful)? And was what he represented misleading or likely to mislead? 49 Lowe Hunt argued that neither the first nor the second representation was "proven to the requisite standards in order to be actionable". I bear in mind the salutary warning given by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-19 upon which Lowe Hunt relied: Where the conduct [alleged to contravene s 52 of the TPA or s 42 of the FTA] is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. 50 Here, however, Mr Colman did not deny he uttered the words attributed to him. He merely tried to put a different spin on them. He testified that "billings" is a term of art in the advertising industry and "has nothing to do with the revenue or profitability of the agency" but to the amount of media spending that an advertising concept generates. 51 It may be literally true that "billings" relates to the amount of media expenditure by clients but in the circumstances it may also be misleading as explained in Hornsby at 227: No doubt the meaning of the statutory prohibition which s 52 (1) enunciates must be gained from the terms of the sub-section itself; but nothing in those terms suggests that a statement made which is literally true … may not at the same time be misleading and deceptive. It clearly may be. To announce an opera as one in which a named and famous prima donna will appear and then to produce an unknown young lady bearing by chance that name will clearly be to mislead and deceive. The announcement would be literally true but none the less deceptive, and this because it conveyed to others something more than the literal meaning which the words spelled out. 52 Mr Colman agreed in cross-examination that billings alone do not provide an accurate guide as to the financial health of an agency as the expenses associated with their generation might be so large as to make the business unsuccessful. But he conceded that the size of the billings could tell you something about an agency; that it was "an indicator", although not necessarily "a conclusive indicator". Although he did not say so expressly, I do not think it unfair (given the context of the cross-examination) to take this as a concession that the size of the billings was an indicator, though not a conclusive indicator, of the financial success of the business. In any case, a statement about the size of the billings with no reference to the level of expenses is apt to lead a person to think that the business is a financial success. In my view, the representation that Mr Colman made in April 2005 was likely to lead a reasonable person to believe that the business was financially successful. Without qualification and in the context in which the statement was made, the reference to $300 million in billings and 150 offices around the world amounted to a representation that the business was financially successful. 53 Yet, the business did not enjoy financial success. The following matters were either admitted or not disputed. 54 At all material times Lowe Hunt depended upon IPG's financial support to continue trading because there was an excess of liabilities over assets. 55 For the reporting period 1 January 2003 to 31 December 2003 Lowe Hunt made a net loss of over $1.1 million, net liabilities exceeded net assets by over $2.5 million, and was only able to continue to trade as a going concern due to the agreement of IPG to continue to provide financial support. 56 The fundamentals of Lowe Hunt's business did not improve. In fact, the figures conceded by Lowe Hunt show that the situation grew steadily worse with the business making larger trading losses in 2004, 2005 and 2006 and the ratio of liabilities to assets also worsening throughout the same period. 57 Letters of support were said to have been provided by IPG, although the only such documents tendered in evidence post-date the period of Mr Moss's employment. 58 The business also experienced ongoing cash flow problems, as operating costs exceeded revenue. By June 2005 its financial position was such that it was not in a position to pay interest due on its borrowing from IPG as and when the payments fell due. 59 At the same time there were question marks over IPG's financial position. In its annual report (Form 10-K) filed with the US Securities Exchange Commission for the fiscal year ending 31 December 2005 IPG warned investors to carefully consider a number of "potential risks", including: · Numerous potential weaknesses in internal control over financial reporting, "each of which results in more than a remote likelihood that a material misstatement will not be prevented or detected" (p 5); · The need for "extensive work" to remedy the material weaknesses in internal control over financial reporting (p 6); · The burden of substantial ongoing compliance costs (p 6); · An ongoing Securities Exchange Commission ("SEC") investigation (p 6); · The prospect of obligations eating into the Group's cash flow for future years as well as the chance of fines, other penalties or damages "in our ongoing SEC investigation or new regulatory actions or civil litigation", any of which could also contribute to further ratings downgrades, negative publicity and difficulties attracting and retaining key clients, employees and management personnel (p 6); · Recent liquidity problems including "operating losses that have adversely affected our cash flows from operations" and which will continue indefinitely with no guarantee that new sources of funding on commercially reasonable terms or at all could be found (p 7); · A long term debt currently rated B+ by two ratings agencies and the prospect of further reduction influencing access to capital (p 7). 60 The report also disclosed trading losses for the years 2003, 2004 and 2005. 61 In all these circumstances the financial position of Lowe Hunt was, at least, vulnerable. It certainly could not be described as financially successful in April 2005, no more than in September or October. Mr Colman, himself, conceded in cross-examination that he would not regard as successful a business operation that was making ongoing losses. 62 Although Lowe Hunt opened its case concerning the third representation by submitting, in effect, that the support of IPG meant that the representation (if made) was not misleading or deceptive, once the admissions about the third and fourth representations were made, it made no submissions about the effect of support from IPG. In the circumstances, I take it as implicit that Lowe Hunt accepts that, even with IPG's support, it could not accurately be said to have been financially successful at the relevant time. 63 Lowe Hunt argued, however, that "the suggestion that there is some expectation of financial disclosure from a prospective employer which gives rise to a claim for damages is without basis in the case at Bar", citing Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458 ("Lam") at 475. It is difficult to see how that decision affords any assistance to Lowe Hunt. Rather, in Lam the Court recognised that silence may be an element in the circumstances of the case which makes the conduct in question misleading regardless of whether there is a duty to disclose at common law or in equity. See, too, Commonwealth of Australia v Mehta (1991) 23 NSWLR 84 at 88, cited with approval by the Full Court in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 ("Demagogue") at 40 per Gummow J, Black CJ agreeing at 31 and Copper J at 46. If the circumstances indicate that silence amounts to misleading or deceptive conduct, then there is a statutory duty of disclosure: Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) ¶53,193 at 53,195 per French J, approved by the Full Court in Demagogue at 41. Silence or non-disclosure about a fact or state of affairs will amount to a misrepresentation where there is a reasonable expectation that the representor would speak or disclose. See, e.g. Gillette Australia Pty Ltd v Energizer Australia Pty Ltd, [2002] FCAFC 223, 193 ALR 629 at 646 per Lindgren J and the cases to which his Honour refers. The knowledge of the person to whom the representation is made may be relevant: Miller at [20]. The question is whether the circumstances called for something more to be said. 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. That 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. 64 Consequently, I find that the applicant has made out its case on the first representation. I am satisfied that the conduct was in contravention of s 52 of the TPA and s 42 of the FTA. It is not necessary for me to decide whether it is also a contravention of s 53B of the TPA or s 46 of the FTA. Whether it caused Mr Moss any damage is another question to which I will return later.

