-

CONTRACT LAW B: LECTURE 2 AUSTRALIAN CONSUMER LAW: * The ACL runs in parallel to the Liability Act (Cth) for misrepresentation and inevitably there is some overlap between the two * If faced with a problem question, consider first the common law possibilities liability first, and then consider the possibilities for liability under the ACL - The key provision is ACL 2010 s18 (1), which replaces the old TPA s 52 (1): A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive - S 18 lays down a standard of conduct which if breached gives rise to remedies as set down in SS 236, 237, 243 ACL 2010 - NOTE: Although the legislation defines consumers in S 3 ACL 2010 this part of the legislation applies whether the victim is a consumer or not - The debate revolving around the ACL is in relation the vagueness of the terms e.g. trade and commerce, mislead or deceive, and how damages are to be assessed, in particular what are they based on, tort or contract law, perhaps neither *the legislation can apply between all businesses or a business and a consumer, more importantly the plaintiff does not have to be a consumer but the defendant must be engaged in trade or commerce THE IN TRADE OR COMMERCE LIMITATION: Concrete Construction (NSW) Pty Ltd. V Nelson (1990) 169 CLR 594: In this case the plaintiff was a worker on a building site who was injured when they fell down an air-conditioning shaft because the foreman told them that it was safe to remove the bolt on the gate which ended up not being the case the plaintiff sought to argue that it fell within the TPA due to various restrictions on damages that one could claim for workplace accidents, it was essentially a way of ensuring that they got maximum compensation Question of Law: Was the defendant acting in trade or commerce for the purposes of the legislation (TPA)? Were these statements made within the course of trade and commerce? HC HELD: No to that matter a misleading statement made by one employee to another in the course of their ordinary activities does not fall within trade or commerce, something done by one employee to another is not conduct within trade or commerce HC concerned with extending the legislation quite broadly (indeterminacy) OBrien v Smolonogov (1983) 53 ALR 107: The defendant advertised certain portions of land for sale in a newspaper one of the plaintiffs spoke to the defendant by telephone it was alleged that the defendant made certain statements about the land which were false and misleading Question of Law: Were the statement made in trade or commerce, on the facts it was said that they were not because the land was not used for any business activity as it was domestic land wasnt used for farming or grazing plaintiff argued that the ads on newspaper and the conduct of the sale over the phone effectively meant the statements were made within trade and commerce this argument was rejected and it was held to not be within trade or commerce

Houghton v Arms (2006) 225 CLR 553: It seem in the cases that the courts have extended the definitions of trade and commerce - In this case it was noted that an employee as well as the employer could be acting within trade and commerce in their own right and thus be liable FACTS: There were two employees of a web site design company who mislead the plaintiff by telling him he could setup an online purchasing system for his wine business, however this turned out to be not possible as a result of the misleading statement the plaintiff had to restructure their business and thus lost money rather than suing the employer the plaintiff sued the employees who argued that they were merely employees acting on behalf of the company and therefore were not acting within trade or commerce - this argument was rejected and they were held to be liable Bevanere Pty Ltd v. Lubidineuse (1985) 59 ALR 334: FACTS: In this case the defendant sold a beauty clinic to the plaintiff which was the only capital asset of the defendant and as part of the sale the defendant had represented that a key employee would stay with the beauty clinic, the defendant however knew that the employee was going to setup their own business Question of Law: Was whether the sale of the beauty clinic was within trade or commerce? The defendant argued that it wasnt and that they had actually gone out of trade and commerce by selling the clinic, this was rejected by the court who held that the sale even if it is their only remaining capital asset is within trade or commerce, must look at activities as a whole and the fact that it was the sale of their only capital asset did not deprive it of the character of a transaction in trade and commerce TCN Channel Nine Pty ltd v Llyariy Pty Ltd [2008] NSWCA 9: FACTS Involved a television investigation of an allegedly dubious building firm Channel 9 wanted to expose nefarious practices, and pretended to want to do some building work the owner of the building firm sued channel 9 for misleading conduct arguing that they were acting in an activity of trade or commerce and he wanted damages for their misleading conduct Question of Law: Was the activity of Channel 9 within the meaning of trade or commerce? Channel 9 argued that they were not in the building business so therefore their activity was not within trade or commerce HELD: NSWCA held that Channel 9 were acting in trade or commerce and emphasised the fact that the conduct occurred in relation to the trade and commerce of the builders i.e. the conduct was directed towards getting some building work done even if it wasnt their main purpose, thus the misleading statements of Channel 9 were within trade or commerce activity The party to whom the statement is made is relevant in considering whether the person making the statement is acting in trade or commerce In order for their to be liability be the person to whom the statement is made doesnt have to be in trade or commerce and can just be a consumer, but here indirectly the fact that they (the builders) were in trade or commerce was relevant to the fact that the person making the statement i.e. Channel 9 was in trade or commerce, this was a broad reading of trade and commerce

