Commercial and personal property law : selected issues [Second edition.] 9780455238777, 0455238774

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES ..................

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES .....................................

Compiled by Professor Stephen Corones BCom LLB (Qld), LLM (UCL), PhD (Qld)

Second Edition

LAWBOOK CO. 2016

Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW ISBN: 9780 455 238 777

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About this book Commercial and Personal Property Law: Selected Issues 2e consists of material extracted from the following books: • Smith, Personal Property Law: Selected Issues, 3rd ed (Thomson Reuters, 2015); • Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013); • Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016); • Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015).

Table of Contents About this book ........................................................................................ v Table of Cases .......................................................................................... ix Table of Statutes ................................................................................... xxv The Concept of Property Understanding Property Law .................................................................... 3 What is Property? ..................................................................................... 5 Distribution of Property ........................................................................... 13 Physical Limits to Land and Fixtures Physical Changes to Things .................................................................... 25 Ownership, Possession and Transfer of Rights to Personal Property Possession .............................................................................................. 49 Bailment Bailment ................................................................................................. 67 Agency Agency ................................................................................................... 81 Transfer of Property Sale of Goods .......................................................................................

115

Australian Consumer Law – Misleading Conduct Scope and Policy Objectives .................................................................

167

Definitions and Key Concepts ...............................................................

217

Misleading or Deceptive Conduct .........................................................

247

Private Remedies .................................................................................. 333 Security Interests in Personal Property Security Rights ..................................................................................... 393 Credit Law ............................................................................................ 401 Personal Property Security .................................................................... 411 Australian Consumer Law – Consumer Guarantees Consumer Guarantees for Goods .......................................................... 431

Consumer Guarantees for Services ....................................................... 513 Remedies for Consumer Guarantees ..................................................... 533 Index ..................................................................................................... 581

TABLE OF CASES .................................................................................................................................................................................. A A1 Perfect Plumbing Pty Ltd v BMW Prestige Pty Ltd (2006) 230 ALR 331 .................................. 6.80 ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34 ......................................... 11.45, 11.195 ACCC v Apple Pty Ltd (2012) ATPR ¶42-404 ............................................................................. 9.100 ACCC v Ascot Four Pty Ltd (2008) 250 ALR 467 ........................................................................ 11.90 ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 .................................. 10.55, 10.70 ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479 ................................................................ 11.155 ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 .......................... 9.65, 11.235, 11.245 ACCC v Chen (2003) 132 FCR 309 ........................................................................................... 9.100 ACCC v Chopra [2015] FCA 539 ................................................................................... 9.100, 10.40 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 .................................................. 9.30 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634 .................................................. 11.90 ACCC v Commonwealth Bank of Australia (2003) 133 FCR 149 .............................................. 11.170 ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 ............................................... 12.230, 12.240 ACCC v Dukemaster Pty Ltd (2009) ATPR ¶42-290 ................................................................... 11.10 ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 ............ 11.250, 11.285, 11.290 ACCC v Giraffe World Australia Pty Ltd (1999) 95 FCR 302 ..................................................... 12.180 ACCC v Google Inc (2012) 201 FCR 503 .................................................................................. 11.45 ACCC v Halkalia Pty Ltd (No 2) (2012) ATPR ¶42-399 ............................................................. 11.140 ACCC v Hillside (Australia New Media) Pty Ltd t/as Bet365 [2015] FCA 1007 .............. 11.85, 11.190 ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412 ................................................ 11.155 ACCC v Hughes (2002) ATPR ¶41-863 ...................................................................................... 9.100 ACCC v IMB Group Ltd [2003] FCAFC 17 .................................................................. 11.195, 12.190 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 .................................................................... 11.185 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 ............................................................. 11.90 ACCC v Jones (No 5) [2011] FCA 49 ......................................................................................... 9.100 ACCC v Jutsen (No 3) (2011) 206 FCR 264 ................................................................... 9.100, 10.40 ACCC v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 ........................................................... 18.225 ACCC v Marksun Australia Pty Ltd (2011) ATPR ¶42-363 ............................................................. 9.35 ACCC v Oceana Commercial Pty Ltd (2004) ATPR (Digest) ¶46-244 ....................................... 11.140 ACCC v Original Mama’s Pizza & Ribs (2008) ATPR ¶42-236; [2008] FCA 370 .......... 11.250, 11.285, 11.290 ACCC v Panasonic Australia Pty Ltd (2010) 269 ALR 622 ........................................................ 11.190 ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 ............................................................. 11.85 ACCC v Purple Harmony Plates Pty Ltd [2001] FCA 1062 ......................................................... 9.100 ACCC v Reebok Australia Pty Ltd (2015) ATPR ¶42-501 ............................................................... 9.35 ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 ..................................................... 11.155 ACCC v Sampson (2011) ATPR ¶42-374 ................................................................................. 10.105 ACCC v Sensaslim Australia Pty Ltd (in liq) (No 1) (2011) 196 FCR 566 .................................... 9.100 ACCC v Seven Network Ltd (2007) 244 ALR 343 .................................................................... 11.245 ACCC v Signature Security Group Pty Ltd (2003) ATPR ¶41-908 ............................................. 11.190 ACCC v Singtel Optus Pty Ltd [2010] FCA 1177 ............................................ 11.185, 11.190, 11.200 ACCC v Singtel Optus Pty Ltd (No 3) (2010) 276 ALR 102 ....................................................... 11.70 ACCC v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 ...................................................... 11.200 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (2015) ATPR ¶42-503; [2015] FCA 25 ............................................................................................................ 10.120, 11.135, 11.140 ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 ...................................................... 11.90, 11.190 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640; 304 ALR 189 ......... 11.60, 11.70, 11.185, 11.190 ACCC v Target Australia Pty Ltd (2001) ATPR ¶41-840 ............................................................ 11.170 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 .............. 11.60, 11.90, 11.170, 11.185, 11.190 ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 ................................................... 11.10, 11.85 ACCC v Trading Post Australia Pty Ltd (2011) 197 FCR 498 ...................................................... 11.45 ACCC v Valve Corporation (No 3) [2016] FCA 196 .............................. 9.95, 16.125, 16.140, 18.275 ALDI Stores v EFTPOS Payments Australia Ltd (2011) ATPR ¶42-371 ........................................ 11.135 ANZ Banking Group Ltd v Curlett, Cannon & Galbell Pty Ltd [1992] 2 VR 647 ......................... 13.50

x

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

ASIC v Fortescue Metals Group Ltd (2011) 190 FCR 364 ........................................................ 11.150 ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201 .............................................. 11.150 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1991) 27 FCR 460 .................... 16.125 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (2001) ATPR (Digest) ¶46-213 ....... 11.115 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 ....................... 11.115 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 ....... 9.05, 11.05, 11.145 Ackers v Austcorp International Ltd [2009] FCA 432 ................................................................ 10.115 Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102 .................................................... 16.55, 18.80 Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 ............................................................................................................................... 10.55 Adams v J & D’s Used Cars Ltd (1983) 26 Sask R 40 ................................................................. 18.70 Advanced Switching Services Pty Ltd v State Bank of New South Wales [2007] FCA 954 ......... 11.125 Aitken Agencies Ltd v Richardson [1967] NZLR 65 .................................................................... 5.140 Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418 ................................................ 18.275 Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72 .................................................................................................................... 18.70 Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873 ................. 7.590, 10.120, 11.125 All Covers and Accessories Pty Ltd v Sidawi (2012) 36 VR 113 .................................................... 6.90 Alley v Quayside [2011] NSWCTTT 228 .................................................................................. 16.340 Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676 .......................................................................................................... 4.40, 8.550, 13.90 Amadio Pty Ltd v Henderson (1998) 81 FCR 149 .................................................................... 11.150 Anderson v Lockhart [1991] 1 Qd R 501 ................................................................................... 13.60 Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400 .................................. 6.350 Andrews Bros (Bournemouth) Ltd v Singer & Co Ltd [1934] 1 KB 17 ........................................ 8.390 Apand Pty Ltd v The Kettle Chip Company Pty Ltd (1994) 52 FCR 474 ................................... 11.225 Apco Service Stations Pty Ltd v ACCC (2005) ATPR ¶42-078 ................................................... 18.225 Arcardi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR ¶40-473 ............................. 12.120 Argy v Blunts (1990) 26 FLR 112 ....................................................... 10.75, 10.100, 10.105, 10.120 Armagas Ltd v Mundogas SA [1986] 1 AC 717 ......................................................................... 7.640 Armory v Delamirie (1722) 1 Strange 506; 93 ER 664 .............................................................. 15.80 Arturi v Zupps Motors Pty Ltd (1980) ATPR ¶40-189 ................................................................. 16.10 Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106 ....................................................................... 11.90 Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 ..................................... 8.240, 16.385 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25 ................................................................................................ 4.40, 8.560, 13.90 Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205; (1996) 14 ACLC 952; [1996] NSWSC 119 ...................................................................... 4.40 Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 .............. 11.10, 11.85, 11.90, 11.175 Atkinson v Hastings Deering (Queensland) Pty Ltd (1985) 71 ALR 93 ..................................... 16.210 Auckland Property Restoration Ltd v Blackford (Unreported ...................................................... 18.70 Australian Beauty Trade Suppliers Ltd v Conference & Exhibition Organisers Pty Ltd (1991) ATPR ¶41-107 ...................................................................................................................... 10.20 Australian Industrial Relations Commission, Re; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216 ........................................................................................... 10.55 Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 ........................................................... 8.270 Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1983) 66 FLR 453 ............... 11.235 Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1985) 58 ALR 549 ............... 11.235 Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 .................................. 11.225

B BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2010] NSWSC 1352 ...................................... 11.125 BG Transport Service Ltd v Marston Motor Co Ltd [1970] 1 Lloyd’s Rep 371 .............................. 6.40 BHP Coal Pty Ltd v O and K Orenstein and Koppel AG [2008] QSC 141 ................................. 12.130 BHP Steel Ltd v HH Robertson (Australia) Pty Ltd [2002] NSWSC 336 ....................................... 8.570 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 ............... 12.145, 12.165

TABLE OF CASES

xi

BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 ................ 12.135 BS Brown & Sons Ltd v Craiks [1970] 1 WLR 752 ..................................................................... 8.270 Baldry v Marshall [1925] 1 KB 260 ............................................................................................ 8.370 Baltic Shipping Company v Dillon (1993) 176 CLR 344 ............................................................ 12.30 Baratta v TPA Pty Ltd [2012] VCAT 679 ................................................................................... 16.305 Barrow, Lane & Ballard v Phillip Phillips & Co [1929] 1 KB 574 ................................................. 8.610 Bartlett v Sydney Marcus Ltd [1965] 1 WLR 1013 ................................................................... 16.210 Bateman v Slayter (1987) 71 ALR 553 ................................................ 11.35, 11.140, 11.150, 11.155 Bayliss v Cassidy [1998] QSC 186 ............................................................................................. 5.130 Beale v Taylor [1967] 1 WLR 1193 ............................................................................................ 8.240 Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 ........... 4.170, 4.180 Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR ¶41-043 .............................................. 11.160 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 ............. 10.115, 10.125, 11.35, 11.135, 11.140, 12.95, 12.165 BestCare Foods Ltd v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) [2013] NSWSC 1287 ..................................................................................................................... 12.105 Bevanere Pty Ltd v Lubidineuse (1984) 7 FCR 325 .................................................................. 10.105 Bialous v Budget Vehicles Pty Ltd [2013] NSWCTTT 130 ......................................................... 16.305 Big Top Hereford Pty Ltd v Thomas (2006) 12 BPR 23,843; [2006] NSWSC 1159 ..................... 4.280 Black v Smallwood (1966) 117 CLR 52 ..................................................................................... 7.520 Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 ................................................................. 11.220 Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536 .................................. 11.145 Bond v Barry (2007) 73 IPR 490 ............................................................................................. 11.235 Bond Corporation Pty Ltd v Theiss Contractors Pty Ltd (1987) 14 FCR 215; 71 ALR 615 ........ 10.105, 12.60, 16.125 Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 .............................................. 12.100 Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725 .......................... 8.1040, 8.1050, 8.1080 Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94 ................................................. 11.135 Boulas v Angelopoulos (1991) 5 BPR 11,477 ........................................................................... 8.1110 Bowler v Hilda Pty Ltd (1998) 80 FCR 191 ................................................................. 11.140, 11.160 Bowler v Hilda Pty Ltd [2000] FCA 899 ................................................................................... 12.180 Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261 ................................ 18.05 Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 ......................................................................... 9.95 Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401 ............................................................... 11.95 Bridges v Hawkesworth (1851) 21 LJQB 75 ................................................................................ 5.30 Bristol-Meyers Squibb Australia Pty Ltd v Astra Pharmaceuticals Pty Ltd (1999) 45 IPR 144 ....... 11.20 Brockway v Pando (2000) 22 WAR 771 ................................................................................... 10.120 Broken Hill South v Commissioner of Taxation (NSW) (1937) 56 CLR 337 ................................ 9.130 Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 ................................................................ 11.05 Buckinghamshire County Council v Moran [1990] Ch 623 ......................................................... 5.40 Buckland v Clarke (1956) 56 SR (NSW) 185 ............................................................................. 7.790 Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115 ............................................ 16.100 Burdon v Outback Generators Pty Ltd [2013] NSWCTTT 270 ................................................. 16.305 Burg Design Pty Ltd v Wolki (1999) ATPR ¶41-689; 162 ALR 639 ................................ 11.120, 11.160 Burton v Chad One Pty Ltd [2013] NSWDC 301 .................................................................... 16.270 Buseska v Sergio (1990) 102 FLR 157 ....................................................................................... 7.260 Business and Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902 .................... 16.80, 18.225 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 ......... 11.10, 11.20, 11.40, 11.55, 11.60, 11.70, 11.75, 11.80, 11.85, 12.130 Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185; [1966] HCA 38 ...................... 3.30 Byers v Dorotea Pty Ltd (1987) ATPR ¶40-760 ......................................................................... 11.140

C CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 ..................................................... 11.160 CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193 .............................. 11.125, 12.70 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 ......... 11.20, 11.210 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 ...... 11.95

xii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Cadorange Pty Ltd v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 ........................................ 13.120 Caffwy v Leatt-Hayter (No 3) [2013] WASC 348 ...................................................................... 11.125 Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822 ............................. 9.100 Caltex Australia Petroleum Pty Ltd v Charbden Haulage Pty Ltd [2005] FCAFC 271 .................. 12.60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 ............. 11.10, 11.20, 11.60, 11.75, 11.145, 11.160, 11.165, 12.75, 12.80 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 ....... 11.05, 11.10, 11.65, 11.70, 11.85, 11.90, 11.95, 11.165, 11.210, 12.230 Cantarella Bros Pty Ltd v Valcorp Fine foods Pty Ltd (2002) ATPR ¶41-856 ................................ 11.65 Caratun v Caratun (1992) 96 DLR (4th) 404 ............................................................................... 2.30 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-100 ........................................ 16.360 Carminco Gold & Resources Ltd v Findlay & Co Stokbrokers (Underwriters) Pty Ltd (2007) 243 ALR 472 ........................................................................................................................ 7.540 Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025; ASC 55-553 .......... 16.75, 16.100, 16.355 Carroll v Pollock Wholesale Pty Ltd [2014] ACAT 14 ................................................................ 16.335 Cary Boyd v Agrison Pty Ltd [2014] VMC 23 .................................................. 16.380, 16.385, 18.35 Cassidy v Medical Benefits Fund of Australia Ltd (2002) ATPR ¶41-892 .................................... 11.170 Cassidy v NRMA Health Pty Ltd (2002) ATPR ¶41-891 ............................................................. 12.175 Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 ......... 16.130 Cehave NV v Bremer Handelsgesellschaft mbH [1976] QB 44 ................................................. 16.260 Cervi v Letcher [2011] VSC 156 .................................................................................................. 5.30 Chalmers v Pardoe [1963] 1 WLR 677; [1963] 3 All ER 552 ..................................................... 13.120 Channel Seven Brisbane Pty Ltd v ACCC (2008) 173 FCR 91 .................................................. 11.245 Chapman Bros v Verco Bros and Co Ltd (1933) 49 CLR 306; [1933] HCA 23 ............................ 5.100 Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions [2014] NSWCATCD 17 .......... 17.80 Christie Owen & Davies Ltd v Rapacioli [1974] QB 781 ............................................................ 7.430 Cicchini v Brabazon [2014] QCAT 671 .................................................................................... 16.305 Cinema Centre Services Pty Ltd v Eastaway Air Conditioning Pty Ltd (1999) ASAL 55-034 ...... 16.100 Clifford v Vegas Enterprises [2011] FCAFC 135 ........................................................................ 11.105 Clough Mill Ltd v Martin [1984] 3 All ER 982; [1985] 1 WLR 111 ..................................... 4.50, 13.90 Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107 ................................................................... 6.50 Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 ................................. 9.35, 11.170 Colley v Overseas Exporters [1921] 3 KB 302 ............................................................................ 8.960 Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601 .............................. 11.20 Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd (1993) ATPR (Digest) ¶46-106 .......... 17.30 Committee for the Commonwealth of Canada v Canada [1991] 1 SCR 139; 77 DLR (4th) 385 ........................................................................................................................................ 3.20 Commonwealth of Australia v Tasmania (1983) 46 ALR 625 ..................................................... 10.20 Con Agra Inc v McCain Foods (Aust Pty Ltd (1992) 33 FCR 302 ............................................. 11.210 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ............. 10.75, 10.95, 10.105, 11.05, 11.210 Contact Energy Ltd v Jones [2009] 2 NZLR 830 ......... 16.55, 16.205, 16.260, 16.265, 18.70, 18.105 Cook v Rogers (1946) 46 SR (NSW) 229 ................................................................................... 7.790 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZ DCR Lexis 19 ...... 16.255, 18.35, 18.60 Cooper v Cadwalader (1904) 5 TC 101 ...................................................................................... 9.95 Corrections Corporation of Australia Pty Ltd v Commonwealth (2000) 104 FCR 448 ................ 10.55 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 .......... 11.25, 11.30 Costello v Derbyshire Constabulary [2001] EWCA Civ 381; [2001] 3 All ER 150; [2001] 1 WLR 1437 ............................................................................................................................ 15.80 Coughlin v Gillison [1899] 1 QB 145 ........................................................................................ 6.240 Council of the City of Sydney v West (1965) 114 CLR 481 .......................................................... 6.40 Council of the Shire of Noosa v Farr [2001] QSC 060 ............................................................... 17.65 Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR 419 ........................... 11.20 Courtney v Medtel Pty Ltd (2003) 126 FCR 219 ..................................................................... 16.215 Cox v Mosman [1909] QSR 45 ................................................................................................. 7.140 Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 ............................................................................................................... 7.130, 7.260 Crawford v Mayne Nickless Ltd (1992) ATPR (Digest) ¶46-091 ................................................. 16.75 Crocodile Marketing v Griffith Vintners (1989) 28 NSWLR 539 ............................................... 12.190 Cummings v Claremont Petroleum NL (1996) 185 CLR 124; [1996] HCA 19 .............................. 2.30

TABLE OF CASES

xiii

D Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 .............................................. 11.40, 11.55 Dargusch v Sherley Investments Pty Ltd [1970] Qd R 338 ........................................................ 7.330 Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 ..................................... 10.80 David Jones Ltd v Willis (1934) 52 CLR 110 ............................................................................ 16.215 Dawson v LNG Holdings [2008] NSWSC 137 ......................................................................... 11.125 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 ..................... 12.45, 12.50 Debenham v Mellon (1880) 5 QBD 394 ................................................................................... 7.190 Dee Trading Co Pty Ltd v Baldwin [1938] VLR 173 ................................................................... 5.170 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 ................................................... 11.100, 12.215 Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 ................................................... 6.270 Derham v Amev Life Assurance Co Ltd (1981) 56 FLR 34 .......................................................... 7.130 Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 ....................... 8.50, 8.207 Dib Group Pty Ltd v Ventouris Enterprises Pty Ltd (2011) 284 ALR 601; [2011] NSWCA 300 .... 11.140 Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248; [2004] NSWCA 58 .............. 11.145, 12.45, 12.60 Dillon v Baltic Shipping Co (1989) 21 NSWLR 614 ................................................................... 17.05 Dinmore Meatworks Pty Ltd v Kerr (1962) 108 CLR 628; [1962] HCA 47 .................................. 13.60 Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559 ............................ 9.150 Dougan v Ley (1946) 71 CLR 142 ........................................................................................... 8.1100 Douglas v Hello! Ltd [2007] UKHL 21 ....................................................................................... 5.140 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 .......................... 11.50, 11.75, 11.140 Dr Martens Australia Pty Ltd v Rivers (1999) 95 FCR 136 ........................................................ 11.220 Drummond v Van Ingren & Co (1887) 12 App Cas 284 ............................................................ 8.380 Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) ATPR ¶40-918 ........................ 11.205

E E v Australian Red Cross Society (1991) ATPR ¶41-085; (1991) 27 FCR 310 ....... 10.20, 10.105, 16.10 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 .................................... 11.110, 11.125 Easts Van Villages v Minister Administering the National Parks and Wildlife Act (2001) ATPR (Digest) ¶46-211 ................................................................................................................. 10.70 Eclipse Motors Pty Ltd v Nixon [1940] VLR 49 .......................................................................... 8.970 Effem Foods Ltd v Nicholls [2004] NSWCA 332 ...................................................................... 16.305 Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 ....................................... 8.1140 Elitestone Ltd v Morris [1997] UKHL 15; [1997] 2 All ER 513; [1997] 1 WLR 687 ...................... 4.180 Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd (2008) ATPR ¶42-219 .......... 11.85 Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (2008) 19 VR 358 ........................ 12.120 Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (2000) ATPR ¶41-751 ............................. 11.180

F Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726 ..................................... 12.55 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 ...................... 11.100, 11.105 Fadu Pty Ltd v ACN 008 112 196 Pty Ltd as Trustee of the “International Linen Service Unit Trust” (2007) ATPR ¶41-206 ................................................................................................ 12.20 Fencott v Muller (1983) 152 CLR 570 ....................................................................................... 10.20 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 .............................................. 12.30 Finding v Commonwealth Bank of Australia [2001] 1 Qd R 168 .............................................. 11.125 Finucane v NSW Egg Corp (1988) 80 ALR 486 ............................................................. 11.20, 11.120 Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198 ................... 10.80 Fisher v Automobile Finance Co of Australia Ltd (1928) 41 CLR 167; [1928] HCA 35 ................ 13.60 Flack v National Crime Authority (1998) 156 ALR 501; [1998] FCA 932 ................ 5.40, 5.100, 15.80 Foley v Hill (1848) 2 HLC 28; 9 ER 1002 ................................................................................... 2.110 Forrest v ASIC (2012) 247 CLR 486 ...................................................... 11.85, 11.90, 11.150, 11.155 Four Square Stores (Queensland) Ltd v ABE Copiers Pty Ltd (1981) ATPR ¶40-232 .................. 16.100 Franich v Swannell (1993) 10 WAR 459 ....................................................................... 10.75, 10.100 Frank v Grosvenor Motor Auctions Pty Ltd [1960] VR 607 ....................................................... 16.365

xiv

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 ............ 7.130, 7.210, 7.240 Freestone Auto Sales Pty Ltd v Musulin [2015] NSWCA 160 .................................................... 16.305 Fullwood v Hurley [1928] 1 KB 498 .......................................................................................... 7.340 Futuretronics International Pty Ltd v Gadzhis [1990] ASC 56-009 ........................................... 8.1110

G GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 ........... 10.55 GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23 .................... 11.285 Galbraith & Grant Ltd v Block [1922] 2 KB 155 ........................................................................ 8.770 Gammasonics Institute of Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd (2010) 77 NSWLR 479; [2010] NSWSC 267 ............................................................. 8.30, 16.135 Gardam v George Willis & Co (1988) 82 ALR 415 ..................................................................... 11.40 Gardiner v Suttons Motor (Homebush) Pty Ltd (1983) 48 ALR 142 ......................................... 11.140 Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 .............................. 12.65, 12.130 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 .................................. 12.85, 12.90 General Motors Acceptance Corp Australia v Southbank Traders Pty Ltd [2007] HCA 19 ........... 13.90 General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 ......................... 11.25, 11.80, 11.105 Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 ..................... 12.175, 12.180 George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553 ..................................... 11.190 Gerlach v Pearson [1950] VLR 321 ............................................................................................ 7.430 Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park [2007] NSWCA 151 ....................... 17.65 Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd [1970] 2 NSWR 156; (1970) 44 ALJR 269; [1970] 3 All ER 825 ................................................................................... 5.110, 5.140 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629; 56 IPR 13 ............... 11.20, 11.205 Giorgianni v The Queen (1985) 156 CLR 473 ......................................................................... 12.175 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 ....... 11.35, 11.145, 11.150, 11.155, 11.235 Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 ............................................................................... 16.135, 18.30, 18.35 Goldsbro v Walker [1993] 1 NZLR 394 ......................................................................... 11.40, 18.105 Gollan v Nugent (1988) 166 CLR 18; [1988] HCA 59 ............................................................... 15.80 Goodwin v Ron Heath Tyre Service (SA) Pty Ltd (1999) 74 SASR 508 ........................................ 6.380 Google Inc v ACCC (2013) 249 CLR 435 ..... 11.05, 11.10, 11.15, 11.20, 11.45, 11.60, 11.70, 11.85, 11.95, 12.245 Gould v Vaggelas (1985) 157 CLR 215 ..................................................................................... 12.85 Gould v Vaggelas (1984) 56 ALR 31 ........................................................................................ 11.165 Graham Barclay Oysters Pty Ltd v Ryan (1999) ATPR (Digest) ¶46-191 .................................... 16.360 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 .................................................. 16.360 Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 5) [2010] FCA 313 ............................. 11.50 Granitigard Pty Ltd v Termicide Pest Control Pty Ltd (2011) 281 ALR 1 ..................................... 11.50 Grant v Australian Knitting Mills Ltd (1935) 54 CLR 49; [1936] AC 85 ......................... 8.270, 16.365 Grant v YYH Holdings Pty Ltd [2012] NSWCA 360 ...................................................................... 4.20 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 .................. 17.65 Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91 ................................................................. 11.120 Gregory v Philip Morris Ltd (1988) 80 ALR 455 ....................................................................... 12.100 Griffiths v Conway Ltd [1939] 1 All ER 685 ................................................................ 16.355, 16.365 Guglielman v Trescowthick [2004] FCA 326 ............................................................................ 11.255 Gurr v Hunter Volkswagen [2011] NSWCTTT 146 ................................................................... 16.340

H HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633 ................................................ 12.180, 12.185 HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 .... 12.90, 12.95, 12.110, 12.120 Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 177 .............................................................. 12.155 Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341; 156 ER 145 ...................... 8.1050, 8.1090

TABLE OF CASES

xv

Hague v Committee for Industrial Organization 307 US 496 (1939) ........................................... 3.20 Hamilton v Whitehead (1989) ATPR ¶42-932 .......................................................................... 10.115 Hamond v State of New South Wales (2001) FCA 157 .............................................................. 10.70 Hamps v Darby [1948] 2 KB 311 ................................................................................................ 5.30 Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 ..................................................... 12.50, 12.55 Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31 ...... 16.355 Hardy v Your Tabs Pty Ltd [2000] NSWCA 150 ........................................................................ 11.125 Hardy & Co v Hillerns and Fowler [1923] 2 KB 490 .................................................................. 8.830 Hardy Wine Co Ltd v Tasman Liquor Traders Pty Ltd (2006) 95 SASR 21 ................................... 8.580 Harling v Eddy [1951] 2 KB 739 .............................................................................................. 8.1110 Haros v Linfox Australia Pty Ltd [2012] FCAFC 42 ..................................................................... 12.55 Havas v Cornish & Co Pty Ltd [1985] Qd R 353 ........................................................................ 7.370 Havyn Pty Ltd v Webster (2005) 220 ALR 211 ...................................... 11.55, 11.140, 12.85, 12.105 Hazlett v Presnell (1982) 149 CLR 107; 56 ALJR 884; 43 ALR 1; [1982] HCA 58 .......................... 4.70 Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 .............................................. 7.230, 7.240, 7.260 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546; 79 ALR 83 ........... 11.25, 11.35, 11.125, 11.160, 12.70, 12.220 Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 .............................. 8.270, 16.365 Henville v Walker (2001) 206 CLR 459 ................ 12.35, 12.40, 12.55, 12.65, 12.85, 12.120, 12.130 Heydon v NRMA Ltd (2000) 51 NSWLR 1 ............................................................................... 12.185 Hoath v Connect Internet Services (2006) 229 ALR 566; [2006] NSWSC 158 ........................... 5.140 Hobson v Gorringe [1897] 1 Ch 182 ........................................................................................ 4.230 Holland v Hodgson (1872) LR 7 CP 328 ................................................................................... 4.180 Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120 ................................................................. 12.15 Hoover (Aust) Pty Ltd v Email Ltd (1991) ATPR ¶41-149 ............................................................ 11.20 Hoover (Aust) Pty Ltd v Email Ltd (1991) 104 ALR 369 ........................................................... 11.205 Hope v Bathurst City Council (1980) 144 CLR 1 ......................................................................... 9.95 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 .............................................. 11.05, 11.70, 11.130, 11.165, 11.210, 11.215 Hosking v The Warehouse Ltd (Unreported ............................................................................... 18.70 Houghton v Arms (2006) 225 CLR 553 ........................................................................ 10.45, 10.100 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 .................................................................. 7.140 Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 .................................. 10.20 Hungier v Grace (1972) 127 CLR 210 ....................................................................................... 10.55 Hydraulic Engineering Co v McHaffie (1879) 4 QBD 670 ........................................................ 8.1090

I I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 .............. 12.35, 12.40, 12.50, 12.65 ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 .... 12.230, 12.240 IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 ....................................... 11.10, 11.150, 11.170 IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 ....................................... 11.160 Ibrahim v Phan [2007] NSWCA 215 ........................................................................................ 11.125 Indian Oil Corp Ltd v Greenstone Shipping Co SA [1988] QB 345 ............................................ 4.280 Ingot Capital Investment v Macquarie Equity Capital Markets (No 6) [2007] NSWSC 125 ........ 12.70 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 .......................................................................................... 12.45, 12.95 Inland Revenue, Commissioners of v Lysaght [1928] AC 234 ...................................................... 9.95 International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 .......................................................................................................................... 7.20 Investmentsource Corporation Pty Ltd v Knox Street Apartments Pty Ltd (2002) 56 NSWLR 27 ........................................................................................................................................ 7.440

J J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 ...................................................... 10.55 JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378 ...................... 8.830 JB & BL Nominees Pty Ltd v McCormack [1982] WAR 258 ........................................................ 8.190

xvi

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Jackson v McClintock (1997) 8 TCLR 161 ................................................................................. 17.40 Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) ¶46-102 ................................................. 11.20 Jainran Pty Ltd v Boyana [2008] NSWSC 468 ............................................................... 12.80, 12.130 James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 ................ 11.35, 11.150, 11.155, 12.120 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; ATPR ¶41-186 .......................... 9.35, 12.45 Jansz v GMB Imports Pty Ltd [1979] VR 581 ............................................................................... 8.80 Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 .................. 16.80 Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd (1994) 2 Qd R 515 ............... 12.120 Jelin Pty Ltd v Murdoch Pty Ltd (1985) ATPR ¶40-562 ............................................................. 11.140 Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144 .................................................................. 11.90 Jillawarra Grazing Company v John Shearer Ltd (1984) ATPR ¶40-441 .................................... 16.100 John Bevins Pty Ltd v Cassidy (2003) 135 FCR 1 ..................................................................... 12.180 John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249 ............. 11.20, 11.40, 11.55, 11.140 Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 ......................... 11.25, 11.30, 11.120 Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR ¶41-794 ............................................... 11.165 Jones v ACCC [2010] FCA 481 .................................................................................................. 9.100 Jones v Canavan [1972] 2 NSWLR 236 ..................................................................................... 7.340 Jones v West Star Motors Pty Ltd (1995) ATPR ¶41-447 ................................................ 16.75, 16.210 Juniper Property Holdings No 15 Pty Ltd v Caltabiano [2016] QSC 5 ........................................ 12.50

K Kabwand v National Australia Bank (1989) ATPR ¶40-950 ....................................................... 11.125 Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR ¶41-265 ..................................... 12.70 Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 ........................................................ 12.120 Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 .................. 4.230 Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 .................................. 12.75 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853 ............................................................................................................................ 12.120 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048 ................................................................................................................. 12.75 Keighley, Maxsted & Co v Durant [1901] AC 240 ..................................................................... 7.550 Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 ................................. 11.195, 12.180, 12.190 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) ATPR ¶41-576 ........................................... 12.85 Ketchell v Master Of Education Services Pty Ltd (2007) 226 FLR 169 ........................................ 12.15 Kettle Chip Co Pty Ltd, The v Apand Pty Ltd (1993) 46 FCR 152 ............................................. 11.225 Khoury v Sidhu [2011] FCAFC 71 ........................................................................................... 12.135 Khoury v Sidhu (No 2) [2010] FCA 1320 ................................................................................ 12.135 Kiley v MCI Technologies Pty Ltd [2006] VCAT 2543 ............................................................... 18.275 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) ¶46-054 ............................... 11.25 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 ...................................... 12.65, 12.85, 12.90 Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 257 .................................................................................................................................... 11.220 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2011] FCAFC 119 ........ 11.80 Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 ............................. 7.660 Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 .................................................... 17.65 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 ............................................. 11.20, 11.110 Kremen v Online Classifieds Inc 337 F 3rd 1024 ....................................................................... 5.140 Ku-ring-gai Co-operative Building Society (No 12) Ltd, Re (1978) 36 FLR 134 .............. 10.25, 10.75, 10.105 Kuwait Airways Corp v Iraqi Airways Co [2002] UKHL 19; [2002] 2 AC 883 ............................... 5.140 Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459 .......................................... 8.820 Kyriacou v Manakis [2006] NSWSC 804 ................................................................................... 4.220

TABLE OF CASES

xvii

L LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1956) 56 SR (NSW) 81 ...................................................................................................................................... 16.390 Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 .............................. 11.80, 11.105 Laminex (Aust) Pty Ltd v Coe Manufacturing Co (1998) ATPR ¶41-610 .................................. 18.275 Laminex (Aust) Pty Ltd v Coe Manufacturing Co [1999] NSWCA 370 ..................................... 18.275 Lampton’s Executors v Preston’s Executors 24 Ky 455 (1829) ..................................................... 4.40 Latrobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Ltd (2011) 273 ALR 774 ............................................................................................................................. 12.110 Law v MCI Technologies Pty Ltd [2006] VCAT 415 .................................................................. 18.275 Laws v GWS Machinery Pty Ltd [2007] NSWSC 316 ............................................................... 16.110 Lazenby Garages Ltd v Wright [1976] 1 WLR 459 ................................................................... 8.1010 Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 .................. 11.20, 11.80, 11.105, 12.75 Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344 ................................... 11.215 Leigh v Taylor [1902] UKHL 1; [1902] AC 157 ........................................................................... 4.180 Lester-Travers v City of Frankston [1970] VR 2 .......................................................................... 5.170 Levene v Commissioners of Inland Revenue [1928] AC 217 ........................................................ 9.95 Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 ................................................... 9.100 Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 ..................................... 11.20, 11.55 Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 ............................................ 10.115 Lockhart v Osman [1981] VR 57 ............................................................................................. 8.1150 London Plywood Ltd v Nasic Oak Ltd [1939] 2 KB 343 ............................................................. 8.790 Lovick & Son Developments Pty Ltd v Doppstadt Australia Pty Ltd [2012] NSWSC 529 .......... 12.160 Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 ...................................................................... 7.400 Lymquartz v 2 Elizabeth Bay Road [2007] NSWSC 457 ........................................................... 11.180 Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114 ........................................ 11.140

M M K Hutchence (Trading as “INXS”) v South Sea Bubble Co (1986) ATPR ¶40-667 ................. 11.175 Mabo v Queensland (No 2) (1992) 175 CLR 1; [1992] HCA 23 ................................................ 2.110 MacCormick v Nowland (1988) ATPR ¶40-852 ....................................................................... 10.130 Mackman v Stengold Pty Ltd (1991) ATPR ¶41-105 ................................................... 12.180, 12.185 Macquarie Bank Ltd v Seagle [2008] FCA 1417 ........................................................................ 9.100 Madden v Seafolly Pty Ltd [2012] FCA 1346 ............................................................................. 9.100 Makita (Aust) Pty Ltd v Black & Decker (A’asia) Pty Ltd (1990) 18 IPR 270 ................................ 11.20 Makower, McBeath & Co Pty Ltd v Dalgety & Co Ltd [1921] VLR 365 ...................................... 6.170 Malam v Graysonline, Rumbles Removals and Storage (General) [2012] NSWCTTT 197 ......... 16.170 Manbre Saccharine Co Ltd v Corn Products Co Ltd [1919] 1 KB 198 ........................................ 8.820 Maple Flock Co v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148 ....................... 8.800 March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 ............................................ 12.40, 12.130 Mark Bain Constructions Pty Ltd v Avis [2012] QCA 100 ........................................................... 12.95 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; 158 ALR 333 ............ 12.45, 12.85, 12.105, 12.220 Marsh v Alabama 326 US 501 .................................................................................................... 3.20 Marsh v Joseph [1897] 1 Ch 213 .............................................................................................. 7.140 Marsh & McLennan Pty Ltd v Stanyers Transport Pty Ltd [1994] 2 VR 232 ................................ 7.540 Marwood v Agrison Pty Ltd [2013] VCAT 1549 ......................................................................... 18.40 Max Christmas Real Estate v Schumann Marine Pty Ltd [1987] 1 Qd R 325 .............................. 7.430 Maxwell v Murphy (1957) 96 CLR 261 ..................................................................................... 16.60 May v Ceedive Pty Ltd [2006] NSWCA 369 .............................................................................. 4.180 Mayne Nickless v Crawford (1992) 59 SASR 490; [1992] ASC 56-188 ............................ 17.05, 17.85 Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 ................................................... 7.550 McCarthy v Australian Rough Riders Association Inc (1988) ATPR ¶40-836 ................................ 10.20 McCarty v Mc Intyre [1999] FCA 784 ....................................................................................... 12.40 McComb v Martin Box Marine Holdings Pty Ltd (1992) 8 SR (WA) 193 .................................... 6.160 McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 ................................. 11.135 McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 ....................................................... 4.150

xviii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

McMahon’s (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185 ................................................... 4.220 McQuillan v Thomas [2012] NSWCTTT 107 ........................................................................... 16.335 McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455 .......... 11.95, 11.165 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 .............. 11.170, 11.185, 11.190, 11.195, 12.180, 12.185, 12.190 Medtel Pty Ltd v Courtney (2003) 130 FCR 182 ........................................................ 16.215, 16.305 Mehta v Commonwealth Bank of Australia (1990) ATPR ¶41-026 ........................................... 12.120 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 .... 12.40, 16.305, 16.360 Mercland Investment Group Pty Ltd v Duncalm Pty Ltd [2012] FCA 183 ................................ 11.125 Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 .......... 11.115, 11.120 Microbeads AG v Vinhurst Road Markings Ltd [1975] 1 WLR 218 ............................................ 16.190 Midgley Estates Ltd v Hand [1952] 2 QB 432 ........................................................................... 7.430 Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 ....................................................................... 2.110 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 ............................................................. 11.05, 11.35, 11.65, 11.100, 11.105, 11.110, 11.130 Miller Associates (Australia) Pty Ltd v Bennington Pty Ltd [1975] 2 NSWLR 506 ........................ 7.530 Mister Figgins Pty Ltd v Centepoint Freeholds Pty Ltd (1981) 36 ALR 23 ................................ 12.215 Mitchell v Ealing London Borough Council [1979] QB 1 ........................................................... 6.140 Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984] WAR 365 ....... 7.480 Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 ................................... 7.440 Morris v CW Martin & Sons Ltd [1966] 1 QB 716 ............................................... 6.170, 6.180, 6.190 Motor Dealers Credit Corp Ltd v Overland (Sydney) Ltd (1931) 31 SR (NSW) 516 ................... 5.140 Mullens v Miller (1882) 22 Ch D 194 ..................................................................................... 10.120 Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274; (1989) ATPR ¶40-926 ............. 12.35, 12.6512.220, Munro v Southern Dairies Ltd [1955] VLR 332 .......................................................................... 5.170 Munro v Willmott [1949] 1 KB 295 ........................................................................................... 7.180 Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388 ............................ 11.20, 12.110, 12.120

N NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 ................................................... 10.115 NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399 ...................... 10.55 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 ............. 10.55, 10.60 Nagle v Miller (1904) 29 VLR 765 ............................................................................................... 4.70 National Bus Co Pty Ltd v Commissioner of Taxation [1998] 143 FCA ...................................... 4.140 National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8; [1981] AC 675 ...................... 4.110 National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 .......... 11.10, 11.90, 11.130, 11.190, 11.285 Nella v Kingia Pty Ltd (1989) ATPR (Digest) ¶46-046 ................................................................ 12.65 Nesbit v Porter [2000] 2 NZLR 465 ............................................................................. 16.260, 18.60 Nescor Industries Group Pty Ltd v Miba Pty Ltd (1998) ATPR ¶41-609 .................................... 11.140 New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 ..................................... 12.120 Nibali v Sweeting & Denney (WA) Pty Ltd (1989) Aust Torts Reports 80-258 .............................. 6.90 Niblett v Confectioners’ Materials Co Ltd [1921] 3 KB 387 ..................................................... 16.185 Nike International Ltd v Campomar Sociedad Limitada (1996) ATPR ¶41-518 ........................... 11.70 Nixon v Slater & Gordon (2000) ATPR ¶41-765 ...................................................................... 16.125 Noonan v Martin (1987) 10 NSWLR 402 .................................................................................. 7.740 Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 .... 11.25, 11.35, 11.115 Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 .................................................. 9.95, 11.115 Norris v Sibberas [1990] VR 161 ............................................................................................... 7.590 North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 ..................... 12.40, 12.95 North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1 ...... 12.105 Norton v Hervey Motors Ltd [1996] DCR 427; 5 NZBLC 99-387 ............................................ 16.255

TABLE OF CASES

xix

O OBG Ltd v Allan [2005] EWCA Civ 106; [2005] QB 762 ............................................................ 5.140 O’Brien v Smolonogov (1983) ATPR ¶40-418 .............................................................................. 9.90 O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 ......................... 11.135, 12.100 Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd [2015] FCA 460 ............... 12.235 Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd (1946) 63 RPC 39 .............................................................................................................................. 11.215 Ogden, Contech Technical Services Pty Ltd v Unmanned Systems Asia Pacific (General) [2013] NSWCTTT 378 ......................................................................................................... 16.80 Ohio v Shaw 65 NE 875 (1902) .................................................................................................. 5.30 Oldham v Lawson [1976] VR 654 ............................................................................................. 5.170 Onesteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1 ............... 8.970 Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 .............. 11.45 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193; [2011] WASCA 76 .... 11.25, 11.30, 11.100, 11.110, 11.165, 12.40

P Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 ............................................................. 7.260 Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] AC 867 ..................... 8.700 Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; [2005] HCA 28 .................................... 13.50 Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711 ....... 7.260 Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548 ................... 10.65, 10.70 Parastatidis v Kotaridis [1978] VR 449 ............................................................................ 6.240, 6.330 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 ....... 9.40, 11.05, 11.20, 11.60, 11.65, 11.70, 11.95, 11.165, 11.210, 11.220 Parker v British Airways Board [1982] 1 QB 1004 ............................................................... 5.30, 5.40 Parker v McKenna (1874) 10 Ch App 96 .................................................................................. 7.340 Parkview (Keppell) Pty Ltd v Mytarc Pty Ltd (1984) 3 FCR 186 ................................................. 11.65 Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1 ........................................................ 5.140 Patten v Thomas Motors Pty Ltd [1965] NSWR 1457 ................................................................ 8.230 Pavich Pty Ltd v Bobra Nominees (1988) ATPR (Digest) ¶46-039 .............................................. 12.65 Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46 ........ 5.130, 5.140, 5.160, 5.170, 6.380, Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 ......................... 11.30 Pereira v Director of Public Prosecutions (1988) 82 ALR 217 ...................................... 11.195, 12.190 Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liq) [2011] NSWCA 367 ............. 9.50, 12.130, 12.140 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 ......................... 11.120, 16.360 Phillips v Brooks Ltd [1919] 2 KB 243 ....................................................................................... 8.690 Pioneer Container KH Enterprise (cargo owners) v Pioneer Container (owners) [1994] 2 AC 324 ...................................................................................................................................... 6.200 Playcorp Group of Companies Pty Ltd v Peter Bodum A/S [2010] FCA 23 ............................... 11.220 Plimer v Roberts (1997) 80 FCR 303 ............................................................................ 10.95, 10.105 Pojzak v Congeo Nominees Pty Ltd [2013] VCAT 2175 ............................................................. 18.75 Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385 .................... 16.125, 17.10 Popov v Hayashi 2002 WL 31833731 (Cal Super 2002) .............................................................. 5.20 Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 ........................................... 11.80, 11.105 Potts v Miller (1940) 64 CLR 282 ................................................................................... 12.85, 12.90 Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd (2005) 220 ALR 211 ............................... 11.2012.75, Prestia v Aknar (1996) 40 NSWLR 165 ......................................................................... 10.85, 10.105 PruneYard Shopping Center v Robins 447 US 74 (1980) ............................................................. 3.20

Q Quickenden v O’Connor, Commissioner of Australian Industrial Relations Commission (2001) 109 FCR 243 ............................................................................................................ 10.20 Quinlivanc v ACCC (2004) 160 FCR 1 .................................................................................... 12.180

xx

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Queensland Aggregates Pty Ltd v TPC (1981) ATPR ¶40-236 .................................................. 16.125

R R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190 ........ 10.20 R v Judges of Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd (1978) 142 CLR 113 ...................................................................................................................... 12.230 R v Ngan [2007] NZSC 105; [2008] 2 NZLR 48 ............................................................. 5.110, 5.140 R v Nousis [2004] VSCA 107; 8 VR 381 ..................................................................................... 4.120 R & C Products Pty Ltd v SC Johnson & Sons Pty Ltd (1993) FCR 188 ...................................... 11.20 RJ Mabarrack Pty Ltd v King (1971) 1 SASR 313 ....................................................................... 7.430 RT & YE Falls Investments Pty Ltd v New South Wales [2001] NSWSC 1027 ................................ 9.95 RV Ward Ltd v Bignall [1967] 1 QB 534 ..................................................................................... 8.930 Rafferty v Time 2000 West Pty Ltd (No 4) [2010] FCA 725 ...................................................... 12.185 Raffety v Madgwicks (2012) 203 FCR 1 ..................................................................... 12.185, 12.190 Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 .............................. 16.210, 16.360 Razdan v Westpac Banking Corporation [2014] NSWCA 126 .................................................... 12.50 Read v Nerey Nominees Pty Ltd [1979] VR 47 .......................................................................... 17.65 Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd (2001) 53 IPR 481 ...................... 11.225 Red House Farms (Thorndon) Ltd v Catchpole [1976] 244 Estates Gazette 295 .......................... 5.30 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 ....................................................................... 7.340 Regent’s Pty Ltd v Subaru (Aust) Pty Ltd (1996) ATPR ¶41-463 ............................................... 12.235 Reid v Smith (1905) 3 CLR 656; [1905] HCA 54 ....................................................................... 4.180 Reinhold v Ford Motor Company [2014] QCAT 671 ............................................................... 16.340 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 ...................... 12.160 Rendell v Associated Finance Pty Ltd [1957] VR 604 .................................................................. 4.140 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 ..... 11.25, 11.30, 11.100 Rick Cobby Haulage Pty Ltd v Simsmetal Pty Ltd (1986) 43 SASR 533 ...................................... 6.170 Riley v Penttila [1974] VR 547 ..................................................................................................... 5.30 Robb v Green [1895] 2 QB 315 ................................................................................................ 7.330 Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) ATPR ¶41-710 .......................... 10.105 Robinson Motors Pty Ltd v Fowler [1982] Qd R 374 ................................................................. 8.750 Rochefoucauld v Boustead [1897] 1 Ch 196 ............................................................................. 15.90 Rogers v Whitaker (1992) 175 CLR 479 .................................................................................... 17.65 Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558 ...................................... 8.570 Roots v Oentory Pty Ltd [1983] 2 Qd R 745 ............................................................................. 7.590 Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd (1999) ATPR ¶41-706 ................................... 11.215 Rowland v Divall [1923] 2 KB 500 ............................................................................... 8.230, 8.1030 Rural Press Ltd v ACCC (2003) 216 CLR 53 ............................................................................. 12.180 Russell v Wilson (1923) 33 CLR 538; [1923] HCA 60 ................................................................. 5.150 Russo v Belcar Pty Ltd (2011) 111 SASR 459 ............................................................................. 8.400 Ryan Connor v Teela Enterprises Pty Ltd and Robyn May Stevenson t/as Sureflo Exhaust [2014] NSWCATCD 93 ...................................................................................................... 16.130

S S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 ............ 11.70, 11.215 SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 ................................................... 11.135 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 .................................................. 12.20 SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) ATPR ¶40-180 ....... 16.125 Sabre Corporation Pty Ltd v Laboratories Pharm-a-Care (1995) ATPR ¶41-396 ........................ 12.235 Sachs v Miklos [1948] 2 KB 23 .................................................................................................. 7.160 St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481 ............ 16.135 St George Bank Ltd v Wright [2009] QSC 337 .................................................. 9.105, 11.250, 17.20 Saints Gallery Pty Ltd, The v Plummer (1988) 80 ALR 525 ......................................................... 11.55 Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 ............................................................................................................ 12.25, 12.230, 12.240 Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227 ....................... 11.205

TABLE OF CASES

xxi

Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238 ...................................... 12.235 Samuels v Davis (1943) 1 KB 526 ........................................................................................... 17.100 Schemmell v Pomeroy (1989) 50 SASR 450 .............................................................................. 5.140 Seafolly Pty Ltd v Madden [2012] FCA 1346; (2012) ATPR ¶42-424 .......................................... 10.40 Selig v Wealthsure Pty Ltd (2015) 89 ALJR 572 ........................................................................ 12.150 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 ........................... 11.20, 12.40, 12.105, 12.110 Serini v Surf Toyota [2013] NSWCTTT 531 ............................................................................. 16.305 Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419 ............................................. 10.120 Seven Network Ltd v News Ltd [2007] FCA 1062 ................................................................... 11.125 Shahid v Australian College of Dermatologists (2008) 168 FCR 46 ......... 10.20, 10.75, 10.85, 12.110 Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd (2005) ATPR ¶42-048 ......... 10.105 Silsbury v McCoon 3 NY 379 (1850) .......................................................................................... 4.50 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 ........................................................ 9.35, 11.200 Singtel Optus Pty Ltd v Telstra Corp Ltd [2004] FCA 859 ........................................................ 11.170 Sirway Asia Pacific Pty Ltd v Commonwealth (2002) ATPR (Digest) ¶46-226 ............................. 10.55 Siu Yin Kwan (Administratrix of the Estate of Chan Ying Lung, Decd) v Eastern Insurance Co Ltd [1994] 2 AC 199 ............................................................................................................ 7.550 Smith v Capewell (1979) 142 CLR 509 ..................................................................................... 10.55 Smith v Chadwick (1884) 9 App Cas 187 ................................................................................. 12.50 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 ...................................................................................................................................... 12.95 Smolonogov v O’Brien (1982) ATPR ¶40-312 .............................................................................. 9.90 Smythe v Thomas (2007) 71 NSWLR 537 ............................................................................... 16.170 Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 ................................................................................................... 4.70 Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 2) [2010] FCA 566 ........................... 11.205 Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451 ........................................................ 11.140 Star Express Merchandising Co Pty Ltd v VG McGrath Pty Ltd [1959] VR 443 ........................... 6.270 State Government Insurance Corporation v Government Insurance Office of NSW (1991) ATPR ¶41-110 ...................................................................................................................... 10.20 State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233 .... 10.55 Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR ¶40-490 .................................................... 12.110 Stephens v Chevron Motor Court Ltd [1996] DCR 1; NZ DCR Lexis 29 ............. 16.255, 18.25, 18.30 Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307; 37 ALR 161 ............................................................................................................ 11.20, 11.180, 11.205 Sun Earth Homes Pty Ltd v Australian Broadcasting Commission (1991) ATPR ¶41-067 ............. 10.20 Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 ........ 9.95, 9.100, 10.75 Sutton v AJ Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 ......................... 11.165, 12.180, 12.185 Sydney Harbour Casino Properties Pty Ltd v Coluzzi (2003) ATPR (Digest) ¶46-238 ................ 11.145 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 ........... 11.20, 11.225 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 .................................... 10.105, 11.135, 11.145 Symes v Laurie [1985] 2 Qd R 547 ............................................................................................. 8.30

T TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd (2008) 71 NSWLR 323 .............................. 10.45, 11.235 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 ................................................................................................... 17.105, 17.115 TPC v Legion Cabs (Trading) Co-op Society Ltd (1978) ATPR ¶40-092 ...................................... 10.20 TPC v Queensland Aggregates Pty Ltd (1982) 61 FLR 52 ........................................................ 10.115 TPC v Queensland Aggregates Pty Ltd (1981) ATPR ¶40-228 .................................................. 16.125 TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 ............................................... 10.115, 10.120 TPG Internet Pty Ltd v ACCC (2012) 210 FCR 277 .................................................................. 11.190 TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731 ............................... 18.85 Tabet v Gett (2010) 240 CLR 537 ............................................................................................. 12.40 Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 ............... 11.05, 11.90, 11.95, 11.165 Tappenden v Artus [1964] 2 QB 185 ........................................................................................ 13.60 Taylor v Crossman (No 2) [2012] FCAFC 11 ............................................................................. 12.40 Tchenguiz v Imerman [2010] EWCA Civ 908; [2011] 2 WLR 592 .............................................. 5.130

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 ............................................... 11.65 Telstra Corp Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 ....................................... 11.20 Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 ............................................... 11.205 Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 ..................... 12.200, 12.220 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 .................................................................. 10.110 Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 ...................................................................................................................... 8.660 Thompson v Henderson & Partners Pty Ltd (1990) 58 SASR 548 .............................................. 7.590 Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 ............ 11.20, 11.150, 11.155 Thompson v Mastertouch TV Services Pty Ltd (No 2) (1977) 29 FLR 270 ................................ 11.140 Thornett & Fehr v Beers & Son [1919] 1 KB 486 ...................................................................... 8.285 Ting v Blanche (1993) 118 ALR 543 ........................................................................................ 11.145 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 .................................................................................................................. 10.80 Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48; 77 FLR 377; 50 ALR 684 .............................................................................................................. 8.30 Tomasetti v Brailey [2012] NSWCA 399 .................................................................................. 12.170 Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 ................................................. 11.125 Toyota Finance Australia Ltd v Dennis (2002) 58 NSWLR 101 ................................................... 6.370 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 ......... 11.75, 11.100, 11.105, 11.125 Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 .......... 9.105, 11.250, 17.20 Trollope (George) & Sons v Martyn Bros [1934] 2 KB 436 ........................................................ 7.730 Tubantia, The [1924] P 78 .......................................................................................................... 5.30 Turnbull v Wightman (1945) 45 SR (NSW) 592 ........................................................................ 7.430 Twentieth Century Fox Film Corporation v The South Australian Brewery Co Ltd (1996) 66 FCR 451 ............................................................................................................................. 11.225 Tytel Pty Ltd v Telecom (1986) 67 ALR 433 ............................................................................. 12.235

U Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30 .... 17.105 Unilan Holdings Pty Ltd v Kerrin (1992) ATPR ¶41-169 ........................................................... 10.105 Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1 ................................. 9.130 Universal Telecasters (Qld) Ltd v Ainsworth Consolidated Industries Ltd (1983) ATPR ¶40-384 ............................................................................................................................. 11.235 Universal Telecasters (Qld) Ltd v Guthrie (1978) 32 FLR 360 ................................................... 11.235

V Varley v Whipp [1900] 1 QB 513 .............................................................................................. 8.240 Vassallo v Haddad Import & Export Pty Ltd (2004) 2 DCLR (NSW) 123 .................................... 8.690 Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 .................................... 11.140 Vero Lenders v Taylor Byrne Pty Ltd [2006] FCA 1430 ............................................................. 12.135 Victorian Alps Wine Co Pty Ltd v All Saints Estate Pty Ltd (2012) 34 VR 397 .............................. 8.390 Village Building Company Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330 .... 10.95 Voli v Inglewood Shire Council (1963) 110 CLR 74 ................................................................... 17.65 Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 ............. 4.230

W Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 ................................... 7.330 Wallis v Downard-Pickford (1994) 179 CLR 388 ........................................................................ 17.30 Wallis, Son & Wells v Pratt & Haynes [1911] AC 394 ................................................................. 8.400 Walplan v Wallace (1985) 8 FCR 27 ........................................................................................ 10.115 Walton Stores Ltd v Sydney City Council (1968) 88 WN (NSW) 153 ........................................... 6.40 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 ............... 12.35, 12.40, 12.50, 12.120 Warner v Elders Rural Finance Ltd (1993) 41 FCR 399; 113 ALR 517 ............................. 11.25, 11.125

TABLE OF CASES

xxiii

Warnock v Australian and New Zealand Banking Group Ltd (1989) ATPR ¶40-928 .................... 17.95 Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd (2005) ALR 134 ................... 11.160 Waugh v HB Clifford & Sons Ltd [1982] 1 Ch 374 .................................................................... 7.260 Waverley Borough Council v Fletcher [1995] 4 All ER 756 ........................................................... 5.30 Weigall & Co v Runciman & Co (1916) 85 LJKB 1187 ............................................................... 7.580 Weitmann v Katies Ltd (1977) 29 FLR 336 ................................................................................ 11.65 Weld-Blundell v Stephens [1920] AC 956 .................................................................................. 7.380 Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194 ................................................. 9.100 Western Australia v R (2007) 33 WAR 483; (2007) 169 A Crim R 206; [2007] WASCA 42 ............. 5.40 Western Australia v Wardley Australia Ltd (1991) ATPR ¶41-131 ............................................... 12.120 Westrac Equipment Pty Ltd v Owners of the Ship Assets Venture (2002) 192 ALR 277 ............... 6.190 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; ATPR ¶40-940 ............. 10.115, 11.35, 11.150, 11.155, 12.180, 12.185 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶50-239 ........................................... 11.140 Whitaker v Paxad Pty Ltd [2009] WASC 47 .............................................................................. 11.110 White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125 .................. 7.550 Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188 .................... 5.30, 5.40 Wildsmith v Dainford Ltd (1983) 51 ALR 24 ............................................................................ 11.120 Williams v Pisano (2015) 299 FLR 172; [2015] NSWCA 177 ................ 10.75, 10.100, 10.135, 12.90, 12.145, 12.150, 12.155 Wimble, Sons & Co v Rosenberg & Sons [1913] 3 KB 743 ........................................................ 8.820 Wincant Pty Ltd v South Australia (1997) 69 SASR 126; 193 LSJS 313; [1997] SASC 6287 ........ 4.220 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 .......... 11.255, 11.285, 11.290 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1993) ATPR ¶41-205 ...................... 11.125 World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 ......................................................... 12.230 Wright v Madden [1992] 1 Qd R 343 ..................................................................................... 8.1110 Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 .................... 11.35, 11.150, 11.155

Y Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53 ......................................................... 3.20, 4.50 Yates v Whitlam (1999) ATPR ¶41-722 .................................................................................... 16.125 Yonge v Toynbee [1910] 1 KB 215 ................................................................................. 7.580, 7.750 Yorke v Lucas (1985) 158 CLR 661 .................................................................. 11.40, 12.175, 12.195 Young v Hichens (1844) 6 QB 606 ............................................................................................. 5.20

Z Zalai v Col Crawford (Retail) Pty Ltd (1980) ATPR ¶40-177 ....................................................... 16.10 Zhang v United Auctions [2013] NSWCTTT 6 ......................................................................... 16.130 Zhang v VP302 SPV (2009) 223 FLR 213 .................................................................................. 7.260 Zhu v Treasurer (NSW) (2004) 218 CLR 530 ............................................................................... 9.90 Zipside Pty Ltd v Anscor Pty Ltd [2000] QCA 395 ........................................................ 12.85, 12.105

TABLE OF STATUTES .................................................................................................................................................................................. COMMONWEALTH A New Tax System (Goods and Services Tax) Act 1999: 17.125 Acts Interpretation Act 1901: 9.30 s 2C(1): 16.70 s 4: 9.55 s 15AA: 9.40 s 15AC: 12.35 Australian Consumer Law: 6.300, 8.10, 8.410, 9.05, 9.50, 9.55, 9.75, 9.85, 11.250 s 2: 9.145, 10.55, 10.75, 10.85, 10.90, 11.100, 11.265, 12.175, 12.180, 12.195, 12.205, 12.225, 16.75, 16.85, 16.110, 16.120, 16.125, 16.135, 16.140, 16.145, 16.150, 16.165, 16.170, 16.400, 17.15, 17.40, 17.45, 18.220, 18.235 s 2(1): 6.230, 6.300, 9.100, 16.70, 16.130, 16.135, 16.160, 18.15, 18.30, 18.115 s 2(2): 11.15, 11.20, 11.25, 11.35 s 2(2)(a): 11.145 s 2(2)(b): 11.145 s 2(2)(c): 11.25 s 239(2(a): 12.205 s 2(b)(i): 17.40 s 3: 9.65, 16.15, 16.70, 16.75, 16.80, 16.115, 16.160, 18.15, 18.115 s 3(1): 6.300, 16.70 s 3(1)(a): 16.75 s 3(1)(c): 16.105 s 3(2): 6.300, 16.70, 16.110, 17.10 s 3(3): 6.230 s 3(4): 16.70, 16.75 ss 3(4) to (9): 16.75 s 3(5): 16.75, 16.85, 16.110, 16.145, 16.165 s 3(6): 16.90

s 3(7): 16.90 s 3(8): 16.90 s 3(9): 16.95 s 3(10): 16.100, 16.115 s 3(11): 16.85 s 4: 9.65, 11.15, 11.135, 11.145 s 4(1): 11.60, 11.135 s 4(2): 11.135, 11.145, 11.150, 11.155 s 5: 9.65, 9.90, 16.160 s 6: 9.90, 10.35 s 6(3A): 9.65 s 7: 9.65, 16.395 s 8: 16.145, 16.165, 17.40 s 12ED: 18.245 s 13: 17.70 s 15: 12.225, 18.250 s 16: 12.20 s 18: 7.590, 9.05, 9.30, 9.50, 9.100, 10.40, 10.55, 10.75, 10.100, 10.135, 11.05, 11.10, 11.15, 11.25, 11.35, 11.65, 11.70, 11.75, 11.80, 11.95, 11.100, 11.135, 11.140, 11.145, 11.155, 11.160, 11.170, 11.180, 11.185, 11.195, 11.205, 11.210, 11.215, 11.220, 11.225, 11.260, 11.285, 12.125, 12.130, 12.135, 12.145, 12.150, 12.155, 12.165, 12.240, 12.245, 16.15, 17.45, 17.105, 18.250 s 18(1): 11.05, 11.20, 11.60, 11.95 s 19: 9.65, 11.235 s 19(1): 11.10, 11.230, 11.235, 11.245, 12.245 s 19(2): 11.240 s 19(2)(3): 11.235, 12.245 s 19(2)(4): 11.235, 12.245 s 19(3): 9.65, 11.245 s 19(4): 9.65, 11.245 s 19(5): 11.235 s 19(6): 11.235 s 21: 9.05, 9.30, 9.65, 11.100 s 21(4): 9.05

s 22(2)(j): 9.65 s 22(3)(j): 9.65 s 23(1): 12.30, 12.225 s 23(2): 12.30 ss 23 to 28: 9.65 s 24(1): 9.05 s 26: 12.30 s 29: 9.65, 10.75, 11.15, 12.135 s 29(1): 12.130 s 29(1)(a): 9.100, 11.155 s 29(1)(b): 11.205 s 29(1)(g): 11.155, 11.205, 16.15 s 29(1)(i): 11.185 s 29(1)(m): 9.100, 10.40, 16.15, 17.105 s 29(1)(n): 16.15 s 29(m): 18.250 s 29(n): 18.250 s 30: 9.65, 10.75, 11.15, 12.155 s 30(1): 12.130, 17.45 s 31: 9.65, 11.15, 12.130 s 32: 9.65 s 32(3): 9.65 s 33: 9.100, 11.15, 12.130 s 34: 11.15, 17.105 s 36: 9.65 s 36(4): 9.65, 10.40 s 37: 11.15, 12.130 s 38: 9.65 s 38(3): 9.65 s 38(4): 9.65 s 40: 9.65 s 42: 9.65 s 43: 9.65 s 46: 9.65 s 47: 9.65 s 50: 9.65 s 51: 16.155, 16.170, 16.180, 16.185, 18.10, 18.260 s 51(2): 16.185 s 51(3): 16.185 ss 51 to 59: 9.65, 10.75 s 52: 6.300, 16.155, 16.170, 16.180, 18.10, 18.260 s 52(1): 11.05, 16.190 s 52(2): 16.190 s 52(3): 16.190 s 52(4): 16.190 s 53: 9.65, 16.155, 16.170, 16.180, 18.10, 18.260

xxvi

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Australian Consumer Law — cont s 53(1): 16.195 s 53(2): 16.195 s 53(3): 16.195 s 53(4): 16.195 s 54: 11.285, 16.05, 16.155, 16.160, 16.180, 16.205, 16.305, 16.350, 16.385, 16.390, 18.10, 18.30, 18.40, 18.70, 18.140 s 54(1): 16.205, 16.220 s 54(1)(b): 16.170 s 54(2): 16.205, 16.220, 16.225, 16.255, 16.270 s 54(2)(c): 16.335 s 54(2)(d): 16.335, 18.40 s 54(2)(e): 16.335 s 54(3): 16.205, 16.220, 16.225, 16.255, 16.270, 18.30 s 54(3)(b): 16.160 s 54(3)(c): 16.55 s 54(3)(d): 16.55 s 54(4): 16.55, 16.310, 16.320 s 54(5): 16.55, 16.310, 16.325 s 54(6): 16.55, 16.310, 16.330 s 54(7): 16.55, 16.310, 16.335 ss 54 to 56: 6.300 s 55: 16.155, 16.180, 16.350, 16.355, 16.365, 18.10, 18.35, 18.70, 18.110, 18.140 s 55(1): 16.370, 16.375, 16.380 s 55(1)(b): 16.170 s 55(2)(a): 16.380 s 56: 16.155, 16.180, 16.385, 18.10, 18.120, 18.140 s 56(1): 16.385 s 56(1)(b): 16.170 s 56(2): 16.385 s 57: 16.155, 16.180, 16.390, 18.10, 18.35 s 57(1)(b): 16.170 s 57(1)(e): 16.390 s 58: 16.155, 16.180, 16.395 s 58(1): 16.395 s 58(1)(b): 16.170 s 58(2): 16.395

s 59: 16.50, 16.155, 16.400, 16.405 s 59(1): 16.180, 16.400 s 59(1)(b): 16.170 s 59(2): 16.180, 16.400, 18.10 s 60: 6.230, 9.65, 16.10, 16.155, 17.05, 17.25, 17.40, 17.60, 17.70, 17.75, 17.110, 18.145, 18.185, 18.190, 18.195 ss 60 to 63: 9.65 s 61: 6.230, 16.155, 17.40, 17.45, 17.95, 17.110, 18.190 s 61(1): 17.05, 17.60, 17.95, 17.105, 18.145 s 61(2): 17.05, 17.60, 17.95, 17.110, 18.145 s 61(3): 17.95 s 61(4): 9.65, 17.25, 17.95 s 62: 16.155, 17.25, 17.40, 17.60, 17.115, 18.145, 18.190 s 63: 9.110, 17.05, 17.30, 17.35 s 64: 16.380, 16.405, 18.255, 18.260, 18.265, 18.280 s 64(1): 6.230, 6.300, 18.255 s 64A: 18.260, 18.265, 18.270 s 64A(1): 6.300 s 64A(2): 6.230 s 64A(3): 6.230, 6.300, 18.260 s 64A(4): 18.260 s 65: 9.65, 17.50 s 65A(1)(b): 11.240 s 66: 9.65, 17.120 s 67: 18.275 s 67(1): 18.275 s 67(a): 18.275 s 67(b): 18.275 s 68: 16.175 ss 69 to 95: 9.65 s 74(2): 17.100 s 87CB: 12.150 ss 96 to 99: 9.65 s 100: 9.65 s 100(1): 17.125, 17.130 s 100(3): 17.130 s 100(4): 17.125 s 101: 9.65, 17.135 s 101(1): 17.135 s 101(2): 17.135

s 101(3): 17.135 s 101(4): 17.135 s 102: 9.65, 16.405 s 102(1): 16.405 s 102(2): 16.405 s 102(3): 16.405 s 103: 9.65 ss 104 to 137: 9.65 s 134A: 17.130 s 137B: 12.130, 12.135 s 137E(2): 12.210 ss 138 to 150: 9.65 s 139(1)(d): 12.35 s 155: 9.100 s 169: 17.120 s 192(1): 16.405 s 218: 17.130 s 219: 17.130 s 223: 17.130 s 224: 9.35 ss 224 to 231: 9.65 s 228: 12.10 s 232: 9.155, 11.85, 12.10, 12.200, 12.230, 17.130 s 232(2): 9.150 s 232(3): 12.30 s 232(4): 12.240 ss 232 to 235: 9.65 s 234: 12.235 s 236: 9.50, 9.65, 11.160, 11.165, 12.05, 12.30, 12.35, 12.40, 12.85, 12.90, 12.105, 12.115, 12.125, 12.130, 12.135, 12.140, 12.145, 12.165, 12.175, 12.185, 12.200, 12.215, 12.225, 12.250, 16.05, 17.130, 18.70, 18.250 s 236(1): 12.10, 12.120 s 236(2): 12.120 s 237: 9.65, 12.20, 12.30, 12.115, 12.135, 12.150, 12.165, 12.175, 12.200, 12.210, 12.215, 12.225, 12.250, 17.130, 18.70, 18.250 s 237(1): 12.10, 12.200, 12.205, 12.210, 12.220, 12.225 s 237(1)(a)(ii): 12.225 s 237(3): 12.200, 12.225, 12.250

TABLE OF STATUTES

Australian Consumer Law — cont s 238: 9.65, 12.200, 12.205, 12.250 s 238(1): 12.200, 12.205, 12.210, 12.220 s 239: 17.130 s 239(1): 12.10 s 242(1): 12.200 s 243: 12.30, 12.200, 12.205, 12.215, 12.220 s 243(a): 12.15, 12.220, 12.225 s 243(d): 12.30, 12.225 s 244: 12.200 s 246: 12.10, 12.200, 17.130 s 247: 12.10, 12.200, 17.130 s 248: 12.10, 12.200, 17.130 s 249: 9.65 s 250: 12.30, 12.200, 12.205, 12.225 s 251: 11.45, 11.235, 11.240, 12.245 ss 254 to 258: 9.65 s 259: 11.285, 18.10, 18.15 s 259(2): 18.25, 18.30, 18.80, 18.100 s 259(2)(a): 16.05, 18.80 s 259(2)(b): 16.05 s 259(2)(b)(i): 18.80 s 259(3): 18.25, 18.30, 18.45, 18.50, 18.55, 18.100 s 259(3)(a): 16.05 s 259(3)(b): 16.05, 18.65 s 259(4): 18.70, 18.75, 18.100, 18.105, 18.140, 18.265 s 259(5): 18.70 s 259(6): 16.05, 18.100 ss 259 to 266: 9.65 s 260: 18.20, 18.30, 18.35, 18.40 s 260(a): 18.20, 18.30 s 261: 18.85, 18.100 s 261(c): 18.90 s 262(1): 18.55 s 262(2): 18.60 s 263: 18.50 s 263(2): 18.50 s 263(4): 18.50 s 263(5): 18.50 s 263(6): 18.50 s 264: 18.50, 18.90 s 266: 16.160, 18.15, 18.115

s 267: 18.145, 18.285 s 267(1): 18.200 s 267(1)(c): 18.190, 18.195 s 267(1)(c)(i): 18.200 s 267(2): 18.180 s 267(3): 18.185 s 267(4): 18.70, 18.210, 18.265, 18.285 ss 267 to 270: 9.65 s 268: 18.150 s 268(a): 18.155 s 268(b): 18.160 s 268(c): 18.165 s 268(d): 18.170 s 268(e): 18.175 s 269(2)(a): 18.180 s 269(2)(b): 18.180 s 271: 18.110, 18.115, 18.135, 18.140 s 271(1): 16.05, 18.110, 18.270 s 271(2): 16.05, 18.120 s 271(3): 18.110 s 271(4): 18.120 s 271(5): 16.400, 16.405, 18.110 s 271(6): 16.05, 16.405, 18.05, 18.125 ss 271 to 273: 9.65 s 272: 18.135 s 272(1): 16.405 s 272(1)(a): 16.05, 18.125 s 272(1)(b): 16.05, 18.130, 18.270 s 274: 9.65, 16.55, 18.140, 18.270 s 274(1): 18.140 s 274(2): 18.140 s 274(3): 16.05 s 275: 18.290 s 276: 18.270 s 276A(1): 18.270 s 276A(2): 18.270 s 277: 18.295 s 277(2): 18.295 s 278: 18.235, 18.245 s 278(1): 18.220, 18.225 s 278(2): 18.220 ss 278 to 287: 9.65 s 279: 18.230 s 280: 18.235 s 280(1): 18.235 s 280(2): 18.235 s 280(3): 18.235 s 280(4): 18.235 s 281: 18.240 s 284: 18.240 s 285: 18.245 Ch 2: 10.75, 11.15, 12.05, 12.10, 12.15, 12.30,

xxvii

12.35, 12.85, 12.120, 12.200, 12.230, 12.235, 16.05, 18.250 Ch 2, Pt 2-3: 9.65 Ch 3: 10.75, 11.15, 12.05, 12.10, 12.15, 12.30, 12.35, 12.85, 12.120, 12.200, 12.230, 12.235, 16.05 Ch 3, Pt 3-1: 9.65 Ch 3, Pt 3-2: 9.60 Ch 3, Pt 3-2, Div 1: 9.65, 16.05 Ch 3, Pt 3-2, Div 3: 9.65 Ch 3, Pt 3-3: 9.65 Ch 3, Pt 3-4: 9.65 Ch 4: 9.160, 12.05, 12.10, 12.15, 12.200, 12.230, 12.235 Ch 9: 10.05 Pt 2: 10.40, 11.250 Pt 2-1: 9.100, 12.125, 12.250 Pt 2-2: 9.100, 12.200, 12.205 Pt 2-3: 9.100 Pt 3-1: 9.100, 12.125, 12.250 Pt 3-1, Div 3: 9.160 Pt 3-2: 16.05, 16.75, 18.280 Pt 3-2, Div 1: 8.10, 11.285, 16.10, 16.105, 16.120, 16.255, 17.50, 18.20, 18.25, 18.235 Pt 3-2, Div 1, subdiv A: 16.180, 16.350, 17.60 Pt 3-2, Div 1, subdiv B: 17.05, 17.60 Pt 3-2, subdiv B: 9.110 Pt 3-3: 9.25, 9.100 Pt 3-4: 9.25, 9.100 Pt 3-5: 9.25, 9.160 Pt 3-5, Div 2: 12.290 Pt 4-1: 9.100 Pt 4-3: 9.100 Pt 4-4: 9.100 Pt 5-2: 12.05 Pt 5-2, Div 4: 12.20 Pt 5-3: 9.95, 9.100 Pt 5-4: 12.05, 18.30 Pt 5-4, Div, subdiv A: 18.10 Pt 5-4, Div 2: 18.70, 18.135 Pt 5-5: 17.20, 18.215, 18.220 Div 3: 9.100 Sch 1: 9.10

xxviii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Australian Consumer Law — cont Sch 2: 6.230, 6.300, 7.590, 9.55, 9.65, 12.175 Australian Securities and Investments Commission Act 2001: 9.55, 11.250, 17.20 s 12BI: 9.110 s 12DA: 9.110, 11.260, 11.285 s 12DA(1A): 11.285 s 12DA(1): 11.10, 11.285 s 12DB: 11.285 s 12DB(1): 11.260 s 12DB(1)(g): 11.285 s 12DC: 11.260 s 12DD: 11.260 s 12DE: 11.260 s 12DF: 11.260 s 12DG: 11.260 s 12DH: 11.260 s 12DI: 11.260 s 12DJ: 11.260 s 12DK: 11.260 s 12DL: 11.260 s 12DM: 11.260 s 12ED: 9.60, 9.105, 11.250, 17.20, 18.225 s 12ED(3): 9.110 s 12BAA: 11.265 s 12BAA(1): 11.270, 11.285 s 12BAA(4): 11.270 s 12BAA(5): 11.285 s 12BAA(7): 11.270 s 12BAA(7)(d): 17.35 s 12BAA(7)(k): 11.270, 11.285, 16.95 s 12BAA(8): 11.270 s 12BAB: 11.265, 16.95 s 12BAB(1): 11.265 s 12BAB(5): 11.275 s 12BAB(6): 11.275 s 12BAB(7): 11.280 s 12BAB(8): 11.280 s 18: 11.285 s 102(2)(e): 11.290 Pt II, Div 2: 11.250 subdiv D: 11.260 Australian Securities and Investments Commission Regulations 2001 reg 2B: 11.270, 11.285 reg 2B(3): 16.95 reg 2B(3)(b)(iv): 11.285 Banking Act 1959 s 5: 15.210

s 9: 15.210 s 9C: 15.210 Bankruptcy Act 1966 s 58: 2.30, 13.20 s 60: 13.20 s 82: 13.20 s 108: 13.20 s 109: 13.20 s 116: 13.20 Commonwealth of Australia Constitution Act 1901 s 51(xxxix): 9.90 s 51(i): 9.90 s 51(xx): 9.90, 10.05, 10.10, 10.25 s 61: 9.90 s 75: 9.150 s 122: 9.90, 9.120 Competition Policy Reform Act 1995: 9.40 Competition and Consumer Act 2010: 6.230, 6.300, 7.590, 9.10, 9.55 s 2: 9.40 s 2A: 10.50 s 2A(1): 10.50 s 2A(2): 10.50 s 2C: 10.60, 10.70 s 2C(1)(b): 10.60 s 2C(1)(c): 10.60 s 2C(1)(d): 10.60 s 2C(3): 10.60 s 4: 16.120 s 4(1): 9.100, 10.10, 10.25, 10.30, 10.110 s 4A(5): 10.35 s 4L: 12.20 s 5: 9.100, 10.40, 10.50 s 5(1): 9.95, 9.130 s 5(1)(g): 9.95 s 6: 9.50, 9.90, 9.100, 10.40, 10.50, 12.150 s 6(2): 9.90 s 6(2)(a): 9.100 s 6(2)(a)(i): 9.95 s 6(3): 9.95, 9.100, 10.40 s 6(3)(a): 9.100, 10.40 s 6(3)(b): 9.100 s 6(3A): 9.100, 10.40 s 75B: 12.180 s 82: 12.35, 12.40 s 84(2): 10.110, 10.120, 10.125 s 84(4): 10.100 ss 86A(1) to (3): 9.160 ss 86A(4) to (6): 9.160 s 87: 12.165 s 87D: 18.70

s 87E(1): 12.250, 18.70, 18.135 s 87M: 12.255 s 87S: 12.265 s 87T: 12.270 s 87U: 12.260 s 87W: 12.280 s 87X: 12.280 s 87CB: 12.150 s 87CB(1): 12.145, 12.150, 12.165 s 87CB(2): 12.145 s 87CB(3): 12.145, 12.155 s 87CB(5): 12.155 s 87CC(1): 12.145 s 87CD(1)(a): 12.160 s 87CE: 12.145 s 87CG: 12.145 s 87CI: 12.145, 12.155 s 87ZB: 12.275 s 87ZC: 12.285 s 130: 9.90, 10.10 s 131: 9.120, 10.40, 10.50, 17.20 s 131(1): 9.50, 9.90, 9.100, 10.05, 10.50 s 131(2): 9.50, 9.90 s 131A: 9.110, 11.250, 17.20, 17.35 s 131A(1): 9.105, 16.95, 18.220 s 131C(3): 9.135 s 131C(4): 9.115, 16.15 s 137: 12.125 s 137A: 12.290 s 137B: 9.50, 12.55, 12.70, 12.125, 12.130, 12.135, 12.140, 12.165 s 137C: 12.250 s 137C(1): 12.125 s 137C(2): 12.125 s 137D: 12.200, 12.205, 12.225 s 137E: 12.250 s 137E(1): 12.210 s 137H: 12.10 s 137H(2): 12.200 s 138: 9.150 s 138A: 9.150 s 138B: 9.150, 9.155 s 138C(1): 9.160 s 138C(2): 9.160 s 138D: 9.160 s 139A: 9.50, 18.280, 18.285 s 139A(1): 18.285 s 139A(2): 18.285 s 139A(4): 18.285 s 139A(5): 18.285

TABLE OF STATUTES

Competition and Consumer Act 2010 — cont s 139B: 10.110, 10.120 s 139B(1): 11.25 s 139B(2): 10.110, 10.115, 10.120, 10.130, 10.135, 12.145 s 139B(2)(a): 10.120, 10.125 s 139B(2)(b): 10.125 s 139C(2): 10.130, 10.135 s 139G: 9.50, 9.55, 9.140 s 139G(4)(a): 9.140 s 139G(4)(b): 9.140 s 139G(4)(c): 9.140 s 140: 9.50 s 140B: 9.50 s 140C: 9.150 s 140H: 9.125 s 140J(1): 9.135 s 140J(2): 9.135 Pt XIAA: 9.50, 9.120 Pt IV: 9.120 Pt IV, Div 1: 18.225 Pt IV, Div 2: 18.225 Pt XI: 9.50, 9.90, 9.95, 9.100, 9.140, 9.160, 10.40 Pt VIA: 9.50, 12.125, 12.145, 12.155, 12.165 Pt VIB: 12.250, 18.70, 18.135 Pt VIB, Div 2: 12.125, 12.210, 12.250 Pt VIB, Div 7: 12.125, 12.250 Sch 1: 9.120 Sch 2: 8.10, 9.10, 9.50, 9.55, 9.60, 9.90, 9.120, 9.140, 10.05, 10.40, 10.50 Competition and Consumer Legislation Amendment Act 2011: 9.65 Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004: 12.145 Sch 3: 12.130 Corporations Act 2001: 7.340, 7.370, 7.530, 9.105, 10.120, 11.250, 11.255, 17.20 ss 12 to 129: 10.120 s 119: 7.530 s 131(1): 7.140, 7.530

s 131(2): 7.530 s 131(3): 7.530 s 180(1): 7.370 s 181(1): 7.370 s 183(1): 7.340 s 191(1): 7.340 s 766A: 11.265 s 1041H: 9.105, 11.130, 11.150, 12.150 s 1041L: 12.150 s 1466: 12.130 Corporations Agreement 2002: 9.105, 11.250 cl 301(1): 9.105 Corporations Law s 266: 8.560 s 995(2): 11.285 Corporations Regulations 2001 r 1.0.02A: 15.160 Crimes Act 1914 s 5: 12.175 Evidence Act 1995 s 144(1): 10.40 Family Law Act 1975 s 66B: 2.100 Federal Court of Australia Act 1976 s 21: 12.25 Financial Sector Reform (Consequential Amendments) Act 1998 Pt II, Div 2: 11.250 Insurance Contracts Act 1984 s 13: 9.110 s 14: 9.110 s 15: 9.110 s 15(1): 9.110 Intergovernmental Agreement for the Australian Consumer Law: 9.140 cl 8: 9.140 cl 12: 9.140 cl 19: 9.140 cl 20: 9.145 cl 21: 9.145 Motor Vehicle Standards Act 1989: 14.120 Mutual Recognition Act 1992: 9.45 National Consumer Credit Protection Act 2009: 7.860

xxix

National Consumer Credit Protection Code: 9.105, 11.250 National Credit Code: 14.150 s 135: 9.65 Personal Property Securities Act 2009: 8.600, 8.750, 14.10, 14.30, 14.40, 14.80, 14.120, 14.140, 14.150, 14.160 s 8: 15.30, 15.60 s 8(1)(b): 14.40 s 8(1)(j): 4.230, 14.40 s 8(1)(ja): 15.60 s 8(6): 15.60 s 9: 14.40 s 10: 14.80, 15.30, 15.210 s 12(1): 14.40 s 12(2): 14.40 s 12(3): 14.40, 15.70 s 13: 15.70 s 14: 15.220 s 19: 15.80 s 19(1): 14.50 s 19(2): 14.50 s 19(4): 15.80 s 20: 14.60, 15.90 s 21: 14.60, 15.100 s 21(2)(b): 15.100 s 21(2)(c): 15.200 s 22: 15.100 s 25: 15.90 s 29: 15.90 s 31: 15.40 s 31(2): 15.40 s 32: 15.100 s 33: 15.100 s 33(1): 15.100 s 35: 15.100 s 42: 15.120 s 43: 14.120, 15.130 s 44: 14.120, 15.150 s 45(1): 14.120, 15.150 s 45(2): 14.120 s 45(3): 14.120, 15.160 s 45(4): 14.120 s 46: 14.120, 15.160 s 47: 14.120, 15.60, 15.170 s 48: 15.180 s 49: 14.120, 15.160 s 50: 15.180 s 51: 15.180 s 52: 15.190 s 53: 14.120, 15.120 s 55: 15.120 s 55(2): 14.80 s 55(3): 14.80 s 55(4): 14.80 s 55(5): 14.80

xxx

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Personal Property Securities Act 2009 — cont s 57: 15.200 s 57(1): 14.80 s 58: 15.120 s 60: 15.120 s 61: 15.120 s 62: 14.80, 15.120, 15.220 s 63: 15.220 s 64: 15.220 s 69: 15.120, 15.180 s 70: 15.180 s 72: 15.180 s 73: 15.60 s 74: 15.120, 15.130 s 75: 15.210 ss 84 to 86: 14.80 s 85: 15.230 s 86: 15.230 s 87: 4.140 s 88: 15.250 ss 88 to 97: 14.80 s 89: 15.250 s 90: 15.250 s 92: 15.250 s 97: 15.250 s 99: 15.260 ss 99 to 103: 14.80 s 100: 15.260 s 101: 15.260 ss 105 to 106: 14.80 ss 108 to 144: 14.140 s 111: 14.140 s 111(1): 15.280 s 111(2): 15.280 s 115: 14.140, 15.280 s 116: 14.140 s 119: 14.150 s 119(2): 14.150 s 123: 15.90 s 128: 15.90 s 131: 15.280 s 132A: 4.140 s 140: 15.280 s 147: 14.160 s 150: 14.160, 15.20 s 151: 15.20 s 153: 14.160, 15.20, 15.30 s 161: 15.20 ss 170 to 173: 14.160 s 171: 14.160 s 242: 13.30, 15.10 s 244: 13.30, 15.10 s 267: 14.160, 15.130 s 267A: 15.130 s 268: 14.160 s 271: 15.20 s 297: 15.270 s 298: 15.270 s 300: 15.270

s 304: 13.30 s 310: 13.30 s 367A: 14.160 Personal Property Securities Regulations 2010 reg 1.17: 14.120 reg 2.1: 14.120 reg 2.2: 14.120 reg 4.1: 14.150 Sch 1, Pt 2.2: 15.30, 15.150 Sch 1, Pt 2.4: 15.100 Torts (Interference with Goods) Act 1977 s 2: 5.160 Trade Practices Act 1974: 6.230, 6.300, 7.590, 8.10 s 2A: 10.55 s 2B: 10.55 s 4(2): 11.15, 11.30 s 4B: 9.65, 16.70, 16.75, 16.80 s 6(3): 9.65, 9.100 s 18: 11.165 s 47(1): 12.20 s 47B(1)(d): 16.360 s 47B(1)(e): 16.360 s 51A: 9.65, 11.135, 11.140 s 51A(1): 11.135 s 51A(2): 11.135 s 51AB: 9.65 s 51AC: 9.65, 16.80 s 51AC(9): 16.80 s 51AD: 12.185 s 52: 7.590, 9.05, 9.35, 9.100, 10.45, 10.55, 10.80, 10.120, 10.130, 11.05, 11.10, 11.20, 11.25, 11.30, 11.40, 11.45, 11.65, 11.70, 11.90, 11.95, 11.110, 11.115, 11.125, 11.140, 11.150, 11.165, 11.175, 11.185, 11.200, 11.210, 11.215, 11.220, 11.225, 11.235, 11.245, 11.255, 11.285, 12.45, 12.50, 12.85, 12.180 s 52(1): 11.05, 11.10, 12.105 s 53: 9.65, 10.45, 12.180 s 53(a): 9.100, 11.185 s 53(c): 9.100, 11.155, 11.225 s 53(d): 11.225 s 53(e): 9.100

s 53(g): 11.185 s 53A: 9.65 s 53A(1)(b): 10.120 s 53A(2): 9.65 s 53B: 9.65 s 54: 9.65 s 54(3): 16.10 s 58: 9.65 s 60: 9.65 s 64: 9.65 s 65A: 9.65, 11.235, 11.240, 11.245 s 65A(1): 11.235 s 65A(1)(a): 11.245 s 65A(1)(a)(vi): 11.245 s 65B: 9.65 s 65C: 9.65 s 65D: 9.65 s 65E: 9.65 s 65F: 9.65 s 65G: 9.65 s 65H: 9.65 s 65R: 9.65 s 65T: 9.65 s 65AAE: 9.65 s 66(2): 16.205, 16.210, 16.215 s 68: 18.255 s 68A: 16.75, 18.260 s 68B(1): 18.280 s 68B(2): 18.280 s 69(1)(a): 16.185 s 69(1)(b): 16.190 s 70: 16.385 s 71(1): 16.50, 16.75, 16.205, 16.210, 16.215 s 71(2): 16.75, 16.355, 16.360 s 72: 16.390 s 73: 9.65, 18.215 s 74: 9.65, 16.75, 17.05, 17.30, 17.65, 17.85, 18.280 s 74(1): 16.10, 17.05, 17.65, 17.75, 17.85 s 74(2): 17.95, 17.100 s 74(3)(a): 17.30 s 74A: 9.65 s 74A(1): 9.65 s 74A(2)(a): 16.100 s 74A(3): 9.65 s 74B: 12.40, 16.10, 16.360 s 74B(1): 16.355 s 74B(1)(a): 16.360 s 74B(1)(b): 16.360 s 74B(1)(c): 16.360 s 74B(2): 16.355 s 74B(2)(b): 16.360

TABLE OF STATUTES

Trade Practices Act 1974 — cont s 74D: 12.40, 16.10, 16.305, 16.360 s 74D(3): 16.210, 16.215 s 74F: 16.395 s 74H: 9.65 s 75A: 16.30, 18.10 s 75B: 10.45, 12.175, 12.180, 12.205 s 75B(1): 12.185 s 75B(1)(a): 12.175, 12.185 s 75B(1)(c): 12.185 s 75AC(2): 16.10 s 76E: 9.65 s 80: 9.65, 12.230 s 82: 9.35, 9.65, 10.45, 12.35, 12.40, 12.45, 12.50, 12.85, 12.95, 12.110, 12.115, 12.120, 12.130, 12.175, 12.180, 16.355 s 82(1): 12.35, 12.120 s 82(1B): 9.50, 12.130 s 82(1AAA): 12.250 s 82(1AAB): 12.250 s 82(2): 12.120 s 83: 12.10 s 84(2): 10.115 s 84(4): 10.130 s 85(3): 11.240, 12.245 s 87: 9.65, 12.85, 12.115, 12.135, 12.200, 12.220 s 87(1): 12.215 s 87(2): 12.215 ss 251 to 253: 9.65 Pt 3-2, Div 1, subdiv A: 16.65 Pt V: 9.40, 9.75, 12.120 Pt V, Div 1: 9.90, 11.235 Pt V, Div 2: 9.65, 9.75, 16.05, 16.10, 16.20, 16.30, 16.50, 16.60, 16.75, 16.210, 16.355, 17.05, 18.10, 18.275 Pt V, Div 2A: 9.65, 16.05, 16.10, 16.30, 16.50, 16.60, 16.210, 16.355 Pt VA: 16.10 Pt XI: 9.65 Div 2A: 17.05 Sch 3: 12.130 Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010: 9.05, 9.55

Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010: 9.05, 9.55

Law Reform (Miscellaneous Provisions) Act 1955 s 15: 9.50, 12.130, 12.140

Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1): 9.05, 9.55, 17.50 reg 90: 16.405 reg 90(1): 16.405 reg 90(2): 16.405 Sch 1: 9.55 Sch 2: 9.55 Sch 3: 9.55

Married Persons’ Property Act 1986 s 5: 7.190

Trans-Tasman Mutual Recognition Act 1997: 9.45 Uniform Consumer Credit Code: 9.105, 11.250

AUSTRALIAN CAPITAL TERRITORY Agents Act 2003 s 18: 7.860 s 22: 7.860 Civil Law (Wrongs) Act 2002 s 107B: 9.50, 12.170 Fair Trading (Australian Consumer Law) Act 1992: 9.50, 9.55, 9.60, 9.120, 9.135, 9.140, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 6: 9.50, 9.120 s 7: 9.50, 9.120 s 11: 9.130 s 20: 9.135 s 14: 10.65 s 15: 10.65 s 15A: 8.1110 s 16: 10.65 s 18: 10.65 s 236: 12.130 Fair Trading (Australian Consumer Law) Amendment Act 2010 Sch 1, Item 1.6: 8.1110 Fair Trading Legislation Amendment Act 2001 s 27: 8.390 Justice and Community Safety Legislation Amendment Act 2014 Sch 1, Pt 1.1: 7.860

Mercantile Law Act 1962 s 22: 13.60 Residential Tenancies Act 1987 Sch 1, s 68(4): 4.220 Sale of Goods Act 1954: 8.10, 16.10 s 2: 8.180 s 3: 8.400, 8.1030 s 5: 8.30, 8.140, 8.870 s 6: 8.20 s 7: 8.70 s 11: 8.150, 8.610 s 12: 8.150, 8.610 s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 20: 8.380 ss 21 to 22: 8.440 s 23: 8.440 s 24: 8.540 s 25: 8.610 s 26: 8.640 s 27: 8.680 s 29: 8.700, 8.710 s 31: 8.760 ss 31 to 32: 8.830 s 32: 8.170, 8.760 s 33: 8.770 s 34: 8.790 s 35: 8.800 s 36: 8.770, 8.820 s 38: 8.830 s 38(1): 8.830 s 39: 8.830 s 40: 8.830 s 42: 8.850 s 43: 8.880 ss 44 to 46: 8.870 s 47: 8.890 s 48: 8.890 s 49: 8.890 s 50: 8.890 s 51: 8.930 s 52: 8.960 s 53: 8.970 s 54: 8.1090 s 56: 8.1040 s 58: 8.390

xxxi

xxxii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Sale of Goods Act 1954 — cont s 60: 8.1110 s 62(1): 8.10 Sale of Goods (Vienna Convention) Act 1987: 16.175 Uncollected Goods Act 1996: 6.380

s 51A : 8.1160 s 58: 9.65 s 65(2): 9.65 s 68(1): 12.55 s 236: 12.130 Fair Trading Amendment (Australian Consumer Law) Act 2010: 9.120 Sch 1, Item 40: 8.1160

Water Resources Act 2007 s 7: 3.20

Fair Trading Amendment (Unfair Contract Terms) Act 2010: 9.55

NEW SOUTH WALES

Frustrated Contract Act 1978: 8.150

Agricultural Tenancies Act 1990 s 10: 4.220 Civil Liability Act 2002 s 34(1)(b): 9.50, 12.170 s 34(2): 12.150, 12.170 s 35(1): 12.150, 12.170 Pt 4: 12.170 Civil and Administrative Tribunal Act 2013 s 38(2): 16.340 s 38(4): 16.340 Commercial Agents and Private Inquiry Agents Act 2004 s 5: 7.860 s 11: 7.860 Crown Lands Act 1989 s 172: 4.70 Factors (Mercantile Agents) Act 1923: 7.790 s 5: 7.790 Fair Trading Act 1987: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.55, 10.65, 10.85, 10.135, 11.05, 11.35, 11.255, 12.140 s 3: 9.120 s 24: 12.140 s 27: 9.50, 9.120 s 28: 9.50, 9.120 s 28(1): 9.120 s 29: 9.140 s 32: 9.130 s 35: 10.65 s 36: 10.65 s 37: 10.65 s 39: 10.65 s 40: 9.65 s 42: 11.285, 12.140, 12.170 s 42(1): 12.55

Interpretation Act 1987 s 21: 9.120, 10.45 Law Reform (Miscellaneous Provisions) Act 1965 s 8: 9.50, 12.130, 12.140 s 9: 9.50, 12.130, 12.140 Married Persons (Equality of Status) Act 1996 s 7: 7.190 National Parks and Wildlife Act 1974 s 97: 3.20 Personal Property Securities (Commonwealth Powers) Act 2009: 14.20 Property, Stock and Business Agents Act 2002: 7.440, 8.1110 s 36: 7.440 s 52: 7.440 s 52(1): 7.440 s 52(2): 7.440 Real Property Act 1900 s 88: 7.100 Real Property (Amendment) Act 1970 s 13: 7.100 Residential Tenancies Act 2010 s 67(1): 4.220 Sale of Goods Act 1923: 8.10, 16.10, 16.135, 18.05 s 4(2): 8.10 s 4(5): 8.210 s 5: 8.30, 8.140, 8.870 s 6: 8.20 s 7: 8.70 s 11: 8.150, 8.610 s 12: 8.150, 8.610

s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 17(1): 16.185 s 17(2): 16.190 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 19(2): 16.205 s 20: 8.380, 16.390 s 21: 16.185 ss 21 to 22: 8.440 ss 21 to 25: 16.185 s 22(1): 16.185 s 23: 8.440 s 24: 8.540 s 25: 8.610 s 25A: 8.530 s 26: 8.640 s 27: 8.680 s 28: 8.700, 8.710 s 30: 8.760 ss 30 to 31: 8.830 s 31: 8.170, 8.760 s 32: 8.770 s 33: 8.790 s 34: 8.800 s 35: 8.770, 8.820 s 37: 8.830 s 37(1): 8.830 s 38: 8.830 s 38(1): 18.55 s 38(2): 8.830 s 39: 8.830 s 41: 8.850 s 42: 8.880 ss 43 to 45: 8.870 s 46: 8.890 s 47: 8.890 s 48: 8.890 s 49: 8.890 s 50: 8.930 s 51: 8.960 s 52: 8.970 s 53: 8.1090 s 54: 8.1040 s 57: 8.390 s 60: 8.1110 Sale of Goods (Amendment) Act 1988: 8.180, 8.400, 8.1030 Sale of Goods (Vienna Convention) Act 1986: 16.175 Travel Agents Act 1986: 7.860 Travel Agents Repeal Act 2014: 7.860

TABLE OF STATUTES

Uncollected Goods Act 1995: 6.380 Warehousemen’s Liens Act 1935 s 6: 13.60

NORTHERN TERRITORY Agents Licensing Act 1979 s 17: 7.860 Auctioneers Act 1935: 8.1110 s 4: 7.860 Auctioneers Repeal Act 2002: 8.1110 Consumer Affairs and Fair Trading Act: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140, 16.10 s 26: 9.50, 9.120 s 27: 9.50, 9.120 s 31: 9.130 s 34: 10.65 s 35: 10.65 s 36: 10.65 s 38: 10.65 s 236: 12.130 Pt 11: 7.860 Pt 13: 8.1110 Consumer Affairs and Fair Trading Amendment Act s 6: 7.860 Interpretation Act s 17: 9.120, 10.45 Law Reform (Miscellaneous Provisions) Act s 16(1): 9.50, 12.130, 12.140 Married Persons (Equality of Status) Act 1989 s 5: 7.190

s 11: 8.150, 8.610 s 12: 8.150, 8.610 s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 20: 8.380 ss 21 to 22: 8.440 s 23: 8.440 s 25: 8.610 s 26: 8.640 s 27: 8.680 s 28: 8.700, 8.710 s 30: 8.760 ss 30 and 31: 8.830 s 31: 8.170, 8.760 s 32: 8.770 s 33: 8.790 s 34: 8.800 s 35: 8.770, 8.820 s 37: 8.830 s 38: 8.830 s 39: 8.830 s 41: 8.850 s 42: 8.880 ss 43 to 45: 8.870 s 46: 8.890 s 47: 8.890 s 48: 8.890 s 49: 8.890 s 50: 8.930 s 51: 8.960 s 52: 8.970 s 53: 8.1090 s 54: 8.1040 s 57: 8.390 s 60: 8.1110 Sale of Goods Amendment Act 1999 s 2: 8.180 Sale of Goods (Vienna Convention) Act: 16.175

xxxiii

Civil Liability Act 2003 s 28(1)(b): 9.50, 12.170 Construction and Tourism (Red Tape Reduction) and Other Legislation Amendment Act 2014 s 52: 7.860 Criminal Code 1899 s 276: 6.370 Debt Collectors (Field Agents and Collection Agents) Act 2014 s 14: 7.860 s 26: 7.440 Disposal of Uncollected Goods Act 1967: 6.380 Factors Act 1892: 7.790 Fair Trading Act 1989: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 3: 9.40 s 5A: 11.35 s 15: 9.50, 9.120 s 16: 9.50, 9.120 s 17: 9.140 s 20: 9.130 s 23: 10.65 s 24: 10.65 s 25: 10.65 s 27: 10.65 s 29: 9.135 s 38: 9.120 s 50: 9.155 s 51: 9.155, 12.225 s 56: 8.1160 s 95: 10.135 s 99: 9.120 s 107: 9.50 s 236: 12.130 Pt 3, Div 5: 9.65 Fair Trading (Australian Consumer Law) Amendment Act 2010 s 18: 8.1160

Power and Water Authority Act s 17(1): 10.55

Uncollected Goods Act 2004: 6.380

Proportionate Liability Act s 4(2)(b): 9.50, 12.170

Warehousemen’s Liens Act s 8: 13.60

Sale of Goods Act 1972: 8.10, 16.10 s 4: 8.540 s 4(2): 8.10 s 5: 8.30, 8.140, 8.870 s 6: 8.20 s 7: 8.70

Water Act s 9: 3.20

Fauna Conservation Act 1974: 3.20 s 7: 3.20

QUEENSLAND

Hire Purchase Act 1959: 4.230 s 32: 4.230

Acts Interpretation Act 1954 s 32D: 9.120, 10.45

Land Act 1994 s 10: 4.70

xxxiv

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Land Title Act 1994 ss 132 to 135: 7.100 Law Reform Act 1995 s 10: 9.50, 12.130, 12.140 Motor Dealers and Chattel Auctioneers Act 2014 s 33: 7.860 s 88: 7.440 s 132: 7.440 Pt 4: 8.1110 Nature Conservation Act 1992 s 83: 3.20 Personal Property Securities (Commonwealth Powers) Act 2009: 14.20

s 46: 8.890 s 47: 8.890 s 48: 8.890 s 49: 8.930 s 50: 8.960 s 51: 8.970 s 52: 8.1090 s 54: 8.1040 s 56: 8.390 s 59: 8.1110 s 61(2): 8.10 Sale of Goods (Vienna Convention) Act 1986: 16.175 Statute of Frauds 1972 s 3: 8.180

Property Law Act 1974 s 155: 4.220

Storage Liens Act 1973 s 6: 13.60

Property Occupations Act 2014 s 26: 7.860 s 89: 7.440

Travel Agents Act 1988: 7.860

Sale of Goods Act 1896: 8.10, 16.10 s 3: 8.30, 8.140, 8.870 s 4: 8.20 s 5: 8.70 s 9: 8.150, 8.610 s 10: 8.150, 8.610 s 11: 8.170 s 12: 8.170 s 13: 8.210 s 14: 8.400 s 15: 8.230 s 16: 8.240, 8.260 s 17: 8.270, 8.290 s 18: 8.380 ss 19 to 20: 8.440 s 21: 8.440 s 22: 8.540 s 23: 8.610 s 24: 8.640 s 25: 8.680 s 27: 8.700, 8.710 s 29: 8.760 ss 29 to 30: 8.830 s 30: 8.170, 8.760 s 31: 8.770 s 32: 8.790 s 33: 8.800 s 34: 8.770, 8.820 s 36: 8.830 s 37: 8.830 s 38: 8.830 s 40: 8.850 s 41: 8.880 ss 42 to 44: 8.870 s 45: 8.890

Water Act 2000: 3.20 s 19: 3.20

SOUTH AUSTRALIA Civil Liability Act 1936 s 50: 9.50, 12.130, 12.140 Consumer Transactions Act 1972-1983: 16.10 Criminal Law (Sentencing) Act 1988 s 57: 16.390 Employment Agents Registration Act 1993 s 6: 7.860 Fair Trading Act 1987: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 13: 9.50, 9.120 s 14: 9.50, 9.120 s 15: 9.140 s 18: 9.130 s 21: 10.65 s 22: 10.65 s 23: 10.65 s 25: 10.65 s 27: 9.135 s 28: 8.1160 Frustrated Contracts Act 1988: 8.150 Land Agents Act 1994 s 6(1): 7.860

s 6(2): 7.440 Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 s 8: 9.50, 12.170 Law of Property Act 1936 s 104: 7.190 Mercantile Law Act 1936: 7.790 Misrepresentation Act 1972 s 6(1)(b): 8.830 s 11: 8.400, 8.1030 Natural Resources Management Act 2004 Ch 7: 3.20 Personal Property Securities (Commonwealth Powers) Act 2000: 14.20 Powers of Attorney and Agency Act 1984 s 12: 7.740 Real Property Act 1886 s 156: 7.100 Registration of Deeds Act 1935 s 35: 7.100 Sale of Goods Act 1895: 8.10, 16.10 s 1: 8.20 s 2: 8.70 s 6: 8.150, 8.610 s 7: 8.150, 8.610 s 8: 8.170 s 9: 8.170 s 10: 8.210 s 11: 8.400 s 12: 8.230 s 13: 8.240, 8.260 s 14: 8.270, 8.290 s 15: 8.380 ss 16 to 17: 8.440 s 18: 8.440 s 19: 8.540 s 20: 8.610 s 20A: 8.530 s 21: 8.640 s 23: 8.680 s 25: 8.700, 8.710 s 27: 8.760 ss 27 to 28: 8.830 s 28: 8.170, 8.760 s 29: 8.770 s 30: 8.790 s 31: 8.800

TABLE OF STATUTES

Sale of Goods Act 1895 — cont s 32: 8.770, 8.820 s 34: 8.830 s 34(1): 8.830 s 35: 8.830 s 36: 8.830 s 38: 8.850 s 39: 8.880 ss 40 to 42: 8.870 s 43: 8.890 s 44: 8.890 s 45: 8.890 s 46: 8.890 s 47: 8.930 s 48: 8.960 s 49: 8.970 s 50: 8.1090 s 52: 8.1040 s 54: 8.390 s 57: 8.1110 s 59(2): 8.10 s 60: 8.30, 8.140, 8.870

9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 5: 9.50, 9.120 s 6: 9.50, 9.120 s 8: 9.140 s 10: 9.130 s 13: 10.65 s 14: 10.65 s 15: 10.65 s 17: 10.65 s 19: 9.135 s 45: 8.10 s 236: 12.130 Civil Liability Act 2002 s 43A: 9.50, 12.170 Criminal Code Act 1924 Sch 1, s 45: 6.370 Disposal of Uncollected Goods Act 1968: 6.380 Factors Act 1891: 7.790

Sale of Goods (Vienna Convention) Act 1986: 16.175

Legislation Repeal Act 2000 s 3: 8.1160 Sch 1: 8.1160

Second-Hand Dealers and Pawnbrokers Regulations 2013 reg 6: 8.1110

Mock Auctions Act 1973: 8.1160

Security and Investigation Agents Act 1995 s 6: 7.860 Statutes Amendment (Enforcement of Contracts) Act 1982 s 4: 8.180 Statutes Amendment and Repeal (Australian Consumer Law) Act 2010 s 7: 8.1160 Travel Agents Act 1986: 7.860 Travel Agents Repeal Act 2014: 7.860 Unclaimed Goods Act 1987: 6.380 Warehouse Liens and Storage Act 1990 s 9: 13.60

TASMANIA Australian Consumer Law (Tasmania) Act 2010: 9.50, 9.55, 9.60, 9.120, 9.135,

Powers of Attorney Act 2000: 7.100 s 52: 7.740 Property Agents and Land Transactions Act 2005 s 5: 7.860 s 18: 7.440 s 42: 8.1160 Pt 3: 8.1110 Sale of Goods Act 1896: 8.10, 16.10 s 3: 8.30, 8.140, 8.870 s 5(2): 8.10 s 6: 8.20 s 7: 8.70 s 9: 8.180 s 9(3): 8.200 s 11: 8.150, 8.610 s 12: 8.150, 8.610 s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 20: 8.380 ss 21 to 22: 8.440 s 23: 8.440

xxxv

s 24: 8.540 s 25: 8.610 s 26: 8.640 s 28: 8.680 s 30: 8.700, 8.710 s 32: 8.760 ss 32 to 33: 8.830 s 33: 8.170, 8.760 s 34: 8.770 s 35: 8.790 s 36: 8.800 s 37: 8.770, 8.820 s 39: 8.830 s 40: 8.830 s 41: 8.830 s 43: 8.850 s 44: 8.880 ss 45 to 47: 8.870 s 48: 8.890 s 49: 8.890 s 50: 8.890 s 51: 8.890 s 52: 8.930 s 53: 8.960 s 54: 8.970 s 55: 8.1090 s 57: 8.1040 s 59: 8.390 s 62: 8.1110 Sale of Goods (Vienna Convention) Act 1987: 16.175 Security and Investigations Agents Act 2002 s 4: 7.860 Tortfeasors and Contributory Negligence Act 1954 s 4(1): 9.50, 12.130, 12.140 Travel Agents Act 1987: 7.860 Water Management Act 1999 s 7: 3.20

VICTORIA Auction Sales Act 1958: 7.860 Auction Sales (Repeal) Act 2001 s 3: 7.860 Australian Consumer Law and Fair Trading Act 2012: 8.150, 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 6: 10.65 s 7: 9.50, 9.120

xxxvi

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Australian Consumer Law and Fair Trading Act 2012 — cont s 8: 9.50, 9.120 s 8(1): 9.120, 9.155 s 9: 9.120, 9.140 s 12: 9.130 s 15: 10.65 s 16: 10.65 s 17: 10.65 s 18: 10.65 s 18(1): 10.70 s 18(1)(a): 10.70 s 18(1)(b): 10.70 s 18(1)(c): 10.70 s 18(1)(d): 10.70 s 18(3): 10.70 s 19: 10.65 s 19(1): 10.65 s 19(2): 10.65 s 20: 10.65 s 22: 9.135, 18.290 s 22(1): 9.50 s 22(4): 18.285 s 31: 8.10 s 54: 6.380 s 57: 6.380 s 64: 9.50 s 196: 10.135 s 217: 12.35 s 236: 12.130 Ch 7: 9.155 Ch 8: 9.155 Pt 8.5: 9.155 Chattel Securities Act 1987: 4.230 s 6: 4.230 Electricity Industry Act 2000 s 35: 17.50 s 36: 17.50 s 39: 17.50 Estate Agents Act 1980 s 12: 7.860 s 49A: 7.440 s 50: 7.440 Fair Trading Act 1999 s 9: 10.45 s 12: 10.45 s 14: 9.65 s 16: 9.65 s 16(6): 9.65 s 19: 9.65 s 26: 9.65 ss 30 to 31: 8.1160 s 159(1): 12.35 s 161A: 9.65, 17.125

Fair Trading Amendment (Australian Consumer Law) Act 2010 s 9: 8.1160 Fair Trading Amendment (Unfair Contract Terms) Act 2010: 9.55 Gas Industry Act 2001 s 42: 17.50 s 43: 17.50 s 46: 17.50 Goods Act 1958: 8.10, 16.10 s 3: 8.30, 8.140, 8.870 s 4(2): 8.10 s 6: 8.20 s 7: 8.70 s 11: 8.150, 8.610 s 12: 8.150, 8.610 s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 20: 8.380 ss 21 to 22: 8.440 s 23: 8.440 s 24: 8.540 s 25: 8.610 s 25A: 8.530 s 27: 8.640 s 29: 8.680 s 30: 8.700, 8.710 s 31: 8.700, 8.710 s 34: 8.760 ss 34 to 35: 8.830 s 35: 8.170, 8.760 s 36: 8.770 s 37: 8.790 s 38: 8.800 s 39: 8.770, 8.820 s 41: 8.830 s 41(1): 8.830 s 42: 8.830 s 43: 8.830 s 45: 8.850 s 46: 8.880 ss 47 to 49: 8.870 s 50: 8.890 s 51: 8.890 s 52: 8.890 s 53: 8.890 s 54: 8.930 s 55: 8.960 s 56: 8.970 s 57: 8.1090 s 59: 8.1040

s 61: 8.390 s 64: 8.1110 ss 65 to 72: 7.790 Pt IV: 16.10 Goods (Sales and Leases) Act 1981: 16.10 Instruments Act 1958 Pt XI: 7.100 Interpretation of Legislation Act 1984 s 38: 9.120, 10.45 Motor Car Traders Act 1986 s 50D : 8.1160 Personal Property Securities (Commonwealth Powers) Act 2009: 14.20 Property Law Act 1958 s 154A: 4.220 Sale of Goods (Vienna Convention) Act 1987: 16.175 s 9: 8.180 Transfer of Land Act 1958 s 94: 7.100 Travel Agents Act 1986: 7.860 Travel Agents Repeal Act 2014: 7.860 Warehousemen’s Liens Act 1958 s 7: 13.60 Water Act 1989 s 7: 3.20 Wrongs Act 1958 s 24AF(1)(b): 9.50, 12.170 s 26(1): 9.50, 12.130, 12.140

WESTERN AUSTRALIA Auction Sales Act 1973: 8.1110 s 6: 7.860 s 25: 8.1160 Chattel Securities Act 1987: 8.650 s 6: 4.230 Civil Liability Act 2002 s 5AI(1)(b): 9.50, 12.170 Criminal Code 1913 s 253: 6.370

TABLE OF STATUTES

Debt Collectors Licensing Act 1964 s 5: 7.860 Disposal of Uncollected Goods Act 1970: 6.380 Employment Agents Act 1976 s 12: 7.860 Factors’ Acts Amendment Act 1878: 7.790 Fair Trading Act 2010: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 3: 9.40 s 7: 9.140 s 11: 9.130 s 18: 9.50, 9.120 s 19: 9.50, 9.120 s 19(1): 9.120 s 19(2): 9.120 s 20: 9.120 s 27: 10.65 s 28: 10.65 s 29: 10.65 s 30: 10.65 s 31: 9.135 s 35: 8.10 s 236: 12.130 Hire Purchase Act 1959 s 27: 4.230 Hospitals and Health Services Act 1927: 10.55 Imperial Act 5 & 6 Vict, c 39: 7.790 Interpretation Act 1984 s 5: 9.120, 10.45 Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 s 4(1): 9.50, 12.130, 12.140 Personal Property Securities Act 2009 s 8: 13.30 s 12: 13.30 s 18: 13.110 s 21: 13.30 s 24: 13.30 s 31: 13.90 s 32: 13.90 s 46: 13.110 s 99: 13.90 s 101: 13.90

Property Law Act 1969 s 85: 7.100 Real Estate and Business Agents Act 1978 s 26: 7.860 s 60: 7.440 Residential Tenancies Act 1987 s 47(2)(b): 4.220 Rights in Water and Irrigation Act 1914 s 5A: 3.20 Sale of Goods Act 1895: 8.10, 16.10 s 1: 8.20 s 2: 8.70 s 4: 8.180 s 4(3): 8.200 s 6: 8.150, 8.610 s 7: 8.150, 8.610 s 8: 8.170 s 9: 8.170 s 10: 8.210 s 11: 8.400 s 12: 8.230 s 13: 8.240, 8.260 s 14: 8.270, 8.290 s 15: 8.380 ss 16 to 17: 8.440 s 18: 8.440 s 19: 8.540 s 20: 8.610 s 21: 8.640 s 21(1): 8.650 s 23: 8.680 s 25: 8.700, 8.710 s 27: 8.760 ss 27 to 28: 8.830 s 28: 8.170, 8.760 s 29: 8.770 s 30: 8.790 s 31: 8.800 s 32: 8.770, 8.820 s 34: 8.830 s 35: 8.830 s 36: 8.830 s 38: 8.850 s 39: 8.880 ss 40 to 42: 8.870 s 43: 8.890 s 44: 8.890 s 45: 8.890 s 46: 8.890 s 47: 8.930 s 48: 8.960 s 49: 8.970 s 50: 8.1090 s 52: 8.1040 s 54: 8.390

xxxvii

s 57: 8.1110 s 59(2): 8.10 s 60: 8.30, 8.140, 8.870 Sale of Goods (Vienna Convention) Act 1986: 16.175 Transfer of Land Act 1893 s 143: 7.100 s 144: 7.100 Travel Agents Act 1985: 7.860 Warehousemen’s Liens Act 1952 s 7: 13.60 Wildlife Conservation Act 1950 s 22: 3.20

IMPERIAL Statute of Frauds 1677: 8.1110

NEW ZEALAND Consumer Guarantees Act 1993: 9.65, 16.10, 16.45, 16.50, 16.170, 16.255, 18.20, 18.25, 18.60 s 2: 17.40 s 2(1)(c): 16.150 s 7(1): 16.205, 16.220, 16.255, 16.260 s 7(2): 16.320 s 7(3): 16.325 s 7(4): 16.330 s 18(2): 18.80 s 18(3): 18.25 s 18(4): 18.70, 18.80, 18.105 s 19: 18.25 s 20: 18.60 s 20(2): 18.60 s 21: 18.20, 18.25 s 23(1): 18.50 s 26: 18.120 s 28: 17.70 s 33(b): 18.205 Fair Trading Act 1986: 18.105

UNITED STATES Uniform Commercial Code Art 9: 14.10

UNITED KINGDOM Consumer Rights Act 2015 s 34: 16.140

xxxviii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Consumer Rights Act 2015 — cont s 35: 16.140 s 36: 16.140 Ch 3: 16.140 Sale of Goods Act 1893: 8.10, 16.355, 16.365 Sale of Goods Act 1979: 16.190

Supply of Goods (Implied Terms) Act 1973: 16.100, 16.210 Supply of Goods and Services Act 1982 s 13: 17.70

TREATIES AND CONVENTIONS Australian Treaty Series: 16.175

United Nations Convention on Contracts for the International Sale of Goods 1980: 16.175

PART 1

THE CONCEPT OF PROPERTY Chapter 1

Understanding Property Law ............................................. 3

Chapter 2

What is Property? .............................................................. 5

Chapter 3

Distribution of Property ................................................... 13

CHAPTER 1

......................................................................................................................

Understanding Property Law Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 1. [1.10] All of us have things. If nothing else, we have the clothes on our backs, but most of us have more: food, money, a place to live, and the list goes on. We have laws regulating the use of our things. They stop others from interfering with our things without our consent. They tell us how things are bought, sold, borrowed, or given away. They provide a peaceful way of resolving disputes when two or more people claim the same thing. Property law is the law relating to things and property rights are the legal rights that entitle people to make use of things. Not everything can be subject to property rights. Most tangible things can be. For example, people have property rights to coats, cats, and cars, but what about human tissue or an entire human body? Many intangible things can be subject to property rights, such as songs, inventions, and shares in a company. What about information and news? Property law determines whether something can or cannot be subject to property rights. This is an issue explored in the pages below. However, most of the law of property is concerned not so much with the things themselves as with the rights people have regarding things. When dealing with property rights, there are three basic questions which should be asked and answered:

(1)

what sort of right is it,

(2)

how was it created, and

(3) what priority does it have? The answer to one question will affect the answer to another, but it is useful to consider each question separately. Property law has a reputation for being a difficult subject (which is only partly deserved). There are three main reasons for this: its vocabulary, the breadth of the subject, and a lack of organisation. First, property law has evolved slowly over centuries and uses words, like “chattel”, that were once generally understood, but ceased to be part of our common speech a very long time ago. However, most of these strange terms identify relatively simple concepts. Secondly, other law subjects tend to be more narrowly confined by their logical or contextual boundaries. For example, tort and contract are each concerned with rights arising from one type of event (wrongdoing or agreement, respectively). Administrative and family law are concerned with rights arising in a particular context.

4

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[1.10]

Property law cuts across these divisions. Property rights can be created by agreement or by wrongdoing and can arise in disputes among family members or with governments. The sheer breadth of the subject can be daunting. Thirdly and most importantly, there is so much material to cover that it is easy to lose sight of the forest for the trees. The successful study of any subject requires a useful taxonomy, so that each part can be compared and contrasted with other parts and with other subjects. This is especially true of property law. Property law is an enjoyable and worthwhile subject of study. It is a useful way to pull together and build a framework for understanding other areas of law, such as contract and tort, which tend to be studied as separate, unrelated pockets of Australian law. An understanding of property law is also an essential foundation for the study of a number of areas of law, such as trusts, restitution, intellectual property, and commercial law. More than this, property law is itself surprisingly enjoyable. It goes beyond the buying, selling, and mortgaging of land with which it is most commonly associated. Many of the most interesting and topical aspects of law are property issues, such as the trade in body parts and genetic material, squatters and homelessness, protection of the environment, de facto spouses and ownership of the family home, freedom of information, and tracing the proceeds of crime.

CHAPTER 2

......................................................................................................................

What is Property? Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 2.

Property rights are rights to things. A basic understanding of them is best achieved in two stages. The first, which is the subject of this chapter, is to identify the kinds of rights which the law regards as property rights. The second is to identify the kinds of things which can be subject to those rights. That is discussed in the next chapter. [2.10]

Definitions of property The word “property” means different things to different people and in different contexts. It is commonly used to refer to the things that people own. For example, when we encounter a sign of “Private Property” on a gate, we assume that the property in question is the land on the other side. When we see “Property Left at Owner’s Risk” posted in a cloakroom, we understand property to mean the coats, hats, etc, that people may choose to leave there from time to time. This is a common and perfectly acceptable use of the word property, but it is a popular or layperson’s usage. When lawyers talk about property, they are usually referring to the rights which people have to things, rather than the things themselves. Lawyers divide legal rights into personal rights and property rights, but they do not always divide them in the same way. Whether a particular right counts as property depends on why it matters. Sometimes, what matters is whether a right can be assigned (that is, transferred) to another person. For that purpose, a right can be counted as property if it is assignable, but that produces a very wide definition of property because most rights are assignable. At other times, the essential issue is the enforcement of the right. In that context, a property right is a right to a thing which can be enforced generally against other members of society and not just against specific persons. This produces a much narrower definition of property since most rights are not enforceable generally against others. The fact that lawyers use different definitions of property for different purposes does not mean that the concept of property is vague or poorly defined. Legal definitions of property are precise and well understood in the contexts in which they are used. However, care must be taken to choose the correct definition and use it consistently. What is commonly regarded as the law of property (and studied as a separate subject in university law schools) is based on the narrow definition of property, set out below. That [2.20]

6

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[2.30]

is what this book is about. However, it is important to be aware that a different and much wider definition of property is used for some purposes. Assignable rights ...............................................................................................................................................................................................

At its widest, property means any right that can be transferred from one person to another. For example, when someone dies, most of her or his rights form the estate which gets transferred to the executor and then distributed according to law. The collection of rights available for distribution in this way is often called the property of the deceased, and can include such things as land, personal belongings, bank accounts, company shares, debts due to the deceased, and even legal claims which the deceased had a right to pursue. A similar process occurs when people are unable to meet their financial obligations and become bankrupt. The bankruptcy process is designed, in part, to prevent a stampede of creditors all rushing to get paid. Instead, the “property of the bankrupt” is transferred to the trustee in bankruptcy, who sells it and distributes the proceeds among the bankrupt’s creditors. 1 The “property of the bankrupt” includes most of the bankrupt’s transferable rights, and can even include a right to appeal from a judgment given against the bankrupt in a court of law. 2 For other purposes, we would not regard a right to appeal as a form of property, but it can count as property for the purposes of bankruptcy law. These wide definitions of property are those based on the assignability of rights. When defined in this way, property includes everything that might be regarded as wealth or which an accountant might list as an asset on a balance sheet. Excluded are personal rights, which in this context are those rights which can be used only by the particular person who holds them. For example, the right to vote in a general election cannot be sold or given away. It is always regarded as a personal right, never property. The same is true of an academic or professional qualification, such as a university degree or licence to practise medicine. 3 If property was always defined this way, it would be a very large subject indeed. Since most contractual rights are assignable, it would swallow up most of the law of contract. Similar things could be said of the law of torts. However, for most purposes (including the study of law), the definition of property is based on the enforceability of rights and not their assignability. [2.30]

Rights in rem ...............................................................................................................................................................................................

For most purposes, the distinction between personal rights and property rights is based on their enforceability. It corresponds to the distinction between rights in personam [2.40]

1 2

Bankruptcy Act 1966 (Cth), s 58. Cummings v Claremont Petroleum NL (1996) 185 CLR 124; [1996] HCA 19.

3

Caratun v Caratun (1992) 96 DLR (4th) 404 (Ont CA).

[2.50]

CHAPTER

2

WHAT IS PROPERTY?

7

and rights in rem (using the Latin words for person and thing). Rights in personam are so called because they are enforced against particular persons, without much regard to the things they might have. Rights in rem are rights people have concerning particular things, without much regard to the people against whom those rights might be enforced. Property law is primarily about rights in rem. An example may help. If I borrow $20 from you and promise to repay it, I owe you $20. You do not expect to get the same $20 note back. Instead, I have a personal obligation to pay which corresponds to your personal right to be paid $20. This is a right in personam which can be enforced against me, regardless of what has become of the $20 note I borrowed. If I give that note to a friend or spend it at a shop, you do not acquire any rights against my friend or the shopkeeper. You have no right to that note nor to any other $20 note I may have. In contrast, if I borrow your book and promise to return it, you continue to own the book. In addition to my promise, you have a right in rem which is enforceable against me because I have your book. The property right follows the book and, if I give your book to a friend, you can assert your right in rem against my friend, because he or she has your book. The distinction between rights in rem and rights in personam is important in the law. A right in rem depends upon the continued existence of the thing to which the right relates. For example, if your book is destroyed, your property right is gone. The destruction may give you a right in personam against the person who destroyed your book or against your insurance company, but it brings to an end your right in rem to the book. In contrast, a right in personam does not depend on the existence of any particular thing. Instead, it corresponds to some person’s obligation to fulfil that right. The value of the right in personam depends upon the ability of the person to perform the corresponding obligation. So, for example, if I owe you $20, you have a right in personam which appears to be worth $20. However, if it turns out that I owe money to almost everyone I know and am unable to pay my debts, the practical value of your right may be greatly reduced. Although your right to be paid does not depend on the existence of any particular thing, my lack of sufficient assets to meet my obligations can affect the value of your right.

The essential characters of property rights Property rights come in a variety of shapes and sizes. For example, the right to use a book borrowed from the library differs in many ways from a landlord’s right to a home which is rented out. Despite these differences, these and all other property rights share two common characteristics which distinguish them from personal rights. The first is that a property right always relates to, and depends upon the existence of, some particular thing. The second is that a property right can be enforced not just against specific persons, but against a wide range of persons. It will be helpful to look at the second characteristic first. [2.50]

8

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[2.60]

Enforceability ...............................................................................................................................................................................................

All legal rights, whether personal or property, have correlating obligations. For example, if I owe you $20, you have a right to be paid $20 and I have a corresponding obligation to pay that amount. Your personal right and my personal obligation are two sides of the same coin. They form a relationship between specific persons. In this example, the relationship is called debt, in which I am the debtor who owes money to you, the creditor. Property rights, like all legal rights, are also enforced against persons. However, unlike personal rights, there are no specific persons responsible for their fulfilment. Who, for example, owes the obligation which corresponds to your property right to this book? Although the book must exist for your property right to exist, it cannot fulfil that right for you. That right can only be enforced against other persons. The obligation which corresponds to your property right is owed by other members of society. They each have a duty not to interfere with your rights to your book. In an influential essay called “Fundamental Legal Conceptions as Applied to Judicial Reasoning”, 4 Wesley Hohfeld said that the difference between rights in rem and rights in personam is simply the number of rights involved. A personal right is either a unique right enforceable against “a single person” or one of a small group of similar rights enforceable against “a few definite persons”. In contrast, property rights consist of “a large class of fundamentally similar yet separate rights”, which correspond to the obligations of “a very large and indefinite class of people”. In other words, Hohfeld would view your property right to your book as a very large collection of rights against every member of society, each of whom is under an obligation to you not to interfere with your rights relating to your book. Hohfeld used an example to illustrate his point. Suppose I made a contract with Yvonne that she would keep off your land. What is the difference between my contractual, personal right against Yvonne and your property right against her? Both rights have the same content. Hohfeld would say that the only real difference is that I have only one right of that kind, whereas you have a large number of similar rights which are enforceable against an indefinite class of people (including Yvonne). A difficulty with Hohfeld’s portrayal of property rights, as equivalent to an indefinite number of personal rights, is that it devalues the role of the things which are subject to those rights. Also, it does not accord with the way property rights function in society. A property right does not normally involve a set of specific relationships between the person who holds it and everyone who is obligated to respect it. As members of society, we are all under the same general duty not to interfere with the persons and things of others. The identity of the persons involved is irrelevant until someone interferes with [2.60]

4

“Fundamental Legal Conceptions as Applied to Judicial Reasoning” (1917) 26 Yale Law Journal 710 at 718.

[2.70]

CHAPTER

2

WHAT IS PROPERTY?

9

the property right of another. The Hohfeldian analysis of property, as an indefinite number of one-to-one relationships of rights and corresponding obligations, is unnecessary. Assume, for example, that I have an obligation not to trespass on land belonging to others and would breach that obligation if I walked across a lawn without the owner’s consent. As I walk along the street passing lawn after lawn, a Hohfeldian might say that I enter a legal relationship with the owners of each lawn that I pass. They have a right to keep me off their lawn which corresponds to my obligation to stay off. However, I do not know who or how many people live in the houses I pass nor whether they are home or away. It does not matter. The identity of the property owners is irrelevant because I know that: (a)

I have a general duty not to interfere with the things of others,

(b)

those are not my lawns, and

(c) I do not have permission to tread on them. We have no legal relationship except as members of the same society bound to observe the laws of that society. The existence of some thing ...............................................................................................................................................................................................

An essential characteristic of property rights is that they are enforceable generally against other persons in society. However, this is not a sufficient definition of property. The law also protects people from personal injury by imposing a general duty on members of society not to injure others intentionally or negligently. These rights to personal integrity and freedom from bodily interference correspond to general duties not to touch others intentionally without their consent and to take reasonable care not to harm them. The law protects your body and your things in much the same manner. Someone who wrongly interferes with your arm is guilty of a tort and liable to compensate you for any loss you suffer. The same is true of someone who wrongly interferes with your book. If your right to non-interference with your body is not a property right, but a personal right, what distinguishes these two types of rights? It is clear, using the language of Hohfeld, that both rights are enforceable against an “indefinite class of people”. However, the right to be free from bodily interference is not a property right because our bodies are not “things”. Property rights must relate to things which are separate and apart from ourselves. As James Penner said, “‘Thing’ here is a term of art which restricts the application of property to those items in the world which are contingently related to us, and this contingency will change given the surrounding circumstances, including our personal, cultural or technological circumstances.” 5 [2.70]

5

“The “Bundle of Rights” Picture of Property” (1996) 43 UCLA Law Review 711” at 807.

10

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[2.80]

Things which are intrinsically connected to us, such as our bodies and reputations, cannot be subject to property rights. Although they are valuable to us and protected by laws such as the rules against assault and defamation, they are not protected by property law. It is possible that the intrinsic connection to something might be severed and reduced to a contingent connection. For example, a lock of hair could be cut off and transformed from being a part of a person into a thing which a person owns. The same is true, perhaps, of a kidney. However, unless the intrinsic connection is broken, they cannot be subject to property rights. 6 Other essential characteristics? ...............................................................................................................................................................................................

So far, a property right has been identified as a right to a thing, which corresponds to a general duty placed on other members of society not to interfere with that right. Although basic, this definition identifies the two characteristics which separate all property rights from personal rights. Given the wide variety of property rights, it is unlikely that anything further can be added to this basic definition. There are several characteristics which the majority of property rights share, such as alienability, excludability, and value. However, as discussed below, not all property rights have these traits, while many personal rights do. Therefore, they are not useful as defining characteristics of property rights. [2.80]

Alienability

First, it is sometimes said that property rights are alienable, meaning that they can be sold or given away to others. Of course, this must be true when a wide definition of property based on assignability is used (as discussed above at [2.30]). However, that definition of property includes both rights in rem and rights in personam. While most rights are alienable, many are not. Most non-assignable rights are rights in personam, but there are also a few non-assignable rights in rem. In other words, there is some property that cannot be sold or given away. For example, a non-assignable, residential lease is certainly a property right, even though the tenants are not free to transfer it to others. All property rights can be described as “alienable” if that term is understood to mean “disposable” rather than “transferable”. Since property rights must relate to some thing which is only contingently connected to the right holder, it must be possible for that person to alienate the thing in the sense of severing her or his connection to it. However, that connection can be severed without transferring the right to another. For example, the tenant with a non-assignable lease can surrender it and vacate the dwelling. [2.90]

Excludability

The second characteristic often attributed to property rights is excludability, meaning that the holder of a property right is able to exclude others from making use of [2.100]

6

See MJ Radin, “Property and Personhood” (1982) 34 Stanford Law Review 957 at 966.

[2.110]

CHAPTER

2

WHAT IS PROPERTY?

11

the thing subject to that right. Most property rights do include this trait. For example, if you own or rent a home, you have the right to exclude others from it. If you borrow a book from the library, you have the right to exclude others from using the book. However, there are property rights which do not allow the right holder to exclude others from the thing subject to that right. For example, a right of way is a property right to cross another person’s land. It meets the definition of a property right in that it relates to some thing (land) and is enforceable against other members of society (including the land owner), who are not permitted to interfere with its proper use. However, the holder of a right of way is not permitted to exclude others from the land subject to it. Just as all property rights do not entitle the right holder to exclude others from the thing, some personal rights do. Hohfeld’s example (discussed above at [2.60]) gave me a personal right to exclude Yvonne from your land. Also, sometimes in the course of a domestic dispute, one spouse might be granted the right to exclude the other spouse from the family home, even though that other spouse is the sole or part owner of that home. 7 Value

Value is a third characteristic which most, but not all, property rights share. They usually have some market value. Even second-hand clothing can fetch a few dollars in a charity shop. However, value is not a necessary characteristic of property. 8 Many things which are subject to property rights have only sentimental value (such as my child’s primary school artwork or an old theatre ticket from a memorable night out). There are other things which are completely valueless. For example, your property right to dirty motor oil drained from your car may create a liability for the cost of discarding it safely. On the other hand, there are many personal rights that have market value, such as a contractual right to be paid a sum of money. In modern Australian society, many of the things for which we pay money are not property rights, but services, such as the right to listen to live music, have our cars washed, or receive medical advice. Some personal rights are commonly regarded as property rights because of their value. The most familiar example is the bank account. Money in the bank may be a person’s most valuable asset, but that does not make it property. If you deposit a $100 note in the bank, your property right to that note passes to the bank and the balance in your account increases by $100. The bank does not keep that $100 note safe for you. It belongs to the bank and is used as the bank sees fit. 9 The deposit does not give you any property rights to any other notes or assets in the bank. Your “money in the bank” does not correspond to anything but the bank’s promise to pay you $100 (plus interest, less fees and taxes) on request. In other words, you have exchanged your property right to the $100 note for a personal right of similar value. You are the bank’s creditor and the bank is your debtor. [2.110]

7 8

Family Law Act 1975 (Cth), s 68B. F Cohen, “Dialogue on Private Property” (1954) 34 Rutgers Law Review 957 at 363-364.

9

Foley v Hill (1848) 2 HLC 28; 9 ER 1002 at 36 (HLC), 1005-1006 (ER).

12

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[2.110]

A personal right against a bank is a valuable asset, not because it relates to any particular thing, but because the bank will almost certainly pay its debts. Most people would rather have money in the bank than large sums of cash, because the risk of a bank not paying is much smaller than the risk of cash being lost, stolen, or destroyed. In other words, a bank account is a desirable form of value precisely because it is not property and does not carry the usual risks of property ownership. It is important not to overstate the essential characteristics of property. This happened in Milirrpum v Nabalco Pty Ltd, 10 and led to the dismissal of the plaintiffs’ claim for native title. The plaintiffs claimed that the defendant’s mining activities were wrongly interfering with their property rights to use certain land to perform ritual ceremonies. The judge, Blackburn J, said, “I think property, in its many forms, generally implies the right to use or enjoy, the right to exclude others, and the right to alienate”. 11 Since the plaintiffs were not entitled to exclude others from the land and could not sell or give their rights to others, Blackburn J decided that they did not have property rights enforceable against other members of society. However, it is clear that the plaintiffs’ rights related to a thing (the land) with which they were contingently connected. Although individual members of the plaintiffs’ clan could not sell or give their rights to others, they had the power to sever their connection with the land by moving away. Also, the right to perform ritual ceremonies on the land, like a right of way, can be a property right so long as it corresponds to a general duty placed on other members of society not to interfere with the exercise of that right. The right to exclude others from the land was not required. The result in Milirrpum would probably be different if that case was decided today, now that native title has been recognised by the High Court of Australia in Mabo v Queensland (No 2). 12

10 11

Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141. Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 at 272.

12

Mabo v Queensland (No 2) (1992) 175 CLR 1; [1992] HCA 23.

CHAPTER 3

......................................................................................................................

Distribution of Property Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 4. [3.10]

kinds:

Jeremy Waldron wrote that discussions about property law are of two different

1

First there are analytical issues, about the meaning and use of the most important concepts in property law, such as “private property”, “ownership”, and “thing”. The second type of issue is normative or justificatory.”

This book is of the first kind. This chapter is but a brief look at a few questions concerning the justification of property rights and their distribution in Australia. This is not an indication of the relative importance of these two different kinds of inquiries, nor is it meant to suggest that they are wholly separate from each other. The property regime discussed in this book exists because the majority of Australians believe that this method of allocating rights to things is justified. The justification of this regime, morally and politically, is a complex and important task, which depends upon an understanding of the nature and regulation of property rights in Australian society. Property rights, like all legal rights, require justification because they correspond to duties placed on other members of society. Laura Underkuffler said, “A right can be defined as that which fulfils an individual need or individual interest that is considered to be of sufficient moral importance to justify the generation of duties for others”. 2 Property rights are especially in need of justification because they correspond to duties imposed on everyone in society and not just on those who have consented to undertake particular duties to particular right holders. The justification of property rights tends to be a contentious business. Why does one person have the right to prevent others from walking on some place on the earth? Why do the police help shopkeepers protect large stores of food from the hungry? The debate is emotionally and politically charged. However, these questions concern the justification of particular types of property rights or the manner in which those rights are distributed in society. They do not address the basic question of whether property rights should exist at all. That question is relatively simple and free of controversy. For example, we might argue about the ownership of Australia’s telephone systems, but would agree that there must be at least one person with the right to prevent others 1

“Property Law” in D Patterson (ed), A Companion to Philosophy of Law and Legal Theory (2nd edn, Oxford, 2010) p 9 at 9.

2

“On Property: An Essay” (1990) 100 Yale Law Journal 127 at 139.

14

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[3.10]

from taking away or destroying the equipment needed to operate those systems. In other words, we can agree that there ought to be property rights to telephone systems, without having to decide who should hold those rights. Similarly, we might debate whether people should have free access to the beach. This is not a debate over whether there should be property rights to the beach. Each side favours a different property right: either the right to use the beach or the right to prevent others from using it. The former is a property right not to be excluded from the beach and to prevent others from using it in a manner that detracts from that access (for example, by building or dumping). Our debate is about the kind of property rights which should exist and who should hold them. A society cannot function peacefully without rules regulating the use of things. As Waldron said, “Disagreements about who is to use or control such objects are likely to be serious because resource use matters to people, for their livelihood as well as their enjoyment. Thus any society with an interest in avoiding violent conflict will need a system of rules for pre-empting disagreements of this kind.” 3 The existence of property rights is simply part of the rule of law. 4 The regulation of human behaviour necessarily involves the regulation of our use of things. Resources in society can be owned either privately or publicly. In other words, the right to decide how something should be used can be allocated to private persons or to society as a whole. One society can be distinguished from another according to the proportions of private and public property that exist within it. 5 As Peter Birks said: 6 Things either fall within the sphere of private ownership or they do not. The way in which the line is drawn goes far to determining the character of a society. Move it a little to one side, to exclude the means of production, and you have communism.

In Australia, private property predominates. However, a large portion of the country is publicly owned as Crown land, as are most minerals located in private land. Also, private and public property blend into one another. For example, a privately owned building may be designated a heritage site, thereby prohibiting the owner from altering its structure without government permission and imposing upon the owner positive duties to preserve it. In that situation, decisions about the use of the thing are being made privately and publicly. The private ownership of most things is limited to some extent by public decisions, through zoning laws and other regulations. The debate over the benefits and evils of “property” is concerned not with the existence of property rights, but with their distribution in society. The use of valuable resources must be regulated, but by whom? Which resources should be allocated to 3 4 5 6

“Property Law” in D Patterson (ed), A Companion to Philosophy of Law and Legal Theory ((2nd edn, Oxford, 2010) p 9 at 11. See J Waldron, The Rule of Law and the Measure of Property (Cambridge, 2012) pp 15-21. See F Cohen, “Dialogue on Private Property” (1954) Rutgers Law Review 357 at 357-359; AM Honoré, “Ownership”, in AG Guest (ed), Oxford Essays in Jurisprudence (Oxford, 1961) p 107 at 109-110. “An Unacceptable Face of Human Property” in P Birks (ed), New Perspectives in the Roman Law of Property: Essays for Barry Nicholas (Oxford, 1989) p 61 at 61.

CHAPTER

[3.20]

3

DISTRIBUTION OF PROPERTY

15

private persons and which should be left in the public domain? Whether property is private or public, how and to what extent should its use be regulated by the State? When we speak of the need to justify property, meaning the right of some people to control things to the exclusion of others, we are usually talking about justifications for private property.

Public property Public property can be either common or collective property. 7 Common property is the right of everyone in society (or a sufficiently large segment of society) to make use of a thing. It corresponds to the general duty of others not to use the thing in a way which interferes with the common use. For example, no-one is permitted to build on a public road or park, pollute a public beach, or prevent an Aboriginal group from exercising its native title. No government or individual member of society is entitled to the exclusive use of a thing which is common property. Collective property exists when decisions regarding the use of a thing are taken on behalf of society by public institutions, such as government agencies and departments and government-owned corporations. In Australia, those decision-makers are ultimately responsible to all members of the particular collective (whether city, State, Territory, or Commonwealth) through the democratic process. The fact that decisions are made collectively does not mean that individual members of the collective have a right to use that thing. For example, public access to a military installation will probably be highly restricted. The distinction between common and collective property is not always easy to see. The collective may decide to use something, such as a freeway, museum, or zoo, in a manner which gives people relatively free access to that thing. However, decisions about the use of that thing are made by, or on behalf of, the government. Public access to it is granted by the decision-maker and does not exist independently as a common right. Collective ownership is often similar to private ownership. For example, an office building gets used in much the same way, regardless whether its occupants are civil servants or employees of a private company. However, it is a mistake to assume that collective ownership is simply the public equivalent of private ownership. In many situations, State ownership exists as a means of regulating the public use of a resource and not for the purpose of giving the State the kind of use and control that a private owner could exercise. In Yanner v Eaton, 8 the defendant was charged with hunting crocodiles without a licence. The Magistrate dismissed that charge because the defendant had exercised his native title right to hunt them. The High Court of Australia was asked to decide whether [3.20]

7

See CB Macpherson, “The Meaning of Property” in CB Macpherson (ed), Property: Mainstream and Critical Positions (Toronto, 1978) p 1 at 4-6; J Waldron, The Right to Private Property (Oxford, 1988) pp 40-42.

8

Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53.

16

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[3.20]

that right had been extinguished by the Fauna Conservation Act 1974 (Qld), which declared that “All fauna … is the property of the Crown”. 9 That native title right would have been extinguished if the Crown had been the owner of the crocodiles. The majority of the court held that the Crown’s “property” was not equivalent to private ownership, but merely part of “a regime forbidding the taking or keeping of fauna except pursuant to licence granted by or under the Act”. 10 They quoted Roscoe Pound on the meaning of public ownership: 11 We are also tending to limit the idea of discovery and occupation by making res nullius (eg, wild game) into res publicae and to justify a more stringent regulation of individual use of res communes (eg, of the use of running water for irrigation or for power) by declaring that they are the property of the state or are “owned by the state in trust for the people”. It should be said, however, that while in form our courts and legislatures seem thus to have reduced everything but the air and the high seas to ownership, in fact the so-called state ownership of res communes and res nullius is only a sort of guardianship for social purposes. It is imperium, not dominium. The state as a corporation does not own a river as it owns the furniture in the state house. It does not own wild game as it owns the cash in the vaults of the treasury. What is meant is that conservation of important social resources requires regulation of the use of res communes to eliminate friction and prevent waste, and requires limitation of the times when, places where, and persons by whom res nullius may be acquired in order to prevent their extermination. Our modern way of putting it is only an incident of the nineteenth-century dogma that everything must be owned.

Other natural resources, such as water, are often regulated in the same way. For example, according to the Water Act 2000 (Qld), “All rights to the use, flow and control of all water in Queensland are vested in the State”. 12 This does not mean that the State owns that water in the same way that it would be privately owned, but provides a mechanism for State regulation of an important resource. The same goals can be achieved without formal State ownership simply by regulating the right to use water within the State. 13 Public resources are often owned as collective property, rather than common property, because it is harder to regulate the use of common property. If every member of society has a right to use a particular resource, how do we restrict or suspend that use for the greater good? It is easier if decisions about the use of that resource are made collectively for the benefit of all. However, there is a risk that collective ownership of public spaces could be exercised in ways that restrict the basic freedoms which members of society ought to enjoy. 9 10 11 12

13

Fauna Conservation Act 1974 (Qld), s 7; replaced by Nature Conservation Act 1992 (Qld), s 83. Also see National Parks and Wildlife Act 1974 (NSW), s 97; Wildlife Conservation Act 1950 (WA), s 22. Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53 at [30]. Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53 at [29], quoting R Pound, An Introduction to the Philosophy of Law (rev ed, Yale, 1954) p 111. Water Act 2000 (Qld), s 19. Also see Water Resources Act 2007 (ACT), s 7; Water Act (NT), s 9; Water Management Act 1999 (Tas), s 7; Water Act 1989 (Vic), s 7; Rights in Water and Irrigation Act 1914 (WA), s 5A. See Water Management Act 2000 (NSW); Natural Resources Management Act 2004 (SA), Ch 7.

[3.20]

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17

In Committee for the Commonwealth of Canada v Canada, 14 two people were prevented from distributing political leaflets and magazines at a public airport in Montreal, and they claimed that this violated their right to freedom of expression under the Canadian Charter of Rights and Freedoms. The government argued that, “as owner of property, the government has the right to exclude whomever it wants, and to impose conditions on invitees to its property without limitation by the Charter”. 15 This was rejected by the Supreme Court: 16 If property rights alone can be invoked to limit, restrain, or abridge a fundamental freedom on any given place of public property, the Charter’s guarantees lose all meaning — only those holding the property-owner’s permission could express themselves.

While the government had the right to restrict activities in the airport for security and operational purposes, that did not justify a ban on peaceful forms of expression in the parts of the airport to which the public normally had free access. This follows the approach taken by the United States Supreme Court to freedom of expression in public places: 17 Wherever the title of streets and parks may rest, they have immemorially been held in trust for the use of the public and, time out of mind, have been used for purposes of assembly, communicating thoughts between citizens, and discussing public questions. Such use of the streets and public places has, from ancient times, been a part of the privileges, immunities, rights, and liberties of citizens. The privilege of a citizen of the United States to use the streets and parks for communication of views on national questions may be regulated in the interest of all; it is not absolute, but relative, and must be exercised in subordination to the general comfort and convenience, and in consonance with peace and good order; but it must not, in the guise of regulation, be abridged or denied.

In the United States, rights to free expression in public places have also been extended to private property to which the public has been invited. In PruneYard Shopping Center v Robins, 18 the Supreme Court upheld the right to distribute political pamphlets and seek signatures on a petition in a privately owned shopping mall, over the objections of its owner. In essence, this treats private property as public property when the owner chooses to use it as a public place. In Marsh v Alabama the court said: 19 Ownership does not always mean absolute dominion. The more an owner, for his advantage, opens up his property for use by the public in general, the more do his rights become circumscribed by the statutory and constitutional rights of those who use it.

14

Committee for the Commonwealth of Canada v Canada [1991] 1 SCR 139; 77 DLR (4th) 385.

15 16 17 18

Committee for the Commonwealth of Canada v Canada [1991] 1 SCR 139; 77 DLR (4th) 385 at 421. Committee for the Commonwealth of Canada v Canada [1991] 1 SCR 139; 77 DLR (4th) 385 at 424. Hague v Committee for Industrial Organization 307 US 496 (1939) at 515-516. PruneYard Shopping Center v Robins 447 US 74 (1980).

19

Marsh v Alabama 326 US 501 at 506 (1946).

18

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[3.30]

Debates over the use of public places go beyond our concern for the free expression of ideas. In “Homelessness and the Issue of Freedom”, Jeremy Waldron observed that freedom also involves the freedom to attend to basic needs: 20 When a person is needy, he does not cease to be preoccupied with freedom; rather his preoccupation tends to focus on freedom to perform certain actions in particular. The freedom that means most to a person who is cold and wet is the freedom that consists in staying under whatever shelter he has found. The freedom that means most to someone who is exhausted is the freedom not to be prodded with a nightstick as he tries to catch a few hours sleep on a subway bench.

The regulation of public places affects us all, but affects the homeless in a different way. Public places are regarded as appropriate for public activities, but inappropriate for certain private activities, such as bathing, sleeping, or having sex. For most of us, a prohibition of those activities in public places is perfectly acceptable, and maybe even desirable, because we have access to private property for those purposes. As Waldron said: 21 For a person who has no home, and has no expectation of being allowed into something like a private office building or a restaurant, prohibitions on things like sleeping that apply particularly to public places pose a special problem. … The rules of property prohibit the homeless person from doing any of these acts in private, since there is no private place that he has a right to be. … If sleeping is prohibited in public places, then sleeping is comprehensively prohibited to the homeless.

Private property Private property is the right of a private person or group of private persons to make decisions regarding the use a thing. For example, if you own this book, you can decide whether to read it, write in it, give it away, etc. You cannot use it to harm others, but the government and other members of society do not otherwise have a say in what you do with it. If you have borrowed this book from the library, your right to use it is limited by the library’s (private or collective) right to it. However, your limited right to use the book during the period of loan is private property, because that right belongs to you and not to the collective or the common. Waldron suggested that private property is in need of justification because it can operate in ways which appear to be “morally objectionable”: 22 [3.30]

Private property involves a pledge by society that it will continue to use its moral and physical authority to uphold the rights of owners, even against those who have no employment, no food to eat, no home to go to, no land to stand on from which they are not at any time liable to be evicted.

What is sought is some moral justification for allowing one private individual to control something which may be essential to the life or well-being of another. 20 21 22

“Homelessness and the Issue of Freedom” (1991) 39 UCLA Law Review 295 at 303. “Homelessness and the Issue of Freedom” (1991) 39 UCLA Law Review 295 at 315. “Property Law” in D Patterson (ed), A Companion to Philosophy of Law and Legal Theory (2nd edn, Oxford, 2010) p 9 at 15.

[3.30]

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19

The controversy can be narrowed further. The argument is not over the institution of private property, but over the things which should be subject to private property rights and over the distribution of those rights in society. There are some things which individuals need to maintain a basic existence, such as food, clothing, and a place to sleep. In some societies, such as a monastery, hospital, prison, or army, individuals may live without control over those things. However, most everywhere else, the right to decide when, where, and with whom we break our daily bread is an essential component of adult life. Even if we believed that the production and distribution of food should be done collectively, we would still want the freedom to decide how to use our allotted portion. At some point between production and consumption, food would become privately owned. Certain basic freedoms, such as the rights to decide what to eat and wear, cannot exist unless people are permitted to control some things. In other words, there must be at least some private property. Of course, personal fulfilment may depend on more than the bare essentials for survival. A meaningful or enjoyable life involves the pursuit of many different interests, such as our health, safety, and relationships with others. It also involves an interest in controlling and using certain external things. This is not to suggest that it is possible to construct a list of essentials which must available for private ownership. What we need to attain a desired quality of life will depend on our personal circumstances. As James Penner said: 23 If I choose the life of contemplation, for instance, a room, regular meals, access to a good library, and the company of others who share my intellectual interests are what I need, not any property.

People seek personal fulfilment in a wide variety of ways, most of which depend upon the ability to control some things. For one person it may be a sailboat. For another it may be a tennis racket or pair of hiking boots. Others may want the right to use a computer or bring flowers home to a loved one. These things are not essential for survival, but can be the ingredients of a life well lived. As Penner said, “the interest in property, no less than our interest in anything else, is an interest in creating values and forming relationships and experiencing delights which together make for the good life”. 24 Our concern is not that people have private property, but that some of us have so much while others have so little. It is the unequal distribution of private property rights that causes anguish. However, even those with very little have an interest in the institution of private property. As Laura Underkuffler asked: 25 Are the poor truly “propertyless”, with no interest in protecting the right of property? It is impossible to imagine a class of persons, let alone a majority, who have no interest, no psychological investment of any kind, in the idea of protecting property. Every individual desires protection for his property, both now possessed and that which may, in 23 24

The Idea of Property in Law (Oxford, 1997) p 205. The Idea of Property in Law (Oxford, 1997) p 204.

25

“The Perfidy of Property” (1991) 70 Texas Law Review 293 at 307.

20

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[3.30]

the future, be acquired; this is true no matter how meager one’s property may be. In fact, the poor might have a greater stake in, and a greater moral claim to, the protection of what little property they have. The general concept of property protection must be distinguished from the protection of existing property distributions.

The justification of private property is a debate over the allocation and use of private property rights and not whether those rights should exist at all. As Underkuffler said: 26 The relationship between the concept of property protection and the separate question of the protection of particular objects of property or particular property distributions could be envisioned as the relationship between a general right and particular instantiations of that right.

Every society has had to consider the list of things which are permissible objects of private ownership. Should it include land, hospitals, educational institutions, or news media? What about the means of production, transportation or communication? There is a vigorous debate over where the lines between common, collective, and private property should be drawn. This debate is not about the nature or existence of property rights, but their allocation. Linked to, but separate from the problem of deciding which things should be privately owned is the problem of their distribution in society. Again, this is not about the nature of property, nor even the nature of private property. It really concerns the rights people have to sell, lease, give, lend, or otherwise exploit their property rights. In other words, there is an important difference between the institution of private property and the existence of a free market which enables people to exchange that property for wealth. Although a free market economy depends upon the existence of private property, private property can exist in the absence of a free market. For example, Butler v Egg and Egg Pulp Marketing Board, 27 concerned the right of egg producers to sell their eggs. Although the farms, barns, equipment, feed, and laying hens were privately owned, the eggs were, by law, the property of the marketing board from the moment they were laid. Therefore, the egg producers were guilty of wrongly interfering with the board’s property rights when they sold the eggs directly to consumers. Questions about the distribution of wealth and resources in society are important. However, the focus of such questions is not on the nature and limits of property, but on the freedom to deal with property and other rights in the market place. The right to exchange property rights for value is an issue of distributive justice, but so too is the right to exchange services for value (consider, for example, the relative salaries of health care workers and movie stars). Calling into question the current distribution of property rights in society is not an attack on the institution of property, but on the regulation of exchange. As Penner said: 28 26 27

“The Perfidy of Property” ((1991) 70 Texas Law Review 293 at 308. Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185; [1966] HCA 38.

28

The Idea of Property in Law (Oxford, 1997) p 206–207.

[3.30]

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21

The legitimacy of property rights per se strikes me as well nigh indisputable, for the practice of property protects a liberty, ie exclusively to determine the use of things, that has proved marvellously productive in contributing to the good life of many. Determining the justice of any distribution of property, on the other hand, should draw our attention to those distributional mechanisms themselves, such as gifts and contracts and commands, all of which distribute a much broader set of goods than property rights.

The economic, moral, philosophical, political, and religious issues concerning property and its distribution in society are fascinating and rewarding subjects of study. This book does not deal with them. However, it does seek to provide an understanding of the nature of property rights and the legal framework in which they exist. This is a prerequisite for the study of broader issues of justification and distribution. The debate concerning these issues often takes place using the generic label, “property”. It is important to be able to look beyond that label and isolate the particular points of debate. In most cases, the issue at hand is not the nature of property, but its distribution. More often than not, this is a debate about the freedom to exploit resources and the regulation of that freedom. Property enters into this debate about the market place as but one of the resources subject to that market.

PART 2

PHYSICAL LIMITS TO LAND AND FIXTURES Chapter 4

Physical Changes to Things ............................................. 25

CHAPTER 4

......................................................................................................................

Physical Changes to Things Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 26.

[4.10] Since property rights relate to things, they can be affected by physical changes to those things. The market value of a property right is dependent on the status of the thing subject to that right. For example, what someone will pay for the ownership of your car depends on its age, previous use, state of repair, etc. However, those factors do not affect the nature and existence of your property right to your car. Your ownership entitles you to possess and use it, regardless of its market value. This chapter concerns physical changes to things that cause property rights to be created, destroyed, or altered. For example, when a house is painted, the paint ceases to exist as a separate thing and becomes part of the house, which is part of the land beneath it. There are no longer any property rights to the paint which are distinct from the property rights to the land. The physical change to the paint (from liquid in a can to solid on a wall) destroyed the ownership of the paint as goods. This chapter is divided into three main sections. The first concerns changes to property rights brought about by the creation and destruction of things (see [4.20] ff). The second deals with the problems which arise when goods belonging to one person get attached to, or mixed with, something belonging to another, as accessories (see [4.120] ff). The third section concerns mixtures of indistinguishable goods (such as oil or grain) belonging to more than one person (see [4.240] ff).

Creation and destruction of things The creation and destruction of things is a normal part of daily life. Agricultural products are turned into food and consumed, while goods are manufactured, used, and discarded. The creation of a new thing brings about the possibility of new property rights. Those rights may arise automatically when the thing comes into existence. For example, if your dog had puppies, you would be the owner of the puppies from the moment of their birth. 1 This is just one of many rules which allocate the ownership of new things among members of society. Conversely, the destruction of a thing will necessarily bring to an end any property rights to it. Sometimes, its destruction will give rise to a personal right to payment (of [4.20]

1

See Grant v YYH Holdings Pty Ltd [2012] NSWCA 360 at [37].

26

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.30]

damages or insurance proceeds) or a property right to some other thing, but property rights to the destroyed item are no longer possible. It is helpful to discuss goods and land separately (at [4.30] ff and [4.60] ff). Goods are created and destroyed all the time, but this is a relatively rare occurrence with land. Also, the nature of property rights to land means that those rights are unlikely to be affected by physical changes to the land or the things attached to it. Goods ............................................................................................................................................................................................... [4.30] The creation of new goods is called specification (from specificatio in Roman law, which is the making of a new thing or nova species). This can happen naturally, such as a plant growing from a seed or producing fruit or an animal giving birth, laying eggs, or producing milk. It also occurs when something is manufactured, such as a car, shirt, or loaf of bread. There are two potentially difficult issues. First, when does specification occur? How do we know (for legal purposes) whether we have a new thing or merely a modification of an existing thing? For example, if I mix an egg with flour, sugar, chocolate, etc, and bake a cake, the egg is gone and a new cake has come into existence. What if I mix the egg with a few vegetables and turn it into an omelette? What if I simply boil or fry the egg? Secondly, when specification does occur, how do we allocate property rights to the new thing? In most cases, this is not a problem. If I make a cake in my kitchen using my ingredients, I will own the cake. What if I make it in your kitchen with your ingredients? What if only some of the ingredients belonged to you? Since new goods do not spring into existence out of thin air (divine intervention and science fiction aside), the creation of goods requires the destruction or use of other goods or the use of land. This can pose a legal problem if the creation of new goods involves things and creative effort supplied by more than one person. The law must provide a mechanism for allocating the property rights to the new goods in a fair, peaceful, and efficient manner.

Making new things

There is no set rule for deciding when a new thing is created. Judges tend to rely on their common sense. For example, in the Associated Alloys case, 2 steel belonging to the plaintiff had been made into pressure vessels and heat exchangers by the defendant. Bryson J decided that the manufactured steel products were new things and therefore the plaintiff’s steel no longer existed: 3 [4.40]

2

3

Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205; (1996) 14 ACLC 952; [1996] NSWSC 119; affirmed (1998) 16 ACLC 1633 (CA); [1998] NSWSC 442; affirmed sub nom Associated Alloys v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25. Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205 at 209; (1996) 14 ACLC 952; [1996] NSWSC 119.

[4.40]

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4

PHYSICAL CHANGES TO THINGS

27

The question whether goods which have been used in some manufacturing process still exist in the goods produced by that process, or have gone out of existence on being incorporated in the derived product is, in my opinion, a question of fact and degree not susceptible of much exposition. When wheat is ground into flour it is reasonably open to debate whether the wheat continues to exist; when flour is baked into bread there could be little doubt that the flour does not. Many examples might be encountered or imagined, and each must be addressed separately.

Very little has changed over the centuries. Debates over this issue can be found in Roman law and the solution seemed to depend on common sense. As Barry Nicholas said: 4 In short the question “is there a nova species?” can be restated in the form “would the ordinary man give the thing as it is a name different from that of the thing as it was?”

Although new goods are being manufactured all the time, there are very few cases dealing with this issue and many of them are fairly old. The reason is simple. Most people use their own materials when making things and it does not matter whether the materials continue to exist in modified form or have been turned into something new. Either way, the maker will be the owner of the product. The issue has gained prominence in recent years, because of the popularity of contractual terms called Romalpa clauses. 5 They are used by suppliers of raw materials to reserve legal ownership of those materials after they have been delivered to manufacturers. One was used in the Associated Alloys case, discussed above. It stated that “the title of the subject goods/product shall not pass to the purchaser until payment in full of the purchase price”. 6 This meant that the defendant did not own the steel it had used to manufacture steel products, but possessed it as a bailee. This is why Bryson J had to decide whether the products were merely modified forms of the plaintiff’s steel or new steel products owned by the defendant. A manufactured product is not a new thing if it can be reconverted easily to its original form. 7 In Lampton’s Executors v Preston’s Executors, 8 the plaintiff’s clay had been made into bricks by the defendant. Some of the bricks had not yet been fired and, since they could be returned to their original (lack of) form, they were still clay and not new bricks. As Bryson J noted in the Associated Alloys case, this issue is not resolved by asking whether it is possible to restore the manufactured article to its original form, but whether it is practical to do so: 9 4 5 6

7 8 9

An Introduction to Roman Law (Oxford, 1962) p 138. Named after Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676. Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205 at 207; (1996) 14 ACLC 952; [1996] NSWSC 119; Associated Alloys v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25 at [9]. See L Smith, The Law of Tracing (Oxford, 1997) pp 111-112. Lampton’s Executors v Preston’s Executors 24 Ky 455 (1829). Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205 at 209-210; (1996) 14 ACLC 952; [1996] NSWSC 119.

28

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.50]

[The] question whether goods are reducible to the original materials is not simply a matter of physics. Other perspectives have to be considered, including the economic perspective. The scraps of leather produced by cutting up a manufactured shoe could not in reality be regarded as the original leather from which the shoe was manufactured. The steel which would be produced by cutting up a pressure vessel and flattening out the cylindrical parts would not be the steel which Associated Alloys delivered under the sale; it would be scrap steel. Allocating property rights

Most things are subject to property rights from the moment they come into existence. The exceptions include animals born in the wild. If no-one owns the mother, then no-one owns the offspring. 10 A newborn domestic animal belongs to its mother’s owner and a plant belongs to the owner of the land on which it grows. In “Dialogue on Private Property”, Felix Cohen, justified these rules on the grounds of fairness, certainty, and economic productivity. 11 When goods are manufactured, the materials used to create those goods cease to exist (in law) and so do any property rights to those materials. Therefore, any property rights to the new goods are new rights, which need to be allocated to somebody. In most cases, the new goods will belong to their creator. As Goff LJ said, in Clough Mill Ltd v Martin: 12 [4.50]

Now it is no doubt true that, where A’s material is lawfully used by B to create new goods, whether or not B incorporates other material of his own, the property in the new goods will generally vest in B, at least where the goods are not reducible to the original materials.

There are two situations in which new goods might belong to the supplier of the materials, rather than their creator. The first is where the supplier and creator agree that they will. For example, you might deliver some cloth to a tailor or dressmaker on the understanding that you will own the garment made from that cloth. Your agreement displaces the normal rule and causes ownership of the garment to pass to you when it comes into existence. Secondly, the ownership of a new thing might belong to the supplier of the materials if the creator used those materials without the supplier’s consent. For example, in Silsbury v McCoon, 13 corn was stolen from the plaintiff and made into whiskey. The court decided that the plaintiff was the owner of the whiskey because his ownership of the corn was not lost when it was wrongly transformed into whiskey. This reasoning is criticised by Lionel Smith. 14 The plaintiff’s property right to the corn could not survive the destruction of that corn. The ownership of the whiskey was a new property right which was allocated to the plaintiff, as former owner of the stolen corn. 10 11 12 13

Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53. “Dialogue on Private Property”, (1954) 9 Rutgers Law Review 357 at 366-369. Clough Mill Ltd v Martin [1984] 3 All ER 982; [1985] 1 WLR 111 at 119 (CA). Silsbury v McCoon 3 NY 379 (1850).

14

L Smith, The Law of Tracing (Oxford, 1997) pp 113-114.

[4.60]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

29

The wrongdoing of the creator of a thing can explain why he or she might be disentitled from owning it. However, this can be very hard on the creator (or someone who buys it from the creator) and may produce a large windfall for the supplier of the materials. For example, suppose an artist used stolen paints and canvas worth $100 to produce an oil painting worth $1,000. Should the painting belong to the owner of the art supplies or the artist? The artist is guilty of conversion of the art supplies and liable to pay damages to their owner for their full value. Is there any reason why the artist should also be required to give up the painting? It is not the profit of wrongdoing nor was it used to commit a wrong. Therefore, restitution or forfeiture of the painting is not justified. It has been suggested that the supplier of materials should own the new goods if the creator knew that he or she was not entitled to use those materials. However, this would add an element of uncertainty, because the ownership of a new thing would depend on the creator’s knowledge at the time of conversion. Lionel Smith suggests that it would be better to allocate ownership of new goods to their creator in all cases (unless the parties agree otherwise). 15 If the creator’s use of the raw materials is unauthorised, he or she will be liable to pay damages for conversion. If the use is a crime, then punishment is also available. Land ...............................................................................................................................................................................................

As with goods, the market value of land is affected by its physical condition (such as the number and quality of buildings and other improvements). Unlike goods, physical changes to land rarely affect property rights to it. This is because of the nature of those rights. An estate is a right to possess a volume of space, measured relative to the surface of the earth, for a period of time. These four dimensions (three spatial and one temporal) are not affected by most changes to the physical condition of the land or the things attached to it. For example, if I own a house in fee simple and it is destroyed by fire, my estate will continue unchanged (but with a reduced market value). I still have the right to possession of the same space on the earth, even though the contents of that space have changed. In contrast, if my books, furniture, and other belongings are destroyed in the fire, my property rights to those things are gone. Since estates are almost immune to physical changes to land, so too are most other property rights to land. This is because other rights, such as mortgages, easements, and restrictive covenants, are attached to estates and not directly to the land subject to those estates. They depend on the continued existence of an estate and not on its physical contents. There are a few rights which are not attached to estates, such as native title and non-possessory rights to Crown land. However, these also tend to exist independently of the physical condition of the land. [4.60]

15

L Smith, The Law of Tracing (Oxford, 1997) p 114.

30

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.70]

A physical change to land can affect an estate only if it alters one of its four dimensions. This can happen in two different ways. The first is by accretion to or erosion from a shoreline (see [4.70] ff). The second is by total destruction of the premises to which the estate relates (see [4.110]). Accretion and erosion

Sometimes, the horizontal dimensions of an estate are defined by reference to the shore of a river, lake, ocean, or other body of water. If a shoreline forms part of the boundary of an estate and that line moves, the dimensions of the estate will change. An increase in the size of the estate is called accretion and a decrease is called erosion. A change to the shoreline will not affect an estate unless the boundary of the estate is defined as the shoreline. Also, the change must be gradual and not brought about intentionally by the estate holder. [4.70]

Definition of the boundary

In Southern Centre of Theosophy Inc v South Australia, 16 the plaintiff held a perpetual lease of Crown land to the west of Lake George in South Australia. The lease described the land as “containing by admeasurement 500 acres or thereabouts being … delineated in the public maps deposited in the Land Office in the City of Adelaide”. 17 The eastern boundary of the land shown on the map was the high-water mark of the lake as surveyed in 1879. The shoreline had changed significantly over the years, creating about 20 acres of new land. However, it was still possible to determine the original boundary of the estate by reference to the surveyed map. The State argued that the description of the land in the lease, by reference to the map and not the shoreline, meant that the boundary was fixed and unaffected by movement of the shoreline. The Privy Council rejected that argument. There was nothing on the map which suggested that the boundary of the estate was intended to be anything other than the shoreline. Lord Wilberforce said: 18

[4.80]

[W]here land is granted with a water boundary, the title of the grantee extends to that land as added to or detracted from by accretion, or diluvion, and … this is so whether or not the grant is accompanied by a map showing the boundary, or contains a parcels clause stating the area of the land, and whether or not the original boundary can be identified.

Lord Wilberforce described this rule as “manifestly convenient” and “fair”. 19 The potential for loss through erosion was balanced by the possibility of gain by accretion. 16 17 18

19

Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706. Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 714. Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 716. ). Also see Hazlett v Presnell (1982) 149 CLR 107; 56 ALJR 884; 43 ALR 1; [1982] HCA 58. Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 716.

[4.110]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

31

Otherwise, waterfront property could become landlocked over time because of accretion or the boundary could end up out in the water because of erosion. Therefore, it is assumed that a water boundary will move with the shoreline unless the grant of the estate clearly states otherwise. This rule can also be excluded by statute. For example, in New South Wales, “The doctrine of accretion does not apply, and never has applied to a non-tidal lake.” 20 Instead, the boundary is fixed as “the bank of the lake at the time of the Crown survey for the purposes of alienation.” Gradual change

The doctrine of accretion and erosion applies only if the shoreline changes gradually. Therefore, even if the boundary of an estate is defined by reference to the shoreline, that boundary will not move if a major change to the shoreline occurs rather suddenly. It is not clear why this is so. As Lord Wilberforce said in Southern Centre of Theosophy Inc v South Australia, “One naturally searches for a reason or rationale for the requirement that the process be gradual and imperceptible, but this proves elusive.” 21 Also unclear is the distinction between gradual and sudden change. Lord Wilberforce said that “there is a logical, and practical, gap or ‘grey area’ between what is imperceptible and what is to be considered as ‘avulsion’” and, therefore, the issue is a question of fact for the jury to decide. 22 In the Theosophy case, the lake was receding by almost 10 metres per year and this was a gradual change to which the doctrine of accretion applied. [4.90]

Intervention by the estate holders

Gradual changes to a shoreline count as accretion or erosion, whether caused naturally or by human intervention. The one exception is accretion caused deliberately by estate holders wanting to increase the size of their estate. There is nothing wrong with preventing erosion, 23 but if they intentionally cause accretion, it will not affect the boundary of their estate. Land created intentionally by reclamation belongs to the Crown at common law, and in Queensland, by statute. 24 [4.100]

Total destruction of the premises

As stated above at [4.60], estates are not normally affected by physical changes to the land or the things attached to it. However, the total destruction of the premises might bring an estate to an end. In National Carriers Ltd v Panalpina (Northern) Ltd, Lord Russell suggested that “the total disappearance of the site … into the sea” would cause [4.110]

20

Crown Lands Act 1989 (NSW), s 172.

21

Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 721.

22 23

Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 721. Nagle v Miller (1904) 29 VLR 765 at 786.

24

Land Act 1994 (Qld), s 10.

32

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.120]

both freehold and leasehold estates to cease to exist. 25 Although its location might still be identified, the estate holders would have no right to possess that part of the ocean. If the land disappeared gradually, it might be regarded as the elimination of the estate by erosion. However, a sudden loss of the land would produce the same result. Lord Russell also suggested that the destruction of a building would destroy a lease of an upper-floor flat. The vacant air space would be of no use to the tenants and there would be no reason to continue their rights to possess it. If a new building was constructed on that site, it would be highly unlikely that it would be identical to the old building and occupy precisely the same space. It would be bizarre if tenants of the old building had rights to possess spaces that intersected floors and walls of the new building. The boundaries of a leasehold estate of an upper-floor flat are defined, not directly in relation to the surface of the earth, but by the walls, floors, and ceilings of the building. If a 42-storey building sways in the wind, the leasehold estates on each floor sway with it. The destruction of the building destroys the boundaries which defined those estates. In contrast, if a tenant leased an entire building and that building was destroyed, the lease would continue to exist (unless the parties had agreed that it would be terminated for that reason). The boundaries of that estate would continue to exist and the tenant’s right to possess that space could be valuable and useful.

Accessories If goods are attached to or mixed with other goods or attached to land, they might lose their separate identity and cease to exist (in law). For example, if you install a new window in your car or house, the window no longer exists as a separate thing. The same is true of sugar added to a cup of coffee. The accessory becomes part of the principal object and the property rights to the accessory are destroyed. The existing property rights to the principal object attach to the whole thing, including the accessory. This is similar to the fate of raw materials used to manufacture new goods (specification, discussed above at [4.30] ff). Accessories, like consumed materials, cease to exist as separate things. There is an important difference between the two situations. Newly manufactured items are subject to new property rights. Those rights are allocated to the manufacturer in most cases, but can be allocated to the owner of the destroyed materials. In contrast, if something loses its identity as an accessory to another thing, no new thing is created. The other thing continues to exist, subject to pre-existing property rights. In most cases, those rights are unaffected by the addition of the accessory Like specification, things are added to other things all the time and yet this rarely causes legal problems. In most cases, the same person owns both accessory and principal and is free to join them together or take them apart. A problem arises when the two things are subject to different property rights and everyone involved did not consent to their combination and cannot agree on the consequences. This might happen if one of [4.120]

25

National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8; [1981] AC 675 at 709.

CHAPTER

[4.140]

4

PHYSICAL CHANGES TO THINGS

33

the things is stolen or otherwise converted or is subject to a security right. 26 The physical act of joining those things together can destroy the separate property rights to the accessory. People who lose property rights to accessories may acquire new personal and property rights. For example, suppose that I used your bricks without consent to add a new room to my house. I would be guilty of conversion and you would have a personal right to damages. You might also have a property right to my land based on tracing and unjust enrichment. If my use of the value of your bricks increased the value of my land, you might be entitled to an equitable lien on my land to secure my obligation to pay for that unjust enrichment. If a lien arises, it is not a continuation of your previous ownership of your bricks, but a new property right based on my unauthorised use of your value. The addition of goods to other goods is called accession. Goods which are attached to land are called fixtures. The law of accession differs from the law of fixtures and, therefore, it is helpful to discuss them separately (at [4.130] ff and [4.160] ff). Accession ...............................................................................................................................................................................................

If goods are joined together, accession will occur if it is impractical to separate them again and one thing is regarded as an accessory to the other. Accession differs from specification, where the operation creates a new thing (see [4.30] ff). For example, thread and cloth can be joined together to make a new garment (specification) or to embroider a design on an existing garment (accession). It also differs from mixtures of indistinguishable things (discussed below at [4.240] ff), where nothing new is created and there is no principal and accessory. For example, combining ground pepper from two sources produces a mixture. Adding pepper to soup is accession. There are two questions which can be difficult to answer: [4.130]

(1)

when is it practical to separate two items joined together (see [4.140]), and

(2)

which is the accessory and which is the principal (see [4.150])?

Is separation practical?

If it is practical to separate things which have been joined together, they will not lose their separate identity and property rights will not be affected by their combination. Separation will not be practical if it will injure or destroy one of the items or costs more than the accessory is worth. In Rendell v Associated Finance Pty Ltd, 27 the plaintiff sold an engine under a hire-purchase agreement to a man named Pell, who installed it in a utility truck he had bought from the defendant under another hire-purchase agreement. Pell had not paid fully for the engine or the truck and therefore merely had possession of both things. The defendant seized the truck and refused to return the engine to the plaintiff. [4.140]

26

See eg R v Nousis [2004] VSCA 107; 8 VR 381.

27

Rendell v Associated Finance Pty Ltd [1957] VR 604.

34

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.150]

Pell’s agreement with the defendant said that any accessories attached to the truck would become part of the truck. However, that contract could not cause ownership of the plaintiff’s engine to pass to the defendant. So, the defendant claimed that the engine had ceased to exist as a separate thing when it was installed in the truck. The court rejected that argument, because the engine could be removed without damage to engine or truck. O’Bryan J said: 28 Prima facie the property in the accessory does not pass to the owner of the vehicle if the owner of the accessory did not intend it to pass. It is for the defendant by proper evidence to show that the necessity of the case requires the application of principles whereby the property is deemed to pass by operation of law. The accessories continue to belong to their original owner unless it is shown that as a matter of practicability they cannot be identified, or, if identified, they have been incorporated to such an extent that they cannot be detached from the vehicle.

The enforcement of security interests in accessories and the removal of accessories by secured creditors are now regulated by the Personal Property Securities Act 2009 (Cth). 29 Accessory or principal?

When two things are joined together, it is usually easy to tell which is the principal item (that continues to exist) and which is the accessory (that does not). For example, when milk is added to a cup of tea, there is no doubt that the combination is still a cup of tea. However, there are cases where the choice is not so easy. The resolution of this issue does not depend on the relative sizes or values of the components. For example, embroidery on a shirt may be far more valuable than the shirt and yet the shirt continues to exist as the principal item. In McKeown v Cavalier Yachts Pty Ltd, 30 the defendant constructed a yacht (worth $24,409) in a hull (worth $1,777), not knowing that the hull belonged to the plaintiff. The defendant argued “that the accretions accordingly are the major chattel, and the laminated hull the minor chattel, so that the doctrine of accession operates that the property in the laminated hull has now acceded to the later accretions rather than the other way around”. 31 Young J rejected that argument, because the work had been done gradually. As each piece was installed in the hull, it was clear that it acceded to the hull and belonged to the plaintiff. Therefore, the plaintiff was entitled to possession of the entire yacht, on the condition that he pay the defendant for the unjust enrichment caused by the mistaken improvement of that hull. When two things of equal status are joined together, it is impossible to say which is the principal and which is the accessory. For example, two boards might be glued together to make a thicker board or two quilts stitched together to make a larger quilt. Lionel Smith [4.150]

28 29 30

Rendell v Associated Finance Pty Ltd [1957] VR 604 at 610. Also see National Bus Co Pty Ltd v Commissioner of Taxation [1998] 143 FCA. Personal Property Securities Act 2009 (Cth), ss 87 – 97. McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303.

31

McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 at 311.

[4.170]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

35

suggested that the product should be regarded as a new thing and allocated to its creator. 32 However, Peter Birks treated it as a mixture (discussed below at [4.240] ff) that should belong to the contributors as tenants in common in proportion to their contributions. 33 Fixtures ...............................................................................................................................................................................................

Fixtures are goods which get joined to land and thereby become part of an estate. This is a form of accession. However, there is no difficulty discerning which is the accessory and which is the principal. Goods become part of the land to which they are joined, regardless of value. For example, an office tower worth millions of dollars, constructed on land worth thousands of dollars, becomes part of that land. The difficulty in this area of law is determining when goods have become fixtures. Something which is not attached to land, but merely resting on it (such as a statue in the garden), can be a fixture. Even though it could be removed easily, without damage to it or the land, a fixture will cease to be a separate thing subject to separate property rights. This treatment of fixtures is possible because the owner of an estate has a right to possess a volume of space. The law can then determine which things within that space form part of the estate and which things continue to exist separately as goods. The decision to treat unattached objects as part of an estate was made at a time when personal property could be given away by will, but real property passed to the owner’s heir. The rules were designed to ensure that the assets of deceased persons were properly divided among their heirs and the beneficiaries of their wills. In contrast, the law of accession to goods was designed to ensure that people would not lose their property rights without consent, except as a practical necessity. There are two factors which are used to determine whether goods have become fixtures: the degree of annexation (extent of attachment to the land) and the object of annexation (apparent purpose of attachment). These factors are discussed below at [4.170] and [4.180], followed by a discussion of two situations in which people are entitled to remove fixtures from land belonging to others: fixtures installed by tenants (see [4.190] ff) and fixtures that were subject to security rights before they were joined to the land (see [4.230]). [4.160]

Degree of annexation

There is no legal uncertainty when goods are joined to land and cannot be removed again without injury to the land or goods. For example, paint applied to a wall cannot be removed without destroying the paint and a tree planted in the yard cannot be [4.170]

32 33

L Smith, The Law of Tracing (Oxford, 1997) pp 106-107. P Birks, “Mixtures”, in N Palmer and E McKendrick (eds), Interests in Goods (2nd ed, London, 1998) p 227 at 238.

