Tuesday, 14 January 2014

[Contract] Vitiating Factor 2, Misleading and Deceptive Conduct/ Australian Consumer Law

VITIATING FACTOR II: MISLEADING AND DECEPTIVE CONDUCT





1 ‘IN TRADE OR COMMERCE’ LIMITATION

S 2 ACL 2010
Trade or commerce means:
(a) trade or commerce within Australia; or
(b) trade or commerce between Australia and places outside Australia;

and includes any business or professional activity (whether or not carried on for a profit).

Concrete Constructions (NSW) Pty Ltd v. Nelson (1990) 169 CLR 594
A statement made to an employee in the course of their ordinary activities is not conduct in trade or commerce.

O’Brien v. Smolonogov (1983) 53 ALR 107
“In trade or commerce” excludes conduct of those who act not in a business capacity but in a purely private capacity concerning domestic transactions

Houghton v. Arms (2006) 225 CLR 553
Issue: Were workers in a company giving misrepresentation liable instead of the company?
Held: Yes; they were liable for deceitful conduct in trade or commerce; mere employee can be liable for deceit


Bevanere Pty Ltd v. Lubidineuse (1985) 59 ALR 334
Was the sale of the beauty business in trade or commerce? Yes: You need to look at the activities as a whole.

TCN Channel Nine Pty Ltd v. Ilvariy Pty Ltd [2008] NSWCA 9
Channel Nine made a misleading statement when they said that they wanted to enter the building. But they just exposed the managing director’s practices.
Issue: Was the activity in trade or commerce?
Held: Yes; it does not matter; the statement to the builders was part of trade or commercial practice.


Bond Corporation Pty v. Thiess Contractors Pty Ltd (1987) 14 FCR 215
Prior to this case (1987), professional advice was not activity in trade or commerce. HELD: Professional advice is in trade or commerce.
Section 2ACL: “includes any business or professional activity”
This provides a broader scope than section 4(1) of TPA 


Shahid v Australasian College of Dermatologists
Held (Jessup J): “Any professional activity” does not mean anything done by professional

2 MISLEADING OR DECEPTIVE CONDUCT 

2.1 Audience

Campomar Sociedad Limitada v. Nike International Limited (2000) 202 CLR 45

Fact: D sold ‘Nike Sports Fragrance’ and P argued that it was misleading because it would deceive the public into thinking that Nike was making the sports fragrance.
Issue: There has to be someone to be deceived if there is to be liability.
Test: What would an ordinary reasoanble member of the public think?


Butcher v. Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
To determine whether a conduct is misleading and deceptive, consider
  • 1) the nature of the parties
  • 2) the character of the transaction and
  • 3) what each party knew aobut the other as a result of the dealings
    Kirby J: “this strikes a blow at the Act’s intended operation”; people would avoid the Act by putting a disclaimer; this is contrary to the language and purposes of the Parliament
2.2 Conduct that is misleading and deceptive

S18 ACL 2010

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Henjo Investments Pty v. Collins Marickville Pty Ltd (1988) 79 ALR 83
The seller of a bar knew that he was contravening the liquor license but when selling, he did not disclose the information.
HELD: On the facts of the case, there was a duty to disclose the limits on the liquor license.


Reasonable expectation test; a fact that is reasonably in the great interest of the party must be disclosed.

Lockhart J (92-93):
The two words, “misleading” and “deceptive”, are plainly not synonymous. That is not to say that each word may not catch some of the same conduct and that there may not be some degree of overlap. “Mislead” does not necessarily involve an element of intent and it is a word of wider reach than “deceive”. However, it is difficult, in my opinion, to read the word “deceive” in s 52 other than as involving some degree of moral turpitude as it does in ordinary English usage. Trickery, craft and guile, though not essential elements of liability, are typically at the heart of this second element of the statutory provision directed to the protection of the public from unfair trading practices.
‘Mislead’ does not necessarily involve an element of intent (it is a word of wider reach than ‘deceive’


Parkdale Custom Built Furniture Pty v. Puxu Pty Ltd (1982) 149 CLR 191
The words of s 52 have been said to be clear and unambiguous... Nevertheless they are productive of considerable difficulty when it becomes necessary to apply them to the facts of particular cases. Like most general precepts framed in abstract terms, the section affords little practical guidance to those who seek to arrange their activities so that they will not offend against its provisions. It has been held that the section is not confined to conduct that is intended to mislead or deceive.. There is nothing in the section that would confine it to conduct which was engaged in as a result of a failure to take reasonable care. A corporation which has acted honestly and reasonably may therefore nevertheless be rendered liable to be restrained by injunction, and to pay damages, if its conduct has in fact misled or deceived or is likely to mislead or deceive.
Therefore, a perfectly innocent misrepresentation may contravene s 18.

