Sydney Catchment Authority v Abigroup

[2007] HCATrans 146

[2007] HCATrans 146

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S396 of 2006

B e t w e e n -

SYDNEY CATCHMENT AUTHORITY

Applicant

and

ABIGROUP CONTRACTORS PTY LTD

Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 24 APRIL 2007, AT 10.45 AM

Copyright in the High Court of Australia

MR T.F. BATHURST, QC:   May it please the Court, I appear with my learned friend, MS J.A. STEELE, for the applicant.  (instructed by DLA Phillips Fox)

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR S.A. KERR and MR P. KULEVSKI, for the respondent.  (instructed by Clayton Utz)

GLEESON CJ:   Yes, Mr Bathurst.

MR BATHURST:   The tortuous history of this litigation would seem, on its face, to make it a difficult vehicle to urge this Court to consider any point of principle, but the facts we say give rise to the issue are clear and based on findings made either by the Court of Appeal or by the trial judge in areas where his judgment was not the subject of challenge.  They can be summarised in this way.             Firstly, the applicant made a representation as to the non-existence of certain plans, which was incorrect.  Secondly, that representation was made in contravention of section 52.  Thirdly, those persons responsible for the preparation of the tender and the making of the representation which was contained in the tender, did not know of the existence of the pipes which made the representation incorrect.  Your Honours can pick that up from the judgment of Justice McDougall at page 60 in paragraph 110 at line 30:

At least in circumstances where Sydney Water had no knowledge, and perhaps no reason to know, of the existence of the 1951 cross-section, a representation that simply omitted the words “or the [any] outlet pipe” might also have been not misleading or deceptive. 

He returned to the same issue at paragraph 113, the sentence between lines 40 and 50:

It is therefore unlikely that, had Sydney Water been aware of the existence of the 1951 cross‑section, it would not have disclosed it.

Justice Beazley who gave the judgment of the Court of Appeal at page 111 extracted another finding of the learned trial judge on this issue which was directed to an estoppel point, but it is to the same effect.  If your Honours could go to page 111 subparagraph (10) just around line 30:

In fact, that information did exist (and, from the representee’s perspective, which is relevant to the consideration of unconscionability, it does not matter that, subjectively, [the respondent], Public Works or their relevant officers may not have been aware of the existence of that further information -

It follows from that, we say, that a mere failure by the Authority to disclose the existence of the plan would not have constituted misleading and deceptive conduct because it would have been inadvertent and therefore fall outside the scope of section 4(2) of the Trade Practices Act. 

The applicant accepts that the respondent relied on the representations in the sense that it was material to the terms on which it tendered and it would not have tendered on that basis had it known of the existence of the plans.  However, the respondent did not establish that it would have tendered on any different basis merely if no representation had been made as distinct from the situation if the plans had been disclosed.  So much stated by the respondent, in its own submissions, and the Court can pick that up at page 173 of the book, paragraph 23 of the respondent’s submissions.  In the second sentence they say:

Rather the position is, as becomes clear elsewhere in the applicant’s submissions, the evidence of the respondent did not seek to address how it would have acted in the hypothetical world that the invitation to tender was in exactly the same form but with the false statement excised. 

The balance of that paragraph seems to suggest that this issue was never raised.  It was raised and it can be shown clearly from the judgment of the learned trial judge.  If your Honours could go back to that judgment at page 62, paragraph 114, Justice McDougall said this:

This analysis assumes that Sydney Water knew, or had reason to know, of the existence of the 1951 cross-section.  If, however, it did not . . . then the alternative form of “but for” representation – ie, simply omitting the reference to “or the [any] outlet pipe” would not have been misleading or deceptive.  In this context, one needs to bear in mind that the referee rejected Abigroup’s alternative case – that the tender documents and contract expressly or by implication represented that the material supplied was complete -

Now, in those circumstances, the proposition we put is this.  To determine the necessary causal link between the misleading conduct and the loss suffered for the purpose of section 82, the relevant question is to consider what would have happened had the representation not been made.

GLEESON CJ:   In the sense that they said nothing?

MR BATHURST:   In the sense they said nothing.

GLEESON CJ:   As distinct from stating the truth?

MR BATHURST:   Stating the true facts which, or course, they did not know on those findings.  That approach, we say, accords both with common sense, to the extent that March v Stramare survives in its purest form in this area, but also accords with the object and purpose of both sections 52 and 82 of the Act.  It accords with common sense because it does not consider causation on the basis of a hypothesis which in reality could not have occurred. 

