Commercial Law Association lunchtime series 

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Introduction

I begin this afternoon by acknowledging the Gadigal people of the Eora nation, the traditional custodians of the land on which we meet in Sydney today, and pay my respects to their elders past, present and emerging.

I propose to discuss the role of context in determining whether conduct is misleading and deceptive or likely to mislead or deceive in contravention of what is now provided in s 18(1) of the Australian Consumer Law in Sch 2 of the misleadingly renamed Competition and Consumer Act 2010 (Cth) (ACL).

This 2023 lunchtime seminar marks the 10^thanniversary of the Commercial Law Association’s June judges’ series of such seminars. Having attended many of its events over many years as a member of the Association at the bar and now as a judge, I can say that the Association plays an important role in professional education and in connecting practitioners, academics and the courts in this important field of law. Educative experiences such as these involving the judiciary, legal profession and the wider public are important for both the legal and commercial communities. They provide legal and professional education through shared observations of recent developments in case law, academic literature and legislation. In her 2021 report concerning judicial education, Professor Gabrielle Appleby, writing for the Australasian Institute of Judicial Administration, observed that such engagements improve “public confidence in the administration of justice and a judiciary that is transparently dedicated to improving the knowledge, skills and other attributes of its members”.[2]

The prohibition

As is necessary whenever one engages with legislation, one must always begin with the words of the statute itself. Although we all (hopefully) know the principal prohibition, it bears repeating (to provide some helpful context of my speech) that s 18(1) provides that:

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

It is 49 years since the Parliament enacted s 52(1) of the Trade Practices Act 1974 (Cth) now substantially re-enacted in s 18(1) of the ACL and, for no apparent intelligible purpose, repeated in at least each of ss 670A, 728 and 1041H(1) of the Corporations Act 2001 (Cth) and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth). I described this legislative overkill in Wingecarribee Shire Council v Lehman Brothers Australia Ltd:[3]

 

Of course, each Act has a myriad of complex definitions of what is a financial product or a financial service or are financial services. Each Act gives a person, who suffers loss or damage by conduct of another in contravention of the prohibition, the right to compensation (e.g. s 1041I(1), s 12GF) coupled with substantively identical related exceptions and qualifications concerning proportionate liability. Since the end result of this legislative morass seems to be the same, it is difficult to discern why the public, their lawyers (if they can afford them) and the Courts must waste their time turning up and construing which of these statutes applies to the particular circumstance. Here, should it make any difference whether Grange was alleged to have engaged in conduct in relation to “financial services” (s 12DA(1)) or “a financial product or a financial service” (s 1041H(1))? Why is there a difference? Why does a court have to waste its time wading through this legislative porridge to work out which one or ones of these provisions apply even though it is likely that the end result will be the same? As Edmund Davies LJ lamented in The “Putbus”[4]:

“Were bewilderment the legitimate aim of statutes, the Merchant Shipping (Liability of Shipowners and Others) Act, 1958, would clearly be entitled to a high award. Indeed, the deep gloom which its tortuousities induced in me has been lifted only by the happy discovery that my attempt to construe them has led me to the same conclusion as my brethren.”

The words of s 52(1) of the Trade Practices Act and s 18(1) have been subject to a great deal of judicial consideration, extra-curial observation and academic commentary across its long history.

The current edition of Miller’s Australian Competition and Consumer Law Annotated summarises the significance that the provision’s 23 words have come to represent quite well:[5]

When this section was introduced in 1974, as TPA s 52, it was described as a “new exocet” because of its potential to reshape our approach to commercial dealings and to dispatch the “buyer beware” philosophy.

The legislative purpose of s 52(1) when enacted was to protect consumers from unfair trade practices. This was an important reform. It has afforded remedies to many by providing relief from the consequences of transactions that should not have occurred either at all or on contractual terms that would otherwise have bound the party who had been misled or deceived into agreeing to the original deal. 

In Campomar Sociedad, Limitada v Nike International Ltd,[6] Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ described s 52 and its analogues as “a statutory norm of conduct”. Over the years since its introduction, this norm of conduct has permeated trade and commerce involving not just individuals who are consumers in their dealings with larger businesses but also trade competitors and business people with each other in dealing with commercial transactions. 

Like the curate’s egg, the reform created by the enactment of s 52 may be thought good in part. It has had some impacts on commercial life that some may regard as unnecessary in situations where all concerned are persons of equal bargaining power and competence. This is particularly so in international trade and commerce. 