Bond Corporation Pty v. Thiess Contractors Pty Ltd (1987) 14 FCR 215: Is professional advice within trade or commerce? HELD: that professional advice was within the scope of trade or commerce, this has now been classified in the ACL under Section 2 B which includes any business or professional activity ** Questions: is the person making the statement acting within trade or commerce? How do the courts assesses the liability as to whether the conduct is misleading or deceptive the courts identify the likely audience to whom the conduct is directed at, sometimes however it is directed at the public at large or a section of the public Campomar Sociedad Limitada v. Nike International Limited (2000) 202 CLR 45: FACTS: The defendant marketed a sports fragrance labelled as Nike Sports Fragrance and Nike argued that this was misleading and deceptive to the public HELD: That because the misleading or deceptive conduct was directed at the public at large, an ordinary and reasonable member of the public could be induced to believe that Nike produced the product themselves or endorsed the product Butcher v. Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592: FACTS: The plaintiff was a purchaser of a waterfront property in Sydney, the defendant was a real estate agent who included a diagram in the brochure for the property which gave a false notion of the properties boundaries, also they included a disclaimer stating that they couldnt guarantee the accuracy of anything in the brochure and that anyone who was thinking of purchasing the property should only rely on their own enquiries when putting the brochure together the estate agent was simply communicated what they were told to include by the owner Question of Law: Was whether the purchasers of the property were misled or deceived the majority said that the defendants were merely a small firm of real estate agents and the purchasers were wealthy and intelligent and legally advised (employed solicitors) and the defendant didnt not hold themselves out to as legally qualified or able to verify the boundaries of the property and included a disclaimer and all the defendant had done as a real estate agent is pass on information supplied by the owners HELD: In considering who the plaintiffs were, the HC held that they were not mislead or deceived Kirby: Was worried about the disclaimer, that the majority made the decision that there was no liable by placing a considerable weight on the disclaimer, and that the plaintiffs status knew what that meant Kirby agued that if weight is based on disclaiming in determining what is deceptive or misleading, this could potentially be used by future defendants to avoid liability for their actions under the legislation (start putting disclaimers) This strikes a blow at the acts intended operation ** Must ask who the audience is and what is meant by misleading or deceptive conduct Deceive: Seems to suggests that there must be an element of moral turpitude - trickery, craft, and guile, is more narrow as it involves moral intention to be deceptive

