Week 2 - Misrepresentation and Misleading or Deceptive Conduct (Statutory…
Week 2 - Misrepresentation and Misleading or Deceptive Conduct
Misrepresentation three elements must be present
statement must be made to the other party at or before the time of contract formation
he statement must intend to induce the other party into entering in the contract and it must actually have that effect
False statement of a past or present fact.
a false statement of a future fact is not misrepresentation
Three categories of misrepresentation
These were identified in the case of Derry v Peek (1889) 14 App Cas 337
Fraudulent - where the person making the misrepresentation intends to lie
Occurs under 4 conditions
when a party knowingly makes a partial statement, which may be true in itself but which has the effect of conveying falsehood
when a party makes a statement which may or may not be true, without caring whether it is true or false
when a party knowingly makes an untrue statement
when a party makes a statement with no belief in its truth
Negligent - where the person making the representation was under a duty to ensure that they were telling the truth to the other party
failure in that duty
innocent part must suffer some kind of harm (loss or damage)
Cases of note
see also Contracts B under misrepresentation
Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225
The D sought information about road widening plans from the council. The council informed that there were no such plans, so the D proceeded with the purchase of a property. The council ended up widening the road at a later date.
Failure - the failure of the council to provide accurate information
Loss - the D lost money associated with the development as a result of purchasing the land at a price that did not consider the road widening
Duty - the duty of the council as the authoritative provider of information
Hedley Byrne & Co Ltd v Heller & Partners Ltd  AC 465
P obtained a new client called Esipower. Before extending credit to them the P sought the D bank about their creditworthiness. The bank gave them appropriate reassurance. It turned out the D was not in a good financial position and went into liquidation. The D sued for economic loss as the bank negligently made misrep.
Failure - the bank failed to provide accurate information
Loss- The D lost money when it went into liquidation, as a result the D suffered clear harm
Duty - the bank chose to provide the information upon request, therefore had a duty to ensure that the information was accurate that it provided
Innocent - where the person making the misrep intends to tell the truth and believe that they are doing so
Curtis v Chemical Cleaning Company  KB 805
in which the attendant for the company would not accept liability for damages to a customers dress during cleaning. The company had a much wider exclusion policy in place that was printed on a receipt and signed by the customer following an explanation by the attendant. Due to the attendants narrower stated exclusion the company was not entitled to rely on its wider policy when the chemicals stained the customers dress. The is an example of innocent misrep by the intendant, as the she had no idea that she had excluded the wider company policy.
Redgrave v Hurd (1881) 20 CH D 1
In this case solicitor sought to retire so sought to sell the house he was living in, to which his practice had been attached. The idea was that the house would be purchased by another solicitor who would become partner in the practice. He told the buyer that the practice bought in 300 pd/yr when really it was closer to 220 pd/yr. This was classified as a innocent mistake. If common law had applied alone then the contract would have been binding due to the parol evidence rule (prevents a party to a written contract from presenting extrinsic evidence that discloses an ambiguity and clarifies it or adds to the written terms of the contract that appears to be whole).
However equity was prepared to intervene to prevent the solicitor from gaining advantage from his own misrep. The contract was rescinded.
Remedies for misrepresentation
two remedies available
available for all three categories
doesnt end the contract just seeks to unravel the contract by seeking to return the parties to substantially the positions they were in prior to entry in the contract. Once it is rescinded neither party has any obligations under contract because it is as if it never existed in the first place - i.e. it is
It must be possible to return the parties substantially to their positions prior to the commencement of the contract
Maguire v Makaronis (1996) 188 CLR 449
Alati v Kruger (1955) 94 CLR 216
court focused on returning the parties to the financial position they were in before the commencement of the contract
The innocent party must not have affirmed the contract
Sargent v ASL Developments Ltd (1974) 131 CLR 634
the appellants were involved in the sale of land, and there were questions about the town planning status of that land; for a period of some months after these questions were resolved they received interest payments on the sale, but then finally sought to rescind the contract. The court found that they were unable to do so, because their conduct in receiving the payments amounted to an affirmation of the contract.
only available for fraudulent and negligent misrep i.e. this is damages in tort (
damages in contract i.e. damages in contract relate to when the contract is still in place)
3 things that need to be understood
. damages can only be awarded in addition to rescission
. So, for fraudulent and negligent misrepresentation the court can award rescission, damages, or both
three additional elements
must also be shown - see Jones v Dumbrell  VR 199
they must show that they actually did so. For instance, if they regarded the representation as irrelevant, or if they did not believe it, then they did not act on the basis of that representation, so no damages will be available
there must be harm. If the plaintiffs have not suffered as a result of the misrepresentation, no damages will be awarded. No monetary compensation is required to restore the plaintiff to its pre-incident position
the plaintiff must show that the party who made the representation intended them to act upon that representation
. need to distinguish between rescission, damages in tort and damages in contract
damages in tort
, aim to compensate the plaintiff for prejudice or disadvantage suffered due to altering their position under the inducement of the defendant's misrepresentation. It is sometimes said they aim to place the innocent party in the position they would have been if the tort had not occurred (pre-incident position)
damages in contract
aim to place the innocent party in the position they were anticipating as a result of the contract, ie the financial benefit they would have had if the contract had been successfully completed (post-contractual position)
an equitable remedy, aims to unravel the contract completely (ab initio) to get the innocent parties back to their original positions (pre-contractual position)
. tortious damages are only available where the conduct is tort - fraudulent and negligent misrep
Statutory mechanism and deceptive conduct
s 18 of the ACL. It reads as follows:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Trade or commerce
: The ACL provides no protection in relation to representations made outside the context of trade or commerce. Trade or commerce is given a fairly wide definition, but sales or investments of a purely private nature, between individuals and absent a normal commercial context, will not be subject to the ACL. In such circumstances, the contracting parties must rely on the general law.
Engaging in conduct
: Conduct may include words, whether written or oral; actions; and even silence, if the effect of the silence is to bring about a misleading or deceptive result.
: in this context, a person includes a corporation, a natural person, the service or includes the corporation, and government entities where they are carrying on a business.
Misleading or deceptive
: It is not enough simply to show that the outcome of the conduct was that a person was misled and that harm occurred; it might have been, for instance, that the conduct of the representing party was clear, but was misinterpreted by the other party. When deciding whether conduct was misleading or deceptive, the court will consider the position of the person to whom the representation is made, and then will consider whether the conduct complained of has a “tendency to lead a person into error.” [Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304].
where there is a breach of s18 the remedy comes out of s236 of the ACL, allows two forms of action
, a person who has suffered loss or damage as a result of the misleading and deceptive conduct may seek compensation for that loss
, the ACL allows the regulator (i.e. the ACCC) to take action on behalf of a class of consumers, without requiring those consumers to make their cases separately
see s29 of the ACL
ACCC v Dell Computer Pty Ltd (2002) 126 FCR 170
Dell’s advertising included a very prominent display of the sale price for their computer, which was generally cheaper than equivalent computers at retail stores. The advertising then contained an asterisk which pointed to the delivery fee in much smaller type. Because the delivery fee was an intrinsic part of the price every customer would be required to pay to Dell, the ACCC alleged, and the court found, that the company had misrepresented the price of the computer.