In a recent judgment about a local transaction (which is subject to a pending appeal),[7] I began by saying:

Samuel Goldwyn, the Hollywood movie mogul, is credited with saying that “a verbal contract isn’t worth the paper it’s written on”. This case seeks to test that aphorism. A common experience of negotiations is that an individual on one side believes that he or she has agreed to a deal with the other side that is not reflected in any documentation of the transaction. How that mistaken perception occurs may give rise to a legal, equitable or statutory remedy for the apparently mistaken side. The position becomes more complicated when those involved in the negotiations are in a non-fiduciary, but nonetheless pre-existing, close or trusting business relationship, as in this proceeding.

Almost every contract case in the courts now, and for some decades past, avoids the operation of the common law parol evidence rule and introduces many variations on the theme of how one or both sides come to have been allegedly misled or deceived into contracting with one another. With the proliferation of digital communications and the records that they create, litigation in this century has to deal with volumes of material that dwarf the impacts of the innovation that arrived shortly before s 52’s enactment, namely the photocopier. We now have emails, WhatsApp, YouTube and SMS records to name but a few of the storage media. In today’s setting, an entire agreement clause in a contract, for which Australian law is its proper or governing law, offers its parties little comfort that the contract will be the sole, or even principal, basis for regulating a dispute that arises in the relationship. 

Commercial parties need certainty. At least before entry into a contract, each party wants the certainty reflected in their agreement’s wording. This is to ensure that he, she or it knows that their negotiated agreed allocations of responsibility and risk, in fact, will govern their relationship. The prospect of a later different allocation because of a factor that the parties had agreed would be excluded from, or not relevant to, their performance can lead to complex and lengthy litigation and increased costs. Moreover, in the case, particularly but not exclusively, of a foreign potential contracting party, there is likely to be an unwillingness to engage in commercial dealings here that might attract future litigation in which the solemnly agreed responsibilities and risks are subsequently rearranged by reason of actual or alleged pre-contractual misleading or deceptive conduct, falling short of a misrepresentation that would be actionable at common law or in equity.

The existence of s 52 and its analogues has proved to be a bane to using Australia as a forum in international commercial disputes. That is because of the provision’s capacity to circumvent the agreed outcomes of hard fought negotiations, with the assistance of competent legal advisors on both sides, contained in a well drafted contract that includes an entire agreement clause.

You may recall the incident when an engine on a Qantas A380 Airbus exploded soon after leaving Singapore on 4 November 2010.[8] Rolls-Royce manufactured the engine. Qantas and Rolls-Royce, using top tier English and Australian law firms, negotiated the multi-million dollar purchase contracts for the engines. The engines were for its then new fleet of A380 aircraft. The contract had an entire agreement clause, together with English law and exclusive jurisdiction clauses. Qantas commenced proceedings in the Federal Court alleging that Rolls-Royce had made representations about the engines that contravened s 52. In effect, Qantas alleged that the pre-contractual representations conveyed that the engines would be good for about 2000 take-offs and landings at full power on the short runway at Los Angeles. However, it alleged in the proceeding that investigations after the explosion revealed that they may have only been able to be used for less than 100 take-offs and landings, which, of course, would have made them relatively much more expensive. But, there were no contractual warranties about that topic on which Qantas could sue and the alleged representation as to the quality of the engines, of course, were not reflected in the freely negotiated contractual terms. There, the representations that Qantas alleged had induced it to enter into the contract were negated by the entire agreement clause. That clause was enforceable under English law to negate the operation of s 52. Hence, there was no point in Qantas suing Rolls-Royce in London. Rolls-Royce never appeared in the proceeding, so that it was not subject to the Federal Court’s jurisdiction, although the parties later reached a negotiated settlement.

This was an example of what often happens in claims under s 52 and its analogues, namely the claimant seeks to achieve an outcome using the statutory remedies for which it did not seek or obtain a contractual promise of performance.

What is conduct that is misleading or deceptive?

How the norm of conduct in s 18(1) and its analogues operates raises a beguilingly simple question: what is conduct that is misleading or deceptive or likely to mislead or deceive? Uninstructed by authority, at first blush, one could be forgiven for turning to dictionary definitions that suggest notions of trickery, lies and moral turpitude. But, from early in its history, s 52(1) came to have a sweepingly broader reach. 

The High Court decided in 1978 that it was not necessary that to contravene s 52(1) a person intended to engage in conduct that was misleading or deceptive. It sufficed that, viewed objectively, the conduct complained of satisfied the statutory criterion that the section proscribed. In Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd,[9] Stephen J explained that s 52(1) was:

concerned with consequences as giving to particular conduct a particular colour. If the consequence is deception, that suffices to make the conduct deceptive … The section should be understood as meaning precisely what it says and as involving no questions of intent upon the part of the [person] whose conduct is in question.

