GIO Australia Holdings Ltd v Marks

[1996] FCA 1006

TRADE PRACTICES - Alleged misleading conduct - Representation in promotional brochure that margin on finance facility fixed - Contract documents provided for variation of margin - Margin purportedly varied by financiers - Whether purported variation effective - Whether financiers contractually bound to adhere to margin stated in brochure - Whether there was a misrepresentation as to margin - Contract claim rejected - Finding that brochure constituted a misrepresentation - Relief available to borrowers - Damages - Variation of contracts by Court - No evidence that borrowers could or would have borrowed more cheaply elsewhere - Effect of rule in Gates v City Mutual.

Trade Practices Act 1974, s 52.
Fair Trading Act (NSW) 1978, S 42.

GIO AUSTRALIA HOLDINGS LIMITED, GIO GENERAL LIMITED, GIO FINANCE LIMITED, GIO BUILDING SOCIETY

v MICHAEL MARKS, JEREMY KINROSS, PAUL McCULLAGH and ALEXANDRA WILLIAMSON

NO. NG.168 of 1996

CORAM:    WILCOX, FOSTER and TAMBERLIN JJ
PLACE:    SYDNEY
DATE:     21 NOVEMBER 1996

IN THE FEDERAL COURT OF AUSTRALIA  )
NEW SOUTH WALES DISTRICT REGISTRY  )  NO. NG.168 OF 1996
GENERAL DIVISION                  )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:GIO AUSTRALIA HOLDINGS LIMITED

First Appellant

GIO GENERAL LIMITED

Second Appellant

GIO FINANCE LIMITED

Third Appellant

GIO BUILDING SOCIETY

Fourth Appellant

AND:MICHAEL MARKS

First Respondent

JEREMY KINROSS

Second Respondent

PAUL McCULLAGH

Third Respondent

ALEXANDRA WILLIAMSON

Fourth Respondent

CORAM:    WILCOX, FOSTER and TAMBERLIN JJ
PLACE:    SYDNEY
DATE:     21 NOVEMBER 1996

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The appeal be allowed.

1. The orders made by Einfeld J be set aside and in lieu thereof it be ordered that the proceeding be dismissed except insofar as it relates to:

(i)the fourth respondent, Alexandra Williamson; and

(ii)the costs incurred at first instance.

1. The proceeding be remitted to Einfeld J for:

(i)determination of the issue concerning service of the letter of 21 April 1992 on Mrs Williamson and the making of such orders, consequential on that finding, as are appropriate; and

(ii)the making of such orders as he thinks appropriate in relation to the costs incurred at first instance.

1. The respondents pay the appellants' costs of the appeal.

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

IN THE FEDERAL COURT OF AUSTRALIA  )
NEW SOUTH WALES DISTRICT REGISTRY  )  NO. NG.168 OF 1996
GENERAL DIVISION                  )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:GIO AUSTRALIA HOLDINGS LIMITED

First Appellant

GIO GENERAL LIMITED

Second Appellant

GIO FINANCE LIMITED

Third Appellant

GIO BUILDING SOCIETY

Fourth Appellant

AND:MICHAEL MARKS

First Respondent

JEREMY KINROSS

Second Respondent

PAUL McCULLAGH

Third Respondent

ALEXANDRA WILLIAMSON

Fourth Respondent

CORAM:    WILCOX, FOSTER and TAMBERLIN JJ
PLACE:    SYDNEY
DATE:     21 NOVEMBER 1996

REASONS FOR JUDGMENT

WILCOX and TAMBERLIN JJ:   We have had the benefit of reading in draft form the reasons for judgment of Foster J.  Except in relation to one point, we agree with him. 

In particular, we agree with Foster J's conclusion that the decision of the High Court of Australia in Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 stands in the way of the Court affording relief to the respondents pursuant to s 87 of the Trade Practices Act 1974. An order under that section that amended the contractual documents in such a way as to limit GIO to a margin of 1.25% would have the effect of preventing disappointment of the expectation induced in the respondents by GIO's misleading brochure. But Gates suggests that relief in respect of a misrepresentation that constitutes a contravention of s 52 of the Trade Practices Act is limited to such orders as are necessary to enable the misrepresentee to recoup, reverse, prevent or limit any consequential damage or loss that he or she may have sustained. The case expressly holds that damages are not available to compensate a misrepresentee for mere disappointed expectations. As it seems to us, it would subvert that limitation if we were to make a s 87 order that made good the respondents' expectations.

It is interesting to note that, in Gates, Gibbs CJ referred to the limited scope of a s 87 order in the situation confronting the Court. He noted (at 7) that no application had been made for any ancillary orders under s 87 and commented:

"No doubt, under that section, the court could have awarded rescission of the policies and return of the premiums paid, but that course
was not sought and would in any event have afforded little benefit to the appellant."

Plainly Gibbs CJ did not think it would have been open to the Court to make an order under s 87 requiring City Mutual to issue a superannuation policy having the benefits represented to Mr Gates by its agent. The position of the present respondents is strikingly similar to that of Mr Gates.

Of course, an order could be made - whether by an award of damages or under s 87 - in respect of consequential losses, if any were proved. [Even the loss of a commercial opportunity would suffice: see Sellars v Adelaide Petroleum NL (1994) 179 CLR 332.] This was made clear in Gates by Mason, Wilson and Dawson JJ at 15:

"This conclusion involves no element of injustice to a plaintiff who is entitled to damages reflecting the loss of benefits he would have obtained under a contract which he could and would have entered into but for his reliance on the contravening conduct of the defendant.  Of course he must prove such loss but there is nothing unfair in requiring him to do so."

Once again the present situation is strikingly similar.  None of the respondents proved that he or she could and would have entered into an alternative financial arrangement involving a lower margin (or lower overall cost) but for his or her reliance on GIO's misleading conduct.

We do not think anything in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 affects what we have said. In that case s 87(1A) was used to base an order avoiding ab initio a contract for the sale of real estate. The respondents had been induced to enter the contract by conduct contravening s 52 of the Act. They argued that an order avoiding the contract was necessary to "prevent or reduce the loss or damage suffered, or likely to be suffered" by them.  In a passage quoted by Foster J in this case, Black CJ expressed the opinion that the "loss or damage" referred to in s 87 was not limited to loss or damage recoverable under s 82. We accept that view but it does not mean that s 87 can sustain an order designed to avoid mere expectation loss. Such loss was expressly rejected in Gates at 15 as lacking support in either principle or authority. In Demagogue there was no claim for expectation loss. The s 87 order was not made as a substitute for expectation damages. It was designed to reduce the respondents' consequential loss.

The Gates limitation might be thought unfortunate, as allowing corporations sometimes to avoid being obliged to match their performance to their marketing. But any review of the limitation must be for the High Court to undertake. While it remains, it precludes relief in respect of the respondents' mere expectation loss, whether by way of damages or a s 87 order.

The point on which we respectfully disagree with Foster J concerns his conclusion that GIO failed effectively to vary the margin fixed by Clause 11.1 of the Conditions of Use.  "Margin" was defined in the Conditions of Use as "the rate per cent per annum specified as such in the Letter of Offer, as varied from time to time in accordance with these Conditions of Use".  Thus the definition itself contemplated a variation in the rate per cent per annum provided that the variation was made in accordance with the Conditions of Use.  Variation was dealt with in clause 11.1:

"11.1GIO may, on giving prior notice to the Customer, vary any of these terms and conditions as it thinks fit.  Unless otherwise provided herein, any such variation shall take effect upon the expiration of ninety (90) days after such notice is served on the Customer."

For good measure, the rate specified in the Letter of Offer was also expressly made variable.  That document defined the Margin as:

"1.25 per cent per annum, as it may vary from time to time in accordance with the Conditions of Use."

In this situation, as it seems to us, a notification of variation given in accordance with the requirements of the Conditions of Use had the effect of varying the stipulated rate for the purposes of both definitions of "Margin", that is, in both the Letter of Offer and the Conditions of Use. 
Contrary to the view of Foster J, we consider that it was not necessary that any notified variation change the definition itself, in either document.  Both definitions contemplated a variation in the rate from time to time, the definitions being left unchanged.

The letter of variation relied on by GIO was that of 21 April 1992.  Foster J quotes it in full.  It opens by advising the addressee "of some changes to the terms and conditions of your AAA facility which are set out below".  After giving a reason, the letter states:  "the Margin on your AAA facility will move from 1.25% to 2.25% over the 90 day Bank Bill Swap Reference rate."

As Foster J holds, this constituted a variation of the rate, as distinct from a variation of either definition.  However, once it is accepted that there was no necessity to vary either definition, because both of them permitted a variation of the rate, then provided it was served the letter plainly sufficed to entitle GIO to require payment of interest calculated by reference to a margin of 2.25%.  The letter was capable of complying with clause 11.1's requirement of 90 days' notice; the increased rate was not to take effect until 1 August 1992.

