Downey v Carlson Hotels Asia Pacific Pty Ltd
[2005] QCA 199
•10 June 2005
SUPREME COURT OF QUEENSLAND
CITATION:
Downey & Anor v Carlson Hotels Asia Pacific P/L
[2005] QCA 199PARTIES:
PETER JUSTIN DOWNEY and TERESITA DOWNEY
(plaintiffs/respondents)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/appellant)DARRYL NORMAN GOSCHNICK
(plaintiff/respondent)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant /appellant)MARTIN HALE and NORMA CHRISTINE HALE
(plaintiffs/respondents)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant/appellant)GARY JAMES BIDNER
(plaintiff/respondent)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant/appellant)GREGORY PAUL JENSEN
(plaintiff/respondent)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant/appellant)WESLEY EARL ELPHICK and
IRENE ETHEL ELPHICK
(plaintiffs/respondents)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant/appellant)EDWIN LOWE and STELLA FOH-LIN LOWE
(plaintiffs/respondents)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant/appellant)DAVID JOHN PRENTICE
(plaintiff/respondent)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant/appellant)TREVOR RICHARD GREEN
(plaintiff/respondent)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant/appellant)KEITH DEREK BISHOP
(plaintiff/respondent)
v
CARLSON HOTELS ASIA PACIFIC PTY LIMITED
ACN 000 708 332
(defendant/applicant/appellant)FILE NO/S:
Appeal No 8852 of 2004
Appeal No 8853 of 2004
Appeal No 8854 of 2004
Appeal No 8855 of 2004
Appeal No 8856 of 2004
Appeal No 8857 of 2004
Appeal No 8858 of 2004
Appeal No 8859 of 2004
Appeal No 8860 of 2004
Appeal No 8861 of 2004
DC No 4992 of 2002
DC No 1747 of 2003
DC No 2460 of 2003
DC No 2150 of 2003
DC No 2149 of 2003
DC No 2148 of 2003
DC No 2147 of 2003
DC No 1825 of 2003
DC No 1816 of 2003
DC No 1817 of 2003DIVISION:
Court of Appeal
PROCEEDING:
General Civil Appeal
Application for Leave s 118 DCA (Civil)ORIGINATING COURT:
District Court at Brisbane
DELIVERED ON:
10 June 2005
DELIVERED AT:
Brisbane
HEARING DATE:
16 May 2005, 17 May 2005
JUDGES:
Williams and Keane JJA and Atkinson J
Separate reasons for judgment of each member of the Court, each concurring as to the orders madeORDER:
In Appeal No 8852 of 2004:
1. Appeal dismissed
2. Appellant to pay costs of the respondents to be assessed on the standard basis
In Appeals numbered 8853-8861, in each case:
1. Application for leave to appeal granted
2. Appeal dismissed
3. Appellant to pay costs of the respondent or respondents to be assessed on the standard basisCATCHWORDS:
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - PARTICULAR CLASSES OF CONDUCT - ADVERTISING AND RELATED PUBLICATION - where advertising material prepared for the sale of apartments in a complex that would be operated by the appellant as a hotel - where advertising material prepared by a third party - where it was necessary to obtain the appellant's consent to the content of any advertising material making use of the appellant's name or logo - where the appellant could not require the third party to publish the advertising material - where advertising material contained statements about the appellant's own opinions and expectations concerning the success of the complex - whether the appellant adopted the representations made by the third party - whether the third party served only as a medium through which the appellant made representations directly to potential consumers
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - OFFICERS OR AGENTS OF BODY CORPORATE - CONDUCT "ON BEHALF OF" - where a third party purported to communicate views of the appellant concerning the prospects of an apartment complex that the appellant was to operate as a hotel - where the third party communicated these views with the permission of the appellant - where the appellant had approved the content of the communications made on its behalf - whether conduct of third party was done in the course of the appellant's own business, affairs or activities - whether the respondent's pleadings were sufficient to invoke s 84(2) Trade Practices Act 1974 (Cth) - whether conduct of third party engaged in "on behalf of" the appellant
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - RELIANCE - where the appellant had approved the inclusion of certain content in advertising material offering the opportunity to purchase an apartment in a new property development - where it was held that this amounted to 'conduct' for the purposes of s 52 Trade Practices Act 1974 (Cth) - where the appellant submitted that the respondents could not be shown to have entered into purchase in reliance on this conduct because they acted unreasonably on the erroneous assumption that the advertising material had actually been produced by the appellant - whether that was true nature of erroneous assumption held by the respondents - whether the response of the respondents to the advertising material was reasonable in the circumstances
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - REPRESENTATIONS - IN GENERAL - where advertising material alleged to contain representations that the appellant considered that a particular property development was a "guaranteed success", that the appellant was offering a rental guarantee, that the appellant's opinion as to the quality of the investment could be relied upon and that the property development would be a good investment by reason of its association with the appellant - whether these representations would have been conveyed to reasonable people who could be expected to have read the whole of the advertising material - whether the disclaimers contained in the advertising material qualified any of these representations
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - PUFFERY - where representation made by the appellant that a property development would be a "guaranteed success" - whether phrase "guaranteed success" can be construed as a puff - whether representation was misleading and deceptive because the appellant never actually held the view that the success of the development was guaranteed
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - REPRESENTATIONS - AS TO FUTURE MATTERS - where advertising material for a new property development offered a rental guarantee to purchasers of apartments in the development - where material contained representation that the appellant considered that the future performance of rent guarantee obligations by a third party was assured - where material also contained representation that the appellant considered that the purchase of an apartment would be a good investment because of the appellant's association with the project - whether the appellant had adduced evidence disclosing reasonable grounds for the making of these representations as to future matters - whether the fact that the appellant had led some evidence in this regard was sufficient to shift the onus of proof back to the respondents
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - KNOWLEDGE OR INTENTION - where trial judge had found the appellant to have been knowingly concerned in the making of certain misleading representations contained in the advertising material relating to a new property development - where the representations made were that the appellant considered the development to be a "guaranteed success" and that the appellant would be offering a rent guarantee - where it was admitted that the appellant was aware of the terms of the representations and that the representations would be published - whether the appellant had knowledge of facts that would allow the representations to be characterised as misleading
Australian Securities and Investments Commission Act 2001 (Cth), s 12DA, s 12GD
Trade Practices Act 1974 (Cth), s 51A, s 52, s 75B, s 84(2)
Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd [2004] FCA 1363; V921 of 2003, 22 October 2004, cited
Australian Competition and Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276; N274 of 2002, 23 October 2002, consideredBarton v Croner Trading Pty Ltd (1984) 3 FCR 95, applied
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 212 ALR 357, applied
Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45, applied
Cassidy v Saatchi & Saatchi Australia Pty Ltd [2004] FCAFC 34; (2004) 134 FCR 585, distinguished
Gardam v George Wills & Co Ltd (1988) 82 ALR 415, cited
Guglielman v Trescowthick [2004] FCA 326; (2004) ATPR 41-995, cited
Medical Benefits Fund of Australia Ltd v Cassidy [2003] FCAFC 289; (2003) 135 FCR 1, applied
National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90; (2004) 49 ACSR 369, considered
NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558; (2000) 107 FCR 270, considered
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177, citedWalplan Pty Ltd v Wallace (1985) 8 FCR 27, cited
COUNSEL:
B D O'Donnell QC, with M R Bland, for the appellant
M M Stewart SC, with A P J Collins, for the respondentsSOLICITORS:
Gilbert + Tobin (Sydney) for the appellant
Quinn & Scattini for the respondents
WILLIAMS JA: I have had the advantage of reading the comprehensive reasons for judgment prepared by Keane JA and there is nothing I can usefully add thereto. I agree with the reasoning therein, and with the orders proposed.