The second representation 65 The second representation was said to have been made between April and June 2005 during a conversation in which Mr Colman was trying to entice Mr Moss onto the staff of the agency. It was pleaded as a representation that during this period the business was in a great position which made it a desirable employer and likely to be successful financially in the future. The statements in which the representation is alleged to have been made were: You should really consider joining us now Adam has joined. The agency is in a great position. We have all the right people in place. Adam will be a great asset. I had to try really hard to get him back. Lionel has agreed to step back. Lionel realises he needs to hand over the reins to people who understand the new media landscape and potential for creative innovation. There is nothing stopping us now. You would also be a great asset to the agency. 66 Lowe Hunt submitted that: · The representation, at its highest, was "ambiguous as to its reference to the financial position since the emphasis was clearly on creativity". · It was true that Mr Colman considered Mr Moss to be a great asset to the agency. 67 Mr Colman denied using the specific words attributed to him. His answers to questions on this subject in cross-examination are instructive. MR LEE: I am suggesting that you had a conversation, Mr Colman, with Mr Moss, in which you said words to the following effect. You said: You should really consider joining us. Now Adam has joined the agency is in a great position. We have all the right people in place. Adam will be a great asset. I had to try really hard to get him back. Lionel has agreed to step back. Lionel realises he needs to hand over the reins to people who understand the new media landscape and potential for creative innovation. There is nothing stopping us now. You would be a great asset to the agency. And Mr Moss said: Thanks, Ben. I do like the changes that have been happening. I respect the agency's potential and appreciate being involved in the way that I am. However, I am still happy with the arrangement as it is now. Do you recall that?---I recall the sentiment of - the detail of the conversation. The sentiment of "Nothing is stopping us now" is not a phrase that I would use, but I did paint a positive picture of the future for Mr Moss in that conversation, because Adam is a very talented, creative professional. And the reason why you say you didn't use the words, There's nothing stopping us now, is because, again, that would have been an incorrect thing to say at that time, because there were things stopping you, weren't there?---It's just not a phrase I would use. (Emphasis added.) 68 I conclude from this exchange that Mr Colman did, indeed, have a conversation to the effect of that which Mr Moss described. I also consider that it is likely that he either used the expression "there is nothing stopping us now" or he said words to similar effect. I reach that conclusion as I have no faith in the denials that Mr Colman made, having regard to the inconsistencies in his evidence and his admission that he would make a false statement where he perceived it to be in his employer's interests. The words were capable, without qualification, of leading someone to believe that the business was in great financial shape. 69 The next question is whether it was false or misleading or liable to mislead to make such a representation. 70 Despite what Mr Colman led Mr Moss to believe, he admitted in cross-examination that Lowe Hunt was "not in a great position" in April or June 2005. I am satisfied that the admission was well founded. As counsel for Pegasus submitted, a business cannot be "in a great position", if it is exponentially losing money each year or is unable to immediately arrest its poor financial performance. 71 The representation may be characterised as both a representation relating to the future and also a statement of present opinion (the opinion, of course, relating to the future). But s 51A of the TPA applies regardless: Ting v Blanche (1993) 118 ALR 543 at 552-3; Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58, 62 IPR 184 at [99]-[102]. Section 51A provides: 51A Interpretation (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation will be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation will, unless it adduces evidence to the contrary, be deemed not to have reasonable grounds for making the representation. (3) Subsection (1) will be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead. 72 The onus referred to in subsection (2) is an evidentiary, not a legal onus: North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60, 269 ALR 262 at [29]-[35]. The effect of the section is that, in the absence of reasonable grounds for it, this representation is taken to be misleading. 73 Section 41 of the FTA is to similar effect, but squarely places both evidentiary and legal onus of proof on the person making the representation. It provides: (1) For the purposes of this Part, where a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation will be taken to be misleading. (2) The onus of establishing that a person had reasonable grounds for making a representation referred to in subsection (1) is on the person. (3) Subsection (1) will not be taken to limit by implication the meaning of a reference in this Part to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead. 74 It might be doubted whether Lowe Hunt adduced evidence sufficient to discharge its evidentiary burden. Lowe Hunt did not point to any such evidence in its submissions and there was no expert evidence about the future success of the business. I am not satisfied that Lowe Hunt has discharged the legal burden imposed upon it by s 41(2) of the FTA. In view of Mr Coleman's admission by cross-examination, the first part of the representation is misleading or likely to mislead. The second part is deemed to be misleading. 75 Accordingly, contraventions of the relevant sections of the TPA and the FTA have been proved.

"Misrepresentation by silence" from October 2005 to November 2006 76 I have already commented on the failure to disclose before Mr Moss joined the staff of Lowe Hunt. For completeness, I now turn to the post-contractual period. In March to April 2006, after reports appeared in the trade press that IPG was closing a large number of Lowe Hunt offices around the world, Mr Moss told Mr Colman he was worried about the position of Lowe Hunt, concerned it was in financial trouble and might be closing. Mr Moss said Mr Colman told him that Lowe Hunt was "in a very strong position" and reassured him that the stories were untrue. Mr Colman denied he had such a conversation but admitted that Mr Moss was nervous about the negative press. For the reasons I gave earlier, I accept Mr Moss's account. In addition, in April 2006 Mr Moss again raised his concerns about the financial state of the business, this time sparked by a planned visit from the Chief Financial Officer of Lowe Worldwide. He asked Mr Colman directly whether the agency was closing or in financial trouble. He said Mr Colman told him the agency was not closing and it remained "in a strong position due to our multi-national clients". Once more, Mr Colman denied using the words Mr Moss attributed to him. Once again, for the reasons given earlier, I prefer Mr Moss. The answer Mr Colman gave Mr Moss was a half-truth. It was plainly misleading. At that very time, Georgina Marriott, who described herself as the agency's Chief Financial Officer, reported to Lowe Worldwide and IPG that it was making "significant trading losses", its cash flow position was "again looking a little precarious" and the partnership was planning to do "some serious cost cutting", including redundancies and office relocations. 77 In June or July 2006, during a leadership team meeting that Mr Moss attended, Mr Colman tried to minimise the problem. According to Mr Moss's account (which I accept) he told the leadership team words to the following effect: Lowe Hunt's financial position is being held back largely by two to three high cost items, which should be addressed in 2006. These include: the salaries of Lionel Hunt and Richard Purdy, audit fees and rent. The combined salaries of Lionel and Richard are $1.4 million per year, which places a significant burden on the agency. This is effectively wiping out any profit opportunity every year. Further, our audit fees are over $400,000.00 per annum, due to a global accounting arrangement being imposed on Lowe Hunt by Interpublic. Finally, our rents are too high. 78 In August or early September 2006 during a lunch meeting at the Establishment Hotel, Mr Moss expressed concerns to Mr Colman about the lack of transparency concerning Lowe Hunt's position. He said, and I accept (despite Mr Colman's denial), that the two had a conversation in which Mr Colman asked him whether he was happy and whether he was about to leave the agency. Mr Moss replied: I am happy, I remain very loyal and positive about the agency's future and its potential. But I am concerned about the lack of information being given to me and the Leadership Team. A lot of weird things keep happening and there appear to be more and more meetings held behind closed doors. 79 Mr Colman again tried to reassure him. He replied: A very positive future lays ahead for all of us, but things will continue to appear strange over the next few weeks. Don't be concerned; none of the Leadership Team should be concerned, everything is all in play now." 80 Within two to three months of this conversation Mr Colman, himself, lost his job. 81 Ultimately, Lowe Hunt did not dispute that its financial position was not disclosed to Mr Moss. But it submitted that the failure was not in breach of any duty to disclose, was not "in trade or commerce", and did not cause any further loss beyond that which may have flowed from the third and fourth representations. 82 I believe that in the circumstances in which Mr Moss found himself disclosure was called for, no less so after he had been hired, and particularly when he made specific inquiries. Keeping him in the dark was apt to lead him into an erroneous view about his job security. Moreover, Mr Colman's own concessions in cross-examination, though not decisive on the point, support the conclusion that there was a reasonable expectation of disclosure. MR LEE: You would have expected Mr Moss to believe that if there was [sic] important factors concerning the financial position of Lowe Hunt, or some other factor that made it an undesirable employer, that he would have expected to have been told about that; correct?---Correct. 83 The question was directed to the position on 17 October 2005, at around the time Mr Moss started work at the agency. In my view, however, there is no reason to think that the position was any different either before Mr Moss entered into the contract or at any time before he was made redundant. 84 The question of whether this conduct was in trade or commerce is more difficult to dispose of. This raises the problems considered in Concrete Constructions Pty Ltd v Nelson (1990) 169 CLR 594 ("Concrete Constructions"). Pegasus sought to distinguish Concrete Constructions, alternatively submitting that it had been impliedly overruled by the WorkChoices decision (New South Wales v Commonwealth [2006] HCA 52, 229 CLR 1) and, failing that, it made the formal submission that it was wrongly decided. It is, however, unnecessary to deal with any of these submissions. Pegasus also relied on the extended definition of "in trade or commerce" in the FTA. That incorporates "any business or professional activity" and is undeniably wide in scope, and as was argued, wide enough to encompass Lowe Hunt's conduct. Staff management and conduct undertaken to retain staff, Pegasus submitted, were necessarily activities undertaken by a business. Lowe Hunt made no submission to the contrary and I take from its silence that it did not dispute the contention. Having regard to all these matters I find that the conduct was in trade or commerce within the meaning of the FTA and I am therefore satisfied that the conduct in this period was at least a contravention of s 42 of that Act.

