Commercial and personal property law : selected issues [Second edition.] 9780455238777, 0455238774

Table of contents :
COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES
About this book
Table of Contents
PART 1
THE CONCEPT OF PROPERTY
1
Understanding Property Law
2
What is Property?
3
Distribution of Property
PART 2
PHYSICAL LIMITS TO LAND AND FIXTURES
4
Physical Changes to Things
PART 3
OWNERSHIP, POSSESSION AND TRANSFER OF RIGHTS TO PERSONAL PROPERTY
5 Possession
PART 4
BAILMENT
6
Bailment
PART 5 AGENCY
7
Agency
PART 6
TRANSFER OF PROPERTY
8
Sale of Goods
PART 7
AUSTRALIAN CONSUMER LAW — MISLEADING CONDUCT
9
Scope and Policy Objectives
10
Definitions and Key Concepts
11
Misleading or Deceptive Conduct
12
Private Remedies
PART 8
SECURITY INTERESTS IN PERSONAL PROPERTY
13
Security Rights
14
Credit Law
15
Personal Property Security
PART 9
AUSTRALIAN CONSUMER LAW — CONSUMER GUARANTEES
16
Consumer Guarantees for Goods
17
Consumer Guarantees for Services
18
Remedies Relating to Guarantees
INDEX

Citation preview

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES ..................

Thomson Reuters (Professional) Australia Limited 19 Harris Street Pyrmont NSW 2009 Tel: (02) 8587 7000 Fax: (02) 8587 7100 [email protected] www.thomsonreuters.com.au For all customer inquiries please ring 1300 304 195 (for calls within Australia only)

INTERNATIONAL AGENTS & DISTRIBUTORS

NORTH AMERICA Thomson Reuters Eagan United States of America

ASIA PACIFIC Thomson Reuters Sydney Australia

LATIN AMERICA Thomson Reuters São Paulo Brazil

EUROPE Thomson Reuters London United Kingdom

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES .....................................

Compiled by Professor Stephen Corones BCom LLB (Qld), LLM (UCL), PhD (Qld)

Second Edition

LAWBOOK CO. 2016

Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW ISBN: 9780 455 238 777

© 2016 Thomson Reuters (Professional) Australia Limited This publication is copyright. Other than for the purposes of and subject to the conditions prescribed under the Copyright Act, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Inquiries should be addressed to the publishers. All legislative material herein is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain reproduction and publication of Commonwealth legislation. In particular, s 182A of the Act enables a complete copy to be made by or on behalf of a particular person. For reproduction or publication beyond that permitted by the Act, permission should be sought in writing. Requests should be submitted online at http://www.ag.gov.au/cca, faxed to (02) 6250 5989 or mailed to Commonwealth Copyright Administration, Attorney-General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600.

Product Developer: Vickie Ma Editor: Ben Brocherie Printed by Ligare Pty Ltd, Riverwood, NSW

This book has been printed on paper certified by the Programme for the Endorsement of Forest Certification (PEFC). PEFC is committed to sustainable forest management through third party forest certification of responsibly managed forests. For more info: http://www.pefc.org

About this book Commercial and Personal Property Law: Selected Issues 2e consists of material extracted from the following books: • Smith, Personal Property Law: Selected Issues, 3rd ed (Thomson Reuters, 2015); • Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013); • Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016); • Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015).

Table of Contents About this book ........................................................................................ v Table of Cases .......................................................................................... ix Table of Statutes ................................................................................... xxv The Concept of Property Understanding Property Law .................................................................... 3 What is Property? ..................................................................................... 5 Distribution of Property ........................................................................... 13 Physical Limits to Land and Fixtures Physical Changes to Things .................................................................... 25 Ownership, Possession and Transfer of Rights to Personal Property Possession .............................................................................................. 49 Bailment Bailment ................................................................................................. 67 Agency Agency ................................................................................................... 81 Transfer of Property Sale of Goods .......................................................................................

115

Australian Consumer Law – Misleading Conduct Scope and Policy Objectives .................................................................

167

Definitions and Key Concepts ...............................................................

217

Misleading or Deceptive Conduct .........................................................

247

Private Remedies .................................................................................. 333 Security Interests in Personal Property Security Rights ..................................................................................... 393 Credit Law ............................................................................................ 401 Personal Property Security .................................................................... 411 Australian Consumer Law – Consumer Guarantees Consumer Guarantees for Goods .......................................................... 431

Consumer Guarantees for Services ....................................................... 513 Remedies for Consumer Guarantees ..................................................... 533 Index ..................................................................................................... 581

TABLE OF CASES .................................................................................................................................................................................. A A1 Perfect Plumbing Pty Ltd v BMW Prestige Pty Ltd (2006) 230 ALR 331 .................................. 6.80 ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34 ......................................... 11.45, 11.195 ACCC v Apple Pty Ltd (2012) ATPR ¶42-404 ............................................................................. 9.100 ACCC v Ascot Four Pty Ltd (2008) 250 ALR 467 ........................................................................ 11.90 ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 .................................. 10.55, 10.70 ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479 ................................................................ 11.155 ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 .......................... 9.65, 11.235, 11.245 ACCC v Chen (2003) 132 FCR 309 ........................................................................................... 9.100 ACCC v Chopra [2015] FCA 539 ................................................................................... 9.100, 10.40 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 .................................................. 9.30 ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634 .................................................. 11.90 ACCC v Commonwealth Bank of Australia (2003) 133 FCR 149 .............................................. 11.170 ACCC v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 ............................................... 12.230, 12.240 ACCC v Dukemaster Pty Ltd (2009) ATPR ¶42-290 ................................................................... 11.10 ACCC v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 ............ 11.250, 11.285, 11.290 ACCC v Giraffe World Australia Pty Ltd (1999) 95 FCR 302 ..................................................... 12.180 ACCC v Google Inc (2012) 201 FCR 503 .................................................................................. 11.45 ACCC v Halkalia Pty Ltd (No 2) (2012) ATPR ¶42-399 ............................................................. 11.140 ACCC v Hillside (Australia New Media) Pty Ltd t/as Bet365 [2015] FCA 1007 .............. 11.85, 11.190 ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412 ................................................ 11.155 ACCC v Hughes (2002) ATPR ¶41-863 ...................................................................................... 9.100 ACCC v IMB Group Ltd [2003] FCAFC 17 .................................................................. 11.195, 12.190 ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263 .................................................................... 11.185 ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 ............................................................. 11.90 ACCC v Jones (No 5) [2011] FCA 49 ......................................................................................... 9.100 ACCC v Jutsen (No 3) (2011) 206 FCR 264 ................................................................... 9.100, 10.40 ACCC v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 ........................................................... 18.225 ACCC v Marksun Australia Pty Ltd (2011) ATPR ¶42-363 ............................................................. 9.35 ACCC v Oceana Commercial Pty Ltd (2004) ATPR (Digest) ¶46-244 ....................................... 11.140 ACCC v Original Mama’s Pizza & Ribs (2008) ATPR ¶42-236; [2008] FCA 370 .......... 11.250, 11.285, 11.290 ACCC v Panasonic Australia Pty Ltd (2010) 269 ALR 622 ........................................................ 11.190 ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 ............................................................. 11.85 ACCC v Purple Harmony Plates Pty Ltd [2001] FCA 1062 ......................................................... 9.100 ACCC v Reebok Australia Pty Ltd (2015) ATPR ¶42-501 ............................................................... 9.35 ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 ..................................................... 11.155 ACCC v Sampson (2011) ATPR ¶42-374 ................................................................................. 10.105 ACCC v Sensaslim Australia Pty Ltd (in liq) (No 1) (2011) 196 FCR 566 .................................... 9.100 ACCC v Seven Network Ltd (2007) 244 ALR 343 .................................................................... 11.245 ACCC v Signature Security Group Pty Ltd (2003) ATPR ¶41-908 ............................................. 11.190 ACCC v Singtel Optus Pty Ltd [2010] FCA 1177 ............................................ 11.185, 11.190, 11.200 ACCC v Singtel Optus Pty Ltd (No 3) (2010) 276 ALR 102 ....................................................... 11.70 ACCC v Singtel Optus Pty Ltd (No 4) (2011) 282 ALR 246 ...................................................... 11.200 ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (2015) ATPR ¶42-503; [2015] FCA 25 ............................................................................................................ 10.120, 11.135, 11.140 ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 ...................................................... 11.90, 11.190 ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640; 304 ALR 189 ......... 11.60, 11.70, 11.185, 11.190 ACCC v Target Australia Pty Ltd (2001) ATPR ¶41-840 ............................................................ 11.170 ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 .............. 11.60, 11.90, 11.170, 11.185, 11.190 ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 ................................................... 11.10, 11.85 ACCC v Trading Post Australia Pty Ltd (2011) 197 FCR 498 ...................................................... 11.45 ACCC v Valve Corporation (No 3) [2016] FCA 196 .............................. 9.95, 16.125, 16.140, 18.275 ALDI Stores v EFTPOS Payments Australia Ltd (2011) ATPR ¶42-371 ........................................ 11.135 ANZ Banking Group Ltd v Curlett, Cannon & Galbell Pty Ltd [1992] 2 VR 647 ......................... 13.50

x

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

ASIC v Fortescue Metals Group Ltd (2011) 190 FCR 364 ........................................................ 11.150 ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201 .............................................. 11.150 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1991) 27 FCR 460 .................... 16.125 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (2001) ATPR (Digest) ¶46-213 ....... 11.115 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 ....................... 11.115 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 ....... 9.05, 11.05, 11.145 Ackers v Austcorp International Ltd [2009] FCA 432 ................................................................ 10.115 Acquired Holdings Ltd v Turvey (2008) 8 NZBLC 102 .................................................... 16.55, 18.80 Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 ............................................................................................................................... 10.55 Adams v J & D’s Used Cars Ltd (1983) 26 Sask R 40 ................................................................. 18.70 Advanced Switching Services Pty Ltd v State Bank of New South Wales [2007] FCA 954 ......... 11.125 Aitken Agencies Ltd v Richardson [1967] NZLR 65 .................................................................... 5.140 Akai Pty Ltd v People’s Insurance Co Ltd (1996) 188 CLR 418 ................................................ 18.275 Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72 .................................................................................................................... 18.70 Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873 ................. 7.590, 10.120, 11.125 All Covers and Accessories Pty Ltd v Sidawi (2012) 36 VR 113 .................................................... 6.90 Alley v Quayside [2011] NSWCTTT 228 .................................................................................. 16.340 Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676 .......................................................................................................... 4.40, 8.550, 13.90 Amadio Pty Ltd v Henderson (1998) 81 FCR 149 .................................................................... 11.150 Anderson v Lockhart [1991] 1 Qd R 501 ................................................................................... 13.60 Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400 .................................. 6.350 Andrews Bros (Bournemouth) Ltd v Singer & Co Ltd [1934] 1 KB 17 ........................................ 8.390 Apand Pty Ltd v The Kettle Chip Company Pty Ltd (1994) 52 FCR 474 ................................... 11.225 Apco Service Stations Pty Ltd v ACCC (2005) ATPR ¶42-078 ................................................... 18.225 Arcardi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR ¶40-473 ............................. 12.120 Argy v Blunts (1990) 26 FLR 112 ....................................................... 10.75, 10.100, 10.105, 10.120 Armagas Ltd v Mundogas SA [1986] 1 AC 717 ......................................................................... 7.640 Armory v Delamirie (1722) 1 Strange 506; 93 ER 664 .............................................................. 15.80 Arturi v Zupps Motors Pty Ltd (1980) ATPR ¶40-189 ................................................................. 16.10 Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106 ....................................................................... 11.90 Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 ..................................... 8.240, 16.385 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25 ................................................................................................ 4.40, 8.560, 13.90 Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205; (1996) 14 ACLC 952; [1996] NSWSC 119 ...................................................................... 4.40 Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 .............. 11.10, 11.85, 11.90, 11.175 Atkinson v Hastings Deering (Queensland) Pty Ltd (1985) 71 ALR 93 ..................................... 16.210 Auckland Property Restoration Ltd v Blackford (Unreported ...................................................... 18.70 Australian Beauty Trade Suppliers Ltd v Conference & Exhibition Organisers Pty Ltd (1991) ATPR ¶41-107 ...................................................................................................................... 10.20 Australian Industrial Relations Commission, Re; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216 ........................................................................................... 10.55 Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 ........................................................... 8.270 Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1983) 66 FLR 453 ............... 11.235 Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1985) 58 ALR 549 ............... 11.235 Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 .................................. 11.225

B BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2010] NSWSC 1352 ...................................... 11.125 BG Transport Service Ltd v Marston Motor Co Ltd [1970] 1 Lloyd’s Rep 371 .............................. 6.40 BHP Coal Pty Ltd v O and K Orenstein and Koppel AG [2008] QSC 141 ................................. 12.130 BHP Steel Ltd v HH Robertson (Australia) Pty Ltd [2002] NSWSC 336 ....................................... 8.570 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656 ............... 12.145, 12.165

TABLE OF CASES

xi

BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 ................ 12.135 BS Brown & Sons Ltd v Craiks [1970] 1 WLR 752 ..................................................................... 8.270 Baldry v Marshall [1925] 1 KB 260 ............................................................................................ 8.370 Baltic Shipping Company v Dillon (1993) 176 CLR 344 ............................................................ 12.30 Baratta v TPA Pty Ltd [2012] VCAT 679 ................................................................................... 16.305 Barrow, Lane & Ballard v Phillip Phillips & Co [1929] 1 KB 574 ................................................. 8.610 Bartlett v Sydney Marcus Ltd [1965] 1 WLR 1013 ................................................................... 16.210 Bateman v Slayter (1987) 71 ALR 553 ................................................ 11.35, 11.140, 11.150, 11.155 Bayliss v Cassidy [1998] QSC 186 ............................................................................................. 5.130 Beale v Taylor [1967] 1 WLR 1193 ............................................................................................ 8.240 Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 ........... 4.170, 4.180 Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR ¶41-043 .............................................. 11.160 Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 ............. 10.115, 10.125, 11.35, 11.135, 11.140, 12.95, 12.165 BestCare Foods Ltd v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) [2013] NSWSC 1287 ..................................................................................................................... 12.105 Bevanere Pty Ltd v Lubidineuse (1984) 7 FCR 325 .................................................................. 10.105 Bialous v Budget Vehicles Pty Ltd [2013] NSWCTTT 130 ......................................................... 16.305 Big Top Hereford Pty Ltd v Thomas (2006) 12 BPR 23,843; [2006] NSWSC 1159 ..................... 4.280 Black v Smallwood (1966) 117 CLR 52 ..................................................................................... 7.520 Bodum v DKSH Australia Pty Ltd [2011] FCAFC 98 ................................................................. 11.220 Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536 .................................. 11.145 Bond v Barry (2007) 73 IPR 490 ............................................................................................. 11.235 Bond Corporation Pty Ltd v Theiss Contractors Pty Ltd (1987) 14 FCR 215; 71 ALR 615 ........ 10.105, 12.60, 16.125 Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 .............................................. 12.100 Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725 .......................... 8.1040, 8.1050, 8.1080 Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94 ................................................. 11.135 Boulas v Angelopoulos (1991) 5 BPR 11,477 ........................................................................... 8.1110 Bowler v Hilda Pty Ltd (1998) 80 FCR 191 ................................................................. 11.140, 11.160 Bowler v Hilda Pty Ltd [2000] FCA 899 ................................................................................... 12.180 Brandt v Flower Power and Stone Masonry Pty Ltd [2012] NSWCTTT 261 ................................ 18.05 Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 ......................................................................... 9.95 Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401 ............................................................... 11.95 Bridges v Hawkesworth (1851) 21 LJQB 75 ................................................................................ 5.30 Bristol-Meyers Squibb Australia Pty Ltd v Astra Pharmaceuticals Pty Ltd (1999) 45 IPR 144 ....... 11.20 Brockway v Pando (2000) 22 WAR 771 ................................................................................... 10.120 Broken Hill South v Commissioner of Taxation (NSW) (1937) 56 CLR 337 ................................ 9.130 Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 ................................................................ 11.05 Buckinghamshire County Council v Moran [1990] Ch 623 ......................................................... 5.40 Buckland v Clarke (1956) 56 SR (NSW) 185 ............................................................................. 7.790 Bunnings Group Ltd v Laminex Group Ltd (2006) ATPR ¶42-115 ............................................ 16.100 Burdon v Outback Generators Pty Ltd [2013] NSWCTTT 270 ................................................. 16.305 Burg Design Pty Ltd v Wolki (1999) ATPR ¶41-689; 162 ALR 639 ................................ 11.120, 11.160 Burton v Chad One Pty Ltd [2013] NSWDC 301 .................................................................... 16.270 Buseska v Sergio (1990) 102 FLR 157 ....................................................................................... 7.260 Business and Professional Leasing Pty Ltd v Dannawi [2008] NSWSC 902 .................... 16.80, 18.225 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 ......... 11.10, 11.20, 11.40, 11.55, 11.60, 11.70, 11.75, 11.80, 11.85, 12.130 Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185; [1966] HCA 38 ...................... 3.30 Byers v Dorotea Pty Ltd (1987) ATPR ¶40-760 ......................................................................... 11.140

C CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 ..................................................... 11.160 CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193 .............................. 11.125, 12.70 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 ......... 11.20, 11.210 Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 ...... 11.95

xii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Cadorange Pty Ltd v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 ........................................ 13.120 Caffwy v Leatt-Hayter (No 3) [2013] WASC 348 ...................................................................... 11.125 Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822 ............................. 9.100 Caltex Australia Petroleum Pty Ltd v Charbden Haulage Pty Ltd [2005] FCAFC 271 .................. 12.60 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 ............. 11.10, 11.20, 11.60, 11.75, 11.145, 11.160, 11.165, 12.75, 12.80 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 ....... 11.05, 11.10, 11.65, 11.70, 11.85, 11.90, 11.95, 11.165, 11.210, 12.230 Cantarella Bros Pty Ltd v Valcorp Fine foods Pty Ltd (2002) ATPR ¶41-856 ................................ 11.65 Caratun v Caratun (1992) 96 DLR (4th) 404 ............................................................................... 2.30 Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd (2004) ATPR ¶42-100 ........................................ 16.360 Carminco Gold & Resources Ltd v Findlay & Co Stokbrokers (Underwriters) Pty Ltd (2007) 243 ALR 472 ........................................................................................................................ 7.540 Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) ¶46-025; ASC 55-553 .......... 16.75, 16.100, 16.355 Carroll v Pollock Wholesale Pty Ltd [2014] ACAT 14 ................................................................ 16.335 Cary Boyd v Agrison Pty Ltd [2014] VMC 23 .................................................. 16.380, 16.385, 18.35 Cassidy v Medical Benefits Fund of Australia Ltd (2002) ATPR ¶41-892 .................................... 11.170 Cassidy v NRMA Health Pty Ltd (2002) ATPR ¶41-891 ............................................................. 12.175 Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1986) 162 CLR 395 ......... 16.130 Cehave NV v Bremer Handelsgesellschaft mbH [1976] QB 44 ................................................. 16.260 Cervi v Letcher [2011] VSC 156 .................................................................................................. 5.30 Chalmers v Pardoe [1963] 1 WLR 677; [1963] 3 All ER 552 ..................................................... 13.120 Channel Seven Brisbane Pty Ltd v ACCC (2008) 173 FCR 91 .................................................. 11.245 Chapman Bros v Verco Bros and Co Ltd (1933) 49 CLR 306; [1933] HCA 23 ............................ 5.100 Cheryl Foster v Mahamudur Rahman t/as Smarty Web Solutions [2014] NSWCATCD 17 .......... 17.80 Christie Owen & Davies Ltd v Rapacioli [1974] QB 781 ............................................................ 7.430 Cicchini v Brabazon [2014] QCAT 671 .................................................................................... 16.305 Cinema Centre Services Pty Ltd v Eastaway Air Conditioning Pty Ltd (1999) ASAL 55-034 ...... 16.100 Clifford v Vegas Enterprises [2011] FCAFC 135 ........................................................................ 11.105 Clough Mill Ltd v Martin [1984] 3 All ER 982; [1985] 1 WLR 111 ..................................... 4.50, 13.90 Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107 ................................................................... 6.50 Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 ................................. 9.35, 11.170 Colley v Overseas Exporters [1921] 3 KB 302 ............................................................................ 8.960 Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601 .............................. 11.20 Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd (1993) ATPR (Digest) ¶46-106 .......... 17.30 Committee for the Commonwealth of Canada v Canada [1991] 1 SCR 139; 77 DLR (4th) 385 ........................................................................................................................................ 3.20 Commonwealth of Australia v Tasmania (1983) 46 ALR 625 ..................................................... 10.20 Con Agra Inc v McCain Foods (Aust Pty Ltd (1992) 33 FCR 302 ............................................. 11.210 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ............. 10.75, 10.95, 10.105, 11.05, 11.210 Contact Energy Ltd v Jones [2009] 2 NZLR 830 ......... 16.55, 16.205, 16.260, 16.265, 18.70, 18.105 Cook v Rogers (1946) 46 SR (NSW) 229 ................................................................................... 7.790 Cooper v Ashley & Johnson Motors Ltd [1997] DCR 170; NZ DCR Lexis 19 ...... 16.255, 18.35, 18.60 Cooper v Cadwalader (1904) 5 TC 101 ...................................................................................... 9.95 Corrections Corporation of Australia Pty Ltd v Commonwealth (2000) 104 FCR 448 ................ 10.55 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 .......... 11.25, 11.30 Costello v Derbyshire Constabulary [2001] EWCA Civ 381; [2001] 3 All ER 150; [2001] 1 WLR 1437 ............................................................................................................................ 15.80 Coughlin v Gillison [1899] 1 QB 145 ........................................................................................ 6.240 Council of the City of Sydney v West (1965) 114 CLR 481 .......................................................... 6.40 Council of the Shire of Noosa v Farr [2001] QSC 060 ............................................................... 17.65 Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR 419 ........................... 11.20 Courtney v Medtel Pty Ltd (2003) 126 FCR 219 ..................................................................... 16.215 Cox v Mosman [1909] QSR 45 ................................................................................................. 7.140 Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 ............................................................................................................... 7.130, 7.260 Crawford v Mayne Nickless Ltd (1992) ATPR (Digest) ¶46-091 ................................................. 16.75 Crocodile Marketing v Griffith Vintners (1989) 28 NSWLR 539 ............................................... 12.190 Cummings v Claremont Petroleum NL (1996) 185 CLR 124; [1996] HCA 19 .............................. 2.30

TABLE OF CASES

xiii

D Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 .............................................. 11.40, 11.55 Dargusch v Sherley Investments Pty Ltd [1970] Qd R 338 ........................................................ 7.330 Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 ..................................... 10.80 David Jones Ltd v Willis (1934) 52 CLR 110 ............................................................................ 16.215 Dawson v LNG Holdings [2008] NSWSC 137 ......................................................................... 11.125 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 200 FCR 253 ..................... 12.45, 12.50 Debenham v Mellon (1880) 5 QBD 394 ................................................................................... 7.190 Dee Trading Co Pty Ltd v Baldwin [1938] VLR 173 ................................................................... 5.170 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 ................................................... 11.100, 12.215 Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 ................................................... 6.270 Derham v Amev Life Assurance Co Ltd (1981) 56 FLR 34 .......................................................... 7.130 Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 ....................... 8.50, 8.207 Dib Group Pty Ltd v Ventouris Enterprises Pty Ltd (2011) 284 ALR 601; [2011] NSWCA 300 .... 11.140 Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248; [2004] NSWCA 58 .............. 11.145, 12.45, 12.60 Dillon v Baltic Shipping Co (1989) 21 NSWLR 614 ................................................................... 17.05 Dinmore Meatworks Pty Ltd v Kerr (1962) 108 CLR 628; [1962] HCA 47 .................................. 13.60 Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559 ............................ 9.150 Dougan v Ley (1946) 71 CLR 142 ........................................................................................... 8.1100 Douglas v Hello! Ltd [2007] UKHL 21 ....................................................................................... 5.140 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 .......................... 11.50, 11.75, 11.140 Dr Martens Australia Pty Ltd v Rivers (1999) 95 FCR 136 ........................................................ 11.220 Drummond v Van Ingren & Co (1887) 12 App Cas 284 ............................................................ 8.380 Duracell Australia Pty Ltd v Union Carbide Australia Ltd (1988) ATPR ¶40-918 ........................ 11.205

E E v Australian Red Cross Society (1991) ATPR ¶41-085; (1991) 27 FCR 310 ....... 10.20, 10.105, 16.10 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 .................................... 11.110, 11.125 Easts Van Villages v Minister Administering the National Parks and Wildlife Act (2001) ATPR (Digest) ¶46-211 ................................................................................................................. 10.70 Eclipse Motors Pty Ltd v Nixon [1940] VLR 49 .......................................................................... 8.970 Effem Foods Ltd v Nicholls [2004] NSWCA 332 ...................................................................... 16.305 Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 ....................................... 8.1140 Elitestone Ltd v Morris [1997] UKHL 15; [1997] 2 All ER 513; [1997] 1 WLR 687 ...................... 4.180 Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd (2008) ATPR ¶42-219 .......... 11.85 Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (2008) 19 VR 358 ........................ 12.120 Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (2000) ATPR ¶41-751 ............................. 11.180

F Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726 ..................................... 12.55 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 ...................... 11.100, 11.105 Fadu Pty Ltd v ACN 008 112 196 Pty Ltd as Trustee of the “International Linen Service Unit Trust” (2007) ATPR ¶41-206 ................................................................................................ 12.20 Fencott v Muller (1983) 152 CLR 570 ....................................................................................... 10.20 Ferme v Kimberley Discovery Cruises Pty Ltd [2015] FCCA 2384 .............................................. 12.30 Finding v Commonwealth Bank of Australia [2001] 1 Qd R 168 .............................................. 11.125 Finucane v NSW Egg Corp (1988) 80 ALR 486 ............................................................. 11.20, 11.120 Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198 ................... 10.80 Fisher v Automobile Finance Co of Australia Ltd (1928) 41 CLR 167; [1928] HCA 35 ................ 13.60 Flack v National Crime Authority (1998) 156 ALR 501; [1998] FCA 932 ................ 5.40, 5.100, 15.80 Foley v Hill (1848) 2 HLC 28; 9 ER 1002 ................................................................................... 2.110 Forrest v ASIC (2012) 247 CLR 486 ...................................................... 11.85, 11.90, 11.150, 11.155 Four Square Stores (Queensland) Ltd v ABE Copiers Pty Ltd (1981) ATPR ¶40-232 .................. 16.100 Franich v Swannell (1993) 10 WAR 459 ....................................................................... 10.75, 10.100 Frank v Grosvenor Motor Auctions Pty Ltd [1960] VR 607 ....................................................... 16.365

xiv

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 ............ 7.130, 7.210, 7.240 Freestone Auto Sales Pty Ltd v Musulin [2015] NSWCA 160 .................................................... 16.305 Fullwood v Hurley [1928] 1 KB 498 .......................................................................................... 7.340 Futuretronics International Pty Ltd v Gadzhis [1990] ASC 56-009 ........................................... 8.1110

G GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 ........... 10.55 GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 117 FCR 23 .................... 11.285 Galbraith & Grant Ltd v Block [1922] 2 KB 155 ........................................................................ 8.770 Gammasonics Institute of Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd (2010) 77 NSWLR 479; [2010] NSWSC 267 ............................................................. 8.30, 16.135 Gardam v George Willis & Co (1988) 82 ALR 415 ..................................................................... 11.40 Gardiner v Suttons Motor (Homebush) Pty Ltd (1983) 48 ALR 142 ......................................... 11.140 Gardner Corporation Pty Ltd v Zed Bears Pty Ltd [2003] WASC 13 .............................. 12.65, 12.130 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 .................................. 12.85, 12.90 General Motors Acceptance Corp Australia v Southbank Traders Pty Ltd [2007] HCA 19 ........... 13.90 General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 ......................... 11.25, 11.80, 11.105 Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 ..................... 12.175, 12.180 George Weston Foods Ltd v Goodman Fielder Ltd (2000) 49 IPR 553 ..................................... 11.190 Gerlach v Pearson [1950] VLR 321 ............................................................................................ 7.430 Gharibian v Propix Pty Ltd t/as Jamberoo Recreational Park [2007] NSWCA 151 ....................... 17.65 Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd [1970] 2 NSWR 156; (1970) 44 ALJR 269; [1970] 3 All ER 825 ................................................................................... 5.110, 5.140 Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629; 56 IPR 13 ............... 11.20, 11.205 Giorgianni v The Queen (1985) 156 CLR 473 ......................................................................... 12.175 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 ....... 11.35, 11.145, 11.150, 11.155, 11.235 Goldiwood Pty Ltd t/as Margaret Franklin & Associates v ADL (Aust) Pty Ltd t/as Adviser Logic [2014] QCAT 238 ............................................................................... 16.135, 18.30, 18.35 Goldsbro v Walker [1993] 1 NZLR 394 ......................................................................... 11.40, 18.105 Gollan v Nugent (1988) 166 CLR 18; [1988] HCA 59 ............................................................... 15.80 Goodwin v Ron Heath Tyre Service (SA) Pty Ltd (1999) 74 SASR 508 ........................................ 6.380 Google Inc v ACCC (2013) 249 CLR 435 ..... 11.05, 11.10, 11.15, 11.20, 11.45, 11.60, 11.70, 11.85, 11.95, 12.245 Gould v Vaggelas (1985) 157 CLR 215 ..................................................................................... 12.85 Gould v Vaggelas (1984) 56 ALR 31 ........................................................................................ 11.165 Graham Barclay Oysters Pty Ltd v Ryan (1999) ATPR (Digest) ¶46-191 .................................... 16.360 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 .................................................. 16.360 Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 5) [2010] FCA 313 ............................. 11.50 Granitigard Pty Ltd v Termicide Pest Control Pty Ltd (2011) 281 ALR 1 ..................................... 11.50 Grant v Australian Knitting Mills Ltd (1935) 54 CLR 49; [1936] AC 85 ......................... 8.270, 16.365 Grant v YYH Holdings Pty Ltd [2012] NSWCA 360 ...................................................................... 4.20 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 .................. 17.65 Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91 ................................................................. 11.120 Gregory v Philip Morris Ltd (1988) 80 ALR 455 ....................................................................... 12.100 Griffiths v Conway Ltd [1939] 1 All ER 685 ................................................................ 16.355, 16.365 Guglielman v Trescowthick [2004] FCA 326 ............................................................................ 11.255 Gurr v Hunter Volkswagen [2011] NSWCTTT 146 ................................................................... 16.340

H HIH Insurance Ltd (in liq) v Adler [2007] NSWSC 633 ................................................ 12.180, 12.185 HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 .... 12.90, 12.95, 12.110, 12.120 Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 177 .............................................................. 12.155 Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341; 156 ER 145 ...................... 8.1050, 8.1090

TABLE OF CASES

xv

Hague v Committee for Industrial Organization 307 US 496 (1939) ........................................... 3.20 Hamilton v Whitehead (1989) ATPR ¶42-932 .......................................................................... 10.115 Hamond v State of New South Wales (2001) FCA 157 .............................................................. 10.70 Hamps v Darby [1948] 2 KB 311 ................................................................................................ 5.30 Hanave Pty Ltd v LFOT Pty Ltd (1999) ATPR ¶41-687 ..................................................... 12.50, 12.55 Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31 ...... 16.355 Hardy v Your Tabs Pty Ltd [2000] NSWCA 150 ........................................................................ 11.125 Hardy & Co v Hillerns and Fowler [1923] 2 KB 490 .................................................................. 8.830 Hardy Wine Co Ltd v Tasman Liquor Traders Pty Ltd (2006) 95 SASR 21 ................................... 8.580 Harling v Eddy [1951] 2 KB 739 .............................................................................................. 8.1110 Haros v Linfox Australia Pty Ltd [2012] FCAFC 42 ..................................................................... 12.55 Havas v Cornish & Co Pty Ltd [1985] Qd R 353 ........................................................................ 7.370 Havyn Pty Ltd v Webster (2005) 220 ALR 211 ...................................... 11.55, 11.140, 12.85, 12.105 Hazlett v Presnell (1982) 149 CLR 107; 56 ALJR 884; 43 ALR 1; [1982] HCA 58 .......................... 4.70 Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 .............................................. 7.230, 7.240, 7.260 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546; 79 ALR 83 ........... 11.25, 11.35, 11.125, 11.160, 12.70, 12.220 Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 .............................. 8.270, 16.365 Henville v Walker (2001) 206 CLR 459 ................ 12.35, 12.40, 12.55, 12.65, 12.85, 12.120, 12.130 Heydon v NRMA Ltd (2000) 51 NSWLR 1 ............................................................................... 12.185 Hoath v Connect Internet Services (2006) 229 ALR 566; [2006] NSWSC 158 ........................... 5.140 Hobson v Gorringe [1897] 1 Ch 182 ........................................................................................ 4.230 Holland v Hodgson (1872) LR 7 CP 328 ................................................................................... 4.180 Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120 ................................................................. 12.15 Hoover (Aust) Pty Ltd v Email Ltd (1991) ATPR ¶41-149 ............................................................ 11.20 Hoover (Aust) Pty Ltd v Email Ltd (1991) 104 ALR 369 ........................................................... 11.205 Hope v Bathurst City Council (1980) 144 CLR 1 ......................................................................... 9.95 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 .............................................. 11.05, 11.70, 11.130, 11.165, 11.210, 11.215 Hosking v The Warehouse Ltd (Unreported ............................................................................... 18.70 Houghton v Arms (2006) 225 CLR 553 ........................................................................ 10.45, 10.100 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 .................................................................. 7.140 Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 .................................. 10.20 Hungier v Grace (1972) 127 CLR 210 ....................................................................................... 10.55 Hydraulic Engineering Co v McHaffie (1879) 4 QBD 670 ........................................................ 8.1090

I I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 .............. 12.35, 12.40, 12.50, 12.65 ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 .... 12.230, 12.240 IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 ....................................... 11.10, 11.150, 11.170 IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 ....................................... 11.160 Ibrahim v Phan [2007] NSWCA 215 ........................................................................................ 11.125 Indian Oil Corp Ltd v Greenstone Shipping Co SA [1988] QB 345 ............................................ 4.280 Ingot Capital Investment v Macquarie Equity Capital Markets (No 6) [2007] NSWSC 125 ........ 12.70 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 .......................................................................................... 12.45, 12.95 Inland Revenue, Commissioners of v Lysaght [1928] AC 234 ...................................................... 9.95 International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 .......................................................................................................................... 7.20 Investmentsource Corporation Pty Ltd v Knox Street Apartments Pty Ltd (2002) 56 NSWLR 27 ........................................................................................................................................ 7.440

J J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 ...................................................... 10.55 JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378 ...................... 8.830 JB & BL Nominees Pty Ltd v McCormack [1982] WAR 258 ........................................................ 8.190

xvi

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Jackson v McClintock (1997) 8 TCLR 161 ................................................................................. 17.40 Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) ¶46-102 ................................................. 11.20 Jainran Pty Ltd v Boyana [2008] NSWSC 468 ............................................................... 12.80, 12.130 James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 ................ 11.35, 11.150, 11.155, 12.120 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; ATPR ¶41-186 .......................... 9.35, 12.45 Jansz v GMB Imports Pty Ltd [1979] VR 581 ............................................................................... 8.80 Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 .................. 16.80 Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd (1994) 2 Qd R 515 ............... 12.120 Jelin Pty Ltd v Murdoch Pty Ltd (1985) ATPR ¶40-562 ............................................................. 11.140 Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144 .................................................................. 11.90 Jillawarra Grazing Company v John Shearer Ltd (1984) ATPR ¶40-441 .................................... 16.100 John Bevins Pty Ltd v Cassidy (2003) 135 FCR 1 ..................................................................... 12.180 John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249 ............. 11.20, 11.40, 11.55, 11.140 Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 ......................... 11.25, 11.30, 11.120 Johnson Tiles Pty Ltd v Esso Australia Ltd (2001) ATPR ¶41-794 ............................................... 11.165 Jones v ACCC [2010] FCA 481 .................................................................................................. 9.100 Jones v Canavan [1972] 2 NSWLR 236 ..................................................................................... 7.340 Jones v West Star Motors Pty Ltd (1995) ATPR ¶41-447 ................................................ 16.75, 16.210 Juniper Property Holdings No 15 Pty Ltd v Caltabiano [2016] QSC 5 ........................................ 12.50

K Kabwand v National Australia Bank (1989) ATPR ¶40-950 ....................................................... 11.125 Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR ¶41-265 ..................................... 12.70 Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 ........................................................ 12.120 Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 .................. 4.230 Keays v J P Morgan Administrative Services Australia Ltd [2011] FCA 358 .................................. 12.75 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853 ............................................................................................................................ 12.120 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR (Digest) ¶46-048 ................................................................................................................. 12.75 Keighley, Maxsted & Co v Durant [1901] AC 240 ..................................................................... 7.550 Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 ................................. 11.195, 12.180, 12.190 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) ATPR ¶41-576 ........................................... 12.85 Ketchell v Master Of Education Services Pty Ltd (2007) 226 FLR 169 ........................................ 12.15 Kettle Chip Co Pty Ltd, The v Apand Pty Ltd (1993) 46 FCR 152 ............................................. 11.225 Khoury v Sidhu [2011] FCAFC 71 ........................................................................................... 12.135 Khoury v Sidhu (No 2) [2010] FCA 1320 ................................................................................ 12.135 Kiley v MCI Technologies Pty Ltd [2006] VCAT 2543 ............................................................... 18.275 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) ¶46-054 ............................... 11.25 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 ...................................... 12.65, 12.85, 12.90 Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 257 .................................................................................................................................... 11.220 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2011] FCAFC 119 ........ 11.80 Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 ............................. 7.660 Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279 .................................................... 17.65 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 ............................................. 11.20, 11.110 Kremen v Online Classifieds Inc 337 F 3rd 1024 ....................................................................... 5.140 Ku-ring-gai Co-operative Building Society (No 12) Ltd, Re (1978) 36 FLR 134 .............. 10.25, 10.75, 10.105 Kuwait Airways Corp v Iraqi Airways Co [2002] UKHL 19; [2002] 2 AC 883 ............................... 5.140 Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459 .......................................... 8.820 Kyriacou v Manakis [2006] NSWSC 804 ................................................................................... 4.220

TABLE OF CASES

xvii

L LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1956) 56 SR (NSW) 81 ...................................................................................................................................... 16.390 Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 .............................. 11.80, 11.105 Laminex (Aust) Pty Ltd v Coe Manufacturing Co (1998) ATPR ¶41-610 .................................. 18.275 Laminex (Aust) Pty Ltd v Coe Manufacturing Co [1999] NSWCA 370 ..................................... 18.275 Lampton’s Executors v Preston’s Executors 24 Ky 455 (1829) ..................................................... 4.40 Latrobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Ltd (2011) 273 ALR 774 ............................................................................................................................. 12.110 Law v MCI Technologies Pty Ltd [2006] VCAT 415 .................................................................. 18.275 Laws v GWS Machinery Pty Ltd [2007] NSWSC 316 ............................................................... 16.110 Lazenby Garages Ltd v Wright [1976] 1 WLR 459 ................................................................... 8.1010 Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 .................. 11.20, 11.80, 11.105, 12.75 Lego Australia Pty Ltd v Paul’s (Merchants) Pty Ltd (1982) 42 ALR 344 ................................... 11.215 Leigh v Taylor [1902] UKHL 1; [1902] AC 157 ........................................................................... 4.180 Lester-Travers v City of Frankston [1970] VR 2 .......................................................................... 5.170 Levene v Commissioners of Inland Revenue [1928] AC 217 ........................................................ 9.95 Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 ................................................... 9.100 Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 ..................................... 11.20, 11.55 Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 ............................................ 10.115 Lockhart v Osman [1981] VR 57 ............................................................................................. 8.1150 London Plywood Ltd v Nasic Oak Ltd [1939] 2 KB 343 ............................................................. 8.790 Lovick & Son Developments Pty Ltd v Doppstadt Australia Pty Ltd [2012] NSWSC 529 .......... 12.160 Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 ...................................................................... 7.400 Lymquartz v 2 Elizabeth Bay Road [2007] NSWSC 457 ........................................................... 11.180 Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114 ........................................ 11.140

M M K Hutchence (Trading as “INXS”) v South Sea Bubble Co (1986) ATPR ¶40-667 ................. 11.175 Mabo v Queensland (No 2) (1992) 175 CLR 1; [1992] HCA 23 ................................................ 2.110 MacCormick v Nowland (1988) ATPR ¶40-852 ....................................................................... 10.130 Mackman v Stengold Pty Ltd (1991) ATPR ¶41-105 ................................................... 12.180, 12.185 Macquarie Bank Ltd v Seagle [2008] FCA 1417 ........................................................................ 9.100 Madden v Seafolly Pty Ltd [2012] FCA 1346 ............................................................................. 9.100 Makita (Aust) Pty Ltd v Black & Decker (A’asia) Pty Ltd (1990) 18 IPR 270 ................................ 11.20 Makower, McBeath & Co Pty Ltd v Dalgety & Co Ltd [1921] VLR 365 ...................................... 6.170 Malam v Graysonline, Rumbles Removals and Storage (General) [2012] NSWCTTT 197 ......... 16.170 Manbre Saccharine Co Ltd v Corn Products Co Ltd [1919] 1 KB 198 ........................................ 8.820 Maple Flock Co v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148 ....................... 8.800 March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 ............................................ 12.40, 12.130 Mark Bain Constructions Pty Ltd v Avis [2012] QCA 100 ........................................................... 12.95 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; 158 ALR 333 ............ 12.45, 12.85, 12.105, 12.220 Marsh v Alabama 326 US 501 .................................................................................................... 3.20 Marsh v Joseph [1897] 1 Ch 213 .............................................................................................. 7.140 Marsh & McLennan Pty Ltd v Stanyers Transport Pty Ltd [1994] 2 VR 232 ................................ 7.540 Marwood v Agrison Pty Ltd [2013] VCAT 1549 ......................................................................... 18.40 Max Christmas Real Estate v Schumann Marine Pty Ltd [1987] 1 Qd R 325 .............................. 7.430 Maxwell v Murphy (1957) 96 CLR 261 ..................................................................................... 16.60 May v Ceedive Pty Ltd [2006] NSWCA 369 .............................................................................. 4.180 Mayne Nickless v Crawford (1992) 59 SASR 490; [1992] ASC 56-188 ............................ 17.05, 17.85 Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 ................................................... 7.550 McCarthy v Australian Rough Riders Association Inc (1988) ATPR ¶40-836 ................................ 10.20 McCarty v Mc Intyre [1999] FCA 784 ....................................................................................... 12.40 McComb v Martin Box Marine Holdings Pty Ltd (1992) 8 SR (WA) 193 .................................... 6.160 McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 ................................. 11.135 McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 ....................................................... 4.150

xviii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

McMahon’s (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185 ................................................... 4.220 McQuillan v Thomas [2012] NSWCTTT 107 ........................................................................... 16.335 McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455 .......... 11.95, 11.165 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 .............. 11.170, 11.185, 11.190, 11.195, 12.180, 12.185, 12.190 Medtel Pty Ltd v Courtney (2003) 130 FCR 182 ........................................................ 16.215, 16.305 Mehta v Commonwealth Bank of Australia (1990) ATPR ¶41-026 ........................................... 12.120 Merck Sharpe & Dohme (Aust) Pty Ltd v Peterson (2011) 196 FCR 145; [2011] FCAFC 128 .... 12.40, 16.305, 16.360 Mercland Investment Group Pty Ltd v Duncalm Pty Ltd [2012] FCA 183 ................................ 11.125 Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 .......... 11.115, 11.120 Microbeads AG v Vinhurst Road Markings Ltd [1975] 1 WLR 218 ............................................ 16.190 Midgley Estates Ltd v Hand [1952] 2 QB 432 ........................................................................... 7.430 Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 ....................................................................... 2.110 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 ............................................................. 11.05, 11.35, 11.65, 11.100, 11.105, 11.110, 11.130 Miller Associates (Australia) Pty Ltd v Bennington Pty Ltd [1975] 2 NSWLR 506 ........................ 7.530 Mister Figgins Pty Ltd v Centepoint Freeholds Pty Ltd (1981) 36 ALR 23 ................................ 12.215 Mitchell v Ealing London Borough Council [1979] QB 1 ........................................................... 6.140 Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984] WAR 365 ....... 7.480 Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 ................................... 7.440 Morris v CW Martin & Sons Ltd [1966] 1 QB 716 ............................................... 6.170, 6.180, 6.190 Motor Dealers Credit Corp Ltd v Overland (Sydney) Ltd (1931) 31 SR (NSW) 516 ................... 5.140 Mullens v Miller (1882) 22 Ch D 194 ..................................................................................... 10.120 Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274; (1989) ATPR ¶40-926 ............. 12.35, 12.6512.220, Munro v Southern Dairies Ltd [1955] VLR 332 .......................................................................... 5.170 Munro v Willmott [1949] 1 KB 295 ........................................................................................... 7.180 Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388 ............................ 11.20, 12.110, 12.120

N NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 ................................................... 10.115 NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399 ...................... 10.55 NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 ............. 10.55, 10.60 Nagle v Miller (1904) 29 VLR 765 ............................................................................................... 4.70 National Bus Co Pty Ltd v Commissioner of Taxation [1998] 143 FCA ...................................... 4.140 National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8; [1981] AC 675 ...................... 4.110 National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 .......... 11.10, 11.90, 11.130, 11.190, 11.285 Nella v Kingia Pty Ltd (1989) ATPR (Digest) ¶46-046 ................................................................ 12.65 Nesbit v Porter [2000] 2 NZLR 465 ............................................................................. 16.260, 18.60 Nescor Industries Group Pty Ltd v Miba Pty Ltd (1998) ATPR ¶41-609 .................................... 11.140 New South Wales v McCloy Hutcherson Pty Ltd (1993) 116 ALR 363 ..................................... 12.120 Nibali v Sweeting & Denney (WA) Pty Ltd (1989) Aust Torts Reports 80-258 .............................. 6.90 Niblett v Confectioners’ Materials Co Ltd [1921] 3 KB 387 ..................................................... 16.185 Nike International Ltd v Campomar Sociedad Limitada (1996) ATPR ¶41-518 ........................... 11.70 Nixon v Slater & Gordon (2000) ATPR ¶41-765 ...................................................................... 16.125 Noonan v Martin (1987) 10 NSWLR 402 .................................................................................. 7.740 Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 .... 11.25, 11.35, 11.115 Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 .................................................. 9.95, 11.115 Norris v Sibberas [1990] VR 161 ............................................................................................... 7.590 North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 ..................... 12.40, 12.95 North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1 ...... 12.105 Norton v Hervey Motors Ltd [1996] DCR 427; 5 NZBLC 99-387 ............................................ 16.255

TABLE OF CASES

xix

O OBG Ltd v Allan [2005] EWCA Civ 106; [2005] QB 762 ............................................................ 5.140 O’Brien v Smolonogov (1983) ATPR ¶40-418 .............................................................................. 9.90 O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 ......................... 11.135, 12.100 Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd [2015] FCA 460 ............... 12.235 Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd (1946) 63 RPC 39 .............................................................................................................................. 11.215 Ogden, Contech Technical Services Pty Ltd v Unmanned Systems Asia Pacific (General) [2013] NSWCTTT 378 ......................................................................................................... 16.80 Ohio v Shaw 65 NE 875 (1902) .................................................................................................. 5.30 Oldham v Lawson [1976] VR 654 ............................................................................................. 5.170 Onesteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1 ............... 8.970 Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 .............. 11.45 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193; [2011] WASCA 76 .... 11.25, 11.30, 11.100, 11.110, 11.165, 12.40

P Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 ............................................................. 7.260 Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] AC 867 ..................... 8.700 Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; [2005] HCA 28 .................................... 13.50 Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711 ....... 7.260 Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548 ................... 10.65, 10.70 Parastatidis v Kotaridis [1978] VR 449 ............................................................................ 6.240, 6.330 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 ....... 9.40, 11.05, 11.20, 11.60, 11.65, 11.70, 11.95, 11.165, 11.210, 11.220 Parker v British Airways Board [1982] 1 QB 1004 ............................................................... 5.30, 5.40 Parker v McKenna (1874) 10 Ch App 96 .................................................................................. 7.340 Parkview (Keppell) Pty Ltd v Mytarc Pty Ltd (1984) 3 FCR 186 ................................................. 11.65 Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1 ........................................................ 5.140 Patten v Thomas Motors Pty Ltd [1965] NSWR 1457 ................................................................ 8.230 Pavich Pty Ltd v Bobra Nominees (1988) ATPR (Digest) ¶46-039 .............................................. 12.65 Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46 ........ 5.130, 5.140, 5.160, 5.170, 6.380, Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 ......................... 11.30 Pereira v Director of Public Prosecutions (1988) 82 ALR 217 ...................................... 11.195, 12.190 Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liq) [2011] NSWCA 367 ............. 9.50, 12.130, 12.140 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 ......................... 11.120, 16.360 Phillips v Brooks Ltd [1919] 2 KB 243 ....................................................................................... 8.690 Pioneer Container KH Enterprise (cargo owners) v Pioneer Container (owners) [1994] 2 AC 324 ...................................................................................................................................... 6.200 Playcorp Group of Companies Pty Ltd v Peter Bodum A/S [2010] FCA 23 ............................... 11.220 Plimer v Roberts (1997) 80 FCR 303 ............................................................................ 10.95, 10.105 Pojzak v Congeo Nominees Pty Ltd [2013] VCAT 2175 ............................................................. 18.75 Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385 .................... 16.125, 17.10 Popov v Hayashi 2002 WL 31833731 (Cal Super 2002) .............................................................. 5.20 Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 ........................................... 11.80, 11.105 Potts v Miller (1940) 64 CLR 282 ................................................................................... 12.85, 12.90 Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd (2005) 220 ALR 211 ............................... 11.2012.75, Prestia v Aknar (1996) 40 NSWLR 165 ......................................................................... 10.85, 10.105 PruneYard Shopping Center v Robins 447 US 74 (1980) ............................................................. 3.20

Q Quickenden v O’Connor, Commissioner of Australian Industrial Relations Commission (2001) 109 FCR 243 ............................................................................................................ 10.20 Quinlivanc v ACCC (2004) 160 FCR 1 .................................................................................... 12.180

xx

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Queensland Aggregates Pty Ltd v TPC (1981) ATPR ¶40-236 .................................................. 16.125

R R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190 ........ 10.20 R v Judges of Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd (1978) 142 CLR 113 ...................................................................................................................... 12.230 R v Ngan [2007] NZSC 105; [2008] 2 NZLR 48 ............................................................. 5.110, 5.140 R v Nousis [2004] VSCA 107; 8 VR 381 ..................................................................................... 4.120 R & C Products Pty Ltd v SC Johnson & Sons Pty Ltd (1993) FCR 188 ...................................... 11.20 RJ Mabarrack Pty Ltd v King (1971) 1 SASR 313 ....................................................................... 7.430 RT & YE Falls Investments Pty Ltd v New South Wales [2001] NSWSC 1027 ................................ 9.95 RV Ward Ltd v Bignall [1967] 1 QB 534 ..................................................................................... 8.930 Rafferty v Time 2000 West Pty Ltd (No 4) [2010] FCA 725 ...................................................... 12.185 Raffety v Madgwicks (2012) 203 FCR 1 ..................................................................... 12.185, 12.190 Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 .............................. 16.210, 16.360 Razdan v Westpac Banking Corporation [2014] NSWCA 126 .................................................... 12.50 Read v Nerey Nominees Pty Ltd [1979] VR 47 .......................................................................... 17.65 Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd (2001) 53 IPR 481 ...................... 11.225 Red House Farms (Thorndon) Ltd v Catchpole [1976] 244 Estates Gazette 295 .......................... 5.30 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 ....................................................................... 7.340 Regent’s Pty Ltd v Subaru (Aust) Pty Ltd (1996) ATPR ¶41-463 ............................................... 12.235 Reid v Smith (1905) 3 CLR 656; [1905] HCA 54 ....................................................................... 4.180 Reinhold v Ford Motor Company [2014] QCAT 671 ............................................................... 16.340 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 ...................... 12.160 Rendell v Associated Finance Pty Ltd [1957] VR 604 .................................................................. 4.140 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 ..... 11.25, 11.30, 11.100 Rick Cobby Haulage Pty Ltd v Simsmetal Pty Ltd (1986) 43 SASR 533 ...................................... 6.170 Riley v Penttila [1974] VR 547 ..................................................................................................... 5.30 Robb v Green [1895] 2 QB 315 ................................................................................................ 7.330 Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) ATPR ¶41-710 .......................... 10.105 Robinson Motors Pty Ltd v Fowler [1982] Qd R 374 ................................................................. 8.750 Rochefoucauld v Boustead [1897] 1 Ch 196 ............................................................................. 15.90 Rogers v Whitaker (1992) 175 CLR 479 .................................................................................... 17.65 Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558 ...................................... 8.570 Roots v Oentory Pty Ltd [1983] 2 Qd R 745 ............................................................................. 7.590 Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd (1999) ATPR ¶41-706 ................................... 11.215 Rowland v Divall [1923] 2 KB 500 ............................................................................... 8.230, 8.1030 Rural Press Ltd v ACCC (2003) 216 CLR 53 ............................................................................. 12.180 Russell v Wilson (1923) 33 CLR 538; [1923] HCA 60 ................................................................. 5.150 Russo v Belcar Pty Ltd (2011) 111 SASR 459 ............................................................................. 8.400 Ryan Connor v Teela Enterprises Pty Ltd and Robyn May Stevenson t/as Sureflo Exhaust [2014] NSWCATCD 93 ...................................................................................................... 16.130

S S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 ............ 11.70, 11.215 SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 ................................................... 11.135 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 .................................................. 12.20 SWB Family Credit Union Ltd v Parramatta Tourist Services Pty Ltd (1980) ATPR ¶40-180 ....... 16.125 Sabre Corporation Pty Ltd v Laboratories Pharm-a-Care (1995) ATPR ¶41-396 ........................ 12.235 Sachs v Miklos [1948] 2 KB 23 .................................................................................................. 7.160 St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481 ............ 16.135 St George Bank Ltd v Wright [2009] QSC 337 .................................................. 9.105, 11.250, 17.20 Saints Gallery Pty Ltd, The v Plummer (1988) 80 ALR 525 ......................................................... 11.55 Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd (No 2) [2015] FCA 477 ............................................................................................................ 12.25, 12.230, 12.240 Samsung Electronics Australia Pty Ltd v LG Electronics Pty Ltd [2015] FCA 227 ....................... 11.205

TABLE OF CASES

xxi

Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238 ...................................... 12.235 Samuels v Davis (1943) 1 KB 526 ........................................................................................... 17.100 Schemmell v Pomeroy (1989) 50 SASR 450 .............................................................................. 5.140 Seafolly Pty Ltd v Madden [2012] FCA 1346; (2012) ATPR ¶42-424 .......................................... 10.40 Selig v Wealthsure Pty Ltd (2015) 89 ALJR 572 ........................................................................ 12.150 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 ........................... 11.20, 12.40, 12.105, 12.110 Serini v Surf Toyota [2013] NSWCTTT 531 ............................................................................. 16.305 Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419 ............................................. 10.120 Seven Network Ltd v News Ltd [2007] FCA 1062 ................................................................... 11.125 Shahid v Australian College of Dermatologists (2008) 168 FCR 46 ......... 10.20, 10.75, 10.85, 12.110 Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd (2005) ATPR ¶42-048 ......... 10.105 Silsbury v McCoon 3 NY 379 (1850) .......................................................................................... 4.50 Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 ........................................................ 9.35, 11.200 Singtel Optus Pty Ltd v Telstra Corp Ltd [2004] FCA 859 ........................................................ 11.170 Sirway Asia Pacific Pty Ltd v Commonwealth (2002) ATPR (Digest) ¶46-226 ............................. 10.55 Siu Yin Kwan (Administratrix of the Estate of Chan Ying Lung, Decd) v Eastern Insurance Co Ltd [1994] 2 AC 199 ............................................................................................................ 7.550 Smith v Capewell (1979) 142 CLR 509 ..................................................................................... 10.55 Smith v Chadwick (1884) 9 App Cas 187 ................................................................................. 12.50 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 ...................................................................................................................................... 12.95 Smolonogov v O’Brien (1982) ATPR ¶40-312 .............................................................................. 9.90 Smythe v Thomas (2007) 71 NSWLR 537 ............................................................................... 16.170 Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 ................................................................................................... 4.70 Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 2) [2010] FCA 566 ........................... 11.205 Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451 ........................................................ 11.140 Star Express Merchandising Co Pty Ltd v VG McGrath Pty Ltd [1959] VR 443 ........................... 6.270 State Government Insurance Corporation v Government Insurance Office of NSW (1991) ATPR ¶41-110 ...................................................................................................................... 10.20 State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233 .... 10.55 Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR ¶40-490 .................................................... 12.110 Stephens v Chevron Motor Court Ltd [1996] DCR 1; NZ DCR Lexis 29 ............. 16.255, 18.25, 18.30 Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307; 37 ALR 161 ............................................................................................................ 11.20, 11.180, 11.205 Sun Earth Homes Pty Ltd v Australian Broadcasting Commission (1991) ATPR ¶41-067 ............. 10.20 Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 ........ 9.95, 9.100, 10.75 Sutton v AJ Thompson Pty Ltd (in liq) (1987) ATPR ¶40-789 ......................... 11.165, 12.180, 12.185 Sydney Harbour Casino Properties Pty Ltd v Coluzzi (2003) ATPR (Digest) ¶46-238 ................ 11.145 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 ........... 11.20, 11.225 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 .................................... 10.105, 11.135, 11.145 Symes v Laurie [1985] 2 Qd R 547 ............................................................................................. 8.30

T TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd (2008) 71 NSWLR 323 .............................. 10.45, 11.235 TLK Transport Pty Ltd v Thornthwaite Pty Ltd t/as Yass Valley Mobile Mechanic [2014] NSWCATCD 147 ................................................................................................... 17.105, 17.115 TPC v Legion Cabs (Trading) Co-op Society Ltd (1978) ATPR ¶40-092 ...................................... 10.20 TPC v Queensland Aggregates Pty Ltd (1982) 61 FLR 52 ........................................................ 10.115 TPC v Queensland Aggregates Pty Ltd (1981) ATPR ¶40-228 .................................................. 16.125 TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 ............................................... 10.115, 10.120 TPG Internet Pty Ltd v ACCC (2012) 210 FCR 277 .................................................................. 11.190 TPS Developments Pty Ltd v Chef’s Hat Australia Pty Ltd [2013] VCAT 731 ............................... 18.85 Tabet v Gett (2010) 240 CLR 537 ............................................................................................. 12.40 Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 ............... 11.05, 11.90, 11.95, 11.165 Tappenden v Artus [1964] 2 QB 185 ........................................................................................ 13.60 Taylor v Crossman (No 2) [2012] FCAFC 11 ............................................................................. 12.40 Tchenguiz v Imerman [2010] EWCA Civ 908; [2011] 2 WLR 592 .............................................. 5.130

xxii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 ............................................... 11.65 Telstra Corp Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515 ....................................... 11.20 Telstra Corporation Ltd v Singtel Optus Pty Ltd [2014] VSC 35 ............................................... 11.205 Tenji v Henneberry & Associates Pty Ltd (2000) ATPR (Digest) ¶46-204 ..................... 12.200, 12.220 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 .................................................................. 10.110 Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 ...................................................................................................................... 8.660 Thompson v Henderson & Partners Pty Ltd (1990) 58 SASR 548 .............................................. 7.590 Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 ............ 11.20, 11.150, 11.155 Thompson v Mastertouch TV Services Pty Ltd (No 2) (1977) 29 FLR 270 ................................ 11.140 Thornett & Fehr v Beers & Son [1919] 1 KB 486 ...................................................................... 8.285 Ting v Blanche (1993) 118 ALR 543 ........................................................................................ 11.145 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 .................................................................................................................. 10.80 Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48; 77 FLR 377; 50 ALR 684 .............................................................................................................. 8.30 Tomasetti v Brailey [2012] NSWCA 399 .................................................................................. 12.170 Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 ................................................. 11.125 Toyota Finance Australia Ltd v Dennis (2002) 58 NSWLR 101 ................................................... 6.370 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 ......... 11.75, 11.100, 11.105, 11.125 Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 .......... 9.105, 11.250, 17.20 Trollope (George) & Sons v Martyn Bros [1934] 2 KB 436 ........................................................ 7.730 Tubantia, The [1924] P 78 .......................................................................................................... 5.30 Turnbull v Wightman (1945) 45 SR (NSW) 592 ........................................................................ 7.430 Twentieth Century Fox Film Corporation v The South Australian Brewery Co Ltd (1996) 66 FCR 451 ............................................................................................................................. 11.225 Tytel Pty Ltd v Telecom (1986) 67 ALR 433 ............................................................................. 12.235

U Ueda v Ecruising Pty Ltd and Southern Cross Safaris Australia Pty Ltd [2014] NSWCATCD 30 .... 17.105 Unilan Holdings Pty Ltd v Kerrin (1992) ATPR ¶41-169 ........................................................... 10.105 Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1 ................................. 9.130 Universal Telecasters (Qld) Ltd v Ainsworth Consolidated Industries Ltd (1983) ATPR ¶40-384 ............................................................................................................................. 11.235 Universal Telecasters (Qld) Ltd v Guthrie (1978) 32 FLR 360 ................................................... 11.235

V Varley v Whipp [1900] 1 QB 513 .............................................................................................. 8.240 Vassallo v Haddad Import & Export Pty Ltd (2004) 2 DCLR (NSW) 123 .................................... 8.690 Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 .................................... 11.140 Vero Lenders v Taylor Byrne Pty Ltd [2006] FCA 1430 ............................................................. 12.135 Victorian Alps Wine Co Pty Ltd v All Saints Estate Pty Ltd (2012) 34 VR 397 .............................. 8.390 Village Building Company Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330 .... 10.95 Voli v Inglewood Shire Council (1963) 110 CLR 74 ................................................................... 17.65 Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 ............. 4.230

W Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 ................................... 7.330 Wallis v Downard-Pickford (1994) 179 CLR 388 ........................................................................ 17.30 Wallis, Son & Wells v Pratt & Haynes [1911] AC 394 ................................................................. 8.400 Walplan v Wallace (1985) 8 FCR 27 ........................................................................................ 10.115 Walton Stores Ltd v Sydney City Council (1968) 88 WN (NSW) 153 ........................................... 6.40 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 ............... 12.35, 12.40, 12.50, 12.120 Warner v Elders Rural Finance Ltd (1993) 41 FCR 399; 113 ALR 517 ............................. 11.25, 11.125

TABLE OF CASES

xxiii

Warnock v Australian and New Zealand Banking Group Ltd (1989) ATPR ¶40-928 .................... 17.95 Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd (2005) ALR 134 ................... 11.160 Waugh v HB Clifford & Sons Ltd [1982] 1 Ch 374 .................................................................... 7.260 Waverley Borough Council v Fletcher [1995] 4 All ER 756 ........................................................... 5.30 Weigall & Co v Runciman & Co (1916) 85 LJKB 1187 ............................................................... 7.580 Weitmann v Katies Ltd (1977) 29 FLR 336 ................................................................................ 11.65 Weld-Blundell v Stephens [1920] AC 956 .................................................................................. 7.380 Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194 ................................................. 9.100 Western Australia v R (2007) 33 WAR 483; (2007) 169 A Crim R 206; [2007] WASCA 42 ............. 5.40 Western Australia v Wardley Australia Ltd (1991) ATPR ¶41-131 ............................................... 12.120 Westrac Equipment Pty Ltd v Owners of the Ship Assets Venture (2002) 192 ALR 277 ............... 6.190 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; ATPR ¶40-940 ............. 10.115, 11.35, 11.150, 11.155, 12.180, 12.185 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶50-239 ........................................... 11.140 Whitaker v Paxad Pty Ltd [2009] WASC 47 .............................................................................. 11.110 White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125 .................. 7.550 Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188 .................... 5.30, 5.40 Wildsmith v Dainford Ltd (1983) 51 ALR 24 ............................................................................ 11.120 Williams v Pisano (2015) 299 FLR 172; [2015] NSWCA 177 ................ 10.75, 10.100, 10.135, 12.90, 12.145, 12.150, 12.155 Wimble, Sons & Co v Rosenberg & Sons [1913] 3 KB 743 ........................................................ 8.820 Wincant Pty Ltd v South Australia (1997) 69 SASR 126; 193 LSJS 313; [1997] SASC 6287 ........ 4.220 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) [2012] FCA 1028 .......... 11.255, 11.285, 11.290 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1993) ATPR ¶41-205 ...................... 11.125 World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 ......................................................... 12.230 Wright v Madden [1992] 1 Qd R 343 ..................................................................................... 8.1110 Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 .................... 11.35, 11.150, 11.155

Y Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53 ......................................................... 3.20, 4.50 Yates v Whitlam (1999) ATPR ¶41-722 .................................................................................... 16.125 Yonge v Toynbee [1910] 1 KB 215 ................................................................................. 7.580, 7.750 Yorke v Lucas (1985) 158 CLR 661 .................................................................. 11.40, 12.175, 12.195 Young v Hichens (1844) 6 QB 606 ............................................................................................. 5.20

Z Zalai v Col Crawford (Retail) Pty Ltd (1980) ATPR ¶40-177 ....................................................... 16.10 Zhang v United Auctions [2013] NSWCTTT 6 ......................................................................... 16.130 Zhang v VP302 SPV (2009) 223 FLR 213 .................................................................................. 7.260 Zhu v Treasurer (NSW) (2004) 218 CLR 530 ............................................................................... 9.90 Zipside Pty Ltd v Anscor Pty Ltd [2000] QCA 395 ........................................................ 12.85, 12.105

TABLE OF STATUTES .................................................................................................................................................................................. COMMONWEALTH A New Tax System (Goods and Services Tax) Act 1999: 17.125 Acts Interpretation Act 1901: 9.30 s 2C(1): 16.70 s 4: 9.55 s 15AA: 9.40 s 15AC: 12.35 Australian Consumer Law: 6.300, 8.10, 8.410, 9.05, 9.50, 9.55, 9.75, 9.85, 11.250 s 2: 9.145, 10.55, 10.75, 10.85, 10.90, 11.100, 11.265, 12.175, 12.180, 12.195, 12.205, 12.225, 16.75, 16.85, 16.110, 16.120, 16.125, 16.135, 16.140, 16.145, 16.150, 16.165, 16.170, 16.400, 17.15, 17.40, 17.45, 18.220, 18.235 s 2(1): 6.230, 6.300, 9.100, 16.70, 16.130, 16.135, 16.160, 18.15, 18.30, 18.115 s 2(2): 11.15, 11.20, 11.25, 11.35 s 2(2)(a): 11.145 s 2(2)(b): 11.145 s 2(2)(c): 11.25 s 239(2(a): 12.205 s 2(b)(i): 17.40 s 3: 9.65, 16.15, 16.70, 16.75, 16.80, 16.115, 16.160, 18.15, 18.115 s 3(1): 6.300, 16.70 s 3(1)(a): 16.75 s 3(1)(c): 16.105 s 3(2): 6.300, 16.70, 16.110, 17.10 s 3(3): 6.230 s 3(4): 16.70, 16.75 ss 3(4) to (9): 16.75 s 3(5): 16.75, 16.85, 16.110, 16.145, 16.165 s 3(6): 16.90

s 3(7): 16.90 s 3(8): 16.90 s 3(9): 16.95 s 3(10): 16.100, 16.115 s 3(11): 16.85 s 4: 9.65, 11.15, 11.135, 11.145 s 4(1): 11.60, 11.135 s 4(2): 11.135, 11.145, 11.150, 11.155 s 5: 9.65, 9.90, 16.160 s 6: 9.90, 10.35 s 6(3A): 9.65 s 7: 9.65, 16.395 s 8: 16.145, 16.165, 17.40 s 12ED: 18.245 s 13: 17.70 s 15: 12.225, 18.250 s 16: 12.20 s 18: 7.590, 9.05, 9.30, 9.50, 9.100, 10.40, 10.55, 10.75, 10.100, 10.135, 11.05, 11.10, 11.15, 11.25, 11.35, 11.65, 11.70, 11.75, 11.80, 11.95, 11.100, 11.135, 11.140, 11.145, 11.155, 11.160, 11.170, 11.180, 11.185, 11.195, 11.205, 11.210, 11.215, 11.220, 11.225, 11.260, 11.285, 12.125, 12.130, 12.135, 12.145, 12.150, 12.155, 12.165, 12.240, 12.245, 16.15, 17.45, 17.105, 18.250 s 18(1): 11.05, 11.20, 11.60, 11.95 s 19: 9.65, 11.235 s 19(1): 11.10, 11.230, 11.235, 11.245, 12.245 s 19(2): 11.240 s 19(2)(3): 11.235, 12.245 s 19(2)(4): 11.235, 12.245 s 19(3): 9.65, 11.245 s 19(4): 9.65, 11.245 s 19(5): 11.235 s 19(6): 11.235 s 21: 9.05, 9.30, 9.65, 11.100 s 21(4): 9.05

s 22(2)(j): 9.65 s 22(3)(j): 9.65 s 23(1): 12.30, 12.225 s 23(2): 12.30 ss 23 to 28: 9.65 s 24(1): 9.05 s 26: 12.30 s 29: 9.65, 10.75, 11.15, 12.135 s 29(1): 12.130 s 29(1)(a): 9.100, 11.155 s 29(1)(b): 11.205 s 29(1)(g): 11.155, 11.205, 16.15 s 29(1)(i): 11.185 s 29(1)(m): 9.100, 10.40, 16.15, 17.105 s 29(1)(n): 16.15 s 29(m): 18.250 s 29(n): 18.250 s 30: 9.65, 10.75, 11.15, 12.155 s 30(1): 12.130, 17.45 s 31: 9.65, 11.15, 12.130 s 32: 9.65 s 32(3): 9.65 s 33: 9.100, 11.15, 12.130 s 34: 11.15, 17.105 s 36: 9.65 s 36(4): 9.65, 10.40 s 37: 11.15, 12.130 s 38: 9.65 s 38(3): 9.65 s 38(4): 9.65 s 40: 9.65 s 42: 9.65 s 43: 9.65 s 46: 9.65 s 47: 9.65 s 50: 9.65 s 51: 16.155, 16.170, 16.180, 16.185, 18.10, 18.260 s 51(2): 16.185 s 51(3): 16.185 ss 51 to 59: 9.65, 10.75 s 52: 6.300, 16.155, 16.170, 16.180, 18.10, 18.260 s 52(1): 11.05, 16.190 s 52(2): 16.190 s 52(3): 16.190 s 52(4): 16.190 s 53: 9.65, 16.155, 16.170, 16.180, 18.10, 18.260

xxvi

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Australian Consumer Law — cont s 53(1): 16.195 s 53(2): 16.195 s 53(3): 16.195 s 53(4): 16.195 s 54: 11.285, 16.05, 16.155, 16.160, 16.180, 16.205, 16.305, 16.350, 16.385, 16.390, 18.10, 18.30, 18.40, 18.70, 18.140 s 54(1): 16.205, 16.220 s 54(1)(b): 16.170 s 54(2): 16.205, 16.220, 16.225, 16.255, 16.270 s 54(2)(c): 16.335 s 54(2)(d): 16.335, 18.40 s 54(2)(e): 16.335 s 54(3): 16.205, 16.220, 16.225, 16.255, 16.270, 18.30 s 54(3)(b): 16.160 s 54(3)(c): 16.55 s 54(3)(d): 16.55 s 54(4): 16.55, 16.310, 16.320 s 54(5): 16.55, 16.310, 16.325 s 54(6): 16.55, 16.310, 16.330 s 54(7): 16.55, 16.310, 16.335 ss 54 to 56: 6.300 s 55: 16.155, 16.180, 16.350, 16.355, 16.365, 18.10, 18.35, 18.70, 18.110, 18.140 s 55(1): 16.370, 16.375, 16.380 s 55(1)(b): 16.170 s 55(2)(a): 16.380 s 56: 16.155, 16.180, 16.385, 18.10, 18.120, 18.140 s 56(1): 16.385 s 56(1)(b): 16.170 s 56(2): 16.385 s 57: 16.155, 16.180, 16.390, 18.10, 18.35 s 57(1)(b): 16.170 s 57(1)(e): 16.390 s 58: 16.155, 16.180, 16.395 s 58(1): 16.395 s 58(1)(b): 16.170 s 58(2): 16.395

s 59: 16.50, 16.155, 16.400, 16.405 s 59(1): 16.180, 16.400 s 59(1)(b): 16.170 s 59(2): 16.180, 16.400, 18.10 s 60: 6.230, 9.65, 16.10, 16.155, 17.05, 17.25, 17.40, 17.60, 17.70, 17.75, 17.110, 18.145, 18.185, 18.190, 18.195 ss 60 to 63: 9.65 s 61: 6.230, 16.155, 17.40, 17.45, 17.95, 17.110, 18.190 s 61(1): 17.05, 17.60, 17.95, 17.105, 18.145 s 61(2): 17.05, 17.60, 17.95, 17.110, 18.145 s 61(3): 17.95 s 61(4): 9.65, 17.25, 17.95 s 62: 16.155, 17.25, 17.40, 17.60, 17.115, 18.145, 18.190 s 63: 9.110, 17.05, 17.30, 17.35 s 64: 16.380, 16.405, 18.255, 18.260, 18.265, 18.280 s 64(1): 6.230, 6.300, 18.255 s 64A: 18.260, 18.265, 18.270 s 64A(1): 6.300 s 64A(2): 6.230 s 64A(3): 6.230, 6.300, 18.260 s 64A(4): 18.260 s 65: 9.65, 17.50 s 65A(1)(b): 11.240 s 66: 9.65, 17.120 s 67: 18.275 s 67(1): 18.275 s 67(a): 18.275 s 67(b): 18.275 s 68: 16.175 ss 69 to 95: 9.65 s 74(2): 17.100 s 87CB: 12.150 ss 96 to 99: 9.65 s 100: 9.65 s 100(1): 17.125, 17.130 s 100(3): 17.130 s 100(4): 17.125 s 101: 9.65, 17.135 s 101(1): 17.135 s 101(2): 17.135

s 101(3): 17.135 s 101(4): 17.135 s 102: 9.65, 16.405 s 102(1): 16.405 s 102(2): 16.405 s 102(3): 16.405 s 103: 9.65 ss 104 to 137: 9.65 s 134A: 17.130 s 137B: 12.130, 12.135 s 137E(2): 12.210 ss 138 to 150: 9.65 s 139(1)(d): 12.35 s 155: 9.100 s 169: 17.120 s 192(1): 16.405 s 218: 17.130 s 219: 17.130 s 223: 17.130 s 224: 9.35 ss 224 to 231: 9.65 s 228: 12.10 s 232: 9.155, 11.85, 12.10, 12.200, 12.230, 17.130 s 232(2): 9.150 s 232(3): 12.30 s 232(4): 12.240 ss 232 to 235: 9.65 s 234: 12.235 s 236: 9.50, 9.65, 11.160, 11.165, 12.05, 12.30, 12.35, 12.40, 12.85, 12.90, 12.105, 12.115, 12.125, 12.130, 12.135, 12.140, 12.145, 12.165, 12.175, 12.185, 12.200, 12.215, 12.225, 12.250, 16.05, 17.130, 18.70, 18.250 s 236(1): 12.10, 12.120 s 236(2): 12.120 s 237: 9.65, 12.20, 12.30, 12.115, 12.135, 12.150, 12.165, 12.175, 12.200, 12.210, 12.215, 12.225, 12.250, 17.130, 18.70, 18.250 s 237(1): 12.10, 12.200, 12.205, 12.210, 12.220, 12.225 s 237(1)(a)(ii): 12.225 s 237(3): 12.200, 12.225, 12.250

TABLE OF STATUTES

Australian Consumer Law — cont s 238: 9.65, 12.200, 12.205, 12.250 s 238(1): 12.200, 12.205, 12.210, 12.220 s 239: 17.130 s 239(1): 12.10 s 242(1): 12.200 s 243: 12.30, 12.200, 12.205, 12.215, 12.220 s 243(a): 12.15, 12.220, 12.225 s 243(d): 12.30, 12.225 s 244: 12.200 s 246: 12.10, 12.200, 17.130 s 247: 12.10, 12.200, 17.130 s 248: 12.10, 12.200, 17.130 s 249: 9.65 s 250: 12.30, 12.200, 12.205, 12.225 s 251: 11.45, 11.235, 11.240, 12.245 ss 254 to 258: 9.65 s 259: 11.285, 18.10, 18.15 s 259(2): 18.25, 18.30, 18.80, 18.100 s 259(2)(a): 16.05, 18.80 s 259(2)(b): 16.05 s 259(2)(b)(i): 18.80 s 259(3): 18.25, 18.30, 18.45, 18.50, 18.55, 18.100 s 259(3)(a): 16.05 s 259(3)(b): 16.05, 18.65 s 259(4): 18.70, 18.75, 18.100, 18.105, 18.140, 18.265 s 259(5): 18.70 s 259(6): 16.05, 18.100 ss 259 to 266: 9.65 s 260: 18.20, 18.30, 18.35, 18.40 s 260(a): 18.20, 18.30 s 261: 18.85, 18.100 s 261(c): 18.90 s 262(1): 18.55 s 262(2): 18.60 s 263: 18.50 s 263(2): 18.50 s 263(4): 18.50 s 263(5): 18.50 s 263(6): 18.50 s 264: 18.50, 18.90 s 266: 16.160, 18.15, 18.115

s 267: 18.145, 18.285 s 267(1): 18.200 s 267(1)(c): 18.190, 18.195 s 267(1)(c)(i): 18.200 s 267(2): 18.180 s 267(3): 18.185 s 267(4): 18.70, 18.210, 18.265, 18.285 ss 267 to 270: 9.65 s 268: 18.150 s 268(a): 18.155 s 268(b): 18.160 s 268(c): 18.165 s 268(d): 18.170 s 268(e): 18.175 s 269(2)(a): 18.180 s 269(2)(b): 18.180 s 271: 18.110, 18.115, 18.135, 18.140 s 271(1): 16.05, 18.110, 18.270 s 271(2): 16.05, 18.120 s 271(3): 18.110 s 271(4): 18.120 s 271(5): 16.400, 16.405, 18.110 s 271(6): 16.05, 16.405, 18.05, 18.125 ss 271 to 273: 9.65 s 272: 18.135 s 272(1): 16.405 s 272(1)(a): 16.05, 18.125 s 272(1)(b): 16.05, 18.130, 18.270 s 274: 9.65, 16.55, 18.140, 18.270 s 274(1): 18.140 s 274(2): 18.140 s 274(3): 16.05 s 275: 18.290 s 276: 18.270 s 276A(1): 18.270 s 276A(2): 18.270 s 277: 18.295 s 277(2): 18.295 s 278: 18.235, 18.245 s 278(1): 18.220, 18.225 s 278(2): 18.220 ss 278 to 287: 9.65 s 279: 18.230 s 280: 18.235 s 280(1): 18.235 s 280(2): 18.235 s 280(3): 18.235 s 280(4): 18.235 s 281: 18.240 s 284: 18.240 s 285: 18.245 Ch 2: 10.75, 11.15, 12.05, 12.10, 12.15, 12.30,

xxvii

12.35, 12.85, 12.120, 12.200, 12.230, 12.235, 16.05, 18.250 Ch 2, Pt 2-3: 9.65 Ch 3: 10.75, 11.15, 12.05, 12.10, 12.15, 12.30, 12.35, 12.85, 12.120, 12.200, 12.230, 12.235, 16.05 Ch 3, Pt 3-1: 9.65 Ch 3, Pt 3-2: 9.60 Ch 3, Pt 3-2, Div 1: 9.65, 16.05 Ch 3, Pt 3-2, Div 3: 9.65 Ch 3, Pt 3-3: 9.65 Ch 3, Pt 3-4: 9.65 Ch 4: 9.160, 12.05, 12.10, 12.15, 12.200, 12.230, 12.235 Ch 9: 10.05 Pt 2: 10.40, 11.250 Pt 2-1: 9.100, 12.125, 12.250 Pt 2-2: 9.100, 12.200, 12.205 Pt 2-3: 9.100 Pt 3-1: 9.100, 12.125, 12.250 Pt 3-1, Div 3: 9.160 Pt 3-2: 16.05, 16.75, 18.280 Pt 3-2, Div 1: 8.10, 11.285, 16.10, 16.105, 16.120, 16.255, 17.50, 18.20, 18.25, 18.235 Pt 3-2, Div 1, subdiv A: 16.180, 16.350, 17.60 Pt 3-2, Div 1, subdiv B: 17.05, 17.60 Pt 3-2, subdiv B: 9.110 Pt 3-3: 9.25, 9.100 Pt 3-4: 9.25, 9.100 Pt 3-5: 9.25, 9.160 Pt 3-5, Div 2: 12.290 Pt 4-1: 9.100 Pt 4-3: 9.100 Pt 4-4: 9.100 Pt 5-2: 12.05 Pt 5-2, Div 4: 12.20 Pt 5-3: 9.95, 9.100 Pt 5-4: 12.05, 18.30 Pt 5-4, Div, subdiv A: 18.10 Pt 5-4, Div 2: 18.70, 18.135 Pt 5-5: 17.20, 18.215, 18.220 Div 3: 9.100 Sch 1: 9.10

xxviii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Australian Consumer Law — cont Sch 2: 6.230, 6.300, 7.590, 9.55, 9.65, 12.175 Australian Securities and Investments Commission Act 2001: 9.55, 11.250, 17.20 s 12BI: 9.110 s 12DA: 9.110, 11.260, 11.285 s 12DA(1A): 11.285 s 12DA(1): 11.10, 11.285 s 12DB: 11.285 s 12DB(1): 11.260 s 12DB(1)(g): 11.285 s 12DC: 11.260 s 12DD: 11.260 s 12DE: 11.260 s 12DF: 11.260 s 12DG: 11.260 s 12DH: 11.260 s 12DI: 11.260 s 12DJ: 11.260 s 12DK: 11.260 s 12DL: 11.260 s 12DM: 11.260 s 12ED: 9.60, 9.105, 11.250, 17.20, 18.225 s 12ED(3): 9.110 s 12BAA: 11.265 s 12BAA(1): 11.270, 11.285 s 12BAA(4): 11.270 s 12BAA(5): 11.285 s 12BAA(7): 11.270 s 12BAA(7)(d): 17.35 s 12BAA(7)(k): 11.270, 11.285, 16.95 s 12BAA(8): 11.270 s 12BAB: 11.265, 16.95 s 12BAB(1): 11.265 s 12BAB(5): 11.275 s 12BAB(6): 11.275 s 12BAB(7): 11.280 s 12BAB(8): 11.280 s 18: 11.285 s 102(2)(e): 11.290 Pt II, Div 2: 11.250 subdiv D: 11.260 Australian Securities and Investments Commission Regulations 2001 reg 2B: 11.270, 11.285 reg 2B(3): 16.95 reg 2B(3)(b)(iv): 11.285 Banking Act 1959 s 5: 15.210

s 9: 15.210 s 9C: 15.210 Bankruptcy Act 1966 s 58: 2.30, 13.20 s 60: 13.20 s 82: 13.20 s 108: 13.20 s 109: 13.20 s 116: 13.20 Commonwealth of Australia Constitution Act 1901 s 51(xxxix): 9.90 s 51(i): 9.90 s 51(xx): 9.90, 10.05, 10.10, 10.25 s 61: 9.90 s 75: 9.150 s 122: 9.90, 9.120 Competition Policy Reform Act 1995: 9.40 Competition and Consumer Act 2010: 6.230, 6.300, 7.590, 9.10, 9.55 s 2: 9.40 s 2A: 10.50 s 2A(1): 10.50 s 2A(2): 10.50 s 2C: 10.60, 10.70 s 2C(1)(b): 10.60 s 2C(1)(c): 10.60 s 2C(1)(d): 10.60 s 2C(3): 10.60 s 4: 16.120 s 4(1): 9.100, 10.10, 10.25, 10.30, 10.110 s 4A(5): 10.35 s 4L: 12.20 s 5: 9.100, 10.40, 10.50 s 5(1): 9.95, 9.130 s 5(1)(g): 9.95 s 6: 9.50, 9.90, 9.100, 10.40, 10.50, 12.150 s 6(2): 9.90 s 6(2)(a): 9.100 s 6(2)(a)(i): 9.95 s 6(3): 9.95, 9.100, 10.40 s 6(3)(a): 9.100, 10.40 s 6(3)(b): 9.100 s 6(3A): 9.100, 10.40 s 75B: 12.180 s 82: 12.35, 12.40 s 84(2): 10.110, 10.120, 10.125 s 84(4): 10.100 ss 86A(1) to (3): 9.160 ss 86A(4) to (6): 9.160 s 87: 12.165 s 87D: 18.70

s 87E(1): 12.250, 18.70, 18.135 s 87M: 12.255 s 87S: 12.265 s 87T: 12.270 s 87U: 12.260 s 87W: 12.280 s 87X: 12.280 s 87CB: 12.150 s 87CB(1): 12.145, 12.150, 12.165 s 87CB(2): 12.145 s 87CB(3): 12.145, 12.155 s 87CB(5): 12.155 s 87CC(1): 12.145 s 87CD(1)(a): 12.160 s 87CE: 12.145 s 87CG: 12.145 s 87CI: 12.145, 12.155 s 87ZB: 12.275 s 87ZC: 12.285 s 130: 9.90, 10.10 s 131: 9.120, 10.40, 10.50, 17.20 s 131(1): 9.50, 9.90, 9.100, 10.05, 10.50 s 131(2): 9.50, 9.90 s 131A: 9.110, 11.250, 17.20, 17.35 s 131A(1): 9.105, 16.95, 18.220 s 131C(3): 9.135 s 131C(4): 9.115, 16.15 s 137: 12.125 s 137A: 12.290 s 137B: 9.50, 12.55, 12.70, 12.125, 12.130, 12.135, 12.140, 12.165 s 137C: 12.250 s 137C(1): 12.125 s 137C(2): 12.125 s 137D: 12.200, 12.205, 12.225 s 137E: 12.250 s 137E(1): 12.210 s 137H: 12.10 s 137H(2): 12.200 s 138: 9.150 s 138A: 9.150 s 138B: 9.150, 9.155 s 138C(1): 9.160 s 138C(2): 9.160 s 138D: 9.160 s 139A: 9.50, 18.280, 18.285 s 139A(1): 18.285 s 139A(2): 18.285 s 139A(4): 18.285 s 139A(5): 18.285

TABLE OF STATUTES

Competition and Consumer Act 2010 — cont s 139B: 10.110, 10.120 s 139B(1): 11.25 s 139B(2): 10.110, 10.115, 10.120, 10.130, 10.135, 12.145 s 139B(2)(a): 10.120, 10.125 s 139B(2)(b): 10.125 s 139C(2): 10.130, 10.135 s 139G: 9.50, 9.55, 9.140 s 139G(4)(a): 9.140 s 139G(4)(b): 9.140 s 139G(4)(c): 9.140 s 140: 9.50 s 140B: 9.50 s 140C: 9.150 s 140H: 9.125 s 140J(1): 9.135 s 140J(2): 9.135 Pt XIAA: 9.50, 9.120 Pt IV: 9.120 Pt IV, Div 1: 18.225 Pt IV, Div 2: 18.225 Pt XI: 9.50, 9.90, 9.95, 9.100, 9.140, 9.160, 10.40 Pt VIA: 9.50, 12.125, 12.145, 12.155, 12.165 Pt VIB: 12.250, 18.70, 18.135 Pt VIB, Div 2: 12.125, 12.210, 12.250 Pt VIB, Div 7: 12.125, 12.250 Sch 1: 9.120 Sch 2: 8.10, 9.10, 9.50, 9.55, 9.60, 9.90, 9.120, 9.140, 10.05, 10.40, 10.50 Competition and Consumer Legislation Amendment Act 2011: 9.65 Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004: 12.145 Sch 3: 12.130 Corporations Act 2001: 7.340, 7.370, 7.530, 9.105, 10.120, 11.250, 11.255, 17.20 ss 12 to 129: 10.120 s 119: 7.530 s 131(1): 7.140, 7.530

s 131(2): 7.530 s 131(3): 7.530 s 180(1): 7.370 s 181(1): 7.370 s 183(1): 7.340 s 191(1): 7.340 s 766A: 11.265 s 1041H: 9.105, 11.130, 11.150, 12.150 s 1041L: 12.150 s 1466: 12.130 Corporations Agreement 2002: 9.105, 11.250 cl 301(1): 9.105 Corporations Law s 266: 8.560 s 995(2): 11.285 Corporations Regulations 2001 r 1.0.02A: 15.160 Crimes Act 1914 s 5: 12.175 Evidence Act 1995 s 144(1): 10.40 Family Law Act 1975 s 66B: 2.100 Federal Court of Australia Act 1976 s 21: 12.25 Financial Sector Reform (Consequential Amendments) Act 1998 Pt II, Div 2: 11.250 Insurance Contracts Act 1984 s 13: 9.110 s 14: 9.110 s 15: 9.110 s 15(1): 9.110 Intergovernmental Agreement for the Australian Consumer Law: 9.140 cl 8: 9.140 cl 12: 9.140 cl 19: 9.140 cl 20: 9.145 cl 21: 9.145 Motor Vehicle Standards Act 1989: 14.120 Mutual Recognition Act 1992: 9.45 National Consumer Credit Protection Act 2009: 7.860

xxix

National Consumer Credit Protection Code: 9.105, 11.250 National Credit Code: 14.150 s 135: 9.65 Personal Property Securities Act 2009: 8.600, 8.750, 14.10, 14.30, 14.40, 14.80, 14.120, 14.140, 14.150, 14.160 s 8: 15.30, 15.60 s 8(1)(b): 14.40 s 8(1)(j): 4.230, 14.40 s 8(1)(ja): 15.60 s 8(6): 15.60 s 9: 14.40 s 10: 14.80, 15.30, 15.210 s 12(1): 14.40 s 12(2): 14.40 s 12(3): 14.40, 15.70 s 13: 15.70 s 14: 15.220 s 19: 15.80 s 19(1): 14.50 s 19(2): 14.50 s 19(4): 15.80 s 20: 14.60, 15.90 s 21: 14.60, 15.100 s 21(2)(b): 15.100 s 21(2)(c): 15.200 s 22: 15.100 s 25: 15.90 s 29: 15.90 s 31: 15.40 s 31(2): 15.40 s 32: 15.100 s 33: 15.100 s 33(1): 15.100 s 35: 15.100 s 42: 15.120 s 43: 14.120, 15.130 s 44: 14.120, 15.150 s 45(1): 14.120, 15.150 s 45(2): 14.120 s 45(3): 14.120, 15.160 s 45(4): 14.120 s 46: 14.120, 15.160 s 47: 14.120, 15.60, 15.170 s 48: 15.180 s 49: 14.120, 15.160 s 50: 15.180 s 51: 15.180 s 52: 15.190 s 53: 14.120, 15.120 s 55: 15.120 s 55(2): 14.80 s 55(3): 14.80 s 55(4): 14.80 s 55(5): 14.80

xxx

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Personal Property Securities Act 2009 — cont s 57: 15.200 s 57(1): 14.80 s 58: 15.120 s 60: 15.120 s 61: 15.120 s 62: 14.80, 15.120, 15.220 s 63: 15.220 s 64: 15.220 s 69: 15.120, 15.180 s 70: 15.180 s 72: 15.180 s 73: 15.60 s 74: 15.120, 15.130 s 75: 15.210 ss 84 to 86: 14.80 s 85: 15.230 s 86: 15.230 s 87: 4.140 s 88: 15.250 ss 88 to 97: 14.80 s 89: 15.250 s 90: 15.250 s 92: 15.250 s 97: 15.250 s 99: 15.260 ss 99 to 103: 14.80 s 100: 15.260 s 101: 15.260 ss 105 to 106: 14.80 ss 108 to 144: 14.140 s 111: 14.140 s 111(1): 15.280 s 111(2): 15.280 s 115: 14.140, 15.280 s 116: 14.140 s 119: 14.150 s 119(2): 14.150 s 123: 15.90 s 128: 15.90 s 131: 15.280 s 132A: 4.140 s 140: 15.280 s 147: 14.160 s 150: 14.160, 15.20 s 151: 15.20 s 153: 14.160, 15.20, 15.30 s 161: 15.20 ss 170 to 173: 14.160 s 171: 14.160 s 242: 13.30, 15.10 s 244: 13.30, 15.10 s 267: 14.160, 15.130 s 267A: 15.130 s 268: 14.160 s 271: 15.20 s 297: 15.270 s 298: 15.270 s 300: 15.270

s 304: 13.30 s 310: 13.30 s 367A: 14.160 Personal Property Securities Regulations 2010 reg 1.17: 14.120 reg 2.1: 14.120 reg 2.2: 14.120 reg 4.1: 14.150 Sch 1, Pt 2.2: 15.30, 15.150 Sch 1, Pt 2.4: 15.100 Torts (Interference with Goods) Act 1977 s 2: 5.160 Trade Practices Act 1974: 6.230, 6.300, 7.590, 8.10 s 2A: 10.55 s 2B: 10.55 s 4(2): 11.15, 11.30 s 4B: 9.65, 16.70, 16.75, 16.80 s 6(3): 9.65, 9.100 s 18: 11.165 s 47(1): 12.20 s 47B(1)(d): 16.360 s 47B(1)(e): 16.360 s 51A: 9.65, 11.135, 11.140 s 51A(1): 11.135 s 51A(2): 11.135 s 51AB: 9.65 s 51AC: 9.65, 16.80 s 51AC(9): 16.80 s 51AD: 12.185 s 52: 7.590, 9.05, 9.35, 9.100, 10.45, 10.55, 10.80, 10.120, 10.130, 11.05, 11.10, 11.20, 11.25, 11.30, 11.40, 11.45, 11.65, 11.70, 11.90, 11.95, 11.110, 11.115, 11.125, 11.140, 11.150, 11.165, 11.175, 11.185, 11.200, 11.210, 11.215, 11.220, 11.225, 11.235, 11.245, 11.255, 11.285, 12.45, 12.50, 12.85, 12.180 s 52(1): 11.05, 11.10, 12.105 s 53: 9.65, 10.45, 12.180 s 53(a): 9.100, 11.185 s 53(c): 9.100, 11.155, 11.225 s 53(d): 11.225 s 53(e): 9.100

s 53(g): 11.185 s 53A: 9.65 s 53A(1)(b): 10.120 s 53A(2): 9.65 s 53B: 9.65 s 54: 9.65 s 54(3): 16.10 s 58: 9.65 s 60: 9.65 s 64: 9.65 s 65A: 9.65, 11.235, 11.240, 11.245 s 65A(1): 11.235 s 65A(1)(a): 11.245 s 65A(1)(a)(vi): 11.245 s 65B: 9.65 s 65C: 9.65 s 65D: 9.65 s 65E: 9.65 s 65F: 9.65 s 65G: 9.65 s 65H: 9.65 s 65R: 9.65 s 65T: 9.65 s 65AAE: 9.65 s 66(2): 16.205, 16.210, 16.215 s 68: 18.255 s 68A: 16.75, 18.260 s 68B(1): 18.280 s 68B(2): 18.280 s 69(1)(a): 16.185 s 69(1)(b): 16.190 s 70: 16.385 s 71(1): 16.50, 16.75, 16.205, 16.210, 16.215 s 71(2): 16.75, 16.355, 16.360 s 72: 16.390 s 73: 9.65, 18.215 s 74: 9.65, 16.75, 17.05, 17.30, 17.65, 17.85, 18.280 s 74(1): 16.10, 17.05, 17.65, 17.75, 17.85 s 74(2): 17.95, 17.100 s 74(3)(a): 17.30 s 74A: 9.65 s 74A(1): 9.65 s 74A(2)(a): 16.100 s 74A(3): 9.65 s 74B: 12.40, 16.10, 16.360 s 74B(1): 16.355 s 74B(1)(a): 16.360 s 74B(1)(b): 16.360 s 74B(1)(c): 16.360 s 74B(2): 16.355 s 74B(2)(b): 16.360

