Berry & Anor v CCL Secure Pty Ltd [2020] HCA 27

The High Court has unanimously allowed an appeal from the Full Court of the Federal Court and awarded a Nigerian businessman, Dr Benoy Berry and his company over $27 million in unpaid commissions following the misleading and deceptive termination of his contract with Securency, an international bank note manufacturer. The case is a striking example of how the Australian statutory consumer protection regime can protect businesses from losses caused by the misleading or deceptive conduct of their commercial partners.

The background

Dr Berry and his company, GSC, were parties to an agency agreement with Securency (once half-owned by the Reserve Bank of Australia). Securency produced the distinctive polymer bank notes used in Australia and sought to expand its sales into other countries. Due to Dr Berry’s connections in Nigeria, Securency appointed him as its agent in negotiations with the Nigerian government. Under the agreement, in return for his efforts, Dr Berry was entitled to a 15% commission on the sales of the polymer. The agency contract was to renew automatically every two years, unless lawfully terminated according to the procedures set out in the contract.  

Securency decided it no longer wanted Dr Berry to act as its agent after a company related to him became associated with legal proceedings against the Nigerian government. However, rather than terminate the contract lawfully, Securency persuaded Dr Berry to sign a termination of the agency agreement on the untruthful basis that the termination was necessary before they could set up a joint venture for the next stage of the bank note production process. Securency also told Dr Berry that, despite the termination, he would remain its agent and would continue to receive his commission. Securency maintained this deliberate deception for some time, as Securency did not want to risk damaging its relationship with the Nigerian government, which it feared would jeopardise its sales. In fact, Dr Berry only discovered his role had been terminated after seeing news reports about Securency’s alleged bribery of public officials in other countries.

After this discovery, Dr Berry and his company commenced proceedings against Securency claiming that Securency had engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act (the predecessor to s 18 of the Australian Consumer Law). The Federal Court found that Securency had perpetrated a “shabby fraud” against Dr Berry and then turned to the question of damages – specifically, how much commission would Dr Berry have received under the contract, but for the termination?

At first instance, the Court found that Dr Berry was entitled to $65 million in damages on the assumption that the agency contract would have continued, through automatic renewal, up to the date of trial. The trial judge found that Securency was prevented, by its fraudulent conduct, from arguing that it would have terminated the contract anyway by lawfully following the procedure set out in the contract.

On appeal, the Full Court of the Federal Court disagreed and held that even though Securency’s fraud had caused the termination, it was still necessary to consider on the balance of probabilities what would have happened but for the fraud. In the absence of any evidence to the contrary, the Full Court concluded that Securency would have lawfully terminated the contract on 1 June 2008 – a finding that significantly reduced Dr Berry’s damages to $1.8 million.

The High Court allowed Dr Berry’s appeal of the Full Court’s decision, finding that the Full Court had erred in its consideration of how damages should be calculated in circumstances where a party that has deliberately acted unlawfully contends that they would have achieved the same outcome by lawful means.  The High Court found that in these circumstances, the burden falls to the wrongdoer to produce evidence that there was a real possibility that it would have terminated the contract through lawful means. Not only did Securency fail to meet this evidentiary burden, the evidence suggested a real possibility that the contract would have continued until 30 June 2010, the date on which Securency terminated its other agency agreements. Assessed on that basis, Dr Berry and his company were entitled to over $27 million in damages.

Key Takeaways

The High Court’s decision is another chapter in a decades long scandal involving Securency’s efforts to expand the manufacture and use of Australian designed polymer bank notes into other countries.  A number of Securency executives have been jailed for their part in bribing foreign officials in Africa and South East Asia.

Importantly, the decision clarifies the approach that is to be taken to calculating damages in cases where a wrongdoer seeks to limit the loss or damage arising from its deceptive conduct by reference to a hypothetical alternative in which it says the same outcome would have been achieved lawfully.  In such circumstances, it is now clear that the burden will fall to the wrongdoer to produce evidence that absent the deceptive conduct, the same outcome would have been achieved lawfully.

The case is also a salient reminder of the business-to-business application of the statutory consumer protection regime in Australia.  While Dr Berry and GSC succeeded in their claims that Securency’s conduct had contravened the prohibition against misleading or deceptive conduct in the Trade Practices Act, the High Court’s damages analysis applies equally to claims under the Australian Consumer Law, which has since replaced the Trade Practices Act.  The Australian Consumer Law is not just intended to promote fair dealing between businesses and consumers.  It also sets a standard of conduct which applies to commercial transactions between businesses and creates an avenue for the recovery of damages in business-to-business claims.

DLA Piper’s Litigation & Regulatory lawyers have extensive experience in advising on claims under the Australian Consumer Law. Please don’t hesitate to reach out to our team, who would be more than happy to discuss this matter with you.