MISLEADING AND ECONOMIC TORTS 1
INDEX Topic 3: OTHER COMMON LAW TORTS 5 Topic 4: KEY CONCEPTS OF ACL 15 Topic 5: NATURE OF MISLEADING CONDUCT 23 Topic 6: CONDUCT WHICH MAY BE MISLEADING 33 Topic 7: ADVERTISING 47 Topic 8: FALSE OR MISLEADING REPRESENTATIONS 57 Topic 9: REMEDIES 73 Topic 10: CONSUMER GUARANTEES 87 Topic 11: SAFETY DEFECTS 99 Topic 12: ECONOMIC TORTS 107 3
Topic 3: OTHER COMMON LAW TORTS REGULATING FALSE OR MISLEADING STATEMENTS These torts regulate liability for false or misleading statements 1. Tort of Deceit Magill v Magill (2006) Held: Couple married After separation, Dad realised (appellant) that he was not father of one Made action against respondent (wife) Claimed tort of deceit and damages in loss of earning capacity and loss of personal injury (anxiety/depression) Appealed to HC after being held that he did not meet the elements Failed to establish these elements Rep was not fraudulent the husband did not rely on the signing of the birth notification forms for his belief in his paternity. appellant did not make clear the way in which he would have acted differently if he had known that the children were not his. Regarding his claims for damage. His depression resulted from the distressing marriage breakdown, not directly from a change of position resulting from the inducement of paternity. Application of deceit to marital relations is not impossible but attempts to construct legal rights and obligations in an unsuitable environment should fail. Elements Onus is on P to prove fraud negligence does not suffice 1. D made a false representation to P 2. D made the statement fraudulently The element of fraudulent intent difficult to prove Necessary for P to establish that D knew statement was false OR had no belief in its truth OR was recklessly indifferent to its truth/falsity (Derek v Peek 1889) Clear/strict proof is necessary where fraud is alleged (Neat Holdings v Karajan Holdings) 5
3. D intended P to believe in/rely on the false representation 4. P was induced to rely on the representation, and 5. P suffered damage Interaction with s 18 Advantages Most prefer s 18 due to the difficulties with establishing element of fraud Also liability under s 18 is strict: meaning it is not dependent of proof of an intention to deceive or negligence Another advantage of s 18 over deceit it has more expansive operation to cases of silence (failure to disclose information) Benefits of deceit Provisions of s 18 only apply to conduct in trade and commerce thus it will not apply to false statements made in the course of a private sale of an asset or otherwise unconnected with a commercial transaction Also aggravated and exemplary damages are not available for s 18 contraventions but are upon proof of deceit In regards to contributory negligence of the appellant s 18 recues damages whereas deceit does not Interaction with s 18 Deceit applies where the plaintiff is the person to whom the false representation was directed and who was induced to rely on the representation Injurious falsehood applies where the false representation is made to a third party who was induced to rely on the representation 6
2. Injurious Falsehood Uniform defamation laws prohibit large corporations from suing in defamation therefore these corps can use the injurious falsehood cause of action for compensation for statements that injure their business reputation An action on the case (something additional to the primary cause of action) available where D has maliciously made to third parties a false representation concerning P s goods, business, profession or property that induces the third parties to act in reliance on the statement, causing loss to P Ratcliffe v Evans [1892] P had for many years carried on a business as an engineer and boiler- maker under the name of Ratcliffe and Sons D published in his newspaper, a false statement purposely made about the manufactures of P, which was intended to (and did in fact) cause him loss of business Not necessary to show that the false statement defames P/P s business Designed to compensate P for commercial loss/damage not appropriate where P s personal rep alone has been targeted Because s 18 doesn t require malice it is preferred over the tort However it is used where s 18 is inapplicable 1. A false statement made about P s goods, business, profession or property; Onus on P to prove that statement is false Statement may be written/oral but MUST be untrue Disparaging statements are not actionable unless false It must disparage the goods, property or business of P E.g. P was not available for future employment, house offered for sale is haunted, P s manure was of low quality E.g. statements by competitors designed to induce P s customers to take business elsewhere (Swimsure Laboratories v McDonald) E.g. statements by disgruntled customers/employees (Kaplan v Go Daddy Group) 7