KEANE JA: The appellant in Appeal No 8852 of 2004, to which Mr and Mrs Downey are respondents, appeals against the judgment of McGill DCJ that it pay Mr and Mrs Downey damages by way of compensation for loss suffered by them in consequence of the appellant's contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the Act").[1]
[1]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004.
In Appeals numbered 8853-8861 of 2004, the appellant applies for leave to appeal against the determination by McGill DCJ of questions in advance of trial which had been agreed between the parties. Leave is required pursuant to s 118(3) of the District Court of Queensland Act 1967 (Qld) because those orders are not final judgments of the District Court. The preliminary questions concerned issues which also arose in the trial of the proceedings involving Mr and Mrs Downey. These preliminary questions were decided on the pleadings and the evidence adduced in the Downeys' action. There was no evidence adduced by the other respondents.
The respondents to the applications for leave do not oppose the grant of leave to appeal. In these circumstances, and since the issues raised in these applications are substantial and might well return to this Court following the final determination of the action in each case, I consider that leave should be granted.
The evidence at trial was largely documentary. Mr and Mrs Downey gave oral evidence. No officer or employee of the appellant gave evidence. The issues agitated by the appellant on appeal turned, for the most part, on the legal significance of facts which were not themselves in dispute.[2]
[2]Cf Warren v Coombes (1979) 142 CLR 531.
I propose now to set out, as briefly as possible and by way of background, a summary of what was at issue and what was common ground between the parties. I will then summarise the decision below before proceeding to discuss the issues agitated on appeal.
Background
It is convenient to refer to the facts of the proceedings involving Mr and Mrs Downey as generally typical of the case of each of the respondents. By way of exception to that general position, however, it should be noted that some of the other respondents did not receive all of the advertising material provided to the Downeys. I shall elaborate on which material was received by what party in due course.
Mr and Mrs Downey were purchasers from the developer, Valco Developments Pty Ltd ("the vendor") of lots in what was then a proposed building unit plan (which was subsequently registered and is now described as Building Unit Plan 106993) in a development to be known as "Radisson Suites". The contract of sale provided, inter alia, that the respondents purchased their lots subject to a lease for five years between themselves as lessors and a company, 570 Queen Street Management Pty Ltd ("570 QSM") as lessee. This company was to act as the serviced apartment manager of the purchaser's unit. The rent payable by 570 QSM under the lease was equivalent to seven per cent per annum of the purchase price paid by the respondents.
The appellant was previously known as Radisson Hotels Pty Ltd. It carried on business which included the operation of hotels. The appellant, as it admitted, held itself out within Australia, and particularly the State of Queensland, as a major hotel operator and maintained a reputation within Queensland whereby the name "Radisson" was intentionally promoted as being associated with hotels and apartments of high quality.
In about the middle of 1997, the vendor, 570 QSM and another company, Southern Cross Investments Pty Ltd ("SCI"), began to advertise and promote the Radisson Suites development. The vendor, 570 QSM and SCI produced a brochure for the purposes of this promotion. This brochure became Exhibit 3. As the appellant knew, the brochure contained the following:
(a) on the front cover, the title:
"Because it's Radisson and it is on Queen",
(b) within the brochure, the words:
"The Radisson Advantage
Radisson Hotels International Inc. (RHI) is one of the world's major hotel companies, with over 330 properties and 76,000 rooms in 42 countries. It operates, manages and franchises deluxe plaza hotels, suite hotels, hotels, inns and resorts and is the parent of Radisson Seven Seas Cruises which operates four luxury cruise ships.
Radisson is a regional hotel management company with a strategic international affiliation through RHI, which has positioned it to allow the company to take advantage of outstanding opportunities in Australia.
Radisson Suites is just the one they were waiting for.
The explosion in demand for visitor accommodation, both in Brisbane and nationwide, is expected to fuel 7% per annum growth in CBD-based serviced apartments to the year 2000. What's more, this figure does not take into account the extra boost which will certainly be generated by the Sydney Olympics. Such growth, coupled with the guaranteed success of such a centrally located and magnificently appointed complex as Radisson Suites, has propelled Radisson's decision to enter into a Hotel Management agreement to operate the $32 million development."
The brochure, Exhibit 3, also contained, under the heading: "Radisson Suites Investment Analysis" a reference to" "Rental Income (7% p.a. net guaranteed for 5 years reviewed to CPI)". Under the heading: "Who pays for your property?" it was explained that the tax office and the tenant pay for the property and: "You receive $178 pw cash in your pocket … after all expenses". This analysis included the following:
"Calculations presume a $45,000 p.a. income and an Interest Only loan of 8.75% p.a. First year calculations are based upon an anticipated settlement date of 25/10/98. Whilst every effort has been made to ensure the accuracy of these figures, no liability will be accepted by Southern Cross Investment Group Pty Ltd or any other firm in respect of any action taken as a result of using these figures. CPI figures calculated at 4%."
The word "Radisson" appears in the brochure 31 times. Under the heading: "Maximise Your Income and Growth Potential", the following appeared:
"A 5 year 7% per annum rental guarantee provided by 570 Queen Street Management Pty Ltd. You will earn $11,675 in the first financial year, or $330 per week."
Later on the following appeared:
"Guaranteed 7% per annum for 5 years.
Lease your apartment back to 570 Queen Street Management Pty Ltd and receive a guaranteed 7% per annum for 5 years. This rent is based on your apartment package purchase price and is after all annual expenses and outgoings have been paid."