We included the proviso about service in the preceding paragraph because there was an issue at the trial as to whether the letter was served on the fourth respondent, Alexandra Williamson.  So far as we can discern, that issue was not resolved by the trial judge.  If the letter was not served on Mrs Williamson earlier than 90 days before 1 August 1992, it was, of course, ineffective to increase from that date the interest rate payable by her.  In that situation, the result suggested by Foster J would be appropriate to her case.  It would not be appropriate in relation to the other borrowers, all of whom were admittedly served within time. 

As it seems to us, the appeal must be allowed and the orders made by the trial judge set aside.  In lieu of those orders we would order that the proceeding be dismissed except insofar as it relates to: 

1. the fourth respondent, Alexandra Williamson; and

2. the costs incurred at first instance.

Insofar as it relates to these topics, the proceeding should be remitted to the trial judge for determination of the issue concerning service of the letter of 21 April 1992 on Mrs Williamson and for the making of such orders, consequential on that finding, as are appropriate; and also for the making of such orders as he considers proper in relation to the costs incurred at first instance.  The respondents should pay the appellants' costs of the appeal.

I certify that this and the preceding six (6) pages
are a true copy of the Reasons for Judgment of

Justices Wilcox and Tamberlin.

Associate:

Dated:    21 November 1996

APPEARANCES

Counsel for the Appellants:          D F Jackson QC and S D Kalfas

Solicitors for the Appellants:       Phillips Fox

Counsel for the First and

Third Respondents:                   S G Finch

Solicitors for the First and

Third Respondents:                   Cashman & Partners

Counsel for the Second and

Fourth Respondents:                  J S P Kinross

Solicitor for the Second and

Fourth Respondents:                  Hugh F A Williamson

Date of hearing:  13 May 1996  

IN THE FEDERAL COURT OF AUSTRALIA       )
  )
NEW SOUTH WALES DISTRICT REGISTRY       )     No. NG 168 of 1996
  )
GENERAL DIVISION  )

On appeal from a Judge of the Federal Court of Australia

BETWEEN:GIO AUSTRALIA HOLDINGS LIMITED

First Appellant

GIO GENERAL LIMITED

Second Appellant

GIO FINANCE LIMITED

Third Appellant

GIO BUILDING SOCIETY LIMITED

Fourth Appellant

AND:MICHAEL MARKS

First Respondent

JEREMY KINROSS

Second Respondent

PAUL McCULLAGH

Third Respondent

ALEXANDRA WILLIAMSON

Fourth Respondent

TABLE OF CONTENTS IN THE REASONS FOR JUDGMENT OF FOSTER J

BACKGROUND........ ........ ........ ........ ........ ........ ........ ....... 2

THE CASE BEFORE THE PRIMARY JUDGE........ ........ ........ ........ ........ 4

(1)Promotional brochure........ ........ ........ ........ ........ .. 4

(2)Confirmation Letter........ ........ ........ ........ ........ ... 5

(3)Letter of Offer........ ........ ........ ........ ........ ....... 6

(4)Acceptance of Letter of Offer and Customer's

Acknowledgment........ ........ ........ ........ ........ ....... 9

(5)Conditions of Use........ ........ ........ ........ ........ ..... 9

(6)Calculation of Prime Rate document........ ........ ........ ... 12

(a)The Claim in Contract........ ........ ........ ........ ........ 15

(b)The Claim of Misrepresentation........ ........ ........ ....... 19

(c)Relief and Damages........ ........ ........ ........ ........ ... 21

THE CASE ON APPEAL........ ........ ........ ........ ........ ........ ...... 23

(a)The Contract Claim........ ........ ........ ........ ........ ... 23

(b)The Claim in Misrepresentation........ ........ ........ ....... 28

RELIEF........ ........ ........ ........ ........ ........ ........ ........ .. 33

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NG 168 of 1996
  )
GENERAL DIVISION                 )

On appeal from a Judge of the Federal Court of Australia

BETWEEN:GIO AUSTRALIA HOLDINGS LIMITED

First Appellant

GIO GENERAL LIMITED

Second Appellant

GIO FINANCE LIMITED

Third Appellant

GIO BUILDING SOCIETY LIMITED

Fourth Appellant

AND:MICHAEL MARKS

First Respondent

JEREMY KINROSS

Second Respondent

PAUL McCULLAGH

Third Respondent

ALEXANDRA WILLIAMSON

Fourth Respondent

CORAM:    WILCOX, FOSTER & TAMBERLIN JJ

DATE:     21 NOVEMBER 1996

PLACE:    SYDNEY

REASONS FOR JUDGMENT

FOSTER J:    This is an appeal from a decision of a single judge of the Court in proceedings brought by the present
respondents alleging breach of contract and misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) ("the TP Act") and s 42 of the Fair Trading Act (NSW) ("the FT Act").   The learned primary judge awarded damages against the appellants, hereafter referred to collectively as GIO, on an application brought by the first respondent, as the representative party in a group or class action pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth), and by the second, third and fourth respondents in their individual capacity. I shall refer to the respondents and represented parties compendiously as the borrowers.

BACKGROUND
         This case concerns a loan facility offered by GIO, known as the "Asset Accumulator Account" ("the facility").  The interest rate on the facility had two main components:

(i)the "Base Rate", which was the average for the month of the daily 90 day Bank Bill Rate, and which changed according to changes in the professional money market rate; and 

(ii)a margin, added by GIO. 

Each of the borrowers obtained a loan from GIO under the facility between February 1991 and April 1992.  When the borrowers entered into their respective loan contracts, the margin added to the base rate was 1.25%.  However in April 1992 most of the borrowers received a letter from GIO advising them that, due to an increase in GIO's cost of funds, it was increasing the interest rate margin by 1% to 2.25%.  The fourth respondent, Mrs Williamson, who was a joint borrower with her husband (who is not a party to these proceedings), however, claims not to have received notice of any increase in the margin.

Following this increase in the margin, the borrowers brought proceedings in this court, alleging that GIO was contractually bound to a fixed margin of 1.25% ("the contract claim"), or in the alternative that GIO had misrepresented to them that the margin was fixed ("the misrepresentation claim"). 

The proceedings were initially brought by Mr Kinross (the second respondent) wholly in a representative capacity pursuant to Part IVA of the Federal Court Act.  However, GIO were partly successful in having the first statement of claim struck out.  Following various rulings of the trial judge, certain of the borrowers, including Mr Kinross, were separated from the representative group and commenced individual proceedings against GIO, which were heard jointly with the representative proceedings.  With the departure of Mr Kinross, Mr Marks became the representative party in the group proceedings. 

THE CASE BEFORE THE JUDGE
         In both the contract claim and the misrepresentation claim, it was necessary for his Honour to consider the effect of various documents provided by GIO to the borrowers in respect of the facility.  In the case of each borrower the same documents were received, mostly in the same order.  These documents were:-

(1)  Promotional brochure
         The brochure was provided in order to promote the facility.  It purported to outline the key features of the facility. 

The brochure dealt with "Interest Rates" in the following terms:

"The Prime Rate which is applicable to your `AAA' facility for the initial period will be that being advertised at the time your application is received.  After this period, the Prime Rate for each subsequent month will be determined at the end of that month and will be set at a margin of 1.25% above the professional money market rate for 90 day funds.  This money market rate is defined as the Authorised Dealers' 90 day bank bill rate.  The GIO AUSTRALIA Prime Rate for each month will be the daily average of these rates plus the margin". [emphasis added]

The brochure further indicated that, depending on the type of security offered for the loan, the interest rate charged could exceed the prime rate.  For example where the security offered was GIO AUSTRALIA Insurance Bonds, the interest rate would be the prime rate plus 1%.  However, the
brochure did not indicate that the margin itself could be varied. 

Attached to the brochure was an application form required to be completed by potential borrowers and returned, along with a $350 "deposit", to GIO.  The evidence indicates that GIO would return this money if it rejected the application, but would forfeit it if a successful applicant did not complete the transaction.

The application read as follows:-

"I/We apply for an Asset Accumulator Account credit facility and propose that the following assets be used to secure the facility."

Following space for the insertion of details of the property intended to secure the loan, the form ended with the words:-

"I/We enclose the application deposit of $350 per property and request GIO AUSTRALIA to open an Asset Accumulator Account in my/our name(s) and give consideration to the granting of a credit facility.  ..."

There is then a space for the signature of the applicant(s) and for the date.

(2)  Confirmation Letter
         If a borrower's application was successful he/she then received a letter from GIO confirming its "conditional" approval of the granting of a loan facility.  Enclosed with this letter was a formal "Letter of Offer" and a document entitled "Conditions of Use", as well as certain other documents, not presently relevant.  The recipient was advised to refer these documents to a solicitor.  The letter also contained the following directions for "action":-

"DOCUMENT

1. `AAA' Letter of Offer
       (2 copies)

2.  `AAA' Conditions of Use

...