Puff Statements that are puff not applicable here, even if false Neither are ones that praise goods of D as being better than of P s However statements including claims which are intended to be taken seriously cannot be dismissed as puff particularly relevant to comparative advertising of products/services Failure to do something May provide basis for action T J Larkins v Chelmer Holdings [1965] where failure to give an architect s certificate of completion of building could be construed as misrepresentation, it could also amount to injurious falsehood if it caused a TP to act on the economic detriment of P 2. Publication of the false statement to a TP; Falsehood about P s goods, business property must be communicated to a TP E.g. disgruntled customers expressing their discontent through publications OR competitors making deliberate false claims about P s business to customers to induce them to take their business elsewhere This distinguishes it from tort of deceit but overlaps with defamation 3. Malice by D (intention); and Must prove that the statement was not only false but was also published maliciously Malice is established where D was motivated to make the statement for a collateral, dishonest or improper motive, such as personal hatred of P OR where D knows the statement is false or is reckless as to its truth or falsity o Recklessness amounts to malice where it was so gross as to constitute willful blindness Refers to the intention of D in knowingly publishing the falsehood calculated to cause harm to P, dishonest motive Malice does not require proof of any personal animosity towards P Hence a false statement made honestly but negligently, is NOT actionable Neither is mere carelessness in failing to investigate matter further or a lack of belief in the truth of material 8
Seafolly v Madden [2012] recklessness sufficient Madden falsely claimed on FB/email that Seafolly had copied her swimwear designs Held: there were simple enquiries D could have made before publishing the claims to verify their accuracy Failure to take these steps was not merely careless but was reckless Ultimately the claim was dismissed as P did not suffer any damage However D was found to have contravened s 18 Orion Pet Products v RSPCA (2002) negligence insufficient Representatives of RSPCA made various comments in the media that electronic dog collars inflicted pain of various sorts to the animals Some of these statements were incorrect and were likely to damage the business of P HOWEVER while they were false, they were NOT made with malice The representatives honestly believed the truth of the claims they made While there might have been carelessness involved in not properly checking the facts this was not tantamount to knowledge of falsity or recklessness 4. Damage Proof by P of actual damage to P s business or profession caused by the malicious statement actual damage is the very gist of the action (Swimsure v McDonald) Palmer Bruyn & Parker Pty Ltd v Parsons (2001) necessary for P to prove a casual link b/w the falsehood and the damage suffered, either on the basis that D intended the harm that materialised OR that it was the natural and probable consequence of the falsehood Remedies If successful entitled to compensatory damages for casually related losses, as well as aggravated and exemplary in appropriate circumstances Not necessary for P to establish that D could reasonably foresee the kind of harm that occurred sufficient that D intended the harm or that it was the natural/probable consequence P will be awarded interlocutory injunction to prevent the publication or repetition of the statements Despite having to suffer actual loss an injunction can lie to restrain the commission of the tort to prevent such loss occurring where there is a reasonable probability that actual loss will occur Courts have shown reluctance to do this 9
3. Negligent Misrepresentations Situations where P acts to his financial detriment, in reliance upon a statement/advice proffered by D Problem of indeterminacy of liability Traditionally courts reluctant to allow recovery for NM causing eco loss for policy reasons in particular the policy concern that to impose liability would expose D to liability in an indeterminate amount for an indeterminate time to an indeterminate class (Ultramares Corp v Touche, Niven & Co 1931) Concern is not that D will be liable to a large number or people BUT that D might not be able to realistically calculate the extent of its potential liability if it engages in particular activity D only liable where D could reasonably ascertain the number and extent of claims thus D should be able to reasonable estimate the potential