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Business Law
BTF11010
Semester 1, 2016Non-Contractual
Risks and Oli!ations
Seminar ", week "
#r$ %erstin Steiner
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Structure of the Seminar
General Matters
Seminar Content: Statements & Behaviour:
Negligent Misrepresentation and Misleading and Deceptive ConductA. Overvie of lia!ilities for statements
B. Australian Consumer "a #hereafter called AC"$
C. %ort
Summar
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General Matters
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Material
Moodle: location for everthing'
(o to Stud: Stud Approach section ith details on online tas)s
*hat to stud: +nit Content section ith details of ee)l activities
*ritten material
+nit Guide: short overvie
Student Activit Guide:
(o to stud: detailed instructions and e,planations including the
online activities *hat to stud: overvie of topics- o!ectives- readings- cases &
legislation- e,ercises for the seminar and tutorials
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%ips for succeeding%he /perfect0 expandable stud organisation
Pre-class activities 1ead the te,t!oo)
Do the studplan e,ercise in MBus"a"a!
2repare the in3class activities
In-class activities Attend and participate
Post-class activities Organise our notes- as) 4uestion in consultation times
Chec) understanding ith the homeor) in MBus"a"a! (ave fun5
6.
Assessment post-class activities
*ee)l online test in MBus"a"a!
2repare ansers to 4uestions and chec) in consultation times
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2ractice: *ee)l Online 7ui8
1 2 3 4 5 6 7 8 9 10
0
20
40
60
80
100
120
140
160
Total numer o& attem'ts( )*"
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Statements & Behaviour:
Negligent Misrepresentation andMisleading and Deceptive Conduct
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%opic O!ectives
On completion of this topic- ou should !e a!le to:
Descri!e the la of torts- its general principles and the statutes of limitations for tort actions9
"ist and e,plain the necessar elements re4uired to esta!lish negligent misstatement and
appl them to a practical situation9
dentif the defences a defendant can raise in an action for negligence- and their potential
impact on damages paid9
;,plain negligence and the introduction of civil lia!ilit legislation ! federal- state and
territor governments9
;,plain the elements of misleading and deceptive conduct and appl them to a practical
situation9 and
;,plain the distinction !eteen common la and statute la- using the lia!ilit for
statements as an e,ample.
C h e c k l i s t
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Scenario: %he )noledgea!le Archie
Archi 2t "td is a compan hich provides architectural services and advice.
B letter Archi advised
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"egal 1is)s for Advice Giver
Incorrect Advice
Statute
S 18 ACL,Seminar 3,
Chapter 3 !
S 12 "A #1$ ASICand
Corporation% Act2001 #C&th$
Seminar 10
Common La'
"eceit( )raud*ot covered in
the %u+ect
*e-.i-ent/i%repre%entatio
nSeminar 3,
Chapter 3 !
Contract reach o a term
Seminar% 6, 8
Chapter% 6, 7,9and 9 !
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Australian Consumer "a
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Misleading or Deceptive Conduct
AC" s >@ provides:
A person shall not- in trade or commerce- engage in conduct that is misleading
or deceptive or is li)el to mislead or deceive.
Section >@ AC" focuses on the NA%+1; O %(; 1;21;S;N%A%ON- NO%
%(; CONDC+% O %(; 1;21;S;N%O1.
%herefore it is not necessar to prove fraud or negligence
Gi!!s C in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd #>E@F$
A%21 ?3H?I Yorke v Ross Lucas Pty Ltd #>E@H$ A%21 ? 3?> #ederal Court$
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"egal 1is) under s >@ AC"
>. Step
• Applica!ilit• A person• n trade or
commerce
F. Step
• Breach• Misleading or deceptive
or li)el to do so• Conduct• (alf truths• Opinions- usuall not
covered e,cept for • "ies• ;,pert opinion as
statement of fact• f totall
unsupported ! thefacts.