TABLE OF STATUTES

Trade Practices Act 1974 — cont s 74D: 12.40, 16.10, 16.305, 16.360 s 74D(3): 16.210, 16.215 s 74F: 16.395 s 74H: 9.65 s 75A: 16.30, 18.10 s 75B: 10.45, 12.175, 12.180, 12.205 s 75B(1): 12.185 s 75B(1)(a): 12.175, 12.185 s 75B(1)(c): 12.185 s 75AC(2): 16.10 s 76E: 9.65 s 80: 9.65, 12.230 s 82: 9.35, 9.65, 10.45, 12.35, 12.40, 12.45, 12.50, 12.85, 12.95, 12.110, 12.115, 12.120, 12.130, 12.175, 12.180, 16.355 s 82(1): 12.35, 12.120 s 82(1B): 9.50, 12.130 s 82(1AAA): 12.250 s 82(1AAB): 12.250 s 82(2): 12.120 s 83: 12.10 s 84(2): 10.115 s 84(4): 10.130 s 85(3): 11.240, 12.245 s 87: 9.65, 12.85, 12.115, 12.135, 12.200, 12.220 s 87(1): 12.215 s 87(2): 12.215 ss 251 to 253: 9.65 Pt 3-2, Div 1, subdiv A: 16.65 Pt V: 9.40, 9.75, 12.120 Pt V, Div 1: 9.90, 11.235 Pt V, Div 2: 9.65, 9.75, 16.05, 16.10, 16.20, 16.30, 16.50, 16.60, 16.75, 16.210, 16.355, 17.05, 18.10, 18.275 Pt V, Div 2A: 9.65, 16.05, 16.10, 16.30, 16.50, 16.60, 16.210, 16.355 Pt VA: 16.10 Pt XI: 9.65 Div 2A: 17.05 Sch 3: 12.130 Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010: 9.05, 9.55

Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010: 9.05, 9.55

Law Reform (Miscellaneous Provisions) Act 1955 s 15: 9.50, 12.130, 12.140

Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1): 9.05, 9.55, 17.50 reg 90: 16.405 reg 90(1): 16.405 reg 90(2): 16.405 Sch 1: 9.55 Sch 2: 9.55 Sch 3: 9.55

Married Persons’ Property Act 1986 s 5: 7.190

Trans-Tasman Mutual Recognition Act 1997: 9.45 Uniform Consumer Credit Code: 9.105, 11.250

AUSTRALIAN CAPITAL TERRITORY Agents Act 2003 s 18: 7.860 s 22: 7.860 Civil Law (Wrongs) Act 2002 s 107B: 9.50, 12.170 Fair Trading (Australian Consumer Law) Act 1992: 9.50, 9.55, 9.60, 9.120, 9.135, 9.140, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 6: 9.50, 9.120 s 7: 9.50, 9.120 s 11: 9.130 s 20: 9.135 s 14: 10.65 s 15: 10.65 s 15A: 8.1110 s 16: 10.65 s 18: 10.65 s 236: 12.130 Fair Trading (Australian Consumer Law) Amendment Act 2010 Sch 1, Item 1.6: 8.1110 Fair Trading Legislation Amendment Act 2001 s 27: 8.390 Justice and Community Safety Legislation Amendment Act 2014 Sch 1, Pt 1.1: 7.860

Mercantile Law Act 1962 s 22: 13.60 Residential Tenancies Act 1987 Sch 1, s 68(4): 4.220 Sale of Goods Act 1954: 8.10, 16.10 s 2: 8.180 s 3: 8.400, 8.1030 s 5: 8.30, 8.140, 8.870 s 6: 8.20 s 7: 8.70 s 11: 8.150, 8.610 s 12: 8.150, 8.610 s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 20: 8.380 ss 21 to 22: 8.440 s 23: 8.440 s 24: 8.540 s 25: 8.610 s 26: 8.640 s 27: 8.680 s 29: 8.700, 8.710 s 31: 8.760 ss 31 to 32: 8.830 s 32: 8.170, 8.760 s 33: 8.770 s 34: 8.790 s 35: 8.800 s 36: 8.770, 8.820 s 38: 8.830 s 38(1): 8.830 s 39: 8.830 s 40: 8.830 s 42: 8.850 s 43: 8.880 ss 44 to 46: 8.870 s 47: 8.890 s 48: 8.890 s 49: 8.890 s 50: 8.890 s 51: 8.930 s 52: 8.960 s 53: 8.970 s 54: 8.1090 s 56: 8.1040 s 58: 8.390

xxxi

xxxii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Sale of Goods Act 1954 — cont s 60: 8.1110 s 62(1): 8.10 Sale of Goods (Vienna Convention) Act 1987: 16.175 Uncollected Goods Act 1996: 6.380

s 51A : 8.1160 s 58: 9.65 s 65(2): 9.65 s 68(1): 12.55 s 236: 12.130 Fair Trading Amendment (Australian Consumer Law) Act 2010: 9.120 Sch 1, Item 40: 8.1160

Water Resources Act 2007 s 7: 3.20

Fair Trading Amendment (Unfair Contract Terms) Act 2010: 9.55

NEW SOUTH WALES

Frustrated Contract Act 1978: 8.150

Agricultural Tenancies Act 1990 s 10: 4.220 Civil Liability Act 2002 s 34(1)(b): 9.50, 12.170 s 34(2): 12.150, 12.170 s 35(1): 12.150, 12.170 Pt 4: 12.170 Civil and Administrative Tribunal Act 2013 s 38(2): 16.340 s 38(4): 16.340 Commercial Agents and Private Inquiry Agents Act 2004 s 5: 7.860 s 11: 7.860 Crown Lands Act 1989 s 172: 4.70 Factors (Mercantile Agents) Act 1923: 7.790 s 5: 7.790 Fair Trading Act 1987: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.55, 10.65, 10.85, 10.135, 11.05, 11.35, 11.255, 12.140 s 3: 9.120 s 24: 12.140 s 27: 9.50, 9.120 s 28: 9.50, 9.120 s 28(1): 9.120 s 29: 9.140 s 32: 9.130 s 35: 10.65 s 36: 10.65 s 37: 10.65 s 39: 10.65 s 40: 9.65 s 42: 11.285, 12.140, 12.170 s 42(1): 12.55

Interpretation Act 1987 s 21: 9.120, 10.45 Law Reform (Miscellaneous Provisions) Act 1965 s 8: 9.50, 12.130, 12.140 s 9: 9.50, 12.130, 12.140 Married Persons (Equality of Status) Act 1996 s 7: 7.190 National Parks and Wildlife Act 1974 s 97: 3.20 Personal Property Securities (Commonwealth Powers) Act 2009: 14.20 Property, Stock and Business Agents Act 2002: 7.440, 8.1110 s 36: 7.440 s 52: 7.440 s 52(1): 7.440 s 52(2): 7.440 Real Property Act 1900 s 88: 7.100 Real Property (Amendment) Act 1970 s 13: 7.100 Residential Tenancies Act 2010 s 67(1): 4.220 Sale of Goods Act 1923: 8.10, 16.10, 16.135, 18.05 s 4(2): 8.10 s 4(5): 8.210 s 5: 8.30, 8.140, 8.870 s 6: 8.20 s 7: 8.70 s 11: 8.150, 8.610 s 12: 8.150, 8.610

s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 17(1): 16.185 s 17(2): 16.190 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 19(2): 16.205 s 20: 8.380, 16.390 s 21: 16.185 ss 21 to 22: 8.440 ss 21 to 25: 16.185 s 22(1): 16.185 s 23: 8.440 s 24: 8.540 s 25: 8.610 s 25A: 8.530 s 26: 8.640 s 27: 8.680 s 28: 8.700, 8.710 s 30: 8.760 ss 30 to 31: 8.830 s 31: 8.170, 8.760 s 32: 8.770 s 33: 8.790 s 34: 8.800 s 35: 8.770, 8.820 s 37: 8.830 s 37(1): 8.830 s 38: 8.830 s 38(1): 18.55 s 38(2): 8.830 s 39: 8.830 s 41: 8.850 s 42: 8.880 ss 43 to 45: 8.870 s 46: 8.890 s 47: 8.890 s 48: 8.890 s 49: 8.890 s 50: 8.930 s 51: 8.960 s 52: 8.970 s 53: 8.1090 s 54: 8.1040 s 57: 8.390 s 60: 8.1110 Sale of Goods (Amendment) Act 1988: 8.180, 8.400, 8.1030 Sale of Goods (Vienna Convention) Act 1986: 16.175 Travel Agents Act 1986: 7.860 Travel Agents Repeal Act 2014: 7.860

TABLE OF STATUTES

Uncollected Goods Act 1995: 6.380 Warehousemen’s Liens Act 1935 s 6: 13.60

NORTHERN TERRITORY Agents Licensing Act 1979 s 17: 7.860 Auctioneers Act 1935: 8.1110 s 4: 7.860 Auctioneers Repeal Act 2002: 8.1110 Consumer Affairs and Fair Trading Act: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140, 16.10 s 26: 9.50, 9.120 s 27: 9.50, 9.120 s 31: 9.130 s 34: 10.65 s 35: 10.65 s 36: 10.65 s 38: 10.65 s 236: 12.130 Pt 11: 7.860 Pt 13: 8.1110 Consumer Affairs and Fair Trading Amendment Act s 6: 7.860 Interpretation Act s 17: 9.120, 10.45 Law Reform (Miscellaneous Provisions) Act s 16(1): 9.50, 12.130, 12.140 Married Persons (Equality of Status) Act 1989 s 5: 7.190

s 11: 8.150, 8.610 s 12: 8.150, 8.610 s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 20: 8.380 ss 21 to 22: 8.440 s 23: 8.440 s 25: 8.610 s 26: 8.640 s 27: 8.680 s 28: 8.700, 8.710 s 30: 8.760 ss 30 and 31: 8.830 s 31: 8.170, 8.760 s 32: 8.770 s 33: 8.790 s 34: 8.800 s 35: 8.770, 8.820 s 37: 8.830 s 38: 8.830 s 39: 8.830 s 41: 8.850 s 42: 8.880 ss 43 to 45: 8.870 s 46: 8.890 s 47: 8.890 s 48: 8.890 s 49: 8.890 s 50: 8.930 s 51: 8.960 s 52: 8.970 s 53: 8.1090 s 54: 8.1040 s 57: 8.390 s 60: 8.1110 Sale of Goods Amendment Act 1999 s 2: 8.180 Sale of Goods (Vienna Convention) Act: 16.175

xxxiii

Civil Liability Act 2003 s 28(1)(b): 9.50, 12.170 Construction and Tourism (Red Tape Reduction) and Other Legislation Amendment Act 2014 s 52: 7.860 Criminal Code 1899 s 276: 6.370 Debt Collectors (Field Agents and Collection Agents) Act 2014 s 14: 7.860 s 26: 7.440 Disposal of Uncollected Goods Act 1967: 6.380 Factors Act 1892: 7.790 Fair Trading Act 1989: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 3: 9.40 s 5A: 11.35 s 15: 9.50, 9.120 s 16: 9.50, 9.120 s 17: 9.140 s 20: 9.130 s 23: 10.65 s 24: 10.65 s 25: 10.65 s 27: 10.65 s 29: 9.135 s 38: 9.120 s 50: 9.155 s 51: 9.155, 12.225 s 56: 8.1160 s 95: 10.135 s 99: 9.120 s 107: 9.50 s 236: 12.130 Pt 3, Div 5: 9.65 Fair Trading (Australian Consumer Law) Amendment Act 2010 s 18: 8.1160

Power and Water Authority Act s 17(1): 10.55

Uncollected Goods Act 2004: 6.380

Proportionate Liability Act s 4(2)(b): 9.50, 12.170

Warehousemen’s Liens Act s 8: 13.60

Sale of Goods Act 1972: 8.10, 16.10 s 4: 8.540 s 4(2): 8.10 s 5: 8.30, 8.140, 8.870 s 6: 8.20 s 7: 8.70

Water Act s 9: 3.20

Fauna Conservation Act 1974: 3.20 s 7: 3.20

QUEENSLAND

Hire Purchase Act 1959: 4.230 s 32: 4.230

Acts Interpretation Act 1954 s 32D: 9.120, 10.45

Land Act 1994 s 10: 4.70

xxxiv

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Land Title Act 1994 ss 132 to 135: 7.100 Law Reform Act 1995 s 10: 9.50, 12.130, 12.140 Motor Dealers and Chattel Auctioneers Act 2014 s 33: 7.860 s 88: 7.440 s 132: 7.440 Pt 4: 8.1110 Nature Conservation Act 1992 s 83: 3.20 Personal Property Securities (Commonwealth Powers) Act 2009: 14.20

s 46: 8.890 s 47: 8.890 s 48: 8.890 s 49: 8.930 s 50: 8.960 s 51: 8.970 s 52: 8.1090 s 54: 8.1040 s 56: 8.390 s 59: 8.1110 s 61(2): 8.10 Sale of Goods (Vienna Convention) Act 1986: 16.175 Statute of Frauds 1972 s 3: 8.180

Property Law Act 1974 s 155: 4.220

Storage Liens Act 1973 s 6: 13.60

Property Occupations Act 2014 s 26: 7.860 s 89: 7.440

Travel Agents Act 1988: 7.860

Sale of Goods Act 1896: 8.10, 16.10 s 3: 8.30, 8.140, 8.870 s 4: 8.20 s 5: 8.70 s 9: 8.150, 8.610 s 10: 8.150, 8.610 s 11: 8.170 s 12: 8.170 s 13: 8.210 s 14: 8.400 s 15: 8.230 s 16: 8.240, 8.260 s 17: 8.270, 8.290 s 18: 8.380 ss 19 to 20: 8.440 s 21: 8.440 s 22: 8.540 s 23: 8.610 s 24: 8.640 s 25: 8.680 s 27: 8.700, 8.710 s 29: 8.760 ss 29 to 30: 8.830 s 30: 8.170, 8.760 s 31: 8.770 s 32: 8.790 s 33: 8.800 s 34: 8.770, 8.820 s 36: 8.830 s 37: 8.830 s 38: 8.830 s 40: 8.850 s 41: 8.880 ss 42 to 44: 8.870 s 45: 8.890

Water Act 2000: 3.20 s 19: 3.20

SOUTH AUSTRALIA Civil Liability Act 1936 s 50: 9.50, 12.130, 12.140 Consumer Transactions Act 1972-1983: 16.10 Criminal Law (Sentencing) Act 1988 s 57: 16.390 Employment Agents Registration Act 1993 s 6: 7.860 Fair Trading Act 1987: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 13: 9.50, 9.120 s 14: 9.50, 9.120 s 15: 9.140 s 18: 9.130 s 21: 10.65 s 22: 10.65 s 23: 10.65 s 25: 10.65 s 27: 9.135 s 28: 8.1160 Frustrated Contracts Act 1988: 8.150 Land Agents Act 1994 s 6(1): 7.860

s 6(2): 7.440 Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 s 8: 9.50, 12.170 Law of Property Act 1936 s 104: 7.190 Mercantile Law Act 1936: 7.790 Misrepresentation Act 1972 s 6(1)(b): 8.830 s 11: 8.400, 8.1030 Natural Resources Management Act 2004 Ch 7: 3.20 Personal Property Securities (Commonwealth Powers) Act 2000: 14.20 Powers of Attorney and Agency Act 1984 s 12: 7.740 Real Property Act 1886 s 156: 7.100 Registration of Deeds Act 1935 s 35: 7.100 Sale of Goods Act 1895: 8.10, 16.10 s 1: 8.20 s 2: 8.70 s 6: 8.150, 8.610 s 7: 8.150, 8.610 s 8: 8.170 s 9: 8.170 s 10: 8.210 s 11: 8.400 s 12: 8.230 s 13: 8.240, 8.260 s 14: 8.270, 8.290 s 15: 8.380 ss 16 to 17: 8.440 s 18: 8.440 s 19: 8.540 s 20: 8.610 s 20A: 8.530 s 21: 8.640 s 23: 8.680 s 25: 8.700, 8.710 s 27: 8.760 ss 27 to 28: 8.830 s 28: 8.170, 8.760 s 29: 8.770 s 30: 8.790 s 31: 8.800

TABLE OF STATUTES

Sale of Goods Act 1895 — cont s 32: 8.770, 8.820 s 34: 8.830 s 34(1): 8.830 s 35: 8.830 s 36: 8.830 s 38: 8.850 s 39: 8.880 ss 40 to 42: 8.870 s 43: 8.890 s 44: 8.890 s 45: 8.890 s 46: 8.890 s 47: 8.930 s 48: 8.960 s 49: 8.970 s 50: 8.1090 s 52: 8.1040 s 54: 8.390 s 57: 8.1110 s 59(2): 8.10 s 60: 8.30, 8.140, 8.870

9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 5: 9.50, 9.120 s 6: 9.50, 9.120 s 8: 9.140 s 10: 9.130 s 13: 10.65 s 14: 10.65 s 15: 10.65 s 17: 10.65 s 19: 9.135 s 45: 8.10 s 236: 12.130 Civil Liability Act 2002 s 43A: 9.50, 12.170 Criminal Code Act 1924 Sch 1, s 45: 6.370 Disposal of Uncollected Goods Act 1968: 6.380 Factors Act 1891: 7.790

Sale of Goods (Vienna Convention) Act 1986: 16.175

Legislation Repeal Act 2000 s 3: 8.1160 Sch 1: 8.1160

Second-Hand Dealers and Pawnbrokers Regulations 2013 reg 6: 8.1110

Mock Auctions Act 1973: 8.1160

Security and Investigation Agents Act 1995 s 6: 7.860 Statutes Amendment (Enforcement of Contracts) Act 1982 s 4: 8.180 Statutes Amendment and Repeal (Australian Consumer Law) Act 2010 s 7: 8.1160 Travel Agents Act 1986: 7.860 Travel Agents Repeal Act 2014: 7.860 Unclaimed Goods Act 1987: 6.380 Warehouse Liens and Storage Act 1990 s 9: 13.60

TASMANIA Australian Consumer Law (Tasmania) Act 2010: 9.50, 9.55, 9.60, 9.120, 9.135,

Powers of Attorney Act 2000: 7.100 s 52: 7.740 Property Agents and Land Transactions Act 2005 s 5: 7.860 s 18: 7.440 s 42: 8.1160 Pt 3: 8.1110 Sale of Goods Act 1896: 8.10, 16.10 s 3: 8.30, 8.140, 8.870 s 5(2): 8.10 s 6: 8.20 s 7: 8.70 s 9: 8.180 s 9(3): 8.200 s 11: 8.150, 8.610 s 12: 8.150, 8.610 s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 20: 8.380 ss 21 to 22: 8.440 s 23: 8.440

xxxv

s 24: 8.540 s 25: 8.610 s 26: 8.640 s 28: 8.680 s 30: 8.700, 8.710 s 32: 8.760 ss 32 to 33: 8.830 s 33: 8.170, 8.760 s 34: 8.770 s 35: 8.790 s 36: 8.800 s 37: 8.770, 8.820 s 39: 8.830 s 40: 8.830 s 41: 8.830 s 43: 8.850 s 44: 8.880 ss 45 to 47: 8.870 s 48: 8.890 s 49: 8.890 s 50: 8.890 s 51: 8.890 s 52: 8.930 s 53: 8.960 s 54: 8.970 s 55: 8.1090 s 57: 8.1040 s 59: 8.390 s 62: 8.1110 Sale of Goods (Vienna Convention) Act 1987: 16.175 Security and Investigations Agents Act 2002 s 4: 7.860 Tortfeasors and Contributory Negligence Act 1954 s 4(1): 9.50, 12.130, 12.140 Travel Agents Act 1987: 7.860 Water Management Act 1999 s 7: 3.20

VICTORIA Auction Sales Act 1958: 7.860 Auction Sales (Repeal) Act 2001 s 3: 7.860 Australian Consumer Law and Fair Trading Act 2012: 8.150, 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 6: 10.65 s 7: 9.50, 9.120

xxxvi

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Australian Consumer Law and Fair Trading Act 2012 — cont s 8: 9.50, 9.120 s 8(1): 9.120, 9.155 s 9: 9.120, 9.140 s 12: 9.130 s 15: 10.65 s 16: 10.65 s 17: 10.65 s 18: 10.65 s 18(1): 10.70 s 18(1)(a): 10.70 s 18(1)(b): 10.70 s 18(1)(c): 10.70 s 18(1)(d): 10.70 s 18(3): 10.70 s 19: 10.65 s 19(1): 10.65 s 19(2): 10.65 s 20: 10.65 s 22: 9.135, 18.290 s 22(1): 9.50 s 22(4): 18.285 s 31: 8.10 s 54: 6.380 s 57: 6.380 s 64: 9.50 s 196: 10.135 s 217: 12.35 s 236: 12.130 Ch 7: 9.155 Ch 8: 9.155 Pt 8.5: 9.155 Chattel Securities Act 1987: 4.230 s 6: 4.230 Electricity Industry Act 2000 s 35: 17.50 s 36: 17.50 s 39: 17.50 Estate Agents Act 1980 s 12: 7.860 s 49A: 7.440 s 50: 7.440 Fair Trading Act 1999 s 9: 10.45 s 12: 10.45 s 14: 9.65 s 16: 9.65 s 16(6): 9.65 s 19: 9.65 s 26: 9.65 ss 30 to 31: 8.1160 s 159(1): 12.35 s 161A: 9.65, 17.125

Fair Trading Amendment (Australian Consumer Law) Act 2010 s 9: 8.1160 Fair Trading Amendment (Unfair Contract Terms) Act 2010: 9.55 Gas Industry Act 2001 s 42: 17.50 s 43: 17.50 s 46: 17.50 Goods Act 1958: 8.10, 16.10 s 3: 8.30, 8.140, 8.870 s 4(2): 8.10 s 6: 8.20 s 7: 8.70 s 11: 8.150, 8.610 s 12: 8.150, 8.610 s 13: 8.170 s 14: 8.170 s 15: 8.210 s 16: 8.400 s 17: 8.230 s 18: 8.240, 8.260 s 19: 8.270, 8.290 s 20: 8.380 ss 21 to 22: 8.440 s 23: 8.440 s 24: 8.540 s 25: 8.610 s 25A: 8.530 s 27: 8.640 s 29: 8.680 s 30: 8.700, 8.710 s 31: 8.700, 8.710 s 34: 8.760 ss 34 to 35: 8.830 s 35: 8.170, 8.760 s 36: 8.770 s 37: 8.790 s 38: 8.800 s 39: 8.770, 8.820 s 41: 8.830 s 41(1): 8.830 s 42: 8.830 s 43: 8.830 s 45: 8.850 s 46: 8.880 ss 47 to 49: 8.870 s 50: 8.890 s 51: 8.890 s 52: 8.890 s 53: 8.890 s 54: 8.930 s 55: 8.960 s 56: 8.970 s 57: 8.1090 s 59: 8.1040

s 61: 8.390 s 64: 8.1110 ss 65 to 72: 7.790 Pt IV: 16.10 Goods (Sales and Leases) Act 1981: 16.10 Instruments Act 1958 Pt XI: 7.100 Interpretation of Legislation Act 1984 s 38: 9.120, 10.45 Motor Car Traders Act 1986 s 50D : 8.1160 Personal Property Securities (Commonwealth Powers) Act 2009: 14.20 Property Law Act 1958 s 154A: 4.220 Sale of Goods (Vienna Convention) Act 1987: 16.175 s 9: 8.180 Transfer of Land Act 1958 s 94: 7.100 Travel Agents Act 1986: 7.860 Travel Agents Repeal Act 2014: 7.860 Warehousemen’s Liens Act 1958 s 7: 13.60 Water Act 1989 s 7: 3.20 Wrongs Act 1958 s 24AF(1)(b): 9.50, 12.170 s 26(1): 9.50, 12.130, 12.140

WESTERN AUSTRALIA Auction Sales Act 1973: 8.1110 s 6: 7.860 s 25: 8.1160 Chattel Securities Act 1987: 8.650 s 6: 4.230 Civil Liability Act 2002 s 5AI(1)(b): 9.50, 12.170 Criminal Code 1913 s 253: 6.370

TABLE OF STATUTES

Debt Collectors Licensing Act 1964 s 5: 7.860 Disposal of Uncollected Goods Act 1970: 6.380 Employment Agents Act 1976 s 12: 7.860 Factors’ Acts Amendment Act 1878: 7.790 Fair Trading Act 2010: 9.50, 9.55, 9.60, 9.120, 9.135, 9.150, 9.155, 10.05, 10.40, 10.65, 10.135, 11.05, 11.35, 11.255, 12.140 s 3: 9.40 s 7: 9.140 s 11: 9.130 s 18: 9.50, 9.120 s 19: 9.50, 9.120 s 19(1): 9.120 s 19(2): 9.120 s 20: 9.120 s 27: 10.65 s 28: 10.65 s 29: 10.65 s 30: 10.65 s 31: 9.135 s 35: 8.10 s 236: 12.130 Hire Purchase Act 1959 s 27: 4.230 Hospitals and Health Services Act 1927: 10.55 Imperial Act 5 & 6 Vict, c 39: 7.790 Interpretation Act 1984 s 5: 9.120, 10.45 Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 s 4(1): 9.50, 12.130, 12.140 Personal Property Securities Act 2009 s 8: 13.30 s 12: 13.30 s 18: 13.110 s 21: 13.30 s 24: 13.30 s 31: 13.90 s 32: 13.90 s 46: 13.110 s 99: 13.90 s 101: 13.90

Property Law Act 1969 s 85: 7.100 Real Estate and Business Agents Act 1978 s 26: 7.860 s 60: 7.440 Residential Tenancies Act 1987 s 47(2)(b): 4.220 Rights in Water and Irrigation Act 1914 s 5A: 3.20 Sale of Goods Act 1895: 8.10, 16.10 s 1: 8.20 s 2: 8.70 s 4: 8.180 s 4(3): 8.200 s 6: 8.150, 8.610 s 7: 8.150, 8.610 s 8: 8.170 s 9: 8.170 s 10: 8.210 s 11: 8.400 s 12: 8.230 s 13: 8.240, 8.260 s 14: 8.270, 8.290 s 15: 8.380 ss 16 to 17: 8.440 s 18: 8.440 s 19: 8.540 s 20: 8.610 s 21: 8.640 s 21(1): 8.650 s 23: 8.680 s 25: 8.700, 8.710 s 27: 8.760 ss 27 to 28: 8.830 s 28: 8.170, 8.760 s 29: 8.770 s 30: 8.790 s 31: 8.800 s 32: 8.770, 8.820 s 34: 8.830 s 35: 8.830 s 36: 8.830 s 38: 8.850 s 39: 8.880 ss 40 to 42: 8.870 s 43: 8.890 s 44: 8.890 s 45: 8.890 s 46: 8.890 s 47: 8.930 s 48: 8.960 s 49: 8.970 s 50: 8.1090 s 52: 8.1040 s 54: 8.390

xxxvii

s 57: 8.1110 s 59(2): 8.10 s 60: 8.30, 8.140, 8.870 Sale of Goods (Vienna Convention) Act 1986: 16.175 Transfer of Land Act 1893 s 143: 7.100 s 144: 7.100 Travel Agents Act 1985: 7.860 Warehousemen’s Liens Act 1952 s 7: 13.60 Wildlife Conservation Act 1950 s 22: 3.20

IMPERIAL Statute of Frauds 1677: 8.1110

NEW ZEALAND Consumer Guarantees Act 1993: 9.65, 16.10, 16.45, 16.50, 16.170, 16.255, 18.20, 18.25, 18.60 s 2: 17.40 s 2(1)(c): 16.150 s 7(1): 16.205, 16.220, 16.255, 16.260 s 7(2): 16.320 s 7(3): 16.325 s 7(4): 16.330 s 18(2): 18.80 s 18(3): 18.25 s 18(4): 18.70, 18.80, 18.105 s 19: 18.25 s 20: 18.60 s 20(2): 18.60 s 21: 18.20, 18.25 s 23(1): 18.50 s 26: 18.120 s 28: 17.70 s 33(b): 18.205 Fair Trading Act 1986: 18.105

UNITED STATES Uniform Commercial Code Art 9: 14.10

UNITED KINGDOM Consumer Rights Act 2015 s 34: 16.140

xxxviii

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Consumer Rights Act 2015 — cont s 35: 16.140 s 36: 16.140 Ch 3: 16.140 Sale of Goods Act 1893: 8.10, 16.355, 16.365 Sale of Goods Act 1979: 16.190

Supply of Goods (Implied Terms) Act 1973: 16.100, 16.210 Supply of Goods and Services Act 1982 s 13: 17.70

TREATIES AND CONVENTIONS Australian Treaty Series: 16.175

United Nations Convention on Contracts for the International Sale of Goods 1980: 16.175

PART 1

THE CONCEPT OF PROPERTY Chapter 1

Understanding Property Law ............................................. 3

Chapter 2

What is Property? .............................................................. 5

Chapter 3

Distribution of Property ................................................... 13

CHAPTER 1

......................................................................................................................

Understanding Property Law Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 1. [1.10] All of us have things. If nothing else, we have the clothes on our backs, but most of us have more: food, money, a place to live, and the list goes on. We have laws regulating the use of our things. They stop others from interfering with our things without our consent. They tell us how things are bought, sold, borrowed, or given away. They provide a peaceful way of resolving disputes when two or more people claim the same thing. Property law is the law relating to things and property rights are the legal rights that entitle people to make use of things. Not everything can be subject to property rights. Most tangible things can be. For example, people have property rights to coats, cats, and cars, but what about human tissue or an entire human body? Many intangible things can be subject to property rights, such as songs, inventions, and shares in a company. What about information and news? Property law determines whether something can or cannot be subject to property rights. This is an issue explored in the pages below. However, most of the law of property is concerned not so much with the things themselves as with the rights people have regarding things. When dealing with property rights, there are three basic questions which should be asked and answered:

(1)

what sort of right is it,

(2)

how was it created, and

(3) what priority does it have? The answer to one question will affect the answer to another, but it is useful to consider each question separately. Property law has a reputation for being a difficult subject (which is only partly deserved). There are three main reasons for this: its vocabulary, the breadth of the subject, and a lack of organisation. First, property law has evolved slowly over centuries and uses words, like “chattel”, that were once generally understood, but ceased to be part of our common speech a very long time ago. However, most of these strange terms identify relatively simple concepts. Secondly, other law subjects tend to be more narrowly confined by their logical or contextual boundaries. For example, tort and contract are each concerned with rights arising from one type of event (wrongdoing or agreement, respectively). Administrative and family law are concerned with rights arising in a particular context.

4

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[1.10]

Property law cuts across these divisions. Property rights can be created by agreement or by wrongdoing and can arise in disputes among family members or with governments. The sheer breadth of the subject can be daunting. Thirdly and most importantly, there is so much material to cover that it is easy to lose sight of the forest for the trees. The successful study of any subject requires a useful taxonomy, so that each part can be compared and contrasted with other parts and with other subjects. This is especially true of property law. Property law is an enjoyable and worthwhile subject of study. It is a useful way to pull together and build a framework for understanding other areas of law, such as contract and tort, which tend to be studied as separate, unrelated pockets of Australian law. An understanding of property law is also an essential foundation for the study of a number of areas of law, such as trusts, restitution, intellectual property, and commercial law. More than this, property law is itself surprisingly enjoyable. It goes beyond the buying, selling, and mortgaging of land with which it is most commonly associated. Many of the most interesting and topical aspects of law are property issues, such as the trade in body parts and genetic material, squatters and homelessness, protection of the environment, de facto spouses and ownership of the family home, freedom of information, and tracing the proceeds of crime.

CHAPTER 2

......................................................................................................................

What is Property? Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 2.

Property rights are rights to things. A basic understanding of them is best achieved in two stages. The first, which is the subject of this chapter, is to identify the kinds of rights which the law regards as property rights. The second is to identify the kinds of things which can be subject to those rights. That is discussed in the next chapter. [2.10]

Definitions of property The word “property” means different things to different people and in different contexts. It is commonly used to refer to the things that people own. For example, when we encounter a sign of “Private Property” on a gate, we assume that the property in question is the land on the other side. When we see “Property Left at Owner’s Risk” posted in a cloakroom, we understand property to mean the coats, hats, etc, that people may choose to leave there from time to time. This is a common and perfectly acceptable use of the word property, but it is a popular or layperson’s usage. When lawyers talk about property, they are usually referring to the rights which people have to things, rather than the things themselves. Lawyers divide legal rights into personal rights and property rights, but they do not always divide them in the same way. Whether a particular right counts as property depends on why it matters. Sometimes, what matters is whether a right can be assigned (that is, transferred) to another person. For that purpose, a right can be counted as property if it is assignable, but that produces a very wide definition of property because most rights are assignable. At other times, the essential issue is the enforcement of the right. In that context, a property right is a right to a thing which can be enforced generally against other members of society and not just against specific persons. This produces a much narrower definition of property since most rights are not enforceable generally against others. The fact that lawyers use different definitions of property for different purposes does not mean that the concept of property is vague or poorly defined. Legal definitions of property are precise and well understood in the contexts in which they are used. However, care must be taken to choose the correct definition and use it consistently. What is commonly regarded as the law of property (and studied as a separate subject in university law schools) is based on the narrow definition of property, set out below. That [2.20]

6

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[2.30]

is what this book is about. However, it is important to be aware that a different and much wider definition of property is used for some purposes. Assignable rights ...............................................................................................................................................................................................

At its widest, property means any right that can be transferred from one person to another. For example, when someone dies, most of her or his rights form the estate which gets transferred to the executor and then distributed according to law. The collection of rights available for distribution in this way is often called the property of the deceased, and can include such things as land, personal belongings, bank accounts, company shares, debts due to the deceased, and even legal claims which the deceased had a right to pursue. A similar process occurs when people are unable to meet their financial obligations and become bankrupt. The bankruptcy process is designed, in part, to prevent a stampede of creditors all rushing to get paid. Instead, the “property of the bankrupt” is transferred to the trustee in bankruptcy, who sells it and distributes the proceeds among the bankrupt’s creditors. 1 The “property of the bankrupt” includes most of the bankrupt’s transferable rights, and can even include a right to appeal from a judgment given against the bankrupt in a court of law. 2 For other purposes, we would not regard a right to appeal as a form of property, but it can count as property for the purposes of bankruptcy law. These wide definitions of property are those based on the assignability of rights. When defined in this way, property includes everything that might be regarded as wealth or which an accountant might list as an asset on a balance sheet. Excluded are personal rights, which in this context are those rights which can be used only by the particular person who holds them. For example, the right to vote in a general election cannot be sold or given away. It is always regarded as a personal right, never property. The same is true of an academic or professional qualification, such as a university degree or licence to practise medicine. 3 If property was always defined this way, it would be a very large subject indeed. Since most contractual rights are assignable, it would swallow up most of the law of contract. Similar things could be said of the law of torts. However, for most purposes (including the study of law), the definition of property is based on the enforceability of rights and not their assignability. [2.30]

Rights in rem ...............................................................................................................................................................................................

For most purposes, the distinction between personal rights and property rights is based on their enforceability. It corresponds to the distinction between rights in personam [2.40]

1 2

Bankruptcy Act 1966 (Cth), s 58. Cummings v Claremont Petroleum NL (1996) 185 CLR 124; [1996] HCA 19.

3

Caratun v Caratun (1992) 96 DLR (4th) 404 (Ont CA).

[2.50]

CHAPTER

2

WHAT IS PROPERTY?

7

and rights in rem (using the Latin words for person and thing). Rights in personam are so called because they are enforced against particular persons, without much regard to the things they might have. Rights in rem are rights people have concerning particular things, without much regard to the people against whom those rights might be enforced. Property law is primarily about rights in rem. An example may help. If I borrow $20 from you and promise to repay it, I owe you $20. You do not expect to get the same $20 note back. Instead, I have a personal obligation to pay which corresponds to your personal right to be paid $20. This is a right in personam which can be enforced against me, regardless of what has become of the $20 note I borrowed. If I give that note to a friend or spend it at a shop, you do not acquire any rights against my friend or the shopkeeper. You have no right to that note nor to any other $20 note I may have. In contrast, if I borrow your book and promise to return it, you continue to own the book. In addition to my promise, you have a right in rem which is enforceable against me because I have your book. The property right follows the book and, if I give your book to a friend, you can assert your right in rem against my friend, because he or she has your book. The distinction between rights in rem and rights in personam is important in the law. A right in rem depends upon the continued existence of the thing to which the right relates. For example, if your book is destroyed, your property right is gone. The destruction may give you a right in personam against the person who destroyed your book or against your insurance company, but it brings to an end your right in rem to the book. In contrast, a right in personam does not depend on the existence of any particular thing. Instead, it corresponds to some person’s obligation to fulfil that right. The value of the right in personam depends upon the ability of the person to perform the corresponding obligation. So, for example, if I owe you $20, you have a right in personam which appears to be worth $20. However, if it turns out that I owe money to almost everyone I know and am unable to pay my debts, the practical value of your right may be greatly reduced. Although your right to be paid does not depend on the existence of any particular thing, my lack of sufficient assets to meet my obligations can affect the value of your right.

The essential characters of property rights Property rights come in a variety of shapes and sizes. For example, the right to use a book borrowed from the library differs in many ways from a landlord’s right to a home which is rented out. Despite these differences, these and all other property rights share two common characteristics which distinguish them from personal rights. The first is that a property right always relates to, and depends upon the existence of, some particular thing. The second is that a property right can be enforced not just against specific persons, but against a wide range of persons. It will be helpful to look at the second characteristic first. [2.50]

8

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[2.60]

Enforceability ...............................................................................................................................................................................................

All legal rights, whether personal or property, have correlating obligations. For example, if I owe you $20, you have a right to be paid $20 and I have a corresponding obligation to pay that amount. Your personal right and my personal obligation are two sides of the same coin. They form a relationship between specific persons. In this example, the relationship is called debt, in which I am the debtor who owes money to you, the creditor. Property rights, like all legal rights, are also enforced against persons. However, unlike personal rights, there are no specific persons responsible for their fulfilment. Who, for example, owes the obligation which corresponds to your property right to this book? Although the book must exist for your property right to exist, it cannot fulfil that right for you. That right can only be enforced against other persons. The obligation which corresponds to your property right is owed by other members of society. They each have a duty not to interfere with your rights to your book. In an influential essay called “Fundamental Legal Conceptions as Applied to Judicial Reasoning”, 4 Wesley Hohfeld said that the difference between rights in rem and rights in personam is simply the number of rights involved. A personal right is either a unique right enforceable against “a single person” or one of a small group of similar rights enforceable against “a few definite persons”. In contrast, property rights consist of “a large class of fundamentally similar yet separate rights”, which correspond to the obligations of “a very large and indefinite class of people”. In other words, Hohfeld would view your property right to your book as a very large collection of rights against every member of society, each of whom is under an obligation to you not to interfere with your rights relating to your book. Hohfeld used an example to illustrate his point. Suppose I made a contract with Yvonne that she would keep off your land. What is the difference between my contractual, personal right against Yvonne and your property right against her? Both rights have the same content. Hohfeld would say that the only real difference is that I have only one right of that kind, whereas you have a large number of similar rights which are enforceable against an indefinite class of people (including Yvonne). A difficulty with Hohfeld’s portrayal of property rights, as equivalent to an indefinite number of personal rights, is that it devalues the role of the things which are subject to those rights. Also, it does not accord with the way property rights function in society. A property right does not normally involve a set of specific relationships between the person who holds it and everyone who is obligated to respect it. As members of society, we are all under the same general duty not to interfere with the persons and things of others. The identity of the persons involved is irrelevant until someone interferes with [2.60]

4

“Fundamental Legal Conceptions as Applied to Judicial Reasoning” (1917) 26 Yale Law Journal 710 at 718.

[2.70]

CHAPTER

2

WHAT IS PROPERTY?

9

the property right of another. The Hohfeldian analysis of property, as an indefinite number of one-to-one relationships of rights and corresponding obligations, is unnecessary. Assume, for example, that I have an obligation not to trespass on land belonging to others and would breach that obligation if I walked across a lawn without the owner’s consent. As I walk along the street passing lawn after lawn, a Hohfeldian might say that I enter a legal relationship with the owners of each lawn that I pass. They have a right to keep me off their lawn which corresponds to my obligation to stay off. However, I do not know who or how many people live in the houses I pass nor whether they are home or away. It does not matter. The identity of the property owners is irrelevant because I know that: (a)

I have a general duty not to interfere with the things of others,

(b)

those are not my lawns, and

(c) I do not have permission to tread on them. We have no legal relationship except as members of the same society bound to observe the laws of that society. The existence of some thing ...............................................................................................................................................................................................

An essential characteristic of property rights is that they are enforceable generally against other persons in society. However, this is not a sufficient definition of property. The law also protects people from personal injury by imposing a general duty on members of society not to injure others intentionally or negligently. These rights to personal integrity and freedom from bodily interference correspond to general duties not to touch others intentionally without their consent and to take reasonable care not to harm them. The law protects your body and your things in much the same manner. Someone who wrongly interferes with your arm is guilty of a tort and liable to compensate you for any loss you suffer. The same is true of someone who wrongly interferes with your book. If your right to non-interference with your body is not a property right, but a personal right, what distinguishes these two types of rights? It is clear, using the language of Hohfeld, that both rights are enforceable against an “indefinite class of people”. However, the right to be free from bodily interference is not a property right because our bodies are not “things”. Property rights must relate to things which are separate and apart from ourselves. As James Penner said, “‘Thing’ here is a term of art which restricts the application of property to those items in the world which are contingently related to us, and this contingency will change given the surrounding circumstances, including our personal, cultural or technological circumstances.” 5 [2.70]

5

“The “Bundle of Rights” Picture of Property” (1996) 43 UCLA Law Review 711” at 807.

10

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[2.80]

Things which are intrinsically connected to us, such as our bodies and reputations, cannot be subject to property rights. Although they are valuable to us and protected by laws such as the rules against assault and defamation, they are not protected by property law. It is possible that the intrinsic connection to something might be severed and reduced to a contingent connection. For example, a lock of hair could be cut off and transformed from being a part of a person into a thing which a person owns. The same is true, perhaps, of a kidney. However, unless the intrinsic connection is broken, they cannot be subject to property rights. 6 Other essential characteristics? ...............................................................................................................................................................................................

So far, a property right has been identified as a right to a thing, which corresponds to a general duty placed on other members of society not to interfere with that right. Although basic, this definition identifies the two characteristics which separate all property rights from personal rights. Given the wide variety of property rights, it is unlikely that anything further can be added to this basic definition. There are several characteristics which the majority of property rights share, such as alienability, excludability, and value. However, as discussed below, not all property rights have these traits, while many personal rights do. Therefore, they are not useful as defining characteristics of property rights. [2.80]

Alienability

First, it is sometimes said that property rights are alienable, meaning that they can be sold or given away to others. Of course, this must be true when a wide definition of property based on assignability is used (as discussed above at [2.30]). However, that definition of property includes both rights in rem and rights in personam. While most rights are alienable, many are not. Most non-assignable rights are rights in personam, but there are also a few non-assignable rights in rem. In other words, there is some property that cannot be sold or given away. For example, a non-assignable, residential lease is certainly a property right, even though the tenants are not free to transfer it to others. All property rights can be described as “alienable” if that term is understood to mean “disposable” rather than “transferable”. Since property rights must relate to some thing which is only contingently connected to the right holder, it must be possible for that person to alienate the thing in the sense of severing her or his connection to it. However, that connection can be severed without transferring the right to another. For example, the tenant with a non-assignable lease can surrender it and vacate the dwelling. [2.90]

Excludability

The second characteristic often attributed to property rights is excludability, meaning that the holder of a property right is able to exclude others from making use of [2.100]

6

See MJ Radin, “Property and Personhood” (1982) 34 Stanford Law Review 957 at 966.

[2.110]

CHAPTER

2

WHAT IS PROPERTY?

11

the thing subject to that right. Most property rights do include this trait. For example, if you own or rent a home, you have the right to exclude others from it. If you borrow a book from the library, you have the right to exclude others from using the book. However, there are property rights which do not allow the right holder to exclude others from the thing subject to that right. For example, a right of way is a property right to cross another person’s land. It meets the definition of a property right in that it relates to some thing (land) and is enforceable against other members of society (including the land owner), who are not permitted to interfere with its proper use. However, the holder of a right of way is not permitted to exclude others from the land subject to it. Just as all property rights do not entitle the right holder to exclude others from the thing, some personal rights do. Hohfeld’s example (discussed above at [2.60]) gave me a personal right to exclude Yvonne from your land. Also, sometimes in the course of a domestic dispute, one spouse might be granted the right to exclude the other spouse from the family home, even though that other spouse is the sole or part owner of that home. 7 Value

Value is a third characteristic which most, but not all, property rights share. They usually have some market value. Even second-hand clothing can fetch a few dollars in a charity shop. However, value is not a necessary characteristic of property. 8 Many things which are subject to property rights have only sentimental value (such as my child’s primary school artwork or an old theatre ticket from a memorable night out). There are other things which are completely valueless. For example, your property right to dirty motor oil drained from your car may create a liability for the cost of discarding it safely. On the other hand, there are many personal rights that have market value, such as a contractual right to be paid a sum of money. In modern Australian society, many of the things for which we pay money are not property rights, but services, such as the right to listen to live music, have our cars washed, or receive medical advice. Some personal rights are commonly regarded as property rights because of their value. The most familiar example is the bank account. Money in the bank may be a person’s most valuable asset, but that does not make it property. If you deposit a $100 note in the bank, your property right to that note passes to the bank and the balance in your account increases by $100. The bank does not keep that $100 note safe for you. It belongs to the bank and is used as the bank sees fit. 9 The deposit does not give you any property rights to any other notes or assets in the bank. Your “money in the bank” does not correspond to anything but the bank’s promise to pay you $100 (plus interest, less fees and taxes) on request. In other words, you have exchanged your property right to the $100 note for a personal right of similar value. You are the bank’s creditor and the bank is your debtor. [2.110]

7 8

Family Law Act 1975 (Cth), s 68B. F Cohen, “Dialogue on Private Property” (1954) 34 Rutgers Law Review 957 at 363-364.

9

Foley v Hill (1848) 2 HLC 28; 9 ER 1002 at 36 (HLC), 1005-1006 (ER).

12

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[2.110]

A personal right against a bank is a valuable asset, not because it relates to any particular thing, but because the bank will almost certainly pay its debts. Most people would rather have money in the bank than large sums of cash, because the risk of a bank not paying is much smaller than the risk of cash being lost, stolen, or destroyed. In other words, a bank account is a desirable form of value precisely because it is not property and does not carry the usual risks of property ownership. It is important not to overstate the essential characteristics of property. This happened in Milirrpum v Nabalco Pty Ltd, 10 and led to the dismissal of the plaintiffs’ claim for native title. The plaintiffs claimed that the defendant’s mining activities were wrongly interfering with their property rights to use certain land to perform ritual ceremonies. The judge, Blackburn J, said, “I think property, in its many forms, generally implies the right to use or enjoy, the right to exclude others, and the right to alienate”. 11 Since the plaintiffs were not entitled to exclude others from the land and could not sell or give their rights to others, Blackburn J decided that they did not have property rights enforceable against other members of society. However, it is clear that the plaintiffs’ rights related to a thing (the land) with which they were contingently connected. Although individual members of the plaintiffs’ clan could not sell or give their rights to others, they had the power to sever their connection with the land by moving away. Also, the right to perform ritual ceremonies on the land, like a right of way, can be a property right so long as it corresponds to a general duty placed on other members of society not to interfere with the exercise of that right. The right to exclude others from the land was not required. The result in Milirrpum would probably be different if that case was decided today, now that native title has been recognised by the High Court of Australia in Mabo v Queensland (No 2). 12

10 11

Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141. Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 at 272.

12

Mabo v Queensland (No 2) (1992) 175 CLR 1; [1992] HCA 23.

CHAPTER 3

......................................................................................................................

Distribution of Property Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 4. [3.10]

kinds:

Jeremy Waldron wrote that discussions about property law are of two different

1

First there are analytical issues, about the meaning and use of the most important concepts in property law, such as “private property”, “ownership”, and “thing”. The second type of issue is normative or justificatory.”

This book is of the first kind. This chapter is but a brief look at a few questions concerning the justification of property rights and their distribution in Australia. This is not an indication of the relative importance of these two different kinds of inquiries, nor is it meant to suggest that they are wholly separate from each other. The property regime discussed in this book exists because the majority of Australians believe that this method of allocating rights to things is justified. The justification of this regime, morally and politically, is a complex and important task, which depends upon an understanding of the nature and regulation of property rights in Australian society. Property rights, like all legal rights, require justification because they correspond to duties placed on other members of society. Laura Underkuffler said, “A right can be defined as that which fulfils an individual need or individual interest that is considered to be of sufficient moral importance to justify the generation of duties for others”. 2 Property rights are especially in need of justification because they correspond to duties imposed on everyone in society and not just on those who have consented to undertake particular duties to particular right holders. The justification of property rights tends to be a contentious business. Why does one person have the right to prevent others from walking on some place on the earth? Why do the police help shopkeepers protect large stores of food from the hungry? The debate is emotionally and politically charged. However, these questions concern the justification of particular types of property rights or the manner in which those rights are distributed in society. They do not address the basic question of whether property rights should exist at all. That question is relatively simple and free of controversy. For example, we might argue about the ownership of Australia’s telephone systems, but would agree that there must be at least one person with the right to prevent others 1

“Property Law” in D Patterson (ed), A Companion to Philosophy of Law and Legal Theory (2nd edn, Oxford, 2010) p 9 at 9.

2

“On Property: An Essay” (1990) 100 Yale Law Journal 127 at 139.

14

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[3.10]

from taking away or destroying the equipment needed to operate those systems. In other words, we can agree that there ought to be property rights to telephone systems, without having to decide who should hold those rights. Similarly, we might debate whether people should have free access to the beach. This is not a debate over whether there should be property rights to the beach. Each side favours a different property right: either the right to use the beach or the right to prevent others from using it. The former is a property right not to be excluded from the beach and to prevent others from using it in a manner that detracts from that access (for example, by building or dumping). Our debate is about the kind of property rights which should exist and who should hold them. A society cannot function peacefully without rules regulating the use of things. As Waldron said, “Disagreements about who is to use or control such objects are likely to be serious because resource use matters to people, for their livelihood as well as their enjoyment. Thus any society with an interest in avoiding violent conflict will need a system of rules for pre-empting disagreements of this kind.” 3 The existence of property rights is simply part of the rule of law. 4 The regulation of human behaviour necessarily involves the regulation of our use of things. Resources in society can be owned either privately or publicly. In other words, the right to decide how something should be used can be allocated to private persons or to society as a whole. One society can be distinguished from another according to the proportions of private and public property that exist within it. 5 As Peter Birks said: 6 Things either fall within the sphere of private ownership or they do not. The way in which the line is drawn goes far to determining the character of a society. Move it a little to one side, to exclude the means of production, and you have communism.

In Australia, private property predominates. However, a large portion of the country is publicly owned as Crown land, as are most minerals located in private land. Also, private and public property blend into one another. For example, a privately owned building may be designated a heritage site, thereby prohibiting the owner from altering its structure without government permission and imposing upon the owner positive duties to preserve it. In that situation, decisions about the use of the thing are being made privately and publicly. The private ownership of most things is limited to some extent by public decisions, through zoning laws and other regulations. The debate over the benefits and evils of “property” is concerned not with the existence of property rights, but with their distribution in society. The use of valuable resources must be regulated, but by whom? Which resources should be allocated to 3 4 5 6

“Property Law” in D Patterson (ed), A Companion to Philosophy of Law and Legal Theory ((2nd edn, Oxford, 2010) p 9 at 11. See J Waldron, The Rule of Law and the Measure of Property (Cambridge, 2012) pp 15-21. See F Cohen, “Dialogue on Private Property” (1954) Rutgers Law Review 357 at 357-359; AM Honoré, “Ownership”, in AG Guest (ed), Oxford Essays in Jurisprudence (Oxford, 1961) p 107 at 109-110. “An Unacceptable Face of Human Property” in P Birks (ed), New Perspectives in the Roman Law of Property: Essays for Barry Nicholas (Oxford, 1989) p 61 at 61.

CHAPTER

[3.20]

3

DISTRIBUTION OF PROPERTY

15

private persons and which should be left in the public domain? Whether property is private or public, how and to what extent should its use be regulated by the State? When we speak of the need to justify property, meaning the right of some people to control things to the exclusion of others, we are usually talking about justifications for private property.

Public property Public property can be either common or collective property. 7 Common property is the right of everyone in society (or a sufficiently large segment of society) to make use of a thing. It corresponds to the general duty of others not to use the thing in a way which interferes with the common use. For example, no-one is permitted to build on a public road or park, pollute a public beach, or prevent an Aboriginal group from exercising its native title. No government or individual member of society is entitled to the exclusive use of a thing which is common property. Collective property exists when decisions regarding the use of a thing are taken on behalf of society by public institutions, such as government agencies and departments and government-owned corporations. In Australia, those decision-makers are ultimately responsible to all members of the particular collective (whether city, State, Territory, or Commonwealth) through the democratic process. The fact that decisions are made collectively does not mean that individual members of the collective have a right to use that thing. For example, public access to a military installation will probably be highly restricted. The distinction between common and collective property is not always easy to see. The collective may decide to use something, such as a freeway, museum, or zoo, in a manner which gives people relatively free access to that thing. However, decisions about the use of that thing are made by, or on behalf of, the government. Public access to it is granted by the decision-maker and does not exist independently as a common right. Collective ownership is often similar to private ownership. For example, an office building gets used in much the same way, regardless whether its occupants are civil servants or employees of a private company. However, it is a mistake to assume that collective ownership is simply the public equivalent of private ownership. In many situations, State ownership exists as a means of regulating the public use of a resource and not for the purpose of giving the State the kind of use and control that a private owner could exercise. In Yanner v Eaton, 8 the defendant was charged with hunting crocodiles without a licence. The Magistrate dismissed that charge because the defendant had exercised his native title right to hunt them. The High Court of Australia was asked to decide whether [3.20]

7

See CB Macpherson, “The Meaning of Property” in CB Macpherson (ed), Property: Mainstream and Critical Positions (Toronto, 1978) p 1 at 4-6; J Waldron, The Right to Private Property (Oxford, 1988) pp 40-42.

8

Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53.

16

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[3.20]

that right had been extinguished by the Fauna Conservation Act 1974 (Qld), which declared that “All fauna … is the property of the Crown”. 9 That native title right would have been extinguished if the Crown had been the owner of the crocodiles. The majority of the court held that the Crown’s “property” was not equivalent to private ownership, but merely part of “a regime forbidding the taking or keeping of fauna except pursuant to licence granted by or under the Act”. 10 They quoted Roscoe Pound on the meaning of public ownership: 11 We are also tending to limit the idea of discovery and occupation by making res nullius (eg, wild game) into res publicae and to justify a more stringent regulation of individual use of res communes (eg, of the use of running water for irrigation or for power) by declaring that they are the property of the state or are “owned by the state in trust for the people”. It should be said, however, that while in form our courts and legislatures seem thus to have reduced everything but the air and the high seas to ownership, in fact the so-called state ownership of res communes and res nullius is only a sort of guardianship for social purposes. It is imperium, not dominium. The state as a corporation does not own a river as it owns the furniture in the state house. It does not own wild game as it owns the cash in the vaults of the treasury. What is meant is that conservation of important social resources requires regulation of the use of res communes to eliminate friction and prevent waste, and requires limitation of the times when, places where, and persons by whom res nullius may be acquired in order to prevent their extermination. Our modern way of putting it is only an incident of the nineteenth-century dogma that everything must be owned.

Other natural resources, such as water, are often regulated in the same way. For example, according to the Water Act 2000 (Qld), “All rights to the use, flow and control of all water in Queensland are vested in the State”. 12 This does not mean that the State owns that water in the same way that it would be privately owned, but provides a mechanism for State regulation of an important resource. The same goals can be achieved without formal State ownership simply by regulating the right to use water within the State. 13 Public resources are often owned as collective property, rather than common property, because it is harder to regulate the use of common property. If every member of society has a right to use a particular resource, how do we restrict or suspend that use for the greater good? It is easier if decisions about the use of that resource are made collectively for the benefit of all. However, there is a risk that collective ownership of public spaces could be exercised in ways that restrict the basic freedoms which members of society ought to enjoy. 9 10 11 12

13

Fauna Conservation Act 1974 (Qld), s 7; replaced by Nature Conservation Act 1992 (Qld), s 83. Also see National Parks and Wildlife Act 1974 (NSW), s 97; Wildlife Conservation Act 1950 (WA), s 22. Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53 at [30]. Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53 at [29], quoting R Pound, An Introduction to the Philosophy of Law (rev ed, Yale, 1954) p 111. Water Act 2000 (Qld), s 19. Also see Water Resources Act 2007 (ACT), s 7; Water Act (NT), s 9; Water Management Act 1999 (Tas), s 7; Water Act 1989 (Vic), s 7; Rights in Water and Irrigation Act 1914 (WA), s 5A. See Water Management Act 2000 (NSW); Natural Resources Management Act 2004 (SA), Ch 7.

[3.20]

CHAPTER

3

DISTRIBUTION OF PROPERTY

17

In Committee for the Commonwealth of Canada v Canada, 14 two people were prevented from distributing political leaflets and magazines at a public airport in Montreal, and they claimed that this violated their right to freedom of expression under the Canadian Charter of Rights and Freedoms. The government argued that, “as owner of property, the government has the right to exclude whomever it wants, and to impose conditions on invitees to its property without limitation by the Charter”. 15 This was rejected by the Supreme Court: 16 If property rights alone can be invoked to limit, restrain, or abridge a fundamental freedom on any given place of public property, the Charter’s guarantees lose all meaning — only those holding the property-owner’s permission could express themselves.

While the government had the right to restrict activities in the airport for security and operational purposes, that did not justify a ban on peaceful forms of expression in the parts of the airport to which the public normally had free access. This follows the approach taken by the United States Supreme Court to freedom of expression in public places: 17 Wherever the title of streets and parks may rest, they have immemorially been held in trust for the use of the public and, time out of mind, have been used for purposes of assembly, communicating thoughts between citizens, and discussing public questions. Such use of the streets and public places has, from ancient times, been a part of the privileges, immunities, rights, and liberties of citizens. The privilege of a citizen of the United States to use the streets and parks for communication of views on national questions may be regulated in the interest of all; it is not absolute, but relative, and must be exercised in subordination to the general comfort and convenience, and in consonance with peace and good order; but it must not, in the guise of regulation, be abridged or denied.

In the United States, rights to free expression in public places have also been extended to private property to which the public has been invited. In PruneYard Shopping Center v Robins, 18 the Supreme Court upheld the right to distribute political pamphlets and seek signatures on a petition in a privately owned shopping mall, over the objections of its owner. In essence, this treats private property as public property when the owner chooses to use it as a public place. In Marsh v Alabama the court said: 19 Ownership does not always mean absolute dominion. The more an owner, for his advantage, opens up his property for use by the public in general, the more do his rights become circumscribed by the statutory and constitutional rights of those who use it.

14

Committee for the Commonwealth of Canada v Canada [1991] 1 SCR 139; 77 DLR (4th) 385.

15 16 17 18

Committee for the Commonwealth of Canada v Canada [1991] 1 SCR 139; 77 DLR (4th) 385 at 421. Committee for the Commonwealth of Canada v Canada [1991] 1 SCR 139; 77 DLR (4th) 385 at 424. Hague v Committee for Industrial Organization 307 US 496 (1939) at 515-516. PruneYard Shopping Center v Robins 447 US 74 (1980).

19

Marsh v Alabama 326 US 501 at 506 (1946).

18

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[3.30]

Debates over the use of public places go beyond our concern for the free expression of ideas. In “Homelessness and the Issue of Freedom”, Jeremy Waldron observed that freedom also involves the freedom to attend to basic needs: 20 When a person is needy, he does not cease to be preoccupied with freedom; rather his preoccupation tends to focus on freedom to perform certain actions in particular. The freedom that means most to a person who is cold and wet is the freedom that consists in staying under whatever shelter he has found. The freedom that means most to someone who is exhausted is the freedom not to be prodded with a nightstick as he tries to catch a few hours sleep on a subway bench.

The regulation of public places affects us all, but affects the homeless in a different way. Public places are regarded as appropriate for public activities, but inappropriate for certain private activities, such as bathing, sleeping, or having sex. For most of us, a prohibition of those activities in public places is perfectly acceptable, and maybe even desirable, because we have access to private property for those purposes. As Waldron said: 21 For a person who has no home, and has no expectation of being allowed into something like a private office building or a restaurant, prohibitions on things like sleeping that apply particularly to public places pose a special problem. … The rules of property prohibit the homeless person from doing any of these acts in private, since there is no private place that he has a right to be. … If sleeping is prohibited in public places, then sleeping is comprehensively prohibited to the homeless.

Private property Private property is the right of a private person or group of private persons to make decisions regarding the use a thing. For example, if you own this book, you can decide whether to read it, write in it, give it away, etc. You cannot use it to harm others, but the government and other members of society do not otherwise have a say in what you do with it. If you have borrowed this book from the library, your right to use it is limited by the library’s (private or collective) right to it. However, your limited right to use the book during the period of loan is private property, because that right belongs to you and not to the collective or the common. Waldron suggested that private property is in need of justification because it can operate in ways which appear to be “morally objectionable”: 22 [3.30]

Private property involves a pledge by society that it will continue to use its moral and physical authority to uphold the rights of owners, even against those who have no employment, no food to eat, no home to go to, no land to stand on from which they are not at any time liable to be evicted.

What is sought is some moral justification for allowing one private individual to control something which may be essential to the life or well-being of another. 20 21 22

“Homelessness and the Issue of Freedom” (1991) 39 UCLA Law Review 295 at 303. “Homelessness and the Issue of Freedom” (1991) 39 UCLA Law Review 295 at 315. “Property Law” in D Patterson (ed), A Companion to Philosophy of Law and Legal Theory (2nd edn, Oxford, 2010) p 9 at 15.

[3.30]

CHAPTER

3

DISTRIBUTION OF PROPERTY

19

The controversy can be narrowed further. The argument is not over the institution of private property, but over the things which should be subject to private property rights and over the distribution of those rights in society. There are some things which individuals need to maintain a basic existence, such as food, clothing, and a place to sleep. In some societies, such as a monastery, hospital, prison, or army, individuals may live without control over those things. However, most everywhere else, the right to decide when, where, and with whom we break our daily bread is an essential component of adult life. Even if we believed that the production and distribution of food should be done collectively, we would still want the freedom to decide how to use our allotted portion. At some point between production and consumption, food would become privately owned. Certain basic freedoms, such as the rights to decide what to eat and wear, cannot exist unless people are permitted to control some things. In other words, there must be at least some private property. Of course, personal fulfilment may depend on more than the bare essentials for survival. A meaningful or enjoyable life involves the pursuit of many different interests, such as our health, safety, and relationships with others. It also involves an interest in controlling and using certain external things. This is not to suggest that it is possible to construct a list of essentials which must available for private ownership. What we need to attain a desired quality of life will depend on our personal circumstances. As James Penner said: 23 If I choose the life of contemplation, for instance, a room, regular meals, access to a good library, and the company of others who share my intellectual interests are what I need, not any property.

People seek personal fulfilment in a wide variety of ways, most of which depend upon the ability to control some things. For one person it may be a sailboat. For another it may be a tennis racket or pair of hiking boots. Others may want the right to use a computer or bring flowers home to a loved one. These things are not essential for survival, but can be the ingredients of a life well lived. As Penner said, “the interest in property, no less than our interest in anything else, is an interest in creating values and forming relationships and experiencing delights which together make for the good life”. 24 Our concern is not that people have private property, but that some of us have so much while others have so little. It is the unequal distribution of private property rights that causes anguish. However, even those with very little have an interest in the institution of private property. As Laura Underkuffler asked: 25 Are the poor truly “propertyless”, with no interest in protecting the right of property? It is impossible to imagine a class of persons, let alone a majority, who have no interest, no psychological investment of any kind, in the idea of protecting property. Every individual desires protection for his property, both now possessed and that which may, in 23 24

The Idea of Property in Law (Oxford, 1997) p 205. The Idea of Property in Law (Oxford, 1997) p 204.

25

“The Perfidy of Property” (1991) 70 Texas Law Review 293 at 307.

20

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[3.30]

the future, be acquired; this is true no matter how meager one’s property may be. In fact, the poor might have a greater stake in, and a greater moral claim to, the protection of what little property they have. The general concept of property protection must be distinguished from the protection of existing property distributions.

The justification of private property is a debate over the allocation and use of private property rights and not whether those rights should exist at all. As Underkuffler said: 26 The relationship between the concept of property protection and the separate question of the protection of particular objects of property or particular property distributions could be envisioned as the relationship between a general right and particular instantiations of that right.

Every society has had to consider the list of things which are permissible objects of private ownership. Should it include land, hospitals, educational institutions, or news media? What about the means of production, transportation or communication? There is a vigorous debate over where the lines between common, collective, and private property should be drawn. This debate is not about the nature or existence of property rights, but their allocation. Linked to, but separate from the problem of deciding which things should be privately owned is the problem of their distribution in society. Again, this is not about the nature of property, nor even the nature of private property. It really concerns the rights people have to sell, lease, give, lend, or otherwise exploit their property rights. In other words, there is an important difference between the institution of private property and the existence of a free market which enables people to exchange that property for wealth. Although a free market economy depends upon the existence of private property, private property can exist in the absence of a free market. For example, Butler v Egg and Egg Pulp Marketing Board, 27 concerned the right of egg producers to sell their eggs. Although the farms, barns, equipment, feed, and laying hens were privately owned, the eggs were, by law, the property of the marketing board from the moment they were laid. Therefore, the egg producers were guilty of wrongly interfering with the board’s property rights when they sold the eggs directly to consumers. Questions about the distribution of wealth and resources in society are important. However, the focus of such questions is not on the nature and limits of property, but on the freedom to deal with property and other rights in the market place. The right to exchange property rights for value is an issue of distributive justice, but so too is the right to exchange services for value (consider, for example, the relative salaries of health care workers and movie stars). Calling into question the current distribution of property rights in society is not an attack on the institution of property, but on the regulation of exchange. As Penner said: 28 26 27

“The Perfidy of Property” ((1991) 70 Texas Law Review 293 at 308. Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185; [1966] HCA 38.

28

The Idea of Property in Law (Oxford, 1997) p 206–207.

[3.30]

CHAPTER

3

DISTRIBUTION OF PROPERTY

21

The legitimacy of property rights per se strikes me as well nigh indisputable, for the practice of property protects a liberty, ie exclusively to determine the use of things, that has proved marvellously productive in contributing to the good life of many. Determining the justice of any distribution of property, on the other hand, should draw our attention to those distributional mechanisms themselves, such as gifts and contracts and commands, all of which distribute a much broader set of goods than property rights.

The economic, moral, philosophical, political, and religious issues concerning property and its distribution in society are fascinating and rewarding subjects of study. This book does not deal with them. However, it does seek to provide an understanding of the nature of property rights and the legal framework in which they exist. This is a prerequisite for the study of broader issues of justification and distribution. The debate concerning these issues often takes place using the generic label, “property”. It is important to be able to look beyond that label and isolate the particular points of debate. In most cases, the issue at hand is not the nature of property, but its distribution. More often than not, this is a debate about the freedom to exploit resources and the regulation of that freedom. Property enters into this debate about the market place as but one of the resources subject to that market.

PART 2

PHYSICAL LIMITS TO LAND AND FIXTURES Chapter 4

Physical Changes to Things ............................................. 25

CHAPTER 4

......................................................................................................................

Physical Changes to Things Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Ch 26.

[4.10] Since property rights relate to things, they can be affected by physical changes to those things. The market value of a property right is dependent on the status of the thing subject to that right. For example, what someone will pay for the ownership of your car depends on its age, previous use, state of repair, etc. However, those factors do not affect the nature and existence of your property right to your car. Your ownership entitles you to possess and use it, regardless of its market value. This chapter concerns physical changes to things that cause property rights to be created, destroyed, or altered. For example, when a house is painted, the paint ceases to exist as a separate thing and becomes part of the house, which is part of the land beneath it. There are no longer any property rights to the paint which are distinct from the property rights to the land. The physical change to the paint (from liquid in a can to solid on a wall) destroyed the ownership of the paint as goods. This chapter is divided into three main sections. The first concerns changes to property rights brought about by the creation and destruction of things (see [4.20] ff). The second deals with the problems which arise when goods belonging to one person get attached to, or mixed with, something belonging to another, as accessories (see [4.120] ff). The third section concerns mixtures of indistinguishable goods (such as oil or grain) belonging to more than one person (see [4.240] ff).

Creation and destruction of things The creation and destruction of things is a normal part of daily life. Agricultural products are turned into food and consumed, while goods are manufactured, used, and discarded. The creation of a new thing brings about the possibility of new property rights. Those rights may arise automatically when the thing comes into existence. For example, if your dog had puppies, you would be the owner of the puppies from the moment of their birth. 1 This is just one of many rules which allocate the ownership of new things among members of society. Conversely, the destruction of a thing will necessarily bring to an end any property rights to it. Sometimes, its destruction will give rise to a personal right to payment (of [4.20]

1

See Grant v YYH Holdings Pty Ltd [2012] NSWCA 360 at [37].

26

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.30]

damages or insurance proceeds) or a property right to some other thing, but property rights to the destroyed item are no longer possible. It is helpful to discuss goods and land separately (at [4.30] ff and [4.60] ff). Goods are created and destroyed all the time, but this is a relatively rare occurrence with land. Also, the nature of property rights to land means that those rights are unlikely to be affected by physical changes to the land or the things attached to it. Goods ............................................................................................................................................................................................... [4.30] The creation of new goods is called specification (from specificatio in Roman law, which is the making of a new thing or nova species). This can happen naturally, such as a plant growing from a seed or producing fruit or an animal giving birth, laying eggs, or producing milk. It also occurs when something is manufactured, such as a car, shirt, or loaf of bread. There are two potentially difficult issues. First, when does specification occur? How do we know (for legal purposes) whether we have a new thing or merely a modification of an existing thing? For example, if I mix an egg with flour, sugar, chocolate, etc, and bake a cake, the egg is gone and a new cake has come into existence. What if I mix the egg with a few vegetables and turn it into an omelette? What if I simply boil or fry the egg? Secondly, when specification does occur, how do we allocate property rights to the new thing? In most cases, this is not a problem. If I make a cake in my kitchen using my ingredients, I will own the cake. What if I make it in your kitchen with your ingredients? What if only some of the ingredients belonged to you? Since new goods do not spring into existence out of thin air (divine intervention and science fiction aside), the creation of goods requires the destruction or use of other goods or the use of land. This can pose a legal problem if the creation of new goods involves things and creative effort supplied by more than one person. The law must provide a mechanism for allocating the property rights to the new goods in a fair, peaceful, and efficient manner.

Making new things

There is no set rule for deciding when a new thing is created. Judges tend to rely on their common sense. For example, in the Associated Alloys case, 2 steel belonging to the plaintiff had been made into pressure vessels and heat exchangers by the defendant. Bryson J decided that the manufactured steel products were new things and therefore the plaintiff’s steel no longer existed: 3 [4.40]

2

3

Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205; (1996) 14 ACLC 952; [1996] NSWSC 119; affirmed (1998) 16 ACLC 1633 (CA); [1998] NSWSC 442; affirmed sub nom Associated Alloys v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25. Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205 at 209; (1996) 14 ACLC 952; [1996] NSWSC 119.

[4.40]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

27

The question whether goods which have been used in some manufacturing process still exist in the goods produced by that process, or have gone out of existence on being incorporated in the derived product is, in my opinion, a question of fact and degree not susceptible of much exposition. When wheat is ground into flour it is reasonably open to debate whether the wheat continues to exist; when flour is baked into bread there could be little doubt that the flour does not. Many examples might be encountered or imagined, and each must be addressed separately.

Very little has changed over the centuries. Debates over this issue can be found in Roman law and the solution seemed to depend on common sense. As Barry Nicholas said: 4 In short the question “is there a nova species?” can be restated in the form “would the ordinary man give the thing as it is a name different from that of the thing as it was?”

Although new goods are being manufactured all the time, there are very few cases dealing with this issue and many of them are fairly old. The reason is simple. Most people use their own materials when making things and it does not matter whether the materials continue to exist in modified form or have been turned into something new. Either way, the maker will be the owner of the product. The issue has gained prominence in recent years, because of the popularity of contractual terms called Romalpa clauses. 5 They are used by suppliers of raw materials to reserve legal ownership of those materials after they have been delivered to manufacturers. One was used in the Associated Alloys case, discussed above. It stated that “the title of the subject goods/product shall not pass to the purchaser until payment in full of the purchase price”. 6 This meant that the defendant did not own the steel it had used to manufacture steel products, but possessed it as a bailee. This is why Bryson J had to decide whether the products were merely modified forms of the plaintiff’s steel or new steel products owned by the defendant. A manufactured product is not a new thing if it can be reconverted easily to its original form. 7 In Lampton’s Executors v Preston’s Executors, 8 the plaintiff’s clay had been made into bricks by the defendant. Some of the bricks had not yet been fired and, since they could be returned to their original (lack of) form, they were still clay and not new bricks. As Bryson J noted in the Associated Alloys case, this issue is not resolved by asking whether it is possible to restore the manufactured article to its original form, but whether it is practical to do so: 9 4 5 6

7 8 9

An Introduction to Roman Law (Oxford, 1962) p 138. Named after Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676. Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205 at 207; (1996) 14 ACLC 952; [1996] NSWSC 119; Associated Alloys v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25 at [9]. See L Smith, The Law of Tracing (Oxford, 1997) pp 111-112. Lampton’s Executors v Preston’s Executors 24 Ky 455 (1829). Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205 at 209-210; (1996) 14 ACLC 952; [1996] NSWSC 119.

28

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.50]

[The] question whether goods are reducible to the original materials is not simply a matter of physics. Other perspectives have to be considered, including the economic perspective. The scraps of leather produced by cutting up a manufactured shoe could not in reality be regarded as the original leather from which the shoe was manufactured. The steel which would be produced by cutting up a pressure vessel and flattening out the cylindrical parts would not be the steel which Associated Alloys delivered under the sale; it would be scrap steel. Allocating property rights

Most things are subject to property rights from the moment they come into existence. The exceptions include animals born in the wild. If no-one owns the mother, then no-one owns the offspring. 10 A newborn domestic animal belongs to its mother’s owner and a plant belongs to the owner of the land on which it grows. In “Dialogue on Private Property”, Felix Cohen, justified these rules on the grounds of fairness, certainty, and economic productivity. 11 When goods are manufactured, the materials used to create those goods cease to exist (in law) and so do any property rights to those materials. Therefore, any property rights to the new goods are new rights, which need to be allocated to somebody. In most cases, the new goods will belong to their creator. As Goff LJ said, in Clough Mill Ltd v Martin: 12 [4.50]

Now it is no doubt true that, where A’s material is lawfully used by B to create new goods, whether or not B incorporates other material of his own, the property in the new goods will generally vest in B, at least where the goods are not reducible to the original materials.

There are two situations in which new goods might belong to the supplier of the materials, rather than their creator. The first is where the supplier and creator agree that they will. For example, you might deliver some cloth to a tailor or dressmaker on the understanding that you will own the garment made from that cloth. Your agreement displaces the normal rule and causes ownership of the garment to pass to you when it comes into existence. Secondly, the ownership of a new thing might belong to the supplier of the materials if the creator used those materials without the supplier’s consent. For example, in Silsbury v McCoon, 13 corn was stolen from the plaintiff and made into whiskey. The court decided that the plaintiff was the owner of the whiskey because his ownership of the corn was not lost when it was wrongly transformed into whiskey. This reasoning is criticised by Lionel Smith. 14 The plaintiff’s property right to the corn could not survive the destruction of that corn. The ownership of the whiskey was a new property right which was allocated to the plaintiff, as former owner of the stolen corn. 10 11 12 13

Yanner v Eaton (1999) 201 CLR 351; [1999] HCA 53. “Dialogue on Private Property”, (1954) 9 Rutgers Law Review 357 at 366-369. Clough Mill Ltd v Martin [1984] 3 All ER 982; [1985] 1 WLR 111 at 119 (CA). Silsbury v McCoon 3 NY 379 (1850).

14

L Smith, The Law of Tracing (Oxford, 1997) pp 113-114.

[4.60]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

29

The wrongdoing of the creator of a thing can explain why he or she might be disentitled from owning it. However, this can be very hard on the creator (or someone who buys it from the creator) and may produce a large windfall for the supplier of the materials. For example, suppose an artist used stolen paints and canvas worth $100 to produce an oil painting worth $1,000. Should the painting belong to the owner of the art supplies or the artist? The artist is guilty of conversion of the art supplies and liable to pay damages to their owner for their full value. Is there any reason why the artist should also be required to give up the painting? It is not the profit of wrongdoing nor was it used to commit a wrong. Therefore, restitution or forfeiture of the painting is not justified. It has been suggested that the supplier of materials should own the new goods if the creator knew that he or she was not entitled to use those materials. However, this would add an element of uncertainty, because the ownership of a new thing would depend on the creator’s knowledge at the time of conversion. Lionel Smith suggests that it would be better to allocate ownership of new goods to their creator in all cases (unless the parties agree otherwise). 15 If the creator’s use of the raw materials is unauthorised, he or she will be liable to pay damages for conversion. If the use is a crime, then punishment is also available. Land ...............................................................................................................................................................................................

As with goods, the market value of land is affected by its physical condition (such as the number and quality of buildings and other improvements). Unlike goods, physical changes to land rarely affect property rights to it. This is because of the nature of those rights. An estate is a right to possess a volume of space, measured relative to the surface of the earth, for a period of time. These four dimensions (three spatial and one temporal) are not affected by most changes to the physical condition of the land or the things attached to it. For example, if I own a house in fee simple and it is destroyed by fire, my estate will continue unchanged (but with a reduced market value). I still have the right to possession of the same space on the earth, even though the contents of that space have changed. In contrast, if my books, furniture, and other belongings are destroyed in the fire, my property rights to those things are gone. Since estates are almost immune to physical changes to land, so too are most other property rights to land. This is because other rights, such as mortgages, easements, and restrictive covenants, are attached to estates and not directly to the land subject to those estates. They depend on the continued existence of an estate and not on its physical contents. There are a few rights which are not attached to estates, such as native title and non-possessory rights to Crown land. However, these also tend to exist independently of the physical condition of the land. [4.60]

15

L Smith, The Law of Tracing (Oxford, 1997) p 114.

30

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.70]

A physical change to land can affect an estate only if it alters one of its four dimensions. This can happen in two different ways. The first is by accretion to or erosion from a shoreline (see [4.70] ff). The second is by total destruction of the premises to which the estate relates (see [4.110]). Accretion and erosion

Sometimes, the horizontal dimensions of an estate are defined by reference to the shore of a river, lake, ocean, or other body of water. If a shoreline forms part of the boundary of an estate and that line moves, the dimensions of the estate will change. An increase in the size of the estate is called accretion and a decrease is called erosion. A change to the shoreline will not affect an estate unless the boundary of the estate is defined as the shoreline. Also, the change must be gradual and not brought about intentionally by the estate holder. [4.70]

Definition of the boundary

In Southern Centre of Theosophy Inc v South Australia, 16 the plaintiff held a perpetual lease of Crown land to the west of Lake George in South Australia. The lease described the land as “containing by admeasurement 500 acres or thereabouts being … delineated in the public maps deposited in the Land Office in the City of Adelaide”. 17 The eastern boundary of the land shown on the map was the high-water mark of the lake as surveyed in 1879. The shoreline had changed significantly over the years, creating about 20 acres of new land. However, it was still possible to determine the original boundary of the estate by reference to the surveyed map. The State argued that the description of the land in the lease, by reference to the map and not the shoreline, meant that the boundary was fixed and unaffected by movement of the shoreline. The Privy Council rejected that argument. There was nothing on the map which suggested that the boundary of the estate was intended to be anything other than the shoreline. Lord Wilberforce said: 18

[4.80]

[W]here land is granted with a water boundary, the title of the grantee extends to that land as added to or detracted from by accretion, or diluvion, and … this is so whether or not the grant is accompanied by a map showing the boundary, or contains a parcels clause stating the area of the land, and whether or not the original boundary can be identified.

Lord Wilberforce described this rule as “manifestly convenient” and “fair”. 19 The potential for loss through erosion was balanced by the possibility of gain by accretion. 16 17 18

19

Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706. Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 714. Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 716. ). Also see Hazlett v Presnell (1982) 149 CLR 107; 56 ALJR 884; 43 ALR 1; [1982] HCA 58. Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 716.

[4.110]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

31

Otherwise, waterfront property could become landlocked over time because of accretion or the boundary could end up out in the water because of erosion. Therefore, it is assumed that a water boundary will move with the shoreline unless the grant of the estate clearly states otherwise. This rule can also be excluded by statute. For example, in New South Wales, “The doctrine of accretion does not apply, and never has applied to a non-tidal lake.” 20 Instead, the boundary is fixed as “the bank of the lake at the time of the Crown survey for the purposes of alienation.” Gradual change

The doctrine of accretion and erosion applies only if the shoreline changes gradually. Therefore, even if the boundary of an estate is defined by reference to the shoreline, that boundary will not move if a major change to the shoreline occurs rather suddenly. It is not clear why this is so. As Lord Wilberforce said in Southern Centre of Theosophy Inc v South Australia, “One naturally searches for a reason or rationale for the requirement that the process be gradual and imperceptible, but this proves elusive.” 21 Also unclear is the distinction between gradual and sudden change. Lord Wilberforce said that “there is a logical, and practical, gap or ‘grey area’ between what is imperceptible and what is to be considered as ‘avulsion’” and, therefore, the issue is a question of fact for the jury to decide. 22 In the Theosophy case, the lake was receding by almost 10 metres per year and this was a gradual change to which the doctrine of accretion applied. [4.90]

Intervention by the estate holders

Gradual changes to a shoreline count as accretion or erosion, whether caused naturally or by human intervention. The one exception is accretion caused deliberately by estate holders wanting to increase the size of their estate. There is nothing wrong with preventing erosion, 23 but if they intentionally cause accretion, it will not affect the boundary of their estate. Land created intentionally by reclamation belongs to the Crown at common law, and in Queensland, by statute. 24 [4.100]

Total destruction of the premises

As stated above at [4.60], estates are not normally affected by physical changes to the land or the things attached to it. However, the total destruction of the premises might bring an estate to an end. In National Carriers Ltd v Panalpina (Northern) Ltd, Lord Russell suggested that “the total disappearance of the site … into the sea” would cause [4.110]

20

Crown Lands Act 1989 (NSW), s 172.

21

Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 721.

22 23

Southern Centre of Theosophy Inc v South Australia [1981] UKPC 41; (1981) 56 ALJR 606; 38 ALR 587; [1982] AC 706 at 721. Nagle v Miller (1904) 29 VLR 765 at 786.

24

Land Act 1994 (Qld), s 10.

32

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.120]

both freehold and leasehold estates to cease to exist. 25 Although its location might still be identified, the estate holders would have no right to possess that part of the ocean. If the land disappeared gradually, it might be regarded as the elimination of the estate by erosion. However, a sudden loss of the land would produce the same result. Lord Russell also suggested that the destruction of a building would destroy a lease of an upper-floor flat. The vacant air space would be of no use to the tenants and there would be no reason to continue their rights to possess it. If a new building was constructed on that site, it would be highly unlikely that it would be identical to the old building and occupy precisely the same space. It would be bizarre if tenants of the old building had rights to possess spaces that intersected floors and walls of the new building. The boundaries of a leasehold estate of an upper-floor flat are defined, not directly in relation to the surface of the earth, but by the walls, floors, and ceilings of the building. If a 42-storey building sways in the wind, the leasehold estates on each floor sway with it. The destruction of the building destroys the boundaries which defined those estates. In contrast, if a tenant leased an entire building and that building was destroyed, the lease would continue to exist (unless the parties had agreed that it would be terminated for that reason). The boundaries of that estate would continue to exist and the tenant’s right to possess that space could be valuable and useful.

Accessories If goods are attached to or mixed with other goods or attached to land, they might lose their separate identity and cease to exist (in law). For example, if you install a new window in your car or house, the window no longer exists as a separate thing. The same is true of sugar added to a cup of coffee. The accessory becomes part of the principal object and the property rights to the accessory are destroyed. The existing property rights to the principal object attach to the whole thing, including the accessory. This is similar to the fate of raw materials used to manufacture new goods (specification, discussed above at [4.30] ff). Accessories, like consumed materials, cease to exist as separate things. There is an important difference between the two situations. Newly manufactured items are subject to new property rights. Those rights are allocated to the manufacturer in most cases, but can be allocated to the owner of the destroyed materials. In contrast, if something loses its identity as an accessory to another thing, no new thing is created. The other thing continues to exist, subject to pre-existing property rights. In most cases, those rights are unaffected by the addition of the accessory Like specification, things are added to other things all the time and yet this rarely causes legal problems. In most cases, the same person owns both accessory and principal and is free to join them together or take them apart. A problem arises when the two things are subject to different property rights and everyone involved did not consent to their combination and cannot agree on the consequences. This might happen if one of [4.120]

25

National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8; [1981] AC 675 at 709.

CHAPTER

[4.140]

4

PHYSICAL CHANGES TO THINGS

33

the things is stolen or otherwise converted or is subject to a security right. 26 The physical act of joining those things together can destroy the separate property rights to the accessory. People who lose property rights to accessories may acquire new personal and property rights. For example, suppose that I used your bricks without consent to add a new room to my house. I would be guilty of conversion and you would have a personal right to damages. You might also have a property right to my land based on tracing and unjust enrichment. If my use of the value of your bricks increased the value of my land, you might be entitled to an equitable lien on my land to secure my obligation to pay for that unjust enrichment. If a lien arises, it is not a continuation of your previous ownership of your bricks, but a new property right based on my unauthorised use of your value. The addition of goods to other goods is called accession. Goods which are attached to land are called fixtures. The law of accession differs from the law of fixtures and, therefore, it is helpful to discuss them separately (at [4.130] ff and [4.160] ff). Accession ...............................................................................................................................................................................................

If goods are joined together, accession will occur if it is impractical to separate them again and one thing is regarded as an accessory to the other. Accession differs from specification, where the operation creates a new thing (see [4.30] ff). For example, thread and cloth can be joined together to make a new garment (specification) or to embroider a design on an existing garment (accession). It also differs from mixtures of indistinguishable things (discussed below at [4.240] ff), where nothing new is created and there is no principal and accessory. For example, combining ground pepper from two sources produces a mixture. Adding pepper to soup is accession. There are two questions which can be difficult to answer: [4.130]

(1)

when is it practical to separate two items joined together (see [4.140]), and

(2)

which is the accessory and which is the principal (see [4.150])?

Is separation practical?

If it is practical to separate things which have been joined together, they will not lose their separate identity and property rights will not be affected by their combination. Separation will not be practical if it will injure or destroy one of the items or costs more than the accessory is worth. In Rendell v Associated Finance Pty Ltd, 27 the plaintiff sold an engine under a hire-purchase agreement to a man named Pell, who installed it in a utility truck he had bought from the defendant under another hire-purchase agreement. Pell had not paid fully for the engine or the truck and therefore merely had possession of both things. The defendant seized the truck and refused to return the engine to the plaintiff. [4.140]

26

See eg R v Nousis [2004] VSCA 107; 8 VR 381.

27

Rendell v Associated Finance Pty Ltd [1957] VR 604.

34

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.150]

Pell’s agreement with the defendant said that any accessories attached to the truck would become part of the truck. However, that contract could not cause ownership of the plaintiff’s engine to pass to the defendant. So, the defendant claimed that the engine had ceased to exist as a separate thing when it was installed in the truck. The court rejected that argument, because the engine could be removed without damage to engine or truck. O’Bryan J said: 28 Prima facie the property in the accessory does not pass to the owner of the vehicle if the owner of the accessory did not intend it to pass. It is for the defendant by proper evidence to show that the necessity of the case requires the application of principles whereby the property is deemed to pass by operation of law. The accessories continue to belong to their original owner unless it is shown that as a matter of practicability they cannot be identified, or, if identified, they have been incorporated to such an extent that they cannot be detached from the vehicle.

The enforcement of security interests in accessories and the removal of accessories by secured creditors are now regulated by the Personal Property Securities Act 2009 (Cth). 29 Accessory or principal?

