Misleading or deceptive conduct

Question 1

s18 Australian Consumer Law

Answer 1

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

Question 2

s 4 Australian Consumer Law

Answer 2

S4 ACL
Misleading representations with respect to future matters
(1) If
(a) apersonmakes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b) thepersondoes not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading.
(2) For the purposes ofapplyingsubsection(1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) apartyto the proceeding; or
(b) any otherperson;
thepartyor otherpersonis taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
(3) To avoid doubt, subsection(2) does not:
(a) have the effect that, merely because such evidence to the contrary is adduced, thepersonwho made the representation is taken to have had reasonable grounds for making the representation; or
(b) have the effect of placing on anypersonan onus of proving that thepersonwho made the representation had reasonable grounds for making the representation.
(4) Subsection(1) does not limit by implication the meaning of a reference in this Schedule to:
(a) a misleading representation; or
(b) a representation that is misleading in a material particular; or
(c) conduct that is misleading or is likely or liable to mislead;
and, in particular, does not imply that a representation that apersonmakes with respect to any future matter is not misleading merely because thepersonhas reasonable grounds for making the representation.

Question 3

What is a vitiating factor?

Answer 3

Something that impairs the contract at the time of formation

Question 4

Requirements of misleading or deceptive conduct?

Answer 4

1. The must have been ‘conduct’

2. ‘in trade or commerce’

Question 5

What constitutes ‘conduct’?

Answer 5

S2(2) ACL
A reference to conduct [when that expression is used as a noun] hall be read as a reference to the doing of or the refusing to do any act, and that a reference to refusing to do an act includes a reference otherwise that inadvertently, from doing that act.

Question 6

Concrete Constructions (NSW) v Nelson 1990 CLR principle

Answer 6

‘trade or commerce’ does not include ‘incidental’ dealings
• E.g. Driver driving company truck indicates left but actually turns right. Conduct may be misleading/deceptive but it’s inclusion in ‘trade and commerce’ is merely incidental
• E.g. If driver has truck with signage which is wrong both misleading and deceptive and ‘in trade or commerce’

Question 7

Concrete Constructions (NSW) v Nelson 1990 CLR facts

Answer 7

• Case brought by construction worker
• He had been told by foreman that grates for air-conditioning shafts were fixed with 3 bolts at each time - and therefore was safe to remove them
• As it turned out one of the grates wasn’t fixed and he fell down the shaft obtaining substantial injury
Arguments:
• S18 only applies to situations where a person was mislead in their capacity as a consumer
○ Heading of section was ‘consumer protection’
• Conduct complained of was not in trade or commerce

Question 8

Concrete Constructions (NSW) v Nelson 1990 CLR decision

Answer 8

• Section 52/18 extends beyond situations where a person is mislead in their capacity as a consumer
○ Heading can only be used if there is ambiguity because it is not a substantial part of the legislation
○ Heading not included
• “In trade or commerce” means that the conduct has to be made towards a person with whom the corporation has dealings of a trading or commercial nature, and must itself relate to dealings of a trading or commercial nature. It’s not enough for the conduct complained of to be incidental to a corporation’s business
○ Looked at surrounding context because section was ambiguous
○ Took into account headings; ‘Trade practices’ and ‘consumer protection’
○ Took narrow conduct

* Does not include 'incidental' dealings
* E.g. Driver driving company truck indicates left but actually turns right. Conduct may be misleading/deceptive but it's inclusion in 'trade and commerce' is merely incidental
* E.g. If driver has truck with signage which is wrong both misleading and deceptive and 'in trade or commerce'

Question 9

Campomar Sociedad Limitada v Nike International 2000 CLR principle

Answer 9

If the representation is made to the public at large the question of will be whether a reasonable or ordinary member of that group will be likely to be misled or deceived.

Question 10

Campomar Sociedad Limitada v Nike International 2000 CLR facts

Answer 10

• Campomar produced a Nike sport fragrance had been produced and placed next to other sports fragrances
  
  • Nike argued that the production of the fragrance was misleading or deceiving the public into thinking it was produced by Nike

Question 11

Campomar Sociedad Limitada v Nike International 2000 CLR decision

Answer 11

• Unanimously decided it was misleading or deceptive conduct
• Made to public at large
• Necessary to consider the effect of the conduct on the ordinary, reasonable member of the class of persons at whom the conduct is directed
○ Exclude the unusually gullible, the stupid and disregard the careless. Not concerned with extreme or fanciful interpretations.
• Placing the product next to fragrances produced by other sports manufacturers would mislead or deceive people into thinking that it was produced or distributed on behalf of Nike

Question 12

Does someone have to actually be misled for the section to apply?

Answer 12

No it is sufficient if they were likely to have been misled as long as there was a real, not remote chance of that occurring.

Question 13

Causation for misleading and deceptive conduct?

Answer 13

There must be some causal link between the misconception and the defendant’s conduct

Question 14

When can a person claim damages for misleading and deceptive conduct?

Answer 14

In order to obtain a remedy under the ACL, the plaintiff must also show that they suffered a loss as a result of the defendant’s conduct (eg by showing that they relied on that conduct)

Question 15

If someone makes a representation about the future which doesn’t eventuate does s18 apply?

