RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd
[1993] FCA 127
•12 MARCH 1993
Re: RAIA INSURANCE BROKERS LIMITED
And: FAI GENERAL INSURANCE CO. LIMITED
No. G372 of 1992
FED No. 127
Number of pages - 33
Trade Practices - Damages - Practice and Procedure
(1993) ATPR 41-225, (1993) 112 ALR 511
(1993) 41 FCR 164
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies(1), Beaumont(2) and Spender(2) JJ.
CATCHWORDS
Trade Practices - misleading or deceptive conduct - representation as to cover provided by a professional indemnity insurance policy - whether statement of fact implicit in statement of opinion grounded on a rational foundation by reason of superior knowledge and expertise.
Damages - claim under s.82(1) of the Trade Practices Act alleging a contravention of s.52(1) of the Act - measure of damages.
Practice and Procedure - proceedings under Trade Practices Act - claim for damages - no claim for injunction - whether declaratory relief also available.
Trade Practices Act 1974, ss. 52, 80A, 82(1), 86(1), 87(1A)
Federal Court of Australia Act 1976, ss. 21, 23.
Global Sportsman Pty. Limited v Mirror Newspapers Limited (1984) 2 FCR 82.
Jackson v Sterling Industries Limited (1987) 162 CLR 612.
Typing Centre of NSW Pty Ltd v Northern Business College Ltd (1989) 11 ATPR 40-943.
Brabazon v Western Mail (1985) 7 ATPR 40-549.
HEARING
SYDNEY, 18, 19 February 1993
#DATE 12:3:1993
Counsel and Solicitors for Appellant: Mr W.H. Nicholas QC with
Mr B.R. McClintock instructed by Dunhill Madden Butler
Counsel and Solicitors for Respondent: Mr S.D. Rares with Mr D.A.
Caspersonn instructed by Tress Cocks and Maddox
ORDER
THE COURT ORDERS: 1. Appeal dismissed, with costs. 2. Cross-appeal dismissed, with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
DAVIES J. I have had an opportunity to read the reasons for judgment prepared by Beaumont and Spender JJ. I agree generally with the remarks of their Honours and with the orders proposed, but would add a few words of my own.
The appellant, RAIA Insurance Brokers Limited ("RAIA") promoted a professional indemnity insurance policy for architects which was in competition with a policy promoted by the respondent, FAI General Insurance Co Limited ("FAI"). RAIA issued to a number of its clients a document which it described as an appraisal of FAI's policy. The trial Judge found that the appraisal conveyed the message that much of the cover offered by the FAI policy was illusory and that the issuance of the appraisal was conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s.52 of the Trade Practices Act 1974 (Cth).
In this appeal, counsel for RAIA submitted that the appraisal merely expressed the opinions of its author, Mr J.R. Down, an employee of RAIA and would have been so read and understood by the clients to whom the appraisal was sent.
Honesty, of course, is not in itself a defence if conduct contravenes s.52. See Parkdale Custombuilt Furniture Pty Ltd v. Puxu Pty Limited (1982) 149 CLR 191 at 197. But a representation involving the maker's state of mind stands in a different position from a representation of facts. As to statements of the former type, Burchett J. said in Industrial Equity Limited v. North Broken Hill Holdings Ltd (1986) 64 ALR 292 at 300:-
"The cases have emphasized the limitations upon the use of statements of this kind in
proceedings based on a provision such as s52: see Bill Acceptance Corporation Ltd v GWA Ltd
(1983) 50 ALR 242 at 247, 250; Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114 at 123; Western Mail Ltd v West Australian Newspapers Ltd (1985) ATPR 47,151 at 47,153; and Steedman v Golden Fleece Petroleum Ltd
(unreported, Woodward J, 24/12/85). In Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd
(1984) 55 ALR 25 at 31; 2 FCR 82 at 88, the joint judgment of Bowen C.J., Lockhart and
Fitzgerald JJ. contains the following:-
'A statement which involves the state of mind of the maker ordinarily conveys the meaning
(expressly or by implication) that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, that there was basis for that state of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, the making of the statement will have contravened s52(1) of the Act ...
'The incorrectness of an opinion (assuming that can be established) does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any, or any
adequate, foundation.
'The applicants argued that, nevertheless, the statement of an incorrect opinion is misleading or deceptive or likely to mislead or deceive merely because it misinforms or is likely to misinform. An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is basis for the opinion. At least if those conditions are met, an expression of
opinion, however erroneous, misrepresents
nothing'."
However, s.52 does not of itself distinguish between representations of fact and representations as to matters other than fact. The common law authorities respecting fraudulent and innocent misrepresentations of fact have no necessary application to s.52. The section is concerned with conduct which misleads or deceives or is likely to do so. If the making of a statement is, in the circumstances of the case, misleading or deceptive or likely to be so, then it contravenes s.52. It is the effect or likely effect of the statement which is the determining factor.
That is not to say that the common law authorities are not informative and helpful. But it is one thing to say that an expression of opinion expressed as such in circumstances where it would be so understood would not contravene s.52 if the opinion were honestly and rationally held, it is another to say that a representation which involves the formation of an opinion, assessment or judgment cannot contravene the section.
In the present case, the fact that the work was an appraisal, that is to say an assessment of worth or relative worth, indicated that it contained matters of judgment as well as fact. And the term "illusionary" which the appraisal used, was not purely factual. The term was used to convey a value judgment.