However, as Mason J explained in The Queen v Credit Tribunal; Ex parte General Motors Acceptance Corporation,[10] the statutory norm of conduct is not directed against conduct that a law requires or compels the person engaging in it to do. He said that the proscription was against “a form of conduct, a trade practice, which is unfair”.

Of course, because the conduct to which s 18(1) and its analogues applies is evaluated objectively, the law must assess an alleged contravention in the context in which it occurred, by having regard to all relevant circumstances and whether, in that context, it reasonably can be characterised as misleading or deceptive or likely to be so. Early on, Gibbs CJ explained in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd[11]that, despite the clarity and unambiguity of the words of s 52, “they are productive of considerable difficulty when it becomes necessary to apply them to the facts of particular cases”. His Honour held that s 52(1) was enforceable not just by consumers but also by trade competitors. The Chief Justice said that, given its broad ambit, the section should not be construed beneficially, but rather only in accordance with its natural and ordinary meaning.[12] The words “likely to mislead or deceive”, at most, make it clear that it is unnecessary to prove that the conduct in question, in fact, misled or deceived anyone. In addition, the Chief Justice identified an important consideration in the context of evaluating the capacity and effect of conduct to contravene the norm set in s 52(1) and its analogues, saying:[13]

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 be 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. What is reasonable will [of] course depend on all the circumstances….

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.

(emphasis added) 

In Puxu,[14] Mason J made clear that conduct will not contravene s 52(1) merely because members of the public are caused to wonder whether, for example, two products came from the same source or manufacturer. Like Gibbs CJ, Mason J concluded that, where the conduct complained of involved whether an alleged representation about the provenance of an expensive and aesthetically attractive piece of furniture would contravene s 52(1), the context required the court to factor in that a potential purchaser of such an item must reasonably be expected to look for and find a label or make an enquiry of a salesperson to ensure that his or her impression was accurate.[15] Of course, less care and attention may be required by a purchaser of a good or service that is less financially or aesthetically significant, such as in the case of what marketing experts call “impulse purchases” of goods in supermarkets for everyday items. Perhaps this is a scenario contemplated by Mark Twain when he said: “Be careful when reading health books; you may die of a misprint”.

What at first blush may seem a relatively straightforward issue often will reveal itself to lawyers as an onion layered problem. Gleeson CJ was confronted with a family provision claim in Green v Green when he said of a non-statutory situation that some may think involved misleading or deceptive conduct:[16]

The deceased appears to have maintained simultaneous domestic establish­ments with all three women and their respective children. In terms of division of his time he appears to have given preference to Margaret Green, but it seems that he spent two nights a week, regularly, with the respondent and, at least according to her evidence, gave what she regarded as a plausible explanation of his absences. Presumably, over a number of years, he managed to achieve the same result with the other women. This is consistent with his apparent success as a used car salesman.

What then of a car salesman who says that the car he or she is selling is “new”? Most people would say that we all know what a ‘new’ car is, but not a lawyer steeped in s 52 lore. In Annand & Thompson Pty Ltd v Trade Practices Commission,[17] Franki, Northrop and Fisher JJ each considered whether a car dealer had contravened s 52(1). There, in 1977, a car dealer had sold two Jeeps as “new”. However, the Jeeps had been manufactured in early 1975, and so, at the time of the sales, they were two years old. Each Jeep was a current model as at the time of sale,[18] but was it ‘new’? The Commission alleged that the car dealer had contravened s 52 by causing the purchasers to believe that the Jeeps were “new”, in the sense that they were of recent origin.[19] 

Franki J[20] with whom Fisher J agreed[21] said that there were at least five possible meanings of ‘new’ when describing a car, namely that it had not previously been sold by retail (ie: was not second hand), it was a current and not superseded model, it had not suffered deterioration or been used to any significant extent, it was of recent origin or it had suffered either a measure of damage that had been quite effectively repaired or any damaged part had been replaced and was otherwise new in every respect. Northrop J set out his own list of meanings that included a common usage that the vehicle was not second-hand or used, and not a demonstrator model.[22] Both substantive judgments referred to the obiter dicta of Kitto, Taylor and Owen JJ in John McGrath Motors (Canberra) Pty Ltd v Applebee[23] that, there (in the context of a claim of fraudulent misrepresentation) both parties had understood a “new car” to mean one that was not second-hand.[24] In the event, the Court held that it was not misleading or deceptive to call the Jeeps “new” because they were current models, not used cars or demonstrators.[25]

