WEEK 2: INTERFERENCE WITH PURE ECONOMIC INTERESTS 10 DECEIT 10 INJURIOUS FALSEHOOD 13

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1 TABLE OF CONTENTS NEGLIGENCE CAUSING PURE ECONOMIC LOSS 5 NEGLIGENT MISSTATEMENTS UNDER TORT LAW 5 VULNERABILITY OF THE PLAINTIFF 5 REASONABLE RELIANCE 5 SPECIAL SKILL 6 SALIENT FEATURES IN SPECIAL CASES OF NEGLIGENCE 7 THE ACL 7 MISREPRESENTATION UNDER CONTRACT LAW 8 NEGLIGENT ACTS CAUSING ECONOMIC LOSS 9 TRANSFERRED LOSS 9 WEEK 2: INTERFERENCE WITH PURE ECONOMIC INTERESTS 10 DECEIT 10 INJURIOUS FALSEHOOD 13 WEEK 3: PASSING OFF 14 WHAT IS PASSING OFF? 14 PURPOSE OF PASSING OFF 14 ELEMENTS OF PASSING OFF! 14 INTENTION IN PASSING OFF 14 DEFINING GOODWILL 16 ACTION IN PASSING OFF OR ACL S 18? 16 TYPES OF PASSING OFF!!! 16 CAMPOMAR SOCIEDAD, LIMITADA V NIKE INTERNATIONAL LTD (2000) 18 REMEDIES FOR PASSING OFF 20 EXTENDED PASSING OFF 20 DISTINCTIVE OR DESCRIPTIVE? (SECONDARY BRANDING) 21 GOODWILL 21 DISCLAIMER MAY BE USEFUL 22 WHAT ARE INDICIA? 22 THE ACL REPRESENTATIONS & REMEDIES 23 REMEDIES 24 WEEK 4: MISLEADING OR DECEPTIVE CONDUCT 25 ACL S 18: MISLEADING OR DECEPTIVE CONDUCT 25 A PERSON 25 IN TRADE OR COMMERCE 25 ENGAGING IN CONDUCT 26 WHAT IS MISLEADING OR DECEPTIVE CONDUCT? 26 TACO TEST MISLEADING OR DECEPTIVE CONDUCT (AT 202) 27 GENERAL PRINCIPLES OF MISLEADING OR DECEPTIVE CONDUCT 30 CONDUCT MUST BE VIEWED IN CONTEXT 30 MULTIPLE MEANINGS 30 INTENT AND HONESTY 30 SPOKEN WORDS 30 LITERAL TRUTHS 31 HALF-TRUTHS 31 SILENCE 32 1

2 DUTY OF PLAINTIFF TO MITIGATE LOSS 33 FUTURE CONDUCT (PREDICTIONS, FORECASTS, OR OPINIONS) 34 FAILURE TO MAKE PROPER INQUIRIES 35 FAILURE TO ACCOMMODATE SUBSEQUENT CHANGES & THE TRANSITORY EFFECT 35 RELAYING INFORMATION ( MERE CONDUIT ) 36 DISCLAIMERS & EXCLUSION CLAUSES 37 EXCLUSION CLAUSES & S DISCLAIMERS 38 MISLEADING CONDUCT RELATING TO PROFESSIONAL ADVICE 39 MISLEADING CONDUCT IN WITHOUT PREJUDICE NEGOTIATIONS 39 LEGAL PROFESSIONAL PRIVILEGE 39 EXEMPTIONS FOR INFORMATION PROVIDERS ACL S OPERATION OF THE ACL S REMEDIES AND ENFORCEMENT POWERS 42 CHAPTER 4: ACL S 18 AND ADVERTISING 43 PUFFERY 43 ADVERTISING AND SMALL PRINT 44 ADVERTISING AND ASTERISK 44 DIFFERENT MEDIA 43 ADVERTISING AND PACKAGING 45 ADVERTISING AND LABELLING 45 CHARACTER ADVERTISING 46 COMPARATIVE ADVERTISING 46 BRILLIANT ANALOGY 47 DISPARAGING ADVERTISING 47 PARODY ADVERTISING 48 TRADING NAMES & BUSINESS NAMES 49 FIRST TO ENTER THE MARKET 49 TWO PRICE ADVERTISING 50 ENVIRONMENTAL CLAIMS 50 REMEDIES AND ENFORCEMENT POWERS 51 LECTURE WEEK 5 52 CHAPTER 8: SPECIFIC MISLEADING REPRESENTATIONS 53 DIFFERENCES BETWEEN S 18 AND S 29 OF THE ACL 53 FALSE OR MISLEADING REPRESENTATIONS ABOUT GOODS / SERVICES 53 MISREPRESENTATION GOODS BEING OF PARTICULAR STANDARD 55 MISREPRESENTATION GOODS ARE NEW 56 5 WAYS GOODS CAN BE NEW 56 MISREPRESENTATIONS FALSE TESTIMONIALS 57 MISREPRESENTATION ORIGIN OF GOODS 58 MISREPRESENTATION CONSUMER GUARANTEE RIGHTS 59 MISREPRESENTATION RELATING TO SALE OF LAND 60 S 152: OFFENCE PROVISION FOR S MISREPRESENTATION EMPLOYMENT 61 MISLEADING CONDUCT NATURE OF GOODS 62 MISLEADING CONDUCT NATURE OF SERVICES 63 MISREPRESENTATIONS CERTAIN BUSINESS ACTIVITIES 64 S 151: OFFENCE PROVISION TO ALL OF S 29!!! 64 S 32 OFFERING REBATES, GIFTS, PRIZES ETC 65 WRONGLY ACCEPTING PAYMENT 65 2

