Misrepresentation and misleading or deceptive conduct

NB REFERENCES TO "HPH" OR JUST TO A PAGE NUMBER ARE TO HEFFEY, PATERSON AND HOCKER CONTRACT COMMENTARY AND MATERIALS 8TH ED 1998 (LBC INFORMATION SERVICES)

We now come to an entirely new part of the contract course. We have seen what the law requires for formation of contract and what are the rules for determining the content of the contract and the rules dealing with interpretation of the contract, including the special case of exclusion clauses. All of this is about the contract itself and is ultimately concerned with possible remedies for breach of contract.

What we turn to now is something which is, in a sense, outside the contract. We go back to the negotiating period before the contract was formed. During this period, all sorts of things may happen which may provide the basis for remedies - not breach of contract remedies because we are not talking about broken contractual promises but, instead, we are talking about what might be described as defective negotiations.

What sort of things might go wrong in the negotiations?

• one party may have said something which influenced the other to enter the contract and it turns out that what was said was wrong, in other words there was a misrepresentation;

• one of the parties may have used improper bargaining tactics, such as exploiting a position of undue influence over the other party, or acting in some way in an unconscionable manner to the other party, or using unfair pressure to get the other party to agree.

All these are the subject of specific doctrines which may allow the victim of this kind of behaviour to rescind the contract, that is, be rid of the contract as if it had never been. This is the basic remedy for this kind of conduct - the contract may be cancelled and the parties restored to the status quo prior to the contract. So what we are about to look at are, broadly, the "excuse" areas of the law of contract. One party says to the other: "Yes, I entered into a contract with you but I should be allowed to get out of it because of what was said/what was done by you/your position of power over me, etc." The law allows this kind of argument.

If a contract is one which may be rescinded, then it is said to be voidable. What this means is that the contract is perfectly good until avoided or rescinded. We have therefore seen that a contract may be

• void (eg for uncertainty)

• unenforceable (eg for non-compliance with the Statute of Frauds or because a limitation period has expired)

• voidable (eg for misrepresentation, mistake, undue influence, duress, unconscionability in bargaining).

The first excuse area we look at is misrepresentation. Something was said during negotiations which played a part in persuading the other party to enter into the contract. It turns out that what was said was wrong - it was a misrepresentation.

Remember that what was said could have been a promise but we are now assuming that it does not pass the promise test and that it is a representation. So we are concerned with an inducing misrepresentation. As already indicated, the effect that a misrepresentation has on the contract is that it enables the misled party to rescind the contract.

In addition to the remedy of rescission, there is also the possibility from outside the law of contract of a right to damages. This comes from the law of tort. You will recall that a fraudulent misrepresentation generates a right to damages for deceit; a negligent misrepresentation may generate a right to damages in negligence under the Shaddock and San Sebastian cases, going back to the Hedley Byrne decision of the House of Lords.

The law of misrepresentation is complicated because we have to look to two sources of law:

• the general law which is an amalgam of law and equity rules; and

• the Trade Practices Act s 52 and its Fair Trading Act mirror provisions in each State and Territory.

The old law is complicated and hedged around with restrictions and complicated rules. The new law is relatively simple and has, in a practical sense, largely replaced the old law. This does not mean that old law has disappeared so much as that the old law is now redundant in a large number of circumstances. It is still law but not used very often. The new law does, however, draw on the concepts from the old law from time to time. Because of limited time and because of the diminished importance of the old law, we will consider the old law pretty quickly after we have considered the far more important TPA provisions.

Misleading or deceptive conduct

We come now to the new law which has very substantially rendered the old law of misrepresentation redundant. This law is found in the Trade Practices Act s 52 which is mirrored in each State and Territory's Fair Trading Act. As I have already said, the old law is sometimes referred to in cases brought under the Trade Practices Act or Fair Trading Act (and hence, we consider the old law, briefly, later). We focus on one provision - the section which deals with misleading or deceptive conduct - though there are other similar sections which deal with misleading conduct in specific contexts and which deal with some other practices - see the sections mentioned in the case book on p 1099.

I have just made the point that the Commonwealth Trade Practices Act section is mirrored in each State and Territory. First have a look at the Commonwealth provision which, of course, applies throughout Australia.

Note the two headings "Consumer Protection" and "Unfair Practices". It might be argued that these limit the situations in which s 52 operates. But, as you know from what you learnt when you studied statutory interpretation, the plain words of a section cannot be modified or read down by reference to headings in legislation. Accordingly, s 52 has been used in very many cases having nothing to do with consumers. And, as we will see, it may apply when no-one has done anything which could be described as unfair, unless you consider telling an innocent untruth constitutes an unfair practice.

An example of a mirror provision is the Fair Trading Act 1992 (ACT) s 12

The reason why the Commonwealth provision applies to corporations is because of the constitutional limits to the Commonwealth's power to legislate. This meant that there was a gap in the coverage. It did not apply to some commercial operators, namely unincorporated sole traders. The States and Territores were persuaded by the Commonwealth to pass complementary legislation to fill the gap. In applying to a "person" the State or Territory provision also covers corporations. This is because in law a "person" includes all legal entities.

By themselves these sections do nothing except set a standard. So it is necessary to look briefly at what is the consequence of engaging in this type of conduct. The remedy sections in the Trade Practices Act are:

• s 80 injunction
• s 82 damages (p 1132)
• s 87 ancillary remedies, including rescission of contracts (p 1132-34).

Each State and Territory Act has mirror remedy sections.

Note the injunction remedy. This is obviously not suited to contract negotiation cases but it is a powerful remedy in misleading advertising cases. It is possible to put a stop to misleading advertisements under s 80. In s 52 itself the words "or is likely to mislead or deceive" are aimed at advertising cases. In contract negotiations it is pretty meaningless to complain that a statement is likely to mislead or deceive. Either it does or it does not. But in advertising cases it is of some importance to be able to stop an advertisement before it does any harm, that is, it can be shown that it is likely to mislead.

The section has been used in company takeover battles, in relation to prospectuses (the NRMA aborted float was an example) and in passing off cases (where one company's goods or advertising resemble another company's goods or advertising so that the first company gets a "free ride" on the second company's reputation). It was tried as another way of suing for defamation but this was stopped by statutory amendment.

