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[2.115]
Under the common law of vicarious liability, a principal is not deemed to have
engaged in the conduct at issue; rather, the principal is made legally liable for the
conduct of the director, servant or agent who engages in the conduct. Under s 139B
of the CCA, on the other hand, the principal is deemed to have engaged in the
conduct at issue. A corporation will be directly liable for the acts of its directors,
managers and other officers who are the governing mind and body of the
corporation, as if their acts were the acts of the corporation in accordance with the
principle accepted by the House of Lords in Tesco Supermarkets Ltd v Nattrass.89 In
those circumstances no question of vicarious liability under s 139B of the CCA will
arise.
Whether the corporate principal will be liable for a contravention of the relevant
substantive prohibition then depends on whether the other elements of that
prohibition can be satisfied, in particular,
• whether the principal is a corporation of the type defined in s 4(1) of the CCA;
and
• whether the principal was engaged “in trade or commerce” at the time the
conduct occurred.
Copyright © 2016. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.
Section 139B(2) of the CCA provides:
Any conduct engaged in on behalf of a body corporate:
(a) by a director, employee or agent of the body corporate within the scope of
the actual or apparent authority of the director, employee or agent; or
(b) by any other person:
(i) at the direction of a director, employee or agent of the body corporate; or
(ii) with the consent or agreement (whether express or implied) of such a
director, employee or agent;
if the giving of the direction, consent or agreement is within the scope of the
actual or apparent authority of the director, employee or agent;
is taken, for the purposes of this Part or the Australian Consumer Law, to have
been engaged in also by the body corporate.
This mirrors s 84(2) of the CCA.
Bodies corporate cannot act except through the conduct of their directors,
employees and agents. Section 139B(2) sets out the circumstances in which a body
corporate will be held liable for the conduct of its directors, employees and agents.
It is first necessary to establish that the person engaging in the conduct was acting
“on behalf of” the body corporate. It is then necessary to establish that the person
engaging in the conduct fell into one of the two categories specified: first, they were
a director, employee or agent; or secondly, they were a person acting at the
direction of a director, employee or agent, or with the consent or agreement of a
director, employee or agent.
On behalf of
[2.115]
Section 139B(2) of the CCA provides that any conduct engaged in “on
behalf of” a body corporate by a director, employee or agent within the scope of the
89 Tesco Supermarkets Ltd v Nattrass [1972] AC 153.
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2 Definitions and Key Concepts
71
person’s actual or apparent authority shall be deemed to have been engaged in by
the body corporate. The words “on behalf of” do not require that the conduct must
have been authorised by the body corporate.
It was held in Walplan v Wallace90 that the phrase “on behalf of” does not have a
strict legal meaning, but there is a limit as to how loose the connection can be.
Something must be done “for” the company in the sense of “in the course of the
body corporate’s affairs or activities”.91
In Wheeler Grace & Pierucci Pty Ltd v Wright92 the Full Court of the Federal Court
considered the effect of s 84(2) of the TPA in light of the High Court decision in
Hamilton v Whitehead.93 The appellant, Wheeler Grace & Pierucci Pty Ltd (WGP),
carried on business as an investment adviser. Collins made misleading statements
to the respondents regarding investments in a gold mining venture, Carbon Gold.
Collins was the appointee of WGP to the board of Carbon Gold. The Full Court
held that WGP was directly liable for Collins’ misleading statements.
Lee J held:
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Furthermore, in s 84(2) of the Act, it has been expressly provided that any conduct
engaged in on behalf of a body corporate by a director, servant or agent within the scope
of the person’s actual or apparent authority or by any other person at the direction or
with consent or agreement, express or implied, of a director, servant or agent, such
direction, consent or agreement being within the scope of the actual or apparent authority
of the director, servant or agent, is deemed for the purposes of the Act to have been
engaged in also by the body corporate. Whether s 84(2) extends the common law is
immaterial. What it does do is make clear that such activities by directors or agents of the
company will attract direct liability to the company under provisions such as s 52 of the
Act and no question of vicarious liability will arise in that circumstance.94
On the other hand, in Lisciandro v Official Trustee in Bankruptcy,95 Kiefel J held that a
company was not responsible for the misleading or deceptive conduct of its
“Service Agent”. The company, Alminco, appointed Radford as its service agent for
North Queensland. This did not entitle Radford to represent the company or
receive moneys on its behalf; rather, it was simply a licence permitting Radford to
use Alminco’s parts in his business. Radford misleadingly induced the applicant to
sign a guarantee in favour of Alminco. It was held that Radford had not been acting
as an agent of Alminco in procuring the guarantee; rather, as a potential purchaser
on credit, Radford had obtained the guarantee on his own account in order to raise
finance.
90 Walplan v Wallace (1985) 8 FCR 27 at 37, Sweeney J agreeing at 28 and Neaves J at 39. In NMFM
Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1243] Lindgren J referred with approval to the
views of Lockhart J in Walplan v Wallace.
91 See TPC v Queensland Aggregates (1982) 61 FLR 52 at 66.
92 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940.
93 Hamilton v Whitehead (1989) ATPR ¶42-932.
94 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 at 50,256, citing TPC v Tubemakers of
Australia Ltd (1983) 76 FLR 455 (Toohey J) at 474-6.
95 Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 at 40-903-4.
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Lindgren J, in NMFM Property Pty Ltd v Citibank Ltd,96 said:
It seems to me that an act is done “on behalf of” a corporation for the purpose of s 84(2)
if either one of two conditions is satisfied: that the actor engaged in the conduct intending
to do so “as the representative of” or “for” the corporation, or that the actor engaged in
the conduct in the course of the corporation’s business, affairs or activities.97
In Ackers v Austcorp International Ltd,98 a group of companies in a property joint
venture were held to be liable for the misleading conduct of an agent engaged by
one of the joint venturers. Rares J held that the particular development was part of
the ordinary business, affairs and activities of Austcorp and that representations
made by the officers, subsidiaries, and agents was the conduct engaged in “on
behalf of” Austcorp.99
In Bennett v Elysium Noosa Pty Ltd,100 Reeves J, after reviewing the authorities about
the operation of s 84(2) of the TPA, summarised them in the following propositions:
Among other things, they show that the level of involvement of the actor concerned may
not be significant, provided it comprises “some” involvement. In context, I consider this
means some real or genuine involvement. They also show that the actor’s subjective
intention is one criterion for assessing whether he or she is acting on behalf of the
company concerned. Alternatively, they show that an objective assessment of the actor’s
conduct may lead to the conclusion that he or she was acting on behalf of that company.
Finally, they show that the assessment as to whether the actor was acting on behalf of a
company is ultimately dictated by the circumstances of each particular case. Thus it may
conceivably involve a combination of the subjective and objective assessments (above) in
a particular case.101
“Actual or apparent authority”
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[2.120]
Having established that the person engaging in the conduct was acting
“on behalf of” the corporation, it is then necessary to establish that the person
engaging in the conduct fell into one of the two categories specified. The first
category specified in s 139B(2)(a) of the CCA is that the person engaging in the
conduct was a director, employee or agent of the body corporate acting within the
scope of their actual or apparent authority. In ACCC v South East Melbourne Cleaning
Pty Ltd (in liq),102 Coverall was the franchisor of a professional cleaning services
franchise system operating in Victoria. Mr Jones was the sole director of Coverall
and effectively its owner. It was a small company and he was central to its
operations. He was directly responsible within Coverall for franchisee recruitment,
new business customer contract development and meeting weekly with Coverall’s
Sales Manager, Ms Haley, to discuss the number of cleaning proposals delivered to
potential customers and the number of accounts and the dollar value of the
96 NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270.
97 NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1244].
98 Ackers v Austcorp International Ltd [2009] FCA 432.
99 Ackers v Austcorp International Ltd [2009] FCA 432 at [217].
100 Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72.
101 Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72 at [207].
102 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts
South East Melbourne Pty Ltd) (2015) ATPR ¶42-503.
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2 Definitions and Key Concepts
73
proposals won by Coverall. Ms Haley represented to a potential franchisee that if
he purchased a franchise at a cost of $28,150 Coverall could provide him with work
that would generate a minimum of $4,000 in revenue per month. Murphy J held
that the making of the representation was within the scope of Ms Haley’s actual or
apparent authority as an employee of Coverall and was deemed to be the conduct
of Coverall pursuant to ss 84(2) and 139B of the CCA.103
The Corporations Act 2001 (Cth) sets out certain rules under which director or agents
will be taken to have acted within the scope of their actual or apparent authority.104
The actual or apparent authority of the agent is to be determined according to
common law principles. For example, in the case of a real estate agent, the agent’s
apparent authority is limited to describing the property, representing its situation
and representing any matter concerning its value.105 If a real estate agent represents
that finance is available in order to induce the purchaser to buy the property, the
agent will be acting outside the agent’s apparent authority and the vendor will not
be liable for the agent’s misleading statement.
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Where an agent makes a statement which is within the agent’s apparent authority,
but which the principal has expressly prohibited the agent from making, the
question is more difficult. The wording of s 139B(2)(a) of the CCA would appear to
be wide enough to make the principal liable for such a statement unless some
limitation on the agent’s authority was known to the other party. Despite
suggestions that an agent who makes a statement expressly prohibited by the
principal is not acting “on behalf of” the principal,106 the words “on behalf of” in
s 139B(2) of the CCA will extend to cases where the director or agent is acting
within apparent authority in some way that is prohibited by the corporation
including fraud.107 However, where the director or agent acts on their own behalf
and not as a representative of the corporation, s 139B(2) will not apply.
In Aliotta v Broadmeadows Bus Service Pty Ltd,108 the respondent wished to sell its
property and engaged an estate agent to act on its behalf. The agent advised that it
would be easier to sell the property as an investment property if it could be leased
before sale. The applicant entered into an agreement for the purchase of the
property conditional upon the property being leased. A lease was executed, but the
use was found to be prohibited without a permit. A permit was refused and the
lease was surrendered. The applicant sought return of the deposit alleging
misleading conduct and false or misleading representations as to the use to which
the land might lawfully be put, in breach of ss 52 and 53A(1)(b) of the TPA. He
claimed that the vendor and the selling agent had both represented that the use
described in the lease was permissible and the lease secure.
103 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts
South East Melbourne Pty Ltd) (2015) ATPR ¶42-503 at [91].
104 See Corporations Act 2001 (Cth), ss 126 – 129.
105 See Mullens v Miller (1882) 22 Ch D 194.
106 See TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 at 475 (Toohey J).
107 Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419; Brockway v Pando (2000) 22 WAR 771.
108 Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873.
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Gray J held that, as a matter of common law, a vendor’s agent has authority to bind
the vendor by any representation made as to the nature or quality of the property,
even if it is false, unless some limitation on the agent’s authority is known to the
intending purchaser. In addition, a company carrying on business as an estate
agent is also liable for the acts of its servant within the scope of his actual or
ostensible authority. His Honour held that the first respondent, the vendor of the
property, was liable for the conduct of the vendor’s agent, which in turn was liable
for the conduct of its employee.
In Aliotta v Broadmeadows Bus Service the transaction involved the sale of
commercial property so that both the respondent vendor and the agent were
engaged in trade or commerce. It is clear from Argy v Blunts109 that where the
vendor principal is not engaged in trade or commerce and is selling residential
property, the vendor will not be liable for any misleading statements of the agent.
“At the direction of” or “with the consent of”
[2.125]
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Where the person engaging in the misleading conduct is not a director,
employee or agent of the respondent corporation, it will be necessary to establish
that they fall within the second category specified in s 139B(2)(b) of the CCA;
namely, that the person was acting at the direction of, or with the consent of a
director, employee or agent of the respondent corporation.
In Bennett v Elysium Noosa Pty Ltd,110 the real estate agents who engaged in the
misleading conduct were not parties to the proceedings. Reeves J found that since
the development was central to the business affairs of the developer and the
marketing of the lots was an activity that was essential to their business, on an
objective assessment, the real estate agents were acting “on behalf of” the developer
when they engaged in the misleading conduct. The real estate agents were not
employed by the developer. They were employed by an independent agency which
was appointed by the developer to be the exclusive marketing consultant for the
development. Accordingly, they could not fall within the first category in s 84(2)
(now CCA, s 139B(2)(a)).
Reeves J held that they fell within the second category (now CCA, s 139B(2)(b))
since the real estate agents had been briefed with sales material by a director who
was the public relations and marketing manager of the developer. His Honour also
found that the real estate agents had acted “at the direction of” a director of the
developer.
Direct liability of non-corporate principals for conduct of employees
or agents
[2.130]
Section 139C(2) of the CCA provides:
Any conduct engaged in on behalf of a person (the principal) other than a body corporate:
(a) by an employee or agent of the principal within the scope of the actual or apparent
authority of the employee or agent; or
109 Argy v Blunts (1990) 26 FLR 112.
110 Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72.