36

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.180]

removed without destroying the tree or digging a big hole in the yard. It is clear that these things ceased to be goods and became part of the real estate when they were joined to the land. A legal question arises when goods are joined to land in a way which permits their removal. The assumption is that goods merely resting on land continue to be goods and that any degree of attachment (by bolts, nails, cement, etc) turns them into fixtures. As Kaye J said in Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd: 34 Even slight fixing to the land is sufficient to raise the presumption that a chattel is a fixture. In those circumstances, the onus of proving otherwise rests upon the party so contending.

The greater the degree of annexation, the more likely it is that goods have become fixtures. However, unattached goods can be fixtures and attached goods need not be. Object of annexation

If it is practical to remove a possible fixture from the land, then its status is determined by the object of annexation. The essential question is this: was it joined to the land for its better use as a chattel or for the improvement of the land? In Leigh v Taylor, 35 valuable tapestries were tacked to canvasses, which were nailed to strips of wood, which were nailed to the walls of a mansion house. The circumstances revealed an intention that the tapestries would remain goods. They could be removed easily without damage to them or the land. Although their attachment improved the enjoyment of land, that was the only practical way to enjoy tapestries. In Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd, 36 an air conditioning plant was installed on the roof of a building. It was resting on pads on the roof and connected with nuts and bolts to water pipes and electrical cables in the building. It could be removed easily without damage to the plant or building. The purpose of installing the air conditioning plant was clearly not for the better enjoyment of the plant, but for the permanent improvement of the land. Although the company that installed the plant did not own the land, it had been hired to make that improvement on the owner’s behalf. The object of annexation does not depend on what anyone was actually thinking when the thing was joined to the land. It is the apparent purpose for joining something to land, as revealed by observable circumstances. 37 What would a bystander, with knowledge of the relevant facts, assume was intended? Reliance on apparent (objective) intention, rather than actual (subjective) intention, helps create greater legal certainty. A judicial decision that something is or is not a fixture [4.180]

34

Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 at 953.

35 36 37

Leigh v Taylor [1902] UKHL 1; [1902] AC 157. Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947. Reid v Smith (1905) 3 CLR 656; [1905] HCA 54; Elitestone Ltd v Morris [1997] UKHL 15; [1997] 2 All ER 513; [1997] 1 WLR 687; May v Ceedive Pty Ltd [2006] NSWCA 369.

[4.200]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

37

in certain circumstances can guide others dealing with similar circumstances. If the status of each thing on land depended on the actual intention of the person who put it there, it could be very difficult to determine what things formed part of an estate. The physical connection of something to the land is just one of the facts which reveal the object of annexation. Therefore, two things can be joined to land in the same way and yet one will be a fixture and the other will not. Blackburn J used this example in Holland v Hodgson: 38 [I]f the intention is apparent to make the articles part of the land, they do become part of the land … Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder’s yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels. Tenant’s fixtures

At common law, tenants of leasehold or life estates are entitled to remove fixtures that they installed for domestic, trade, or ornamental purposes and not for the permanent improvement of the land. These are called tenant’s fixtures to distinguish them from permanent fixtures which tenants are not entitled to remove. A tenant’s removal of a permanent fixture without the landlord’s consent is not trespass (since the tenant has possession of the land), but waste. It might also be a breach of a leasehold covenant. [4.190]

Tenant’s fixture or permanent fixture?

It is not always easy to distinguish tenant’s fixtures from permanent fixtures. This is because tenant’s fixtures, like all fixtures, are no longer goods, but part of the land. 39 The question is whether the tenant is permitted to remove them and turn them back into goods. As Romer LJ said in Spyer v Phillipson: 40 [4.200]

So long as the article can be removed without doing irreparable damage to the demised premises I do not think that either the method of annexation or the degree of annexation, or the quantum of damage that would be done to the article itself or to the demised premises by its removal, has really any bearing upon the question of the tenant’s right to remove, except in so far as they throw light upon the question of the intention with which the chattel was affixed by him to the demised premises.

In that case, the tenant leased a flat for 21 years and half way through the term installed valuable antique wood panelling and period fireplaces and chimneys. He died and his executors were entitled to remove them, even though that would cause some damage to the flat. Tenants are liable to repair the damage caused by removing fixtures, but this does not affect their right to remove them. 38

Holland v Hodgson (1872) LR 7 CP 328 at 335.

39

North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52; 40 SR (NSW) 110; [1940] HCA 7 at 68 (CLR); Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (Vic) (2004) 12 VR 351; 55 ATR 1; [2004] VSCA 10 at [24], [25]; TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; 85 ALJR 316; [2010] HCA 49 at [25].

40

Spyer v Phillipson [1931] 2 Ch 183 at 209-210.

38

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.210]

The question whether something is a tenant’s fixture or permanent fixture (like the question whether it is a chattel or a fixture) depends a little on the degree of annexation and a lot on the object of annexation. If its removal would cause serious damage to the land or destroy the fixture, then it is permanent. Otherwise, its character depends on the object of annexation: was it attached so the tenant could better enjoy the leasehold estate or as a permanent improvement to the land? There is another way to phrase the question: was the fixture attached to the tenant’s leasehold estate or the landlord’s freehold estate? There is an assumption that tenants are not intending to make valuable gifts to others when they attach things to the land. As Barton J said of a life estate in Registrar of Titles v Spencer, the tenant “should be able to improve the estate for his own enjoyment without being thereby compelled to make a present to the remainderman”. 41 The same assumption was used in Leigh v Taylor, 42 discussed above at [4.180], to decide that tapestries attached to walls by the life tenant were goods and not fixtures. If they had been fixtures, they would have been tenant’s fixtures. Generally speaking, structural additions or repairs to buildings are normally regarded as permanent improvements to the land, while other fixtures installed by the tenant are tenant’s fixtures. However, the common law treats agricultural fixtures, such as pens and sheds, as permanent improvements to the land. Statutory changes

In every State and Territory, short-term residential tenancies are governed by a statute, which regulates the tenant’s rights to install and remove fixtures. 43 The rules vary across Australia, but generally speaking, tenants are not permitted to install fixtures without the landlord’s consent, have a right to remove them at the end of the tenancy unless that would cause damage to the premises, and are responsible for any damages caused by their removal. In Victoria, tenants must remove their fixtures unless the parties agree otherwise. New South Wales, Queensland and Tasmania also have statutes dealing with fixtures installed by agricultural tenants, 44 while there is a statutory provision in Victoria which applies generally to all tenant’s fixtures. 45 In both Queensland and Tasmania, these fixtures are by statute deemed to be the property of the tenant so long as they are removable by the tenant. 46 This probably [4.210]

41 42 43

44 45 46

Registrar of Titles v Spencer (1909) 9 CLR 641; [1909] HCA 69 at 651 (CLR). Leigh v Taylor [1902] UKHL 1; [1902] AC 157 Residential Tenancies Act 1987 (ACT), ss 67, 68 of Sch 1; Residential Tenancies Act 2010 (NSW), ss 67, 68; Residential Tenancies Act (NT), s 55; Residential Tenancies and Rooming Accommodation Act 2008 (Qld), ss 207 – 209; Residential Tenancies Act 1995 (SA), s 70; Residential Tenancies Act 1997 (Tas), s 54; Residential Tenancies Act 1997 (Vic), s 64; Residential Tenancies Act 1987 (WA), s 47. Agricultural Tenancies Act 1990 (NSW), s 10; Property Law Act 1974 (Qld), s 155; Landlord and Tenant Act 1935 (Tas), s 26. Property Law Act 1958 (Vic), s 154A. Property Law Act 1974 (Qld), s 155; Landlord and Tenant Act 1935 (Tas), s 26; and also previously in Victoria: Landlord and Tenant Act 1958 (Vic), s 28 (repealed).

[4.220]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

39

means that they are chattels, 47 but they could still be the property of the tenant if they were regarded as fixtures attached to the leasehold estate and not to the freehold. Mining equipment which is attached to land, including buildings and machinery, is treated differently from fixtures. The right to remove the equipment at the end of a mining licence or lease is regulated by statute 48 and therefore the normal rules regarding fixtures do not apply. 49 Also, mining rights are sometimes treated as forms of personal property and so too are things attached to the land pursuant to those rights. Removal of tenant’s fixtures

At common law, tenants are entitled to remove their fixtures at any time during the lease or while they continue in possession thereafter. In McMahon’s (Transport) Pty Ltd v Ebbage, 50 the court decided that tenants could also remove their fixtures within a reasonable time after they gave up possession. Pincus JA said: 51

[4.220]

There is authority in favour of the view that once the tenant gives up physical possession … the right to remove fixtures is gone … But the better view, and certainly one more in accordance with practical justice, is that the right to remove continues for a reasonable time after a lease has been terminated.

The time for removing agricultural fixtures is set by statute in New South Wales and Queensland. In New South Wales, “a fixture affixed to a farm by a tenant may be removed by the tenant before or within a reasonable time after the end of the tenancy”. 52 Agricultural tenants in Queensland are allowed to remove fixtures up to two months after the tenancy ends. 53 Tenants in Victoria “may remove them before the relevant agreement terminates or during any extended period of possession of the premises, but not afterwards”. 54 For short residential tenancies in the Australian Capital Territory, New South Wales, and Western Australia, tenants may remove fixtures only while they continue in possession. 55

47 48

49 50 51 52 53 54 55

Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; 55 ATR 1; [2004] VSCA 10. Mining Act 1992 (NSW), ss 244, 245; Mineral Titles Act (NT), s 99; Mineral Resources Act 1989 (Qld), ss 121 – 123, 228 – 230, 312 – 314; Mining Act 1971 (SA), s 86; Mineral Resources Development Act 1995 (Tas), s 105; Mineral Resources (Sustainable Development) Act 1990 (Vic), s 114; Mining Act 1978 (WA), s 114. TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; 85 ALJR 316; [2010] HCA 49. McMahon’s (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185. McMahon’s (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185 at 198. Also see Kyriacou v Manakis [2006] NSWSC 804. Agricultural Tenancies Act 1990 (NSW), s 10. Property Law Act 1974 (Qld), s 155. Property Law Act 1958 (Vic), s 154A. Residential Tenancies Act 1987 (ACT), s 68(4) of Sch 1; Residential Tenancies Act 2010 (NSW), s 67(1); Residential Tenancies Act 1987 (WA), s 47(2)(b).

40

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.230]

Most cases and statutes about tenant’s fixtures are concerned with the tenant’s right to remove them. In Wincant Pty Ltd v South Australia, 56 the court decided that a tenant is required to remove fixtures at the end of the lease if they would interfere with the landlord’s use of the premises. The government leased seven floors of an office tower in Adelaide for 25 years and left its fixtures behind at the end of the lease. The premises could not be leased again without removing them at a cost of $58,550. The government was required to pay this cost, because the failure to remove them was a breach of its covenant to leave the “premises in good and substantial repair”. It might also be regarded as waste. If tenants do not remove their fixtures within the allotted time, they are abandoned by the tenant and belong to the landlord. In one sense, the abandonment does not affect the landlord’s property rights, since the fixtures became part of the estate when they were attached to the land (unless they were deemed by statute to be the property of the tenant). However, tenant’s fixtures are attached when the tenant has possession of the land and the landlord does not. Whether they will still be part of the land when the lease ends and possession reverts to the landlord is contingent on the tenant’s decision to leave them behind. Security rights

In most cases, people do not attach things to their land unless they own them. There is one common exception. People buy goods under hire-purchase contracts and attach them to land before the purchase price is paid in full. This happened in Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd. 57 A company hired manufacturing machinery from the plaintiff and attached it to its land, which was mortgaged to the defendant. The company defaulted on both the hire-purchase contract and the mortgage and the court had to decide whether the plaintiff or the defendant was entitled to the machinery. The hire-purchase contract entitled the plaintiff to enter the company’s land and seize the machinery if the company breached the contract. However, the machinery had become fixtures and ceased to exist as goods. They were part of the land and the defendant was entitled to possession of the land, including the fixtures, when the company defaulted on the mortgage. Since the machinery was part of the land, the plaintiff no longer owned it. However, it still had a right to enter the company’s land, remove the machinery, and take it away. As Adam J said: 58 [4.230]

In law, no doubt, fixtures become part of the freehold while they remain annexed thereto and the legal title to them belongs to him who owns the freehold. But the contractual right, which the owner has against the hirer, to repossess on default confers 56 57

Wincant Pty Ltd v South Australia (1997) 69 SASR 126; 193 LSJS 313; [1997] SASC 6287. Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429.

58

Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 at 436.

[4.240]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

41

on him a species of equitable interest which entitles him, as against the hirer, to enter upon the premises and sever and remove the chattels which have become fixtures.

The plaintiff’s right to enter the company’s land and remove the machinery was an equitable property right to that land, which had priority over the defendant’s legal property right. As AL Smith LJ said in Hobson v Gorringe, “this right was not an easement created by deed, nor was it conferred by a covenant running with the land”. 59 It was created both by the contract and by the attachment of the machinery to the land as fixtures. This property right is produced not just by hire-purchase contracts, but by any security agreement which entitles the secured creditor to enter the debtor’s land and seize goods that have become fixtures. It could also be created by a chattel lease or other contract of bailment which gives the bailor the same right, or by a contract of sale of the fixtures which gives the buyer the right to enter the land and remove them. 60 In each case, the right to remove fixtures from the land is not a property right to the fixtures as chattels, but an equitable right to the land. Without a right to enter land and remove goods, the owner of goods fixed to another person’s land will not have an equitable property right to that land. For example, the victim of conversion does not have a right to enter the wrongdoer’s land. Also, he or she would probably not have a right to recover the converted goods even if they had not become fixtures. The normal response to conversion is to compel the wrongdoer to pay the victim for the value of the goods. In Queensland and Western Australia, the Hire Purchase Act 1959 alters the law of fixtures for goods obtained under a hire-purchase contract. It states that the goods shall not be treated as fixtures so long as the contract is in force. 61 Therefore, the seller would continue to have legal ownership of the goods, rather than an equitable property right to the land. Victoria and Western Australia also have a Chattel Securities Act 1987, which treats in a similar fashion any goods that are subject to a security interest or obtained under a lease or hire-purchase contract. 62 The Personal Property Securities Act 2009 (Cth) does not apply to interests in fixtures. 63

Mixtures This final part of the chapter concerns the property rights created when similar goods belonging to two or more people get mixed together and it is impractical to identify each person’s goods in the mixture. For example, 10 litres of your petrol might be poured into a tank which contained my petrol, or 10 boxes of your paper might be [4.240]

59 60 61 62

Hobson v Gorringe [1897] 1 Ch 182 at 192. Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 at [48]; 55 ATR 1; [2004] VSCA 10. Hire Purchase Act 1959 (Qld), s 32; Hire Purchase Act 1959 (WA), s 27. Chattel Securities Act 1987 (Vic), s 6; Chattel Securities Act 1987 (WA), s 6.

63

Personal Property Securities Act 2009 (Cth), s 8(1)(j).

42

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.250]

stacked together with 10 boxes of my paper. The mixture does not create a new thing (specification) nor does one contribution cease to exist and become part of the other (accession). There is no difficulty dividing the mixture into portions, but it is no longer possible (or at least not practical) to identify each person’s contribution. If we take a litre of petrol from the tank or a box of paper from the stack, no-one can say for sure whether it was yours or mine. The litre of petrol is probably a mixture of both. If we divide the mixture again, and you take 10 litres of petrol or 10 boxes of paper, you will have some of the petrol or paper that used to belong to me and I will have some of yours. (The chance of you randomly selecting all 10 boxes of your own paper is 1 in 184,756.) Your reaction to this might be “Who cares?” So long as you recover the same quantity and quality of goods with which you started, it does not matter whether they used to belong to you or me. This is also true if all the goods get destroyed. If all the petrol in the tank is consumed, we know that both contributions to the mixture are gone. A problem arises when some of the goods are damaged, destroyed, or stolen. If seven boxes of paper are ruined by flooding, who suffered the loss: you, me, or us? If, instead of small quantities of petrol or paper, the mixture consists of gold ingots or tonnes of oil, people become very concerned about its ownership. Possible property rights ...............................................................................................................................................................................................

If our goods are mixed indistinguishably, it is impossible to restore the status quo. We can deal with the mixture in several different ways, but cannot ensure that we will end up with the same things we had before the mixture. There are three ways to allocate the property rights to the mixture: [4.250]

(1)

The whole mixture belongs to you or me.

(2)

We share the mixture as joint tenants or tenants in common.

(3)

We continue to own the goods we contributed to the mixture, even though we cannot identify them. The choice among these three possibilities depends primarily on whether we both consented to the mixture and, if not, whether one of us was at fault for causing the mixture. It might also depend on the nature of the goods that were mixed. These factors are discussed below. The first possibility is that one of us owns the whole mixture. The property rights to the owner’s contribution continue unchanged, while the other’s contribution is transferred to the owner. In other words, the property rights to only some of the goods in the mixture are affected by their combination. The second possibility is joint or common ownership of the whole mixture. The property rights to all the goods in the mixture are changed. Everything used to have one owner (you or me) and now has two owners (you and me). We have both exchanged sole ownership of our separate contributions for an undivided share of the whole.

[4.280]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

43

The third possibility is continuing ownership of our contributions to the mixture. Our property rights are unaffected by the mixture, but we no longer know which goods belong to you and which belong to me. Our property rights will be changed if we divide the mixture again. At that point, some of the goods which used to belong to you will be transferred to me and vice versa. Mixture by consent ...............................................................................................................................................................................................

If we agree to mix our goods, then the property rights to the mixture will be determined by our agreement. We might choose any of the possibilities discussed above at [4.250]. If we do not specify the rights we intend to create, the law assumes that we want to own the mixture as tenants in common in proportion to our contributions to it. [4.260]

Mixture without consent ...............................................................................................................................................................................................

If we do not agree to mix our goods, then any alteration of our property rights occurs not by intention, but by operation of law. In other words, the mixing together of similar goods is an event which can create and destroy property rights. Generally speaking, we are each entitled to take from the mixture an amount of goods equal to our contribution to it. If some of the goods are consumed, damaged, destroyed, lost, or stolen, we bear the loss proportionately to our contributions and our right to take goods from the mixture is reduced accordingly. However, these rights can be affected by wrongdoing. If I mixed our goods without your consent, I am guilty of wrongly interfering with your goods and my rights to the mixture will be subordinated to yours as a result. This is discussed below at [4.280]. If we do not know how much we contributed to the mixture, then we share it equally. This is subject to any evidence that might define the limits of our contributions. For example, suppose that I have an unknown quantity of petrol in a 20-litre fuel can. If it is poured into a tank which holds an unknown quantity of your petrol, we know that the most I could have contributed to the mixture is 20 litres. Therefore, we would share the mixture equally, unless it contained more than 40 litres, in which case I would have a right to take only 20 litres. These rights are also affected by wrongdoing. [4.270]

Wrongful mixture

Our rights to the mixture of our goods can depend on whether one of us was at fault for mixing the goods without the other’s consent. If so, the wrongdoer’s interests will be subordinated to those of the other contributor, if necessary. For example, if I mixed our goods by mistake, I am guilty of wrongly interfering with your right to possession even though I did not intend to commit the wrong. My breach of duty made it impossible for you to identify your own goods, so any uncertainty will be resolved in your favour. This is the same presumption against wrongdoers which is used when tracing value through mixtures. [4.280]

44

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.290]

The presumption against wrongdoers can help resolve uncertainties relating to two different issues: how much each person contributed to the mixture and what happened to each person’s contribution after they were mixed. First, if it is impossible to tell how much each person contributed to the mixture, the person who wrongly caused it will have no right to any of it. The other contributors will be entitled to the whole mixture. Using a previous example, if I poured an unknown quantity of my petrol from a 20-litre fuel can into a tank containing an unknown quantity of your petrol, we could not ascertain how much each of us had contributed to the mixture. Since I wrongly caused the problem, the law assumes that you contributed all the petrol and own the whole mixture. Change the facts again and assume that your petrol was in the 20-litre fuel can and mine in the tank. If I pour your petrol into my tank by mistake, the law will resolve any uncertainty in your favour. We do not know how much we each contributed, but do know that you did not contribute more than 20 litres. Therefore, you are entitled to all the petrol in the tank up to that amount. Secondly, the presumption against wrongdoers is used to help determine the fate of the goods after they are mixed. For example, if I stole 42 bales of your hay and added it to my haystack, you would be entitled to recover 42 bales from that stack. If some of the bales are damaged or destroyed, the law assumes that my bales were harmed and not yours. The loss does not affect your property rights until the number of good bales in the stack drops below 42. The presumption against wrongdoers is not used to punish or deter wrongdoing, but merely to resolve uncertainties created by the wrongdoer. The wrongful mixing of goods is a breach of duty which can destroy evidence of ownership. The uncertainty created by that lack of evidence is resolved adversely to the person who caused the problem. The presumption is used no more than necessary and does not displace actual evidence regarding contributions to or losses from a mixture. 64 Nature of property rights to a mixture

Where goods are mixed without consent, each contributor is entitled to take from the mixture an amount of goods equal to her or his contribution, subject to two exceptions. First, if goods in the mixture are damaged or destroyed, the contributors bear the loss in proportion to their contributions. Secondly, if a contributor wrongly caused the mixture, he or she is subordinated to the other contributors and cannot take goods from the mixture until the others have received their full shares. What remains uncertain is the nature of the property rights to the mixture before it is divided among the contributors. There are two possibilities: [4.290]

(1)

64

common ownership, with the contributors owning the mixture together as tenants in common; or Indian Oil Corp Ltd v Greenstone Shipping Co SA [1988] QB 345; Big Top Hereford Pty Ltd v Thomas (2006) 12 BPR 23,843; [2006] NSWSC 1159 at [62].

[4.310]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

45

(2)

continuing ownership, with the contributors continuing to own the goods they contributed to the mixture, even though those goods cannot be identified. In Roman law, the choice between common and continuing ownership depended on the nature of the goods that were mixed. A mixture of fluids, such as oil or molten silver, was called confusio and produced common ownership, while a mixture of solid things, such as rice or lumber, was called commixtio and produced continuing ownership. Although Roman law has influenced the development of common law, it is not clear whether this distinction is part of the common law, and if not, whether a mixture of goods produces common or continuing ownership. Fluids and solids

It is easy to understand why Roman law would apply different rules to mixtures of fluids and mixtures of solids (usually called granular mixtures). If our petrol gets mixed together it is likely that every drop contains petrol from both sources. If our rice gets mixed together, you can pick up a grain and know that it used to belong to just one of us. However, as Peter Birks said: 65 [4.300]

With the advance of science we know that there is no absolute line to draw between the two kinds of mixture. At the atomic level the particles retain their integrity in every case, though the higher the physics the less certain it is which model should prevail. At a more humdrum domestic level even a substance such as talcum powder clouds the distinction between units which do and units which do not retain their integrity.

The problem is not that mixed goods have lost their integrity. Whether liquid or solid, they are easily divided into smaller portions without changing their quality or nature. The difficulty to which the law responds is the inability to identify the owners of those goods. This is equally true of molecules of petrol and grains of rice. There is no reason to treat fluid and granular mixtures differently. 66 Common or continuing ownership?

Since fluid and granular mixtures create the same problems and should be dealt with in the same manner, they should both produce either common or continuing ownership. It is generally accepted that a fluid mixture creates common ownership and there are cases which suggest that a granular mixture should do the same. For example, in Spence v Union Marine Insurance Co Ltd, 67 a ship carrying bales of cotton was wrecked near Florida. Although most of the bales were recovered, the majority had lost the marks that indicated who owned which bales. Bovill CJ applied the rules that governed fluid mixtures to the mixture of indistinguishable cotton bales: 68 [4.310]

65

P Birks, “Mixtures”, in N Palmer and E McKendrick (eds), Interests in Goods (2nd ed, London, 1998) p 227 at 234.

66 67 68

Hill v Reglon Pty Ltd [2007] NSWCA 295 at [100]. Spence v Union Marine Insurance Co Ltd (1868) LR 3 CP 427. Spence v Union Marine Insurance Co Ltd (1868) LR 3 CP 427 at 437. See Crouch v Adams [2006] NSWSC 1029 at [37]; Hazelton Air Charter Pty Ltd v Mentha [2002] FCA 529 at [35]-[37].

46

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.310]

[W]hen goods of different owners become by accident so mixed together as to be indistinguishable, the owners of the goods so mixed become tenants in common of the whole, in the proportions which they have severally contributed to it.

In Big Top Hereford Pty Ltd v Thomas, 69 this same principle was applied to a mixture of cattle, and in Hill v Reglon Pty Ltd, 70 it was applied to a mixture of scaffolding. Lionel Smith agreed that there is no meaningful distinction between fluid and granular mixtures. However, he argued that the correct response to all mixtures without consent is not common ownership, but continuing ownership. 71 This is because the rights of the contributors differ from those of an ordinary co-tenant. Tenants in common are not normally entitled to take a portion of the shared goods without the consent of the other tenants or authorisation of a court. However, an involuntary contributor to a mixture has that right. Peter Birks said that this problem could be solved by adjusting the law relating to common ownership to allow the contributors to end their co-tenancy without agreement. Common ownership could then become the normal response to all mixtures of goods without consent: 72 The position that the law will ultimately take is reasonably predictable. Involuntary co-ownership will be the consequence of all mixtures without regard to the nature of the substance mixed, provided only that the units have ceased to be identifiable: the penal rule will only be invoked where and to the extent that it is necessary to break an evidential deadlock brought about by the wrongdoer; and special rules for unilateral partition will be worked out for all cases of involuntary co-ownership.

If goods are subject to a security interest and then become indistinguishably mixed with other goods, the security interest attaches to the mixture, limited by the value of the secured goods at the time they were mixed. 73 The Personal Property Securities Act 2009 (Cth) provides rules for determining the priority of multiple security interests in the same mixture, with secured creditors sharing the mixture pro rata with other secured creditors who have the same priority. 74 This is common ownership of the mixture.

69 70 71

Big Top Hereford Pty Ltd v Thomas (2006) 12 BPR 23,843; [2006] NSWSC 1159. Hill v Reglon Pty Ltd [2007] NSWCA 295. L Smith, The Law of Tracing (Oxford, 1997) pp 74-75.

72 73

P Birks, “Mixtures”, in N Palmer and E McKendrick (eds), Interests in Goods (2nd ed, London, 1998) p 227 at 248-249. Personal Property Securities Act 2009 (Cth), s 101.

74

Personal Property Securities Act 2009 (Cth), ss 102, 103.

PART 3

OWNERSHIP, POSSESSION AND TRANSFER OF RIGHTS TO PERSONAL PROPERTY Chapter 5

Possession ....................................................................... 49

CHAPTER 5

......................................................................................................................

Possession Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Chs 6 and 7.

[5.10] Possession is the cornerstone of the law of property. Several sophisticated property concepts, such as the estate, evolved from the more basic concept of possession. Also, most of the legal remedies available for the protection of property rights are actually remedies to protect the right to possession. The importance which the common law places on possession accords with popular notions of fairness. These notions are learned at an early age. Young children will defend a claim to a chair or toy by yelling, I “had it first!” There is a famous American movie character who travels the world in search of archaeological treasure. On several occasions, he risks life and limb to find some priceless artefact, only to have it taken almost immediately by the bad guys. We sense wrongdoing, but what claim did he have to the treasure? There is a belief, which the law confirms, that simple possession of a thing is a property right worthy of protection.

What is possession? Possession is a legal concept. To have possession of a thing, a person must control that thing and intend to possess it. Both are required. For example, you might intend to possess a wild animal, but will not have possession unless you can catch and control it. Conversely, suppose you board a train and sit down, unaware that someone has left a $10 note on your seat. You are in complete control of the note (since no-one else can take it from under you without committing a tort), but do not possess it since you are unaware of its existence and have no intention to possess it. In Popov v Hayashi, 1 a California court invented the concept of a “pre-possessory interest”, which can be acquired when someone intends to possess a thing and then makes a serious attempt to control it. The case concerned a baseball hit into the stands during a professional baseball game. It was the batter’s record breaking 73rd home run of the season and the ball was later sold for US$450,000. The plaintiff attempted to catch the ball, but could not control it because he was mobbed by the crowd around him. The ball rolled to the defendant, who picked it up and thus became the first person to control and possess it. [5.20]

1

Popov v Hayashi 2002 WL 31833731 (Cal Super 2002).

50

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.30]

The plaintiff sued the defendant and was awarded half the proceeds from the sale of the ball, even though the defendant did not part in the mob attack and had done him no wrong. McCarthy J said: Where an actor undertakes significant but incomplete steps to achieve possession of a piece of abandoned personal property and the effort is interrupted by the unlawful acts of others, the actor has a legally cognizable pre-possessory interest in the property. That pre-possessory interest constitutes a qualified right to possession which can support a cause of action for conversion.

This is not the law in Australia (and probably not outside California). There are several different ways to acquire a right to possession, including by sale, gift, or even simply taking possession, but an attempt to take possession is not sufficient. In Young v Hichens, 2 the plaintiff was in the process of enclosing some fish in a net, when the defendant rowed his boat between the ends of the plaintiff’s net and netted the fish inside. Lord Denham CJ said, “It does appear almost certain that the plaintiff would have had possession of the fish but for the act of the defendant: but it is quite certain that he had not possession.” 3 The plaintiff’s claim for wrongful interference with his right to possession failed because he had not yet acquired that right. Control ...............................................................................................................................................................................................

Control (sometimes called factual possession) means physical control. 4 Only tangible things, such as a book, dog, or parcel of land, can be controlled in this way. Intangible things, such as a copyright to a song, can be subject to property rights, but they cannot be possessed. How one controls a thing varies according to its nature. For example, you might control a dollar coin by placing it in your pocket or purse, but cannot control a horse or house in that way. The methods used will be dictated by factors such as the size of the thing, its situation, and whether it is movable. The essential question is whether the person is able to control access to the thing. With some things, such as animals or fluids, there is an additional problem of preventing the thing from escaping. To control land, steps are taken to limit access to that land. Locking doors, windows, and gates is one method of exercising control. However, locks are not required. We live in a society regulated by law and land can be controlled without taking steps to prevent forcible entry. A closed, but unlocked gate will do. It is also possible to control land without any fence at all. Many people do not have fences all the way around the yards they control. Tending the lawn and garden or otherwise making use of the space around the house is sufficient. Others know that they need permission (express or implied) to enter the land. Although there are no physical impediments to entry, this exclusion of others is sufficient to constitute control.

[5.30]

2 3

Young v Hichens (1844) 6 QB 606. Young v Hichens (1844) 6 QB 606 at 611.

4

Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188.

[5.30]

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5

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51

Conversely, it is possible to fence an area of land and not control it. In Riley v Penttila, 5 the owners of homes adjoining a park had a property right (called an easement), to use that park for recreation or a garden. One of the owners built a tennis court on the park and put a fence around it. However, the other owners were invited to use the tennis court as part of their right to use the park for recreation. The fence did not amount to control over the tennis court because it was used not to keep people out, but to keep tennis balls in. The occupation of land is just one way to control it. A vacation house can be controlled even though it sits empty for most of the year. Bare vacation lots or farmers’ fields can be controlled although they are used only infrequently. In such cases, fences are normally used to control the space, but perhaps a “Private Property” or “Keep Out” sign will do. The essential question is whether someone has taken sufficient steps to use or otherwise limit access to the land in question. In Red House Farms (Thorndon) Ltd v Catchpole, 6 a person regularly used a small parcel of marsh land for shooting. This was sufficient control of the land because shooting was the only profitable use for it. Larger chattels, such as cars, boats, and aeroplanes, are controlled in much the same way as land. This is because people use them in a similar way: by going inside them. Therefore, control is achieved by steps taken to keep people out or limit their access. Normally, this is done with keys and locks. A person with a key to a locked car has control over that car (provided no-one else has a key). It is not necessary to lock a vehicle to control it (although this reduces the risk of losing control to another). Small things are controlled somewhat differently. Less use is made of locks and keys (although some items, such as filing cabinets and bicycles, are routinely locked). Instead, they are often controlled manually. People take control of pieces of fruit or books by picking them up. Coins and keys are kept in pockets and purses. Clothes are worn. This is not the only way to control smaller things. Although homeless people are often required to maintain close manual control over their possessions, most of us would be unable to keep all of our things with us at all times. Instead, we put them inside other things we control, such as a house, garage, shed, or car. Controlling a space allows people to control the smaller things within it. Generally speaking, things located in a private home are controlled by the people in possession of that home. This is because they can control access to those things. Of course, there are exceptions, such as insects, which are not controlled by the human occupants. Also, visitors to the home will have things with them which are not controlled by their hosts. When two or more people live together in a home, it can be difficult to know who has possession of the things in it. There are places to which the public enjoys relatively free access, such as public roads and parks, shops, cafes, and airports. This raises the question whether the people who possess those places control the things found there. As a general rule, things attached to 5

Riley v Penttila [1974] VR 547. Also see Cervi v Letcher [2011] VSC 156.

6

Red House Farms (Thorndon) Ltd v Catchpole [1976] 244 Estates Gazette 295.

52

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.30]

the land are controlled by the possessor of the land. In Waverley Borough Council v Fletcher, 7 the defendant used a metal detector to find a medieval gold brooch nine inches beneath the surface of the plaintiff’s public park. The plaintiff controlled the brooch because public access to the park did not include the right to dig in the soil. Generally speaking, things found on (but not attached to) land to which the public enjoys access are not controlled by the possessor of that land. In Bridges v Hawkesworth, 8 the owner of a shop did not control a bundle of bank notes that had been dropped by an unknown person in the part of the shop to which the customers had access. In Parker v British Airways Board, 9 the defendant did not have control over a gold bracelet found lying on the floor of its international executive lounge at Heathrow Airport. Access to the lounge was restricted to passengers who had cleared customs and held first class tickets or were members of the defendant’s passenger club. However, that level of public access meant that the defendant did not have control over everything in that space. The method of controlling a thing can be affected by its location. For example, a ship at a dock will be controlled differently than one wrecked at the bottom of the ocean. The Tubantia 10 concerned a steamship which sank in 1916 to a depth of 20 fathoms (37 metres). In 1922, the plaintiffs (who were not acting on behalf of the ship’s owner) began salvage operations. Over 15 months, they spent 25 days trying to recover the ship’s cargo. They had moored buoys to the ship and cut a hole in its side, but their divers could spend only eight minutes each day inside the ship. Although the plaintiffs could not control access to the wreck and had spent little time there, they had sufficient control to give them legal possession. That level of control was measured against what was possible in the 1920s. Changes in technology might bring about changes in the control required. Would eight minutes in the ship two or three times a month be sufficient if another salvor could be there eight hours every day? The court was concerned about the peaceful, orderly exploitation of resources and the safety of the salvors. The declaration that the plaintiffs had possession of the ship prevented a dangerous free for all. However, deciding that people have control of a thing, when in fact they have very little, can lead to the sterilisation of resources. Should the first people to find a wreck acquire the legal right to exclude others from that wreck if they do not have the ability to bring any part of it to the surface? How much control should be needed before that right is acquired? Some things have a tendency to escape, such as animals, fluids, or logs floating on a river. To control such things, a person must able to keep them from escaping. The level of control need not be absolute. This was demonstrated in Ohio v Shaw, 11 where three men were charged with stealing fish. The defendants had removed the fish from 7 8 9 10

Waverley Borough Council v Fletcher [1995] 4 All ER 756 (CA). Bridges v Hawkesworth (1851) 21 LJQB 75. Parker v British Airways Board [1982] 1 QB 1004 (CA). The Tubantia [1924] P 78.

11

Ohio v Shaw 65 NE 875 (1902).

[5.40]

CHAPTER

5

POSSESSION

53

unattended nets in Lake Eerie. The nets had a funnel-like entrance through which fish would swim. It was possible for them to swim out again (if they could find the entrance) and, in stormy weather, some fish would escape over the top of the nets. The trial judge decided that the defendants were not guilty of theft because no-one had control of the fish in the nets and, therefore, they did not belong to anybody when they were taken. This was reversed on appeal. The owners of the nets had control and possession of the fish in the nets, but would lose control and all rights to fish which managed to escape into the lake. There are some domestic animals, such as cats, homing pigeons, and honey bees, which are permitted to wander because they have a tendency to return home on their own. Although there are many times when a wandering domestic animal is beyond the control of its owner, the animal’s homing instinct provides the owner with sufficient control for possession. 12 Once someone has obtained enough control of a thing to be in possession of it, that control can be relaxed without losing possession. For example, you can go to work or on vacation and still have possession of your home. You can go for coffee and leave your books and coat unattended in the library without losing possession of those things. Possession will be lost if you lose something or throw it away or if someone else takes possession of it. Intention to possess ...............................................................................................................................................................................................

Control is one component of possession. An intention to possess (sometimes called animus possidendi) is the other. 13 All that is required is an intention to possess something for the time being. There is no need to intend to own it or possess it permanently. 14 In most cases, this requirement does not create a problem. The acts of control reveal an intention to possess. When we see someone pick up a carton of milk at a shop or lock up a bicycle, we have no doubt that he or she intends to possess that thing. The intention to possess something is a fact. Normally, it is proved by the acts of control and surrounding circumstances. This is because a state of mind is difficult to prove. People can testify about what they intended at a relevant time, but if proof of that intention provides them with an advantage, their evidence is self serving and treated with caution. The court looks for other evidence to support that testimony. Since the intention to possess a thing is often proved by the acts of control in relation to that thing, it is easy to confuse the two components of possession. It is possible to intend to possess something without knowing it exists. For example, if you intend to possess a suitcase, then you intend to possess its contents, even though you do not know what it contains. The same is true of a house or flat. In Flack v National [5.40]

12 13

Hamps v Darby [1948] 2 KB 311 at 320-323 (CA). Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188.

14

Buckinghamshire County Council v Moran [1990] Ch 623.

54

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.50]

Crime Authority, 15 a bag containing $433,000 in cash was seized lawfully by police from the plaintiff’s home. She had never seen the bag before and did not know it was there. Its true owner was never discovered, but the police suspected that the plaintiff’s son had used his key to the home to hide the bag there. The plaintiff’s intention to possess her home meant that she intended to possess the things inside it, including the bag and money. It is important to distinguish between the intention needed to obtain possession of a thing and the intention needed to commit the crime of possessing something illegally, such as banned drugs, firearms, or stolen goods. 16 There is nothing inconsistent with the law of property deciding that persons have possession of stolen goods placed in their garage without their knowledge and the criminal law deciding that they are not guilty of the crime of possessing of those goods. The intention to exclude others from the garage and its contents does not necessarily amount to the guilty mind of intending to possess stolen goods. When people possess places to which the public has access, it may be difficult to know whether they intend to possess everything within those places. In Parker v British Airways Board, 17 discussed above at [5.30], the board did not intend to control the gold bracelet lost by a passenger in its executive lounge. However, we can assume that the board intended to possess the furniture and decorations in the lounge. If the board intended to possess only some of the things in the lounge, what sets them apart? Clearly, the board would not want passengers to remove items placed in the lounge by the board. However, no effort was made to prevent passengers from removing other items. If the board had posted signs requesting passengers to surrender found items to the board or it had regularly checked the lounge for lost items, the result might have been different. Many people invite the public to places they possess and make it clear that they do not want possession of the things brought there by the public. For example, it is not uncommon to see a sign above a coat rack in a cafe which disclaims responsibility for items left there.

Importance of possession Possession is significant in several ways. First and foremost, it is itself a property right. In other words, having possession of a thing corresponds to the general duty of other members of society not to interfere with that possession. Secondly, possession of a thing can generate a separate right to possession. For example, when you borrow a library book, you obtain possession of it. If you accidentally leave it behind in a cafe and the waiter picks it up, you have lost possession. Discovering your loss, you return to the cafe to recover the book. The waiter has possession of the book, but you have a better right to possession, based on your earlier possession of the book. Competing rights to possession are discussed below. [5.50]

15 16

Flack v National Crime Authority (1998) 156 ALR 501; [1998] FCA 932. See Western Australia v R (2007) 33 WAR 483; (2007) 169 A Crim R 206; [2007] WASCA 42.

17

Parker v British Airways Board [1982] 1 QB 1004.

[5.80]

CHAPTER

5

POSSESSION

55

Thirdly, possession provides evidence of ownership. For example, how does anyone know whether you own the shoes you are wearing? It is unlikely that you could produce a receipt or that the shopkeeper would remember selling them to you. Absent evidence to the contrary, your possession of your shoes is sufficient proof that they belong to you. Daily commerce depends on this. When you purchased the shoes, did you ask for documentary evidence of the shopkeeper’s ownership of them? The shop’s possession of the shoes was sufficient. Fourthly, possession of a thing for long enough can become ownership. The passage of time can bring to an end the owner’s right to recover possession of a thing. By default, the person with possession then becomes the owner since there is no-one else with a better property right.

Ownership, title, and possession It is helpful to distinguish possession from two other property concepts: ownership and title. [5.60]

Ownership ...............................................................................................................................................................................................

Ownership is a concept which is familiar and generally understood. Even though we might find it difficult to define ownership, most of us would have no trouble making a list of five things we own and five things we do not. Even without that detailed knowledge, we recognise the difference between ownership and possession. There are many situations in which you obtain possession of a thing, but not ownership, such as when you borrow a pen, hire a car, or rent a flat. Ownership of a thing usually includes the right to possess it. However, it is possible to own intangible things which cannot be possessed, such as copyrights and patents. Also, the owners of tangible things can transfer their rights to possession to others. For example, the owners of a house can rent it to a tenant, thereby temporarily giving up their rights to possess that house. Many students of property law are surprised to discover that the common law does not match the popular understanding of the difference between ownership and possession. The law developed clear ideas of possession and the right to possession, along with remedies to protect those rights. It did not do so with respect to ownership. This comes to the surface occasionally. For example, people often refer to the goods they own as their possessions. This is a fairly accurate reflection of their legal rights to those goods. [5.70]

Title ...............................................................................................................................................................................................

Title is a less familiar concept. Lawyers often speak of having title to a thing, by which they mean the right or entitlement to that thing. There are several different kinds of title and also several different ways in which the word is used. Sometimes title is used as [5.80]

56

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.90]

a synonym for ownership, that is, the best possible right to a thing. People might say they have title to a car or parcel of land to indicate that they own it. Title sometimes refers to the documentary evidence of ownership, such as the bill of sale for a car or the deed to a house. Title documents are used for the more valuable things in society, such as land, vehicles, expensive horses, and rare musical instruments. We are happy to rely on our possession as evidence of ownership of common household items, but need greater assurance when investing more money in a thing. Proof of title may depend on a series of documents, which enable the current owners to prove their property right by tracing it back to someone who held it an earlier time. There is also registered title. Much of the land in Australia is registered under a statutory system commonly called the Torrens system (after Sir Robert Torrens, the politician responsible for introducing the system to South Australia). Registered title under a Torrens system is more than mere evidence of ownership. It is the source of the property right. Native title or Aboriginal title is a property right that existed before the British government acquired sovereignty over Australia. It may be equivalent to ownership, but it can be something less, such as a right to hunt or fish. Lawyers also speak of possessory title, by which they mean a right to possession acquired simply by taking possession of something. This is contrasted with the usual way of acquiring title to things, by purchase or gift from the previous owner.

Obtaining possession As discussed above, possession requires both control and intention. It is obtained from the first moment when both those conditions exist simultaneously. Usually, intention precedes control, so that possession is acquired by some act of taking control. For example, you may see a coin on the pavement, form an intention to possess it, and then reach down and pick it up. It is conceivable that a person might obtain control of a thing before forming the intention to possess it. Using an earlier example, if you unknowingly sat on and therefore had control of a $10 note on the seat of a train, you could obtain possession by becoming aware of the note and forming the intention to possess it. However, as discussed above, people can intend to possess things left, without their knowledge, in spaces they control. Therefore, it less likely that someone will obtain control of a thing before forming the intention to possess it. Normally, possession of a thing is obtained with the consent of someone who previously possessed it. However, it can be obtained without such consent. These two situations are discussed separately. [5.90]

Possession acquired by consent ...............................................................................................................................................................................................

Most of the things you possess were obtained with the consent of someone else who possessed it. They may have been purchased, received as gifts, leased, or borrowed. [5.100]

[5.100]

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57

The transfer of possession of goods from one person to another is called delivery. For land, it is common to speak of granting or giving possession. The transfer of possession may be permanent or temporary. For example, when you purchase a book, you buy the right to possess it for as long as you choose. The bookshop parts with its right to the book forever. In contrast, when you borrow a book from the library, you acquire possession for a limited time only. At some point, the loan comes to an end and the library has the right to have the book returned. A temporary transfer of possession is called a bailment. The person with actual possession is the bailee and the person with the right to possession in the future is the bailor. Bailment is often regarded as the separation of ownership and possession. The library continues to own the book while you possess it and will have the right to possess it again when your right comes to an end. However, it is possible to have a bailment between persons who are not owners of the thing bailed. For example, you might borrow a book from the library and let a friend use it for an hour. You have temporarily transferred your possession to your friend and will soon have the right to possess it again, even though you do not own the book. In this example, the library loan to you is a bailment and your loan to your friend is a sub-bailment. The library is the bailor, your friend is the sub-bailee, and you wear two hats: bailee and sub-bailor. Bailment without ownership does not always involve a sub-bailment. For example, you might find some jewellery and deliver it to the police in hopes of locating the true owner. Your delivery of possession to the police is a bailment, even though you do not own the jewellery. You have a right to recover possession if the true owner cannot be found. 18 Of course, the true owner of the jewellery might be found and you might never recover possession. The possibility that your loss of possession will be permanent does not prevent a bailment from arising. You still have a right to possession of the jewellery in the future if the owner cannot be found. This conditional right is a sufficient foundation for a bailment. This is because you did not transfer your entire right to possession to the police. They have possession, but subject to your right to have the jewellery returned if the true owner cannot be located. Bailment differs from a sale or gift because the bailor retains some right to possession, but the seller or donor does not. In Chapman Bros v Verco Bros and Co Ltd, 19 farmers delivered bags of wheat to a merchant under a “wheat storage” contract. Under the contract, the merchant could be required to return the same quantity of wheat to the farmers, but “shall not be required to return the identical wheat”. This was an immediate sale of wheat to the merchant and not a bailment, because the farmers did not retain any right to possession of the wheat they had delivered. A bailment can exist even if the bailor does not expect to ever recover possession. There is a common transaction, called a conditional sale or hire-purchase, in which the 18

Flack v National Crime Authority (1998) 156 ALR 501; [1998] FCA 932.

19

Chapman Bros v Verco Bros and Co Ltd (1933) 49 CLR 306; [1933] HCA 23.

58

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[5.110]

seller lets the buyer have possession of the thing before it is paid for. The buyer pays the purchase price in instalments and, when it is fully paid, ownership of the thing will be transferred from seller to buyer. If all goes well, the seller will never have possession of the thing again. This is still a bailment because the seller retains a right to possession of the thing in the event that the buyer fails to make the payments on time. Automobiles are often sold under conditional sale or hire-purchase agreements. A similar method is a chattel lease coupled with an option to purchase. During the term of the lease, the lessee is a bailee with a right to possess the car (so long as the payments are made and the other terms of the lease are observed). At the end of the lease, the lessee has a right to buy the car. The lessor is a bailor who has the right to recover possession of the car only if the lessee breaches the terms of the lease or chooses not to exercise the option to purchase the car at the end. Regardless of differences in terminology or form, these relationships are essentially the same. The conditional seller, hirer, or lessor is a bailor during the term of the contract. The bailment will most likely come to an end in one of two ways. Either the bailor will recover possession of the thing or ownership of the thing will pass to the bailee. There is also a possibility that the bailment will end because the thing is destroyed or is stolen by persons unknown, but that is another story. Possession acquired without consent ...............................................................................................................................................................................................

It is possible to obtain possession of a thing without anyone else’s consent. This can happen in several different ways. First, you might take possession of something which has never been possessed before. This can occur when you catch a wild animal or pick up a sea shell washed up on a public beach. It can also happen when you create a new thing, such as a loaf of bread or a painting. Secondly, you might find something which someone else lost. Although the owner might not object to your possession, he or she is not aware of your possession and therefore has not consented to it. This is different from a bailment, discussed above at [5.100], but the law treats you as if you were a bailee with “an obligation to keep it safe and return it to the owner (if that is possible)”. 20 Thirdly, you might take something from another person without her or his consent. This happens when a person takes the wrong jacket home from a party, a thief steals, or squatters take over an empty house. Possession acquired without consent is a property right which the law protects. It gives rise to a right to possession which is enforceable against everyone except those people with a better right to possession. [5.110]

20

R v Ngan [2007] NZSC 105; [2008] 2 NZLR 48 at [15] and at 59 (NZLR), per Blanchard J. Also see Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd [1970] 2 NSWR 156; (1970) 44 ALJR 269; [1970] 3 All ER 825.

[5.140]

CHAPTER

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59

Breach of duty Possession and the right to possession are property rights. This means that other members of society are under a general duty not to interfere with those rights. A breach of that duty is a legal wrong, called a tort. The most common torts of wrongly interfering with possession or a right to possession are trespass, conversion, and detinue. [5.120]

Trespass ...............................................................................................................................................................................................

Trespass is the wrongful interference with other persons or with their possession of things. To constitute trespass, the interference must be unauthorised, direct, and done voluntarily. 21 Trespass to goods or land involves interference with possession or damage to the thing possessed. It is an interesting question whether interference with computer equipment solely by electronic means can be trespass to goods. 22 Trespass is not committed unless there is a direct connection between the trespasser’s actions and the interference with possession or damage. For example, I would be guilty of trespass if, without your consent, I handled your goods, pushed you and caused you to drop an object, walked on your land, or threw something onto your land. Indirect interference is not trespass (although it may be some other type of wrong). For example, if you left your things in a library while you went for coffee and the library doors were locked when you returned, this would interfere with your possession of those things, but would not be sufficiently direct to be trespass. Only a voluntary act can be trespass. So, for example, accidentally tripping and knocking over a vase would not be trespass. However, the tort does not require that the trespasser intended to commit a wrong. Taking the wrong coat home from a party is a voluntary act and a trespass, even though it was an honest mistake. So too is wandering by mistake onto the land of another while out bushwalking. [5.130]

Conversion ...............................................................................................................................................................................................

Unlike trespass, the tort of conversion does not apply to land. It is the unauthorised interference with another’s possession or right to possession of goods, documents, or cash. Like trespass, a voluntary act causing such interference is conversion, even if the converter did not intend to do wrong. However, unlike trespass, indirect interference will suffice. Conversion (which was once called trover) is some dealing with goods, documents, or cash which is repugnant to someone else’s right to possess them. 23 Using them for your [5.140]

21 22

23

Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46; Bayliss v Cassidy [1998] QSC 186. See New Zealand Law Commission, Electronic Commerce (Report 50, 1998) at [149]-[153]; T Rollo, “Liability for Spam through Trespass to Goods” [2001] Privacy Law and Policy Reporter 37; Tchenguiz v Imerman [2010] EWCA Civ 908; [2011] 2 WLR 592. Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46; Kuwait Airways Corp v Iraqi Airways Co [2002] UKHL 19; [2002] 2 AC 883 at [37]-[44].

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[5.140]

own benefit or purporting to sell, give, or lend them to another would be conversion. These acts involve an intention to exercise dominion over them. Temporarily handling or detaining things without that intention would not suffice. For example, it is not conversion to find a lost item and take possession of it with the intention of locating its owner (although the finder will be treated like a bailee with an obligation to keep it safe and return it to the owner if possible). 24 A temporary interference with a right to possession can be conversion if that interference amounts to a repudiation of that right. In Aitken Agencies Ltd v Richardson, 25 the defendant took the plaintiff’s van for a joy ride and damaged it. He was guilty of conversion because, as McGregor J said, he “intended to exercise a temporary dominion over the van. He assumed possession of it for his own purpose, and such act was inconsistent with the rights of the owner”. 26 This can be compared with Schemmell v Pomeroy, 27 in which a 14-year-old boy took his mother’s car for a joy ride while she was at work. He intended to put the car back safely before she got home, but wrecked it in an accident. His intention to return the car meant that he was guilty of trespass, but not conversion (at least not before the accident). Unlike trespass, which is interference with someone’s possession of a thing, it is conversion to interfere with a right to possession. In other words, a person who does not possess, but has the right to possess goods, can sue for conversion of them. In Motor Dealers Credit Corp Ltd v Overland (Sydney) Ltd, 28 the plaintiff had a right to possession of a car, which had been improperly seized by a car dealer. The dealer sold it to the defendant, who resold it without ever taking possession of the car. Even though neither the plaintiff nor the defendant had possession of the car at the relevant time, the defendant was guilty of conversion. As Street CJ said, “there may be a conversion of goods even though the defendant has never been in physical possession of them, if his act amounts to an absolute denial and repudiation of the plaintiff’s right”. 29 To sue for conversion, the plaintiff must have a right to immediate possession of the goods. A right to possession at some time in the future would not suffice. For example, if you borrowed a book from the library for four weeks and that book was taken from you the next day, the library could not sue for conversion until its right to possession revived 27 days later. This short wait is not much of a problem. However, what if you leased a car to someone for three years and it was stolen the next day? Having to wait three years before commencing action against the thief could cause considerable difficulty. This is why many leases of this kind contain a clause which gives the owner a right to immediate possession of the car if it is wrecked or stolen. 24

R v Ngan [2007] NZSC 105; [2008] 2 NZLR 48; Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd [1970] 2 NSWR 156; (1970) 44 ALJR 269; [1970] 3 All ER 825.

25 26 27 28

Aitken Agencies Ltd v Richardson [1967] NZLR 65. Aitken Agencies Ltd v Richardson [1967] NZLR 65 at 67. Schemmell v Pomeroy (1989) 50 SASR 450. Motor Dealers Credit Corp Ltd v Overland (Sydney) Ltd (1931) 31 SR (NSW) 516.

29

Motor Dealers Credit Corp Ltd v Overland (Sydney) Ltd (1931) 31 SR (NSW) 516 at 519.

[5.160]

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61

It is possible to sue for conversion of money, but only if the money exists in a physical form as cash, cheques, or other negotiable instruments. 30 The conversion is the wrongful interference with the plaintiff’s right to possession of a piece of paper, but the defendant’s liability is measured not by its value as paper, but by the value it represents or entitles the plaintiff to receive. People who interfere with purely intangible forms of value (such as a bank account or other debts due to the plaintiff) are not liable for conversion, since intangible things are not possessed and there has been no interference with a right to possession. 31 This means that the nature of the liability for misappropriating money depends on whether the misappropriation involved a cheque or electronic funds transfer. A person can be liable for conversion of intangible assets in the United States, 32 but that is not the law in Australia. 33 Detinue ...............................................................................................................................................................................................

Detinue, like conversion, is a tort which involves goods, documents, or cash, but not land. It is the wrongful detention of them from a person with a right to immediate possession. 34 A person who commits the tort of detinue will know of the plaintiff’s claim to possession, since the essence of the tort is the failure to deliver the things on demand. This sets it apart from trespass and conversion, which can be committed by people who have no idea that their actions are interfering with another’s property rights. However, it is no defence to a claim of detinue that the defendant honestly believed that the plaintiff was not entitled to possession. [5.150]

Overlap ...............................................................................................................................................................................................

The torts of trespass, conversion, and detinue are used to protect possession and the right to possession of goods, documents, or cash. This similarity means that there are potential overlaps among them. All three torts might be committed by the same person in respect to the same thing. For example, if I took your lawn mower from your yard without your consent and then refused to return it, I would be guilty of trespass, conversion, and detinue, since I directly interfered with your possession of the mower, repudiated your right to possession, and failed to comply with your lawful demand for its return. Despite the similarities, each tort is a different type of wrong. The essence of trespass is the direct interference with actual possession. Brief interference, such as minor damage to [5.160]

30

Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1 at [32]-[33].

31

OBG Ltd v Allan [2005] EWCA Civ 106; [2005] QB 762 at [49]-[58]; affirmed Douglas v Hello! Ltd [2007] UKHL 21 at [94]-[107].

32 33

Kremen v Online Classifieds Inc 337 F 3rd 1024 (CA 9th 2003). Hoath v Connect Internet Services (2006) 229 ALR 566; [2006] NSWSC 158 at [119]-[139] concerning internet protocol addresses and a domain name.

34

Russell v Wilson (1923) 33 CLR 538; [1923] HCA 60.

62

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[5.170]

goods, is trespass even though the plaintiff’s possession otherwise remains intact. In contrast, the essence of conversion is the complete repudiation of the plaintiff’s right to possession as a result of the defendant’s use of, dealing with, or destruction of the goods. 35 The essence of detinue is the failure to return the plaintiff’s goods on demand. Although the defendant may have obtained possession wrongly, through trespass or conversion, this is not an element of the tort. Detinue is committed also by someone who obtains possession of goods properly as a bailee but fails to return them when the bailment comes to an end. 36 Other Wrongs ...............................................................................................................................................................................................

Trespass, conversion, and detinue are the main types of wrongful interference with possession or a right to possession. Four others are discussed here: permanent damage to goods, overholding by tenants, nuisance, and crime. A person with a right to possession of goods in the future cannot sue for trespass, conversion, or detinue. Possession or a right to immediate possession is required. However, he or she can sue someone who causes permanent damage to the goods. 37 Normally, damage which can be repaired is insufficient, since it might be repaired before the time for possession arrives. However, if the goods have not been repaired when the owner or bailor does recover possession, he or she can sue for the “permanent” damage even though the damage can be repaired. There are so few cases involving this wrong that it does not have a name, but was called a “special action” by Dixon J in Penfolds Wines Pty Ltd v Elliott. 38 A person with a right to future possession of land has a right to sue for permanent damage to the land. There are many cases in which someone obtained possession of land with permission of the owner, but refused to leave when that right came to an end. That person is called an overholding tenant. This is not trespass to land, since the owner was not in possession of the land when the wrong was committed. However, it is wrongful interference with the owner’s right to possession, similar to detinue. There is no specific tort of refusing to give up possession of land properly acquired. It is known simply as adverse possession. Nuisance is the wrongful interference with someone’s possession of land through actions which interfere with her or his use and enjoyment of that land. Those actions may cause physical damage to the land, such as a diversion of water which causes flooding or golf balls which break windows. 39 However, physical interference is not necessary. [5.170]

35 36 37 38

Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46 at 229 (CLR). This would be conversion in England, where detinue has been abolished: Torts (Interference with Goods) Act 1977, s 2. Dee Trading Co Pty Ltd v Baldwin [1938] VLR 173. Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46 at 230 (CLR).

39

Lester-Travers v City of Frankston [1970] VR 2.

[5.170]

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63

Odour or noise can also be a nuisance. 40 Whether an activity constitutes a nuisance depends on the normal way in which land in that area is used. Noises and smells which are acceptable in an industrial section may be nuisances in a quiet residential suburb. Noise which is acceptable during the day, may be a nuisance if made in the middle of the night. Normally, nuisances are recurring or ongoing activities. People are expected to tolerate temporary annoyances, such as a renovation to a neighbour’s house. However, in Munro v Southern Dairies Ltd, Sholl J said “that the loss of even one night’s sleep may amount to such a substantial interference with personal comfort as to constitute a nuisance”. 41 The wrongful interference with possession or a right to possession may be a crime as well as a tort. For example, conversion of goods could also be theft, and trespass to land might be breaking and entering, depending on the circumstances. The main difference between crime and tort is the intention of the actor. Crime requires both a criminal act (actus reus) and a criminal intention (mens rea), whereas a tort can be committed by someone who intends to act honestly. A secondary difference is the standard of proof required. Crime must be proved beyond a reasonable doubt, while torts need only be proved on the balance of probabilities. Therefore, someone acquitted of theft might be found liable for converting the goods alleged to have been stolen.

40

Oldham v Lawson [1976] VR 654.

41

Munro v Southern Dairies Ltd [1955] VLR 332 at 335.

PART 4

BAILMENT Chapter 6

Bailment ........................................................................... 67

CHAPTER 6

......................................................................................................................

Bailment Extracted from Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015), Ch 21.

A bailment is a delivery of goods from one person (the bailor) to another (the bailee) on a condition, either express or implied, that when the purpose for which the goods were bailed has been fulfilled, the goods will be returned to the bailor or delivered according to their instructions. Bailments are of everyday occurrence, for example leaving a car at a garage for repair; depositing items at a bank for safe custody; hiring goods; handing goods over to a carrier for delivery; or loaning goods to a friend. These actions all create bailments and give rise to the legal relationship of bailor and bailee. [6.10]

Nature and classification of bailments To constitute a bailment there must be a transfer of possession of the goods from one person to another person without any intention on the part of the bailor to transfer the ownership of the goods to the bailee. The bailee receives the goods for the purpose of fulfilling the instructions of the bailor which may be to keep the goods in safe custody, or to carry the goods from one place to another, or to do something to the goods and then return them. The requirement that there be a transfer of possession distinguishes the relationship of bailor and bailee from that of licensor and licensee. A mere licence or permission to use particular premises or facilities for the purpose of temporarily leaving or storing goods does not involve a transfer of possession. The importance of the distinction between a bailment of goods on the one hand, and a mere licence to use premises or facilities on the other, is that the relationship of bailor and bailee gives rise to certain duties and liabilities which do not apply where the relationship is that of licensor and licensee. However, it is not always easy to determine whether the relationship between the parties is that of bailor and bailee or licensor and licensee, as is illustrated by the following case: [6.20]

Greenwood v Council of the Municipality of Waverley (1928) 28 SR (NSW) 219 at 221 [6.30] The plaintiff, G, paid a fee to hire a locker in the defendant council’s dressing sheds at Bondi Beach. After putting his clothes in the locker, G ensured that it was locked. G was not given a key but was supplied with a numbered disc to identify the locker. On returning from the beach G presented the disc to the attendant who opened the locker which was found to be empty. G sued the council contending that it was a bailee of his clothes and as such owed him a duty of reasonable care.

68

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[6.40]

cont. However, it was held that the council was not a bailee since possession of the clothes had not passed to the council and had always remained in G. The council had merely let the locker to G which did not give rise to a duty of care in respect of the contents of the locker.

There is a divergence of authority on whether parking a car in an attended parking lot or parking station gives rise to a bailment. The trend of United Kingdom cases is to regard the position as merely that of licensor and licensee: BG Transport Service Ltd v Marston Motor Co Ltd [1970] 1 Lloyd's Rep 371. However, Australian courts are more disposed to find that there has been a transfer of possession, that is control over the vehicle, giving rise to the relationship of bailor and bailee, particularly where some card or ticket has to be presented before regaining the vehicle: Council of the City of Sydney v West (1965) 114 CLR 481 at 489, 501; Walton Stores Ltd v Sydney City Council (1968) 88 WN (NSW) 153. [6.40]

Classification of bailments ...............................................................................................................................................................................................

The traditional classification of bailments is that based, with certain modifications, on the judgment of Lord Holt in Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107, namely: [6.50]

1.

The deposit of goods for gratuitous safekeeping by the bailee, for example the handing over of jewellery to a bank for safe custody where no charge is made for the service.

2.

The delivery of goods to a bailee for work to be done on the goods for the benefit of the bailor without reward, for example where A leaves his watch with B for repair without a charge being made for the repair.

3.

The delivery of goods by way of gratuitous loan for use by the bailee, for example where A lends his car to his friend B without charge.

4.

The deposit of goods for safekeeping for reward, for example where jewellery is handed over to a bank for safe custody and a fee is charged for the service.

5.

The delivery of goods to have something done to them for reward, for example where a car is left at a garage for repair.

6.

The delivery of goods for use by the bailee for reward, that is, the hiring of goods.

7. The delivery of chattels to be held as security for a loan, that is, a pledge or pawn. It will be observed that the first three types of bailment listed above are gratuitous, whereas the following three are bailments for reward. The distinction between a gratuitous bailment and a bailment for reward is relevant in considering the extent of the duty of care owed by a bailee to the bailor. The distinction is also important in considering the rights and liabilities of the bailor or bailee against third parties.

[6.90]

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69

Duties of a bailee Duties of a bailee for reward ...............................................................................................................................................................................................

A bailee for reward has a duty to take such care of the goods as is reasonable in the circumstances. 1 In the event of loss of, or damage to, the goods during the bailment, the onus is upon the bailee to prove that such loss or damage was not the result of their failure to take reasonable care. For example, if goods are stolen from a bailee, the latter will be liable to the bailor for the loss of the goods unless the bailee can show that he or she took reasonable precautions to secure the premises against intruders. [6.60]

Pitt Son & Badgery Ltd v Proulefco SA (1984) 153 CLR 644 at 647–648 [6.70] The bailee stored bales of wool in an old timber building, the fencing around which was clearly inadequate to keep out intruders. The High Court held that the bailee was liable for breach of his duty to take reasonable care of the wool when it was destroyed in a fire deliberately lit by an intruder who had gained access to the wool store through the inadequate fencing.

Tottenham Investments Pty Ltd v Carburettor Services Pty Ltd (1994) Aust Torts Reports 81-292 at 61,554 [6.80] The plaintiff left a valuable car with the defendants for repair. Overnight, thieves entered the defendants’ premises through a skylight in the roof, started the car with the keys that had been left in the ignition, opened the roller doors to the premises and drove off with the vehicle. Shortly after the break-in, the defendants placed security bars over the skylight, installed an alarm system and placed signs on the outside of the building warning possible intruders of the presence of alarms. The New South Wales Court of Appeal held that the defendants were liable to the plaintiff for the loss of the vehicle since they had failed to discharge the onus of establishing that they had taken reasonable care appropriate in the circumstances. The precautions taken to secure their premises subsequent to the break-in should have been implemented earlier. However, leaving the ignition keys in the vehicle did not of itself constitute a failure to take reasonable care. See also A1 Perfect Plumbing Pty Ltd v BMW Prestige Pty Ltd (2006) 230 ALR 331 (inadequate security for bailed vehicle).

The duty of a bailee for reward is not that of an insurer. Accordingly, the bailee is not obliged to take every conceivable or possible precaution to prevent the loss of goods. The bailee's duty is simply to act reasonably. Where the bailee can show that he or she had taken reasonable care for the safekeeping of the goods, the bailee will not be liable if they are stolen. The standard of care required is to use such care as a careful and vigilant person would exercise in the custody of their own property of the like character and in the like circumstances: Nibali v Sweeting & Denney (WA) Pty Ltd (1989) Aust Torts Reports 80-258. [6.90]

1

See J Tarrant, “Duties of a Bailee for Reward” (2008) 22(3) Commercial Law Quarterly 18.

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[6.100]

A bailee for reward is not obliged to insure the bailed goods. Where the loss of the goods was not due to the negligence of the bailee, a bailee for reward who lacks insurance protection for the loss is not required to inform the bailor of that fact, unless the bailee could foresee an unusual risk to the goods: All Covers and Accessories Pty Ltd v Sidawi (2012) 36 VR 113 at [10]-[11], [49]. A bailee's primary duty is to redeliver the goods to the bailor or as the bailor may direct. Hence, if the bailee delivers the goods to a third person other than in accordance with the bailor's express authority or mandate, the bailee will be liable for their loss. Jackson v Cochrane [1989] 2 Qd R 23 at 26–27 [6.100] The owner of a caravan gave possession of it to a motor dealer to sell “on consignment”. The motor dealer allowed three strangers to tow it away on their persuading her that they had the authority of the owner to do so when such was not the case. It was held that the motor dealer was liable to the owner for the loss of the caravan.

It appears from the latter case that the bailee will be liable for such misdelivery even in the absence of negligence. In addition to the general obligation to take reasonable care in the case of the delivery of a chattel for work to be done upon it for reward, if the work is of the type which the bailee holds herself or himself out as skilled to do, for example as a watch repairer, the bailee warrants that he or she possesses the technical skill and ability to do the work. In the case of the carriage of goods, where the bailee is a common carrier, more onerous rules of liability for loss or damage apply. [6.110]

Duties of a gratuitous bailee ...............................................................................................................................................................................................

The modern trend is for the courts to apply the same basic principle to both a bailment for reward and a gratuitous bailment, namely, whether the bailee took such care of the goods as was reasonable in the circumstances. [6.120]

WGH Nominees Pty Ltd v Tomblin (1985) 39 SASR 117 [6.130] The plaintiff jeweller had insisted that the defendant husband T take a particular ring to show his wife. On his way home T went to a hotel where the ring was apparently stolen from his coat. The jeweller sued T for damages for negligence. However, it was held that, having regard to the totality of the circumstances, T had not been negligent and accordingly was not liable to the jeweller for the loss of the ring.

Although the general position would seem to be that a bailee, whether a gratuitous bailee or a bailee for reward, has a duty to take reasonable care of the goods, what constitutes a breach of that duty will depend upon the particular circumstances and the nature of the bailment. A gratuitous bailee who negligently fails to return the goods within a reasonable time of a demand being made for them will be liable for their loss to the bailor: Mitchell v Ealing London Borough Council [1979] QB 1. [6.140]

[6.180]

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71

Graham v Voigt (1989) 89 ACTR 11 [6.150] A landlady was held liable for failing to return a former boarder’s possessions, including a number of valuable stamp albums, which had been left with her for some eight months. As a gratuitous bailee, the landlady was bound to take reasonable care of the goods and to deliver them up on an unequivocal demand for their return being made. Since she failed to deliver the goods and could not show that they had been lost without negligence or default on her part she was held liable for their value.

Where goods under a gratuitous bailment are damaged, it has been held that the onus is on the bailee to show that he or she took reasonable care of them while they were in their possession: McComb v Martin Box Marine Holdings Pty Ltd (1992) 8 SR (WA) 193. [6.160]

Liability of bailee for employees and agents ...............................................................................................................................................................................................

Where a bailee for reward entrusts the article bailed to their employee for safekeeping and the article is lost owing to the negligence of the employee, the bailee is liable even though he or she proves to the satisfaction of the court that a reasonably prudent person in similar circumstances would have entrusted such an article to an employee. The bailee would be liable because the bailee undertakes that all reasonable care will be exercised by themselves and their employees, in other words, a bailee for reward is liable for their own negligence and vicariously liable for the negligence of their employees: Makower, McBeath & Co Pty Ltd v Dalgety & Co Ltd [1921] VLR 365 at 375; Morris v CW Martin & Sons Ltd [1966] 1 QB 716. Similarly, a bailee whose employee or agent sells the goods entrusted to the bailee is liable in damages to the owner of goods, unless an exemption clause in the contract of bailment precludes liability: Rick Cobby Haulage Pty Ltd v Simsmetal Pty Ltd (1986) 43 SASR 533. [6.170]

Sub-bailments ...............................................................................................................................................................................................

A bailee to whom goods have been entrusted will often transfer possession of the goods to a third party thereby creating a sub-bailment of the goods. 2 The nature of a sub-bailment was well described by Professor Palmer in his classic text on Bailment (3rd ed, 2009), p 1240: [6.180]

A true sub-bailment may be defined as that relationship which arises whenever a bailee of goods transfers possession to a third party for a limited period or a specific purpose, on the understanding (express or implied) that his own position as bailee is to persist throughout the subsidiary disposition. … The third party, by taking possession and by consenting to 2

See generally K Lewins, “Sub-Bailment On Terms and the Australian Consumer” (2002) 9(3) E LAW: Murdoch University Electronic Journal of Law, available at https://elaw.murdoch.edu.au; H Austin, “The Essentiality of Possession in Bailment: Sub-bailment on Terms, Quasi-bailment and Freight Forwarders” (2004) 20 Journal of Contract Law 145.

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.190]

the limits set upon it, assumes the role of a special class of bailee. He will owe to the original bailor all the common law duties which would traditionally arise upon a direct bailment of the kind in question.

The leading authority on the duty owed by a sub-bailee to the original bailor to take reasonable care of the goods entrusted to their possession is Morris v CW Martin & Sons Ltd [1966] 1 QB 716: Morris v CW Martin & Sons Ltd [1966] 1 QB 716 [6.190] In Morris v CW Martin & Sons Ltd [1966] 1 QB 716, the plaintiff sent her mink stole to a furrier, B, for cleaning. B explained that he did not provide this service and, with the plaintiff’s consent, forwarded the mink to the defendant drycleaners, who accordingly became sub-bailees. While in the defendants’ possession, the mink was stolen by the employee entrusted with cleaning it, although the defendants had not themselves been negligent either in failing to take proper steps to safeguard the mink or in employing the particular employee. The Court of Appeal held that the sub-bailee was liable to the bailor for the unauthorised theft of the mink by their employee, notwithstanding the absence of a contractual relationship between the original bailor and sub-bailee. See similarly, Westrac Equipment Pty Ltd v Owners of the Ship Assets Venture (2002) 192 ALR 277.

In an action by the owner of goods against a sub-bailee for loss of the goods, the sub-bailee can rely as against the owner on the terms of the contract between the bailee and the sub-bailee if the owner has expressly or impliedly consented to the bailee making a sub-bailment containing such terms, but not otherwise. Thus, where the owners (the bailors) of goods arranged with freight carriers (the bailees) for the carriage of the goods to a foreign port, and the carriers subcontracted with shipowners (the sub-bailees) for shipment of the goods, it was held that the owners were bound by the terms of the contract between the freight carriers and shipowners, since the owners were regarded as having authorised the freight carriers to entrust the goods to the shipowners on those terms: Pioneer Container KH Enterprise (cargo owners) v Pioneer Container (owners) [1994] 2 AC 324. [6.200]

Exclusion of liability ...............................................................................................................................................................................................

A bailee may seek to limit or exempt their liability for negligence in a contract of bailment. [6.210]

Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Aust) Pty Ltd (1966) 115 CLR 353 at 360, 366 [6.220] The appellant was an interstate transport company which regularly employed a subcontractor to pick up goods around Melbourne and transport them to the appellant’s central depot in Melbourne where they were sorted for interstate carriage. The appellant’s depot closed at 5.30 pm. On the day the subcontractor collected the respondent’s goods he finished his round at 5.40 pm and consequently took his loaded truck home, as he had been directed to do by the appellant on a number of previous

CHAPTER

[6.230]

6

BAILMENT

73

cont. occasions when he had been late in completing his collections. The subcontractor backed the truck into his garage but in the early hours of the morning a fire broke out damaging the respondent’s goods. In an action for damages by the respondent, the High Court held that it was implicit in the contract between the appellant and the respondent that the latter’s goods would be taken to and received by the appellant’s depot at the conclusion of the subcontractor’s pick-up round. Accordingly, the subcontractor’s act in taking the goods home for the night constituted such an unauthorised departure or deviation from the terms of the contract between the appellant and the respondent as to preclude the appellant from relying on the exemption clause in the contract which purported to exempt it from liability.

Statutory obligations where services are provided to a consumer ...............................................................................................................................................................................................

The widespread use of exemption clauses designed to limit or exclude the common law obligations of, for example a bailee for the work performed on chattels delivered for repair, has resulted in statutory provisions to protect “consumers” in respect of the quality of the work or services so provided. Thus, the Australian Consumer Law, 3 ss 60 and 61 provide: [6.230]

60. If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. 61. (1) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer; there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose. (2) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer makes known, expressly or by implication, to: (i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made; the result that the consumer wishes the services to achieve; there is a guarantee 3

The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)).

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[6.240]

that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.

The obligations imposed by these provisions cannot be excluded (s 64(1)), at least where the services are of a kind ordinarily acquired for personal, domestic or household use or consumption. If the services are not of that kind, then liability for breach of the provisions can be limited to supplying the services again or payment of the cost of having the services supplied again: s 64A(2). However, a term so limiting liability cannot be relied on if the person to whom the services were supplied establishes that it is not fair or reasonable in the circumstances for the supplier to rely on such limiting term: s 64A(3). The scope of the statutory guarantees in contracts for the provision of services is very wide since “services” is broadly defined: s 2(1). A person is taken to have acquired particular services as a consumer if either: (a)

the price of the services did not exceed $40,000 (or a greater amount prescribed by regulation); or

(b)

where the price exceeded that amount, the services were of a kind ordinarily acquired for personal, domestic or household use or consumption: s 3(3).

Duties of a bailor Where a bailment for reward is for a fixed term, the bailor is under a duty not to interfere with the bailee's possession of the goods until the expiry of the period of the bailment. If the bailor retakes possession of the goods during the term of the bailment, the bailor may be liable to the bailee for trespass, conversion, or breach of contract. On the other hand, a gratuitous bailment is revocable at the will of the bailor: Parastatidis v Kotaridis [1978] VR 449. A further duty of the bailor is that they must inform the bailee of dangers in the goods of which the bailor is aware, whether the bailment is gratuitous or for reward. A gratuitous bailor has a duty “to communicate to the borrower defects in the article lent of which he is aware, and if either deliberately or by gross negligence he does not discharge this duty, he is liable for injury resulting to the borrower”: Coughlin v Gillison [1899] 1 QB 145 at 149. Where the bailee accepts possession of the goods after being sufficiently warned of their dangerous qualities, the bailor will not be liable for subsequent loss or damage suffered by the bailee. [6.240]

Pivovaroff v Chernabaeff (1978) 21 SASR 1 [6.250] A market gardener gratuitously lent an onion-sorting machine to a fellow market gardener. While giving directions to the bailee on how to use the machine, the bailor warned the bailee not to allow children near it. However, the bailee operated the machine assisted by a 13-year-old boy whose hand became caught in the machine and was mutilated.

[6.300]

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75

cont. In an action by the boy against both the bailor and bailee, it was held that the bailor was not liable since he had sufficiently discharged his duty to warn of dangers that might arise from the operation of the machine by the directions he had given to the bailee. It was further held that the bailee was liable in negligence for the injuries suffered by the boy.

Hire of goods ...............................................................................................................................................................................................

This section considers the obligations imposed on the bailor/lessor in the case of the hiring of goods for reward. These obligations may be imposed by common law or statute. [6.260]

At common law

Where goods are hired for use by the hirer, the common law implies in the contract of hire a condition that the goods are reasonably fit for the particular purpose made known to the bailor/lessor for which they are being hired: Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 at 642, 645, 650, 657, 660; Star Express Merchandising Co Pty Ltd v VG McGrath Pty Ltd [1959] VR 443. [6.270]

Cottee v Franklins Self-Serve Pty Ltd [1997] 1 Qd R 469 [6.280] The plaintiff was injured when she attempted to prevent a laden shopping trolley from toppling over when one of its wheels collapsed. The trolley had been supplied to the plaintiff by an employee of the defendant supermarket. It was held by the Queensland Court of Appeal that there was a contract of hire between the plaintiff and the defendant supermarket. Implied in the contract was a term that the trolley would be reasonably fit for its contemplated purpose or use. The plaintiff was awarded $25,000 damages for the injuries she suffered as a result of the breach of the implied term. Macrossan CJ expressed the view that since the trolley had been supplied to the plaintiff at the checkout counter, there was a contract of hire for reward between the plaintiff and the supermarket, the consideration for the contract being the plaintiff’s payment of the price for her selected goods at the checkout.

Since the condition of fitness for purpose is implied at common law, it can be excluded by an appropriately drafted exclusion clause. [6.290]

The Australian Consumer Law ...............................................................................................................................................................................................

Further protection is afforded by the Australian Consumer Law 4 where goods are hired or leased by a consumer. The guarantees of undisturbed possession and the conditions of correspondence with description, acceptable quality and fitness for purpose

[6.300]

4

The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)).

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.310]

which apply to contracts of sale under the Australian Consumer Law are applied to contracts of hire: ss 52, 54 – 56. This is because these guarantees apply to contracts for the “supply” of goods, which is defined as including the hiring or leasing of goods: s 2(1). A person (including a corporation) is taken to have acquired particular goods as a consumer in the present context if the price at which the hirer or lessee could have purchased the goods from the supplier either: (a)

did not exceed $40,000 or a greater amount prescribed by regulation; or

(b)

if it exceeded that amount, the goods are of a kind ordinarily acquired for personal, domestic or household use; or

(c)

if it exceeded that amount, the goods are a vehicle or trailer acquired for use principally for transport of goods on public roads (s 3(1)); provided that the goods are not acquired for the purpose of resupply or for the purposes of transformation as part of a manufacturing process: s 3(2). These guarantees cannot be excluded (s 64(1)), at least where the goods are of a kind ordinarily acquired for personal, domestic or household use. If the goods are not of that kind, liability for breach of implied condition can be limited to the replacement or repair of the goods or to the cost of replacement or repair: s 64A(1). However, a term so limiting liability cannot be relied on if the person to whom the goods were supplied establishes that it is not fair or reasonable in the circumstances for the supplier to rely on the limitation: s 64A(3).

Termination of bailments A bailment may be terminated in a number of ways, of which the following are the most common: [6.310]

1. By expiry of the term ...............................................................................................................................................................................................

A bailment will terminate when the period for which the goods were bailed expires. Similarly, the bailment will terminate when the purpose for which the bailment was created has been fulfilled. [6.320]

2. By demand of a gratuitous bailor ...............................................................................................................................................................................................

In the case of gratuitous bailments, the bailment may be determined at any time by the bailor: Parastatidis v Kotaridis [1978] VR 449. [6.330]

3. By wrongful act of the bailee ...............................................................................................................................................................................................

Where the bailee commits a wrongful act of such a nature as to jeopardise the title of the bailor to the goods or otherwise to amount to a repudiation of the transaction, such as purporting to sell the goods, the bailment may be terminated. The bailment is not automatically terminated but the bailor has an option whether to terminate it. [6.340]

[6.370]

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6

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77

Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400 [6.350] In Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400, Anderson hired a valuable car under a hire-purchase agreement with finance company Esanda. The agreement provided that Anderson would not part with possession of the car unless Esanda gave prior written consent. Anderson told Esanda that it had decided to sell the car and was given a payout figure by Esanda. Esanda did not give its prior written consent to the sale. Anderson brought the vehicle to a car yard, from which it was stolen. Esanda then sought to repossess the vehicle. Anderson sued the car yard for breach of its duty as a bailee. The car yard argued that Anderson had committed a fundamental breach of the hire-purchase agreement and therefore had no right to sue it in bailment. The New South Wales Court of Appeal observed that a repudiation of a simple bailment terminates the bailment. However, where there is a bailment within a contract a bailee does not forfeit their right to immediate possession by any dealing that is unwarranted by the bailment. Here there was a bailment of the vehicle to Anderson under a contract (the hire-purchase agreement). A term providing for the way in which the bailee’s right of possession could be terminated would need to be expressed in the “clearest express terms”: at [70]. A term that allows termination by notice for breach of any term of the bailment will not be construed to have the effect of terminating the bailee’s right of possession. An act would need to be “very serious” to justify termination of the bailment, “virtually a disclaimer of the contract of bailment”: at [72]. Conversion was not necessarily sufficient to justify termination. Here there was no attempt to defraud Esanda. Accordingly, Anderson had a right to immediate possession of the vehicle and had standing to sue the car yard in bailment. 5

4. By destruction of the subject matter ...............................................................................................................................................................................................

A bailment is terminated when the subject matter of the bailment is lost or destroyed, or by reason of some change in its nature becomes incapable of use for the purposes of the bailment. [6.360]

Repossession of bailed goods ...............................................................................................................................................................................................

At common law the owner of a bailed chattel cannot use force to repossess the chattel since the bailee's possession was not wrongful from its inception: Toyota Finance Australia Ltd v Dennis (2002) 58 NSWLR 101. In that case it was held that the lessor of a car was not entitled to use force in repossessing the car from a lessee who wrongfully refused to return the vehicle. In some jurisdictions legislation has provided that limited force may be used in repossessing a chattel. 6 [6.370]

5 6

See N Palmer, “Title to Sue in Bailment: Repudiation and the Contractual Basis of Liability for Wrongs to Chattels” (2008) 24 Journal of Contract Law 132. See, for example, Criminal Code Act 1924 (Tas), Sch 1, s 45; Criminal Code 1899 (Qld), s 276; Criminal Code 1913 (WA), s 253.

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.380]

Rights against third parties ...............................................................................................................................................................................................

If a third party commits a wrongful act against the chattel bailed, for example wrongfully takes possession of it, the bailor has the right to sue the third party in tort for damages for conversion if the bailment is a bailment at will. A bailee is also entitled to bring an action against a tortfeasor who has negligently caused damage to the bailed chattel while the chattel was in the bailee's possession. Such an independent cause of action arises because the bailee's possession is good against any tortfeasor: Goodwin v Ron Heath Tyre Service (SA) Pty Ltd (1999) 74 SASR 508. Where the bailment is for reward, the bailor's right to possession of the goods is suspended, and accordingly the general position is that only the bailee can sue the third party for the wrongful interference with the goods. However, if the interference with the goods adversely affects the bailor's reversionary interest, for example where the goods are destroyed or permanently damaged so that they will not be returned to the bailor in good order at the expiry of the bailment, the bailor may bring an action against the third party: Penfolds Wines Pty Ltd v Elliot (1946) 74 CLR 204 at 226-227; [1946] HCA 46. Where the bailee wrongfully disposes of the chattel, such act entitles the bailor to terminate the bailment; if the bailor does so, he or she will have an immediate right to possession of the goods enabling the bailor to sue not only the bailee but also the third party in an action for conversion. In each State and Territory legislation provides a statutory framework for the disposal of uncollected goods. 7 [6.380]

7

Uncollected Goods Act 1995 (NSW); Australian Consumer Law and Fair Trading Act 2012 (Vic), ss 54 – 77; Disposal of Uncollected Goods Act 1967 (Qld); Unclaimed Goods Act 1987 (SA); Disposal of Uncollected Goods Act 1970 (WA); Disposal of Uncollected Goods Act 1968 (Tas); Uncollected Goods Act 1996 (ACT); Uncollected Goods Act 2004 (NT).

PART 5

AGENCY Chapter 7

Agency ............................................................................. 81

CHAPTER 7

......................................................................................................................

Agency Extracted from Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015), Ch 13.

Many business matters are conducted through the instrumentality of an agent. The relationship of agency generally arises as a result of agreement between the principal and the agent, and the rights and liabilities of each are based upon this original agreement. An agent is usually employed to bring about a contractual relationship between the principal and a third party. A principal will be bound by what the agent does on the principal's behalf provided that the agent acted within the scope of her or his authority. The general position is that where the agent acts within the scope of their authority and accordingly brings about a contractual relationship between the principal and a third party, such contract is between the principal and the third party. The agent is not a party to that contract. [7.10]

Definition of agency Agency is the relationship existing between two parties whereby one (the agent) is authorised by the other (the principal) to do, on the principal's behalf, certain acts which affect the principal's rights and duties in relation to third parties. An agent, therefore, is a person who has authority (either express or implied) to act for a principal with the general object of bringing the principal into legal relations with a third party. However, in the business world the word “agency” is by no means so restricted and is often used in a much wider sense: International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644 at 652. In other words, the mere use of the word “agent” is not conclusive of the existence of an agency relationship in law. [7.20]

Agency distinguished from other relationships ...............................................................................................................................................................................................

Agency overlaps with two other relationships which appear at first sight to be somewhat similar, namely, that of employer and employee and that between an independent contractor and the person with whom he or she contracts. Employees and independent contractors are mutually exclusive classes. The former comprises persons employed on such terms that they are subject to control regarding the manner in which their work is to be carried out. Independent contractors, on the other hand, exercise their own discretion as to the manner in which they carry out the work they undertake to perform. [7.30]

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.40]

The difference may be further illustrated by distinguishing between a person employed under a contract of service (an employee) and a person engaged under a contract for services (an independent contractor). Some independent contractors are agents for those who employ them and some employees are general agents for their employers but it is not true to say that all employees or all independent contractors are agents for their employers. This is obvious in the case of the independent contractor but it is also true in relation to the employee. The essence of agency is that it should be within the scope of the employment that the person employed brings the employer into a legal relationship with a third party. In the case of some types of employee this will be readily implied, for example a shop assistant employed to sell goods is an agent. On the other hand a domestic servant is not generally an agent of the employer. An auctioneer (an independent contractor) retained to sell goods is an agent but not an employee. An agent should also be distinguished from a trustee. Both act in a similar manner, that is, on behalf of other persons. However, although a trustee exercises their powers on behalf of beneficiaries, a trustee is not the agent of the beneficiaries. Thus, a trustee does not bring the beneficiaries of the trust into a contractual relationship with third parties which is the normal function of an agent. In dealing with matters relating to the trust, the trustee is considered a principal not an agent. Capacity to act as principal and agent ...............................................................................................................................................................................................

There is a marked distinction between a person's capacity to act as a principal and their capacity to act as an agent. Generally speaking, only those persons with full contractual capacity may employ an agent, the rule being that anyone may appoint an agent to do any act which he or she has capacity to do themselves. Any person can be employed as an agent and can exercise any of the rights and powers conferred by the contract of agency even though they may not have the necessary contractual capacity to bind themselves in similar negotiations. For example, although a minor is not able to bind herself or himself to certain contracts, a minor may be employed as an agent, and consequently may bind the principal to contracts he or she has entered into as agent. In respect of contracts to which a minor is able by law to bind herself or himself, it is permissible for the minor to appoint an agent for such purpose. A minor's capacity to act through an agent is coextensive with the minor's capacity to do the act which he or she purports to delegate. An agent cannot have greater powers conferred upon them than the principal possesses; and, if the principal is under some disability, the powers of the agent are equally limited according to the nature of such disability. Where the alleged principal is in fact incapable of giving authority to an agent to act on their behalf, an agent who represents that he or she has such authority is liable to the third party for breach of warranty of authority. [7.40]

CHAPTER

[7.90]

7

AGENCY

83

Classification of agents ............................................................................................................................................................................................... [7.50]

A general classification of agents is as follows:

(a)

special agents;

(b)

general agents; and

(c) universal agents. These classifications have no special legal significance apart from illustrating the varying authorities of the agents mentioned. The real problem is the actual extent of the agent's authority. Special agents

A special agent is one who is appointed for the performance of some special act, or to represent the principal in some particular transaction, such act or transaction not being in the ordinary course of the agent's trade, profession, or business as an agent. For example, P appoints A his agent for the purpose of procuring a truck suitable for towing; the only authority given to A as agent, is that necessary to procure the type of truck mentioned. [7.60]

General agents [7.70]

A general agent is an agent who has authority:

(a)

to act for the principal in all matters, or in all matters concerning a particular trade or business, or of a particular nature; or

(b)

to do some act in the ordinary course of their trade, profession or business as an agent on behalf of the principal, for example where a solicitor or broker is employed as such.

Universal agents

A universal agent is one whose authority is unlimited to do such things which the principal may do through the instrumentality of another. Such types of agents are rare in practice and, when they do exist, they are appointed by extensive powers of attorney. The only limits which are imposed upon the authority of a universal agent are those which the law imposes with regard to the legality of the objects and the capacity of the parties in relation to contracts in general. [7.80]

Creation of agency [7.90]

(a)

The relationship of principal and agent may be created in the following ways:

expressly (that is, by agreement) (i)

by deed;

(ii)

by writing;

(iii)

by word of mouth;

84

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

(b)

holding out or estoppel;

(c)

ratification; or

(d)

operation of law (i)

agency of necessity;

(ii)

agency arising by cohabitation.

[7.100]

Expressly ...............................................................................................................................................................................................

By deed

The appointment of an agent by deed (that is, instrument under seal) is necessary where the agent is required to execute any instrument under seal on behalf of their principal, in which case the document creating the power is termed a power of attorney. 1 A power of attorney is often given where a principal is going abroad and desires to leave another in charge of their affairs. [7.100]

By writing

An agent is often appointed in writing. In some cases the appointment is required by statute to be in writing. For example, in most States agents employed to sell or buy land and agents employed to sell or buy businesses cannot sue for remuneration, that is, commission, unless the appointment of the agent is in writing: see further, [7.440]. [7.110]

By word of mouth

A verbal offer followed by acceptance in writing or verbally is sufficient to conclude a contract of agency for most purposes other than those mentioned above. In practice, it is usually desirable that the appointment of an agent be in writing. [7.120]

Holding out or estoppel ...............................................................................................................................................................................................

The relationship of principal and agent may arise between two persons by virtue of one, by words or conduct “holding out” that the other is their agent or permitting the latter to do so. That is, where P, either by words or conduct, leads others to believe that A is P's agent, then P will not be allowed to subsequently deny the authority of A to act as P's agent where a third person has entered into an agreement with [7.130]

1

Powers of attorney to enable attorneys to deal with land under the Torrens system of registration in force in the various States require registration or deposit of copy. See Transfer of Land Act 1958 (Vic), s 94; Real Property Act 1886 (SA), s 156; Transfer of Land Act 1893 (WA), ss 143, 144. The corresponding provision in the Real Property Act 1900 (NSW), s 88 was repealed by the Real Property (Amendment) Act 1970 (NSW), s 13. As to dealings with land under the general law by attorneys, see Instruments Act 1958 (Vic), Pt XI; Land Title Act 1994 (Qld), ss 132 – 135; Registration of Deeds Act 1935 (SA), s 35; Property Law Act 1969 (WA), s 85; Powers of Attorney Act 2000 (Tas), requiring registration of powers to validate such dealings.

[7.140]

CHAPTER

7

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85

A on the faith of the representation that A was the agent of P: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. The question whether one person has led third parties to believe that another person is their agent is a question of fact to be decided upon the circumstances of each particular case: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72; Derham v Amev Life Assurance Co Ltd (1981) 56 FLR 34. Ratification ...............................................................................................................................................................................................

The relationship of agency may also arise as a result of “ratification”. Where one person acts on behalf of another, without having authority to do the particular act, the person on whose behalf the act is done may, by “ratifying” it, render the act as valid and effectual as if it had been done by their duly authorised agent. This may arise where an agent has exceeded their authority. For example, where an estate agent enters into a contract for a lease for a term longer than the principal has stipulated, the principal may adopt the transaction and thus bind themselves to the unauthorised act of the agent. In order that the ratification may be effectual, the following rules should be observed: [7.140]

1.

The acts must have been done as agent for and on behalf of the supposed principal: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68. For the legal position where an agent does not disclose to the third party that he or she is acting as an agent, see [7.550].

2.

The ratification may only be by a principal who was in existence at the time of the making of the contract. However, s 131(1) of the Corporations Act 2001 (Cth) provides that where a nonexistent company purports to contract and the company is within a reasonable time subsequently formed, the company may then ratify the contract.

3.

The principal must have the capacity to make the contract both at the date of the contract and at the date of ratification.

4.

Ratification must be of the whole contract. A principal cannot ratify that which is beneficial and reject the remainder: Cox v Mosman [1909] QSR 45.

5.

Ratification must be with full knowledge of what has been done so that the inference may properly be drawn that the principal intended to take upon themselves the responsibility for such acts: Marsh v Joseph [1897] 1 Ch 213. Where the rules set out above are satisfied, ratification operates retrospectively to validate a previously unauthorised act. The position is the same as if the agent had been vested with authority at the outset.

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.150]

Operation of law ...............................................................................................................................................................................................

An agency can arise by operation of law, that is, irrespective of assent or intention, in two main situations; namely, in cases of: [7.150]

(a)

necessity; and

(b)

arising out of cohabitation.

Agency of necessity

The common law recognises that an emergency situation may occur which allows one person to bind another without the authority of that other. In such a case an agency of necessity arises, not through any contract or agency agreement but from the relationship of the parties in the particular case. Four factors are essential to establish such an agency of necessity: [7.160]

1.

A person must have been entrusted with another's property.

2.

An immediate expense must be required for the preservation of the property, or there must be some commercial necessity for the action, that is, there must be an emergency.

3.

It must be commercially impossible or extraordinarily difficult to communicate with the owner of the property: Sachs v Miklos [1948] 2 KB 23.

4.

The agent must act bona fide in the interest of the principal.

Great Northern Railway Co v Swaffield (1874) LR 9 Exch 132 [7.170] The plaintiff railway company agreed to deliver the defendant’s horse to a particular railway station. However, on arrival at the station at night there was no-one to take possession of the horse on the defendant’s behalf. Accordingly, the plaintiff’s stationmaster sent the horse to a nearby livery stable. Subsequently, the plaintiff paid the stablekeeper his charges. It was held that the plaintiff had acted reasonably in placing the horse in the livery stable and was entitled to recover from the defendant the expense it had incurred in doing so.

Another example of an agency of necessity is where the master of a ship is compelled to pledge (hypothecate) the ship in order to effect essential repairs to preserve the ship, or to sell damaged cargo which would be ruined if there was further delay. On the other hand, the fact that property (for example, a parked car) may be causing a person inconvenience does not mean that such an emergency has arisen which compels its disposal: Munro v Willmott [1949] 1 KB 295. [7.180]

Agency arising by cohabitation

In the case of a married woman cohabitating with her husband, and even in the case of an unmarried woman cohabitating with a man, the law presumes that she has his authority to pledge his credit for necessaries in all domestic matters ordinarily entrusted to a wife. It is possible for the man to rebut the presumption of such authority in various [7.190]

[7.210]

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ways, for example, by showing that he had expressly warned the tradesman not to supply his wife or de facto wife, that he had expressly forbidden her to pledge his credit or that he had provided her with a sufficient allowance to pay for necessaries: Debenham v Mellon (1880) 5 QBD 394. The common law also recognised that a wife left without adequate means of support by her husband, for example in the case of desertion, had the authority to pledge the husband's credit for goods that she reasonably required for her maintenance. In New South Wales, South Australia, the Australian Capital Territory and the Northern Territory the common law doctrine enabling a wife to pledge her husband's credit has been abolished. 2

Nature and scope of an agent’s authority The principal will only be bound by those acts of the agent which fall within the scope of the agent's authority. The principal will not be affected by what the agent does in excess of her or his authority, unless the principal subsequently ratifies the unauthorised act of the agent. Furthermore, if the agent acts outside their authority, the agent may be liable to the principal for breach of the contract of agency or to third parties for breach of implied warranty of authority. The authority of an agent may be: [7.200]

(a)

actual authority; or

(b)

apparent or ostensible authority.

Actual authority ...............................................................................................................................................................................................

The general nature and effect of the actual authority of an agent was explained by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502-503 as follows: [7.210]

An “actual” authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the “actual” authority, it does create contractual rights and liabilities between the principal and the contractor.

The actual authority of an agent can be express or implied. That is to say, the actual authority of an agent is either: 2

In New South Wales, the Married Persons (Equality of Status) Act 1996 (NSW), s 7 provides: “A married person does not, by reason only of the person’s status as a spouse, have authority to pledge the credit of the other spouse for necessaries or to act as agent for the other spouse for the purchase of necessaries.” See similarly, Law of Property Act 1936 (SA), s 104; Married Persons’ Property Act 1986 (ACT), s 5; Married Persons (Equality of Status) Act 1989 (NT), s 5.

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

(a)

actual express authority; or

(b)

actual implied authority.

[7.220]

Actual express authority

The express authority of an agent is the authority the principal has expressly given the agent in words or writing, for example where the principal gives the agent specific instructions to enter into a contract on the principal's behalf to purchase a particular piece of land at a stipulated price, or to sell a specific item. In other words, the agent's authority may be specifically created and limited by the terms of the agreement which gives rise to the agency relationship. [7.220]

Actual implied authority

In addition to the express authority contained in the agency agreement, the agent may have a further implied authority to do whatever is necessarily incidental to carrying out the principal's express instructions. For example, where an agent is expressly authorised to buy certain shares, the agent will also have implied authority to do everything in the usual course of business to complete the transaction. Furthermore, where a person employs a particular type of agent to carry out some act on behalf of the principal, the agent will have such implied authority as agents of that class normally have, that is, the agent will have the usual authority which agents of that particular profession or calling normally have to carry out their functions. For example, when the board of directors of a company appoints one of their number to be managing director: “They thereby impliedly authorise him to do all such things as fall within the usual scope of that office”: Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583. [7.230]

Hopcroft v Edmunds (2013) 116 SASR 191 at [55] [7.231] The respondent’s accountant sent a shareholders agreement to the appellants for signature. The respondents did not sign the agreement. The appellants argued that the accountant had authority to make an offer on the respondent’s behalf by sending the contract for their signature. It was held that the accountant did not have actual authority to bind the respondents. The respondents had told their accountant to “do whatever [is] necessary”: at [33]. The court held that such an instruction related only to ascertaining the necessary actions and preparing the necessary documents, not binding the respondents: at [47]. The expectation that the respondents would need to have signed the agreement in order to be bound could only have been displaced by clear evidence of the accountant’s authority to bind them.

[7.235] Implied authority is regarded as an aspect of an agent's actual or real authority since such implications of implied authority are made on the basis that the principal has consented to the agent having authority to act in such a manner. If there is evidence that the principal has not so consented, for example where the board of directors specifically limited the managing director's authority in some respect, then to the extent of such

[7.250]

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limitation an implication of implied authority cannot be made. However, it may well be that in such a case the third party can rely on the agent's apparent authority to enter into the particular transaction. Apparent (or ostensible) authority ...............................................................................................................................................................................................

Apparent (also known as ostensible) authority is “the authority of an agent as it appears to others”: Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583 per Lord Denning MR. Thus, where a principal represents either by words or conduct that an agent has authority to contract on the principal's behalf, the principal will be bound by those acts of the agent which fall within that represented authority. The agent in such a case is said to act within the scope of their apparent or ostensible authority. This principle applies whether or not the agent has any actual authority, or such actual authority has been limited. The principal may specifically represent to the third party that a person has authority to act on the principal's behalf, for example where the principal tells the third party that a particular person has been authorised to negotiate for the purchase of goods on behalf of the principal. More often, however, the representation which creates the apparent or ostensible authority is representation by conduct, for example by the principal permitting a person to act in the management or conduct of the principal's business so that the third party is led to believe that such person has authority to contract on behalf of the principal. The courts have taken the view that if a principal allows or acquiesces in an agent occupying a particular position, for example where the board of directors of a company permits one of the directors to act as a managing director without having been formally appointed, the agent will have apparent or ostensible authority to deal with third parties in a manner consistent with the functions and duties normally falling within the usual authority of the holder of such position. The leading case on this point is Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480: [7.240]

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 [7.250] K and H formed the defendant company to acquire and develop certain land. The board of directors comprised K, H and a nominee of each. The development of the land was left to K who, with the knowledge of the board of directors, acted as managing director although he had never been formally appointed to the position. K employed the plaintiff firm of architects who later sued the company for payment of their fees for work they had done. It was held by the Court of Appeal that the defendant company was liable for the plaintiffs’ fees. Thus, the contract of employment entered into by K with the plaintiffs fell within the scope of K’s apparent or ostensible authority. It was the kind of contract which was within the usual authority of a managing director to enter into on behalf of a company.

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[7.260]

Where a person is appointed to a particular position such person will have as part of their apparent authority all the usual authority of a person occupying that position. For example, it was held that a company secretary has apparent authority to hire vehicles and the company is bound to pay the cost of such hire even where the vehicles are used for the secretary's own purposes: Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711. A principal is bound by those acts of an agent which fall within the scope of the agent's apparent authority even though the agent acted outside the terms of their actual authority. Where an agent occupies a particular office, or exercises a particular profession or calling the agent, by virtue of the position he or she holds, may have both implied actual authority and apparent authority to do a particular act binding on the principal. That is to say, although actual authority and apparent authority are independent of each other, in certain circumstances they may co-exist and coincide in the same person. In such a case, the agent's ostensible authority is likely to be wider than their actual authority (whether express or implied) which may be limited by the terms of the agreement between the agent and the principal: Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583 per Lord Denning MR. An employer may hold out that an employee has authority if the employer/principal permits the employee to act in a particular way, for example in signing documents without taking appropriate precautions: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451. In the latter case, the High Court said that: “A kind of representation that often arises in business dealings is one which flows from equipping an officer of a company with a certain title, status and facilities … The holding out might result from permitting a person to act in a certain manner without taking proper safeguards against misrepresentation”: at [38]. In those circumstances it may be unjust to permit the employer to depart from a reasonable assumption based upon that misrepresentation: at [44]. The basis of apparent (or ostensible) authority is that there has been a representation of authority of the agent on which the third party relied. However, the representation of authority can only be made by someone who has authority to make the representation. For example, in the case of a company, the representation must have been made by a person or persons who had actual authority (not only apparent or ostensible authority) to manage the business of the company: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72. It has been held that the apparent authority of a solicitor includes authority to compromise a dispute on behalf of their client. Accordingly, the client will generally be bound by a compromise entered into by the solicitor with a third party, notwithstanding that the solicitor's actual authority to compromise on behalf of the client had been withdrawn: Waugh v HB Clifford & Sons Ltd [1982] 1 Ch 374. Even where the solicitor mistakenly exceeds the client's instructions as to the amount of a proposed settlement the client will generally be bound, unless it would be unconscionable for the party seeking to [7.260]

[7.280]

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enforce the compromise to rely on it: Buseska v Sergio (1990) 102 FLR 157. Where the plaintiff's solicitor exchanged identical signed contracts that included terms to which the plaintiff had not agreed at the time of signature, it was held that the plaintiff's solicitor possessed ostensible authority to bind the plaintiff: Zhang v VP302 SPV (2009) 223 FLR 213 at [34], [51]. A third party will generally rely on the apparent or ostensible authority of an agent when contending that the principal is bound by the acts of the agent, since: (a)

the third party will usually be unaware of the terms of the agreement between the principal and the agent, and therefore be unaware of the extent of the agent's actual authority; and

(b)

the agent's apparent or ostensible authority will be unaffected by limitations on the agent's actual authority (whether express or implied) of which the third party was unaware. In other words, it is usually easier for the third party to establish that the agent acted within the scope of their apparent authority, rather than the agent's actual authority.

Duties of an agent [7.270] Every agent owes certain duties to their principal which vary in degree according to the nature of the agency or according to the express terms of the contract of agency. These duties include the:

(a)

duty to follow the principal's instructions;

(b)

duty to act in person;

(c)

duty to act in good faith;

(d)

duty to make full disclosure of any personal interest;

(e)

duty not to make a secret profit;

(f)

duty to exercise reasonable care and skill; and

(g) several other duties. Each of these duties will be examined in turn. Duty to follow principal’s instructions ...............................................................................................................................................................................................

The primary duty of every agent is to follow the principal's instructions, written or verbal. An agent must comply with the provisions of the contract of agency before he or she will be entitled to remuneration. Failure to comply with the principal's instructions, except where they are illegal, will render the agent liable for the loss suffered by the principal as a result of the breach. [7.280]

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[7.290]

Duty to act in person ...............................................................................................................................................................................................

Every agent must act in person and, apart from the express or implied authority of the principal, or from particular usage, an agent has no authority to delegate their duties as agent to another. This is expressed in law by the maxim “Delegatus non potest delegare”, that is, a person to whom authority has been given cannot delegate that authority to another. Owing to the exigencies of business, this rule is relaxed in order to enable the agent in certain cases to delegate their powers and appoint a sub-agent. The authority of an agent to delegate their duties may be implied in the following situations: [7.290]

1.

Where by the usage of a trade an agent usually acts through other agents; for example a country solicitor may employ a city agent whose acts will bind the client. However, where the principal forbids the employment of a sub-agent, the agent has no authority to delegate.

2.

Where the duties to be performed by the agent are purely ministerial, and do not involve the exercise of any discretion or skill on the part of the agent in person; for example, collecting rents.

3.

Where from the nature of the transaction it is clear that the parties intended, or may be reasonably presumed to have known, that it might be necessary to act through a sub-agent.

4.

Where unforeseen circumstances arise which necessitate the agent delegating. The necessity must be urgent and the sub-agent must be appointed with discretion.

Duty to act in good faith ...............................................................................................................................................................................................

An agent occupies what is called a fiduciary position. A fiduciary relationship exists between one person and another where the former is bound to exercise rights and powers in good faith for the latter. An agent's duty to make full disclosure of any personal interest and not to make a secret profit, discussed separately below, are really aspects of the agent's basic duty to act in good faith. The agent is under a duty in all cases to act in the interests of the principal and must not allow their own interests to conflict with those of the principal. [7.300]

Lintrose Nominees Pty Ltd v King [1995] 1 VR 574 at 576 [7.310] The respondent purchaser had bought property from the appellant vendor on the advice of an agent to whom the purchaser had paid a fee for the advice. Unknown to the purchaser, the agent had been retained by the vendor to market the property. The Supreme Court of Victoria, Appeal Division, held that the purchaser was entitled to rescind the contract of sale with the vendor. “[T]he vendor could not properly sell its property through its agent, knowing that the agent was retained to advise the purchaser on the purchase, without knowing also that the dual allegiance of the agent was disclosed to the purchaser”.

[7.340]

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The proper course to be adopted by every agent upon entering into an agreement to act on behalf of another is to consider whether he or she has any personal interest in the matter which might conflict with the duty owed to the intended principal and, if so, he or she should decline to act as agent. [7.320]

Duty to make full disclosure of any personal interest ...............................................................................................................................................................................................

An agent must disclose to the principal all the material circumstances of which they are aware which might influence the principal in entering into any negotiation. If the agent fails to make such disclosure he or she is not entitled to commission: Dargusch v Sherley Investments Pty Ltd [1970] Qd R 338. Any profit received by the agent resulting from non-disclosure is recoverable by the principal on learning the true facts: Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815. Should any question arise as to the validity of any transaction on this score, the onus lies upon the agent to prove that they acted bona fide and also that they made full disclosure of all material facts. After the termination of their employment, an agent may not use information acquired in the course of the agency in a manner prejudicial to the interests of the principal: Robb v Green [1895] 2 QB 315. [7.330]

Duty not to make a secret profit ...............................................................................................................................................................................................

A fundamental duty of an agent is not to use their position to make a gain for themselves without the knowledge and assent of the principal. In the case of Parker v McKenna (1874) 10 Ch App 96, James LJ said: [7.340]

No agent in the course of his agency, in the matters of his agency can be allowed to make any profit without the knowledge of his principal; … that rule is an inflexible rule and must be applied inexorably by this court, which is not entitled, in my judgment, to receive evidence, or suggestion or argument as to whether the principal did or did not suffer any injury in fact, by reason of the dealing of the agent.

Directors of companies are agents of their companies and are under a duty not to make a secret profit: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134. Directors are also subject to statutory provisions which are in addition to their duties under the general law. The Corporations Act 2001 (Cth) provides that a director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest: s 191(1). A person who obtains information because they are, or have been, a director must not improperly use the information to gain an advantage for themselves or someone else, or to cause detriment to the corporation: s 183(1). Should the agent receive a secret commission or profit the principal may recover it as well as dismiss the agent without notice. Where the agent desires to act for both vendor and purchaser and to obtain commission from both, the agent must make full disclosure

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[7.350]

to each party of her or his intention to act for and receive payment from the other, and must obtain the assent of each party for so acting: Fullwood v Hurley [1928] 1 KB 498. This general principle applies unless a special usage or custom which is notorious, certain and reasonable is proved to the contrary. Thus, it has been held that a firm of stock and sharebrokers were entitled as a matter of custom, which had been established to be sufficiently notorious and certain and which was reasonable in the circumstances of the case, to “marry” or cross certain selling and buying orders for shares without express reference to the respective clients. Where such custom is established, it would seem that the sharebroker is entitled to commission from both the seller and the buyer of the shares: Jones v Canavan [1972] 2 NSWLR 236. Duty to exercise reasonable care and skill ...............................................................................................................................................................................................

An agent who is employed for remuneration is presumed to have and is bound to exercise such skill, care and diligence in the performance of the undertaking as is usual or necessary for the ordinary or proper conduct of the profession or business in which the agent is employed, or is reasonably necessary for the proper performance of the duties. If the agent fails to exercise the requisite care and skill in carrying out the terms of the contract of agency, the agent will be liable to the principal for the loss sustained by the latter as a result of the agent's breach of duty. [7.350]

Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984] WAR 365 [7.360] An insurance broker was instructed by a client to obtain unqualified insurance cover against damage caused by storm and flood. Unknown to the client, the broker obtained insurance cover excluding flood caused by the sea. Subsequently the client suffered loss as a result of flooding by the sea in a cyclone but the insurance company avoided liability by virtue of the exclusion clause. The broker was held liable because of his failure to exercise reasonable care and skill in effecting the insurance.

It has also been held that a real estate agent owes the vendor, by whom the agent is employed to sell property, the duty to inform the vendor as soon as practicable that the purchaser has avoided the contract of sale. If the agent fails to do so, he or she will be liable to the vendor for the loss the vendor suffers as a result of the delay: Havas v Cornish & Co Pty Ltd [1985] Qd R 353. So far as directors of companies are concerned, their duty is the subject of statutory provisions, without prejudice to any duty which they might have under the general law. The Corporations Act 2001 (Cth) provides that a director must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation's circumstances; and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer: s 180(1). The Corporations Act 2001 further [7.370]

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[7.400]

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provides that a director or other officer of a corporation must exercise their powers and discharge their duties in good faith in the best interests of the corporation and for a proper purpose: s 181(1). A person who acts as agent gratuitously on behalf of another is not presumed to have any special knowledge of the subject matter of the transaction but is bound to exercise such knowledge and skill as he or she does possess in the best interests of the principal and must show as much care and diligence in performing the undertaking as he or she would in conducting their own affairs. A gratuitous agent is not bound to carry out the terms of an undertaking into which he or she has entered gratuitously. However once such person commences to fulfil the office of agent they will be liable, in the event of performing their duties negligently, for any damage or loss the principal thereby sustains. Further duties ............................................................................................................................................................................................... [7.380]

Further duties of the agent are:

(a)

to take such care in keeping the property (which includes money) of the principal as a reasonably prudent person would take in caring for their own property;

(b)

to keep all moneys and property of the principal separate from their own;

(c)

to keep separate accounts of all dealings on behalf of the principal, and to have such accounts ready for inspection by the principal, and, subject to the agent's right of lien, to hand over to the principal, if so required, all moneys, papers and documents relating to the principal's affairs; and

(d)

to preserve confidentiality in all matters coming to their knowledge whilst acting as agent: Weld-Blundell v Stephens [1920] AC 956.

Rights of agents Right to remuneration ...............................................................................................................................................................................................

The amount of remuneration for an agent depends upon the agreement made between the principal and the agent. In commercial transactions remuneration often takes the form of a percentage commission on the value of the transaction. In order to determine the agent's right to commission, the terms and circumstances of the appointment must be examined as the agent may be entitled to remuneration only if he or she completes the sale, or again, in special cases, commission may be payable if the agent simply brings the parties together. Further, there may exist a time limit for the completion of the contract or the remuneration may be of a continuous nature payable on all further business arising from the same source. [7.390]

Agent must be effective cause of sale

The transaction in relation to which the agent claims remuneration must not only come within the scope of the agent's authority but the transaction must have [7.400]

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.410]

resulted from the services he or she has rendered. The agent must, in effect, have been the means whereby the two contracting parties were brought together and entered into a legally binding contract: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108. That is to say, the agent must have been the effective cause of the sale to be entitled to remuneration. This principle is illustrated by the following cases: L J Hooker Ltd v W J Adams Estate Pty Ltd (1977) 138 CLR 52 [7.410] The respondent company was the owner of a property in Sydney and engaged the appellant real estate agent to find a purchaser for it. The appellant introduced the property to Company A which made several unsuccessful offers to purchase it. Meanwhile, the respondent was negotiating for the sale of the property to Company B which the appellant had not introduced. On Companies A and B learning of each other’s interest in the property, they entered into a joint venture agreement for the purpose, inter alia, of avoiding the risk of forcing up the price by competing bids. The joint venture agreement provided that each company would continue to negotiate upon agreed terms and conditions with the respondent, and that upon one of the companies becoming the purchaser, that party would complete the purchase and carry out the redevelopment of the site with the other on an equal basis. Neither the appellant estate agent nor the respondent owner were then aware of the joint venture agreement. The property was eventually sold by the respondent owner to Company B. The appellant then sued the respondent to recover commission. It was held by a majority of the High Court that the appellant estate agent was not entitled to recover any commission as it had not been an effective cause of the sale to Company B, nor of any sale of any interest in the property to Company A.

Rasmussen & Russo Pty Ltd v Gaviglio [1982] Qd R 571 [7.420] The vendor of land agreed to pay commission to a real estate agent, A, “if you find a purchaser who enters into a valid and enforceable contract of sale confirmed by me/us for such property and who completes such sale”. A introduced a purchaser who signed a contract for the purchase of the property subject to obtaining approval for bank finance by a certain date, otherwise the transaction would be void. The purchaser was unable to obtain bank finance by the date stipulated and, accordingly, the contract of sale was rescinded. Shortly afterwards, the purchaser signed another contract for the purchase of the property through a second real estate agent, B, who was able to arrange finance for the purchaser from a finance organisation which generally only did business through B. The first agent, A, claimed commission from the vendor. It was held that A was not entitled to commission simply because of the purchaser’s completion of the contract of sale through B. Thus, there had been a break in the necessary causal connection between A’s actions (in introducing a purchaser who had signed a contract for the purchase of the property) and the actual sale which eventually took place through B. The sale could not have occurred had it not been for the engagement of B who had been able to arrange the necessary finance. Accordingly, A was not the effective cause of the sale and therefore was not entitled to the commission claimed.

Estate agent’s entitlement to commission

There is a considerable body of reported case law concerning disputes between a vendor and an estate agent employed to sell the vendor's property on whether the estate [7.430]

[7.440]

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agent had done sufficient within the precise terms of the agency agreement to be entitled to commission. Each case depends on the construction of the terms of the agency contract between the vendor and the estate agent and the particular circumstances of the case. The general principles were stated in Midgley Estates Ltd v Hand [1952] 2 QB 432 at 435 as follows: The question depends on the construction of each particular contract, but prima facie the intention of the parties to a transaction of this type is likely to be that the commission stipulated for should only be payable in the event of an actual sale resulting. … That is, broadly speaking, the intention which, as a matter of probability, the court should be disposed to impute to the parties. … this does not mean that the contract, if its terms are clear, should not have effect in accordance with those terms even if they do involve the result that the agent's commission is earned and becomes payable although the sale in respect of which it is claimed, for some reason or another, turns out to be abortive.

It has been held that where the agency agreement provides for the payment of commission on the estate agent “finding a purchaser” or “introducing a person who shall become a purchaser”, the agent is not entitled to commission unless he or she introduces a purchaser who, at the vendor's price and on the vendor's terms: (i) is ready and willing to purchase; (ii) is able to purchase; and (iii) in fact purchases by entering into a binding contract to purchase: Gerlach v Pearson [1950] VLR 321; Turnbull v Wightman (1945) 45 SR (NSW) 592. Where the contract of agency provides on its proper construction for the payment of commission on the occurrence of some other event, for example on a person being “introduced to the property” either by the agent or the vendor and “as a result” of such introduction the property is sold, the agent will be entitled to commission on the occurrence of the specified event: Max Christmas Real Estate v Schumann Marine Pty Ltd [1987] 1 Qd R 325. If the contract fails to stipulate the event on which the agent's right to commission arises, commission becomes payable only on completion of the sale by the purchaser (unless the failure to complete is the vendor's fault) and not at the time of the purchaser signing the contract of sale. Accordingly, if in such a case the purchaser fails to complete after entering into the contract of sale, the vendor is not liable to pay commission to the agent: RJ Mabarrack Pty Ltd v King (1971) 1 SASR 313. Should the vendor refuse to complete the sale, the agent will still be entitled to her or his commission: Christie Owen & Davies Ltd v Rapacioli [1974] QB 781. Statutory restrictions on right to remuneration

In some cases the agent is debarred by statute from suing for commission unless the agent's engagement or appointment to act is in writing signed by the person to be charged. In Victoria and Western Australia this applies to agents employed to sell or buy land and to agents employed to sell or buy businesses, in South Australia to land agents, and in Tasmania to real estate agents and auctioneers, and in Queensland to resident letting [7.440]

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[7.450]

agents, property agents, chattel auctioneers, motor dealers, and debt collectors. 3 The writing need not make “specific reference to the very transaction out of which the claim for commission arises”, but need only be “in respect of such transaction”. This ensures that agents are able to rely on general appointments, rather than having to seek a new appointment with each new contract: Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 at [155]. In New South Wales, it is provided that a “licensee” under the Property, Stock and Business Agents Act 2002 (NSW) is not entitled to any commission unless the agreement was in writing and signed by the licensee and the person for whom the services were performed: s 52(1). A copy of the agreement must have been served by the licensee on the person to be charged within 48 hours after signature by that person: s 52(2). Furthermore, a licensee cannot commence an action for the recovery of remuneration until the expiration of 28 days after a written statement of claim has been served on the person to be charged: s 36. 4 Service of a statutory demand does not constitute service of a statement of claim: Investmentsource Corporation Pty Ltd v Knox Street Apartments Pty Ltd (2002) 56 NSWLR 27 at [48]-[49]. Right to indemnity and reimbursement ...............................................................................................................................................................................................

Every agent is entitled to be indemnified against all losses and liabilities sustained, and to be reimbursed for all expenses lawfully incurred in the carrying out of the principal's instructions. Attention is drawn to the word “lawfully” for where the agent has acted outside the scope of her or his authority, or has engaged in an unlawful act, or suffered loss through their own negligence or default, the agent has no claim to be reimbursed or indemnified. [7.450]

Right of lien ...............................................................................................................................................................................................

An agent has what is called a particular lien on such property of the principal as comes into the agent's hands for the due payment of all expenses and remuneration lawfully incurred by the agent in transacting the principal's affairs. However, the transactions must relate to the property over which the agent desires to exercise a lien. The agent may have a general lien extending to all claims arising out of the agency either by express contract or by usage. [7.460]

3

Estate Agents Act 1980 (Vic), ss 49A, 50; Motor Dealers and Chattel Auctioneers Act 2014 (Qld), ss 88, 132; Property Occupations Act 2014 (Qld), s 89; Debt Collectors (Field Agents and Collection Agents) Act 2014 (Qld), s 26; Land Agents Act 1994 (SA), s 6(2); Real Estate and Business Agents Act 1978 (WA), s 60; Property Agents and Land Transactions Act 2005 (Tas), s 18.

4

Property, Stock and Business Agents Act 2002 (NSW), ss 36, 52.

CHAPTER

[7.500]

7

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99

Liabilities of agents [7.470]

An agent may incur liability:

(a)

to the principal; and

(b)

to third parties.

Liability of agent to principal ...............................................................................................................................................................................................

The general position is that the agent is an intermediary who is employed to negotiate some transaction on behalf of one person with another in order to effect the completion of a contract between them. Generally the agent incurs no liability to the principal in regard to the contract. However, where the agent disobeys the principal's instructions, the agent will be liable for the loss suffered by the principal as a result of the breach of the contract of agency. Furthermore, where the agent is negligent in carrying out their duties, the agent will be liable to make good the damage suffered by the principal as a consequence of the agent's negligence: Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984] WAR 365. Any confidential knowledge acquired by an agent during the course of the agency should not be used by the agent or made available to third parties, and should the agent do so, he or she may be liable in an action for damages. [7.480]

Liability of agent to third parties ...............................................................................................................................................................................................

The agent's liability towards third parties depends upon the agent's method of contracting and in particular as to whether:

[7.490]

1.

The agent discloses the name of the principal.

2.

The agent does not disclose the name of the principal but does disclose the existence of the principal.

3.

The agent does not disclose the existence of any agency, that is, where the agent acts as if he or she were a principal.

Name of principal disclosed

Where the agent discloses the name of the principal, the contract is deemed to be that of the principal, and the agent is not liable on the contract except: [7.500]

(a)

where the agent contracts outside the scope of their actual or apparent authority, in which case the agent will be liable to the third party in damages for breach of warranty of authority (discussed at [7.580]);

(b)

the agent agrees to be liable;

(c)

usage or custom makes the agent liable;

(d)

the agent contracts by deed in their own name; or

(e)

where the principal is in fact non-existent.

100

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.510]

In terms of the latter, where a person professes to contract on behalf of a principal and the principal is a fictitious or non-existent person, the person so professing to contract is presumed to have intended to contract personally, unless a contrary intention is proved; and where the contract is in writing, such contrary intention cannot be proved by oral evidence, but must appear from the terms of the contract or from the surrounding circumstances. The words “professes to contract on behalf of a principal” are the critical ones, for if the person were to sign a document, not as agent, but, in effect, as the principal, the rule would have no operation. The distinction is shown by the following cases: Kelner v Baxter (1866) LR 2 CP 174 [7.510] In Kelner v Baxter (1866) LR 2 CP 174 the promoters of a company entered into a contract to buy goods, the contract being signed by them “on behalf of the proposed Gravesend Royal Alexandra Hotel Company”. It was held that, as the contract was not contingent upon the company being formed, the only persons who could be liable were the promoters.

Black v Smallwood (1966) 117 CLR 52 [7.520] By contrast, in Black v Smallwood (1966) 117 CLR 52 a contract for the sale of land was signed “Western Suburbs Holdings Pty Limited, Robert Smallwood, J Cooper, Directors”. It was held that the two persons who purported to sign the contract as directors put their signatures on the contract not as agents but as part of the act of authenticating the signature for “Western Suburbs Holdings Pty Limited”. This being so, they did not purport or profess to act as agents and were accordingly not liable.

The fundamental question in such cases must be what the parties intended, or must be fairly understood to have intended; thus, where the intention is that the contract be made by the company, and the person who signs “For and on behalf of” the company does not purport to contract as agent, he or she will not be personally liable on the contract: Miller Associates (Australia) Pty Ltd v Bennington Pty Ltd [1975] 2 NSWLR 506. Under the Corporations Act 2001 (Cth), a company comes into existence upon registration: s 119. If a person purports to enter into a contract on behalf of a company before it is registered, the company becomes bound by the contract if the company is registered and ratifies the contract within the time agreed to by the parties to the contract; or if there is no agreed time, within a reasonable time after the contract is entered into: s 131(1). The person is liable to pay damages to the other party to the pre-registration contract if the company is not registered, or the company is registered but does not ratify the contract within the time agreed to by the parties; or if there is no agreed time, within a reasonable time after the contract is entered into: s 131(2). The amount of damages is the amount the company would be liable to pay to the party if the company had ratified the [7.530]

CHAPTER

[7.550]

7

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101

contract and then did not perform it at all. The court may do anything that it considers appropriate in the circumstances, including ordering the company to do one or more of the following: (a)

pay all or part of the damages that the person is liable to pay;

(b)

transfer property that the company received because of the contract to a party to the contract; or

(c)

pay an amount to a party to the contract: s 131(3).

Existence but not name of principal disclosed

The general rule is that where the agent discloses the fact that a principal exists but not the name of the principal, the agent's liability, provided he or she contracts as agent, is similar to the cases where the name of the principal is disclosed. If the third party contracts knowing there is a principal and yet does not ascertain the principal's name, the third party cannot sue the agent: Marsh & McLennan Pty Ltd v Stanyers Transport Pty Ltd [1994] 2 VR 232 at 241. In other words, the agent's liability is the same, provided he or she contracts as agent, whether or not the principal's name is disclosed. This principle may alter where the custom of trade makes the agent personally liable. However, the particular circumstances may disclose an intention that the agent alone is a party to the contract. Thus, where the principals would be drawn from a known class (the agent's clients) but the agent had not selected any particular client at the time the contract was made, the agent was held to have contracted as principal: Carminco Gold & Resources Ltd v Findlay & Co Stokbrokers (Underwriters) Pty Ltd (2007) 243 ALR 472 at [25]. [7.540]

Existence of principal not disclosed

Sometimes an agent does not disclose to the third party that he or she is acting as an agent. Accordingly, the third party believes that the person they have been negotiating with is the other party to the contract, whereas in reality such person is acting on behalf of an undisclosed principal. In such a case either the undisclosed principal or the agent can sue or be sued on the contract, unless the contract between the agent and the third party expressly or impliedly excludes the rights of persons other than the agent to be a party to the contract: Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 149-150. However, the legal rights and obligations of the undisclosed principal only arise where the agent was in fact her or his agent at the time of the transaction, that is, where the agent had actual authority from the principal to enter into the contract. An undisclosed principal cannot purport to ratify as the act of their agent a transaction entered into without their authority by one who purports at the time to be a principal and does not disclose that he or she is an agent: Keighley, Maxsted & Co v Durant [1901] AC 240. While some contracts by their nature cannot be entered into by an agent for an undisclosed principal, a rental agreement was able to be entered into by a photocopier company as agent on behalf of an undisclosed principal, in this case a finance company: White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125 at [86]-[87]. [7.550]

102

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.560]

The general principles applying to undisclosed principals were summarised in Siu Yin Kwan (Administratrix of the Estate of Chan Ying Lung, Decd) v Eastern Insurance Co Ltd [1994] 2 AC 199 at 207 per Lord Lloyd as follows: “(1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal's behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.”

While at the outset it is open to the third party to hold either the agent or the undisclosed principal liable on the contract, once the third party has elected to hold liable either the agent or the principal, the third party is then irrevocably bound by the election and cannot afterwards charge the other on the contract. Where the third party sues and recovers judgment against the agent on the contract, the third party is conclusively deemed to have elected to hold the agent liable and cannot thereafter sue the undisclosed principal. Where the third party has not sued the agent to judgment the question whether the third party has so elected or not is a question of fact depending on the circumstances of the particular case; the mere fact that the third party has commenced an action against the agent is not of itself conclusive although it may be some evidence of an election. Clarkson, Booker Ltd v Andjel [1964] 2 QB 775 [7.560] The plaintiffs supplied to the defendant goods and services. The defendant did not disclose that he was not acting as a principal. Prior to the transaction, the plaintiffs had done business of a similar nature with the defendant on several occasions, always as a principal. Subsequently the plaintiffs were informed that the defendant had acted as agent for a company in the transaction. The plaintiffs’ solicitors wrote to both the defendant and the company, in each case threatening proceedings unless the amount due was forthcoming. Payment not having been made, the plaintiffs’ solicitors wrote to the company stating that they had been instructed to proceed to “obtain judgment” against it, and a writ was subsequently issued against the company. When the company went into liquidation, the plaintiffs did not proceed further against the company but issued a writ against the defendant. It was held that the institution of proceedings against the company did not amount, as a matter of law, to a binding election so as to bar proceedings against the defendant, although if the plaintiffs had obtained judgment against the company they could not thereafter have proceeded against the defendant.

The undisclosed principal may intervene and sue on the contract unless the contract is such as to be entirely inconsistent with agency. The undisclosed principal may be met with any right of set-off which the third party has acquired against the agent before the third party discovered the existence of the principal. [7.570]

[7.590]

CHAPTER

7

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103

Where an agent contracts in such a manner as to make themselves personally responsible, the agent will be liable whether the principal was or was not known at the time of the contract, for example where the agent signs a bill of exchange in their own name instead of on behalf of the principal. Breach of warranty of authority ...............................................................................................................................................................................................

So long as the agent does not exceed their authority the agent will not be personally liable to persons with whom he or she deals. It is a complete answer for the agent to show that he or she acted only as an agent as the other party well knew, and that everything they did was within the scope of their authority. Where an agent represents, either expressly or impliedly, that he or she has authority to enter into a particular transaction and a third party relies on that representation of authority, the agent is taken to warrant that such representation is true. If it is in fact untrue, the agent is liable in damages for breach of warranty of authority. The measure of damages is the actual loss sustained by the third party. It will be no defence that the agent acted innocently or in mistake as to the precise extent of the authority conferred upon her or him. A person who purports to act as an agent impliedly warrants that they have authority and is liable for breach of that warranty even though their authority has come to an end by reason of facts of which they have no knowledge or means of knowledge: Yonge v Toynbee [1910] 1 KB 215. However, the agent is not liable where the other party knew of the agent's lack of authority: Weigall & Co v Runciman & Co (1916) 85 LJKB 1187. [7.580]

Liability of principal and agent for misrepresentations ...............................................................................................................................................................................................

Where an agent is engaged to sell property, it will normally fall within the scope of the agent's ostensible authority to describe the nature and quality of the property the agent is selling on behalf of the principal. Accordingly, if the agent's representations are untrue, the vendor will be liable to the purchaser for the loss suffered by the purchaser as a result of relying on the agent's representations: Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ¶ATPR 40-873 at 49,445. Where the agent made a negligent misrepresentation which was relied on by the purchaser, the agent will be liable in damages to the purchaser for the loss suffered. For example, a real estate agent for the vendor of a business was held liable to the purchaser for negligent misrepresentations made by the agent as to earnings of the business: Roots v Oentory Pty Ltd (1983) 2 Qd R 745; cf Norris v Sibberas (1990) VR 161. A principal is vicariously liable for a tort committed by an agent where the agent has acted within the scope of their actual or apparent authority. The liability of the principal includes liability for the negligent misrepresentations of their agent. For example, the vendor of a building was held vicariously liable to the purchaser for damages because of the negligent misrepresentation made by the vendor's agent as to the “lettable” floor [7.590]

104

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.600]

space of the building: Thompson v Henderson & Partners Pty Ltd (1990) 58 SASR 548. In the latter case the agent was also held liable to the purchaser; furthermore, the vendor was entitled to an indemnity from the agent in respect of the vendor's liability to pay damages to the purchaser. The representations of an agent may also constitute, in an appropriate case, misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law 5 (formerly s 52 of the Commonwealth Trade Practices Act 1974 (Cth)): Aliotta v Broadmeadows Bus Service Pty Ltd [1988] ATPR 40-873 (see further, [14.40] (Turner)). Where an agent's representation to a third party comprises information provided to the agent by their principal, the agent will be entitled to an indemnity from the principal in the event of the agent being liable to the third party because the representation proves to have been untrue. In such a case, the agent would have the ordinary right of indemnity of an agent against a principal where the agent has acted within the scope of their authority. Liability of principal and agent for wrongful acts ...............................................................................................................................................................................................

An agent is liable for their tortious acts but the principal will also be liable for any tort committed by the agent where the agent has acted within the scope of their actual or apparent authority, whether the tort was committed for the benefit of the principal or of the agent. The liability of the principal includes liability for the negligence or negligent misrepresentations of their agent (see previous section). The principal will also be liable for the fraudulent conduct of their agent or employee where such was committed within the scope of the agent's apparent authority or the employee's course of employment. [7.600]

Royal Globe Life Assurance Co Ltd v Kovacevic (1979) 22 SASR 78 [7.610] An insurance agent persuaded K to enter into certain life assurance proposals. K paid the agent an initial premium and was given a receipt for the amount by the agent from a receipt book provided by the insurance company. Some months later, the agent again approached K and invited him to invest moneys on loan with the insurance company. The agent told K that a deposit of moneys with the company would return a higher rate of interest and give K the right to obtain from the company a loan on mortgage for the purchase of a house. K paid the agent $2,000 and was again given a receipt from the agent’s receipt book. The agent misappropriated the money and disappeared and K sued the insurance company for the $2,000. It was held that the agent had received the money from K in the course of his employment by the insurance company which was accordingly liable to K for the agent’s fraud.

Thus the principal may be liable in tort for damages if the agent is guilty of a wrong or deceit or fraudulent misrepresentation. The fraud may be the fraud of the principal in instructing the agent that a certain fact is true, whereas it is actually untrue; or [7.620]

5

The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)).

[7.680]

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7

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it may be the fraud of the agent in taking upon themselves to say that it is true whereas the agent knows that it is untrue. In either case the principal is liable. However, it is not permissible to “add together” the knowledge of the principal and that of the agent, where both are innocent, in an action for fraudulent misrepresentation. Armstrong v Strain [1952] 1 KB 232 [7.630] Skinner was a member of a firm of estate agents employed by the defendant to sell his bungalow. Skinner made a statement which was in fact untrue but which he believed to be true. The defendant vendor knew that such a statement was untrue but did not authorise Skinner to make the statement and did not know he was going to make it. It was held that the purchaser was unable to recover damages against the defendant for fraudulent misrepresentation since no fraudulent intention had been established on the part of either Skinner or the defendant.

A principal will not be liable for the fraud of an agent where the agent was not authorised to do the act; where the act was not within the class of acts that an agent in their position is usually authorised to do; and the principal has done nothing to represent that the agent had authority to do the act: Armagas Ltd v Mundogas SA [1986] 1 AC 717. Similarly, a principal will not be liable for other wrongful acts of an agent which are outside the agent's actual or apparent authority, for example where an agent commits an unauthorised assault upon third parties: [7.640]

Deatons Pty Ltd v Flew (1949) 79 CLR 370 [7.650] D conducted a hotel in which it employed B as a barmaid. P, a customer in the hotel, acted in an offensive manner and B asked him to go away. In the course of an altercation B threw in P’s face a glass of beer and then the glass. It was held that, whether or not B had been provoked as D alleged, B was not acting within the scope of her employment in doing what she did and that accordingly D was not liable to P in damages.

A principal (or employer) will not be liable for the negligence of an agent (or employee) who acts without any authority and in their own interests and not on behalf of the principal (or employer): Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 (PC). [7.660]

Termination of agency The time when, and the circumstances upon which, the relationship of principal and agent will end depend upon the terms of the original contract of agency. [7.670]

Performance or completion of agency ...............................................................................................................................................................................................

Where the agent is appointed either for the performance of one specific act, or for the duration of a definite period, then the authority of the agent will extend only until such act has been done, or the specified period has expired. [7.680]

106

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.690]

Impossibility of performance ...............................................................................................................................................................................................

Where it becomes impossible for the agent to carry out their obligations, for example where the subject matter of the agency is destroyed, the authority of the agent must cease there and then, for example where the building which an agent has been instructed to sell is destroyed by fire. [7.690]

Agreement ...............................................................................................................................................................................................

Whilst the agency is still current both the principal and agent may mutually agree to its termination. [7.700]

Revocation ...............................................................................................................................................................................................

In considering the rights of the principal to revoke the agent's authority or the right of the agent to renounce, it must be borne in mind that in any contract of agency, unless some express stipulation has been made to the contrary, there is an implied term that either party may terminate it upon notice. But neither notice of revocation nor notice of renunciation will affect any rights or liabilities which may have been created between the principal and third parties prior to the notice. The right of the principal to revoke the agent's authority may be limited or affected by the rights of: [7.710]

(a)

third parties; and

(b)

the agent.

Rights of third parties

The principal may be liable to third parties even after the principal has validly revoked the authority of the agent, where such parties have had previous dealings with the agent and continue to deal with the agent without notice of the withdrawal of the agent's authority. An example would be where a commercial traveller had authority to collect the debts of their firm and was dismissed without the firm notifying the customers of the termination of the traveller's authority. The traveller continues to call and receive from the old customers, payment of their accounts supposedly for the firm. The traveller's action would bind the firm as payment to the traveller would be held as good payment to the firm as regards customers unaware of the traveller's dismissal. [7.720]

Rights of the agent

The right of the principal to revoke the authority of their agent may be limited by the principal's obligation to indemnify the agent against any loss or damage the agent may have suffered as a result of their employment, for example expenses in advertising, etc, connected with the agency. Further, the agent may be entitled to claim for loss of [7.730]

[7.760]

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commission in certain cases depending upon the nature of the agency, the terms upon which commission is payable and the circumstances existing at the time the principal revoked the agent's authority. For instance, the principal cannot capriciously or without reasonable grounds refuse to enter into a contract and determine the agency when the agent has found and introduced a purchaser ready, willing and able to buy at the stipulated price: Trollope (George) & Sons v Martyn Bros [1934] 2 KB 436. By death ...............................................................................................................................................................................................

The death (or in the case of a corporation, the liquidation) of either principal or agent immediately puts an end to the agency. Accordingly, an agent's authority to draw on the principal's bank account terminates on the principal's death: Noonan v Martin (1987) 10 NSWLR 402. The general rule is that the death of the principal terminates the authority of the agent even though the agent is unaware of and had no means of ascertaining the fact. Consequently the agent becomes personally liable to third parties for having made any contract entered into by the agent after the death of the principal and on behalf of the deceased principal, and may be sued by such party for breach of warranty of authority even though the agent was ignorant of the principal's death. The estate of the principal is not liable under such a contract though the personal representative (for example, the executor) may confirm the contract. In some States 6 every act done in good faith within the scope of a power of attorney after the death of the donor and before the receipt of notice thereof is valid and the donee of such power is not liable. [7.740]

By insanity ...............................................................................................................................................................................................

Once insanity has overtaken either principal or agent, the contract of agency, with its attendant rights and liabilities, is at an end: Yonge v Toynbee [1910] 1 KB 215. However, a third party is entitled to treat the authority of the agent as subsisting until they receive notice of the insanity in cases where the principal, before becoming insane, had held out the agent as having authority. [7.750]

Bankruptcy ...............................................................................................................................................................................................

Of the agent

The bankruptcy of the agent determines their authority, except where the bankruptcy does not affect their capacity to contract as agent. Thus where the duties of the agent are merely formal, the agent's bankruptcy would not necessarily affect their authority. [7.760]

6

Powers of Attorney and Agency Act 1984 (SA), s 12; Property Law Act 1969 (WA), s 85(2); Powers of Attorney Act 2000 (Tas), s 52.

108

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.770]

Of the principal

The bankruptcy of the principal also determines the relationship of principal and agent. However, an agent, even after notice of the principal's bankruptcy, may do such acts as are necessary to complete some transaction which was already binding on the principal before the bankruptcy. [7.770]

Renunciation by the agent ...............................................................................................................................................................................................

The agent may renounce the agency at any time but must compensate the principal for any loss occasioned by such renunciation. [7.780]

Particular types of agents Factors and mercantile agents ............................................................................................................................................................................................... [7.790] A factor is considered at common law to be an agent employed to sell goods, the possession or control of which has been entrusted to the factor's care by the principal. A factor has been generally recognised as possessing certain powers which apply in the absence of any special instructions from the principal to the contrary. Thus a factor may sell goods in their own name as though he or she was the principal. Consequently, with regard to third parties dealing with factors, the purchaser and factor stand in exactly the same relation to each other as any other purchaser and vendor – provided the purchaser was not aware that the factor was not in fact the principal. Consequently, the purchaser may set off against the purchase money any personal liability which may exist between the factor and the purchaser. Further, by custom a factor is entitled to receive payment for the goods from the purchaser and the purchaser is absolutely protected provided he or she had no notice from the principal requiring payment to the principal personally. In the various States there exist Acts 7 relating to factors and mercantile agents. They define a mercantile agent as “an agent having in the customary course of his business as such agent authority either to sell goods, or to consign goods for the purpose of sale or to buy goods, or to raise money on the security of goods”. The Acts further provide that when a mercantile agent is, with the consent of the owner, 8 in possession of goods or of the documents of title to goods, any sale, pledge, or other disposition of the goods made by her or him when acting in the ordinary course of business of a mercantile agent shall be as valid as if he was expressly authorised by the 7

8

Factors (Mercantile Agents) Act 1923 (NSW); Goods Act 1958 (Vic), ss 65 – 72; Factors Act 1892 (Qld); Mercantile Law Act 1936 (SA); Imperial Act 5 & 6 Vict, c 39 (WA); Factors’ Acts Amendment Act 1878 (WA); Factors Act 1891 (Tas). In New South Wales the Factors (Mercantile Agents) Act 1923 (NSW), s 5 does not state “with the consent of the owner” but in Cook v Rogers (1946) 46 SR (NSW) 229 at 232, it was held that the words in the Act “entrusted with possession” had in substance the same meaning, as a mercantile agent could not be “entrusted” with goods unless he or she obtained possession of them “with the consent of the owner”.

[7.820]

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owner of the goods to make the same; provided that the person taking under the disposition acts in good faith, and has not, at the time of the disposition, notice of the want of authority. 9 Another provision of the Acts covers the position where the authority of the agent has been revoked by the principal before the sale, pledge or disposition was made. When a mercantile agent has, with the consent of the owner, been in possession of goods or of the documents of title to goods, any sale, pledge or other disposition which would have been valid if the consent had continued, is valid notwithstanding the determination of the consent provided that the person taking under the disposition does not have notice that the consent has been determined. Del credere agents ...............................................................................................................................................................................................

This type of mercantile agent undertakes to make good any loss incurred, as regards payment only, with respect to persons with whom he or she contracts on behalf of the principal, that is, a del credere agent undertakes the payment for goods accepted by the customers he or she procures upon the buyer's failure to pay; a del credere agent does not guarantee that customers will not repudiate contracts in some other manner such as by refusal to accept goods. Such an agent is usually paid an extra commission known as del credere commission. A del credere agent is not primarily the debtor. On the contrary, the principal may sue the buyer in her or his own name notwithstanding the del credere commission so that the latter amounts to no more than consideration for a guarantee. [7.800]

Brokers ...............................................................................................................................................................................................

A broker is a general agent who buys and sells goods for a principal without being entrusted either with the possession or control of the goods or of their documents of title. Often a broker does little more than bring the parties together, and when a contract is concluded takes their commission and entirely drops out of the transaction. The general practice of brokerage is for the broker, upon making the contract, to enter a note in their book signed by the broker, and send a note or memorandum to both parties. The one sent to the purchaser is called the “bought note”, that to the vendor is the “sold note”. [7.810]

Partners ...............................................................................................................................................................................................

Each partner is a general agent of the other with regard to partnership matters, and the partnership is bound by any act done by one of its members in the course of the firm's business, unless the partner so acting has in fact no authority to act for the firm in [7.820]

9

It should be noted that the onus of proving: (a) the ostensible authority of the mercantile agent; and (b) that the purchaser was unaware that the transaction was outside the scope of the actual authority of the mercantile agent, lies on the purchaser: Buckland v Clarke (1956) 56 SR (NSW) 185.

110

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.830]

the particular matter and the person with whom the partner is dealing either knows that he or she has no authority or does not know or believe her or him to be a partner. Directors ...............................................................................................................................................................................................

Subject to the qualification that they must act together as a board, directors are agents for their company, and a company is liable in respect of all contracts made on its behalf by directors acting within the scope of the authority given to them by the rules of the company. [7.830]

Estate agents ...............................................................................................................................................................................................

Generally the term “estate agent” is used in statutes to include agents entrusted with the duty of buying or selling land, or of buying or selling businesses, on behalf of principals. Sometimes, however, the statutes differentiate between “land agents” or “real estate agents” and “business agents”. [7.840]

Auctioneers ............................................................................................................................................................................................... [7.850]

An auctioneer is an agent for the sale of property at a public auction.

Statutory regulation of agents There is considerable regulation by State statutory law of auctioneers and “estate agents”. Thus in most States auctioneers and estate agents have to be licensed. 10 In most States repossession and debt collecting agents (referred to as “commercial agents”) are subject to licensing requirements. 11 Finance brokers (that is, agents who negotiate loans for other persons) are required to be licensed and are subject to certain obligations in the conduct of their business under the national scheme established by the Commonwealth National Consumer Credit Protection Act 2009 (Cth). In all States and Territories “uniform” legislation formerly required the licensing of travel agents and regulated their operations. One of the conditions to be satisfied before a licence would be granted was that the applicant be a participant in the Travel [7.860]

10

11

Estate Agents Act 1980 (Vic), s 12; Motor Dealers and Chattel Auctioneers Act 2014 (Qld), s 33; Property Occupations Act 2014 (Qld), s 26; Land Agents Act 1994 (SA), s 6(1); Real Estate and Business Agents Act 1978 (WA), s 26; Property Agents and Land Transactions Act 2005 (Tas), s 5; Auction Sales Act 1973 (WA), s 6; Agents Act 2003 (ACT), s 18; Auctioneers Act 1935 (NT), s 4; Agents Licensing Act 1979 (NT), s 17. The National Competition Review “concluded that the benefits of licensing auctioneers of goods are outweighed by the costs”: Victorian Hansard (Assembly), 5 April 2001, p 761. As a result of this recommendation, the Victorian Auction Sales Act 1958 (Vic) was repealed: Auction Sales (Repeal) Act 2001 (Vic), s 3. Commercial Agents and Private Inquiry Agents Act 2004 (NSW), ss 5, 11; Debt Collectors (Field Agents and Collection Agents) Act 2014 (Qld), s 14; Security and Investigation Agents Act 1995 (SA), s 6; Debt Collectors Licensing Act 1964 (WA). s 5 ; Security and Investigations Agents Act 2002 (Tas), s 4; Commercial and Private Agents Licensing Act 1979 (NT), s 5.

[7.860]

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111

Compensation Fund which was established to compensate travellers who suffered loss as a result of misappropriations by travel agents. However, it is intended that these licensing requirements will be repealed in all jurisdictions and the Compensation Fund will be closed. See Victorian Legislative Assembly Hansard, 13 November 2013, p 4024. The legislation has already been repealed in New South Wales, Queensland, Victoria, South Australia, Northern Territory and the Australian Capital Territory. 12 Employment agents may also be subject to licensing requirements. 13

12

13

Travel Agents Act 1985 (WA); Travel Agents Act 1987 (Tas). The Travel Agents Act 1986 (NSW) was repealed by the Travel Agents Repeal Act 2014 (NSW). The Travel Agents Act 1986 (Vic) was repealed by the Travel Agents Repeal Act 2014 (Vic). The Travel Agents Act 1988 (Qld) was repealed by the Construction and Tourism (Red Tape Reduction) and Other Legislation Amendment Act 2014 (Qld), s 52. The Travel Agents Act 1986 (SA) was repealed by the Travel Agents Repeal Act 2014 (SA). The Consumer Affairs and Fair Trading Act (NT), Pt 11 was repealed by the Consumer Affairs and Fair Trading Amendment Act (NT), s 6. The Agents Act 2003 (ACT), s 21 was repealed by the Justice and Community Safety Legislation Amendment Act 2014 (ACT), Sch 1 Pt 1.1 Item 1.3. Employment Agents Registration Act 1993 (SA), s 6; Employment Agents Act 1976 (WA), s 12; Agents Act 2003 (ACT), s 22.

PART 6

TRANSFER OF PROPERTY Chapter 8

Sale of Goods ................................................................. 115

CHAPTER 08

......................................................................................................................

Sale of Goods Extracted from Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015), Ch 14.

[8.10] The principles of the common law relating to the sale of goods were codified in the United Kingdom Sale of Goods Act 1893 (UK), and each of the Australian States and Territories passed legislation practically identical to the United Kingdom Act. 1 The common law continues to apply to contracts for the sale of goods where it is not inconsistent with the Acts. 2 Relevant common law rules include those relating to agency, fraud, misrepresentation, mistake and duress. The Acts apply to all contracts for the sale of goods whether it is a commercial contract between two companies involving the supply of goods worth many thousands of dollars, or to the sale of everyday items such as food and clothing to consumers. This chapter deals with the provisions of the State and Territory Sale of Goods Acts. In Victoria and Tasmania the sale by description, fitness for a particular purpose and sale by sample provisions of the Sale of Goods Act do not apply to contracts of supply to which the consumer guarantees provisions of the Australian Consumer Law apply (Div 1, Part 3-2). 3 A reference to a condition in the formation of the contract provisions of the Sale of Goods Act includes a consumer guarantee under the Australian Consumer Law. Except as expressly provided by the consumer guarantees provisions of the Australian Consumer Law, those provisions do not affect the application of the Sale of Goods Act to a contract for the supply of goods and services. 4 In Western Australia where the consumer guarantees provisions of the Australian Consumer Law are inconsistent with the Sale of Goods Act, the Australian Consumer Law prevails. 5

1

2

3 4 5

Sale of Goods Act 1923 (NSW); Goods Act 1958 (Vic); Sale of Goods Act 1896 (Qld); Sale of Goods Act 1895 (SA); Sale of Goods Act 1895 (WA); Sale of Goods Act 1896 (Tas); Sale of Goods Act 1954 (ACT); Sale of Goods Act 1972 (NT). Sale of Goods Act 1923 (NSW), s 4(2); Goods Act 1958 (Vic), s 4(2); Sale of Goods Act 1896 (Qld), s 61(2); Sale of Goods Act 1895 (SA), s 59(2); Sale of Goods Act 1895 (WA), s 59(2); Sale of Goods Act 1896 (Tas), s 5(2); Sale of Goods Act 1954 (ACT)62(1); Sale of Goods Act 1972 (NT), s 4(2). The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)). Australian Consumer Law and Fair Trading Act 2012 (Vic), s 31; Australian Consumer Law (Tasmania) Act 2010 (Tas), s 45. Fair Trading Act 2010 (WA), s 35.

116

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.20]

Contract of sale of goods Formation of the contract ...............................................................................................................................................................................................

A contract of sale of goods is defined by the Sale of Goods Act as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. 6 The ordinary elements of a contract must be present, that is, offer and acceptance, consideration, etc, but it will be noticed that in every contract for the sale of goods there must be present three main matters: “goods”, “money consideration”, and “transfer of property”. [8.20]

Goods

The term “goods” includes all chattels personal other than things in action and money; it includes emblements 7 and things attached to or forming part of land which are agreed to be severed before sale or under the contract of sale. 8 Therefore, the term “goods” embraces a wide field including clothes, food, motor cars, machinery, furniture and growing crops. Timber is also included if it is to be cut down before the title of it is to pass to the buyer. A contract for the removal of a house in its entirety from its original site to another location has been held to constitute a sale of goods: Symes v Laurie [1985] 2 Qd R 547 at 549-550. However, the term does not include land or any interest in land, nor does it include shares or debentures. It has been held that an agreement for the sale of a computer system comprising three items of computer hardware and two items of software is a sale of goods within the meaning of the Sale of Goods Act: Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48; 77 FLR 377; 50 ALR 684. However, it has been held that a software package supplied as an online download does not constitute “goods” and is not a sale of goods within the meaning of the Act: Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd (2010) 77 NSWLR 479 at [12], [42], [47]; [2010] NSWC 267. [8.30]

Money consideration

In order to constitute a sale of goods under the Act there must exist some money consideration for the sale. If the goods are given away free or transferred by means of barter, that is, exchanged for other goods, the Sale of Goods Act would not apply to the transaction. [8.40]

6

7 8

Sale of Goods Act 1923 (NSW), s 6; Goods Act 1958 (Vic), s 6; Sale of Goods Act 1896 (Qld), s 4; Sale of Goods Act 1895 (SA), s 1; Sale of Goods Act 1895 (WA), s 1; Sale of Goods Act 1896 (Tas), s 6; Sale of Goods Act 1954 (ACT), s 6; Sale of Goods Act 1972 (NT), s 6. The term “emblements” refers to industrial crops such as wheat, potatoes and hay. Sale of Goods Act 1923 (NSW), s 5; Goods Act 1958 (Vic), s 3; Sale of Goods Act 1896 (Qld), s 3; Sale of Goods Act 1895 (SA), s 60; Sale of Goods Act 1895 (WA), s 60; Sale of Goods Act 1896 (Tas), s 3; Sale of Goods Act 1954 (ACT), s 5; Sale of Goods Act 1972 (NT), s 5.

CHAPTER

[8.80]

08

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117

Transfer of property

By transfer of property is meant the transfer of ownership in the goods. The principles governing the transfer of property or ownership in goods the subject of a contract of sale are considered at [8.420]. [8.50]

Contracts of sale and for work and materials

Some agreements, although providing for the delivery of an article, are not contracts for the sale of goods but for work and labour and the supply of materials. Each case must be decided on its individual merits but broadly speaking if it can be shown that the main substance of the agreement is the transfer of title to a chattel then the contract is for the sale of goods. On the other hand, where the main substance of the agreement is the skill and experience to be displayed by one of the parties in performance and the transfer of title to the materials used is only ancillary, then the contract is for work and labour and the supply of materials. In a Victorian case it was said that the “substance of the contract” test for determining whether a contract is one for the sale of goods or for work and labour is “illogical and unsatisfactory” and that the more satisfactory test is whether the contract when carried out would result in the sale of a chattel; if so, the contract is one for the sale of goods: Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 181-186. The distinction between contracts for the sale of goods and contracts for work and labour and the supply of materials is of importance, since the statutory requirements for a contract for the sale of goods to be enforceable do not apply to contracts of work and the supply of materials. [8.60]

Capacity to buy and sell ...............................................................................................................................................................................................

The capacity to buy and sell goods is governed by the general law concerning the capacity to contract. Where necessaries are sold and delivered to minors, or to persons who by reason of their mental incapacity or drunkenness are incompetent to contract, they must pay a reasonable price for them. 9 [8.70]

Sale and agreement to sell ............................................................................................................................................................................................... [8.80]

The term “contract for the sale of goods” includes:

(a)

a sale of goods (an executed contract); and

(b)

an agreement to sell goods (an executory contract). 10

9

10

Sale of Goods Act 1923 (NSW), s 7; Goods Act 1958 (Vic), s 7; Sale of Goods Act 1896 (Qld), s 5; Sale of Goods Act 1895 (SA), s 2; Sale of Goods Act 1895 (WA), s 2; Sale of Goods Act 1896 (Tas), s 7; Sale of Goods Act 1954 (ACT), s 7; Sale of Goods Act 1972 (NT), s 7. This is not the usual sense of the words “executory” and “executed”; in the case of a sale the property passes at once but the contract may still be executory in the sense that the buyer may still have to pay the price. However, these meanings have been adopted by common usage in the case of the topic of sale of goods.

118

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.90]

A “sale” occurs where the ownership of the goods is transferred to the buyer at the time of the contract. For example, B goes to a sports store, selects and purchases a particular cricket bat. The thing sold immediately becomes the property of the buyer and the transaction is known as a “sale”. The goods are agreed upon at the time of the sale and there is nothing further required of the seller to transfer the ownership. An “agreement to sell” arises where the ownership of the goods is to be transferred at a future time, or subject to some condition. An agreement to sell becomes a “sale” when the time elapses or the conditions are fulfilled. For example, A phones B and orders 10 litres of “red paint” to be made up and delivered to his store. Until the particular goods are delivered to A's store the contract is an agreement to sell. When the goods are delivered, the agreement becomes executed and constitutes a sale. A contract to sell unascertained goods is not a sale but an agreement to sell. There must be added to it some act which completes the sale, such as delivery or the appropriation of specific goods to the contract by the assent, express or implied, of both buyer and seller: Jansz v GMB Imports Pty Ltd [1979] VR 581. The distinction between a sale and an agreement to sell has an important effect on the rights of the parties. These rights are briefly summarised below. Rights under a sale ...............................................................................................................................................................................................

The seller has a right to sue the buyer for the price of the goods. The buyer has the right to sue the seller for damages if the seller defaults, and also for conversion 11 if the seller wrongfully disposes of the goods. The risk of any loss to the goods after a sale is with the buyer as the ownership has passed to her or him. For example, if a person purchases a ready-made suit from a tailor the property passes to him, and he must bear any later loss or destruction of the suit. [8.90]

Rights under an agreement to sell ...............................................................................................................................................................................................

The seller has a right to sue the buyer for damages in the event of default. The buyer, where the seller defaults, can only sue for damages as the property in the goods has not passed to the buyer. The risk of any loss to the goods in an agreement to sell is with the seller as ownership has not passed to the buyer. For example, if a buyer is measured for a suit and during its making there is a fire which damages the suit, the loss must be borne by the tailor. [8.100]

11

Conversion is the tort committed by a person who wilfully interferes with a chattel in a manner constituting a denial of the title of the person who has the right to its possession. It is essentially conduct which deprives another of their property permanently or for an indefinite time: see Chapter 28 (Turner and Trone).

[8.160]

CHAPTER

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119

Classification of goods ...............................................................................................................................................................................................

The goods which form the subject matter of a contract of sale include the following: [8.110]

Existing goods

Existing goods are those owned or possessed by the seller at the time of the contract, for example a particular car. [8.120]

Future goods

Future goods are those to be manufactured or acquired by the seller after the making of the contract of sale. It is also necessary to observe the meanings of “specific” and “unascertained” goods. [8.130]

Specific goods

Specific goods 12 are goods identified and agreed upon at the time the contract of sale is made; for example a 2006 Holden Commodore, a specific piece of Dresden china, “Oscar” the champion merino ram.

[8.140]

Unascertained goods

Unascertained goods are goods sold under a description where no particular goods were identified and agreed upon (that is, “earmarked”) at the time when the contract was made; for example a contract for the sale of generic goods such as “100 tonnes of best quality wheat”.

[8.150]

Distinction between specific and unascertained goods

The distinction between specific and unascertained goods is important for the purpose of determining when the property in the goods and the risk passes to the buyer. In a sale of specific (or ascertained goods) the property passes to the buyer at such time as the parties to the contract intend it to be transferred, taking into account the terms of the contract, the conduct of the parties, and the circumstances of the case. The property in unascertained goods does not pass until the goods become ascertained and being in a deliverable state are appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller. Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void. 13 [8.160]

12

Sale of Goods Act 1923 (NSW), s 5; Goods Act 1958 (Vic), s 3; Sale of Goods Act 1896 (Qld), s 3; Sale of Goods Act 1895 (SA), s 60; Sale of Goods Act 1895 (WA), s 60; Sale of Goods Act 1896 (Tas), s 3; Sale of Goods Act 1954 (ACT), s 5; Sale of Goods Act 1972 (NT), s 5.

13

Sale of Goods Act 1923 (NSW), s 11; Goods Act 1958 (Vic), s 11; Sale of Goods Act 1896 (Qld), s 9; Sale of Goods Act 1895 (SA), s 6; Sale of Goods Act 1895 (WA), s 6; Sale of Goods Act 1896 (Tas), s 11; Sale of Goods Act 1954 (ACT), s 11; Sale of Goods Act 1972 (NT), s 11.

120

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.170]

Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish before the risk passes to the buyer, the agreement is avoided. 14 In these circumstances, legislation in Victoria (the Australian Consumer Law and Fair Trading Act 2012 (Vic); New South Wales (the Frustrated Contract Act 1978 (NSW)) and South Australia (the Frustrated Contracts Act 1988 (SA)) provides for the adjustment of the rights and liabilities of the parties. The price ...............................................................................................................................................................................................

The price of the goods may be fixed by the contract or in some manner agreed upon, or by the dealings between the parties. The contract may be complete and binding although no price is stated, and in such circumstances the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent upon the circumstances of each particular case. 15 Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and the third party cannot or does not make the valuation, the agreement is avoided. However, if the goods have been taken by the buyer he or she must pay a reasonable price for them and where the third party is prevented from making the valuation by the fault of the seller or buyer, the party not at fault may maintain an action for damages against the other. 16 The price of the goods, unless otherwise provided, is to be paid upon the delivery of the goods, and it should be paid in legal tender unless arranged otherwise. Delivery and payment are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods. 17 [8.170]

Formalities ...............................................................................................................................................................................................

Formerly, the position in all Australian States and Territories was that a contract for the sale of goods of the value of $20 or upwards was not enforceable unless: [8.180]

(a)

some note or memorandum in writing of the contract was made and signed by the party to be charged or her or his authorised agent; or

14

Sale of Goods Act 1923 (NSW), s 12; Goods Act 1958 (Vic), s 12; Sale of Goods Act 1896 (Qld), s 10; Sale of Goods Act 1895 (SA), s 7; Sale of Goods Act 1895 (WA), s 7; Sale of Goods Act 1896 (Tas), s 12; Sale of Goods Act 1954 (ACT), s 12; Sale of Goods Act 1972 (NT), s 12. Sale of Goods Act 1923 (NSW), s 13; Goods Act 1958 (Vic), s 13; Sale of Goods Act 1896 (Qld), s 11; Sale of Goods Act 1895 (SA), s 8; Sale of Goods Act 1895 (WA), s 8; Sale of Goods Act 1896 (Tas), s 13; Sale of Goods Act 1954 (ACT), s 13; Sale of Goods Act 1972 (NT), s 13. Sale of Goods Act 1923 (NSW), s 14; Goods Act 1958 (Vic), s 14; Sale of Goods Act 1896 (Qld), s 12; Sale of Goods Act 1895 (SA), s 9; Sale of Goods Act 1895 (WA), s 9; Sale of Goods Act 1896 (Tas), s 14; Sale of Goods Act 1954 (ACT), s 14; Sale of Goods Act 1972 (NT), s 14.

15

16

17

Sale of Goods Act 1923 (NSW), s 31; Goods Act 1958 (Vic), s 35; Sale of Goods Act 1896 (Qld), s 30; Sale of Goods Act 1895 (SA), s 28; Sale of Goods Act 1895 (WA), s 28; Sale of Goods Act 1896 (Tas), s 33; Sale of Goods Act 1954 (ACT), s 32; Sale of Goods Act 1972 (NT), s 31.

[8.200]

(b)

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the buyer accepted part of the goods so sold and actually received the same; or

(c)

the buyer had given something in earnest to bind the contract, or given something in part payment. However, this requirement has been repealed in New South Wales, Victoria, Queensland, South Australia, the Australian Capital Territory and the Northern Territory. 18 Accordingly, in these States and Territories there are no special formalities to be observed before a contract of sale becomes enforceable. Such a contract may be made in writing, by word of mouth, or by implication from the conduct of the parties. However, the formality requirement referred to above still applies in Western Australia and Tasmania. 19 It applies to contracts for the sale of goods of the value of $20 and upwards. The following explanation of the requirement is relevant only to these jurisdictions. Note or memorandum [8.190]

The note or memorandum must show:

(a)

the names of the parties;

(b)

the quantity and description of the goods sold;

(c)

the price and terms as to mode or time of payment if they have been agreed upon; and

(d) the signature of the party to be charged or that of their authorised agent. These particulars may appear in one document or may be comprised in a series of documents, provided that they are connected or related to each other so that they constitute all the terms of the bargain and give a sufficient description of the subject matter. The memorandum may be good even though no price is mentioned, for where no price is agreed upon the buyer is bound to pay a reasonable price. If, however, a price had been agreed upon, a memorandum which omitted to state the agreed price would be defective. The omission from the note or memorandum of an agreed date for delivery of the goods will render the note or memorandum insufficient: JB & BL Nominees Pty Ltd v McCormack [1982] WAR 258. Acceptance

The word “acceptance” has two distinct meanings under the Sale of Goods Act, one relating to the enforceability of the contract of sale and the other to performance of the contract. For a discussion on the latter see [8.870]. As regards the former, one of the alternative formality requirements of an enforceable contract for the sale of goods of $20 or upwards, in the absence of a note or [8.200]

18

19

Sale of Goods (Amendment) Act 1988 (NSW); Sale of Goods (Vienna Convention) Act 1987 (Vic), s 9; Statute of Frauds 1972 (Qld), s 3; Statutes Amendment (Enforcement of Contracts) Act 1982 (SA), s 4; Sale of Goods Act 1954 (ACT), s 2; Sale of Goods Amendment Act 1999 (NT), s 2. Sale of Goods Act 1895 (WA), s 4; Sale of Goods Act 1896 (Tas), s 9.

122

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.205]

memorandum of the contract, is that the buyer accept part of the goods and actually receive them. There must be an acceptance and a receipt. “Acceptance” has a particular meaning. The Acts state: There is an acceptance of goods within the meaning of this section when the buyer does any act in relation to the goods which recognises a pre-existing contract of sale, whether there be an acceptance in performance of the contract or not. 20

It is to be noted that the act of acceptance need not be an acceptance of the goods as conforming to the contract; it is sufficient if the act relied upon is consistent only with the recognition of an existing contract. An example would be where the buyer makes an effort to resell the goods before their actual receipt, for example by using a sample. The question is whether the buyer has done anything which amounts to an admission that he or she had contracted to buy the goods. Russo v Belcar Pty Ltd (2011) 111 SASR 459 at [2] [8.205] The appellant purchased a Ferrari. After delivery of the car he became convinced that it was not a new vehicle. In response to the purchaser’s complaints, the dealer ensured that extensive repairs were made under warranty. Over four years after delivery of the car the purchaser purported to rescind the contract of purchase: at [17]. The South Australian Full Court held that the purchaser had accepted the car and it was too late to rescind the contract. The purchaser had accepted major warranty repairs and used the car for more than four years: at [19]. Rescission must take place within a reasonable time: at [11]. The period in which goods may be accepted or rejected is “relatively short” in view of the commercial need for finality in transactions: at [96].

In addition to acceptance there must be an “actual receipt” of the goods. Where there has been an acceptance and receipt of the goods or part of them by the buyer, the contract is enforceable by the seller against the buyer, or by the buyer against the seller despite the absence of a note or memorandum of the contract in writing: Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167. [8.207]

Terms of the contract A “condition” is a term that is vital to the existence of the contract, a breach of which gives the innocent party a right to rescind the contract and claim for such damages as he or she may have sustained. Instead of rescinding the contract the innocent party may bring an action for damages only. A “warranty” is a term of lesser importance, the breach of which merely gives rise to a claim for damages but not a right to repudiate the contract and reject the goods. In New South Wales the Act has introduced the concept of an “intermediate stipulation”, that is, a term which is neither a condition nor a warranty. Whether breach of such an intermediate stipulation constitutes a repudiation of the contract will depend [8.210]

20

Sale of Goods Act 1895 (WA), s 4(3); Sale of Goods Act 1896 (Tas), s 9(3).

[8.220]

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on the seriousness of the breach. Thus, s 4(5) of the Sale of Goods Act 1923 (NSW) provides that nothing in the Act is to be construed “as excluding a right to treat a contract of sale as repudiated for a sufficiently serious breach of a stipulation that is neither a condition nor a warranty but is an intermediate stipulation”. Under the Sale of Goods Act certain implied conditions and warranties are applicable to contracts for the sale of goods but the parties themselves can also make specific conditions or warranties. An express condition or warranty does not negative an implied condition or warranty stipulated by the Act unless inconsistent with it, in which case the express stipulation prevails. Whether a stipulation in a contract for the sale of goods is a condition or a warranty is a matter of construction, and a stipulation may be a condition although called a warranty in the contract. As a general rule stipulations as to time of payment are not deemed to be conditions of the sale, and whether any other stipulation as to time is of the essence of the contract depends upon the terms of the contract. 21 However, stipulations as to time for delivery of the goods are considered essential terms unless a contrary intention is clearly shown. A breach of a condition may be treated by the innocent party as a breach of warranty, thus enabling the contract to be carried out but giving her or him the right to claim damages against the party defaulting. A warranty must be distinguished from a representation amounting to an expression of opinion. Such a representation is more in the nature of sales “puffing” and may be a mere expression of opinion by the seller on a matter of which the buyer may also be expected to have an opinion. Should an expression of opinion prove incorrect there is no right of action unless there has been fraud on the part of the seller, in which case the buyer may either set aside the contract or permit the contract to continue and claim damages. A warranty must also be distinguished from a representation of fact which induces but does not form part of the contract. Conditions implied in contracts of sale ............................................................................................................................................................................................... [8.220] The Sale of Goods Act implies certain important terms in all contracts for the sale of goods unless the circumstances of the contract are such as to show a different intention. The terms implied are conditions as to title, correspondence with description, quality, and fitness of goods supplied under the contract of sale. Each of these conditions is now considered in turn.

21

Sale of Goods Act 1923 (NSW), s 15; Goods Act 1958 (Vic), s 15; Sale of Goods Act 1896 (Qld), s 13; Sale of Goods Act 1895 (SA), s 10; Sale of Goods Act 1895 (WA), s 10; Sale of Goods Act 1896 (Tas), s 15; Sale of Goods Act 1954 (ACT), s 15; Sale of Goods Act 1972 (NT), s 15.

124

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.230]

Condition as to title

In a contract of sale, there is an implied condition on the part of the seller that he or she has a right to sell the goods and, in the case of an agreement to sell, that they will have a right to sell the goods at the time when the property is to pass. 22 This condition relates to the title of the seller and amounts to a guarantee of undisturbed possession. Should the buyer's title be avoided by reason of the fact that the seller had no title to the goods transferred, the buyer is entitled to a refund from the seller of any money paid to the seller for the goods, notwithstanding that the buyer may have had temporary use or enjoyment of them: Rowland v Divall [1923] 2 KB 500. This is because in the case of a contract for the sale of goods the main purpose of the contract is to transfer the property or title to goods. Accordingly, if the seller has no title, there has been a total failure of consideration. However, where a seller who has no title to goods they purport to sell subsequently acquires a good title before the buyer rescinds the contract, the seller can hold the buyer to the contract. The reason is that the subsequently acquired title goes to “feed”, that is, cure, the previously defective title of the seller and will in turn pass to the buyer: Patten v Thomas Motors Pty Ltd [1965] NSWR 1457. The following warranties as to title are also implied by the Sale of Goods Act: [8.230]

1.

That the goods are free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.

2.

That the buyer will have and enjoy quiet possession of the goods. This amounts to an indemnity against the consequences of a defective title and of any disturbance which might result.

Correspondence with description

Where there is a contract for the sale of goods by description, there is an implied condition that the goods will correspond with the description. 23 If the goods do not conform to their description in the contract the buyer is entitled to reject them for breach of the implied condition or, alternatively, sue for damages, since the buyer would not have received what he or she bargained for. For the condition to apply the goods must be sold “by description”. This requirement is satisfied in all cases where the buyer has not seen the goods but is relying on the description alone: Varley v Whipp [1900] 1 QB 513. In addition, however, goods may be [8.240]

22

Sale of Goods Act 1923 (NSW), s 17; Goods Act 1958 (Vic), s 17; Sale of Goods Act 1896 (Qld), s 15; Sale of Goods Act 1895 (SA), s 12; Sale of Goods Act 1895 (WA), s 12; Sale of Goods Act 1896 (Tas), s 17; Sale of Goods Act 1954 (ACT), s 17; Sale of Goods Act 1972 (NT), s 17.

23

Sale of Goods Act 1923 (NSW), s 18; Goods Act 1958 (Vic), s 18; Sale of Goods Act 1896 (Qld), s 16; Sale of Goods Act 1895 (SA), s 13; Sale of Goods Act 1895 (WA), s 13; Sale of Goods Act 1896 (Tas), s 18; Sale of Goods Act 1954 (ACT), s 18; Sale of Goods Act 1972 (NT), s 18.

[8.260]

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bought by description even where the buyer has seen and examined the goods provided the buyer bought them as corresponding to a description: Beale v Taylor [1967] 1 WLR 1193. The implied condition of correspondence with description applies (in contrast to the implied conditions of merchantable quality and fitness for purpose) even though the goods are not sold by a dealer, that is, it also applies to private sales. Statements made about the goods only form part of the description under which the goods are sold where they are used to identify the goods and, in general, statements merely relating to the quality of the goods do not form part of their contractual description for the purpose of determining whether there has been a breach of the implied condition as to correspondence with description: Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441. It is, however, often not easy to distinguish between statements which essentially concern the identity of the goods as distinct from their quality as the following case demonstrates: Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 [8.250] P was the owner of a bull which was bought by M for stud purposes at an auction sale of stud cattle at the Royal Easter Show in Sydney. The bull subsequently proved to be sterile. M had bid $21,000 for the bull and it had been knocked down to him at that price, whereas its value for slaughtering purposes was only $500. It was held that the sale of the bull between P and M was a sale by description, the description being “a breeding bull”; there was implied in the contract by virtue of the Sale of Goods Act a condition that the bull would correspond with that description. Since there had been a breach of that implied condition as a result of the bull’s sterility, the purchaser M was entitled to recover from the seller the price he had paid for the bull less its value for slaughtering purposes.

The Sale of Goods Act further provides that where there is a sale by sample as well as by description, there is an implied condition that the goods must correspond both with the sample and the description. It is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. 24 (For sale by sample only, see [8.380].) [8.260]

24

Sale of Goods Act 1923 (NSW), s 18; Goods Act 1958 (Vic), s 18; Sale of Goods Act 1896 (Qld), s 16; Sale of Goods Act 1895 (SA), s 13; Sale of Goods Act 1895 (WA), s 13; Sale of Goods Act 1896 (Tas), s 18; Sale of Goods Act 1954 (ACT), s 18; Sale of Goods Act 1972 (NT), s 18.

126

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.270]

Merchantable quality

Where goods are bought by description from a seller who deals in goods of that description (whether the seller is the manufacturer or not), there is an implied condition that the goods are of merchantable quality provided that, if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed. 25 The expression “merchantable quality” means, in essence, that the goods are commercially saleable under the description they were sold; that is, fit for a purpose for which goods of that description are normally used, having regard also to the price paid for the goods and the other circumstances of the sale: Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 at 75 per Lord Reid. The meaning of “merchantable quality” has also been described as follows: 26 [8.270]

The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms: Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 at 418; [1933] HCA 35 per Dixon J.

For the condition of merchantable quality to be implied in the contract, the goods must be bought by description but this requirement has been broadly interpreted by the courts. Goods may be bought by description even where the buyer has seen and examined the goods provided the buyer bought them as corresponding to a description. It may also be pointed out that there is a sale by description even though the buyer is buying something displayed before him on the counter; a thing is sold by description, though it is specific, so long as it is sold not merely as the specific thing but as a thing corresponding to a description; for example, woollen undergarments, a hot-water bottle, a second-hand reaping machine – to select a few obvious illustrations: Grant v Australian Knitting Mills Ltd (1936) 54 CLR 49 at 61; [1936] AC 85 per Lord Wright (PC).

Accordingly, goods sold by description over the counter must be of merchantable quality. David Jones Ltd v Willis (1934) 52 CLR 110 at 118-119, 123-124, 130-131 [8.280] W went to the shoe department of a retail store and asked for a pair of comfortable walking shoes. She was shown three pairs and purchased a particular pair which she had tried on. On the third occasion of wearing them, the heel of one of the shoes came off and as a result W fell and broke her leg. The evidence showed that the shoes were a “very bad job” and that the heels had not been properly fastened. 25

26

Sale of Goods Act 1923 (NSW), s 19; Goods Act 1958 (Vic), s 19; Sale of Goods Act 1896 (Qld), s 17; Sale of Goods Act 1895 (SA), s 14; Sale of Goods Act 1895 (WA), s 14; Sale of Goods Act 1896 (Tas), s 19; Sale of Goods Act 1954 (ACT), s 19; Sale of Goods Act 1972 (NT), s 19. There have been numerous judicial interpretations of the meaning of merchantable quality. One eminent judge expressed the view that: “I do not think that it is possible to frame, except in the vaguest terms a definition of merchantable quality which can apply to every kind of case”: BS Brown & Sons Ltd v Craiks [1970] 1 WLR 752 at 754 per Lord Reid.

[8.290]

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cont. The High Court held that there was evidence upon which the jury was entitled to find that the shoes had been bought by description, and that there had been a breach of the implied condition of merchantable quality.

If the buyer examines the goods before the contract is made, the condition is not implied as regards defects which such examination ought to have revealed: Thornett & Fehr v Beers & Son [1919] 1 KB 486. [8.285]

Aqua-Marine Marketing Pty Ltd v Pacific Reef Fisheries (Australia) Pty Ltd (No 5) [2012] FCA 908 at [171] [8.286] A prawn wholesaler purchased black tiger prawns from a prawn farmer for onsale to Woolworths. The prawns supplied were not suitable for sale to Woolworths as they did not meet that company’s quality specifications. The wholesaler had visited the farm and tasted three prawns out of a 50 tonne consignment. The Federal Court held that the implied condition of merchantable quality had been breached. The superficial examination conducted by the wholesaler could not have revealed the latent defects that made a large proportion of the prawns unsuitable for onsale to Woolworths.

Fitness for purpose

Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether the seller is the manufacturer or not) there is an implied condition that the goods are reasonably fit for such purpose; provided that in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose. 27 From a strict reading of the provision it would appear that this implied condition applies only when the buyer makes known to the seller the particular purpose for which the goods are required. However, there have been cases which decided that the seller need not be informed of the particular purpose when such purpose is the ordinary use for which such goods are used. For example, when a milk vendor supplies his customer regularly it would not be necessary to inform him that the milk was required for human consumption. Where, however, the proposed use is not the only or ordinary use to which the goods are normally put, it remains necessary for the buyer to bring home to the mind of the seller the particular purpose contemplated and also to bring home to the seller the fact that the buyer is relying on the seller. Although it is necessary for the buyer to inform the seller in such cases of the use contemplated and to indicate to the seller that the buyer [8.290]

27

Sale of Goods Act 1923 (NSW), s 19; Goods Act 1958 (Vic), s 19; Sale of Goods Act 1896 (Qld), s 17; Sale of Goods Act 1895 (SA), s 14; Sale of Goods Act 1895 (WA), s 14; Sale of Goods Act 1896 (Tas), s 19; Sale of Goods Act 1954 (ACT), s 19; Sale of Goods Act 1972 (NT), s 19.

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[8.300]

relies on the seller's skill and judgment, it is not necessary that there be any reference to such matters in the contract itself; it is sufficient if the matters are adverted to during the course of negotiations which precede the making of the contract of sale. Ashford Shire Council v Dependable Motors Pty Ltd (1960) 104 CLR 139 (PC) [8.300] A shire council requested its engineer to inspect a tractor and see whether it was suitable for roadwork. The engineer went to the company’s showroom where he introduced himself to the company’s managing director as the Shire Engineer of the council and told him that he had been instructed to give a report on the tractor with a view to its purchase. After inspecting the tractor the engineer informed the managing director that the tractor was required for roadwork and asked whether it could perform such work which he described. The engineer reported to the Shire Clerk that the tractor seemed to have plenty of horsepower and was big enough to do the work; he did not however report what had passed between the managing director and himself. The Shire President instructed the Shire Clerk to make the purchase, relying upon the report made by the engineer. It was held that the engineer, having disclosed the proposed purpose for which the tractor was required, had acted on the skill and judgment of the managing director of the company. The council had relied upon the company’s skill and judgment and, consequently, as the tractor was unsuitable for roadwork the council was entitled to damages.

