Clifford v Vegas Enterprises Pty Ltd: Failed sales forecasts, misleading and deceptive conduct and duty of disclosure

The Federal Court in Clifford v Vegas Enterprises Pty Ltd [2011] FCAFC has today held that failed sales forecasts which were made to Phillip Clifford (the Appellant) before he acquired shares in Vegas Enterprises (the Respondent)  were made on reasonable grounds and therefore, not misleading or deceptive conduct.

The case which was largely decided on the facts was based on section 1041H of the Corporations Act 2001 which states that a person must not in relation to a financial product or service, engage in conduct which is likely to mislead or deceive.

The court held that Vegas Enterprises had reasonable grounds to assume that its sales forecasts were accurate when it provided the data to Mr Clifford, and thus, they had not engaged in misleading or deceptive conduct. (at 193)

The court also held that there was no duty on Vegas to give all of its sales and financial information to Mr Clifford -  it was reasonable for Vegas to assume that Mr Clifford would ask for whatever information he required before he purchased the shares with Besanko J agreeing with the trial judge’s finding that “the reasonable expectation was that the appellant would ask for whatever information he needed…the respondents were not under any practical duty to disclose any of the matters that the appellant alleges they should have disclosed.” (at 144)

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