The provision has had a profound effect on commercial dealings. If we just confine ourselves to its impact on contracts and contract negotiations, it has imposed on people negotiating a contract or performing a contract an absolute obligation not to mislead - an absolute obligation to tell the truth. The section has been interpreted as imposing strict liability, which means liability without having to prove fault. Lawyers are used to the idea of fault as a pre-requisite to liability. We see this is negligence actions, in estoppel cases (remember the need to show unconscionable conduct), in contract cases where it is necessary to show breach (though it is sometimes argued that contract is a form of strict liability). In s 52 cases all that needs to be shown is that the defendant engaged in misleading conduct, in other words that he or she misled the other party. To do this it is necessary to show that what he or she said was wrong and that the other person was led into error as a result. That is all that is required. It is no good saying in a s 52 case "I did my best" or "It was an honest mistake" or "It wasn't my fault that I got it wrong". None of these are any good as excuses. This is made clear in the short extract from

These words which appear in both the Commonwealth and the State and Territory provisions represent the main limit on the reach of s 52 and its counter-parts. Although the words "trade or commerce" have been interpreted very broadly, it is clear that they do not apply to some types of contracts. These are non-commercial deals such as when you sell your car privately on a Saturday morning. In such a case, the old law of misrepresentation (with its statutory modifications in the ACT and South Australia) is the only applicable misrepresentation law. The same is true if you were selling your house privately. But, note that if you had an agent selling your house, then anything said by the agent would be in trade or commerce because he or she is obviously in business when selling houses.

Apart from private sales, there have been one or two cases which have required the courts to state what the limits of "trade or commerce" are.

This was a case where a company sold its principal asset. The company was in the business of providing cosmetic services to customers. It was obviously not in the business of selling assets. So, it was arguable that this one-off sale was not in trade or commerce. But this argument was not accepted. It was held that the sale of a business asset was in trade or commerce.

The High Court had reason to consider the meaning of the words "in trade or commerce" in

A worker was injured after he had been told incorrectly that it was safe to work in a certain place on a building site. He tried to use s 52 to claim damages. It was advantageous to try this because there were certain limits on recovery in the relevant workers' compensation legislation. The High Court had to consider whether a communication within a company between its employees was in "trade or commerce". It was concluded that this was not in trade or commerce but the High Court had a rather difficult time in describing what is in trade or commerce and why, in this particular instant, the communication was not in trade or commerce. It was said that what goes on within a company is merely incidental to trade or commerce. Its trading and commercial activities are what it does with the outside world. But there were certainly some difficult lines to draw. One of the hypothetical examples which the Court considered was: suppose a truck driver gives a misleading hand signal which causes an accident. Was the hand signal given in trade or commerce? It was thought that this would not be in trade or commerce, even though the truck driver was delivering goods at the time.

It has been held that politicians when they make misleading statements are not "in trade or commerce": Durant v Greiner (1990) 21 NSWLR 119; Unilan Holdings Pty Ltd v Kerin (1992) 107 ALR 709. There is also a hint in these cases that a politician's statement is, in any case, not misleading!

Note that the formula is "misleading or deceptive" not "misleading and deceptive". Many commentators, and even judges, talk of misleading and deceptive conduct. If it was necessary to show that conduct was misleading and deceptive then the number of successful s 52 cases would be miniscule. It is simply a matter of adopting the simple words of the legislation which talks of misleading or deceptive conduct.

As I have already said, "misleading" simply means that the conduct in question led the other party into error. I repeat: there is no element of fault in the concept of misleading. S 52 has therefore largely displaced the old law of misrepresentation in contract cases and to a large extent has provided an alternative and easier remedy in negligent mis-statement cases.

For example in advertising cases, the courts are very ready to say that an advertisement is misleading and it is no defence for the advertiser to say: "No-one would be misled by that." After all, it is part of the advertiser's skill to appeal to the irrational in people. The courts have said specifically that the hypothetical receiver of the information may be a bit gullible or a bit naive, so long as he or she is not unusually stupid. See the extract from

Advertisers are still allowed a bit of flourish and a bit of hyperbole, but they have to be much more careful now about any factual statements and about images which may give a misleading impression.

On the other hand in contract cases, the courts will look at the person providing the information and the person receiving the information and will judge whether it was misleading in the particular context. The objective approach is to some extent displaced in a one-to-one interaction. The question becomes: was this person misled? You will see this discussed in the case book with reference to the Finucane case, extracted on pp 1104-5.

The relative expertise of the parties may be a relevant factor in deciding whether one party had engaged in misleading conduct. For example, there have been a number of s 52 cases arising out of the foreign currency loans which were encouraged by the banks in the 1980s. Interests rates in Australia were very high and borrowers were told by banks and other lending institutions that it would be a good idea to borrow in a foreign currency, such as Swiss francs, where the interest rate was much lower. What the banks failed to reveal was the risk associated with foreign currency loans, namely, if there were fluctuations in the exchange rate between the Australian dollar and the currency in which the loan was taken out. In fact such fluctuations could result in the loan blowing out very considerably. Some of these cases involved unsophisticted players and the courts very readily held that it was misleading conduct to tell only half the story, that is, not point out the risks. But one foreign currency loan case involved a doctor who argued that he had been misled. The court said that it was not misleading having regard to the fact that the doctor was quite aware of the risks and in fact knew more about foreign currency loans than did the bank clerk with whom he was dealing: Commonwealth Bank v Mehta (1991) 23 NSWLR 84.

You can see that s 52 raises some profound questions - essentially political and philosophical questions - about the dealings between people. Economists would probably argue that s 52 represents a distortion of the market in that it imposes such grave responsibility on people who provide information or advice. It may have the effect of chilling the flow of information. Others would argue that a dose of honesty is just what Australia needs after the excesses of the 1980s. These are empirical questions and no-one, so far as I know, has done an empirical study on the effect of s 52 on business dealings.

One liberalising effect of s 52, when compared with old law, is that it is no longer necessary to draw fine lines between statements of fact, law, opinion, etc. All of this is subsumed under the rubric of "misleading". Of course, a pure opinion - "I think it will rain to-morrow" - is not capable of being misleading. Nor is a puff used in advertising so long as it is clear that it is a puff. So the old distinctions are still relevant but they are applied in a common sense way. Clearly, under s 52 it would be futile to argue that a statement of law could not be misleading.