In Campomar,[26] Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ discussed the principles applicable to whether conduct directed to a class of persons can found a contravention of analogues of ss 18(1) and 236(1) of the ACL. Their Honours held that, first, a contravention of the norm of conduct now found in s 18(1) of the ACL, of itself, does not give rise to any liability. Rather, other provisions of the legislation, such as s 236(1), provide for the consequences of a contravention of ss 18(1) and 29(1) of the ACL.[27]Secondly, in considering whether the public or a class of persons to whom a representation is made would be or would be likely to be misled or deceived by conduct, such as the making of a representation, in contravention of s 18(1), the court is concerned to assess the effect of the conduct complained of on reasonable members of the class, that is, persons who take reasonable care of their own interests.[28]

Over the succeeding years since, the courts have built their understanding of how s 52(1) and its analogues operate on the foundations of the above cases. Thus, I think it can safely be said that the test that Franki J had identified in Annand & Thompson[29] has fallen by the wayside, at least since cases such as Campomar.[30] Subsequently, Wilcox and Heerey JJ applied Franki J’s test in Siddons Pty Ltd v The Stanley Works Pty Ltd,[31] namely that the effect of a representation on a member of a class of person to whom it was made must be to mislead or deceive “a person, not particularly intelligent or well-informed, but perhaps of somewhat less than average intelligence and background knowledge, although the test is not the effect on a person who is, for example, unusually stupid”. Such a characterisation of the public or members of a class may have fallen into the same category as the test that Foster J used in discussing a claim for passing off, namely “only a moron in a hurry would be misled”.[32] However, as the High Court has made clear, where a representation is made to a class allegedly in contravention of s 18(1) of the Act, the law now requires the court to identify whether the conduct complained of would have led an ordinary reasonable member of that class into error.[33]

In Australian Competition and Consumer Commission v TPG Internet Pty Ltd,[34] French CJ, Crennan, Bell and Keane JJ held that s 18(1) of the ACL and its analogues did not impose an obligation on a person to volunteer information so as to avoid the consequence if another person of equal bargaining power and competence carelessly or unreasonably disregarded his, her or its own interests. Their Honours specified that conduct is misleading or deceptive or likely to mislead or deceive the public at large or persons of equal bargaining power and competence “if it has a tendency to lead into error”. They explained that there must be a causal link between the impugned conduct and any error that had an effect on persons exposed to it who had taken reasonable care of their own interests.[35]

There, French CJ, Crennan, Bell and Keane JJ discussed how to evaluate whether a television commercial contravened s 18(1) of the ACL.[36] They said that such an advertisement was “an unbidden intrusion on the consciousness of the target audience” and that many within that audience would only absorb its general thrust, as opposed to paying close attention to its detail. In the context of watching a program, an ordinary and reasonable viewer may well only pay perfunctory attention to the advertisement. However, their Honours held that such perfunctory attention did not equate to the viewer failing to take reasonable care of his or her own interests.[37] Thus, where the tendency of the advertisement’s general thrust was to engender an erroneous belief, and so bring the viewer into a negotiation with the advertiser, rather than with its competitors, its misleading effect was to entice the viewer into “the marketing web”. That misleading effect contravened s 18(1) even though the viewer’s subsequent negotiations with the advertiser for a contract may have dispelled the erroneous impression created by the advertisement.[38] 

Moreover, their Honours held that, where one communication conveys two or more representations, it is wrong to analyse the separate effect of each representation. What matters in such cases is the “dominant message” or “general thrust” that the advertiser’s chosen mode of communication would have on the audience to whom, in the circumstances, it is published or conveyed.[39]

Context affects whether and to what extent conduct may contravene s 18(1). The process to evaluate whether a television advertisement has a tendency to lead its viewers into error is not necessarily the same as that for evaluating whether a defamatory meaning or misleading or deceptive representation is carried to the same audience by the program they watch and in which the advertisement appears. In the law of defamation, an ordinary reasonable viewer will watch the program as a whole before he or she considers what meanings or imputations it conveyed. Again, in all these situations, context may be significant. As I explained, with the agreement of Katzmann and O’Callaghan JJ, in V’landys v Australian Broadcasting Commission:[40]

81 The ordinary reasonable reader, listener or viewer is a person whose understanding of what the matter complained of in a defamation action conveys necessarily must be representative of the class of ordinary reasonable members of the community who read, listened or viewed the publication. Different classes of readers, listeners or viewers will have different appreciations of what a publication is saying. Thus, the readers of a technical scientific journal that allegedly conveys a defamatory meaning, and those readers’ characteristics or approach, are not likely to be the same as those of ordinary reasonable persons who read a tabloid newspaper or a weekly gossip magazine.

