MLL217 Study Guide - Final Guide: Australia And New Zealand Banking Group, Susan Crennan, Btq
2 Jun 2018
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CONDUCT WHICH MAY BE MISLEADING OR DECEPTIVE
CONTRACTUAL MISREPRESENTATIONS
Pre-contractual misrepresentations
▪ False representations made in negotiating a contract are actionable under Section
18, provided in trade or commerce
o Argy v Blunts and Lane Cove Real Estate
Advantages of Section 18 over deceit/negligent misrepresentation:
- No fault is required
- More flexible remedies, e.g.
▪ Variation or avoidance of the contract
▪ Damages
▪ Often stated that a non-disclosure is actionable under s 18 only where the defendant
deliberately and intentionally withheld the information:
▪ Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd
▪ Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd
▪ The applicant had a reasonable expectation that the defendant
would disclose the information…
▪ Claim failed as the defendant did not deliberately withhold
information
▪ The defendant can be excused where the failure to disclose
was out of ignorance
▪ This view is based on s 2 which in effect states that engaging in conduct includes
refraining (otherwise than inadvertently) from doing an act.
▪ Therefore engaging in conduct includes acts and omissions
▪ Defendant can be excused where the failure to disclose the relevant information was
attributable to carelessness or of ignorance as to the significance of the matter to the
applicant:
▪ Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd
Silence
▪ Authority that Plaintiff must show Defendant deliberately withheld the information
▪ Rhone-Poulenc Agrochimie SA v UIM Chemical Services
▪ Costa Vraca Pty Ltd v Berrigan Weed and Pest Control Pty Ltd
Non-disclosure/silence
▪ However, later authorities have suggested that it will not be necessary in all cases of
non-disclosure to prove that the defendant deliberately withheld that information.
▪ Those authorities suggest that where the plaintiffs claim is based on a combination
of circumstances, including positive representations made, that deliberateness is not
an essential element of the claim:
▪ Johnson Tiles Pty Ltd v ESSO Australia
▪ Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd
▪ Charles Lloyd Property Group Pty Ltd v Buchanan
▪ Therefore, in cases such as Demagogue v Ramensky and Costa Vraca Pty Ltd v
Berrigan Weed & Pest Control Pty Ltd where s 18 is found to have been contravened
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because of a combination of circumstances, including positive conduct by the
defendant, it might no longer be necessary to establish that the defendant
deliberately withheld the information (as Section 2 would be satisfied by the positive
conduct).
▪ However, this will still be a critical element of the claim where it is based on silence
alone or mere silence, as in cases like Rhone-Poulenc Agrochimie SA v UIM
Chemical Services Pty Ltd and Johnson Tiles Pty Ltd v ESSO Australia where the
courts held that there were not positive misrepresentations on the matter in question.
▪ This issue awaits further consideration by the courts as this area of law develops.
▪ Ultimate test: Was Defendant’s conduct misleading or deceptive, judged in the
light of all the circumstances, including acts, omissions, statements or silence.
▪ Demagogue v Ramensky
▪ Johnson Tiles Pty Ltd v Esso Australia Ltd
▪ A defendant will be liable for failing to disclose information where the failure to
disclose is one of the elements in the surrounding circumstances that render the
conduct misleading or deceptive
▪ The courts have recognised that the respondents silence should not be looked at in
isolation, but in the matrix of all the surrounding circumstances.
▪ Three main situations where it has been recognised that a failure to disclose
information, when considered in the context of the surrounding circumstances, will
contravene s 18:
1) The provision of incomplete information
2) The failure to disclose a change of circumstances
3) Where Plaintiff has a reasonable expectation of disclosure
Commercial transactions
▪ Where parties are dealing at arms length in a commercial situation in which they
have conflicting interests, the fact that one party is aware of information that would
cause the other to take a different negotiating stance does not of itself impose an
obligation of disclosure.