One issue in s 52 cases is whether it is misleading conduct to make and then break a promise. If it is, then the whole law of contract would be effectively displaced by s 52. The courts have been very reluctant to allow s 52 to be used when someone has made a promise. Nevertheless, there are one or two cases where the courts have been willing to apply s 52 to what appear to be promissory statements. (See Cheshire & Fifoot's Law of Contract (7th Aus ed) para 11.118 for further discussion.) You will see the whole question of whether promissory conduct is actionable under s 52 discussed on p 1108-1113 of the case book. Also in

there is a long analysis of the problem of whether a broken promise can amount to misleading or deceptive conduct. The problem is complicated by an amendment to the Act - s 51A - which deals with statements about the future. Have a look at s 51A on p 1132 of the case book. It is a very peculiar provision. It says that a representation about any future matter will be taken to be misleading unless the the maker of the statement can prove that he or she had reasonable grounds for making the representation. We will see that this section has caused some puzzlement in judges.

In the Futuretronics case, Mr Gadzhis was the successful bidder at an auction of a commercial building. When he was asked to sign the contract he refused. This is a problem with auctions for the sale of land because of the Statute of Frauds requirement that the contract must be evidenced by writing and signed by the defendant. Does this mean that in all land auctions the highest bidder can renege? There is authority for the proposition that the auctioneer can sign on behalf of the bidder. This is so, despite the fact the auctioneer is for most purposes the seller's agent. Anyway, in this case the auctioneer did not sign on behalf of Mr Gadzhis so we are left with the rather fascinating (from a contract lawyer's perspective) situation with Mr Gadzhis sitting tight and the seller jumping up and down. Ormiston J held that a breach of contract claim could not be sustained because of the Statute of Frauds difficulty.

This left a possible claim under the Victorian Fair Trading Act 1985 s 11.

The report of this case reveals that this auction was rather peculiar and the judge makes some caustic comments about the way in which auctions are conducted. In this one it was expressly stated that the vendor could make bids and he in fact did so. The only other bidder was Mr Gadzhis. This is an important fact when we come to look at this case again in connection with remedies.

Turning to the question whether a promise and its breach can amount to misleading conduct, Ormiston spends some considerable time on this issue - see pp 1143-1151 of the case book. Leaving aside s 51A for the moment, Ormiston found some difficulty in accepting that a broken promise can be misleading conduct. The argument goes as follows. When a promise is made it cannot be said to be true or false. Therefore by itself it cannot be said to be misleading. When there is a subsequent breach of the promise, the breach may arguably be misleading in a sense but it did not cause any harm. It was the promise which was relied on and, as we have already seen, it cannot be said to have been misleading. Even if we elaborate a bit and argue that a promise carries with it an implied representation that it will be carried out, then there may be limited potential for arguing that a promise could be misleading. It would have to be shown that the promisor either did not have any intention of carrying out the promise or did not have the capacity or ability to carry out the promise so that the very making of the promise was misleading.

Ormiston J was prepared to concede that to this extent a promise could be misleading. It would obviously be difficult to prove that the person making the promise had no intention of carrying it out or else had no hope (i.e. capacity) of carrying it out. Take the facts of this case. Ormiston J accepted as proven fact that Mr Gadzhis, when he bid, intended to sign the contract and that Mr Gadzhis had the available funds to make the purchase. When Mr Gadzhis changed his mind, as we have already seen, that conduct could be argued to be in a sense misleading, but it did not mislead anyone. Therefore, no breach of s 11 of the Fair Trading Act 1985 (Vic).

Ormiston J then turned his attention to s 51A (that is, its Victorian equivalents 10A). It imposes an onus on a person making a statement or representation about the future to show that he had reasonable grounds for making it. Mr Gadzhis, remember, made an implied representation when he bid, namely, that he would sign the contract. Did he have reasonable grounds for making this representation? Well, he failed to adduce evidence as to this matter so he failed to discharge the onus imposed by s 51A (s 10A). This meant that the statutory presumption that his representation was misleading applied. Therefore, by this route, Ormiston J found in the end that Mr Gadzhis had engaged in misleading conduct when he bid.

We will come back to this case when we look at remedies.

One of the extraordinary features of s 52 is that attempts to exclude liability arising from s 52 have been almost invariably unsuccessful. You have not been exposed to exclusion clauses very much so far so that it may not seem surprising that s 52 liability cannot be excluded. But bear in mind that the High Court in the Darlington Futures case has made it clear that an exclusion clause can be effective to protect the person relying on it from liability in respect of what would seem to be a very serious breach of contract. It is also undoubtedly possible to exclude liability for negligence, so long as the clause is appropriately drafted. So why is it not possible to exclude s 52 liability?

Many attempts have been made, using various drafting tricks. For example we will see in the Henjo case, which we will examine shortly, a clause under which the buyer of a business promised in the contract that he did not rely on anything said by the seller. It was no use. The reason used by judges in many cases where an exclusion clause has been relied on in an attempt to exclude s 52 liability is that a statement is no less misleading just because a person says - or even promises - that he or she has not been misled. This is an independent statutory cause of action. Parliament has said that there are legal consequences if one person misleads another. The only question is whether there has been misleading conduct. As Sheppard J says in

"The terms of the contract are irrelevant."

In a passage further down the page (2nd para), the case book editors make the point that an exclusion clause could be effective to exclude s 52 liability. But to do so it must be proved that the clause in fact had the effect of rendering a statement not misleading. This is tested on the facts of the particular case. But, usually, exclusion clauses, no matter how elaborately drafted, have not worked to exclude liability in s 52 cases. See the passage of Burchett J taken from Oraka on pp 1122-23. In the case of Waltip mentioned on p 1123 a landlord had got a commercial tenant to sign a deed which said that the tenant had not relied on anything said by the landlord. This did not work either.

There may of course be circumstances where the information is not misleading because of the way it has been presented. So, for example, if you were to ask me a question about the law of contract and I were to reply: "Well, that's a tricky one and I cannot be very confident about the answer. For what it's worth I reckon that the answer is this..." and I then proceed to give you my opinion. In such a case, if it turns out that what I said was wrong, you would have difficulty in establishing that I had been misleading. The way in which the information was presented and my expression of doubt makes it clear that I do not really know what I am talking about and you, the recipient of the information, should not have relied on it. This is made clear in the passage from Yorke v Lucas on the top of p 1124 where the High Court was talking about the situation where someone is a mere conduit for information. That is, a person providing information makes it clear that he or she is merely passing on information and not adopting that information as his or her own.

Let us have a look at some cases in a bit more detail. The first case is pretty typical of s 52 cases and contains some important points about the way the section works with its associated remedies.