Nevertheless, the appraisal was issued by RAIA, a firm with expertise and a large broker of professional indemnity insurance for architects. Clients would expect a formal appraisal issued by such a firm to be expert in its analysis. And as the appraisal compared the worth of FAI's policy as compared to other such policies, a reader would be likely to have understood the remarks to have been made deliberately and with care. As Fox J. said with respect to comparative advertising in Hospitals Contribution Fund of Australia Limited v. Switzerland Australia Health Fund Pty Limited (1987) 78 ALR 483 at 484:-
"... in general, where representations are made comparing one product with another, the ordinary person to whom they are addressed is less likely than otherwise to regard what is said or written as a mere exaggeration, stated with an excess of enthusiasm. The language is more likely to be regarded as having been put forward deliberately and with some precision."
In these circumstances, the clients of RAIA would have been likely to have given far more significance to the appraisal than it deserved. No attempt had been made by Mr Down to write a fair or accurate appraisal. Mr Down gave this evidence:-
"You weren't trying to be fair to FAI and C.E. Heath's wording in this appraisal, were you?---No, I was not.
You were trying to find every fault, real or
imagined, that you could in it, weren't you?--- Correct."
The appraisal was misleading, indeed extremely misleading. His Honour was well justified in finding that the issuance of the appraisal contravened s.52 of the Trade Practices Act.
The case was an appropriate one for a declaration, the making of which was empowered by s.23 of the Federal Court of Australia Act 1976 and s.87(1A) of the Trade Practices Act. The declaration will assist FAI to reduce the damage which has been suffered and to prevent further damage. However, the form of declaration as proposed by my colleagues should be substituted. It was the appellant's conduct in issuing the appraisal which contravened the section.
JUDGE2
INTRODUCTORY
BEAUMONT AND SPENDER JJ. In proceedings instituted in this Court by the respondent, FAI General Insurance Co. Limited ("FAI"), Foster J. made a declaration that a representation with respect to the cover provided by a professional indemnity insurance policy underwritten by FAI, which representation was made by the appellant, RAIA Insurance Brokers Limited ("RAIA"), was "false and untrue" and "misleading and/or likely to mislead contrary to section 52 of the Trade Practices Act, 1974." Foster J. further ordered that there be judgment for FAI against RAIA in the sum of $15,000. RAIA now appeals from these orders.
THE PROCEEDINGS AT FIRST INSTANCE
2. In order to understand the questions which arise on the appeal, it is necessary to describe the issues agitated at the trial which are relevant to the appeal and then to refer to his Honour's findings and reasons in this connection.
(a) The relevant issues at the trial
3. By its statement of claim, FAI alleged, relevantly, the following:
"3. In or about late August 1989, (FAI) and CE Heath Casualty and General Insurance Ltd ... agreed to underwrite 50% each of risks placed pursuant to a professional indemnity policy wording for architects (herein called 'the Policy')...
4. In or about October and November 1989, (RAIA) in trade or commerce, represented (herein called 'the Representations') that:-
(a) the Policy was so stupidly worded that it would ensure that architects would be unable to defend themselves when sued by third parties;
(b) much of the cover provided by the Policy was illusory; (Emphasis added)
(c) the rating for the Policy had been so badly calculated that (FAI) and Heath would lose more than $5 million per annum;
(d) the Policy was proffered by (FAI) as a confidence trick on architects.
Particulars
(i) The Representations were made to architects and others enquiring about the Policy by:
(a) provision of a 3 page document headed 'Appraisal of Australian Architects Indemnity Plan' ...
(b) informing them orally in terms of the whole or part of the Appraisal.
(ii) (FAI) relies on the admissions in a letter dated 23 November 1989 from (the solicitors for RAIA) to (the solicitors for FAI).
5. Each of the Representations:-
(a) was false and untrue;
(b) was misleading and or deceptive and or likely to mislead and or deceive contrary to s.52 of the Trade Practices Act, 1974.
6. By reason of the matters aforesaid, (FAI) has suffered loss and damage."
By its amended defence, RAIA did not admit the matters alleged in para.3 of the statement of claim. RAIA denied the allegations in paras.4, 5 and 6.
(b) The findings made by the trial Judge Foster J. made findings which, so far as is presently material, may be summarised as follows:
(i) FAI was an insurer which provided professional indemnity insurance. In 1989, with a view to increasing its share of business in the area of architect's professional indemnity insurance, FAI entered into an arrangement with C.E. Heath Casualty and General Insurance Limited
("Heath") to underwrite, on a 50-50 basis, a new form of professional indemnity policy for architects. Willis Faber Johnson and Higgins (Professional Services) Pty. Limited ("Willis Faber"), insurance brokers, were appointed to market the policy. In August and September 1989, Willis Faber sent standard letters to architects recommending the policy.
(ii) RAIA acted as insurance broker for members of the Royal Australian Institute of Architects. In response to Willis Faber's aggressive campaign for the promotion of FAI's policy, RAIA prepared an "appraisal" of the policy for the benefit of architects.
(iii) In the appraisal, the following, inter alia, was stated: "(5) Certificate Wording:
Despite the adoption of a plain language format, the scope of cover provided by the Australian Architect Indemnity Plan Wording is in part ill-defined and in some respect almost illusionary, a potential bonanza for the legal profession.