82 Likewise, the characteristics and approach of the viewing audience for a serious daily current affairs program broadcast after 7pm such as 7:30 are likely to be different to those of an audience for a program dealing with random dance partners of celebrities, or people for whom the audience votes as to whether they should get married or leave a shared house, to which the viewers have devoted their attention by watching over numerous episodes. In the former case the viewer is seeking to be informed about what may be significant issues of the day, whereas in the latter he or she is seeking to be entertained by the on screen antics of the performers or those who wish to display some aspect of their personalities to the watching audiences.

83 Depending on the nature of the program that the viewer has selected to watch, his or her focus may be to learn from what is broadcast or to be informed, amused, distracted or entertained by it. It is a feature of everyday life that people change their approach to absorbing or comprehending communications that they read, hear or see depending on the context of the publication and the person’s purpose in reading, listening to or viewing it. A person may be expected to read a tabloid newspaper with a different degree of care and attention to how he or she would read a scientific or learned paper, an important business document or an email or letter from a friend or relative.

84 But in every case where the question is whether a video or television publication conveys a defamatory imputation, the hypothetical viewer is an ordinary reasonable member of the type of audience who watches a program of the kind in issue in the way in which such a person ordinarily does. This required his Honour to take into account, in assessing how the viewer would understand the report and whether it conveyed the imputations, the degree to which such a program’s viewers had a proneness to loose thinking.

(bold emphasis added)

In order to evaluate whether the effect of particular conduct is to lead a person or class of persons into error, one must understand the factual scenario facing the person or class: that is, it is necessary to put the conduct complained of into its context, namely the whole of the circumstances.

Returning to the role of context, where individuals complain of another’s conduct being misleading or deceptive or likely to mislead or deceive, Gleeson CJ, Hayne and Heydon JJ reemphasised in Butcher v Lachlan Elder Realty Pty Ltd that it is necessary to consider all of the circumstances.[41] They said that this required consideration of the particular conduct complained of, while bearing in mind what matters of fact each side knew about the other as a result of their dealings and conversations with each other or what each may be taken to have known. 

In that case, the issue was whether a sales brochure produced by a real estate agent contravened s 52(1) by making a representation as to the location of the mean high water mark of a waterfront property. The brochure partially reproduced a survey report that was also annexed to the draft contract for sale of the land. The agent had included a disclaimer in the brochure that expressly stated that the agent could not guarantee the accuracy of the information in it and advised interested persons to rely on their own inquiries. Mr and Mrs Butcher made the winning bid at the auction for the property, saying that they had relied on the representation in the brochure, which, as events later revealed, incorrectly depicted the location of the mean high water mark. This raised the defence that two decades earlier Mason ACJ, Wilson, Deane and Dawson JJ had identified in Yorke v Lucas.[42] They held that a person did not necessarily engage in conduct that contravened s 52(1) merely because the person passed on misleading information obviously supplied by another but without endorsing its correctness or accuracy.[43]

In Butcher,[44] Gleeson CJ, Hayne and Heydon JJ held that when evaluating the agent’s conduct as a whole, it was wrong to analyse that conduct divorced from the disclaimer and other circumstances that might qualify the character of the particular conduct. They said:

It is also important to remember that the relevant question must not be reduced to a crude inquiry: ‘Did the agent realise the purchasers were relying on the diagram?’ To do so would be impermissibly to dilute the strict liability which s 52 imposes.

However, the mere fact that a publication that conveys a misleading representation also includes a disclaimer or qualification will not necessarily negate the overall effect of that representation. In Australian Competition and Consumer Commission v Valve Corp (No 3),[45] Edelman J discussed seven propositions that reflected his Honour’s distillation of legal principles concerning the court’s approach to s 18(1). Before stating the following about the role of context, as his second proposition, Edelman J applied[46] what Keane JA had said in an appeal,[47] namely that a qualification must have “the effect of erasing whatever is misleading in the conduct”. Edelman J went on:[48]

Secondly, and flowing from the need to examine the alleged conduct in the light of the relevant surrounding facts and circumstances, the question of whether the effect of the conduct complained of answers the statutory description is one of fact to be answered in the context of the evidence. Conduct must be characterised by considering what was said and done against the background of all surrounding circumstances. The relevant context in which the conduct must be considered encompasses both:

(a) internal context such as surrounding words including the context which some words give to others; and

(b) external context such as the type of market, the manner in which such goods are sold, and the habits and characteristics of reasonable purchasers in such a market.[49]

(emphasis ad ded) 

The identification of the internal and external contexts in which conduct occurs may aid in the analysis of the ultimate question, namely whether, having regard to all of the circumstances, was the conduct complained of misleading or deceptive or likely to mislead or deceive the individual or class concerned?

