February 28, 2024

Victory for NATIVE EXTRACTS, Federal Court awards over $3M in case against Ross Macdougald, Biologi, FPI Oceania, Plant Extracts and Phytoverse

The Federal Court of Australia has delivered a resounding statement against corporate malfeasance and conduct in the cosmetics industry when it delivered the second judgement in the case of Native Extracts Pty Ltd v Plant Extracts Pty Ltd (No 2) [2024] FCA 106. In this second decision, Justice Downes ordered Ross Macdougald, Plant Extracts Pty Ltd and alternatively Phytoverse Pty Ltd to pay up to a staggering $3,262,880 for the various proven breaches.

This amount comes on top of the amounts ordered to be paid in the first judgment made by the Federal Court on 23 October 2023 that ordered NATIVE EXTRACTS Pty Ltd be paid a total of $447,886 by Ross Macdougald, Plant Extracts Pty Ltd and FPI Oceania Pty Ltd. This amount was due in November 2023, and has still not been paid. In the first judgement Justice Downes ordered Plant Extracts Pty Ltd and Biologi Pty Ltd to publish “corrective advertising” so that customers would no longer be misled.

These "corrective advertising" are detailed in skincare brand Biologi breached the Australian Consumer Law - ordered to publish 5 corrective actions by Malcom Burrows Dundas Lawyers.

Justice Downes said at paragraph 9 of the first judgement that:

“As third parties (namely existing and potential customers) were likely being misled by the impugned conduct, I made this order at the conclusion of the trial rather than waiting for the final judgment to be handed down.

I was particularly concerned that the injunctions be issued and that the corrective advertising occur as soon as possible”.[5]

The second decision of the Federal Court requires that NATIVE EXTRACTS Pty Ltd, Ross Macdougald and his controlled companies, confer on the issue of payment of legal costs before 1 March 2024.

A case like this between participants in the cosmetics industry is unusual as actions for false and misleading statements and misleading and deceptive conduct are usually pursued the Australian Competition and Consumer Commission (ACCC).

The decision of the Federal Court vindicates that NATIVE EXTRACTS actions against Ross Macdougald and his controlled companies for breach of contract, breach of copyright, breach of director’s duties, a litany of false misleading & deceptive statements and misleading and deceptive conducts because of the sheer amount of damages awarded.

The case serves as a warning to unscrupulous operators that pseudo science and unsubstantiated claims about products on social media will no longer be tolerated.

This result comes after two previous Federal Court matters were commenced by Ross Macdougald and his companies against Lisa Carroll and her companies.

These two proceedings were discontinued by the parties after Ross Macdougald and his controlled companies agreed to pay each respondents legal costs.

NATIVE EXTRACTS initiated these proceedings in July 2021 so it’s been a long battle.

“Not only is this a win for NATIVE EXTRACTS, it’s a win for the industry, for transparency and for the consumer. I feel vindicated, I’ve taken a stand to protect my business from numerous breaches of contract, breach of restraint, breach of confidence, various false and misleading statements, misleading and deceptive conducts by Ross Macdougald his controlled companies,

.

The decisions give a voice to those crying out for transparency and accountability and supports those ethical brands simply wanting a level playing field in a highly competitive retail market. It serves as a warning to unscrupulous operators”. Said Lisa Carroll CEO of NATIVE EXTRACTS.

This case has ignited conversations and shown just how easy it is for false and misleading statements to proliferate and multiply online often unintentionally by media, brands and influencers.

“It is disappointing that this has happened in an industry that is driving exciting innovation in ingredient and finished product design, advancing plant science, building a robust regulatory community, collaborating with primary industry partners and research institutions, and creating new markets for growers and building trust and scalability in the supply chain.” says Lisa Carroll

Brands deserve to compete in a level playing field which is difficult when some are overstating and flat out lying to consumers with pseudo-science.

Consumers deserve to know what’s in the products they use, if the organic certification that is being claimed is real and if they can rely on the claims made by the brand.