In the following cases the implied condition that the goods were reasonably fit for a particular purpose was considered: [8.310]

Grant v Australian Knitting Mills Ltd (1936) 54 CLR 49 (PC) [8.320] G purchased woollen underwear from M, a retailer whose business it was to sell goods of that description, and after wearing the garments G developed an acute skin disease. It was held that the goods were not reasonably fit for their only proper use and G was entitled to damages against the retailer.

McWilliam’s Wines Pty Ltd v Liaweena (NSW) Pty Ltd [1988] ASC 55-695; [1991] ASC 56-038 (NSWCA) [8.330] In 1983, the plaintiff wine maker bought 500,000 corks from the defendant cork merchant. It was later found that a significant proportion of the bottles of wine sealed with the corks had been contaminated and were unsaleable. It was held that the defendant was liable for breach of the implied condition of fitness. Given the background of many other transactions between the parties over a number of years, it had been established that the plaintiff had made known to the defendant that it was relying on the latter’s skill and judgment to deliver corks which were not contaminated in some way unobservable to visual examination and which would cause a deleterious effect upon wine. It was further held that the corks were not of merchantable quality and that provisions purporting to exclude the defendant’s liability had not been sufficiently brought to the plaintiff’s attention. Damages for breach of the implied conditions were assessed at $2,080,892.

[8.360]

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Expo Aluminium (NSW) Pty Ltd v WR Pateman Pty Ltd [1990] ASC 55-978 [8.340] The owner of a house built on a site exposed to the weather requested the appellant manufacturer to supply replacement aluminium windows for wooden ones which leaked. The appellant ordered the windows in turn from the respondent manufacturer who was told: “There is nothing between the job and the South Pole”. The windows supplied were totally unsuited to the site. In the New South Wales Court of Appeal, Meagher JA (with whom Samuels JA agreed) said: “The buyer, if he relies on s 19(1) [implied condition of fitness], must establish two elements. He must establish purpose and he must establish reliance. He can establish reliance as an inference from his statement of purpose or it may be established by some other evidence”. On the facts the appellant had made known to the respondent the particular purpose for which the windows were required; reliance on the respondent’s skill and judgment was established as an inference from the appellant’s statement of purpose.

Aqua-Marine Marketing Pty Ltd v Pacific Reef Fisheries (Australia) Pty Ltd (No 5) [2012] FCA 908 at [173]-[174] [8.345] A prawn wholesaler purchased black tiger prawns from a prawn farmer for onsale to Woolworths. The farmer knew that the prawns were to be onsold to Woolworths. The prawns supplied were not suitable for sale to Woolworths as they did not meet that company’s quality specifications. The prawns had to be sold for a lower price to a seafood distributor. The wholesaler sued the farmer for the difference between the price Woolworths would have paid and the price that was ultimately obtained. The Federal Court held that the implied condition of fitness for purpose had been breached. The parties had agreed that the prawns would comply with the Woolworths specifications: at [152]. Given the huge size of the order (50 tonnes) and the difficulty of testing frozen perishable items without spoiling them, the wholesaler had no practical choice but to rely on the farmer’s skill and judgment: at [161]. Judgment was given for the amount claimed.

It is sufficient if the buyer relies only partially on the skill and judgment of the seller provided that the matters of which the buyer complains are matters in respect of which the buyer relied on the seller. [8.350]

Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 [8.360] The plaintiff, a compounder of animal foodstuffs, contracted with the defendant mink farmer to compound and supply to him certain mink food in accordance with a formula supplied by the defendant. One of the ingredients in the formula was herring meal which the plaintiff purchased from a third party. However, the herring meal supplied had become contaminated by a substance produced by a chemical reaction following the use of a preservative. The substance was highly toxic to mink and the defendant suffered heavy losses on feeding his mink with the compound. The plaintiff sued the defendant for the price of the mink food and the defendant counterclaimed for damages. The House of Lords held that the plaintiff was liable for breach of the implied condition of fitness for purpose because, although the defendant had relied on his own judgment as to the suitability of the compound for mink food, he relied on the plaintiff

130

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.370]

cont. seller to select and acquire good quality ingredients of the kind set out in the formula. It was further held that the third party supplier of the herring meal was liable to the plaintiff for breach of the implied condition.

The mere fact that an article sold is described in the contract by its trade name does not necessarily make it a sale “under a trade name” so as to prevent the condition of fitness for a particular purpose from being implied. It all depends on the circumstances. Basically, the trade name proviso applies only where the buyer orders the goods under their trade name in such a way as to show that the buyer does not rely on the seller's skill and judgment: Baldry v Marshall [1925] 1 KB 260. A condition or warranty as to quality or fitness for a particular purpose may be annexed by the custom or usage of trade. However, before such term will be implied, the custom or usage must be notorious (that is, generally known throughout the trade), certain, and reasonable. [8.370]

Sale by sample [8.380]

Where the sale is by sample only, there is an implied condition that:

(a)

the bulk will correspond with the sample in quality;

(b)

the buyer will have a reasonable opportunity of comparing the bulk with the sample; and

(c)

the goods will be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample. 28 The goods must be free from any defect rendering them unmerchantable which is not apparent from a reasonable examination of the sample: Drummond v Van Ingren & Co (1887) 12 App Cas 284. A contract of sale is a contract for sale by sample where there is a term in the contract express or implied to that effect. Exclusion of the terms implied by the Sale of Goods Acts ...............................................................................................................................................................................................

The implied conditions and warranties may be, and frequently are, excluded or varied by express or implied agreement between the parties to the sale. It is provided by the Sale of Goods Act that where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties or by usage, if the usage is such as to bind both [8.390]

28

Sale of Goods Act 1923 (NSW), s 20; Goods Act 1958 (Vic), s 20; Sale of Goods Act 1896 (Qld), s 18; Sale of Goods Act 1895 (SA), s 15; Sale of Goods Act 1895 (WA), s 15; Sale of Goods Act 1896 (Tas), s 20; Sale of Goods Act 1954 (ACT), s 20; Sale of Goods Act 1972 (NT), s 20.

[8.400]

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parties to the contract. 29 An exclusion clause which provided that “[a]ll statutory and implied conditions and warranties except as to title are excluded” was effective to exclude the supplier’s liability for breach of the implied conditions of merchantable quality and fitness for purpose: Victorian Alps Wine Co Pty Ltd v All Saints Estate Pty Ltd (2012) 34 VR 397 at [1], [9], [43], [52]. A clause may be included in the contract excluding liability as follows: “All conditions, warranties and liabilities implied by statute, common law or otherwise are excluded”. Such a clause does not protect the seller against any express warranty which may be included in the contract: Andrews Bros (Bournemouth) Ltd v Singer & Co Ltd [1934] 1 KB 17. It is for the party seeking to rely upon the exclusion clause to establish that the clause excludes their liability: Victorian Alps Wine Co Pty Ltd v All Saints Estate Pty Ltd (2012) 34 VR 397 at [1], [39]. When a condition is to be treated as a warranty ...............................................................................................................................................................................................

Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or may elect to treat the breach of such condition as a breach of warranty and not as a ground for treating the contract as repudiated; 30 for example where goods sold by description are of a different description: Wallis, Son & Wells v Pratt & Haynes [1911] AC 394 at 395. Where a contract of sale is not severable and the buyer has accepted the goods or part of them, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is an express or implied term of the contract to that effect. 31 In Russo v Belcar Pty Ltd (2011) 111 SASR 459 the South Australian Full Court held that the purchaser had accepted the car and it was too late to rescind the contract. In these circumstances any breach on the part of the seller was a breach of warranty and there was no ground for rejecting the goods: at [21]. [8.400]

29

30

31

Sale of Goods Act 1923 (NSW), s 57; Goods Act 1958 (Vic), s 61; Sale of Goods Act 1896 (Qld), s 56; Sale of Goods Act 1895 (SA), s 54; Sale of Goods Act 1895 (WA), s 54; Sale of Goods Act 1896 (Tas), s 59; Sale of Goods Act 1972 (NT), s 57. In the ACT, the former Sale of Goods Act 1954 (ACT), s 58 was omitted by the Fair Trading Legislation Amendment Act 2001 (ACT), s 27. Sale of Goods Act 1923 (NSW), s 16; Goods Act 1958 (Vic), s 16; Sale of Goods Act 1896 (Qld), s 14; Sale of Goods Act 1895 (SA), s 11; Sale of Goods Act 1895 (WA), s 11; Sale of Goods Act 1896 (Tas), s 16; Sale of Goods Act 1954 (ACT), s 16; Sale of Goods Act 1972 (NT), s 16. See previous footnote. The Sale of Goods Act further provided that the buyer lost the right to reject goods for breach of condition of a contract for the sale of specific goods once the property in the goods had passed to the buyer. However, this provision has been repealed in New South Wales (Sale of Goods (Amendment) Act 1988 (NSW)), South Australia (Misrepresentation Act 1972 (SA), s 11) and in the Australian Capital Territory (Sale of Goods Act 1954 (ACT), s 3). Therefore, in those States and Territory the buyer will only lose the right to reject where he or she has accepted the goods or part of them.

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[8.410]

Caveat emptor ...............................................................................................................................................................................................

Apart from the conditions and warranties referred to above, there are no implied warranties or conditions at common law as to the quality or fitness for any particular purpose of goods supplied and the maxim “caveat emptor” or “let the buyer beware” applies. However, the position of a consumer purchasing goods has been considerably strengthened by the Australian Consumer Law. [8.410]

Transfer of property We have discussed the formalities attaching to the formation of a contract of sale and the terms implied in such contract. It is now necessary to consider the following important matters connected with the transfer of the goods: [8.420]

(a)

the distinction between property in and possession of goods;

(b)

the rules covering the transfer of the ownership or property in goods;

(c)

the right of reserving disposal, that is, the seller deferring the transfer of the property; and

(d)

the risk of loss of or injury to goods.

Property and possession ...............................................................................................................................................................................................

There is a vast difference between “property” in and the “possession” of goods. Property relates to ownership or title, whilst possession refers to the custody or control of goods. Thus, one person may have the possession of certain goods, whilst another may have the property in, or ownership of, such goods. For example, A leaves his damaged car with B for repair. The ownership of the car is in A but the possession is in B. Also, goods may be in the possession of a third person, for example a carrier, and although the property has passed on a sale to the buyer, the carrier is entitled to possession of them until the carrier's charges are paid. [8.430]

Transfer of ownership or property in goods ...............................................................................................................................................................................................

It is important to be able to ascertain the exact time when the ownership of or property in goods passes from the seller to the buyer as the risk of loss vests in the owner. This question arises where goods are stolen, or destroyed by fire, or upon the bankruptcy of either party. The primary rule for ascertaining when the ownership of goods passes to the buyer is: [8.440]

(a)

in the case of specific or ascertained goods, the property passes at such time as the parties intend it to pass taking into account the terms of the contract, the conduct of the parties and the circumstances of the case; and

[8.490]

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in the case of unascertained or future goods, no property can pass unless and until the goods become ascertained. 32 Subject to these two basic rules, the following sub-rules set out in the Sale of Goods Act 33 apply and, in the absence of a contrary intention, they are the rules for ascertaining the time at which the property in the goods is to pass to the buyer: (b)

Rule 1

Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, are postponed. [8.450]

Bodilingo Pty Ltd v Webb Projects Pty Ltd (1990) ASC 56-001 [8.460] A contract for the sale of office furniture, computers and other equipment provided for the purchase price to be paid by a deposit of $10,000 and the balance of $360,000 by 10 monthly instalments of $36,000. The New South Wales Court of Appeal held that, since there was no contrary intention in the contract, property passed to the buyer under this rule at the time when the contract was made. Accordingly, the seller was not entitled to recover the goods when the buyer became insolvent after payment of the fifth instalment and thereby unable to pay the balance of the purchase price in full.

Goods are said to be in a deliverable state when they are in such a state that the buyer is bound under the contract to take delivery of them. [8.470]

Rule 2

Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state, the property does not pass until such thing is done and the buyer has notice of it – there is no immediate passing of property. [8.480]

Rule 3

Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice of it. [8.490]

32

Sale of Goods Act 1923 (NSW), ss 21 – 22; Goods Act 1958 (Vic), ss 21 – 22; Sale of Goods Act 1896 (Qld), ss 19 – 20; Sale of Goods Act 1895 (SA), ss 16 – 17; Sale of Goods Act 1895 (WA), ss 16 – 17; Sale of Goods Act 1896 (Tas), ss 21 – 22; Sale of Goods Act 1954 (ACT), ss 21 – 22; Sale of Goods Act 1972 (NT), ss 21 – 22. For the meaning of “future”, “specific” and “unascertained” goods, see [8.130]-[8.150].

33

Sale of Goods Act 1923 (NSW), s 23; Goods Act 1958 (Vic), s 23; Sale of Goods Act 1896 (Qld), s 21; Sale of Goods Act 1895 (SA), s 18; Sale of Goods Act 1895 (WA), s 18; Sale of Goods Act 1896 (Tas), s 23; Sale of Goods Act 1954 (ACT), s 23; Sale of Goods Act 1972 (NT), s 23.

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[8.500]

Rule 4

Where goods are delivered to the buyer on approval, or on “sale or return”, or other similar terms, the property in them passes to the buyer: [8.500]

(a)

when the buyer signifies their approval or acceptance to the seller, or does any other act adopting the transaction; or

(b)

if the buyer does not signify their approval or acceptance to the seller, but retains the goods without giving notice of the rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.

Rule 5 [8.510]

(a)

Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. The Act provides that the “assent” may be express or implied. Therefore if the seller notifies the buyer of an appropriation and the buyer does not object within a reasonable time, the property may be deemed to pass on the implied assent of the buyer.

(b)

Where in pursuance of the contract the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer and does not reserve the right of disposal, the seller is deemed to have unconditionally appropriated the goods to the contract. Where the agreement covers by description unascertained or future goods, the property in such goods does not pass to the buyer until goods answering that description and in a deliverable state are unconditionally appropriated to the contract by one party with the assent of the other. A common form of appropriation of the goods by the seller occurs when the seller delivers them to a carrier for the purpose of transmission to the buyer. There is no appropriation if the seller reserves a right of disposal (see below), but if this right is not reserved the property passes to the buyer on delivery by the seller to the carrier.

Wardar’s (Import & Export) Co Ltd v W Norwood & Sons Ltd [1968] 2 QB 663 [8.520] The plaintiff wholesaler agreed to buy 600 cartons of frozen ox kidneys from the defendant importer. The cartons were held in a cold store. When the plaintiff’s carrier arrived at the cold store at 8 am he found the cartons stacked on the pavement outside. The carrier handed over the delivery note and loading commenced but was

[8.550]

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cont. not completed until 12 noon. The carrier did not turn on the refrigeration unit in his lorry until 10 am. Around 11 am the carrier noticed that some of the cartons on the pavement were dripping. Cooling of the lorry was not effective until 1 pm. The carrier delivered the cartons to Scotland where the kidneys were found to be unfit for human consumption. The plaintiff sued for damages for breach of the implied condition of merchantable quality and the defendant counterclaimed for the price of the kidneys. The Court of Appeal held that property in the cartons of kidneys, and therefore the risk of their deterioration, passed to the plaintiff buyer on the carrier handing over the delivery note at the cold store: it appeared that the kidneys were in good condition at that time and their deterioration occurred subsequently. Accordingly, the plaintiff’s action failed and the plaintiff held liable for the price of the kidneys.

The buyer may appropriate goods to the contract by selecting certain goods to satisfy her or his order. The New South Wales Act makes special provision for the sale of goods forming part of a bulk quantity, such as contracts for the sale of grain: Sale of Goods Act 1923 (NSW), s 25A. This provision applies to a contract for the sale of a specified quantity of unascertained goods of which some or all form part of a single bulk quantity of goods. The bulk must be identified by the contract and the buyer must have paid for some or all of the goods forming part of the bulk. Unless the parties agree otherwise, property in an undivided share in the bulk is transferred to the buyer, and the buyer becomes an owner in common of the bulk. The Victorian and South Australian Acts also make similar provision in relations to goods forming part of a bulk: Goods Act 1958 (Vic), s 25A; Sale of Goods Act 1895 (SA), s 20A. [8.530]

Reservation of right of disposal ...............................................................................................................................................................................................

In a contract for the sale of specific goods or a later appropriation of unascertained goods to the contract, the seller may by the terms of the contract or appropriation reserve the right of disposal of the goods until certain conditions are fulfilled. 34 In such case, notwithstanding the delivery of the goods to the buyer or to a carrier, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. For example, the buyer may be required to accept certain bills of exchange or pay cash before obtaining the goods. [8.540]

“Romalpa” clauses

In recent years reservation of title clauses in contracts for the sale of goods have become increasingly sophisticated in the attempt to preserve for the seller rights in respect of the goods sold until the seller has been paid the purchase price in full. The purpose of [8.550]

34

Sale of Goods Act 1923 (NSW), s 24; Goods Act 1958 (Vic), s 24; Sale of Goods Act 1896 (Qld), s 22; Sale of Goods Act 1895 (SA), s 19; Sale of Goods Act 1895 (WA), s 19; Sale of Goods Act 1896 (Tas), s 24; Sale of Goods Act 1954 (ACT), s 24; Sale of Goods Act 1972 (NT), s 4.

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[8.560]

the clauses is to enable the seller to recover the goods (or the proceeds of sale where resold by the buyer) in the event of the buyer's insolvency and thereby prevent the goods from becoming part of the property or assets of the buyer available for distribution amongst the buyer's other creditors. Such clauses are commonly referred to as “Romalpa” clauses after the decision of the United Kingdom Court of Appeal in Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676. 35 Associated Alloys v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25 [8.560] The decision of the High Court in Associated Alloys v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25 demonstrates the viability of “Romalpa” clauses under Australian law. In this case, a “Romalpa” clause in a contract of sale provided as follows: “In the event that the [buyer] uses the goods … in some manufacturing … process … then the [buyer] shall hold such part of the proceeds of such manufacturing … process … as relates to the goods … in trust for the [seller]. Such part shall be deemed to equal … the amount owing by the [buyer] to the [seller] at the time of the receipt of such proceeds”. Section 266 of the former Corporations Law provided that an unregistered “charge” was void against the liquidator or administrator of a company. The court held that the trust created by the Romalpa clause did not constitute an unregistered charge, and was thus not rendered void against the liquidator by s 266. The Romalpa clause could be effective to create a trust over the proceeds in the amount owing to the seller. However, on the facts, the seller had not established that the buyer had received the “proceeds” of the manufacturing process, an essential precondition for the creation of a trust under the Romalpa clause. The court also indicated that it was an implied term of the contract that the buyer’s debt to the seller would be discharged by the constitution of a trust under the Romalpa clause. 36

Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558 at [13] [8.570] A Romalpa clause provided that the buyer of goods was permitted to sell them, but until the purchase price was paid, the buyer acted as agent for the seller when selling the goods. The clause also provided that the proceeds of sale would be held in a separate account in trust for the buyer. It was held that the buyer’s obligation to pay the purchase price would not be discharged until the full price was held in that separate account: Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558; see also BHP Steel Ltd v HH Robertson (Australia) Pty Ltd [2002] NSWSC 336.

A further example of the effect of a Romalpa clause is Hardy Wine Co Ltd v Tasman Liquor Traders Pty Ltd (2006) 95 SASR 21:

[8.580]

35

36

See generally D Ong, “Romalpa Clauses and the Issues Concerning (i) the Meaning of “the Proceeds” Received by the Buyer; (ii) the Buyer’s Credit Period; and (iii) the Charge/Trust Dichotomy in Relation to “the Proceeds”” (2000) 12 Bond Law Review 148. See T M Carlin, “Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd: A Commentary and Analysis” (2002) 30 Australian Business Law Review 106.

[8.610]

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Hardy Wine Co Ltd v Tasman Liquor Traders Pty Ltd (2006) 95 SASR 21 at [40], [56] [8.590] Hardy supplied wines to Tasman, a Victorian wholesaler. Tasman onsold Hardy wines to Eaglehawk, a Tasmanian business. A credit agreement between Hardy and Tasman contained a Romalpa clause by which Hardy retained ownership until payment. The invoice for every consignment of wine also contained a Romalpa clause. After the credit agreement was entered into, the delivery arrangements for the wine were changed. Instead of Hardy dispatching wine to Tasman which would send it to Eaglehawk, Hardy dispatched the wines directly to Eaglehawk. Each consignment of goods sent to Eaglehawk was accompanied by a delivery docket containing a retention of title clause. When Tasman became insolvent it had not made payment for eight consignments of Hardy wines. The South Australian Full Court held that the change in delivery arrangements had no effect upon the Romalpa clause. In the absence of payment, title over the wines had not passed and Hardy retained title.

However, retention of title clauses of the kind discussed in these cases are likely to constitute a “security interest” for the purposes of the Personal Property Securities Act 2009 (Cth) and require registration in the national Personal Property Securities Register to be enforceable against third parties. [8.600]

Risk

The risk of loss or damage to the goods and the question of ownership of goods are linked together, and it is often important to know who is really the owner of goods as a loss of such goods must be borne by the person who owns them: that is the risk of loss prima facie passes with property. The Sale of Goods Act provides: [8.610]

Unless otherwise agreed, the goods remain at the seller's risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer's risk whether delivery is made or not. 37

As was previously explained, ownership of goods does not necessarily vest in the buyer simply because he or she has possession of them. Further, the buyer may own the goods although they have not gained possession of them. The loss of specific goods which have been destroyed at the time the parties enter into an agreement falls upon the seller and the contract is void. The Sale of Goods Act provides: Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void.

37

Sale of Goods Act 1923 (NSW), s 25; Goods Act 1958 (Vic), s 25; Sale of Goods Act 1896 (Qld), s 23; Sale of Goods Act 1895 (SA), s 20; Sale of Goods Act 1895 (WA), s 20; Sale of Goods Act 1896 (Tas), s 25; Sale of Goods Act 1954 (ACT), s 25; Sale of Goods Act 1972 (NT), s 25.

138

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.620]

Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish before the risk passes to the buyer, the agreement is thereby avoided. 38

A contract for the sale and delivery of an indivisible parcel of goods may be avoided if part of the goods is not forthcoming. For example, the sale of a specific parcel of 700 bags of Chinese nuts was avoided when it was found that there were only 591 bags: The result is that the parties were contracting about something which, at the date of the contract, without knowledge or fault of either party, did not exist. To compel the buyer in those circumstances to take 591 bags would be to compel him to take something which he had not contracted to take, and would in my judgment be unjust: Barrow, Lane & Ballard v Phillip Phillips & Co [1929] 1 KB 574 at 583 per Wright J.

It will be noticed that the above provisions relate to specific goods, that is, goods identified and agreed upon, and therefore, if these goods are destroyed, the contract becomes impossible of performance. If the stock from which a seller intended to fulfil a contract of sale of unascertained goods has perished at the time of the contract of sale, there is no ground for an avoidance of the agreement and the seller would be required to find other goods to tender in performance of the contract. Where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault. 39 Allied Mills Ltd v Gwydir Valley Oilseeds Pty Ltd [1978] 2 NSWLR 26 [8.620] A seller sold a quantity of linseed meal in his store to a buyer, property in the goods passing to the buyer on the making of the contract of sale. In breach of contract, the seller declined to deliver part of the goods within the agreed period. Later the goods were destroyed by fire while still in the seller’s store. It was found that the loss might not have occurred but for the seller’s breach of contract. It was held the buyer was not only relieved from liability to pay for the goods but was also entitled to recover damages for the seller’s failure to deliver since the buyer had been forced to buy equivalent goods in the market at a considerably higher price.

Title of transferee The general rule is that the transferee of goods cannot obtain a better title to such goods than that of the transferor. This is usually referred to as the nemo dat rule (the full expression is nemo dat quod non habet, that is, no-one can pass to another a better title than he himself has). [8.630]

38

Sale of Goods Act 1923 (NSW), ss 11, 12; Goods Act 1958 (Vic), ss 11, 12; Sale of Goods Act 1896 (Qld), ss 9, 10; Sale of Goods Act 1895 (SA), ss 6, 7; Sale of Goods Act 1895 (WA), ss 6, 7; Sale of Goods Act 1896 (Tas), ss 11, 12; Sale of Goods Act 1954 (ACT), ss 11, 12; Sale of Goods Act 1972 (NT), ss 11, 12.

39

Sale of Goods Act 1923 (NSW), s 25; Goods Act 1958 (Vic), s 25; Sale of Goods Act 1896 (Qld), s 23; Sale of Goods Act 1895 (SA), s 20; Sale of Goods Act 1895 (WA), s 20; Sale of Goods Act 1896 (Tas), s 25; Sale of Goods Act 1954 (ACT), s 25; Sale of Goods Act 1972 (NT), s 25.

CHAPTER

[8.650]

08

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139

Accordingly, where goods are sold by a person who is not the owner of them and who does not sell them under the authority or with the consent of the owner, the buyer does not acquire a good title. For example, the buyer does not obtain a good title to goods which have been stolen or lost. Where goods are stolen the property in the goods remains in the owner notwithstanding any intermediate dealing. Where the goods have been obtained by wrongful means not amounting to theft, for example as the result of a contract induced by fraud, they will not re-vest in the owner by reason only of the conviction of the offender. There are, however, certain exceptions to the nemo dat rule, namely: (a)

a sale where the owner is estopped from denying the authority of the seller;

(b)

a sale by a mercantile agent or a sale under special common law or statutory power of sale;

(c)

a sale by a person having a voidable title; or

(d)

a sale by a seller or buyer in possession after the sale.

Estoppel ...............................................................................................................................................................................................

Where the owner of goods is by their conduct precluded from denying the seller's authority to sell, the buyer obtains a good title. 40 To permit goods to go into the possession of a person in circumstances which make it appear that such person has authority to sell the goods may estop (prevent) the owner from upsetting a purchase of the goods by a buyer in good faith and for value. [8.640]

Big Rock Pty Ltd v Esanda Finance Corp Ltd (1992) 10 WAR 259 [8.650] The respondent financier lent money to a borrower on the security of a mortgage over a motor vehicle. By mistake, the financier wrote a letter to the borrower stating that the loan had been finalised and that the financier no longer had an interest in the vehicle. In fact, only two of 48 payments had been paid in reduction of the loan. The borrower purported to sell the vehicle to the appellant motor dealers. The latter, by a search of the Register of Encumbered Motor Vehicles established under the Chattel Securities Act 1987 (WA), ascertained the existence of the financier’s mortgage but relied on the letter as supporting the borrower’s claim that the mortgage debt had been paid in full. The financier sued the motor dealers in conversion for the value of the vehicle. The Western Australia Full Supreme Court held that under the Sale of Goods Act 1895 (WA), s 21(1) the respondent financier was precluded, that is, estopped by its conduct from denying the borrower’s authority to sell the vehicle. The appellant motor dealers therefore acquired a good title to the vehicle.

40

Sale of Goods Act 1923 (NSW), s 26; Goods Act 1958 (Vic), s 27; Sale of Goods Act 1896 (Qld), s 24; Sale of Goods Act 1895 (SA), s 21; Sale of Goods Act 1895 (WA), s 21; Sale of Goods Act 1896 (Tas), s 26; Sale of Goods Act 1954 (ACT), s 26; Sale of Goods Act 1972 (NT), s 26.

140

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.660]

Merely parting with possession of goods will not in itself raise an estoppel against the true owner. There must usually have been conduct on the part of the true owner amounting to a representation that the person in possession of the goods was entitled to sell them. [8.660]

An owner may be precluded from denying the seller's authority by reason of his conduct which, expressly or impliedly, constitutes an unambiguous representation to the buyer that the seller has his authority to make the sale. … In some cases, the omission of the owner to take steps to prevent the sale may also estop him from asserting his title. But inaction, silence, or even gross carelessness in the protection of property is not of itself enough to preclude an owner from asserting his title: Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 at 469 per McHugh JA.

Sale by mercantile agent or by person under special power ...............................................................................................................................................................................................

When goods are sold by a mercantile agent to a person who takes them bona fide, such person obtains a good title to the goods, notwithstanding that the principal may have revoked the agent's authority to sell. Sales made under any special common law or statutory power of sale (for example, sheriffs, innkeepers, and landlords) also pass the title to the buyer. [8.670]

Sale under a voidable title ...............................................................................................................................................................................................

Where the seller of goods has a voidable title, for example a title gained through fraud, but the title has not been avoided at the time of the sale, the buyer acquires a good title to the goods provided he or she buys them in good faith and without notice of the seller's defect of title. 41 Where the seller's title is void then the buyer gains no title unless one of the other exceptions applies. [8.680]

Phillips v Brooks Ltd [1919] 2 KB 243 [8.690] A man entered a shop and purchased a ring valued at £450, stating that he was Sir George Bullough, a well-known person. He gave the address of Sir George, which the jeweller verified by reference to a directory, and thus assumed he actually was the person represented. The person took the ring and later pawned it for £350. It was held that the property passed to the swindler so as to enable him to give a good title to any person who gave value and acted bona fide without notice as his title, which had been obtained by fraud, was voidable not void: Phillips v Brooks Ltd [1919] 2 KB 243; see similarly, Vassallo v Haddad Import & Export Pty Ltd (2004) 2 DCLR (NSW) 123.

41

Sale of Goods Act 1923 (NSW), s 27; Goods Act 1958 (Vic), s 29; Sale of Goods Act 1896 (Qld), s 25; Sale of Goods Act 1895 (SA), s 23; Sale of Goods Act 1895 (WA), s 23; Sale of Goods Act 1896 (Tas), s 28; Sale of Goods Act 1954 (ACT), s 27; Sale of Goods Act 1972 (NT), s 27.

[8.720]

CHAPTER

08

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141

Sale by seller or buyer in possession after sale ...............................................................................................................................................................................................

Sale by seller in possession

The Sale of Goods Act provides that, where a seller having sold goods continues in possession of the goods or of the documents of title to the goods, the delivery or transfer by the seller of the goods or documents of title under any sale, pledge or other disposition to a person receiving them in good faith and without notice of the previous sale has the same effect as if the transaction was authorised by the owner, that is the original purchaser. 42 In other words, where this provision applies, the bona fide purchaser of goods from a seller who has continued in possession of the goods after their sale to the original purchaser will acquire a good title to the goods as against the original purchaser: Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] AC 867. [8.700]

Sale by buyer in possession

Similar provision is made in the case of a buyer in possession. Where a person having bought or agreed to buy goods obtains possession of the goods with the consent of the seller, the delivery or transfer by the buyer of the goods or documents of title under any sale, pledge or other disposition to some other person receiving the same in good faith and without notice of the rights of the original seller has the same effect as if the buyer was a “mercantile agent” entrusted by the owner with the goods or documents of title. 43 In substance, the bona fide purchaser of goods from a buyer who obtained possession of the goods with the consent of the original seller obtains a good title to them. [8.710]

Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236 [8.720] G, a motor vehicle wholesaler, agreed to sell certain vehicles to E, a retail dealer. The contract of sale provided that property in the vehicles was not to pass to E until G had been paid in full. E was given possession of the vehicles but G was never paid. E had entered into a floor plan agreement with N, a finance company. The agreement provided for the purchase by N of vehicles acquired by E, with E retaining possession of them as bailee for N pending their sale in the course of E’s retail business. E purported to sell to N, under the terms of the floor plan, the vehicles he had previously “bought” from G. G, not having been paid, seized possession of the vehicles from E. N brought an action against G to recover the vehicles or their value. It was held by a majority of the High Court that N had acquired a good title to the vehicles. Thus, when E sold them to N under the terms of the floor plan agreement 42

Sale of Goods Act 1923 (NSW), s 28; Goods Act 1958 (Vic), ss 30, 31; Sale of Goods Act 1896 (Qld), s 27; Sale of Goods Act 1895 (SA), s 25; Sale of Goods Act 1895 (WA), s 25; Sale of Goods Act 1896 (Tas), s 30; Sale of Goods Act 1954 (ACT), s 29; Sale of Goods Act 1972 (NT), s 28.

43

Sale of Goods Act 1923 (NSW), s 28; Goods Act 1958 (Vic), ss 30, 31; Sale of Goods Act 1896 (Qld), s 27; Sale of Goods Act 1895 (SA), s 25; Sale of Goods Act 1895 (WA), s 25; Sale of Goods Act 1896 (Tas), s 30; Sale of Goods Act 1954 (ACT), s 29; Sale of Goods Act 1972 (NT), s 28.

142

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.730]

cont. there had been a constructive delivery of the vehicles to N. Accordingly, E was a person who, having agreed to buy the vehicles from G, had obtained possession of them with G’s consent, and their delivery (albeit constructive rather than actual) under the sale to N had the effect of vesting a good title in N.

The bona fide purchaser of goods from a buyer who obtained possession of the goods with the consent of the original seller will only obtain a good title to the goods under the statutory provision where the original seller was lawfully entitled to sell the goods. [8.730]

Ford Credit Australia Ltd v Auto Trade Auction Pty Ltd [1982] VR 795 [8.740] The plaintiff finance company leased a truck to a lessee under a leasing agreement. In breach of the agreement, the lessee employed a dealer to sell the truck for him. The dealer, who knew that the plaintiff finance company was the owner of the truck, purported to sell it to R, who in turn purported to sell it to the defendant. The plaintiff finance company sued the defendant for damages in conversion and the defendant contended that he had acquired a good title as a bona fide purchaser from the buyer in possession, namely, R. However, it was held that the statutory provision only applied where the original seller (that is, the dealer employed by the lessee to sell the truck) was lawfully entitled to sell the goods and, since such was clearly not the case on the facts, the defendant had not acquired a good title and, accordingly, was liable for conversion of the truck to the plaintiff finance company. A subsequent purchaser of the truck was similarly held liable to the finance company.

A purchaser from a buyer in possession only acquires a good title under the statutory provision where the purchaser receives the goods in good faith and without notice of the rights of the original seller of the goods (assuming, of course, that the other requirements of the section are satisfied). The onus of proving such is on the purchaser. Notice in this context means actual not constructive notice, that is, it is not sufficient for the original seller to contend that by making further inquiries the purchaser could have discovered that the buyer in possession of the goods who had purported to sell the goods to the purchaser had no right to do so, unless of course there was something obviously suspicious such as to put the purchaser on inquiry: Robinson Motors Pty Ltd v Fowler [1982] Qd R 374. Where the good being sold is a motor vehicle which is subject to a security interest, the legal position of the bona fide purchaser will depend on whether the security interest has been registered in the national Personal Property Securities Register established under the Personal Property Securities Act 2009 (Cth) (see [19.1380] (Turner and Trone)). [8.750]

CHAPTER

[8.770]

08

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143

Performance of the contract It is the duty of the seller to deliver the goods and that of the buyer to accept and pay for them in accordance with the terms of the contract. 44 Delivery may be actual or constructive. Apart from any agreement to the contrary, in all sales payment and delivery are concurrent conditions, so that the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer must be ready to pay the price in exchange for possession of the goods. 45 Unless otherwise agreed, the price should be paid in legal tender and the buyer has no right to have possession of the goods until he or she pays the price. If the goods are sold on credit and nothing is said as to the time of delivery, the buyer is entitled to immediate possession and the property as well as possession passes to the buyer, liable only to be defeated under the rule of stoppage in transitu where the buyer becomes insolvent before the goods reach her or his actual possession. [8.760]

Rules as to delivery ...............................................................................................................................................................................................

The Sale of Goods Act sets out the following general rules as to the delivery of goods under a contract of sale: 46 [8.770]

1.

Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer, is a question depending in each case on the contract between the parties. Apart from any contract the place of delivery is the seller's place of business or, if the seller has no place of business, the seller's residence. If the contract is for specific goods and the parties know that they are in some other place, then that place is the place of delivery unless otherwise agreed. If the seller agrees to deliver goods to the buyer's premises and, without negligence, delivers them there to a person apparently authorised to receive them and the person receiving them misappropriates them, the loss must fall on the buyer and not on the seller: Galbraith & Grant Ltd v Block [1922] 2 KB 155.

2.

Where goods are to be delivered but no time for sending them is fixed, the seller is bound to send them within a reasonable time.

44

Sale of Goods Act 1923 (NSW), s 30; Goods Act 1958 (Vic), s 34; Sale of Goods Act 1896 (Qld), s 29; Sale of Goods Act 1895 (SA), s 27; Sale of Goods Act 1895 (WA), s 27; Sale of Goods Act 1896 (Tas), s 32; Sale of Goods Act 1954 (ACT), s 31; Sale of Goods Act 1972 (NT), s 30. Sale of Goods Act 1923 (NSW), s 31; Goods Act 1958 (Vic), s 35; Sale of Goods Act 1896 (Qld), s 30; Sale of Goods Act 1895 (SA), s 28; Sale of Goods Act 1895 (WA), s 28; Sale of Goods Act 1896 (Tas), s 33; Sale of Goods Act 1954 (ACT), s 32; Sale of Goods Act 1972 (NT), s 31.

45

46

Sale of Goods Act 1923 (NSW), ss 32, 35; Goods Act 1958 (Vic), ss 36, 39; Sale of Goods Act 1896 (Qld), ss 31, 34; Sale of Goods Act 1895 (SA), ss 29, 32; Sale of Goods Act 1895 (WA), ss 29, 32; Sale of Goods Act 1896 (Tas), ss 34, 37; Sale of Goods Act 1954 (ACT), ss 33, 36; Sale of Goods Act 1972 (NT), ss 32, 35.

144

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.780]

3.

Where the goods at the time of sale are in the possession of a third person, there is no delivery unless the third person acknowledges to the buyer that he or she holds the goods on the buyer's behalf.

4.

Demand or tender of delivery must be made at a reasonable hour.

5.

Unless otherwise agreed, the expenses of putting the goods into a deliverable state must be borne by the seller.

6.

Where the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier for the purpose of transmission to the buyer is, prima facie, deemed to be a delivery of the goods to the buyer.

7.

The general rule is that the seller must make the arrangements with the carrier for the transit but this rule is subject to any agreement to the contrary. If the seller omits to make all reasonable arrangements with the carrier, the buyer may decline to treat the delivery to the carrier as a delivery to herself or himself, or the buyer may do so and hold the seller responsible and sue for damages.

8.

If the goods are to be forwarded by a route involving sea transit, it is generally the duty of the seller to notify the buyer so that the buyer may insure the goods and if the seller defaults in giving such notice the goods will be at the seller's risk during the sea transit.

9.

When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, the buyer is liable to the seller for any loss occasioned by the buyer's neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods.

10.

The preceding rule does not affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract.

Constructive or symbolical delivery ...............................................................................................................................................................................................

In certain cases delivery may not amount to an actual transfer of the goods after sale but it may be construed from the circumstances. This is known as “constructive” or “symbolical delivery”. For example, where A has a motor launch locked in a boatshed and sells it to B and hands B the key of the shed so that he may take delivery at his convenience, constructive or symbolical delivery has taken place. A delivery of documents of title, for example a bill of lading, amounts to symbolical delivery of the goods. To be valid, constructive delivery must have the effect of immediately subjecting the goods to the control of the person to whom delivery has to be made. [8.780]

[8.800]

CHAPTER

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145

Delivery of wrong quantity or mixed goods ...............................................................................................................................................................................................

Where the seller delivers to the buyer a quantity of goods less than the seller contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered the buyer must pay for them at the contract rate. 47 Where the seller delivers to the buyer a quantity of goods larger than the seller contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or the buyer may reject the whole. If the buyer accepts the whole of the goods so delivered the buyer must pay for them at the contract rate. Where the seller delivers to the buyer the goods the seller contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or the buyer may reject the whole: London Plywood Ltd v Nasic Oak Ltd [1939] 2 KB 343. The above provisions are subject to any usage of trade, special agreement, or course of dealing between the parties; for example, the contract may contain a clause approximating the quantity such as “more or less” or say “about” a definite number in order to allow for a reasonable variation. Where the excess or deficiency in quantity is trifling or negligible and not sufficient to influence a buyer, the variation is not a ground for rejecting the contract. [8.790]

Instalment deliveries

Unless otherwise agreed, the buyer of goods is not bound to accept delivery by instalments. Where the contract provides for instalment delivery and each delivery is to be paid for separately and the seller makes defective deliveries or the buyer makes default in respect of one or more instalments, it is a question in each case depending on the terms of the contract whether the breach is a repudiation of the whole contract, or whether it is a severable breach, giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated. 48 If the default in instalment delivery amounts to a slight breach of the contract only and persistent breach or repudiation of the contract is not contemplated, then the failure to a minor degree of delivery would not amount to a repudiation of the whole contract. The main test usually applied in such cases is to consider “first, the ratio quantitatively which the breach bears to the contract as a whole, and secondly, the degree of probability or improbability that such a breach will be repeated”: Maple Flock Co v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148 at 157 per Lord Hewart CJ. [8.800]

47

Sale of Goods Act 1923 (NSW), s 33; Goods Act 1958 (Vic), s 37; Sale of Goods Act 1896 (Qld), s 32; Sale of Goods Act 1895 (SA), s 30; Sale of Goods Act 1895 (WA), s 30; Sale of Goods Act 1896 (Tas), s 35; Sale of Goods Act 1954 (ACT), s 34; Sale of Goods Act 1972 (NT), s 33.

48

Sale of Goods Act 1923 (NSW), s 34; Goods Act 1958 (Vic), s 38; Sale of Goods Act 1896 (Qld), s 33; Sale of Goods Act 1895 (SA), s 31; Sale of Goods Act 1895 (WA), s 31; Sale of Goods Act 1896 (Tas), s 36; Sale of Goods Act 1954 (ACT), s 35; Sale of Goods Act 1972 (NT), s 34.

146

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.810]

Hammer and Barrow v Coca-Cola [1962] NZLR 723 [8.810] Where a manufacturer agreed to supply 200,000 yoyos to a buyer to be used in an advertising campaign and approximately 80 per cent of 85,000 yoyos delivered in a number of separate consignments were found to be defective, it was held that the buyer was entitled to rescind the contract so far as future deliveries were concerned rather than submit to the risk of being sent further unsatisfactory consignments.

FOB and CIF contracts ...............................................................................................................................................................................................

The terms “FOB” (Free on Board) and “CIF” (Cost, Insurance and Freight) are commonly used in connection with contracts for the sale of goods which are to be carried by sea or shipped to the buyer. Where the goods have been quoted “FOB” it is the seller's duty to put the goods on board the ship at the port of shipment and to pay all expenses incurred in doing so, the buyer being responsible for subsequent charges such as freight and insurance. Delivery is complete once the goods have been put aboard the ship and the seller has no further control over the goods and has parted with the possession and property in them. It is the duty of the seller to notify the buyer of the shipment to enable the buyer to insure, otherwise the goods are at the seller's risk. The Sale of Goods Act makes provision for this duty as follows: [8.820]

Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable the buyer to insure them during their sea transit, and if the seller fails to do so, the goods shall be deemed to be at the seller's risk during such sea transit. 49

It was held in Wimble, Sons & Co v Rosenberg & Sons [1913] 3 KB 743 that this subsection applied to a contract for the sale of goods FOB. When the goods have been quoted “CIF” the seller's duties are: (a)

to make arrangements for the transport of the goods;

(b)

to ship the goods paying the costs thereof;

(c)

to effect upon the terms current in the trade an insurance of the goods and to pay the premium; and

(d)

to tender, within a reasonable time after shipment, the shipping documents (bill of lading, policy of insurance and invoice) to the buyer. In both types of contract the general rule is that once the goods are placed on board ship the risk is on the buyer and he or she must rely on insurance for protection against loss. The essential difference between a CIF contract and an ordinary contract for the sale of goods rests in the fact that performance of the bargain in the former is primarily to be 49

Sale of Goods Act 1923 (NSW), s 35; Goods Act 1958 (Vic), s 39; Sale of Goods Act 1896 (Qld), s 34; Sale of Goods Act 1895 (SA), s 32; Sale of Goods Act 1895 (WA), s 32; Sale of Goods Act 1896 (Tas), s 37; Sale of Goods Act 1954 (ACT), s 36; Sale of Goods Act 1972 (NT), s 35.

CHAPTER

[8.830]

08

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147

fulfilled by delivery of documents and not by the actual physical delivery of goods by the vendor. All that the buyer can call for is delivery of the customary documents. The buyer cannot refuse the documents and ask for the tender of the goods they represent. On presentation of the documents, the buyer is bound to pay the price; this is so even though the goods, to the seller's knowledge, have already been lost at sea: Manbre Saccharine Co Ltd v Corn Products Co Ltd [1919] 1 KB 198. Once the documents have been handed over to the buyer, he or she can claim under the contract of carriage and sue on the policy of insurance should the goods have been damaged or lost in transit. At the time of handing over the documents the buyer takes the property in the goods subject to a condition, that is, that the goods are in accordance with the contract. Actually the buyer's rights under these types of contract fall into two categories: (a)

a right to reject the documents, and

(b) a right to reject the goods. The two rights are quite distinct. “The right to reject the documents arises when the documents are tendered, and the right to reject the goods arises when they are landed and when after examination they are found not to be in conformity with the contract”: Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459 at 481 per Devlin J. The property in the goods passes to the buyer when the documents are handed over but it is conditional property, that is, the buyer can reject the goods if upon examination the buyer finds that they are not in accordance with the contract. “Acceptance” of the goods ...............................................................................................................................................................................................

As previously mentioned, it is the duty of the seller to deliver the goods and that of the buyer to accept and pay for them in accordance with the terms of the contract. 50 So far we have considered the duty of the seller in respect of the delivery of the goods. We must now consider the duty of the buyer to accept and pay for the goods. Failure by the buyer to accept the goods renders the buyer liable for breach of contract unless the buyer has a right to reject them for breach of condition. Acceptance in the present context has a different meaning from the use of the word in connection with the formalities for an enforceable contract of sale. Here the expression relates to the acceptance of the goods in performance of the contract and the transfer of ownership. A buyer is deemed to have accepted the goods: [8.830]

(a)

when the buyer intimates to the seller that he or she has accepted them; or

(b)

when the goods have been delivered to the buyer and the buyer does any act in relation to them which is inconsistent with the ownership of the seller, for example where the buyer re-sells them; or

50

Sale of Goods Act 1923 (NSW), ss 30–31; Goods Act 1958 (Vic), ss 34–35; Sale of Goods Act 1896 (Qld), ss 29–30; Sale of Goods Act 1895 (SA), ss 27–28; Sale of Goods Act 1895 (WA), ss 27–28; Sale of Goods Act 1896 (Tas), ss 32–33; Sale of Goods Act 1954 (ACT), ss 31–32; Sale of Goods Act 1972 (NT), ss 30–31.

148

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.830]

(c)

when the buyer retains the goods after the lapse of a reasonable time without intimating to the seller that he or she has rejected them. 51 The Sale of Goods Act also provides that where the buyer has not previously examined the goods, the buyer is entitled to a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract before the buyer is deemed to have accepted them. 52 There is a possibility of conflict between this provision and the circumstances in which the buyer is deemed to have accepted the goods in b. above: that is, the buyer may have done an act inconsistent with the ownership of the seller in, for example re-selling the goods, before the buyer has had an opportunity of examining them: Hardy & Co v Hillerns and Fowler [1923] 2 KB 490. This is no longer a problem in New South Wales, Victoria, South Australia and the Australian Capital Territory where the provision setting out the circumstances in which a buyer is deemed to have accepted the goods in (b) above is now expressed to be subject to the provision whereby the buyer is not deemed to have accepted the goods until the buyer had a reasonable opportunity of examining them. 53 In New South Wales, it is further provided that the buyer's acceptance of the goods does not preclude rescission of the contract for an innocent misrepresentation, unless the acts constituting acceptance amount to affirmation of the contract: Sale of Goods Act 1923 (NSW), s 38(2). In South Australia, the Misrepresentation Act 1972 (SA), s 6(1)(b) provides that, where a misrepresentation has been made by reason of which a party to a contract would, but for the fact that the contract has been performed, be entitled to rescind, that party shall have the right to rescind. It has been held by the Full Federal Court that the effect of the provision is to keep open a purchaser's right to rescind even after the goods have been “accepted” by the purchaser under the State Sale of Goods Act: JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378. The effect was that the purchaser of a truck was held entitled to rescind the contract of sale for innocent misrepresentation as to the vehicle's engine on becoming aware of the true facts some 12 months after purchasing the vehicle. Where the buyer in accordance with her or his rights refuses to accept the goods, the buyer is not bound, unless otherwise agreed, to return them to the seller: it is sufficient if the buyer intimates to the seller that he or she refuses to accept them. 54 51

52

Sale of Goods Act 1923 (NSW), s 38; Goods Act 1958 (Vic), s 42; Sale of Goods Act 1896 (Qld), s 37; Sale of Goods Act 1895 (SA), s 35; Sale of Goods Act 1895 (WA), s 35; Sale of Goods Act 1896 (Tas), s 40; Sale of Goods Act 1954 (ACT), s 39; Sale of Goods Act 1972 (NT), s 38. Sale of Goods Act 1923 (NSW), s 37; Goods Act 1958 (Vic), s 41; Sale of Goods Act 1896 (Qld), s 36; Sale of Goods Act 1895 (SA), s 34; Sale of Goods Act 1895 (WA), s 34; Sale of Goods Act 1896 (Tas), s 39; Sale of Goods Act 1954 (ACT), s 38; Sale of Goods Act 1972 (NT), s 37.

53

Sale of Goods Act 1923 (NSW), s 37(1); Goods Act 1958 (Vic), s 41(1); Sale of Goods Act 1895 (SA), s 34(1); Sale of Goods Act 1954 (ACT), s 38(1).

54

Sale of Goods Act 1923 (NSW), s 39; Goods Act 1958 (Vic), s 43; Sale of Goods Act 1896 (Qld), s 38; Sale of Goods Act 1895 (SA), s 36; Sale of Goods Act 1895 (WA), s 36; Sale of Goods Act 1896 (Tas), s 41; Sale of Goods Act 1954 (ACT), s 40; Sale of Goods Act 1972 (NT), s 39.

CHAPTER

[8.870]

08

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149

Remedies for breach of the contract of sale [8.840]

The Sale of Goods Act deals separately with:

(a)

the remedies of the unpaid seller of goods; and

(b)

the remedies of the buyer for the seller's breach of the contract of sale.

Remedies of the unpaid seller ............................................................................................................................................................................................... [8.850]

(a)

The seller of goods is deemed to be an unpaid seller where:

the whole of the price has not been paid or tendered; or

(b)

the bill of exchange or other negotiable instrument has been received as conditional payment, and the condition has not been fulfilled by reason of the dishonour of the instrument or otherwise. 55 The unpaid seller has two classes of rights: (a)

against the goods; and

(b)

against the buyer.

Rights of the unpaid seller against the goods ............................................................................................................................................................................................... [8.860]

The unpaid seller may have any of the following rights against the goods:

(a)

a lien (when ownership has passed to the buyer but possession is with the seller);

(b)

withholding delivery (when ownership and possession are still with the seller);

(c)

stoppage of goods in transit (when ownership has passed to the buyer but possession is not with either party); or

(d)

resale (when ownership may be with either party but possession is with the seller).

Lien [8.870] A seller's lien is a right to retain possession of the goods until the price is paid or tendered and it attaches when default is made by the buyer either through insolvency or otherwise. The seller has no lien unless he or she has actual possession of the goods. When the seller loses possession of the goods, the seller has the right either to stop the goods whilst they are in transit or to sue the buyer for the price if the buyer has gained possession. The unpaid seller may exercise their lien when:

(a)

the goods have been sold without any stipulation as to credit; or

(b)

the goods have been sold on credit but the term of credit has expired; or

55

Sale of Goods Act 1923 (NSW), s 41; Goods Act 1958 (Vic), s 45; Sale of Goods Act 1896 (Qld), s 40; Sale of Goods Act 1895 (SA), s 38; Sale of Goods Act 1895 (WA), s 38; Sale of Goods Act 1896 (Tas), s 43; Sale of Goods Act 1954 (ACT), s 42; Sale of Goods Act 1972 (NT), s 41.

150

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.880]

(c) the buyer becomes insolvent. 56 The seller will lose their lien: (a)

when the goods are delivered to a carrier for the purpose of transmission to the buyer, without reserving the right of disposal of the goods; or

(b)

when the buyer or her or his agent lawfully obtains possession of the goods; or

(c)

by waiver; for example, by handing over to the buyer the documents of title relating to the goods, or assenting to a resale by the buyer. When an unpaid seller has made part delivery of the goods they may exercise their rights of lien on the remainder, unless part delivery has been made under such circumstances as to show an agreement to waive the lien. 57 Withholding delivery

Where the buyer defaults and neither the ownership nor possession of the goods has passed to the buyer, the unpaid seller, in addition to the right of suing the buyer for breach of contract, has a right of withholding delivery of the goods. This right is similar to and equally extensive with the unpaid seller's right of lien (see above) in cases where the ownership has passed to the buyer. 58 [8.880]

Stoppage in transitu [8.890]

An unpaid seller has the right of stopping the goods in transitu when:

(a)

they have parted with possession of the goods; and

(b)

they are still in transit; and

(c) the buyer becomes insolvent. The unpaid seller may in these circumstances resume possession of the goods as long as they are in course of transit, and may retain them until payment or tender of the price. 59 It will be noticed that this right applies when the ownership but not the possession of the goods has passed to the buyer, and the goods must be in the course of transit. 56

57

58

59

A person is deemed to be insolvent within the meaning of the Sale of Goods Act when that person has either ceased to pay their debts in the ordinary course of business, or cannot pay their debts as they become due, whether having committed an act of bankruptcy or not: Sale of Goods Act 1923 (NSW), s 5; Goods Act 1958 (Vic), s 3; Sale of Goods Act 1896 (Qld), s 3; Sale of Goods Act 1895 (SA), s 60; Sale of Goods Act 1895 (WA), s 60; Sale of Goods Act 1896 (Tas), s 3; Sale of Goods Act 1954 (ACT), s 5; Sale of Goods Act 1972 (NT), s 5. Sale of Goods Act 1923 (NSW), ss 43 – 45; Goods Act 1958 (Vic), ss 47 – 49; Sale of Goods Act 1896 (Qld), ss 42 – 44; Sale of Goods Act 1895 (SA), ss 40 – 42; Sale of Goods Act 1895 (WA), ss 40 – 42; Sale of Goods Act 1896 (Tas), ss 45 – 47; Sale of Goods Act 1954 (ACT), ss 44 – 46; Sale of Goods Act 1972 (NT), ss 43 – 45. Sale of Goods Act 1923 (NSW), s 42; Goods Act 1958 (Vic), s 46; Sale of Goods Act 1896 (Qld), s 41; Sale of Goods Act 1895 (SA), s 39; Sale of Goods Act 1895 (WA), s 39; Sale of Goods Act 1896 (Tas), s 44; Sale of Goods Act 1954 (ACT), s 43; Sale of Goods Act 1972 (NT), s 42. Sale of Goods Act 1923 (NSW), s 46; Goods Act 1958 (Vic), s 50; Sale of Goods Act 1896 (Qld), s 45; Sale of Goods Act 1895 (SA), s 43; Sale of Goods Act 1895 (WA), s 43; Sale of Goods Act 1896 (Tas), s 48; Sale of Goods Act 1954 (ACT), s 47; Sale of Goods Act 1972 (NT), s 46.

CHAPTER

[8.910]

08

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151

Duration of transit

In practice it is often difficult to determine whether the goods are still in transit. The Sale of Goods Act contains the following rules: [8.900]

1.

Goods are deemed to be in course of transit from the time they are delivered to a carrier until the buyer or their agent takes delivery of them.

2.

If the buyer or their agent obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end.

3.

If, after the arrival of the goods at the appointed destination, the carrier acknowledges to the buyer or their agent that the carrier holds the goods on the buyer's behalf and continues in possession of them for the buyer, the transit is at an end and it is immaterial that a further destination for the goods may have been indicated by the buyer.

4.

If the goods are rejected by the buyer and the carrier continues in possession of them, the transit is not deemed to be at an end even if the seller has refused to receive them back.

5.

When goods are delivered to a ship chartered by the buyer it is a question depending on the circumstances of the particular case whether they are in the possession of the master as a carrier or as agent for the buyer.

6.

Where the carrier wrongfully refuses to deliver the goods to the buyer the transit is deemed to be at an end.

7.

Where part delivery of the goods has been made to the buyer the remainder of the goods may be stopped in transitu, unless the part delivery has been made under such circumstances as to show an agreement to give up possession of the whole of the goods. 60

How stoppage in transitu is effected

The unpaid seller may exercise the right of stoppage in transitu either by taking actual possession of the goods or by giving notice of their claim to the carrier. The notice may be given either to the person in actual possession of the goods or to their principal. In the latter case the notice to be effectual must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to the agent in time to prevent a delivery to the buyer. When notice of stoppage in transitu is given by the seller to the carrier, the carrier must redeliver the goods according to the directions of the seller. The expenses of the redelivery are borne by the seller. 61 [8.910]

60

Sale of Goods Act 1923 (NSW), s 47; Goods Act 1958 (Vic), s 51; Sale of Goods Act 1896 (Qld), s 46; Sale of Goods Act 1895 (SA), s 44; Sale of Goods Act 1895 (WA), s 44; Sale of Goods Act 1896 (Tas), s 49; Sale of Goods Act 1954 (ACT), s 48; Sale of Goods Act 1972 (NT), s 47.

61

Sale of Goods Act 1923 (NSW), s 48; Goods Act 1958 (Vic), s 52; Sale of Goods Act 1896 (Qld), s 47; Sale of Goods Act 1895 (SA), s 45; Sale of Goods Act 1895 (WA), s 45; Sale of Goods Act 1896 (Tas), s 50; Sale of Goods Act 1954 (ACT), s 49; Sale of Goods Act 1972 (NT), s 48.

152

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.920]

The unpaid seller's right of lien or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made without the seller's assent. 62 For example, A agrees to sell to B 100 bags of wheat from general stock and receives a cheque in payment. B immediately sells to C and gives her or him an authority to collect from A, but before C takes delivery B's cheque is dishonoured. A can refuse to deliver the goods to C. Defeat of stoppage in transitu

If, however, a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods and that person transfers, by way of sale, the document to a person who takes it in good faith and for valuable consideration, then the unpaid seller's right of lien or stoppage in transitu is defeated. 63 Reverting to the previous illustration, if A gives B a document of title to the goods, for example a delivery order, and B transfers this for value to C, then A must deliver the wheat to C as his (the seller's) lien is defeated. His only right now is to sue B for the price. [8.920]

Right of resale [8.930]

The unpaid seller has a right of resale of the goods where:

(a)

the goods are of a perishable nature; or

(b)

the seller exercises the right of lien or stoppage in transitu and gives notice to the buyer of their intention to resell, and the price is not paid or tendered within a reasonable time; or

(c)

the seller has expressly reserved a right of re-sale in case the buyer should make a default. 64 The seller's exercise of the right of resale under (a) and (b) has the effect of rescinding the contract of sale and the seller is entitled to recover damages from the original buyer for any loss occasioned by the latter's breach of contract: RV Ward Ltd v Bignall [1967] 1 QB 534. If on resale the goods realise more than the original contract price, the seller would not have to account to the original purchaser for any profit made on the resale. The same consequences flow where the unpaid seller exercises the rights under (c) on the buyer's default. The unpaid seller's right of resale under these statutory provisions is in addition to other general contractual remedies which may be available. Thus, an unpaid seller, as a contracting party, is entitled at common law to terminate a contract which has been 62

63

64

Sale of Goods Act 1923 (NSW), s 49; Goods Act 1958 (Vic), s 53; Sale of Goods Act 1896 (Qld), s 48; Sale of Goods Act 1895 (SA), s 46; Sale of Goods Act 1895 (WA), s 46; Sale of Goods Act 1896 (Tas), s 51; Sale of Goods Act 1954 (ACT), s 50; Sale of Goods Act 1972 (NT), s 49. Sale of Goods Act 1923 (NSW), s 49; Goods Act 1958 (Vic), s 53; Sale of Goods Act 1896 (Qld), s 48; Sale of Goods Act 1895 (SA), s 46; Sale of Goods Act 1895 (WA), s 46; Sale of Goods Act 1896 (Tas), s 51; Sale of Goods Act 1954 (ACT), s 50; Sale of Goods Act 1972 (NT), s 49. Sale of Goods Act 1923 (NSW), s 50; Goods Act 1958 (Vic), s 54; Sale of Goods Act 1896 (Qld), s 49; Sale of Goods Act 1895 (SA), s 47; Sale of Goods Act 1895 (WA), s 47; Sale of Goods Act 1896 (Tas), s 52; Sale of Goods Act 1954 (ACT), s 51; Sale of Goods Act 1972 (NT), s 50.

[8.960]

CHAPTER

08

SALE OF GOODS

153

repudiated by the purchaser and, following such termination, to resell the goods without giving notice of intention to do so to the original purchaser or giving the latter a reasonable time to pay the purchase price. Wherry v Watson [1991] ASC 56-048 [8.940] For example, the first plaintiff agreed to buy the defendant’s 1963 Bentley car for $35,000 and gave the defendant a cheque for $3,000 as a deposit. The cheque was dishonoured because of an administrative error on the part of the first plaintiff’s bank. A day after dishonour of the cheque, the defendant agreed to sell the vehicle to the second plaintiff for $37,000. Both plaintiffs claimed an order for specific performance of their respective contracts for the purchase of the vintage car. The New South Wales Court of Appeal held that due payment of the deposit by the first plaintiff’s cheque being met was an essential term of the contract. Dishonour of the cheque entitled the defendant to terminate the contract and sell the vehicle to the second plaintiff.

Rights of unpaid seller against the buyer ...............................................................................................................................................................................................

The unpaid seller, in addition to the rights discussed above against the goods, has certain rights against the buyer for the price of the goods or for damages for non-acceptance of the goods. [8.950]

Action for the price

In ordinary cases and unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions. Where the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue the buyer for the price. 65 However, where the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue for the price even though the property in the goods has not passed and the goods themselves have not been appropriated to the contract. Where there is no special agreement as to the payment of the price and the property in the goods has not passed to the buyer, the seller could not sue for the price of the goods: Colley v Overseas Exporters [1921] 3 KB 302. [8.960]

65

Sale of Goods Act 1923 (NSW), s 51; Goods Act 1958 (Vic), s 55; Sale of Goods Act 1896 (Qld), s 50; Sale of Goods Act 1895 (SA), s 48; Sale of Goods Act 1895 (WA), s 48; Sale of Goods Act 1896 (Tas), s 53; Sale of Goods Act 1954 (ACT), s 52; Sale of Goods Act 1972 (NT), s 51.

154

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.970]

Damages for non-acceptance

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue for damages for non-acceptance. The general rule is that on a buyer's non-acceptance of the goods, the measure of damages recoverable by the seller is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract. 66 Where there is an “available market” for the goods in question the measure of damages is, prima facie, the difference between the contract price and the market or current price at the time when the goods ought to have been accepted. This prima facie rule will not apply where the seller proves a higher loss. A party seeking to depart from the prima facie rule must show that the circumstances support such a departure: Onesteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1 at [171]. An “available market” means a market available from day-to-day in which the goods might be sold at a then current price or at a fair price at the will of the vendor. The expression contemplates a continuous market for a commodity but always subject to fluctuation according to rise and fall of the market: Eclipse Motors Pty Ltd v Nixon [1940] VLR 49 at 53-54. Where there is no available market, then the general rule will apply, namely, that the measure of damages recoverable by the seller is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract. [8.970]

WL Thompson Ltd v Robinson (Gunmakers) Ltd [1955] Ch 177 [8.980] R contracted to buy a motor car from T, who were car dealers. R refused to accept delivery and T returned the car to the suppliers. It was held that T were entitled to damages for the loss of their bargain, namely the profit they would have made as they had sold one car less than they otherwise would have sold.

On the other hand, where it appears that the seller did not have a replacement for the particular goods sold to the buyer then, on the buyer refusing to take delivery, the seller is only entitled to recover for the loss which they suffer on the resale of the goods, that is the difference between the price agreed to be paid by the original buyer and the price at which the goods were resold. [8.990]

Kargotich v Mustica [1973] WAR 167 [8.1000] M agreed to buy a new hay-baling machine from K for $4,920. K’s profit on the sale would have been nearly $870. However, M refused to accept the machine. K sold it to another customer for $4,830. The question arose whether K was entitled to recover from M $90 (the difference between the original contract price with M and the resale price) or the full loss of profit of nearly $870 on the basis that K could have sold two hay-balers instead of one.

66

Sale of Goods Act 1923 (NSW), s 52; Goods Act 1958 (Vic), s 56; Sale of Goods Act 1896 (Qld), s 51; Sale of Goods Act 1895 (SA), s 49; Sale of Goods Act 1895 (WA), s 49; Sale of Goods Act 1896 (Tas), s 54; Sale of Goods Act 1954 (ACT), s 53; Sale of Goods Act 1972 (NT), s 52.

CHAPTER

[8.1030]

08

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155

cont. It was held that K was only entitled to recover $90 since he had not shown that he could have obtained a second hay-baler and hence made a second sale.

Where a buyer has agreed to buy a unique item, such as a second-hand motor vehicle, but subsequently refuses to accept the goods, the seller is only entitled to recover the loss they have suffered; accordingly, if the seller resells the goods at a higher price than that agreed to be paid by the original buyer, the seller has suffered no loss and hence cannot recover damages from the original buyer: Lazenby Garages Ltd v Wright [1976] 1 WLR 459. The seller is under a duty to mitigate their loss on default by the buyer which will normally be done by the seller reselling the goods. If the seller does resell they are bound to act reasonably and obtain the best price they can for the goods. [8.1010]

Remedies of the buyer ............................................................................................................................................................................................... [8.1020]

The buyer's remedies against the seller may be considered under the following

headings: 1.

Repudiation of the contract.

2.

Damages for breach of warranty of quality.

3.

Damages for non-delivery.

4.

Specific performance.

Repudiation of the contract

The buyer is entitled to rescind the contract and reject the goods where there is a breach of a condition. In such a case the buyer can recover the purchase price he or she has paid if there has been a total failure of consideration. Thus in one case a buyer purchased a car and it subsequently transpired that he had no title. The car was returned to the true owner. It was held that the buyer was entitled to a refund of the full price paid; there was a total failure of consideration even though the buyer had had some use of the car: Rowland v Divall [1923] 2 KB 500. However, this right of repudiation may be lost to the buyer in the following cases: [8.1030]

(a)

where the buyer has waived the breach of condition or elected to treat it only as a breach of warranty, see [8.400];

(b)

where the contract of sale is not severable and the buyer has accepted the goods or part of them (as to the meaning of acceptance in this context, see [8.830]); or

(c)

where the contract is for specific goods and the property in them has passed to the buyer. 67

67

This no longer applies in New South Wales, South Australia and the Australian Capital Territory where the corresponding provision in the Sale of Goods Act has been repealed: Sale of Goods (Amendment) Act 1988 (NSW); Misrepresentation Act 1972 (SA), s 11; and Sale of Goods Act 1954 (ACT), s 3, respectively.

156

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.1040]

Damages for breach of warranty of quality

Where there is a breach of warranty of quality by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods but the buyer may: [8.1040]

(a)

set up against the seller the breach of warranty in diminution or extinction of the price; or

(b) maintain an action against the seller for damages. 68 The measure of damages for breach of warranty is the estimated loss directly and naturally resulting in the ordinary course of events from the breach of warranty. The Sale of Goods Act further provides that in the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. However, such prima facie rule is appropriate only where the buyer's claim is in respect of the actual defect in the goods. Where, as is often the case, the buyer is claiming for the damage to persons or property caused by the defective goods, the measure of damages is determined in accordance with the basic rule mentioned earlier, namely, the estimated loss directly and naturally resulting in the ordinary course of events from the breach of warranty. In the case of Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725, the particular purpose for which the goods were wanted was not communicated to the seller: Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725 [8.1050] The defendants in Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725 contracted to sell the plaintiffs sulphuric acid commercially free from arsenic. The plaintiffs used the acid in the manufacture of glucose which was sold to brewers. In breach of the implied condition of correspondence with description in the contract, the sulphuric acid contained arsenic, with the result that the beer made by the brewers who had purchased the glucose from the plaintiffs poisoned a large number of people. Consequently, the plaintiffs were liable to pay damages to the brewers. The plaintiffs in turn claimed damages from the defendants as follows: (a)

the price paid for the acid;

(b)

the value of the other materials spoilt in the manufacture of the glucose;

(c)

loss of goodwill; and

(d)

the damages they were liable to pay the brewers.

The court held that the plaintiffs were only entitled to damages to cover: (a)

the price paid for the acid; and

(b)

the value of the goods rendered useless by being mixed with the poisonous acid.

68

Sale of Goods Act 1923 (NSW), s 54; Goods Act 1958 (Vic), s 59; Sale of Goods Act 1896 (Qld), s 54; Sale of Goods Act 1895 (SA), s 52; Sale of Goods Act 1895 (WA), s 52; Sale of Goods Act 1896 (Tas), s 57; Sale of Goods Act 1954 (ACT), s 56; Sale of Goods Act 1972 (NT), s 54.

CHAPTER

[8.1080]

08

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157

cont. The plaintiffs were not entitled to damages in respect of: (a)

The loss of goodwill, as this was not a loss directly and naturally resulting in the ordinary course of events from the breach of warranty. It did not arise directly from the act of the defendants but arose from the act of the plaintiffs in selling the poisonous glucose to the brewers and, in the circumstances, was too remote to be recoverable.

(b)

The damages which had to be paid to the brewers. As the special circumstances surrounding the purpose of the contract had not been communicated to the defendant, the damages were not within the contemplation of the parties within the meaning of the rule in Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341; 156 ER 145: see [12.120] (Turner and Trone).

[8.1060] The chain of contracting parties may in some cases be followed in order to calculate the damages for breach of warranty in supplying goods not fit for the purpose for which they were sold, namely, where such purpose was made known to the sellers at the time of contract and it was within the contemplation of the parties that if there was a breach of contract damages would be claimed by parties separated by several contractual steps.

Kasler & Cohen v Slavouski [1928] 1 KB 78 [8.1070] A sold some dyed rabbit skins to B, a wholesale furrier, and knew that B intended making them into fur collars. B, having made the collars, sold to C, C resold to D, D to E and E had one attached to a coat and sold it to F who wore the coat with the fur attached. F developed dermatitis caused by the presence of antimony in the dyed skin and sued E for damages and was successful with costs. E claimed the amount he paid F together with his costs from D, who in turn claimed this amount plus his costs from C. C claimed from B and by this time the original £67 damages awarded to F had risen to £699 by reason of successive costs. It was held that B was entitled to recover from A: (a)

the damages awarded in the original action to F;

(b)

the costs of both sides of that action; and

(c)

a sum in respect of the costs incurred by B, C and D respectively in connection with the claims against them.

This case differed from Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725 not only because in the latter case there was no breach of the warranty of fitness whereas in the present case there was, but also because it was within the contemplation of the sellers that, in the event of breach, damages would be incurred by later purchasers and sub-purchasers. In such cases where the same article passes from hand-to-hand with the same warranty, particularly where the breach of contract which gives rise to the damages consists in there being a latent defect discoverable only in the hands of the ultimate user, and where it must have been within the contemplation of the parties that there would be several contractual steps, the damages recoverable from the original supplier would be the [8.1080]

158

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.1090]

damages awarded to the injured user and costs which are reasonably and properly incurred in defending the actions for damages by the several contracting parties. Damages for non-delivery

The contract of sale may contain certain stipulations as to time of delivery and the buyer is entitled to have these carried out. Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery. 69 The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the seller's breach of contract. It has also been held that the damages are such as may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract as the probable result of the breach. If the special circumstances under which the contract was actually made were communicated and known to both parties, the damages resulting from breach of such contract would be the amount of injury which would ordinarily flow from a breach of contract under those special circumstances so known and communicated: Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341; 156 ER 145. Where there is an available market for the goods in question, the measure of damages is, prima facie, to be ascertained by the difference between the contract price and the market or current price of the goods at the time when they ought to have been delivered or, if no time was fixed, then at the time of the refusal to deliver. It is the duty of the buyer to mitigate their loss if this is possible and, should the buyer fail to do so, the court will reduce the claim to that to which the buyer would have been entitled if he or she had acted as a reasonable and prudent person would in the course of business. Where a buyer unreasonably, without first ascertaining the true intention of the seller, refused his offer to repurchase part of the goods alleged to be faulty, it was held that the damages obtained must be reduced by the amount to which the seller's offer would have mitigated the buyer's loss. In certain cases the question may arise whether the buyer can claim special damages for non-delivery, as where the goods are required for a particular purpose. These damages depend on a number of factors: [8.1090]

(a)

that the seller knew at the time of the contract of sale of the particular circumstances relating to the contract;

(b)

the buyer actually suffered damage through the seller's default; and

(c) there was not an available market for the goods in question. For example, the buyer notifies the seller that he or she requires a particular “gun” for a pile driver that has to be delivered to a third party within a specified period. The third party refused to take delivery because of unreasonable delay and, as the gun was useless to 69

Sale of Goods Act 1923 (NSW), s 53; Goods Act 1958 (Vic), s 57; Sale of Goods Act 1896 (Qld), s 52; Sale of Goods Act 1895 (SA), s 50; Sale of Goods Act 1895 (WA), s 50; Sale of Goods Act 1896 (Tas), s 55; Sale of Goods Act 1954 (ACT), s 54; Sale of Goods Act 1972 (NT), s 53.

[8.1110]

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anyone else except as old iron, and the manufacturers were aware of these circumstances, their liability was the expenses incurred and the profit which would have been made upon the contract with the third party. From this would be deducted any amount obtained on the sale of the rejected machine: Hydraulic Engineering Co v McHaffie (1879) 4 QBD 670. Specific performance

Where there is failure by the seller to deliver specific or ascertained goods, the court may direct specific performance of the contract on such conditions as it thinks fit. As a general rule, however, the court will not enforce specific performance of an agreement to sell and deliver chattels unless the goods are, by reason of their nature, unique or of a special kind, and where the award of damages would not be an adequate compensation to the buyer, for example the purchase of a particular portrait by a famous artist. Where a taxicab was the subject of an agreement of sale, specific performance was ordered as the contract was for the sale of a chattel with a valuable privilege (taxicab licence) annexed to it: Dougan v Ley (1946) 71 CLR 142 at 147, 151, 153. [8.1100]

Auctioneers and auction sales Auctioneers are a class of licensed agents employed to sell goods or land in a particular manner as required by statute between sunrise and sunset. An auction is a sale of property in public by calling for bids, the property being usually sold to the highest bidder. A bid is an offer of a price for the property being sold, and the fall of the auctioneer's hammer the acceptance. Once the auctioneer's hammer has fallen, the auctioneer has by implication the authority of the highest bidder to sign any memorandum on the bidder's behalf embodying the conditions of the sale, such memorandum being sufficient to satisfy the requirements of the Statute of Frauds 1677 (Imp) and the Sale of Goods Act. However, this is not the position in Victoria where it has been held that acceptance of a bid for real property at an auction does not give rise to enforceable rights against the bidder where the latter refuses to sign the contract of sale or any other written memorandum of the contract: Futuretronics International Pty Ltd v Gadzhis [1990] ASC 56-009. In Queensland, the successful bidder for certain land at an auction sale was held not liable when he refused to sign a written sale agreement and the auctioneer had neglected to do so on his behalf, since the contract could not be enforced in the absence of a memorandum in writing: Wright v Madden [1992] 1 Qd R 343 at 346, 350. The extent of the authority of an auctioneer depends upon the contract with the auctioneer's principal but a number of powers are implied by law. An auctioneer has authority to sell the goods subject to all the usual conditions governing sales by auction unless expressly negatived. He or she has authority to deal with the goods in the manner customary amongst auctioneers and to prepare the conditions of sale. [8.1110]

160

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.1110]

The conditions of sale may contain a clause excluding all warranties but this may not be sufficient to exclude an express oral condition or warranty subsequently given at the time of sale. If a seller of goods by auction gives an express oral warranty he or she cannot escape from her or his responsibility for it by saying that the catalogue contained an exempting clause: Harling v Eddy [1951] 2 KB 739. A sale by auction may be with or without reserve. The usual manner of providing for a reserve price is to specify that the vendor shall be entitled to one bid. If there is a reserve price, or a bid is allowed to the vendor, that fact should be notified before the sale. However, if a sale is not announced to be subject to a reserve the auctioneer is bound to accept the bid of the highest bidder and so make a contract with her or him, and the owner is not allowed to bid. Sometimes the reserve price is termed the “upset price”. Where a sale is announced to be subject to a reserve but the auctioneer by mistake accepts a bid and knocks down the property to the highest bidder, there is no completed contract as the whole auction is subject to a condition that the reserve price should be reached: Boulas v Angelopoulos (1991) 5 BPR 11,477 (NSWCA). A bid being merely an offer may be retracted at any time before the property is knocked down; similarly, the vendor may withdraw the property from sale before a bid is accepted, or at any rate before the reserve price is reached. Upon the fall of the hammer, prima facie, the property in the lot knocked down passes to the bidder. If it is intended that this prima facie rule should be excluded, it must be clearly made a condition of the sale. An auctioneer's authority is to make a contract of sale by auction and once this is made the auctioneer has no authority to vary or rescind it. An auctioneer has no implied authority to sell by private contract as he or she is engaged to sell by auction. However, it is common practice for an auctioneer to be given the right to sell by private sale if the auction proves unsuccessful. An auctioneer has possession of the goods to be auctioned and, like a factor, has a special property in them to the extent of having a lien upon them for her or his expenses and commission. Where the auction is one of goods, an auctioneer has implied authority to receive the purchase money on behalf of the vendor and to hand over the goods when the full price is paid. Where the auction is one of land or an interest in land the auctioneer has merely authority to receive a deposit. He or she has no implied authority to take bills of exchange as payment except to the extent of taking cheques as deposits. Any auctioneer who knowingly misrepresents the value, composition, structure or origin of manufacture of any goods being auctioned is liable to a penalty. There must be kept a full written record of all goods auctioned during the past 12 months and this record is open to inspection by the police. The provisions of the Sale of Goods Act relating to auction sales are as follows: 1.

Where goods are put up for sale by auction in lots, each lot is prima facie deemed to be the subject of a separate contract of sale.

CHAPTER

[8.1120]

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2.

A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in any other customary manner; until such announcement is made any bidder may retract her or his bid.

3.

Where a sale by auction is not notified in the conditions of sale to be subject to a right to bid on behalf of the seller, it is not lawful for the seller to bid or to employ any person to bid at the sale, or for the auctioneer knowingly to take any bid from the seller or any such person. Any sale contravening this rule may be treated as fraudulent by the buyer.

4.

A sale by auction may be notified in the conditions of sale to be subject to a reserve price, and a right to bid may also be reserved expressly by or on behalf of the seller.

5.

Where a right to bid is expressly reserved, but not otherwise, the seller or any one person on her or his behalf may bid at the auction. 70 In addition to the above provisions contained in the Sale of Goods Act there also exists legislation in the various States 71 regulating and controlling the licensing of auctioneers and general provisions relating to auction sales such as conduct of sale; riotous behaviour; music playing at sale; suitable sale room; keeping records of sales; misrepresentation, etc. Duties of auctioneers ............................................................................................................................................................................................... [8.1120]

It is the duty of an auctioneer:

(a)

to hold a licence and act in person;

(b)

to sell for money only, in the absence of instructions to the contrary;

(c)

to sell to a third person;

(d)

to accept the highest bona fide bid where the auctioneer sells without reserve;

(e)

to account for the proceeds of goods sold;

(f)

not to deliver goods sold until paid for, nor allow any deduction from the price, unless authorised to do so by the principal; and

(g)

to keep full records of sales.

70

71

Sale of Goods Act 1923 (NSW), s 60; Goods Act 1958 (Vic), s 64; Sale of Goods Act 1896 (Qld), s 59; Sale of Goods Act 1895 (SA), s 57; Sale of Goods Act 1895 (WA), s 57; Sale of Goods Act 1896 (Tas), s 62; Sale of Goods Act 1954 (ACT), s 60; Sale of Goods Act 1972 (NT), s 60. Property, Stock and Business Agents Act 2002 (NSW); Motor Dealers and Chattel Auctioneers Act 2014 (Qld), Pt 4; Second-Hand Dealers and Pawnbrokers Regulations 2013 (SA), reg 6; Auction Sales Act 1973 (WA); Property Agents and Land Transactions Act 2005 (Tas), Pt 3. Section 15A of the Fair Trading Act (Australian Consumer Law) 1992 (ACT) was repealed by Sch 1, Item 1.6 of the Fair Trading (Australian Consumer Law) Amendment Act 2010 (ACT). The Auctioneers Act 1935 (NT) was repealed by the Auctioneers Repeal Act 2002 (NT). It is to be replaced by a mandatory code of practice under Consumer Affairs and Fair Trading Act (NT), Pt 13.

162

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[8.1130]

Warranties by auctioneers ............................................................................................................................................................................................... [8.1130]

When an auctioneer sells goods, he or she impliedly gives the following

warranties: (a)

their authority to sell;

(b)

that they know of no defect in the principal's title;

(c)

to give possession against the price paid; and

(d) that such possession will not be disturbed by the principal or the auctioneer. However, the auctioneer who as agent sells a specific chattel and does not disclose the name of the principal gives no implied warranty that the buyer will get a good title. It would seem that generally an auctioneer's only obligation to a purchaser is to deliver the goods the purchaser successfully bid for. Accordingly, notwithstanding that the goods sold do not correspond with their description, the auctioneer is still entitled to recover the price at which the goods were knocked down to the purchaser at the auction. In such a case, the buyer may well have recourse against the vendor for breach of implied condition of the contract of sale, unless such condition has been clearly excluded by the terms of the auction sale. Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 [8.1140] In Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631, the defendant M successfully bid $21,000 for a bull at an auction sale of stud cattle conducted by the plaintiff auctioneer E. The bull proved infertile and M refused to pay the price. The auctioneer E brought an action for the price against M, who joined P the owner and vendor of the bull. Sheppard J said: “When an auctioneer sells goods on behalf of a disclosed principal there are three contracts; namely, the contract between the vendor and purchaser, a contract between the vendor and the auctioneer and a contract between the auctioneer and the highest bidder, that is the purchaser”: at 638-639. It was held that the contract between the auctioneer E and the purchaser M was not a contract of sale in the true sense and therefore the conditions implied by the Sale of Goods Act were not applicable to that transaction. On the facts, it was not a term of the contract between E and M that E had undertaken to deliver a fertile bull but only the bull actually sold. Accordingly, the auctioneer E was entitled to recover the price of the bull bid by the purchaser M. However, Sheppard J further held that the contract of sale of the bull by auction between the purchaser M and the vendor P was a sale by description, the description being “a breeding bull”. Since the bull was infertile, there had been a breach of the condition of correspondence with description implied in the contract by the Sale of Goods Act, which implied condition had not been effectively excluded on the facts by the terms of sale in the auction catalogue. The result was that although the auctioneer E was entitled to recover the price of $21,000 bid by the purchaser M, M in turn was entitled to recover his loss (namely, $21,000 less the value of the bull for slaughtering purposes, that is, $500) from the vendor P for breach of implied condition.

[8.1160]

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An auction sale of cattle need not attract any of the conditions as to correspondence with description, merchantable quality or fitness for purpose implied by the Sale of Goods Act, as in the absence of representations such a sale would not be a sale by description and the purchaser might not have made known to the seller the particular purpose for which the cattle he bought were required. However, where the auction sale is preceded by an advertisement which, in effect, represents that the cattle are well suited for breeding, such would constitute an express term of the contract. Furthermore, the effect of the representation would be to make the contract one for the sale of goods by description, the description being cows well suited for breeding and accordingly, there arises an implied condition under the Sale of Goods Act that the cattle correspond with the description. In such a case there also arises an implied condition that the cattle are of merchantable quality where the buyer could not have ascertained the presence of a detrimental condition in them by examination before the auction. By going to the sale in response to such advertisement, the purchaser by implication makes known to the seller that he or she requires the cattle for breeding purposes and that he or she relies on the seller's skill and judgment so as to bring into operation the statutory implied condition that the cattle would be reasonably fit for such purpose. Thus, where an auction was advertised as a “Special Cattle Breeders' Sale” and described the cows as being well-known for their quality and as being in excellent condition when in fact they were subsequently found to be infected with brucellosis, it was held that the seller was in breach of the conditions of correspondence with description, merchantable quality, and fitness for purpose implied by the Sale of Goods Act: Lockhart v Osman [1981] VR 57. [8.1150]

Mock auctions ...............................................................................................................................................................................................

Western Australia prohibits “mock” auctions, 72 that is, auctions at which people are induced, in effect, to make substantial offers for articles of often inferior quality in the expectation of either having their bids eventually reduced by the auctioneer, or of being given other free gifts, or the chance of obtaining more expensive items at a comparatively low cost, having regard to what had taken place earlier in the proceedings of the so-called auction sale. Tasmania prohibits dummy bids at auctions: Property Agents and Land Transactions Act 2005 (Tas), s 42. In Victoria legislation prohibits the making of dummy bids at auctions for the sale of motor vehicles: Motor Car Traders Act 1986 (Vic), s 50D.

[8.1160]

72

Auction Sales Act 1973 (WA), s 25. The Mock Auctions Act 1973 (Tas) was repealed by the Legislation Repeal Act 2000 (Tas), s 3 and Sch 1. The Fair Trading Act 1987 (NSW), s 51A was repealed by the Fair Trading Amendment (Australian Consumer Law) Act 2010 (NSW), Sch 1, Item 40. The Fair Trading Act 1989 (Qld), s 56 was repealed by the Fair Trading (Australian Consumer Law) Amendment Act 2010 (Qld), s 18. The Fair Trading Act 1999 (Vic), ss 30 – 31 was repealed by the Fair Trading Amendment (Australian Consumer Law) Act 2010 (Vic), s 9. The Fair Trading Act 1987 (SA), s 28 was repealed by the Statutes Amendment and Repeal (Australian Consumer Law) Act 2010 (SA), s 7.

PART 7

AUSTRALIAN CONSUMER LAW — MISLEADING CONDUCT Chapter 9

Scope and Policy Objects .............................................. 167

Chapter 10 Definitions and Key Concepts ....................................... 217 Chapter 11 Misleading or Deceptive Conduct ................................. 247 Chapter 12 Private Remedies ........................................................... 333

CHAPTER 09

......................................................................................................................

Scope and Policy Objectives Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 1.

Scope of the work On 24 June 2010, the last sitting day of Parliament before the winter recess, both Houses of the Australian Parliament passed the second stage of the Australian Consumer Law (ACL) reforms, the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth). The first stage of the ACL reforms, the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth), had been passed on 17 March 2010. The third stage of the ACL reforms, the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1), were made on 16 November 2010. 1 These three pieces of primary and subordinate legislation comprise the Australian Consumer Law at the Commonwealth level. The passage of the ACL implements one of the Commonwealth's major commitments in COAG's National Partnership Agreement to Deliver a Seamless National Economy (NPA). The ACL is a single, national law concerning consumer protection and fair trading, which applies in the same way nationally and in each State and Territory. For the first time, consumers have the same protections and expectations about business conduct wherever they live in Australia. Similarly, businesses have the same obligations and responsibilities wherever they operate in Australia. There are a number of possible legislative approaches to the regulation of consumer protection. One approach is to prohibit specific types of conduct which are defined (rule-based regulation). This approach has the advantage of clarity and certainty, but it also allows unscrupulous traders to take advantage of consumers by devising trading practices that fall outside the definition of the banned practice. Another approach is to adopt a general prohibition expressed in terms of a standard of behaviour that is prohibited, such as “misleading conduct”, “unconscionable conduct”, or “unfair terms”, sometimes referred to as safety-net regulation. 2 Some jurisdictions adopt both general and specific approaches. The approach adopted in the ACL is to provide for three general protections which are supplemented by specific prohibitions in relation to trading practices that are highly unfair, such as pyramid selling, or aggressive selling techniques such as door-to-door or unsolicited sales, and undue harassment or coercion. [9.05]

1

Explanatory Statement, Select Legislative Instrument 2010, No 280.

2

See Paterson and Brody, “Safety Net Consumer Protection: Using Prohibitions on Unfair and Unconscionable Conduct to Respond to Predatory Business Models” (2015) 38 Journal of Consumer Policy 331 at 332-3.

168

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.05]

A significant feature of the three general protections is that they adopt a principlesbased approach to drafting. 3 They set out general principles to allow for their flexible application, rather than attempting to define all forms of conduct prohibited with a great deal of specificity. The open-ended nature of the general protections leaves it to the courts to set a legal standard and to decide whether the particular conduct at issue is deserving of intervention. In effect, the court must consider the conduct at issue in the light of its own circumstances and surrounding facts and make a public policy judgment as to whether that conduct is “misleading” or “unconscionable,” or whether a particular term of a standard form contract is “unfair” in the light of all the surrounding circumstances. Such an approach places great faith in the judiciary. It also means that it takes time to develop sufficient case law to enable businesses to be able to predict with certainty what conduct is prohibited. Uncertainty increases risk. It also increases compliance costs, including the costs arising from delay. The first general protection, the prohibition of misleading conduct in s 18 of the ACL, is a broad provision. It does not define “misleading conduct”. It is based on s 52 of the Trade Practices Act 1974 (Cth) (TPA) which imposed a “norm of conduct”, 4 and the role of the courts has been to apply it to a wide range of circumstances involving not just business-to-consumer conduct, but business-to-business conduct as well. The second general protection, s 21 of the ACL (statutory unconscionable conduct), is also a broad provision. Section 21 does not define “unconscionable conduct”, although since 1 January 2012 it now contains three interpretative principles in s 21(4) which give some indication as to Parliament's intention regarding its scope. While these interpretative principles provide useful guidance, they are unlikely to deter judicial creativity or eliminate judicial discretion. The third general protection relates to unfair terms in standard form consumer contracts. In order to satisfy the definition of “unfair term” in s 24(1) of the ACL it is necessary to prove that the term at issue would cause “a significant imbalance” in the parties' rights and obligations arising under the contract and that “it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term”. This leaves considerable scope for judicial discretion in deciding what constitutes a “significant” imbalance; what constitutes a “legitimate interest”; and whether the term at issue is “reasonably” necessary to protect the respondent's “legitimate” interest. Before examining the scope of these general and specific protections it is necessary to have some understanding of the economic foundation for consumer protection laws.

3

See, eg, Second Explanatory Memorandum at [9.5], where, in relation to the lay-by sales provisions it is stated: “The ACL provisions draw on the ACT, NSW and Victorian approaches, but are expressed in principles-based form, in keeping with the remainder of the ACL”.

4

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505.

CHAPTER

[9.10]

09

SCOPE AND POLICY OBJECTIVES

169

Part I – Consumer protection policy Consumer detriment refers to the loss in economic welfare consumers incur “if they are misled into making purchases of goods and services which they would not otherwise have made or if they pay more for purchases than they would if they had been better informed.” 5 Consumer detriment may be subdivided into structural detriment and personal detriment. 6 Structural detriment is the principal concern of competition policy. It focuses on the supply side. It includes market failure arising from sub-optimal market structures, such as monopoly and oligopoly, which limit choice and create inefficiencies resulting in increased prices above those that would prevail under competitive conditions. Personal detriment is the principal concern of consumer policy. It focuses on the demand side. It includes market failures arising from transaction costs or an inequality of information, bargaining power or litigious power as between suppliers and consumers. It focuses on the individual experiences of consumers when goods or services do not meet their expectations and includes loss of money, time and stress arising from: [9.10]

(i)

scams and fraud;

(ii)

misleading advertising;

(iii)

unfair marketing practices;

(iv)

unfair contract terms;

(v)

sales of unsafe products; and

(vi) inadequate redress in response to complaints. 7 In Australia, both policy objects (limiting consumer detriment arising from structural detriment and limiting consumer detriment arising from personal detriment), are pursued in the same Act. The Competition and Consumer Act 2010 (Cth) (CCA), and related State and Territory legislation, gives effect to the Competition Code in Sch 1 and the ACL in Sch 2 of the CCA as laws of their respective jurisdictions. The Productivity Commission (PC) in its Report considered at some length the role of consumers in promoting effective competition: 8 The role of consumers in facilitating competition, and promoting well-functioning markets, has long been recognised. In seeking the “best” value (the good or service and price/quality combination most appropriate for them) consumers not only advance their own self-interest, but also provide signals to suppliers on the product characteristics they require. Competition between suppliers, who respond to these signals, can variously lead to lower costs, improved product quality, greater innovation and higher productivity. 5 6

7 8

OECD, Consumer Policy Toolkit (OECD, Paris, 2010), p 52. Europe Economics, An Analysis of the Issue of Consumer Detriment and the Most Appropriate Methodologies to Estimate It (Final Report for DG SANCO, Europe Economics, London, July 2007), available at http://www.ec.europa.eu/consumers/strategy/docs/study_consumer_detriment.pdf. OECD, Consumer Policy Toolkit (OECD, Paris, 2010), p 53. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, ch 3.

170

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.10]

However, poorly informed consumers send weak and confused signals to the market, limiting the benefits they receive from transactions and reducing gains from competition more generally. As pointed out by Vickers, informed choice has two dimensions – knowing the alternatives on offer and having the ability to judge their price and quality differences. In addition to having access to relevant information, consumers need to be sufficiently confident to act on it. Confident consumers have the skills needed to deal effectively with suppliers, and obtain what they expect from a transaction, or, if not, to access effective redress mechanisms. Of course, it is not necessary for all consumers to be well informed and confident to encourage effective competition between firms. Competition will still be robust if there is a sufficient proportion of informed, “marginal” consumers who are willing to switch suppliers to secure a better deal. That said, as a general rule, competition works best when the bulk of consumers are reasonably well-informed and willing to act on that information. To this end, a key goal of consumer policy is to overcome significant information failures that can hinder effective competition. However, it is important to emphasise that competition is a means to achieving an improvement in consumer wellbeing rather than an end in itself. In addition, it is only one means. Where competition is limited (or absent), consumer policy can still achieve improvements in consumer wellbeing through other policy responses such as business or product regulation, improved access to redress mechanisms, and support measures (such as legal aid and financial counselling). 9

As regards the policy object of the ACL, the PC also recommended that Australian governments should adopt the common overarching object and six operational objects that have since been incorporated into the Intergovernmental Agreement for the Australian Consumer Law (IGA). 10 The principal focus of the ACL is to deliver better outcomes for consumers and to minimise consumer detriment. The aims are to minimise costs and unintended side-effects of interventions, and to have special regard for the needs of vulnerable and disadvantaged consumers. The importance of integrating supply and demand polices is widely accepted. 11 The position is summarised by the OECD: 9

Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, p 28.

10

Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, pp 41-2, recommendation 3.1.

11

See OECD, Consumer Policy Toolkit (OECD, Paris, 2010), Ch 2 which sets out an overview of the way in which consumer protection complements competition policy, at http://www.oecd.org/sti/consumerpolicy/toolkit. See also OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), available at http://www.oecd.org. For commentary on this issue in an Australian context, see Consumer Policy in Australia: A Companion to the OECD, Consumer Policy Toolkit (Commonwealth of Australia, March 2011); Sylvan, “Activating Competition: The Consumer–Competition Interface” (2004) 12 Competition & Consumer Law Journal 191; Griggs, “Intervention or Empowerment – Choosing the Consumer Law Weapon!” (2007) 15 Competition & Consumer Law Journal 111; Hally-Burton, Shirodkar, Winckler and Writer, “Harnessing the Demand Side: Australian Consumer Policy” (2008) 4 Economic Roundup 91; King and Smith, “The Shaky Economic Foundations of Consumer Protection Policy and Law” (2010) 18 Competition & Consumer Law Journal 71.

CHAPTER

[9.15]

09

SCOPE AND POLICY OBJECTIVES

171

Competition involves the interaction of supply and demand. Competition policy is concerned mainly with the supply-side structure of markets, ensuring that there are no unnecessary barriers to entry, that market concentration does not lead to economic loss or unreasonable transfers from consumers to producers, and that there are effective legal sanctions against fraud, misleading conduct, and collusion among suppliers. Various policy instruments in member countries are used to achieve structural soundness in markets. Even when markets are structurally sound on the supply-side, however, there can still be adverse consequences for consumers and therefore a misallocation of resources. Problems in gaining access to information and certain patterns of consumer behaviour can result in some potentially beneficial transactions not occurring (“deadweight loss”), an excessive burden of transaction costs (the costs of searching for and switching to alternative suppliers), and some stickiness in prices, all to the detriment of consumers. In short, the potential benefits of competition are not fully realised. It is the behaviour of consumers that activates competition, and that behaviour can be shaped in part by public policy. Public policy, therefore, is concerned with the demand-side as well as the supply-side of markets, to ensure as a basic condition that consumers are well-informed. Provision of information however, while being necessary to activate competition, may not be in itself sufficient. Even well-informed consumers exhibit consistent patterns of behaviour that can lead them away from making decisions that satisfy their preferences. The Committee examined the core question of the extent to which these distortions should be addressed by public policy. 12

Market failure and consumer detriment ...............................................................................................................................................................................................

A principal source of consumer detriment on the demand side is market failure arising from transactions costs and information asymmetry. Transaction costs are costs of searching for and switching to alternative suppliers. If search costs are high, decisions will be based on incomplete information. Consumers' “bounded rationality” refers to purchasing decisions being based on less than perfect information; consumers will only undertake a limited or “bounded” range of research prior to purchase. The theory of “bounded rationality” suggests that decision makers truncate their search at the point when the costs of searching start to outweigh the benefits resulting from that search. The OECD explains the situation of “bounded rationality” as one where “the rational decision-maker weighs up the sum of search and switching costs against the expected benefits of continuing to search for a lower priced or more satisfactory product”. 13 In some markets consumers are well-informed because it is in the interests of suppliers to provide information about the quality of their products so that prospective purchasers can make comparisons about the price and quality of the goods or services on offer. In many [9.15]

12 13

OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [8]. OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [10].

172

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.15]

cases prospective purchasers can inspect the goods before purchase and there are many repeat purchases. But in some markets information is not optimised; it is suppressed. 14 Transactions involving asymmetric information, where one party to the transaction knows more than the other party, can also produce significant inefficiencies. 15 In relation to most consumer goods or services, the ACL does not provide for mandatory disclosure. 16 It is assumed that market forces will put pressure on suppliers to make sufficient information available to consumers to allow them to make an informed decision as to which goods or services will maximise their utility. Provided this information is accurate, and provided consumers are able to evaluate it properly, consumers can use this information to select products and services which meet their requirements. In some situations there is a greater likelihood that the decision-making process will be constrained and that this will result in poor consumer choices. According to the Secondary Explanatory Memorandum: Information standards are an example of regulatory intervention to address the market failure associated with information asymmetry. Lack of information on which to base purchasing decisions can lead consumers to make decisions which are not in their best interests. This can apply to services as well as goods. The service sector accounts for a significant share of economic activity in Australia and covers a wide variety of categories including financial services, property and business services, telecommunications, health services, travel and tourism, cultural and recreational services and personal services. Some services are subject to industry-specific regulation whereas others are subject only to the general fair trading laws. The misleading and deceptive conduct laws in Australia set a minimum acceptable standard of commercial behaviour. They are reactive, providing for sanctions (for example prosecution and injunctions) and remedies (for example compensation orders) to protect the public when misled or deceived. Information standards, on the other hand, are proactive, requiring a positive standard of information disclosure that the market, on its own, has not provided. 17

For example, selling products in complex bundles may make it difficult for consumers to calculate the price of each item in the bundle and make comparisons with the prices of competitors. This is a feature of pricing in the telecommunications sector where, for example, fixed line, mobile and internet services are advertised as a bundle of telecommunication services at a single price. 14 15 16

17

Akerlof, “The Market for “Lemons”: Quality, Uncertainty and the Market Mechanism” (1970) 84(3) Quarterly Journal of Economics 488. Hadfield, Howse, and Trebilcock, “Information-Based Principles for Rethinking Consumer Protection Policy” (1998) 21 Journal of Consumer Policy 131 at 150. Safety warning notices are required in relation to some hazardous products where there is a risk of physical injury. Mandatory information standards are required in relation to matters such as fibre content labelling of textile products, care labelling for clothing and textile products, and ingredient labelling for cosmetics and toiletries. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [23.180]-[23.181].

CHAPTER

[9.20]

09

SCOPE AND POLICY OBJECTIVES

173

Behavioural economics and consumer detriment ...............................................................................................................................................................................................

“Classical” economic theory rests on assumptions of rational consumer behaviour. It is assumed that consumers are well-informed and that they will act in ways that fulfil their preferences. 18 Preferences are determined on the basis of self-interest. The rationale behind the classical model is to aggregate consumer decision-making so that analysis and predictions can be made at the market level rather than at the level of an individual or group of consumers. “Behavioural economics” is an empirical discipline that: [9.20]

extends the knowledge base of economics with insights from empirical studies of consumer behaviour. Relying largely on psychological studies, in laboratory simulations and actual markets, behavioural economics delves into the ways in which people make decisions. These patterns of behaviour, or biases, indicate ways in which consumers make decisions that are inconsistent with their welfare. This extension of knowledge can provide an important contribution to policy, both by identifying market failures missed by traditional theory and by contributing to the effectiveness and efficiency of remedies. 19

On 8 and 9 August 2007, the PC convened a roundtable on the topic “Behavioural Economics and Public Policy” in Melbourne. Behavioural economics applies insights from psychology to economic issues and analysis. Participants at the Roundtable discussed the contribution that behavioural economics can make to a broader understanding of people's motivation and behaviour in markets and the implications for policy and regulatory approaches. The PC acknowledged that behavioural economics has particular relevance to consumer policy, and that the insights gained through the Roundtable made a useful contribution to the Commission's inquiry on Australia's consumer policy framework. 20 Several important insights for consumer protection emerge from behavioural economics. One is that consumers do not always behave rationally and are in need of assistance in making purchasing decisions. Some consumers behave emotionally and are vulnerable to exploitation, for example, through the acquisition of weight loss products that do not entail diet or exercise, or get rich quick schemes that do not entail risk. 21 18 19

For a description see King and Smith, “The Shaky Economic Foundations of Consumer Protection Policy and Law” (2010) 18 Competition & Consumer Law Journal 71 at 74. OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [13]. For seminal works on behavioural economics, see Sunstein, Behavioural Law and Economics (Cambridge University Press, 2000) and Korobkin and Ulen, “Law and Behavioural Science: Removing the Rationality Assumption from Law and Economics” (2000) 88(4) California Law Review 1051.

20

See especially the papers by Mulholland, “Behavioural Economics and the Federal Trade Commission”; Shafir, “A Behavioural Background for Economic Policy”, and Field, “Having One’s Cake and Eating it too – an Analysis of Behavioural Economics from a Consumer Policy Perspective”. The conference proceedings can be found at http://www.pc.gov.au/research/supporting/behavioural-economics.

21

Mulholland, “Behavioural Economics and the Federal Trade Commission”, p 12.

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Mulholland observes that cooling off regulations in unsolicited consumer agreements provide another example of laws that incorporate behavioural economics insights: In particular, these rules are premised on the view that consumers at times make purchases in emotionally or biologically “hot” states that, in a cooler or more rational state, they would not make. Mandating a cooling-off period allows consumers to reframe their choices and to give them an opportunity for rational re-consideration to overcome the influence of impulsive choice. 22

Some high pressure sales techniques play on human weaknesses and the tendency of consumers to behave irrationally. For example, “limited time” sales put pressure on consumers to make up their minds quickly in the belief that the goods or services are scarce. They can result in consumer detriment because the decision to purchase is made under time pressure without the benefit of shopping around and making comparisons. “Reference pricing” or “two-price” advertising provides another example of a sales technique that may be used to exploit consumer irrationality. It refers to the practice of advertising the seller's current price for goods or services by reference to its previous price. The “was” price acts as a reference or anchor to what the goods or services are “worth” and can result in consumer detriment if goods or services were not, in fact, previously sold at that price. Finally, sellers may try to make the purchases less “painful” by allowing consumers to spread the payment into the future through lay-by schemes and thereby avoid the emotionally unpleasant experience of having to pay in full at the time of purchase. Consumers may suffer detriment if they are thereby induced to acquire goods or services they cannot afford. Suppliers can seek to exploit natural human weakness through unfair sales techniques including: • misleading conduct generally, or specific misleading representations or lack of disclosure of material information in relation to the supply of goods or services; • unfair marketing practices including harassment and coercion by sales people; • unconscionable conduct in relation to vulnerable consumer groups, including the elderly, consumers with poor understanding of English and the disadvantaged; and • using strong bargaining power to insert unfair terms in standard form consumer contracts. In order to eradicate these high-pressure sales techniques, an effective consumer regulatory regime requires that consumers have access to remedies should problems occur. Traders must have a clear understanding of their obligations and the enforcement powers of the regulator and the penalties imposed for failure to comply must act as a real deterrent for failure to comply. 22

Mulholland, “Behavioural Economics and the Federal Trade Commission”, pp 17-8.

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Sale of unsafe products and consumer detriment ...............................................................................................................................................................................................

A further source of personal consumer detriment arises from the sale of defective or unsafe products. The detriment will be easy to detect where the products result in physical injury or, for example, illness (that is, from ingesting tainted food). The ACL contains a number of product liability regimes. It seeks to limit consumer detriment arising from the sale of defective or unsafe products in Pt 3-3 (“Safety of consumer goods and product relate services”), Pt 3-4 (“Information standards”) and Pt 3-5 (“Liability of manufacturers for goods with safety defects”). [9.25]

Protection against business detriment ...............................................................................................................................................................................................

Despite its title, some general and specific protections in the ACL are available to businesses as well as consumers. Section 18, the general prohibition of misleading conduct, is not confined to consumer transactions, and much litigation has arisen as a result of businesses seeking to protect their commercial interests rather than as a result of consumers seeking remedies from businesses. Section 21, the general prohibition of unconscionable conduct, in trade or commerce, in relation to: the supply or possible supply of goods or services to a person (other than a listed public company), or the acquisition or possible acquisition of goods or services from a person (other than a listed public company). Thus, in the context of a business's dealings with other businesses, s 21 is intended to protect “business consumers” and “business suppliers” as well as individual consumers. A more restrictive approach was initially taken in relation to the general protection for unfair terms. Until 2015, the unfair terms law only applied where the supply of goods or services or the sale of an interest in land was to an individual. The term “individual” is defined in the Acts Interpretation Act 1901 (Cth) to mean a natural person. In 2015, the general protection in relation to unfair terms was extended to small businesses, although the more egregious unfair terms in business-to-business transactions may be caught by the prohibition of unconscionable conduct in s 21 of the ACL. 23 [9.30]

Misleading conduct and business detriment ...............................................................................................................................................................................................

It had long been recognised that the “consumer protection” provisions of the TPA were, before their repeal, concerned with the supply side as well as the demand side of markets and with market efficiency considerations. This is because misleading advertising increases demand for an inferior product at the expense of a superior product. It harms competition and is a cause of business detriment on the supply side. For [9.35]

23

ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 (Gordon J). See Corones, “Regulating Supermarket Misconduct as Customer/Acquirer of Goods and Services” (2015) 43(6) Australian Business Law Review 400 at 406-10.

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[9.35]

example, Lockhart J in Colgate-Palmolive Pty Ltd v Rexona Pty Ltd, 24 granted an interlocutory injunction to prevent misleading claims by Rexona concerning the effectiveness of Aim toothpaste for the following reasons: It is the plain purpose of the Act to require truthful conduct in the market place and that competition be free and fair. In this case, claims are made by Rexona which consumers themselves cannot verify. They rely on the technical expertise of Rexona to assure the validity of the claims. As I have found that a prima facie case has been established, the public interest is a matter to be taken into account, weighing heavily in favour of the granting of interlocutory injunctions …. There is evidence that Rexona's advertising campaign may erode the market share enjoyed by the smaller manufacturers of toothpastes. Indeed, Mr Johns, the General Sales Manager of Rexona, said in cross-examination that the introduction of Aim toothpaste would, in his view, cause the small brands to suffer substantially, …

Rexona contended that these matters are irrelevant as the small manufacturers are neither parties to the proceedings nor consumers. In my opinion the possible detriment to the small manufacturers is a relevant consideration. The Act is concerned with the maintenance of free and healthy competition. If a corporation is engaging in misleading or deceptive advertising which assists it in gaining a substantial share of a market at the expense of small manufacturers, the interests of those manufacturers must be a relevant consideration when considering the balance of convenience. 25 The same principle has been recognised in other cases. In Janssen-Cilag Pty Ltd v Pfizer Pty Ltd, 26 Pfizer argued that only a person who relied on the misleading representation which constituted the contravention of s 52 could recover damages under s 82 of the TPA. Lockhart J rejected this argument and refused to give s 82 a restrictive interpretation. His Honour held that the wording of s 82 did not impose some general requirement that damage can be recovered only where the applicant relies upon the conduct of the respondent constituting the contravention, and that s 82 can be relied upon by a rival trader who suffers a business detriment as a result of the contravening conduct. 27 Misleading conduct in relation to premium (or credence) claims can also harm competition on the supply side. 28 Where products are genuinely superior, premium claims assist consumers to make informed decisions and enhance consumer welfare. Where premium claims are false they are a source not only of consumer detriment, but also result in lost sales to the suppliers of genuine products. On the supply side, premium claims are the result of innovation and can promote competitive rivalry. False premium claims can deter suppliers from engaging in innovation, because consumers will be 24 25 26 27

Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242. Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 at 43,194-5. See also Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) ATPR ¶41-186 (Lockhart J). Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526. Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at [16].

28

ACCC v Marksun Australia Pty Ltd (2011) ATPR ¶42-363 at [107].

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cynical in future about the accuracy of such claims. In assessing the level of pecuniary penalties to be imposed under s 224 of the ACL, the court is required to take into account the amount of the loss or damage caused by the conduct to consumers on the demand side and competitors on the supply side. For example, in ACCC v Reebok Australia Pty Ltd, McKerracher J took into account the loss or damage suffered by competitors: The damage to fair and open competition in the footwear market in Australia cannot be quantified, but it is likely that the conduct had a significant effect because some consumers were misled into purchasing the EasyTone shoes on the basis of credence attributes which they could not readily verify, and where they would not otherwise have made such a purchase had they known the shoes did not have such attributes. 29

Drip pricing can be a source of consumer detriment on the demand side and business detriment on the supply side. It is a feature of online selling. Drip pricing refers to the practice of using a headline price to attract potential buyers which is misleading because it is not the final total price. This is only ascertained after working through several pages on the site which disclosure fees and surcharges incrementally. The buyer may decide to purchase because of the investment of time and effort involved in searching for the final price even though they would not have purchased if they had been advised of the total price at the outset. Consumer detriment arises because drip pricing leads consumers into making purchases of goods and services which they would not otherwise have made, or paying more for goods and services than they would have paid if they had been better informed. Competition is harmed on the supply side because of the erosion of market share by suppliers with less expensive products whose goods and services would have been purchased but for the drip pricing. Because of this demand and supply side interaction it was thought appropriate to include the ACL in the CCA. Policy objects included in the IGA ...............................................................................................................................................................................................

The modern approach or “purposive” approach to statutory interpretation favours a construction of legislation which gives effect to its legislative purpose. Section 15AA of the Acts Interpretation Act 1901 (Cth) requires the courts when interpreting a statute to adopt a meaning that would “promote the purpose or object underlying the Act” rather than one that would not do so. Objects provisions can play a significant role as an aid to judicial interpretation and can influence judicial outcomes. The overarching national consumer policy objective favoured by the PC, 30 agreed to by MCCA on 15 August 2008, and included in the IGA signed by COAG on 2 July 2009, is: [9.40]

29 30

ACCC v Reebok Australia Pty Ltd (2015) ATPR ¶42-501 at [143] citing the Full Federal Court in Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [69]. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008)), recommendation 3.1, vol 2, pp 41-2.

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[9.40]

To improve consumer well-being through consumer empowerment and protection fostering effective competition and enabling confident participation of consumers in markets in which both consumers and suppliers trade fairly. 31

Some of the States and Territories have amended their Application Acts to include this objective. 32 This overarching objective is supported by six operational objectives: (a)

to ensure that consumers are sufficiently well-informed to benefit from and stimulate effective competition;

(b)

to ensure that goods and services are safe and fit for the purposes for which they were sold;

(c)

to prevent practices that are unfair;

(d)

to meet the needs of those consumers who are most vulnerable or are at the greatest disadvantage;

(e)

to provide accessible and timely redress where consumer detriment has occurred; and

(f) to promote proportionate, risk-based enforcement. 33 Other objectives of the ACL can be gleaned from the extrinsic materials, especially the Productivity Commission Report, the CCAAC Report and the MCCA. They are: (a)

to clarify the law relating to consumer protection in Australia (clarity);

(b)

to make the law relating to consumer protection in Australia consistent across all jurisdictions and sectors of the economy (consistency);

(c)

to make the law relating to consumer protection in Australia more readily enforceable from the consumer's point of view (accessibility);

(d)

to raise awareness of consumers and suppliers of their rights and responsibilities under the law relating to consumer protection in Australia (awareness); and

(e)

to promote compliance by business with the law relating to consumer protection in Australia (compliance). The Competition Policy Reform Act 1995 (Cth) inserted a new objects provision into the CCA. It provides: The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

Well before s 2 was inserted, the consumer protection provisions of Pt V of the TPA were consistently recognised as having important public policy objectives. For example, in 31 32 33

Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), Recital C. See Fair Trading Act 1989 (Qld), s 3; Fair Trading Act 2010 (WA), s 3. Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), Recital D.

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Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 34 Mason J (as his Honour then was) observed that the two policy objectives of promoting competition and protecting consumers could be reconciled: The object of Pt V is to protect the consumer by eliminating unfair trade practices, just as the object of Pt IV is to promote competition by eliminating restrictive trade practices. Knowledge of the history of the legislative proposals, of the legislation and of the controversy which has surrounded it might suggest that the dominant object of the Act is the promotion of freedom of competition. But examination and analysis of its provisions yields no acceptable foundation for this conclusion. The two Parts are independent and there is no direction that one Part is to be read subject to the other. Although they have to be read together as parts of the same statute, they might in other circumstances have been enacted as separate statutes with not very much difference in legal effect. 35

Managing consumer policy and reform ...............................................................................................................................................................................................

In 2011, COAG reformed its organisation and processes. The former Ministerial Council on Consumer Affairs (MCCA) was replaced by the COAG Legislative and Governance Forum of Consumer Affairs (CAF) which consists of the Australian and New Zealand Ministers responsible for consumer affairs. CAF's role and objectives are set out in the Charter 2013-2015 (dated 1 July 2013). 36 CAF is responsible for the administration of the ACL and other issues under the Inter-Governmental Agreements. 37 Consumer Affairs Australia and New Zealand (CAANZ) comprises: the Australian Treasury (the Commonwealth Department responsible for administering the CCA) and Federal agencies (ACCC and ASIC); the New Zealand Ministry of Business, Innovation and Employment and the NZ Commerce Commission; and the eight State and Territory regulators set out at [9.145]. CAANZ provides primary support to CAF in achieving its strategic objectives. CAANZ has established a number of advisory and consultative committees for each of its four main functions: [9.45]

• education and information (Education &Information Committee); • compliance and dispute resolution (Compliance & Dispute Resolution Advisory Committee); • product safety (Product Safety Consultative Committee); and • policy and research (Policy & Research Advisory Committee). The Australian Consumer Law Review Issues Paper was released in March 2016 and is available at the www.consumerlaw.gov.au website. It will be overseen by CAANZ and 34 35

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 202-5.

36

COAG Legislative and Governance Forum of Consumer Affairs and Consumer Affairs Australia and New Zealand, Charter 2013-2015 (1 July 2013), at http://consumerlaw.gov.au/files/2015/09/CAF_charter_ 20130515.pdf Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), the Trans-Tasman Mutual Recognition Act 1997, the Mutual Recognition Act 1992, the “Travel Agents Participation Agreement” and other matters delegated by COAG.

37

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[9.50]

will formally commence in 2016, incorporating an extensive public consultation process and with a final report to Ministers in early 2017. Overview of the ACL ...............................................................................................................................................................................................

Part XI of the CCA provides for the application of the Australian Consumer Law as a law of the Commonwealth. The text of the ACL consists of: [9.50]

• Schedule 2 of the CCA; • the remaining provisions of the that relate to Sch 2 of the CCA; and • regulations under the CCA that relate to the ACL. The ACL applies as a law of the Commonwealth under the CCA. Part XIAA of the CCA regulates the application of the Australian Consumer Law as a law of a State or Territory. The “applied Australian Consumer Law” is defined in s 140 of the CCA to mean the text described in s 140B. Section 140B of the CCA states: The applied Australian Consumer Law consists of: (g) Schedule 2; and (h) The regulations made under section 139G of this Act.

The ACL applies as a law of each State and Territory by separate State and Territory application legislation referred to collectively in this work as the ACL (Application Acts). They are considered in Part IV of this chapter. When the States and Territories implemented the ACL (Application Acts) they adopted the “Australian Consumer Law text”. 38 The Australian Consumer Law text consists of: (f) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth, and (g) the regulations made under s 139G of that Act.

Thus, there are nine ACLs in force in Australia. The ACL (Cth), applies principally to corporations. In addition, there are six State and two Territory ACLs that apply to persons generally. However, while the States and Territories adopted the text as defined which includes the regulations made under s 139G of the CCA, they did not adopt the other provisions in the CCA. This means that the nine ACLs are not entirely uniform, because there are a number of important provisions in the CCA that are not in the ACL (Cth) itself, and have not been enacted in the ACL (Application Acts) or other State and Territory legislation. 38

The Principal State and Territory Application Acts are: Fair Trading Act 1987 (NSW) (FTA 1987 (NSW)), ss 27 and 28; Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA 2012 (Vic)), ss 7 and 8; Fair Trading Act 1989 (Qld) (FTA 1989 (Qld)), ss 15 and 16; Fair Trading Act 2010 (WA) (FTA 2010 (WA)), ss 18 and 19; Fair Trading Act 1987 (SA) (FTA 1987 (SA)), ss 13 and 14; Australian Consumer Law (Tasmania) Act 2010 (Tas) (ACLA 2010 (Tas)), ss 5 and 6; Consumer Affairs and Fair Trading Act (NT) (CAFTA (NT)), ss 26 and 27; and Fair Trading (Australian Consumer Law) Act 1992 (ACT) (FT(ACL)A 1992 (ACT)), ss 6 and 7.

[9.50]

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Some important differences that should be noted are: • Section 131(1) of the CCA provides that the ACL (Cth) applies to the conduct of corporations, and only to a limited extent to the conduct of individuals, although ss 6 and 131(2) of the CCA extend the operation of the ACL (Cth) to natural persons in certain circumstances where the Commonwealth has constitutional power to do so. The ACL (Application Acts) apply to the conduct of persons (corporations and individuals). • A contributory fault defence is provided by s 137B of the CCA in relation to claims for damages under s 236 of the ACL (Cth) which re-enacts s 82(1B) of the TPA. 39 State legislation 40 allows a court to reduce an award of damages for contributory negligence only for claims arising out of the tort of negligence and contributory negligence is available at common law; or the claim is for loss arising from a breach of contractual duty that is concurrent with a duty of care in tort. The legislative provisions have not been amended to extend contributory negligence to a statutory claim for damages under s 236 of the ACL (Application Acts). This presents a procedural advantage for claimants seeking damages under the ACL (Application Acts), who will be able to avoid a reduction of their damages award for contributory fault. • Section 139A of the CCA expressly allows for a term that limits or excludes liability for a failure to comply with the consumer guarantees by suppliers of recreational services under the ACL (Cth). Some States and Territories adopt similar provisions. 41 • Part VIA of the CCA (Proportionate liability) only applies to a claim for damages made under s 236 of the ACL (Cth) for economic loss or damage to property caused by conduct that was done in contravention of s 18 of the ACL (Cth). Similar provisions have been introduced into State and Territory legislation and apply in relation to claims for negligence and misleading conduct. 42 39

In relation to New South Wales, see the decision of the New South Wales Court of Appeal in Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liq) [2011] NSWCA 367. Seddon and Fridman, “Misleading Conduct and Contributory Fault: Inconsistency under the Uniform Australian Consumer Law” (2012) 20 Australian Journal of Competition and Consumer Law 87.

40

See Law Reform (Miscellaneous Provisions) Act 1965 (NSW), ss 8 and 9; Law Reform Act 1995 (Qld), s 10; Civil Liability Act 1936 (SA), s 50; Tortfeasors and Contributory Negligence Act 1954 (Tas), s 4(1); Wrongs Act 1958 (Vic), s 26(1); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA), s 4(1); Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s 15; Law Reform (Miscellaneous Provisions) Act (NT), s 16(1). For example, s 22(1) of the ACLFTA 2012 (Vic) provides that a term of a contract which operates to limit liability in relation to the supply of recreational services in the ways described is not void by virtue of s 64 of the ACLFTA 2012 (Vic). On the other hand, s 107 of the FTA 1989 (Qld) prohibits all forms of contracting out of the ACL (Qld). Civil Liability Act 2002 (NSW), s 34(1)(b); Civil Liability Act 2003 (Qld), s 28(1)(b) (but note the exclusion for claims by consumers); Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), s 8; Civil Liability Act 2002 (Tas), s 43A; Wrongs Act 1958 (Vic), s 24AF(1)(b); Civil Liability Act 2002 (WA), s 5AI(1)(b); Civil Law (Wrongs) Act 2002 (ACT), s 107B; Proportionate Liability Act (NT), s 4(2)(b).

41

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[9.55]

Before commencing proceedings prospective litigants will need to consider which ACL applies. There may be procedural advantages in framing the cause of action as one based on the ACL (Application Acts) rather than the ACL (Cth). Commencement dates ...............................................................................................................................................................................................

The ACL (Cth), Sch 2 was implemented in two stages. The first stage of the reforms contained in the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth) (First Commonwealth Act) was passed by the Parliament on 17 March 2010. The First Commonwealth Act comprised: [9.55]

(a)

national unfair contract terms provisions, and

(b)

new civil pecuniary penalties, enforcement powers and consumer redress options for breaches of the TPA or the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). These provisions came into operation on 1 July 2010. The second stage of the reforms contained in the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) (Second Commonwealth Act) was passed on 24 June 2010. The Second Commonwealth Act comprised: (i)

changes drawing on best practice in the States and Territories, 43

(ii)

the consumer guarantees reforms, and

(iii)

a new standard consumer product safety law for consumer goods and product related services. This Act introduced the ACL and provided that the new law would commence on 1 January 2011. Section 139G of the CCA provides that the Governor-General may make regulations prescribing matters required or permitted by the ACL to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the ACL. Item 12 of Sch 7 to the Second Commonwealth Act provides that the GovernorGeneral may make regulations prescribing matters of a transitional, application or saving nature in relation to the amendments and repeals made by the Schedules to the Second Commonwealth Act. On 16 November 2010, the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1) 44 (ACL Amendment Regulations) were published. Since the Second Commonwealth Act was scheduled to commence on 1 January 2011, these regulations were made pursuant to s 4 of the Acts Interpretation Act 1901 (Cth) 43

44

The Ministerial Council on Consumer Affairs (MCCA) held in Perth on 4 December 2009, considered and agreed on 14 specific proposals to enhance the effectiveness of the Australian Consumer Law. These include unsolicited sales practices, and other forms of direct selling which do not take place in a retail context, lay-by sales transactions, demanding payment for unsolicited advertising, and clarifications to the provisions on pyramid selling. Registered on the Federal Register of Legislative Instruments, at http://www.comlaw.gov.au.

[9.55]

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which provides that the regulation-making powers in the ACL (Cth) can be exercised as if the Act had come into force. The ACL Amendment Regulations provide for three transition periods for the implementation of the ACL, to allay the fears expressed by the business community that they would be unable to comply with the 1 January 2011 commencement date. Schedule 1 to the ACL Amendment Regulations relates to the following provisions in the ACL: (a)

prescribed requirements for asserting a right to payment,

(b)

agreements that are not unsolicited consumer agreements and

(c)

reporting requirements for goods or product-related services associated with death, serious injury or serious illness. These provisions commenced on 1 January 2011. Schedule 2 to the ACL Amendment Regulations relates to repair notices provisions of the ACL, which commenced on 1 July 2011. Schedule 3 to the ACL Amendment Regulations relates to warranties against defects provisions of the ACL, which commenced on 1 January 2012. The TPA was amended and partially renumbered with effect from 1 January 2011 by the Second Commonwealth Act. At the same time, the TPA was renamed by item 2 of Sch 5 to the Second Commonwealth Act to become the Competition and Consumer Act 2010 (Cth). By reason of item 7(1) of Sch 7 to the Second Commonwealth Act the TPA as in force immediately before 1 January 2011 continues to apply to acts or omissions that occurred before that date. This means that in relation to conduct that occurred before 1 January 2011, and continued after that date, it will be necessary to seek relief under the relevant provisions of the TPA and the CCA. At the State and Territory level the ACL was also implemented in stages. Two States implemented the unfair terms provisions of the ACL as a law of their States by incorporating them into their Fair Trading Acts. The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (Vic) was passed by the Parliament of Victoria on 1 June 2010 and came into operation as a law of the State of Victoria on 1 July 2010. 45 The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (NSW) was passed by the Parliament of New South Wales on 23 June 2010 and came into operation as a law of the State of New South Wales on 1 July 2010. 46 From 1 January 2011, the FTA unfair terms provisions in these States were repealed and the unfair terms provisions of the CCA, Sch 2 now apply. The ACL (Application Acts) which enacted the ACL as a law of their respective jurisdictions commenced on 1 January 2011. 45

46

Available at http://www.parliament.vic.gov.au/static/www.legislation.vic.gov.au-bills.html. See Government Gazette (24 June 2010) http://www.gazette.vic.gov.au/gazette/Gazettes2010/ GG2010G025.pdf. See Government Gazette (1 July 2010) http://www.legislation.nsw.gov.au/sessionalview/sessional/sr/ 2010-321.pdf.

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[9.60]

Transitional measures ...............................................................................................................................................................................................

Transitional measures are contained in Sch 7 of the Second Commonwealth Act. Items 2–5 make the following provisions in relation to existing product declaration, bans and standards: [9.60]

2 Declarations of goods to be unsafe goods A notice under subsection 65C(5) of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if: (a) it were an interim ban imposed under section 109 of the Australian Consumer Law by the Commonwealth Minister; and (b) it starts on the day of that commencement. 3 Permanent bans A notice under subsection 65C(7) of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were a permanent ban imposed under section 114 of the Australian Consumer Law. 4 Prescribed consumer product safety standards A prescribed consumer product safety standard under section 65C of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were a safety standard made under section 104 of the Australian Consumer Law. 5 Prescribed consumer product information standards A prescribed consumer product information standard under section 65D of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were an information standard made under section 134 of the Australian Consumer Law.

Implementation of the new consumer guarantees regime is dealt with in item 6 of Sch 7 of the Second Commonwealth Act. It provides that Ch 3, Pt 3-2 (Consumer transactions) applies to all relevant conduct occurring in trade or commerce on or after 1 January 2011. Conduct occurring prior to 1 January 2011 will remain subject to the repealed (and saved, for those purposes) provisions of the TPA or the relevant FTA of a State or Territory . 47 Goods and services acquired before 1 January 2011 will be covered by TPA and FTA regimes . Eligible goods and services acquired on or after 1 January 2011 will be subject to the guarantees. Warranties for financial services provided by the ASIC Act 48 will continue to apply and be administered by ASIC. 47

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.144].

48

ASIC Act, s 12ED.

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Item 7 of Sch 7 of the Second Commonwealth Act provides that the TOA, as in force immediately before the commencement of the CCA, Sch 2, continues to apply to or in relation to any proceedings which were commenced, but not concluded, before the commencement of the ACL. Substantive changes introduced by the ACL ...............................................................................................................................................................................................

The principal substantive changes introduced by the ACL are the national law on unfair contract terms (Ch 2, Pt 2-3) and the national consumer guarantees law, which replaces the statutory implied conditions and warranties (Ch 3, Pt 3-2, Div 1). However, many of the ACL provisions are not substantively different from their equivalent former TPA provisions. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, when transferring the provisions of the TPA into the ACL, the opportunity was taken to express the law in a clearer style. It stated: [9.65]

much of the TPA has been in place for over 30 years, so a number of ACL provisions have been redrafted to comply with plain English drafting. 49

The drafting changes are not intended to alter the legal effect of those TPA provisions. Thus, the extensive jurisprudence that developed around those TPA provisions will apply equally to the new ACL provisions that re-enact them. The Australian Treasury, the Commonwealth Department responsible for the administration of the CCA, has published two guides to explain the context of the ACL reforms: • The Australian Consumer Law: An Introduction; 50 and • The Australian Consumer Law: A Guide to Provisions. 51 In The Australian Consumer Law: An Introduction, Treasury identifies the following changes as the principal ones being implemented by the ACL: • a single set of definitions and interpretive provisions, some of which differ from those currently used in the (Ch 1); • a new, national law on unfair contract terms (Ch 2, Pt 2-3); • a single set of provisions about unfair practices and fair trading, including amendments and additions which reflect existing provisions in State and Territory consumer laws (Ch 3, Pt 3-1); • new national consumer guarantees provisions, which will replace statutory implied conditions and warranties (Ch 3, Pt 3-2, Div 1); 49 50

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.8]. The Australian Consumer Law: An Introduction (July 2010).

51

The Australian Consumer Law: A Guide to Provisions (July 2010).

186

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.65]

• a new national regime for unsolicited consumer agreements, which will replace existing State and Territory laws on door-to-door sales and other direct marketing (Ch 3, Pt 3-2, Div 2); • simple national rules for lay-by agreements (Ch 3, Pt 3-2, Div 3); • a new, national product safety legislative regime (Ch 3, Pt 3-3); and • new national provisions on information standards which apply to services as well as goods (Ch 3, Pt 3-4). 52 The following table, originally prepared by the Australian Treasury, summarises the principal differences between the ACL and the TPA consumer protection provisions. 53 It was prepared before the Second ACL Bill was amended in the Senate. It has been amended to reflect those and other changes that have occurred since 1 January 2011. TABLE 1.1 Australian Consumer Law – Table of provisions that have substantially changed compared to the TPA

Description

ACL

TPA or other source

Comments

Chapter 1 Meaning of consumer

s3

TPA, s 4B

$40,000 threshold retained contrary to the version of the Bill first introduced into Parliament. Amended to clarify that burden of proof is evidentiary only in nature; no legal burden on defendant; and not a defence to otherwise misleading or deceptive conduct. Proposed changes agreed by MCCA on 4 December 2009. New provision – based on NZ Consumer Guarantees Act 1993 (CG Act). Only applies to contracts for or relating to the use of postal, telegraphic or telephonic services; or contracts for or relating to radio or television broadcasts.

s4 Misleading representations with respect to future matters

TPA, s 51A

When donations are s 5 treated as supplies

-

Postal, telegraphic or telephonic services or contracts for or in relation to a radio or television broadcast

s 6(3A)

TPA, s 6(3)

52

The Australian Consumer Law: An Introduction, p 3.

53

The Table in its original form appears as an Appendix to the submission by the Treasury to the Senate Economics Legislation Committee. It is reproduced with the kind permission of Office of the Senior Clerk of Committees Department of the Senate.

[9.65]

CHAPTER

Description

ACL

Meaning of manufacturer

s7

09

SCOPE AND POLICY OBJECTIVES

TPA or other source TPA, s 74A

Part 2-1: Misleading or deceptive conduct TPA, s 65A Application of this s 19 Part to information providers Part 2-2: Unconscionable conduct s 21 Unconscionable conduct in consumer and business transactions

Part 2-3 Unfair Terms ss 23 – 28 Unfair terms in standard form consumer contracts

187

Comments Draws on the definition of “manufactured” in s 74A(1) and deemed “manufacturer” in s 74A(3) of the of the TPA. Subsections 19(3) and 19(4) reflect the High Court's interpretation of 65A of the in ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305.

TPA, ss 51AB and 51AC

Amended to give effect to Government response to the 2009 Senate Economics Committee report on unconscionable conduct. Section 22(2)(j) and 22(3)(j) inserted to allow the court to have regard to the progress of a contract in considering unconscionability. Amended by the Competition and Consumer Legislation Amendment Act 2011 (Cth) which implemented the Expert Panel's recommendations to include a list of interpretive principles and unify the consumer and business related provisions prohibiting unconscionable conduct.

-

Adds prohibition of unfair terms in standard form consumer contracts

188

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Description

[9.65]

TPA or other Comments source Part 3-1 Unfair practices, Division 1: False or misleading representations etc. TPA, s 53 Section 53 of the TPA expanded False or misleading s 29 to: representations about goods or • clarify that discharging an evidentiary burden does not services amount to a defence; • prohibit both false or misleading representations (whereas s 53 prohibited only false representations in some instances); and • include additional prohibitions relating to: – representations that are testimonials and representations about testimonials (based on s 14 FTA 1999); and – representations concerning consumer guarantees.

False or misleading representations about sale etc of land Offering rebates, gifts, prizes etc

ACL

s 30 s 31

s 32

These changes were agreed by MCCA on 4 December 2009. TPA, s 53A TPA, Prohibition on offering gifts and s 53B prizes in connection with the sale of land moved to s 32 of the ACL. TPA, s 54; FTA (Vic), s 16(6)

Combines s 54 of TPA and s 16 of FTA 1999. Defence: s 32(3) added to no providing rebate, gift prize or other free item within time specified (or reasonable time) if: • act or omission of another person or cause beyond person's control; and • took reasonable precautions to ensure rebate, gift, prize or other free item would be provided within time specified (or reasonable time).

CHAPTER

[9.65]

Description

ACL

Wrongly accepting payment

s 36

09

TPA or other source TPA, s 58

Applications of s 38 TPA, s 65A provision of this Division to information providers Part 3-1, Division 2: Unsolicited supplies TPA, s 64 Assertion of right to s 40 payment for unsolicited goods or services s 42 Liability of recipient for unsolicited services Assertion of right to s 43 payment for unauthorised entries or advertisements

SCOPE AND POLICY OBJECTIVES

–

TPA, s 64

189

Comments Provision now includes requirement to provide goods or services for which payment has been accepted within a specified time, or if no time is specified, within a reasonable time (s 36(4)). Based on s 19 of FTA 1999. Defence: s 36(4) added to accepting payment for goods or services without supply within specified period if: • failure due to act or omission of another person or cause beyond person's control; and • person took reasonable precautions and exercised due diligence to avoid failure. Subsections 38(3) and 38(4) reflect the High Court's interpretation of s 65A of the in ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305. Adds requirement for a warning statement to be set out in the regulations. Based on s 58 FTA 1987. Agreed by Ministerial Council on Consumer Affairs on 4 December 2009. Based on s 26 of the FTA 1999.

Adds prohibition on asserting a right to payment for unauthorised advertisements. Expansion to advertisements

190

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Description

ACL

[9.65]

TPA or other Comments source Part 3-1, Divisions 3 to 5: Pyramid schemes, multiple pricing and other unfair practices TPA, s 65AAE Amended such that a court Marketing schemes s 46 “must” have regard to certain as pyramid schemes matters, instead of “may”. Ministerial Council on Consumer Affairs agreed to clarification of pyramid selling provisions on 4 December 2009. s 47 Multiple pricing – Similar to s 40 of the FTA 1987. The inclusion of this provision in the ACL was agreed by Ministerial Council on Consumer Affairs on 4 December 2009. s 50 TPA, ss 60 & Harassment and Combines harassment and 53A(2) coercion coercion in connection with supply of goods and services (s 60) with the same in relation to interests in land (s 53A(2)). Part 3-2, Division 1: Consumer guarantees Guarantees relating ss 51 – 59 NZ CGA Guarantees correspond to implied to the supply of conditions and warranties in Pt V, Div 2 of the TPA. goods NZ CGA Guarantees correspond to existing Guarantees relating ss 60 – 63 conditions and warranties in Pt V, to the supply of Div 2 of the TPA. A new services guarantee, based on a NZ provision, relates to supply of services within a reasonable time. An exemption for architects and engineers in s 74 of the TPA has been carried over in s 61(4) of the ACL. s 65 – New provision – regulationApplication of making power to allow for Division to supplies exclusion of guarantees for these of gas, electricity supplies. and telecommunications Sch 2, s 66 Display notices – New provision based on Commonwealth Consumer Affairs Advisory Council recommendation. The inclusion of this provision in the ACL was agreed by the Ministerial Council on Consumer Affairs on 4 December 2009.

CHAPTER

[9.65]

Description

ACL

09

SCOPE AND POLICY OBJECTIVES

191

TPA or other Comments source Part 3-2, Division 2: Unsolicited consumer agreements ss 69 – 95 All provisions – New law – based on existing arrangements in all States and Territories. Part 3-2, Division 3: Lay-by agreements ss 96 – 99 All provisions – New law – high level principles, as agreed at Ministerial Council on Consumer Affairs on 4 December 2009. Part 3-2, Division 4 : Miscellaneous s 100 Similar to s 161A, The inclusion of this provision in Supplier must FTA 1999. the ACL was agreed by the provide proof of Ministerial Council on Consumer transaction Affairs on 4 December 2009. s 101 Similar to s 161A, The inclusion of this provision in Customer may FTA 1999 (Vic). the ACL was agreed by the request itemised bill Ministerial Council on Consumer Affairs on 4 December 2009. s 102 Similar to FTA Allows regulation to be made to Prescribed 1989 (Qld), Pt 3, prescribe requirements contact requirements for Div 5 details, etc to be provided when warranties against warranty provided by supplier. defects s 103 – New provision – allows Repairers must regulations to be made requiring comply with repairers of goods to provide prescribed information to consumers about, requirements for example, the potential for data to be erased from electronic storage media when goods are repaired, as agreed at the Ministerial Council on Consumer Affairs on 4 December 2009.

192

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Description

ACL

[9.65]

TPA or other Comments source Parts 3-3 and 3-4, Product Safety and Information Standards ss 104 – 137 TPA, ss 65B, Safety standards The Ministerial Council on 65C, 65D, 65E, Consumer Affairs agreed to a new 65F, 65G, 65H, approach to product safety at its 65R, 65T meeting on 23 May 2008. On 4 December 2009 the MCCA agreed to the detailed operation of this approach. It is based on existing arrangements for safety standards, interim bans, permanent bans, mutual recognition, compulsory recalls, voluntary recalls, safety warning notices and information standards under the TPA and recommendations by the Productivity Commission. A new reporting requirement for incidents occasioning death or serious injury has been included in the ACL. The Productivity Commission recommended a mandatory reporting requirement along these lines. Part 3-5, Manufacturer's liability for safety defects s 138 – 150 TPA, Pt V, No policy change between TPA Manufacturer's Div 2A and ACL. liability Chapter 4, Offences Offences replicate Chapter 3 provisions Parts 5-1 and 5-2: Enforcement and Remedies TPA, s 76E Pecuniary penalties ss 224 – 231 Penalties apply to new provisions in Chapter 3 based on best practice from States and Territories. ss 232 – 235 TPA, s 80 Injunctions Addition of an injunction restraining a person from carrying on a business. Based on s 65(2) of the FTA 1987. s 236 TPA, s 82 Actions for Provisions dealing with damages damages for personal injury moved to Pt XI of the TPA, to apply only as Commonwealth law. ss 237, 238 TPA, s 87 Provisions dealing with damages Compensation for personal injury moved to orders for injured Pt XI of the TPA, to apply only as persons Commonwealth law.

[9.65]

Description

CHAPTER

ACL

09

SCOPE AND POLICY OBJECTIVES

TPA or other source

s 249 Privilege against exposure to a penalty Defences for certain ss 251 – 253 civil prosecutions Part 5-3, Country of origin representations ss 254 – 258 Country or origin representations

193

Comments New law

New law

New defence to misleading or deceptive conduct for goods “grown in” a particular country.

Part 5-4, Remedies relating to consumer guarantees ss 259 – 266 Actions against Based on NZ suppliers of goods CGA ss 267 – 270 Actions against Based on NZ suppliers of services CGA ss 271 – 273 Based on NZ Actions for CGA damages against manufacturers of goods TPA, s 74H Indemnity expanded to cover not Indemnification of s 274 only situations where a suppliers by manufacturer would be required manufacturers to pay damages, but to circumstances in which a supplier incurs costs because goods are not of acceptable quality, fit for purpose or fail to match their description. Part 5-5, Liability of linked credit providers ss 278 – 287 TPA, s 73 Linked credit Based on s 73 of the TPA and s 135 of the National Credit Code, contracts to ensure that amounts can be recovered in State and Territory tribunals in respect of linked credit contracts. The NCC is otherwise only enforceable in courts (but not tribunals).

The remainder of this chapter is divided into four parts. • Part II – explains the history of the ACL; • Part III – considers the adoption and scope of the ACL (Cth); • Part IV – considers the adoption and scope of the ACL (Application Acts); and • Part V – considers the implementation and enforcement of the ACL by the ACL regulators.

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

194

[9.70]

Part II: History of the ACL The catalyst for the ACL reforms was the two studies completed by the Productivity Commission (PC): the 2006 report, Review of the Australian Consumer Product Safety System, 54 and the 2008 report, Review of Australia's Consumer Policy Framework. 55 As part of its terms of reference for the 2008 report the PC was to consider “ways to improve the consumer policy framework so as to assist and empower consumers to meet current and future challenges”. The PC was also required to report on “any barriers to, and ways to improve, the harmonisation and coordination of consumer policy and its development and administration across jurisdictions in Australia, including ways to institutionalise arrangements and to avoid duplications of effort”. 56 [9.70]

Comparison of generic consumer protection legislation ...............................................................................................................................................................................................

As part of its 2008 Inquiry, the PC commissioned a report to ascertain the nature and extent of any differences between the existing Commonwealth, State and Territory legislation governing consumer protection (Consultancy Report). 57 The Consultancy Report considered first the Commonwealth consumer protection regime contained in Pt V of the former TPA and other Commonwealth legislation, principally the ASIC Act. Having considered the material differences between the Commonwealth legislation, the report compared the TPA (the template legislation) with the equivalent provisions of the State and Territory Fair Trading legislation (eight separate pieces of State and Territory legislation), including the enforcement powers of the State and Territory regulators. The report also considered the material differences between the statutory implied terms regime in Pt V Div 2 of the TPA, and the State and Territory Sale of Goods Acts (another eight separate pieces of legislation). Finally, the report considered other State legislation dealing with unfair or unjust terms (a further two separate pieces of legislation). The overall conclusion of the report was that a myriad of Commonwealth, State and Territory consumer laws had developed over time with many small variations, even in regard to the definition of “consumer”, and that rather than moving towards uniformity and simplicity, they were moving towards greater complexity and disharmony. The national consumer protection laws contained in the TPA, overlapped with separate but [9.75]

54 55

56 57

Productivity Commission, Review of the Australian Consumer Product Safety System: Research Report (7 February 2006), at http://www.pc.gov.au/inquiries/completed/product-safety/report. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008). The PC’s report is available at http://www.pc.gov.au/inquiries/completed/consumer-policy/ report. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 1, p vii. Professors Corones and Christensen, Comparison of Generic Consumer Protection Legislation (Consultancy Report prepared for Productivity Commission, Faculty of Law, Queensland University of Technology, September, 2007), available at http://www.pc.gov.au/inquiries/completed/consumer-policy/ consumerprotectionlegislation.

CHAPTER

[9.80]

09

SCOPE AND POLICY OBJECTIVES

195

discontinuous State and Territory fair trading provisions, leading to uncertainty and unjustified compliance costs for businesses, and confusion for consumers as to their rights and remedies. The PC recommended that a single national generic consumer law (to be called “The Australian Consumer Law”) be implemented and that the existing consumer protection provisions of the TPA should form the basis for the new law. The Australian Consumer Law would constitute a single, national law for fair trading and consumer protection, which would apply equally in all Australian jurisdictions. Commonwealth Consumer Affairs Advisory Council Report

The PC, in its review of Australia's Consumer Policy Framework, noted that it had not “undertaken the detailed analysis necessary to reach a judgment on the adequacy or otherwise of the existing regulation in this area, or the merits of alternative models such as those adopted in countries such as New Zealand”. 58 Accordingly, it recommended that: “The adequacy of existing legislation related to implied warranties and conditions should be examined as part of the development of the new national generic consumer law”. 59 On 12 March 2009, the Australian government announced that a review of the Australian law of implied terms would be undertaken by the Commonwealth Consumer Affairs Advisory Council (CCAAC). 60 On 26 July 2009, the Minister for Competition Policy and Consumer Affairs, the Hon Dr Craig Emerson MP released an Issues Paper on behalf of CCAAC. The Issues Paper examined the adequacy of the existing laws on implied terms and the need, if any, for amendments. 61 A parallel consultation process was conducted with the States and Territory consumer agencies. Based on the 33 written submissions received by CCAAC in response to the Issues Paper, there were interviews in Canberra and Melbourne with interested parties and additional teleconferences in September 2009. CCAAC also had discussions with the New Zealand Ministry of Consumer Affairs, ASIC and the ACCC on the adequacy and effectiveness of the [9.80]

58 59 60

61

Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), p 176. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), recommendation 8.1. The function of CCAAC is to “consider reports and papers referred to CCAAC by the Minister and report to the Minister on their likely consumer impacts; identify emerging issues impacting on consumers and draw those to the attention of the Minister; and investigate and report to the Minister on consumer issues referred to CCAAC by the Minister”. The reports are available on the Australian Government, the Treasury’s website, CCAAC Review of Statutory Implied Conditions and Warranties (2009) at http://www.ccaac.gov.au. The report was compiled by a sub-group of CCAAC led by Professor Stephen Corones and assisted by Ms Deborah Healey, Mr Ray Steinwall and Ms Carolyn Bond.

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

196

[9.85]

existing implied terms regime. On 30 October 2009, CCAAC presented its report, Consumer Rights: Reforming Statutory Implied Conditions and Warranties to Minister Emerson. 62 NEIAT Report

While CCAAC was conducting its review, the National Education and Information Advisory Taskforce (NEIAT) 63 commissioned Latitude Research, together with On Track Research, to conduct a baseline study to generate robust data from consumers and traders in relation to statutory warranties and refunds in three markets, whitegoods, electronic goods and mobile phones (the target goods). 64 The baseline research was conducted during July and August 2009. On 4 December 2009, the Ministerial Council on Consumer Affairs (MCCA) met in Perth. 65 In relation to consumer guarantees, the MCCA noted: [9.85]

the comprehensive studies of the law on consumer rights and the effectiveness of existing laws undertaken by the Commonwealth Consumer Affairs Advisory Council (CCAAC) in its Report Consumer rights: Reforming statutory implied conditions and warranties and the SCOCA's National Education and Information Taskforce (NEIAT) in its Baseline Study for Statutory Warranties and Refunds. Ministers thanked CCAAC and NEIAT for their impressive contributions to the understanding of these laws and the needs of consumers and businesses, and further noted the publication of these reports. Ministers noted the findings of the NEIAT study to the effect that many consumers and businesses have little, if any, awareness of consumer rights and that a significant contributor to this is the current legal framework. Informed by the NEIAT study, CCAAC has recommended that the existing system of statutory implied conditions and warranties in consumer contracts be replaced with a system of statutory consumer guarantees. Ministers share CCAAC's view that such a system will be a significant enhancement of the law and will be more readily understood by consumers and businesses. MCCA agreed, as part of the development of the Australian Consumer Law, to improve the legal framework for consumer rights that apply to the acquisition of goods and services. This will be a single national law guaranteeing consumer rights in relation to their acquisition of goods and services. They will be based on existing implied conditions and warranties, which will be simplified and streamlined. 62

The report is available on the Australian Government, Treasury’s website, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009) at http://www.ccaac.gov.au.

63

NEIAT was established in 2007 by the Standing Committee of Officials of Consumer Affairs (SCOCA), composed of the senior officers of consumer policy and enforcement bodies in Australia and New Zealand, to help identify, develop and implement strategies to empower consumers to make informed and timely market place decisions.

64

NEIAT, National Baseline Study for Statutory Warranties and Refunds, Research Paper No 2 October 2009 (NEIAT Baseline Study), http://www.archive.treasury.gov.au/documents/1666/PDF/National_Baseline_ Study_Warranties_and_Refunds.pdf. MCCA comprises Commonwealth, State, Territory and New Zealand Ministers responsible for fair trading, consumer protection laws, trade measurement and credit laws. More information can be obtained from its official site at: Consumer.gov.au “Official Site of the Ministerial Council on Consumer Affairs” at http://www.consumer.gov.au/.

65

CHAPTER

[9.90]

09

SCOPE AND POLICY OBJECTIVES

197

This new system of consumer guarantees, supported by effective redress, will foster a greater ability to inform and educate all Australian consumers and businesses about their rights and obligations, and will reduce the compliance burden for businesses, particularly those that operate in more than one state or territory. 66

On 15 August 2008, the MCCA adopted the recommendation of the PC that there should be a new ACL based on the consumer protection provisions of the former TPA, together with amendments reflecting best practice in the State and Territory consumer protection legislation. While the Joint Communiqué recognised that the Australian Consumer Law would be “a significant enhancement of the law”, the consumer guarantees regime would be “based on existing implied conditions and warranties, which will be simplified and streamlined”.

Part III: ACL as a law of the Commonwealth In the case of the Commonwealth, the application law is contained in Pt XI of the CCA. Section 130 of the defines the term “Australian Consumer Law” to mean Sch 2 as applied under Pt XI of the CCA. As an application law, the ACL in Sch 2 of the CCA is drafted to reflect that it will be a law of the Commonwealth and of each State and Territory. Consequently, all of the provisions are drafted to apply to the conduct of “persons” rather than “corporations”, as was the case in the consumer protection provisions of the former TPA. Section 131(1) of the CCA provides: [9.90]

Schedule 2 applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chapter 2, 3 or 4 of Schedule 2 by corporations.

Because of constitutional limitations on the legislative power of the Commonwealth Parliament, the does not apply universally to all transactions or activities. The Commonwealth does not have constitutional power to make consumer protection laws generally but may make laws with respect to the conduct of corporations under the corporations power in s 51(xx) of the Constitution. Sections 6 and 131(2) of the CCA extend the operation of the CCA, Sch 2 to natural persons where the Commonwealth has constitutional power to do so. By virtue of s 6(2) of the CCA, reliance is placed on other heads of constitutional power, namely: (a)

the overseas trade and commerce power; 67

(b)

the interstate trade and commerce power; 68

66 67

The MCCA Joint Communique (2009), at http://www.consumerlaw.gov.au/files/2015/09/Meeting_ 22_4_Dec_09.pdf. Australian Constitution, s 51(i).

68

Australian Constitution, s 51(i).

198

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

(c)

the Territories power; 69

(d)

the executive power of the Commonwealth; 70 and

[9.95]

(e) the incidental power. 71 These powers were used to ensure that the CCA applies directly to the greatest extent possible under the Commonwealth Parliament's legislative power. 72 A number of the phrases used in the Constitution, such as “trading or financial corporations” and “trade and commerce among the States” are also incorporated into the CCA. In the early years of the TPA's operation, the extension provisions in ss 5 and 6 were very important because, in relation to conduct occurring in the States, they provided the only means of subjecting natural persons to liability under the TPA. In Smolonogov v O'Brien, 73 for example, it was the respondent's use of the telephone to make the representations complained of that brought this conduct within the purview of the Act. However, the enactment during the 1980s of the Fair Trading Acts in each State and Territory which mirrored most of the provisions in Pt V, Div 1 of the TPA meant that reliance on ss 5 and 6 of the was no longer necessary. Extended application of ACL (Cth) to conduct outside Australia ...............................................................................................................................................................................................

The operation of the ACL (Cth) is extended to conduct occurring outside Australia by ss 5(1), 6(2)(a)(i) and 6(3) of the CCA. Section 6(2)(a)(i) extends the territorial operation of the ACL (Cth) to conduct between Australia and places outside Australia. Section 6(3) of the CCA extends to representations using the telegraphic or telephonic services. Sections 6(2)(a)(i) and 6(3) are considered at [9.100]. Section 5(1) of the CCA applies Pt XI of the CCA and the ACL, other than Pt 5-3, to: [9.95]

the engaging in conduct outside Australia by: (g) bodies corporate incorporated or carrying on business within Australia; or (h) Australian citizens; or (i) persons ordinarily resident within Australia …

Section 5(1) focuses on the body corporate or person engaging in the conduct. In the case of a body corporate, the necessary connection with Australia exists if it is incorporated or carries on business within Australia. The first test, incorporation, requires no explanation. The second test, “carrying on business”, will be established by trading in Australia. In 69 70 71 72

Australian Constitution, s 122. Australian Constitution, s 61. Australian Constitution, s 51(xxxix). Zhu v Treasurer (NSW) (2004) 218 CLR 530 at [96] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ).

73

Smolonogov v O’Brien (1982) ATPR ¶40-312. On appeal O’Brien v Smolonogov (1983) ATPR ¶40-418.

[9.95]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

199

Hope v Bathurst City Council, 74 Mason J (with whom by Gibbs, Stephen and Aickin JJ concurred) said that the word “business” denotes “activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis”. 75 This definition was adopted by Merkel J for the purposes of s 5(1) in Bray v Hoffman-La Roche Ltd. 76 Merkel J also stated: I see no reason, however, for importing the additional requirement that to carry on business in the jurisdiction the foreign company must also have a place of business in the jurisdiction. A place of business is not a requirement of comity. 77

This approach has been adopted in subsequent cases. 78 In the case of natural persons, the necessary connection with Australia is citizenship or ordinary residence within Australia. The first test, citizenship, requires no explanation. 79 The second test, ordinary residence, is a question of fact and degree. In each case it will be necessary to isolate the factors that give rise to some connection with Australia, such as the frequency, duration and purpose of visits to Australia; family or business ties; and the ownership and use of property in Australia. The fact that a person is a resident of another country does not preclude a finding of ordinary residence within Australia. 80 Section 5(1)(g) of the CCA applies Pt XI of the CCA and the ACL, other than Pt 5-3, to the “engaging in conduct outside Australia by … bodies corporate incorporated or carrying on business within Australia”. There is no definition of the phrase “carrying on business within Australia”. 81 In ACCC v Valve Corporation (No 3), 82 Valve Corporation did not have a physical presence or place of business in Australia. It supplied computer games to Australian consumers via the internet and granted licences of its computer games to Australian consumers. Even if Valve did not engage in conduct in Australia, Edelman J held that Valve Corporation was carrying on business in Australia, because: • it had many customers in Australia and earned significant revenue from them; • it had content servers in Australia to ensure that consumers could download content as soon as possible; • it had significant personal property and servers located in Australia and paid invoices to Australian companies for equipment involving servers; 74 75 76 77 78

Hope v Bathurst City Council (1980) 144 CLR 1. Hope v Bathurst City Council (1980) 144 CLR 1 at 8-9. Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [63]. See also Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 at [255] (Gordon J). Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [63]. Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 437-9 [380]-[384] (Croft J) and RT & YE Falls Investments Pty Ltd v New South Wales [2001] NSWSC 1027 at [78] (Palmer J).

79

Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 445 [401] (Croft J).

80 81

Levene v Commissioners of Inland Revenue [1928] AC 217; Commissioners of Inland Revenue v Lysaght [1928] AC 234; Cooper v Cadwalader (1904) 5 TC 101. See Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [59]-[60].

82

ACCC v Valve Corporation (No 3) [2016] FCA 196.

200

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.100]

• it paid for rack space and power to its servers in Australia; • it relied on relationships with third party content delivery providers in Australia; and • it entered into contracts with third party service providers outside Australia who provided content around the world, including Australia. 83 Application of ACL (Cth) to conduct of natural persons ...............................................................................................................................................................................................

Section 6(2)(a) of the CCA extends the application of the ACL (other than ss 33 or 155 of the ACL) to natural persons who are engaged in trade or commerce between Australia and places outside Australia, or within Australia but among the States or Territories of Australia. Section 4(1) of the CCA and s 2(1) of the ACL (Cth) both define “trade or commerce” to mean “trade or commerce within Australia or between Australia and places outside Australia”. Misleading conduct engaged in by Australian firms in an overseas location in respect of their purely overseas transactions will not be actionable under s 18 of the ACL as that conduct was not “in trade or commerce” as so defined. On the other hand, if the conduct in question occurred in the course of trade to or from Australia, the protection given by the Act will extend to overseas consumers and not just those in Australia. For example, in Wells v John R Lewis (International) Pty Ltd, 84 liability arose in respect of prohibited conduct originating in Australia but directed towards consumers resident overseas. By virtue of s 6(3)(a) of the CCA, Pts 2-1 (misleading or deceptive conduct), 2-2 (unconscionable conduct), 3-1 (unfair practices other than Div 3, pyramid schemes), 3-3, 3-4, 4-1 (other than Div 3), 4-3, 4-4 and 5-3, apply to natural persons where the conduct in question involved the use of postal, telegraphic or telephonic services, or took place in a radio or television broadcast. The process of achieving this outcome is as follows: the relevant provisions of the ACL refer to “persons”; the effect of s 131(1) of the CCA is that as a law of the Commonwealth these provisions are restricted “to the conduct of corporations”. Section 6(3)(b) then reverses this by providing that a reference in the provisions of Pt XI to a corporation include a reference to a person not being a corporation where the conduct involves the use of postal, telegraphic or telephonic services, or takes place in a radio or television broadcast. Section 6(3)(a) of the CCA is of particular significance in the context of the internet, email and e-commerce. In ACCC v Jutsen (No 3), 85 Nicholas J held that the expression “telegraphic … services” in s 6(3) of the CCA extends to conduct involving the use of the internet. The statutory provisions of the ACL relating to pyramid selling schemes were held to be applicable to natural persons by reason of the internet-based nature of the [9.100]

83

ACCC v Valve Corporation (No 3) [2016] FCA 196 at [199]-[205].

84

Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194. See Clarke, “The Extraterritorial Reach of the CCA – A Primer” (2012) 27(10) Competition and Consumer Law News 308.

85

ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [100]. See also ACCC v Sensaslim Australia Pty Ltd (in liq) (No 1) (2011) 196 FCR 566 at [17], [25] and [38] (Yates J); ACCC v Jones (No 5) [2011] FCA 49 at [5] and [10] (Logan J); Jones v ACCC [2010] FCA 481 at [30] (Collier J); Macquarie Bank Ltd v Seagle [2008] FCA

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scheme. In ACCC v Chopra, 86 the court ordered a natural person, the sole operator of an online electronics store based in Australia, Electronic Bazaar (EB), to pay penalties of $100,000 for contraventions of ss 18 and 29(1)(m) of the ACL. Mr Chopra represented that consumers who purchased goods through the EB website were not entitled to a refund, replacement or repair in relation to those goods. Where a natural person engages in infringing conduct by means of a website located outside Australia, it may be necessary to have recourse to both s 5 and s 6(3) of the CCA to bring the conduct within the ACL (Cth). In ACCC v Hughes, 87 Mr Hughes, a natural person living within Australia, contravened the TPA, ss 52, 53(e), misleading representation with respect to price, and 53(c), misleading representation with respect of performance characteristics, uses or benefits, by making false or misleading representations through an internet-based website with a United States domain name. The goods offered for sale were prescription pharmaceutical products, namely a range of oral contraceptives. The court made a number of declarations and restrained Hughes from continuing to supply pharmaceutical products unlawfully. Hughes was later imprisoned for contempt for disregarding those orders. Allsop J concluded: Thus, Mr Hughes places on a computer site overseas misleading or deceptive material with the intention that consumers in Australia, the United States and elsewhere will use telephonic services to access that information and rely upon it. Thus, relief is available under the TPA by reason of s 5 and s 6 of the Act, notwithstanding the lack of a presence of a corporation. 88

It is unclear whether the references to ss 5 and 6 mean that it is necessary to have recourse to both sections to apply s 18 of the ACL (Cth) to the conduct of natural persons where the website is based outside Australia, rather than s 5 of the CCA alone. 89 These provisions are important to ensure that the ACL protections are available in cases of internet shopping where goods are acquired for personal use directly from overseas suppliers online. In addition, online services such as eBay allow people not only to acquire a wide variety of products from around the world, but also to become sellers in an online global marketplace. By searching more effectively online, consumers are presented with a wider range of choice and a greater opportunity to make savings. However, e-commerce is inherently different from traditional methods of acquiring goods and services. It provides additional risks for the exploitation of consumers, and can make it more difficult for consumers to obtain redress. Online consumers should be able 1417 at [17] and [19] (Jagot J); Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822 at [130]-[131] (Jacobson J); Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 (Stone J) at [164]; ACCC v Chen (2003) 132 FCR 309 at [20] and [32]; ACCC v Hughes (2002) ATPR ¶41-863 at [77]-[79] (Allsop J). 86 87 88 89

ACCC v Chopra [2015] FCA 539 at [6] (Middleton J). ACCC v Hughes (2002) ATPR ¶41-863 at [77]. See also ACCC v Purple Harmony Plates Pty Ltd [2001] FCA 1062 at [35] (Goldberg J); and ACCC v Chen (2003) 132 FCR 309 at [32] (Sackville J). ACCC v Hughes (2002) ATPR ¶41-863 at [78]-[79]. See Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 445 [401] (Croft J).

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[9.100]

to access rights under the ACL that are as extensive as those provided to consumers participating in face-to-face consumer transactions. As Bromberg J observed in ACCC v Apple Pty Ltd: Multi-national corporations who (through their subsidiaries or otherwise) operate in and profit from the Australian market, must respect that market and the laws which serve to regulate it and protect its participants. Those who design global campaigns, and those in Australia who adopt them, need to be attuned to the understandings and perceptions of Australian consumers and ensure that representations made by such campaigns will not serve to mislead. The penalty imposed in this case [$2.25 million], needs to make that message clear. 90

In Dataflow Computer Services Pty Ltd v Goodman, s 6(3) of the TPA was held to apply to messages communicated by email. Similarly, in Madden v Seafolly Pty Ltd, 91 the appellant, Ms Madden, whose label was “White Sands”, and the respondent were competitors in the ladies swimwear fashion industry. The appellant asserted on her personal Facebook page, her business Facebook page (“White Sands”) and in emails to media outlets that the respondent had copied eight of her swimwear designs. The primary judge found that the assertions were false and misleading contrary to ss 52 and 53(a) of the TPA, now ACL, ss 18 and 29(1)(a) respectively. The TPA applied to Madden (an individual) because each of the publications made use of the internet. An appeal to the Full Federal Court was dismissed. Section 6(3A) of the CCA extends Pt 2-3, the general protection for unfair terms in consumer contracts for, or relating to the use of postal, telegraphic or telephonic services; or contracts for or relating to radio or television broadcasts. Section 6(3A) states: the provisions of Part 2-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions were, by express provision, confined in their operation to contracts for or relating to: (i) the use of the postal, telegraphic or telephonic services or (ii) radio or television broadcasts; and (b) a reference in those provisions of Part XI to a corporation included a reference to a person not being a corporation.

It should be noted that s 6(3A) of the CCA differs from s 6(3) of the CCA. Section 6(3) of the CCA extends the misleading conduct and unconscionable conduct provisions to catch conduct involving “the use of postal, telegraphic or telephonic services or which occurs in a radio or television broadcast”. However, s 6(3A) of the CCA is narrower in its ambit: it only applies to unfair terms in consumer contracts for or relating to the use of postal, telegraphic or telephonic services; or consumer contracts for or relating to radio or television broadcasts. For example, it would apply to unfair terms imposed by the supplier of mobile telephony services in relation to the terms of a mobile phone contract. 90

ACCC v Apple Pty Ltd (2012) ATPR ¶42-404 at [32].

91

Madden v Seafolly Pty Ltd [2012] FCA 1346.

[9.105]

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Financial services ...............................................................................................................................................................................................

The Commonwealth may also make consumer protection laws in respect of financial services, through a referral of legislative competence from the States set out in the Corporations Agreement 2002. In 2009, the States also referred their specific powers concerning consumer credit. The Intergovernmental Agreement for the Australian Consumer Law (IGA), signed by COAG on 2 July 2009 required the Commonwealth to enact changes to the investor protection provisions of the ASIC Act, and to the extent necessary, the Corporations Act 2001 (Cth), to ensure that they were consistent with the ACL (Cth). 92 Relevant amendments to the ASIC Act are included in Sch 3 of the Second Commonwealth Act. The IGA reflects that financial services will be carved out of the scope of the ACL (Cth), and separate legislative arrangements would be made for the regulation of financial services under the Corporations Agreement 2002. Section 131A(1) of the CCA provides: [9.105]

Despite section 131, this Division does not apply (other than in relation to the application of Part 5-5 of Schedule 2 as a law of the Commonwealth) to the supply, or possible supply, of services that are financial services, or of financial products.

This carve-out for financial services means that the ACL (Cth) does not apply to financial services, which are regulated at the Commonwealth level by the Corporations Act 2001 (Cth) and the ASIC Act. The ASIC Act continues to apply, separately, to financial services, with the Australian Securities and Investments Commission (ASIC) as the national regulator. This reflects the current subject matter referral by the States and Territories set out in the Corporations Agreement 2002 and administered by the Ministerial Council for Corporations (MINCO). Clause 301(1) of the Corporations Agreement 2002 states that “the Commission [ASIC] will have sole responsibility for the general administration of the national law [which includes the Corporations Act 2001 (Cth) and the Australian Investments and Securities Commission Act 2001]”. The consumer protection provisions of the ASIC Act have been amended to maintain consistency with the ACL. However, the consumer guarantees regime in the ACL does not apply to financial services (with the exception of linked credit services). 93 This position is at odds with the policy objectives of consistency and uniformity which the ACL was intended to achieve. Section 12ED of the ASIC Act only implies warranties of due care and skill and fitness for purpose into contracts for the supply of financial services to a consumer in the course of a business. 94 92 93 94

Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), subclause 3.1.3. See [17.20]. There have been few cases which have sought to rely on a breach of these implied warranties. See, eg, St George Bank Ltd v Wright [2009] QSC 337 at [54]-[59] (McMurdo J); and Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 at [113]-[116] (Perram J).

204

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[9.110]

Consumer credit regulation was referred to the Commonwealth by the States and Territories in 2009. The Uniform Consumer Credit Code was replaced by the National Consumer Credit Protection Code (the National Credit Code) from 1 July 2010. The National Credit Code applies to credit that is provided to individual debtors or strata corporations wholly or predominantly (a) for personal, domestic or household purposes; or (b) to purchase, renovate or improve residential property for investment purposes or to refinance such credit. In relation to misleading conduct or unconscionable conduct involving the supply financial services, great care will need to be taken in framing the cause of action. The conduct may fall within s 1041H of the Corporations Act 2001 (Cth), or the ASIC Act, but not the ACL (Cth). Insurance ...............................................................................................................................................................................................

While the PC in its Review of Australia's Consumer Policy Framework, recommended that a new generic national consumer law should apply to all sectors of the economy, 95 insurance has been excluded from the ACL regime and the ASIC Act regime. The reason for that is to be found ss 13, 14 and 15 of the Insurance Contracts Act 1984 (Cth) (IC Act). Section 13 of the IC Act provides: [9.110]

A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.

Section 14 of the IC Act provides that parties are not to rely on provisions in a contract of insurance except in the utmost good faith. Insurance is a financial product and the supply of insurance is the supply of a financial service. The supply of financial services is regulated by the ASIC Act. For example, misleading statements about flood cover during pre-contractual negotiations for the supply of home and contents insurance would be subject to s 12DA of the ASIC Act. However, it seems that the unfair terms provisions of the ASIC Act do not cover insurance contracts. This is because s 15(1) of the IC Act provides: A contract of insurance is not capable of being made the subject of relief under: • Any other [Commonwealth] Act; • A State Act; or • An Act or Ordinance of a Territory.

95

Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), recommendation 4.2. The PC’s report is available at http://www.pc.gov.au/inquiries/ completed/consumer-policy/report.

[9.120]

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While conduct leading up to the making of an insurance contract is covered by the provisions of the ASIC Act, the terms themselves are regulated by the ICA. 96 Even if insurance contracts are covered by the unfair terms provisions of the ASIC Act, those core terms that govern matters such as the risk covered and the premium payable will be excluded by s 12BI of the ASIC Act. The relevant provisions excluding consumer protection applying to insurance are: • s 131A of the CCA excludes financial services from the ACL (Cth); • s 63 of the ACL excludes insurance services (that are not included in the definition of financial services) from Subdiv B of Pt 3-2 (guarantees relating to the supply of services); • s 12ED(3) of the ASIC Act excludes the implied warranties in relation to a contract of insurance; • s 15 of the IC Act operates to prevent some or all of the unfair terms provisions of the ASIC Act in respect of financial services applying to terms in insurance contracts. ACL (Cth) not intended to cover the field ............................................................................................................................................................................................... [9.115]

Section 131C(4) of the CCA states:

Except as expressly provided by this Part or the Australian Consumer Law, nothing in this Part or the Australian Consumer Law is taken to limit, restrict or otherwise affect any right or remedy a person would have had if this Part and the Australian Consumer Law had not been enacted.

The purpose of this provision is to ensure that it is not held that the ACL (Cth) is intended to “cover the field” of consumer protection regulation, so as to render invalid State or Territory legislation dealing with that topic. Consequently, the ACL (Cth) will exist side-by-side with other legislation regulating transactions with consumers.

Part IV: The ACL as State or Territory law In the case of the ACL (Application Acts), the States and Territories have separately legislated to make the ACL a law of their respective jurisdictions, although the approach adopted has not been entirely uniform. Part XIAA of the CCA facilitates the application of the ACL by the States and Territories. The States have a general power to make laws in respect of consumer protection matters, as do the Territories within the scope of the territories power in s 122 of the Australian Constitution. The ACL as State or Territory law applies to the conduct of anyone who is a “person”. The word “person” is not defined in the Application Acts. However, interpretation legislation in most jurisdictions provides that a “person” [9.120]

96

See Corporations and Financial Services Division, Unfair Terms in Insurance Contracts – Options Paper (The Treasury, Langton Crescent, Parkes, ACT, 2600).

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.120]

includes a body politic or corporate as well as a natural person. 97 Consequently, as used in the ACL as a law of each State or Territory, the word “person” is likely to be given its ordinary meaning and to cover natural and artificial persons and the Crown. The ACL gives effect to COAG's National Partnership Agreement to Deliver a Seamless National Economy (NPA). 98 It adopts the application model used previously in relation to competition provisions in Pt IV of the CCA and the Competition Code set out in Sch 1 of the CCA, with the Australian Government as the lead legislator. The Principal State and Territory Acts are: • New South Wales: Fair Trading Act 1987 (FTA 1987 (NSW)), ss 27 and 28 • Victoria: Australian Consumer Law and Fair Trading Act 2012 (ACLFTA 2012 (Vic)), ss 7 and 8 • Queensland: Fair Trading Act 1989 (FTA 1989 (Qld)), ss 15 and 16 • Western Australia: Fair Trading Act 2010 (FTA 2010 (WA)), ss 18 and 19 • South Australia: Fair Trading Act 1987 (FTA 1987 (SA)), ss 13 and 14 • Tasmania: Australian Consumer Law (Tasmania) Act 2010 (ACLA 2010 (Tas)), ss 5 and 6 • Northern Territory: Consumer Affairs and Fair Trading Act (CAFTA (NT)), ss 26 and 27 • Australian Capital Territory: Fair Trading (Australian Consumer Law) Act 1992 (FT(ACL)A 1992 (ACT)), ss 6 and 7. By way of example, the Fair Trading Amendment (Australian Consumer Law) Act 2010 (NSW) added “The Australian Consumer Law” as Pt 3 of the FTA 1987 (NSW). Section 27 of the FTA 1987 (NSW) defines the Australian Consumer Law text as: (a) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth; and (b) the regulations under s 139G of that Act.

Section 28(1) of the FTA 1987 (NSW) states that: [t]he Australian Consumer Law text, as in force from time to time – (a) applies as a law of New South Wales; and (b) as so applying may be referred to as the Australian Consumer Law (NSW); and (c) as so applying is a part of the Fair Trading Act 1987.

In a similar way, s 7 of the ACLFTA 2012 (Vic) defines the Australian Consumer Law text as: (c) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth; and (d) the regulations under s 139G of that Act. 97

See Interpretation Act 1987 (NSW), s 21; Interpretation of Legislation Act 1984 (Vic), s 38; Acts Interpretation Act 1954 (Qld), s 32D; Interpretation Act 1984 (WA), s 5; Interpretation Act (NT), s 17.

98

The NPA provides for the States and Territories to receive partnership payments from the Commonwealth, consisting of facilitation payments to compensate for set-up costs, and reward payments if they achieve key milestones.

[9.120]

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Section 8(1) of the ACLFTA 2012 (Vic) states that: The Australian Consumer Law text, as in force from time to time: (a) applies as a law of this jurisdiction; and (b) as so applying may be referred to as the Australian Consumer Law (Victoria); and (c) as so applying is a part of this Act.

In Western Australia a slightly different approach was adopted. Section 19(1) of the FTA 2010 (WA) states: For the purposes of this section, the Australian Consumer Law text consists of – 1. Schedule 2 to the Competition and Consumer Act 2010 (Commonwealth), as in force on the commencement of this section… 2. The regulations made under section 139G of that Act, as those regulations are in force from time to time.

Section 19(2) of the FTA 2010 (WA) states: The Australian Consumer Law text – a) applies as a law of this jurisdiction; and b) as so applying, may be referred to as the Australian Consumer Law (WA); c) in so far as it constitutes Schedule 2 to the Competition and Consumer Act 2010 (Commonwealth), is part of this Act; and d) in so far as it constitutes regulations made under section 139G of the Competition and Consumer Act 2010 (Commonwealth), is subsidiary legislation for the purposes of this Act.

Section 19(1) of the FTA 2010 (WA) makes clear that it is only the text of the ACL as in force on 1 January 2011 that applies as a law of Western Australia. The omission of the words “as in force from time to time” from s 19(2) of the FTA 2010 (WA) means that any future amendment to the text of the ACL in Sch 2 of the CCA will not automatically apply in Western Australia. Section 20 of the FTA 2010 (WA) provides: “the Australian Consumer Law (WA) (as described in s 19(1)(a)) may be amended by bill”. Thus, future changes to the ACL (WA) will be enacted by the Western Australian Parliament, and will not automatically apply as in other States and Territories. As regards the position in Queensland, a significant amendment has been the removal of the limitation placed upon the cause of action for damages for contravening s 38 of the FTA 1989 (Qld), the general prohibition of misleading conduct. The cause of action in damages for misleading conduct in s 99 of the FTA 1989 (Qld) was previously confined to consumers. Since the adoption of the ACL, this limitation has been removed.

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

208

[9.125]

The alternative model for the adoption of the ACL considered by the PC was a referral of powers by the States and Territories to the Commonwealth, making the ACCC solely responsible for enforcing the ACL (the one regulator model). 99 This was rejected for the following reasons: But while the States and Territories remain responsible for enforcing a large body of specific consumer regulation, the loss of regulatory synergies and the costs of creating a parallel regional office network are powerful arguments against implementation of the one regulator model. More pragmatically, in the face of considerable jurisdictional opposition to the one regulator model, packaging it with the implementation of a new national generic law, could put the latter at risk. As indicated above, implementation of this new law is a critical first step in creating a more nationally coherent consumer policy framework that could deliver more efficient and effective outcomes for consumers and the wider community. The Commission has therefore concluded that, for the time being – and with the important exception of the product safety provisions – the new national generic law should be jointly enforced by the Australian Government and the States and Territories. 100 TABLE 1.2 Adoption of the ACL

CCA (Cth) s 131

FTA 1987 (NSW) ss 27, 28

FTA 1989 (Qld) ss 15, 16

ACLFTA 2012 (Vic) ss 8, 9

FTA 1987 (SA) ss 13, 14

FTA 2010 (WA) ss 18, 19

ACLA 2010 (Tas) ss 5, 6

FT(ACL)A 1992 (ACT) ss 6, 7

CAFTA (NT) ss 26, 27

ACL (Application Acts) not intended to cover the field ...............................................................................................................................................................................................

Section 140H of the CCA expressly provides that the application of the ACL as a law of a State or Territory is not intended to exclude or limit the concurrent operation of any law, whether written or unwritten, of a State or a Territory. Consequently, the ACL of a State or Territory will exist side by side with other legislation regulating transactions with consumers. [9.125]

Extraterritorial application of ACL (Application Acts) ...............................................................................................................................................................................................

The State and Territory application laws make it clear that the ACL as a law of their respective jurisdictions is not to be construed as merely applying in the territorial area of that State or Territory, and that the extraterritorial power of the State or Territory [9.130]

99

100

The one regulator model applies in relation to the enforcement of the competition provisions of the CCA. The ACCC is the only regulator with the power to bring proceedings for contraventions of Pt IV of the CCA. The Australian Energy Regulator (AER) has responsible for compliance with the Australian Electricity Law and the Australian Gas Law. See Corones, Competition Law in Australia (6th ed, Lawbook Co, Sydney, 2014) ch 3. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008) vol 1, p 22.

[9.135]

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Legislature is being used. The power of a State legislature to make laws of extraterritorial application was considered by the High Court in Broken Hill South v Commissioner of Taxation (NSW), 101 and Union Steamship Company of Australia Pty Ltd v King. 102 The High Court held that there must be some connection with the jurisdiction which may consist in “presence within the territory, residence, domicile, carrying on business there, or even remoter connections”. 103 Section 12 of the ACLFTA 2012 (Vic) mirrors s 5(1) of the CCA. It provides: (1) The Australian Consumer Law (Victoria) applies to and in relation to– (a) persons carrying on business within this jurisdiction; or (b) bodies corporate incorporated or registered under the law of this jurisdiction; or (c) persons ordinarily resident in this jurisdiction; or (d) persons otherwise connected with this jurisdiction. (2) Subject to subsection (1), the Australian Consumer Law (Victoria) extends to conduct, and other acts, matters and things, occurring or existing outside or partly outside this jurisdiction (whether within or outside Australia).

There are similar provisions in the State and Territory Acts that apply the ACL as a law of their jurisdiction. TABLE 1.3 Extraterritorial application of ACL (Application Acts)

FTA 1987 (NSW) s 32

FTA 1989 (Qld) s 20

ACLFTA 2012 (Vic) s 12

FTA 1987 (SA) s 18

FTA 2010 (WA) s 11

ACLA 2010 (Tas) s 10

FT(ACL)A 1992 (ACT) s 11

CAFTA (NT) s 31

The definition of “carrying on a business” for the purposes of the ACL (Application Acts) is the same as the definition of “carrying on a business” in the CCA, considered at [10.55] and [10.70]. No doubling-up of liabilities ...............................................................................................................................................................................................

Because the same conduct may be actionable under the and also under the ACL (Application Acts) , and because the same conduct may be the subject of a pecuniary penalty for a consumer protection breach as well as criminal action, the CCA contains a number of provisions designed to prevent the doubling-up of liabilities. As regards the application of the ACL (Cth), s 131C(3) of the CCA provides if an act or omission is an offence under that Act and also under the application law of a State or Territory and the offender has been punished for the offence under the Commonwealth law, the offender is not liable to punishment for the offence under the State or Territory laws. [9.135]

101 102

Broken Hill South v Commissioner of Taxation (NSW) (1937) 56 CLR 337. Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1.

103

Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1 at 13.

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[9.140]

As regards the application of the ACL (Application Acts) provides that if an act or omission is an offence under the CCA and also under the application law of a State or Territory and the offender has been punished for the offence under the latter, the offender is not liable to punishment for the offence under the CCA. In respect of pecuniary penalties, s 140J(2) of the CCA likewise provides that there is to be no double imposition. The ACL (Application Acts) contain similar protections against double jeopardy. The Explanatory Memorandum to the Queensland Fair Trading (Australian Consumer Law) Amendment Bill 2010 provides an example of how the Queensland regulator may be bound by the action of another jurisdiction where an offender has been punished for the same offence in that jurisdiction: if a false representation (the act or omission is made by a business in a newspaper that is published in New South Wales, and the newspaper is read in both Queensland and New South Wales, it would be an offence in both States. If the business in New South Wales is prosecuted and punished in that State, then Queensland cannot seek to punish the business and vice versa. If the punishment is sought and obtained in New South Wales, then the Queensland regulator will not be able to pursue another form of punishment even if it believes the punishment in New South Wales was too lenient, not appropriate or more importantly did not adequately provide redress or compensation for Queensland residents affected by the false representation. 104

These provisions recognise the importance of uniformity and that consistency is necessary under a single national law, however this may come at the expense of the right of the regulators to act unilaterally. TABLE 1.4 Protection against doubling-up of liabilities

FTA FTA 1987 1989 (NSW) (Qld) ss 131C(3), s 29 140J(1) and (2)

CCA

ACLFTA 2012 (Vic) s 22

FTA 1987 (SA) s 27

FTA 2010 (WA) s 31

ACLA 2010 (Tas) s 19

FT(ACL)A 1992 (ACT) s 20

CAFTA (NT)

Future modifications to the ACL ............................................................................................................................................................................................... [9.140] The Intergovernmental Agreement for the Australian Consumer Law (IGA) signed by COAG on 2 July 2009, regulates the way in which future amendments can be made to the template ACL to avoid slipping back into disharmony. By signing the IGA, participating jurisdictions have agreed to abide by the processes for co-operative negotiation of amendments to the ACL. Any party may submit to the Commonwealth a valid proposal to amend the ACL. 105 After a period of consultation provided for in cl 12 of the IGA, the Commonwealth Minister will call a vote on the proposed amendment. 104 105

Explanatory Memorandum, Fair Trading (Australian Consumer Law) Amendment Bill 2010, p 16. Intergovernmental Agreement for the Australian Consumer Law, cl 8.