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2 Definitions and Key Concepts
75
(b) by any other person:
(i) at the direction of an employee or agent of the principal; or
(ii) with the consent or agreement (whether express or implied) of such an employee
or agent;
if the giving of the direction, consent or agreement is within the scope of the actual or
apparent authority of the employee or agent;
is taken, for the purposes of this Part or the Australian Consumer Law, to have been
engaged in also by the principal.
This re-enacts s 84(4) of the TPA. Subsection 139C(2) of the CCA has the same effect
as s 139B(2) where conduct is engaged in on behalf of non-corporate principals.
Section 139C(2) deems the conduct of an employee or agent to be the conduct of a
natural person. If regard is had to the reasoning in Wright’s case, it cannot be
concluded that the effect of s 139C(2) is to impose liability upon the principal.
Rather, it is necessary to consider whether the other elements of the relevant
substantive prohibition are satisfied and, in particular, whether the natural person
was engaged in trade or commerce at the time the conduct occurred. This will not
be the case, for example, where the sale related to the vendor’s private residence.
There is very little authority on the liability of a natural person for the misleading
conduct of a corporate agent. In MacCormick v Nowland111 the facts presented an
opportunity for the question to be considered, but as liability was found in
negligent misrepresentation the court did not consider whether the vendor had
contravened s 52 of the TPA.
Direct liability: summary
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[2.135]
Sections 139B(2) and 139C(2) of the CCA operate to impose direct
liability rather than vicarious liability on a principal. The sections deem the conduct
of the agent to be the conduct of the principal. The sections do not deem the
business of the agent to be the business of the principal. Thus, where for example,
a vendor principal is not engaged in trade or commerce and is selling a private
residence, the vendor will not be liable for a breach of a provision such as s 18 of
the ACL for any misleading statements by the agent.112
The ACL (Application Acts) have equivalent provisions to ss 139B(2) and 139C(2) of
the CCA.113
111 MacCormick v Nowland (1988) ATPR ¶40-852.
112 Williams v Pisano (2015) 299 FLR 172 at [39].
113 See, eg, ACLFTA 2012 (Vic), s 196; FTA 1989 (Qld), s 95.
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3
Misleading or Deceptive
Conduct
[3.05] INTRODUCTION .................................................................................................................. 78
[3.15] PART I: IDENTIFYING THE CONDUCT AT ISSUE ...................................................... 82
[3.15] Introduction ........................................................................................................... 82
[3.20] Doing any act ........................................................................................................ 83
[3.25] Refusing to do any act ......................................................................................... 84
[3.30] Silence in isolation ................................................................................................ 86
[3.35] Silence and other conduct ................................................................................... 86
[3.40] Relaying incorrect information supplied by another ..................................... 88
[3.50] Adopting or endorsing information supplied by another ............................ 92
[3.55] Contemporaneous disclaimers ........................................................................... 93
[3.60] PART II: ASSESSING WHETHER THE CONDUCT WAS MISLEADING, OR LIKELY
TO MISLEAD ......................................................................................................................... 94
[3.60] Context all important ........................................................................................... 94
[3.65] Misleading conduct: objective test ..................................................................... 95
[3.70] Role of intention .................................................................................................... 96
Copyright © 2016. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.
[3.75] Conduct directed at identified persons ............................................................ 97
[3.80] Commercial negotiations involving identified persons ................................. 99
[3.85] Conduct directed at the public ........................................................................... 99
[3.90] Knowledge base of a reasonable member of the class ................................ 100
[3.95] Confusion or uncertainty .................................................................................. 102
[3.100] Silence as misleading conduct: general principles ..................................... 104
[3.105] Silence as misleading conduct: commercial negotiations .......................... 107
[3.110] Silence: making known specific transactional requirements ..................... 109
[3.115] Silence: unusual or unexpected matters ....................................................... 110
[3.120] Silence: subsequent change in circumstances .............................................. 112
[3.125] Silence: case examples ...................................................................................... 113
[3.130] Literal truth ........................................................................................................ 115
[3.135] Representations with respect to future matters ........................................... 115
[3.140] Case examples: representations about future matters ................................ 118
[3.145] Contractual promises ........................................................................................ 119
[3.150] Expressions of opinion, law and legal rights .............................................. 120
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[3.155] Information asymmetry ................................................................................... 123
[3.160] Exclusion clauses .............................................................................................. 124
[3.165] PART III: DID THE RESPONDENT’S CONDUCT CAUSE THE ALLEGED ERROR
OR MISCONCEPTION? ................................................................................................... 125
[3.170] PART IV: ADVERTISING: GENERAL PRINCIPLES ................................................... 126
[3.170]
[3.175]
[3.180]
[3.185]
[3.190]
[3.195]
[3.200]
[3.205]
Introduction .......................................................................................................
Knowledge base of the target audience ........................................................
Puffery or exaggeration in advertising .........................................................
Medium used to convey the advertisement ................................................
Qualifying statements and small print disclaimers ....................................
Advertising on social media sites ..................................................................
Assessing the advertisement ...........................................................................
Comparative advertising .................................................................................
126
128
130
130
133
135
136
137
[3.210] PART V: MISLEADING CONDUCT AND PASSING-OFF ........................................ 139
[3.210] Introduction ....................................................................................................... 139
[3.215] Choice of name .................................................................................................. 139
[3.220] Design features or shape ................................................................................. 141
[3.225] Choice of get up ................................................................................................ 142
[3.230] PART VI: EXEMPTION FOR INFORMATION PROVIDERS .................................... 143
[3.235] Scope of the exemption for information providers .................................... 144
[3.240] Publication of an advertisement .................................................................... 145
[3.245] Exceptions to the exemption ........................................................................... 145
Copyright © 2016. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.
[3.250] PART VII: MISLEADING OR DECEPTIVE CONDUCT UNDER THE ASIC ACT . 147
[3.250]
[3.255]
[3.260]
[3.285]
[3.290]
Introduction .......................................................................................................
Background to the reform ...............................................................................
Misleading or deceptive conduct under the ASIC Act ..............................
Misleading or deceptive conduct ...................................................................
Overlap between the ACL and ASIC Act .....................................................
147
148
149
153
156
INTRODUCTION
[3.05] The legislative approach to the regulation of consumer protection adopted
in Australia is to provide for three general protections and to supplement these
with more prescriptive protections in relation to specific conduct. The first general
protection is contained in s 18(1) of the ACL which provides that:
A person must not, in trade or commerce, engage in conduct that is misleading or
deceptive or is likely to mislead of deceive.
This prohibition does not substantively change compared to s 52(1) of the Trade
Practices Act 1974 (Cth) (TPA), and the State and Territory equivalents in their Fair
Trading Acts. The only difference is that s 18 is directed at the conduct of persons
generally rather than corporations. If the conduct concerns that of a corporation,
reliance will generally be placed on the ACL (Cth). If the conduct concerns that of
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3 Misleading or Deceptive Conduct
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natural persons, reliance will generally be placed on the ACL (Application Acts).
Before considering the elements of a contravention of s 18 of the ACL, it is
necessary to have some understanding of its policy objects and the policy objects of
its predecessor, s 52 of the TPA.
In Brown v The Jam Factory Pty Ltd,1 s 52(1) of the TPA was described by Fox J as:
a comprehensive provision of wide impact, which does not adopt the language of any
common law cause of action. It does not purport to create liability at all; rather does it
establish a norm of conduct, failure to observe which has consequences provided for
elsewhere in the same statute, or under the general law.2
In relation to s 52 of the TPA, Lockhart and Gummow JJ in Accounting Systems 2000
(Developments) Pty Ltd v CCH Australia Ltd3 observed:
the evident purpose and policy underlying Pt V, which includes s 52, recommends a
broad construction of its constituent provisions, the legislation being of a remedial
character so that it should be construed so as to give the fullest relief which the fair
meaning of its language will allow.4
Their Honours also observed that s 52 imposes a “norm of conduct”,5 and the role
of the courts was to apply it to a wide range of circumstances involving businesses
as well as consumers. The policy object of s 52 of the TPA was to operate as a
catch-all provision that could apply to objectionable conduct that might otherwise
escape liability, on technical grounds, under the more specific provisions of the Act.
According to Senator Murphy, who as Attorney-General was responsible for
introducing the TPA, its role was to ensure that the law was not “continually one
step behind businessmen who resort to smart practices”.6
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By 1993, former Chief Justice of the High Court, Sir Anthony Mason commented on
how the statutory remedies had eclipsed the traditional common law remedies:
Section 52 of the Trade Practices Act 1974 (Cth), which provides a statutory cause of action
sounding in damages in respect of misleading or deceptive conduct, has reduced the
importance of actions for breach of warranty, fraudulent misrepresentation and
negligence in those cases to which the statute applies.7
Similarly, French CJ and Kiefel J commented in Miller & Associates Insurance Broking
Pty Ltd v BMW Australia Finance Ltd:8
The cause of action for contravention of statutory prohibitions against conduct in trade or
commerce that is misleading or deceptive or is likely to mislead or deceive has become a
1 Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340.
2 Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 at 348.
3 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470.
4 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 503.
5 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505.
6 See Parliamentary Debates, Hansard, 1974, Vol S 60, p 547.
7 Sir Anthony Mason, “Changing the Law in a Changing Society” (1993) 67 Australian Law Journal 568.
8 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010]
HCA 31 at [5]. See also Mason, “Changing the Law in a Changing Society” (1993) 67 Australian Law
Journal 568 at 568.
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[3.05]
staple of civil litigation in Australian courts at all levels. Its frequent invocation, in cases
to which it is applicable, reflects its simplicity relative to the torts of negligence, deceit
and passing off.
However, there were limits imposed on the general protection against misleading
conduct in s 52 of the TPA. The policy object of the law was not to protect the
unusually stupid or obtuse, or those who did not take reasonable steps to protect
their own interests. In Campomar Sociedad Limitada v Nike International Ltd,9 the High
Court stated:
It is in these cases of representations to the public … that there enter the “ordinary” or
“reasonable” members of the class of prospective purchasers. Although a class of
consumers may be expected to include a wide range of persons, in isolating the
“ordinary” or “reasonable” members of that class, there is an objective attribution of
certain characteristics.
… Where the persons in question are not identified individuals to whom a particular
misrepresentation has been made or from whom a relevant fact, circumstance or proposal
was withheld, but are members of a class to which the conduct in question was directed
in a general sense, it is necessary to isolate by some criterion a representative member of
that class. The inquiry thus is to be made with respect to this hypothetical individual why
the misconception complained has arisen or is likely to arise if no injunctive relief be
granted.10
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In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,11 it was held that a
reasonable member of the target audience (members of the public who were in the
market for an expensive make of furniture) would not be misled into buying a
similarly designed “look-alike” product, because they would check the label to
confirm that they were purchasing their desired brand.
In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre
Ltd,12 the High Court held that intention was not a requirement for a person to
have engaged in misleading conduct. The question whether conduct was
misleading within the meaning of s 52(1) of the TPA was to be determined by the
court itself, and the test was objective. Evidence that members of the target
audience may in fact have been misled was admissible though not conclusive.13
Section 52(1) was interpreted expansively and this allowed it to be invoked in a
wide variety of situations not traditionally associated with consumer protection.14
As a result, it had an impact on Australian law that was not anticipated when it
9 Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45.
10 Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 per Gleeson CJ, Gaudron,
McHugh, Gummow, Kirby, Hayne and Callinan JJ. See also Google Inc v ACCC (2013) 249 CLR 435 at
443 (French CJ, Crennan and Kiefel JJ).
11 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.
12 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR
216 at 228 (Stephen J).
13 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-9 (Gibbs CJ); Taco
Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202.
14 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR
216 at 223-6 (Stephen J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at
197-8 (Gibbs CJ) and 202-5 (Mason J); Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR
594 at 601-2 (Mason CJ, Deane, Dawson and Gaudron JJ); 606-607 (Brennan J).
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was introduced as part of the TPA in 1974. Its location in the consumer protection
parts of the TPA reflected an expectation that its role would be to protect consumers
by improving the conduct of businesses in trade or commerce – their advertising,
selling practices and promotional activities generally – and by prohibiting
businesses from engaging in sharp practices when dealing with individual
consumers.
[3.10] However, whilst s 52(1) was used to promote the interests of consumers in
these ways, by far its most frequent use was in connection with disputes of a
commercial nature between businesses. In effect, competitors held each other to
account in complying with the raised standards of business conduct imposed by
s 52(1). As a result it became one of Australia’s most litigated statutory provisions
and, in conjunction with its Fair Trading Act equivalents, largely usurped
important areas of common law including contract, tort and restitution.15 The same
policy objects that informed the construction of s 52 of the TPA are likely to inform
the construction of s 18 of the ACL.
