Misleading or deceptive conduct and employment contract: Rakic v Johns Lyng Insurance Building Solution (Victoria) Pty Ltd [2016] FCA 430

Published 29 June 2016

A woman who worked at an insurance building company was awarded over $300,000 in damages after the Federal Court ruled her employer had engaged in misleading and deceptive conduct during employment negotiations.

Rakic was offered a position at Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Johns Lyng) with a base salary of $115,000 plus superannuation and a 2.5% profit share. The base salary was around $100,000 less than Rakic was receiving at her current job. Rakic was assured the profit share would make up the difference.

Rakic sought compensation under clause 236 of the Australian Consumer Law, alleging the company engaged in misleading or deceptive conduct in regards to representations made about her salary.

Rakic claimed she was entitled to 2.5% of net profit for that year. Johns Lyng argued the profit share was payable from the net profit made during her employment, and the company made a loss during that period.

Rakic also claimed the company stated they would pay for her vehicle. Rakic alleged this was an oral term of her employment contract and sought a declaration that she did not owe Johns Lyng the $20,343.63 paid by the company for the lease of her vehicle.


The Court recognised that for Rakic to be successful in her claim under the Australian Consumer Law, it was necessary to prove the conduct occurred “in trade or commerce” and was “misleading or deceptive”.

The Court noted that employment negotiations were considered to be “in trade or commerce”. As the assurances made by Johns Lyng were intended to induce Rakic to accept the job offer, the Court found these assurances were part of the employment negotiations. As such, the conduct was deemed to have occurred “in trade or commerce”.

The Court ruled the representation made by Johns Lyng that the 2013 profits would meet or exceed profits made in 2011 and 2012 and that the business would remain as profitable as it had been in the past two years constituted misleading conduct. This was because the business had made a substantial net loss prior to making these assurances. The Court ruled this loss would foreseeably affect sales and profits and therefore there were no reasonable grounds for making these representations.

The representation that the business would make its profit forecast in the 2013 financial year was not deemed to be misleading or deceptive because it was not clear Johns Lyng knew it would not meet this forecast.

The Court recognised that “misleading or deceptive” conduct must lead, or be capable of leading, a person into error. The Court determined this requirement was met because if the assurances had not been made, it would have been unlikely for Rakic to enter into the contract. Consequently, it was likely she would have found a job that paid significantly more than the base salary at Johns Lyng.

The Court ordered Johns Lyng to pay $333,422 in damages to Rakic to compensate her for the loss she suffered from entering into an employment contract with Johns Lyng rather than seeking out a higher paid position at another company.

The Court ordered Johns Lyng to pay $16,529 to Rakic by reason of the net profit clause in her employment contract.

The Court ruled against Rakic’s claim that Johns Lyng would pay for her vehicle as the written contract contained no such term.

Read the full decision here

This content is general in nature and provides a summary of the issues covered. It is not intended to be, nor should it be relied upon, as legal or professional advice for specific employment situations.

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