CHAPTER

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Clause 19 of the IGA provides that the Commonwealth will not amend the ACL unless the proposed amendment is supported by the Commonwealth plus four jurisdictions, three of which must be States. Part XI of the CCA provides for a system to deal with future modifications of the ACL text by Commonwealth legislation. Section 139G of the CCA provides that the Governor-General may make regulations prescribing matters required or permitted by Sch 2 to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect of the Schedule. Section 139G provides that a regulation may exempt from Sch 2: • conduct engaged in by a specified organisation or body that performs functions in relation to the marketing of primary products; 106 • a specified contract pursuant to or for the purposes of a specified agreement arrangement or understanding between the Government of Australia and the Government of a foreign country; 107 • a specified contract or prescribed conduct engaged in, in the course of a business carried on by the Commonwealth or by a prescribed authority of the Commonwealth. 108 The States and Territories have reserved the right to exclude any future modification to the ACL as at 1 January 2011 for the ACL in their respective jurisdictions. For example, s 9 of the ACLFTA 2012 (Vic) provides: (1) A modification made by a Commonwealth law to the Australian Consumer Law text after the commencement of this section does not apply under s 8, if the modification is declared by Order of the Governor in Council published in the Government Gazette to be excluded from the operation of the section. (2) An Order under subsection (1) has effect only if published before the end of 2 months after the date of the modification. (3) Subsection (1) ceases to apply to the modification if a further Order so provides. (4) For the purposes of this section, the date of the modification is the date on which the Commonwealth Act effecting the modification receives Royal Assent or the regulation effecting the modification is registered under the Legislative Instruments Act 2003 of the Commonwealth. TABLE 1.5 Future modifications to the ACL

FTA 1987 (NSW) s 29 106 107 108

FTA 1989 (Qld) s 17

CCA, s 139G(4)(a). CCA, s 139G(4)(b). CCA, s 139G(4)(c).

ACLFTA 2012 (Vic) s9

FTA 1987 (SA) s 15

FTA 2010 (WA) n/a

ACLA 2010 (Tas) s7

FT(ACL)A 1992 (ACT) s8

CAFTA (NT)

212

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[9.145]

Part V: Enforcement ACL regulators ...............................................................................................................................................................................................

Enforcement and administration of the ACL will be shared between the ACCC, ASIC and State and Territory administrative agencies pursuant to agreed Memoranda of Understanding. 109 Commonwealth, State and Territory consumer agencies will jointly administer and enforce the ACL. The relevant ACL regulators are: [9.145]

• Australian Competition and Consumer Commission; 110 • Australian Securities and Investments Commission; 111 • ACT Office of Regulatory Services; 112 • NSW Fair Trading; 113 • Northern Territory Consumer Affairs; 114 • Queensland Office of Fair Trading; 115 • South Australia Office of Consumer & Business Affairs; 116 • Tasmania Consumer Affairs and Fair Trading; 117 • Consumer Affairs Victoria; 118 • Western Australia Department of Commerce. 119 The term “regulator” is used to refer to the relevant regulator responsible for enforcing the ACL in the particular jurisdiction concerned. The term “regulator” is defined in s 2 of the ACL as follows: (a)

for the purposes of the application of this Schedule as a law of the Commonwealth – means the Commission; or

(b)

for the purposes of the application of this Schedule as a law of a State or a Territory – has the meaning given by the application law of the State or Territory.

109 110

Intergovernmental Agreement for the Australian Consumer Law, cll 20 and 21. Available at http://www.accc.gov.au.

111

Available at http://www.asic.gov.au.

112

Available at http://www.accesscanberra.act.gov.au.

113

Available at http://www.fairtrading.nsw.gov.au.

114

Available at http://www.consumeraffairs.nt.gov.au.

115

Available at http://www.qld.gov.au/law/fair-trading/.

116

Available at http://www.cbs.sa.gov.au.

117

Available at http://www.consumer.tas.gov.au.

118

Available at http://www.consumer.vic.gov.au.

119

Available at http://www.commerce.wa.gov.au.

[9.150]

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Jurisdiction of the Federal Court ...............................................................................................................................................................................................

Section 138 of the CCA confers jurisdiction over any civil matter in relation to the ACL (Cth) on the Federal Court. The jurisdiction is exclusive, except that jurisdiction is also conferred by s 138A on the Federal Circuit Court in relation to civil matters where the loss or damage does not exceed $750,000 or an amount specified in the regulations, on the courts of the States and Territories under s 138B, and the High Court of Australia, under s 75 of the Constitution. Section 138 provides: [9.150]

(1) Jurisdiction is conferred on the Federal Court in relation to any matter arising under this Part or the Australian Consumer Law in respect of which a civil proceeding has been instituted under this Part or the Australian Consumer Law. (2) The jurisdiction conferred by subsection (1) on the Federal Court is exclusive of the jurisdiction of any other court other than: (a) the jurisdiction of the Federal Magistrates Court under section 138A; and (b) the jurisdiction of the several courts of the States and Territories under section 138B; and (c) the jurisdiction of the High Court under section 75 of the Constitution.

The State and Territory courts have concurrent jurisdiction with the Federal Court over civil matters arising under the ACL (Cth). Section 138B of the CCA provides: (1) Jurisdiction is conferred on the several courts of the States and Territories in relation to any matter arising under this Part or the Australian Consumer Law in respect of which a civil proceeding is instituted by a person other than the Commonwealth Minister or the Commission. (2) However, subsection (1) does not apply in relation to a matter arising under: (a) Division 3 of Part 3-1 of the Australian Consumer Law; or (b) Part 3-5 of the Australian Consumer Law. (3) The jurisdiction conferred by subsection (1) on the several courts of the States is conferred within the limits of their several jurisdictions, whether those limits are as to locality, subject matter or otherwise. (4) The jurisdiction conferred by subsection (1) on the several courts of the Territories is conferred to the extent that the Constitution permits. (5) This section is not to be taken to enable an inferior court of a State or a Territory to grant a remedy other than a remedy of a kind that the court is able to grant under the law of that State or Territory.

Section 140C of the provides that the Federal Court may exercise jurisdiction (whether original or appellate) conferred on that Court by an application law of a Territory with respect to matters arising under the ACL (Application Acts).

214

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.155]

In Director of Consumer Affairs v Dimmeys Stores Pty Ltd, 120 the applicant sought injunctive relief against the defendants for alleged breaches of both the ACL (Vic) and its equivalent provisions in the ACL (Cth). The respondents raised a preliminary question as to whether the applicant, being a public official representing a State, had the authority to issue a proceeding in Federal Court relying on Commonwealth legislation. Section 232(2) of the ACL provided relevantly that the court could grant an injunction on application by the regulator or “any other person”. Marshall J observed that the IGA was designed to effect a national approach to consumer protection laws. The IGA also provided for shared enforcement functions between federal, State and Territory regulators. His Honour held “[i]t is consistent with such a shared scheme for the Director to be considered to be ‘another person’ for the purposes of the ACL”. 121 Accordingly, the court rejected the respondents' submission. Jurisdiction of the courts of the States and Territories ............................................................................................................................................................................................... [9.155] The CCA and a State or Territory's Application Act specifies that the ACL is a law of the relevant jurisdiction. 122 The CCA vests Federal jurisdiction on the courts of the States and Territories in civil proceedings instituted under the ACL (Cth) other than proceedings by the ACCC or the Commonwealth Minister, except in relation to manufacturers' liability and pyramid schemes. 123 The CCA and the State and Territory Application Acts :

• govern the way in which consumers can access national, State and Territory courts and tribunals; and • make provision for enforcement, administrative and judicial review procedures in respect of the actions of regulators under the ACL. 124 The State and Territory Application Acts provide that proceedings under their respective ACLs must be referred to a court of competent jurisdiction. For example, under the ACL (Qld), jurisdiction to hear and determine proceedings under that law is conferred on: (a)

the Supreme Court;

(b)

the District Court;

(c)

the Magistrates Court; and

(d)

the Queensland Civil and Administrative Tribunal (QCAT). 125

120 121 122 123 124 125

Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559. Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559 at [14]. In relation to the Australian Consumer Law (Cth) see s 8(1) of the ACLFTA 2012 (Vic). CCA, s 138B. See ACLFTA 2012 (Vic), Chs 7 and 8. FTA 1989 (Qld), ss 50 and 51.

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[9.160]

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215

The tribunal or court having jurisdiction for the proceeding, must have regard to: 1

for the tribunal – whether the subject of the proceeding would be a minor civil dispute within the meaning of the QCAT Act; or

2

for a court – any civil jurisdictional limit, including any monetary limit, applying to the court. In relation to the grant of an injunction under s 232 of the ACL, s 51 of the FTA 1989 (Qld) provides that if the injunction is sought in connection with, or in the course of another proceeding under the ACL (Qld), whether for an offence or otherwise, the matter is to be heard before the District Court, and the District Court has jurisdiction, otherwise the Supreme Court has jurisdiction. Other States and Territories make similar provision for the conferral of jurisdiction on their tribunals and courts to hear and determine matters arising under their respective ACLs. 126 Transfer of proceedings ...............................................................................................................................................................................................

The Federal Court may transfer civil proceedings, other than proceedings instituted by the ACCC or the Minister, to State and Territory courts. 127 Section 138C(2) provides that, in deciding whether to transfer proceedings, the Federal Court must take into account whether the other court has the power to grant the remedies sought before the Federal Court, whether the matter “arises out of or is related to” the proceeding pending in the other court, and whether it is in the interests of justice that the matter be determined by the other court. 128 Section 138D of the CCA provides that a State or Territory court (other than the Supreme Court) hearing a matter under Pt XI of the CCA or the ACL other than under Div 3 of Pt 3-1 of the ACL; or Pt 3-5 of the ACL; or Ch 4 of the ACL must transfer the matter to the Federal Court, if the Federal Court directs it to do so. 129 [9.160]

126 127 128 129

See ACLFTA 2012 (Vic), Pt 8.5 – Enforcement of Australian Consumer Law (Victoria). CCA, s 138C(1). These provisions reflect CCA, s 86A(1) – (3). These provisions reflect CCA, s 86A(4) – (6).

CHAPTER 10

......................................................................................................................

Definitions and Key Concepts Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 2.

Introduction This chapter considers a number of definitions and key concepts that are common to the general and specific protections contained in the ACL. As explained in Chapter 9, the Australian Consumer Law (ACL) has been designed to operate uniformly across Australia. There are nine ACLs – the ACL (Cth), and eight ACL (Application Acts) – all of which apply Sch 2 of the Competition and Consumer Act 2010 (Cth) as a law of their respective jurisdictions. However, the ACL does not apply to all types of transactions; it is restricted in a number of ways. First, although the ACL is drafted so as to apply to the conduct of a “person” the effect of s 131(1) of the CCA is to apply the ACL “as a law of the Commonwealth to the conduct of corporations…”. The ACL also applies to natural persons in circumstances where the Commonwealth Parliament has been able to rely on a head of power in the Constitution other than the corporations power created by s 51(xx) of the Australian Constitution. Where an applicant seeks relief from an individual, the applicant will have to frame the cause of action as a breach of a State or Territory ACL (primary liability), or rely on the accessorial liability provisions of the ACL. Secondly, the ACL (Cth) applies to the Crown in right of the Commonwealth, 1 and the ACL (Application Acts) apply to the Crown in right of the States and Territories, but only in so far as the Crown carries on a business. Thirdly, many of the key provisions in the CCA, the ACL (Cth) and the ACL (Application Acts), apply only to conduct that occurs “in trade or commerce”. Finally, many of the provisions of the ACL are restricted by reference to some concept of a consumer. This chapter will focus on the key concepts which limit the scope of the ACL and is divided into five parts. [10.05]

• Part I – considers the meaning of “corporation” for the purposes of the ACL. • Part II – examines the liability of natural persons under the ACL and the ACL (Application Acts). • Part III – examines the liability of the Crown under the ACL and the ACL (Application Acts). 1

CCA, s 2A(1).

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[10.10]

• Part IV – analyses the “in trade or commerce” requirement under the ACL and the ACL (Application Acts). • Part V – discusses the liability of corporate and non-corporate principals for conduct of directors, employees or agents.

Part I: Liability of corporations Introduction ...............................................................................................................................................................................................

Section 130 of the CCA provides that the word “corporation” for the purposes of the ACL (Cth), Sch 2 has the same meaning as in s 4(1) of the CCA. Section 4(1) of the CCA provides: [10.10]

“corporation” means a body corporate that – a) is a foreign corporation; b) is a trading corporation formed within the limits of Australia or is a financial corporation so formed; c) is incorporated in a Territory; or d) is the holding company of a body corporate of a kind referred to in paragraph (a), (b) or (c).

“Foreign”, “trading” and “financial” corporations are also defined in s 4(1) by reference to the meaning to be given to them by s 51(xx) of the Constitution. These definitions, which are not mutually exclusive, have, generally speaking, been interpreted broadly by the courts with the result that few corporations fall outside the ambit of the Act. Foreign corporation ...............................................................................................................................................................................................

A “foreign corporation” is one incorporated outside continental Australia; that is, in another country or in an external territory. [10.15]

Trading corporation ...............................................................................................................................................................................................

A “trading corporation” is one which engages in trading (which in this context means the activity of acquiring, or supplying, goods or services in a commercial or business context) as a substantial and not merely a peripheral activity. The “substantial current activities test” was summarised in Hughes v Western Australian Cricket Association by Toohey J: [10.20]

Views as to the necessary extent of trading activity have varied. It must be a substantial corporate activity (Barwick CJ in Adamson [R v Federal Court of Australia; Ex parte WA National Football League] (1979) 143 CLR 190 at 208]; the trading activities must form a sufficiently significant proportion of the corporation's overall activities (Mason J in Adamson at 233, with Jacobs J concurring at 237); the trading activities should not be insubstantial (Adamson at 239); the corporation must carry on trading activities on a

[10.20]

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significant scale (Mason, Murphy and Deane JJ in State Superannuation Board (57 ALJR at 96); Deane J in Commonwealth v Tasmania (1983) 46 ALR 625 at 833)). 2

The following corporations have been held to be “trading corporations” on the basis of this “substantial current activities” test: • a football club and a football league; 3 • a rodeo organiser; 4 • the Royal Prince Alfred Hospital; 5 • the Australian Red Cross Society; 6 • a co-operative society; 7 • the Hydro-Electric Commission of Tasmania; 8 • the organiser of an annual trade exhibition for members of the corporation; 9 • the Australian Broadcasting Commission; 10 • the Australian College of Dermatologists; 11 • the University of Western Australia; 12 and • the New South Wales Government Insurance Office. 13 While the substantial current activities test focuses on what the corporation actually does, the purpose for which it was formed, as indicated by its constitution, is not irrelevant. As Toohey J held in Hughes case, a corporation's constitution will be especially important where the corporation has not yet started to trade. Thus, for example, as Fencott v Muller 14 shows, a shelf company which has remained dormant since its incorporation can still be a trading corporation for the purposes of the CCA if its constitution authorises it to engage in trading activity.

2

Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 20.

3 4 5 6

R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190. McCarthy v Australian Rough Riders Association Inc (1988) ATPR ¶40-836. E v Australian Red Cross Society (1991) 27 FCR 310. E v Australian Red Cross Society (1991) 27 FCR 310.

7 8 9 10

TPC v Legion Cabs (Trading) Co-op Society Ltd (1978) ATPR ¶40-092. Commonwealth of Australia v Tasmania (1983) 46 ALR 625. Australian Beauty Trade Suppliers Ltd v Conference & Exhibition Organisers Pty Ltd (1991) ATPR ¶41-107. Sun Earth Homes Pty Ltd v Australian Broadcasting Commission (1991) ATPR ¶41-067.

11 12

13

Shahid v Australian College of Dermatologists (2008) 168 FCR 46. Quickenden v O’Connor, Commissioner of Australian Industrial Relations Commission (2001) 109 FCR 243. The University engaged in trading activities such as selling publications, parking services, student accommodation services and making investments. State Government Insurance Corporation v Government Insurance Office of NSW (1991) ATPR ¶41-110.

14

Fencott v Muller (1983) 152 CLR 570.

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[10.25]

Financial corporation ............................................................................................................................................................................................... [10.25]

“Financial corporation” is defined in s 4(1) of the CCA to mean:

a financial corporation within the meaning of paragraph 51(xx) of the Constitution and includes a body corporate that carries on its sole or principal business the business of banking (other than State banking not extending beyond the limits of the State concerned) or insurance (other than State insurance not extending beyond the limits of the State concerned).

It was held in Re Ku-ring-gai Co-operative Building Society (No 12) Ltd, 15 that the essence of a financial corporation is that it deals in finance to an appreciable degree – that is – in transactions whose subject matter is finance, such as lending or borrowing money, as distinct from transactions which merely involve the use of money. The test of whether a corporation is a “financial corporation,” is the same as that used in respect of trading corporations, namely the substantial current activities test. Consequently, it is not essential for a corporation's financial activities to be its principal activities so long as they form a significant part of its operations. Corporation incorporated in a Territory ...............................................................................................................................................................................................

A “corporation incorporated in a Territory” is one formed in an internal Australian Territory. As the definition of “corporation” in s 4(1) extends to all corporations of this nature, the ACL has a somewhat wider operation in the Australian Capital Territory and Northern Territory than it does in the States where it applies only to those corporations described at [10.15]-[10.25]. [10.30]

Related bodies corporate ............................................................................................................................................................................................... [10.35]

The Second Explanatory Memorandum states:

It is recognised that, for the purposes of the ACL, there are many potential applications of the Law that could be: • avoided or frustrated unless the activities of all corporations forming part of a corporate group are treated in the same way and taken together; or • may apply inconsistently or inappropriately if the activities of a corporate group are not recognised and treated accordingly. 16

Section 6 of the ACL provides that a body corporate is taken to be related to another body corporate if the bodies corporate would, under s 4A(5) of the CCA, be deemed to be related to each other. Section 4A(5) of the deems a body corporate to be related to another body corporate if the first-mentioned body corporate is: 15

Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134.

16

Second Explanatory Memorandum, [10.30].

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[10.40]

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221

• the holding company of another body corporate; • a subsidiary of another body corporate; or • a subsidiary of the holding company of another body corporate.

Part II: Liability of natural persons Direct liability under the ACL (Cth) ...............................................................................................................................................................................................

Sections 5 and 6 of the CCA extend the operation of, inter alia, Pt 2 of the ACL to natural persons in a miscellaneous set of situations in which the Commonwealth Parliament has the legislative power to bind them. The prohibitions in Sch 2 of the CCA are directed at “a person”. As a result of s 131 of the CCA, the provisions of the ACL apply as a law of the Commonwealth only to “the conduct of corporations”. However, extension provisions are included in s 6 of the CCA which apply the ACL to natural persons in a number of situations in which the Commonwealth Parliament has the legislative power to do so. The most significant of these are s 6(3) and 6(3A) of the CCA. Section 6(3) and (3A) provide: [10.40]

(3) In addition to the effect that this Act, other than Parts IIIA, VIIA and X, has as provided by another subsection of this section, the provisions of Parts 2-1, 2-2, 3-1 (other than Division 3), 3-3, 3-4, 4-1 (other than Division 3), 4-3, 4-4 and 5-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions (other than sections 33 and 155 of the Australian Consumer Law) were, by express provision, confined in their operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast; and (b) a reference in the provisions of Part XI to a corporation included a reference to a person not being a corporation. (3A) In addition to the effect that this Act, other than Parts IIIA, VIIA and X, has as provided by subsection (2), the provisions of Part 2-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions were, by express provision, confined in their operation to contracts for or relating to: (i) the use of postal, telegraphic or telephonic services; or (ii) radio or television broadcasts; and (b) a reference in the provisions of Part XI to a corporation included a reference to a person not being a corporation.

The relevant provisions of the ACL in Sch 2 of the CCA refer to “persons”. The effect of s 131 of the CCA is that the ACL as a law of the Commonwealth is restricted “to the conduct of corporations”. Section 6(3) then reverses this, in the instances listed, by

222

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.40]

providing that the references to “a corporation” in Pt XI of the Act (which contains s 131) should be read as including natural persons. The extensive use that is being made of the internet, access to which involves the use of telephonic services, allows the private parties and the regulators to have recourse to the ACL as a law of the Commonwealth to catch the conduct of natural persons. For example, in Seafolly Pty Ltd v Madden, 17 it was held that the TPA applied to an individual (Madden) because each of the publications of which the applicant complained (Facebook postings and sending an email) made use of the internet. In ACCC v Jutsen (No 3), 18 Nicholas J held that the expression “telegraphic …services” in s 6(3) of the CCA extends to conduct involving the use of the internet. His Honour stated that “the internet is a ‘telegraphic’ apparatus or system used to transmit and receive electronic communications”. 19 Similarly, in ACCC v Chopra, 20 Middleton J held that the promotion of and sale of electronic goods to consumers by Mr Chopra through the website, www.elcetronicbazaar.com.au, contravened ss 18, 29(1)(m) and 36(4) of the ACL by the operation of s 6(3)(a) of the CCA. 21 Section 6(3A) applies a similar approach to s 6(3) but is narrower in its ambit. It extends the reach of the ACL as a law of the Commonwealth to the conduct of natural persons in relation to unfair terms in consumer contracts for, or relating to, the use of postal, telegraphic, or telephonic services, or radio or television broadcasts. Where a natural person engages in conduct in contravention of one of the provisions of the ACL, applicants in all States and Territories are able to take proceedings by invoking their respective ACL (Application Acts). In summary, the forms of conduct on the part of a natural person which may come within the scope of the ACL (Cth) because of the operation of these sections can be summarised as follows: • conduct occurring overseas where the person involved was an Australian citizen or resident; • conduct occurring in overseas, or interstate trade or commerce; • conduct occurring in trade or commerce within a Territory, between a State and a Territory, or between two Territories; • conduct occurring in the course of supplying goods or services to the Commonwealth; • conduct involving the use of postal, telegraphic or telephonic services; and • contracts for or in relation to the use of postal, telegraphic or telephonic services or contracts for or in relation to a radio or television broadcast. 17 18 19 20

Seafolly Pty Ltd v Madden [2012] FCA 1346; (2012) ATPR ¶42-424. ACCC v Jutsen (No 3) (2011) 206 FCR 264. ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [100] citing s 144(1) of the Evidence Act 1995 (Cth). ACCC v Chopra [2015] FCA 539.

21

ACCC v Chopra [2015] FCA 539 at [6].

[10.45]

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223

Direct liability ACL (Application Acts) ...............................................................................................................................................................................................

As noted in Chapter 9, each State and Territory has applied the ACL as a law of its jurisdiction. In doing so, they have retained the generality of the ACL's proscriptions with the result that, subject to certain constitutional limitations, they apply to anyone who is a “person”. Whilst these acts do not define “person”, in most jurisdictions interpretation legislation provides that a “person” includes a body politic or corporate as well as an individual. 22 Consequently, as used in the ACL as a law of each State or Territory, the word is likely to be given its ordinary meaning and will cover natural and artificial persons and the Crown. Furthermore, “a person” has not been restricted to someone acting as a principal. Consequently, an individual who acts on behalf of a corporation in a transaction occurring in trade or commerce can be held personally liable, independent of the corporation, if the conduct they undertook on its behalf contravenes a provision of one of those Acts. In Houghton v Arms, 23 Mr Arms entered into a contract with WSA Online Ltd to advise on website design, construction and administration. An employee of WSA Online Ltd, Mr Student, who was described as “WSA online project manager”, and a fellow employee, Mr Houghton, who was described as the “guru of interactive web design and development” gave incorrect information to Mr Arms. Mr Arms sued WSA under s 82 for a contravention of ss 52 and 53 of the TPA. Houghton and Student were also sued under s 75B as accessories and for contraventions of ss 9 and 12 of the FTA 1999 (Vic). Ryan J found that WSA was liable, but WSA was in liquidation. Ryan J dismissed the claims against Houghton and Student based on the FTA since it only applied to persons who were acting “in trade or commerce in their own right and not on behalf of another”. The Court held that the employees were directly liable for giving incorrect advice or information in the course of their employment, even though they were not acting for themselves in trade or commerce. The High Court held that s 52 did not refer to the trade or commerce of any particular person, and that a representation can be made in trade or commerce even though it is not the trade or commerce of the person making the representation. 24 Thus, an employee will be directly liable for misleading conduct under a State or Territory ACL if the employer is engaged in trade or commerce and the conduct occurred in the course of the employer's trade or commerce, or the trade or commerce of the person to whom that representation is made. It is not the trade or commerce of the employee, but the trade or commerce of the employer in which the conduct takes place. 25 [10.45]

22

See Interpretation Act 1987 (NSW), s 21; Interpretation of Legislation Act 1984 (Vic), s 38; Acts Interpretation Act 1954 (Qld), s 32D; Interpretation Act 1984 (WA), s 5; Interpretation Act (NT), s 17.

23 24

Houghton v Arms (2006) 225 CLR 553 (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). Houghton v Arms (2006) 225 CLR 553 at [32]-[35]. See also TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd (2008) 71 NSWLR 323 (Spigelman CJ, Beazley and Hodgson JJA).

25

Houghton v Arms (2006) 225 CLR 553 at [35].

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[10.50]

Houghton v Arms indicates the superiority of proceeding against a natural person directly under a State or Territory ACL, rather than indirectly as an accessory to a contravention by a corporation under the ACL (Cth). It avoids the problems of proof associated with the requirement of actual knowledge established by the High Court in Yorke v Lucas.

Part III: Liability of the Crown Commonwealth Crown ...............................................................................................................................................................................................

Section 2A(1) of the CCA provides: “this Act binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth”. Section 131(1) of the CCA provides that Sch 2 applies as a law of the Commonwealth to the conduct of corporations and refers to conduct of corporations as extended by ss 5 and 6 of the CCA, but there is no reference to s 2A or the fact the ACL binds the Crown. However, because s 2A refers to the “Act” and an Act includes any Schedules, this includes the ACL despite the fact that in the application provision (s 131) there is no mention of the application of the ACL to the Crown in right of the Commonwealth. Section 2A(2) of the CCA provides that for this purpose the Crown, in right of the Commonwealth and its authorities, are to be treated as if they were corporations. Thus, if the Crown in right of the Commonwealth engages in conduct proscribed by the ACL (Cth) whilst carrying on a business its conduct will be actionable. [10.50]

Commonwealth Crown carrying on a business ...............................................................................................................................................................................................

The definition of the word “business” in s 2 of the ACL includes a not-for-profit business, but does not elaborate any further. It is necessary to ask: does the activity constitute carrying on a business in the ordinary sense? The word “business” is a “wide and general” word. 26 It takes its meaning from its context. 27 It was held in J S McMillan Pty Ltd v Commonwealth, 28 that the phrase “carries on a business” has a different meaning to that of engaging in “trade or commerce” as used in 18 of the ACL, but the terms are not mutually exclusive. In particular, it “signifies that the Commonwealth is to be bound only where the conduct complained of is engaged in, in the course of carrying on a business”. 29 In that case the Australian Government Publishing Service (AGPS) was a unit within the Department of Administrative Services. It was not a separate authority [10.55]

26

Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 at 184 (Gibbs CJ).

27 28

Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216 at 226 (Mason CJ, Gaudron and McHugh JJ). J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337.

29

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356.

[10.55]

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of the Commonwealth. The AGPS was systematically and regularly providing general printing services, dispatch and distribution services, graphic design services and editorial services to other Commonwealth departments. Emmett J expressed the view that in providing these services the Commonwealth was carrying on a business with the meaning of s 2A of the TPA. 30 However, the fact that the AGPS carried on a business by providing these services did not mean that the Commonwealth, in conducting a sale of the AGPS, was carrying on that business. The Commonwealth was not in the business of selling capital assets. 31 Emmett J drew a distinction between carrying on the day-to-day operations of the AGPS which was carrying on a business, and issuing a Request for Tender for the sale of the assets of the business which was not conduct in the carrying on of a business. 32 His Honour adopted the view of Gibbs J in Smith v Capewell 33 that: “The expression ‘carries on a business’ in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts and not simply the effecting of one solitary transaction.” Emmett J elaborated: 34 However, mere repetitiveness is not sufficient to constitute carrying on of a business. System and regularity are involved in the carrying on of the business but it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. The example of regular deposits to a bank account is sufficient to explain that proposition. Absence of a system and regularity might deny that a business is being carried on but the presence does not necessarily establish that it is.

Thus, the Commonwealth was able to escape liability for its misleading conduct when it invited tenders for aspects of the AGPS's business. Its conduct in so doing did not amount to carrying on that business. One factor that the courts consider is whether the activities being undertaken are in the nature of government activities, in the sense of public or regulatory, as opposed to private or commercial. An examination of the entity's governing statute will be a useful reference point. 35 In NT Power Generation Pty Ltd v Power and Water Authority, 36 s 17(1) of the Power and Water Authority Act (NT) stated that PAWA's duty was to “act in a commercial manner”. In ACCC v Australian Medical Association (WA), 37 the Hospitals and Health Services Act 1927 (WA) did not suggest that the Minister for Health, when providing medical services 30 31 32 33

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 355. J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356-357. J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356. Smith v Capewell (1979) 142 CLR 509 at 517.

34

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 354 citing Barwick CJ in Hungier v Grace (1972) 127 CLR 210 at 217.

35 36

NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399 at [129] (Finkelstein J); and ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 at [390] (Carr J). NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399.

37

ACCC v Australian Medical Association (WA) (2003) 199 ALR 423.

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[10.55]

in public hospitals, was carrying on a business and Carr J concluded that the activities of the state in this regard were properly characterised as fulfilling a governmental or welfare function. They did not have the requisite “commercial flavour” to amount to carrying on a business. 38 Another useful reference point is the language used in the entity's annual reports and other internal records. This self-description was crucial in the NT Power case where PAWA's documents indicated that its officers perceived it to be carrying on a business for the purposes of the equivalent “carries on a business” requirement in s 2B of the TPA. 39 The High Court referred to PAWA's Report to the Legislative Assembly in which it stated that it was undergoing “commercialisation” and that: “Like all business, [PAWA] needs to generate a return in the very significant amount of capital invested.” The High Court referred to these admissions being made pursuant to statutory duties as being matters of the “utmost solemnity”. 40 Another factor that the courts consider is whether the activities are undertaken with repetition, system and regularity. If so, this tends to indicate that the entity is carrying on a business. An isolated transaction will tend to indicate that the entity is not carrying on a business. The High Court in NT Power approved the result in McMillan since “the officers engaged in the sale had nothing to do with the day-to-day operations of enterprise; the Commonwealth did not conduct any business of selling assets”. 41 Another matter of some importance that emerges from the court's decision in McMillan is that if the government is engaged in the procurement of goods or services for its own use in the conduct of governmental activities it is not carrying on a business. In McMillan, Emmett J held that the AGPS was carrying on a business as a provider of services but that the other government departments that were users of these services were not carrying on a business; rather, they were engaged in purely governmental activities. His Honour stated: 42 Insofar as the Commonwealth, in the guise of the Department of the Senate, the Department of the House of Representatives and other departments, utilises the services provided or procured by AGPS, it does so in the carrying out of governmental functions. It could not be said that the Commonwealth in those guises is carrying on a business. It is acquiring the services systematically and regularly, but only for the purposes of governing.

38 39 40 41

ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 at [393]. NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 110-111 [52]-[54] (McHugh A-CJ, Gummow, Callinan and Heydon JJ). NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 110-111 [53]-[55]. NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 119 [74].

42

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 355.

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227

This interpretation has been followed in other cases 43 but has been the subject of judicial criticism. Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd 44 observed: Government contracting (in procurement and otherwise) is of major significance in the economic life of this country, as it is in most countries … It is somewhat surprising, that when the State enters the market place to acquire goods or services, it should exempt itself from those norms of conduct considered appropriate to the conduct of trade and commerce that it has imposed upon the private sector as of course – the more so given the “business-like” manner in which the Executive government commonly professes it conducts its affairs both internally and in its dealings with the community.

In State of New South Wales v RT & YE Falls Investments Pty Ltd, 45 representations made by the NSW Department of Agriculture in connection with a disease eradication program it was administering were found by the New South Wales Court of Appeal not to fall within the ambit of the Fair Trading Act 1987 (NSW) which provided that the Crown was bound only to the extent that it carried on a business. Although compensation was paid to the owners of cattle destroyed and although the Department received payments from the abattoirs, its activities were best characterised as “purely governmental in the interests of the community, rather than constituting the carrying on of a business”. 46 Exceptions to Commonwealth Crown carrying on a business ...............................................................................................................................................................................................

If a Commonwealth entity represents the Crown and the challenged conduct occurs in the course of carrying on a business it is necessary to consider whether a s 2C exception applies. Section 2C of the CCA identifies certain activities that do not amount to carrying on a business. It provides: [10.60]

(1) For the purposes of sections 2A, 2B and 2BA, the following do not amount to carrying on a business: 43

See Corrections Corporation of Australia Pty Ltd v Commonwealth (2000) 104 FCR 448 where the Department of Immigration and Multicultural Affairs (“DIMA”) maintained a number of centres for the detention of “non-citizens” entering Australia unlawfully. In 1997, the government decided to privatise the provision of these centres. It requested a number of organisations, including the applicant, to tender for this work. The requests for tender set out certain criteria and other requirements with which tenders had to comply. The applicant submitted a tender but was unsuccessful. It alleged that DIMA had engaged in misleading conduct contrary to s 52 by representing that it would evaluate the tenders it received in accordance with the terms of the request. Finkelstein J held that the process of selecting a person to provide services to the Commonwealth was quite distinct from any business and struck out the applicant’s s 52 claim. In Sirway Asia Pacific Pty Ltd v Commonwealth (2002) ATPR (Digest) ¶46-226, the Department of Defence was held not to be carrying on a business when it purchased chinaware in “industrial quantities”. Sundberg J held that in doing so it was fulfilling its government related responsibilities, not engaging in a commercial exercise.

44 45 46

GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at [1375]. State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233. State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233 at 53,719 (Hodgson JA).

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[10.60]

(a) imposing or collecting: (i) taxes; or (ii) levies; or (iii) fees for licences; (b) granting, refusing to grant, revoking, suspending or varying licences (whether or not they are subject to conditions); (c) a transaction involving: (i) only persons who are all acting for the Crown in the same right (and none of whom is an authority of the Commonwealth or an authority of a State or Territory); or (ii) only persons who are all acting for the same authority of the Commonwealth; or (iii) only persons who are all acting for the same authority of a State or Territory; or (iv) only the Crown in right of the Commonwealth and one or more non-commercial authorities of the Commonwealth; or (v) only the Crown in right of a State or Territory and one or more non-commercial authorities of that State or Territory; or (vi) only non-commercial authorities of the Commonwealth; or (vii) only non-commercial authorities of the same State or Territory; or (viii) only persons who are all acting for the same local government body (within the meaning of section 2BA) or for the same incorporated company in which such a body has a controlling interest; (d) the acquisition of primary products by a government body under legislation, unless the acquisition occurs because: (i) the body chooses to acquire the products; or (ii) the body has not exercised a discretion that it has under the legislation that would allow it not to acquire the products. (2) Subsection (1) does not limit the things that do not amount to carrying on a business for the purposes of sections 2A, 2B and 2BA.

In the NT Power case, 47 the High Court stated that the “licence” referred to in s 2C(1)(b) is of the kind that prevents what would otherwise be an illegality or wrong against the Crown. According to the High Court: 48 [The illegality] is found in conduct without a licence, contrary to an enactment–carrying on some profession (like medicine or law), or some trade or business (like selling liquor or drugs, or erecting buildings, or dealing in second-hand goods), or some pastime (like shooting, fishing, owning a pet or, in former times, watching television), or some common activity (like driving). 47

NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 128 [101].

48

NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 128 [101].

[10.65]

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229

Thus, the granting of taxi licences to operators who meet certain minimum criteria in return for an appropriate licence fee would be covered by the exemption. So too would the grant of licences to operate private hospitals that meet specified standards, or the grant of a licence to an approved service operator. Section 2C(1)(b) would not exempt the grant or sale of permits to acquire goods or services; it only exempts licences that allow the licensee to supply goods or services. Similarly, a licence in the nature of a right to occupy land or premises owned by the Crown, or a licence to use certain material owned by the Crown would not constitute a licence for the purposes of s 2C(3) since it does not allow the licensee to supply “goods or services”. Section 2C(1)(c) provides that carrying on a business is not constituted by merely carrying out an intra-governmental transaction. It is important to note the limited nature of this exemption. An intra-governmental transaction will only be exempt if it involves persons, all of whom are acting for the Crown in the same right, and none of whom is an authority of the Commonwealth or an authority of a State or Territory. Section 2C(1)(d) provides that carrying on a business is not constituted by the compulsory acquisition of primary products by a Crown body. If a State marketing authority does not represent the Crown, the exemption will not apply and it will carry on a business. State and Territory Crowns ...............................................................................................................................................................................................

The ACL (Cth) does not apply to the State and Territory Crowns. However, the State and Territory application legislation of each jurisdiction provides that the ACL of their jurisdiction will bind the Crown in right of each of the States, and of the Northern Territory and the Australian Capital Territory, to the full extent of its constitutional capacity to do so. This expressly rebuts the common law presumption that the Crown is not bound by legislation. For example, the relevant Part of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA 2012 (Vic)) is Pt 2.4, “Application of the Australian Consumer Law to the Crown”. It contains the following definitions that are relevant to the issue of Crown liability: [10.65]

• The term “jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “a State or the Commonwealth”. • The term “this jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “Victoria”. • The term “participating jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “a jurisdiction that is a party to the Intergovernmental Agreement and applies the Australian Consumer Law as a law of the jurisdiction, either with or without modifications”. • The term “State” is defined in s 6 of the ACLFTA 2012 (Vic) to include a Territory.

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[10.65]

• Section 15 of the ACLFTA 2012 (Vic) qualifies s 4 and provides: “In this Part, participating jurisdiction or other jurisdiction does not include the Commonwealth”. Section 16 of the ACLFTA 2012 (Vic) provides: The application law of this jurisdiction binds (so far as the legislative power of Parliament permits) the Crown in right of this jurisdiction and of each other jurisdiction, so far as the Crown carries on a business, either directly or by an authority of the jurisdiction concerned.

Section 17 of the ACLFTA 2012 (Vic) provides: (1)

The application law of each participating jurisdiction other than this jurisdiction binds the Crown in right of this jurisdiction, so far the Crown carries on a business, either directly or by an authority of this jurisdiction.

(2)

If because of this Chapter, a provision of the law of another participating jurisdiction binds the Crown in right of this jurisdiction, the Crown in that right is subject to that provision despite any prerogative right or privilege. However, s 19 of the ACLFTA 2012 (Vic) provides: (1)

Nothing in the application law of this jurisdiction makes the Crown in any capacity liable to a pecuniary penalty or to be prosecuted for an offence.

(2)

Without limiting subsection (1), nothing in the application law of a participating jurisdiction makes the Crown in right of this jurisdiction liable to a pecuniary penalty or to be prosecuted for an offence.

(3)

The protection in subsection (1) or (2) does not apply to an authority of any jurisdiction. In summary, the complementary coverage of the ACL (Application Acts) means that each State and Territory Crown is bound by its own ACL, and by each the ACLs of the other States and Territories. However, each application law provides that a State or Territory Crown is only bound by the ACL to the extent that it carries on a business, either directly or by an authority of its jurisdiction. Each State and Territory application law excludes the Commonwealth Crown from its coverage. Thus, the Commonwealth Crown is bound by the ACL (Cth). State and Territory Crowns that contravene the ACL are not liable to a pecuniary penalty or prosecution for an offence. Consider a situation where the Crown in right of New South Wales carried on a business of providing first aid training for reward 49 and made a false representation in a newspaper published in both New South Wales and Victoria. Section 16 of the ACLFTA 2012 (Vic) provides that the ACL (Vic) binds the Crown in right of the State of New South Wales so far as it carries on a business. Section 36 of the FTA 1987 (NSW) provides that the ACL (NSW) binds the Crown in right of New South Wales. Thus, the conduct of the Crown in right of New South Wales could be challenged under either the ACL (Vic) or the ACL (NSW), but the Crown in right of New South Wales would not be 49

Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548.

CHAPTER

[10.70]

10

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DEFINITIONS AND KEY CONCEPTS

liable for a pecuniary penalty or prosecution for an offence under either the ACL (Vic) or the ACL (NSW). TABLE 2.1 Application of State and Territory ACLs to the Crown

FTA 1987 (NSW) s 36

Crown bound by application laws of its own jurisdiction s 37 Crown bound by application law of other jurisdictions s 39 Crown not liable for pecuniary penalty or prosecution Application s 35 of the ACL to the Crown does not include the Commonwealth

FTA 1989 (Qld) s 24

ACLFTA 2012 (Vic) s 16

FTA 1987 (SA) s 22

FTA 2010 (WA) s 28

ACLA 2010 (Tas) s 14

CAFTA FTA (NT) 1992 (ACT) s 15 s 35

s 25

s 18

s 23

s 29

s 15

s 16

s 36

s 27

s 20

s 25

s 30

s 17

s 18

s 38

s 23

s 16

s 21

s 27

s 13

s 14

s 34

State or Territory Crown: exceptions to carrying on a business ...............................................................................................................................................................................................

If a State or Territory authority represents the Crown and the challenged conduct occurs in the course of carrying on a business, it is necessary to consider whether an exception applies. For example, s 18(1) of the ACLFTA 2012 (Vic) provides: [10.70]

For the purposes of sections 16 and 17, the following do not amount to carrying on a business– (a) imposing or collecting– (i) taxes; or (ii) levies; or (iii) fees for authorisations; (b) granting, refusing to grant, revoking, suspending or varying authorisations (whether or not they are subject to conditions);

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[10.70]

(c) a transaction involving– (i) only persons who are all acting for the Crown in the same right (and none of whom is an authority of a State); or (ii) only persons who are all acting for the same authority of a State; or (iii) only the Crown in right of a State and one or more non-commercial authorities of that State; or (iv) only non-commercial authorities of the same State; (d) the acquisition of primary products by a government body under legislation, unless the acquisition occurs because– (i) the body chooses to acquire the products; or (ii) the body has not exercised a discretion that it has under the legislation that would allow it not to acquire the products. (e) Subjection (1) does not limit the things that do not amount to carrying on a business for the purposes of sections 16 and 17.

These exceptions raise the same issues as those discussed at [10.60] in relation to s 2C of the CCA. Section 18(1)(a) provides that carrying on a business is not constituted by Crown bodies which merely impose or collect fees, taxes and levies. This is self-explanatory. Section 18(1)(b) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by Crown bodies which merely grant, refuse, revoke, suspend or vary authorisations in relation to the supply of goods or services. The definition of “authorisation” in s 18(3) requires that it “allows the holder of the authorisation to supply goods or services”. Thus, the granting of authorisations to taxi operators who meet certain minimum criteria in return for an appropriate fee would be covered by the exemption. So too would the grant of authorisations to operate private hospitals that meet specified standards, or the grant of a licence to an approved service operator. Section 18(1)(b) would not exempt the grant or sale of permits to acquire goods or services; it only exempts licences that allow the licensee to supply goods or services. Section 18(1)(c) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by merely carrying out an intra-governmental transaction. It is important to note the limited nature of this exemption. An intra-governmental transaction will only be exempt if it involves persons, all of whom are acting for the Crown in the same right, and none of whom is an authority of the Commonwealth or an authority of another State or Territory. For example, an intra-governmental transaction between a State Department of Health and a State Department of Administrative Services, both of which are part of the same legal entity (the Crown in right of the State) would be exempt. On the other hand, where a Departmental “business unit” supplies goods or services to a commercial authority of that State, the transaction will not be exempt.

[10.75]

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Section 18(1)(d) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by the compulsory acquisition of primary products by a Crown body. If a State marketing authority does not represent the Crown, the exemption will not apply and it will carry on a business. Other participating jurisdictions contain similar provisions. In determining whether the ACL of a State or Territory applies to a particular authority, the starting point is to determine its status, and whether it is a manifestation of the Crown. If is not the Crown, the State or Territory ACL will apply and it is unnecessary to enquire further. If the authority is the Crown in right of the particular State or Territory, it is then necessary to consider whether it “carries on a business”. If it is not carrying on a business, it is unnecessary to enquire further. If the authority is carrying on a business, it is necessary to enquire whether the particular business being carried on falls within one of the exceptions. The following State activities have been held to constitute the carrying on of a business: • providing ambulance services at sporting events and first aid training for reward. 50 The following State activities have been held not to constitute the carrying on of a business: • managing a national park; 51 • operating a public hospital through an outsourced contractor and providing hospital services to public patients; and, 52 • providing police and corrective services. 53

Part IV: “in trade or commerce” requirement Introduction ...............................................................................................................................................................................................

The general protections against misleading conduct and unconscionable conduct in Ch 2 of the ACL, and some of the specific protections in Ch 3 of the ACL only apply if the conduct at issue occurs “in trade or commerce.” For example, s 29 provides that a person must not, in trade or commerce, in connection with the supply of goods or services make false or misleading representations concerning various matters, and s 30 provides that a person must not, in trade or commerce, in connection with the sale of an interest in land make false or misleading representations concerning various [10.75]

50

Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548.

51 52

Easts Van Villages v Minister Administering the National Parks and Wildlife Act (2001) ATPR (Digest) ¶46-211. ACCC v Australian Medical Association (WA) (2003) 199 ALR 423.

53

Hamond v State of New South Wales (2001) FCA 157.

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[10.75]

matters. These provisions were not intended to apply to all conduct regardless of its nature. In particular, they are not intended to apply to conduct of a purely private or personal nature. For example, a person who sells their home would not be engaged in trade or commerce, and this would be so even if they had renovated the home with a view to making a profit on the sale, engaged an agent to assist them with the sale, and prepared brochures and other advertisements. 54 The sale by the vendor of his or her home is not an act done as part of a trading or commercial business. In Williams v Pisano, 55 the joint vendors of a property retained a real estate agent to market the property on their behalf. The vendors had renovated the property with a view to resale at a profit. They lived in the property from before 2005 until 2010 as their home and the renovations were carried out over a two year period. As soon as the renovations were completed they sold the property. The advertising brochure prepared by the agent made false representations about the standard of the renovations that had been made to the property. The case was decided on the basis that the sale did not occur in trade or commerce because it was a private residence, so there was no contravention of ss 18 or 30 of the ACL. 56 Emmett JA observed: the element of acting in trade or commerce will not be attributed to owners selling their home merely by reason of their engagement of an estate agent to find a buyer … The business character of the acts done by an agent cannot be imputed to the acts of the principals. 57

The consumer guarantees provided for in ACL, Ch 3, Pt 3-2, Div 1, subdiv A, ss 51 – 59 only apply if the supply occurs “in trade or commerce”. In relation to the supply of goods the guarantees would not apply to a private sale of a motor vehicle, or a “garage sale” of personal effects. These are not activities of a trading or commercial nature. In each case it is necessary to consider the character of the conduct at issue from the perspective of the person engaging in the conduct. The term “trade or commerce” is defined in s 2 of the ACL to mean: (a)

trade or commerce within Australia; or

(b) trade or commerce between Australia and places outside Australia; and includes any business or professional activity (whether or not carried on for profit). The ACL applies to conduct engaged in outside Australia, provided that at least some aspect of the trading relationship between two or more parties has taken place in Australia.

54 55 56

Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 129-130. Williams v Pisano (2015) 299 FLR 172. Williams v Pisano (2015) 299 FLR 172.

57

Williams v Pisano (2015) 299 FLR 172 at [40] citing Franich v Swannell (1993) 10 WAR 459 at 481-483.

[10.80]

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235

In Concrete Constructions (NSW) Pty Ltd v Nelson, the majority described the terms “trade or commerce” as “terms of common knowledge of the widest import”. 58 In Re Ku-ring-gai Co-operative Building Society (No 12) Ltd, 59 Deane J said: the terms “trade” and “commerce” are not terms of art. … [They] are clearly of the widest import … [and] are not restricted to dealings or communications which can properly be described as being at arm's length in the sense that they are within open markets or between strangers or have a dominant objective of profit making. They are apt to include commercial or business dealings in finance between a company and its members…which, while being commercial in character, are marked by a degree of altruism which is not compatible with a dominant objective of profit-making.

In order to satisfy the definition of the term “trade or commerce” in s 2 of the ACL it is also necessary to establish that it constitutes trading or commercial activity within Australia or between Australia and places outside Australia. In Sunland v Prudentia Investments, 60 it was argued that misleading conduct which took place in Dubai in relation to the acquisition of a block of land in Dubai, occurred in trade or commerce between Australia and places outside Australia on the basis that one of the parties to the negotiations for the acquisition of the block of land, Sunland Group Ltd, was incorporated in Queensland. Croft J, in the Supreme Court of Victoria, held that the conduct at issue was not conduct in trade or commerce between Australia and Dubai. 61 Examples ...............................................................................................................................................................................................

In Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc, 62 an advertisement published by the Tobacco Institute suggested that there was little evidence proving that cigarette smoke caused disease in non-smokers. The Federation of Consumer Organisations sought an injunction restraining the Institute from publishing these advertisements. It succeeded at first instance and the Institute appealed to the Full Court. The Full Court held that the Institute was formed to promote the interests of a particular industry whose activities were “in trade or commerce”. When conveying representations about that industry's product and downplaying the risks of passive smoking this was likely to promote sales of tobacco-based products. Accordingly, the Institute was acting in trade or commerce. 63 [10.80]

58 59 60 61 62 63

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 602-604 (majority judgment of Mason CJ, Deane, Dawson and Gaudron JJ). Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134 at 167, cited with approval by Branson and Stone JJ in Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [25]. Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243. Sunland Waterfront (BVI) LTD v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 447 [406] and [407]. Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1. Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 16 (Sheppard J), at 25 (Foster J) and 44 (Hill J).

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[10.80]

On the other hand, in Dataflow Computer Services Pty Ltd v Goodman, 64 Goodman, a former employee of Dataflow, sent an email to Harvey Norman, one of its important customers, suggesting that Dataflow was going to alter its distribution arrangements to the detriment of the Harvey Norman chain of stores. This was not correct. Dataflow took these proceedings against Goodman on the ground that his action in sending the email contravened s 52 of the TPA. Dataflow submitted that the e-mail had a “trading or commercial character” as it was intended to influence the recipients not to deal with Dataflow any longer because of the falsely suggested misbehaviour by Dataflow. Hely J did not agree with this characterisation of the conduct at issue and concluded: Trade or commerce does not exist in the abstract. For present purposes the trade or commerce with which one is concerned can probably be described as the business or commercial dealings between Dataflow and Harvey Norman and other retailers of Dataflow products. In my view the sending of the e-mail was not conduct on the part of the respondent which was engaged in as part of those business or commercial dealings, as opposed to being in connection with or in relation to those dealings. 65

Goodman's conduct was more appropriately characterised as that of a bystander commenting on the trade or commerce in which others were engaged. 66 It is difficult to reconcile Dataflow with the decision of in Firewatch Australia Pty Ltd v Country Fire Authority. 67 Goldberg J held that an internal Fire Authority bulletin which strongly recommended that brigades not become involved in the distribution or recommendation of the applicant's “Firewatch extinguisher” had a trading or commercial character. His Honour stated: Although an internal CFA communication will ordinarily not have a trading or commercial character there was added to the bulletin a recommendation to brigades that as part of their trading or commercial activity they not be involved in the distribution or recommendation of the Firewatch extinguisher. In that context the primary distribution of the bulletin was conduct “in trade or commerce”. More particularly was this so where the bulletin was distributed further to persons outside the CFA organisation and reached consumers and potential consumers.

Although the bulletin was an internal document it had “a trading or commercial character” in the sense that it was intended to influence servicing brigades not to be involved in the distribution or recommendation of the Firewatch extinguisher. Putting the matter another way, the bulletin had more than “an internal character”; it was intended to have a consequence or impact on trading and commercial activities. It was intended that in dealings or potential dealings with consumers' fire equipment maintenance servicing brigades would be influenced not to become involved in the distribution or recommendation of the product. 68 64 65 66 67

Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 (Hely J). Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 at [22]. Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 at [23]. Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198.

68

Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198 at [63]-[64].

[10.90]

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Goldberg J's focus on the purpose or intention of those responsible for the bulletin suggests a subjective inquiry rather than an objective inquiry as to whether the conduct at issue is an aspect or element of a trading or commercial nature. 69 Extended definition: any professional activity ...............................................................................................................................................................................................

The phrase “trade or commerce” is expressly defined in s 2 of the ACL to include “any business or professional activity”. The effect of this inclusion is to expose accountants, lawyers, medical practitioners and the members of other professions to liability under the ACL should they mislead their clients in the course of carrying out professional work for them. It also exposes them to liability under the consumer guarantees law if they fail to comply with the standards imposed by those provisions that have an “in trade or commerce” requirement. 70 In Shahid v Australian College of Dermatologists, 71 Branson and Stone JJ held that the extended definition of “trade or commerce” in s 10 of the FTA 1987 (NSW), which included “any business or professional activity,” was not confined to professional activities that have a trading or commercial character. Included within the concept “professional activity” were the activities and transactions done by the College for the purposes of a training program. This included representations in the College's Handbook which contained information relating to the selection process, the adequacy of the College's record keeping and an appeals process for unsuccessful applicants. Branson and Stone JJ held that the College published its Handbooks “in trade or commerce”, and that the College had a commercial relationship with practitioners who applied for a position as a trainee registrar. It charged them significant examination fees and gained further revenue from conducting training and seminars that trainee registrars were required to attend. 72 In so finding, their Honours rejected the analysis of Santow J in Prestia v Aknar, 73 who adopted a narrow interpretation of “any professional activity” confining it to professional activities that have a trading or commercial character. [10.85]

Non-profit activities ...............................................................................................................................................................................................

The definition of “trade or commerce” in s 2 of the ACL expressly includes non-profit activities. This part of the definition differs from that found in the TPA. For example, it would apply to advice given by a lawyer to a client on a pro bono basis, and, it [10.90]

69

See McCabe, “Section 52 and the Regulation of Non-commercial Speech” (2010) 18 Trade Practices Law Journal 21 at 24-5.

70 71 72

See Chapter 17. Shahid v Australian College of Dermatologists (2008) 168 FCR 46. Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [26].

73

Prestia v Aknar (1996) 40 NSWLR 165. Prestia was concerned with the FTA 1987 (NSW) which was the first of the Fair Trading Acts to contain an extension of the definition of “trade or commerce” to include “professional activity”.

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[10.95]

seems it would also apply to the activities of charities such as supplying goods or services free of charge. This may have implications for charities under the consumer guarantees law of the ACL. 74 “In” trade or commerce ...............................................................................................................................................................................................

Conduct must occur “in” trade or commerce. The High Court, in Concrete Constructions (NSW) Ply Ltd v Nelson, 75 held that the conduct at issue must itself be trading or commercial in nature, and that it is not sufficient for it to be merely connected with, or incidental, to trade or commerce. In other words, the trade or commerce requirement is not satisfied merely because the conduct occurred as part of some overall commercial or trading activity. The majority concluded that the conduct at issue, which consisted of an internal communication by one employee (the foreman) to another (Mr Nelson) in the course of their activities constructing a building, was not “in trade or commerce”. 76 The question whether representations made by a business or professional firm to its employees about the terms of their employment are “in” trade or commerce remains unresolved. The position was summarised in the following extract from the Full Federal Court in Village Building Company Ltd v Canberra International Airport Pty Ltd: 77

[10.95]

The difficulty that can arise in applying the principles in Concrete Constructions is illustrated by the different views expressed in this Court as to whether representations made by a corporation to an employee in connection with the employee's terms of employment constitute conduct in trade or commerce. In Barto v GPR Management, in the context of a strike out application, Wilcox J held negotiations with a prospective or present employee in respect of that person's employment contact is conduct capable of falling within s 52 of the TPA. In Martin v Tasmania Development and Resources, Heerey J disagreed, holding that a communication to an employee asserting that termination of his employment was required on operational grounds was not a dealing of a trading or commercial nature. In Stoelwinder v Southern Health Care Network, Finkelstein J preferred Barto to Martin. In Hearn v O'Rourke, a case involving a different fact situation, Kiefel J at first instance expressed a preference for the reasoning in Martin. The Full Court allowed an appeal (Finn and Jacobson JJ; Dowsett J dissenting), but did not find it necessary to resolve the conflict. (citations omitted)

Trade or commerce of another ...............................................................................................................................................................................................

Where vendors of private property have retained an agent in connection with the sale of the property, and the conduct of the agent is conduct in trade or commerce, the “trade or commerce” of the agent is not to be attributed to the principal, where the [10.100]

74

See Chapters 16 and 17.

75 76

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 603-4; Plimer v Roberts (1997) 80 FCR 303 at 326-9 (Lindgren J). Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604-5.

77

Village Building Company Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330 at [46]-[52].

[10.105]

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239

principal was not engaged in trade or commerce. 78 Section 84(4) of the CCA provides that conduct engaged in on behalf of a person (the principal) by an agent within the scope of the actual or apparent authority of the agent is deemed to have been engaged in by the principal. However, s 84(4) does not impute to the principal the trade or commerce of the agent. 79 However, an employee who engages in misleading conduct in the course of his or her employment engages in that conduct in trade or commerce if the employer is engaged in trade or commerce. The conduct takes place in the trade or commerce of the employer. In Houghton v Arms, 80 the High Court held that while in most cases the focus would be on the nature of the business of the person making the representations, statements made by employees, who are not themselves engaged in trade or commerce, may be held to be in “trade or commerce” where they are made for the purposes of the employer's business. In such circumstances, the employee will be personally liable if their conduct constitutes a contravention of s 18 of the ACL. In Williams v Pisano, 81 Emmett JA observed: it does not follow from the propositions just formulated that an employer (or principal) is deemed to engage in conduct in trade or commerce merely because the employee, or agent, engages in his own trade or commerce in the course of that employment or agency. Such a result would in effect work backwards the principle stated in Houghton v Arms. 82

Summary ...............................................................................................................................................................................................

Davies J in Plimer v Roberts, observed: “the precise limits of what is or is not trade or commerce, or what act is in or is not in trade or commerce cannot be definitely stated…”. 83 In summary, the following conduct will occur in trade of commerce: [10.105]

• external transactions or communications by businesses to further their commercial interests; 84 and

78 79 80 81 82 83 84

Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 127-9. See also Williams v Pisano (2015) 299 FLR 172 at [39] (Emmett JA). Franich v Swannell (1993) 10 WAR 459 at 481-3. Houghton v Arms (2006) 225 CLR 553 at 565 [32]-[35] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). Williams v Pisano (2015) 299 FLR 172 (Bathurst CJ, McColl and Emmett JJA). Williams v Pisano (2015) 299 FLR 172 at [43]. Plimer v Roberts (1997) 80 FCR 303 at 305. See, eg, Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134; Bevanere Pty Ltd v Lubidineuse (1984) 7 FCR 325; E v Australian Red Cross Society (1991) 27 FCR 310; Sykes v Reserve Bank of Australia (1998) 88 FCR 511; and Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd (2005) ATPR ¶42-048.

240

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[10.110]

• external transactions or communications by professionals in the course of a retainer for which they are remunerated. 85 The following conduct will not occur in trade of commerce: • internal communications by one employee to another in the course of their ordinary activities; 86 • government announcements and policy statements; 87 and • making representations in the course of lectures on a subject of historical, religious and/or scientific interest for which the lecturer is not remunerated. 88

Part V: Liability of corporate and non-corporate principals Introduction ...............................................................................................................................................................................................

The liability of corporate principals for the conduct of others who contravene the consumer protection provisions of the ACL (Cth) does not arise as a result of the common law of vicarious liability. The right of a claimant to sue a corporate principal for the infringing conduct of others, including directors, servants or agents, relies on proof of the matters in s 139B of the CCA. A distinction is made in the relevant authorities between direct liability (as it applies to corporations) and the principle of vicarious liability. Under the common law of vicarious liability, a principal is not deemed to have engaged in the conduct at issue; rather, the principal is made legally liable for the conduct of the director, servant or agent who engages in the conduct. Under s 139B of the CCA, on the other hand, the principal is deemed to have engaged in the conduct at issue. A corporation will be directly liable for the acts of its directors, managers and other officers who are the governing mind and body of the corporation, as if their acts were the acts of [10.110]

85

See, eg, Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 71 ALR 615; Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 127 where it was conceded that a firm of solicitors acting for the vendor of a residential property was engaged in trade or commerce. In ACCC v Sampson (2011) ATPR ¶42-374 Tracey J declared that Ms Sampson, a lawyer, carried on business as a partner and principal of the law firm, Goddard Elliott. Her actions on behalf of her clients in sending debt collection letters and notices seeking to recover debts which contained misleading information were held to have occurred in trade or commerce. Cf Prestia v Aknar (1996) 40 NSWLR 165 where remarks made during the course of settlement negotiations by a solicitor were held not to be in trade or commerce because he was not retained or remunerated by the parties to the settlement.

86 87

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594. Unilan Holdings Pty Ltd v Kerrin (1992) ATPR ¶41-169 at 40,324-40,344 (Hill J); Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) ATPR ¶41-710 at 43,117-43,122 (Gyles J).

88

Plimer v Roberts (1997) 80 FCR 303 at [325]-[329] (Lindgren J).

[10.115]

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241

the corporation in accordance with the principle accepted by the House of Lords in Tesco Supermarkets Ltd v Nattrass. 89 In those circumstances no question of vicarious liability under s 139B of the CCA will arise. Whether the corporate principal will be liable for a contravention of the relevant substantive prohibition then depends on whether the other elements of that prohibition can be satisfied, in particular, • whether the principal is a corporation of the type defined in s 4(1) of the CCA; and • whether the principal was engaged “in trade or commerce” at the time the conduct occurred. Section 139B(2) of the CCA provides: Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the actual or apparent authority of the director, employee or agent; or (b) by any other person: (i) at the direction of a director, employee or agent of the body corporate; or (ii) with the consent or agreement (whether express or implied) of such a director, employee or agent; if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; is taken, for the purposes of this Part or the Australian Consumer Law, to have been engaged in also by the body corporate.

This mirrors s 84(2) of the CCA. Bodies corporate cannot act except through the conduct of their directors, employees and agents. Section 139B(2) sets out the circumstances in which a body corporate will be held liable for the conduct of its directors, employees and agents. It is first necessary to establish that the person engaging in the conduct was acting “on behalf of” the body corporate. It is then necessary to establish that the person engaging in the conduct fell into one of the two categories specified: first, they were a director, employee or agent; or secondly, they were a person acting at the direction of a director, employee or agent, or with the consent or agreement of a director, employee or agent. On behalf of ...............................................................................................................................................................................................

Section 139B(2) of the CCA provides that any conduct engaged in “on behalf of” a body corporate by a director, employee or agent within the scope of the person's actual or apparent authority shall be deemed to have been engaged in by the body corporate. The words “on behalf of” do not require that the conduct must have been authorised by the body corporate. [10.115]

89

Tesco Supermarkets Ltd v Nattrass [1972] AC 153.

242

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.115]

It was held in Walplan v Wallace 90 that the phrase “on behalf of” does not have a strict legal meaning, but there is a limit as to how loose the connection can be. Something must be done “for” the company in the sense of “in the course of the body corporate's affairs or activities”. 91 In Wheeler Grace & Pierucci Pty Ltd v Wright 92 the Full Court of the Federal Court considered the effect of s 84(2) of the TPA in light of the High Court decision in Hamilton v Whitehead. 93 The appellant, Wheeler Grace & Pierucci Pty Ltd (WGP), carried on business as an investment adviser. Collins made misleading statements to the respondents regarding investments in a gold mining venture, Carbon Gold. Collins was the appointee of WGP to the board of Carbon Gold. The Full Court held that WGP was directly liable for Collins' misleading statements. Lee J held: Furthermore, in s 84(2) of the Act, it has been expressly provided that any conduct engaged in on behalf of a body corporate by a director, servant or agent within the scope of the person's actual or apparent authority or by any other person at the direction or with consent or agreement, express or implied, of a director, servant or agent, such direction, consent or agreement being within the scope of the actual or apparent authority of the director, servant or agent, is deemed for the purposes of the Act to have been engaged in also by the body corporate. Whether s 84(2) extends the common law is immaterial. What it does do is make clear that such activities by directors or agents of the company will attract direct liability to the company under provisions such as s 52 of the Act and no question of vicarious liability will arise in that circumstance. 94

On the other hand, in Lisciandro v Official Trustee in Bankruptcy, 95 Kiefel J held that a company was not responsible for the misleading or deceptive conduct of its “Service Agent”. The company, Alminco, appointed Radford as its service agent for North Queensland. This did not entitle Radford to represent the company or receive moneys on its behalf; rather, it was simply a licence permitting Radford to use Alminco's parts in his business. Radford misleadingly induced the applicant to sign a guarantee in favour of Alminco. It was held that Radford had not been acting as an agent of Alminco in procuring the guarantee; rather, as a potential purchaser on credit, Radford had obtained the guarantee on his own account in order to raise finance. Lindgren J, in NMFM Property Pty Ltd v Citibank Ltd, 96 said: 90

91 92 93 94

Walplan v Wallace (1985) 8 FCR 27 at 37, Sweeney J agreeing at 28 and Neaves J at 39. In NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1243] Lindgren J referred with approval to the views of Lockhart J in Walplan v Wallace. See TPC v Queensland Aggregates (1982) 61 FLR 52 at 66. Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940. Hamilton v Whitehead (1989) ATPR ¶42-932.

95

Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 at 50,256, citing TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 (Toohey J) at 474-6. Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 at 40-903-4.

96

NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270.

[10.120]

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243

It seems to me that an act is done “on behalf of” a corporation for the purpose of s 84(2) if either one of two conditions is satisfied: that the actor engaged in the conduct intending to do so “as the representative of” or “for” the corporation, or that the actor engaged in the conduct in the course of the corporation's business, affairs or activities. 97

In Ackers v Austcorp International Ltd, 98 a group of companies in a property joint venture were held to be liable for the misleading conduct of an agent engaged by one of the joint venturers. Rares J held that the particular development was part of the ordinary business, affairs and activities of Austcorp and that representations made by the officers, subsidiaries, and agents was the conduct engaged in “on behalf of” Austcorp. 99 In Bennett v Elysium Noosa Pty Ltd, 100 Reeves J, after reviewing the authorities about the operation of s 84(2) of the TPA, summarised them in the following propositions: Among other things, they show that the level of involvement of the actor concerned may not be significant, provided it comprises “some” involvement. In context, I consider this means some real or genuine involvement. They also show that the actor's subjective intention is one criterion for assessing whether he or she is acting on behalf of the company concerned. Alternatively, they show that an objective assessment of the actor's conduct may lead to the conclusion that he or she was acting on behalf of that company. Finally, they show that the assessment as to whether the actor was acting on behalf of a company is ultimately dictated by the circumstances of each particular case. Thus it may conceivably involve a combination of the subjective and objective assessments (above) in a particular case. 101

“Actual or apparent authority” ...............................................................................................................................................................................................

Having established that the person engaging in the conduct was acting “on behalf of” the corporation, it is then necessary to establish that the person engaging in the conduct fell into one of the two categories specified. The first category specified in s 139B(2)(a) of the CCA is that the person engaging in the conduct was a director, employee or agent of the body corporate acting within the scope of their actual or apparent authority. In ACCC v South East Melbourne Cleaning Pty Ltd (in liq), 102 Coverall was the franchisor of a professional cleaning services franchise system operating in Victoria. Mr Jones was the sole director of Coverall and effectively its owner. It was a small company and he was central to its operations. He was directly responsible within Coverall for franchisee recruitment, new business customer contract development and meeting weekly with Coverall's Sales Manager, Ms Haley, to discuss the number of cleaning proposals delivered to potential customers and the number of accounts and the [10.120]

97 98 99

NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1244]. Ackers v Austcorp International Ltd [2009] FCA 432. Ackers v Austcorp International Ltd [2009] FCA 432 at [217].

100 101 102

Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72. Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72 at [207]. ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (2015) ATPR ¶42-503.

244

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[10.120]

dollar value of the proposals won by Coverall. Ms Haley represented to a potential franchisee that if he purchased a franchise at a cost of $28,150 Coverall could provide him with work that would generate a minimum of $4,000 in revenue per month. Murphy J held that the making of the representation was within the scope of Ms Haley's actual or apparent authority as an employee of Coverall and was deemed to be the conduct of Coverall pursuant to ss 84(2) and 139B of the CCA. 103 The Corporations Act 2001 (Cth) sets out certain rules under which director or agents will be taken to have acted within the scope of their actual or apparent authority. 104 The actual or apparent authority of the agent is to be determined according to common law principles. For example, in the case of a real estate agent, the agent's apparent authority is limited to describing the property, representing its situation and representing any matter concerning its value. 105 If a real estate agent represents that finance is available in order to induce the purchaser to buy the property, the agent will be acting outside the agent's apparent authority and the vendor will not be liable for the agent's misleading statement. Where an agent makes a statement which is within the agent's apparent authority, but which the principal has expressly prohibited the agent from making, the question is more difficult. The wording of s 139B(2)(a) of the CCA would appear to be wide enough to make the principal liable for such a statement unless some limitation on the agent's authority was known to the other party. Despite suggestions that an agent who makes a statement expressly prohibited by the principal is not acting “on behalf of” the principal, 106 the words “on behalf of” in s 139B(2) of the CCA will extend to cases where the director or agent is acting within apparent authority in some way that is prohibited by the corporation including fraud. 107 However, where the director or agent acts on their own behalf and not as a representative of the corporation, s 139B(2) will not apply. In Aliotta v Broadmeadows Bus Service Pty Ltd, 108 the respondent wished to sell its property and engaged an estate agent to act on its behalf. The agent advised that it would be easier to sell the property as an investment property if it could be leased before sale. The applicant entered into an agreement for the purchase of the property conditional upon the property being leased. A lease was executed, but the use was found to be prohibited without a permit. A permit was refused and the lease was surrendered. The applicant sought return of the deposit alleging misleading conduct and false or misleading representations as to the use to which the land might lawfully be put, in breach of ss 52 and 53A(1)(b) of the TPA. He claimed that the vendor and the selling agent had both represented that the use described in the lease was permissible and the lease secure. 103

ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (2015) ATPR ¶42-503 at [91].

104 105 106 107

See Corporations Act 2001 (Cth), ss 126 – 129. See Mullens v Miller (1882) 22 Ch D 194. See TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 at 475 (Toohey J). Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419; Brockway v Pando (2000) 22 WAR 771.

108

Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873.

CHAPTER

[10.130]

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245

Gray J held that, as a matter of common law, a vendor's agent has authority to bind the vendor by any representation made as to the nature or quality of the property, even if it is false, unless some limitation on the agent's authority is known to the intending purchaser. In addition, a company carrying on business as an estate agent is also liable for the acts of its servant within the scope of his actual or ostensible authority. His Honour held that the first respondent, the vendor of the property, was liable for the conduct of the vendor's agent, which in turn was liable for the conduct of its employee. In Aliotta v Broadmeadows Bus Service the transaction involved the sale of commercial property so that both the respondent vendor and the agent were engaged in trade or commerce. It is clear from Argy v Blunts 109 that where the vendor principal is not engaged in trade or commerce and is selling residential property, the vendor will not be liable for any misleading statements of the agent. “At the direction of” or “with the consent of” ...............................................................................................................................................................................................

Where the person engaging in the misleading conduct is not a director, employee or agent of the respondent corporation, it will be necessary to establish that they fall within the second category specified in s 139B(2)(b) of the CCA; namely, that the person was acting at the direction of, or with the consent of a director, employee or agent of the respondent corporation. In Bennett v Elysium Noosa Pty Ltd, 110 the real estate agents who engaged in the misleading conduct were not parties to the proceedings. Reeves J found that since the development was central to the business affairs of the developer and the marketing of the lots was an activity that was essential to their business, on an objective assessment, the real estate agents were acting “on behalf of” the developer when they engaged in the misleading conduct. The real estate agents were not employed by the developer. They were employed by an independent agency which was appointed by the developer to be the exclusive marketing consultant for the development. Accordingly, they could not fall within the first category in s 84(2) (now CCA, s 139B(2)(a)). Reeves J held that they fell within the second category (now CCA, s 139B(2)(b)) since the real estate agents had been briefed with sales material by a director who was the public relations and marketing manager of the developer. His Honour also found that the real estate agents had acted “at the direction of” a director of the developer. [10.125]

Direct liability of non-corporate principals for conduct of employees or agents ............................................................................................................................................................................................... [10.130]

Section 139C(2) of the CCA provides:

Any conduct engaged in on behalf of a person (the principal) other than a body corporate: 109

Argy v Blunts (1990) 26 FLR 112.

110

Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72.

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.135]

(a) by an employee or agent of the principal within the scope of the actual or apparent authority of the employee or agent; or (b) by any other person: (i) at the direction of an employee or agent of the principal; or (ii) with the consent or agreement (whether express or implied) of such an employee or agent; if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the employee or agent; is taken, for the purposes of this Part or the Australian Consumer Law, to have been engaged in also by the principal.

This re-enacts s 84(4) of the TPA. Subsection 139C(2) of the CCA has the same effect as s 139B(2) where conduct is engaged in on behalf of non-corporate principals. Section 139C(2) deems the conduct of an employee or agent to be the conduct of a natural person. If regard is had to the reasoning in Wright's case, it cannot be concluded that the effect of s 139C(2) is to impose liability upon the principal. Rather, it is necessary to consider whether the other elements of the relevant substantive prohibition are satisfied and, in particular, whether the natural person was engaged in trade or commerce at the time the conduct occurred. This will not be the case, for example, where the sale related to the vendor's private residence. There is very little authority on the liability of a natural person for the misleading conduct of a corporate agent. In MacCormick v Nowland 111 the facts presented an opportunity for the question to be considered, but as liability was found in negligent misrepresentation the court did not consider whether the vendor had contravened s 52 of the TPA. Direct liability: summary ...............................................................................................................................................................................................

Sections 139B(2) and 139C(2) of the CCA operate to impose direct liability rather than vicarious liability on a principal. The sections deem the conduct of the agent to be the conduct of the principal. The sections do not deem the business of the agent to be the business of the principal. Thus, where for example, a vendor principal is not engaged in trade or commerce and is selling a private residence, the vendor will not be liable for a breach of a provision such as s 18 of the ACL for any misleading statements by the agent. 112 The ACL (Application Acts) have equivalent provisions to ss 139B(2) and 139C(2) of the CCA. 113 [10.135]

111 112

MacCormick v Nowland (1988) ATPR ¶40-852. Williams v Pisano (2015) 299 FLR 172 at [39].

113

See, eg, ACLFTA 2012 (Vic), s 196; FTA 1989 (Qld), s 95.

CHAPTER 11

......................................................................................................................

Misleading or Deceptive Conduct Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 3.

Introduction The legislative approach to the regulation of consumer protection adopted in Australia is to provide for three general protections and to supplement these with more prescriptive protections in relation to specific conduct. The first general protection is contained in s 18(1) of the ACL which provides that: [11.05]

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead of deceive.

This prohibition does not substantively change compared to s 52(1) of the Trade Practices Act 1974 (Cth) (TPA), and the State and Territory equivalents in their Fair Trading Acts. The only difference is that s 18 is directed at the conduct of persons generally rather than corporations. If the conduct concerns that of a corporation, reliance will generally be placed on the ACL (Cth). If the conduct concerns that of natural persons, reliance will generally be placed on the ACL (Application Acts). Before considering the elements of a contravention of s 18 of the ACL, it is necessary to have some understanding of its policy objects and the policy objects of its predecessor, s 52 of the TPA. In Brown v The Jam Factory Pty Ltd, 1 s 52(1) of the TPA was described by Fox J as: a comprehensive provision of wide impact, which does not adopt the language of any common law cause of action. It does not purport to create liability at all; rather does it establish a norm of conduct, failure to observe which has consequences provided for elsewhere in the same statute, or under the general law. 2

In relation to s 52 of the TPA, Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd 3 observed: the evident purpose and policy underlying Pt V, which includes s 52, recommends a broad construction of its constituent provisions, the legislation being of a remedial character so that it should be construed so as to give the fullest relief which the fair meaning of its language will allow. 4 1 2 3

Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340. Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 at 348. Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470.

4

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 503.

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.05]

Their Honours also observed that s 52 imposes a “norm of conduct”, 5 and the role of the courts was to apply it to a wide range of circumstances involving businesses as well as consumers. The policy object of s 52 of the TPA was to operate as a catch-all provision that could apply to objectionable conduct that might otherwise escape liability, on technical grounds, under the more specific provisions of the Act. According to Senator Murphy, who as Attorney-General was responsible for introducing the TPA, its role was to ensure that the law was not “continually one step behind businessmen who resort to smart practices”. 6 By 1993, former Chief Justice of the High Court, Sir Anthony Mason commented on how the statutory remedies had eclipsed the traditional common law remedies: Section 52 of the Trade Practices Act 1974 (Cth), which provides a statutory cause of action sounding in damages in respect of misleading or deceptive conduct, has reduced the importance of actions for breach of warranty, fraudulent misrepresentation and negligence in those cases to which the statute applies. 7

Similarly, French CJ and Kiefel J commented in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd: 8 The cause of action for contravention of statutory prohibitions against conduct in trade or commerce that is misleading or deceptive or is likely to mislead or deceive has become a staple of civil litigation in Australian courts at all levels. Its frequent invocation, in cases to which it is applicable, reflects its simplicity relative to the torts of negligence, deceit and passing off.

However, there were limits imposed on the general protection against misleading conduct in s 52 of the TPA. The policy object of the law was not to protect the unusually stupid or obtuse, or those who did not take reasonable steps to protect their own interests. In Campomar Sociedad Limitada v Nike International Ltd, 9 the High Court stated: It is in these cases of representations to the public … that there enter the “ordinary” or “reasonable” members of the class of prospective purchasers. Although a class of consumers may be expected to include a wide range of persons, in isolating the “ordinary” or “reasonable” members of that class, there is an objective attribution of certain characteristics. … Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of 5

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505.

6 7 8

See Parliamentary Debates, Hansard, 1974, Vol S 60, p 547. Sir Anthony Mason, “Changing the Law in a Changing Society” (1993) 67 Australian Law Journal 568. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [5]. See also Mason, “Changing the Law in a Changing Society” (1993) 67 Australian Law Journal 568 at 568.

9

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45.

[11.10]

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249

that class. The inquiry thus is to be made with respect to this hypothetical individual why the misconception complained has arisen or is likely to arise if no injunctive relief be granted. 10

In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 11 it was held that a reasonable member of the target audience (members of the public who were in the market for an expensive make of furniture) would not be misled into buying a similarly designed “look-alike” product, because they would check the label to confirm that they were purchasing their desired brand. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd, 12 the High Court held that intention was not a requirement for a person to have engaged in misleading conduct. The question whether conduct was misleading within the meaning of s 52(1) of the TPA was to be determined by the court itself, and the test was objective. Evidence that members of the target audience may in fact have been misled was admissible though not conclusive. 13 Section 52(1) was interpreted expansively and this allowed it to be invoked in a wide variety of situations not traditionally associated with consumer protection. 14 As a result, it had an impact on Australian law that was not anticipated when it was introduced as part of the TPA in 1974. Its location in the consumer protection parts of the TPA reflected an expectation that its role would be to protect consumers by improving the conduct of businesses in trade or commerce – their advertising, selling practices and promotional activities generally – and by prohibiting businesses from engaging in sharp practices when dealing with individual consumers. However, whilst s 52(1) was used to promote the interests of consumers in these ways, by far its most frequent use was in connection with disputes of a commercial nature between businesses. In effect, competitors held each other to account in complying with the raised standards of business conduct imposed by s 52(1). As a result it became one of Australia's most litigated statutory provisions and, in conjunction with its Fair Trading Act equivalents, largely usurped important areas of common law including contract, tort [11.10]

10

11 12 13 14

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ. See also Google Inc v ACCC (2013) 249 CLR 435 at 443 (French CJ, Crennan and Kiefel JJ). Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J). Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-9 (Gibbs CJ); Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223-6 (Stephen J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197-8 (Gibbs CJ) and 202-5 (Mason J); Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 601-2 (Mason CJ, Deane, Dawson and Gaudron JJ); 606-607 (Brennan J).

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[11.10]

and restitution. 15 The same policy objects that informed the construction of s 52 of the TPA are likely to inform the construction of s 18 of the ACL. The principles for determining whether misleading conduct has occurred were considered by McHugh J in Butcher v Lachlan Elder Realty Pty Ltd: The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document. 16

The analysis of whether conduct is misleading or likely to mislead in this chapter will focus on the following three matters: • first, identifying or characterising the conduct at issue; 17 • secondly, considering the approach taken by the courts in assessing whether the conduct at issue is misleading or likely to mislead; and • thirdly, the need to consider whether the respondent's conduct caused the applicant's error or misconception. 18 The chapter then considers how the general protection in relation to misleading conduct has been applied in the context of advertising conduct, and in relation to passing-off. These two areas have generated a significant number of cases because of their importance in market economies which depend on consumers being provided with actuate information, and businesses competing fairly. Next, the statutory exemption for

15 16

17

18

See Clarke, “Misleading or Deceptive Conduct Cases in the Supreme Court of Victoria” (2015) 89 Australian Law Journal 397. Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (citations omitted), approved in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 341-2 [102] (Gummow, Hayne, Heydon and Kiefel JJ). See also Google Inc v ACCC (2013) 249 CLR 435 at 443-4 [6]-[9] (French CJ, Crennan and Kiefel JJ) and ACCC v Dukemaster Pty Ltd (2009) ATPR ¶42-290 at [10] (Gordon J). Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [105]; National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at [18] (Dowsett J, with whom Jacobson and Bennett JJ agreed); Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett and Graham JJ); ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 at [14]-[20] (Gordon J); IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 (24 November 2015) at 54] (Judd J). Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [24] (French CJ).

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information providers in s 19(1) of the ACL is discussed. Finally, the prohibition of misleading conduct in relation to financial products and financial services in s 12DA(1) of the ASIC Act is considered.

Part I: Identifying the conduct at issue Introduction ...............................................................................................................................................................................................

The importance of identifying or characterising the relevant conduct alleged to be misleading has been stressed in a number of cases. For example, in Google Inc v ACCC, Hayne J stated: [11.15]

The generality with which s 52 was expressed should not obscure one fundamental point. The section prohibited engaging in conduct that is misleading or deceptive or is likely to mislead or deceive. It is, therefore, always necessary to begin consideration of the application of the section by identifying the conduct that is said to meet the statutory description “misleading or deceptive or … likely to mislead or deceive”. The first question for consideration is always: “What did the alleged contravener do (or not do)?” It is only after identifying the conduct that is impugned that one can go on to consider separately whether that conduct is misleading or deceptive or likely to be so. 19

The concept of “engaging in conduct” is defined expansively in s 2(2) of the ACL. Section 2(2) of the ACL provides: (2) In this Schedule: (a) a reference to engaging in conduct is a reference to doing or refusing to do any act, including: (i) the making of, or the giving effect to a provision of, a contract or arrangement; or (ii) the arriving at, or the giving effect to a provision of, an understanding; or (iii) the requiring of the giving of, or the giving of, a covenant; and (b) a reference to conduct, when that expression is used as a noun otherwise than as mentioned in paragraph (a), is a reference to the doing of or the refusing to do any act, including: (i) the making of, or the giving effect to a provision of, a contract or arrangement; or (ii) the arriving at, or the giving effect to a provision of, an understanding; or (iii) the requiring of the giving of, or the giving of, a covenant; and (c) a reference to refusing to do an act includes a reference to: (i) refraining (otherwise than inadvertently) from doing that act; or (ii) making it known that that act will not be done; and (d) a reference to a person offering to do an act, or to do an act on a particular condition, includes a reference to the person making it known that the person 19

Google Inc v ACCC (2013) 249 CLR 435 at 464-5 [89].

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[11.20]

will accept applications, offers or proposals for the person to do that act or to do that act on that condition, as the case may be.

This mirrors s 4(2) of the TPA. The concept of “engaging in conduct” as defined in s 2(2) of the ACL is not confined to a false or misleading representation. Section 18 is contained in Ch 2 of the ACL which is headed “General Protections”. Chapter 3 of the ACL is headed “Specific Protections” and prohibits a number of unfair practices that are confined to “false or misleading representations”. 20 Other prohibitions in Ch 3 of the ACL are directed at “misleading conduct”. 21 The same distinction between a “representation” and “conduct” is made in s 4 of the ACL, the evidentiary provision concerning representations with respect to future matters. 22 Doing any act ...............................................................................................................................................................................................

The concept of “engaging in conduct” in s 2(2) of the ACL divides conduct into two broad categories: “doing any act” and “refusing to do any act”. The statutory language used does not require the making of some representation. As Hayne J observed in Google Inc v ACCC, the focus must be on the statutory text which focuses on “conduct” rather than “representations”: [11.20]

It will often be possible to identify the relevant conduct as the making of one or more representations, but it is necessary to bear in mind that s 52 was not confined to the prohibition of misrepresentations. It follows that a claim of contravention of s 52 need not be pleaded or argued by reference to the making of some representation. “It suffices that [the conduct] leads or is likely to lead into error”. Melding the two issues of conduct and characterisation is apt to distract and confuse. Especially is that so if the melding is achieved by using the language of misrepresentation to give a single composite description of both the conduct and its character. Describing the alleged misleading or deceptive conduct as “making a misrepresentation” is distracting and confusing…. 23

The proposition that the expression “conduct” extends beyond representations was also described as “sound” by a majority of the High Court in Butcher v Lachlan Elder Realty Pty Ltd. 24 Where the relevant conduct consists of doing an act, the “act” will generally involve the making of some express or implied representation and there is a vast body of case law in which pre and post-contractual representations have been held to be misleading in contravention of s 52 of the TPA, and its State and Territory equivalents. Contractual 20 21 22 23 24

ACL, ss 29, 30, and 37. ACL, ss 31, 33 and 34. See [11.135]. Google Inc v ACCC (2013) 249 CLR 435 at 465-6 [92]-[96] (citations omitted). Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [32] (Gleeson CJ, Hayne and Heydon JJ), [102]-[110] (McHugh J) and [179] (Kirby J).

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representations in a commercial context, such as advertising, 25 franchising, 26 leasing transactions, 27 sales of businesses, 28 and passing-off, 29 have generated as many, if not more, cases than representations involving a consumer as the victim of misleading conduct. For the doing of an act to constitute a contravention of s 18(1) of the ACL it is only necessary to prove that the representation leads into error or is likely to lead into error. 30 It does not require proof of fault on the part of the respondent. The determination of whether the representation was made is a question of fact. Where the evidence that the representation was made is contested, findings of fact will be required to be made on each point. The ultimate issue is whether the representation leads or is likely to lead into error. 31 Refusing to do any act ...............................................................................................................................................................................................

The concept of “conduct” is defined expansively in s 2(2) of the ACL and includes doing or refusing to do any act. Section 2(2)(c), in turn, provides: [11.25]

A reference to refusing to do an act includes a reference to: (i) refraining (otherwise that inadvertently) from doing that act; or (ii) making it known that the act will not be done.

The words “otherwise than inadvertently” have been held to mean that an unintentional non-disclosure is not regarded as “conduct” for the purposes of s 2(2)(c). 32 There is a 25

26

27

28 29

30 31 32

See, eg, Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 56 IPR 13; Hoover (Aust) Pty Ltd v Email Ltd (1991) ATPR ¶41-149; Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR 419; Makita (Aust) Pty Ltd v Black & Decker (A’asia) Pty Ltd (1990) 18 IPR 270; Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307; Telstra Corp Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515; Bristol-Meyers Squibb Australia Pty Ltd v Astra Pharmaceuticals Pty Ltd (1999) 45 IPR 144; and R & C Products Pty Ltd v SC Johnson & Sons Pty Ltd (1993) FCR 188. See eg, Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) ¶46-102; Thomson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611; and Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd (2005) 220 ALR 211. See, eg, Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388; Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601; Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249. See eg, Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Finucane v NSW Egg Corp (1988) 80 ALR 486; and Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354; and Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 (Gibbs CJ); and Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25] (French CJ). Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 722 (Finkelstein J); Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J).

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[11.25]

substantial body of case law and commentary on the circumstances in which silence and non-disclosure gave rise to a contravention of s 52 of the TPA and this jurisprudence will be equally applicable to s 18. 33 Where silence is alleged to constitute misleading or deceptive conduct, it is first necessary to consider whether the respondent's silence amounts to “conduct” as defined in s 2(2) of the ACL. This is a broad definition which includes, inter alia, “refraining” from doing an act. 34 However, whilst this definition is sufficiently broad to embrace silence, it goes on to exclude from its ambit refraining from doing an act “inadvertently”. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd, 35 Bowen CJ interpreted this to mean that the respondent's failure to disclose information must be deliberate, so that should it be attributable to carelessness, or, perhaps, ignorance of the significance of the information involved, s 52 would not be contravened. Where the applicant complains not about some positive conduct on the respondent's part, but about its failure to disclose information, the respondent can be found to have “engaged in conduct” only if this failure was deliberate. In the words of Finkelstein J in Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd: It is clear that a failure to provide information can be conduct which is misleading or deceptive. For the purposes of s 52(1) “engaging in conduct” is defined in s 4(2)(a) as a reference to doing or refusing to do any act and by s 4(2)(c) a reference to refusing to do an act includes a reference to refraining (otherwise than inadvertently) from doing that act. However, when the complaint is that s 52(1) has been infringed by conduct that involves either refusing or refraining from doing an act before that conduct is actionable it must have been deliberately engaged in. 36

According to his Honour, this followed “from the use of the words ‘refuse’ and ‘refrain’ in s 4(2) of the TPA and was reinforced by the fact that in s 4(2)(c) conduct is said to include refraining from doing an act provided it is ‘otherwise than inadvertently’.” In Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd, 37 McLure P drew attention to the requirement that the defendant must be aware of the undisclosed fact and that the silence must be intentional or deliberate: To refrain otherwise than inadvertently requires a deliberate decision to withhold information: Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; Rhone-Poulenc at 489-490; Costa Vraca at 723. Thus, the defendant must advert to 33

34

See Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 and Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83; Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) ¶46-054 (French J); Warner v Elders Rural Finance Ltd (1993) 41 FCR 399; and General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164. For commentary on these cases see Gillies, “Non-disclosure Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653. ACL, s 2(2)(c).

35 36

Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489. Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1999) ATPR ¶41-694 at 42,879. See also Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 at 657 (Hoeben J).

37

Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193.

[11.30]

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the question and form an intention not to disclose. That conclusion is consistent with the natural and ordinary meaning of the term “refrain” which means to forebear or to keep oneself back. 38

Where a corporation engages in conduct that involves silence, and it is necessary to establish that the corporation deliberately failed to disclose within the definition of conduct in s 2(2)(c) of the ACL, s 139B(1) of the CCA must be considered. Section 139B(1) provides that if in a proceeding under the ACL (Cth) in respect of conduct engaged in by a body corporate, it is necessary to establish the state of mind of the body corporate, it is sufficient to show (a) “that a director, employee or agent of that body corporate engaged in that conduct within the scope of the actual or apparent authority of the director, employee or agent”; and (b) “that the director, employee or agent had that state of mind”. Silence in isolation ...............................................................................................................................................................................................

Where silence occurs in isolation it is not always misleading. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd, 39 Rhone-Poulenc alleged that UIM contravened s 52 of the TPA by selling an agricultural chemical product without disclosing that the sale and use of that product was prohibited in certain States. The applicant was a trade rival of UIM and also alleged that the latter had infringed one of its patents in producing and selling the product. In relation to the definition of “conduct” in s 4(2) of the TPA, Bowen CJ held:

[11.30]

The appellants submit that UIM's failure to warn customers of the risks of seizure and forfeiture constituted “engaging in conduct” within the special definition in s 4(2). I do not agree. Although s 4(2) recognises that an omission to do an act may constitute “engaging in conduct”, that will only be so where there has been a refusal to do, or a deliberate refraining from doing, an act. The words “refuse” and “refrain” clearly connote that the omission to do an act must be deliberate. I agree with the trial judge that s 4(2) does not materially assist the appellants. 40

Unless there is a deliberate decision to withhold information, the silence will not be actionable. If the respondent's silence is attributable to carelessness, or, perhaps, ignorance of the significance of the information involved, it will not be actionable. 41

38 39

Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [59]. Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477.

40 41

Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489-90. See Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 723 (Finkelstein J); Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J); Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; and Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [59] (McLure P).

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[11.35]

Silence and other conduct ............................................................................................................................................................................................... [11.35] In many situations the respondent's silence will not occur in isolation. Rather, it will be accompanied by other acts or omissions so that when viewed as a whole, the respondent's conduct may be misleading or deceptive in a positive manner. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, French CJ and Kiefel J drew attention to the distinction between “silence in isolation” cases and “silence including other acts or omissions” cases:

Where silence or non-disclosure is relied upon, the pleading should identify whether it is alleged of itself to be, in the circumstances of the case, misleading or deceptive conduct or whether it is an element of conduct, including other acts or omissions, said to be misleading or deceptive. 42

In cases where the silence is accompanied by other acts or omissions, the applicant will not need to establish that the respondent's silence alone amounted to “conduct” within s 2(2) of the ACL. The presence of the additional acts or omissions, when combined with the respondent's failure to disclose, may render the respondent's conduct, viewed in its entirety, misleading or deceptive for the purpose of s 18 of the ACL. The definition of conduct in s 2(2) of the ACL has been adopted in the ACL (Application Acts). 43 For this reason, when silence is alleged to constitute the basis of misleading or deceptive conduct, it will be desirable for the applicant to consider the whole of the conduct and whether there was something more involved than silence in isolation. As Reeves J observed in Bennett v Elysium Noosa Pty Ltd (in liq): Where a person is pleading an implied representation arising out of a failure to disclose, or silence, which has its foundation in the circumstances surrounding that silence, or separately some duty to disclose in the particular circumstances, it is absolutely critical that the circumstances relevant to either situation are pleaded clearly and precisely. 44

Implied representations can arise in cases involving silence. The approach for determining whether an implied representation was made “is to determine whether what was actually said or done, in all the relevant circumstances, conveyed something more, such that it led the applicant into error”. 45 For example, it may be implied that there was nothing material that needed to be disclosed to the other party. In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (Henjo), 46 it was held to be misleading to inform a prospective purchaser that a restaurant had a certain number of tables without also disclosing that a significant number of them were not allowed under the applicable liquor licensing laws. Similarly, in Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd, 47 it was held to be misleading to point out the limitations of a site the respondent was proposing to 42

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [5].

43 44 45 46

See, eg, FTA 1989 (Qld), s 5A. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [78]. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [40] (Reeves J). Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546.

47

Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625.

[11.40]

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lease without also mentioning the risks of contamination it presented. In cases involving the expression of an opinion, there may be an implied representation that the opinion is honestly held, or an implied representation that there is a reasonable basis for the opinion. 48 These cases illustrate that in cases involving silence, the question is whether what was actually said, in all the relevant circumstances, would convey something more to a reasonable person in the position of the applicant, such that it was likely to lead into error. Relaying incorrect information supplied by another ...............................................................................................................................................................................................

The conduct at issue may consist of merely relaying information supplied by another. In Yorke v Lucas, 49 Mason A-CJ, Wilson, Deane and Dawson JJ considered a situation where a corporation purported to do no more than pass on information supplied by another in circumstances where it was apparent that the corporation was not the source of the information, and expressed the view that it was doubtful that the corporation could itself be engaging in conduct: [11.40]

That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive. 50

This has subsequently been dubbed “the conduit defence”, 51 where the intermediary acts as a mere “postman” and does not do anything to adopt the information. 52 It arises in the context of principal–agency relationships, where the agent relays information imparted by the principal and seeks to immunise himself or herself by means of a contemporaneous disclaimer. It also arises in situations where an information provider, such as a newspaper or magazine, publishes an advertisement on behalf of a supplier of goods or services that may contain misleading representations, and the newspaper does not express its own views as to the truth or falsity of those representations. 48

49 50

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88; James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J). See [11.150]. Yorke v Lucas (1985) 158 CLR 661. Yorke v Lucas (1985) 158 CLR 661 at 666.

51

See Gillies, “Misleading and Deceptive Conduct: Immunising the Intermediary – the Conduit Defence” (2006) 14 Trade Practices Law Journal 209; and McCabe, “In the Wake of Butcher: Decisions Affecting the Liability of Agents and Third Parties in Proceedings for Misleading or Deceptive Conduct” (2006) 14 Trade Practices Law Journal 46.

52

The term “postman” was used by French J in Gardam v George Willis & Co (1988) 82 ALR 415 at 427.

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[11.40]

For example, in Dalton v Lawson Hill Estate Pty Ltd, 53 the purchaser of a vineyard was unsuccessful in attempting to make an agent liable for representations about the area of the vines planted and the output of a bore on the property. The court noted that there were disclaimers in the promotional material that made it clear that the agent was not accepting any responsibility for the information provided by another person. The Full Federal Court held that the agent was not liable and stated: In considering the liability of an agent for sale for contravention of s 52 of the Trade Practices Act or s 42 of the Fair Trading Act, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchaser, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, of which each may be taken to have known. The mere fact that a person had engaged in the conduct of supplying a document containing information which is in fact misleading does not necessarily mean that that person had engaged in misleading conduct. It is crucial to examine the role of the person in question. 54

The Full Court distinguished John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd 55 on the basis that in that case the agent held itself out as “Consultants to institutional investors and to developers of major properties”, and the representation concerned what the net lettable area of a building would be when it was constructed, a matter which the purchaser could not independently verify for itself. 56 The liability of an intermediary or conduit was considered by the High Court in Butcher. 57 In that case, Butcher purchased at auction an expensive waterfront property in Sydney. Prior to the auction, Butcher was shown the property by an estate agent, Lachlan, who provided a brochure describing the property. The brochure reproduced part of a survey done by a surveyor in 1980. The survey was inaccurate in certain details. The brochure contained the following statement: All information contained herein is gathered from sources we believe to be reliable. However, we cannot guarantee its accuracy and interested persons should rely on their own inquiries.

Before settlement, Butcher discovered that the boundary was not located as shown on the survey diagram. Butcher declined to proceed with the transaction and commenced proceedings against the vendor and against the agent, Lachlan, alleging that it had been guilty of misleading conduct contrary to s 52 of the TPA.

53 54 55 56

Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 (Lindgren, Finn and Emmett JJ). Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,252 [82]. John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249. Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,252 [96]-[97].

57

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.

[11.45]

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In a joint majority judgment, Gleeson CJ, Hayne and Heydon JJ held that the intermediary, the agent Lachlan, was not in breach of s 52. The agent's conduct and the disclaimer were part of the surrounding circumstances and had to be viewed as a whole. 58 Their Honours cited with approval 59 the decision of the New Zealand Court of Appeal Goldsbro v Walker, 60 and concluded: The agent did not engage in conduct towards the purchasers which was misleading or deceiving. Whatever representation the vendor made to the purchasers by authorising the agent to issue the brochure, it was not made by the agent to the purchasers. The agent did no more than communicate what the vendor was representing, without adopting or endorsing it. The conclusion flows from the nature of the parties, the character of the transaction contemplated, and the contents of the brochure itself. 61 (emphasis added)

As regards the nature of the parties, it was significant that the relevant class of persons to whom the property was marketed (purchasers prepared to pay above $1 million in 1997) could be expected to have legal advice and the purchasers were “intelligent, shrewd and self-reliant”. The fact that the agent did not adopt or endorse the communication was a factor that supported the finding that the agent had done no more than pass on information from the vendor. Likewise, the disclaimers in the brochure were merely part of the circumstances relevant to the inquiry whether it would have been plain to a reasonable purchaser that the agent was not the source of the misleading information. 62 In Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd, 63 Orix, an international finance house involved in financing the acquisition of heavy industrial machinery, sought damages from a broker, Moody Kidell. Orix provided finance to QCE, an equipment hire business to acquire six cranes from Nelson Equipment. Orix acted in reliance upon information provided by Moody Kidell. The information provided contained a disclaimer to the effect that it had been provided to Moody Kidell by the proposed borrower/lessee and that Moody Kidell could not accept responsibility for its accuracy. The trial judge (White J) held that Moody Kidell did not adopt or endorse the misleading information, and that Moody Kidell did no more than communicate to Orix what QCE was representing, and was not liable under s 52 of the TPA. The New South Wales Court of Appeal dismissed the appeal. After an extensive analysis of what was said by the majority in Butcher, Ipp JA concluded: [11.45]

58 59 60 61 62 63

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605[39]; McHugh J expressed similar views at 625 [109].See also Campbell v Backoffice Investments at [29] (French CJ). Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 602, fn 38. Goldsbro v Walker [1993] 1 NZLR 394. Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605. Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 at [45]-[46]. Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 (Ipp JA, with whom Spigelman CJ and Basten JA agreed).

260

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[11.45]

From the passages that I have quoted it appears that the ratio of the majority's decision that the agent had not engaged in misleading conduct was that the agent did no more than communicate what the vendor was representing. Their Honours held that an innocent agent, who acts merely as a conduit and makes it clear, expressly or impliedly, that he or she is doing no more than passing on information obtained from others, does not attract liability under s 52.

The High Court considered the issue again in Google Inc v ACCC. 64 The conduct at issue concerned Google's well-known search engine, “Google search”. A search of the google.com search engine produced two types of result, “organic” search results and “sponsored links”. Organic search results consisted of information displayed free of charge. Sponsored links were advertisements which appeared at the top or right-hand side of the results page, and included a link to the web address displayed beneath the headline. The primary judge, Nicholas J held that in four instances advertisers had engaged in misleading conduct by falsely representing that there was a commercial association or affiliation with its competitor and that information regarding the competitor could be found by clicking on the advertiser's web address. For example, advertisements for Harvey World Travel (HWT) appeared as sponsored links amid organic search results. STA Travel was a major competitor of HWT. The court held that the representation that there was a commercial association or affiliation between STA and HWT were made by STA, not by Google, and that Google did not adopt or endorse the representation. 65 On appeal, the Full Federal Court held that Google engaged in misleading conduct because Google took an active role in the preparation, dissemination and publication of the advertisements, and endorsed the information supplied by the advertisers such as STA. 66 Google's appeal to the High Court was successful. Before the High Court there was no challenge to the findings of the primary judge that the advertisements were misleading. 67 The question was whether Google had engaged in the conduct. The majority, French CJ, Crennan and Kiefel JJ, in their joint reasons held that the advertisers were the authors of the sponsored links. Google had no control over an advertiser's choice of search terms, or an advertiser's choice of keywords. Their Honours stated: It is critical to appreciate that, even with the facility of keyword insertion, the advertiser is the author of the sponsored link. As Google correctly submitted, each relevant aspect of a sponsored link is determined by the advertiser. The automated response which the Google search engine makes to a user's search request by displaying a sponsored link is

64 65 66

Google Inc v ACCC (2013) 249 CLR 435. ACCC v Trading Post Australia Pty Ltd (2011) 197 FCR 498. ACCC v Google Inc (2012) 201 FCR 503 at [93].

67

Google Inc v ACCC (2013) 249 CLR 435 at 455 [54] (French CJ, Crennan and Kiefel JJ).

[11.50]

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wholly determined by the keywords and other content of the sponsored link which the advertiser has chosen. Google does not create, in any authorial sense, the sponsored links that it publishes or displays. 68

Their Honours held that Google was a mere conduit passing on the advertisements, without adopting or endorsing them: Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online), who publish, display or broadcast the advertisements of others. The fact that the provision of information via the internet will – because of the nature of the internet – necessarily involve a response to a request made by an internet user does not, without more, disturb the analogy between Google and other intermediaries. To the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers. 69

Hayne and Heydon JJ wrote separate opinions but agreed that Google's appeal should be upheld. The High Court's decision in Google Inc provides comfort for intermediaries who disseminate, publish or broadcast information provided by others. So long as they can demonstrate that they have not been involved in the preparation of the material by, for example, drafting the wording of the advertisement, they will not be liable for the content they publish or distribute. Publishers of advertisements are provided additional protection by s 251 of the ACL. However, once intermediaries become aware that the information supplied by another is misleading, they must act promptly to remove it, otherwise they risk becoming involved in the contravention as an accessory. 70 Adopting or endorsing information supplied by another ...............................................................................................................................................................................................

Where, however, an intermediary adopts or endorses the representations supplied by another, the intermediary will be equally culpable if the representations are false or misleading. In Downey v Carlson Hotels Asia Pacific Pty Ltd, 71 the appellant, Carlson Hotels, previously known as Raddison Hotels, was in the business of running hotels and apartments of high quality. It lent its name to a development known as “Raddison Suites”, which was being developed by Valco Developments Pty Ltd. A brochure was prepared to promote the development. The name “Raddison” appeared on the brochure 31 times. Raddison approved of the brochure and knew that it would be provided to potential purchasers to promote the sale of units in the Raddison Suites development. [11.50]

68 69 70

Google Inc v ACCC (2013) 249 CLR 435 at 459 [68]. Google Inc v ACCC (2013) 249 CLR 435 at 459 [69]. ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34 at [33] (Finkelstein J) and see [11.195].

71

Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199.

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[11.50]

The suites were to be managed for letting purposes and the brochure contained an “Investment Analysis” which guaranteed a net 7% per annum for five years. On the last page of the investment analysis was the following disclaimer: Whilst the information inside this publication is believed to be true and correct, the figures and advice supplied are given as a guide only and no responsibility will be taken for any errors and omissions.

Mr and Mrs Downey were investors who purchased units in the development, but the investment return did not materialise. Although Carlton Hotels were not selling the units, it was alleged to have adopted or endorsed the representations of the developer, Valco. Keane JA (with whom Williams JA and Atkinson J agreed) concluded that after considering the material in its entirety, including the disclaimer, that the appellant's conduct was misleading. His Honour acknowledged 72 that disclaimers could be effective if they made it clear that they were only communicating the information prepared by Valco, but the disclaimer in the case before him did not have this effect. On the contrary, his Honour concluded 73 that a reasonable purchaser in the position of the Downeys would have formed the view that the brochure contained a representation by the appellant that it was endorsing the information prepared by Valco, and was not merely passing it on for what it was worth. It was making two representations: first, a representation that the units would be a good investment; and secondly, a representation that potential investors could rely on its opinion as to the quality of the investment. The Full Federal Court considered this issue in Granitigard Pty Ltd v Termicide Pest Control Pty Ltd. 74 In that case, the trial judge held that Termicide had not adopted a Commonwealth Scientific and Industrial Research Organisation (CSIRO) appraisal document under which experts employed by the CSIRO were engaged in assessing new building products to determine whether they complied with the relevant Australian Standard. 75 On appeal, Reeves J (with whom Kenny and Lander JJ agreed) considered that Termicide had adopted the CSIRO appraisal document as its own. It had not merely provided a means by which the CSIRO appraisal document could be read, without using any words or otherwise doing anything to adopt or endorse it. Instead, it took additional steps that amounted to an adoption of it. These steps were removing the CSIRO logo and reproducing parts of the appraisal document on its own website under the Termicide logo.

72 73 74

Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [83]. Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [85]-[117]. Granitigard Pty Ltd v Termicide Pest Control Pty Ltd (2011) 281 ALR 1.

75

Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 5) [2010] FCA 313 (Logan J).

[11.55]

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Contemporaneous disclaimers ...............................................................................................................................................................................................

Agents and intermediaries sometimes seek to protect themselves from liability by alerting those who may rely on the information being disseminated that the agent or intermediary is not the source of the information by means of contemporaneous disclaimers. A contemporaneous disclaimer refers to a notice of the kind at issue in Butcher v Lachlan Elder Realty Pty Ltd. 76 There, the disclaimer was made available during pre-contractual negotiations. It stated that the information contained in the brochure had been obtained from other sources and that the agent could not guarantee its accuracy. Where, however, the evidence shows that the agent or intermediary is the source of the information; or is responsible for its preparation; or has subsequently endorsed it, the agent or intermediary will not be a mere conduit and will share liability with the principal if it is misleading. 77 In Havyn Pty Ltd v Webster, 78 the court distinguished the information sought to be disclaimed from that at issue in Butcher's case. In Butcher, the information concerned the boundaries of the property which surveyors normally certify, while in Havyn the information concerned the floor area of flats in a building which could easily be measured by a person without expertise and fell within the competence of a real estate agent. 79 In summary, in deciding whether a disclaimer is effective to protect an agent or intermediary, the courts have regard to the following factors: [11.55]

• The nature of the parties to the transaction: whether the agent or intermediary held itself out as an expert in transactions of that kind and would be expected to know the accuracy of the information being imparted; whether the circumstances made it clear that the other party was acting in reliance on the agent, or intended to make its own inquiries. • The nature of the information: whether it is was the kind of information the agent would be expected to possess; whether it concerned a “hard physical fact” 80 admitting of only one answer and which should be within the knowledge of the agent, or alternatively, some matter that the agent was clearly not in a position to express a view about its veracity; and whether it was possible for the other party to independently verify it.

76

78 79

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. See also The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525 at 530-531 and Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 at 552-3, 556-8. John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249; and Havyn Pty Ltd v Webster (2005) 220 ALR 211 (Santow JA, with whom Tobias JA and Brownie AJA agreed). Havyn Pty Ltd v Webster (2005) 220 ALR 211. Havyn Pty Ltd v Webster (2005) 220 ALR 211 at [88]-[91].

80

Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,253 [87].

77

264

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.60]

• The character of the transaction: the more valuable the transaction the more likely the purchaser will make independent inquiries, engage other professionals to advise, and not rely on the information provided by the agent. • The contents of the disclaimer itself: the size, clarity, prominence and specificity of the disclaimer, and whether it was brought to the attention of the purchaser prior to entry into the transaction.

Part II: Assessing whether the conduct was misleading, or likely to mislead Context all important ...............................................................................................................................................................................................

The central concept in s 18(1), that of “misleading or deceptive” conduct, is not defined in the ACL. There are no specific categories of misleading or deceptive conduct although some guidance is provided in relation to representations about future matters by s 4(1) of the ACL. 81 In Google Inc, Hayne J stated: [11.60]

Analysis of the decided cases is not to be glossed over and obscured by attempting to identify particular species of misleading or deceptive conduct, attaching some general description to each (such as a “misrepresentation” case, an “advertisement” case or a “mere conduit” case) and then applying s 52 by fitting the case into one of those constructed categories. Analogical reasoning is important but analogies can be drawn only after understanding the full factual context in which it was held that s 52 did or did not apply. 82

In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 83 Gibbs CJ held: The words of s 52 require the Court to consider the nature of the conduct of the corporation against which proceedings are brought and to decide whether that conduct was, within the meaning of that section, misleading or deceptive or likely to mislead or deceive. Those words are on any view tautologous. One meaning which the words “mislead” and “deceive” share in common is “to lead into error”. If the word “deceptive” in s 52 stood alone, it would be a question whether it was used in a bad sense, with a connotation of craft or overreaching, but “misleading” carries no such flavour, and the use of that word appears to render “deceptive” redundant. The words “likely to mislead or deceive”, which were inserted by amendment in 1977, add little to the section; at most they make it clear that it is unnecessary to prove that the conduct in question actually deceived or misled anyone. 84

81 82 83

See [11.135]. Google Inc v ACCC (2013) 249 CLR 435 at 467-8 [102]. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.

84

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198.

[11.60]

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The conduct is of the prohibited kind for the purposes of s 18(1) of the ACL if “the conduct viewed as a whole has a tendency to lead a person into error”. 85 In deciding whether conduct is misleading or deceptive, regard must be had to the context in which that conduct took place. Conduct that is misleading in one context may not be so in another. 86 In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ stated: The conduct of a defendant must be viewed as a whole. It would be wrong to select some words or act, which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading. It is obvious that where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words. The same is true of acts. 87

Accordingly, the courts will undertake a very detailed analysis of the evidence, and each case turns on its own specific facts and context. This is a “quintessential question of fact”. 88 It is for this reason that Hayne J in Google Inc v ACCC warned about the dangers of extrapolating from decided cases: Because it is the statutory text which controls, there is no little danger in attempting to extrapolate from the decided cases to a rule of general application. No such rule can stand in the place of the statutory text. This is not to say that the decided cases are unimportant or that they do not contribute to the proper understanding of how the Act operates. But each case must be understood by reference to the statutory text and the particular facts that were identified as relevant to the application of that text. When considering what was said in the reasons for decision in a s 52 case, the description of the relevant conduct is as important as are the facts and circumstances identified as bearing upon whether that conduct was misleading or deceptive. 89

85

ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [39] (French CJ, Crennan, Bell and Keane JJ); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25] (French CJ).

86 87 88

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (McHugh J). Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [49]. For commentary on the tendency of the courts to undertake a very detailed analysis of the evidence and the purported representations see Rickett, “Some Reflections on Open-Textured Commercial Contracting” [2001] AMPLA Yearbook 374 at 378-379 and Stewart and McClurg, “Playing Your Cards Rights: Obligations of Disclosure in Commercial Negotiations” [2007] AMPLA Yearbook 36 at 51.

89

Google Inc v ACCC (2013) 249 CLR 435 at 467 [100]-[101].

266

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.65]

Misleading conduct: objective test ...............................................................................................................................................................................................

In determining whether conduct is misleading or deceptive under s 18 of the ACL, an important consideration will be the nature of the audience at whom it was directed. Early in the history of s 52 of the TPA it was held that conduct will be regarded as misleading or deceptive only if it misled or deceived (or is likely to mislead or deceive) members of that audience. 90 If conduct was not misleading in relation to the target audience, it did not contravene s 52 merely because it misled, or was capable of misleading, some other person to whom it may have been communicated, at least where this could not reasonably have been anticipated. 91 In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ stated: [11.65]

Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion by [sic] regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. 92

These principles were confirmed by the High Court in Campomar Sociedad Limitada v Nike International Ltd: It is in these cases of representations to the public … that there enter the “ordinary” or “reasonable” members of the class of prospective purchasers. Although a class of consumers may be expected to include a wide range of persons, in isolating the “ordinary” or “reasonable” members of that class, there is an objective attribution of certain characteristics. 93

In Telstra Corp Ltd v Cable & Wireless Optus Ltd, 94 Goldberg J thought that the “[t]he extremely stupid, and perhaps the gullible may well be excluded from the class”. 95 The class does not include those who fail to take reasonable care of their own interests. 96 Reasonable members of the class would take reasonable steps to look after their own interests. 90 91 92

Weitmann v Katies Ltd (1977) 29 FLR 336 (Franki J). Parkview (Keppell) Pty Ltd v Mytarc Pty Ltd (1984) 3 FCR 186 at 190-191 (McGregor J). Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. See also Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 371 [22] (French CJ and Kiefel J).

93

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [102] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ) (citations omitted).

94 95 96

Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478. Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 at [23]. See Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [105]; Cantarella Bros Pty Ltd v Valcorp Fine foods Pty Ltd (2002) ATPR ¶41-856 at [35]-[36] (Lindgren J).

[11.70]

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Role of intention ...............................................................................................................................................................................................

Intention was not a necessary element of the contravention of s 52 of the TPA. The section involved no questions of intent upon the part of the person whose conduct was in question. Thus, in Google Inc v ACCC, French CJ and Crennan and Kiefel JJ noted that: [11.70]

Section 52 is not confined to conduct which is intended to mislead or deceive. A corporation could contravene s 52 even though it acted reasonably and honestly. 97

In Butcher v Lachlan Elder Realty Pty Ltd, McHugh J stated: Section 52 looks at the conduct of a corporation and is concerned only with whether that conduct misled or was likely to mislead a consumer. It is not concerned with the mental state of the corporation. 98

However, intention is not entirely irrelevant. In Campomar v Nike the primary judge, Sheppard J, found that Campomar deliberately marketed the Nike Sports Fragrance products in order to take advantage of the goodwill and reputation of Nike International. 99 The High Court held, where there is a finding of intention to deceive, the court may more readily infer that the intention has been or in all probability will be, effective. 100 The same approach applies in relation to s 18 of the ACL. Conduct may be found to contravene s 18 of the ACL even though the respondent acted honestly and did not intend to mislead or deceive. On the other hand, where the respondent did intend to mislead or deceive, a court may more readily find that the conduct was misleading or likely to mislead. 101 In ACCC v TPG Internet Pty Ltd, the High Court majority stated: [W]here a representation is made in terms apt to create a particular mental impression in the representee, and is intended to do so, it may properly be inferred that it has that

97

Google Inc v ACCC (2013) 249 CLR 435 at 443. See also Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J) and Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 (Gibbs CJ).

98 99 100

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 634 [139]. Nike International Ltd v Campomar Sociedad Limitada (1996) ATPR ¶41-518 at 42,478, 42,480. Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [33] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). This principle has been applied in subsequent cases. See, eg, ACCC v Singtel Optus Pty Ltd (No 3) (2010) 276 ALR 102 where Perram J inferred that Optus intended its misleading advertising campaign to have a substantial impact in the broadband market, based on the amount of money which Optus spent on the campaign, and concluded that the effect of the campaign was substantial (at [16]-[17]). S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 at 361-363 (Hill, RD Nicholson and Emmett JJ).

101

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.75]

effect. Such an inference may be drawn more readily where the business of the representor is to make such representations and where the representor's business benefits from creating such an impression. 102

Two other areas where intention has a role to play are where the misleading conduct at issue consists of refraining from doing an act, 103 and where an applicant seeks to establish accessorial liability for misleading conduct. 104 Conduct directed at identified persons ...............................................................................................................................................................................................

The courts draw a distinction between conduct directed at particular individuals in a one-on-one situation and conduct directed at the public or a segment of the public. Where conduct is directed at identified persons, rather than the public at large, French CJ in Campbell v Backoffice Investments Pty Ltd, stated: [11.75]

In the case of an individual it is not necessary that he or she be reconstructed into a hypothetical, 'ordinary person'. Characterisation may proceed by reference to the circumstances and context of the questioned conduct. The state of knowledge of the person to whom the conduct is directed may be relevant, at least in so far as it relates to the content and circumstances of the conduct. 105

Where the conduct at issue consists of misleading pre-contractual representations such as those at issue in Butcher v Lachlan Elder Realty Pty Ltd, 106 directed at identified persons, then whether the conduct is misleading is to be assessed in relation to the individual applicants alone. According to the majority in Butcher's case: So here, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchasers, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known. Indeed, counsel for the purchasers conceded that the mere fact that a person had engaged in the conduct of supplying a document containing misleading information did not mean that that person had engaged in misleading conduct: it was crucial to examine the role of the person in question. 107

Thus, assessing whether conduct which consists of a representation made to a particular person is misleading or likely to mislead will be ascertained by reference to the context in which the parties are situated, and may involve a combination of subjective and objective assessments. The assessment of whether the conduct is likely to mislead proceeds by reference to what “a reasonable person in the position of the [representees], taking into 102

106

ACCC v TPG Internet Pty Ltd (2013) 304 ALR 189 at 198 [55] (French CJ, Crennan, Bell and Keane JJ) (Citations omitted). See [11.25]. See [12.175]–[12.195]. Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26]. See Miller, Miller’s Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.50]. Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.

107

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].

103 104 105

[11.80]

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account what they knew, would make of the [representor]'s behaviour”. 108 Thus, if the applicant claims to have been misled, the conduct will not contravene s 18 if a hypothetical reasonable person who possessed the applicant's knowledge of the surrounding circumstances would not have been misled by the conduct at issue. In Traderight (NSW) Pty Ltd v Bank of Queensland Ltd, 109 Barrett JA (with whom Bathurst CJ and Beazley P agreed) stated: It is the quality of the conduct in terms of capacity or tendency, objectively ascertained, that must be judged, not its actual impact on a particular person. Where… the conduct consists of a representation actively made to a particular person in a one-on-one situation, the quality of the conduct is to be ascertained by reference to the context in which the parties are situated, including such matters as their respective states of prior knowledge and understanding. It is within the whole of that context that the court must address the question whether the representation consists of a representation actively made to a particular person in a one-on-one situation, the quality of the conduct is to be ascertained by reference to the representee. The question whether the representee relied or acted upon the representation is irrelevant to that inquiry. 110

Commercial negotiations involving identified persons ...............................................................................................................................................................................................

Section 18 of the ACL applies to statements made in the course of private negotiations between commercial entities and is not limited consumer transactions. 111 The cases indicate that the courts place particular emphasis upon the whole context of the pre-contractual negotiations between the parties. In considering their effect of the conduct at issue on a reasonable person in the applicant's position the courts may take into account the following matters: [11.80]

• the character of the particular conduct by the respondent towards the aggrieved party; 112 • the nature of the dealings between the parties and what matters of fact each knew about the other as a result of their dealings; in particular, what discussions took place, at what times, and what documents were exchanged; 113 • the relative commercial experience of the aggrieved party; • the length of time over which the negotiations took place; and 108

112

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [50]. Applied in Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [69]. Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 (14 April 2015). Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [161]. See, eg, Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 at 50,880 (Gleeson CJ, Samuels AP and Meagher JA concurring). The same view was taken in Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 (Burchett J); General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 especially at 177-179 (Davies and Einfeld JJ); Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40,513 (Branson and Emmett JJ), and Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2011] FCAFC 119 at [111]-[115] (Gilmour, Jagot and Nicholas JJ). Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].

113

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].

109 110 111

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[11.85]

• any professional advice (valuation, survey, legal, or accounting) that the aggrieved party may have sought or received in coming to a decision whether to enter into the transaction. Conduct directed at the public ...............................................................................................................................................................................................

However, where misleading representations are not directed at identified individuals, but to the public generally and the relief sought is an injunction under ACL, s 232, it is necessary to determine who could fairly be regarded as its target. This may have been a segment of the public, or the public as a whole, and it is necessary to isolate some criterion or criteria of a representative member. 114 In Campomar Sociedad Limitada v Nike International Ltd, the majority, in a joint judgment stated: [11.85]

Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of that class. The inquiry thus is to be made with respect to this hypothetical individual why the misconception complained has arisen or is likely to arise if no injunctive relief be granted. In formulating this inquiry, the courts have had regard to what appears to be the outer limits of the purpose and scope of the statutory norm of conduct fixed by s 52. 115 (citations omitted)

Thus, where conduct is directed at the public, the class is first identified. Having identified the class, the effect of the conduct is assessed having regard to the reactions of the “hypothetical individual” – the ordinary, reasonable member of the class, not those of persons whose reactions are “extreme or fanciful”. 116 The test is an objective one. As Beach J observed in ACCC v Hillside (Australia New Media) Pty Ltd t/as Bet365, “[t]his hypothetical construct avoids using the very gullible or the highly astute to assess effect or likely effect”. 117 Knowledge base of a reasonable member of the class ...............................................................................................................................................................................................

The ordinary or reasonable consumer does not exist in the abstract, but depends on the specific context in which the public statement was made. The level of knowledge [11.90]

114 115

116 117

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [36]. Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [103] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). See also Google Inc v ACCC (2013) 249 CLR 435 at [6]-[9] (French CJ, Crennan and Kiefel JJ); Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett and Graham JJ); ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 at [14]-[15] (Gordon J); Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd (2008) ATPR ¶42-219 at [16] (Moore J); and ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 at [16]-[19] (Moore J). Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 86-7 [105]. See also Forrest v ASIC (2012) 247 CLR 486 at [49]-[50] (French CJ, Gummow, Hayne and Kiefel JJ). ACCC v Hillside (Australia New Media) Pty Ltd t/as Bet365 [2015] FCA 1007 at [70].

[11.90]

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to be imputed to a reasonable member of the pleaded target audience will be crucial for the obvious reason that the more sophisticated and knowledgeable the audience, the more difficult it will be to prove that a reasonable member of that audience would be likely to be misled or deceived by the statement at issue. In ACCC v TPG Internet Pty Ltd Murphy J stated that “[t]he degree of knowledge to be imputed to the class, and thus to the ordinary or reasonable consumer, is a matter of inference from the evidence”. 118 In misleading or deceptive conduct cases involving a statement directed towards a specific individual, the court may be assisted by receiving evidence pertaining to this issue from that person. Similarly, where the statement was directed towards a target audience of prospective purchasers, evidence of this nature may be given by members of that audience. For example, in National Exchange Pty Ltd v ASIC, 119 the Australian Securities and Investment Commission (ASIC) led evidence concerning the reactions of shareholders to the two dollar offers, two of whom were confused or misled at least temporarily. 120 As regards this evidence, Dowsett J stated: There is evidence that both Mr Locke and Ms Normoyle were at least temporarily misled by the offer. It is not clear whether this was as a result of the impact upon them of the format of the offer or as a result of their not giving sufficient attention to the payment provision. It would be wrong to place great weight on their having been misled. Further, there is no evidence of any substantial number of people having been mislead [sic]. 121

If evidence is led that members of the target audience have actually been misled by the public statement, the task of the court is to ascertain whether they were “reasonable” members of the target audience, or whether they were misled because they made assumptions that were extreme or fanciful. 122 In ACCC v Coles Supermarkets Pty Ltd Allsop CJ stated: Evidence that someone was actually misled or deceived may be given weight. The presence or absence of such evidence is relevant to an evaluation of all the circumstances relating to the impugned conduct. Where the conduct and representations are to the public generally and concern a body of simple direct advertising, the absence of individuals saying they were misled may not be of great significance. There was no such evidence here. The ACCC was criticised for that. That criticism is unfounded. The objective assessment of advertising using ordinary English words in an attempt to persuade can be undertaken without the lengthening of a trial by the bringing of 118

ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 at 44,686 [25].

119 120

National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000. ASIC led evidence that a third shareholder had also been confused or misled: National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at 48,712 [7] (Dowsett J). However, Dowsett J considered that it would be unfair to give that evidence any weight due to its ambiguity (at 48,716 [29]). National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at 48 719 [41].

121 122

AstraZeneca v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at 44 891 [37] (Wilcox, Bennett and Graham JJ), citing Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85-6 [104]-[105] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ).

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[11.90]

witnesses of indeterminate numbers. Language, especially advertising, seeking to raise intuitive senses and associations, can have its ambiguities and subtleties. The task of evaluating the objective character and meaning of the language in the minds of reasonable members of the public is not necessarily one that will be assisted in any cost-effective manner by calling members of the public. The question is one for the Court. 123

Identifying the attributes of the target audience is a crucial step in applying the test. Higher standards of accuracy are expected where members of the intended audience are naive, unsophisticated or impressionable. On the other hand, where members of the intended audience are sufficiently “tough, shrewd and sceptical” 124 they can, to a greater extent, be expected to look after their own interests and make their own judgments. Individual judges vary in their assessments of the ability of members of the target audience to assess the purport of the words used in the context the conduct as a whole. It is clearly an area where there is room for legitimate differences of opinion. 125 The target audience may be found to consist of sub-classes. One sub-class may have a greater awareness or knowledge of the way a particular industry operates than the other. If so, the conduct at issue is be tested by reference to its likely impact on a reasonable member of the unaware sub-class. In ACCC v Jewellery Group Pty Ltd, 126 the ACCC alleged that the respondent breached s 52 of the TPA by distributing catalogues with higher prices that were struck through with a line and next to that price was another lower price indicated as the sale price. Lander J accepted that the relevant class would have consisted of both persons who were aware of the discount culture in the jewellery market, and persons who were unaware of the discount culture. 127 His Honour focussed on the effect of the “strike through pricing” on the unaware members of the class, who would have thought that the strike through price was the actual price at which the jewellery item had been sold, rather than a negotiable price. The savings representation was false because the items had been sold at a price less than the strike through price because of the respondent's price negotiation policy. 128

123 124 125

126 127

128

ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634 at [45] citing Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202. Forrest v ASIC (2012) 247 CLR 486 at [105] (Heydon J). ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at 475-6. (Gyles J). See Corones, “Misleading Conduct Arising from Public Statements: Establishing the Knowledge Base of the Target Audience” (2014) 38 (1) Melbourne University Law Review 281. ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411. ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [36] adopting the reasoning of Mansfield J in ACCC v Ascot Four Pty Ltd (2008) 250 ALR 467 which was approved by the Full Federal Court in Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106. ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [38] and [152] applying Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106 at [43]-[49]. The decision was upheld by the Full Federal Court in Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144.

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Confusion or uncertainty ...............................................................................................................................................................................................

It is necessary to draw a distinction between conduct that is misleading or likely to mislead, and conduct that causes confusion or uncertainty. Conduct that has a tendency to cause confusion or uncertainty does not suffice to establish that it was misleading or deceptive within s 18(1) of the ACL. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 129 Gibbs CJ held: [11.95]

that to prove a breach of s 52 it is not enough to establish that the conduct complained of was confusing or caused people to wonder whether two products may have come from the same source. 130

In McWilliam's Wines Pty Ltd v McDonald's System of Australia Pty Ltd, 131 advertisements prepared for McWilliams, flagons of its wine were described by a journalist as “the Big Mac”. McDonald's sought an injunction to restrain this use of the words “Big Mac” on the ground that they contravened TPA, s 52 by falsely implying that there was a business connection between McDonald's and McWilliam's, or that they were engaged in a joint promotion. It succeeded at first instance. However, an appeal by McWilliam's was successful because the Full Court found that although readers of the advertisement may have been confused about the existence of a possible connection between the two firms, it would not actually mislead them into thinking that there was such a connection. In Taco Co of Australia Inc v Taco Bell Pty Ltd, Deane and Fitzgerald JJ said: Conduct which produces or contributes to confusion or uncertainty may or may not be misleading or deceptive for the purposes of s 52. In some circumstances, conduct could conceivably be properly categorized as misleading or deceptive for the very reason that it represents that confusion or uncertainty exists where, in truth, there is no proper room for either. Ordinarily, however, a tendency to cause confusion or uncertainty will not suffice to establish that conduct is of the type described in s 52. The question whether particular conduct causes confusion or wonderment cannot be substituted for the question whether the conduct answers the statutory description contained in s 52. 132

This was endorsed by the High Court in Campomar Sociedad Limitada v Nike International Ltd. 133 The distinction drawn in these cases is between misleading conduct and conduct which merely causes uncertainty or confusion. In practice, however, there will often be no sharp dividing line between the two. 129 130

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-199.

131 132 133

McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455. Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 201. Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at 87 [106]. See also Google Inc v ACCC (2013) 249 CLR 435 at 443 [8] (French CJ, Crennan and Kiefel JJ).

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[11.95]

Thus, for example, in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8), 134 Darrell Lea made significant use of purple in relation to packaging and point of sale displays. An expert witness for Cadbury, Dr Gibbs, gave evidence that in his opinion Darrell Lea's use of purple was likely to cause information-processing errors to occur among consumers of chocolate confectionery, including misidentification when consumers seeking to buy Cadbury chocolate mistakenly identify a Darrell Lea product as a Cadbury product, and therefore buy the Darrell Lea product by mistake. Heerey J concluded that these “information processing errors” did not amount to misleading conduct. His Honour held: Much of Dr Gibbs' opinions as to misinference and misassociation would seem to be examples of the “caused to wonder” reaction by consumers (and others such as employees and competitors). Insofar as they are, they would seem to raise matters outside the purview of the Trade Practices Act or the tort of passing off, even if they are matters of commercial concern to Cadbury. 135

In Bridge Stockbrokers Ltd v Bridges, 136 Lockhart J drew attention to the legislative policy behind s 52, namely to prevent the public being misled in a practical sense by the conduct of corporations and provided the following illustration where confusion may cross the dividing line and constitute misleading conduct: The corporation may deliberately produce and market the new brand of soap with a similar get-up, style and name to the already established soap for the purpose of increasing market share by confusing the public so that they are uncertain whether the two products come from the same source. The corporation would know that a not insignificant number of people would buy its product in those circumstances. It is not straining credulity too much, or indeed at all, to conceive of such a corporation, with ready access to competent marketing advice, planning its marketing strategy so that it could not be said that the public would think that the two products in fact came from the same source. But the corporation would know that, by stopping short of such conduct at the point where the public is merely confused or uncertain, it will nevertheless increase its sales and market share at the expense of the established product. In my view, the corporation is guilty of misleading or deceptive conduct within s 52. It is cheating. 137

In relation to s 18 of the ACL, the court must decide objectively whether the representations made are misleading or deceptive or likely to mislead or deceive. Evidence of the kind led in Cadbury Schweppes Pty Ltd v Darrell Lea from expert witnesses that members of the public are likely to be confused of caused to wonder will not suffice.

134

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 (11 April 2008).

135 136

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 (11 April 2008) at [88]. Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401.

137

Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401 at 415.

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Silence as misleading conduct: general principles ...............................................................................................................................................................................................

Whether silence amounts to “conduct” for the purposes of s 18 of the ACL is considered at [11.25]–[11.35]. Assuming that the definition of “conduct” in s 2 of the ACL can be satisfied, it is then necessary to consider whether the omission or withholding of information in a particular case was misleading. 138 In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, different approaches were taken for determining whether the conduct at issue was misleading. 139 One approach was to analyse whether the conduct viewed as a whole, conveyed a representation which was misleading. Another approach was to analyse whether the circumstances gave rise to a “reasonable expectation” that if some relevant fact existed, it would be disclosed to the person who claimed to have been misled. 140 French CJ and Kiefel J observed: [11.100]

Reasonable expectation analysis is unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation. A party to precontractual negotiations who provides to another party a document containing a false representation which is not disclaimed will, in all probability, have engaged in misleading or deceptive conduct. When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. 141

The facts of the case were that Consolidated Timber Holdings, a borrower, engaged insurance broker, Miller & Associates (Miller), to assist it in applying for an insurance premium funding loan with a lender, BMW. Miller supplied BMW with documentation which included a memorandum and certificate of insurance with HIH. BMW lent Consolidated a sum of money which Consolidated did not fully repay. The insurance policy was not a cancellable policy. A cancellable property policy provides a form of security for a lender because in the event of a default by the borrower, the lender can cancel the policy and recover the unused premium. BMW claimed that Miller engaged in misleading conduct on two different bases: first, that the HIH certificate falsely represented that the underlying policy was cancellable and good security for the loan, when it was not; and secondly, that Miller failed to disclose to BMW an unattractive feature of the policy (that it was non-cancellable) a feature that BMW was not aware of. As regards, BMW's first case, the majority (Heydon, Crennan and Bell JJ), concluded that the HIH certificate did not convey a representation that it was a cancellable 138 139

140 141

See Miller, Miller’s Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.85]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [19]. See McCabe, “When Silence Misleads, and When it Doesn’t?” (2011) 19 Australian Journal of Competition and Consumer Law 47 at 49-51. The genesis of the “reasonable expectation” approach is to be found in the judgment of Gummow J in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [23].

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[11.100]

policy. 142 As regards BMW's second case, the majority noted that BMW was known by Miller to be an “experienced premium lender” 143 and the parties were “commercially sophisticated”. 144 The majority held that Miller had not engaged in misleading conduct: Miller had supplied BMW with a copy of the policy. BMW was an experienced premium lender. The policy was not a lengthy document. It was apparent that it did not insure the holders against loss or damage to property. It did not contain a cancellation clause. Miller's failure to draw to BMW's attention a circumstance that the document itself disclosed was not misleading or deceptive. 145

French CJ and Kiefel J agreed with the majority that, the HIH certificate did not contain a false representation that it was a cancellable policy. 146 As regards BMW's second case, on a close analysis of all the circumstances of the transaction, their Honours held that BMW could not have had a reasonable expectation that Miller would disclose that the policy was not cancellable. A copy of the policy was provided to BMW and they simply failed to read it. 147 Their Honours observed: s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. 148

Commenting more broadly on the “reasonable expectation” test, their Honours observed: The language of reasonable expectation is not statutory. It indicates an approach which can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations. An example in the former category is non-disclosure of material facts in a prospectus. 149

The “reasonable expectation” test is predicated on the assumption that one party is aware of an undisclosed fact and the circumstances and context of the case give rise to an objectively reasonable expectation on the part of the other party that the fact should be disclosed because it would be relevant or material in its decision-making. The reasonableness of the alleged expectation is to be assessed objectively, and not be

142 143 144 145

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [87]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [85]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 384 at [91]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 386 at [96].

146 147 148

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [24]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [26]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Lyd (2010) 241 CLR 357 at [22]. See also Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [91]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [19]-[20].

149

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reference to the subjective expectation of the other party to the transaction. 150 All of the members of the High Court in Miller & Associates v BMW were of the opinion that the lender could not have had a reasonable expectation that the broker would disclose that the policy was not cancellable. 151 In Rhone-Poulenc, 152 and a number of subsequent cases, it was suggested that silence will amount to misleading conduct where there was a “duty” to disclose the information withheld. Subsequently, this situation was incorporated into a general proposition that silence will amount to misleading conduct where the surrounding circumstances give rise to a “reasonable expectation” on the part of the respondent that information would be disclosed. In Demagogue Pty Ltd v Ramensky, 153 Black CJ observed: Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of “mere silence” or of duty of disclosure can divert attention from that primary question. Although “mere silence” is a convenient way of describing some fact situations, there is in truth no such thing as “mere silence” because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed. 154

A reasonable expectation of disclosure may arise if the supplier inserts a term into a contract that is highly unusual or harsh from the consumer's perspective. A reasonable expectation of disclosure is less likely to arise in the case of agreements between two commercial parties of roughly equal bargaining strength, experience and commercial sophistication. It is important to note that silence or a failure to disclose highly unusual or harsh term may also demonstrate a lack of good faith, and be a relevant consideration for determining whether a supply or acquisition of goods or services fell within the prohibition of statutory unconscionability in s 21 of the ACL.

150

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20].

151

For a summary of the relevant principles, see Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209] (Sackville AJA) cited with approval by Barrett JA in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [192]. Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477. Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32. See Gillies, “Non-disclosure: Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653; O’Shea, “Undisclosed Unusual and Unexpected Matters – Liability Issues under s 52 of the Trade Practices Act” (2006) 14(1) Competition & Consumer Law Journal 1; McCabe, “When Silence Misleads, and When it Doesn’t?” (2011) 19 Australian Journal of Competition and Consumer Law 47 at 50.

152 153 154

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[11.105]

Silence as misleading conduct: commercial negotiations ...............................................................................................................................................................................................

In the context of commercial negotiations the courts have been reluctant to impose additional obligations of disclosure to those already imposed by the common law, such as where a fiduciary duty is owed to the other party, or where there is a sufficient relationship of proximity. 155 In Lam v Ausintel Investments Australia Pty Ltd, Gleeson CJ observed: [11.105]

Where parties are dealing at arm's length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not of itself impose any obligation on the first party to bring that information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonest or even sharp practice. 156 (emphasis added)

There is no need to impose additional burdens where the parties are of roughly equal bargaining strength and each party is capable of ascertaining the relevant information. The “more” to which his Honour refers applies to other circumstances which may give rise to a “reasonable expectation of disclosure”. In Miller v BMW Australia, French CJ and Kiefel J observed: In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52. 157

For example, in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd, 158 the New South Wales Court of Appeal held that there was no reasonable expectation by prospective franchisees that the Bank of Queensland (BOQ) would disclose information regarding business volumes achieved by existing franchisees. The Bank operated through corporate branches and agencies which from 2001 to 2003 were converted to franchises and became known as Owner Manager Branches (OMBs). Eleven OMB principals who operated OMBs in NSW sued BOQ for losses they claimed to suffer from entering into 155

157

See Gillies, “Non-disclosure: Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653 at 657-60; and Stewart and McClurg, “Playing your Cards Right: Obligations of Disclosure in Commercial Negotiations” (2007) Australian Mining and Petroleum Laws Association Handbook 36 at 36-8. Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 at 50,880 (Gleeson CJ, Samuels AP and Meagher JA concurring). The same view was taken in Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 (Burchett J); General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 especially at 177-9 and Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40,513. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20].

158

Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94.

156

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their respective franchise agreements. Barrett JA (with whom Bathurst CJ and Beazley P agreed) stated that the crucial question was whether the “course of dealing” by BOQ with each prospective franchisee was such as to give rise to an objectively reasonable expectation of disclosure. 159 His Honour found that no objectively reasonable expectation of disclosure arose that BOQ should volunteer the information that BOQ possessed about the actual financial performance of existing OMBs in NSW because “all OMB principals were persons of some commercial sophistication, all had business experience and most had specifically banking experience”, 160 and the OMB principals were told by BOQ that it was for them to investigate the feasibility and viability of their business proposal. 161 By way of contrast, in Fabcot Pty Ltd v Port Macquarie-Hastings Council 162 the Macquarie-Hastings Council was seeking to develop a parcel of land into a supermarket. The Council issued as an Expression of Interest (EOI) and conditionally accepted an offer from Woolworths, although the Council did not expressly state in the EOI process that it was negotiating with Woolworths exclusively. On 19 May 2009 the Council decided to negotiate with Coles for the sale of the Land. The New South Wales Court of Appeal held that the EOI process gave rise to a reasonable expectation by Woolworths that it would receive notification before the Council commenced negotiations with a third party. The following factors were held to be relevant in the “course of dealing” between the successful tenderer (Woolworths) and the Council as part of the Expression of Interest (EOI) process: • the nature of the EOI process and the fact that a single bidder was selected; • the Council's communication that it had conditionally accepted Woolworths' offer; and • the nature of the project and the fact the proposal accepted by the Council would require a substantial level of collaboration by the negotiating parties. 163 However, the EOI process did not give rise to an expectation that Woolworths would be entitled to notification for an indefinite period. 164 Once it became clear that there were “substantial impediments to the finalisation of an agreement,” 165 there was no longer any reasonable expectation that Woolworths was entitled to a period of exclusivity by reason of the EOI process. By 1 April 2009, serious issues remained unresolved. Sackville AJA stated: 159 160 161

163 164

Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [203]. Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [204]. Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [207]; Clifford v Vegas Enterprises [2011] FCAFC 135 at 144 and 226. Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 (Sackville AJA with whom Beazley JA and Campbell JA agreed). Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [223]. Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [225].

165

Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [227].

162

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[11.110]

A reasonable observer would have concluded at that point that in view of the urgency of completing a sale of the Land, the Council might well seek another negotiating partner and that Woolworths could no longer have an expectation that it would receive prior notice of the Council's intention to do so. 166

Thus, the Council had not engaged in misleading conduct on the 19 May 2009 when it decided to negotiate with Coles for the sale of the Land. Silence: making known specific transactional requirements ...............................................................................................................................................................................................

The circumstances or contextual factors that may be relevant in giving rise to a reasonable expectation of disclosure will now be considered. A reasonable expectation of disclosure is more likely to arise where one party, during pre-contractual negotiations, explicitly makes known a particular purpose or objective which that party is seeking to achieve, or specific transactional requirements by entering into the transaction. 167 In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, Heydon, Crennan and Bell JJ held: [11.110]

There was nothing in the conduct of the parties … to convey that cancellability was important to the determination of this later application. The request for guarantees suggested that it was not. There was no foundation for the conclusion that the known importance of cancellability gave rise to a reasonable expectation, in the circumstances of this transaction, that Miller would not supply the HIH certificate in response to BMW's request without disclosing at that time or later that the policy was not cancellable. 168

This factor has been held to be relevant in other cases. For example, in Whitaker v Paxad Pty Ltd, 169 a real estate agent acting in the sale of his mother's home and who had grown up in the home, had a thorough knowledge of its defects which included water drainage problems in the garage. The purchasers informed the agent that they wished to use the garage as a home office. The agent disclosed to the purchasers that the back shed contained asbestos, but made no mention of the drainage problems in the garage. Blaxel J held that in the circumstances, it was reasonable for the purchasers to expect that if the garage was not suitable for their disclosed intended use, the agent would have told them so. 170 Similarly, in EK Nominees Pty Ltd v Woolworths Ltd, 171 a property developer, EK Nominees, and the owner of a chain of supermarkets, Woolworths, commenced 166 167

168 169 170

Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [229]. For example, in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 583 and 587-588 (Brennan, Deane, Gaudron and McHugh JJ), where the appellants made clear to the respondent’s agent that their express purpose was to acquire a tenanted property that would generate a 10% return on their investment. The seller was found to have breached s 52 of the TPA for failing to disclose a collateral agreement with the tenant for a rent-free period that would prevent the 10% return being realised. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [95]. Whitaker v Paxad Pty Ltd [2009] WASC 47. Whitaker v Paxad Pty Ltd [2009] WASC 47 at 98.

171

EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172.

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negotiations for a lease that provided for construction of a supermarket on EK Nominees' land (the Auburn Road site). EK Nominees expended significant amounts obtaining development approval and preparing the land for development in anticipation of obtaining a formal lease with Woolworths. Subsequently, a third party developer (Markham Corporation) approached Woolworths with a superior development opportunity and Woolworths withdrew from the negotiations with EK Nominees. EK Nominees pleaded that Woolworths made two representations which were misleading. White J considered that Woolworths made an implied representation that it intended to enter into a lease on the terms and conditions contained in its approval letter of 18 July 2011, and that it was a continuing representation. 172 White J held: The relevant conduct is the advertent failure to disclose Woolworths' alleged change in intentions. It was Mr Hunt who deliberately made no disclosure of the approach of Markham Corporation or the implications that might have for the Auburn Road site. … If circumstances changed after the Property Committee's approval was given, so that a decision had to be made as to whether Woolworths should go ahead, that decision would be made by representatives of the Property Committee, which did not include Mr Hunt. Mr Hunt was not the person authorised to decide whether or not Woolworths should enter into an agreement for lease. 173

However, White J found: Woolworths' failure to disclose its changed position, whilst continuing to encourage E K Nominees to carry out work on the project, and continuing to negotiate terms of the agreement for lease, was conduct, in trade or commerce, which was misleading or deceptive, or likely to mislead or deceive. 174

By way of contrast, in Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd, 175 Mr Anderson had been shown premises in which he planned to store his collection of antiques and art works. During a pre-lease inspection of the building Mr Anderson observed sprinkler heads and formed the erroneous impression that the premises had an operational sprinkler system. Mr Anderson stated that the building had to be “airconditioned, waterproof and secure”, but said nothing about the need for fire protection. The trial judge found that Clambake had engaged in misleading conduct by failing to disclose that despite the visible sprinkler system, the premises did not have an operational fire protection system. On appeal, McLure P took into account that at no time during the inspection did Mr Anderson seek any information concerning the type of fire protection system in the building, and that Mr Anderson's erroneous impression had never been expressly or impliedly communicated to Clambake. 176 The appeal was upheld. 172 173 174 175

EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [139]. EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [147]-[149]. EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [156]. Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193.

176

Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [91].

282

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[11.115]

Silence: unusual or unexpected matters ...............................................................................................................................................................................................

The existence of something unusual or unexpected may give rise to a reasonable expectation of disclosure in the circumstances of a particular case. If the other party is unable to find out the true position by conducting searches of public records or making other inquiries, a reasonable expectation of disclosure is more likely to arise. Deliberately concealing the existence of the unusual or unexpected matter may amount to misleading conduct. For example, in negotiating the sale of a quantity of scrap metal copper a reasonable expectation of disclosure arose where the purchaser became aware that it may have been stolen, but did not disclose this suspicion to the vendor. 177 In negotiating the terms for a lease of premises for conducting a flying school, a reasonable expectation of disclosure arose where the lessor's agent knew that there had been a risk of contamination on the site. 178 In Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd, 179 Barrett J, the primary judge, found that a developer (Peninsula) had breached s 52 of the TPA by failing to disclose to a building contractor (Abigroup) the existence of an agency agreement pursuant to which a third company (the superintendent) was Peninsula's agent in all matters relating to the design and construction of the project. However, on appeal, 180 the New South Wales Court of Appeal held that the primary judge erred in his finding of misleading or deceptive conduct. Hodgson JA stated: [11.115]

In my opinion, for conduct to be misleading or deceptive, it must be such as is apt to mislead or deceive in some non-trivial respect; so that to make out a case under s 52, Abigroup needed to show that the non-disclosure of the project management agreement was apt to do just that. 181

There is nothing unusual or unexpected about undisclosed agency agreements. Generally, neither the principal nor the agent would engage in misleading conduct if the agent entered into a contract with a third party and failed to disclose the existence of the agency agreement. However, silence as regards the existence of a bid rigging arrangement may give rise to misleading or deceptive conduct. In Norcast SarL v Bradken Ltd (No 2), 182 a request for bids was made in the United States by Norcast S ar L (Norcast) in relation to its subsidiary, a Canadian company, Norcast Wear Solutions Inc (NWS). There was an arrangement between Castle Harlan Inc (a private equity investment firm) and Bradken that Castle Harlan Inc would bid for NWS and Bradken would not bid (the bidding provision). It was at least possible that Castle Harlan Inc and Bradken would have 177 178 179 180

Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 at 54,203-54,204 (Handley JA). Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 (Hoeben J). Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (2001) ATPR (Digest) 46-213.

181

Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 (Hodgson JA, with whom Mason P and Stein JA agreed). Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 at [54].

182

Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14.

[11.120]

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competed with each other to acquire the shares in NWS but for the bid rigging arrangement. Norcast alleged that Castle Harlan and Bradken engaged in misleading or deceptive conduct during the course of the NWS sales process. Norcast relied upon Bradken's silence about the bidding provision, the back-to-back sale arrangement with Castle Harlan and the fact that it and Castle Harlan were co-operating for the purpose of acquiring NWS. Gordon J found that Bradken took deliberate and deceptive steps: to prevent disclosure of its direct involvement in Castle Harlan's acquisition of NWS. In doing so, by its silence, Bradken represented that it was not involved in Castle Harlan's acquisition of NWS. That conduct was misleading and deceptive… Even in the absence of the Bid Rigging Arrangement, in all the circumstances, Bradken and Castle Harlan's silence constituted misleading or deceptive conduct in contravention of the ACL. Bradken further submitted that Bradken's silence was not misleading or deceptive in circumstances where Norcast knew that it was not uncommon for a private equity business to resell a company it had acquired. Norcast's general awareness of the likelihood that Castle Harlan might, at some time in the future, sell NWS cannot and does not cure Bradken's misleading or deceptive conduct by silence. 183

Bradken appealed against the decision, but the parties subsequently reached a settlement so that no appeal was required. The Full Court made orders setting aside the orders of the primary judge, but left intact the reasoning and legal and factual conclusions. Silence: subsequent change in circumstances ...............................................................................................................................................................................................

A failure to qualify a statement made earlier in negotiations which is no longer accurate because of a subsequent change in circumstances, or varying agreed terms, may give rise to a reasonable expectation of disclosure. In Gregg v Tasmanian Trustees Ltd, 184 it was held to be misleading for the respondent to ask the applicant to sign mortgage documents relating to her property without first informing her that the terms differed significantly from what they had agreed earlier. According to Merkel J: [11.120]

The fact that the mortgage departed in significant respects from the transaction agreed to by the respondent, gave rise to a reasonable expectation that the changes and their effect would be brought to the attention of the applicant. A failure to do so and remaining silent in the circumstances, in itself, can constitute conduct in contravention of s 52 … 185

It may be misleading or deceptive conduct not to correct a representation which was true when it was originally made but which later becomes false, or qualified in some way due 183

Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 at [317]-[318].

184 185

Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91. Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91 at 108. See also Finucane v NSW Egg Corp (1988) 80 ALR 486 (Lockhart J); Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J); and Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 at 54,203 [14] (Handley JA).

284

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.125]

to a subsequent change in circumstances. The common law rule that representations, once made, are treated as continuing beyond the time they are made, was applied in relation to the TPA. For example, in Wildsmith v Dainford Ltd, 186 the applicants purchased a unit off-the-plan on the basis of a representation that the balconies would have certain features substantially in accordance with the sketch in the contract. When constructed the balconies departed in significant respects from the sketch. Similarly, in Burg Design Pty Ltd v Wolki, 187 the applicant purchased a business (selling barbecued chicken) on the basis of representations by the respondent that it made “$130,000 a year by way of net profit”. Burchett J held that it was misleading to fail to correct the previous statements and accounts. The issue of failure to disclose subsequent changes also arose in Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd. 188 It was held to be misleading for MSDA not to qualify its pharmaceutical Product Information brochure for Vioxx once it was aware of the results of the subsequent VIGOR trial which demonstrated that the use of Vioxx increased the risk of heart attack. Jessup J did not hold that the initial Product Information was misleading. Rather, his Honour held that the misleading conduct was constituted by the failure to draw the attention of doctors and other health care professionals to the increased cardiovascular risk that emerged from the VIGOR study. Jessup J held: …MSDA's failure to provide any qualification to what was then contained in the Product Information did … amount to misleading information. 189

Silence: case examples ............................................................................................................................................................................................... [11.125]

Cases where a reasonable expectation of disclosure has arisen include:

• on the part of a purchaser, where the trading figures disclosed were accurate, but they misrepresented the true trading position; 190 • on the part of a purchaser, where the vendor knew that its major client, which represented almost two-thirds of its annual sales, had just had its Government funding reduced by 40% and future orders would be reduced in consequence; 191

186 187 188 189 190

191

Wildsmith v Dainford Ltd (1983) 51 ALR 24 at 31-34 (Smithers J). Burg Design Pty Ltd v Wolki (1999) ATPR ¶41-689 at 42,810 (Burchett J). Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 (Jessup J). Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 at 338 [904]. This finding was not challenged on the appeal. See CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193 (Branson, Stone and Edmonds JJ). See also Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 at [92] (Buss JA, with whom Wheeler JA and McClure JA agreed). Caffwy v Leatt-Hayter (No 3) [2013] WASC 348 (Beech J).

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• on the part of a purchaser negotiating the sale of a restaurant, where the vendor knew that the actual seating capacity differed from the licensed seating capacity; 192 • on the part of a purchaser, where the vendor's agent informed the purchaser that there was a proposal to lease the property in a certain manner when the agent knew that it could not be used in this manner without a local government permit which had not been obtained; 193 • on the part of a shopping centre developer negotiating terms for a lease, where the prospective anchor tenant failed to disclose that it had already decided not to take up a lease in the shopping centre; 194 • on the part of potential investors in a joint venture corporation, where one of the directors was an undischarged bankrupt; 195 and, • on the part of a prospective purchaser of a Pizza Haven restaurant, where the vendor failed to disclose that a Pizza Hut restaurant was opening nearby. 196 Cases in which no objectively reasonable expectation of disclosure has arisen include: • on the part of a purchaser, that a bank would disclose that the vendor's business was unprofitable because the bank was under a pre-existing duty of confidence to the vendor; 197 • on the part of a commercial borrower, that a lender will explain the intricacies of the financial system and the risk of loss; 198 • on the part of a building contractor, that a mortgagee would disclose that a property developer was facing insolvency and would not be able to pay for the work done; 199

192 193 194 195 196 197

198 199

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 (Lockhart J, Burchett and Foster JJ concurring). Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873 (Gray J). EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 (16 November 2006). Dawson v LNG Holdings [2008] NSWSC 137 (White J). Hardy v Your Tabs Pty Ltd [2000] NSWCA 150 (22 June 2000) (Heydon JA, with whom Meagher JA and Foster AJA agreed). Kabwand v National Australia Bank (1989) ATPR ¶40-950 (Lockhart, Hartigan and Hill JJ) and Finding v Commonwealth Bank of Australia [2001] 1 Qd R 168. The Banks were found not to have breached s 52 for failing to disclose information concerning the business or financial affairs of another client. In the absence of a fiduciary relationship to disclose matters regarding other clients there could be no reasonable expectation of disclosure in such circumstances because of the duty of confidentiality owed by a bank to a client. See also Advanced Switching Services Pty Ltd v State Bank of New South Wales [2007] FCA 954 (Rares J) and Ibrahim v Phan [2007] NSWCA 215, where the NSW Court of Appeal held that in the circumstances of that case there was no reasonable expectation of disclosure by a solicitor. Warner v Elders Rural Finance Ltd (1993) 113 ALR 517 at 522-523 (Hill J). Winterton Constructions Pty Ltd v Hambros Australia Ltd (1993) ATPR ¶41-205 (Hill J). A borrower is entitled to expect that his financier will keep confidential matters concerning the borrower’s financial affairs.

286

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[11.130]

• on the part of a lessor, that a prospective tenant had changed its intention to take up the lease where the correspondence made clear that either party was free to withdraw at any time prior to execution; 200 • on the part of a purchaser, that the vendor of a Service Centre for trucks and cars would disclose the past history or causes of fracturing in pavement bitumen which was unsuitable for heavy vehicles in the absence of specific questions raised by the purchaser; 201 • on the part of new franchisees, that the franchisor would share with them information that the franchisor possessed about the financial performance and business levels achieved by existing franchisees, when it had been made clear, both orally and in writing, that it was for the prospective franchisees to investigate the feasibility and viability of their own business proposal; 202 and, • on the part of a sports program supplier, that a customer was engaged in discussions with an alternative program supplier. 203 Literal truth ...............................................................................................................................................................................................

While a statement may be literally true or factually accurate, it may, depending on its context, create a misleading impression. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd, Stephen J held: [11.130]

[W]hat the Hornsby Centre has done is, in a sense, no more than to use its own corporate name in association with its activities. No doubt the meaning of the statutory prohibition which s 52(1) enunciates must be gained from the terms of the subsection itself; but nothing in those terms suggests that a statement made which is literally true, ie, that the centre at Hornsby is conducted by Hornsby Building Information Centre Pty Ltd may not at the same time be misleading and deceptive. It clearly may be. To announce an opera as one in which a named and famous prima donna will appear and then to produce an unknown young lady bearing by chance that name will clearly be to mislead and deceive. The announcement would be literally true but none the less deceptive, and this because it conveyed to others something more than the literal meaning which the words spelled out. 204

Similarly, in National Exchange Pty Ltd v ASIC, 205 it was held to be misleading or deceptive in contravention of s 1041H of the Corporations Act 2001 (Cth) for the appellant to compare the price it was offering to pay shareholders for their shares with the 200 201 202 203 204 205

BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2010] NSWSC 1352 at [254]-[256] (McDougall J). Mercland Investment Group Pty Ltd v Duncalm Pty Ltd [2012] FCA 183 at [117] (Edmonds J). Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [203]-[213] (Barrett JA, with whom Bathurst CJ and Beazley P agreed). Seven Network Ltd v News Ltd [2007] FCA 1062 (27 July 2007) (Sackville J). This finding was not challenged on the appeal. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 227-8. National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000.

[11.135]

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current market price without drawing attention to the fact that the purchase price it was offering would be paid by instalments over 15 years. Although there were no false statements in the offer document, it created the false impression that was likely to mislead members of the target audience. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, French CJ and Kiefel J observed: When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. In some cases it might not be necessary to invoke non-disclosure at all where a statement which is literally true, but incomplete in some material respect, conveys a false representation that it is complete. 206

Representations with respect to future matters ...............................................................................................................................................................................................

Section 4 of the ACL contains an important evidentiary provision which may assist an applicant in a claim based on s 18 of the ACL. Where the conduct at issue contains a representation as to a future matter, the person making the representation must adduce evidence that there were reasonable grounds for making the representation or it will be deemed be misleading. Section 4 of the ACL provides: [11.135]

(1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: 206

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [23].

288

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.135]

(a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

Section 4 of the ACL is based on s 51A of the TPA. 207 According to the Second Explanatory Memorandum: Section 4 of the ACL includes a provision that replaces section 51A of the TPA. It places an evidentiary burden on a defendant who is alleged to have made a representation as to a future matter that is misleading. When compared to section 51A, the new provision seeks to clarify that • the burden of proof under this section is evidentiary in nature and does not place a legal burden on defendants to prove that representations were not misleading; • satisfying the burden of proof under this section does not constitute a substantive defence for breach of any other section of the ACL; and • the section can operate in proceedings against accessories to contraventions as well as primary contraveners. 208

If the respondent adduces no evidence as to the existence of reasonable grounds for making the representations, ss 4(1) and (2) of the ACL operate to deem the representations to be misleading and contrary to s 18 of the ACL. 209 Adducing some evidence that tends to establish reasonable grounds for making the representation discharges the onus on the respondent/representor and eliminates the operation of the deeming provision in s 4(2) of the ACL. There will be no automatic deeming as there would be if the respondent adduced no evidence at all. When the respondent adduces evidence, it will then be a matter for the court to determine whether that evidence establishes reasonable grounds. 210 For example, in Bennett v Elysium Noosa Pty Ltd (in liq), 211 the applicant purchaser alleged that real estate agents had no reasonable grounds for making oral representations that a Community Centre would be completed in Stage 1 of a development. Reeves J found that the respondent (property developer) had adduced quite extensive evidence to avoid the deeming provision in TPA, s 51A(2) (now ACL, s 4(2)). 212 207 208

Duke, “Representations as to the Future under the Proposed Australian Consumer Law” (2009) 33 Melbourne University Law Review 454. Second Explanatory Memorandum, [2.22]-[2.26].

209

ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) [2015] FCA 25 at [94] and [102].

210 211

See McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 at [191]-[192] (Allsop J) and ALDI Stores v EFTPOS Payments Australia Ltd (2011) ATPR ¶42-371 at 44,319 (Jacobson J). Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [78].

212

Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [120].

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It was then a matter for Reeves J to assess under TPA, s 51A(1) (now ACL, s 4(1)), on all the evidence, whether he was satisfied on the balance of probabilities, that the property developer had reasonable grounds to make the representations it did. If it had reasonable grounds the representations would not be taken to be misleading. If it did not have reasonable grounds, the representations would be taken to be misleading. If the court was not persuaded either way, the applicant would fail because the onus of proof still rested on the applicant. 213 His Honour concluded that there were no reasonable grounds and the representations were misleading: This review of the evidence relating to the Community Centre building as at early 2005, when the Burkes made the representations about it, shows that it was a component of the Elysium Noosa development for which there was no development approval, no final plans or design drawings, no construction program, no reliable costings and no genuine commitment to it by the joint venture partners. 214

Section 4 of the ACL highlights the importance of preserving contemporaneous evidence that substantiates any representations made during pre-contractual negotiations or in advertising material. In relation to s 51A (now s 4, ACL) Heerey J stated in Sykes v Reserve Bank of Australia: 215 If there was a representation as to a future matter, s 51A requires the representor to show: • some facts or circumstances • existing at the time of the representation • on which the representor in fact relied • which are objectively reasonable and • which support the representation made. 216

The third proposition – a requirement that that the representor show that the grounds said to be reasonable were in fact relied upon by the representor at the time of making the representation – was not contained within the wording of s 51A. It was said to be “implicit” in the provision. 217 Whether the Sykes requirement is thought to be implicit in the language of s 4 of the ACL remains to be seen. 218 If a person intends to rely on s 4 of the ACL they ought to plead to that effect so that the person alleged to have made the representation as to a future matter has notice that they are required to adduce evidence to avoid the deeming effect of s 4(1) of the ACL. In SPAR Licensing Pty Ltd v MIS QLD Pty Ltd, 219 Foster J stated: 213 214 215 216

Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [120]. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [161]. Sykes v Reserve Bank of Australia (1998) 88 FCR 511. Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513. Sundberg J agreed.

217 218

Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94 at [85] (Mason P). See Eastwood, “Future Representations and the Grounds that May be Relied on to Establish Reasonableness” (2015) 89 Australia Law Journal 270.

219

SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50.

290

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.140]

In my view, a party who wishes to rely upon s 51A (or its equivalent in the Australian Consumer Law) should specifically plead its intention to do so in the first pleading where it is appropriate to do so. Although not bearing any ultimate onus of proof on the issue of reasonable grounds, the counter-party ought then be required to plead that it had reasonable grounds for making the relevant statement and to specify with particularity the nature of those grounds and, by way of particulars, the substance of the evidence it intends to adduce to establish those grounds. 220

Case examples: representations about future matters ...............................................................................................................................................................................................

In Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd 221 the Dib Group was a franchisor of services stations. The Chief Executive Officer was Mr George Dib. The plaintiff was a small lending business. It lent $100,000 to E-Style Marketing which operated three service stations as a franchisee and lessee from the Dib Group. E-Style was placed into receivership and the loan was not repaid. The plaintiff claimed that it was induced to make the loan on the basis of representations made by the Dib Group and Mr George Dib that were misleading. The plaintiff's case was based on positive representations that were alleged to be misleading: Mr Dib recommended E-Style as a suitable borrower. He represented that its owners were running a good business and would be suitable borrowers. Mr Dib also stated:

[11.140]

Short-term lending normally brings 20%. You will be helping us and we will be helping you… Nothing will go wrong, I assure you. It will be OK trust me. The Dib Group won't let anything go wrong.

Slattery J found that Mr Dib did encourage the plaintiff to invest in service stations sites franchised from the Dib Group by lending money to Dib Group franchisees and that such a conversation did occur. 222 His Honour held: The repeated emphasis at the time of these assurances on the role of the Dib Group and the role of Mr George Dib as the speaker and CEO of the Dib Group also support the inference that the defendants were representing that they would ensure that the proposed $100,000 loan would be repaid with interest. 223

These representations related to future matters and the case relied upon s 51A of the TPA. His Honour concluded: The defendants have not established that they did have reasonable grounds for making representations as to the future matters about which Mr George Dib assured Ms Ventouris.

220

221 222

SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 at [77] and O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 at 461–3 [15]–[21]). See McCabe, “Important Lessons on the Approach to Claims of Misleading or Deceptive Conduct that Involve Representations as to Future Matter” (2014) 22 Australian Journal of Competition and Consumer Law 215. Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 (13 September 2010). Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [23].

223

Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [88].

[11.145]

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The absence of evidence of reasonable grounds and evidence in this case compels the inference that the defendants engaged in misleading and deceptive conduct. 224

The New South Wales Court of Appeal confirmed that Mr Dib did not have reasonable grounds for making the relevant representations. 225 Section 18 of the ACL, and its predecessor s 52 of the TPA, have been used extensively in the context of representations made to potential investors about the future profitability of a business or investment. 226 Section 18 of the ACL, and its predecessor s 52 of the TPA, have also been used extensively in the context of representations made to potential purchasers about the facilities, uses and amenities that will be available when a property development is completed. 227 Contractual promises ...............................................................................................................................................................................................

Section 2(2)(a) and (b) of the ACL defines engaging in conduct to include “the making of, or giving effect to a provision of, a contract”. As a result, “making” a contract, as well as “refusing” to perform its terms, can amount to engaging in conduct for the purposes of s 18. A contractual promise about an existing matter of fact will contravene s 18 where the facts are not as promised and this misleads someone whom the promisor knew may rely on that promise. In such a case, the promise will convey a misrepresentation to that person and liability will arise for that reason. A promise may also contain an implied representation of existing fact, namely that the promisor has a present intention to make good the promise, or that the promisor has the means to do so. 228 In Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd, Lockhart and Gummow JJ observed: [11.145]

the making of a statement as to a presently existing state of affairs, if false, may be the engaging in misleading or deceptive conduct, where the statement is embodied as a provision of a contract. 229 224 225

228

Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [94]. Dib Group Pty Ltd v Ventouris Enterprises Pty Ltd (2011) 284 ALR 601; [2011] NSWCA 300 at [41]-[45] (Allsop P, with whom Macfarlan and Handley JJA agreed). ACCC v South East Melbourne Cleaning Pty Ltd (in liq) [2015] FCA 25; ACCC v Halkalia Pty Ltd (No 2) (2012) ATPR ¶42-399; Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199; ACCC v Oceana Commercial Pty Ltd (2004) ATPR (Digest) ¶46-244; Nescor Industries Group Pty Ltd v Miba Pty Ltd (1998) ATPR ¶41-609; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶50-239; Bateman v Slayter (1987) 71 ALR 553; Jelin Pty Ltd v Murdoch Pty Ltd (1985) ATPR ¶40-562; Gardiner v Suttons Motor (Homebush) Pty Ltd (1983) 48 ALR 142; Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114; Thompson v Mastertouch TV Services Pty Ltd (No 2) (1977) 29 FLR 270. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249; Havyn Pty Ltd v Webster (2005) 220 ALR 211; Bowler v Hilda Pty Ltd (1998) 80 FCR 191; Byers v Dorotea Pty Ltd (1987) ATPR ¶40-760; and Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451. Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536 at [49].

229

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505.

226

227

292

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[11.150]

This observation was endorsed by French CJ in Campbell v Backoffice Investments Pty Ltd, who stated: There is no reason in principle why the fact that a false statement is contained in a contractual document thereby takes the use of that statement in the document out of the scope of “misleading or deceptive conduct”. 230

Where the promise is about some future matter, assistance may be derived from s 4 of the ACL which is discussed at [11.135]. Where a contractual promise is about some future matter, the mere failure of the promisor to perform the promise will not constitute misleading or deceptive conduct. According to the Full Court in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd this is because: [T]he non-fulfilment of a promise when the time comes for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. 231

However, the promisor must adduce some evidence that tends to establish reasonable grounds for making the contractual promise to discharge the onus on the promisor and eliminate the operation of the deeming provision in s 4(2) of the ACL. In Digi-Tech (Australia) Ltd v Brand, 232 the New South Wales Court of Appeal held that a representation expressed as a belief that projected sales would be achieved or a belief concerning the potential profitability of products did not preclude it from having the character of a representation as to a future matter. 233 Expressions of opinion, law and legal rights ...............................................................................................................................................................................................

The early case law on s 52 of the TPA drew a distinction between expressions of fact and expressions of opinion. Having identified the impugned statement as an opinion, the court then inquired into the mental state of the maker of the statement to determine whether the opinion was honestly held, and also whether it was reasonable for the maker of the statement to hold that opinion. In Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd, the Full Court held that: [11.150]

An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is a basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing. 234 230

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 322 [35].

231

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88. See Miller, Miller’s Australian Competition and Consumer Law Annotated (37 ed, Lawbook Co, Sydney, 2015), [1.S2.18.90]. Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 (Sheller JA, Ipp JA and McColl JA).

232 233

Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at 54,241 [114]. See also Sydney Harbour Casino Properties Pty Ltd v Coluzzi (2003) ATPR (Digest) ¶46-238 at [24] (Mason P); Ting v Blanche (1993) 118 ALR 543 at 553 (Hill J); Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 514 (Heerey J) and 520-521 (Sundberg J).

234

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88.

[11.150]

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Something must have been misleading at the time the statement was made. An expression of opinion may be misleading if it implies a representation of an existing fact which is false. For example, the expression of an opinion may be accompanied by an implied representation that the speaker holds that opinion. In such cases liability for misleading conduct may well arise should that implied representation be false. 235 Thus, a reasonable reader of an expression of opinion would expect the person expressing the opinion to have a genuine and reasonable basis for making the statements, 236 or that it is based upon appropriate research. For example, in Bateman v Slatyer, 237 the respondents' representations concerning the cash flow of the business being sold to the applicants and their ability to afford it were found to contravene s 52 because no serious attempt had been made to establish a basis for the cash flow projection and the respondents could not have believed that the figures it used were soundly based. Similarly, in Thompson v Ice Creameries of Australia Pty Ltd, 238 a representation as to the suitability of a site for the establishment of an ice cream franchise was found to be misleading because there were no reasonable grounds for this opinion. As the speaker held himself out to be a leader in the industry, the representation conveyed not merely that he believed that the site was suitable but that, based on information available to him there were reasonable grounds for that belief. As there were no such grounds, s 52 was contravened. An incorrect statement of law or a statement about legal rights can constitute misleading conduct, but one needs to be cautious about reaching a conclusion that such a representation has been made. In ASIC v Fortescue Metals Group Ltd [No 5], 239 the issue was whether Fortescue Metals Group Ltd (“FMG”) and its Chief Executive Officer, Mr Forrest, had contravened s 1041H of the Corporations Act, which prohibits misleading conduct by a person in relation to a financial product or a financial service, by announcing to investors and potential investors in FMG shares in emphatic, unequivocal and unqualified terms that FMG had entered into “binding contracts” with Chinese state-owned entities, when, in fact, the contracts were not legally binding. 240 At first instance, Forrest and FMG were successful in the Federal Court, 241 but then they lost an appeal by ASIC to the Full Federal Court, which unanimously upheld the appeal. 242 On 235 236

237 238 239 240

Amadio Pty Ltd v Henderson (1998) 81 FCR 149 at 239 (Macaulay AJA, with whom Harper JA and Hansen JA agreed). Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88; James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J). Bateman v Slatyer (1987) 71 ALR 553. Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 at 40,693 (Lehane J). ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201, 341 [684] (Gilmour J).

241

Forrest v ASIC (2012) 247 CLR 486. See Humphrey and Corones,“Forrest v ASIC: A Perfect Storm” (2014) 88(1) Australian Law Journal 26. ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201.

242

ASIC v Fortescue Metals Group Ltd (2011) 190 FCR 364, at 504 [32].

294

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[11.155]

a further appeal, the High Court unanimously found that FMG and Forrest had not engaged in misleading or deceptive conduct. 243 French CJ, Gummow, Hayne and Kiefel JJ, in their joint reasons, did not think that the representations conveyed some message about legal enforceability: it is ultimately unprofitable to attempt to classify the statement according to some taxonomy, no matter whether that taxonomy adopts as its relevant classes fact and opinion, fact and law, or some mixture of these classes. It is necessary instead to examine more closely and identify more precisely what it is that the impugned statements conveyed to their audience. 244

Heydon J reached the same conclusion as the majority that FMG's statements were not misleading, but his approach differed from that of the majority. His Honour adopted the fact/opinion distinction. Heydon J considered that the existence of reasonable grounds to support an opinion had come to be expected in the pre-existing case law. Heydon J observed: It is also often said that to state an opinion which one does hold implies that one has reasonable grounds for holding it. In some circumstances that may be so, but why should it be so in all? Assume that two people are asked: “In your opinion, is that document a contract?”, one answers “Yes”, and the other answers “Yes, and I have reasonable grounds for that view”. The two answers are different. The first answer does not imply the second, unless there are special circumstances indicating that it should. 245

Heydon J cast doubt on the existence of a requirement that there be any grounds or reasonable grounds for an opinion: As noted above, the case which originated the fact/opinion distinction in this field offered no support for the requirement that there be grounds, let alone reasonable grounds, for an opinion if it were not to be misleading. … The matter calls for examination on some future occasion. 246

In some cases the conduct at issue may involve a combination of representations as to present fact, future matters and opinion. Where a business makes false or misleading claims about the past performance characteristics of its product, and predicted rates of future success in a comparative advertising campaign, it will be required to adduce evidence of reasonable grounds if the operation of s 4(2) of the ACL is to be avoided. 247 Information asymmetry ...............................................................................................................................................................................................

In cases involving information asymmetry, or where representors hold themselves out as having specialist knowledge or expertise, the court may find that a [11.155]

243 244

Forrest v ASIC (2012) 247 CLR 486. Forrest v ASIC (2012) 247 CLR 486 at 505 [33].

245 246

Forrest v ASIC (2012) 247 CLR 486 at 525 [102] (citations omitted). Forrest v ASIC (2012) 247 CLR 486 at 525 [103], citing Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88 (Bowen CJ, Lockhart and Fitzgerald JJ).

247

IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 at [67] (Judd J).

[11.155]

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reasonable member of the target audience may conclude that the representation conveyed not merely that the maker believed the claim, but also that there were reasonable grounds for that belief, or, in the case of scientific or medical claims, that there was an adequate scientific or medical basis for the claim. If there is no adequate basis to substantiate the claim it will be found to be misleading. In ACCC v Safe Breast Imaging Pty Ltd, 248 the respondent conducted a breast imaging business using a device known as a multi-frequency electrical impedance mammograph (MEM device). The respondent made a number of representations, including a representation that the MEM device could be used for assessing whether a customer was at risk from breast cancer and the level of that risk (the risk of cancer representation), and that imaging with the MEM device was a substitute for a breast cancer screening mammogram, such as ultrasound and magnetic resonance imaging (the substitute for mammography representation). Barker J found that the risk of cancer representation in the promotional materials “conveyed the representation that the MEM device could provide an adequate scientific basis for assessing whether a customer was at risk from breast cancer and if so, the level of such risk”. 249 Similarly, in ACCC v Breast Check Pty Ltd, 250 Breast Check published promotional pamphlets stating that its thermography devices for conducting breast imaging could be used for assessing whether a customer was at risk from breast cancer and the level of that risk. The ACCC also alleged that Breast Check's claim contained representation that there was an adequate scientific basis for using the thermography devices as a substitute for mammography. It was held that Breast Check had contravened s 53(c) of the TPA and s 29(1)(g) of the ACL. Barker J found: In the context of a representation of a medical nature …it would be entirely reasonable for a consumer to conclude that, where a service of a medical nature is being provided, there would be scientific medical evidence of a sufficient quality to support the use of the equipment used to provide such a service and that the use of breast imaging devices would not be promoted in a way as to be contrary to the state of scientific medical knowledge. 251

What constitutes an “adequate” basis was considered by Barker J stated: As to the question of the representation conveying that there is an adequate scientific or medical basis, I accept the submission made on behalf of ACCC that the word “adequate” should be taken in the sense by which it is generally understood. In the medical context that is that the service is provided according to evidence based medical knowledge and that there is sufficient support in medical science for the use of the

248 249 250

ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 (Barker J). ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 at [68]. ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479.

251

ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479 at [141].

296

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.160]

devices for the purposes represented. This is particularly so in the context of assessing whether or not a person may have or be at risk of breast cancer, which is clearly a question of medical science. 252

Finally, in ACCC v Homeopathy Plus! Australia Pty Ltd, 253 the respondent made representations on its website to the effect that there was a reasonable basis, in the sense of an adequate foundation, to enable it to state that its homeopathic treatments were a safe and effective alternative treatment to the whooping cough vaccine. It was found to have contravened s 18 and s 29(1)(a) of the ACL by representing that its homeopathic treatments were of a particular standard or quality, and s 29(1)(g) of the ACL by representing that its homeopathic treatments had a use or benefit. The court found that there was no reasonable basis, in the sense of an adequate foundation, in medical science to make such a representation. Perry J stated: In line with the lack of published evidence supporting the asserted effectiveness of homeopathic treatments for whooping cough, the consensus based on medical science is that homeopathic treatments are not an effective alternative to the whooping cough vaccine for the prevention of whooping cough. 254

In summary, the “real question” in a misleading conduct case is not the “mental state” of the maker of the statement, but the effect of a statement upon its audience – whether the statement is apt to mislead those to whom it is published. This in turn will depend on the knowledge base attributed to a reasonable member of the target audience. However, if the opinion concerns a future matter, the speaker must adduce some evidence that tends to establish reasonable grounds for holding it, in order to eliminate the operation of the deeming provision in s 4(2) of the ACL. Exclusion clauses ...............................................................................................................................................................................................

An exclusion exclude or exempt one occurred. Such a clause misleading conduct and [11.160]

252

clause refers to a provision of a contract which purports to party from liability for misleading conduct that has already will not normally break the nexus between pre-contractual the loss or damage suffered as a result of entering into the

253

ACCC v Breast Check Pty Ltd (2014) ATPR 42-479 at [139]. There is a line of authority that supports this approach. See Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88 (Bowen CJ, Lockhart and Fitzgerald JJ); James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J); and Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 at 40,693 (Lehane J). Cf Forrest v ASIC (2012) 247 CLR 486 at 525 [103] (Heydon J). ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412.

254

ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412 at [264].

[11.165]

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contract. For many years the courts have consistently recognised that as a matter of public policy, an exclusion clause should not be allowed to defeat the operation of s 18 of the ACL. 255 However, it may be possible to avoid liability of misleading conduct by means of a declaration of non-reliance. Where one party expressly acknowledges in writing that it has not relied on a representation that was misleading in deciding to enter into a transaction, the courts will take this into account in deciding the question of causation in relation to the cause of action for damages under s 236 of the ACL. 256 The issue is considered at [12.75].

Part III: Did the respondent’s conduct cause the alleged error or misconception? There must be a causal connection between the respondent's conduct and the applicant's alleged error or misconception. 257 In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd 258, Stephen J held that in order to determine whether there had been a contravention of s 52 of the TPA it was necessary to inquire whether there is a sufficient nexus between the conduct at issue, which may include refraining from doing an act, and the error that was alleged to have arisen. This was approved by a unanimous High Court in Campomar Sociedad Limitada v Nike International Ltd. 259 The respondent's conduct must cause or materially contribute to the applicant's misapprehension applying, inter alia, the “but for” test of factual causation. 260 The issue of whether the conduct caused or contributed to error suffered by the applicant is separate and anterior to the issue of whether the misleading conduct caused the claimed loss or damage said to flow from the misleading conduct as required by s 236 of the ACL. According to the French J (as his Honour then was), in Johnson Tiles Pty Ltd v Esso Australia Ltd: [11.165]

There must be a logical causal connection between the conduct and some hypothesised error. But not every case involving a logical connection between conduct and alleged 255

256 257 258

See Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 at 561 (Lockhart J); Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR ¶41-043 at 51,590 (Burchett J); Burg Design Pty Ltd v Wolki (1999) 162 ALR 639; Bowler v Hilda Pty Ltd (1998) 80 FCR 191 (Heerey J); Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd (2005) ALR 134 at 147-8 (Steytler P, with whom McLure and Pullin JJA agreed); CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 (1 April 2010) (Beazley, Basten and Young JJA). See Miller, Miller’s Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.95]. Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 321 [31] (French CJ). See also IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 at 480. Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26] (French CJ).