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The principles for determining whether misleading conduct has occurred were
considered by McHugh J in Butcher v Lachlan Elder Realty Pty Ltd:
The question whether conduct is misleading or deceptive or is likely to mislead or
deceive is a question of fact. In determining whether a contravention of s 52 has occurred,
the task of the court is to examine the relevant course of conduct as a whole. It is
determined by reference to the alleged conduct in the light of the relevant surrounding
facts and circumstances. It is an objective question that the court must determine for itself.
It invites error to look at isolated parts of the corporation’s conduct. The effect of any
relevant statements or actions or any silence or inaction occurring in the context of a
single course of conduct must be deduced from the whole course of conduct. Thus, where
the alleged contravention of s 52 relates primarily to a document, the effect of the
document must be examined in the context of the evidence as a whole. The court is not
confined to examining the document in isolation. It must have regard to all the conduct of
the corporation in relation to the document including the preparation and distribution of
the document and any statement, action, silence or inaction in connection with the
document.16
The analysis of whether conduct is misleading or likely to mislead in this chapter
will focus on the following three matters:
• first, identifying or characterising the conduct at issue;17
• secondly, considering the approach taken by the courts in assessing whether the
conduct at issue is misleading or likely to mislead; and
15 See Clarke, “Misleading or Deceptive Conduct Cases in the Supreme Court of Victoria” (2015) 89
Australian Law Journal 397.
16 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (citations omitted), approved in
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 341-2 [102] (Gummow, Hayne, Heydon
and Kiefel JJ). See also Google Inc v ACCC (2013) 249 CLR 435 at 443-4 [6]-[9] (French CJ, Crennan and
Kiefel JJ) and ACCC v Dukemaster Pty Ltd (2009) ATPR ¶42-290 at [10] (Gordon J).
17 Campomar Sociedad, Limitada v Nike International (2000) 202 CLR 45 at [105]; National Exchange Pty Ltd
v ASIC (2004) ATPR ¶42-000 at [18] (Dowsett J, with whom Jacobson and Bennett JJ agreed);
Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett
and Graham JJ); ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 at [14]-[20] (Gordon J); IDP
Education Ltd v Lejburg Pty Ltd [2015] VSC 650 (24 November 2015) at 54] (Judd J).
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• thirdly, the need to consider whether the respondent’s conduct caused the
applicant’s error or misconception.18
The chapter then considers how the general protection in relation to misleading
conduct has been applied in the context of advertising conduct, and in relation to
passing-off. These two areas have generated a significant number of cases because
of their importance in market economies which depend on consumers being
provided with actuate information, and businesses competing fairly. Next, the
statutory exemption for information providers in s 19(1) of the ACL is discussed.
Finally, the prohibition of misleading conduct in relation to financial products and
financial services in s 12DA(1) of the ASIC Act is considered.
PART I: IDENTIFYING THE CONDUCT AT ISSUE
Introduction
[3.15] The importance of identifying or characterising the relevant conduct
alleged to be misleading has been stressed in a number of cases. For example, in
Google Inc v ACCC, Hayne J stated:
The generality with which s 52 was expressed should not obscure one fundamental point.
The section prohibited engaging in conduct that is misleading or deceptive or is likely to
mislead or deceive. It is, therefore, always necessary to begin consideration of the
application of the section by identifying the conduct that is said to meet the statutory
description “misleading or deceptive or … likely to mislead or deceive”. The first
question for consideration is always: “What did the alleged contravener do (or not do)?”
It is only after identifying the conduct that is impugned that one can go on to consider
separately whether that conduct is misleading or deceptive or likely to be so.19
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The concept of “engaging in conduct” is defined expansively in s 2(2) of the ACL.
Section 2(2) of the ACL provides:
(2) In this Schedule:
(a) a reference to engaging in conduct is a 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
(iii) the requiring of the giving of, or the giving of, a covenant; and
(b) a reference to conduct, when that expression is used as a noun otherwise than as
mentioned in paragraph (a), is a reference to the doing of or the 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
(iii) the requiring of the giving of, or the giving of, a covenant; and
(c) a reference to refusing to do an act includes a reference to:
(i) refraining (otherwise than inadvertently) from doing that act; or
18 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [24] (French CJ).
19 Google Inc v ACCC (2013) 249 CLR 435 at 464-5 [89].
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(ii) making it known that that act will not be done; and
(d) a reference to a person offering to do an act, or to do an act on a particular
condition, includes a reference to the person making it known that the person will
accept applications, offers or proposals for the person to do that act or to do that
act on that condition, as the case may be.
This mirrors s 4(2) of the TPA. The concept of “engaging in conduct” as defined in
s 2(2) of the ACL is not confined to a false or misleading representation. Section 18
is contained in Ch 2 of the ACL which is headed “General Protections”. Chapter 3
of the ACL is headed “Specific Protections” and prohibits a number of unfair
practices that are confined to “false or misleading representations”.20 Other
prohibitions in Ch 3 of the ACL are directed at “misleading conduct”.21 The same
distinction between a “representation” and “conduct” is made in s 4 of the ACL,
the evidentiary provision concerning representations with respect to future
matters.22
Doing any act
[3.20] The concept of “engaging in conduct” in s 2(2) of the ACL divides conduct
into two broad categories: “doing any act” and “refusing to do any act”. The
statutory language used does not require the making of some representation. As
Hayne J observed in Google Inc v ACCC, the focus must be on the statutory text
which focuses on “conduct” rather than “representations”:
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It will often be possible to identify the relevant conduct as the making of one or more
representations, but it is necessary to bear in mind that s 52 was not confined to the
prohibition of misrepresentations. It follows that a claim of contravention of s 52 need not
be pleaded or argued by reference to the making of some representation. “It suffices that
[the conduct] leads or is likely to lead into error”.
Melding the two issues of conduct and characterisation is apt to distract and confuse.
Especially is that so if the melding is achieved by using the language of misrepresentation
to give a single composite description of both the conduct and its character. Describing
the alleged misleading or deceptive conduct as “making a misrepresentation” is
distracting and confusing….23
The proposition that the expression “conduct” extends beyond representations was
also described as “sound” by a majority of the High Court in Butcher v Lachlan Elder
Realty Pty Ltd.24
Where the relevant conduct consists of doing an act, the “act” will generally
involve the making of some express or implied representation and there is a vast
body of case law in which pre and post-contractual representations have been held
to be misleading in contravention of s 52 of the TPA, and its State and Territory
equivalents. Contractual representations in a commercial context, such as
20 ACL, ss 29, 30, and 37.
21 ACL, ss 31, 33 and 34.
22 See [3.135].
23 Google Inc v ACCC (2013) 249 CLR 435 at 465-6 [92]-[96] (citations omitted).
24 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [32] (Gleeson CJ, Hayne and Heydon JJ),
[102]-[110] (McHugh J) and [179] (Kirby J).
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advertising,25 franchising,26 leasing transactions,27 sales of businesses,28 and
passing-off,29 have generated as many, if not more, cases than representations
involving a consumer as the victim of misleading conduct.
For the doing of an act to constitute a contravention of s 18(1) of the ACL it is only
necessary to prove that the representation leads into error or is likely to lead into
error.30 It does not require proof of fault on the part of the respondent. The
determination of whether the representation was made is a question of fact. Where
the evidence that the representation was made is contested, findings of fact will be
required to be made on each point. The ultimate issue is whether the representation
leads or is likely to lead into error.31
Refusing to do any act
[3.25] The concept of “conduct” is defined expansively in s 2(2) of the ACL and
includes doing or refusing to do any act.
Section 2(2)(c), in turn, provides:
A reference to refusing to do an act includes a reference to:
(i) refraining (otherwise that inadvertently) from doing that act; or
(ii) making it known that the act will not be done.
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The words “otherwise than inadvertently” have been held to mean that an
unintentional non-disclosure is not regarded as “conduct” for the purposes of
s 2(2)(c).32 There is a substantial body of case law and commentary on the
circumstances in which silence and non-disclosure gave rise to a contravention of
25 See eg, Gillette Aust Pty Ltd v Energizer Australia Pty Ltd (2002) 56 IPR 13; Hoover (Aust) Pty Ltd v
Email Ltd (1991) ATPR ¶41-149; Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR
419; Makita (Aust) Pty Ltd v Black & Decker (A’asia) Pty Ltd (1990) 18 IPR 270; Stuart Alexander & Co
(Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307; Telstra Corp Ltd v Optus Communications Pty
Ltd (1996) 36 IPR 515; Bristol-Meyers Squibb Australia Pty Ltd v Astra Pharmaceuticals Pty Ltd (1999) 45
IPR 144; and R & C Products Pty Ltd v SC Johnson & Sons Pty Ltd (1993) FCR 188.
26 See eg, Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) ¶46-102; Thomson v Ice Creameries of
Australia Pty Ltd (998) ATPR ¶41-611; and Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd (2005) 220
ALR 211.
27 See, eg, Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; Murphy v Overton Investments Pty Ltd
(2004) 21 CLR 388; Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601; Lezam Pty Ltd v
Seabridge Australia Pty Ltd (1992) 35 FCR 535; John G Glass Real Estate Pty Ltd v Karawi Constructions
Pty Ltd (1993) ATPR ¶41-249.
28 See eg, Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Finucane v NSW Egg Corp (1988) 80 ALR
486; and Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601.
29 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Sydneywide Distributors Pty
Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354; and Cadbury Schweppes Pty Ltd v Darrell Lea
Chocolate Shops Pty Ltd (2007) 159 FCR 397.
30 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198.
31 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 (Gibbs CJ); and
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25] (French CJ).
32 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 722 (Finkelstein J);
Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J).
Stephen, C 2016, Australian Consumer Law, Thomson Reuters (Professional) Australia Pty Limited, Sydney. Available from: ProQuest Ebook Central. [13 March 2020].
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s 52 of the TPA and this jurisprudence will be equally applicable to s 18.33 Where
silence is alleged to constitute misleading or deceptive conduct, it is first necessary
to consider whether the respondent’s silence amounts to “conduct” as defined in
s 2(2) of the ACL. This is a broad definition which includes, inter alia, “refraining”
from doing an act.34 However, whilst this definition is sufficiently broad to embrace
silence, it goes on to exclude from its ambit refraining from doing an act
“inadvertently”. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd,35
Bowen CJ interpreted this to mean that the respondent’s failure to disclose
information must be deliberate, so that should it be attributable to carelessness, or,
perhaps, ignorance of the significance of the information involved, s 52 would not
be contravened. Where the applicant complains not about some positive conduct
on the respondent’s part, but about its failure to disclose information, the
respondent can be found to have “engaged in conduct” only if this failure was
deliberate. In the words of Finkelstein J in Costa Vraca Pty Ltd v Berrigan Weed & Pest
Control Pty Ltd:
It is clear that a failure to provide information can be conduct which is misleading or
deceptive. For the purposes of s 52(1) “engaging in conduct” is defined in s 4(2)(a) as a
reference to doing or refusing to do any act and by s 4(2)(c) a reference to refusing to do
an act includes a reference to refraining (otherwise than inadvertently) from doing that
act.
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However, when the complaint is that s 52(1) has been infringed by conduct that involves
either refusing or refraining from doing an act before that conduct is actionable it must
have been deliberately engaged in.36
According to his Honour, this followed “from the use of the words ‘refuse’ and
‘refrain’ in s 4(2) of the TPA and was reinforced by the fact that in s 4(2)(c) conduct
is said to include refraining from doing an act provided it is ‘otherwise than
inadvertently’.” In Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd,37 McLure P
drew attention to the requirement that the defendant must be aware of the
undisclosed fact and that the silence must be intentional or deliberate:
To refrain otherwise than inadvertently requires a deliberate decision to withhold
information: Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at
[58]; Rhone-Poulenc at 489-490; Costa Vraca at 723. Thus, the defendant must advert to the
question and form an intention not to disclose. That conclusion is consistent with the
natural and ordinary meaning of the term “refrain” which means to forebear or to keep
oneself back.38
33 See Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 and Henjo
Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83; Kimberley NZI Finance Ltd v Torero
Pty Ltd (1989) ATPR (Digest) ¶46-054 (French J); Warner v Elders Rural Finance Ltd (1993) 41 FCR 399;
and General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164. For commentary on these cases see
Gillies, “Non-disclosure Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653.
34 ACL, s 2(2)(c).
35 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489.
36 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1999) ATPR ¶41-694 at 42,879. See also
Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 at 657 (Hoeben J).
37 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193.
38 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [59].
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Where a corporation engages in conduct that involves silence, and it is necessary to
establish that the corporation deliberately failed to disclose within the definition of
conduct in s 2(2)(c) of the ACL, s 139B(1) of the CCA must be considered.
Section 139B(1) provides that if in a proceeding under the ACL (Cth) in respect of
conduct engaged in by a body corporate, it is necessary to establish the state of
mind of the body corporate, it is sufficient to show (a) “that a director, employee or
agent of that body corporate engaged in that conduct within the scope of the actual
or apparent authority of the director, employee or agent”; and (b) “that the director,
employee or agent had that state of mind”.