(6) Introduction of the much lauded 'Civil Liabilities Wording' in the operative clause is presently unnecessary and a retrograde step for the architectural profession. If universally adopted by Professional Indemnity Insurers, the 'Civil Liabilities Wording' will eventually encourage Courts to 'award damages in the absence of negligence'.
(7) This would effectively remove the Architects main defence to a Breach of Duty Claim, namely that the Architect acted reasonably and achieved or provided the standard of service expected from a competent member of the profession. Such absolute liability must ultimately result in much higher premiums.
(8) Other Certificates features are:-
(9) Unlimited Reinstatements of Sum Insured - This could be impaired by cancellation provisions (refer Conditions 5 and 7).
(10) Dishonesty of Principals - Despite the wording utilised in this extension, it is debatable that cover would be readily provided for the most common form of dishonesty by Principals, namely that which involves 'non-disclosure and misrepresentation' by one of more of the Insured. (Refer Exclusion (d) and Conditions 2 and 5). Further, it is interesting to note that the dishonest Principal's financial interest or assets in the insured practice are applied as an additional excess in respect of such a claim. Furthermore, the insured practice is clearly expected to actively pursue recovery from the personal assets of the dishonest Principal and reimburse the Insurer.
...
(16) Some CERTIFICATE CONDITIONS are very biased in favour of the Insurer, for example - Condition (ii)(d) states that if the Insured fails to comply with a provision of this Certificate the Company may cancel the Certificate. This gives the Insurers absolute control and a multiplicity of reasons for cancellation. However, if Condition 5(ii)(d) is read in conjunction with Conditions 7(a) and (c), it is readily apparent that failure to immediately advise the Insurers of changes to or in the practice, that is, acquisitions, mergers, establishment of branch offices (question are site offices branches?), or any material change in the nature of services offered by the practice are all grounds for cancellation of the Certificate. But from what date?
..."
(iv) The combined effect of the several statements made in the appraisal was to convey to a reasonable reader the impression that the cover was not as satisfactory or as effective as it might seem to be because the policy was vulnerable, in ways not readily apparent, to exclusions and conditions in favour of the insurer; that is to say, it was represented that the cover was illusory.
(v) Publication of the appraisal was very limited: no more than seven architects received it.
(vi) The representation by RAIA that the cover provided by the FAI policy was "almost illusionary" had no rational basis and was thus misleading.
(c) His Honour's reasons for finding a contravention of s.52 of the
Trade Practices Act
5. Foster J. said:
"...in the circumstances in which the representation was made by the forwarding of the appraisal document to those architects who had sought the respondent's comments in relation to the Willis Faber documentation, the representation would have been perceived as an expression of opinion by the respondent rather than a statement of fact. Comment was sought in response to comment.
It was sought, however, as the comment of an experienced insurance broker favourably known to and relied upon by the architects seeking the comment. Accordingly the making of the comment and the expressing of the opinion carried with it the assurance that the opinion embodied in the representation was genuinely held and reasonably based. (See Global Sportsman Pty Limited v Mirror Newspapers Limited (1984) 2 FCR 82 at 88; James v ANZ Banking Group Limited (1986) 64 ALR 347 at 372.)"
His Honour held that -
"...whereas the document was largely the product of lack of reasonable care on (the) part (of its author, Mr Downs) it was not the product of dishonesty."
Foster J. found that criticisms made by RAIA in paras. (5), (6), (7), (9), (10) and (16) lacked "any material basis" or "any basis" or were "not based on reasonable grounds". His Honour said:
"In the upshot, I am quite satisfied that the representation which I have found to have been made by the respondent by the publication to the architects seeking it of the appraisal document was a relevantly misleading representation made in trade and commerce. I am satisfied, therefore, that the breach of s.52 of the Act (pleaded) in these proceedings has been established."
(d) His Honour's reasons for granting relief
8. Turning to the question of the form of relief, Foster J. held that, by virtue of the provisions of s.21(1) of the Federal Court of Australia Act, the Court had power to make a declaration that RAIA had engaged in misleading conduct in contravention of s.52 of the Trade Practices Act. His Honour said that FAI was "clearly entitled" to an "appropriate declaration".
Addressing FAI's claim for damages by virtue of the provisions of s.82(1) (read in conjunction with s.4K) of the Trade Practices Act, Foster J. said:
"There is no direct evidence that any of the architects who received the appraisal were induced by it to remain with the respondent's policy rather than taking out insurance cover with the applicant through Willis Faber. The simple fact is that they were sent the appraisal and thereafter did not yield to the blandishments of the Willis Faber promotional material. The situation is not an easy one. However, having regard to the serious nature of the misleading representations that I have found to have arisen from the appraisal document, I am satisfied that there is a likelihood that some at least of the recipients were influenced against taking out insurance with the applicant by those representations."
His Honour was further of the view that the misrepresentations -
"...would cause some injury to the applicant through the unjustified belittling of its product. It could cause potential insured to adopt an unnecessarily cynical view of the effectiveness of the policy cover. It is reasonable to assume that the effect of the representation would have spread to some extent beyond the recipients of the appraisal with consequent injury to the applicant."