liability from its activities (Perre v Apand 1999) 1. Damage P must establish actual economic loss Cause of action accrues on the date the loss was ascertained or reasonably ascertainable (Commonwealth v Cornwall) The amount recoverable for NM is the amount necessary to restore P to position he was in before the statement was made 2. Duty of Care D will owe a duty of care to P to ensure advice is accurate where: 1. D could reasonably foresee that P as an individual or as a member of an ascertainable class will suffer economic loss 2. D knew or ought to know that P is likely in the circumstances (factors below) to rely upon the advice, or assumed responsibility for its accuracy, and 3. P s reliance on the advice is reasonable. Same general test applies regardless of whether the advice is requested or unsolicited Ultimately all of the circumstances of the relationship b/w parties must be examined to determine if a duty to take care arose 4 main categories of relationship where DoC to provide accurate advice recognised: 10
1. Professional relationships 2. Assumption of responsibility by D In situations outside contract where D assumes responsibility, a casual connection b/w the D s statements and the injury sustained may, nevertheless be established MLC v Evatt (19680) when a person gives info, he ought to realise that he s being trusted to give the best of his info and that it s reasonable in some circumstances for the other party to act on that info o Thus a speaker is under a duty to exercise reasonable care in the provision of the info/advice he chooses to give 3. Provision of info by public authorities L Shaddock & Ass v Parramatta CC (1981) solicitor acting for a redevelopment company applied to the council of Parramatta, asking whether the property that the company intended to purchase was affected by any road- widening proposals o Held that when the council undertook to issue the certificate it placed itself under a duty to purchasers to take reasonable care that the info presented was correct failure to mention road- widening proposals on certificate amounted to an erroneous statement that none existed thus breaching duty to P s 4. Employment contracts Factors that courts will take into account in determining whether to impose a duty of care The nature of the subject matter (importance of the information) The circumstances in which the information is conveyed Formal or informal? Oral or written? Requested or unsolicited? Whether D is in the business of providing advice of the kind given (MLC v Evatt) Whether D knew of the specific purpose for which P intended to rely on the advice Control of the info by D: the relative capacity of the parties to obtain the information Whether P could have protected himself, or verified its accuracy in another way The existence of a disclaimer of liability clause (Hedley Byrne v Heller) Whether D skilled in providing information of that kind (Norris v Siberas) Legal coherence (Dale v Veda Information Services and Solutions Ltd) Interaction with s 18 Negligent misrepresentation available to private transactions but main disadvantage is the requirement to prove fault 11
4. Passing Off Gist of action = P claimed to have suffered or likely to suffer economic loss either due to; o Consumers being confused by the rep and transfer their custom to D OR o Consumers, having purchased D s goods believing them to be those of P, may be disappointed that their expectations as to quality are not realized Has been extended to include not only the goodwill attached to a business but also the unauthorized appropriation of a person s other trade values earned as a result of artistic/creative reputations o E.g. their name, voice, photo in such a way as to imply that the well- known person is associated with/sponsored/approved of D s business, product, service Prohibits free- riding can t attach product to a well recognized thing so as to benefit from the goodwill and publicity gained by makers of the genuine product S 18 may be used by one trader against a rival who misleads consumers by passing off goods as being those of the P s or associated with P thus overlap b/w s 18 and the tort o Largely superseded by s 18 because it is usually committed in a trading and commercial context (as in injurious falsehood) Reckitt & Colman Products Ltd v Borden [1990]: (3 elements) 1. Plaintiff has an established reputation or goodwill in its products or services; and P must establish that its business/products have acquired goodwill/reputation in the locality in which P claims protection for its goodwill If persons are not familiar with P or his product consumers cannot be misled about a connection b/w the two Hansen Beverage Co v Bickfords (Aus) Pty Ltd [2008]: o Designed to protect the property/goodwill of a business o Available where P can show goodwill/reputation by showing distinctiveness of the goods in a particular market o P will succeed where he can show that a customer is likely to be misled into believing D s goods are P s goods or somehow associated No need for P to establish that it was actually trading in the relevant jurisdiction, ONLY that it has acquired a reputation in that jurisdiction (Conagra v McCain Foods 1992) 12
2. A false representation by D that D s business, goods or services are those of P OR are associated with that of P; and Representation must be such that a customer is likely to mistake the goods/services offered by D with those of P P is required to establish that its name/mark is distinctive and identified with P s business E.g. trade mark or logo, key advertising features 3. P has suffered actual damage, or is likely to do so P seeking more than nominal damages must show that customers have actually been misled and that this has resulted in actual damage OR is likely to Main remedies = damages, an account of D s profits, injunction preventing further passing off 13
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Topic 4: KEY CONCEPTS OF THE ACL Introduction ACL came into operation on 1 st Jan 2011 replacing some 17 different pieces of Cth, State and Ter legislation relating to consumer protection Based largely on Trade Practices Act 1974 (Cth) Creation of this meant that consumers throughout Aus had the same rights and remedies AND businesses had the same obligations and responsibilities towards consumers The ACL is set out in Sch 2 of the (CCA) Competition and Consumer Act 2010 (Cth) Legislative basis Under Aus Const leg power in relation to consumer protection is divide b/w Cth and State/Ter parlts Cooperative arrangement b/w necessary for law to be uniform across Aus Under the application model new leg designed to operate uniformly is enacted by a lead legislator in broad terms that can be adopted (with any local variations thought necessary) by all other legislatures As a law of the Commonwealth Pt XI of CCA restricts application of Sch 2 by reference to the limits imposed on Cth leg power by Const and by reference to the policy decision to leave the regulation of financial services/products to the ASIC Act S 131(1) of CCA applies Sch 2 as a law of Cth ONLY to the conduct of corporations and in relation to contravention of Chaps 2, 3, 4 of Sch 2 by corporations Even where ACL does not apply as a valid law of Cth s 131C of the CCA provides that it does not exclude or limit the concurrent operations of State/Ter law o If State/Ter law is not inconsistent with ACL, it will continue to operate As a State/Territory law In the case of each state and ter the ACL is made part of their law by an application law enacted by them Victoria Australian Consumer Law and Fair Trading Act 2012, ss 7 and 8 o Victorian FTA 15
Double punishment Because the same conduct may be actionable under both Cth and State ACL and because the same conduct may be the subject of a pecuniary penalty for a consumer protection breach as well as criminal action: o CCA and State Fair Trading Acts contain a number of provisions designed to prevent double punishment Conduct that is actionable under both ACL s s 140J(1) of CCA provides that if an act/omission is an offence under that Act and also under the application law of a State and the offender has been punished for the offence under the latter offender is not liable to punishment for the offence under the CCA Same approach taken in respect of conduct that is both a consumer protection breach and an offence so far as s 225(1) of ACL provides that a pecuniary penalty cannot be imposed in relation to conduct where person in breach has already been convicted of an offence constituted by the same conduct HOWEVER s 255(3) specifically allows crim proceedings to be taken against a person despite the imposition upon them of a pecuniary penalty under s 334 Extraterritorial application Each state/ter application law also gives ACL extrater app Particularly to: cover non- residents in relation to their business dealings occurring within the jurisdiction; and the conduct of person who reside within the jurisdiction or otherwise connected with it, occurring outside its boundaries Policy Objectives The purposive approach to stat interpretation favours construing leg so as to give it effect to its leg purpose With Cth leg this is reinforced by s 15AA of Acts Interpretation Act 1901 o Requires courts when interpreting a statue to adopt the meaning that would promote the purpose/object underlying the Act Thus it is important that when giving meaning to stat provs especially those in CCA and ACL to have regard to the policy objectives that gave rise to them 16