Silence in isolation
[3.30] Where silence occurs in isolation it is not always misleading. In
Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd,39 Rhone-Poulenc
alleged that UIM contravened s 52 of the TPA by selling an agricultural chemical
product without disclosing that the sale and use of that product was prohibited in
certain States. The applicant was a trade rival of UIM and also alleged that the
latter had infringed one of its patents in producing and selling the product.
In relation to the definition of “conduct” in s 4(2) of the TPA, Bowen CJ held:
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The appellants submit that UIM’s failure to warn customers of the risks of seizure and
forfeiture constituted “engaging in conduct” within the special definition in s 4(2). I do
not agree. Although s 4(2) recognises that an omission to do an act may constitute
“engaging in conduct”, that will only be so where there has been a refusal to do, or a
deliberate refraining from doing, an act. The words “refuse” and “refrain” clearly connote
that the omission to do an act must be deliberate. I agree with the trial judge that s 4(2)
does not materially assist the appellants.40
Unless there is a deliberate decision to withhold information, the silence will not be
actionable. If the respondent’s silence is attributable to carelessness, or, perhaps,
ignorance of the significance of the information involved, it will not be actionable.41
Silence and other conduct
[3.35] In many situations the respondent’s silence will not occur in isolation.
Rather, it will be accompanied by other acts or omissions so that when viewed as a
whole, the respondent’s conduct may be misleading or deceptive in a positive
manner. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd,
French CJ and Kiefel J drew attention to the distinction between “silence in
isolation” cases and “silence including other acts or omissions” cases:
39 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477.
40 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489-90.
41 See Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 723
(Finkelstein J); Johnson Tiles Pty Ltd & Ors v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9
(Merkel J); Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; and
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [59] (McLure P).
Stephen, C 2016, Australian Consumer Law, Thomson Reuters (Professional) Australia Pty Limited, Sydney. Available from: ProQuest Ebook Central. [13 March 2020].
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Where silence or non-disclosure is relied upon, the pleading should identify whether it is
alleged of itself to be, in the circumstances of the case, misleading or deceptive conduct or
whether it is an element of conduct, including other acts or omissions, said to be
misleading or deceptive.42
In cases where the silence is accompanied by other acts or omissions, the applicant
will not need to establish that the respondent’s silence alone amounted to
“conduct” within s 2(2) of the ACL. The presence of the additional acts or
omissions, when combined with the respondent’s failure to disclose, may render
the respondent’s conduct, viewed in its entirety, misleading or deceptive for the
purpose of s 18 of the ACL. The definition of conduct in s 2(2) of the ACL has been
adopted in the ACL (Application Acts).43
For this reason, when silence is alleged to constitute the basis of misleading or
deceptive conduct, it will be desirable for the applicant to consider the whole of the
conduct and whether there was something more involved than silence in isolation.
As Reeves J observed in Bennett v Elysium Noosa Pty Ltd (in liq):
Where a person is pleading an implied representation arising out of a failure to disclose,
or silence, which has its foundation in the circumstances surrounding that silence, or
separately some duty to disclose in the particular circumstances, it is absolutely critical
that the circumstances relevant to either situation are pleaded clearly and precisely.44
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Implied representations can arise in cases involving silence. The approach for
determining whether an implied representation was made “is to determine
whether what was actually said or done, in all the relevant circumstances,
conveyed something more, such that it led the applicant into error”.45 For example,
it may be implied that there was nothing material that needed to be disclosed to the
other party. In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (Henjo),46 it
was held to be misleading to inform a prospective purchaser that a restaurant had
a certain number of tables without also disclosing that a significant number of them
were not allowed under the applicable liquor licensing laws.
Similarly, in Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd,47 it was
held to be misleading to point out the limitations of a site the respondent was
proposing to lease without also mentioning the risks of contamination it presented.
In cases involving the expression of an opinion, there may be an implied
representation that the opinion is honestly held, or an implied representation that
there is a reasonable basis for the opinion.48 These cases illustrate that in cases
involving silence, the question is whether what was actually said, in all the relevant
42 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [5].
43 See, eg, FTA 1989 (Qld), s 5A.
44 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [78].
45 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [40] (Reeves J).
46 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546.
47 Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625.
48 Global Sportsman v Mirror Newspapers (1984) 2 FCR 82 at 88; James v Australia and New Zealand Banking
Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR
¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189;
Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J). See [3.150].
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circumstances, would convey something more to a reasonable person in the
position of the applicant, such that it was likely to lead into error.
Relaying incorrect information supplied by another
[3.40] The conduct at issue may consist of merely relaying information supplied
by another. In Yorke v Lucas,49 Mason A-CJ, Wilson, Deane and Dawson JJ
considered a situation where a corporation purported to do no more than pass on
information supplied by another in circumstances where it was apparent that the
corporation was not the source of the information, and expressed the view that it
was doubtful that the corporation could itself be engaging in conduct:
That does not, however, mean that a corporation which purports to do no more than pass
on information supplied by another must nevertheless be engaging in misleading or
deceptive conduct if the information turns out to be false. If the circumstances are such as
to make it apparent that the corporation is not the source of the information and that it
expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for
what it is worth, we very much doubt that the corporation can properly be said to be
itself engaging in conduct that is misleading or deceptive.50
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This has subsequently been dubbed “the conduit defence”,51 where the intermediary
acts as a mere “postman” and does not do anything to adopt the information.52 It
arises in the context of principal–agency relationships, where the agent relays
information imparted by the principal and seeks to immunise himself or herself by
means of a contemporaneous disclaimer. It also arises in situations where an
information provider, such as a newspaper or magazine, publishes an advertisement
on behalf of a supplier of goods or services that may contain misleading
representations, and the newspaper does not express its own views as to the truth
or falsity of those representations.
For example, in Dalton v Lawson Hill Estate Pty Ltd,53 the purchaser of a vineyard
was unsuccessful in attempting to make an agent liable for representations about
the area of the vines planted and the output of a bore on the property. The court
noted that there were disclaimers in the promotional material that made it clear
that the agent was not accepting any responsibility for the information provided by
another person.
The Full Federal Court held that the agent was not liable and stated:
In considering the liability of an agent for sale for contravention of s 52 of the Trade
Practices Act or s 42 of the Fair Trading Act, it is necessary to consider the character of the
particular conduct of the particular agent in relation to the particular purchaser, bearing
in mind what matters of fact each knew about the other as a result of the nature of their
dealings and the conversations between them, of which each may be taken to have
49 Yorke v Lucas (1985) 158 CLR 661.
50 Yorke v Lucas (1985) 158 CLR 661 at 666.
51 See Gillies, “Misleading and Deceptive Conduct: Immunising the Intermediary – the Conduit
Defence” (2006) 14 Trade Practices Law Journal 209; and McCabe, “In the Wake of Butcher: Decisions
Affecting the Liability of Agents and Third Parties in Proceedings for Misleading or Deceptive
Conduct” (2006) 14 Trade Practices Law Journal 46.
52 The term “postman” was used by French J in Gardam v George Willis & Co (1988) 82 ALR 415 at 427.
53 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 (Lindgren, Finn and Emmett JJ).
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known. The mere fact that a person had engaged in the conduct of supplying a document
containing information which is in fact misleading does not necessarily mean that that
person had engaged in misleading conduct. It is crucial to examine the role of the person
in question.54
The Full Court distinguished John G Glass Real Estate Pty Ltd v Karawi Constructions
Pty Ltd55 on the basis that in that case the agent held itself out as “Consultants to
institutional investors and to developers of major properties”, and the representation
concerned what the net lettable area of a building would be when it was
constructed, a matter which the purchaser could not independently verify for
itself.56
The liability of an intermediary or conduit was considered by the High Court in
Butcher.57 In that case, Butcher purchased at auction an expensive waterfront
property in Sydney. Prior to the auction, Butcher was shown the property by an
estate agent, Lachlan, who provided a brochure describing the property. The
brochure reproduced part of a survey done by a surveyor in 1980. The survey was
inaccurate in certain details. The brochure contained the following statement:
All information contained herein is gathered from sources we believe to be reliable.
However, we cannot guarantee its accuracy and interested persons should rely on their
own inquiries.
Before settlement, Butcher discovered that the boundary was not located as shown
on the survey diagram. Butcher declined to proceed with the transaction and
commenced proceedings against the vendor and against the agent, Lachlan,
alleging that it had been guilty of misleading conduct contrary to s 52 of the TPA.
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In a joint majority judgment, Gleeson CJ, Hayne and Heydon JJ held that the
intermediary, the agent Lachlan, was not in breach of s 52. The agent’s conduct and
the disclaimer were part of the surrounding circumstances and had to be viewed as
a whole.58
Their Honours cited with approval59 the decision of the New Zealand Court of
Appeal Goldsbro v Walker,60 and concluded:
The agent did not engage in conduct towards the purchasers which was misleading or
deceiving. Whatever representation the vendor made to the purchasers by authorising the
agent to issue the brochure, it was not made by the agent to the purchasers. The agent did
no more than communicate what the vendor was representing, without adopting or
endorsing it. The conclusion flows from the nature of the parties, the character of the
transaction contemplated, and the contents of the brochure itself.61 (emphasis added)
54 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,252 [82].
55 John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249.
56 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,252 [96]-[97].
57 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.
58 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605 [39]; McHugh J expressed similar
views at 625 [109].See also Campbell v Backoffice Investments at [29] (French CJ).
59 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 602, fn 38.
60 Goldsbro v Walker [1993] 1 NZLR 394.
61 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605.
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[3.45] As regards the nature of the parties, it was significant that the relevant
class of persons to whom the property was marketed (purchasers prepared to pay
above $1 million in 1997) could be expected to have legal advice and the purchasers
were “intelligent, shrewd and self-reliant”. The fact that the agent did not adopt or
endorse the communication was a factor that supported the finding that the agent
had done no more than pass on information from the vendor. Likewise, the
disclaimers in the brochure were merely part of the circumstances relevant to the
inquiry whether it would have been plain to a reasonable purchaser that the agent
was not the source of the misleading information.62
In Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd,63 Orix, an
international finance house involved in financing the acquisition of heavy
industrial machinery, sought damages from a broker, Moody Kidell. Orix provided
finance to QCE, an equipment hire business to acquire six cranes from Nelson
Equipment. Orix acted in reliance upon information provided by Moody Kidell.
The information provided contained a disclaimer to the effect that it had been
provided to Moody Kidell by the proposed borrower/lessee and that Moody Kidell
could not accept responsibility for its accuracy.
The trial judge (White J) held that Moody Kidell did not adopt or endorse the
misleading information, and that Moody Kidell did no more than communicate to
Orix what QCE was representing, and was not liable under s 52 of the TPA.
The New South Wales Court of Appeal dismissed the appeal. After an extensive
analysis of what was said by the majority in Butcher, Ipp JA concluded:
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From the passages that I have quoted it appears that the ratio of the majority’s decision
that the agent had not engaged in misleading conduct was that the agent did no more
than communicate what the vendor was representing. Their Honours held that an
innocent agent, who acts merely as a conduit and makes it clear, expressly or impliedly,
that he or she is doing no more than passing on information obtained from others, does
not attract liability under s 52.
The High Court considered the issue again in Google Inc v ACCC.64 The conduct at
issue concerned Google’s well-known search engine, “Google search”. A search of
the google.com search engine produced two types of result, “organic” search results
and “sponsored links”. Organic search results consisted of information displayed
free of charge. Sponsored links were advertisements which appeared at the top or
right-hand side of the results page, and included a link to the web address
displayed beneath the headline. The primary judge, Nicholas J held that in four
instances advertisers had engaged in misleading conduct by falsely representing
that there was a commercial association or affiliation with its competitor and that
information regarding the competitor could be found by clicking on the advertiser’s
web address. For example, advertisements for Harvey World Travel (HWT)
appeared as sponsored links amid organic search results. STA Travel was a major
competitor of HWT. The court held that the representation that there was a
62 Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 at [45]-[46].
63 Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 (Ipp JA, with
whom Spigelman CJ and Basten JA agreed).