Causation/reliance 85 Counsel for Pegasus submitted that "it is axiomatic that following an admission of contravening conduct the Respondents' position to resist a claim for statutory compensation is untenable". That is not so, for two reasons. 86 First, loss or damage is the gist of an action under s 82 and its State equivalent: Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 at 418 per Gummow J, Sellars v Adelaide Petroleum NL (1992-4) 179 CLR 332 ("Sellars") at 348. Accordingly, Pegasus will not succeed unless it proves that Mr Moss relied on one or more of the representations and, in doing so, suffered loss. I will return to this question shortly. 87 The second reason is that s 82 of the TPA (or FTA, s 68) requires that the loss and damage be caused "by" the contravening conduct. Lowe Hunt accepted that the principles inMarch v E & M H Stramare Pty Ltd (1990-91) 171 CLR 506 apply (see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525). Thus, it is sufficient if the conduct is a cause of the alleged loss or made a material contribution to it, no matter that the contribution is a minor one. As the Full Court put it in Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) ATPR ¶41-550 ("Como") at 43,619: The law does not consider cause and effect in mathematical or in philosophical terms. The law looks at what influences the actions of the parties. Acknowledging that people are often swayed by several considerations, influencing them to varying extents, the law attributes causality to a single one of those considerations, provided it had some substantial rather than negligible effect. As Brennan J said in San Sebastian Pty Ltd v Minister administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 at 366: "The representation must be a real inducement or one of the real inducements to engage in the conduct which occasions the loss". 88 Where the misleading conduct consists of misrepresentations, "acts done by the representee in reliance upon the misrepresentations amount to a sufficient connexion to satisfy causation": Sellars at 348. 89 Lowe Hunt submitted, in effect, that, without the misleading conduct, the evidence was equivocal about whether Mr Moss would have entered into a contract of employment when it was offered to him, "given the administrative pressures that were on him, with which he was obviously not coping well as a sole practitioner". I do not agree. 90 The financial records do not show that Mr Moss was "not coping well as a sole practitioner"; they simply showed that he was dilatory with regard to his taxation obligations. Counsel cross-examined Mr Moss in an apparent attempt to lay the foundation for such a submission. The cross-examination was not fruitful. It disclosed nothing more than the documents themselves revealed. 91 The evidence shows that in May 2005 Mr Moss received a demand for payment of $67,105.15 from the Australian Taxation Office. That sum rose to $74,271.70 by September 2007 and in November 2007 Pegasus came to an arrangement with the Tax Office to pay the debt by instalments. On 30 June 2005 Mr Moss received another demand for $15,848.68 owing on its Superannuation Contributions Surcharge account. Brandstand Pty Limited, one of the companies Mr Moss incorporated before Pegasus, failed to file its Business Activity Statement (BAS) for the fourth quarter of 2004, on time and for at least a year, Pegasus did not file its BAS statement for the second quarter of 2005 and Pegasus's income tax return for 2005 was not lodged on time. The 2006 return was lodged three months late. In March 2007 Pegasus received another payment demand for income tax of $3,426.75. 92 It was never put to Mr Moss that the delay in paying the tax reflected anything about the state of his business or his business acumen. No suggestion was made, let alone evidence adduced, to suggest that he was incapable of paying the debt. In any case, if he did have administrative pressures, and if he were not coping well as a sole practitioner, it is unlikely he would have resumed consulting through Pegasus when he left Lowe Hunt. His failure to seek out other employment opportunities at any time after he was retrenched supports the inference that he did not take up the job offer with Lowe Hunt because of any problems he had, or felt he had, in running his own business. 93 Mr Moss said that, as Mr Colman was the Managing Director and described himself as a shareholder of Lowe Hunt, he placed "a great deal of faith" in his representations about the creative direction and the financial position of the agency. I accept that that is so. Mr Colman conceded that it was likely that Mr Moss would rely on what he said about any proposed employment with Lowe Hunt. Moss rejected three previous offers of employment Mr Colman had made and it took Mr Colman over nine months to persuade him. At the very time he was about to commence work Mr Moss sought a reassurance about the strength of the agency's financial position. 94 The evidence Mr Moss gave, which I accept, is that when he learned about the redundancies he specifically asked Mr Colman whether the agency was in a strong financial position and was informed that "the redundancies place Lowe Hunt in a very healthy financial position" turning a $1 million loss into a $1 million operating profit, that Mr Colman made a similar announcement to the staff, and that he took on the job believing that it was "an exceptional opportunity" for him. Shortly before he accepted Mr Colman's offer, he said he told the principal of one of his other significant clients that "Lowe Hunt seems to be an exciting and growing agency and Lowe Sydney is being positioned as one of the key offices in the Lowe Worldwide network". 95 Mr Moss testified that had he been told that Lowe Hunt had been making losses for some years and was in "a net deficient position" he would not have accepted the offer of employment and would have continued to operate his consultancy business. There is, of course, a danger that this statement is affected by hindsight. No matter how honest Mr Moss may try to be, self-interest and the knowledge of the misfortunes that followed his decision will necessarily have coloured his evidence. Cf. Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 560. As Ipp JA said in a different area of discourse in Capital Brake Service Pty Ltd v Meagher [2003] NSWCA 225 at [30], "[a]ny fool can be wise after the event". 96 Nevertheless, I am satisfied that Mr Moss's evidence was both honest and reliable. Lowe Hunt does not now apparently dispute that Mr Moss asked Mr Colman whether the agency was in a strong financial position on the eve of accepting the job offer. As counsel for Pegasus put it, if Mr Moss did not care about the answer, he would not have asked the question. If Mr Moss were prepared to throw caution to the wind to escape running Pegasus, why did he not accept any one of the earlier job offers? The impression I formed of him was of a cautious man, not easily seduced by Mr Colman's propositions. 97 The financial records do not show that he had little choice. The very fact that Mr Colman was so keen to bring him onto the staff supports the inference that he is likely to have been highly sought after. It is scarcely surprising that he tried to maintain a relationship with Lowe Hunt, even on a part-time basis when he was told his position would be made redundant. That would have enabled him to maintain his Lowe Hunt work and allow him to return to his own business. 98 In all the circumstances, I think it is most unlikely Mr Moss would have accepted Mr Colman's offer but for his repeated assurances about the strength of the business and the implicit representations concerning its financial security. It is also more likely than not that Mr Moss accepted the offer of employment on the faith of misleading or deceptive representations about the financial security of the business and not because "he was not coping well as a sole practitioner". Doubtless there were other factors that influenced him to make the decision. He said that earlier in 2005 he was not interested in the offer because he was enjoying the independence, but he was forsaking other work because of the intensity of the FFA campaign, which was taking up so much of his time. In these circumstances, working exclusively for Lowe Hunt in an employment arrangement was probably attractive. Still the fact that several factors may have played a part in the decision does not mean that the misleading conduct did not play a significant role. The representation Mr Colman made to Mr Moss on 13 October was plainly relevant to the decision he was making and in its nature "persuasive to induce the making of that decision". As the Full Court said in Comoat 43,619. Where a representation is relevant to the decision in question, and in its nature persuasive to induce the making of that decision, it accords with legal notions of causation to hold that it has a causative effect. And where a respondent, who may be taken to know his own business, has thought it was in his interests to misrepresent the situation in a particular respect, the Court may infer that the misrepresentation was persuasive. These inferences arise from the making of the representation doing the thing it was calculated to induce him to do. All this is a matter of common sense. 99 As for the first two representations, Lowe Hunt submitted that there was no evidence that they either misled Lowe Hunt or induced him to accept a contract of employment. It is true that he did not immediately take up an offer of employment, but I have little doubt that these representations influenced him to some extent in making his eventual decision. Mr Moss said he relied upon them. He said he was very uncertain about taking the position and was very considered in the approach he took. It was why he attended the leadership meetings and carefully observed what was happening in the agency. It was why he was concerned about its performance. As counsel for Pegasus submitted, it is contrary to ordinary experience to suggest that representations made over a period of time cannot have a cumulative effect. He did not make up his mind to take the job overnight and, at no time, did Mr Colman disabuse him of the positive impression his earlier representations would have made on him. 100 I doubt, however, that the fourth representation had any significant impact on Mr Moss's decision. By then he had made up his mind to accept the offer. If it had any effect, it would only have been to reinforce the decision he had already made. 101 In the case of the post-contractual misrepresentations by silence, it is strictly unnecessary to consider whether they caused any damage, as I am satisfied that Mr Moss was induced to enter into the contract by the earlier misleading conduct. Mr Moss's evidence was that if he had been told the true financial position of Lowe Hunt he would have resigned from his employment and restarted his consulting business. There is, of course, a possibility that this evidence, too, is affected by hindsight bias. On balance, however, and having regard to my views about Mr Moss's credibility generally, I accept it. He was not (at least directly) challenged on it. Pegasus did not submit that these representations caused any loss over and above the loss occasioned by Mr Moss abandoning his business and entering into the contract of employment and it is difficult to see how they could have. In the circumstances, nothing more need be said on the subject.

