Mll117 Exam Notes - Misleading Conduct and Economic Torts

Table of Contents 1 Misinformation Torts ................................................................................................................. 3 1.1 Tort of Deceit ....................................................................................................................... 3 1.2 Tort of injurious falsehood .............................................................................................. 5 1.3 Negligent Misrepresentation ........................................................................................... 7 2 Where negligence law should not interfere: ....................................................................... 8 3 To establish that the statements were made maliciously ............................................... 8 4 Section 18 of the ACL ............................................................................................................... 9 5 6 7 4.1 Person ................................................................................................................................... 9 4.2 In trade or in commerce ................................................................................................... 9 4.3 Conduct .............................................................................................................................. 10 4.4 Misleading or deceptive, or likely to mislead or deceive ...................................... 11 4.5 Remedies:........................................................................................................................... 12 False Claims In Advertising .................................................................................................. 13 5.1 Tests, Scienntific Studies and Future Representations ........................................ 15 5.2 Disclaimers in advertising ............................................................................................. 16 5.3 Puffery ................................................................................................................................. 17 5.4 Comparative advertising ................................................................................................ 17 Common Law ............................................................................................................................ 19 6.1 The tort of passing off .................................................................................................... 19 6.2 Cases ................................................................................................................................... 25 PART 3-1 of the ACL................................................................................................................ 27 7.1 Goods - S29 of the ACL ......................................................................................................... 27 7.2 Services - s 29 (1)(b) ....................................................................................................... 29 7.3 New goods - s 29 (1)(c) ................................................................................................... 29 7.4 Acquired goods or services - s 29 (1)(d).................................................................... 29 7.5 Testimonials s 29(1)(e),(f) .............................................................................................. 29 7.6 Sponsorship or approval s 29(1)(g) ............................................................................ 30 7.7 Affiliations 29(1)(h) .......................................................................................................... 31 7.8 Pricing of goods or services 29(1)(i) ........................................................................... 32 7.9 Availability of repair of goods/spare parts for goods 29(1)(j) .............................. 33 7.10 Place of origin 29(1)(k) .................................................................................................... 33 7.11 S 255 sets out 5 'safe harbour' defences: ................................................................. 34 7.12 The need for goods/services 29(1)(L) ......................................................................... 35 1 7.13 Misleading consumers as to their rights under the ACL - Adequately presenting terms or conditions 29(1)(m) ............................................................................... 35 Misleading the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any goods or services:................................................................. 36 1 Manufacturing process, characteristics or suitability of goods - s 33 ..................... 36 2 Manufacturing process, characteristics or suitability of services - s 34 ................. 37 Remedies............................................................................................................................................ 37 2 1 Misinformation Torts Provides a cause of action for false or misleading statement that result in economic loss. 1.1 Tort of Deceit Is committed where the defendant fraudulently makes a false representation to the plaintiff with the intention the plaintiff will rely on it, and the plaintiff does rely on it and suffers loss as a result. The elements of the tort are: Magill v Magill 1. The defendant made a false representation to the plaintiff a- Partial Disclosure A defendant who has partially disclosed certain facts will be liable where the partial disclosure creates a deception Curwen v Yan Yean Land Co Limited. b- Subsequent change of circumstances: A defendant is liable in deceit for failing to disclose that a stated fact, true at the time of the statement, had become false prior to the plaintiff acting in reliance on it Jones v Dumbrell. c- Subsequent discovery of the falsity of the representation: s 18 of the ACL will normally be the preferred cause of action where a non-disclosure is in issue. 2. The defendant made the representation fraudulently: The necessary requirement is that the defendant intended to deceive the plaintiff, not that the defendant intended to injure the plaintiff. Knowing the statement to be false, or having no belief in its truth, or recklessly not caring whether it is true or false. Negligence—even gross negligence—is not equivalent to fraud, unless the plaintiff has deliberately shut his or her eyes to the facts or has deliberately refrained from investigating the truth of the matters Derry v Peek. 3. The defendant intended the plaintiff to believe in and rely on the representation It is not necessary to show that the defendant made the representation directly to the plaintiff; it is sufficient that the defendant intended it to be passed on to the plaintiff Commercial Banking Co of Sydney Ltd v RH Brown & Co. 4. The plaintiff did act in reliance on the representation, and 3 The plaintiffs have the onus of proving that the representations they complain of were material, and that they were induced to act upon them Gould v Vaggelas. it is sufficient that the fraudulent misrepresentation was a materially contributing factor to the plaintiff's decision to act. However, the action will fail where there is no causal relationship between the representation and the claimed loss Alati v Kruger. 5. The plaintiff suffered damage: The damage will be economic in nature; however, the High Court in Magill v Magill did not rule out a personal injury damages award for deceit. It is currently uncertain whether the plaintiff must prove that the defendant could reasonably foresee the loss that occurred. In Gates v City Mutual Life Assurance Society Ltd: an action for deceit a plaintiff is entitled 'to all the consequential loss directly flowing from his reliance on the representation, at least if the loss is foreseeable'. However, the English courts have adopted a contrary view, and in Palmer Bruyn & Parker Pty Ltd v Parsons, argued that the English approach is to be preferred. His Honour noted (at [66]) that 'the law with respect to intentional torts had developed satisfactory means of limiting a defendant's liability, without the need to resort to that notion'—that is, the notion of reasonable foreseeability. • • • • Remedies: The plaintiff is entitled to damages for all causally related losses. the plaintiff is entitled to the difference between the price paid for the business and its real value at that time, as well as compensation for any consequential losses, such as losses incurred in running the business Doyle v Olby Archer v Brown: Aggravated damages are available to compensate the plaintiff for insult and humiliation experienced as a result of the deception Musca v Astle Corp Pty Ltd; James v Hill: Exemplary damages are available where the deception was committed in a particularly calculated The plaintiff's damages will not be reduced for contributory negligence, for example because the plaintiff did not take reasonable steps to verify the accuracy of the representations Standard Chartered Bank v Pakistan National Shipping Co. Section 18 of the ACL: Damages awarded under s 236 of the ACL for a contravention of s 18 of the ACL will be reduced for the contributory negligence of the claimant, however no such reduction is made in the case of the common law tort of deceit: Standard Chartered Bank v Pakistan National Shipping Co (Nos 2 & 4). Aggravated and exemplary damages are not available for a contravention of s 18 of the ACL but are available upon proof of deceit: Musta v Astle Corp Pty Ltd. 3 types of evidence that a court would give most weight to when making a finding about the defendants state of mind: Internal company 4 documentation, such as emails or a memo of advice - Contemporaneous notes of a meeting or conversation - The testimony of an independent, impartial witness about statements or conduct by the defendant which evidence state of mind. 1.2 Tort of injurious falsehood The tort of injurious falsehood applies where the defendant maliciously publishes a false statement about the plaintiff's goods business or profession to third parties who act in a manner that causes a loss to the plaintiff. There is no requirement that the false statement disparage the plaintiff's business reputation, it often will have this effect, it advantageous as it is available for large corporations who cannot sue in defamation. Elements of Injurious Falsehood: THIRD-PARTY 1- False statement about the plaintiff's goods, business or profession or property: Onus is on the plaintiff establish that the statement is false Swimsure Laboratories Pty Ltd v McDonald. When determining the falsity of statement, the court could consider implied meanings of words not just the literal meanings. The statement 'Holden Hunter Sucks' imputes that the plaintiff's dealership was poorly managed and that it provided poor products and services. There was a sufficient ground for extending a temporary injunction Kaplan v Go Daddy Group Inc. Nyoni V Pharmacy Broad of Australia (no 6): meanings can be considered through innuendo or false imputations - ORP 2- Publication of the false statement to a third party: false statements made about the plaintiff's goods, business or property, to third parties, which induce third parties to act, resulting in loss to the plaintiff. Palmer Bruyn & Parker Pty Ltd v Parsons. 3- The statements were motivated by malice: Malice will be established where the statement was predominantly motivated by an improper or collateral purpose, such as ill will or animosity towards the plaintiff. Proof that the defendant knew the defamatory matter to be false is almost invariably conclusive evidence that the publication was actuated by an improper motive Roberts v Bass. Recklessness by the defendant in making the defamatory statement will amount to malice where the recklessness was so gross as to constitute wilful blindness Seafolly Pty Ltd v Madden. A mere lack of belief in the truth of the material is not malice, nor is mere carelessness in failing to reasonably investigate the matter: 'even irrationality, stupidity or refusal to face facts concerning the plaintiff' does not constitute malice Orion Pet Products v Royal Society for the Prevention of Cruelty to Animals. 4- The malicious statements caused actual damage to the plaintiff's business or profession: 5 The plaintiff bears the onus of proving actual (pecuniary) damage to the plaintiff's business or profession Seafolly Pty Ltd v Madden. Damages for hurt feelings or distress are not recoverable under this tort, although in Williams v Smith it was arguable that loss of earnings resulting from a psychiatric injury is 'actual damage' for the purposes of the tort. The plaintiff must also prove a causal link between the falsehood and the damage suffered, either on the basis that the defendant intended the harm that materialised, or that it was the 'natural and probable consequence' of the falsehood: Palmer Bruyn & Parker Pty Ltd v Parsos. Normal 'but for' principles will apply, so that the claim will fail where on the balance of probabilities the damage would have been suffered in any event regardless of the false statements that founded the tort Swimsure Laboratories Pty Ltd v McDonald. REMEDIES: A successful plaintiff will be entitled to compensatory damages for causally related losses, as well as aggravated and exemplary damages in appropriate circumstances. It is sufficient that the defendant intended the harm, or that it was the natural and probable consequence of the defendant's falsehood Palmer Bruyn. 6 1.3 Negligent Misrepresentation Duty of care is the first element of the negligence action and the only element. 1st element: Would imposition of liability give rise to indeterminacy of liability? A duty of care is only owed to members of an 'ascertainable' or 'determinate' class. The concern about indeterminacy of liability is that the defendant might not be able to reasonably ascertain the extent of its potential liability if it acts with negligence Perre v Apand Pty Ltd. 2nd element: The High Court held that a duty to exercise reasonable care in making a statement or giving advice will arise where the following two salient features are present: aka a test of known reasonable reliance. a- The defendant knew, or the circumstances must be such that the defendant should have known, that the recipient of the information or advice intends to act on that information or advice in connection with some matter of business or serious consequence; b- It was reasonable in all the circumstances for the recipient to rely on that information or advice.  Eight main circumstances or factors considered by the court to determine whether the requisite reasonable reliance was present 1- The nature of the subject matter - was it given for a serious purpose, which was important to the plaintiff? L Shaddock & Assoc v Parramatta CC (1981) 140 CLR 225 2- the circumstances in which the information is conveyed. How formal was the occasion in which the information was given? Was it given part pf a contract for the provision of information? Was it given on an informal occasion? L Shaddock & Assoc v Parramatta CC (1981) 140 CLR 225 3- whether the advice was requested or unsolicited: San Sebastian v MAEPA (1986) 162 CLR 341 - the reliance tests applies both where the advice is provided in response to a request and where it was volunteered. 4- Whether the defendant is in the business of providing advice of that MLC v Evatt (1968) 122 CLR 556. 5- Whether the defendant knew of the specific purpose or purposes for which the plaintiff intended to rely on the advice? Tepko Pty Ltd v Water Board (2001) 206 CLR 1 6- The relative capacity of the parties to obtain the information. liability is more likely to be imposed where the defendant was in control of, or the sole repository of, the information so that the plaintiff was reliant on the defendant for accurate information. L Shaddock & Assoc v Parramatta CC (1981) 140 CLR 225: a council was found liable where is negligently misrepresented to persons interested in purchasing land that would not be affected by a road widening proposal. 7- The relationship of control and vulnerability b/w the parties - the vulnerability of the plaintiff. Where the defendant is in control of the information and the plaintiff is vulnerable and dependent on the defendant to get information right Tepko Pty Ltd v Water Board (2001) 7