64 Google Inc v ACCC (2013) 249 CLR 435.
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commercial association or affiliation between STA and HWT were made by STA,
not by Google, and that Google did not adopt or endorse the representation.65
On appeal, the Full Federal Court held that Google engaged in misleading conduct
because Google took an active role in the preparation, dissemination and
publication of the advertisements, and endorsed the information supplied by the
advertisers such as STA.66
Google’s appeal to the High Court was successful. Before the High Court there was
no challenge to the findings of the primary judge that the advertisements were
misleading.67 The question was whether Google had engaged in the conduct. The
majority, French CJ, Crennan and Kiefel JJ, in their joint reasons held that the
advertisers were the authors of the sponsored links. Google had no control over an
advertiser’s choice of search terms, or an advertiser’s choice of keywords. Their
Honours stated:
It is critical to appreciate that, even with the facility of keyword insertion, the advertiser is
the author of the sponsored link. As Google correctly submitted, each relevant aspect of a
sponsored link is determined by the advertiser. The automated response which the
Google search engine makes to a user’s search request by displaying a sponsored link is
wholly determined by the keywords and other content of the sponsored link which the
advertiser has chosen. Google does not create, in any authorial sense, the sponsored links
that it publishes or displays.68
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Their Honours held that Google was a mere conduit passing on the advertisements,
without adopting or endorsing them:
Google is not relevantly different from other intermediaries, such as newspaper
publishers (whether in print or online) or broadcasters (whether radio, television or
online), who publish, display or broadcast the advertisements of others. The fact that the
provision of information via the internet will – because of the nature of the internet –
necessarily involve a response to a request made by an internet user does not, without
more, disturb the analogy between Google and other intermediaries. To the extent that it
displays sponsored links, the Google search engine is only a means of communication
between advertisers and consumers.69
Hayne and Heydon JJ wrote separate opinions but agreed that Google’s appeal
should be upheld.
The High Court’s decision in Google Inc provides comfort for intermediaries who
disseminate, publish or broadcast information provided by others. So long as they
can demonstrate that they have not been involved in the preparation of the material
by, for example, drafting the wording of the advertisement, they will not be liable
for the content they publish or distribute. Publishers of advertisements are
provided additional protection by s 251 of the ACL. However, once intermediaries
65 ACCC v Trading Post Australia Pty Ltd (2011) 197 FCR 498.
66 ACCC v Google Inc (2012) 201 FCR 503 at [93].
67 Google Inc v ACCC (2013) 249 CLR 435 at 455 [54] (French CJ, Crennan and Kiefel JJ).
68 Google Inc v ACCC (2013) 249 CLR 435 at 459 [68].
69 Google Inc v ACCC (2013) 249 CLR 435 at 459 [69].
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become aware that the information supplied by another is misleading, they must
act promptly to remove it, otherwise they risk becoming involved in the
contravention as an accessory.70
Adopting or endorsing information supplied by another
[3.50] Where, however, an intermediary adopts or endorses the representations
supplied by another, the intermediary will be equally culpable if the representations
are false or misleading. In Downey v Carlson Hotels Asia Pacific Pty Ltd,71 the
appellant, Carlson Hotels, previously known as Raddison Hotels, was in the
business of running hotels and apartments of high quality. It lent its name to a
development known as “Raddison Suites”, which was being developed by Valco
Developments Pty Ltd. A brochure was prepared to promote the development. The
name “Raddison” appeared on the brochure 31 times. Raddison approved of the
brochure and knew that it would be provided to potential purchasers to promote
the sale of units in the Raddison Suites development.
The suites were to be managed for letting purposes and the brochure contained an
“Investment Analysis” which guaranteed a net 7% per annum for five years. On the
last page of the investment analysis was the following disclaimer:
Whilst the information inside this publication is believed to be true and correct, the
figures and advice supplied are given as a guide only and no responsibility will be taken
for any errors and omissions.
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Mr and Mrs Downey were investors who purchased units in the development, but
the investment return did not materialise. Although Carlton Hotels were not selling
the units, it was alleged to have adopted or endorsed the representations of the
developer, Valco.
Keane JA (with whom Williams JA and Atkinson J agreed) concluded that after
considering the material in its entirety, including the disclaimer, that the appellant’s
conduct was misleading. His Honour acknowledged72 that disclaimers could be
effective if they made it clear that they were only communicating the information
prepared by Valco, but the disclaimer in the case before him did not have this effect.
On the contrary, his Honour concluded73 that a reasonable purchaser in the
position of the Downeys would have formed the view that the brochure contained
a representation by the appellant that it was endorsing the information prepared by
Valco, and was not merely passing it on for what it was worth. It was making two
representations: first, a representation that the units would be a good investment;
and secondly, a representation that potential investors could rely on its opinion as
to the quality of the investment.
The Full Federal Court considered this issue in Granitigard Pty Ltd v Termicide Pest
Control Pty Ltd.74 In that case, the trial judge held that Termicide had not adopted a
70 ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34 at [33] (Finkelstein J) and see [3.195].
71 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199.
72 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [83].
73 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [85]-[117].
74 Granitigard Pty Ltd v Termicide Pest Control Pty Ltd (2011) 281 ALR 1.
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Commonwealth Scientific and Industrial Research Organisation (CSIRO) appraisal
document under which experts employed by the CSIRO were engaged in assessing
new building products to determine whether they complied with the relevant
Australian Standard.75 On appeal, Reeves J (with whom Kenny and Lander JJ
agreed) considered that Termicide had adopted the CSIRO appraisal document as
its own. It had not merely provided a means by which the CSIRO appraisal
document could be read, without using any words or otherwise doing anything to
adopt or endorse it. Instead, it took additional steps that amounted to an adoption
of it. These steps were removing the CSIRO logo and reproducing parts of the
appraisal document on its own website under the Termicide logo.
Contemporaneous disclaimers
[3.55] Agents and intermediaries sometimes seek to protect themselves from
liability by alerting those who may rely on the information being disseminated that
the agent or intermediary is not the source of the information by means of
contemporaneous disclaimers.
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A contemporaneous disclaimer refers to a notice of the kind at issue in Butcher v
Lachlan Elder Realty Pty Ltd.76 There, the disclaimer was made available during
pre-contractual negotiations. It stated that the information contained in the
brochure had been obtained from other sources and that the agent could not
guarantee its accuracy. Where, however, the evidence shows that the agent or
intermediary is the source of the information; or is responsible for its preparation;
or has subsequently endorsed it, the agent or intermediary will not be a mere
conduit and will share liability with the principal if it is misleading.77
In Havyn Pty Ltd v Webster,78 the court distinguished the information sought to be
disclaimed from that at issue in Butcher’s case. In Butcher, the information concerned
the boundaries of the property which surveyors normally certify, while in Havyn
the information concerned the floor area of flats in a building which could easily be
measured by a person without expertise and fell within the competence of a real
estate agent.79
In summary, in deciding whether a disclaimer is effective to protect an agent or
intermediary, the courts have regard to the following factors:
• The nature of the parties to the transaction: whether the agent or intermediary held
itself out as an expert in transactions of that kind and would be expected to
know the accuracy of the information being imparted; whether the circumstances
made it clear that the other party was acting in reliance on the agent, or intended
to make its own inquiries.
75 Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 5) [2010] FCA 313 (Logan J).
76 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. See also The Saints Gallery Pty Ltd v
Plummer (1988) 80 ALR 525 at 530-531 and Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR
535 at 552-3, 556-8.
77 John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249; and Havyn Pty
Ltd v Webster (2005) 220 ALR 211 (Santow JA, with whom Tobias JA and Brownie AJA agreed).
78 Havyn Pty Ltd v Webster (2005) 220 ALR 211.
79 Havyn Pty Ltd v Webster (2005) 220 ALR 211 at [88]-[91].
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• The nature of the information: whether it is was the kind of information the agent
would be expected to possess; whether it concerned a “hard physical fact”80
admitting of only one answer and which should be within the knowledge of the
agent, or alternatively, some matter that the agent was clearly not in a position to
express a view about its veracity; and whether it was possible for the other party
to independently verify it.
• The character of the transaction: the more valuable the transaction the more likely
the purchaser will make independent inquiries, engage other professionals to
advise, and not rely on the information provided by the agent.
• The contents of the disclaimer itself: the size, clarity, prominence and specificity of
the disclaimer, and whether it was brought to the attention of the purchaser prior
to entry into the transaction.
PART II: ASSESSING WHETHER THE CONDUCT WAS MISLEADING,
OR LIKELY TO MISLEAD
Context all important
[3.60] The central concept in s 18(1), that of “misleading or deceptive” conduct,
is not defined in the ACL. There are no specific categories of misleading or
deceptive conduct although some guidance is provided in relation to representations
about future matters by s 4(1) of the ACL.81 In Google Inc, Hayne J stated:
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Analysis of the decided cases is not to be glossed over and obscured by attempting to
identify particular species of misleading or deceptive conduct, attaching some general
description to each (such as a “misrepresentation” case, an “advertisement” case or a
“mere conduit” case) and then applying s 52 by fitting the case into one of those
constructed categories. Analogical reasoning is important but analogies can be drawn
only after understanding the full factual context in which it was held that s 52 did or did
not apply.82
In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,83 Gibbs CJ held:
The words of s 52 require the Court to consider the nature of the conduct of the
corporation against which proceedings are brought and to decide whether that conduct
was, within the meaning of that section, misleading or deceptive or likely to mislead or
deceive. Those words are on any view tautologous. One meaning which the words
“mislead” and “deceive” share in common is “to lead into error”. If the word “deceptive”
in s 52 stood alone, it would be a question whether it was used in a bad sense, with a
connotation of craft or overreaching, but “misleading” carries no such flavour, and the
use of that word appears to render “deceptive” redundant. The words “likely to mislead
or deceive”, which were inserted by amendment in 1977, add little to the section; at most
they make it clear that it is unnecessary to prove that the conduct in question actually
deceived or misled anyone.84
80 Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,253 [87].
81 See [3.135].
82 Google Inc v ACCC (2013) 249 CLR 435 at 467-8 [102].
83 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.
84 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198.
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The conduct is of the prohibited kind for the purposes of s 18(1) of the ACL if “the
conduct viewed as a whole has a tendency to lead a person into error”.85 In
deciding whether conduct is misleading or deceptive, regard must be had to the
context in which that conduct took place. Conduct that is misleading in one context
may not be so in another.86
In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ stated:
The conduct of a defendant must be viewed as a whole. It would be wrong to select some
words or act, which, alone, would be likely to mislead if those words or acts, when
viewed in their context, were not capable of misleading. It is obvious that where the
conduct complained of consists of words it would not be right to select some words only
and to ignore others which provided the context which gave meaning to the particular
words. The same is true of acts.87
Accordingly, the courts will undertake a very detailed analysis of the evidence, and
each case turns on its own specific facts and context. This is a “quintessential
question of fact”.88 It is for this reason that Hayne J in Google Inc v ACCC warned
about the dangers of extrapolating from decided cases:
Because it is the statutory text which controls, there is no little danger in attempting to
extrapolate from the decided cases to a rule of general application. No such rule can stand
in the place of the statutory text.
This is not to say that the decided cases are unimportant or that they do not contribute to
the proper understanding of how the Act operates. But each case must be understood by
reference to the statutory text and the particular facts that were identified as relevant to
the application of that text. When considering what was said in the reasons for decision in
a s 52 case, the description of the relevant conduct is as important as are the facts and
circumstances identified as bearing upon whether that conduct was misleading or
deceptive.89
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Misleading conduct: objective test
[3.65] In determining whether conduct is misleading or deceptive under s 18 of
the ACL, an important consideration will be the nature of the audience at whom it
was directed. Early in the history of s 52 of the TPA it was held that conduct will be
regarded as misleading or deceptive only if it misled or deceived (or is likely to
mislead or deceive) members of that audience.90
85 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [39] (French CJ, Crennan, Bell and Keane JJ);
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25] (French CJ).
86 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (McHugh J).
87 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199.
88 ACCC v Telstra (2004) 208 ALR 459 at [49]. For commentary on the tendency of the courts to
undertake a very detailed analysis of the evidence and the purported representations see Rickett,
“Some Reflections on Open-Textured Commercial Contracting” [2001] AMPLA Yearbook 374 at
378-379 and Stewart and McClurg, “Playing Your Cards Rights: Obligations of Disclosure in
Commercial Negotiations” [2007] AMPLA Yearbook 36 at 51.
89 Google Inc v ACCC (2013) 249 CLR 435 at 467 [100]-[101].
90 Weitmann v Katies Ltd (1977) 29 FLR 336 (Franki J).
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If conduct was not misleading in relation to the target audience, it did not
contravene s 52 merely because it misled, or was capable of misleading, some other
person to whom it may have been communicated, at least where this could not
reasonably have been anticipated.91
In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ stated:
Although it is true, as has often been said, that ordinarily a class of consumers may
include the inexperienced as well as the experienced, and the gullible as well as the
astute, the section must in my opinion by [sic] regarded as contemplating the effect of the
conduct on reasonable members of the class. The heavy burdens which the section creates
cannot have been intended to be imposed for the benefit of persons who fail to take
reasonable care of their own interests.92
These principles were confirmed by the High Court in Campomar Sociedad Limitada v
Nike International Ltd:
It is in these cases of representations to the public … that there enter the “ordinary” or
“reasonable” members of the class of prospective purchasers. Although a class of
consumers may be expected to include a wide range of persons, in isolating the
“ordinary” or “reasonable” members of that class, there is an objective attribution of
certain characteristics.93
In Telstra Corp Ltd v Cable & Wireless Optus Ltd,94 Goldberg J thought that the “[t]he
extremely stupid, and perhaps the gullible may well be excluded from the class”.95
The class does not include those who fail to take reasonable care of their own
interests.96 Reasonable members of the class would take reasonable steps to look
after their own interests.
