Case: Watson v Foxman (1995) 49 NSWLR 315
Outcome: applied
Section 52 of the Act provides that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Proceedings before this Court involving s 52 claims are not infrequent and feature widely varying factual scenarios. A number of principles should be kept in mind in considering claims in the context of s 52. These include the following: 1. Section 52 of the Act requires that the relevant corporation engage in conduct that is misleading or deceptive. Section 4(2)(a) of the Act provides that: a reference to engaging in conduct shall be read as a reference to doing or refusing to do any act, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or the giving effect to a provision of, an understanding or the requiring of the giving of, or the giving of, a covenant. "Conduct" is not co-extensive with "representation" in s 52 (Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 504, Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60 ; (2004) 218 CLR 592 per Gleeson CJ, Hayne and Heydon JJ at 603, McHugh J at 622) however engaging in conduct does encompass making representations (cf McGrath; in the matter of Pan Pharmaceuticals Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2 at [150] ). 2. Where a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive, it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court the nature of the alleged conduct and the circumstances which rendered the conduct misleading: McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 (cf for example, Lahoud v Lahoud [2006] NSWCA 169 at [91] , Yang v American International Assurance Co (Australia) Ltd [2008] FCA 39 at [89] ). 3. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances: Watson 49 NSWLR 315 at 318 (cf for example Christofidellis v Zdrilic [1999] FCA 39 , Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 6) (2007) 63 ACLR 1 at 107, Yang FCA 39 at [89]). 4. The essential characteristic of misleading or deceptive conduct is that it contains or conveys a meaning which is false ( Global Sportsman Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180 ; (1984) 2 FCR 82 at 88). 5. There will be no contravention unless error or misconception results from the conduct of the corporation, and not from other circumstances for which the corporation is not responsible ( Equity Access Pty Ltd v Westpac Banking Corporation [1989] FCA 506 ; (1990) ATPR 40-994 at 50,950; Miller's Annotated Trade Practices Act (29th ed) 1.51.5). 6. Whether or not conduct is misleading or deceptive is a question of fact to be decided by considering what is said and done against the background of all surrounding circumstances ( Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202). 7. The words likely to mislead or deceive add little to s 52; at most they make it clear that it is unnecessary to prove that the conduct in question actually deceived or misled anyone (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44 ; (1982) 149 CLR 191 at 198). Conduct will be likely to mislead or deceive if there is a real or not remote chance or possibility of misleading or deceiving, regardless of whether it is more than 50% ( Parkdale Custom Built Furniture Pty Ltd [1982] HCA 44 ; 149 CLR 191 at [6] , [15], Equity Access Pty Ltd ATPR 40-994 at 50,950, Global Sportsman Pty Ltd [1984] FCA 180 ; 2 FCR 82 , McHugh J in Butcher [2004] HCA 60 ; 218 CLR 592 at 626). 8. Silence, or failure to disclose information, can fall within the gamut of misleading or deceptive conduct in the sense that having regard to all the relevant circumstances, it constitutes conduct that has been misleading or deceptive or that is likely to mislead or deceive ( Demagogue Pty Ltd v Ramensky [1992] FCA 557 ; (1992) 39 FCR 31 at 32, 41; Fleetman Pty Ltd v Cairns Pty Ltd [2005] FCAFC 80 at [1] - [2] ). 9. The conduct of a corporation 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 (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd [1982] HCA 44 ; 149 CLR 191 at 199). 10. As a general rule intention (or lack of intention) to mislead or deceive is not a necessary element of conduct proscribed by s 52 ( Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228). The liability imposed by s 52 is unrelated to fault (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd [1982] HCA 44 ; 149 CLR 191 at 197). 11. The court must decide objectively whether the conduct is misleading or deceptive or likely to mislead or deceive, and that evidence that members of the public have actually been misled is not conclusive, although it can be very persuasive (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd [1982] HCA 44 ; 149 CLR 191 at 198-199, McWilliam's Wines Pty Ltd v McDonald's System of Australia [1980] FCA 159 ; (1980) 33 ALR 394 per Smithers J at 399 and Fisher J at 414, Equity Access Pty Ltd ATPR 40-994 at 50,950). 