H. Step
• Damages• Causation
. Step
• Defences• ;,clusion
clauses anddisclaimers• Not ver
effective- see Bateman v
Slatyer#>E@I$ A%21?3IJF#ederalCourt$
Disclaimer as usual
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>. Step: Applica!ilit
A trader hose conduct- o!ectivel determined- is misleading ill
contravene s >@- hether or not he or she has acted honestl andKor
reasona!l: ;4uit Access.
t is necessar to prove a causal connection !eteen the claimed loss
or damage and the conduct complained of.
But it is not necessar that the claimant !e misled.
t ma !e- for e,ample- that a trader has suffered loss of !usiness !ecause his or her customers have !een misled ! a competitor0s
misleading advertising.
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F. Step: Le %erm
Conduct
%he use of another trader0s distinctive ords or products- features and slogans9
Similar !usiness names #Taco Bell of Australia Inc v Taco Bell Pty Ltd .$9
Comparative advertising hen comparisons !eteen products are claimed not to !e accurate# Eveready Australia Pty Ltd v illette Australia Pty Ltd F??? A%21 >3I>$9
Defamator comments9
Misleading conduct in emploment9
Character merchandising9
Silence- here there is an o!ligation to disclose # !en"o Investments Pty Ltd # $rs v Collins %arrickville Pty Ltd #>E@@$ IE A"1 @$.
%he plaintiff is assisted ! s AC" hich provides that a representation as to a future mattershall !e ta)en to !e misleading if the author did not have reasona!le grounds for ma)ing therepresentation.
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F. Step: Le %erm
Misleading or Deceptive
Conduct that ma result in confusion in the mind of consumers is notsufficient to esta!lish a !reach of s >@ AC": see %c&onald's System of
Australia Pty Ltd v %c(illiams (ines Pty Ltd #>E@?$ HH A"1 HE case.
*hether conduct is misleading or is li)el to mislead or deceive is ano!ective 4uestion to !e determined ! the court.
;vidence as to persons in the target class having !een misled ill !e persuasive !ut not determinative.
Need a /real or remote chance or possi!ilit0 of possi!le victims !eingmisled.
NB: ntention is not an element of the contravention.
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Activit: *or)ing ith Cases
Taco Com)any of Australia v Taco Bell Pty Ltd #>E@F$ A%21 ?3H?H
n >E@>- %aco Bell of Australia 2t "td- a su!sidiar of a +nited States
chain of Me,ican restaurants- opened a Me,ican food restaurant called
P%aco BellP at Bondi in Sdne. Both companies complained of the use of
the name of the other.
(as there !een an infringement of the AC" and- if so- hich sectionKs
and ! hom5 + l e a s e n o t e t a t w e n
t e c a s e w a s o r i ! i n a l l -
d e c i d e d , t e . C L w a s
n o t i n & o r c e , i n s t e a d i t
w a s i t s ' r e d e c e s s o r , t e
T + . t a t w a s
c o n s i d e r e d $
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Solution
Taco Com)any of Australia v Taco Bell
Pty Ltdssue: Breach of s >@ AC" ! %aco Bell of Australia 2t "td5
>. Applica!ilit
person
in trade or commerce
F. Breach
conduct that is misleading5
%he court set don four guidelines in relation to hether the conduct complained of is li)el to mislead ordeceive.
>. t is necessar to identif the relevant section of the pu!lic ho might !e li)el to !e misled.F. F. Once the relevant section of the pu!lic has !een identified- the matter is to !e considered ! reference to
all those ho come ithin it.
H. ;vidence that some have !een misled or deceived is admissi!le and ma !e persuasive- !ut it does notitself conclusivel esta!lish that conduct is misleading or deceptive or li)el to mislead or deceive.
. t is necessar to in4uire h proven misconception has arisen !ecause it is onl ! this investigation thatthe evidence of those ho are shon to have !een misled can !e evaluated and it can !e determined
hether the are confused !ecause of misleading or deceptive conduct on the part of the defendant.