The claim 102 The claim is referred to in the application as "statutory compensation" under s 82 of the TPA or s 68 of the FTA. In its outline of opening submissions Pegasus described it as the value of its lost opportunity to have continuously grown its business, without the interruption of the employment of Mr Moss by Lowe Hunt. The loss claimed relates to a discrete period from 14 October 2005 until 30 June 2009. The first date is the date according to the letter of appointment containing the contractual terms that Mr Moss is said to have started work in the position of Lowe Hunt's Strategic Planning Director. The second is the date by which Pegasus apparently accepts it would have been in no different position had the contravening conduct not occurred.

The respondent's position 103 Lowe Hunt resisted the claim on the following grounds: s The representations did not cause any loss, as: o Lowe Hunt had performed its obligations to Mr Moss under the contract of employment; o The applicants had derived the benefits of the contract according to its terms; o When the contract was terminated on 23 February 2007 by redundancy, the redundancy came about in circumstances that were unrelated to the financial position of Lowe Hunt. s Pegasus has not proven a loss that is actionable under s 82, only a loss of opportunity and not the value of the foregone benefit. 104 I will now deal with each of these contentions.

Lowe Hunt performed its obligations to Mr Moss under the contract of employment 105 As Pegasus points out in its submissions in reply, there is no longer an issue about Mr Moss's contractual entitlements. Mr Moss's claim has been satisfied. The Court is concerned only with the question of Pegasus's loss or damage and that question is not answered by saying that Lowe Hunt has met its obligations to Mr Moss under the employment contract. In the light of the evidence Mr Moss gave, and which I accept, that he would not have entered into the contract had it not been for Mr Colman's misleading conduct, the Court has to assess what Pegasus would have earned had Mr Moss not been misled and had he continued to operate Pegasus without the interruption of employment with Lowe Hunt. The benefit of that contract, however, must be set off against the projected earnings. 106 It is true, as Lowe Hunt submitted, that the contract of employment set no fixed minimum period in which Lowe Hunt was obliged to deliver its benefits and Mr Moss knew that the employment could be terminated for any reason on three months notice or pay in lieu. This means that there was always some element of risk in accepting the job offer. Nevertheless, the proper way to treat these matters is to consider them in the context of the assessment of the chance of loss in the event that the lost opportunity is proved. Those circumstances alone do not demonstrate, as Lowe Hunt suggested, that the alleged loss is not causally connected to the contravening conduct. Neither does the fact, as Lowe Hunt also argued, that Mr Moss was aware that he had redundancy entitlements. It was never suggested to him that the prospect of receiving those benefits would have persuaded him to accept the job offer even if he had been aware of the true financial position of Lowe Hunt. I am satisfied that Mr Moss is unlikely to have accepted the job offer if he thought he would be made redundant within eighteen months of doing so and that Mr Colman's representations lulled him into a false sense of security.

No loss because redundancy not due to Lowe Hunt's financial difficulties 107 Lowe Hunt argued that the redundancy had nothing to do with its financial difficulties. Rather, it was attributable to the loss of a valuable account, the Nestlé account, upon which Mr Moss was working. It is true that the timing of Mr Moss's redundancy coincided with the loss of this account. But it is also true that his redundancy was on the cards a lot earlier. Given Lowe Hunt's financial pressures and the evidence of Stephen Pearson, Lowe Hunt's CEO, that only a limited number of Lowe Hunt's clients were prepared to pay for planning, I think it is unlikely that the loss of the Nestle account was the only reason for retrenching Mr Moss. It may have been the catalyst but it seems highly likely that he would have gone, if not then, soon afterwards. In any event, the question is what loss or damage was caused by the misleading conduct, not why Mr Moss was made redundant. The position would be no different if, instead of being retrenched, Mr Moss left of his own accord after discovering the state of Lowe Hunt's finances.

The question of actionable loss 108 Lowe Hunt argued that Pegasus had to prove, not only what Mr Moss would have done, but also what he could have done, and that it was necessary to prove on the balance of probabilities that what he would and could have done was more valuable than the opportunity he took. It submitted that all he proved was what he would have done, not what he could have done. 109 Lowe Hunt referred to Sellars in its submissions, relying on the reasoning of Brennan J who said (179 CLR at 362): Gates v City Mutual Life Assurance Society Ltd shows that, for the purposes of s 82(1) of the Act, the loss of a mere opportunity to acquire a benefit is not in itself a loss, but the loss of the benefit will be such a loss if the plaintiff proves that he could and would have taken the opportunity and that the benefit would then have been yielded. That is tantamount to saying that the benefit is a loss in respect of which an amount may be recovered if the links in the chain of causation up to the loss of the benefit are proved. In this respect the law under s 82(1) is no different from the law of torts. 110 Later in his Honour's judgment (at 364), in a passage to which Lowe Hunt did not refer, Brennan J acknowledged that "[p]rovided an opportunity offers a substantial, and not merely speculative, prospect of acquiring a benefit that the plaintiff sought to acquire or of avoiding a detriment that the plaintiff sought to avoid, the opportunity can be held to be valuable", in which case, the loss of opportunity qualifies as loss or damage for the purpose of s 82. 111 The primary question in Sellars, which the plurality (Mason CJ, Dawson, Toohey and Gaudron JJ) resolved in favour of the respondent, Adelaide Petroleum Ltd, was whether, in the circumstances of that case, loss of opportunity to obtain a commercial advantage or benefit amounts to "loss or damage" within s 82(1). The plurality held (at 348) that, although compensation is payable under s 82 for actual, rather than potential or likely, loss or damage, a loss of an opportunity to acquire a commercial advantage or benefit (assuming it to have value) is a form of economic loss compensable under s 82. Despite their differences, all members of the Court in Sellars agreed that, provided an applicant can establish on the balance of probabilities that it has suffered a loss of a commercial opportunity, it is entitled to damages. In this case that means that Pegasus is entitled to damages if it proves to the requisite standard that the misleading conduct caused it to lose the chance of earning more income and, during the period of employment, more than Mr Moss received in income and benefits from the contract of employment.

