FEDERAL COURT OF AUSTRALIA Duxbury v Pierce [2009] FCAFC 164 TRADE PRACTICES – misleading or deceptive conduct – where respondent failed to participate in trial below – whether uncontroverted evidence establishes liability for representations Held: appeal allowed Trade Practices Act 1974 (Cth) s 52 Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 cited Dare v Pulham (1982) 148 CLR 658 cited BRUCE LYALL DUXBURY v ROGER BRIAN PIERCE VID 359 of 2009 MOORE, MIDDLETON & GORDON JJ 17 NOVEMBER 2009 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 359 of 2009 GENERAL DIVISION ON APPEAL FROM THE FEDERAL COURT BETWEEN: BRUCE LYALL DUXBURY Appellant AND: ROGER BRIAN PIERCE Respondent JUDGES: MOORE, MIDDLETON & GORDON JJ DATE OF ORDER: 17 NOVEMBER 2009 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The Appeal be allowed. 2. The matter be remitted to the Trial Judge for further consideration. 3. The Respondent pay the Appellant's costs of the appeal, to be taxed in default of agreement. 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 eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 359 of 2009 GENERAL DIVISION ON APPEAL FROM THE FEDERAL COURT BETWEEN: BRUCE LYALL DUXBURY Appellant AND: ROGER BRIAN PIERCE Respondent JUDGES: MOORE, MIDDLETON & GORDON JJ DATE: 17 NOVEMBER 2009 PLACE: MELBOURNE REASONS FOR JUDGMENT THE COURT: 1 EVP Recruitment Pty Ltd ("EVP Recruitment") conducted recruitment businesses and promoted and sold joint venture recruitment businesses across Australia and New Zealand. At the relevant time, the respondent, Roger Brian Pierce ("Mr Pierce") was a director of EVP Recruitment and its parent company, EVP Holdings Pty Ltd ("EVP Holdings"). 2 In September 2003, the appellant, Bruce Lyall Duxbury ("Mr Duxbury"), responded to an internet advertisement published on www.seek.com.au headed "Managing Partner for new Queensland Office" and read documents published on www.evp.cc. Mr Duxbury ultimately invested in a joint venture recruitment business promoted and sold by EVP Recruitment ("the EVP Windsor Business"). 3 Mr Duxbury alleged that in the course of the negotiations to invest in the EVP Windsor Business, he relied upon representations made by, amongst others, Mr Pierce or in which Mr Pierce was directly or indirectly knowingly involved. Those representations were set out in paragraph 11 of the Amended Statement of Claim ("the Initial Representations"). Further, Mr Duxbury alleged that in the course of conducting the EVP Windsor Business, he relied upon further representations made by, amongst others, Mr Pierce or in which Mr Pierce was directly or indirectly knowingly involved. Those representations were set out in paragraph 15 of the Amended Statement of Claim ("the Further Representations"). 4 On 21 April 2009, the trial judge granted Mr Duxbury a declaration that Mr Pierce had aided, abetted, counselled or procured contraventions of s 52 of the Trade Practices Act 1974 (Cth)("the Trade Practices Act") by EVPHoldings and / or EVP Recruitment ("the Companies") as a result of the conduct referred to in paragraphs 15(a), (b), (e), (f) and (g) of the Amended Statement of Claim, namely, some but not all of the Further Representations: see paragraph 1(a) of the Orders. There is no appeal in relation to the declaration concerning the Further Representations. 5 On 20 October 2009, Sundberg J granted the appellant leave to appeal. The appeal is limited to the trial judge's refusal to grant a declaration in relation to the Initial Representations. In substance, Mr Duxbury seeks to vary the declaration, identified in [4], by including a declaration that Mr Pierce aided, abetted, counselled or procured contraventions of s 52 of the Trade Practices Actby one or more of the Companies as a result of the conduct referred to in paragraphs 11(a), (b), (c), (d), (h), (j) and (n) of the Amended Statement of Claim, namely the Initial Representations. 6 So far as is relevant, paragraphs 11(a), (b), (c), (d), (h), (j) and (n) of the Amended Statement of Claim provided that: … Pierce made the following representations and / or caused them to be made and / or [was] directly or indirectly knowingly involved in such representations being made by [EVP] Holdings and / or [EVP] Recruitment: (a) the EVP group and business model had a solid and successful trading history behind it; (b) previous joint-venture businesses commenced with EVP of the type advertised had all, alternatively, been largely successful and / or that 10 or more EVP offices (including a Perth office) were established and operating at that time; (c) a new joint venture business commenced by … [Duxbury] would enjoy the benefit of the proven EVP business model; (d) a new joint venture business commenced by … [Duxbury] would enjoy the benefit of access to EVP's established and commercially proved infrastructure and / or office systems and / or centralised administrative, clerical and