▪ Lam v Ausintel Investments Australia Pty Ltd (Gleeson CJ)
▪ See also Miller & Associates v BMW Australia
▪ Knowledge and common assumptions in the particular practice may
be relevant
▪ Johnson Tiles Pty Ltd v Esso Australia
▪ General principle was endorsed and applied by the Full Court of the Federal Court in:
▪ Leda Holdings Pty Ltd v Oraka Pty Ltd
▪ Facts - A tenant of a shopping centre sought damages for a contravention of
s 18 partly on the basis that the landlord should have disclosed to the
applicant before it entered into the lease that only a few of the shops in the
shopping centre had been leased.
▪ Decision - The court denied that the applicant had a reasonable expectation
of disclosure for a number of reasons:
▪ The applicant was a sophisticated commercial party with considerable
experience in negotiating leases;
▪ The applicant had never inquired of the landlord as to the level of
occupancy; and
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▪ The applicant, to the landlords knowledge, relied on the landlords
agent (JLW) for information about occupancy.
▪ Whilst an employee of JLW had made certain representations as to
the likely occupancy of the shopping centre, these representations
were found to be based on reasonable grounds and hence did not
contravene s 18.
▪ There was a further claim based on an earlier positive statement by
the landlords solicitor to the effect that the occupancy level would be
high by the time the shopping centre opened
▪ However the Court found that this statement had not induced the
applicant to enter into the lease, partly because of the existence of a
disclaimer clause in the lease contract
▪ Note - the landlord would not be liable for failure to disclose changed
circumstances, as the original representation was not an inducing
one; i.e. continuing in the mind of the applicant.
Non-disclosure/silence continued
▪ However, this principle (from Lam v Ausintel) is not absolute and will not apply in all
circumstances.
▪ For example, in Johnson Tiles Pty Ltd v ESSO Australia (Merkel J) - an example of a
breach of Section 18 in the situation where the respondent, who is negotiating to
supply a product to the applicant, knows that the applicant dedicates its
manufacturing process to that supply on the basis of its continuity, however does not
disclose that it cannot guarantee supply.
▪ Therefore, liability might now be imposed where business parties are negotiating
toward a contract and the respondent fails to disclose information in circumstances
where it has become clear in the course of the negotiations that that is a matter of
importance to the applicant
See again the discussion of the Ramensky and Costa Vraca cases
▪ On the other hand, where the matter in question had not arisen in the course of the
negotiations, and the applicant merely assumed that a certain state of affairs was
true, the respondent will not be liable, as evidenced by the cases of Rhone-Poulenc
and Johnson Tiles
▪ Therefore important considerations are:
a) Was the non-disclosure deliberate?
b) Did the topic arise during contract negotiations?
c) Are the parties on an equal footing (sophistication) negotiating a commercial
transaction?
Incomplete information
▪ A statement which is literally true, but which is misleading when unqualified by further
facts, will contravene s 18
▪ A failure to mention a qualification, the absence of which makes an absolute
statement misleading or deceptive
▪ Henjo Investments v Collins Marrickville
▪ - Restaurant that can seat 124 people, permit for 96 seats
▪ - Difference in profitability
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Document Summary
Pre-contractual misrepresentations: false representations made in negotiating a contract are actionable under section. 18, provided in trade or commerce: argy v blunts and lane cove real estate. Silence: authority that plaintiff must show defendant deliberately withheld the information, rhone-poulenc agrochimie sa v uim chemical services, costa vraca pty ltd v berrigan weed and pest control pty ltd. Restaurant that can seat 124 people, permit for 96 seats. It is not misleading or deceptive to fail to disclose additional information where such disclosure would be likely to confuse rather than assist the reasonable person in the target audience: fraser v nrma holdings ltd (1995) It sued the defendant for damages for contravention of s 52. They claimed the agent represented to them that the lower level of the house (comprising a games room and a garage) was suitable for use as a fourth bedroom and office respectively.