4.  `AAA' Calculation of         Prime Interest Rate

..."

ACTION

Read and then if you accept the terms and conditions, sign each page, date and return one copy.

Read and then retain for your own information

Retain for your own information

(3)  Letter of Offer
         This letter commenced by advising the recipient that the application for the facility had been approved "subject to GIO's following terms and conditions (including GIO's Conditions of Use for the facility accompanying this Letter of Offer)".

Among the "following terms and conditions" were included:- 

"BASE RATE:

MARGIN:

LOWER INTEREST RATE:

TERM OF FACILITY:

...

ACCOUNT MANAGEMENT FEE:

...

OTHER TERMS AND
CONDITIONS:

The Base Rate shall be determined in accordance with the Conditions of Use.

1.25 per cent per annum, as it may vary from time to time in accordance with the Conditions of Use.

The Lower Interest Rate chargeable under the Facility is the aggregate from time to time of the Base Rate and the Margin, as such rates may vary from time to time in accordance with the Conditions of Use.  Until 29th February 1992 the Lower Interest Rate shall not be greater than 12.00 per cent per annum.

The term of the Facility shall commence from and including the date of this letter and end on and including the Maturity Date.

The Account Management Fee payable by the Customer to GIO during each month shall be $55.00 (Fifty Five Dollars), as such amount may be varied in accordance with the Conditions of Use.

1. GIO reserves the right to amend or withdraw this offer at any time prior to receipt by GIO of the Customer's acceptance of this offer.

1. ...

2. ...

1. The Conditions of Use for the Facility shall form part of this Letter of Offer.

...

NO REPRESENTATIONS:

..."

Save as specifically set out in the documentation duly executed by GIO pursuant to this Letter of Offer, no representations, warranties or statements whatsoever are, or have been, made by GIO to induce you to enter into any transaction.  Any arrangements between you and GIO shall only be binding if reduced to writing and signed by both parties.

If the "above conditions" (including the Conditions of Use) were acceptable to the recipient then he or she was asked to execute the copy of the Letter of Offer and return it to GIO within 14 days.

The Letter of Offer provided for the term of the facility to end on a particular Maturity Date specified in the Letter.  This date differed in accordance with the requirements of the individual customer.  The Letter also provided for a Facility Limit, being the maximum which might be outstanding under the Facility at any time.

The nature and description of the security which had been accepted was also set out in the Letter.  Furthermore, provision was also made for the payment by the customer to GIO of the amount of $4,600 "as such amount may be varied in accordance with the Conditions of Use".  This amount
represented "the costs and expenses (including any stamp duty) of GIO in the granting of the Facility".  Payment was deferred if the Facility was maintained for ten years, after which it was not claimed.

(4)Acceptance of Letter of Offer and Customer's Acknowledgment

Each borrower was required to sign and return to GIO a document stating that they agreed to be bound by all the terms and conditions set out in the Letter of Offer, including the Conditions of Use.  This document contained terms that the borrower expressly acknowledged that:

"(a)I have received the Conditions of Use and have read this Letter of Offer and the Conditions of Use before executing this Letter of Offer;

(b)GIO recommended that I seek independent legal advice before executing this Letter of Offer;

(c)I am aware of the right of GIO to vary the terms and conditions thereof including, without limitation, the Account Management Fee and the Facility Limit;

(d)I understand the nature and effect of the documents and my obligations thereunder ..."

(5)  Conditions of Use
         This document, which was headed "GIO Asset Accumulator Account Facility Conditions of Use" and referred to in the Letter of Offer, was also sent to each borrower with the Letter of Confirmation.  It commenced as follows:-

"The following terms and conditions apply to the establishment, operation and use of the GIO Asset Accumulator Account Facility (hereinafter referred to as the `Facility').  By signing a copy of the Letter of Offer in relation to the Facility or making a Drawing thereunder, the Customer agrees to be bound by the terms and conditions set out in these Conditions of Use."

There followed immediately a section headed "Definitions and Interpretation".  The "Definitions" portion was very extensive, containing a large number of defined terms.  It commenced with the statement that "in these Conditions of Use and the Letter of Offer, unless the context otherwise requires, the following terms shall have the meanings set forth below".  Amongst the many defined terms, the following are relevant to these proceedings:

"`Account Management Fee' means the fee stipulated as such in the Letter of Offer as such fee may be varied from time to time;

`Base Rate' means:

(a)for any month, the rate of interest (expressed as a rate per cent per annum) determined by GIO on the last day of such month as being the arithmetic mean (rounded upwards to two decimal places) for that month of the daily Bank Bill Rate; and

(b)for any period of less than one month, such rate as GIO may determine from time to time, in its absolute discretion, as being the Base Rate for such period;

`Higher Interest Rate' means, for any period, the rate per cent per annum equal to the aggregate of the Lower Interest Rate for that period and the rate of two per cent (2%) per annum;

`Letter of Offer' means the letter of offer from GIO to the Customer in relation to the Facility and incorporating these Conditions of Use;

`Lower Interest Rate' means, for any period, the rate per cent per annum equal to the aggregate from time to time of the Base Rate for that period and the Margin PROVIDED THAT where the Letter of Offer stipulates that the Lower Interest Rate for a particular period is not to be greater than the rate per cent per annum specified in the Letter of Offer, then the Lower Interest Rate for that particular period shall not be greater than that rate;

`Margin' means the rate per cent per annum specified as such in the Letter of Offer, as varied from time to time in accordance with these Conditions of Use."

Under the heading "Interest and Fees", the following relevant terms appear:

"5.1 Interest

(a)As from and including the first Drawdown Date, the Customer shall pay interest to GIO on the daily balances of the Amount Outstanding from time to time.  Such interest is to be calculated for each month or part thereof at the Higher Interest Rate for such month or part thereof (as the case may be) and on actual days elapsed in a 365 day year PROVIDED THAT if on the due date the Customer shall pay interest on the Amount Outstanding at the relevant Lower Interest Rate and no Event of Default has occurred or is subsisting then GIO shall accept payment of interest at the Lower Interest Rate.

...

5.3Account Management Fee

On each Fee Payment Date, the Customer shall pay to GIO an Account Management Fee, such fee to be paid monthly in arrears.  GIO may, from time to time, by prior notice to the Customer of its intention so to do, vary the Account Management Fee.  The decision of GIO to vary the Account Management Fee shall be conclusive and binding on the Customer and shall take effect on the date specified in the notice, being a date not less than seven (7) days after the date the notice is served."

Under the heading "Variations and Switching" the following provision appeared, which has assumed considerable significance in this case:-

"11.1GIO may, on giving prior notice to the Customer, vary any of these terms and conditions as it thinks fit.  Unless otherwise provided herein, any such variation shall take effect upon the expiration of ninety (90) days after such notice is served on the Customer."

It should be noted that this document was an elaborate one containing many provisions set out in fairly small print over thirteen pages.

(6)  Calculation of Prime Rate document
         Accompanying the documents set out above was a two page document entitled "Calculation of Prime Rate" (the "Prime Rate document").  It provided a brief overview of the facility and a description of "Authorised Dealers" and "90 day bank bills".  Under the heading "Calculation of the Prime Rate", there was a statement that:

"The Prime Rate which is applicable to Asset Accumulator Account facilities is set at a margin of 1.25% p.a. above the average of the Authorised Dealers 90 day bank bill rates for the month." [emphasis added]

There then followed an example of the monthly calculation of the interest rate on the facility.  The final step in that calculation was expressed to be "Add margin (1.25%)". 
         It should be noted that this document also referred to the total interest rate payable as the "Prime Rate". 

The evidence before his Honour indicated that not all the borrowers received the documents in this order.  Mr McCullagh, the third respondent, received the brochure and Prime Rate document together, and the balance of the documentation after completing the application form in the brochure.  Ms Knight, and her partner Mr Cory, both members of the representative group, received a copy of the brochure from GIO.  They inquired about the facility with an external broker, who then put a manager from GIO in contact with them.  That person sent them another copy of the brochure,  the Conditions of Use, and various other documents.  Upon filling in the application form, they received the Letter of Offer and other documents.  Mr Kinross, the second respondent, obtained a copy of the brochure, and filled in the application form.  He then received a copy of the Letter of Offer by facsimile transmission.  He could not recall whether he received the Conditions of Use before accepting the offer.  However, soon after he received the balance of the documents.

GIO did not adhere to the margin of 1.25%.  In fact on 21 April 1992, which was for some borrowers only very shortly after their entry into the Facility, it purported to increase the margin from 1.25% to 2.25%.  It informed the applicants of this change by letter of that date, the contents
of which have received considerable attention in argument.  Accordingly, I set it out in full:-

"We wish to advise you of some changes to the terms and conditions of your AAA facility which are set out below:-

Change to the Margin Rate

As a result of the increase in the cost of borrowing the funds we lend for AAA facilities, the Margin on your AAA facility will move from 1.25% to 2.25% over the 90 day Bank Bill Swap Reference rate.