Consideration of the internal context will involve identifying and analysing the vehicle conveying the conduct alleged in order to ascertain what, taken by itself, it may have evinced. Human communication does not always depend on verbal expression of an idea, concept or emotion. Sometimes conduct can comprise silence or a gesture. We are all accustomed to using non-verbal cues to communicate thoughts — a raised eyebrow, a nod or shaking of the head, and an expression of disdain or delight, can paint a picture, like an artist, worth a thousand words. And, irony, rhetoric and other verbal techniques can change the literal meaning of words radically. After listening to Marc Antony’s “Friends, Romans, countrymen” speech in Shakespeare’s play, Julius Caesar, few members of the audience would be left with the impression that he was extolling Brutus and the other assassins of Caesar as “honourable men”, despite his constant references to them being of that character.

Humour can convey mordant thought too, as one illustration in a book review in the old satirical magazine, Punch, published at the turn of the 20^th century demonstrated. There, a Mr FM Thomas was the long term private secretary turned biographer of a deceased Fleet Street mogul. Mr Thomas wound up as plaintiff in a defamation action over a review of his book in Punch that began:[50]

MANGLED REMAINS.

“Extract from the Recess Diary of Toby, M.P.

“Been reading ‘Fifty Years of Fleet Street’ just issued by Macmillan. Purports to be the ‘Life and Recollections of Sir John Robinson,’ the man who made, and for a quarter of a century maintained at high level, the Daily News. The story is written by Mr. F. M. Thomas, who has added a new terror to death.

Knowing the context can show how a message gets across.

Similarly, using Edelman J’s category of external context can also provide an important frame of analysis. Just as in the law of contract, the external context provides an objective perspective that can inform an overall understanding of what meaning a communication or conduct conveys. As we know, the principle of objectivity is used to determine the rights and liabilities of parties to a contract.[51] That requires the court to decide, from the perspective of a reasonable person in the position of the parties, what the words in which they chose to express their agreement meant in the context of the mutually known facts and surrounding circumstances together with the purpose and object of the transaction.

To some extent, this method of analysis will aid also in the evaluation of the external context of conduct that is alleged to contravene s 18(1). However, there is a crucial difference between the contractual principle of objectivity and the operation of the statutory norm, because the latter does not exclude the subjective state of mind of the claimant in a proceeding where that person asserts that the other party to the contract, or the maker of a representation, engaged in conduct that was misleading or deceptive or likely to mislead or deceive. In such a situation, the surrounding circumstances and facts mutually known to both parties, the object and purpose of the contract or other interactions will still be relevant to the evaluation of whether the impugned conduct had the character of contravening s 18(1), but those factors may not displace the effect of the conduct in causing (in the sense of being a cause) the formation of the claimant’s erroneous state of mind or understanding.

Today, we live in a world in which not just politicians castigate another’s description of an event as “alternative facts” to imply that, however objectively implausible the speaker’s version of the event is, the other is lying or operating in some parallel universe. Truth in public discourse is no longer, or not necessarily, what ordinary reasonable people expect to hear. Thus, we are told that about 70% of all registered Republican Party voters in the United States of America believe that Donald Trump won the 2020 Presidential election despite the overwhelming evidence to the contrary. Many of those persons, like millions of Germans before World War II, are intelligent, ordinarily rational, sensible members of the community. Yet, once a big lie takes hold of the public mood, it can become orthodoxy. Abraham Lincoln, an earlier and wholly different Republican Party President, once famously observed that “You can fool some of the people some of the time, and some of the people all of the time, and all of the people some of the time, but you can’t fool all of the people all of the time”.

In a context where all, or at least some, of the people are being fooled at a particular point in time, what conduct could be characterised as misleading or deceptive? A person presenting an objective, soundly based perspective may be dismissed, readily, by the retort that he or she is speaking “alternative facts”. Are those already wedded to the dystopian view misled or deceived by someone peddling the same view when, as we can see in the United States, no amount of objective evidence would penetrate the blocked politically partisan ears of each major party? This exposes a trait of human behaviour which Hans Christian Anderson’s fairy tale The Emperor’s New Clothes While the Emperor persisted in espousing the swindling (non) clothes makers’ delusion that he was wearing their magnificent creations, no one could or would do what, eventually, the little child did during the parade — call out the truth.