On the findings of lack of knowledge, there is no possible basis, on any hypothesis, that the Authority could have disclosed the existence of the plans. It is consistent, we say, also with the scope, purpose and object of the Act because such an approach provides protection against the effect of the representation whilst doing no more than relieving the respondent from its actual effect.  That is particularly so, we submit, in a commercial contract where both parties proceeded on the basis that information could be inaccurate. 

At page 25 of the application book there is extracted the exclusion clause or limitation clause which appeared in the tender itself.  It is paragraph 22, line 40:

“The Principal does not represent that information made available to the Tenderer/Contractor shows completely the existing site conditions as it may contain errors, omissions or be misleading . . . 

The Tenderer/Contractor . . . must independently check -

and then the following page, at line 20:

The Principal shall not be liable for any incorrect, misleading or inaccurate information provided.”

That does not mean we accept that there is an exclusion of liability for a contravention of section 52 but, taken in the context of what the parties accepted, we submit the objects of the Act are achieved by determining causation on the basis of what the applicant – all the applicant could have done, namely, simply not say anything about the question.

The Court of Appeal rejected those propositions for two reasons.  The first can be found in paragraph 59 of the judgment of Justice Beazley at page 124 of the book.  Her Honour says:

Rather, what has to be done is to ascertain what would have occurred for the respondent not to have engaged in conduct which was misleading.

We do not dispute that proposition but we say what would have been necessary was, as I indicated, not disclosing anything.

In my opinion that would require that the existence of the plan be disclosed. 

One asks rhetorically, “How can that be done when there was no knowledge of its existence?”

This can be tested, in my opinion, by contrasting that response with the response argued for by the respondent - namely, saying nothing about the plan.  In the latter case, a number of possibilities emerge, including that the appellant might have had a claim for non‑disclosure –

There could be no basis for that, having regard to the finding of the lack of knowledge -

might have insisted upon undertaking its own investigations.  But the Court does not need to, no[r] should it engage in, speculation –

We agree, with respect, the court should not engage in speculation, but the onus on our case was on the respondent to show what it would have done, at least on the balance of probabilities.  It failed – it took a deliberate approach not to do so and that cannot be a reason, we submit, for imposing a higher standard on the applicant.  The second reason seems to be based on an assumption that there would have been liability for non‑disclosure.  The Court can pick that up from two areas of the judgment.  At page 122, paragraph 54, her Honour says this in the last sentence:

Contravening conduct includes both express misrepresentations and non‑disclosure and there may be a contravention of the section even though the conduct is innocent.

That seems to, with the greatest respect to her Honour, ignore the additional requirements for silence to constitute misleading and deceptive conduct, namely, those found in section 4(2)(c) of the Act. 

GUMMOW J:   Is section 4(2)(c) set out anywhere?

MR BATHURST:   No, it is not.  It is an oversight.  We should have given your Honour the material.  What section 4(2)(c) relevantly says is:

a reference to refusing to do an act includes a reference to:

(i)     refraining (otherwise than inadvertently) from doing that act ‑ ‑ ‑

GUMMOW J:   Where is the material reference in the Act to refusing, which is picked up by the notion then of refraining?

MR BATHURST:   The reference to refusing is in section 4(2)(a):

a reference to engaging in conduct shall be read as a reference to doing or refusing to do any act, including the making of, or the giving effect to a provision of, a contract -

et cetera.  So 4(2)(c) explains and limits the effect of 4(2)(a).  Now, the Court, with respect, did not take that into account.

GLEESON CJ:   You are not challenging, or we are not concerned with an argument about whether there was misleading or deceptive conduct here?

MR BATHURST:   No, we accept that.

GLEESON CJ:   Your proposition is that there was no damage because the alternative, or the relevant alternative to misleading or deceptive conduct was doing and saying nothing?

MR BATHURST:   That is right.

GLEESON CJ:   It is not unusual for there to be a situation in which, if you make a representation, you can be liable for damages in circumstances where if you had simply said nothing you would have been all right.

MR BATHURST:   Yes, that would certainly be the case, for example, in fraud cases.

GLEESON CJ:   Or if somebody is walking on the beach and says to you, “Is it safe to swim here?” and you walk along silently or you walk away silently you would probably be all right but if you said, “Yes, it’s safe”.

MR BATHURST:   With no reasonable grounds for doing so ‑ ‑ ‑

GLEESON CJ:   In circumstances where it is misleading and deceptive to do so you may be liable.

MR BATHURST:   We accept that.  That is the basis in one sense in some of the cases to which the Court of Appeal relied where there is an express inquiry as to a matter and an answer is given.  Here the situation is there was a tender with an exclusion and a mistaken representation in the tender. 