The appellant admitted that it approved of this brochure (and even suggested amendments to the draft), and knew that it would be provided to potential purchasers in order to promote the sale of units in the Radisson Suites development.
SCI was involved in the marketing of units in the Radisson Suites development. As the appellant knew, SCI promoted the sale of the units on the basis that, according to a brochure, which became Exhibit 4, headed "Building has begun on Radisson Suites" and distributed by SCI:
(a) investors in units in the Radisson Suites development would have a guaranteed net return of seven per cent per annum for a period of five years;
(b) the units would be self-funding and would produce a positive cash flow from the date of purchase;
(c) an investor would receive the amount of $178.00 "in the pocket" each week (based on an average unit package price).
The appellant admitted that it approved of the contract and authorised the use of the brochure headed "Building has begun on Radisson Suites" and its provision to potential purchasers.
SCI also distributed to potential purchasers an advertisement entitled "Brisbane Property Investment Report". This document became Exhibit 5. The appellant did not admit that it knew and approved of the contents of this document or its provision to potential purchasers, but it did not deny the respondents' allegations to that effect. Accordingly, pursuant to r 166(5) of the Uniform Civil Procedure Rules 1999 (Qld), the learned trial judge proceeded on the footing that these allegations were deemed to have been admitted. There has been no challenge by the appellant to this aspect of his Honour's decision. This document stated, inter alia:
(a) the hotel is "to be managed by internationally acclaimed operator, Radisson.";
(b) "The management company is offering investors a seven per cent per annum guaranteed net return for five years. Outgoings such as rates, body corporate and management fees are paid by the lessee during that five year period.";
(c) "Investors who purchase a furniture package will be offered a 5 year 7% p.a. annum net rental guarantee so they receive a guaranteed income. During this period the management company as lessee will pay all of the running costs including body corporate fees, rates and maintenance."
The parties were at odds over the representations conveyed by Exhibits 3, 4 and 5. In the event, the learned primary judge upheld the respondents' contentions in relation to a number of these representations while rejecting others. The correctness of his Honour's conclusions in this regard occupied a substantial part of the hearing of the appeal. I shall set out his Honour's conclusions in due course.
The Downeys alleged, and the appellant denied, that the making of the representations in Exhibits 3, 4 and 5 was conduct engaged in by the appellant.
The Downeys invoked the provisions of s 51A of the Act in relation to the representations, and asserted that the appellant had no reasonable grounds for making those representations. The Downeys alleged that the appellant had engaged in misleading and deceptive conduct in trade or commerce in contravention of s 52 of the Act. In the alternative, the Downeys contended that SCI engaged in misleading and deceptive conduct in trade or commerce in respect of which conduct the appellant was knowingly concerned within the meaning of s 75B of the Act.
The Downeys alleged, and the appellant denied, that the respondents were induced to purchase their units by the representations referred to above and that, as a result, they suffered loss. This issue of reliance has, thus far, been resolved only in the action brought by Mr and Mrs Downey.
The Downeys' contract for the acquisition of their unit was signed on 27 November 1997 and settled on 22 November 1999.
In February 2000, 570 QSM failed to pay the rental due under its lease with the Downeys. On 15 March 2000, a provisional liquidator was appointed to the vendor and 570 QSM and, on 16 March 2000, a receiver and manager was appointed to the vendor and 570 QSM.
The appellant denied that it engaged in, or was knowingly concerned in, any conduct in contravention of s 52 of the Act. It also advanced a number of alternative grounds of defence. In this regard, it contended that it had reasonable grounds for making the representations in that:
(a) it had executed a hotel management agreement in respect of the proposed development on 16 September 1997;
(b) the association of the proposed development with the appellant was likely to benefit the development because of Radisson's reputation for being associated with hotels of high quality;
(c) to the extent that the representations concerned the future feasibility or profitability of the proposed development, in or about May 1997, the appellant calculated preliminary forecasts for the operation of the proposed development as a hotel;
(d) to the extent that the representations concerned the future availability to the respondents of a seven per cent per annum rental guarantee for five years, the units were being sold on the basis that the units would be leased to 570 QSM on those terms.
The appellant also contended that any potential for Exhibits 3, 4 and 5 to mislead or deceive was neutralised by express disclaimers in the documents. I will set out the terms of these disclaimers in due course.
Further in this regard, the appellant relies upon the fact that the respondents, before entering into their contract for the purchase of their unit, signed a document entitled "Acknowledgment" contained within a disclosure statement included with the contract documents, which stated:
"ARRANGEMENTS WITH RADISSON HOTELS PTY. LTD.
The Serviced Apartments Manager proposes to engage Radisson Hotels Pty. Ltd. ('Radisson') as its Manager to operate the Serviced Apartment/Apartment Hotel Business and to carry out certain of its duties which are stipulated in the Building Management Agreement and the Letting & Liquor Licence Agreement. Notwithstanding any delegation of authority to Radisson, the Serviced Apartment Manager will remain primarily responsible for the obligations of the Building Manager in the Building Management Agreement and to the owners of Lots in relation to the terms of a Serviced Apartment lease. The Serviced Apartment Manager is entitled either before or after the date of completion of the Contract to appoint a suitably qualified Serviced Apartment/Apartment Hotel Operator as its manager in lieu of Radisson if Radisson fails to proceed with the proposed management arrangements with the Serviced Apartment Manager. Although this is not contemplated by the Serviced Apartment Manager, should this occur the Serviced Apartment Manager will inform the Purchaser of the change of management arrangements.
…
6.2 Acknowledgment by Purchaser
The Purchaser has read and understands all of these matters and agrees to enter into the Contract upon this basis."
Finally, the appellant also contended that the respondents' claims were barred by the effluxion of time under s 82(2) of the Act.
The judgment below
It should be noted at this point that all of the respondents in Appeals numbered 8853-8861 of 2004 agreed to the determination of questions by the learned trial judge dealing with representations made by Exhibit 3. Mr Goschnick, Mr Prentice and Mr and Mrs Hale also agreed to the determination of questions concerning Exhibit 4.[3] Only Mr Goschnick and Mr Jensen agreed to questions concerning Exhibit 5.[4] The questions agreed to concerning Exhibit 3 and 4 were the same. They are adequately addressed in the discussion of the issues agitated in the appeal involving the Downeys. There is one important difference about the questions agreed to concerning Exhibit 5 in the matters involving Mr Goschnick and Mr Jensen. That is a matter to which I shall return when it becomes relevant.
[3]The respondents in Appeals numbered 8853, 8859 and 8854 of 2004.