The increase in our borrowing costs has risen following a credit rating review in advance of GIO becoming a listed company.

Your new Margin rate will come into effect on 1st August 1992, giving you the required ninety days' notice in accordance with Clause 11.1 of the Conditions of Use.

Management Fee

The $55 monthly management fee will not be increased this year but will be held at this level at least until 30 June, 1993.

AAA - Still an Attractive Option

As you may wish to confirm in your own mind that the AAA facility is still one of the most competitive options available in the market we have enclosed a comparison of other lines of credit and variable mortgage products.

If as a result of the increase in the Margin you decide to refinance your facility through another financial institution we will not penalise you.  Under our existing agreement (Clause 6.4 of the Conditions of Use) you would normally have to pay a percentage of the deferred costs if you close your account prior to the end of the 10 year Cost Recovery Period.

The 10 year cost recovery will be waived if you notify us in writing before 30 June, 1992 of your intention to refinance.  Mail your notification directly to:

[address supplied]

You must have refinanced before 1 August, 1992 for this offer to apply.

If your facility has not settled, and you decide not to continue as a result of the Margin change, we will refund your initial application deposit.

In making your decision you will need to be mindful that most organisations do charge up-front establishment, as well as legal, mortgage stamp duty and valuation costs.

Despite the Margin change we believe the AAA facility continues to offer a very competitive interest rate and provides many advantages over traditional mortgage products."

Not surprisingly (and the evidence indicates that it came as no surprise to GIO) the customers were most concerned at this substantial rise in the interest margin.  The fixed margin had been, quite obviously, a significant selling point and inducement to them to enter into the Facility.  They took the view that it was not permissible for GIO to raise this Margin during the currency of the Facility.  They brought these proceedings to give effect to this view and to seek appropriate relief.  I shall refer to the nature of the relief sought later in these reasons. 

It is convenient at this point to consider the case before the primary judge, under the headings of (a) the claim in contract, (b) the claim of misrepresentation and (c) the award of damages.

(a)  The Claim in Contract

It was the borrowers' contention that, as a matter of contract between themselves and GIO, the "Margin" was "set" for the period of the Facility i.e. it was not capable of change solely at the discretion of GIO. There were, necessarily, many facets to the arguments in support of this submission. Because of concessions made at an interlocutory stage of the proceedings for the purpose of preserving, at least in part, their representative nature, it was not open to the borrowers to assert that oral statements as to the fixed nature of the Margin, allegedly made by representatives of GIO in discussions preceding the entry of the borrowers into the Facility, were contractual in nature. Nor could they be relied upon as misrepresentations having any direct effect upon the integrity of the contract, nor as grounding proceedings under s 52 of the TP Act or s 42 of the FT Act.  His Honour, however, ultimately admitted them as having relevance to the issue of reliance in the misrepresentation proceedings.  I shall refer to this matter later. 

His Honour made a similar ruling in respect of the evidence of Peter Smith, a former GIO executive.  Mr Smith testified as to a general understanding on the part of relevant representatives of GIO at the time of the promotion of the facility that the Margin of 1.25% was immutable for the term of the Facility.  This evidence was ultimately admitted as providing a "context" for the written representations in the brochure, which were, of course, relied upon. 

So far as the claim in contract was concerned, however, his Honour rejected a submission that the oral representations of the GIO representatives and the evidence of Smith were admissible on the basis that they were of assistance in elucidating ambiguity which appeared on the face of the document.  His Honour held that there was no relevant ambiguity.  The brochure and the Calculation of Prime Rate document were clearly not intended to form part of the contract, which was equally clearly intended to be comprehended by, and comprised in, the Letter of Offer, the document of Acceptance and Acknowledgment executed by the customer, and the "Conditions of Use".  These documents were intended to be read together and to form the contract between the parties.  As a result, whatever might have been said in the brochure and Calculation of Prime Rate document, the contract clearly provided for GIO's power to vary the Margin by resort to Clause 11.1.  There was no relevant ambiguity as to the existence of this power.  There was, accordingly, no basis for the admission into evidence of this extrinsic evidence in relation to the contract claim.

The primary judge also rejected other arguments advanced by the borrowers on the question of the construction of the contract.  His Honour was not prepared to accept a restricted interpretation of Clause 11.1 which would have made it inapplicable for the purpose of varying the definition of "Margin" to enable the imposition of the higher rate.  He rejected an argument to this effect based upon the "expressio unius" doctrine, which relied upon the fact that the Conditions of Use specifically provided for the variation of the "Management Fee" and the "Facility Limit", whereas no corresponding express power was conferred for the variation of the Margin.  His Honour said "while there may be some limitations on the right to vary ... the power to vary the Margin is not one of them.  The Letter of Offer sets up an expectation that the Margin will or may be varied and Clause 11.1 provides the power". 

His Honour also rejected a submission on the part of the borrowers that the definition of "Margin", appearing in the Conditions of Use, was not itself a term or condition of the contract susceptible to variation under Clause 11.1.  He held that "the term `Margin' was clearly within the frame of reference within the Conditions of Use".  He also held that the concept of variation of the Margin could not be read down, contractually, so as to accommodate the borrowers' submission, founded upon wording in the brochure, that contemplated variations in the "Margin" were restricted to the taking into account of alterations in the debt-security ratio or alterations in the nature of the security itself.  Variation permitted by Clause 11.1 extended beyond restricted variations of this kind; it permitted variation in the 1.25% rate of Margin. 

His Honour also rejected a submission that the words "may vary from time to time" in Clause 11.1, in their application to the definition of Margin in the Conditions of Use, were of no force and effect.  The borrowers had relied upon an argument based upon the wording of the definition of Margin in the Conditions of Use, namely that it meant the rate "specified as such in the Letter of Offer, as varied from time to time in accordance with these Conditions of Use".  The Letter of Offer referred to the Margin as being "1.25 per cent per annum, as it may vary from time to time in accordance with the Conditions of Use".  It was contended that this imported "circularity" into these provisions which rendered them nugatory.  I shall return to this argument later.

His Honour, having rejected these submissions, held that the variation in the rate of Margin from 1.25% to 2.25% did not involve any breach of contract.

(b)  The Claim of Misrepresentation
His Honour found, however, that misrepresentation within the meaning of s 52 of the TP Act and s 42 of the FT Act had been proved.  This misrepresentation was occasioned by the statement in the brochure that the Margin was "set" at 1.25%, and by a similar expression in the Calculation of Prime Rate document, which was, in fact, reinforced by the example of calculation set out in that document. 

His Honour rejected a submission that these statements should be read as a representation only that the rate was set for an indefinite period but was not immutable over the life of the Facility.  Instead, his Honour held that the expressions clearly conveyed the meaning that the rate would not be altered during the currency of the Facility.

He also found that the borrowers relied upon these statements, which were relevantly an inducing cause of their entering into the Facility contract.  In this regard he allowed into evidence and relied upon the statements allegedly made by GIO representatives to the individual respondents, which statements "reinforced" the representations made by the documents themselves.  He regarded the brochure, in which the fixed rate was a major selling point, as "setting the scene" for entry into the contract and as exercising a continuing influence upon the minds of the respondents in their appreciation of the terms of that contract.  He also took into account, having ruled it admissible, the evidence of the witness Smith, which pointed, clearly enough, to the fact that Smith and the GIO representatives were also of the view that the 1.25% margin was intended to be "set" for the period of the Facility.  This latter evidence was of use in determining whether persons of the knowledge and experience of the respondents should have perceived the essential difference, in this regard, between the representations of the brochure and the reality of the contract.  It was also of relevance in relation to questions of relief.

His Honour, having heard oral evidence from each of the borrowers, was satisfied that each had relied upon the words of the brochure and the Calculation of Prime Rate document in entering into the Facility.  Notwithstanding the not inconsiderable financial expertise of many of them, the primary judge was satisfied that they were misled by what was said as to the fixing of the rate, and that their being so was a cause of their entering into the obligations of the contract.  Although some had seen the references in the contractual documents to the Margin being subject to variation in accordance with the Conditions of Use, they did not appreciate that this meant that GIO had the power under the contract to vary the 1.25% referred to in the brochure.  The brochure made reference to interest rate variations in relation to changes in the security and/or its value.  The borrowers did not contemplate that variations "in accordance with the Conditions of Use" could go beyond variations of this kind.  Some were also influenced by the fact that in the brochure the Account Management Fee and Facility Limit were expressly subject to variation and not "set" for the period of the Facility.