259

Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J). Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 83-4 [98].

260

Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at 209 [67] (McLure P).

298

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[11.165]

error will result in the conduct being regarded as misleading or deceptive for the purposes of s 52. There is an evaluative judgment involved. As the Full Court said in SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 14: The characterisation of conduct as “misleading or deceptive or likely to mislead or deceive” involves a judgment of a notional cause and effect relationship between the conduct and the putative consumer's state of mind. Implicit in that judgment is a selection process which can reject some causal connections, which, although theoretically open, are too tenuous or impose responsibility otherwise than in accordance with the policy of the legislation. By way of example, it might be said that, strictly speaking, a causal connection exists between conduct and error where the error is based upon erroneous assumption derived from but not logically justified by the conduct. The conduct will not ordinarily be treated on that account, as misleading or deceptive in such a case. 261

In Sutton v A J Thompson Pty Ltd (in liq), 262 the Full Federal Court referred to the principles of law relating to the common law action of deceit as expressed by Wilson J in Gould v Vaggelas. 263 These, the court held, were equally applicable to breaches of s 52 of the TPA. 264 According to the first of these principles, if a representation is false and fraudulent, and the representee does not rely upon it, the representee has no case. The Full Federal Court stated in relation to s 52 of the TPA: Similarly, if a person is so determined to enter into a contract that he is not in truth influenced by some false representation made to him, he clearly has no case. 265

The need for a causal connection of this nature means that where the evidence reveals that a statement or representation was made by the respondent it will not contravene s 18 where the applicant's error or misconception was attributable to: • an erroneous assumption on the part of the applicant; 266 or • the applicant relying on representations or conduct of a third party; or • the applicant relying on his or her own assessment of the situation, rather than on the representations or conduct of the respondent.

261 262 263 264

Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR ¶41-794 at [42,547]. Sutton v AJ Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 46,607 (Forster, Woodward and Wilcox JJ). Gould v Vaggelas (1984) 56 ALR 31 at 46. Sutton v AJ Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 46,606.

265 266

Sutton v AJ Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 46,607. McWilliams Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455 at 464 (Smithers, with whom Northrop J generally agreed). See also Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 203-4 (Mason J) and Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200 (Deane and Fitzgerald JJ).

[11.170]

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Part IV: Advertising: general principles Introduction ...............................................................................................................................................................................................

Misleading advertising can be a major source of consumer detriment. The OECD, in its Consumer Policy Toolkit, defines consumer detriment broadly to include financial detriment and non-financial detriment. 267 It may take the form of structural detriment or personal detriment. Structural detriment arises where misleading advertising increases demand for one product over a rival's product even though it may be inferior to the rival's product. 268 Personal detriment focuses on consumers' experiences once a product has been purchased, and includes stress and disappointment: [11.170]

The disappointment and the monetary and time losses that a consumer experience after purchasing and using a weight loss product that fails to deliver on its advertised promise are examples of such detriment. In addition to money and time costs, personal detriment includes negative psychological impacts such as stress. 269

Advertising has been the subject of action by individual consumers, the ACCC (on behalf of consumers generally) and rivals of the firm advertising to ensure that it was accurate and did not mislead consumers. 270 The ACCC has stated that truth in advertising is a current priority enforcement area, “particularly where misleading claims are made by large businesses with the potential to result in significant consumer detriment, or where conduct is likely to become widespread if the ACCC does not intervene”. 271 The ACCC has been particularly active in relation credence claims made in food labelling. However, most actions have been initiated by rival firms which face a loss of revenue and market share arising from misleading advertising. The general principles for determining when an advertisement is misleading or deceptive in contravention of s 18 of the ACL are set out at [11.60]-[11.165]. Of particular importance is the principle that each case needs to be determined on its own particular facts and context, so that decisions reached in similar cases in the past can only ever provide guidance and cannot determine the outcome of a new case. 272 In relation to advertisements the courts pay particular attention to the following matters: • the attributes of the target audience; 267 268 269 270 271 272

See OECD, Consumer Policy Toolkit, (OECD, Paris, 2010), pp 12 and 52. See Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 at 43,185-6. OECD, Consumer Policy Toolkit, (OECD, Paris, 2010), p 53. See Miller, Miller’s Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.155]-[1.S2.18.205]. See ACCC Compliance and Enforcement Policy (February 2015), p 4. See, eg, ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 (Gyles J); Singtel Optus Pty Ltd v Telstra Corp Ltd [2004] FCA 859; ACCC v Commonwealth Bank of Australia (2003) 133 FCR 149; Cassidy v Medical Benefits Fund of Australia Ltd (2002) ATPR ¶41-892 (Hill J); on appeal, Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 (Stone J with whom Moore and Mansfield JJ agreed); and ACCC v Target Australia Pty Ltd (2001) ATPR ¶41-840 (Lee J).

300

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[11.170]

• the need to consider the entirety of the advertisement rather than considering some words in isolation; • the nature of the product being promoted; and • the medium used to convey the advertisement; and • any qualifying statements or disclaimers. The general principles to be applied in the context of advertising are usefully summarised by Judd J in IDP Education Ltd v Lejburg Pty Ltd: Conduct is misleading or deceptive if it has a tendency to lead into error, although there must be a sufficient causal link between the conduct and the error on the part of the relevant class exposed to the conduct. Consideration of conduct under inquiry should not involve a dissection, or line by line analysis. The conduct should be considered as a whole, in its proper context. Context will include the market to which the conduct is directed, the nature of the product being promoted and the characteristics of those in the particular market to whom the promotion is directed. Regard must also be had to qualifying statements, disclaimers or explanations. A contravention of ss 18 or 29 of the Australian Consumer Law does not depend upon the intention or belief concerning the accuracy of the facts stated, but upon whether the statement conveys a meaning that is false or misleading. When the impugned conduct involves statements made in a public forum, such as the internet, regard must be had to the effect of the statements or representations on ordinary or reasonable members of the class of prospective purchasers. The dominant message of promotional or advertising material will be of crucial importance. The advertising or promotional material must be considered as a whole, rather than straining at the meaning of critical words and phrases. The first impression conveyed by promotional material is often that which creates the greatest impact on the member of the class to which it is directed. 273

Because most advertising is directed at the public at large or a particular segment or group of the public, the test of what is misleading or likely to mislead is an objective one for the court, the outcome will depend first, on the characteristics or attributes of the target audience at whom the advertisement was directed; and secondly, on the views of the particular judge as to how an ordinary, reasonable member of the class is likely to respond to the advertisement. As a result, an advertisement which may be misleading or deceptive when directed towards one audience may not be so were it directed towards another. This can give rise to legitimate differences of opinion, as Gyles J observed in ACCC v Telstra Corporation Ltd: Reading the numerous cases in this field makes it perfectly apparent that individual judges vary considerably in their assessments of the effect of advertising. Some take a robust view and credit consumers with a fair amount of cynicism about advertisements and a fair amount of ability to make their own judgments. Others are convinced of the power of advertisements and are protective of the consumer. Neither side is right or wrong – it is a matter of opinion. 274 273

IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 at [56]-[59] (citations omitted).

274

ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at 475-6.

[11.175]

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Knowledge base of the target audience ...............................................................................................................................................................................................

Advertisements are directed at the public generally or a segment of the public that acquires the particular goods or services being advertised. As a first step, it will be necessary to determine the knowledge base of the class of consumers at whom it is directed. This will involve considering such matters as their age, geographical location, sophistication, unusual predilections (if any) and familiarity with the subject. Generally speaking, higher standards of accuracy are expected in connection with advertisements directed towards unsophisticated or impressionable audiences such as children or teenagers. For example, in M K Hutchence (Trading as INXS) v South Sea Bubble Co, 275 applicants were members of a pop group known as INXS. As well as performing, they also merchandised goods, including T-shirts, using their name. The respondents manufactured and sold T-shirts which were copied from those authorised by the applicants. A small sign at the stalls selling these products indicated that they were not authorised. The applicants sought orders restraining the respondents from dealing with these T-shirts on the ground, inter alia, that their conduct contravened s 52 of the TPA. In identifying the target audience, Wilcox J held: [11.175]

In the present case the section of the public likely to be affected by the sale of T-shirts bearing the names of, or symbols relating to, INXS is the body of people who enjoy the music of that group: the people who attend their concerts, purchase their records and/or listen to their music on the radio or on television. Bearing in mind the notorious fact that the proportion of persons in any given age group who are rock enthusiasts tends to diminish with increasing age, it is reasonable to assume that a major proportion of INXS followers are teenagers or persons in their twenties. There is no reason to assume otherwise than that, in intelligence and educational attainments, INXS followers will represent a fair cross-section of the community. 276

Advertising directed at a smaller, professional target audience arose for consideration in Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd. 277 The advertisements and flyers were placed in Australian Doctor, a professional publication directed at general medical practitioners by Glaxo to promote the prescription by general practitioners of Glaxo's drug, “Seretide”. Glaxo claimed that virtually all or a majority of asthma patients would achieve total control of their symptoms if Seretide was prescribed. The flyers and the advertisements were headed, “Seretide TOTAL CONTROL*”. The asterisk, referred to the findings of “The Gaining Optimal Asthma Control Study” (GOAL study), according to which, only 41% of patients achieved total control and 71% achieved substantial relief from using Seretide. The appellant, another pharmaceutical company, took exception to the representations made in the advertisements. The primary judge dismissed the appellant's application. The appellant argued that the references to the GOAL study were 275 276

M K Hutchence (Trading as “INXS”) v South Sea Bubble Co (1986) ATPR ¶40-667. M K Hutchence (Trading as “INXS”) v South Sea Bubble Co (1986) ATPR ¶40-667 at 47,376-7.

277

Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106.

302

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[11.180]

deficient in that they failed to point out that the GOAL study did not include patients with significant concomitant diseases, smokers and patients below 12 years of age. The Full Court held that the representations contained in the advertisements and flyers were not made to identified individuals, nor were they made to the public at large. 278 The section of the community towards whom the conduct had been directed was the community of general practitioners throughout Australia: The task of the Court is to determine whether any misconceptions or deceptions alleged to arise or to be likely to arise from the conduct complained of are properly to be attributed to the ordinary or reasonable members of the section of the community towards whom the conduct has been directed. The Court may disregard assumptions drawn by persons to whom the conduct is directed, where those assumptions or their reactions are extreme or fanciful … 279

“Seretide TOTAL CONTROL” was nothing more than an alternative brand name and the elucidator was effective to clarify the extent of the control that was achievable using Seretide. After carefully considering each of advertisements and flyers in their entirety, the Full Court agreed with the primary judge that they were not misleading. None of the advertisements or flyers represented that the GOAL study patients were representative of the community at large; the footnotes clearly indicated that the study was based on the observations of “3,416 patients with uncontrolled asthma” and no more. 280 Puffery or exaggeration in advertising ...............................................................................................................................................................................................

“Puffery” refers to exaggeration in the course of advertising with a view to attracting customers. Section 18 of the ACL does not prohibit the expression of exaggerated opinions, or the making of grandiose claims in advertising, where the audience to whom they are addressed could not reasonably be misled by them. Thus, in Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd, Lockhart J said: [11.180]

a robust approach is called for when determining whether television commercials of this kind are false, misleading or deceptive. The public is accustomed to the puffing of products in advertising. 281

However, the courts will carefully scrutinise claims based on “puffery”. If the representation is one of specific fact that is false, it will not be dismissed as puffery. In Eveready Australia Pty Ltd v Gillette Australia Pty Ltd, Lindgren J found: the words “lasts up to four times longer” hold out to the viewer that Duracell batteries do offer a meaningful advantage over competing brands. The specificity of those words is inconsistent with the nature of advertising puff. To my mind it is misleading and 278

Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [35] (Wilcox, Bennett and Graham JJ).

279 280 281

Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37]. Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [48]. Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307 at 311. See also Lymquartz v 2 Elizabeth Bay Road [2007] NSWSC 457 at [183] (Biscoe AJ).

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deceptive to appear to a reasonable television viewer to be saying something meaningful on which the viewer is invited to rely as a basis for action…. 282

Medium used to convey the advertisement ...............................................................................................................................................................................................

Corporations advertise their goods and services on the radio and television, in newspapers and in brochures distributed to clients and prospective clients and more recently, on social media sites. Questions sometimes arise as to whether any significance should be placed on the choice of medium. In ACCC v TPG Internet Pty Ltd, 283 the High Court emphasised the importance of the context in which the advertisements were broadcast and contrasted it with the context in which the alleged misleading conduct arose in Parkdale v Puxu. The High Court majority stated: [11.185]

TPG's target audience did not consist of potential purchasers focused on the subject matter of their purchase in the calm of the showroom to which they had come with a substantial purchase in mind. Here, the advertisements were an unbidden intrusion on the consciousness of the target audience. … [W]hile the attention of the audience might have been arrested, it cannot have been expected to pay close attention to the advertisement … 284

A distinction is drawn between radio, television and cinema advertisements which are fleeting or ephemeral forms of advertising, and newspapers, magazines and brochures which are static forms of advertising and allow for a more considered approach to understanding the representations contained in the advertisements. A distinction is also made between static forms of advertising and internet advertising. In ACCC v Jetstar Airways Pty Ltd, 285 Foster J found that the impugned conduct was not the same as advertising in print and radio and television broadcasts, and that the relevant target audience was not the public at large as the ACCC contended, but a narrower class consisting of members of the public who had internet access and possessed some level of knowledge and experience in navigating the internet and using online booking services, including an understanding of the use of hyperlinks to navigate particular websites. 286 This finding was crucial to his Honour's ultimate finding that, while in the case of Jetstar the website representations in May 2013 were misleading and contrary to ACL, ss 18 and 29(1)(i), 287 the disclosures made in 2014 were adequate and not false or misleading. 288 Prior to the High Court's decision in ACCC v TPG, the significance of the medium used to convey the advertisement was considered by the Full Federal Court in Medical 282 283

Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (2000) ATPR ¶41-751 at 40,694. ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640.

284 285 286 287

ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at 654 [47] (French CJ, Crennan, Bell and Keane JJ). ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263. ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [168]. ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [181].

288

ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 at [186].

304

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.185]

Benefits Fund of Australia Ltd v Cassidy. 289 MBF commissioned an advertising agency to produce a series of television, print and railway billboard advertisements for its private health insurance products. The advertisements presented the image of a pregnant woman and contained a representation that MBF would waive private health insurance waiting periods. In the television advertisements the following statement appeared at the bottom of the screen for less than five seconds: “12 month waiting periods such as pre-existing conditions and obstetrics still apply”. The Full Federal Court held: Even an astute and observant viewer may not have had sufficient time to peruse the fine print with sufficient care to notice the qualification and it is not unlikely that even a reasonably careful viewer might have been misled … the disproportion in both the television and billboard advertisements between the dominant representations and the qualification of those representations was such that the qualification was insufficient to draw the attention of prospective customers to the fact that a waiting period applied for obstetrics claims. It is the entire effect, particularly the first impression, that makes the advertisements misleading. 290

However, it was held that the print advertisements were not misleading as the qualifying statement could more readily be viewed in that context. In ACCC v Telstra Corporation Ltd, 291 Telstra placed various advertisements using the expression “$0*” and “$0 upfront” to promote the sale of handsets and mobile telephone services in newspapers and brochures. Particular handsets that a subscriber might acquire under the Phone Option were promoted in the brochure with the expression “$0*” displayed prominently alongside a picture of each. The asterisk (*) symbol referred to additional information displayed in fine print in a footnote at the bottom of each relevant page. The ACCC alleged that these expressions contravened ss 52 and 53(a) and (g) of the TPA with respect to the price of the relevant handset, because it amounted to a representation that the handset could be obtained at no extra cost. Gyles J concluded that the expression “$0*” was misleading because the telephone service could be obtained without the mobile phone for significantly less than the ultimate cost of the bundled price, so an amount must have been attributed to the handset. 292 On the other hand, the expression “$0 upfront” was not misleading as the plan did not require an initial payment. 293 As regards the significance of the medium used to advertise the handset and telephony services, his Honour observed: The newspaper advertisement and the brochure are different media and, to an extent, would be read differently. The newspaper advertisement would have a wider and more random circulation and would tend to be more ephemeral. It would tend to catch the eye and raise interest rather than lead to a decision as to purchase. The brochure would 289 290 291 292

Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 17 [36]-[37]. Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 18 [40]-[41]. ACCC v Telstra Corporation Ltd (2004) 208 ALR 459. ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [54].

293

ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [54].

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be more likely to be picked up and read by those with a closer interest in acquiring a phone and closer to the time of making a decision. It is more likely to be taken away and read with some care. 294

The significance of the medium used to display the advertisement was also considered by Perram J in ACCC v Singtel Optus Pty Ltd (No 1). 295 In that case, the advertising campaign was conducted using five different media: television, online, metropolitan and local newspapers, billboards, and direct marketing with flyers. Perram J observed: Each form of medium, of course, presents its own subtleties in terms of gauging whether an advertisement is misleading or not. Less attention is generally paid by the public to a billboard commercial than to a television commercial and that kind of commercial, in turn, generally receives less attention from consumers than do some online commercials. These general observations have some truth, however, only because people do not stare at computer screens in quite the same way in which they stare at television screens and also because most people do not stare at billboards at all. Generalisations in this field are, however, difficult to justify because the nature of any particular advertisement is such a significant variable in the calculus of deception. Some television commercials are quite transfixing and, by the same token, many online advertisements are tedious and are readily ended with a simple click. The central principle is that each advertisement must be considered in the context of the medium in which it is expressed taking full cognisance of the different consumer experiences arising with different media. Much beyond that it is difficult to go. 296

Qualifying statements and small print disclaimers ...............................................................................................................................................................................................

Where an advertisement consists of a dominant message in a bold headline statement with a small print footnote that attempts to disclaim, limit, or qualify the dominant message the courts adopt a two-stage approach in assessing whether there is a real rather than a remote chance that a reasonable member of the target audience will be led into error. 297 The first stage is to identify what representations are made by the advertisement in its dominant message to the intended audience. The second stage is to determine whether the corrective information was sufficiently prominent to dispel the [11.190]

294 295

ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [52]. ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 1177 (29 October 2010).

296 297

ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 1177 at [5]. See ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [20], [40] and [45] (French CJ, Crennan, Bell and Keane JJ); ACCC v Signature Security Group Pty Ltd (2003) ATPR ¶41-908 at 46 538-9 [26]-[27] (Stone J); Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 17-18 [35]-[39] (Stone J), with whom Mansfield J agreed: at 11 [17]. Both of these cases are authority for the principle that the qualifying material must be sufficiently prominent or conspicuous to prevent the headline statement from being misleading. See also ACCC v Telstra Corporation Ltd (2004) 208 ALR 459, 475-8 [49]-[62] (Gyles J); ACCC v Singtel Optus Pty Ltd [2010] FCA 1177 (29 October 2010) at [28][29] (Perram J); National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at 48 724-5 [48]-[59] (Jacobson and Bennett JJ); ACCC v Panasonic Australia Pty Ltd (2010) 269 ALR 622, 631-4 [43]-[58], where Mansfield J held that it was misleading to publish promotional material informing the purchasers of television sets that they would receive a “Bonus Wii”, but failed to convey the fact that matters outside the control of the purchaser (such as the delivery time for televisions paid for at a retail store) could disqualify the purchaser from receiving the Bonus Wii.

306

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[11.190]

false dominant message. Accurate information in a footnote may not remedy a false headline statement because a reasonable consumer may glance only at the headline. The issue in ACCC v TPG 298 was the effectiveness of small print elucidators to clarify a bold headline statement in a television advertisement. This will depend on the all the surrounding circumstances but especially the medium used to convey the advertisement, and whether it allows a reasonable member of the target audience the opportunity to carefully consider the advertisement in its entirety. The ACCC was successful in the Federal Court at first instance, with the primary judge finding that an ordinary or reasonable member of the target audience would not have assumed that ADSL2+ services were bundled when this was not immediately apparent, and that the “dominant message” of the advertisements was that the entire cost of the service was only $29.99 per month. 299 The ACCC lost an appeal by TPG Internet Pty Ltd (“TPG”) to the Full Federal Court. The Full Federal Court held that a reasonable consumer would have read the advertisement in its entirety, not just the dominant message, and that the bundling condition could not have been missed except on a “perfunctory” viewing or listening. 300 The High Court majority upheld the ACCC's appeal and agreed with the primary judge that TPG's advertising stratagems were misleading. 301 The Full Court (Jacobson, Bennett and Gilmour JJ) rejected the primary judge's two-stage approach of first identifying the dominant message and then examining whether the corrective information was effective to dispel the misleading dominant message. In their joint reasons, their Honours stated that there was only one question, and that was “whether … the ordinary or reasonable consumer would be led into error by the advertisements, read or viewed as a whole, in their full context”. 302 The High Court majority (French CJ, Crennan, Bell and Keane JJ) held that the Full Court erred in two respects: first, the Full Court erred in holding that the primary judge was wrong to place importance on the dominant message of the advertisements; and secondly, the Full Court erred in considering that the tendency of TPG's advertisements to mislead was neutralised by the Full Court's attribution of a higher level of knowledge to members of the target audience that TPG's ADSL2+ services were being offered as part of a bundle. 303 The High Court majority concluded that even with this higher attributed level of knowledge of the bundling method of sale, TPG's advertisements still had a tendency to mislead because the target audience was “left only with the general thrust or dominant message”. 304 The High Court majority accepted that viewers cannot realistically be 298 299

ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640. ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383.

300 301 302 303

TPG Internet Pty Ltd v ACCC (2012) 210 FCR 277. ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640. TPG Internet Pty Ltd v ACCC (2012) 210 FCR 277 at 289 [100]; see also at 289 [103]. ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 [45].

304

ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 [53].

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expected to absorb and digest the small print in cases involving bold headline statements of attractive prices, especially in television advertisements where the opportunity to do so is fleeting. The High Court majority observed: As the primary judge said, the vice of TPG's advertisements was that they required “consumers to find their way through to the truth past advertising stratagems which have the effect of misleading or being likely to mislead them”. 305

The High Court held that TPG intended to emphasise the most attractive component of its offer and to downplay the less attractive components, rather than give equal prominence to each component of the package. In such circumstances it may properly be inferred that the advertisement had the effect of leaving the target audience with the general thrust or dominant message. 306 In the case of fleeting or ephemeral advertisements as opposed to static advertisements, it is necessary to consider the dominant message in the context of the advertisement as a whole. Unless the advertiser gives equal prominence to the less attractive features of the advertised product, a court is likely to infer that the advertisement had the effect of leaving a reasonable member of the target audience with the general thrust or dominant message. In ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365), 307 Beach J found that Bet365's Australian and United Kingdom companies, Hillside (Australia New Media) and Hillside (Shared Services) engaged in misleading conduct concerning promotions relating to “Free Bets” for new customers as part of an internet advertising campaign. The dominant message contained in the promotional offer on its homepage (http://www.bet365.com.au) stated “$200 FREE BETS FOR NEW CUSTOMERS”. However, there were important conditions that qualified the dominant message, including that the customer had to pay a deposit and risk that deposit before being entitled to make a “free” bet and that the customer had to risk the value of their deposit and the amount of the “free” bet three times prior to making a withdrawal. These conditions were not displayed on the webpage containing the promotional offer. Beach J found that the digital pathway to the terms and conditions was “complicated and problematic”. 308 The use of a small print qualifier in a static advertisement was at issue in George Weston Foods Ltd v Goodman Fielder Ltd. 309 Bread packaging declared in large typeface: “Now Twice the Fibre*”. As regards the target audience, Moore J concluded:

305 306 307 308

ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [54], quoting ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 at 44 697 [116] (Murphy J). ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [55] and [57] (citations omitted). ACCC v Hillside (Australia New Media) Pty Ltd t/as Bet365 [2015] FCA 1007. ACCC v Hillside (Australia New Media) Pty Ltd t/as Bet365 [2015] FCA 1007 at [101].

309

George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553.

308

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.195]

The broadest description of the class is consumers of bread. However, in my opinion, the relevant class can more appropriately be described as consumers of bread who have some interest in the fibre content of bread. 310

Moore J held that an asterisk can be sufficient to draw the attention of a consumer to a qualification of a representation. Moore J observed that the asterisk was prominent and would have been taken to signify some qualification or explanation of the words used. One could expect a consumer interested in fibre content to seek out the qualification or explanation. Not only was the explanation within 2 cm of the words on the package (albeit in much smaller type) but it was repeated elsewhere on the packaging. 311 Advertising on social media sites ...............................................................................................................................................................................................

Corporations may also provide information about their goods and services by means of posts on their website, Facebook and Twitter pages. The provisions relating to misleading or deceptive conduct impose strict liability. An aspect of strict liability is that a corporation that fails to remove misleading comments from its website, Facebook, or Twitter page will be liable for a contravention of s 18 of the ACL. In ACCC v Allergy Pathway Pty Ltd (No 2), 312 Finkelstein J held that Allergy Pathway was responsible for Facebook and Twitter comments by fans on its account in breach of an undertaking not to make misleading claims about its allergy treatments. His Honour concluded: [11.195]

While it cannot be said that Allergy Pathway was responsible for the initial publication of the testimonials (the original publisher was the third party who posted the testimonials on Allergy Pathway's Twitter and Facebook pages) it is appropriate to conclude that Allergy Pathway accepted responsibility for the publications when it knew of the publications and decided not to remove them. Hence it became the publisher of the testimonials. In any event it is clear that it caused them to continue to be published from the time when it became aware of their existence, which is enough to put Allergy Pathway in breach of the second limb of its undertaking. 313 (emphasis added)

The test adopted by Finkelstein J has two elements. Suppliers of goods and services that have Facebook and Twitter pages will incur primary or accessorial liability when they have actual knowledge of the publications on their Facebook and Twitter pages and they decide not to remove them. This does not mean that they can avoid liability by keeping themselves in a state of ignorance. Where a person wilfully turns a blind eye, or deliberately abstains from asking questions or making enquiries, they may be held to have

310 311 312

George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553 568 [37]. George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553 at 571-2 [46]. ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34.

313

ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34 at [33].

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actual knowledge sufficient to attract accessorial liability. 314 Actual knowledge may be inferred from a combination of suspicious circumstances and a failure to make inquiry. 315 Accordingly, corporations should pre-monitor comments left by third party users of their Facebook and Twitter pages to ensure that they comply with the ACL before they are posted. Assessing the advertisement ...............................................................................................................................................................................................

Having identified the target audience, the effect of the advertisement must be assessed having regard to the reactions of an ordinary, reasonable member of the target audience, not those of persons whose reactions are extreme or fanciful. For example, in ACCC v Singtel Optus Pty Ltd (No 1), 316 Optus advertised its internet broadband plans and represented that for a monthly payment, a consumer would receive an overall cap or quota data allowance of broadband which was then split into two allowances: a peak allowance (midday to midnight) and an off-peak allowance (midnight to midday). The “headline” claim was accompanied by a disclaimer in smaller or less prominent print noting “Speed limited once peak data exceeded”. The ACCC alleged that Optus had not sufficiently disclosed that the service would be speed limited once consumers exceeded their peak data allowance. The target audience was held to be the general public with a need or desire for broadband internet access. The trial judge, Perram J, held that in 2010 consumers must be taken to have a certain degree of background knowledge of internet usage; to understand that broadband plans have usage limits and that when those limits are exceeded considerable inconvenience is likely to result. 317 In assessing the likely impact of the advertisement on a reasonable member of the target audience, Perram J found that Optus had contravened s 52 of the TPA: [11.200]

I accept that a careful reading of the small print disclaimer at the bottom of the page, “Speed limited once peak data exceeded”, and some meditation upon the full import of that statement would lead sophisticated persons to deduce that the 150GB was not the total of two distinct usage allowances but in fact a theoretical maximum which could be obtained only by using the 75GB off-peak allowance in full before exhausting the 75GB peak allowance. But that is not what an ordinary person reading it would have understood. 318 (emphasis added) 314

316 317

See the discussion of this issue in the judgment of Stone J in Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 84-93.See also ACCC v IMB Group Ltd [2003] FCAFC 17 at [135] (Cooper, Kiefel, and Emmett JJ) and Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at [335]-[336] (Besanko J). Pereira v Director of Public Prosecutions (1988) 82 ALR 217 at 219-220 (Mason CJ, Deane, Dawson, Toohey and Gaudron JJ). ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 1177 (29 October 2010). ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 1177 at [28].

318

ACCC v Singtel Optus Pty Ltd (No 1) [2010] FCA 1177 at [25].

315

310

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.205]

A pecuniary penalty of $5.26 million was imposed, 319 which was reduced on appeal by the Full Federal Court to $3.61 million. 320 Comparative advertising ...............................................................................................................................................................................................

Comparative advertising is a form of advertising whereby a firm seeks to promote sales of its products by comparing them favourably with a rival products, or by denigrating a rival products in some way. In Gillette Australia Pty Ltd v Energizer Australia Pty Ltd, Heerey J observed: [11.205]

The characterisation of advertising as comparative does not of itself have legal significance, or create any kind of presumption in favour of a party alleging a breach of Pt V of the TPA. There is no basis in the TPA for regarding comparative advertising as an inherently disreputable form of commercial conduct, to be viewed with suspicion by the courts. On the contrary, to the extent that comparative advertising provides consumers with accurate hard facts about competing products, it assists in the making of better informed consumer choices and thereby results in more effective competition. 321

Nevertheless, advertisers using this form of advertising would be well advised to take special care to ensure that the representations they make are accurate and that there is no real chance they are likely to mislead ordinary consumers. 322 As with other forms of advertising, it is necessary to consider the scope of the representations that are being made, the audience to whom they are being conveyed, and the likely effect the representations will have on an ordinary, reasonable member of the target audience. For example, in Telstra Corporation Ltd v Singtel Optus Pty Ltd, 323 Optus conducted a comparative advertising campaign in relation to its 3G and 4G mobile networks in which it represented that: “When it comes to the percentage of Australians the Optus mobile network reaches, there isn't much difference between us and Telstra. In fact, it's less than 1%.” Optus contended that a hypothetical ordinary or reasonable member of the target audience would know that the representations made concerning 98.5% and 99.3% coverage could not possibly relate to geographic coverage. Elliott J of the Supreme Court of Victoria found that Optus' advertising campaign contravened ACL, s 18 and 29(1)(b) and (g). It misled consumers on the extent of its network coverage on the basis that it misrepresented the geographical coverage of Optus' mobile network and the comparative coverage of the two networks. In reaching that conclusion, Elliott J held that an ordinary 319

ACCC v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246.

320 321

Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249. Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629 at [20]. See also Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 2) [2010] FCA 566 at [1], where Katzmann J stated: “provided it is accurate and does not involve half-truths, it promotes competition and helps consumers make informed choices”.

322

See, for example, Hoover (Australia) Pty Ltd v Email Ltd (1991) 104 ALR 369 at 375.4 (Gummow J), referring with approval to Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) ATPR ¶40-918 at 49,861.8 col 1 (Burchett J); see also Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 37 ALR 161 at 163.9 (Lockhart J).

323

Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35.

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or reasonable person in the target audience would be likely to “accept the Representations at face value”, 324 and gave weight to the fact that the advertisement was “part of a deliberate advertising strategy that was calculated to benefit Optus' business”. 325 Finally, the fact that the advertisement was a television commercial, a medium that did not allow a reasonable member of the target audience the opportunity to carefully consider the advertisement, meant that it was likely to mislead. 326 Elliott J held: it is irrefutable that a key component of the Advertisement is the focus upon the Geographic Coverage of the Optus mobile network and the comparison with the Telstra mobile network. This aspect of the Advertisement provides the platform upon which Optus seeks to make it attractive to “switch” and enter into the deals that are being offered. 327

On the other hand, in Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd, 328 Samsung used a form of 3D technology known as “active shutter” technology. In April 2011, LG produced 3D televisions which operated using a different form of technology known as “passive technology”. Samsung alleged that LG produced a television commercial which represented that the shuttering effect of active shutter technology caused discomfort and interfered with the viewing experience, and in doing so was misleading or deceptive, in contravention of s 18 of the ACL. The television commercial featured a man in a “lab coat” dressed up as a scientist or technician conducting a “3D TV test” which was “in the nature of a comical and exaggerated comparison of different types of 3D television technology”. 329 Nicholas J found that although the material conveyed technical information that would normally be taken seriously by viewers, the humorous style was a contextual matter that had to be borne in mind when determining whether reasonable viewers would make significant allowance for what was readily discernible as exaggeration and parody. 330 However, his Honour found certain representations made by LG relating to specific technical features contravened the ACL.

324 325 326 327 328 329

Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 at [72]. Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 at [53]. See the role of intention at [11.70]. Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 at [73]. See the medium used to convey the advertisement at [11.185]. Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 at [93]. Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227. Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227 at [88].

330

Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227 at [94].

312

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[11.210]

Part V: Misleading conduct and passing-off Introduction ...............................................................................................................................................................................................

Section 52 of the TPA was intended to protect consumers, 331 however, early in the life of s 52 of the TPA it was held that businesses could also take advantage of the general protection provided by it. 332 Businesses have made considerable use of s 52 of the TPA and s 18 of the ACL in order to protect their business goodwill, and incidentally to protect consumers from being misled as to the source or origin of goods and services. The common law action of passing off is intended to protect business goodwill, while s 18 of the ACL is designed primarily to protect consumers. 333 The two causes of action are separate and require separate analysis, however, they will frequently be pleaded together. In order to succeed in each cause of action the applicant must establish an adequate reputation in its name or logo or the design features of its product. 334

[11.210]

Choice of name ...............................................................................................................................................................................................

Sometimes businesses use, as a part, or all, of their name, words that describe the nature of the business, or adopt a get-up that is confusingly similar to that of another existing business. In such cases, the central issue is whether the words used, while descriptive of the business, have also acquired a meaning that identifies the existing business in the eyes of consumers so as to make it misleading for another firm to adopt them. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd, 335 the Sydney Building Information Centre (Sydney) conducted an information centre in Sydney. At this Centre, building products and techniques were displayed, without charge, to members of the public. Sydney derived its revenue from the exhibitors who displayed their products. It was the only business of this kind. In 1975 the Hornsby Building Information Centre commenced a similar business in the Sydney suburb of Hornsby. Sydney then brought proceedings in the Australian Industrial Court [11.215]

331 332

333

334 335

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [108] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223-6 (Stephen J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197-8 (Gibbs CJ) and 202-5 (Mason J); Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 601-2 (Mason CJ, Deane, Dawson and Gaudron JJ); 606-7 (Brennan J). Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [108] and [109] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ); Con Agra Inc v McCain Foods (Aust Pty Ltd (1992) 33 FCR 302 at 355-6 (Gummow J); Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 at [97]-[98]. See Miller, Miller’s Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.495]-[1.S2.18.575]. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216.

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313

(the court then having jurisdiction over trade practices matters) seeking an injunction restraining Hornsby from conducting its business under its corporate name. It argued that this conduct contravened s 52 because it would mislead or deceive others into believing that Hornsby was associated in some way with Sydney. An interim injunction was issued against Hornsby from which it appealed to the High Court. The High Court held: There is a price to be paid for the advantages flowing from the possession of an eloquently descriptive trade name. Because it is descriptive it is equally applicable to any business of a like kind, its very descriptiveness ensures that it is not distinctive of any particular business and hence its application to other like businesses will not ordinarily mislead the public. In cases of passing off, where it is the wrongful appropriation of the reputation of another or that of his goods that is in question, a plaintiff which uses descriptive words in its trade name will find that quite small differences in a competitor's trade name will render the latter more immune from action. 336

Sometimes generic or descriptive words can acquire a secondary meaning, or product features can acquire a secondary meaning with a sufficient number of consumers, such that if the words are copied or the features are copied by a competitor they may give rise to an action for passing off and/or an action based on a contravention of ACL, s 18. For example, in S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd, 337 the appellant, S&I Publishing Pty Ltd (S&I) commenced publishing Triathlon & Multi Sport Magazine. The respondent, who published Triathlon Sports, sought to restrain S&I from selling or distributing the new magazine in its current format on the ground that, inter alia, doing so contravened s 52 of the TPA. The respondent succeeded at first instance and S&I appealed to the Full Court. The Full Court held: It is difficult to see how the name of a sport on its own could ever become distinctive of particular products of a person. No such suggestion is directly made in the present case. But no doubt the name of a sport, like the name of an article such as an opal, may be used as part of a get-up including a name such that it could become distinctive of a particular person's business or product. However, it will not be the name of the sport that creates the necessary distinctiveness to enable the circumstances to fall within s 52. Rather it will be a combination of names or the get-up adopted which will bring about this result. We do not doubt that the name Triathlon Sports used over a period of time in connection with a magazine could become and indeed (as his Honour found) did become distinctive of the magazine of Life Saver. No doubt anyone using the same name would engaged in conduct within the meaning of s 52 of the Act. We do not think that the mere use of the name Triathlon & Multi Sport Magazine on its own is sufficiently similar to the name Triathlon Sports to itself constitute conduct which is misleading and deceptive. Indeed it would seem that the trial judge took the same view for his Honour did not concentrate on the name itself but on the prominence which the word 336

Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J) citing Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd (1946) 63 RPC 39 at 42 (Lord Simonds).

337

S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354.

314

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.220]

“triathlon” had in the masthead or, in other words, upon the get-up which S & I had adopted. So much is clear from the orders made by his Honour as well as the reasons to which we have already referred. 338

The court concluded that the S&I masthead was sufficiently differentiated from the Life Saver masthead and allowed the appeal. In Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd, 339 there was a dispute between two companies each carrying on a business taking telephone orders for the delivery of packages containing roses to retail customers. The applicant has conducted its business since 1995 under the name “Roses Only”, while the respondent commenced its business in early March 1999 under the name “Roses Plus”. The interlocutory claim was based solely on an alleged breach of s 52 of the TPA. Sackville J made an interlocutory order restraining the respondent from advertising, in certain formats, its business as “Roses Plus” on the basis that there was a serious question of fact as to whether the name “Roses Only” has acquired a reputation or secondary meaning distinctive of the applicant's business. 340 The adoption of the same name as that of an existing manufacturer, as occurred in Campomar v Nike, will not always be misleading. The conduct of the respondent – the acts or words or silence – must be viewed in their context. For example, in Lego Australia Pty Ltd v Paul's (Merchants) Pty Ltd, 341 “Lego” is a well-known brand applicable to the applicant's Lego toys. The respondent imported irrigation equipment that bore the name “Lego”. Deane and Fitzgerald JJ considered that an ordinary or reasonable purchaser of irrigation equipment would not be misled into thinking that there was a connection with the toy manufacturer. Their Honours concluded: “The fact that companies may and sometimes do expand the range of products they produce cannot of itself warrant a conclusion that a particular company has done so”. 342 Design features or shape ...............................................................................................................................................................................................

Section 18 and passing off claims can be relied upon to protect product designs. Such claims do not replace proprietary intellectual property rights such as design registrations. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 343 Parkdale (the rival) sold furniture that was virtually identical in appearance to those sold by Puxu; however, sewn into the front of each of Parkdale's chairs was a label, “Parkdale Custom Built Furniture”. The Puxu furniture had acquired an established reputation, but the claims based on s 52 and passing off were not established because “potential purchasers of [11.220]

338

S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 at 363-4.

339 340 341 342

Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd (1999) ATPR ¶41-706. Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd (1999) ATPR ¶41-706 at 43,051 [23]. Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344. Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344 at 352.

343

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.

[11.225]

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a suite of furniture costing about $1,500, would, if acting reasonably, look for a label, brand or mark if they were concerned to buy a suite of particular manufacture”. 344 In Playcorp Group of Companies Pty Ltd v Peter Bodum A/S, 345 Bodum alleged that it had a reputation or secondary meaning in the Chambord Coffee Plunger and the Assam Teapot, based on the products' features, and that the promotion of similar articles by Playcorp constituted a breach of s 52 and passing off. Middleton J held that Playcorp had not engaged in passing off or in conduct in breach of s 52 of the TPA. On appeal, 346 a majority (Greenwood J, with whom Tracey J agreed) examined the “vast amount of advertising” 347 engaged in by Bodum and concluded that Bodum had a reputation or secondary meaning in the features of the Bodum plunger. Although much of the advertising featured some reference to the Bodum name or trade mark, Greenwood J was satisfied that the evidence established “a very significant secondary reputation in the features of the Bodum Chambord Coffee Plunger associated in the minds of consumers with Bodum as the manufacturer of the product…”. 348 In reaching this conclusion his Honour considered “all of the contextual circumstances.” 349 DKSH had not done enough to distinguish its coffee plunger. Unlike the Puxu case, the rival had not affixed a trade mark on the product itself as opposed to on the packaging. 350 Choice of get up ...............................................................................................................................................................................................

However, in cases where a new trader deliberately sets out to “cash in” on the reputation of an existing trader, the courts are likely to find a breach of s 18 and to find that a claim based on passing of is made out. 351 For example, in The Kettle Chip Co Pty Ltd v Apand Pty Ltd, 352 the respondent was the largest manufacturer of potato chips in Australia and marketed its products under the name “Smith's”. The applicant entered the market in 1989 with a chip called a “kettle chip”, which was cooked in batches rather than mass-produced in a continuous fryer. The chips had a distinctive flavour and texture and were sold at a premium price under the registered business name “The Kettle Chip”. The Kettle chips were very successful and in 1992 the respondent brought onto the market a new line of potato chips called [11.225]

344 345 346

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. Playcorp Group of Companies Pty Ltd v Peter Bodum A/S [2010] FCA 23 (Middleton J). Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98.

347 348 349 350

Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 at [51]. Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 at [197]. Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 at [255] and [261]. Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 at [256] and [257]-[258] citing Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 257 and Dr Martens Australia Pty Ltd v Rivers (1999) 95 FCR 136.

351

Twentieth Century Fox Film Corporation v The South Australian Brewery Co Ltd (1996) 66 FCR 451 at 467 (Tamberlin J). In that case it was found that the intention of the brewery was to persuade consumers that there was a strong association between its product and “The Simpsons” animated television series (466-7).

352

The Kettle Chip Co Pty Ltd v Apand Pty Ltd (1993) 46 FCR 152.

316

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.230]

“Country Kettle”. In addition to the use of the word “Kettle”, the respondent's packet bore a picture of a stylised cauldron and utilised a similar colour scheme to that of the applicant. Later in 1992 the respondent modified the packets by removing the cauldron and replacing it with a pastoral scene. The applicant brought proceedings against the respondent, alleging that the use by the respondent of the word “Kettle” and similar features on its packaging contravened ss 52, 53(c) and (d) of the TPA. Burchett J held: In my opinion, this evidence makes it clear that potato chips sold in the new packets will continue to benefit from the goodwill of the applicant misappropriated by the original promotion and packaging of “Country Kettle”. The image of “Country Kettle” which the respondent desired to create, and did in part create by its passing off and its misrepresentation, will continue to sustain the sale of the new packets, and will be recalled to the minds of consumers by compelling visual and other links. 353

His Honour's finding in relation to s 52 was confirmed by the Full Federal Court. 354 In Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd, the trial judge, Conti J, found that Sydneywide had adopted a get up for its LiveWire energy drink that was calculated to deceive potential purchasers into thinking that it was the Red Bull energy drink, or believing that the LiveWire energy drink was made by, or with the licence or approval of Red Bull. 355 On appeal, in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd, 356 Weinberg and Dowsett JJ (with whom Branson J agreed) upheld the findings of the primary judge. Their Honours confirmed that while there is no requirement that there be an actual, subjective intention to mislead, as an element that has to be demonstrated in a passing off action, “that does not detract from the evidentiary value of deliberate borrowing”. 357 Similarly, in relation to a contravention of s 18 of the ACL, while there is no requirement that there be an actual, subjective intention to mislead as an element that has to be demonstrated, the courts are more likely to conclude that where a trader deliberately sets out to mislead to consumers, the conduct is likely to do so. See [11.70].

Part VI: Exemption for information providers [11.230] The provisions relating to misleading or deceptive conduct impose strict liability. An aspect of strict liability is that any newspaper which publishes, or television or radio station which broadcasts, misleading or deceptive news, information, opinion or commentary has engaged in misleading or deceptive conduct. It may, however, be 353 354

The Kettle Chip Co Pty Ltd v Apand Pty Ltd (1993) 46 FCR 152 at 174. Apand Pty Ltd v The Kettle Chip Company Pty Ltd (1994) 52 FCR 474.

355 356 357

Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd (2001) 53 IPR 481 at [69]-[70]. Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354. Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 at [62] citing the reasons of Dixon and McTiernan JJ in Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 at 657.

CHAPTER

[11.235]

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317

possible for information providers to rely on the statutory exemption in ACL, s 19(1), which states that the provisions relating to misleading or deceptive conduct do not apply to an information provider if the information provider made a publication in the course of carrying on a business of providing information, unless the publication is related directly to its business activities. Scope of the exemption for information providers ............................................................................................................................................................................................... [11.235]

Section 19 provides:

(1) This Part does not apply to a publication of matter by an information provider if: (a) in any case – the information provider made the publication in the course of carrying on a business of providing information; or (b) if the information provider is the Australian Broadcasting Corporation, the Special Broadcasting Service Corporation or the holder of a licence granted under the Broadcasting Services Act 1992 –the publication was by way of a radio or television broadcast by the information provider.

However, the scope of s 19(1) is circumscribed by ss 19(2)(3) and (4). This exemption does not apply to: • advertisements; • a publication in connection with the supply (or promotion of the supply) of goods or services by the information provider; or • a publication in connection with the sale or grant (or promotion of the sale or grant) of an interest in land by the information provider. In relation to publishers of advertisements there is a special defence created by s 251 of the ACL considered at [13.330] (Corones). Section 19 of the ACL replaces and clarifies s 65A of the TPA. The Second Explanatory Memorandum states: Section 19 of the ACL operates in the same way as the repealed subsections 65A(1) and (2) of the TP Act, and the jurisprudence on the understanding, interpretation and application of those provisions is relevant to section 19. 358

Section 65A was enacted because decisions of the Federal Court had suggested that a newspaper publisher may be taken to have engaged in conduct for the purposes of s 52 of the TPA if the newspaper contained inaccurate information. 359 Section 65A operated to exempt the media and other persons engaged in the business of providing information from the operation of Pt V, Div 1 of the TPA, so as not to inhibit the provision of news and other information. 358 359

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [3.19]-[3.20]. Universal Telecasters (Qld) Ltd v Guthrie (1978) 32 FLR 360; Universal Telecasters (Qld) Ltd v Ainsworth Consolidated Industries Ltd (1983) ATPR ¶40-384 and Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82. See also Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1983) 66 FLR 453, and Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1985) 58 ALR 549.

318

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.240]

The term “information provider” is defined in s 19(5) to mean “a person who carries on a business of providing information”. Section 19(6) provides that it includes media organisations such as radio and television stations (including the Australian Broadcasting Corporation and the Special Broadcasting Service Corporation), as well as publishers of newspapers and magazines. The rationale for such an approach is that the information provider is merely a conduit and it is apparent from the circumstances that the information provider is not the source of the information and is passing it on for what it is worth. 360 In ACCC v Channel Seven Brisbane Pty Ltd, French CJ and Kiefel J held that the rationale of s 65A(1) of the was to maintain a free and vigorous press “by releasing newspapers and electronic media proprietors, inter alia, from undesirable inhibitions on the provision, by them, of news, information, opinion and comment.” 361 However, the exemption did not extend to the provision of information where information provider had a commercial interest in the content of the information, such as “advertorial content”, where a newspaper has agreed to publish a “news” item about a product in exchange for the product supplier taking out paid advertising in that publication. Such advertorial content fell outside the exemption. 362 The Second Explanatory Memorandum states: The prohibition in section 18 of the ACL does not apply to publications by an information provider, where the information provider made the publication in the course of carrying on a business of providing information or, in the case of a radio or television broadcaster, the publication was by radio or television broadcast by the information provider.

Publication of an advertisement ...............................................................................................................................................................................................

Section 19(2) provides that the exemption does not apply to the publication of an advertisement. This mirrors s 65A(1)(b) of the which provided that “publication of matter in connection with … an advertisement” was not protected under s 65A of the TPA. In order to protect the publishers of misleading advertisements a special defence is created by s 251 of the ACL (previously s 85(3) of the TPA). This defence is considered at [13.330] (Corones). [11.240]

Exceptions to the exemption ...............................................................................................................................................................................................

There are a number of exceptions to the exemption in ACL, s 19(1). Section 19(3) of the ACL deprives the information provider of immunity in the following circumstances: [11.245]

360 361 362

See Gillies, “Avoiding Infringement of Section 52: Reconciling the Information Provider’s Defence and the Conduit Defence” (2009) 17 Trade Practices Law Journal 186. ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [42]. See Bond v Barry (2007) 73 IPR 490 (French J); TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd (2008) 71 NSWLR 323 at [52]-[53] (Spigelman CJ, Beasley and Hodgson JJA).

[11.245]

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(3) Subsection (1) does not apply to a publication of matter in connection with the supply or possible supply of, or the promotion by any means of the supply or use of, goods or services (the publicised goods or services), if: (a) the publicised goods or services were goods or services of a kind supplied by the information provider or, if the information provider is a body corporate, by a body corporate that is related to the information provider; or (b) the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with, a person who supplies goods or services of the same kind as the publicised goods or services; or (c) the publication was made on behalf of, or pursuant to a contract, arrangement or understanding with, a body corporate that is related to a body corporate that supplies goods or services of the same kind as the publicised goods or services.

Section 19(4) of the ACL makes similar provision in relation to the publication of matter in connection with the grant of an interest in land. Sections 19(3) and (4) have been drafted in such a way as to maintain the High Court's interpretation of s 65A of the TPA in ACCC v Channel Seven Brisbane Pty Ltd. 363 In ACCC v Channel Seven Brisbane Pty Ltd, 364 the question for determination whether Channel Seven had contravened the TPA in the course of broadcasting two episodes of the current affairs television program “Today Tonight” which reported on a “mentoring program” for women, the Wildly Wealthy Women Millionaire Mentoring Program. The ACCC alleged that in the course of broadcasting the episodes the Seven Licensees (Channel Seven Brisbane Pty Ltd, Channel Seven Sydney Pty Ltd, Channel Seven Melbourne Pty Ltd and Channel Seven Perth Pty Ltd) contravened s 52 of the TPA by making or adopting as their own, misleading representations concerning the mentoring program. The Channel Seven Licensees submitted that even if misleading representations were made, s 65A provided a complete defence. The ACCC argued that the Channel Seven Licensees' conduct fell within the statutory exception, s 65A(1)(a), to the general exemption, namely a publication in connection with the supply of services of the information provider. The trial judge, Bennett J, found in favour of the ACCC. 365 The Full Federal Court upheld Bennett J's findings that Seven had made the representations in the program. 366 However, the Full Court concluded that the services being promoted were the Wildly Wealthy Women's financial services, and these were not services of a kind being supplied by the Channel Seven licensees, so the exemption applied to the media proprietors. 363 364 365 366

Second Explanatory Memorandum, at [3.21]; ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305. ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 (French CJ, Gummow, Hayne and Kiefel JJ, Heydon J dissenting). ACCC v Seven Network Ltd (2007) 244 ALR 343. Channel Seven Brisbane Pty Ltd v ACCC (2008) 173 FCR 91 at 103-104 [47]-[57] (Sundberg, Jacobson and Lander JJ).

320

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.250]

Before the High Court, the ACCC succeeded in establishing that the exemption in s 65A did not apply because the exception in s 65A(1)(a)(vi) applied. Their Honours observed: Where, however, the information provider publishes matter in connection with goods or services which it itself provides, or publishes an advertisement for its own or someone else's goods or services, the rationale of maintaining a free and vigorous press does not require its exemption from the prohibition of misleading or deceptive conduct. The same is true where the information provider promotes the goods or services of a third party pursuant to a contract, arrangement or understanding with that party. It would be true also of publications critical of goods or services provided by competitors of the information provider or of a third party with whom the information provider has a contract, arrangement or understanding. 367

Seven had entered into an agreement to produce a number of episodes of “Today Tonight” with the Wildly Wealthy Women and misleading representations were made in connection with the promotion of the Wildly Wealthy Women's financial services. Accordingly, the exception in s 65A(1)(a)(vi) applied. The publication was made on behalf of or pursuant to a contract, arrangement or understanding with a person who supplies goods or services of that kind, and Seven did not have the benefit of the s 65A protection. Their Honours held: Sub-paragraph (vi) is concerned with contracts, arrangements or understandings between information providers and the suppliers of goods or services. The information provider that publishes matter in connection with the supply of goods or services, and engages in misleading or deceptive conduct in so doing by the adoption or making of misrepresentations, is the party affected by this exception. This case was well within the purposes of the exception. Other cases may require consideration of the range of arrangements or understandings that fall within it. 368

Part VII: Misleading or deceptive conduct under the ASIC Act Introduction ...............................................................................................................................................................................................

The Financial Sector Reform (Consequential Amendments) Act 1998 (Cth) inserted Pt II Div 2, commonly known as the consumer protection provisions, into the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). The provisions are general and specific protections against misleading and other unfair practices, such as unconscionable conduct in relation to financial services. On 1 July 1998, the Australian Securities and Investments Commission (ASIC) took over the ACCC's powers and functions in relation to the enforcement of these provisions.

[11.250]

367

ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [42].

368

ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [48]-[50].

[11.255]

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From 2006 to 2010, Australia underwent a fundamental revision and reform of its generic consumer protection laws, resulting in the Australian Consumer Law (ACL). The government decided to exclude financial services and financial products from many of those reforms. Subclause 3.1.3 of the Intergovernmental Agreement for the Australian Consumer Law (IGA), signed by the Council of Australian Governments on 2 July 2009, required the Commonwealth to enact changes to the consumer investor protection provisions of the ASIC Act, and, to the extent necessary, the Corporations Act 2001 (Cth), to ensure that they are consistent with the ACL. Part 2 of the ACL regulates misleading conduct, unconscionable conduct, and unfair terms; however, it does not extend to financial products and contracts in relation to the supply of financial services (other than linked credit providers). Section 131A of the CCA provides: (1) Despite section 131, this Division does not apply (other than in relation to the application of Part 5-5 of Schedule 2 as a law of the Commonwealth) to the supply, or possible supply, of services that are financial services, or of financial products.

This reflects the current referral of power by the States and Territories set out in the Corporations Agreement 2002 and administered by the Ministerial Council for Corporations (MINCO). The consumer protection provisions of the ASIC Act have been amended to maintain consistency with the ACL. However, the consumer guarantees law in the ACL does not apply to financial services, with the exception of linked credit provider services. Section 12ED of the ASIC Act only implies warranties of due care and skill and fitness for purpose into contracts for the supply financial services to a consumer in the course of a business. There have been very few cases in which consumers have sought to rely on a breach of these implied warranties. 369 Proceedings for breaches of the consumer protections of the ASIC Act are brought by the ACCC pursuant to a delegation from ASIC. 370 Consumer credit regulation was referred to the Commonwealth by the States and Territories in 2009. The Uniform Consumer Credit Code was replaced by the National Consumer Credit Protection Code from 1 July 2010. This Part is primarily concerned with the consumer protection provisions of the ASIC Act in relation to financial services and the powers of enforcement and remedies available to ASIC for breaches or potential breaches of Pt II Div 2 of the ASIC Act. Background to the reform ...............................................................................................................................................................................................

The provisions of the ASIC Act and the Corporations Act 2001 operate in a complementary way to the misleading conduct provisions of the ACL (Cth) and the ACL

[11.255]

369 370

See eg, St George Bank Ltd v Wright [2009] QSC 337 at [54]-[59] (McMurdo J) and Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 at [113]-[116] (Perram J). See ACCC v Original Mama’s Pizza & Ribs [2008] FCA 370 (18 March 2008) and ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 (19 December 2014).

322

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.255]

(Application Acts) in different areas of commercial activity, but without overlapping. In Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq), 371 Rares J trenchantly criticised the government for replacing the “elegantly simple” s 52 of the TPA with “a labyrinth of statutes”. 372 His Honour observed: Of course, each Act has a myriad of complex definitions of what is a financial product or a financial service or are financial services. Each Act gives a person, who suffers loss or damage by conduct of another in contravention of the prohibition, the right to compensation (eg, s 1041I(1), s 12GF) coupled with substantively identical related exceptions and qualifications concerning proportionate liability. Since the end result of this legislative morass seems to be the same, it is difficult to discern why the public, their lawyers (if they can afford them) and the Courts must waste their time turning up and construing which of these statutes applies to the particular circumstance. 373

The rationale for this “tangled legislative weave” 374 is ASIC's role as a specialist consumer protection regulator for financial services which resulted from recommendations of the Wallis Committee. In March 1997 the Wallis Committee in its Financial System Inquiry Final Report (FSI) recommended to the Government that: in relation to the regulatory framework for market integrity and consumer protection in the financial system it would be desirable to ensure that: • the regulatory structure is flexible and responsive to the forces for change operating on the system; • there is consistency in regulation of similar financial products to promote competition by improving comparability; • financial markets are more contestable, efficient and fair; • regulation of financial conglomerates is effective which will facilitate competition and efficiency; and • international competitiveness of the Australian financial system is facilitated.

The Wallis Committee also recommended that there should be a self-contained regulatory regime in relation to fundraising and other dealings in securities that required the issue of a prospectus. The rationale for the different regimes was explained by Wallis in the following terms: The provisions of the Corporations Law require positive disclosure and provided tailored defences. The balance between disclosure, liability and defences has been carefully struck, and is consistent with provisions governing securities issues and takeovers in the United Kingdom, the United States, Canada and New Zealand … The provisions of the Trade Practices Act apply generally and were not constructed in the context of provisions which require positive disclosure. 371 372 373

Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 (21 September 2012). Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 at [947]. Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 at [948].

374

Guglielman v Trescowthick [2004] FCA 326 at [35] (Mansfield J).

[11.265]

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Unlike the consumption of products and services in general, many investments provide a return to investors based on their bearing a share of the risks which are intrinsic to financial activity. This distinguishes the act of investment from the act of consumption. Among the risks that investors may be rewarded for bearing are those deriving from imperfect information. It is vital to economic efficiency that regulation not unduly interfere with this risk allocation function of the financial system. 375

The factors that led to the adoption of industry-specific regulation in relation to financial services and a specialist regulator (ASIC) in this area include: • the complex nature of financial products generally; • the compulsory nature of superannuation, the attendant risks of poor decision-making by consumers and the serious consequences that would flow from this; • ASIC's specialist knowledge of financial markets and its ability to co-ordinate consumer protection enforcement with its other compliance work. Misleading or deceptive conduct under the ASIC Act ...............................................................................................................................................................................................

Part II, Div 2, Subdiv D of the ASIC Act mirrors the ACL (Cth). It contains a broad general protection (s 12DA) against misleading or deceptive conduct in relation to financial services or financial products, the equivalent of s 18 of the ACL, and then contains two sets of more specific protections – first, the making of specific false or misleading representations in relation to financial services; 376 and, second, unfair sales techniques. 377 [11.260]

Financial products, financial services

“Financial product” is defined in s 2 of the ACL to have the same meaning as s 12BAA of the ASIC Act. See [11.270]. “Financial service” is defined in s 2 of the ACL to have the same meaning as s 12BAB of the ASIC Act. The ASIC Act contains a very broad definition of “financial service” which is linked with the definition of “financial product”. Section 12BAB(1) of the ASIC Act provides: [11.265]

a person provides a financial service if they: (a) provide financial product advice (see subsection (5)); or (b) deal in a financial product (see subsection (7)); or (c) make a market for a financial product (see subsection (11)); or (d) operate a registered scheme; or (e) provide a custodial or depository service (see subsection (12)); or (f) operate a financial market (see subsection (15)) or clearing and settlement facility (see subsection (17)); or 375 376

Wallis Committee, Financial System Inquiry Final Report (March 1997), p 251. ASIC Act, s 12DB(1).

377

ASIC Act, ss 12DC, 12DD, 12DE, 12DF, 12DG, 12DH, 12DI, 12DJ, 12DK, 12DL and 12DM.

324

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.270]

(g) provide a service that is otherwise supplied in relation to a financial product; or (h) engage in conduct of a kind prescribed in regulations made for the purposes of this paragraph.

Financial services are similarly defined in s 766A of the Corporations Act 2001 (Cth) except that the clauses (f) and (g) are not included. Financial product [11.270]

A “financial product” is defined in s 12BAA(1) of the ASIC Act.

a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following: (a) makes a financial investment (see subsection (4)); (b) manages financial risk (see subsection (5)); (c) makes non cash payments (see subsection (6)).

Section 12BAA(4) of the ASIC Act provides that a person makes a financial investment if the investor gives money or money's worth (the contribution) to another person and the other person uses the contribution to generate a financial return or other benefit for the investor, or the investor intends the other person to use the contribution to generate a financial return, and the investor does not have day-to-day control over the use of the contribution to generate the return or benefit. This definition would include an investor paying money to receive an issue of shares in a company. This general definition of “financial product” is then followed by a number of specific products that are included within the general concept (set out in subs (7)), and a number of specific products that are excluded from the general concept (set out in subs (8)). Section 12BAA(7) of the ASIC Act provides that the following transactions are financial products: (a) a security; (b) any of the following in relation to a managed investment scheme: (i) an interest in the scheme; (ii) a legal or equitable right or interest in an interest covered by subparagraph (i); (iii) an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii); (c) a derivative; (d) a contract of insurance (see subsection (9)) (except health insurance provided as part of a health insurance business as defined by Division 121 of the Private Health Insurance Act 2007); (e) a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995, that is not a contract of insurance (see subsection (9)); (f) a beneficial interest in a superannuation fund (as defined by section 10 of the Superannuation Industry (Supervision) Act 1993);

[11.270]

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(g) an RSA (retirement savings account) within the meaning of the Retirement Savings Accounts Act 1997; (h) any deposit-taking facility made available by an ADI (within the meaning of the Banking Act 1959) in the course of its banking business (within the meaning of that Act), other than an RSA (RSAs are covered by paragraph (g)); (i) a debenture, stock or bond issued or proposed to be issued by a government; (j) a foreign exchange contract; (k) a credit facility (within the meaning of the regulations); (l) anything declared by the regulations to be a financial product for the purposes of this subsection.

A credit facility for the purposes of s 12BAA(7)(k) of the ASIC Act is defined in reg 2B of the Australian Securities and Investments Commission Regulations 2001 (Cth). Regulation 2B lists nine separate transactions and deems each to be a credit facility: (1) For paragraph 12BAA (7) (k) of the Act, each of the following is a credit facility: (a) the provision of credit: (i) for any period; and (ii) with or without prior agreement between the credit provider and the debtor; and (iii) whether or not both credit and debit facilities are available; (b) a facility: (i) known as a bill facility; and (ii) under which a credit provider provides credit by accepting, drawing, discounting or indorsing a bill of exchange or promissory note; (c) the provision of credit by a pawnbroker in the ordinary course of a pawnbroker's business (being a business which is being lawfully conducted by the pawnbroker); (d) the provision of credit by the trustee of the estate of a deceased person by way of an advance to a beneficiary or prospective beneficiary of the estate; (e) the provision of credit by an employer, or a related body corporate of an employer, to an employee or former employee (whether or not it is provided to the employee or former employee with another person); (f) the provision of a mortgage that secures obligations under a credit contract (other than a lien or charge arising by operation of any law or by custom); (g) a guarantee related to a mortgage mentioned in paragraph (f); (h) a guarantee of obligations under a credit contract; (i) a facility for making non-cash payments (within the meaning of section 763D of the Corporations Act) if payments made using the facility will all be debited to a facility mentioned in paragraphs (a) to (h). (2) The provision of consumer credit insurance that includes a contract of general insurance for the Insurance Contracts Act 1984 is not a credit facility.

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[11.270]

(3) In this regulation: credit means a contract, arrangement or understanding: (a) under which: (i) payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred; or (ii) one person (a debtor) incurs a deferred debt to another person (a credit provider); and (b) including any of the following: (i) any form of financial accommodation; (ii) a hire purchase agreement; (iii) credit provided for the purchase of goods or services; (iv) a contract, arrangement or understanding for the hire, lease or rental of goods or services, other than a contract, arrangement or understanding under which: (A) full payment is made before or when the goods or services are provided; and (B) for the hire, lease or rental of goods – an amount at least equal to the value of the goods is paid as a deposit in relation to the return of the goods; (v) an article known as a credit card or charge card; (vi) an article, other than a credit card or a charge card, intended to be used to obtain cash, goods or services; (vii) an article, other than a credit card or a charge card, commonly issued to customers or prospective customers by persons who carry on business for the purpose of obtaining goods or services from those persons by way of a loan; (viii) a liability in respect of redeemable preference shares; (ix) a financial benefit arising from or as a result of a loan; (x) assistance in obtaining a financial benefit arising from or as a result of a loan; (xi) issuing, indorsing or otherwise dealing in a promissory note; (xii) drawing, accepting, indorsing or otherwise dealing in a negotiable instrument (including a bill of exchange); (xiii) granting or taking a lease over real or personal property; (xiv) a letter of credit.

In essence, a person provides a financial service if they provide financial product advice or deal in financial products.

CHAPTER

[11.285]

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Providing financial product advice

Financial product advice is defined in s 12BAB(5) of the ASIC Act to mean a recommendation or a statement of opinion, or a report of either of those things, that: [11.275]

(a)

is intended to influence a person or person in making a decision in relation to a particular financial product; or

(b) could reasonably be regarded as being intended to have such an influence. Section 12BAB(6) of the ASIC Act provides that advice given by a lawyer in his or her professional capacity about matters of law or legal interpretation or the application of the law to any facts, is not financial product advice. However, the ASIC Act provision could, nevertheless, apply to lawyers who act as financial brokers or arrange loans for clients. Dealing in financial products

Section 12BAB(7) of the ASIC Act provides that the following conduct constitutes dealing in a financial product: [11.280]

(a) applying for or acquiring a financial product; (b) issuing a financial product; (c) in relation to securities or managed investment schemes – underwriting the securities or interests; (d) varying a financial product; (e) disposing of a financial product.

Section 12BAB(8) provides that “arranging for a person to engage in conduct referred to in s 12BAB(7) is also dealing in a financial product, unless the actions concerned amount to providing financial advice”. Misleading or deceptive conduct ............................................................................................................................................................................................... [11.285]

Section 12DA provides:

(1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. (1A) Conduct: (a) that contravenes: (i) section 670A of the Corporations Act (misleading or deceptive takeover document); or (ii) section 728 of the Corporations Act (misleading or deceptive fundraising document); or (b) in relation to a disclosure document or statement within the meaning of section 953A of the Corporations Act; or (c) in relation to a disclosure document or statement within the meaning of section 1022A of the Corporations Act; does not contravene subsection (1).

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COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.285]

In ACCC v Original Mama's Pizza & Ribs, 378 the misleading conduct consisted of representations that the “purchasers” of the pizza ovens financed their acquisition by leases from third party financiers, could try them for six months, and if they were not satisfied, they could be returned to the financiers, and the “purchasers” would have no further financial obligations in relation to the lease. In fact, there was no six month trial period, and no entitlement to be released from the obligations after six months. A credit facility for the purposes of s 12BAA(7)(k) of the ASIC Act is defined in reg 2B of the Australian Securities and Investments Commission Regulations 2001 (Cth). 379 Madgwick J held that the representations contravened s 12DA(1) and s 12DB(1)(g) of the ASIC Act – making a false or misleading representation concerning the existence or effect of a right. The test for deciding whether conduct is misleading under s 18 of the and s 12DA of the ASIC Act is the same, namely whether the conduct is likely to mislead a reasonable member of the class at whom the conduct is directed. 380 For example, in GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd, 381 GPG commenced actions against GIO for contraventions of s 52 of the TPA, s 42 of the FTA 1987, s 995(2) of the Corporations Law and s 12DA of the ASIC Act. GPG alleged misrepresentations in the announcement of 24 September 1999 to the ASX concerning the extent of its exposure. Gyles J stated that in his opinion there was no relevant difference between the various statutory provisions and that s 12DA of the ASIC Act was the pertinent provision. 382 His Honour held the 24 September 1999 announcement made by GIO to the ASX was misleading. The reasonable reader would assume that there was no relevant change for the worse in what was to be expected in relation to reinsurance claims from events known to GIO compared with the announcements in August 1999. Put another way, the reasonable reader would assume that no further doubt had been cast upon the adequacy of the current provisions on that account. 383

In Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq), 384 Grange Securities Ltd (Grange), which had been acquired by Lehman Brothers Australia Ltd in March 2007, was engaged by three local councils to acquire complex financial products (synthetic collateralised debt obligations – SCDOs). Before dealing with Grange, the councils had invested conservatively. The councils were concerned to ensure that ratepayers' funds were not invested in products that had a substantive risk of loss. Nevertheless, the councils wanted to ensure their funds earned best returns available, consistent with their conservative investment policies. 378 379

ACCC v Original Mama’s Pizza & Ribs (2008) ATPR ¶42-236. See Australian Securities and Investments Commission Regulations 2001, reg 2B(3)(b)(iv) which includes hire, lease or rental of goods other than one under which full payment is made.

380 381 382 383

National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000. GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23. GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23 at [100]. GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23 at [101].

384

Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028.

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Grange put itself forward as a financial adviser that understood the investment requirements of local governments, including the relevant legislative and policy constraints. Grange represented to the councils that the SCDO investments were suitable for a conservative investment strategy. After the Global Financial Crisis began to develop in mid-2007, many of the councils' SCDOs suffered “credit events” causing the money invested in them to be lost. The councils suffered significant losses. The councils alleged that Grange had engaged in misleading or deceptive conduct in breach of s 12DA of the ASIC Act. Rares J held that Grange engaged in misleading conduct when it promoted SCDOs to councils as suitable for investors with a conservative investment strategy. This was not the case; investment in SCDOs was not consistent with a conservative investment strategy. Grange had failed to look at the individual managed portfolio agreement entered into by Wingecarribee and Grange in January 2007 which contained a prohibition on the acquisition of any product that did not have an active secondary market. 385 In ACCC v Fisher & Paykel Customer Services Pty Ltd, 386 the ACCC alleged false or misleading representations regarding consumer guarantees in the context of businesses offering extended warranties. The proceedings were brought by the ACCC under the ASIC Act pursuant to a delegation from the ASIC, as the extended warranty in this case was a financial product under the ASIC Act. Between January 2011 and December 2012, Fisher & Paykel and Domestic & General sent letters to consumers who had purchased a Fisher & Paykel appliance inviting them to purchase an extended warranty. The letters contained a number of statements, including: Your Fisher & Paykel [appliance] is now a year old, which means that you have 12 months remaining – after that your appliance won't be protected against repair costs.

Wigney J held that the extended warranty offered by Domestic & General, as agent for Fisher & Paykel Customer Services, was a financial product as defined in subss 12BAA(1) and (5) of the ASIC Act because it was a facility through which a person (the consumer) managed financial risk by managing the financial consequences to them of the appliance breaking down. 387 In sending the extended warranty letters to consumers, Fisher & Paykel Customer Services and Domestic & General contravened s 12DA of the ASIC Act because the letters represented that the consumer would not be protected against repair costs for the appliance after a period of two years from the date of purchase of the appliance unless the consumer purchased the extended warranty. Under the consumer guarantees regime in Pt 3-2, Div 1 of the ACL, a consumer may have had a right to have the appliance replaced or repaired beyond a period of two years depending on the nature of the failure to comply with the guarantee, without the purchase of an extended warranty. Under the guarantee of acceptable quality in s 54 of 385 386

Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 at [753], [957] and [962]. ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393.

387

ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 at [24].

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[11.290]

the ACL, an appliance used for residential purposes could be expected to last for up to five years or more. Section 259 of the ACL creates a right of action against a supplier in respect of, amongst other things, non-compliance with a guarantee of acceptable quality under s 54 of the ACL. The right of action under s 259 of the ACL contains no time limit. A consumer can take action under s 259 at any time so long as the terms of s 259 are satisfied. The right of action does not cease two years after purchase, or upon the expiry of any warranty provided by the manufacturer or supplier. The Court found that Fisher & Paykel did not make the relevant consumer guarantees clear to consumers. The effect of s 12DA(1A) is that the section does not apply to dealings in securities involving: • a misleading takeover document; or • a misleading fundraising document; or • a financial services guide; or • a product disclosure statement. Section 12DB of the (concerning false or misleading representations) also contains a subsection equivalent to s 12DA(1A). Why are dealings in securities involving disclosure documents excluded? In order to answer this question it is necessary to understand the different policy rationales for consumer protection and investor protection. Broadly speaking, consumer protection relates to goods and services used by consumers to meet their daily needs. The test for misleading conduct under s 18 of the ACL is an objective one: what is the likely effect of the conduct on a reasonable member of the target audience? Investor protection recognises that the value of the choses in action being acquired (eg, shares, debentures etc) will depend on the underlying value of the business. It accepts that there will always be an element of risk involved, but the investor is entitled to make an informed decision and the information made available to investors through disclosure document (eg, prospectus) must be reliable. However, so long as those responsible for preparing the disclosure document have made all reasonable inquiries, and any statements or predictions are based on reasonable grounds, there should be no further liability, if something is omitted or the predictions do not come to pass. Thus, there is some justification for due diligence defences in relation to dealings in securities. Overlap between the ACL and ASIC Act ...............................................................................................................................................................................................

Where goods are supplied in combination with financial products or services, such as goods supplied in conjunction with a credit facility, 388 or goods supplied in conjunction with an extended warranty that is a financial product, 389 it can cause difficulties in determining which legislative scheme applies as Rares J observed in [11.290]

388

ACCC v Original Mama’s Pizza & Ribs (2008) ATPR ¶42-236.

389

ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393.

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Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq). 390 It may be necessary to plead under both legislative schemes. In the case of public enforcement, the proceedings are generally brought by the ACCC under the ASIC Act pursuant to a delegation from ASIC under s 102(2)(e) of the ASIC Act. Enforcement of the ACL and the related ASIC Act provisions is regulated at an operational level by a Memorandum of Understanding (MOU) between the ACCC, ASIC and State and Territory consumer agencies. 391

390 391

Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 at [948]. Australian Consumer Law, Memorandum of Understanding, 6 July 2010. Available at: http:// www.consumerlaw.gov.au/files/2015/06/acl_mou.pdf.

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Private Remedies Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 14.

Introduction Broadly speaking, three consequences flow from conduct being found to contravene a provision in Chs 2 (General protections), 3 (Specific protections) or 4 (Offences) of the ACL. First, the person who contravenes, or who is an accessory involved in the contravention of a provision of Chs 2, 3 or 4, is exposed to the risk of the regulators taking enforcement action for the imposition of one of the public remedies discussed in Parts I and II of Chapter 13 of Corones. Secondly, the validity of any impugned provision in a contract is affected. As will be seen in this chapter, any provision in a contract that contravenes a provision in Chs 2, 3 or 4 of the ACL is illegal and unenforceable. Furthermore, the person who contravenes a provision of Chs 2 or 3, or who is involved in the contravention, is liable to pay damages and may be subject to other remedial orders in Pt 5-2 of the ACL. However, in the absence of a false or misleading representation or other contravening conduct, the mere failure to comply with a consumer guarantee does not constitute a contravention of one of the substantive prohibitions in Chs 2 or 3 and does not give rise to an action for damages under ACL, s 236 or other private remedial relief in Pt 5-2. Part 5-4 of the provides for separate private remedies for failure to comply with consumer guarantees. 1 [12.05]

Evidence – findings in other proceedings Generally, an applicant bears the onus of proof in relation to each element of a cause of action, and findings by one court cannot be used as evidence to substantiate a claim in another action. However, s 137H of the CCA provides that in a proceeding against a person, under s 236(1) of the ACL for damages, or in an application under ss 237(1) or 239(1) of the ACL for compensation orders, a finding of any fact by a court made in proceedings under ss 228, 232, 246, 247, or 248 of the ACL, or for an offence [12.10]

1

See Chapter 18.

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[12.15]

against a provision of Ch 4 of the ACL, in which that person has been found to have contravened, or been involved in a contravention of Chs 2, 3, or 4 of the is prima facie evidence of that fact. 2 Thus, where the ACCC successfully institutes public proceedings for the imposition of fines, civil penalties, injunctions or an order for corrective advertising for a contravention of Chs 2, 3 or 4 of the ACL, those persons who have suffered loss or damage as a result of the contravention may bring a private action under ss 236(1), 237(1) or 239(1) to recover the loss or damage. The court in the private action is not absolutely bound by the former finding in the public action (for example, fresh evidence may be put forward), but the prima facie presumption made by CCA, s 137H may considerably ease the task of the private applicant.

Consequences of illegality Provisions of contracts that contravene one of the substantive prohibitions in Chs 2, 3 or 4 of the ACL are not merely void, but are also illegal. Thus the courts are unlikely to allow a cause of action for recovery of moneys paid under a contract which is illegal under the ACL. 3 It is submitted that in actions for the recovery of moneys paid under a contract which is void by virtue of a contravention of a provision of Chs 2, 3 or 4, it would be proper to apply the in pari delicto maxim. If both parties are equally at fault, the effect of the maxim is that one party cannot recover what has been given to the other under a prohibited contract if it is necessary to rely on the illegality to do so. The ACL does not exclude the general operation of the common law. While ACL, s 243(a) provides for an order declaring a contract to be void, it does not preclude illegality from being pleaded by way of a defence to an action for damages. 4 [12.15]

Severability ............................................................................................................................................................................................... [12.20]

Section 16 of the ACL provides:

(1) If the making of a contract after the commencement of this section contravenes this Schedule because the contract includes a particular provision, nothing in this Schedule affects the validity or enforceability of the contract otherwise than in relation to that provision, so far as that provision is severable. (2) This section has effect subject to any order made under Division 4 of Part 5-2.

2 3 4

This provision reflects TPA, s 83. Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120 at 343 (Cowp), 1121 (ER). Ketchell v Master Of Education Services Pty Ltd (2007) 226 FLR 169 at [35] (Mason P, with whom Basten JA and Handley AJA agreed).

[12.30]

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This provision is in similar terms to s 4L of the CCA which was considered by the High Court in SST Consulting Services Pty Ltd v Rieson. 5 In that case it was held that s 4L requires rather than permits the severance of the offending provision. 6 The facts were, a loan was made on the basis that the borrower was to use a company associated with the applicant for its freight forwarding needs. The loan was guaranteed by the respondent. The High Court confirmed that the arrangement constituted third line forcing which was prohibited by s 47(1) of the TPA. Section 4L required the offending provisions to be severed, and accordingly the guarantee could be enforced. 7 If a provision in a contract is illegal under the Chs 2, 3 or 4 of the ACL, s 16 requires it to be severed. If it cannot be severed, the entire agreement is enforceable, subject to any orders that may be made under Div 4 of Pt 5-2 of the ACL. Section 237 which is in Div 4 of Pt 5-2 allows the court on the application of an injured person, or on the application of the regulator made on behalf of one or more such injured persons, to make such order or orders as the court thinks appropriate, including an order declaring a contract to be void or an order amending a contract so as to do justice to the parties. This approach allows for greater contractual certainty.

Declarations The Federal Court's power to grant declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) in relation to public enforcement of the ACL is considered at [13.145] (Corones). The granting of a declaration is a discretionary remedy. In cases of false or misleading advertising a declaration will often be the most appropriate form of relief. 8 If a declaration is granted, it will be drafted to reflect the actual finding in the case. The court may grant a declaration even though the contravening conduct has ceased. 9

[12.25]

Declarations: unfair terms ...............................................................................................................................................................................................

Section 250 of the ACL is set out at [13.150] (Corones). If a term in a standard form contract is declared under s 250 of the ACL to be an unfair term, s 23(1) of the ACL provides that it is void. The word “term” is not defined. Where a term has several parts, but only one part is found to be unfair, it seems that only the offending part is void and the remainder of the term will be enforced if the contract is [12.30]

5

SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516.

6 7

SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at 533 [53]. See also Fadu Pty Ltd v ACN 008 112 196 Pty Ltd as Trustee of the “International Linen Service Unit Trust” (2007) ATPR ¶41-206 at [18] (Finn J). Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [5] (Nicholas J).

8 9

Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [5].

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[12.30]

capable of operating without the unfair part of the term. Section 23(2) provides that the remainder of the contract continues to bind the parties if the contract is “capable of operating without the term”. The words “capable of operating without the term” are not defined. Terms relating to price and subject matter are excluded from being considered as unfair by s 26 of the ACL. Since terms that define the main subject matter of consumer contracts are not affected there is unlikely to be a total failure of consideration in the event that another term is held to be unfair and void. The contract may be capable of operating without the term, even though the party seeking to apply or rely on the term would not have entered into it without the unfair term. The contract only has to “operate” without the term; it does not need to have the same effect. Any acts performed in reliance upon the unfair term will be unsupported by the contract. For example, if there has been a payment of money or transfer of property in reliance upon an unfair term, a court has the power under s 237 of the ACL, read in conjunction with s 243(d) of the ACL, to order the respondent to refund the money. If the operation of the unfair term has resulted in one party being forced to enter into a second contract, for example, the exercise of an option, the court would have the power under s 237, read in conjunction with s 243 of the of the ACL, to declare that the second contract is also void. Section 232(3) of the ACL provides that a court may grant an injunction on the application of any person in relation to conduct constituted by relying on, or purporting to rely on, a term of a consumer contract that has been declared to be void under s 250, as if the conduct were a contravention of a provision of Ch 2 of the ACL. In Ferme v Kimberley Discovery Cruises Pty Ltd, 10 the applicants purchased a packaged tour that incorporated as its central feature, a cruise in the Kimberley region of Western Australia. The applicants had paid the full price in advance. Subsequently the cruise company cancelled the cruise because of a severe tropical cyclone which meant that “the cruise was likely to be unsafe and was certain to be unpleasant”. 11 The respondent sought to rely on a provision of their terms and conditions which said that where a cruise was cancelled due to an “unexpected event” (which was defined quite expansively and included many things which would be within the control of the cruise company). The clause went on to provide “the passenger accepts that the passenger will not be entitled to any compensation or a refund of the fare paid should this occur except as provided for in these Cruise Ticket Conditions” (the forfeiture term). It was held the contracts were standard form contracts and that the forfeiture term was unfair and therefore void by reason of s 23(1) of the ACL. 12 The applicants were no longer precluded by contract from seeking a refund of their fares. In accordance with the 10 11

Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 (2 September 2015). Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [3].

12

Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [99].

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test established in Baltic Shipping Company v Dillon, 13 the applicants were entitled to restitution under the common law if there had been a total failure of consideration. There would not be a total failure of consideration if the applicants had received a substantial part of the benefit expected under the contract. 14 The applicants had been flown from Darwin to Kununurra and had been provided with accommodation. However, the court held that the main object of the package was the Kimberley cruise, and that they were entitled to restitution. 15 In the alternative, the applicants claimed damages under s 236 of the ACL. Although it was unnecessary to decide the point, the court concluded that the applicants were not entitled to damages under s 236 because the inclusion of an unfair term in the contract, and relying on it, did not contravene Chapter 2 or 3 of the ACL. 16 The applicants had not sought relief under s 237 of the ACL.

Damages [12.35]

Section 236 of the ACL provides:

(1) If: (a) a person (the claimant) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3 the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. (2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.

Section 236 is the ACL equivalent of s 82 of the CCA. One difference between s 236 of the ACL and s 82 of the CCA is that the words “suffers loss or damage by the conduct of another person” in s 82 have been replaced with “suffers loss or damage because of the conduct of another person” in 236. 17 The words “because of” are also used as a test of causation in s 139(1)(d) of the ACL. Parliament did not intend to change the degree of causation required between the conduct and the loss or damage suffered by the claimant. The Second Explanatory Memorandum, accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states: Division 3 of Part 5-2 allows a person to seek recovery of the amount of loss or damage caused by another person's contravention of the consumer protection provisions in Chapters 2 or 3 of the ACL. It also allows such recovery of loss or damage from a person involved in a contravention. 13

Baltic Shipping Company v Dillon (1993) 176 CLR 344.

14 15 16

Baltic Shipping Company v Dillon (1993) 176 CLR 344 at 350 (Mason CJ). Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [115]. Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 at [118].

17

It is worth noting that the words “because of” were used in s 159(1), the action for damages under the Fair Trading Act 1999 (Vic), and the equivalent to s 82(1) of the TPA. They are also used in the action for damages under s 217 of the Australian Consumer Law and Fair Trading Act 2012 (Vic).

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[12.40]

The damages provision in the ACL replace section 82 of the TPA and existing jurisprudence should continue to apply. 18

The Second Explanatory Memorandum also states that when transferring the provisions of the TPA into the ACL, the opportunity was taken to express the law in a clearer style. 19 The Treasury publication, The Australian Consumer Law – An Introduction, states: The ACL has been drafted in accordance with the requirements of plain language drafting. Existing TPA provisions included in the ACL have, in most cases, been modified and reordered to make the law clearer and also to reflect changes in drafting conventions since they were initially inserted into the TPA. With the exception of those areas where there have been policy changes, these drafting changes are not intended to alter the legal effect of these provisions. 20

Section 15AC of the Acts Interpretation Act 1901 (Cth) provides: Where: (a) an Act has expressed an idea in a particular form of words; and (b) a later Act appears to have expressed the same idea in a different form of words for the purpose of using a clearer style; the ideas shall not be taken to be different merely because different forms of words were used.

The preposition “by” for the purposes of s 82 of the CCA has been construed to mean “by reason of” or “as a result of”, 21 and the change in s 236 of the ACL to “because of” has the same meaning as “by reason of” or “as a result of”. There is no difference between the causation tests under s 236 of the ACL and s 82 of the TPA/CCA. 22 Consequently, a claimant will have to prove that conduct in contravention of a provision of Chs 2 or 3 of the ACL was a material cause of the loss or damage, even though other causative factors may also have contributed to the loss. “Common sense” approach to causation ...............................................................................................................................................................................................

Section 236 of the ACL links the loss or damage to the contravention: the losses suffered must flow from the inducement, requiring that a direct causal link be established, [12.40]

18

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [15.13]-[15.14].

19

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.8] states: “much of the TPA has been in place for over 30 years, so a number of ACL provisions have been redrafted to comply with the requirements of plain English drafting.” The Australian Consumer Law – An Introduction, p 19. Munchies Management Pty Ltd v Belperio (1989) ATPR ¶40-926 at 50,037 (Fisher, Gummow and Lee JJ); and Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (Mason CJ, Dawson, Gaudron, and McHugh JJ).

20 21

22

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [15.75]-[15.76]. See Henville v Walker (2001) 206 CLR 459 at [132] (McHugh J); and I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [142]-[143] (Kirby J).

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but s 236 does not provide any further guidance as to the appropriate test. The rules of causation and remoteness in relation to s 236 of the ACL are the same as those applied under the torts of negligence and deceit. Under the common law, the courts have traditionally applied the “common sense” approach. 23 In relation to the law of negligence, the question of causation is whether the negligent act or omission was a factual cause of the plaintiff's loss or injury as a matter of ordinary common sense and experience. 24 This approach has been relied upon in the context of s 82 of the TPA, 25 but its usefulness in the context of the has been called into question. 26 If the claimant would have entered into the transaction even if the representation had not been made, it cannot be said that the losses suffered have flowed from the inducement. Such an approach is likely to be taken in relation to s 236 of the ACL. In Wardley Australia Ltd v Western Australia, 27 the High Court established that the term “by” in s 82 of the invoked common law analogies of causation: The statutory cause of action arises when the plaintiff suffers loss or damage “by” contravening conduct of another person. “By” is a curious word to use … But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s 82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v Stramare (E & M H) Pty Ltd, except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Had Parliament intended to say something else, it would have been natural and easy to have said so. 28

In March v Stramare (E & M H) Pty Ltd, 29 Mason CJ (with whom Toohey and Gaudron JJ agreed) observed: The common law tradition is that what was the cause of a particular occurrence is a question of fact which “must be determined by applying common sense to the facts of each particular case”… 30 23

For a consideration of the “common sense” approach to causation see the Hon Justice Allsop, “Causation in Commercial Law” in Degeling, Edelman, Goudkamp (eds), Torts in Commercial Law (Thompson Reuters, Sydney, 2011) and Stapleton, “Reflections on Common Sense Causation in Australia” in Degeling, Edelman, Goudkamp (eds), Torts in Commercial Law (Thompson Reuters, Sydney, 2011).

24

March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 at 522 (Deane J) and at 517 (Mason CJ, with whom Toohey J agreed).

25

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (Mason CJ, Dawson, Gaudron, and McHugh JJ). See Stapleton, “Reflections on Common Sense Causation in Australia”, in Degeling, Edelman, Goudkamp (eds), Torts in Commercial Law (Lawbook Co., Sydney, 2011), and Kelly, “Causation and s 82 of the Trade Practices Act”, at http://www.hearsay.org.au/index.php?option=com_content&task= view&id=828&Itemid=203. Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.

26

27 28 29

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (Mason CJ, Dawson, Gaudron, and McHugh JJ). March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506.

30

March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 at 515.

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[12.40]

In Henville v Walker, 31 a majority of the High Court emphasised that a “common sense” approach is necessary in applying common law concepts of causation under s 82 of the CCA, rather than a mechanical application. The “common law conceptions of causation” that may be applicable in relation to s 236 of the ACL include: • the contravention needs to be a cause, but need not be the sole cause of the loss or damage; 32 • the contravention must make a “material contribution” to the loss or damage; 33 • the “but for” test of causation in tort law “… applied in a common sense and not a pedantic way, provides a … useful approach to the issue of causation”; 34 and • there may be an abnormal, superseding event between the contravening conduct and the loss or damage that, as a matter of common sense, could be said to break the chain of causation. 35 The “but for” test of causation was considered by the Full Federal Court in Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson. 36 At issue were the damages that could be claimed against a manufacturer under s 74B and s 74D of the TPA. The court examined the effect of the authorities on the test for causation under the common law in Australia and concluded: The “but for” test serves, in this field of discourse, as a negative criterion. That is to say, unless the defendant's actionable conduct is shown to be a necessary condition of the plaintiff's injury, the plaintiff's claim will not succeed. Thus, in Amaca v Ellis at [11]-[12], it was accepted that a plaintiff must show on the balance of probabilities that the actionable conduct of the defendant was a necessary condition of the occurrence of the harm in respect of which the plaintiff claims damages. It is true, as counsel for Mr Peterson pointed out, that this rule was not the subject of argument in Amaca v Ellis; but it is also true that this rule represents the law in Australia binding on all courts below the High Court. 37

The Full Court cited the following passage from the judgment of Kiefel J (with whom Hayne, Crennan and Bell JJ agreed) in Tabet v Gett: 38 The common law requires proof, by the person seeking compensation, that the negligent act or omission caused the loss or injury constituting the damage. All that is necessary is 31 32

Henville v Walker (2001) 206 CLR 459. Henville v Walker (2001) 206 CLR 459 at [14] (Gleeson CJ) and [106] (McHugh J). See also I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [33] (Gleeson CJ) and Taylor v Crossman (No 2) [2012] FCAFC 11 at [64]-[65].

33

36 37

Henville v Walker (2001) 206 CLR 459 at [106] (McHugh J). See also North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 at [71]. McCarty v Mc Intyre [1999] FCA 784 (Full Court) and Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76 at [67] (McLure P). Henville v Walker (2001) 206 CLR 459 at [14 (Gleeson CJ), [106] (McHugh J) and Gaudron J at [58]. See also Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 356-7 (Brennan J). Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145 (Keane CJ, Bennett and Gordon JJ). Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145 at [99].

38

Tabet v Gett (2010) 240 CLR 537 at [111]-[113].

34 35

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that, according to the course of common experience, the more probable inference appearing from the evidence is that a defendant's negligence caused the injury or harm. “More probable” means no more than that, upon a balance of probabilities, such an inference might reasonably be considered to have some greater degree of likelihood; it does not require certainty. The “but for” test is regarded as having an important role in the resolution of the issue of causation, although more as a negative criterion than as a comprehensive test. The resolution of the question of causation has been said to involve the common sense idea of one matter being the cause of another. But it is also necessary to understand the purpose for making an inquiry about causation and that may require value judgments and policy choices. Once causation is proved to the general standard, the common law treats what is shown to have occurred as certain. The purpose of proof at law, unlike science or philosophy, is to apportion legal responsibility. That requires the courts, by a judgment, to “reduce to legal certainty questions to which no other conclusive answer can be given”. The result of this approach is that when loss or damage is proved to have been caused by a defendant's act or omission, a plaintiff recovers the entire loss (the “all or nothing” rule).

Evidence of causation ...............................................................................................................................................................................................

In relation to proof of causation the courts distinguish between cases where the plaintiff passively suffers a loss from another's act where proof of causation is not required, and cases where the plaintiff is not passive but makes a positive decision to enter into a transaction based on a misrepresentation said to be material, which requires proof of causation. 39 A case that falls into the former category is Janssen-Cilag Pty Ltd v Pfizer Pty Ltd, 40 where Janssen passively suffered loss from Pfizer's misleading conduct because consumers were led by the misleading conduct to buy less of Janssen's product. Pfizer argued that only a person who relied on the misleading representation which constituted the contravention of s 52 of the TPA could recover damages under TPA, s 82. That is, only a consumer who was led by the misleading conduct to buy the product could recover damages (direct loss), and not a competitor, Janssen, who had passively lost sales as a result of consumers buying less of its product because of the misleading conduct by Pfizer (indirect losses). Lockhart J rejected this argument and refused to give s 82 a restrictive interpretation. His Honour held that the wording of s 82 did not impose some general requirement that damage can be recovered only where the applicant relies upon the conduct of the [12.45]

39

See De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [64] (Stone J) referring to two decisions of the New South Wales Court of Appeal, Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at [155]-[158] and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 at [12]-[13].

40

Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526.

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[12.50]

respondent constituting the contravention, and that s 82 can be relied upon by a rival trader whose business has suffered as a result of the contravening conduct. 41 Lockhart J concluded: Whilst the applicant's loss or damage must be caused by the respondent's misleading or deceptive conduct, I see nothing in the language of the Act or its purpose to warrant the suggestion that the right of an applicant for damages under s 82 is confined to the case where he has relied upon or personally been influenced by the conduct of the respondent which contravenes the relevant provision of Pt IV or Pt V of the Act. Examples abound to prove the point, but it is sufficient if I take one simple case. A manufacturer of, say, leather goods may have established over many years a large and valuable reputation amongst the public or a significant section of the public. The respondent may commence to carry on business of manufacturing leather products under a name deceptively similar to that of the applicant and by which the applicant's goods are known. Members of the public may be misled into believing that the respondent's business is the business of the applicant or associated with the business of the applicant and they may take their business to the respondent. The applicant has not relied on any representation of the respondent or been misled or deceived by it, but his loss is the loss of business occasioned directly by the respondent's conduct (or the consequent loss of profit). I can conceive of no reason why the Act, which is designed to foster and promote competition and, by Pt V, to prevent misleading or deceptive conduct, should be given a restrictive interpretation in s 82 such that only persons who relied upon the representation are entitled to recover loss or damage from the respondent. The evident purpose of the Act leads in my opinion plainly to a different conclusion. 42

Proving reliance ...............................................................................................................................................................................................

Where the plaintiff is not passive but makes a positive decision to enter into a transaction based on a misrepresentation said to be material, the applicant must prove by direct evidence that it relied upon the misrepresentation by, for example, entering into a contract. In Wardley Australia Ltd v Western Australia, 43 the High Court stated: [12.50]

Here we are concerned with contraventions of s 52(1) in the form of misleading conduct constituted by misrepresentations. In this situation, as at common law, acts done by the representee in reliance upon the misrepresentation constitute a sufficient connexion to satisfy the concept of causation. 44

The courts are likely to treat a self-serving assertion of reliance cautiously and are likely to require other evidence of reliance. In Hanave Pty Ltd v LFOT Pty Ltd, 45 Kiefel J stated: 41 42 43 44

45

Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at [16]. Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at [19]. Lockhart J’s views were quoted with approval by Gummow J in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at [101]. Wardley Australia Ltd v Western Australia (1992) 175 CLR 514. Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (Mason CJ, Dawson, Gaudron and McHugh JJ). See also I&L Securities v HWT Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 127 [55] (Gaudron, Gummow and Hayne JJ). Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 at 42,793.

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Courts ought to be, and no doubt are, cautious in accepting mere assertions of reliance as essentially self-serving, and will usually attempt to assess that prospect by reference to objective criteria. This will be so particularly where the misrepresentation is not necessarily likely to be recalled as having had a strong impact. 46

In De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq), 47 De Bortoli Wines Pty Ltd (DBW) acquired more than 19 million shares in HIH Insurance Ltd (HIH). HIH was eventually liquidated and the shares became worthless. DBW submitted a proof of debt to the liquidators claiming to be owed more than $9 million, being the total cost of the HIH shares acquired by DBW. HIH contravened s 52 of the TPA directly, by providing false and misleading representations in financial statements, reports and media releases issued by HIH and in the statements of its officers, and indirectly, by way of third party analysts' reports based on information provided by HIH. The liquidators rejected the proof of debt and DBW sought to have the liquidators' decision set aside. In relation to the causal link required under s 82 of the TPA, DBW argued that the court could infer reliance from the fact that DBW purchased the HIH shares. 48 Stone J held that the inference of reliance is rebuttable and that any inferred reliance must be weighed in the light of all the evidence. The weight of evidence in the case rebutted any such inference. Mr De Bortolli could not identify any marking or notation on the HIH or stockbroker documents that he had made to indicate that he had read the documents. Stone J concluded: In the absence of any contemporaneous notes or marking on the documents his assertion that he paid particular attention to statements highlighted by his legal advisors almost nine years later cannot be regarded reliable evidence. 49

Despite the continuing fall in HIH's share price, Mr De Bortolli continued to invest in the company because, in his judgment, the shares still represented good value. Mr De Bortoli explained that in the past he had invested in numerous companies where the share price had dropped significantly and admitted that he was “backing my own judgment”. 50 Her Honour concluded: Mr De Bortoli's actions over this period show that, far from relying on external information from HIH or any other source, Mr De Bortoli pursued his own strategy 46

47 48

Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 at 42,793 [51], Wilcox J agreeing at [11]. See also Razdan v Westpac Banking Corporation [2014] NSWCA 126 at [15] (McColl JA); and Juniper Property Holdings No 15 Pty Ltd v Caltabiano [2016] QSC 5 at 75-6 (Jackson J). De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253. De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [65] based on the Lord Blackburn’s comment in Smith v Chadwick (1884) 9 App Cas 187 at 196 that:

49

if it is proved that the defendants with a view to induce the plaintiff to enter into a contract made a statement to the plaintiff of such nature as would be likely to induce a person to enter into a contract, and it is proven that the plaintiff did enter into the contract, it is a fair inference of fact that he was induced to do so by the statement. De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [90].

50

De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [99].

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[12.55]

relying on his own views about investment generally and his own belief that what goes down must come up. His purchase of a large volume of shares in the face of strong independent statements in the financial press and by analysts that HIH was in severe financial trouble was not made in reliance on representations from HIH but on his own strategic plan. 51

An appeal from this decision on the basis that Stone J erred in finding that the inference was rebutted by the evidence was dismissed. 52 The Full Court found that Stone J did not err in finding that Mr De Bortoli did not rely on the misrepresentations. Leave to appeal to the High Court was refused. 53 However, direct evidence of reliance may be unnecessary. The circumstances in which an inference may be drawn were considered by Kiefel J in Hanave Pty Ltd v LFOT Pty Ltd. 54 Kiefel J held that causation can sometimes be resolved by the court objectively determining the likely effect of the misleading conduct. Her Honour stated: [12.55]

The question of causation can sometimes be resolved not by direct evidence as to what part a misrepresentation played in the process of entry into contract, but by a Court determining what effect must be taken to have resulted. Indeed this course may sometimes be preferable to one which rested solely on evidence later given on the point. In Gould v Vaggelas [(1985) 157 CLR 215 at 236] Wilson J held that if a material representation is calculated (which is to say, objectively likely …) to induce the representee to enter into a contract and the person in fact enters into a contract, a fair inference arises that the representation operated as an inducement, adding that it need not be the only cause … That part of Wilson J's judgment was not stated to be an exhaustive rule, but is to be seen as a guide to a question of fact which may arise. A conclusion of inducement may then be reached where a combination of factors, including the quality of the representation itself, goes unanswered. In relation to the representation itself it would need to be of a kind likely to provide that inducement and such that … commonsense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract. 55

In Henville v Walker, 56 Mr Henville was an architect and property developer. Mr Walker was a real estate agent. Mr Henville approached Mr Walker to assist him to locate a suitable property for development. Mr Walker represented to Mr Henville that there was a significant demand for luxury units in Albany and that if he constructed units on the proposed site he was likely to achieve a sale price of between $250,000 and $280,000. After these misleading statements were made, Mr Henville prepared his own feasibility study that was hopelessly wrong. If it had been prepared with due care, Mr Henville 51 52

De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 at [103]. De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2012] FCAFC 28 (Jacobson, Siopis and Nicholas JJ).

53 54 55

De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2012] HCASL 157 (13 November 2012). Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687. Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 at [46]. Wilcox J agreed (at [11]). Emmett J dissented. This objective approach to proving causation was confirmed by the Full Federal Court in Haros v Linfox Australia Pty Ltd [2012] FCAFC 42 at [52]-[54] (Gray, Marshall and Bromberg JJ).

56

Henville v Walker (2001) 206 CLR 459.

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would have realised before he purchased the property that the investment was not profitable. The High Court held that the misleading statements by Mr Walker were still a direct cause of Mr Henville's loss. 57 In Fabcot Pty Ltd v Port Macquarie-Hastings Council 58 the primary judge, Hammerschlag J, held although the Council engaged in misleading conduct contrary to s 42(1) of the Fair Trading Act 1987 (NSW), Woolworths had not demonstrated that that it had suffered loss or damage by the Council's conduct for the purposes of s 68(1) of the Fair Trading Act 1987 (NSW). The court did not accept that Woolworths would have acted any differently had it known that the Council had commenced to deal with Coles. The primary judge found that the hypothetical evidence of Woolworths' executives that they would have accepted the Council's demands if they had known of Coles' involvement was coloured by the benefit of hindsight and had little probative value. The New South Wales Court of Appeal upheld this finding. 59 Indirect theory of causation ...............................................................................................................................................................................................

However, where there are a series of transactions or events and intermediaries are involved – for example, the misleading conduct of the respondent induces an innocent party to act in some way, and the innocent party's act causes the applicant's loss – it will be necessary to plead an indirect theory of causation. 60 In Digi-Tech (Australia) Ltd v Brand, 61 the appellants (investors) submitted that it was not necessary for a party seeking to recover damages to show direct reliance upon misleading conduct by the representor. The appellants relied upon an independent valuation report based on alleged misleading profit forecasts provided by Digi-Tech. They submitted that the misleading conduct might cause other persons to act in a way that led to the loss suffered by a plaintiff. They described the “indirect causation theory” as follows: [12.60]

if Digi-Tech had not produced misleading and deceptive forecasts concerning the revenue and gross margin of the products, Deloitte would not have produced a valuation to support the price of $72.5m. In the absence of that valuation, or any valuation supporting that price, the investment scheme would not have gone ahead and Mr Urwin 57

Henville v Walker (2001) 206 CLR 459 at [134] (McHugh J, with whom Gummow and Hayne JJ agreed). It is now necessary to consider s 137B of the CCA which provides that a court can reduce the damages awarded where the failure of the claimant to take reasonable care had contributed to the loss.

58

Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726. The facts of this case are set out at [11.105]. . Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [203]-[206]. Bond Corporation Pty Ltd v Theiss Contractors Pty Ltd (1987) 14 FCR 215 at 222-223. See also Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58 (Sheller JA, Ipp JA and Mc Coll JA) at [164] and Caltex Australia Petroleum Pty Ltd v Charbden Haulage Pty Ltd [2005] FCAFC 271 where the respondent claimed that it had suffered damage due to an allegedly incorrect remediation report prepared by the appellant, but failed to prove its case because it did not establish that it had relied on the report.

59 60

61

Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 (Sheller JA, Ipp JA, and McColl JA).

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[12.65]

would not have proposed the scheme to any of the investors. It was submitted that Digi-Tech's misleading conduct, thereby, caused Mr Urwin to act in a way that led to loss or damage to the appellants. 62

The New South Wales Court of Appeal rejected the “indirect causation theory” as a test of causation because it had not been pleaded in the original statement of claim. However, by way of obiter the court stated that in cases of misrepresentation inducing a transaction, where plaintiffs claim to have suffered loss because they are induced by misleading representations of other persons, they must prove that they relied on those misrepresentations. 63 This reasoning was approved by the New South Wales Court of Appeal in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd. 64 Breaks in the chain of causation ...............................................................................................................................................................................................

The claimant must establish causation between the conduct at issue and the loss or damage suffered. Causation will be established if the claimant can demonstrate that it relied on the misleading conduct. It is sufficient if the contravening conduct is a cause of the loss, so long as it materially contributes to the loss. 65 A break in the chain of causation requires a supervening event such that the misleading representation is no longer an operative cause of the loss. 66 In Pavich Pty Ltd v Bobra Nominees, French J stated: [12.65]

The primacy of the causation principle in s 82 would seem to exclude reliance upon such concepts as mitigation or contributory negligence, unless it can be shown that the applicant's own carelessness or disregard for his or her interest is the cause of all or some part of the claimed loss. 67

In Nella v Kingia Pty Ltd, 68 the applicants contended that they were induced to acquire a hotel business by misleading representation as to the estimate of takings from the sale of beer. The applicants were told at the time they inspected the hotel that the actual sales figures were not available. The applicants decided to purchase the hotel on the basis of the estimates alone, without enquiring beyond them. It was argued that the chain of causation was broken by the applicants' own imprudence in not bothering to check the 62 63 64 65 66

67

68

Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at [149]. Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at [159]. Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd. (2008) 73 NSWLR 653 at [12]-[13] (Giles JA) and [616]-[618] (Ipp JA). I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [3] (Gleeson CJ); and Henville v Walker (2001) 206 CLR 459 at [106] (McHugh J). Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 356-7 (Brennan J); and Henville v Walker (2001) 206 CLR 459 at [14] (Gleeson CJ). For a case in which it was alleged that mismanagement of the franchise that had been acquired in reliance upon the misleading representations about profit levels, broke the chain of causation, see Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 at [64]-[65] (Steytler J). See Pavich Pty Ltd v Bobra Nominees (1988) ATPR (Digest) ¶46-039 at 53,124 (French J) cited with approval by the Full Federal Court in Munchies Management Pty Ltd v Belperio (1989) ATPR ¶40-926 at 50,037 (Fisher, Gummow and Lee JJ). Nella v Kingia Pty Ltd (1989) ATPR (Digest) ¶46-046.

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estimates. French J rejected this argument; however, his Honour reduced the amount of the loss claimed by the amount that was attributable to the losses incurred as a result of the applicants' continued operation of the business after it became clear that it was not profitable. 69 While subsequent events by an outside agency cannot be regarded as a supervening event breaking the chain of causation, they can be taken into account when assessing the true purchase value of a business at the date of purchase. In Kizbeau Pty Ltd v WG & B Pty Ltd, 70 the appellant purchased a hotel business from the respondent in 1988. The appellant contended that they were induced to buy a hotel business by a misleading representation about the ability to hold seminars in the hotel when condition (p) of the Town Council planning permit prohibited this. From 1988 to 1991, the appellant conducted the business as though condition (p) did not exist. The value of the business with condition (p) was considerably less than the value of the business without (p). In 1991 the Town Council amended condition (p) by adding condition (s) which allowed for seminars of no more than 50 people. The High Court held that in assessing the value of the hotel at the date of purchase, subsequent events (the insertion of condition (s)) were admissible to prove the value of the business at the date of purchase. 71 Once the changes occurred they affected the future revenues and consequently the value of the business. Furthermore, the court held that damages are to be assessed as compensation for loss actually suffered, and as the business had been conducted from 1988 to 1991 as if condition (p) did not exist it caused no diminution in the value of the business. 72 Reliance and failure to verify a representation ...............................................................................................................................................................................................

Questions of reliance and causation are questions of fact and in many cases it will be clear that the representations were relied upon. For example, in Karawi Constructions Pty Ltd v Bonefind Pty Ltd, 73 the representation was that a commercial building when completed would consist of three floors with car parking for five cars and the net lettable area of 180 square metres. In fact, the net lettable area was only 137.4 square metres. The applicant's managing director, Mr McDougall gave evidence that he relied upon the representation as to the net lettable area and that: “If [the lettable area] had been any less than 180 square metres … it just wouldn't have been feasible to build the jolly thing”. The respondent submitted that Mr McDougall was an experienced real estate agent and property developer, and that his failure to verify the net lettable area negated reliance. Beaumont J rejected this submission: [12.70]

69 70 71 72

Nella v Kingia Pty Ltd (1989) ATPR (Digest) ¶46-046 at 53,141. Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 (Brennan, Deane, Dawson, Gaudron and McHugh JJ). Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291. Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 296-7.

73

Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR ¶41-265.

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[12.75]

There may be cases under s 52 of the Act where, in considering whether, in all the circumstances, the conduct of the respondent was misleading or likely to mislead, a failure to verify a representation may negate reliance … But that kind of case, which must depend on its own circumstances, is not apposite to the present case. 74

In relation to this passage McDougall J, in Ingot Capital Investment v Macquarie Equity Capital Markets (No 6), stated: 75 Of course, Beaumont J was not seeking to lay down a rule of general application. His Honour was making the point that the question, whether reliance has been established, is something that needs to be considered on the whole of the available material (including, as I have said above, the nature of the representations found to have been made and what happened after they were made); and that, in some circumstances, an inference, adverse to reliance, may be drawn from a failure to check or verify a representation.

For example, if that which was represented were unlikely or improbable, evidence of reliance without any attempt at verification might be treated with some suspicion. On the other hand, if that which was represented were inherently plausible, and if the representor was someone who should be thought to have knowledge of the subject matter of the representation, a failure to check or verify might not negative reliance.In CPI Group Ltd v Stora Enso Australia Pty Ltd, 76 the Full Federal Court pointed out that it is no answer to a claim of misleading conduct by silence to say that the person misled should have made his or her own enquiries and that if they had they done so it would have revealed the true position. 77 Whether a failure to verify might constitute contributory fault for the purposes of s 137B of the CCA is considered at [12.130]. Declaration of non-reliance ...............................................................................................................................................................................................

Where the conduct at issue involves allegedly misleading pre-contractual representations and the applicant signs a deed or declaration of non-reliance, the deed or declaration may be evidence of non-reliance on the misleading pre-contractual representation. 78 French CJ elaborated on this issue in Campbell v Backoffice Investments Pty Ltd: [12.75]

[I]f a person expressly declares in a contractual document that he or she did not rely upon pre-contractual representations, that declaration may, according to the circumstances, be evidence of non-reliance and of want of a causal link between the impugned conduct and the loss or damage flowing from the entry into the contract. 79 74 75 76 77

Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR ¶41-265 at 41,570. Ingot Capital Investment v Macquarie Equity Capital Markets (No 6) [2007] NSWSC 125 at [457] and [458]. CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193.

78

CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193 at [68] citing Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 at 558. Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 (13 April 2011).

79

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [31] 321.

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For a declaration of non-reliance to be effective it must be clear in its terms, brought to the attention of the other contracting party, and the declaration will generally require the other contracting party to obtain professional advice in relation to its effect. A declaration of non-reliance was successfully relied upon in Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd. 80 In Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd, 81 the appellants (the tenants) leased shops in a shopping centre owned by the respondents. Before signing the lease the tenants were required by the landlord to specify in a deed any representations that had been made to them concerning the premises. The deed was signed in consultation with their solicitor. The tenants submitted that representations that a national chicken take-away operator would lease space in the centre misled them as to the characteristics the centre would have when the tenants entered into possession. These representations were not included in the deed signed by the tenants. The trial judge found that the misleading statements were in fact made and that they did induce the tenants to enter into the lease. On appeal, a majority of the Full Federal Court, (Morling and Wilcox JJ), found that even if the statement was made, it did not induce the tenants to enter into the lease. Their Honours reached this conclusion on the basis that after they took possession of their shop, it must have been apparent to them that a national chicken operator had not leased space in the centre. They made written complaints to their landlord about a variety of matters on seven occasions between April 1982 and they signed a deed which set out the matters that they had relied upon and no mention was made in the deed of a representation that a national chicken take-away operator would lease space in the centre. Their Honours concluded that the tenants had made their own assessments about the prospects of the centre: the combination of their failure to make any mention in the deed that they relied on Mr Wakeham's statement and their subsequent failure to make any complaint about it (in the context of a long history of complaints about other matters) provides a substantial basis for a finding that, even if the statement was made to them, it did not induce the Pallesons to enter into the lease. 82

Similarly, in Leda Holdings Pty Ltd v Oraka Pty Ltd, 83 a majority of the Full Federal Court (Branson and Emmett JJ) concluded that a tenant did not rely nor was induced by a vague prediction made by a Mr Keast, a director of the landlord, Leda Holdings, in informal circumstances concerning his optimistic expectations about occupancy levels at the shopping centre on opening. 80

Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd (2005) 220 ALR 211 (Branson, Nicholson and Jacobson JJ). See also Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048; and Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601.

81 82

Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048. Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048 at 53,147.

83

Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601.

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[12.80]

The tenant did not refer to Mr Keast's prediction as a matter that induced it to enter into the shopping centre lease in the deed of acknowledgment that it signed prior to entering into the lease. Furthermore, the tenant had extensive commercial experience in negotiating leases; and it was aware that information about expected occupancy levels could have been obtained by it from the landlord's agent with whom it had extensive dealings. 84 Branson and Emmett JJ concluded: Mr Johnson [managing director of Oraka] had available to him … ample means for obtaining specific information concerning the letting of the other shops in the shopping centre. In particular, he was aware that such information was readily available from Ms Vale [the landlord's agent]. There would be nothing surprising in his not placing reliance, in the circumstances, on the statement made in informal circumstances by Mr Keast. 85

Such a declaration of non-reliance will not necessarily erase the misleading conduct of the franchisor in relation to sales/profitability forecasts in all circumstances. The fact that independent advice has been obtained and relied upon does not preclude a purchaser of a business from also relying on the vendor's representations. The person making the declaration may nevertheless be found to have been actuated by the misrepresentations into entering the contract. The question is not one of law, but of fact. 86 For example, in Jainran Pty Ltd v Boyana, 87 the plaintiff contracted to buy a service station site from the first defendant. Raine & Horne were engaged as agents for the vendor. The service station was the subject of a lease. There was a pre-existing dispute between the lessee of the service station and Boyana, the tenant claiming rent-free relief. Raine & Horne were aware of the litigation but continued to use a brochure that described the site as an “outstanding investment” and a “great opportunity for long-term income”. The plaintiff signed a contract which contained the following non-reliance term: “Purchaser acknowledges that neither vendor not anyone on behalf of the Vendor has made any representation on which the purchaser relies”. Jainran was entitled to recover against Boyana, but Boyana had no resources, so Jainran sought to make Raine & Horne liable. Raine & Horne argued that the brochure made it clear it was acting as a mere conduit, and that the declaration of non-reliance was evidence of lack of causation. Bryson AJ held that the brochure was misleading because it set out the positive characteristics of the tenant while omitting any facts about the dispute and whether the rent should be paid. 88 Bryson AJ also held that there was evidence of reliance despite the declaration of non-reliance. The making of the representations by Raine & Horne were [12.80]

84 85 86 87

Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40-515-7. Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40-516. Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 321 [31] (French CJ). Jainran Pty Ltd v Boyana [2008] NSWSC 468.

88

Jainran Pty Ltd v Boyana [2008] NSWSC 468 at [96].

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followed within a very short time by Jainran entering into the contract, which indicated that Jainran had, in fact, relied upon them. 89

Measure of damages Section 236 of the ACL does not prescribe the measure of damages recoverable by a plaintiff for a contravention of Chs 2 and 3 of the ACL. Accordingly, it is for the courts to determine what the appropriate measure is. In relation to s 82 of the TPA, the High Court in Henville v Walker acknowledged that the traditional common law measure of damages in tort and contract “will usually be of great assistance” in applying the Act. 90 However, in assessing the measure of damage under s 236 of the ACL the court is not bound to adopt the measure of damages in tort for deceit or the measure of damages in contract. 91 In Gates v City Mutual Life Assurance Society Ltd, 92 the Mason, Wilson and Dawson JJ summarised the two tests at common law: [12.85]

In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed–he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss). 93

The tortious measure of damages attempts to place the plaintiff in the position the plaintiff would have enjoyed if the tort had not been committed. In Gates, the High Court held that the question to be asked in cases involving misleading conduct is: “how much worse off the plaintiff is as a result of entering into the transaction which the representation induced him to enter than he would have been if the transaction had not taken place”. 94 According to the Gates test, a plaintiff can recover reliance loss, but not expectation loss. The appellant, Gates, was misled by an agent of the respondent about the coverage of an insurance policy. He had been told that the policy would cover him if he became disabled and could not engage in his usual occupation. In fact, the policy only covered him if he became totally disabled for work. No evidence was presented by the appellant to show that he would have taken out a disability policy with another insurance company had he been aware of the misrepresentation before he entered the policy. Mason, Wilson and Dawson JJ held: 89

Jainran Pty Ltd v Boyana [2008] NSWSC 468 at [107].

90 91 92 93

Henville v Walker (2001) 206 CLR 459 at [130] (McHugh J, with whom Gummow and Hayne JJ agreed). Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 14 (Mason, Wilson and Dawson JJ). Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12 (Mason, Wilson and Dawson JJ). Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 11-2.

94

Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12.

352

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[12.85]

if the appellant were able to establish that, but for his reliance on Mr Rainbird's representation, he could and would have entered into policies of insurance containing a disability clause of the kind represented by Mr Rainbird, he might then succeed in obtaining an award of damages equal to the benefits which would have been payable under such policies less the premiums paid or payable in respect of them. Unfortunately for the appellant the evidence does not support this basis for an award of damages … 95

Thus, the applicant will be able to recover monies spent in reliance upon the representation if it turns out to be false or misleading. However, the applicant will not be able to recover loss of an expectation or profits unless the applicant can prove that, but for reliance on the misleading conduct, the applicant would have entered into a different contract in respect of which the applicant would have made a profit. 96 This approach was followed by the High Court in Marks v GIO Australia Holdings Ltd. 97 The trial judge found that GIO told the borrowers that it would charge interest at a rate calculated as a base rate plus a fixed margin of 1.25%. The borrowers received a letter from GIO telling them that it proposed to increase the interest rate margin from 1.25% to 2.25% with effect from 1 August 1992. The loan agreements which the borrowers had signed permitted GIO to change the interest rate margin in this way. However, Einfeld J found that GIO represented to the borrowers that the interest rate margin was set at 1.25% and would not be changed during the life of the loan and that each of the borrowers had relied on this representation and had been induced by it to take the loan. Einfeld J found that GIO had engaged in misleading or deceptive conduct in contravention of s 52 of the TPA. His Honour gave judgment for the borrowers for damages assessed as the difference between the amount of interest calculated with a margin of 1.25% and the amount of interest calculated with a margin of 2.25% for the period between 1 August 1992 and the date of judgment in the case of borrowers who chose to continue their loans, or a date six weeks later for those borrowers who did not. Einfeld J rejected the borrowers' claim for relief under s 87. GIO appealed to the Full Court of the Federal Court. The Full Court allowed the appeal. Although GIO had breached s 52, even with the margin increase, the GIO loan rate was the best available, so the borrowers could not prove that they were “worse off” as a result of the contravention. The borrowers appealed to the High Court, seeking orders under s 87 of the Act limiting the interest payable to the base rate plus a fixed margin of 1.25% for the life of the loans and damages under s 82 compensating them for the increased interest that they had paid. The High Court dismissed the appeal. McHugh, Hayne and Callinan JJ held: 95 96

Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 14-5. Havyn Pty Ltd v Webster (2005) 220 ALR 211 at [117] (Santow JA). See also Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 and Zipside Pty Ltd v Anscor Pty Ltd [2000] QCA 395.

97

Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494.

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What is important is what that party could have done, not what it might have hoped for or expected. Some examples may serve to illustrate the point. If a person agrees to pay $50,000 for goods which the vendor falsely represents are worth $100,000 but which are, in fact, worth $50,000, what loss has the purchaser who is misled suffered by agreeing to buy (assuming no more is known)? If a person agrees to pay interest at the rate of 10% for a loan which the lender falsely represents would ordinarily command interest at a rate of 15% but which, in fact, would ordinarily command interest at 12%, what loss has the borrower who is misled suffered by agreeing to borrow (again, assuming no more is known)? … The fact that each of the misled parties in the examples given may have thought that it was to obtain some advantage from the transaction is not to the point. The contravening conduct has left the party that was misled no worse off than it was before the contravention occurred. 98

The same principles are applicable in relation to the measure of damages for misleading conduct recoverable under s 236 of the ACL. Where a person purchases an asset in reliance upon a misrepresentation and the asset was worth less at the time of the contract than it was represented to be, the measure of damages will be the same as that applicable in an action for deceit, namely the difference between price and value – between the real value of the property at the time of contract and what the buyer actually paid for the property. 99 Similarly, where misleading conduct induces a person to buy a business, the measure of damages will be the difference between the price and the real value of the business at the acquisition date. 100 This is the so-called “common approach” to assessing damages under s 236 of the ACL. The courts have recognised an alternative approach for assessing damages, namely for the purchaser to deduct from the purchase price of the property or assets, the value of whatever was “left in its hands”. Each approach will now be considered. Price minus value at acquisition date ...............................................................................................................................................................................................

The approach commonly employed in cases where misleading conduct gives rise to the acquisition of land, chattels, a business or shares is to deduct the real value of the asset at the date of acquisition from the purchase price. 101 The “common approach” is sometimes referred to as the rule in Potts v Miller. 102 The court compares the applicant's financial position prior to entering into the contract with the applicant's financial position [12.90]

98 99 100 101

102

Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 515. The real value can be affected by subsequent events. See Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281. Potts v Miller (1940) 64 CLR 282; Gould v Vaggelas (1985) 157 CLR 215 at 220; and Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) ATPR ¶41-576 (Wilcox, Branson and Sackville JJ concurring). Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291 (Brennan, Deane, Dawson, Gaudron and McHugh JJ). See Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 6-7 (Gibbs CJ), at 12 (Mason, Wilson and Dawson JJ); Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291 (Brennan, Deane, Dawson, Gaudron and McHugh JJ). Potts v Miller (1940) 64 CLR 282. See HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [35] (Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ).

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[12.95]

after entering into the contract to determine how much worse off the applicant is as a result of the conduct. This assumes that the property is retained by the applicant. When the court is assessing damages by comparing the contract price and the real value at the date of acquisition, the court is entitled to take into account events after the date of acquisition; however, the cause of the decline in value must be inherent in the thing itself, and not the result of some extrinsic or supervening event. 103 The common approach does not allow the applicant to recover any loss resulting from a general decline in property values since the date of acquisition. A person misled will generally not be able to recover their lost expectation or anticipated profit. Lost expectations, such as profits, are only likely to be recoverable under ACL, s 236, if the applicant can prove that, but for the misleading conduct, the applicant would have entered into another available arrangement that would have resulted in the expectation being met. The critical question is: what would the claimant have done if the respondent had not engaged in the misleading conduct and how much worse off is the claimant as a result of the conduct. It will generally be necessary for the party misled to prove by credible evidence that he or she would have acted in some other way (or refrained from acting) which would have resulted in him or her obtaining greater benefit or incurring less detriment. 104 No transaction approach ...............................................................................................................................................................................................

An alternative approach for assessing damages is referred to as the “non transaction” approach. Where it is established that the applicant would not have entered into the contract but for the misleading conduct (no transaction) the applicant is entitled to the difference between the purchase price of the property, and the real value at the date of the trial. This “alternative” or “no transaction” approach was identified by the High Court in HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd, 105 as being available when assessing damages under s 82 of the TPA. In that case, a valuer made representations to the proposed purchaser of a shopping centre that a new shopping centre to be constructed nearby would not have an adverse impact on tenancy levels in the existing shopping centre, the subject of the purchase. When the new shopping centre [12.95]

103

Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291-6, and HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [40].

104 105

See Williams v Pisano [2015] NSWCA 177. Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 at 284; affirmed in HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [63]-[64]. Applied in Ingot Capital Investment Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206. In North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 at [176] the Full Court held that the trial judge should have considered whether the alternative approach applied in circumstances where new plant and equipment was integrated into existing plant and equipment so that the applicant was “locked into” using it. See also Mark Bain Constructions Pty Ltd v Avis [2012] QCA 100.

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was completed, the applicant suffered a loss in rental income. The applicant had tried unsuccessfully to sell the shopping centre. The applicant sought to be compensated on the basis that but for the misleading conduct of the valuer it would not have entered into the transaction and therefore would not have suffered any loss. While acknowledging that the “no transaction” approach is available under s 82, the High Court applied the common approach (price minus value at acquisition date). It seems that the “no transaction” approach will only be available where there is evidence that the applicant has tried unsuccessfully to sell the assets or property acquired as a result of the misleading representations, or where the applicant is “locked into” using the assets as part of its business. 106 In Bennett v Elysium Noosa Pty Ltd (in liq), 107 property purchased as a result of misleading conduct declined sharply in value soon after purchase because of an extrinsic, supervening event, the global financial crisis. Counsel for the applicant sought to rely on the “alternative” approach, and submitted that the applicant's case was a “no transaction” in that but for the agents' representations, the transaction would not have ensued at all. Accordingly, the measure of damage was the difference between the purchase price of the property and its real value at the date of the trial. Reeves J rejected this submission because there was no evidence that the applicant was “locked into” the transaction and could not sell the property and there was no business activity associated with the purchase of the asset. 108 His Honour applied the “common approach” which does not allow the applicant to recover any loss suffered as a result of a decline in value since the purchase. The additional loss or decline in value was not the consequence of the inducement. Measure of damages in employment cases ...............................................................................................................................................................................................

In O'Neill v Medical Benefits Fund of Australia Ltd, 109 misleading conduct led Mr O'Neill to leave his secure employment and take other employment with MBF. He left a secure job at a particular level of remuneration and took up employment with MBF two years later. He was then employed in occasional temporary employment and then in more permanent employment. The Full Federal Court held that any loss he suffered was the loss flowing from his reliance on the misleading conduct. The loss could be quantified by ascertaining the difference (if any) between the salary he would have been earning in employment with his former employer and the income he then received in the position with MBF and in the employment he entered or might enter after being made redundant

[12.100]

106 107 108

See the discussion in Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72 at [248]-[253] (Reeves J). Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72. Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72 at [253].

109

O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 (Carr, Moore and Marshall JJ).

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[12.105]

by MBF. The damages would be the difference over the period it was likely Mr O'Neill would have stayed in employment with his former employer. 110 Loss of commercial opportunity ...............................................................................................................................................................................................

In seeking to recover damages for loss of an opportunity the applicant must prove on the balance of probabilities that the respondent's conduct caused the loss of the opportunity to acquire a benefit. The court will then assess the loss by reference to the possibilities of that benefit eventuating. 111 However, loss of expectation or anticipated profit will generally not be able to be recovered under s 236 unless the applicant can prove that, but for reliance on the misleading conduct, the applicant would have entered into a different contract or another available arrangement in respect of which the applicant would have made a profit. 112 In Sellars v Adelaide Petroleum NL, Mason CJ, Dawson, Toohey and Gaudron JJ, in their joint judgment stated that the principles to be applied in assessing damages for loss of a commercial opportunity were the same for a breach of contract, tort or contravention of s 52(1) of the TPA. Their Honours distinguished between proof of causation and proof of damages. Proof of causation is to be determined on the balance of probabilities. The applicant is required to prove the existence of a valuable loss of opportunity, and the fact that it was caused by the respondent's misleading conduct on the balance of probabilities. The applicant is not required to prove the extent of the loss on the balance of probabilities. [12.105]

the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable. 113

The inquiry is to be conducted in two stages. The applicant must first prove on the balance of probabilities that there was an opportunity said to have been lost, and that such an opportunity had some value that was “not negligible” and was not speculative. The 110

111

112 113

O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 at [45]. See also Gregory v Philip Morris Ltd (1988) 80 ALR 455 at 482-484 and Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 32-3. Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 368-9. See Rich, “Can Loss of Chance Damages Survive in Commercial Cases after Tabet v Gett?” (2011) 19 Australian Journal of Competition and Consumer Law 98 at 106-7. Havyn Pty Ltd v Webster (2005) 220 ALR 211 at [117] (Santow JA). See also Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 and Zipside Pty Ltd v Anscor Pty Ltd [2000] QCA 395. Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355 and see Brennan J at 364-5.

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second stage is to put a value on the chance or opportunity, that value being calculated “by reference to the degree of probabilities or possibilities” as to the success of the opportunity if it had it been pursued. 114 Consequential damages ...............................................................................................................................................................................................

The “price minus value at acquisition date” approach is sufficiently flexible to allow for the recovery of consequential damages not limited to economic loss. 115 In Murphy v Overton Investments Pty Ltd, a unanimous High Court stated: [12.110]

The Act's references to “loss or damage” can be given no narrow meaning. Section 4K of the Act provides that loss or damage includes a reference to injury. It follows that the loss or damage spoken of in ss 82 and 87 is not confined to economic loss. 116

The immediate and direct consequential losses caused by the respondent's conduct will depend upon evidence of causation. Consequential losses may include loss of a chance or an opportunity, 117 and in some cases, damages for anxiety, mental distress and inconvenience. 118 For example, in Shahid v Australian College of Dermatologists, 119 the court held that absent the making of the representations by the College in its Handbooks, the appellant would not have lodged any of her internal appeals following her unsuccessful application for a position as trainee registrar. The anxiety and distress that she suffered came about because of her participation in the appeals process and was injury “by conduct” of the College. 120 Exemplary damages ...............................................................................................................................................................................................

In Musca v Astle Corporation Pty Ltd, French J held (at 262) that exemplary damages were not recoverable under ss 82 and 87 of the TPA because they do not compensate for loss or damage and that those provisions were essentially compensatory. It would seem that the same reasoning applies to ss 236 and 237 of the ACL which also refer to “loss or damage” and are compensatory in nature.

[12.115]

114

For cases in which these principles have been applied see BestCare Foods Ltd v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) [2013] NSWSC 1287 (Stevenson J) and North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1 (Croft J).

115 116 117

See HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [35]. Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388 at [45]. Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Latrobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Ltd (2011) 273 ALR 774. Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR ¶40-490. Wilcox J considered without deciding (at 45,642) that if the tortious approach to remoteness of damage applied to assessing damages under s 82 of the TPA, “damage which is of a type foreseeable to occur in the event of a breach of the section – as in this case loss of enjoyment of the holiday, distress and inconvenience – would be allowed”. Shahid v Australian College of Dermatologists (2008) 168 FCR 46. Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [30] (Branson and Stone JJ) and [230] (Jessup J).

118

119 120

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[12.120]

Time limits Section 236(2) of the ACL provides that an action under s 236(1) for damages may be commenced at any time within six years after the day on which the cause of action accrued. This mirrors s 82(2) of the TPA. Whether a time limit has been exceeded is an issue that should be raised by the respondent as a defence. 121 There is no provision in the ACL for the extension of time periods, and a party is unable to rely on State or Territory Limitation of Actions Acts, or equitable discretions to extend the time for commencement. 122 A cause of action under s 236(1) consists of two elements: a contravention of a provision of Chs 2 or 3 of the ACL and the suffering of loss or damage. Since damage is the gist of the action, time runs when it is suffered. In Arcardi v Colonial Mutual Life Assurance Society Ltd, 123 Toohey J held that a cause of action under s 82 accrues not when the contravention occurs, but rather when loss or damage is suffered in consequence. When there are several distinct losses, the cause of action is not kept alive so long as any loss or damage is being suffered. Once the applicant for damages has suffered the relevant loss or damage, the limitation period commences to run. 124 The question of when the cause of action accrues depends on the facts of the case and the type of damage alleged. This question caused considerable problems in relation to actions based on a contravention of Pt V of the TPA. In the evidence-gathering process the first step is to obtain evidence of the making of the agreement or the offending conduct. The second step will be to obtain evidence from the victim as to the loss or damage suffered, when the loss or damage was suffered, and the causal or proximate connection between the conduct and the loss or damage suffered. It will be apparent from the second step when the limitation period starts to run. The High Court in HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd, 125 provided four examples of the point in time at which loss or damages is sustained and the limitation period for the purposes of an action based on s 82 of the commences. First, where an asset was purchased due to misleading conduct and there was evidence of an under-value at the time of purchase, the limitation period commences to run at the [12.120]

121

See James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 396; Mehta v Commonwealth Bank of Australia (1990) ATPR ¶41-026; and Western Australia v Wardley Australia Ltd (1991) ATPR ¶41-131 at 52,928.

122

Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853 at 49,196 where Pincus J held: “Claims under the Trade Practices Act … are subject to such time bars as the Act contains and I do not think it to be implicit in s 82(2) that the rules in equity shall be applied to relieve applicants against the statutory time bar’s operation”. See also New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 at 377-80 and Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd (1994) 2 Qd R 515.

123 124 125

Arcardi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR ¶40-473 at 45,454. See James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 392. HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [28]-[33]. See also Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (2008) 19 VR 358 at 392.

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time when the contract was entered into, or the time when it was completed. 126 In such a case it is not necessary to wait to ascertain that some loss has been suffered. Secondly, in cases such as Wardley Australia Ltd v Western Australia, 127 the High Court held that since loss or damage is the essence of the cause of action under s 82(1), it does not accrue until actual loss or damage is suffered, as distinct from potential or likely damage. 128 The court drew a distinction between actual loss or damage and potential loss or damage, which is likely to be suffered in the future. The limitation period does not begin to run when the plaintiff's loss or damage is merely potential. The third example provided by the High Court is where “a contingency is hidden by the respondent's conduct which might or might not come to pass”. 129 For example, in Murphy v Overton Investments Pty Ltd, 130 a lessee entered into a retirement village lease based on misleading representations as to the amount of outgoings payable under the lease. The High Court held that time did not commence until the lessor exercised its discretion to increase the charges. The fourth example provided by the High Court is where an asset is purchased due to misleading conduct for a specific purpose and it is not suitable for that purpose. In Henville v Walker, 131 land was purchased for a development project. Since there was no evidence of loss or damage at the date of purchase, time did not commence until the losses were incurred after the building and marketing of the units. 132 Another example of this category of case is where a lessor's misleading representations as to likely takings induces a tenant to enter a lease. Time will not commence to run at the time the lease was entered into; time will only run from the date when the disadvantageous character of the lease was ascertained or reasonably ascertainable. 133

Other limits on damages It is not possible to recover damages under s 236 of the ACL for personal injury or death arising from misleading or deceptive conduct, 134 or unfair practices, 135 except where the personal injury or death results from smoking or the use of tobacco [12.125]

126 127

HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [28] and fn 43. Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.

128

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 526 (Mason CJ, Dawson, Gaudron, and McHugh JJ), at 536 (Brennan J), at 539 (Deane J), and at 551 (Toohey J).

129 130

HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 655 [30] and Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388 at 410 [55] and 414-5 [70]. Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388.

131 132 133 134

Henville v Walker (2001) 206 CLR 459. Henville v Walker (2001) 206 CLR 459 at 471 [22]. Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 at 40-3 (Burchett and Hill JJ). ACL, Pt 2-1.

135

ACL, Pt 3-1.

360

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[12.130]

products. 136 Where death or personal injury results from smoking or other use of tobacco products, Divs 2 and 7 of Pt VIB of the CCA apply to the action. 137 Secondly, s 137 of the CCA limits the compensation payable for a contravention of s 18 of the ACL (misleading or deceptive conduct) where a professional standards law of a State of Territory is in place at the time to limit occupational liability. Section 137B of the CCA also provides that the amount awarded for a claim for economic loss or damage to property based on a contravention of s 18 of the ACL may be reduced if there is a failure to take reasonable care by the claimant. Finally, Pt VIA of the CCA limits the amount that can be recovered from each concurrent wrongdoer to the amount of the loss for which that party is responsible.

Contributory fault: ACL (Cth) [12.130] A contributory fault defence is provided by s 137B of the CCA in relation to claims for damages under s 236 of the ACL which re-enacts s 82(1B) of the TPA. 138 State legislation 139 allows a court to reduce an award of damages for contributory negligence only for claims arising out of the tort of negligence and contributory negligence is available at common law; or the claim is for loss arising from a breach of contractual duty that is concurrent with a duty of care in tort. The legislative provisions have not been amended to extend contributory negligence to a statutory claim for damages under s 236 of the ACL (Application Acts). Where a claim for damages for economic loss or damage to property is made in relation to a contravention of s 18 of the ACL, and the loss or damage was partly the fault of the respondent, and partly due to the claimant's fault, the amount the claimant can recover is to be reduced. Section 137B of the CCA allows a court to reduce the damages to be awarded under s 236 for a contravention of s 18 where the claimant has failed to take reasonable care of their interest and this failure has contributed to their loss. 140 Section 137B provides: 136 137 138

139

140

CCA, s 137C(1). CCA, s 137C(2). In relation to New South Wales see the decision of the New South Wales Court of Appeal in Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liq) [2011] NSWCA 367. Seddon and Fridman, “Misleading conduct and Contributory Fault: Inconsistency under the Uniform Australian Consumer Law” (2012) 20 Australian Journal of Competition and Consumer Law 87. See Law Reform (Miscellaneous Provisions) Act 1965 (NSW), ss 8 and 9; Law Reform Act 1995 (Qld), s 10; Civil Liability Act 1936 (SA), s 50; Tortfeasors and Contributory Negligence Act 1954 (Tas), s 4(1); Wrongs Act 1958 (Vic), s 26(1); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA), s 4(1); Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s 15; Law Reform (Miscellaneous Provisions) Act (NT), s 16(1). This will only apply where the cause of action accrues after 26 July 2004. Section 82 was amended by Sch 3 to the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth). By s 1466 of the Corporations Act 2001 (Cth) it is provided that the amendments to the Trade Practices Act 1974 made by Sch 3 apply to causes of action that arise on or after the day on which that Schedule commenced, which was 26 July 2004. Applied in BHP Coal Pty Ltd v O and K Orenstein and Koppel AG [2008] QSC 141 and Jainran Pty Ltd v Boyana [2008] NSWSC 468.

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If: (a) a person (the claimant) makes a claim under subs 236(1) of the Australian Consumer Law in relation to economic loss, or damage to property, suffered by the claimant because of the conduct of another person; and (b) the conduct contravened s 18 of the Australian Consumer Law; and (c) the claimant suffered the loss or damage as result: (i) partly of the claimant's failure to take reasonable care; and (ii) partly of the conduct of the other person; and (d) the other person did not intend to cause the loss or damage and did not fraudulently cause the loss or damage; the amount of the loss or damage that the claimant may recover under subs 236(1) of the Australian Consumer Law is to be reduced to the extent to which a court thinks just and equitable having regard to the claimant's share in the responsibility for the loss or damage.

This re-enacts s 82(1B) of the TPA. 141 The operation of s 137B is limited in the following ways. • The claim must be for economic loss or damage to property so that claims for personal injury will not be affected by a failure to take reasonable care. The phrase “reasonable care” suggests an objective approach, but the courts are likely to take into account the attributes of the claimant, and be more lenient towards a claimant who is inexperienced than one who is sophisticated. 142 • The claim must be for a contravention of s 18 of the ACL so that a claim based on a contravention of one of the other consumer protection provisions of the ACL, such as ss 29(1), 30(1), 31, 33 or 37, will not be affected. • There must be a causal link between the claimant's failure to take reasonable care and the claimant's loss or damage. The phrase “as a result of” is likely to be construed in accordance with the “common sense” approach adopted in March v Stramare (E & MH) Pty Ltd. 143 • A failure to verify a representation is unlikely to constitute contributory fault unless the circumstances are such as to put the claimant on notice that the representation is false or misleading. 144 • The court is obliged to reduce the loss or damage but has the discretion as to the amount of the reduction. The court must consider what is just and equitable having regard to the claimant's share in the responsibility for the loss or damage. 141

142

143 144

For commentary on the role played by TPA, s 82(1B) and its equivalent, s 137B, see Price and Griggs, “Causation, Contributory Negligence and Misleading or Deceptive Conduct” (2010) 18(2) Competition & Consumer Law Journal 93. Compare Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 where the claimant was inexperienced and lacked training, with the High Court’s approach in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 where the purchasers were “intelligent, shrewd and self-reliant”. March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 at 515. See Jainran Pty Ltd v Boyana [2008] NSWSC 468 at [141] where Bryson AJ rejected a claim that a failure to check the viability of a tenant’s business constituted a failure to take reasonable care for the purposes of s 82(1B) of the TPA.

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[12.135]

• Section 137B does not apply if the defendant intended to cause the loss or damage or caused the loss or damage intentionally or fraudulently. • As McHugh J noted in Henville v Walker: There may, of course, be cases where the injured person's failure to take care is such that it can be characterised as the sole cause of the loss or damage suffered. In that event, there will be no causal connection between the breach of the Act and the “loss or damage” to which s 82 refers. 145

In such cases there is no causal link between the misleading conduct and the loss or damage suffered. In other cases the injured person's failure to take care may be contributory, in which case s 137B will apply. Avoiding the operation of s 137B ...............................................................................................................................................................................................

The same conduct can give rise to more than one contravention of a provision of the ACL. For example, assume that a claim is made for a contravention of ss 18 and 29 of the ACL, false or misleading representations about goods or services. In such circumstances, it seems that it would be open to an applicant to avoid the operation of s 137B of the CCA by basing its cause of action solely on the contravention of s 29 of the ACL. In Vero Lenders v Taylor Byrne Pty Ltd, Greenwood J said: [12.135]

Section 82(1B) has no application to a claim for compensation pursuant to s 87 nor to a claim for damages pursuant to s 82(1) arising out of a contravention of s 53A. Accordingly, had a contravention of ss 52 or 53A of the Act been found, such a claim would not be susceptible of reduction under s 82(1B). 146

If Parliament had intended s 137B of the CCA to apply to a contravention other than s 18 of the ACL it would have been a simple matter to do so. Another possibility is to rely on the contravention of s 18, but claim compensation under s 237 rather than s 236 of the ACL. However, it seems that the courts will not allow the use of s 237 to circumvent the operation of s 137B, and in exercising its discretion under s 237 the court will take account of any contributory fault by the applicant. In other words, an applicant should be no better off by framing the cause of action for loss or damage under s 237, rather than s 236. In relation to the equivalent provisions of the TPA, Finkelstein J in BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3), said: For the sake of completeness on this issue, I should address an argument raised by BHPB that it could seek relief under s 87 for its s 52 claim and so avoid s 82(1B) because that section does not apply to claims under s 87. I cannot accept this argument. BHPB's claim for damages under s 82 and compensation under s 87 are essentially for the same loss. To obtain a compensation order under s 87 where damages under s 52 might be limited by 145

Henville v Walker (2001) 206 CLR 459 at [138].

146

Vero Lenders v Taylor Byrne Pty Ltd [2006] FCA 1430 at [186].

[12.140]

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s 82(1B), would be to use s 87 to circumvent the operation of s 82(1B). The power of a court to make an order under s 87 is discretionary. It would not be an appropriate exercise of that discretion to allow the section to be used in this way. 147

Similarly, in Khoury v Sidhu (No 2), Greenwood J said that in exercising the discretion under s 87, “it is relevant to consider whether the same claim (that is, the substantive elements of the claim notwithstanding that the claim is not made under s 82) if framed under s 82 would be susceptible of just and equitable reduction …”. 148

Contributory fault: ACL (Application Acts) There is no equivalent to s 137B of the CCA in the State and Territory Application Acts. State legislation 149 allows a court to reduce an award of damages for contributory negligence only where the claim arises out of the tort of negligence and contributory negligence is available at common law or the claim is for loss arising from a breach of contractual duty that is concurrent with a duty of care in tort. The legislative provisions have not been amended to extend their operation to a statutory claim for damages under s 236 of the ACL (Application Acts). This presents a procedural advantage for claimants seeking damages under the ACL (Application Acts), who will be able to avoid a reduction of their damages award for contributory fault. In Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liq), 150 the New South Wales Court of Appeal held that a defence of contributory negligence is not available in respect of a claim for damages arising as a result of a contravention of s 42 of the Fair Trading Act 1987 (NSW). Milanex was a mortgage broker that submitted a loan application to one of Perpetual's mortgage managers and misrepresented that it had verified the borrower's identity and income. Perpetual's loan was found to have been unjust at the time it was made and the loan was declared void. Perpetual Trustee brought a claim against Milanex for damages for misleading conduct in breach of s 24 of the Fair Trading Act 1987 (NSW). Milanex argued that Perpetual had failed to take reasonable care of its own interests in relation to the loan, and that any damages awarded ought to be reduced to take account of Perpetual's contributory negligence. Macfarlane JA (with whom Campbell JA and Young JA agreed) held: [12.140]

Whilst a defence of contributory negligence is, by statute, available in relation to claims for damages for contravention of s 52 Trade Practices Act (see s 82(1B)) and of s 12GF(1) 147 148 149

BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 at [62]. Khoury v Sidhu (No 2) [2010] FCA 1320 at [70]. This was affirmed by the Full Federal Court in Khoury v Sidhu [2011] FCAFC 71. See Law Reform (Miscellaneous Provisions) Act 1965 (NSW), ss 8 and 9; Law Reform Act 1995 (Qld), s 10; Civil Liability Act 1936 (SA), s 50; Tortfeasors and Contributory Negligence Act 1954 (Tas), s 4(1); Wrongs Act 1958 (Vic), s 26(1); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA), s 4(1); Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s 15; Law Reform (Miscellaneous Provisions) Act (NT), s 16(1).

150

Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367.

364

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[12.145]

Australian Securities and Investments Commission Act 2001 (Cth) (see s 12GF(1B)) (which latter provision was one of the bases of Perpetual's claim), the Fair Trading Act (upon which Perpetual also based its claim) does not contain any comparable provision. Milanex did not contend that Perpetual was not entitled to rely upon the cause of action most favourable to it, that is, that under the Fair Trading Act. Further, no other statute or principle of law gives Milanex the right to rely upon a defence of contributory negligence. Milanex relied upon s 5R and s 5S of the Civil Liability Act but those sections do not confer a right to raise a defence of contributory negligence. They operate where that right otherwise exists. In any event Part 1A Civil Liability Act, of which ss 5R and 5S form part, applies only to claims “for damages for harm resulting from negligence” (s 5A), requiring in my view that negligence be an element of the relevant cause of action (although, as s 5A makes clear, it does not matter whether the claim is brought in tort, in contract, under statute or otherwise). However, negligence is not an element of a claim for damages arising out of contravention of s 42 Fair Trading Act (as the section appeared prior to enactment of the Fair Trading Amendment (Australian Consumer Law) Act 2010, Schedule 1). A contravention of that section may occur whether or not the defendant has been negligent. That a defendant might as a matter of fact have been careless does not convert a claim against it under s 42 into one based upon negligence. Milanex also relied upon ss 8 and 9 Law Reform (Miscellaneous Provisions) Act 1965 but those sections are only concerned with the reduction for contributory negligence of claims in respect of a “wrong”, where a “wrong” is defined as an act or omission giving rise to a liability in tort or related contractual duty of care. Neither tort nor contractual liability is alleged in the present case. The claims here are under statute. 151

Proportionate liability for misleading conduct under ACL In many circumstances it will be possible to obtain an award of damages not just from the person who is directly responsible for the misleading conduct, but also from other persons. A claim for damages for a contravention of s 18 of the ACL made under s 236 of the ACL may be brought against anyone who is “involved in” a contravention. See [12.160]–[12.175]. Where the principal offender is a corporation, it may be possible to claim against the directors, employees and agents of the corporation if they are involved in the conduct found to contravene the ACL. The operation of s 139B(2) of the CCA which deems the conduct of the agent to be the conduct of the principal is considered at [10.110]–[10.135]. This part considers the circumstances in which the proportionate liability provisions contained in Pt VIA of the CCA apply. 152 Part VIA was inserted into the TPA by the Corporate Law Economic Reform Program (Audit Reform and [12.145]

151 152

Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367 at [86]-[88]. For an explanation of the background to the introduction of Pt VIA of the CCA, see BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 at [4]-[5] (Finkelstein J) where it is stated: “The impetus for the inquiry was the growing number of actions against professionals, particularly auditors, who were being singled out as targets for negligence actions not because of their culpability (which might be small) but because they were insured and had the capacity to pay large damages awards. One consequence was a sharp rise in insurance premiums payable by professionals”.

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Corporate Disclosure) Act 2004 (Cth). 153 The legislative policy of Pt VIA is that, in respect of claims for economic loss or property damage, a defendant should only be liable to the extent of his or her responsibility. Part VIA of the CCA applies to a claim for damages made under s 236 of the ACL for economic loss or damage to property caused by conduct that was done in contravention of s 18 of the ACL. The objective of proportionate liability provisions is to limit the amount that can be recovered from each concurrent wrongdoer to the amount of the loss for which that party is responsible. The operation of Pt VIA of the CCA is limited in the following ways. • Section 87CB(1) of the CCA provides that only a claim for economic loss or damage to property can be apportioned between concurrent wrongdoers so that claims for personal injury will not be affected. • Section 87CB(2) of the CCA provides that an apportionable claim will exist even where there are alternative causes of action against the wrongdoers provided that the causes of action arise from a contravention of s 18 of the ACL. • Section 87CC(1) of the CCA provides that a wrongdoer is not entitled to the benefit of proportionate liability if they have fraudulently or intentionally caused the loss of the claimant. Such a wrongdoer will be an excluded wrongdoer and liable jointly and severally for the loss suffered. • For the claim to be apportionable there must be a concurrent wrongdoer. This is defined in s 87CB(3) of the CCA as one of two or more persons whose “acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim”. It is irrelevant that a wrongdoer is insolvent, being wound up or has ceased to exist or died. This has the potential to disadvantage consumers where one or more of the wrongdoers is insolvent or has ceased to exist. • Section 87CE of the CCA imposes a positive obligation on the defendant to notify the plaintiff of any other possible concurrent wrongdoers and any unnecessary cost that the plaintiff incurs as a result of not being aware of a concurrent wrongdoer is recoverable from the defendant. • When apportioning the loss between concurrent wrongdoers the court may have regard to the culpability of wrongdoers who are not parties to the proceedings including those who are insolvent or deceased. Section 87CG of the CCA provides that where a wrongdoer is not a party to the current proceedings the plaintiff is permitted to commence a further claim for recovery of the loss or damage against that that other wrongdoer, but cannot recover more the loss sustained. • Section 87CI of the CCA provides that the proportionate liability provisions do not prevent: 153

The reform followed the report on the law of joint and several liability by Professor JLR Davis, Inquiry into the Law of Joint and Several Liability (Commonwealth of Australia, 1994-5).

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[12.150]

(i)

a person being vicariously liable for a proportion of the claim for which another is liable;

(ii)

a partner from being held severally liable with another partner for a proportion of a claim; or

(iii)

the operation of any other Act to the extent that is imposes several liability on any person in respect of an apportionable claim. Thus, the provisions of Pt VIA of the CCA do not prevent a principal from being held to be vicariously liable for the wrongful acts of an agent within the scope of the agent's authority. There does not need to be an apportionment of liability as between the principal and agent in those circumstances, and they will be jointly and severally liable. 154 Apportionable claim ............................................................................................................................................................................................... [12.150]

An apportionable loss or claim is defined in s 87CB(1) of the CCA as

… a claim for damages made under s 236 for: (a) economic loss; or (b) damage to property; caused by conduct that was done in a contravention of section 18 of the Australian Consumer Law.

The provisions will not apply to a claim for compensation under s 237 of the ACL or for a contravention of a substantive prohibition other than s 18 of the ACL. 155 Where an individual is a concurrent wrongdoer, the individual, unless the conduct falls within the terms of s 6 of the CCA, will not have contravened s 18 of the ACL. The individual may, however, be liable for common law negligence. If so, the individual could not take advantage of s 87CB as the individual would not be a concurrent wrongdoer with an apportionable claim. If the claim is brought against the individual for a breach of s 18 of the ACL (NSW), for example, the individual would be a concurrent wrongdoer under s 34(2) of the Civil Liability Act 2002 (NSW) and the claim would be an apportionable claim for the purposes of s 35(1) of the Civil Liability Act 2002 (NSW). Concurrent wrongdoers ...............................................................................................................................................................................................

If an apportionable claim exists, the second requirement is that the parties must be concurrent wrongdoers. The term “concurrent wrongdoers” is defined in s 87CB(3) of the CCA as “a person who is one of two or more persons whose acts or [12.155]

154 155

Williams v Pisano [2015] NSWCA 177 at [77] (Emmett JA). Selig v Wealthsure Pty Ltd (2015) 89 ALJR 572 at [29]-[30] (French CJ, Kiefel, Bell and Keane JJ) in relation to the equivalent proportionate liability provisions of Corporations Act 2001 (Cth), namely s 1041L which corresponds to s 87CB of the CCA, and s 1041H, which corresponds to s 18 of the ACL, and Williams v Pisano [2015] NSWCA 177 at [59]-[62] (Emmett JA).

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omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim”. This definition is satisfied if each wrongdoer gives rise to the loss or damage suffered by the claimant. The definition does not require that each wrongdoer give rise to the same damage or loss. Where a single act is attributable to more than one person those persons are not concurrent wrongdoers. In Hadgelias Holdings Pty Ltd v Seirlis, 156 the Holmes JA (with whom Gotterson and Morrison JJA agreed) stated: The phrase “independently of each other or jointly” in the s 87CB(3) definition qualifies the verb “caused”, rather than describing the acts or omissions. In other words, the issue is not whether acts or omissions are jointly undertaken but whether they either independently produce the same outcome or combine in their effect to do so. 157

Thus, a vendor and the real estate agent acting on the vendor's behalf were not concurrent wrongdoers because they performed a single act causing loss, namely the making of the representations that there were three car spaces attached to the apartment. On the facts of that case, there did not need to be an apportionment of liability as between the vendor principal and the agent. Section 87CI of the CCA expressly provides that Pt VIA does not prevent a principal from being held to be vicariously liable for the wrongful acts of an agent within the scope of the agent's authority. Thus, there need not be an apportionment of liability between principal and agent in such a situation. In Williams v Pisano, 158 the joint vendors of a property (Mr Williams and Ms Dandris) retained a real estate agent to market the property on their behalf. The vendors had renovated the property with a view to resale at a profit. They lived in the property from before 2005 until 2010 as their home and the renovations were carried out over a two year period. As soon as the renovations were completed they sold the property. The advertising brochure prepared by the agent made false representations about the standard of the renovations that had been made to the property. Mr Pisano purchased the property and brought a claim in damages for contraventions of ss 18 and 30 of the ACL. Mr Williams contended that the claim against the vendors was an apportionable claim under Pt VIA and that he should not be held liable for the total amount of the loss suffered by the purchaser. The case was decided on the basis that the sale did not occur in trade or commerce so there was no contravention of ss 18 or 30 of the ACL. 159 Emmett JA expressed the “provisional” view in obiter that the joint vendors of a property were concurrent wrongdoers. His Honour stated that there was no reason why the purpose of Pt VIA “should not extend to wrongdoers who jointly commit a single act that causes the loss claimed by the plaintiff”. 160 The agent who engaged in the misleading conduct on their behalf was not a concurrent wrongdoer because s 87CI of 156 157 158 159

Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 177. Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 177 at [20]. Williams v Pisano [2015] NSWCA 177 (Bathurst CJ, McColl and Emmett JJA). Williams v Pisano [2015] NSWCA 177 at [47].

160

Williams v Pisano [2015] NSWCA 177 at [81].

368

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[12.160]

the CCA expressly provides that Pt VIA does not prevent a principal from being held to be vicariously liable for the wrongful acts of an agent within the scope of the agent's authority. 161 No apportionment was required. Bathurst CJ and McColl JA declined to express a concluded view on the issues of concurrent wrongdoers and apportionment. A wrongdoer who does not come within this definition or is excluded because the conduct was fraudulent or intentional will be an excluded wrongdoer. 162 An excluded wrongdoer will be jointly and severally liable for the entire loss or damage suffered. If a corporation that is a concurrent wrongdoer with an apportionable claim is in liquidation, s 87CB(5) provides that this does not preclude the court from taking into account its contribution and apportioning liability to it. Relevant factors in apportioning responsibility ...............................................................................................................................................................................................

Section 87CD(1)(a) of the CCA requires the court to apportion the liability of a defendant who is a concurrent wrongdoer on the basis of what it considers “just” having regard to the extent of the defendant's responsibility for the damage or loss. In Reinhold v New South Wales Lotteries Corporation (No 2), 163 Barrett J determined the apportionment of loss on the basis of: [12.160]

(a)

the degree of departure from the standard of care of the reasonable man as regards the causative conduct of the putative concurrent wrongdoer and the defendants; and

(b)

relative importance of the acts of the putative wrongdoer and the defendants in causing the loss suffered. 164 In applying these criteria, Barrett J made a comparative examination of the whole conduct of each of Lotteries and the Newsagents in relation to the circumstances in which the loss was sustained. All of the concurrent wrongdoers will be parties in the one action and each will need to give evidence to prove the extent of their responsibility. The discretion to apportion will be applied on the basis of “common sense” principles. For example, did the one wrongdoer fail to check the information before providing it to the claimant. Avoiding the operation of proportionate liability ...............................................................................................................................................................................................

Section 87CB(1) falls within Pt VIA of the CCA. It is confined to claims for damages under s 236 of the ACL for misleading conduct in breach of s 18 of the ACL. Section 87CB(1) of the CCA does not apply to claims under s 237 of the ACL, or to [12.165]

161 162 163 164

Williams v Pisano [2015] NSWCA 177 at [77]. See McDonald, “Proportionate Liability in Australia – The Devil in the Detail” (2006) 26 Australian Bar Review 29. Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187. Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [60]; and Lovick & Son Developments Pty Ltd v Doppstadt Australia Pty Ltd [2012] NSWSC 529 at [257]-[261] (Slattery J).

[12.170]

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contraventions of substantive prohibitions other than s 18. The question of whether it is possible to circumvent s 87CB(1) by bringing a claim under s 237 of the ACL, or relying on a contravention other than s 18 of the ACL gives rise to issues similar to those considered in relation to circumventing s 137B of the CCA. In BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2), 165 Finkelstein J held that a claim for relief under s 87 of the is not an apportionable claim within Pt VIA. This was affirmed by Reeves J in Bennett v Elysium Noosa Pty Ltd (in liq), 166 who stated: I consider it is plain that s 87CB does not apply to claims for damages made under s 87(1A), or to claims where the damages are caused by false or misleading representations in contravention of s 53A(1) of the TPA. If the legislature had intended that s 87CB was to apply to all claims for loss or damage under the TPA, it could very easily have done that by omitting the words “made under s 82” from that section. It has not chosen to do so. Similarly, if the legislature had intended s 87CB to apply to any claim for conduct in contravention of any of the provisions of Pt V of the TPA, it could very easily have done that by referring to that Part, rather than specifically referring to “a contravention of s 52”. Again, it has not chosen to do so. 167

Proportionate liability under ACL (Application Acts) Similar provisions have been introduced into State and Territory legislation and apply in relation to claims for negligence and misleading conduct. 168 For example, Pt 4 of the Civil Liability Act 2002 (NSW) is concerned with proportionate liability. By s 34(1)(b), Pt 4 is expressly rendered applicable to claims for economic loss for a contravention of s 42 of the Fair Trading Act 1987 (NSW). Section 35(1) of the Civil Liability Act 2002 (NSW) provides: [12.170]

In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and (b) the court may give judgment against the defendant for not more than that amount. … (4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings. 165 166

BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 at [7]-[9]. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72.

167 168

Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [275]. Civil Liability Act 2002 (NSW), s 34(1)(b); Civil Liability Act 2003 (Qld), s 28(1)(b) (but note the exclusion for claims by consumers); Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), s 8; Civil Liability Act 2002 (Tas), s 43A; Wrongs Act 1958 (Vic), s 24AF(1)(b); Civil Liability Act 2002 (WA), s 5AI(1)(b); Civil Law (Wrongs) Act 2002 (ACT), s 107B; Proportionate Liability Act (NT), s 4(2)(b).

370

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[12.175]

The definition of “concurrent wrongdoer” is contained in s 34(2) of the Civil Liability Act 2002 (NSW) which provides: In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.

Section 35(1) of the Civil Liability Act 2002 (NSW) was considered in Tomasetti v Brailey, 169 where a director of a company engaged in misleading conduct while providing financial advice on behalf of the company to clients. The director and the company were held to be jointly liable for the whole amount of the loss suffered by the clients and s 35(1) did not require an apportionment to be made. 170

Accessorial liability for damages The remedies in ss 236 and 237 of the ACL may be brought against anyone who is “involved in” a contravention of a provision of Sch 2. Where the principal offender is corporation, it may be possible to claim against the directors, employees and agents of the corporation if they are involved in the conduct found to contravene the ACL. A person will only be “involved” in the contravention if they have sufficient knowledge to bring them within the definition in s 2 of the ACL which provides: [12.175]

a person is involved, in a contravention of a provision of this Schedule or in conduct that constitutes such a contravention, if the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention.

The definition of “involved” in s 2 of the ACL mirrors that in s 75B of the TPA. Thus, the extensive jurisprudence surrounding the meaning and application of “involved” in s 75B of the TPA will also apply to the application of “involved” in s 2 of the ACL. In Yorke v Lucas, 171 the High Court of Australia considered the meaning of s 75B of the TPA. The action arose out of the sale of the business of Treasureway. The trial judge found that Yorke had been induced to enter into a contract to purchase the business by misleading and deceptive statements as to the average weekly turnover of the business. Also sued in the action was the respondent, Lucas, who was managing director of Ross Lucas Pty Ltd which acted as agent for Treasureway in the sale of the business. It was 169 170

Tomasetti v Brailey [2012] NSWCA 399. Tomasetti v Brailey [2012] NSWCA 399 at [154] (Macfarlan JA).

171

Yorke v Lucas (1985) 158 CLR 661. See Bannan, “Accessorial Liability under the Trade Practices Act” (2009) 83 Australian Law Journal 407 and Lumb, “Establishing Accessorial Liability under the Australian Consumer Law” (2014) 22 Australian Journal of Competition & Consumer Law 254.

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[12.180]

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Lucas who passed on the misleading turnover figures to Yorke. The trial judge found that Lucas was not aware and had no reason to suspect that the turnover figures were incorrect. Accordingly, the trial judge dismissed the claim against Lucas on the ground that he was insufficiently aware of the relevant facts for him to be involved in the contravention within the meaning of ss 75B and 82 of the TPA. The High Court upheld the finding, dismissed the appeal. Mason ACJ, Wilson, Deane and Dawson JJ held that s 75B of the TPA was derived from the criminal law, and that the concept of a person involved in a contravention draws on s 5 of the Crimes Act 1914 (Cth). 172 Their Honours held that there was no reason to dispense with the requirement of intent and knowledge because s 75B gives rise to civil liability. They held that s 75B(1)(a) of the TPA, “aiding and abetting”, will only be satisfied where the accessory “intentionally participates” in the contravention. 173 There are thus two elements that need to be satisfied to establish liability as an accessory: first, a subjective intention or knowledge; and, secondly, some degree of participation in the contravention by the principal offender. Intention or knowledge ............................................................................................................................................................................................... [12.180]

In Yorke v Lucas Mason ACJ, Wilson, Deane and Dawson JJ held

To form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime. 174

Natural persons will not be held liable as accessories if they act innocently or inadvertently and have no knowledge of the falsity of the representations made. The weight of authority is that a person will only be “involved” in conduct within the ambit of s 75B of the CCA or s 2 of the ACL if that person intentionally participated in the contravention, in the sense that the person must have had actual knowledge of the “essential matters” that go to make up the contravention, including knowledge of the falsity of the representations made, or possibly a failure to inquire where there are suspicious circumstances, which may lead to the conclusion that the person had actual knowledge. 175 172

Yorke v Lucas (1985) 158 CLR 661 at 668-9.

173

Yorke v Lucas (1985) 158 CLR 661 at 667 relying on a previous decision, Giorgianni v The Queen (1985) 156 CLR 473 which had held that in the criminal law where a party is accused of aiding and abetting, the party must have knowledge of the essential matters that go to make up the offence even if the person does not know that those matters amount to a crime. See also Cassidy v NRMA Health Pty Ltd (2002) ATPR ¶41-891 at [71]-[73] (Jacobson J); and Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [268]-[280] (Lander J).

174 175

Yorke v Lucas (1985) 158 CLR 661 at 670 (Mason ACJ, Wilson, Deane and Dawson JJ). See eg, Sutton v AJ Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 46,608 (Forster, Woodward and Wilcox JJ); Wheeler Grace and Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 at 50,257 (Lee J); Mackman v Stengold Pty Ltd (1991) ATPR ¶41-105 at 52,628-52,632 (Spender J); Bowler v Hilda Pty Ltd [2000] FCA 899 at [77] (Finn J); Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 84-93 (Stone J);

372

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[12.180]

For example, in Medical Benefits Fund of Australia Ltd v Cassidy, 176 Moore J, with whom Mansfield J agreed, defined the “essential matters” in relation to a television advertisement as being the fact of publication, knowledge of the content of the advertisement and an awareness of matters that would allow that content to be characterised as misleading. 177 In Keller v LED Technologies Pty Ltd, 178 LED Technologies alleged that the Condor range of combination rear lights for motor vehicles were marketed with packaging that claimed the lights were “Australian Design Rules approved” and complied with Australian Design Rules. LED Technologies claimed that these captions were misleading contrary to ss 52 and 53 of the TPA because the Condor products did not comply with the relevant motor vehicle standard. LED claimed damages against Keller and Armstrong, the directors of the corporate respondents, on the basis that they were “involved” in the contraventions based on s 75B of the TPA. The primary judge concluded that the corporate respondents contravened ss 52 and 53TPA, but that Keller and Armstrong were not knowingly concerned in the contraventions. The primary judge found that Mr Keller understood that the expression “ADR Approved” was commonly understood to mean that a product has passed a test for compliance with the Australian Design Rules (ADRs). Mr Keller was unaware that the Condor products did not, in fact, comply with the Australian Design Rules and believed at all material times that they did based on assurances from the Chinese manufacturers that the Condor lights complied with the Australian vehicle standard. While he may have been negligent in relying on the assurances of the Chinese manufacturers, his attitude was not such as to suggest wilful blindness or actual knowledge of how a relevant purchaser might understand the captions. On appeal, the Full Court held that no basis had been advanced on which it should depart from what is essentially a finding of credit on the part of the primary judge. 179 One of the “essential matters” was to show that Keller and Armstrong sold the Condor products knowing that they did not comply with the ADRs. 180

176 177 178 179 180

John Bevins Pty Ltd v Cassidy (2003) 135 FCR 1 at 84-93 (Stone J); Quinlivanc v ACCC (2004) 160 FCR 1 at [9]-[10] (Heerey, Sundberg and Dowsett JJ); Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [268]-[280] (Lander J); HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633 (22 June 2007) at [56]-[60] (Einstein J). Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1. Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 10-1. Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 (Emmett, Besanko and Jessup JJ). Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at [143] (Emmett J); at [342] (Besanko J). Jessup J agreed with Besanko J in relation to all questions arising under ss 52, 53, 75B and 82 of the TPA. ACCC v Giraffe World Australia Pty Ltd (1999) 95 FCR 302 at 346. In Rural Press Ltd v ACCC (2003) 216 CLR 53 at [48] the High Court said: “In order to know the essential facts, and thus satisfy s 75B(1) of the Act and like provisions, it is not necessary to know that those facts are capable of characterisation in the language of the statute”.

[12.185]

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There may be circumstances in which professional advisers have the requisite knowledge to be “involved” in the contravention by a client. 181 In Heydon v NRMA Ltd, 182 McPherson A-JA (with whom Ormiston A-JA agreed) said that solicitors engaged to advise on a prospectus would fall within s 75B(1)(a) or 75B(1)(c) of the TPA provided they had the knowledge required by that section. 183 In Rafferty v Time 2000 West Pty Ltd (No 4), 184 members of a firm of solicitors, Madgwicks, submitted that they were not liable to the applicants under s 75B(1) of the TPA because they did not have the required level of knowledge. The contravention in this case was a contravention of s 51AD of the TPA, and that came about because of a failure to comply with the requirements of cll 10 and 11 of the Franchising Code. Madgwicks knew that some of the Donovan respondents were corporations and that they were acting in trade or commerce. They knew of the terms of the agreements. They knew that there was a Franchising Code, and they knew that the Donovan respondents had taken no action to comply with it. The applicants submitted that this knowledge was sufficient to render Madgwicks liable under s 75B(1) of the TPA. Madgwicks submitted that, in order for them to be liable under s 75B(1) of the TPA, the applicants had to show, in addition, that they knew the Franchising Code applied to the agreements. Madgwicks accepted that it is not necessary for the applicants to show that they knew that there was a contravention of the Act. Besanko J at first instance dismissed the claim against Madgwicks based on s 75B(1) of the TPA because they did not have the required knowledge to be “involve” in the contraventions. They did not know that the Franchising Code applied to the agreements. 185 In Raffety v Madgwicks, 186 the Full Federal Court dismissed the appeal. The court defined the “essential matters” as being: [12.185]

(1) a corporation (2) acting in trade and commerce (3) entering a franchise agreement (4) without giving a copy of the Code and a disclosure document to the prospective franchisee 14 days before the franchisee enters the franchise agreement; and/or (5) without receiving written statements from the prospective franchisee to the effect that the franchisee has received, read and had a reasonable opportunity to understand the disclosure document and the Code, and has been given advice by an

181

See Sutton v AJ Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 at 48,608 (Forster, Woodward and Wilcox JJ); Wheeler Grace and Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 at 50,257 (Lee J); Mackman v Stengold Pty Ltd (1991) ATPR ¶41-105 at 52,628-32 (Spender J); Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 84-93 (Stone J); HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633 at [56]-[60] (Einstein J).

182 183 184 185

Heydon v NRMA Ltd (2000) 51 NSWLR 1. Heydon v NRMA Ltd (2000) 51 NSWLR 1 at 150 [436]. Rafferty v Time 2000 West Pty Ltd (No 4) [2010] FCA 725 (13 July 2010). Rafferty v Time 2000 West Pty Ltd (No 4) [2010] FCA 725 at [335].

186

Raffety v Madgwicks (2012) 203 FCR 1 (Kenny, Stone and Logan JJ).

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[12.190]

independent lawyer, business advisor or accountant about the proposed franchise agreement, or has been told that that kind of advice should be sought and has decided not to seek it. 187

It held that Madgwicks was not required to know that the relevant conduct was a contravention of s 51AD, 188 but an essential element of the contravention of s 51AD of the TPA was entering into a franchise agreement. In order to be involved in that contravention it would have to be shown that Madgwicks had actual knowledge that the agreement was a franchise agreement and Madgwicks did not possess that knowledge. 189 Thus, in order to be liable as an accessory under s 236 of the ACL it will not be sufficient to prove that a lawyer was merely negligent in failing to turn his or her mind to the possible application of the law in a given set of circumstances; it will be necessary to prove that the lawyer knew that the law applied, but not that the conduct at issue constituted a contravention of the relevant law. Wilful blindness ...............................................................................................................................................................................................

In some circumstances actual knowledge may be inferred from wilful blindness or deliberate ignorance in order to establish accessorial liability. 190 In Crocodile Marketing v Griffith Vintners, 191 the plaintiff sued the defendant company and its managing director for damages for supplying defective low alcohol wine to the plaintiff. The company was in receivership. The plaintiff alleged that the managing director was involved in the company's contravention of the TPA in that he aided, abetted, procured or was in some way knowingly concerned in or party to the contravention. The managing director's defence to the claim was that he had no actual knowledge of the falsity of the representations regarding the wine's alcoholic and calorific content. The plaintiff argued that, as managing director, he should have been aware of the elements constituting the contravention. Cole J of the Supreme Court of New South Wales stated: 192 [12.190]

The propositions advanced on behalf of the plaintiff are not, in my view, supported by authority. Yorke v Lucas establishes that there is a requirement of knowledge of falsity and thus to have been involved intentionally in the contravention. I do not think one can say that a person intentionally participated in a contravention if, in fact, his unawareness of falsity (that being an ingredient of contravention) was due to a simple failure to direct the 187 188

Raffety v Madgwicks (2012) 203 FCR 1 at [255]. Raffety v Madgwicks (2012) 203 FCR 1 at [257].

189 190

191

Raffety v Madgwicks (2012) 203 FCR 1 at [257]-[260]. ACCC v IMB Group Pty Ltd [2003] FCAFC 17 at [135] and Raffety v Madgwicks (2012) 203 FCR 1 at [261] (Kenny, Stone and Logan JJ). See Lumb, “Establishing Accessorial Liability under the Australian Consumer Law” (2014) 22 Australian Journal of Competition & Consumer Law 254 at 260-2. Crocodile Marketing v Griffith Vintners (1989) 28 NSWLR 539 (Cole J).

192

Crocodile Marketing v Griffith Vintners (1989) 28 NSWLR 539 at 546.

[12.195]

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conduct of acts to establish a fact. Absence of knowledge, save perhaps in the exceptional circumstance of ignorance being dishonestly and deliberately maintained, denies the necessary intent in regard to contravention.

This is particularly important to a non-executive director of a corporation who is not involved in the day-to-day operation of the corporation. Such a director who has no knowledge of the conduct of other directors and who is not involved in the particular negotiations giving rise to a contravention will not be liable for the misleading or deceptive conduct of another person. In Keller v LED Technologies Pty Ltd Besanko J stated: For present purposes, knowledge may be considered to include wilful blindness. However, it does not include recklessness or negligence. In a case concerning representations, the essential elements of the contravention are the fact that the representation was made and that, in a case such as the present, it was misleading or deceptive, or likely to mislead or deceive (s 52) or was false (s 53(a) and (c)). To establish accessorial liability it must be established that the relevant person knew the representation was made and the facts which made it misleading or deceptive, or likely to mislead or deceive, or false. It need not be shown that the relevant person actually drew the conclusion that the representation was misleading or deceptive, or likely to mislead or deceive, or was false. 193

Where a person wilfully turns a blind eye, or deliberately abstains from asking questions or making enquiries, they may be held to have actual knowledge sufficient to attract accessorial liability. 194 Actual knowledge may be inferred from a combination of suspicious circumstances and a failure to make inquiry. 195 However, the courts will not draw an adverse inference lightly, given the seriousness of the consequences that flow from it. In ACCC v IMB Group Ltd, 196 the Full Federal Court stated: 197 before any accessorial liability will arise, it is necessary to establish the subjective element of knowledge of each of the essential elements of the contravention. That knowledge may be constructive in the sense that it may be possible to show wilful blindness in relation to the elements of a contravention. However, absent a finding of wilful blindness, it is necessary to establish actual knowledge on the part of a person to whom it is sought to sheet home accessorial liability in respect of a contravention of Pt V [of the TPA].

Participation in the contravention ...............................................................................................................................................................................................

In addition to subjective intention or knowledge, it is also necessary to establish some degree of participation in the contravention by the primary respondent. In [12.195]

193

Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at [335]-[336].

194

See the discussion of this issue in the judgment of Stone J in Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at 84-93.

195 196

Pereira v Director of Public Prosecutions (1988) 82 ALR 217 at 219-220 (Mason CJ, Deane, Dawson, Toohey and Gaudron JJ). ACCC v IMB Group Ltd [2003] FCAFC 17 (Cooper, Kiefel, and Emmett JJ).

197

ACCC v IMB Group Ltd [2003] FCAFC 17 at [135].

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[12.200]

Yorke v Lucas, it was Lucas who passed on the misleading turnover figures to Yorke. This was what made Lucas a participant in the contravention in that case. 198 However, it is unclear what level of participation in the contravention is necessary in order to satisfy the requirements of s 2 of the ACL. Where the alleged accessory adopts or endorses the misleading information supplied by the primary respondent this will be sufficient participation for the purposes of s 2 of the ACL. However, where the alleged accessory passively acquiesces in the relaying of false information this would be insufficient participation to attract liability as an accessory under s 2 of the ACL.

Compensation orders Compensatory orders in private actions may be made under ss 237(1) or 238(1) of the ACL. Section 237 mirrors s 87 of the TPA. It expressly provides for orders to be made “compensating” the applicant. Section 237 provides: [12.200]

(1) A court may: (a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that: (i) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or (ii) constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term; or (b) on the application of the regulator made on behalf of one or more such injured persons; make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. (2) The order must be an order that the court considers will: (a) compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons. (3) An application under subsection (1) may be made at any time within 6 years after the day on which: (a) if subsection (1)(a)(i) applies – the cause of action that relates to the conduct referred to in that subsection accrued; or (b) if subsection (1)(a)(ii) applies – the declaration referred to in that subsection is made.

Section 237(1) provides the court with the widest possible discretion “to make such order as the court thinks appropriate” unconstrained by equitable and common law 198

Yorke v Lucas (1985) 158 CLR 661 at 670.

[12.200]

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principles, but the court must be guided by the compensatory principle. In Tenji v Henneberry & Associates Pty Ltd, 199 French J stated: the compensatory principle that informs the exercise of the power conferred by s 87. That principle derives from s 87(1) which conditions the power to make orders under the section upon the Court considering that the orders concerned will compensate a party who has suffered or is likely to suffer loss by reason of a contravention in whole or in part for the loss or damage or will prevent or reduce the loss or damage. 200

The types of orders that can be made are set out in ACL s 243 and are considered at [12.220]. In order to recover loss or damage pursuant to s 237, the injured person must prove that the loss or damage was suffered “because of” the conduct in contravention of the ACL. The same issues surrounding causation as an element of the cause of action under s 236 of the ACL (considered at [12.40]–[12.65]) also arise in relation to the cause of action under s 237. For example, an applicant must prove by direct evidence that they were induced by a misleading representation to enter into a contract before a court will make an order for rescission under s 237. The same issues surrounding accessorial liability in relation to s 236 of the ACL (considered at [12.160]–[12.175]) also arise in relation to the cause of action under s 237. Section 137D of the CCA provides that in determining whether to make an order for compensation under ss 237 or 238 of the ACL in relation to unconscionable conduct, 201 or a declared unfair term, 202 a court may have regard to the conduct of the parties since the contravention or declaration was made. Section 137H(2) of the CCA provides that a finding of fact in a prosecution or civil penalty case for a contravention of a provision of Chapter 2, 3 or 4 of the ACL is prima facie evidence in proceedings for an order against a person under s 237(1) of the ACL. Section 242(1) of the ACL provides: An application may be made under section 237(1) or 239(1) even if an enforcement proceeding in relation to the conduct, or the term of a consumer contract, referred to in that subsection has not been instituted.

Section 244 of the ACL provides that a court may make an order under s 237 of the ACL as a principal remedy where a person has contravened a provision of Chs 2, 3 or 4 of the ACL; or for conduct that constitutes applying or relying on or purporting to apply or rely on a term of a consumer contract that has been declared under s 250 of the ACL to be an unfair term. The order-making power is not ancillary to the granting of an injunction under s 232 or the making of an order for damages under s 236, or non-punitive orders under s 246, adverse publicity orders under s 247, or orders for disqualifying a person from managing a corporation under s 248. 199 200 201

Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 (French, Whitlam and Carr JJ). Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 at 50,382 [17]. ACL, Pt 2-2.

202

ACL, s 250.

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[12.205]

The limitation period prescribed is six years after the date of the cause of action based on a contravention of Chs 2, 3 or 4 accrued, or the date on which the unfair term declaration under s 250 was made. 203

Compensation orders arising out of other proceedings Section 238 provides for orders to be made “compensating” an injured person who is a party to the proceeding. Section 238 of the ACL provides: [12.205]

(1) If a court finds, in a proceeding instituted under a provision of Chapter 4 or this Chapter (other than this section), that a person (the injured person) who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of the conduct of another person that: (a) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or (b) constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term; the court may make such order or orders as it thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct. (2) The order must be an order that the court considers will: (a) compensate the injured person in whole or in part for the loss or damage; or (b) prevent or reduce the loss or damage.

The kinds of orders that may be made are set out in s 243 of the ACL and are considered at [12.220]. Section 137D of the CCA provides that in determining whether to make an order for compensation under ss 237(1) or 238(1) of the ACL in relation to unconscionable conduct, 204 or a declared unfair term, 205 a court may have regard to the conduct of the parties since the contravention or declaration was made. The purpose of this provision is to draw the court's attention to the fact that the supplier may have already refunded money to the consumer since the contravention or declaration. 206 Compensation orders may be made against a person involved in the contravening conduct. 207 The definition of involved is contained in s 2 of the ACL and it mirrors s 75B of the TPA.

203 204 205 206

ACL, s 237(3). ACL, Pt 2-2. ACL, s 250. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [18.16].

207

See ACL, ss 237(1), 238(1) and 239(2(a).

[12.215]

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Limits on compensation orders ...............................................................................................................................................................................................