3 MULTIPLE PRICING S DEFENCE OF ACTING HONESTLY & REASONABLY S INTENTIONALLY PROCURING BREACH OF CONTRACT (IBK) 66 OBG (PLANT & TRANSPORT HIRE) LTD V ALLAN [2007] 68 GREIG V INSOLE [1978] 69 STOCZNIA V LATCO [2002] 69 CONDUCT AMOUNTING TO INTERFERENCE / PROCUREMENT 70 DEFENCE OF JUSTIFICATION 70 UNLAWFUL INTERFERENCE WITH TRADE OR BUSINESS 71 DOES THE TORT EXIST 71 CONSPIRACY 72 LAWFUL V UNLAWFUL MEANS CONSPIRACY 72 LAWFUL MEANS CONSPIRACY 73 UNLAWFUL MEANS CONSPIRACY 74 COMPETITION LAW 75 CCA 2010 (CTH) 75 TORT OF INTIMIDATION 76 REMEDIES FOR INTIMIDATION 76 MISFEASANCE IN PUBLIC OFFICE 78 ELEMENTS MISFEASANCE IN PUBLIC OFFICE 78 MENTAL ELEMENT SANDERS V SNELL 79 WHO IS A PUBLIC OFFICER? 79 WEEK 9: DEFAMATION 80 PUBLICATION 82 SETTLING OUT OF COURT 82 OFFER TO MAKE AMENDS DEFAMATION ACT PART 3 82 MULTIPLE PUBLICATION 83 FAULT ELEMENT 83 KNOWLEDGE OF FACT IS IRRELEVANT 83 DISTRIBUTORS 83 DEFENCES 84 JUSTIFICATION 84 CONTEXTUAL TRUTH 84 ABSOLUTE PRIVILEGE 84 PUBLICATION OF PUBLIC DOCUMENTS 85 FAIR REPORT OF PROCEEDINGS OF PUBLIC CONCERN 85 QUALIFIED PRIVILEGE FOR PROVISION OF CERTAIN INFO 86 HONEST OPINION 87 INNOCENT DISSEMINATION 87 TRIVIALITY 87 POLLY PECK DEFENCE 87 LUCAS-BOX PLEA 87 REMEDIES 88 COMPENSATORY DAMAGES 88 3

4 INJUNCTION 88 NO EXEMPLARY DAMAGES 88 NO ACTION AGAINST DECEASED PERSON 88 4

5 NEGLIGENCE CAUSING PURE ECONOMIC LOSS Negligent Misstatements Under Tort Law In tort law, a person may owe a duty to take reasonable care not to provide to another person misleading information or advice that causes pure economic loss. Claims of this kind were not available prior to the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963]. Negligent misstatements and acts causing pure economic loss are governed by different principles than negligent misstatements and acts causing physical loss. Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] Hedley made advertising arrangements with Easipower to pay upfront and later be reimbursed. Hedley checked Easipower s financial position with their bank, Heller. Heller provided that Easipower were in a good financial position to conduct business, but on their letterhead wrote, without responsibility on the part of this bank. Easipower went into liquidation and Hedley sued Heller for misleading information. The House of Lords held that Heller was not liable in negligence, as their letterhead stated without responsibility, however the relationship between the parties was sufficiently proximate as to create a duty of care. Lords Morris and Hodson: If in a sphere, in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise In this case however, D was not held to have been negligent, notwithstanding their negligent advice regarding the creditworthiness of Easipower, as D had expressly stated that the advice was being given WITHOUT RESPONSIBILITY this is the first case, which proposed that D owes a duty to P if it is foreseeable that P will suffer harm as a result of D s negligent misstatement. Vulnerability of the Plaintiff Gleeson CJ, Gummow, Hayne, and Heydon JJ: Vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. Vulnerability in this context is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, vulnerability is to be understood as a reference to the plaintiff s inability to protect itself from the consequences of a defendant s want of reasonable care, either entirely or at least in a way, which would cast the consequences of loss on the defendant Woolcock Street Investments Pty Ltd v CDG Pty Ltd Reasonable Reliance It was held that a company who sold off their land due to a negligent misstatement given by a water company that the cost of connecting water supply in order to have the property rezoned and subdivided, telling the company that the water cost was going to be far more than it actually was, was not held to be a negligent misstatement, 5