The evidence relating to damage 112 Mr Moss was last employed in January 2003. A couple of months later he started working as a sole trader. In May 2003 he started trading as Andrew Moss Pty Limited (later as Brandstand Pty Limited) and contracted for work. 113 On 21 December 2004 he incorporated Pegasus and from January 2005 contracted his services through it. His work involved providing strategic advertising, consulting and research services. 114 During the period of his employment with Lowe Hunt he received a remuneration package of $330,000 per year. In the financial year ending 30 June 2007 he earned $348,284 through his employment, comprising salary up to 23 February 2007, the value of accrued leave, redundancy and other termination payments. 115 Between the time of his retrenchment and the end of the 2007 financial year, Pegasus earned only $1,993. 116 Mr Moss resumed full time work for Pegasus in June or July 2007 and he testified that he continues to run the business on a full time basis. 117 After he was retrenched on 23 February 2007 Mr Moss embarked on further studies. They included: s starting a Graduate Certificate of Innovation and Enterprise at the University of Sydney; s upgrading that course to a Master of Commerce degree in March 2008; and s concurrently embarking upon a Graduate Certificate in Applied Science (Psychology of Coaching) in March 2008. 118 In addition, he acted as a project manager on the renovations to his family home in Paddington; and travelled to London to undertake minor maintenance work on his former home and arrange for its sale. His evidence, however, was that he was out of the country for only two weeks. 119 He resumed work for Pegasus on a full-time basis in July 2007 although he did some consulting work for Lowe Hunt on the Football Federation account in April. 120 Mr Moss's evidence on damage is sparse. In his first affidavit he said, as I have already mentioned, that he would have continued operating his consultancy business if he had been informed that Lowe Hunt had been making losses for some years and was in a "net deficient" position. In his third affidavit he said: I confirm that if I had not received the assurance from Mr Colman on 13 October 2005 about the financial position of the Respondents, I would not have accepted their offer and would have continued my consulting business. Even if the Respondents had ceased giving me and my company their work at that time, that would have enabled me to accept the larger projects from PhD Creative and MercerBell which I had previously indicated in early 2005 that I would not have sufficient capacity to take on.... 121 This evidence was not challenged. Counsel for Pegasus made much of that fact in submissions. It is true, as counsel submitted, that the evidence does not require corroboration. But there are two problems with it. First, it is self-serving and likely to be affected by hindsight. For this reason it should be treated cautiously. For this reason, too, I am disinclined to put much weight on it. Nevertheless, as Mr Moss had been building his business at the time he accepted the offer from Lowe Hunt, and as he returned to it when he was retrenched, it is reasonable to infer that he would have continued to work in it if he had not been lured away from it by Mr Colman's misleading representations. What is more, when he took up the position with Lowe Hunt, he had a number of clients. He knew what rates he was able to command, what rates the market would bear. He was obviously talented in the work he did. Otherwise, no doubt, Mr Colman would not have courted him. It took him a relatively short amount of time to build his business back up to what it would have been and, when Pegasus resumed trading in late June 2007, he immediately started working for one of his former clients, PhD Creative. In the two years that followed, another client, Peach Advertising, also returned to the fold, and he also acquired a number of new clients. Lowe Hunt submitted that, as Mr Moss's work for Lowe Hunt - whether as a contractor or as an employee - was substantially related to the Nestlé account, it was unlikely that the redundancy would have caused him to suffer any greater loss than if he had not taken up Mr Colman's job offer. The possibility of this must be factored into the assessment of loss but it does not necessarily mean that Pegasus has suffered no loss. Whilst it is true that in 2005 the lion's share of Pegasus's income came from consulting to Lowe Hunt, the problem with the argument is that it wrongly assumes that Lowe Hunt was Mr Moss's only client. The loss of work from Lowe Hunt in February 2007 would have freed Mr Moss to accept additional work from existing and new clients without the interruption to his business and the concomitant loss of goodwill that the period of employment with Lowe Hunt undoubtedly caused. Although there is no direct evidence from any client about the prospect of this occurring, an inference that work would have been available can be drawn from Mr Moss's capacity to attract work both before and after his period of employment with Lowe Hunt. Lowe Hunt conceded as much but argued that Pegasus must still fail because it had not proved that the other opportunities were more valuable. I disagree. Pegasus did not call direct evidence about this but there is evidence from which such an inference can be drawn. 122 In the first full financial year of the business (year ending 30 June 2004) the evidence is that Mr Moss's company earned just over $200,000 in consulting fees. The following financial year fees increased by about $100,000 (there is a difference in the figures given by the two experts qualified by the parties but it is insignificant for present purposes), just over a third of which (34%) was derived from consulting work for Lowe Hunt. In the financial year ending 30 June 2006 fees from consulting income totalled $290,364 (88% of which admittedly derived from work performed for Lowe Hunt) although Mr Moss commenced employment for Lowe Hunt in mid October. During the financial year ending 30 June 2008 fees from consulting income were over $100,000 lower according to the joint report. In the 2009 financial year consulting income increased to over $300,000 and, I infer from the limited period of the claim the subject of the proceeding, have continued to rise or, at least, not fallen. If it were not for the interruption in Mr Moss's business, and notwithstanding the uncertain impact of the global financial crisis, I think it unlikely there would have been such a dramatic fall in income in the 2008 and 2009 financial years. I also think it likely that it took some time for Mr Moss to build his business up again. I am satisfied, too, that it is more probable than not that, had he remained in the marketplace during 2005-7, he would have been able to pick up work from other clients. 123 I conclude that it is more likely than not that the company lost a valuable commercial opportunity. The more difficult question is how to assess it. Of course, difficulties in estimating the loss cannot defeat an entitlement to an award of damages: Fink v Fink (1946) 74 CLR 127 at 143, State of New South Wales v Moss [2000] NSWCA 133, 54 NSWLR 536 (NSW v Moss) at [62]-[87]. Lowe Hunt placed a great deal of emphasis in their submissions on the failure of Pegasus to call evidence from prospective clients about what it would have paid him during the period of the claim had Pegasus continuously traded. 124 In NSW v Moss at [66] Heydon JA, with whom Mason P and Handley JA agreed, observed in a claim for damages for personal injuries, that, although it is generally desirable for precise evidence to be called as to what a plaintiff would have been likely to earn but for the injury and what he or she is likely to earn after it, the failure to call such evidence does not necessarily result in selection of only a nil or nominal figure as damages for impaired earning capacity. There is no reason in principle why the position should be different here. As the Full Court said in Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167, a claim for damages under the Trade Practices Act, at 183; The principle is clear. If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved. Furthermore, if actual damage is suffered, the award must be for more than nominal damages.

Method of assessment of loss 125 As we are dealing with a past hypothetical situation, the loss is to be measured, not by proof on the balance of probabilities, but by reference to the degree of probabilities or possibilities, in accordance with the principles in Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 ("Malec v Hutton"): Sellars at 355, 368.

The expert evidence 126 Each party qualified a forensic accountant. The experts participated in a joint conference and produced a report dated 26 October 2009 ("the joint report"), which set out their agreed views and their points of difference. The report calculated loss as at 30 June 2009. The three reports were tendered and both experts were cross-examined. Without discounting for contingencies, Jenny Wheatley, the accountant retained for Pegasus, estimated the loss at $451,882. David Crase, who was retained for Lowe Hunt, put it at less than half that amount. 127 Before I turn to the evidence it is important that I deal with one matter. In cross-examination Mr Lee, counsel for Pegasus, mounted a vigorous attack on Mr Crase's independence, accusing him of improperly communicating with the lawyers for Lowe Hunt during the preparation of the joint report in breach of a court order. The order stipulated that the process and preparation of the joint report take place without the intervention of any legal representatives from either party. Mr Crase revealed that he had been in touch with the solicitors for Lowe Hunt during that period but I cannot see any basis for concluding that Mr Crase acted in breach of the Court order and, overall, despite the vigour with which the attack on his independence was conducted, I did not have the impression that Mr Crase was doing anything more than his best to present a critical appraisal of Mrs Wheatley's approach in accordance with his professional obligations. He pointed out that, during the period of the preparation of the joint report, Mrs Wheatley had received correspondence from Pegasus's lawyers. The gist of his evidence was that he was merely keeping Lowe Hunt's solicitors, who were paying for his services, informed of his what he was doing. He told the Court that at no time did he seek any guidance from Mr Clare, the solicitor for Lowe Hunt, or any other party and the views he expressed in his report and the joint report were his own. Moreover, he insisted that at no stage did he seek advice from Mr Clare or did Mr Clare proffer any and he maintained that Mr Clare was adamant that the report was to be. Although there was a suggestion from the cross-examination that Mr Crase omitted something from his report at the suggestion of Mr Clare, the nature of the omission was never explored. In all the circumstances I accept Mr Crase's assurance as to the integrity of the process. The attack on his independence fails. Despite a throwaway line in the written submissions, Mr Lee left the matter alone in argument, presumably recognising as much.