Hamlet told Rozencrantz and Gildenstern “there is nothing either good or bad, but thinking makes it so” to justify his description to them of Denmark — namely “To me it is a prison”.[52] But, as we know, what we think is not necessarily the same as cold hard fact.

I suspect that sooner or later courts may have to grapple with considering what standard applies to determine whether something is misleading or deceptive within an echo chamber filled with “alternative facts” such as now is a feature of the digital world. We now live in circumstances in which groups, like the current majority of Republican Party voters, self-reinforce their beliefs regardless of their connection to the objective world. The phenomenon that is now pervading our relationships is that people online see and respond to life through the binary choices of zero or one, like or not like, that social media presents to its users. The presentation of those choices also draws the social media user into engaging with such virtual (in both senses) contentless communication vortexes in order to maintain our social connections with other human users. Human problems usually are not solved without thought and communication of ideas and issues before making a decision on a course of action. Not so in most interactions in the digital world that the majority of our society now frequents.

The norm of conduct that s 18(1) and its analogues imposes can only provide a foil to such societal “group thinking” or binary speak so long as the public values and respects, among other core values, the courts as institutions of government that can and do act reasonably, on objective material and in accordance with law as enacted by a democratically elected and accountable legislature.

Representation as to future matters

There is one further complication to the reach of s 18(1). That is its application in the frequent situation where there is a representation with respect to any future matter (a future representation). If a person makes a future representation, including the doing or refusing to do any act, and he, she or it does not have reasonable grounds for making it, s 4(1) deems the representation to be misleading for the purposes of the ACL. Next, s 4(2) deems that the representor did not have reasonable grounds for making the future representation “unless evidence is adduced to the contrary”.

The practical effect of s 4(2) of the ACL and its analogues (such as s 51A(2) of the Trade Practices Act) is to impose an evidential burden on the representor to adduce some evidence on the issue of whether there were reasonable grounds for making the future representation. Sometimes, the claimant does so in any event. However, as Mansfield, Greenwood and Barker JJ held in North East Equity Pty Ltd v Proud Nominees Pty Ltd,[53] the deeming in s 4(2) does not cast a persuasive burden of proof on the representor. Once there is some evidence to contradict the deemed lack of reasonable grounds, then the claimant must prove, as a fact, that the representor did not have reasonable grounds for making the future representation. They held that the knowledge, understanding or reasoning of the representor at the time of making the future representation would be “particularly illuminating” on this question.

However, Mansfield, Greenwood and Barker JJ held that even if the future representation were proved to be true, the representor still had to adduce some evidence under the analogue of s 4(2) of the ACL in order to escape its deeming of the now proved true representation to be false.[54] Their Honours observed that where the future representation also constituted a contractual term, it did not matter, if there were no evidence to the contrary of the deemed absence of reasonable grounds in s 4(2), for the purpose of negating that deeming, that the Court found that there was no breach of contract. 

In Australian Competition and Consumer Commission v Dateline Imports Pty Ltd, Gilmour, McKerracher and Gleeson JJ reemphasised that, at the time of making a future representation, the representor must have had facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation regardless of whether or not it were true.[55] They said:[56]

101 It matters not that it transpires, in due course, that the fact represented is true. That may simply be serendipitous. The representation, “I have reasonable grounds” for making the representation of fact is a discrete representation, indeed one which is likely to reinforce in the representee the reliability of the representation of fact.”

102 Moreover the reasonable grounds representation is also one of fact. It is not directed to grounds which may become known but are not then known. Consumers should be protected against such conduct where, in fact, objectively assessed, there were no reasonable grounds known to the representor.

(bold emphasis added)

Nonetheless, despite truth being no defence in such a situation, it is difficult to understand how anyone could claim compensation under s 236 of the ACL or any cognisable loss or damage from being told something that was true, even if the accuracy of that future representation were serendipitous because the representor did not then have reasonable grounds for making it, especially if it was also a promise to the same effect in a contract that was fulfilled.

I recently pointed out this apparently anomalous outcome for a representor of an accurate future representation in Abbott v Zoetis Australia Pty Ltd,[57] comparing the position of such a representor with that of King Lear’s fool:[58]

 

I marvel what kin thou and thy daughters are.
They’ll have me whipped for speaking true, thou’lt
have me whipped for lying, and sometimes I am
whipped for holding my peace. I had rather be any
kind o’ thing than a Fool. And yet I would not be
thee, nuncle. Thou hast pared thy wit o’ both sides
and left nothing i’ th’ middle.