179 Earlier in the judgment I referred to words of warning of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 concerning oral statements claimed to be misleading or deceptive. His Honour said: Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the Court, which means that the Court "must feel an actual persuasion of its occurrence or existence"... 180 This principle is of particular relevance in relation to this claim. 181 I do not consider this claim substantiated for the following reasons. 377 First, on the basis of the evidence before the court I consider it possible that Mr Strahley mentioned the figure of $1.5 million during the meeting in relation to the lemon crop. This potentially ties in with the gross income from the lemons and limes to which Mr Bailey referred in his valuation report of 11 January 2005. However even if Mr Strahley had mentioned the amount of $1.5 million referable to the lemon crop, on the facts I do not consider it at all likely that Mr Strahley made the representation alleged by the applicants, namely that this represented the net realisable value of the lemon crop. No documentation existed which was produced by the respondents, either for Mr Tracy's benefit or otherwise, which could support a claim that the net realisable value of the lemon crop following deduction of costs including picking, packing and transport would be $1.5 million. The only evidence before the Court that Mr Strahley made the representation to Mr Tracy claimed by the applicants is the oral evidence of Mr Tracy that he recalled Mr Strahley making a statement referring to $1.5 million for the lemon crop at the meeting of 3 December 2004. Mr Tracy took no notes of the meeting or the statement and I have already found that Mr Tracy's recollection in relation to another claim arising from that meeting was inaccurate. I note again the warning of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 concerning recollection of oral statements claimed to be misleading or deceptive. 378 Second, and in any event, there is evidence from which it can be inferred that Mr Tracy himself derived the amount of $1.5 million for the lemon crop from other information he had received in relation to the orchards and citrus prices in general, including information he received from third parties. So: &#8226; The evidence demonstrates that the first respondent communicated to Mr Tracy that it was only prepared to accept $4.5 million for the relevant properties. An email from Mr Tracy to Mr Douglas acting for the first respondent (which Mr Douglas then forwarded to Mr Strahley on 6 December 2004: exhibit A106) shows that Mr Tracy had offered $4 million, but was prepared to increase his offer to $4.5 million if the directors of the parent company of the first respondent gave a directors' guarantee that the net realisable value of the lemon crop was $1.5 million. (TS 415 ll 46-48, 416 ll 1-2, 419-420). This appeared to be the first time that reference to valuation of the lemon crop appears in writing. &#8226; Mr Tracy had made undated handwritten notes (Ex R40) which were tendered as evidence as to his deliberations in relation to purchasing the relevant properties. These handwritten notes included calculations. Mr Tracy agreed that the notes showed: o he had calculated receiving 38,000 cases of lemons, but had taken a conservative approach and discounted this sum by 10% to 35,000 cases of lemons; and o he had formed a view that he would receive $50 net per case of lemons. On the notes he had written "1.75 M", and below that following further calculations "1.5 LEM". (Significantly in my view, Mr Tracy said at the hearing in explanation of this figure " leaving me with a number of 1.5 lemons " (TS 419-420)). 379 Although no concession was made by Mr Tracy as to when these notes were made, I accept the submission of Mr Bell QC that it is likely that, given the nature of the notes and the information they reference, the notes date from early December 2004, and probably after the meeting with Mr Strahley when Mr Tracy was considering making an offer for the relevant properties, and that they reflect Mr Tracy's deliberations in relation to making an offer. If that is so, then it is clear that Mr Tracy had formed a view as to the approximate number of cartons of lemons which could be produced by the orchards, namely 38,000 cartons (despite his evidence that he did not have such information: TS 412 ll 41-44). It is not clear where Mr Tracy derived this information - a likely source was the first respondent although there is no evidence as to whether this figure was provided to Mr Tracy and if so what it represented.