His Honour was satisfied that the misrepresentations relied upon had been made out, that relevant reliance and causation had been established, and that the respondents were entitled to declarations that GIO had breached s 52 of the TP Act and s 42 of the FT Act.  He then considered the question of relief.

(c)  Relief and Damages
His Honour rejected a submission on behalf of the borrowers that orders should be made in their favour under s 87 of the TP Act entitling them to have the contract varied so as to include a term that the Margin would not exceed 1.25% for the term of the Facility.  In doing so it appears that he relied upon the authority of Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 ("Gates") as denying this form of relief and restricting the respondents to a claim in damages. 

His Honour also rejected submissions on behalf of GIO that, the relevant measure of damage being that appropriate to the tort of deceit, the respondents had proved no damage.  This submission was made in the conceded circumstances that even with the increased Margin, the GIO contract was more beneficial to the borrowers than any other available loan facility.  His Honour was, however, satisfied that notwithstanding this, the borrowers had suffered measurable detriment as a result of entering into the Facilities.  He awarded damages on the basis that, notwithstanding that the letter of 21 April 1992 from GIO provided the opportunity of leaving the contract without penalty, each borrower was justified in refusing to take advantage of this opportunity and remaining in the contract whilst the questions between the parties were determined by litigation.  He awarded to those borrowers who intended, as at date of judgment, to remain within the contract, damages based upon the difference between the two rates of Margin up to the time of judgment; in respect of those respondents who, the matter having now been decided, opted to leave the contract he allowed a further period of damages of 60 days, during which those respondents could find other sources of finance.

The primary judge rejected a submission on behalf of the borrowers that the question of relief could be approached on the basis that the borrowers had each lost the opportunity not only of seeking alternative finance (it being conceded that they had not done so) but also of approaching GIO itself for confirmation that the rate was set at 1.25%.  His Honour was satisfied that if Mr Smith or the individual representatives had been so approached they would have orally confirmed that the rate was so fixed.  However, he was not satisfied on the evidence that formal written confirmation would necessarily have been given by GIO.  He pointed to the fact that one of the borrowers had sought written confirmation of another aspect of the contract and had received in answer a letter from GIO's solicitors. 

His Honour was also satisfied that the "no representations clause" of the contract was ineffectual to erase the effect of the misrepresentation from the brochure.

THE CASE ON APPEAL
(a)  The Contract Claim
         The arguments adduced before the primary judge were relied on in the appeal.  In the circumstances that it was agreed between the parties, as already indicated, that the oral representations of GIO representatives had no contractual force in themselves, the question was whether, as contended for by the borrowers, the brochure and Calculation of Prime Rate document formed part of the contract between the parties.

I am quite satisfied that his Honour was correct in finding that they did not.  The fact, relied upon by the borrowers, that the brochure contained a tear-off application form which was to be sent to GIO together with the amount of $350 to be banked into an AAA account in the name of the applicant, was not, in my view, sufficient to incorporate the brochure or the application form into the contractual documents.  It was clearly contemplated that, if the application were approved, contractual documents would thereafter be forwarded.  This was quite in keeping with normal commercial practice which would have been well known to the respondents.

Thus, the nature and extent of the contractual rights and obligations of the borrowers and GIO respectively fall for determination under the Letter of Offer and Conditions of Use, the relevant provisions of which have already been set out. 

I am quite satisfied, as was his Honour, that the "expressio unius" doctrine does not require that the provisions of Clause 11.1 have no application to the definition of "Margin".  In my view, the significant question is what effect is to be given to Clause 11.1 when read in conjunction with that definition and the corresponding provision of the Letter of Offer.

The submission, rejected by his Honour, that the apparent circularity of these provisions robbed Clause 11.1 of any effect in relation to variation of the 1.25% Margin referred to in the Letter of Offer, was made again to this Court.  That submission, in detail, was as follows.  Clause 11.1 enabled GIO, on the giving of the prescribed notice, to "vary any of these terms and conditions".  The terms and conditions referred to are, necessarily, those in the Conditions of Use document.  The relevant term is the definition of "Margin" set out above, in which it is stipulated that Margin "means the rate per cent per annum specified as such in the Letter of Offer".  It is to be noted that the definition makes no reference to any particular figure.  The figure of 1.25% appears only in the Letter of Offer, in the passage already set out, where it is qualified by the phrase "as it may vary from time to time in accordance with the Conditions of Use". The power given by Clause 11.1 is to vary only terms in the Conditions of Use; it does not extend to varying the terms of the Letter of Offer.  There is no provision in the Conditions of Use stipulating the amount of the "Margin".  There is no express power given by Clause 11.1 to vary the amount of the Margin although such an express
power is given, in a separate clause, in respect of the Account Management Fee.

The result of the interaction of these clauses is, so it was submitted, that the rate of "Margin" cannot, under Clause 11.1, be varied by a simple notification of increase in the actual figures, i.e. by notice that Margin is to be increased from 1.25% to 2.25%.  It is necessary that the actual "term" , i.e. the definition of Margin, in the Conditions of Use be itself the subject of variation.  Such a variation could, of course, take the form of an express deletion of the words "specified as such in the Letter of Offer" and the substitution of some other place of specification such as an accompanying letter, in which the new rate would be set out. 

The main thrust of this argument was that the reading of Clause 11.1 with the definition of Margin and the referred-to definition in the Letter of Offer produced circularity and uncertainty, which amounted to ambiguity.  This enabled the introduction of the brochure and the representations of the GIO representatives to solve the ambiguity.  I reject this aspect of the submission.  Although the provisions, read together, produce a degree of commercial untidiness, I do not consider that they produce ambiguity.

However, there is necessarily implicit in this submission the further contention that, given that Clause 11.1 confers the power to vary the Margin, it is, nevertheless, a power that must be exercised in accordance with the requirements of the clause conferring it.  As Clause 11.1 is obviously intended to confer advantages on GIO, it is proper, in my opinion, that it be construed contra proferentem.  That being so, I am quite satisfied that in order for the clause to be used for the purpose of changing the amount of the rate, it is necessary that the variation be made expressly as a variation of a term of the Conditions of Use.  That is, it should be framed expressly to alter the term, in this case the definition of Margin.  The letter of 21 April 1992 set out above, which is the only attempt on the part of GIO to comply with the requirements of Clause 11.1, does not purport to vary the definition of Margin.  It merely indicates a changed rate.  In my view, it is not an effective exercise of the power given by Clause 11.1.  I reject the submissions to the contrary made on behalf of GIO.

The result is, in my view, that no effective change in the Margin stipulated in the Letter of Offer has yet been made.  Accordingly, his Honour's finding and judgment in damages can be supported on this basis.  The borrowers have been overcharged in respect of the Margin since 1 August 1992 and are entitled to recover the amount of that overcharge.  GIO has power, in my view, to vary the Margin, and when it exercises that power in accordance with Clause 11.1 by notifying a variation of the definition itself it will then
become entitled contractually to the increased Margin; but not before.

(b)  The Claim in Misrepresentation
         I have already set out the substantial contentions of GIO and the borrowers in this area of the case.  I respectfully agree with his Honour that the brochure conveyed a representation to the effect that the Margin was set at 1.25% for the period of the Facility.  I am satisfied that a fair reading of its relevant parts set out above produces this result, rather than that the Margin was set for some indeterminate or temporary period.  Furthermore, that representation was false, because the contract documents gave GIO the power to vary the Margin if that power was exercised correctly in accordance with Clause 11.1.

The issue of the reliance of each borrower upon the misrepresentation was the subject, as already indicated, of oral testimony from each borrower.  Each was cross-examined as to this issue before his Honour.  His Honour accepted their evidence.  We were referred to the transcript of this evidence.  It was submitted on behalf of GIO that the borrowers, for various reasons, had relied not upon the representation in the brochure but upon their own experience in the finance and associated industries to which they belonged, in arriving at the conception that the rate was fixed.

I have considered the relevant portions of the transcript and note, of course, that his Honour, in coming to the conclusion that he should accept the evidence of the borrowers that they were relevantly misled into believing that the Margin rate was fixed at 1.25%, had the usual advantage of a trial judge of observing the witnesses in the giving of their evidence.  It was the contention of GIO that his Honour had misused this advantage, and that his finding that each of the borrowers relied upon the misrepresentation and was induced by it to enter into the Facility contract was, in the circumstances, "glaringly improbable" (Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178; DeVries v Australian National Railways Commission (1993) 177 CLR 472 at 479). I do not agree. Questions of fact of this kind must be approached in a realistic fashion and, as his Honour said, with due appreciation of the fact that the situation must not be evaluated through the medium of hindsight.