One has to determine what would have occurred, in our respectful submission, had that simply not been said.

GLEESON CJ:   Section 52 must have overtaken a lot of practical protection given by these clauses that say the contractor must rely on his own inquiries.

MR BATHURST:   Section 52 seems to have entirely overtaken them.   The Federal Court on a number of occasions has said they are ineffective.  This Court – I am sorry, I withdraw that.  At least some Justices of this Court in dicta have taken the same view.  We have not put the proposition below and we cannot put it now that the clause was effective do that, but we do say that in considering the scope and purpose of the Act and the protection that is offered to consumers in the extended sense, and this was a very experienced person, one does not have to, in our respectful submission, hypothesise a situation where one, in effect, turns a misrepresentation into a positive warranty.

It is important because if the Court of Appeal be correct there will be, in our respectful submission, a further extension of liability, not only in consumer contracts but perhaps more importantly in this area where people are, one would assume, free to make their own inquiries, determine whether they will enter into a contract on a particular basis and extend liability, we say, to an extent beyond the ‑ ‑ ‑

GLEESON CJ:   Free, right, but I think somebody has pointed out in the course of the reasons here that they discourage contractors from, to use the expression, “swarming all over the site”.

MR BATHURST:   Quite, we accept that.  They are our submissions, if the Court pleases.

GLEESON CJ:   Thank you, Mr Bathurst.  Yes, Mr Gleeson.

MR GLEESON:   Your Honours, in relation to the facts, at page 109 of the application book, the express false statement is set out at paragraph 17 and it was a representation made in the context of certain tender documents.  In paragraph 18 it is clear that the applicant had the relevant plan “in its possession”, indeed, in its “Central Plan Room”.  The fact that individuals of the applicant responsible for the tender may not have looked at the plan room does not mean that the applicant did not have knowledge or possession of the document.  That is the false statement.  The context in which it is made is set out in paragraph 20, over the page.

GUMMOW J:   Yes.  You say it is not quite accurate for the other side to say, “Oh, there’s nothing we could have done”?

MR GLEESON:    No.  They had the document and it is not inadvertent conduct in the sense of section 4.  They chose to make a tender.  They chose to include in it a statement which was false by reference to a document in their own possession and they did that in the context of the 13 agreed factual findings in paragraph 20, particularly that the suite of documents included information about rock levels.  That is paragraphs (1) through to (4).  Paragraph (5), they had “peculiar knowledge” of the topic; (6) they did not want tenderers swarming over the site – that is (6) and (7); (8) both parties had an interest in ensuring “the information was as accurate as possible”; (9) is the false representation, (10) is the reason for its falsity and (11) to (13) are important.  There is an express finding that the information in the plan was material to the pricing of the works.

Their witnesses accepted that if the information was available it “would fundamentally change the basis upon which any reasonable” tenderer would act, and (13), the respondent actually submitted its “tender documents, and entered into the contract, on the basis that, as represented, that further information did not exist.”

Now, that is the causal connection between contravening conduct and the suffering of loss or damage.  The loss or damage is explained over on page 112 in paragraphs 23 to 25, the loss or damage being entering a tender which bound the respondent to do the work on a lump sum basis which did not allow for the extra work indicated by this plan that was falsely represented not to exist.

What the applicant says is the point of law is this, “Notwithstanding that I chose to make an express statement, notwithstanding it was false, notwithstanding it was material to your actions and that you have in fact acted to your detriment and suffered loss, when one comes to section 82 I, the applicant, should be put in the position as if I had chosen not to make that express statement”.

There is no authority we have found to that effect and there is no authority cited to that effect and it has absolutely nothing to do with whether the representation is positive or negative in form, contrary to the applicant’s written submissions.  In Tambree, for instance, which your Honours considered, the representation made by the respondents was, in one case, “Here are appropriate accounts”.  In the other case, “Here is my audit certificate for those accounts”.       The reason it was false was that the accounts omitted relevant information, namely creditors.  Your Honours did not, with respect, consider that to be a material distinction, nor did your Honours consider what would have been the position had the accountant and auditor remained silent and never spoken.

GUMMOW J:   It may be implicit in your criticism of your opponent’s argument, but involved in it is some switching of onus.

MR GLEESON:   A complete switching of onus, your Honours, and our point about the pleading is, in a common law sense it was our onus, as the applicant under sections 52 and 82, to prove misleading conduct and to put forward evidence of a causal connection between that conduct and our loss.  Our witnesses did that by saying – and the inference would be drawn, in any event – “You made a false statement.  Had we known there was a plan we would have considered it material to our conduct and acted differently.”  That was the end of our case in proof.