Section 137E(1) of the CCA provides that a court must not make compensation orders under ss 237(1) or 238(1) of the ACL for loss or damage resulting from personal injury or death to the extent that they are based on misleading or deceptive conduct, or unfair practices where they do not result from smoking or use of tobacco products. Section 137E(2) provides that compensation orders can be made under s 237 of the ACL for death or personal injury based on misleading or deceptive conduct, or unfair practices where the death or personal injury results from smoking or other use of tobacco products. Div 2 of Pt VIB of the CCA applies to the actions made under s 237 for death or personal injury based on misleading or deceptive conduct, or unfair practices where the death or personal injury results from smoking or other use of tobacco products. [12.210]

Nature of the relief ...............................................................................................................................................................................................

It is likely that the words “loss or damage” in ss 237 and 243 of the ACL will be construed broadly and will not be confined to monetary damages of the kind recoverable under s 236 of the ACL. Section 237 differs from s 236 in that, unlike damages under s 236, an order under s 237 is discretionary. Also, it is not necessary to prove that damage has actually been suffered; it is sufficient if the damage is likely to be suffered in the future. 208 Sections 237 and 243 of the ACL are based on s 87(1) and (2) of the TPA. The meaning of “loss or damage” in s 87(1) and (2) of the TPA was considered by the Full Federal Court in Demagogue Pty Ltd v Ramensky. 209 Black CJ held: [12.215]

In my view, the loss or damage for the purposes of both ss 87(1) … will include the detriment suffered by being bound to a contract induced by misleading or deceptive conduct in contravention of s 52. Proof of loss or damage of the sort that would be an “amount of … loss or damage” for the purpose of s 82 is not a prerequisite for the grant of relief under either subsection. 210

Cooper J held: In my opinion “loss or damage” in s 87(1) means no more than the disadvantage which is suffered by a person as the result of the act or default of another… 211

208 209 210

Mister Figgins Pty Ltd v Centepoint Freeholds Pty Ltd (1981) 36 ALR 23 at 60. Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32-3.

211

Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 46-7.

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[12.220]

Kinds of orders ...............................................................................................................................................................................................

The kinds of compensatory orders that a court may make under s 237(1) or s 238(1) include those set out in s 243. Section 243(a) provides that a court may make an order declaring the whole or any part of a contract made between the respondent and a person (the injured person) who suffered, or is likely to suffer, the loss or damage referred to in that section, or of a collateral arrangement relating to such a contract to be void; and if the court thinks fit – to have been void ab initio or void at all times on and after such date as is specified in the order (which may be a date that is before the date on which the order is made). In Marks v GIO Australia Holdings Ltd, Gummow J stated, “the principles regulating the administration of equitable remedies afford guidance for, but do not dictate, the exercise of the statutory discretion conferred by s 87”. 212 Principles such as affirmation, delay, the adequacy of damages as a remedy and third party rights will be taken into account but are not determinative. Rescission may be awarded even though the status quo cannot be entirely restored; however, in exercising its discretion the court will have regard to the conduct of the applicant after the applicant becomes aware of the misleading conduct. 213 In Tenji v Henneberry & Associates Pty Ltd, 214 the purchasers signed a contract to acquire a service station. Soon after taking possession they discovered that the annual sales of petrol were much less than had been represented to them. The purchasers purported to rescind the contract, but remained in possession without making proper arrangements to account to the vendor. The primary judge, Lee J, found that the loss suffered by the purchasers was $10,000 representing the difference between the purchase price and the real value of the land, but declined the purchasers' claim for relief under s 87 of the TPA, treating the claim for relief under s 87 as “having the effect of an order for rescission in equity”. 215 In allowing the appeal, the Full Federal Court held unanimously that the fact that the buyer remained in possession and did not undertake to account to the seller for the takings did not bar the grant of relief under s 87 of the TPA. French J stated: [12.220]

The effect of an order for avoidance of a contract under s 87 is to be equated only in a limited sense to that of an order for rescission in equity. For orders made under s 87(2)(a) declaring a contract void in whole or in part and ab initio or from a later date have their effect entirely by operation of the statute. The other element which is of importance in this case is the compensatory principle that informs the exercise of the power conferred by s 87. That principle derives from s 87(1) which conditions the power to make orders under the section upon the Court considering that the orders concerned will compensate 212

Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 535.

213 214

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 79 ALR 83 at 102. See also Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274. Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 (French, Whitlam and Carr JJ).

215

Tenji v Henneberry & Associates Pty Ltd (1999) FCA 1029 at [78].

[12.225]

CHAPTER

12

PRIVATE REMEDIES

381

a party who has suffered or is likely to suffer loss by reason of a contravention in whole or in part for the loss or damage or will prevent or reduce the loss or damage. 216

The overriding question for the court is whether an order for rescission will compensate the applicant for the loss sustained or avoid the loss likely to be sustained. Compensation orders: unfair terms ...............................................................................................................................................................................................

Section 15 of the ACL provides that conduct consisting merely of the voiding of an unfair term under s 23(1) will not constitute a contravention of the ACL. The effect of this provision, in relation to unfair terms is that the mere declaration of an unfair term is not a contravention of the ACL and the remedy provisions for damages will not apply. There is no “conduct” and no “contravention” for the purposes of bringing an action for damages under s 236 of the ACL. However, it will be possible to bring an action for damages if there is other conduct (eg, misleading conduct) surrounding the adoption of the unfair term, or as to its meaning. If a person applies or relies on an unfair term after it is declared to be unfair under s 250, the injured person may seek a compensation order under s 237(1)(a)(ii) which provides: [12.225]

(1) A court may: (a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that: … (ii) constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer contract that has been declared under section 250 to be an unfair term; … make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.

Compensation is available if a person has suffered or is likely to suffer loss or damage as a result of a person relying upon or applying a term declared to be unfair. The court may declare another contract entered into in reliance upon the unfair term to be void. 217 Money paid or property transferred under the term may be recovered. 218 There is some uncertainty surrounding the application of s 237. Once a term of a particular contract has been declared to be unfair, it is clear that relief will be available if the supplier seeks to apply or rely upon it in relation to the same consumer who is a party to that contract. However, it is not clear whether relief will be available if the same supplier seeks to rely upon the same term previously declared to be unfair in relation to a different consumer, without obtaining a second declaration. Furthermore, it is not clear whether a 216 217

Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 at 50,382 [17]. ACL, s 243(a).

218

ACL, s 243(d).

382

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[12.230]

compensation order will be available if a different supplier seeks to rely a term of the same type previously declared to be unfair, in subsequent consumer transactions without obtaining a second declaration. Section 137D of the CCA provides that in determining whether to make an order under subs 237(1) of the ACL in relation to a term of a consumer contract that has been declared under s 250 of the ACL to be an unfair term, the court may have regard to the conduct of the parties to the proceeding referred to in that subsection since the contravention occurred or the declaration was made. An order can be made against the person relying on or applying the unfair term or a person “involved” in that conduct. 219 Section 237(3) provides that an application under s 237(1) must be made within six years after the day on which the declaration is made. Jurisdiction to grant a compensation order under the ACL (Qld) is conferred on the District Court. 220 An appeal lies to the Court of Appeal.

Injunctions An application for an injunction under s 232 may be made by any person. Section 232 of the ACL it written in the same terms as s 80 of the TPA, and the decisions interpreting and applying s 80 of the TPA have been applied in relation to s 232 of the ACL. 221 While a person adversely affected by conduct in contravention of a provision of Chs 2, 3 or 4 is more likely to apply for an injunction, an applicant need not have suffered damage or have any particular interest in the subject matter of the proceeding. 222 The grant of an injunction is a discretionary matter for the court. The parties can put up draft orders expressed in wide terms for the court's consideration, but the court will only grant injunctive relief that is confined to the facts at issue. 223 [12.230]

Interim injunctions ............................................................................................................................................................................................... [12.235]

Section 234 of the provides:

(1) If an application is made under section 232, the court may, if it considers it is desirable to do so, grant an interim injunction under this subsection pending the determination of the application. (2) If a responsible Minister or the regulator made the application under section 232, the court must not require the applicant or any other person to give any undertakings as to damages as a condition of granting the interim injunction. 219

The term “involved” is defined in ACL, s 2.See [12.75]–[12.195].

220 221

Fair Trading Act 1989 (Qld), s 51. See Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [10]-[17] (Nicholas J) relying on the Full Federal Court’s reasons in ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 (Lockhart, Gummow and French JJ); and ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513. See World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 186 (Bowen CJ) and R v Judges of Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd (1978) 142 CLR 113 at 131 (Murphy J).

222 223

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [111]-[113].

CHAPTER

[12.235]

12

PRIVATE REMEDIES

383

(3) If: (a) in a case to which subsection (2) does not apply the court would, but for this subsection, require a person to give an undertaking as to damages or costs; and (b) a responsible Minister gives the undertaking; the court must accept the undertaking by the responsible Minister and must not require a further undertaking from any other person.

In Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd, 224 Edelman J, referring to the decision of the Full Court in Samsung Electronics Company Ltd v Apple Inc, 225 set out the test for an interlocutory injunction: Where an interlocutory injunction is sought in respect of private rights, it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which the final relief is sought (Samsung, 256 [52]). There are two questions: (1) has the applicant established a prima facie case (in the sense that if the evidence remains as it is there is a probability that at the trial of the action the applicant will be held entitled to relief); and (2) does the balance of convenience and justice favour the grant of an injunction or the refusal of that relief? The balance of convenience includes a consideration of whether the refusal of the injunction would have the effect that the applicant will suffer irreparable injury for which damages will not be adequate compensation (Samsung, 259-260 [61] - [63]).

The balance of convenience and the strength of the prima facie case are inter-related. The significance of the strength of the prima facie case will be less where the balance of convenience clearly favours the applicant than in a case where the balance of convenience favours the respondent. 226 If an award of damages would be adequate to compensate the applicant for losses sustained by conduct in contravention of a provision of Chs 2, 3 or 4 of the ACL prior to trial, an interlocutory injunction will not be granted however strong the applicant's claim at the interlocutory stage. 227 In considering whether to grant interlocutory relief it is necessary to consider not only the interests of the parties to the application but also the adverse impact upon third parties and the public interest. 228 Where the practical effect of an interlocutory injunction would be to finally determine the issue, the court will pay special attention to the strength of the applicant's case. 229 224 225 226

Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd [2015] FCA 460 at [26]-[27]. Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238. Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238 at 261 [67].

227 228 229

Tytel Pty Ltd v Telecom (1986) 67 ALR 433 at 441 (Jackson J). Tytel Pty Ltd v Telecom (1986) 67 ALR 433 at 442. Sabre Corporation Pty Ltd v Laboratories Pharm-a-Care (1995) ATPR ¶41-396 at 40,382-4 (Beazley J) and Regent’s Pty Ltd v Subaru (Aust) Pty Ltd (1996) ATPR ¶41-463 at 41,628 (RD Nicholson J).

384

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[12.240]

Final injunctions ...............................................................................................................................................................................................

In Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) Nicholas J held that the court had a wide discretion and that while s 232(4) expressly permits an injunction to be granted whether or not there appears to be any likelihood of a future contravention, however the possibility that the respondent is likely to repeat the contravening conduct is a relevant factor to be taken into account when deciding whether or not to grant an injunction. 230 The court may also grant an injunction to mark its disapproval of the respondent's contravening conduct. 231 The court is not likely to grant an injunction where unintentional conduct is found to be misleading and contrary to s 18 of the ACL, or where there is an isolated breach. 232 [12.240]

Publisher’s defence The provisions relating to misleading or deceptive conduct impose strict liability. An aspect of strict liability is that any newspaper which publishes, or television or radio station which broadcasts, a misleading or deceptive segment of news, information, opinion and comment has engaged in misleading or deceptive conduct. It may, however, be possible for information providers to rely on the statutory exemption in ACL, s 19(1), which states that the provisions relating to misleading or deceptive conduct do not apply to an information provider if the information provider made a publication in the course of carrying on a business of providing information, unless the publication is related directly to its business activities. However, s 19(1) is circumscribed by ss 19(2)(3) and (4).This exemption does not apply to: [12.245]

(a)

advertisements;

(b)

a publication in connection with the supply (or promotion of the supply) of goods or services by the information provider; or

(c)

a publication in connection with the sale or grant (or promotion of the sale or grant) of an interest in land by the information provider. In relation to advertisements there is a special defence for information providers created by s 251 of the ACL. Section 251 provides: (1) This section applies to a proceeding under this Part [Part 5-2-Remedies] in relation to a contravention of a provision of Part 2-1 or 2-2 or Chapter 3 if the contravention was committed by the publication of an advertisement. 230

231

Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [18] (Nicholas J) citing the Full Federal Court’s reasons in ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 (Lockhart, Gummow and French JJ); and ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513. Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 at [17].

232

ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [111].

[12.250]

CHAPTER

12

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385

(2) In the proceeding, it is a defence if the defendant proves that: (a) the defendant is a person whose business it is to publish or arrange for the publication of advertisements; and (b) the defendant received the advertisement for publication in the ordinary course of business; and (c) the defendant did not know, and had no reason to suspect, that its publication would amount to a contravention of such a provision.

Section 251 of the ACL replaces s 85(3) of the TPA. Section 18 of the ACL will not apply to the information provider where it is apparent that the information provider is not the source of the advertisement, did not endorse it and was merely relaying it without accepting responsibility for it. 233 The scope and operation of s 85(3) of the TPA was considered by French CJ, Crennan and Kiefel JJ in Google Inc v ACCC. 234 Their Honours observed: Section 85(3) provided a defence in proceedings in relation to a contravention of Pt V or VC of the Act which was limited to publishers of advertisements. If an intermediary publisher has not endorsed or adopted a published representation of an advertiser, that circumstance may be sufficient, in the context of a particular case, to justify a finding that the intermediary has not contravened s 52. By way of contrast, an intermediary publisher who has endorsed or adopted a published representation of an advertiser without appreciating the capacity of that representation to mislead or deceive may have resort to the statutory defence. In those circumstances, recognising that its business carried a risk of unwitting contravention, an intermediary publisher may need to show that it had some appropriate system in place to succeed in the defence that it did not know and had no reason to suspect that the publication of that representation would amount to a contravention. It is sufficient for present purposes to state that the recognisable distinctions between these different scenarios illustrate the different spheres of operation of the line of authority in this Court commencing with Yorke v Lucas and the statutory defence in s 85(3). 235

Death or personal injury: CCA and ACL Framework Dramatic increases in insurance premiums in the early years of the 21st century prompted a review of the laws of negligence relating to personal injury. State and Territory governments introduced a range of reforms designed to limit liability for personal injury in certain circumstances, and to place restrictions on the amount of damages which could be awarded. At the same time, the Federal Government initiated a review of personal injury laws, chaired by Ipp J. [12.250]

233 234

See [11.40]. Google Inc v ACCC (2013) 249 CLR 435.

235

Google Inc v ACCC (2013) 249 CLR 435 at 461, see also Hayne J at 472-4.

386

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[12.250]

The Ipp Report 236 made 61 recommendations for reform, including a suggestion that uniform legislation be adopted across Australia. Several amendments to the TPA were also recommended, most of which were enacted. However, rather than adopt a uniform framework, State and Territory reforms varied from the Ipp recommendations in a number of ways, and as a result there were several differences between jurisdictions, and between the States and Territories and the TPA with regards to the availability of damages or compensation for personal injury, and the quantum of awards where available. The CCA imposes limits on plaintiffs seeking an award of personal injury damages. Sections 137C and 137E of the CCA respectively provide that plaintiffs cannot bring actions for personal injury damages under s 236 of the ACL and compensation orders under ss 237 and 238 of the ACL to the extent that they relate to misleading or deceptive conduct, 237 or unfair practices, 238 where they do not relate to smoking or use of tobacco products. Section 137C of the CCA provides: (1) A person is not entitled to recover an amount of loss or damage by action under subsection 236(1) of the Australian Consumer Law to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury does not result from smoking or other use of tobacco products. (2) Divisions 2 and 7 of Part VIB of this Act apply to an action under subsection 236(1) of the Australian Consumer Law to compensate a person for loss or damage a person suffers to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury results from smoking or other use of tobacco products; as if the action were a proceeding to which Part VIB of this Act applied.

Section 137E of the CCA provides: (1) A court must not make an order under subsection 237(1) or 238(1) of the Australian Consumer Law to compensate a person for loss or damage the person suffers because of the conduct of another person to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or 3-1 of the Australian Consumer Law; and 236 237

Commonwealth of Australia, Review of the Law of Negligence Report (Canberra, 2002). ACL, Pt 2-1.

238

ACL, Pt 3-1.

[12.250]

CHAPTER

12

PRIVATE REMEDIES

387

(b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury does not result from smoking or other use of tobacco products. (2) Division 2 of Part VIB of this Act applies to an application for an order under subsection 237(1) of the Australian Consumer Law to compensate a person for loss or damage the person suffers because of the conduct of another person to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury results from smoking or other use of tobacco products; as if the proceeding in relation to the application were a proceeding to which Part VIB of this Act applies and as if the making of the application were the commencement of the proceeding. (3) Division 7 of Part VIB of this Act applies to a proceeding in which an order under subsection 237(1) or 238(1) of the Australian Consumer Law to compensate a person for loss or damage the person suffers because of the conduct of another person is made, to the extent to which: (a) the action would be based on the conduct contravening a provision of Part 2-1 or Part 3-1 of the Australian Consumer Law; and (b) the loss or damage is, or results from, death or personal injury; and (c) the death or personal injury results from smoking or other use of tobacco products; as if the proceeding were a proceeding to which Part VIB of this Act applied.

This provision is based on the repealed s 82(1AAA) and (1AAB) of the TPA. Part VIB, Div 2 of the CCA deals with the limitation periods that apply for claims for damages or compensation for death or personal injury and, to the extent to which that Division is applied to the application by this subsection, it overrides subs 237(3) of the ACL. Part VIB, Div 7 of the CCA deals with structured settlements for claims for damages or compensation for death or personal injury. Part VIB of the CCA regulates awards of damages or compensation for death or personal injury. Section 87E(1) of the CCA provides that Pt VIB applies to proceedings taken under the ACL: (a)

that relate to Part 2-2 (unconscionable conduct), Part 3-3 (safety standards in relation to consumer goods, bans on consumer goods and product related services, compulsory recall of consumer goods, voluntary recall of consumer goods), Part 3-4 (information standards), Part 3-5 (liability of manufacturers for goods

388

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[12.255]

with safety defects) or Division 2 of Part 5-4 (actions for damages against manufacturers of goods where there is a failure to comply with the consumer guarantees); and (b)

in which the plaintiff is seeking an award of personal injury damages; and

(c)

that are not proceedings in respect of the death of or personal injury to a person resulting from smoking or other use of tobacco products. It specifies the relevant time limits for bringing claims, imposes limits on the amount and types of damages that can be awarded, and sets thresholds for non-economic loss, below which damages are not available. It provides for the circumstances under which a plaintiff can be awarded damages for gratuitous care, and abolishes exemplary and aggravated damages. It also provides that a court can refer to past decisions, and can make consent orders for structured settlements. The CCA and the State and Territory application legislation treat actions for death similarly to those for personal injury. Maximum damages available ...............................................................................................................................................................................................

The Ipp review recommended that awards for non-economic loss be capped at $250,000. Section 87M of the CCA imposes such a cap. [12.255]

Cap on damages for loss of earnings ...............................................................................................................................................................................................

Section 87U of the CCA places a cap on damages for loss of earnings at two times the average full time weekly earnings. [12.260]

Threshold for damages ...............................................................................................................................................................................................

Section 87S of the CCA imposes a threshold for claiming damages at 15% of the most extreme case. Section 87S provides: [12.265]

If the non-economic loss the plaintiff suffers is less than 15% of a most extreme case, the court must not award personal injury damages for non-economic loss.

Court may refer to past decision in determining non-economic loss ...............................................................................................................................................................................................

Section 87T of the CCA allows for the court to refer to past decisions. This was one of the recommendations of the Ipp Review. Section 87T provides: [12.270]

(1) In determining personal injury damages for non-economic loss, the court may refer to earlier decisions of the court or of other courts for the purpose of establishing the appropriate award in the proceeding.

CHAPTER

[12.285]

12

PRIVATE REMEDIES

389

(2) For that purpose, the parties to the proceeding or their counsel may bring the court's attention to awards of personal injury damages for non-economic loss in those earlier decisions. (3) This section does not affect the rules for determination of other damages or compensation.

Abolition of aggravated and exemplary damages ...............................................................................................................................................................................................

Section 87ZB of the CCA expressly excludes awards for aggravated and exemplary damages for personal injury. [12.275]

Gratuitous care ...............................................................................................................................................................................................

Sections 87W and 87X of the CCA provide that damages for gratuitous care will not be available unless certain prerequisites are established. These apply to both care which the plaintiff will require as a result of the accident, and compensation for loss of the plaintiff's ability to provide care which was provided by them prior to the accident. In order for damages for gratuitous care to be available, the care must be provided for at least six hours a week, and for a period of at least six months. Care which is required by the plaintiff must be necessary and must be a result of the personal injury. [12.280]

Availability of structured settlements ...............................................................................................................................................................................................

Section 87ZC of the CCA, and all States and Territories, make provision for the court to grant a consent order for a structured settlement. Section 87ZC provides: [12.285]

(1) In a proceeding to which this Part applies, a court may, on the application of the parties, make an order under section 87 approving a structured settlement, or the terms of a structured settlement, even though the payment of damages is not in the form of a lump sum award of damages. (2) This section does not limit the powers of a court to make an order under section 87 in a proceeding that is not a proceeding to which this Part applies. (3) In this section: structured settlement means an agreement that provides for the payment of all or part of an award of damages in the form of periodic payments funded by an annuity or other agreed means.

390

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[12.290]

Reduced compensation in defective goods actions ...............................................................................................................................................................................................

Part 3-5, Div 2 of the ACL (defective goods actions) considered in Chapter 12 (Corones) is a strict liability scheme which absolves the plaintiff of the need to establish the defendant's negligence. However, s 137A of the CCA provides that if the plaintiff's actions contributed to their loss, a manufacturer's liability will be reduced to such an extent that the court thinks fit. See [12.145]. [12.290]

PART 8

SECURITY INTERESTS IN PERSONAL PROPERTY Chapter 13 Security Rights .............................................................. 393 Chapter 14 Credit Law ..................................................................... 401 Chapter 15 Personal Property Security ............................................ 411

CHAPTER 13

......................................................................................................................

Security Rights Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 14.

A security right (often called a security interest) is a right which exists for the purpose of securing the performance of a personal obligation. Both personal and property rights can be used for this purpose. For example, a bank might be willing to lend money to a small company only if the company’s directors agree to guarantee payment of the loan. The bank is concerned that the company might become insolvent and fail to keep its promise to pay, and it wants the guarantee as security for that obligation. If the company does fail to pay, the directors will be called on to pay the company’s debt. The guarantee is a personal right which the bank holds as security for the performance of the company’s obligation. Property rights can also be used as security. The simplest example is the deposit of an ID card to borrow a key to a tennis court. Possession of the card is held as security for the performance of the borrower’s obligation to return the key. This is called a pledge. There are many other types of security rights, such as the lien, charge, and conditional sale. The most familiar is the mortgage. Most people who buy a home need to borrow money to pay the purchase price. The lender has the benefit of the borrower’s promise to repay the loan, but usually insists on receiving a mortgage of the home as well. If the borrower fails to repay the loan, the lender can obtain or sell the home to satisfy the amount owing. A security right may be legal or equitable and may be ownership, possession, or a lesser property right. Regardless of the form of the transaction, all security rights exist for the limited purpose of making it more likely that some personal obligation will be performed. They further that purpose in two ways. First, the existence of a security right creates an additional incentive to perform the obligation. Secondly, most security rights have a market value which can be used as a substitute for performance. The usual type of personal obligation for which people take security rights to property is an obligation to pay money. As discussed in Chapter 2 at [2.60] (Chambers), this obligation is called a debt. The person who owes money is a debtor, and the person to whom money is owed is a creditor. A creditor who has taken a property right to secure payment of the debt is called a secured creditor, and a creditor without security is an unsecured creditor. Although security rights are often used for obligations other than debts, the person under the obligation is referred to below as the debtor for the sake of convenience. [13.10]

394

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[13.20]

Reasons for taking security rights Most obligations are unsecured, such as your promise to pay the balance owing on your credit card, your employer’s promise to pay your salary at the end of the month, or your travel agent’s promise to deliver the airline tickets you reserved. Generally, we are happy to rely on the fact that most people keep their promises. We are willing to take a risk when the possibility and consequences of non-performance are relatively low. There are two main disadvantages of unsecured obligations. The first is the expense, delay, and inconvenience of taking legal action to enforce the obligation in the event of non-performance. An unsecured creditor must obtain a court judgment for the debt (thereby becoming a judgment creditor), and if the judgment is not paid, must proceed to execution (as an execution creditor) by instructing the sheriff to seize the debtor’s assets to pay the judgment. Having security can both reduce the risk of non-performance and provide a property right which can be used to satisfy the debt. Secondly, unsecured creditors are vulnerable to the risk of their debtors’ insolvency or bankruptcy. If a debtor is declared bankrupt, her or his assets vest in the trustee in bankruptcy, who uses them to pay the bankrupt’s creditors according to law. 1 The process is designed to facilitate the orderly and fair payment of the bankrupt’s debts. The unsecured creditors are then limited to a claim in the bankruptcy and can no longer take independent steps to obtain payment. 2 If there is anything left after the secured creditors enforce their security rights and the preferred creditors (who have a statutory priority for certain debts such as funeral expenses or wages) are paid, the ordinary creditors share what remains pro rata (for example, 10 cents for every dollar owed). 3 After the assets are sold and distributed, the bankruptcy can be discharged and the bankrupt’s debts are extinguished. The risk of being adversely affected by a debtor’s bankruptcy is reduced by taking security. This is because a bankruptcy affects personal rights against the debtor, but does not normally affect other people’s property rights to the debtor’s things. The theory of bankruptcy is that the debtor’s property is used to pay her or his creditors. Bankruptcy does not allow other people’s property to be used for that purpose. A security right (such as a mortgage of the debtor’s home) is the property of the secured creditor and unavailable to the other creditors. [13.20]

Types of security rights There are three main types of property rights used as security: possession, ownership, and encumbrance. These distinctions have become somewhat less important in relation to personal property since the commencement of the Personal Property Securities [13.30]

1 2

Bankruptcy Act 1966 (Cth), ss 58, 116. Bankruptcy Act 1966 (Cth), ss 58, 60, 82.

3

Bankruptcy Act 1966 (Cth), ss 108, 109, 140.

[13.50]

CHAPTER

13

SECURITY RIGHTS

395

Act 2009 (Cth) in 2012. 4 This book follows the common practice of referring to that statute as the PPSA. Under the PPSA, most of the different kinds of security rights to personal property are all treated in a similar way and are simply known as “security interests”. 5 It still matters whether the creditor has possession of the goods or documents in question. 6 Also, the PPSA does not apply to security rights that arise by operation of law. 7 Possession ...............................................................................................................................................................................................

Possession is the oldest form of security in which the creditor is entitled to possession of something belonging to debtor until the debt is paid. There are two main types of possessory security: the pledge and the legal or common law lien. These are legal security rights (the right to possession). The equitable lien is a different type of security: an encumbrance. [13.40]

Pledge

A pledge is the delivery of a chattel for the express purpose that possession of the chattel be held for security. Any sort of chattel may be pledged, including goods and documents (such as a bill of lading for goods being shipped). 8 A pledge is sometimes called a pawn and someone in the business of lending money in exchange for pledges is called a pawnbroker. 9 Although most pledges arise when the chattel is delivered to the secured party, he or she might already have possession when the owner agrees that it can be used as a pledge. The essence of a pledge is not an act of delivery, but the possession of a chattel to secure performance of an obligation. The secured party has a right to retain possession until the obligation is performed. If the debtor fails to perform the secured obligation, the creditor has the right to sell the thing pledged and use the proceeds to satisfy that obligation. Anything which remains after payment of the debt (and costs of sale) must be returned to the debtor. [13.50]

4

Personal Property Securities Act 2009 (Cth), ss 304–310. This Act, called the PPSA below, applies throughout Australia with each state referring its powers to legislate on personal property security to the Commonwealth: PPSA, ss 242–244; Personal Property Securities (Commonwealth Powers) Act 2009 (NSW); Personal Property Securities (Commonwealth Powers) Act 2009 (Qld); Personal Property Securities (Commonwealth Powers) Act 2009 (SA); Personal Property Securities (Commonwealth Powers) Act 2010 (Tas); Personal Property Securities (Commonwealth Powers) Act 2009 (Vic); Personal Property Securities (Commonwealth Laws) Act 2011 (WA).

5 6 7 8

PPSA, s 12. PPSA, ss 21, 24. PPSA, s 8. ANZ Banking Group Ltd v Curlett, Cannon & Galbell Pty Ltd [1992] 2 VR 647.

9

See Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; [2005] HCA 28.

396

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[13.60]

Common law lien

A common law lien is like a pledge, except it arises by operation of law when a person has possession of a chattel for some other purpose and is permitted by law to retain possession until a related obligation is performed. 10 For example, an unpaid vendor has a lien on goods sold until the full purchase price is paid, a garage has a lien on goods repaired until its repair bill is paid, and accountants have a lien on their client’s books until their fees are paid. The lien ends when either the debt is paid or possession of the goods is lost. Unlike a pledge, a lien does not give the secured party a right to sell the chattel to satisfy the debt. There are some exceptions created by statute. For example, in most jurisdictions, a warehouse has the right to sell the goods to pay the cost of storage charges. 11 However, at common law, liens are passive security rights to do no more than retain possession until the relevant debt is paid. The lien arises because it is unfair to permit an owner of goods to enforce her or his right to possession without paying the bailee for services which have enhanced or preserved the value of those goods. There is no right to a lien on a chattel unless the debt relates to that chattel in some way. For example, the debt might be the purchase price or the charges for storing, transporting, repairing, or improving that chattel. The connection required between debt and chattel varies according to the custom in each trade and profession. In some cases, a lien on a chattel will arise only for work done on that particular chattel. This is called a particular lien. In Dinmore Meatworks Pty Ltd v Kerr, 12 an abattoir butchered cattle for a customer who became insolvent and failed to pay for the work. The abattoir still had some of the customer’s meat and claimed a lien for the entire debt. The High Court held that the lien secured only those fees charged for preparing the meat still in the abattoir’s possession. In some trades and professions, the secured party is entitled to a general lien. For example, a carrier of goods can claim a lien on part of a shipment for the shipping charges for the whole shipment. Also, solicitors have a lien on a client’s file for all the fees owed by the client and not just the legal work done on that particular file. The lien entitles a secured party to resist the debtor’s claim to possession of the goods, but does not operate against other persons with a better right to immediate possession. In Anderson v Lockhart, 13 a solicitor had a lien on his client’s leasehold documents. A bank, which foreclosed on the property, had a better right to possession of those documents than the client. The solicitor’s lien did not entitle him to resist the bank’s claim for possession of the documents. Also, there are cases where a bailee of goods delivered them to a shop for repairs. The lien for the cost of repairs will not entitle the shop to resist the [13.60]

10 11

12

Tappenden v Artus [1964] 2 QB 185. Mercantile Law Act 1962 (ACT), s 22; Warehousemen’s Liens Act 1935 (NSW), s 6; Warehousemen’s Liens Act (NT), s 8; Storage Liens Act 1973 (Qld), s 6; Warehouse Liens and Storage Act 1990 (SA), s 9; Warehousemen’s Liens Act 1958 (Vic), s 7; Warehousemen’s Liens Act 1952 (WA), s 7. Dinmore Meatworks Pty Ltd v Kerr (1962) 108 CLR 628; [1962] HCA 47.

13

Anderson v Lockhart [1991] 1 Qd R 501.

[13.90]

CHAPTER

13

SECURITY RIGHTS

397

bailor’s right to immediate possession, unless the bailee had the bailor’s (express or implied) permission to get the goods repaired. 14 Ownership ...............................................................................................................................................................................................

In some cases, the secured party gets legal ownership of some thing for the purposes of securing a personal obligation. On full performance of the secured obligation (usually payment of a debt), the creditor is required to transfer the ownership to the debtor. Normally, the debtor has possession of the thing unless he or she fails to perform the obligation as agreed, in which case the creditor becomes entitled to possession. The debtor benefits from being entitled to the possession, use, and enjoyment of the thing while the obligation is being performed. This is especially important if performance of the secured obligation will continue over a long period of time (such as a mortgage payable over 25 years). There are two main types of ownership security: the common law mortgage and the hire-purchase (or conditional sale). The Torrens mortgage is a type of encumbrance. [13.70]

Mortgage

Anything which can be owned (such as a car, estate, or violin) can be mortgaged. The common law mortgage of land has a long history and is discussed below in greater detail. A mortgage of goods is usually called a chattel mortgage or bill of sale. Most mortgages are used to help the debtor purchase the thing mortgaged. The debtor (as purchaser) asks the vendor to transfer ownership of the thing to the secured creditor, who lends money to the debtor to be used to pay the purchase price to the vendor. However, a mortgage can be used for any purpose. For example, you might borrow money to renovate your house or travel overseas and your bank might take a mortgage of your land as security for the loan. [13.80]

Hire-purchase and conditional sale

The hire-purchase and conditional sale are functionally similar to a mortgage: the secured creditor has ownership of the thing until the debt is paid. Unlike the mortgage, they are always used to secure the payment of a purchase price. Under a conditional sale, the vendor is the secured creditor and the thing sold is subject to the security right. In other words, the vendor finances the purchase. He or she is the owner of the thing at the outset and retains ownership as a secured creditor until the full purchase price is paid. 15 Both land and goods can be sold in this manner. Raw materials are often supplied to manufacturers under conditional sale contracts, which state that ownership will not pass to the manufacturer until the supplier is paid in full. The relevant provisions in these contracts are commonly called “retention of title [13.90]

14

Fisher v Automobile Finance Co of Australia Ltd (1928) 41 CLR 167; [1928] HCA 35.

15

General Motors Acceptance Corp Australia v Southbank Traders Pty Ltd [2007] HCA 19.

398

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[13.100]

clauses”, but are also known as “Romalpa clauses”, after a famous case involving one. 16 Their effect is limited because the supplier cannot retain ownership of the materials after they are consumed in the manufacturing process, but the security interest can continue as a statutory encumbrance over the manufactured products and the proceed of sale of those products. 17 A hire-purchase works in much the same way as a conditional sale. The debtor obtains possession of goods being purchased as bailee, with an obligation or option to buy the goods at the end of the bailment. The vendor may be the bailor-creditor under this arrangement, but need not be. For example, if a buyer agrees to buy a new car under a hire-purchase agreement, the dealer may sell the car to a finance company, which makes the hire-purchase agreement with the buyer. Encumbrance ...............................................................................................................................................................................................

As discussed above, possession and ownership can be held for security purposes. It is also possible to create a security right which is neither possession nor ownership. The secured creditor merely has the right to take and sell the thing if the debtor defaults. It is not some other type of property right (possession or ownership) which is used for security purposes. The security right is simply an encumbrance on the debtor’s property right, which may, on default by the debtor, become a right to possession or ownership. The granting of this type of security is sometimes called hypothecation. There are three types of encumbrances: the equitable charge, the equitable lien, and the statutory encumbrance. [13.100]

Equitable charge

The equitable charge is created by agreement between the creditor and debtor. The debtor agrees that certain assets will be available to the creditor to satisfy the debt if payment is not made. The creditor gets neither possession nor ownership, but the equitable right to use the assets for the satisfaction of the debt in the event of default. The equitable charge is sometimes called an equitable mortgage, especially when it is a charge over land. A debtor may grant an equitable charge or mortgage over a specific asset, such as an estate or piece of machinery, or may grant a charge over a pool of assets, such as the stock in trade of a business or all of a company’s assets. A charge over a specific asset is sometimes called a fixed charge to distinguish it from a charge over a pool of assets, which is called a floating charge. The identity of the assets which constitute the pool subject to a floating charge can change. For example, a floating charge over all the assets of a company [13.110]

16 17

Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676. PPSA, ss 31, 32, 99, 101. See Clough Mill Ltd v Martin [1984] 3 All ER 982; [1985] 1 WLR 111; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25.

[13.120]

CHAPTER

13

SECURITY RIGHTS

399

is a security interest over whatever assets the company has at any given time. Assets will be removed from and added to that pool as they are sold, consumed, created, or purchased. Floating charges used to be granted by companies through a document called a debenture. The same effect is now achieved under the PPSA by means of “a security interest in all present and after-acquired property” of the debtor. 18 An equitable charge is comparable to a trust. The debtor (like the trustee) has legal ownership and is compelled by equity to use that legal right for the purpose of securing the debt. The debtor’s legal ownership is subject to the creditor’s equitable property right (just as the trustee’s legal ownership is subject to the beneficiary’s equitable property right). Unlike the trust, the creditor does not get the full beneficial use and enjoyment of the assets, but merely a security interest. So, while debtor and trustee both have legal ownership, the debtor has beneficial ownership, while the trustee has only bare legal title. Conversely, the secured creditor and trust beneficiary both have equitable property rights, but the creditor has a limited security interest, while the beneficiary has full beneficial ownership. There are two main advantages of an equitable charge. First, non-possessory and personal rights (such as a bank account) can be charged. Secondly, the debtor retains ownership (and possession) of the things charged and can deal with them subject to the charge. Floating charges permit debtors to deal with their assets in the ordinary course of business. This makes it possible for a debtor to give security to a creditor without freezing assets needed by the debtor to carry on business (so long as the debt is being paid as required). The same is true of a security interest in present and after-acquired property under the PPSA. 19 Equitable lien

The equitable lien is equivalent to an equitable charge, but created by operation of law, rather than by an intention to create it. The distinction between the equitable charge and equitable lien can be compared to the distinction between the pledge and common law lien. The equitable lien, like its common law counterpart, arises to secure payment of a debt related to the thing subject to the lien. Unlike the common law lien, the equitable lien is not possession, but an equitable property right attaching to the debtor’s property or personal right. Equitable liens are sometimes referred to as equitable charges, and vice versa, so it is important to note whether the lien or charge in question has been granted by the debtor or has arisen by operation of law. There are a number of situations in which equitable liens are known to arise. The most familiar is the unpaid vendor’s lien which arises on the sale of land. If an estate is transferred to the purchaser before the full purchase price is paid, the vendor has an [13.120]

18

PPSA, s 18.

19

PPSA, s 46.

400

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[13.120]

equitable lien on the estate for the balance owing. This can be compared to the common law lien which the vendor of goods has to retain possession of those goods until the full purchase price is paid. The purchaser of land can also have an equitable lien. If he or she pays any part of the purchase price before the land is transferred, a purchaser’s lien arises to secure a refund in the event that the sale cannot be completed. The purchaser also has an equitable beneficial interest in the land so long as the sale can be performed. Equitable liens can also arise in favour of a person who has contributed to the improvement or preservation of land, goods, or some other right. In these cases, the lien attaches to that right to secure the right holder’s obligation to pay for the value of the benefit. People are not normally required to pay for unrequested benefits. However, a lien can arise where the benefit was conferred by mistake or with the encouragement of the right holder. 20

20

See Chalmers v Pardoe [1963] 1 WLR 677; [1963] 3 All ER 552 (PC); Cadorange Pty Ltd v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26.

CHAPTER 14

......................................................................................................................

Credit Law Extracted from Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015), Ch 19.

The new personal property securities legislation Introduction ...............................................................................................................................................................................................

The Personal Property Securities Act 2009 (Cth) effects fundamental changes to the law relating to the taking of security over personal property to secure the repayment of a loan or other contractual obligation. It has replaced the more than 70 different personal property securities statutes in the Commonwealth, States and Territories that dealt with the registration of different types of securities including motor vehicle securities, bills of sale, ship mortgages, company charges, crop liens, stock mortgages and so on. That system was cumbersome and complex and gave rise to inconsistencies in treatment between the different jurisdictions. The principal objectives of the new legislation are to replace the myriad of existing Commonwealth, State and Territory laws and registers with a single national law governing security interests over personal property together with a single national system of registration of such interests in the Personal Property Securities Register. 1 The Personal Property Securities Act 2009 (Cth) was assented to on 14 December 2009 and its main provisions came into operation on 30 January 2012. The Personal Property Securities Act 2009 (Cth) is largely modelled on the Canadian (in particular, Saskatchewan) and New Zealand Personal Property Securities Acts. All of these Acts have Article 9 of the United States Uniform Commercial Code as their common basis.

[14.10]

Background to the legislation ...............................................................................................................................................................................................

The Australian Law Reform Commission had recommended in its 1993 Report the establishment of a single regime to apply in all jurisdictions for the regulation [14.20]

1

See N Mirzai, “The Consumer and the Personal Property Securities Act 2009: Does the Regime Protect Consumers?” (2013) 87 Australian Law Journal 59; A Duggan, “A PPSA Registration Primer” (2011) 35 Melbourne University Law Review 865; I Davidson, “Overview of the New Personal Property Securities Law” (2011) 35 Australian Bar Review 93.

402

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[14.30]

of priorities between personal property security interests. 2 However, notwithstanding the release of a discussion paper and consultations no legislation eventuated. Some years later the issue was taken up again by the Standing Committee of Attorneys-General which prepared an options paper to gauge the level of support for personal property securities reform which was issued in April 2006. Three further detailed discussion papers were released for comment in November 2006, and in March and April 2007. Subsequently, the Council of Australian Governments (COAG) meeting of 13 April 2007 gave in-principle agreement to the establishment of a national system for the registration of personal property securities. A year later, on 16 May 2008, the Commonwealth Attorney-General circulated the Consultation Draft Personal Properties Securities Bill 2008. This was followed by the Commonwealth and State governments signing the Personal Properties Law Agreement on 2 October 2008 to “establish a national system for the registration of personal property securities to be implemented by Commonwealth legislation, supported by a State text-based referral of certain matters to the Commonwealth Parliament, in accordance with subsection 51(xxxvii) of the Constitution.” The States and Territories have subsequently enacted legislation referring their powers in this area to the Commonwealth, in accordance with the Agreement. 3 Overview of the legislation ...............................................................................................................................................................................................

The Personal Property Securities Act 2009 (Cth) provides for the registration of security interests in personal property. This raises the questions of what constitutes a “security interest” in personal property for the purposes of the Act. Both “security interest” and “personal property” are very broadly defined in the Personal Property Securities Act 2009 (Cth). The Act further sets down the requirements to be satisfied for a security interest to be enforceable against: [14.30]

(a)

the grantor of the security interest; and

(b)

against third parties who, for example, may have purchased the goods, the subject of the security interest from the grantor unaware of the existence of the security interest. An important issue which arises is the position where the grantor of the security interest, for example a debtor who has provided the security for a loan, subsequently gives security 2 3

The Law Reform Commission, Personal Property Securities (Report No 64, 1993). Personal Property Securities (Commonwealth Powers) Act 2009 (NSW); Personal Property Securities (Commonwealth Powers) Act 2009 (Vic); Personal Property Securities (Commonwealth Powers) Act 2009 (Qld); Personal Property Securities (Commonwealth Powers) Act 2000 (SA).

[14.40]

CHAPTER

14

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403

over the same personal property to another lender. This raises the question of which of the lenders has priority in respect of the security interest under the priority rules set down by the Act. In certain circumstances, a third party may acquire the property free from the security interest which had earlier been given by the grantor, for example a debtor in return for a loan. The relevant provisions of the Act detailing these circumstances are considered. Following the discussion of the application of the Act to these basic issues, consideration will be given to the enforcement of security interests and the Personal Property Securities Register. The main concepts of the Act ...............................................................................................................................................................................................

The meaning of security interest

The Personal Property Securities Act 2009 (Cth) defines a “security interest” as an interest in personal property provided for by a transaction that in substance secures a payment or performance of an obligation: s 12(1). This is a functional approach which focuses on the substance of the transaction rather than its particular form and regardless of who has title to the property. Examples of security interests included in the definition are: a chattel mortgage, conditional sale agreement (including an agreement to sell subject to retention of title), hire-purchase agreement, lease of goods, pledge, trust receipt, consignment, fixed charge, floating charge, assignment or transfer of title that in substance secures payment or performance of an obligation: s 12(2). In addition, a “security interest” is deemed by the Personal Property Securities Act 2009 (Cth) to extend to three classes of transaction: [14.40]

(a)

transfers of accounts and chattel paper;

(b)

commercial consignments of goods; and

(c) certain leases and bailments of goods. This is regardless of whether these deemed security interests secure in substance the payment or performance of obligations: s 12(3). Personal property means any kind of property (tangible and intangible) other than real property. It is also defined to include licences: s 9. Examples of personal property include motor vehicles, household goods, business inventory, intellectual property and company shares. The Personal Property Securities Act 2009 (Cth) does not apply to certain specified security interests, regardless of these interests securing in substance the payment or performance of obligations. An example of an excluded security interest is the class of liens that arise by operation of law: s 8(1)(b). Also, security interests in fixtures are excluded, even though fixtures fall within the Act’s definition of personal property: s 8(1)(j).

404

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[14.50]

The Act applies to security interests given by corporations, partnerships, other legal entities and individuals. Enforceability, attachment and perfection of security interests Attachment

Personal property is known as collateral if it is the subject of a security interest. A security interest is enforceable against a grantor in respect of particular collateral (for example in respect of the personal property provided as security for a loan) when it attaches to the collateral: Personal Property Securities Act 2009 (Cth), s 19(1). This raises the question of what requirements must be satisfied for a security interest to attach to collateral. Two requirements must be met for attachment to occur: [14.50]

(a)

the grantor has rights in the collateral, or has the power to transfer rights in the collateral to the secured party; and

(b)

either value is given for the security interest or the grantor does an act by which the security interest arises: s 19(2).

Enforceability against third parties

A security interest will generally be enforceable against a third party in respect of particular collateral only if the security interest is attached to the collateral and one of the following applies: [14.60]

(a)

the secured party has possession of the collateral;

(b)

the secured party has perfected the security interest by control; or

(c)

a security agreement is evidenced in writing that is: (i)

signed by the grantor; or

(ii)

adopted or accepted by the grantor by an act or omission that reasonably appears to be done with the intention of adopting or accepting the writing; and contains:

(iii)

a description of the particular collateral; or

(iv)

a statement that a security interest is taken in all of the grantor's present and after-acquired property (or specifying certain excluded property): Personal Property Securities Act 2009 (Cth), s 20.

Perfection

Broadly, a security interest is perfected when the secured party has done all they can do to protect their security interest from competing security interests. A security interest will generally be perfected in relation to collateral if it has attached to the collateral and is enforceable against a third party and: [14.70]

(a)

the security interest is registered in the Personal Property Securities Register; or

(b)

the secured party has possession of the collateral (other than as a result of seizure or repossession); or

[14.90]

(c)

CHAPTER

14

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405

for certain kinds of collateral such as bank accounts and investment instruments (for example, shares or debentures), the secured party has control of the collateral: Personal Property Securities Act 2009 (Cth), s 21.

Priority between security interests

The Personal Property Securities Act 2009 (Cth) contains provisions to deal with the priority between competing security interests in collateral. Priority rules are relevant when the same personal property is subject to two or more security interests. If the debtor defaults, the rules determine the order of priority in which collateral is to be applied to meet the claims of the various secured parties. [14.80]

The general priority rules [14.90]

The general priority rules are as follows:

1.

A perfected security interest has priority over an unperfected security interest. A perfected security interest in collateral has priority over an unperfected interest in the same collateral: Personal Property Securities Act 2009 (Cth), s 55(3). In other words, a security interest in personal property which has been registered in the Personal Property Securities Register will take priority over an interest in the property which has not been registered (or perfected by possession or control). For example, a borrower grants a security interest over its assets to a first financier and later grants a security interest over the same assets to a second financier. The second financier registers a security interest in the assets whereas the first financier does not register or otherwise perfect its security interest. The second financier's security interest will have priority over the first financier's security interest notwithstanding that the second financier's security interest was given later.

2.

Priority between unperfected security interests. Priority between unperfected security interests in the same collateral is determined by the order of attachment of the security interests so that the first unperfected security interest to be attached takes priority over later ones: s 55(2).

3.

Priority between perfected security interests. Priority between two or more security interests in collateral that are perfected is determined by the time perfection occurred: s 55(4), (5). For example, if two security interests have been perfected by registration the first-in-time will take priority. However, if the secured party takes possession of the collateral before the security interest of another person has been registered, the secured party who has taken possession will take priority. The Personal Property Securities Act 2009 (Cth) confers “super-priority” on security interests perfected by control. A security interest perfected by control has priority over all other security interests in the same collateral perfected by registration or possession: s 57(1).

406

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[14.100]

Priority of purchase money security interests

A security interest is a purchase money security interest (PMSI) when the secured party has provided the finance required by the grantor to acquire the collateral. Examples include: [14.100]

• a security interest that secures an obligation to the seller to pay the purchase price, for example property sold on a retention of title basis; • a security interest that secures an obligation to a secured party in relation to new value 4 provided by the secured party to allow the grantor to acquire the collateral; • certain leases and bailments of goods; and • commercial consignments of goods. The holder of a purchase money security interest has a “super-priority” in respect of the collateral because the security interest has a higher priority than another security interest in the same collateral granted by the same grantor that is perfected by either possession or registration: Personal Property Securities Act 2009 (Cth), s 62. Other special priority rules [14.110] The Personal Property Securities Act 2009 (Cth) contains specific provisions, including rules dealing with priority of security interests in relation to:

• certain agricultural interests (ss 84 – 86); • security interests in goods that become an accession 5 to other goods (ss 88 – 97); • security interests in personal property that has been manufactured, processed, assembled or commingled 6 with other property (ss 99 – 103); and • intellectual property (that is, patents, trade marks, designs, copyright, circuit layouts and plant breeders' rights) and intellectual property licences (ss 105 – 106). Acquiring personal property free of security interests

The Act provides for situations in which personal property may be acquired by a third party free of a security interest. The circumstances in which this may occur include the following: [14.120]

1.

Unperfected security interests. A buyer or lessee of personal property for value takes the personal property free of an unperfected security interest in the property (for example, where the security interest has not been registered): Personal Property Securities Act 2009 (Cth), s 43.

4

“New value” in this context means a new debt and does not extend to forgiving an antecedent debt or liability: Personal Property Securities Act 2009 (Cth), s 10.

5

“Accession to other goods means goods that are installed in, or affixed to, the other goods, unless both the accession and the other goods are required or permitted by the regulations to be described by serial number”: Personal Property Securities Act 2009 (Cth), s 10. “Commingled: goods that are commingled include goods that are mixed with goods of the same kind”: Personal Property Securities Act 2009 (Cth), s 10.

6

[14.120]

2.

3.

CHAPTER

14

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407

Serial number incorrect. A buyer or lessee of personal property takes the property free of a security interest in the property if: (a)

the regulations provide that personal property of that kind may or must be described by serial number in a registration; and

(b)

searching the register, immediately before the time of sale or lease, by reference to the correct serial number of the property, would not disclose the registration of the security interest: s 44.

Motor vehicles. A buyer or lessee for value of a motor vehicle takes the motor vehicle free of a security interest in the vehicle if: (a)

the regulations provide that motor vehicles of that kind may or must be described by serial number (see the definition of “motor vehicle” in Personal Property Securities Regulations 2010 (Cth), reg 1.17). This definition includes all motor vehicles that have been assigned vehicle identification numbers under the Motor Vehicle Standards Act 1989 (Cth) or have chassis numbers or have been assigned a manufacturer’s number): Personal Property Securities Regulations 2010 (Cth), reg 2.1; and

(b)

(i) searching the register between the start of the previous day and the time of the sale or lease would not disclose the registration of the security interest; or (ii) the seller or lessor is in a class of persons prescribed by the regulations (that is, holds a licence to deal or trade in motor vehicles: Personal Property Securities Regulations 2010 (Cth), reg 2.2): s 45(1), (3). This does not apply if the buyer or lessee has actual or constructive knowledge of the security interest or that the sale or lease constitutes a breach of the security agreement: s 45(2), (4). In other words, the bona fide purchaser of a motor vehicle from a car dealer will normally acquire the vehicle free from the security interest created over the vehicle.

4.

Ordinary course of business. A buyer or lessee of personal property takes the personal property free of a security interest given by the seller or lessor if the personal property was sold or leased in the ordinary course of the seller's or lessor's business of selling or leasing personal property of that kind. This does not apply if the buyer or lessee has actual knowledge that the sale or lease constitutes a breach of the security agreement: s 46.

5.

Personal, domestic or household property. A buyer or lessee of personal property for value that the buyer or lessee intends to use predominantly for personal, domestic or household purposes takes the property free of a security interest if the market value given for the property is not more than $5,000 or such greater amount (if any) prescribed by the regulations. This does not apply if the personal property is of a kind that the regulations provide may or must by described by serial number

408

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[14.130]

in a registration. The provision also does not apply if the buyer or lessee has actual or constructive knowledge that the sale or lease constitutes a breach of the security agreement: s 47. 6.

Investment interest in the ordinary course of trading. A person who buys an investment instrument (for example, shares or debentures) in the ordinary course of trading on a prescribed financial market takes the investment instrument free of a security interest: s 49.

Rights of secured party

The Personal Property Securities Act 2009 (Cth) contains provision concerning the rights of a secured party where a transferee takes personal property from a transferor (who gave the security) free from the security interest in the property. The rights of the secured party are subrogated to the rights (if any) of the transferor including the transferor's right to receive any part of the purchase price for the property which has not been paid. However, payment of the purchase price by the transferee before receiving notice of the secured party's right discharges the obligation of the transferee to the extent of the payment: s 53. [14.130]

Enforcement of security interests ...............................................................................................................................................................................................

The Personal Property Securities Act 2009 (Cth) includes detailed enforcement provisions dealing with the seizure, disposal and retention of collateral in the event that the debtor defaults on the secured obligation: Pt 4, ss 108 – 144. Many of the provisions can be excluded by agreement between the parties when the collateral is not used predominantly for personal, domestic or household purposes: s 115. All rights, duties and obligations which arise in relation to the enforcement provisions must be exercised honestly and in a “commercially reasonable manner”: s 111. 7 The provisions do not apply to property in the hands of receivers or receivers and managers: s 116. [14.140]

Relationship with the National Credit Code

Where collateral is used for consumer purposes and the National Credit Code applies to the security interest, the Personal Property Securities Act 2009 (Cth) and the National Credit Code will operate concurrently and a secured party will have to comply with both the requirements in the Personal Property Securities Act 2009 and the National Credit Code: Personal Property Securities Act 2009 (Cth), s 119. Where both the National Credit Code and the Personal Property Securities Act 2009 contain similar obligations relating to enforcement, a secured party who has complied with the relevant provision in the [14.150]

7

See S Colley, “Enforcing Rights under the PPSA: Honestly and in a Commercially Reasonable Manner” (2013) 21 Insolvency Law Journal 109.

[14.160]

CHAPTER

14

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409

Code is taken to have complied with the corresponding obligation in the Act: Personal Property Securities Act 2009 (Cth), s 119(2) and Personal Property Securities Regulations 2010 (Cth), reg 4.1. Personal Property Securities Register ...............................................................................................................................................................................................

The Personal Property Securities Act 2009 (Cth) provides for the establishment and maintenance of a Personal Property Securities Register by the Registrar: s 147. A person may apply to register what is referred to as a “financing statement” with respect to a security interest or certain personal property: s 150. The financing statement can be registered before any secured transaction takes place. In general, a financing statement will contain information which includes: details of the secured party; the grantor's details (unless the collateral is consumer property and required to be described by serial number); an address for service of notices on secured parties; a description of the collateral (particularly whether it is consumer or commercial property); and the period of registration. Registration for consumer property, or property described by serial number, may be made for up to seven years and renewed for further periods of up to seven years. Commercial property may be registered for an indefinite period, or for a term of up to 25 years and subsequently renewed: s 153. On application to the Registrar, a person may be given access to search the register provided that it is for an authorised purpose: ss 170 – 173. The register can be searched by reference to either the grantor's details, which will disclose security interests registered against the grantor, or in the case of serial-numbered property, the unique serial number referable to that property (as in the case, for example, of a motor vehicle): s 171. However, the grantor's details will not be registered if the security interest relates to collateral that is serial-numbered consumer property. The Personal Property Securities Register is a single online register for all personal property securities in Australia. It is not mandatory to register security interests and there is no time limit for registering an interest. However, the failure to register, and thereby perfect, a security interest will have important consequences for the secured party should an issue as to the priority of competing security interests arise as discussed earlier. In addition, the Personal Property Securities Act 2009 (Cth) invalidates unperfected security interests (but not deemed security interests that are unperfected) on the bankruptcy, winding up or administration of the grantor: ss 267, 267A and 268. [14.160]

CHAPTER 15

......................................................................................................................

Personal Property Security Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 31.

This chapter provides an introduction to the Personal Property Securities Act 2009 (Cth), which commenced in 2012 and is commonly called the PPSA. Similar statutes are in force in New Zealand and in every Canadian province and territory except Quebec. The Canadian statutes were inspired by Article 9 of the American Uniform Commercial Code, but with significant differences. 2 The Australian PPSA is based mainly on the Saskatchewan version. 3 The PPSA replaces a wide variety of different systems for registering security rights to personal property, in which the choice of system depended on the location and nature of the property, the type of right, and the status of the debtor. The States and Territories maintained separate registers for bills of sale (including mortgages and charges), security interests in motor vehicles, and security interests in specific agricultural products. Charges and mortgages granted by companies used to be registered under the Corporations Act 2001 (Cth). Searching for security rights to a particular asset or to the assets of a particular debtor would often involve multiple registers in multiple jurisdictions. A big advantage of the PPSA is the creation of a central register for most of these different security rights. Another big advantage of the PPSA is its uniform treatment of security rights regardless of the particular forms which they might take. Previously, hire-purchase and conditional sales contracts were not registrable unless they related to motor vehicles, since the secured creditor did not acquire a new right granted by the debtor but retained a pre-existing right. 4 However, these transactions create the same risks for third parties as do chattel mortgages, since the debtor appears to be the owner of the assets in her or his possession. The need for registration is the same and the PPSA solves this problem by focusing on function instead of form. [15.10] 1

1

The Personal Property Securities Act 2009 (Cth) applies throughout Australia with each State referring its powers to legislate on personal property security to the Commonwealth: PPSA, ss 242 – 244; Personal Property Securities (Commonwealth Powers) Act 2009 (NSW); Personal Property Securities (Commonwealth Powers) Act 2009 (Qld); Personal Property Securities (Commonwealth Powers) Act 2009 (SA); Personal Property Securities (Commonwealth Powers) Act 2010 (Tas); Personal Property Securities (Commonwealth Powers) Act 2009 (Vic); Personal Property Securities (Commonwealth Laws) Act 2011 (WA).

2 3

R Cuming, C Walsh and R Wood, Personal Property Security Law (2nd ed, Irwin Law, Toronto, 2012) pp 5, 83-89. A Duggan, “A PPSA Registration Primer” (2011) 35 Melbourne University Law Review 865 at 866.

4

A Duggan, “Romalpa Agreements Post-PPSA” (2011) 33 Sydney Law Review 645 at 646.

412

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.20]

The next section introduces the registration process. This is followed by introductions to the meaning of personal property and several key PPSA concepts: collateral, proceeds, security interests, attachment, enforceability, and perfection. The priority rules are then explained. The chapter ends with a brief note on the enforcement of security agreements.

Registration There are three main types of registration systems discussed in this book: notice registration, document registration, and title registration. The Personal Property Securities Register under the PPSA is a notice registration system. Personal property security rights are created by documents, but those documents are not registered. Instead, secured creditors register “financing statements” which provide notice that they may have or acquire such rights. Financing statements are short and simple documents containing the following information: the identity and address of the secured creditor (called the secured party), the identity of the debtor (called the grantor), a description of the assets (called the collateral and proceeds), and a few other details. 5 A financing statement can be amended by registering a “financing change statement”. 6 The registration systems replaced by the PPSA were document registration systems. Bills of sale, chattel mortgages, company charges, etc, would be submitted to the appropriate registrars for registration. Interested parties would search various registers for potentially relevant documents, obtain copies from the registrars, and read them to determine their legal effect. These systems were similar to the deeds registration systems. The Torrens systems are title registration systems, in which legal property rights are created by registration and not by the documents submitted for registration. The main advantage of notice registration over document registration is the efficiency of the system. It is much easier to manage and store short forms and the data they contain than it is to store, catalogue, and reproduce the long documents used to create security rights. People interested in acquiring rights to particular assets or dealing with particular persons can search for notice of competing rights, and if they discover anything which might be of concern, they can contact the secured creditors for further details and copies of the relevant documents, if necessary. Notice registration also allows for advance registration before the creation of new security rights, which ensures that they will be protected from the outset. 7 In a document registration system, there is always a gap between the execution of a document and its registration, which can lead to serious problems if competing rights arise during the gap. Also, under the PPSA it is possible to register a single financing statement which gives notice of security rights that will be created by multiple documents. In a document registration system, every document would have to be registered. [15.20]

5 6 7

PPSA, ss 150, 153. PPSA, s 150. PPSA, s 161.

[15.30]

CHAPTER

15

PERSONAL PROPERTY SECURITY

413

The PPSA controls abuse of the system with the requirement that people must not apply for registration unless they reasonably believe that they have or will acquire security rights to the assets described in the financing statement. 8A person who breaches that duty may be liable to civil penalties and an award of damages. 9 The registration of a financing statement is one of two main ways to “perfect” the security rights described in the statement. The other is by the secured creditor having possession or control of the assets. Perfection is a key concept under the PPSA which helps determine the priority of competing rights. It is discussed below at [15.100].

Personal property The PPSA applies to most forms of personal property, including goods, documents, accounts, debts, “financial property”, and intellectual property. 10 Goods include crops, wool, extracted minerals, vehicles, ships, aircraft, and “satellites and other space objects”. Financial property is defined to mean “chattel paper”, currency, documents of title, “investment instruments”, and “negotiable instruments”. Chattel paper is written evidence of a monetary obligation combined with a security interest in goods or intellectual property. Investment instruments are shares, debentures, stocks, bonds, derivatives, and the like. Negotiable instruments include cheques, bills of exchange, promissory notes, and letters of credit. Expressly excluded from the definition of personal property are interests in land, as well as any “right, entitlement or authority that is granted by or under a law of the Commonwealth, a State or a Territory; and declared by that law not to be personal property for the purposes of this Act.” 11 Mineral rights are often classified by statute as personal property, but with the proviso that they are excluded from the definition of personal property under the PPSA. It makes much more sense for them to be governed by the specific registration systems set up for mineral rights in each jurisdiction. Fixtures (discussed at [4.160]) are specifically excluded from the PPSA. 12 Since they are regarded as part of the land to which they are attached, they would fall within the more general exclusion of interests in land. However, since goods which are subject to personal property security interests do get attached to land as fixtures, it is helpful to say expressly that they are excluded from the PPSA. Those goods would cease to be governed by the PPSA while they are fixtures and instead be subject to the registration system which governs that land. This avoids the difficulties of juggling two different and conflicting sets of priority rules. [15.30]

8 9 10 11 12

PPSA, s 151. PPSA, ss 151, 271. PPSA, s 10. PPSA, s 10. PPSA, s 8.

414

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.40]

The PPSA divides personal property into consumer property and commercial property. 13 Consumer property is held by an individual and not used to carry on a business. Everything else is commercial property. This distinction is important for the content of financing statements. Certain types of consumer property must be described by serial number, including motor vehicles, watercraft, aircraft, and some forms of intellectual property. 14 If consumer property is described by serial number, then the debtor’s details are omitted from the financing statement. 15

Collateral and proceeds The PPSA divides the assets which might be subject to security rights into two categories: collateral and proceeds. As discussed above, most forms of personal property can be subject to security rights governed by the PPSA. Collateral is the name given to an asset which is either subject to a security right or described in a financing statement as an asset which is intended to become subject to a security right in the future. Proceeds are assets which are the traceable proceeds of the original collateral, the fruits or income derived from it, or insurance payments arising from its loss or damage. 16 Tracing is used when the debtor no longer has the collateral. It is a process for identifying any assets that were acquired in exchange for it. The PPSA does not set out the tracing rules, but it does say that a fiduciary relationship is not necessary for tracing purposes. 17 This implies that the equitable tracing rules would apply. They are supposedly more generous than the common law rules when tracing through mixtures. If the collateral is an income producing asset, then proceeds can be obtained without exchanging it. For example, dividends paid on company shares are treated as the proceeds of those shares by the PPSA. The identification of the income produced by collateral does not involve tracing, at least not initially, since it is not acquired in exchange for the collateral. Tracing might be needed to identify what has become of that income if it is exchanged by the debtor for another asset. For example, if the debtor deposits a dividend cheque in her or his bank account, the increased balance of that account is the traceable proceeds of that cheque. Proceeds can also consist of the natural produce of collateral, such as wool from sheep. [15.40]

Security interests As mentioned above, a key feature of the PPSA is that it applies to a wide variety of security rights to personal property (called “security interests”) without regard to the form which they may take. Section 12 states: [15.50]

13 14 15 16 17

PPSA, s 10. Personal Property Securities Regulations 2010, Sch 1, Pt 2.2. PPSA, s 153. PPSA, s 31. PPSA, s 31(2).

[15.60]

CHAPTER

15

PERSONAL PROPERTY SECURITY

415

A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property).

That section goes on to list examples of security interests, including fixed and floating charges, chattel mortgages, conditional sales, hire-purchases, and pledges. The focus is clearly on function over form. Although the PPSA refers to the debtor as the grantor of the security interest, the inclusion of conditional sales and hire-purchases shows that it does not matter whether a security interest is a new right granted by the debtor or an old right that belonged to the creditor before their agreement. On a conditional sale, the seller is the owner of the goods both before and after the sale. Normally, title to specific goods in a deliverable state passes to the buyer when the contract is made, even if payment is postponed, but the parties are free to agree to other conditions for the passing of title. If it is agreed that title will not pass until the purchase price is paid in full, then the seller will retain ownership until payment. When a contract of sale is made, the seller’s ownership continues to exist as before, but with the additional function of securing performance of the buyer’s obligation to pay the purchase price. Therefore, it becomes a security interest within the meaning of the PPSA. This is clear when the goods are delivered to the buyer, since the seller’s only real remaining interest in them is in getting paid. It is less obviously true when the seller retains both possession and title. By making the contract of sale, the buyer comes under an obligation to pay the purchase price, meaning that the buyer is now a debtor and the seller a creditor. The retention of both title and possession secures performance of that obligation. The seller who retains title and possession pending payment might argue that payment on delivery was included as a term of the contract of sale precisely because the seller did not want to extend credit to the buyer. This overlooks the fact that a debt was created by the contract, with the seller’s retention of title and possession being the most effective way to secure payment and avoid the need to resort to other remedies. In any event, the classification of these property rights as security interests will not adversely affect the seller in possession since those interests are perfected by the seller’s possession of the goods. This preserves the priority of those rights over competing rights, as discussed below at [15.100]. Excluded security interests ...............................................................................................................................................................................................

The PPSA excludes many security rights from its expansive definition of security interests. 18 Perhaps the largest and most important category of excluded rights are security rights arising by operation of law, such as the common law and equitable liens described in Chapter 13 at [13.60] and [13.120]. The PPSA applies primarily and almost [15.60]

18

PPSA, s 8.

416

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.70]

exclusively to security rights created by consent, although it does have to deal with situations where those rights are in competition with other rights, such as non-security rights or security rights arising by operation of law. 19 There is also an exemption for licensed pawnbrokers who accept pledges of goods worth up to $5,000 in the ordinary course of business. 20 They are treated on par with consumers who can purchase the same value of goods for personal or domestic use and take them free of prior security interests. 21 It is not clear why this form of protection should be extended to pawnbrokers. By taking possession of pledged goods, their security interests are perfected and thus protected. The exemption allows them to gain priority over older perfected security interests. Pawnbrokers have a similar exemption in Ontario, but not in the other Canadian provinces. Professors Cuming, Walsh, and Wood say: 22 Given that property pawned could very easily be subject to a prior PPSA security interest, it is difficult to see the justification for the broad scope of the Ontario exclusion.

Deemed security interests ...............................................................................................................................................................................................

The definition of security interests is artificially extended to include a few non-security rights, which might be regarded as “deemed security interests”. 23 These are transfers of accounts or chattel paper, commercial consignments of goods, and many leases and bailments, “whether or not the transaction concerned, in substance, secures payment or performance of an obligation”. 24 There are two main reasons for doing so. First, these transactions produce situations where the true ownership of assets is no longer readily apparent, thereby creating the risk that people will deal with the wrong person in the mistaken belief that they are dealing with the true owner. This is the main reason for the registration of personal property security rights and it justifies the extension of those provisions to these other transactions. Secondly, it is not always easy to tell whether these transactions create security interests or not. Without the deeming provision, people might be uncertain whether the PPSA applies. This can be demonstrated by comparing a hire-purchase with a non-security lease of goods. Under a hire-purchase, the payments are the purchase price for the hired goods, plus interest. The bailor does not expect to get the goods back, but will terminate the bailment and recover the goods as a remedy for default. In other words, the bailor’s ownership continues to secure payment of the purchase price over time. [15.70]

19 20 21 22 23 24

See eg PPSA, s 73. PPSA, ss 8(1)(ja), 8(6). PPSA, s 47. R Cuming, C Walsh and R Wood, Personal Property Security Law (2nd ed, Irwin Law, Toronto, 2012) pp 13, 445. R Cuming, C Walsh and R Wood, Personal Property Security Law (2nd ed, Irwin Law, Toronto, 2012) p 167. PPSA, s 12(3).

[15.80]

CHAPTER

15

PERSONAL PROPERTY SECURITY

417

Under an ordinary, non-security lease, the payments represent the use-value of the goods, the bailor does expect to get the goods back, and the bailor’s right to possession at the end of the lease does not exist to secure another obligation. This is true even if the bailee has an option to purchase the goods for their estimated market value at the end of the lease. However, simply by changing the values to increase the rental payments and lower the option price, the lease becomes functionally equivalent to a hire-purchase. Even without a right or option to purchase the goods, a lease can be used as a security device if the term of the lease exceeds the useful life of those goods. For example, computer equipment might be leased for seven years on the understanding that it will be replaced and sold as scrap by the end of the lease. The payments cover the capital cost of the equipment and the bailor does not expect to get it back. If ordinary leases were not subject to the PPSA, creditors might be tempted to disguise their secured transactions as leases, which would detract from the effectiveness of the system and increase uncertainty (and therefore litigation) over the boundary between ordinary leases and those being used for security purposes. A lease which is subject to the PPSA is called a “PPS lease”. 25 These include leases for an indefinite term or for more than one year, including leases that may be renewed for terms adding up to more than one year and leases where the bailee in fact continues in possession for more than one year. If the goods are described by serial number, this borderline is only 90 days. Regardless of duration, a lease is not a PPS lease if the bailor “is not regularly engaged in the business of bailing goods”, it is a lease of consumer property incidental to a lease of land, or the bailee does not provide value for it. 26

Attachment It is the attachment of a security interest to an asset which makes it enforceable against the debtor. This is a necessary first step in the creation of that interest. There is an additional requirement before it can be enforced against others. That is discussed in the next section. Two conditions must be fulfilled before a security interest will attach to assets. First, the debtor must have rights to those assets or the power to transfer rights to them to the creditor. Secondly, value must be “given for the security interest” or the debtor must do “an act by which the security interest arises”. 27 The first condition invokes the nemo dat principle and the exceptions to it. 28 Nemo dat quod non habet means that no-one can give what he or she does not have. So, if the debtor has any rights to assets, a security interest can attach to them. Simple possession of goods or documents, however acquired, would be sufficient. Finders and thieves have rights to [15.80]

25

PPSA, s 13.

26

PPSA, s 13.

27

PPSA, s 19.

28

R Cuming, C Walsh and R Wood, Personal Property Security Law (2nd ed, Irwin Law, Toronto, 2012) pp 247-250.

418

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.90]

possession that are enforceable against everyone else in society, except someone with a better right. 29 A security interest can attach to a thief’s right to possess stolen goods; albeit subject to the better rights to which the thief’s right would also be subject. The question of priorities is different from the question of attachment. In some cases, the debtor has the power to transfer rights that he or she does not have. These are the exceptions to nemo dat for agents with apparent authority and for sellers and buyers in possession. It also includes a debtor who has a voidable title to assets. If the debtor had the power to transfer good title to a purchaser acting in good faith, then the grant of a security interest can also operate as an exception to nemo dat and attach to the rights of others. The requirement that “value is given for the security interest” seems almost superfluous. The PPSA does not apply to security interests arising by operation of law, so every security interest will be created by an agreement to secure an obligation, and in most cases, that obligation will also be created by agreement. Almost all these agreements will be contracts, and the consideration needed to make an enforceable contract will be the value needed for attachment of the security interest. Obligations and property rights can be created by deed in the absence of a contract. The PPSA provides for this possibility with an alternative for security interests to attach when created by an act of the debtor even though value is not given in return. This might be useful in complex financing transactions involving related companies. For example, suppose that a business enterprise granted a charge over its assets by deed to an intermediary, which then issued bonds or shares to investors. For PPSA purposes, it would not matter whether value was given for that charge. The parties can agree that a security interest will not attach as soon as the conditions for attachment are fulfilled but will be delayed to a specified time. If the security interest is described as a floating charge, that does not mean that attachment is postponed to some later time, such as an event of default. 30 Under the PPSA, a floating charge attaches to the assets covered by that charge as soon as they are acquired by the debtor. The debtor can dispose of them free of the charge in the ordinary course of business (as discussed below at [15.160]), but the charge attaches to each and every asset while they belong to the debtor.

Enforceability A security interest can be enforced against the debtor once it has attached to an asset, but it cannot be enforced against third parties unless the creditor also has possession or control of the asset or the parties have made a written security agreement which was [15.90]

29

Armory v Delamirie (1722) 1 Strange 506; 93 ER 664; Gollan v Nugent (1988) 166 CLR 18; [1988] HCA 59; Flack v National Crime Authority (1998) 156 ALR 501; [1998] FCA 932; Costello v Derbyshire Constabulary [2001] EWCA Civ 381; [2001] 3 All ER 150; [2001] 1 WLR 1437.

30

PPSA, s 19(4).

[15.100]

CHAPTER

15

PERSONAL PROPERTY SECURITY

419

signed or adopted by the debtor. 31 Since some assets cannot be possessed, such as bank accounts, intermediated securities, and electronic instruments, control is provided as an alternative. 32 The additional requirement of possession, control, or a written agreement serves an evidential function. The creditor’s possession or control of an asset provides some evidence that he or she has a right to it (beyond mere possession). In the absence of possession or control, writing is required. This is somewhat similar to the formalities required for dealing with interests in land. Writing is normally required except where a tenant takes possession of land under a short lease. What is the status of an attached security interest which is unenforceable against third parties? The hallmark of a right in rem is that it can be enforced generally against others: see [2.40]. Without that ability, the attached security interest appears to be a right in personam, albeit in relation to specific assets. This is somewhat similar to a contractual licence to use land. However, when it comes to enforcement of the security interest against the debtor, the creditor would be entitled to use the remedies provided by the PPSA, such as seizure and sale of the assets. 33 This is very different to obtaining judgment on the debt and then pursuing the remedies generally available to all judgment creditors. An unenforceable security interest might be regarded as similar to an unenforceable oral express trust of land. The oral declaration brings the trust into existence, but it remains unenforceable without written evidence of that declaration, which can be produced later. In exceptional circumstances, courts will enforce the oral express trust, but only between the parties to the trust. 34

Perfection A security interest which is attached and enforceable against others remains vulnerable to competing rights until it is perfected. The priority rules, discussed in the next section, draw a fundamental distinction between perfected and unperfected security interests. There are two main ways to perfect a security interest: by registration of a financing statement or by possession or control of the asset. Perfection by control is limited to specific assets (including “satellites and other space objects”), while possession is effective for any asset capable of being possessed and registration works for everything. 35 [15.100]

31

PPSA, s 20.

32

PPSA, ss 25 – 29.

33

PPSA, ss 123, 128.

34

Rochefoucauld v Boustead [1897] 1 Ch 196 (CA); see W Swadling, “The Nature of the Trust in Rochefoucauld v Boustead”, in Charles Mitchell (ed), Constructive and Resulting Trusts (Hart Publishing, Oxford, 2010) p 95.

35

PPSA, s 21.

420

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.110]

A security interest can also be perfected if a bailee (other than the debtor) is in possession of the asset. 36 This occurs if the bailee has possession on behalf of the creditor or if the bailee provides the creditor with a document of title to the asset. If a creditor takes possession by seizing or repossessing an asset, this will not perfect the security interest. 37 This is an important limitation to remove the incentive to enforce unperfected security interests in order to perfect them and thereby preserve or enhance their priority. Creditors without possession or control of the asset should be using the registration system. The PPSA also provides for temporary perfection for up to five days in several situations, most notably for a security interest in proceeds which is not perfected by registration. 38 If collateral gives rise to proceeds, the security interest in the collateral will automatically “attach to the proceeds, unless the security agreement provides otherwise.” 39 The interest in the proceeds will be perfected by registration if the proceeds are described in the financing statement or if the proceeds consist of money (as currency, a cheque, or a bank account) or a right to an insurance payment. 40 If the collateral is described as “all present and after-acquired property”, which is the PPSA equivalent to a floating charge, this will include any proceeds. 41

Priorities The PPSA provides a long list of rules for determining the priorities of competing rights to personal property where at least one of those rights is a security interest subject to the PPSA. A comprehensive description of these rules would be tedious and potentially misleading. For that level of detail, readers should consult the current version of the PPSA. This section discusses some of its basic principles. It can be helpful to recall the common law and equitable priority rules and then consider how they are applied or modified by the PPSA. These include the nemo dat principle and the exceptions to it, the defence of bona fide purchase, and the “first in time” rule. The basic approach to priority problems is still the same: begin by identifying the competing rights and when they arose (or for PPSA security interests, when they attached or were perfected). One important difference is that it does not matter whether a PPSA security interest is legal or equitable. This is an inherent feature of the PPSA, which focuses on function instead of form. [15.110]

36

PPSA, s 22.

37

PPSA, s 21(2)(b).

38

PPSA, s 33. Also see PPSA, ss 22, 35.

39

PPSA, s 32.

40

PPSA, s 33(1).

41

Personal Property Securities Regulations 2010, Sch 1, Pt 2.4.

CHAPTER

[15.120]

15

PERSONAL PROPERTY SECURITY

421

The basic rules ...............................................................................................................................................................................................

Unless a security interest is attached to an asset and enforceable against third parties (as discussed above at [15.80] and [15.90]), it cannot be involved in a priority dispute. As discussed, nemo dat and its exceptions may be relevant at this stage to determine whether the debtor was able to grant the security interest to the creditor. Of course, if the interest was not granted by the debtor but retained by the creditor under a conditional sale or hire-purchase, then this is not an issue (although it may be relevant whether the person who initially transferred that interest to the creditor had the power to do so). The PPSA provides a basic set of “default priority rules” for determining the priority between competing PPSA security interests: 42 [15.120]

1)

perfected interests take priority over unperfected interests;

2)

the priority between perfected interests depends on the order of perfection;

3) the priority between unperfected interests depends on the order of attachment. These default rules are applied or modified by specific rules, the most important of which give special priority to “purchase money security interests”, as discussed below at [15.220]. 43 Rules are also provided for determining priorities between PPSA security interests and other rights, including non-security rights and security rights arising by operation of law. 44 The PPSA also spells out several other rules which would probably still apply even if they were not expressly stated. Although this helps make for a very long statute, it does help avoid the problems created by uncertainty. First, creditors can agree to subordinate their own security interests to other interests. 45 Secondly, the transfer of a security interest does not affect its priority. 46 Thirdly: 47 A security interest provided for by a security agreement has the same priority in respect of all advances (including future advances), and the performance of all obligations, secured by the agreement.

Finally, if a security interest is lost because the asset is transferred to a third party, the creditor is subrogated to the transferor’s rights against that third party. 48 For example, if the debtor sold the asset and the purchase price was not paid in full, the creditor would be entitled to receive the sum due from the purchaser. 42 43 44 45 46 47 48

PPSA, s 55. PPSA, s 62. PPSA, ss 42 – 53, 69 – 74. PPSA, s 61. PPSA, s 60. PPSA, s 58. PPSA, s 53.

422

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.130]

Unperfected security interests ...............................................................................................................................................................................................

Unperfected security interests are fragile. They are easily defeated by newer property rights, execution creditors, and the debtor’s insolvency. As stated above, the priority between two unperfected security interests is normally determined by the order in which they attached to the asset. That would be reversed if the newer interest gets perfected first, and this could be done simply by registering a financing statement. Unperfected security interests are also subject to non-security rights acquired for value: “A buyer or lessee of personal property, for value, takes the personal property free of an unperfected security interest in the property”, unless that person was a party to the transaction which gave rise to that interest. 49 Notice or knowledge of the security interest is irrelevant for this rule, so it is stronger than the defence of bona fide purchase and easier to apply. It can also operate as an exception to nemo dat, since it can destroy a creditor’s legal title retained under a conditional sale or hire-purchase. If the debtor becomes insolvent, most unperfected security interests in the debtor’s assets will vest in the debtor and become available for distribution among the debtor’s other creditors. 50 For example, if goods were delivered to a buyer under a conditional sale and the seller failed to register a financing statement, the buyer’s bankruptcy would cause the seller’s legal title to be transferred to the buyer. This transfer would take effect immediately before the bankruptcy occurred. Title to the goods might be caught by some other security interest (such as a charge over all the debtor’s present and after acquired property), but if not, the buyer’s trustee in bankruptcy would be able to sell them free of the seller’s interest and distribute the proceeds among the buyer’s creditors. If goods are seized on behalf of an execution creditor (who is using the execution process to obtain payment of a judgment debt), that creditor will obtain priority over unperfected security interests in those goods. 51 The same is true of debts garnisheed by an execution creditor or any other asset which is subject to a court order in favour of an execution creditor. The assets would be used to satisfy the debt to the execution creditor before anything would be available to the creditor with the unperfected security interest. [15.130]

Perfected security interests ...............................................................................................................................................................................................

As discussed above, the perfection of a security interest can give it priority over older unperfected interests. It also protects that interest from becoming subordinated to newer rights. Generally speaking, new rights to assets are subject to any perfected security interests that already exist in those assets. This is consistent with the normal priority rules of nemo dat and first in time, but it is subject to many important exceptions, including: [15.140]

49 50 51

PPSA, s 43. PPSA, ss 267, 267A. PPSA, s 74.

CHAPTER

[15.160]

15

PERSONAL PROPERTY SECURITY

1)

incorrect or missing serial numbers;

2)

assets sold or leased in the ordinary course of business;

3)

personal, domestic, or household goods;

4)

money and investment instruments;

5)

temporary perfection;

6)

perfection by control;

7)

ADI accounts;

8)

purchase money security interests;

423

9) agricultural products. Each of these exceptions is discussed below. Incorrect or missing serial numbers

If an asset may or must be described by serial number in the financing statement, and that number is incorrect or missing, a buyer or lessee will take the asset free of the perfected security interest. 52 This does not apply to assets which the buyer or lessee acquires to be held as inventory. The assets that may or must be described by serial number include motor vehicles, watercraft, aircraft, and some forms of intellectual property. 53 The essential issue is whether a search of the register by serial number only would have revealed the security interest (and not whether the buyer or lessee searched the register). It could be argued that priority should be lost only if someone relies on the apparent absence of perfected security interests, but under the PPSA, the priority provided by registration is not linked to notice. A simple rule, under which the creditor always bears the consequences of failing to provide an accurate serial number, is a strong incentive to get this right. [15.150]

The ordinary course of business [15.160] If any assets are sold by someone in the ordinary course of her or his business, the buyers will acquire them free of perfected security interests unless they actually know that the sales were in breach of a security agreement. 54 The same rule also applies to leases, but it does not apply to assets described by serial number and acquired as inventory. A similar exception applies to a motor vehicle bought or leased from a licensed dealer, but not if the buyer or lessee had actual or constructive knowledge that the transaction was in breach of the security agreement. 55 The meaning of actual and constructive knowledge is discussed below at [15.270]. 52 53 54 55

PPSA, ss 44, 45(1). Personal Property Securities Regulations 2010, Sch 1, Pt 2.2. PPSA, s 46. PPSA, s 45(3).

424

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.170]

Similar protection is also provided to people who purchase on the stock market: 56 A person who buys an investment instrument or an intermediated security in the ordinary course of trading on a prescribed financial market (within the meaning of the Corporations Act 2001) takes the instrument or intermediated security free of a security interest in the instrument or intermediated security.

The buyer’s knowledge is irrelevant. The prescribed financial markets are the Asia Pacific Exchange, ASX, Chi-X Australia, National Stock Exchange of Australia, and SIM Venture Securities Exchange. 57 Personal, domestic, or household use

Priority is given to people who buy or lease goods worth up to $5,000, intending to use them “predominantly for personal, domestic or household purposes”. 58 They take them free of perfected security interests unless they have actual or constructive knowledge that the transaction is in breach of a security agreement. The buyer or lessee will often be protected anyway because the goods will be acquired from someone selling or leasing in the ordinary course of business or from a licensed dealer in motor vehicles, as discussed above. This exception is important for people buying second-hand goods from private sellers. In such cases, there is no need to search the register. However, this exception does not apply to goods described by serial number (such as motor vehicles), for which a search of the register would be prudent. [15.170]

Money and investment instruments

When a debt is paid, the creditor takes priority over security interests in the money used to pay the debt, unless he or she has actual knowledge that the payment was in breach of a security agreement. It does not matter whether payment is made by cash, cheque, direct debit, or electronic funds transfer. 59 Additionally, the holder of cash takes it free of security interests unless he or she has actual or constructive knowledge of a security interest in that cash. 60 This latter exception is broader than the normal defence of bona fide purchase that applies when money is used as currency since it does not require that value be given in exchange. Purchasers for value of investment instruments, intermediate securities, negotiable instruments, negotiable title documents, and chattel paper can take them free of security interests unless they have actual or constructive knowledge of a competing security interest. 61 [15.180]

56

PPSA, s 49.

57 58

Corporations Regulations 2001 (Cth), r 1.0.02A. PPSA, s 47.

59

PPSA, s 69.

60

PPSA, s 48.

61

PPSA, ss 50, 51, 70 – 72.

[15.220]

CHAPTER

15

PERSONAL PROPERTY SECURITY

425

Temporary perfection

The PPSA provides for temporary perfection in several different situations, as discussed above at [15.100]. People who buy or lease goods, proceeds, or documents of title take them free of any temporarily perfected security interests unless they actually know that the transaction was in breach of the security agreement which gave rise to that interest. 62 The purpose of temporary perfection is to preserve priorities among security interests during transitional periods. [15.190]

Perfection by control

As discussed at [15.100], security interests in some assets can be perfected by control. Most of these assets are intangible, such as bank accounts, company shares, or rights evidenced by letters of credit. Also included are “satellites and other space objects” since they are not possessed while in space, but are controlled from earth by the people with the proper equipment and security codes. 63 A security interest which is perfected by control has priority over security interests perfected in other ways. 64 If two or more competing interests are perfected by control, they take priority in the order in which they were perfected. [15.200]

ADI accounts

An ADI account is an account kept with an authorised deposit-taking institution (or ADI for short). An ADI is a corporation which is authorised by the Australian Prudential Regulation Authority to carry on a banking business in Australia. 65 If an ADI has a perfected security interest in an account kept with it, that interest takes priority over any other security interests in the account. 66 This does not affect any right of set-off which the account holder might have. [15.210]

Purchase money security interests

A purchase money security interest, commonly called a PMSI (or “pimsie”), is a right which secures payment of the purchase price for the asset subject to that interest. 67 A perfected PMSI is given special priority because the credit made it possible for the debtor to acquire the asset. 68 If the purchase price is paid in priority to other debts, other creditors cannot complain because they are left no worse off than they would have been if the asset had never been acquired by the debtor. Two deemed security interests, a PPS lease and a commercial consignment, are classified as PMSIs for the same [15.220]

62 63 64 65 66 67 68

PPSA, s 52. PPSA, s 21(2)(c). PPSA, s 57. Banking Act 1959 (Cth), ss 5, 9, 9C; PPSA, s 10. PPSA, s 75. PPSA, s 14. PPSA, s 62.

426

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.230]

reason. 69 It does not matter whether the creditor is the person who sold or leased the asset to the debtor or a lender who financed the transaction, unless there is more than one PMSI in the asset. In that case, the PMSI belonging to the seller, lessor, or consignor normally takes priority. 70 PMSIs are often used to finance inventories, which will be sold on to the debtor’s customers. The PMSI in the inventory (as original collateral) will automatically attach to the proceeds of sale, retaining its super-priority status as a PMSI. However, a non-PMSI granted over the account into which the proceeds are paid can take priority over the PMSI in the proceeds. 71 Agricultural products

Perfected security interests in crops, livestock, or their proceeds, which are granted for value “to enable the crops to be produced” or “to enable the livestock to be fed or developed”, are given special priority over other security interests (but not PMSIs). 72 They are similar to PMSIs because they help increase the value of the debtor’s assets, and are given special priority for the same reason. [15.230]

Accession, specification, and mixture ...............................................................................................................................................................................................

The PPSA deals with priority disputes that may arise due to accession, specification, or a mixture of goods. These are situations in which physical changes to goods can affect property rights, including security interests. [15.240]

Accession

Accession occurs when one chattel is attached to another. If it is impractical to separate them again, the accessory ceases to exist as a separate chattel and becomes part of the principal chattel. While this issue concerns physical attachment, care must be taken when using that term in this context because of potential confusion with the attachment of security interests. The PPSA refers to the attachment of one chattel to another as accession, whether the accessory is easily removable or not. The starting point is that a security interest in an accessory will continue to exist after its accession and will take priority over existing rights to the principal chattel. 73 However, an unperfected security interest in the accessory will lose priority to new rights to the principal chattel which are acquired for value. 74 It will also lose priority to any new advances made by creditors with perfected security interests in the principal chattel. [15.250]

69

PPSA, s 14.

70

PPSA, s 63.

71

PPSA, s 64.

72

PPSA, ss 85, 86.

73

PPSA, ss 88, 89.

74

PPSA, s 90.

[15.270]

CHAPTER

15

PERSONAL PROPERTY SECURITY

427

The PPSA also provides rules for the removal of the accessory by the creditor and the payment of compensation for any damage done to the principal chattel. 75 Specification and mixture

Specification occurs when new goods are manufactured or created naturally (see [4.30]). A mixture of goods can create problems if the goods belonged to different people and it is no longer possible to identify who owns which goods (see [4.240]). The PPSA does not distinguish between these two situations, but applies the same rules whenever “goods are so manufactured, processed, assembled or commingled that their identity is lost in the product or mass”. 76 A security interest in the original goods continues in the product or mass, but is limited to the value of the goods at the time they were consumed or mixed. 77 If the security interest was perfected at that time, it continues to be perfected in the product or mass. 78 [15.260]

Constructive knowledge ...............................................................................................................................................................................................

As discussed above, some priority rules depend on the actual knowledge of the person acquiring the new interest, while others depend on actual or constructive knowledge. The PPSA defines constructive knowledge in a way which is similar to the concept of constructive notice in equity: 79 [15.270]

For the purposes of this Act, a person (the first person) has constructive knowledge of a circumstance if the first person would have had actual knowledge of the circumstance if the first person had: (a) made the inquiries that would ordinarily have been made by an honest and prudent person in the first person’s situation; or (b) made the inquiries that would be made by an honest and prudent person with the first person’s actual knowledge in the first person’s situation.

The constructive knowledge of a director, officer, employee, or agent is imputed to the company or other entity for which he or she works. 80 Most importantly, registration does not provide knowledge or notice of a security interest unless someone actually searches the register and thereby discovers it: 81 A person does not have notice, or actual or constructive knowledge, about the existence or contents of a registration merely because data in the registration is available for search in the register.

75 76 77 78 79 80 81

PPSA, ss 92 – 97. PPSA, s 99. PPSA, s 101. PPSA, s 100. PPSA, s 297. PPSA, s 298. PPSA, s 300.

428

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[15.280]

Enforcement The PPSA provides a set of rules which govern the enforcement of security interests. These rules do not apply to deemed security interests, which are brought under the PPSA only for registration and priority purposes. The parties can agree to contract out of many of the enforcement provisions, but not if the assets are “used predominantly for personal, domestic or household purposes”. 82 The enforcement provisions “must be exercised or discharged honestly and in a commercially reasonable manner”. 83 It is not dishonest to do so actually knowing that enforcement will destroy the rights of others. 84 If the debtor is in default, the creditor can seize the assets and sell them. The creditor has a duty to obtain market value for the assets or the best price reasonably obtainable. 85 The proceeds are distributed among the people who had interests in the assets, according to the priority of those interests. 86 [15.280]

82 83 84 85 86

PPSA, s 115. PPSA, s 111(1). PPSA, s 111(2). PPSA, s 131. PPSA, s 140.

PART 9

AUSTRALIAN CONSUMER LAW — CONSUMER GUARANTEES Chapter 16 Consumer Guarantees for Goods .................................. 431 Chapter 17 Consumer Guarantees for Services ............................... 513 Chapter 18 Remedies for Consumer Guarantees ............................. 533

CHAPTER 16

......................................................................................................................

Consumer Guarantees for Goods Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 8.

Introduction The consumer guarantees contained in Ch 3, Pt 3-2, Div 1 of the ACL create a number of minimum standards or statutory duties, called “guarantees” which apply where goods or services are supplied to consumers. The term “guarantee” is used in the sense of a statutory duty imposed on the supplier or manufacturer to meet a certain standard, rather than a promise to answer for the debt of another. Implementation of the consumer guarantees law is dealt with in item 6 of Sch 7 of the Second Commonwealth Act. It provides that Ch 3, Pt 3-2 (Consumer transactions) applies to all relevant conduct occurring in trade or commerce on or after 1 January 2011. Conduct occurring prior to 1 January 2011 will remain subject to the repealed (and saved, for those purposes) provisions of Pt V, Div 2 and Div 2A of the Trade Practices Act 1974 (Cth) (TPA), or the relevant FTA of a State or Territory. 1 The ACL regulators have issued a guide to help businesses understand their responsibilities under the law. 2 Failure to comply with a consumer guarantee gives rise to statutory causes of action. Failure to comply with a consumer guarantee does not constitute conduct that contravenes a provision of Chs 2 or 3 of the ACL, and therefore does not give rise to a cause of action for damages under s 236 of the ACL or the other private remedies considered in Chapter 12 of this book. The rights and remedies available for a failure to comply with the consumer guarantees are considered in detail in Chapter 18. In summary, the guarantees are enforced by private litigation, although there is scope for the ACCC to bring a representative action on behalf of consumers to enforce the guarantees. Where there is a failure to comply with a consumer guarantee, the consumer has a choice. The consumer can seek recourse against the manufacturer, or pursue the person who supplied the goods to the consumer (typically, a retailer or dealer). The consumer's rights against the supplier are more extensive than they are against the manufacturer. The consumer can only recover his or her losses (monetary damages) from the manufacturer, whereas the consumer has specific repair, replacement and refund rights against the supplier. The consumer's specific rights [16.05]

1 2

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.144]. Australian Consumer Law, Consumer Guarantees, A Guide for Businesses and Legal Practitioners, available at http://www.consumerlaw.gov.au/files/2015/09/consumer_guarantees_guide.pdf.

432

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.05]

and remedies against the supplier depend on whether the fault is major, or not major. If the fault is major and cannot be remedied within a reasonable time, the consumer can either: • reject the goods (in which case the supplier would have to collect the goods at the supplier's expense if the goods cannot be returned or removed without significant cost to the consumer), and, at the consumer's election, obtain a refund or have the goods replaced at the supplier's cost; 3 or • keep the goods and ask for compensation to make up the difference in value caused by the failure. 4 If the failure to comply with a guarantee can be remedied and is not major, the consumer may require the supplier either: • to remedy the failure within a reasonable time at the supplier's cost; 5 or • if the supplier refuses or fails to remedy the failure within a reasonable time (i) have the failure remedied and recover the costs incurred from the supplier, or (ii) notify the supplier that the consumer rejects the goods, and of the ground or grounds for the rejection. 6 In all cases (whether the failure is major or not major) the consumer has in addition, a right to sue the supplier for any reasonably foreseeable consequential loss or damage. 7 Where a consumer exercises his or her rights against the supplier, the supplier will have a right of indemnity against the manufacturer. Sections 271(1) and (2) of the ACL provide that the manufacturer is liable to indemnify the supplier in respect of the liability of the supplier to a consumer if the supplier is liable for a failure of the goods to comply with the guarantee of acceptable quality in s 54 of the ACL. Section 274(3) of the ACL states that the manufacturer's liability to indemnify the supplier is the same as if it had arisen under a contract of indemnity made between the supplier and the manufacturer. This means that the manufacturer must hold the supplier harmless in relation to the failure to comply with the consumer guarantee. The consumer's specific rights against the manufacturer depend on whether the manufacturer has agreed to provide an express warranty. Manufacturers generally prefer to repair or replace faulty goods rather than pay damages. Where the manufacturer provides an express warranty specifying that they will remedy a fault by repair or replacement of the goods, they must remedy the failure within a reasonable time. 8 Where the manufacturer has not provided an express warranty, or fails to remedy the failure within a reasonable time, the consumer may recover damages against the 3

ACL, s 259(3)(a).

4

ACL, s 259(3)(b).

5

ACL, s 259(2)(a).

6

ACL, s 259(2)(b).

7

ACL, s 259(6).

8

ACL, s 271(6).

[16.10]

CHAPTER

16

CONSUMER GUARANTEES FOR GOODS

433

manufacturer in accordance with s 272(1)(a) of the ACL, for any reduction in value of the goods resulting from the failure to comply with the guarantee. In addition, the consumer will be able to recover any reasonably foreseeable consequential loss or damage against the manufacturer pursuant to s 272(1)(b) of the ACL. This chapter is divided into two parts. Part I – examines the background and policy object of the consumer guarantees law. Part II – considers the consumer guarantees that apply to goods.

Part I: Background and policy object Part V, Div 2 of the former TPA created a set of implied terms that imposed contractual obligations in favour of consumers that could not be excluded by suppliers. Those provisions were modelled on similar provisions contained in the State 9 and Territory 10 Sale of Goods Acts. However, they were different in scope and incorporated a number of important modifications designed to improve the position of consumers. Similar provisions to Pt V, Div 2 of the TPA were introduced in Victoria, 11 Western Australia, 12 South Australia, 13 and the Northern Territory. 14 New South Wales, Queensland, the Australian Capital Territory and Tasmania did not introduce special provisions, apparently being content to leave the matter to the TPA. While there was a general consensus that Pt V Div 2 and Div 2A of the TPA had outlived their usefulness, there was also broad agreement that their essential elements should be retained. The consumer guarantees law in the ACL employs some of the language of the repealed provisions in relation to statutory implied terms in consumer contracts with suppliers in Pt V Div 2, 15 the statutory causes of action that consumers could bring directly against manufacturers in ss 74B and 74D of the TPA, and State and Territory fair trading and sale of goods laws dealing with implied conditions and warranties in consumer contracts. Thus, the jurisprudence relating to the TPA will also be relevant to the interpretation and understanding of the ACL where the same language is adopted in the ACL. 16 The consumer guarantees law is similar to the statutory causes of action contained in Pt VA of the TPA which were intended to provide relief in cases of goods having a defect [16.10]

9 10 11 12 13 14 15

16

Sale of Goods Act 1923 (NSW); Goods Act 1958 (Vic); Sale of Goods Act 1896 (Qld); Sale of Goods Act 1895 (SA); Sale of Goods Act 1895 (WA); Sale of Goods Act 1896 (Tas). Sale of Goods Act 1954 (ACT); Sale of Goods Act 1972 (NT). Pt IV of the Goods Act 1958 (Vic), introduced by the Goods (Sales and Leases) Act 1981 (Vic). Fair Trading Act 2010 (WA). Consumer Transactions Act 1972-1983 (SA). Consumer Affairs and Fair Trading Act (NT). For example, s 60 of the ACL imposes a statutory guarantee that services will be rendered with “due care and skill”. This mirrors the statutory implied warranty in s 74(1) of the TPA that services will be rendered with “due care and skill”. See eg, Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [3.34] in relation to the meaning of “related bodies corporate”; [2.36] in relation to the meaning of “manufactured”; [2.52] in relation to the meaning of “acquisition”, supply and re-supply.

434

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.15]

which cause personal injury or death to consumers. The consumer guarantees regime uses some of same terminology in Pt VA, such as the broad definitions of “supplier” and “manufacturer”; and the relevant circumstances that are to be taken into account in deciding whether goods have a “defect” listed in s 75AC(2) are similar to the statutory factors listed in s 54(3) in deciding whether goods are of “acceptable quality” under the ACL. These statutory causes of action arise independently of contract, and thereby avoid the difficulty sometimes encountered with the statutory implied terms regime where consumers could not bring actions against suppliers of faulty goods because they were unable to point to a contract onto which the implied term could be grafted. 17 The Second Explanatory Memorandum accompanying the Bill, states that the provisions set out in Pt 3-2, Div 1 of the ACL are couched in terms broadly similar to those used in the New Zealand Consumer Guarantees Act 1993 (NZ) (NZ CGA) and “the jurisprudence applicable to that Act is of relevance to those provisions.” 18 Guarantees not intended to cover the field ............................................................................................................................................................................................... [16.15]

Section 131C(4) of the CCA provides:

Except as expressly provided by this Part or the Australian Consumer Law, nothing in this Part or the Australian Consumer Law is taken to limit, restrict or otherwise affect any right or remedy a person would have had if this Part and the Australian Consumer Law had not been enacted.

The purpose of this provision is to ensure that it is not held that the ACL is intended to “cover the field” of consumer protection regulation, so as to render invalid State or Territory legislation dealing with that topic. Consequently, the ACL will exist side by side with other legislation regulating transactions with consumers in cases where failure to comply with a consumer guarantee is also a breach of an implied term of a contract for the supply of goods or services. For example, the State and Territory Sale of Goods Acts, imply conditions and warranties into contracts for the sale of goods that will continue to exist alongside the consumer guarantees in the ACL. The Sale of Goods legislation in each State and Territory contains a set of implied terms relating to the title and quality of the goods sold and provisions governing the remedies available to the seller and buyer in the event of a breach of contract. These implied terms improve the contractual position of the buyer by 17

18

See E v Australian Red Cross Society (1991) ATPR ¶41-085; (1991) 27 FCR 310 (Wilcox J); Arturi v Zupps Motors Pty Ltd (1980) ATPR ¶40-189 (Brennan J); and Zalai v Col Crawford (Retail) Pty Ltd (1980) ATPR ¶40-177 (Rogers J). Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.9], p 179. For commentary on the NZ CGA, see Gault on Commercial Law; Borrrowdale (ed), Butterworths Commercial Law in New Zealand (4th ed, Butterworths, 2000), (ch 18 by Cynthia Hawes); Tokeley, Consumer Law in New Zealand (Butterworths, 2000), chs 2 and 3; and Paterson and Tokeley, “Consumer Guarantees”, in Malbon and Nottage (eds), Consumer Law & Policy in Australia and New Zealand (Federation Press, Sydney, 2013), Ch 4.

[16.20]

CHAPTER

16

CONSUMER GUARANTEES FOR GOODS

435

imposing, in certain circumstances, contractual obligations on the seller. There are three principal differences between the consumer guarantees law in the ACL and the Sale of Goods legislation. (a)

They cover different transactions. Thus, whilst the Sale of Goods Acts apply only to contracts for the “sale” of “goods”, the consumer guarantees apply to contracts for the “supply” of both goods and services.

(b)

They impose obligations on different persons. Thus, whilst the Sale of Goods Acts apply only to sellers whether or not they are incorporated, the consumer guarantees law adopts a “whole of supply chain” approach making manufacturers as well as suppliers liable for goods and services that do not comply with the consumer guarantees.

(c)

They create rights in favour of different persons. Thus, whilst the consumer guarantees law creates rights only in favour of consumers as defined in s 3 of the ACL, the Sale of Goods Acts create rights in favour of businesses and consumers.

However, the Sale of Goods legislation has been of limited value to consumers because it allows the seller to limit, or exclude altogether, its liability for breach of these obligations. 19 The new statutory causes of action are in addition to the other rights and remedies the consumer may have under the ACL, and there is scope for overlap, where, for example, the supplier engages in misleading conduct with respect to the attributes of the goods or services supplied contrary to ss 18 or 29(1)(g), (m) and (n) of the ACL. Findings of the NEIAT study ...............................................................................................................................................................................................

The National Education and Information Advisory Taskforce (NEIAT) conducted a study during July and August of 2009 to obtain data from consumers and traders in relation to the statutory implied terms scheme in three markets – white goods, electronic goods and mobile phones. 20 The NEIAT Study concluded that there were four principal barriers to consumers exercising their statutory rights under Pt V Div 2 of the TPA. They are: [16.20]

• lack of awareness of the law on the part of consumers, retailers and manufacturers was found to be the primary barrier for both consumers and traders, when consumers sought to exercise their rights; • lack of clarity as to the meaning and scope of the existing law; • lack of cost effective dispute resolution mechanisms for consumers; and • lack of incentives for suppliers to comply. 19

See Paterson, “The New Consumer Guarantee Law and the Reasons for Replacing the Regime of Statutory Implied Terms in Consumer Transactions” (2011) 35(1) Melbourne University Law Review 252.

20

NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), at http://www.archive.treasury.gov.au/documents/1666/PDF/National_ Baseline_Study_Warranties_and_Refunds.pdf.

436

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.25]

Lack of awareness

The primary reason for the existing laws being ineffective was lack of awareness. One of the surprising findings of the NEIAT study was that consumers, retailers and manufacturers only had a limited understanding of their rights and obligations under the existing law. The study found that 57% of retailers and 47% of manufacturers were unaware that consumers are entitled to remedies for breaches of statutory implied terms. 21 It also found that consumer awareness of statutory warranties was very low, with 71% of consumers being unaware that they had any implied statutory rights. 22 Most believed they only had rights if the manufacturer provided an express warranty. Manufacturers and retailers exploited this lack of awareness on the part of consumers by playing the “blame game”. 23 The consumer bears the onus of proving which firm in the supply chain is responsible for a fault, and unless the consumer can do so, the retailer and the manufacturer blame each other, or a third party such as a spare parts manufacturer. [16.25]

Lack of clarity

A further problem with Pt V Divs 2 and 2A of the TPA identified by the NEIAT survey was ambiguity and lack of clarity as to the nature and content of consumers' rights and traders' obligations. As the NEIAT study noted under the heading “ambiguous law”: “[t]he law cannot empower consumers if there are grey areas”. 24 Under the former conceptual framework, consumers' rights were based on terms that were implied into the contract between the trader and the consumer. There were 15 different Commonwealth, State and Territory statutes that established generic statutory implied terms regimes. This created a compliance nightmare for businesses that trade across more than one jurisdiction. There were two tiers of implied terms under the TPA, conditions and warranties, with different remedies attaching to their breach. Breach of condition entitled the consumer to a right of termination and a right to damages, whereas a breach of warranty only entitled the consumer to a right to damages. In order to be entitled to return the goods, a consumer was required to rescind the contract under s 75A of the TPA. This required proof that the supplier had breached a condition rather than a warranty. There were no statutory remedies for breach of the implied terms. In order to obtain a remedy a consumer was required to commence a civil action for damages for breach of contract. [16.30]

21 22 23 24

NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), p 52. NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), p 51. NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), Table 3, p 69. NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), Table 3, p 69.

[16.45]

CHAPTER

16

CONSUMER GUARANTEES FOR GOODS

437

There was also uncertainty as to the meaning of key concepts such as the condition that goods sold must be of “merchantable quality”. 25 The term “merchantable quality” is general and vague. It was accepted that the goods in question must be durable for a period of time that is reasonable in light of the circumstances of the sale, but the elusive question was: for how long after purchase must the goods remain durable? Lack of effective dispute resolution mechanisms

A third barrier to consumers exercising their statutory rights identified in the NEIAT study was the lack of effective dispute resolution mechanisms for consumers. Consumers perceived the exercise of their statutory rights as involving a “lengthy process that is unlikely to result in a positive outcome”. 26 Civil litigation is expensive. The limited dollar value of most consumer claims meant that consumers were unlikely to seek redress through the superior courts. [16.35]

Lack of incentives to comply

A fourth barrier to consumers exercising their statutory rights was the lack of incentives to comply. The only incentive for a recalcitrant supplier to comply was the threat of civil action by individuals. There was no scope for action by regulators on behalf of consumers. Recalcitrant suppliers were aware that consumers were unlikely to litigate in the event of a dispute; so suppliers had little incentive to comply. The result was that “retailers and manufacturers play the ‘blame game’ with neither party prepared to take responsibility”. 27 [16.40]

Commonwealth Consumer Affairs Advisory Council ...............................................................................................................................................................................................

On 13 March 2009, the Australian Government announced that a review of the Australian law of implied terms would be undertaken by the Commonwealth Consumer Affairs Advisory Council (CCAAC). CCAAC's starting point was that consumers' reasonable expectations should be met, and that they should be entitled to get what they pay for. 28 It examined ways to reduce consumer detriment, principally by reducing the barriers identified in the NEIAT Study that prevent consumers having recourse to retailers and manufacturers for faulty goods and services. In order to clarify the law CCAAC recommended replacing the current implied terms regime with a new statutory scheme that stands independently of the law of contract. It recommended that the Australian Consumer Law (ACL) should include a single set of statutory consumer [16.45]

25 26 27 28

See Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [25.25]. NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), Table 3, p 69. NEIAT, “National Baseline Study for Statutory Warranties and Refunds”, Research Paper No 2 (October 2009) (NEIAT Baseline Study), Table 3, p 69. The report is available on the Australian Government, the Treasury’s website, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009), at http://www.ccaac.gov.au.

438

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.45]

guarantees along the lines of those contained in the NZ CGA. The NZ CGA resulted from a Report prepared by Professor David Vernon at the request of the Minister for Justice, the Rt Hon Geoffrey Palmer (the Vernon Report). The Vernon Report recommended that the interference with the functioning of the free market should be minimal and only to the extent necessary to provide consumer protection. 29 The rationale for eliminating the need for a contract, and imposing liability on both the manufacturer as well as the retailer of goods was explained by Professor Vernon in terms of a “single enterprise theory”. According to the single enterprise theory, consumer sales are made possible by the co-operative efforts of everyone in the distribution chain and accordingly they should be jointly responsible. While manufacturers have the greatest control over production of the goods and so prevent faults occurring, distributors and retailers profit from the transaction, and should also be held accountable: Some retailers may object to shouldering the responsibility for defects. They may perceive their role simply as a conduit of a product manufactured and packaged by others in the distribution chain. Since these retailers play no role in creating the product, they may view themselves as blameless when the goods or services turn out to be badly designed or produced. In a very real sense, they are blameless unless they had reason to know of the defect prior to sale. Accepting as fact the retailers' claim that they neither created the defect nor had any way of knowing prior to sale that it existed does not lead to the conclusion that they should be exempted from responsibility to consumers for the defect. It leads only to the conclusion that they should be reimbursed for their outlay by others in the distribution chain or that it is merely another cost of doing business. The retailer, who sells the goods or services in an effort to make a profit, should not be permitted to retain the profit while rejecting responsibility for the very thing that produced it. Indeed, no entity in the chain should be permitted to shelter itself from its obligation to the ultimate consumer by pointing a finger at someone else in the chain. It is beyond argument that all in the chain are engaged in a single enterprise. Since the enterprise functionally is a separate unit, the fault of one is functionally the fault of all. 30

CCAAC recommended that manufacturers and retailers should assume joint responsibility for the quality of the goods and services they release into the market place. Consumers should not be forced to identify the cause of the fault and prove which firm in the supply chain was responsible for it.

29

30

Vernon, An Outline for Post-Sale Consumer Legislation in New Zealand: A Report to the Minister of Justice (1987), p 8 (Vernon Report). For commentary on the Vernon Report see Harland, “Post-Sale Consumer Legislation for New Zealand – A Discussion of the Report to the Minister of Justice by Professor David H Vernon” (1988) 3 Canterbury Law Journal 410. Vernon, An Outline for Post-Sale Consumer Legislation in New Zealand: A Report to the Minister of Justice (1987), p 17.

[16.50]

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Clarifying the law ...............................................................................................................................................................................................

In order to clarify the law CCAAC recommended that the ACL should include a single set of statutory consumer guarantees along the lines of those contained in the NZ CGA. Consumer guarantees impose strict liability on both manufacturers and suppliers of goods and services. Strict liability means that the guarantees may be breached without negligence. As Treasury noted in its submission to the Senate Economics Legislation Committee: [16.50]

A significant benefit of the consumer guarantee is that it is written on the face of the law. As such, a statutory guarantee is more accessible to consumers compared to actions for negligence, which usually requires the services of a lawyer to understand. This is a different protection to the common law notion of negligence, which provides consumers with protection when services are provided in a way which does not meet the standard of care required. The consumer guarantee is directed to ensuring that the services are provided in accordance with the purpose expressed by the consumer. A particular service might be provided in a way that is not negligence but may, nevertheless, fail to achieve the purpose that a consumer made known to a supplier. 31

“Innocent” suppliers who are obliged to provide consumers with remedies will be able to recover the costs incurred from manufacturers. It is apparent that in enacting the consumer guarantees law Parliament intended: • to increase consumer and business understanding and raise awareness; • to harmonise differences between national, State and Territory laws; and • to make enforcement activity more effective. It also intended to create some new substantive consumer rights and remedies available to consumers for failure to comply with the guarantees. 32 However, in relation to the scope of consumer guarantees themselves, it only intended to repeat and clarify the previous law relating Pt V Div 2 and Div 2A of the TPA; it did not intend to expand those provisions. This is apparent from the Joint Communiqué issued Ministerial Council on Consumer Affairs (MCCA) when it met in Perth on 4 December 2009 which states: MCCA agreed, as part of the development of the Australian Consumer Law, to improve the legal framework for consumer rights that apply to the acquisition of goods and services. This will be a single national law guaranteeing consumer rights in relation to 31 32

Treasury, Submission 46, p 22. For example, the effect of ACL, s 59 is to elevate all pre-contractual representations by a supplier or manufacturer to the status of consumer guarantees. Consumers will have a statutory cause of action under the ACL for damages, repair or replacement if there is a failure to comply with any Express Warranty. This represents a significant increase in the rights of consumers over the rights available under the TPA.

440

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.55]

their acquisition of goods and services. They will be based on existing implied conditions and warranties, which will be simplified and streamlined. 33

It is also apparent from the Second Explanatory Memorandum which states: The RIS discusses the impact of implementing the CCAAC recommendations, including the costs and benefits of moving from a system of implied conditions and warranties to statutory consumer guarantees. Given that the proposal does not involve a change in the substantive rights and obligations of business and consumers, the only cost is transitional in nature. 34

For example, as regards the guarantee of acceptable quality, it appears that it was not intended to extend the protection afforded by s 71(1) of the TPA. It was intended only to clarify the scope of the protection by, for example, expressly providing that durability and minor defects as to appearance and finish are to be taken into account in determining whether goods are of acceptable quality. Thus, in order to understand the scope of the new consumer guarantees law, it is first necessary to consider the scope of the equivalent statutory implied terms of Pt V Div 2 of the TPA, and the statutory causes of action that were available against manufacturers and importers under Pt V Div 2A of the TPA. Policy objects ...............................................................................................................................................................................................

According to the Second Explanatory Memorandum, the Government had three objects in adopting the consumer guarantees law: [16.55]

• reducing complexity and uncertainty in the law; • improving consumers' awareness of their rights; and • providing effective enforcement mechanisms for consumers. 35 The Government's object in providing for a national consumer guarantees law according to the Second Explanatory Memorandum was to: [provide] consumers with a minimum level of protection in all transactions for the acquisition of goods and services while minimising complexity, uncertainty and the cost burden of regulation. The RIS concludes that legislating to provide a national system of statutory consumer guarantees is the most appropriate option given the objectives of government action. 36 33

34 35 36

See The MCCA Joint Communiqué (2009), p 4 at http://www.consumerlaw.gov.au/files/2015/09/ Meeting_22_4_Dec_09.pdf. For a consideration of the policy objectives of the consumer guarantees provisions see Paterson, “The New Consumer Guarantees Law and the Reasons for Replacing the Regime of Statutory Implied Terms in Consumer Transactions” (2011) 35(1) Melbourne University Law Review 252. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [25.8]. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [25.43]-[25.58]. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [25.6].

[16.55]

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It has been recognised that New Zealand's consumer guarantees law provides a “loss allocation mechanism” between manufacturers, suppliers and consumers. 37 The consumer guarantees law attempts to strike a balance between the rights of the manufacturer, the supplier and the consumer. It is not intended to provide the consumer with an indemnity against all of the consequences of all defects in goods or faulty services. The policy of the consumer guarantees law is to make legal redress readily accessible to consumers. Broadly, it provides that consumers can recover from the manufacturer or the supplier without proof of fault or negligence. If the consumer recovers against the supplier, the supplier must pursue its own remedies against the manufacturer. The policy of the scheme recognises that the supplier will be in a stronger position to negotiate with the manufacturer than the consumer. In its Report to the then Minister for Competition Policy and Consumer Affairs, the Hon Dr Craig Emerson MP, CCAAC recommended that consumers should be able to proceed against either the supplier or the manufacturer for the full amount of the damage at the consumer's option. 38 In effect, the supplier and manufacturer will be jointly and severally liable to the consumer. However, CCAAC recognised that in some circumstances it would be unreasonable to make the supplier jointly liable with the manufacturer. This is because it is the manufacturer who is responsible for putting the unsuitable or defective goods into circulation and it is the manufacturer who is responsible for the packaging and labelling which describe the goods. In such circumstances, where the consumer elects to seek redress from the supplier, the supplier should be indemnified by the manufacturer pursuant to s 274 of the ACL. However, in other respects responsibility is assigned to consumers. Suppliers must first be given the opportunity to make good any failure to comply with the guarantee, if the failure is not major and capable of remedy. This gives the supplier the opportunity to assess whether the goods in question have been subjected to unreasonable use. Section 54(6) of the ACL provides that goods do not fail to be of acceptable quality if the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and they are damaged by abnormal use. Also, in relation to the definition of acceptable quality, s 54(3)(c) and (d) of the ACL recognise that the consumer must take into account any statements made about the goods on any packaging or label on the goods, and any representation made about the goods by the supplier or manufacturer. In this way, it allows suppliers and manufacturers to put consumers on notice if the goods in question have limitations. Consumers cannot then complain that the goods fail to comply with the guarantee of acceptable quality. 37 38

Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102 at 107 (Winkelmann J). See also the commentary by Miller J in Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [132]-[134]. CCAAC, Consumer Rights: Reforming Statutory Implied Conditions and Warranties (Final Report, October, 2009), Finding 5.3, 51-53 at http://www.ccaac.gov.au. See Corones, “Consumer Guarantees in Australia: Putting an End to the Blame Game” (2009) 9(2) Queensland University of Technology Law and Justice Journal 137.

442

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.60]

Section 54(4), (5), (6) and (7) excuse the supplier of liability in the following circumstances: • where the problems with the goods were specifically drawn to the consumer's attention before the consumer agreed to the supply; 39 • where goods were displayed for sale or hire with a notice drawing the consumer's attention to the problems with the goods; 40 • the consumer subjected the goods to abnormal use; 41 and • the consumer examined the goods before supply and the examination ought reasonably to have revealed the problems with the goods. 42 Commencement date ...............................................................................................................................................................................................

These guarantees replace the statutory implied warranties and conditions contained in the repealed Pt V Div 2 of the TPA and the repealed statutory causes of action in Pt V Div 2A of the TPA. Goods and services acquired before 1 January 2011 will be covered by regime. Eligible goods and services acquired on or after 1 January 2011 will be subject to the consumer guarantees law. Where conduct occurs both before and after the commencement of the ACL, courts must observe the general presumption against retrospective application. 43 In practice, this means that where conduct occurs prior to the commencement of the ACL, and continues after the commencement of the ACL it would not be covered by the consumer guarantees law. [16.60]

Part II: Consumer guarantees – supply of goods The purpose of this Part is to consider the scope of the consumer guarantees that apply in relation to the supply of goods to a consumer. The sums involved in relation to the supply of consumer goods will not generally warrant the time and expense involved in bringing proceedings in the superior courts in Australia. However, there have been a number of tribunal decisions relating to the scope of the consumer guarantees that apply in relation to the supply of goods to a consumer, which will be considered in this chapter. Part 3-2, Div 1, subdiv A imposes ten consumer guarantees in relation to the supply of goods to a consumer. [16.65]

39 40 41 42 43

ACL, s 54(4). ACL, s 54(5). ACL, s 54(6). ACL, s 54(7). Maxwell v Murphy (1957) 96 CLR 261.

CHAPTER

[16.70]

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443

Some of these guarantees mirror the warranties that were implied into contracts for the supply of goods under the TPA. The statutory causes of action for failure to comply with these consumer guarantees for goods will be considered in Chapter 18. Definition of consumer ...............................................................................................................................................................................................

The word “consumer” is defined in s 3 of the ACL. The approach adopted in s 3 mirrors that in s 4B of the TPA. Section 3 provides: [16.70]

(1) A person is taken to have acquired particular goods as a consumer if, and only if: (a) the amount paid or payable for the goods … did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of this paragraph – that greater amount; or (b) the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or (c) the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads. (2) However, subsection (1) does not apply if the person acquired goods or services, or held himself or herself out as acquiring the goods: (a) for the purpose of re-supply; or (b) for the purpose of using them up or transforming them, in trade or commerce: (i) in the course of a process of production or manufacture; or (ii) in the course of repairing or treating other goods or fixtures on land.

In order to satisfy the definition of consumer it is necessary that the consumer “acquire” the goods. The word “acquire” is defined in an inclusive way in s 2(1) of the ACL to mean: (a) in relation to goods – acquire by way of purchase, exchange or taking on lease, on hire or hire-purchase

The definition of “acquire” in s 2(1) of the ACL is inclusive but the examples given are all transaction based, and have in common the acquisition of goods by payment of some form of consideration. This is re-enforced by s 3 framing the primary test of “consumer” by reference to the price of the goods or services. If this construction is correct it narrows the scope of the definition of “consumer” and excludes third party bystanders who suffer product-related loss and volunteers. 44 Since the definition of “acquire” in s 2(1) of the ACL is inclusive, “acquire” may also embrace its ordinary meaning. The Macquarie Dictionary definition of “acquire” is “to come into possession of”, 45 which is broad enough to include third party bystanders who suffer product-related loss and volunteers. 44

See Kellam, Clark and Glavac, “Theories of Product Liability and the Australian Consumer Law” (2013) 21(1) Competition & Consumer Law Journal 1 at 52.

45

Macquarie Dictionary (4th ed, Macquarie University, Sydney, 2005), p 12.

444

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.75]

However, for the consumer guarantees to apply, there must be a “supply” of goods or services that was “in trade or commerce”. The definition of “supply” is considered at [16.160] and for the reasons given there a volunteer is not considered to be a consumer for the purposes of the definition in s 3 of the ACL. The definition of consumer in s 3 of the ACL has two parts. In the first part, s 3(1) provides that “a person” shall be taken to have acquired particular goods as a consumer if, and only if: • the amount paid or payable was less than $40,000 or the prescribed amount; or • adopts an objective test and focuses on the uses to which the goods or services at issue are ordinarily put; or • the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads. In the second part, s 3(2), contains three exceptions. It adopts a subjective test and focuses on the purpose of the particular person who acquired the goods or services in question. If that person had one of the three excluded purposes, then the acquirer is not a “consumer”, even though the goods or services at issue may be ordinarily acquired for personal, domestic or household use or consumption. As “a person” is defined in s 2C(1) of the Acts Interpretation Act 1901 (Cth) to include a “body politic or corporate as well as an individual”, this definition is wide enough to embrace the acquisition of goods or services by businesses as well as by individuals. Furthermore, s 3(4) of the ACL creates a presumption that a person was a “consumer” unless the contrary is established. The three grounds upon which a person may be a “consumer” under s 3(1) of the ACL will be considered in turn. Prescribed amount

The first ground upon which a person may be taken to have acquired goods or services as a “consumer” is by reference to the “amount paid or payable” for the goods. Unless the “non-consumer” use exceptions (discussed at [16.110]) apply, where the amount paid or payable does not exceed $40,000, a person will be a “consumer” and it is not necessary to inquire into the nature of the goods or services. The effect of this provision is that business goods acquired for a price less than $40,000 will be deemed to be consumer goods and the consumer guarantee provisions in Pt 3-2 of the ACL will apply to them. Under the TPA, when an end user acquired goods or services as a consumer, Div 2 of Pt V implied statutory terms into the supply contract. For example, in Crawford v Mayne Nickless Ltd 46 it was assumed that the repealed s 74 of the TPA which implied a warranty of due care and skill into contracts for the supply or services which did not exceed $40,000, applied to the defendant's installation of a security system, even though this was installed at the plaintiff's commercial premises, rather than at a home because the amount [16.75]

46

Crawford v Mayne Nickless Ltd (1992) ATPR (Digest) ¶46-091.

[16.80]

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paid was less than $40,000. In relation to the supply of goods s 71(1) and (2) of the TPA implied conditions of merchantable quality and fitness for purpose into the contract for the supply of the goods. 47 However, where goods were not of a kind ordinarily acquired for personal, domestic or household use, s 68A of the TPA allowed the supplier to limit liability for breach of those conditions and warranties and effectively exclude liability for consequential loss. Unlike the definition of “consumer goods” in s 4B of the TPA which defined the term by reference to “the price of the goods”, s 3 of the ACL defines “consumer” by reference to “the amount paid or payable” for the acquisition. Section 3(1)(a) provides that the amount paid or payable for the goods is to be worked out under subss (4) to (9). Section 3(4) of the ACL provides the amount paid or payable for goods purchased by a person is taken to be the price paid or payable for the goods unless s 3(5) applies. The word “price” is defined in s 2 of the ACL to mean: (a) the amount paid or payable (including any charge of any description) for the acquisition; or (b) if such an amount is not specified because the acquisition is part only of a transaction for which a total amount is paid or payable: (i) the lowest amount (including any charge of any description) for which the goods or services could reasonably have been acquired from the supplier at the time of the transaction or, if not from the supplier, from another supplier; or (ii) if they could not reasonably have been acquired separately from another supplier – their value at the time of the transaction.

In connection with s 3 it seems that any form of consideration upon which a monetary value can be placed is covered. Where a single item is purchased for a cash sum in a single contract, the position is clear. So too is the position where multiple items are acquired under a single contract and the total consideration does not exceed $40,000. Aggregation

Where each contract for the sale of goods is unconnected with the others, aggregation is not possible, but what is the position where an acquirer enters in to a single contract for multiple items or where multiple orders are placed over a number of years pursuant to a single contract? Is each order to be assessed separately to determine whether it exceeds $40,000, or are the orders to be aggregated to determine whether the total amount payable for all of the orders exceeds the $40,000 limit? The position is unclear. In the context of the repealed s 51AC of the TPA (unconscionable conduct in the context of business transactions where the price did not exceed $3 million), the Full Federal Court ruled that there was no general rule as to whether the prices of goods or services over a period of a relationship should be aggregated or not for the purposes of [16.80]

47

See Jones v West Star Motors Pty Ltd (1995) ATPR ¶41-447 (MacKenzie J with whom McPherson JA agreed); Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025 (Thomas J).

446

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.85]

s 51AC(9). The court was required to take into account all the facts and circumstances before deciding whether aggregation was appropriate or not. 48 In Business and Professional Leasing Pty Ltd v Dannawi, 49 two pizza ovens were purchased and the purchase price was documented as $42,900. The question arose as to whether s 4B of the TPA referred to the price of each item of goods or the aggregate purchase price. Young CJ in Equity held that the prices of two separate identical items in one single transaction ought not to be aggregated in determining whether it was a consumer sale. His Honour stated: when one looks at the whole of the material, two ovens were being purchased for two different sites. There was no discount for quantity. The deal should be considered as two separate transactions. It really makes nonsense in the present type of case to hold that a company making two purchases for different businesses loses its protection under a consumer sale because the paperwork puts the two in the one document. 50

In relation to s 3 of the ACL it will be necessary to consider what is being sold. Where two or more different and unrelated items of goods are being purchased under the same contract, and a price is assigned to each item in the contract, each item is to be separately assessed to determine whether it exceeds $40,000. It is irrelevant that the aggregate price for all the items in the same contract exceeded $40,000. Where two identical items of goods are purchased at the same time under the same contract and the price of each item exceeded $20,000 each item should be separately assessed as a separate transaction to determine whether it exceeds $40,000. This approach was applied in Ogden, Contech Technical Services Pty Ltd v Unmanned Systems Asia Pacific (General), 51 where three different but related items were purchased under the same contract. In that case, the applicants were surveyors and ordered from the respondent, an unmanned aerial vehicle, software, and a camera. The unmanned aerial vehicle could fly over a pre-determined area in such a fashion that photographs were automatically taken by the camera on the vehicle, which could be processed by the software in such a way that a finished mosaic image could be produced. The final quote did not specify the cost of each item, but provided a lump sum figure of over $50,000. The three items were different but related in the sense that all three were necessary to produce the photographic image required. The cost of each item was less than $40,000. They were treated as though they were three separate transactions and the ACL applied. Mixed supply

Difficulties may also arise where the goods or services in issue are supplied in conjunction with other goods or services. For example, chattels such as a dishwasher [16.85]

48

Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 at [33] (Finkelstein J); [112] (Rares J), and [151] (Gordon J).

49 50 51

Business and Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902. Business and Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902 at [150]. Ogden, Contech Technical Services Pty Ltd v Unmanned Systems Asia Pacific (General) [2013] NSWCTTT 378 at [77].

[16.90]

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(goods) may be acquired in conjunction with an interest in real property (a lease) which is included in the definition of “services” in s 2 of the ACL, for a single price (“mixed supply”). The position is dealt with in s 3(5) of the ACL which provides: (5) For the purposes of subsection (1) or (3), if a person purchased goods or services by a mixed supply and a specified price was not allocated to the goods or services in the contract under which they were purchased, the amount paid or payable for goods or services is taken to be: (a) if, at the time of the acquisition, the person could have purchased from the supplier the goods or services other than by a mixed supply–the price at which they could have been purchased from the supplier; or (b) if: (a) paragraph (a) does not apply; but (b) at the time of the acquisition, goods or services of the kind acquired could have been purchased from another supplier other than by a mixed supply; the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or (c) if, at the time of the acquisition, goods or services of the kind acquired could not have been purchased from any supplier except by a mixed supply–the value of the goods or services at that time.

“Mixed supply” is defined in s 3(11) to mean: (11) A purchase or other acquisition of goods or services is made by a mixed supply if the goods or services are purchased or acquired together with other property or services, or together with both other property and other services.

Section 3(5) provides that the relevant amount in determining whether the goods are consumer goods is that which would have been paid if the goods were available from the supplier for purchase separately. If the goods were not available from the supplier for purchase separately, the relevant amount is the lowest reasonable price for which goods of that kind (close substitutes) could have been purchased in the market place from another supplier. If there are no close substitutes for the goods in question, the relevant amount is to be calculated by reference to the value of the goods. Purchase, hire or lease

Where a person acquires goods other than by way of purchase, the price of the goods is, by virtue of s 3(6) of the ACL, taken to be: [16.90]

the price at which, at the time of the acquisition, the person could have purchased the goods from the supplier, unless subsection (7) or (8) applies.

Section 3(6) of the ACL will be relied on when goods are hired or leased, and the price for the purposes of applying the definition of “consumer” will be the price that would have been paid if the hirer or lessor had, in fact, purchased the goods. Section 3(7) of the ACL provides:

448

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.95]

For the purposes of subsection (1) or (3), if: (i) goods acquired by a person other than by way of purchase could not, at the time of the acquisition, have been purchased from the supplier, or could have been purchased only by a mixed supply; but (ii) at that time, goods of the kind acquired could have been purchased from another supplier other than by a mixed supply; the amount paid or payable for the goods is taken to be the lowest price at which the person could, at that time, reasonably have purchased goods of that kind from another supplier.

Section 3(8) of the ACL provides: For the purposes of subsection (1) or (3), if goods acquired by a person other than by way of purchase could not, at the time of the acquisition, have been purchased from any supplier other than by a mixed supply, the amount paid or payable for the goods is taken to be the value of the goods at that time. Credit terms [16.95]

Section 3(9) of the ACL provides:

If: • a person obtains credit in connection with the acquisition of goods by him or her; and • the amount paid or payable by him or her for the goods is increased because he or she so obtains credit; obtaining the credit is taken for the purposes of subsection (3) to be the acquisition of a service, and the amount paid or payable by him or her for the service of being provided with the credit is taken to include the amount of the increase.

The effect of s 3(9) is that for the purpose of ascertaining whether a person who acquires goods on credit is a consumer, the provision of credit is deemed to be the provision of a separate service in addition to the goods. Any additional amount representing the credit charges is excluded from the determination of whether the amount paid or payable for the goods exceeds $40,000. Thus, for example, if the amount paid or payable for the goods is $39,000 and the person acquires them on credit for which the person pays an additional sum of $2,000, although the total amount paid exceeds $40,000, the additional sum of $2,000 for credit is disregarded, and the goods are deemed to be consumer goods and it is not necessary to consider whether the goods are of a kind ordinarily acquired for person, domestic or household use or consumption. The supply of credit is deemed to be a separate service, but unless the credit is supplied by a linked credit provider, 52 it will be a financial service and outside the scope of the ACL. 53 Section 12BAB of the ASIC Act provides that a person provides a financial service if they provide financial product advice or deal in financial products. Section 12BAA(7)(k) 52

See [18.220].

53

CCA, s 131A(1). See [9.105].

[16.100]

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449

provides that a credit facility (within the meaning of the regulations) is a financial product. Credit is defined broadly to mean a contract, arrangement or understanding under which payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred or one person (a debtor) incurs a deferred debt to another person (a credit provider): Regulation 2B(3) of the Australian Securities and Investments Commission Regulations 2001 (Cth). Objective approach

The second ground upon which a person may be taken to have acquired goods as a “consumer” is where the goods being acquired are “of a kind ordinarily acquired for personal, domestic or household use or consumption”. This expression was adopted from the Supply of Goods (Implied Terms) Act 1973 (UK). In Cinema Centre Services Pty Ltd v Eastaway Air Conditioning Pty Ltd, 54 the applicant was held to be a consumer in relation to the purchase of a number of air-conditioning units because, although they were acquired for use in its motel business, they were goods of a kind ordinarily acquired for personal or domestic use. Conversely, goods are not “personal” merely because they are personal to the acquirer. For example, in Jillawarra Grazing Company v John Shearer Ltd 55 the court rejected an argument that an agricultural air seeder was a consumer item because “everything on the farm is domestic to a farmer”. Toohey J held: [16.100]

the term “domestic” carries its usual significance of pertaining to the home. I refer to only one dictum, that of Phillimore J in Metropolitan Water Board v Colley's Patents Ltd [1911] 2 KB 38 at 40: … “domestic” does not mean civilised or domesticated or something appertaining to man, but means something to do with man as occupying or using a house or dwelling. In no sense is an air seeder within goods of a kind ordinarily acquired for use or consumption in connection with the home. The fact that a farmer's residence is ordinarily on the land where he conducts his business does not mean that the distinction ceases to exist. 56

In Carpet Call Pty Ltd v Chan, 57 the defendants acquired commercial quality carpet for their nightclub at a cost of approximately $69,000. As the price of the carpet exceeded the prescribed amount, the court had to decide whether the carpet was “of a kind ordinarily acquired” for use in the home or for personal use. Thomas J held: It should also be noted that the purchasers … invoked s 71(2) of the Trade Practices Act as a basis for the warranty … such a warranty arises only in relation to goods supplied to “a consumer” and this requirement may be satisfied only when the price is below a prescribed amount (not satisfied in this case) or in relation to goods that are of a kind 54 55 56

Cinema Centre Services Pty Ltd v Eastaway Air Conditioning Pty Ltd (1999) ASAL 55-034. Jillawarra Grazing Company v John Shearer Ltd (1984) ATPR ¶40-441. Jillawarra Grazing Company v John Shearer Ltd (1984) ATPR ¶40-441 at 45,090-1.

57

Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025.

450

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.105]

“ordinarily acquired for personal, domestic or household use or consumption” (s 4B(1)(a) and 4B(2)). In my view “carpet” is a commodity, or goods, ordinarily acquired for domestic consumption, and it does not lose that description by reason of a commercial rating, or some quality which makes it last longer than other carpet normally supplied for use in a domestic setting. 58

An industrial photocopier with a reduction facility was held not to be of a kind ordinarily acquired for personal, domestic or household use or consumption in Four Square Stores (Queensland) Ltd v ABE Copiers Pty Ltd. 59 Goods or services may be capable of several uses (personal or business or both). In Bunnings Group Ltd v Laminex Group Ltd, 60 the product at issue was insulation with a white facing. It was advertised on the basis that it was suitable for industrial or commercial buildings where there was no ceiling or wall lining to conceal the insulation material. However, it could also be used in a domestic setting. Young J, made three important findings. First, his Honour held that the word “ordinarily” means “commonly” or “regularly”, not “principally”, “exclusively” or “predominantly”. 61 Secondly, his Honour held the question whether goods were of a kind ordinarily acquired for personal, domestic or household use or consumption, is a single composite question. Thirdly, Young J held that in deciding whether goods were of a kind ordinarily acquired for personal, domestic or household use or consumption it will be relevant to inquire as to the essential character of the goods in question. The essential character test is relevant, but it is necessary to undertake a broader inquiry into the design, marketing, pricing and potential uses of the goods in question. Young J concluded that the products were marketed as being ideally suited for use in commercial and industrial applications, but their use in residential applications was left open. Nothing other than price made them unsuitable for use in residential applications. Accordingly, the products were of a kind ordinarily acquired for personal, domestic or household use or consumption within the meaning of the repealed s 74A(2)(a) of the TPA. 62 While the expression “ordinarily acquired for personal, domestic or household use or consumption” gives rise to difficulties where the same goods are bought for private and commercial use, s 3(10) of the ACL creates a presumption that a person was a consumer unless the contrary is established. Commercial road vehicles and trailers [16.105] Section 3(1)(c) of the ACL sets out the third ground upon which a person may be taken to have acquired goods as a “consumer”. If the goods consist of a commercial road vehicle or trailer acquired for use principally in the transport of goods 58 59 60 61

Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025 at 53,072. Four Square Stores (Queensland) Ltd v ABE Copiers Pty Ltd (1981) ATPR ¶40-232 at 43,114 (Campbell J). Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115. Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115 at [81].

62

Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115 at [113].

[16.110]

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451

on public roads they are deemed to be consumer purchases. Thus, the purchaser of a prime mover for $140,000 for the transport of goods on public roads will be able to rely on the consumer guarantees law that applies to the supply of goods in Pt 3-2, Div 1 of the ACL. Non-consumer use exceptions

The exception in s 3(2) of the ACL provides that a person who is otherwise a consumer will not be so: [16.110]

if the person acquired goods, or held himself or herself out as acquiring the goods: (1) for the purpose of re-supply; or (2) for the purpose of using them up or transforming them, in trade or commerce: (a) in the course of a process of production or manufacture; or (b) in the course of repairing or treating other goods or fixtures on land.

As regards para (a), a retailer who purchases goods for sale is acquiring them for re-supply and is not considered to be a “consumer” in relation to those goods. The word “supply” is defined in s 2 to include re-supply by way of sale, exchange, lease, hire or hire-purchase, so that a car hire firm will be excluded from the definition of “consumer”. For example, in relation to a contract for the sale of a business, the contract may involve the sale of land, stock-in-trade, and equipment such as an air-conditioning system, a refrigerator, a computer and computer software and an alarm system. The stock-in-trade will be excluded from the definition of consumer goods because it has been acquired for re-supply. The other goods will be consumer goods under s 3(5) if the lowest reasonable price for which goods of that kind (close substitutes) could have been purchased in the market place from another supplier does not exceed $40,000. As regards para (b), using up goods, or transforming them as part of a process of production or manufacture, is easily understood. Note, however, that there is a distinction to be drawn between “using” goods and “using them up” in the course of production or manufacture. Thus, a car manufacturer that acquires sheet steel and transforms it into a car body is transforming it in the course of a process of manufacture and will be excluded from the definition of consumer. If the same car manufacturer acquires tools valued at less than $40,000 for use in the manufacturing process, it will be a consumer in relation to those tools and will not come within the exception. If the car manufacturer acquires tyres to affix to its cars, the manufacturer will not be using them up or transforming them, but they will have been acquired for the purpose of re-supply and so will not be consumer goods. However, where a tyre is acquired as a replacement, or for repair, the acquirer will be a consumer, and the exception will not apply. In Laws v GWS Machinery Pty Ltd, 63 the plaintiff claimed damages for serious injuries suffered when a tyre he was fitting to his tractor exploded. GWS argued that 63

Laws v GWS Machinery Pty Ltd [2007] NSWSC 316.

452

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.115]

Mr Laws was not a consumer because, although under the prescribed monetary limit, Mr Laws acquired them for the purpose of using them up. It was argued that the term “use up” includes “consumed the whole of or exhaust”, and that because a tyre is perishable, and may blow out and be damaged beyond repair, it is consumed in whole or exhausted. Rothman J rejected the GWS's submission. His Honour held: The fallacy in the submission of GWS is that it omits the words “in the course of” and reads the section as if the word “of” did not appear before the words “repairing or treating”. The use there of the word “of”, after the word “or”, means that the reading of the subsection requires that the alternative (“of repairing or treating other goods”) is an alternative to one of: the purpose of re-supply; or the purpose of using them up; or the process of production or manufacture. The last mentioned reading is the only logical result. In that way the person remains a consumer even though goods are required for the purpose of using them up unless the goods are used up, relevantly, “in the course of repairing or treating other goods” or “in the course of the process of repairing or treating other goods”. On that construction, a manufacturer who purchases biscuits for its staff is a consumer, even if the staff eats the biscuits while manufacturing, repairing etc. Also, a manufacturer or owner of other goods is still a consumer if it acquires goods for the purpose of using them up but the consumption of them is not in the course of a process of production or manufacture or in the course of repair or treating other goods. A tyre on a car, truck or tractor is a perfect example of the acquisition of goods which may be used in repairing or treating other goods (and sometimes in the course of a process of production or manufacture) and would be acquired for the purpose of using it up, but it would not be used up in the course of that repair or treatment. It would be used up by the use of the tyre (or goods on which it was fitted) once repaired or treated. 64

Presumption ...............................................................................................................................................................................................

Section 3(10) of the ACL creates a presumption in relation to the definition of consumer in s 3. It provides: [16.115]

If it is alleged in any proceeding under this Schedule, or in any other proceeding in respect of a matter arising under this Schedule, that a person was a consumer in relation to particular goods or services, it is presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services.

Thus, the onus or proving that a person was not a “consumer” rests on the supplier. Goods protected ...............................................................................................................................................................................................

Part 3-2, Div 1 of the ACL is much broader in scope than the Sale of Goods Acts. It is not limited to contracts of sale, or to contracts relating to goods, but covers, instead, the “supply” of “goods” or “services” to consumers. Section 2 of the ACL defines “goods” to mean: [16.120]

64

Laws v GWS Machinery Pty Ltd [2007] NSWSC 316 at [142]-[143].

[16.125]

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453

goods includes: (a) ships, aircraft and other vehicles; and (b) animals, including fish; and (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas and electricity; and (e) computer software; and (f) second-hand goods; and (g) any component part of, or accessory to, goods.

Section 2 of the ACL defines “services” to mean: services includes: (a) any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce; and (b) without limiting paragraph (a), the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under: (i) a contract for or in relation to the performance of work (including work of a professional nature), whether with or without the supply of goods; or (ii) a contract for or in relation to the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or (iii) a contract for or in relation to the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; or (iv) a contract of insurance; or (v) a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or (vi) any contract for or in relation to the lending of money; but does not include rights or benefits being the supply of goods or the performance of work under a contract of service.

These definitions mirror the definitions of “goods” and “services” in s 4 of the CCA. They give rise to a number of complex issues including the following: • how to distinguish between goods and services; • the mixed supply of goods and services; • whether digital products should be characterised as goods or services; and • the treatment of goods affixed to land or premises. Distinguishing between goods and services ...............................................................................................................................................................................................

The definition of goods is inclusive, and includes its ordinary meaning of “goods”. In Pont Data Australia Pty Ltd v ASX Operations Pty Ltd, Wilcox J held that: [16.125]

454

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.125]

The word [goods] generally refers to tangible and visible objects; although it is notable that both the Oxford English Dictionary and the Macquarie Dictionary define “goods” or “goods and chattels” as referring merely to “movable property”, without further limitation. 65

In ACCC v Valve Corporation (No 3), 66 Edelman J observed: The definition emphasises an important aspect of a “good”. That aspect is sometimes described in theoretical studies as “thinghood”: eg Penner J, The Idea of Property in Law (Clarendon Press, Oxford, 1997). The legal meaning of “goods” can be analogised to the strict definition of “property” which is “a description of a legal relationship with a thing”: Yanner v Eaton [1999] HCA 53; (1999) 201 CLR 351, 365-366 [17] (Gleeson CJ, Gaudron, Kirby, and Hayne JJ describing the word “property”). This explains why a chose in action, such as a debt, is not a “good”. A chose in action is a right against a person. It is not a right in relation to a thing. 67

The definition of services in s 2 includes any rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, but does not include work to be performed under a contract of service. This is intended to ensure that the regulation of contracts of employment is not affected by the CCA and the ACL, but left to the industrial jurisdiction. The activities of professionals are included within the definition of services. Paragraph (a)(i) of the definition of “services” set out in [16.120] expressly includes rights, benefits, privileges or facilities provided, granted or conferred under a contract for the performance of work, including work or a professional nature. The professional services must be provided “in trade or commerce”. 68 On a broad reading of the definition, the mere payment of money may be the provision of a service in the sense of conferring a benefit. In SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd, 69 Sheppard J held that the payment by the Credit Union of a credit into a member's account was not the supply of a service, but emphasised that every case of a payment of money would need to be determined on its facts. In TPC v Queensland Aggregates Pty Ltd, Sheppard J held that offering paid work as a cartage contractor was offering a “benefit” which came within the definition of “services”. 70 This was confirmed by the Full Federal Court. 71 65

66 67 68

Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385 at 421. On appeal the Full Federal Court agreed that the definition of “goods” extended the ordinary meaning of “goods”. See ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1991) 27 FCR 460 at 468. ACCC v Valve Corporation (No 3) [2016] FCA 196. ACCC v Valve Corporation (No 3) [2016] FCA 196 at [128].

69 70

See Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 71 ALR 615 at 620 (French J); Yates v Whitlam (1999) ATPR ¶41-722 at 43,380-43,381 (Windeyer J); and Nixon v Slater & Gordon (2000) ATPR ¶41-765 at [27]-[29] (Merkel J) SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) ATPR ¶40-180 at 42,487. TPC v Queensland Aggregates Pty Ltd (1981) ATPR ¶40-228 at 43,081-43,082.

71

Queensland Aggregates Pty Ltd v TPC (1981) ATPR ¶40-236 at 43,143 (Bowen CJ. Deane and Lockhart JJ).

[16.135]

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Mixed supply of goods and services ...............................................................................................................................................................................................

The definition of “services” in s 2(1) of the ACL “does not include rights or benefits being the supply of goods”. It is important to appreciate the role played by these exclusionary words. The definition contemplates that services may accompany the supply of goods. However, if the transaction is properly characterised as a supply of goods, the effect of the exclusionary words is that the accompanying services are disregarded, and the whole transaction is treated as a supply of goods. 72 For example, in Ryan Connor v Teela Enterprises Pty Ltd and Robyn May Stevenson t/as Sureflo Exhaust, 73 the contract was for the supply of an exhaust system purchased from, and installed by, the respondent. The cost of the exhaust system was $1,500. The installation services were relatively minor. Over a year after the purchase and installation of the exhaust system, the applicant noticed a noise from the left rear of the vehicle when driving over bumps. It was discovered that the left rear “hangar” (the rod attaching the muffler to the vehicle) was missing. The applicant unsuccessfully claimed that the muffler failed to comply with the guarantee of acceptable quality. No claim was made that the installation services were not rendered with due care and skill. Similarly, in Zhang v United Auctions, 74 the respondent operated a business of retailing and installing kitchens and other improvements to residential premises. In October 2011, the applicant visited the respondent's show rooms and ordered a kitchen for his home which was to be installed by the respondent. On completion, there was an unattractive and raised joint line on the granite bench top in the kitchen. The applicant successfully claimed the granite bench top failed to comply with the guarantee of acceptable quality, rather than the installation services failed to comply with the guarantee of due care and skill. However, maintenance agreements on hired or purchased goods will probably be for the supply of services rather than part of the supply of goods. [16.130]

Digital products: goods or services? ...............................................................................................................................................................................................

At common law, and under the Sale of Goods Acts in the States and Territories, computer software supplied by means of a physical medium, for example, on a CD, DVD or USB, are a supply of goods because the physical medium contains the software. 75 Where no physical medium is supplied at the time of purchase, for example if the software is downloaded from the internet onto a device operated by the purchaser, [16.135]

72

See Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 at 402 (Wilson J).

73 74

Ryan Connor v Teela Enterprises Pty Ltd and Robyn May Stevenson t/as Sureflo Exhaust [2014] NSWCATCD 93. Zhang v United Auctions [2013] NSWCTTT 6.

75

See St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481.

456

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.140]

this was held not to be a supply of goods under the Sale of Goods Act 1923 (NSW). 76 Following the extension of the definition of “goods” in s 2 of the ACL to include computer software a physical medium is not required. For example, in Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic, 77 web-based software was held to fall within the definition of “goods” in s 2 of the ACL. In order to use the software clients needed to access the web-based system through the internet. Once logged in, users could ask for financial planning documents and reports to be produced, downloaded and/or printed. The licence also provided for the migration of data services and training. The Tribunal held the software itself was expressly included within the definition of “goods” in ACL, s 2(1). New releases of the software would also constitute the supply of goods. Digital products and consumer software

As explained earlier in this chapter, the definition of “services” in s 2 of the ACL set out at [16.130], “does not include rights or benefits being the supply of goods”. Australian courts have only recently considered the legal characterisation of digital products. Digital products such as songs, books and games generally involve the supply of computer software in order to enable a consumer to download them, and the supply of other non-executable data such as html images and music. In each case it will be necessary to determine whether the supply of the computer software supplied was integral to the supply of the particular digital product, or merely incidental. If the supply of computer software is integral, then it will be a contract for the supply of goods. In relation to digital music, the major record companies are generally the owners of the copyright in the music. They allow the music to be sold but only on the condition that the downloaded music is protected by a Digital Rights Management (DRM) technology. The music can be played on a buyer's device, but only using software produced by the licensees of the DRM technology. Other software will be unable to read or play the downloaded music files. If the buyer wishes to use the songs on a device, such as an iPod, they can only do so by utilising the appropriate DRM technology. In other words, because of the use of Apple iTunes DRM technology (known as “FairPlay”), the music purchased from an Apple iTunes Music Store can only be played on a DRM compatible device, such as an iPod. The definition of “goods” in ACL, s 2 expressly includes “computer software”. The definition of “services” includes “rights in relation to personal property granted or conferred in trade or commerce”. Copyright is a chose in action. It is personal property, but does not fall within the ordinary meaning of “goods”. See [16.125]. The iTunes software program that allows the download to occur involves the supply of “goods”. However, an iTunes song that is downloaded is not software. The digital download is [16.140]

76 77

Gammasonics Institute of Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd [2010] NSWSC 267. Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238.

[16.140]

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supplied with DRM technology that allows the owner of the digital content to control access to it. A consumer who “buys” an iTunes song acquires a licence to play the song. The licence takes the form of an encryption key that allows the consumer to unlock the DRM technology. However, since the downloaded iTunes software program falls within the definition of “goods” and it is integral to the supply of the digital music, it will be a contract for the supply of goods to the exclusion of the supply of services. In ACCC v Valve Corporation (No 3), 78 a consumer obtained digital games from Valve by going to the Steam website and clicking on the hyperlink “Install Steam”, and installing a software program, “Steam Client”, on the consumer's computer. The Steam Client software allowed the consumer to download digital games. 79 In characterising the nature of the digital games as goods or services, Edelman J distinguished between non-executable data such as music and html images downloaded by consumers which were not computer software, and the Steam Client software that was used to access the games. The games consisted of software and other assets (music and images). 80 Valve submitted that the transaction should be characterised as a supply of services – a software licence which was a chose in action. Edelman J rejected this submission and concluded: Although not everything Valve supplied was a good, the important point for the purposes of this case is that the core of Steam's supply to its subscribers was the provision of games. And at the heart of the provision of games was the supply of computer software. 81

Accordingly, the contract was one for the supply of goods. A separate question then arises as to whether there has been a “supply” of the downloaded software if it is supplied free of charge. The definition of supply considered at [16.160] requires a supply of goods for consideration before the consumer acquires any rights under the consumer guarantees. If the digital download is characterised as two separate transactions and the software is supplied free of charge the consumer guarantees in relation to goods will not apply to it. However, if the proper characterisation is one transaction, consisting of the provision of the software together with the data, there will be a supply of goods and services for consideration, and both sets of guarantees will apply – the guarantees in relation to goods for the software, and the guarantees in relation to services for the downloaded data. In the United Kingdom, Ch 3 of the Consumer Rights Act 2015 (UK) introduces new rules in relation to digital content and consumer remedies. The statutory rights of satisfactory quality, 82 fitness for purpose 83 and compliance with description 84 that apply to goods also apply to digital content. 78 79

ACCC v Valve Corporation (No 3) [2016] FCA 196. ACCC v Valve Corporation (No 3) [2016] FCA 196 at [14]-[23].

80 81 82 83

ACCC v Valve Corporation (No 3) [2016] FCA 196 at [138]-[139]. ACCC v Valve Corporation (No 3) [2016] FCA 196 at [157]. Consumer Rights Act 2015 (UK), s 34. Consumer Rights Act 2015 (UK), s 35.

84

Consumer Rights Act 2015 (UK), s 36.

458

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.145]

Goods affixed to land or premises ...............................................................................................................................................................................................

Where a contract for the sale of land or a business includes chattels, such as air-conditioners, dishwashers and hot water systems, the vendor is unable to avoid liability under the consumer guarantees regime in the ACL by arguing that the chattels are fixtures and thus part of the land. The fact that they are attached to premises does not change their status as “goods”. Section 8 of the ACL expressly provides: [16.145]

goods are taken to be supplied to a consumer even if they are affixed to land or premises at the time of supply.

Chattels affixed to land or premises are “goods” for the purposes of the definition in s 2 of the ACL. The consumer guarantees in relation to goods will apply to chattels if the supply was “in trade or commerce” and the supply was to a “consumer”. According to the Second Explanatory Memorandum: Goods supplied in relation to another transaction, for example the transfer of an interest in a property, are subject to the ACL for certain purposes. This could include, for example, kitchen or laundry fittings supplied as part of a home construction contract, which would otherwise become fixtures at the time of their installation. 85

The following transactions involving the supply of chattels will be “in trade or commerce” and the consumer guarantees will apply to any chattels if the amount paid or payable for the chattels did not exceed $40,000, or they are of a kind ordinarily acquired for personal, domestic or household use or consumption: • the sale of a residential investment property; • the sale of a residential property built for the purpose of resale at a profit by a property developer; • the sale of a residential property by a mortgagee; • the sale of a business; • the sale of a commercial or agricultural property; and • the sale of a commercial property by a mortgagee or receiver. In the case of mixed supply of goods and services (chattels and a dwelling or whole building), the value of the chattels will be calculated in accordance with s 3(5) of the ACL. The prices of the chattels will be calculated by reference to the price at which the chattels could have been purchased from the vendor or another supplier on a stand-alone basis. Residential dwelling ...............................................................................................................................................................................................

If a residential dwelling on the land is defective in some way, for example, it has a leaking roof or termites, can the purchaser claim relief for failure to comply with the [16.150]

85

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [2.42].

[16.155]

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459

guarantees of acceptable quality or fitness for purpose that apply in relation to goods supplied to a “consumer”? A residential dwelling does not fit easily within the ordinary dictionary definition of “goods”. Section 2(1)(c) of the NZ CGA expressly excludes from the definition of “goods” “a whole building, or part of a whole building, attached to land unless the building is a structure that is easily removable and is not designed for residential accommodation”. There is no equivalent exclusion from the definition of “goods” in s 2 of the ACL. Does this mean that Parliament intended to include a whole building, or part of a building, attached to land within the definition of “goods”? The extrinsic materials do not provide any guidance on the matter. It seems that a residential dwelling would not satisfy the definition of “goods” since it does not fall within the ordinary dictionary definition of “goods” and is not included in the extended definition of “goods” in s 2 of the ACL: see [17.40]–[17.45]. Trade or commerce requirement ...............................................................................................................................................................................................

The consumer guarantees as to undisturbed title to goods, 86 undisturbed possession of goods, 87 and no undisclosed securities, 88 apply to any supply of goods. It is not necessary to prove that the goods were supplied “in trade or commerce”. However, the guarantees as to goods of acceptable quality, 89 goods fit for the purpose, 90 goods of corresponding description, 91 supply by way of sample or demonstration model, 92 repairs and spare parts, 93 compliance with any express warranty, 94 services rendered with due care and skill, 95 services fit for the purpose, 96 and services supplied within a reasonable time, 97 are only imposed where the goods are supplied to a consumer “in trade or commerce”: see [9.75]–[9.105]. Thus, the consumer guarantees do not apply to a private sale, that is, one where an individual person sells, say a motor vehicle, to another consumer through a classified advertisement in a newspaper. There will be no consumer guarantee as to acceptable quality in a private sale of this nature, and buyers will need to undertake their own independent mechanical checks prior to purchase.

[16.155]

86 87 88 89 90 91 92 93 94 95 96 97

ACL, s 51. ACL, s 52. ACL, s 53. ACL, s 54. ACL, s 55. ACL, s 56. ACL, s 57. ACL, s 58. ACL, s 59. ACL, s 60. ACL, s 61. ACL, s 62.

460

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.160]

Supply ............................................................................................................................................................................................... [16.160]

Section 2(1) of the ACL defines “supply” to mean:

supply when used as a verb, includes: (a) in relation to goods–supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and (b) in relation to services–provide, grant or confer; and, when used as a noun, has a corresponding meaning, and supplied and supplier have corresponding meanings.

Section 5 of the ACL deals with “donation” as a form of “supply”. It provides: (1) For the purposes of this Schedule, other than Parts 3-3, 3-4, 4-3 and 4-4: (a) a donation of goods or services is not treated as a supply of the goods or services unless the donation is for promotional purposes; and (b) receipt of a donation of goods or services is not treated as an acquisition of the goods or services unless the donation is for promotional purposes. (2) For the purposes of Parts 3-3, 3-4, 4-3 and 4-4: (a) any donation of goods or services is treated as a supply of the goods or services; and (b) receipt of any donation of goods or services is treated as an acquisition of the goods or services.

The definition of “supply” in s 2(1) of the ACL is inclusive but the examples given are all transaction based, and have in common the supply of goods in return for some form of consideration. If this construction is correct it narrows the scope of the protection afforded by the consumer guarantees and excludes volunteers, unless the volunteer can have recourse to s 266 of the ACL, or it is a promotional donation. Section 266 provides that if a consumer acquires goods from a supplier and gives them to another person, the recipient of a gift may also enforce the consumer guarantees against the supplier or manufacturer. Thus, where goods or services are acquired not for the consumer paying for them, but for a family member or friend, that person has the same rights as the consumer who acquired them. However, there must first have been a supply of goods to a consumer for consideration before the recipient of the goods acquires any rights. As a matter of statutory interpretation, s 266 of the ACL supports the view that the definition of “supply” in s 2(1) of the ACL does not extend to cover supply by way of gift. If Parliament intended the definition of “supply” to include supply by way of gift there would have been no need to include s 266 in the ACL. This interpretation is re-enforced by s 3 framing the primary test of “consumer” by reference to the price of the goods or services, and by many of the guarantees only applying where the goods or services were supplied “in trade or commerce” (see [16.155]). Furthermore, in determining the scope of the guarantee of acceptable quality in s 54 one of the matters that is to be taken into account under s 54(3)(b) of the ACL is the price of the goods (see [16.280]).

[16.170]

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Supply of chattels

Where a contract for the sale of land or a business includes chattels, such as air-conditioners, dishwashers and hot water systems, the vendor is unable to avoid liability under the consumer guarantees regime in the ACL by arguing that the chattels are fixtures and thus part of the land. The fact that they are attached to premises does not change their status as “goods”. Section 8 of the ACL expressly provides: [16.165]

goods are taken to be supplied to a consumer even if they are affixed to land or premises at the time of supply.

Chattels are “goods” for the purposes of the definition in s 2 of the ACL. The consumer guarantees in relation to goods will apply to chattels if the supply was “in trade or commerce” and the supply was to a “consumer”. The following transactions involving the supply of chattels will be “in trade or commerce” and the consumer guarantees will apply to any chattels if the amount paid or payable for the chattels did not exceed $40,000, or they are of a kind ordinarily acquired for personal, domestic or household use or consumption: • the sale of a residential investment property; • the sale of a residential property built for the purpose of resale at a profit by a property developer; • the sale of a residential property by a mortgagee; • the sale of a business; • the sale of a commercial or agricultural property; and • the sale of a commercial property by a mortgagee or receiver. In the case of mixed supply of goods and services (chattels and a dwelling or whole building), the value of the chattels will be calculated in accordance with s 3(5) of the ACL. See [16.85]. The prices of the chattels will be calculated by reference to the price at which the chattels could have been purchased from the vendor or another supplier on a stand-alone basis. Sales by auction ...............................................................................................................................................................................................

The guarantees as to acceptable quality, 98 fitness for any disclosed purpose, 99 supply of goods by description, 100 supply of goods by way of sample, 101 repairs and spare parts, 102 and express warranties, 103 do not apply to sales by auction.

[16.170]

98

ACL, s 54(1)(b).

99

ACL, s 55(1)(b).

100

ACL, s 56(1)(b).

101

ACL, s 57(1)(b).

102

ACL, s 58(1)(b).

103

ACL, s 59(1)(b).

462

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.175]

The guarantees as to title, 104 undisturbed possession, 105 and undisclosed securities, 106 apply regardless of whether the goods are sold at auction. This approach followed the recommendation by CCAAC that auctions should not be subject to the consumer guarantees law to the same extent as in-store transactions. CCAAC took the view that: Unlike in-store transactions, auctions provide consumers with the opportunity to examine goods, note defects and then make bid based on an evaluation of the value of the goods to the consumer. Further, auctions often act as a clearing-house, allowing consumers to purchase new and used goods at bargain prices. 107

The term “sale by auction”, is defined in s 2 of the ACL to mean: in relation to the supply of goods by a person, means a sale by auction that is conducted by an agent of the person (whether the agent acts in person or by electronic means).

The effect of this definition is that online transactions (including online “auctions” such as eBay) should be covered by the consumer guarantees law in the same way as in-store transactions. 108 Websites such as eBay do not act as the agent of the person selling the goods. eBay is simply a conduit: it facilitates the making of relationships between consumers for the supply of goods. It supplies a service to consumers but does not supply goods. The seller pays a small amount to list goods on eBay and a larger amount if the goods are sold. 109 This interpretation of “sale by auction” was adopted in Malam v Graysonline, Rumbles Removals and Storage (General). 110 Convention on Contracts for the International Sale of Goods ............................................................................................................................................................................................... [16.175] The United Nations Convention on Contracts for the International Sale of Goods 1980 (Vienna Convention), provides uniform rules that govern contracts for the sale of goods between people located in different countries. The terms of the Vienna Convention are contained in the Sale of Goods (Vienna Convention) Acts passed in each State and Territory. 111 Section 68 of the ACL provides: 104 105 106 107

ACL, s 51. ACL, s 52. ACL, s 53. CCAAC Report, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009), p 123 at http://www.ccaac.gov.au.

108

CCAAC Report, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009), Finding 10.1, p 111 at http://www.ccaac.gov.au. In Smythe v Thomas (2007) 71 NSWLR 537, Rein AJ ordered specific performance of an online contract. See Tokeley, “Towards a New Regulatory Regime for New Zealand Online Auctions” [2011] New Zealand Law Review 91. The exception for auctions was removed from the NZ CGA in 2013. Malam v Graysonline, Rumbles Removals and Storage (General) [2012] NSWCTTT 197 (18 May 2012). See Sale of Goods (Vienna Convention) Act 1986 (NSW); Sale of Goods (Vienna Convention) Act 1987 (Vic); Sale of Goods (Vienna Convention) Act 1986 (Qld); Sale of Goods (Vienna Convention) Act 1986 (SA); Sale of Goods (Vienna Convention) Act 1986 (WA); Sale of Goods (Vienna Convention) Act 1987 (Tas); Sale of Goods (Vienna Convention) Act (NT); and Sale of Goods (Vienna Convention) Act 1987 (ACT).

109

110 111

CHAPTER

[16.180]

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The provisions of the United Nations Convention on Contracts for the International Sale of Goods, done at Vienna on 11 April 1980, as amended and in force for Australia from time to time, prevail over the provisions of this Division to the extent of any inconsistency. 112

Thus, the Sale of Goods (Vienna Convention) Acts passed in each State and Territory will prevail over the ACL in relation to international contracts for the supply of consumer goods. Consumer guarantees in relation to goods ...............................................................................................................................................................................................

Part 3-2, Div 1, sub-Div A of the ACL imposes ten guarantees in relation to the supply of goods: [16.180]

(1)

s 51 – a guarantee that the supplier has the right to sell the goods;

(2)

s 52 – a guarantee that the consumer will have undisturbed possession of the goods;

(3)

s 53 – a guarantee that the goods are free from any undisclosed security;

(4)

s 54 – a guarantee that goods are of acceptable quality;

(5)

s 55 – a guarantee that the goods are reasonably fit for a disclosed purpose;

(6)

s 56 – where goods are sold by description, a guarantee that goods will comply with that description;

(7)

s 57 – where goods are sold by sample or demonstration model, a guarantee that the goods comply with that sample or model;

(8)

s 58 – a guarantee that the manufacturer will take reasonable action to ensure that facilities for repair of the goods and parts for goods are reasonably available for a reasonable period after goods are supplied;

(9)

s 59(1) – where a manufacturer provides an express warranty, a guarantee that the manufacturer will comply with the express warranty; and

(10)

s 59(2) – where a supplier provides an express warranty, a guarantee that the supplier will comply with the express warranty. Their underlying philosophy reflects the realities of the market place and modern methods of doing business. As explained at [16.45], the consumer guarantees law adopts a “single enterprise” approach under which manufacturers assume joint responsibility with other suppliers for the goods or services they release into the market place, and these statutory duties exist independently of contract. The rationale for this approach is that it is manufacturers who should be responsible for ensuring that goods are of acceptable quality. They should accept responsibility if their goods turn out to be defective. Manufacturers are responsible for packaging and labelling and for the description of the goods, and accordingly, should be responsible if the goods 112

The text of the Convention is set out in Australian Treaty Series 1988 No 32 ([1988] ATS 32). In 2010, the text of a Convention in the Australian Treaty Series was accessible through the Australian Treaties Library on the AustLii website (http://www.austlii.edu.au).

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[16.185]

do not comply with that description. Manufacturers are responsible for any promotional material that has a natural tendency to induce the sale of their products, and accordingly they should accept responsibilities for any express warranties in that material. Finally, manufacturers should ensure that there are adequate spare parts and repair services available for their goods so that consumers have the full benefit of them over their expected life-cycle. Guarantee: title ............................................................................................................................................................................................... [16.185]

Section 51 of the ACL provides:

(1) If a person (the supplier) supplies goods to a consumer, there is a guarantee that the supplier will have a right to dispose of the property in the goods when that property is to pass to the consumer. (2) Subsection (1) does not apply to a supply (a supply of limited title) if an intention that the supplier of the goods should transfer only such title as the supplier, or another person, may have: (c) appears from the contract for the supply; or (d) is to be inferred from the circumstances of the contract. (3) This section does not apply if the supply is a supply by way of hire or lease.

The repealed s 69(1)(a) of the TPA implied a condition that in the case of a supply by way of sale, the supplier had a right to sell the goods. Section 17(1) of the Sale of Goods Act 1923 (NSW), provides that “in a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied condition on the part of the seller that in the case of a sale he has a right to sell the goods, and that in the case of an agreement to sell he will have a right to sell the goods at the time when property is to pass”. 113 Section 51 imposes a guarantee that the supplier “will have a right to dispose of the property in the goods when that property is to pass to the consumer”. The rules relating to when property passes are dealt with under the Sale of Goods Act legislation. 114 If the goods are specific or ascertained, property passes when the parties intend it to be transferred, 115 and that intention is to be determined from the terms of the contract, the conduct of the parties and the circumstances of the case. If the goods are unascertained, no property can pass until the goods are ascertained. 116 Once the goods are ascertained, s 22(1) of the Sale of Goods Act 1923 (NSW) applies and property passes when the parties intend it to be transferred. 113

Sale of Goods Act 1923 (NSW), s 17(1).

114 115

For example, the rules relating to transfer of property as between buyer and seller are contained in ss 21 to 25 of the Sale of Goods Act 1923 (NSW). Sale of Goods Act 1923 (NSW), s 22(1).

116

Sale of Goods Act 1923 (NSW), s 21.

[16.190]

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The most obvious situation covered by the s 51 guarantee is the sale by a supplier who has no title to the goods sold. However, the use of the words “right to dispose of the property in the goods” means that it is not restricted to the case where the seller owns the goods and can pass the property in them, but has not the right to sell the goods. For example, in Niblett v Confectioners' Materials Co Ltd, 117 it was held that the seller had no right to sell goods because they carried a label which infringed the trade mark of a third party. Scrutton LJ observed that “If a vendor can be stopped by process of law from selling he has not the right to sell”. 118 Section 51(2) of the ACL provides that the guarantee as to title does not apply if a supply is of limited title. According to the Second Explanatory Memorandum, “A supply of limited title occurs when a supplier tells prospective purchasers of good that they do not know whether there are any claims over particular goods and that, in the event of a sale, they will be transferring only the title that they have”. 119 Section 51(3) of the ACL provides that the guarantee as to title does not apply to a hire or lease of goods, in which case the consumer acquires a right to use goods for a certain period of time but does not acquire title to the goods. The ACL Guide on Consumer Guarantees provides: A supplier guarantees they have the right to sell the goods (clear title), unless they alerted the consumer before the sale that they had “limited title”. If goods are sold with limited title, any other person with ownership rights – for example, a person owed money by the previous owner – can ask a court for permission to take the goods back from the consumer. This happens most often when goods are sold from deceased estates. While alive, the person may have pledged the goods as security. People owed money by the deceased sometimes try to repossess the goods after the items were sold as part of the deceased estate. 120

Guarantee: undisturbed possession ...............................................................................................................................................................................................

Section 52(1) of the ACL imposes a guarantee that the consumer has the right to undisturbed possession of the goods. It provides: [16.190]

If: (a) a person (the supplier) supplies goods to a consumer; and (b) the supply is not a supply of limited title; there is a guarantee that the consumer has the right to undisturbed possession of the goods.

The repealed s 69(1)(b) of the TPA implied a warranty that the consumer would enjoy quiet possession of the goods except so far as it may lawfully be disturbed by the supplier 117

Niblett v Confectioners’ Materials Co Ltd [1921] 3 KB 387.

118 119

Niblett v Confectioners’ Materials Co Ltd [1921] 3 KB 387 at 398. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.19].

120

ACL, Consumer Guarantees, p 17.

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[16.190]

or by another person who is entitled to the benefit of any charge or encumbrance disclosed or known to the consumer before the contract is made. The Sale of Goods Acts also provide that in the absence of a different intention, there are implied warranties that the buyer shall have and enjoy quiet possession of the goods, and that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time of the contract. 121 Section 52(2) provides that the guarantee of undisturbed possession does not apply if possession is disturbed by a security, charge or encumbrance (eg, lease or hire-purchase) that the consumer was told about prior to supply. It seems that the guarantee of undisturbed possession and the guarantee as to title may run from different times. The guarantee as to undisturbed possession may apply where the guarantee as to title does not. In relation to the Sales of Goods Act, in Microbeads AG v Vinhurst Road Markings Ltd 122 it was held by the English Court of Appeal that the implied condition as to title under the Sale of Goods Act 1979 (UK) only had to be satisfied at the time of sale, so that if the supplier had a right to sell at that time, the condition could not be breached. On the other hand, the implied warranty as to quiet possession under the United Kingdom Sale of Goods Act applied not only at the time of sale but also after that date. In that case goods were sold, but at the time of sale they were the subject of a patent application. After the sale, letters patent were granted which enabled the patentee to restrain the use of the goods. The buyer was unable to rely on the implied condition as to title; however, it was held that there was a breach of the implied warranty as to quiet possession. Section 52(3) deals with a situation where the parties intend that the supplier should transfer only a limited title. It provides: If: (a) a person (the supplier) supplies goods to a consumer; and (b) the supply is a supply of limited title; there is a guarantee that the following person will not disturb the consumer's possession of the goods: (c) the supplier; (d) if the parties to the contract for the supply intend that the supplier should transfer only such title as another person may have – that other person; or (e) anyone claiming through or under the supplier or that other person (otherwise than under a security, charge or encumbrance disclosed to the consumer before the consumer agreed to the supply

When it applies the supplier guarantees that; • the supplier; or 121

See eg, Sale of Goods Act 1923 (NSW), s 17(2).

122

Microbeads AG v Vinhurst Road Markings Ltd [1975] 1 WLR 218.

[16.195]

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• a third party where the agreement is to transfer a third party's interest (eg, a deceased estate); or • a person claiming through them (other than in respect of disclosed charges etc), will not disturb the consumer's possession. Section 52(4) provides that the guarantee of undisturbed possession applies to a supply by way of hire or lease only for the period of the hire or lease. Thus, if a consumer hires a motor vehicle for one month, the guarantee as to undisturbed possession applies only for that month. Guarantee: undisclosed securities ............................................................................................................................................................................................... [16.195]

Section 53(1) of the ACL provides:

If: (a) a person (the supplier) supplies goods to consumer; and (b) the supply is not a supply of limited title; there is a guarantee that: (c) the goods are free from any security, charge or encumbrance: (i) that was not disclosed to the consumer, in writing, before the consumer agreed to the supply; or (ii) that was not created by or with the express consent of the consumer; and (d) the goods will remain free such a security, charge or encumbrance until the time when the property in the goods passes to the consumer.

Section 53(1) imposes a guarantee that goods are free from any security, charge or encumbrance • that was not disclosed to the consumer, in writing, before the consumer agreed to the supply, or • that was not created by or with the consent of the consumer. The goods must remain free from undisclosed securities until property in the goods passes to the consumer. Section 53(2) provides that the existence of a floating charge is not a failure to comply with the guarantee unless the charge becomes fixed and enforceable. Section 53(3) provides that in relation to a supply of limited title, there is a guarantee that all securities, charges or encumbrances known to the supplier and not known to the consumer, were disclosed to the consumer before the consumer agreed to the supply. Section 53(4) provides that the guarantee as to undisclosed securities does not apply to supply by way of hire or lease. Thus, a motor vehicle hire company does not need to provide a notice to its customers of any securities over its motor vehicles, and any rights of repossession inherent in those securities. The ACL Guide on Consumer Guarantees provides:

468

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[16.200]

A supplier guarantees that goods bought by a consumer are free of any hidden securities or charges and will remain so, unless the security or charge was either: • placed on the goods with the consumer's permission • brought to the consumer's attention in writing before they bought the goods. A supplier who makes it clear to the consumer there is limited title before sale can claim to have disclosed all known securities or charges over the goods. For example: • A financier claims to be owed money by the former owner of some goods, who may have used the goods as security for a loan. If the consumer did not know about the outstanding debt when buying the goods, the supplier would have to provide a remedy – for example, replacement goods. 123 Summary

In summary, these guarantees as to title, undisturbed possession and undisclosed securities are intended to ensure that the supplier is able to pass property in the goods to the consumer. The supplier must disclose in writing to the consumer if a third party has rights over the goods. The consumer is entitled to expect that no one will have any right or claim over the goods, unless the supply is by way of lease or hire. Where the supplier tells prospective purchasers of goods that there are claims over particular goods (supply of limited title), and the consumer is made aware of the possibility of repossession, in the event of a sale, the supplier will only transfer the title that they have. [16.200]

Guarantee: acceptable quality ...............................................................................................................................................................................................

Section 54 of the ACL imposes a guarantee that goods supplied to a consumer in trade or commerce (other than by way of auction), will be of acceptable quality. For the guarantee to be imposed, there is only one pre-condition, namely that the supply must have occurred in trade or commerce. However, the guarantee will not be imposed in relation to: [16.205]

• a sale by auction; • defects specifically drawn to the consumer's attention (not in general terms); 124 • where the consumer has inspected the goods in relation to defects that the examination ought to have revealed, or • defects arising from abnormal use by the consumer. Section 54(1) provides: (1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and 123

ACL, Consumer Guarantees, p 17.

124

See Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [114].

[16.205]

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(b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality.

Section 54(1) imposes strict liability in the sense that the supplier of goods will be liable if they are not of acceptable quality even though the supplier was in no way to blame for the faults in the goods. Section 54(1) makes a fundamental break with the Sale of Goods legislation which implies a condition into contracts that goods will be of merchantable quality. 125 A similar condition was imposed under the repealed s 71(1) of the TPA. The definition of merchantability under the Sale of Goods legislation relates to the saleability of goods and is appropriate for commercial transactions where goods are purchased by merchants for resale: they will be suitable for resale if they are fit for at least one of the purposes for which goods of that kind or description are purchased. The definition of acceptable quality adopts as its test the reasonable expectations of consumers. Where goods have more than one purpose, the reasonable expectations of a consumer at the time of purchase are that the goods will be fit for all of their normal purposes. Sections 54(2) and (3) of the ACL define “acceptable quality” for the purposes of the guarantee. They provide: (2) Goods are of acceptable quality if they are: (a) fit for all the purposes for which the goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; (d) safe; and (e) durable as a reasonable consumer fully acquainted with the state and condition of the goods, (including any hidden defects of the goods), would regard as acceptable, having regard to the matters in subsection (3). (3) The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods.

This definition of “acceptable quality” mirrors that contained in s 7(1) of the NZ CGA, and is similar to the definition of merchantable quality in s 66(2) of the TPA. The first and most obvious change is the substitution of “acceptable” for “merchantable”, thereby 125

Sale of Goods Act 1923 (NSW), s 19(2).

470

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[16.210]

emphasising that it is a consumer protection provision and is not concerned with the commerce and the requirements of merchants who purchase goods for re-sale. The second change is that the condition of merchantable quality under s 71(1) of the TPA only applied to supplies of goods in the course of a business carried on by the supplier. The ACL guarantee of acceptable quality applies to the supply of goods in trade or commerce, even though the person is not in the business of supplying those goods. The use of “trade or commerce” indicates an intention to broaden the scope of the guarantees. Before examining the definition of “acceptable quality” in s 54 of the ACL, it is first necessary to examine the scope of the definition of “merchantable quality” in the repealed s 66(2) of the TPA. Merchantable quality: TPA, s 66(2) ............................................................................................................................................................................................... [16.210]

The repealed s 71(1) of the TPA provided:

Where a corporation supplies (otherwise than by way of auction) goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, except that there is no such condition by virtue only of this section – (a) as regards defects specifically drawn to the consumer's attention before the contract is made; or (b) if the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal.

The rights could be enforced against the supplier, but also against the manufacturer under Pt V Div 2A. The repealed s 66(2) of the TPA provided: Goods of any kind are of merchantable quality within the meaning of this Division if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all other relevant circumstances.

This definition of merchantable quality was copied from the Supply of Goods (Implied Terms) Act 1973 (UK). It was intended to provide a flexible means to allow each case to be decided on its merits and specifically identified two relevant matters that were to be taken into account in deciding whether goods were of merchantable quality – the description applied to them and the price. The concept of merchantable quality was quite different from the concept of merchantable quality under the Sale of Goods Acts. In Rasell v Cavalier Marketing (Australia) Pty Ltd, 126 Cooper J (with whom Shepherdson and Kneipp JJ agreed on the question of merchantability) stated: 126

Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 (FC).