When two things are joined together, it is usually easy to tell which is the principal item (that continues to exist) and which is the accessory (that does not). For example, when milk is added to a cup of tea, there is no doubt that the combination is still a cup of tea. However, there are cases where the choice is not so easy. The resolution of this issue does not depend on the relative sizes or values of the components. For example, embroidery on a shirt may be far more valuable than the shirt and yet the shirt continues to exist as the principal item. In McKeown v Cavalier Yachts Pty Ltd, 30 the defendant constructed a yacht (worth $24,409) in a hull (worth $1,777), not knowing that the hull belonged to the plaintiff. The defendant argued “that the accretions accordingly are the major chattel, and the laminated hull the minor chattel, so that the doctrine of accession operates that the property in the laminated hull has now acceded to the later accretions rather than the other way around”. 31 Young J rejected that argument, because the work had been done gradually. As each piece was installed in the hull, it was clear that it acceded to the hull and belonged to the plaintiff. Therefore, the plaintiff was entitled to possession of the entire yacht, on the condition that he pay the defendant for the unjust enrichment caused by the mistaken improvement of that hull. When two things of equal status are joined together, it is impossible to say which is the principal and which is the accessory. For example, two boards might be glued together to make a thicker board or two quilts stitched together to make a larger quilt. Lionel Smith [4.150]

28 29 30

Rendell v Associated Finance Pty Ltd [1957] VR 604 at 610. Also see National Bus Co Pty Ltd v Commissioner of Taxation [1998] 143 FCA. Personal Property Securities Act 2009 (Cth), ss 87 – 97. McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303.

31

McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 at 311.

[4.170]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

35

suggested that the product should be regarded as a new thing and allocated to its creator. 32 However, Peter Birks treated it as a mixture (discussed below at [4.240] ff) that should belong to the contributors as tenants in common in proportion to their contributions. 33 Fixtures ...............................................................................................................................................................................................

Fixtures are goods which get joined to land and thereby become part of an estate. This is a form of accession. However, there is no difficulty discerning which is the accessory and which is the principal. Goods become part of the land to which they are joined, regardless of value. For example, an office tower worth millions of dollars, constructed on land worth thousands of dollars, becomes part of that land. The difficulty in this area of law is determining when goods have become fixtures. Something which is not attached to land, but merely resting on it (such as a statue in the garden), can be a fixture. Even though it could be removed easily, without damage to it or the land, a fixture will cease to be a separate thing subject to separate property rights. This treatment of fixtures is possible because the owner of an estate has a right to possess a volume of space. The law can then determine which things within that space form part of the estate and which things continue to exist separately as goods. The decision to treat unattached objects as part of an estate was made at a time when personal property could be given away by will, but real property passed to the owner’s heir. The rules were designed to ensure that the assets of deceased persons were properly divided among their heirs and the beneficiaries of their wills. In contrast, the law of accession to goods was designed to ensure that people would not lose their property rights without consent, except as a practical necessity. There are two factors which are used to determine whether goods have become fixtures: the degree of annexation (extent of attachment to the land) and the object of annexation (apparent purpose of attachment). These factors are discussed below at [4.170] and [4.180], followed by a discussion of two situations in which people are entitled to remove fixtures from land belonging to others: fixtures installed by tenants (see [4.190] ff) and fixtures that were subject to security rights before they were joined to the land (see [4.230]). [4.160]

Degree of annexation

There is no legal uncertainty when goods are joined to land and cannot be removed again without injury to the land or goods. For example, paint applied to a wall cannot be removed without destroying the paint and a tree planted in the yard cannot be [4.170]

32 33

L Smith, The Law of Tracing (Oxford, 1997) pp 106-107. P Birks, “Mixtures”, in N Palmer and E McKendrick (eds), Interests in Goods (2nd ed, London, 1998) p 227 at 238.

36

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.180]

removed without destroying the tree or digging a big hole in the yard. It is clear that these things ceased to be goods and became part of the real estate when they were joined to the land. A legal question arises when goods are joined to land in a way which permits their removal. The assumption is that goods merely resting on land continue to be goods and that any degree of attachment (by bolts, nails, cement, etc) turns them into fixtures. As Kaye J said in Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd: 34 Even slight fixing to the land is sufficient to raise the presumption that a chattel is a fixture. In those circumstances, the onus of proving otherwise rests upon the party so contending.

The greater the degree of annexation, the more likely it is that goods have become fixtures. However, unattached goods can be fixtures and attached goods need not be. Object of annexation

If it is practical to remove a possible fixture from the land, then its status is determined by the object of annexation. The essential question is this: was it joined to the land for its better use as a chattel or for the improvement of the land? In Leigh v Taylor, 35 valuable tapestries were tacked to canvasses, which were nailed to strips of wood, which were nailed to the walls of a mansion house. The circumstances revealed an intention that the tapestries would remain goods. They could be removed easily without damage to them or the land. Although their attachment improved the enjoyment of land, that was the only practical way to enjoy tapestries. In Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd, 36 an air conditioning plant was installed on the roof of a building. It was resting on pads on the roof and connected with nuts and bolts to water pipes and electrical cables in the building. It could be removed easily without damage to the plant or building. The purpose of installing the air conditioning plant was clearly not for the better enjoyment of the plant, but for the permanent improvement of the land. Although the company that installed the plant did not own the land, it had been hired to make that improvement on the owner’s behalf. The object of annexation does not depend on what anyone was actually thinking when the thing was joined to the land. It is the apparent purpose for joining something to land, as revealed by observable circumstances. 37 What would a bystander, with knowledge of the relevant facts, assume was intended? Reliance on apparent (objective) intention, rather than actual (subjective) intention, helps create greater legal certainty. A judicial decision that something is or is not a fixture [4.180]

34

Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 at 953.

35 36 37

Leigh v Taylor [1902] UKHL 1; [1902] AC 157. Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947. Reid v Smith (1905) 3 CLR 656; [1905] HCA 54; Elitestone Ltd v Morris [1997] UKHL 15; [1997] 2 All ER 513; [1997] 1 WLR 687; May v Ceedive Pty Ltd [2006] NSWCA 369.

[4.200]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

37

in certain circumstances can guide others dealing with similar circumstances. If the status of each thing on land depended on the actual intention of the person who put it there, it could be very difficult to determine what things formed part of an estate. The physical connection of something to the land is just one of the facts which reveal the object of annexation. Therefore, two things can be joined to land in the same way and yet one will be a fixture and the other will not. Blackburn J used this example in Holland v Hodgson: 38 [I]f the intention is apparent to make the articles part of the land, they do become part of the land … Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder’s yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels. Tenant’s fixtures

At common law, tenants of leasehold or life estates are entitled to remove fixtures that they installed for domestic, trade, or ornamental purposes and not for the permanent improvement of the land. These are called tenant’s fixtures to distinguish them from permanent fixtures which tenants are not entitled to remove. A tenant’s removal of a permanent fixture without the landlord’s consent is not trespass (since the tenant has possession of the land), but waste. It might also be a breach of a leasehold covenant. [4.190]

Tenant’s fixture or permanent fixture?

It is not always easy to distinguish tenant’s fixtures from permanent fixtures. This is because tenant’s fixtures, like all fixtures, are no longer goods, but part of the land. 39 The question is whether the tenant is permitted to remove them and turn them back into goods. As Romer LJ said in Spyer v Phillipson: 40 [4.200]

So long as the article can be removed without doing irreparable damage to the demised premises I do not think that either the method of annexation or the degree of annexation, or the quantum of damage that would be done to the article itself or to the demised premises by its removal, has really any bearing upon the question of the tenant’s right to remove, except in so far as they throw light upon the question of the intention with which the chattel was affixed by him to the demised premises.

In that case, the tenant leased a flat for 21 years and half way through the term installed valuable antique wood panelling and period fireplaces and chimneys. He died and his executors were entitled to remove them, even though that would cause some damage to the flat. Tenants are liable to repair the damage caused by removing fixtures, but this does not affect their right to remove them. 38

Holland v Hodgson (1872) LR 7 CP 328 at 335.

39

North Shore Gas Co Ltd v Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52; 40 SR (NSW) 110; [1940] HCA 7 at 68 (CLR); Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (Vic) (2004) 12 VR 351; 55 ATR 1; [2004] VSCA 10 at [24], [25]; TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; 85 ALJR 316; [2010] HCA 49 at [25].

40

Spyer v Phillipson [1931] 2 Ch 183 at 209-210.

38

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.210]

The question whether something is a tenant’s fixture or permanent fixture (like the question whether it is a chattel or a fixture) depends a little on the degree of annexation and a lot on the object of annexation. If its removal would cause serious damage to the land or destroy the fixture, then it is permanent. Otherwise, its character depends on the object of annexation: was it attached so the tenant could better enjoy the leasehold estate or as a permanent improvement to the land? There is another way to phrase the question: was the fixture attached to the tenant’s leasehold estate or the landlord’s freehold estate? There is an assumption that tenants are not intending to make valuable gifts to others when they attach things to the land. As Barton J said of a life estate in Registrar of Titles v Spencer, the tenant “should be able to improve the estate for his own enjoyment without being thereby compelled to make a present to the remainderman”. 41 The same assumption was used in Leigh v Taylor, 42 discussed above at [4.180], to decide that tapestries attached to walls by the life tenant were goods and not fixtures. If they had been fixtures, they would have been tenant’s fixtures. Generally speaking, structural additions or repairs to buildings are normally regarded as permanent improvements to the land, while other fixtures installed by the tenant are tenant’s fixtures. However, the common law treats agricultural fixtures, such as pens and sheds, as permanent improvements to the land. Statutory changes

In every State and Territory, short-term residential tenancies are governed by a statute, which regulates the tenant’s rights to install and remove fixtures. 43 The rules vary across Australia, but generally speaking, tenants are not permitted to install fixtures without the landlord’s consent, have a right to remove them at the end of the tenancy unless that would cause damage to the premises, and are responsible for any damages caused by their removal. In Victoria, tenants must remove their fixtures unless the parties agree otherwise. New South Wales, Queensland and Tasmania also have statutes dealing with fixtures installed by agricultural tenants, 44 while there is a statutory provision in Victoria which applies generally to all tenant’s fixtures. 45 In both Queensland and Tasmania, these fixtures are by statute deemed to be the property of the tenant so long as they are removable by the tenant. 46 This probably [4.210]

41 42 43

44 45 46

Registrar of Titles v Spencer (1909) 9 CLR 641; [1909] HCA 69 at 651 (CLR). Leigh v Taylor [1902] UKHL 1; [1902] AC 157 Residential Tenancies Act 1987 (ACT), ss 67, 68 of Sch 1; Residential Tenancies Act 2010 (NSW), ss 67, 68; Residential Tenancies Act (NT), s 55; Residential Tenancies and Rooming Accommodation Act 2008 (Qld), ss 207 – 209; Residential Tenancies Act 1995 (SA), s 70; Residential Tenancies Act 1997 (Tas), s 54; Residential Tenancies Act 1997 (Vic), s 64; Residential Tenancies Act 1987 (WA), s 47. Agricultural Tenancies Act 1990 (NSW), s 10; Property Law Act 1974 (Qld), s 155; Landlord and Tenant Act 1935 (Tas), s 26. Property Law Act 1958 (Vic), s 154A. Property Law Act 1974 (Qld), s 155; Landlord and Tenant Act 1935 (Tas), s 26; and also previously in Victoria: Landlord and Tenant Act 1958 (Vic), s 28 (repealed).

[4.220]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

39

means that they are chattels, 47 but they could still be the property of the tenant if they were regarded as fixtures attached to the leasehold estate and not to the freehold. Mining equipment which is attached to land, including buildings and machinery, is treated differently from fixtures. The right to remove the equipment at the end of a mining licence or lease is regulated by statute 48 and therefore the normal rules regarding fixtures do not apply. 49 Also, mining rights are sometimes treated as forms of personal property and so too are things attached to the land pursuant to those rights. Removal of tenant’s fixtures

At common law, tenants are entitled to remove their fixtures at any time during the lease or while they continue in possession thereafter. In McMahon’s (Transport) Pty Ltd v Ebbage, 50 the court decided that tenants could also remove their fixtures within a reasonable time after they gave up possession. Pincus JA said: 51

[4.220]

There is authority in favour of the view that once the tenant gives up physical possession … the right to remove fixtures is gone … But the better view, and certainly one more in accordance with practical justice, is that the right to remove continues for a reasonable time after a lease has been terminated.

The time for removing agricultural fixtures is set by statute in New South Wales and Queensland. In New South Wales, “a fixture affixed to a farm by a tenant may be removed by the tenant before or within a reasonable time after the end of the tenancy”. 52 Agricultural tenants in Queensland are allowed to remove fixtures up to two months after the tenancy ends. 53 Tenants in Victoria “may remove them before the relevant agreement terminates or during any extended period of possession of the premises, but not afterwards”. 54 For short residential tenancies in the Australian Capital Territory, New South Wales, and Western Australia, tenants may remove fixtures only while they continue in possession. 55

47 48

49 50 51 52 53 54 55

Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351; 55 ATR 1; [2004] VSCA 10. Mining Act 1992 (NSW), ss 244, 245; Mineral Titles Act (NT), s 99; Mineral Resources Act 1989 (Qld), ss 121 – 123, 228 – 230, 312 – 314; Mining Act 1971 (SA), s 86; Mineral Resources Development Act 1995 (Tas), s 105; Mineral Resources (Sustainable Development) Act 1990 (Vic), s 114; Mining Act 1978 (WA), s 114. TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; 85 ALJR 316; [2010] HCA 49. McMahon’s (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185. McMahon’s (Transport) Pty Ltd v Ebbage [1999] 1 Qd R 185 at 198. Also see Kyriacou v Manakis [2006] NSWSC 804. Agricultural Tenancies Act 1990 (NSW), s 10. Property Law Act 1974 (Qld), s 155. Property Law Act 1958 (Vic), s 154A. Residential Tenancies Act 1987 (ACT), s 68(4) of Sch 1; Residential Tenancies Act 2010 (NSW), s 67(1); Residential Tenancies Act 1987 (WA), s 47(2)(b).

40

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.230]

Most cases and statutes about tenant’s fixtures are concerned with the tenant’s right to remove them. In Wincant Pty Ltd v South Australia, 56 the court decided that a tenant is required to remove fixtures at the end of the lease if they would interfere with the landlord’s use of the premises. The government leased seven floors of an office tower in Adelaide for 25 years and left its fixtures behind at the end of the lease. The premises could not be leased again without removing them at a cost of $58,550. The government was required to pay this cost, because the failure to remove them was a breach of its covenant to leave the “premises in good and substantial repair”. It might also be regarded as waste. If tenants do not remove their fixtures within the allotted time, they are abandoned by the tenant and belong to the landlord. In one sense, the abandonment does not affect the landlord’s property rights, since the fixtures became part of the estate when they were attached to the land (unless they were deemed by statute to be the property of the tenant). However, tenant’s fixtures are attached when the tenant has possession of the land and the landlord does not. Whether they will still be part of the land when the lease ends and possession reverts to the landlord is contingent on the tenant’s decision to leave them behind. Security rights

In most cases, people do not attach things to their land unless they own them. There is one common exception. People buy goods under hire-purchase contracts and attach them to land before the purchase price is paid in full. This happened in Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd. 57 A company hired manufacturing machinery from the plaintiff and attached it to its land, which was mortgaged to the defendant. The company defaulted on both the hire-purchase contract and the mortgage and the court had to decide whether the plaintiff or the defendant was entitled to the machinery. The hire-purchase contract entitled the plaintiff to enter the company’s land and seize the machinery if the company breached the contract. However, the machinery had become fixtures and ceased to exist as goods. They were part of the land and the defendant was entitled to possession of the land, including the fixtures, when the company defaulted on the mortgage. Since the machinery was part of the land, the plaintiff no longer owned it. However, it still had a right to enter the company’s land, remove the machinery, and take it away. As Adam J said: 58 [4.230]

In law, no doubt, fixtures become part of the freehold while they remain annexed thereto and the legal title to them belongs to him who owns the freehold. But the contractual right, which the owner has against the hirer, to repossess on default confers 56 57

Wincant Pty Ltd v South Australia (1997) 69 SASR 126; 193 LSJS 313; [1997] SASC 6287. Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429.

58

Kay’s Leasing Corp Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 at 436.

[4.240]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

41

on him a species of equitable interest which entitles him, as against the hirer, to enter upon the premises and sever and remove the chattels which have become fixtures.

The plaintiff’s right to enter the company’s land and remove the machinery was an equitable property right to that land, which had priority over the defendant’s legal property right. As AL Smith LJ said in Hobson v Gorringe, “this right was not an easement created by deed, nor was it conferred by a covenant running with the land”. 59 It was created both by the contract and by the attachment of the machinery to the land as fixtures. This property right is produced not just by hire-purchase contracts, but by any security agreement which entitles the secured creditor to enter the debtor’s land and seize goods that have become fixtures. It could also be created by a chattel lease or other contract of bailment which gives the bailor the same right, or by a contract of sale of the fixtures which gives the buyer the right to enter the land and remove them. 60 In each case, the right to remove fixtures from the land is not a property right to the fixtures as chattels, but an equitable right to the land. Without a right to enter land and remove goods, the owner of goods fixed to another person’s land will not have an equitable property right to that land. For example, the victim of conversion does not have a right to enter the wrongdoer’s land. Also, he or she would probably not have a right to recover the converted goods even if they had not become fixtures. The normal response to conversion is to compel the wrongdoer to pay the victim for the value of the goods. In Queensland and Western Australia, the Hire Purchase Act 1959 alters the law of fixtures for goods obtained under a hire-purchase contract. It states that the goods shall not be treated as fixtures so long as the contract is in force. 61 Therefore, the seller would continue to have legal ownership of the goods, rather than an equitable property right to the land. Victoria and Western Australia also have a Chattel Securities Act 1987, which treats in a similar fashion any goods that are subject to a security interest or obtained under a lease or hire-purchase contract. 62 The Personal Property Securities Act 2009 (Cth) does not apply to interests in fixtures. 63

Mixtures This final part of the chapter concerns the property rights created when similar goods belonging to two or more people get mixed together and it is impractical to identify each person’s goods in the mixture. For example, 10 litres of your petrol might be poured into a tank which contained my petrol, or 10 boxes of your paper might be [4.240]

59 60 61 62

Hobson v Gorringe [1897] 1 Ch 182 at 192. Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 at [48]; 55 ATR 1; [2004] VSCA 10. Hire Purchase Act 1959 (Qld), s 32; Hire Purchase Act 1959 (WA), s 27. Chattel Securities Act 1987 (Vic), s 6; Chattel Securities Act 1987 (WA), s 6.

63

Personal Property Securities Act 2009 (Cth), s 8(1)(j).

42

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.250]

stacked together with 10 boxes of my paper. The mixture does not create a new thing (specification) nor does one contribution cease to exist and become part of the other (accession). There is no difficulty dividing the mixture into portions, but it is no longer possible (or at least not practical) to identify each person’s contribution. If we take a litre of petrol from the tank or a box of paper from the stack, no-one can say for sure whether it was yours or mine. The litre of petrol is probably a mixture of both. If we divide the mixture again, and you take 10 litres of petrol or 10 boxes of paper, you will have some of the petrol or paper that used to belong to me and I will have some of yours. (The chance of you randomly selecting all 10 boxes of your own paper is 1 in 184,756.) Your reaction to this might be “Who cares?” So long as you recover the same quantity and quality of goods with which you started, it does not matter whether they used to belong to you or me. This is also true if all the goods get destroyed. If all the petrol in the tank is consumed, we know that both contributions to the mixture are gone. A problem arises when some of the goods are damaged, destroyed, or stolen. If seven boxes of paper are ruined by flooding, who suffered the loss: you, me, or us? If, instead of small quantities of petrol or paper, the mixture consists of gold ingots or tonnes of oil, people become very concerned about its ownership. Possible property rights ...............................................................................................................................................................................................

If our goods are mixed indistinguishably, it is impossible to restore the status quo. We can deal with the mixture in several different ways, but cannot ensure that we will end up with the same things we had before the mixture. There are three ways to allocate the property rights to the mixture: [4.250]

(1)

The whole mixture belongs to you or me.

(2)

We share the mixture as joint tenants or tenants in common.

(3)

We continue to own the goods we contributed to the mixture, even though we cannot identify them. The choice among these three possibilities depends primarily on whether we both consented to the mixture and, if not, whether one of us was at fault for causing the mixture. It might also depend on the nature of the goods that were mixed. These factors are discussed below. The first possibility is that one of us owns the whole mixture. The property rights to the owner’s contribution continue unchanged, while the other’s contribution is transferred to the owner. In other words, the property rights to only some of the goods in the mixture are affected by their combination. The second possibility is joint or common ownership of the whole mixture. The property rights to all the goods in the mixture are changed. Everything used to have one owner (you or me) and now has two owners (you and me). We have both exchanged sole ownership of our separate contributions for an undivided share of the whole.

[4.280]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

43

The third possibility is continuing ownership of our contributions to the mixture. Our property rights are unaffected by the mixture, but we no longer know which goods belong to you and which belong to me. Our property rights will be changed if we divide the mixture again. At that point, some of the goods which used to belong to you will be transferred to me and vice versa. Mixture by consent ...............................................................................................................................................................................................

If we agree to mix our goods, then the property rights to the mixture will be determined by our agreement. We might choose any of the possibilities discussed above at [4.250]. If we do not specify the rights we intend to create, the law assumes that we want to own the mixture as tenants in common in proportion to our contributions to it. [4.260]

Mixture without consent ...............................................................................................................................................................................................

If we do not agree to mix our goods, then any alteration of our property rights occurs not by intention, but by operation of law. In other words, the mixing together of similar goods is an event which can create and destroy property rights. Generally speaking, we are each entitled to take from the mixture an amount of goods equal to our contribution to it. If some of the goods are consumed, damaged, destroyed, lost, or stolen, we bear the loss proportionately to our contributions and our right to take goods from the mixture is reduced accordingly. However, these rights can be affected by wrongdoing. If I mixed our goods without your consent, I am guilty of wrongly interfering with your goods and my rights to the mixture will be subordinated to yours as a result. This is discussed below at [4.280]. If we do not know how much we contributed to the mixture, then we share it equally. This is subject to any evidence that might define the limits of our contributions. For example, suppose that I have an unknown quantity of petrol in a 20-litre fuel can. If it is poured into a tank which holds an unknown quantity of your petrol, we know that the most I could have contributed to the mixture is 20 litres. Therefore, we would share the mixture equally, unless it contained more than 40 litres, in which case I would have a right to take only 20 litres. These rights are also affected by wrongdoing. [4.270]

Wrongful mixture

Our rights to the mixture of our goods can depend on whether one of us was at fault for mixing the goods without the other’s consent. If so, the wrongdoer’s interests will be subordinated to those of the other contributor, if necessary. For example, if I mixed our goods by mistake, I am guilty of wrongly interfering with your right to possession even though I did not intend to commit the wrong. My breach of duty made it impossible for you to identify your own goods, so any uncertainty will be resolved in your favour. This is the same presumption against wrongdoers which is used when tracing value through mixtures. [4.280]

44

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.290]

The presumption against wrongdoers can help resolve uncertainties relating to two different issues: how much each person contributed to the mixture and what happened to each person’s contribution after they were mixed. First, if it is impossible to tell how much each person contributed to the mixture, the person who wrongly caused it will have no right to any of it. The other contributors will be entitled to the whole mixture. Using a previous example, if I poured an unknown quantity of my petrol from a 20-litre fuel can into a tank containing an unknown quantity of your petrol, we could not ascertain how much each of us had contributed to the mixture. Since I wrongly caused the problem, the law assumes that you contributed all the petrol and own the whole mixture. Change the facts again and assume that your petrol was in the 20-litre fuel can and mine in the tank. If I pour your petrol into my tank by mistake, the law will resolve any uncertainty in your favour. We do not know how much we each contributed, but do know that you did not contribute more than 20 litres. Therefore, you are entitled to all the petrol in the tank up to that amount. Secondly, the presumption against wrongdoers is used to help determine the fate of the goods after they are mixed. For example, if I stole 42 bales of your hay and added it to my haystack, you would be entitled to recover 42 bales from that stack. If some of the bales are damaged or destroyed, the law assumes that my bales were harmed and not yours. The loss does not affect your property rights until the number of good bales in the stack drops below 42. The presumption against wrongdoers is not used to punish or deter wrongdoing, but merely to resolve uncertainties created by the wrongdoer. The wrongful mixing of goods is a breach of duty which can destroy evidence of ownership. The uncertainty created by that lack of evidence is resolved adversely to the person who caused the problem. The presumption is used no more than necessary and does not displace actual evidence regarding contributions to or losses from a mixture. 64 Nature of property rights to a mixture

Where goods are mixed without consent, each contributor is entitled to take from the mixture an amount of goods equal to her or his contribution, subject to two exceptions. First, if goods in the mixture are damaged or destroyed, the contributors bear the loss in proportion to their contributions. Secondly, if a contributor wrongly caused the mixture, he or she is subordinated to the other contributors and cannot take goods from the mixture until the others have received their full shares. What remains uncertain is the nature of the property rights to the mixture before it is divided among the contributors. There are two possibilities: [4.290]

(1)

64

common ownership, with the contributors owning the mixture together as tenants in common; or Indian Oil Corp Ltd v Greenstone Shipping Co SA [1988] QB 345; Big Top Hereford Pty Ltd v Thomas (2006) 12 BPR 23,843; [2006] NSWSC 1159 at [62].

[4.310]

CHAPTER

4

PHYSICAL CHANGES TO THINGS

45

(2)

continuing ownership, with the contributors continuing to own the goods they contributed to the mixture, even though those goods cannot be identified. In Roman law, the choice between common and continuing ownership depended on the nature of the goods that were mixed. A mixture of fluids, such as oil or molten silver, was called confusio and produced common ownership, while a mixture of solid things, such as rice or lumber, was called commixtio and produced continuing ownership. Although Roman law has influenced the development of common law, it is not clear whether this distinction is part of the common law, and if not, whether a mixture of goods produces common or continuing ownership. Fluids and solids

It is easy to understand why Roman law would apply different rules to mixtures of fluids and mixtures of solids (usually called granular mixtures). If our petrol gets mixed together it is likely that every drop contains petrol from both sources. If our rice gets mixed together, you can pick up a grain and know that it used to belong to just one of us. However, as Peter Birks said: 65 [4.300]

With the advance of science we know that there is no absolute line to draw between the two kinds of mixture. At the atomic level the particles retain their integrity in every case, though the higher the physics the less certain it is which model should prevail. At a more humdrum domestic level even a substance such as talcum powder clouds the distinction between units which do and units which do not retain their integrity.

The problem is not that mixed goods have lost their integrity. Whether liquid or solid, they are easily divided into smaller portions without changing their quality or nature. The difficulty to which the law responds is the inability to identify the owners of those goods. This is equally true of molecules of petrol and grains of rice. There is no reason to treat fluid and granular mixtures differently. 66 Common or continuing ownership?

Since fluid and granular mixtures create the same problems and should be dealt with in the same manner, they should both produce either common or continuing ownership. It is generally accepted that a fluid mixture creates common ownership and there are cases which suggest that a granular mixture should do the same. For example, in Spence v Union Marine Insurance Co Ltd, 67 a ship carrying bales of cotton was wrecked near Florida. Although most of the bales were recovered, the majority had lost the marks that indicated who owned which bales. Bovill CJ applied the rules that governed fluid mixtures to the mixture of indistinguishable cotton bales: 68 [4.310]

65

P Birks, “Mixtures”, in N Palmer and E McKendrick (eds), Interests in Goods (2nd ed, London, 1998) p 227 at 234.

66 67 68

Hill v Reglon Pty Ltd [2007] NSWCA 295 at [100]. Spence v Union Marine Insurance Co Ltd (1868) LR 3 CP 427. Spence v Union Marine Insurance Co Ltd (1868) LR 3 CP 427 at 437. See Crouch v Adams [2006] NSWSC 1029 at [37]; Hazelton Air Charter Pty Ltd v Mentha [2002] FCA 529 at [35]-[37].

46

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[4.310]

[W]hen goods of different owners become by accident so mixed together as to be indistinguishable, the owners of the goods so mixed become tenants in common of the whole, in the proportions which they have severally contributed to it.

In Big Top Hereford Pty Ltd v Thomas, 69 this same principle was applied to a mixture of cattle, and in Hill v Reglon Pty Ltd, 70 it was applied to a mixture of scaffolding. Lionel Smith agreed that there is no meaningful distinction between fluid and granular mixtures. However, he argued that the correct response to all mixtures without consent is not common ownership, but continuing ownership. 71 This is because the rights of the contributors differ from those of an ordinary co-tenant. Tenants in common are not normally entitled to take a portion of the shared goods without the consent of the other tenants or authorisation of a court. However, an involuntary contributor to a mixture has that right. Peter Birks said that this problem could be solved by adjusting the law relating to common ownership to allow the contributors to end their co-tenancy without agreement. Common ownership could then become the normal response to all mixtures of goods without consent: 72 The position that the law will ultimately take is reasonably predictable. Involuntary co-ownership will be the consequence of all mixtures without regard to the nature of the substance mixed, provided only that the units have ceased to be identifiable: the penal rule will only be invoked where and to the extent that it is necessary to break an evidential deadlock brought about by the wrongdoer; and special rules for unilateral partition will be worked out for all cases of involuntary co-ownership.

If goods are subject to a security interest and then become indistinguishably mixed with other goods, the security interest attaches to the mixture, limited by the value of the secured goods at the time they were mixed. 73 The Personal Property Securities Act 2009 (Cth) provides rules for determining the priority of multiple security interests in the same mixture, with secured creditors sharing the mixture pro rata with other secured creditors who have the same priority. 74 This is common ownership of the mixture.

69 70 71

Big Top Hereford Pty Ltd v Thomas (2006) 12 BPR 23,843; [2006] NSWSC 1159. Hill v Reglon Pty Ltd [2007] NSWCA 295. L Smith, The Law of Tracing (Oxford, 1997) pp 74-75.

72 73

P Birks, “Mixtures”, in N Palmer and E McKendrick (eds), Interests in Goods (2nd ed, London, 1998) p 227 at 248-249. Personal Property Securities Act 2009 (Cth), s 101.

74

Personal Property Securities Act 2009 (Cth), ss 102, 103.

PART 3

OWNERSHIP, POSSESSION AND TRANSFER OF RIGHTS TO PERSONAL PROPERTY Chapter 5

Possession ....................................................................... 49

CHAPTER 5

......................................................................................................................

Possession Extracted from Chambers, An Introduction to Property Law in Australia, 3rd ed (Thomson Reuters, 2013), Chs 6 and 7.

[5.10] Possession is the cornerstone of the law of property. Several sophisticated property concepts, such as the estate, evolved from the more basic concept of possession. Also, most of the legal remedies available for the protection of property rights are actually remedies to protect the right to possession. The importance which the common law places on possession accords with popular notions of fairness. These notions are learned at an early age. Young children will defend a claim to a chair or toy by yelling, I “had it first!” There is a famous American movie character who travels the world in search of archaeological treasure. On several occasions, he risks life and limb to find some priceless artefact, only to have it taken almost immediately by the bad guys. We sense wrongdoing, but what claim did he have to the treasure? There is a belief, which the law confirms, that simple possession of a thing is a property right worthy of protection.

What is possession? Possession is a legal concept. To have possession of a thing, a person must control that thing and intend to possess it. Both are required. For example, you might intend to possess a wild animal, but will not have possession unless you can catch and control it. Conversely, suppose you board a train and sit down, unaware that someone has left a $10 note on your seat. You are in complete control of the note (since no-one else can take it from under you without committing a tort), but do not possess it since you are unaware of its existence and have no intention to possess it. In Popov v Hayashi, 1 a California court invented the concept of a “pre-possessory interest”, which can be acquired when someone intends to possess a thing and then makes a serious attempt to control it. The case concerned a baseball hit into the stands during a professional baseball game. It was the batter’s record breaking 73rd home run of the season and the ball was later sold for US$450,000. The plaintiff attempted to catch the ball, but could not control it because he was mobbed by the crowd around him. The ball rolled to the defendant, who picked it up and thus became the first person to control and possess it. [5.20]

1

Popov v Hayashi 2002 WL 31833731 (Cal Super 2002).

50

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.30]

The plaintiff sued the defendant and was awarded half the proceeds from the sale of the ball, even though the defendant did not part in the mob attack and had done him no wrong. McCarthy J said: Where an actor undertakes significant but incomplete steps to achieve possession of a piece of abandoned personal property and the effort is interrupted by the unlawful acts of others, the actor has a legally cognizable pre-possessory interest in the property. That pre-possessory interest constitutes a qualified right to possession which can support a cause of action for conversion.

This is not the law in Australia (and probably not outside California). There are several different ways to acquire a right to possession, including by sale, gift, or even simply taking possession, but an attempt to take possession is not sufficient. In Young v Hichens, 2 the plaintiff was in the process of enclosing some fish in a net, when the defendant rowed his boat between the ends of the plaintiff’s net and netted the fish inside. Lord Denham CJ said, “It does appear almost certain that the plaintiff would have had possession of the fish but for the act of the defendant: but it is quite certain that he had not possession.” 3 The plaintiff’s claim for wrongful interference with his right to possession failed because he had not yet acquired that right. Control ...............................................................................................................................................................................................

Control (sometimes called factual possession) means physical control. 4 Only tangible things, such as a book, dog, or parcel of land, can be controlled in this way. Intangible things, such as a copyright to a song, can be subject to property rights, but they cannot be possessed. How one controls a thing varies according to its nature. For example, you might control a dollar coin by placing it in your pocket or purse, but cannot control a horse or house in that way. The methods used will be dictated by factors such as the size of the thing, its situation, and whether it is movable. The essential question is whether the person is able to control access to the thing. With some things, such as animals or fluids, there is an additional problem of preventing the thing from escaping. To control land, steps are taken to limit access to that land. Locking doors, windows, and gates is one method of exercising control. However, locks are not required. We live in a society regulated by law and land can be controlled without taking steps to prevent forcible entry. A closed, but unlocked gate will do. It is also possible to control land without any fence at all. Many people do not have fences all the way around the yards they control. Tending the lawn and garden or otherwise making use of the space around the house is sufficient. Others know that they need permission (express or implied) to enter the land. Although there are no physical impediments to entry, this exclusion of others is sufficient to constitute control.

[5.30]

2 3

Young v Hichens (1844) 6 QB 606. Young v Hichens (1844) 6 QB 606 at 611.

4

Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188.

[5.30]

CHAPTER

5

POSSESSION

51

Conversely, it is possible to fence an area of land and not control it. In Riley v Penttila, 5 the owners of homes adjoining a park had a property right (called an easement), to use that park for recreation or a garden. One of the owners built a tennis court on the park and put a fence around it. However, the other owners were invited to use the tennis court as part of their right to use the park for recreation. The fence did not amount to control over the tennis court because it was used not to keep people out, but to keep tennis balls in. The occupation of land is just one way to control it. A vacation house can be controlled even though it sits empty for most of the year. Bare vacation lots or farmers’ fields can be controlled although they are used only infrequently. In such cases, fences are normally used to control the space, but perhaps a “Private Property” or “Keep Out” sign will do. The essential question is whether someone has taken sufficient steps to use or otherwise limit access to the land in question. In Red House Farms (Thorndon) Ltd v Catchpole, 6 a person regularly used a small parcel of marsh land for shooting. This was sufficient control of the land because shooting was the only profitable use for it. Larger chattels, such as cars, boats, and aeroplanes, are controlled in much the same way as land. This is because people use them in a similar way: by going inside them. Therefore, control is achieved by steps taken to keep people out or limit their access. Normally, this is done with keys and locks. A person with a key to a locked car has control over that car (provided no-one else has a key). It is not necessary to lock a vehicle to control it (although this reduces the risk of losing control to another). Small things are controlled somewhat differently. Less use is made of locks and keys (although some items, such as filing cabinets and bicycles, are routinely locked). Instead, they are often controlled manually. People take control of pieces of fruit or books by picking them up. Coins and keys are kept in pockets and purses. Clothes are worn. This is not the only way to control smaller things. Although homeless people are often required to maintain close manual control over their possessions, most of us would be unable to keep all of our things with us at all times. Instead, we put them inside other things we control, such as a house, garage, shed, or car. Controlling a space allows people to control the smaller things within it. Generally speaking, things located in a private home are controlled by the people in possession of that home. This is because they can control access to those things. Of course, there are exceptions, such as insects, which are not controlled by the human occupants. Also, visitors to the home will have things with them which are not controlled by their hosts. When two or more people live together in a home, it can be difficult to know who has possession of the things in it. There are places to which the public enjoys relatively free access, such as public roads and parks, shops, cafes, and airports. This raises the question whether the people who possess those places control the things found there. As a general rule, things attached to 5

Riley v Penttila [1974] VR 547. Also see Cervi v Letcher [2011] VSC 156.

6

Red House Farms (Thorndon) Ltd v Catchpole [1976] 244 Estates Gazette 295.

52

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.30]

the land are controlled by the possessor of the land. In Waverley Borough Council v Fletcher, 7 the defendant used a metal detector to find a medieval gold brooch nine inches beneath the surface of the plaintiff’s public park. The plaintiff controlled the brooch because public access to the park did not include the right to dig in the soil. Generally speaking, things found on (but not attached to) land to which the public enjoys access are not controlled by the possessor of that land. In Bridges v Hawkesworth, 8 the owner of a shop did not control a bundle of bank notes that had been dropped by an unknown person in the part of the shop to which the customers had access. In Parker v British Airways Board, 9 the defendant did not have control over a gold bracelet found lying on the floor of its international executive lounge at Heathrow Airport. Access to the lounge was restricted to passengers who had cleared customs and held first class tickets or were members of the defendant’s passenger club. However, that level of public access meant that the defendant did not have control over everything in that space. The method of controlling a thing can be affected by its location. For example, a ship at a dock will be controlled differently than one wrecked at the bottom of the ocean. The Tubantia 10 concerned a steamship which sank in 1916 to a depth of 20 fathoms (37 metres). In 1922, the plaintiffs (who were not acting on behalf of the ship’s owner) began salvage operations. Over 15 months, they spent 25 days trying to recover the ship’s cargo. They had moored buoys to the ship and cut a hole in its side, but their divers could spend only eight minutes each day inside the ship. Although the plaintiffs could not control access to the wreck and had spent little time there, they had sufficient control to give them legal possession. That level of control was measured against what was possible in the 1920s. Changes in technology might bring about changes in the control required. Would eight minutes in the ship two or three times a month be sufficient if another salvor could be there eight hours every day? The court was concerned about the peaceful, orderly exploitation of resources and the safety of the salvors. The declaration that the plaintiffs had possession of the ship prevented a dangerous free for all. However, deciding that people have control of a thing, when in fact they have very little, can lead to the sterilisation of resources. Should the first people to find a wreck acquire the legal right to exclude others from that wreck if they do not have the ability to bring any part of it to the surface? How much control should be needed before that right is acquired? Some things have a tendency to escape, such as animals, fluids, or logs floating on a river. To control such things, a person must able to keep them from escaping. The level of control need not be absolute. This was demonstrated in Ohio v Shaw, 11 where three men were charged with stealing fish. The defendants had removed the fish from 7 8 9 10

Waverley Borough Council v Fletcher [1995] 4 All ER 756 (CA). Bridges v Hawkesworth (1851) 21 LJQB 75. Parker v British Airways Board [1982] 1 QB 1004 (CA). The Tubantia [1924] P 78.

11

Ohio v Shaw 65 NE 875 (1902).

[5.40]

CHAPTER

5

POSSESSION

53

unattended nets in Lake Eerie. The nets had a funnel-like entrance through which fish would swim. It was possible for them to swim out again (if they could find the entrance) and, in stormy weather, some fish would escape over the top of the nets. The trial judge decided that the defendants were not guilty of theft because no-one had control of the fish in the nets and, therefore, they did not belong to anybody when they were taken. This was reversed on appeal. The owners of the nets had control and possession of the fish in the nets, but would lose control and all rights to fish which managed to escape into the lake. There are some domestic animals, such as cats, homing pigeons, and honey bees, which are permitted to wander because they have a tendency to return home on their own. Although there are many times when a wandering domestic animal is beyond the control of its owner, the animal’s homing instinct provides the owner with sufficient control for possession. 12 Once someone has obtained enough control of a thing to be in possession of it, that control can be relaxed without losing possession. For example, you can go to work or on vacation and still have possession of your home. You can go for coffee and leave your books and coat unattended in the library without losing possession of those things. Possession will be lost if you lose something or throw it away or if someone else takes possession of it. Intention to possess ...............................................................................................................................................................................................

Control is one component of possession. An intention to possess (sometimes called animus possidendi) is the other. 13 All that is required is an intention to possess something for the time being. There is no need to intend to own it or possess it permanently. 14 In most cases, this requirement does not create a problem. The acts of control reveal an intention to possess. When we see someone pick up a carton of milk at a shop or lock up a bicycle, we have no doubt that he or she intends to possess that thing. The intention to possess something is a fact. Normally, it is proved by the acts of control and surrounding circumstances. This is because a state of mind is difficult to prove. People can testify about what they intended at a relevant time, but if proof of that intention provides them with an advantage, their evidence is self serving and treated with caution. The court looks for other evidence to support that testimony. Since the intention to possess a thing is often proved by the acts of control in relation to that thing, it is easy to confuse the two components of possession. It is possible to intend to possess something without knowing it exists. For example, if you intend to possess a suitcase, then you intend to possess its contents, even though you do not know what it contains. The same is true of a house or flat. In Flack v National [5.40]

12 13

Hamps v Darby [1948] 2 KB 311 at 320-323 (CA). Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188.

14

Buckinghamshire County Council v Moran [1990] Ch 623.

54

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.50]

Crime Authority, 15 a bag containing $433,000 in cash was seized lawfully by police from the plaintiff’s home. She had never seen the bag before and did not know it was there. Its true owner was never discovered, but the police suspected that the plaintiff’s son had used his key to the home to hide the bag there. The plaintiff’s intention to possess her home meant that she intended to possess the things inside it, including the bag and money. It is important to distinguish between the intention needed to obtain possession of a thing and the intention needed to commit the crime of possessing something illegally, such as banned drugs, firearms, or stolen goods. 16 There is nothing inconsistent with the law of property deciding that persons have possession of stolen goods placed in their garage without their knowledge and the criminal law deciding that they are not guilty of the crime of possessing of those goods. The intention to exclude others from the garage and its contents does not necessarily amount to the guilty mind of intending to possess stolen goods. When people possess places to which the public has access, it may be difficult to know whether they intend to possess everything within those places. In Parker v British Airways Board, 17 discussed above at [5.30], the board did not intend to control the gold bracelet lost by a passenger in its executive lounge. However, we can assume that the board intended to possess the furniture and decorations in the lounge. If the board intended to possess only some of the things in the lounge, what sets them apart? Clearly, the board would not want passengers to remove items placed in the lounge by the board. However, no effort was made to prevent passengers from removing other items. If the board had posted signs requesting passengers to surrender found items to the board or it had regularly checked the lounge for lost items, the result might have been different. Many people invite the public to places they possess and make it clear that they do not want possession of the things brought there by the public. For example, it is not uncommon to see a sign above a coat rack in a cafe which disclaims responsibility for items left there.

Importance of possession Possession is significant in several ways. First and foremost, it is itself a property right. In other words, having possession of a thing corresponds to the general duty of other members of society not to interfere with that possession. Secondly, possession of a thing can generate a separate right to possession. For example, when you borrow a library book, you obtain possession of it. If you accidentally leave it behind in a cafe and the waiter picks it up, you have lost possession. Discovering your loss, you return to the cafe to recover the book. The waiter has possession of the book, but you have a better right to possession, based on your earlier possession of the book. Competing rights to possession are discussed below. [5.50]

15 16

Flack v National Crime Authority (1998) 156 ALR 501; [1998] FCA 932. See Western Australia v R (2007) 33 WAR 483; (2007) 169 A Crim R 206; [2007] WASCA 42.

17

Parker v British Airways Board [1982] 1 QB 1004.

[5.80]

CHAPTER

5

POSSESSION

55

Thirdly, possession provides evidence of ownership. For example, how does anyone know whether you own the shoes you are wearing? It is unlikely that you could produce a receipt or that the shopkeeper would remember selling them to you. Absent evidence to the contrary, your possession of your shoes is sufficient proof that they belong to you. Daily commerce depends on this. When you purchased the shoes, did you ask for documentary evidence of the shopkeeper’s ownership of them? The shop’s possession of the shoes was sufficient. Fourthly, possession of a thing for long enough can become ownership. The passage of time can bring to an end the owner’s right to recover possession of a thing. By default, the person with possession then becomes the owner since there is no-one else with a better property right.

Ownership, title, and possession It is helpful to distinguish possession from two other property concepts: ownership and title. [5.60]

Ownership ...............................................................................................................................................................................................

Ownership is a concept which is familiar and generally understood. Even though we might find it difficult to define ownership, most of us would have no trouble making a list of five things we own and five things we do not. Even without that detailed knowledge, we recognise the difference between ownership and possession. There are many situations in which you obtain possession of a thing, but not ownership, such as when you borrow a pen, hire a car, or rent a flat. Ownership of a thing usually includes the right to possess it. However, it is possible to own intangible things which cannot be possessed, such as copyrights and patents. Also, the owners of tangible things can transfer their rights to possession to others. For example, the owners of a house can rent it to a tenant, thereby temporarily giving up their rights to possess that house. Many students of property law are surprised to discover that the common law does not match the popular understanding of the difference between ownership and possession. The law developed clear ideas of possession and the right to possession, along with remedies to protect those rights. It did not do so with respect to ownership. This comes to the surface occasionally. For example, people often refer to the goods they own as their possessions. This is a fairly accurate reflection of their legal rights to those goods. [5.70]

Title ...............................................................................................................................................................................................

Title is a less familiar concept. Lawyers often speak of having title to a thing, by which they mean the right or entitlement to that thing. There are several different kinds of title and also several different ways in which the word is used. Sometimes title is used as [5.80]

56

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.90]

a synonym for ownership, that is, the best possible right to a thing. People might say they have title to a car or parcel of land to indicate that they own it. Title sometimes refers to the documentary evidence of ownership, such as the bill of sale for a car or the deed to a house. Title documents are used for the more valuable things in society, such as land, vehicles, expensive horses, and rare musical instruments. We are happy to rely on our possession as evidence of ownership of common household items, but need greater assurance when investing more money in a thing. Proof of title may depend on a series of documents, which enable the current owners to prove their property right by tracing it back to someone who held it an earlier time. There is also registered title. Much of the land in Australia is registered under a statutory system commonly called the Torrens system (after Sir Robert Torrens, the politician responsible for introducing the system to South Australia). Registered title under a Torrens system is more than mere evidence of ownership. It is the source of the property right. Native title or Aboriginal title is a property right that existed before the British government acquired sovereignty over Australia. It may be equivalent to ownership, but it can be something less, such as a right to hunt or fish. Lawyers also speak of possessory title, by which they mean a right to possession acquired simply by taking possession of something. This is contrasted with the usual way of acquiring title to things, by purchase or gift from the previous owner.

Obtaining possession As discussed above, possession requires both control and intention. It is obtained from the first moment when both those conditions exist simultaneously. Usually, intention precedes control, so that possession is acquired by some act of taking control. For example, you may see a coin on the pavement, form an intention to possess it, and then reach down and pick it up. It is conceivable that a person might obtain control of a thing before forming the intention to possess it. Using an earlier example, if you unknowingly sat on and therefore had control of a $10 note on the seat of a train, you could obtain possession by becoming aware of the note and forming the intention to possess it. However, as discussed above, people can intend to possess things left, without their knowledge, in spaces they control. Therefore, it less likely that someone will obtain control of a thing before forming the intention to possess it. Normally, possession of a thing is obtained with the consent of someone who previously possessed it. However, it can be obtained without such consent. These two situations are discussed separately. [5.90]

Possession acquired by consent ...............................................................................................................................................................................................

Most of the things you possess were obtained with the consent of someone else who possessed it. They may have been purchased, received as gifts, leased, or borrowed. [5.100]

[5.100]

CHAPTER

5

POSSESSION

57

The transfer of possession of goods from one person to another is called delivery. For land, it is common to speak of granting or giving possession. The transfer of possession may be permanent or temporary. For example, when you purchase a book, you buy the right to possess it for as long as you choose. The bookshop parts with its right to the book forever. In contrast, when you borrow a book from the library, you acquire possession for a limited time only. At some point, the loan comes to an end and the library has the right to have the book returned. A temporary transfer of possession is called a bailment. The person with actual possession is the bailee and the person with the right to possession in the future is the bailor. Bailment is often regarded as the separation of ownership and possession. The library continues to own the book while you possess it and will have the right to possess it again when your right comes to an end. However, it is possible to have a bailment between persons who are not owners of the thing bailed. For example, you might borrow a book from the library and let a friend use it for an hour. You have temporarily transferred your possession to your friend and will soon have the right to possess it again, even though you do not own the book. In this example, the library loan to you is a bailment and your loan to your friend is a sub-bailment. The library is the bailor, your friend is the sub-bailee, and you wear two hats: bailee and sub-bailor. Bailment without ownership does not always involve a sub-bailment. For example, you might find some jewellery and deliver it to the police in hopes of locating the true owner. Your delivery of possession to the police is a bailment, even though you do not own the jewellery. You have a right to recover possession if the true owner cannot be found. 18 Of course, the true owner of the jewellery might be found and you might never recover possession. The possibility that your loss of possession will be permanent does not prevent a bailment from arising. You still have a right to possession of the jewellery in the future if the owner cannot be found. This conditional right is a sufficient foundation for a bailment. This is because you did not transfer your entire right to possession to the police. They have possession, but subject to your right to have the jewellery returned if the true owner cannot be located. Bailment differs from a sale or gift because the bailor retains some right to possession, but the seller or donor does not. In Chapman Bros v Verco Bros and Co Ltd, 19 farmers delivered bags of wheat to a merchant under a “wheat storage” contract. Under the contract, the merchant could be required to return the same quantity of wheat to the farmers, but “shall not be required to return the identical wheat”. This was an immediate sale of wheat to the merchant and not a bailment, because the farmers did not retain any right to possession of the wheat they had delivered. A bailment can exist even if the bailor does not expect to ever recover possession. There is a common transaction, called a conditional sale or hire-purchase, in which the 18

Flack v National Crime Authority (1998) 156 ALR 501; [1998] FCA 932.

19

Chapman Bros v Verco Bros and Co Ltd (1933) 49 CLR 306; [1933] HCA 23.

58

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.110]

seller lets the buyer have possession of the thing before it is paid for. The buyer pays the purchase price in instalments and, when it is fully paid, ownership of the thing will be transferred from seller to buyer. If all goes well, the seller will never have possession of the thing again. This is still a bailment because the seller retains a right to possession of the thing in the event that the buyer fails to make the payments on time. Automobiles are often sold under conditional sale or hire-purchase agreements. A similar method is a chattel lease coupled with an option to purchase. During the term of the lease, the lessee is a bailee with a right to possess the car (so long as the payments are made and the other terms of the lease are observed). At the end of the lease, the lessee has a right to buy the car. The lessor is a bailor who has the right to recover possession of the car only if the lessee breaches the terms of the lease or chooses not to exercise the option to purchase the car at the end. Regardless of differences in terminology or form, these relationships are essentially the same. The conditional seller, hirer, or lessor is a bailor during the term of the contract. The bailment will most likely come to an end in one of two ways. Either the bailor will recover possession of the thing or ownership of the thing will pass to the bailee. There is also a possibility that the bailment will end because the thing is destroyed or is stolen by persons unknown, but that is another story. Possession acquired without consent ...............................................................................................................................................................................................

It is possible to obtain possession of a thing without anyone else’s consent. This can happen in several different ways. First, you might take possession of something which has never been possessed before. This can occur when you catch a wild animal or pick up a sea shell washed up on a public beach. It can also happen when you create a new thing, such as a loaf of bread or a painting. Secondly, you might find something which someone else lost. Although the owner might not object to your possession, he or she is not aware of your possession and therefore has not consented to it. This is different from a bailment, discussed above at [5.100], but the law treats you as if you were a bailee with “an obligation to keep it safe and return it to the owner (if that is possible)”. 20 Thirdly, you might take something from another person without her or his consent. This happens when a person takes the wrong jacket home from a party, a thief steals, or squatters take over an empty house. Possession acquired without consent is a property right which the law protects. It gives rise to a right to possession which is enforceable against everyone except those people with a better right to possession. [5.110]

20

R v Ngan [2007] NZSC 105; [2008] 2 NZLR 48 at [15] and at 59 (NZLR), per Blanchard J. Also see Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd [1970] 2 NSWR 156; (1970) 44 ALJR 269; [1970] 3 All ER 825.

[5.140]

CHAPTER

5

POSSESSION

59

Breach of duty Possession and the right to possession are property rights. This means that other members of society are under a general duty not to interfere with those rights. A breach of that duty is a legal wrong, called a tort. The most common torts of wrongly interfering with possession or a right to possession are trespass, conversion, and detinue. [5.120]

Trespass ...............................................................................................................................................................................................

Trespass is the wrongful interference with other persons or with their possession of things. To constitute trespass, the interference must be unauthorised, direct, and done voluntarily. 21 Trespass to goods or land involves interference with possession or damage to the thing possessed. It is an interesting question whether interference with computer equipment solely by electronic means can be trespass to goods. 22 Trespass is not committed unless there is a direct connection between the trespasser’s actions and the interference with possession or damage. For example, I would be guilty of trespass if, without your consent, I handled your goods, pushed you and caused you to drop an object, walked on your land, or threw something onto your land. Indirect interference is not trespass (although it may be some other type of wrong). For example, if you left your things in a library while you went for coffee and the library doors were locked when you returned, this would interfere with your possession of those things, but would not be sufficiently direct to be trespass. Only a voluntary act can be trespass. So, for example, accidentally tripping and knocking over a vase would not be trespass. However, the tort does not require that the trespasser intended to commit a wrong. Taking the wrong coat home from a party is a voluntary act and a trespass, even though it was an honest mistake. So too is wandering by mistake onto the land of another while out bushwalking. [5.130]

Conversion ...............................................................................................................................................................................................

Unlike trespass, the tort of conversion does not apply to land. It is the unauthorised interference with another’s possession or right to possession of goods, documents, or cash. Like trespass, a voluntary act causing such interference is conversion, even if the converter did not intend to do wrong. However, unlike trespass, indirect interference will suffice. Conversion (which was once called trover) is some dealing with goods, documents, or cash which is repugnant to someone else’s right to possess them. 23 Using them for your [5.140]

21 22

23

Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46; Bayliss v Cassidy [1998] QSC 186. See New Zealand Law Commission, Electronic Commerce (Report 50, 1998) at [149]-[153]; T Rollo, “Liability for Spam through Trespass to Goods” [2001] Privacy Law and Policy Reporter 37; Tchenguiz v Imerman [2010] EWCA Civ 908; [2011] 2 WLR 592. Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46; Kuwait Airways Corp v Iraqi Airways Co [2002] UKHL 19; [2002] 2 AC 883 at [37]-[44].

60

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.140]

own benefit or purporting to sell, give, or lend them to another would be conversion. These acts involve an intention to exercise dominion over them. Temporarily handling or detaining things without that intention would not suffice. For example, it is not conversion to find a lost item and take possession of it with the intention of locating its owner (although the finder will be treated like a bailee with an obligation to keep it safe and return it to the owner if possible). 24 A temporary interference with a right to possession can be conversion if that interference amounts to a repudiation of that right. In Aitken Agencies Ltd v Richardson, 25 the defendant took the plaintiff’s van for a joy ride and damaged it. He was guilty of conversion because, as McGregor J said, he “intended to exercise a temporary dominion over the van. He assumed possession of it for his own purpose, and such act was inconsistent with the rights of the owner”. 26 This can be compared with Schemmell v Pomeroy, 27 in which a 14-year-old boy took his mother’s car for a joy ride while she was at work. He intended to put the car back safely before she got home, but wrecked it in an accident. His intention to return the car meant that he was guilty of trespass, but not conversion (at least not before the accident). Unlike trespass, which is interference with someone’s possession of a thing, it is conversion to interfere with a right to possession. In other words, a person who does not possess, but has the right to possess goods, can sue for conversion of them. In Motor Dealers Credit Corp Ltd v Overland (Sydney) Ltd, 28 the plaintiff had a right to possession of a car, which had been improperly seized by a car dealer. The dealer sold it to the defendant, who resold it without ever taking possession of the car. Even though neither the plaintiff nor the defendant had possession of the car at the relevant time, the defendant was guilty of conversion. As Street CJ said, “there may be a conversion of goods even though the defendant has never been in physical possession of them, if his act amounts to an absolute denial and repudiation of the plaintiff’s right”. 29 To sue for conversion, the plaintiff must have a right to immediate possession of the goods. A right to possession at some time in the future would not suffice. For example, if you borrowed a book from the library for four weeks and that book was taken from you the next day, the library could not sue for conversion until its right to possession revived 27 days later. This short wait is not much of a problem. However, what if you leased a car to someone for three years and it was stolen the next day? Having to wait three years before commencing action against the thief could cause considerable difficulty. This is why many leases of this kind contain a clause which gives the owner a right to immediate possession of the car if it is wrecked or stolen. 24

R v Ngan [2007] NZSC 105; [2008] 2 NZLR 48; Gilchrist Watt & Sanderson Pty Ltd v York Products Pty Ltd [1970] 2 NSWR 156; (1970) 44 ALJR 269; [1970] 3 All ER 825.

25 26 27 28

Aitken Agencies Ltd v Richardson [1967] NZLR 65. Aitken Agencies Ltd v Richardson [1967] NZLR 65 at 67. Schemmell v Pomeroy (1989) 50 SASR 450. Motor Dealers Credit Corp Ltd v Overland (Sydney) Ltd (1931) 31 SR (NSW) 516.

29

Motor Dealers Credit Corp Ltd v Overland (Sydney) Ltd (1931) 31 SR (NSW) 516 at 519.

[5.160]

CHAPTER

5

POSSESSION

61

It is possible to sue for conversion of money, but only if the money exists in a physical form as cash, cheques, or other negotiable instruments. 30 The conversion is the wrongful interference with the plaintiff’s right to possession of a piece of paper, but the defendant’s liability is measured not by its value as paper, but by the value it represents or entitles the plaintiff to receive. People who interfere with purely intangible forms of value (such as a bank account or other debts due to the plaintiff) are not liable for conversion, since intangible things are not possessed and there has been no interference with a right to possession. 31 This means that the nature of the liability for misappropriating money depends on whether the misappropriation involved a cheque or electronic funds transfer. A person can be liable for conversion of intangible assets in the United States, 32 but that is not the law in Australia. 33 Detinue ...............................................................................................................................................................................................

Detinue, like conversion, is a tort which involves goods, documents, or cash, but not land. It is the wrongful detention of them from a person with a right to immediate possession. 34 A person who commits the tort of detinue will know of the plaintiff’s claim to possession, since the essence of the tort is the failure to deliver the things on demand. This sets it apart from trespass and conversion, which can be committed by people who have no idea that their actions are interfering with another’s property rights. However, it is no defence to a claim of detinue that the defendant honestly believed that the plaintiff was not entitled to possession. [5.150]

Overlap ...............................................................................................................................................................................................

The torts of trespass, conversion, and detinue are used to protect possession and the right to possession of goods, documents, or cash. This similarity means that there are potential overlaps among them. All three torts might be committed by the same person in respect to the same thing. For example, if I took your lawn mower from your yard without your consent and then refused to return it, I would be guilty of trespass, conversion, and detinue, since I directly interfered with your possession of the mower, repudiated your right to possession, and failed to comply with your lawful demand for its return. Despite the similarities, each tort is a different type of wrong. The essence of trespass is the direct interference with actual possession. Brief interference, such as minor damage to [5.160]

30

Parsons v The Queen (1999) 195 CLR 619; [1999] HCA 1 at [32]-[33].

31

OBG Ltd v Allan [2005] EWCA Civ 106; [2005] QB 762 at [49]-[58]; affirmed Douglas v Hello! Ltd [2007] UKHL 21 at [94]-[107].

32 33

Kremen v Online Classifieds Inc 337 F 3rd 1024 (CA 9th 2003). Hoath v Connect Internet Services (2006) 229 ALR 566; [2006] NSWSC 158 at [119]-[139] concerning internet protocol addresses and a domain name.

34

Russell v Wilson (1923) 33 CLR 538; [1923] HCA 60.

62

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[5.170]

goods, is trespass even though the plaintiff’s possession otherwise remains intact. In contrast, the essence of conversion is the complete repudiation of the plaintiff’s right to possession as a result of the defendant’s use of, dealing with, or destruction of the goods. 35 The essence of detinue is the failure to return the plaintiff’s goods on demand. Although the defendant may have obtained possession wrongly, through trespass or conversion, this is not an element of the tort. Detinue is committed also by someone who obtains possession of goods properly as a bailee but fails to return them when the bailment comes to an end. 36 Other Wrongs ...............................................................................................................................................................................................

Trespass, conversion, and detinue are the main types of wrongful interference with possession or a right to possession. Four others are discussed here: permanent damage to goods, overholding by tenants, nuisance, and crime. A person with a right to possession of goods in the future cannot sue for trespass, conversion, or detinue. Possession or a right to immediate possession is required. However, he or she can sue someone who causes permanent damage to the goods. 37 Normally, damage which can be repaired is insufficient, since it might be repaired before the time for possession arrives. However, if the goods have not been repaired when the owner or bailor does recover possession, he or she can sue for the “permanent” damage even though the damage can be repaired. There are so few cases involving this wrong that it does not have a name, but was called a “special action” by Dixon J in Penfolds Wines Pty Ltd v Elliott. 38 A person with a right to future possession of land has a right to sue for permanent damage to the land. There are many cases in which someone obtained possession of land with permission of the owner, but refused to leave when that right came to an end. That person is called an overholding tenant. This is not trespass to land, since the owner was not in possession of the land when the wrong was committed. However, it is wrongful interference with the owner’s right to possession, similar to detinue. There is no specific tort of refusing to give up possession of land properly acquired. It is known simply as adverse possession. Nuisance is the wrongful interference with someone’s possession of land through actions which interfere with her or his use and enjoyment of that land. Those actions may cause physical damage to the land, such as a diversion of water which causes flooding or golf balls which break windows. 39 However, physical interference is not necessary. [5.170]

35 36 37 38

Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46 at 229 (CLR). This would be conversion in England, where detinue has been abolished: Torts (Interference with Goods) Act 1977, s 2. Dee Trading Co Pty Ltd v Baldwin [1938] VLR 173. Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46 at 230 (CLR).

39

Lester-Travers v City of Frankston [1970] VR 2.

[5.170]

CHAPTER

5

POSSESSION

63

Odour or noise can also be a nuisance. 40 Whether an activity constitutes a nuisance depends on the normal way in which land in that area is used. Noises and smells which are acceptable in an industrial section may be nuisances in a quiet residential suburb. Noise which is acceptable during the day, may be a nuisance if made in the middle of the night. Normally, nuisances are recurring or ongoing activities. People are expected to tolerate temporary annoyances, such as a renovation to a neighbour’s house. However, in Munro v Southern Dairies Ltd, Sholl J said “that the loss of even one night’s sleep may amount to such a substantial interference with personal comfort as to constitute a nuisance”. 41 The wrongful interference with possession or a right to possession may be a crime as well as a tort. For example, conversion of goods could also be theft, and trespass to land might be breaking and entering, depending on the circumstances. The main difference between crime and tort is the intention of the actor. Crime requires both a criminal act (actus reus) and a criminal intention (mens rea), whereas a tort can be committed by someone who intends to act honestly. A secondary difference is the standard of proof required. Crime must be proved beyond a reasonable doubt, while torts need only be proved on the balance of probabilities. Therefore, someone acquitted of theft might be found liable for converting the goods alleged to have been stolen.

40

Oldham v Lawson [1976] VR 654.

41

Munro v Southern Dairies Ltd [1955] VLR 332 at 335.

PART 4

BAILMENT Chapter 6

Bailment ........................................................................... 67

CHAPTER 6

......................................................................................................................

Bailment Extracted from Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015), Ch 21.

A bailment is a delivery of goods from one person (the bailor) to another (the bailee) on a condition, either express or implied, that when the purpose for which the goods were bailed has been fulfilled, the goods will be returned to the bailor or delivered according to their instructions. Bailments are of everyday occurrence, for example leaving a car at a garage for repair; depositing items at a bank for safe custody; hiring goods; handing goods over to a carrier for delivery; or loaning goods to a friend. These actions all create bailments and give rise to the legal relationship of bailor and bailee. [6.10]

Nature and classification of bailments To constitute a bailment there must be a transfer of possession of the goods from one person to another person without any intention on the part of the bailor to transfer the ownership of the goods to the bailee. The bailee receives the goods for the purpose of fulfilling the instructions of the bailor which may be to keep the goods in safe custody, or to carry the goods from one place to another, or to do something to the goods and then return them. The requirement that there be a transfer of possession distinguishes the relationship of bailor and bailee from that of licensor and licensee. A mere licence or permission to use particular premises or facilities for the purpose of temporarily leaving or storing goods does not involve a transfer of possession. The importance of the distinction between a bailment of goods on the one hand, and a mere licence to use premises or facilities on the other, is that the relationship of bailor and bailee gives rise to certain duties and liabilities which do not apply where the relationship is that of licensor and licensee. However, it is not always easy to determine whether the relationship between the parties is that of bailor and bailee or licensor and licensee, as is illustrated by the following case: [6.20]

Greenwood v Council of the Municipality of Waverley (1928) 28 SR (NSW) 219 at 221 [6.30] The plaintiff, G, paid a fee to hire a locker in the defendant council’s dressing sheds at Bondi Beach. After putting his clothes in the locker, G ensured that it was locked. G was not given a key but was supplied with a numbered disc to identify the locker. On returning from the beach G presented the disc to the attendant who opened the locker which was found to be empty. G sued the council contending that it was a bailee of his clothes and as such owed him a duty of reasonable care.

68

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.40]

cont. However, it was held that the council was not a bailee since possession of the clothes had not passed to the council and had always remained in G. The council had merely let the locker to G which did not give rise to a duty of care in respect of the contents of the locker.

There is a divergence of authority on whether parking a car in an attended parking lot or parking station gives rise to a bailment. The trend of United Kingdom cases is to regard the position as merely that of licensor and licensee: BG Transport Service Ltd v Marston Motor Co Ltd [1970] 1 Lloyd's Rep 371. However, Australian courts are more disposed to find that there has been a transfer of possession, that is control over the vehicle, giving rise to the relationship of bailor and bailee, particularly where some card or ticket has to be presented before regaining the vehicle: Council of the City of Sydney v West (1965) 114 CLR 481 at 489, 501; Walton Stores Ltd v Sydney City Council (1968) 88 WN (NSW) 153. [6.40]

Classification of bailments ...............................................................................................................................................................................................

The traditional classification of bailments is that based, with certain modifications, on the judgment of Lord Holt in Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107, namely: [6.50]

1.

The deposit of goods for gratuitous safekeeping by the bailee, for example the handing over of jewellery to a bank for safe custody where no charge is made for the service.

2.

The delivery of goods to a bailee for work to be done on the goods for the benefit of the bailor without reward, for example where A leaves his watch with B for repair without a charge being made for the repair.

3.

The delivery of goods by way of gratuitous loan for use by the bailee, for example where A lends his car to his friend B without charge.

4.

The deposit of goods for safekeeping for reward, for example where jewellery is handed over to a bank for safe custody and a fee is charged for the service.

5.

The delivery of goods to have something done to them for reward, for example where a car is left at a garage for repair.

6.

The delivery of goods for use by the bailee for reward, that is, the hiring of goods.

7. The delivery of chattels to be held as security for a loan, that is, a pledge or pawn. It will be observed that the first three types of bailment listed above are gratuitous, whereas the following three are bailments for reward. The distinction between a gratuitous bailment and a bailment for reward is relevant in considering the extent of the duty of care owed by a bailee to the bailor. The distinction is also important in considering the rights and liabilities of the bailor or bailee against third parties.

[6.90]

CHAPTER

6

BAILMENT

69

Duties of a bailee Duties of a bailee for reward ...............................................................................................................................................................................................

A bailee for reward has a duty to take such care of the goods as is reasonable in the circumstances. 1 In the event of loss of, or damage to, the goods during the bailment, the onus is upon the bailee to prove that such loss or damage was not the result of their failure to take reasonable care. For example, if goods are stolen from a bailee, the latter will be liable to the bailor for the loss of the goods unless the bailee can show that he or she took reasonable precautions to secure the premises against intruders. [6.60]

Pitt Son & Badgery Ltd v Proulefco SA (1984) 153 CLR 644 at 647–648 [6.70] The bailee stored bales of wool in an old timber building, the fencing around which was clearly inadequate to keep out intruders. The High Court held that the bailee was liable for breach of his duty to take reasonable care of the wool when it was destroyed in a fire deliberately lit by an intruder who had gained access to the wool store through the inadequate fencing.

Tottenham Investments Pty Ltd v Carburettor Services Pty Ltd (1994) Aust Torts Reports 81-292 at 61,554 [6.80] The plaintiff left a valuable car with the defendants for repair. Overnight, thieves entered the defendants’ premises through a skylight in the roof, started the car with the keys that had been left in the ignition, opened the roller doors to the premises and drove off with the vehicle. Shortly after the break-in, the defendants placed security bars over the skylight, installed an alarm system and placed signs on the outside of the building warning possible intruders of the presence of alarms. The New South Wales Court of Appeal held that the defendants were liable to the plaintiff for the loss of the vehicle since they had failed to discharge the onus of establishing that they had taken reasonable care appropriate in the circumstances. The precautions taken to secure their premises subsequent to the break-in should have been implemented earlier. However, leaving the ignition keys in the vehicle did not of itself constitute a failure to take reasonable care. See also A1 Perfect Plumbing Pty Ltd v BMW Prestige Pty Ltd (2006) 230 ALR 331 (inadequate security for bailed vehicle).

The duty of a bailee for reward is not that of an insurer. Accordingly, the bailee is not obliged to take every conceivable or possible precaution to prevent the loss of goods. The bailee's duty is simply to act reasonably. Where the bailee can show that he or she had taken reasonable care for the safekeeping of the goods, the bailee will not be liable if they are stolen. The standard of care required is to use such care as a careful and vigilant person would exercise in the custody of their own property of the like character and in the like circumstances: Nibali v Sweeting & Denney (WA) Pty Ltd (1989) Aust Torts Reports 80-258. [6.90]

1

See J Tarrant, “Duties of a Bailee for Reward” (2008) 22(3) Commercial Law Quarterly 18.

70

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.100]

A bailee for reward is not obliged to insure the bailed goods. Where the loss of the goods was not due to the negligence of the bailee, a bailee for reward who lacks insurance protection for the loss is not required to inform the bailor of that fact, unless the bailee could foresee an unusual risk to the goods: All Covers and Accessories Pty Ltd v Sidawi (2012) 36 VR 113 at [10]-[11], [49]. A bailee's primary duty is to redeliver the goods to the bailor or as the bailor may direct. Hence, if the bailee delivers the goods to a third person other than in accordance with the bailor's express authority or mandate, the bailee will be liable for their loss. Jackson v Cochrane [1989] 2 Qd R 23 at 26–27 [6.100] The owner of a caravan gave possession of it to a motor dealer to sell “on consignment”. The motor dealer allowed three strangers to tow it away on their persuading her that they had the authority of the owner to do so when such was not the case. It was held that the motor dealer was liable to the owner for the loss of the caravan.

It appears from the latter case that the bailee will be liable for such misdelivery even in the absence of negligence. In addition to the general obligation to take reasonable care in the case of the delivery of a chattel for work to be done upon it for reward, if the work is of the type which the bailee holds herself or himself out as skilled to do, for example as a watch repairer, the bailee warrants that he or she possesses the technical skill and ability to do the work. In the case of the carriage of goods, where the bailee is a common carrier, more onerous rules of liability for loss or damage apply. [6.110]

Duties of a gratuitous bailee ...............................................................................................................................................................................................

The modern trend is for the courts to apply the same basic principle to both a bailment for reward and a gratuitous bailment, namely, whether the bailee took such care of the goods as was reasonable in the circumstances. [6.120]

WGH Nominees Pty Ltd v Tomblin (1985) 39 SASR 117 [6.130] The plaintiff jeweller had insisted that the defendant husband T take a particular ring to show his wife. On his way home T went to a hotel where the ring was apparently stolen from his coat. The jeweller sued T for damages for negligence. However, it was held that, having regard to the totality of the circumstances, T had not been negligent and accordingly was not liable to the jeweller for the loss of the ring.

Although the general position would seem to be that a bailee, whether a gratuitous bailee or a bailee for reward, has a duty to take reasonable care of the goods, what constitutes a breach of that duty will depend upon the particular circumstances and the nature of the bailment. A gratuitous bailee who negligently fails to return the goods within a reasonable time of a demand being made for them will be liable for their loss to the bailor: Mitchell v Ealing London Borough Council [1979] QB 1. [6.140]

[6.180]

CHAPTER

6

BAILMENT

71

Graham v Voigt (1989) 89 ACTR 11 [6.150] A landlady was held liable for failing to return a former boarder’s possessions, including a number of valuable stamp albums, which had been left with her for some eight months. As a gratuitous bailee, the landlady was bound to take reasonable care of the goods and to deliver them up on an unequivocal demand for their return being made. Since she failed to deliver the goods and could not show that they had been lost without negligence or default on her part she was held liable for their value.

Where goods under a gratuitous bailment are damaged, it has been held that the onus is on the bailee to show that he or she took reasonable care of them while they were in their possession: McComb v Martin Box Marine Holdings Pty Ltd (1992) 8 SR (WA) 193. [6.160]

Liability of bailee for employees and agents ...............................................................................................................................................................................................

Where a bailee for reward entrusts the article bailed to their employee for safekeeping and the article is lost owing to the negligence of the employee, the bailee is liable even though he or she proves to the satisfaction of the court that a reasonably prudent person in similar circumstances would have entrusted such an article to an employee. The bailee would be liable because the bailee undertakes that all reasonable care will be exercised by themselves and their employees, in other words, a bailee for reward is liable for their own negligence and vicariously liable for the negligence of their employees: Makower, McBeath & Co Pty Ltd v Dalgety & Co Ltd [1921] VLR 365 at 375; Morris v CW Martin & Sons Ltd [1966] 1 QB 716. Similarly, a bailee whose employee or agent sells the goods entrusted to the bailee is liable in damages to the owner of goods, unless an exemption clause in the contract of bailment precludes liability: Rick Cobby Haulage Pty Ltd v Simsmetal Pty Ltd (1986) 43 SASR 533. [6.170]

Sub-bailments ...............................................................................................................................................................................................

A bailee to whom goods have been entrusted will often transfer possession of the goods to a third party thereby creating a sub-bailment of the goods. 2 The nature of a sub-bailment was well described by Professor Palmer in his classic text on Bailment (3rd ed, 2009), p 1240: [6.180]

A true sub-bailment may be defined as that relationship which arises whenever a bailee of goods transfers possession to a third party for a limited period or a specific purpose, on the understanding (express or implied) that his own position as bailee is to persist throughout the subsidiary disposition. … The third party, by taking possession and by consenting to 2

See generally K Lewins, “Sub-Bailment On Terms and the Australian Consumer” (2002) 9(3) E LAW: Murdoch University Electronic Journal of Law, available at https://elaw.murdoch.edu.au; H Austin, “The Essentiality of Possession in Bailment: Sub-bailment on Terms, Quasi-bailment and Freight Forwarders” (2004) 20 Journal of Contract Law 145.

72

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.190]

the limits set upon it, assumes the role of a special class of bailee. He will owe to the original bailor all the common law duties which would traditionally arise upon a direct bailment of the kind in question.

The leading authority on the duty owed by a sub-bailee to the original bailor to take reasonable care of the goods entrusted to their possession is Morris v CW Martin & Sons Ltd [1966] 1 QB 716: Morris v CW Martin & Sons Ltd [1966] 1 QB 716 [6.190] In Morris v CW Martin & Sons Ltd [1966] 1 QB 716, the plaintiff sent her mink stole to a furrier, B, for cleaning. B explained that he did not provide this service and, with the plaintiff’s consent, forwarded the mink to the defendant drycleaners, who accordingly became sub-bailees. While in the defendants’ possession, the mink was stolen by the employee entrusted with cleaning it, although the defendants had not themselves been negligent either in failing to take proper steps to safeguard the mink or in employing the particular employee. The Court of Appeal held that the sub-bailee was liable to the bailor for the unauthorised theft of the mink by their employee, notwithstanding the absence of a contractual relationship between the original bailor and sub-bailee. See similarly, Westrac Equipment Pty Ltd v Owners of the Ship Assets Venture (2002) 192 ALR 277.

In an action by the owner of goods against a sub-bailee for loss of the goods, the sub-bailee can rely as against the owner on the terms of the contract between the bailee and the sub-bailee if the owner has expressly or impliedly consented to the bailee making a sub-bailment containing such terms, but not otherwise. Thus, where the owners (the bailors) of goods arranged with freight carriers (the bailees) for the carriage of the goods to a foreign port, and the carriers subcontracted with shipowners (the sub-bailees) for shipment of the goods, it was held that the owners were bound by the terms of the contract between the freight carriers and shipowners, since the owners were regarded as having authorised the freight carriers to entrust the goods to the shipowners on those terms: Pioneer Container KH Enterprise (cargo owners) v Pioneer Container (owners) [1994] 2 AC 324. [6.200]

Exclusion of liability ...............................................................................................................................................................................................

A bailee may seek to limit or exempt their liability for negligence in a contract of bailment. [6.210]

Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Aust) Pty Ltd (1966) 115 CLR 353 at 360, 366 [6.220] The appellant was an interstate transport company which regularly employed a subcontractor to pick up goods around Melbourne and transport them to the appellant’s central depot in Melbourne where they were sorted for interstate carriage. The appellant’s depot closed at 5.30 pm. On the day the subcontractor collected the respondent’s goods he finished his round at 5.40 pm and consequently took his loaded truck home, as he had been directed to do by the appellant on a number of previous

CHAPTER

[6.230]

6

BAILMENT

73

cont. occasions when he had been late in completing his collections. The subcontractor backed the truck into his garage but in the early hours of the morning a fire broke out damaging the respondent’s goods. In an action for damages by the respondent, the High Court held that it was implicit in the contract between the appellant and the respondent that the latter’s goods would be taken to and received by the appellant’s depot at the conclusion of the subcontractor’s pick-up round. Accordingly, the subcontractor’s act in taking the goods home for the night constituted such an unauthorised departure or deviation from the terms of the contract between the appellant and the respondent as to preclude the appellant from relying on the exemption clause in the contract which purported to exempt it from liability.

Statutory obligations where services are provided to a consumer ...............................................................................................................................................................................................

The widespread use of exemption clauses designed to limit or exclude the common law obligations of, for example a bailee for the work performed on chattels delivered for repair, has resulted in statutory provisions to protect “consumers” in respect of the quality of the work or services so provided. Thus, the Australian Consumer Law, 3 ss 60 and 61 provide: [6.230]

60. If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. 61. (1) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer; there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose. (2) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer makes known, expressly or by implication, to: (i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made; the result that the consumer wishes the services to achieve; there is a guarantee 3

The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)).

74

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.240]

that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.

The obligations imposed by these provisions cannot be excluded (s 64(1)), at least where the services are of a kind ordinarily acquired for personal, domestic or household use or consumption. If the services are not of that kind, then liability for breach of the provisions can be limited to supplying the services again or payment of the cost of having the services supplied again: s 64A(2). However, a term so limiting liability cannot be relied on if the person to whom the services were supplied establishes that it is not fair or reasonable in the circumstances for the supplier to rely on such limiting term: s 64A(3). The scope of the statutory guarantees in contracts for the provision of services is very wide since “services” is broadly defined: s 2(1). A person is taken to have acquired particular services as a consumer if either: (a)

the price of the services did not exceed $40,000 (or a greater amount prescribed by regulation); or

(b)

where the price exceeded that amount, the services were of a kind ordinarily acquired for personal, domestic or household use or consumption: s 3(3).

Duties of a bailor Where a bailment for reward is for a fixed term, the bailor is under a duty not to interfere with the bailee's possession of the goods until the expiry of the period of the bailment. If the bailor retakes possession of the goods during the term of the bailment, the bailor may be liable to the bailee for trespass, conversion, or breach of contract. On the other hand, a gratuitous bailment is revocable at the will of the bailor: Parastatidis v Kotaridis [1978] VR 449. A further duty of the bailor is that they must inform the bailee of dangers in the goods of which the bailor is aware, whether the bailment is gratuitous or for reward. A gratuitous bailor has a duty “to communicate to the borrower defects in the article lent of which he is aware, and if either deliberately or by gross negligence he does not discharge this duty, he is liable for injury resulting to the borrower”: Coughlin v Gillison [1899] 1 QB 145 at 149. Where the bailee accepts possession of the goods after being sufficiently warned of their dangerous qualities, the bailor will not be liable for subsequent loss or damage suffered by the bailee. [6.240]

Pivovaroff v Chernabaeff (1978) 21 SASR 1 [6.250] A market gardener gratuitously lent an onion-sorting machine to a fellow market gardener. While giving directions to the bailee on how to use the machine, the bailor warned the bailee not to allow children near it. However, the bailee operated the machine assisted by a 13-year-old boy whose hand became caught in the machine and was mutilated.

[6.300]

CHAPTER

6

BAILMENT

75

cont. In an action by the boy against both the bailor and bailee, it was held that the bailor was not liable since he had sufficiently discharged his duty to warn of dangers that might arise from the operation of the machine by the directions he had given to the bailee. It was further held that the bailee was liable in negligence for the injuries suffered by the boy.

Hire of goods ...............................................................................................................................................................................................

This section considers the obligations imposed on the bailor/lessor in the case of the hiring of goods for reward. These obligations may be imposed by common law or statute. [6.260]

At common law

Where goods are hired for use by the hirer, the common law implies in the contract of hire a condition that the goods are reasonably fit for the particular purpose made known to the bailor/lessor for which they are being hired: Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633 at 642, 645, 650, 657, 660; Star Express Merchandising Co Pty Ltd v VG McGrath Pty Ltd [1959] VR 443. [6.270]

Cottee v Franklins Self-Serve Pty Ltd [1997] 1 Qd R 469 [6.280] The plaintiff was injured when she attempted to prevent a laden shopping trolley from toppling over when one of its wheels collapsed. The trolley had been supplied to the plaintiff by an employee of the defendant supermarket. It was held by the Queensland Court of Appeal that there was a contract of hire between the plaintiff and the defendant supermarket. Implied in the contract was a term that the trolley would be reasonably fit for its contemplated purpose or use. The plaintiff was awarded $25,000 damages for the injuries she suffered as a result of the breach of the implied term. Macrossan CJ expressed the view that since the trolley had been supplied to the plaintiff at the checkout counter, there was a contract of hire for reward between the plaintiff and the supermarket, the consideration for the contract being the plaintiff’s payment of the price for her selected goods at the checkout.

Since the condition of fitness for purpose is implied at common law, it can be excluded by an appropriately drafted exclusion clause. [6.290]

The Australian Consumer Law ...............................................................................................................................................................................................

Further protection is afforded by the Australian Consumer Law 4 where goods are hired or leased by a consumer. The guarantees of undisturbed possession and the conditions of correspondence with description, acceptable quality and fitness for purpose

[6.300]

4

The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)).

76

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.310]

which apply to contracts of sale under the Australian Consumer Law are applied to contracts of hire: ss 52, 54 – 56. This is because these guarantees apply to contracts for the “supply” of goods, which is defined as including the hiring or leasing of goods: s 2(1). A person (including a corporation) is taken to have acquired particular goods as a consumer in the present context if the price at which the hirer or lessee could have purchased the goods from the supplier either: (a)

did not exceed $40,000 or a greater amount prescribed by regulation; or

(b)

if it exceeded that amount, the goods are of a kind ordinarily acquired for personal, domestic or household use; or

(c)

if it exceeded that amount, the goods are a vehicle or trailer acquired for use principally for transport of goods on public roads (s 3(1)); provided that the goods are not acquired for the purpose of resupply or for the purposes of transformation as part of a manufacturing process: s 3(2). These guarantees cannot be excluded (s 64(1)), at least where the goods are of a kind ordinarily acquired for personal, domestic or household use. If the goods are not of that kind, liability for breach of implied condition can be limited to the replacement or repair of the goods or to the cost of replacement or repair: s 64A(1). However, a term so limiting liability cannot be relied on if the person to whom the goods were supplied establishes that it is not fair or reasonable in the circumstances for the supplier to rely on the limitation: s 64A(3).

Termination of bailments A bailment may be terminated in a number of ways, of which the following are the most common: [6.310]

1. By expiry of the term ...............................................................................................................................................................................................

A bailment will terminate when the period for which the goods were bailed expires. Similarly, the bailment will terminate when the purpose for which the bailment was created has been fulfilled. [6.320]

2. By demand of a gratuitous bailor ...............................................................................................................................................................................................

In the case of gratuitous bailments, the bailment may be determined at any time by the bailor: Parastatidis v Kotaridis [1978] VR 449. [6.330]

3. By wrongful act of the bailee ...............................................................................................................................................................................................

Where the bailee commits a wrongful act of such a nature as to jeopardise the title of the bailor to the goods or otherwise to amount to a repudiation of the transaction, such as purporting to sell the goods, the bailment may be terminated. The bailment is not automatically terminated but the bailor has an option whether to terminate it. [6.340]

[6.370]

CHAPTER

6

BAILMENT

77

Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400 [6.350] In Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400, Anderson hired a valuable car under a hire-purchase agreement with finance company Esanda. The agreement provided that Anderson would not part with possession of the car unless Esanda gave prior written consent. Anderson told Esanda that it had decided to sell the car and was given a payout figure by Esanda. Esanda did not give its prior written consent to the sale. Anderson brought the vehicle to a car yard, from which it was stolen. Esanda then sought to repossess the vehicle. Anderson sued the car yard for breach of its duty as a bailee. The car yard argued that Anderson had committed a fundamental breach of the hire-purchase agreement and therefore had no right to sue it in bailment. The New South Wales Court of Appeal observed that a repudiation of a simple bailment terminates the bailment. However, where there is a bailment within a contract a bailee does not forfeit their right to immediate possession by any dealing that is unwarranted by the bailment. Here there was a bailment of the vehicle to Anderson under a contract (the hire-purchase agreement). A term providing for the way in which the bailee’s right of possession could be terminated would need to be expressed in the “clearest express terms”: at [70]. A term that allows termination by notice for breach of any term of the bailment will not be construed to have the effect of terminating the bailee’s right of possession. An act would need to be “very serious” to justify termination of the bailment, “virtually a disclaimer of the contract of bailment”: at [72]. Conversion was not necessarily sufficient to justify termination. Here there was no attempt to defraud Esanda. Accordingly, Anderson had a right to immediate possession of the vehicle and had standing to sue the car yard in bailment. 5

4. By destruction of the subject matter ...............................................................................................................................................................................................

A bailment is terminated when the subject matter of the bailment is lost or destroyed, or by reason of some change in its nature becomes incapable of use for the purposes of the bailment. [6.360]

Repossession of bailed goods ...............................................................................................................................................................................................

At common law the owner of a bailed chattel cannot use force to repossess the chattel since the bailee's possession was not wrongful from its inception: Toyota Finance Australia Ltd v Dennis (2002) 58 NSWLR 101. In that case it was held that the lessor of a car was not entitled to use force in repossessing the car from a lessee who wrongfully refused to return the vehicle. In some jurisdictions legislation has provided that limited force may be used in repossessing a chattel. 6 [6.370]

5 6

See N Palmer, “Title to Sue in Bailment: Repudiation and the Contractual Basis of Liability for Wrongs to Chattels” (2008) 24 Journal of Contract Law 132. See, for example, Criminal Code Act 1924 (Tas), Sch 1, s 45; Criminal Code 1899 (Qld), s 276; Criminal Code 1913 (WA), s 253.

78

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[6.380]

Rights against third parties ...............................................................................................................................................................................................

If a third party commits a wrongful act against the chattel bailed, for example wrongfully takes possession of it, the bailor has the right to sue the third party in tort for damages for conversion if the bailment is a bailment at will. A bailee is also entitled to bring an action against a tortfeasor who has negligently caused damage to the bailed chattel while the chattel was in the bailee's possession. Such an independent cause of action arises because the bailee's possession is good against any tortfeasor: Goodwin v Ron Heath Tyre Service (SA) Pty Ltd (1999) 74 SASR 508. Where the bailment is for reward, the bailor's right to possession of the goods is suspended, and accordingly the general position is that only the bailee can sue the third party for the wrongful interference with the goods. However, if the interference with the goods adversely affects the bailor's reversionary interest, for example where the goods are destroyed or permanently damaged so that they will not be returned to the bailor in good order at the expiry of the bailment, the bailor may bring an action against the third party: Penfolds Wines Pty Ltd v Elliot (1946) 74 CLR 204 at 226-227; [1946] HCA 46. Where the bailee wrongfully disposes of the chattel, such act entitles the bailor to terminate the bailment; if the bailor does so, he or she will have an immediate right to possession of the goods enabling the bailor to sue not only the bailee but also the third party in an action for conversion. In each State and Territory legislation provides a statutory framework for the disposal of uncollected goods. 7 [6.380]

7

Uncollected Goods Act 1995 (NSW); Australian Consumer Law and Fair Trading Act 2012 (Vic), ss 54 – 77; Disposal of Uncollected Goods Act 1967 (Qld); Unclaimed Goods Act 1987 (SA); Disposal of Uncollected Goods Act 1970 (WA); Disposal of Uncollected Goods Act 1968 (Tas); Uncollected Goods Act 1996 (ACT); Uncollected Goods Act 2004 (NT).

PART 5

AGENCY Chapter 7

Agency ............................................................................. 81

CHAPTER 7

......................................................................................................................

Agency Extracted from Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015), Ch 13.

Many business matters are conducted through the instrumentality of an agent. The relationship of agency generally arises as a result of agreement between the principal and the agent, and the rights and liabilities of each are based upon this original agreement. An agent is usually employed to bring about a contractual relationship between the principal and a third party. A principal will be bound by what the agent does on the principal's behalf provided that the agent acted within the scope of her or his authority. The general position is that where the agent acts within the scope of their authority and accordingly brings about a contractual relationship between the principal and a third party, such contract is between the principal and the third party. The agent is not a party to that contract. [7.10]

Definition of agency Agency is the relationship existing between two parties whereby one (the agent) is authorised by the other (the principal) to do, on the principal's behalf, certain acts which affect the principal's rights and duties in relation to third parties. An agent, therefore, is a person who has authority (either express or implied) to act for a principal with the general object of bringing the principal into legal relations with a third party. However, in the business world the word “agency” is by no means so restricted and is often used in a much wider sense: International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644 at 652. In other words, the mere use of the word “agent” is not conclusive of the existence of an agency relationship in law. [7.20]

Agency distinguished from other relationships ...............................................................................................................................................................................................

Agency overlaps with two other relationships which appear at first sight to be somewhat similar, namely, that of employer and employee and that between an independent contractor and the person with whom he or she contracts. Employees and independent contractors are mutually exclusive classes. The former comprises persons employed on such terms that they are subject to control regarding the manner in which their work is to be carried out. Independent contractors, on the other hand, exercise their own discretion as to the manner in which they carry out the work they undertake to perform. [7.30]

82

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.40]

The difference may be further illustrated by distinguishing between a person employed under a contract of service (an employee) and a person engaged under a contract for services (an independent contractor). Some independent contractors are agents for those who employ them and some employees are general agents for their employers but it is not true to say that all employees or all independent contractors are agents for their employers. This is obvious in the case of the independent contractor but it is also true in relation to the employee. The essence of agency is that it should be within the scope of the employment that the person employed brings the employer into a legal relationship with a third party. In the case of some types of employee this will be readily implied, for example a shop assistant employed to sell goods is an agent. On the other hand a domestic servant is not generally an agent of the employer. An auctioneer (an independent contractor) retained to sell goods is an agent but not an employee. An agent should also be distinguished from a trustee. Both act in a similar manner, that is, on behalf of other persons. However, although a trustee exercises their powers on behalf of beneficiaries, a trustee is not the agent of the beneficiaries. Thus, a trustee does not bring the beneficiaries of the trust into a contractual relationship with third parties which is the normal function of an agent. In dealing with matters relating to the trust, the trustee is considered a principal not an agent. Capacity to act as principal and agent ...............................................................................................................................................................................................