His Honour concluded:
"Doing the best I can on what is extremely exiguous material I think it appropriate that I award damages in the sum of $15,000. In arriving at this award I have accepted that it is open to award damages for vindication of commercial reputation under s.82 (see Brabazon v Western Mail Limited (1985) 7 ATPR 40-549 at 46,453; Flamingo Park Pty Limited v Dolly Dolly Creation Pty Limited (1986) 65 ALR 500 at 525; Typing Centre of NSW Pty Limited v Northern Business College Limited (1989) 11 ATPR 40-943 at 50,290)."
(e) The orders made at first instance
12. Foster J. made orders as follows:
"1. a declaration that the respondent made the representation set out in paragraph 4(b) of the statement of claim and that the representation was:-
(a) false and untrue, and
(b) misleading and/or likely to mislead contrary to s 52 of the Trade Practices Act;
2. that there (be) judgment for the applicant in the amount of $15,000;
3. that the respondent pay the applicant's costs."
CONCLUSIONS ON THE APPEAL
13. It is convenient to deal separately with the arguments advanced by RAIA in support of the appeal.
(a) Whether the representation alleged in para.(b) of the FAI's statement of claim was made
14. It will be recalled that the material allegation pleaded by FAI in its statement of claim (para.4(b)) was that RAIA represented that -
"(b) much of the cover provided by the policy was illusory."
On behalf of RAIA it is now argued that even if some criticism of the appraisal may have been open, the finding made by his Honour that the allegation made in para.4(b) above had been established was not justified. In particular, it was said, for RAIA, that there was no statement made in the appraisal that "much" of the cover was "illusory". Reference was made to the relevant dictionary definitions of "much" as follows:
"1. in great quantity, amount, measure, or degree: much work. - n. 2. a great quantity or amount; a great deal: much of this is true."
Reference was also made to the Macquarie Dictionary definition of "illusory" as - "causing an illusion; deceptive" and, in turn, to the dictionary meanings of "illusion" as -
"1. something that deceives by producing a false impression. 2. the act of deceiving; deception; delusion; mockery. 3. the state of being deceived, or an instance of this; a false impression or belief." It was said, on behalf of RAIA, that the language used in the appraisal did not go so far as to claim, in terms or by implication, that "much" of the FAI cover was "illusory".
We cannot accept RAIA's argument.
It may be that not all of the criticisms levelled at the policy used the phrase "illusory" in literal terms. But, in our opinion, it was open to his Honour to conclude that the thrust of the message in the appraisal was to the effect found by the learned Judge. His Honour was supported in this conclusion by the circumstance, as Foster J. found, that Mr Downs, the author of the document, agreed in his evidence that -
"...in writing the appraisal he was not seeking to be fair to the applicant's policy and that he was 'trying to find every fault real or imagined' in it that he could."
The question of the proper characterisation of the statements made in the appraisal was really one of impressions and of degree. In our opinion, his Honour's conclusion on this aspect was plainly open to him. Nor error of principle in the approach taken by the learned Judge has been demonstrated. No other sufficient basis for setting aside his Honour's finding in this respect has, in our view, been shown to exist. When the appraisal is read as a whole and when regard is had to the stated objective of its author in undertaking the "appraisal" exercise, the overall character of the statements made in the appraisal do, we think, warrant the description claimed in para.4(b) of the statement of claim and so found by his Honour.
(b) Whether the representation was misleading or likely to mislead for the purposes of s.52
20. In the present case, FAI claimed, and his Honour found, that the relevant misleading conduct on the part of RAIA now complained of consisted of the making of the statements in the appraisal which have already been mentioned.
As has been noted, Foster J. found that the statements in the appraisal were expressions of opinion, or comment, rather than statements of fact. His Honour held that although Mr Down held the opinions expressed honestly, the expression of the opinions "carried with it the assurance (of RAIA) that, (inter alia) the opinion embodied in the representation was...reasonably based.
On behalf of RAIA it is submitted that it cannot be said that the expression of an opinion necessarily conveys with it a representation as to its reasonableness. In our opinion, even if the submission of RAIA were to be accepted, in accordance with the settled course of authority in England, it should be held that, in circumstances of the present kind, there was implicit in the expression of opinion a statement of fact, namely that RAIA knew of facts which justified the opinion, that is to say, that RAIA's opinion was held on reasonable grounds.
In Smith v Land and House Property Corporation (1884) 28 Ch D 7, the vendors of a property stated that it was "let to Mr Frederick Fleck (a most desirable tenant) ..." In fact, the tenant's rent was in arrears and he was not a desirable tenant. It was held that this was not a mere expression of opinion, but contained an implied assertion that the vendors knew of no facts leading to the conclusion that he was not; and that, in the circumstances, there was a misrepresentation.
