Case: Demagogue Pty Ltd v Ramensky and Another (1992) 39 FCR 31
Outcome: applied
It is convenient to discuss the applicable legal principles before discussing the facts. Silence, or the failure to disclose information, can constitute misleading and deceptive conduct for the purposes of s 52 of the TP Act . In Demagogue Pty Ltd v Ramensky and Another (1992) 39 FCR 31, the Full Court dismissed an appeal where the trial judge had held that a vendor (by its real estate agent) had failed to disclose that access to a property purchased by the respondents was to be by public road as opposed to private driveway and that such failure was misleading and deceptive within the terms of the Act. The failure to disclose the relevant information occurred in the context of a positive representation from the agent of the appellant as to the proposed construction of the private driveway, and certain documents included in the contract of sale which referred to a 'driveway'. Black CJ said (at 32): '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 a 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'. (emphasis added) and Gummow J said (at 40): '"Conduct" within the meaning of s 52 includes refusing to do an act and refusal to do an act includes a reference to "refraining (otherwise than inadvertently) from doing that act": s 4(2). But in any case where a failure to speak is relied upon the question must be whether in the particular circumstances the silence constitutes or is part of misleading or deceptive conduct. The expanded meaning given by s 4(2) to "conduct" should not distract attention from the fundamental issue in the case at hand.' Gummow J expressed doubt that it was necessary to inquire in such a case about whether an independent "duty to disclose" had arisen on the basis that to do so digressed from the application of the terms of s 52 . 131 Another Full Court judgment followed shortly, Warner and Another v Elders Rural Finance Limited and Others (1993) 41 FCR 399 in which Hill J said at 405: 'To that extent, therefore, I would agree with Gummow J in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, that the search for a "duty to disclose" might be to digress from the application of the terms of s 52. Certainly I agree, with respect to his Honour, that neither Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 nor Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 ultimately depended upon the existence of a duty and my analysis in Winterton (supra) in fact points to the fact that Henjo (supra), in which the applicant was successful, was what I have labelled "a half-truth case". I would not understand what his Honour said in Demagogue (supra), however, to mean that it was irrelevant that a duty to speak arose, for so to say would be to disapprove the language of Bowen CJ in Rhone-Poulenc and of Lockhart J in Henjo (at 557), both of which passages have been often cited with approval, including by Full Courts of this court: see, for example, Kabwand Pty Ltd v National Australia Bank Ltd [1989] ATPR 50,367. The test adopted by Black CJ, in separate comments, and by Gummow J, with whom Cooper J agreed, in Demagogue , of the need to find a reasonable expectation that silence would be broken before failure to speak is misleading or deceptive, differs little, if at all, from the test I suggested in Winterton when I spoke of "entitlement to expect" or "entitlement to infer". I would not have entered into further discussion of the matter but for the "Editorial Comment" with which Demagogue was published in the CCH report of the judgment (15 ATPR 40,844). That comment suggested that there was some conflict between the judgment of Gummow J in Demagogue and my discussion in Winterton . With respect, I think that the learned authors place too great an emphasis upon the comments made by Gummow J, with respect to the existence of a "duty to disclose". If one accepts the formulation of "reasonable expectation" in Demagogue as a test to be applied, either universally, or, at least, in most cases, the existence of a duty to disclose will still have significance'. 132 The approach in Demagogue has been applied on many occasions including most recently by the Full Court of this Court in Fleetman Pty Ltd v Cairns Pty Ltd [2005] FCAFC 80 (per Marshall, Mansfield and Siopis JJ) in which, in a joint judgment, their Honours referred with approval, to the above passage on the reasons of the Chief Justice. Similarly, the Court of Appeal of New South Wales in Hardy v Your Tabs Pty Ltd (in liq) [2000] NSWCA 150 per Heydon JA (at [69]) with whom Meagher JA and Foster AJA agreed, cited with approval the same passage. 134 In Butcher and Another v Lachlan Elder Realty Pty Ltd [2004] HCA 60 ; (2004) 212 ALR 357, which was a case on the effect of a disclaimer and the passing on of information, rather than on a failure to disclose material information, the High Court considered a question similar to that consider in Demagogue involving the sale of real estate. McHugh J (dissenting on a different point) at 383 to 384, at [109], analysed s 52 and said: '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'. (references omitted) The majority (Gleeson CJ, Hayne and Heydon JJ) said at 366 to 367, at [37] to [39]: 'The plaintiff must establish a causal link between the impugned conduct and the loss that is claimed. That depends on analysing the conduct of the defendant in relation to that plaintiff alone. 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. The relevant principles. In Yorke v Lucas [(1985) [1985] HCA 65 ; 158 CLR 661 at 666], Mason ACJ, Wilson, Deane and Dawson JJ said that a corporation could contravene s 52 even though it acted honestly and reasonably: 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. In applying those principles, it is important that the agent's conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of its "conduct" divorced from "disclaimers" about that "conduct" and divorced from other circumstances which might qualify its character. Everything relevant the agent did up to the time when the purchasers contracted to buy the Rednal land must be taken into account. It is also important to remember that the relevant question must not be reduced to a crude inquiry: "Did the agent realise the purchasers were relying on the diagram?" To do that would be impermissibly to dilute the strict liability which s 52 imposes'. (references omitted)