It is quite plain that the Facility contract was marketed as a "product" having as one of its major attractive features the fact that, although variation could occur in other respects, the "Margin" added by GIO was not variable.  The brochure made a feature of this in the context that it referred to the variability of the interest rate based upon the 90 Day Bank Bill, which was, of course, a matter not under the control of GIO, and also to potential variations relating to the nature and value of the security provided, which variations were obviously under the control of GIO.  It was not unlikely, in my view, that in these circumstances a customer who had been significantly attracted by the major selling feature of the set Margin should fail to realise that references in the contractual documents forwarded to him as to the Margin being variable could refer to variations other than those mentioned in the brochure.  After all, the possibility of variations in the 1.25% Margin was right in the teeth of a major representation in the brochure and nothing was done in the later documents or in oral communications from representatives of the GIO to advert to this highly important fact.  Indeed, the representations from the representatives only served to reinforce the impression that GIO regarded the rate as immutable for the life of the Facility.

In my view, this is not a case which could be said to be analogous to Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 149 CLR 191. Here, the respondents could not, in my view, be regarded as the authors of their own misconceptions. Whilst it is true that a careful and close analysis of the Letter of Offer and the Conditions of Use would have raised the question whether the Margin rate of 1.25% referred to in the Letter of Offer might not be subject to unilateral increase by GIO under the power given by Clause 11.1, this would not, in my view, have been so blindingly obvious as to counteract the ongoing effect of the representation that the Margin was "set" for the life of the Facility. It would also have been noticeable that items such as the "Management Fee", referred to in the brochure as being subject to variation, were expressly singled out in the Conditions of Use as being so subject. In my view, in the absence of clear direction from GIO, a discerning, even sceptical, customer would have been unlikely to have ascertained that the Margin represented as fixed could, nevertheless, be amenable to variation through the operation of a "catch all" provision such as Clause 11.1. Persons versed in the operation of the finance industry would not have expected GIO so readily to give with one hand and take away with the other. Indeed, as was mentioned in argument, persons of this background might well be thought to be more vulnerable to misleading conduct of this kind than persons who were relatively financially inexperienced and who might well have subjected the documents to close scrutiny.

I am also satisfied, as was his Honour, that the "no-representations" clause set out above was ineffective to prevent a finding of reliance and inducement.  Such a clause:-

"... does not operate to defeat an action in deceit in relation to conduct antecedent to the contract: see S Pearson & Son Ltd v Dublin Corporation [1907] AC 351 at 354, 356, 360, 362, 365-366; Wehr v Thom [1969] WAR 39 at 43; Snarski v Barbarich [1969] WAR 46 at 47. In principle the same approach must apply to s 52."

(Per Wilcox J, Petera Pty Ltd v EAJ Pty Ltd (1985) 7 FCR 375 at 377-8).

I also agree with the primary judge that the present clause could not have "the effect of erasing whatever is misleading in the conduct" (per Burchett J, Benlist Pty Limited v Olivetti Australia Pty Limited & Anor (1990) ATPR 41-043 at 51-590).

In this case, as stated by counsel in argument, the issues of reliance and causation or inducement tended to overlap.  For the borrowers, reliance was placed upon the enunciation by Wilson J in Gould & Anor v Vaggelas & Ors (1985) 157 CLR 215 at 236 of the following statements of principle:-

"If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation."

And in relation to the representation not being the only inducement:-

"It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract."

It was clearly open to his Honour, on the evidence, in respect of each of the borrowers, to find that the representation in question acted as an inducement, even if not the sole inducement.  It was causative and not merely trivial in its effect (Ricochet Pty Limited & Ors v Equity Trustees Executor and Agency Company Ltd & Ors (1993) 41 FCR 229).

Although the Court was taken in argument to the evidence in relation to reliance and inducement applicable to the individual cases of each borrower, I do not find it necessary to refer, in these reasons, to the individual cases.  I am satisfied, with respect, that his Honour correctly applied the appropriate principles in reaching the conclusion on the facts in each case that reliance and inducement had been proved.  I am also satisfied that no error has been demonstrated in his Honour's findings of fact in this regard.  Accordingly, in my view, they should not be interfered with on appeal.

I come, then, to the question of relief.

RELIEF
His Honour made, as already indicated, an award of damages in favour of each respondent under s 82 of the TP Act and s 68 of the FT Act. For reasons which I have already stated I am of the view that an award of damages, based upon the difference between the two marginal rates, can be sustained as damages for breach of contract. Such damages will continue to be incurred until such time as GIO effectively exercises its power to vary the rate pursuant to Clause 11.1 of the Conditions of Use. His Honour's award of damages, however, was based upon the breaches of s 52 of the TP Act and s 42 of the FT Act established in the case of each respondent.  This award has been the subject of attack in this appeal, and it is necessary to consider whether there was, as submitted, an error of principle involved in his Honour's approach.
GIO submits that what his Honour did was, in effect, to award damages for the proven breaches of s 52 and s 42 as though those damages were being awarded for a breach of contract in which the representation as to the Margin being "set" was a term. In other words damages were awarded on the basis that the borrowers should be compensated, in effect, for the loss of a bargain which would have produced for them the entitlement to pay the lower rather than the increased rate of Margin for the life of the Facility. It was submitted that this was an erroneous approach. His Honour should have awarded damages not for the loss of a supposed bargain but for compensation analogous to what would have been recoverable in an action in common law for deceitful misrepresentation.

Reliance for this submission was placed upon Gates.  In that case the facts were, as stated in the headnote, that:-

"An insurer represented to a proposer for insurance that the total disability clause in a life insurance policy would entitle him to benefits if he were totally disabled from following his occupation as a builder.  The insured suffered an injury which disabled him from following that occupation, but not from following any occupation, and the clause in fact entitled him to benefits only in the latter event."

It was held that the representation was not contractual. There was, however, a breach of s 52 of the TP Act and s 42 of the FT Act for which damages would be recoverable if proved.
         In the judgment of Mason, Wilson and Dawson JJ the following passages appear (at pp 11 - 12):-

"The Act does not prescribe the measure of damages recoverable by a plaintiff for contravention of the provisions of Pts IV and V.  Accordingly, it is for the courts to determine what is the appropriate measure of damages recoverable by a plaintiff who suffers loss or damage by conduct done in contravention of the relevant provisions.  Two established measures of damages, those applicable in contract and tort respectively, compete for acceptance.  In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed - he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss).  In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss).

The differences and the similarities between the two approaches are best illustrated by contrasting the damages recoverable for breach of contractual warranty on a purchase of goods with those recoverable for a fraudulent misrepresentation inducing entry into a contract for the purchase of goods on the assumption that the contracts are identical except that in one case the representation amounts to a warranty and n the other it is merely a non-contractual representation.  For breach of warranty the plaintiff is prima facie entitled to recover the difference between the real value of the goods and the value of the goods as warranted.  In deceit the measure of damages is the difference at the time of purchase between the real value of the goods, and the price paid: Potts v. Miller (1940) 64 C.L.R. 282, at pp. 289,297; Toteff v. Antonas (1952) 87 C.L.R. 647, at pp. 650-651, 654; Gould v. Vaggelas (1984) 157 C.L.R. 215, at p. 220. But this has been treated as a prima facie measure only, the true measure being reflected in the proposition stated by Dixon J. in Toteff v. Antonas (1952) 87 C.L.R. at p. 650 in these terms:

`In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant.'

As his Honour then pointed out, it is a question of determining how much worse off the plaintiff is as a result of entering into the transaction which the representation induced him to enter than he would have been had the transaction not taken place.  This entitles the plaintiff to all the consequential loss directly flowing from his reliance on the representation (Potts v. Miller (1940) 64 C.L.R., at pp. 297-298; Doyle v. Olby (Ironmongers) Ltd. [1969] 2 Q.B. 158), at least if the loss us foreseeable: see Gould v. Vaggelas (1984) 157 C.L.R., at pp. 223-224."

Their Honours continued (at p 13):-

"Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation.  If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation.  This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed: cf. Esso Petroleum Co. Ltd. v. Mardon [1976] Q.B. 801, at pp. 820-821, 828-829; Doyle v. Olby (Ironmongers) Ltd. [1969] 2 Q.B., at p.167.  The lost benefit is referrable to opportunities foregone by reason of reliance on the misrepresentation.  In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract save that it is for the plaintiff to establish that he could and would have entered into the different contract."

The plaintiff failed because he had not adduced any evidence demonstrating that, but for his reliance upon the representation, he would have entered into a contract which provided him with the disability cover he desired.  Nor did he lead evidence to establish the existence of such a contract.

It is submitted by GIO that the present respondents should fail for the same reason.  There was no evidence called on behalf of any of them that, had they realised that the rate of Margin was not set for the period of the Facility, they would have entered into a more advantageous financial facility elsewhere.  Indeed, it appears to have been conceded that there was no such facility, the position being that, even at the increased rate of Margin, the subject facility was still the most beneficial available.  The respondents' real demand was that GIO should be required by order of the Court to adhere to the terms of its representation and be restrained from increasing the Margin.  I shall refer to this claim later.  His Honour rejected it but provided a remedy in damages which, it is submitted by GIO, was, having regard to the principles in Gates, not available.  His Honour's reasoning in this regard appears in the passages from his judgment set out below.