Bowen L.J. said (at 15):
"In considering whether there was a misrepresentation, I will first deal with the argument that the particulars only contain a statement of opinion about the tenant. It is material to observe that it is often fallaciously assumed that a statement of opinion cannot involve the statement of a fact. In a case where the facts are equally well known to both parties, what one of them says to the other is frequently nothing but an expression of opinion. The statement of such opinion is in a sense a statement of a fact, about the condition of the man's own mind, but only of an irrelevant fact, for it is of no consequence what the opinion is. But if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion. Now a landlord knows the relations between himself and his tenant, other persons either do not know them at all or do not know them equally well, and if the landlord says that he considers that the relations between himself and his tenant are satisfactory, he really avers that the facts peculiarly within his knowledge are such as to render that opinion reasonable. Now are the statements here statements which involve such a representation of material facts? They are statements on a subject as to which prima facie the vendors know everything and the purchasers nothing. The vendors state that the property is let to a most desirable tenant, what does that mean? I agree that it is not a guarantee that the tenant will go on paying his rent, but it is to my mind a guarantee of a different sort, and amounts at least to an assertion that nothing has occurred in the relations between the landlords and the tenant which can be considered to make the tenant an unsatisfactory one. That is an assertion of a specific fact. Was it a true assertion?"
In Brown v Raphael (1958) 1 Ch 636, a statement was made by solicitor s for the vendor of a reversionary interest that an annuitant was "believed to have no aggregable estate". The statement, which was honestly made, but without reasonable grounds, for so believing, was held to be a misrepresentation.
After referring to Smith's case, Lord Evershed M.R. said (at 642-3):
"Mr Lindner argued that to hold, as the judge did, affirmatively on that point was to lay down the principle that wherever it is stated that one party entertains a particular belief then it must follow that there is a representation that he has grounds reasonably supporting his belief. But I lay down no such general proposition. The question here is whether in this case and in the context of these particulars concerning lot 11 such a representation of reasonable grounds to support the belief ought to emerge; and, as the judge held, I think that in this case the answer is in the affirmative."
Lord Evershed went on to say (at 643):
"The next thing to notice, I think, about the particulars is the item at the end: 'Solicitors as to lot 11 - Messrs Oscar Mason and Co.' - a well-known firm of solicitors of standing and repute. What would be the effect of this language upon the mind of a possible purchaser? Clearly, I should have thought, it would flow from the language used and would be intended to be understood by a reader of the particulars that persons who knew the significance of this matter and who were experienced and competent to look into it were expressing a belief founded upon substantial and reasonable grounds. As between the vendor and the prospective purchaser it is quite plain that this is a case within the category stated by Bowen L.J., namely, a case where the vendor's knowledge or means of knowledge is far superior to that of the purchaser. The purchaser can know nothing whatever which could guide him on this point."
Lord Evershed concluded (at 644):
"I am, therefore, entirely of the same opinion as was the judge, that this is a case in which the representation was not merely confined to the fact that the vendor entertained the belief but also, inescapably, there goes with it the further representation that he, being competently advised, had reasonable grounds for supporting that belief."
Romer L.J. said (at 648-9):
"It might be, such is the efficiency of the Public Trustee's office, that that might be sufficient, after a great deal of research, to discover who the testator was and the terms of the will and everything else; but short of that, as my Lord has pointed out, the purchaser was helpless in this matter. On the other hand, the vendor, who has to be identified for this purpose, as I think, with the bankrupt herself, the owner of the reversion, was in a far stronger position - to put it at its lowest - than was the purchaser to ascertain all relevant facts bearing upon this reversion, and more particularly bearing upon its value and what it was likely to bring in on the death of the annuitant. That being so, I should have thought that it was fairly obvious that the statement purporting to come, as it did come, from the vendor's solicitors, and expressing a belief vital in relation to this legal transaction, inevitably would suggest to the purchaser that the opinion was being expressed upon reasonable grounds; for it was a matter which everybody concerned, and especially a solicitor, must know would vitally affect the value of the reversion which the purchaser was proposing to buy, in that a matter which obviously affects the value of a reversion more than anything else is whether the value of it will be reduced because of the principle of aggregation when it falls in."
In Global Sportsman, in the passage cited by Foster J., the Full Federal Court (Bowen C.J., Lockhart and Fitzgerald JJ.) said ((1984) 2 FCR at 88):
"A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or by implication) that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, that there was basis for that state of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, the making of the statement will have contravened s.52(1) of the Act."
In James, in the passage cited by Foster J., Toohey J. said ((1986) 64 ALR at 372):
"(4) A statement involving the state of mind of the maker of the statement, eg promises, predictions and opinions, ordinarily conveys the meaning that the maker of the statement had a particular state of mind when the statement was made and that there was basis for that state of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, there will have been a contravention of s.52".
In Bateman v Slatyer (1982) 71 ALR 553, Burchett J. said (at 559):
"It is of course clear law that a statement of opinion cannot be regarded as false or misleading, or as misleading or deceptive, simply because it turns out to be incorrect: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd... But such an opinion may convey that there is a basis for it, that it is honestly held, and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise". (Emphasis added)
These observations were followed by von Doussa J. in Brown v Australian Harvestore Products Pty. Ltd. (1989) ATPR (Digest) 46-051 and by Hill J. in The Harbour Agency Pty. Limited v Agency for the Performing Arts Pty. Ltd. (1989) ATPR 40-969 at 50,593; cf. Inn Leisure Industries Pty. Ltd. v D.F. McCloy Pty. Ltd., French J., 28 February 1991, unreported.
It is true that Burchett J. did not suggest that, in every case, it is implicit in the expression of an opinion that it is based on rational grounds. As his Honour said, it may do so. With respect, we agree. We would add that, in circumstances such as those here, which are similar, in principle, to those in Smith's case and in Brown v Raphael, it is implicit in the expression of the opinion that the party concerned actually knows facts which justify the opinion (see Kenny v Fenton (1971) NZLR 1 per North P at 12-13).