Role of intention
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[3.70] Intention was not a necessary element of the contravention of s 52 of the
TPA. The section involved no questions of intent upon the part of the person whose
conduct was in question. Thus, in Google Inc v ACCC, French CJ and Crennan and
Kiefel JJ noted that:
Section 52 is not confined to conduct which is intended to mislead or deceive. A
corporation could contravene s 52 even though it acted reasonably and honestly.97
In Butcher v Lachlan Elder Realty Pty Ltd, McHugh J stated:
91 Parkview (Keppell) Pty Ltd v Mytarc Pty Ltd (1984) 3 FCR 186 at 190-191 (McGregor J).
92 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. See also Miller &
Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 371 [22]
(French CJ and Kiefel J).
93 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [102] (Gleeson CJ,
Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ) (citations omitted).
94 Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478.
95 Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 at [23].
96 See Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [105]; Cantarella Bros
Pty Ltd v Valcorp Fine foods Pty Ltd (2002) ATPR ¶41-856 at [35]-[36] (Lindgren J).
97 Google Inc v ACCC (2013) 249 CLR 435 at 443. See also Hornsby Building Information Centre Pty Ltd v
Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J) and Parkdale Custom Built
Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 (Gibbs CJ).
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Section 52 looks at the conduct of a corporation and is concerned only with whether that
conduct misled or was likely to mislead a consumer. It is not concerned with the mental
state of the corporation.98
However, intention is not entirely irrelevant. In Campomar v Nike the primary judge,
Sheppard J, found that Campomar deliberately marketed the Nike Sports Fragrance
products in order to take advantage of the goodwill and reputation of Nike
International.99 The High Court held, where there is a finding of intention to
deceive, the court may more readily infer that the intention has been or in all
probability will be, effective.100
The same approach applies in relation to s 18 of the ACL. Conduct may be found to
contravene s 18 of the ACL even though the respondent acted honestly and did not
intend to mislead or deceive. On the other hand, where the respondent did intend
to mislead or deceive, a court may more readily find that the conduct was
misleading or likely to mislead.101
In ACCC v TPG Internet Pty Ltd, the High Court majority stated:
[W]here a representation is made in terms apt to create a particular mental impression in
the representee, and is intended to do so, it may properly be inferred that it has that effect.
Such an inference may be drawn more readily where the business of the representor is to
make such representations and where the representor’s business benefits from creating
such an impression.102
Two other areas where intention has a role to play are where the misleading
conduct at issue consists of refraining from doing an act,103 and where an applicant
seeks to establish accessorial liability for misleading conduct.104
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Conduct directed at identified persons
[3.75] The courts draw a distinction between conduct directed at particular
individuals in a one-on-one situation and conduct directed at the public or a
segment of the public. Where conduct is directed at identified persons, rather than
the public at large, French CJ in Campbell v Backoffice Investments Pty Ltd, stated:
In the case of an individual it is not necessary that he or she be reconstructed into a
hypothetical, ’ordinary person’. Characterisation may proceed by reference to the
circumstances and context of the questioned conduct. The state of knowledge of the
98 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 634 [139].
99 Nike International Ltd v Campomar Sociedad Limitada (1996) ATPR ¶41-518 at 42,478, 42,480.
100 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [33] (Gleeson CJ, Gaudron,
McHugh, Gummow, Kirby, Hayne and Callinan JJ). This principle has been applied in subsequent
cases. See, eg, ACCC v Singtel Optus Pty Ltd (No 3) (2010) 276 ALR 102 where Perram J inferred that
Optus intended its misleading advertising campaign to have a substantial impact in the broadband
market, based on the amount of money which Optus spent on the campaign, and concluded that
the effect of the campaign was substantial (at [16]-[17]).
101 S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 at 361-363 (Hill, RD
Nicholson and Emmett JJ).
102 ACCC v TPG Internet Pty Ltd (2013) 304 ALR 189 at 198 [55] (French CJ, Crennan, Bell and Keane JJ)
(Citations omitted).
103 See [3.25].
104 See [14.175]–[14.195].
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person to whom the conduct is directed may be relevant, at least in so far as it relates to
the content and circumstances of the conduct.105
Where the conduct at issue consists of misleading pre-contractual representations
such as those at issue in Butcher v Lachlan Elder Realty Pty Ltd,106 directed at
identified persons, then whether the conduct is misleading is to be assessed in
relation to the individual applicants alone. According to the majority in Butcher’s
case:
So here, it is necessary to consider the character of the particular conduct of the particular
agent in relation to the particular purchasers, bearing in mind what matters of fact each
knew about the other as a result of the nature of their dealings and the conversations
between them, or which each may be taken to have known. Indeed, counsel for the
purchasers conceded that the mere fact that a person had engaged in the conduct of
supplying a document containing misleading information did not mean that that person
had engaged in misleading conduct: it was crucial to examine the role of the person in
question.107
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Thus, assessing whether conduct which consists of a representation made to a
particular person is misleading or likely to mislead will be ascertained by reference
to the context in which the parties are situated, and may involve a combination of
subjective and objective assessments. The assessment of whether the conduct is
likely to mislead proceeds by reference to what “a reasonable person in the position
of the [representees], taking into account what they knew, would make of the
[representor]’s behaviour”.108 Thus, if the applicant claims to have been misled, the
conduct will not contravene s 18 if a hypothetical reasonable person who possessed
the applicant’s knowledge of the surrounding circumstances would not have been
misled by the conduct at issue. In Traderight (NSW) Pty Ltd v Bank of Queensland
Ltd,109 Barrett JA (with whom Bathurst CJ and Beazley P agreed) stated:
It is the quality of the conduct in terms of capacity or tendency, objectively ascertained,
that must be judged, not its actual impact on a particular person. Where… the conduct
consists of a representation actively made to a particular person in a one-on-one situation,
the quality of the conduct is to be ascertained by reference to the context in which the
parties are situated, including such matters as their respective states of prior knowledge
and understanding. It is within the whole of that context that the court must address the
question whether the representation consists of a representation actively made to a
particular person in a one-on-one situation, the quality of the conduct is to be ascertained
by reference to the representee. The question whether the representee relied or acted upon
the representation is irrelevant to that inquiry.110
105 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26]. See R V Miller, Australian
Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.50].
106 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.
107 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].
108 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [50]. Applied in Downey v Carlson Hotels
Asia Pacific Pty Ltd [2005] QCA 199 at [69].
109 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 (14 April 2015).
110 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [161].
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Commercial negotiations involving identified persons
[3.80] Section 18 of the ACL applies to statements made in the course of private
negotiations between commercial entities and is not limited consumer
transactions.111 The cases indicate that the courts place particular emphasis upon
the whole context of the pre-contractual negotiations between the parties. In
considering their effect of the conduct at issue on a reasonable person in the
applicant’s position the courts may take into account the following matters:
• the character of the particular conduct by the respondent towards the aggrieved
party;112
• the nature of the dealings between the parties and what matters of fact each
knew about the other as a result of their dealings; in particular, what discussions
took place, at what times, and what documents were exchanged;113
• the relative commercial experience of the aggrieved party;
• the length of time over which the negotiations took place; and
• any professional advice (valuation, survey, legal, or accounting) that the
aggrieved party may have sought or received in coming to a decision whether to
enter into the transaction.
Conduct directed at the public
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[3.85] However, where misleading representations are not directed at identified
individuals, but to the public generally and the relief sought is an injunction under
ACL, s 232, it is necessary to determine who could fairly be regarded as its target.
This may have been a segment of the public, or the public as a whole, and it is
necessary to isolate some criterion or criteria of a representative member.114 In
Campomar Sociedad Limitada v Nike International Ltd, the majority, in a joint judgment
stated:
Where the persons in question are not identified individuals to whom a particular
misrepresentation has been made or from whom a relevant fact, circumstance or proposal
was withheld, but are members of a class to which the conduct in question was directed
in a general sense, it is necessary to isolate by some criterion a representative member of
that class. The inquiry thus is to be made with respect to this hypothetical individual why
the misconception complained has arisen or is likely to arise if no injunctive relief be
granted. In formulating this inquiry, the courts have had regard to what appears to be the
outer limits of the purpose and scope of the statutory norm of conduct fixed by s 52.115
(citations omitted)
111 See eg, Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 at 50,880 (Gleeson CJ,
Samuels AP and Meagher JA concurring). The same view was taken in Poseidon Ltd v Adelaide
Petroleum NL (1991) 105 ALR 25 at 26 (Burchett J); General Newspapers Pty Ltd v Telstra Corp (1993) 45
FCR 164 especially at 177-179 (Davies and Einfeld JJ); Leda Holdings Pty Ltd v Oraka Pty Ltd (1998)
ATPR ¶41-601 at 40,513 (Branson and Emmett JJ), and Kooee Communications Pty Ltd v Primus
Telecommunications Pty Ltd [2011] FCAFC 119 at [111]-[115] (Gilmour, Jagot and Nicholas JJ).
112 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].
113 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].
114 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [36].
115 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [103] (Gleeson CJ,
Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). See also Google Inc v ACCC (2013) 249
CLR 435 at [6]-[9] (French CJ, Crennan and Kiefel JJ); Astrazeneca Pty Ltd v GlaxoSmithKline Australia
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Thus, where conduct is directed at the public, the class is first identified. Having
identified the class, the effect of the conduct is assessed having regard to the
reactions of the “hypothetical individual” – the ordinary, reasonable member of the
class, not those of persons whose reactions are “extreme or fanciful”.116 The test is
an objective one. As Beach J observed in ACCC v Hillside (Australia New Media) Pty
Ltd (t/as Bet365), “[t]his hypothetical construct avoids using the very gullible or the
highly astute to assess effect or likely effect”.117
Knowledge base of a reasonable member of the class
[3.90] The ordinary or reasonable consumer does not exist in the abstract, but
depends on the specific context in which the public statement was made. The level
of knowledge to be imputed to a reasonable member of the pleaded target audience
will be crucial for the obvious reason that the more sophisticated and knowledgeable
the audience, the more difficult it will be to prove that a reasonable member of that
audience would be likely to be misled or deceived by the statement at issue.
In ACCC v TPG Internet Pty Ltd Murphy J stated that “[t]he degree of knowledge to
be imputed to the class, and thus to the ordinary or reasonable consumer, is a
matter of inference from the evidence”.118
In misleading or deceptive conduct cases involving a statement directed towards a
specific individual, the court may be assisted by receiving evidence pertaining to
this issue from that person. Similarly, where the statement was directed towards a
target audience of prospective purchasers, evidence of this nature may be given by
members of that audience.
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For example, in National Exchange Pty Ltd v ASIC,119 the Australian Securities and
Investment Commission (ASIC) led evidence concerning the reactions of
shareholders to the two dollar offers, two of whom were confused or misled at least
temporarily.120 As regards this evidence, Dowsett J stated:
There is evidence that both Mr Locke and Ms Normoyle were at least temporarily misled
by the offer. It is not clear whether this was as a result of the impact upon them of the
format of the offer or as a result of their not giving sufficient attention to the payment
provision. It would be wrong to place great weight on their having been misled. Further,
there is no evidence of any substantial number of people having been mislead [sic].121
Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett and Graham JJ); ACCC v Telstra Corporation Ltd
(2007) ATPR ¶42-203 at [14]-[15] (Gordon J); Energizer Australia Pty Ltd v Remington Products
Australia Pty Ltd (2008) ATPR ¶42-219 at [16] (Moore J); and ACCC v Prouds Jewellers Pty Ltd (2008)
ATPR ¶42-217 at [16]-[19] (Moore J).
116 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 86-7 [105]. See also Forrest
v ASIC (2012) 247 CLR 486 at [49]-[50] (French CJ, Gummow, Hayne and Kiefel JJ).
117 ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007 at [70].
118 ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 at 44,686 [25].
119 National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000.
120 ASIC led evidence that a third shareholder had also been confused or misled: National Exchange Pty
Ltd v ASIC (2004) ATPR ¶42-000 at 48,712 [7] (Dowsett J). However, Dowsett J considered that it
would be unfair to give that evidence any weight due to its ambiguity (at 48,716 [29]).
121 National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) ATPR ¶42-000 at
48,719 [41].
