16 Oct Carr v Empirical Works Pty Ltd & Anor [2017] FCCA 1813: Employer Makes Counter-claim Seeking $450,000.00 for Pre-Engagement Misrepresentations

A salesperson who brought a general protections case against their employer is now facing a counter-claim from their employer of $450,000.00 in damages for lost sales and the cost of recruiting him.

The employer’s proposed amended counter-claim

The employer sought leave from the Federal Court to amend its response to the salesperson’s allegations that it took adverse action against him when it dismissed him.

The employer alleged the salesperson had engaged in misleading and deceptive conduct by making false pre-employment representations about his experience and seniority.

It claimed that the false representations made by the salesperson included stating that he:

1.  had over 10 years’ experience in sales;

2.  worked for a company of a similar size;

3.  worked as a sales director for six years;

4.  had experience selling to large multinational companies;

5.  made two million dollars in sales in the last financial year;

6.  had close business connections that would result in sales; and

7.  would be able to source sales leads independently.

The employer claimed that these representations gave the impression that he was a “highly skilled and successful sales person” and it relied on these representations in offering the salesperson a salary which was much higher than he would have been offered had the representations not been made.

It said the salesperson engaged in conduct that was misleading and deceptive or likely to mislead or deceive in contravention of clause 18 of the Australian Consumer Law contained in schedule 2 of the Competition and Consumer Act 2010 (which states “a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”), as the representations (contraventions) made by him were false.

The salesperson’s request for the proposed amendment to the counter-claim to be rejected

The salesperson sought to have the amended response struck out on the basis that it contained “new claims and arguments and a new cause of action”.  He submitted further, that in any event, the original cross-claim was not a maintainable course of action and was an abuse of process.

He submitted that the original cross-claim did not disclose a reasonable cause of action and would not be made out against him and argued that he was not acting in “trade or commerce” when answering questions as to his previous employment in the context of seeking employment.  He said that the representations were made during the “interview process” for the purpose of securing employment, which “was a completely different context to making representations when engaged in trade or commerce”.

The employers counter argument

The employer said that the amendment did not raise a new claim, argument or cause of action as it relied on “the same factual matrix”.  It asserted the amendments sought to clarify the “sole cause of action” of the cross-claim, i.e. “the matter of representations said to have been made by the applicant, how they can be said to be misleading and/or deceptive, and the claimed damage that results from the first respondent’s reliance on the representations”.

The Employer relied on propositions from a number of authorities which include:

1.  Pre-employment negotiations have a “commercial character” in a number of different circumstances; and

2.  The alleged conduct (engaging in the representation) “does not have to occur within the trade of the person making the representation, so long as it is within the trade of the person to whom the representation is made”.

It also argued that section 18 of the Australian Consumer Law is much broader than the Trade Practices Act as it prohibits a “person” from engaging in misleading and deceptive conduct, rather than just a “corporation”.

The Courts findings

Judge Jack Nicholls held that the employer’s amended counter-claim should be accepted.  He said “it may be that the respondents’ [employers] cross-claim raises a “novel” point.  But I cannot accept the applicant’s [salesperson’s] argument to the extent that it relies on the assertion that that, of itself, means the cross-claim does not disclose a reasonable cause of action.”

Accordingly, he rejected the salespersons arguments that:

1.  the proposed amendment raises a completely “new” case; and

2.  that the employer did not have a reasonable course of action, saying that, “The respondents [employer] rely on propositions that flow from a number of authorities to submit that an arguable case, disclosing a reasonable cause of action, does exist within their proposed amended cross-claim”.

He said that the amendment to the counter-claim “provides particular detail on the precise boundaries of the counter-claim”, which would be an advantage to the salesperson in understanding and preparing for the case against him and “gives definition to what was initially, albeit insufficiently expressed”.