In the present case, as has been seen, the document published by RAIA was described by it as an "appraisal". The relevant Macquarie Dictionary meaning of "appraisal" is:
"2. an assessment or statement of worth, quality, or condition."
Further, the "appraisal" was prepared by an insurance broker, that is to say, by a person held out as an expert in the field of insurance.
In our opinion, it is appropriate to infer, in these circumstances, a representation that, in expressing the opinions it did, FAIA had acted on a rational basis, especially when the opinions expressed purport to deal with the actual operation, in practical terms, of the provisions of the FAI policy. That is to say, the statements made in the appraisal were not merely opinions; implicit in them, as in Smith's case and the other authorities mentioned, was a representation that the opinions had been grounded on a rational foundation by reason of the superior knowledge and expertise of RAIA as professional insurance brokers. In substance, Foster J. so held and we agree respectfully with his Honour's conclusion.
As has been noted, Foster J. further held that there was no rational basis for the comments made in paras. (5), (6), (7), (9), (10) and (16) of the appraisal. No substantial challenge is made to these conclusions.
It follows, in our view, that his Honour's finding that the representation described in para.4(b) of the statement of claim was misleading should not be disturbed.
(c) Whether declaratory relief should have been granted
40. As has been said, Foster J. made two declarations: first, that the representation in para.4(b) of the statement of claim was "false and untrue"; and, secondly, that the representation was "misleading and/or likely to mislead contrary to section 52 of the Trade Practices Act, 1974".
(i) Whether there was power to make the declarations:
41. On behalf of RAIA, it is first submitted that his Honour had no power to make a declaration that s.52 has been contravened, or otherwise. It is said, for RAIA, that Part VI of the Trade Practices Act provides an exclusive code for relief for contravention of the provisions of Part V of that Act (which includes s.52); and that Part VI does not, in terms, and should not, by implication, confer upon the Court the power to grant a declaration that s.52 had been contravened.
We have difficulty in accepting this analysis.
The relevant provisions of Part VI are as follows. By s.80(1), the Court is empowered, in the circumstances there mentioned, to grant injunctive relief, inter alia, in the event of a contravention of Part V of the Act. By s.80A, upon a contravention of Part V, the Court may order the disclosure of information or the publication of an advertisement. Upon such a contravention, s.82 also provides for actions for damages. By s.87(1A) it is provided:
"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 ... in contravention of a provision of Part V ..., make such order or orders as the Court thinks appropriate against the person who engaged in the conduct ... (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 ... 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 person."
The ancillary orders specified in s.87(2) include an order declaring a contract void.
In order to consider the nature of the jurisdiction being exercised by the Court in the present case it is necessary, in the first place, to refer to the amended application filed on behalf of FAI which was relevantly as follows:
"On the grounds appearing in the accompanying Statement of Claim, the Applicant claims:-
1. A declaration that each of the Representations by the Respondent referred to in paragraph 4 of the Statement of Claim was:-
(a) false and untrue;
(b) misleading and/or deceptive and/or likely to mislead and/or deceive contrary to s.52 of the Trade Practices Act, 1974.
2. Damages (including aggravated damages).
..."
In our opinion, the Court had jurisdiction to entertain each of those claims.
By s.86(1) of the Trade Practices Act it is provided:
"86(1) Jurisdiction is conferred on the Federal Court in any matter arising under this Act in respect of which a civil proceeding has ... been instituted under ... Part (VI)."
As has been noted, by para.2 of the amended application, a claim was made for damages. In the statement of claim, a contravention of s.52 was alleged and damages alleged. It follows, in our view, that an action for damages under s.82 of the Trade Practices Act was before the Court. The Court plainly had jurisdiction to entertain that claim. Further, in our opinion, the Court had jurisdiction to deal with any attached common law claim that was part of the same matter (see, e.g., Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 at 219).
By s.23 of the Federal Court of Australia Act 1976 it is relevantly provided:
"23 The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds ... as the Court thinks appropriate."
Speaking of this provision, Deane J. said in Jackson v Sterling Industries Limited (1987) 162 CLR 612 at 622:
"Wide though that power is, it is subject to both jurisdictional and other limits. It exists only 'in relation to matters' in respect of which jurisdiction has been conferred upon the Federal Court. Even in relation to such matters, the power is restricted to the making of the 'kinds' of order, whether final or interlocutory, which are capable of properly being seen as 'appropriate' to be made by the Federal Court in the exercise of its jurisdiction."
By s.21(1) of the Federal Court of Australia Act it is provided:
"21(1) The Court may, in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed."
As Gummow J. pointed out in Bond v Sulan (1990) 26 FCR 580 at 585:
"...in relation to a matter in which this Court has original jurisdiction, it may make binding declarations of right, as provided by s 21 of the Federal Court of Australia Act 1976 (Cth), and in this regard, no distinction is drawn between the accrued and the primary jurisdiction of the Court".
Since this was a matter in which the Court was invested with jurisdiction under s.86(1) of the Trade Practices Act by virtue of the claim made under s.82 of that Act, in our view, it follows that, if appropriate, the Court was empowered to make a declaration of right to the effect that s.52 had been contravened.