This case involved the sale of a restaurant called "The New York Deli". The important point was that it was licensed to seat 84 people. The owner had however increased the seats to 128 without authority from the local council or the liquor licensing authority. He had also installed 8 bar stools at the bar when the licence did not in fact permit this. The buyer was shown the restaurant and, of course, saw that there were 128 seats and bar stools at the bar. The buyer retained a solicitor to process the purchase. One of the jobs the solicitor was supposed to do was to check the licence and confirm that council by-laws had been complied with. The solicitor failed to check these things. (The solicitor was a tad negligent. His name was Tadd.) The sale went through. The buyer, Collins Marrickville, signed a contract which contained some special conditions, the effect of which was to say that the written contract was the entire agreement between the parties and that the buyer had not relied on any representations made by the seller. Later, the truth came out and the buyer sued under the Trade Practices Act seeking an order that the contract be rescinded and an order for damages. The trial judge Wilcox J found in favour of the buyer and ordered that the contract be rescinded and made an order for damages. The seller, Henjo, appealed.

You will see a reference to s 75B of the Trade Pactices Act. This deals with the problem of personal liability of company officers. S 52 is aimed at corporations. Of course, corporations can only act through people. The Act therefore deals with the responsibility of individuals involved in a breach of a provision of the Act, such as s 52.

In the Full Federal Court various aspects of a s 52 claim are discussed. Lockhart J on p 1135 started out by making some general observations about s 52. We have covered these points already. The language is plain and does not need some esoteric lawyer's trick to read it. He made the point that "deceptive" involves an element of guile or fraud whereas "misleading" involves no mental element or intention.

Turning to the facts of this case (on p 1136) there was evidence that Mr Collins was shown a card with the words "Seats 128" and the word "Licensed" on the back. Lockhart interpreted this as saying that the restaurant was licensed to seat 128 people. This would be enough to establish misleading conduct. But Lockhart J went on to discuss whether Henjo's silence about the true position was misleading.

You may recall that under the old law of misrepresentation a misleading half-truth was actionable as a misrepresentation. The position is the same in s 52 cases. In 2nd para of p 1137 Lockhart J alluded to cases where there is a duty of disclosure under equitable principles where there is a fiduciary relationship. The law has for a long time recognised special relationships such as solicitor/client, trustee/beneficiary, principal/agent, guardian/ward and others where there is a duty of utmost good faith and a duty to disclose information. Lockhart made the point that we are not concerned here with such relationships. There is a duty to disclose in ordinary commercial relationships in certain circumstances. He had no difficulty in concluding that Henjo had engaged in misleading conduct by failing to reveal the true position as to licensed seating capacity.

Note the Redgrave v Hurd point on 1137. Collins both had an opportunity to find out the true position and indeed ought to have found out the true position if his solicitor, Mr Tadd, had been half competent. Yet Lockhart said that that made no difference, relying on Redgrave v Hurd. This is a most unfortunate consequence of the way in which s 52 can work. As I have said earlier, it means that s 52 places all (and strict) responsibility on the person who makes a statement and none on the person receiving the statement.

Next, Lockhart J asked whether Collins, the buyer, relied on the misleading conduct of Henjo. Here, we again see the old law of misrepresentation being used to establish the proposition that the misleading conduct only has to be an inducing factor and that the chain of causation is not broken by the misled person being negligent. He concluded that the misleading conduct in this case was certainly an inducing factor, in fact, the major inducing factor in Collins' decision to purchase the business.

What about the special conditions which attempted to insulate Henjo from the consequences of any misleading conduct? This case is one of the many in which the attempt has been made to argue that such a clause or clauses protect the person who has engaged in misleading conduct. But to no avail. One way of arguing is to say that the buyer could not have been induced by the misleading conduct because the contract, in effect, said as such. But, we have already seen that the courts do not accept this argument unless it can truly be said that the clause rendered what would otherwise be misleading not misleading. Somewhat surprisingly, Lockhart J on p 1139 went through the exercise of interpreting the clauses to see whether they covered the conduct in this case. This is surprising because there is no need to go through this exercise. He acknowledged this on p 1139 when he said "Irrespective of the construction of these two Special Conditions it does not matter ultimately whether the impugned conduct with which this case is concerned falls literally within them or not." He then went on to explain that it would be thwarting the will of Parliament to allow exclusion clauses to have effect.

Next, Lockhart J dealt with the s 75B point which I have already explained. Mr Saade, a director of Henjo, was involved in the contravention of s 52. This meant that he could be personally liable.

Finally, Lockhart J turned to the question of appropriate relief or remedies. We have not looked at the remedy provisions yet but this case is a good example of the range of remedies that are available under the Trade Practices Act. The trial judge had ordered rescission - called "restitution" by Lockhart J plus damages. There were some causation type problems in Collins' claim. It was found by the trial judge that Collins had made trading losses but these were not attributable to the misleading conduct. The bar stools had to be removed but this had a minor impact on trading losses. The business in the hands of Collins had been changed quite considerably and had lost goodwill and was no longer a profit making business. There was also a considerable delay in the litigation itself with Collins changing from seeking just damages to seeking rescission as well. These factors went to the issue of whether the court should order rescission. Lockhart concluded that rescission (or "restitution") should not be ordered because it would be unfair to the seller, Henjo.

Note that rescission under s 87 is a discretionary remedy with none of the rules about rescission that we saw under the old law. Nevertheless, to the extent that those rules are rules of fairness, the court will be guided by them in exercising its discretion in a s 52 case. This point was made by Lockhart J on p 1141 4th para.

Lockhart went on to say that Collins was entitled to damages but that they should be re-assessed by the trial judge.

There are a couple of puzzling references to arguments apparently put by Henjo (p 1140 5th para and p 1141 last para) but which looked more like arguments which would have been in the interests of Collins.

The reason we look at the Henjo case in some detail is to gain experience in the way a s 52 case works. The case demonstrates 4 important points:

• silence can be misleading conduct, that is, in a particular context a failure to speak or explain will be misleading;
• exclusion clauses do not work;
• there is no concept of contributory fault in s 52 cases; the person who engages in misleading conduct takes entire responsibility for any harm caused by that conduct, however stupid or negligent the other person has been
• the remedy of rescission is discretionary.

Remedies for misleading or deceptive conduct

We have seen that the Trade Practices Act provides a variety of remedies for breach of s 52, including an injunction remedy which is appropriate for advertising cases but not for pre-contract negotiations. What we need to do now is examine the remedy provisions a little more closely.

To establish a successful s 52 claim, it is necessary to show that the misleading conduct caused loss. But this simple statement disguises two levels of causation.