accounting support and / or training and / or management and business advice from experienced operators; … (h) financial projections provided to … [Duxbury] …, being budgets and cash-flows, were based on other EVP joint venture businesses and / or were based in fact and / or gave a genuine indication of earnings and returns which could reasonably be expected to be enjoyed by the business; … (j) on the basis of their experience, projections and the established business model, the joint-venture business would only require working capital of $80,000.00; … (n) the joint venture business, funded as aforesaid, with the financial support of [EVP] Holdings and / or [EVP] Recruitment and / or the EVP Group would be able to pay the said salary and meet its outgoings from its inception, alternatively, within months of commencement; … 7 The particulars stated that the Initial Representations to Mr Duxbury were partly written, partly oral and partly to be implied. The written representations were said to be comprised in three documents: an article on the seek.com.au website on 30 October 2003, a document dated 29 September 2003 and a letter from EVP Holdings (signed by Mr Pierce) to Mr Duxbury dated 27 November 2003. The oral representations were said to have been made in five conversations: "in or about November 2003", 1 February 2004, 25 March 2004, 3 April 2004 and on or about 25 May 2004. Mr Duxbury alleged that Mr Pierce was involved in all but the conversation on 25 March 2004. However, as will be apparent, only the first meeting is the subject of appeal. 8 The trial judge dealt with the Initial Representations at paragraph [38] of the Reasons for Judgment in the following terms: The Initial Representations were made in documents provided by the second respondent and others to the first applicant [Mr Duxbury]. There is no evidence to show the first respondent [Mr Pierce] prepared or authorised these documents. The Initial Representations were also made during meetings which the first respondent did not attend. There is no evidence to suggest that the first respondent directed or knew what was said at these meetings. No liability on the part of the first respondent under s 75B of the Act arises in relation to these aspects of the Initial Representations. 9 The appellant contends that the trial judge erred in finding (at [38] of the Reasons for Judgment) that Mr Pierce did not attend meetings during which the Initial Representations were made. Mr Duxbury contends that the correct finding on the evidence was that in mid December 2003 Mr Pierce attended and actively participated in a meeting with Mr Duxbury and others at which the prospective investment in the EVP Windsor Business was discussed and the Initial Representations were made. 10 In support of that contention, Mr Duxbury contends that the trial judge failed to consider and give due weight to the uncontroverted evidence of Mr Duxbury that Mr Pierce was present at and participated in a meeting held in mid December 2003 at which representations were made concerning: 1. the experience and success of the EVP Business; 2. the track record and success of the EVP Business; 3. the profitability of the EVP Business; and 4. the services which would be provided to the joint venture business upon investment. 11 Mr Pierce filed a defence but did not attend the trial. The evidence adduced was by affidavit and the deponents were not cross examined. 12 What then was Mr Duxbury's evidence? Mr Duxbury described the first meeting in mid December 2003 at paragraphs [25]-[27] of his affidavit sworn on 1 December 2008 in the following terms: [25] In or about mid December 2003, I attended the office of EVP Recruitment … (First Meeting). There I met with Pierce, Hughey and Kilpatrick. From time to time, Nick Smith … also joined the meeting. [26] The First Meeting was a roundtable discussion in which Hughey typically presented and answered information about the operational aspects of the EVP businesses and Pierce presented and answered information about the financial aspects. I can not now recall the specifics of who said what, however generally the following representations were made to me: (a) EVP was a strong business with proven success. In this context Hughey talked about the fact the EVP had operated previously in the United Kingdom and, New Zealand, New South Wales, Victoria and Western Australia and that these businesses had been bought back Master Franchises to enable consistency in the business model. (Experience Representation #3); (b) all of the businesses to date had turned a profit in their sixth month of operation (Profit Representation #2); (c) to establish an office that would accommodate 10 consultants as this was the EVP model for every office (Business Model Representation #2); (d) each recruitment consultant should easily achieve billings of $25,000.00 per month (Income Representation #2) (Business Model