Demagogue v. Ramensky (1992) 110 ALR 608
Reasonable expectation test: What matters is whether or not the facts of the case give rise to a reasonable expectation that the facts that the D remained silent about should be disclosed.

Miller & Associates Insurance Broking Pty v. BMW Australia Finance Ltd (2010) 241 CLR 357
Expectation of disclosure depends on the nature of the parties
Reasonable expectation of disclosure dos not arise merely because one party knows that a particular matter is likely to be of importance to the other party.
Just because a party holds a knowledge that is likely to be important for the other party does not mean that it needs to be disclosed.


Byers v. Dorotea Pty Ltd (1986) 69 ALR 715
The purchasers bought units in a complex known as Boulevarde North on the Gold Coast off the plan. They already had an investment unit in a nearby apartment building, the Boulevarde Towers. The agent represented to them that:
This complex would be bigger, better and more luxurious; It would have an indoor swimming pool;
It would be superior to Boulevarde Towers; and
It would look like the brochure.

The purchasers claimed they were induced by these representations to enter into the contract. The contract contained the further representations that the building was architect designed and would be built by a qualified builder. Neither of these representations was true. Further, there was never any intention to build an indoor pool. This was brought to the attention of the purchasers in a very ambiguous way insofar as the agent sent them a brochure after exchange of contracts but before settlement, showing the swimming pool crossed out. The letter accompanying this brochure made mention only of the change to the tennis court, from a half court to a full size court, without mentioning that the pool had been omitted. On completion of the building, it was apparent that the units were smaller than on the plan in the brochure and the quality was inferior to the Boulevarde Towers. The purchasers inspected the progress of the building a number of times while it was under construction, but made no complaint about the size and quality of the unit. They even sought an extension of time to settle.
The respondents claimed that the purchasers had affirmed the contract by seeking an extension of time and requesting that the vendor submit the transfer. Pincus J held that:

"In my view, under the general law, the request for an extension would in those circumstances have amounted to an affirmation, precluding a right of rescission. However, it is my opinion that the right to grant relief under the Trade Practices Act is not necessarily brought to an end by an affirmation of the contract."

He later said:

"In my opinion, the power given by s.87 is wide enough to justify an order that the deposits be returned. I am of the view that in determining what relief, if any, should be granted on account of a breach of s. 52 which has caused loss, the Court is not necessarily precluded by an affirmation. Here, the factual circumstances discussed under the last two headings may, in my view, be taken into account in determining whether, on the whole, it is fair to require the deposits to be returned on the ground of a breach of s.52."

2.3 Representations about future matters

S4 ACL
Misleading representations with respect to future matters (1) If:
(a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b) the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.

(2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) a party to the proceeding; or
(b) any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.

(3) To avoid doubt, subsection (2) does not:
(a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.

(4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or
(b) a representation that is misleading in a material particular; or
(c) conduct that is misleading or is likely or liable to mislead;

and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.


Example:
Anne makes a representation about a future matter to Bill. If Anne does not have reasonable grounds for making the representation it will be misleading s 4 (1). But she can show that she had reasonable grounds to make the representation under s 4 (2).

Suppose Anne provides no evidence under s 4 (2) then the representation will be deemed to be misleading. Suppose Anne provides some evidence that she had reasonable grounds for the representation that does not mean that she did actually have reasonable grounds under s 4 (3) (a) it is for Bill to show that she did not have reasonable grounds.
The section creates an evidential onus on Anne. She must produce evidence. It does not reverse the burden of proof. If she discharges the evidential onus the burden of proof is still on Bill to show that Anne did not have reasonable grounds and therefore that the representation was misleading


Miba Pty Ltd v. Nescor Industries Group Pty Ltd (1996) 141 ALR 525
Facts: A representation was made about the likely takings of a franchise business that D were selling. A letter was sent by the D with figures of various other similar businesses and this was presented to the P. the question was where it was a representation about the future (i.e. future takings). If it was, it was necessary that the representation had to be made on reasonable grounds otherwise, it would be taken as misleading or deceptive conduct.
Arguments: P argued that it was a representation into the future (future takings)
Held:
  • No, it was not a representation to the future because it was merely statement of present belief. The
    statement was merely suggesting that it was a present belief that the person making the statement held
    that these were the takings that would be received.
  • Whilst there was a future element/ prediction of future takings, it was expressed as ‘it is our current
    belief that the franchise would make X amount of money’.
    Comment: Miba’s approach was firmly rejected in Digitech: The Court did not accept that the statement of the grounds on which a forecast was based meant that it was not a statement of future matters.
Digi Tech (Aust) Pty Ltd v. Brand [2004] NSWCA 58
Facts: Similar statement of forecast as Miba v Nescor case.
Held:
  • the way that the statement was framed “i.e. it is our belief that in the future, the business would have
    X amount of income, did not prevent it from being a statement of the future.
  • It all depends on the words used and the general context
  • The expression of a belief involves the expression of a state of mind. There is no reason why a
    person’s state of mind should not relate to future matters. Thus, indetermining whether an expressed belief relates to future matters, regard must be had to the words used and the context.
2.4 Promises