Differences in approach 128 The proper way to begin the assessment of loss is to attempt to quantify what the business would have earned if Mr Moss had not left it to work as Lowe Hunt's employee and to compare that sum with what he actually earned. Counsel for Pegasus submitted that only Mrs Wheatley approached the assessment in this way and that Mr Crase "simply failed to address the counterfactual question of what would have occurred if Mr Moss had not accepted the employment with Lowe Hunt". Although at times it seems that Mr Crase did in fact lose sight of the counterfactual scenario (for instance, during the period between the redundancy and the resumption of the business), I do not think this is a fair criticism of all of Mr Crase's evidence. 129 The experts were agreed on Mr Moss's actual gross income during the period from 14 October 2005 until 30 June 2008. Mr Crase was concerned about the figures for the 2009 financial year, reserving his right to seek more information. Nothing came of this and Mrs Wheatley explained that she based her calculations on the actual invoices which she provided to Mr Crase. In these circumstances, I propose to proceed on the basis that there was no dispute between them about the figure for the entire period. Still, as Lowe Hunt did not agree about the value of Pegasus's actual business expenses to be offset against its income (or, in fact, what they would be in the counterfactual scenario), it could not come to an agreement about the value of Pegasus's actual net income. Mrs Wheatley said in the joint report that, because business expenses were applied to both forecast and actual income, adopting Mr Crase's approach to business expenses for the figure for actual net income would have a minimal effect, reducing her figure for loss by about $18,000. Mr Crase did not dispute this last calculation. 130 The differences between the two experts identified in the joint report were as follows: (a) The first relates to the assessment of forecast net income. There are two aspects to it. One is the increase in charge out rates. The other is the evaluation of productivity. As to the first, Mrs Wheatley used what she said was the actual increase in charge rates for the years 2004 and 2005 of 12.5% and applied it to the charge rates for the years 2005 to 2008: Mr Crase noted that the increase is considerably higher than the rises in the Consumer Price Index over the same period and he would only allow increases at CPI rates. As to the second, there also appeared, at least for a time, to be an issue about the calculation of average recovered productivity. (b) As I have already noted, the experts were at odds about the value of the business expenses which must be deducted from the actual gross consulting income to reach Mr Moss's actual net (or taxable) income and which must be taken into account in estimating Pegasus's projected profit. (c) Mrs Wheatley allowed four weeks annual leave, Mr Crase six. (d) Unlike Mrs Wheatley, Mr Crase considered there was no loss for the period to 30 June 2007 (or for the year ending 30 June 2009). (e) Mr Crase was concerned that Mrs Wheatley made no allowance for the time Mr Moss took off to pursue personal projects, "personal report writing and self-promotion" or for unforeseen illness either of him or a family member.

Productivity 131 In order to determine Pegasus's loss it was common ground that it was necessary to assess Mr Moss's level of productivity in the business. In their individual reports the experts also differed about productivity rates. Mrs Wheatley's calculations were made on the basis of an eight hour day and a 225 working day year. She then had regard to the actual fees earned in the years 2005 and 2009. She declined to use the 2004 year because it was the first full year in which his business was operating or 2008 because it was the year during which it resumed trading after a break of about 16 months. In my view, that approach was reasonable. For each year, she divided the actual fees earned by putative maximum fees, by which she meant what the business could have earned if it had been able to charge for all 8 hours a day, 225 days per year (i.e. 100% productivity). She then averaged the results for each year to arrive at her figure of 76.6%. 132 Mr Crase raised a number of potential problems with the 76.6% figure, which he considered too high. First, he pointed out that she had only allowed for four weeks annual leave when Mr Moss was insistent on taking six weeks annual leave with Lowe Hunt. Secondly, he said that no allowance was made for time off from consulting after February 2007 to pursue personal pursuits such as his university course, home renovations and an overseas trip, as well as personal report writing and self-promotion. Thirdly, he said there was no allowance for any unforeseen period of illness of him or family members. Fourthly, he said the calculation presupposes that he would be almost constantly employed as a consultant with minimal productivity downtime. Fifthly, he asserted that the existence of a large customer like Lowe Hunt "provides constant work akin to that of an employee" and "a mechanism for greater work efficiency and productivity" with the result that the loss of such a large client could severely impair Mr Moss's ability to achieve such a productivity target. Finally, he said, Mrs Wheatley made no separate allowance for the write off of any time or bad debts. 133 The last criticism is misplaced. Mrs Wheatley made no separate allowance for any factor that might interfere with productivity. Bad debts and time write-offs are two possible explanations. In any case there was no evidence that bad debts were a problem. 134 There is, however, merit in Lowe Hunt's argument about annual leave. Mr Moss did not give evidence about the time he spent on holidays before or after his period of employment with Lowe Hunt but in his first affidavit he reported that he told Mr Colman that "six weeks was important to [him] in having time with the family" and he pressed Lowe Hunt to provide for it in the written contract. In the circumstances, there is every prospect that in self-employment he would also have taken six weeks leave. For the purpose of calculating Mr Moss's level of productivity Mrs Wheatley stated in her report that she assumed the statutory entitlement (four weeks) would be taken. Of course, for the purpose of that calculation, had she assumed six weeks annual leave, then, all other things being equal, Mr Moss's productivity would actually have increased because he would have had the same amount of actual earnings but his hypothetical "maximum fees" would be reduced as he would have worked fewer days. Projecting this into the counterfactual scenario would result in a greater loss to Mr Moss. That is because it would result in a lower figure for Pegasus' hypothetical "maximum fees", as he would be assumed to be working 10 days less per year, but recovery of a greater proportion of those fees. Pegasus submitted that, as a result, the dispute about whether or not Mr Moss would take four or six weeks' annual holidays is an arid one and the difference in calculations would be negligible. I agree. I also note that Mr Crase did not himself suggest what actual difference to the sums this would make. 135 Mr Crase's second point is problematic. It focuses in part on the situation in which Pegasus found itself after Lowe Hunt's misleading conduct when the focus needs to be on the situation but for that conduct, that is, in the counterfactual world where Mr Moss was never enticed to join Lowe Hunt. For this reason, what Mr Moss did upon his retrenchment is irrelevant unless he failed to mitigate his loss (an issue to which I will come later) or he would have pursued these endeavours regardless of whether he had accepted Lowe Hunt's job offer. In the case of personal report writing and promotion that is certainly so. It is probably also so in the case of the two weeks in the United Kingdom when Mr Moss was preparing his house for sale, as the evidence was that this was connected to his need to discharge his debt to the Tax Office. But there is no evidence that Mr Moss would have undertaken the university course or carried out home renovations himself if the opportunity provided by the redundancy had not presented itself. Similarly, there is no evidence that Mr Moss was ill during the period of the claim or that he would have had to take time out to attend to the needs of family members. It was not unreasonable for Mr Crase to raise these matters but, with the exception of the trip to the UK, they were not taken up in cross-examination. 136 As for the point regarding the loss of Lowe Hunt as a client, Mr Crase conceded in cross-examination that his concerns would dissipate on the assumption that the loss of Lowe Hunt would have enabled Pegasus to accept larger projects from other clients that Mr Moss had previously indicated he would not have had the capacity to take on. Nevertheless, he remained concerned about whether the company would be able to charge at the same rate or fill the void left by such a dominant client. His concern was a reasonable one. In the assessment of damages some allowance must be made for the chance that the loss of Lowe Hunt might have affected the company's income. 137 As for the question of "minimal downtime", the assumption might be seen to be generous to Pegasus but Mr Crase offered no alternative and Mrs Wheatley based her calculation on Mr Moss's actual earnings. She also pointed out in the joint report that her figure represents an average of 34.5 productive hours out of a total of 168 hours in the week. 138 Yet, there was one factor that did trouble me. That is the assumption that Mr Moss's ordinary working day was eight hours. If it were greater than that, then, other things being equal, the level of productivity would naturally decline. The assumption was not supported by evidence. Mr Moss said nothing about the number of hours he worked. Still, Mrs Wheatley's assumption was not unreasonable, Mr Crase did not attack it (at least not directly), and, some assessment must be made of productivity. 139 In the end, most, if not all, of Mr Crase's criticisms fell away. During cross-examination of Mrs Wheatley, Lowe Hunt did not challenge her approach on this issue, nor did it refer to the issue in its closing submissions. In all the circumstances, I propose to adopt Mrs Wheatley's approach, but to discount for the chance that Mr Moss may not have been as productive throughout the period the subject of the claim.

