Misrepresentation (at Common Law)

1. Summary.

   1. Misapprehension in mistake alone arises not due to one party misleading the other, but in some other spontaneous and non-induced manner.
   2. Representer → person who makes the statement.
   3. Representee → person to whom misrepresentation is made.

2. Elements → a false statement of a present fact which is intended to induce entry into a contract and which has that effect.

   1. Question → was there a false statement of a present fact?
      1. Identify the representations and classify the statements as either a:
         1. Future prediction;
         2. Opinion;
         3. Silence;
         4. [Non-exhaustive list].
   2. A false statement of a present fact → Edgington v Fitzmaurice (1885) 29 Ch D 459 at 481-82 per Bowen LJ; With v O-Flanagan [1936] Ch 575.
      1. Generally limited to statements that are true or false at the time they are made → eg. statement, nod, wink etc.
      2. Excludes → future matters, opinions, puff and misstatements of law → classify which one is in play.
         1. Exception → implied representation → it may be possible to say that a representation as to one of these excluded matters contains an implied representation as to a present fact → need to show either:
            1. That the representer honestly holds the view expressed; OR
            2. That the representer has reasonable grounds for holding that view.
      3. Excludes → silence by representer → common law holds that a failure to disclose information or remaining silent does not amount to misrepresentation.
         1. Exception → where a failure to speak can amount to misrepresentation:
            1. Half-truth → where there is one representation of fact, but there is a failure to disclose something else that was important leading to an overall misleading impression.
            2. Failure to correct statement → facts change between time the statement is made and when the transaction closed → With v O'Flanagan Ch 575.
            3. Contracts of utmost good faith → insurance contracts.
   3. Statement induced entry into a contract.
      1. Requires → intention to induce the representee who then relied on the statement → Edington v Fitzmaurice (1885) 29 Ch D 459 at 481-82 per Bowen LJ.
         1. An opportunity to verify the facts does not prevent proof of reliance → Redgrave v Hurd (1881) 20 Ch D 1.
      2. Onus → onus of proof is generally on the representee BUT where a fraudulent statement is made that is calculated to induce the representee to enter into a contract, then inducement will be presumed.
         1. Subject to the representer showing that the representee did not rely on the statement → ie. if the representee did not rely on the statement, the second element of MR is not made out → Holmes v Jones (1907) 4 CLR 1692 per Isaacs J at pg. 1710.

3. Remedies.

   1. Note → because the representee is not suing for breach of contract, any right to sue in damages must be found in tort or statute.
   2. Innocent misrepresentation.
      1. The only remedy available for an innocent misrepresentation is rescission of the contract.
   3. Fault misrepresentation.
      1. In addition to rescission there will be damages for:
         1. Tort of deceit for fraudulent misrepresentation.
            1. The person who made the statement must know the statement is untrue OR be reckless as to the truth → Derry v Peek per Lord Herschell at 374.
         2. Tort of negligence for negligence misrepresentation.
            1. The person who made the statement must owe and breach a duty to take reasonable care as to the accuracy of information provided.

Misleading and Deceptive Conduct (Statutory Liability)

1. Statutory prohibition.

   1. **s18(1) ACL** → a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
      1. Note → replaces s52 of the Trade Practices Act 1974 (Cth) → many of the authorities we consider were decided under the old regime.
      2. Corporations as 'persons' → the ACL applies as a law of the Commonwealth to the conduct of corporations (s131) so 'person' in s18 includes corporation.
   2. Three elements.
      1. Conduct.
         1. Definition → s2(2) ACL → doing or refusing to do any act → refusing includes:
            1. Refraining (otherwise than inadvertently ) from doing that act; OR
               1. Note → ACL is broader than misrepresentation at common law as it may include acts, omissions and silence → Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83.
               2. Must silence be deliberate? → there is some uncertainty around whether silence must be deliberate in order to amount to contravention for s2(2) ACL.
                  1. There is some suggestion by Gummow J in Demogogue Pty Ltd v Ramensky (1992) 39 FCR 31 that deliberateness is required → remains unresolved by the HCA.
                  2. But note → generally a failure to disclose will not be misleading under **s18 ACL** unless the circumstances are such as to give rise to a reasonable expectation of disclosure → Demogogue Pty Ltd v Ramensky (1992) 39 FCR 31.
            2. Making it known that the act will not be done.
         2. Includes spoken and written statements.
            1. Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470.
      2. Trade or commerce.
         1. Definition → **s2 ACL** → includes any business or professional activity.
            1. Must be trading or commercial in nature and not merely incidental to trade or commerce.
         2. Includes.
            1. Commercial dealings by business → but not necessarily their internal affairs → Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594.
            2. Sale of a business → Bevanere Pty Ltd v Lubidienuse (1985) 7 FCR 325.
            3. Fundraising activities of a charity (may include, weak) → in the course of business but not gratuitous acts → E v Australian Red Cross Society (1991) 27 FCR 310.
         3. Excludes.
            1. Private sales of property between individuals → O'Brien v Smolongov [1983] FCA 333.
               1. Exception → the sale of property is a business activity of a real estate agent, which in that case, it will be covered by the Act.
      3. Misleading or deceptive or is likely to mislead or deceive.
         1. Intention not relevant → factual issue only.
            1. This element is not confined to conduct that is intended to mislead or deceive or that involves a failure to take reasonable care → Hornsby Building Information Centre v Sydney Building Information Centre (1978) 140 CLR 216.
            2. Rationale → intended to protect the "inexperienced as well as the experienced, the gullible as well as the astute", though not those who fail to take reasonable care of their own interests → Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.
         2. Assessment of what is misleading.
            1. Process → consider the audience to whom the conduct was directed → ie. the public or a class of the public, or particular individuals.
            2. Class of the public → isolate by some criterion a representative member of that class and ask whether a reasonable hypothetical member would be misled or deceived → Campomar Sociedad Ltd v Nike International Ltd [2000] HCA 12 at [105].
            3. Individuals → consider the character of the particular conduct in relation to the particular individual "bearing in mind what matters of fact each knew about the other as a result of the nature of the dealings and the conversations between them" → Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.
               1. Consider.
                  1. Nature of the parties;
                  2. Who they are;
                  3. What is their level of expertise/ financial ability;
                  4. Nature of the transaction;
                  5. What each party knew about the other;
                  6. The conduct itself.
               2. Court perspective → looks at the subjective circumstances and then makes an objective assessment as to whether a reasonable person in the position of the individual would have been misled.

2. Statutory remedies for contravention → of **s18 ACL**.

   1. Rationale → most situations of misleading conduct under the general law are also actionable as a contravention of s18, so ultimately the real significance of s18 relates to remedies.
   2. Damages → **s236 Competition and Consumer Act 2010 (Cth)**.
      1. Elements.
         1. Suffering loss or damage is essential → nominal damages cannot be awarded.
         2. Causation → claimant must be able to prove that the misleading or deceptive conduct in fact contributed to the decision to enter into the contract → Henville v Walker (2001) 206 CLR 459.
      2. Measure of loss → generally tortious measure of damages → Marks v GIO Australia Holdings Ltd (1998) 169 CLR 494.
         1. "A party misled suffers no prejudice or disadvantage unless it is shown that they could have acted in some way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted".
         2. "What is important is what that party would have done...not what might have hoped for or expected" → Marks per McHugh, Hayne and Callinan JJ at 514.
         3. Looks at reliance / expenditure loss → rarely looks at expectation loss.
         4. Compensatory only → no exemplary / punitive damages.
            1. Damages may only be awarded alongside some other remedy.
   3. Injunction → **s232 Competition and Consumer Act 2010 (Cth)**.
      1. An order mandating or prohibiting the doing.
   4. General powers → s237 - 245 CCA 2010 (Cth) → to make any other orders court thinks appropriate to compensate, prevent, or reduce actual or likely loss or damage.
      1. Can include orders to:
         1. Declare a contract void.
         2. Vary a contract.
         3. Direct refund of money or return of property.
         4. Direct repair of goods or supply of services.
         5. Pay compensation.
   5. Contributory negligence → **s137B Competition and Consumer Act 2010 (Cth)**.
      1. If a person making a claim under **s236 CCA** (caused by a contravention of **s18 ACL**) has suffered loss or damage partly as a result of his/her own failure to take reasonable care, the damages recovered are "to be reduced to the extent which a court thinks just and equitable having regard to the claimant's share in the responsibility for the loss or damage".
      2. Note → there are no equivalent provisions in State or Territory fair trading Acts → Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367 at [84].
         1. Macfarlan JA → the Fair Trading Act NSW does not provide for a defence of contributory negligence in a claim under the Act for misleading or deceptive conduct.

3. Cases → misrepresentation and deceptive conduct.

   1. With v O'Flanagan [1936] Ch 575 → misrepresentation → representation is false → failure to correct statement exception for silence to be treated as misrepresentation.
      • The facts.
      • The principle.
   2. Redgrave v Hurd (1881) 20 Ch D 1 → misrepresentation → inducement into contract by misrepresentation → opportunity to verify facts does not prevent proof of reliance.
      • The facts.