[4]The respondents in Appeals numbered 8853 and 8856 of 2004.
The materials before the learned trial judge consisted of the pleadings, evidence from the Downeys and documentary evidence including documents disclosed by the appellant. No employees or agents of the appellant gave evidence at trial. His Honour resolved most, but not all, issues in favour of the respondents. It will be necessary to refer in some further detail to the learned primary judge's reasoning in the course of discussing the appellant's arguments in this Court; but, at this point, it is sufficient to note the bare bones of his Honour's conclusions in relation to the matters in issue in order to set the scene for a consideration of the arguments agitated in this Court.
The learned trial judge found that:
(a) the advertising material made the following representations to investors who read it:
(i) the units would be a good investment by reason of their association with the appellant;[5]
[5]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [13].
(ii) the appellant considered the investment to be a guaranteed success;[6]
[6]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [15].
(iii) potential investors could rely on the appellant's opinion as to the quality of the investment in deciding to invest;[7]
[7]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [17].
(iv) a purchaser of an apartment who leased the apartment to 570 QSM was assured of receiving rental which would amount to seven per cent per annum net for five years reviewed to CPI;[8]
[8]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [26].
(v) an investment comprising the purchase of the apartment and the lease of it to 570 QSM would be self-funding and produce a positive cash flow from the date of purchase, provided the purchaser met the appropriate profile and the transaction was funded in the specified way;[9]
[9]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [27].
(vi) an investor purchasing an apartment and leasing it to 570 QSM would receive the amount of $178 "in the pocket" each week, provided the purchaser met the appropriate profile and the transaction was funded in the specified way, but only during the first year;[10]
[10]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [28].
(b) by approving of the content of Exhibit 3, its provision to potential purchasers and its use in the promotion of the proposed development, the applicant engaged in conduct within the meaning of that term in s 52 of the Act;[11]
[11]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [50] - [53].
(c) that conduct was misleading or deceptive or likely to mislead or deceive within the meaning of those terms in s 52 of the Act;[12]
[12]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [66] and at [70] - [72].
(d) in the alternative to (c), the appellant was a party knowingly concerned in a contravention by SCI within the meaning of those terms in s 75B of the Act;[13]
(e) each respondent's claim is not barred by s 82(2) of the Act.[14]
[13]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [105].
[14]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [128].
In relation to the claim by Mr and Mrs Downey, the learned trial judge also found:
(a) that they entered into the contract for the purchase of the unit in reliance upon the appellant's misleading and deceptive conduct;[15]
[15]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [79].
(b) that they had suffered loss as a result of so doing;
(c) that the damages payable by way of compensation for that loss should be assessed at $125,419, inclusive of interest.[16]
[16]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [132].
The issues on appeal
The appellant challenges the learned primary judge's conclusions in a number of respects. They may be summarised as follows:
(a) the appellant did not itself engage in conduct within the meaning of s 52 of the Act;
(b) it was not a person knowingly concerned in the conduct of SCI within the meaning of s 75B of the Act;
(c) the brochures did not convey a representation that the appellant considered the investment being offered to be a guaranteed success;
(d) the brochures did not represent that it was Radisson which was offering the rental guarantee;
(e) the brochures did not convey a representation that, by reason of the association with the appellant, the units would be a good investment;
(f) the brochures did not convey a representation that potential investors could rely on the appellant's opinion as to the quality of the investment in deciding to invest;
(g) that the representations as to "seven per cent guaranteed return", "self-funding investment" and "in the pocket" return to investors were not misleading or deceptive.
It will be seen that the appellant does not challenge his Honour's conclusion that the respondents' claims were not statute barred or his Honour's conclusions on causation or the quantification of the damages payable to the Downeys. Reliance was, however, in issue. I turn now to deal with the issues raised on appeal by the appellant.
The appellant's conduct
The respondents contended that the conduct in which the appellant engaged included the making of the representations conveyed in Exhibits 3, 4 and 5 because the appellant authorized SCI to publish the documents to potential purchasers. The appellant, in its written submissions and oral submissions in chief, argued that the respondents could not rely upon s 84(2) of the Act to establish that the advertising material was published by SCI "on behalf of" the appellant. In the appellant's oral submissions in reply, the appellant suggested, for the first time, that s 84(2) had nothing to do with the case because the respondents had not pleaded their reliance upon it.
The appellant accepted that it authorised the inclusion of some statements in the brochures and advertisement, but not their actual publication, and urged that his Honour erred in concluding that the appellant had engaged in the making of any representations to the respondents to whom the advertising material was actually published. The appellant contended that any liability on the part of the appellant to the respondents arises, if at all, only pursuant to s 75B of the Act by reason of the appellant's having been knowingly concerned in the making of the representations by SCI.
While the appellant argues that in this case s 75B of the Act does not operate to render the appellant liable as an accessory of SCI, it is clear that significant advantages for the appellant would flow from the conclusion that the appellant's liability arose only by reason of the operation of s 75B. The most important of these is that, in order to establish the appellant's liability as an accessory of SCI via s 75B, the respondents would have to show a contravention by SCI and that the appellant actually knew of the facts which gave rise to the contravention by SCI.[17] Further, there is the point that the reversal of the evidentiary onus effected by s 51A(2) does not apply where accessorial liability is alleged under s 75B.[18] Where liability is alleged under s 75B, it is the plaintiff who bears the onus of showing that the respondent had actual knowledge that a representation was made by a corporation, that it was misleading and that the corporation had no reasonable grounds for making it.[19]
[17]Yorke v Lucas (1985) 158 CLR 661 at 667.
[18]Australian Competition and Consumer Commission v Universal Sports Challenge Pty Ltd [2002] FCA 1276; N274 of 2002, 23 October 2002 at [43 - [45]; Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC 175 at [11] - [13]; (2004) ATPR 42-010 at 48,843.
[19]Australian Competition and Consumer Commission v Michigan Group Pty Ltd [2002] FCA 1439; Q105 of 2000, 26 November 2000 at [303]; Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC 175 at [15]; (2004) ATPR 42-010 at 48,844.
Did the appellant engage in making representations?
The learned primary judge held that the appellant had, and exercised, the capacity to control the content of the advertising material. The appellant argues that its capacity for control arose only because the hotel management agreement between the appellant and the vendor required the developer to obtain the appellant's consent to the content of any marketing material which used the Radisson name and logo. The appellant says that this gave the appellant a right of veto but not the power to dictate what was included in the advertising material or to cause this material to be distributed to potential purchasers. Even though changes, and indeed material changes, were proposed by the appellant and adopted by SCI as the vendor's marketing agent, it was SCI which decided whether any advertising material would be published. The appellant could not require it to publish any advertising material. There is no evidence that the appellant requested SCI to publish the advertising material. To permit publication, so the appellant argues, is not to cause publication to occur.