6 notwithstanding that the company was led to sell their land for far less than what it was worth, due to relying on this misstatement Tepko v Water Board (2001) An accountant did not owe a duty to take reasonable care in giving investment advice over the telephone, because the recipients of the advice had merely asked the accountant for an off-the-cuff opinion Mohr v Cleaver [1986] If D is a professional person and P is D s client, it is not necessary to plead and prove reliance in order to establish a requisite relationship to give rise to a DOC Pullen v Gutteridge Haskins & Davey [1993] Special Skill Was there a presence of expertise on the defendant s part? If D is an expert in the field, and P is not, then there are strong grounds for saying that it would be reasonable for P to rely on D s expertise rather than trusting his/her own judgment. P sought investment advice from D, an investment company. The company, in whom he wished to invest, was a co-subsidiary of D. The insurance company advised that this was a sound investment, which it was not. P invested and lost his money, and sued for loss caused by negligent advice. The HCA held that D owed a DOC to P to take care in giving advice the fact that the company was not in the business of giving investment advice did not negate the existence of a DOC D appealed to the Privy Council, which held D not liable, as D did not have special skill in the giving of investment advice Mutual Life & Citizens Assurance v Evatt (1968) P wished to purchase land in the condition that D, the council, was not following through with the road widening proposals. P s solicitor sent the council a form requesting whether or not D would be following through with their proposal, however D returned the form with no indication as to whether or not the proposal would eventuate. P purchased the land, and D pursued their proposal. The HCA held that it was enough to hold that liability extends to those whose profession of business is to give advice or information, whether gratuitously or not Murphy J stated that there was no justification for adhering to the error expressed in Evatt s case, and it should no longer be followed in Australia Shaddock & Associates v Parramatta City Council (No 1) (1981) The council was not held to be liable for a plan that did not materialise, notwithstanding that the developer asked beforehand whether or not the development was going to go ahead the development plan had no feasibility statements, it was in the planning stage and not certain as of yet San Sebastian Pty Ltd v Minister Administering Environmental Planning (1986) Volunteered Advice by Professional Although advice had been volunteered by the adviser, the court held that D s position as P s financial adviser and their continuing relationship led to the conclusion that D owed P a DOC in relation to volunteered advice Mbakwe v Sarkis [2009] NSWCA 6

7 Salient Features in Special Cases of Negligence Caltex Refineries (Qld) Pty Ltd v Stavar [2009] Allsop P: The following is a list of salient features to determine liability in special cases of negligence: (a) The foreseeability of harm; (b) The nature of the harm alleged; (c) The degree and nature of control able to be exercised by the defendant to avoid harm; (d) The degree of vulnerability of the plaintiff to harm from the defendant s conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself; (e) The degree of reliance by the plaintiff upon the defendant; (f) Any assumption of responsibility by the defendant; (g) The proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant; (h) The existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff; (i) The nature of the activity undertaken by the defendant; (j) The nature or the degree of the hazard or danger liable to be caused by the defendant s conduct or the activity or substance controlled by the defendant; (k) Knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff; (l) Any potential indeterminacy of liability; (m) The nature and consequences of any action that can be taken to avoid the harm to the plaintiff; (n) The extent of imposition on the autonomy or freedom of individuals, including the right to pursue one s own interests; (o) The existence of conflicting duties arising from other principles of law or statute; (p) Consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and (q) The desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law. Remedies Available for Negligent Misstatements Under Tort Law The main remedy is compensatory damages, however aggravated and exemplary damages are also available in certain cases. The ACL S 18 of the ACL applies to a wide variety of conduct, whereas the tort law of negligent misstatements only applies where there is a duty of care. Damages under s 236 of the ACL are not capped (limited), whereas damages under the tort law state legislation for economic loss are capped. Pursuing a claim in tort however can be beneficial, as there is no requirement for the act to have been committed in trade or commerce. The limitation period for pursuing a claim under the tort law of negligent misstatements and under s 236 of the ACL is 6 years. 7