Mislead: Is much wider and does not involve necessarily an element of intent and as one could mislead without intending to mislead (No damages under common law for innocent misrepresentation but it does give rise to liability under the ACL) Another difference to the common law are the rules of disclosure as under the ACL there is liability for silence (non disclosure) Henjo Investments Pty v. Collins Marickville Pty Ltd (1988) 79 ALR 83: FACTS: Concerned a liquor licence: The plaintiff was wanting to buy a restaurant - he saw many people drinking in a bar, and was under the illusion that it was a profitable business and was wanting to buy it the defendants failed to disclose that drinking in this area was forbidden under the terms of the licence, in other words the existing owners were contravening their liquor licence - Question of Law: Was whether there was a duty to disclose the limit on the liquor licence: HELD: FC held that there was a duty to disclose and this is seen as an expansionist decision in regard to the legislation It was said that in deciding whether or not there was liability under the legislation for remaining silent, the question the court needed to ask was whether there was a duty on the facts to disclose, duty to disclose was taken broadly by the federal court in this decision, it was said that the legislation was intended to have a broad reach whether there is a duty depends on the facts of the case at hand, however in explaining when there is a duty, the court said that a duty does not arrive out of a particular relationship and is not confined to certain relationships nor is a duty negated by the fact that the person to whom the statement is made could have found out that it was untrue - Demagogue v. Ramensky (1992) 110 ALR 608: Put in place a different test to determine whether there was a duty to disclose , it was said that what matters is whether the facts devise to a reasonable expectation, if so the facts that the defendant remained silent about should be disclosed Chief Justice Black: There is in truth no such thing as mere silence, because the significance of silence always falls to be considered in the context in which it occurs, that context may nor may not include facts giving rise to a reasonable expectation in the circumstances of the case i.e. do the facts give rise to a reasonable expectation that the facts that the defendant remained silent about should/would be disclosed Miller & Associates Insurance Broking Pty v. BMW Australia Finance Ltd (2010) 241 CLR 357: This case actually fills out the reasonable expectation test as the court said that expectations of disclosure depend on the nature of the parties, an expectation does not arise merely because one party knows that the matter of which they remain silent is likely to be important to the other party on the facts there were two large commercial parties in which the legislation was sensitive to both Does the silence have to be deliberate or can it be accidental? The authorities on this point are conflictual The difficulty in saying that accidental non-disclosure gives rise to liability under the legislation is that section 2 (2) of the ACL refers to doing or refusing to do an act, so conduct can be doing an act or refusing to do an act, this sort of seems to suggest that it has to be deliberate rather than accidental

Byers v. Dorotea Pty Ltd (1986) 69 ALR 715 Considered whether mere puffs are within the scope of the legislation FACTS: There a statement by the vendor of an apartment that it would be bigger and better than those close by - It was said by the court that what mattered under the legislation was the particular audience to whom the statement was directed to and the particular facts - HELD: That this particular statement made to the plaintiff was not a mere puff because it specifically compared the apartment to other ones nearby REPRESENTATIONS ABOUT FUTURE MATTTERS - S 4 ACL 2010: This section only applies if the representation is made in reference to the future Where something is a representation about a future matter, the question of whether there is liability for making such a representation is whether the person making the statement has reasonable grounds for making the representation, if they do not have reasonable grounds for making such a representation then it can be misleading and deceptive conduct EXAMPLES OF EVIDENCE: 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 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 the defendant was selling, a letter was sent by the defendant with figures from various other similar businesses and was presented to the plaintiff - Question of Law: Was whether it was a representation about the future i.e. in regard to future takings, if it was it was necessary that the representation be made on reasonable grounds otherwise it was misleading or deceptive, the argument by the plaintiff was that it was a representation to the future takings, and therefore it was a representation to the future HELD: The court disagreed and said that it was not a representation to the future and was merely a statement of present belief, the statement merely suggested that it was the present belief of the person making the statement that these were the takings that would be received i.e. it was a prediction of future takings crucial to the case was the way that the statement was framed, it was expressed as it is our current belief that the franchise will make this much money