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If evidence is led that members of the target audience have actually been misled by
the public statement, the task of the court is to ascertain whether they were
“reasonable” members of the target audience, or whether they were misled because
they made assumptions that were extreme or fanciful.122
In ACCC v Coles Supermarkets Pty Ltd Allsop CJ stated:
Evidence that someone was actually misled or deceived may be given weight. The
presence or absence of such evidence is relevant to an evaluation of all the circumstances
relating to the impugned conduct. Where the conduct and representations are to the
public generally and concern a body of simple direct advertising, the absence of
individuals saying they were misled may not be of great significance. There was no such
evidence here. The ACCC was criticised for that. That criticism is unfounded. The
objective assessment of advertising using ordinary English words in an attempt to
persuade can be undertaken without the lengthening of a trial by the bringing of
witnesses of indeterminate numbers. Language, especially advertising, seeking to raise
intuitive senses and associations, can have its ambiguities and subtleties. The task of
evaluating the objective character and meaning of the language in the minds of
reasonable members of the public is not necessarily one that will be assisted in any
cost-effective manner by calling members of the public. The question is one for the
Court.123
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Identifying the attributes of the target audience is a crucial step in applying the test.
Higher standards of accuracy are expected where members of the intended
audience are naive, unsophisticated or impressionable. On the other hand, where
members of the intended audience are sufficiently “tough, shrewd and sceptical”124
they can, to a greater extent, be expected to look after their own interests and make
their own judgments. Individual judges vary in their assessments of the ability of
members of the target audience to assess the purport of the words used in the
context the conduct as a whole. It is clearly an area where there is room for
legitimate differences of opinion.125
The target audience may be found to consist of sub-classes. One sub-class may have
a greater awareness or knowledge of the way a particular industry operates than
the other. If so, the conduct at issue is be tested by reference to its likely impact on
a reasonable member of the unaware sub-class. In ACCC v Jewellery Group Pty
Ltd,126 the ACCC alleged that the respondent breached s 52 of the TPA by
distributing catalogues with higher prices that were struck through with a line and
next to that price was another lower price indicated as the sale price. Lander J
accepted that the relevant class would have consisted of both persons who were
aware of the discount culture in the jewellery market, and persons who were
122 AstraZeneca v GSK (2006) ATPR ¶42-106 at 44 891 [37] (Wilcox, Bennett and Graham JJ), citing
Campomar (2000) 202 CLR 45 at 85-6 [104]–[105] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby,
Hayne and Callinan JJ).
123 ACCC v Coles Supermarkets Pty Ltd [2014] FCA 634 at [45] citing Taco Co of Australia v Taco Bell Pty
Ltd (1982) 42 ALR 177 at 202.
124 Forrest v ASIC (2012) 247 CLR 486 at [105] (Heydon J).
125 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at 475-6. (Gyles J). See Corones, “Misleading
Conduct Arising from Public Statements: Establishing the Knowledge Base of the Target Audience”
(2014) 38 (1) Melbourne University Law Review 281.
126 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411.
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unaware of the discount culture.127 His Honour focussed on the effect of the “strike
through pricing” on the unaware members of the class, who would have thought
that the strike through price was the actual price at which the jewellery item had
been sold, rather than a negotiable price. The savings representation was false
because the items had been sold at a price less than the strike through price because
of the respondent’s price negotiation policy.128
Confusion or uncertainty
[3.95] It is necessary to draw a distinction between conduct that is misleading or
likely to mislead, and conduct that causes confusion or uncertainty. Conduct that
has a tendency to cause confusion or uncertainty does not suffice to establish that it
was misleading or deceptive within s 18(1) of the ACL.
In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,129 Gibbs CJ held:
that to prove a breach of s 52 it is not enough to establish that the conduct complained of
was confusing or caused people to wonder whether two products may have come from
the same source.130
In McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd,131
advertisements prepared for McWilliams, flagons of its wine were described by a
journalist as “the Big Mac”. McDonald’s sought an injunction to restrain this use of
the words “Big Mac” on the ground that they contravened TPA, s 52 by falsely
implying that there was a business connection between McDonald’s and
McWilliam’s, or that they were engaged in a joint promotion.
It succeeded at first instance. However, an appeal by McWilliam’s was successful
because the Full Court found that although readers of the advertisement may have
been confused about the existence of a possible connection between the two firms,
it would not actually mislead them into thinking that there was such a connection.
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In Taco Co (Aust) Inc v Taco Bell Pty Ltd, Deane and Fitzgerald JJ said:
Conduct which produces or contributes to confusion or uncertainty may or may not be
misleading or deceptive for the purposes of s 52. In some circumstances, conduct could
conceivably be properly categorized as misleading or deceptive for the very reason that it
represents that confusion or uncertainty exists where, in truth, there is no proper room for
either. Ordinarily, however, a tendency to cause confusion or uncertainty will not suffice
to establish that conduct is of the type described in s 52. The question whether particular
conduct causes confusion or wonderment cannot be substituted for the question whether
the conduct answers the statutory description contained in s 52.132
127 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [36] adopting the reasoning of Mansfield J in
ACCC v Ascot Four Pty Ltd (2008) 250 ALR 467 which was approved by the Full Federal Court in
Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106.
128 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [38] and [152] applying Ascot Four Pty Ltd v
ACCC (2009) 176 FCR 106 at [43]-[49]. The decision was upheld by the Full Federal Court in
Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144.
129 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.
130 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-199.
131 McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455.
132 Taco Co (Aust) Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 201.
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3 Misleading or Deceptive Conduct
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This was endorsed by the High Court in Campomar Sociedad Limitada v Nike
International Ltd.133
The distinction drawn in these cases is between misleading conduct and conduct
which merely causes uncertainty or confusion. In practice, however, there will often
be no sharp dividing line between the two.
Thus, for example, in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd
(No 8),134 Darrell Lea made significant use of purple in relation to packaging and
point of sale displays. An expert witness for Cadbury, Dr Gibbs, gave evidence that
in his opinion Darrell Lea’s use of purple was likely to cause informationprocessing errors to occur among consumers of chocolate confectionery, including
misidentification when consumers seeking to buy Cadbury chocolate mistakenly
identify a Darrell Lea product as a Cadbury product, and therefore buy the Darrell
Lea product by mistake.
Heerey J concluded that these “information processing errors” did not amount to
misleading conduct. His Honour held:
Much of Dr Gibbs’ opinions as to misinference and misassociation would seem to be
examples of the “caused to wonder” reaction by consumers (and others such as
employees and competitors). Insofar as they are, they would seem to raise matters outside
the purview of the Trade Practices Act or the tort of passing off, even if they are matters of
commercial concern to Cadbury.135
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In Bridge Stockbrokers Ltd v Bridges,136 Lockhart J drew attention to the legislative
policy behind s 52, namely to prevent the public being misled in a practical sense
by the conduct of corporations and provided the following illustration where
confusion may cross the dividing line and constitute misleading conduct:
The corporation may deliberately produce and market the new brand of soap with a
similar get-up, style and name to the already established soap for the purpose of
increasing market share by confusing the public so that they are uncertain whether the
two products come from the same source. The corporation would know that a not
insignificant number of people would buy its product in those circumstances. It is not
straining credulity too much, or indeed at all, to conceive of such a corporation, with
ready access to competent marketing advice, planning its marketing strategy so that it
could not be said that the public would think that the two products in fact came from the
same source. But the corporation would know that, by stopping short of such conduct at
the point where the public is merely confused or uncertain, it will nevertheless increase its
sales and market share at the expense of the established product. In my view, the
corporation is guilty of misleading or deceptive conduct within s 52. It is cheating.137
In relation to s 18 of the ACL, the court must decide objectively whether the
representations made are misleading or deceptive or likely to mislead or deceive.
133 Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at 87 [106]. See also Google Inc
v ACCC (2013) 249 CLR 435 at 443 [8] (French CJ, Crennan and Kiefel JJ).
134 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 (11 April 2008).
135 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 (11 April 2008)
at [88].
136 Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401.
137 Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401 at 415.
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Evidence of the kind led in Cadbury Schweppes Pty Ltd v Darrell Lea from expert
witnesses that members of the public are likely to be confused of caused to wonder
will not suffice.
Silence as misleading conduct: general principles
[3.100]
Whether silence amounts to “conduct” for the purposes of s 18 of the
ACL is considered at [3.25]-[3.35].
Assuming that the definition of “conduct” in s 2 of the ACL can be satisfied, it is
then necessary to consider whether the omission or withholding of information in a
particular case was misleading.138 In Miller & Associates Insurance Broking Pty Ltd v
BMW Australia Finance Ltd, different approaches were taken for determining
whether the conduct at issue was misleading.139 One approach was to analyse
whether the conduct viewed as a whole, conveyed a representation which was
misleading. Another approach was to analyse whether the circumstances gave rise
to a “reasonable expectation” that if some relevant fact existed, it would be
disclosed to the person who claimed to have been misled.140
French CJ and Kiefel J observed:
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Reasonable expectation analysis is unnecessary in the case of a false representation where
the undisclosed fact is the falsity of the representation. A party to precontractual
negotiations who provides to another party a document containing a false representation
which is not disclaimed will, in all probability, have engaged in misleading or deceptive
conduct. When a document contains a statement that is true, non-disclosure of an
important qualifying fact will be misleading or deceptive if the recipient would be misled,
absent such disclosure, into believing that the statement was complete.141
The facts of the case were that Consolidated Timber Holdings, a borrower, engaged
insurance broker, Miller & Associates (Miller), to assist it in applying for an
insurance premium funding loan with a lender, BMW. Miller supplied BMW with
documentation which included a memorandum and certificate of insurance with
HIH. BMW lent Consolidated a sum of money which Consolidated did not fully
repay. The insurance policy was not a cancellable policy. A cancellable property
policy provides a form of security for a lender because in the event of a default by
the borrower, the lender can cancel the policy and recover the unused premium.
BMW claimed that Miller engaged in misleading conduct on two different bases:
first, that the HIH certificate falsely represented that the underlying policy was
cancellable and good security for the loan, when it was not; and secondly, that
Miller failed to disclose to BMW an unattractive feature of the policy (that it was
non-cancellable) a feature that BMW was not aware of.
138 See R V Miller, Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney,
2015), [1.S2.18.85].
139 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [19].
See McCabe, “When Silence Misleads, and When it Doesn’t?” (2011) 19 Australian Journal of
Competition and Consumer Law 47 at 49-51.
140 The genesis of the “reasonable expectation” approach is to be found in the judgment of Gummow J
in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41.
141 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [23].
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3 Misleading or Deceptive Conduct
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As regards, BMW’s first case, the majority (Heydon, Crennan and Bell JJ),
concluded that the HIH certificate did not convey a representation that it was a
cancellable policy.142 As regards BMW’s second case, the majority noted that BMW
was known by Miller to be an “experienced premium lender”143 and the parties
were “commercially sophisticated”.144 The majority held that Miller had not
engaged in misleading conduct:
Miller had supplied BMW with a copy of the policy. BMW was an experienced premium
lender. The policy was not a lengthy document. It was apparent that it did not insure the
holders against loss or damage to property. It did not contain a cancellation clause.
Miller’s failure to draw to BMW’s attention a circumstance that the document itself
disclosed was not misleading or deceptive.145
French CJ and Kiefel J agreed with the majority that, the HIH certificate did not
contain a false representation that it was a cancellable policy.146 As regards BMW’s
second case, on a close analysis of all the circumstances of the transaction, their
Honours held that BMW could not have had a reasonable expectation that Miller
would disclose that the policy was not cancellable. A copy of the policy was
provided to BMW and they simply failed to read it.147 Their Honours observed:
s 52 does not require a party to commercial negotiations to volunteer information which
will be of assistance to the decision-making of the other party. A fortiori it does not
impose on a party an obligation to volunteer information in order to avoid the
consequences of the careless disregard, for its own interests, of another party of equal
bargaining power and competence.148
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Commenting more broadly on the “reasonable expectation” test, their Honours
observed:
The language of reasonable expectation is not statutory. It indicates an approach which
can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or
including, non-disclosure of information. That approach may differ in its application
according to whether the conduct is said to be misleading or deceptive to members of the
public, or whether it arises between entities in commercial negotiations. An example in
the former category is non-disclosure of material facts in a prospectus.149
The “reasonable expectation” test is predicated on the assumption that one party is
aware of an undisclosed fact and the circumstances and context of the case give rise
to an objectively reasonable expectation on the part of the other party that the fact
should be disclosed because it would be relevant or material in its decision-making.
The reasonableness of the alleged expectation is to be assessed objectively, and not
142 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [87].
143 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [85].
144 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 384 at [91].
145 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 386 at [96].
146 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [24].
147 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [26].
148 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Lyd (2010) 241 CLR 357 at [22].
See also Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [91].
149 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at
[19]-[20].