A legal odyssey culminates in victory for truth and transparency

For those in the cosmetics industry, the decision of Justice Downes's made on 23 February 2023 comprised of 336 paragraphs over 76 pages, is not just a judgment but a narrative of corporate malfeasance that commenced in July of 2021.

“The allegations considered by the Court after a 3-year battle read like a “what’s what” of corporate malfeasance and included breach of contract, breach of contractual and equitable obligations of confidence, breach of copyright, breach of contractual restraint, a litany of false and misleading statements and misleading and deceptive conduct by Macdougald and his controlled entities.”

said Malcolm Burrows, Legal Practice Director of Dundas Lawyers, whose firm acted for NATIVE EXTRACTS and the other applicants in each of the proceedings.

Detail of the Case

At the heart of the legal battle was a breach of a settlement deed between Lisa Carroll and Ross Macdougald and each of their companies. After their business separation, where Carroll acquired Macdougald's interest in NATIVE EXTRACTS, allegations surfaced that read like a ledger of corporate wrongdoing.

The list was exhaustive and included, breach of contract, breach of confidentiality, copyright infringement, breach of a contractual restraint, and a series of false and misleading statements made by Biologi and Plant Extracts in addition to misleading and deceptive conduct.

Ross Macdougald's absence and Court's acknowledgement of the truth

'Self-proclaimed cosmetic chemist,' Mr. Ross Macdougald, who Justice Downes noted in the second decision made on 23 February 2024 “….did not appear to have any ‘scientific qualifications’ [1] was conspicuously absent during the week of the trial that commenced on 9 October 2023, despite being the director of all the corporate respondents.

Mr. Macdougald and the corporate respondents elected not to file any evidence to dispute the allegations made against them and only admitted them at the last minute during the week of the trial.

NATIVE EXTRACTS expert scientific evidence was not challenged by Ross Macdougald and the corporate respondents and as a result was accepted in full by the Court.

Since the initial judgement was made on 23 October 2023, NATIVE EXTRACTS has become aware of various statements being made by the Ross Macdougald and the respondents on their website and on social media that conflict with the matters that they admitted in the legal proceedings.

Ross Macdougald and his controlled respondents had many months (if not years) to prepare and file evidence to defend the allegations against them and they chose not to.

Because Ross Macdougald and his controlled companies did not file any expert scientific evidence in reply to what was filed by NATIVE EXTRACTS that Court to accepted in full NATIVE EXTRACTS' scientific evidence.

The Compensation Breakdown

The Court has provided NATIVE EXTRACTS with two options for compensation, based on making an election for loss of profits or damages as is usual in these sorts of cases.

the option to elect $3,105,682 for lost profits due to the conduct of Plant Extracts and Ross Macdougald.
or, $1,904,375 from Mr. Ross Macdougald and Phytoverse.

This is in addition to an award of $157,198 and flagrant breach of copyright because Plant Extracts had used various scientific tests belonging to NATIVE EXTRACTS and sending them to potential customers, saying passing them off as their own.

The second judgement also provides NATIVE EXTRACTS with the opportunity to be heard on the issue of legal costs to be paid by Ross Macdougald and his controlled respondents.

A further $447,886 was ordered to be paid by the expedited orders made on 23 October, 2023. Despite being payable in November 2023 NATIVE EXTRACTS has not yet received payment.

The next steps

The solicitors for the parties have been ordered to attempt to reach a consensus about the payment of legal costs, failing which a case management hearing is set for 1 March 2024.

Conclusion

This case is a watershed moment for the cosmetics industry, spotlighting the gravity of corporate deception and how Courts will rule against businesses making false and misleading statements and engaging in conduct designed to mislead consumers.

The ruling is not just a victory for NATIVE EXTRACTS but a clear win for the Cosmetic industry highlighting the potentially severe consequences of deceptive practices and pseudo-science.

For those interested in reading the first decision it is accessible here:

The second judgment is judgement it is accessible here.

These two decisions made by the Federal Court, vindicates NATIVE EXTRACTS claims for breach of contract, breach of copyright, breach of fiduciary duties, false misleading & deceptive conduct, to bring about truth and transparency, and a level playing field for brands, ingredient manufacturers and greater protection for the consumer.