There is a marked distinction between a person's capacity to act as a principal and their capacity to act as an agent. Generally speaking, only those persons with full contractual capacity may employ an agent, the rule being that anyone may appoint an agent to do any act which he or she has capacity to do themselves. Any person can be employed as an agent and can exercise any of the rights and powers conferred by the contract of agency even though they may not have the necessary contractual capacity to bind themselves in similar negotiations. For example, although a minor is not able to bind herself or himself to certain contracts, a minor may be employed as an agent, and consequently may bind the principal to contracts he or she has entered into as agent. In respect of contracts to which a minor is able by law to bind herself or himself, it is permissible for the minor to appoint an agent for such purpose. A minor's capacity to act through an agent is coextensive with the minor's capacity to do the act which he or she purports to delegate. An agent cannot have greater powers conferred upon them than the principal possesses; and, if the principal is under some disability, the powers of the agent are equally limited according to the nature of such disability. Where the alleged principal is in fact incapable of giving authority to an agent to act on their behalf, an agent who represents that he or she has such authority is liable to the third party for breach of warranty of authority. [7.40]

CHAPTER

[7.90]

7

AGENCY

83

Classification of agents ............................................................................................................................................................................................... [7.50]

A general classification of agents is as follows:

(a)

special agents;

(b)

general agents; and

(c) universal agents. These classifications have no special legal significance apart from illustrating the varying authorities of the agents mentioned. The real problem is the actual extent of the agent's authority. Special agents

A special agent is one who is appointed for the performance of some special act, or to represent the principal in some particular transaction, such act or transaction not being in the ordinary course of the agent's trade, profession, or business as an agent. For example, P appoints A his agent for the purpose of procuring a truck suitable for towing; the only authority given to A as agent, is that necessary to procure the type of truck mentioned. [7.60]

General agents [7.70]

A general agent is an agent who has authority:

(a)

to act for the principal in all matters, or in all matters concerning a particular trade or business, or of a particular nature; or

(b)

to do some act in the ordinary course of their trade, profession or business as an agent on behalf of the principal, for example where a solicitor or broker is employed as such.

Universal agents

A universal agent is one whose authority is unlimited to do such things which the principal may do through the instrumentality of another. Such types of agents are rare in practice and, when they do exist, they are appointed by extensive powers of attorney. The only limits which are imposed upon the authority of a universal agent are those which the law imposes with regard to the legality of the objects and the capacity of the parties in relation to contracts in general. [7.80]

Creation of agency [7.90]

(a)

The relationship of principal and agent may be created in the following ways:

expressly (that is, by agreement) (i)

by deed;

(ii)

by writing;

(iii)

by word of mouth;

84

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

(b)

holding out or estoppel;

(c)

ratification; or

(d)

operation of law (i)

agency of necessity;

(ii)

agency arising by cohabitation.

[7.100]

Expressly ...............................................................................................................................................................................................

By deed

The appointment of an agent by deed (that is, instrument under seal) is necessary where the agent is required to execute any instrument under seal on behalf of their principal, in which case the document creating the power is termed a power of attorney. 1 A power of attorney is often given where a principal is going abroad and desires to leave another in charge of their affairs. [7.100]

By writing

An agent is often appointed in writing. In some cases the appointment is required by statute to be in writing. For example, in most States agents employed to sell or buy land and agents employed to sell or buy businesses cannot sue for remuneration, that is, commission, unless the appointment of the agent is in writing: see further, [7.440]. [7.110]

By word of mouth

A verbal offer followed by acceptance in writing or verbally is sufficient to conclude a contract of agency for most purposes other than those mentioned above. In practice, it is usually desirable that the appointment of an agent be in writing. [7.120]

Holding out or estoppel ...............................................................................................................................................................................................

The relationship of principal and agent may arise between two persons by virtue of one, by words or conduct “holding out” that the other is their agent or permitting the latter to do so. That is, where P, either by words or conduct, leads others to believe that A is P's agent, then P will not be allowed to subsequently deny the authority of A to act as P's agent where a third person has entered into an agreement with [7.130]

1

Powers of attorney to enable attorneys to deal with land under the Torrens system of registration in force in the various States require registration or deposit of copy. See Transfer of Land Act 1958 (Vic), s 94; Real Property Act 1886 (SA), s 156; Transfer of Land Act 1893 (WA), ss 143, 144. The corresponding provision in the Real Property Act 1900 (NSW), s 88 was repealed by the Real Property (Amendment) Act 1970 (NSW), s 13. As to dealings with land under the general law by attorneys, see Instruments Act 1958 (Vic), Pt XI; Land Title Act 1994 (Qld), ss 132 – 135; Registration of Deeds Act 1935 (SA), s 35; Property Law Act 1969 (WA), s 85; Powers of Attorney Act 2000 (Tas), requiring registration of powers to validate such dealings.

[7.140]

CHAPTER

7

AGENCY

85

A on the faith of the representation that A was the agent of P: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. The question whether one person has led third parties to believe that another person is their agent is a question of fact to be decided upon the circumstances of each particular case: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72; Derham v Amev Life Assurance Co Ltd (1981) 56 FLR 34. Ratification ...............................................................................................................................................................................................

The relationship of agency may also arise as a result of “ratification”. Where one person acts on behalf of another, without having authority to do the particular act, the person on whose behalf the act is done may, by “ratifying” it, render the act as valid and effectual as if it had been done by their duly authorised agent. This may arise where an agent has exceeded their authority. For example, where an estate agent enters into a contract for a lease for a term longer than the principal has stipulated, the principal may adopt the transaction and thus bind themselves to the unauthorised act of the agent. In order that the ratification may be effectual, the following rules should be observed: [7.140]

1.

The acts must have been done as agent for and on behalf of the supposed principal: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68. For the legal position where an agent does not disclose to the third party that he or she is acting as an agent, see [7.550].

2.

The ratification may only be by a principal who was in existence at the time of the making of the contract. However, s 131(1) of the Corporations Act 2001 (Cth) provides that where a nonexistent company purports to contract and the company is within a reasonable time subsequently formed, the company may then ratify the contract.

3.

The principal must have the capacity to make the contract both at the date of the contract and at the date of ratification.

4.

Ratification must be of the whole contract. A principal cannot ratify that which is beneficial and reject the remainder: Cox v Mosman [1909] QSR 45.

5.

Ratification must be with full knowledge of what has been done so that the inference may properly be drawn that the principal intended to take upon themselves the responsibility for such acts: Marsh v Joseph [1897] 1 Ch 213. Where the rules set out above are satisfied, ratification operates retrospectively to validate a previously unauthorised act. The position is the same as if the agent had been vested with authority at the outset.

86

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.150]

Operation of law ...............................................................................................................................................................................................

An agency can arise by operation of law, that is, irrespective of assent or intention, in two main situations; namely, in cases of: [7.150]

(a)

necessity; and

(b)

arising out of cohabitation.

Agency of necessity

The common law recognises that an emergency situation may occur which allows one person to bind another without the authority of that other. In such a case an agency of necessity arises, not through any contract or agency agreement but from the relationship of the parties in the particular case. Four factors are essential to establish such an agency of necessity: [7.160]

1.

A person must have been entrusted with another's property.

2.

An immediate expense must be required for the preservation of the property, or there must be some commercial necessity for the action, that is, there must be an emergency.

3.

It must be commercially impossible or extraordinarily difficult to communicate with the owner of the property: Sachs v Miklos [1948] 2 KB 23.

4.

The agent must act bona fide in the interest of the principal.

Great Northern Railway Co v Swaffield (1874) LR 9 Exch 132 [7.170] The plaintiff railway company agreed to deliver the defendant’s horse to a particular railway station. However, on arrival at the station at night there was no-one to take possession of the horse on the defendant’s behalf. Accordingly, the plaintiff’s stationmaster sent the horse to a nearby livery stable. Subsequently, the plaintiff paid the stablekeeper his charges. It was held that the plaintiff had acted reasonably in placing the horse in the livery stable and was entitled to recover from the defendant the expense it had incurred in doing so.

Another example of an agency of necessity is where the master of a ship is compelled to pledge (hypothecate) the ship in order to effect essential repairs to preserve the ship, or to sell damaged cargo which would be ruined if there was further delay. On the other hand, the fact that property (for example, a parked car) may be causing a person inconvenience does not mean that such an emergency has arisen which compels its disposal: Munro v Willmott [1949] 1 KB 295. [7.180]

Agency arising by cohabitation

In the case of a married woman cohabitating with her husband, and even in the case of an unmarried woman cohabitating with a man, the law presumes that she has his authority to pledge his credit for necessaries in all domestic matters ordinarily entrusted to a wife. It is possible for the man to rebut the presumption of such authority in various [7.190]

[7.210]

CHAPTER

7

AGENCY

87

ways, for example, by showing that he had expressly warned the tradesman not to supply his wife or de facto wife, that he had expressly forbidden her to pledge his credit or that he had provided her with a sufficient allowance to pay for necessaries: Debenham v Mellon (1880) 5 QBD 394. The common law also recognised that a wife left without adequate means of support by her husband, for example in the case of desertion, had the authority to pledge the husband's credit for goods that she reasonably required for her maintenance. In New South Wales, South Australia, the Australian Capital Territory and the Northern Territory the common law doctrine enabling a wife to pledge her husband's credit has been abolished. 2

Nature and scope of an agent’s authority The principal will only be bound by those acts of the agent which fall within the scope of the agent's authority. The principal will not be affected by what the agent does in excess of her or his authority, unless the principal subsequently ratifies the unauthorised act of the agent. Furthermore, if the agent acts outside their authority, the agent may be liable to the principal for breach of the contract of agency or to third parties for breach of implied warranty of authority. The authority of an agent may be: [7.200]

(a)

actual authority; or

(b)

apparent or ostensible authority.

Actual authority ...............................................................................................................................................................................................

The general nature and effect of the actual authority of an agent was explained by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502-503 as follows: [7.210]

An “actual” authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the “actual” authority, it does create contractual rights and liabilities between the principal and the contractor.

The actual authority of an agent can be express or implied. That is to say, the actual authority of an agent is either: 2

In New South Wales, the Married Persons (Equality of Status) Act 1996 (NSW), s 7 provides: “A married person does not, by reason only of the person’s status as a spouse, have authority to pledge the credit of the other spouse for necessaries or to act as agent for the other spouse for the purchase of necessaries.” See similarly, Law of Property Act 1936 (SA), s 104; Married Persons’ Property Act 1986 (ACT), s 5; Married Persons (Equality of Status) Act 1989 (NT), s 5.

88

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

(a)

actual express authority; or

(b)

actual implied authority.

[7.220]

Actual express authority

The express authority of an agent is the authority the principal has expressly given the agent in words or writing, for example where the principal gives the agent specific instructions to enter into a contract on the principal's behalf to purchase a particular piece of land at a stipulated price, or to sell a specific item. In other words, the agent's authority may be specifically created and limited by the terms of the agreement which gives rise to the agency relationship. [7.220]

Actual implied authority

In addition to the express authority contained in the agency agreement, the agent may have a further implied authority to do whatever is necessarily incidental to carrying out the principal's express instructions. For example, where an agent is expressly authorised to buy certain shares, the agent will also have implied authority to do everything in the usual course of business to complete the transaction. Furthermore, where a person employs a particular type of agent to carry out some act on behalf of the principal, the agent will have such implied authority as agents of that class normally have, that is, the agent will have the usual authority which agents of that particular profession or calling normally have to carry out their functions. For example, when the board of directors of a company appoints one of their number to be managing director: “They thereby impliedly authorise him to do all such things as fall within the usual scope of that office”: Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583. [7.230]

Hopcroft v Edmunds (2013) 116 SASR 191 at [55] [7.231] The respondent’s accountant sent a shareholders agreement to the appellants for signature. The respondents did not sign the agreement. The appellants argued that the accountant had authority to make an offer on the respondent’s behalf by sending the contract for their signature. It was held that the accountant did not have actual authority to bind the respondents. The respondents had told their accountant to “do whatever [is] necessary”: at [33]. The court held that such an instruction related only to ascertaining the necessary actions and preparing the necessary documents, not binding the respondents: at [47]. The expectation that the respondents would need to have signed the agreement in order to be bound could only have been displaced by clear evidence of the accountant’s authority to bind them.

[7.235] Implied authority is regarded as an aspect of an agent's actual or real authority since such implications of implied authority are made on the basis that the principal has consented to the agent having authority to act in such a manner. If there is evidence that the principal has not so consented, for example where the board of directors specifically limited the managing director's authority in some respect, then to the extent of such

[7.250]

CHAPTER

7

AGENCY

89

limitation an implication of implied authority cannot be made. However, it may well be that in such a case the third party can rely on the agent's apparent authority to enter into the particular transaction. Apparent (or ostensible) authority ...............................................................................................................................................................................................

Apparent (also known as ostensible) authority is “the authority of an agent as it appears to others”: Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583 per Lord Denning MR. Thus, where a principal represents either by words or conduct that an agent has authority to contract on the principal's behalf, the principal will be bound by those acts of the agent which fall within that represented authority. The agent in such a case is said to act within the scope of their apparent or ostensible authority. This principle applies whether or not the agent has any actual authority, or such actual authority has been limited. The principal may specifically represent to the third party that a person has authority to act on the principal's behalf, for example where the principal tells the third party that a particular person has been authorised to negotiate for the purchase of goods on behalf of the principal. More often, however, the representation which creates the apparent or ostensible authority is representation by conduct, for example by the principal permitting a person to act in the management or conduct of the principal's business so that the third party is led to believe that such person has authority to contract on behalf of the principal. The courts have taken the view that if a principal allows or acquiesces in an agent occupying a particular position, for example where the board of directors of a company permits one of the directors to act as a managing director without having been formally appointed, the agent will have apparent or ostensible authority to deal with third parties in a manner consistent with the functions and duties normally falling within the usual authority of the holder of such position. The leading case on this point is Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480: [7.240]

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 [7.250] K and H formed the defendant company to acquire and develop certain land. The board of directors comprised K, H and a nominee of each. The development of the land was left to K who, with the knowledge of the board of directors, acted as managing director although he had never been formally appointed to the position. K employed the plaintiff firm of architects who later sued the company for payment of their fees for work they had done. It was held by the Court of Appeal that the defendant company was liable for the plaintiffs’ fees. Thus, the contract of employment entered into by K with the plaintiffs fell within the scope of K’s apparent or ostensible authority. It was the kind of contract which was within the usual authority of a managing director to enter into on behalf of a company.

90

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.260]

Where a person is appointed to a particular position such person will have as part of their apparent authority all the usual authority of a person occupying that position. For example, it was held that a company secretary has apparent authority to hire vehicles and the company is bound to pay the cost of such hire even where the vehicles are used for the secretary's own purposes: Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711. A principal is bound by those acts of an agent which fall within the scope of the agent's apparent authority even though the agent acted outside the terms of their actual authority. Where an agent occupies a particular office, or exercises a particular profession or calling the agent, by virtue of the position he or she holds, may have both implied actual authority and apparent authority to do a particular act binding on the principal. That is to say, although actual authority and apparent authority are independent of each other, in certain circumstances they may co-exist and coincide in the same person. In such a case, the agent's ostensible authority is likely to be wider than their actual authority (whether express or implied) which may be limited by the terms of the agreement between the agent and the principal: Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583 per Lord Denning MR. An employer may hold out that an employee has authority if the employer/principal permits the employee to act in a particular way, for example in signing documents without taking appropriate precautions: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451. In the latter case, the High Court said that: “A kind of representation that often arises in business dealings is one which flows from equipping an officer of a company with a certain title, status and facilities … The holding out might result from permitting a person to act in a certain manner without taking proper safeguards against misrepresentation”: at [38]. In those circumstances it may be unjust to permit the employer to depart from a reasonable assumption based upon that misrepresentation: at [44]. The basis of apparent (or ostensible) authority is that there has been a representation of authority of the agent on which the third party relied. However, the representation of authority can only be made by someone who has authority to make the representation. For example, in the case of a company, the representation must have been made by a person or persons who had actual authority (not only apparent or ostensible authority) to manage the business of the company: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72. It has been held that the apparent authority of a solicitor includes authority to compromise a dispute on behalf of their client. Accordingly, the client will generally be bound by a compromise entered into by the solicitor with a third party, notwithstanding that the solicitor's actual authority to compromise on behalf of the client had been withdrawn: Waugh v HB Clifford & Sons Ltd [1982] 1 Ch 374. Even where the solicitor mistakenly exceeds the client's instructions as to the amount of a proposed settlement the client will generally be bound, unless it would be unconscionable for the party seeking to [7.260]

[7.280]

CHAPTER

7

AGENCY

91

enforce the compromise to rely on it: Buseska v Sergio (1990) 102 FLR 157. Where the plaintiff's solicitor exchanged identical signed contracts that included terms to which the plaintiff had not agreed at the time of signature, it was held that the plaintiff's solicitor possessed ostensible authority to bind the plaintiff: Zhang v VP302 SPV (2009) 223 FLR 213 at [34], [51]. A third party will generally rely on the apparent or ostensible authority of an agent when contending that the principal is bound by the acts of the agent, since: (a)

the third party will usually be unaware of the terms of the agreement between the principal and the agent, and therefore be unaware of the extent of the agent's actual authority; and

(b)

the agent's apparent or ostensible authority will be unaffected by limitations on the agent's actual authority (whether express or implied) of which the third party was unaware. In other words, it is usually easier for the third party to establish that the agent acted within the scope of their apparent authority, rather than the agent's actual authority.

Duties of an agent [7.270] Every agent owes certain duties to their principal which vary in degree according to the nature of the agency or according to the express terms of the contract of agency. These duties include the:

(a)

duty to follow the principal's instructions;

(b)

duty to act in person;

(c)

duty to act in good faith;

(d)

duty to make full disclosure of any personal interest;

(e)

duty not to make a secret profit;

(f)

duty to exercise reasonable care and skill; and

(g) several other duties. Each of these duties will be examined in turn. Duty to follow principal’s instructions ...............................................................................................................................................................................................

The primary duty of every agent is to follow the principal's instructions, written or verbal. An agent must comply with the provisions of the contract of agency before he or she will be entitled to remuneration. Failure to comply with the principal's instructions, except where they are illegal, will render the agent liable for the loss suffered by the principal as a result of the breach. [7.280]

92

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.290]

Duty to act in person ...............................................................................................................................................................................................

Every agent must act in person and, apart from the express or implied authority of the principal, or from particular usage, an agent has no authority to delegate their duties as agent to another. This is expressed in law by the maxim “Delegatus non potest delegare”, that is, a person to whom authority has been given cannot delegate that authority to another. Owing to the exigencies of business, this rule is relaxed in order to enable the agent in certain cases to delegate their powers and appoint a sub-agent. The authority of an agent to delegate their duties may be implied in the following situations: [7.290]

1.

Where by the usage of a trade an agent usually acts through other agents; for example a country solicitor may employ a city agent whose acts will bind the client. However, where the principal forbids the employment of a sub-agent, the agent has no authority to delegate.

2.

Where the duties to be performed by the agent are purely ministerial, and do not involve the exercise of any discretion or skill on the part of the agent in person; for example, collecting rents.

3.

Where from the nature of the transaction it is clear that the parties intended, or may be reasonably presumed to have known, that it might be necessary to act through a sub-agent.

4.

Where unforeseen circumstances arise which necessitate the agent delegating. The necessity must be urgent and the sub-agent must be appointed with discretion.

Duty to act in good faith ...............................................................................................................................................................................................

An agent occupies what is called a fiduciary position. A fiduciary relationship exists between one person and another where the former is bound to exercise rights and powers in good faith for the latter. An agent's duty to make full disclosure of any personal interest and not to make a secret profit, discussed separately below, are really aspects of the agent's basic duty to act in good faith. The agent is under a duty in all cases to act in the interests of the principal and must not allow their own interests to conflict with those of the principal. [7.300]

Lintrose Nominees Pty Ltd v King [1995] 1 VR 574 at 576 [7.310] The respondent purchaser had bought property from the appellant vendor on the advice of an agent to whom the purchaser had paid a fee for the advice. Unknown to the purchaser, the agent had been retained by the vendor to market the property. The Supreme Court of Victoria, Appeal Division, held that the purchaser was entitled to rescind the contract of sale with the vendor. “[T]he vendor could not properly sell its property through its agent, knowing that the agent was retained to advise the purchaser on the purchase, without knowing also that the dual allegiance of the agent was disclosed to the purchaser”.

[7.340]

CHAPTER

7

AGENCY

93

The proper course to be adopted by every agent upon entering into an agreement to act on behalf of another is to consider whether he or she has any personal interest in the matter which might conflict with the duty owed to the intended principal and, if so, he or she should decline to act as agent. [7.320]

Duty to make full disclosure of any personal interest ...............................................................................................................................................................................................

An agent must disclose to the principal all the material circumstances of which they are aware which might influence the principal in entering into any negotiation. If the agent fails to make such disclosure he or she is not entitled to commission: Dargusch v Sherley Investments Pty Ltd [1970] Qd R 338. Any profit received by the agent resulting from non-disclosure is recoverable by the principal on learning the true facts: Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815. Should any question arise as to the validity of any transaction on this score, the onus lies upon the agent to prove that they acted bona fide and also that they made full disclosure of all material facts. After the termination of their employment, an agent may not use information acquired in the course of the agency in a manner prejudicial to the interests of the principal: Robb v Green [1895] 2 QB 315. [7.330]

Duty not to make a secret profit ...............................................................................................................................................................................................

A fundamental duty of an agent is not to use their position to make a gain for themselves without the knowledge and assent of the principal. In the case of Parker v McKenna (1874) 10 Ch App 96, James LJ said: [7.340]

No agent in the course of his agency, in the matters of his agency can be allowed to make any profit without the knowledge of his principal; … that rule is an inflexible rule and must be applied inexorably by this court, which is not entitled, in my judgment, to receive evidence, or suggestion or argument as to whether the principal did or did not suffer any injury in fact, by reason of the dealing of the agent.

Directors of companies are agents of their companies and are under a duty not to make a secret profit: Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134. Directors are also subject to statutory provisions which are in addition to their duties under the general law. The Corporations Act 2001 (Cth) provides that a director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest: s 191(1). A person who obtains information because they are, or have been, a director must not improperly use the information to gain an advantage for themselves or someone else, or to cause detriment to the corporation: s 183(1). Should the agent receive a secret commission or profit the principal may recover it as well as dismiss the agent without notice. Where the agent desires to act for both vendor and purchaser and to obtain commission from both, the agent must make full disclosure

94

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.350]

to each party of her or his intention to act for and receive payment from the other, and must obtain the assent of each party for so acting: Fullwood v Hurley [1928] 1 KB 498. This general principle applies unless a special usage or custom which is notorious, certain and reasonable is proved to the contrary. Thus, it has been held that a firm of stock and sharebrokers were entitled as a matter of custom, which had been established to be sufficiently notorious and certain and which was reasonable in the circumstances of the case, to “marry” or cross certain selling and buying orders for shares without express reference to the respective clients. Where such custom is established, it would seem that the sharebroker is entitled to commission from both the seller and the buyer of the shares: Jones v Canavan [1972] 2 NSWLR 236. Duty to exercise reasonable care and skill ...............................................................................................................................................................................................

An agent who is employed for remuneration is presumed to have and is bound to exercise such skill, care and diligence in the performance of the undertaking as is usual or necessary for the ordinary or proper conduct of the profession or business in which the agent is employed, or is reasonably necessary for the proper performance of the duties. If the agent fails to exercise the requisite care and skill in carrying out the terms of the contract of agency, the agent will be liable to the principal for the loss sustained by the latter as a result of the agent's breach of duty. [7.350]

Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984] WAR 365 [7.360] An insurance broker was instructed by a client to obtain unqualified insurance cover against damage caused by storm and flood. Unknown to the client, the broker obtained insurance cover excluding flood caused by the sea. Subsequently the client suffered loss as a result of flooding by the sea in a cyclone but the insurance company avoided liability by virtue of the exclusion clause. The broker was held liable because of his failure to exercise reasonable care and skill in effecting the insurance.

It has also been held that a real estate agent owes the vendor, by whom the agent is employed to sell property, the duty to inform the vendor as soon as practicable that the purchaser has avoided the contract of sale. If the agent fails to do so, he or she will be liable to the vendor for the loss the vendor suffers as a result of the delay: Havas v Cornish & Co Pty Ltd [1985] Qd R 353. So far as directors of companies are concerned, their duty is the subject of statutory provisions, without prejudice to any duty which they might have under the general law. The Corporations Act 2001 (Cth) provides that a director must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation's circumstances; and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer: s 180(1). The Corporations Act 2001 further [7.370]

CHAPTER

[7.400]

7

AGENCY

95

provides that a director or other officer of a corporation must exercise their powers and discharge their duties in good faith in the best interests of the corporation and for a proper purpose: s 181(1). A person who acts as agent gratuitously on behalf of another is not presumed to have any special knowledge of the subject matter of the transaction but is bound to exercise such knowledge and skill as he or she does possess in the best interests of the principal and must show as much care and diligence in performing the undertaking as he or she would in conducting their own affairs. A gratuitous agent is not bound to carry out the terms of an undertaking into which he or she has entered gratuitously. However once such person commences to fulfil the office of agent they will be liable, in the event of performing their duties negligently, for any damage or loss the principal thereby sustains. Further duties ............................................................................................................................................................................................... [7.380]

Further duties of the agent are:

(a)

to take such care in keeping the property (which includes money) of the principal as a reasonably prudent person would take in caring for their own property;

(b)

to keep all moneys and property of the principal separate from their own;

(c)

to keep separate accounts of all dealings on behalf of the principal, and to have such accounts ready for inspection by the principal, and, subject to the agent's right of lien, to hand over to the principal, if so required, all moneys, papers and documents relating to the principal's affairs; and

(d)

to preserve confidentiality in all matters coming to their knowledge whilst acting as agent: Weld-Blundell v Stephens [1920] AC 956.

Rights of agents Right to remuneration ...............................................................................................................................................................................................

The amount of remuneration for an agent depends upon the agreement made between the principal and the agent. In commercial transactions remuneration often takes the form of a percentage commission on the value of the transaction. In order to determine the agent's right to commission, the terms and circumstances of the appointment must be examined as the agent may be entitled to remuneration only if he or she completes the sale, or again, in special cases, commission may be payable if the agent simply brings the parties together. Further, there may exist a time limit for the completion of the contract or the remuneration may be of a continuous nature payable on all further business arising from the same source. [7.390]

Agent must be effective cause of sale

The transaction in relation to which the agent claims remuneration must not only come within the scope of the agent's authority but the transaction must have [7.400]

96

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.410]

resulted from the services he or she has rendered. The agent must, in effect, have been the means whereby the two contracting parties were brought together and entered into a legally binding contract: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108. That is to say, the agent must have been the effective cause of the sale to be entitled to remuneration. This principle is illustrated by the following cases: L J Hooker Ltd v W J Adams Estate Pty Ltd (1977) 138 CLR 52 [7.410] The respondent company was the owner of a property in Sydney and engaged the appellant real estate agent to find a purchaser for it. The appellant introduced the property to Company A which made several unsuccessful offers to purchase it. Meanwhile, the respondent was negotiating for the sale of the property to Company B which the appellant had not introduced. On Companies A and B learning of each other’s interest in the property, they entered into a joint venture agreement for the purpose, inter alia, of avoiding the risk of forcing up the price by competing bids. The joint venture agreement provided that each company would continue to negotiate upon agreed terms and conditions with the respondent, and that upon one of the companies becoming the purchaser, that party would complete the purchase and carry out the redevelopment of the site with the other on an equal basis. Neither the appellant estate agent nor the respondent owner were then aware of the joint venture agreement. The property was eventually sold by the respondent owner to Company B. The appellant then sued the respondent to recover commission. It was held by a majority of the High Court that the appellant estate agent was not entitled to recover any commission as it had not been an effective cause of the sale to Company B, nor of any sale of any interest in the property to Company A.

Rasmussen & Russo Pty Ltd v Gaviglio [1982] Qd R 571 [7.420] The vendor of land agreed to pay commission to a real estate agent, A, “if you find a purchaser who enters into a valid and enforceable contract of sale confirmed by me/us for such property and who completes such sale”. A introduced a purchaser who signed a contract for the purchase of the property subject to obtaining approval for bank finance by a certain date, otherwise the transaction would be void. The purchaser was unable to obtain bank finance by the date stipulated and, accordingly, the contract of sale was rescinded. Shortly afterwards, the purchaser signed another contract for the purchase of the property through a second real estate agent, B, who was able to arrange finance for the purchaser from a finance organisation which generally only did business through B. The first agent, A, claimed commission from the vendor. It was held that A was not entitled to commission simply because of the purchaser’s completion of the contract of sale through B. Thus, there had been a break in the necessary causal connection between A’s actions (in introducing a purchaser who had signed a contract for the purchase of the property) and the actual sale which eventually took place through B. The sale could not have occurred had it not been for the engagement of B who had been able to arrange the necessary finance. Accordingly, A was not the effective cause of the sale and therefore was not entitled to the commission claimed.

Estate agent’s entitlement to commission

There is a considerable body of reported case law concerning disputes between a vendor and an estate agent employed to sell the vendor's property on whether the estate [7.430]

[7.440]

CHAPTER

7

AGENCY

97

agent had done sufficient within the precise terms of the agency agreement to be entitled to commission. Each case depends on the construction of the terms of the agency contract between the vendor and the estate agent and the particular circumstances of the case. The general principles were stated in Midgley Estates Ltd v Hand [1952] 2 QB 432 at 435 as follows: The question depends on the construction of each particular contract, but prima facie the intention of the parties to a transaction of this type is likely to be that the commission stipulated for should only be payable in the event of an actual sale resulting. … That is, broadly speaking, the intention which, as a matter of probability, the court should be disposed to impute to the parties. … this does not mean that the contract, if its terms are clear, should not have effect in accordance with those terms even if they do involve the result that the agent's commission is earned and becomes payable although the sale in respect of which it is claimed, for some reason or another, turns out to be abortive.

It has been held that where the agency agreement provides for the payment of commission on the estate agent “finding a purchaser” or “introducing a person who shall become a purchaser”, the agent is not entitled to commission unless he or she introduces a purchaser who, at the vendor's price and on the vendor's terms: (i) is ready and willing to purchase; (ii) is able to purchase; and (iii) in fact purchases by entering into a binding contract to purchase: Gerlach v Pearson [1950] VLR 321; Turnbull v Wightman (1945) 45 SR (NSW) 592. Where the contract of agency provides on its proper construction for the payment of commission on the occurrence of some other event, for example on a person being “introduced to the property” either by the agent or the vendor and “as a result” of such introduction the property is sold, the agent will be entitled to commission on the occurrence of the specified event: Max Christmas Real Estate v Schumann Marine Pty Ltd [1987] 1 Qd R 325. If the contract fails to stipulate the event on which the agent's right to commission arises, commission becomes payable only on completion of the sale by the purchaser (unless the failure to complete is the vendor's fault) and not at the time of the purchaser signing the contract of sale. Accordingly, if in such a case the purchaser fails to complete after entering into the contract of sale, the vendor is not liable to pay commission to the agent: RJ Mabarrack Pty Ltd v King (1971) 1 SASR 313. Should the vendor refuse to complete the sale, the agent will still be entitled to her or his commission: Christie Owen & Davies Ltd v Rapacioli [1974] QB 781. Statutory restrictions on right to remuneration

In some cases the agent is debarred by statute from suing for commission unless the agent's engagement or appointment to act is in writing signed by the person to be charged. In Victoria and Western Australia this applies to agents employed to sell or buy land and to agents employed to sell or buy businesses, in South Australia to land agents, and in Tasmania to real estate agents and auctioneers, and in Queensland to resident letting [7.440]

98

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.450]

agents, property agents, chattel auctioneers, motor dealers, and debt collectors. 3 The writing need not make “specific reference to the very transaction out of which the claim for commission arises”, but need only be “in respect of such transaction”. This ensures that agents are able to rely on general appointments, rather than having to seek a new appointment with each new contract: Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 at [155]. In New South Wales, it is provided that a “licensee” under the Property, Stock and Business Agents Act 2002 (NSW) is not entitled to any commission unless the agreement was in writing and signed by the licensee and the person for whom the services were performed: s 52(1). A copy of the agreement must have been served by the licensee on the person to be charged within 48 hours after signature by that person: s 52(2). Furthermore, a licensee cannot commence an action for the recovery of remuneration until the expiration of 28 days after a written statement of claim has been served on the person to be charged: s 36. 4 Service of a statutory demand does not constitute service of a statement of claim: Investmentsource Corporation Pty Ltd v Knox Street Apartments Pty Ltd (2002) 56 NSWLR 27 at [48]-[49]. Right to indemnity and reimbursement ...............................................................................................................................................................................................

Every agent is entitled to be indemnified against all losses and liabilities sustained, and to be reimbursed for all expenses lawfully incurred in the carrying out of the principal's instructions. Attention is drawn to the word “lawfully” for where the agent has acted outside the scope of her or his authority, or has engaged in an unlawful act, or suffered loss through their own negligence or default, the agent has no claim to be reimbursed or indemnified. [7.450]

Right of lien ...............................................................................................................................................................................................

An agent has what is called a particular lien on such property of the principal as comes into the agent's hands for the due payment of all expenses and remuneration lawfully incurred by the agent in transacting the principal's affairs. However, the transactions must relate to the property over which the agent desires to exercise a lien. The agent may have a general lien extending to all claims arising out of the agency either by express contract or by usage. [7.460]

3

Estate Agents Act 1980 (Vic), ss 49A, 50; Motor Dealers and Chattel Auctioneers Act 2014 (Qld), ss 88, 132; Property Occupations Act 2014 (Qld), s 89; Debt Collectors (Field Agents and Collection Agents) Act 2014 (Qld), s 26; Land Agents Act 1994 (SA), s 6(2); Real Estate and Business Agents Act 1978 (WA), s 60; Property Agents and Land Transactions Act 2005 (Tas), s 18.

4

Property, Stock and Business Agents Act 2002 (NSW), ss 36, 52.

CHAPTER

[7.500]

7

AGENCY

99

Liabilities of agents [7.470]

An agent may incur liability:

(a)

to the principal; and

(b)

to third parties.

Liability of agent to principal ...............................................................................................................................................................................................

The general position is that the agent is an intermediary who is employed to negotiate some transaction on behalf of one person with another in order to effect the completion of a contract between them. Generally the agent incurs no liability to the principal in regard to the contract. However, where the agent disobeys the principal's instructions, the agent will be liable for the loss suffered by the principal as a result of the breach of the contract of agency. Furthermore, where the agent is negligent in carrying out their duties, the agent will be liable to make good the damage suffered by the principal as a consequence of the agent's negligence: Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984] WAR 365. Any confidential knowledge acquired by an agent during the course of the agency should not be used by the agent or made available to third parties, and should the agent do so, he or she may be liable in an action for damages. [7.480]

Liability of agent to third parties ...............................................................................................................................................................................................

The agent's liability towards third parties depends upon the agent's method of contracting and in particular as to whether:

[7.490]

1.

The agent discloses the name of the principal.

2.

The agent does not disclose the name of the principal but does disclose the existence of the principal.

3.

The agent does not disclose the existence of any agency, that is, where the agent acts as if he or she were a principal.

Name of principal disclosed

Where the agent discloses the name of the principal, the contract is deemed to be that of the principal, and the agent is not liable on the contract except: [7.500]

(a)

where the agent contracts outside the scope of their actual or apparent authority, in which case the agent will be liable to the third party in damages for breach of warranty of authority (discussed at [7.580]);

(b)

the agent agrees to be liable;

(c)

usage or custom makes the agent liable;

(d)

the agent contracts by deed in their own name; or

(e)

where the principal is in fact non-existent.

100

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.510]

In terms of the latter, where a person professes to contract on behalf of a principal and the principal is a fictitious or non-existent person, the person so professing to contract is presumed to have intended to contract personally, unless a contrary intention is proved; and where the contract is in writing, such contrary intention cannot be proved by oral evidence, but must appear from the terms of the contract or from the surrounding circumstances. The words “professes to contract on behalf of a principal” are the critical ones, for if the person were to sign a document, not as agent, but, in effect, as the principal, the rule would have no operation. The distinction is shown by the following cases: Kelner v Baxter (1866) LR 2 CP 174 [7.510] In Kelner v Baxter (1866) LR 2 CP 174 the promoters of a company entered into a contract to buy goods, the contract being signed by them “on behalf of the proposed Gravesend Royal Alexandra Hotel Company”. It was held that, as the contract was not contingent upon the company being formed, the only persons who could be liable were the promoters.

Black v Smallwood (1966) 117 CLR 52 [7.520] By contrast, in Black v Smallwood (1966) 117 CLR 52 a contract for the sale of land was signed “Western Suburbs Holdings Pty Limited, Robert Smallwood, J Cooper, Directors”. It was held that the two persons who purported to sign the contract as directors put their signatures on the contract not as agents but as part of the act of authenticating the signature for “Western Suburbs Holdings Pty Limited”. This being so, they did not purport or profess to act as agents and were accordingly not liable.

The fundamental question in such cases must be what the parties intended, or must be fairly understood to have intended; thus, where the intention is that the contract be made by the company, and the person who signs “For and on behalf of” the company does not purport to contract as agent, he or she will not be personally liable on the contract: Miller Associates (Australia) Pty Ltd v Bennington Pty Ltd [1975] 2 NSWLR 506. Under the Corporations Act 2001 (Cth), a company comes into existence upon registration: s 119. If a person purports to enter into a contract on behalf of a company before it is registered, the company becomes bound by the contract if the company is registered and ratifies the contract within the time agreed to by the parties to the contract; or if there is no agreed time, within a reasonable time after the contract is entered into: s 131(1). The person is liable to pay damages to the other party to the pre-registration contract if the company is not registered, or the company is registered but does not ratify the contract within the time agreed to by the parties; or if there is no agreed time, within a reasonable time after the contract is entered into: s 131(2). The amount of damages is the amount the company would be liable to pay to the party if the company had ratified the [7.530]

CHAPTER

[7.550]

7

AGENCY

101

contract and then did not perform it at all. The court may do anything that it considers appropriate in the circumstances, including ordering the company to do one or more of the following: (a)

pay all or part of the damages that the person is liable to pay;

(b)

transfer property that the company received because of the contract to a party to the contract; or

(c)

pay an amount to a party to the contract: s 131(3).

Existence but not name of principal disclosed

The general rule is that where the agent discloses the fact that a principal exists but not the name of the principal, the agent's liability, provided he or she contracts as agent, is similar to the cases where the name of the principal is disclosed. If the third party contracts knowing there is a principal and yet does not ascertain the principal's name, the third party cannot sue the agent: Marsh & McLennan Pty Ltd v Stanyers Transport Pty Ltd [1994] 2 VR 232 at 241. In other words, the agent's liability is the same, provided he or she contracts as agent, whether or not the principal's name is disclosed. This principle may alter where the custom of trade makes the agent personally liable. However, the particular circumstances may disclose an intention that the agent alone is a party to the contract. Thus, where the principals would be drawn from a known class (the agent's clients) but the agent had not selected any particular client at the time the contract was made, the agent was held to have contracted as principal: Carminco Gold & Resources Ltd v Findlay & Co Stokbrokers (Underwriters) Pty Ltd (2007) 243 ALR 472 at [25]. [7.540]

Existence of principal not disclosed

Sometimes an agent does not disclose to the third party that he or she is acting as an agent. Accordingly, the third party believes that the person they have been negotiating with is the other party to the contract, whereas in reality such person is acting on behalf of an undisclosed principal. In such a case either the undisclosed principal or the agent can sue or be sued on the contract, unless the contract between the agent and the third party expressly or impliedly excludes the rights of persons other than the agent to be a party to the contract: Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 149-150. However, the legal rights and obligations of the undisclosed principal only arise where the agent was in fact her or his agent at the time of the transaction, that is, where the agent had actual authority from the principal to enter into the contract. An undisclosed principal cannot purport to ratify as the act of their agent a transaction entered into without their authority by one who purports at the time to be a principal and does not disclose that he or she is an agent: Keighley, Maxsted & Co v Durant [1901] AC 240. While some contracts by their nature cannot be entered into by an agent for an undisclosed principal, a rental agreement was able to be entered into by a photocopier company as agent on behalf of an undisclosed principal, in this case a finance company: White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125 at [86]-[87]. [7.550]

102

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.560]

The general principles applying to undisclosed principals were summarised in Siu Yin Kwan (Administratrix of the Estate of Chan Ying Lung, Decd) v Eastern Insurance Co Ltd [1994] 2 AC 199 at 207 per Lord Lloyd as follows: “(1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal's behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.”

While at the outset it is open to the third party to hold either the agent or the undisclosed principal liable on the contract, once the third party has elected to hold liable either the agent or the principal, the third party is then irrevocably bound by the election and cannot afterwards charge the other on the contract. Where the third party sues and recovers judgment against the agent on the contract, the third party is conclusively deemed to have elected to hold the agent liable and cannot thereafter sue the undisclosed principal. Where the third party has not sued the agent to judgment the question whether the third party has so elected or not is a question of fact depending on the circumstances of the particular case; the mere fact that the third party has commenced an action against the agent is not of itself conclusive although it may be some evidence of an election. Clarkson, Booker Ltd v Andjel [1964] 2 QB 775 [7.560] The plaintiffs supplied to the defendant goods and services. The defendant did not disclose that he was not acting as a principal. Prior to the transaction, the plaintiffs had done business of a similar nature with the defendant on several occasions, always as a principal. Subsequently the plaintiffs were informed that the defendant had acted as agent for a company in the transaction. The plaintiffs’ solicitors wrote to both the defendant and the company, in each case threatening proceedings unless the amount due was forthcoming. Payment not having been made, the plaintiffs’ solicitors wrote to the company stating that they had been instructed to proceed to “obtain judgment” against it, and a writ was subsequently issued against the company. When the company went into liquidation, the plaintiffs did not proceed further against the company but issued a writ against the defendant. It was held that the institution of proceedings against the company did not amount, as a matter of law, to a binding election so as to bar proceedings against the defendant, although if the plaintiffs had obtained judgment against the company they could not thereafter have proceeded against the defendant.

The undisclosed principal may intervene and sue on the contract unless the contract is such as to be entirely inconsistent with agency. The undisclosed principal may be met with any right of set-off which the third party has acquired against the agent before the third party discovered the existence of the principal. [7.570]

[7.590]

CHAPTER

7

AGENCY

103

Where an agent contracts in such a manner as to make themselves personally responsible, the agent will be liable whether the principal was or was not known at the time of the contract, for example where the agent signs a bill of exchange in their own name instead of on behalf of the principal. Breach of warranty of authority ...............................................................................................................................................................................................

So long as the agent does not exceed their authority the agent will not be personally liable to persons with whom he or she deals. It is a complete answer for the agent to show that he or she acted only as an agent as the other party well knew, and that everything they did was within the scope of their authority. Where an agent represents, either expressly or impliedly, that he or she has authority to enter into a particular transaction and a third party relies on that representation of authority, the agent is taken to warrant that such representation is true. If it is in fact untrue, the agent is liable in damages for breach of warranty of authority. The measure of damages is the actual loss sustained by the third party. It will be no defence that the agent acted innocently or in mistake as to the precise extent of the authority conferred upon her or him. A person who purports to act as an agent impliedly warrants that they have authority and is liable for breach of that warranty even though their authority has come to an end by reason of facts of which they have no knowledge or means of knowledge: Yonge v Toynbee [1910] 1 KB 215. However, the agent is not liable where the other party knew of the agent's lack of authority: Weigall & Co v Runciman & Co (1916) 85 LJKB 1187. [7.580]

Liability of principal and agent for misrepresentations ...............................................................................................................................................................................................

Where an agent is engaged to sell property, it will normally fall within the scope of the agent's ostensible authority to describe the nature and quality of the property the agent is selling on behalf of the principal. Accordingly, if the agent's representations are untrue, the vendor will be liable to the purchaser for the loss suffered by the purchaser as a result of relying on the agent's representations: Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ¶ATPR 40-873 at 49,445. Where the agent made a negligent misrepresentation which was relied on by the purchaser, the agent will be liable in damages to the purchaser for the loss suffered. For example, a real estate agent for the vendor of a business was held liable to the purchaser for negligent misrepresentations made by the agent as to earnings of the business: Roots v Oentory Pty Ltd (1983) 2 Qd R 745; cf Norris v Sibberas (1990) VR 161. A principal is vicariously liable for a tort committed by an agent where the agent has acted within the scope of their actual or apparent authority. The liability of the principal includes liability for the negligent misrepresentations of their agent. For example, the vendor of a building was held vicariously liable to the purchaser for damages because of the negligent misrepresentation made by the vendor's agent as to the “lettable” floor [7.590]

104

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.600]

space of the building: Thompson v Henderson & Partners Pty Ltd (1990) 58 SASR 548. In the latter case the agent was also held liable to the purchaser; furthermore, the vendor was entitled to an indemnity from the agent in respect of the vendor's liability to pay damages to the purchaser. The representations of an agent may also constitute, in an appropriate case, misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law 5 (formerly s 52 of the Commonwealth Trade Practices Act 1974 (Cth)): Aliotta v Broadmeadows Bus Service Pty Ltd [1988] ATPR 40-873 (see further, [14.40] (Turner)). Where an agent's representation to a third party comprises information provided to the agent by their principal, the agent will be entitled to an indemnity from the principal in the event of the agent being liable to the third party because the representation proves to have been untrue. In such a case, the agent would have the ordinary right of indemnity of an agent against a principal where the agent has acted within the scope of their authority. Liability of principal and agent for wrongful acts ...............................................................................................................................................................................................

An agent is liable for their tortious acts but the principal will also be liable for any tort committed by the agent where the agent has acted within the scope of their actual or apparent authority, whether the tort was committed for the benefit of the principal or of the agent. The liability of the principal includes liability for the negligence or negligent misrepresentations of their agent (see previous section). The principal will also be liable for the fraudulent conduct of their agent or employee where such was committed within the scope of the agent's apparent authority or the employee's course of employment. [7.600]

Royal Globe Life Assurance Co Ltd v Kovacevic (1979) 22 SASR 78 [7.610] An insurance agent persuaded K to enter into certain life assurance proposals. K paid the agent an initial premium and was given a receipt for the amount by the agent from a receipt book provided by the insurance company. Some months later, the agent again approached K and invited him to invest moneys on loan with the insurance company. The agent told K that a deposit of moneys with the company would return a higher rate of interest and give K the right to obtain from the company a loan on mortgage for the purchase of a house. K paid the agent $2,000 and was again given a receipt from the agent’s receipt book. The agent misappropriated the money and disappeared and K sued the insurance company for the $2,000. It was held that the agent had received the money from K in the course of his employment by the insurance company which was accordingly liable to K for the agent’s fraud.

Thus the principal may be liable in tort for damages if the agent is guilty of a wrong or deceit or fraudulent misrepresentation. The fraud may be the fraud of the principal in instructing the agent that a certain fact is true, whereas it is actually untrue; or [7.620]

5

The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)).

[7.680]

CHAPTER

7

AGENCY

105

it may be the fraud of the agent in taking upon themselves to say that it is true whereas the agent knows that it is untrue. In either case the principal is liable. However, it is not permissible to “add together” the knowledge of the principal and that of the agent, where both are innocent, in an action for fraudulent misrepresentation. Armstrong v Strain [1952] 1 KB 232 [7.630] Skinner was a member of a firm of estate agents employed by the defendant to sell his bungalow. Skinner made a statement which was in fact untrue but which he believed to be true. The defendant vendor knew that such a statement was untrue but did not authorise Skinner to make the statement and did not know he was going to make it. It was held that the purchaser was unable to recover damages against the defendant for fraudulent misrepresentation since no fraudulent intention had been established on the part of either Skinner or the defendant.

A principal will not be liable for the fraud of an agent where the agent was not authorised to do the act; where the act was not within the class of acts that an agent in their position is usually authorised to do; and the principal has done nothing to represent that the agent had authority to do the act: Armagas Ltd v Mundogas SA [1986] 1 AC 717. Similarly, a principal will not be liable for other wrongful acts of an agent which are outside the agent's actual or apparent authority, for example where an agent commits an unauthorised assault upon third parties: [7.640]

Deatons Pty Ltd v Flew (1949) 79 CLR 370 [7.650] D conducted a hotel in which it employed B as a barmaid. P, a customer in the hotel, acted in an offensive manner and B asked him to go away. In the course of an altercation B threw in P’s face a glass of beer and then the glass. It was held that, whether or not B had been provoked as D alleged, B was not acting within the scope of her employment in doing what she did and that accordingly D was not liable to P in damages.

A principal (or employer) will not be liable for the negligence of an agent (or employee) who acts without any authority and in their own interests and not on behalf of the principal (or employer): Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 (PC). [7.660]

Termination of agency The time when, and the circumstances upon which, the relationship of principal and agent will end depend upon the terms of the original contract of agency. [7.670]

Performance or completion of agency ...............................................................................................................................................................................................

Where the agent is appointed either for the performance of one specific act, or for the duration of a definite period, then the authority of the agent will extend only until such act has been done, or the specified period has expired. [7.680]

106

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.690]

Impossibility of performance ...............................................................................................................................................................................................

Where it becomes impossible for the agent to carry out their obligations, for example where the subject matter of the agency is destroyed, the authority of the agent must cease there and then, for example where the building which an agent has been instructed to sell is destroyed by fire. [7.690]

Agreement ...............................................................................................................................................................................................

Whilst the agency is still current both the principal and agent may mutually agree to its termination. [7.700]

Revocation ...............................................................................................................................................................................................

In considering the rights of the principal to revoke the agent's authority or the right of the agent to renounce, it must be borne in mind that in any contract of agency, unless some express stipulation has been made to the contrary, there is an implied term that either party may terminate it upon notice. But neither notice of revocation nor notice of renunciation will affect any rights or liabilities which may have been created between the principal and third parties prior to the notice. The right of the principal to revoke the agent's authority may be limited or affected by the rights of: [7.710]

(a)

third parties; and

(b)

the agent.

Rights of third parties

The principal may be liable to third parties even after the principal has validly revoked the authority of the agent, where such parties have had previous dealings with the agent and continue to deal with the agent without notice of the withdrawal of the agent's authority. An example would be where a commercial traveller had authority to collect the debts of their firm and was dismissed without the firm notifying the customers of the termination of the traveller's authority. The traveller continues to call and receive from the old customers, payment of their accounts supposedly for the firm. The traveller's action would bind the firm as payment to the traveller would be held as good payment to the firm as regards customers unaware of the traveller's dismissal. [7.720]

Rights of the agent

The right of the principal to revoke the authority of their agent may be limited by the principal's obligation to indemnify the agent against any loss or damage the agent may have suffered as a result of their employment, for example expenses in advertising, etc, connected with the agency. Further, the agent may be entitled to claim for loss of [7.730]

[7.760]

CHAPTER

7

AGENCY

107

commission in certain cases depending upon the nature of the agency, the terms upon which commission is payable and the circumstances existing at the time the principal revoked the agent's authority. For instance, the principal cannot capriciously or without reasonable grounds refuse to enter into a contract and determine the agency when the agent has found and introduced a purchaser ready, willing and able to buy at the stipulated price: Trollope (George) & Sons v Martyn Bros [1934] 2 KB 436. By death ...............................................................................................................................................................................................

The death (or in the case of a corporation, the liquidation) of either principal or agent immediately puts an end to the agency. Accordingly, an agent's authority to draw on the principal's bank account terminates on the principal's death: Noonan v Martin (1987) 10 NSWLR 402. The general rule is that the death of the principal terminates the authority of the agent even though the agent is unaware of and had no means of ascertaining the fact. Consequently the agent becomes personally liable to third parties for having made any contract entered into by the agent after the death of the principal and on behalf of the deceased principal, and may be sued by such party for breach of warranty of authority even though the agent was ignorant of the principal's death. The estate of the principal is not liable under such a contract though the personal representative (for example, the executor) may confirm the contract. In some States 6 every act done in good faith within the scope of a power of attorney after the death of the donor and before the receipt of notice thereof is valid and the donee of such power is not liable. [7.740]

By insanity ...............................................................................................................................................................................................

Once insanity has overtaken either principal or agent, the contract of agency, with its attendant rights and liabilities, is at an end: Yonge v Toynbee [1910] 1 KB 215. However, a third party is entitled to treat the authority of the agent as subsisting until they receive notice of the insanity in cases where the principal, before becoming insane, had held out the agent as having authority. [7.750]

Bankruptcy ...............................................................................................................................................................................................

Of the agent

The bankruptcy of the agent determines their authority, except where the bankruptcy does not affect their capacity to contract as agent. Thus where the duties of the agent are merely formal, the agent's bankruptcy would not necessarily affect their authority. [7.760]

6

Powers of Attorney and Agency Act 1984 (SA), s 12; Property Law Act 1969 (WA), s 85(2); Powers of Attorney Act 2000 (Tas), s 52.

108

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.770]

Of the principal

The bankruptcy of the principal also determines the relationship of principal and agent. However, an agent, even after notice of the principal's bankruptcy, may do such acts as are necessary to complete some transaction which was already binding on the principal before the bankruptcy. [7.770]

Renunciation by the agent ...............................................................................................................................................................................................

The agent may renounce the agency at any time but must compensate the principal for any loss occasioned by such renunciation. [7.780]

Particular types of agents Factors and mercantile agents ............................................................................................................................................................................................... [7.790] A factor is considered at common law to be an agent employed to sell goods, the possession or control of which has been entrusted to the factor's care by the principal. A factor has been generally recognised as possessing certain powers which apply in the absence of any special instructions from the principal to the contrary. Thus a factor may sell goods in their own name as though he or she was the principal. Consequently, with regard to third parties dealing with factors, the purchaser and factor stand in exactly the same relation to each other as any other purchaser and vendor – provided the purchaser was not aware that the factor was not in fact the principal. Consequently, the purchaser may set off against the purchase money any personal liability which may exist between the factor and the purchaser. Further, by custom a factor is entitled to receive payment for the goods from the purchaser and the purchaser is absolutely protected provided he or she had no notice from the principal requiring payment to the principal personally. In the various States there exist Acts 7 relating to factors and mercantile agents. They define a mercantile agent as “an agent having in the customary course of his business as such agent authority either to sell goods, or to consign goods for the purpose of sale or to buy goods, or to raise money on the security of goods”. The Acts further provide that when a mercantile agent is, with the consent of the owner, 8 in possession of goods or of the documents of title to goods, any sale, pledge, or other disposition of the goods made by her or him when acting in the ordinary course of business of a mercantile agent shall be as valid as if he was expressly authorised by the 7

8

Factors (Mercantile Agents) Act 1923 (NSW); Goods Act 1958 (Vic), ss 65 – 72; Factors Act 1892 (Qld); Mercantile Law Act 1936 (SA); Imperial Act 5 & 6 Vict, c 39 (WA); Factors’ Acts Amendment Act 1878 (WA); Factors Act 1891 (Tas). In New South Wales the Factors (Mercantile Agents) Act 1923 (NSW), s 5 does not state “with the consent of the owner” but in Cook v Rogers (1946) 46 SR (NSW) 229 at 232, it was held that the words in the Act “entrusted with possession” had in substance the same meaning, as a mercantile agent could not be “entrusted” with goods unless he or she obtained possession of them “with the consent of the owner”.

[7.820]

CHAPTER

7

AGENCY

109

owner of the goods to make the same; provided that the person taking under the disposition acts in good faith, and has not, at the time of the disposition, notice of the want of authority. 9 Another provision of the Acts covers the position where the authority of the agent has been revoked by the principal before the sale, pledge or disposition was made. When a mercantile agent has, with the consent of the owner, been in possession of goods or of the documents of title to goods, any sale, pledge or other disposition which would have been valid if the consent had continued, is valid notwithstanding the determination of the consent provided that the person taking under the disposition does not have notice that the consent has been determined. Del credere agents ...............................................................................................................................................................................................

This type of mercantile agent undertakes to make good any loss incurred, as regards payment only, with respect to persons with whom he or she contracts on behalf of the principal, that is, a del credere agent undertakes the payment for goods accepted by the customers he or she procures upon the buyer's failure to pay; a del credere agent does not guarantee that customers will not repudiate contracts in some other manner such as by refusal to accept goods. Such an agent is usually paid an extra commission known as del credere commission. A del credere agent is not primarily the debtor. On the contrary, the principal may sue the buyer in her or his own name notwithstanding the del credere commission so that the latter amounts to no more than consideration for a guarantee. [7.800]

Brokers ...............................................................................................................................................................................................

A broker is a general agent who buys and sells goods for a principal without being entrusted either with the possession or control of the goods or of their documents of title. Often a broker does little more than bring the parties together, and when a contract is concluded takes their commission and entirely drops out of the transaction. The general practice of brokerage is for the broker, upon making the contract, to enter a note in their book signed by the broker, and send a note or memorandum to both parties. The one sent to the purchaser is called the “bought note”, that to the vendor is the “sold note”. [7.810]

Partners ...............................................................................................................................................................................................

Each partner is a general agent of the other with regard to partnership matters, and the partnership is bound by any act done by one of its members in the course of the firm's business, unless the partner so acting has in fact no authority to act for the firm in [7.820]

9

It should be noted that the onus of proving: (a) the ostensible authority of the mercantile agent; and (b) that the purchaser was unaware that the transaction was outside the scope of the actual authority of the mercantile agent, lies on the purchaser: Buckland v Clarke (1956) 56 SR (NSW) 185.

110

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[7.830]

the particular matter and the person with whom the partner is dealing either knows that he or she has no authority or does not know or believe her or him to be a partner. Directors ...............................................................................................................................................................................................

Subject to the qualification that they must act together as a board, directors are agents for their company, and a company is liable in respect of all contracts made on its behalf by directors acting within the scope of the authority given to them by the rules of the company. [7.830]

Estate agents ...............................................................................................................................................................................................

Generally the term “estate agent” is used in statutes to include agents entrusted with the duty of buying or selling land, or of buying or selling businesses, on behalf of principals. Sometimes, however, the statutes differentiate between “land agents” or “real estate agents” and “business agents”. [7.840]

Auctioneers ............................................................................................................................................................................................... [7.850]

An auctioneer is an agent for the sale of property at a public auction.

Statutory regulation of agents There is considerable regulation by State statutory law of auctioneers and “estate agents”. Thus in most States auctioneers and estate agents have to be licensed. 10 In most States repossession and debt collecting agents (referred to as “commercial agents”) are subject to licensing requirements. 11 Finance brokers (that is, agents who negotiate loans for other persons) are required to be licensed and are subject to certain obligations in the conduct of their business under the national scheme established by the Commonwealth National Consumer Credit Protection Act 2009 (Cth). In all States and Territories “uniform” legislation formerly required the licensing of travel agents and regulated their operations. One of the conditions to be satisfied before a licence would be granted was that the applicant be a participant in the Travel [7.860]

10

11

Estate Agents Act 1980 (Vic), s 12; Motor Dealers and Chattel Auctioneers Act 2014 (Qld), s 33; Property Occupations Act 2014 (Qld), s 26; Land Agents Act 1994 (SA), s 6(1); Real Estate and Business Agents Act 1978 (WA), s 26; Property Agents and Land Transactions Act 2005 (Tas), s 5; Auction Sales Act 1973 (WA), s 6; Agents Act 2003 (ACT), s 18; Auctioneers Act 1935 (NT), s 4; Agents Licensing Act 1979 (NT), s 17. The National Competition Review “concluded that the benefits of licensing auctioneers of goods are outweighed by the costs”: Victorian Hansard (Assembly), 5 April 2001, p 761. As a result of this recommendation, the Victorian Auction Sales Act 1958 (Vic) was repealed: Auction Sales (Repeal) Act 2001 (Vic), s 3. Commercial Agents and Private Inquiry Agents Act 2004 (NSW), ss 5, 11; Debt Collectors (Field Agents and Collection Agents) Act 2014 (Qld), s 14; Security and Investigation Agents Act 1995 (SA), s 6; Debt Collectors Licensing Act 1964 (WA). s 5 ; Security and Investigations Agents Act 2002 (Tas), s 4; Commercial and Private Agents Licensing Act 1979 (NT), s 5.

[7.860]

CHAPTER

7

AGENCY

111

Compensation Fund which was established to compensate travellers who suffered loss as a result of misappropriations by travel agents. However, it is intended that these licensing requirements will be repealed in all jurisdictions and the Compensation Fund will be closed. See Victorian Legislative Assembly Hansard, 13 November 2013, p 4024. The legislation has already been repealed in New South Wales, Queensland, Victoria, South Australia, Northern Territory and the Australian Capital Territory. 12 Employment agents may also be subject to licensing requirements. 13

12

13

Travel Agents Act 1985 (WA); Travel Agents Act 1987 (Tas). The Travel Agents Act 1986 (NSW) was repealed by the Travel Agents Repeal Act 2014 (NSW). The Travel Agents Act 1986 (Vic) was repealed by the Travel Agents Repeal Act 2014 (Vic). The Travel Agents Act 1988 (Qld) was repealed by the Construction and Tourism (Red Tape Reduction) and Other Legislation Amendment Act 2014 (Qld), s 52. The Travel Agents Act 1986 (SA) was repealed by the Travel Agents Repeal Act 2014 (SA). The Consumer Affairs and Fair Trading Act (NT), Pt 11 was repealed by the Consumer Affairs and Fair Trading Amendment Act (NT), s 6. The Agents Act 2003 (ACT), s 21 was repealed by the Justice and Community Safety Legislation Amendment Act 2014 (ACT), Sch 1 Pt 1.1 Item 1.3. Employment Agents Registration Act 1993 (SA), s 6; Employment Agents Act 1976 (WA), s 12; Agents Act 2003 (ACT), s 22.

PART 6

TRANSFER OF PROPERTY Chapter 8

Sale of Goods ................................................................. 115

CHAPTER 08

......................................................................................................................

Sale of Goods Extracted from Turner and Trone, Australian Commercial Law, 30th ed (Thomson Reuters, 2015), Ch 14.

[8.10] The principles of the common law relating to the sale of goods were codified in the United Kingdom Sale of Goods Act 1893 (UK), and each of the Australian States and Territories passed legislation practically identical to the United Kingdom Act. 1 The common law continues to apply to contracts for the sale of goods where it is not inconsistent with the Acts. 2 Relevant common law rules include those relating to agency, fraud, misrepresentation, mistake and duress. The Acts apply to all contracts for the sale of goods whether it is a commercial contract between two companies involving the supply of goods worth many thousands of dollars, or to the sale of everyday items such as food and clothing to consumers. This chapter deals with the provisions of the State and Territory Sale of Goods Acts. In Victoria and Tasmania the sale by description, fitness for a particular purpose and sale by sample provisions of the Sale of Goods Act do not apply to contracts of supply to which the consumer guarantees provisions of the Australian Consumer Law apply (Div 1, Part 3-2). 3 A reference to a condition in the formation of the contract provisions of the Sale of Goods Act includes a consumer guarantee under the Australian Consumer Law. Except as expressly provided by the consumer guarantees provisions of the Australian Consumer Law, those provisions do not affect the application of the Sale of Goods Act to a contract for the supply of goods and services. 4 In Western Australia where the consumer guarantees provisions of the Australian Consumer Law are inconsistent with the Sale of Goods Act, the Australian Consumer Law prevails. 5

1

2

3 4 5

Sale of Goods Act 1923 (NSW); Goods Act 1958 (Vic); Sale of Goods Act 1896 (Qld); Sale of Goods Act 1895 (SA); Sale of Goods Act 1895 (WA); Sale of Goods Act 1896 (Tas); Sale of Goods Act 1954 (ACT); Sale of Goods Act 1972 (NT). Sale of Goods Act 1923 (NSW), s 4(2); Goods Act 1958 (Vic), s 4(2); Sale of Goods Act 1896 (Qld), s 61(2); Sale of Goods Act 1895 (SA), s 59(2); Sale of Goods Act 1895 (WA), s 59(2); Sale of Goods Act 1896 (Tas), s 5(2); Sale of Goods Act 1954 (ACT)62(1); Sale of Goods Act 1972 (NT), s 4(2). The Australian Consumer Law is Sch 2 to the Commonwealth Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)). Australian Consumer Law and Fair Trading Act 2012 (Vic), s 31; Australian Consumer Law (Tasmania) Act 2010 (Tas), s 45. Fair Trading Act 2010 (WA), s 35.

116

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.20]

Contract of sale of goods Formation of the contract ...............................................................................................................................................................................................

A contract of sale of goods is defined by the Sale of Goods Act as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. 6 The ordinary elements of a contract must be present, that is, offer and acceptance, consideration, etc, but it will be noticed that in every contract for the sale of goods there must be present three main matters: “goods”, “money consideration”, and “transfer of property”. [8.20]

Goods

The term “goods” includes all chattels personal other than things in action and money; it includes emblements 7 and things attached to or forming part of land which are agreed to be severed before sale or under the contract of sale. 8 Therefore, the term “goods” embraces a wide field including clothes, food, motor cars, machinery, furniture and growing crops. Timber is also included if it is to be cut down before the title of it is to pass to the buyer. A contract for the removal of a house in its entirety from its original site to another location has been held to constitute a sale of goods: Symes v Laurie [1985] 2 Qd R 547 at 549-550. However, the term does not include land or any interest in land, nor does it include shares or debentures. It has been held that an agreement for the sale of a computer system comprising three items of computer hardware and two items of software is a sale of goods within the meaning of the Sale of Goods Act: Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48; 77 FLR 377; 50 ALR 684. However, it has been held that a software package supplied as an online download does not constitute “goods” and is not a sale of goods within the meaning of the Act: Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd (2010) 77 NSWLR 479 at [12], [42], [47]; [2010] NSWC 267. [8.30]

Money consideration

In order to constitute a sale of goods under the Act there must exist some money consideration for the sale. If the goods are given away free or transferred by means of barter, that is, exchanged for other goods, the Sale of Goods Act would not apply to the transaction. [8.40]

6

7 8

Sale of Goods Act 1923 (NSW), s 6; Goods Act 1958 (Vic), s 6; Sale of Goods Act 1896 (Qld), s 4; Sale of Goods Act 1895 (SA), s 1; Sale of Goods Act 1895 (WA), s 1; Sale of Goods Act 1896 (Tas), s 6; Sale of Goods Act 1954 (ACT), s 6; Sale of Goods Act 1972 (NT), s 6. The term “emblements” refers to industrial crops such as wheat, potatoes and hay. Sale of Goods Act 1923 (NSW), s 5; Goods Act 1958 (Vic), s 3; Sale of Goods Act 1896 (Qld), s 3; Sale of Goods Act 1895 (SA), s 60; Sale of Goods Act 1895 (WA), s 60; Sale of Goods Act 1896 (Tas), s 3; Sale of Goods Act 1954 (ACT), s 5; Sale of Goods Act 1972 (NT), s 5.

CHAPTER

[8.80]

08

SALE OF GOODS

117

Transfer of property

By transfer of property is meant the transfer of ownership in the goods. The principles governing the transfer of property or ownership in goods the subject of a contract of sale are considered at [8.420]. [8.50]

Contracts of sale and for work and materials

Some agreements, although providing for the delivery of an article, are not contracts for the sale of goods but for work and labour and the supply of materials. Each case must be decided on its individual merits but broadly speaking if it can be shown that the main substance of the agreement is the transfer of title to a chattel then the contract is for the sale of goods. On the other hand, where the main substance of the agreement is the skill and experience to be displayed by one of the parties in performance and the transfer of title to the materials used is only ancillary, then the contract is for work and labour and the supply of materials. In a Victorian case it was said that the “substance of the contract” test for determining whether a contract is one for the sale of goods or for work and labour is “illogical and unsatisfactory” and that the more satisfactory test is whether the contract when carried out would result in the sale of a chattel; if so, the contract is one for the sale of goods: Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 181-186. The distinction between contracts for the sale of goods and contracts for work and labour and the supply of materials is of importance, since the statutory requirements for a contract for the sale of goods to be enforceable do not apply to contracts of work and the supply of materials. [8.60]

Capacity to buy and sell ...............................................................................................................................................................................................

The capacity to buy and sell goods is governed by the general law concerning the capacity to contract. Where necessaries are sold and delivered to minors, or to persons who by reason of their mental incapacity or drunkenness are incompetent to contract, they must pay a reasonable price for them. 9 [8.70]

Sale and agreement to sell ............................................................................................................................................................................................... [8.80]

The term “contract for the sale of goods” includes:

(a)

a sale of goods (an executed contract); and

(b)

an agreement to sell goods (an executory contract). 10

9

10

Sale of Goods Act 1923 (NSW), s 7; Goods Act 1958 (Vic), s 7; Sale of Goods Act 1896 (Qld), s 5; Sale of Goods Act 1895 (SA), s 2; Sale of Goods Act 1895 (WA), s 2; Sale of Goods Act 1896 (Tas), s 7; Sale of Goods Act 1954 (ACT), s 7; Sale of Goods Act 1972 (NT), s 7. This is not the usual sense of the words “executory” and “executed”; in the case of a sale the property passes at once but the contract may still be executory in the sense that the buyer may still have to pay the price. However, these meanings have been adopted by common usage in the case of the topic of sale of goods.

118

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.90]

A “sale” occurs where the ownership of the goods is transferred to the buyer at the time of the contract. For example, B goes to a sports store, selects and purchases a particular cricket bat. The thing sold immediately becomes the property of the buyer and the transaction is known as a “sale”. The goods are agreed upon at the time of the sale and there is nothing further required of the seller to transfer the ownership. An “agreement to sell” arises where the ownership of the goods is to be transferred at a future time, or subject to some condition. An agreement to sell becomes a “sale” when the time elapses or the conditions are fulfilled. For example, A phones B and orders 10 litres of “red paint” to be made up and delivered to his store. Until the particular goods are delivered to A's store the contract is an agreement to sell. When the goods are delivered, the agreement becomes executed and constitutes a sale. A contract to sell unascertained goods is not a sale but an agreement to sell. There must be added to it some act which completes the sale, such as delivery or the appropriation of specific goods to the contract by the assent, express or implied, of both buyer and seller: Jansz v GMB Imports Pty Ltd [1979] VR 581. The distinction between a sale and an agreement to sell has an important effect on the rights of the parties. These rights are briefly summarised below. Rights under a sale ...............................................................................................................................................................................................

The seller has a right to sue the buyer for the price of the goods. The buyer has the right to sue the seller for damages if the seller defaults, and also for conversion 11 if the seller wrongfully disposes of the goods. The risk of any loss to the goods after a sale is with the buyer as the ownership has passed to her or him. For example, if a person purchases a ready-made suit from a tailor the property passes to him, and he must bear any later loss or destruction of the suit. [8.90]

Rights under an agreement to sell ...............................................................................................................................................................................................

The seller has a right to sue the buyer for damages in the event of default. The buyer, where the seller defaults, can only sue for damages as the property in the goods has not passed to the buyer. The risk of any loss to the goods in an agreement to sell is with the seller as ownership has not passed to the buyer. For example, if a buyer is measured for a suit and during its making there is a fire which damages the suit, the loss must be borne by the tailor. [8.100]

11

Conversion is the tort committed by a person who wilfully interferes with a chattel in a manner constituting a denial of the title of the person who has the right to its possession. It is essentially conduct which deprives another of their property permanently or for an indefinite time: see Chapter 28 (Turner and Trone).

[8.160]

CHAPTER

08

SALE OF GOODS

119

Classification of goods ...............................................................................................................................................................................................

The goods which form the subject matter of a contract of sale include the following: [8.110]

Existing goods

Existing goods are those owned or possessed by the seller at the time of the contract, for example a particular car. [8.120]

Future goods

Future goods are those to be manufactured or acquired by the seller after the making of the contract of sale. It is also necessary to observe the meanings of “specific” and “unascertained” goods. [8.130]

Specific goods

Specific goods 12 are goods identified and agreed upon at the time the contract of sale is made; for example a 2006 Holden Commodore, a specific piece of Dresden china, “Oscar” the champion merino ram.

[8.140]

Unascertained goods

Unascertained goods are goods sold under a description where no particular goods were identified and agreed upon (that is, “earmarked”) at the time when the contract was made; for example a contract for the sale of generic goods such as “100 tonnes of best quality wheat”.

[8.150]

Distinction between specific and unascertained goods

The distinction between specific and unascertained goods is important for the purpose of determining when the property in the goods and the risk passes to the buyer. In a sale of specific (or ascertained goods) the property passes to the buyer at such time as the parties to the contract intend it to be transferred, taking into account the terms of the contract, the conduct of the parties, and the circumstances of the case. The property in unascertained goods does not pass until the goods become ascertained and being in a deliverable state are appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller. Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void. 13 [8.160]

12

Sale of Goods Act 1923 (NSW), s 5; Goods Act 1958 (Vic), s 3; Sale of Goods Act 1896 (Qld), s 3; Sale of Goods Act 1895 (SA), s 60; Sale of Goods Act 1895 (WA), s 60; Sale of Goods Act 1896 (Tas), s 3; Sale of Goods Act 1954 (ACT), s 5; Sale of Goods Act 1972 (NT), s 5.

13

Sale of Goods Act 1923 (NSW), s 11; Goods Act 1958 (Vic), s 11; Sale of Goods Act 1896 (Qld), s 9; Sale of Goods Act 1895 (SA), s 6; Sale of Goods Act 1895 (WA), s 6; Sale of Goods Act 1896 (Tas), s 11; Sale of Goods Act 1954 (ACT), s 11; Sale of Goods Act 1972 (NT), s 11.

120

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.170]

Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish before the risk passes to the buyer, the agreement is avoided. 14 In these circumstances, legislation in Victoria (the Australian Consumer Law and Fair Trading Act 2012 (Vic); New South Wales (the Frustrated Contract Act 1978 (NSW)) and South Australia (the Frustrated Contracts Act 1988 (SA)) provides for the adjustment of the rights and liabilities of the parties. The price ...............................................................................................................................................................................................

The price of the goods may be fixed by the contract or in some manner agreed upon, or by the dealings between the parties. The contract may be complete and binding although no price is stated, and in such circumstances the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent upon the circumstances of each particular case. 15 Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and the third party cannot or does not make the valuation, the agreement is avoided. However, if the goods have been taken by the buyer he or she must pay a reasonable price for them and where the third party is prevented from making the valuation by the fault of the seller or buyer, the party not at fault may maintain an action for damages against the other. 16 The price of the goods, unless otherwise provided, is to be paid upon the delivery of the goods, and it should be paid in legal tender unless arranged otherwise. Delivery and payment are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods. 17 [8.170]

Formalities ...............................................................................................................................................................................................

Formerly, the position in all Australian States and Territories was that a contract for the sale of goods of the value of $20 or upwards was not enforceable unless: [8.180]

(a)

some note or memorandum in writing of the contract was made and signed by the party to be charged or her or his authorised agent; or

14

Sale of Goods Act 1923 (NSW), s 12; Goods Act 1958 (Vic), s 12; Sale of Goods Act 1896 (Qld), s 10; Sale of Goods Act 1895 (SA), s 7; Sale of Goods Act 1895 (WA), s 7; Sale of Goods Act 1896 (Tas), s 12; Sale of Goods Act 1954 (ACT), s 12; Sale of Goods Act 1972 (NT), s 12. Sale of Goods Act 1923 (NSW), s 13; Goods Act 1958 (Vic), s 13; Sale of Goods Act 1896 (Qld), s 11; Sale of Goods Act 1895 (SA), s 8; Sale of Goods Act 1895 (WA), s 8; Sale of Goods Act 1896 (Tas), s 13; Sale of Goods Act 1954 (ACT), s 13; Sale of Goods Act 1972 (NT), s 13. Sale of Goods Act 1923 (NSW), s 14; Goods Act 1958 (Vic), s 14; Sale of Goods Act 1896 (Qld), s 12; Sale of Goods Act 1895 (SA), s 9; Sale of Goods Act 1895 (WA), s 9; Sale of Goods Act 1896 (Tas), s 14; Sale of Goods Act 1954 (ACT), s 14; Sale of Goods Act 1972 (NT), s 14.

15

16

17

Sale of Goods Act 1923 (NSW), s 31; Goods Act 1958 (Vic), s 35; Sale of Goods Act 1896 (Qld), s 30; Sale of Goods Act 1895 (SA), s 28; Sale of Goods Act 1895 (WA), s 28; Sale of Goods Act 1896 (Tas), s 33; Sale of Goods Act 1954 (ACT), s 32; Sale of Goods Act 1972 (NT), s 31.

[8.200]

(b)

CHAPTER

08

SALE OF GOODS

121

the buyer accepted part of the goods so sold and actually received the same; or

(c)

the buyer had given something in earnest to bind the contract, or given something in part payment. However, this requirement has been repealed in New South Wales, Victoria, Queensland, South Australia, the Australian Capital Territory and the Northern Territory. 18 Accordingly, in these States and Territories there are no special formalities to be observed before a contract of sale becomes enforceable. Such a contract may be made in writing, by word of mouth, or by implication from the conduct of the parties. However, the formality requirement referred to above still applies in Western Australia and Tasmania. 19 It applies to contracts for the sale of goods of the value of $20 and upwards. The following explanation of the requirement is relevant only to these jurisdictions. Note or memorandum [8.190]

The note or memorandum must show:

(a)

the names of the parties;

(b)

the quantity and description of the goods sold;

(c)

the price and terms as to mode or time of payment if they have been agreed upon; and

(d) the signature of the party to be charged or that of their authorised agent. These particulars may appear in one document or may be comprised in a series of documents, provided that they are connected or related to each other so that they constitute all the terms of the bargain and give a sufficient description of the subject matter. The memorandum may be good even though no price is mentioned, for where no price is agreed upon the buyer is bound to pay a reasonable price. If, however, a price had been agreed upon, a memorandum which omitted to state the agreed price would be defective. The omission from the note or memorandum of an agreed date for delivery of the goods will render the note or memorandum insufficient: JB & BL Nominees Pty Ltd v McCormack [1982] WAR 258. Acceptance

The word “acceptance” has two distinct meanings under the Sale of Goods Act, one relating to the enforceability of the contract of sale and the other to performance of the contract. For a discussion on the latter see [8.870]. As regards the former, one of the alternative formality requirements of an enforceable contract for the sale of goods of $20 or upwards, in the absence of a note or [8.200]

18

19

Sale of Goods (Amendment) Act 1988 (NSW); Sale of Goods (Vienna Convention) Act 1987 (Vic), s 9; Statute of Frauds 1972 (Qld), s 3; Statutes Amendment (Enforcement of Contracts) Act 1982 (SA), s 4; Sale of Goods Act 1954 (ACT), s 2; Sale of Goods Amendment Act 1999 (NT), s 2. Sale of Goods Act 1895 (WA), s 4; Sale of Goods Act 1896 (Tas), s 9.

122

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.205]

memorandum of the contract, is that the buyer accept part of the goods and actually receive them. There must be an acceptance and a receipt. “Acceptance” has a particular meaning. The Acts state: There is an acceptance of goods within the meaning of this section when the buyer does any act in relation to the goods which recognises a pre-existing contract of sale, whether there be an acceptance in performance of the contract or not. 20

It is to be noted that the act of acceptance need not be an acceptance of the goods as conforming to the contract; it is sufficient if the act relied upon is consistent only with the recognition of an existing contract. An example would be where the buyer makes an effort to resell the goods before their actual receipt, for example by using a sample. The question is whether the buyer has done anything which amounts to an admission that he or she had contracted to buy the goods. Russo v Belcar Pty Ltd (2011) 111 SASR 459 at [2] [8.205] The appellant purchased a Ferrari. After delivery of the car he became convinced that it was not a new vehicle. In response to the purchaser’s complaints, the dealer ensured that extensive repairs were made under warranty. Over four years after delivery of the car the purchaser purported to rescind the contract of purchase: at [17]. The South Australian Full Court held that the purchaser had accepted the car and it was too late to rescind the contract. The purchaser had accepted major warranty repairs and used the car for more than four years: at [19]. Rescission must take place within a reasonable time: at [11]. The period in which goods may be accepted or rejected is “relatively short” in view of the commercial need for finality in transactions: at [96].

In addition to acceptance there must be an “actual receipt” of the goods. Where there has been an acceptance and receipt of the goods or part of them by the buyer, the contract is enforceable by the seller against the buyer, or by the buyer against the seller despite the absence of a note or memorandum of the contract in writing: Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167. [8.207]

Terms of the contract A “condition” is a term that is vital to the existence of the contract, a breach of which gives the innocent party a right to rescind the contract and claim for such damages as he or she may have sustained. Instead of rescinding the contract the innocent party may bring an action for damages only. A “warranty” is a term of lesser importance, the breach of which merely gives rise to a claim for damages but not a right to repudiate the contract and reject the goods. In New South Wales the Act has introduced the concept of an “intermediate stipulation”, that is, a term which is neither a condition nor a warranty. Whether breach of such an intermediate stipulation constitutes a repudiation of the contract will depend [8.210]

20

Sale of Goods Act 1895 (WA), s 4(3); Sale of Goods Act 1896 (Tas), s 9(3).

[8.220]

CHAPTER

08

SALE OF GOODS

123

on the seriousness of the breach. Thus, s 4(5) of the Sale of Goods Act 1923 (NSW) provides that nothing in the Act is to be construed “as excluding a right to treat a contract of sale as repudiated for a sufficiently serious breach of a stipulation that is neither a condition nor a warranty but is an intermediate stipulation”. Under the Sale of Goods Act certain implied conditions and warranties are applicable to contracts for the sale of goods but the parties themselves can also make specific conditions or warranties. An express condition or warranty does not negative an implied condition or warranty stipulated by the Act unless inconsistent with it, in which case the express stipulation prevails. Whether a stipulation in a contract for the sale of goods is a condition or a warranty is a matter of construction, and a stipulation may be a condition although called a warranty in the contract. As a general rule stipulations as to time of payment are not deemed to be conditions of the sale, and whether any other stipulation as to time is of the essence of the contract depends upon the terms of the contract. 21 However, stipulations as to time for delivery of the goods are considered essential terms unless a contrary intention is clearly shown. A breach of a condition may be treated by the innocent party as a breach of warranty, thus enabling the contract to be carried out but giving her or him the right to claim damages against the party defaulting. A warranty must be distinguished from a representation amounting to an expression of opinion. Such a representation is more in the nature of sales “puffing” and may be a mere expression of opinion by the seller on a matter of which the buyer may also be expected to have an opinion. Should an expression of opinion prove incorrect there is no right of action unless there has been fraud on the part of the seller, in which case the buyer may either set aside the contract or permit the contract to continue and claim damages. A warranty must also be distinguished from a representation of fact which induces but does not form part of the contract. Conditions implied in contracts of sale ............................................................................................................................................................................................... [8.220] The Sale of Goods Act implies certain important terms in all contracts for the sale of goods unless the circumstances of the contract are such as to show a different intention. The terms implied are conditions as to title, correspondence with description, quality, and fitness of goods supplied under the contract of sale. Each of these conditions is now considered in turn.

21

Sale of Goods Act 1923 (NSW), s 15; Goods Act 1958 (Vic), s 15; Sale of Goods Act 1896 (Qld), s 13; Sale of Goods Act 1895 (SA), s 10; Sale of Goods Act 1895 (WA), s 10; Sale of Goods Act 1896 (Tas), s 15; Sale of Goods Act 1954 (ACT), s 15; Sale of Goods Act 1972 (NT), s 15.

124

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.230]

Condition as to title

In a contract of sale, there is an implied condition on the part of the seller that he or she has a right to sell the goods and, in the case of an agreement to sell, that they will have a right to sell the goods at the time when the property is to pass. 22 This condition relates to the title of the seller and amounts to a guarantee of undisturbed possession. Should the buyer's title be avoided by reason of the fact that the seller had no title to the goods transferred, the buyer is entitled to a refund from the seller of any money paid to the seller for the goods, notwithstanding that the buyer may have had temporary use or enjoyment of them: Rowland v Divall [1923] 2 KB 500. This is because in the case of a contract for the sale of goods the main purpose of the contract is to transfer the property or title to goods. Accordingly, if the seller has no title, there has been a total failure of consideration. However, where a seller who has no title to goods they purport to sell subsequently acquires a good title before the buyer rescinds the contract, the seller can hold the buyer to the contract. The reason is that the subsequently acquired title goes to “feed”, that is, cure, the previously defective title of the seller and will in turn pass to the buyer: Patten v Thomas Motors Pty Ltd [1965] NSWR 1457. The following warranties as to title are also implied by the Sale of Goods Act: [8.230]

1.

That the goods are free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.

2.

That the buyer will have and enjoy quiet possession of the goods. This amounts to an indemnity against the consequences of a defective title and of any disturbance which might result.

Correspondence with description

Where there is a contract for the sale of goods by description, there is an implied condition that the goods will correspond with the description. 23 If the goods do not conform to their description in the contract the buyer is entitled to reject them for breach of the implied condition or, alternatively, sue for damages, since the buyer would not have received what he or she bargained for. For the condition to apply the goods must be sold “by description”. This requirement is satisfied in all cases where the buyer has not seen the goods but is relying on the description alone: Varley v Whipp [1900] 1 QB 513. In addition, however, goods may be [8.240]

22

Sale of Goods Act 1923 (NSW), s 17; Goods Act 1958 (Vic), s 17; Sale of Goods Act 1896 (Qld), s 15; Sale of Goods Act 1895 (SA), s 12; Sale of Goods Act 1895 (WA), s 12; Sale of Goods Act 1896 (Tas), s 17; Sale of Goods Act 1954 (ACT), s 17; Sale of Goods Act 1972 (NT), s 17.

23

Sale of Goods Act 1923 (NSW), s 18; Goods Act 1958 (Vic), s 18; Sale of Goods Act 1896 (Qld), s 16; Sale of Goods Act 1895 (SA), s 13; Sale of Goods Act 1895 (WA), s 13; Sale of Goods Act 1896 (Tas), s 18; Sale of Goods Act 1954 (ACT), s 18; Sale of Goods Act 1972 (NT), s 18.

[8.260]

CHAPTER

08

SALE OF GOODS

125

bought by description even where the buyer has seen and examined the goods provided the buyer bought them as corresponding to a description: Beale v Taylor [1967] 1 WLR 1193. The implied condition of correspondence with description applies (in contrast to the implied conditions of merchantable quality and fitness for purpose) even though the goods are not sold by a dealer, that is, it also applies to private sales. Statements made about the goods only form part of the description under which the goods are sold where they are used to identify the goods and, in general, statements merely relating to the quality of the goods do not form part of their contractual description for the purpose of determining whether there has been a breach of the implied condition as to correspondence with description: Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441. It is, however, often not easy to distinguish between statements which essentially concern the identity of the goods as distinct from their quality as the following case demonstrates: Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 [8.250] P was the owner of a bull which was bought by M for stud purposes at an auction sale of stud cattle at the Royal Easter Show in Sydney. The bull subsequently proved to be sterile. M had bid $21,000 for the bull and it had been knocked down to him at that price, whereas its value for slaughtering purposes was only $500. It was held that the sale of the bull between P and M was a sale by description, the description being “a breeding bull”; there was implied in the contract by virtue of the Sale of Goods Act a condition that the bull would correspond with that description. Since there had been a breach of that implied condition as a result of the bull’s sterility, the purchaser M was entitled to recover from the seller the price he had paid for the bull less its value for slaughtering purposes.

The Sale of Goods Act further provides that where there is a sale by sample as well as by description, there is an implied condition that the goods must correspond both with the sample and the description. It is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. 24 (For sale by sample only, see [8.380].) [8.260]

24

Sale of Goods Act 1923 (NSW), s 18; Goods Act 1958 (Vic), s 18; Sale of Goods Act 1896 (Qld), s 16; Sale of Goods Act 1895 (SA), s 13; Sale of Goods Act 1895 (WA), s 13; Sale of Goods Act 1896 (Tas), s 18; Sale of Goods Act 1954 (ACT), s 18; Sale of Goods Act 1972 (NT), s 18.

126

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.270]

Merchantable quality

Where goods are bought by description from a seller who deals in goods of that description (whether the seller is the manufacturer or not), there is an implied condition that the goods are of merchantable quality provided that, if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed. 25 The expression “merchantable quality” means, in essence, that the goods are commercially saleable under the description they were sold; that is, fit for a purpose for which goods of that description are normally used, having regard also to the price paid for the goods and the other circumstances of the sale: Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 at 75 per Lord Reid. The meaning of “merchantable quality” has also been described as follows: 26 [8.270]

The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms: Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 at 418; [1933] HCA 35 per Dixon J.

For the condition of merchantable quality to be implied in the contract, the goods must be bought by description but this requirement has been broadly interpreted by the courts. Goods may be bought by description even where the buyer has seen and examined the goods provided the buyer bought them as corresponding to a description. It may also be pointed out that there is a sale by description even though the buyer is buying something displayed before him on the counter; a thing is sold by description, though it is specific, so long as it is sold not merely as the specific thing but as a thing corresponding to a description; for example, woollen undergarments, a hot-water bottle, a second-hand reaping machine – to select a few obvious illustrations: Grant v Australian Knitting Mills Ltd (1936) 54 CLR 49 at 61; [1936] AC 85 per Lord Wright (PC).

Accordingly, goods sold by description over the counter must be of merchantable quality. David Jones Ltd v Willis (1934) 52 CLR 110 at 118-119, 123-124, 130-131 [8.280] W went to the shoe department of a retail store and asked for a pair of comfortable walking shoes. She was shown three pairs and purchased a particular pair which she had tried on. On the third occasion of wearing them, the heel of one of the shoes came off and as a result W fell and broke her leg. The evidence showed that the shoes were a “very bad job” and that the heels had not been properly fastened. 25

26

Sale of Goods Act 1923 (NSW), s 19; Goods Act 1958 (Vic), s 19; Sale of Goods Act 1896 (Qld), s 17; Sale of Goods Act 1895 (SA), s 14; Sale of Goods Act 1895 (WA), s 14; Sale of Goods Act 1896 (Tas), s 19; Sale of Goods Act 1954 (ACT), s 19; Sale of Goods Act 1972 (NT), s 19. There have been numerous judicial interpretations of the meaning of merchantable quality. One eminent judge expressed the view that: “I do not think that it is possible to frame, except in the vaguest terms a definition of merchantable quality which can apply to every kind of case”: BS Brown & Sons Ltd v Craiks [1970] 1 WLR 752 at 754 per Lord Reid.

[8.290]

CHAPTER

08

SALE OF GOODS

127

cont. The High Court held that there was evidence upon which the jury was entitled to find that the shoes had been bought by description, and that there had been a breach of the implied condition of merchantable quality.

If the buyer examines the goods before the contract is made, the condition is not implied as regards defects which such examination ought to have revealed: Thornett & Fehr v Beers & Son [1919] 1 KB 486. [8.285]

Aqua-Marine Marketing Pty Ltd v Pacific Reef Fisheries (Australia) Pty Ltd (No 5) [2012] FCA 908 at [171] [8.286] A prawn wholesaler purchased black tiger prawns from a prawn farmer for onsale to Woolworths. The prawns supplied were not suitable for sale to Woolworths as they did not meet that company’s quality specifications. The wholesaler had visited the farm and tasted three prawns out of a 50 tonne consignment. The Federal Court held that the implied condition of merchantable quality had been breached. The superficial examination conducted by the wholesaler could not have revealed the latent defects that made a large proportion of the prawns unsuitable for onsale to Woolworths.

Fitness for purpose

Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether the seller is the manufacturer or not) there is an implied condition that the goods are reasonably fit for such purpose; provided that in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose. 27 From a strict reading of the provision it would appear that this implied condition applies only when the buyer makes known to the seller the particular purpose for which the goods are required. However, there have been cases which decided that the seller need not be informed of the particular purpose when such purpose is the ordinary use for which such goods are used. For example, when a milk vendor supplies his customer regularly it would not be necessary to inform him that the milk was required for human consumption. Where, however, the proposed use is not the only or ordinary use to which the goods are normally put, it remains necessary for the buyer to bring home to the mind of the seller the particular purpose contemplated and also to bring home to the seller the fact that the buyer is relying on the seller. Although it is necessary for the buyer to inform the seller in such cases of the use contemplated and to indicate to the seller that the buyer [8.290]

27

Sale of Goods Act 1923 (NSW), s 19; Goods Act 1958 (Vic), s 19; Sale of Goods Act 1896 (Qld), s 17; Sale of Goods Act 1895 (SA), s 14; Sale of Goods Act 1895 (WA), s 14; Sale of Goods Act 1896 (Tas), s 19; Sale of Goods Act 1954 (ACT), s 19; Sale of Goods Act 1972 (NT), s 19.