His Honour, after having discussed Gates and set out the passages from the judgment cited above, and indicating the difficulties that were thus presented to the respondents obtaining any award of damages, went on to say (at 2):-

"However, I consider that the applicants did in fact suffer a detriment from the misrepresentation when the rate was increased from 1.25% to 2.25%.  Since 1 August 1992 the applicants have had an obligation to pay a greater margin of interest than they were told at the time they signed up.  To the extent that the increased interest has been paid, the case differs from Gates as it is not the mere non-attainment of a represented benefit. I disagree with the respondents' submission that it was lawful conduct that caused the detriment. To my mind that isolates the two parts of the conduct beyond what is practical. It was the prior unlawful conduct that coloured the subsequent raising of the margin as `damage' or `loss'. The difference between the variable margin and the fixed margin is a loss suffered as a direct result of the respondents' conduct in contravention of section 52 of the TPA and section 42 of the FTA."

His Honour later said:-

"What the applicants paid for was a loan facility with a fixed margin.  What they were given was a loan facility with a variable margin and a consequently greater interest obligation."

It was these basic findings which, it would appear, led his Honour to make the award of damages that he did.  It is submitted on behalf of GIO that, in truth, what his Honour did was to apply the "contract" approach to the award of damages rather than the appropriate "tortious" approach.  I am satisfied that this submission is correct.  To my mind, the second of the two passages quoted above clearly indicates the application of the "contract" test.  The applicants (the present respondents) had no contractual right to receive a loan facility with a fixed Margin.  The representation in the brochure, as has been held both by his Honour and in this judgment, was of no contractual effect.  Accordingly, damages could not be approached on the "lost benefit" or "expectation loss" approach. 

The proper method was to consider what difference existed between the value of what was "paid", and what was received, namely a loan facility with a variable Margin.  On
this basis, which, in my respectful opinion, was the correct one, no loss could be proved.  Nor, as already demonstrated, could any loss be proved on the alternative basis that, had the borrowers not yielded to the representation, they would have entered into other and more advantageous arrangements.

Accordingly, in my respectful view, his Honour should have found that the borrowers had failed to prove any damage in accordance with the principles of Gates.

It must be added, however, that both before the primary judge and in this Court, the borrowers argued in favour of relief being granted to them under s 87 of the TP Act and s 72 of the FT Act. The relief sought was to the effect, however framed, that GIO should be held to the terms of its representation and the respondents therefore entitled to the use of the Facility for its term upon payment of a Margin of 1.25% only. If this argument were successful it would, of course, achieve the result of giving, for practical purposes, contractual force to the representation. Whereas the claim for damages brought under s 82 of the TP Act could enable only the recovery of "loss or damage" actually incurred as a result of the contravening conduct, s 87, it was submitted, could provide the wider remedy sought.

His Honour, it seems, was not prepared to grant relief under s 87 in the terms sought. It appears that he was of the view that Gates stood in the way of this course. It is contended in this appeal that his Honour could and should have granted relief under s 87. It is necessary, therefore, to consider the section and certain authorities in relation to its operation. The section, so far as relevant, reads as follows:-

"87 (1a) Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this sub-section) in contravention of a provision of Part IVa or V ... on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in sub-section (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person.

...

(2) The orders referred  to in sub-sections (1) and (1a) are -

...

(b)an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date before the date on which the order is made as is so specified;

..."

It does not appear that s 80 of the TP Act or any other sub-sections of s 87 were relied on before the primary
judge or before this Court.  What was sought on behalf of the respondents was that:-

"the Court ... declare, pursuant to section 87 of the Trade Practices Act ... that it is a term of each of the contracts that the margin be fixed at the rate of 1.25%, subject to any alteration in the nature and value of security ... this declaration [to be] effective as and from 1 August 1992, together with ancillary orders to the effect that any payments made by Applicants in excess of 1.25% margins stand to their credit in the accounts of the Respondents."

[Present respondents' written submissions of 23 June 1995 to primary judge].

It seemed that there was an underlying assumption in oral submissions made to this Court that s 87 could not be enlivened in favour of the present respondents unless financial damage or its likelihood was demonstrated. In my view, however, it must now be taken as established that the concept of damage or its likelihood in s 87 is not to be restricted to the "loss or damage" referred to in s 82. This question was considered by a Full Court of this Court in Demagogue Pty Limited v Ramensky (1992) 39 FCR 31, in which it was submitted by the appellant that the words were used in the same sense in the two sections. There Black CJ said (at 32-33):-

"I add some observations of my own about the requirement in ss 87(1) and 87(1a) of the Trade Practices Act to show that loss or damage has been suffered or is likely to be suffered and the appellant's contention that `loss or damage' is used in s 87 in the same sense as it is in s 82.

The general law does not impose, as a requirement for effective rescission, that a party who has been induced to enter into a contract by a misrepresentation must have suffered loss and damage in the sense of a loss for which a pecuniary award may be made.  In the Trade Practices Act itself, the right of rescission given to consumers by s 75a where there has been a breach of a condition implied by a provision of Div 2 of Pt V is not conditional upon the existence of loss or damage in that sense. Despite the use of the same words `loss or damage' that appear in s 82, it would be surprising if s 87, in providing a range of discretionary remedies, contained a limitation that is not imposed by the general law in cases that would fall within the scope of Pt V of the Trade Practices Act and that would, in any event, seriously limit the usefulness of the section.

Moreover, I consider that s 87(1), read in the context of the Act as a whole, contains clear indications that the suggested limitation was not intended. Section 87(1) provides that an order under that subsection may be made whether or not the court `grants an injunction under section 80 or makes an order under section 80a or 82'. That would cover a case where no entitlement to damages under s 82 had been shown. By reason of s 87(1C), an application may be made under the similar provisions of s 87(1a) in relation to a contravention of Pt V notwithstanding that a proceeding has not been instituted for damages under s 82. That would cover a case where no entitlement to damages under s 82 could be shown.

In any event, s 87(1) is not confined to cases in which damages under s 82 are sought; it applies also in proceedings for an injunction and in proceedings for offences against Pt V. Section 87(1b) has a similar effect in relation to s 87(1a).

A further indication of the intention of s 87(1) and of s 87(1a) is to be found by considering the provisions of the Act concerning unconscionable conduct. Section 52a(1) provides:

`(1) A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable.'

Section 82(1) does no apply in relation to conduct done in contravention of s 52a and so no damages can be recovered under the Act in respect of such conduct: see s 82(3). Section 80a is also excluded in such cases. Section 80 is not excluded but an injunction under s 80 is unlikely to be a useful remedy where unconscionable conduct has occurred. It is thus left to s 87(1a), which uses the same language of loss or damage as appears in s 87(1), to provide a civil remedy. The applicability of s 87(1a) in such cases is expressly recognised by s 87(1ca)(a), which imposes a special two year limitation period, and by s 87(1d). It could not have been intended that the remedy available to those who have suffered from unconscionable conduct in breach of s 52a should be limited by the need to show loss and damage in the s 82 sense, especially since recovery under that section is specifically excluded and, in practical terms, s 87(1a) can provide the only useful remedy. In these circumstances I consider it to be clear that the loss or damage contemplated by s 87(1a) is not limited to loss or damage in the s 82 sense but was intended to include the detriment suffered by being bound to a contract unconscionably induced.

Sections 87(1) and 87(1a) are part of the same scheme and cover much common ground. They can each be enlivened by a contravention of s 52 and the concept of loss and damage in each subsection must be the same.

In my view, the loss or damage for the purposes of both ss 87(1) and 87(1a) will include the detriment suffered by being bound to a contract induced by misleading or deceptive conduct in contravention of s 52. Proof of loss or damage of the sort that would be an `amount of ... loss or damage' for the purpose of s 82 is not a prerequisite for the grant of relief under either subsection."

See also per Gummow J at pp 43-44.  See also per Cooper J at 47, where his Honour says:

"In my opinion `loss or damage' in s 87(1) means no more than the disadvantage which is suffered by a person as the result of the act of default of another (Halsbury's Laws of England (4th ed), Vol 12, par 1102) in the circumstances provided for in the section.

The phrase `loss or damage' in s 87(1) does not involve any concept of quantum or assessment of damages: see Barneys Blu-Crete Pty Ltd v Australian Workers' Union (1979) 43 FLR 463 at 473 where Northrop J expressed a similar view as to the use of the same phrase in s 45d(1)(a) of the Act. This is to be contrasted with the context of the phrase in s 82 where it is `the amount of the loss or damage' which is recoverable by action. For the purpose of s 82 it is the quantum or assessment of the loss or damage suffered in monetary terms which must be demonstrated. The rules as to the assessment of damages or the measure of damages in an action for deceit are relevant to the question of loss or damage under s 82. However those rules are not relevant to the meaning of the phrase in s 87(1)."