Charge out rates 140 Apart from the passage to which I referred above, the only other evidence Mr Moss gave on damages appeared in his second affidavit. He said that, had he not agreed to work for Lowe Hunt, he "believes" Pegasus would have increased his charge out rates to clients each year by about 10-15%. Mrs Wheatley noted in her report that she had been informed that the charge out rate for 2004 was $200 and for 2005 $225 ("the assumed rates") but in evidence she indicated she had also reviewed the invoices. The invoices were in evidence. They show that the rates were not uniform in any one year but varied throughout the period in which Pegasus was in operation. Lowe Hunt, however, did not make anything of the variations or the discrepancies and did not take issue with the figures of $200 and $225 as charge out rates. In the circumstances, I accept Mrs Wheatley's assumed rates as average rates and will take them as the actual rates for those two financial years. 141 For the future Mrs Wheatley assumed an increase in charge out rates annually of 12.5%, no doubt based on Mr Moss's evidence of a 10-15% increase, an approach she considered justified by the earlier increase in fees, but she made no adjustment for the 2009 financial year. Mr Moss's evidence was not the subject of any direct challenge in cross-examination. There are, however, some problems with his evidence and also with Mrs Wheatley's approach. 142 The first problem is that Mr Moss's statement of his current belief is little more than a bare ipse dixit. 143 The second problem is that Mrs Wheatley adopted the 12.5% figure, not merely because of her review of the invoices and what appeared in Mr Moss's affidavit, but also after reviewing charge out rates of "other professional service firms," which caused her to conclude that such a level of increase was "general practice" and reasonable. The difficulty is that she did not purport to confine herself to the advertising industry in so doing. And there is no evidence to indicate that she looked at all at the work of strategic planners. I accept the substance of Lowe Hunt's submission on this point. Without evidence of the nature of the review, the sources of information, the periods to which it related and the nature of the comparisons undertaken, the evidence is of little weight. Cf. Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305, 52 NSWLR 705 at [85]. 144 The third problem is that Mrs Wheatley said she assumed that the charge out rate would have been the same in the 2008 and 2009 financial years "because of the economic conditions prevailing at June 2008", which I take to be a reference to the impact of the global financial crisis. But she allowed for the 12.5% increase from $285 in the 2007 financial year to $320 in the 2008 financial year. Presumably she was of the opinion that the impact of the global financial crisis would not have been felt in 2007-8. The issue was not explored in evidence. 145 Despite these difficulties in the evidence, I accept that it is more than likely that Pegasus would have increased Mr Moss's charge out rates had it remained in business. But there is no certainty about when that would have occurred. Neither is there any certainty that they would have increased annually, let alone by 12.5%. What impact the global financial crisis had on the advertising market, for example, was not explored in evidence. We simply do not know whether the market would have borne the suggested 12.5% increase over that period. Mr Crase's opinion was that a rate of increase so far above the average CPI in Sydney of 2.8% p.a. over a period of several years was excessive, but only because he was unaware of whether the market could have borne it. Mr Crase's approach might, in the circumstances, be a fairer way of approaching the question, but it, too, is open to criticism, and, as the rate increases in the past seem to have been unrelated to the CPI, would probably be unfair to Pegasus. There was, at least, some foundation in the evidence for Mrs Wheatley's 12.5%. 146 It seems to me that the proper approach is to adopt Mrs Wheatley's figures but to adjust them for the chances that the increases would not have occurred annually or by as much as 12.5%. Cf. Norris (by his tutor Porter) v Blake (No 2) (1997) 41 NSWLR 49 at 73.

Business expenses 147 Mrs Wheatley said she had reviewed the historical financial statements of Mr Moss's companies for the financial years ending 30 June 2004 to 30 June 2009 in order to determine the ongoing business expenses. She assessed those expenses as approximately $10,000 in 2005. She increased that sum by 12.5% each year for increases in these expenses "for the cost of living". The difficulty with Mrs Wheatley's assessment is twofold. First, there was no evidence about the cost of living and the CPI increases were significantly lower. Secondly, the base figure appears to bear no relationship to the company's actual expenses. She said she excluded expenses that, in her opinion, were not necessarily incurred and directly related to the derivation of Pegasus's forecast income, such as interest paid to the Tax Office or banks, expenses in the nature of one-off establishment costs and expenses that were personal in nature and not necessary for the derivation of the forecast income. Mr Crase pointed out in the joint report that the financial statements for Brandstand and Pegasus for the years ending 30 June 2004 and 30 June 2005 show business expenses (excluding interest costs and wages and superannuation for Mr Moss) as $36,147 and $27,296 respectively. In the first full year of the business it is perhaps unsurprising that business expenses would be relatively high. Indeed, in that year no wages or superannuation contributions were deducted. Ultimately Mr Crase settled on a "conservative" figure of $22,000 for projected business expenses, which he thought should be indexed by the CPI. I note that in reaching this figure he said he took into account expenses for the following items which he considered reasonable to attribute to the operations of a business: accounting, bank charges, couriers, contract research, computer supplies, consultancy fees (paid to others), depreciation, home office expenses claimed by companies, ASIC annual filing fees, insurance, internet, legal expenses, magazines, journals, periodicals & subscriptions, meeting expenses, motor vehicle expenses, office supplies, postage, printing and stationery, repairs and maintenance, secretarial fees, staff amenities, telephone, travelling costs. I cannot see any error in this approach. Mrs Wheatley was critical of Mr Crase for taking into account amounts actually paid to Mr Moss, such as director's fees and superannuation, but Mr Crase makes it clear in the joint report that he did not take into account superannuation and he does not mention director's fees in the above-mentioned list of expenses. 148 Mrs Wheatley was not cross-examined on her evidence concerning the business expenses and neither party made any submissions about the issue. Nevertheless, Lowe Hunt did not concede the point and there are deficiencies in Mrs Wheatley's evidence that affect its reliability. No question of unfairness arises because the competing views and the reasons for them were exposed in the joint report. 149 The problem with Mrs Wheatley's evidence is that the foundations necessary to establish its reliability were not laid. For example, Mr Moss gave no evidence about which items were purely establishment costs. 150 Mr Crase also pointed out that Mrs Wheatley made no allowance for the possibility that operating expenses may vary according to the level of business activity. 151 In the light of evidence Mrs Wheatley's $10,000 figure is unsupportable and I prefer Mr Crase's approach. I therefore propose to apply the $22,000 figure Mr Crase used, adjusted as he suggested for increases in the CPI. There is no necessary correlation between the rate of increase in charge out rates and the rate of increase in business expenses. 152 The joint report included a number of tables. Unfortunately, none of them set out calculations in a way that provided the best assistance to the Court. One was a table of calculations based on Mrs Wheatley's figures for forecast net income, which I have accepted subject to appropriate discounts, the actual income based on Mr Crase's figure for business expenses, which I have accepted, and the corresponding losses. The difficulty with it was that it included years that finished on 30 September, presumably based on the fact that Mr Moss did not start at Lowe Hunt until October. The joint report also included a table based on financial years, which was a better approach considering that the evidence was that Mr Moss resumed his consulting business on 1 July 2007, but it set out Mr Crase's projected earnings (and not Mrs Wheatley's) which assumed a net income growth based on CPI (Sydney) rates. There was no table that correlated each set of figures with the two seminal events: the termination of Mr Moss's employment with Lowe Hunt and the resumption of his business activities. 153 The numbers in Mr Crase's table for forecast net income appear to accept Mrs Wheatley's productivity figures. The cause of the variation is his refusal to countenance increases in charge out rates above the CPI. He also emphasised that the loss figures need to be discounted for various reasons. Mrs Wheatley paid little or no attention to the various contingencies which the law requires be taken into account but, to be fair, she was instructed not to discount for vicissitudes. This was regarded, correctly, as a matter properly left to the Court. 154 Mr Crase's calculations made on the basis of financial years were as follows: Period Forecast Net Income Actual Net Income Applicant's Loss 14 October 2005 - 30 June 2006 $315,323 $224,100 N/a 1 July 2006- 30 June 2007 $321,863 $350,277 N/a 1 July 2007 - 30 June 2008 $336,372 $124,069 $212,303 1 July 2008 - 30 June 2009 $341,276 $325,406 $15,870 Total $1,314,834 $1,023,852 $228,173

155 I should add that Mr Crase considered the loss figure for the 2009 financial year should be discounted to nothing.

156 Mrs Wheatley's figures (adopting Mr Crase's business expenses) were as follows: Period Forecast Net Income Actual Income Applicant's Loss 14 October 2005 - 30 September 2006 $325,345 $306,600 $18,746 1 October 2006 - 30 September 2007 $382,083 $307,342 $74,741 1 October 2007 - 30 September 2008 $418,439 $176,010 $242,429 1 October 2008 - 30 June 2009 $312,544 $215,109 $97,434 Total $1,438,412 $1,005,061 $433,351