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[3.100]
be reference to the subjective expectation of the other party to the transaction.150 All
of the members of the High Court in Miller & Associates v BMW were of the opinion
that the lender could not have had a reasonable expectation that the broker would
disclose that the policy was not cancellable.151
In Rhone-Poulenc,152 and a number of subsequent cases, it was suggested that
silence will amount to misleading conduct where there was a “duty” to disclose the
information withheld. Subsequently, this situation was incorporated into a general
proposition that silence will amount to misleading conduct where the surrounding
circumstances give rise to a “reasonable expectation” on the part of the respondent
that information would be disclosed.
In Demagogue Pty Ltd v Ramensky,153 Black CJ observed:
Silence is to be assessed as a circumstance like any other. To say this is certainly not to
impose any general duty of disclosure; the question is simply whether, having regard to
all the relevant circumstances, there has been conduct that is misleading or deceptive or
that is likely to mislead or deceive. To speak of “mere silence” or of duty of disclosure can
divert attention from that primary question. Although “mere silence” is a convenient way
of describing some fact situations, 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 or may not include facts giving rise to a reasonable expectation,
in the circumstances of the case, that if particular matters exist they will be disclosed.154
Copyright © 2016. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.
A reasonable expectation of disclosure may arise if the supplier inserts a term into a
contract that is highly unusual or harsh from the consumer’s perspective. A
reasonable expectation of disclosure is less likely to arise in the case of agreements
between two commercial parties of roughly equal bargaining strength, experience
and commercial sophistication.
It is important to note that silence or a failure to disclose highly unusual or harsh
term may also demonstrate a lack of good faith, and be a relevant consideration for
determining whether a supply or acquisition of goods or services fell within the
prohibition of statutory unconscionability in s 21 of the ACL.
150 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20].
151 For a summary of the relevant principles, see Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011]
NSWCA 167 at [209] (Sackville AJA) cited with approval by Barrett JA in Traderight (NSW) Pty Ltd
v Bank of Queensland Ltd [2015] NSWCA 94 at [192].
152 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477.
153 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31.
154 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32. See Gillies, “Non-disclosure: Trade Practices
Act, s 52” (2004) 78 Australian Law Journal 653; O’Shea, “Undisclosed Unusual and Unexpected
Matters – Liability Issues under s 52 of the Trade Practices Act” (2006) 14(1) Competition & Consumer
Law Journal 1; McCabe, “When Silence Misleads, and When it Doesn’t?” (2011) 19 Australian Journal
of Competition and Consumer Law 47 at 50.
Stephen, C 2016, Australian Consumer Law, Thomson Reuters (Professional) Australia Pty Limited, Sydney. Available from: ProQuest Ebook Central. [13 March 2020].
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[3.105]
3 Misleading or Deceptive Conduct
107
Silence as misleading conduct: commercial negotiations
[3.105]
In the context of commercial negotiations the courts have been reluctant
to impose additional obligations of disclosure to those already imposed by the
common law, such as where a fiduciary duty is owed to the other party, or where
there is a sufficient relationship of proximity.155 In Lam v Ausintel Investments
Australia Pty Ltd, Gleeson CJ observed:
Where parties are dealing at arm’s length in a commercial situation in which they have
conflicting interests it will often be the case that one party will be aware of information
which, if known to the other, would or might cause that other party to take a different
negotiating stance. This does not of itself impose any obligation on the first party to bring
that information to the attention of the other party, and failure to do so would not, without
more, ordinarily be regarded as dishonest or even sharp practice.156 (emphasis added)
There is no need to impose additional burdens where the parties are of roughly
equal bargaining strength and each party is capable of ascertaining the relevant
information. The “more” to which his Honour refers applies to other circumstances
which may give rise to a “reasonable expectation of disclosure”.
In Miller v BMW Australia, French CJ and Kiefel J observed:
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In commercial dealings between individuals or individual entities, characterisation of
conduct will be undertaken by reference to its circumstances and context. Silence may be
a circumstance to be considered. The knowledge of the person to whom the conduct is
directed may be relevant. Also relevant, as in the present case, may be the existence of
common assumptions and practices established between the parties or prevailing in the
particular profession, trade or industry in which they carry on business. The judgment
which looks to a reasonable expectation of disclosure as an aid to characterising
non-disclosure as misleading or deceptive is objective. It is a practical approach to the
application of the prohibition in s 52.157
For example, in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd,158 the New South
Wales Court of Appeal held that there was no reasonable expectation by
prospective franchisees that the BOQ would disclose information regarding
business volumes achieved by existing franchisees. The Bank operated through
corporate branches and agencies which from 2001 to 2003 were converted to
franchises and became known as Owner Manager Branches (OMBs). Eleven OMB
principals who operated OMBs in NSW sued BOQ for losses they claimed to suffer
from entering into their respective franchise agreements. Barrett JA (with whom
Bathurst CJ and Beazley P agreed) stated that the crucial question was whether the
155 See Gillies, “Non-disclosure: Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653 at
657-60; and Stewart and McClurg, “Playing your Cards Right: Obligations of Disclosure in
Commercial Negotiations” (2007) Australian Mining and Petroleum Laws Association Handbook 36 at
36-8.
156 Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 at 50,880 (Gleeson CJ, Samuels AP
and Meagher JA concurring). The same view was taken in Poseidon Ltd v Adelaide Petroleum NL
(1991) 105 ALR 25 at 26 (Burchett J); General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164
especially at 177-9 and Leda Holdings Pty Ltd v Oraka Pty Ltd (1997) ATPR ¶41-601 at 40,513.
157 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20].
158 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94.
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“course of dealing” by BOQ with each prospective franchisee was such as to give
rise to an objectively reasonable expectation of disclosure.159
His Honour found that no objectively reasonable expectation of disclosure arose
that BOQ should volunteer the information that BOQ possessed about the actual
financial performance of existing OMBs in NSW because “all OMB principals were
persons of some commercial sophistication, all had business experience and most
had specifically banking experience”,160 and the OMB principals were told by BOQ
that it was for them to investigate the feasibility and viability of their business
proposal.161
By way of contrast, in Fabcot Pty Ltd v Port Macquarie-Hastings Council162 the
Macquarie-Hastings Council was seeking to develop a parcel of land into a
supermarket. The Council issued as an Expression of Interest (EOI) and
conditionally accepted an offer from Woolworths, although the Council did not
expressly state in the EOI process that it was negotiating with Woolworths
exclusively. On 19 May 2009 the Council decided to negotiate with Coles for the
sale of the land. The New South Wales Court of Appeal held that the EOI process
gave rise to a reasonable expectation by Woolworths that it would receive
notification before the Council commenced negotiations with a third party. The
following factors were held to be relevant in the “course of dealing” between the
successful tenderer (Woolworths) and the Council as part of the Expression of
Interest (EOI) process:
• the nature of the EOI process and the fact that a single bidder was selected;
• the Council’s communication that it had conditionally accepted Woolworths’
offer; and
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• the nature of the project and the fact the proposal accepted by the Council would
require a substantial level of collaboration by the negotiating parties.163
However, the EOI process did not give rise to an expectation that Woolworths
would be entitled to notification for an indefinite period.164 Once it became clear
that there were “substantial impediments to the finalisation of an agreement,”165
there was no longer any reasonable expectation that Woolworths was entitled to a
period of exclusivity by reason of the EOI process. By 1 April 2009, serious issues
remained unresolved. Sackville AJA stated:
159 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [203].
160 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [204].
161 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [207]; Clifford v Vegas
Enterprises [2011] FCAFC 135 at 144 and 226.
162 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 (Sackville AJA with whom
Beazley JA and Campbell JA agreed).
163 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [223].
164 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [225].
165 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [227].
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[3.110]
3 Misleading or Deceptive Conduct
109
A reasonable observer would have concluded at that point that in view of the urgency of
completing a sale of the Land, the Council might well seek another negotiating partner
and that Woolworths could no longer have an expectation that it would receive prior
notice of the Council’s intention to do so.166
Thus, the Council had not engaged in misleading conduct on the 19 May 2009
when it decided to negotiate with Coles for the sale of the Land.
Silence: making known specific transactional requirements
[3.110]
The circumstances or contextual factors that may be relevant in giving
rise to a reasonable expectation of disclosure will now be considered. A reasonable
expectation of disclosure is more likely to arise where one party, during
pre-contractual negotiations, explicitly makes known a particular purpose or
objective which that party is seeking to achieve, or specific transactional
requirements by entering into the transaction.167 In Miller & Associates Insurance
Broking Pty Ltd v BMW Australia Finance Ltd, Heydon, Crennan and Bell JJ held:
Copyright © 2016. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.
There was nothing in the conduct of the parties … to convey that cancellability was
important to the determination of this later application. The request for guarantees
suggested that it was not. There was no foundation for the conclusion that the known
importance of cancellability gave rise to a reasonable expectation, in the circumstances of
this transaction, that Miller would not supply the HIH certificate in response to BMW’s
request without disclosing at that time or later that the policy was not cancellable.168
This factor has been held to be relevant in other cases. For example, in Whitaker v
Paxad Pty Ltd,169 a real estate agent acting in the sale of his mother’s home and who
had grown up in the home, had a thorough knowledge of its defects which
included water drainage problems in the garage. The purchasers informed the
agent that they wished to use the garage as a home office. The agent disclosed to
the purchasers that the back shed contained asbestos, but made no mention of the
drainage problems in the garage. Blaxel J held that in the circumstances, it was
reasonable for the purchasers to expect that if the garage was not suitable for their
disclosed intended use, the agent would have told them so.170
Similarly, in EK Nominees Pty Ltd v Woolworths Ltd,171 a property developer, EK
Nominees, and the owner of a chain of supermarkets, Woolworths, commenced
negotiations for a lease that provided for construction of a supermarket on EK
Nominees’ land (the Auburn Road site). EK Nominees expended significant
amounts obtaining development approval and preparing the land for development
in anticipation of obtaining a formal lease with Woolworths. Subsequently, a third
166 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [229].
167 For example, in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 583 and 587-588 (Brennan,
Deane, Gaudron and McHugh JJ), where the appellants made clear to the respondent’s agent that
their express purpose was to acquire a tenanted property that would generate a 10% return on their
investment. The seller was found to have breached s 52 of the TPA for failing to disclose a collateral
agreement with the tenant for a rent-free period that would prevent the 10% return being realised.
168 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [95].
169 Whitaker v Paxad Pty Ltd [2009] WASC 47.
170 Whitaker v Paxad Pty Ltd [2009] WASC 47 at 98.
171 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172.
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party developer (Markham Corporation) approached Woolworths with a superior
development opportunity and Woolworths withdrew from the negotiations with
EK Nominees. EK Nominees pleaded that Woolworths made two representations
which were misleading.
White J considered that Woolworths made an implied representation that it
intended to enter into a lease on the terms and conditions contained in its approval
letter of 18 July 2011, and that it was a continuing representation.172 White J held:
The relevant conduct is the advertent failure to disclose Woolworths’ alleged change in
intentions. It was Mr Hunt who deliberately made no disclosure of the approach of
Markham Corporation or the implications that might have for the Auburn Road site.
…
If circumstances changed after the Property Committee’s approval was given, so that a
decision had to be made as to whether Woolworths should go ahead, that decision would
be made by representatives of the Property Committee, which did not include Mr Hunt.
Mr Hunt was not the person authorised to decide whether or not Woolworths should
enter into an agreement for lease.173
However, White J found:
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Woolworths’ failure to disclose its changed position, whilst continuing to encourage E K
Nominees to carry out work on the project, and continuing to negotiate terms of the
agreement for lease, was conduct, in trade or commerce, which was misleading or
deceptive, or likely to mislead or deceive.174
By way of contrast, in Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd,175
Mr Anderson had been shown premises in which he planned to store his collection
of antiques and art works. During a pre-lease inspection of the building
Mr Anderson observed sprinkler heads and formed the erroneous impression that
the premises had an operational sprinkler system. Mr Anderson stated that the
building had to be “air-conditioned, waterproof and secure”, but said nothing
about the need for fire protection. The trial judge found that Clambake had
engaged in misleading conduct by failing to disclose that despite the visible
sprinkler system, the premises did not have an operational fire protection system.
On appeal, McLure P took into account that at no time during the inspection did
Mr Anderson seek any information concerning the type of fire protection system in
the building, and that Mr Anderson’s erroneous impression had never been
expressly or impliedly communicated to Clambake.176 The appeal was upheld.
Silence: unusual or unexpected matters
[3.115]
The existence of something unusual or unexpected may give rise to a
reasonable expectation of disclosure in the circumstances of a particular case. If the
other party is unable to find out the true position by conducting searches of public
records or making other inquiries, a reasonable expectation of disclosure is more
172 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [139].
173 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [147]-[149].
174 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [156].
175 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193.
176 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [91].
Stephen, C 2016, Australian Consumer Law, Thomson Reuters (Professional) Australia Pty Limited, Sydney. Available from: ProQuest Ebook Central. [13 March 2020].
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