The appellant contends that the learned primary judge's approach, as indicated by the following proposition:
"Arming another with the capacity to make a particular representation to a third party, knowing that there is an intention to make that representation, can in my opinion amount to conduct for the purposes of s 52 of the Trade Practices Act."[20]
is in conflict with the decision of the Full Court of the Federal Court in Cassidy v Saatchi & Saatchi Australia Pty Ltd.[21]
[20]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [48].
[21][2004] FCAFC 34; [2004] 134 FCR 585.
In that case Saatchi & Saatchi, an advertising agency, had been engaged by the NRMA, an insurance company, to develop a series of advertisements to be approved and published by the NRMA. The advertisements contained material which both the NRMA and Saatchi later admitted was misleading for the purposes of s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"). That section is materially identical to s 52(1) of the Act. The NRMA consented to declarations that it had breached s 12DA. Saatchi & Saatchi disputed liability, however, on the basis that the advertising agency had not actually made the misleading representations. It was also submitted that Saatchi & Saatchi should not be taken to have done so purely as a result of its involvement in the preparation of the advertisements.
The Full Court of the Federal Court held that Saatchi & Saatchi did not make representations to the public by preparing advertisements and providing them to NRMA expecting that NRMA would publish them or knowing that it was the natural and probable consequence of their preparation that they would be published.[22] In this regard, the Court rejected the claimant's attempt to draw an analogy with liability at common law for the publication of defamatory material.[23] The Full Court affirmed the reasoning of the learned trial judge that the presence of accessorial liability provisions such as s 12GD of the ASIC Act and s 75B of the Act in the statutory scheme leaves no room for the operation of common law principles of ancillary liability.[24] It is not necessary, for present purposes, to call the correctness of that view into question.
[22][2004] FCAFC 34 at [29] - [40]; (2004) 134 FCR 585 at 591 - 593.
[23]Cassidy v Saatchi & Saatchi Australia Pty Ltd [2004] FCAFC 34 at [29] - [35] and [58] - [59]; (2004) 134 FCR 585 at 591 - 592 and 597. Cf Webb v Block (1928) 41 CLR 331 at 363 - 366.
[24]Cassidy v NRMA Health Pty Ltd [2002] FCA 1228 at [71] - [74]; (2002) ATPR 41-891 at 45,242.
More relevant to the disposition of this appeal is the consideration given by the Full Federal Court to whether the representations made in the NRMA advertisements could be said to have been made directly by Saatchi & Saatchi. It is apparent that both the learned trial judge and the Full Court regarded the question of who engaged in the making of the representations contained in the advertisements as a question of fact to be decided by considering the form and content of the advertisement to ascertain whether, in all the circumstances, the advertisement could convey to the relevant section of the public that representations were being made by Saatchi & Saatchi.[25] In this regard, the role of Saatchi & Saatchi in the preparation of the advertisements, the prominence of Saatchi & Saatchi's name and identification number as displayed on the advertisements and the terms of the advertisements were all matters that were considered to be relevant. The conclusion reached, both at first instance and on appeal, was that there was nothing to suggest Saatchi & Saatchi had adopted the representations that were made or that anyone other than the NRMA could be thought to have made the misleading representations contained in the advertisements.[26]
[25]Cassidy v Saatchi & Saatchi Australia Pty Ltd [2004] FCAFC 34 at [40] and [63] - [64]; (2004) 134 FCR 585 at 593 and 598 - 599; Cassidy v NRMA Health Pty Ltd [2002] FCA 1228 at [31]; (2002) ATPR 41-891 at 45,236.
[26]Cassidy v Saatchi & Saatchi Australia Pty Ltd [2004] FCAFC 34 at [28] and [65]; (2004) 134 FCR 585 at 591 and 599; Cassidy v NRMA Health Pty Ltd [2002] FCA 1228 at [32]; (2002) ATPR 41-891 at 45,236.
In this case, the appellant adopted the representations which were made in the advertising material for the purpose of dissemination. It is true that, taken in abstract, the proposition applied by the learned trial judge in this case does not sit easily with the result in Saatchi where the advertising agency that knowingly prepared material to allow its client to make certain representations was found not to be liable for contravening s 52. In context, however, it should be noted that the passage in the learned trial judge's reasons cited in [37] above was preceded by the statement that:
"… the conduct alleged to be in breach of s 52 by way of a representation does not necessarily have to be a representation directly by the defendant to the plaintiff."
Taking that statement together with the reasons which followed, it is clear that what his Honour was suggesting was that the conduct in which the appellant engaged was providing SCI with the capacity to convey information to third parties about the appellant's own opinions and expectations.
That view of the facts is not in any way inconsistent with the reasoning in Saatchi. There the advertisements prepared for the NRMA could not be seen to convey any representations on behalf of the advertising agency. Unlike Saatchi, the learned primary judge here was dealing with a situation where, as his Honour found, the advertising material in question did convey representations about the appellant's own views of the project and its prospects as the appellant agreed it would.[27] Those findings of fact, which, in my respectful opinion, were correct, support the conclusion that representations were made by the appellant.
[27]See, eg, Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [15] and [17].
His Honour's consideration of this issue was not informed solely by the proposition specifically attacked by the appellant. Having stated that proposition, his Honour went on to say:
"There is also the consideration that the [appellant] allowed the marketer to associate the project with the Radisson name, in particular in these brochures, thus conferring on the project and the contents of the brochures an aura of respectability that they did not deserve. This added credibility to the brochures, by association with a prominent and respectable company. Even though the brochures may not have gone so far as to say that [the appellant] was guaranteeing the return which was such a prominent feature of the marketing programme the association with [the appellant] would have added credibility to this guarantee, particularly in the eyes of unsophisticated investors. This was something which in a practical sense the defendant contributed to the brochures, and in that way became a significant part of the process by which buyers such as the plaintiffs came to be misled. In my opinion it was an important feature of the [appellant's] conduct in approving the brochures that this associated the Radisson name with the representations they contained."[28]
[28]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [49].
There is another feature that distinguishes this case from Saatchi, which has since been described by Mansfield J, who was a member of the Full Court who decided the case, as:
"An illustration of circumstances where an advertising agent created a misleading advertisement but, on the particular facts, was not found to have engaged in misleading conduct where it had no role in its publication …"[29]
In this case, the learned trial judge found that the appellant had a role in the publication in that it had capacity to control what information was to be published on its behalf and exercised that capacity.[30] The usage of the appellant's official commercial insignia and the terms of the material, especially in Exhibit 3, conveyed what was presented as being the actual views of the appellant. The statements about the appellant's views of the prospects of the development were made with its authority. In this way the advertising material did convey that the representations were made by the appellant in the relevant sense despite the role of SCI as an intermediary.