128

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.300]

relies on the seller's skill and judgment, it is not necessary that there be any reference to such matters in the contract itself; it is sufficient if the matters are adverted to during the course of negotiations which precede the making of the contract of sale. Ashford Shire Council v Dependable Motors Pty Ltd (1960) 104 CLR 139 (PC) [8.300] A shire council requested its engineer to inspect a tractor and see whether it was suitable for roadwork. The engineer went to the company’s showroom where he introduced himself to the company’s managing director as the Shire Engineer of the council and told him that he had been instructed to give a report on the tractor with a view to its purchase. After inspecting the tractor the engineer informed the managing director that the tractor was required for roadwork and asked whether it could perform such work which he described. The engineer reported to the Shire Clerk that the tractor seemed to have plenty of horsepower and was big enough to do the work; he did not however report what had passed between the managing director and himself. The Shire President instructed the Shire Clerk to make the purchase, relying upon the report made by the engineer. It was held that the engineer, having disclosed the proposed purpose for which the tractor was required, had acted on the skill and judgment of the managing director of the company. The council had relied upon the company’s skill and judgment and, consequently, as the tractor was unsuitable for roadwork the council was entitled to damages.

In the following cases the implied condition that the goods were reasonably fit for a particular purpose was considered: [8.310]

Grant v Australian Knitting Mills Ltd (1936) 54 CLR 49 (PC) [8.320] G purchased woollen underwear from M, a retailer whose business it was to sell goods of that description, and after wearing the garments G developed an acute skin disease. It was held that the goods were not reasonably fit for their only proper use and G was entitled to damages against the retailer.

McWilliam’s Wines Pty Ltd v Liaweena (NSW) Pty Ltd [1988] ASC 55-695; [1991] ASC 56-038 (NSWCA) [8.330] In 1983, the plaintiff wine maker bought 500,000 corks from the defendant cork merchant. It was later found that a significant proportion of the bottles of wine sealed with the corks had been contaminated and were unsaleable. It was held that the defendant was liable for breach of the implied condition of fitness. Given the background of many other transactions between the parties over a number of years, it had been established that the plaintiff had made known to the defendant that it was relying on the latter’s skill and judgment to deliver corks which were not contaminated in some way unobservable to visual examination and which would cause a deleterious effect upon wine. It was further held that the corks were not of merchantable quality and that provisions purporting to exclude the defendant’s liability had not been sufficiently brought to the plaintiff’s attention. Damages for breach of the implied conditions were assessed at $2,080,892.

[8.360]

CHAPTER

08

SALE OF GOODS

129

Expo Aluminium (NSW) Pty Ltd v WR Pateman Pty Ltd [1990] ASC 55-978 [8.340] The owner of a house built on a site exposed to the weather requested the appellant manufacturer to supply replacement aluminium windows for wooden ones which leaked. The appellant ordered the windows in turn from the respondent manufacturer who was told: “There is nothing between the job and the South Pole”. The windows supplied were totally unsuited to the site. In the New South Wales Court of Appeal, Meagher JA (with whom Samuels JA agreed) said: “The buyer, if he relies on s 19(1) [implied condition of fitness], must establish two elements. He must establish purpose and he must establish reliance. He can establish reliance as an inference from his statement of purpose or it may be established by some other evidence”. On the facts the appellant had made known to the respondent the particular purpose for which the windows were required; reliance on the respondent’s skill and judgment was established as an inference from the appellant’s statement of purpose.

Aqua-Marine Marketing Pty Ltd v Pacific Reef Fisheries (Australia) Pty Ltd (No 5) [2012] FCA 908 at [173]-[174] [8.345] A prawn wholesaler purchased black tiger prawns from a prawn farmer for onsale to Woolworths. The farmer knew that the prawns were to be onsold to Woolworths. The prawns supplied were not suitable for sale to Woolworths as they did not meet that company’s quality specifications. The prawns had to be sold for a lower price to a seafood distributor. The wholesaler sued the farmer for the difference between the price Woolworths would have paid and the price that was ultimately obtained. The Federal Court held that the implied condition of fitness for purpose had been breached. The parties had agreed that the prawns would comply with the Woolworths specifications: at [152]. Given the huge size of the order (50 tonnes) and the difficulty of testing frozen perishable items without spoiling them, the wholesaler had no practical choice but to rely on the farmer’s skill and judgment: at [161]. Judgment was given for the amount claimed.

It is sufficient if the buyer relies only partially on the skill and judgment of the seller provided that the matters of which the buyer complains are matters in respect of which the buyer relied on the seller. [8.350]

Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 [8.360] The plaintiff, a compounder of animal foodstuffs, contracted with the defendant mink farmer to compound and supply to him certain mink food in accordance with a formula supplied by the defendant. One of the ingredients in the formula was herring meal which the plaintiff purchased from a third party. However, the herring meal supplied had become contaminated by a substance produced by a chemical reaction following the use of a preservative. The substance was highly toxic to mink and the defendant suffered heavy losses on feeding his mink with the compound. The plaintiff sued the defendant for the price of the mink food and the defendant counterclaimed for damages. The House of Lords held that the plaintiff was liable for breach of the implied condition of fitness for purpose because, although the defendant had relied on his own judgment as to the suitability of the compound for mink food, he relied on the plaintiff

130

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.370]

cont. seller to select and acquire good quality ingredients of the kind set out in the formula. It was further held that the third party supplier of the herring meal was liable to the plaintiff for breach of the implied condition.

The mere fact that an article sold is described in the contract by its trade name does not necessarily make it a sale “under a trade name” so as to prevent the condition of fitness for a particular purpose from being implied. It all depends on the circumstances. Basically, the trade name proviso applies only where the buyer orders the goods under their trade name in such a way as to show that the buyer does not rely on the seller's skill and judgment: Baldry v Marshall [1925] 1 KB 260. A condition or warranty as to quality or fitness for a particular purpose may be annexed by the custom or usage of trade. However, before such term will be implied, the custom or usage must be notorious (that is, generally known throughout the trade), certain, and reasonable. [8.370]

Sale by sample [8.380]

Where the sale is by sample only, there is an implied condition that:

(a)

the bulk will correspond with the sample in quality;

(b)

the buyer will have a reasonable opportunity of comparing the bulk with the sample; and

(c)

the goods will be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample. 28 The goods must be free from any defect rendering them unmerchantable which is not apparent from a reasonable examination of the sample: Drummond v Van Ingren & Co (1887) 12 App Cas 284. A contract of sale is a contract for sale by sample where there is a term in the contract express or implied to that effect. Exclusion of the terms implied by the Sale of Goods Acts ...............................................................................................................................................................................................

The implied conditions and warranties may be, and frequently are, excluded or varied by express or implied agreement between the parties to the sale. It is provided by the Sale of Goods Act that where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties or by usage, if the usage is such as to bind both [8.390]

28

Sale of Goods Act 1923 (NSW), s 20; Goods Act 1958 (Vic), s 20; Sale of Goods Act 1896 (Qld), s 18; Sale of Goods Act 1895 (SA), s 15; Sale of Goods Act 1895 (WA), s 15; Sale of Goods Act 1896 (Tas), s 20; Sale of Goods Act 1954 (ACT), s 20; Sale of Goods Act 1972 (NT), s 20.

[8.400]

CHAPTER

08

SALE OF GOODS

131

parties to the contract. 29 An exclusion clause which provided that “[a]ll statutory and implied conditions and warranties except as to title are excluded” was effective to exclude the supplier’s liability for breach of the implied conditions of merchantable quality and fitness for purpose: Victorian Alps Wine Co Pty Ltd v All Saints Estate Pty Ltd (2012) 34 VR 397 at [1], [9], [43], [52]. A clause may be included in the contract excluding liability as follows: “All conditions, warranties and liabilities implied by statute, common law or otherwise are excluded”. Such a clause does not protect the seller against any express warranty which may be included in the contract: Andrews Bros (Bournemouth) Ltd v Singer & Co Ltd [1934] 1 KB 17. It is for the party seeking to rely upon the exclusion clause to establish that the clause excludes their liability: Victorian Alps Wine Co Pty Ltd v All Saints Estate Pty Ltd (2012) 34 VR 397 at [1], [39]. When a condition is to be treated as a warranty ...............................................................................................................................................................................................

Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or may elect to treat the breach of such condition as a breach of warranty and not as a ground for treating the contract as repudiated; 30 for example where goods sold by description are of a different description: Wallis, Son & Wells v Pratt & Haynes [1911] AC 394 at 395. Where a contract of sale is not severable and the buyer has accepted the goods or part of them, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is an express or implied term of the contract to that effect. 31 In Russo v Belcar Pty Ltd (2011) 111 SASR 459 the South Australian Full Court held that the purchaser had accepted the car and it was too late to rescind the contract. In these circumstances any breach on the part of the seller was a breach of warranty and there was no ground for rejecting the goods: at [21]. [8.400]

29

30

31

Sale of Goods Act 1923 (NSW), s 57; Goods Act 1958 (Vic), s 61; Sale of Goods Act 1896 (Qld), s 56; Sale of Goods Act 1895 (SA), s 54; Sale of Goods Act 1895 (WA), s 54; Sale of Goods Act 1896 (Tas), s 59; Sale of Goods Act 1972 (NT), s 57. In the ACT, the former Sale of Goods Act 1954 (ACT), s 58 was omitted by the Fair Trading Legislation Amendment Act 2001 (ACT), s 27. Sale of Goods Act 1923 (NSW), s 16; Goods Act 1958 (Vic), s 16; Sale of Goods Act 1896 (Qld), s 14; Sale of Goods Act 1895 (SA), s 11; Sale of Goods Act 1895 (WA), s 11; Sale of Goods Act 1896 (Tas), s 16; Sale of Goods Act 1954 (ACT), s 16; Sale of Goods Act 1972 (NT), s 16. See previous footnote. The Sale of Goods Act further provided that the buyer lost the right to reject goods for breach of condition of a contract for the sale of specific goods once the property in the goods had passed to the buyer. However, this provision has been repealed in New South Wales (Sale of Goods (Amendment) Act 1988 (NSW)), South Australia (Misrepresentation Act 1972 (SA), s 11) and in the Australian Capital Territory (Sale of Goods Act 1954 (ACT), s 3). Therefore, in those States and Territory the buyer will only lose the right to reject where he or she has accepted the goods or part of them.

132

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.410]

Caveat emptor ...............................................................................................................................................................................................

Apart from the conditions and warranties referred to above, there are no implied warranties or conditions at common law as to the quality or fitness for any particular purpose of goods supplied and the maxim “caveat emptor” or “let the buyer beware” applies. However, the position of a consumer purchasing goods has been considerably strengthened by the Australian Consumer Law. [8.410]

Transfer of property We have discussed the formalities attaching to the formation of a contract of sale and the terms implied in such contract. It is now necessary to consider the following important matters connected with the transfer of the goods: [8.420]

(a)

the distinction between property in and possession of goods;

(b)

the rules covering the transfer of the ownership or property in goods;

(c)

the right of reserving disposal, that is, the seller deferring the transfer of the property; and

(d)

the risk of loss of or injury to goods.

Property and possession ...............................................................................................................................................................................................

There is a vast difference between “property” in and the “possession” of goods. Property relates to ownership or title, whilst possession refers to the custody or control of goods. Thus, one person may have the possession of certain goods, whilst another may have the property in, or ownership of, such goods. For example, A leaves his damaged car with B for repair. The ownership of the car is in A but the possession is in B. Also, goods may be in the possession of a third person, for example a carrier, and although the property has passed on a sale to the buyer, the carrier is entitled to possession of them until the carrier's charges are paid. [8.430]

Transfer of ownership or property in goods ...............................................................................................................................................................................................

It is important to be able to ascertain the exact time when the ownership of or property in goods passes from the seller to the buyer as the risk of loss vests in the owner. This question arises where goods are stolen, or destroyed by fire, or upon the bankruptcy of either party. The primary rule for ascertaining when the ownership of goods passes to the buyer is: [8.440]

(a)

in the case of specific or ascertained goods, the property passes at such time as the parties intend it to pass taking into account the terms of the contract, the conduct of the parties and the circumstances of the case; and

[8.490]

CHAPTER

08

SALE OF GOODS

133

in the case of unascertained or future goods, no property can pass unless and until the goods become ascertained. 32 Subject to these two basic rules, the following sub-rules set out in the Sale of Goods Act 33 apply and, in the absence of a contrary intention, they are the rules for ascertaining the time at which the property in the goods is to pass to the buyer: (b)

Rule 1

Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, are postponed. [8.450]

Bodilingo Pty Ltd v Webb Projects Pty Ltd (1990) ASC 56-001 [8.460] A contract for the sale of office furniture, computers and other equipment provided for the purchase price to be paid by a deposit of $10,000 and the balance of $360,000 by 10 monthly instalments of $36,000. The New South Wales Court of Appeal held that, since there was no contrary intention in the contract, property passed to the buyer under this rule at the time when the contract was made. Accordingly, the seller was not entitled to recover the goods when the buyer became insolvent after payment of the fifth instalment and thereby unable to pay the balance of the purchase price in full.

Goods are said to be in a deliverable state when they are in such a state that the buyer is bound under the contract to take delivery of them. [8.470]

Rule 2

Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state, the property does not pass until such thing is done and the buyer has notice of it – there is no immediate passing of property. [8.480]

Rule 3

Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice of it. [8.490]

32

Sale of Goods Act 1923 (NSW), ss 21 – 22; Goods Act 1958 (Vic), ss 21 – 22; Sale of Goods Act 1896 (Qld), ss 19 – 20; Sale of Goods Act 1895 (SA), ss 16 – 17; Sale of Goods Act 1895 (WA), ss 16 – 17; Sale of Goods Act 1896 (Tas), ss 21 – 22; Sale of Goods Act 1954 (ACT), ss 21 – 22; Sale of Goods Act 1972 (NT), ss 21 – 22. For the meaning of “future”, “specific” and “unascertained” goods, see [8.130]-[8.150].

33

Sale of Goods Act 1923 (NSW), s 23; Goods Act 1958 (Vic), s 23; Sale of Goods Act 1896 (Qld), s 21; Sale of Goods Act 1895 (SA), s 18; Sale of Goods Act 1895 (WA), s 18; Sale of Goods Act 1896 (Tas), s 23; Sale of Goods Act 1954 (ACT), s 23; Sale of Goods Act 1972 (NT), s 23.

134

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.500]

Rule 4

Where goods are delivered to the buyer on approval, or on “sale or return”, or other similar terms, the property in them passes to the buyer: [8.500]

(a)

when the buyer signifies their approval or acceptance to the seller, or does any other act adopting the transaction; or

(b)

if the buyer does not signify their approval or acceptance to the seller, but retains the goods without giving notice of the rejection, then if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.

Rule 5 [8.510]

(a)

Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. The Act provides that the “assent” may be express or implied. Therefore if the seller notifies the buyer of an appropriation and the buyer does not object within a reasonable time, the property may be deemed to pass on the implied assent of the buyer.

(b)

Where in pursuance of the contract the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer and does not reserve the right of disposal, the seller is deemed to have unconditionally appropriated the goods to the contract. Where the agreement covers by description unascertained or future goods, the property in such goods does not pass to the buyer until goods answering that description and in a deliverable state are unconditionally appropriated to the contract by one party with the assent of the other. A common form of appropriation of the goods by the seller occurs when the seller delivers them to a carrier for the purpose of transmission to the buyer. There is no appropriation if the seller reserves a right of disposal (see below), but if this right is not reserved the property passes to the buyer on delivery by the seller to the carrier.

Wardar’s (Import & Export) Co Ltd v W Norwood & Sons Ltd [1968] 2 QB 663 [8.520] The plaintiff wholesaler agreed to buy 600 cartons of frozen ox kidneys from the defendant importer. The cartons were held in a cold store. When the plaintiff’s carrier arrived at the cold store at 8 am he found the cartons stacked on the pavement outside. The carrier handed over the delivery note and loading commenced but was

[8.550]

CHAPTER

08

SALE OF GOODS

135

cont. not completed until 12 noon. The carrier did not turn on the refrigeration unit in his lorry until 10 am. Around 11 am the carrier noticed that some of the cartons on the pavement were dripping. Cooling of the lorry was not effective until 1 pm. The carrier delivered the cartons to Scotland where the kidneys were found to be unfit for human consumption. The plaintiff sued for damages for breach of the implied condition of merchantable quality and the defendant counterclaimed for the price of the kidneys. The Court of Appeal held that property in the cartons of kidneys, and therefore the risk of their deterioration, passed to the plaintiff buyer on the carrier handing over the delivery note at the cold store: it appeared that the kidneys were in good condition at that time and their deterioration occurred subsequently. Accordingly, the plaintiff’s action failed and the plaintiff held liable for the price of the kidneys.

The buyer may appropriate goods to the contract by selecting certain goods to satisfy her or his order. The New South Wales Act makes special provision for the sale of goods forming part of a bulk quantity, such as contracts for the sale of grain: Sale of Goods Act 1923 (NSW), s 25A. This provision applies to a contract for the sale of a specified quantity of unascertained goods of which some or all form part of a single bulk quantity of goods. The bulk must be identified by the contract and the buyer must have paid for some or all of the goods forming part of the bulk. Unless the parties agree otherwise, property in an undivided share in the bulk is transferred to the buyer, and the buyer becomes an owner in common of the bulk. The Victorian and South Australian Acts also make similar provision in relations to goods forming part of a bulk: Goods Act 1958 (Vic), s 25A; Sale of Goods Act 1895 (SA), s 20A. [8.530]

Reservation of right of disposal ...............................................................................................................................................................................................

In a contract for the sale of specific goods or a later appropriation of unascertained goods to the contract, the seller may by the terms of the contract or appropriation reserve the right of disposal of the goods until certain conditions are fulfilled. 34 In such case, notwithstanding the delivery of the goods to the buyer or to a carrier, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. For example, the buyer may be required to accept certain bills of exchange or pay cash before obtaining the goods. [8.540]

“Romalpa” clauses

In recent years reservation of title clauses in contracts for the sale of goods have become increasingly sophisticated in the attempt to preserve for the seller rights in respect of the goods sold until the seller has been paid the purchase price in full. The purpose of [8.550]

34

Sale of Goods Act 1923 (NSW), s 24; Goods Act 1958 (Vic), s 24; Sale of Goods Act 1896 (Qld), s 22; Sale of Goods Act 1895 (SA), s 19; Sale of Goods Act 1895 (WA), s 19; Sale of Goods Act 1896 (Tas), s 24; Sale of Goods Act 1954 (ACT), s 24; Sale of Goods Act 1972 (NT), s 4.

136

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.560]

the clauses is to enable the seller to recover the goods (or the proceeds of sale where resold by the buyer) in the event of the buyer's insolvency and thereby prevent the goods from becoming part of the property or assets of the buyer available for distribution amongst the buyer's other creditors. Such clauses are commonly referred to as “Romalpa” clauses after the decision of the United Kingdom Court of Appeal in Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552; [1976] 1 WLR 676. 35 Associated Alloys v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25 [8.560] The decision of the High Court in Associated Alloys v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; 74 ALJR 862; [2000] HCA 25 demonstrates the viability of “Romalpa” clauses under Australian law. In this case, a “Romalpa” clause in a contract of sale provided as follows: “In the event that the [buyer] uses the goods … in some manufacturing … process … then the [buyer] shall hold such part of the proceeds of such manufacturing … process … as relates to the goods … in trust for the [seller]. Such part shall be deemed to equal … the amount owing by the [buyer] to the [seller] at the time of the receipt of such proceeds”. Section 266 of the former Corporations Law provided that an unregistered “charge” was void against the liquidator or administrator of a company. The court held that the trust created by the Romalpa clause did not constitute an unregistered charge, and was thus not rendered void against the liquidator by s 266. The Romalpa clause could be effective to create a trust over the proceeds in the amount owing to the seller. However, on the facts, the seller had not established that the buyer had received the “proceeds” of the manufacturing process, an essential precondition for the creation of a trust under the Romalpa clause. The court also indicated that it was an implied term of the contract that the buyer’s debt to the seller would be discharged by the constitution of a trust under the Romalpa clause. 36

Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558 at [13] [8.570] A Romalpa clause provided that the buyer of goods was permitted to sell them, but until the purchase price was paid, the buyer acted as agent for the seller when selling the goods. The clause also provided that the proceeds of sale would be held in a separate account in trust for the buyer. It was held that the buyer’s obligation to pay the purchase price would not be discharged until the full price was held in that separate account: Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558; see also BHP Steel Ltd v HH Robertson (Australia) Pty Ltd [2002] NSWSC 336.

A further example of the effect of a Romalpa clause is Hardy Wine Co Ltd v Tasman Liquor Traders Pty Ltd (2006) 95 SASR 21:

[8.580]

35

36

See generally D Ong, “Romalpa Clauses and the Issues Concerning (i) the Meaning of “the Proceeds” Received by the Buyer; (ii) the Buyer’s Credit Period; and (iii) the Charge/Trust Dichotomy in Relation to “the Proceeds”” (2000) 12 Bond Law Review 148. See T M Carlin, “Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd: A Commentary and Analysis” (2002) 30 Australian Business Law Review 106.

[8.610]

CHAPTER

08

SALE OF GOODS

137

Hardy Wine Co Ltd v Tasman Liquor Traders Pty Ltd (2006) 95 SASR 21 at [40], [56] [8.590] Hardy supplied wines to Tasman, a Victorian wholesaler. Tasman onsold Hardy wines to Eaglehawk, a Tasmanian business. A credit agreement between Hardy and Tasman contained a Romalpa clause by which Hardy retained ownership until payment. The invoice for every consignment of wine also contained a Romalpa clause. After the credit agreement was entered into, the delivery arrangements for the wine were changed. Instead of Hardy dispatching wine to Tasman which would send it to Eaglehawk, Hardy dispatched the wines directly to Eaglehawk. Each consignment of goods sent to Eaglehawk was accompanied by a delivery docket containing a retention of title clause. When Tasman became insolvent it had not made payment for eight consignments of Hardy wines. The South Australian Full Court held that the change in delivery arrangements had no effect upon the Romalpa clause. In the absence of payment, title over the wines had not passed and Hardy retained title.

However, retention of title clauses of the kind discussed in these cases are likely to constitute a “security interest” for the purposes of the Personal Property Securities Act 2009 (Cth) and require registration in the national Personal Property Securities Register to be enforceable against third parties. [8.600]

Risk

The risk of loss or damage to the goods and the question of ownership of goods are linked together, and it is often important to know who is really the owner of goods as a loss of such goods must be borne by the person who owns them: that is the risk of loss prima facie passes with property. The Sale of Goods Act provides: [8.610]

Unless otherwise agreed, the goods remain at the seller's risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer's risk whether delivery is made or not. 37

As was previously explained, ownership of goods does not necessarily vest in the buyer simply because he or she has possession of them. Further, the buyer may own the goods although they have not gained possession of them. The loss of specific goods which have been destroyed at the time the parties enter into an agreement falls upon the seller and the contract is void. The Sale of Goods Act provides: Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void.

37

Sale of Goods Act 1923 (NSW), s 25; Goods Act 1958 (Vic), s 25; Sale of Goods Act 1896 (Qld), s 23; Sale of Goods Act 1895 (SA), s 20; Sale of Goods Act 1895 (WA), s 20; Sale of Goods Act 1896 (Tas), s 25; Sale of Goods Act 1954 (ACT), s 25; Sale of Goods Act 1972 (NT), s 25.

138

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.620]

Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish before the risk passes to the buyer, the agreement is thereby avoided. 38

A contract for the sale and delivery of an indivisible parcel of goods may be avoided if part of the goods is not forthcoming. For example, the sale of a specific parcel of 700 bags of Chinese nuts was avoided when it was found that there were only 591 bags: The result is that the parties were contracting about something which, at the date of the contract, without knowledge or fault of either party, did not exist. To compel the buyer in those circumstances to take 591 bags would be to compel him to take something which he had not contracted to take, and would in my judgment be unjust: Barrow, Lane & Ballard v Phillip Phillips & Co [1929] 1 KB 574 at 583 per Wright J.

It will be noticed that the above provisions relate to specific goods, that is, goods identified and agreed upon, and therefore, if these goods are destroyed, the contract becomes impossible of performance. If the stock from which a seller intended to fulfil a contract of sale of unascertained goods has perished at the time of the contract of sale, there is no ground for an avoidance of the agreement and the seller would be required to find other goods to tender in performance of the contract. Where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault. 39 Allied Mills Ltd v Gwydir Valley Oilseeds Pty Ltd [1978] 2 NSWLR 26 [8.620] A seller sold a quantity of linseed meal in his store to a buyer, property in the goods passing to the buyer on the making of the contract of sale. In breach of contract, the seller declined to deliver part of the goods within the agreed period. Later the goods were destroyed by fire while still in the seller’s store. It was found that the loss might not have occurred but for the seller’s breach of contract. It was held the buyer was not only relieved from liability to pay for the goods but was also entitled to recover damages for the seller’s failure to deliver since the buyer had been forced to buy equivalent goods in the market at a considerably higher price.

Title of transferee The general rule is that the transferee of goods cannot obtain a better title to such goods than that of the transferor. This is usually referred to as the nemo dat rule (the full expression is nemo dat quod non habet, that is, no-one can pass to another a better title than he himself has). [8.630]

38

Sale of Goods Act 1923 (NSW), ss 11, 12; Goods Act 1958 (Vic), ss 11, 12; Sale of Goods Act 1896 (Qld), ss 9, 10; Sale of Goods Act 1895 (SA), ss 6, 7; Sale of Goods Act 1895 (WA), ss 6, 7; Sale of Goods Act 1896 (Tas), ss 11, 12; Sale of Goods Act 1954 (ACT), ss 11, 12; Sale of Goods Act 1972 (NT), ss 11, 12.

39

Sale of Goods Act 1923 (NSW), s 25; Goods Act 1958 (Vic), s 25; Sale of Goods Act 1896 (Qld), s 23; Sale of Goods Act 1895 (SA), s 20; Sale of Goods Act 1895 (WA), s 20; Sale of Goods Act 1896 (Tas), s 25; Sale of Goods Act 1954 (ACT), s 25; Sale of Goods Act 1972 (NT), s 25.

CHAPTER

[8.650]

08

SALE OF GOODS

139

Accordingly, where goods are sold by a person who is not the owner of them and who does not sell them under the authority or with the consent of the owner, the buyer does not acquire a good title. For example, the buyer does not obtain a good title to goods which have been stolen or lost. Where goods are stolen the property in the goods remains in the owner notwithstanding any intermediate dealing. Where the goods have been obtained by wrongful means not amounting to theft, for example as the result of a contract induced by fraud, they will not re-vest in the owner by reason only of the conviction of the offender. There are, however, certain exceptions to the nemo dat rule, namely: (a)

a sale where the owner is estopped from denying the authority of the seller;

(b)

a sale by a mercantile agent or a sale under special common law or statutory power of sale;

(c)

a sale by a person having a voidable title; or

(d)

a sale by a seller or buyer in possession after the sale.

Estoppel ...............................................................................................................................................................................................

Where the owner of goods is by their conduct precluded from denying the seller's authority to sell, the buyer obtains a good title. 40 To permit goods to go into the possession of a person in circumstances which make it appear that such person has authority to sell the goods may estop (prevent) the owner from upsetting a purchase of the goods by a buyer in good faith and for value. [8.640]

Big Rock Pty Ltd v Esanda Finance Corp Ltd (1992) 10 WAR 259 [8.650] The respondent financier lent money to a borrower on the security of a mortgage over a motor vehicle. By mistake, the financier wrote a letter to the borrower stating that the loan had been finalised and that the financier no longer had an interest in the vehicle. In fact, only two of 48 payments had been paid in reduction of the loan. The borrower purported to sell the vehicle to the appellant motor dealers. The latter, by a search of the Register of Encumbered Motor Vehicles established under the Chattel Securities Act 1987 (WA), ascertained the existence of the financier’s mortgage but relied on the letter as supporting the borrower’s claim that the mortgage debt had been paid in full. The financier sued the motor dealers in conversion for the value of the vehicle. The Western Australia Full Supreme Court held that under the Sale of Goods Act 1895 (WA), s 21(1) the respondent financier was precluded, that is, estopped by its conduct from denying the borrower’s authority to sell the vehicle. The appellant motor dealers therefore acquired a good title to the vehicle.

40

Sale of Goods Act 1923 (NSW), s 26; Goods Act 1958 (Vic), s 27; Sale of Goods Act 1896 (Qld), s 24; Sale of Goods Act 1895 (SA), s 21; Sale of Goods Act 1895 (WA), s 21; Sale of Goods Act 1896 (Tas), s 26; Sale of Goods Act 1954 (ACT), s 26; Sale of Goods Act 1972 (NT), s 26.

140

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.660]

Merely parting with possession of goods will not in itself raise an estoppel against the true owner. There must usually have been conduct on the part of the true owner amounting to a representation that the person in possession of the goods was entitled to sell them. [8.660]

An owner may be precluded from denying the seller's authority by reason of his conduct which, expressly or impliedly, constitutes an unambiguous representation to the buyer that the seller has his authority to make the sale. … In some cases, the omission of the owner to take steps to prevent the sale may also estop him from asserting his title. But inaction, silence, or even gross carelessness in the protection of property is not of itself enough to preclude an owner from asserting his title: Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 at 469 per McHugh JA.

Sale by mercantile agent or by person under special power ...............................................................................................................................................................................................

When goods are sold by a mercantile agent to a person who takes them bona fide, such person obtains a good title to the goods, notwithstanding that the principal may have revoked the agent's authority to sell. Sales made under any special common law or statutory power of sale (for example, sheriffs, innkeepers, and landlords) also pass the title to the buyer. [8.670]

Sale under a voidable title ...............................................................................................................................................................................................

Where the seller of goods has a voidable title, for example a title gained through fraud, but the title has not been avoided at the time of the sale, the buyer acquires a good title to the goods provided he or she buys them in good faith and without notice of the seller's defect of title. 41 Where the seller's title is void then the buyer gains no title unless one of the other exceptions applies. [8.680]

Phillips v Brooks Ltd [1919] 2 KB 243 [8.690] A man entered a shop and purchased a ring valued at £450, stating that he was Sir George Bullough, a well-known person. He gave the address of Sir George, which the jeweller verified by reference to a directory, and thus assumed he actually was the person represented. The person took the ring and later pawned it for £350. It was held that the property passed to the swindler so as to enable him to give a good title to any person who gave value and acted bona fide without notice as his title, which had been obtained by fraud, was voidable not void: Phillips v Brooks Ltd [1919] 2 KB 243; see similarly, Vassallo v Haddad Import & Export Pty Ltd (2004) 2 DCLR (NSW) 123.

41

Sale of Goods Act 1923 (NSW), s 27; Goods Act 1958 (Vic), s 29; Sale of Goods Act 1896 (Qld), s 25; Sale of Goods Act 1895 (SA), s 23; Sale of Goods Act 1895 (WA), s 23; Sale of Goods Act 1896 (Tas), s 28; Sale of Goods Act 1954 (ACT), s 27; Sale of Goods Act 1972 (NT), s 27.

[8.720]

CHAPTER

08

SALE OF GOODS

141

Sale by seller or buyer in possession after sale ...............................................................................................................................................................................................

Sale by seller in possession

The Sale of Goods Act provides that, where a seller having sold goods continues in possession of the goods or of the documents of title to the goods, the delivery or transfer by the seller of the goods or documents of title under any sale, pledge or other disposition to a person receiving them in good faith and without notice of the previous sale has the same effect as if the transaction was authorised by the owner, that is the original purchaser. 42 In other words, where this provision applies, the bona fide purchaser of goods from a seller who has continued in possession of the goods after their sale to the original purchaser will acquire a good title to the goods as against the original purchaser: Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] AC 867. [8.700]

Sale by buyer in possession

Similar provision is made in the case of a buyer in possession. Where a person having bought or agreed to buy goods obtains possession of the goods with the consent of the seller, the delivery or transfer by the buyer of the goods or documents of title under any sale, pledge or other disposition to some other person receiving the same in good faith and without notice of the rights of the original seller has the same effect as if the buyer was a “mercantile agent” entrusted by the owner with the goods or documents of title. 43 In substance, the bona fide purchaser of goods from a buyer who obtained possession of the goods with the consent of the original seller obtains a good title to them. [8.710]

Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236 [8.720] G, a motor vehicle wholesaler, agreed to sell certain vehicles to E, a retail dealer. The contract of sale provided that property in the vehicles was not to pass to E until G had been paid in full. E was given possession of the vehicles but G was never paid. E had entered into a floor plan agreement with N, a finance company. The agreement provided for the purchase by N of vehicles acquired by E, with E retaining possession of them as bailee for N pending their sale in the course of E’s retail business. E purported to sell to N, under the terms of the floor plan, the vehicles he had previously “bought” from G. G, not having been paid, seized possession of the vehicles from E. N brought an action against G to recover the vehicles or their value. It was held by a majority of the High Court that N had acquired a good title to the vehicles. Thus, when E sold them to N under the terms of the floor plan agreement 42

Sale of Goods Act 1923 (NSW), s 28; Goods Act 1958 (Vic), ss 30, 31; Sale of Goods Act 1896 (Qld), s 27; Sale of Goods Act 1895 (SA), s 25; Sale of Goods Act 1895 (WA), s 25; Sale of Goods Act 1896 (Tas), s 30; Sale of Goods Act 1954 (ACT), s 29; Sale of Goods Act 1972 (NT), s 28.

43

Sale of Goods Act 1923 (NSW), s 28; Goods Act 1958 (Vic), ss 30, 31; Sale of Goods Act 1896 (Qld), s 27; Sale of Goods Act 1895 (SA), s 25; Sale of Goods Act 1895 (WA), s 25; Sale of Goods Act 1896 (Tas), s 30; Sale of Goods Act 1954 (ACT), s 29; Sale of Goods Act 1972 (NT), s 28.

142

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.730]

cont. there had been a constructive delivery of the vehicles to N. Accordingly, E was a person who, having agreed to buy the vehicles from G, had obtained possession of them with G’s consent, and their delivery (albeit constructive rather than actual) under the sale to N had the effect of vesting a good title in N.

The bona fide purchaser of goods from a buyer who obtained possession of the goods with the consent of the original seller will only obtain a good title to the goods under the statutory provision where the original seller was lawfully entitled to sell the goods. [8.730]

Ford Credit Australia Ltd v Auto Trade Auction Pty Ltd [1982] VR 795 [8.740] The plaintiff finance company leased a truck to a lessee under a leasing agreement. In breach of the agreement, the lessee employed a dealer to sell the truck for him. The dealer, who knew that the plaintiff finance company was the owner of the truck, purported to sell it to R, who in turn purported to sell it to the defendant. The plaintiff finance company sued the defendant for damages in conversion and the defendant contended that he had acquired a good title as a bona fide purchaser from the buyer in possession, namely, R. However, it was held that the statutory provision only applied where the original seller (that is, the dealer employed by the lessee to sell the truck) was lawfully entitled to sell the goods and, since such was clearly not the case on the facts, the defendant had not acquired a good title and, accordingly, was liable for conversion of the truck to the plaintiff finance company. A subsequent purchaser of the truck was similarly held liable to the finance company.

A purchaser from a buyer in possession only acquires a good title under the statutory provision where the purchaser receives the goods in good faith and without notice of the rights of the original seller of the goods (assuming, of course, that the other requirements of the section are satisfied). The onus of proving such is on the purchaser. Notice in this context means actual not constructive notice, that is, it is not sufficient for the original seller to contend that by making further inquiries the purchaser could have discovered that the buyer in possession of the goods who had purported to sell the goods to the purchaser had no right to do so, unless of course there was something obviously suspicious such as to put the purchaser on inquiry: Robinson Motors Pty Ltd v Fowler [1982] Qd R 374. Where the good being sold is a motor vehicle which is subject to a security interest, the legal position of the bona fide purchaser will depend on whether the security interest has been registered in the national Personal Property Securities Register established under the Personal Property Securities Act 2009 (Cth) (see [19.1380] (Turner and Trone)). [8.750]

CHAPTER

[8.770]

08

SALE OF GOODS

143

Performance of the contract It is the duty of the seller to deliver the goods and that of the buyer to accept and pay for them in accordance with the terms of the contract. 44 Delivery may be actual or constructive. Apart from any agreement to the contrary, in all sales payment and delivery are concurrent conditions, so that the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer must be ready to pay the price in exchange for possession of the goods. 45 Unless otherwise agreed, the price should be paid in legal tender and the buyer has no right to have possession of the goods until he or she pays the price. If the goods are sold on credit and nothing is said as to the time of delivery, the buyer is entitled to immediate possession and the property as well as possession passes to the buyer, liable only to be defeated under the rule of stoppage in transitu where the buyer becomes insolvent before the goods reach her or his actual possession. [8.760]

Rules as to delivery ...............................................................................................................................................................................................

The Sale of Goods Act sets out the following general rules as to the delivery of goods under a contract of sale: 46 [8.770]

1.

Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer, is a question depending in each case on the contract between the parties. Apart from any contract the place of delivery is the seller's place of business or, if the seller has no place of business, the seller's residence. If the contract is for specific goods and the parties know that they are in some other place, then that place is the place of delivery unless otherwise agreed. If the seller agrees to deliver goods to the buyer's premises and, without negligence, delivers them there to a person apparently authorised to receive them and the person receiving them misappropriates them, the loss must fall on the buyer and not on the seller: Galbraith & Grant Ltd v Block [1922] 2 KB 155.

2.

Where goods are to be delivered but no time for sending them is fixed, the seller is bound to send them within a reasonable time.

44

Sale of Goods Act 1923 (NSW), s 30; Goods Act 1958 (Vic), s 34; Sale of Goods Act 1896 (Qld), s 29; Sale of Goods Act 1895 (SA), s 27; Sale of Goods Act 1895 (WA), s 27; Sale of Goods Act 1896 (Tas), s 32; Sale of Goods Act 1954 (ACT), s 31; Sale of Goods Act 1972 (NT), s 30. Sale of Goods Act 1923 (NSW), s 31; Goods Act 1958 (Vic), s 35; Sale of Goods Act 1896 (Qld), s 30; Sale of Goods Act 1895 (SA), s 28; Sale of Goods Act 1895 (WA), s 28; Sale of Goods Act 1896 (Tas), s 33; Sale of Goods Act 1954 (ACT), s 32; Sale of Goods Act 1972 (NT), s 31.

45

46

Sale of Goods Act 1923 (NSW), ss 32, 35; Goods Act 1958 (Vic), ss 36, 39; Sale of Goods Act 1896 (Qld), ss 31, 34; Sale of Goods Act 1895 (SA), ss 29, 32; Sale of Goods Act 1895 (WA), ss 29, 32; Sale of Goods Act 1896 (Tas), ss 34, 37; Sale of Goods Act 1954 (ACT), ss 33, 36; Sale of Goods Act 1972 (NT), ss 32, 35.

144

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.780]

3.

Where the goods at the time of sale are in the possession of a third person, there is no delivery unless the third person acknowledges to the buyer that he or she holds the goods on the buyer's behalf.

4.

Demand or tender of delivery must be made at a reasonable hour.

5.

Unless otherwise agreed, the expenses of putting the goods into a deliverable state must be borne by the seller.

6.

Where the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier for the purpose of transmission to the buyer is, prima facie, deemed to be a delivery of the goods to the buyer.

7.

The general rule is that the seller must make the arrangements with the carrier for the transit but this rule is subject to any agreement to the contrary. If the seller omits to make all reasonable arrangements with the carrier, the buyer may decline to treat the delivery to the carrier as a delivery to herself or himself, or the buyer may do so and hold the seller responsible and sue for damages.

8.

If the goods are to be forwarded by a route involving sea transit, it is generally the duty of the seller to notify the buyer so that the buyer may insure the goods and if the seller defaults in giving such notice the goods will be at the seller's risk during the sea transit.

9.

When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, the buyer is liable to the seller for any loss occasioned by the buyer's neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods.

10.

The preceding rule does not affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract.

Constructive or symbolical delivery ...............................................................................................................................................................................................

In certain cases delivery may not amount to an actual transfer of the goods after sale but it may be construed from the circumstances. This is known as “constructive” or “symbolical delivery”. For example, where A has a motor launch locked in a boatshed and sells it to B and hands B the key of the shed so that he may take delivery at his convenience, constructive or symbolical delivery has taken place. A delivery of documents of title, for example a bill of lading, amounts to symbolical delivery of the goods. To be valid, constructive delivery must have the effect of immediately subjecting the goods to the control of the person to whom delivery has to be made. [8.780]

[8.800]

CHAPTER

08

SALE OF GOODS

145

Delivery of wrong quantity or mixed goods ...............................................................................................................................................................................................

Where the seller delivers to the buyer a quantity of goods less than the seller contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered the buyer must pay for them at the contract rate. 47 Where the seller delivers to the buyer a quantity of goods larger than the seller contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or the buyer may reject the whole. If the buyer accepts the whole of the goods so delivered the buyer must pay for them at the contract rate. Where the seller delivers to the buyer the goods the seller contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or the buyer may reject the whole: London Plywood Ltd v Nasic Oak Ltd [1939] 2 KB 343. The above provisions are subject to any usage of trade, special agreement, or course of dealing between the parties; for example, the contract may contain a clause approximating the quantity such as “more or less” or say “about” a definite number in order to allow for a reasonable variation. Where the excess or deficiency in quantity is trifling or negligible and not sufficient to influence a buyer, the variation is not a ground for rejecting the contract. [8.790]

Instalment deliveries

Unless otherwise agreed, the buyer of goods is not bound to accept delivery by instalments. Where the contract provides for instalment delivery and each delivery is to be paid for separately and the seller makes defective deliveries or the buyer makes default in respect of one or more instalments, it is a question in each case depending on the terms of the contract whether the breach is a repudiation of the whole contract, or whether it is a severable breach, giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated. 48 If the default in instalment delivery amounts to a slight breach of the contract only and persistent breach or repudiation of the contract is not contemplated, then the failure to a minor degree of delivery would not amount to a repudiation of the whole contract. The main test usually applied in such cases is to consider “first, the ratio quantitatively which the breach bears to the contract as a whole, and secondly, the degree of probability or improbability that such a breach will be repeated”: Maple Flock Co v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148 at 157 per Lord Hewart CJ. [8.800]

47

Sale of Goods Act 1923 (NSW), s 33; Goods Act 1958 (Vic), s 37; Sale of Goods Act 1896 (Qld), s 32; Sale of Goods Act 1895 (SA), s 30; Sale of Goods Act 1895 (WA), s 30; Sale of Goods Act 1896 (Tas), s 35; Sale of Goods Act 1954 (ACT), s 34; Sale of Goods Act 1972 (NT), s 33.

48

Sale of Goods Act 1923 (NSW), s 34; Goods Act 1958 (Vic), s 38; Sale of Goods Act 1896 (Qld), s 33; Sale of Goods Act 1895 (SA), s 31; Sale of Goods Act 1895 (WA), s 31; Sale of Goods Act 1896 (Tas), s 36; Sale of Goods Act 1954 (ACT), s 35; Sale of Goods Act 1972 (NT), s 34.

146

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.810]

Hammer and Barrow v Coca-Cola [1962] NZLR 723 [8.810] Where a manufacturer agreed to supply 200,000 yoyos to a buyer to be used in an advertising campaign and approximately 80 per cent of 85,000 yoyos delivered in a number of separate consignments were found to be defective, it was held that the buyer was entitled to rescind the contract so far as future deliveries were concerned rather than submit to the risk of being sent further unsatisfactory consignments.

FOB and CIF contracts ...............................................................................................................................................................................................

The terms “FOB” (Free on Board) and “CIF” (Cost, Insurance and Freight) are commonly used in connection with contracts for the sale of goods which are to be carried by sea or shipped to the buyer. Where the goods have been quoted “FOB” it is the seller's duty to put the goods on board the ship at the port of shipment and to pay all expenses incurred in doing so, the buyer being responsible for subsequent charges such as freight and insurance. Delivery is complete once the goods have been put aboard the ship and the seller has no further control over the goods and has parted with the possession and property in them. It is the duty of the seller to notify the buyer of the shipment to enable the buyer to insure, otherwise the goods are at the seller's risk. The Sale of Goods Act makes provision for this duty as follows: [8.820]

Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable the buyer to insure them during their sea transit, and if the seller fails to do so, the goods shall be deemed to be at the seller's risk during such sea transit. 49

It was held in Wimble, Sons & Co v Rosenberg & Sons [1913] 3 KB 743 that this subsection applied to a contract for the sale of goods FOB. When the goods have been quoted “CIF” the seller's duties are: (a)

to make arrangements for the transport of the goods;

(b)

to ship the goods paying the costs thereof;

(c)

to effect upon the terms current in the trade an insurance of the goods and to pay the premium; and

(d)

to tender, within a reasonable time after shipment, the shipping documents (bill of lading, policy of insurance and invoice) to the buyer. In both types of contract the general rule is that once the goods are placed on board ship the risk is on the buyer and he or she must rely on insurance for protection against loss. The essential difference between a CIF contract and an ordinary contract for the sale of goods rests in the fact that performance of the bargain in the former is primarily to be 49

Sale of Goods Act 1923 (NSW), s 35; Goods Act 1958 (Vic), s 39; Sale of Goods Act 1896 (Qld), s 34; Sale of Goods Act 1895 (SA), s 32; Sale of Goods Act 1895 (WA), s 32; Sale of Goods Act 1896 (Tas), s 37; Sale of Goods Act 1954 (ACT), s 36; Sale of Goods Act 1972 (NT), s 35.

CHAPTER

[8.830]

08

SALE OF GOODS

147

fulfilled by delivery of documents and not by the actual physical delivery of goods by the vendor. All that the buyer can call for is delivery of the customary documents. The buyer cannot refuse the documents and ask for the tender of the goods they represent. On presentation of the documents, the buyer is bound to pay the price; this is so even though the goods, to the seller's knowledge, have already been lost at sea: Manbre Saccharine Co Ltd v Corn Products Co Ltd [1919] 1 KB 198. Once the documents have been handed over to the buyer, he or she can claim under the contract of carriage and sue on the policy of insurance should the goods have been damaged or lost in transit. At the time of handing over the documents the buyer takes the property in the goods subject to a condition, that is, that the goods are in accordance with the contract. Actually the buyer's rights under these types of contract fall into two categories: (a)

a right to reject the documents, and

(b) a right to reject the goods. The two rights are quite distinct. “The right to reject the documents arises when the documents are tendered, and the right to reject the goods arises when they are landed and when after examination they are found not to be in conformity with the contract”: Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459 at 481 per Devlin J. The property in the goods passes to the buyer when the documents are handed over but it is conditional property, that is, the buyer can reject the goods if upon examination the buyer finds that they are not in accordance with the contract. “Acceptance” of the goods ...............................................................................................................................................................................................

As previously mentioned, it is the duty of the seller to deliver the goods and that of the buyer to accept and pay for them in accordance with the terms of the contract. 50 So far we have considered the duty of the seller in respect of the delivery of the goods. We must now consider the duty of the buyer to accept and pay for the goods. Failure by the buyer to accept the goods renders the buyer liable for breach of contract unless the buyer has a right to reject them for breach of condition. Acceptance in the present context has a different meaning from the use of the word in connection with the formalities for an enforceable contract of sale. Here the expression relates to the acceptance of the goods in performance of the contract and the transfer of ownership. A buyer is deemed to have accepted the goods: [8.830]

(a)

when the buyer intimates to the seller that he or she has accepted them; or

(b)

when the goods have been delivered to the buyer and the buyer does any act in relation to them which is inconsistent with the ownership of the seller, for example where the buyer re-sells them; or

50

Sale of Goods Act 1923 (NSW), ss 30–31; Goods Act 1958 (Vic), ss 34–35; Sale of Goods Act 1896 (Qld), ss 29–30; Sale of Goods Act 1895 (SA), ss 27–28; Sale of Goods Act 1895 (WA), ss 27–28; Sale of Goods Act 1896 (Tas), ss 32–33; Sale of Goods Act 1954 (ACT), ss 31–32; Sale of Goods Act 1972 (NT), ss 30–31.

148

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.830]

(c)

when the buyer retains the goods after the lapse of a reasonable time without intimating to the seller that he or she has rejected them. 51 The Sale of Goods Act also provides that where the buyer has not previously examined the goods, the buyer is entitled to a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract before the buyer is deemed to have accepted them. 52 There is a possibility of conflict between this provision and the circumstances in which the buyer is deemed to have accepted the goods in b. above: that is, the buyer may have done an act inconsistent with the ownership of the seller in, for example re-selling the goods, before the buyer has had an opportunity of examining them: Hardy & Co v Hillerns and Fowler [1923] 2 KB 490. This is no longer a problem in New South Wales, Victoria, South Australia and the Australian Capital Territory where the provision setting out the circumstances in which a buyer is deemed to have accepted the goods in (b) above is now expressed to be subject to the provision whereby the buyer is not deemed to have accepted the goods until the buyer had a reasonable opportunity of examining them. 53 In New South Wales, it is further provided that the buyer's acceptance of the goods does not preclude rescission of the contract for an innocent misrepresentation, unless the acts constituting acceptance amount to affirmation of the contract: Sale of Goods Act 1923 (NSW), s 38(2). In South Australia, the Misrepresentation Act 1972 (SA), s 6(1)(b) provides that, where a misrepresentation has been made by reason of which a party to a contract would, but for the fact that the contract has been performed, be entitled to rescind, that party shall have the right to rescind. It has been held by the Full Federal Court that the effect of the provision is to keep open a purchaser's right to rescind even after the goods have been “accepted” by the purchaser under the State Sale of Goods Act: JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378. The effect was that the purchaser of a truck was held entitled to rescind the contract of sale for innocent misrepresentation as to the vehicle's engine on becoming aware of the true facts some 12 months after purchasing the vehicle. Where the buyer in accordance with her or his rights refuses to accept the goods, the buyer is not bound, unless otherwise agreed, to return them to the seller: it is sufficient if the buyer intimates to the seller that he or she refuses to accept them. 54 51

52

Sale of Goods Act 1923 (NSW), s 38; Goods Act 1958 (Vic), s 42; Sale of Goods Act 1896 (Qld), s 37; Sale of Goods Act 1895 (SA), s 35; Sale of Goods Act 1895 (WA), s 35; Sale of Goods Act 1896 (Tas), s 40; Sale of Goods Act 1954 (ACT), s 39; Sale of Goods Act 1972 (NT), s 38. Sale of Goods Act 1923 (NSW), s 37; Goods Act 1958 (Vic), s 41; Sale of Goods Act 1896 (Qld), s 36; Sale of Goods Act 1895 (SA), s 34; Sale of Goods Act 1895 (WA), s 34; Sale of Goods Act 1896 (Tas), s 39; Sale of Goods Act 1954 (ACT), s 38; Sale of Goods Act 1972 (NT), s 37.

53

Sale of Goods Act 1923 (NSW), s 37(1); Goods Act 1958 (Vic), s 41(1); Sale of Goods Act 1895 (SA), s 34(1); Sale of Goods Act 1954 (ACT), s 38(1).

54

Sale of Goods Act 1923 (NSW), s 39; Goods Act 1958 (Vic), s 43; Sale of Goods Act 1896 (Qld), s 38; Sale of Goods Act 1895 (SA), s 36; Sale of Goods Act 1895 (WA), s 36; Sale of Goods Act 1896 (Tas), s 41; Sale of Goods Act 1954 (ACT), s 40; Sale of Goods Act 1972 (NT), s 39.

CHAPTER

[8.870]

08

SALE OF GOODS

149

Remedies for breach of the contract of sale [8.840]

The Sale of Goods Act deals separately with:

(a)

the remedies of the unpaid seller of goods; and

(b)

the remedies of the buyer for the seller's breach of the contract of sale.

Remedies of the unpaid seller ............................................................................................................................................................................................... [8.850]

(a)

The seller of goods is deemed to be an unpaid seller where:

the whole of the price has not been paid or tendered; or

(b)

the bill of exchange or other negotiable instrument has been received as conditional payment, and the condition has not been fulfilled by reason of the dishonour of the instrument or otherwise. 55 The unpaid seller has two classes of rights: (a)

against the goods; and

(b)

against the buyer.

Rights of the unpaid seller against the goods ............................................................................................................................................................................................... [8.860]

The unpaid seller may have any of the following rights against the goods:

(a)

a lien (when ownership has passed to the buyer but possession is with the seller);

(b)

withholding delivery (when ownership and possession are still with the seller);

(c)

stoppage of goods in transit (when ownership has passed to the buyer but possession is not with either party); or

(d)

resale (when ownership may be with either party but possession is with the seller).

Lien [8.870] A seller's lien is a right to retain possession of the goods until the price is paid or tendered and it attaches when default is made by the buyer either through insolvency or otherwise. The seller has no lien unless he or she has actual possession of the goods. When the seller loses possession of the goods, the seller has the right either to stop the goods whilst they are in transit or to sue the buyer for the price if the buyer has gained possession. The unpaid seller may exercise their lien when:

(a)

the goods have been sold without any stipulation as to credit; or

(b)

the goods have been sold on credit but the term of credit has expired; or

55

Sale of Goods Act 1923 (NSW), s 41; Goods Act 1958 (Vic), s 45; Sale of Goods Act 1896 (Qld), s 40; Sale of Goods Act 1895 (SA), s 38; Sale of Goods Act 1895 (WA), s 38; Sale of Goods Act 1896 (Tas), s 43; Sale of Goods Act 1954 (ACT), s 42; Sale of Goods Act 1972 (NT), s 41.

150

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.880]

(c) the buyer becomes insolvent. 56 The seller will lose their lien: (a)

when the goods are delivered to a carrier for the purpose of transmission to the buyer, without reserving the right of disposal of the goods; or

(b)

when the buyer or her or his agent lawfully obtains possession of the goods; or

(c)

by waiver; for example, by handing over to the buyer the documents of title relating to the goods, or assenting to a resale by the buyer. When an unpaid seller has made part delivery of the goods they may exercise their rights of lien on the remainder, unless part delivery has been made under such circumstances as to show an agreement to waive the lien. 57 Withholding delivery

Where the buyer defaults and neither the ownership nor possession of the goods has passed to the buyer, the unpaid seller, in addition to the right of suing the buyer for breach of contract, has a right of withholding delivery of the goods. This right is similar to and equally extensive with the unpaid seller's right of lien (see above) in cases where the ownership has passed to the buyer. 58 [8.880]

Stoppage in transitu [8.890]

An unpaid seller has the right of stopping the goods in transitu when:

(a)

they have parted with possession of the goods; and

(b)

they are still in transit; and

(c) the buyer becomes insolvent. The unpaid seller may in these circumstances resume possession of the goods as long as they are in course of transit, and may retain them until payment or tender of the price. 59 It will be noticed that this right applies when the ownership but not the possession of the goods has passed to the buyer, and the goods must be in the course of transit. 56

57

58

59

A person is deemed to be insolvent within the meaning of the Sale of Goods Act when that person has either ceased to pay their debts in the ordinary course of business, or cannot pay their debts as they become due, whether having committed an act of bankruptcy or not: Sale of Goods Act 1923 (NSW), s 5; Goods Act 1958 (Vic), s 3; Sale of Goods Act 1896 (Qld), s 3; Sale of Goods Act 1895 (SA), s 60; Sale of Goods Act 1895 (WA), s 60; Sale of Goods Act 1896 (Tas), s 3; Sale of Goods Act 1954 (ACT), s 5; Sale of Goods Act 1972 (NT), s 5. Sale of Goods Act 1923 (NSW), ss 43 – 45; Goods Act 1958 (Vic), ss 47 – 49; Sale of Goods Act 1896 (Qld), ss 42 – 44; Sale of Goods Act 1895 (SA), ss 40 – 42; Sale of Goods Act 1895 (WA), ss 40 – 42; Sale of Goods Act 1896 (Tas), ss 45 – 47; Sale of Goods Act 1954 (ACT), ss 44 – 46; Sale of Goods Act 1972 (NT), ss 43 – 45. Sale of Goods Act 1923 (NSW), s 42; Goods Act 1958 (Vic), s 46; Sale of Goods Act 1896 (Qld), s 41; Sale of Goods Act 1895 (SA), s 39; Sale of Goods Act 1895 (WA), s 39; Sale of Goods Act 1896 (Tas), s 44; Sale of Goods Act 1954 (ACT), s 43; Sale of Goods Act 1972 (NT), s 42. Sale of Goods Act 1923 (NSW), s 46; Goods Act 1958 (Vic), s 50; Sale of Goods Act 1896 (Qld), s 45; Sale of Goods Act 1895 (SA), s 43; Sale of Goods Act 1895 (WA), s 43; Sale of Goods Act 1896 (Tas), s 48; Sale of Goods Act 1954 (ACT), s 47; Sale of Goods Act 1972 (NT), s 46.

CHAPTER

[8.910]

08

SALE OF GOODS

151

Duration of transit

In practice it is often difficult to determine whether the goods are still in transit. The Sale of Goods Act contains the following rules: [8.900]

1.

Goods are deemed to be in course of transit from the time they are delivered to a carrier until the buyer or their agent takes delivery of them.

2.

If the buyer or their agent obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end.

3.

If, after the arrival of the goods at the appointed destination, the carrier acknowledges to the buyer or their agent that the carrier holds the goods on the buyer's behalf and continues in possession of them for the buyer, the transit is at an end and it is immaterial that a further destination for the goods may have been indicated by the buyer.

4.

If the goods are rejected by the buyer and the carrier continues in possession of them, the transit is not deemed to be at an end even if the seller has refused to receive them back.

5.

When goods are delivered to a ship chartered by the buyer it is a question depending on the circumstances of the particular case whether they are in the possession of the master as a carrier or as agent for the buyer.

6.

Where the carrier wrongfully refuses to deliver the goods to the buyer the transit is deemed to be at an end.

7.

Where part delivery of the goods has been made to the buyer the remainder of the goods may be stopped in transitu, unless the part delivery has been made under such circumstances as to show an agreement to give up possession of the whole of the goods. 60

How stoppage in transitu is effected

The unpaid seller may exercise the right of stoppage in transitu either by taking actual possession of the goods or by giving notice of their claim to the carrier. The notice may be given either to the person in actual possession of the goods or to their principal. In the latter case the notice to be effectual must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to the agent in time to prevent a delivery to the buyer. When notice of stoppage in transitu is given by the seller to the carrier, the carrier must redeliver the goods according to the directions of the seller. The expenses of the redelivery are borne by the seller. 61 [8.910]

60

Sale of Goods Act 1923 (NSW), s 47; Goods Act 1958 (Vic), s 51; Sale of Goods Act 1896 (Qld), s 46; Sale of Goods Act 1895 (SA), s 44; Sale of Goods Act 1895 (WA), s 44; Sale of Goods Act 1896 (Tas), s 49; Sale of Goods Act 1954 (ACT), s 48; Sale of Goods Act 1972 (NT), s 47.

61

Sale of Goods Act 1923 (NSW), s 48; Goods Act 1958 (Vic), s 52; Sale of Goods Act 1896 (Qld), s 47; Sale of Goods Act 1895 (SA), s 45; Sale of Goods Act 1895 (WA), s 45; Sale of Goods Act 1896 (Tas), s 50; Sale of Goods Act 1954 (ACT), s 49; Sale of Goods Act 1972 (NT), s 48.

152

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.920]

The unpaid seller's right of lien or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made without the seller's assent. 62 For example, A agrees to sell to B 100 bags of wheat from general stock and receives a cheque in payment. B immediately sells to C and gives her or him an authority to collect from A, but before C takes delivery B's cheque is dishonoured. A can refuse to deliver the goods to C. Defeat of stoppage in transitu

If, however, a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods and that person transfers, by way of sale, the document to a person who takes it in good faith and for valuable consideration, then the unpaid seller's right of lien or stoppage in transitu is defeated. 63 Reverting to the previous illustration, if A gives B a document of title to the goods, for example a delivery order, and B transfers this for value to C, then A must deliver the wheat to C as his (the seller's) lien is defeated. His only right now is to sue B for the price. [8.920]

Right of resale [8.930]

The unpaid seller has a right of resale of the goods where:

(a)

the goods are of a perishable nature; or

(b)

the seller exercises the right of lien or stoppage in transitu and gives notice to the buyer of their intention to resell, and the price is not paid or tendered within a reasonable time; or

(c)

the seller has expressly reserved a right of re-sale in case the buyer should make a default. 64 The seller's exercise of the right of resale under (a) and (b) has the effect of rescinding the contract of sale and the seller is entitled to recover damages from the original buyer for any loss occasioned by the latter's breach of contract: RV Ward Ltd v Bignall [1967] 1 QB 534. If on resale the goods realise more than the original contract price, the seller would not have to account to the original purchaser for any profit made on the resale. The same consequences flow where the unpaid seller exercises the rights under (c) on the buyer's default. The unpaid seller's right of resale under these statutory provisions is in addition to other general contractual remedies which may be available. Thus, an unpaid seller, as a contracting party, is entitled at common law to terminate a contract which has been 62

63

64

Sale of Goods Act 1923 (NSW), s 49; Goods Act 1958 (Vic), s 53; Sale of Goods Act 1896 (Qld), s 48; Sale of Goods Act 1895 (SA), s 46; Sale of Goods Act 1895 (WA), s 46; Sale of Goods Act 1896 (Tas), s 51; Sale of Goods Act 1954 (ACT), s 50; Sale of Goods Act 1972 (NT), s 49. Sale of Goods Act 1923 (NSW), s 49; Goods Act 1958 (Vic), s 53; Sale of Goods Act 1896 (Qld), s 48; Sale of Goods Act 1895 (SA), s 46; Sale of Goods Act 1895 (WA), s 46; Sale of Goods Act 1896 (Tas), s 51; Sale of Goods Act 1954 (ACT), s 50; Sale of Goods Act 1972 (NT), s 49. Sale of Goods Act 1923 (NSW), s 50; Goods Act 1958 (Vic), s 54; Sale of Goods Act 1896 (Qld), s 49; Sale of Goods Act 1895 (SA), s 47; Sale of Goods Act 1895 (WA), s 47; Sale of Goods Act 1896 (Tas), s 52; Sale of Goods Act 1954 (ACT), s 51; Sale of Goods Act 1972 (NT), s 50.

[8.960]

CHAPTER

08

SALE OF GOODS

153

repudiated by the purchaser and, following such termination, to resell the goods without giving notice of intention to do so to the original purchaser or giving the latter a reasonable time to pay the purchase price. Wherry v Watson [1991] ASC 56-048 [8.940] For example, the first plaintiff agreed to buy the defendant’s 1963 Bentley car for $35,000 and gave the defendant a cheque for $3,000 as a deposit. The cheque was dishonoured because of an administrative error on the part of the first plaintiff’s bank. A day after dishonour of the cheque, the defendant agreed to sell the vehicle to the second plaintiff for $37,000. Both plaintiffs claimed an order for specific performance of their respective contracts for the purchase of the vintage car. The New South Wales Court of Appeal held that due payment of the deposit by the first plaintiff’s cheque being met was an essential term of the contract. Dishonour of the cheque entitled the defendant to terminate the contract and sell the vehicle to the second plaintiff.

Rights of unpaid seller against the buyer ...............................................................................................................................................................................................

The unpaid seller, in addition to the rights discussed above against the goods, has certain rights against the buyer for the price of the goods or for damages for non-acceptance of the goods. [8.950]

Action for the price

In ordinary cases and unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions. Where the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue the buyer for the price. 65 However, where the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue for the price even though the property in the goods has not passed and the goods themselves have not been appropriated to the contract. Where there is no special agreement as to the payment of the price and the property in the goods has not passed to the buyer, the seller could not sue for the price of the goods: Colley v Overseas Exporters [1921] 3 KB 302. [8.960]

65

Sale of Goods Act 1923 (NSW), s 51; Goods Act 1958 (Vic), s 55; Sale of Goods Act 1896 (Qld), s 50; Sale of Goods Act 1895 (SA), s 48; Sale of Goods Act 1895 (WA), s 48; Sale of Goods Act 1896 (Tas), s 53; Sale of Goods Act 1954 (ACT), s 52; Sale of Goods Act 1972 (NT), s 51.

154

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.970]

Damages for non-acceptance

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue for damages for non-acceptance. The general rule is that on a buyer's non-acceptance of the goods, the measure of damages recoverable by the seller is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract. 66 Where there is an “available market” for the goods in question the measure of damages is, prima facie, the difference between the contract price and the market or current price at the time when the goods ought to have been accepted. This prima facie rule will not apply where the seller proves a higher loss. A party seeking to depart from the prima facie rule must show that the circumstances support such a departure: Onesteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1 at [171]. An “available market” means a market available from day-to-day in which the goods might be sold at a then current price or at a fair price at the will of the vendor. The expression contemplates a continuous market for a commodity but always subject to fluctuation according to rise and fall of the market: Eclipse Motors Pty Ltd v Nixon [1940] VLR 49 at 53-54. Where there is no available market, then the general rule will apply, namely, that the measure of damages recoverable by the seller is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract. [8.970]

WL Thompson Ltd v Robinson (Gunmakers) Ltd [1955] Ch 177 [8.980] R contracted to buy a motor car from T, who were car dealers. R refused to accept delivery and T returned the car to the suppliers. It was held that T were entitled to damages for the loss of their bargain, namely the profit they would have made as they had sold one car less than they otherwise would have sold.

On the other hand, where it appears that the seller did not have a replacement for the particular goods sold to the buyer then, on the buyer refusing to take delivery, the seller is only entitled to recover for the loss which they suffer on the resale of the goods, that is the difference between the price agreed to be paid by the original buyer and the price at which the goods were resold. [8.990]

Kargotich v Mustica [1973] WAR 167 [8.1000] M agreed to buy a new hay-baling machine from K for $4,920. K’s profit on the sale would have been nearly $870. However, M refused to accept the machine. K sold it to another customer for $4,830. The question arose whether K was entitled to recover from M $90 (the difference between the original contract price with M and the resale price) or the full loss of profit of nearly $870 on the basis that K could have sold two hay-balers instead of one.

66

Sale of Goods Act 1923 (NSW), s 52; Goods Act 1958 (Vic), s 56; Sale of Goods Act 1896 (Qld), s 51; Sale of Goods Act 1895 (SA), s 49; Sale of Goods Act 1895 (WA), s 49; Sale of Goods Act 1896 (Tas), s 54; Sale of Goods Act 1954 (ACT), s 53; Sale of Goods Act 1972 (NT), s 52.

CHAPTER

[8.1030]

08

SALE OF GOODS

155

cont. It was held that K was only entitled to recover $90 since he had not shown that he could have obtained a second hay-baler and hence made a second sale.

Where a buyer has agreed to buy a unique item, such as a second-hand motor vehicle, but subsequently refuses to accept the goods, the seller is only entitled to recover the loss they have suffered; accordingly, if the seller resells the goods at a higher price than that agreed to be paid by the original buyer, the seller has suffered no loss and hence cannot recover damages from the original buyer: Lazenby Garages Ltd v Wright [1976] 1 WLR 459. The seller is under a duty to mitigate their loss on default by the buyer which will normally be done by the seller reselling the goods. If the seller does resell they are bound to act reasonably and obtain the best price they can for the goods. [8.1010]

Remedies of the buyer ............................................................................................................................................................................................... [8.1020]

The buyer's remedies against the seller may be considered under the following

headings: 1.

Repudiation of the contract.

2.

Damages for breach of warranty of quality.

3.

Damages for non-delivery.

4.

Specific performance.

Repudiation of the contract

The buyer is entitled to rescind the contract and reject the goods where there is a breach of a condition. In such a case the buyer can recover the purchase price he or she has paid if there has been a total failure of consideration. Thus in one case a buyer purchased a car and it subsequently transpired that he had no title. The car was returned to the true owner. It was held that the buyer was entitled to a refund of the full price paid; there was a total failure of consideration even though the buyer had had some use of the car: Rowland v Divall [1923] 2 KB 500. However, this right of repudiation may be lost to the buyer in the following cases: [8.1030]

(a)

where the buyer has waived the breach of condition or elected to treat it only as a breach of warranty, see [8.400];

(b)

where the contract of sale is not severable and the buyer has accepted the goods or part of them (as to the meaning of acceptance in this context, see [8.830]); or

(c)

where the contract is for specific goods and the property in them has passed to the buyer. 67

67

This no longer applies in New South Wales, South Australia and the Australian Capital Territory where the corresponding provision in the Sale of Goods Act has been repealed: Sale of Goods (Amendment) Act 1988 (NSW); Misrepresentation Act 1972 (SA), s 11; and Sale of Goods Act 1954 (ACT), s 3, respectively.

156

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.1040]

Damages for breach of warranty of quality

Where there is a breach of warranty of quality by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods but the buyer may: [8.1040]

(a)

set up against the seller the breach of warranty in diminution or extinction of the price; or

(b) maintain an action against the seller for damages. 68 The measure of damages for breach of warranty is the estimated loss directly and naturally resulting in the ordinary course of events from the breach of warranty. The Sale of Goods Act further provides that in the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. However, such prima facie rule is appropriate only where the buyer's claim is in respect of the actual defect in the goods. Where, as is often the case, the buyer is claiming for the damage to persons or property caused by the defective goods, the measure of damages is determined in accordance with the basic rule mentioned earlier, namely, the estimated loss directly and naturally resulting in the ordinary course of events from the breach of warranty. In the case of Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725, the particular purpose for which the goods were wanted was not communicated to the seller: Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725 [8.1050] The defendants in Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725 contracted to sell the plaintiffs sulphuric acid commercially free from arsenic. The plaintiffs used the acid in the manufacture of glucose which was sold to brewers. In breach of the implied condition of correspondence with description in the contract, the sulphuric acid contained arsenic, with the result that the beer made by the brewers who had purchased the glucose from the plaintiffs poisoned a large number of people. Consequently, the plaintiffs were liable to pay damages to the brewers. The plaintiffs in turn claimed damages from the defendants as follows: (a)

the price paid for the acid;

(b)

the value of the other materials spoilt in the manufacture of the glucose;

(c)

loss of goodwill; and

(d)

the damages they were liable to pay the brewers.

The court held that the plaintiffs were only entitled to damages to cover: (a)

the price paid for the acid; and

(b)

the value of the goods rendered useless by being mixed with the poisonous acid.

68

Sale of Goods Act 1923 (NSW), s 54; Goods Act 1958 (Vic), s 59; Sale of Goods Act 1896 (Qld), s 54; Sale of Goods Act 1895 (SA), s 52; Sale of Goods Act 1895 (WA), s 52; Sale of Goods Act 1896 (Tas), s 57; Sale of Goods Act 1954 (ACT), s 56; Sale of Goods Act 1972 (NT), s 54.

CHAPTER

[8.1080]

08

SALE OF GOODS

157

cont. The plaintiffs were not entitled to damages in respect of: (a)

The loss of goodwill, as this was not a loss directly and naturally resulting in the ordinary course of events from the breach of warranty. It did not arise directly from the act of the defendants but arose from the act of the plaintiffs in selling the poisonous glucose to the brewers and, in the circumstances, was too remote to be recoverable.

(b)

The damages which had to be paid to the brewers. As the special circumstances surrounding the purpose of the contract had not been communicated to the defendant, the damages were not within the contemplation of the parties within the meaning of the rule in Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341; 156 ER 145: see [12.120] (Turner and Trone).

[8.1060] The chain of contracting parties may in some cases be followed in order to calculate the damages for breach of warranty in supplying goods not fit for the purpose for which they were sold, namely, where such purpose was made known to the sellers at the time of contract and it was within the contemplation of the parties that if there was a breach of contract damages would be claimed by parties separated by several contractual steps.

Kasler & Cohen v Slavouski [1928] 1 KB 78 [8.1070] A sold some dyed rabbit skins to B, a wholesale furrier, and knew that B intended making them into fur collars. B, having made the collars, sold to C, C resold to D, D to E and E had one attached to a coat and sold it to F who wore the coat with the fur attached. F developed dermatitis caused by the presence of antimony in the dyed skin and sued E for damages and was successful with costs. E claimed the amount he paid F together with his costs from D, who in turn claimed this amount plus his costs from C. C claimed from B and by this time the original £67 damages awarded to F had risen to £699 by reason of successive costs. It was held that B was entitled to recover from A: (a)

the damages awarded in the original action to F;

(b)

the costs of both sides of that action; and

(c)

a sum in respect of the costs incurred by B, C and D respectively in connection with the claims against them.

This case differed from Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725 not only because in the latter case there was no breach of the warranty of fitness whereas in the present case there was, but also because it was within the contemplation of the sellers that, in the event of breach, damages would be incurred by later purchasers and sub-purchasers. In such cases where the same article passes from hand-to-hand with the same warranty, particularly where the breach of contract which gives rise to the damages consists in there being a latent defect discoverable only in the hands of the ultimate user, and where it must have been within the contemplation of the parties that there would be several contractual steps, the damages recoverable from the original supplier would be the [8.1080]

158

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.1090]

damages awarded to the injured user and costs which are reasonably and properly incurred in defending the actions for damages by the several contracting parties. Damages for non-delivery

The contract of sale may contain certain stipulations as to time of delivery and the buyer is entitled to have these carried out. Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery. 69 The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the seller's breach of contract. It has also been held that the damages are such as may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract as the probable result of the breach. If the special circumstances under which the contract was actually made were communicated and known to both parties, the damages resulting from breach of such contract would be the amount of injury which would ordinarily flow from a breach of contract under those special circumstances so known and communicated: Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341; 156 ER 145. Where there is an available market for the goods in question, the measure of damages is, prima facie, to be ascertained by the difference between the contract price and the market or current price of the goods at the time when they ought to have been delivered or, if no time was fixed, then at the time of the refusal to deliver. It is the duty of the buyer to mitigate their loss if this is possible and, should the buyer fail to do so, the court will reduce the claim to that to which the buyer would have been entitled if he or she had acted as a reasonable and prudent person would in the course of business. Where a buyer unreasonably, without first ascertaining the true intention of the seller, refused his offer to repurchase part of the goods alleged to be faulty, it was held that the damages obtained must be reduced by the amount to which the seller's offer would have mitigated the buyer's loss. In certain cases the question may arise whether the buyer can claim special damages for non-delivery, as where the goods are required for a particular purpose. These damages depend on a number of factors: [8.1090]

(a)

that the seller knew at the time of the contract of sale of the particular circumstances relating to the contract;

(b)

the buyer actually suffered damage through the seller's default; and

(c) there was not an available market for the goods in question. For example, the buyer notifies the seller that he or she requires a particular “gun” for a pile driver that has to be delivered to a third party within a specified period. The third party refused to take delivery because of unreasonable delay and, as the gun was useless to 69

Sale of Goods Act 1923 (NSW), s 53; Goods Act 1958 (Vic), s 57; Sale of Goods Act 1896 (Qld), s 52; Sale of Goods Act 1895 (SA), s 50; Sale of Goods Act 1895 (WA), s 50; Sale of Goods Act 1896 (Tas), s 55; Sale of Goods Act 1954 (ACT), s 54; Sale of Goods Act 1972 (NT), s 53.

[8.1110]

CHAPTER

08

SALE OF GOODS

159

anyone else except as old iron, and the manufacturers were aware of these circumstances, their liability was the expenses incurred and the profit which would have been made upon the contract with the third party. From this would be deducted any amount obtained on the sale of the rejected machine: Hydraulic Engineering Co v McHaffie (1879) 4 QBD 670. Specific performance

Where there is failure by the seller to deliver specific or ascertained goods, the court may direct specific performance of the contract on such conditions as it thinks fit. As a general rule, however, the court will not enforce specific performance of an agreement to sell and deliver chattels unless the goods are, by reason of their nature, unique or of a special kind, and where the award of damages would not be an adequate compensation to the buyer, for example the purchase of a particular portrait by a famous artist. Where a taxicab was the subject of an agreement of sale, specific performance was ordered as the contract was for the sale of a chattel with a valuable privilege (taxicab licence) annexed to it: Dougan v Ley (1946) 71 CLR 142 at 147, 151, 153. [8.1100]

Auctioneers and auction sales Auctioneers are a class of licensed agents employed to sell goods or land in a particular manner as required by statute between sunrise and sunset. An auction is a sale of property in public by calling for bids, the property being usually sold to the highest bidder. A bid is an offer of a price for the property being sold, and the fall of the auctioneer's hammer the acceptance. Once the auctioneer's hammer has fallen, the auctioneer has by implication the authority of the highest bidder to sign any memorandum on the bidder's behalf embodying the conditions of the sale, such memorandum being sufficient to satisfy the requirements of the Statute of Frauds 1677 (Imp) and the Sale of Goods Act. However, this is not the position in Victoria where it has been held that acceptance of a bid for real property at an auction does not give rise to enforceable rights against the bidder where the latter refuses to sign the contract of sale or any other written memorandum of the contract: Futuretronics International Pty Ltd v Gadzhis [1990] ASC 56-009. In Queensland, the successful bidder for certain land at an auction sale was held not liable when he refused to sign a written sale agreement and the auctioneer had neglected to do so on his behalf, since the contract could not be enforced in the absence of a memorandum in writing: Wright v Madden [1992] 1 Qd R 343 at 346, 350. The extent of the authority of an auctioneer depends upon the contract with the auctioneer's principal but a number of powers are implied by law. An auctioneer has authority to sell the goods subject to all the usual conditions governing sales by auction unless expressly negatived. He or she has authority to deal with the goods in the manner customary amongst auctioneers and to prepare the conditions of sale. [8.1110]

160

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.1110]

The conditions of sale may contain a clause excluding all warranties but this may not be sufficient to exclude an express oral condition or warranty subsequently given at the time of sale. If a seller of goods by auction gives an express oral warranty he or she cannot escape from her or his responsibility for it by saying that the catalogue contained an exempting clause: Harling v Eddy [1951] 2 KB 739. A sale by auction may be with or without reserve. The usual manner of providing for a reserve price is to specify that the vendor shall be entitled to one bid. If there is a reserve price, or a bid is allowed to the vendor, that fact should be notified before the sale. However, if a sale is not announced to be subject to a reserve the auctioneer is bound to accept the bid of the highest bidder and so make a contract with her or him, and the owner is not allowed to bid. Sometimes the reserve price is termed the “upset price”. Where a sale is announced to be subject to a reserve but the auctioneer by mistake accepts a bid and knocks down the property to the highest bidder, there is no completed contract as the whole auction is subject to a condition that the reserve price should be reached: Boulas v Angelopoulos (1991) 5 BPR 11,477 (NSWCA). A bid being merely an offer may be retracted at any time before the property is knocked down; similarly, the vendor may withdraw the property from sale before a bid is accepted, or at any rate before the reserve price is reached. Upon the fall of the hammer, prima facie, the property in the lot knocked down passes to the bidder. If it is intended that this prima facie rule should be excluded, it must be clearly made a condition of the sale. An auctioneer's authority is to make a contract of sale by auction and once this is made the auctioneer has no authority to vary or rescind it. An auctioneer has no implied authority to sell by private contract as he or she is engaged to sell by auction. However, it is common practice for an auctioneer to be given the right to sell by private sale if the auction proves unsuccessful. An auctioneer has possession of the goods to be auctioned and, like a factor, has a special property in them to the extent of having a lien upon them for her or his expenses and commission. Where the auction is one of goods, an auctioneer has implied authority to receive the purchase money on behalf of the vendor and to hand over the goods when the full price is paid. Where the auction is one of land or an interest in land the auctioneer has merely authority to receive a deposit. He or she has no implied authority to take bills of exchange as payment except to the extent of taking cheques as deposits. Any auctioneer who knowingly misrepresents the value, composition, structure or origin of manufacture of any goods being auctioned is liable to a penalty. There must be kept a full written record of all goods auctioned during the past 12 months and this record is open to inspection by the police. The provisions of the Sale of Goods Act relating to auction sales are as follows: 1.

Where goods are put up for sale by auction in lots, each lot is prima facie deemed to be the subject of a separate contract of sale.

CHAPTER

[8.1120]

08

SALE OF GOODS

161

2.

A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in any other customary manner; until such announcement is made any bidder may retract her or his bid.

3.

Where a sale by auction is not notified in the conditions of sale to be subject to a right to bid on behalf of the seller, it is not lawful for the seller to bid or to employ any person to bid at the sale, or for the auctioneer knowingly to take any bid from the seller or any such person. Any sale contravening this rule may be treated as fraudulent by the buyer.

4.

A sale by auction may be notified in the conditions of sale to be subject to a reserve price, and a right to bid may also be reserved expressly by or on behalf of the seller.

5.

Where a right to bid is expressly reserved, but not otherwise, the seller or any one person on her or his behalf may bid at the auction. 70 In addition to the above provisions contained in the Sale of Goods Act there also exists legislation in the various States 71 regulating and controlling the licensing of auctioneers and general provisions relating to auction sales such as conduct of sale; riotous behaviour; music playing at sale; suitable sale room; keeping records of sales; misrepresentation, etc. Duties of auctioneers ............................................................................................................................................................................................... [8.1120]

It is the duty of an auctioneer:

(a)

to hold a licence and act in person;

(b)

to sell for money only, in the absence of instructions to the contrary;

(c)

to sell to a third person;

(d)

to accept the highest bona fide bid where the auctioneer sells without reserve;

(e)

to account for the proceeds of goods sold;

(f)

not to deliver goods sold until paid for, nor allow any deduction from the price, unless authorised to do so by the principal; and

(g)

to keep full records of sales.

70

71

Sale of Goods Act 1923 (NSW), s 60; Goods Act 1958 (Vic), s 64; Sale of Goods Act 1896 (Qld), s 59; Sale of Goods Act 1895 (SA), s 57; Sale of Goods Act 1895 (WA), s 57; Sale of Goods Act 1896 (Tas), s 62; Sale of Goods Act 1954 (ACT), s 60; Sale of Goods Act 1972 (NT), s 60. Property, Stock and Business Agents Act 2002 (NSW); Motor Dealers and Chattel Auctioneers Act 2014 (Qld), Pt 4; Second-Hand Dealers and Pawnbrokers Regulations 2013 (SA), reg 6; Auction Sales Act 1973 (WA); Property Agents and Land Transactions Act 2005 (Tas), Pt 3. Section 15A of the Fair Trading Act (Australian Consumer Law) 1992 (ACT) was repealed by Sch 1, Item 1.6 of the Fair Trading (Australian Consumer Law) Amendment Act 2010 (ACT). The Auctioneers Act 1935 (NT) was repealed by the Auctioneers Repeal Act 2002 (NT). It is to be replaced by a mandatory code of practice under Consumer Affairs and Fair Trading Act (NT), Pt 13.

162

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[8.1130]

Warranties by auctioneers ............................................................................................................................................................................................... [8.1130]

When an auctioneer sells goods, he or she impliedly gives the following

warranties: (a)

their authority to sell;

(b)

that they know of no defect in the principal's title;

(c)

to give possession against the price paid; and

(d) that such possession will not be disturbed by the principal or the auctioneer. However, the auctioneer who as agent sells a specific chattel and does not disclose the name of the principal gives no implied warranty that the buyer will get a good title. It would seem that generally an auctioneer's only obligation to a purchaser is to deliver the goods the purchaser successfully bid for. Accordingly, notwithstanding that the goods sold do not correspond with their description, the auctioneer is still entitled to recover the price at which the goods were knocked down to the purchaser at the auction. In such a case, the buyer may well have recourse against the vendor for breach of implied condition of the contract of sale, unless such condition has been clearly excluded by the terms of the auction sale. Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631 [8.1140] In Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631, the defendant M successfully bid $21,000 for a bull at an auction sale of stud cattle conducted by the plaintiff auctioneer E. The bull proved infertile and M refused to pay the price. The auctioneer E brought an action for the price against M, who joined P the owner and vendor of the bull. Sheppard J said: “When an auctioneer sells goods on behalf of a disclosed principal there are three contracts; namely, the contract between the vendor and purchaser, a contract between the vendor and the auctioneer and a contract between the auctioneer and the highest bidder, that is the purchaser”: at 638-639. It was held that the contract between the auctioneer E and the purchaser M was not a contract of sale in the true sense and therefore the conditions implied by the Sale of Goods Act were not applicable to that transaction. On the facts, it was not a term of the contract between E and M that E had undertaken to deliver a fertile bull but only the bull actually sold. Accordingly, the auctioneer E was entitled to recover the price of the bull bid by the purchaser M. However, Sheppard J further held that the contract of sale of the bull by auction between the purchaser M and the vendor P was a sale by description, the description being “a breeding bull”. Since the bull was infertile, there had been a breach of the condition of correspondence with description implied in the contract by the Sale of Goods Act, which implied condition had not been effectively excluded on the facts by the terms of sale in the auction catalogue. The result was that although the auctioneer E was entitled to recover the price of $21,000 bid by the purchaser M, M in turn was entitled to recover his loss (namely, $21,000 less the value of the bull for slaughtering purposes, that is, $500) from the vendor P for breach of implied condition.

[8.1160]

CHAPTER

08

SALE OF GOODS

163

An auction sale of cattle need not attract any of the conditions as to correspondence with description, merchantable quality or fitness for purpose implied by the Sale of Goods Act, as in the absence of representations such a sale would not be a sale by description and the purchaser might not have made known to the seller the particular purpose for which the cattle he bought were required. However, where the auction sale is preceded by an advertisement which, in effect, represents that the cattle are well suited for breeding, such would constitute an express term of the contract. Furthermore, the effect of the representation would be to make the contract one for the sale of goods by description, the description being cows well suited for breeding and accordingly, there arises an implied condition under the Sale of Goods Act that the cattle correspond with the description. In such a case there also arises an implied condition that the cattle are of merchantable quality where the buyer could not have ascertained the presence of a detrimental condition in them by examination before the auction. By going to the sale in response to such advertisement, the purchaser by implication makes known to the seller that he or she requires the cattle for breeding purposes and that he or she relies on the seller's skill and judgment so as to bring into operation the statutory implied condition that the cattle would be reasonably fit for such purpose. Thus, where an auction was advertised as a “Special Cattle Breeders' Sale” and described the cows as being well-known for their quality and as being in excellent condition when in fact they were subsequently found to be infected with brucellosis, it was held that the seller was in breach of the conditions of correspondence with description, merchantable quality, and fitness for purpose implied by the Sale of Goods Act: Lockhart v Osman [1981] VR 57. [8.1150]

Mock auctions ...............................................................................................................................................................................................

Western Australia prohibits “mock” auctions, 72 that is, auctions at which people are induced, in effect, to make substantial offers for articles of often inferior quality in the expectation of either having their bids eventually reduced by the auctioneer, or of being given other free gifts, or the chance of obtaining more expensive items at a comparatively low cost, having regard to what had taken place earlier in the proceedings of the so-called auction sale. Tasmania prohibits dummy bids at auctions: Property Agents and Land Transactions Act 2005 (Tas), s 42. In Victoria legislation prohibits the making of dummy bids at auctions for the sale of motor vehicles: Motor Car Traders Act 1986 (Vic), s 50D.

[8.1160]

72

Auction Sales Act 1973 (WA), s 25. The Mock Auctions Act 1973 (Tas) was repealed by the Legislation Repeal Act 2000 (Tas), s 3 and Sch 1. The Fair Trading Act 1987 (NSW), s 51A was repealed by the Fair Trading Amendment (Australian Consumer Law) Act 2010 (NSW), Sch 1, Item 40. The Fair Trading Act 1989 (Qld), s 56 was repealed by the Fair Trading (Australian Consumer Law) Amendment Act 2010 (Qld), s 18. The Fair Trading Act 1999 (Vic), ss 30 – 31 was repealed by the Fair Trading Amendment (Australian Consumer Law) Act 2010 (Vic), s 9. The Fair Trading Act 1987 (SA), s 28 was repealed by the Statutes Amendment and Repeal (Australian Consumer Law) Act 2010 (SA), s 7.

PART 7

AUSTRALIAN CONSUMER LAW — MISLEADING CONDUCT Chapter 9

Scope and Policy Objects .............................................. 167

Chapter 10 Definitions and Key Concepts ....................................... 217 Chapter 11 Misleading or Deceptive Conduct ................................. 247 Chapter 12 Private Remedies ........................................................... 333

CHAPTER 09

......................................................................................................................

Scope and Policy Objectives Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 1.

Scope of the work On 24 June 2010, the last sitting day of Parliament before the winter recess, both Houses of the Australian Parliament passed the second stage of the Australian Consumer Law (ACL) reforms, the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth). The first stage of the ACL reforms, the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth), had been passed on 17 March 2010. The third stage of the ACL reforms, the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1), were made on 16 November 2010. 1 These three pieces of primary and subordinate legislation comprise the Australian Consumer Law at the Commonwealth level. The passage of the ACL implements one of the Commonwealth's major commitments in COAG's National Partnership Agreement to Deliver a Seamless National Economy (NPA). The ACL is a single, national law concerning consumer protection and fair trading, which applies in the same way nationally and in each State and Territory. For the first time, consumers have the same protections and expectations about business conduct wherever they live in Australia. Similarly, businesses have the same obligations and responsibilities wherever they operate in Australia. There are a number of possible legislative approaches to the regulation of consumer protection. One approach is to prohibit specific types of conduct which are defined (rule-based regulation). This approach has the advantage of clarity and certainty, but it also allows unscrupulous traders to take advantage of consumers by devising trading practices that fall outside the definition of the banned practice. Another approach is to adopt a general prohibition expressed in terms of a standard of behaviour that is prohibited, such as “misleading conduct”, “unconscionable conduct”, or “unfair terms”, sometimes referred to as safety-net regulation. 2 Some jurisdictions adopt both general and specific approaches. The approach adopted in the ACL is to provide for three general protections which are supplemented by specific prohibitions in relation to trading practices that are highly unfair, such as pyramid selling, or aggressive selling techniques such as door-to-door or unsolicited sales, and undue harassment or coercion. [9.05]

1

Explanatory Statement, Select Legislative Instrument 2010, No 280.

2

See Paterson and Brody, “Safety Net Consumer Protection: Using Prohibitions on Unfair and Unconscionable Conduct to Respond to Predatory Business Models” (2015) 38 Journal of Consumer Policy 331 at 332-3.

168

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.05]

A significant feature of the three general protections is that they adopt a principlesbased approach to drafting. 3 They set out general principles to allow for their flexible application, rather than attempting to define all forms of conduct prohibited with a great deal of specificity. The open-ended nature of the general protections leaves it to the courts to set a legal standard and to decide whether the particular conduct at issue is deserving of intervention. In effect, the court must consider the conduct at issue in the light of its own circumstances and surrounding facts and make a public policy judgment as to whether that conduct is “misleading” or “unconscionable,” or whether a particular term of a standard form contract is “unfair” in the light of all the surrounding circumstances. Such an approach places great faith in the judiciary. It also means that it takes time to develop sufficient case law to enable businesses to be able to predict with certainty what conduct is prohibited. Uncertainty increases risk. It also increases compliance costs, including the costs arising from delay. The first general protection, the prohibition of misleading conduct in s 18 of the ACL, is a broad provision. It does not define “misleading conduct”. It is based on s 52 of the Trade Practices Act 1974 (Cth) (TPA) which imposed a “norm of conduct”, 4 and the role of the courts has been to apply it to a wide range of circumstances involving not just business-to-consumer conduct, but business-to-business conduct as well. The second general protection, s 21 of the ACL (statutory unconscionable conduct), is also a broad provision. Section 21 does not define “unconscionable conduct”, although since 1 January 2012 it now contains three interpretative principles in s 21(4) which give some indication as to Parliament's intention regarding its scope. While these interpretative principles provide useful guidance, they are unlikely to deter judicial creativity or eliminate judicial discretion. The third general protection relates to unfair terms in standard form consumer contracts. In order to satisfy the definition of “unfair term” in s 24(1) of the ACL it is necessary to prove that the term at issue would cause “a significant imbalance” in the parties' rights and obligations arising under the contract and that “it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term”. This leaves considerable scope for judicial discretion in deciding what constitutes a “significant” imbalance; what constitutes a “legitimate interest”; and whether the term at issue is “reasonably” necessary to protect the respondent's “legitimate” interest. Before examining the scope of these general and specific protections it is necessary to have some understanding of the economic foundation for consumer protection laws.

3

See, eg, Second Explanatory Memorandum at [9.5], where, in relation to the lay-by sales provisions it is stated: “The ACL provisions draw on the ACT, NSW and Victorian approaches, but are expressed in principles-based form, in keeping with the remainder of the ACL”.

4

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505.