Representation #3). As recruitment consultants were paid a base salary of $60,000.00 plus commission per annum, each consultant would generate a significant gross profit (Profit Representation #3); (e) the EVP Windsor Business opportunity would provide me with significant personal financial gain within two years (Return on Equity Representation #1); (f) for working capital contribution of $40,000.00 from each party would be more than sufficient as no other existing business had ever required more than $80,000.00. (Investment Representation #1); (g) [EVP] Holdings would take care of all the set-up arrangements for the EVP Windsor Business such as business registration, company registration, factoring services, staffing, opening of bank accounts, insurances, etc. (Set Up Representation #1). All I would have to attend to would be the location and leasing of business premises; (h) my role would only involve the management of the recruitment consultants and day-to-day administration of the office (Role of Investor Representation); (i) the Licence payment entitled the new business to trade under the good name of EVP and to access the services such as the proprietary database, factoring, promotional material, and accounting services (Service Representation #2); (j) [EVP] Holdings already had identified and interviewed three prospective recruitment consultants who were appropriate for the EVP Windsor Business (Services Representation #3). Having consultants available from day one was seen to be one of the keys to the success of the business; and (k) EVP West End, which was operated by Smith, was going 'gang busters' and already looking like it would earn Smith great returns in the near future and that I should expect the same (Return on Equity Representation #2). [27] Towards the close of the meeting, Pierce clasped his hands together and said the words to the effect of 'so let's get things moving!' I took this to mean that he (Pierce) was formally offering the EVP Windsor Business to me. I responded by querying whether they would like me to provide employment references. Hughey said that this was not necessary as he was very adept at identifying talent and character. Pierce said that he was comfortable with me. Pierce closed the meeting by saying that I would receive a formal written proposal from Kilpatrick. 13 A careful reader of the pleading (see [6] and [7] above) will have noticed that it contained no reference to a meeting held at EVP West End in "mid December 2003" but one "in or about November 2003". The discrepancy is of some significance. As noted earlier, Mr Pierce did not attend the trial. In fact, on 25 February 2009, Mr Pierce informed the Court by email that he would not appear at the trial of the proceedings and went on to state: … I maintain my defence and if the matter proceeds in my absence as I expect, I require the [Appellant] be obliged to prove [his] case against me to the required burden of proof. 14 As the analysis of the pleading and affidavit illustrates, the evidence relied upon by Mr Duxbury did not prove the case pleaded against Mr Pierce, namely that at a meeting in or about November 2003 certain representations were made to him by Mr Pierce. The evidence was that the first meeting took place in mid December 2003 and that the Initial Representations were made. 15 Mr Duxbury did not seek to amend the pleading at trial, and thereby put Mr Pierce on notice that the Initial Representations were made at the first meeting in mid December 2003. If an amendment had been sought, undoubtedly Mr Pierce would need to have been notified of the amendment. 16 It is not appropriate for the appellant to proceed other than in accordance with the issues raised by the pleadings at trial: Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 288-9; Dare v Pulham (1982) 148 CLR 658 at 664. 17 In the circumstances, the trial judge overlooked the uncontroverted evidence of the meeting attended by Mr Pierce in mid December 2003 at which the Initial Representations were made. The conclusion reached by the trial judge set out earlier in these reasons for judgment (see [8]) that "the Initial Representations were … made during meetings which [Mr Pierce] did not attend" cannot stand in the face of that uncontroverted evidence. The matter must be remitted to the trial judge for further consideration. 18 Accordingly, the orders of the Court are as follows: 1. The Appeal be allowed. 2. The matter be remitted to the Trial Judge for further consideration. 3. The Respondent pay the Appellant's costs of the appeal, to be taxed in default of agreement. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Moore, Middleton & Gordon. Associate: Dated: 17 November 2009 Counsel for the Appellant: Mr S Minahan Solicitor for the Appellant: Hicks Oakley Chessell Williams No appearance by the Respondent Date of Hearing: 17 November 2009 Date of Judgment: 17 November 2009