[29]Guglielman v Trescowthick [2004] FCA 326 at [76]; (2004) ATPR 41-995 at 48,650.
[30]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [49] - [51].
This approach draws some support from the reasons of French J in Gardam v George Wills & Co Ltd[31] where his Honour discussed what amounts to "making a representation". His Honour said:
"The innocent carriage of a false representation from one person to another in circumstances where the carrier is and is seen to be a mere conduit, does not involve him in making that representation.
… When, however, a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes that representation. It will be a question of fact in each case, but in my opinion the wholesaler who resells goods labelled without attribution of authorship can be taken in ordinary circumstances to adopt the text of those labels."
[31](1988) 82 ALR 415 at 427.
This approach is directly supported by that taken by the Full Court of the Federal Court in Barton v Croner Trading Pty Ltd[32] where it was held that a party will be responsible for representations made to consumers via a third party when that third party is no more than a "convenient medium" or serves only as a "vehicle of communication with the public". In Barton v Croner Trading Pty Ltd, the defendant was a wholesale supplier of toys to Woolworths. The toys had a label attached which contained representations. The question was whether the wholesale supplier made representations proscribed by s 53(a) and (c) of the Trade Practices Act in relation to toys offered for sale to the public by Woolworths. The Full Court of the Federal Court said:
" In our opinion, the defendant is correct in its submission that no agency relationship subsisted between it and Woolworths (see International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644 at 652-653): their relationship was that of wholesale distributor and retailer of the goods respectively. It was thus primarily a transaction involving the sale of goods rather than agency, although it is possible that a marketing agreement of a more general application could also have come into existence (see Prints for Pleasure Ltd v Oswald-Sealy (Overseas) Ltd [1968] 3 NSWR 761). But, even if the absence of a relationship of principal and agent means that the defendant cannot be vicariously responsible for the actions of Woolworths, it does not necessarily follow that the display of the goods by Woolworths was not part of a matrix of facts which, when taken together, constitute a representation on the part of the defendant of the kind now charged against it.
In our opinion, the determination of the question whether any, and, if so, when a representation of the kind proscribed by s 53(a) or (c) has been made is essentially one of fact. In a case such as this, it is possible that a number of representations as to the goods will be made to a number of persons by the wholesale distributor: he may make representations to the reseller on their wholesale acquisition, although no charge is made here on this account; and he may make representations to the ultimate purchaser even if, as a matter of contract, that purchaser deals only with the retailer. In our opinion, there is no reason of principle, derived from the construction of the statute or otherwise, why the defendant may not be liable for contraventions of s 53(a) and (c) in the event that it be established that it made representations of the proscribed kind to prospective retail purchasers, even if it were also previously engaged in a transaction with Woolworths for the sale by wholesale of those goods and whether or not it made similar representations to Woolworths: the question is whether the defendant made a representation to prospective purchasers by means of the label affixed to the goods upon the occasion when Woolworths displayed them for sale. In this connection, the circumstance that Woolworths may be making a concurrent representation to the same effect is, in our view, irrelevant to the question whether the defendant made such a representation. This is not to say that, ultimately, the position under the Act of Woolworths would be the same as that of the defendant: for example Woolworths may have the benefit of a defence under s 85(4) of the Act.
In our opinion, when the conduct of the defendant is looked at as a whole and all the surrounding circumstances are taken into account, the statements made in the labels affixed by the defendant to the goods displayed for sale to the public by Woolworths can properly be treated as representations made by the defendant at that point of time. We see nothing artificial or oppressive in such a result: it was the very thing the defendant wished to happen.
It is true, as the defendant submits, that the prospective purchaser never made any direct contact with the defendant. It may also be accepted, for present purposes, as the defendant contends, that Woolworths was at liberty to do what it liked with the goods and that the defendant had no control over Woolworths in this respect. It is also true, as the defendant argues, that the defendant cannot be held vicariously liable for the actions of Woolworths: the parties were at arm's length, there was no joint enterprise between them and the defendant had no claim to share in any part of the proceeds of sale of the goods by Woolworths. Nonetheless, the surrounding circumstances indicate that the defendant was seeking to implement a scheme for the marketing of the goods, a central feature of which was the display for sale to the public of goods bearing labels intended to be read by the public. The defendant required a retail outlet to market its product, and Woolworths, by assuming that role in the defendant's marketing plan, acted as an intermediary between the defendant and the ultimate purchasers.
In this sense, the defendant's conduct may be seen as the projection by it of the goods into the course of trade accompanied by representations as to their history, standard and sponsorship, intended for publication, not to its retail outlet, Woolworths, or some other reseller, but to potential purchasers in the form of members of the public who might be expected to see the labels on display with the goods at the retail outlet. In this sense also, the position of Woolworths may be seen, not as the agent of the defendant in any strict sense, but rather as a convenient medium through which the defendant chose to pass its message - as a channel for communication between the defendant and consumers, the class of persons primarily intended to be protected by s 53. We think that representations made under these circumstances may properly be characterised as a representation of the kind contemplated by s 53(a) and (c) and that such representations should be regarded as having been made whenever they are communicated to consumers. In the present case, since Woolworths was chosen by the defendant as its vehicle for the purpose of communicating with the public, the representations in question should be regarded as having occurred whenever Woolworths offered the goods to the public for sale."[33]
[32](1984) 3 FCR 95. See also Cat Media Pty Ltd v McCoy [2000] SASC 193; SCGRG-99-501, 30 June 2000 at [16].
[33](1984) 3 FCR 95 at 106 - 107 (citations in original).
The appellant submits that SCI cannot be seen as "a convenient medium" whereby the appellant communicated with the public because the brochures read as statements made by SCI and the appellant is only referred to in the third person. It may be true that the appellant is referred to in the third person; but it is also the case that SCI is not identified as the author or publisher (as opposed to the marketer of the project) and that neither SCI nor the developer speak in the first person. More importantly, the references made about the appellant are to views that the appellant had expressed. What is said on p 12 of Exhibit 3 serves to illustrate this point. After several introductory paragraphs establishing the appellant's expertise as an operator of upmarket hotels that is looking to "take advantage of outstanding opportunities in Australia", it is stated that "the guaranteed success of such a centrally located and magnificently appointed complex … has propelled [the appellant's] decision to enter into a Hotel Management agreement". This clearly conveys the appellant's apparent reasons for deciding to become involved in the project. It is not as if the passage could sensibly be read as mere speculation on the part of the author as to why the appellant had chosen to become involved.