CHAPTER

[9.10]

09

SCOPE AND POLICY OBJECTIVES

169

Part I – Consumer protection policy Consumer detriment refers to the loss in economic welfare consumers incur “if they are misled into making purchases of goods and services which they would not otherwise have made or if they pay more for purchases than they would if they had been better informed.” 5 Consumer detriment may be subdivided into structural detriment and personal detriment. 6 Structural detriment is the principal concern of competition policy. It focuses on the supply side. It includes market failure arising from sub-optimal market structures, such as monopoly and oligopoly, which limit choice and create inefficiencies resulting in increased prices above those that would prevail under competitive conditions. Personal detriment is the principal concern of consumer policy. It focuses on the demand side. It includes market failures arising from transaction costs or an inequality of information, bargaining power or litigious power as between suppliers and consumers. It focuses on the individual experiences of consumers when goods or services do not meet their expectations and includes loss of money, time and stress arising from: [9.10]

(i)

scams and fraud;

(ii)

misleading advertising;

(iii)

unfair marketing practices;

(iv)

unfair contract terms;

(v)

sales of unsafe products; and

(vi) inadequate redress in response to complaints. 7 In Australia, both policy objects (limiting consumer detriment arising from structural detriment and limiting consumer detriment arising from personal detriment), are pursued in the same Act. The Competition and Consumer Act 2010 (Cth) (CCA), and related State and Territory legislation, gives effect to the Competition Code in Sch 1 and the ACL in Sch 2 of the CCA as laws of their respective jurisdictions. The Productivity Commission (PC) in its Report considered at some length the role of consumers in promoting effective competition: 8 The role of consumers in facilitating competition, and promoting well-functioning markets, has long been recognised. In seeking the “best” value (the good or service and price/quality combination most appropriate for them) consumers not only advance their own self-interest, but also provide signals to suppliers on the product characteristics they require. Competition between suppliers, who respond to these signals, can variously lead to lower costs, improved product quality, greater innovation and higher productivity. 5 6

7 8

OECD, Consumer Policy Toolkit (OECD, Paris, 2010), p 52. Europe Economics, An Analysis of the Issue of Consumer Detriment and the Most Appropriate Methodologies to Estimate It (Final Report for DG SANCO, Europe Economics, London, July 2007), available at http://www.ec.europa.eu/consumers/strategy/docs/study_consumer_detriment.pdf. OECD, Consumer Policy Toolkit (OECD, Paris, 2010), p 53. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, ch 3.

170

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.10]

However, poorly informed consumers send weak and confused signals to the market, limiting the benefits they receive from transactions and reducing gains from competition more generally. As pointed out by Vickers, informed choice has two dimensions – knowing the alternatives on offer and having the ability to judge their price and quality differences. In addition to having access to relevant information, consumers need to be sufficiently confident to act on it. Confident consumers have the skills needed to deal effectively with suppliers, and obtain what they expect from a transaction, or, if not, to access effective redress mechanisms. Of course, it is not necessary for all consumers to be well informed and confident to encourage effective competition between firms. Competition will still be robust if there is a sufficient proportion of informed, “marginal” consumers who are willing to switch suppliers to secure a better deal. That said, as a general rule, competition works best when the bulk of consumers are reasonably well-informed and willing to act on that information. To this end, a key goal of consumer policy is to overcome significant information failures that can hinder effective competition. However, it is important to emphasise that competition is a means to achieving an improvement in consumer wellbeing rather than an end in itself. In addition, it is only one means. Where competition is limited (or absent), consumer policy can still achieve improvements in consumer wellbeing through other policy responses such as business or product regulation, improved access to redress mechanisms, and support measures (such as legal aid and financial counselling). 9

As regards the policy object of the ACL, the PC also recommended that Australian governments should adopt the common overarching object and six operational objects that have since been incorporated into the Intergovernmental Agreement for the Australian Consumer Law (IGA). 10 The principal focus of the ACL is to deliver better outcomes for consumers and to minimise consumer detriment. The aims are to minimise costs and unintended side-effects of interventions, and to have special regard for the needs of vulnerable and disadvantaged consumers. The importance of integrating supply and demand polices is widely accepted. 11 The position is summarised by the OECD: 9

Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, p 28.

10

Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 2, pp 41-2, recommendation 3.1.

11

See OECD, Consumer Policy Toolkit (OECD, Paris, 2010), Ch 2 which sets out an overview of the way in which consumer protection complements competition policy, at http://www.oecd.org/sti/consumerpolicy/toolkit. See also OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), available at http://www.oecd.org. For commentary on this issue in an Australian context, see Consumer Policy in Australia: A Companion to the OECD, Consumer Policy Toolkit (Commonwealth of Australia, March 2011); Sylvan, “Activating Competition: The Consumer–Competition Interface” (2004) 12 Competition & Consumer Law Journal 191; Griggs, “Intervention or Empowerment – Choosing the Consumer Law Weapon!” (2007) 15 Competition & Consumer Law Journal 111; Hally-Burton, Shirodkar, Winckler and Writer, “Harnessing the Demand Side: Australian Consumer Policy” (2008) 4 Economic Roundup 91; King and Smith, “The Shaky Economic Foundations of Consumer Protection Policy and Law” (2010) 18 Competition & Consumer Law Journal 71.

CHAPTER

[9.15]

09

SCOPE AND POLICY OBJECTIVES

171

Competition involves the interaction of supply and demand. Competition policy is concerned mainly with the supply-side structure of markets, ensuring that there are no unnecessary barriers to entry, that market concentration does not lead to economic loss or unreasonable transfers from consumers to producers, and that there are effective legal sanctions against fraud, misleading conduct, and collusion among suppliers. Various policy instruments in member countries are used to achieve structural soundness in markets. Even when markets are structurally sound on the supply-side, however, there can still be adverse consequences for consumers and therefore a misallocation of resources. Problems in gaining access to information and certain patterns of consumer behaviour can result in some potentially beneficial transactions not occurring (“deadweight loss”), an excessive burden of transaction costs (the costs of searching for and switching to alternative suppliers), and some stickiness in prices, all to the detriment of consumers. In short, the potential benefits of competition are not fully realised. It is the behaviour of consumers that activates competition, and that behaviour can be shaped in part by public policy. Public policy, therefore, is concerned with the demand-side as well as the supply-side of markets, to ensure as a basic condition that consumers are well-informed. Provision of information however, while being necessary to activate competition, may not be in itself sufficient. Even well-informed consumers exhibit consistent patterns of behaviour that can lead them away from making decisions that satisfy their preferences. The Committee examined the core question of the extent to which these distortions should be addressed by public policy. 12

Market failure and consumer detriment ...............................................................................................................................................................................................

A principal source of consumer detriment on the demand side is market failure arising from transactions costs and information asymmetry. Transaction costs are costs of searching for and switching to alternative suppliers. If search costs are high, decisions will be based on incomplete information. Consumers' “bounded rationality” refers to purchasing decisions being based on less than perfect information; consumers will only undertake a limited or “bounded” range of research prior to purchase. The theory of “bounded rationality” suggests that decision makers truncate their search at the point when the costs of searching start to outweigh the benefits resulting from that search. The OECD explains the situation of “bounded rationality” as one where “the rational decision-maker weighs up the sum of search and switching costs against the expected benefits of continuing to search for a lower priced or more satisfactory product”. 13 In some markets consumers are well-informed because it is in the interests of suppliers to provide information about the quality of their products so that prospective purchasers can make comparisons about the price and quality of the goods or services on offer. In many [9.15]

12 13

OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [8]. OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [10].

172

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.15]

cases prospective purchasers can inspect the goods before purchase and there are many repeat purchases. But in some markets information is not optimised; it is suppressed. 14 Transactions involving asymmetric information, where one party to the transaction knows more than the other party, can also produce significant inefficiencies. 15 In relation to most consumer goods or services, the ACL does not provide for mandatory disclosure. 16 It is assumed that market forces will put pressure on suppliers to make sufficient information available to consumers to allow them to make an informed decision as to which goods or services will maximise their utility. Provided this information is accurate, and provided consumers are able to evaluate it properly, consumers can use this information to select products and services which meet their requirements. In some situations there is a greater likelihood that the decision-making process will be constrained and that this will result in poor consumer choices. According to the Secondary Explanatory Memorandum: Information standards are an example of regulatory intervention to address the market failure associated with information asymmetry. Lack of information on which to base purchasing decisions can lead consumers to make decisions which are not in their best interests. This can apply to services as well as goods. The service sector accounts for a significant share of economic activity in Australia and covers a wide variety of categories including financial services, property and business services, telecommunications, health services, travel and tourism, cultural and recreational services and personal services. Some services are subject to industry-specific regulation whereas others are subject only to the general fair trading laws. The misleading and deceptive conduct laws in Australia set a minimum acceptable standard of commercial behaviour. They are reactive, providing for sanctions (for example prosecution and injunctions) and remedies (for example compensation orders) to protect the public when misled or deceived. Information standards, on the other hand, are proactive, requiring a positive standard of information disclosure that the market, on its own, has not provided. 17

For example, selling products in complex bundles may make it difficult for consumers to calculate the price of each item in the bundle and make comparisons with the prices of competitors. This is a feature of pricing in the telecommunications sector where, for example, fixed line, mobile and internet services are advertised as a bundle of telecommunication services at a single price. 14 15 16

17

Akerlof, “The Market for “Lemons”: Quality, Uncertainty and the Market Mechanism” (1970) 84(3) Quarterly Journal of Economics 488. Hadfield, Howse, and Trebilcock, “Information-Based Principles for Rethinking Consumer Protection Policy” (1998) 21 Journal of Consumer Policy 131 at 150. Safety warning notices are required in relation to some hazardous products where there is a risk of physical injury. Mandatory information standards are required in relation to matters such as fibre content labelling of textile products, care labelling for clothing and textile products, and ingredient labelling for cosmetics and toiletries. Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [23.180]-[23.181].

CHAPTER

[9.20]

09

SCOPE AND POLICY OBJECTIVES

173

Behavioural economics and consumer detriment ...............................................................................................................................................................................................

“Classical” economic theory rests on assumptions of rational consumer behaviour. It is assumed that consumers are well-informed and that they will act in ways that fulfil their preferences. 18 Preferences are determined on the basis of self-interest. The rationale behind the classical model is to aggregate consumer decision-making so that analysis and predictions can be made at the market level rather than at the level of an individual or group of consumers. “Behavioural economics” is an empirical discipline that: [9.20]

extends the knowledge base of economics with insights from empirical studies of consumer behaviour. Relying largely on psychological studies, in laboratory simulations and actual markets, behavioural economics delves into the ways in which people make decisions. These patterns of behaviour, or biases, indicate ways in which consumers make decisions that are inconsistent with their welfare. This extension of knowledge can provide an important contribution to policy, both by identifying market failures missed by traditional theory and by contributing to the effectiveness and efficiency of remedies. 19

On 8 and 9 August 2007, the PC convened a roundtable on the topic “Behavioural Economics and Public Policy” in Melbourne. Behavioural economics applies insights from psychology to economic issues and analysis. Participants at the Roundtable discussed the contribution that behavioural economics can make to a broader understanding of people's motivation and behaviour in markets and the implications for policy and regulatory approaches. The PC acknowledged that behavioural economics has particular relevance to consumer policy, and that the insights gained through the Roundtable made a useful contribution to the Commission's inquiry on Australia's consumer policy framework. 20 Several important insights for consumer protection emerge from behavioural economics. One is that consumers do not always behave rationally and are in need of assistance in making purchasing decisions. Some consumers behave emotionally and are vulnerable to exploitation, for example, through the acquisition of weight loss products that do not entail diet or exercise, or get rich quick schemes that do not entail risk. 21 18 19

For a description see King and Smith, “The Shaky Economic Foundations of Consumer Protection Policy and Law” (2010) 18 Competition & Consumer Law Journal 71 at 74. OECD, Roundtable on Demand-side Economics for Consumer Policy, Summary Report (OECD, Paris, 20 April 2006), at [13]. For seminal works on behavioural economics, see Sunstein, Behavioural Law and Economics (Cambridge University Press, 2000) and Korobkin and Ulen, “Law and Behavioural Science: Removing the Rationality Assumption from Law and Economics” (2000) 88(4) California Law Review 1051.

20

See especially the papers by Mulholland, “Behavioural Economics and the Federal Trade Commission”; Shafir, “A Behavioural Background for Economic Policy”, and Field, “Having One’s Cake and Eating it too – an Analysis of Behavioural Economics from a Consumer Policy Perspective”. The conference proceedings can be found at http://www.pc.gov.au/research/supporting/behavioural-economics.

21

Mulholland, “Behavioural Economics and the Federal Trade Commission”, p 12.

174

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.20]

Mulholland observes that cooling off regulations in unsolicited consumer agreements provide another example of laws that incorporate behavioural economics insights: In particular, these rules are premised on the view that consumers at times make purchases in emotionally or biologically “hot” states that, in a cooler or more rational state, they would not make. Mandating a cooling-off period allows consumers to reframe their choices and to give them an opportunity for rational re-consideration to overcome the influence of impulsive choice. 22

Some high pressure sales techniques play on human weaknesses and the tendency of consumers to behave irrationally. For example, “limited time” sales put pressure on consumers to make up their minds quickly in the belief that the goods or services are scarce. They can result in consumer detriment because the decision to purchase is made under time pressure without the benefit of shopping around and making comparisons. “Reference pricing” or “two-price” advertising provides another example of a sales technique that may be used to exploit consumer irrationality. It refers to the practice of advertising the seller's current price for goods or services by reference to its previous price. The “was” price acts as a reference or anchor to what the goods or services are “worth” and can result in consumer detriment if goods or services were not, in fact, previously sold at that price. Finally, sellers may try to make the purchases less “painful” by allowing consumers to spread the payment into the future through lay-by schemes and thereby avoid the emotionally unpleasant experience of having to pay in full at the time of purchase. Consumers may suffer detriment if they are thereby induced to acquire goods or services they cannot afford. Suppliers can seek to exploit natural human weakness through unfair sales techniques including: • misleading conduct generally, or specific misleading representations or lack of disclosure of material information in relation to the supply of goods or services; • unfair marketing practices including harassment and coercion by sales people; • unconscionable conduct in relation to vulnerable consumer groups, including the elderly, consumers with poor understanding of English and the disadvantaged; and • using strong bargaining power to insert unfair terms in standard form consumer contracts. In order to eradicate these high-pressure sales techniques, an effective consumer regulatory regime requires that consumers have access to remedies should problems occur. Traders must have a clear understanding of their obligations and the enforcement powers of the regulator and the penalties imposed for failure to comply must act as a real deterrent for failure to comply. 22

Mulholland, “Behavioural Economics and the Federal Trade Commission”, pp 17-8.

CHAPTER

[9.35]

09

SCOPE AND POLICY OBJECTIVES

175

Sale of unsafe products and consumer detriment ...............................................................................................................................................................................................

A further source of personal consumer detriment arises from the sale of defective or unsafe products. The detriment will be easy to detect where the products result in physical injury or, for example, illness (that is, from ingesting tainted food). The ACL contains a number of product liability regimes. It seeks to limit consumer detriment arising from the sale of defective or unsafe products in Pt 3-3 (“Safety of consumer goods and product relate services”), Pt 3-4 (“Information standards”) and Pt 3-5 (“Liability of manufacturers for goods with safety defects”). [9.25]

Protection against business detriment ...............................................................................................................................................................................................

Despite its title, some general and specific protections in the ACL are available to businesses as well as consumers. Section 18, the general prohibition of misleading conduct, is not confined to consumer transactions, and much litigation has arisen as a result of businesses seeking to protect their commercial interests rather than as a result of consumers seeking remedies from businesses. Section 21, the general prohibition of unconscionable conduct, in trade or commerce, in relation to: the supply or possible supply of goods or services to a person (other than a listed public company), or the acquisition or possible acquisition of goods or services from a person (other than a listed public company). Thus, in the context of a business's dealings with other businesses, s 21 is intended to protect “business consumers” and “business suppliers” as well as individual consumers. A more restrictive approach was initially taken in relation to the general protection for unfair terms. Until 2015, the unfair terms law only applied where the supply of goods or services or the sale of an interest in land was to an individual. The term “individual” is defined in the Acts Interpretation Act 1901 (Cth) to mean a natural person. In 2015, the general protection in relation to unfair terms was extended to small businesses, although the more egregious unfair terms in business-to-business transactions may be caught by the prohibition of unconscionable conduct in s 21 of the ACL. 23 [9.30]

Misleading conduct and business detriment ...............................................................................................................................................................................................

It had long been recognised that the “consumer protection” provisions of the TPA were, before their repeal, concerned with the supply side as well as the demand side of markets and with market efficiency considerations. This is because misleading advertising increases demand for an inferior product at the expense of a superior product. It harms competition and is a cause of business detriment on the supply side. For [9.35]

23

ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 (Gordon J). See Corones, “Regulating Supermarket Misconduct as Customer/Acquirer of Goods and Services” (2015) 43(6) Australian Business Law Review 400 at 406-10.

176

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.35]

example, Lockhart J in Colgate-Palmolive Pty Ltd v Rexona Pty Ltd, 24 granted an interlocutory injunction to prevent misleading claims by Rexona concerning the effectiveness of Aim toothpaste for the following reasons: It is the plain purpose of the Act to require truthful conduct in the market place and that competition be free and fair. In this case, claims are made by Rexona which consumers themselves cannot verify. They rely on the technical expertise of Rexona to assure the validity of the claims. As I have found that a prima facie case has been established, the public interest is a matter to be taken into account, weighing heavily in favour of the granting of interlocutory injunctions …. There is evidence that Rexona's advertising campaign may erode the market share enjoyed by the smaller manufacturers of toothpastes. Indeed, Mr Johns, the General Sales Manager of Rexona, said in cross-examination that the introduction of Aim toothpaste would, in his view, cause the small brands to suffer substantially, …

Rexona contended that these matters are irrelevant as the small manufacturers are neither parties to the proceedings nor consumers. In my opinion the possible detriment to the small manufacturers is a relevant consideration. The Act is concerned with the maintenance of free and healthy competition. If a corporation is engaging in misleading or deceptive advertising which assists it in gaining a substantial share of a market at the expense of small manufacturers, the interests of those manufacturers must be a relevant consideration when considering the balance of convenience. 25 The same principle has been recognised in other cases. In Janssen-Cilag Pty Ltd v Pfizer Pty Ltd, 26 Pfizer argued that only a person who relied on the misleading representation which constituted the contravention of s 52 could recover damages under s 82 of the TPA. Lockhart J rejected this argument and refused to give s 82 a restrictive interpretation. His Honour held that the wording of s 82 did not impose some general requirement that damage can be recovered only where the applicant relies upon the conduct of the respondent constituting the contravention, and that s 82 can be relied upon by a rival trader who suffers a business detriment as a result of the contravening conduct. 27 Misleading conduct in relation to premium (or credence) claims can also harm competition on the supply side. 28 Where products are genuinely superior, premium claims assist consumers to make informed decisions and enhance consumer welfare. Where premium claims are false they are a source not only of consumer detriment, but also result in lost sales to the suppliers of genuine products. On the supply side, premium claims are the result of innovation and can promote competitive rivalry. False premium claims can deter suppliers from engaging in innovation, because consumers will be 24 25 26 27

Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242. Colgate-Palmolive Pty Ltd v Rexona Pty Ltd (1981) ATPR ¶40-242 at 43,194-5. See also Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) ATPR ¶41-186 (Lockhart J). Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526. Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at [16].

28

ACCC v Marksun Australia Pty Ltd (2011) ATPR ¶42-363 at [107].

CHAPTER

[9.40]

09

SCOPE AND POLICY OBJECTIVES

177

cynical in future about the accuracy of such claims. In assessing the level of pecuniary penalties to be imposed under s 224 of the ACL, the court is required to take into account the amount of the loss or damage caused by the conduct to consumers on the demand side and competitors on the supply side. For example, in ACCC v Reebok Australia Pty Ltd, McKerracher J took into account the loss or damage suffered by competitors: The damage to fair and open competition in the footwear market in Australia cannot be quantified, but it is likely that the conduct had a significant effect because some consumers were misled into purchasing the EasyTone shoes on the basis of credence attributes which they could not readily verify, and where they would not otherwise have made such a purchase had they known the shoes did not have such attributes. 29

Drip pricing can be a source of consumer detriment on the demand side and business detriment on the supply side. It is a feature of online selling. Drip pricing refers to the practice of using a headline price to attract potential buyers which is misleading because it is not the final total price. This is only ascertained after working through several pages on the site which disclosure fees and surcharges incrementally. The buyer may decide to purchase because of the investment of time and effort involved in searching for the final price even though they would not have purchased if they had been advised of the total price at the outset. Consumer detriment arises because drip pricing leads consumers into making purchases of goods and services which they would not otherwise have made, or paying more for goods and services than they would have paid if they had been better informed. Competition is harmed on the supply side because of the erosion of market share by suppliers with less expensive products whose goods and services would have been purchased but for the drip pricing. Because of this demand and supply side interaction it was thought appropriate to include the ACL in the CCA. Policy objects included in the IGA ...............................................................................................................................................................................................

The modern approach or “purposive” approach to statutory interpretation favours a construction of legislation which gives effect to its legislative purpose. Section 15AA of the Acts Interpretation Act 1901 (Cth) requires the courts when interpreting a statute to adopt a meaning that would “promote the purpose or object underlying the Act” rather than one that would not do so. Objects provisions can play a significant role as an aid to judicial interpretation and can influence judicial outcomes. The overarching national consumer policy objective favoured by the PC, 30 agreed to by MCCA on 15 August 2008, and included in the IGA signed by COAG on 2 July 2009, is: [9.40]

29 30

ACCC v Reebok Australia Pty Ltd (2015) ATPR ¶42-501 at [143] citing the Full Federal Court in Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [69]. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008)), recommendation 3.1, vol 2, pp 41-2.

178

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.40]

To improve consumer well-being through consumer empowerment and protection fostering effective competition and enabling confident participation of consumers in markets in which both consumers and suppliers trade fairly. 31

Some of the States and Territories have amended their Application Acts to include this objective. 32 This overarching objective is supported by six operational objectives: (a)

to ensure that consumers are sufficiently well-informed to benefit from and stimulate effective competition;

(b)

to ensure that goods and services are safe and fit for the purposes for which they were sold;

(c)

to prevent practices that are unfair;

(d)

to meet the needs of those consumers who are most vulnerable or are at the greatest disadvantage;

(e)

to provide accessible and timely redress where consumer detriment has occurred; and

(f) to promote proportionate, risk-based enforcement. 33 Other objectives of the ACL can be gleaned from the extrinsic materials, especially the Productivity Commission Report, the CCAAC Report and the MCCA. They are: (a)

to clarify the law relating to consumer protection in Australia (clarity);

(b)

to make the law relating to consumer protection in Australia consistent across all jurisdictions and sectors of the economy (consistency);

(c)

to make the law relating to consumer protection in Australia more readily enforceable from the consumer's point of view (accessibility);

(d)

to raise awareness of consumers and suppliers of their rights and responsibilities under the law relating to consumer protection in Australia (awareness); and

(e)

to promote compliance by business with the law relating to consumer protection in Australia (compliance). The Competition Policy Reform Act 1995 (Cth) inserted a new objects provision into the CCA. It provides: The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

Well before s 2 was inserted, the consumer protection provisions of Pt V of the TPA were consistently recognised as having important public policy objectives. For example, in 31 32 33

Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), Recital C. See Fair Trading Act 1989 (Qld), s 3; Fair Trading Act 2010 (WA), s 3. Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), Recital D.

CHAPTER

[9.45]

09

SCOPE AND POLICY OBJECTIVES

179

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 34 Mason J (as his Honour then was) observed that the two policy objectives of promoting competition and protecting consumers could be reconciled: The object of Pt V is to protect the consumer by eliminating unfair trade practices, just as the object of Pt IV is to promote competition by eliminating restrictive trade practices. Knowledge of the history of the legislative proposals, of the legislation and of the controversy which has surrounded it might suggest that the dominant object of the Act is the promotion of freedom of competition. But examination and analysis of its provisions yields no acceptable foundation for this conclusion. The two Parts are independent and there is no direction that one Part is to be read subject to the other. Although they have to be read together as parts of the same statute, they might in other circumstances have been enacted as separate statutes with not very much difference in legal effect. 35

Managing consumer policy and reform ...............................................................................................................................................................................................

In 2011, COAG reformed its organisation and processes. The former Ministerial Council on Consumer Affairs (MCCA) was replaced by the COAG Legislative and Governance Forum of Consumer Affairs (CAF) which consists of the Australian and New Zealand Ministers responsible for consumer affairs. CAF's role and objectives are set out in the Charter 2013-2015 (dated 1 July 2013). 36 CAF is responsible for the administration of the ACL and other issues under the Inter-Governmental Agreements. 37 Consumer Affairs Australia and New Zealand (CAANZ) comprises: the Australian Treasury (the Commonwealth Department responsible for administering the CCA) and Federal agencies (ACCC and ASIC); the New Zealand Ministry of Business, Innovation and Employment and the NZ Commerce Commission; and the eight State and Territory regulators set out at [9.145]. CAANZ provides primary support to CAF in achieving its strategic objectives. CAANZ has established a number of advisory and consultative committees for each of its four main functions: [9.45]

• education and information (Education &Information Committee); • compliance and dispute resolution (Compliance & Dispute Resolution Advisory Committee); • product safety (Product Safety Consultative Committee); and • policy and research (Policy & Research Advisory Committee). The Australian Consumer Law Review Issues Paper was released in March 2016 and is available at the www.consumerlaw.gov.au website. It will be overseen by CAANZ and 34 35

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 202-5.

36

COAG Legislative and Governance Forum of Consumer Affairs and Consumer Affairs Australia and New Zealand, Charter 2013-2015 (1 July 2013), at http://consumerlaw.gov.au/files/2015/09/CAF_charter_ 20130515.pdf Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), the Trans-Tasman Mutual Recognition Act 1997, the Mutual Recognition Act 1992, the “Travel Agents Participation Agreement” and other matters delegated by COAG.

37

180

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.50]

will formally commence in 2016, incorporating an extensive public consultation process and with a final report to Ministers in early 2017. Overview of the ACL ...............................................................................................................................................................................................

Part XI of the CCA provides for the application of the Australian Consumer Law as a law of the Commonwealth. The text of the ACL consists of: [9.50]

• Schedule 2 of the CCA; • the remaining provisions of the that relate to Sch 2 of the CCA; and • regulations under the CCA that relate to the ACL. The ACL applies as a law of the Commonwealth under the CCA. Part XIAA of the CCA regulates the application of the Australian Consumer Law as a law of a State or Territory. The “applied Australian Consumer Law” is defined in s 140 of the CCA to mean the text described in s 140B. Section 140B of the CCA states: The applied Australian Consumer Law consists of: (g) Schedule 2; and (h) The regulations made under section 139G of this Act.

The ACL applies as a law of each State and Territory by separate State and Territory application legislation referred to collectively in this work as the ACL (Application Acts). They are considered in Part IV of this chapter. When the States and Territories implemented the ACL (Application Acts) they adopted the “Australian Consumer Law text”. 38 The Australian Consumer Law text consists of: (f) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth, and (g) the regulations made under s 139G of that Act.

Thus, there are nine ACLs in force in Australia. The ACL (Cth), applies principally to corporations. In addition, there are six State and two Territory ACLs that apply to persons generally. However, while the States and Territories adopted the text as defined which includes the regulations made under s 139G of the CCA, they did not adopt the other provisions in the CCA. This means that the nine ACLs are not entirely uniform, because there are a number of important provisions in the CCA that are not in the ACL (Cth) itself, and have not been enacted in the ACL (Application Acts) or other State and Territory legislation. 38

The Principal State and Territory Application Acts are: Fair Trading Act 1987 (NSW) (FTA 1987 (NSW)), ss 27 and 28; Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA 2012 (Vic)), ss 7 and 8; Fair Trading Act 1989 (Qld) (FTA 1989 (Qld)), ss 15 and 16; Fair Trading Act 2010 (WA) (FTA 2010 (WA)), ss 18 and 19; Fair Trading Act 1987 (SA) (FTA 1987 (SA)), ss 13 and 14; Australian Consumer Law (Tasmania) Act 2010 (Tas) (ACLA 2010 (Tas)), ss 5 and 6; Consumer Affairs and Fair Trading Act (NT) (CAFTA (NT)), ss 26 and 27; and Fair Trading (Australian Consumer Law) Act 1992 (ACT) (FT(ACL)A 1992 (ACT)), ss 6 and 7.

[9.50]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

181

Some important differences that should be noted are: • Section 131(1) of the CCA provides that the ACL (Cth) applies to the conduct of corporations, and only to a limited extent to the conduct of individuals, although ss 6 and 131(2) of the CCA extend the operation of the ACL (Cth) to natural persons in certain circumstances where the Commonwealth has constitutional power to do so. The ACL (Application Acts) apply to the conduct of persons (corporations and individuals). • A contributory fault defence is provided by s 137B of the CCA in relation to claims for damages under s 236 of the ACL (Cth) which re-enacts s 82(1B) of the TPA. 39 State legislation 40 allows a court to reduce an award of damages for contributory negligence only for claims arising out of the tort of negligence and contributory negligence is available at common law; or the claim is for loss arising from a breach of contractual duty that is concurrent with a duty of care in tort. The legislative provisions have not been amended to extend contributory negligence to a statutory claim for damages under s 236 of the ACL (Application Acts). This presents a procedural advantage for claimants seeking damages under the ACL (Application Acts), who will be able to avoid a reduction of their damages award for contributory fault. • Section 139A of the CCA expressly allows for a term that limits or excludes liability for a failure to comply with the consumer guarantees by suppliers of recreational services under the ACL (Cth). Some States and Territories adopt similar provisions. 41 • Part VIA of the CCA (Proportionate liability) only applies to a claim for damages made under s 236 of the ACL (Cth) for economic loss or damage to property caused by conduct that was done in contravention of s 18 of the ACL (Cth). Similar provisions have been introduced into State and Territory legislation and apply in relation to claims for negligence and misleading conduct. 42 39

In relation to New South Wales, see the decision of the New South Wales Court of Appeal in Perpetual Trustee Company Ltd v Milanex Pty Ltd (In liq) [2011] NSWCA 367. Seddon and Fridman, “Misleading Conduct and Contributory Fault: Inconsistency under the Uniform Australian Consumer Law” (2012) 20 Australian Journal of Competition and Consumer Law 87.

40

See Law Reform (Miscellaneous Provisions) Act 1965 (NSW), ss 8 and 9; Law Reform Act 1995 (Qld), s 10; Civil Liability Act 1936 (SA), s 50; Tortfeasors and Contributory Negligence Act 1954 (Tas), s 4(1); Wrongs Act 1958 (Vic), s 26(1); Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA), s 4(1); Law Reform (Miscellaneous Provisions) Act 1955 (ACT), s 15; Law Reform (Miscellaneous Provisions) Act (NT), s 16(1). For example, s 22(1) of the ACLFTA 2012 (Vic) provides that a term of a contract which operates to limit liability in relation to the supply of recreational services in the ways described is not void by virtue of s 64 of the ACLFTA 2012 (Vic). On the other hand, s 107 of the FTA 1989 (Qld) prohibits all forms of contracting out of the ACL (Qld). Civil Liability Act 2002 (NSW), s 34(1)(b); Civil Liability Act 2003 (Qld), s 28(1)(b) (but note the exclusion for claims by consumers); Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), s 8; Civil Liability Act 2002 (Tas), s 43A; Wrongs Act 1958 (Vic), s 24AF(1)(b); Civil Liability Act 2002 (WA), s 5AI(1)(b); Civil Law (Wrongs) Act 2002 (ACT), s 107B; Proportionate Liability Act (NT), s 4(2)(b).

41

42

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

182

[9.55]

Before commencing proceedings prospective litigants will need to consider which ACL applies. There may be procedural advantages in framing the cause of action as one based on the ACL (Application Acts) rather than the ACL (Cth). Commencement dates ...............................................................................................................................................................................................

The ACL (Cth), Sch 2 was implemented in two stages. The first stage of the reforms contained in the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth) (First Commonwealth Act) was passed by the Parliament on 17 March 2010. The First Commonwealth Act comprised: [9.55]

(a)

national unfair contract terms provisions, and

(b)

new civil pecuniary penalties, enforcement powers and consumer redress options for breaches of the TPA or the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). These provisions came into operation on 1 July 2010. The second stage of the reforms contained in the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) (Second Commonwealth Act) was passed on 24 June 2010. The Second Commonwealth Act comprised: (i)

changes drawing on best practice in the States and Territories, 43

(ii)

the consumer guarantees reforms, and

(iii)

a new standard consumer product safety law for consumer goods and product related services. This Act introduced the ACL and provided that the new law would commence on 1 January 2011. Section 139G of the CCA provides that the Governor-General may make regulations prescribing matters required or permitted by the ACL to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the ACL. Item 12 of Sch 7 to the Second Commonwealth Act provides that the GovernorGeneral may make regulations prescribing matters of a transitional, application or saving nature in relation to the amendments and repeals made by the Schedules to the Second Commonwealth Act. On 16 November 2010, the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No 1) 44 (ACL Amendment Regulations) were published. Since the Second Commonwealth Act was scheduled to commence on 1 January 2011, these regulations were made pursuant to s 4 of the Acts Interpretation Act 1901 (Cth) 43

44

The Ministerial Council on Consumer Affairs (MCCA) held in Perth on 4 December 2009, considered and agreed on 14 specific proposals to enhance the effectiveness of the Australian Consumer Law. These include unsolicited sales practices, and other forms of direct selling which do not take place in a retail context, lay-by sales transactions, demanding payment for unsolicited advertising, and clarifications to the provisions on pyramid selling. Registered on the Federal Register of Legislative Instruments, at http://www.comlaw.gov.au.

[9.55]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

183

which provides that the regulation-making powers in the ACL (Cth) can be exercised as if the Act had come into force. The ACL Amendment Regulations provide for three transition periods for the implementation of the ACL, to allay the fears expressed by the business community that they would be unable to comply with the 1 January 2011 commencement date. Schedule 1 to the ACL Amendment Regulations relates to the following provisions in the ACL: (a)

prescribed requirements for asserting a right to payment,

(b)

agreements that are not unsolicited consumer agreements and

(c)

reporting requirements for goods or product-related services associated with death, serious injury or serious illness. These provisions commenced on 1 January 2011. Schedule 2 to the ACL Amendment Regulations relates to repair notices provisions of the ACL, which commenced on 1 July 2011. Schedule 3 to the ACL Amendment Regulations relates to warranties against defects provisions of the ACL, which commenced on 1 January 2012. The TPA was amended and partially renumbered with effect from 1 January 2011 by the Second Commonwealth Act. At the same time, the TPA was renamed by item 2 of Sch 5 to the Second Commonwealth Act to become the Competition and Consumer Act 2010 (Cth). By reason of item 7(1) of Sch 7 to the Second Commonwealth Act the TPA as in force immediately before 1 January 2011 continues to apply to acts or omissions that occurred before that date. This means that in relation to conduct that occurred before 1 January 2011, and continued after that date, it will be necessary to seek relief under the relevant provisions of the TPA and the CCA. At the State and Territory level the ACL was also implemented in stages. Two States implemented the unfair terms provisions of the ACL as a law of their States by incorporating them into their Fair Trading Acts. The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (Vic) was passed by the Parliament of Victoria on 1 June 2010 and came into operation as a law of the State of Victoria on 1 July 2010. 45 The Fair Trading Amendment (Unfair Contract Terms) Act 2010 (NSW) was passed by the Parliament of New South Wales on 23 June 2010 and came into operation as a law of the State of New South Wales on 1 July 2010. 46 From 1 January 2011, the FTA unfair terms provisions in these States were repealed and the unfair terms provisions of the CCA, Sch 2 now apply. The ACL (Application Acts) which enacted the ACL as a law of their respective jurisdictions commenced on 1 January 2011. 45

46

Available at http://www.parliament.vic.gov.au/static/www.legislation.vic.gov.au-bills.html. See Government Gazette (24 June 2010) http://www.gazette.vic.gov.au/gazette/Gazettes2010/ GG2010G025.pdf. See Government Gazette (1 July 2010) http://www.legislation.nsw.gov.au/sessionalview/sessional/sr/ 2010-321.pdf.

184

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.60]

Transitional measures ...............................................................................................................................................................................................

Transitional measures are contained in Sch 7 of the Second Commonwealth Act. Items 2–5 make the following provisions in relation to existing product declaration, bans and standards: [9.60]

2 Declarations of goods to be unsafe goods A notice under subsection 65C(5) of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if: (a) it were an interim ban imposed under section 109 of the Australian Consumer Law by the Commonwealth Minister; and (b) it starts on the day of that commencement. 3 Permanent bans A notice under subsection 65C(7) of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were a permanent ban imposed under section 114 of the Australian Consumer Law. 4 Prescribed consumer product safety standards A prescribed consumer product safety standard under section 65C of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were a safety standard made under section 104 of the Australian Consumer Law. 5 Prescribed consumer product information standards A prescribed consumer product information standard under section 65D of the Trade Practices Act 1974 that was in force immediately before the commencement of this item continues in force after that commencement as if it were an information standard made under section 134 of the Australian Consumer Law.

Implementation of the new consumer guarantees regime is dealt with in item 6 of Sch 7 of the Second Commonwealth Act. It provides that Ch 3, Pt 3-2 (Consumer transactions) applies to all relevant conduct occurring in trade or commerce on or after 1 January 2011. Conduct occurring prior to 1 January 2011 will remain subject to the repealed (and saved, for those purposes) provisions of the TPA or the relevant FTA of a State or Territory . 47 Goods and services acquired before 1 January 2011 will be covered by TPA and FTA regimes . Eligible goods and services acquired on or after 1 January 2011 will be subject to the guarantees. Warranties for financial services provided by the ASIC Act 48 will continue to apply and be administered by ASIC. 47

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [7.144].

48

ASIC Act, s 12ED.

CHAPTER

[9.65]

09

SCOPE AND POLICY OBJECTIVES

185

Item 7 of Sch 7 of the Second Commonwealth Act provides that the TOA, as in force immediately before the commencement of the CCA, Sch 2, continues to apply to or in relation to any proceedings which were commenced, but not concluded, before the commencement of the ACL. Substantive changes introduced by the ACL ...............................................................................................................................................................................................

The principal substantive changes introduced by the ACL are the national law on unfair contract terms (Ch 2, Pt 2-3) and the national consumer guarantees law, which replaces the statutory implied conditions and warranties (Ch 3, Pt 3-2, Div 1). However, many of the ACL provisions are not substantively different from their equivalent former TPA provisions. According to the Second Explanatory Memorandum accompanying the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, when transferring the provisions of the TPA into the ACL, the opportunity was taken to express the law in a clearer style. It stated: [9.65]

much of the TPA has been in place for over 30 years, so a number of ACL provisions have been redrafted to comply with plain English drafting. 49

The drafting changes are not intended to alter the legal effect of those TPA provisions. Thus, the extensive jurisprudence that developed around those TPA provisions will apply equally to the new ACL provisions that re-enact them. The Australian Treasury, the Commonwealth Department responsible for the administration of the CCA, has published two guides to explain the context of the ACL reforms: • The Australian Consumer Law: An Introduction; 50 and • The Australian Consumer Law: A Guide to Provisions. 51 In The Australian Consumer Law: An Introduction, Treasury identifies the following changes as the principal ones being implemented by the ACL: • a single set of definitions and interpretive provisions, some of which differ from those currently used in the (Ch 1); • a new, national law on unfair contract terms (Ch 2, Pt 2-3); • a single set of provisions about unfair practices and fair trading, including amendments and additions which reflect existing provisions in State and Territory consumer laws (Ch 3, Pt 3-1); • new national consumer guarantees provisions, which will replace statutory implied conditions and warranties (Ch 3, Pt 3-2, Div 1); 49 50

Second Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010, at [6.8]. The Australian Consumer Law: An Introduction (July 2010).

51

The Australian Consumer Law: A Guide to Provisions (July 2010).

186

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.65]

• a new national regime for unsolicited consumer agreements, which will replace existing State and Territory laws on door-to-door sales and other direct marketing (Ch 3, Pt 3-2, Div 2); • simple national rules for lay-by agreements (Ch 3, Pt 3-2, Div 3); • a new, national product safety legislative regime (Ch 3, Pt 3-3); and • new national provisions on information standards which apply to services as well as goods (Ch 3, Pt 3-4). 52 The following table, originally prepared by the Australian Treasury, summarises the principal differences between the ACL and the TPA consumer protection provisions. 53 It was prepared before the Second ACL Bill was amended in the Senate. It has been amended to reflect those and other changes that have occurred since 1 January 2011. TABLE 1.1 Australian Consumer Law – Table of provisions that have substantially changed compared to the TPA

Description

ACL

TPA or other source

Comments

Chapter 1 Meaning of consumer

s3

TPA, s 4B

$40,000 threshold retained contrary to the version of the Bill first introduced into Parliament. Amended to clarify that burden of proof is evidentiary only in nature; no legal burden on defendant; and not a defence to otherwise misleading or deceptive conduct. Proposed changes agreed by MCCA on 4 December 2009. New provision – based on NZ Consumer Guarantees Act 1993 (CG Act). Only applies to contracts for or relating to the use of postal, telegraphic or telephonic services; or contracts for or relating to radio or television broadcasts.

s4 Misleading representations with respect to future matters

TPA, s 51A

When donations are s 5 treated as supplies

-

Postal, telegraphic or telephonic services or contracts for or in relation to a radio or television broadcast

s 6(3A)

TPA, s 6(3)

52

The Australian Consumer Law: An Introduction, p 3.

53

The Table in its original form appears as an Appendix to the submission by the Treasury to the Senate Economics Legislation Committee. It is reproduced with the kind permission of Office of the Senior Clerk of Committees Department of the Senate.

[9.65]

CHAPTER

Description

ACL

Meaning of manufacturer

s7

09

SCOPE AND POLICY OBJECTIVES

TPA or other source TPA, s 74A

Part 2-1: Misleading or deceptive conduct TPA, s 65A Application of this s 19 Part to information providers Part 2-2: Unconscionable conduct s 21 Unconscionable conduct in consumer and business transactions

Part 2-3 Unfair Terms ss 23 – 28 Unfair terms in standard form consumer contracts

187

Comments Draws on the definition of “manufactured” in s 74A(1) and deemed “manufacturer” in s 74A(3) of the of the TPA. Subsections 19(3) and 19(4) reflect the High Court's interpretation of 65A of the in ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305.

TPA, ss 51AB and 51AC

Amended to give effect to Government response to the 2009 Senate Economics Committee report on unconscionable conduct. Section 22(2)(j) and 22(3)(j) inserted to allow the court to have regard to the progress of a contract in considering unconscionability. Amended by the Competition and Consumer Legislation Amendment Act 2011 (Cth) which implemented the Expert Panel's recommendations to include a list of interpretive principles and unify the consumer and business related provisions prohibiting unconscionable conduct.

-

Adds prohibition of unfair terms in standard form consumer contracts

188

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Description

[9.65]

TPA or other Comments source Part 3-1 Unfair practices, Division 1: False or misleading representations etc. TPA, s 53 Section 53 of the TPA expanded False or misleading s 29 to: representations about goods or • clarify that discharging an evidentiary burden does not services amount to a defence; • prohibit both false or misleading representations (whereas s 53 prohibited only false representations in some instances); and • include additional prohibitions relating to: – representations that are testimonials and representations about testimonials (based on s 14 FTA 1999); and – representations concerning consumer guarantees.

False or misleading representations about sale etc of land Offering rebates, gifts, prizes etc

ACL

s 30 s 31

s 32

These changes were agreed by MCCA on 4 December 2009. TPA, s 53A TPA, Prohibition on offering gifts and s 53B prizes in connection with the sale of land moved to s 32 of the ACL. TPA, s 54; FTA (Vic), s 16(6)

Combines s 54 of TPA and s 16 of FTA 1999. Defence: s 32(3) added to no providing rebate, gift prize or other free item within time specified (or reasonable time) if: • act or omission of another person or cause beyond person's control; and • took reasonable precautions to ensure rebate, gift, prize or other free item would be provided within time specified (or reasonable time).

CHAPTER

[9.65]

Description

ACL

Wrongly accepting payment

s 36

09

TPA or other source TPA, s 58

Applications of s 38 TPA, s 65A provision of this Division to information providers Part 3-1, Division 2: Unsolicited supplies TPA, s 64 Assertion of right to s 40 payment for unsolicited goods or services s 42 Liability of recipient for unsolicited services Assertion of right to s 43 payment for unauthorised entries or advertisements

SCOPE AND POLICY OBJECTIVES

–

TPA, s 64

189

Comments Provision now includes requirement to provide goods or services for which payment has been accepted within a specified time, or if no time is specified, within a reasonable time (s 36(4)). Based on s 19 of FTA 1999. Defence: s 36(4) added to accepting payment for goods or services without supply within specified period if: • failure due to act or omission of another person or cause beyond person's control; and • person took reasonable precautions and exercised due diligence to avoid failure. Subsections 38(3) and 38(4) reflect the High Court's interpretation of s 65A of the in ACCC v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305. Adds requirement for a warning statement to be set out in the regulations. Based on s 58 FTA 1987. Agreed by Ministerial Council on Consumer Affairs on 4 December 2009. Based on s 26 of the FTA 1999.

Adds prohibition on asserting a right to payment for unauthorised advertisements. Expansion to advertisements

190

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Description

ACL

[9.65]

TPA or other Comments source Part 3-1, Divisions 3 to 5: Pyramid schemes, multiple pricing and other unfair practices TPA, s 65AAE Amended such that a court Marketing schemes s 46 “must” have regard to certain as pyramid schemes matters, instead of “may”. Ministerial Council on Consumer Affairs agreed to clarification of pyramid selling provisions on 4 December 2009. s 47 Multiple pricing – Similar to s 40 of the FTA 1987. The inclusion of this provision in the ACL was agreed by Ministerial Council on Consumer Affairs on 4 December 2009. s 50 TPA, ss 60 & Harassment and Combines harassment and 53A(2) coercion coercion in connection with supply of goods and services (s 60) with the same in relation to interests in land (s 53A(2)). Part 3-2, Division 1: Consumer guarantees Guarantees relating ss 51 – 59 NZ CGA Guarantees correspond to implied to the supply of conditions and warranties in Pt V, Div 2 of the TPA. goods NZ CGA Guarantees correspond to existing Guarantees relating ss 60 – 63 conditions and warranties in Pt V, to the supply of Div 2 of the TPA. A new services guarantee, based on a NZ provision, relates to supply of services within a reasonable time. An exemption for architects and engineers in s 74 of the TPA has been carried over in s 61(4) of the ACL. s 65 – New provision – regulationApplication of making power to allow for Division to supplies exclusion of guarantees for these of gas, electricity supplies. and telecommunications Sch 2, s 66 Display notices – New provision based on Commonwealth Consumer Affairs Advisory Council recommendation. The inclusion of this provision in the ACL was agreed by the Ministerial Council on Consumer Affairs on 4 December 2009.

CHAPTER

[9.65]

Description

ACL

09

SCOPE AND POLICY OBJECTIVES

191

TPA or other Comments source Part 3-2, Division 2: Unsolicited consumer agreements ss 69 – 95 All provisions – New law – based on existing arrangements in all States and Territories. Part 3-2, Division 3: Lay-by agreements ss 96 – 99 All provisions – New law – high level principles, as agreed at Ministerial Council on Consumer Affairs on 4 December 2009. Part 3-2, Division 4 : Miscellaneous s 100 Similar to s 161A, The inclusion of this provision in Supplier must FTA 1999. the ACL was agreed by the provide proof of Ministerial Council on Consumer transaction Affairs on 4 December 2009. s 101 Similar to s 161A, The inclusion of this provision in Customer may FTA 1999 (Vic). the ACL was agreed by the request itemised bill Ministerial Council on Consumer Affairs on 4 December 2009. s 102 Similar to FTA Allows regulation to be made to Prescribed 1989 (Qld), Pt 3, prescribe requirements contact requirements for Div 5 details, etc to be provided when warranties against warranty provided by supplier. defects s 103 – New provision – allows Repairers must regulations to be made requiring comply with repairers of goods to provide prescribed information to consumers about, requirements for example, the potential for data to be erased from electronic storage media when goods are repaired, as agreed at the Ministerial Council on Consumer Affairs on 4 December 2009.

192

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

Description

ACL

[9.65]

TPA or other Comments source Parts 3-3 and 3-4, Product Safety and Information Standards ss 104 – 137 TPA, ss 65B, Safety standards The Ministerial Council on 65C, 65D, 65E, Consumer Affairs agreed to a new 65F, 65G, 65H, approach to product safety at its 65R, 65T meeting on 23 May 2008. On 4 December 2009 the MCCA agreed to the detailed operation of this approach. It is based on existing arrangements for safety standards, interim bans, permanent bans, mutual recognition, compulsory recalls, voluntary recalls, safety warning notices and information standards under the TPA and recommendations by the Productivity Commission. A new reporting requirement for incidents occasioning death or serious injury has been included in the ACL. The Productivity Commission recommended a mandatory reporting requirement along these lines. Part 3-5, Manufacturer's liability for safety defects s 138 – 150 TPA, Pt V, No policy change between TPA Manufacturer's Div 2A and ACL. liability Chapter 4, Offences Offences replicate Chapter 3 provisions Parts 5-1 and 5-2: Enforcement and Remedies TPA, s 76E Pecuniary penalties ss 224 – 231 Penalties apply to new provisions in Chapter 3 based on best practice from States and Territories. ss 232 – 235 TPA, s 80 Injunctions Addition of an injunction restraining a person from carrying on a business. Based on s 65(2) of the FTA 1987. s 236 TPA, s 82 Actions for Provisions dealing with damages damages for personal injury moved to Pt XI of the TPA, to apply only as Commonwealth law. ss 237, 238 TPA, s 87 Provisions dealing with damages Compensation for personal injury moved to orders for injured Pt XI of the TPA, to apply only as persons Commonwealth law.

[9.65]

Description

CHAPTER

ACL

09

SCOPE AND POLICY OBJECTIVES

TPA or other source

s 249 Privilege against exposure to a penalty Defences for certain ss 251 – 253 civil prosecutions Part 5-3, Country of origin representations ss 254 – 258 Country or origin representations

193

Comments New law

New law

New defence to misleading or deceptive conduct for goods “grown in” a particular country.

Part 5-4, Remedies relating to consumer guarantees ss 259 – 266 Actions against Based on NZ suppliers of goods CGA ss 267 – 270 Actions against Based on NZ suppliers of services CGA ss 271 – 273 Based on NZ Actions for CGA damages against manufacturers of goods TPA, s 74H Indemnity expanded to cover not Indemnification of s 274 only situations where a suppliers by manufacturer would be required manufacturers to pay damages, but to circumstances in which a supplier incurs costs because goods are not of acceptable quality, fit for purpose or fail to match their description. Part 5-5, Liability of linked credit providers ss 278 – 287 TPA, s 73 Linked credit Based on s 73 of the TPA and s 135 of the National Credit Code, contracts to ensure that amounts can be recovered in State and Territory tribunals in respect of linked credit contracts. The NCC is otherwise only enforceable in courts (but not tribunals).

The remainder of this chapter is divided into four parts. • Part II – explains the history of the ACL; • Part III – considers the adoption and scope of the ACL (Cth); • Part IV – considers the adoption and scope of the ACL (Application Acts); and • Part V – considers the implementation and enforcement of the ACL by the ACL regulators.

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

194

[9.70]

Part II: History of the ACL The catalyst for the ACL reforms was the two studies completed by the Productivity Commission (PC): the 2006 report, Review of the Australian Consumer Product Safety System, 54 and the 2008 report, Review of Australia's Consumer Policy Framework. 55 As part of its terms of reference for the 2008 report the PC was to consider “ways to improve the consumer policy framework so as to assist and empower consumers to meet current and future challenges”. The PC was also required to report on “any barriers to, and ways to improve, the harmonisation and coordination of consumer policy and its development and administration across jurisdictions in Australia, including ways to institutionalise arrangements and to avoid duplications of effort”. 56 [9.70]

Comparison of generic consumer protection legislation ...............................................................................................................................................................................................

As part of its 2008 Inquiry, the PC commissioned a report to ascertain the nature and extent of any differences between the existing Commonwealth, State and Territory legislation governing consumer protection (Consultancy Report). 57 The Consultancy Report considered first the Commonwealth consumer protection regime contained in Pt V of the former TPA and other Commonwealth legislation, principally the ASIC Act. Having considered the material differences between the Commonwealth legislation, the report compared the TPA (the template legislation) with the equivalent provisions of the State and Territory Fair Trading legislation (eight separate pieces of State and Territory legislation), including the enforcement powers of the State and Territory regulators. The report also considered the material differences between the statutory implied terms regime in Pt V Div 2 of the TPA, and the State and Territory Sale of Goods Acts (another eight separate pieces of legislation). Finally, the report considered other State legislation dealing with unfair or unjust terms (a further two separate pieces of legislation). The overall conclusion of the report was that a myriad of Commonwealth, State and Territory consumer laws had developed over time with many small variations, even in regard to the definition of “consumer”, and that rather than moving towards uniformity and simplicity, they were moving towards greater complexity and disharmony. The national consumer protection laws contained in the TPA, overlapped with separate but [9.75]

54 55

56 57

Productivity Commission, Review of the Australian Consumer Product Safety System: Research Report (7 February 2006), at http://www.pc.gov.au/inquiries/completed/product-safety/report. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008). The PC’s report is available at http://www.pc.gov.au/inquiries/completed/consumer-policy/ report. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), vol 1, p vii. Professors Corones and Christensen, Comparison of Generic Consumer Protection Legislation (Consultancy Report prepared for Productivity Commission, Faculty of Law, Queensland University of Technology, September, 2007), available at http://www.pc.gov.au/inquiries/completed/consumer-policy/ consumerprotectionlegislation.

CHAPTER

[9.80]

09

SCOPE AND POLICY OBJECTIVES

195

discontinuous State and Territory fair trading provisions, leading to uncertainty and unjustified compliance costs for businesses, and confusion for consumers as to their rights and remedies. The PC recommended that a single national generic consumer law (to be called “The Australian Consumer Law”) be implemented and that the existing consumer protection provisions of the TPA should form the basis for the new law. The Australian Consumer Law would constitute a single, national law for fair trading and consumer protection, which would apply equally in all Australian jurisdictions. Commonwealth Consumer Affairs Advisory Council Report

The PC, in its review of Australia's Consumer Policy Framework, noted that it had not “undertaken the detailed analysis necessary to reach a judgment on the adequacy or otherwise of the existing regulation in this area, or the merits of alternative models such as those adopted in countries such as New Zealand”. 58 Accordingly, it recommended that: “The adequacy of existing legislation related to implied warranties and conditions should be examined as part of the development of the new national generic consumer law”. 59 On 12 March 2009, the Australian government announced that a review of the Australian law of implied terms would be undertaken by the Commonwealth Consumer Affairs Advisory Council (CCAAC). 60 On 26 July 2009, the Minister for Competition Policy and Consumer Affairs, the Hon Dr Craig Emerson MP released an Issues Paper on behalf of CCAAC. The Issues Paper examined the adequacy of the existing laws on implied terms and the need, if any, for amendments. 61 A parallel consultation process was conducted with the States and Territory consumer agencies. Based on the 33 written submissions received by CCAAC in response to the Issues Paper, there were interviews in Canberra and Melbourne with interested parties and additional teleconferences in September 2009. CCAAC also had discussions with the New Zealand Ministry of Consumer Affairs, ASIC and the ACCC on the adequacy and effectiveness of the [9.80]

58 59 60

61

Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), p 176. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), recommendation 8.1. The function of CCAAC is to “consider reports and papers referred to CCAAC by the Minister and report to the Minister on their likely consumer impacts; identify emerging issues impacting on consumers and draw those to the attention of the Minister; and investigate and report to the Minister on consumer issues referred to CCAAC by the Minister”. The reports are available on the Australian Government, the Treasury’s website, CCAAC Review of Statutory Implied Conditions and Warranties (2009) at http://www.ccaac.gov.au. The report was compiled by a sub-group of CCAAC led by Professor Stephen Corones and assisted by Ms Deborah Healey, Mr Ray Steinwall and Ms Carolyn Bond.

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

196

[9.85]

existing implied terms regime. On 30 October 2009, CCAAC presented its report, Consumer Rights: Reforming Statutory Implied Conditions and Warranties to Minister Emerson. 62 NEIAT Report

While CCAAC was conducting its review, the National Education and Information Advisory Taskforce (NEIAT) 63 commissioned Latitude Research, together with On Track Research, to conduct a baseline study to generate robust data from consumers and traders in relation to statutory warranties and refunds in three markets, whitegoods, electronic goods and mobile phones (the target goods). 64 The baseline research was conducted during July and August 2009. On 4 December 2009, the Ministerial Council on Consumer Affairs (MCCA) met in Perth. 65 In relation to consumer guarantees, the MCCA noted: [9.85]

the comprehensive studies of the law on consumer rights and the effectiveness of existing laws undertaken by the Commonwealth Consumer Affairs Advisory Council (CCAAC) in its Report Consumer rights: Reforming statutory implied conditions and warranties and the SCOCA's National Education and Information Taskforce (NEIAT) in its Baseline Study for Statutory Warranties and Refunds. Ministers thanked CCAAC and NEIAT for their impressive contributions to the understanding of these laws and the needs of consumers and businesses, and further noted the publication of these reports. Ministers noted the findings of the NEIAT study to the effect that many consumers and businesses have little, if any, awareness of consumer rights and that a significant contributor to this is the current legal framework. Informed by the NEIAT study, CCAAC has recommended that the existing system of statutory implied conditions and warranties in consumer contracts be replaced with a system of statutory consumer guarantees. Ministers share CCAAC's view that such a system will be a significant enhancement of the law and will be more readily understood by consumers and businesses. MCCA agreed, as part of the development of the Australian Consumer Law, to improve the legal framework for consumer rights that apply to the acquisition of goods and services. This will be a single national law guaranteeing consumer rights in relation to their acquisition of goods and services. They will be based on existing implied conditions and warranties, which will be simplified and streamlined. 62

The report is available on the Australian Government, Treasury’s website, Consumer Rights – CCAAC Report on Statutory Implied Conditions and Warranties (2009) at http://www.ccaac.gov.au.

63

NEIAT was established in 2007 by the Standing Committee of Officials of Consumer Affairs (SCOCA), composed of the senior officers of consumer policy and enforcement bodies in Australia and New Zealand, to help identify, develop and implement strategies to empower consumers to make informed and timely market place decisions.

64

NEIAT, National Baseline Study for Statutory Warranties and Refunds, Research Paper No 2 October 2009 (NEIAT Baseline Study), http://www.archive.treasury.gov.au/documents/1666/PDF/National_Baseline_ Study_Warranties_and_Refunds.pdf. MCCA comprises Commonwealth, State, Territory and New Zealand Ministers responsible for fair trading, consumer protection laws, trade measurement and credit laws. More information can be obtained from its official site at: Consumer.gov.au “Official Site of the Ministerial Council on Consumer Affairs” at http://www.consumer.gov.au/.

65

CHAPTER

[9.90]

09

SCOPE AND POLICY OBJECTIVES

197

This new system of consumer guarantees, supported by effective redress, will foster a greater ability to inform and educate all Australian consumers and businesses about their rights and obligations, and will reduce the compliance burden for businesses, particularly those that operate in more than one state or territory. 66

On 15 August 2008, the MCCA adopted the recommendation of the PC that there should be a new ACL based on the consumer protection provisions of the former TPA, together with amendments reflecting best practice in the State and Territory consumer protection legislation. While the Joint Communiqué recognised that the Australian Consumer Law would be “a significant enhancement of the law”, the consumer guarantees regime would be “based on existing implied conditions and warranties, which will be simplified and streamlined”.

Part III: ACL as a law of the Commonwealth In the case of the Commonwealth, the application law is contained in Pt XI of the CCA. Section 130 of the defines the term “Australian Consumer Law” to mean Sch 2 as applied under Pt XI of the CCA. As an application law, the ACL in Sch 2 of the CCA is drafted to reflect that it will be a law of the Commonwealth and of each State and Territory. Consequently, all of the provisions are drafted to apply to the conduct of “persons” rather than “corporations”, as was the case in the consumer protection provisions of the former TPA. Section 131(1) of the CCA provides: [9.90]

Schedule 2 applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chapter 2, 3 or 4 of Schedule 2 by corporations.

Because of constitutional limitations on the legislative power of the Commonwealth Parliament, the does not apply universally to all transactions or activities. The Commonwealth does not have constitutional power to make consumer protection laws generally but may make laws with respect to the conduct of corporations under the corporations power in s 51(xx) of the Constitution. Sections 6 and 131(2) of the CCA extend the operation of the CCA, Sch 2 to natural persons where the Commonwealth has constitutional power to do so. By virtue of s 6(2) of the CCA, reliance is placed on other heads of constitutional power, namely: (a)

the overseas trade and commerce power; 67

(b)

the interstate trade and commerce power; 68

66 67

The MCCA Joint Communique (2009), at http://www.consumerlaw.gov.au/files/2015/09/Meeting_ 22_4_Dec_09.pdf. Australian Constitution, s 51(i).

68

Australian Constitution, s 51(i).

198

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

(c)

the Territories power; 69

(d)

the executive power of the Commonwealth; 70 and

[9.95]

(e) the incidental power. 71 These powers were used to ensure that the CCA applies directly to the greatest extent possible under the Commonwealth Parliament's legislative power. 72 A number of the phrases used in the Constitution, such as “trading or financial corporations” and “trade and commerce among the States” are also incorporated into the CCA. In the early years of the TPA's operation, the extension provisions in ss 5 and 6 were very important because, in relation to conduct occurring in the States, they provided the only means of subjecting natural persons to liability under the TPA. In Smolonogov v O'Brien, 73 for example, it was the respondent's use of the telephone to make the representations complained of that brought this conduct within the purview of the Act. However, the enactment during the 1980s of the Fair Trading Acts in each State and Territory which mirrored most of the provisions in Pt V, Div 1 of the TPA meant that reliance on ss 5 and 6 of the was no longer necessary. Extended application of ACL (Cth) to conduct outside Australia ...............................................................................................................................................................................................

The operation of the ACL (Cth) is extended to conduct occurring outside Australia by ss 5(1), 6(2)(a)(i) and 6(3) of the CCA. Section 6(2)(a)(i) extends the territorial operation of the ACL (Cth) to conduct between Australia and places outside Australia. Section 6(3) of the CCA extends to representations using the telegraphic or telephonic services. Sections 6(2)(a)(i) and 6(3) are considered at [9.100]. Section 5(1) of the CCA applies Pt XI of the CCA and the ACL, other than Pt 5-3, to: [9.95]

the engaging in conduct outside Australia by: (g) bodies corporate incorporated or carrying on business within Australia; or (h) Australian citizens; or (i) persons ordinarily resident within Australia …

Section 5(1) focuses on the body corporate or person engaging in the conduct. In the case of a body corporate, the necessary connection with Australia exists if it is incorporated or carries on business within Australia. The first test, incorporation, requires no explanation. The second test, “carrying on business”, will be established by trading in Australia. In 69 70 71 72

Australian Constitution, s 122. Australian Constitution, s 61. Australian Constitution, s 51(xxxix). Zhu v Treasurer (NSW) (2004) 218 CLR 530 at [96] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ).

73

Smolonogov v O’Brien (1982) ATPR ¶40-312. On appeal O’Brien v Smolonogov (1983) ATPR ¶40-418.

[9.95]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

199

Hope v Bathurst City Council, 74 Mason J (with whom by Gibbs, Stephen and Aickin JJ concurred) said that the word “business” denotes “activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis”. 75 This definition was adopted by Merkel J for the purposes of s 5(1) in Bray v Hoffman-La Roche Ltd. 76 Merkel J also stated: I see no reason, however, for importing the additional requirement that to carry on business in the jurisdiction the foreign company must also have a place of business in the jurisdiction. A place of business is not a requirement of comity. 77

This approach has been adopted in subsequent cases. 78 In the case of natural persons, the necessary connection with Australia is citizenship or ordinary residence within Australia. The first test, citizenship, requires no explanation. 79 The second test, ordinary residence, is a question of fact and degree. In each case it will be necessary to isolate the factors that give rise to some connection with Australia, such as the frequency, duration and purpose of visits to Australia; family or business ties; and the ownership and use of property in Australia. The fact that a person is a resident of another country does not preclude a finding of ordinary residence within Australia. 80 Section 5(1)(g) of the CCA applies Pt XI of the CCA and the ACL, other than Pt 5-3, to the “engaging in conduct outside Australia by … bodies corporate incorporated or carrying on business within Australia”. There is no definition of the phrase “carrying on business within Australia”. 81 In ACCC v Valve Corporation (No 3), 82 Valve Corporation did not have a physical presence or place of business in Australia. It supplied computer games to Australian consumers via the internet and granted licences of its computer games to Australian consumers. Even if Valve did not engage in conduct in Australia, Edelman J held that Valve Corporation was carrying on business in Australia, because: • it had many customers in Australia and earned significant revenue from them; • it had content servers in Australia to ensure that consumers could download content as soon as possible; • it had significant personal property and servers located in Australia and paid invoices to Australian companies for equipment involving servers; 74 75 76 77 78

Hope v Bathurst City Council (1980) 144 CLR 1. Hope v Bathurst City Council (1980) 144 CLR 1 at 8-9. Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [63]. See also Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 at [255] (Gordon J). Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [63]. Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 437-9 [380]-[384] (Croft J) and RT & YE Falls Investments Pty Ltd v New South Wales [2001] NSWSC 1027 at [78] (Palmer J).

79

Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 445 [401] (Croft J).

80 81

Levene v Commissioners of Inland Revenue [1928] AC 217; Commissioners of Inland Revenue v Lysaght [1928] AC 234; Cooper v Cadwalader (1904) 5 TC 101. See Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1 at [59]-[60].

82

ACCC v Valve Corporation (No 3) [2016] FCA 196.

200

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.100]

• it paid for rack space and power to its servers in Australia; • it relied on relationships with third party content delivery providers in Australia; and • it entered into contracts with third party service providers outside Australia who provided content around the world, including Australia. 83 Application of ACL (Cth) to conduct of natural persons ...............................................................................................................................................................................................

Section 6(2)(a) of the CCA extends the application of the ACL (other than ss 33 or 155 of the ACL) to natural persons who are engaged in trade or commerce between Australia and places outside Australia, or within Australia but among the States or Territories of Australia. Section 4(1) of the CCA and s 2(1) of the ACL (Cth) both define “trade or commerce” to mean “trade or commerce within Australia or between Australia and places outside Australia”. Misleading conduct engaged in by Australian firms in an overseas location in respect of their purely overseas transactions will not be actionable under s 18 of the ACL as that conduct was not “in trade or commerce” as so defined. On the other hand, if the conduct in question occurred in the course of trade to or from Australia, the protection given by the Act will extend to overseas consumers and not just those in Australia. For example, in Wells v John R Lewis (International) Pty Ltd, 84 liability arose in respect of prohibited conduct originating in Australia but directed towards consumers resident overseas. By virtue of s 6(3)(a) of the CCA, Pts 2-1 (misleading or deceptive conduct), 2-2 (unconscionable conduct), 3-1 (unfair practices other than Div 3, pyramid schemes), 3-3, 3-4, 4-1 (other than Div 3), 4-3, 4-4 and 5-3, apply to natural persons where the conduct in question involved the use of postal, telegraphic or telephonic services, or took place in a radio or television broadcast. The process of achieving this outcome is as follows: the relevant provisions of the ACL refer to “persons”; the effect of s 131(1) of the CCA is that as a law of the Commonwealth these provisions are restricted “to the conduct of corporations”. Section 6(3)(b) then reverses this by providing that a reference in the provisions of Pt XI to a corporation include a reference to a person not being a corporation where the conduct involves the use of postal, telegraphic or telephonic services, or takes place in a radio or television broadcast. Section 6(3)(a) of the CCA is of particular significance in the context of the internet, email and e-commerce. In ACCC v Jutsen (No 3), 85 Nicholas J held that the expression “telegraphic … services” in s 6(3) of the CCA extends to conduct involving the use of the internet. The statutory provisions of the ACL relating to pyramid selling schemes were held to be applicable to natural persons by reason of the internet-based nature of the [9.100]

83

ACCC v Valve Corporation (No 3) [2016] FCA 196 at [199]-[205].

84

Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194. See Clarke, “The Extraterritorial Reach of the CCA – A Primer” (2012) 27(10) Competition and Consumer Law News 308.

85

ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [100]. See also ACCC v Sensaslim Australia Pty Ltd (in liq) (No 1) (2011) 196 FCR 566 at [17], [25] and [38] (Yates J); ACCC v Jones (No 5) [2011] FCA 49 at [5] and [10] (Logan J); Jones v ACCC [2010] FCA 481 at [30] (Collier J); Macquarie Bank Ltd v Seagle [2008] FCA

[9.100]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

201

scheme. In ACCC v Chopra, 86 the court ordered a natural person, the sole operator of an online electronics store based in Australia, Electronic Bazaar (EB), to pay penalties of $100,000 for contraventions of ss 18 and 29(1)(m) of the ACL. Mr Chopra represented that consumers who purchased goods through the EB website were not entitled to a refund, replacement or repair in relation to those goods. Where a natural person engages in infringing conduct by means of a website located outside Australia, it may be necessary to have recourse to both s 5 and s 6(3) of the CCA to bring the conduct within the ACL (Cth). In ACCC v Hughes, 87 Mr Hughes, a natural person living within Australia, contravened the TPA, ss 52, 53(e), misleading representation with respect to price, and 53(c), misleading representation with respect of performance characteristics, uses or benefits, by making false or misleading representations through an internet-based website with a United States domain name. The goods offered for sale were prescription pharmaceutical products, namely a range of oral contraceptives. The court made a number of declarations and restrained Hughes from continuing to supply pharmaceutical products unlawfully. Hughes was later imprisoned for contempt for disregarding those orders. Allsop J concluded: Thus, Mr Hughes places on a computer site overseas misleading or deceptive material with the intention that consumers in Australia, the United States and elsewhere will use telephonic services to access that information and rely upon it. Thus, relief is available under the TPA by reason of s 5 and s 6 of the Act, notwithstanding the lack of a presence of a corporation. 88

It is unclear whether the references to ss 5 and 6 mean that it is necessary to have recourse to both sections to apply s 18 of the ACL (Cth) to the conduct of natural persons where the website is based outside Australia, rather than s 5 of the CCA alone. 89 These provisions are important to ensure that the ACL protections are available in cases of internet shopping where goods are acquired for personal use directly from overseas suppliers online. In addition, online services such as eBay allow people not only to acquire a wide variety of products from around the world, but also to become sellers in an online global marketplace. By searching more effectively online, consumers are presented with a wider range of choice and a greater opportunity to make savings. However, e-commerce is inherently different from traditional methods of acquiring goods and services. It provides additional risks for the exploitation of consumers, and can make it more difficult for consumers to obtain redress. Online consumers should be able 1417 at [17] and [19] (Jagot J); Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822 at [130]-[131] (Jacobson J); Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 (Stone J) at [164]; ACCC v Chen (2003) 132 FCR 309 at [20] and [32]; ACCC v Hughes (2002) ATPR ¶41-863 at [77]-[79] (Allsop J). 86 87 88 89

ACCC v Chopra [2015] FCA 539 at [6] (Middleton J). ACCC v Hughes (2002) ATPR ¶41-863 at [77]. See also ACCC v Purple Harmony Plates Pty Ltd [2001] FCA 1062 at [35] (Goldberg J); and ACCC v Chen (2003) 132 FCR 309 at [32] (Sackville J). ACCC v Hughes (2002) ATPR ¶41-863 at [78]-[79]. See Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 445 [401] (Croft J).

202

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.100]

to access rights under the ACL that are as extensive as those provided to consumers participating in face-to-face consumer transactions. As Bromberg J observed in ACCC v Apple Pty Ltd: Multi-national corporations who (through their subsidiaries or otherwise) operate in and profit from the Australian market, must respect that market and the laws which serve to regulate it and protect its participants. Those who design global campaigns, and those in Australia who adopt them, need to be attuned to the understandings and perceptions of Australian consumers and ensure that representations made by such campaigns will not serve to mislead. The penalty imposed in this case [$2.25 million], needs to make that message clear. 90

In Dataflow Computer Services Pty Ltd v Goodman, s 6(3) of the TPA was held to apply to messages communicated by email. Similarly, in Madden v Seafolly Pty Ltd, 91 the appellant, Ms Madden, whose label was “White Sands”, and the respondent were competitors in the ladies swimwear fashion industry. The appellant asserted on her personal Facebook page, her business Facebook page (“White Sands”) and in emails to media outlets that the respondent had copied eight of her swimwear designs. The primary judge found that the assertions were false and misleading contrary to ss 52 and 53(a) of the TPA, now ACL, ss 18 and 29(1)(a) respectively. The TPA applied to Madden (an individual) because each of the publications made use of the internet. An appeal to the Full Federal Court was dismissed. Section 6(3A) of the CCA extends Pt 2-3, the general protection for unfair terms in consumer contracts for, or relating to the use of postal, telegraphic or telephonic services; or contracts for or relating to radio or television broadcasts. Section 6(3A) states: the provisions of Part 2-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions were, by express provision, confined in their operation to contracts for or relating to: (i) the use of the postal, telegraphic or telephonic services or (ii) radio or television broadcasts; and (b) a reference in those provisions of Part XI to a corporation included a reference to a person not being a corporation.

It should be noted that s 6(3A) of the CCA differs from s 6(3) of the CCA. Section 6(3) of the CCA extends the misleading conduct and unconscionable conduct provisions to catch conduct involving “the use of postal, telegraphic or telephonic services or which occurs in a radio or television broadcast”. However, s 6(3A) of the CCA is narrower in its ambit: it only applies to unfair terms in consumer contracts for or relating to the use of postal, telegraphic or telephonic services; or consumer contracts for or relating to radio or television broadcasts. For example, it would apply to unfair terms imposed by the supplier of mobile telephony services in relation to the terms of a mobile phone contract. 90

ACCC v Apple Pty Ltd (2012) ATPR ¶42-404 at [32].

91

Madden v Seafolly Pty Ltd [2012] FCA 1346.

[9.105]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

203

Financial services ...............................................................................................................................................................................................

The Commonwealth may also make consumer protection laws in respect of financial services, through a referral of legislative competence from the States set out in the Corporations Agreement 2002. In 2009, the States also referred their specific powers concerning consumer credit. The Intergovernmental Agreement for the Australian Consumer Law (IGA), signed by COAG on 2 July 2009 required the Commonwealth to enact changes to the investor protection provisions of the ASIC Act, and to the extent necessary, the Corporations Act 2001 (Cth), to ensure that they were consistent with the ACL (Cth). 92 Relevant amendments to the ASIC Act are included in Sch 3 of the Second Commonwealth Act. The IGA reflects that financial services will be carved out of the scope of the ACL (Cth), and separate legislative arrangements would be made for the regulation of financial services under the Corporations Agreement 2002. Section 131A(1) of the CCA provides: [9.105]

Despite section 131, this Division does not apply (other than in relation to the application of Part 5-5 of Schedule 2 as a law of the Commonwealth) to the supply, or possible supply, of services that are financial services, or of financial products.

This carve-out for financial services means that the ACL (Cth) does not apply to financial services, which are regulated at the Commonwealth level by the Corporations Act 2001 (Cth) and the ASIC Act. The ASIC Act continues to apply, separately, to financial services, with the Australian Securities and Investments Commission (ASIC) as the national regulator. This reflects the current subject matter referral by the States and Territories set out in the Corporations Agreement 2002 and administered by the Ministerial Council for Corporations (MINCO). Clause 301(1) of the Corporations Agreement 2002 states that “the Commission [ASIC] will have sole responsibility for the general administration of the national law [which includes the Corporations Act 2001 (Cth) and the Australian Investments and Securities Commission Act 2001]”. The consumer protection provisions of the ASIC Act have been amended to maintain consistency with the ACL. However, the consumer guarantees regime in the ACL does not apply to financial services (with the exception of linked credit services). 93 This position is at odds with the policy objectives of consistency and uniformity which the ACL was intended to achieve. Section 12ED of the ASIC Act only implies warranties of due care and skill and fitness for purpose into contracts for the supply of financial services to a consumer in the course of a business. 94 92 93 94

Intergovernmental Agreement for the Australian Consumer Law (signed by COAG on 2 July 2009), subclause 3.1.3. See [17.20]. There have been few cases which have sought to rely on a breach of these implied warranties. See, eg, St George Bank Ltd v Wright [2009] QSC 337 at [54]-[59] (McMurdo J); and Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1 at [113]-[116] (Perram J).

204

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.110]

Consumer credit regulation was referred to the Commonwealth by the States and Territories in 2009. The Uniform Consumer Credit Code was replaced by the National Consumer Credit Protection Code (the National Credit Code) from 1 July 2010. The National Credit Code applies to credit that is provided to individual debtors or strata corporations wholly or predominantly (a) for personal, domestic or household purposes; or (b) to purchase, renovate or improve residential property for investment purposes or to refinance such credit. In relation to misleading conduct or unconscionable conduct involving the supply financial services, great care will need to be taken in framing the cause of action. The conduct may fall within s 1041H of the Corporations Act 2001 (Cth), or the ASIC Act, but not the ACL (Cth). Insurance ...............................................................................................................................................................................................

While the PC in its Review of Australia's Consumer Policy Framework, recommended that a new generic national consumer law should apply to all sectors of the economy, 95 insurance has been excluded from the ACL regime and the ASIC Act regime. The reason for that is to be found ss 13, 14 and 15 of the Insurance Contracts Act 1984 (Cth) (IC Act). Section 13 of the IC Act provides: [9.110]

A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.

Section 14 of the IC Act provides that parties are not to rely on provisions in a contract of insurance except in the utmost good faith. Insurance is a financial product and the supply of insurance is the supply of a financial service. The supply of financial services is regulated by the ASIC Act. For example, misleading statements about flood cover during pre-contractual negotiations for the supply of home and contents insurance would be subject to s 12DA of the ASIC Act. However, it seems that the unfair terms provisions of the ASIC Act do not cover insurance contracts. This is because s 15(1) of the IC Act provides: A contract of insurance is not capable of being made the subject of relief under: • Any other [Commonwealth] Act; • A State Act; or • An Act or Ordinance of a Territory.

95

Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008), recommendation 4.2. The PC’s report is available at http://www.pc.gov.au/inquiries/ completed/consumer-policy/report.

[9.120]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

205

While conduct leading up to the making of an insurance contract is covered by the provisions of the ASIC Act, the terms themselves are regulated by the ICA. 96 Even if insurance contracts are covered by the unfair terms provisions of the ASIC Act, those core terms that govern matters such as the risk covered and the premium payable will be excluded by s 12BI of the ASIC Act. The relevant provisions excluding consumer protection applying to insurance are: • s 131A of the CCA excludes financial services from the ACL (Cth); • s 63 of the ACL excludes insurance services (that are not included in the definition of financial services) from Subdiv B of Pt 3-2 (guarantees relating to the supply of services); • s 12ED(3) of the ASIC Act excludes the implied warranties in relation to a contract of insurance; • s 15 of the IC Act operates to prevent some or all of the unfair terms provisions of the ASIC Act in respect of financial services applying to terms in insurance contracts. ACL (Cth) not intended to cover the field ............................................................................................................................................................................................... [9.115]

Section 131C(4) of the CCA states:

Except as expressly provided by this Part or the Australian Consumer Law, nothing in this Part or the Australian Consumer Law is taken to limit, restrict or otherwise affect any right or remedy a person would have had if this Part and the Australian Consumer Law had not been enacted.

The purpose of this provision is to ensure that it is not held that the ACL (Cth) is intended to “cover the field” of consumer protection regulation, so as to render invalid State or Territory legislation dealing with that topic. Consequently, the ACL (Cth) will exist side-by-side with other legislation regulating transactions with consumers.

Part IV: The ACL as State or Territory law In the case of the ACL (Application Acts), the States and Territories have separately legislated to make the ACL a law of their respective jurisdictions, although the approach adopted has not been entirely uniform. Part XIAA of the CCA facilitates the application of the ACL by the States and Territories. The States have a general power to make laws in respect of consumer protection matters, as do the Territories within the scope of the territories power in s 122 of the Australian Constitution. The ACL as State or Territory law applies to the conduct of anyone who is a “person”. The word “person” is not defined in the Application Acts. However, interpretation legislation in most jurisdictions provides that a “person” [9.120]

96

See Corporations and Financial Services Division, Unfair Terms in Insurance Contracts – Options Paper (The Treasury, Langton Crescent, Parkes, ACT, 2600).

206

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.120]

includes a body politic or corporate as well as a natural person. 97 Consequently, as used in the ACL as a law of each State or Territory, the word “person” is likely to be given its ordinary meaning and to cover natural and artificial persons and the Crown. The ACL gives effect to COAG's National Partnership Agreement to Deliver a Seamless National Economy (NPA). 98 It adopts the application model used previously in relation to competition provisions in Pt IV of the CCA and the Competition Code set out in Sch 1 of the CCA, with the Australian Government as the lead legislator. The Principal State and Territory Acts are: • New South Wales: Fair Trading Act 1987 (FTA 1987 (NSW)), ss 27 and 28 • Victoria: Australian Consumer Law and Fair Trading Act 2012 (ACLFTA 2012 (Vic)), ss 7 and 8 • Queensland: Fair Trading Act 1989 (FTA 1989 (Qld)), ss 15 and 16 • Western Australia: Fair Trading Act 2010 (FTA 2010 (WA)), ss 18 and 19 • South Australia: Fair Trading Act 1987 (FTA 1987 (SA)), ss 13 and 14 • Tasmania: Australian Consumer Law (Tasmania) Act 2010 (ACLA 2010 (Tas)), ss 5 and 6 • Northern Territory: Consumer Affairs and Fair Trading Act (CAFTA (NT)), ss 26 and 27 • Australian Capital Territory: Fair Trading (Australian Consumer Law) Act 1992 (FT(ACL)A 1992 (ACT)), ss 6 and 7. By way of example, the Fair Trading Amendment (Australian Consumer Law) Act 2010 (NSW) added “The Australian Consumer Law” as Pt 3 of the FTA 1987 (NSW). Section 27 of the FTA 1987 (NSW) defines the Australian Consumer Law text as: (a) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth; and (b) the regulations under s 139G of that Act.

Section 28(1) of the FTA 1987 (NSW) states that: [t]he Australian Consumer Law text, as in force from time to time – (a) applies as a law of New South Wales; and (b) as so applying may be referred to as the Australian Consumer Law (NSW); and (c) as so applying is a part of the Fair Trading Act 1987.

In a similar way, s 7 of the ACLFTA 2012 (Vic) defines the Australian Consumer Law text as: (c) Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth; and (d) the regulations under s 139G of that Act. 97

See Interpretation Act 1987 (NSW), s 21; Interpretation of Legislation Act 1984 (Vic), s 38; Acts Interpretation Act 1954 (Qld), s 32D; Interpretation Act 1984 (WA), s 5; Interpretation Act (NT), s 17.

98

The NPA provides for the States and Territories to receive partnership payments from the Commonwealth, consisting of facilitation payments to compensate for set-up costs, and reward payments if they achieve key milestones.

[9.120]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

207

Section 8(1) of the ACLFTA 2012 (Vic) states that: The Australian Consumer Law text, as in force from time to time: (a) applies as a law of this jurisdiction; and (b) as so applying may be referred to as the Australian Consumer Law (Victoria); and (c) as so applying is a part of this Act.

In Western Australia a slightly different approach was adopted. Section 19(1) of the FTA 2010 (WA) states: For the purposes of this section, the Australian Consumer Law text consists of – 1. Schedule 2 to the Competition and Consumer Act 2010 (Commonwealth), as in force on the commencement of this section… 2. The regulations made under section 139G of that Act, as those regulations are in force from time to time.

Section 19(2) of the FTA 2010 (WA) states: The Australian Consumer Law text – a) applies as a law of this jurisdiction; and b) as so applying, may be referred to as the Australian Consumer Law (WA); c) in so far as it constitutes Schedule 2 to the Competition and Consumer Act 2010 (Commonwealth), is part of this Act; and d) in so far as it constitutes regulations made under section 139G of the Competition and Consumer Act 2010 (Commonwealth), is subsidiary legislation for the purposes of this Act.

Section 19(1) of the FTA 2010 (WA) makes clear that it is only the text of the ACL as in force on 1 January 2011 that applies as a law of Western Australia. The omission of the words “as in force from time to time” from s 19(2) of the FTA 2010 (WA) means that any future amendment to the text of the ACL in Sch 2 of the CCA will not automatically apply in Western Australia. Section 20 of the FTA 2010 (WA) provides: “the Australian Consumer Law (WA) (as described in s 19(1)(a)) may be amended by bill”. Thus, future changes to the ACL (WA) will be enacted by the Western Australian Parliament, and will not automatically apply as in other States and Territories. As regards the position in Queensland, a significant amendment has been the removal of the limitation placed upon the cause of action for damages for contravening s 38 of the FTA 1989 (Qld), the general prohibition of misleading conduct. The cause of action in damages for misleading conduct in s 99 of the FTA 1989 (Qld) was previously confined to consumers. Since the adoption of the ACL, this limitation has been removed.

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

208

[9.125]

The alternative model for the adoption of the ACL considered by the PC was a referral of powers by the States and Territories to the Commonwealth, making the ACCC solely responsible for enforcing the ACL (the one regulator model). 99 This was rejected for the following reasons: But while the States and Territories remain responsible for enforcing a large body of specific consumer regulation, the loss of regulatory synergies and the costs of creating a parallel regional office network are powerful arguments against implementation of the one regulator model. More pragmatically, in the face of considerable jurisdictional opposition to the one regulator model, packaging it with the implementation of a new national generic law, could put the latter at risk. As indicated above, implementation of this new law is a critical first step in creating a more nationally coherent consumer policy framework that could deliver more efficient and effective outcomes for consumers and the wider community. The Commission has therefore concluded that, for the time being – and with the important exception of the product safety provisions – the new national generic law should be jointly enforced by the Australian Government and the States and Territories. 100 TABLE 1.2 Adoption of the ACL

CCA (Cth) s 131

FTA 1987 (NSW) ss 27, 28

FTA 1989 (Qld) ss 15, 16

ACLFTA 2012 (Vic) ss 8, 9

FTA 1987 (SA) ss 13, 14

FTA 2010 (WA) ss 18, 19

ACLA 2010 (Tas) ss 5, 6

FT(ACL)A 1992 (ACT) ss 6, 7

CAFTA (NT) ss 26, 27

ACL (Application Acts) not intended to cover the field ...............................................................................................................................................................................................

Section 140H of the CCA expressly provides that the application of the ACL as a law of a State or Territory is not intended to exclude or limit the concurrent operation of any law, whether written or unwritten, of a State or a Territory. Consequently, the ACL of a State or Territory will exist side by side with other legislation regulating transactions with consumers. [9.125]

Extraterritorial application of ACL (Application Acts) ...............................................................................................................................................................................................

The State and Territory application laws make it clear that the ACL as a law of their respective jurisdictions is not to be construed as merely applying in the territorial area of that State or Territory, and that the extraterritorial power of the State or Territory [9.130]

99

100

The one regulator model applies in relation to the enforcement of the competition provisions of the CCA. The ACCC is the only regulator with the power to bring proceedings for contraventions of Pt IV of the CCA. The Australian Energy Regulator (AER) has responsible for compliance with the Australian Electricity Law and the Australian Gas Law. See Corones, Competition Law in Australia (6th ed, Lawbook Co, Sydney, 2014) ch 3. Productivity Commission, Review of Australia’s Consumer Policy Framework (Final Report, Canberra, 2008) vol 1, p 22.

[9.135]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

209

Legislature is being used. The power of a State legislature to make laws of extraterritorial application was considered by the High Court in Broken Hill South v Commissioner of Taxation (NSW), 101 and Union Steamship Company of Australia Pty Ltd v King. 102 The High Court held that there must be some connection with the jurisdiction which may consist in “presence within the territory, residence, domicile, carrying on business there, or even remoter connections”. 103 Section 12 of the ACLFTA 2012 (Vic) mirrors s 5(1) of the CCA. It provides: (1) The Australian Consumer Law (Victoria) applies to and in relation to– (a) persons carrying on business within this jurisdiction; or (b) bodies corporate incorporated or registered under the law of this jurisdiction; or (c) persons ordinarily resident in this jurisdiction; or (d) persons otherwise connected with this jurisdiction. (2) Subject to subsection (1), the Australian Consumer Law (Victoria) extends to conduct, and other acts, matters and things, occurring or existing outside or partly outside this jurisdiction (whether within or outside Australia).

There are similar provisions in the State and Territory Acts that apply the ACL as a law of their jurisdiction. TABLE 1.3 Extraterritorial application of ACL (Application Acts)

FTA 1987 (NSW) s 32

FTA 1989 (Qld) s 20

ACLFTA 2012 (Vic) s 12

FTA 1987 (SA) s 18

FTA 2010 (WA) s 11

ACLA 2010 (Tas) s 10

FT(ACL)A 1992 (ACT) s 11

CAFTA (NT) s 31

The definition of “carrying on a business” for the purposes of the ACL (Application Acts) is the same as the definition of “carrying on a business” in the CCA, considered at [10.55] and [10.70]. No doubling-up of liabilities ...............................................................................................................................................................................................

Because the same conduct may be actionable under the and also under the ACL (Application Acts) , and because the same conduct may be the subject of a pecuniary penalty for a consumer protection breach as well as criminal action, the CCA contains a number of provisions designed to prevent the doubling-up of liabilities. As regards the application of the ACL (Cth), s 131C(3) of the CCA provides if an act or omission is an offence under that Act and also under the application law of a State or Territory and the offender has been punished for the offence under the Commonwealth law, the offender is not liable to punishment for the offence under the State or Territory laws. [9.135]

101 102

Broken Hill South v Commissioner of Taxation (NSW) (1937) 56 CLR 337. Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1.

103

Union Steamship Company of Australia Pty Ltd v King (1988) 166 CLR 1 at 13.

210

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.140]

As regards the application of the ACL (Application Acts) provides that if an act or omission is an offence under the CCA and also under the application law of a State or Territory and the offender has been punished for the offence under the latter, the offender is not liable to punishment for the offence under the CCA. In respect of pecuniary penalties, s 140J(2) of the CCA likewise provides that there is to be no double imposition. The ACL (Application Acts) contain similar protections against double jeopardy. The Explanatory Memorandum to the Queensland Fair Trading (Australian Consumer Law) Amendment Bill 2010 provides an example of how the Queensland regulator may be bound by the action of another jurisdiction where an offender has been punished for the same offence in that jurisdiction: if a false representation (the act or omission is made by a business in a newspaper that is published in New South Wales, and the newspaper is read in both Queensland and New South Wales, it would be an offence in both States. If the business in New South Wales is prosecuted and punished in that State, then Queensland cannot seek to punish the business and vice versa. If the punishment is sought and obtained in New South Wales, then the Queensland regulator will not be able to pursue another form of punishment even if it believes the punishment in New South Wales was too lenient, not appropriate or more importantly did not adequately provide redress or compensation for Queensland residents affected by the false representation. 104

These provisions recognise the importance of uniformity and that consistency is necessary under a single national law, however this may come at the expense of the right of the regulators to act unilaterally. TABLE 1.4 Protection against doubling-up of liabilities

FTA FTA 1987 1989 (NSW) (Qld) ss 131C(3), s 29 140J(1) and (2)

CCA

ACLFTA 2012 (Vic) s 22

FTA 1987 (SA) s 27

FTA 2010 (WA) s 31

ACLA 2010 (Tas) s 19

FT(ACL)A 1992 (ACT) s 20

CAFTA (NT)

Future modifications to the ACL ............................................................................................................................................................................................... [9.140] The Intergovernmental Agreement for the Australian Consumer Law (IGA) signed by COAG on 2 July 2009, regulates the way in which future amendments can be made to the template ACL to avoid slipping back into disharmony. By signing the IGA, participating jurisdictions have agreed to abide by the processes for co-operative negotiation of amendments to the ACL. Any party may submit to the Commonwealth a valid proposal to amend the ACL. 105 After a period of consultation provided for in cl 12 of the IGA, the Commonwealth Minister will call a vote on the proposed amendment. 104 105

Explanatory Memorandum, Fair Trading (Australian Consumer Law) Amendment Bill 2010, p 16. Intergovernmental Agreement for the Australian Consumer Law, cl 8.