What the applicant is suggesting is either that a moving party under section 52 needs to go into a further irrelevant speculation which is this, “Had you not behaved the way you did, had you given me a different set of tender documents, otherwise the same but omitting these two particular statements, here is what I would have done.”  That would be irrelevant for an applicant to raise that as part of their proof.  Our point, as a matter of the way the case was run before the referee was we did not put up that case - we acknowledge that because it was irrelevant – nor did they put up a case which said, “We, by way of defence wish to seek a finding from the court that had there been a different tender omitting the statement, the statute would not have been contravened and had there been that different tender you would have ended up behaving in exactly the same way.”

Our point is, you do not find that joined on the pleadings, you do not find any reference to such a finding from either the trial judge or the Court of Appeal and to the extent the applicant gave your Honours references to the referee’s report in their written submissions, which they have not been to today, we have made the point that the referee (a) never made findings to that effect because that was not the issue and, (b) in any event, whatever the referee said about misleading conduct has been overtaken by the fact that his report on that question has been rejected by the court beyond appeal.

Your Honours will find the order itself at page 85 of the book.  This is the order on misleading conduct.  What the court has done in paragraph 1(a) is to reject a:

finding of the Referee that the Defendant had not engaged in misleading or deceptive conduct . . . and that in lieu thereof a finding be made . . . that in issuing the Invitation to Tender to the Plaintiff and entering into the Contract with the Plaintiff . . . containing –

the no plan statements:

in circumstances where it had the Cross Section in its possession, the Defendant engaged in conduct that was misleading –

Over the page the referee’s findings on reliance have been rejected and a finding has been made of reliance by way of:

submitting its tender and subsequently entering the Contract -

Now, against those findings, which are not appealed against, we submit that there is nothing that can be resuscitated in this Court by way of the referee’s views on these questions.  The referee has been dismissed.  Your Honours, the final matters are that the decision of the Court itself can be found conveniently at page 123 at paragraphs 56 and 57, in particular, 56 at about line 31:

If that misrepresentation was simply excised from the contract so that the appellant bore the risk that additional work might be required . . . the misleading conduct would be neutralised.  However, the appellant did not agree to bear the contractual risk in the face of a misrepresentation.

That also answers Mr Bathurst’s point that, well, there were some sort of disclaimers in the contract.  The appellant, that is, my client, did not agree to bear the contractual risk under a lump sum contract in the face of a misrepresentation.  We also rely upon paragraph 57.

Your Honours, finally, at page 141 the findings of the court at paragraphs 113 and 114, which are powerful findings of fact, we submit are supportive of the causal connection which has been properly found by the Court of Appeal.  If your Honours please.

GLEESON CJ:   Yes, Mr Bathurst.

MR BATHURST:   It is odd, in our respectful submission, to make a finding that the respondent did not agree to bear the risk in the circumstances where the contract expressly provided that it was to bear the risk of inaccuracy.  Having said that, as I indicate, we do not dispute that there was reliance in the sense that the representation was material to the tender, nor do we dispute that it was misleading and deceptive.  My learned friend seemed to suggest that there was a possibility that the representation was not inadvertent.  No, there was no challenge to the paragraphs of Justice McDougall’s judgment which I read to the Court.  The referee whose judgment on this issue was not the subject of challenge came to the same view.  That appears at page 26 in the supplementary book of the applicants, paragraph 420:

On the issue of “inadvertence”, I am satisfied that the defendant only directed its mind to the sufficiency of the information for the purpose of deciding that it was sufficient to enable the tenderers to fulfil their tasks, but on the express basis that it would be transparently clear that the information may be inaccurate –

This is a different case from Tambree where the accountants were employed for a particular purpose, to give certain advice, and they gave advice that was wrong.  It was on the faith of that advice that the travel agents expended the moneys.  What we say is that those questions simply were not answered on the respondent’s case.  It is not a question of onus.  It is a matter for the respondent to prove what it would have done, we say, in the circumstances where the representation was not made.  If it does not do that, it cannot, in our respectful submission, salvage itself in the circumstances of this case by hypothesising what it would have done in an entirely different situation.  They are our submissions, if your Honours please.

GLEESON CJ:   We think that there are insufficient prospects of success of an appeal to warrant a grant of special leave and the application is dismissed with costs.

AT 11.14 AM THE MATTER WAS CONCLUDED