Stephen Von Muenster, Partner, DVM Law presented 'Inside the Client vs Agency Test Case'

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Stephen von Muenster
Partner DVM Law
P: 02 8599 1280
M: 0417 724 573
E: stephen.vm@dvmlaw.com
www.dvmlaw.com
Lunchtime Session:
Inside the Client v’s Agency Test Case

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About us
DVM Law advises and supports the people and
businesses that innovate, create, communicate and
entertain.
Stephen von Muenster has practiced as a legal &
commercial adviser in these fields for nearly 25 years.
A significant portion of his practice involves resolving
disputes and conflicts for clients in these sectors.
Inside the Client v’s Agency Test Case

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Simple facts & focus of presentation
• The Protagonists.
• The Court: Equity Division, Supreme Court of NSW
• The Case: 2 November 2018 [2018] NSWSC 1650, Ball J
• Focus: not who won or lost, right or wrong, but when a
campaign does not meet a client’s expectations:
• What the Court said about professional standards of care in
the comms industry
• Identify key lessons learned
• How the lessons can be put into practice for benefit of both
Agency and Client
• All information presented today is in the public domain
Inside the Client v’s Agency Test Case

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Today’s outline
Inside the Client v’s Agency Test Case
v What happened?
v The long road to resolution
v Agency’s claim & Client’s cross
claims
v The Decision
v The Outcome
v Lessons learned
Audience Q&A

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What happened?
Inside the Client v’s Agency Test Case
l April 15 Agency invited to pitch for the launch’ of
Client’s new brand in the Australian market
l First time launch of brand, no prior major campaigns
l Agency is successful, commences services
l Agency originating Services Agreement signed July 15
l Agency provides extensive “full services”:
l Connections strategy
l Creative & production
l Media planning & buying
l Search
l Social media & social influencers
l Digital & website services
l Integration
l TVC and integrated comms go live August 15
l Shortly thereafter Client decides it is not happy & in
mid October 15 pulls TVC & entire 12 month campaign
despite signing all MBA’s and full campaign approvals
l Client decides not to pay any of the outstanding fees
owed to Agency - media & creative services fees, third
party costs including very significant media and
production costs
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The long road to final resolution
Inside the Client v’s Agency Test Case
l In early November 15 Client emails and
confirms that Agency services are to
halt, but wants all materials produced to
provide to new agency
l Late November 15 - July 16 the
parties try to resolve between lawyers
and then contract mandated mediation –
unsuccessful
l Late July 16 Agency commences
proceedings in the Supreme Court of
NSW, Equity Division
l Supreme Court trial dates 10 – 14 and
17 – 20 September 18
l Judgment rendered by Justice Ball
2 November 18
l Orders issued by Justice Ball
22 November 18

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The Claims and Counter Claims
Inside the Client v’s Agency Test Case
Agency:
l Agency’s claim was a simple debt claim
for:
l Professional service fees - retainer
l Agency expenses
l Media costs
l Production costs
l Campaign related third party expenses
l Interest under the Services Agreement
l Legal Costs
l Retainer claim for media services circa
$116k
l Creative services circa $125k
l Media costs circa $734k
l Expenses circa $6k
l Identified credits following post-analysis
(circa $41k)
l Total circa $940k + interest + costs
Client:
l Client’s counter claim was extensive
and touched the entire service
spectrum:
l Breach of the contractual standard for all services
Agency failed to “provide the services with the
degree of skill, care and diligence expected …”
l TVC did not properly explain product
l No increase in brand awareness
l Did not achieve $750,000 in sales July-November 15
l No emphasis on where to purchase
l TVC spots booked were not relevant to target market
- incorrect audience
l Did not use more than one FTA TVC network
l Did not properly integrate TVC with each other
campaign element
l Did not provide all the services under the services
agreement, in particular website
l Breached the services agreement
l Overcharged Client
l Engaged in misleading or deceptive conduct under the
Australian Consumer Law
l Damages claim > $1.7 million +
interest + costs

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Inside the Client v’s Agency Test Case

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The Decision
Inside the Client v’s Agency Test Case
The Decision on 2 November 18
l Judgment for Agency – success on debt claim
l Agency to be paid interest under the Service
Agreement
l Client’s cross-claim dismissed – Agency met
the professional (contractual) standard across
entire service spectrum, did not breach the
services agreement and did not act in a
misleading way
l Parties to agree costs in 14 days or relisted –
parties did not agree
The Decision on 22 November 18
l Agency awarded party/party costs to
15 August 16
l Agency awarded indemnity costs from
16 August 16
l Agency awarded interest on costs

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The Outcome
Inside the Client v’s Agency Test Case
l Judgment for Agency in the sum of
$1,301,429.70 inclusive of pre-judgment
interest calculated at the rate under the
Services Agreement
l Agency awarded party/party costs to
15 August 16
l Agency awarded indemnity costs from
16 August 16
l Agency awarded interest on costs

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Lessons Learned
For the first time, agencies can now look to guidance from the Court to help
determine the professional standard of care they owe to their clients
Inside the Client v’s Agency Test Case
l #1 Getting the Pitch Right
l Alleged misrepresentations in pre-contract
stage: brand awareness and sales increase
l Take out – assess information available and
do not over promise, agree unrealistic goals
or exaggerate skills & expertise
l #2 Advertiser sales targets -
beware
l Take out – projections and reach targets
supported by calculation and industry
standards; strict terms around sales targets
& use of disclaimers
l #3 Understand the audience
l Take out – audiences need to be explained,
approved and accurate for the media used
l #4 Understand the regulatory
space
l Take out – regulators may reject scripts and
ads, client needs to be responsible for
briefing agency & should be in contract
l #5 Process & creative briefs
l Take out – seek clear written instructions,
structured process, respond to feedback from
regulators, ensure limitations are disclaimed
l #6 Advertiser approvals
l Take out – the court requires approvals and
this must be across all comms disciplines at
critical stages
l #7 In-scope & Out of scope
l Take out - expressly ID the out of scope
service in the contract so agency cannot be
blamed for follow on elements
l #8 Contracts & processes in place
l Take out – Agency succeeded because it had a
contract that covered the field, had good
disclosure and approvals processes and at the
end of the day delivered a professional full
service that met the contractual standard

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Questions?
See our blogs at www.dvmlaw.com:
See our detailed article on this case here.
Feel free to reach out to us at any time

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surry hills nsw 2010
+ 61 2 85991280
www.dvmlaw.com
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