CHAPTER

[9.140]

09

SCOPE AND POLICY OBJECTIVES

211

Clause 19 of the IGA provides that the Commonwealth will not amend the ACL unless the proposed amendment is supported by the Commonwealth plus four jurisdictions, three of which must be States. Part XI of the CCA provides for a system to deal with future modifications of the ACL text by Commonwealth legislation. Section 139G of the CCA provides that the Governor-General may make regulations prescribing matters required or permitted by Sch 2 to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect of the Schedule. Section 139G provides that a regulation may exempt from Sch 2: • conduct engaged in by a specified organisation or body that performs functions in relation to the marketing of primary products; 106 • a specified contract pursuant to or for the purposes of a specified agreement arrangement or understanding between the Government of Australia and the Government of a foreign country; 107 • a specified contract or prescribed conduct engaged in, in the course of a business carried on by the Commonwealth or by a prescribed authority of the Commonwealth. 108 The States and Territories have reserved the right to exclude any future modification to the ACL as at 1 January 2011 for the ACL in their respective jurisdictions. For example, s 9 of the ACLFTA 2012 (Vic) provides: (1) A modification made by a Commonwealth law to the Australian Consumer Law text after the commencement of this section does not apply under s 8, if the modification is declared by Order of the Governor in Council published in the Government Gazette to be excluded from the operation of the section. (2) An Order under subsection (1) has effect only if published before the end of 2 months after the date of the modification. (3) Subsection (1) ceases to apply to the modification if a further Order so provides. (4) For the purposes of this section, the date of the modification is the date on which the Commonwealth Act effecting the modification receives Royal Assent or the regulation effecting the modification is registered under the Legislative Instruments Act 2003 of the Commonwealth. TABLE 1.5 Future modifications to the ACL

FTA 1987 (NSW) s 29 106 107 108

FTA 1989 (Qld) s 17

CCA, s 139G(4)(a). CCA, s 139G(4)(b). CCA, s 139G(4)(c).

ACLFTA 2012 (Vic) s9

FTA 1987 (SA) s 15

FTA 2010 (WA) n/a

ACLA 2010 (Tas) s7

FT(ACL)A 1992 (ACT) s8

CAFTA (NT)

212

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.145]

Part V: Enforcement ACL regulators ...............................................................................................................................................................................................

Enforcement and administration of the ACL will be shared between the ACCC, ASIC and State and Territory administrative agencies pursuant to agreed Memoranda of Understanding. 109 Commonwealth, State and Territory consumer agencies will jointly administer and enforce the ACL. The relevant ACL regulators are: [9.145]

• Australian Competition and Consumer Commission; 110 • Australian Securities and Investments Commission; 111 • ACT Office of Regulatory Services; 112 • NSW Fair Trading; 113 • Northern Territory Consumer Affairs; 114 • Queensland Office of Fair Trading; 115 • South Australia Office of Consumer & Business Affairs; 116 • Tasmania Consumer Affairs and Fair Trading; 117 • Consumer Affairs Victoria; 118 • Western Australia Department of Commerce. 119 The term “regulator” is used to refer to the relevant regulator responsible for enforcing the ACL in the particular jurisdiction concerned. The term “regulator” is defined in s 2 of the ACL as follows: (a)

for the purposes of the application of this Schedule as a law of the Commonwealth – means the Commission; or

(b)

for the purposes of the application of this Schedule as a law of a State or a Territory – has the meaning given by the application law of the State or Territory.

109 110

Intergovernmental Agreement for the Australian Consumer Law, cll 20 and 21. Available at http://www.accc.gov.au.

111

Available at http://www.asic.gov.au.

112

Available at http://www.accesscanberra.act.gov.au.

113

Available at http://www.fairtrading.nsw.gov.au.

114

Available at http://www.consumeraffairs.nt.gov.au.

115

Available at http://www.qld.gov.au/law/fair-trading/.

116

Available at http://www.cbs.sa.gov.au.

117

Available at http://www.consumer.tas.gov.au.

118

Available at http://www.consumer.vic.gov.au.

119

Available at http://www.commerce.wa.gov.au.

[9.150]

CHAPTER

09

SCOPE AND POLICY OBJECTIVES

213

Jurisdiction of the Federal Court ...............................................................................................................................................................................................

Section 138 of the CCA confers jurisdiction over any civil matter in relation to the ACL (Cth) on the Federal Court. The jurisdiction is exclusive, except that jurisdiction is also conferred by s 138A on the Federal Circuit Court in relation to civil matters where the loss or damage does not exceed $750,000 or an amount specified in the regulations, on the courts of the States and Territories under s 138B, and the High Court of Australia, under s 75 of the Constitution. Section 138 provides: [9.150]

(1) Jurisdiction is conferred on the Federal Court in relation to any matter arising under this Part or the Australian Consumer Law in respect of which a civil proceeding has been instituted under this Part or the Australian Consumer Law. (2) The jurisdiction conferred by subsection (1) on the Federal Court is exclusive of the jurisdiction of any other court other than: (a) the jurisdiction of the Federal Magistrates Court under section 138A; and (b) the jurisdiction of the several courts of the States and Territories under section 138B; and (c) the jurisdiction of the High Court under section 75 of the Constitution.

The State and Territory courts have concurrent jurisdiction with the Federal Court over civil matters arising under the ACL (Cth). Section 138B of the CCA provides: (1) Jurisdiction is conferred on the several courts of the States and Territories in relation to any matter arising under this Part or the Australian Consumer Law in respect of which a civil proceeding is instituted by a person other than the Commonwealth Minister or the Commission. (2) However, subsection (1) does not apply in relation to a matter arising under: (a) Division 3 of Part 3-1 of the Australian Consumer Law; or (b) Part 3-5 of the Australian Consumer Law. (3) The jurisdiction conferred by subsection (1) on the several courts of the States is conferred within the limits of their several jurisdictions, whether those limits are as to locality, subject matter or otherwise. (4) The jurisdiction conferred by subsection (1) on the several courts of the Territories is conferred to the extent that the Constitution permits. (5) This section is not to be taken to enable an inferior court of a State or a Territory to grant a remedy other than a remedy of a kind that the court is able to grant under the law of that State or Territory.

Section 140C of the provides that the Federal Court may exercise jurisdiction (whether original or appellate) conferred on that Court by an application law of a Territory with respect to matters arising under the ACL (Application Acts).

214

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[9.155]

In Director of Consumer Affairs v Dimmeys Stores Pty Ltd, 120 the applicant sought injunctive relief against the defendants for alleged breaches of both the ACL (Vic) and its equivalent provisions in the ACL (Cth). The respondents raised a preliminary question as to whether the applicant, being a public official representing a State, had the authority to issue a proceeding in Federal Court relying on Commonwealth legislation. Section 232(2) of the ACL provided relevantly that the court could grant an injunction on application by the regulator or “any other person”. Marshall J observed that the IGA was designed to effect a national approach to consumer protection laws. The IGA also provided for shared enforcement functions between federal, State and Territory regulators. His Honour held “[i]t is consistent with such a shared scheme for the Director to be considered to be ‘another person’ for the purposes of the ACL”. 121 Accordingly, the court rejected the respondents' submission. Jurisdiction of the courts of the States and Territories ............................................................................................................................................................................................... [9.155] The CCA and a State or Territory's Application Act specifies that the ACL is a law of the relevant jurisdiction. 122 The CCA vests Federal jurisdiction on the courts of the States and Territories in civil proceedings instituted under the ACL (Cth) other than proceedings by the ACCC or the Commonwealth Minister, except in relation to manufacturers' liability and pyramid schemes. 123 The CCA and the State and Territory Application Acts :

• govern the way in which consumers can access national, State and Territory courts and tribunals; and • make provision for enforcement, administrative and judicial review procedures in respect of the actions of regulators under the ACL. 124 The State and Territory Application Acts provide that proceedings under their respective ACLs must be referred to a court of competent jurisdiction. For example, under the ACL (Qld), jurisdiction to hear and determine proceedings under that law is conferred on: (a)

the Supreme Court;

(b)

the District Court;

(c)

the Magistrates Court; and

(d)

the Queensland Civil and Administrative Tribunal (QCAT). 125

120 121 122 123 124 125

Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559. Director of Consumer Affairs v Dimmeys Stores Pty Ltd (2013) 213 FCR 559 at [14]. In relation to the Australian Consumer Law (Cth) see s 8(1) of the ACLFTA 2012 (Vic). CCA, s 138B. See ACLFTA 2012 (Vic), Chs 7 and 8. FTA 1989 (Qld), ss 50 and 51.

CHAPTER

[9.160]

09

SCOPE AND POLICY OBJECTIVES

215

The tribunal or court having jurisdiction for the proceeding, must have regard to: 1

for the tribunal – whether the subject of the proceeding would be a minor civil dispute within the meaning of the QCAT Act; or

2

for a court – any civil jurisdictional limit, including any monetary limit, applying to the court. In relation to the grant of an injunction under s 232 of the ACL, s 51 of the FTA 1989 (Qld) provides that if the injunction is sought in connection with, or in the course of another proceeding under the ACL (Qld), whether for an offence or otherwise, the matter is to be heard before the District Court, and the District Court has jurisdiction, otherwise the Supreme Court has jurisdiction. Other States and Territories make similar provision for the conferral of jurisdiction on their tribunals and courts to hear and determine matters arising under their respective ACLs. 126 Transfer of proceedings ...............................................................................................................................................................................................

The Federal Court may transfer civil proceedings, other than proceedings instituted by the ACCC or the Minister, to State and Territory courts. 127 Section 138C(2) provides that, in deciding whether to transfer proceedings, the Federal Court must take into account whether the other court has the power to grant the remedies sought before the Federal Court, whether the matter “arises out of or is related to” the proceeding pending in the other court, and whether it is in the interests of justice that the matter be determined by the other court. 128 Section 138D of the CCA provides that a State or Territory court (other than the Supreme Court) hearing a matter under Pt XI of the CCA or the ACL other than under Div 3 of Pt 3-1 of the ACL; or Pt 3-5 of the ACL; or Ch 4 of the ACL must transfer the matter to the Federal Court, if the Federal Court directs it to do so. 129 [9.160]

126 127 128 129

See ACLFTA 2012 (Vic), Pt 8.5 – Enforcement of Australian Consumer Law (Victoria). CCA, s 138C(1). These provisions reflect CCA, s 86A(1) – (3). These provisions reflect CCA, s 86A(4) – (6).

CHAPTER 10

......................................................................................................................

Definitions and Key Concepts Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 2.

Introduction This chapter considers a number of definitions and key concepts that are common to the general and specific protections contained in the ACL. As explained in Chapter 9, the Australian Consumer Law (ACL) has been designed to operate uniformly across Australia. There are nine ACLs – the ACL (Cth), and eight ACL (Application Acts) – all of which apply Sch 2 of the Competition and Consumer Act 2010 (Cth) as a law of their respective jurisdictions. However, the ACL does not apply to all types of transactions; it is restricted in a number of ways. First, although the ACL is drafted so as to apply to the conduct of a “person” the effect of s 131(1) of the CCA is to apply the ACL “as a law of the Commonwealth to the conduct of corporations…”. The ACL also applies to natural persons in circumstances where the Commonwealth Parliament has been able to rely on a head of power in the Constitution other than the corporations power created by s 51(xx) of the Australian Constitution. Where an applicant seeks relief from an individual, the applicant will have to frame the cause of action as a breach of a State or Territory ACL (primary liability), or rely on the accessorial liability provisions of the ACL. Secondly, the ACL (Cth) applies to the Crown in right of the Commonwealth, 1 and the ACL (Application Acts) apply to the Crown in right of the States and Territories, but only in so far as the Crown carries on a business. Thirdly, many of the key provisions in the CCA, the ACL (Cth) and the ACL (Application Acts), apply only to conduct that occurs “in trade or commerce”. Finally, many of the provisions of the ACL are restricted by reference to some concept of a consumer. This chapter will focus on the key concepts which limit the scope of the ACL and is divided into five parts. [10.05]

• Part I – considers the meaning of “corporation” for the purposes of the ACL. • Part II – examines the liability of natural persons under the ACL and the ACL (Application Acts). • Part III – examines the liability of the Crown under the ACL and the ACL (Application Acts). 1

CCA, s 2A(1).

218

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.10]

• Part IV – analyses the “in trade or commerce” requirement under the ACL and the ACL (Application Acts). • Part V – discusses the liability of corporate and non-corporate principals for conduct of directors, employees or agents.

Part I: Liability of corporations Introduction ...............................................................................................................................................................................................

Section 130 of the CCA provides that the word “corporation” for the purposes of the ACL (Cth), Sch 2 has the same meaning as in s 4(1) of the CCA. Section 4(1) of the CCA provides: [10.10]

“corporation” means a body corporate that – a) is a foreign corporation; b) is a trading corporation formed within the limits of Australia or is a financial corporation so formed; c) is incorporated in a Territory; or d) is the holding company of a body corporate of a kind referred to in paragraph (a), (b) or (c).

“Foreign”, “trading” and “financial” corporations are also defined in s 4(1) by reference to the meaning to be given to them by s 51(xx) of the Constitution. These definitions, which are not mutually exclusive, have, generally speaking, been interpreted broadly by the courts with the result that few corporations fall outside the ambit of the Act. Foreign corporation ...............................................................................................................................................................................................

A “foreign corporation” is one incorporated outside continental Australia; that is, in another country or in an external territory. [10.15]

Trading corporation ...............................................................................................................................................................................................

A “trading corporation” is one which engages in trading (which in this context means the activity of acquiring, or supplying, goods or services in a commercial or business context) as a substantial and not merely a peripheral activity. The “substantial current activities test” was summarised in Hughes v Western Australian Cricket Association by Toohey J: [10.20]

Views as to the necessary extent of trading activity have varied. It must be a substantial corporate activity (Barwick CJ in Adamson [R v Federal Court of Australia; Ex parte WA National Football League] (1979) 143 CLR 190 at 208]; the trading activities must form a sufficiently significant proportion of the corporation's overall activities (Mason J in Adamson at 233, with Jacobs J concurring at 237); the trading activities should not be insubstantial (Adamson at 239); the corporation must carry on trading activities on a

[10.20]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

219

significant scale (Mason, Murphy and Deane JJ in State Superannuation Board (57 ALJR at 96); Deane J in Commonwealth v Tasmania (1983) 46 ALR 625 at 833)). 2

The following corporations have been held to be “trading corporations” on the basis of this “substantial current activities” test: • a football club and a football league; 3 • a rodeo organiser; 4 • the Royal Prince Alfred Hospital; 5 • the Australian Red Cross Society; 6 • a co-operative society; 7 • the Hydro-Electric Commission of Tasmania; 8 • the organiser of an annual trade exhibition for members of the corporation; 9 • the Australian Broadcasting Commission; 10 • the Australian College of Dermatologists; 11 • the University of Western Australia; 12 and • the New South Wales Government Insurance Office. 13 While the substantial current activities test focuses on what the corporation actually does, the purpose for which it was formed, as indicated by its constitution, is not irrelevant. As Toohey J held in Hughes case, a corporation's constitution will be especially important where the corporation has not yet started to trade. Thus, for example, as Fencott v Muller 14 shows, a shelf company which has remained dormant since its incorporation can still be a trading corporation for the purposes of the CCA if its constitution authorises it to engage in trading activity.

2

Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 20.

3 4 5 6

R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190. McCarthy v Australian Rough Riders Association Inc (1988) ATPR ¶40-836. E v Australian Red Cross Society (1991) 27 FCR 310. E v Australian Red Cross Society (1991) 27 FCR 310.

7 8 9 10

TPC v Legion Cabs (Trading) Co-op Society Ltd (1978) ATPR ¶40-092. Commonwealth of Australia v Tasmania (1983) 46 ALR 625. Australian Beauty Trade Suppliers Ltd v Conference & Exhibition Organisers Pty Ltd (1991) ATPR ¶41-107. Sun Earth Homes Pty Ltd v Australian Broadcasting Commission (1991) ATPR ¶41-067.

11 12

13

Shahid v Australian College of Dermatologists (2008) 168 FCR 46. Quickenden v O’Connor, Commissioner of Australian Industrial Relations Commission (2001) 109 FCR 243. The University engaged in trading activities such as selling publications, parking services, student accommodation services and making investments. State Government Insurance Corporation v Government Insurance Office of NSW (1991) ATPR ¶41-110.

14

Fencott v Muller (1983) 152 CLR 570.

220

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.25]

Financial corporation ............................................................................................................................................................................................... [10.25]

“Financial corporation” is defined in s 4(1) of the CCA to mean:

a financial corporation within the meaning of paragraph 51(xx) of the Constitution and includes a body corporate that carries on its sole or principal business the business of banking (other than State banking not extending beyond the limits of the State concerned) or insurance (other than State insurance not extending beyond the limits of the State concerned).

It was held in Re Ku-ring-gai Co-operative Building Society (No 12) Ltd, 15 that the essence of a financial corporation is that it deals in finance to an appreciable degree – that is – in transactions whose subject matter is finance, such as lending or borrowing money, as distinct from transactions which merely involve the use of money. The test of whether a corporation is a “financial corporation,” is the same as that used in respect of trading corporations, namely the substantial current activities test. Consequently, it is not essential for a corporation's financial activities to be its principal activities so long as they form a significant part of its operations. Corporation incorporated in a Territory ...............................................................................................................................................................................................

A “corporation incorporated in a Territory” is one formed in an internal Australian Territory. As the definition of “corporation” in s 4(1) extends to all corporations of this nature, the ACL has a somewhat wider operation in the Australian Capital Territory and Northern Territory than it does in the States where it applies only to those corporations described at [10.15]-[10.25]. [10.30]

Related bodies corporate ............................................................................................................................................................................................... [10.35]

The Second Explanatory Memorandum states:

It is recognised that, for the purposes of the ACL, there are many potential applications of the Law that could be: • avoided or frustrated unless the activities of all corporations forming part of a corporate group are treated in the same way and taken together; or • may apply inconsistently or inappropriately if the activities of a corporate group are not recognised and treated accordingly. 16

Section 6 of the ACL provides that a body corporate is taken to be related to another body corporate if the bodies corporate would, under s 4A(5) of the CCA, be deemed to be related to each other. Section 4A(5) of the deems a body corporate to be related to another body corporate if the first-mentioned body corporate is: 15

Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134.

16

Second Explanatory Memorandum, [10.30].

CHAPTER

[10.40]

10

DEFINITIONS AND KEY CONCEPTS

221

• the holding company of another body corporate; • a subsidiary of another body corporate; or • a subsidiary of the holding company of another body corporate.

Part II: Liability of natural persons Direct liability under the ACL (Cth) ...............................................................................................................................................................................................

Sections 5 and 6 of the CCA extend the operation of, inter alia, Pt 2 of the ACL to natural persons in a miscellaneous set of situations in which the Commonwealth Parliament has the legislative power to bind them. The prohibitions in Sch 2 of the CCA are directed at “a person”. As a result of s 131 of the CCA, the provisions of the ACL apply as a law of the Commonwealth only to “the conduct of corporations”. However, extension provisions are included in s 6 of the CCA which apply the ACL to natural persons in a number of situations in which the Commonwealth Parliament has the legislative power to do so. The most significant of these are s 6(3) and 6(3A) of the CCA. Section 6(3) and (3A) provide: [10.40]

(3) In addition to the effect that this Act, other than Parts IIIA, VIIA and X, has as provided by another subsection of this section, the provisions of Parts 2-1, 2-2, 3-1 (other than Division 3), 3-3, 3-4, 4-1 (other than Division 3), 4-3, 4-4 and 5-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions (other than sections 33 and 155 of the Australian Consumer Law) were, by express provision, confined in their operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast; and (b) a reference in the provisions of Part XI to a corporation included a reference to a person not being a corporation. (3A) In addition to the effect that this Act, other than Parts IIIA, VIIA and X, has as provided by subsection (2), the provisions of Part 2-3 of the Australian Consumer Law have, by force of this subsection, the effect they would have if: (a) those provisions were, by express provision, confined in their operation to contracts for or relating to: (i) the use of postal, telegraphic or telephonic services; or (ii) radio or television broadcasts; and (b) a reference in the provisions of Part XI to a corporation included a reference to a person not being a corporation.

The relevant provisions of the ACL in Sch 2 of the CCA refer to “persons”. The effect of s 131 of the CCA is that the ACL as a law of the Commonwealth is restricted “to the conduct of corporations”. Section 6(3) then reverses this, in the instances listed, by

222

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.40]

providing that the references to “a corporation” in Pt XI of the Act (which contains s 131) should be read as including natural persons. The extensive use that is being made of the internet, access to which involves the use of telephonic services, allows the private parties and the regulators to have recourse to the ACL as a law of the Commonwealth to catch the conduct of natural persons. For example, in Seafolly Pty Ltd v Madden, 17 it was held that the TPA applied to an individual (Madden) because each of the publications of which the applicant complained (Facebook postings and sending an email) made use of the internet. In ACCC v Jutsen (No 3), 18 Nicholas J held that the expression “telegraphic …services” in s 6(3) of the CCA extends to conduct involving the use of the internet. His Honour stated that “the internet is a ‘telegraphic’ apparatus or system used to transmit and receive electronic communications”. 19 Similarly, in ACCC v Chopra, 20 Middleton J held that the promotion of and sale of electronic goods to consumers by Mr Chopra through the website, www.elcetronicbazaar.com.au, contravened ss 18, 29(1)(m) and 36(4) of the ACL by the operation of s 6(3)(a) of the CCA. 21 Section 6(3A) applies a similar approach to s 6(3) but is narrower in its ambit. It extends the reach of the ACL as a law of the Commonwealth to the conduct of natural persons in relation to unfair terms in consumer contracts for, or relating to, the use of postal, telegraphic, or telephonic services, or radio or television broadcasts. Where a natural person engages in conduct in contravention of one of the provisions of the ACL, applicants in all States and Territories are able to take proceedings by invoking their respective ACL (Application Acts). In summary, the forms of conduct on the part of a natural person which may come within the scope of the ACL (Cth) because of the operation of these sections can be summarised as follows: • conduct occurring overseas where the person involved was an Australian citizen or resident; • conduct occurring in overseas, or interstate trade or commerce; • conduct occurring in trade or commerce within a Territory, between a State and a Territory, or between two Territories; • conduct occurring in the course of supplying goods or services to the Commonwealth; • conduct involving the use of postal, telegraphic or telephonic services; and • contracts for or in relation to the use of postal, telegraphic or telephonic services or contracts for or in relation to a radio or television broadcast. 17 18 19 20

Seafolly Pty Ltd v Madden [2012] FCA 1346; (2012) ATPR ¶42-424. ACCC v Jutsen (No 3) (2011) 206 FCR 264. ACCC v Jutsen (No 3) (2011) 206 FCR 264 at [100] citing s 144(1) of the Evidence Act 1995 (Cth). ACCC v Chopra [2015] FCA 539.

21

ACCC v Chopra [2015] FCA 539 at [6].

[10.45]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

223

Direct liability ACL (Application Acts) ...............................................................................................................................................................................................

As noted in Chapter 9, each State and Territory has applied the ACL as a law of its jurisdiction. In doing so, they have retained the generality of the ACL's proscriptions with the result that, subject to certain constitutional limitations, they apply to anyone who is a “person”. Whilst these acts do not define “person”, in most jurisdictions interpretation legislation provides that a “person” includes a body politic or corporate as well as an individual. 22 Consequently, as used in the ACL as a law of each State or Territory, the word is likely to be given its ordinary meaning and will cover natural and artificial persons and the Crown. Furthermore, “a person” has not been restricted to someone acting as a principal. Consequently, an individual who acts on behalf of a corporation in a transaction occurring in trade or commerce can be held personally liable, independent of the corporation, if the conduct they undertook on its behalf contravenes a provision of one of those Acts. In Houghton v Arms, 23 Mr Arms entered into a contract with WSA Online Ltd to advise on website design, construction and administration. An employee of WSA Online Ltd, Mr Student, who was described as “WSA online project manager”, and a fellow employee, Mr Houghton, who was described as the “guru of interactive web design and development” gave incorrect information to Mr Arms. Mr Arms sued WSA under s 82 for a contravention of ss 52 and 53 of the TPA. Houghton and Student were also sued under s 75B as accessories and for contraventions of ss 9 and 12 of the FTA 1999 (Vic). Ryan J found that WSA was liable, but WSA was in liquidation. Ryan J dismissed the claims against Houghton and Student based on the FTA since it only applied to persons who were acting “in trade or commerce in their own right and not on behalf of another”. The Court held that the employees were directly liable for giving incorrect advice or information in the course of their employment, even though they were not acting for themselves in trade or commerce. The High Court held that s 52 did not refer to the trade or commerce of any particular person, and that a representation can be made in trade or commerce even though it is not the trade or commerce of the person making the representation. 24 Thus, an employee will be directly liable for misleading conduct under a State or Territory ACL if the employer is engaged in trade or commerce and the conduct occurred in the course of the employer's trade or commerce, or the trade or commerce of the person to whom that representation is made. It is not the trade or commerce of the employee, but the trade or commerce of the employer in which the conduct takes place. 25 [10.45]

22

See Interpretation Act 1987 (NSW), s 21; Interpretation of Legislation Act 1984 (Vic), s 38; Acts Interpretation Act 1954 (Qld), s 32D; Interpretation Act 1984 (WA), s 5; Interpretation Act (NT), s 17.

23 24

Houghton v Arms (2006) 225 CLR 553 (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). Houghton v Arms (2006) 225 CLR 553 at [32]-[35]. See also TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd (2008) 71 NSWLR 323 (Spigelman CJ, Beazley and Hodgson JJA).

25

Houghton v Arms (2006) 225 CLR 553 at [35].

224

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.50]

Houghton v Arms indicates the superiority of proceeding against a natural person directly under a State or Territory ACL, rather than indirectly as an accessory to a contravention by a corporation under the ACL (Cth). It avoids the problems of proof associated with the requirement of actual knowledge established by the High Court in Yorke v Lucas.

Part III: Liability of the Crown Commonwealth Crown ...............................................................................................................................................................................................

Section 2A(1) of the CCA provides: “this Act binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth”. Section 131(1) of the CCA provides that Sch 2 applies as a law of the Commonwealth to the conduct of corporations and refers to conduct of corporations as extended by ss 5 and 6 of the CCA, but there is no reference to s 2A or the fact the ACL binds the Crown. However, because s 2A refers to the “Act” and an Act includes any Schedules, this includes the ACL despite the fact that in the application provision (s 131) there is no mention of the application of the ACL to the Crown in right of the Commonwealth. Section 2A(2) of the CCA provides that for this purpose the Crown, in right of the Commonwealth and its authorities, are to be treated as if they were corporations. Thus, if the Crown in right of the Commonwealth engages in conduct proscribed by the ACL (Cth) whilst carrying on a business its conduct will be actionable. [10.50]

Commonwealth Crown carrying on a business ...............................................................................................................................................................................................

The definition of the word “business” in s 2 of the ACL includes a not-for-profit business, but does not elaborate any further. It is necessary to ask: does the activity constitute carrying on a business in the ordinary sense? The word “business” is a “wide and general” word. 26 It takes its meaning from its context. 27 It was held in J S McMillan Pty Ltd v Commonwealth, 28 that the phrase “carries on a business” has a different meaning to that of engaging in “trade or commerce” as used in 18 of the ACL, but the terms are not mutually exclusive. In particular, it “signifies that the Commonwealth is to be bound only where the conduct complained of is engaged in, in the course of carrying on a business”. 29 In that case the Australian Government Publishing Service (AGPS) was a unit within the Department of Administrative Services. It was not a separate authority [10.55]

26

Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 at 184 (Gibbs CJ).

27 28

Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216 at 226 (Mason CJ, Gaudron and McHugh JJ). J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337.

29

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356.

[10.55]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

225

of the Commonwealth. The AGPS was systematically and regularly providing general printing services, dispatch and distribution services, graphic design services and editorial services to other Commonwealth departments. Emmett J expressed the view that in providing these services the Commonwealth was carrying on a business with the meaning of s 2A of the TPA. 30 However, the fact that the AGPS carried on a business by providing these services did not mean that the Commonwealth, in conducting a sale of the AGPS, was carrying on that business. The Commonwealth was not in the business of selling capital assets. 31 Emmett J drew a distinction between carrying on the day-to-day operations of the AGPS which was carrying on a business, and issuing a Request for Tender for the sale of the assets of the business which was not conduct in the carrying on of a business. 32 His Honour adopted the view of Gibbs J in Smith v Capewell 33 that: “The expression ‘carries on a business’ in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts and not simply the effecting of one solitary transaction.” Emmett J elaborated: 34 However, mere repetitiveness is not sufficient to constitute carrying on of a business. System and regularity are involved in the carrying on of the business but it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. The example of regular deposits to a bank account is sufficient to explain that proposition. Absence of a system and regularity might deny that a business is being carried on but the presence does not necessarily establish that it is.

Thus, the Commonwealth was able to escape liability for its misleading conduct when it invited tenders for aspects of the AGPS's business. Its conduct in so doing did not amount to carrying on that business. One factor that the courts consider is whether the activities being undertaken are in the nature of government activities, in the sense of public or regulatory, as opposed to private or commercial. An examination of the entity's governing statute will be a useful reference point. 35 In NT Power Generation Pty Ltd v Power and Water Authority, 36 s 17(1) of the Power and Water Authority Act (NT) stated that PAWA's duty was to “act in a commercial manner”. In ACCC v Australian Medical Association (WA), 37 the Hospitals and Health Services Act 1927 (WA) did not suggest that the Minister for Health, when providing medical services 30 31 32 33

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 355. J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356-357. J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 356. Smith v Capewell (1979) 142 CLR 509 at 517.

34

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 354 citing Barwick CJ in Hungier v Grace (1972) 127 CLR 210 at 217.

35 36

NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399 at [129] (Finkelstein J); and ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 at [390] (Carr J). NT Power Generation Pty Ltd v Power and Water Authority (2002) 122 FCR 399.

37

ACCC v Australian Medical Association (WA) (2003) 199 ALR 423.

226

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.55]

in public hospitals, was carrying on a business and Carr J concluded that the activities of the state in this regard were properly characterised as fulfilling a governmental or welfare function. They did not have the requisite “commercial flavour” to amount to carrying on a business. 38 Another useful reference point is the language used in the entity's annual reports and other internal records. This self-description was crucial in the NT Power case where PAWA's documents indicated that its officers perceived it to be carrying on a business for the purposes of the equivalent “carries on a business” requirement in s 2B of the TPA. 39 The High Court referred to PAWA's Report to the Legislative Assembly in which it stated that it was undergoing “commercialisation” and that: “Like all business, [PAWA] needs to generate a return in the very significant amount of capital invested.” The High Court referred to these admissions being made pursuant to statutory duties as being matters of the “utmost solemnity”. 40 Another factor that the courts consider is whether the activities are undertaken with repetition, system and regularity. If so, this tends to indicate that the entity is carrying on a business. An isolated transaction will tend to indicate that the entity is not carrying on a business. The High Court in NT Power approved the result in McMillan since “the officers engaged in the sale had nothing to do with the day-to-day operations of enterprise; the Commonwealth did not conduct any business of selling assets”. 41 Another matter of some importance that emerges from the court's decision in McMillan is that if the government is engaged in the procurement of goods or services for its own use in the conduct of governmental activities it is not carrying on a business. In McMillan, Emmett J held that the AGPS was carrying on a business as a provider of services but that the other government departments that were users of these services were not carrying on a business; rather, they were engaged in purely governmental activities. His Honour stated: 42 Insofar as the Commonwealth, in the guise of the Department of the Senate, the Department of the House of Representatives and other departments, utilises the services provided or procured by AGPS, it does so in the carrying out of governmental functions. It could not be said that the Commonwealth in those guises is carrying on a business. It is acquiring the services systematically and regularly, but only for the purposes of governing.

38 39 40 41

ACCC v Australian Medical Association (WA) (2003) 199 ALR 423 at [393]. NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 110-111 [52]-[54] (McHugh A-CJ, Gummow, Callinan and Heydon JJ). NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 110-111 [53]-[55]. NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 119 [74].

42

J S McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337 at 355.

[10.60]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

227

This interpretation has been followed in other cases 43 but has been the subject of judicial criticism. Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd 44 observed: Government contracting (in procurement and otherwise) is of major significance in the economic life of this country, as it is in most countries … It is somewhat surprising, that when the State enters the market place to acquire goods or services, it should exempt itself from those norms of conduct considered appropriate to the conduct of trade and commerce that it has imposed upon the private sector as of course – the more so given the “business-like” manner in which the Executive government commonly professes it conducts its affairs both internally and in its dealings with the community.

In State of New South Wales v RT & YE Falls Investments Pty Ltd, 45 representations made by the NSW Department of Agriculture in connection with a disease eradication program it was administering were found by the New South Wales Court of Appeal not to fall within the ambit of the Fair Trading Act 1987 (NSW) which provided that the Crown was bound only to the extent that it carried on a business. Although compensation was paid to the owners of cattle destroyed and although the Department received payments from the abattoirs, its activities were best characterised as “purely governmental in the interests of the community, rather than constituting the carrying on of a business”. 46 Exceptions to Commonwealth Crown carrying on a business ...............................................................................................................................................................................................

If a Commonwealth entity represents the Crown and the challenged conduct occurs in the course of carrying on a business it is necessary to consider whether a s 2C exception applies. Section 2C of the CCA identifies certain activities that do not amount to carrying on a business. It provides: [10.60]

(1) For the purposes of sections 2A, 2B and 2BA, the following do not amount to carrying on a business: 43

See Corrections Corporation of Australia Pty Ltd v Commonwealth (2000) 104 FCR 448 where the Department of Immigration and Multicultural Affairs (“DIMA”) maintained a number of centres for the detention of “non-citizens” entering Australia unlawfully. In 1997, the government decided to privatise the provision of these centres. It requested a number of organisations, including the applicant, to tender for this work. The requests for tender set out certain criteria and other requirements with which tenders had to comply. The applicant submitted a tender but was unsuccessful. It alleged that DIMA had engaged in misleading conduct contrary to s 52 by representing that it would evaluate the tenders it received in accordance with the terms of the request. Finkelstein J held that the process of selecting a person to provide services to the Commonwealth was quite distinct from any business and struck out the applicant’s s 52 claim. In Sirway Asia Pacific Pty Ltd v Commonwealth (2002) ATPR (Digest) ¶46-226, the Department of Defence was held not to be carrying on a business when it purchased chinaware in “industrial quantities”. Sundberg J held that in doing so it was fulfilling its government related responsibilities, not engaging in a commercial exercise.

44 45 46

GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at [1375]. State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233. State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) ATPR (Digest) ¶46-233 at 53,719 (Hodgson JA).

228

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.60]

(a) imposing or collecting: (i) taxes; or (ii) levies; or (iii) fees for licences; (b) granting, refusing to grant, revoking, suspending or varying licences (whether or not they are subject to conditions); (c) a transaction involving: (i) only persons who are all acting for the Crown in the same right (and none of whom is an authority of the Commonwealth or an authority of a State or Territory); or (ii) only persons who are all acting for the same authority of the Commonwealth; or (iii) only persons who are all acting for the same authority of a State or Territory; or (iv) only the Crown in right of the Commonwealth and one or more non-commercial authorities of the Commonwealth; or (v) only the Crown in right of a State or Territory and one or more non-commercial authorities of that State or Territory; or (vi) only non-commercial authorities of the Commonwealth; or (vii) only non-commercial authorities of the same State or Territory; or (viii) only persons who are all acting for the same local government body (within the meaning of section 2BA) or for the same incorporated company in which such a body has a controlling interest; (d) the acquisition of primary products by a government body under legislation, unless the acquisition occurs because: (i) the body chooses to acquire the products; or (ii) the body has not exercised a discretion that it has under the legislation that would allow it not to acquire the products. (2) Subsection (1) does not limit the things that do not amount to carrying on a business for the purposes of sections 2A, 2B and 2BA.

In the NT Power case, 47 the High Court stated that the “licence” referred to in s 2C(1)(b) is of the kind that prevents what would otherwise be an illegality or wrong against the Crown. According to the High Court: 48 [The illegality] is found in conduct without a licence, contrary to an enactment–carrying on some profession (like medicine or law), or some trade or business (like selling liquor or drugs, or erecting buildings, or dealing in second-hand goods), or some pastime (like shooting, fishing, owning a pet or, in former times, watching television), or some common activity (like driving). 47

NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 128 [101].

48

NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 128 [101].

[10.65]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

229

Thus, the granting of taxi licences to operators who meet certain minimum criteria in return for an appropriate licence fee would be covered by the exemption. So too would the grant of licences to operate private hospitals that meet specified standards, or the grant of a licence to an approved service operator. Section 2C(1)(b) would not exempt the grant or sale of permits to acquire goods or services; it only exempts licences that allow the licensee to supply goods or services. Similarly, a licence in the nature of a right to occupy land or premises owned by the Crown, or a licence to use certain material owned by the Crown would not constitute a licence for the purposes of s 2C(3) since it does not allow the licensee to supply “goods or services”. Section 2C(1)(c) provides that carrying on a business is not constituted by merely carrying out an intra-governmental transaction. It is important to note the limited nature of this exemption. An intra-governmental transaction will only be exempt if it involves persons, all of whom are acting for the Crown in the same right, and none of whom is an authority of the Commonwealth or an authority of a State or Territory. Section 2C(1)(d) provides that carrying on a business is not constituted by the compulsory acquisition of primary products by a Crown body. If a State marketing authority does not represent the Crown, the exemption will not apply and it will carry on a business. State and Territory Crowns ...............................................................................................................................................................................................

The ACL (Cth) does not apply to the State and Territory Crowns. However, the State and Territory application legislation of each jurisdiction provides that the ACL of their jurisdiction will bind the Crown in right of each of the States, and of the Northern Territory and the Australian Capital Territory, to the full extent of its constitutional capacity to do so. This expressly rebuts the common law presumption that the Crown is not bound by legislation. For example, the relevant Part of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (ACLFTA 2012 (Vic)) is Pt 2.4, “Application of the Australian Consumer Law to the Crown”. It contains the following definitions that are relevant to the issue of Crown liability: [10.65]

• The term “jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “a State or the Commonwealth”. • The term “this jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “Victoria”. • The term “participating jurisdiction” is defined in s 6 of the ACLFTA 2012 (Vic) to mean “a jurisdiction that is a party to the Intergovernmental Agreement and applies the Australian Consumer Law as a law of the jurisdiction, either with or without modifications”. • The term “State” is defined in s 6 of the ACLFTA 2012 (Vic) to include a Territory.

230

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.65]

• Section 15 of the ACLFTA 2012 (Vic) qualifies s 4 and provides: “In this Part, participating jurisdiction or other jurisdiction does not include the Commonwealth”. Section 16 of the ACLFTA 2012 (Vic) provides: The application law of this jurisdiction binds (so far as the legislative power of Parliament permits) the Crown in right of this jurisdiction and of each other jurisdiction, so far as the Crown carries on a business, either directly or by an authority of the jurisdiction concerned.

Section 17 of the ACLFTA 2012 (Vic) provides: (1)

The application law of each participating jurisdiction other than this jurisdiction binds the Crown in right of this jurisdiction, so far the Crown carries on a business, either directly or by an authority of this jurisdiction.

(2)

If because of this Chapter, a provision of the law of another participating jurisdiction binds the Crown in right of this jurisdiction, the Crown in that right is subject to that provision despite any prerogative right or privilege. However, s 19 of the ACLFTA 2012 (Vic) provides: (1)

Nothing in the application law of this jurisdiction makes the Crown in any capacity liable to a pecuniary penalty or to be prosecuted for an offence.

(2)

Without limiting subsection (1), nothing in the application law of a participating jurisdiction makes the Crown in right of this jurisdiction liable to a pecuniary penalty or to be prosecuted for an offence.

(3)

The protection in subsection (1) or (2) does not apply to an authority of any jurisdiction. In summary, the complementary coverage of the ACL (Application Acts) means that each State and Territory Crown is bound by its own ACL, and by each the ACLs of the other States and Territories. However, each application law provides that a State or Territory Crown is only bound by the ACL to the extent that it carries on a business, either directly or by an authority of its jurisdiction. Each State and Territory application law excludes the Commonwealth Crown from its coverage. Thus, the Commonwealth Crown is bound by the ACL (Cth). State and Territory Crowns that contravene the ACL are not liable to a pecuniary penalty or prosecution for an offence. Consider a situation where the Crown in right of New South Wales carried on a business of providing first aid training for reward 49 and made a false representation in a newspaper published in both New South Wales and Victoria. Section 16 of the ACLFTA 2012 (Vic) provides that the ACL (Vic) binds the Crown in right of the State of New South Wales so far as it carries on a business. Section 36 of the FTA 1987 (NSW) provides that the ACL (NSW) binds the Crown in right of New South Wales. Thus, the conduct of the Crown in right of New South Wales could be challenged under either the ACL (Vic) or the ACL (NSW), but the Crown in right of New South Wales would not be 49

Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548.

CHAPTER

[10.70]

10

231

DEFINITIONS AND KEY CONCEPTS

liable for a pecuniary penalty or prosecution for an offence under either the ACL (Vic) or the ACL (NSW). TABLE 2.1 Application of State and Territory ACLs to the Crown

FTA 1987 (NSW) s 36

Crown bound by application laws of its own jurisdiction s 37 Crown bound by application law of other jurisdictions s 39 Crown not liable for pecuniary penalty or prosecution Application s 35 of the ACL to the Crown does not include the Commonwealth

FTA 1989 (Qld) s 24

ACLFTA 2012 (Vic) s 16

FTA 1987 (SA) s 22

FTA 2010 (WA) s 28

ACLA 2010 (Tas) s 14

CAFTA FTA (NT) 1992 (ACT) s 15 s 35

s 25

s 18

s 23

s 29

s 15

s 16

s 36

s 27

s 20

s 25

s 30

s 17

s 18

s 38

s 23

s 16

s 21

s 27

s 13

s 14

s 34

State or Territory Crown: exceptions to carrying on a business ...............................................................................................................................................................................................

If a State or Territory authority represents the Crown and the challenged conduct occurs in the course of carrying on a business, it is necessary to consider whether an exception applies. For example, s 18(1) of the ACLFTA 2012 (Vic) provides: [10.70]

For the purposes of sections 16 and 17, the following do not amount to carrying on a business– (a) imposing or collecting– (i) taxes; or (ii) levies; or (iii) fees for authorisations; (b) granting, refusing to grant, revoking, suspending or varying authorisations (whether or not they are subject to conditions);

232

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.70]

(c) a transaction involving– (i) only persons who are all acting for the Crown in the same right (and none of whom is an authority of a State); or (ii) only persons who are all acting for the same authority of a State; or (iii) only the Crown in right of a State and one or more non-commercial authorities of that State; or (iv) only non-commercial authorities of the same State; (d) the acquisition of primary products by a government body under legislation, unless the acquisition occurs because– (i) the body chooses to acquire the products; or (ii) the body has not exercised a discretion that it has under the legislation that would allow it not to acquire the products. (e) Subjection (1) does not limit the things that do not amount to carrying on a business for the purposes of sections 16 and 17.

These exceptions raise the same issues as those discussed at [10.60] in relation to s 2C of the CCA. Section 18(1)(a) provides that carrying on a business is not constituted by Crown bodies which merely impose or collect fees, taxes and levies. This is self-explanatory. Section 18(1)(b) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by Crown bodies which merely grant, refuse, revoke, suspend or vary authorisations in relation to the supply of goods or services. The definition of “authorisation” in s 18(3) requires that it “allows the holder of the authorisation to supply goods or services”. Thus, the granting of authorisations to taxi operators who meet certain minimum criteria in return for an appropriate fee would be covered by the exemption. So too would the grant of authorisations to operate private hospitals that meet specified standards, or the grant of a licence to an approved service operator. Section 18(1)(b) would not exempt the grant or sale of permits to acquire goods or services; it only exempts licences that allow the licensee to supply goods or services. Section 18(1)(c) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by merely carrying out an intra-governmental transaction. It is important to note the limited nature of this exemption. An intra-governmental transaction will only be exempt if it involves persons, all of whom are acting for the Crown in the same right, and none of whom is an authority of the Commonwealth or an authority of another State or Territory. For example, an intra-governmental transaction between a State Department of Health and a State Department of Administrative Services, both of which are part of the same legal entity (the Crown in right of the State) would be exempt. On the other hand, where a Departmental “business unit” supplies goods or services to a commercial authority of that State, the transaction will not be exempt.

[10.75]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

233

Section 18(1)(d) of the ACLFTA 2012 (Vic) provides that carrying on a business is not constituted by the compulsory acquisition of primary products by a Crown body. If a State marketing authority does not represent the Crown, the exemption will not apply and it will carry on a business. Other participating jurisdictions contain similar provisions. In determining whether the ACL of a State or Territory applies to a particular authority, the starting point is to determine its status, and whether it is a manifestation of the Crown. If is not the Crown, the State or Territory ACL will apply and it is unnecessary to enquire further. If the authority is the Crown in right of the particular State or Territory, it is then necessary to consider whether it “carries on a business”. If it is not carrying on a business, it is unnecessary to enquire further. If the authority is carrying on a business, it is necessary to enquire whether the particular business being carried on falls within one of the exceptions. The following State activities have been held to constitute the carrying on of a business: • providing ambulance services at sporting events and first aid training for reward. 50 The following State activities have been held not to constitute the carrying on of a business: • managing a national park; 51 • operating a public hospital through an outsourced contractor and providing hospital services to public patients; and, 52 • providing police and corrective services. 53

Part IV: “in trade or commerce” requirement Introduction ...............................................................................................................................................................................................

The general protections against misleading conduct and unconscionable conduct in Ch 2 of the ACL, and some of the specific protections in Ch 3 of the ACL only apply if the conduct at issue occurs “in trade or commerce.” For example, s 29 provides that a person must not, in trade or commerce, in connection with the supply of goods or services make false or misleading representations concerning various matters, and s 30 provides that a person must not, in trade or commerce, in connection with the sale of an interest in land make false or misleading representations concerning various [10.75]

50

Paramedical Services Pty Ltd v Ambulance Service of NSW [1999] FCA 548.

51 52

Easts Van Villages v Minister Administering the National Parks and Wildlife Act (2001) ATPR (Digest) ¶46-211. ACCC v Australian Medical Association (WA) (2003) 199 ALR 423.

53

Hamond v State of New South Wales (2001) FCA 157.

234

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.75]

matters. These provisions were not intended to apply to all conduct regardless of its nature. In particular, they are not intended to apply to conduct of a purely private or personal nature. For example, a person who sells their home would not be engaged in trade or commerce, and this would be so even if they had renovated the home with a view to making a profit on the sale, engaged an agent to assist them with the sale, and prepared brochures and other advertisements. 54 The sale by the vendor of his or her home is not an act done as part of a trading or commercial business. In Williams v Pisano, 55 the joint vendors of a property retained a real estate agent to market the property on their behalf. The vendors had renovated the property with a view to resale at a profit. They lived in the property from before 2005 until 2010 as their home and the renovations were carried out over a two year period. As soon as the renovations were completed they sold the property. The advertising brochure prepared by the agent made false representations about the standard of the renovations that had been made to the property. The case was decided on the basis that the sale did not occur in trade or commerce because it was a private residence, so there was no contravention of ss 18 or 30 of the ACL. 56 Emmett JA observed: the element of acting in trade or commerce will not be attributed to owners selling their home merely by reason of their engagement of an estate agent to find a buyer … The business character of the acts done by an agent cannot be imputed to the acts of the principals. 57

The consumer guarantees provided for in ACL, Ch 3, Pt 3-2, Div 1, subdiv A, ss 51 – 59 only apply if the supply occurs “in trade or commerce”. In relation to the supply of goods the guarantees would not apply to a private sale of a motor vehicle, or a “garage sale” of personal effects. These are not activities of a trading or commercial nature. In each case it is necessary to consider the character of the conduct at issue from the perspective of the person engaging in the conduct. The term “trade or commerce” is defined in s 2 of the ACL to mean: (a)

trade or commerce within Australia; or

(b) trade or commerce between Australia and places outside Australia; and includes any business or professional activity (whether or not carried on for profit). The ACL applies to conduct engaged in outside Australia, provided that at least some aspect of the trading relationship between two or more parties has taken place in Australia.

54 55 56

Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 129-130. Williams v Pisano (2015) 299 FLR 172. Williams v Pisano (2015) 299 FLR 172.

57

Williams v Pisano (2015) 299 FLR 172 at [40] citing Franich v Swannell (1993) 10 WAR 459 at 481-483.

[10.80]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

235

In Concrete Constructions (NSW) Pty Ltd v Nelson, the majority described the terms “trade or commerce” as “terms of common knowledge of the widest import”. 58 In Re Ku-ring-gai Co-operative Building Society (No 12) Ltd, 59 Deane J said: the terms “trade” and “commerce” are not terms of art. … [They] are clearly of the widest import … [and] are not restricted to dealings or communications which can properly be described as being at arm's length in the sense that they are within open markets or between strangers or have a dominant objective of profit making. They are apt to include commercial or business dealings in finance between a company and its members…which, while being commercial in character, are marked by a degree of altruism which is not compatible with a dominant objective of profit-making.

In order to satisfy the definition of the term “trade or commerce” in s 2 of the ACL it is also necessary to establish that it constitutes trading or commercial activity within Australia or between Australia and places outside Australia. In Sunland v Prudentia Investments, 60 it was argued that misleading conduct which took place in Dubai in relation to the acquisition of a block of land in Dubai, occurred in trade or commerce between Australia and places outside Australia on the basis that one of the parties to the negotiations for the acquisition of the block of land, Sunland Group Ltd, was incorporated in Queensland. Croft J, in the Supreme Court of Victoria, held that the conduct at issue was not conduct in trade or commerce between Australia and Dubai. 61 Examples ...............................................................................................................................................................................................

In Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc, 62 an advertisement published by the Tobacco Institute suggested that there was little evidence proving that cigarette smoke caused disease in non-smokers. The Federation of Consumer Organisations sought an injunction restraining the Institute from publishing these advertisements. It succeeded at first instance and the Institute appealed to the Full Court. The Full Court held that the Institute was formed to promote the interests of a particular industry whose activities were “in trade or commerce”. When conveying representations about that industry's product and downplaying the risks of passive smoking this was likely to promote sales of tobacco-based products. Accordingly, the Institute was acting in trade or commerce. 63 [10.80]

58 59 60 61 62 63

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 602-604 (majority judgment of Mason CJ, Deane, Dawson and Gaudron JJ). Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134 at 167, cited with approval by Branson and Stone JJ in Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [25]. Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243. Sunland Waterfront (BVI) LTD v Prudentia Investments Pty Ltd (No 2) (2012) 266 FLR 243 at 447 [406] and [407]. Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1. Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 16 (Sheppard J), at 25 (Foster J) and 44 (Hill J).

236

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.80]

On the other hand, in Dataflow Computer Services Pty Ltd v Goodman, 64 Goodman, a former employee of Dataflow, sent an email to Harvey Norman, one of its important customers, suggesting that Dataflow was going to alter its distribution arrangements to the detriment of the Harvey Norman chain of stores. This was not correct. Dataflow took these proceedings against Goodman on the ground that his action in sending the email contravened s 52 of the TPA. Dataflow submitted that the e-mail had a “trading or commercial character” as it was intended to influence the recipients not to deal with Dataflow any longer because of the falsely suggested misbehaviour by Dataflow. Hely J did not agree with this characterisation of the conduct at issue and concluded: Trade or commerce does not exist in the abstract. For present purposes the trade or commerce with which one is concerned can probably be described as the business or commercial dealings between Dataflow and Harvey Norman and other retailers of Dataflow products. In my view the sending of the e-mail was not conduct on the part of the respondent which was engaged in as part of those business or commercial dealings, as opposed to being in connection with or in relation to those dealings. 65

Goodman's conduct was more appropriately characterised as that of a bystander commenting on the trade or commerce in which others were engaged. 66 It is difficult to reconcile Dataflow with the decision of in Firewatch Australia Pty Ltd v Country Fire Authority. 67 Goldberg J held that an internal Fire Authority bulletin which strongly recommended that brigades not become involved in the distribution or recommendation of the applicant's “Firewatch extinguisher” had a trading or commercial character. His Honour stated: Although an internal CFA communication will ordinarily not have a trading or commercial character there was added to the bulletin a recommendation to brigades that as part of their trading or commercial activity they not be involved in the distribution or recommendation of the Firewatch extinguisher. In that context the primary distribution of the bulletin was conduct “in trade or commerce”. More particularly was this so where the bulletin was distributed further to persons outside the CFA organisation and reached consumers and potential consumers.

Although the bulletin was an internal document it had “a trading or commercial character” in the sense that it was intended to influence servicing brigades not to be involved in the distribution or recommendation of the Firewatch extinguisher. Putting the matter another way, the bulletin had more than “an internal character”; it was intended to have a consequence or impact on trading and commercial activities. It was intended that in dealings or potential dealings with consumers' fire equipment maintenance servicing brigades would be influenced not to become involved in the distribution or recommendation of the product. 68 64 65 66 67

Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 (Hely J). Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 at [22]. Dataflow Computer Services Pty Ltd v Goodman (1999) 168 ALR 169 at [23]. Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198.

68

Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198 at [63]-[64].

[10.90]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

237

Goldberg J's focus on the purpose or intention of those responsible for the bulletin suggests a subjective inquiry rather than an objective inquiry as to whether the conduct at issue is an aspect or element of a trading or commercial nature. 69 Extended definition: any professional activity ...............................................................................................................................................................................................

The phrase “trade or commerce” is expressly defined in s 2 of the ACL to include “any business or professional activity”. The effect of this inclusion is to expose accountants, lawyers, medical practitioners and the members of other professions to liability under the ACL should they mislead their clients in the course of carrying out professional work for them. It also exposes them to liability under the consumer guarantees law if they fail to comply with the standards imposed by those provisions that have an “in trade or commerce” requirement. 70 In Shahid v Australian College of Dermatologists, 71 Branson and Stone JJ held that the extended definition of “trade or commerce” in s 10 of the FTA 1987 (NSW), which included “any business or professional activity,” was not confined to professional activities that have a trading or commercial character. Included within the concept “professional activity” were the activities and transactions done by the College for the purposes of a training program. This included representations in the College's Handbook which contained information relating to the selection process, the adequacy of the College's record keeping and an appeals process for unsuccessful applicants. Branson and Stone JJ held that the College published its Handbooks “in trade or commerce”, and that the College had a commercial relationship with practitioners who applied for a position as a trainee registrar. It charged them significant examination fees and gained further revenue from conducting training and seminars that trainee registrars were required to attend. 72 In so finding, their Honours rejected the analysis of Santow J in Prestia v Aknar, 73 who adopted a narrow interpretation of “any professional activity” confining it to professional activities that have a trading or commercial character. [10.85]

Non-profit activities ...............................................................................................................................................................................................

The definition of “trade or commerce” in s 2 of the ACL expressly includes non-profit activities. This part of the definition differs from that found in the TPA. For example, it would apply to advice given by a lawyer to a client on a pro bono basis, and, it [10.90]

69

See McCabe, “Section 52 and the Regulation of Non-commercial Speech” (2010) 18 Trade Practices Law Journal 21 at 24-5.

70 71 72

See Chapter 17. Shahid v Australian College of Dermatologists (2008) 168 FCR 46. Shahid v Australian College of Dermatologists (2008) 168 FCR 46 at [26].

73

Prestia v Aknar (1996) 40 NSWLR 165. Prestia was concerned with the FTA 1987 (NSW) which was the first of the Fair Trading Acts to contain an extension of the definition of “trade or commerce” to include “professional activity”.

238

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.95]

seems it would also apply to the activities of charities such as supplying goods or services free of charge. This may have implications for charities under the consumer guarantees law of the ACL. 74 “In” trade or commerce ...............................................................................................................................................................................................

Conduct must occur “in” trade or commerce. The High Court, in Concrete Constructions (NSW) Ply Ltd v Nelson, 75 held that the conduct at issue must itself be trading or commercial in nature, and that it is not sufficient for it to be merely connected with, or incidental, to trade or commerce. In other words, the trade or commerce requirement is not satisfied merely because the conduct occurred as part of some overall commercial or trading activity. The majority concluded that the conduct at issue, which consisted of an internal communication by one employee (the foreman) to another (Mr Nelson) in the course of their activities constructing a building, was not “in trade or commerce”. 76 The question whether representations made by a business or professional firm to its employees about the terms of their employment are “in” trade or commerce remains unresolved. The position was summarised in the following extract from the Full Federal Court in Village Building Company Ltd v Canberra International Airport Pty Ltd: 77

[10.95]

The difficulty that can arise in applying the principles in Concrete Constructions is illustrated by the different views expressed in this Court as to whether representations made by a corporation to an employee in connection with the employee's terms of employment constitute conduct in trade or commerce. In Barto v GPR Management, in the context of a strike out application, Wilcox J held negotiations with a prospective or present employee in respect of that person's employment contact is conduct capable of falling within s 52 of the TPA. In Martin v Tasmania Development and Resources, Heerey J disagreed, holding that a communication to an employee asserting that termination of his employment was required on operational grounds was not a dealing of a trading or commercial nature. In Stoelwinder v Southern Health Care Network, Finkelstein J preferred Barto to Martin. In Hearn v O'Rourke, a case involving a different fact situation, Kiefel J at first instance expressed a preference for the reasoning in Martin. The Full Court allowed an appeal (Finn and Jacobson JJ; Dowsett J dissenting), but did not find it necessary to resolve the conflict. (citations omitted)

Trade or commerce of another ...............................................................................................................................................................................................

Where vendors of private property have retained an agent in connection with the sale of the property, and the conduct of the agent is conduct in trade or commerce, the “trade or commerce” of the agent is not to be attributed to the principal, where the [10.100]

74

See Chapters 16 and 17.

75 76

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 603-4; Plimer v Roberts (1997) 80 FCR 303 at 326-9 (Lindgren J). Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604-5.

77

Village Building Company Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330 at [46]-[52].

[10.105]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

239

principal was not engaged in trade or commerce. 78 Section 84(4) of the CCA provides that conduct engaged in on behalf of a person (the principal) by an agent within the scope of the actual or apparent authority of the agent is deemed to have been engaged in by the principal. However, s 84(4) does not impute to the principal the trade or commerce of the agent. 79 However, an employee who engages in misleading conduct in the course of his or her employment engages in that conduct in trade or commerce if the employer is engaged in trade or commerce. The conduct takes place in the trade or commerce of the employer. In Houghton v Arms, 80 the High Court held that while in most cases the focus would be on the nature of the business of the person making the representations, statements made by employees, who are not themselves engaged in trade or commerce, may be held to be in “trade or commerce” where they are made for the purposes of the employer's business. In such circumstances, the employee will be personally liable if their conduct constitutes a contravention of s 18 of the ACL. In Williams v Pisano, 81 Emmett JA observed: it does not follow from the propositions just formulated that an employer (or principal) is deemed to engage in conduct in trade or commerce merely because the employee, or agent, engages in his own trade or commerce in the course of that employment or agency. Such a result would in effect work backwards the principle stated in Houghton v Arms. 82

Summary ...............................................................................................................................................................................................

Davies J in Plimer v Roberts, observed: “the precise limits of what is or is not trade or commerce, or what act is in or is not in trade or commerce cannot be definitely stated…”. 83 In summary, the following conduct will occur in trade of commerce: [10.105]

• external transactions or communications by businesses to further their commercial interests; 84 and

78 79 80 81 82 83 84

Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 127-9. See also Williams v Pisano (2015) 299 FLR 172 at [39] (Emmett JA). Franich v Swannell (1993) 10 WAR 459 at 481-3. Houghton v Arms (2006) 225 CLR 553 at 565 [32]-[35] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). Williams v Pisano (2015) 299 FLR 172 (Bathurst CJ, McColl and Emmett JJA). Williams v Pisano (2015) 299 FLR 172 at [43]. Plimer v Roberts (1997) 80 FCR 303 at 305. See, eg, Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134; Bevanere Pty Ltd v Lubidineuse (1984) 7 FCR 325; E v Australian Red Cross Society (1991) 27 FCR 310; Sykes v Reserve Bank of Australia (1998) 88 FCR 511; and Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd (2005) ATPR ¶42-048.

240

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.110]

• external transactions or communications by professionals in the course of a retainer for which they are remunerated. 85 The following conduct will not occur in trade of commerce: • internal communications by one employee to another in the course of their ordinary activities; 86 • government announcements and policy statements; 87 and • making representations in the course of lectures on a subject of historical, religious and/or scientific interest for which the lecturer is not remunerated. 88

Part V: Liability of corporate and non-corporate principals Introduction ...............................................................................................................................................................................................

The liability of corporate principals for the conduct of others who contravene the consumer protection provisions of the ACL (Cth) does not arise as a result of the common law of vicarious liability. The right of a claimant to sue a corporate principal for the infringing conduct of others, including directors, servants or agents, relies on proof of the matters in s 139B of the CCA. A distinction is made in the relevant authorities between direct liability (as it applies to corporations) and the principle of vicarious liability. Under the common law of vicarious liability, a principal is not deemed to have engaged in the conduct at issue; rather, the principal is made legally liable for the conduct of the director, servant or agent who engages in the conduct. Under s 139B of the CCA, on the other hand, the principal is deemed to have engaged in the conduct at issue. A corporation will be directly liable for the acts of its directors, managers and other officers who are the governing mind and body of the corporation, as if their acts were the acts of [10.110]

85

See, eg, Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 71 ALR 615; Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 127 where it was conceded that a firm of solicitors acting for the vendor of a residential property was engaged in trade or commerce. In ACCC v Sampson (2011) ATPR ¶42-374 Tracey J declared that Ms Sampson, a lawyer, carried on business as a partner and principal of the law firm, Goddard Elliott. Her actions on behalf of her clients in sending debt collection letters and notices seeking to recover debts which contained misleading information were held to have occurred in trade or commerce. Cf Prestia v Aknar (1996) 40 NSWLR 165 where remarks made during the course of settlement negotiations by a solicitor were held not to be in trade or commerce because he was not retained or remunerated by the parties to the settlement.

86 87

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594. Unilan Holdings Pty Ltd v Kerrin (1992) ATPR ¶41-169 at 40,324-40,344 (Hill J); Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) ATPR ¶41-710 at 43,117-43,122 (Gyles J).

88

Plimer v Roberts (1997) 80 FCR 303 at [325]-[329] (Lindgren J).

[10.115]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

241

the corporation in accordance with the principle accepted by the House of Lords in Tesco Supermarkets Ltd v Nattrass. 89 In those circumstances no question of vicarious liability under s 139B of the CCA will arise. Whether the corporate principal will be liable for a contravention of the relevant substantive prohibition then depends on whether the other elements of that prohibition can be satisfied, in particular, • whether the principal is a corporation of the type defined in s 4(1) of the CCA; and • whether the principal was engaged “in trade or commerce” at the time the conduct occurred. Section 139B(2) of the CCA provides: Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the actual or apparent authority of the director, employee or agent; or (b) by any other person: (i) at the direction of a director, employee or agent of the body corporate; or (ii) with the consent or agreement (whether express or implied) of such a director, employee or agent; if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; is taken, for the purposes of this Part or the Australian Consumer Law, to have been engaged in also by the body corporate.

This mirrors s 84(2) of the CCA. Bodies corporate cannot act except through the conduct of their directors, employees and agents. Section 139B(2) sets out the circumstances in which a body corporate will be held liable for the conduct of its directors, employees and agents. It is first necessary to establish that the person engaging in the conduct was acting “on behalf of” the body corporate. It is then necessary to establish that the person engaging in the conduct fell into one of the two categories specified: first, they were a director, employee or agent; or secondly, they were a person acting at the direction of a director, employee or agent, or with the consent or agreement of a director, employee or agent. On behalf of ...............................................................................................................................................................................................

Section 139B(2) of the CCA provides that any conduct engaged in “on behalf of” a body corporate by a director, employee or agent within the scope of the person's actual or apparent authority shall be deemed to have been engaged in by the body corporate. The words “on behalf of” do not require that the conduct must have been authorised by the body corporate. [10.115]

89

Tesco Supermarkets Ltd v Nattrass [1972] AC 153.

242

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.115]

It was held in Walplan v Wallace 90 that the phrase “on behalf of” does not have a strict legal meaning, but there is a limit as to how loose the connection can be. Something must be done “for” the company in the sense of “in the course of the body corporate's affairs or activities”. 91 In Wheeler Grace & Pierucci Pty Ltd v Wright 92 the Full Court of the Federal Court considered the effect of s 84(2) of the TPA in light of the High Court decision in Hamilton v Whitehead. 93 The appellant, Wheeler Grace & Pierucci Pty Ltd (WGP), carried on business as an investment adviser. Collins made misleading statements to the respondents regarding investments in a gold mining venture, Carbon Gold. Collins was the appointee of WGP to the board of Carbon Gold. The Full Court held that WGP was directly liable for Collins' misleading statements. Lee J held: Furthermore, in s 84(2) of the Act, it has been expressly provided that any conduct engaged in on behalf of a body corporate by a director, servant or agent within the scope of the person's actual or apparent authority or by any other person at the direction or with consent or agreement, express or implied, of a director, servant or agent, such direction, consent or agreement being within the scope of the actual or apparent authority of the director, servant or agent, is deemed for the purposes of the Act to have been engaged in also by the body corporate. Whether s 84(2) extends the common law is immaterial. What it does do is make clear that such activities by directors or agents of the company will attract direct liability to the company under provisions such as s 52 of the Act and no question of vicarious liability will arise in that circumstance. 94

On the other hand, in Lisciandro v Official Trustee in Bankruptcy, 95 Kiefel J held that a company was not responsible for the misleading or deceptive conduct of its “Service Agent”. The company, Alminco, appointed Radford as its service agent for North Queensland. This did not entitle Radford to represent the company or receive moneys on its behalf; rather, it was simply a licence permitting Radford to use Alminco's parts in his business. Radford misleadingly induced the applicant to sign a guarantee in favour of Alminco. It was held that Radford had not been acting as an agent of Alminco in procuring the guarantee; rather, as a potential purchaser on credit, Radford had obtained the guarantee on his own account in order to raise finance. Lindgren J, in NMFM Property Pty Ltd v Citibank Ltd, 96 said: 90

91 92 93 94

Walplan v Wallace (1985) 8 FCR 27 at 37, Sweeney J agreeing at 28 and Neaves J at 39. In NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1243] Lindgren J referred with approval to the views of Lockhart J in Walplan v Wallace. See TPC v Queensland Aggregates (1982) 61 FLR 52 at 66. Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940. Hamilton v Whitehead (1989) ATPR ¶42-932.

95

Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 at 50,256, citing TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 (Toohey J) at 474-6. Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-436 at 40-903-4.

96

NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270.

[10.120]

CHAPTER

10

DEFINITIONS AND KEY CONCEPTS

243

It seems to me that an act is done “on behalf of” a corporation for the purpose of s 84(2) if either one of two conditions is satisfied: that the actor engaged in the conduct intending to do so “as the representative of” or “for” the corporation, or that the actor engaged in the conduct in the course of the corporation's business, affairs or activities. 97

In Ackers v Austcorp International Ltd, 98 a group of companies in a property joint venture were held to be liable for the misleading conduct of an agent engaged by one of the joint venturers. Rares J held that the particular development was part of the ordinary business, affairs and activities of Austcorp and that representations made by the officers, subsidiaries, and agents was the conduct engaged in “on behalf of” Austcorp. 99 In Bennett v Elysium Noosa Pty Ltd, 100 Reeves J, after reviewing the authorities about the operation of s 84(2) of the TPA, summarised them in the following propositions: Among other things, they show that the level of involvement of the actor concerned may not be significant, provided it comprises “some” involvement. In context, I consider this means some real or genuine involvement. They also show that the actor's subjective intention is one criterion for assessing whether he or she is acting on behalf of the company concerned. Alternatively, they show that an objective assessment of the actor's conduct may lead to the conclusion that he or she was acting on behalf of that company. Finally, they show that the assessment as to whether the actor was acting on behalf of a company is ultimately dictated by the circumstances of each particular case. Thus it may conceivably involve a combination of the subjective and objective assessments (above) in a particular case. 101

“Actual or apparent authority” ...............................................................................................................................................................................................

Having established that the person engaging in the conduct was acting “on behalf of” the corporation, it is then necessary to establish that the person engaging in the conduct fell into one of the two categories specified. The first category specified in s 139B(2)(a) of the CCA is that the person engaging in the conduct was a director, employee or agent of the body corporate acting within the scope of their actual or apparent authority. In ACCC v South East Melbourne Cleaning Pty Ltd (in liq), 102 Coverall was the franchisor of a professional cleaning services franchise system operating in Victoria. Mr Jones was the sole director of Coverall and effectively its owner. It was a small company and he was central to its operations. He was directly responsible within Coverall for franchisee recruitment, new business customer contract development and meeting weekly with Coverall's Sales Manager, Ms Haley, to discuss the number of cleaning proposals delivered to potential customers and the number of accounts and the [10.120]

97 98 99

NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 at [1244]. Ackers v Austcorp International Ltd [2009] FCA 432. Ackers v Austcorp International Ltd [2009] FCA 432 at [217].

100 101 102

Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72. Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72 at [207]. ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (2015) ATPR ¶42-503.

244

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.120]

dollar value of the proposals won by Coverall. Ms Haley represented to a potential franchisee that if he purchased a franchise at a cost of $28,150 Coverall could provide him with work that would generate a minimum of $4,000 in revenue per month. Murphy J held that the making of the representation was within the scope of Ms Haley's actual or apparent authority as an employee of Coverall and was deemed to be the conduct of Coverall pursuant to ss 84(2) and 139B of the CCA. 103 The Corporations Act 2001 (Cth) sets out certain rules under which director or agents will be taken to have acted within the scope of their actual or apparent authority. 104 The actual or apparent authority of the agent is to be determined according to common law principles. For example, in the case of a real estate agent, the agent's apparent authority is limited to describing the property, representing its situation and representing any matter concerning its value. 105 If a real estate agent represents that finance is available in order to induce the purchaser to buy the property, the agent will be acting outside the agent's apparent authority and the vendor will not be liable for the agent's misleading statement. Where an agent makes a statement which is within the agent's apparent authority, but which the principal has expressly prohibited the agent from making, the question is more difficult. The wording of s 139B(2)(a) of the CCA would appear to be wide enough to make the principal liable for such a statement unless some limitation on the agent's authority was known to the other party. Despite suggestions that an agent who makes a statement expressly prohibited by the principal is not acting “on behalf of” the principal, 106 the words “on behalf of” in s 139B(2) of the CCA will extend to cases where the director or agent is acting within apparent authority in some way that is prohibited by the corporation including fraud. 107 However, where the director or agent acts on their own behalf and not as a representative of the corporation, s 139B(2) will not apply. In Aliotta v Broadmeadows Bus Service Pty Ltd, 108 the respondent wished to sell its property and engaged an estate agent to act on its behalf. The agent advised that it would be easier to sell the property as an investment property if it could be leased before sale. The applicant entered into an agreement for the purchase of the property conditional upon the property being leased. A lease was executed, but the use was found to be prohibited without a permit. A permit was refused and the lease was surrendered. The applicant sought return of the deposit alleging misleading conduct and false or misleading representations as to the use to which the land might lawfully be put, in breach of ss 52 and 53A(1)(b) of the TPA. He claimed that the vendor and the selling agent had both represented that the use described in the lease was permissible and the lease secure. 103

ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (2015) ATPR ¶42-503 at [91].

104 105 106 107

See Corporations Act 2001 (Cth), ss 126 – 129. See Mullens v Miller (1882) 22 Ch D 194. See TPC v Tubemakers of Australia Ltd (1983) 76 FLR 455 at 475 (Toohey J). Serrata Investments Pty Ltd v Rajane Pty Ltd (1991) 6 WAR 419; Brockway v Pando (2000) 22 WAR 771.

108

Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873.

CHAPTER

[10.130]

10

DEFINITIONS AND KEY CONCEPTS

245

Gray J held that, as a matter of common law, a vendor's agent has authority to bind the vendor by any representation made as to the nature or quality of the property, even if it is false, unless some limitation on the agent's authority is known to the intending purchaser. In addition, a company carrying on business as an estate agent is also liable for the acts of its servant within the scope of his actual or ostensible authority. His Honour held that the first respondent, the vendor of the property, was liable for the conduct of the vendor's agent, which in turn was liable for the conduct of its employee. In Aliotta v Broadmeadows Bus Service the transaction involved the sale of commercial property so that both the respondent vendor and the agent were engaged in trade or commerce. It is clear from Argy v Blunts 109 that where the vendor principal is not engaged in trade or commerce and is selling residential property, the vendor will not be liable for any misleading statements of the agent. “At the direction of” or “with the consent of” ...............................................................................................................................................................................................

Where the person engaging in the misleading conduct is not a director, employee or agent of the respondent corporation, it will be necessary to establish that they fall within the second category specified in s 139B(2)(b) of the CCA; namely, that the person was acting at the direction of, or with the consent of a director, employee or agent of the respondent corporation. In Bennett v Elysium Noosa Pty Ltd, 110 the real estate agents who engaged in the misleading conduct were not parties to the proceedings. Reeves J found that since the development was central to the business affairs of the developer and the marketing of the lots was an activity that was essential to their business, on an objective assessment, the real estate agents were acting “on behalf of” the developer when they engaged in the misleading conduct. The real estate agents were not employed by the developer. They were employed by an independent agency which was appointed by the developer to be the exclusive marketing consultant for the development. Accordingly, they could not fall within the first category in s 84(2) (now CCA, s 139B(2)(a)). Reeves J held that they fell within the second category (now CCA, s 139B(2)(b)) since the real estate agents had been briefed with sales material by a director who was the public relations and marketing manager of the developer. His Honour also found that the real estate agents had acted “at the direction of” a director of the developer. [10.125]

Direct liability of non-corporate principals for conduct of employees or agents ............................................................................................................................................................................................... [10.130]

Section 139C(2) of the CCA provides:

Any conduct engaged in on behalf of a person (the principal) other than a body corporate: 109

Argy v Blunts (1990) 26 FLR 112.

110

Bennett v Elysium Noosa Pty Ltd (2012) 202 FCR 72.

246

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[10.135]

(a) by an employee or agent of the principal within the scope of the actual or apparent authority of the employee or agent; or (b) by any other person: (i) at the direction of an employee or agent of the principal; or (ii) with the consent or agreement (whether express or implied) of such an employee or agent; if the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the employee or agent; is taken, for the purposes of this Part or the Australian Consumer Law, to have been engaged in also by the principal.

This re-enacts s 84(4) of the TPA. Subsection 139C(2) of the CCA has the same effect as s 139B(2) where conduct is engaged in on behalf of non-corporate principals. Section 139C(2) deems the conduct of an employee or agent to be the conduct of a natural person. If regard is had to the reasoning in Wright's case, it cannot be concluded that the effect of s 139C(2) is to impose liability upon the principal. Rather, it is necessary to consider whether the other elements of the relevant substantive prohibition are satisfied and, in particular, whether the natural person was engaged in trade or commerce at the time the conduct occurred. This will not be the case, for example, where the sale related to the vendor's private residence. There is very little authority on the liability of a natural person for the misleading conduct of a corporate agent. In MacCormick v Nowland 111 the facts presented an opportunity for the question to be considered, but as liability was found in negligent misrepresentation the court did not consider whether the vendor had contravened s 52 of the TPA. Direct liability: summary ...............................................................................................................................................................................................

Sections 139B(2) and 139C(2) of the CCA operate to impose direct liability rather than vicarious liability on a principal. The sections deem the conduct of the agent to be the conduct of the principal. The sections do not deem the business of the agent to be the business of the principal. Thus, where for example, a vendor principal is not engaged in trade or commerce and is selling a private residence, the vendor will not be liable for a breach of a provision such as s 18 of the ACL for any misleading statements by the agent. 112 The ACL (Application Acts) have equivalent provisions to ss 139B(2) and 139C(2) of the CCA. 113 [10.135]

111 112

MacCormick v Nowland (1988) ATPR ¶40-852. Williams v Pisano (2015) 299 FLR 172 at [39].

113

See, eg, ACLFTA 2012 (Vic), s 196; FTA 1989 (Qld), s 95.

CHAPTER 11

......................................................................................................................

Misleading or Deceptive Conduct Extracted from Corones, The Australian Consumer Law, 3rd ed (Thomson Reuters, 2016), Ch 3.

Introduction The legislative approach to the regulation of consumer protection adopted in Australia is to provide for three general protections and to supplement these with more prescriptive protections in relation to specific conduct. The first general protection is contained in s 18(1) of the ACL which provides that: [11.05]

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead of deceive.

This prohibition does not substantively change compared to s 52(1) of the Trade Practices Act 1974 (Cth) (TPA), and the State and Territory equivalents in their Fair Trading Acts. The only difference is that s 18 is directed at the conduct of persons generally rather than corporations. If the conduct concerns that of a corporation, reliance will generally be placed on the ACL (Cth). If the conduct concerns that of natural persons, reliance will generally be placed on the ACL (Application Acts). Before considering the elements of a contravention of s 18 of the ACL, it is necessary to have some understanding of its policy objects and the policy objects of its predecessor, s 52 of the TPA. In Brown v The Jam Factory Pty Ltd, 1 s 52(1) of the TPA was described by Fox J as: a comprehensive provision of wide impact, which does not adopt the language of any common law cause of action. It does not purport to create liability at all; rather does it establish a norm of conduct, failure to observe which has consequences provided for elsewhere in the same statute, or under the general law. 2

In relation to s 52 of the TPA, Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd 3 observed: the evident purpose and policy underlying Pt V, which includes s 52, recommends a broad construction of its constituent provisions, the legislation being of a remedial character so that it should be construed so as to give the fullest relief which the fair meaning of its language will allow. 4 1 2 3

Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340. Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 at 348. Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470.

4

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 503.

248

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.05]

Their Honours also observed that s 52 imposes a “norm of conduct”, 5 and the role of the courts was to apply it to a wide range of circumstances involving businesses as well as consumers. The policy object of s 52 of the TPA was to operate as a catch-all provision that could apply to objectionable conduct that might otherwise escape liability, on technical grounds, under the more specific provisions of the Act. According to Senator Murphy, who as Attorney-General was responsible for introducing the TPA, its role was to ensure that the law was not “continually one step behind businessmen who resort to smart practices”. 6 By 1993, former Chief Justice of the High Court, Sir Anthony Mason commented on how the statutory remedies had eclipsed the traditional common law remedies: Section 52 of the Trade Practices Act 1974 (Cth), which provides a statutory cause of action sounding in damages in respect of misleading or deceptive conduct, has reduced the importance of actions for breach of warranty, fraudulent misrepresentation and negligence in those cases to which the statute applies. 7

Similarly, French CJ and Kiefel J commented in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd: 8 The cause of action for contravention of statutory prohibitions against conduct in trade or commerce that is misleading or deceptive or is likely to mislead or deceive has become a staple of civil litigation in Australian courts at all levels. Its frequent invocation, in cases to which it is applicable, reflects its simplicity relative to the torts of negligence, deceit and passing off.

However, there were limits imposed on the general protection against misleading conduct in s 52 of the TPA. The policy object of the law was not to protect the unusually stupid or obtuse, or those who did not take reasonable steps to protect their own interests. In Campomar Sociedad Limitada v Nike International Ltd, 9 the High Court stated: It is in these cases of representations to the public … that there enter the “ordinary” or “reasonable” members of the class of prospective purchasers. Although a class of consumers may be expected to include a wide range of persons, in isolating the “ordinary” or “reasonable” members of that class, there is an objective attribution of certain characteristics. … Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of 5

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505.

6 7 8

See Parliamentary Debates, Hansard, 1974, Vol S 60, p 547. Sir Anthony Mason, “Changing the Law in a Changing Society” (1993) 67 Australian Law Journal 568. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [5]. See also Mason, “Changing the Law in a Changing Society” (1993) 67 Australian Law Journal 568 at 568.

9

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45.

[11.10]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

249

that class. The inquiry thus is to be made with respect to this hypothetical individual why the misconception complained has arisen or is likely to arise if no injunctive relief be granted. 10

In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 11 it was held that a reasonable member of the target audience (members of the public who were in the market for an expensive make of furniture) would not be misled into buying a similarly designed “look-alike” product, because they would check the label to confirm that they were purchasing their desired brand. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd, 12 the High Court held that intention was not a requirement for a person to have engaged in misleading conduct. The question whether conduct was misleading within the meaning of s 52(1) of the TPA was to be determined by the court itself, and the test was objective. Evidence that members of the target audience may in fact have been misled was admissible though not conclusive. 13 Section 52(1) was interpreted expansively and this allowed it to be invoked in a wide variety of situations not traditionally associated with consumer protection. 14 As a result, it had an impact on Australian law that was not anticipated when it was introduced as part of the TPA in 1974. Its location in the consumer protection parts of the TPA reflected an expectation that its role would be to protect consumers by improving the conduct of businesses in trade or commerce – their advertising, selling practices and promotional activities generally – and by prohibiting businesses from engaging in sharp practices when dealing with individual consumers. However, whilst s 52(1) was used to promote the interests of consumers in these ways, by far its most frequent use was in connection with disputes of a commercial nature between businesses. In effect, competitors held each other to account in complying with the raised standards of business conduct imposed by s 52(1). As a result it became one of Australia's most litigated statutory provisions and, in conjunction with its Fair Trading Act equivalents, largely usurped important areas of common law including contract, tort [11.10]

10

11 12 13 14

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ. See also Google Inc v ACCC (2013) 249 CLR 435 at 443 (French CJ, Crennan and Kiefel JJ). Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J). Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-9 (Gibbs CJ); Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223-6 (Stephen J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197-8 (Gibbs CJ) and 202-5 (Mason J); Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 601-2 (Mason CJ, Deane, Dawson and Gaudron JJ); 606-607 (Brennan J).

250

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.10]

and restitution. 15 The same policy objects that informed the construction of s 52 of the TPA are likely to inform the construction of s 18 of the ACL. The principles for determining whether misleading conduct has occurred were considered by McHugh J in Butcher v Lachlan Elder Realty Pty Ltd: 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. 16

The analysis of whether conduct is misleading or likely to mislead in this chapter will focus on the following three matters: • first, identifying or characterising the conduct at issue; 17 • secondly, considering the approach taken by the courts in assessing whether the conduct at issue is misleading or likely to mislead; and • thirdly, the need to consider whether the respondent's conduct caused the applicant's error or misconception. 18 The chapter then considers how the general protection in relation to misleading conduct has been applied in the context of advertising conduct, and in relation to passing-off. These two areas have generated a significant number of cases because of their importance in market economies which depend on consumers being provided with actuate information, and businesses competing fairly. Next, the statutory exemption for

15 16

17

18

See Clarke, “Misleading or Deceptive Conduct Cases in the Supreme Court of Victoria” (2015) 89 Australian Law Journal 397. Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (citations omitted), approved in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 341-2 [102] (Gummow, Hayne, Heydon and Kiefel JJ). See also Google Inc v ACCC (2013) 249 CLR 435 at 443-4 [6]-[9] (French CJ, Crennan and Kiefel JJ) and ACCC v Dukemaster Pty Ltd (2009) ATPR ¶42-290 at [10] (Gordon J). Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [105]; National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at [18] (Dowsett J, with whom Jacobson and Bennett JJ agreed); Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett and Graham JJ); ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 at [14]-[20] (Gordon J); IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 (24 November 2015) at 54] (Judd J). Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [24] (French CJ).

[11.15]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

251

information providers in s 19(1) of the ACL is discussed. Finally, the prohibition of misleading conduct in relation to financial products and financial services in s 12DA(1) of the ASIC Act is considered.

Part I: Identifying the conduct at issue Introduction ...............................................................................................................................................................................................

The importance of identifying or characterising the relevant conduct alleged to be misleading has been stressed in a number of cases. For example, in Google Inc v ACCC, Hayne J stated: [11.15]

The generality with which s 52 was expressed should not obscure one fundamental point. The section prohibited engaging in conduct that is misleading or deceptive or is likely to mislead or deceive. It is, therefore, always necessary to begin consideration of the application of the section by identifying the conduct that is said to meet the statutory description “misleading or deceptive or … likely to mislead or deceive”. The first question for consideration is always: “What did the alleged contravener do (or not do)?” It is only after identifying the conduct that is impugned that one can go on to consider separately whether that conduct is misleading or deceptive or likely to be so. 19

The concept of “engaging in conduct” is defined expansively in s 2(2) of the ACL. Section 2(2) of the ACL provides: (2) In this Schedule: (a) a reference to engaging in conduct is a reference to doing or refusing to do any act, including: (i) the making of, or the giving effect to a provision of, a contract or arrangement; or (ii) the arriving at, or the giving effect to a provision of, an understanding; or (iii) the requiring of the giving of, or the giving of, a covenant; and (b) a reference to conduct, when that expression is used as a noun otherwise than as mentioned in paragraph (a), is a reference to the doing of or the refusing to do any act, including: (i) the making of, or the giving effect to a provision of, a contract or arrangement; or (ii) the arriving at, or the giving effect to a provision of, an understanding; or (iii) the requiring of the giving of, or the giving of, a covenant; and (c) a reference to refusing to do an act includes a reference to: (i) refraining (otherwise than inadvertently) from doing that act; or (ii) making it known that that act will not be done; and (d) a reference to a person offering to do an act, or to do an act on a particular condition, includes a reference to the person making it known that the person 19

Google Inc v ACCC (2013) 249 CLR 435 at 464-5 [89].

252

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.20]

will accept applications, offers or proposals for the person to do that act or to do that act on that condition, as the case may be.

This mirrors s 4(2) of the TPA. The concept of “engaging in conduct” as defined in s 2(2) of the ACL is not confined to a false or misleading representation. Section 18 is contained in Ch 2 of the ACL which is headed “General Protections”. Chapter 3 of the ACL is headed “Specific Protections” and prohibits a number of unfair practices that are confined to “false or misleading representations”. 20 Other prohibitions in Ch 3 of the ACL are directed at “misleading conduct”. 21 The same distinction between a “representation” and “conduct” is made in s 4 of the ACL, the evidentiary provision concerning representations with respect to future matters. 22 Doing any act ...............................................................................................................................................................................................

The concept of “engaging in conduct” in s 2(2) of the ACL divides conduct into two broad categories: “doing any act” and “refusing to do any act”. The statutory language used does not require the making of some representation. As Hayne J observed in Google Inc v ACCC, the focus must be on the statutory text which focuses on “conduct” rather than “representations”: [11.20]

It will often be possible to identify the relevant conduct as the making of one or more representations, but it is necessary to bear in mind that s 52 was not confined to the prohibition of misrepresentations. It follows that a claim of contravention of s 52 need not be pleaded or argued by reference to the making of some representation. “It suffices that [the conduct] leads or is likely to lead into error”. Melding the two issues of conduct and characterisation is apt to distract and confuse. Especially is that so if the melding is achieved by using the language of misrepresentation to give a single composite description of both the conduct and its character. Describing the alleged misleading or deceptive conduct as “making a misrepresentation” is distracting and confusing…. 23

The proposition that the expression “conduct” extends beyond representations was also described as “sound” by a majority of the High Court in Butcher v Lachlan Elder Realty Pty Ltd. 24 Where the relevant conduct consists of doing an act, the “act” will generally involve the making of some express or implied representation and there is a vast body of case law in which pre and post-contractual representations have been held to be misleading in contravention of s 52 of the TPA, and its State and Territory equivalents. Contractual 20 21 22 23 24

ACL, ss 29, 30, and 37. ACL, ss 31, 33 and 34. See [11.135]. Google Inc v ACCC (2013) 249 CLR 435 at 465-6 [92]-[96] (citations omitted). Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [32] (Gleeson CJ, Hayne and Heydon JJ), [102]-[110] (McHugh J) and [179] (Kirby J).

[11.25]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

253

representations in a commercial context, such as advertising, 25 franchising, 26 leasing transactions, 27 sales of businesses, 28 and passing-off, 29 have generated as many, if not more, cases than representations involving a consumer as the victim of misleading conduct. For the doing of an act to constitute a contravention of s 18(1) of the ACL it is only necessary to prove that the representation leads into error or is likely to lead into error. 30 It does not require proof of fault on the part of the respondent. The determination of whether the representation was made is a question of fact. Where the evidence that the representation was made is contested, findings of fact will be required to be made on each point. The ultimate issue is whether the representation leads or is likely to lead into error. 31 Refusing to do any act ...............................................................................................................................................................................................

The concept of “conduct” is defined expansively in s 2(2) of the ACL and includes doing or refusing to do any act. Section 2(2)(c), in turn, provides: [11.25]

A reference to refusing to do an act includes a reference to: (i) refraining (otherwise that inadvertently) from doing that act; or (ii) making it known that the act will not be done.

The words “otherwise than inadvertently” have been held to mean that an unintentional non-disclosure is not regarded as “conduct” for the purposes of s 2(2)(c). 32 There is a 25

26

27

28 29

30 31 32

See, eg, Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 56 IPR 13; Hoover (Aust) Pty Ltd v Email Ltd (1991) ATPR ¶41-149; Country Road Clothing Pty Ltd v Najee Nominees Pty Ltd (1991) 20 IPR 419; Makita (Aust) Pty Ltd v Black & Decker (A’asia) Pty Ltd (1990) 18 IPR 270; Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307; Telstra Corp Ltd v Optus Communications Pty Ltd (1996) 36 IPR 515; Bristol-Meyers Squibb Australia Pty Ltd v Astra Pharmaceuticals Pty Ltd (1999) 45 IPR 144; and R & C Products Pty Ltd v SC Johnson & Sons Pty Ltd (1993) FCR 188. See eg, Jacques v Cut Price Deli Pty Ltd (1993) ATPR (Digest) ¶46-102; Thomson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611; and Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd (2005) 220 ALR 211. See, eg, Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; Murphy v Overton Investments Pty Ltd (2004) 21 CLR 388; Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601; Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249. See eg, Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Finucane v NSW Egg Corp (1988) 80 ALR 486; and Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354; and Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 (Gibbs CJ); and Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25] (French CJ). Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 722 (Finkelstein J); Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J).

254

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.25]

substantial body of case law and commentary on the circumstances in which silence and non-disclosure gave rise to a contravention of s 52 of the TPA and this jurisprudence will be equally applicable to s 18. 33 Where silence is alleged to constitute misleading or deceptive conduct, it is first necessary to consider whether the respondent's silence amounts to “conduct” as defined in s 2(2) of the ACL. This is a broad definition which includes, inter alia, “refraining” from doing an act. 34 However, whilst this definition is sufficiently broad to embrace silence, it goes on to exclude from its ambit refraining from doing an act “inadvertently”. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd, 35 Bowen CJ interpreted this to mean that the respondent's failure to disclose information must be deliberate, so that should it be attributable to carelessness, or, perhaps, ignorance of the significance of the information involved, s 52 would not be contravened. Where the applicant complains not about some positive conduct on the respondent's part, but about its failure to disclose information, the respondent can be found to have “engaged in conduct” only if this failure was deliberate. In the words of Finkelstein J in Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd: It is clear that a failure to provide information can be conduct which is misleading or deceptive. For the purposes of s 52(1) “engaging in conduct” is defined in s 4(2)(a) as a reference to doing or refusing to do any act and by s 4(2)(c) a reference to refusing to do an act includes a reference to refraining (otherwise than inadvertently) from doing that act. However, when the complaint is that s 52(1) has been infringed by conduct that involves either refusing or refraining from doing an act before that conduct is actionable it must have been deliberately engaged in. 36

According to his Honour, this followed “from the use of the words ‘refuse’ and ‘refrain’ in s 4(2) of the TPA and was reinforced by the fact that in s 4(2)(c) conduct is said to include refraining from doing an act provided it is ‘otherwise than inadvertently’.” In Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd, 37 McLure P drew attention to the requirement that the defendant must be aware of the undisclosed fact and that the silence must be intentional or deliberate: To refrain otherwise than inadvertently requires a deliberate decision to withhold information: Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; Rhone-Poulenc at 489-490; Costa Vraca at 723. Thus, the defendant must advert to 33

34

See Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 and Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83; Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) ¶46-054 (French J); Warner v Elders Rural Finance Ltd (1993) 41 FCR 399; and General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164. For commentary on these cases see Gillies, “Non-disclosure Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653. ACL, s 2(2)(c).