Promise can be viewed as containing two representations:
  1. That the promisor currently intends and is able to perform the promise or honor the commitment
  2. The promise or commitment will be honored in the future.
S 2 (2) (a) ACL 2010
A reference to engaging in conduct is reference to doing or refusing to do any act, including: (i) The making of, or the giving effect to a provision of, a contract or arrangement; or (ii) The arriving at, or the giving effect to a provision of, an understanding; or
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(iii) The requiring of the giving of, or the giving of, a covenant.
Accounting Systems 2000 (Developments) Pty Ltd v. CCH Australia Ltd (1993) 42 FCR 470
Facts: A entered into a contract with Castle Douglas underwhich copyright interests in software were assigned. A. Gave a warranty to Castle Douglas that they were owners of the copyright and Castle Douglas sold to CCH the licence to use the software. In fact, A did not own the copyright. CCH said that they were mislead and sought to recover money that it has spent on the licence from Castle Douglas.
Issue: CCH was not the party to the original contract therefore, whilst there was a warranty in the contract between A and Castle Douglas, privity of contract* applies and CCH is banned from suing under contract for misleading conduct of A. *Privity of contract means taht one cannot sue under the contract for which one was not a party.
Held:
  • Even though the parties were in a contractual relationship and even though the warranty was included
    in the contract and had taken the form of the promise, CCH had no remedy in contract and hence,
    sought for remedies under the legislation.
  • Under legislation, CCH was allowed to recover.
  • (Lockhart and Gummow J) s2(2) provides significant support for the general proposition that the
    making of a statement as to a presently existing state of affairs may be engaging in misleading or deceptive conduct where the statement is embodied as a provision of a contract.
Futuretronics Pty Ltd v. Gadzhis [1992] 2 VR 217
Facts: under the statutes of fraud, the contract could not be enforced and hence Pl. Could not have remedy under contract law. The D. Bid for the Pl. Property at an auction. For some reason, as required for the condition under the auction, D. Decides that they did not want it and refuses to pay. Pl. Could not sue in contract because of Victorian Statue of frauds. Pl. Then argues that the D. Had engaged in misleading or deceptive conduct by bidding at the auction and that was misleading because it was a representation that he bid was genuine and they intended to be bound by the conditions of sale.
Issue was whether Pl. Could then recover under the legislation?
Held: on what basis was the liability? It is not necessary for the Pl. On the facts here to show that the D. Had no intention of performing the promise(ie. s4 is not limited to whether or not there was an intention nor ability by hte D to perform the contract at the time the promise was made – the promise here being implied by their behaviour – rather, the representation that D. would complete the contract shows that there was an implicit promise on the part of hte D. To perform and if you implicitly promise to perform nad you fail to perform, that conduct is misleading and decepetive.
Note: In this case, the P cannot be said to have suffered loss because there was no competing genuine bidder at the auction.
The following case demonstrates a more restrictive approach

Concrete Constructions Group Ltd v. Litevale Pty Ltd (2002) 170 FLR 290
Facts: implied promise was that we would perform the act and was bound by the contract and would complete
the sale
Held:
failure to keep a promise was not enough to be a deceptive conduct. Instead, a narrower view was
taken.
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  • It is necessary that you have the capacity to perform more than just the intention to perform in order to be a promise that was deceptive conduct.
  • Not enough that D impliedly or expressly represented that he would perform in the future
  • Contractual promises fall within the legislation- liability can be imposed by implication, but it is not
    simply that we are in a contractual relationship and one does not perform, there has to bee a representation that a promise was made, whether implicitly or expressly, that at that time, I have the capacity to perform.
2.5 Opinions

S4 ACL

Misleading representations with respect to future matters (1) If:
(a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b) the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.

(2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) a party to the proceeding; or
(b) any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.

(3) To avoid doubt, subsection (2) does not:
(a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.

(4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or
(b) a representation that is misleading in a material particular; or
(c) conduct that is misleading or is likely or liable to mislead;

and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd (1984) 2 FCR 82
Principle: an opinion can amount to deceptive and misleading conduct but an opinion is not misleading and deceptive merely because it was incorrect
There has to be within the opinion an implied statement of fact that there is a basis for the opinion


Havyn Pty Ltd v. Webster [2005] NSWCA 182
Representation of belief when the promisor has no adequate foundation upon which the belief could be held (unreasonable grounds or no grounds for opinion)


2.6 Statements of law

Inn Leisure Industries Pty Ltd v. DF McCloy Pty Ltd (1991) 28 FCR 151
Fact: Statement was made that sale would not attract sales tax. Turned out not to be misleading or deceptive
conduct because person making the statement didn’t represent themselves as having expertise.
Principle: Statements are not misleading or deceptive if the person making the statement doesn’t make themselves out have expertise.