Further, it was submitted that the appellant's approval of the documents was given only in the context of protecting the goodwill in its name and logo. The difficulty with this submission is that the obvious reason for wanting to protect the goodwill in the appellant's name and logo is to prevent either of them being associated with content in the brochure that the appellant did not actually endorse. It is this authorized association that the appellant now seeks to deny. The presence of the official name and logo of the appellant means that a reader of the advertising material was entitled to conclude that the information about the reasons for the appellant's involvement in the project presented in the material was a statement of the appellant's actual reasons for its involvement. As in Barton v Croner Trading Pty Ltd, the publication of the material was merely providing the means for the appellant to communicate its own message to prospective consumers.
In my opinion, the learned primary judge was correct to conclude that the appellant would be regarded by those to whom the advertising material was published as having adopted the representations conveyed thereby.
The appellant also seeks to rely upon the decision of the High Court in Butcher v Lachlan Elder Realty Pty Ltd[34] to support its submission. In my respectful opinion that reliance is misplaced.
[34]Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 212 ALR 357.
In Butcher v Lachlan Elder Realty Pty Ltd[35] Gleeson CJ, Hayne and Heydon JJ said:
"[38] The relevant principles.In Yorke v Lucas, Mason ACJ, Wilson, Deane and Dawson JJ said that a corporation could contravene s 52 even though it acted honestly and reasonably:
'That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in it its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.'[39] In applying those principles, it is important that the agent's conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of its 'conduct' divorced from 'disclaimers' about that 'conduct' and divorced from other circumstances which might qualify its character. Everything relevant the agent did up to the time when the purchasers contracted to buy the Rednal land must be taken into account. It is also important to remember that the relevant question must not be reduced to a crude inquiry: 'Did the agent realise the purchasers were relying on the diagram?' To do that would be impermissibly to dilute the strict liability which s 52 imposes.
[40] For the following reasons, the agent did not engage in conduct towards the purchasers which was misleading. Whatever representation the vendor made to the purchasers by authorising the agent to issue the brochure, it was not made by the agent to the purchasers. The agent did no more than communicate what the vendor was representing, without adopting it or endorsing it. That conclusion flows from the nature of the parties, the character of the transaction contemplated, and the contents of the brochure itself."
[35][2004] HCA 60 at [38] - [40]; (2004) 212 ALR 357 at 367.
In the same case, McHugh J, who dissented as to the outcome of the case, expressed similar views on this issue. His Honour said:[36]
"[109] The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document."
[36]Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60 at [109]; (2004) 212 ALR 357 at 383 - 384.
In my respectful opinion, the fundamental error in the appellant's attempt to rely upon Butcher v Lachlan Elder Realty lies in its failure to recognise that the advertising material which the appellant had approved was directed to promoting the Radisson Suites project expressly by reference to the appellant's own views. The appellant's argument focusses narrowly on the purpose of the developer and marketer in relation to the publication of the advertising material as part of a campaign to sell units in the complex, and says that the appellant was not selling the units. But to say this is not to say the appellant had no interest in the promotion. While the appellant was not the marketer or the developer, it had a real interest in the success of the promotion of the project in which it was integrally involved. It approved the publication of what purported to be its views about the project. For these reasons the appellant's submission on this point should be rejected.
Liability under s 84(2) of the Act
Even if the conduct in question was engaged in by SCI, rather than by the appellant or by both of them, in my opinion, the respondents were entitled to succeed on this issue by reason of s 84(2) of the Act. Section 84(2) of the Act deems certain conduct "to have been engaged in also by the body corporate" so that conduct by another person with the consent of an employee of the body corporate becomes its conduct where the act constituting the conduct is done "on behalf of" the body corporate.[37]
[37]Trade Practices Commission v Tubemakers of Australia Ltd (1983) 47 ALR 719 at 740.
The appellant has submitted that the correct interpretation of "on behalf of" is that given to the phrase by Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 10) where his Honour stated that:
"It seems to me that an act is done 'on behalf of' a corporation for the purpose of s 84(2) if either one of two conditions is satisfied: that the actor engaged in the conduct intending to do so 'as representative of' or 'for' the corporation, or that the actor engaged in the conduct in the course of the corporation's business, affairs or activities."[38]
The appellant then goes on to assert that SCI did not publish the brochures "as representative of" or "for" the appellant. There are, in my respectful opinion, two reasons for rejecting the appellant's assertion. First, it should be remembered that Lindgren J recognised that this definition could not be exhaustive. Before reaching this passage, his Honour had referred to previous decisions, such as Walplan Pty Ltd v Wallace,[39] where it had been noted that:
This submission should be rejected for two reasons. The first is that, as has been recognised elsewhere, it was unnecessary for Emmett J to express any concluded view on this issue, and the appellant's contention is against the trend of established authority.[77] The second point is that it seems to me that, understood correctly, Emmett J is only advancing the common sense proposition that, when a representor does adduce evidence attesting to reasonable grounds, it will be a matter for the court to determine if that evidence does establish reasonable grounds, and so there will be no automatic deeming as there would be if a representor did not adduce any evidence at all. If this is all that was meant by his Honour's remarks then I would respectfully agree with them.
[77]See Australian Competition and Consumer Commission v Danoz Direct Pty Ltd [2003] FCA 881 at [173]; (2003) 60 IPR 296 at 333 - 334 and Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd [2004] FCA 1363; V921 of 2003, 22 October 2004 at [133].
It follows that I do not read the reasons of Emmett J to go so far as to suggest that the burden shifts back to a representee once evidence has been adduced by the representor. The wording of s 51A(2) means that if the evidence adduced by a representor is not actually "to the contrary", ie it does not tend to establish reasonable grounds for making the representation, then no evidence of the kind required by the section will have been adduced and there is no reason why the deeming provision contained in s 51(2) would not continue to operate. It would, of course, be a matter for the court to determine whether or not the evidence adduced was "to the contrary". The result is that the learned primary judge in this case was correct to decide this issue by looking to see if the appellant had adduced evidence capable of proving that it possessed reasonable grounds for the representations that it made. He concluded that such evidence had not been adduced. That view was correct in my respectful opinion. The appellant's submission on this point must be rejected.
For the sake of completeness, it should also be noted that, even if the appellant's submission as to the reversal of the onus in s 51A where a representor tenders evidence is correct, there are two further reasons why the appellant's challenge to this aspect of his Honour's decision should fail. First, the evidence of the appellant's preliminary forecasts relating to the project was tendered by the respondents. For that reason, the respondents contend, correctly in my view, that even on the view of the onus provisions of s 51A for which the appellant contends, the onus remained on the appellant to establish a reasonable basis for making the representations in question.