Remember that the problem, in this case was whether Mr Gadzhis had engaged in misleading conduct by bidding successfully at an auction and then refusing to sign the contract. By resort to the statutory presumption contained in s 51A (s 10A of the Fair Trading Act) Ormiston J found that Mr Gadzhis had engaged in misleading conduct when he bid. What follows from this? It was alleged by the seller that in reliance on Mr Gadzhis's bid, the auctioneer then concluded the auction and sought no further bids and did not negotiate with any other prospective purchaser. Well, Ormiston J simply rejected this allegation because it was clear that Mr Gadzhis was the only bidder and so no opportunity was lost to seek other bids, etc.

So, assuming that Mr Gadzhis had engaged in misleading conduct when he bid, what loss was suffered by Futuretronics? As a result of Mr Gadzhis's bid the auctioneer brought the hammer down. A short time after, the auctioneer and the seller learnt that Mr Gadzhis had changed his mind. They then could have put the lot up again for auction but did not do so. Ormiston J came to the conclusion (see discussion pp 1153-1155) that Futuretronics had suffered no loss because of the bid (which was the only possible source of misleading conduct). If Futuretronics had been able to show that there was another willing bidder and that the opportunity to sell to that bidder was lost as a result of relying on Mr Gadzhis's bid, then Futuretronics would have had an arguable case. But this was impossible because there were no other genuine bidders. So, in the end the claim under the Fair Trading Act failed because there was no relevant loss caused by the misleading conduct.

This case has something to say about remedies, as already noted. We have already seen that the remedy of rescission was refused because it was impossible to restore the status quo. The remedy of damages was not, in the end, pursued very far because Lockhart J said that the question of damages should be remitted to the trial judge. There were real problems about causation in this case because the relevant misleading conduct was not directly responsible for the losses suffered by the buyer Collins. But it depends on how you look at it. The trading losses suffered by Collins, though not attributable to the legal seating capacity problem, would not have been suffered by Collins if it had not got into the contract in the first place. This simply illustrates that the problems of causation can be just as intractable in s 52 cases as they are in other areas such as negligence and breach of contract.

Have a look at the damages section on p 1132. It is very simply expressed - it uses the word "by" to make the link between the relevant conduct and the loss. I have argued that the word can be used by the courts to take account of cases like Henjo where it might be sensible to reduce damages because of the negligent or foolhardy conduct of the plaintiff. Remember that there is no notion of contributory fault expressly written into the Act. It is, in my view, very simple to argue a notion of contributory fault if a claim is being made under s 82. The court may come to the conclusion that misleading conduct was a cause of the loss but may also say that the loss was also caused by other factors, such as the plaintiff's failure to look out for its own interests. There is a sort of argument like this in an extract from Argy v Blunts on p 1120 3rd last para. But the court is arguing here for a novus actus interveniens result which would mean that the chain of causation is broken with the result that the plaintiff would get nothing. My solution is equivalent to contributory negligence where a percentage reduction would be the proper solution - see Seddon, "Misleading Conduct: The Case for Proportionality" (1997) 71 ALJ 146.

I should point out that the courts have not generally acted on this basis but, instead, have provided all-or-nothing solutions. This is unsatisfactory in my view. My suggested solution does tip the balance struck by s 52 cases back to a more sensible allocation of responsibility. I have already made the point that s 52 as it is imposes absolute responsibility on people who make statements, provide information, etc and none on the people who receive that information.

The courts have held that the type of damages that a court should order under s 82 is what is referred to as reliance damages rather than expectation damages. Broadly this distinction means the kind of damages one can get in tort actions (whereas expectation damages is what one could expect to get in contract actions) - see 3rd para on p 1158 "The Act does not...". See also the next para on p 1158 where the difference is illustrated by a hypothetical sale of goods case.

This distinction is linked to the debate about whether s 52 should cover broken promises. Generally, it can be said that the courts have been reluctant to allow s 52 to invade the domain of contract.

The distinction between expectation and reliance damages is neatly illustrated by the facts of the next case.

Mr Gates was a carpenter who worked on building sites. He wanted an insurance policy which would cover him if he had an accident. He talked to a representative of CML, a Mr Rainbird. Mr Rainbird told Mr Gates that he had a policy which would pay Mr Gates if he had an accident which resulted in him being permanently incapacitated as a carpenter. In fact the policy said that the insured would only be paid if he was permanently incapacitated for any work. You can see the discrepancy on p 1156 in the 2nd and 3rd paras. Mr Gates did have an accident which rendered him incapacitated to perform carpentry work. CML refused to pay.

Mr Gates sued for breach of collateral contract and under the Trade Practices Act. The trial judge held in favour of Mr Gates in respect of breach of collateral contract and awarded him damages, being the amount which CML should have paid out under the policy if Mr Rainbird had been correct. He also found that there had been a breach of s 52 and s 53(g) of the Trade Practices Act but regarded damages in the form of the amount which should have been paid out under the policy as not allowable under the Act. See top para on p 1157 where Ellicott J's reasoning is discussed. The appropriate measure of damages under the Act is the tort measure of damages, that is, reliance loss not expectation loss. The expectation loss is, of course, what Mr Gates expected to be paid under the policy. The reliance loss is the difference between what he actually paid and the value of what he in fact got, namely, a policy which was more restrictive than he thought. There was no evidence that he paid too much for the cover that he in fact got and so the loss on this basis was zero.

Another possible way of proceeding would have been to rescind the contract and get back his premiums but he did not choose this course of action.

Of course, this measure of damages was of no use to Gates who wanted the payout that he had been led to believe would be made under the policy. He could only get this on the basis of breach of contract.

The case went up to the Full Federal Court where it was held that the statement made by Mr Rainbird was not contractual in character and therefore there could not be damages awarded on the basis of collateral contract. The Full Court also held that the reliance basis for assessing damages for breaches of the Act was correct. Mr Gates appealed to the High Court.

Here was an opportunity to change the rule in Hoyt's v Spencer, assuming that the statement made by Mr Rainbird was promissory. However, the High Court agreed that it was not promissory in character and so the contract argument failed for that reason. But, even if it had been promissory, the judges said, it still could not be upheld because of the rule in Hoyt's v Spencer.

So, that left the Trade Practices Act. Was the assessment of damages by Ellicott J correct? Unfortunately for Mr Gates, the High Court upheld this method of assessment and so Mr Gates ended up with no money.