[16.215]

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It is unnecessary and undesirable to look to the common law definition of merchantability for the purposes of construing s 66(2) … of the Act. The common law tests relate to saleability of goods. They are the tests of merchants and are more appropriate to commercial sales. The provisions of s 66(2) … are quite different and focus on the reasonable objective expectations of a consumer as defined. 127

Cooper J in Rasell v Cavalier Marketing held: The definition of merchantable quality requires a determination of two matters. The first matter for determination is the identification of the “purpose or purposes for which goods of that kind are commonly bought”. The second matter for determination is whether the goods are as fit for the purpose, or purposes, so identified, as reasonable to expect having regard to the listed criteria. This is an objective test. Goods may have more than one normal purpose, eg a utility motor vehicle has two obvious purposes, namely, to act as a means of transport to convey the driver from A to B and also to act as a means of transport to convey cargo from A to B. Some consumers may acquire a utility solely as a means of personal transport; others may acquire it for both purposes. In my view, as a matter of construction and as a matter of legislative intent, the section requires that all normal purposes for which goods are commonly bought be brought into consideration. Fitness is to be tested against each of those purposes and none are to be excluded. 128

Although this dictum was concerned with a case under Pt V Div 2A it was implicit that it applied equally to the implied terms in Pt V Div 2, since the definition of “merchantable quality” in s 74D(3) was the same as that in s 66(2) of the TPA. The purpose or purposes for which the goods would be put expanded and contracted with the description attached to the goods by the supplier. For example, in Bartlett v Sydney Marcus Ltd, 129 a car with a defective clutch was sold. Had a new car been sold in this condition without any accompanying statement describing the vehicle it would have been unmerchantable. However, the contract description was a “second-hand car with defective clutch” and so described it was not unmerchantable. This case was adopted by Pincus J in Atkinson v Hastings Deering (Queensland) Pty Ltd, 130 and by McPherson JA in Jones v West Star Motors Pty Ltd. 131 The purpose or purposes for which the goods would be put also expanded and contracted with the price received for the goods by the supplier. A low price might indicate that a particular normal purpose should be excluded; a high price might indicate higher quality and raise the reasonable expectations of the consumer about additional purposes and performance levels. In Medtel Pty Ltd v Courtney, 132 Branson J held that what it is objectively reasonable to expect at the time of supply to the consumer under s 74D(3) depended on all the relevant circumstances including price: [16.215]

127

Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 at 348.

128 129 130 131

Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 at 348. Bartlett v Sydney Marcus Ltd [1965] 1 WLR 1013. Atkinson v Hastings Deering (Queensland) Pty Ltd (1985) 71 ALR 93 at 98. Jones v West Star Motors Pty Ltd (1995) ATPR ¶41-447 at 41,016.

132

Medtel Pty Ltd v Courtney (2003) 130 FCR 182.

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[16.215]

What it would be reasonable to expect in terms of fitness for purpose of an inexpensive product might be quite different from what it would be reasonable to expect of an expensive product of the same kind. 133

However, there was no express reference to durability in s 66(2) of the TPA. The implied obligations of merchantability and fitness under the TPA and the Sale of Goods legislation, only related to the state of goods when they were delivered. The defects may not have been immediately apparent, but provided they existed at the time of delivery, there was a breach of s 71(1) of the TPA. The merchantable quality of a product was to be ascertained at the time of delivery of the goods. This did not preclude claims for latent defects which only appeared after the time of delivery as occurred in David Jones Ltd v Willis. 134 However, the latent defect must have been present at the time of delivery. Section 71(1) of the TPA did not impose a continuing obligation guaranteeing the durability of goods. 135 In Courtney v Medtel Pty Ltd, 136 the appellant was the Australian distributor of Tempo pacemakers. Mr Courtney had a Tempo pacemaker implanted in 1999. Following the implantation the pacemaker was tested and found to be functioning normally. In 2000 it was discovered that there was a risk of early battery depletion that affected Tempo pacemakers because they were manufactured with “yellow spool solder”. Mr Courtney's Tempo pacemaker was removed. It was tested twice (eight months and 12 months after removal) and found to be working normally. Nevertheless the primary judge, Sackville J, held that the pacemaker was not of merchantable quality or fit for the purpose for which it was sold, even though it had never failed, because of the “super-added” risk of failure. 137 The question posed by the legislation is whether the particular goods are as fit for the purpose for which goods of that kind are commonly bought as it is reasonable to expect. If it is reasonable to expect that products of a certain kind will not have a physical anomaly that materially increases the risk that they will not fulfil the relevant purpose, it seems to me consistent with the statutory language to hold that each item with that physical anomaly is not of merchantable quality. To so hold is also consistent with the “remedial character” of the legislation (Rasell v Cavalier Marketing at 348 per Cooper J). Nor do I consider that acknowledging that the reasonable expectations of consumers can extend to the superadded risk that a particular device will fail imposes an inappropriate or unsustainable burden on a manufacturer or distributor. The complaint in the present case is not that Pacesetter and Medtel have been unable to eliminate all risk from a product that human ingenuity can never make risk-free. The complaint is that each Pacemaker implanted into a patient was manufactured using materials that exposed the patient to a 133

Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [64].

134 135

136

David Jones Ltd v Willis (1934) 52 CLR 110. See Sutton, Sales and Consumer Law (4th ed, LBC Information Services, 1995) at [10.48] and Kapnoullas and Clarke, “Countdown to Zero: The Duration of Statutory Rights for Unfit and Unmerchantable Goods” (1999) 14 Journal of Contract Law 154 at 161. Courtney v Medtel Pty Ltd (2003) 126 FCR 219.

137

Courtney v Medtel Pty Ltd (2003) 126 FCR 219 at [241]-[242].

[16.215]

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substantial risk of failure that did not apply to other similar devices manufactured using different materials. It is not clear to me why the patient, rather than the manufacturer or distributor, should bear any loss or damage fairly attributable to the use of materials in the manufacturing process that significantly increased the risk that the goods would fail to achieve their purpose. Doubtless, the manufacturer did not appreciate at the time that the yellow spool solder should not have been used to manufacture pacemakers. But as between the manufacturer and distributor, on the one hand, and the consumer, on the other, it was the former that had the capacity to prevent or eliminate the problem. 138

The Full Federal Court dismissed the appeal. Moore J observed: Central to this appeal is the apparent paradox arising from a conclusion that Mr Courtney's pacemaker was not fit for the purpose for which pacemakers are acquired (and therefore not of merchantable quality) yet it served that purpose prior to explanation and would, on the findings of the primary judge, have continued to serve that purpose into the foreseeable future had it remained implanted. Both elements of the paradox are sustained by facts now known but not known (or at least the significance of which was not known) at the time Mr Courtney acquired his pacemaker. It was common ground both before the primary judge and on appeal that facts now known can be relied on in determining whether Mr Courtney's pacemaker was of merchantable quality. 139

Branson J (with whom Jacobson J agreed) observed: It was accepted on this appeal, as it was before the learned primary judge, Sackville J, that the time at which it is to be determined whether the goods are of merchantable quality is the time of the supply of the goods to the consumer. However, although the determination to be made is whether the goods supplied to the consumer were of merchantable quality when so supplied, it is accepted that at least some information not available at that time may be taken into account at trial for the purpose of making that determination. A critical question on this appeal, as it seems to me, is how much later-acquired information may be taken into account. 140

Her Honour held: Section 74D, as is mentioned above, calls for the quality, or fitness for purpose, of the goods to be measured against what it was reasonable to expect in that regard at the time of the supply of the goods to the consumer. That measurement must be undertaken, in my view, in the light of information concerning the goods available at the time of trial. 141 However, the issue remains whether the goods were as fit for the relevant purpose as it was reasonable to expect at the time of their supply to the consumer.

Branson J agreed with the primary judge that at the time of supply the pacemaker was not of merchantable quality because the use of yellow spool solder meant that it has an appreciably higher risk of premature failure. 142 138 139 140 141

Courtney v Medtel Pty Ltd (2003) 126 FCR 219 at [232]-[233]. Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [36]. Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [57]. Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [70].

142

Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [78].

474

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.220]

Definition of acceptable quality: ACL ...............................................................................................................................................................................................

Section 54(1) of the ACL imposes strict liability in the sense that the supplier of goods will be liable if they are not of acceptable quality even though the supplier was in no way to blame for the faults in the goods. Section 54(2) and (3) defines “acceptable quality” for the purposes of the guarantee. The definition of acceptable quality falls into three parts. The first part consists of the set of attributes in s 54(2). The second part consists of a reasonable consumer test which applies an objective evaluation of the attributes taking into account the characteristics specified in the third part of the definition in s 54(3). As regards the second part of the definition, acceptable quality is to be determined in accordance with the expectations of a hypothetical reasonable consumer who is fully acquainted with the state and condition of the goods, including any hidden defects. This definition of acceptable quality mirrors that contained in s 7(1) of the NZ CGA. [16.220]

First part: attributes

The first part consists of a set of attributes which must be complied with as part of the statutory duty. These are set out in s 54(2): [16.225]

• fit for all the purposes for which the goods of that kind are commonly supplied; • acceptable in appearance and finish; • free from defects; • safe; and • durable. The hypothetical reasonable consumer test is to be applied to the particular goods and circumstances surrounding the supply transaction. Not all of the attributes set out in s 54(2) will necessarily apply to the supply transaction at issue. Similarly, not all of the characteristics specified in s 54(3) will be relevant to the supply transaction at issue. Fit for all of the purposes for which goods of that kind are commonly supplied

The first attribute specified in s 54(2)(a) of the ACL is that the goods must be “fit for all of the purposes for which goods of that kind are commonly acquired”. This repeats the wording of the definition of “merchantable quality” in s 66(2) of the TPA. All of the purposes must first be identified; if the goods in question are not fit for one of those purposes they are not of acceptable quality. For example, in Paul Madsen v Agrison Pty Ltd, 143 the applicant purchased a second-hand tractor from the respondent for $24,699. Its known and intended purpose was general property maintenance, such as keeping paddocks in working order by slashing. The contract included a new, complementary 6-foot slasher as a part of the package. Mr Madsen purchased the tractor and slasher sight unseen, and did not obtain a [16.230]

143

Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79.

[16.235]

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mechanical report prior to completing the sale. He was told by the respondent's sales representative that the tractor was “like new” and that it had only been operated for 12 hours. On 27 April 2013, the applicant's mechanic, Mr Tatarko, conducted a detailed inspection of the tractor and advised Mr Madsen not to operate it further because it was unsafe to operate and to ask for a refund as repairs were not practical. Mr Madsen sought to reject the tractor on the basis that it failed to comply with the guarantee of acceptable quality in ACL, s 54. The Tribunal found that the tractor had numerous defects of a serious character; was not fit for purpose and did not comply with the guarantee of acceptable quality. 144 In Harwood, Howard v Rich and Mor Diamonds Pty Ltd, 145 the applicant Mr Harwood and his fiancé, Ms Howard, approached the respondent to create an engagement ring in accordance with their design. Ms Howard informed the respondent that the ring had to be of sufficient strength to withstand normal every day wear without any damage. Ms Howard took delivery of the ring in January 2013. On 30 March 2013 one of the diamonds fell out of the setting. The Tribunal accepted the evidence of the applicants' expert that the size and type of the settings for the diamonds was not suitable to support and retain them and that they were likely to fall out. 146 The ring manufacture did not reach commercially acceptable standards. 147 The Tribunal found that the ring did not comply with the guarantee of acceptable quality and ordered the respondent to refund the purchase price of the ring. 148 Acceptable in appearance and finish

The second attribute specified in s 54(2)(b) of the ACL is that the goods must be acceptable in appearance and finish. This confirms the principle established in Rasell v Cavalier Marketing (Australia) Pty Ltd, that the aesthetic quality of goods is relevant in determining whether they are fit for purpose. The Second Explanatory Memorandum provides an example of how this aspect of the definition of acceptable quality may vary depending on the factors listed in s 54(3): [16.235]

The appearance and durability that a reasonable consumer would expect of a 10 year-old motor vehicle would be of a much lower standard than would apply to a new vehicle. The age of the goods is relevant under s 54(3) under the heading of “the nature of the goods”. On the other hand, the price and the nature of the goods are relevant considerations under subs 54(3), as the appearance expected of a vintage motor vehicle purchased for a large sum of money might be of a relatively high standard, irrespective of its age. 149 144 145 146

Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79 at [85]. Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502. Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502 at [25].

147 148 149

Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502 at [17]. Harwood, Howard v Rich and Mor Diamonds Pty Ltd [2013] NSWCTTT 502 at [25]. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.31].

476

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.240]

In Zhang v United Auctions, 150 the Tribunal took into account the aesthetic quality and appearance of the installed bench top. It took into account that the applicant had first inspected the demonstration model in the respondent's shop and concluded that the materials and workmanship was not of acceptable quality. 151 See [16.130]. Free from defects

The third attribute specified in s 54(2)(c) of the ACL is that the goods must be free from defects. The word “defects” for the purposes of the definition of “acceptable quality” in s 54(2)(c) is not defined. The Macquarie Dictionary (4 th ed) defines the word “defect” to mean: “a fault” or “imperfection”. In relation to s 7(1) of the NZ CGA, Miller J, in Contact Energy Ltd v Jones, held that defects are not confined to inherent defects, but may include: [16.240]

• design defects (those caused by matters such as the form, structure and composition of the goods) • manufacturing defects, (those caused by matters such as the process of construction and assembly), or • “instructional” defects (those caused by incorrect or inadequate warnings and instructions). 152 As regards s 54(3)(c) of the ACL, any statements made about the goods on any packaging or label on the goods, the guarantee could be broken by not informing the buyer that the goods sold would react dangerously if mixed with other goods – apparently even though the goods sold were fit for the purpose for which they were bought. Miller J held: The hypothetical reasonable consumer is taken to be fully acquainted with the “state and condition” of the goods, including any hidden defects. Less obviously, he or she must also be taken to know the nature of the goods, all relevant circumstances of supply, and any representations made about the goods by the manufacturer or supplier, so far as relevant. That is so because it is the hypothetical consumer who determines by reference to those considerations whether the goods are acceptable. The test is objective, but it is applied to the particular goods and circumstances. 153

The question is: would a reasonable consumer knowing all these defects about the goods at the time of supply regard them as acceptable? The time for assessing whether goods are free from defects is the time of supply. Safe

The fourth attribute specified in s 54(2)(d) is that the goods must be safe. The definition of acceptable quality does not require that goods be absolutely free from risk. The level of safety required is that which a reasonable consumer would regard as [16.245]

150 151 152

Zhang v United Auctions [2013] NSWCTTT 6. Zhang v United Auctions [2013] NSWCTTT 6 at [83]. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [84].

153

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [94].

[16.245]

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acceptable. “Safety” for the purposes of ACL, s 54(2)(d) is used in a relative sense, according to the factors set out in ACL, s 54(3), including the price paid for the goods. Higher levels of safety would be expected by a reasonable consumer of goods on goods, (such as a motor vehicle) that are expensive relative to what would be expected of less expensive goods in the same category. However, a reasonable consumer would not expect goods to be absolutely safe, and goods are likely to be of acceptable quality in circumstances where a defect could not have been detected given the state of scientific or technical knowledge that existed at the time the goods were supplied. In Marwood v Agrison Pty Ltd, 154 the Tribunal member had to assess whether a relatively low-priced tractor was “safe” for the purposes of s 54. The Tribunal member observed: When setting out the consumer guarantee of safety (and the other guarantees), section 54 does not say “the goods must be safe”. It says they must be “as safe … as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3)”. Then subsections (3) (a) and (b) say that the nature of the goods and the price if relevant are such factors. In the context of safety the “nature of the goods” requires one to distinguish between goods which were normally used by qualified people and those who were not (say, a fork lift v a jet ski) and the locations where the goods are normally used (a paddock v a confined child care centre). Similarly, whilst even a very low price could never justify the sale of goods which were dangerous (eg, small plastic toys with sharp removable parts which could injure children), there is a point where the consumer gets what they pay for. Subsections 54(3)(a) and (b) recognise that if one class of goods simply complies with safety legislation whereas a more expensive class of goods has additional features which improve safety, it does not follow that the goods in the former class do not meet the guarantee. 155

It is thus the objective knowledge and expectations of a reasonable consumer which are to be assessed, not the subjective knowledge and expectations of the particular consumer who is dissatisfied with the goods. In assessing “safety”, the potential risk of damage to property should be taken into account as well as the risk of personal injury or death. It would also be relevant to consider the extent, duration, and frequency of any faults. The cost of eliminating some faults completely may be so high that a reasonable consumer may be taken to have accepted any damage resulting from that cause otherwise this would have an adverse impact on the price and the range of goods available to consumers. For the purposes of the product liability regime in Part 3-5, Div 1 of the ACL, the term “safety defect” is defined in ACL, s 9. Section 9(1) of the ACL provides that “goods have a ‘safety defect’ if their safety is not such as persons generally are entitled to expect”. Section 9(2) provides that in determining the extent of the safety of goods, regard is to be given to all relevant circumstances, including: (a) the manner in which, and the purposes for which, they have been marketed; and 154

Marwood v Agrison Pty Ltd [2013] VCAT 1549.

155

Marwood v Agrison Pty Ltd [2013] VCAT 1549 at [54]-[55].

478

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.245]

(b) their packaging; and (c) the use of any mark in relation to them; and (d) any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to them; and (e) what might reasonably be expected to be done with or in relation to them; and (f) the time when they were supplied by their manufacturer.

The word “safe” in ACL, s 54(2)(d) is to be distinguished from the term “safety defect”. According to the Second Explanatory Memorandum (at [2.46]), the test to be applied in relation to the term “safety defect” for the purposes of the product liability regime “is an absolute, rather than relative proposition, and must be determined with reference to the state of scientific or technical knowledge that existed at the time the goods were supplied”. In Paul Madsen v Agrison Pty Ltd, 156 the Tribunal member referred to s 9(2) of the ACL and held that in determining whether goods are safe for the purposes of ACL, s 54, it was relevant to consider the accuracy of any operational instructions issued in relation to them. Are goods “unsafe” for the purposes of s 54 if they are rendered unsafe by minor flaws that can be easily remedied? In Paul Madsen v Agrison Pty Ltd, the Tribunal member stated: Aside from the structural flaws discussed above, specific issues include the mislabelled operational instructions, and the detachable mirror, which render operation of the tractor – in particular for a new owner who is unfamiliar with the vehicle – to be unsafe. The fact that these flaws can be corrected with relative ease – as observed by Mr Banks – is irrelevant; the applicant is entitled to expect that controls be labelled correctly, and there not being so constitutes a safety hazard. So too does the defective door handle, which hinders the operator entering and exiting the vehicle both during normal operation and should an emergency occur. Mr Banks claims he fixed this problem, however the applicant states that it has since recurred. 157

The Tribunal concluded that the tractor was “if not unsafe, of unsound condition”, and that the tractor did not comply with the guarantee of acceptable quality. 158 It appears that vehicles subject to a voluntary recall by a manufacturer are not deemed to be unsafe for the purposes of the guarantee of acceptable quality. Vehicle recalls occur where there is the possibility of a safety concern with one or more of the parts used in vehicles that are part of the recalled model range. A recall applies to all vehicles and models that use the part. Generally, the majority of the vehicles the subject of a voluntary recall will be safe, but there may a possibility that some of them will contain a defective part. A recall is not evidence that any particular vehicle that is part of a recalled model is unsafe or defective. According to the ACCC: 156 157

Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79. Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79 at [99].

158

Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79 at [101] and [106].

[16.250]

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A recalled vehicle is not automatically considered “unsafe” for the purposes of failing the guarantee of acceptable quality under the consumer guarantees. The two regimes operate independently and the reason for the recall will still need to be considered in relation to the test of “acceptable quality”. 159

Where a particular vehicle is part of a category that is covered by a vehicle recall, the question of whether the guarantee of merchantable quality has been complied with needs to be considered on a case-by-case basis for each vehicle. The voluntary recall does not, of itself, provide evidence of this. 160 Durable

The fifth attribute specified in s 54(2)(e) of the ACL is that the goods must be durable. The word “durable” for the purposes of the definition of “acceptable quality” in s 54(2)(e) is not defined. The Macquarie Dictionary (4th ed) defines the word “durable” to mean: “having the quality of lasting or enduring; of or relating to goods which will be good for some time, as opposed to those intended to be used or consumed immediately”. 161 Goods will not be of acceptable quality if they have latent defects at the time of supply even though the defects may take some time to manifest themselves. The absence of a defect at the time of supply does not preclude being able to demonstrate by evidence available after the time of supply that the goods were not of acceptable quality at the time of supply. 162 If goods possess latent defects at the time of supply they will not be durable for the purposes of the definition of acceptable quality. They must last or endure in a reasonable condition for a reasonable time taking into account the factors listed in ACL, s 54(3). Whether second-hand goods are sufficiently durable to satisfy the guarantee of acceptable quality will depend on the characteristics to be taken in to account by the reasonable consumer in s 54(3), especially the price paid for the goods. In Barratta v TPA Pty Ltd, 163 the applicant, Ms Baratta, inspected a 2007 Nissan Navara utility vehicle at the premises of the respondent. She told the respondent's director that she wanted it for towing a horse float and for use on a farm. He replied that the car would be suitable for that purpose because it was a 4-wheel drive utility vehicle with a towing capacity of three tonnes and a diesel engine which was better for towing than a petrol engine. On 8 January 2011 she purchased the vehicle for $27,070. On 14 January 2011 she collected the vehicle. On 16 January 2011 after a short trip of about 15 to 20 minutes she noticed that the temperature gauge in the vehicle had risen. She put coolant in the car at once. [16.250]

159 160 161 162

163

See ACCC, “Motor Vehicle Sales and Repairs: An Industry Guide to the Australian Consumer Law”, p 8. ACCC Media release, “Takata Air bags – Your Consumer Rights” (30 July 2015), at https:// www.accc.gov.au/update/takata-airbag-recalls-your-consumer-rights. Macquarie Dictionary (4th ed, Macquarie University, Sydney, 2005), 443. Medtel Pty Ltd v Courtney [2003] FCAFC 151; (2003) 130 FCR 182 at [74] in relation to the equivalent guarantee in s 74D of the TPA. Applied in Barratta v TPA Pty Ltd [2012] VCAT 679 at [164] and Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [74]. Barratta v TPA Pty Ltd [2012] VCAT 679.

480

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.255]

On 17 January 2011 she drove the vehicle back to the dealership where it was inspected, and the temperature gauge was operating at the normal level. However, when driving back from the dealership the vehicle overheated and it was also prone to stalling and loss of power after use for a short period. On 20 January 2011, the vehicle again overheated after being driven a short distance, and the applicant thereafter notified the respondent through her lawyers that she rejected the vehicle and of the grounds for her rejection in accordance with ACL, s 259(3)(a). On 12 July 1011, the applicant arranged for an expert (Mr Cuthbert) to inspect the vehicle. Based on his inspection after purchase the vehicle had a defect that was probably a cracked cylinder head and the defect existed prior to the applicant's purchase. The Tribunal held that information available after the time of purchase may be taken into account in deciding whether the car was of acceptable quality for the purposes of ACL, s 54 at the time it was purchased. 164 Relevant information included the driving history of the vehicle after purchase, and the evidence of the expert witness, Mr Cuthbert, based on his inspection after purchase. 165 The Tribunal concluded: The car had a defect (suggested by Mr Cuthbert to be a cracked cylinder head) such that it was and is not fit for the purpose for which a car is commonly supplied, namely driving reasonable distances. Nor is it durable. Therefore, I agree with the applicant that paragraphs (a), (c) and (e) of sub-s 54(2) apply. 166 Second part: “reasonable consumer” standard

The second part of the definition promulgates an objective test: the court is required to make an objective assessment of the quality elements in ACL, s 54(2) taking into account the factors set out in the third part of the definition in s 54(3). As regards the second part of the definition, acceptable quality is to be determined in accordance with the expectations of a hypothetical reasonable consumer who is fully acquainted with the state and condition of the goods including any hidden defects. The question is: would a reasonable consumer knowing all these defects about the goods at the time of supply regard them as acceptable? It is not a guarantee that the goods supplied will be perfect. Rather, it is a guarantee that the goods are of a quality that a reasonable consumer would consider acceptable, taking into account the circumstances of the particular transaction. The flexibility of the reasonableness test in the guarantee of acceptable quality is intended to protect consumers and suppliers: to protect consumers while not imposing unrealistic standards on suppliers. Some guidance as to how to apply this part of the test, can be obtained from having regard to the way the New Zealand courts have applied the equivalent test of “acceptable quality” under the NZ CGA. According to the Explanatory Memorandum accompanying [16.255]

164 165

Barratta v TPA Pty Ltd [2012] VCAT 679 at [164]. Barratta v TPA Pty Ltd [2012] VCAT 679 at [165].

166

Barratta v TPA Pty Ltd [2012] VCAT 679 at [166].

[16.255]

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the Trade Practices Amendment (Australian Consumer Law) Bill 2009, New Zealand Case law will be of persuasive authority in interpreting Pt 3-2, Div 1 of the ACL. 167 There have only been a small number of New Zealand cases interpreting and applying the guarantee of acceptable quality. 168 In Stephens v Chevron Motor Court Ltd, 169 the appellant consumer purchased a 1983 Mitsubishi Pajero from the respondent dealer. The vehicle was 11 years old at the time of sale and the price paid was $24,000. Within a matter of days after supply, the vehicle developed a number of ongoing problems. The cost of repairs which amounted to $1,200 was paid by the dealer. The District Court (Dunedin) held that there was a breach of the guarantee of acceptable quality. A reasonable consumer would not have acquired the vehicle if acquainted with the badly worn state of the rings and the cost of repairs, even though cost of repairs represented only 5% of the purchase price. The court ordered a full refund of the purchase price despite the fact that 14 months had elapsed since the date of purchase and during that time the purchaser had driven some 15,000 km. The provided no means of compensating the dealer for the use of the vehicle in the interim period. In Cooper v Ashley & Johnson Motors Ltd, 170 Dr Cooper visited the defendant's premises and test-drove a 1989 Nissan Fairlady that was six years old at the time. He entered into a contract to purchase it for $41,000. The defendant's salesperson told the plaintiff that the vehicle was “a good one”. A few days after supply the vehicle, a number of ongoing minor problems manifested themselves, requiring repairs over the next 12 months that eventually cost a total of $2,000. The District Court (Auckland) held that the vehicle supplied was in breach of the guarantee of acceptable quality. At the time of supply it had substantial latent defects in that the transmission was faulty (it needed replacement within three or four days of purchase); the driveshaft couplings were in a seriously worn state and required replacement by 7 November; and the vehicle was starting poorly and running roughly, the reasons for which did not emerge until much later. A reasonable consumer fully acquainted with these defects the vehicle would not have regarded it as acceptable. In this case the plaintiff's position is strengthened further by the fact that there was an admitted representation that the vehicle was “a good one”. The court ordered that the plaintiff was entitled to a full refund of the purchase price. Judge Hubble made two significant findings. First, his Honour held that the time at which it is to be determined whether the goods are of acceptable quality is the time of the supply of the goods to the consumer: 167 168

169

Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill 2009, at [7.9]. The equivalent definition of “acceptable quality” in relation to s 7(1) of the NZ CGA was considered in Stephens v Chevron Motor Court Ltd [1996] DCR 1; NZ DCR Lexis 29 (Judge JE MacDonald); Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZ DCR Lexis 19 (Judge GV Hubble); and Norton v Hervey Motors Ltd [1996] DCR 427; 5 NZBLC 99-387 (Judge JE Ryan). Stephens v Chevron Motor Court Ltd [1996] DCR 1; NZ DCR Lexis 29.

170

Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZ DCR Lexis 19.

482

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.260]

In my judgment this vehicle was supplied in breach of that guarantee [of acceptable quality]. At the time of supply it had substantial latent defects in that the transmission was faulty (it needed replacement within three or four days of purchase); the drive shaft couplings were in a seriously worn state and required replacement by 7 November; and the vehicle was starting poorly and running roughly, the reasons for which did not emerge until much later. If a reasonable consumer was fully acquainted with these defects I am satisfied that the vehicle would not have been regarded as acceptable. 171 (emphasis added)

Secondly, Judge Hubble made clear that the supplier has an ongoing obligation to assist the purchaser to detect any latent defects: In my view it is a continuing obligation of the supplier to provide a consumer with sufficient information on which to make that informed decision. In other words if a problem of a “substantial character” exists at the time of sale, the dealer is prima facie responsible for the diagnosis of that problem and to fully inform the purchaser accordingly. If the dealer abdicates that responsibility to the purchaser then he cannot be heard to complain in my opinion if the purchaser takes a long time to carry out the diagnosis himself. 172 (emphasis added)

In Nesbit v Porter, 173 the defects relied on by the Nesbits were the extensive rust and the problems with the steering box and the shock absorbers, which were latent at the time of supply, but which became apparent six months later at the time of the first mandatory warranty check on 19 January 1996. In relation to s 7(1) of the NZ CGA, Miller J, in Contact Energy Ltd v Jones, 174 held:

[16.260]

The hypothetical reasonable consumer is taken to be fully acquainted with the “state and condition” of the goods, including any hidden defects. Less obviously, he or she must also be taken to know the nature of the goods, all relevant circumstances of supply, and any representations made about the goods by the manufacturer or supplier, so far as relevant. That is so because it is the hypothetical consumer who determines by reference to those considerations whether the goods are acceptable. The test is objective, but it is applied to the particular goods and circumstances. 175

His Honour identified the following, non-exhaustive list of things that the reasonable consumer must be taken to have considered in that case: • The uses to which electricity is commonly put, including personal computers and other electronic consumer equipment. 176 • The nature and extent of the risk posed by the fault, and the extent to which safety may be compromised. 177 171 172

Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZDCR Lexis 19 at 24-5. Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZDCR Lexis 19 at 24-5.

173 174 175 176

Nesbit v Porter [2000] 2 NZLR 465. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [56]. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [94]. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [94].

177

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [103].

[16.265]

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• The extent, duration, and frequency of the faults: one or more outages or voltage fluctuations may be acceptable, but not a series of outages including a nine hour outage as in the Taylor complaint. 178 • The point at which an outage or voltage fluctuation becomes unacceptable needs to have regard to the nature of the distribution system to which the consumer is connected (urban or rural environmental risks; overhead or underground lines) and any quality standards set by the regulator. 179 • The cause of the fault is relevant but not determinative: the reasonable consumer does not expect the retailer or lines company to manage force majeure events, including acts of God or other extraordinary circumstance that could not have been foreseen and guarded against, and third party damage; however, a reasonable consumer would expect them to protect against some third party damage where assets are exposed and or the consequence of failure very severe. 180 • The price of the service: if the cost of eliminating some interruptions completely is so high that consumers would not be prepared to pay the consumer must be taken to have accepted an outage or surge resulting from that cause. 181 • Information provided by the supplier as to the quality of the goods: information that surge protection equipment may protect against risks that the retailer cannot control may mean that the guarantee was not breached. 182 Miller J observed that “acceptable quality is a composite and context-specific attribute”. 183 The reasonable consumer test has regard to the price and the nature of the goods and by linking the quality expectations to price, the guarantee of acceptable quality contemplates that consumers may choose to buy low quality goods at a low price. 184 Goods do not have to be absolutely free from defects or absolutely safe. It is not a guarantee that the goods supplied will be perfect. Rather, it is a guarantee that the goods are of a quality that a reasonable consumer would consider acceptable, taking into account the circumstances of the particular transaction. The flexibility of the [16.265]

178

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [104].

179 180 181 182

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [105]. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [106]. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [107]. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [108].

183

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [95]. In so holding Millar J adopted the observations of Ormrod LJ, speaking of merchantable quality, in Cehave NV v Bremer Handelsgesellschaft mbH [1976] QB 44 at 80, “It is a composite quality comprising elements of description, purpose, condition and price. The relative significance of each of these elements will vary from case to case according to the nature of the goods in question and the characteristics of the market which exists for them. This may explain why the formulations of the test of merchantable quality vary so much from case to case.”

184

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [106].

484

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.270]

reasonableness test in the guarantee of acceptable quality is intended to protect consumers and suppliers: that is, to protect consumers while not imposing unrealistic standards on suppliers. The reasonable consumer does not expect the retailer to manage force majeure events, including acts of God or other extraordinary circumstance that could not have been foreseen or guarded against. 185 The cost of eliminating some risks is so high that consumers would not be prepared to pay, and the reasonable consumer must be taken to have accepted safety risks arising from that cause. 186 There may be scope for arguing that a reasonable consumer would not hold manufacturers liable for defects that could not be detected given the state of scientific and technical knowledge at the time the goods were put into circulation. This would import a “state of the art” defence into the guarantee of acceptable quality, see [12.130] (Corones). Third part: matters to be taken into account by reasonable consumer

The third part of the definition in ACL, s 54(3) sets out the specific factors that must be taken into account in considering each of the qualities listed in s 54(2). The use of the conjunction “and” in s 54(3) means all of the matters are to be taken into account, rather than considering only one matter in isolation. 187 [16.270]

Nature of the goods

The first characteristic specified in ACL, s 54(3)(a) that must be considered is the nature of the goods. This factor would include the uses to which the goods in question are commonly put which will have an impact on their durability. A reasonable consumer would expect a refrigerator to last longer than a toaster. [16.275]

Price of the goods

The second characteristic specified in ACL, s 54(3)(b) that must be considered is the price of the goods (if relevant). A reasonable consumer would expect fewer (or no) faults in high priced goods. A reasonable consumer would expect an expensive toaster to last longer than a cheap toaster. The price of a motor vehicle may be so low that a reasonable consumer would conclude that a purchaser was prepared to accept any and all defects. The actual purchaser could not subsequently complain that the vehicle was not roadworthy or fit to drive. On the other hand, a reasonable consumer would not expect an expensive watch costing $4,000 to stop working after 18 months. A watch of that price should still be fit for purpose and durable: it should still be keeping accurate time. In Cary Boyd v Agrison Pty Ltd, 188 the applicant lived in Evandale, Tasmania. He worked as a slashing contractor. Agrison was a company that imported tractors from [16.280]

185 186 187

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [106]. Contact Energy v Jones Ltd [2009] 2 NZLR 830 at [107]. Burton v Chad One Pty Ltd [2013] NSWDC 301 at [42] (Olsson DCJ).

188

Cary Boyd v Agrison Pty Ltd [2014] VMC 23.

[16.290]

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485

China and sold them under the Agrison brand name. They were located in Victoria. Mr Boyd came to Melbourne to examine an Agrison tractor at Agrison's premises. He disclosed to the sales representative that he required a tractor that was suitable for his work as a slashing contractor, and that it must be capable of travelling long distances on open roads to and from contract slashing jobs. He told the sales representative that the tractor needed to be fast, but stable. The sales representative advised him that the Agrison tractor he examined could achieve 35 to 38 km/hour. The applicant purchased the tractor and had it shipped to Tasmania. The applicant claimed the tractor was rife with problems from the outset of its delivery and was unsafe to drive. He was unable to use it for his intended purpose of work and so he rejected it. The applicant claimed that he was entitled to reject the tractor because of the defects and that the defects amounted to a major failure within the meaning of the ACL. Before the Magistrates' Court of Victoria, the defendant argued that in determining whether the tractor was of acceptable quality, the price of the Agrison tractor was a relevant consideration: The defendant uses the example of a watch and pointed out that it is trite that acceptable quality for a high-end Swiss engineered timepiece will not be assessed for “acceptable quality” in the same way that a functional digital-watch is sold by a general department store. Mr White said that an Agrison tractor is different to a John Deere tractor. They are directed to different segments of the market. That Agrison occupies the budget end of the tractor market was a factor of some attraction to Mr Boyd who acknowledged that he was “price sensitive”. 189

Nevertheless, the court was not persuaded that the comparatively cheap price of the Agrison tractor diluted the expectations of a reasonable consumer regarding the safety of the tractor. The court concluded: I am satisfied that there is more than sufficient evidence to enable me to conclude that the tractor was supplied to Mr Boyd in a state in which the steering was compromised and that this amounted to a very significant defect such as to render the tractor unsafe. It follows in my assessment that the tractor being unsafe that it cannot be regarded as of acceptable quality and therefore does not comply with the applicable consumer guarantee. 190 Statements made about the goods on any packaging or label

The third characteristic specified in ACL, s 54(3)(c) that must be considered is any statements made about the goods on any packaging or label. A reasonable consumer would expect a washing machine labelled “commercial” or “heavy duty” to last longer than one labelled “suitable for domestic use only”. [16.285]

Representations made by the supplier or manufacturer

The fourth characteristic specified in s 54(3)(d) that must be considered is any representation made about the goods by the supplier or manufacturer of the goods. [16.290]

189

Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [67].

190

Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [75].

486

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.290]

Representations made by the supplier or manufacturer, will often be an important consideration. A reasonable consumer would expect a washing machine described as “2 years old in good condition” to last longer than one described as “10 years old with defective motor”. If the supplier represents that a motor vehicle is of “premium quality” or “top quality”, the guarantee of acceptable quality expands and this will strengthen a consumer's claim that the vehicle is not satisfy the guarantee of acceptable quality if major and minor faults become apparent soon after purchase. On the other hand, if the vehicle is described as “second hand car with defective clutch,” the guarantee of acceptable quality contracts. Representations can also have the effect of expanding or contracting the number of different purposes for which the goods must be fit, how they are expected to perform, and how long they are expected to last. The manner in which the scope of the guarantee of acceptable quality can expand or contract by means of the representations made in relation to the goods at the time of supply can be illustrated by two tribunal decisions involving similar facts. In Brandt v Flower Power and Stone Masonry Pty Ltd, 191 the applicant purchased paving tiles for landscaping around the swimming pool at her residence from the first respondent (the supplier). The second respondent, Stone Masonry (NSW) Pty Ltd, was the manufacturer of the tiles. The supplier's brochure stated that the pavers may have a 3mm thickness variation. A representative of the manufacturer advised the applicant that the tiles needed to be laid in a compacted sand and concrete base so that the tiles would not shift. The applicant stated that it would be too expensive to lay the tiles in this manner. The applicant claimed that the pavers were not of acceptable quality because they were “uneven” when laid. No evidence was given as to whether the tiles had been laid in a compacted sand base. The Tribunal referred to the manufacturer's representation in the brochure that the pavers may have a 3mm thickness variation, and on the evidence, was not satisfied that the “unevenness” of the pavers was due to the quality of the pavers, rather than the manner in which they had been laid. 192 On the other hand, in Bonomo v Tile Trends, 193 the applicant was shown floor tiles prior to purchase that were very white and shiny with no marks. The sales person represented to the wife of the applicant that the tiles when laid would look the same as the sample on the floor in the shop. However, when the tiles had been laid they had a film over them that prevented them being shiny and they showed up all marks. The applicant tendered an expert report that the tiles suffered from “optical hazing” which was an aesthetic problem but did not affect the technical performance of the tile. The Tribunal found: On the balance of probabilities and the evidence before me, I accept that the tiles supplied did not match the quality of those provided in the sample. I am satisfied that the 191 192

Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261. Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261 at [61].

193

Bonomo v Tile Trends [2012] NSWCTTT 363.

[16.300]

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applicant relied on the pre-contractual representation made at the salesroom by the salesperson that the tiles would correspond in appearance to those shown in the sample at the showroom. It may be true as the respondent states that optical hazing is an inherent aspect of tiles. However, the evidence shows that the applicant clearly represented that the appearance of tiles was important and needed to match that provided in the sample in the showroom. 194 Any other relevant circumstances

The fifth characteristic specified in s 54(3)(e) of the ACL that must be considered is any other relevant circumstances relating to the supply of the goods. Relevant circumstances relating to the supply of the goods may include: [16.300]

(a)

the manner in which and the purposes for which the goods have been marketed; and

(b) the role played by intermediaries in the supply of the goods. In Burton v Chad One Pty Ltd, 195 the applicant purchased a second hand, 1998 model, Nissan Patrol from the respondent. The purchase price was $16,990. The odometer recorded that the vehicle had travelled 250,816km. Just over three months later having driven 3,249km since purchase, the vehicle broke down. The estimated cost of the repairs was approximately $12,000. At the time of sale the applicant signed Form 8 under the Motor Dealers Act 1974 (NSW) which stated: THERE IS NO WARRANTY UNDER THE MOTOR DEALERS ACT 1974 IN RESPECT TO THE SALE OF THIS VEHICLE. ACCORDINGLY THE DEALER IS NOT REQIRED BY THE ACT TO REPAIR OR MAKE GOOD ANY DEFECT WHICH MAY EXIST OR OCCUR IN THIS VEHICLE.

The applicant commenced proceedings in the Consumer Trader and Tenancy Tribunal on the basis that the goods failed to be of acceptable quality. The Tribunal held that the signing of Form 8 was a “relevant circumstance” for the purposes of ACL, s 54(3)(e), and that any reasonable consumer who signed Form 8 would appreciate that they were assuming the risk of the vehicle not complying with the guarantee of acceptable quality, and accordingly denied the applicant a remedy. On appeal, the News South Wales District Court held that the Tribunal had made an error of law in its interpretation of s 54(3), by considering s 54(3)(e) alone in determining whether the car was of acceptable quality, and not taking into account all of the matters in s 54(3). The court concluded the car was not of acceptable quality: The preponderance of evidence before the Tribunal was that the subject vehicle was sold for a price that was greatly in excess of the market price for a vehicle of that age and mileage. Price is a factor to be considered in the matters to be considered in s 54(3) of the ACL. The evidence suggests that in this case, it was an important factor. 196 194 195

Bonomo v Tile Trends [2012] NSWCTTT 363 at [20]. Burton v Chad One Pty Ltd [2013] NSWDC 301.

196

Burton v Chad One Pty Ltd [2013] NSWDC 301 at [44].

488

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.305]

Time at which goods are to be of acceptable quality

The time at which goods are to be of acceptable quality is the time at which the goods are supplied to the consumer. The Full Federal Court held in Medtel Pty Ltd v Courtney, 197 in relation to s 74D of the TPA, stated that the time for assessing whether goods were of merchantable quality was at the time they were supplied to the consumer. This approach has been applied by tribunals in relation to s 54 of the ACL. 198 It was implicitly applied as the correct test by the New South Wales Court of Appeal in Freestone Auto Sales Pty Ltd v Musulin. 199 The onus is on the consumer to prove that there existed an inherent defect in the goods that was present at the time of supply and that it was the cause of the damage suffered by the applicant. However, where a supplier contends that a defect arose after it was supplied from abnormal use or lack of maintenance by the consumer, the supplier bears the onus of proving that fact. 200 [16.305]

Defences ...............................................................................................................................................................................................

The guarantee of acceptable quality is not intended to provide the consumer with a complete indemnity against the consequences of all defects in the goods. The supplier is excused from liability in the following circumstances: [16.310]

• ACL, s 54(4): where the problem with the goods was specifically drawn to the consumer's attention before the consumer agreed to the supply; or • ACL, s 54(5): where goods were displayed for sale or hire with a notice drawing the consumer's attention to the problem with the goods; or • ACL, s 54(6): the consumer subjected the goods to abnormal use; or • ACL, s 54(7): the consumer examined the goods before supply and that examination ought reasonably to have revealed the problem with the goods. Defects specifically drawn to the consumer’s attention [16.320] Section 54(4) of the ACL deems goods to be of acceptable quality if the only reason that they are not of acceptable quality relates to matters that were specifically drawn to the consumer's attention prior to supply. It provides:

If: 197

198

199

200

Medtel Pty Ltd v Courtney (2003) 130 FCR 182 at [64] and [70]. This was confirmed by the Full Federal Court in Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [180]. See Cicchini v Brabazon [2014] QCAT 671 at [21]-[22]; Burdon v Outback Generators Pty Ltd [2013] NSWCTTT 270 at [14], [22]; Bialous v Budget Vehicles Pty Ltd [2013] NSWCTTT 130 at [36] and [41]; Serini v Surf Toyota [2013] NSWCTTT 531 at [15]; and Baratta v TPA Pty Ltd [2012] VCAT 679 at [164]-[165]. Freestone Auto Sales Pty Ltd v Musulin [2015] NSWCA 160 at [63] where Simpson J stated: “An inference is arguably available that the ignition problems were present, although latent, at the time of sale.” McColl JA and Ward JA agreed with Simpson J. Effem Foods Ltd v Nicholls [2004] NSWCA 332. See Cicchini v Brabazon [2014] QCAT 671 at [21]-[22]; Burdon v Outback Generators Pty Ltd [2013] NSWCTTT 270 at [14], [22].

CHAPTER

[16.325]

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489

(a) goods supplied to a consumer are not of acceptable quality; and (b) the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer's attention before the consumer agreed to the supply; the goods are taken to be of acceptable quality.

This mirrors s 7(2) of the NZ CGA. The underlying premise for excluding the consumer guarantee in such circumstances is that if the consumer has been made aware of the defect prior to the agreement to supply, the consumer has the opportunity choose other goods without such defect, perhaps at a higher price. The reference to the word “specifically” in ACL, s 54(4) means that the guarantee would not be excluded if a supplier draws the consumer's attention to the risk of defects in very general terms, or blanket statements as to their condition, such as, “these goods are sold as is”. Nevertheless, the proviso allows suppliers a measure of protection if they make full disclosure. Written notice of defects

A separate deeming provision applies to goods that are displayed for sale. They will be deemed to be of acceptable quality if they are displayed with a written notice that specifically draws the consumer's attention to the reason why they are not of acceptable quality. Section 54(5) of the ACL provides: [16.325]

(5) If: • goods are displayed for sale or hire; and • the goods would not be of acceptable quality if they were supplied to a consumer; the reason or reasons why they are not of acceptable quality are taken, for the purposes of subsection (4), to have been specifically drawn to consumer's attention if those reasons were disclosed on a written notice that was displayed with the goods and that was transparent.

This mirrors s 7(3) of the NZ CGA. The “ACL Guide on Consumer Guarantees” provides: Some goods may not be of acceptable quality due to problems already known to the supplier – for example, goods with cosmetic defects sold as “seconds”. Defective goods can be sold, usually for lower prices, if the consumer is alerted to the defects before sale. For instance, the supplier: (2) tells the consumer before selling the goods, or (3) displays a written notice with the goods. This must be clearly presented, legible and expressed in plain language. It is not enough to simply describe the goods as “seconds”, “sale” items or “as is”. However, a consumer is assumed to be aware of defects if a written notice setting out the defects was displayed with the goods. When a consumer is alerted to defects in goods before sale, they will not have the right to a remedy if those particular defects later cause problems with the goods. However, the consumer may be entitled to a remedy for a different fault.

490

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.330]

For example: A consumer finds a bargain in a shoe shop – shoes labelled as “seconds”. A tag attached to the shoes advises there is a problem with the stitching. He buys the shoes. When the stitching splits, he cannot claim the shoes were not of acceptable quality. However, he may be entitled to a remedy if another fault develops, such as the sole cracking. 201 Abnormal use

The third defence applies where the consumer to whom the goods were supplied damages them by abnormal use. Section 54(6) provides: [16.330]

Goods do not fail to be of acceptable quality if: (a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and (b) they are damaged by abnormal use.

This mirrors s 7(4) of the NZ CGA. The term “abnormal use” is not defined. The Macquarie Dictionary (4th ed) defines the word “abnormal” to mean: “not conforming to rule; deviating from the type or standard; irregular”. 202 The “ACL Guide on Consumer Guarantees” provides: Goods are not expected to be indestructible; a consumer's use of goods can affect the durability of those goods. The guarantee of acceptable quality will not apply if the consumer: • uses the goods abnormally • causes the quality of the goods to become unacceptable • fails to take reasonable steps to avoid the quality becoming unacceptable. The law does not define “abnormal use”. However, examples of abnormal use include: • a mobile phone is dropped in water or is left out in the rain • a television is broken by an object hitting the screen • a small electric lawnmower is used to mow four hectares every fortnight • a laptop is picked up by the corner of its screen, which then cracks down the middle. 203 Examination of goods

The fourth defence applies where the consumer has examined the goods prior to their supply. Section 54(7) provides: [16.335]

Goods do not fail to be of acceptable quality if: (a) the consumer acquiring the goods examines them before the consumer agrees to the supply of the goods; and 201 202

ACL, “Guide on Consumer Guarantees”, p 13. Macquarie Dictionary (4th ed, Macquarie University, Sydney, 2005), p 3.

203

ACL, “Guide on Consumer Guarantees”, p 14.

[16.335]

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(b) the examination ought reasonably to have revealed that the goods were not of acceptable quality.

The Second Explanatory Memorandum provides: This exemption may be particularly relevant to second-hand goods and antiques. Such goods are often sold on an “as-is” basis. In such circumstances, suppliers are not required to remedy defects that a consumer should have noticed when examining the goods. The amount of effort that a consumer should take examining goods depends on the nature of the goods. For example, in the case of new goods sold by commercial retailers, very limited or no examination will be required in almost all cases. 204

This explanation is somewhat misleading in that it implies a consumer is required to examine the goods, especially second-hand goods, and to a lesser extent new goods, prior to their supply. It is important to appreciate that the consumer is not required to examine the goods before supply. Accordingly, a consumer who does not bother to examine the goods is in a better position than one who does. This is because an examining consumer will be unable to rely on the guarantee of acceptable quality if a reasonable consumer making the type of examination actually made by the consumer would have discovered the defects. However, the proviso only operates in respect of the examination actually made, rather than one that could have been made. Accordingly, a consumer who makes a cursory examination will be in a better position than one who makes a thorough examination. In Carroll v Pollock Wholesale Pty Ltd, 205 the applicant purchased a 12-year old, second hand vehicle which had an odometer reading of 12,108 km. The applicant examined and test drove the vehicle before purchase without incident. For about three weeks after purchase the vehicle was driven without incident. Problems with the vehicle became apparent when the service light came on. The applicant had the vehicle serviced and was advised to replace the front and rear brake discs and pads at a cost of $1,300. The applicant had the work done because of safety concerns. Additional work was recommended, namely, the replacement of the “strut tops” and the “throttle body”. On 30 April 2013, less than seven weeks after the purchase, the applicant telephoned the respondent and purported to reject the vehicle. The Tribunal concluded that the vehicle was not free from defects as required by s 54(2)(c) of the ACL because the “strut tops”, brake pads and discs, and the “timing belt” all needed replacement. The vehicle could not be driven with confidence as to its safety as required by s 54(2)(d); and the vehicle was not durable as required by ACL, s 54(2)(e). The Tribunal held that for the purposes of s 54(7), the inspection and test drive made by the applicant would not have revealed the problems that emerged, and that it was reasonable for the applicant not to arrange for a further inspection after the test drive. 206 204 205

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.39]. Carroll v Pollock Wholesale Pty Ltd [2014] ACAT 14.

206

Carroll v Pollock Wholesale Pty Ltd [2014] ACAT 14 at [91]-[92].

492

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.340]

In McQuillan v Thomas, 207 the applicant purchased a 1995 BMW M3 motor vehicle from the respondent who was a motor dealer. The applicant had it inspected by RW Brown (the inspector), prior to purchase. During the pre-purchase inspection the inspector detected engine oil and coolant leaks, the source of which could not be identified without further investigation. The inspection report recommended that the vehicle be re-inspected once the engine had been cleaned, but this was not carried out. Subsequently, after purchase the source of the oil leak was identified as a cracked engine block which had been repaired with silicon based sealant. The Tribunal held that the defence in ACL, s 54(7) applied: The applicant had the vehicle examined prior to purchase. Had he acted on the recommendation of the inspector and had the vehicle re-inspected once the engine had been cleaned, that examination ought to reasonably have revealed the defect. 208 Evidentiary issues

State and Territory tribunals provide a process for the resolution of small claims, but the process requires a hearing of each party's evidence and submission being considered. Proceedings in the tribunals are less formal than those in superior courts and they are not bound by the rules of evidence. 209 Nevertheless, it has been held that the applicant bears the onus of proof according to the civil standard, the balance of probabilities. In Gurr v Hunter Volkswagen, the tribunal stated: [16.340]

… in order to succeed, the applicant, who bears the onus of proof, must show that there are problems with the vehicle, and that in all the circumstances the respondents or either of them is responsible for those problems. He has failed to discharge this onus of proof. 210

Such findings are not uncommon in tribunal disputes involving motor vehicles. If the applicant fails to adduce sufficient evidence to allow the tribunal to conclude that there has been a major failure to comply a statutory guarantee, the tribunal has no choice but to dismiss the application. 211 Both parties are likely to give sworn evidence that is contradictory. The applicant may present evidence as the general nature of the problem and be accepted by the tribunal to be an honest witness. However, honesty is not enough. In order to obtain a refund the applicant must present expert evidence that will 207

McQuillan v Thomas [2012] NSWCTTT 107.

208 209

McQuillan v Thomas [2012] NSWCTTT 107 at [24]. Section 38(2) of the Civil and Administrative Tribunal Act 2013 (NSW) provides that the NSW Civil and Administrative Tribunal “is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice”. In addition, s 38(4) provides that the Tribunal “is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms”. Gurr v Hunter Volkswagen [2011] NSWCTTT 146. See Alley v Quayside [2011] NSWCTTT 228 and Reinhold v Ford Motor Company [2014] QCAT 671 at [47]-[48].

210 211

CHAPTER

[16.350]

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493

persuade the tribunal that there is an inherent defect in the vehicle that was present at the time of supply which constitutes a major failure to comply with the guarantee of acceptable quality. 212 Summary

Some may argue that the standard of acceptable quality is just as uncertain as the standard of merchantable quality, and that the amendment does not assist to clarify the law. It is necessary to adopt a standard that provides for flexibility, so that it can be applied to a myriad of different consumer transactions. That flexibility comes at the loss of some certainty. As CCAAC noted in its Report, 213 there will always be a degree of uncertainty surrounding statements or definitions of the standard of quality required by the law. The adoption of the concept of “acceptable quality”, along with a more certain definition will retain the intended effect of the merchantability provision, while providing clarity to both consumers and businesses, especially in relation to the issue of durability. [16.345]

Guarantee: fitness for purpose ...............................................................................................................................................................................................

The scheme of Pt 3-2, Div 1, Subdiv A is to allow s 54 to deal with the general suitability of goods and requires that the goods supplied will be reasonably fit for all of the purposes for which goods of that kind are commonly supplied. Section 55 of the ACL, on the other hand, deals with the suitability of goods for one or more specific disclosed purpose(s) made known by the consumer to the supplier, or a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made, or the manufacturer. Section 55 does this by imposing a guarantee where there is a supply of goods (otherwise than by auction) that the goods are reasonably fit for any disclosed purpose. It provides: [16.350]

(1) If: (a) a person (the supplier) supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of auction; there is a guarantee that the goods are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit. (2) A disclosed purpose is a particular purpose (whether or not that purpose is a purpose for which the goods are commonly supplied) for which the goods are being acquired by the consumer and that: 212

See Corones, “Why Australia Needs a Motor Vehicle Lemon Law” (2016) 39(2) University of New South Wales Law Journal (forthcoming).

213

CCAAC Report, p 38 and ch 7, at http://www.ccaac.gov.au.

494

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.355]

(a) the consumer makes known, expressly or by implication to: (i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; or (b) the consumer makes known to the manufacturer of the goods either directly or through the supplier or the person referred to in paragraph (a)(ii). (3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier, the person referred to in subsection (2)(a)(ii) or the manufacturer, as the case may be.

There are two pre-conditions that must be satisfied before the s 55 guarantee will apply. First, the consumer must disclose the particular purpose for which goods are acquired. This may be done expressly or by implication and may be communicated directly to the corporation or to any person negotiating for it. Secondly, the supply must be in trade or commerce. This requirement is less onerous than the fitness for purpose implied term under the Sale of Goods Acts. In particular, there is no requirement that the goods sold be of a kind which it was in the course of the seller's business to supply. However, no liability is imposed on the supplier where the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the supplier's skill or judgment, or that of the person who conducted the negotiations or the manufacturer. Fitness for purpose under ss 71(2) and 74B of the TPA

Before considering the terms of ACL, s 55, it is necessary to consider how fitness for purpose in relation to goods was treated under the previous law relating Pt V Div 2 and Div 2A of the TPA. Section 55 is only intended to repeat and clarify that pre-existing law; it is not intended to expand it. The repealed s 71(2) of the TPA implied a condition into a contract between a supplier and a consumer that the goods would be fit for purpose. It provided: [16.355]

Where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation or to the person by whom any antecedent negotiations are conducted any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the corporation or of that person.

[16.355]

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In connection with this aspect of the Sale of Goods Act 1893 (UK), in Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association, 214 Lord Reid suggested that, as the object of disclosure is to give the seller an opportunity to exercise its skill and judgment in making or selecting goods, the purpose must be stated with sufficient particularity to enable this to occur. For example, in Griffiths v Conway Ltd, 215 the plaintiff, who had abnormally sensitive skin, contracted dermatitis from a tweed coat she purchased from the defendant. She argued that she had made known to the defendant the particular purpose for which the coat was purchased, namely for being worn. However, the Court of Appeal held that the particular purpose was the purpose of being worn by a woman suffering from an abnormally sensitive skin because, unless the seller knew of this abnormality, the requisite skill and judgment in relation to the sale could not be exercised. 216 Accordingly, the plaintiff failed. In Carpet Call Pty Ltd v Chan, 217 the purchasers wanted extensive areas of their nightclub to be carpeted. They disclosed to the vendor that they wanted a carpet of good quality, grey in colour, capable of withstanding heavy human traffic and generally suitable for a big nightclub catering for young patrons. The grey carpet supplied and laid by the vendor was rated as heavy duty domestic. In an action to recover the balance due for the supply and laying of the carpet, the purchasers alleged that the vendor had breached an implied condition that the carpet was reasonably fit for use in a nightclub where food and drink would be consumed and large numbers of persons would be present. Thomas J of the Supreme Court of Queensland did not consider that there was any sufficiently clear disclosure of purpose made by the purchasers such as to show that they were relying on the skill and judgment of the seller or such as to imply a warranty under s 17(1) of the Sale of Goods Act 1896 (Qld) or s 71(2) of the TPA. Thomas J observed: Of course in some circumstances the mere disclosure by the buyer of his particular purpose may in itself be enough to show a reliance on the skill and judgment of the seller, but I do not think that the imprecise generalisations of the purchasers in this case demonstrated reliance on the vendor's skill. It is true that the persons who were face to face in the dealing were not of equal competence, and that greater knowledge of carpet qualities would be expected on the part of the vendor's agent. On the other hand the purchasers knew much more about nightclubs and about the possible extremities of users that might be encountered. Even they had no conception of the type of abuse that would occur. 218 214

215 216 217

Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31. “It is not sufficient merely to show that the seller knew of the purpose; of course he may: businessmen do not work in a vacuum, they know their trade and their customers and they are not to be saddled with conditions merely because they are competent and knowledgeable. The purpose must be made known so as to show reliance” (at 125). Griffiths v Conway Ltd [1939] 1 All ER 685. Griffiths v Conway Ltd [1939] 1 All ER 685 at 691. Carpet Call Pty Ltd v Chan (1987) ASC 55-553.

218

Carpet Call Pty Ltd v Chan (1987) ASC 55-553.

496

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.360]

The repealed s 74B(1) of the TPA imposed strict liability on a manufacturer where goods were not fit for purpose. 219 It provided: Where– (d) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (e) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; (f) the goods are acquired by the consumer for a particular purpose that was, expressly or by implication, made known to the corporation, either directly, or through the person from whom the consumer acquired the goods or a person by whom any antecedent negotiations in connection with the acquisition of the goods were conducted; (g) the goods are not reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied; and (h) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not reasonably fit for that purpose; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction.

The repealed s 74B(2) provided: Sub-section (1) does not apply– (c) if the goods are not reasonably fit for the purpose referred to in that subsection by reason of: (iii) an act or default of any person (not being the corporation or a servant or agent of the corporation); or (iv) a cause independent of human control; occurring after the goods have left the control of the corporation; or (d) where the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the skill or judgment of the corporation.

Actions under s 74B required proof of five elements. First, a corporation in trade or commerce must have supplied goods manufactured by it to another who acquired the goods for re-supply. 220 Secondly, a person (not necessarily the same person who acquired the goods from the manufacturer) must have supplied the goods to a consumer. 221 [16.360]

219 220 221

TPA, s 82. TPA, s 74B(1)(a). TPA, s 74B(1)(b).

[16.360]

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497

Thirdly, the goods must have been acquired by a consumer for a particular purpose that was expressly or by implication made known to the manufacturer either directly or through the person from whom the consumer acquired the goods. 222 The particular purpose was ascertained subjectively. 223 Fourthly, the test for determining whether the goods were fit for the particular purpose was objective. 224 The standard of reasonable fitness for the “particular” purpose(s) was the same as the standard required by the implied condition in contracts by virtue of s 71(2). Reasonable fitness for the “particular” purpose did not require absolute fitness for that purpose. This was a question of fact and depended upon the circumstances of the case. Fifthly, the consumer must have suffered loss or damage which was caused by the goods not being fit for the particular purpose. 225 In the first case which interpreted and applied these provisions, Graham Barclay Oysters Pty Ltd v Ryan, 226 Ryan developed Hepatitis A as a result of consuming contaminated oysters. The trial judge held the manufacturer/grower liable under ss 74B and 74D of the TPA on the basis that it was reasonable for Ryan to have relied on the grower's skill or judgment, and for him to have assumed that the oysters were fit for purpose and of merchantable quality in the absence of a warning to the contrary. It was no defence that the manufacturer/grower could not detect that the oysters were contaminated. Wilcox J held: I accept it would not have been possible for Barclay Oysters to test the particular oysters sold to the applicant's father and brother. I also accept it is impossible to ensure that a particular oyster is free from viral contamination, although it is possible to minimise the risk of the oyster being contaminated at the time of sale. However, as counsel for the applicant submit in reply, the question is not whether the grower could reasonably have discovered the defect; the issue is the reasonableness of the consumer's reliance, not the reasonableness of the manufacturer's behaviour. The right of action created by s 74B is a statutory cause of action. Its elements must be taken from the statute itself, free of any preconceptions that might arise by reference to principles governing common law negligence. 227

On appeal, Barclay Oysters argued in relation to the first limb of s 74B(2)(b) (non-reliance) that the primary judge was not entitled to conclude that Mr Ryan had in fact relied on the skill and judgment of Barclay Oysters. In relation to the second limb of 222 223 224 225 226 227

TPA, s 74B(1)(c). Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 at 330; Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145 at [171]. TPA, s 47B(1)(d). TPA, s 47B(1)(e). Graham Barclay Oysters Pty Ltd v Ryan (1999) ATPR (Digest) ¶46-191. On appeal, Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307. Graham Barclay Oysters Pty Ltd v Ryan (1999) ATPR (Digest) ¶46-191 at 52,337.

498

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.360]

s 74B(2)(b) (unreasonable reliance), Barclay Oysters argued that the trial judge erred in failing to find that it was unreasonable for Mr Ryan to have relied on the skill or judgment of Barclay Oysters. The Full Federal Court dismissed the appeal. As regards the first limb of s 74B(2)(b), the Full Court held that the trial judge was entitled to infer that Mr Ryan had in fact relied on the skill and judgment of the manufacturer/grower, even though Mr Ryan did not have direct dealings with manufacturer/grower. The buyers of the oysters were his father and his brother. In the absence of any warning by the manufacturer/grower that the oysters might not be safe to eat, Mr Ryan was entitled to assume that they were safe to eat. As regards the second limb of s 74B(2)(b), Barclay Oysters submitted that the phrase “unreasonable for the consumer to rely on the skill or judgment of the corporation” imported an objective element so that one must hypothesise a consumer who knew all relevant facts. Lindgren J, (with whom Lee and Kiefel JJ agreed in relation to Barclays' liability under the TPA) rejected Barclay Oysters' construction of the unreasonable reliance limb of s 74B(2)(b). 228 His Honour held: Against this background, in what circumstances, it may be asked, might the consumer's actual reliance on the skill or judgment of the manufacturer have been unreasonable? It might be if, for example, the manufacturer had notified the particular consumer that it could not guarantee the goods' fitness for the consumer's particular purpose or if the particular consumer's knowledge or means of knowledge was equal to or exceeded that of the manufacturer. Perhaps, in addition, for the purpose of the application of the provision, there should be imputed to the particular consumer the knowledge that “a reasonable consumer” would have. Perhaps the particular consumer should also be treated as having taken any steps for his or her own protection that “a reasonable consumer” would have taken, having regard to the nature of the goods and the circumstances of the case. Be this as it may, in my view, ordinarily, there should not be imputed to the consumer special technical knowledge touching the process of manufacture of the goods. 229

The next case which sought to rely on these provisions was Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd. 230 It concerned the implant of a mechanical or prosthetic mitral valve in the applicant's heart and her subsequent development of thromboembolisms with serious consequences, including the need for further surgery to replace the valve with a tissue or bio-prosthetic valve. The applicant's case was brought against the first respondent in its capacity as the supplier in Australia. Kiefel J held that the claim based on s 74B was not made out: The question whether goods which have a use are reasonably fit for it must be assessed not only by reference to the fact that they failed to accomplish their purpose, but also by 228 229

Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at [526]. Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at [524].

230

Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-100.

[16.360]

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reference to what a consumer could reasonably expect from the goods. The evidence here clearly establishes that the risk in question was well known to medical practitioners. The applicant was advised of this risk, as I later discuss. In my view, for the reasons I give later it could not therefore have been reasonable for the applicant to expect that there was no prospect that the valve would cause the development of thrombi. This claim is not made out. 231

Finally, in Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd, 232 Peterson alleged that the consumption of a medication for the relief of arthritic pain called Vioxx sold by Merck between late 2000 and September 2004 when it was withdrawn from the market, contributed to the onset of various kinds of cardiovascular disease. Peterson started taking Vioxx in 2001 and had a heart attack in 2003 which he alleged Vioxx contributed to. Vioxx was the commercial embodiment of the rofecoxib molecule. The relationship between the consumption of Vioxx and cardiovascular disease was an unsettled question during this period. Peterson alleged that well before September 2004, the respondents knew or ought to have known that Vioxx increased the risk of cardiovascular disease. In 2000 the VIGOR trial suggested a link between Vioxx and cardiovascular disease. However, arthritis does not lend itself easily to placebo-controlled trials, because patients with arthritis require some medication for pain relief and the use of placebo, especially for long durations, was considered unethical. Vioxx's risk of causing heart attack did not become apparent until it had been used by a large population for a prolonged period, ie, until September 2004. The applicant argued that Merck, and/or its Australian subsidiary and importer MSDA, were liable under an action based on ss 74B and 74D in Pt V Div 2A of the TPA. In relation to s 74B, Jessup J held: In my view, in a case such as the present where there is no express or clearly implicit expression of purpose that the consumer requires a product that is free of risk (or of increased risk, or materially increased risk, etc), the point at which the absence of risk becomes relevant is where the existence of the presumptively dangerous tendency of the goods in question compromises their fitness for the purpose in fact made known to the manufacturer. For example, a sunscreen lotion that was coincidentally attractive to wasps would be unfit for purpose as a sunscreen lotion. It would be quite artificial to enquire whether the consumer made it implicitly known to the manufacturer that he or she entertained the purpose of using a wasp-free lotion. On the facts of the present case, the applicant's point must be that the tendency of Vioxx to contribute to the onset of cardiovascular disease justifies the conclusion that it was not reasonably fit for the purpose of providing relief from arthritic pain. 233

The Full Federal Court upheld the appeal on the substantive ground that by having a prescription filled by a pharmacist, Mr Peterson implicitly made it known that he was acquiring Vioxx for the purpose of use as a medication for treatment of arthritic pain 231 232

Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-100 at [212]-[213]. Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1.

233

Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 at [944].

500

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.365]

without gastrointestinal sides-effects. 234 However, that purpose did not include as a negative element that the Vioxx was absolutely safe and would have no adverse side-effects. 235 The trial judge found Mr Peterson's claim based on TPA, s 74B should succeed because Vioxx approximately doubled the risk of heart attack. However, the Full Court upheld the appeal for the following reasons. First, the evidence did not support the finding that Vioxx approximately doubled the risk of heart attack. Secondly, the question whether Vioxx was reasonably fit for purpose as a prescription medication was a complex question that could not be answered simply by a “mathematical comparison of relative risk”. 236 Prescription medications are rarely risk free. Thirdly, the issue of causation was not determined in Mr Peterson's favour. The Court did not consider that it was more probable than not that the consumption of Vioxx was a necessary precondition of Mr Peterson's heart attack. It had not been proven that Mr Peterson would not have had the heart attack but for the consumption of Vioxx. 237 Disclosing the consumer’s purpose

Case law in relation to the Sale of Goods Acts which implies a condition into contracts that goods will be fit for a particular purpose made known to the seller, may be of assistance in interpreting s 55 of the ACL. In some cases the consumer's purpose will be obvious from the nature of the transaction and there will be no need for this to be shown. Thus, for example, it was unnecessary for Dr Grant to say why he purchased underwear; 238 or for the plaintiff in Frank v Grosvenor Motor Auctions Pty Ltd, 239 to say why he was purchasing a car. On the other hand, if the goods are required for some special purpose, or if they could be used for several purposes, then the consumer's purpose must be made known to the supplier. It is not necessary for the consumer's purpose to be stated expressly, or for it to be made a term of the contract. However, what is less clear is the amount of detail that the consumer must disclose in order to satisfy this precondition. In connection with this aspect of the United Kingdom Sale of Goods Act 1893, in Henry Kendall & Sons v William Lillico & Sons Ltd 240 Lord Reid suggested that, as the object of disclosure is to give the seller an opportunity to exercise its skill and judgment in making or selecting goods, the purpose must be stated with sufficient particularity to enable this to occur. This explains why the plaintiff failed in Griffiths v Conway Ltd. 241 See [16.355]. [16.365]

234 235 236

Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [171]. Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [172]. Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [174].

237 238 239 240

Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 at [175]. See Grant v Australian Knitting Mills Ltd [1936] AC 85. Frank v Grosvenor Motor Auctions Pty Ltd [1960] VR 607. Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31.

241

Griffiths v Conway Ltd [1939] 1 All ER 685.

[16.375]

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Nature of the supplier’s statutory duty

The statutory duty imposed on suppliers by ACL, s 55(1) is to supply goods that are “reasonably fit” for purpose, not absolutely fit. The Second Explanatory Memorandum states: “This guarantee will ordinarily require a higher standard of quality that the guarantee of acceptable quality.” 242 The following example is provided by the Second Explanatory Memorandum: [16.370]

A lawnmower that is sold to a consumer who does not mention the purpose for which it is to be used might be expected to mow the lawn of an ordinary suburban house once per week for several years without any significant problems to satisfy the guarantee of acceptable quality. If a consumer indicates to a supplier that he or she wants a lawnmower to mow a 4 hectare block of land each week, the standard that the lawnmower would need to meet to be fit for that disclosed purpose would be higher than that required by the guarantee of acceptable quality for a domestic lawnmower. 243

It is unclear for how long the goods must remain reasonably fit for purpose after delivery to the buyer. It seems that they must continue to be fit for a reasonable length of time after delivery, taking into account the circumstances of the contract and the nature of the goods. For example, it is also unclear whether the words “reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit” provide scope for arguing a “state of the art” defence. It is arguable that it would not be “reasonable” to hold manufacturers and suppliers liable for defects which could not be detected given the state of scientific and technical knowledge at the time goods were manufactured. Prior negotiations

The guarantee in ACL, s 55(1) also applies where a particular purpose is made known to a person other than the supplier during any “prior negotiations”, or “arrangements in relation to the acquisition of the goods were conducted or made” or where the consumer makes known the purpose to the manufacturer either directly or through the supplier. The Second Explanatory Memorandum states: [16.375]

This is intended to cover the categories of people that a consumer most often deals with when purchasing goods. In any of these cases, the consumer will receive the benefit of the guarantee if he or she makes their purpose known to the relevant person. 244

The following example is provided by the Second Explanatory Memorandum: a consumer tells a checkout operator at a discount department store that he or she wants goods to achieve a particular purpose. In such circumstances, a court might find that it 242 243 244

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.43]. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Example 7.5, p 189. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.41].

502

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.380]

was not reasonable for the consumer to rely the skill or judgment of the supplier and the guarantee of fitness for purpose would not apply. 245

On the other hand, in a linked credit contract involving a motor vehicle, the motor vehicle may be delivered, direct by the authorised distributor, to the consumer although the lease may be entered into between the consumer and the linked credit provider. The linked credit provider could be liable for a breach of the s 55(1) guarantee if the vehicle is not suitable for a particular purpose made known to a sales person working for the authorised distributor who conducted the antecedent negotiations, unless the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on that person's skill or judgment. Statutory proviso to the guarantee

Unlike the position under the Sale of Goods Acts, consumers seeking to rely on s 55(1) guarantee do not have to prove that they relied on the seller's skill or judgment. However, the guarantee will not apply if the consumer did not do so, or if this was unreasonable in the circumstances. In effect, the section presumes reliance but leaves it open to a supplier to prove that there was no reliance, or that this was unreasonable. This exception is important in at least two respects. First, suppliers may be able to avoid the guarantee through using a “no reliance clause” in contracts of supply, although ACL, s 64 will limit the scope of this opportunity. Secondly, it provides a defence where the supplier genuinely disclaims skill where it would otherwise, because of s 64, be unable to protect itself by an exclusion clause. The ACL “Guide on Consumer Guarantees” provides the following example: [16.380]

• A consumer tells a fellow customer at a discount department store that he wants a television capable of showing all available digital channels. The other customer tells the consumer that a particular television “looks like one my dad bought, which I think does what you want”. After buying the television, the consumer discovers that it is analogue and will not capture digital signals. • The consumer did not rely on the supplier when buying the goods, so is not entitled to a remedy. 246 In Cary Boyd v Agrison Pty Ltd, 247 the applicant disclosed to Agrison's sales representative that he required a tractor that was suitable for his work as a slashing contractor, and that it must be capable of travelling long distances on open roads to and from contract slashing jobs. He told the sales representative that the tractor needed to be fast, but stable. The sales representative advised Mr Boyd that the Agrison tractor he examined could achieve 35 to 38 km/hour. The Agrison tractor was not technically capable of achieving that speed. The court held that pursuant to s 55(2)(a) of the ACL, Mr Boyd expressly made 245 246

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Example 7.4, p 189. ACL, “Guide on Consumer Guarantees”, p 15.

247

Cary Boyd v Agrison Pty Ltd [2014] VMC 23.

CHAPTER

[16.385]

16

CONSUMER GUARANTEES FOR GOODS

503

known to Agrison the purpose for which he required the tractor and that speed was necessary for him to achieve that purpose. The tractor was unable to maintain safe driving at a speed of 33 kph, and accordingly Agrison failed to comply with the guarantee in s 55(1) of the ACL. 248 Guarantee: correspondence with description ...............................................................................................................................................................................................

Section 56 of the ACL imposes a guarantee of correspondence with description. It provides: [16.385]

(1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of auction; there is a guarantee that the goods correspond with the description. (2) A supply of goods is not prevented from being a supply by description only because, having been exposed for sale or hire, they are selected by the consumer. (3) If goods are supplied by description as well as by reference to sample or demonstration model, the guarantee in this section and in s 57 both apply.

Section 70 of the TPA implied a condition as to correspondence with description as does the Sale of Goods legislation. The key questions that arise for consideration are: what is a supply by description; and what is the nature of the obligation it imposes? As regards, the nature of a “supply by description”, s 56(2) of the ACL expressly provides a supply of goods is not prevented from being a supply by description only because, having been exposed for sale or hire, they are selected by the consumer. This is intended to resolve any doubts as to whether a person selecting an item in a supermarket from a number of similar goods could be said to be buying by description. Where the consumer relies on the description of the goods supplied by the supplier, for example, on the packaging of the goods displayed in a supermarket, or a photograph in relation to an on-line sale, this will constitute a sale by description. As regards, the nature of the obligation imposed, s 56 of the ACL provides that the supplier's obligation is to supply goods that correspond with the description given to them. What then, constitutes the contract description? The application of the corresponding provision of the Sale of Goods legislation has given rise to considerable difficulties as to what will be held to be part of the description. There are two views as to what constitutes the contract description. Under the narrow view words referring to the quality of goods will not be held to be part of the description. The broader view is that in appropriate circumstances, a contract description can include a reference to quality where they can be said to have been used to identify the goods. 249 248

Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [105].

249

See Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441.

504

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.390]

Like the Sale of Goods Acts, the ACL provides separate guarantees for compliance with the description by which goods are sold and their acceptable quality, under s 54. It is likely that the courts in construing s 56 of the ACL, will adopt the Ashington Piggeries approach and hold that statements about quality will only form part of the description to the extent that they go towards identifying the goods. Thus, it will need to be demonstrated that the existence of a specific quality was so important in the minds of the parties that it formed part of the description, and that the failure to supply goods of that quality would amount to supplying different goods. In Cary Boyd v Agrison Pty Ltd, 250 Mr Boyd agreed to a “brand new” Agrison ST448 Tractor. He was shown a 2012 demonstration model Agrison tractor, but was told by the sales representative that the 2011 model that he would be purchasing would operate in precisely the same way as the 2012 model. The description applied to it was “brand new”. The Court held that Agrison failed to comply with the guarantee in s 56(1) of the ACL: Without being exhaustive, the tractor exhibited strong indications that it was not a new piece of machinery. There were signs that it had been re-sprayed suggested by evidence of overspray, the presence of paint and gaps at the headlight covers, the gas struts were inoperative and needed to be re-gassed, the steering was faulty, it suffered from hydraulic oil leaks and of course there is the evidence of corrosion incompatible with the time during which the tractor was exposed to the elements. 251

Guarantee: supply by sample ...............................................................................................................................................................................................

A consumer may request a sample and then order goods on the basis of the sample. Section 57 of the ACL imposes a guarantee that the goods supplied will comply with the sample provided, and that the consumer will have a reasonable opportunity of comparing the goods supplied with the original sample. The goods supplied should have no defects which were not apparent from a reasonable examination of the sample. Section 57 of the ACL provides: [16.390]

(1) If: (a) a person supplies, in trade or commerce, goods to a consumer by reference to a sample or demonstration model; and (b) the supply does not occur by way of auction; there is a guarantee that: (c) the goods correspond with the sample or demonstration model in quality, state or condition; and (d) if the goods are supplied by reference to a sample – the consumer will have a reasonable opportunity to compare the goods with the sample; and (e) the goods are free from any defect that: 250

Cary Boyd v Agrison Pty Ltd [2014] VMC 23.

251

Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [109].

CHAPTER

[16.395]

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505

(i) would not be apparent on reasonable examination of the sample or demonstration model; and (ii) would cause the goods not to be of acceptable quality. (2) If goods are supplied by reference to sample or demonstration model as well as by description, the guarantees in section 56 and in this section both apply.

The following example is provided by the Second Explanatory Memorandum: a sample of fabric is used to sell a couch and the couch supplied to a consumer is a different colour to the sample. 252

The repealed s 72 of the TPA implied a condition as to compliance with sample, as does the Sale of Goods legislation. 253 Section 57(1)(e) of the imposes a higher duty of care on the consumer than the general guarantee of acceptable quality under s 54 of the ACL. A consumer who fails to examine the goods before agreeing to the supply of them is not prevented from relying on the guarantee of acceptable quality, even if the defects in the goods would be apparent on a reasonable examination. By contrast, s 57(1)(e) provides that the guarantee will not apply in relation to a sale by sample if there are defects that would be apparent on a reasonable examination of the sample. Guarantee: repair and spare parts ...............................................................................................................................................................................................

The ACL provides consumers with a guarantee that spare parts and repair facilities will be reasonably available for a reasonable period it time. This is similar to the obligation imposed by the repealed s 74F of the TPA. Section 58 of the ACL provides: [16.395]

(1) If: (a) person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the manufacturer of the goods will take reasonable action to ensure that facilities for the repair of the goods, are reasonably available for a reasonable period after the goods are supplied. (2) This section does not apply if the manufacturer took reasonable action to ensure that the consumer would be given written notice, at or before the time when the consumer agrees to the supply of the goods, that: (a) facilities for the repair of the goods would not be available or would not be available after a specified period; or (b) parts for the goods would not be available or would not be available after a specified period. 252 253

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Example 7.6, p 190. See eg, Sale of Goods Act 1923 (NSW), s 20. See LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1956) 56 SR (NSW) 81 at 87 (Street CJ with whom Roper CJ in Equity agreed).

506

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.400]

The guarantee is imposed on a “manufacturer”, rather than a “supplier”. Since the definition of “manufacturer” in s 7 of the ACL includes an “importer”, where the foreign manufacturer does not have a place of business in Australia, the Australian importer will need to establish a facility for repair and the supply of spare parts in order to comply with the guarantee imposed by s 58 of the ACL, unless the importer can rely on the proviso in s 58(2). The guarantee applies irrespective of whether the manufacturer supplies goods directly to a consumer or indirectly through a dealer or distribution network. The guarantee relating to repairs and spare parts is based on reasonableness. The test is to be applied from the manufacturer's point of view rather than the consumer's point of view. In other words, whether it is reasonable for the manufacturer to place the consumer in a position in which repairs or spare parts are not available. Each case will turn on its particular facts and circumstances, including the nature of the goods concerned, industry practice and the reason for the lack repair facilities or spare parts. As regards the nature of the goods, the Second Explanatory Memorandum states: The test of reasonability that apply to this guarantee allow for the fact that what is reasonable will depend on the nature of the goods supplied. For example, it would be reasonable to expect that tyres for a new car will be available for many years after its purchase. It may not be reasonable to expect that spare parts for an inexpensive children's toy are available at all. 254

It is unclear what is meant by the words “reasonably available” in s 58(1) of the ACL; however, it would seem that in the case of some goods, such as motor vehicles, white goods and high technology products such as personal computers that need to be serviced periodically, service centres should be available at a number of different geographic locations, so as not to cause consumers undue costs and inconvenience. Manufacturers are able to exempt themselves from liability in relation to this guarantee. Section 58(2) of the ACL provides that the guarantee relating to repairs and spare parts will not apply if the manufacturer/importer took “reasonable action” to ensure that the consumer, at or before the time of sale, was given “written notice” that spare parts would not be available in relation to the goods or will only be available for a specified time. This proviso is likely to be construed strictly by the courts, and a high standard imposed with regard to what constitutes “reasonable action” on the part of manufacturers to bring to the attention of consumers any restriction or limitation on parts and service to ensure that consumers were fully informed prior to accepting this risk. Guarantee: manufacturer’s and supplier’s express warranty ...............................................................................................................................................................................................

Section 59(1) of the ACL includes a guarantee that any express warranty provided by a manufacturer will be complied with. Manufacturers often provide a “voluntary” warranty to consumers, also called an “express warranty”, even though there [16.400]

254

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.52].

[16.400]

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is no contractual nexus between the manufacturer and the consumer. They may be oral, or in writing, and may be supplied in the packaging with the item purchased, or advertised by the retailer on the manufacturer's behalf where the goods are displayed in-store. They may be subject to time limits and other conditions. Section 271(5) of the ACL creates a direct right of action for failure to comply with the s 59(1) guarantee relating to manufacturers' express warranties. This obviates the need to establish a collateral contract with the manufacturer. Section 59(2) of the ACL creates a guarantee that the supplier of the goods will comply with any express warranty given or made by the supplier. An “express warranty” is defined broadly in s 2 of the ACL to mean representations “whose natural tendency is to induce persons to acquire goods”. It is not necessary for the consumer to prove that they were intended to be relied upon, or that they were in fact relied upon by the consumer. The term “express warranty” is broadly defined in s 2 of the ACL to mean: In relation to goods, means an undertaking, assertion or representation: (a) that relates to: (i) the quality, state, condition, performance or characteristics of the goods; or (ii) the provision of services that are or may at any time be required for the goods; or (iii) the supply of parts that are or may at any time be required for the goods; or (iv) the future availability of identical goods, or of goods constituting or forming part of a set of which the goods, in relation to which the undertaking, assertion or representation is given or made, form part; and (b) that is given or made in connection with the supply of the goods, or in connection with the promotion by any means of the supply or use of the goods; and (c) the natural tendency of which is to induce persons to acquire the goods.

It is clear from para (c) of the definition that it is not necessary to prove that the manufacturer intended to induce persons to acquire the goods by making the express warranty, or that the express warranty actually induced the consumer to acquire the goods. It seems that the test is objective rather than subjective and that it is only necessary to prove that the representation would have a “natural tendency to induce” a reasonable person to acquire the goods. The guarantee as to express warranties is potentially very significant, and its ramifications may not at first be appreciated: it fundamentally changes the common law position. An express warranty or representation made by a manufacturer will only be enforceable at common law by a consumer who acquires the goods from a retailer or distributor, if the consumer can establish the existence of a collateral contract with the manufacturer and suing for breach of that contract. In order to establish a collateral contract, it would first be necessary to prove that the manufacturer has agreed with the ultimate consumer, that in consideration of the latter entering into a contract with the retailer for the purchase of the goods concerned, the

508

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.405]

manufacturer will promise to repair or replace the goods if they are faulty. It would be necessary to prove that the consumer was aware of the existence of manufacturer's offer before the consumer entered into the contract with the retailer. For example, if the manufacturer's express warranty was displayed as part of the advertising or promotion in the retailer's store, or on the outside of the packaging. If the express warranty as to repair or replacement is contained inside the packaging this will not be the case. It would also be necessary to prove that the representation by the manufacturer was intended to be relied on, in the sense that the manufacturer guaranteed truth of the statement, and it was, in fact, relied on by the consumer. Section 59 of the ACL circumvents these common law problems of proof. It provides: (1) If: (a) person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the manufacturer of the goods will comply with any express warranty given of made by the manufacturer in relation to the goods. (2) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the supplier will comply with any express warranty given or made by the supplier in relation to the goods.

The definition of “express warranty” would cover all representations made by the manufacturer in advertisements and promotional literature made prior to the consumer entering into the contract. Representations made in promotional literature by manufacturers have a tendency to induce the making of the contract. If they are relied upon and turn out to be untrue, the consumer does not need to rely on a cause of action for misrepresentation, or to prove the existence of a collateral contract with the manufacturer. It would not seem to matter how the consumer came by the promotional literature so long as the consumer became aware of it prior to entry into the contract. Warranties against defects ...............................................................................................................................................................................................

The ACL draws a distinction between “express warranties” considered earlier in this chapter and “warranties against defects”. A “warranty against defects” is a subset of “express warranties” in s 59. A “warranty against defects” is defined in s 102(3) to mean: [16.405]

(3) A warranty against defects is a representation communicated to a consumer in connection with the supply of goods or services, at or about the time of supply, to the effect that a person will (unconditionally or on specified conditions): (a) repair or replace the goods or part of them; or

[16.405]

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509

(b) provide again or rectify the services or part of them; or (c) wholly or partly recompense the consumer; if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced.

The purpose of s 102 is set out in the Second Explanatory Memorandum: Suppliers and manufacturers often provide promises to consumers that goods or services supplied will be free from defects for a certain period of time. Consumers may experience difficulties seeking to have suppliers or manufacturers fulfil such promises if they lack access to basic details, such as the name and address of the supplier. The ACL provides for regulations to be made prescribing requirements relating to the content and form of such warranties against defects. 255

The s 59 guarantee as to express warranties applies in relation to “warranties against defects”. Thus, a failure by a manufacturer to comply with a warranty against defects is a failure to comply with an express warranty under s 59. When goods covered by a warranty against defects fail to meet a consumer guarantee, the consumer has a choice. The consumer can insist that the warranty be honoured, or rely on s 271(5) of the ACL which creates a statutory cause of action for failure to comply with the consumer guarantee. It might be thought that s 59 will have the effect of discouraging manufacturers from providing warranties against defects. However, in many cases it will be to the manufacturer's advantage to provide an express warranty against defects. The reason for this is that manufacturers generally prefer to repair or replace defective goods. Section 271(6) of the ACL provides that if a manufacturer provides an express warranty, and the consumer requires the manufacturer to remedy a failure to comply with a guarantee of acceptable quality by repairing or replacing the goods, the consumer is not entitled to commence an action for damages under s 272(1) of the ACL, unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the fault within a reasonable time. Thus, unless manufacturers provide an express warranty specifying that they will remedy a fault by repair or replacement of the goods, they could be obliged to pay monetary damages if a consumer guarantee of acceptable quality applies. The manufacturer's express warranty against defects should state that it is in addition to the guarantee provided under the ACL, to avoid any suggestion that the manufacturer is trying to exclude the consumer guarantees contrary to s 64 of the ACL. Section 102(2) provides: (2) A person must not, in connection with the supply, in trade or commerce, of goods or services to a consumer: 255

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.73].

510

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[16.405]

(a) give to the consumer a document that evidences a warranty against defects that does not comply with the requirements prescribed for the purposes of subsection (1); or (b) represent directly to the consumer that the goods or services are goods or services to which such a warranty against defects relates. A maximum pecuniary penalty payable for a contravention of this subsection is $50,000 for a body corporate, and $10,000 for an individual.

Section 192(1) of the ACL provides that a person commits an offence if they fail to comply with s 102(2) of the ACL. The maximum fine payable is the same as the civil penalties. The offence is one of strict liability. Section 102(1) of the ACL provides that the regulations may prescribe requirements relating to the form and content of warranties against defects. Suppliers and manufacturers often provide promises to consumers that goods or services will be free from defects for a certain period of time. Consumers may experience difficulties seeking to have suppliers or manufacturers fulfil such promises if they lack access to basic details, such as the name and address of the supplier. Regulation 90 of the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1) prescribes certain requirements for warranties against defects. Regulation 90(1) provides: • a warranty against defects must be in a document that is transparent – ie, it is expressed in reasonably plain language, legible and presented clearly; • a warranty against defects must concisely state what the person who gives the warranty must do so the warranty may be honoured – eg, the supplier will repair the goods, or replace the goods within a certain time period; • a warranty against defects must concisely state what the consumer must do to entitle the consumer to claim the warranty – eg, contact the supplier or manufacturer and point to the defect; • a warranty against defects must include the statement prescribed in subreg 90(2) regarding consumer guarantees; • a warranty against defects must prominently state the name, business address, telephone number and email address (if any) of the person who gives the warranty; • a warranty against defects must state the period of the warranty; • a warranty against defects must set out the procedure for the consumer to claim the warranty, including the address to which claims may be sent; • a warranty against defects must state who will bear the expense of claiming the warranty; and • a warranty against defects must state that the benefits are in addition to other rights and remedies available to the consumer.

[16.405]

CHAPTER

16

CONSUMER GUARANTEES FOR GOODS

Regulation 90(2) provides the text is: Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.

The commencement date for reg 90 was 1 January 2012.

511

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......................................................................................................................

Consumer Guarantees for Services Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 9.

Introduction The history and background leading to the adoption of the consumer guarantees law in the ACL is explained in Chapter 16. The consumer guarantees law in the ACL employs some of the language of the repealed provisions in relation to statutory implied terms in consumer contracts with suppliers in Pt V Div 2 and Div 2A of the former TPA. 1 Thus, the jurisprudence relating to these terms will also be relevant to the interpretation and understanding of the ACL where the same language is adopted in the ACL. 2 In relation to the scope of the protection provided by the consumer guarantees themselves, Parliament only intended to repeat and clarify the previous law relating Pt V Div 2 and Div 2A of the TPA rather than to expand those provisions. For example, as regards the guarantee of due care and skill that applies to services, the Second Explanatory Memorandum provides examples of the application of this guarantee. It refers to Mayne Nickless v Crawford, 3 where a supplier installed a burglar alarm that was easily by-passed by burglars, and Dillon v Baltic Shipping Co, 4 where personal luggage was lost in the course of negligent transportation by a cruise ship operator. Second Explanatory Memorandum states: [17.05]

Whilst the cases cited here were heard under the comparable implied warranty provision of the TPA, the intention is that the guarantee applies to such services in a similar way. 5

Part 3-2, Div 1, subdiv B of the ACL imposes four consumer guarantees in relation to the supply of services: • s 60 – a guarantee that services will be rendered with due care and skill; 1

For example, s 60 of the ACL imposes a statutory guarantee that services will be rendered with “due care and skill”. This mirrors the statutory implied warranty in s 74(1) of the TPA that services will be rendered with “due care and skill”.

2

See eg, Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [3.34] in relation to the meaning of “related bodies corporate”; [2.36] in relation to the meaning of “manufactured”; [2.52] in relation to the meaning of “acquisition”, “supply and re-supply”.

3 4 5

Mayne Nickless v Crawford (1992) 59 SASR 490. Dillon v Baltic Shipping Co (1989) 21 NSWLR 614. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.59].

514

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.10]

• s 61(1) – a guarantee that services will be fit for a particular purpose made known to the supplier; • s 61(2) – a guarantee that services will achieve a result made known to the supplier or a person by whom any prior negotiations in relation to the acquisition of the services was conducted; • s 63 – a guarantee that the services will be completed in a reasonable time. These guarantees mirror the warranties that were implied into contracts for the supply of services by the repealed s 74 of the TPA. The consumer guarantees in relation to services arise independently of contract and it is not possible to exclude, restrict, or modify liability in relation to them. This chapter is divided into two parts. Part I – considers what services are protected by consumer guarantees; and, Part II – considers the guarantees that apply to services. Services acquired as a consumer ...............................................................................................................................................................................................

A person is taken to have acquired services as a consumer if the amount paid or payable for the services did not exceed a prescribed amount (currently $40,000), or where the amount paid or payable exceeds the prescribed amount, they are of a kind ordinarily acquired for personal, domestic or household use or consumption. See [16.70]-[16.115]. There is no non-consumer use exception equivalent to ACL, s 3(2) in cases where a person acquires services, or holds himself or herself out as acquiring the services for re-supply. See [16.110]. The personal nature of many services means that they cannot be re-supplied. However, some electronic and telecommunications services are acquired by wholesalers for the purposes of re-supply to retailers. 6 Where a wholesaler acquires such services for re-supply and the amount paid or payable does not exceed $40,000, the wholesaler will be taken to be a consumer. [17.10]

Part I – Services protected The term “services” is widely defined in s 2 of the ACL to include “any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce” (see [16.120]). Services which are ordinarily acquired for personal, domestic or household use include home building and renovation services; electrical, plumbing, and house-painting services; motor vehicle repair services; a variety of personal services [17.15]

6

See Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385.

[17.30]

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515

such as haircutting and dry cleaning; as well as professional services such as educational, 7 legal, accounting and tax agent's services. However, a number of services are excluded from this apparently broad coverage. Financial services ...............................................................................................................................................................................................

The ACL is intended to be a generic law which applies to all sectors of the economy; however, financial products and services are separately regulated under the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and the Corporations Act 2001 (Cth). Section 131A of the CCA provides that despite s 131, the ACL as a law of the Commonwealth does not apply to the supply or possible supply of financial services, or of financial products. To this general exclusion there is one exception, namely, financial services or financial products known as “linked credit contracts” which are subject to the consumer guarantees regime under Pt 5-5 of the ACL. At the Commonwealth level there is only an implied warranty in relation to financial services (excluding insurance). Section 12ED of the ASIC Act implies warranties of due care and skill and fitness for purpose into contracts for the supply of financial services to a consumer in the course of a business. 8 [17.20]

Services of architects and engineers ...............................................................................................................................................................................................

Section 61(4) of the ACL provides that the guarantee as to fitness for a particular purpose does not apply to the supply of professional services by a qualified architect or engineer. However, the guarantees of due care and skill 9 and reasonable time for supply, 10 apply equally to the supply of professional services by a qualified architect or engineer. [17.25]

Transportation or storage services ...............................................................................................................................................................................................

Section 63 of the ACL excludes services that are, or are to be supplied under a contract for or in relation to the transportation or storage of goods for the purpose of a business, trade or occupation carried on by the person for whom the goods are transported or stored. The repealed s 74(3)(a) of the TPA excluded services in relation to transportation or storage of goods for the purposes of a business, trade or occupation carried on by the person for whom the goods are transported or stored. Thus, for [17.30]

7

9

Corones, “Consumer Guarantees and Re-supply of Educational Services by Higher Education Providers” (2012) 35(1) University of NSW Law Journal 1. There have been very few cases in which a party has sought to rely on a breach of these implied warranties. See, eg, St George Bank Ltd v Wright [2009] QSC 337 at [54]-[59] (McMurdo J); and Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 at [113]-[116] (Perram J). ACL, s 60.

10

ACL, s 62.

8

516

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.35]

example, in Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd, 11 the applicant's claim based on s 74 failed because the aluminium coils being transported were to be used in its business. In Wallis v Downard-Pickford, 12 the appellant was a member of the Queensland Police Force who was transferred in the course of his employment from one station to another. In connection with this transfer, the Commissioner of Police entered into a contract with the respondent to transport the appellant's personal goods to the new location. In the course of transit the goods were damaged due to the respondent's failure to exercise due care and skill. A defence raised by the respondent was that the contract was of a kind that fell within the exception in s 74(3)(a). While Wallis carried on the occupation of a police officer, the actual transportation itself did not answer the description of being “for the purposes of purposes of a business, trade or occupation”. The purpose of the transportation was for the transport of private property, not for the transport of police property. Contracts of insurance ...............................................................................................................................................................................................

Section 63 of the ACL excludes services that are, or are to be supplied under a contract of insurance. A contract of insurance is a financial product pursuant to s 12BAA(7)(d) of the ASIC Act, excluding health insurance provided as part of a health insurance business. It seems s 63 was inserted to cover those forms of insurance excluded from the definition of “financial product” in s 12BAA(7)(d) of the ASIC Act, and therefore not covered by the s 131A, CCA exclusion. [17.35]

Building services ...............................................................................................................................................................................................

Contracts for the supply of mixed goods and services are considered at [16.130]. A building contract for the construction of a domestic residence will be a contract for both the supply of goods and for the supply of services, so that both sets of guarantees will apply to the contract. The consumer will be able to bring an action against the builder if there is a failure to comply with any of the guarantees imposed by ss 60, 61 and 62 of the ACL in relation to the provision of building services. The contract will not be precluded from being a contract for the supply of services, even though the materials used in the building work involve the supply of goods. “Services” are defined in s 2(b)(i) of the ACL to include: “a contract for or in relation to the performance of work (including work of a professional nature), whether with or without the supply of goods”. Contracts for the supply of fixtures are considered at [16.145]. Section 8 of the ACL provides that chattels affixed to land or premises retain their character as “goods” for the [17.40]

11

Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd (1993) ATPR (Digest) ¶46-106.

12

Wallis v Downard-Pickford (1994) 179 CLR 388.

[17.45]

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517

purposes of the definition in s 2 of the ACL. The consumer guarantees in relation to goods will apply to chattels if the supply was “in trade or commerce” and the supply was to a “consumer”. Section 2 of the Consumer Guarantees Act 1993 (NZ) defines “service” in the same way as s 2 of the ACL. In Jackson v McClintock, 13 a contract for the purchase of a partially completed home unit from the respondent vendor provided that the builder/vendor was to complete the construction of the property, driveways, paths, landscaping, and fencing. McClintock did not complete the work or failed to complete it to an appropriate trade standard. Laurenson J held that the contract in so far as it related to driveways, paths, landscaping, and fencing was for the supply of services. Residential dwelling

A residential dwelling does not fall within the definition of “goods” (see [16.150] or within the definition of “services” in s 2 of the ACL, which includes “any rights (including rights in relation to, and interests in real or personal property)”. The focus of the definition of services in s 2 of the ACL is on “rights” and “interests” in real property, and not on the buildings affixed to the land. The consumer guarantees as to services would be confined to those rights and interests, and would not extend to any dwelling on the land. If a leasehold or freehold interest is supplied to a consumer, in trade or commerce, the consumer guarantees in relation to services will apply and cannot be excluded. For example, if a purchaser makes it known during pre-contractual negotiations that a particular freehold interest is being acquired for a particular purpose, such as grazing cattle, and there are restrictions imposed in relation to the interest in real property, for example, the property does not have water rights under the Water Acts or is subject to vegetation management restrictions, or an easement is necessary to obtain access to a major road, there will be a failure to comply with the ACL, s 61 guarantee of fitness for purpose in relation to the “rights” or “interests” acquired. Other State and Territory legislation provides for consumer protection in relation the sale and purchase of residential dwellings. 14 The definition of services is confined in this narrower sense to rights or interests in real property. The ACL consumer guarantees are confined to defects such as encumbrances on the title, third party rights, or restrictions or limitations that affect the ability of the acquirer to use the interest acquired for some particular purpose made known expressly or by implication to the other party. However, the definition of “services” in s 2 of the ACL would include building services [17.45]

13 14

Jackson v McClintock (1997) 8 TCLR 161. See the Domestic Building Contracts Acts of New South Wales, Victoria and Queensland which contain various requirements, obligations and warranties in connection with the sale of domestic buildings.

518

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.50]

The protections afforded by the ACL consumer guarantees to domestic chattels (goods), and interests and rights in real property (services) will be in addition to any rights the purchaser may have for misleading conduct in breach of s 18 and/or s 30(1) of the ACL. Industry specific regulation ...............................................................................................................................................................................................

The ACL is intended to be a generic consumer law. However, it is recognised that industry-specific regulation may be necessary to deal with industry-specific problems. The Second Explanatory Memorandum states: [17.50]

Special policy considerations apply to supplies of gas, electricity and telecommunications. Since these goods and services are usually supplied via an interconnected system of wires or pipes, disruption to the supply can affect many consumers. These services are also crucial to many areas in human activity such that the consequential losses experienced by consumers can in some instances be substantial. Further, disruptions to the supply can be the result of factors beyond the control of the supplier. 15

Gas and electricity are included in the definition of “goods” set out at [16.120]-[16.125]. Under the ACL, retailer electricity suppliers who contract with consumers are supplying goods and the consumer has a statutory guarantee that the electricity will be of acceptable quality. Consumers also have a statutory guarantee that line function services will be supplied with due care and skill. Section 65 of the ACL provides that the relevant Commonwealth Minister may provide by regulation that Div 1 of Pt 3-2 of the ACL does not apply to the supply of gas, electricity or a telecommunication service. However, the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1) did not do so. There are other State and Territory laws providing for redress in relation to the supply of electricity and gas. 16

Part II – Consumer guarantees; supplier services These consumer guarantees in relation to services overcome the perceived failures of the common law to provide adequate protection for consumers of services. First, it is possible to avoid liability under the law of contract by inserting a term excluding liability. Secondly, under the law of tort it is necessary to prove fault on the part of the supplier which can be a difficulty evidentiary matter for the consumer. The consumer guarantees in relation to services arise independently of contract and it is not possible to exclude, restrict, or modify liability in relation to them. [17.55]

15 16

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.65]. For example, in Victoria see Electricity Industry Act 2000 (Vic), ss 35, 36, 39; Gas Industry Act 2001 (Vic), ss 42, 43, 46; and the Energy Retail Code.

[17.65]

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519

Guarantee of due care and skill ............................................................................................................................................................................................... [17.60]

The scheme of ACL, Pt 3-2, Div 1, subdiv B mirrors Pt 3-2, Div 1, subdiv A:

• s 60 deals with the general suitability of services; • s 61(1) deals with the suitability of services for a particular purpose for which the services are being acquired made known by the consumer to the supplier; • s 61(2) deals with the suitability of services, where the consumer makes known to the supplier, or a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made, the result the consumer wishes the services to achieve; and • s 62 deals with the supply of services within a reasonable time if the time of supply is not fixed by contract. Due care and skill: TPA, s 74(1)

The Joint Communiqué issued by the Ministerial Council on Consumer Affairs (MCCA) when it met in Perth on 4 December 2009 stated that the single national law guaranteeing consumer rights in relation to their acquisition of goods and services would be based on the existing implied conditions and warranties in the TPA. 17 The repealed s 74(1) of the TPA provided: [17.65]

In every contract for the supply by a corporation in the course of a business of services to a consumer there is an implied warranty that the services will be rendered with due care and skill and that any materials supplied in connection with those services will be reasonably fit for the purpose for which they are supplied.

The term “due care” in the repealed s 74(1) of the TPA was construed to mean that the services must be of a standard and quality that could reasonably be expected from a competent person in the particular trade or profession, and that the warranty would be breached if work was carried out in a careless and unskilful manner. The implication of a warranty by s 74(1) was a question of fact to be determined by the courts after an examination of what was said or done in relation to the supply of those services. A breach of the term implied by s 74(1) could occur without any negligence on the part of the defendant. For example, in Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park, 18 the appellant was injured when using a toboggan run at the respondent's recreational park. Using a toboggan when the tracks upon which it ran were wet was dangerous as the toboggan's brakes would then have no traction and be unable to slow or stop it. For this reason, the respondent had a system in place to prevent their use during rain. When the appellant visited the park there were signs warning that the toboggan run would be 17 18

See The MCCA Joint Communiqué (2009), p 4 at http://www.consumerlaw.gov.au/files/2015/09/ Meeting_22_4_Dec_09.pdf. Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park [2007] NSWCA 151 (New South Wales Court of Appeal).

520

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.65]

closed when wet and customers were warned, verbally, that should it start raining they should stop the toboggan within 10 seconds and get off the track. When the appellant commenced her toboggan run it was cloudy but not raining. However, during her run, a sudden heavy shower occurred and she was unable to stop the toboggan from which she was then thrown and injured. The appellant claimed damages relying on a breach of the warranty implied by s 74(1) of the TPA and the tort of negligence. The primary judge concluded that the toboggan and the track were fit for the purpose for which they were supplied The New South Wales Court of Appeal held that by s 74(1) of the TPA the respondent impliedly warranted that any materials supplied by it in connection with the recreational services would be reasonably fit for the purpose for which they were supplied. The materials supplied were the toboggan and the toboggan run, and the purpose for which they were supplied was to enable customers to undertake the toboggan run safely. Ipp JA (with whom Mason P and Tobias JA agreed) concluded: In my opinion, recreational equipment, intended for general use by the public, should not depend for its safeness on the ability of members of the public to react, as soon as they detect rain, by operating a brake within a few seconds. As I have mentioned, regard must be had to the fact that a number of potential users may be inexperienced, react slowly, and panic. 19

The duty imposed by s 74(1) was similar to the common law duty of care and skill in negligence cases as expressed by the High Court in Rogers v Whitaker. 20 The scope of the duty of care at common law is objective and based on what is expected of the “reasonable” person or service provider. The care and skill required of a professional will be objectively assessed by the standards and procedures adopted in the relevant field. In the case of a medical practitioner it extends to “the examination, diagnosis and treatment of the patient and the provision of information in an appropriate case…”. 21 For a professional who is held out as being a specialist in a particular field, the standard will be pitched at a higher level. The specialist will be required to attain the ordinary level of skill, competence and diligence of those who specialise in the same field. 22 There is also an implied term by operation of law in a contract for the supply of services that the supplier will exercise reasonable care and skill in the provision of those services. 23 In Read v Nerey Nominees Pty Ltd, 24 in a case involving a contract for repairs to a motor vehicle which had been extensively damaged in a road accident, it was alleged 19 20 21 22

Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park [2007] NSWCA 151 at [57]. Rogers v Whitaker (1992) 175 CLR 479 (Mason CJ, Brennan, Dawson, Toohey and McHugh JJ). Rogers v Whitaker (1992) 175 CLR 479 at 483, 484. Rogers v Whitaker (1992) 175 CLR 479 at 487.

23

Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 at 1100 (Lord Denning); Voli v Inglewood Shire Council (1963) 110 CLR 74 at 85. Applied in Council of the Shire of Noosa v Farr [2001] QSC 060 at [61]-[62] (Chesterman J). See also Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 (15 July 2010) at [31] (McGill J).

24

Read v Nerey Nominees Pty Ltd [1979] VR 47.

CHAPTER

[17.70]

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521

that there was a warranty that the repairs would be rendered with due care and skill, and that this warranty was implied by s 74(1) of the TPA. Marks J held that that s 74 of the applied to the repair contract. 25 Marks J also held that the common law implied into the repair contract a term that “the repairs would be carried out in a workmanlike manner and with reasonable skill and ability”. 26 It was found that a breach of that implied warranty under s 74 of the might be constituted by a failure to diagnose correctly the fault in the safety system, or because of careless and unskilful work, namely incorrect wiring. In Kovacevic v Holland Park Holdings Pty Ltd, 27 the plaintiff fractured her ankle when she slipped as a result of perspiration of the persons taking part in the exercise class falling on the floor. McGill DCJ held that “it was negligent to cause or permit an exercise class to be conducted … without taking precautions to prevent contamination of the floor from perspiration prior to the commencement of that particular form of exercise”. 28 McGill DCJ also held that there was an implied warranty pursuant to s 74(1) of the TPA, and that the services were not rendered with due care and skill: it seems to me that there was a failure to recognise and make proper allowance for the hazards associated with slipping when exercising on a wooden floor in this particular way and as vigorously as was required by this particular exercise programme, and hence a breach of this warranty. 29 NZ and UK provisions

While the guarantee of acceptable quality in relation to goods is the same as that adopted in the NZ CGA, the wording of the guarantee in ACL, s 60 differs from its New Zealand counterpart. Section 28 of the NZ CGA imposes a guarantee of “reasonable care and skill” in relation to services supplied to a consumer. The intention of the New Zealand Parliament was not to change the common law standard for negligence. 30 For reasons of clarity and consistency it was decided to follow s 13 of the Supply of Goods and Services Act 1982 (UK). 31 However, the NZ CGA goes further than the common law by providing a system of redress. Hawes summarises the position under the NZ CGA: [17.70]

The requirement of reasonable care and skill in s 28 is the same as that found in s 13 of the Supply of Goods and Services Act 1982 (UK), of which has been said that the standard required would appear to be that which the common law demanded, and the statute 25 26 27

Read v Nerey Nominees Pty Ltd [1979] VR 47 at 48. Read v Nerey Nominees Pty Ltd [1979] VR 47 at 49. Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 (15 July 2010).

28 29 30

Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 at [21]. Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 at [41]. Report of the Department of Justice on the Consumer Guarantees Bill (1992), Pt II.

31

Section 13 provides: In a contract for the supply of a service where the supplier is acting in the course of a business there is an implied term that the supplier will carry out the service with reasonable care and skill.

522

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.75]

codified the existing law. The case law indicates that the supplier must exercise the ordinary skill of an ordinary competent person exercising the particular art, the standard being an objective one. 32 Due care and skill: s 60, ACL [17.75]

Section 60 of the ACL provides:

If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that services will be rendered with due care and skill.

There is no definition of “due care and skill” in the ACL. According to the Second Explanatory Memorandum, two requirements must be met: • first, the provider of the service must have “an acceptable level of skill” in the area of activity covered by the service; and • secondly, the provider must exercise due care in supplying the service. 33 It is submitted that the test to be applied in relation to s 60 of the ACL is the same test that applied in relation to s 74(1) of the TPA. The test is an objective one for the court or tribunal which must decide what standard and quality could reasonably be expected from a competent person in the particular trade or profession, and there will be a failure to comply with the guarantee if the work was carried out in a careless and unskilful manner. First requirement: an acceptable level of skill

Under the first requirement, the consumer would be able to cancel the contract, even before any work was performed if the consumer discovered that the supplier was not properly qualified before the services are supplied. It seems that an acceptable level of skill is the level of skill necessary to complete the contract in an acceptable way. It will be necessary to have regard to the nature of the services, the cost of the services (if relevant), any statements made about the services, any representations made about the services by the provider and other relevant circumstances. For example, if a supplier informs a consumer about his or her lack of skill to perform a particular task and the consumer decides to contract on that basis, what is an acceptable level of skill may be lower than would otherwise be the case. On the other hand, if a supplier holds himself or herself out as having specialist skills and expertise, what is an acceptable level of skill would be higher than in normal circumstances. In Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions, 34 the applicant engaged the respondent to produce an interactive e-commerce site with limited functionality to enable users to sell their handmade items and receive a commission on their sales. The contract stipulated that the website would be developed within 42 days. In fact, it took 225 days to develop. When completed the site was workable but it did not [17.80]

32 33 34

See Borrrowdale (ed), Butterworths Commercial Law in New Zealand (4th ed, Butterworths, 2000), (ch 18 by Cynthia Hawes), at [18.3.1]. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.59]. Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions [2014] NSWCATCD 17.

[17.85]

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523

include a number of the functions that had been agreed in the original contract. The respondent admitted that the website was difficult to create and “new” to him. The Tribunal member held that he failed to comply with the guarantee of providing due skill to the services: I am satisfied that he applied what care he could to making good his obligations once he became aware of the level of difficulty. However, he did not have the requisite skill to develop the site for which he quoted. He was making amendments as the project progressed due to the lack of such skill. He charged extra for items clearly envisaged in the original agreement. 35 Second requirement: due care

No guidance is provided as to what the standard, “due care”, means. The Macquarie Dictionary defines “due” in this context to mean “rightful, proper, adequate”. 36 Thus, it does not impose strict liability. Under strict liability, suppliers of services would be responsible for any loss or damage arising from the provision of services whether it was caused by a failure to exercise proper or adequate care or not. The term “due care” was used in the implied warranty provision in the repealed s 74(1) of the TPA. In that context it was construed to mean that the services be carried out in a workmanlike manner and that the warranty would be breached if work was carried out in a careless and unskilful manner. The Second Explanatory Memorandum provides as an example of the application of the guarantee of due care and skill a fact scenario in which a supplier installs a burglar alarm that is easily bypassed by burglars. 37 This is taken from Mayne Nickless Ltd v Crawford, 38 In that case the appellant installed an intruder alarm system in the respondent's shop. The alarm system failed to work during a burglary because the wiring between the system's control box and the Telecom cord was severed. A large quantity of the respondent's stock was stolen. The respondent sued the appellant for breach of warranty implied by s 74 of the TPA. Bollen J of the Supreme Court of South Australia held that s 74 applied. The appellant appealed to the Full Court. Mohr J (who gave the principal judgment) stated: [17.85]

There remains the question that this installation was covered by s 74(1) and/or (2). There can be no doubt that the respondent wished to make her premises more secure … What she bargained for was an alarm system which would operate both on the premises by the sounding of the siren and by automatically telephoning the appellant's control room so that a wider alarm could be raised both to the police and the appellant's own patrols if appropriate. From the passage of her evidence set out earlier she quite clearly saw what she regarded as a potential weakness in the system and that was that if the telephone line was cut there would be no notification to the control room. On this the appellant was reassured by Mr Rooney when he told her “Don't worry about that. There is a battery 35

Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions [2014] NSWCATCD 17 at [45].

36 37

Macquarie Dictionary (4th ed., Macquarie University, Sydney, 2005), 440. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.59].

38

Mayne Nickless Ltd v Crawford [1992] ASC 56-188.

524

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.90]

back-up, the alarm will still go off. If anyone tampers with the alarm it will still activate in the control room.” As events turned out this was not so. The telephone line was severed and the system did not automatically dial the control room. Thus the very purpose that the respondent wished to achieve was made known to the appellant and in my opinion this brings the matter squarely within the terms of s 74 of the TPA. 39 Due care: motor vehicle repair services

In assessing whether mechanical work is inadequate or defective, an important consideration will be establishing the scope of work to be performed. In TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic, 40 the applicant operated a transport business and made use of a Nissan truck as part of that business. The respondent was a motor vehicle repairer. The applicant's truck broke down twice in 2013 and each time it was repaired by the respondent. The first breakdown was caused by the failure of the turbo. The cause of the second failure was the failure of the camshaft. The camshaft and bearings were old and worn and had undergone 450,000 kms of use. The applicant alleged that the second breakdown was the result of the failure to remove and replace the camshaft at the time of the first repair. The applicant alleged that respondent should have inspected the camshaft and bearings at the time of the first repair of the turbo. The Tribunal member stated: [17.90]

The respondent is a licenced repairer, therefore is deemed to have and be capable of exercising the requisite skills. 41

The Tribunal found that the respondent's failure to inspect and replace the camshaft and bearings in the first repairs constituted acting without due care and skill. 42 The scope of the work for which the respondent was engaged was influential in determining whether the repairs were carried out with due care and skill. The respondent asserted a narrow scope of work (limited to get the truck working). The applicant asserted a broader scope of work (assessing the problem and undertaking repairs). The Tribunal accepted the applicant's submissions on this point: its mechanical ignorance precluded it issuing explicit instructions regarding the exact parts to be replaced or checked. This is a common situation faced by mechanics and repairers, and is no excuse for not performing work in a thorough and timely manner. Moreover, the respondent should have addressed any uncertainty by clarifying the scope of work to be undertaken… 43

39 40 41 42 43

Mayne Nickless Ltd v Crawford [1992] ASC 56-188 at 57,915. TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147. TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [109]. TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [126]. TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [120].

[17.95]

CHAPTER

17

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525

Guarantee as to fitness for a particular purpose or desired result ...............................................................................................................................................................................................

The guarantees imposed by s 61 of the ACL are expressed in similar terms to the warranties implied by the repealed s 74(2) of the TPA; however, the reference to materials in s 74(2) is replaced by “product” in s 61(1) of the ACL. Section 61(1) provides: [17.95]

If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose.

Section 61(2) provides: If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer makes known, expressly or by implication, to (i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made; the result that the consumer wishes the services to achieve; there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.

The guarantees in s 61(1) and (2) are not expressed in absolute terms. Whether the services or the finished product might reasonably be expected to achieve that result is a question of fact. 44 The courts are likely to apply a common sense approach in determining what was the particular purpose made known or the result the consumer desires the service to achieve. Furthermore, s 61(1) and (2) only require the services to be reasonably fit for that purpose, or of such a nature and quality that they might reasonably be expected to achieve that result. Section 61(3) provides that the guarantees in s 61(1) and (2) do not apply “if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on the skill or judgment of the supplier”. Section 61(4) of the ACL provides that the guarantee as to fitness for a particular purpose does not apply to the supply of professional services by a qualified architect or engineer. 44

See Warnock v Australian and New Zealand Banking Group Ltd (1989) ATPR ¶40-928.

526

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.100]

Fitness for a particular purpose: TPA, s 74(2) [17.100]

The repealed s 74(2) of the TPA provided:

Where a corporation supplies services (other than services of a professional nature provided by a qualified architect or engineer) to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation any particular purpose for which the services are required or the result he desires the services to achieve, there is an implied warranty that the services supplied under the contract for the supply of the services and any materials supplied in connection with those services will be reasonably fit for that purpose or are of such a nature and quality that they might reasonably be expected to achieve that result, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him to rely, on the corporation's skill or judgment.

Section 74(2) was based on the warranty of fitness for purpose that is implied by the common law in contracts for the sale of goods, and in contracts for the supply of work and materials, including those provided by professionals. 45 Section 74(2) was not expressed in absolute terms; the statutory warranty implied is that the services would be reasonably fit for that purpose. The implication of a warranty by s 74(2) was a question of fact to be determined by the courts after an examination of what was said or done in relation to the supply of those services. A breach of the term implied by s 74(2) could occur without any negligence on the part of the defendant. Section 74(2) did not imply any warranty where it was unreasonable for the consumer to rely on the corporation's skill or judgment. Making known the purpose

In TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic (considered at [17.90]), the applicant operated a transport business and made use of a Nissan truck as part of that business. The first and second repairs each took two months to complete. The Tribunal found that the applicant had expressly made known the particular purpose for which the services were being acquired, namely to have repaired the truck so that it was fit to be driven and conduct a transportation business. 47 Given that both repairs were inadequate or defective there was a failure to comply with the guarantee in ACL, s 61(1). 48 In Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd, 49 the first respondent was a tour company which produced a brochure which advertised the “The Migration Tour” as an “unparalleled once in a lifetime experience” to see the wildebeest migration in Africa's Maasai Mara National Park and the Serengeti National Park. In [17.105]

46

45

See Samuels v Davis (1943) 1 KB 526 at 527.

46 47

TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147. TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [144]. TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [145].

48 49

Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30.

[17.115]

CHAPTER

17

CONSUMER GUARANTEES FOR SERVICES

527

small print at the bottom of the page was a paragraph that stated: “Commencement of the gathering of the animals before the migration is subject to weather conditions”. The applicants' tour took place in April, which was the wettest month of the year in Tanzania which made the roads hazardous, and the country was plagued with insects. The respondent failed to warn the applicants of this. Parts of the itinerary did not eventuate. In particular, the tour party did not see vast herds of animals in the Maasai Mara or the Serengeti. The preponderance of evidence was that vast herds were never likely to be seen at that time of year. The Tribunal held the purpose of witnessing the mass migration was not made known to the respondent by the applicants, either expressly or by implication: They simply came to their own understanding as to what the tour would involve from the e-mail of 12 January, and the brochure. They did not communicate their desire to see, for instance, “The Migration” to the first respondent. Therefore that particular section does not come into play, and no adverse findings are made under that section. 50

The statutory causes of action for failure to comply with the consumer guarantees as to services are in addition to the other rights and remedies the consumer may have, so there is scope for overlap, where, for example, the supplier engages in misleading conduct with respect to the attributes of services supplied contrary to ss 18, 29(1)(m) and 34 of the ACL. The Tribunal found that the respondent made representations that induced the applicants into believing that they would see the migration and that these representations were misleading in contravention of s 18 of the ACL. 51 Will the desired result be achieved?

Whether the services might reasonably be expected to achieve that result for the purposes of s 61(2) of the ACL is a question of fact. Suppliers of services must be careful not to lead consumers to believe a particular result is achievable when they ought to know that such a result is unlikely. The difference between the guarantees provided by ss 60 and 61 can be explained by reference to an example. Suppose a consumer takes her car, which has been damaged in a hailstorm, to be repaired by a car body works and spray painter. After the work is completed, the dents in the bodywork are still visible. The consumer may not have a remedy against the car body works for failure to comply with the guarantee of due care and skill in s 60 of the ACL. However, if she asked the car body works to restore the car to its original condition, she may have a remedy for failure to comply with the guarantee imposed by s 61(2) of the ACL. [17.110]

Guarantee as to reasonable time for supply ...............................................................................................................................................................................................

Contracts for the supply of services generally stipulate the time for providing the service. Section 62 imposes a guarantee as to the time of completion. It provides: [17.115]

50

Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30 at [158].

51

Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30 at [152].

528

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.120]

If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the time within which the services are to be supplied: (i) is not fixed by the contract for the supply of the services; or (ii) is not to be determined in a manner agreed to by the consumer and supplier; there is a guarantee that the services will be supplied within a reasonable time.

The Second Explanatory Memorandum states: The time period that is reasonable will vary significantly depending on the nature of the services to be provided. The reasonable time to build a house will obviously be much longer than what is reasonable for providing a tree-lopping service. Accordingly, it is not possible to set out in the ACL what is reasonable and the courts and tribunals will need to consider all the circumstances that apply to a particular case to determine the time period that is reasonable. 52

In TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic 53 (considered at [17.90]), the time taken to effect the first repairs (approximately two months) far exceeded the original estimate (two weeks). The Tribunal found that there was a failure to comply with the guarantee in s 62 of the ACL: the respondent delayed to commence work on the truck for a week after receiving the parts, and then took a further seven business days to address the problems. Given the amount of time which had already been lost, and the applicant's pressing need to recover the vehicle – a fact known to the respondent – it seems unreasonable for the respondent to have delayed to commence work for this amount of time. This is particularly so as the respondent knew the date on which the parts would arrive by, and so could have scheduled the truck repairs to occur accordingly. 54

Offences relating to consumer transactions ...............................................................................................................................................................................................

Consumer guarantees

Section 169 of the ACL makes it a criminal offence not to display a notice that complies with a determination by the Commonwealth Minister pursuant to s 66 of the ACL regarding specified information that must be provided to consumers at the point of sale relating to the consumer's right under the consumer guarantees regime. Section 169 provides: [17.120]

(1) A person commits an offence if: (a) the person makes a supply to a consumer to which: (i) guarantees apply under Division 1 of Part 3-2; and (ii) a determination under subsection 66(1) applies; and 52 53 54

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.64]. TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147. TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 at [164].

CHAPTER

[17.125]

17

CONSUMER GUARANTEES FOR SERVICES

529

(b) a notice that meets the requirements of the determination is not, in accordance with the determination: (i) if the consumer takes delivery of the goods or services at the supplier's premises – displayed at those premises; or (ii) otherwise – drawn to the consumer's attention before the consumer agrees to the supply of the goods.

The maximum fine payable for a contravention of them is $50,000 for a body corporate and $10,000 for any other person. The offences are ones of strict liability so that it is not necessary to consider the intent of the person committing the offence. Miscellaneous provisions ...............................................................................................................................................................................................

Proof of transaction

Section 100(1) of the ACL imposes a mandatory requirement on suppliers of goods and services to consumers, where the total price (excluding GST) is $75, to provide a “proof of transaction”: [17.125]

(1) If: (a) a person (the supplier), in trade or commerce, supplies goods or services to a consumer; and (b) the total price (excluding GST) of the goods or services is $75 or more; the supplier must give the consumer a proof of transaction as soon as practicable after the goods or services are so supplied. (2) If: (a) a person (the supplier), in trade or commerce, supplies goods or services to a consumer; and (b) the total price (excluding GST) of the goods or services is less than $75; the consumer may request a proof of transaction from the supplier as soon as practicable after the goods or services are so supplied. (3) If a request is made under subsection (2), the supplier must give the proof of transaction within 7 days after the request is made.

A “proof of transaction” is defined in s 100(4): (4) A proof of transaction for a supply of goods or services to a consumer is a document that: (a) identifies the supplier of the goods or services; and (b) if the supplier has an ABN – states the supplier's ABN; and (c) if the supplier does not have an ABN but has an can – states the supplier's ACN; and (d) states the date of the supply; and (e) states the goods or services supplied to the consumer; and

530

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[17.130]

(f) states the price of the goods or services.

The following examples provided of a proof of transaction: (a)

a tax invoice within the meaning of the A New Tax System (Goods and Services Tax) Act 1999 (Cth);

(b)

a cash register receipt;

(c)

a credit card or debit card statement;

(d)

a handwritten receipt;

(e)

a lay-by agreement;

(f) a confirmation or receipt number provided for a telephone or internet transaction. This provision is similar to s 161A of the repealed Fair Trading Act 1999 (Vic), which imposed an obligation on business to provide a “proof of transaction” for purchases of more than $50, and the right for a consumer to request this proof if the transaction was valued at $50 or less. Its inclusion in the ACL was agreed by the MCCA on 4 December 2009. Enforcement powers and remedies

A person contravening s 100(1) or (3) of the ACL is liable to pay a civil pecuniary penalty of up to: [17.130]

• $15,000 for a body corporate; • $3,000 for other persons. The following enforcement powers and remedies apply in relation to a contravention of s 100(1) or (3) of the ACL: • undertakings; 55 • substantiation notices; 56 • public warning notices; 57 • infringement notices; 58 • injunctions; 59 • damages; 60 • compensatory orders; 61 • orders for non-party consumers; 62 55 56 57 58 59 60 61 62

ACL, s 218. ACL, s 219. ACL, s 223. ACL, s 134A. ACL, s 232. ACL, s 236. ACL, s 237. ACL, s 239.

[17.135]

CHAPTER

17

CONSUMER GUARANTEES FOR SERVICES

531

• non-punitive orders; 63 • adverse publicity orders; 64 and • orders disqualifying a person from managing corporations. 65 No criminal liability attaches to a contravention of s 100(1) or (3) of the ACL. Itemised bills for consumer services

Section 101 of the ACL provides that a consumer is entitled to ask for an itemised bill from a supplier of consumer services. An itemised bill may assist in resolving disputes since it ensures that suppliers are required to stipulate precisely what has been provided, and how the price for the services was arrived at. The consumer has a written record which can be relied upon as evidence in the event of a dispute. The itemised bill must provide certain minimum information specified in s 101(1) which provides: [17.135]

(1) If a person (the supplier), in trade or commerce, supplies services to a consumer, the consumer may request that the supplier give the consumer an itemised bill that: (a) specifies how the price of the services was calculated; and (b) includes, if applicable, the number of hours of labour that related to the supply of the services and the hourly rate for that labour; and (c) includes, if applicable, a list of the materials used to supply the services and the amount charged for those materials.

A request for an itemised bill must be made within 30 days after the consumer receives a bill or account from the supplier, 66 and the supplier must provide the itemised bill within seven days after the request is made. 67 The supplier must not charge the consumer for the itemised bill. 68

63

ACL, s 246.

64

ACL, s 247.

65

ACL, s 248.

66

ACL, s 101(2).

67

ACL, s 101(3).

68

ACL, s 101(4).

CHAPTER 18

......................................................................................................................

Remedies Relating to Guarantees Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 15.

Introduction This chapter deals with the remedies available to a consumer when the supplier of goods or services, or the manufacturer of goods fails to comply with one or more of the consumer guarantees. In this situation, it is advisable, initially, to address two matters – first, the nature of the supplier's or manufacturer's failure to comply with the relevant consumer guarantee; and secondly, the variety of remedies that may be available to the consumer. When a failure to comply with a consumer guarantee in relation to goods occurs, the consumer has a choice under the ACL. The consumer can either pursue the manufacturer of the goods; or pursue the person that supplied the goods to the consumer. The consumer's rights against the supplier of goods are more extensive than they are against the manufacturer. The consumer can only recover its losses (monetary damages) from the manufacturer (subject to s 271(6)), whereas the consumer has specific repair, replacement and refund rights against the supplier of the goods. The statutory causes of action for failure to comply with the consumer guarantees arise independently of contract. They arise as a consequence of goods or services having been “supplied”. 1 This avoids the difficulty sometimes encountered with the statutory implied terms regime where consumers cannot bring actions against suppliers of faulty goods because they are unable to point to a contract onto which the implied term can be grafted. These statutory causes of action are in addition to the other rights and remedies the consumer may have. 2 In all cases, the ACL recognises that a failure to meet one of the guarantees may result in consequential damages, and allows the consumer to recover these to ensure that the [18.05]

1 2

See [16.160]. See, eg, Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261 (13 July 2012) which was decided on the basis that both the implied conditions of fitness for purpose and merchantable quality under the Sale of Goods Act 1923 (NSW) and the guarantee of acceptable quality under s 54 of the ACL (NSW) applied to the transaction.

534

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.10]

consumer is fully compensated. The ACL regulators have issued a guide that explains the remedies available to consumers when goods or services fail to meet the consumer guarantees. 3 This chapter is divided into five parts: • Part I – considers the rights and remedies available against suppliers of goods. • Part II – considers rights and remedies available against manufacturers of goods. • Part III – considers the rights and remedies available against suppliers of services. • Part IV – considers rights and remedies available against linked credit providers. • Part V – considers the extent to which suppliers and manufacturers can use exclusion clauses and other limitations of liability in their contracts.

Part I: Remedies against suppliers of goods Introduction ...............................................................................................................................................................................................

The statutory causes of action that can be brought against suppliers of goods are regulated by Pt 5-4, Div 1, Sub-div A of the ACL. Under the Sale of Goods Acts there are two tiers of implied terms, conditions and warranties, and different remedies attaching to their breach. Under the Sale of Goods Acts, a consumer may rescind the contract of sale and reject the goods supplied where the supplier is in breach of an express or implied condition of the contract. It appears to be the design of these Acts that the various “conditions” they imply are to be strictly observed so that if the supplier is in breach of any one of them, no matter how trivial the breach, it will allow the consumer to rescind the contract and reject the goods. On the other hand, rescission is not possible where the supplier is in breach of a mere implied “warranty”. In such a case, the consumer's remedy is a claim for damages only. 4 The repealed s 75A of the TPA created a special provision governing the rescission of consumer contracts for the supply of goods. However, this provision applied only where there had been a breach of a condition implied by Pt V, Div 2 of the TPA. 5 One of the purposes behind the consumer guarantees law is to overcome the lack of clarity associated with the two tiers of implied terms, conditions and warranties, and different remedies attaching to their breach. However, some uncertainty still surrounds the manner in which the different remedies available under the ACL apply in practice. Section 259 of the ACL establishes a hierarchy of remedies under which the supplier is given the opportunity to remedy the failure where it is capable of being remedied. If the [18.10]

3 4

See Australian Consumer Law, Consumer Guarantees: A Guide for Businesses and Legal Practitioners, at http://www.consumerlaw.gov.au/files/2015/09/consumer_guarantees_guide.pdf. See the discussion in Sutton, Sales and Consumer Law (4th ed, LBC Information Services, 1995), [7.15].

5

See the discussion in Sutton, Sales and Consumer Law (4th ed, LBC Information Services, 1995), [7.46].

[18.10]

CHAPTER

18

REMEDIES RELATING TO GUARANTEES

535

failure cannot be remedied or is a major failure, the consumer may reject the goods or obtain damages in compensation for any reduction in value below the price paid. The consumer may take action against the supplier of goods for: • non-compliance with the guarantee as to title; 6 • non-compliance with the guarantee as to undisturbed possession; 7 • non-compliance with the guarantee as to undisclosed securities; 8 • non-compliance with the acceptable quality guarantee; 9 • non-compliance with the guarantee as to fitness for any disclosed purpose; 10 • non-compliance with the description guarantee; 11 • non-compliance with the guarantee relating to the supply of goods by sample demonstration model; or 12 • non-compliance with the guarantee relating to express warranties by a supplier. 13 Section 259 of the ACL provides: (1) A consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, goods to the consumer; and (b) a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2 (other than sections 58 and 59(1)) is not complied with. (2) If the failure to comply with the guarantee can be remedied and is not a major failure: (a) the consumer may require the supplier to remedy the failure within a reasonable time; or (b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time–the consumer may: (i) otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or (ii) subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection. (3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: 6 7 8 9 10 11 12 13

ACL, s 51. See [16.185]. ACL, s 52. See [16.190]. ACL, s 53. See [16.195]. ACL, s 54. See [16.205]–[16.345]. ACL, s 55. See [16.350]–[16.380]. ACL, s 56. See [16.385]. ACL, s 57. See [16.390]. ACL, s 59(2). See [16.400]–[16.405].

536

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.15]

(a) subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection; or (b) by action against the supplier, recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods. (4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. (5) Subsection (4) does not apply if the failure to comply with the guarantee occurred only because of a cause independent of human control that occurred after the goods left the control of the supplier. (6) To avoid doubt, subsection (4) applies in addition to subsections (2) and (3). (7) The consumer may take action under this section whether or not the goods are in their original packaging.

Who may bring the cause of action against the supplier? ...............................................................................................................................................................................................

The only person who may bring a cause of action against the supplier under s 259 is a “consumer” as defined in s 3 of the ACL. The definition of the word “consumer” is considered at [16.70]–[16.115]. A person will only be a “consumer” for the purposes of s 3 of the ACL if they “acquire” goods. The definition of “acquire” in s 2(1) of the ACL is inclusive but the examples given – acquire by way of purchase, exchange, lease hire or hire-purchase – are all transaction based, and have in common an acquisition of goods by payment of some form of consideration. This narrows the scope of the cause of action and would exclude acquisition by way of gift. However, s 266 of the ACL provides that the recipient of a gift can enforce the consumer guarantees against the supplier. Thus, where goods are acquired by a consumer paying for them, but the goods are for a family member or friend, that family member or friend has the same rights as the consumer who acquired them. [18.15]

What is a major failure? ...............................................................................................................................................................................................

The ACL classifies failures into those that are “major” and those that are not major. The equivalent expression in s 21 of the NZ CGA is “a failure of a substantial character”. It is unclear why the word “major” was adopted in Australia, rather than the New Zealand term “a failure of a substantial character”. This may raise issues about the relevance of New Zealand authorities in Australia, despite the statement in the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, that the provisions set out in Pt 3-2, Div 1 of the ACL are couched in terms broadly similar to those used in the NZ CGA and “the jurisprudence applicable to that Act is of relevance to those provisions”. [18.20]

[18.25]

CHAPTER

18

REMEDIES RELATING TO GUARANTEES

537

Since the right to rescind and reject the goods depends on whether the failure is major or not, an essential first step is to determine whether the failure is “major”. There is a lack of clarity in the tests for distinguishing between major and non-major failures that has been the subject of some criticism. 14 Section 260 of the ACL sets out a number of alternative tests for determining whether a failure is “major”. It provides a failure is major if: (a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or (b) the goods depart in one or more significant respects: (i) if they were supplied by description – from that description; or (ii) if they were supplied by reference to a sample or demonstration model – from that sample or demonstration model; or (c) the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; (d) the goods are unfit for a disclosed purpose that was made know to: (i) the supplier of the goods; (ii) or a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (e) the goods are not of acceptable quality because they are unsafe.

In relation to s 260(a), the matters that a reasonable consumer would take into account include: • how soon the fault developed after supply: the shorter the time the more serious the fault; • the price of the goods: the more expensive the goods, the less acceptable is any fault; • any representations made about the goods by the supplier or manufacturer, either orally or in the advertising or packaging; • any other faults with the goods: a number of small faults may not be serious, but their cumulative effect may be major. Cannot be remedied or is a major failure: NZ approach ...............................................................................................................................................................................................

The remedies available against a supplier of goods in ss 259(2) and (3) of the ACL are predicated on a determination of whether the goods can be remedied or not. It is only if the goods cannot be remedied and the failure is major that the consumer has a right to reject the goods. [18.25]

14

Griggs, Freilich and Messel, “Consumer Guarantees – Lessons to be Learnt from Afar” (2015) 23 Australian Journal of Competition and Consumer Law 36.

538

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.25]

This mirrors s 18(3) of the NZ CGA which provides: Where the failure cannot be remedied or is of a substantial character within the meaning of Section 21 of this Act the consumer may – (1) subject to Section 20 of this Act, reject the goods in accordance with section 22 of this Act; or (2) obtain from the supplier damages in compensation for any reduction in value of the goods below the price paid or payable by the consumer for the goods.

The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, states that the provisions set out in Pt 3-2, Div 1 of the ACL are couched in terms broadly similar to those used in the New Zealand Consumer Guarantees Act 1993 (NZ) and “the jurisprudence applicable to that Act is of relevance to those provisions.” 15 The application of the remedies available against the supplier of defective goods under the NZ CGA was first considered in Stephens v Chevron Motor Court Ltd. 16 The District Court of New Zealand held that the correct approach was first to consider whether the goods were of “acceptable quality”. If the goods are not of acceptable quality, the consequence is that the purchaser is then entitled to seek cancellation of the contract if the failure cannot be remedied or it was of a “substantial character” as envisaged by s 21 of the NZ CGA. However, it may not be immediately apparent whether the defects can be remedied. If the purchaser requires the trader to remedy any faults within a reasonable time in accordance with s 19 of the NZ CGA, the consumer is entitled to require the supplier to provide information as to the nature and extent of the defect before being in a position to consider whether the defect is of a substantial character. The election to repair does not preclude the purchaser from cancelling the contract if it subsequently transpires that the defect is of a substantial character. If the failure to comply with the guarantee of acceptable quality was of a “substantial character” within the meaning of s 21 of the NZ CGA, or if the faults cannot be remedied, it is necessary to ask whether the purchaser exercised their right to reject the goods within a reasonable time. In Stephens v Chevron Motor Court Ltd, the appellant consumer purchased a 1983 Mitsubishi Pajero from the respondent dealer on 25 November 1994. Within a matter of days of purchase, the vehicle was found to be out of oil, with no brake or clutch fluid. The consumer elected to repair the vehicle and returned it to the respondent. Shortly afterwards, the vehicle started to burn oil and the consumer informed the dealer that she wished to reject the vehicle. It was thought that the turbo charger needed to be cleaned, and without consulting the consumer, the dealer sent the vehicle to a specialist repairer. 15

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.9], p 179.

16

Stephens v Chevron Motor Court Ltd [1996] DCR 1.

[18.25]

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539

The repairer replaced the valve stem oil seals, but the vehicle continued to burn oil. The vehicle was returned to the repairer, which removed the turbo charger, finding no oil traces that might suggest that the turbo charger was at fault. It was found that the rings were worn and had to be replaced. The cost of repairs amounted to $1,200, and was paid by the dealer. In January 1995, after the last repairs, the consumer refused to accept the vehicle back and ceased paying hire purchase instalments. Cancellation of the contract was sought by solicitor's letter dated 27 January 1995. A complaint was lodged with the Christchurch Motor Vehicle Disputes Tribunal. The tribunal required the appellant to accept the vehicle back. The vehicle continued to suffer further mechanical problems. On appeal, Judge MacDonald observed: The issues of whether the vehicle was not of “acceptable quality” and whether there had been a failure of a “substantial character” are in my opinion linked, with the test for acceptable quality being “fit for all purposes for which the goods [of the type in question] are commonly supplied” and “substantial failure” being “the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure.” 17

His Honour held: Whether a defect is of a “substantial character” is obviously a matter of degree in any given case. On a monetary level being required to spend say $1,000 on repairs in respect of a vehicle purchased for $5,000 might indicate a failure of a “substantial character” but that would not necessarily hold true for the same repairs on a vehicle of significantly greater value. 18

On the facts, the repairs represented only 5% of the purchase price; nevertheless, Judge MacDonald concluded that the failure (a mechanical defect: badly worn rings which had to be replaced) was of a substantial character, because “a reasonable consumer would not have acquired the vehicle if acquainted with the badly worn state of the rings and the cost of repair.” 19 Judge MacDonald concluded: I consider that the correct approach to the Act was to first consider whether the vehicle was of “acceptable quality”. The tribunal considered it was not and as I perceived it there was no quarrel with that conclusion. The consequence of that conclusion was that the appellant was then entitled to seek cancellation of the contract if the failure could not be remedied or it was of a “substantial character” as envisaged by s 21. In that regard I have found that the failure was of a “substantial character”. I have also found that the remedy sought was cancellation and not repair. Therefore once cancellation was sought the respondent was obliged to accept it. It was not for the respondent to decide that it was unnecessary and proceed to carry out repairs which is effectively what occurred. 20 17 18 19

Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 6. Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 6. Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 6.

20

Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 21.

540

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.30]

Cannot be remedied or is a major failure: Australian approach ...............................................................................................................................................................................................

The tests of whether goods are of “acceptable quality” for the purposes of s 54 of the ACL and whether there is a “major failure” to comply with that guarantee for the purposes of s 260 of the ACL are linked in that both tests adopt a “reasonable consumer” test. The test of “acceptable quality” is: “fit for all of the purposes for which goods of that kind are commonly supplied”, and whether a reasonable consumer fully acquainted with the state and condition of the goods, (including any hidden defects of the goods), would regard as acceptable, having regard to the matters in subs 54(3). The test of “major failure” in s 260(a) is: “the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure”. The Tribunal member in Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic, 21 commented on this similarity. In that case, Margaret Franklin & Associates (MFA) entered into a contract with ADL for the supply of software pursuant to a licence. The software was web-based. In order to use the software clients needed to access the web-based system through the internet. Once logged in, users could ask for financial planning documents and reports to be produced, downloaded and/or printed. The Tribunal held that the software itself was expressly included within the definition of “goods” in ACL, s 2(1). New releases of the software would also constitute the supply of goods. There were three defects in the software as supplied: there was a failure to provide the email noting system compatible with MFA's system, a failure of the software to merge the template from MFA licensed adviser partner when merging other templates as well, and there was an error checking failure on one of the reports. On the basis of these defects MFA terminated the software licence and sought a refund. In relation to the guarantee of acceptable quality, the Tribunal member found: [18.30]

Overall it cannot be said that the software was not of acceptable quality under section 54 of the ACL having regard to the matters set out in that section. In particular, the software was fit for the purpose for which software of that kind was commonly supplied as a reasonable consumer fully acquainted with it would regard as acceptable. It is inevitable that software will have some problems, particularly when it needs to be compatible with software provided by third parties. The reasonable consumer envisaged under section 54 would take this into account when considering the fitness of the software. 22

However, in relation to the guarantee of fitness for purpose, the Tribunal member found: In my view, the failure of the software to provided [sic] the email noting system and to merge properly with the template from MFA's licensed adviser partner were breaches of 21 22

Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238. Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 at [70].

[18.35]

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541

section 55. These were things that MFA explained they needed from the system, yet they were not part of the functionality of the software upon delivery and installation on MFA's system. 23

In deciding whether MFA was legally justified in rejecting the goods, the Tribunal member had to determine whether the failure to comply with the guarantee of fitness for purpose was a major failure. The Tribunal member noted a reasonable consumer test was common to both the guarantee of acceptable quality in s 54 of the ACL and the test in s 260 for what constitutes a major failure and observed: It is fair to say that no reasonable consumer would ever be willing to acquire goods which were not of acceptable quality and in breach of the guarantee in section 54. It might be said that this is wrong because a reasonable consumer would always be willing to acquire goods which were not of acceptable quality provided they could be obtained at a much lower price than they were being offered. But I do not think that this can be the test intended by section 260 because otherwise no failure could ever be a “major failure”. Thus it would appear that a breach of section 54 will always be one which is a “major failure” permitting a purchaser to reject the goods, provided the entitlement to do so has not been lost under the provisions of section 262. 24

With respect, this disregards the overall scheme of Pt 5-4 of the ACL – the remedies relating to guarantees. The definition of a major failure in s 260 needs to be read in conjunction with the remedies available against a supplier of goods pursuant to ss 259(2) and (3). While rejection and a full refund may be the preferred remedy for the consumer, the ACL recognises that this may be unjust from the supplier's perspective, especially if the failure is not major and the supplier is willing to repair or replace the goods. Accordingly, rejection and a refund are not available unless the failure is major, and the consumer has not lost the right to reject the goods. Where the failure to comply with the guarantee of acceptable quality is not major, the remedies available are repair or replacement at the supplier's option. It was never intended that a failure to comply with the guarantee of acceptable quality would always be a major failure entitling the consumer to reject the goods. Whether the goods can be remedied will depend on the cost of the repairs in relation to the price of the goods as the court held in Stephens v Chevron Motor Court Ltd. 25 It will also depend on the nature of the goods, the time taken to effect the repair and the level of disruption that the consumer is likely to suffer while the repairs are being carried out. Major failure: aggregation of defects

In Cary Boyd v Agrison Pty Ltd, 26 (considered at [16.280]), the applicant made a number of claims, including a claim that the tractor delivered to him failed to comply

[18.35]

23

Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 at [72].

24 25

Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 at [84]-[85]. Stephens v Chevron Motor Court Ltd [1996] DCR 1 at 6.

26

Cary Boyd v Agrison Pty Ltd [2014] VMC 23.

542

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.40]

with the demonstration model he inspected in terms of its quality, state or condition, as required by ACL, s 57; that the tractor failed to comply with a disclosed purpose as to speed as required by ACL, s 55; and that these failures “individually or collectively” amounted to a major failure within the meaning of ACL, s 260. The defendant, on the other hand, submitted that the alleged defects in quality, state or condition such as an overspray on a headlight, insufficient gas in bonnet struts could not be considered anything but easily repairable minor defects. The court held: on a proper construction of s 260 of the ACL, that the use of the conjunction “or” after each of sub-paragraph (a), (b), (c) and (d) has the effect that to amount to a major failure only one of the sub-paragraphs need qualify and that s 260 does not require a consumer to prove each sub-paragraph in order to satisfy the Court that there has been a major failure. 27

The court also held that: despite the use of “a”, to suggest the singular, “a major failure” might be constituted by a series of specific and individual defects which taken as a whole constitute one major failure. I also agree with this interpretation of s 260 of the ACL. 28

The court concluded: the tractor suffers a major failure due to a steering defect … I am also satisfied that the tractor is incapable of obtaining speed that Mr Boyd was told the tractor could reach in response to a disclosed purpose known to Agrison and moreover that the tractor on the balance of probabilities was suffering rust occasioned by corrosion of an extent that is counter indicative to the tractor being a new tractor and that these matters either individually or collectively amount to a major failure within the meaning of the ACL. 29 Major failure: unsafe goods

Safety is one of the attributes to be considered in determining whether goods are of acceptable quality (see [16.245]). “Safety” for the purposes of s 54(2)(d) of the ACL is a relative concept to be determined according to the characteristics to be taken into account by a reasonable consumer, including the nature of the goods and their price. Safety is also a relevant consideration in determining whether there has been a major failure to comply with a guarantee. For the purposes of s 260 of the ACL, safety is also to be assessed in a relative sense. Goods that are relatively lowly priced may pose some risk to safety, without there being a major failure to comply with the guarantee of acceptable quality. This will be especially so if the goods can be easily remedied without undue expense and rendered completely safe. [18.40]

27 28

Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [50]. Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [51]. See also Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 at [65]. The same approach has been adopted in New Zealand. See Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170 at [32]-[33].

29

Cary Boyd v Agrison Pty Ltd [2014] VMC 23 at [112].

CHAPTER

[18.50]

18

REMEDIES RELATING TO GUARANTEES

543

In Marwood v Agrison Pty Ltd, 30 the applicant purchased a new Agrison tractor for $26,000 in May 2012. Mr Marwood used the tractor in his vineyard and needed a tight turning circle so that the tractor could go from one row to the next at the end of a row. The tractor had power steering which was defective and did not allow the tractor to turn more than 20 degrees. He sought a refund of the purchase price on the basis that he had rejected the tractor in September 2012 because the tractor was unsafe, and that this was a major failure to comply with the guarantee of acceptable quality in ACL, s 54. Even though the defective steering posed a threat to the safety of the driver, the Tribunal member did not consider that it amounted to a major failure because it could be remedied relatively simply. It would only be a major failure if the bleeding of the steering system did not remedy the defect. 31 Remedies – major failure ...............................................................................................................................................................................................

Section 259(3) of the ACL provides that if the failure is major or cannot be remedied, the consumer (not the supplier) has a choice. The consumer may: [18.45]

(a)

reject the goods by notifying the supplier of the rejection and the ground or grounds for rejecting the goods; or

(b)

keep the goods but asking for compensation to make up the difference in value caused by the failure.

Rejecting the goods

The consequences of rejecting goods are provided for in s 263 of the ACL. If the consumer rejects the goods under s 259(3) the consumer must: [18.50]

(a) notify the supplier; and (b) return the goods, unless the goods cannot be returned, removed or transported “without significant cost to the consumer,” in which case the supplier must collect the goods at their own expense and within a reasonable time.

If the consumer decides they would like to reject the goods they need to advise the supplier of their intention to do so and their reason. This can be done orally or in writing. The consumer would normally be responsible for returning the goods. If the cost of returning the goods is “significant” the supplier is responsible for collecting them from the consumer at the supplier's expense. Section 263(2) does not indicate what would constitute a “significant” cost, and whether it is to be determined in absolute or relative terms. Section 263(6) provides: If the property in the rejected goods has passed to the consumer before the rejection was notified, the property in those goods rejected revests in the supplier on the notification of the rejection. 30

Marwood v Agrison Pty Ltd [2013] VCAT 1549.

31

Marwood v Agrison Pty Ltd [2013] VCAT 1549 at [27].

544

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.55]

Thus, any risk to the goods from the notification of rejection onwards is borne by the supplier. If the goods are, for example, uninsured and are damaged by fire, the supplier must bear the loss. After the consumer has returned the goods, or they have been collected by the supplier, the supplier must provide the remedy the consumer has chosen. Section 263(4) of the ACL provides that the consumer may choose between: • a refund; or • replacing the rejected goods with goods of the same type, and of similar value, if such goods are reasonably available to the supplier. The consumer is entitled to a full refund of the purchase price and there is no provision in the ACL for the supplier to be compensated for any depreciation in value of the rejected goods. Section 263(4) is in similar terms to s 23(1) of the NZ CGA. Section 263(5) of the ACL provides that if the consumer chooses a refund after rejecting the goods, the supplier is specifically precluded from providing replacement goods to satisfy the requirement of a refund. If the consumer chooses replacement of the rejected goods, s 264 of the ACL provides that the same guarantees are then applicable to the replaced goods as applied to the goods originally supplied. Loss of right to reject

Section 262(1) of the ACL provides that the right to reject goods conferred by s 259(3) is lost if: [18.55]

(a) the rejection period for the goods has ended; or (b) the goods have been lost, destroyed or disposed of by the consumer; or (c) the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or (d) the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.

These provisions replace the Sale of Goods legislation which provides for the circumstances in which a buyer is deemed to have accepted goods and thereby lost any right of rejection. 32 Rejection period [18.60]

The “rejection period” for goods is defined in s 262(2) of the ACL as:

The period from the time of supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to: (a) the type of goods; and 32

See Sale of Goods Act 1923 (NSW), s 38(1). See the discussion in Sutton, Sales and Consumer Law (4th ed, LBC Information Services, 1995), at [7.38] and [20.3].

[18.60]

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545

(b) the use to which a consumer is likely to put them; and (c) the length of time for which it is reasonable for them to be used; and (d) the amount of use to which it is reasonable for them to be put before such a failure becomes apparent.

The test is one based on the period within which it would be reasonable to expect the relevant failure to become apparent; it is not based on actual knowledge by the consumer of the nature of the defect. The consumer must reject seriously defective goods promptly. In the New Zealand case, Nesbit v Porter, 33 the Nesbits purchased an 11-year-old, Nissan Navara, four-wheel drive utility motor vehicle. Some five months later, problems became apparent. There was extensive rust and problems with the steering box and the shock absorbers, which were latent at the time of supply. The New Zealand Court of Appeal had to consider what would be a “reasonable period” within which to reject goods for the purposes of s 20 of the NZ CGA. Section 20 of the NZ CGA defines the term “reasonable period” in the same way as the term “rejection period” is defined in the ACL. The court observed that the period must be reasonable in relation to the particular defect or failure at issue. Within what time would it be reasonable for such defects to become apparent? The court held that a reasonable period was one that: suffices to enable the consumer to become fully acquainted with the nature of the defect, which, where the cause of breakage or malfunction is not apparent, the consumer can be expected to do by taking the goods to someone, usually or preferably the supplier, for inspection. In this context, therefore, a defect is not “apparent” until its cause has been identified and the buyer knows what has to be done to fix it, and what that will cost; in other words, until the buyer is in a position to determine whether the defect is substantial. 34

The defects relied on by the Nesbits were the extensive rust and the problems with the steering box and the shock absorbers, which were latent at the time of supply, but which became apparent six months later at the time of the first mandatory warranty check on 19 January 1996. After considering the relevant factors in s 20(2) of the NZ CGA, the court concluded that the reasonable time for rejection was the middle of February. 35 The court recognised that the NZ CGA imposed burdens on suppliers: In our view the motor vehicle dealer should generally be freed from the burden of having to accept rejection of a vehicle of this age and pedigree after the time for the next mandatory six-monthly warrant of fitness check has passed. If, at the latest, a defect of the kind found in the Navara has not manifested itself on such an inspection, it would be an 33 34

Nesbit v Porter [2000] 2 NZLR 465. Nesbit v Porter [2000] 2 NZLR 465 at [39].

35

Nesbit v Porter [2000] 2 NZLR 465 at [50].

546

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.60]

unfair burden upon the supplier if a buyer of such a vehicle, which must be assumed to have been in daily use, sometimes in rough conditions, should thereafter be able to reject it. 36

What constitutes a reasonable time for rejection also arose for consideration in another New Zealand case, Cooper v Ashley & Johnson Motors Ltd. 37 On 12 June 1995 the plaintiff, Dr Cooper, visited the defendant's premises and test-drove a 1989 Nissan Fairlady. He entered into a contract to purchase it for $41,000. According to the plaintiff, the vehicle was hard to start and was not running smoothly from his first day of ownership. Within three days the plaintiff complained to the defendant and was referred to a workshop, which diagnosed transmission problems and required repairs costing $2,000. The cost was paid by the defendant. After the repairs the plaintiff still experienced difficulty in starting the vehicle and it ran poorly when cold but satisfactorily when warm. In September the brake indicator lights showed a malfunction. The plaintiff paid $342 to have the malfunction repaired making no claim on the defendant. In November, the vehicle's drive shaft failed and was repaired by the plaintiff for $510. In early December, the vehicle was not running well and spark plugs were replaced. Late in December, using another mechanic, it was found that the cam belt was very worn. It was replaced but the vehicle still ran roughly. The mechanic thought the vehicle had travelled 80,000 km rather than 40,000km. The plaintiff paid $586 for the repairs. The plaintiff told the defendant about the various faults and was asked if it was prepared to repair them. The defendant was not. The vehicle was taken back to the original repairer who cleaned the electrical injectors, replaced a water pump and fuel filter and installed a turbo boost. The vehicle still ran poorly. The plaintiff paid $893.82 for the repairs. The vehicle was again referred to that mechanic in April but no fault could be found. In early May, the plaintiff tried a third mechanic who could not solve the problems. The plaintiff paid that mechanic $757.87. The plaintiff telephoned the defendant to seek its assistance. It was not prepared to assist further. On 22 May 1996, the plaintiff wrote to the defendant purporting reject the vehicle, cancel the contract and took proceedings against the defendant. The plaintiff argued he was entitled to cancel the contract under the NZ CGA. The defendant contended that the plaintiff had retained the vehicle for too long to enable him to cancel the contract. Judge GV Hubble found that the vehicle supplied failed to comply with the guarantee of acceptable quality. At the time of supply it had substantial latent defects in that the transmission was faulty (it needed replacement within three or four days of purchase); the driveshaft couplings were in a seriously worn state and required replacement by 7 November; and the vehicle was starting poorly and running roughly, the reasons for which did not emerge until much later. A reasonable consumer fully acquainted with these defects would not regard the vehicle as acceptable. 36

Nesbit v Porter [2000] 2 NZLR 465 at [48].

37

Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170.

[18.65]

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547

In this case the plaintiff's position is strengthened further by the fact that there was an admitted representation that the vehicle was “a good one” and that the relatively low mileage indicated was correct “as far as the dealer was aware”. His Honour found that under s 20(2) of the NZ CGA (the NZ equivalent of s 262(2) of the ACL): Time will begin to run as soon as it can be said that the goods have a “substantial defect”, the substance of which is known by the consumer. I do not agree with Mr Holland that an understanding of the nature of the fault is irrelevant. Section 21(a) allows a consumer to become “fully acquainted with the nature and extent of the failure”. This “substantial defect” may either exist as a latent defect at the time of purchase or it may result because of an accumulation of more minor defects which in themselves could not be described as “substantial”. 38

Furthermore, his Honour stated: In my view it is a continuing obligation of the supplier to provide a consumer with sufficient information on which to make that informed decision. In other words if a problem of a “substantial character” exists at the time of sale, the dealer is prima facie responsible for the diagnosis of that problem and to fully inform the purchaser accordingly. If the dealer abdicates that responsibility to the purchaser then he cannot be heard to complain in my opinion if the purchaser takes a long time to carry out the diagnosis himself. 39

The court concluded that in relation to the Nissan vehicle: it is not entirely clear that the problem has yet been diagnosed even at the date of hearing. Last minute investigations by both parties and their mechanics have now come up with some plausible theories which will clearly require substantial work on a number of functions in the engine. The plaintiff even now cannot be said to be fully informed in the nature of the problem. In my judgment therefore his election to reject or claim compensation remains open. 40 Keeping the goods

As an alternative to rejection, s 259(3)(b) of the ACL provides that the consumer is entitled to keep the goods but ask for compensation to make up the difference in value caused by the failure. The damages recoverable against a supplier are the reduction in value caused to the goods below the price paid or payable by the consumer of the goods. For example, if consumer bought goods for $30, the goods are worth only $10 due to the failure to meet a consumer guarantee. The supplier must pay the consumer $20. In some cases where the fault is serious, it may mean that the goods have no value and the full price paid is recovered. [18.65]

38 39

Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170 at [32]-[33]. Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170 at [34].

40

Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170 at [36].

548

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.70]

Damages for consequential loss against supplier of goods [18.70]

Section 259(4) of the ACL provides:

The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee, if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.

The Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 states: If a consumer suffers losses as a result of a failure of a supplier to comply with guarantees, the consumer can recover those losses from the supplier. This type of loss is often known as “consequential loss”. The losses that are recoverable are limited to those that are “reasonably foreseeable” to result from the failure. In other words, the consumer can recover all those losses that are a probable consequence of the failure. An example is water damage to a carpet that is a result of a failure of a washing machine to be of acceptable quality. 41

Section 259(5) of the ACL provides that a consumer cannot recover consequential losses from a supplier if they were caused by something independent of human control that occurred after the goods left the control of the supplier. Thus, the supplier will not be liable for losses unrelated to their own conduct. The same issues regarding the appropriate measure of damages, causation and remoteness considered in relation to ss 236 and 237 of the ACL arise in relation to claims for consequential losses under ss 259(4) and 267(4) of the ACL. The consumer must be able to prove on the balance of probabilities that the loss or damage arose “because of” the failure to comply with the guarantee. First, the statutory measure of damages for a breach of a guarantee is the loss or damage that was “reasonably foreseeable”. The choice of “reasonably foreseeable” (the measure of damage in tort) appears to signify a rejection of the measure of damage in contract. 42 It is likely that the tort measure will be applied in relation to s 259(4) of the ACL. Under the tort measure a plaintiff will be entitled to any consequential losses directly flowing from the failure to comply with the relevant consumer guarantee. The immediate and direct consequential losses caused by the respondent's conduct will depend upon evidence of causation. In order to make out a cause of action against the supplier based on s 259(4) of the ACL for a failure to comply with one of the consumer guarantees in relation to goods, the following matters need to be determined: • whether the supplier has failed to comply with the relevant guarantee, for example, as to acceptable quality or fitness for purpose; • whether loss or damage has been suffered by the consumer; 41

Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 at [7.95].

42

See [12.40].

[18.70]

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549

• whether that loss or damage was “as a result of” the failure to comply with the guarantee; and • whether it was “reasonably foreseeable” that the consumer would suffer such loss or damage. In relation to motor vehicles that do not comply with guarantees that goods are of acceptable quality 43 or fitness for any disclosed purpose, 44 a reasonably foreseeable loss recoverable under s 259(4) would be the cost of hiring a replacement vehicle while repairs were being performed on the motor vehicle acquired from the supplier, and loss of salary. 45 It seems that damages for distress and inconvenience that is reasonably foreseeable from a failure to comply with a consumer guarantee may also be recoverable. 46 However, the supplier will not be liable for losses that are not reasonably foreseeable. For example, if a consumer purchased a domestic oven for the purpose of baking bread for resale, and the oven developed a serious fault, the consumer could reject it and obtain a refund. However, the consumer would not be able to obtain damages for loss of earnings since these would not have been reasonably foreseeable. It seems that the loss or damage must have been reasonably foreseeable at the time when the contract for the supply of the goods was entered into, and the consumer is entitled to be fully compensated, and put into the position he or she would have been in if the goods supplied had complied with the guarantee. It is unclear whether such an action for consequential loss or damage would extend to cover “personal injury damages”, that is, damages or compensation for loss or damage that is, or results from the death of or personal injury to a person, as defined in CCA, s 87D. Part VIB of the CCA is meant to cover all claims for damages or compensation for death or personal injury under the ACL and it makes no mention of ACL, s 259(4). The causes of action that may be brought against a manufacturer are expressed as actions for damages. They clearly extend to cover “personal injury damages” as CCA, s 87E(1) expressly refers to proceedings taken under Div 2 of Pt 5-4 of the ACL. The equivalent provision in the NZ CGA is s 18(4) which provides: In addition to the remedies set out in subsection (2) and subsection (3) of this section, the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure. 43 44 45 46

ACL, s 54. ACL, s 55. See Adams v J & D’s Used Cars Ltd (1983) 26 Sask R 40. See Hosking v The Warehouse Ltd (Unreported, District Court, Auckland NP 1476/97, 5 October 1998) and Auckland Property Restoration Ltd v Blackford (Unreported, District Court, Auckland NP 3852/97, 25 November 1998). See Tokeley, Consumer Law in New Zealand (Butterworths, Wellington, 2000), at [2.2.5].

550

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.75]

The scope of s 18(4) and issues of causation and loss sharing arose in Contact Energy Ltd v Jones. 47 Miller J held that the language of s 18(4) of the NZ CGA indicated that the court's power to award the full loss was discretionary and carried with it the power to award less, taking into account the consumer's contribution to the loss. 48 His Honour held that the language of s 18(4) “evokes the common law, with its common sense approach to causation and remoteness”. 49 In Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink, 50 the applicant purchased a Skope three door freezer cabinet from the respondent supplier for use in the applicant's catering business. The purchase price was $10,395. The installation cost was $2,134. The unit supplied was incorrectly labelled by the manufacturer leading the installer to fit the wrong compressor. A second larger compressor was fitted but the applicant continued to experience problems. The sliding action of the trays was producing metal shavings which were contaminating the food stored in the cabinet. The applicant gave evidence that contaminated food had to be thrown out to the value of $6,345. The Tribunal held that the failure to comply with the consumer guarantees of acceptable quality and fitness for disclosed purpose was a major failure because no reasonable consumer would have acquired the goods if they had known of the failures to comply with the consumer guarantees in this case. The Tribunal also found that the applicant was entitled to reject the goods and that the rejection period had not expired. 51 The Tribunal held that, even though the goods were attached to the applicant's premises, they could be removed without damage. The Tribunal further found that the goods could not be returned to the supplier without significant cost to the applicant and that the respondent had to collect the goods at the respondent's expense. 52 Duty to mitigate

It seems that although there is no reference to a duty to mitigate in ACL, s 259(4), applicants will be under a duty to mitigate their damages, and that a failure to do so will be taken into account in the final award. In Pojzak v Congeo Nominees Pty Ltd, 53 the consumer purchased a second-hand car from a dealer, Congeo. Congeo had replaced the car's engine with a used engine bought from a wrecker. The engine failed because it was not fitted properly. On 26 March 2012 Mrs Pojzak rejected the car and sought a refund. After the car had been rejected it was placed in storage, incurring storage charges that were alleged to amount to $6,240. Mrs Pojzak claimed the storage charges as consequential damages under s 259(4) of the [18.75]

47 48

Contact Energy Ltd v Jones [2009] 2 NZLR 830. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [131].

49 50 51 52

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [133]. Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72. Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72 at [16]. Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72 at [17].

53

Pojzak v Congeo Nominees Pty Ltd [2013] VCAT 2175.

[18.80]

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ACL. The Tribunal held that the consumer had a duty to mitigate the damages, and that “[h]er damages should have been the cost of towing the car from Auto Star to her own property or that of Congeo; a few hundred dollars at most”. 54 Remedies – not a major failure ...............................................................................................................................................................................................

Repair by the supplier: optional or mandatory?

If the failure to comply with a guarantee can be remedied and is not a major failure, s 259(2)(a) of the ACL provides that the consumer “may” require the supplier to remedy the failure within a reasonable time. The use of “may” rather than “must” suggests that the consumer is not obliged to give the supplier the opportunity to make good the failure. Section 259(2)(b)(i) of the ACL provides that if the supplier refuses or fails to provide a remedy for the failure within a reasonable time, the consumer may have the failure remedied and recover the costs against the supplier, or notify the supplier that the consumer rejects the goods, and the ground or grounds for rejecting the goods. The right provided for in s 259(2)(b)(i) to have the failure remedied by a third party appears to be predicated on the consumer first giving the supplier the opportunity to make good the failure. Thus, the position is that the supplier must rectify the goods and if the supplier fails to do so, the consumer may rectify and recover the costs from the supplier. However, if the consumer has the goods repaired by a third party without first giving the supplier the opportunity to rectify the defect, the consumer will be denied the right to recover the third party costs from the supplier. Persuasive authority for this construction of s 259(2) is provided by the interpretation s 18(2) of the NZ CGA (the equivalent of ACL, s 259(2)) in Acquired Holdings Ltd v Turvey. 55 Mr Turvey purchased a Nissan Skyline for $15,000 from Acquired Holdings. Six months after the purchase, defects emerged in the vehicle's gauges and onboard computer. Mr Turvey did not notify the supplier, but instead had the defects repaired by a third party at a cost of $4,299. In the District Court it was accepted by the parties that the defects could be remedied and were not substantial, and that Mr Turvey had not given Acquired Holdings the opportunity to repair them. The District Court held that Mr Turvey was entitled by s 18(4) of the NZ CGA to the cost of the repairs. Acquired Holdings appealed to the High Court which upheld the appeal. Winkelmann J stated: [18.80]

I consider that on a plain reading of s 18 in circumstances where the defect can be remedied and is not of a substantial character, the purchaser must follow the requirement in s 18(2) to allow the supplier an opportunity to remedy the failure within a reasonable time in accordance with the provisions of s 19. Although the first sentence in s 18(2) uses the word “may”, that word does not connote that the procedure in s 18(2) is optional in the sense that it is an option available to a consumer who wishes the supplier to remedy 54

Pojzak v Congeo Nominees Pty Ltd [2013] VCAT 2175 at [80].

55

Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102, 107.

552

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.85]

the failure but who may equally decide to recover the cost of repair under s 18(4). Rather the word “may” is used because two alternative remedies are set out in s 18(2), with the second self-help remedy in s 18(2)(b) exercisable only if the supplier refuses or fails to remedy the failure under s 18(2)(a). It is difficult to see the reason for the inclusion of the stepped procedure in s 18(2) and the related provisions in s 19 (which details how the supplier may meet its obligations under s 18(2)(a)) if the scheme set out there is purely optional. 56

As regards the policy reasons that supported this interpretation, Winkelmann J stated: There are, as set out in Gault on Commercial Law, good reasons why s 18(2) should be interpreted to require a consumer to provide the supplier with an opportunity to repair or replace before commissioning such repairs him or herself (at CG 18.09): Where a consumer exercises rights under s 18(2), he or she is required to first give the supplier the opportunity to remedy the defect in the goods. As well as the practicality of this remedy, the supplier is able to assess whether the goods have been subjected to unreasonable use, whether the defect has caused the problem, and, in particular, to control the quality of the remedy, which would not necessarily be the case if repairs are carried out by an unauthorised repairer. The supplier is also in a better position than a third party repairer to negotiate its own remedy with the manufacturer. Section 19 sets out options for suppliers as to how defects are to be remedied. The policy underlying the Act is that suppliers of goods are liable not because of their own default, but because businesses and not consumers, should bear the risk where the goods and services they supply fail to comply with consumers' reasonable expectations: Kerry Stone Ltd v Knowles (2006) 11 TCLR 768 at [44]. Given the burden this places on the supplier, it is only reasonable that the legislation requires the consumer to first allow the supplier to remedy the defects. 57

What is “reasonable” time in which to remedy the failure will depend in part on the nature of the goods. According to Second Explanatory Memorandum, accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 a “reasonable time to remedy a problem with essential goods such as hot water systems would be much shorter than discretionary goods such as a games console”. 58 Remedies provided at the supplier’s option [18.85]

If the failure to comply is not major s 261 provides that the supplier may choose

between: (a) if the failure relates to title – by curing any defect in title; or (b) if the failure does not relate to title – by repairing the goods; or (c) by replacing the goods with goods of an identical type; or (d) by refunding: (i) any money paid by the consumer for the goods; and 56 57 58

Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102,107 at [11]. Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102,107 at [13]-[14]. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 at [7.92].

[18.90]

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(ii) any amount that is equal to the value of any other consideration provided by the consumer for the goods.

In TPS Developments Pty Ltd v Chef's Hat Australia Pty Ltd, 59 TPS, which operated a restaurant, purchased a commercial dishwasher from Chef's Hat, a retailer. The purchase price was $4,900. The dishwasher was “new”, but its manufacturer had used is as a display unit in two food catering “Expos”. It had not been operated, but merely put on display. Chef's Hat purchased it from the manufacturer at a discounted price. TPS claimed that the dishwasher was not of acceptable quality because it had required five service calls in 15 months. The repairs had been carried out by the manufacturer under warranty at no cost to TPS. The Tribunal held that the dishwasher was not of acceptable quality, because it was not free from defects or durable. A commercial dishwasher does not meet the requirement of being acceptable by merely operating properly in the first few weeks. 60 However, the failure to comply was not a major failure and that accordingly s 261 applied: Chef's Hat is entitled to repair the dishwasher, and it has affected the repairs by arranging for the manufacturer to do so under its warranty. Whilst s 261 is prefaced by the concept of the consumer requiring a supplier to remedy a failure to comply with a consumer guarantee, the section says that the “supplier may comply with the requirement” in a number of ways. The section does not dictate which method is to predominate, but there is a logic in reading statutory provisions in order. “Repairing the goods” is stated before the other methods. The section empowers the supplier to choose the method of remedying the breach, in the sense that the supplier would take the initiative in saying how it would do so, and once it took that action the consumer would be unable to insist on another method. 61

Replacement restarts consumer guarantees ...............................................................................................................................................................................................

If the supplier replaces the rejected goods pursuant to s 261(c), the same guarantees are then applicable to the replaced goods as applied to the goods originally supplied. Section 264 provides: [18.90]

If the goods are replaced under section 261(c) or 263(4)(b): (a) the replacement goods are taken, for the purposes of Division 1of Part 3-2 and this Part, to be supplied by the supplier; and (b) the provisions of Division 1 of Part 3-2 and this Part apply in relation to the replacement goods.

The following example is provided by the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010: 59 60

TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731. TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731 at [18].

61

TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731 at [21].

554

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.95]

due to a major failure six months after its purchase, the guarantees that apply would be exactly the same as would apply to a new mobile telephone. It is not the case that, for example, the guarantee as to acceptable quality would extend for six months less than would apply to a new mobile telephone because the consumer had the use of the original telephone for six months. 62

Technically, s 264 only applies to goods that are replaced by the supplier (not the manufacturer). However, while the ACL does not expressly state that the consumer guarantees also apply to the replacement products provided by a manufacturer, this is likely to be the case because the guarantees are expressed to apply in very general terms. Refund ...............................................................................................................................................................................................

As an alternative to repairing or replacing the goods, the supplier is entitled to refund any money paid by the consumer for the goods, or refund an amount equal to the value of any other consideration provided by the consumer for the goods. [18.95]

Damages for reasonably foreseeable consequential loss ...............................................................................................................................................................................................

Section 259(4) provides that in addition to the remedy which the supplier elects to provide under s 261 of the ACL, the consumer has a cause of action to recover any reasonably foreseeable consequential loss resulting from the failure to comply with the guarantee. The issues surrounding a claim for reasonably foreseeable consequential loss are considered at [18.70] in relation to a major failure. Section 259(6) provides that for the avoidance of doubt the cause of action for reasonable foreseeable consequential loss or damage under s 259(4) applies in cases where the failure is not major under s 259(2), and cases where the failure is major under s 259(3). [18.100]

Consequential loss: causation and loss sharing ...............................................................................................................................................................................................

The equivalent provision to s 259(4) of the ACL in the NZ CGA is s 18(4) which provides: [18.105]

In addition to the remedies set out in subsection (2) and subsection (3) of this section, the consumer may obtain from the supplier damages for any loss or damage to the consumer resulting from the failure (other than loss or damage through reduction in value of the goods) which was reasonably foreseeable as liable to result from the failure.

The scope of s 18(4) and issues of causation and loss sharing arose in Contact Energy Ltd v Jones. 63 Miller J held that the language of s 18(4) of the NZ CGA indicated that the court's power to award the full loss was discretionary and carried with it the power to 62

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, Example 7.10.

63

Contact Energy Ltd v Jones [2009] 2 NZLR 830.

[18.110]

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award less, taking into account the consumer's contribution to the loss. 64 His Honour held that the language of s 18(4) “evokes the common law, with its commonsense approach to causation and remoteness”. 65 Miller J accepted that electricity retailing differed from other goods in that the retailer was not able to prevent or manage defects and that the consumer may be able to manage defects by installing surge devices. 66 Nevertheless, the consumer was entitled to recover the full amount of the loss unless the retailer could establish that it was more likely than not that surge equipment would have avoided the loss. 67

Part II: Remedies against manufacturers of goods Introduction ...............................................................................................................................................................................................

Section 271 of the ACL provides for four separate causes of action against the manufacturer: [18.110]

• non-compliance with the guarantee of acceptable quality; • non-compliance with the description guarantee; • non-compliance with the guarantee as to repair and spare parts; and • non-compliance with the guarantee as to express warranties. Section 271(1) of the ACL provides: If: 1 a guarantee under s 54 applies to a supply of goods to a consumer; and 2 the guarantee is not complied with; an affected person in relation to the goods, may by action against the manufacturer of the goods, recover damages.

Section 271(3) of the ACL provides: If: (a) a person supplies, in trade or commerce, goods by description to a consumer; and (b) the description was applied to the goods by or on behalf of the manufacturer of the goods, or with express or implied consent of the manufacturer; and (c) the guarantee under section 56 applies to the supply and it is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer. 64

65 66

Contact Energy Ltd v Jones [2009] 2 NZLR 830 [131] by analogy with the Court of Appeal’s ruling in Goldsbro v Walker [1993] 1 NZLR 394 where in relation to the Fair Trading Act 1986 (NZ) Hardie Boys J held (at 406) that the power to order payment of the entire loss encompasses a discretion to award less taking into account the plaintiff’s contribution to the loss. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [133]. Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [136].

67

Contact Energy Ltd v Jones [2009] 2 NZLR 830 at [137].

556

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.115]

Section 271(5) of the ACL provides: If: (a) the guarantee under section 58 [guarantee as to repairs and spare parts] or 59(1) [guarantees as to express warranties] applies to a supply of goods to a consumer; and (b) the guarantee is not complied with; an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer.

There is no cause of action against the manufacturer for breach of the guarantee as to a disclosed purpose in s 55 of the ACL. The policy reason for this may be the consumer guarantees law is a “loss allocation mechanism” that attempts to strike a balance between the manufacturer, the supplier and the consumer. 68 It is not intended to provide the consumer with an indemnity against all of the consequences of all defects in goods or faulty services. It may be that it was not thought appropriate to hold the manufacturer liable for a purpose disclosed to the supplier, but not to the manufacturer in circumstances where the manufacturer never intended that the goods would be fit for that disclosed purpose. Who may bring the cause of action against the manufacturer? ...............................................................................................................................................................................................

The cause of action against the manufacturer under s 271 can be brought by an “affected person”. The term “affected person” is defined in s 2(1) of the ACL: [18.115]

in relation to goods, means: (a) a consumer who acquires the goods; or (b) a person who acquires the goods from the consumer (other than for the purpose of re-supply); or (c) a person who derives title to the goods through or under the consumer.

The range of persons who may bring a cause of action against the manufacturer is broader than the range of persons who may bring a cause of action against the supplier. The only person who may bring a cause of action against the supplier is a “consumer” as defined in s 3 of the ACL. However, the persons who may bring a cause of action against the manufacturer include not only a consumer, but also a person who “acquires the goods from a consumer”, and a person who “derives title to the goods through or under the consumers”. What is the significance of the use of the words “derives title” in para (c) rather than “acquires title”? While the word “acquire” as defined in s 2(1) of the ACL appears to be limited to acquisition pursuant to some transaction by way of purchase, exchange, lease hire or hire-purchase, and the goods are acquired by payment of some form of consideration. This would exclude acquisition by way of gift. The word “derives” is not defined in the ACL, and is to be given its ordinary meaning. According 68

See [16.55].

CHAPTER

[18.125]

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557

to the Macquarie Dictionary, the meaning of the word “derive” is “to receive, obtain, take or trace”. Thus, a third party who derives title to the goods without paying any consideration and suffers loss would fall within the definition of “an affected person”. There is no need for s 266 of the ACL to extend the right of action against the manufacturer under s 271 to the recipients of gifts. The recipient of a gift from a consumer is included within the definition of an “affected person” as they derive title to the goods through the consumer. Exceptions to right of redress against the manufacturer of goods ...............................................................................................................................................................................................

Section 271(2) of the ACL provides that there shall be no right of redress against the manufacturer in respect of goods which do not comply with the guarantee of acceptable quality only because of: [18.120]

• an act, default or omission of, or any representation made by, any person other than the manufacturer or an employee or agent of the manufacturer; or • a cause independent of human control, that occurred after the goods left the control of the manufacturer; or • the fact that the price charged by the supplier was higher than the manufacturer's recommended retail price, or the average retail price, for the goods. The equivalent provision of the NZ CGA (NZ) is s 26. Section 271(4) of the ACL provides a further exception which relates to noncompliance with the description guarantee (ACL, s 56). It provides: (4) Subsection (3) does not apply if the guarantee under section 56 is not complied with only because of: (i) an act, default or omission of any person other than the manufacturer or an employee or agent of the manufacturer; or (ii) a cause independent of human control that occurred after the goods left the control of the manufacturer.

Once again the words “only because of” are critical: the other person's failure must be the sole cause of the failure. Damages that may be recovered against the manufacturer ...............................................................................................................................................................................................

Section 272(1)(a) of the ACL provides that the damages recoverable against a manufacturer of goods is the reduction in value caused to the goods below whichever of the following prices is the lower: [18.125]

(a)

the price paid or payable by the consumer of the goods; or

(b)

the average retail price of the goods at the time of supply.

558

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.130]

The following example is provided at [8.9] of the “ACL Guide on Consumer Guarantees”: A consumer bought goods for $30. The average retail price at the time was $28. The goods are worth only $10 due to the failure to meet a consumer guarantee. The manufacturer must pay the consumer $18.

In some cases where the fault is serious, it may mean that the goods have no value and the full price paid is recovered. Manufacturers generally prefer to repair or replace faulty goods rather than pay damages. Section 271(6) of the ACL provides that if a manufacturer provides an express warranty, and the consumer has required the manufacturer to remedy a failure to comply with a guarantee of acceptable quality by repairing or replacing the goods, the consumer is not entitled to commence an action for damages under s 272(1)(a), unless the manufacturer has refused or failed to remedy the failure, or has failed to remedy the fault within a reasonable time. Thus, unless manufacturers provide an express warranty specifying that they will remedy a fault by repair or replacement of the goods, they could be obliged to pay monetary damages if a consumer guarantee of acceptable quality applies. Damages for consequential loss against manufacturer of goods ...............................................................................................................................................................................................