Secondly, his Honour's conclusions that the representations were misleading stand on the evidence which was adduced irrespective of where the onus of persuasion lay.
In relation to the representation that the appellant considered the investment to be a guaranteed success, the learned trial judge proceeded on the footing that the onus was on the respondents because the representation did not concern a "future matter" within the meaning of s 51A of the Act but, rather, the appellant's state of mind at the time of the publication of the advertising material. His Honour concluded that the appellant did not ever come to the view that it did regard the complex as a guaranteed success.
His Honour said:
"… all of the material that I have seen suggests that no consideration was given to the question of whether the project was assured of success. There was the preliminary forecast to which I have already referred, but that was prepared without having completed a market study or a detailed analysis of manning estimates for the hotel, as noted in the covering document. It appears to have been prepared simply to give some idea of what figures would be likely to be involved, on the basis of the [appellant's] experience in operating hotels of this nature, for use in connection with the negotiations with the developer as to the terms of the management agreement, which was not finally signed until about four months later …
It does not appear that the defendant ever actually considered whether the project would be a success, let alone a guaranteed success. This projection is directed to the viability of the hotel business, and conveniently ignores the obligation to pay rent for the rooms to be used in running the hotel. Indeed it had no particular reason for being concerned about this, since none of its money was at stake …"[78]
[78]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [69] - [70].
In my respectful opinion, his Honour's conclusion was correct. The appellant's employees did not give evidence in an attempt to dispel the obvious inference from the documentary evidence adduced by the respondents. To say this is not to draw on adverse inference from the appellant's failure to call witnesses.[79] It is simply to observe that there is no reason not to act upon what appears from the appellant's documents.
[79]Cf Australian Competition and Consumer Commission v Henry Kaye and National Investment Institute Pty Ltd [2004] FCA 1363; V921 of 2003, 22 October 2004 at [189].
The appellant's liability as an accessory under s 75B of the Act
Given that I have already reached the conclusion that the appellant is liable as a principle for contravention of s 52 it is strictly unnecessary for me, as it was for the learned primary judge, to deal with this issue. Nonetheless, I will do so, as did the learned primary judge, on a precautionary basis.
Section 75B of the Act relevantly provides that:
"(1) A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC, or of section 75AU or 75AYA, shall be read as a reference to a person who:
(a)has aided, abetted, counselled or procured the contravention;
(b)has induced, whether by threats or promises or otherwise, the contravention;
(c)has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d)has conspired with others to effect the contravention."
The learned primary judge found that the appellant had been knowingly concerned in the making of two of the representations contained in the brochures prepared by SCI, that these representations were misleading and that, as such, were in contravention of s 52.[80] These representations were that:
[80]Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310; DC No 4992 of 2002, 14 September 2004 at [88] - [105].
(a) the appellant considered an investment in Radisson Suites to be a guaranteed success; and
(b) that the appellant was the management company offering the rental guarantee.
The appellant disputes the findings of the learned primary judge with respect to both of these representations. As I have already decided that the representation that the appellant was the management company offering the rental guarantee was not made, it is necessary only to consider the further submissions of the appellant in the light of the first representation outlined above, that is, that the appellant considered an investment in Radisson Suites to be a guaranteed success.
For liability to be imposed for being "knowingly concerned in" a contravention, it is necessary to show that the alleged accessory had knowledge of the "essential matters" making up the contravention.[81] In Medical Benefits Fund of Australia Ltd v Cassidy[82] Moore J, with whom Mansfield J agreed, defined the "essential matters" in relation to a television advertisement as being the fact of publication, knowledge of the content of the advertisement and an awareness of matters that would allow that content to be characterized as misleading.[83] The authorities canvassed by Moore J dictate a similar approach to the advertising material found in this case.
[81]Yorke v Lucas (1985) 158 CLR 661 at 667.
[82][2003] FCAFC 289; (2003) 135 FCR 1.
[83]Medical Benefits Fund of Australia Ltd v Cassidy [2003] FCAFC 289 at [13] - [15]; (2003) 135 FCR 1 at 10 - 11.
The complaint that the appellant makes with respect to the reasoning of the learned primary judge on this issue relates to his Honour's conclusion that the appellant must be taken to have been aware of the representations made by the advertising material because it had seen and approved the material prior to its publication. The text giving rise to the relevant representation is that on p 12 of Exhibit 3 which states that:
"Such growth, coupled with the guaranteed success of such a centrally located and magnificently appointed complex as Radisson Suites, has propelled Radisson's decision to enter into a Hotel Management agreement to operate the $32 million development."
Returning to the three "essential matters" identified by Moore J, it is admitted that the appellant was aware of the terms of this statement and that the material containing this statement would be, and was, published. The appellant submits, however, that what has not been shown is that it appreciated that this statement would convey an impression that was misleading. I have already explained, earlier in these reasons, why a reasonable reader would take from this passage the understanding that the appellant did consider an investment in Radisson Suites to be a guaranteed success. The effect of the statement is that one of the reasons why the appellant has decided to enter into the management agreement is because the success of Radisson Suites is guaranteed. Special knowledge is not required to understand that this is the effect of the words used.
As the appellant knew of the terms of the material before publication, it knew that its belief in "guaranteed success" was being put forward as one of its reasons for participation in the project. As the learned primary judge pointed out, the appellant never actually had this belief. It is an inference of fact readily to be drawn in the absence of evidence to the contrary that the appellant knew its own mind. It follows from that inference that the appellant had knowledge of facts that would allow the statement to be characterized as misleading. If it were necessary to do so, I would hold the appellant liable under s 75B with respect to this representation.
Conclusion
The appellant has been successful in its appeal only in relation to the representation that it was offering the rent guarantee. This issue did not occupy a lot of hearing time. More importantly, the appellant's success on that issue does not materially affect the appellant's position vis-à-vis the respondents. I would not regard this measure of success on the part of the appellant as warranting an approach to the award of costs other than that they should go to the respondents on the basis of their substantial success in the appeal.
In Appeal No 8852 of 2004, I would dismiss the appeal and order that the appellant pay the costs of the respondents to be assessed on the standard basis.
In Appeals numbered 8853-8861 of 2004, I would, in each case, grant leave to appeal, dismiss the appeal and order that the appellant pay the costs of the respondent or respondents to be assessed on the standard basis.
ATKINSON J: I agree with the reasons for judgment of Keane JA and the orders proposed.
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