% h i s a n s e r i s l e f t i n o n p u r p o s e t o s h o & o u
h o t o s o l v e t h e s e p r o ! l e m s '
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Solution continued6
Court0s decision
P%aco BellP had !ecome associated ith the Bondi restaurant some considera!le time !efore the+nited States %aco Compan commenced operations in Sdne under the same name.
H. Damages
Causation
%he cause of an actual or li)el misconception as the use of the name ! the +nited Statescompan hich had come after the Bondi restaurant had esta!lished its reputation throughoutSdne and accordingl should !e restrained
As long as the Cronulla P%aco BellP can esta!lish that it has ac4uired a reputation throughoutSdne for Me,ican food in that name- an later competitor ho ished to use the same nameis li)el to cause actual or li)el misconception and could !e met ith an action under s. F.
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mportant 2oints
Mere confusion does not amount to conduct that is misleading or deceptive: %c(illiams(ines Pty Ltd v %c&onald*s System of Australia
;ven if a product has a close resem!lance to the product of another manufacturer to the
point here the consumer ould !e li)el to !e misled- if the product is properl
la!elled ith the name of its on manufacture- there generall ill not !e a !reach:
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd
%he operation of s >@ is not limited to transactions involving consumers.
Much of the litigation involves traders attac)ing each other0s advertising or other
representations- i.e. Eveready Australia Pty Ltd v illette Australia Pty Ltd #F???$
+nfair trading ill not !e caught as such: it must involve some element of misleading
conduct.
%his ill onl occur if the conduct contains or conves a misrepresentation: see Taco
Bell of Australia Inc v Taco Bell Pty Ltd .
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%ort of Negligence
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&ono+,ue v Stevenson
and Negligent Misrepresentation6.
(ouse of "ords #(o"$ decided a person could !e lia!le for
negligence even though no contract
(o" set out the elements of negligence action:
Dut of care
Standard of care
Causation & 1emoteness tests
But &ono+,ue v Stevenson concerned ith negligentl
manufactured goods- not ords
ssue: Could a person oe a dut of care hen giving advice or
information5
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Definition:
Negligent Misrepresentation
A statement of fact- advice or opinion made in !usiness that is relied upon !
another !ut hich is inaccurate or misleading.
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(istorical Detour
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Development of the Common "a
Candler v Crane- C,ristmas # Co >E> F LB >J
!edley Byrne # Co Ltd v !eller and Partners Ltd >EJ AC J
%LC Assurance Co Ltd v Evatt #>EJ@$ >FF C"1 J
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;arl Decisions
Candler v Crane C,ristmas # C$ >E> ;nglish Court of Appeal
acts
CC & Co as a firm of accountants
CC prepared accounts for %( Mines "td
CC )ne accounts ere to induce Candler to invest in %(
Candler invested !ut lost hen %( ent !ro)e.
CC had !een /e,tremel0 careless 3 !ut NO% dishonest
Candler sued CC for damages for negligence
Decision
As4uith & Cohen " 3 the maorit 3 held that:
Donoghue v Stevenson did not appl to negligent advice
Damages onl in /fraud0 case- folloing Derr v 2ee) as there as no evidence ofdishonest- no lia!ilit for deceit
Denning " 3 dissenting 3 held that:
Donoghue v Stevenson applied
Candler as entitled to damages
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Case:
!edley Byrne # Co v !eller # Partners >EJ AC J
acts (edle Brne as an advertising agenc.
(eller as a !an).
;asipoer #/;0$ as a customer of the !an). Before ta)ing or) from ;- (B as)ed Ban) for reference.
1eference as good and mar)ed:
/Confidential. or private use & ithout responsi!ilit on part of !an)0
;asipoer ent !ro)e oing (B mone
(B sued Ban) for damages for giving negligent advice
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D;CSON:
!edley Byrne # Co v !eller # Partners
(ouse of "ords held:
2erson could !e lia!le for giving negligent advice or information if
the oed a dut of care to the plaintiff not to !e negligent.