Digi Tech (Aust) Pty Ltd v. Brand [2004] NSWCA 58: The NSWCA was faced with a similar statement of forecast the court held that the way the statement was expressed i.e. as a statement of current belief in regard to the future earnings of the business, did not preclude it from being a representation of the future this seems to contradict the decision in Miba STATEMENTS THAT AMOUNT TO PROMISES: The ACL also applies to promises as well as representations, in other words contractual promises and promises to perform contractual obligations can be misleading or deceptive conduct - Accounting Systems 2000 (Developments) Pty Ltd v. CCH Australia Ltd (1993) 42 FCR 470: FACTS: Accounting Systems entered into a contract with Castle Douglas under which copy right interests in software were assigned, so it was a simple transfer of copyright in software to Castle Douglas, Accounting Systems gave a warranty to Castle Douglas that they own the copyright, Castle Douglas then assigned the copyright to CCH Australia, the problem in this case was that Accounting Systems were in fact not owners of the copyright CCH argued that the statements about warranties were misleading and deceptive and sought to recover from Accounting Systems the money they paid Castle Douglas for the copyright, however there was a problem as CCH was not a party to the original contract i.e. they were a third party, in other words a contract claim is not actionable as there was a warranty in the contract between Accounting Systems and Castle Douglas but CCH were not a party to that original contract, in other words there is a privity problem (discussed in more detail latter) THE BASIC RULE: Unless there are exceptions that apply one cannot sue on a contract to which one is not a party given that a claim in contract was barred even though the parties were in a contractual relationship, even though the warranty had been included in the contract and had taken the form of a promise CCH Australia had no remedy in contract and therefore sought a remedy under the TPA HELD: That they could make a claim the mere fact that the statement had been embodied in a contract did not make it impossible for a claim to be made under the TPA the Federal Court is of the stance that it is no objection that the alleged misleading or deceptive conduct has actually been incorporated into a contract as a term the complainant still had an action under the legislation and was allowed to recover - Futuretronics Pty Ltd v. Gadzhis [1992] 2 VR 217: there wasnt a privity problem here but a claim in contract was barred because the contract was unenforceable under the statute of frauds in Victoria Question of Law: Whether they could recover under the legislation - FACTS: The defendant bid for the plaintiffs property at an auction for some reason they then refused to sign the contract and pay the deposit as was required under the conditions of the sale of the auction the plaintiffs came up with a clever argument as they could not have a contract claim due to the statute of frauds the plaintiffs claimed that the defendants had engaged in misleading or deceptive conduct the bid at the auction was misleading as it amounted to a representation that they intended to be bound by the conditions of the sale Basis of Liability: It is not necessary for the plaintiff on the facts to show that they defendant had no intention of performing the promise here being

implied by their behaviour rather the representation is misleading if the defendant here is unable to show that they had reasonable grounds for making a representation In essence the argument was that there was an implicit promise on the part o the defendant to perform and if you implicitly promise and fail to perform than that conduct is misleading or deceptive HELD: On the facts the defendant had no reasonable grounds for making such a representation - however this would not be the conclusion under concrete constructions which stressed that failure to keep a promise was not enough as that in itself is not misleading or deceptive conduct it is necessary to be misleading or deceptive if you have a present intention or capacity to perform the promise so its more about a capacity to perform which is rather more narrower than an intention to perform MAIN POINT WITH PROMISE CASES: Contractual promises fall within the legislation and liability can be imposed by implication but it is not simply that the parties are in a contractual relationship and one doesnt perform there has to be a representation made at the time that the promise was made either implicitly or explicitly and at the time there must be a present intention or capacity to perform on the defendant STATEMENTS OF OPINION: The basic rule is that an opinion can amount to misleading or deceptive conduct but not merely because it proves to be incorrect - Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd (1984) 2 FCR 82: There has to be an implied statement of fact that is a basis for the opinion the fact being that the statement of belief is genuine and has a reasonable foundation - Havyn Pty Ltd v. Webster [2005] NSWCA 182: It was held that a representation of opinion is misleading or deceptive if the person making it lacked belief in the opinion or there was no adequate foundation on which the belief could be held - S 4 ACL 2010 STATEMENTS OF LAW: The question here is whether the person making the statement holds them selves out to be an expert - under the common law there is no liability for statements of law but under the legislation there can be liability where the person making the statement regards themselves as an expert - Inn Leisure Industries Pty Ltd v. DF McCloy Pty Ltd (1991) 28 FCR 151: A statement was made that the sale would not attract sales tax which on its face was not misleading or deceptive conduct as the person making the statement did not hold themselves out as having legal expertise rather it was an opinion This decision is contrast to the decision in - SWF Hoists and Industrial Equipment Pty Ltd v. State Government Insurance Commission [1990] ATPR 41-043 that concerned liability or potential cover under an insurance policy ISSUE: Whether the policy of that the plaintiffs had taken out worked interstate or was confined to coverage under the one state the plaintiffs in this case asked the opinion of the state insurance commission if they will be covered if one of their worker is injured the state commission were in fact experts in insurance law and held themselves out to be knowledgeable in the law and to have expertise, it was not an opinion and were thus held to be liable