Answer 15

Not necessarily - it must actually be either misleading or deceptive

Question 16

Butcher v Lachlan Elder Realty 2004 CLR principle

Answer 16

If the representation is made to a specific person or a specific group the question is whether a person in their position would be misled or decieved

Question 17

Butcher v Lachlan Elder Realty 2004 CLR facts

Answer 17

• Successful bidders at Sydney waterfront property $1.6 million
• Showed swimming pool to be within boundaries
• Brochure which stated that they could not guarantee the accuracy and people should rely on their own analysis
• Visited property - took architect and real estate agent
• Discussed relocating swimming pool - only would have been feasible if pool was within property as represented on diagram, but as it turned out, the pool was not entirely within the boundary
• Paid deposit then found out and refused to pay the rest
• Appellants wanted their deposit back

Question 18

Butcher v Lachlan Elder Realty 2004 CLR decision

Answer 18

• Analyse defendants conduct in relation to specific plaintiff
  
  • Character of conduct, of particular agents, in relationship to these particular purchasers bearing mind what each of them knew about each other and the dealings they had
  • Importance of looking at the defendants conduct as a whole - entirety of the conduct to see whether it was likely to mislead or deceive the plaintiffs
  • Plaintiffs: Shrewd, intelligent, had experts helping (accountant, architect ect.)
  • Real estate agent - no special experience in questions about title etc. - complex issues which are not normally dealt with by real estate agents
  • Real estate agent clearly represented that they hadn’t produced the brochure themselves and that it was merely a replica based on a survey
  • Purchaser had time (2 weeks) to study the brochure before auction
  • The particular audience of conduct can change the interpretation and whether the act has been contravened.

Question 19

Can silence be ‘conduct’?

Answer 19

Yes, sometimes

Question 20

Miller and Associates Insurance Broking v BMW Australia Finance 2010 CLR principle

Answer 20

Does not requires parties of commercial transactions to volunteer information which will be of assistance to the decision making of the other party. Does not impose on a party an obligation to volunteer information in order to avoid the consequences of careless disregard of it’s own interests of another party of equal bargaining power and competence

Question 21

Miller and Associates Insurance Broking v BMW Australia Finance 2010 CLR facts

Answer 21

• Miller was an insurance broker company
• Negotiated for BMW Finance to loan about $4000000 to it’s client plantation management
• Plantation Management was being consolidated by Timber
• Loan for insurance
• Policy to protect Plantation Management from credit risks of plantation scheme
• Before granting loan BMW asked about details of policy
• Miller handed over document with four properties listed
• Where a loan is made to pay insurance the lender usually requires the policy to be transferrable and cancellable so the insurance becomes a security
• Property insurance is usually cancellable
• BMW decided it was a policy for property and was therefore cancellable. However it wasn’t a policy for property -
• Miller provided other document including policy documents. Made clear it was a cost of production policy and wasn’t cancellable. Miller didn’t say anything to bring this to BMW’s attention.
• Plantation defaulted. BMW tried to cancel - and when they couldn’t tried to sue Miller for misleading and deceptive conduct
ISSUE
• Millers supply of information provided it was a cancellable policy
• Millers failure to tell BMW that it wasn’t cancellable was misleading and deceptive conduct

Question 22

Miller and Associates Insurance Broking v BMW Australia Finance 2010 CLR decision

Answer 22

• Even if they did have the power the High Court believed the conduct was not misleading and deceptive
• Approved test from Demagogue - none of the judges found that this was made out
• The known importance of cancellability did not give rise to a reasonable expectation
• All parties commercially sophisticated
• Enough information in certificate to show BMW that it was not what they thought it was (shorter term, high excess etc.)
• BMW could have but didn’t make reasonable enquiries
• ALSO BMW accidently accepted earlier - giving the impression that cancellability wasn’t important to them
• Does not requires parties of commercial transactions to volunteer information which will be of assistance to the decision making of the other party. Does not impose on a party an obligation to volunteer information in order to avoid the consequences of careless disregard of it’s own interests of another party of equal bargaining power and competence

Question 23

Demagogue v Ramensky (1992) principle

Answer 23

“In the light of all relevant circumstances constituted by acts, omissions, statements or silence, has there been conduct which is or is likely to be misleading or deceptive?”

it is unlikely that silence can be misleading or deceptive unless the situation is such that there would be a reasonable expectation that the information would be disclosed

Question 24

Demagogue v Ramensky (1992) facts

Answer 24

• Multi-unit development marketed at retirees
  
  • Ramensky’s were prospective purchasers
  • Visited site with real estate agent during development - there was no access to property
  • When they asked the real estate agent said ‘of course there will be access, the developers will build a driveway’
  • Agent showed purchasers a plan which included the road going to the block of units
  • Ramenskys assumed that the road was built on common land (jointly owned by unit owners)
  • But it was actually built on public land
  • Licence had been purchased - but this was more expensive (because it required annual renewal) and less secure.
  • Created in the respondents clear and erroneous representation that there was nothing out of the ordinary (that the driveway was on common land)