8 Misrepresentation Under Contract Law Elements of Misrepresentation in Contract Law 1. The representation must be of a fact; 2. The representation must be false; 3. The representation must be made by a party of the contract to another party of the contract, unless an exception to the doctrine of privity applies; and 4. The plaintiff must have been induced to enter into the contract as a result of this misrepresentation by the defendant. Types of Misrepresentation Under Contract Law Fraudulent: D made a false statement knowing that it was false or was reckless in not caring whether it was true. Negligent: D made the incorrect statement without taking reasonable care or based the statement on unreasonable grounds. P must prove that D owed a duty to take reasonable care that the statement made was true and reliable. In L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981), The HCA held that a person can have a duty of care in giving information or advice and that duty of care is not confined to those who carry on, or profess to carry on a profession, business, or occupation involving the possession of skill and competence. Innocent: P must prove that D made an incorrect statement without the need to prove the intention to mislead or deceive or the knowledge of its falsity. The misrepresentation, which has induced P, is neither fraudulent nor negligent. Remedies Available for Misrepresentation Under Contract Law Damages are available for negligent and fraudulent misrepresentations in contract law, but not available for innocent misrepresentation. Rescission of contract is available for all types of misrepresentation in contract law. If the court makes an order for rescission, the contract will be voidable. Differences Between s 18 of the ACL and Misrepresentation S 18 applies to a wide variety of conduct, not limited to representations. S 18 of the ACL can be contravened without evidence that someone has actually been misled, whereas in relation to misrepresentations under contract law inducement and reliance on the misrepresentation is an essential element for an actionable case. S 18 must be in trade or commerce, whereas suing in misrepresentation means that the act need not have been committed in trade or commerce. 8

9 Negligent Acts Causing Economic Loss Facts: This is the case, which decided that a plaintiff can sue for pure economic loss the Defendant (Dredge) damaged a pipeline while dredging. It was aware of the pipeline's existence, and the whereabouts of the pipeline. The negligence of the officers of the dredge was not independent of the negligence of Decca. They relied on Decca's chart, but failed to check its correctness or to notice its inaccuracies. The pipeline was used, but not owned, by the Plaintiff (Caltex) for the purposes of transferring oil. As a result of the damage, the Plaintiff suffered great economic loss. Ratio: Gibbs J: Where a defendant has knowledge or means of knowledge that the plaintiff individually, and not merely as a member of an unascertained class, will be likely to suffer economic loss as a consequence of his negligence, he owes the plaintiff a duty to take care not to cause him such damage by his negligent act Caltex Oil (Australia) v The Dredge Willemstad (1976) Facts: D sent a new brand of potato seed to P, which was infected with bacterial wilt, and P sued D for pure economic loss. It was held that D owed P a DOC P could do nothing to protect itself from the economic consequences of D s negligence, in sowing a crop, which caused to quarantining of P s land. Ratio: Gaudron J: Where a person knows or ought to know his/her acts or omissions may cause the loss or impairment of legal rights, enjoyed or exercised by another, and that person is in no position to protect his/her own interests, there is a relationship such that the law should impose a DOC on the former to take reasonable steps to avoid a foreseeable risk of economic loss resulting from the loss or impairment of those rights the class of P was also determinate Perre v Apand Pty Ltd (1999) Transferred Loss D, the builder of a house, had not damaged an otherwise sound house, but had built a house that had never been right. The HCA held the builder of a house owed a DOC to a subsequent purchaser to take reasonable care in the construction of the house. The house did not begin to develop cracks until after the purchaser had taken possession from the first owner. This was treated as a case of pure economic loss. A builder owes a DOC to a purchaser because of such factors as, an assumption of responsibility of the builder and reliance by the purchaser on the builder s competence Bryan v Maloney (1995) 9