Accordingly, I am of the view that the borrowers' inability in the present case to demonstrate any financial loss resulting from the representation is no bar to their seeking relief under s 87. Additionally, there would appear to be no reason in principle why a victim of misleading or deceptive conduct within the meaning of s 52 should not have available, under s 87, a wide variety of remedies. This question was considered by Gummow J in Elna Australia Pty Limited v International Computers (Aust) Pty Limited (No 2) (1987) 16 FCR 410. In the context of a consideration of the scope of the decision of the High Court in Gates, his Honour said (at 420-421):-

"... that was a case concerned with the measure of damages for contravention of s 52 of the TP Act, and, in that setting Mason, Wilson and Dawson JJ (at 14), whilst favouring the tort measure, did point out that there was no necessity to make a definitive choice between the `contractual' and `tort' measures of damages so that one applies to all contraventions to the exclusion of the other. Tort and contract today are separated by rather less than clear bright lines. This is true both of acts, statements and omissions preceding entry into contract (for example, Esso Petroleum Co Ltd v Mardon [1976] QB 801; Ware v Johnson [1984] 2 NZLR 518 at 540-541; Waddams, The Law of Contracts, pp 257-259) and of the standard required in performance of contractual obligations: for example, Brickhill v Cooke [1984] 3 NSWLR 396 at 401.

Further, it would appear that in Gates' case submissions to the High Court proceeded on the footing that between them tort and contract comprised the universe of analogues offered by the general law in s 52 cases. This is not so. Equity long has exercised jurisdiction to require representations to be made good. The modern branch of that jurisdiction is represented by decisions upon so-called proprietary estoppel: Dawson, `Making Representations Good' (1982) 1 Canterbury L Rev 329; I E Davidson, `The Equitable Remedy of Compensation' (1982) 13 Melb U L Rev 349 at 356 et seq. These decisions, in Australia, include cases where pecuniary relief was deemed appropriate: Norris v Perpetual Executors, Trustees and Agency Co (WA) Ltd (1942) 44 WALR 21; Raffaele v Raffaele [1962] WAR 29; Jackson v Crosby (No 2) (1979) 21 SASR 280; Morris v Morris [1982] 1 NSWLR 61. Like s 52, and unlike deceit, equity operates without the necessity to prove any misleading intention by the defendant. Like s 52, and unlike negligence, equity does not require the existence of a duty of care. And the width of the equity jurisdiction is balanced by the general power to impose terms on a successful plaintiff.

Further, equity may remedy breach of fiduciary duty (for example, by failure to disclose a conflict of interest) by requiring pecuniary restitution for loss consequent upon that breach (McKenzie v McDonald [1927] VLR 134 at 146; United States Surgical Corp v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 816; Farrington v Rowe McBride and Partners [1985] 1 NZLR 83 at 93, 99); the measure of restitution is not governed by principles drawn from tort or contract: Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211; Bartlett v Barclays Bank Trust Co (No 2) [1980] Ch 515 at 543; Guerin v The Queen (1985) 13 DLR (4d) 321 at 362-367; Mid-Northern Fertilisers Ltd v Connell (unreported, New Zealand High Court, Thorp J, 18 September 1986, at 43, 45); Marr v Arabco Traders Ltd (unreported, New Zealand High Court, Tompkins J, 22 May 1987, at 228-231). And failure, in breach of equitable duty, to make disclosure may also constitute misleading or deceptive conduct within the meaning of s 52 of the TP Act: Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 68 ALR 77 at 84-85, 98, 102.

In any event, it would be unfortunate if s 82 of the TP Act were to be applied to particular cases by a process that encouraged the court first to turn to common law concepts, whether as to causation, remoteness or measure of damages."

There is, of course, no doubt that the question of the possible availability of other remedies was left open in
Gates. Their Honours, Mason, Wilson and Dawson JJ (at 14) said, after reference to the facts of that case:-

"The question then is whether it is appropriate to apply the contract measure of damages to the contraventions found to have taken place.  The courts are not bound to make a definitive choice between the two measures of damages so that one applies to all contraventions to the exclusion of the other.  However, there is much to be said for the view that the measure of damages in tort is appropriate in most, if not all, Pt V cases, especially those involving misleading or deceptive conduct and the making of false statements.  Such conduct is similar both in character and effect to tortious conduct, particularly fraudulent misrepresentation and negligent misstatement."

It must be recognised, of course, that this passage gives scant encouragement to the introduction of more extensive remedies flowing from a misrepresentation or breach of s 52. However, it may be noted that Gates appears, basically, to have been concerned with a claim for damages under s 82 and, although s 87 is mentioned in the judgments, it seems clear that no relief was sought under that section. However, the question whether the applicant should have been entitled to a contractual measure of damages on the basis that the representation made to him was essentially of a promissory kind was clearly raised. In relation to this, two passages in the majority judgment are, in my view, of particular significance. The first is at pages 12-13 and is as follows:-

"In the United States there is strong authority for the proposition that in deceit, as distinct from negligent misstatement, the plaintiff is entitled to recover expectation loss when he is induced by a fraudulent misrepresentation to enter into a contract: Prosser and Keeton on the Law of Tort, 5th ed. (1984), p.767 et seq.; Restatement of Torts (2d) pars. 549, 552b.  This approach seems to reflect the view that because the defendant's fraudulent conduct exposes the plaintiff to loss he is entitled to compensation on the basis that is most favourable to him.  The approach, which is by no means consistent with the object of awarding damages in tort, has not been adopted in Australia or the United Kingdom and the recent affirmation by the Court in Gould v. Vaggelas of the application of the measure of damages in tort to actions in deceit is quite inconsistent with it.  And, even if the American rule were to be adopted, it would not necessarily avail the appellant here in the absence of a finding of fraud."

The second is a pages 14-15 as follows:-

"The disappointed expectations of a person induced by a misrepresentation to believe erroneously that his insurance policy entitles him to the payment of benefits on maturity or on the happening of a certain event are sometimes so great as to encourage the thought that compensation on the basis of lost expectations would be appropriate.  However, neither authority nor principle offer support for adopting this approach.  In all the cases in which a plaintiff has sought to recover damages on the footing that a representation amounts to a collateral contract, a fraudulent misrepresentation or a negligent misstatement, damages for expectation loss have only been awarded when the representation amounted to a collateral contract.  Neither the fact that the representation induces entry into a contract nor the fact that it is a statement of the benefits to which the plaintiff will be entitled under that contract is enough to justify compensation for expectation loss.  Just as it is impossible to suppose that there is any difference in the measure of damages in deceit depending upon the nature of the contract into which the plaintiff is induced to enter (Clark v. Urquhart [1930] A.C. 28, at pp. 67-68), so there can be no variation in the measure of damages awarded under the Act for contraventions of ss. 52 and 53(g) depending on the nature of the contract."

Although these passages do not relate to any claim under s 87, I am of the opinion that they currently operate to bar the type of relief sought under that section in the present case. The facts of the two cases are similar in that in each the applicant complains that a representation as to the inclusion of a particular term in a contract was not fulfilled, there being included, in fact, a term significantly less advantageous to the applicant. The facts in Gates were clearly held insufficient to accord to the applicant relief on a promissory or loss of expectation basis. Although that relief was claimed under s 82, I am satisfied that the reasoning leading to its denial would apply equally to a claim for relief based on ss 87(1a) and 87(2)(b).

I am of the opinion, then, that it is not possible properly to distinguish Gates from the present case and that it is, therefore, not open to this Court to grant the relief sought.  I should say that, were it not for this, I should be most attracted to the granting of that relief.  The misrepresentation in the present case was, in my view, a serious one and was, on the evidence of Mr Smith, persisted in, even when it was known that there was an intention on the part of GIO to raise the Margin.  If it be accepted that a major underlying purpose of the TP Act and the FT Act is the maintenance of appropriate levels of commercial propriety then it would appear to be consonant with that purpose that in cases of this kind the representor be held to the representation as though it were, in fact, a binding contractual term. 

In the circumstances, however, the only relief that can be granted is on the limited base adverted to earlier in this judgment for breach of contract.  I should add that because I have held that the GIO letter of 21 April 1992 was ineffective to alter the Margin, it is unnecessary to consider the question raised by the alleged non-service of this letter on the fourth respondent. 

As I have the misfortune to be in disagreement with my brethren on the only aspect of the case which would have led me to disallow the appeal, I shall refrain from formulating the orders which I would otherwise have proposed.

I certify that this and the preceding forty eight (48) pages are a true copy of the reasons for judgment herein of the Honourable Justice M. L. Foster.

Associate:

Date:   21 NOVEMBER 1996