Question 25

Demagogue v Ramensky (1992) decision

Answer 25

Gummow J:
• Positive misrepresentation and failure to say something about the road licence - not silence itself, but silence in context
• Argument:
○ No need to inform the Ramenskys that it was not on common land because they had no duty to disclose
• Court said what is required to avoid liability under the general law is irrelevant to avoiding liability under s52
• Question is “In the light of all relevant circumstances constituted by acts, omissions, statements or silence, has there been conduct which is or is likely to be misleading or deceptive?”
• French J: Observed in earlier case while it would be dangerous to provide one principle for silence cases, it is unlikely that silence can be misleading or deceptive unless the situation is such that there would be a reasonable expectation that the information would be disclosed
• In this case, based on the fact that they had been shown around the property, told there would be a driveway etc. there was a reasonable expectation that the information would be disclosed

Question 26

Futuretronics v Gadzhis 1992 principles

Answer 26

○ If you give someone an unqualified promise to perform that can be a future matter

Question 27

Futuretronics v Gadzhis 1992 facts

Answer 27

• Arose from auction of a distinctive building in Oakleigh
  
  • Mr S was auctioneer - wanted to tempt tenants to bid
  • Invited property developer to view the premises
  • Plan to get him to view it to make the tenants think other were interested. Second, he wanted Mr Gadzhis to be interested
  • Discussed with Mr Gadzhis what he might have to do to buy the property
  • Made clear he would need vendor finance (not on cash terms)
  • Mr Sweet asked him to attend the auction to create a bit of atmosphere
  • Mr Gadzhis made offer on vendor terms - rejected by vendor who made clear
  • Condition of sale said successful bidder said deposit and signature were required within 20 minutes of auction or otherwise auction could be recommenced
  • Vendor reserved right to personally make bids (dummy bids) - this was exercised liberally
  • Eventually imaginary bids reached $2.2 million
  • Break - auctioneer made it clear ‘another $50 000 you’ll get it’
  • Mr Gadzhis put his hand up - Mr Sweets kept trying to get more bids
  • Mr Gadzhis didn’t withdraw bid
  • Property sold
  • Mr Gadzhis refused to sign contract - claimed he was just trying to help out
  • Seller and auctioneer claimed they had not asked him

Question 28

Futuretronics v Gadzhis 1992 decision

Answer 28

• In favour of auctioneer and vendor
• Mr Gadzhis had made a mistake and then changed his mind when he realised he didn’t have the money
• The agreement couldn’t be enforced against Mr Gadzhis because there was no evidence in writing (required by instruments act)
• Claim that Mr Gadzhis had engaged in misleading and deceptive conduct
• Conduct: his making the bid where he was implicitly representing that the bid was genuinely - said to have no belief or reasonable grounds that he would comply with the auction conditions
• Mr Gadzhis claimed he changed his mind after the hammer went down
• Not engaged in conduct because at the time he intended to go trough with it
• Court asked whether this changed if the conduct amounted to a representation to the future
○ If you give someone an unqualified promise to perform that can be a future matter
○ Mr Gadzhis had given this kind of representation
○ He couldn’t now argue that his intention was good at the time he made the representation
○ He must bring some evidence that the representation was made on reasonable grounds
○ He couldn’t bring any evidence
○ Deemed to be misleading
• Conduct was found to be misleading
• Although they won - except they were not able to claim any damages since they could not prove loss

Question 29

Byers v Doretea (1986) ALR facts

Answer 29

• Two apartment buildings faced each other in the Gold Coast
• The buyers had previous ought units in one building and wanted to buy investment units in the other
• They were told that the new building would be ‘bigger and better’ and brochure contained a swimming pool
• Property prices dropped and value fell below purchase price
• Contained an exclusion clause: ‘the buyers weren’t reliant on any representation etc.’
• Buyers sought to rescind contract on basis of misrepresentation

Question 30

Byers v Doretea (1986) ALR principle

Answer 30

Statements which are honest can still be misleading
Misleading conduct encompasses more than misrepresentations; misleading opinions and ‘puff’ so long as a reasonable person would belief it and the representation is false
Misleading and deceptive conduct cannot be excluded by a clause in the contract.

Question 31

Byers v Doretea (1986) ALR decision

Answer 31

Byers was misled, a reasonable person would be misled - therefore misleading conduct

Question 32

When is misleading or deceptive conduct determined?

Answer 32

Conduct will only be misleading or deceptive if it is misleading or deceptive at the time it is made; it does not become misleading if the party deviates from a statement which was not misleading at the time
- not misleading/deceptive if there is an actual belief in the statement at the time

Question 33

Can a disclaimer protect a party from allegations of misleading/deceptive conduct?

Answer 33

Disclaimer can be a protection if a reasonable person would have realised the disclaimer and believed it. In Butcher the purchasers had time to consider the brochure, it was clearly not within the realtors expertise, he had clearly not made it, the purchasers were shrewd and intelligent : it is likely they would have noticed and read the disclaimer therefore should not have relied upon the information.
**turns on facts.