SWF Hoists and Industrial Equipment Pty Ltd v. State Government Insurance Commission [1990] ATPR Fact: The issue was whether the policy that P had taken out worked within the state. They asked for the state
governor’s opinion who was knowledgeable and had expertise and was held to be liable.
Principle: Statement of law can amount to misleading or deceptive conduct where the person making the statement holds themselves out to having expertise.

2.7 Failing to take care

Parkdale Custom built Furniture Pty Ltd v. Puxu Pty Ltd (1982) 149 CLR 191, 199 Fact: Manufacturer of a couch was very similar in design to a more expensive one
Held: A reasonable consumer would have paid close attention to the brand of the couch and any labels attached
Principle: Section 52(TPA) is not confined to conduct that is intende to mislead or deceive. A corporation which has acted honestly and reasonably may therefore be rendered liable to be restrained by injunction and to pay damages if its conduct has in fact misled or deceived or is likely to mislead or deceive.
A perfectly innocent misrepresentation may contravene section 18 of ACL


Suncoast Pastoral Co Pty Ltd v. Coburg AG (No 2) Pty Ltd [2012] QSC 157
Facts: Suncoast sold a farming property to Coburg, partially in return for shares in Coburg’s parent company - Suncoast alleged it was induced to do so by misrepresentations from directors of Coburg and its parent company - misrepresentations included that the parent company had an existing business and that its shares had a certain value, and that there was a secondary market for the shares in the parent company -held: the directors of Suncoast relied upon the representations that were made, and they were intended to be relied upon - failure by Suncoast to undertake reasonable due diligence, and unreasonable reliance by Suncoast were not grounds of defence - misrepresentations materially contributed to Suncoast’s entry into the sale - Suncoast succeeded in its claim under the Trade Practices Act 1974 (Cth) and the tort of deceit - transaction ordered to be reversed - compensation awarded.
Obiter: [57] In order to defeat the plaintiff’s claim the defendant must show that the plaintiff’s conduct was of a character that warrants the defendant being relieved from any legal responsibility so that the plaintiff carries responsibility for its own losses. Fairly extreme conduct by a plaintiff is required to reach such a judgment in the context of an Act that is intended to protect consumers from conduct, including conduct which may breach a norm in circumstances in which the defendant acted reasonably. The conclusion that the plaintiff’s own conduct disentitles it from recovering its losses may be expressed in the language of causation.


3 REMEDIES

3.1 Relevant provisions (ACL)


232 Injunctions ACL

(1) A court may grant an injunction, in such terms as the court considers appropriate, if the court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:
(a) a contravention of a provision of Chapter 2, 3 or 4; or
(b) attempting to contravene such a provision; or
(c) aiding, abetting, counselling or procuring a person to contravene such a provision; or

(d) inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; or
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or
(f) conspiring with others to contravene such a provision.
(2) The court may grant the injunction on application by the regulator or any other person.
(3) Subsection (1) applies in relation to conduct constituted by applying or relying on, or purporting

to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term as if the conduct were a contravention of a provision of Chapter 2.
(4) The power of the court to grant an injunction under subsection (1) restraining a person from engaging in conduct may be exercised:
(a) whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of a kind referred to in that subsection; and
(b) whether or not the person has previously engaged in conduct of that kind; and
(c) whether or not there is an imminent danger of substantial damage to any other person if the person engages in conduct of that kind.
(5) Without limiting subsection(1), the court may grant an injunction under that subsection restraining a person from carrying on a business or supplying goods or services (whether or not as part of, or incidental to, the carrying on of another business):
(a) for a specified period; or
(b) except on specified terms and conditions.
(6) Without limiting subsection (1), the court may grant an injunction under that subsection requiring

a person to do any of the following: (a) refund money;
(b) transfer property;
(c) honour a promise;
(d) destroy or dispose of goods.

(7) The power of the court to grant an injunction under subsection (1) requiring a person to do an act or thing may be exercised:
(a) whether or not it appears to the court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing; and
(b) whether or not the person has previously refused or failed to do that act or thing; and
(c) whether or not there is an imminent danger of substantial damage to any other person if the person refuses or fails to do that act or thing.
Simply, courts have power to award an injunction.


236 Actions for damages

(1) If:
(a) a person (the
claimant ) suffers loss or damage because of the conduct of another person;
and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.

(2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.
Division 4 -- Compensation orders etc. for injured persons and orders for non-party consumers Subdivision A -- Compensation orders etc. for injured persons

Courts have power to award damages.