On the brighter side, sometimes a statement that is demonstrably false will not contravene s 18(1). If like, or perhaps quoting Walt Disney’s cartoon character, Chicken Little, a person says that the sky is falling or will fall tomorrow in advertising a product like a roof or umbrella, no one would be likely to be misled by that false future representation. In 1992, French J explained that, once again, context is all important in evaluating the character of such conduct:[59]

The question is one of characterisation of the conduct, not of the reactions of consumers or others to that conduct. So where some express representation is made and that representation is demonstrably false, it is not usually necessary to go beyond that finding in order to conclude that it is misleading or deceptive. The case of an obvious puff might be taken as an exception. Where conduct depends upon context or surrounding circumstances to convey a particular meaning, then those factors must be taken into account but only as a way of characterising the conduct.

Conclusion

I hope I have not misled or deceived anyone in this or made any future representations. If I have, I disclaim any liability and note that I have not been engaged today in trade or commerce.

[1] A judge of the Federal Court of Australia, an additional judge of the Supreme Court of the Australian Capital Territory and a judge of the Supreme Court of Norfolk Island. The author acknowledges the assistance of his associate, Anthony Coter, in the preparation of this speech. The errors are the author’s alone.

[2] G Appleby et al, Judicial Education in Australia: A Contemporary Overview (Report, December 2021) 6.

[3] 301 ALR at 247 [948].

[4] [1969] P 136 at 152.

[5] At 1470 [18.20].

[6] 202 CLR at 85 [103].

[7] Yammine v Lantrak Holdings Pty Ltd (No 2) [2023] FCA 162 at [1].

[8] Qantas Airways Ltd v Rolls-Royce Plc [2010] FCA 1481.

[9] 140 CLR at 228, with whose reasons Barwick CJ at 221, Jacobs and Aickin JJ agreed, and Murphy at 234.

[10] 137 CLR at 561, with whom Barwick CJ, Gibbs, Stephen, Jacobs and Murphy JJ agreed.

[11] 149 CLR at 197.

[12] 149 CLR at 198 and see too per Mason J at 206–207.

[13] 149 CLR at 199.

[14] 149 CLR at 209.

[15] 149 CLR at 211.

[16] 17 NSWLR at 346D–E.

[17] 25 ALR 91.

[18] 25 ALR at 105.

[19] 25 ALR at 94.

[20] 25 ALR at 94.

[21] 25 ALR at 115–116.

[22] 25 ALR at 111.

[23] 110 CLR 656 at 659.

[24] 25 ALR at 95, 112.

[25] 25 ALR at 102, 113, 114.

[26] 202 CLR at 85 [99] and 85 [102]–[103].

[27] 202 CLR at 84 [99].

[28] 202 CLR at 85 [102]-[103].

[29] 25 ALR at 102.

[30] 202 CLR 45.

[31] 29 FCR at 17–18.

[32] Morning Star Co-operative Society Ltd v Express Newspapers Ltd [1979] FSR 113 at 117

[33] 202 CLR at 85 [102]–[103].

[34] 250 CLR at 651 [38].

[35] 250 CLR at 651–652 [39].

[36] 250 CLR at 654–656 [47]–[52].

[37] 250 CLR at 654 [47].

[38] 250 CLR at 654–656 [48]–[51].

[39] 250 CLR at 656 [52].

[40] [2023] FCAFC 80 at [81]–[84].

[41] 218 CLR at 604–605 [37].

[42] 158 CLR 661.

[43] 158 CLR at 666.

[44] 218 CLR at 605 [39].

[45] 337 ALR at 689–692 [212]–[226] in propositions that were not challenged on appeal (Valve Corp v Australian Competition and Consumer Commission (2017) 258 FCR at 237 [158]).

[46] 337 ALR at 689–390 [214].

[47] Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 at [83].

[48] 337 ALR at 690 [215].

[49] Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; 304 ALR 186; 96 ACSR 475; [2013] HCA 54 at [52]; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199; 42 ALR 1 at 6–7; 1A IPR 684 at 688–9 (Parkdale) (Gibbs CJ); Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2014) 317 ALR 74 ; [2014] FCA 634 at [41] (Allsop CJ).

[50] Thomas v Bradbury, Agnew & Co Ltd [1906] 2 KB 627 at 628.

[51] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR at 179 [40] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

[52] Hamlet, Act 2 sc II, 268–270

[53] 285 ALR at 223–224 [28]–[30].

[54] 285 ALR at 224 [31]–[32].

[55] [2015] FCAFC 114 at [99]–[102].

[56] [2015] FCAFC 114 at [101]–[102].

[57] [2022] FCA 1390 at [491].

[58] King Lear, Act I sc 4 ll 182–188.

[59] ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR at 380.