The rule that damages under s 52 or its near relatives in the Trade Practices Act must be assessed on the basis of reliance losses is not one which is dictated by the wording of the legislation. But the courts have had to find their way in entirely new territory, created by these novel sections and remedies, and they have done this by borrowing from familiar territory, namely, the law of torts. Up until the Gates case, it was at least arguable that the reliance loss measure of damages was not correct but the High Court has now in the Gates case made this quite clear.

The Court conceded (see last para p 1157) that, had Mr Gates been able to show that he would, but for the misrepresentation by Mr Rainbird, have bought another policy which would have provided him with the type of cover that he wanted, then he could have claimed the expectation loss, that is, the payout that he thought he would get under this policy. In short an "opportunity cost" measure of damages is possible. But, Mr Gates failed to adduce evidence that there was another policy which he could have bought and that he would have bought it.

The Court discussed the difference between contract and tort damages on pp 1158-1159 and illustrated the difference between the two. In relation to tort damages, the plaintiff must show how much worse off he or she is as a result of the tort. It is therefore open to the plaintiff to show what opportunities were foregone as a result of the misrepresentation. Sometimes this approach to the assessment of damages may get very close to the expectation measure of damages. We have already seen that if Mr Gates had been able to show that he lost the opportunity to buy a policy of the type which he wanted (and represented by Mr Rainbird) then he would have got the full measure of damages. But this he failed to do. Another type of case where expectation damages may be claimable under the legislation arises where the misleading conduct relates to the soundness of a machine or product. This is akin to a contractual guarantee of quality.

Section 87 provides the court with the ability to make very flexible orders if a breach of s 52 (or other section) has occurred. Have a look at s 87 (p 1132-1134). It is really quite unusual and is in marked contrast to traditional contract remedies in the flexibility offered by the section. It is necessary for the plaintiff to show that he or she has suffered or is likely to suffer loss by reason of the conduct which constitutes a breach of the Act - see s 87(1A). The court is then given power to make "such order or orders as it [the Court] thinks appropriate..." The court may order compensation, may make an order to prevent or alleviate future loss, may declare a contract to be void in whole or in part, from the beginning or from a particular point of time onwards, may make an order varying a contract, prospectively or retrospectively, may make an order that a certain term or terms will not be enforced, may make an order refunding money or returning property, may make an order for repair or to supply spare parts, may make an order to supply specified services, or make an order that a party execute an instrument, such as a contract.

in which the court made an order to vary the terms of two leases

The most common remedy is to order rescission of a contract. This is, like all orders under s 87, a discretionary remedy. Further it is an order of the court - the court orders that the contract be rescinded - which is different from the position under the old law. It was made clear in Alati v Kruger that it was the party who rescinded and that the court's job is to pronounce on whether the rescission was justified or not. Under the Act the court makes the decision whether rescission is appropriate and, of course, the court has the power under s 87 to make any necessary adjustments if rescission is ordered. Note that the section specifically provides that the court may have regard to the conduct of the parties since the breach of s 52 (or other section) took place - see s 87(1D). We have already seen in

that the remedy of rescission was not granted in that case because it would have been very unfair on the seller to force it to take back a business which had been very substantially changed by the buyer.

 Now we briefly turn to the old law.

Misrepresentation under the general law

For a misrepresentation to be actionable at law, that is, provide the basis for rescinding the contract, two basic criteria had to be satisfied. The statement relied on must:

• have been one of fact, and not opinion, puff, etc

• have induced the other party to enter into the contract.

The old law requires the statement to be a misrepresentation of fact. This is always contrasted with statements of opinion, statements of law, puffs and so forth. The test for determining whether something is a statement of fact is the familiar objective test. It is determined by the content of the statement. Sometimes it is not so clear, for example whether a statement is one of opinion or fact. This is illustrated by

where someone selling a property which was let described the tenant, a Mr Frederick Fleck, as a "most desirable tenant". This was not correct because Mr Fleck went bankrupt shortly after and it was shown that he had a history of not paying. Was this just an opinion? It looks like it but this case shows that the courts are prepared to dig deeper and say that a statement like this is based on a substratum of fact and, if those facts, or an important fact, are incorrect, then the statement is a misstatement of fact. Bowen LJ emphasised that differential knowledge between the parties may be an important factor in deciding whether the statement contains factual information. This is a bit like the test which is used to differentiate a promise from a representation. Here we are testing the difference between a representation and an opinion. If the person making the statement knows the underlying facts, as in this case, then he is impliedly stating facts which underpin his opinion.

You will see in the notes on p 1042 that statements about the future can be actionable misrepresentations.

It has been said for many years that a statement of law is not a statement of fact. But the distinction between the two has always been a very difficult one to draw and many judges have deplored the distinction. It seems pretty clear that now that distinction has finally been killed off. This emerges from

a case which does not deal with misrepresentation as such. The law/fact distinction has also been adopted in other areas, apart from misrepresentation, for example, in the law of mistake, the law of restitution and in the law of estoppel. The David Securities case actually was a restitution case involving an alleged mistake of law. All that we need to be concerned about for present purposes is that the High Court made it clear that the law/fact distinction is now no longer tenable - see note 1 on p 1007 and note 2 on p 1045. We do not have a direct authority which says that the law/fact distinction is dead in misrepresentation cases, but I would be prepared to bet that it is in the light of the David Securities case.

The next issue is whether silence can be a misrepresentation. The answer to this is the pure silence cannot be. So, for example, suppose a used car dealer shows you a car and says, "There it is, and there's the price on the windscreen" and then says nothing more. In fact the car is harbouring a gearbox which does not have teeth on its gearwheels so much as stumps. Has the dealer made a misrepresentation? The answer is that he has not. But, of course, how many car dealers merely point to the car and say what the price is? They start to say things about the car but then omit to say other things, such as the gearbox is in very bad shape. In this context, a failure to speak may amount to a misrepresentation. This is illustrated by

A misleading half-truth - that is, when only half the true story is told so as to give a misleading impression - is a misrepresentation. There are also cases which say that if someone tells the truth but subsequent events make that statement no longer true, then there is a duty to correct. Davies v London & Provincial Marine Insurance Co on p 1046 is an example.

In addition to the statement being one of fact, it must have induced entry into the contract. What this means is that it must have been an inducing factor, not the inducing factor. If it did not influence the person who received the statement to enter the contract, then it is not an actionable misrepresentation. So, for example, if the person is told something which is not correct and he or she knows that it is not correct, then it is not an actionable misrepresentation.