Section 272(1)(b) of the ACL provides that the damages payable by a manufacturer to a consumer include losses that were “reasonably foreseeable” as a result of the failure. See [18.70]. [18.130]

Limits on damages for personal injury and death ...............................................................................................................................................................................................

Part VIB of the CCA regulates awards of damages under ACL, ss 271 and 272 for a failure by a manufacturer of goods to comply with a consumer guarantee pursuant to Pt 5-4 Div 2. See CCA, s 87E(1). Part VIB of the CCA is meant to cover all claims for damages or compensation for death or personal injury under the ACL. The causes of action that may be brought against a manufacturer are expressed as actions for damages. They clearly extend to cover “personal injury damages” as CCA, s 87E(1) expressly refers to proceedings taken under Div 2 of Pt 5-4 of the ACL. [18.135]

Indemnification of suppliers by manufacturers of goods ...............................................................................................................................................................................................

The consumer guarantees law recognises that in some circumstances it would be unreasonable to make the supplier jointly liable with the manufacturer. This is because it is the manufacturer who is responsible for putting the unsuitable or defective goods into circulation and it is the manufacturer who is responsible for packaging and labelling [18.140]

[18.140]

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which describe the goods. In such circumstances, where the consumer elects to seek redress from the supplier, the supplier can be indemnified by the manufacturer pursuant to s 274. Section 274 of the ACL provides: 1) A manufacturer of goods is liable to indemnify a person (the supplier) who supplies the goods to a consumer if: a) the supplier is liable to pay damages under section 259(4) to the consumer for loss or damage suffered by the consumer; and b) the manufacturer is or would be liable under section 271 to pay damages to the consumer for the same loss or damage. 2) Without limiting subsection (1), a manufacturer of goods is liable to indemnify a person (the supplier) who supplies the goods to a consumer if: a) the supplier incurs costs because the supplier is liable under this Part for a failure to comply with a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2; and b) the failure is: c) a failure to comply with the guarantee under section 54; or d) a failure to comply with the guarantee under section 55 in relation to a disclosed purpose that the consumer made known to the manufacturer either directly or through the supplier or the person referred to in section 55(2)(a)(ii); or e) a failure to comply with the guarantee under section 56 in relation to a description that was applied to the goods by or on behalf of the manufacturer of the goods, or with the express or implied consent of the manufacturer. 3) The supplier may, with respect to the manufacturer's liability to indemnify the supplier, commence an action against the manufacturer in a court of competent jurisdiction for such legal or equitable relief as the supplier could have obtained if that liability had arisen under a contract of indemnity made between them.

Section 274(1) provides that if the consumer sues the supplier and the supplier is liable to pay consequential damages under s 259(4), and the manufacturer would be liable to the consumer under s 271, for failure to comply with the guarantee as to acceptable quality under s 54, the manufacturer is liable to indemnify the supplier as if a contract of indemnity had been made between them in relation to those consequential damages. Section 274(2) provides that the manufacturer is additionally liable to indemnify the supplier for any costs incurred by the supplier, including replacing or repairing the goods, because of the supplier's liability arose from a failure to comply with: (i)

the guarantee of acceptable quality under s 54 (for which the manufacturer will be responsible); or

(ii)

the guarantee as to fitness for purpose under s 55, but only in relation to a purpose disclosed to the manufacturer; or

560

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

(iii)

[18.145]

the guarantee as to compliance with description under s 56, but only for a description applied by or on behalf of the manufacturer.

Part III: Remedies against suppliers of services Introduction ...............................................................................................................................................................................................

Section 267 of the ACL establishes a hierarchy of remedies under which the supplier of the services is given the opportunity to remedy the failure to comply with the guarantee within a reasonable time where it is capable of being remedied. If the guarantee cannot be remedied or is a major failure, the consumer may terminate the contract; or obtain damages in compensation for any reduction in the value of the services below the price paid or payable by the consumer of the services. Section 267 provides for four separate causes of action. The consumer may take action against the supplier of services for: [18.145]

• non-compliance with the guarantee of due care and skill; 69 • non-compliance with the guarantee as to fitness for a particular purpose; 70 • non-compliance with the guarantee that services will achieve the desired result; 71 and • non-compliance with the guarantee as to reasonable time for supply. 72 Section 267 of the ACL provides: (1) a consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) a guarantee that applies to the supply under Subdivision B of Division 1 of Part 3-2 is not complied with; and (c) unless the guarantee is the guarantee under section 60 – the failure to comply with the guarantee did not occur only because of: (i) an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or (ii) a cause independent of human control that occurred after the service were supplied. (2) If the failure to comply with the guarantee can be remedied and is not a major failure: (a) the consumer may require the supplier to remedy the failure within a reasonable time; or 69 70 71 72

ACL, s 60. See [17.75]–[17.90]. ACL, s 61(1). See [17.95]–[17.105]. ACL, s 61(2). See [17.110]. ACL, s 62. See [17.115].

[18.150]

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(b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time – the consumer may: (i) otherwise have the failure remedied and, by action against the supplier, recover al reasonable costs incurred by the consumer in having the failure remedied; or (ii) terminate the contract for the supply of the services. (3) If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may: (a) terminate the contract for the supply of the services; or (b) by action against the supplier, recover compensation for any reduction in the value of the services below the price paid or payable by the consumer for the services. (4) The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss as a result of such a failure. (5) To avoid doubt, subsection (4) applies in addition to subsections (2) and (3).

The ACL classifies failures into those that are major and those that are not major. What is a major failure? ...............................................................................................................................................................................................

Section 268 of the ACL sets out a number of alternative tests that need to be satisfied that are not entirely clear. Section 268 provides that a failure is major if: [18.150]

A failure to comply with a guarantee referred to in section 267(1)(b) that applies to a supply of services is a major failure if: (a) the services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or (b) the services are substantially unfit for a purpose for which services of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (c) both of the following apply: (i) the services, and any product resulting from the services, are unfit for a particular purpose for which the services were acquired by the consumer that was made known to the supplier of the services; (ii) the services, and any of those products, cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or (d) both of the following apply: (i) the services, and any product resulting from the services, are not of such a nature, or quality, state or condition, that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier;

562

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.155]

(ii) the services, and any of those products, cannot, easily and within a reasonable time, be remedied to achieve such a result; or (e) the supply of the services creates an unsafe situation. Services would not have been acquired by a reasonable consumer

In relation to s 268(a) of the ACL, the matters that a reasonable consumer would take into account include: [18.155]

• how soon the fault developed after supply: the shorter the time the more serious the fault; • the price of the services: the more expensive the services, the less acceptable is any fault; • any representations made about the services by the supplier either orally or in the advertising; • any other faults with the services: a number of small faults may not be serious, but their cumulative effect may be major. Services are substantially unfit for normal purpose

Section 268(b) of the ACL provides that a failure to comply with a guarantee is major if the services are substantially unfit for their normal purpose and cannot easily be remedied to make them fit for purpose within a reasonable time. In deciding whether the failure is major, it is necessary to have regard to “the nature and extent” of the failure, and to have regard to compliance with the fitness for purpose, whether the services can be remedied within a reasonable time, and how serious the failure is in relation to the contract as a whole. The “ACL Guide on Consumer Guarantees” provides the following example (p 21): [18.160]

the services are substantially unfit for their normal purpose and cannot easily be made fit, within a reasonable time. For example, a carpet-cleaning service changes the colour of the consumer's carpet in some places. Services are substantially unfit for a special purpose

Section 268(c) of the ACL provides that a failure to comply with a guarantee is major if the services are substantially unfit for a particular purpose that the consumer told the supplier about, and cannot easily be made fit within a reasonable time. In deciding whether the failure is major it is necessary to have regard to “the nature and extent” of the failure, and to have regard to compliance with fitness for purpose, whether the goods can be remedied within a reasonable time, and how serious the failure is in relation to the contract as a whole. [18.165]

[18.180]

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563

Services not expected to achieve desired result

Section 268(d) of the ACL provides that a failure to comply with a guarantee is major if the services are not of such a nature, or quality, state or condition that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier, and they cannot be remedied to achieve such a result within a reasonable time. [18.170]

Supply creates unsafe situation

Section 268(e) of the ACL provides that a failure to comply with a guarantee is major if the supply of the services creates an unsafe situation. Safety is to be assessed in a relative sense for the purpose of s 268(e) of the ACL, so that in relation to lowly priced services, the consumer must accept some minor level of risk without there being a major failure to comply with the guarantee of due care and skill. However, even in the case of lowly priced services, if they create a dangerous situation, such as incorrectly wiring a kitchen appliance, this will constitute a major failure to comply with the guarantee of due care and skill. [18.175]

Remedies – not a major failure ...............................................................................................................................................................................................

If the failure to comply with a guarantee can be remedied and is not a major failure, s 267(2) of the ACL provides the consumer may require the supplier to remedy the failure within a reasonable time. The consumer must give the supplier who provided the service the opportunity to fix the problem at no cost to the consumer. If the supplier refuses, or fails to remedy the failure within a reasonable time, the consumer has two choices: [18.180]

(1)

have the failure remedied and recover the costs from the first supplier; or

(2)

terminate the contract for the supply of services and refuse to pay for the services supplied. Section 269(2)(a) provides that if the consumer terminates, the termination takes effect at the time the termination is made known to the supplier. Where the consumer has difficulty contacting the supplier, s 269(2)(b) provides that the termination takes effect at the time the consumer indicates “by means which are reasonable in the circumstances, his or her intention to terminate the contract.” According to the Second Explanatory Memorandum, “An example of this type of termination might involve the consumer sending a letter to the supplier's last known address.” 73

73

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.113].

564

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.185]

Remedies – major failure ...............................................................................................................................................................................................

When a consumer makes a contract for the supply of services, the consumer is under an obligation to pay the contract price; however, the consumer will be relieved of this obligation where the consumer exercises a statutory right to terminate. Section 267(3) of the ACL provides that if the failure is major or cannot be remedied, the consumer (not the supplier) has a choice. The consumer may: [18.185]

• terminate the contract for the supply of services; or • recover compensation from the supplier to make up any reduction in value of the services caused by the failure. For example, if the consumer elects to terminate for breach of the consumer guarantee imposed by s 60 to exercise due care and skill, the contract is discharged and the consumer is discharged from further performance. If the consumer has already paid the supplier, the consumer will be able to recover compensation. The amount of the compensation will depend on whether some aspect of the service was satisfactory. The consumer may also be able claim damages for consequential loss. Exceptions to right of redress against the supplier of services ...............................................................................................................................................................................................

Section 267(1)(c) of the ACL provides two exceptions to the consumer's right of redress against the supplier for failure to comply with the guarantee of fitness for purpose or desired result (ACL, s 61), and the guarantee of supply within a reasonable time (ACL, s 62), but not the guarantee of due care and skill (ACL, s 60). Section 267(1)(c) provides:

[18.190]

A consumer may take action under this section if: … (c) unless the guarantee is the guarantee under section 60 – the failure to comply with the guarantee did not occur only because of: (i) an act, default or omission of, or a representation made by, any person other than the supplier, or an agent or employee of the supplier; or (ii) a cause independent of human control that occurred after the service were supplied. Carve out for guarantee of due care and skill

The opening words in s 267(1)(c) of the ACL carve out the guarantee of due care and skill in s 60 of the ACL from the exclusion. [18.195]

[18.210]

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565

First exclusion: acts, defaults, omissions or representations made by third parties

Section 267(1) of the ACL is drafted positively. The opening words are: “A consumer may take action under this section … against a person (the supplier)”. The section then sets out the circumstances in which the consumer may bring an action against the supplier. Section 267(1)(c)(i) deals with the situation where there is a third party involved and that third party's conduct may have been a contributory cause of the breach. In such circumstances, where the breach did not occur only because of an act, default or omission of, or a representation made by a third party, and the supplier was partly responsible for the breach, the consumer will have a cause of action against the supplier. Where, however, the breach occurred only because of an act, default or omission of, or a representation made by a third party, the consumer will not have a cause of action against the supplier. [18.200]

Second exclusion: causes independent of human control

The second exception is where the failure to comply with the guarantee of fitness for purpose or achieving a desired result or completion within a reasonable time is due to a cause independent of human control occurring after the services were supplied in which case the fault will not be attributed to the supplier. The exclusion is narrower than its New Zealand counterpart in s 33(b) of the NZ CGA which applies to a cause independent of human control whenever it occurs, rather than being limited to causes after the services were supplied. [18.205]

Damages for consequential loss against supplier of services

Section 267(4) of the ACL provides that the consumer may bring an action against the supplier to recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee, including losses that were “reasonably foreseeable” as a result of the failure. See [18.70]. The Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 states: [18.210]

If a consumer suffers losses as a result of a failure of a supplier of services to comply with guarantees, the consumer can recover those losses from the supplier. This type of loss is often known as “consequential loss”. The losses that are recoverable are limited to those that are “reasonably foreseeable” to result from the failure. In other words, the consumer can recover all those losses that are a probable consequence of the failure. An example of this type of loss is a house fire caused by incorrect installation of electric lighting in the house of a consumer. 74

74

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.114].

566

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.215]

Part IV: Rights and remedies against linked credit providers Introduction ...............................................................................................................................................................................................

The repealed s 73 of the TPA contained a detailed set of provisions dealing with the allocation of liability in cases in which one corporation (the “supplier”) supplied goods to a credit provider which, in turn, supplied those goods to a consumer. In broad outline, it provided that where a consumer suffered loss through the breach of a term implied by the TPA: [18.215]

• the supplier and the credit provider were jointly and severally liable to the consumer where the supplier and credit provider were “linked”; • only the supplier was liable to the consumer where it was not linked to the credit provider and the latter did not take possession of the goods. Joint liability meant that the consumer could seek a remedy from either the supplier or the lender in the event of a breach of one of the implied terms, and protected consumers in the event of the insolvency of the supplier or the lender. Part 5-5 of the ACL now makes suppliers of goods and services and a person providing certain types of connected finance jointly liable for certain breaches of contract in relation to either the contract of sale or the linked credit contract. Joint liability ...............................................................................................................................................................................................

Part 5-5 of the ACL now makes suppliers of goods and services and a person providing certain types of connected finance jointly liable for certain breaches of contract in relation to either the contract of sale or the linked credit contract. While s 131A(1) of the CCA provides that the ACL does not apply to the supply, or possible supply of financial services or of financial products, an exception is made for Pt 5-5 of the ACL. Section 278(1) provides: [18.220]

(1) If a consumer who is a party to a linked credit contract suffers loss or damage as a result of: (a) a misrepresentation relating to the credit provided under that linked credit contract, or to a supply of goods or services (a related supply) to which that contract relates; or (b) a breach of the linked credit contract, or of a contract for a related supply; or (c) the failure of consideration in relation to the linked credit contract, or to a contract for a related supply; or (d) a failure to comply with a guarantee that applies, under section 54, 55, 56, 57, 60, 61 or 62, in relation to a related supply; or (e) a breach of a warranty that is implied in the linked credit contract by section 12ED of the Australian Securities and Investments Commission Act 2001;

CHAPTER

[18.225]

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REMEDIES RELATING TO GUARANTEES

567

the linked credit provider who is a party to the contract, and the supplier of a related supply, are jointly and severally liable to the consumer for the amount of the loss or damage.

Section 278(2) of the ACL defines a “linked credit contract” to mean: a contract that a consumer enters into with a linked credit provider of a person (the supplier) for the provision of credit in relation to: (a) the supply by way of sale, lease, hire or hire-purchase of goods to the consumer by the linked credit provider where the supplier supplies the goods, or causes the goods to be supplied, to the linked credit provider; or (b) the supply by the supplier of goods or services, or goods and services, to the consumer.

The term “linked credit provider” is defined in s 2 to mean: in relation to a supplier of goods or services, means a credit provider: (3) with whom the supplier has a contract, arrangement or understanding relating to: (i) the supply to the supplier of goods in which the supplier deals; or (ii) the business carried on by the supplier of supplying goods or services; or (iii) the provision to persons to whom goods or services are supplied by the supplier of credit in respect of payment for those goods or services; or (4) to whom the supplier, by arrangement with the credit provider, regularly refers persons for the purpose of obtaining credit; or (5) whose forms of contract, forms of application or offers for credit are, by arrangement with the credit provider, made available to persons by the supplier; or (6) with whom the supplier has a contract, arrangement or understanding under which contracts, applications or offers for credit from the credit provider may be signed by persons at premises of the supplier.

Section 278(1) is concerned with the situation where a supplier furnishes goods or services to the consumer and the linked credit provider supplies credit in relation to that transaction. It is not concerned with a situation where the supplier furnishes goods to the linked credit provider and the latter enters into a contract with the consumer for the supply of goods and the supply of credit. The essential requirement is that there is a pre-existing link between the supplier and the credit provider whereby the supplier assists or facilitates the provision of credit in relation to goods or services supplied by the supplier to a consumer. That link can take one of four different forms: [18.225]

1.

a contract, arrangement or understanding between the credit provider and the supplier of the goods or services relating to the provision of credit in respect of payment of the goods or services; or

2.

an arrangement under which the supplier regularly refers its customers to the credit provider; or

568

3.

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.225]

an arrangement under which the supplier makes available to its customers the loan application forms of the credit provider; or

4.

a contract, arrangement or understanding between the credit provider and the supplier under which applications for credit and contracts may be signed at the premises of the supplier. The words “contract, arrangement or understanding” are not defined in the ACL or the CCA. They appear in Pt IV Div 1 and 2 of the CCA, and have been the subject of much judicial consideration. They embrace a “spectrum of consensual dealings”. 75 While the word “contract” should be given its ordinary common law meaning, the words “arrangement” and “understanding” are intended to catch transactions or dealings which are less formal and may not give rise to a legally binding contract. 76 However, what is required is some form of communication between two or more parties to the arrangement or understanding and some level of commitment that at least one of them will act in a certain way. 77 In Business and Professional Leasing Pty Ltd v Dannawi, 78 Young CJ in Equity held that an “arrangement or understanding” between the linked credit provider and the supplier can be inferred from the surrounding circumstances. It could be inferred even though applications for finance were channelled through a third party and even though that third party sometimes directed applications to other financiers. It depended on the closeness of the relationship between the particular parties. 79 The purpose of establishing this link is to ensure that “the credit supplier is sufficiently involved in the transaction so as to justify joint and several liability with the supplier”. 80 Where that link is established both the supplier and the linked credit provider are jointly responsible for loss suffered by the consumer as a result of: • misrepresentation; • breach of contract; • failure of consideration; • failure to comply with a consumer guarantee (in relation to goods: acceptable quality, fitness for purpose, correspondence with description, correspondence with sample; and in relation to services: due care and skill, fitness of purpose, and reasonable time of supply); or • a breach of warranty under s 12ED of the ASIC Act. 75 76

77 78 79 80

ACCC v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 at [24] (Gray J). For a consideration of the case law construing the terms “arrangement” and “understanding” in the context of Divs 1 and 2 of Pt IV of the CCA, see Corones, Competition Law in Australia (Lawbook Co, Sydney, 2010), pp 271-80. Apco Service Stations Pty Ltd v ACCC (2005) ATPR ¶42-078 at [44]-[45]. Business and Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902. Business Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902 at [169]. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [20.12].

[18.235]

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569

Action to be taken jointly ...............................................................................................................................................................................................

Where a supplier and a linked credit provider are jointly responsible, an action must be taken jointly in a court of competent jurisdiction unless the supplier is dissolved or winding up proceedings have been commenced. 81 [18.230]

Exceptions where linked credit supplier is not liable ...............................................................................................................................................................................................

Section 280 provides for the following specific exceptions where a linked credit provider will not be liable to a consumer under s 278 of the ACL. First, if the linked credit provider establishes that the credit provided was the result of an approach made to the credit provider by the consumer, and the approach was not induced by the supplier. 82 Secondly, if the linked credit provider establishes that before becoming a linked credit provider of the supplier the credit provider made “due inquiry” to satisfy itself that the supplier's financial standing and business conduct was “good”, and after becoming a linked credit provider had no cause to suspect that the supplier might not be able to meet the supplier's liabilities as and when they fell due. 83 Thirdly, if the linked credit provider establishes that before becoming a linked credit provider of the supplier: [18.235]

• the credit provider made “due inquiry” to satisfy itself that the supplier's financial standing and business conduct was “good”, and • after becoming a linked credit provider but before a tied loan contract was entered into, had no cause to suspect that the consumer might, if the tied loan contract was entered into, be entitled to recover damages for failure to comply with a guarantee, and • had no cause to suspect that the supplier might not be able to meet the supplier's liabilities as and when they fell due. 84 A “tied loan contract” is defined in s 2 of the ACL to mean: a loan contract entered into between a credit provider and a consumer where: (a) the credit provider knows, or ought reasonably to know, that the consumer enters into the loan contract wholly or partly for the purposes of payment for goods or services supplied by a supplier; and (b) at the time the loan contract is entered into the credit provider is a linked credit provider of the supplier. 81 82 83 84

ACL, s 279. ACL, s 280(1). ACL, s 280(2). ACL, s 280(3).

570

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.240]

Fourthly, if the linked credit provider establishes that, in relation to a tied continuing credit contract, the credit provider, before becoming aware of the contract of sale or proposals for making such a contract, and having regard to: • the nature and volume of the business of the credit provider; and • such other matters relevant to the case, had no cause to suspect that the person entering into such a contract with the supplier might be entitled to make a claim as a result of a failure to comply with a consumer guarantee under Div 1 of Pt 3-2 of the ACL for the goods or services. 85 A “tied continuing credit contract” is defined in s 2 of the ACL to mean: a continuing credit contract under which a credit provider provides credit in respect of the payment by a consumer for goods or services supplied by a supplier in relation to whom the credit provider is a linked credit provider.

Amount of liability ...............................................................................................................................................................................................

Section 281 limits the liability of a linked credit provider to the amount financed under the credit contract plus the amount of interest awarded by the court and the cost of the proceedings. 86 Section 284 of the ACL provides that if, in joint liability proceedings, judgment is given against the supplier or a linked credit provider, the court must award interest to the consumer from the time when the consumer became entitled to recover the amount of the loss or damage until the date on which judgment is given, unless the respondents show good cause that interest should not be awarded. [18.240]

Liability of suppliers and linked credit providers inter se ...............................................................................................................................................................................................

Section 285 of the ACL provides that if a supplier and credit provider are liable to a consumer under s 278: [18.245]

• if the liability relates to the supply of goods or services or to a consumer guarantee under the ACL – then the supplier is liable to the credit provider for the amount of loss suffered by the credit provider (up to the amount of the credit contract plus interest and costs); • if the liability relates to the linked credit contract or to a warranty under s 12ED of the – then the credit provider is liable to the supplier for the amount of loss suffered by the supplier (up to the amount of the sale contract plus costs).

85

ACL, s 280(4).

86

ACL, s 281.

CHAPTER

[18.255]

18

REMEDIES RELATING TO GUARANTEES

571

Scope for overlap with general and specific protections ............................................................................................................................................................................................... [18.250]

Section 15 provides:

Conduct is not taken, for the purposes of this Schedule, to contravene a provision of this Schedule merely because of the application of: (b) a provision of Division 1 of Part 3-2 (other than section 66(2))

Thus, conduct consisting of the failure to honour a consumer guarantee, other than a failure to display a notice at the point of sale summarising the content of the guarantees, will not constitute a contravention of the ACL. The effect of this provision is that the remedy provisions for damages 87 and compensation orders 88 will not apply, and the consumer must have recourse to remedy provisions expressly provided where there is a major or a minor failure to comply with the standard. However, it is important to note the word “merely” in s 15. There may be other surrounding circumstances involving attempts to explain, modify, limit or exclude the consumer guarantees that may be misleading and constitute a contravention of s 18 of the ACL or another provision of Ch 2 of the ACL. The same fact situation may give rise to a contravention of s 18 (misleading conduct) and s 29(m) and/or (n) (false or misleading representations), as well as to an action for failure to comply with the consumer guarantees.

Part V: Exclusion clauses and limitations of liability Introduction ...............................................................................................................................................................................................

Clauses that purport to exclude, restrict or modify liability for failure to comply with the consumer guarantees (exclusion clauses) will generally be void. Section 64(1) of the ACL provides: [18.255]

A term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term of the contract) is void to the extent that the term purports to exclude, restrict or modify, or has the effect of excluding, restricting or modifying: (a) the application of all or any of the provisions of this Division; or (b) the exercise of a right conferred by such a provision; or (c) any liability of a person for a failure to comply with a guarantee that applies under this Division to a supply goods or services.

This mirrors the repealed s 68 of the TPA. 87

ACL, s 236.

88

ACL, s 237.

572

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.260]

The prohibition on contracting out applies to both suppliers and manufacturers. It is intended to ensure that a supplier or manufacturer cannot avoid obligations imposed by the consumer guarantees by inserting a term to the effect that the guarantees do not apply. The most obvious examples of terms that will be prohibited by s 64 of the ACL are “all care but no responsibility” or “no liability for negligence” terms. However, s 64 will also render void terms which purport to restrict the remedies available to consumers following a breach of a consumer guarantee. Where the ACL applies it will generally not be possible to exclude liability for: • claims made after a certain period; or • claims in excess of a certain amount; or • claims for consequential damages; or • “no refund” or “no exchange” claims. Suppliers limiting liability: non-personal goods under $40,000 limit ...............................................................................................................................................................................................

It is possible for suppliers of goods or services to limit the remedy available to a consumer, in the case of consumer goods of a kind not ordinarily acquired for personal, domestic or household use or consumption under the $40,000 limit. Section 64A of the ACL provides: [18.260]

(1) A term of a contract for the supply by a person of goods other than goods of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 64 merely because the term limits the person's liability for failure to comply with a guarantee (other than a guarantee under section 51, 52 or 53) to one or more of the following: (a) the replacement of the goods or the supply of equivalent goods; (b) the repair of the goods; (c) the payment of the cost of replacing the goods or of acquiring equivalent goods; (d) the payment of the cost of having the goods repaired. (2) A term of a contract for the supply by a person of services other than services of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 64 merely because the term limits the person's liability for failure to comply with a guarantee to: (a) the supplying of the services again; or (b) the payment of the cost of having the services supplied again. (3) This section does not apply in relation to a term of a contract if the person to whom the goods or services were supplied establishes that it is not fair or reasonable for the person who supplied the goods or services to rely on that term of the contract.

CHAPTER

[18.260]

18

REMEDIES RELATING TO GUARANTEES

573

(4) In determining for the purposes of subsection (3) whether or not reliance on a term of a contract is fair or reasonable, a court is to have regard to all the circumstances of the case, and in particular to the following matters: (a) the strength of the bargaining positions of the person who supplied the goods or services and the person to whom the goods or services were supplied (the buyer) relative to each other, taking into account, among other things, the availability of equivalent goods or services and suitable alternative sources of supply; (b) whether the buyer received an inducement to agree to the term or, in agreeing to the term, had an opportunity of acquiring the goods or services or equivalent goods or services from any source of supply under a contract that did not include that term; (c) whether the buyer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties); (d) in the case of the supply of goods, whether the goods were manufactured, processed or adapted to the special order of the buyer.

This is similar to s 68A of the TPA. The effect of s 64A is to create a form of exception to s 64 where the goods or services involved are of a non-personal kind and are under the $40,000 limit. Thus, for example, in relation to non-personal goods a supplier can limit liability under the consumer guarantees to replacement, repair or the payment of the cost of replacement or repair. The supplier may require the purchaser in such circumstances to acknowledge in writing that the goods are being acquired for a business purpose or use. If the supplier does not seek to limit its liability, the full remedies available under the consumer guarantees will apply. For example, the definition of “goods” includes computer software. Some business software packages are priced less than $40,000. The supplier of such business software is able to limit its liability for consequential losses such as lost business sales, if there is a major failure of the software to comply with the guarantee of acceptable quality. However, liability for failure to comply with the guarantees imposed by ACL, ss 51 (guarantee as to title), 89 52 (guarantee as to undisturbed possession) 90 or 53 (guarantee as to undisclosed securities) 91 cannot be limited, and there is a residual discretion retained whereby limitations of liability can be overturned by a court on the basis that it is not fair and reasonable for the supplier to rely on the clause. Section 64A(3) and (4) sets out the criteria for determining whether it is “fair or reasonable” for the supplier to rely on the limitation of liability term of the contract. 89 90 91

See [16.185]. See [16.190]. See [16.195].

574

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.265]

Suppliers excluding liability for consequential loss ...............................................................................................................................................................................................

Section 259(4) of the ACL provides that the consumer may bring an action against the supplier to recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee, including losses that were “reasonably foreseeable” as a result (consequence) of the failure. Section 267(4) makes similar provision in relation to services. If a supplier purports to exclude liability for consequential loss or damage the term is void pursuant to s 64 of the ACL, and the supplier may incur civil or criminal liability. 92 However, s 64A permits the supplier to limit liability, including liability for consequential loss or damage that is reasonably foreseeable, in the case of non-personal goods and services under the $40,000 limit. [18.265]

Manufacturers excluding liability ...............................................................................................................................................................................................

Section 271(1) of the ACL provides that if there is a failure to comply with the guarantee of acceptable quality, an affected person in relation to the goods may by action against the manufacturer of the goods, recover damages from the manufacturer. Section 272(1)(b) of the ACL provides that the damages that can be recovered by an affected person against the manufacturer include “any loss or damage suffered by the affected person … if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of the failure”. Section 274 of the ACL provides that a manufacturer of goods is liable to indemnify a supplier where the supplier is liable to pay damages to the consumer for loss or damage suffered by the consumer. Section 276 provides that any term of a contract that purports to exclude, restrict or modify the obligation of the manufacturer to reimburse the supplier is void. Section 276A(1) provides that when the goods are of the non-personal kind, the manufacturer can limit their liability to the supplier to an amount equal to: [18.270]

(a)

the cost of replacing the goods; or

(b)

the cost of obtaining equivalent goods; or

(c) the cost of having the goods repaired; whichever of the above is the lowest amount. However, s 276A(2) provides that it is only possible to limit liability under s 276A(1) if it is “fair and reasonable” to do so. The ability of suppliers to limit their liability under s 64A for consequential losses arising in respect of defects in non-personal goods whose price did not exceed the $40,000 limit is considered at [18.260]. Manufacturers will not generally sell directly to consumers and there will be no supply contract between the manufacturer and the consumer. Where s 271(1) of the ACL applies, the affected person can claim damages from the 92

See [18.285].

CHAPTER

[18.275]

18

REMEDIES RELATING TO GUARANTEES

575

manufacturer, including consequential loss or damage that is reasonably foreseeable. Section 276 provides that this liability cannot be limited or excluded. Thus, manufacturers are more exposed to liability for consequential loss than suppliers in relation to non-personal goods. There seems to be no good policy reason why manufacturers should not be able to limit their liability for consequential loss in relation to non-personal goods under the $40,000 limit. Choice of law and venue clauses ...............................................................................................................................................................................................

Many contracts with suppliers will include provisions which purport to specify the laws which govern the contract, and the courts that have jurisdiction over the contract or any claims resulting from it. It may be more convenient for the supplier to have all actions against them brought under the laws of the supplier's own State or country, and in courts or tribunals where the supplier already has a physical presence. However, a choice of law and venue clause may have “the effect of” excluding, restricting or modifying the consumers' rights under the consumer guarantees regime, The Second Explanatory Memorandum states that s 67(1) of the ACL is intended to ensure that “it is not possible for a contract to displace consumer guarantees by specifying that some other law, such as the law of the country where a supplier resides, applies to the contract”. 93 Section 67 of the ACL provides: [18.275]

If: (a) the proper law of a contract for the supply of goods or services to a consumer would be the law of any part of Australia but for a term of the contract that provides otherwise; or (b) a contract for the supply of goods or services to a consumer contains a term that purports to substitute, or has the effect of substituting, the following provisions for all or any of the provisions of this Division: (i) the provisions of the law of a country other than Australia; (ii) the provisions of the law of a State or a Territory; the provisions of this Division apply in relation to the supply under the contract despite that term.

Section 67(a) of the ACL requires the court to apply a common-law test to establish what the “proper law” of the contract is – that is, the law of the country with the most real and substantial connection to the contract. In Akai Pty Ltd v People's Insurance Co Ltd, 94 a majority of the High Court (Toohey, Gaudron and Gummow JJ) held that in determining the law with the most real connection to the contract it is necessary to have regard to the parties' place of residence or business, the place of formation of the contract, 93

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.10].

94

Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418.

576

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.280]

the place of performance, and the nature and subject matter of the contract. 95 If after this assessment the proper law of the contract would be the law of Australia (if not for the term of the contract), s 67(a) will render the governing law clause, and most likely a governing forum clause unenforceable. 96 Unlike s 67(a), the operation of s 67(b) is not dependent on Australian law otherwise being the proper law of the contract. In Laminex (Aust) Pty Ltd v Coe Manufacturing Co, 97 an Australian company sued a US-based supplier for misleading and deceptive conduct, and breach of warranties implied by the repealed Pt V Div 2 of the TPA. The contract in this case contained a provision that “[t]he terms, conditions and covenants herein shall be governed by the laws of the State of Oregon and venue shall be in Multnomah County, Oregon for any actions arising hereunder”. The New South Wales Supreme Court held that the proper law of the contract was the law of the State of Oregon, so s 67(a) had no application, and the court permanently stayed an action brought by Laminex in Australia. 98 Sections 67(a) and (b) of the ACL were considered in ACCC v Valve Corporation (No 3). 99 The facts of the case are set out at [16.140]. The Subscriber Service Agreements, which purported to exclude the right to a refund in the event that the computer software (goods) supplied failed to comply with the guarantee of acceptable quality, were expressed to be governed by the law of the State of Washington. Edelman J applied the common law test set out in Akai and concluded that the proper law of the contract was not a law of any part of Australia, and that accordingly s 67(a) did not apply. Valve submitted that s 67(b) was conditional on the proper law of the contract being Australian law. His Honour rejected this submission concluded that s 67(b) applied because “… the inclusion of a Washington State choice of law clause purported to substitute Washington State law for all or any of the provisions of Division 1 [of the ACL]”. 100 This construction means that it is not possible to exclude the statutory guarantees regime by the adoption of a foreign choice of law clause, even if applying the common law test leads to the conclusion that the proper law of the contract is that foreign law. Limitation of liability: recreational services – ACL ...............................................................................................................................................................................................

One of the recommendations of the Ipp Review was that limitations should be placed on the liability for personal injury of persons or companies that provide recreational services. Section 68B(1) of the TPA, before it was repealed, allowed for a [18.280]

95 96

Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418 at 437. For example, see Law v MCI Technologies Pty Ltd [2006] VCAT 415 at [43]-[48] (Morris P); and Kiley v MCI Technologies Pty Ltd [2006] VCAT 2543 at [26]-[30] (Steele DP).

97 98

99

Laminex (Aust) Pty Ltd v Coe Manufacturing Co (1998) ATPR ¶41-610. This was confirmed on appeal in Laminex (Aust) Pty Ltd v Coe Manufacturing Co [1999] NSWCA 370, but the Court of Appeal varied the stay to make it conditional on Coe Manufacturing allowing a claim for breach of the Pt V Div 2 implied warranties to be tried on its merits in proceedings in Oregon. ACCC v Valve Corporation (No 3) [2016] FCA 196.

100

ACCC v Valve Corporation (No 3) [2016] FCA 196 at [89].

[18.280]

CHAPTER

18

REMEDIES RELATING TO GUARANTEES

577

limitation of liability which arises under s 74 (warranties implied in contracts for the supply of services) in relation to personal injury where the services are recreational services. Section 68B(2) of the TPA defined “recreational services” to mean services that consist of participation in: (a) a sporting activity or a similar leisure time pursuit; or (b) any other activity that: (i) involves a significant degree of physical exertion or physical risk; and (ii) is undertaken for the purposes of recreation, enjoyment or leisure.

Section 139A of the CCA expressly provides that suppliers of recreational services may exclude, restrict or modify their liability to consumers for death or personal injury. Such a term is not void under s 64 of the ACL. Section 139A of the CCA allows suppliers of recreational services to exclude, limit or modify the application of the consumer guarantees in relation to services in Pt 3-2 of the ACL. It provides: (1) A term of a contract for the supply of recreational services to a consumer by a person is not void under section 64 of the Australian Consumer Law only because the term excludes, restricts or modifies, or has the effect of excluding, restricting or modifying: (a) the application of all or any of the provisions of Subdivision B of Division 1 of Part 3-2 of the Australian Consumer Law; or (b) the exercise of a right conferred by such a provision; or (c) any liability of the person for a failure to comply with a guarantee that applies under that Subdivision to the supply. (2) Recreational services are services that consist of participation in: (a) a sporting activity or a similar leisure time pursuit; or (b) any other activity that: (i) involves a significant degree of physical exertion or physical risk; and (ii) is undertaken for the purposes of recreation, enjoyment or leisure. (3) This section does not apply unless the exclusion, restriction or modification is limited to liability for: (a) death; or (b) a physical or mental injury of an individual (including the aggravation, acceleration or recurrence of such an injury of the individual); or (c) the contraction, aggravation or acceleration of a disease of an individual; or (d) the coming into existence, the aggravation, acceleration or recurrence of any other condition, circumstance, occurrence, activity, form of behaviour, course of conduct or state of affairs in relation to an individual: (i) that is or may be harmful or disadvantageous to the individual or community; or (ii) that may result in harm or disadvantage to the individual or community.

578

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[18.285]

The remedies in s 267 of the ACL, for failure to comply with the consumer guarantees in relation to the supply of services, arise independently of contract. Section 267(4) of the ACL provides that a consumer may bring an action against the supplier of consumer services to recover damages for losses that were “reasonably foreseeable” as a result of the failure to comply with the guarantee of due care and skill. Section 139A(1) of the CCA provides that suppliers of recreational services may limit their liability for death, physical or mental injury and illness, not property damage. This would include liability for consequential loss under s 267(4) of the ACL. The term limiting liability would only bind the other party to the contract (the consumer), but not another person who may be injured as a result of the failure to comply with the guarantee (third party). The consumer guarantees arise independently of contract, and a cause of action under s 267(4) of the ACL would be available to a third party whose injuries were a “reasonably foreseeable” consequence of the failure to comply. Section 139A(2) of the CCA defines the term “recreational services” to mean: [18.285]

services that consist of participation in: (a) a sporting activity or a similar leisure-time pursuit; or (b) any other activity that: (i) involves a significant degree of physical exertion or physical risk; and (ii) is undertaken for the purposes of recreation, enjoyment or leisure. 101

The Second Explanatory Memorandum states: Examples of activities that are within the scope of this definition are all forms of sport and other activities such as hiking, bungee jumping and paintball. Activities that are not captured include bus tours, shopping and theatre going. 102

Section 139A(4) of the CCA provides that while a failure to comply with the consumer guarantees relating to services can be excluded, s 139A does not apply “if the exclusion, restriction or modification would apply to significant personal injury suffered by a person that is caused by the reckless conduct of the supplier of the recreational services”. 103 The use of the expression “would apply” appears to require an analysis of the wording of the particular exclusion clause at issue and whether it attempts to exclude recklessness. If it is drafted too broadly and attempts to exclude recklessness, it seems that it cannot be relied upon even when the particular act or omission that has occurred is a simple failure to comply with the guarantee of due care and skill, rather than a reckless failure to comply with the guarantee of due care and skill. The term “reckless conduct” is defined in s 139A(5) of the CCA which provides: 101 102 103

The same definition of “recreational services” is adopted in s 22(4) of the Australian Consumer Law and Fair Trading Act 2012 (Vic). Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.139]. CCA, s 139A(4).

[18.295]

CHAPTER

18

REMEDIES RELATING TO GUARANTEES

579

The supplier's conduct is reckless conduct if the supplier: (a) is aware, or should reasonably have been aware, of a significant risk that the conduct could result in personal injury to another person; and (b) engages in the conduct despite the risk and without adequate justification.

No guidance is provided as to what constitutes a “significant risk” that conduct could result in personal injury and what constitutes an “adequate justification”. Limitation of liability: recreational services ACL (Application Acts) ...............................................................................................................................................................................................

Section 275 of the ACL provides that where there is a failure to comply with a guarantee that applies to the a supply of services and a law of a State or Territory is the proper law of the contract, that State or Territory law may apply to limit or preclude liability for the failure to comply with the guarantee. 104 [18.290]

Action by the ACCC to enforce consumer guarantees ............................................................................................................................................................................................... [18.295] CCAAC in its report, Consumer Rights: Reforming Statutory Implied Conditions and Warranties, 105 recommended that in order to provide an additional incentive for suppliers to comply with consumer guarantees the ACCC should have the right to bring civil proceedings to secure compensation for systemic failure to honour guarantees. Section 277 of the ACL provides that the regulator may commence an action on behalf of one or more persons who are entitled to take action against suppliers or manufacturers who fail to honour consumer guarantees. The regulator may only make the application if it has obtained the written consent of the person, or each of the persons, on whose behalf the application is made. 106 The maximum penalty that can be imposed is $1.1 million if the supplier or manufacturer is a body corporate or $220,000 if the retailer is not a body corporate.

104 105

See eg, s 22 of the Australian Consumer Law and Fair Trading Act 2012 (Vic). The report is available on the Australian Government, Treasury’s website, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009), at http://www.ccaac.gov.au.

106

ACL, s 277(2).

INDEX .................................................................................................................................................... A

Aboriginal people native title — see Native

title Acceptable quality — see

Consumer guarantees for goods Accession accessories, [4.120]–[4.150] becoming part of principal, [4.120] distinguishing from principal, [4.150] mixtures distinguished, [4.130], [4.150] definition, [4.120], [15.250] examples, [4.130] goods joined together, [4.120], [4.130] identifying accessory and principal, [4.150] land, to — see Fixtures mixtures — see Mixtures property rights, effect on, [4.120]–[4.150] security interests, [14.110], [15.240], [15.250] separation, whether practical, [4.140] specification distinguished, [4.130] Accessorial liability agents, [12.175] aiding and abetting, [12.175] damages, for, [12.175] deliberate ignorance, [12.190] directors, [12.175], [12.190] employees, [12.175] injunctions, [12.240] intention, [12.175], [12.180] involvement in contravention, [12.175] innocent or inadvertent, [12.180] involved, definition, [12.175] proportionate liability, [12.145] unfair contract terms, [12.225]

knowledge of contravention, [12.175], [12.180] actual knowledge, [12.180], [12.185] essential matters, [12.180], [12.185] inferred actual knowledge, [12.190] professional advisers, [12.180] sufficient knowledge, [12.175] overview, [12.175] participation in contravention, [12.175], [12.195] professional advisers, [12.180] wilful blindness, [12.190] Accessories goods — see Accession land, to — see Fixtures Accretion estate, effect on, [4.70]–[4.100] definition of boundary, [4.80] gradual change, [4.90] intervention by estate holder, [4.100] exclusion of doctrine by statute, [4.80] ACL — see Australian

Consumer Law (ACL) ACL regulators ACCC — see Australian

Competition and Consumer Commission (ACCC) ASIC — see Australian Securities and Investments Commission (ASIC) memoranda of understanding, [9.145] regulator, definition, [9.145] States and Territories, [9.145] Adverse publicity orders lay-by agreement breach, [10.125]

proof of transaction breach, [17.130] Advertising comparative, [11.205] consumer detriment, [9.10], [11.170] false or misleading representations — see

False or misleading representations information provider defence

— see Information provider defence misleading or deceptive — see Misleading or deceptive advertising overview, [11.170] price — see also Price comparative advertising, [11.205] false or misleading — see

False or misleading representations two-price advertising, [9.20], [6.155] trading or commercial character, [10.80] unauthorised advertisements

— see Unauthorised entries or advertisements Agency agent — see Agent cohabitation, by, [7.190] contract with third party agent not party to, [7.10] principal party to, [7.10] creation of, [7.90]–[7.190] cohabitation, [7.190] deed, [7.100] estoppel, [7.130] expressly, [7.90]–[7.120] holding out, [7.130] necessity, [7.150]–[7.180] operation of law, [7.150]–[7.190] ratification, [7.140] word of mouth, [7.120] writing, [7.110] definition, [7.20]

582

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Agency — cont duties of agent — see Agent employment distinguished, [7.30] holding out, [7.130] independent contractor distinguished, [7.30] liability of agent — see

Agent’s liability necessity, of, [7.150]–[7.180] common law recognition, [7.160] factors to establish, [7.160] pledge of ship, [7.180] power of attorney, [7.100] principal agent’s duties to — see

Agent agent’s liability to, [7.480] bankruptcy, [7.770] bound by agent’s acts, [7.10], [7.200] capacity to act as, [7.40] death of, [7.740] insanity, [7.750] misrepresentation, liability for, [7.590] tort by agent, liability for, [7.590] ratification, by, [7.140] relationship, [7.20] creation of, [7.90]–[7.190] use of “agent” not conclusive proof of, [7.10] when arises, [7.10] renunciation by agent, [7.780] rights of agent — see Agent termination of, [7.670]–[7.780] agreement, [7.700] bankruptcy of agent, [7.760] bankruptcy of principal, [7.770] completion of act, [7.680] death, [7.740] impossibility of performance, [7.690] insanity, [7.750] performance of act, [7.680] renunciation by agent, [7.780] revocation of authority, [7.710]–[7.730] Agent accessorial liability, [12.175] actual authority, [7.210]–[7.235] express, [7.220] implied, [7.230]–[7.235] apparent authority, [7.240]–[7.260] principal bound by acts within, [7.260]

representation of authority, [7.240], [7.260] unaffected by limitations on actual authority, [7.260] usual authority of person occupying position, [7.260] appointment of deed, [7.100] sub-agent, [7.290] word of mouth, [7.120] writing, [7.100] auctioneer as, [7.30], [7.850] licensing, [7.860] statutory regulation, [7.860] authority of, [7.200] actual, [7.210]–[7.235] actual express, [7.220] actual implied, [7.230]–[7.235] apparent/ostensible, [7.240]–[7.260] breach of warranty of, [7.580] delegation to sub-agent, [7.290] revocation of, [7.710]–[7.730] bailee’s liability for, [6.170] bankruptcy, [7.760] breach of warranty of authority, [7.580] brokers, [7.810] licensing, [7.860] capacity to act as, [7.40] capacity to employ, [7.40] classifications, [7.50] commercial agents, [7.860] confidentiality duty of, [7.380] liability for breach of, [7.480] death of, [7.740] deceit by, [7.620] definition, [7.20] del credere agents, [7.800] delegation not permitted, [7.290] directors of companies, [7.830] disclosure of interests, [7.340] duty of care and skill, [7.370] secret profit, not to make, [7.340] duties of, [7.270]–[7.380] act in good faith, [7.300]–[7.320] act in interests of principal, [7.300] act in person, [7.290] care and skill, [7.350]–[7.370] care of property of principal, [7.380] confidentiality, [7.380]

disclosure of personal interest, [7.300], [7.330] follow principal’s instructions, [7.280] keep principal’s money and property separate, [7.380] secret profit, not to make, [7.300], [7.340] separate accounts, [7.380] employee distinguished, [7.30] employment agent, [7.860] estate agents, [7.840] commission, entitlement to, [7.390]–[7.440] duty of care and skill, [7.370] informing vendor of avoidance of contract of sale, [7.370] exceeding authority, [7.140] ratification, [7.140] factors, [7.790] finance brokers, [7.860] fraud by, [7.600]–[7.620] principal’s liability, [7.600]–[7.620] unauthorised act, [7.640] general agents, [7.70] good faith, duty of, [7.300]–[7.320] indemnity, right to, [7.450] independent contractor distinguished, [7.30] insanity, [7.750] liability for conduct of, [10.110]–[10.135] actual or apparent authority, [10.120] conduct “on behalf of”, [10.115], [10.120] consent or direction, [10.125] corporate principal, [10.110]–[10.125] direct liability, [10.110]–[10.135] elements of prohibition, [10.110] non-corporate principal, [10.130] vicarious liability at common law, [10.110] liability of — see also Agent’s liability lien, right to, [7.460] general lien, [7.460] particular lien, [7.460] mercantile agents, [7.790] minor as, [7.40] misleading or deceptive conduct, [7.590], [11.40], [11.45] conduit defence, [11.40], [11.45] disclaimers, [11.40]–[11.55]

CHAPTER

Agent — cont passing on representations, [11.40]–[11.50] misrepresentation, [7.590] fraudulent, [7.620], [7.630] negligent, [7.590] negligence, [7.480] unauthorised act, [7.660] ostensible authority, [7.240]–[7.260] partner as, [7.820] personal interest in matter, [7.320] declining to act, [7.320] duty to disclose, [7.300], [7.330] principal bound by acts of, [7.10] authority, acts within, [7.200] proportionate liability, [12.145] remuneration, right to, [7.390]–[7.440] amount, [7.390] commission, [7.390]–[7.440] effective cause of sale, [7.400], [7.410] licensee, [7.440] real estate agent, [7.410]–[7.440] statutory restrictions, [7.440] terms of appointment, [7.390] renunciation of agency by, [7.780] revocation of authority, [7.710]–[7.730] agent’s rights, [7.730] third party rights, [7.720] rights of, [7.390]–[7.460] commission, [7.390]–[7.440] indemnity, [7.450] lien, [7.460] reimbursement, [7.450] remuneration, [7.390]–[7.440] secret profit, duty not to make, [7.300], [7.340] separate accounts, [7.380] special agents, [7.60] statutory regulation, [7.860] sub-agent, appointment of, [7.290] tort by, [7.600]–[7.660] negligence, [7.480], [7.660] negligent misrepresentation, [7.590] principal’s liability, [7.590], [7.600] unauthorised act, [7.660] trade or commerce, conduct in, [10.100] travel agents, [7.860] trustee distinguished, [7.30]

unauthorised act by, [7.140] ratification, [7.140] uniform legislation, [7.860] universal agents, [7.80] vicarious liability of principal, [10.110] wrongful conduct by, [7.600]–[7.660] Agent’s liability agent not liable authority not exceeded, [7.580] name of principal disclosed, [7.500] breach of warranty of authority, [7.580] fraud, [7.600]–[7.620] unauthorised act, [7.640] misleading or deceptive conduct, [7.590] misrepresentation, [7.590] fraudulent, [7.620], [7.630] negligent, [7.590] negligence, [7.480] unauthorised act, [7.660] overview, [7.470] principal, to, [7.480] third parties, to, [7.490]–[7.570] company not yet in existence, [7.510], [7.530] contract in agent’s own name, [7.500] contract outside scope of authority, [7.500] election to hold agent liable, [7.550], [7.560] existence but not name of principal disclosed, [7.540] existence of principal not disclosed, [7.550]–[7.570] fictitious principal, [7.500] intention of parties, [7.530] intention that agent alone is party, [7.540] method of contracting, dependent on, [7.490] name of principal disclosed, [7.500]–[7.530] non-existent principal, [7.500], [7.510] pre-registration contract, [7.530] undisclosed principal, [7.550]–[7.570] usage or custom making agent liable, [7.500] torts, [7.600]–[7.660] unauthorised act, [7.640], [7.660] undisclosed principal, [7.550]–[7.570]

A

INDEX

583

actual authority of agent, [7.550] agent’s manner of contracting, [7.570] election to hold agent liable, [7.550], [7.560] general principles, [7.550] intervention by, [7.570] set-off, [7.570] wrongful conduct, [7.600]–[7.660] Aiding and abetting — see

Accessorial liability Agricultural tenants fixtures, removal of, [4.210], [4.220] Alienability meaning, [2.90] property rights, [2.90] Animals control of, [5.30] fauna as Crown property, [3.20] Architects consumer guarantees, [17.25] exclusion, [17.25], [17.100] ASIC — see Australian

Securities and Investments Commission (ASIC) ASIC Act complementary operation with ACL, [11.255] consistency with ACL, [11.250] consumer protection provisions, [9.105], [11.250] financial products and services

— see Financial products and services insurance contracts, [9.110] misleading or deceptive conduct, [9.105], [11.250]–[11.290] overlap with ACL, [11.290] proceedings for breach, [11.250] unconscionable conduct, [9.105], [4.195]–[4.215] Assignable rights assignable rights, [2.30], [2.90] bankrupt, property of, [2.30] non-assignable rights, [2.90] property definition, [2.30], [2.90]

584

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Auction sales advertisement, correspondence of goods with, [8.1150] auctioneer — see

Auctioneer conditions of sale, [8.1110] consumer guarantee exceptions, [14.05] definition, [8.1110] description, correspondence with, [8.1150] dummy bids, [8.1160] mock auctions, [8.1160] reserve, with or without, [8.1110] Sale of Goods Acts, application, [8.1110] three contracts, [8.1140] withdrawal of bid, [8.1110] Auctioneer agent, as, [7.30], [7.850], [8.1110] authority to make contract, [8.1110] authority to sell goods, [8.1110] warranty of, [8.1130] contract between vendor/purchaser and, [8.1140] duties of, [8.1120] licensing, [7.860], [8.1110] obligation to purchaser, [8.1130] possession of goods, [8.1110] statutory regulation, [7.860] warranties by, [8.1130]–[8.1150] Australian Competition and Consumer Commission (ACCC) administration of ACL, [9.145] ASIC Act breaches, proceedings for, [11.250] consumer guarantees, action to enforce, [18.295] enforcement by — see

Enforcement public enforcement by, [12.10] representative proceedings, [18.295] Australian Consumer Law (ACL) administration by CAF, [9.45] application, [9.50] Commonwealth law, as, [9.90]–[9.115] conduct outside Australia, [9.95], [9.100], [10.40] corporations, [9.50], [9.90], [10.05]–[10.35] cover the field, not intended to, [9.115], [9.125], [16.15]

Crown, [10.05], [10.50]–[10.70] doubling-up of liabilities prevented, [9.135] extraterritorial, [9.95], [9.130] financial services, [9.105] insurance excluded, [9.110] internet, use of, [9.100], [10.40] legislation, [9.50], [9.55] natural persons, [9.90], [9.100], [10.05], [10.40], [10.45] necessary connection with Australia, [9.95] “person”, [9.90], [9.120], [10.05], [10.40], [10.45] regulated by Pt XIAA of CCA, [9.50] small business, [9.30] States and Territories, [9.50], [9.55], [9.120]–[9.135], [10.05] trade or commerce, [9.100], [10.05], [10.75]–[10.105] background, [9.05] bailor’s duty under, [6.300] commencement dates, [9.55] Commonwealth law, as, [9.90]–[9.115] Competition and Consumer Act Sch 2, [9.50] constitutional power, [9.90], [10.05] consumer guarantees — see

Consumer guarantees consumer protection policy —

see Consumer protection policy contents, [9.50] corporations, application to, [9.90], [10.05] carrying on business in Australia, [9.95] conduct outside Australia, [9.95] definition, [10.10], [10.30] financial corporations, [10.10], [10.25] foreign corporations, [10.10], [10.15] incorporated in a Territory, [10.30] related bodies corporate, [10.35] trading corporations, [10.10], [10.20] Crown, application to, [10.05] Commonwealth, [10.50]–[10.60] States and Territories, [10.65]–[10.70]

defective goods actions — see

Defective goods actions detriment, protection against business — see Business

detriment consumer — see

Consumer detriment drafting approach, [9.05], [9.65], [9.90] enforcement — see

Enforcement false or misleading representations — see

False or misleading representations financial services exclusion, [9.105], [11.250] overlap with ASIC Act, [11.290] future modifications, [9.140] general consumer protections, [9.05], [11.05] goods — see Goods hire of goods, guarantees, [6.300] historical background, [9.70]–[9.85] CAAC recommendations, [9.80], [9.85], [16.45], [16.50] consumer guarantees, [9.75]–[9.85], [16.10]–[16.60] differences in legislation, [9.75] one regulator model, [9.120] Productivity Commission, [9.70]–[9.85], [9.120] implementation, [9.55] insurance excluded from, [9.110] interpretation, [9.40] policy objectives and, [9.40] “purposive” approach, [9.40] unconscionable conduct, [9.05], [4.45]–[4.70] lay-by agreements — see

Lay-by agreements legislation constituting, [9.05] misleading or deceptive conduct — see

Misleading or deceptive conduct national law, [9.05] natural persons, application to, [9.90], [9.100], [10.05], [10.40] corporations power relied on, where, [10.05]

CHAPTER

implementation of ACL, [9.55] natural persons, [10.45] principal acts, [9.120] substantive changes introduced by, [9.65] supply, meaning — see

Australian Consumer Law (ACL) — cont direct liability, [10.40], [10.45] forms of conduct, [10.40] necessary connection with Australia, [9.95] overseas conduct, [9.95], [10.40] States and Territories, [10.45] unfair contract terms, [10.40], [5.50] other legislation, relationship with, [9.115], [9.130], [16.15] overseas conduct, application to, [9.95], [9.100], [10.40] overview, [9.05], [9.50], [10.05] policy objectives — see

Supply of goods or services trade or commerce, conduct in

— see Trade or commerce Trade Practices Act compared, [9.65] principal differences, [9.65] transitional measures, [9.60] unconscionable conduct — see

Unconscionable conduct unfair contract terms — see Unfair contract terms unfair sales techniques — see Unfair sales techniques

Consumer protection policy product safety — see Product safety regulations, [9.50], [9.140] commencement dates, [9.55] exemptions, [9.140] future modifications, [9.140] regulators — see ACL

unsolicited consumer agreements — see

Unsolicited consumer agreements

regulators review of, [9.45] scope of law, [10.05] services — see Services small business, application to

— see Small business specific consumer protections, [9.05] stages of reforms, [9.05] States and Territories, [9.05], [9.75], [9.120] ACL as law of, [9.120]–[9.140] application in, [9.50], [9.120], [10.05] application legislation, [9.50], [9.55], [9.120]–[9.135], [10.05] commencement dates, [9.55] cover the field, not intended to, [9.125] Crown in right of — see

Crown differences in provisions, [9.50] double jeopardy, [9.135] doubling-up of liabilities prevented, [9.135] extraterritorial application, [9.130] future amendments, [9.140]

Australian Securities and Investments Commission (ASIC) administration of ACL, [9.145] enforcement of ACL, [9.145] financial services regulation, [9.105], [11.250], [11.255] specialist regulator, [11.255]

B

Bailee agent, liability for, [6.170] breach of duty damage to goods, [6.60], [6.160] failure to secure premises, [6.60]–[6.80] misdelivery of goods, [6.90]–[6.110] nature of bailment, dependent on, [6.140] negligent failure to return goods, [6.140], [6.150] sub-bailee, [6.200] carriage of goods, [6.110] delivery of goods to, [6.50] detinue by, [5.160] duty of care

B

INDEX

585

bailee for reward, [6.30], [6.60]–[6.110] gratuitous bailee, [6.120]–[6.160] insurer distinguished, [6.90] nature of bailment, dependent on, [6.50] redelivery of goods, [6.90]–[6.110] services, for, [6.230] sub-bailee, [6.180]–[6.200] employee, liability for, [6.170] exclusion of liability, [6.210] gratuitous, [6.50] duties of, [6.120]–[6.160] liability damaged goods, [6.60], [6.160] employees and agents, for, [6.170] exclusion or limitation of, [6.210] lost goods, [6.170] stolen goods, [6.60], [6.80], [6.90], [6.130], [6.190] misdelivery of goods, [6.90]–[6.110] possession of goods creditor, on behalf of, [15.100] perfection of security interest, [15.100] reward, for, [6.50] duties, [6.60]–[6.110] rights against third parties, [6.380] services provided by statutory obligations, [6.230] sub-bailment, [5.100], [6.180] duty of bailee, [6.180]–[6.200] wrongful act terminating bailment, [6.340], [6.380] wrongfully disposing of goods, [6.380] Bailment bailee — see Bailee bailor — see Bailor car parking, whether creates, [6.40] classification of, [6.50] damage to bailed goods bailee’s liability, [6.60], [6.160] rights against third parties, [6.380] definition, [6.10] delivery of goods to bailee, [6.50] detinue by bailee, [5.160] disposal of uncollected goods, [6.380] duties of bailee — see Bailee

586

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Bailment — cont duties of bailor — see Bailor examples, [6.10] gratuitous, [6.50] duties of bailee, [6.120]–[6.160] hire of goods, [6.50] Australian Consumer Law guarantees, [6.300] duties of bailor, [6.260]–[6.300] fitness for purpose, condition of, [6.270]–[6.300] hire-purchase agreements, [5.100] liability of bailee — see Bailee licence distinguished, [6.20], [6.40] nature of, [5.100], [6.20] owner repossessing bailed goods, [6.370] possession without consent, [5.110] repair, delivery of goods for, [6.50] reward, for, [6.50] bailor’s right to possession, [6.380] duties of bailee, [6.60]–[6.110] duties of bailor, [6.240]–[6.300] safekeeping, deposit of goods for, [6.50] security interest, as, [14.40] sub-bailment, [5.100], [6.180] duty of bailee, [6.180]–[6.200] temporary transfer of possession, [5.100] termination of, [6.310] demand of gratuitous bailor, [6.330] destruction of subject matter, [6.360] expiry of term, [6.320] repossession of bailed goods, [6.370] wrongful act of bailee, [6.340], [6.380] transfer of possession, [5.100], [6.20] Bailor demand to terminate bailment, [6.330] duties of, [6.240]–[6.300] Australian Consumer Law, [6.300] bailment for reward for fixed term, [6.240] fitness for purpose, ensuring, [6.270]–[6.300]

hire of goods, [6.260]–[6.300] inform bailee of dangers in goods, [6.240] non-interference with bailee’s possession, [6.240] retaking possession of goods, [6.240] reversionary interest adversely affected, [6.380] right to possession, [5.100], [6.380] rights against third parties, [6.380] Bait advertising prohibition, [4.120] Bank money in, [2.110] personal right against, [2.110] Bankruptcy agency terminated by agent, [7.760] principal, [7.770] property of bankrupt, [2.30] security rights, reasons for taking, [13.20] unsecured creditors, disadvantages, [13.20]

detriment to — see Business

detriment sale of consumer guarantees and non-consumer use, [16.110] misleading or deceptive conduct, [11.20] stock-in-trade not consumer goods, [16.110] small — see Small business Business detriment business consumers, [9.30], [9.35] business suppliers, [9.30] business-to-business transactions, [9.30] drip pricing, [9.35] misleading or deceptive conduct, [9.35], [11.05] premium claims, [9.35] protection against, [9.30] unfair contract terms, [9.30] Business-to-business transactions misleading or deceptive conduct, [9.35], [11.10] small business protection —

see Small business unconscionable conduct, [9.30]

Banning orders proof of transaction breach, [17.130] Behavioural economics, [9.20] “Bounded rationality” theory, [9.15] Building services consumer guarantees, [17.40] fixtures as goods, [16.145], [17.40] leasehold or freehold interest, [17.45] mixed supplies, [16.130], [17.40] residential dwellings, [17.45] Broker — see also Agent definition, [7.810] finance brokers, [7.860] practice of brokerage, [7.810] statutory regulation, [7.860] Burden of proof — see Onus

of proof Business carrying on — see Carrying

on a business

C

Carrying on a business Australia, in, [9.95] commercial flavour, [10.55] Commonwealth Crown, [10.05], [10.55] exceptions, [10.60] government activities, [10.55] conduct outside Australia, [9.95] meaning, [10.55] State and Territory Crowns, [10.05], [10.65] authorisations, [10.70] exceptions, [10.70] intra-governmental transactions, [10.70] “trade or commerce”, distinction, [10.55] Causation “because of”, meaning, [12.35] breaks in chain of, [12.65] “but for” test, [11.165], [12.40] “common sense” approach, [12.40] consumer guarantee breaches, [18.70], [18.105]

CHAPTER

Causation — cont damages actions, [12.35]–[12.75] declaration of non-reliance, [11.160], [12.75] evidence of, [12.45] indirect causation theory, [12.60] misleading or deceptive conduct, [11.165], [11.170] reliance, proof of, [12.50], [12.55], [12.70] supervening event, [12.65] TPA compared, [12.35], [12.40] CAANZ, [9.45] CCAAC — see

Commonwealth Consumer Affairs Advisory Council Changes to things creation or destruction, [4.20] goods, [4.30]–[4.50] land, [4.60]–[4.110] fixtures — see Fixtures goods accession, [4.120]–[4.150] creation or destruction, [4.30]–[4.50] land, on — see Fixtures mixtures — see Mixtures land accretion, [4.70]–[4.100] dimensions altered, [4.60]–[4.110] erosion, [4.70]–[4.100] fixtures — see Fixtures rights affected, [4.60]–[4.110] rights not affected, [4.60] total destruction, [4.110] value affected, [4.60] mixtures — see Mixtures physical changes, [4.10] property rights affected by, [4.10] Chattels — see also Goods affixed to land, [16.145], [17.40] chattel mortgage, [13.80], [14.40] consumer guarantees, [16.165] fixtures, [16.145], [17.40] mixed supply, [16.85] trade or commerce, supply in, [16.165] control of, [5.30] goods, as, [16.165], [17.40] land, attached to — see

Fixtures

pledge, [13.50] supply of, [16.165] tenant’s fixtures, [4.200] use of term, [1.10] Choice of law and venue clauses consumer guarantees and, [18.275] proper law of contract, [18.275]

C

INDEX

587

Commonwealth Crown — see

Crown Comparative advertising definition, [11.205] misleading and deceptive conduct, [11.205]

Common property collective property distinguished, [3.20] definition, [3.20] mixtures, [4.290], [4.310]

Compensation orders — see also Damages ACL and TPA compared, [9.65] compensatory principle, [12.200] discretion of court, [12.200] equitable principles, [12.220] evidence from other proceedings, [12.200] jurisdiction to grant, [12.225] limitation period, [12.200] limits on, [12.210] nature of relief, [12.215] other proceedings, arising out of, [12.205] overview, [12.200] personal injury or death, [12.205] injured person party to proceedings, [12.205] limitation period, [12.200] limits on compensation, [12.210] loss or damage, meaning, [12.215] misleading or deceptive conduct, [12.210] smoking or tobacco products, [12.210] types of orders, [12.220] unfair practices, [12.210] private actions, [12.200] proof of transaction offence, [17.130] rescission of contract, [12.220] types of orders, [12.220] unconscionable conduct, [12.200], [12.205] unfair contract terms, [12.200], [12.205], [12.225] declared unfair, [12.200], [12.225] different consumer, [12.225] jurisdiction to grant, [12.225] limitation period, [12.200]

Commonwealth Consumer Affairs Advisory Council (CCAAC) ACL background, [9.80], [9.85] consumer guarantees, [16.45], [16.50], [18.295] acceptable quality, [16.50], [16.345] implied terms regime, [9.80], [9.85], [16.45], [16.50]

Competition and Consumer Act 2010 ACL — see also Australian Consumer Law (ACL) Pt XIAA regulation application of, [9.50] Sch 2 containing, [9.50], [9.90] constitutional power, [9.90] future amendments, [9.140]

Choses in action copyright, [16.140] goods, whether, [16.125] software licence, [16.140] Civil pecuniary penalties ACCC, public proceedings by, [12.10] ACL and TPA compared, [9.65] proof of transaction offence, [17.130] TPA compared, [9.65] COAG, [9.05], [9.45], [9.120], [9.140] Coercion — see Harassment

or coercion Cohabitation agency arising by, [7.190] Collateral contracts express warranties and, [16.400] proof of, [16.400] Collective property common property distinguished, [3.20] definition, [3.20] private ownership compared, [3.20] public resources, [3.20]

588

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Competition and Consumer Act 2010 — cont key provisions, [10.05] objects clause, [9.40] overview of provisions, [9.50] Trade Practices Act 1974 renamed, [9.55] transitional provisions, [9.60] Competition policy consumer detriment and, [9.10] objects of IGA, [9.40] overview, [9.10] supply and demand, [9.10] Compliance — see

Enforcement Computer software consumer guarantees, [16.140] goods or services, [16.135], [16.140] supplier limiting liability, [18.260] supply, [16.140] goods, as, [8.30], [16.135], [16.140] licence as chose in action, [16.140] Concurrent wrongdoers apportionable claim, [12.145], [12.150] apportionment of loss, [12.145], [12.160] definition, [12.145], [12.155], [12.170] proportionate liability, [12.145], [12.155] State legislation, [9.50], [12.170] Conditional sale agreement, as security interest, [14.40], [15.50] bailment, [5.100] nature of, [13.90] ownership, security giving, [13.70] raw materials supplied under, [13.90] Romalpa clauses, [4.40], [13.90] right of possession, [5.100] Confidentiality agent’s duty of, [7.380] liability for breach of, [7.480] Constitution High Court jurisdiction, [9.150] legislative powers under

consumer protections laws, [9.90], [9.105] corporations power, [9.90], [10.05] heads of power, [9.90] referral of, [9.105], [9.120] States and Territories, [9.120] Consumer acquisition as, [16.70]–[16.115] acquire, meaning, [16.70] aggregation, [16.80] amount paid or payable, [16.75], [16.80], [16.95] business goods, [16.75] commercial road vehicles and trailers, [16.105] credit terms, [16.95] hire or lease, [16.90] mixed supplies, [16.85], [16.90], [16.130] non-consumer use exceptions, [16.75], [16.110] personal, household or domestic use, [16.100] prescribed amount, [16.75] presumption, [16.115] price, definition, [16.75] purpose of acquisition, [16.70] re-supply of goods, [16.110], [16.160] services, [17.10] stock-in-trade, [16.110] using up or transforming goods, [16.110] “bounded rationality”, [9.15] business consumers, [9.30], [9.35] competition policy and, [9.10] definition, [9.35], [16.70]–[16.115] ACL and TPA compared, [9.65] objective approach, [16.100] detriment to — see

Consumer detriment presumption, [16.115] Consumer Affairs Australia and New Zealand (CAANZ) advisory and consultative committees, [9.45] functions, [9.45] Consumer credit — see Credit Consumer detriment behavioural economics and, [9.20]

“bounded rationality” and, [9.15] business detriment, protection against, [9.30] competition policy and, [9.10] consumer protection policy, [9.10]–[9.30] defective products, [9.25] definition, [9.10] drip pricing, [9.35] high pressure sales techniques, [9.20] information asymmetry, [9.15] market failure, [9.15] misleading advertising, [9.10] overview, [9.10] personal detriment, [9.10], [11.170] structural detriment, [9.10], [11.170] supply and demand and, [9.10] transaction costs, [9.15] unsafe or defective products, [9.10], [9.25] unsolicited consumer agreements, [9.20] Consumer guarantees ACCC action to enforce, [18.295] acquisition as consumer — see

Consumer application of ACL, [16.15], [16.65] assignment of responsibility, [16.55] Australian Consumer Law, Sale of Goods Acts and, [8.10] background, [9.75]–[9.85], [16.10]–[16.60] CCAAC recommendations, [9.80], [9.85], [16.45]–[16.55] intention of parliament, [16.55] NEIAT study findings, [9.85], [16.20]–[16.45] Productivity Commission recommendations, [9.75], [9.80] single enterprise theory, [16.45] commencement date, [16.05], [16.60] consumer, definition — see

Consumer cover the filed, not intended to, [16.15] criminal offences, [17.120] disputes — see Consumer

disputes failure to comply, [16.05], [12.05], [18.05] choices for consumers, [16.05], [18.05]

CHAPTER

Consumer guarantees — cont remedies — see

Consumer guarantees: remedies goods — see Consumer guarantees for goods New Zealand — see New Zealand consumer guarantees overlap of protections, [16.15], [18.250] overview, [9.65] policy objectives, [16.55] remedies — see Consumer

guarantees: remedies Sale of Goods Acts compared, [16.15] Sale of Goods Acts implied terms, [16.10] services — see Consumer

guarantees for services Trade Practices Act compared, [9.65], [16.10] Consumer guarantees for goods acceptable quality, [16.50], [16.180], [16.205]–[16.345] abnormal use exclusion, [16.205], [16.310], [16.330] onus of proof, [16.305] aesthetic quality, [16.235] appearance and finish, [16.225], [16.235] attributes, [16.225]–[16.250] auction sales excluded, [16.170], [16.205] CCAAC findings, [16.50], [16.345] defects aggregation of, [18.35] definition, [16.240] design defects, [16.240] drawn to consumer’s attention, [16.310], [16.320] freedom from, [16.225], [16.240], [16.265] instructional defects, [16.240] latent, [16.250] manufacturing defects, [16.240] notice of, [9.65], [16.310], [16.325] safety defects, [16.245] definition, [16.55], [16.205], [16.220]–[16.250]

durability, [6.205], [16.225], [16.235], [16.250] evidentiary issues, [16.340] examination of goods, [16.310], [16.335] exclusions from liability, [16.205], [16.310]–[16.335] abnormal use, [16.330] defects drawn to attention, [16.320] examination of goods, [16.335] written notice of defects, [9.65], [16.235] extended warranties and, [6.205] fitness for purposes, [16.230] freedom from defects, [16.225], [16.240], [16.265] inspection of goods by consumer, [16.205] intermediaries, role of, [16.300] latent defects, [16.250] major failure, [18.20]–[18.40], [18.70] marketing of goods, [16.300] matters to be considered, [16.205], [16.260], [16.270]–[16.300] merchantable quality under TPA compared, [16.210], [16.215] motor vehicles disputes, [16.340] nature of goods, [16.245], [16.265], [16.275] New Zealand, [16.205], [16.220], [16.240], [16.255]–[16.265] non-major failure, [18.85] objective assessment of quality, [16.255] price of goods, [16.260], [16.265], [16.280] reasonable consumer standard, [16.205], [16.225], [16.240], [16.245], [16.225]–[16.265], [18.30] relevant circumstances, [16.300] remedies for failure — see

Consumer guarantees: remedies representations by supplier or manufacturer, [16.290] safety, [16.225], [16.245], [16.265], [18.40]

C

INDEX

589

second-hand goods, [16.245] state and condition of goods, [16.260] statements on packaging or labels, [16.285] strict liability, [16.205] time for assessing, [16.305] trade or commerce, supply in, [16.155] ACL Guide, [16.185], [16.195], [16.325], [16.380], [18.125] ACL regime generally — see

Consumer guarantees acquisition as consumer — see

Consumer application of ACL, [16.15], [16.65] assignment of responsibility, [16.55] auction sales, [16.170] background — see

Consumer guarantees chattels, [16.165], [17.40] affixed to land, [16.145], [17.40] mixed supply, [16.85] supply of, [16.165] commencement date, [16.05], [16.60] computer software goods or services, [16.135], [16.140] supplier limiting liability, [18.260] consumer, definition — see

Consumer correspondence with description, [16.180], [16.385] auction sales excluded, [16.170] nature of obligation, [16.385] non-compliance, remedy for, [18.10] supply by description, [16.385] TPA compared, [16.385] trade or commerce, supply in, [16.155] credit terms, [16.95] criminal offences, [17.120] damages for breach — see

Consumer guarantees: remedies definition of consumer — see

Consumer enforcement by ACCC, [18.295]

590

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Consumer guarantees for goods — cont exclusion clauses, [16.380], [18.255]–[18.290] express warranties, [16.180], [16.400] auction sales excluded, [16.170] collateral contracts, [16.400] definition, [16.400] manufacturer, [16.400] non-compliance, remedy for, [18.10] supplier, [16.400] warranties against defects distinguished, [16.405] failure to comply, [16.05][18.05] choices for consumers, [16.05], [18.05] opportunity to remedy, [18.10] recreational services, [9.50] remedies — see

Consumer guarantees: remedies false or misleading representation as to, [6.180] fitness for purpose, [16.180], [16.350]–[16.380] acceptable quality and, [16.230] ACL Guide, [16.380] auction sales excluded, [16.170] disclosed purpose, [16.350] disclosure of purpose, [16.365] elements under TPA, [16.360] loss or damage from goods not being, [16.360] major failure, [18.70] nature of supplier’s duty, [16.370] “no reliance clause”, [16.380] non-compliance, remedy for, [18.10] particular purpose, [16.360] pre-conditions, [16.350] prior negotiations, [16.375] proviso, [16.380] reasonably fit, [16.370] reliance on seller’s skill or judgment, [16.260] special purpose, [16.365] “state of the art” defence, [16.370] test for determining, [16.360] TPA compared, [16.355], [16.360]

trade or commerce, supply in, [16.155] unreasonable reliance, [16.260] gift recipients, [16.160] goods, definition, [16.120], [16.125] chattels affixed to land, [16.145], [17.40] digital products, [16.135], [16.140] mixed supply, [16.85], [16.130], [16.145] residential dwellings, [16.150] services distinguished, [16.125]–[16.150] “guarantee”, use of term, [16.05] hire of goods, [16.90] consumer, definition, [16.90] title guarantee not applicable, [16.185] undisclosed securities, [16.195] undisturbed possession, [16.190] implementation, [16.05] implied terms regime, replacing, [9.75], [16.10] background, [9.75]–[9.85], [16.10]–[16.60] comparison, [16.15] international sale of goods, [16.175] lease of goods, [16.90] consumer, definition, [16.90] title guarantee not applicable, [16.185] undisclosed securities, [16.195] undisturbed possession, [16.190] linked credit providers, [17.20], [18.215] ACL applicable, [11.250], [17.20] rights and remedies, [18.215]–[18.245] major failure — see

Consumer guarantees: remedies manufacturers, [16.180], [18.110] exclusion of liability, [18.255], [18.270] express warranties, [16.400] indemnification of suppliers, [9.65], [16.05], [16.55], [18.140] joint responsibility for quality, [16.45]

remedies against — see

Consumer guarantees: remedies repairs, [16.395] responsibility of, [16.55] spare parts, [16.395] warranties against defects, [16.405] mixed supplies, [16.85], [16.130] chattels and dwelling/building, [16.165], [17.40] digital products, [16.140] modification or restriction exclusion clauses, [16.380], [18.255]–[18.290] motor vehicles acceptable quality, [16.235], [16.280], [16.290] damages for failure of, [18.70] disputes, evidence in, [16.340] hire, [16.190] inspection by purchaser, [16.335] linked credit contract, [16.375] private sales, [16.155] repair and spare parts, [16.395] undisclosed securities, [16.195] undisturbed possession, [16.190] New Zealand Consumer Guarantees Act, [16.10], [16.45] acceptable quality, [16.205], [16.220], [16.240], [16.255] ACL regime based on, [16.45], [16.50] loss allocation mechanism, [16.55] residential dwellings, [16.150] single enterprise theory, [16.45] obligations on different persons, [16.15] overview, [16.05], [16.65] point-of-sale information criminal offences, [17.120] failure to display, [17.120], [18.250] policy objectives, [16.55] private sales, [16.155] proof of transactions, [17.125] ACL and TPA compared, [9.65] definition, [17.125] enforcement powers, [17.130]

CHAPTER

Consumer guarantees for goods — cont examples, [17.125] remedies, [17.130] remedies for non-compliance

— see Consumer guarantees: remedies repair of goods, [16.180], [16.395] auction sales excluded, [16.170] exemption from liability, [16.395] importers, [16.395] manufacturers, [16.395] reasonableness test, [16.395] warranties against defects and, [16.405] residential dwellings, [16.150], [17.45] re-supply of goods, [16.110], [16.160] rights of different persons, [16.15] Sale of Goods Acts compared, [16.15] sample, compliance with, [16.180], [16.390] auction sales excluded, [16.170] freedom from defects, [16.390] single enterprise theory, [16.45], [16.180] spare parts, [16.180], [16.395] auction sales excluded, [16.170] exemption from liability, [16.395] importers, [16.395] manufacturers, [16.395] reasonableness test, [16.395] strict liability, [16.50] suppliers express warranty, [16.400] indemnification by manufacturers, [9.65], [16.05], [16.55], [18.140] joint responsibility for quality, [16.45] limitation of liability, [16.55], [18.255]–[18.265] opportunity to make good non-compliance, [16.55] proof of transactions, [17.125], [17.130] remedies against — see

Consumer guarantees: remedies

warranty against defects, [16.405] supply, definition, [16.160] title to goods, [16.180], [16.185], [16.200] ACL Guide, [16.185] hire or lease excluded, [16.185] limitation of liability not permitted, [18.260] limited title, [16.185], [16.200] non-compliance, remedy for, [18.10] remedy by supplier, [18.85] right to dispose, [16.185] undisturbed possession and, [16.190] trade or commerce requirement, [10.75], [10.85], [16.155] transitional provisions, [9.60] underlying philosophy, [16.180] undisclosed securities, [16.180], [16.195], [16.200] ACL Guide, [16.195] floating charges, [16.195] limitation of liability not permitted, [18.260] non-compliance, remedy for, [18.10] undisturbed possession, [16.180], [16.190], [16.200] hire or lease, [16.190] limitation of liability not permitted, [18.260] limited title, [16.190] non-compliance, remedy for, [18.10] United Kingdom fitness for purpose, [16.355], [16.365] merchantable quality, [16.210] Vienna Convention, [16.175] warranties against defects, [16.405] whole of supply chain obligations, [16.15] Consumer guarantees for services ACL regime generally — see

Consumer guarantees architects, [17.25], [17.100] background — see

Consumer guarantees building services, [17.40] fixtures as goods, [16.145], [17.40] leasehold or freehold interest, [17.45]

C

INDEX

591

mixed supplies, [16.130], [17.40] residential dwellings, [16.150], [17.45] common law duties duty of care, [17.65] overcoming inadequacies of, [17.55] consumer — see also Consumer acquisition as, [17.10] criminal offences, [17.120] desired result, [17.95], [17.110] major failure, [18.150], [18.170] non-compliance, remedy for, [18.145] question of fact, [17.110] reasonably expected to achieve, [17.95], [17.110] digital products, whether, [16.135], [16.140] due care and skill, [17.05], [17.60]–[17.90] acceptable level, [17.80] architects, [17.25] common law duty compared, [17.65] due care, meaning, [17.65], [17.85] engineers, [17.25] exception to right of redress, [18.195] major failure, [18.150] motor vehicle repairs, [17.90] New Zealand, [17.70], [17.85] non-compliance, remedy for, [18.145] requirements, [17.75] standard of due care, [17.85], [17.90] test for, [17.75] TPA compared, [17.65], [17.85] United Kingdom, [17.70] electricity, [17.500] engineers, [17.25], [17.100] excluded services, [17.15]–[17.50] exclusion clauses, [18.255]–[18.290] financial services, [17.20] ACL not applicable, [11.250], [17.20] fitness for purpose, [17.05], [17.95]–[17.105] architects excluded, [17.25], [17.100] engineers excluded, [17.25], [17.100] major failure, [18.150], [18.160], [18.165] making known purpose, [17.105]

592

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Consumer guarantees for services — cont non-compliance, remedy for, [18.145] reasonably fit, [17.95] TPA compared, [17.100] gas, [17.500] insurance contracts excluded, [17.35] itemised bills, [17.135] linked credit providers, [17.20], [18.215] ACL applicable, [11.250], [17.20] rights and remedies, [18.215]–[18.245] major failure — see

Consumer guarantees: remedies mixed supplies, [16.85], [16.130] chattels and building, [16.165], [17.40] digital products, [16.140] motor vehicle repairs desired result, [17.110] due care and skill, [17.90] overview, [17.05], [17.55] personal, domestic or household use, services for, [17.15] point-of-sale information criminal offences, [17.120] display of notice, [17.120] failure to display, [17.120], [18.250] proof of transactions, [17.125] ACL and TPA compared, [17.65] definition, [17.125] enforcement powers, [17.130] examples, [17.125] remedies, [17.130] purpose, [17.55] reasonable time for supply, [17.05], [17.115] architects and engineers, [17.25] consideration of circumstances, [17.115] major failure, [18.150] non-compliance, remedy for, [18.145] recreational services, [17.50], [18.280] guarantee independent of contract, [18.285] limitation of liability, [17.50], [18.280]–[18.290] reckless conduct of supplier, [18.285] remedies for failure to comply, [18.285]

States and Territories, [17.50], [18.290] remedies for non-compliance

— see Consumer guarantees: remedies residential dwellings, [16.150], [17.45] re-supply of services, [17.10] scheme of ACL, [17.60] service, definition, [16.120], [17.15], [17.45] goods distinguished, [16.125]–[16.150] services protected, [17.15] exclusions, [17.15]–[17.50] storage services, [17.30] suppliers indemnification by manufacturers, [9.65], [16.05], [18.140] itemised bills, [17.135] proof of transactions, [17.125], [17.130] remedies against — see

Consumer guarantees: remedies supply, meaning, [16.160] telecommunications services, [17.50] TPA compared, [17.05] trade or commerce, supply in, [16.155] transportation services, [17.30] fitness for purpose, [17.105] Consumer guarantees remedies ACCC action to enforce, [18.295] ACL and TPA compared, [9.65] choice of law and venue clauses, [18.275] choices for consumers, [16.05], [18.05], [18.45], [18.185] consumer, available to, [18.15] curing defect in title, [18.85] damages against supplier of goods non-delivery, [16.1090] damages for consequential loss, [18.05] causation, [18.70], [18.105] duty to mitigate, [18.75] exclusion of liability, [18.265], [18.270] indemnification of supplier, [9.65], [16.05], [16.55], [18.140] loss sharing, [18.105] major failure, [18.70] manufacturer, against, [18.130], [18.270]

manufacturer excluding liability, [18.270] measure of, [18.70] motor vehicles, [18.70] New Zealand, [18.105] non-major failure, [18.100] reasonably foreseeable loss, [18.70], [18.100], [18.130], [18.210], [18.265] supplier excluding liability, [18.265] supplier of goods, against, [18.70], [18.100], [18.265] supplier of services, against, [18.210], [18.265] damages for personal injury and death, [18.135] damages for reduction in value manufacturer, against, [18.125] supplier of goods, [18.45], [18.65] supplier of services, [18.185] exclusion clauses, [16.380], [18.255] choice of law and venue clauses, [18.275] manufacturer excluding liability, [18.270] recreational services, [18.280]–[18.290] supplier excluding liability for consequential loss, [18.265] supplier limiting liability, [18.260] failure cannot be remedied, [18.20] Australian approach, [18.30] NZ approach, [18.20], [18.25] indemnification of supplier by manufacturer, [9.65], [16.05], [16.55], [18.140] limitation of liability, [18.255] manufacturer, [18.270] “no reliance clause”, [16.380] non-personal goods, [18.260], [18.270] recreational services, [9.50], [18.280]–[18.290] supplier, [18.260] linked credit providers, against, [18.215]–[18.245] ACL and TPA compared, [9.65], [18.215] amount of liability, [18.240] exceptions to liability, [18.235] joint actions, [18.230] joint liability, [18.215], [18.220] pre-existing link, [18.225]

CHAPTER

Consumer guarantees remedies — cont prior negotiations, [16.375] remedies in relation to, [18.215]–[18.245] supplier and credit provider liable inter se, [18.245] TPA compared, [9.65], [18.215] loss allocation, [16.55], [18.110] major failure of goods, [16.05], [18.10], [18.20]–[18.75] aggregation of defects, [18.35] Australian approach, [18.30]–[18.40] compensation, [18.45], [18.65]–[18.75] meaning, [18.20]–[18.30] NZ approach, [18.20], [18.25] quality, [18.20]–[18.40] reasonable consumer test, [18.30], [18.40] rejection of goods, [18.50]–[18.60] remedies, [18.45]–[18.75] substantial character, [18.20], [18.25] tests, [18.20]–[18.40] unsafe goods, [18.40] major failure of services, [18.145]–[18.170], [18.185] desired result not achieved, [18.170] meaning, [18.150] reasonable consumer test, [18.155] remedies, [18.185] unfit for normal purpose, [18.160] unfit for special purpose, [18.165] unsafe situation, [18.175] manufacturer, against, [16.05], [18.05], [18.110]–[18.135] affected person, [18.115] causes of action, [18.110] damages for consequential loss, [18.130], [18.270] damages for personal injury and death, [18.135] damages for reduction in value, [18.125] exceptions to right of redress, [18.120] exclusion of liability, [18.270] failure to remedy fault in reasonable time, [18.125] who may bring action, [18.115] New Zealand

damages for consequential loss, [18.105] failure of a substantial character, [18.20], [18.25] rejection of goods, [18.50], [18.60] repair by supplier, [18.80] non-major failure, [16.05], [18.10], [18.20] goods, [18.80]–[18.105] repair by supplier, [18.80] services, [18.180] overlap of protections, [16.15], [18.250] overview, [9.65], [16.05], [18.05] private litigation, [16.05] proof of transaction offences, [17.130] proper law of contract, [18.275] recreational services, [9.50], [18.280] damages for reasonably foreseeable loss, [18.285] guarantee independent of contract, [18.285] limitation of liability, [9.50], [18.280]–[18.290] reckless conduct of supplier, [18.285] remedies for failure to comply, [18.285] States and Territories, [9.50], [18.290] refund, [18.50], [18.85], [18.95] rejection of goods, [18.50]–[18.60] cost of returning goods, [18.50] loss of right, [18.55] major failure, [18.30], [18.45] reasonable time, [18.60] rejection period, [18.60] replacement goods, [18.50] seriously defective goods, [18.60] repair by manufacturer, [18.125] repair by supplier, [18.80], [18.85] replacement of goods, [18.50], [18.85] restarts consumer guarantees, [18.90] Sale of Goods Acts — see also Sale of goods remedies specific performance, [8.1100] specific performance, [8.1100] “state of the art” defence, [16.265], [16.370]

C

INDEX

593

statutory causes of action, [18.05] independent of contract, [18.05] supplier and credit provider liable inter se, [18.245] supplier of goods, against, [16.05], [18.10]–[18.105] compensation, [18.45], [18.65] consumer, available to, [18.15] curing defect in title, [18.85] damages for consequential loss, [18.70], [18.100], [18.105], [18.265] exclusion of liability, [18.265] hierarchy of remedies, [18.10] indemnification by manufacturer, [9.65], [16.05], [16.55], [18.140] keeping goods, [18.65] limitation of liability, [18.260] major failure, [18.10], [18.20]–[18.75] non-major failure, [18.10], [18.20], [18.80]–[18.105] opportunity to remedy failure, [18.10] optional, [18.80], [18.85] refund, [18.50], [18.85], [18.95] rejection of goods, [18.50]–[18.60] repair, [18.80], [18.85] replacement of goods, [18.50], [18.85] Sale of Goods legislation compared, [18.10] TPA compared, [18.10] who may bring action, [18.15] supplier of services, against, [18.145] compensation for reduction in value, [18.185] damages for consequential loss, [18.210], [18.265] exceptions to right of redress, [18.190]–[18.205] act, default or representation by third party, [18.200] causes beyond human control, [18.205] guarantee of due care and skill, [18.195] exclusion of liability, [18.265]

594

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Consumer guarantees remedies — cont limitation of liability, [18.260] major failure, [18.145]–[18.170], [18.185] non-major failure, [18.180] remedy failure and pay costs, [18.180] termination of contract, [18.180], [18.185] Consumer protection ACL approach, [9.05] business consumers, [9.30], [9.35] different approaches to, [9.05] financial services, [9.105] general prohibitions, [9.05] laws, power to make, [9.90], [9.105] policy — see Consumer

protection policy rule-based regulation, [9.05] statutory framework, [9.05] Consumer protection policy accessibility, [9.40] awareness, [9.40] behavioural economics, [9.20] business detriment, [9.30], [9.35] unfair contract terms, [9.30] clarity, [9.40] COAG, [9.05], [9.45], [9.120], [9.140] competition policy and, [9.10], [9.15] compliance, [9.40] consistency, [9.40] consumer detriment and, [9.10] behavioural economics, [9.20] defective products, [9.25] information asymmetry, [9.15] market failure, [9.15] minimising, [9.10]–[9.30] transaction costs, [9.15] unfair sales techniques, [9.20] consumer guarantees, [16.55] Governance Forum of Consumer Affairs (CAF), [9.45] information asymmetry, [9.15] Intergovernmental Agreement for the ACL (IGA), [9.40], [9.105], [9.140] interpretation and, [9.40] purposive approach, [9.40] lay-buy sales, [9.20] market failure, [9.15] overarching objective, [9.40] overview, [9.05], [9.40]

product liability, [9.25] Productivity Commission, [9.05], [9.10], [9.40] review of framework, [9.70], [9.75] “purposive” interpretation, [9.40] reform and, [9.45] review of framework, [9.70], [9.75] States and Territories, [9.40] unsolicited selling practices, [9.20] Contract for sale of goods —

see Sale of goods contract Contracts breaching ACL, [12.05], [12.10] consequences of illegality, [12.15] declaration — see

Declarations evidence, [12.10] rescission, [12.220] severance of provisions, [12.20] collateral contracts, [16.400] unfair terms — see Unfair

contract terms exclusion clauses — see

Exclusion clauses illegality, [12.15] severance of provisions, [12.20] implied terms — see Implied

terms regime insurance — see Insurance misleading representations —

see Misleading or deceptive conduct rescission, [12.220] severance of illegal provisions, [12.20] unconscionable conduct — see

Unconscionable conduct unfair terms — see Unfair contract terms void, [12.15] declaration, [12.15], [12.220] unfair terms — see Unfair

contract terms Contributory fault circumventing operation, [12.135] contributory negligence, [12.130], [12.140] damages reduced for, [9.50], [12.130], [12.290]

failure to take reasonable care, [12.125], [12.130] failure to verify representation, [12.70], [12.130] reduction for, [12.130], [12.140] State and Territory legislation, [12.140] TPA compared, [12.130] Control animals, [5.30] chattels, [5.30] intention to possess shown by, [5.40] land, [5.30] method of, [5.30] physical, [5.30] possession, element of, [5.20], [5.30], [5.90] public access and, [5.30] ship, [5.30] without knowledge of existence, [5.90] Conversion definition, [5.140] detinue compared, [5.150], [5.160] future right excluded, [5.170] loss of property rights, [4.120] money, [5.140] overlap with trespass and detinue, [5.160] repudiation of right to possession, [5.140], [5.160] right to sue for, [4.120], [5.140] theft, also crime of, [5.170] tort of, [5.140], [5.160] trespass compared, [5.140], [5.160] voluntary act, [5.140] Cooling off period unsolicited consumer agreements, [9.20] Corporate liability breaches of ACL, [10.110] director, employee or agent, conduct of, [10.110]–[10.125] actual or apparent authority, [10.120] conduct “on behalf of”, [10.115], [10.120] consent or direction, [10.125] direct liability, [10.110]–[10.135] scope of authority, [10.120] vicarious liability at common law, [10.110]

CHAPTER

Corporate liability — cont elements to be satisfied, [10.110] overview, [10.110] Corporations application of ACL, [9.50], [9.90], [10.05] carrying on business in Australia, [9.95] conduct outside Australia, [9.95] definition, [10.10], [10.30] financial corporations, [10.10], [10.25] foreign corporations, [10.10], [10.15] incorporated in a Territory, [10.30] liability for breaches — see

Corporate liability misleading or deceptive conduct, [10.05] related bodies corporate, [10.35] trading corporations, [10.10], [10.20] Corporations Act complementary operation with ACL, [11.255] consistency with ACL, [11.250] financial service, definition, [11.265] financial services regulation, [9.105], [11.250] misleading or deceptive conduct, [11.250], [11.285] disclosure documents, [11.285] financial services, [9.105], [11.250] literal truth, [11.130] opinion, [11.150] takeover documents, [11.285] Corporations Agreement, 2002, [9.105], [11.250] Country of origin representations ACL and TPA compared, [9.65] Courts Federal Circuit Court, [9.150] Federal Court — see Federal

Court State and Territory courts, [9.150], [9.155] transfer of proceedings, [9.160] Creation of things goods, [4.30]–[4.50]

agreement as to rights, [4.50] allocation of property rights, [4.50] destruction or use of other goods, [4.30], [4.40] ownership of raw materials, [4.40], [4.50], [13.90] reconvertible to original form, [4.40] Romalpa clauses, [4.40], [13.90] specification, [4.30], [15.260] stolen material, made from, [4.50] time of creation, [4.30], [4.40] unauthorised use of materials, [4.50] whether goods used still exist, [4.40] land accretion, [4.70]–[4.100] definition of boundary, [4.80] estate affected, [4.60]–[4.110] property rights created, [4.20] specification, [4.30], [15.260] security interests, priority of, [15.260] Credit consumer, definition, [16.95] definition, [11.270], [16.95] facilities — see Credit

facilities goods sold on, entitlement to possession, [8.760] linked credit provider — see

Linked credit provider National Credit Code, [9.105], [11.250] Credit facilities definition, [11.270], [11.285] financial products, as, [11.270], [16.95] goods supplied in conjunction with, [11.290] misleading or deceptive conduct, [11.285] overlap of ACL and ASIC Act, [11.290] transactions deemed to be, [11.270] Credit providers — see Linked

credit providers Crime standard of proof, [5.170] tort distinguished, [5.170]

D

INDEX

595

wrongful interference with possession, [5.170] Criminal liability consumer guarantees, [17.120] Crown application of ACL, [10.05], [10.50]–[10.70] Commonwealth Crown application to, [10.05], [10.50] carrying on business, [10.05], [10.55] exceptions, [10.60] meaning, [10.55] liability of, [10.50], [10.55] State and Territory Crowns application to, [10.05], [10.65] carrying on business, [10.05], [10.65] authorisations, whether, [10.70] exceptions, [10.70] intra-governmental transactions, [10.70] jurisdiction, [10.65] participating jurisdiction, [10.65] Crown land changes to land not affecting rights, [4.60] public property, [3.10] reclamation, created by, [4.100]

D

Damages — see also Compensation orders ACL and TPA compared, [9.65], [12.35] breach of warranty of quality, [8.1040]–[8.1080] chain of contracting parties, [8.1060] entitlement, [8.1050] measure of, [8.1040] unfitness for purpose, [8.1060], [8.1080] causation, [12.35]–[12.75] “because of”, meaning, [12.35] breaks in chain of, [12.65] “but for” test, [12.40] “common sense” approach, [12.40] declaration of non-reliance, [11.160], [12.75] evidence of, [12.45] indirect theory of, [12.60] reliance, proof of, [12.50], [12.55], [12.70]

596

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Damages — cont supervening event, [12.65] TPA compared, [12.35], [12.40] concurrent wrongdoers, [12.145], [12.155] apportionable claims, [12.150] apportionment of loss, [12.145], [12.160] definition, [12.145], [12.155], [12.170] limits on amount recoverable, [12.125] consequential losses, [12.105] consumer guarantee remedies

— see Consumer guarantees: remedies contributory fault, [9.50], [12.130] circumventing operation, [12.135] contributory negligence, [12.130], [12.140] defective goods action, [12.290] failure to take reasonable care, [12.125], [12.130] failure to verify representation, [12.70], [12.130] reduction for, [12.130], [12.140] State and Territory legislation, [12.140] TPA compared, [12.130] defective product, injury from contributory fault, [12.290] evidence causation, of, [12.45] findings in other proceedings, [12.10] exemplary damages, [12.115] expectation loss, [12.85], [12.90] indirect causation theory, [12.60] interpretation of s 236, [12.35] limitation period, [12.35], [12.120] accrual of cause of action, [12.120] limits on, [12.85], [12.125] expectation loss, [12.85] failure to take reasonable care, [12.125], [12.130] professional standards law, [12.125] loss of commercial opportunity, [12.105] loss or damage caused by contravention, [12.35] measure of, [12.85]–[12.110] “alternative approach”, [12.95]

“common approach”, [12.90], [12.95] common law measures, [12.85] consequential losses, [12.105] discretion of court, [12.85] employment cases, [12.100] expectation loss, [12.85], [12.90] loss of commercial opportunity, [12.105] “no transaction” approach, [12.95] Potts v Miller, rule in, [12.90] price minus benefits left in hands, [12.95] price minus value at acquisition date, [12.90], [12.110] reliance loss, [12.85] tortious measure, [12.85] unreasonable conduct of applicant, [12.95] non-acceptance of goods, [8.970]–[8.1010] available market for goods, [8.970] duty to mitigate loss, [8.1010] loss of a bargain, [8.980] loss suffered on resale, [8.990] unique item, [8.1010] non-delivery of goods, [8.1090] overview, [12.35] personal injury or death, [12.125], [12.250] aggravated damages abolished, [12.275] consumer guarantees, [18.135] contributory fault, [12.290] exemplary damages abolished, [12.275] gratuitous care, [12.280] limits, [12.125], [12.250]–[12.260], [18.135] loss of earnings, [12.260] manufacturer, against, [18.135] maximum amount, [12.255] negligence reforms, [12.250] non-economic loss, [12.270] smoking or tobacco products, [12.125], [12.250] structured settlements, [12.285] threshold for, [12.265] TPA compared, [12.250] professional standards law limiting, [12.125] proof of reliance, [12.50], [12.55]

proof of transaction breach, [17.130] proportionate liability, [9.50], [12.145] apportionable claim, [12.145], [12.150] apportionment of loss, [12.145], [12.160] circumventing provisions, [12.165] concurrent wrongdoers, [12.145], [12.155], [12.170] excluded wrongdoer, [12.155] involvement in contravention, [12.145] limited operation of provisions, [12.145] misleading conduct, for, [12.145] State legislation, [9.50], [12.170] reliance loss, [12.85] reliance, proof of, [12.50], [12.55] declaration of non-reliance, [11.160], [12.75], [12.80] failure to verify representation, [12.70] indirect evidence, [12.55] self-serving assertion, [12.50] statutory cause of action, [12.35] structured settlements, [12.285] Death — see Personal injury

or death Debt collection — see

Harassment or coercion Deceit measure of damages for, [12.85] misleading and deceptive conduct action compared, [11.05] Declarations discretionary remedy, [12.25] false or misleading advertising, [12.25] Federal Court power to grant, [12.25] non-reliance, [11.160], [12.75], [12.80] overview, [12.25] unfair contract terms, [12.30], [12.225] compensation orders, [12.200], [12.225]

CHAPTER

Declarations — cont void, [12.30] void contract, [12.15], [12.220] Deed agency created by, [7.100] Defective goods action against manufacturer —

see Defective goods actions consumer detriment, [9.10], [9.25] declarations under TPA, [9.60] false or misleading representations, [6.105] manufacturer’s liability — see

Defective goods actions permanent bans under TPA, [9.60] transitional provisions, [9.60] Defective goods actions ACL and TPA compared, [9.65] manufacturer’s liability definition of manufacturer, [9.65] personal injury, damages for contributory fault reducing[12.290] policy objectives, [9.25] Trade Practices Act, [9.65] transitional provisions, [9.60] Defences ACL and TPA compared, [9.65] conduit defence, [11.40], [11.45] contributory fault, [9.50], [12.130]–[12.140] contributory negligence, [12.130], [12.140] information provider — see

Information provider defence misleading or deceptive conduct, [11.40] Definitions acceptable quality, [16.205], [16.220]–[16.250] ACL reforms, [9.65] acquire, [16.70] applied Australian Consumer Law, [9.50] apportionable loss or claim, [12.150] Australian Consumer Law, [9.90] Australian Consumer Law text, [9.120] authorisation, [10.70]

concurrent wrongdoers, [12.145], [12.155], [12.170] conduct, [11.25], [11.30] consumer, [9.35], [16.70]–[16.115], [17.10] consumer detriment, [9.10] consumer goods, [16.75] corporation, [10.10], [10.30] credit, [11.270], [16.95] credit facility, [11.270] engaging in conduct, [11.15], [11.30], [11.30] express warranty, [16.400] financial corporation, [10.25] financial product, [11.265], [11.270] financial product advice, [11.275] financial service, [11.265] foreign corporation, [10.15] goods, [16.120], [16.125] individual, [9.30] information provider, [11.235] involved, [12.175] jurisdiction, [10.65] linked credit contract, [18.220] linked credit provider, [18.220] merchantable quality, [16.205], [16.210] mixed supply, [16.85] participating jurisdiction, [10.65] person, [9.120] price, [16.75] proof of transaction, [17.125] recreational services, [18.280] regulator, [9.145] rejection period, [18.60] safety, [18.40] sale by auction, [16.170] services, [16.120], [16.125], [17.15], [17.45] structured settlement, [12.285] supply, [16.160] this jurisdiction, [10.65] tied continuing credit contract, [18.235] tied loan contract, [18.235] trade or commerce, [9.100], [10.75]–[10.90] trading corporation, [10.20] unfair term, [9.05] warranty against defects, [16.405] Del credere agents, [7.800] Description, sale/supply by assent to appropriation, [8.510], [8.520] auction, [8.1150] correspondence with description

D

INDEX

597

implied condition, [8.240]–[8.260] correspondence with sample and description, [8.260] passing of property, [8.510], [8.520] Sale of Goods Act conditions, [8.240]–[8.260] Destruction of thing goods, making new, [4.30]–[4.50] land erosion, [4.70]–[4.100] estate affected, [4.60]–[4.110] total destruction, [4.110] property right ending, [4.20] Detinue bailee, by, [5.160] conversion compared, [5.150], [5.160] definition, [5.150] future right excluded, [5.170] overholding tenant compared, [5.170] overlap with conversion and trespass, [5.160] tort of, [5.150], [5.160] trespass compared, [5.150], [5.160] Detriment business, to — see Business

detriment consumers, to — see

Consumer detriment Digital products goods or services, [16.135], [16.140] Director of company agent, as, [7.830] — see also Agent disclosure of interests, [7.340] duty of care and skill, [7.370] secret profit, not to make, [7.340] Directors accessorial liability, [12.175], [12.190] disqualification/banning orders proof of transaction breach, [17.130] liability for conduct of, [10.110]–[10.125] actual or apparent authority, [10.120]

598

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Directors — cont consent or direction, [10.125] direct liability, [10.110]–[10.135] elements of breach, [10.110] “on behalf of” corporation, [10.115], [10.120] scope of authority, [10.120] vicarious liability at common law, [10.110] proportionate liability, [12.145] Disclaimers misleading or deceptive conduct and advertising, [11.190] agent or intermediary, [11.40]–[11.55] contemporaneous, [11.55] effectiveness, [11.50], [11.55] endorsement of representations, [11.50] small print, [11.190] Disqualification orders — see

Banning orders Donations supply, form of, [16.160] ACL and TPA compared, [9.65] Double jeopardy State and Territory legislation, [9.135] Drafting of ACL, [9.05], [9.65], [9.90] Drip pricing business detriment, [9.35] consumer detriment, [9.35]

E

Easements changes to land not affecting, [4.60] estate, attached to, [4.60] E-commerce application of ACL, [9.100] Electricity consumer guarantees, [17.50] ACL and TPA compared, [9.65] goods, included in definition of, [16.120], [17.50]

Email trading or commercial character, [10.80]

Federal Court jurisdiction, [9.150] fines — see Fines infringement notices — see

Employees accessorial liability, [12.175] agency and employment distinguished, [7.30] bailee’s liability for, [6.170] liability for conduct of, [10.110]–[10.130] actual or apparent authority, [10.120] conduct “on behalf of”, [10.115], [10.120] consent or direction, [10.125] corporate principal, [10.110]–[10.125] direct liability, [10.110]–[10.135] elements of breach, [10.110] non-corporate principal, [10.130] “on behalf of” corporation, [10.115], [10.120] scope of authority, [10.120] vicarious liability at common law, [10.110] proportionate liability, [12.145] trade or commerce, conduct in, [10.100] terms of employment representations, [10.95]

Infringement notices injunctions — see Injunctions

Employment measure of damages, [12.100] Encumbrances equitable charge, [13.110] equitable lien, [13.120] nature of, [13.100] Torrens mortgage, [13.70] types, [13.100] Enforcement ACCC proceedings, [12.10] civil pecuniary penalties — see

Civil pecuniary penalties compensation orders — see Compensation orders consumer guarantees — see Consumer guarantees: remedies declarations — see Declarations evidence, [12.10] Federal Circuit Court jurisdiction, [9.150]

overview, [12.05] private, [12.05] compensation orders — see

Compensation orders damages — see Damages declarations — see Declarations injunctions — see Injunctions State and Territory courts jurisdiction, [9.150], [9.60] transfer of proceedings to/from, [9.160] State and Territory tribunals, [9.155] States and Territories, [9.120] Engineers consumer guarantees, [17.25] exclusion, [17.25], [17.100] Equitable charge definition, [13.110] encumbrance, [13.100] fixed/floating charges, [13.110] nature of, [13.110] trust compared, [13.110] Equitable lien definition, [13.120] encumbrance, [13.100] nature of, [13.120] right to, [4.120] Erosion estate, effect on, [4.70]–[4.100] definition of boundary, [4.80] gradual change, [4.90] intervention by estate holder, [4.100] Estate definition, [4.60] fee simple, [4.60] physical changes to land, [4.60] accretion, [4.70]–[4.100] definition of boundary, [4.80] dimensions altered, [4.60]–[4.110] erosion, [4.70]–[4.100] gradual change, [4.90]

CHAPTER

Estate — cont intervention by estate holder, [4.100] shoreline, [4.70]–[4.100] total destruction, [4.110] whether estate affected, [4.60]–[4.110] right to possess land, [4.60] Estate agent — see also Agent commission, entitlement to, [7.390]–[7.440] definition, [7.840] duty of care and skill, [7.370] informing vendor of avoidance of contract of sale, [7.370] licensing, [7.860] statutory regulation, [7.860] Estoppel agency created by, [7.130] title of transferee of goods, [8.640]–[8.660] conduct amounting to representation, [8.660] nemo dat rule exception, [8.630] owner estopped from denying authority of seller, [8.640] Evidence breach of ACL, [12.10] findings in other proceedings as, [12.10] compensation order application, [12.200] loss or damage, [12.10] onus of proof — see Onus of

F

Factors, [7.790] False billing — see

Unsolicited goods or services False or misleading representations advertising declaratory relief, [12.25] two-price advertising, [9.20] goods, [9.65] internet-based business, application of ACL, [9.100] price drip pricing, [9.35] two-price advertising, [9.20] services, [9.65] Trade Practices Act compared, [9.65] Fauna Crown property, [3.20] Federal Circuit Court jurisdiction, [9.150] Federal Court declarations, [12.25] injunction, power to grant, [9.150] jurisdiction, [9.150] transfer of proceedings to/from, [9.160]

proof reliance, proof of, [12.50], [12.55]

Financial corporations application of ACL — see

Corporations Exclusion clauses consumer guarantees and, [16.380] misleading or deceptive conduct and, [11.160] declaration of non-reliance, [11.160] Exclusion of liability bailee, [6.210] Exclusion, right of Aboriginal land, [2.110] property right, [2.100] public property, [3.20] Exploitative pricing unconscionable conduct [4.130] financial services, [4.210]

corporation, definition, [10.10] definition, [10.25] overview, [10.25] substantial current activities test, [10.25] Financial product advice definition, [11.275] lawyer, by, [11.275] misleading or deceptive conduct, [11.285] Financial products and services ACL carve-out for, [9.105], [11.250] application of ACl, [9.105] ASIC Act provisions, [9.105] complementary operation with ACL, [11.255]

F

INDEX

599

consistency with ACL, [11.250] implied warranties, [11.250] ASIC’s role, [9.105], [11.250], [11.255] background to reforms, [11.255] Commonwealth legislative powers, [9.105] consumer guarantees, [17.20] ACL not applicable, [11.250], [17.20] linked credit providers —

see Linked credit providers credit facilities, [11.270], [11.285] overlap of ACL and ASIC Act, [11.290] dealing in, [11.280] definition, [11.270] exclusions and inclusions, [11.270] exclusion from ACL, [9.105], [11.250] false or misleading representations consumer guarantees, regarding, [11.285] financial investment, meaning, [11.270] financial product advice, [11.275] financial products dealing in, [11.280] definition, [11.265], [11.270] exclusions and inclusions, [11.270] financial services, definition, [11.270] implied warranties, [11.250] insurance contracts, [9.110], [17.35] linked credit providers — see

Linked credit providers misleading or deceptive conduct, [9.105], [11.250]–[11.290] ACL not applicable, [9.105], [11.250] ASIC Act, [9.105], [11.250]–[11.290] Corporations Act, [9.105], [11.250], [11.285] determination, [11.285] disclosure documents, [11.285] financial product advice, [11.275] general prohibition, [11.260], [11.285] overlap with ACL, [11.290] predictions, [11.285]

600

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Financial products and services — cont rationale for regulation, [11.255] securities dealings excluded, [11.285] National Credit Code, [9.105], [11.250] overview, [9.105], [11.250] rationale for legislative framework, [11.255] regulation, [9.105], [11.250] unconscionable conduct, [9.105] Wallis Committee, [11.255] Fines — see also Civil pecuniary penalties ACCC, public proceedings by, [12.10] Fitness for purpose consumer guarantee for goods hired goods, [6.300] goods — see Consumer

guarantees for goods hire of goods, condition of, [6.270]–[6.300] consumer guarantee, [6.300] sale of goods, implied condition, [8.290]–[8.370] annexed by custom or usage of trade, [8.370] damages for breach, [8.1060], [8.1080] disclosure of proposed purpose, [8.290], [8.300] establishing purpose and reliance, [8.340] particular purpose, [8.290] proposed use not only or ordinary use, [8.290] reliance on seller’s skill or judgment, [8.290], [8.330], [8.345]–[8.360] Sale of Goods Acts, under, [8.290]–[8.370] trade name, sale under, [8.370] services — see Consumer

guarantees for services Fixtures accession, type of, [4.120], [4.160] agricultural tenants, [4.210], [4.220] consumer guarantees, [16.145], [17.40] definition, [4.120], [4.160] degree of annexation, [4.170]

tenant’s fixtures, [4.200] determining whether goods are, [4.160] degree of annexation, [4.170] object of annexation, [4.180] estate owner’s right to possession, [4.160] goods, as, [16.145], [17.40] goods becoming part of land, [4.160] hire-purchase contract, goods under, [4.230] object of annexation, [4.180] tenant’s fixtures, [4.200] permanent fixtures, [4.200] Personal Property Securities Act, excluded from, [15.30] physical connection, [4.170], [4.180] removal of, [4.160] agricultural tenants, [4.210], [4.220] possibility of, [4.170] tenant’s right to, [4.190]–[4.220] waste, as, [4.190] security rights, [4.230] tenant’s fixtures, [4.190] agricultural tenants, [4.210], [4.220] chattels, [4.200] degree of annexation, [4.200] mining equipment, [4.210] object of annexation, [4.200] permanent fixtures distinguished, [4.200] removal of, [4.220] right to remove, [4.190]–[4.220] short-term residential tenancies, [4.210], [4.220] statutory changes, [4.210] time for removal of, [4.220] waste, removal as, [4.190] unattached goods, [4.160] degree of annexation, [4.170] Foreign corporations application of ACL — see

Corporations corporation, definition, [10.10] definition, [10.15]

silence as, [11.105] reasonable expectation of disclosure, [11.105] Fraud agent, by, [7.600]–[7.620] sale of goods under voidable title, [8.680], [8.690] nemo dat rule exception, [8.630] Freedom of expression private property, in, [3.20] public property, in, [3.20] Future matters misleading or deceptive conduct, [11.135] ACL and TPA compared, [9.65] case examples, [11.140] contractual promises, [11.145] evidentiary burden, [11.135] opinions, [11.150] reliance, [11.135], [11.165] reasonable grounds for making representation, [11.135]

G

Gas consumer guarantees, [17.50] ACL and TPA compared, [9.65] goods, included in definition of, [16.120], [17.50] General consumer protections

— see Misleading and deceptive conduct — see Unconscionable conduct — see Unfair contract terms Gifts consumer guarantees for recipients, [16.160] promotional offers — see

Rebates, gifts or prizes

Forfeiture unfair forfeiture term, [12.30]

Good faith agent’s duty of, [7.300]–[7.320]

Franchising misleading or deceptive conduct, [11.20]

Goods accession — see Accession chattels, [16.165]

CHAPTER

unsafe action against manufacturer

Goods — cont affixed to land, [16.145], [17.40] computer software, [16.135], [16.140] consumer goods, definition, [16.75] consumer guarantees — see

Consumer guarantees for goods consumer of — see Consumer creation of, [4.30]–[4.50] defective — see Defective

goods definition, [16.30], [16.120]–[16.150] mixed supply, [16.130] services distinguished, [16.125]–[16.150] digital products, [16.135], [16.140] electricity as, [16.120], [17.50] false or misleading representations — see

False or misleading representations fixtures as, [16.145], [17.40] gas as, [16.120], [17.50] joining together — see

Accession land, attached to — see Fixtures mixture of — see Mixtures mortgage of, [13.80] product safety — see

Product safety residential dwellings, [16.150] sale of — see Sale of goods services distinguished, [16.125] supply of, [16.160] consumer guarantees — see

Consumer guarantees for goods definition, [16.160] donations, [9.65], [16.160] hire or lease, [16.90] mixed supplies, [16.85], [16.130] unconscionable conduct —

see Unconscionable conduct specification, [4.30] accession distinguished, [4.130] property rights, [4.30]–[4.50] transitional provisions, [9.60] unfair sales techniques — see

Unfair sales techniques

— see Defective goods actions unsolicited — see Unsolicited goods or services wrongly accepting payment for

— see Wrongly accepting payment Governance Forum of Consumer Affairs (CAF), [9.45] Guarantees — see Consumer

guarantees H

Harassment or coercion ACL and TPA compared, [9.65] High pressure sales techniques consumer detriment, [9.20] “limited time” sales, [9.20] Hire of goods bailment, as, [6.50] consumer guarantees, [6.300] duties of bailor, [6.260]–[6.300] fitness for purpose, condition of, [6.270]–[6.300] consumer, definition, [16.90] consumer guarantees, [16.90] title guarantee not applicable, [16.185] undisclosed securities, [16.195] undisturbed possession, [16.190] Hire-purchase agreement, as security interest, [14.40], [15.50] bailment, [5.100] fixtures where goods under, [4.230] nature of, [13.90] ownership, security giving, [13.70] right of possession, [5.100] Hohfeld, Wesley analysis of property rights, [2.60], [2.100] Homeless people public places, in, [3.20]

I

INDEX

601

I

IGA — see

Intergovernmental Agreement for the Australian Consumer Law (IGA) Implied terms regime ACL replacing — see also Consumer guarantees background, [9.75]–[9.85], [16.10]–[16.60] CCAAC recommendations, [9.80], [9.85], [16.45]–[16.55] commencement date, [16.05], [16.60] comparison, [16.15] NEIAT study findings, [9.85], [16.20]–[16.45] policy objectives, [16.55] Productivity Commission recommendations, [9.75], [9.80] single enterprise theory, [16.45] merchantable quality, [16.205], [16.210], [16.230] definition, [16.205], [16.210] durability, [16.215] purpose or purposes of goods, [16.215] time for determining, [16.215], [16.305] Trade Practices Act, [16.210], [16.215] uncertainty about meaning, [16.30], [16.345] NEIAT study findings, [9.85], [16.20]–[16.45] awareness, [16.25] clarity, [16.30] compliance incentives, [16.40] dispute resolution mechanisms, [16.35] Sale of Goods Acts, [9.75], [16.15] ACL compared, [16.15] application of, [16.15] correspondence with description, [16.385] fitness for purpose, [16.350] loss of right to reject goods, [18.55] merchantable quality, [16.205], [16.215] TPA provisions and, [9.75], [16.10] undisturbed possession, [16.190]

602

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Implied terms regime — cont services, [17.05] due care and skill, [17.65], [17.85] fitness for purpose, [17.100] transportation or storage excluded, [17.30] States and Territories Fair Trading Acts, [16.05] Sale of Goods Acts, [16.15] Trade Practices Act, [9.75], [16.10] ACL replacing, background, [9.75]–[9.85], [16.10]–[16.60] ambiguities, [16.30] clarity, lack of, [16.30] compliance incentives, lack of, [16.40] consumer awareness, [16.25] correspondence with description, [16.385] dispute resolution mechanisms, [16.35] due care and skill, [17.65], [17.85] fitness for purpose, [16.355], [16.360], [17.100] merchantable quality, [16.210], [16.215], [16.345] NEIAT study findings, [9.85], [16.20]–[16.45] quiet possession, [16.190] reasons for ineffectiveness, [16.20]–[16.45] review of, [9.80] right to sell, [16.185] sample, compliance with, [16.390] uncertainty as to meanings, [16.30] Implied terms ACL, under — see Consumer

guarantees Sale of Goods Act, under, [8.210]–[8.380] auction sale, [8.1130]–[8.1150] correspondence with description, [8.240]–[8.260] correspondence with sample, [8.380] correspondence with sample and description, [8.260] exclusion of, [8.390] fitness for purpose, [8.290]–[8.370] merchantable quality, [8.270]–[8.286] title to goods, [8.230]

Indemnity agent’s right of, [7.450] Information asymmetry consumer detriment from, [9.15] misleading or deceptive conduct, [11.155] scientific or medical basis, [11.155] specialist knowledge or expertise, [11.155] Information provider defence exceptions, [11.235], [11.245], [12.245] misleading and deceptive conduct, [11.230], [11.235], [12.245] ACL and TPA compared, [9.65] advertisements, [11.40], [11.235], [11.240], [12.245] definition of information provider, [11.235] exceptions, [11.235], [11.245], [12.245] publication of advertisement, [11.240] scope, [11.235] sponsored links, [11.45] Information standards — see

Product safety Infringement notices proof of transaction breach, [17.130] Injunctions ACCC, public proceedings by, [12.10] ACL and TPA compared, [9.65], [12.230] application for, [12.230] balance of convenience, [12.235] discretion to grant, [12.230] final injunctions, [12.240] interim injunctions, [12.235] jurisdiction to grant, [9.150], [9.155] misleading or deceptive conduct, [9.35], [11.85], [11.95], [11.215] overview, [12.230] passing off, against, [11.215] private remedies, [12.230] proof of transaction breach, [17.130] TPA compared, [9.65], [12.230] who may apply, [12.230]

Insurance ASIC Act application, [9.110] contracts consumer guarantees, [17.35] misleading conduct, silence as, [11.100] utmost good faith, [9.110] exclusion from ACL, [9.110] financial product, as, [9.110], [17.35] overview, [9.110] regulation, [9.110] Intangible things ownership, [5.70] property rights, [1.10] Intellectual property Personal Property Securities Act application, [14.40], [15.30] priority rules, [14.110] Intention accessorial liability, [12.175], [12.180] misleading or deceptive conduct, [11.05], [11.70], [11.225] advertising, [11.170] intentional or deliberate silence, [11.25], [11.30] Intergovernmental Agreement for the Australian Consumer Law (IGA) consumer detriment, [9.10] future amendments to ACL, regulating, [9.140] investor protection provisions, [9.105] policy objects, [9.40] International sale of goods Vienna Convention, [16.175] application in Australia, [16.175] Internet application of ACL and, [9.100], [10.40] auctions and consumer guarantees, [16.170] misleading or deceptive conduct advertising, [11.170], [11.185] social media, advertising on, [11.195] sponsored links, [11.45] Interpretation ACL reforms, [9.65] damages provision, [12.35]

CHAPTER

Interpretation — cont definitions — see

Definitions key provisions, [10.05] misleading or deceptive conduct, [11.60] overview, [10.05] policy objectives and, [9.40] “purposive” approach, [9.40] unconscionable conduct, [9.05] Involved in — see Accessorial

liability Ipp Report, [12.250], [18.280] Itemised bills ACL and TPA compared, [9.65] consumer services, for, [17.135] minimum information, [17.135] request for, [17.135]

J

Joint liability linked credit providers, [18.215], [18.220] amount of liability, [18.240] pre-existing link, [18.220] Jurisdiction Federal Circuit Court, [9.150] overview, [9.150] State and Territory courts, [9.150], [9.155] State and Territory Crowns, [10.65] State and Territory tribunals, [9.155] Justification private property, [3.30] property rights, [3.10]

L

publication of matter in connection with, [11.245] native title — see Native

title physical changes to accretion, [4.70]–[4.100] dimensions altered, [4.60]–[4.110] erosion, [4.70]–[4.100] estate, effect on, [4.60]–[4.110] rights not affected, [4.60] total destruction, [4.110] value affected, [4.60] possession control, [5.30] occupation, [5.30] private — see Private

property right to use or enjoy, [2.110] title, [5.80] total destruction, [4.110] value affected by physical condition, [4.60] Lay-by agreements ACL and TPA compared, [9.65] ACL reforms, [9.65] consumer detriment, [9.20] Lease consumer, definition, [16.90] consumer guarantees, [16.90] title guarantee not applicable, [16.185] undisturbed possession, [16.190] definition of boundaries, [4.110] linked credit provider — see

Linked credit provider overholding by tenant, [5.170] PPS lease, [15.70] security interest, as, [14.40], [15.70] tenant’s fixtures — see

Tenant’s fixtures

Land accretion, [4.70]–[4.100] boundary, definition of, [4.80] control of, [5.30] Crown land — see Crown

land erosion, [4.70]–[4.100] estate in — see Estate fixtures, [16.145], [17.40] consumer guarantees, [16.145], [17.40] goods attached to — see

Fixtures interest in

total destruction of property ending, [4.110] Legal rights correlating obligations, [2.60] division of, [2.20], [2.40] enforceability, [2.40], [2.60] in personam, [2.40], [2.60], [2.90] in rem, [2.40], [2.60], [2.90] non-assignable rights, [2.90] personal rights, [2.20], [2.40] enforceability, [2.40], [2.60] value, [2.110] property, to — see Property

rights

M

INDEX

603

Lien agent’s right of, [7.460] general lien, [7.460] particular lien, [7.460] common law, [13.40], [13.60] equitable, [13.120] encumbrance, [13.100] nature of, [13.120] right to, [4.120] general, [13.60] pledge compared, [13.60] possessory security, [13.40], [13.60] unpaid seller, [8.870] right of resale where price not paid, [8.930] Limitation of liability bailee, [6.210] Limitation period compensation orders, [5.190], [12.200] damages action, [12.35], [12.120] personal injury or death, [12.225] Linked credit providers consumer guarantees, [17.20], [18.215] ACL applicable, [11.250], [17.20] amount of liability, [18.240] exceptions to liability, [18.235] joint actions, [18.230] joint liability, [18.215], [18.220] remedies in relation to, [18.215]–[18.245] supplier and credit provider liable inter se, [18.245] contract, arrangement or understanding, [18.220] definition, [18.220] liability, [9.65], [18.215] amount of, [18.240] exceptions to, [18.235] joint, [18.215], [18.220] pre-existing link, [18.220] linked credit contract, definition, [18.220] tied continuing credit contract, [18.235] tied loan contract, [18.235] TPA compared, [9.65], [18.215]

M

Manufacturer consumer guarantees, [16.180], [18.110]

604

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Manufacturer — cont exclusion of liability, [18.270] express warranties, [16.180], [16.400] indemnification of supplier, [9.65], [16.05], [16.55], [18.140] remedies — see

Consumer guarantees: remedies repair facilities, [16.395] spare parts, [16.395] warranties against defects, [16.405] defective goods action against

— see Defective goods actions definition ACL and TPA compared, [9.65] express warranties, [16.180], [16.400] indemnification of supplier, [9.65], [16.05], [16.55], [18.140] statutory causes of action against, [16.10] Manufacturer’s liability — see

Defective goods actions Market failure bounded rationality and, [9.15] consumer detriment and, [9.15] Mercantile agent — see also Agent authority, [7.790] definition, [7.790] del credere agent, [7.800] title of transferee of goods sold by, [8.670] nemo dat rule exception, [8.630] revocation of agent’s authority, [8.670] Merchantable quality — see also Acceptable quality definition, [8.270] implied condition of sale, [8.270]–[8.286] auction sale, [8.1150] damages for breach, [8.1040]–[8.1080] examination before purchasing, [8.285], [8.286] Sale of Goods Acts, [8.270]–[8.286]

Minerals ownership of, [3.10] private land, on, [3.10] Mining equipment fixtures, removal of, [4.210] Ministerial Council for Corporations (MINCO), [11.250] Ministerial Council on Consumer Affairs (MCCA) consumer policy, [9.40], [9.85] replacement by CAF, [9.45] single national law, [16.50] Misleading or deceptive advertising accessorial liability, [11.195] knowledge of contravention, [11.195] assessment of impact, [11.200] asterisk, use of, [11.185] business connection, falsely implying, [11.95] causation, [11.170] choice of medium, [11.185] comparative advertising, [11.205] consumer detriment, [9.10], [11.170] personal, [9.10], [11.170] structural, [9.10], [11.170] declaration, [12.25] disclaimers, small print, [11.190] dominant message, [11.190] elucidators, small print, [11.190] entirety of advertisement, [11.170], [11.190] ephemeral vs static forms, [11.185], [11.190] failure to remove, [11.195] general principles — see

Misleading or deceptive conduct information provider exemption, [11.40], [11.235], [11.240] intention not necessary, [11.170] internet, [11.170], [11.185] knowledge base of target, [11.175] reasonable member of class, [11.90] medium used, [11.170], [11.185] overview, [11.20], [11.170] publication of advertisement, [11.240]

puffery or exaggeration, [11.180] qualifying statements, [11.190] small print disclaimers/elucidators, [11.190] social media, [11.195] strict liability, [11.195] target audience, [11.170], [11.175] assessment of impact on, [11.200] identifying, [11.175] knowledge base of, [11.175] ordinary and reasonable standard, [11.190] professional, [11.175] public at large, [11.170] trade or commerce, what constitutes, [10.80] Misleading or deceptive conduct ACL and TPA compared, [9.65] advertising — see

Misleading or deceptive advertising agents, [11.40]–[11.55] conduit defence, [11.40], [11.45] disclaimers, [11.40]–[11.55] endorsement of representations, [11.50] agent, liability of, [7.590] application of ACL, [9.100] ASIC Act, [9.105], [11.250]–[11.290] complementary operation with ACL, [11.255] consistency with ACL, [11.250] financial services — see

Financial products and services overlap with ACL, [11.290] rationale for regulation, [11.255] business connection, falsely implying, [11.95] business protection, [9.35], [11.10] business-to-business transactions, [9.35], [11.10] causation, [11.165], [11.170], [12.35]–[12.65] class of persons aimed at, [11.85] hypothetical individual, [11.85] knowledge base of reasonable member, [11.90] sub-classes, [11.90]

CHAPTER

Misleading or deceptive conduct — cont commercial negotiations, [11.80] silence as misleading conduct, [11.105] Commonwealth, whether carrying on business, [10.55] compensation orders — see

Compensation orders conduct as a whole, [11.60] conduct constituting, [11.10] conduct, definition, [11.25], [11.30] contractual representations, [11.20] doing any act, [11.20] engaging in conduct, meaning, [11.15], [11.20] identifying, [11.15] implied representations, [11.35] intermediaries, [11.40]–[11.55] refusing to do any act, [11.25] silence — see Silence conduit defence, [11.40], [11.45] confusion or uncertainty distinguished, [11.95] consumer protection, [11.05] context, [11.60], [11.75] contractual representations, [11.20] exclusion clauses, [11.160] promise about future matter, [11.145] corporations, [11.05] Corporations Act, [9.105], [11.250], [11.285] complementary operation with ACL, [11.255] consistency with ACL, [11.250] disclosure documents, [11.285] literal truth, [11.130] opinion, [11.150] takeover documents, [11.285] credit facilities, [11.270], [11.285] overlap of ACL and ASIC Act, [11.290] damages — see Damages declaration of non-reliance, [11.160], [12.75], [12.80] disclaimers, [11.40]–[11.55] advertising, [11.190] agent or intermediary, [11.40]–[11.55]

contemporaneous, [11.55] effectiveness, [11.50], [11.55] endorsement of representation, [11.50] small print, [11.190] disclosure documents, [11.285] elements of contravention, [11.05] engaging in conduct, meaning, [11.15], [11.20] silence, [11.25], [11.30] erroneous impression silence causing, [11.110] whether conduct caused, [11.165] evidentiary burden, [11.135] exclusion clauses and, [11.160] declaration of non-reliance, [11.160] fact/opinion distinction, [11.150] failure to take care of own interests, [11.05], [11.65] financial products and services, [9.105], [11.250]–[11.290] ACL not applicable, [9.105], [11.250] ASIC Act, [9.105], [11.250]–[11.290] Corporations Act, [9.105], [11.250], [11.285] financial product advice, [11.275] general prohibition, [11.260], [11.285] predictions, [11.285] rationale for regulation, [11.255] securities dealings excluded, [11.285] future matters, [11.135] ACL and TPA compared, [9.65] case examples, [11.140] contractual promises, [11.145] evidentiary burden, [11.135] opinions, [11.150] reasonable grounds for making representation, [11.135] reliance, [11.135] identified persons, aimed at, [11.75] commercial negotiations, [11.80] pre-contractual representations, [11.75] identifying conduct, [11.15]–[11.55] implied representations, [11.35], [11.145] inaction, whether, [11.10], [11.25]

M

INDEX

605

deliberate refusal to act, [11.25] inadvertent failure to act, [11.25] information asymmetry and, [11.155] information processing errors, [11.100] information provider exemption, [11.230], [11.235] ACL and TPA compared, [9.65] advertisements, [11.40], [11.235], [11.240] definition of information provider, [11.235] exceptions, [11.235], [11.245] publication of advertisement, [11.240] scope, [11.235] sponsored links, [11.45] injunction against — see

Injunction intention, [11.05], [11.70], [11.225] deliberate silence or inaction, [11.25], [11.30] lack of, [11.70] intermediaries, [11.40]–[11.55] adoption of representation, [11.50] conduit defence, [11.40], [11.45] disclaimers, [11.40]–[11.55] endorsement of representation, [11.50] intermediary, liability of, [7.590] internet advertising, [11.170], [11.185] sponsored links, [11.45] interpretation, [11.60] knowledge base of target, [11.175] reasonable member of class, [11.90] likely to mislead or deceive, [11.10], [11.15], [11.60] target audience, [11.65]–[11.90] literal truth, [11.130] misleading impression, [9.130] misleading or deceptive, meaning, [11.60] confusion or uncertainty distinguished, [11.95] context, [11.60], [11.75] intention, [11.70] objective test, [11.65] question of fact, [11.60] natural persons, [11.05] non-disclosure as — see

Silence objective test, [11.65]

606

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Misleading or deceptive conduct — cont onus of proof, [11.135] opinions, [11.150] ordinary person standard, [11.05] overlap of provisions, [6.25], [6.105] overview, [9.05], [11.05] passing off and, [11.210]–[11.225] design features or shape, [11.220] get up, [11.225] intention, [11.225] name, [11.215] passing on representations, [11.40] adoption or endorsement, [11.50] agent or intermediary, [11.40]–[11.50] conduit defence, [11.40], [11.45] disclaimers, [11.40]–[11.55] policy objectives, [9.35] pre-contractual representations, [11.75] commercial negotiations, [11.80] future statements, [11.135] identified persons, directed at, [11.75], [11.80] opinions, [11.150] premium claims, [9.35] principles for determining, [11.10] private remedies compensation orders — see

Compensation orders damages — see Damages declaration — see Declarations injunction — see Injunction public at large, directed at, [11.75], [11.85] advertising, [11.170] class of persons, [11.85] knowledge base of reasonable member, [11.90] sub-classes, [11.90] publisher’s defence, [12.245] puffery or exaggeration, [11.180] question of fact, [11.60] reasonable person standard, [11.05] refusal to act, [11.25] reliance on representation, [11.135] declaration of non-reliance, [11.160], [12.80]

failure to verify representation, [12.70] proof of, [12.50], [12.55], [12.70] scientific or medical representations, [11.155] scope of provision, [9.05] silence as — see Silence small business protection, [9.35] specialist knowledge or expertise, [11.155] strict liability, [11.230], [12.245] information provider exemption, [11.230], [12.245] takeover documents, [11.285] target audience, [11.65] advertising, [11.170], [11.175] class of persons, [11.85] hypothetical individual, [11.85] identified persons, [11.75] knowledge base of, [11.90], [11.175] misleading in relation to, [11.65] ordinary, reasonable person, [11.05], [11.75] public at large, [11.75], [11.85], [11.90], [11.170] sub-classes, [11.90] trade or commerce, in — see also Trade or commerce application of ACL, [9.100], [10.75] definition, [9.100], [10.75]–[10.90] employee or agent, [10.100] “in” requirement, [10.95] Trade Practices Act s 52, [9.05], [11.05], [11.10] norm of conduct imposed by, [11.05] unintentional non-disclosure, [11.25] unusually stupid or obtuse persons, [11.05], [11.65] Misleading promotional offers

— see Rebates, gifts or prizes Misrepresentation agent’s liability for, [7.590] auctioneer, [8.1110] principal’s liability for, [7.590] Mixtures accessories distinguished, [4.130], [4.150]

agreement as to ownership, [4.260] allocation of property rights, [4.250] commixtio, [4.290] confusio, [4.290] consent, by, [4.260] continuing ownership of contribution, [4.250] impractical to identity goods, [4.240] joint ownership, [4.250] one contributor owning whole, [4.250] property rights, [4.240]–[4.310] security interest goods subject to, [4.310], [15.260] priority of, [15.260] tenants in common, [4.250] mixture without consent, [4.290], [4.310] without consent, [4.270]-[4.310] alteration of rights by operation of law, [4.270] amount of contribution unknown, [4.270] common ownership, [4.290], [4.310] continuing ownership, [4.290], [4.310] entitlement equal to contribution, [4.270], [4.290] fluids or solids, [4.290]–[4.310] goods damaged or destroyed, [4.290] granular mixtures, [4.300], [4.310] nature of property rights, [4.290] security interest, goods subject to, [4.310] tenants in common, [4.290], [4.310] wrongdoers, presumption against, [4.280] wrongful mixture, [4.280] presumption against wrongdoers, [4.280] subordination of rights, [4.290] Mortgage changes to land not affecting, [4.60] chattel mortgage, [13.80], [14.40] estate, attached to, [4.60] goods, of, [13.80] land, of, [13.80] ownership, giving, [13.70] Torrens mortgage, [13.70]

CHAPTER

Motor vehicles consumer guarantees acceptable quality, [16.235], [16.280], [16.290] damages for failure of, [15.70] disputes, evidence in, [16.340] due care in repairs, [17.90] hire, [16.190] inspection by purchaser, [16.335] linked credit contract, [16.375] private sales, [16.155] repair and spare parts, [16.395] undisclosed securities, [16.195] undisturbed possession, [16.190] Multiple pricing ACL and TPA compared, [9.65]

N

National Credit Code consumer credit regulation, [11.250] overview, [9.105] National Education and Informatory Advisory Taskforce (NEIAT) consumer guarantees regime, [9.85] implied terms regime, [9.85], [16.20]–[16.45] National Partnership Agreement to Deliver a Seamless National Economy, [9.05], [9.120] Natural persons application of ACL, [9.90], [9.100], [10.05], [10.40] corporations power relied on, where, [10.05] engaged in trade or commerce, [9.100] forms of conduct, [10.40] law of the Commonwealth, as, [10.40] overseas conduct, [9.95], [10.40] unfair contract terms, [10.40] direct liability under ACL, [10.40] States and Territories, [10.45]

misleading or deceptive conduct, [11.05] overview, [10.40]

NEIAT — see National

Education and Informatory Advisory Taskforce Nemo dat rule definition, [8.630], [15.80] exceptions, [8.630]–[8.750], [15.80] buyer in possession, sale by, [8.710]–[8.750] estoppel, [8.640]–[8.660] mercantile agent, sale by, [8.670] seller in possession, sale by, [8.700] voidable title, sale under, [8.680], [8.690] security interests attachment of, [15.80] priority rules, [15.110], [15.130], [15.140] title to goods, [8.630] New Zealand Personal Property Securities Act, [14.10], [15.10] New Zealand consumer guarantees acceptable quality, [16.205], [16.220], [16.240], [16.255]–[16.265] ACL regime based on, [16.45], [16.50]

INDEX

607

Consumer Guarantees Act 1993, [16.10], [16.45] due care and skill, [17.70], [17.85] loss allocation mechanism, [16.55] remedies damages for consequential loss, [18.105] failure of a substantial character, [18.20], [18.25] rejection of goods, [18.50], [18.60] repair by supplier, [18.80] residential dwellings as goods, [16.150] single enterprise theory, [16.45]

Native title connection with land, [2.110] exclusion, right of, [2.110] extinguishment by legislation, [3.20] hunting rights, [3.20] meaning, [5.80] ownership distinguished, [5.80] physical changes to land not affecting, [4.60] preventing exercise of, not permitted, [3.20] right to use or enjoy land, [2.110] Negligence agent, liability for, [7.480] unauthorised act, [7.660] Ipp Report, [12.250], [18.280] misleading and deceptive conduct action compared, [11.05] personal injuries or death, [12.250]

O

Non-disclosure — see Silence Non-profit activity “trade or commerce”, definition, [10.90] Nuisance noise or smell, [5.170] tort of, [5.170] wrongful interference with possession, [5.170]

O

Online auctions consumer guarantees, [16.170] Onus of proof abnormal use exclusion, [16.305] applicant bearing, [12.10] breach of ACL, [12.10] Overholding tenant adverse possession, [5.170] wrongful interference with possession, [5.170] Overseas conduct application of ACL, [9.95], [9.100] carrying on business in Australia, [9.95] natural persons, to, [9.95], [10.40] pyramid selling schemes, [7.130] Ownership collective, [3.20] intangible things, [5.70] meaning, [5.70] mixtures — see Mixtures

608

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Ownership — cont possession becoming ownership, [5.50] distinguished, [5.70] evidence of ownership, [5.50] private, [3.10], [3.20] public, [3.10], [3.20] security rights giving, [13.70]–[13.90] hire-purchase, [13.90] mortgage, [13.80] State, [3.20] title distinguished, [5.80]

P

Partner agent, as, [7.820] Passing off cashing in on reputation, [11.225] common law action, [11.210] business goodwill, protection of, [11.210] statutory action compared, [11.05], [11.210] context, [11.215] design features or shape, [11.220] generic or descriptive words, [11.215] get up, [11.225] intention to mislead, [11.225] interim injunction [11.215] misleading and deceptive conduct and, [11.20], [11.210]–[11.225] name, [11.215] statutory action under s 18, [11.05], [11.210] Payment asserting right to unauthorised entries or advertisements — see

Unauthorised entries or advertisements unsolicited goods or services

— see Unsolicited goods or services service, payment of money as, [16.125] wrongly accepting — see

Wrongly accepting payment Penalty infringement notices — see

Infringement notices

pecuniary — see Civil

pecuniary penalties unconscionability and relief against, [4.15] Person ACL applicable to, [9.90], [9.120], [10.05], [10.40] States and Territories, [10.45] Personal injury or death compensation orders, [12.205] injured person party to proceedings, [12.205] limitation period, [12.200] limits, [12.210] loss or damage, meaning, [12.215] misleading or deceptive conduct, [12.210] smoking or tobacco products, [12.210] types of orders, [12.220] unfair practices, [12.210] damages, [12.125], [12.250] aggravated damages abolished, [12.275] consumer guarantees, [18.135] exemplary damages abolished, [12.275] gratuitous care, [12.280] limits, [12.125], [12.250]–[12.260], [18.135] loss of earnings, [12.260] manufacturer, against, [18.135] maximum amount, [12.255] negligence reforms, [12.250] non-economic loss, [12.270] smoking or tobacco products, [12.125], [12.250] structured settlements, [12.285] threshold for, [12.265] TPA compared, [12.250] Ipp Report, [12.250], [18.280] Personal property securities accession, [14.110], [15.240], [15.250] acquiring property free from security interests, [14.30], [14.120] investment interest, [14.120] motor vehicles, [14.120] ordinary course of business, [14.120], [15.160] personal, domestic or household property, [14.120], [15.170]

rights of secured party, [14.130] serial number incorrect, [14.120], [15.150] unperfected security interest, [14.120] ADI accounts, [15.210] agricultural interests, [14.110], [15.230] attachment, [14.50], [15.80] conditions, [15.80] nemo dat rule, [15.80] value given for security interest, [15.80] background to legislation, [14.20] collateral, [14.50], [15.40] commercial property, [15.30] constructive knowledge breach of security agreement, [15.160] priority and, [15.270] consumer property, [15.30] deemed security interests, [14.40], [15.70] enforceability of security interests, [14.30], [14.50], [15.90] third parties, against, [14.60], [15.90] enforcement of security interests, [14.140], [15.280] commercially reasonable manner, [14.140], [15.280] National Credit Code and, [14.150] excluded property, [14.40], [15.30] excluded security interests, [14.40], [15.60] financing statements, [15.20] fixtures excluded, [15.30] intellectual property application of PPSA, [14.40], [15.30] priority rules, [14.110] lease PPS lease, [15.70] security interest, [14.40], [15.70] legislation, [14.10] mineral rights excluded, [15.30] mixtures, [4.310], [14.100], [15.260] money and investment instruments, [15.180] overview, [14.10], [14.30], [15.10] pawnbroker exclusion, [15.60] perfected security interest, [15.140] priority, [14.90], [15.120], [15.140]–[15.230] perfection of security interest, [14.70], [15.100]

CHAPTER

Personal property securities — cont control, by, [15.200] possession by bailee, [15.100] temporary, [15.100], [15.190] Personal Properties Law Agreement, [14.20] personal property, meaning, [14.40], [15.30] commercial property, [15.30] consumer property, [15.30] financial property, [15.30] Personal Property Securities Act 2009 (Cth), [14.10], [15.10] background, [14.20] exclusions, [14.40], [15.30] main concepts, [14.40]–[14.130] overview, [14.30], [15.10] systems replaced by, [15.10] Personal Property Securities Register, [14.160], [15.20] priority between security interests, [14.80]–[14.110], [15.110] accession, [14.110], [15.240], [15.250] ADI accounts, [15.210] agricultural interests, [14.110], [15.230] constructive knowledge, [15.160], [15.270] default priority rules, [15.120] exceptions to basic rules, [15.140]–[15.230] general rules, [14.90], [15.120] intellectual property, [14.110] manufactured, processed, assembled or commingled goods, [14.100], [15.260] money and investment instruments, [15.180] nemo dat rule, [15.110], [15.130], [15.140] ordinary course of business, [14.120], [15.160] perfected, [14.90], [15.120], [15.140] perfected by control, [15.200] perfected over unperfected, [14.90], [15.120] personal, domestic or household property, [14.120], [15.170]

purchase money security interests, [14.100], [15.220] serial number incorrect, [14.120], [15.150] special priority rules, [14.110] specification, [15.260] temporary perfection, [15.100], [15.190] transfer not affecting, [15.120] unperfected, [14.90], [15.120], [15.130] unregistered, [14.160] proceeds, [15.40] purchase money security interests, [14.100], [15.220] registration of security interests, [14.30], [14.160], [15.10] document registration, [14.20] financing statements, [15.20] notice registration, [14.20] process, [15.20] register, [14.160], [15.20] systems, [15.20] title registration, [14.20] security interests, [14.40], [15.10], [15.50] acquiring property free from, [14.30], [14.120] attachment, [14.50], [15.80] deemed, [14.40], [15.70] definition, [14.40], [15.50] enforceability, [14.30], [14.50], [15.90] enforcement, [14.140], [14.150], [15.280] examples, [14.40], [15.50] exclusions, [14.40], [15.60] failure to register, [14.160] perfection, [14.70], [15.100] priority rules, [14.80]–[14.110], [15.110] registration of, [14.30], [14.160], [15.10], [15.20] third parties, enforceability against, [14.60] seller retaining title and possession, [15.50] stock market, purchase on, [15.160] tracing, [15.40] Personal rights bank, against, [2.110] enforceability, [2.40], [2.60] nature of, [2.20], [2.40] non-assignable rights, [2.90] value, [2.110]

P

INDEX

609

Pledge chattel, of, [13.50] definition, [13.50] lien compared, [13.60] pawn, [13.50] pawnbrokers excluded from PPSA, [15.60] possessory security, [13.40], [13.50] security interest, as, [14.40] ship, of, [13.50] agency of necessity, [7.180] Policy objectives — see

Consumer protection policy Possession acquisition of, [5.90] consent, by, [5.100] without consent, [5.110] acquisition of right to, [5.20] attempt to take, [5.20] auctioneer, [8.1110] bailment, [5.100] breach of duty, [5.120]–[5.170] competing rights, [5.50] concept of, [5.10], [5.20] conditional sale, [5.100] consent acquiring by, [5.100] acquiring without, [5.110] control, [5.20], [5.30], [5.90] animals, [5.30] chattels, [5.30] intention and, [5.90] intention to possess shown by, [5.40] land, [5.30] method of, [5.30] physical, [5.30] public access, [5.30] ship, [5.30] without knowledge of existence, [5.90] evidence of ownership, [5.50] factual possession, [5.30] hire-purchase agreements, [5.100] illegal, [5.40] importance of, [5.10], [5.50] intention, [5.20], [5.40], [5.90] act of control revealing, [5.40] attempt to control, [5.20] control and, [5.90] illegal possession, for, [5.40] without knowledge of existence, [5.40], [5.90] land control of, [5.30] occupation, [5.30] public access to, [5.30], [5.40] legal concept, [5.20] meaning, [5.20]

610

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Possession — cont obtaining, [5.90]–[5.110] consent, by, [5.100] without consent, [5.110] ownership becoming, [5.50] distinguished, [5.70] evidence of, [5.50] pre-possessory interest, [5.20] property right, as, [5.50] security rights, [13.40]–[13.60] lien, [13.60] pledge, [13.50] separate right, creation of, [5.50] sub-bailment, [5.100] temporary transfer of, [5.100] title distinguished, [5.80] torts in relation to, [5.120]–[5.170] transfer of, [5.100] trespass, [5.130] without consent, [5.110] wrongful interference with, [5.120]–[5.170] conversion, [5.140], [5.160] crime, [5.170] detinue, [5.150], [5.160] nuisance, [5.170] overholding tenant, [5.170] permanent damage to goods, [5.170] torts, [5.120]–[5.170] trespass, [5.130], [5.160] Postal services ACL and TPA compared, [9.65] application of ACL, [9.100] natural persons, to, [10.40] Power of attorney agency created by, [7.100] Premium claims false or misleading, [9.35] Price advertising comparative, [11.205] two-price advertising, [9.20] definition, [16.75] false or misleading representations drip pricing, [9.35] two-price advertising, [9.20] goods, sale of, [8.170] contract, fixed by, [8.170] payment upon delivery, [8.170] valuation by third party, [8.170] reference pricing, [9.20] two-price advertising, [9.20] Pricing — see also Price drip pricing, [9.35] multiple pricing

ACL and TPA compared, [9.65] Private property collective property compared, [3.20] definition, [3.30] free market and, [3.30] freedom of expression in, [3.20] justification of, [3.30] minerals on, [3.10] morally objectionable operation of, [3.30] nature of, [3.30] permissible objects of, [3.30] public decisions about, [3.10] public place, treated as, [3.20] unequal distribution, [3.30] Private remedies compensation orders — see

Compensation orders contracts breaching ACL, [12.05], [12.10] damages — see Damages declaration — see

Declarations evidence, [12.10] injunctions — see

Injunctions Prizes — see Rebates, gifts

or prizes Product liability ACL and TPA compared, [9.65] defective goods — see

Defective goods policy objectives, [9.25] Trade Practices Act transitional provisions, [9.60] Product safety ACL reforms, [9.65] defective goods — see

Defective goods information standards transitional provisions, [9.60] transitional provisions, [9.60]

consumer policy framework, [9.10], [9.40]–[9.85] behavioural economics, [9.20] insurance, [9.110] implied terms regime, [9.75], [9.80] policy objectives, [9.05], [9.10], [9.40] product safety report, [9.70] Professional activities “trade or commerce”, definition, [10.85], [10.95], [10.105] Professional advisers accessorial liability, [12.180] Promotional offers — see

Rebates, gifts or prizes Proof of transactions ACL and TPA compared, [9.65] definition, [17.125] enforcement powers, [17.130] examples, [17.125] remedies, [17.130] Property bankrupt, of, [2.30] debate over benefits and evils of, [3.10] definitions, [2.20]–[2.40] assignable rights, [2.30], [2.90] different, for different purposes, [2.20] rights in rem, [2.40] distribution in society, [3.10] private, [3.10] value, [2.110] Property law concepts, [1.10] nature of, [1.10] Property rights alienability, [2.90] allocating, [4.50] assignable rights, [2.30], [2.90] body not subject to, [2.70] changes, affected by — see

Changes to things Productivity Commission background to ACL, [9.70]–[9.85] consumer guarantees, [9.85] differences in legislation, [9.75] one regulator model, [9.120] product safety report, [9.70]

correlating obligations, [2.60], [2.70] creation of, [1.10] creation of thing — see

Creation of things definition, [2.10] enforceability, [2.40], [2.60] indefinite class of people, against, [2.70]

CHAPTER

Property rights — cont range of persons, against, [2.50] essential characteristics, [2.50]–[2.110] estate in land — see Estate excludability, [2.100] existence of thing, [2.70] Hohfeldian analysis, [2.60], [2.100] intangible things subject to, [1.10] justification of, [3.10] nature of, [2.50] non-assignable rights, [2.90] non-interference, right to, [2.70] possession — see Possession questions to be answered, [1.10] reputation not subject to, [2.70] rights in rem, [2.40], [15.90] security, as, [13.10] thing changes to — see

Changes to things existence of, [2.70] particular, relating to, [2.50], [2.70] use of term, [2.70] types of analysis of, [3.10] value, [2.110] Proportionate liability apportionable claim, [12.145], [12.150] apportionment of loss, [12.145], [12.160] relevant factors, [12.160] circumventing provisions, [12.165] concurrent wrongdoers, [12.145], [12.155] definition, [12.145], [12.155], [12.170] excluded wrongdoer, [12.155] involvement in contravention, [12.145] limited operation of provisions, [12.145] misleading conduct, for, [12.145] objective, [12.145] overview, [9.50], [12.145] State legislation, [9.50], [12.170] Public enforcement — see

private property treated as, [3.20] Public property collective property, [3.20] common property, [3.20] Crown land, [3.10] exclusion, right of, [3.20] fauna, [3.20] freedom of expression in, [3.20] private property blending with, [3.10] resources, [3.10], [3.20] State ownership, [3.20]

INDEX

611

independent of contract, [18.285] limitation of liability, [9.50], [18.280]–[18.290] reckless conduct of supplier, [18.285] remedies for failure to comply, [18.285] States and Territories, [9.50], [18.290] definition, [18.280], [18.285] TPA provisions, [18.280]

Public warning notices proof of transaction breach, [17.130]

Regulations commencement dates, [9.55] exemptions, [9.140] future modifications to ACL, [9.140] overview, [9.55]

Publisher’s defence — see

Regulators — see ACL

Information provider defence Purchase money security interests definition, [14.100], [15.220] inventory financed by, [15.220] priority, [14.100], [15.220] Pyramid selling ACL and TPA compared, [9.65] internet-based, application of ACL, [9.100]

R

Radio broadcasts application of ACL, [9.100], [10.40] natural persons, to, [10.40] misleading and deceptive conduct advertising, [11.185] information provider exemption, [11.235] unfair contract terms, [10.40] Ratification agency created by, [7.140] Rebates, gifts or prizes misleading promotional offers, [9.65] ACL and TPA compared, [9.65]

Enforcement Public place freedom of expression in, [3.20] homeless people in, [3.20] private activities in, [3.20]

R

Recreational services consumer guarantees, [9.50], [18.280] damages for reasonably foreseeable loss, [18.285]

regulators Related bodies corporate application of ACL, [10.35] meaning, [10.35] Remedies ACL and TPA compared, [9.65] compensation orders — see

Compensation orders consumer guarantees — see Consumer guarantees: remedies damages — see Damages declaration — see Declarations inadequate, consumer detriment, [9.10] private, [12.05] Repairs ACL and TPA compared, [9.65] consumer guarantees, [16.180], [16.395] auction sales excluded, [16.170] exemption from liability, [16.395] importers, [16.395] manufacturers, [16.395] reasonableness test, [16.395] warranties against defects, [16.405] Rescission of contract compensatory order, [12.220] equitable principles, [12.220] Residential dwellings consumer guarantees, [16.150], [17.45]

612

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Residential dwellings — cont goods or services, [16.150], [17.45] Resources collective property, [3.20] distribution in society, [3.10] ownership of, [3.10], [3.20] Restrictive covenants changes to land not affecting, [4.60] estate, attached to, [4.60] Retention of title clause — see

Romalpa clause Review of Australia’s Consumer Policy Framework, 2008, [9.70]–[9.80], [9.110] Review of the Australian Consumer Product Safety System, 2006, [9.70] Rights in personam — see

Personal rights Rights in rem — see also Property rights alienability, [2.90] enforceability, [2.40], [2.60] meaning, [2.40] non-assignable rights, [2.90] rights in personam distinguished, [2.40], [2.60] security interests, [15.90] Romalpa clause materials, reserving ownership in, [4.40], [13.90] sale of goods contracts, [8.550]–[8.600] security interest, whether constitutes, [8.600] separate account, requiring proceeds to be held in, [8.570] unregistered charge, whether constitutes, [8.560] viability under Australian law, [8.560]

S

Sale of business consumer guarantees and non-consumer use, [16.110]

misleading or deceptive conduct, [11.20] stock-in-trade not consumer goods, [16.110] Sale of goods legislation implied terms — see Implied

terms regime international sale of goods, [16.175] Sale of goods acceptance of goods, [8.830] agreement to sell, [8.80] rights under, [8.100] auction, by — see Auction

sales — see Auctioneer buyer in possession, by, [8.710]–[8.750] nemo dat rule exception, [8.630] purchaser in good faith and without notice, [8.750] title of transferee, [8.710]–[8.750] buyer’s remedies — see Sale

of goods remedies capacity to buy and sell, [8.70] caveat emptor, [8.410] common law principles, [8.10] consumer guarantees under ACL — see Consumer

guarantees contract for — see Sale of

goods contract credit, on, [8.760] delivery of goods, [8.770]–[8.810] acceptance, [8.830] actual or constructive, [8.760] CIF contracts, [8.820] constructive, [8.780] credit, sold on, [8.760] FOB contracts, [8.820] instalments, [8.800], [8.810] mixed with goods of different description, [8.790] performance of contract by, [8.760] rejection of, [8.790], [8.820] right of rejection, [8.820] rules as to, [8.770] stoppage in transitu, rule of, [8.760] symbolic, [8.780] withholding, [8.880] wrong quantity, [8.790] description, by, [8.240] assent to appropriation, [8.510], [8.520] correspondence with

description, [8.240]–[8.260] passing of property, [8.510], [8.520] estoppel, [8.640]–[8.660] conduct amounting to representation, [8.660] nemo dat rule exception, [8.630] owner estopped from denying authority of seller, [8.640] existing goods, [8.120] future goods, [8.130] passing of property, [8.440], [8.510] goods classification of, [8.110]–[8.160] meaning, [8.30] implied conditions — see Sale

of goods contract mercantile agent, by, [8.670] nemo dat rule exception, [8.630] revocation of agent’s authority, [8.670] title of transferee, [8.670] nemo dat rule, [8.630] exceptions, [8.630]–[8.750] property meaning, [8.430] passing of — see transfer of property below possession distinguished, [8.430] rejection of delivery right of, [8.820] wrong quantity, [8.790] reservation of right of disposal, [8.540]–[8.600] Romalpa clause, [8.550]–[8.600] rights under, [8.90] risk, [8.610], [8.620] Sale of Goods Acts, [8.10] ACL and, [8.10] auctions, application to, [8.1110] barter, not applicable to, [8.40] free goods, not applicable to, [8.40] implied conditions in, [8.210]–[8.380] remedies — see Sale of

goods remedies sample, by, [8.380] seller in possession, by, [8.700] seller’s remedies — see Sale

of goods remedies specific goods, [8.140] property, passing of, [8.440]–[8.490] risk, passing of, [8.610]

CHAPTER

Sale of goods — cont unascertained goods distinguished, [8.160] title of transferee, [8.630]–[8.750] buyer in possession, sale by, [8.710]–[8.750] estoppel, [8.640]–[8.660] exceptions to nemo dat rule, [8.630]–[8.750] mercantile agent, sale by, [8.670] nemo dat rule, [8.630] seller in possession, sale by, [8.700] voidable title, sale under, [8.680], [8.690] transfer of property, [8.50], [8.420]–[8.620] assent to appropriation, [8.510], [8.520] deliverable state, [8.450]–[8.490] meaning, [8.470] seller bound to get goods into, [8.480] specific goods in, [8.450], [8.490] future goods, [8.440], [8.510] goods delivered on approval, [8.500] indivisible parcel of goods, [8.610] meaning, [8.50] ownership or property in goods, [8.440] possession distinguished, [8.430] reservation of right of disposal, [8.540]–[8.600] risk, [8.610], [8.620] rules for determining, [8.440]–[8.500] “sale or return”, goods on, [8.500] seller bound ascertain price, [8.490] specific goods, [8.440]–[8.490] title of transferee, [8.630]–[8.750] unascertained goods, [8.440], [8.510]–[8.530] unconditional contract for specific goods, [8.450] when property passes to buyer, [8.440]–[8.500] unascertained goods, [8.80], [8.150] assent to appropriation, [8.510], [8.520] bulk quantity, [8.530] passing of property, [8.440], [8.510]–[8.530] risk, passing of, [8.610]

specific goods distinguished, [8.160] unpaid seller’s remedies — see

Sale of goods remedies voidable title, under, [8.680] fraud, [8.680], [8.690] nemo dat rule exception, [8.630] title of transferee, [8.680], [8.690] Sale of goods contract acceptance, [8.200]–[8.207] actual receipt, [8.207] attempt to rescind contract after, [8.205] receipt of goods, [8.200] acceptance of goods, [8.830] agreement to sell, [8.80] price, [8.170] rights under, [8.100] breach, remedies for — see

Sale of goods remedies capacity to contract, [8.70] caveat emptor, [8.410] CIF contracts, [8.820] conditions, [8.210] breach, [8.210], [8.400] implied, [8.210]–[8.380] exclusion of, [8.390] waiver, [8.400] warranty, treated as, [8.400] consideration, [8.40] contract for work and materials distinguished, [8.60] definition, [8.20] delivery of goods, [8.770]–[8.810] CIF contracts, [8.820] FOB contracts, [8.820] rules of — see Sale of

goods elements of, [8.20] enforceability, [8.180] exclusion of implied terms, [8.390] executed contract, [8.80] executory contract, [8.80] FOB contracts, [8.820] formalities, [8.180] formation, [8.20]–[8.60] goods classification of, [8.110]–[8.160] existing, [8.120] future, [8.130] specific, [8.140], [8.160] unascertained, [8.80], [8.150], [8.160] what constitute, [8.30], [13.15] guarantee of undisturbed possession, [8.230]

S

INDEX

613

implied conditions, [8.210]–[8.380] ACL and, [8.10] auction sale, [8.1130]–[8.1150] correspondence with description, [8.240]–[8.260] correspondence with sample, [8.380] correspondence with sample and description, [8.260] exclusion of, [8.390] fitness for purpose, [8.290]–[8.370] merchantable quality, [8.270]–[8.286] title to goods, [8.230] intermediate stipulations, [8.210] memorandum, [8.190] merchantable quality, [8.270]–[8.286] damages for breach, [8.1040]–[8.1080] definition, [8.270] examination before purchasing, [8.285], [8.286] implied condition, [8.270]–[8.286] money consideration, [8.40] note or memorandum, [8.190] performance of, [8.760] delivery of goods, [8.770]–[8.810] price, [8.170] contract fixing, [8.170] legal tender, payment in, [8.760] payment upon delivery, [8.170] right of possession after payment, [8.760] valuation by third party, [8.170] receipt of goods, [8.200] actual receipt, [8.207] remedies for breach — see

Sale of goods remedies rescission after acceptance, [8.205] retention of title clauses, [8.550]–[8.600] rights under, [8.90] risk, passing of, [8.610], [8.620] Romalpa clauses, [8.550]–[8.600] sale, what constitutes, [8.80] signature, [8.190] specific goods, [8.140] unascertained goods distinguished, [8.160] substance of contract, [8.60] terms, [8.210]

614

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Sale of goods contract — cont implied, [8.210]–[8.380] transfer of property, [8.50] contracts of sale and for work and materials, [8.60] meaning, [8.50] rules for ascertaining — see

Sale of goods unascertained goods, [8.80], [8.150] specific goods distinguished, [8.160] waiver of conditions, [8.400] warranties, [8.210] breach, [8.210], [8.400] conditions treated as, [8.400] exclusion of, [8.390] implied, [8.210] opinion distinguished, [8.210] writing requirement, [8.180] Sale of goods remedies buyer, [8.1020]–[8.1100] damages for breach of warranty of quality, [8.1040]–[8.1080] damages for late delivery, [16.50] damages for non-delivery, [8.1090] repudiation of contract, [8.1030] specific performance, [8.1100] damages for breach of warranty of quality, [8.1040]–[8.1080] chain of contracting parties, [8.1060] entitlement, [8.1050] measure of, [8.1040] unfitness for purpose, [8.1060], [8.1080] damages for non-acceptance, [8.970]–[8.1010] available market for goods, [8.970] duty to mitigate loss, [8.1010] loss of a bargain, [8.980] loss suffered on resale, [8.990] unique item, [8.1010] damages for non-delivery, [8.1090] overview, [8.840] specific performance, [8.1100] stoppage in transitu, [8.760], [8.890]–[8.920] defeat of, [8.920] determining if goods still in transit, [8.900] duration of transit, [8.900]

how effected, [8.910] notice, [8.910] right of resale where price not paid, [8.930] rule of, [8.760], [8.890] unpaid seller, [8.850]–[8.1010] action for price, [8.960] damages for non-acceptance, [8.970]–[8.1010] lien, [8.870] right of resale, [8.930]–[8.940] rights against buyer, [8.950]–[8.1010] rights against goods, [8.860]–[8.940] stoppage in transitu, [8.890]–[8.920] withholding delivery, [8.880]

obligation to pay money, [13.10] ownership, [13.70]–[13.90] pawn, [13.50] personal property securities —

see Personal property securities pledge, [13.50] lien compared, [13.60] possession, [13.40]–[13.60] property rights as security, [13.10] purpose, [13.10] reasons for taking, [13.20] types of, [13.30]–[13.120] unsecured obligations, disadvantages, [13.20] Services building services — see

Building services Sale of land fixtures and consumer guarantees, [16.145]

business detriment, [9.35] consumer, definition — see

Consumer consumer guarantees — see

Sample, sale/supply by correspondence with sample implied condition, [8.380] correspondence with sample and description, [8.260] Sale of Goods Act conditions, [8.380] Scams consumer detriment, [9.10] Security rights/interests bankruptcy, advantage in, [13.20] common law lien, [13.60] conditional sale, [13.90] creditor, [13.10] debtor, [13.10] definition, [13.10] encumbrances, [13.100]–[13.120] equitable charge, [13.110] equitable lien, [13.120] fixed/floating charges, [13.110] fixture where goods subject to, [4.230] general lien, [13.60] hire-purchase, [13.90] insolvency, advantage in, [13.20] legal or equitable, [13.10] lien common law, [13.60] equitable, [13.120] general, [13.60] mixture of goods subject to, [4.310] mortgage — see Mortgage

Consumer guarantees for services definition, [16.120], [16.125], [17.15], [17.45] goods distinguished, [16.125]–[16.150] mixed supply, [16.130] digital products, [16.135], [16.140] false or misleading representations — see

False or misleading representations financial — see Financial products and services goods distinguished, [16.125] digital products, [16.135], [16.140] implied terms, [17.05] due care and skill, [17.65], [17.85] fitness for purpose, [17.100] transportation or storage excluded, [17.30] itemised bills, [17.135] ACL and TPA compared, [17.65] minimum information, [17.135] request for, [17.135] mixed supply of goods and, [16.85], [16.130] payment of money as, [16.125] product-related services — see

Product safety

CHAPTER

Services — cont recreational — see

Recreational services supply of consumer guarantees — see

Consumer guarantees for services definition, [16.160] mixed supplies, [16.85], [16.130] unconscionable conduct —

see Unconscionable conduct trade or commerce, conferred in, [16.125] transitional provisions, [9.60] unfair contract terms — see

Unfair contract terms unfair sales techniques — see Unfair sales techniques unsolicited — see Unsolicited goods or services wrongly accepting payment for

— see Wrongly accepting payment Ship goods, as PPSA definition, [15.30] pledge of, [13.50] agency of necessity, [7.180] Silence conduct, whether, [11.25]–[11.35], [11.100] misleading or deceptive conduct, [11.25], [11.100] agency agreement, non-disclosure of, [11.115] bid-rigging arrangement, non-disclosure of, [11.115] case examples, [11.125] commercial negotiations, [11.105], [11.110] course of conduct as a whole, [11.10] duty to disclose, [11.100], [11.105] engaging in conduct, [11.25]–[11.35] general principles, [11.100] implied representations, [11.35], [11.120] inadvertent, [11.25]

intentional or deliberate, [11.25], [11.30] isolated silence, [11.30], [11.35] other conduct and, [11.35] pre-contractual negotiations, [11.105], [11.110] qualifying earlier statement, [11.120] reasonable expectation of disclosure, [11.100]–[11.125] subsequent change in circumstances, [11.120] unintentional non-disclosure, [11.25] unusual or unexpected matters, [11.115] reasonable expectation of disclosure, [11.100]–[11.125] cases where found/not found, [11.125] change in circumstances, [11.120] commercial negotiations, [11.105], [11.110] contextual factors, [11.110] course of dealing, [11.105] fiduciary duty, [11.105] specific transactional requirements, [11.110] unusual or unexpected matters, [11.115] Single enterprise theory consumer guarantees, [16.45], [16.180] Small business business-to-business transactions, [9.30] misleading conduct protection, [9.35] unfair contract terms protection extension to, [9.30] Social media misleading advertising on, [11.195] Spare parts consumer guarantees, [16.180], [16.395] auction sales excluded, [16.170] exemption from liability, [16.395] importers, [16.395] manufacturers, [16.395] reasonableness test, [16.395] Specific performance consumer remedy, [8.1100]

S

INDEX

615

Specification meaning, [4.30], [15.260] security interests, priority of, [15.260] State and Territory courts injunction, power to grant, [9.155] jurisdiction, [9.150], [9.155] transfer of proceedings to/from, [9.160] States and Territories ACL regulators, [9.145] adoption of ACL, [9.120] amendments to ACL, [9.140] application of ACL, [9.05], [9.50], [9.120], [10.05] application legislation, [9.50], [9.55], [9.120]–[9.135] Australian Consumer Law text, [9.50], [9.120] commencement dates, [9.55] Crown, [10.05] differences in provisions, [9.50] double jeopardy, [9.135] doubling-up of liabilities prevented, [9.135] extraterritorial application, [9.130] future amendments, [9.140] natural persons, [10.45] “person”, [10.45] principal acts, [9.120] background to ACL, [9.75] consumer credit, [9.105] consumer guarantees, [16.15] Fair Trading Acts, [16.05] recreational services, [9.50], [18.290] residential dwellings, [17.45] contributory negligence, [9.50], [12.130], [12.140] corporation incorporated in a territory, [10.30] Corporations Agreement, 2002, [9.105] courts — see State and

Territory courts Crown, application of ACL to, [10.05], [10.65] carrying on business, [10.05], [10.65] exceptions, [10.70] enforcement, [9.120] Fair Trading Acts, [9.50], [9.120] doubling-up of liabilities, [9.135] jurisdiction under, [9.150], [9.155] key provisions, [10.05]

616

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

States and Territories — cont transitional provisions, [9.60] implementation of ACL, [9.55] legislative powers, [9.120] policy objectives, [9.40] proportionate liability, [9.50], [12.170] referral of powers, [9.105], [9.120] sale of goods legislation implied terms — see

social media, advertising on, [11.195] publisher’s defence, [12.245] Structured settlement definition, [12.285] personal injury damages, [12.285] Suppliers consumer guarantees goods — see Consumer

guarantees for goods services — see Consumer guarantees for services

Implied terms regime international sale of goods, [16.175] tribunals, jurisdiction of, [9.155]

indemnification by manufacturers, [9.65], [16.05], [16.55], [18.140] itemised bills, [17.135] ACL and TPA compared, [9.65] linked credit providers — see

“State of the art” defence consumer guarantees, [16.265], [16.370] Stock-in-trade consumer guarantees, [16.110]

Linked credit providers

Stolen property bailee’s liability, [6.60], [6.80], [6.90], [6.130], [6.190] nemo dat rule, [8.630], [15.80] ownership of goods made from, [4.50] passing of property, [8.440] property rights, effect on, [4.120] title of transferee, [8.630] Stoppage in transitu defeat of, [8.920] determining if goods still in transit, [8.900] duration of transit, [8.900] how effected, [8.910] notice, [8.910] rule of, [8.760], [8.890] unpaid seller’s remedy, [8.890]–[8.920] right of resale where price not paid, [8.930]

overseas, application of ACL to, [9.95] product safety — see

Product safety proof of transactions, [17.125], [17.130] ACL and TPA compared, [9.65] Supply of goods or services chattels, [16.165] consumer contracts unfair terms — see Unfair

contract terms consumer guarantees — see

Consumer guarantees definition, [16.160] donations, [9.65], [16.160] gifts, [16.160] mixed supply, [16.130], [16.145] overview, [16.160] unconscionable conduct — see

Storage services consumer guarantees, [17.30] Strict liability consumer guarantees imposing, [16.50] acceptable quality, [16.205] fitness for purpose, [16.355] misleading or deceptive conduct, [11.230], [12.245] information provider exemption, [11.230], [12.245]

Unconscionable conduct unsolicited — see Unsolicited goods or services T Telecommunications services — see also Telephonic services consumer guarantees, [17.50]

ACL and TPA compared, [9.65] unfair contract terms, [10.40] Telegraphic services ACL and TPA compared, [9.65] application of ACL, [9.100], [10.40] conduct outside Australia, [9.95], [9.100] internet, use of, [9.100], [10.40] natural persons, to, [10.40] unfair contract terms, [10.40] Telephonic services — see also Telecommunications services ACL and TPA compared, [9.65] application of ACL, [9.100], [10.40] conduct outside Australia, [9.95], [9.100] natural persons, to, [10.40] unfair contract terms, [10.40] Television broadcasts application of ACL, [9.100], [10.40] natural persons, to, [10.40] misleading and deceptive conduct advertising, [11.185] information provider exemption, [11.235] unfair contract terms, [10.40] Tenant’s fixtures definition, [4.190] degree of annexation, [4.200] object of annexation, [4.200] permanent fixtures distinguished, [4.200] removal of, [4.220] agricultural tenants, [4.210], [4.220] chattels, [4.200] mining equipment, [4.210] right, [4.190]–[4.220] short-term residential tenancies, [4.210], [4.220] statutory changes, [4.210] time for, [4.220] waste, as, [4.190] Theft bailee’s liability, [6.60], [6.80], [6.90], [6.130], [6.190] conversion also crime of, [5.170] nemo dat rule, [8.630], [15.80] Things — see also Goods changes to — see Changes

to things

CHAPTER

Things — cont creation or destruction, [4.20] goods, [4.30]–[4.50] land, [4.60]–[4.110] existence of, [2.70] property rights relate to, [2.50], [2.70] use of term, [2.70] Title documents, [5.80] meaning, [5.80] native — see Native title ownership and, [5.80] possession distinguished, [5.80] registered under Torrens system, [5.80] Title to goods consumer guarantee, [16.180], [16.185], [16.200] hire or lease excluded, [16.185] limitation of liability not permitted, [18.260] limited title, [16.185], [16.200] remedy by supplier, [18.85] right to dispose, [16.185] specific or ascertained goods, [16.185] unascertained goods, [16.185] undisturbed possession and, [16.190] implied condition, [16.185] supplier curing defect, [18.85] Torts agent, by, [7.600]–[7.660] negligence, [7.480], [7.660] negligent misrepresentation, [7.590] principal’s liability, [7.590], [7.600] unauthorised act, [7.660] conversion — see

Conversion crime distinguished, [5.170] definition, [5.120] detinue — see Detinue nuisance, [5.170] overlap, [5.160] permanent damage to goods, [5.170] standard of proof, [5.170] trespass — see Trespass wrongful interference with possession, [5.120]–[5.170] Trade or commerce agents, [10.100] application to conduct in, [9.100], [10.05], [10.75]–[10.105]

carrying on a business, distinction, [10.55] chattels, supply in, [16.165] conduct not constituting, [10.105] consumer guarantees, [10.75], [10.85], [16.155] definition, [9.100], [10.75]–[10.90] email as, [10.80] employees, [10.100] terms of employment representations, [10.95] examples, [10.80] “in”, requirement, [10.95] misleading or deceptive conduct in, [9.100], [10.75], [10.95] employee or agent, [10.100] natural persons engaged in, [9.100], [10.40], [10.45] non-profit activities, [10.90] others, of, [10.100] overview, [10.75], [10.105] personal transactions, [10.75] professional activities, [10.85], [10.95], [10.105] purpose or intention, [10.75] services conferred in, [16.125] Trade Practices Act 1974 — see also Competition and Consumer Act 2010 ACL compared, [9.65] background to ACL, [9.75], [9.85] commencement dates of amendments, [9.55], [4.05] consumer protection provisions, [9.85] implied terms — see Implied

terms regime misleading or deceptive conduct (s 52), [9.05], [11.05], [11.10] norm of conduct imposed by, [11.05] policy objectives, [9.40] renumbering and renaming, [9.55] transitional provisions, [9.60] unconscionable conduct, [9.65], [4.05], [4.50], [4.85] Trading corporations application of ACL — see

Corporations constitution, [10.20] corporation, definition, [10.10] definition, [10.20] overview, [10.20] substantial current activities test, [10.20]

U

INDEX

617

Transfer of proceedings Federal Court, [9.160] State and Territory Courts, [9.160] Transportation services consumer guarantees, [17.30] fitness for purpose, [17.105] Travel agents — see also Agent licensing, [7.860] Travel Compensation Fund, [7.860] Travel services unfair contract terms forfeiture term, [12.30] Trespass breaking and entering, also crime of, [5.170] conversion compared, [5.140], [5.160] definition, [5.130] detinue compared, [5.150], [5.160] direct interference with actual possession, [5.160] future right excluded, [5.170] goods or land, to, [5.130] Hohfeldian analysis, [2.60] obligation not to, [2.60] overholding tenant distinguished, [5.170] overlap with conversion and detinue, [5.160] tort of, [5.130], [5.160] voluntary act, [5.130] Two-price advertising consumer detriment, [9.20] use of, [9.20]

U

Unascertained goods contract for sale of, [8.80], [8.150] assent to appropriation, [8.510], [8.520] bulk quantity, [8.530] property, passing of, [8.440], [8.510]–[8.530] risk, passing of, [8.610] specific goods distinguished, [8.160] Unauthorised entries or advertisements asserting right to payment for ACL and TPA compared, [9.65]

618

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Unconscionable conduct ACL and TPA compared, [9.65] application of ACL, [9.100], [10.75] ASIC Act, [9.105] business detriment, [9.30] business-to-business transactions, [9.30] consumer detriment, [9.20] financial services, [9.105] interpretative principles, [9.05] meaning, [9.05] interpretative principles, [9.05] scope of provisions, [9.05] trade or commerce, in, [10.75] Trade Practices Act provisions, [9.65] ACL compared, [9.65] Undertakings proof of transaction breach, [17.130] Undue harassment — see

Harassment or coercion Unfair contract terms ACL regime, [9.65] acts performed in reliance on, [12.30] business detriment, [9.30] business-to-business transactions, [9.30] commencement date of provisions, [9.55] consumer detriment, [9.10], [9.20] definition, [9.05] forfeiture term, [12.30] insurance contracts, [5.45] natural person, supply by, [10.40] postal services, [10.40] radio broadcasts, [10.40] regulation, terms prescribed by, [5.165] scope of provision, [9.05] second contract, forced entry into, [12.30] severance of offending part, [12.30]

Trade Practices Act compared, [9.65] Unfair sales techniques ACL and TPA compared, [9.65] ACL reforms, [9.65] application of prohibitions, [7.05] bait advertising — see Bait

advertising coercion — see Harassment

Unsolicited consumer agreements ACL and TPA compared, [9.65] consumer detriment, [9.20] cooling off period, [9.20] door-to-door sales, [9.65] Unsolicited goods or services ACL and TPA compared, [9.65]

V

or coercion consumer detriment, [9.10], [9.20] gifts — see Rebates, gifts

or prizes harassment — see

Harassment or coercion “limited time” sales, [9.20] multiple pricing — see

Multiple pricing promotional offers — see Rebates, gifts or prizes pyramid selling — see Pyramid selling rebates, offering — see Rebates, gifts or prizes wrongly accepting payment —

see Wrongly accepting payment United Kingdom consumer guarantees due care and skill, [17.70] fitness for purpose, [16.355], [16.365] merchantable quality, [16.210]

Value land, affected by physical condition, [4.60] property rights, [2.110] Vernon Report, [16.45] Vicarious liability common law of, [10.110] corporate liability, [10.110] Vienna Convention application in Australia, [16.175] international sale of goods, [16.175]

W

Wallis Committee, [11.255]

Unjust enrichment property right based on, [4.120]

Warranties — see also Consumer guarantees — see also Implied terms regime express warranties collateral contracts, [16.400] consumer guarantee in relation to, [16.05], [16.400] definition, [16.400] warranties against defects distinguished, [16.405] warranties against defects, [16.405]

Unsecured creditors disadvantages, [13.20]

Wrongly accepting payment ACL and TPA compared, [9.65]

Universal agents, [7.80]