237 Compensation orders etc. on application by an injured person or the regulator

(1) A court may:
(a) on application of a person (the
injured person ) who has suffered, or is likely to suffer, loss
or damage because of the conduct of another person that:
(i) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or

(ii) constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term; or
(b) on the application of the regulator made on behalf of one or more such injured persons;
make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
Note 1: For applications for an order or orders under this subsection, see section 242.
Note 2: The orders that the court may make include all or any of the orders set out in section 243.

(2) The order must be an order that the court considers will:
(a) compensate the injured person, or any such injured persons, in whole or in part for the loss or

damage; or
(b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person

or any such injured persons.
(3) An application under subsection (1) may be made at any time within 6 years after the day on

which:
(a) if subsection (1)(a)(i) applies--the cause of action that relates to the conduct referred to in that subsection accrued; or
(b) if subsection (1)(a)(ii) applies--the declaration referred to in that subsection is made.


243 Kinds of orders that may be made

Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of those sections against a person (the respondent ) include all or any of the following:
(a) an order declaring the whole or any part of a contract made between the respondent and a person (the injured person ) who suffered, or is likely to suffer, the loss or damage referred to in that section, or of a collateral arrangement relating to such a contract:
(i) to be void; and
(ii) if the court thinks fit--to have been void ab initio or void at all times on and after such

date as is specified in the order (which may be a date that is before the date on which the order is made); (b) an order:
(i) varying such a contract or arrangement in such manner as is specified in the order; and (ii) if the court thinks fit--declaring the contract or arrangement to have had effect as so
varied on and after such date as is specified in the order (which may be a date that is before the date on which the order is made);
(c) an order refusing to enforce any or all of the provisions of such a contract or arrangement; (d) an order directing the respondent to refund money or return property to the injured person; (e) except if the order is to be made under section 239(1)--an order directing the respondent to
pay the injured person the amount of the loss or damage;
(f) an order directing the respondent, at his or her own expense, to repair, or provide parts for,
goods that had been supplied by the respondent to the injured person;
(g) an order directing the respondent, at his or her own expense, to supply specified services to
the injured person;
(h) an order, in relation to an instrument creating or transferring an interest in land, directing the
respondent to execute an instrument that:
(i) varies, or has the effect of
varying, the first mentioned instrument; or
(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first mentioned instrument.


3.1.1 S236 and Expectation loss
‘Expectation damages’ are typically awarded for breach of contract.

However, there is an issue of whether s236 comprises expectation loss or if its limited by analogy to reliance- based loss.

However, Gleeson CJ in Henville v Walker (decided after Marks) said that “common law analogies represent an accumulation of valuable insight and experience which may be useful in applying the Act.” Even though the remedies under the Act are not strictly limited by analgoies with common law, common law still provides a good insight into how damages are to be measured in each case.
The aims of the ACL must also be noted. The aims are:
  1. Fair trading
  2. Consumer protection
Marks v Gio Australia
Obiter:
McHugh, Hayne, and Callinan JJ: “There is nothing in s236 which suggests that the amount that may
be recovered should be limited by drawing some analogy with the law of contract, tort or equitable remedies...it is wrong to limit the apparently clear words of the Act by reference to one or other of these analogies. 

Therefore, expectation loss may be allowed if it is necessary to recognize and enforce legitimate expectations. That is the P must show that the value of the performance of the promise should be compensated by showing that the P was entitled to performance of the contract.
Further, section 236 does not confer such an entitlement. It allows for a claim for loss or damage caused by being misled as to whether a promise will be performed and not loss or damage caused by failure to perform the promise.
In Henville v Walker, McHugh J stated that loss that s18 prohibits is the making of not the failure to honour the false representation.

3.2 Relevant provisions CCA 2010

S137B CCA 2010
If
(a) A person (the claimant) makes a claim under s 236(1) ACL in relation to economic loss, or damage to property,
suffered by the claimant because of the conduct of another person; and
(b) The conduct contravened s 18 ACL; and
(c) The claimant suffered the loss or damage as result:

i. Partly of the claimant’s failure to take reasonable care; and
ii. Party of the conduct of the other person; and
(d) The other person did not intend to cause the loss or damage and did not fraudulently cause the loss or damage;

The amount of the loss or damage that the claimant may recover under s 236 (1) ACL is to be reduced to the extent to which a court thinks just and equitable having regard to the claimant’s share in the responsibility for the loss or damage.