Note that it only has to be an inducing factor. This is made clear in Gould v Vaggelas (1985) 157 CLR 215 by Wilson J at 236 (unfortunately not extracted in the case book). This means that there can be a lack of proportionality in misrepresentation cases. A person may be able to rescind a contract for a relatively trivial misrepresentation, so long as it played some part in inducing him or her to enter into the contract. The rule that the misrepresentation need only be an inducing factor is, on the other hand, sensible because, if it had to be the inducing factor, then almost every case in which misrepresentation is argued would fail. This is because it is most unlikely that a statement would be the only reason why someone decided to enter into a contract.

Inducement raises the problem of whether it is sufficient if someone says they were induced or claims they relied on the statement. Suppose someone relied on a statement when no reasonble person would have considered that statement to be of any importance. For example, suppose I am a car dealer and I say to a customer that this car was owned by a bishop. The customer is most impressed and decides to buy the car. It turns out that it was not owned by a bishop but by a butcher. The customer finds out and wants to rescind the contract. You can see that in a case like this there is a problem about whether a misrepresentation has to be material, that is objectively inducing - a statement such as would induce any reasonable person - or whether it is enough that it induced this person.

This kind of problem is dealt with in

In this case there was a representation by Thompson, the seller of a new film process, that he had been offered a very large sum of money for it which he had refused. The Nicholas brothers, the buyers, said that they entered into the contracts in reliance on this statement. It turned out that it was not correct. The Nicholas brothers rescinded the contract. The trial judge held in favour of the buyers and said that they could rescind and get their money back.

On appeal Thompson argued that

• the statement was not one of fact;

• the statement was not material.

You can see that Thompson must have been a bit desperate because neither of these arguments make much sense in this particular case. As to the question - was it a statement of fact? - there was simply no problem about saying that it was.

As to whether it was material, again this is an odd context to test this argument because it is obviously a material consideration that a product or process has been the subject of offers. It shows that it has market value. So this case simply does not really test the limits of inducement and whether it is subjective or objective. Nevertheless, McArthur J gave a useful analysis of the issue.

McArthur J was asked to apply a wholly objective test: would a reasonable person be induced by this statement? But he rejected this argument in favour of a more complicated test. In some cases, arguments about whether a statement is material are not relevant. This is where the person making the misrepresentation has been fraudulent. In such a case the fraudulent party cannot be heard to say "Well, you should not have relied on my lie."

McArthur J went on to say that if the statement was intended to induce and it did in fact induce, then that is sufficient for the statement to be actionable. He also applied a partly subjective test by stating it in terms of whether the statement induced this particular person, rather than a reasonable person. See p 1056 indented middle para.

If a person making a statement knows that the person to whom it is made is particularly gullible or persuadable, the maker of the statement cannot later be heard to say that the representee was stupid or idiosyncratic.

Another aspect of inducement is dealt with in this case. Remember I said that if a statement is known to be wrong then it is not actionable. Suppose a person has the opportunity to check a statement but does not use that opportunity to check it. If the check had been carried out it would have revealed the error. It might then be argued that he or she ought to have known that it was wrong. Or, alternatively, if someone does not protect his or her own interests, then he or she should not complain and try and pin responsibility on another. Redgrave v Hurd decided that a person who trusts another and does not check, even though there was an opportunity to check, is able to claim successfully against the person who made the misrepresentation. In this case, the buyer of a solicitor's practice had the opportunity to check the books but did not do so. It was held that he was entitled to take the seller at his word without inquiring further.

It seems from this case that even if the representee does carry out an inspection or investigation, but does not do it very thoroughly, then he or she can still claim that there has been an actionable misrepresentation. In this case the buyer made a desultory inspection of the papers shown to him.

That completes what has to be said about what is an actionable misrepresentation under the old law. The next step is to look to the remedy.

The remedy of rescission is the remedy available when something has gone wrong in the negotiations for a contract, including misrepresentation, mistake, undue influence, etc. The defective negotiation therefore renders the contract voidable, as we have seen.

The consequences of an actionable misrepresentation on the contract is that the contract may be rescinded. What this means is that the parties are restored to the status quo which existed before the contract was entered into. Think of rescission as winding the film back to the time before the parties made a contract. Because rescission involves this process of restoring the status quo, it is obvious that sometimes it will not be possible to do this. Things may have gone too far so that it is no longer possible to get back to the status quo - in short, rescission is not possible. An example of where rescission is no longer possible is if third party rights have intervened, that is, the purchaser of goods or land has sold them on to a third party or has mortgaged them to a third party. This last point is illustrated by the short extract from

which is simply an example of where rescission (for fraudulent misrepresentation in this case) was no longer possible because the goods in question had been acquired by an innocent third party. The case also illustrates that a voidable contract is perfectly good and effective before it is avoided. In this case it was good to pass title to the fraudulent buyer who, in turn, could pass good title to the innocent third party.

The Latin expression restitutio in integrum is used as another way of saying restoring the status quo.

In fact the remedy of rescission under the old law is surrounded by restrictive rules of which the pre-requisite that the status quo must be restored is just one.

This case illustrates the difficulty of restoring the status quo after the contract has started. The case involved the sale of a fruit shop. The seller was alleged to have made incorrect statements about the takings of the business. The buyer moved in and started trading but found that the takings of the business were much lower than what the seller had said. It was accepted that the misrepresentations were made fraudulently.

Before we look at what is involved in unwinding a contract to achieve rescission, there is a preliminary matter we must look at. A curious feature of this case is that the statement relied on by the buyer was actually in the contract itself. So, how could this be a case about misrepresentation? Up till now we have assumed that a statement must be either a promise or a representation - that the two are mutually exclusive and lead to quite different remedies. But the High Court in Alati v Kruger stated that an inducing statement may be both an inducing representation and a term of the contract. However, the party complaining must make a choice between the various remedies open to him or her. This is dealt with in the last para on p 1073. Remember that when there has been a fraudulent misrepresentation, then there is an independent action in tort for damages (the tort of deceit). The choice of remedies available to the buyer in this case, assuming that the fraudulent statement was both an inducing misrepresentation and a broken contractual term, are:

We will see shortly that a person who wants to rescind must make a considered choice and decide whether to rescind or whether to affirm the contract. Once that choice has been made, then the person is bound by it and cannot change his or her mind. This explains the reference to "affirming the purchase" in the passage 6 lines from the end of p 1073. Choices 1 and 2 above are acts of affirmation of the contract. (Note that the measure of damages is different in each case.).