We turn next to the question whether, in the present circumstances, it was appropriate to make such a declaration.
(ii) Whether it was appropriate to make the declaration?
55. On behalf of RAIA it is next argued that, even if there were power to make a declaration, it was not appropriate to do so in the present case. In particular, it was said that, because there was no suggestion that the conduct complained of would be repeated, there was no useful purpose to be served by making the declaration sought.
We are not persuaded that we should interfere with his Honour's discretion in favour of making a suitable declaration.
In Ainsworth v Criminal Justice Commission (1992) 106 ALR 11, Mason C.J., Dawson, Toohey and Gaudron JJ. said (at 22):
"It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which 'it is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise'... However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. ... The person seeking relief must have 'a real interest'... and relief will not be granted if the question 'is purely hypothetical', if relief is 'claimed in relation to circumstances that (have) not occurred and might never happen' ... of if 'the court's declaration will produce no foreseeable consequences for the parties'. ...
The present case involves no mere hypothetical question. At all stages there has been a controversy as to the Commission's duty of fairness. A report has been made and delivered under s 2.18 of the Act. That report has already had practical consequences for the appellants' reputations. For all that is known, those consequences may extend well into the future. It is appropriate that a declaration be made in terms indicating that the appellants were denied natural justice. That may redress some of the harm done."
Brennan J. said (at 33):
"The circumstances that call for the making of a declaration are not present if there is no real controversy to be determined."
In the present case, it could not be suggested that there was no real controversy between the parties on the matter the subject of the declaration. Prima facie at least, a useful purpose is achieved by making a declaration, notwithstanding that damages were also claimed under s.82 and awarded (cf. Meagher, Gummow and Lehane, Equity - Doctrines and Remedies, 3rd ed. at 492-4). See also Tobacco Institute of Australia Limited v Australian Federation of Consumer Organisations Inc., Full Federal Court, 10 March 1993, unreported.
(e) Whether the declarations made were in a suitable form 60. Ordinarily, a declaration should reflect the substantive cause of action sued upon. In the present case the substantive cause of action is found in s.52(1) of the Trade Practices Act, notwithstanding that, as has been noted, the remedies in that connection are conferred elsewhere. By s.52(1) it is relevantly provided:
"52(1) A corporation shall not ... engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
In the present circumstances, a suitable form of declaration would be as follows:
"Declare that, by representing that much of the cover provided by the professional indemnity policy underwritten by the applicant was illusory, the respondent engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, contrary to the provisions of s.52(1) of the Trade Practices Act 1974."
We propose that the orders made at first instance be varied by setting aside the declarations made and by making the above declaration in lieu thereof.
(f) Whether damages should have been awarded
63. On behalf of RAIA it is contended that there was no evidence of loss or damage of the kind contemplated by s.82(1) of the Act which provides as follows:
"82(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention."
In our opinion, there was material in the evidence before his Honour upon which an award of damages of $15,000 could be justified. It is true, as his Honour said, that the material was "extremely exiguous". But it does not follow that it would have been appropriate to award no damages or a nominal amount only.
Foster J. referred, in this connection, to observations made in the Typing Centre case. There, Wilcox J. said ((1989) 11 ATPR at 50.290-1):
"In the case of a corporation, damages in defamation are confined to such amount as will reflect the court's assessment of the pecuniary damage likely to have been, or to be, sustained by the corporation as a result of the defamation. That damage need not be confined to income. The goodwill of a business may be injured, causing a capital loss. And it is not necessary that the court be able to calculate mathematically the appropriate sum. However difficult the exercise may be, the court has to make the best estimate it can, even if the result seems arbitrary; see Enzed Holdings Limited v Wynthea Pty. Limited ... A similar position arises in respect of the sec. 52 claim. Section 82 of the Trade Practices Act confers a right to 'recover the amount of the loss or damage', that is, in relation to a claim under sec. 52 of the Act, the loss or damage suffered by the applicant as a consequence of the proved misleading or deceptive conduct. Once again, of course, it may be possible to do no more than make a broad estimate of the extent of that loss or damage.
As the position, in relation to damages, does not differ as between the two causes of action, I need not hereafter distinguish between them. In the present case there is no claim for special damage. There is no evidence of any loss of income as a result of the publication of the advertisements. But it is claimed that the consequence of the publication must have been to affect the goodwill of the applicant's business and that, in determining the extent of that loss, the court ought to have regard to the nature of the statements made by the respondents and to the manner and extent of their publication."
With respect, we agree (see also Prince Manufacturing Inc. v Abac Corp. (1984) 2 FCR 288 at 293-4; Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 40-41).
In the present kind of matter, it is to be expected that it will be difficult for a party in the position of FAI to lead evidence of any precise measure of its loss because that information will not be readily obtainable. But it does not follow that it is appropriate to award only nominal damages. We are not persuaded that any basis exists for interfering with his Honour's assessment, by way of compensatory damages, of the measure of loss probably suffered by FAI.
It is true, as senior counsel for RAIA has pointed out, that, in awarding damages, Foster J. referred to the "vindication of commercial reputation"; and that, whilst this phraseology is used as a term of art in the law of defamation, it is another question whether such a notion has a place in the present context where relief is to be granted upon a compensatory basis only. It may be noted, in this connection, that the relevant dictionary meaning of "vindicate" (Macquarie) is - "1. to clear, as from a charge, imputation, suspicion or the like."