157 Having regard to my earlier conclusions, subject to the question of contingencies, I accept these figures.

Contingencies 158 Pegasus sought the full value of Mrs Wheatley's calculations plus interest, but there are a number of contingencies that must be taken into account in order to avoid over-compensation. 159 Lowe Hunt was Pegasus's main client in 2005. I accept the submission that, had it not been for his decision to take up the job offer, Lowe Hunt is likely to have remained Pegasus's main client until February 2007. There is no reason to think otherwise. The concentration of work with Lowe Hunt means that there is a real prospect that Mr Moss, through Pegasus, would not have been able to pursue major projects for other clients regardless of whether he accepted the job offer, although what impact that would have had on his earning capacity is unknown. It also means that even if Pegasus had continued to contract out his services, when Lowe Hunt lost the Nestlé contract, it is highly likely that the Lowe Hunt work would have gone by the wayside and he would have lost a valuable source of work. There is only one invoice to Lowe Hunt for work done after February 2007. That is in April 2007, and it relates to the Football Federation account upon which Mr Moss had been working for some time. It is for $1,311.75 and is for 4.5 hours work. As he was apparently well regarded, other clients might have flocked to him. But, as events have shown, this is likely to have taken some time. And it might have been hard to make up for the loss of such a significant client. I regard the prospect of the loss of such a major client as a significant negative vicissitude. 160 I consider, however, that Mr Crase's criticism of Mrs Wheatley for not making an allowance for Mr Moss's private activities in this period is misconceived. Mr Moss gave evidence that I accept that, after he was made redundant, he felt upset and humiliated, and did not feel up to the task of trying to immediately re-start his consulting business. He said he considered there were a number of projects it might be useful to complete before he did so. These were the matters upon which Mr Crase focussed. There is no evidence to suggest that, were it not for the termination of his employment with Lowe Hunt, Mr Moss would have taken the time out of his consulting practice to undertake these ventures. The trip overseas took only two weeks. There is no evidence about how much time Mr Moss spent writing the paper for the advertising awards or about how lengthy or detailed it was. He was not the sole author. As for the studies, even if he were to have undertaken them regardless of the contravening conduct, there is no evidence to indicate that they would have interfered significantly in his consulting work. The degree was part-time after all. He continues to pursue higher education and embarked on an additional course in 2008 although working full-time. The only relevance these matters could have is if they indicated a failure on Mr Moss's part to mitigate his loss, an issue I address later. 161 Mr Crase also drew attention to some other matters. The first was what he called "family factors", being considerable medical costs for family members that, he speculated, "may have necessitated greater personal involvement of Mr Moss". The second was the decision by Mr Moss's wife to increase her level of paid work, which Mr Crase thought might have "inversely impacted on the time available by Mr Moss to pursue consulting activities". Mr Crase did not explain why that might have been so. Nor was the suggestion Mr Crase made that Mr Moss's management of his share portfolio might have had an impact on his time, availability and commitment to consultancy work, an hypothesis based, it would appear, entirely on an increase in investment in public company shares. What is more, Mr Moss's evidence was that the bulk of his shares were locked up in a managed fund. That evidence was not challenged. Having regard to the absence of any foundation in the evidence for them, none of them is irrelevant. 162 Apart from the concentration of work with Lowe Hunt in the first year of the claim and the impact of the loss of Lowe Hunt as a client that features prominently during the second year, the other contingencies include the chance that Mr Moss would not have been able to increase his charge out rate by as much as 12.5% or that he would not have increased it each year by that amount or at all, the chance that he would not have worked an eight hour day as Mrs Wheatley assumed, the risks inherent in business, including this business, which would include bad debts and the uncertainty of continuous work, the uncertain impact of the global financial crisis, the ordinary vicissitudes of life (as the income was generated solely through Mr Moss and the business depended on his skill and talent) and the fact that Pegasus's customer base was small. Mr Crase expressed the opinion, which was uncontradicted, and which I accept, as it accords with commonsense, that the reliance on few customers makes the consultancy revenue vulnerable. There is also the (uncontested) evidence from Mr Pearson about the limited demand for strategic planners in 2007, which is unlikely to have been confined to Lowe Hunt's clients. 163 For completeness I note, as I mentioned earlier, the submission relating to the contractual rights to terminate the contract of employment. There was, however, no evidence to suggest that Lowe Hunt had any intention of terminating Mr Moss for any reason other than the loss of the Nestlé contract or its financial circumstances. On this question Lowe Hunt has an evidentiary onus. In any case, these risks were no greater (and probably less) than the risks inherent in conducting the business. In the circumstances, there should be no discount for them. 164 Neither party made any submissions concerning the percentage discounts. 165 Having regard to the various contingencies, doing the best I can, I propose discounting the numerical differences in Mrs Wheatley's table by the following percentages: (a) In the first period (14 October 2005 to 30 September 2006) - 35%. (b) In the second period (1 October 2006 to 30 September 2007) - 60%. (c) In the third period (1 October 2007 to 30 September 2008) - 40% (d) In the fourth period (1 October 2008 to 30 September 2009) - 40%. 166 This means that the loss during the first period is $12,184, which I will round down to $12,000, the second period is $29,896, which I will round up to $30,000, in the third, $145,457, which I will round down to $145,000, and in the fourth, $58,460, which I will round down to $58,000. As Brennan and Dawson JJ observed in Malec v Hutton at 640, "[d]amages founded on hypothetical evaluation defy precise calculation".

No failure to mitigate 167 Lowe Hunt pleaded a failure to mitigate loss but made no submissions on the subject. It bears the onus of proof of this issue: Finucane v New South Wales Egg Corporation (1988) 80 ALR 486 at 519 per Lockhart J (holding that there is an obligation under s 82 to mitigate, and implying, but not clearly stating, that the onus is on the respondent); Hellyer Drilling Co v MacDonald Hamilton & Co Pty Ltd (1983-84) 51 ALR 177 at 192 per Fitzgerald J (holding that onus varies, but will lie on the respondent where "the issue is raised only by the nature of the respondent's defence".). 168 Lowe Hunt has not discharged its onus. A failure to mitigate loss will only be established if the conduct was unreasonable. I referred earlier to the conduct that could arguably be raised in support of the defence. There is, in my view, nothing unreasonable in Mr Moss's decision to take advantage of the opportunity presented by the loss of his job to pursue higher studies before resuming his business within five months of his retrenchment: cf. Medlin v State Government Insurance Commission (1994-95) 182 CLR 1 at 22-23 per McHugh J. It may well have enhanced the earning capacity of his business and its position in the marketplace in the long term.

Interest 169 The application seeks interest under s 51A of the Federal Court of Australia Act 1976 (Cth). There is no reason why interest should not be awarded and Lowe Hunt did not argue otherwise. Pegasus sought interest at the rate of 8% p.a. in accordance with Order 59 Rule 7A. As the sum would have accrued over time until 30 June 2009, the figure up until then should be applied to half of the loss and thereafter to the whole, which has been outstanding since then.

Summary 170 The loss, then, is as follows: 14 October 2005 to 30 September 2006 $12,000 1 October 2006 to 30 September 2007 $30,000 1 October 2007 to 30 September 2008 $145,000 1 October 2008 to 30 September 2009 $58,000 Subtotal $245,000 Interest on half the sum at 8% p.a. from 14 October 2005 to 30 June 2009 (3.7 years) $36,260 Interest on the whole sum ($245,000) at 8% p.a. from 1 July 2009 to date (1.3 years) $25,480 Total $306,740

171 There will therefore be judgment in favour of the second applicant in the sum of $306,740.

costs 172 Pegasus asked to be heard further on the question of costs. But for that, I would have made an order that Lowe Hunt pay its costs. Unless either party lists the matter within seven days, that is what I will do. Mr Moss also sought to be heard further on the question of costs, although I note that on 25 March 2010, without opposition, I made an order that Lowe Hunt pay his costs of the proceeding up to 23 July 2008 in accordance with the order sought in the amended application.

orders 173 There will be judgment in favour of the second applicant in the sum of $306,740. 174 Costs are reserved. I certify that the preceding one hundred and seventy-four (174) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.