(oever- on the facts- Ban) not lia!le !ecause of disclaimer
Side ssue: *e ill loo) at disclaimers later on hen e are tal)ing
a!out contract'
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Disclaimers
/Confidential: or our private use and ithout responsi!ilit on the
part of
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Case:
%LC Assurance Co v Evatt #>EJ@$ >FF C"1 J acts
M"C Assurance "td and 2almer "td ere !oth su!sidiaries of M"C "td
;vatt held polic ith M"C Assurance.
; sought advice from M"C Assurance regarding financial sta!ilit of2almer
M"C Assurance said 2almer sta!le & safe investment
; invested in 2almer
2almer insolvent & ; lost investment Q interest
; sued M"C Assurance for damages for giving negligent advice.
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D;CSON:
%LC Assurance Co v Evatt
%he (igh Court 3 #>EJ@$ >FF C"1 J R held that the defendant as
lia!le for their negligent misstatement.
Dut e,tended not onl to professional advisors !ut also to persons ho
give advice in /serious circumstances0 as per Baric) C
%he (igh Court0s decision as overturned hen the case as
appealed to the 2riv Council.
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Case:
S,addock # Assocs. v Parramata City Council #>E@>$ (G(CO+1% O A+S%1A"A
Shaddoc) land developer
S as)ed 2CC if an road3idening
proposals for land
2CC said no & S !ought land
"ater 2CC compulsoril ac4uired >KH
of land for road3idening.
S sued for damages for
negligent misrepresentation
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Decision: Shaddoc)
>. (edle Brne is clearl adopted as la in Australia.
F. *hen is dut of care oed5
*henever a person gives advice or info.9
to another on a serious matter9
heKshe realises or ought to realise that the other person ill act on it9
it is reasona!le for the other person to so act on it9 and
heKshe oes a dut to e,ercise reasona!le care hen giving the advice or
information.
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;nd of (istorical Detour
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1oadmap: Overvie
"ia!ilit under Common "a
1 Step
•Dut of Care•Advice given inserious manner •Advice giver should
realise trust and thatadvice ill !e actedupon•1easona!le that theother person ill actupon it•2ossi!le limitationsas per s@#>$ *rongsAct•1is) forseea!le•
1is) notinsignificant•1easona!le personould have ta)en precautions
2 Step
•Breach Standard of Care•2ro!a!ilit•2ractica!ilit•Gravit•ustifia!ilit
•2ossi!le limitations as pers @#F$ *rongs Act•Dut to arn of ris)- s?
•1easona!le personould have ta)en
precautions- s @ #F$•Standard of care for professionals•Other principles#alternative !ehaviour-change of !ehaviour$- sE
3 Step
•Damages•Causation•remoteness
4 "eence%
•Contri!utornegligence•Toluntar ris)assumption
Disclaimer: %his is one of m so called 1OADMA2S R no the are not giving ou an anser to a legal pro!lem 6
%he provide ou ith a structure on ho to anser a legal 4uestion
M2O1%AN%: %he are also sometimes incomplete- no- for instance- the are missing case studies. %his means UO+ have to complete it6
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>. Step: Dut of Care
*hen is it oed5
Dut on the defendant to avoid ma)ing careless statements hich cause harm. !edley Byrne v !eller #>EJ$ esta!lished that the la ill impl a dut of carein the ma)ing of statements.
A dut of care e,tends not onl to professional advisers !ut also to persons ho provide information: %LC v Evatt #>EJ@$
%his dut of care also e,tends to advice that is given in /serious circumstances0:S,addock v Parramatta City Council #>E@>$
A dut of care also arises and e,ists here there is a /special relationship0
!eteen the parties: San Se/astian v %inister Res)onsi/le for Administerin+ Plannin+ and Assessment Act #>E@J$
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>. Step: Dut of Care
Special 1elationship
>. Spea)er must !e aare that heK she is !eing trusted ! the
representee to give informationKadvice hich the representee
!elieves the spea)er to possess or to have access to9
F. %he su!ect matter of the informationK advice must !e of a serious
or !usiness nature.
H. %he spea)er must realise that the representee intended to act on the
advice.