However, as the passage previously cited from the judgment of the primary Judge shows, his Honour appears to have awarded damages here on a compensatory basis rather than in accordance with the rules governing the measure of damages in an action for defamation. This appears from the authorities relied on by Foster J.
In Brabazon, Toohey J., after holding that the measure of damages for injurious falsehood provided no analogy in a claim under s.82 of the Act, said (at 46,454):
"In the case of a claim under sec.82 of the Trade Practices Act, there is no actual and positive right which may be disturbed and as to which the law presumes some damage. Section 52 proscribes certain conduct and a person who suffers loss or damage by that conduct may recover that loss or damage by action. That is not to say that special damage must be shown; the question is whether the applicant has suffered loss or damage by the respondent's conduct in contravention of sec.52. The Act itself offers no other guidance save that, by reason of sec.4K, a reference to loss or damage includes a reference to injury. The present question is not one of the measure of damages under sec.82; rather it is one of the nature of the compensation that may be recovered. The words 'loss or damage' are wide in their operation as appears from the illustrations provided in Stroud's Judicial Dictionary, 4th ed. at pp.674-678, 1577-1580. Damages for mental distress have been awarded in certain cases of breach of contract... Damages for injury to reputation of course lie at the very heart of actions for defamation. Whether an individual, whose reputation has been damaged by misleading or deceptive conduct in the form of a newspaper report, should be compensated for that injury to reputation, whether or not there is accompanying economic loss in the form of special or general damage, is a matter of interpretation of the Trade Practices Act. In my view the words 'loss or damage' are wide enough to include such compensation; however, the loss or damage suffered must be the result of conduct done in contravention of sec.52.
As the applicant has failed to establish misleading or deceptive conduct on the part of the respondent, there is no need to explore the question of damages further. It is enough to say that no financial loss has been established and, if the applicant were entitled to damages, it would be confined to such injury to his reputation as he was able to establish."
Foster J. next referred to Flamingo Park. There, in proceedings under s.82 of the Act and in passing off under the general law, a claim was made for damage to the applicant's goodwill and reputation by the release onto the market of inferior quality garments bearing the name of the applicant (at 523). Wilcox J. said (at 524-5) that -
"...there appears to be no reason why...reputations should not be treated in the same manner as mental distress... I am encouraged in this opinion by the fact that in Brabazon v Western Mail Ltd (1985) 58 ALR 712 at 718 Toohey J. expressed the view that s.82 of the Trade Practices Act permits the recovery of damages in respect of loss of reputation; his Honour drawing on the contract cases I have mentioned in which damages have been awarded for mental distress.
Any assessment of damages for loss of reputation must necessarily be made with a broad brush; as in a defamation case a court can do no more than fix a sum of money which, in the whole of the circumstances, appears to be proportionate to the damage which has been incurred. The greater the reputation, the more vulnerable it is to damage. In the present case the damage was in the area of greatest sensitivity; the applicant's reputation for excellence and for limitation of output. I think that the damage was likely to have been considerable and that an appropriate sum of money to allow for damage to reputation is $30,000."
Wilcox J. went on (at 525-6) to reject a claim for exemplary or aggravated damages.
Finally, as has been noted, Foster J. relied upon the reasoning of Wilcox J. in the Typing Centre case.
If, by referring to the "vindication" of the commercial reputation of FAI, the primary Judge meant that the award he made would "clear" FAI from an imputation, then it may have been more appropriate for his Honour to have proceeded under s.87 rather than s.82. For instance, it may have been proper to order corrective advertising under s.87. However, when his Honour's reasons are read as a whole, and, in particular, when regard is had to the reasoning of Toohey J. and of Wilcox J. (in the two instances cited), it appears that what Foster J. had in mind was the award of damages for the compensation of FAI for the commercial loss which his Honour inferred that FAI had probably suffered because of RAIA's misleading conduct. Viewed as such, the award was made in accordance with the correct principles. As has already been said, no basis has been demonstrated for our interference with the amount awarded.
(g) Costs at first instance
75. Notwithstanding that he dismissed other claims made by FAI in defamation, his Honour ordered that RAIA pay FAI's costs at first instance. Foster J. said:
"I have also considered whether I should make some special order for costs in this matter having regard to the applicant's failure on the defamation counts. I have decided, however, on balance that the applicant is entitled to its costs in the ordinary way."
It is now submitted, on behalf of RAIA, that his Honour should have made due allowance for the time taken in hearing the unsuccessful defamation and other claims and made no order for the costs of the trial.
In our view, there is no basis here for interfering with the undoubted discretion of a trial Judge on the matter of costs. There was some overlapping of issues, especially on the facts. Moreover, in his reasons on the issue of costs, Foster J. squarely addressed the point now raised by RAIA and resolved the question adversely to RAIA. We would dismiss the appeal on the issue of costs.
(h) Orders proposed on the appeal
78. In the result, we would vary the terms of the declaration made at first instance in the manner already indicated. Otherwise, the appeal should be dismissed, with costs. The cross-appeal
Although FAI has lodged a cross-appeal, it indicated on the hearing of the appeal that, in the event that the appeal were to be dismissed, the cross-appeal would not be pursued. In the circumstances, the cross-appeal should be dismissed with costs.
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