Turning now to the business of rescission, the buyer issued a writ soon after taking over the business. Of course the trial of the action was some time later and then judgment was some time later again. All the while the business was deteriorating and it became increasingly difficult to restore the parties to the status quo. By the time of the court hearing the lease which the business depended on had been terminated by the landlord. So, who bears the risk of the inevitable delay with these sorts of consequences which make it more and more difficult to rescind as time passes? The answer is that it is not fair on the party who wants to rescind to say that he or she cannot rescind because of these inevitable delays. The High Court in this case made it clear that recission is the act of the party and not the act of the court (see the reference to the Reese River Silver Mining case on p 1074). This means that the buyer rescinded in good time when he issued the writ. The seller could have accepted the rescission and moved back into the business and thereby saved it from going down the drain. If it goes to court, then the court's task is to pronounce on whether the rescission was valid and proper and then the court can make orders to adjust the position of the parties to restore the status quo as nearly as possible.

You will see in the middle of p 1074 discussion about rescission at law and rescission in equity. The law took a very strict approach and said that rescission was not possible unless absolute and exact restitution was possible. Equity took a much more flexible approach and allowed rescission even if the parties could not be restored precisely to the status quo. Equity would make adjustments between the parties - a process called equitable indemnification.

The High Court has in this case has taken the process of equitable rescission a step further. One of the problems with rescission, as it has been traditionally applied, is that it is an all-or-nothing remedy. This is so even in equity because a court of equity would grant substantial rescission which meant as complete rescission as possible. The whole contract would be undone, not just a part of it. Equity's flexibility extended only to the making of adjustments between the parties to achieve an undoing of the contract. The facts of Vadasz illustrate how this approach may be unsatisfactory.

V was the director of a company which built foundation pilings. The company needed a constant supply of concrete and it obtained its concrete from Pioneer. It had a running account with Pioneer which meant in effect that it obtained concrete on credit for 45 days. The company got into financial difficulties and Pioneer was prepared to extend credit to 60 days. The company continued to experience financial difficulties. After discussion it was agreed that Mr Vadasz would provide a personal guarantee to Pioneer that the company's debt would be paid. At this stage the company was indebted to Pioneer for over $200,000. The guarantee document was drawn up and it provided that, in exchange for Pioneer continuing to supply concrete on credit, Vadasz would provide a guarantee of the company's debt, namely, of "all monies which are now or may at any time ... be owing to [Pioneer] by the Company ..." Vadasz signed this without reading it. Things continued to go badly and, in the end, Pioneer called on the guarantee in respect of a debt of $357,427.37.

Vadasz argued that he had been led to believe in conversations with Pioneer that the guarantee would only cover the future indebtedness of the company, not the past and future debts. Of course the wording of the guarantee was quite clear but Vadasz argued that he had been misled about the effect of what he was signing. This case is then somewhat similar to Curtis but with the difference that Vadasz wanted to rescind the contract of guarantee whereas in Curtis Mrs Curtis merely wanted to be not bound by a particular term, namely the exclusion clause.

The trial judge accepted that there had been a misrepresentation about the effect of the contract of guarantee. The judge said that Vadasz was entitled to rescission. But he then considered the question: what sort of rescission? If the contract of guarantee was rescinded in toto then this would be too much because Vadasz had clearly agreed to provide some form of guarantee to Pioneer and had in fact benefited from further deliveries of concrete for his company. On the other hand not ordering some form of relief when Vadasz had been misled about the extent of the liability he was agreeing to would also be unfair. The trial judge compromised and ordered that the contract of guarantee be rescinded only in respect of past debts of the company but that it be effective in respect of future debts.

When will a court order part rescission as opposed to full rescission? It is relevant, in deciding whether a court should set aside the contract in its entirety or only in part, to ask whether the representee, had he or she known the truth, would not have entered into the contract at all (in which case full rescission is appropriate) or would have asked for a suitable modification to its terms (in which case part rescission may be appropriate). This test is briefly referred to on p 1084 end of 2nd last para "If it appears that the other party ...".

The next case continues with the theme: what exactly does the process of rescission involve?

In this case Smitt was induced into buying a farm by 3 fraudulent misrepresentations. For reasons which are not clear he did not, or could not, sue for damages in deceit. So the court only had to consider what could be done by way of rescission. There is sometimes a difficult line to draw between a claim for damages and a claim for adjustment as part of equitable indemnification, that is the process by which equity seeks to achieve substantial restitution to the status quo. The case explores this line between the two. Smitt, the buyer had paid for improvements to the farm before he rescinded. The High Court ruled that as part of the process of making adjustments to achieve substantial rescission, Smitt could claim:

• return of purchase money plus interest
• legal and other costs associated with the purchase
• cost of permanent improvements which were put in for the good of the property and not just for his own enjoyment.

He could not recover by way of indemnification the losses suffered in running the business. This could only be the subject of a damages claim. The seller was able to claim as part of the restoration to the status quo an occupation rent from Smitt for the time he had been in possession of the farm.

Another rule about rescission is that the person wishing to rescind must make a choice whether to rescind or whether to affirm the contract. We have seen this mentioned already when we looked at Alati v Kruger. Once the choice is made, then he or she is bound by that choice. It is sometimes possible to argue that a person has lost the right to rescind because he or she affirmed the contract, that is, acted as if he or she wished to continue with the contract. This argument was tried but without success in Brown v Smitt. It is an argument which can work if the party does nothing. In such a case he or she may be taken to have affirmed the contract.

I have already pointed out that, quite independently of contract, an inducing misrepresentation may generate a tort remedy of damages. I do not need to say any more about this. You have dealt with this in your torts course, though I suspect that you did not spend much time on the tort of deceit, that is, the tort appropriate to fraudulent misrepresentation. The tort of negligence, on the other hand, you spent a lot of time on. The area of negligence which is relevant to an inducing misrepresentation is that of negligent statements giving rise to economic loss. You may recall that there were some difficulties about pinning down when a duty of care would be owed and when it would not be owed in these cases. When the negligent statement is made in the context of contractual negotiations, the problems of proximity and the fear of indeterminate liability are obviously very much lessened and so the courts are prepared to find that a duty of care is owed in the context of contractual negotiations. The most often cited case in this context is Esso Petroleum Co Ltd v Mardon (see case book p 1053).

That finishes with the old law on misrepresentation. There is just one more point to make about the old law of misrepresentation and that is that in the Australian Capital Territory and in South Australia legislation has been passed to modify some of the less satisfactory aspects of the old law. This legislation is based on the English Misrepresentation Act 1967.

Statutory modifications to the general law of misrepresentation in SA and ACT

What this legislation does is: