Cassidy v Saatchi & Saatchi Australia Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Cassidy v Saatchi & Saatchi Australia Pty Ltd [2004] FCAFC 34

MISLEADING CONDUCT – misleading conduct in relation to financial services – misleading advertisements prepared by advertising agency but vetted and approved by principal – principal arranged publication of advertisements through separate entity – whether advertising agency made the representations contained in the advertisements – whether advertising agency contravened s 12DA(1) of Australian Securities & Investments Commission Act 2001 (Cth) as principal – no allegation that advertising agency liable as accessory under s 12DN of Act

TRADE PRACTICES – misleading conduct – advertising agency – consideration of circumstances in which advertising agency preparing advertisements which are misleading may be liable as principal for contravention of s 12DA(1) of Australian Securities & Investments Commission Act 2001 (Cth) in terms equivalent to s 52 of Trade Practices Act 1974 (Cth)

Australian Securities and Investments Commission Act 1989 (Cth)
Australian Securities & Investments Commission Act 2001 (Cth) ss 12DA, 12DA(1), 12DB, 12DN, 12GB, 12GD, 12GF, 12GI, 12GM
Trade Practices Act 1974 (Cth) ss 52, 53, 53(e),65A, 65A(1)(b), 75B, 79, 80, 82, 85(3), 87

Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1983) 66 FLR 453 noted
Barton v Croner Trading Pty Ltd (1984) 3 FCR 95 applied
Brown v Jam Factory Pty Ltd (1991) 35 ALR 79 referred to
Cassidy v NRMA Health Pty Ltd [2002] FCA 1228 discussed
Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 cited
Gardam v George Wills & Co Ltd (1988) 82 ALR 415 considered
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 applied
Henville v Walker (2001) 206 CLR 459 cited
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty (1981) 149 CLR 191 discussed
Taco Company of Australia Ltd v Taco Bell Pty Ltd (1982) 42 ALR 177 considered
Thompson v Riley McKay Pty Ltd (1980) 29 ALR 267 considered
Thompson v Australian Capital Television Pty Limited (1996) 186 CLR 574 referred to
Universal Telecasters (Qld) Ltd v Guthrie (1978) 18 ALR 531 followed
Webb v Bloch (1928) 41 CLR 331 considered

BRIAN CASSIDY CHIEF EXECUTIVE OFFICER AUSTRALIAN COMPETITION AND CONSUMER COMMISSION AND AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v SAATCHI & SAATCHI AUSTRALIA PTY LTD ACN 001 720 921
N 1123 of 2002

MOORE, MANSFIELD AND STONE JJ
25 FEBRUARY 2004
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 1123 OF 2002

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

BRIAN CASSIDY CHIEF EXECUTIVE OFFICER AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
FIRST APPELLANT

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
SECOND APPELLANT

AND:

SAATCHI & SAATCHI AUSTRALIA PTY LTD
ACN 001 720 921
RESPONDENT

JUDGES:

MOORE, MANSFIELD AND STONE JJ

DATE OF ORDER:

25 FEBRUARY 2004

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.        The appeal is dismissed.

2.        The appellants pay the respondent’s costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

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Details
Case
[2004] FCAFC 34
Decision Date

CaseChat Overview and Summary

In the matter of Cassidy v Saatchi & Saatchi Australia Pty Ltd, the respondents appealed against the dismissal of their claim that the respondents had contravened section 12DA(1) of the ASIC Act by making misleading representations in a series of newspaper advertisements for NRMA's health insurance product. The appellants contended that the respondents were liable as principals for the misleading representations in the advertisements, while the respondents argued that they were not responsible for the misleading nature of the advertisements. The primary judge found in favour of the respondents, concluding that the advertisements did not convey to the public that the respondents made the misleading representations. The appellants appealed this decision, contending that the primary judge erred in his interpretation of the law and the facts.

The central issue before the court was whether the respondents, Saatchi & Saatchi Australia Pty Ltd, were liable as principals for the misleading representations made in the advertisements. The court had to determine whether the advertisements conveyed to the public that the respondents made the misleading representations, or whether they were merely advertisements created for NRMA. The court considered the size of the printed name and key number of the respondents in relation to the rest of the advertisement, and the overall impression created by the advertisements.

The court found that the advertisements did not convey to the public that the respondents made the misleading representations. The size of the printed name and key number of the respondents, and the overall impression created by the advertisements, did not convert them into joint advertisements of NRMA and the respondents. The court concluded that the respondents did not make the misleading representations, and therefore were not liable as principals for the contravention of section 12DA(1) of the ASIC Act. The appeal was dismissed, with the appellants ordered to pay the respondents' costs of the appeal.

Orders

Orders of the court

1. The appeal is dismissed.

2. The appellants pay the respondent’s costs of the appeal.

Background

Background to the litigation

For the reasons given below, in the circumstances of this matter, we have reached the view that the respondent did not contravene s 12DA(1) of the new ASIC Act in the manner alleged, and that the appeal should be dismissed.THE FACTS The facts are not now contentious. The following recitation of the facts is taken from the reasons for decision of the learned judge at first instance. The respondent provided advertising services to NRMA Ltd (NRMA) from about 1993. The relationship between the respondent and NRMA was recorded in an agency agreement entered into in September 1998. The practice which was then followed when NRMA wanted the respondent to develop an advertising campaign was to send to the respondent a ‘communications brief’ which contained essential information about the campaign which NRMA wanted the respondent to develop. The next step was for the respondent to prepare an ‘ideas brief’ for NRMA, setting out the approach which it proposed to take in creating a suitable advertisement for the campaign. If NRMA approved the ideas brief, the respondent’s creative personnel would then prepare and design the advertisements in accordance with the concepts set out in the ideas brief. Its creative team would prepare drafts, which were sent to NRMA for approval. There would commonly be an exchange of comments between the parties before NRMA gave its final approval to the form of the advertisement. Draft advertisements were reviewed by the marketing personnel of NRMA, that is, those who had issued the campaign instructions, and by its in-house legal advisers. Those various steps were followed in the present case. The in-house solicitor for NRMA approved the final draft advertisements submitted to NRMA by the respondent, and the respondent was aware of that. In July and August 2001, NRMA ran a series of newspaper advertisements for a new health insurance product under the caption ‘Closing the Gap’. The substance of the advertisements was that pregnant women would be able to have their babies delivered without making any payment for hospitalisation or medical expenses. The advertisements stated that NRMA would make every payment for its fund members irrespective of how advanced the pregnancy was at the time when the mother joined the fund. There were provisos in small print to the advertisements. A pregnant woman was fully covered only after payment of any policy excess or ‘co-payment’. Women who were pregnant at the time of joining the fund were required to have completed a 12 month waiting period with NRMA or with their existing fund. The respondent did not place the advertisements in the newspapers for NRMA. A separate company Zenith Media Pty Ltd (Zenith), unrelated to the respondent, was engaged by NRMA to decide in which publications the advertisements were to appear. Then Zenith purchased the necessary space in the publications on behalf of NRMA. Each of the published advertisements had the name ‘Saatchi’ followed by the respondent’s ‘key number’ in its bottom right hand corner, immediately after the provisos which referred to the policy excess and co-payment. Its name and key number were in even smaller font than the provisos. The key number was a unique identification number to ensure the correct advertisement was published as arranged by Zenith.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

MOORE, MANSFIELD AND STONE JJ
It is not disputed that the advertisements contained representations which were misleading. NRMA consented to declarations that it had breached s 12DA of the new ASIC Act. The respondent also formally admitted that the advertisements contained representations that were misleading. What the respondent disputed was that the representations were made by it. The respondent says, in the written outline of argument of its senior counsel, that it did no more than prepare the advertisement for NRMA in the knowledge that, if approved, they would be likely to be published as part of an advertising campaign. The respondent did not approve the advertisements or authorise or arrange for their publication. There is no claim that the respondent aided or abetted the contravention by its principal of s 12DA of the new ASIC Act or that it was knowingly concerned in the contravention of s 12DA by its principal.THE DECISION AT FIRST INSTANCE Section 12DA(1) of the new ASIC Act provides that a corporation must not in trade or commerce engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. Apart from it applying only to conduct in relation to financial services, s 12DA(1) corresponds with s 52(1) of the TP Act. There is no direct overlap of the operation of those provisions. Section 51AF of the TP Act makes it clear that Part V of the TP Act, including s 52, does not apply to the supply, or possible supply, of financial services or to conduct in relation to financial services. Section 12GD(1) of the new ASIC Act deals with accessorial liability. In relevant respects, it is also to the same effect as s 75B of the TP Act. However, the appellants did not seek to establish that the respondent’s conduct engaged s 12GD(1). The case presented by the appellants was that the respondent as principal, by its conduct, contravened s 12DA(1) by making misrepresentations that NRMA would make all payments of hospital and medical expenses for the delivery of babies for pregnant mothers who were members of the NRMA Fund. The learned judge at first instance identified the issue as being whether there were facts which brought home to the relevant section of the public that the respondent made the misrepresentations. His Honour pointed out that in Taco Company of Australia Ltd v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202 Deane and Fitzgerald JJ said that whether or not conduct amounts to a misrepresentation is a question of fact to be decided by considering what is said and what is done against the background of all relevant surrounding circumstances. His Honour then concluded that the advertisements did not convey to the relevant section of the public that the misrepresentations they contained were made by the respondent. They were clearly advertisements of NRMA making (what came to be accepted as) misrepresentations. The size of the printed name of the respondent and its key number, relative to the size of other print on the advertisements, and the impression created by a fair reading of the advertisements, did not convert the advertisements into joint advertisements of NRMA and the respondent, and would not give any such impression to the relevant section of the public.

Ratio Decidendi

Legal Principle Established

Established by: MOORE, MANSFIELD AND STONE JJ

Accordingly, the application was dismissed with costs.CONSIDERATION OF CONTENTIONS The appellants first attributed to the learned judge at first instance the reasoning that the respondent was not liable as a principal contravener but was liable as an accessory because there were provisions in both the new ASIC Act and the TP Act which deal with accessorial liability. Then they contend there are errors in so reasoning. It is convenient to deal with that contention immediately. We do not consider the learned judge at first instance did adopt that process of reasoning. His Honour observed that the appellants’ claim was that the respondent was liable as a principal contravener of s 12DA(1) of the new ASIC Act, and that there was no claim that it was liable as an accessory by reason of s 12GD(1). His Honour did not conclude that the respondent was, or if the claim was made against it on that basis would have been, liable as an accessory. That claim was not made. It was not addressed by his Honour because he did not need to do so. He did not reason, as asserted, that because s 12GD(1) provided for circumstances in which accessorial liability could arise, the respondent was not liable as a principal contravener of s 12DA(1). In our judgment, the learned judge at first instance correctly addressed the question as being whether the respondent made the representation (which is now acknowledged as having been misleading). The case pleaded by the appellants was that the conduct of the respondent resulted in it making the false representations. Paragraph 38 of the Second Further Amended Statement of Claim included the allegation that the respondent arranged for the misleading advertisements to be published. It was not found to have done so. The alternative pleas in pars 38A, 38B and 38C were that the respondent made the false representations either because it was the natural and probable consequence of its creation and development of the advertisements that they would be published, or because it provided the advertisements to NRMA so that NRMA would publish them. It is then pleaded in par 39:‘By engaging in the conduct referred to in paragraphs 38, 38A, 38B and 38C above, (the respondent) made one or more of the (misrepresentations).’The conclusion in par 48 of the Second Further Amended Statement of Claim is that, by reason of those factual matters, the respondent in trade or commerce in relation to financial services engaged in conduct that was misleading and deceptive in contravention of s 12DA(1) of the new ASIC Act. It was precisely that case which his Honour addressed. He said:‘The case was pleaded and conducted upon the footing that Saatchi engaged in misleading conduct by making misrepresentations that the NRMA companies would make all payments of hospital and medical expenses for the delivery of babies for pregnant mothers who were members of the fund. Thus, as stated above, the only issue is whether Saatchi made that misrepresentation.’ He considered whether the respondent made the misrepresentations, by having created the advertisements with the intention or knowledge that they would (subject to the approval of the NRMA in-house legal advisers) later be published by NRMA by placing or causing them to be placed in newspapers. That is the conduct which, the appellants alleged, amounted to a contravention of s 12DA(1).