3.3 Case study

Gates v City Mutual Life Investments Pty Ltd (1986) 160 CLR 1
Facts: Plaintiff had been induced by an agent of D to take out total disability cover on his insisting insurance policy. P claimed that he did that because of a representation by the D that he was entitled to the full amount of the insurance should he be injured and unable to carry out his current occupation as a carpenter. In fact, what the policy entitled him to was that he could not recover the full amount under the policy if he could carry on any sort of employment. That is, whilst he could not work as a carpenter but can work as something else, then the policy would preclude him from recovery.
Issue: There was a problem in terms of recovering for damages- it was said that if the tort measure applied, he would have gotten what he paid for. Plaintiff had paid for a policy that covered if he could not work at all- applying the tort measure, this was what he got therefore damages would be none.
Held:
  • Gibbs CJ: “when deciding what damages you get, you always go for the tort measure.
  • Mason, Wilson and Dawson JJ: It is unnecessary to make a definitive choice between contract
    measure and torts- they wont rule out a contract measure. BUT in cases where there is a making of
    false statements or making of misleading/deceptive conduct then the tort measure applies.
  • Under the tort measure, P got what he paid for even though there had been misleading and deceptive conduct = no loss. He had not gotten what he had expected so under a contract measure, he could
    have recovered but under the tort measure, there was no recovery.
  • The claim for damages under s 236 of the ACL failed as there was no evidence that the cover was not
    worth what he paid for it
    Obiter:
  • “The Act does not prescribe the measure of damages recoverable by a pl. for contravention of the
    provisions of Pts IV and V...it is for the courts to determine what is the appropriate measure of damages recoverable by a pl. who suffers loss or dmamage by conduct done contravension of the relevant provisions. [11]
  • 1) Contract basis of measurement: damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed.
o Therefore he is entitle dto damages for loss of bargain (expectation loss) and damage suffered including expenditure incurred (reliance loss) in reliance of the contract.
2) Tort bass: damages are awarded with the object of placing the pl. in the position in which he would have been had the tort not been committed.
NB: Another way of giving relief would have been to rescind the contract BUT the P did not plead it that way. He tried to claim the benefits that were payable according to the representations. Plaintiff tried to claim expectation loss but the court said that this was not a method appropriate for loss in such a context.


Marks v. GIO Australia Holdings Ltd (1998) 196 CLR 494
Held:
Recovery under the statute was not the same as common law and therefore common law rule should
not be as readily applied to qualify the remedy under statute


Murphy v. Overton Investments Pty Ltd (2004) 216 CLR 388
Facts: P takes out a 99 year lease over a unit in a retirement village owned and managed by the defendant. As part of the package, the P was required to contribute to ‘outgoings’ (e.g. service charges for maintain the property.) P asked what the outgoings would be and the D gave an estimate buy saying that it could vary from time to time. The estimate was inaccurate and the P was lumbered with a large bill. P alleged misleading and deceptive conduct and sought damages.
Issue: The property that the P had paid for was worth what they paid and the money that they paid for maintenance was perfectly reasonable. P was getting good value for what they were paying. The issue was then what loss has the plaintiff suffered?
Held:
  • HC took a broad view of ‘losses suffered’ and stressed that what the P had lost was a loss of
    opportunity to enter into a contract with a third party because they had relied on the defendant’s
    misleading and deceptive conduct.
  • Instead of characterising the loss as an expectation loss, they catergorised it as a lost opportunity. This
    is clever because it avoids the expectations issue.
o Referring back to Gates, the P would have been able to claim damages for loss of opportunity
if he was able to prove that had it not been for the agent’s misrepresentation, he could and would have entered into a contract of insurance that would have covered him in the event that he could not work in his profession.
HC said that the lost laid in the continuing financial obligation undertaken under the lease to the extent they were larger than what they were led to believe.

Further comments: The case shows that courts have not ruled on an expectation measure but they are prepared to use a tort measure broadly by invoking the idea of a lost opportunity.

Exam note: If I want to allow expectations loss, go with this approach. This approach can be seen in cases Dalecoast v Guardian International and Callander v Ladang Jalong

Dalecoast v Guardian International
Facts: P purchased a graffiti removal franchise from the D. D misrepresented that the P would have an indefinite supply of a graffiti removal product when in fact the P only had the right to an indefinite supply of a graffiti-coating product. There was no operating loss suffered.
Held:
  • Damages were awarded by reference to the profits that would have been made from the
    distribution and application of the graffiti removal product on the basis that the P did
    not receive all that it bargained for.
  • This is an expectation measure of loss.
  • Judge justified this based on Murphy and said that there is a compensatory element and
    a public element interest in the assessment of damages for breach of the prohibition against misleading or deceptive conduct in trade or commerces.
Callander v Ladang Jalong (Australia) Pty Ltd
Facts: D represented that it would advance money to a business and the P would be appointed CEO of the business at a certain salary. P then joins the company and worked in the expectation that he would be paid that salary.
Held: Damage was calculated by reference to the amount P expected to be paid less the amount he had received rather than on the basis of salary payments foregone (which would have been the reliance measure of damages)
Held:


Wakefield Trucks v Lach Transport

Facts: a ‘Western Star’ truck was purchased on the faith of representations that it would achieve fuel consumption of 4.5-4.8 miles per gallon.
  • Truck did not achieve that fuel consumption
  • Buyer therefore lost the opportunity to buy another truck then available that was able to achieve that
    fuel consumption
    Held: The cost difference between the fuel consumption as represented and that achieve was recoverable as loss flowing from reliance on the representation.
Sellars v. Adelaide Petroleum NL (1992) 179 CLR 332
Facts: Adelaide entered into parallel negotiations with two companies with the purpose of persuading one of them to acquire the shares in A. Afterwards however, A decides not to pursue the negotiations with one party so as to enter the contract with S. However, S had exceeded his authority and the document was not authorised by the company that S represented. A though that meant that S had repudiated the agreement (as a result of the misrepresentation) and resumed negotiations with the first party in which a contract was signed but the terms of that contract were less favourable than the agreement that would have resulted had A not decided to stop negotiations with it to negotiate with S.
Held:
  • The court considered the problem of proof of damage and assessment of damages in a case where the
    P seeks to show that he had lost an opportunity to obtain a commercial advantage but was based on
    hypothetical fact situation.
  • HC said that it was not necessary for the P to prove that on the balance of probabilities a benefit
    would have been derived from the opportunity had it not been lost.
o Also it is not necessary to show the extent of the benefit.
  • It is sufficient for P to show, by reference to the degree of possibilities and probabilities, that there was some prospect of deriving a benefit from the opportunity had it not been lost.
  • The court will ascertain the value of the opportunity or benefit by reference to such possibilities and probabilities.

4 EXCLUSION CLAUSES

107 Contracting out prohibited
This Act has effect even though any provision in any contract or agreement purportedly provides expressly or impliedly to the contrary.

S107 is aimed that when party enters into a provision with an expressed or implied exclusion clause, it will act to prohibit the exclusion of liability under the act. This means that there is liability if the first place which is ten excluded. Therefore, the parties have to accept that there is liability but because of the exclusion clause, one party cannot sue the other. It is not the same as a disclaimer. The legislation, fortunately, was broadly worded to allow for flexibility.

Butcher v Lacklan Elder Realty
Facts: Disclaimer in the brochure said “all information contained herein is gathered from sources we belive to be reliable. Hwoever, we cannot guarantee its accuracy and interested parties should rely on their own enquiries”.
Held:
  • important that he agent’s conduct be viewed as a whole = everything that hte agent did up to the time
    when the purchasers contracted ot buy the land must be taken into accocunt.
  • Court looked at
o The nature of the parties involved
o Short length and brevity of the brochure
o The claimants were sophisticated buyers who had access to legal and other professional
advice whilst the D were small real estate agents.
  • McHugh in dissent took the conduct of hte D. to include its actions during the inspection whereby it
    had told Butcher that it was sceptical about the pool that it wanted to build but whre it did not
    reinforce the disclaimer.
  • Kirby J in dissent: the disclaimer wqas in tiny font nad majority placed incorrect emphasis on the
    relationship between the parties.
Campbell v. Backoffice Investments Pty Ltd (2009) 238 CLR 304
Facts: Clause in the contract saying “we do not rely on any representation made by the defendant” which was
trying to show that htere was no causal link between the deceptive conduct and the loss.
Held:
  • French CJ: it is a question of fact depending on the individual case – how effective the
    acknowledgement clause is.
  • “whether conduct is misleading or deceptive is a question of fact to be decided by reference to all of
    the relevant circusmtnaces of which hte terms of the contract are but one.”
    Note: Because s18 was a consumer protection provision aimed at protecting the public from misleading conduct, it would be contrary to public policy for an exclusion clause to preclude its operation. Courts are likely to read down the effects of the exclusion clauses (NEA v Magenta Mining)
NEA v Magenta Mining
Facts: D. stated htat crushing equipment it hired to the Pl. was fit for the purpose of crushing ore stockpiled by the Pl. Contract included an exclusion clause 8: “no warranty or condition expressed or implied is given by the owner as to the condition of hte plant or as to the suitability or fitness ofthe plant for any purpose”. o nothing else was said to the Pl .to dispel
18
the misrep that hte equipemtn was fit for the relevant purpose.
Held:
  • (Martin CJ) important to differentiate between a factual siautation wher one party
    makes it clear to hte other party that information provided may not be reliable (ie. that there is no liabitliy from the very beginning – a disclaimer effectively) vs. a situation in which there is nothing more than a contractual provision which attempts to limit liability.
  • In this case, cl 8 only worked to prevent any term from being incorporated into the contract relating to the condition of the equipment. The party did not negate the misleading or deceptive nature of the representation made by the respondent.
4.1 Disclaimer

Disclaimer or contractual provision can only affect statuary liability if:

1. It has the effect hat teh relevant conduct cannot e properly characterised as misleadindg or deceptive (ie. the conduct that is alleged to be misleading encompasses the inclusion of the exclusion clause with teh result being that hte conduct is no longer misleading)
  1. In this sense, the inclusion of the exclusion clause menas that the conduct is no longer misleading
  2. However, this is not so in the case of Havyn v Webster
Havyn v Webster
Facts: brochure said that each flat was approximately 63 square metres in area and included a disclaimer that said “the information contained herein...has been supplied to us and we have no reasons to doubt its accuracy, however, we cannot guarantee it.” The real estate agent had provided the figure by pacing out part of one of the units in the block.
Held:
The manner in which the area was calculated was so haphazardly done that the
disclaimer did not negate the misleading representation
o The disclaimer that the agent had no reason to doubt its accuracy was untrue
2. OR it has the effect that he Pl. cannot successfully establish that it reasonably relied on teh misleading conduct. (ie. the conduct was misleading BUT because of the exclusion clause, the Pl. cannot be said to have relied on it)

Poulet Frais v The Silver Fox Company
Facts: D. used a disclaimer at the itme of providing infomriaton that required teh Pl. to sign an acknowledgment claused and included a merger clause in the resulting contract. Multiple documents givne by the D. showed that it gave no guarantee that the estimates it gave would be achived and that the P should make its own enquiries and seek legal and financial advice before signing the franchise agreement. Ultimately, the estimates of hte likely level of sales and profitability of htee franchise were not met.
Held: the Ds were not laible because it was “not easy to see how the D oculd have made more clear than it did that it was making no rperesntatations...even if hte methods used by hte D. did not negate a misleaaidng impression, the Pl. could not have proved that it relied on the information provided by the respondents.
For a disclaimer to negate potentially misleading conduct, it must be:
  1. Worded unambiguously
  2. Feature prominently
  3. Must be communicated to the reader that the disclaimer is relevant to the information it is seeking to
    qualify.
One way to make hte disclaimer clear is to say that it was a mere ‘conduit’ = like in Yorke v Lucas where the D., having acted honestly and reaosnbly , although engaged in conduct that was misleading, it had made it clear that it was not the source of he information and was merely passing it onf for what it is worth. HELD: disclaimer effective in preventing liability from arising in the first place.


Disclaimer was effective in the following case:


Butcher v Lacklan Elder Realty
Facts: Disclaimer in the brochure said “all information contained herein is gathered from sources we belive to be reliable. Hwoever, we cannot guarantee its accuracy and interested parties should rely on their own enquiries”.
Held:
  • important that he agent’s conduct be viewed as a whole = everything that hte agent did up to the time
    when the purchasers contracted ot buy the land must be taken into accocunt.
  • Court looked at
o The nature of the parties involved
o Short length and brevity of the brochure
o The claimants were sophisticated buyers who had access to legal and other professional
advice whilst the D were small real estate agents.
  • McHugh in dissent took the conduct of hte D. to include its actions during the inspection whereby it
    had told Butcher that it was sceptical about the pool that it wanted to build but whre it did not
    reinforce the disclaimer.
  • Kirby J in dissent: the disclaimer wqas in tiny font nad majority placed incorrect emphasis on the
    relationship between the parties.
4.2 Acknowledgement clauses

Acknowledgement clauses are inserted where one or both parties declare that in entering into hte contract, no reliance was palced on any represnteatiosn made by the other contracting party.


Campbell v Backoffice Investments
Court: “if a person expressly declares in a contractual document that he or hse did not rely upon pre- contractual representations, thatdeclaratoin may be evidence of no-reliance and of want of a causal link... BUT “in many cases, such a provision will not be taken to evidence a abreak in the causal link.”
Fact: Pl. eneterd into a lease of a shop in a shopping centre and signed a separate deed of acknowleedgment that stated in cl 1 that the Pl. confirmed that it had only relied on the statements in Cl 2 and nothing else. Cl. 2 identified two represntaiotns – neither of which related to hte number or proportion of leases which were likely ot be entered into by teh D. It also included an indemnity clause that the Pl. agreed to indemnify hte D. against any calim he might make in respect of statements other than those in Cl. 2 --> effectively, Pl. would not be able to sue on other repsresntatiosn. The D. had misrepresented that hte centre had already leased out 80% of its shops.


Held:
Court made a finding in fact hat Pl. was induced by the misleading conduct to sign the deed and did
not understand that the ded related to represnetatison about the occupancy of surrounding shops. o Deed was therefore not effective in barring the claim.
o Ie. the exclusion clasue was part of the whole conduct of hte D. which was held tobe
misleading.