Australia: Headhunting: The risks of making misleading statements during pre-contractual negotiations

Last Updated: 11 September 2016
Article by Lauren Drummond
Most Read Contributor in Australia, September 2017

Headhunting: The risks of making misleading statements during pre-contractual negotiations

In Rakic v Johns Lyng Building Solutions (Victoria) Pty Ltd (2016), the Federal Court awarded an employee more than $330,000 in compensation for the misleading and deceptive conduct of her former employer, Johns Lyng Building Solutions (Johns Lyng).

In 2013, an employee was enticed to leave a position on a base salary of $230,000 and accept a position as general manager of Johns Lyng where her base salary was significantly less. The employee alleged that she relied on representations made by Johns Lyng that a 2.5% annual profit share, which was part of the offer, would make up the difference in salary.

Johns Lyng did not achieve the anticipated profit in 2013. The employee therefore received significantly less pay than represented to her prior to accepting the position. To make matters worse, Johns Lyng terminated her employment in February 2014 due to redundancy.

The employee filed a claim against Johns Lyng in the Federal Court for loss and damage on the basis that it had engaged in misleading and deceptive conduct under the Australian Consumer Law (ACL).

Under s 18 of the ACL, a person is prohibited from engaging in misleading and deceptive conduct "in trade or commerce". Under s 31, a person must not engage in conduct "in relation to employment that is to be, or may be offered" which is misleading, including as to the "nature, terms or conditions of the employment".

The Court found that conduct which occurs in the course of negotiations of an employment contract was "in trade or commerce" or would otherwise attract s 31 of the ACL.

Alleged representations

The employee argued that by the conduct of its agents, Johns Lyng represented the following to the employee:

  1. Johns Lyng's profits and sales for 2013 were likely to meet or exceed its sales and profits from the previous 2 years.
  2. Johns Lyng would remain profitable for at least the next 12 months.
  3. As at March 2013, there was no reason, of which Johns Lyng was aware, that it would not meet its forecast profits in 2013.

The Court found that Johns Lyng had made the representations in the following instances:

  • during a meeting prior to accepting employment, the employee was told that Johns Lyng was very profitable and as such, her 2.5% profit share would make up the difference in pay with her current position; and
  • the employee received an email about the financial position of the company as summarised by the chief financial officer, which showed its sales and profits from the previous 2 years and its profit forecast for 2013.

Representations can also be made by implication or by omission. The Court held the third representation was implied as a result of Johns Lyng failing to qualify any of its statements regarding its profitability and the employee's potential profit share amount.

Since the purpose of those statements was to entice the employee to accept employment with Johns Lyng, the Court held that conduct occurred in the course of pre-contractual negotiations, and thus fell within ss 18 and 31 of the ACL.

Were the representations misleading or deceptive?

The employer's representations about the expected profits for 2013 were as to "future matters". Under the ACL, such representations are taken to be misleading unless there are reasonable grounds for making them.

The Court ruled the first and second representations constituted misleading and deceptive conduct as the employer failed to show there was a reasonable basis for making them. It held that Johns Lyng did not take relevant factors into account, including the fact that Johns Lyng had suffered a significant decline in its number of successful bids for new work, which occurred before the representations were made. Thus, the representations were not made on reasonable grounds.

However, the third representation was found not to be misleading. This is because the employer did not have actual knowledge that it could not achieve the forecast profits in 2013, despite failing to take relevant factors into account that suggested otherwise.

Key lessons

Statements that promise certain outcomes or deliverables should be avoided when seeking to entice prospective employees to join your business, unless there are reasonable grounds to support them.

It is important to ensure that:

  • all information or statements are accurate and, where necessary, include qualifications as to the accuracy of the information;
  • employment contracts contain a clause that the employee has not relied on information/representations not contained in the contract; and
  • any briefs given to head hunters are reviewed carefully, and recruiters are warned against making other statements or promises in relation to employment.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Lauren Drummond
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.