Case: McCarthy v McIntyre [1999] FCA 784
Outcome: discussed
The second respondent submitted that relief for third party reliance on misleading or deceptive conduct is only available in the limited circumstance where the contravention was a "sine qua non" of the claimant entering into a transaction . It relied upon the statement by Hill, Sackville and Katz JJ in McCarthy v McIntyre [1999] FCA 784 at [50] in support of this submission: "Where a claimant is able to show that, but for the misleading or deceptive conduct, he or she would not have entered into a transaction, then such loss as flows directly to the claimant from the transaction will satisfy the requirement of causation. This is so where the claimant relies upon the misleading or deceptive conduct (the usual case). It is also so where a third party whose action was a sina qua non of the entry by the claimant into the transaction (the present case as alleged) relies upon the misleading or deceptive conduct." 103 No such transaction was entered into by the applicant, and nor, according to the second respondent, did the applicant itself rely upon the representation. 104 Further, the second respondent contended that if relief is more generally available for third party reliance in the circumstances of this case, the applicant's loss was not caused by the conduct of Colliers. Rather, the second respondent submitted that the applicant's loss was caused by their own failure to object to the notice, and/or the unconscionable conduct of the first respondent or its breach of the implied term of good faith, if indeed these causes of action are established. 105 The second respondent acknowledged that negligence on behalf of the "victim" is not a "defence" to a s 52 contravention (although I note that the Act has now been amended such that "contributory negligence" can be taken into account so as to reduce damages under s 82). However, the second respondent contended that this proposition does not apply where the conduct of the "victim" destroys the causal connection between the contravention of the Act, and the loss or damage suffered. In other words, the second respondent submitted that the applicant's failure to respond to the notice constituted a novus actus interveniens that broke the chain of causation. 106 As previously mentioned, the respondents submitted that the applicant did not adequately plead the claim that the notice is invalid because it failed to assess the rent on the assumption that only the fixtures and fittings in schedule 2 were to be taken into account. Nor, according to the respondents, had the claim been opened, or supported by any evidence specifically adduced in relation to it. As such, the respondents contended that the applicant is required to seek leave to amend its statement of claim in order to pursue this claim. The respondents opposed any such leave being granted. 164 The authorities are clear that the applicant does not itself have to rely upon the misrepresentation in order to make a claim under s 82. It may be sufficient for a third party to rely upon the misrepresentation, and for that third party reliance to cause the applicant's loss. See Janssen-Cilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 (" Janssen-Cilag "), Haynes v Top Slice Deli Pty Limited (1995) ATPR (Digest) |P46-147 (" Haynes "), and McCarthy v McIntyre [1999] FCA 784. However, the authorities require a "sufficient and direct link", or a "requisite element of proximity" in order for s 82 to be satisfied. 167 In McCarthy v McIntyre , a bank relied upon a misleading valuation in making a loan. The appellant suffered loss from the transaction entered into using the funds from the loan. The issue in that case was whether, if the transaction would not have been entered into by the appellant had it not been for the making of the loan, was this sufficient to make a claim under s 82. The Full Court (Hill, Sackville and Katz JJ) stated at [48]-[50]: "All that is necessary, in our opinion, is that there be a sufficient and direct link (ie, causation) between the loss or damage alleged to have been suffered by the claimant and the misleading or deceptive conduct. It is well established that the misleading or deceptive conduct need not be the sole cause of the loss. ... Precisely what test should be used to judge what constitutes the sufficient causal connection required between the misleading conduct and the outcome is the subject of some difficulty. Perhaps there is no simple test capable of formulation. It is necessary that the issue of causation be approached in what the High Court in Wardley called a "practical or commonsense" way. In many areas, the courts have applied a "but for" test of causation. As McHugh, Hayne and Callinan JJ pointed out in Marks v GIO Australia Holdings Ltd at 346, the idea that a "but for" test is the exclusive test of causation has been found wanting in some contexts and it may yet be found to be wanting in the context of ss 82 and 87 of the Trade Practices Act (and their State equivalents). Whether this be the case or not, the "but for" test, applied in a common sense and not a pedantic way, provides still a useful approach to the issue of causation. Where a claimant is able to show that, but for the misleading or deceptive conduct, he or she would not have entered into a transaction, then such loss as flows directly to the claimant from the transaction will satisfy the requirement of causation. This is so where the claimant relies upon the misleading or deceptive conduct (the usual case). It is also so where a third party whose action was a sina qua non of the entry by the claimant into the transaction (the present case as alleged) relies upon the misleading or deceptive conduct."