10 WEEK 2: INTERFERENCE WITH PURE ECONOMIC INTERESTS Deceit The tort of deceit consists of, and is confined to, the making of a fraudulent representation to the plaintiff. As evidenced in the HCA in Magill v Magill [2006], P must prove 5 elements: 1. That D made a false representation; 2. That D was dishonest lacking an honest belief in the representation s truth; 3. That D intended P to rely upon the representation; 4. That P did in fact act in reliance upon the representation; and 5. That P suffered damage (pecuniary) as a result of this reliance. Magill v Magill [2006] In this case, Mrs Magill had extramarital relations and became pregnant with children, whom her husband, Mr Magill, believed to be his children. He supported these children under the assumption that they were his own. Upon finding out that the children were not his, he instituted proceedings against his wife for the tort of deceit. The matter was appealed by Mrs Magill in the VCA, where she was successful, and then Mr Magill appealed to the HCA, where he was unsuccessful, as he was unable to prove all of the necessary elements, constituting the tort. The modern tort of deceit will be established where a plaintiff can show five elements: 1. First, that the defendant made a false representation [Edgington v Fitzmaurice (1885)]; 2. Secondly, that the defendant made the representation with the knowledge that it was false, or that the defendant was reckless or careless as to whether the representation was false or not [Derry v Peek per Lord Herschell]; 3. Thirdly, that the defendant made the representation with the intention that it be relied upon by the plaintiff [Bradford Third Equitable Benefit Building Society v Borders [1941] per Viscount Maugham]; 4. Fourthly, that the plaintiff acted in reliance on the false representation [Redgrave v Hurd (1881) per Jessel MR]; and 5. Fifthly, that the plaintiff suffered damage which was caused by reliance on the false representation [Pasley v Freeman per Buller J]. Pasley v Freeman (1789) Action was brought by a plaintiff who was induced to extend credit to an insolvent third party on the faith of the defendant s fraudulent representation that the third party was a person of financial substance. The action succeeded even though there was no contract of suretyship. It was the combination of fraud and damage that entitled the plaintiff to sue. 10

11 Derry v Peek (1889) The element of intention is that D intended to induce P; D need not intended to cause P damage Derry v Peek (1889) The defendant tramway company represented to investors that they were permitted to use steam to power their trains rather than horsepower, this in fact not being true, as the Board of Trade refused to consent to the defendant company using the steampower. Consequent to the defendant company s directors representing by way of prospectus to the plaintiff that they had the right to use steampower, the plaintiff invested in the company s shares. The defendant s company was subsequently wound up, due to being refused access to steampower and the plaintiff suffered detriment by way of pure economic loss. The defendant company s directors made the representation to the plaintiff in good faith, and evidently in the absence of fraud, as they believed that the representation made was the honest truth. Gould v Vaggelas (1984) 56 ALR 31 Wilson J: Where a plaintiff shows that a defendant has made false statements to him, intending thereby to induce him to enter into a contract, and those statements are of such a nature as would be likely to provide such inducement and the plaintiff did in fact enter into that contract and thereby suffered damage and nothing more appears, common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract. Smith v Chadwick (1882) Lindley LJ: The plaintiff has to prove, first, that the misrepresentation was made to him; secondly, he must prove that it was false; thirdly, that it was false to the knowledge of the defendants, or at all events that they did not believe the truth of it." This appears to be a different statement of the law to that which I have just criticised, and one much more in accord with the prior decisions. Where P has been permanently deprived of his goods as a result of the deceit, the correct measure is the market value of the goods, rather than the cost of replacing them Smith Kline & French Laboratories v Long [1988] Aggravated damages are available in deceit actions and, to the extent that it represents a different loss, P can claim for distress, which the deceit has caused Archer v Brown [1984] If the representation be capable of two senses the plaintiff must shew in which sense he understood it, and that it was false in that sense: Hallows v Fernie [cited from Smith v Chadwick, Chadwick, Adamson and Collier (1884) UKHL] Higinbotham CJ: Concealment of a fact may cause the true representation of another fact to be misleading, and may thus become a substantive misrepresentation A true representation, coupled with concealment, thus became a positive misrepresentation calculated to deceive Curwen v Yan Yean Land Co Ltd (1891) 11

12 Leading Cases in Deceit: Krakowski v Eurolynx Properties (1995) 12

13 Injurious Falsehood Injurious falsehood is concerned with damaging misrepresentations, but it focuses exclusively on those, which disparage a plaintiff s property or business in the eyes of others so as to discourage them from dealing with the plaintiff. Contrastingly, the tort of deceit deals with any type of factual misrepresentation, and it is the plaintiff himself that is misled. As evidenced in Palmer Bruyn & Parker v Parsons (2001) at [52], under the tort of injurious falsehood, P must prove four elements: 1. There was a false statement by D concerning P s goods or business; 2. Publication of that statement by D to a third person; 3. Malice (bad intention) on the part of D; and 4. Proof by P of actual damage (pecuniary) à was there causation? v In this case, P was unable to prove the last element à Causation. AMI Australia Holdings Pty Ltd & anor v Fairfax Media Publications Pty Ltd & ors [2010] case restates the elements. Even if there is no proof of actual loss having been suffered, a court may always grant P an injunction to restrain the continued publication of an injurious falsehood if there is a reasonable probability that actual damage will result to P from the continued publication of the statements in question. 13