REMEDIES UNDER THE LEGISLATION: Are complex in that there are three broad categories of remedy - Section 232 allows the courts to award a range of different injunction Performance injunction can be awarded which requires a person to do something rather than requiring somebody to cease to do a thing - Section 236 allows an award of damages this has proved problematic because the courts are divided on how damages under this section should be assessed - section 237 gives the courts wide discretionary powers, in other words where the statement is misleading or deceptive and thus falls under the legislation a wider range of remedies are available in the case where the statement is innocent EXAMPLE MEASURING DAMAGES: Suppose by misleading or deceptive conduct Ann sells a business (for $1 million) to bill in which she informs him that he can expect a profit of $100,000 a year but it turns out to be only $50,000 Question is what damages can be recovered TORT MEASURE: Aims to put the person in the position they would have been had they not brought the business here on the facts there is no loss as the business is worth a million and was brought for a million dollars CONTRACT MEASURE: Is based on expectations the misleading conduct is the representation about the profit on the contractual expectation measure Bill would be able to recover the damages of $50,000 Gates v City Mutual Life Investments Pty Ltd (1986) 160 CLR 1: This decision concerned an insurance policy where the plaintiff was induced to purchase the insurance policy with the defendant plaintiff claims that he took out the policy on the basis that were he unable to work and carry out his usual occupation as a carpenter he would be allowed to recover under the policy i.e. the policy was designed to ensure against injury at work he was injured at work and had to get another job Question of Law Whether he was entitled to recover under the policy insurance company argued that the terms of the policy were that you could only recover under the policy if you were unable to work at all in this case he was able to work, but simply not as a carpenter What was the measure of damages then? On the tort measure he received what he payed for i.e. what the policy was worth e.g. $100 insurance per month in the case therefore using the tort measure there is no loss The question then was were the losses so limited? The majority in this case said that although they cannot rule out the possibility of measuring damages on the contract measure i.e. for loss of expectation nevertheless where the misleading and deceptive conduct has the character of a fraudulent/negligent misstatement then the tort measure should be used however as time has passed the courts have been less willing to limit themselves to awarding the tort measure of damages in these cases Damage have thus been awarded quite broadly under the legislation but there are however no clear guidelines Murphy v. Overton Investments Pty Ltd (2004) 216 CLR 388: FACTS: the plaintiff took a 99 year lease over a unit in retirement village that was owned and managed by the defendant before the lease was entered the defendant gave an estimate of contributions that the plaintiff would have to make to out goings e.g. service charge which turned out to be incorrect as in

fact the costs that had to be payed for were actually much higher plaintiff brought a claim under the TPA for the additional payments i.e. the difference between the valuation of what the payments would be and the actual payments if a simple tort measure was to be applied they faced a problem in that what they paid for was actually what they got e.g. the property was what they paid for and so were the service they received, thus it is difficult to see what the plaintiff suffered a loss HELD: Nevertheless the HC held that a loss was suffered the plaintiff suffered a loss not because of the expectations that were generated i.e. additional payments owed, but because they entered into a contract with the defendant, they lost an opportunity to enter into an arrangement with a third party Section 237: Effectively gives the courts wide powers to make a wide range of orders but it is entirely a matter for the courts discretion its not like 236 where the plaintiff is entitled to compensation where they suffer a loss - just simply advice where the possibility of this may occur in a problem question EXCLUSION CLAUSES: whether liability under the ACL can be excluded under a contract Fair Trading Act if parties put an exclusion clause in the contract excluding the ACL the ACL will still apply - Butcher v. Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 here no liability arose in the first place because of a disclaimer which tries to prevent liability whereas an exclusion clause accepts there is liability but limits it the reasoning of the majority in this case said that where the parties are negotiating with disclaimers the conduct is not misleading or deceptive defendant would have been liable perhaps if purchaser were not rich or wealthy Acknowledgement clause - essentially states an acknowledgement that no reliance was made on the representation of the party i.e. tries to break a causal link between conduct and loss - Campbell v. Backoffice Investments Pty Ltd (2009) 238 CLR 304 an acknowledgement clause is still a possibility