. n the circumstances- it must !e reasona!le for the representee to
rel on the spea)er0s informationKadvice.
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>. Step: Dut of Care
n 2ractice: Hrd 2art6 Auditors
Accounting firm #ABC$ acted as auditors for < Compan.
After auditing < in F??J- ABC certified
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>. Step: Dut of Care
%pes of 1elationship
Advi%or
epre%entee
Auditor
Compan
Shareho.der
anerotentia.inve%tor%
Creditor%
Simple #direct$ relationship Auditor
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>. Step: Dut of Care
Case: Esanda Finance Cor)oration #>EEI$ >@@ C"1 F>
2M( as the auditor for a compan called ;,cel.
As auditors- 2M( certified the accounts of ;,cel for the ear ending
une >E@E.
;sanda made loans to a num!er of companies associated ith ;,cel.
As securit for the repament of those loans- ;sanda accepted
guarantees from ;,cel.
;sanda claimed that its decision ma)e loans as in part due to its
reliance on the audited accounts of ;,cel.
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Decision: Esanda Finance Cor)oration
No suggestion that the audit had !een done especiall for ;sanda.
;sanda sued 2M(.
2M( claimed that it oed no dut of care to ;sanda.
(eld: 2M( oed no dut of care to ;sanda.
+ltimatel- this seemed to !e due to the reasona!leness of the
plaintiff0s reliance.
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>. Step: Dut of Care
AuditorsKAccountantsK inancial AdvisorsK Anone giving 2rofessional
Advice
Auditors etc onl oe a dut of care if:
Auditor etc prepared report for purpose of inducing plaintiff #or a
determinate class of persons hich included the plaintiff$ to act in a
certain a- &
Auditor etc )ne or ought to have )non that plaintiff ould rel
on the report ithout see)ing further advice
;sanda inance Corp v 2eat Maric) (ungerfords
Dut often onl oed to compan- not investors
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F. Step: Breach of Standard of Care
%he level of care of a reasona!le person in the position of the defendant inthe circumstances
actors R (yon+ SC v S,irt R no codified in *rongs Act 2ro!a!ilit
Gravit
2ractica!ilit
ustifia!ilit
2rofessional advisers 3 the level of s)ill & care is that appropriate to a
person ith that professional statusK4ualificationsKe,pertise s.E *rongs Act >E@ #S&O01 p >F?$
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F. Step: Breach of Standard of Care
S@#F$ *rongs Act
S @#F$ %o determine if reasona!le person ould have ta)en precautions- Court
considers #among other things$:
#a$ pro!a!ilit that harm ould occur
#!$ li)el seriousness of harm
#c$ !urden of ta)ing precautions
#d$ social utilit of activit
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H. Step: Damages
%he plaintiff must sho some lin) !eteen the damage suffered and the
defendant0s conduct. %o factors for consideration are:
that the loss or damage as /directl caused0 ! the defendant0s !reach R causation9
and
that the loss as /not too remote0 from the !reach 3 remoteness
*ould a reasona!le person ith the )noledge and e,perience to !e e,pected of
a advisor etc of the advice have foreseen the )ind of damage that occurred5
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. Step: Defences
"eence%
Contri+utor*e-.i-ence
roportionatereduction o
dama-e%
Can +e up to100
o.untar i%A%%umption
!ota. deence,the p.ainti'i.. recover
nothin-
*o deence
)u.. amountrecovered
Disclaimer as usual
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Summar
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OvervieApp.ica+i.it
reach "ama-e% "eence%
roduct%art 3:5ACL
Statement%
S 18 ACL "ut oCare
reach oStandard oCare
"ama-e% "eence%
roduct% !ort o
ne-.i-ence
Statement% !ort o*e-.i-ence
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Don0t forget6
This week’s topic
Tutorials, attendance and preparation
Homework - online activit testing our )noledge and preparing for
-> Weekly Online Test- starting and visi!le from Saturda onards and counting toards
our grade'
Next week’s topics
1eading the material
Online Studplan e,ercises
2reparation for seminars and tutorials