35 36

Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489. Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1999) ATPR ¶41-694 at 42,879. See also Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 at 657 (Hoeben J).

37

Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193.

[11.30]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

255

the question and form an intention not to disclose. That conclusion is consistent with the natural and ordinary meaning of the term “refrain” which means to forebear or to keep oneself back. 38

Where a corporation engages in conduct that involves silence, and it is necessary to establish that the corporation deliberately failed to disclose within the definition of conduct in s 2(2)(c) of the ACL, s 139B(1) of the CCA must be considered. Section 139B(1) provides that if in a proceeding under the ACL (Cth) in respect of conduct engaged in by a body corporate, it is necessary to establish the state of mind of the body corporate, it is sufficient to show (a) “that a director, employee or agent of that body corporate engaged in that conduct within the scope of the actual or apparent authority of the director, employee or agent”; and (b) “that the director, employee or agent had that state of mind”. Silence in isolation ...............................................................................................................................................................................................

Where silence occurs in isolation it is not always misleading. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd, 39 Rhone-Poulenc alleged that UIM contravened s 52 of the TPA by selling an agricultural chemical product without disclosing that the sale and use of that product was prohibited in certain States. The applicant was a trade rival of UIM and also alleged that the latter had infringed one of its patents in producing and selling the product. In relation to the definition of “conduct” in s 4(2) of the TPA, Bowen CJ held:

[11.30]

The appellants submit that UIM's failure to warn customers of the risks of seizure and forfeiture constituted “engaging in conduct” within the special definition in s 4(2). I do not agree. Although s 4(2) recognises that an omission to do an act may constitute “engaging in conduct”, that will only be so where there has been a refusal to do, or a deliberate refraining from doing, an act. The words “refuse” and “refrain” clearly connote that the omission to do an act must be deliberate. I agree with the trial judge that s 4(2) does not materially assist the appellants. 40

Unless there is a deliberate decision to withhold information, the silence will not be actionable. If the respondent's silence is attributable to carelessness, or, perhaps, ignorance of the significance of the information involved, it will not be actionable. 41

38 39

Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [59]. Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477.

40 41

Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489-90. See Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 723 (Finkelstein J); Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J); Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; and Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [59] (McLure P).

256

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.35]

Silence and other conduct ............................................................................................................................................................................................... [11.35] In many situations the respondent's silence will not occur in isolation. Rather, it will be accompanied by other acts or omissions so that when viewed as a whole, the respondent's conduct may be misleading or deceptive in a positive manner. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, French CJ and Kiefel J drew attention to the distinction between “silence in isolation” cases and “silence including other acts or omissions” cases:

Where silence or non-disclosure is relied upon, the pleading should identify whether it is alleged of itself to be, in the circumstances of the case, misleading or deceptive conduct or whether it is an element of conduct, including other acts or omissions, said to be misleading or deceptive. 42

In cases where the silence is accompanied by other acts or omissions, the applicant will not need to establish that the respondent's silence alone amounted to “conduct” within s 2(2) of the ACL. The presence of the additional acts or omissions, when combined with the respondent's failure to disclose, may render the respondent's conduct, viewed in its entirety, misleading or deceptive for the purpose of s 18 of the ACL. The definition of conduct in s 2(2) of the ACL has been adopted in the ACL (Application Acts). 43 For this reason, when silence is alleged to constitute the basis of misleading or deceptive conduct, it will be desirable for the applicant to consider the whole of the conduct and whether there was something more involved than silence in isolation. As Reeves J observed in Bennett v Elysium Noosa Pty Ltd (in liq): Where a person is pleading an implied representation arising out of a failure to disclose, or silence, which has its foundation in the circumstances surrounding that silence, or separately some duty to disclose in the particular circumstances, it is absolutely critical that the circumstances relevant to either situation are pleaded clearly and precisely. 44

Implied representations can arise in cases involving silence. The approach for determining whether an implied representation was made “is to determine whether what was actually said or done, in all the relevant circumstances, conveyed something more, such that it led the applicant into error”. 45 For example, it may be implied that there was nothing material that needed to be disclosed to the other party. In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (Henjo), 46 it was held to be misleading to inform a prospective purchaser that a restaurant had a certain number of tables without also disclosing that a significant number of them were not allowed under the applicable liquor licensing laws. Similarly, in Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd, 47 it was held to be misleading to point out the limitations of a site the respondent was proposing to 42

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [5].

43 44 45 46

See, eg, FTA 1989 (Qld), s 5A. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [78]. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [40] (Reeves J). Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546.

47

Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625.

[11.40]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

257

lease without also mentioning the risks of contamination it presented. In cases involving the expression of an opinion, there may be an implied representation that the opinion is honestly held, or an implied representation that there is a reasonable basis for the opinion. 48 These cases illustrate that in cases involving silence, the question is whether what was actually said, in all the relevant circumstances, would convey something more to a reasonable person in the position of the applicant, such that it was likely to lead into error. Relaying incorrect information supplied by another ...............................................................................................................................................................................................

The conduct at issue may consist of merely relaying information supplied by another. In Yorke v Lucas, 49 Mason A-CJ, Wilson, Deane and Dawson JJ considered a situation where a corporation purported to do no more than pass on information supplied by another in circumstances where it was apparent that the corporation was not the source of the information, and expressed the view that it was doubtful that the corporation could itself be engaging in conduct: [11.40]

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. 50

This has subsequently been dubbed “the conduit defence”, 51 where the intermediary acts as a mere “postman” and does not do anything to adopt the information. 52 It arises in the context of principal–agency relationships, where the agent relays information imparted by the principal and seeks to immunise himself or herself by means of a contemporaneous disclaimer. It also arises in situations where an information provider, such as a newspaper or magazine, publishes an advertisement on behalf of a supplier of goods or services that may contain misleading representations, and the newspaper does not express its own views as to the truth or falsity of those representations. 48

49 50

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88; James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J). See [11.150]. Yorke v Lucas (1985) 158 CLR 661. Yorke v Lucas (1985) 158 CLR 661 at 666.

51

See Gillies, “Misleading and Deceptive Conduct: Immunising the Intermediary – the Conduit Defence” (2006) 14 Trade Practices Law Journal 209; and McCabe, “In the Wake of Butcher: Decisions Affecting the Liability of Agents and Third Parties in Proceedings for Misleading or Deceptive Conduct” (2006) 14 Trade Practices Law Journal 46.

52

The term “postman” was used by French J in Gardam v George Willis & Co (1988) 82 ALR 415 at 427.

258

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.40]

For example, in Dalton v Lawson Hill Estate Pty Ltd, 53 the purchaser of a vineyard was unsuccessful in attempting to make an agent liable for representations about the area of the vines planted and the output of a bore on the property. The court noted that there were disclaimers in the promotional material that made it clear that the agent was not accepting any responsibility for the information provided by another person. The Full Federal Court held that the agent was not liable and stated: In considering the liability of an agent for sale for contravention of s 52 of the Trade Practices Act or s 42 of the Fair Trading Act, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchaser, 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, of which each may be taken to have known. The mere fact that a person had engaged in the conduct of supplying a document containing information which is in fact misleading does not necessarily mean that that person had engaged in misleading conduct. It is crucial to examine the role of the person in question. 54

The Full Court distinguished John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd 55 on the basis that in that case the agent held itself out as “Consultants to institutional investors and to developers of major properties”, and the representation concerned what the net lettable area of a building would be when it was constructed, a matter which the purchaser could not independently verify for itself. 56 The liability of an intermediary or conduit was considered by the High Court in Butcher. 57 In that case, Butcher purchased at auction an expensive waterfront property in Sydney. Prior to the auction, Butcher was shown the property by an estate agent, Lachlan, who provided a brochure describing the property. The brochure reproduced part of a survey done by a surveyor in 1980. The survey was inaccurate in certain details. The brochure contained the following statement: All information contained herein is gathered from sources we believe to be reliable. However, we cannot guarantee its accuracy and interested persons should rely on their own inquiries.

Before settlement, Butcher discovered that the boundary was not located as shown on the survey diagram. Butcher declined to proceed with the transaction and commenced proceedings against the vendor and against the agent, Lachlan, alleging that it had been guilty of misleading conduct contrary to s 52 of the TPA.

53 54 55 56

Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 (Lindgren, Finn and Emmett JJ). Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,252 [82]. John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249. Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,252 [96]-[97].

57

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.

[11.45]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

259

In a joint majority judgment, Gleeson CJ, Hayne and Heydon JJ held that the intermediary, the agent Lachlan, was not in breach of s 52. The agent's conduct and the disclaimer were part of the surrounding circumstances and had to be viewed as a whole. 58 Their Honours cited with approval 59 the decision of the New Zealand Court of Appeal Goldsbro v Walker, 60 and concluded: The agent did not engage in conduct towards the purchasers which was misleading or deceiving. Whatever representation the vendor made to the purchasers by authorising the agent to issue the brochure, it was not made by the agent to the purchasers. The agent did no more than communicate what the vendor was representing, without adopting or endorsing it. The conclusion flows from the nature of the parties, the character of the transaction contemplated, and the contents of the brochure itself. 61 (emphasis added)

As regards the nature of the parties, it was significant that the relevant class of persons to whom the property was marketed (purchasers prepared to pay above $1 million in 1997) could be expected to have legal advice and the purchasers were “intelligent, shrewd and self-reliant”. The fact that the agent did not adopt or endorse the communication was a factor that supported the finding that the agent had done no more than pass on information from the vendor. Likewise, the disclaimers in the brochure were merely part of the circumstances relevant to the inquiry whether it would have been plain to a reasonable purchaser that the agent was not the source of the misleading information. 62 In Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd, 63 Orix, an international finance house involved in financing the acquisition of heavy industrial machinery, sought damages from a broker, Moody Kidell. Orix provided finance to QCE, an equipment hire business to acquire six cranes from Nelson Equipment. Orix acted in reliance upon information provided by Moody Kidell. The information provided contained a disclaimer to the effect that it had been provided to Moody Kidell by the proposed borrower/lessee and that Moody Kidell could not accept responsibility for its accuracy. The trial judge (White J) held that Moody Kidell did not adopt or endorse the misleading information, and that Moody Kidell did no more than communicate to Orix what QCE was representing, and was not liable under s 52 of the TPA. The New South Wales Court of Appeal dismissed the appeal. After an extensive analysis of what was said by the majority in Butcher, Ipp JA concluded: [11.45]

58 59 60 61 62 63

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605[39]; McHugh J expressed similar views at 625 [109].See also Campbell v Backoffice Investments at [29] (French CJ). Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 602, fn 38. Goldsbro v Walker [1993] 1 NZLR 394. Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605. Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 at [45]-[46]. Orix Australia Corporation Ltd v Moody Kidell & Partners Pty Ltd [2006] NSWCA 257 (Ipp JA, with whom Spigelman CJ and Basten JA agreed).

260

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.45]

From the passages that I have quoted it appears that the ratio of the majority's decision that the agent had not engaged in misleading conduct was that the agent did no more than communicate what the vendor was representing. Their Honours held that an innocent agent, who acts merely as a conduit and makes it clear, expressly or impliedly, that he or she is doing no more than passing on information obtained from others, does not attract liability under s 52.

The High Court considered the issue again in Google Inc v ACCC. 64 The conduct at issue concerned Google's well-known search engine, “Google search”. A search of the google.com search engine produced two types of result, “organic” search results and “sponsored links”. Organic search results consisted of information displayed free of charge. Sponsored links were advertisements which appeared at the top or right-hand side of the results page, and included a link to the web address displayed beneath the headline. The primary judge, Nicholas J held that in four instances advertisers had engaged in misleading conduct by falsely representing that there was a commercial association or affiliation with its competitor and that information regarding the competitor could be found by clicking on the advertiser's web address. For example, advertisements for Harvey World Travel (HWT) appeared as sponsored links amid organic search results. STA Travel was a major competitor of HWT. The court held that the representation that there was a commercial association or affiliation between STA and HWT were made by STA, not by Google, and that Google did not adopt or endorse the representation. 65 On appeal, the Full Federal Court held that Google engaged in misleading conduct because Google took an active role in the preparation, dissemination and publication of the advertisements, and endorsed the information supplied by the advertisers such as STA. 66 Google's appeal to the High Court was successful. Before the High Court there was no challenge to the findings of the primary judge that the advertisements were misleading. 67 The question was whether Google had engaged in the conduct. The majority, French CJ, Crennan and Kiefel JJ, in their joint reasons held that the advertisers were the authors of the sponsored links. Google had no control over an advertiser's choice of search terms, or an advertiser's choice of keywords. Their Honours stated: It is critical to appreciate that, even with the facility of keyword insertion, the advertiser is the author of the sponsored link. As Google correctly submitted, each relevant aspect of a sponsored link is determined by the advertiser. The automated response which the Google search engine makes to a user's search request by displaying a sponsored link is

64 65 66

Google Inc v ACCC (2013) 249 CLR 435. ACCC v Trading Post Australia Pty Ltd (2011) 197 FCR 498. ACCC v Google Inc (2012) 201 FCR 503 at [93].

67

Google Inc v ACCC (2013) 249 CLR 435 at 455 [54] (French CJ, Crennan and Kiefel JJ).

[11.50]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

261

wholly determined by the keywords and other content of the sponsored link which the advertiser has chosen. Google does not create, in any authorial sense, the sponsored links that it publishes or displays. 68

Their Honours held that Google was a mere conduit passing on the advertisements, without adopting or endorsing them: Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online), who publish, display or broadcast the advertisements of others. The fact that the provision of information via the internet will – because of the nature of the internet – necessarily involve a response to a request made by an internet user does not, without more, disturb the analogy between Google and other intermediaries. To the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers. 69

Hayne and Heydon JJ wrote separate opinions but agreed that Google's appeal should be upheld. The High Court's decision in Google Inc provides comfort for intermediaries who disseminate, publish or broadcast information provided by others. So long as they can demonstrate that they have not been involved in the preparation of the material by, for example, drafting the wording of the advertisement, they will not be liable for the content they publish or distribute. Publishers of advertisements are provided additional protection by s 251 of the ACL. However, once intermediaries become aware that the information supplied by another is misleading, they must act promptly to remove it, otherwise they risk becoming involved in the contravention as an accessory. 70 Adopting or endorsing information supplied by another ...............................................................................................................................................................................................

Where, however, an intermediary adopts or endorses the representations supplied by another, the intermediary will be equally culpable if the representations are false or misleading. In Downey v Carlson Hotels Asia Pacific Pty Ltd, 71 the appellant, Carlson Hotels, previously known as Raddison Hotels, was in the business of running hotels and apartments of high quality. It lent its name to a development known as “Raddison Suites”, which was being developed by Valco Developments Pty Ltd. A brochure was prepared to promote the development. The name “Raddison” appeared on the brochure 31 times. Raddison approved of the brochure and knew that it would be provided to potential purchasers to promote the sale of units in the Raddison Suites development. [11.50]

68 69 70

Google Inc v ACCC (2013) 249 CLR 435 at 459 [68]. Google Inc v ACCC (2013) 249 CLR 435 at 459 [69]. ACCC v Allergy Pathway Pty Ltd (No 2) (2011) 192 FCR 34 at [33] (Finkelstein J) and see [11.195].

71

Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199.

262

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.50]

The suites were to be managed for letting purposes and the brochure contained an “Investment Analysis” which guaranteed a net 7% per annum for five years. On the last page of the investment analysis was the following disclaimer: Whilst the information inside this publication is believed to be true and correct, the figures and advice supplied are given as a guide only and no responsibility will be taken for any errors and omissions.

Mr and Mrs Downey were investors who purchased units in the development, but the investment return did not materialise. Although Carlton Hotels were not selling the units, it was alleged to have adopted or endorsed the representations of the developer, Valco. Keane JA (with whom Williams JA and Atkinson J agreed) concluded that after considering the material in its entirety, including the disclaimer, that the appellant's conduct was misleading. His Honour acknowledged 72 that disclaimers could be effective if they made it clear that they were only communicating the information prepared by Valco, but the disclaimer in the case before him did not have this effect. On the contrary, his Honour concluded 73 that a reasonable purchaser in the position of the Downeys would have formed the view that the brochure contained a representation by the appellant that it was endorsing the information prepared by Valco, and was not merely passing it on for what it was worth. It was making two representations: first, a representation that the units would be a good investment; and secondly, a representation that potential investors could rely on its opinion as to the quality of the investment. The Full Federal Court considered this issue in Granitigard Pty Ltd v Termicide Pest Control Pty Ltd. 74 In that case, the trial judge held that Termicide had not adopted a Commonwealth Scientific and Industrial Research Organisation (CSIRO) appraisal document under which experts employed by the CSIRO were engaged in assessing new building products to determine whether they complied with the relevant Australian Standard. 75 On appeal, Reeves J (with whom Kenny and Lander JJ agreed) considered that Termicide had adopted the CSIRO appraisal document as its own. It had not merely provided a means by which the CSIRO appraisal document could be read, without using any words or otherwise doing anything to adopt or endorse it. Instead, it took additional steps that amounted to an adoption of it. These steps were removing the CSIRO logo and reproducing parts of the appraisal document on its own website under the Termicide logo.

72 73 74

Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [83]. Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [85]-[117]. Granitigard Pty Ltd v Termicide Pest Control Pty Ltd (2011) 281 ALR 1.

75

Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 5) [2010] FCA 313 (Logan J).

[11.55]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

263

Contemporaneous disclaimers ...............................................................................................................................................................................................

Agents and intermediaries sometimes seek to protect themselves from liability by alerting those who may rely on the information being disseminated that the agent or intermediary is not the source of the information by means of contemporaneous disclaimers. A contemporaneous disclaimer refers to a notice of the kind at issue in Butcher v Lachlan Elder Realty Pty Ltd. 76 There, the disclaimer was made available during pre-contractual negotiations. It stated that the information contained in the brochure had been obtained from other sources and that the agent could not guarantee its accuracy. Where, however, the evidence shows that the agent or intermediary is the source of the information; or is responsible for its preparation; or has subsequently endorsed it, the agent or intermediary will not be a mere conduit and will share liability with the principal if it is misleading. 77 In Havyn Pty Ltd v Webster, 78 the court distinguished the information sought to be disclaimed from that at issue in Butcher's case. In Butcher, the information concerned the boundaries of the property which surveyors normally certify, while in Havyn the information concerned the floor area of flats in a building which could easily be measured by a person without expertise and fell within the competence of a real estate agent. 79 In summary, in deciding whether a disclaimer is effective to protect an agent or intermediary, the courts have regard to the following factors: [11.55]

• The nature of the parties to the transaction: whether the agent or intermediary held itself out as an expert in transactions of that kind and would be expected to know the accuracy of the information being imparted; whether the circumstances made it clear that the other party was acting in reliance on the agent, or intended to make its own inquiries. • The nature of the information: whether it is was the kind of information the agent would be expected to possess; whether it concerned a “hard physical fact” 80 admitting of only one answer and which should be within the knowledge of the agent, or alternatively, some matter that the agent was clearly not in a position to express a view about its veracity; and whether it was possible for the other party to independently verify it.

76

78 79

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592. See also The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525 at 530-531 and Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 at 552-3, 556-8. John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249; and Havyn Pty Ltd v Webster (2005) 220 ALR 211 (Santow JA, with whom Tobias JA and Brownie AJA agreed). Havyn Pty Ltd v Webster (2005) 220 ALR 211. Havyn Pty Ltd v Webster (2005) 220 ALR 211 at [88]-[91].

80

Dalton v Lawson Hill Estate Pty Ltd (2005) ATPR ¶42-079 at 43,253 [87].

77

264

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.60]

• The character of the transaction: the more valuable the transaction the more likely the purchaser will make independent inquiries, engage other professionals to advise, and not rely on the information provided by the agent. • The contents of the disclaimer itself: the size, clarity, prominence and specificity of the disclaimer, and whether it was brought to the attention of the purchaser prior to entry into the transaction.

Part II: Assessing whether the conduct was misleading, or likely to mislead Context all important ...............................................................................................................................................................................................

The central concept in s 18(1), that of “misleading or deceptive” conduct, is not defined in the ACL. There are no specific categories of misleading or deceptive conduct although some guidance is provided in relation to representations about future matters by s 4(1) of the ACL. 81 In Google Inc, Hayne J stated: [11.60]

Analysis of the decided cases is not to be glossed over and obscured by attempting to identify particular species of misleading or deceptive conduct, attaching some general description to each (such as a “misrepresentation” case, an “advertisement” case or a “mere conduit” case) and then applying s 52 by fitting the case into one of those constructed categories. Analogical reasoning is important but analogies can be drawn only after understanding the full factual context in which it was held that s 52 did or did not apply. 82

In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 83 Gibbs CJ held: The words of s 52 require the Court to consider the nature of the conduct of the corporation against which proceedings are brought and to decide whether that conduct was, within the meaning of that section, misleading or deceptive or likely to mislead or deceive. Those words are on any view tautologous. One meaning which the words “mislead” and “deceive” share in common is “to lead into error”. If the word “deceptive” in s 52 stood alone, it would be a question whether it was used in a bad sense, with a connotation of craft or overreaching, but “misleading” carries no such flavour, and the use of that word appears to render “deceptive” redundant. The words “likely to mislead or deceive”, which were inserted by amendment in 1977, add little to the section; at most they make it clear that it is unnecessary to prove that the conduct in question actually deceived or misled anyone. 84

81 82 83

See [11.135]. Google Inc v ACCC (2013) 249 CLR 435 at 467-8 [102]. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.

84

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198.

[11.60]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

265

The conduct is of the prohibited kind for the purposes of s 18(1) of the ACL if “the conduct viewed as a whole has a tendency to lead a person into error”. 85 In deciding whether conduct is misleading or deceptive, regard must be had to the context in which that conduct took place. Conduct that is misleading in one context may not be so in another. 86 In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ stated: The conduct of a defendant 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. It is obvious that where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words. The same is true of acts. 87

Accordingly, the courts will undertake a very detailed analysis of the evidence, and each case turns on its own specific facts and context. This is a “quintessential question of fact”. 88 It is for this reason that Hayne J in Google Inc v ACCC warned about the dangers of extrapolating from decided cases: Because it is the statutory text which controls, there is no little danger in attempting to extrapolate from the decided cases to a rule of general application. No such rule can stand in the place of the statutory text. This is not to say that the decided cases are unimportant or that they do not contribute to the proper understanding of how the Act operates. But each case must be understood by reference to the statutory text and the particular facts that were identified as relevant to the application of that text. When considering what was said in the reasons for decision in a s 52 case, the description of the relevant conduct is as important as are the facts and circumstances identified as bearing upon whether that conduct was misleading or deceptive. 89

85

ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [39] (French CJ, Crennan, Bell and Keane JJ); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [25] (French CJ).

86 87 88

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625 [109] (McHugh J). Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at [49]. For commentary on the tendency of the courts to undertake a very detailed analysis of the evidence and the purported representations see Rickett, “Some Reflections on Open-Textured Commercial Contracting” [2001] AMPLA Yearbook 374 at 378-379 and Stewart and McClurg, “Playing Your Cards Rights: Obligations of Disclosure in Commercial Negotiations” [2007] AMPLA Yearbook 36 at 51.

89

Google Inc v ACCC (2013) 249 CLR 435 at 467 [100]-[101].

266

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.65]

Misleading conduct: objective test ...............................................................................................................................................................................................

In determining whether conduct is misleading or deceptive under s 18 of the ACL, an important consideration will be the nature of the audience at whom it was directed. Early in the history of s 52 of the TPA it was held that conduct will be regarded as misleading or deceptive only if it misled or deceived (or is likely to mislead or deceive) members of that audience. 90 If conduct was not misleading in relation to the target audience, it did not contravene s 52 merely because it misled, or was capable of misleading, some other person to whom it may have been communicated, at least where this could not reasonably have been anticipated. 91 In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ stated: [11.65]

Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion by [sic] regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. 92

These principles were confirmed by the High Court in Campomar Sociedad Limitada v Nike International Ltd: It is in these cases of representations to the public … that there enter the “ordinary” or “reasonable” members of the class of prospective purchasers. Although a class of consumers may be expected to include a wide range of persons, in isolating the “ordinary” or “reasonable” members of that class, there is an objective attribution of certain characteristics. 93

In Telstra Corp Ltd v Cable & Wireless Optus Ltd, 94 Goldberg J thought that the “[t]he extremely stupid, and perhaps the gullible may well be excluded from the class”. 95 The class does not include those who fail to take reasonable care of their own interests. 96 Reasonable members of the class would take reasonable steps to look after their own interests. 90 91 92

Weitmann v Katies Ltd (1977) 29 FLR 336 (Franki J). Parkview (Keppell) Pty Ltd v Mytarc Pty Ltd (1984) 3 FCR 186 at 190-191 (McGregor J). Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. See also Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 371 [22] (French CJ and Kiefel J).

93

Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [102] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ) (citations omitted).

94 95 96

Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478. Telstra Corp Ltd v Cable & Wireless Optus Ltd [2001] FCA 1478 at [23]. See Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [105]; Cantarella Bros Pty Ltd v Valcorp Fine foods Pty Ltd (2002) ATPR ¶41-856 at [35]-[36] (Lindgren J).

[11.70]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

267

Role of intention ...............................................................................................................................................................................................

Intention was not a necessary element of the contravention of s 52 of the TPA. The section involved no questions of intent upon the part of the person whose conduct was in question. Thus, in Google Inc v ACCC, French CJ and Crennan and Kiefel JJ noted that: [11.70]

Section 52 is not confined to conduct which is intended to mislead or deceive. A corporation could contravene s 52 even though it acted reasonably and honestly. 97

In Butcher v Lachlan Elder Realty Pty Ltd, McHugh J stated: Section 52 looks at the conduct of a corporation and is concerned only with whether that conduct misled or was likely to mislead a consumer. It is not concerned with the mental state of the corporation. 98

However, intention is not entirely irrelevant. In Campomar v Nike the primary judge, Sheppard J, found that Campomar deliberately marketed the Nike Sports Fragrance products in order to take advantage of the goodwill and reputation of Nike International. 99 The High Court held, where there is a finding of intention to deceive, the court may more readily infer that the intention has been or in all probability will be, effective. 100 The same approach applies in relation to s 18 of the ACL. Conduct may be found to contravene s 18 of the ACL even though the respondent acted honestly and did not intend to mislead or deceive. On the other hand, where the respondent did intend to mislead or deceive, a court may more readily find that the conduct was misleading or likely to mislead. 101 In ACCC v TPG Internet Pty Ltd, the High Court majority stated: [W]here a representation is made in terms apt to create a particular mental impression in the representee, and is intended to do so, it may properly be inferred that it has that

97

Google Inc v ACCC (2013) 249 CLR 435 at 443. See also Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J) and Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 (Gibbs CJ).

98 99 100

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 634 [139]. Nike International Ltd v Campomar Sociedad Limitada (1996) ATPR ¶41-518 at 42,478, 42,480. Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at [33] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). This principle has been applied in subsequent cases. See, eg, ACCC v Singtel Optus Pty Ltd (No 3) (2010) 276 ALR 102 where Perram J inferred that Optus intended its misleading advertising campaign to have a substantial impact in the broadband market, based on the amount of money which Optus spent on the campaign, and concluded that the effect of the campaign was substantial (at [16]-[17]). S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 at 361-363 (Hill, RD Nicholson and Emmett JJ).

101

268

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.75]

effect. Such an inference may be drawn more readily where the business of the representor is to make such representations and where the representor's business benefits from creating such an impression. 102

Two other areas where intention has a role to play are where the misleading conduct at issue consists of refraining from doing an act, 103 and where an applicant seeks to establish accessorial liability for misleading conduct. 104 Conduct directed at identified persons ...............................................................................................................................................................................................

The courts draw a distinction between conduct directed at particular individuals in a one-on-one situation and conduct directed at the public or a segment of the public. Where conduct is directed at identified persons, rather than the public at large, French CJ in Campbell v Backoffice Investments Pty Ltd, stated: [11.75]

In the case of an individual it is not necessary that he or she be reconstructed into a hypothetical, 'ordinary person'. Characterisation may proceed by reference to the circumstances and context of the questioned conduct. The state of knowledge of the person to whom the conduct is directed may be relevant, at least in so far as it relates to the content and circumstances of the conduct. 105

Where the conduct at issue consists of misleading pre-contractual representations such as those at issue in Butcher v Lachlan Elder Realty Pty Ltd, 106 directed at identified persons, then whether the conduct is misleading is to be assessed in relation to the individual applicants alone. According to the majority in Butcher's case: 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. 107

Thus, assessing whether conduct which consists of a representation made to a particular person is misleading or likely to mislead will be ascertained by reference to the context in which the parties are situated, and may involve a combination of subjective and objective assessments. The assessment of whether the conduct is likely to mislead proceeds by reference to what “a reasonable person in the position of the [representees], taking into 102

106

ACCC v TPG Internet Pty Ltd (2013) 304 ALR 189 at 198 [55] (French CJ, Crennan, Bell and Keane JJ) (Citations omitted). See [11.25]. See [12.175]–[12.195]. Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26]. See Miller, Miller’s Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.50]. Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.

107

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].

103 104 105

[11.80]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

269

account what they knew, would make of the [representor]'s behaviour”. 108 Thus, if the applicant claims to have been misled, the conduct will not contravene s 18 if a hypothetical reasonable person who possessed the applicant's knowledge of the surrounding circumstances would not have been misled by the conduct at issue. In Traderight (NSW) Pty Ltd v Bank of Queensland Ltd, 109 Barrett JA (with whom Bathurst CJ and Beazley P agreed) stated: It is the quality of the conduct in terms of capacity or tendency, objectively ascertained, that must be judged, not its actual impact on a particular person. Where… the conduct consists of a representation actively made to a particular person in a one-on-one situation, the quality of the conduct is to be ascertained by reference to the context in which the parties are situated, including such matters as their respective states of prior knowledge and understanding. It is within the whole of that context that the court must address the question whether the representation consists of a representation actively made to a particular person in a one-on-one situation, the quality of the conduct is to be ascertained by reference to the representee. The question whether the representee relied or acted upon the representation is irrelevant to that inquiry. 110

Commercial negotiations involving identified persons ...............................................................................................................................................................................................

Section 18 of the ACL applies to statements made in the course of private negotiations between commercial entities and is not limited consumer transactions. 111 The cases indicate that the courts place particular emphasis upon the whole context of the pre-contractual negotiations between the parties. In considering their effect of the conduct at issue on a reasonable person in the applicant's position the courts may take into account the following matters: [11.80]

• the character of the particular conduct by the respondent towards the aggrieved party; 112 • the nature of the dealings between the parties and what matters of fact each knew about the other as a result of their dealings; in particular, what discussions took place, at what times, and what documents were exchanged; 113 • the relative commercial experience of the aggrieved party; • the length of time over which the negotiations took place; and 108

112

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [50]. Applied in Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [69]. Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 (14 April 2015). Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [161]. See, eg, Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 at 50,880 (Gleeson CJ, Samuels AP and Meagher JA concurring). The same view was taken in Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 (Burchett J); General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 especially at 177-179 (Davies and Einfeld JJ); Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40,513 (Branson and Emmett JJ), and Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2011] FCAFC 119 at [111]-[115] (Gilmour, Jagot and Nicholas JJ). Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].

113

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].

109 110 111

270

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.85]

• any professional advice (valuation, survey, legal, or accounting) that the aggrieved party may have sought or received in coming to a decision whether to enter into the transaction. Conduct directed at the public ...............................................................................................................................................................................................

However, where misleading representations are not directed at identified individuals, but to the public generally and the relief sought is an injunction under ACL, s 232, it is necessary to determine who could fairly be regarded as its target. This may have been a segment of the public, or the public as a whole, and it is necessary to isolate some criterion or criteria of a representative member. 114 In Campomar Sociedad Limitada v Nike International Ltd, the majority, in a joint judgment stated: [11.85]

Where the persons in question are not identified individuals to whom a particular misrepresentation has been made or from whom a relevant fact, circumstance or proposal was withheld, but are members of a class to which the conduct in question was directed in a general sense, it is necessary to isolate by some criterion a representative member of that class. The inquiry thus is to be made with respect to this hypothetical individual why the misconception complained has arisen or is likely to arise if no injunctive relief be granted. In formulating this inquiry, the courts have had regard to what appears to be the outer limits of the purpose and scope of the statutory norm of conduct fixed by s 52. 115 (citations omitted)

Thus, where conduct is directed at the public, the class is first identified. Having identified the class, the effect of the conduct is assessed having regard to the reactions of the “hypothetical individual” – the ordinary, reasonable member of the class, not those of persons whose reactions are “extreme or fanciful”. 116 The test is an objective one. As Beach J observed in ACCC v Hillside (Australia New Media) Pty Ltd t/as Bet365, “[t]his hypothetical construct avoids using the very gullible or the highly astute to assess effect or likely effect”. 117 Knowledge base of a reasonable member of the class ...............................................................................................................................................................................................

The ordinary or reasonable consumer does not exist in the abstract, but depends on the specific context in which the public statement was made. The level of knowledge [11.90]

114 115

116 117

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [36]. Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [103] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ). See also Google Inc v ACCC (2013) 249 CLR 435 at [6]-[9] (French CJ, Crennan and Kiefel JJ); Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at [37] (Wilcox, Bennett and Graham JJ); ACCC v Telstra Corporation Ltd (2007) ATPR ¶42-203 at [14]-[15] (Gordon J); Energizer Australia Pty Ltd v Remington Products Australia Pty Ltd (2008) ATPR ¶42-219 at [16] (Moore J); and ACCC v Prouds Jewellers Pty Ltd (2008) ATPR ¶42-217 at [16]-[19] (Moore J). Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 86-7 [105]. See also Forrest v ASIC (2012) 247 CLR 486 at [49]-[50] (French CJ, Gummow, Hayne and Kiefel JJ). ACCC v Hillside (Australia New Media) Pty Ltd t/as Bet365 [2015] FCA 1007 at [70].

[11.90]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

271

to be imputed to a reasonable member of the pleaded target audience will be crucial for the obvious reason that the more sophisticated and knowledgeable the audience, the more difficult it will be to prove that a reasonable member of that audience would be likely to be misled or deceived by the statement at issue. In ACCC v TPG Internet Pty Ltd Murphy J stated that “[t]he degree of knowledge to be imputed to the class, and thus to the ordinary or reasonable consumer, is a matter of inference from the evidence”. 118 In misleading or deceptive conduct cases involving a statement directed towards a specific individual, the court may be assisted by receiving evidence pertaining to this issue from that person. Similarly, where the statement was directed towards a target audience of prospective purchasers, evidence of this nature may be given by members of that audience. For example, in National Exchange Pty Ltd v ASIC, 119 the Australian Securities and Investment Commission (ASIC) led evidence concerning the reactions of shareholders to the two dollar offers, two of whom were confused or misled at least temporarily. 120 As regards this evidence, Dowsett J stated: There is evidence that both Mr Locke and Ms Normoyle were at least temporarily misled by the offer. It is not clear whether this was as a result of the impact upon them of the format of the offer or as a result of their not giving sufficient attention to the payment provision. It would be wrong to place great weight on their having been misled. Further, there is no evidence of any substantial number of people having been mislead [sic]. 121

If evidence is led that members of the target audience have actually been misled by the public statement, the task of the court is to ascertain whether they were “reasonable” members of the target audience, or whether they were misled because they made assumptions that were extreme or fanciful. 122 In ACCC v Coles Supermarkets Pty Ltd Allsop CJ stated: Evidence that someone was actually misled or deceived may be given weight. The presence or absence of such evidence is relevant to an evaluation of all the circumstances relating to the impugned conduct. Where the conduct and representations are to the public generally and concern a body of simple direct advertising, the absence of individuals saying they were misled may not be of great significance. There was no such evidence here. The ACCC was criticised for that. That criticism is unfounded. The objective assessment of advertising using ordinary English words in an attempt to persuade can be undertaken without the lengthening of a trial by the bringing of 118

ACCC v TPG Internet Pty Ltd (2011) ATPR ¶42-383 at 44,686 [25].

119 120

National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000. ASIC led evidence that a third shareholder had also been confused or misled: National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at 48,712 [7] (Dowsett J). However, Dowsett J considered that it would be unfair to give that evidence any weight due to its ambiguity (at 48,716 [29]). National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000 at 48 719 [41].

121 122

AstraZeneca v GlaxoSmithKline Australia Pty Ltd (2006) ATPR ¶42-106 at 44 891 [37] (Wilcox, Bennett and Graham JJ), citing Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85-6 [104]-[105] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ).

272

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.90]

witnesses of indeterminate numbers. Language, especially advertising, seeking to raise intuitive senses and associations, can have its ambiguities and subtleties. The task of evaluating the objective character and meaning of the language in the minds of reasonable members of the public is not necessarily one that will be assisted in any cost-effective manner by calling members of the public. The question is one for the Court. 123

Identifying the attributes of the target audience is a crucial step in applying the test. Higher standards of accuracy are expected where members of the intended audience are naive, unsophisticated or impressionable. On the other hand, where members of the intended audience are sufficiently “tough, shrewd and sceptical” 124 they can, to a greater extent, be expected to look after their own interests and make their own judgments. Individual judges vary in their assessments of the ability of members of the target audience to assess the purport of the words used in the context the conduct as a whole. It is clearly an area where there is room for legitimate differences of opinion. 125 The target audience may be found to consist of sub-classes. One sub-class may have a greater awareness or knowledge of the way a particular industry operates than the other. If so, the conduct at issue is be tested by reference to its likely impact on a reasonable member of the unaware sub-class. In ACCC v Jewellery Group Pty Ltd, 126 the ACCC alleged that the respondent breached s 52 of the TPA by distributing catalogues with higher prices that were struck through with a line and next to that price was another lower price indicated as the sale price. Lander J accepted that the relevant class would have consisted of both persons who were aware of the discount culture in the jewellery market, and persons who were unaware of the discount culture. 127 His Honour focussed on the effect of the “strike through pricing” on the unaware members of the class, who would have thought that the strike through price was the actual price at which the jewellery item had been sold, rather than a negotiable price. The savings representation was false because the items had been sold at a price less than the strike through price because of the respondent's price negotiation policy. 128

123 124 125

126 127

128

ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634 at [45] citing Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202. Forrest v ASIC (2012) 247 CLR 486 at [105] (Heydon J). ACCC v Telstra Corporation Ltd (2004) 208 ALR 459 at 475-6. (Gyles J). See Corones, “Misleading Conduct Arising from Public Statements: Establishing the Knowledge Base of the Target Audience” (2014) 38 (1) Melbourne University Law Review 281. ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411. ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [36] adopting the reasoning of Mansfield J in ACCC v Ascot Four Pty Ltd (2008) 250 ALR 467 which was approved by the Full Federal Court in Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106. ACCC v Jewellery Group Pty Ltd (2012) ATPR ¶42-411 at [38] and [152] applying Ascot Four Pty Ltd v ACCC (2009) 176 FCR 106 at [43]-[49]. The decision was upheld by the Full Federal Court in Jewellery Group Pty Ltd v ACCC [2013] FCAFC 144.

[11.95]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

273

Confusion or uncertainty ...............................................................................................................................................................................................

It is necessary to draw a distinction between conduct that is misleading or likely to mislead, and conduct that causes confusion or uncertainty. Conduct that has a tendency to cause confusion or uncertainty does not suffice to establish that it was misleading or deceptive within s 18(1) of the ACL. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, 129 Gibbs CJ held: [11.95]

that to prove a breach of s 52 it is not enough to establish that the conduct complained of was confusing or caused people to wonder whether two products may have come from the same source. 130

In McWilliam's Wines Pty Ltd v McDonald's System of Australia Pty Ltd, 131 advertisements prepared for McWilliams, flagons of its wine were described by a journalist as “the Big Mac”. McDonald's sought an injunction to restrain this use of the words “Big Mac” on the ground that they contravened TPA, s 52 by falsely implying that there was a business connection between McDonald's and McWilliam's, or that they were engaged in a joint promotion. It succeeded at first instance. However, an appeal by McWilliam's was successful because the Full Court found that although readers of the advertisement may have been confused about the existence of a possible connection between the two firms, it would not actually mislead them into thinking that there was such a connection. In Taco Co of Australia Inc v Taco Bell Pty Ltd, Deane and Fitzgerald JJ said: Conduct which produces or contributes to confusion or uncertainty may or may not be misleading or deceptive for the purposes of s 52. In some circumstances, conduct could conceivably be properly categorized as misleading or deceptive for the very reason that it represents that confusion or uncertainty exists where, in truth, there is no proper room for either. Ordinarily, however, a tendency to cause confusion or uncertainty will not suffice to establish that conduct is of the type described in s 52. The question whether particular conduct causes confusion or wonderment cannot be substituted for the question whether the conduct answers the statutory description contained in s 52. 132

This was endorsed by the High Court in Campomar Sociedad Limitada v Nike International Ltd. 133 The distinction drawn in these cases is between misleading conduct and conduct which merely causes uncertainty or confusion. In practice, however, there will often be no sharp dividing line between the two. 129 130

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-199.

131 132 133

McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 49 FLR 455. Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 201. Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 at 87 [106]. See also Google Inc v ACCC (2013) 249 CLR 435 at 443 [8] (French CJ, Crennan and Kiefel JJ).

274

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.95]

Thus, for example, in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8), 134 Darrell Lea made significant use of purple in relation to packaging and point of sale displays. An expert witness for Cadbury, Dr Gibbs, gave evidence that in his opinion Darrell Lea's use of purple was likely to cause information-processing errors to occur among consumers of chocolate confectionery, including misidentification when consumers seeking to buy Cadbury chocolate mistakenly identify a Darrell Lea product as a Cadbury product, and therefore buy the Darrell Lea product by mistake. Heerey J concluded that these “information processing errors” did not amount to misleading conduct. His Honour held: Much of Dr Gibbs' opinions as to misinference and misassociation would seem to be examples of the “caused to wonder” reaction by consumers (and others such as employees and competitors). Insofar as they are, they would seem to raise matters outside the purview of the Trade Practices Act or the tort of passing off, even if they are matters of commercial concern to Cadbury. 135

In Bridge Stockbrokers Ltd v Bridges, 136 Lockhart J drew attention to the legislative policy behind s 52, namely to prevent the public being misled in a practical sense by the conduct of corporations and provided the following illustration where confusion may cross the dividing line and constitute misleading conduct: The corporation may deliberately produce and market the new brand of soap with a similar get-up, style and name to the already established soap for the purpose of increasing market share by confusing the public so that they are uncertain whether the two products come from the same source. The corporation would know that a not insignificant number of people would buy its product in those circumstances. It is not straining credulity too much, or indeed at all, to conceive of such a corporation, with ready access to competent marketing advice, planning its marketing strategy so that it could not be said that the public would think that the two products in fact came from the same source. But the corporation would know that, by stopping short of such conduct at the point where the public is merely confused or uncertain, it will nevertheless increase its sales and market share at the expense of the established product. In my view, the corporation is guilty of misleading or deceptive conduct within s 52. It is cheating. 137

In relation to s 18 of the ACL, the court must decide objectively whether the representations made are misleading or deceptive or likely to mislead or deceive. Evidence of the kind led in Cadbury Schweppes Pty Ltd v Darrell Lea from expert witnesses that members of the public are likely to be confused of caused to wonder will not suffice.

134

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 (11 April 2008).

135 136

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) [2008] FCA 470 (11 April 2008) at [88]. Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401.

137

Bridge Stockbrokers Ltd v Bridges (1985) 57 ALR 401 at 415.

[11.100]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

275

Silence as misleading conduct: general principles ...............................................................................................................................................................................................

Whether silence amounts to “conduct” for the purposes of s 18 of the ACL is considered at [11.25]–[11.35]. Assuming that the definition of “conduct” in s 2 of the ACL can be satisfied, it is then necessary to consider whether the omission or withholding of information in a particular case was misleading. 138 In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, different approaches were taken for determining whether the conduct at issue was misleading. 139 One approach was to analyse whether the conduct viewed as a whole, conveyed a representation which was misleading. Another approach was to analyse whether the circumstances gave rise to a “reasonable expectation” that if some relevant fact existed, it would be disclosed to the person who claimed to have been misled. 140 French CJ and Kiefel J observed: [11.100]

Reasonable expectation analysis is unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation. A party to precontractual negotiations who provides to another party a document containing a false representation which is not disclaimed will, in all probability, have engaged in misleading or deceptive conduct. When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. 141

The facts of the case were that Consolidated Timber Holdings, a borrower, engaged insurance broker, Miller & Associates (Miller), to assist it in applying for an insurance premium funding loan with a lender, BMW. Miller supplied BMW with documentation which included a memorandum and certificate of insurance with HIH. BMW lent Consolidated a sum of money which Consolidated did not fully repay. The insurance policy was not a cancellable policy. A cancellable property policy provides a form of security for a lender because in the event of a default by the borrower, the lender can cancel the policy and recover the unused premium. BMW claimed that Miller engaged in misleading conduct on two different bases: first, that the HIH certificate falsely represented that the underlying policy was cancellable and good security for the loan, when it was not; and secondly, that Miller failed to disclose to BMW an unattractive feature of the policy (that it was non-cancellable) a feature that BMW was not aware of. As regards, BMW's first case, the majority (Heydon, Crennan and Bell JJ), concluded that the HIH certificate did not convey a representation that it was a cancellable 138 139

140 141

See Miller, Miller’s Australian Competition and Consumer Law Annotated (37th ed, Lawbook Co, Sydney, 2015), [1.S2.18.85]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [19]. See McCabe, “When Silence Misleads, and When it Doesn’t?” (2011) 19 Australian Journal of Competition and Consumer Law 47 at 49-51. The genesis of the “reasonable expectation” approach is to be found in the judgment of Gummow J in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [23].

276

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.100]

policy. 142 As regards BMW's second case, the majority noted that BMW was known by Miller to be an “experienced premium lender” 143 and the parties were “commercially sophisticated”. 144 The majority held that Miller had not engaged in misleading conduct: Miller had supplied BMW with a copy of the policy. BMW was an experienced premium lender. The policy was not a lengthy document. It was apparent that it did not insure the holders against loss or damage to property. It did not contain a cancellation clause. Miller's failure to draw to BMW's attention a circumstance that the document itself disclosed was not misleading or deceptive. 145

French CJ and Kiefel J agreed with the majority that, the HIH certificate did not contain a false representation that it was a cancellable policy. 146 As regards BMW's second case, on a close analysis of all the circumstances of the transaction, their Honours held that BMW could not have had a reasonable expectation that Miller would disclose that the policy was not cancellable. A copy of the policy was provided to BMW and they simply failed to read it. 147 Their Honours observed: s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. 148

Commenting more broadly on the “reasonable expectation” test, their Honours observed: The language of reasonable expectation is not statutory. It indicates an approach which can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations. An example in the former category is non-disclosure of material facts in a prospectus. 149

The “reasonable expectation” test is predicated on the assumption that one party is aware of an undisclosed fact and the circumstances and context of the case give rise to an objectively reasonable expectation on the part of the other party that the fact should be disclosed because it would be relevant or material in its decision-making. The reasonableness of the alleged expectation is to be assessed objectively, and not be

142 143 144 145

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [87]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [85]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 384 at [91]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 386 at [96].

146 147 148

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [24]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 383 at [26]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Lyd (2010) 241 CLR 357 at [22]. See also Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [91]. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [19]-[20].

149

[11.100]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

277

reference to the subjective expectation of the other party to the transaction. 150 All of the members of the High Court in Miller & Associates v BMW were of the opinion that the lender could not have had a reasonable expectation that the broker would disclose that the policy was not cancellable. 151 In Rhone-Poulenc, 152 and a number of subsequent cases, it was suggested that silence will amount to misleading conduct where there was a “duty” to disclose the information withheld. Subsequently, this situation was incorporated into a general proposition that silence will amount to misleading conduct where the surrounding circumstances give rise to a “reasonable expectation” on the part of the respondent that information would be disclosed. In Demagogue Pty Ltd v Ramensky, 153 Black CJ observed: 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 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. 154

A reasonable expectation of disclosure may arise if the supplier inserts a term into a contract that is highly unusual or harsh from the consumer's perspective. A reasonable expectation of disclosure is less likely to arise in the case of agreements between two commercial parties of roughly equal bargaining strength, experience and commercial sophistication. It is important to note that silence or a failure to disclose highly unusual or harsh term may also demonstrate a lack of good faith, and be a relevant consideration for determining whether a supply or acquisition of goods or services fell within the prohibition of statutory unconscionability in s 21 of the ACL.

150

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20].

151

For a summary of the relevant principles, see Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209] (Sackville AJA) cited with approval by Barrett JA in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [192]. Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477. Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32. See Gillies, “Non-disclosure: Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653; O’Shea, “Undisclosed Unusual and Unexpected Matters – Liability Issues under s 52 of the Trade Practices Act” (2006) 14(1) Competition & Consumer Law Journal 1; McCabe, “When Silence Misleads, and When it Doesn’t?” (2011) 19 Australian Journal of Competition and Consumer Law 47 at 50.

152 153 154

278

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.105]

Silence as misleading conduct: commercial negotiations ...............................................................................................................................................................................................

In the context of commercial negotiations the courts have been reluctant to impose additional obligations of disclosure to those already imposed by the common law, such as where a fiduciary duty is owed to the other party, or where there is a sufficient relationship of proximity. 155 In Lam v Ausintel Investments Australia Pty Ltd, Gleeson CJ observed: [11.105]

Where parties are dealing at arm's length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not of itself impose any obligation on the first party to bring that information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonest or even sharp practice. 156 (emphasis added)

There is no need to impose additional burdens where the parties are of roughly equal bargaining strength and each party is capable of ascertaining the relevant information. The “more” to which his Honour refers applies to other circumstances which may give rise to a “reasonable expectation of disclosure”. In Miller v BMW Australia, French CJ and Kiefel J observed: In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52. 157

For example, in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd, 158 the New South Wales Court of Appeal held that there was no reasonable expectation by prospective franchisees that the Bank of Queensland (BOQ) would disclose information regarding business volumes achieved by existing franchisees. The Bank operated through corporate branches and agencies which from 2001 to 2003 were converted to franchises and became known as Owner Manager Branches (OMBs). Eleven OMB principals who operated OMBs in NSW sued BOQ for losses they claimed to suffer from entering into 155

157

See Gillies, “Non-disclosure: Trade Practices Act, s 52” (2004) 78 Australian Law Journal 653 at 657-60; and Stewart and McClurg, “Playing your Cards Right: Obligations of Disclosure in Commercial Negotiations” (2007) Australian Mining and Petroleum Laws Association Handbook 36 at 36-8. Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR ¶40-990 at 50,880 (Gleeson CJ, Samuels AP and Meagher JA concurring). The same view was taken in Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 (Burchett J); General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164 especially at 177-9 and Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 at 40,513. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20].

158

Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94.

156

[11.105]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

279

their respective franchise agreements. Barrett JA (with whom Bathurst CJ and Beazley P agreed) stated that the crucial question was whether the “course of dealing” by BOQ with each prospective franchisee was such as to give rise to an objectively reasonable expectation of disclosure. 159 His Honour found that no objectively reasonable expectation of disclosure arose that BOQ should volunteer the information that BOQ possessed about the actual financial performance of existing OMBs in NSW because “all OMB principals were persons of some commercial sophistication, all had business experience and most had specifically banking experience”, 160 and the OMB principals were told by BOQ that it was for them to investigate the feasibility and viability of their business proposal. 161 By way of contrast, in Fabcot Pty Ltd v Port Macquarie-Hastings Council 162 the Macquarie-Hastings Council was seeking to develop a parcel of land into a supermarket. The Council issued as an Expression of Interest (EOI) and conditionally accepted an offer from Woolworths, although the Council did not expressly state in the EOI process that it was negotiating with Woolworths exclusively. On 19 May 2009 the Council decided to negotiate with Coles for the sale of the Land. The New South Wales Court of Appeal held that the EOI process gave rise to a reasonable expectation by Woolworths that it would receive notification before the Council commenced negotiations with a third party. The following factors were held to be relevant in the “course of dealing” between the successful tenderer (Woolworths) and the Council as part of the Expression of Interest (EOI) process: • the nature of the EOI process and the fact that a single bidder was selected; • the Council's communication that it had conditionally accepted Woolworths' offer; and • the nature of the project and the fact the proposal accepted by the Council would require a substantial level of collaboration by the negotiating parties. 163 However, the EOI process did not give rise to an expectation that Woolworths would be entitled to notification for an indefinite period. 164 Once it became clear that there were “substantial impediments to the finalisation of an agreement,” 165 there was no longer any reasonable expectation that Woolworths was entitled to a period of exclusivity by reason of the EOI process. By 1 April 2009, serious issues remained unresolved. Sackville AJA stated: 159 160 161

163 164

Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [203]. Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [204]. Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [207]; Clifford v Vegas Enterprises [2011] FCAFC 135 at 144 and 226. Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 (Sackville AJA with whom Beazley JA and Campbell JA agreed). Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [223]. Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [225].

165

Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [227].

162

280

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.110]

A reasonable observer would have concluded at that point that in view of the urgency of completing a sale of the Land, the Council might well seek another negotiating partner and that Woolworths could no longer have an expectation that it would receive prior notice of the Council's intention to do so. 166

Thus, the Council had not engaged in misleading conduct on the 19 May 2009 when it decided to negotiate with Coles for the sale of the Land. Silence: making known specific transactional requirements ...............................................................................................................................................................................................

The circumstances or contextual factors that may be relevant in giving rise to a reasonable expectation of disclosure will now be considered. A reasonable expectation of disclosure is more likely to arise where one party, during pre-contractual negotiations, explicitly makes known a particular purpose or objective which that party is seeking to achieve, or specific transactional requirements by entering into the transaction. 167 In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, Heydon, Crennan and Bell JJ held: [11.110]

There was nothing in the conduct of the parties … to convey that cancellability was important to the determination of this later application. The request for guarantees suggested that it was not. There was no foundation for the conclusion that the known importance of cancellability gave rise to a reasonable expectation, in the circumstances of this transaction, that Miller would not supply the HIH certificate in response to BMW's request without disclosing at that time or later that the policy was not cancellable. 168

This factor has been held to be relevant in other cases. For example, in Whitaker v Paxad Pty Ltd, 169 a real estate agent acting in the sale of his mother's home and who had grown up in the home, had a thorough knowledge of its defects which included water drainage problems in the garage. The purchasers informed the agent that they wished to use the garage as a home office. The agent disclosed to the purchasers that the back shed contained asbestos, but made no mention of the drainage problems in the garage. Blaxel J held that in the circumstances, it was reasonable for the purchasers to expect that if the garage was not suitable for their disclosed intended use, the agent would have told them so. 170 Similarly, in EK Nominees Pty Ltd v Woolworths Ltd, 171 a property developer, EK Nominees, and the owner of a chain of supermarkets, Woolworths, commenced 166 167

168 169 170

Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [229]. For example, in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 583 and 587-588 (Brennan, Deane, Gaudron and McHugh JJ), where the appellants made clear to the respondent’s agent that their express purpose was to acquire a tenanted property that would generate a 10% return on their investment. The seller was found to have breached s 52 of the TPA for failing to disclose a collateral agreement with the tenant for a rent-free period that would prevent the 10% return being realised. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [95]. Whitaker v Paxad Pty Ltd [2009] WASC 47. Whitaker v Paxad Pty Ltd [2009] WASC 47 at 98.

171

EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172.

[11.110]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

281

negotiations for a lease that provided for construction of a supermarket on EK Nominees' land (the Auburn Road site). EK Nominees expended significant amounts obtaining development approval and preparing the land for development in anticipation of obtaining a formal lease with Woolworths. Subsequently, a third party developer (Markham Corporation) approached Woolworths with a superior development opportunity and Woolworths withdrew from the negotiations with EK Nominees. EK Nominees pleaded that Woolworths made two representations which were misleading. White J considered that Woolworths made an implied representation that it intended to enter into a lease on the terms and conditions contained in its approval letter of 18 July 2011, and that it was a continuing representation. 172 White J held: The relevant conduct is the advertent failure to disclose Woolworths' alleged change in intentions. It was Mr Hunt who deliberately made no disclosure of the approach of Markham Corporation or the implications that might have for the Auburn Road site. … If circumstances changed after the Property Committee's approval was given, so that a decision had to be made as to whether Woolworths should go ahead, that decision would be made by representatives of the Property Committee, which did not include Mr Hunt. Mr Hunt was not the person authorised to decide whether or not Woolworths should enter into an agreement for lease. 173

However, White J found: Woolworths' failure to disclose its changed position, whilst continuing to encourage E K Nominees to carry out work on the project, and continuing to negotiate terms of the agreement for lease, was conduct, in trade or commerce, which was misleading or deceptive, or likely to mislead or deceive. 174

By way of contrast, in Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd, 175 Mr Anderson had been shown premises in which he planned to store his collection of antiques and art works. During a pre-lease inspection of the building Mr Anderson observed sprinkler heads and formed the erroneous impression that the premises had an operational sprinkler system. Mr Anderson stated that the building had to be “airconditioned, waterproof and secure”, but said nothing about the need for fire protection. The trial judge found that Clambake had engaged in misleading conduct by failing to disclose that despite the visible sprinkler system, the premises did not have an operational fire protection system. On appeal, McLure P took into account that at no time during the inspection did Mr Anderson seek any information concerning the type of fire protection system in the building, and that Mr Anderson's erroneous impression had never been expressly or impliedly communicated to Clambake. 176 The appeal was upheld. 172 173 174 175

EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [139]. EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [147]-[149]. EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [156]. Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193.

176

Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193 at [91].

282

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.115]

Silence: unusual or unexpected matters ...............................................................................................................................................................................................

The existence of something unusual or unexpected may give rise to a reasonable expectation of disclosure in the circumstances of a particular case. If the other party is unable to find out the true position by conducting searches of public records or making other inquiries, a reasonable expectation of disclosure is more likely to arise. Deliberately concealing the existence of the unusual or unexpected matter may amount to misleading conduct. For example, in negotiating the sale of a quantity of scrap metal copper a reasonable expectation of disclosure arose where the purchaser became aware that it may have been stolen, but did not disclose this suspicion to the vendor. 177 In negotiating the terms for a lease of premises for conducting a flying school, a reasonable expectation of disclosure arose where the lessor's agent knew that there had been a risk of contamination on the site. 178 In Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd, 179 Barrett J, the primary judge, found that a developer (Peninsula) had breached s 52 of the TPA by failing to disclose to a building contractor (Abigroup) the existence of an agency agreement pursuant to which a third company (the superintendent) was Peninsula's agent in all matters relating to the design and construction of the project. However, on appeal, 180 the New South Wales Court of Appeal held that the primary judge erred in his finding of misleading or deceptive conduct. Hodgson JA stated: [11.115]

In my opinion, for conduct to be misleading or deceptive, it must be such as is apt to mislead or deceive in some non-trivial respect; so that to make out a case under s 52, Abigroup needed to show that the non-disclosure of the project management agreement was apt to do just that. 181

There is nothing unusual or unexpected about undisclosed agency agreements. Generally, neither the principal nor the agent would engage in misleading conduct if the agent entered into a contract with a third party and failed to disclose the existence of the agency agreement. However, silence as regards the existence of a bid rigging arrangement may give rise to misleading or deceptive conduct. In Norcast SarL v Bradken Ltd (No 2), 182 a request for bids was made in the United States by Norcast S ar L (Norcast) in relation to its subsidiary, a Canadian company, Norcast Wear Solutions Inc (NWS). There was an arrangement between Castle Harlan Inc (a private equity investment firm) and Bradken that Castle Harlan Inc would bid for NWS and Bradken would not bid (the bidding provision). It was at least possible that Castle Harlan Inc and Bradken would have 177 178 179 180

Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 at 54,203-54,204 (Handley JA). Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd (2005) 215 ALR 625 (Hoeben J). Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (2001) ATPR (Digest) 46-213.

181

Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 (Hodgson JA, with whom Mason P and Stein JA agreed). Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 at [54].

182

Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14.

[11.120]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

283

competed with each other to acquire the shares in NWS but for the bid rigging arrangement. Norcast alleged that Castle Harlan and Bradken engaged in misleading or deceptive conduct during the course of the NWS sales process. Norcast relied upon Bradken's silence about the bidding provision, the back-to-back sale arrangement with Castle Harlan and the fact that it and Castle Harlan were co-operating for the purpose of acquiring NWS. Gordon J found that Bradken took deliberate and deceptive steps: to prevent disclosure of its direct involvement in Castle Harlan's acquisition of NWS. In doing so, by its silence, Bradken represented that it was not involved in Castle Harlan's acquisition of NWS. That conduct was misleading and deceptive… Even in the absence of the Bid Rigging Arrangement, in all the circumstances, Bradken and Castle Harlan's silence constituted misleading or deceptive conduct in contravention of the ACL. Bradken further submitted that Bradken's silence was not misleading or deceptive in circumstances where Norcast knew that it was not uncommon for a private equity business to resell a company it had acquired. Norcast's general awareness of the likelihood that Castle Harlan might, at some time in the future, sell NWS cannot and does not cure Bradken's misleading or deceptive conduct by silence. 183

Bradken appealed against the decision, but the parties subsequently reached a settlement so that no appeal was required. The Full Court made orders setting aside the orders of the primary judge, but left intact the reasoning and legal and factual conclusions. Silence: subsequent change in circumstances ...............................................................................................................................................................................................

A failure to qualify a statement made earlier in negotiations which is no longer accurate because of a subsequent change in circumstances, or varying agreed terms, may give rise to a reasonable expectation of disclosure. In Gregg v Tasmanian Trustees Ltd, 184 it was held to be misleading for the respondent to ask the applicant to sign mortgage documents relating to her property without first informing her that the terms differed significantly from what they had agreed earlier. According to Merkel J: [11.120]

The fact that the mortgage departed in significant respects from the transaction agreed to by the respondent, gave rise to a reasonable expectation that the changes and their effect would be brought to the attention of the applicant. A failure to do so and remaining silent in the circumstances, in itself, can constitute conduct in contravention of s 52 … 185

It may be misleading or deceptive conduct not to correct a representation which was true when it was originally made but which later becomes false, or qualified in some way due 183

Norcast SarL v Bradken Ltd (No 2) (2013) 219 FCR 14 at [317]-[318].

184 185

Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91. Gregg v Tasmanian Trustees Ltd (1997) 73 FCR 91 at 108. See also Finucane v NSW Egg Corp (1988) 80 ALR 486 (Lockhart J); Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-696 at 42,888-9 (Merkel J); and Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd (2004) ATPR (Digest) ¶46-243 at 54,203 [14] (Handley JA).

284

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.125]

to a subsequent change in circumstances. The common law rule that representations, once made, are treated as continuing beyond the time they are made, was applied in relation to the TPA. For example, in Wildsmith v Dainford Ltd, 186 the applicants purchased a unit off-the-plan on the basis of a representation that the balconies would have certain features substantially in accordance with the sketch in the contract. When constructed the balconies departed in significant respects from the sketch. Similarly, in Burg Design Pty Ltd v Wolki, 187 the applicant purchased a business (selling barbecued chicken) on the basis of representations by the respondent that it made “$130,000 a year by way of net profit”. Burchett J held that it was misleading to fail to correct the previous statements and accounts. The issue of failure to disclose subsequent changes also arose in Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd. 188 It was held to be misleading for MSDA not to qualify its pharmaceutical Product Information brochure for Vioxx once it was aware of the results of the subsequent VIGOR trial which demonstrated that the use of Vioxx increased the risk of heart attack. Jessup J did not hold that the initial Product Information was misleading. Rather, his Honour held that the misleading conduct was constituted by the failure to draw the attention of doctors and other health care professionals to the increased cardiovascular risk that emerged from the VIGOR study. Jessup J held: …MSDA's failure to provide any qualification to what was then contained in the Product Information did … amount to misleading information. 189

Silence: case examples ............................................................................................................................................................................................... [11.125]

Cases where a reasonable expectation of disclosure has arisen include:

• on the part of a purchaser, where the trading figures disclosed were accurate, but they misrepresented the true trading position; 190 • on the part of a purchaser, where the vendor knew that its major client, which represented almost two-thirds of its annual sales, had just had its Government funding reduced by 40% and future orders would be reduced in consequence; 191

186 187 188 189 190

191

Wildsmith v Dainford Ltd (1983) 51 ALR 24 at 31-34 (Smithers J). Burg Design Pty Ltd v Wolki (1999) ATPR ¶41-689 at 42,810 (Burchett J). Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 (Jessup J). Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (2010) 184 FCR 1 at 338 [904]. This finding was not challenged on the appeal. See CPI Group Ltd v Stora Enso Australia Pty Ltd (2007) ATPR ¶42-193 (Branson, Stone and Edmonds JJ). See also Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 at [92] (Buss JA, with whom Wheeler JA and McClure JA agreed). Caffwy v Leatt-Hayter (No 3) [2013] WASC 348 (Beech J).

[11.125]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

285

• on the part of a purchaser negotiating the sale of a restaurant, where the vendor knew that the actual seating capacity differed from the licensed seating capacity; 192 • on the part of a purchaser, where the vendor's agent informed the purchaser that there was a proposal to lease the property in a certain manner when the agent knew that it could not be used in this manner without a local government permit which had not been obtained; 193 • on the part of a shopping centre developer negotiating terms for a lease, where the prospective anchor tenant failed to disclose that it had already decided not to take up a lease in the shopping centre; 194 • on the part of potential investors in a joint venture corporation, where one of the directors was an undischarged bankrupt; 195 and, • on the part of a prospective purchaser of a Pizza Haven restaurant, where the vendor failed to disclose that a Pizza Hut restaurant was opening nearby. 196 Cases in which no objectively reasonable expectation of disclosure has arisen include: • on the part of a purchaser, that a bank would disclose that the vendor's business was unprofitable because the bank was under a pre-existing duty of confidence to the vendor; 197 • on the part of a commercial borrower, that a lender will explain the intricacies of the financial system and the risk of loss; 198 • on the part of a building contractor, that a mortgagee would disclose that a property developer was facing insolvency and would not be able to pay for the work done; 199

192 193 194 195 196 197

198 199

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 (Lockhart J, Burchett and Foster JJ concurring). Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR ¶40-873 (Gray J). EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 (16 November 2006). Dawson v LNG Holdings [2008] NSWSC 137 (White J). Hardy v Your Tabs Pty Ltd [2000] NSWCA 150 (22 June 2000) (Heydon JA, with whom Meagher JA and Foster AJA agreed). Kabwand v National Australia Bank (1989) ATPR ¶40-950 (Lockhart, Hartigan and Hill JJ) and Finding v Commonwealth Bank of Australia [2001] 1 Qd R 168. The Banks were found not to have breached s 52 for failing to disclose information concerning the business or financial affairs of another client. In the absence of a fiduciary relationship to disclose matters regarding other clients there could be no reasonable expectation of disclosure in such circumstances because of the duty of confidentiality owed by a bank to a client. See also Advanced Switching Services Pty Ltd v State Bank of New South Wales [2007] FCA 954 (Rares J) and Ibrahim v Phan [2007] NSWCA 215, where the NSW Court of Appeal held that in the circumstances of that case there was no reasonable expectation of disclosure by a solicitor. Warner v Elders Rural Finance Ltd (1993) 113 ALR 517 at 522-523 (Hill J). Winterton Constructions Pty Ltd v Hambros Australia Ltd (1993) ATPR ¶41-205 (Hill J). A borrower is entitled to expect that his financier will keep confidential matters concerning the borrower’s financial affairs.

286

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.130]

• on the part of a lessor, that a prospective tenant had changed its intention to take up the lease where the correspondence made clear that either party was free to withdraw at any time prior to execution; 200 • on the part of a purchaser, that the vendor of a Service Centre for trucks and cars would disclose the past history or causes of fracturing in pavement bitumen which was unsuitable for heavy vehicles in the absence of specific questions raised by the purchaser; 201 • on the part of new franchisees, that the franchisor would share with them information that the franchisor possessed about the financial performance and business levels achieved by existing franchisees, when it had been made clear, both orally and in writing, that it was for the prospective franchisees to investigate the feasibility and viability of their own business proposal; 202 and, • on the part of a sports program supplier, that a customer was engaged in discussions with an alternative program supplier. 203 Literal truth ...............................................................................................................................................................................................

While a statement may be literally true or factually accurate, it may, depending on its context, create a misleading impression. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd, Stephen J held: [11.130]

[W]hat the Hornsby Centre has done is, in a sense, no more than to use its own corporate name in association with its activities. No doubt the meaning of the statutory prohibition which s 52(1) enunciates must be gained from the terms of the subsection itself; but nothing in those terms suggests that a statement made which is literally true, ie, that the centre at Hornsby is conducted by Hornsby Building Information Centre Pty Ltd may not at the same time be misleading and deceptive. It clearly may be. To announce an opera as one in which a named and famous prima donna will appear and then to produce an unknown young lady bearing by chance that name will clearly be to mislead and deceive. The announcement would be literally true but none the less deceptive, and this because it conveyed to others something more than the literal meaning which the words spelled out. 204

Similarly, in National Exchange Pty Ltd v ASIC, 205 it was held to be misleading or deceptive in contravention of s 1041H of the Corporations Act 2001 (Cth) for the appellant to compare the price it was offering to pay shareholders for their shares with the 200 201 202 203 204 205

BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2010] NSWSC 1352 at [254]-[256] (McDougall J). Mercland Investment Group Pty Ltd v Duncalm Pty Ltd [2012] FCA 183 at [117] (Edmonds J). Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [203]-[213] (Barrett JA, with whom Bathurst CJ and Beazley P agreed). Seven Network Ltd v News Ltd [2007] FCA 1062 (27 July 2007) (Sackville J). This finding was not challenged on the appeal. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 227-8. National Exchange Pty Ltd v ASIC (2004) ATPR ¶42-000.

[11.135]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

287

current market price without drawing attention to the fact that the purchase price it was offering would be paid by instalments over 15 years. Although there were no false statements in the offer document, it created the false impression that was likely to mislead members of the target audience. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, French CJ and Kiefel J observed: When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. In some cases it might not be necessary to invoke non-disclosure at all where a statement which is literally true, but incomplete in some material respect, conveys a false representation that it is complete. 206

Representations with respect to future matters ...............................................................................................................................................................................................

Section 4 of the ACL contains an important evidentiary provision which may assist an applicant in a claim based on s 18 of the ACL. Where the conduct at issue contains a representation as to a future matter, the person making the representation must adduce evidence that there were reasonable grounds for making the representation or it will be deemed be misleading. Section 4 of the ACL provides: [11.135]

(1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: 206

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [23].

288

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.135]

(a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

Section 4 of the ACL is based on s 51A of the TPA. 207 According to the Second Explanatory Memorandum: Section 4 of the ACL includes a provision that replaces section 51A of the TPA. It places an evidentiary burden on a defendant who is alleged to have made a representation as to a future matter that is misleading. When compared to section 51A, the new provision seeks to clarify that • the burden of proof under this section is evidentiary in nature and does not place a legal burden on defendants to prove that representations were not misleading; • satisfying the burden of proof under this section does not constitute a substantive defence for breach of any other section of the ACL; and • the section can operate in proceedings against accessories to contraventions as well as primary contraveners. 208

If the respondent adduces no evidence as to the existence of reasonable grounds for making the representations, ss 4(1) and (2) of the ACL operate to deem the representations to be misleading and contrary to s 18 of the ACL. 209 Adducing some evidence that tends to establish reasonable grounds for making the representation discharges the onus on the respondent/representor and eliminates the operation of the deeming provision in s 4(2) of the ACL. There will be no automatic deeming as there would be if the respondent adduced no evidence at all. When the respondent adduces evidence, it will then be a matter for the court to determine whether that evidence establishes reasonable grounds. 210 For example, in Bennett v Elysium Noosa Pty Ltd (in liq), 211 the applicant purchaser alleged that real estate agents had no reasonable grounds for making oral representations that a Community Centre would be completed in Stage 1 of a development. Reeves J found that the respondent (property developer) had adduced quite extensive evidence to avoid the deeming provision in TPA, s 51A(2) (now ACL, s 4(2)). 212 207 208

Duke, “Representations as to the Future under the Proposed Australian Consumer Law” (2009) 33 Melbourne University Law Review 454. Second Explanatory Memorandum, [2.22]-[2.26].

209

ACCC v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) [2015] FCA 25 at [94] and [102].

210 211

See McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 at [191]-[192] (Allsop J) and ALDI Stores v EFTPOS Payments Australia Ltd (2011) ATPR ¶42-371 at 44,319 (Jacobson J). Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [78].

212

Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [120].

[11.135]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

289

It was then a matter for Reeves J to assess under TPA, s 51A(1) (now ACL, s 4(1)), on all the evidence, whether he was satisfied on the balance of probabilities, that the property developer had reasonable grounds to make the representations it did. If it had reasonable grounds the representations would not be taken to be misleading. If it did not have reasonable grounds, the representations would be taken to be misleading. If the court was not persuaded either way, the applicant would fail because the onus of proof still rested on the applicant. 213 His Honour concluded that there were no reasonable grounds and the representations were misleading: This review of the evidence relating to the Community Centre building as at early 2005, when the Burkes made the representations about it, shows that it was a component of the Elysium Noosa development for which there was no development approval, no final plans or design drawings, no construction program, no reliable costings and no genuine commitment to it by the joint venture partners. 214

Section 4 of the ACL highlights the importance of preserving contemporaneous evidence that substantiates any representations made during pre-contractual negotiations or in advertising material. In relation to s 51A (now s 4, ACL) Heerey J stated in Sykes v Reserve Bank of Australia: 215 If there was a representation as to a future matter, s 51A requires the representor to show: • some facts or circumstances • existing at the time of the representation • on which the representor in fact relied • which are objectively reasonable and • which support the representation made. 216

The third proposition – a requirement that that the representor show that the grounds said to be reasonable were in fact relied upon by the representor at the time of making the representation – was not contained within the wording of s 51A. It was said to be “implicit” in the provision. 217 Whether the Sykes requirement is thought to be implicit in the language of s 4 of the ACL remains to be seen. 218 If a person intends to rely on s 4 of the ACL they ought to plead to that effect so that the person alleged to have made the representation as to a future matter has notice that they are required to adduce evidence to avoid the deeming effect of s 4(1) of the ACL. In SPAR Licensing Pty Ltd v MIS QLD Pty Ltd, 219 Foster J stated: 213 214 215 216

Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [120]. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72 at [161]. Sykes v Reserve Bank of Australia (1998) 88 FCR 511. Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513. Sundberg J agreed.

217 218

Botany Bay City Council v Jazabas Pty Ltd [2001] NSWCA 94 at [85] (Mason P). See Eastwood, “Future Representations and the Grounds that May be Relied on to Establish Reasonableness” (2015) 89 Australia Law Journal 270.

219

SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50.

290

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.140]

In my view, a party who wishes to rely upon s 51A (or its equivalent in the Australian Consumer Law) should specifically plead its intention to do so in the first pleading where it is appropriate to do so. Although not bearing any ultimate onus of proof on the issue of reasonable grounds, the counter-party ought then be required to plead that it had reasonable grounds for making the relevant statement and to specify with particularity the nature of those grounds and, by way of particulars, the substance of the evidence it intends to adduce to establish those grounds. 220

Case examples: representations about future matters ...............................................................................................................................................................................................

In Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd 221 the Dib Group was a franchisor of services stations. The Chief Executive Officer was Mr George Dib. The plaintiff was a small lending business. It lent $100,000 to E-Style Marketing which operated three service stations as a franchisee and lessee from the Dib Group. E-Style was placed into receivership and the loan was not repaid. The plaintiff claimed that it was induced to make the loan on the basis of representations made by the Dib Group and Mr George Dib that were misleading. The plaintiff's case was based on positive representations that were alleged to be misleading: Mr Dib recommended E-Style as a suitable borrower. He represented that its owners were running a good business and would be suitable borrowers. Mr Dib also stated:

[11.140]

Short-term lending normally brings 20%. You will be helping us and we will be helping you… Nothing will go wrong, I assure you. It will be OK trust me. The Dib Group won't let anything go wrong.

Slattery J found that Mr Dib did encourage the plaintiff to invest in service stations sites franchised from the Dib Group by lending money to Dib Group franchisees and that such a conversation did occur. 222 His Honour held: The repeated emphasis at the time of these assurances on the role of the Dib Group and the role of Mr George Dib as the speaker and CEO of the Dib Group also support the inference that the defendants were representing that they would ensure that the proposed $100,000 loan would be repaid with interest. 223

These representations related to future matters and the case relied upon s 51A of the TPA. His Honour concluded: The defendants have not established that they did have reasonable grounds for making representations as to the future matters about which Mr George Dib assured Ms Ventouris.

220

221 222

SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 at [77] and O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 at 461–3 [15]–[21]). See McCabe, “Important Lessons on the Approach to Claims of Misleading or Deceptive Conduct that Involve Representations as to Future Matter” (2014) 22 Australian Journal of Competition and Consumer Law 215. Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 (13 September 2010). Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [23].

223

Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [88].

[11.145]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

291

The absence of evidence of reasonable grounds and evidence in this case compels the inference that the defendants engaged in misleading and deceptive conduct. 224

The New South Wales Court of Appeal confirmed that Mr Dib did not have reasonable grounds for making the relevant representations. 225 Section 18 of the ACL, and its predecessor s 52 of the TPA, have been used extensively in the context of representations made to potential investors about the future profitability of a business or investment. 226 Section 18 of the ACL, and its predecessor s 52 of the TPA, have also been used extensively in the context of representations made to potential purchasers about the facilities, uses and amenities that will be available when a property development is completed. 227 Contractual promises ...............................................................................................................................................................................................

Section 2(2)(a) and (b) of the ACL defines engaging in conduct to include “the making of, or giving effect to a provision of, a contract”. As a result, “making” a contract, as well as “refusing” to perform its terms, can amount to engaging in conduct for the purposes of s 18. A contractual promise about an existing matter of fact will contravene s 18 where the facts are not as promised and this misleads someone whom the promisor knew may rely on that promise. In such a case, the promise will convey a misrepresentation to that person and liability will arise for that reason. A promise may also contain an implied representation of existing fact, namely that the promisor has a present intention to make good the promise, or that the promisor has the means to do so. 228 In Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd, Lockhart and Gummow JJ observed: [11.145]

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. 229 224 225

228

Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [94]. Dib Group Pty Ltd v Ventouris Enterprises Pty Ltd (2011) 284 ALR 601; [2011] NSWCA 300 at [41]-[45] (Allsop P, with whom Macfarlan and Handley JJA agreed). ACCC v South East Melbourne Cleaning Pty Ltd (in liq) [2015] FCA 25; ACCC v Halkalia Pty Ltd (No 2) (2012) ATPR ¶42-399; Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199; ACCC v Oceana Commercial Pty Ltd (2004) ATPR (Digest) ¶46-244; Nescor Industries Group Pty Ltd v Miba Pty Ltd (1998) ATPR ¶41-609; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶50-239; Bateman v Slayter (1987) 71 ALR 553; Jelin Pty Ltd v Murdoch Pty Ltd (1985) ATPR ¶40-562; Gardiner v Suttons Motor (Homebush) Pty Ltd (1983) 48 ALR 142; Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114; Thompson v Mastertouch TV Services Pty Ltd (No 2) (1977) 29 FLR 270. Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249; Havyn Pty Ltd v Webster (2005) 220 ALR 211; Bowler v Hilda Pty Ltd (1998) 80 FCR 191; Byers v Dorotea Pty Ltd (1987) ATPR ¶40-760; and Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451. Body Bronze International Pty Ltd v Fehcorp Pty Ltd (2011) 34 VR 536 at [49].

229

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505.

226

227

292

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.150]

This observation was endorsed by French CJ in Campbell v Backoffice Investments Pty Ltd, who stated: There is no reason in principle why the fact that a false statement is contained in a contractual document thereby takes the use of that statement in the document out of the scope of “misleading or deceptive conduct”. 230

Where the promise is about some future matter, assistance may be derived from s 4 of the ACL which is discussed at [11.135]. Where a contractual promise is about some future matter, the mere failure of the promisor to perform the promise will not constitute misleading or deceptive conduct. According to the Full Court in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd this is because: [T]he non-fulfilment of a promise when the time comes for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. 231

However, the promisor must adduce some evidence that tends to establish reasonable grounds for making the contractual promise to discharge the onus on the promisor and eliminate the operation of the deeming provision in s 4(2) of the ACL. In Digi-Tech (Australia) Ltd v Brand, 232 the New South Wales Court of Appeal held that a representation expressed as a belief that projected sales would be achieved or a belief concerning the potential profitability of products did not preclude it from having the character of a representation as to a future matter. 233 Expressions of opinion, law and legal rights ...............................................................................................................................................................................................

The early case law on s 52 of the TPA drew a distinction between expressions of fact and expressions of opinion. Having identified the impugned statement as an opinion, the court then inquired into the mental state of the maker of the statement to determine whether the opinion was honestly held, and also whether it was reasonable for the maker of the statement to hold that opinion. In Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd, the Full Court held that: [11.150]

An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is a basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing. 234 230

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 322 [35].

231

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88. See Miller, Miller’s Australian Competition and Consumer Law Annotated (37 ed, Lawbook Co, Sydney, 2015), [1.S2.18.90]. Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 (Sheller JA, Ipp JA and McColl JA).

232 233

Digi-Tech (Australia) Ltd v Brand (2004) ATPR (Digest) ¶46-248 at 54,241 [114]. See also Sydney Harbour Casino Properties Pty Ltd v Coluzzi (2003) ATPR (Digest) ¶46-238 at [24] (Mason P); Ting v Blanche (1993) 118 ALR 543 at 553 (Hill J); Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 514 (Heerey J) and 520-521 (Sundberg J).

234

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88.

[11.150]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

293

Something must have been misleading at the time the statement was made. An expression of opinion may be misleading if it implies a representation of an existing fact which is false. For example, the expression of an opinion may be accompanied by an implied representation that the speaker holds that opinion. In such cases liability for misleading conduct may well arise should that implied representation be false. 235 Thus, a reasonable reader of an expression of opinion would expect the person expressing the opinion to have a genuine and reasonable basis for making the statements, 236 or that it is based upon appropriate research. For example, in Bateman v Slatyer, 237 the respondents' representations concerning the cash flow of the business being sold to the applicants and their ability to afford it were found to contravene s 52 because no serious attempt had been made to establish a basis for the cash flow projection and the respondents could not have believed that the figures it used were soundly based. Similarly, in Thompson v Ice Creameries of Australia Pty Ltd, 238 a representation as to the suitability of a site for the establishment of an ice cream franchise was found to be misleading because there were no reasonable grounds for this opinion. As the speaker held himself out to be a leader in the industry, the representation conveyed not merely that he believed that the site was suitable but that, based on information available to him there were reasonable grounds for that belief. As there were no such grounds, s 52 was contravened. An incorrect statement of law or a statement about legal rights can constitute misleading conduct, but one needs to be cautious about reaching a conclusion that such a representation has been made. In ASIC v Fortescue Metals Group Ltd [No 5], 239 the issue was whether Fortescue Metals Group Ltd (“FMG”) and its Chief Executive Officer, Mr Forrest, had contravened s 1041H of the Corporations Act, which prohibits misleading conduct by a person in relation to a financial product or a financial service, by announcing to investors and potential investors in FMG shares in emphatic, unequivocal and unqualified terms that FMG had entered into “binding contracts” with Chinese state-owned entities, when, in fact, the contracts were not legally binding. 240 At first instance, Forrest and FMG were successful in the Federal Court, 241 but then they lost an appeal by ASIC to the Full Federal Court, which unanimously upheld the appeal. 242 On 235 236

237 238 239 240

Amadio Pty Ltd v Henderson (1998) 81 FCR 149 at 239 (Macaulay AJA, with whom Harper JA and Hansen JA agreed). Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88; James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J). Bateman v Slatyer (1987) 71 ALR 553. Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 at 40,693 (Lehane J). ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201, 341 [684] (Gilmour J).

241

Forrest v ASIC (2012) 247 CLR 486. See Humphrey and Corones,“Forrest v ASIC: A Perfect Storm” (2014) 88(1) Australian Law Journal 26. ASIC v Fortescue Metals Group Ltd [No 5] (2009) 264 ALR 201.

242

ASIC v Fortescue Metals Group Ltd (2011) 190 FCR 364, at 504 [32].

294

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.155]

a further appeal, the High Court unanimously found that FMG and Forrest had not engaged in misleading or deceptive conduct. 243 French CJ, Gummow, Hayne and Kiefel JJ, in their joint reasons, did not think that the representations conveyed some message about legal enforceability: it is ultimately unprofitable to attempt to classify the statement according to some taxonomy, no matter whether that taxonomy adopts as its relevant classes fact and opinion, fact and law, or some mixture of these classes. It is necessary instead to examine more closely and identify more precisely what it is that the impugned statements conveyed to their audience. 244

Heydon J reached the same conclusion as the majority that FMG's statements were not misleading, but his approach differed from that of the majority. His Honour adopted the fact/opinion distinction. Heydon J considered that the existence of reasonable grounds to support an opinion had come to be expected in the pre-existing case law. Heydon J observed: It is also often said that to state an opinion which one does hold implies that one has reasonable grounds for holding it. In some circumstances that may be so, but why should it be so in all? Assume that two people are asked: “In your opinion, is that document a contract?”, one answers “Yes”, and the other answers “Yes, and I have reasonable grounds for that view”. The two answers are different. The first answer does not imply the second, unless there are special circumstances indicating that it should. 245

Heydon J cast doubt on the existence of a requirement that there be any grounds or reasonable grounds for an opinion: As noted above, the case which originated the fact/opinion distinction in this field offered no support for the requirement that there be grounds, let alone reasonable grounds, for an opinion if it were not to be misleading. … The matter calls for examination on some future occasion. 246

In some cases the conduct at issue may involve a combination of representations as to present fact, future matters and opinion. Where a business makes false or misleading claims about the past performance characteristics of its product, and predicted rates of future success in a comparative advertising campaign, it will be required to adduce evidence of reasonable grounds if the operation of s 4(2) of the ACL is to be avoided. 247 Information asymmetry ...............................................................................................................................................................................................

In cases involving information asymmetry, or where representors hold themselves out as having specialist knowledge or expertise, the court may find that a [11.155]

243 244

Forrest v ASIC (2012) 247 CLR 486. Forrest v ASIC (2012) 247 CLR 486 at 505 [33].

245 246

Forrest v ASIC (2012) 247 CLR 486 at 525 [102] (citations omitted). Forrest v ASIC (2012) 247 CLR 486 at 525 [103], citing Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88 (Bowen CJ, Lockhart and Fitzgerald JJ).

247

IDP Education Ltd v Lejburg Pty Ltd [2015] VSC 650 at [67] (Judd J).

[11.155]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

295

reasonable member of the target audience may conclude that the representation conveyed not merely that the maker believed the claim, but also that there were reasonable grounds for that belief, or, in the case of scientific or medical claims, that there was an adequate scientific or medical basis for the claim. If there is no adequate basis to substantiate the claim it will be found to be misleading. In ACCC v Safe Breast Imaging Pty Ltd, 248 the respondent conducted a breast imaging business using a device known as a multi-frequency electrical impedance mammograph (MEM device). The respondent made a number of representations, including a representation that the MEM device could be used for assessing whether a customer was at risk from breast cancer and the level of that risk (the risk of cancer representation), and that imaging with the MEM device was a substitute for a breast cancer screening mammogram, such as ultrasound and magnetic resonance imaging (the substitute for mammography representation). Barker J found that the risk of cancer representation in the promotional materials “conveyed the representation that the MEM device could provide an adequate scientific basis for assessing whether a customer was at risk from breast cancer and if so, the level of such risk”. 249 Similarly, in ACCC v Breast Check Pty Ltd, 250 Breast Check published promotional pamphlets stating that its thermography devices for conducting breast imaging could be used for assessing whether a customer was at risk from breast cancer and the level of that risk. The ACCC also alleged that Breast Check's claim contained representation that there was an adequate scientific basis for using the thermography devices as a substitute for mammography. It was held that Breast Check had contravened s 53(c) of the TPA and s 29(1)(g) of the ACL. Barker J found: In the context of a representation of a medical nature …it would be entirely reasonable for a consumer to conclude that, where a service of a medical nature is being provided, there would be scientific medical evidence of a sufficient quality to support the use of the equipment used to provide such a service and that the use of breast imaging devices would not be promoted in a way as to be contrary to the state of scientific medical knowledge. 251

What constitutes an “adequate” basis was considered by Barker J stated: As to the question of the representation conveying that there is an adequate scientific or medical basis, I accept the submission made on behalf of ACCC that the word “adequate” should be taken in the sense by which it is generally understood. In the medical context that is that the service is provided according to evidence based medical knowledge and that there is sufficient support in medical science for the use of the

248 249 250

ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 (Barker J). ACCC v Safe Breast Imaging Pty Ltd (2014) ATPR ¶42-464 at [68]. ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479.

251

ACCC v Breast Check Pty Ltd (2014) ATPR ¶42-479 at [141].

296

COMMERCIAL AND PERSONAL PROPERTY LAW: SELECTED ISSUES

[11.160]

devices for the purposes represented. This is particularly so in the context of assessing whether or not a person may have or be at risk of breast cancer, which is clearly a question of medical science. 252

Finally, in ACCC v Homeopathy Plus! Australia Pty Ltd, 253 the respondent made representations on its website to the effect that there was a reasonable basis, in the sense of an adequate foundation, to enable it to state that its homeopathic treatments were a safe and effective alternative treatment to the whooping cough vaccine. It was found to have contravened s 18 and s 29(1)(a) of the ACL by representing that its homeopathic treatments were of a particular standard or quality, and s 29(1)(g) of the ACL by representing that its homeopathic treatments had a use or benefit. The court found that there was no reasonable basis, in the sense of an adequate foundation, in medical science to make such a representation. Perry J stated: In line with the lack of published evidence supporting the asserted effectiveness of homeopathic treatments for whooping cough, the consensus based on medical science is that homeopathic treatments are not an effective alternative to the whooping cough vaccine for the prevention of whooping cough. 254

In summary, the “real question” in a misleading conduct case is not the “mental state” of the maker of the statement, but the effect of a statement upon its audience – whether the statement is apt to mislead those to whom it is published. This in turn will depend on the knowledge base attributed to a reasonable member of the target audience. However, if the opinion concerns a future matter, the speaker must adduce some evidence that tends to establish reasonable grounds for holding it, in order to eliminate the operation of the deeming provision in s 4(2) of the ACL. Exclusion clauses ...............................................................................................................................................................................................

An exclusion exclude or exempt one occurred. Such a clause misleading conduct and [11.160]

252

clause refers to a provision of a contract which purports to party from liability for misleading conduct that has already will not normally break the nexus between pre-contractual the loss or damage suffered as a result of entering into the

253

ACCC v Breast Check Pty Ltd (2014) ATPR 42-479 at [139]. There is a line of authority that supports this approach. See Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88 (Bowen CJ, Lockhart and Fitzgerald JJ); James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372 (Toohey J); Wright v Wheeler Grace & Pierucci Pty Ltd (1988) ATPR ¶40-865 at 49,375-6 (French J); affirmed in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Bateman v Slayter (1987) 71 ALR 553 at 559 (Burchett J); and Thompson v Ice Creameries of Australia Pty Ltd (1998) ATPR ¶41-611 at 40,693 (Lehane J). Cf Forrest v ASIC (2012) 247 CLR 486 at 525 [103] (Heydon J). ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412.

254

ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412 at [264].

[11.165]

CHAPTER

11

MISLEADING OR DECEPTIVE CONDUCT

297

contract. For many years the courts have consistently recognised that as a matter of public policy, an exclusion clause should not be allowed to defeat the operation of s 18 of the ACL. 255 However, it may be possible to avoid liability of misleading conduct by means of a declaration of non-reliance. Where one party expressly acknowledges in writing that it has not relied on a representation that was misleading in deciding to enter into a transaction, the courts will take this into account in deciding the question of causation in relation to the cause of action for damages under s 236 of the ACL. 256 The issue is considered at [12.75].

Part III: Did the respondent’s conduct cause the alleged error or misconception? There must be a causal connection between the respondent's conduct and the applicant's alleged error or misconception. 257 In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd 258, Stephen J held that in order to determine whether there had been a contravention of s 52 of the TPA it was necessary to inquire whether there is a sufficient nexus between the conduct at issue, which may include refraining from doing an act, and the error that was alleged to have arisen. This was approved by a unanimous High Court in Campomar Sociedad Limitada v Nike International Ltd. 259 The respondent's conduct must cause or materially contribute to the applicant's misapprehension applying, inter alia, the “but for” test of factual causation. 260 The issue of whether the conduct caused or contributed to error suffered by the applicant is separate and anterior to the issue of whether the misleading conduct caused the claime