Case: Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
Outcome: applied
conclusion does not exclude the possibility of a claim by Olivaylle for relief under the TPA. The following observations made by Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505-506 are apposite: (8) The result of this examination of the provisions of the legislation before and after the 1977 Act is that para. 4 (2) (a), in dealing with "conduct" operates generally, in its terms, so that the T.P. Act after the 1977 Act, was to be read as "one connected and combined statement of the will of Parliament . ..": Sweeney v Fitzhardinge ; [1906] HCA 73 ; (1906) 4 CLR 716 at 735. So understood, para. 4 (2) (a) provides significant support for the conclusion reached in this case by the primary Judge, and for the general proposition that 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. In many cases, there will have been pre-contractual conduct which itself contravenes s. 52. The present case is a striking one because it was presented on a narrower basis, and concerned the giving of the warranties in the contract itself. (9) Where the conduct relied upon involves not a statement as to a presently existing state of affairs, but a representation with respect to a future matter, which is contained purely in a contractual promise, then a case for contravention of s. 52 will involve consideration of the extra steps spelled out in s. 51A of the T.P. Act. Some of the issues that would arise in such a case are discussed by Ormiston J in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 233-241, where reference is made to the relevant authorities in this Court. But this is not a case concerning representations as to future conduct. This case does concern a representation with respect to a future matter. In that regard and as Lockhart and Gummow JJ counsel in the passage quoted assistance is to be gained by regard to the judgement of Ormiston J in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 239-241 His Honour offered the following analysis with which I respectfully agree: It would seem on the authorities that, at the least, a contractual promise would amount to an implied representation that the promisor then had an intention to carry out that promise. If it can be shown that he had no such intention he would be guilty of misleading or deceptive conduct. Likewise it would seem that such a representation connotes a present ability to fulfil that promise which, if shown to be untrue at the time of making, would likewise characterise the implied representation as misleading or deceptive. It is not easy to fit s51A and s10A into the scheme of each Act if the broader view should prevail. One of the principal difficulties is subs(3) in each case which says that subs(1) shall be deemed not to limit by implication the meaning of any reference in the Division to, inter alia, "conduct that is misleading or is likely . . . to mislead". One can understand that the section should not be treated as qualifying by implication the types of conduct which can be characterised as misleading or deceptive. It is another to say that the section does not show in what way a defendant can establish that a representation as to the future which is "taken to be misleading" does not amount to a contravention of s52 or s11, as the case may be; for subs(2), by negative implication, says that, if a person adduces evidence that he had "reasonable grounds for making the representation" as to future conduct, then the representation shall no longer be taken to be misleading. If those who maintain that implied promise plus breach are sufficient to constitute misleading conduct are correct, then the question whether the promisor had reasonable grounds for making the representation would be irrelevant. It would be sufficient, on that hypothesis, to show that the promisee was "led into error" by reason of the promise subsequently broken, regardless of the promisor's having reasonable grounds for making the representation. Thus, despite the apparently restrictive words of subs(3), the basis for holding that a promise amounts to misleading conduct must be that it carries with it an implication that the promisor had no reasonable grounds for making the representation, i.e. the promise. If he overcomes the section's presumption against him, by proof to the contrary, then it follows that his representation and thus his conduct was not misleading, for present purposes. Otherwise each of the inserted sections would be pointless in so far as it purports to qualify, or expand, s52 and s11. In my opinion, therefore, accepting that s51A and s10A each assumes that a promise may give rise to an implied representation that the promisor will perform an act in the future, namely the promised act, then the promisee is not, in proceedings under s52 or s11, bound to show that the promisor had no intention or no ability to perform the promise at the time of its making. The promisor will be deemed not to have reasonable grounds for making the representation or promise, unless he satisfies the court by evidence to the contrary that he had reasonable grounds for making that representation. He may achieve this, in part, by showing that he had a genuine intention to perform his promise and that he had the ability at the time to perform it, but in the end he must show objectively that he had reasonable grounds for making the representation. For present purposes I am not prepared to accept that the plaintiff can make out its case by showing merely promise and breach. In my opinion, that evidence, on its own, is insufficient to show that the promisee was "led into error" unless the plaintiff can rely on s10A or s51A If there is no element of actual or deemed misrepresentation then the promisee can have been led into no error, nor can it be said to have been misled, by reason of some subsequent breach which causes it harm or loss. If the facts connote no error or misrepresentation, nothing thereby led it to take a course which was erroneous. It follows from what has been said that I am not persuaded that one should treat every contractual promise as giving rise to an implied representation of the kind referred to in s10A (and s51A) However. I am persuaded that if there be an unconditional promise which forms part of the contractual obligations, then it is proper to treat the giving of that promise, at least in the ordinary case, as the making of a representation as to a future matter, being either the doing of an act or the "refusing" (sic) to do an act, being in each case the subject of the promise. Perhaps conditional promises may also be treated as the making of a representation as to future conduct, but in each case the qualified terms of the promise would usually lead to the conclusion that the maker had reasonable grounds therefore, unless it could be shown that under no circumstances would the promisor have fulfilled his promise. It is, however, not necessary to determine this latter point. Has Flottweg shown that it had reasonable grounds for making each of the "representations", ie the promise as to oil recovery, the promise as to the achievement of a minimum level of atmospheric oxygen and the promise as to the processing speed of the line? I find that, objectively, it did, for the following reasons. I should observe at once that I am satisfied on the whole of the evidence that Flottweg had a genuine intention to fulfil the Contract in all respects, including the supply of equipment that would meet each of the specifications in the Contract.