The Second Question
36 This is the core problem in the appeal and is raised by Appeal ground 1.
37 The primary judge noted at [27] that for this part of the case, the respondent relied on the fact that the appellant failed to inform the respondent of the winding up of Comsta with the intention that his businesses would continue to receive credit and that he continued to deal with the respondent knowing that the respondent would mistakenly think that its account was secured by the appellant's guarantee.
38 The appellant argued both here and below that he made no misrepresentation. He was under no obligation to make any disclosure. In his belief that he had informed the respondent of the change of operation of his group's accounts, the fact that Comsta had gone into liquidation was of no moment.
39 The primary judge accepted at [31] the proposition that silence may in certain circumstances constitute a substantive misrepresentation, that "concealment of a fact may cause the true representation of another fact to be misleading".
40 Mr Coles submitted that the so-called conduct which the primary judge ruled was misleading and deceptive was not "conduct" as defined in the Fair Trading Act.
41 Section 4(4) of that Act provides that a reference to "conduct" in the Act "is a reference to an act or a refusal to act, including in either case an act that constitutes, or would but for the refusal constitute, making or giving effect to a provision of a contract or arrangement, arriving at or giving effect to a provision of an understanding, or requiring or entering into a covenant …".
42 Further, the section provides in subs (4)(b)(i) that "a reference to refusing to do an act includes a reference to refraining (otherwise than inadvertently) from doing the act."
43 A very similar definition occurs in s 12BA(2) of the Australian Securities and Investments Commission Act 2001 (Cth).
44 Mr Coles put that in each statute "refraining" is not within "conduct" unless the refraining is otherwise than inadvertent. In the present case, the primary judge made no finding that Mr Dwyer did not believe that his organisation had informed the respondent of the change of trading terms. All he found was that the respondent did not receive the letter.
45 Thus, it was put that the evidence did not establish anything more than inadvertent non disclosure of the winding up and that was not enough for the respondent to establish misleading and deceptive conduct.
46 The primary judge did not make any finding as to whether the non-disclosure was or was not inadvertent.
47 In Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211, Hodgson JA, with whom Mason P and Stein JA agreed, said at [58] that "the requirement … that a refraining be otherwise than inadvertent requires that there be actual advertence to the question of whether something should be done or not and the formation of an intention that it not be done."
48 One gets to the same result if one follows through the reasoning in cases on exceptions and provisos in statute law such as Vines v Djordjevitch [1955] HCA 19; 91 CLR 512 at 519-520 and Dowling v Bowie [1952] HCA 63; 86 CLR136 at 139-140, which were much discussed during argument.
49 Thus, the appellant submitted, even though there is no direct finding on the issue, it is implicit in the primary judge's approach that there was no advertence to the question as to whether the respondent should be notified of the cessation of Comsta. Thus, if the case be one of refraining, the refraining must be inadvertent.
50 Mr Greenwood said that all this is irrelevant as the case is not one just of a refusal to or refraining to do something, but of a combination of acts and refrainings which must be looked at as a whole.
51 It is to be noted that in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32, Black CJ said:
"Although 'mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as 'mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."
52 The Chief Justice cited copious authority including the words of Samuels JA in this Court in Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at 88 that silence "may simply be an element in all the circumstances which render the conduct in question misleading or deceptive."
53 Again, there is high authority for the proposition that the court is to look at conduct generally not just at representations; see eg Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 at 623 per McHugh J and Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at 341 [102].
54 In Demagogue Pty Ltd v Ramensky, Gummow J said at [40] that:
"in any case where a failure to speak is relied upon the question must be whether in the particular circumstances the silence constitutes or is part of misleading or deceptive conduct. The expanded meaning given by s4(2) to 'conduct' should not distract attention from the fundamental issue in the case at hand."
55 It is not necessary to enter into discussion as to the actual extent of the degree to which inadvertent refraining from disclosure (which is not of itself "'conduct"' as defined and so cannot, of itself, amount to misleading or deceptive conduct) can nonetheless be a core element of a totality of behaviour which can be held to be misleading and deceptive conduct. This is because as Finkelstein J said in Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 722-3, it is clear that:
"One circumstance where the failure to provide information will constitute misleading or deceptive conduct is where the circumstances of the case give rise to a reasonable expectation that if a relevant fact exists it will be disclosed."
56 In Semrani v Manoun; Williams v Manoun [2001] NSWCA 337 at [62], Beazley JA with whom Mason P and Ipp AJA agreed said that in order for the silence in that case to be "actionable, [the defendant] must have had actual knowledge of a matter which he intentionally refrained from telling [the other party] in circumstances where there was either a duty to disclose or else where [the other party] had a reasonable expectation that such information would be disclosed to him."
57 The primary judge held at [33] that in the circumstances there was a "rational expectation" that the disclosure would be made. Mr Coles criticised the fact that there was no specific finding as to what those circumstances might be. However, he put that there was in fact nothing in the circumstances which would give rise to an expectation.
58 Mr Coles submitted that there is no general duty of disclosure in commercial dealings. This is so, though it is also so that there is a duty to disclose in various sets of circumstances. Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 at 475 per Gleeson CJ, Mr Coles submitted, supports both parts of this proposition.
59 That may be so, but Mr Greenwood put that even if that be the case, one needs to make disclosure of the fact that the company who is paying the bills reinforced by a director's guarantee is no longer doing so and that continued trade will be on some other basis.
60 Mr Coles' submissions focussed strongly on Mr Dwyer and what Mr Dwyer could reasonably expect. However, the question is not what Mr Dwyer could reasonably expect, but as noted in the passage quoted from Semrani in [56] above, what the other party (in this case, the respondent) would reasonably expect. That matter is to be judged objectively by what a reasonable person would expect in the relevant circumstances.
61 There is some suggestion in Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (see p 722) that even if the non-disclosure is part of the rolled up conduct sued upon the non-disclosure element must be intentional. If I have read the case right, I would respectfully disagree.
62 Mr Coles pointed out that the guarantee was given in 2005 and Comsta was wound up in 2007. He put that it was unrealistic to assume that in 2007, he still remembered what had occurred in 2005.
63 Mr Coles quoted from the judgment of Megarry VC in In re Montagu's Settlement Trusts [1987] 1 Ch 264 at 284:
"If a person once has clear and distinct knowledge of some fact, is he to be treated as knowing that fact for the rest of his life, even after he has genuinely forgotten all about it? To me, such a question almost answers itself. I suppose that there may be some remarkable beings for whom once known is never forgotten; but apart from them, the generality of mankind probably forgets far more than is remembered … the question is whether at the time in question notice previously obtained continues to operate on the mind of the recipient."
64 There was some evidence that Mr Dwyer was bored by emails and probably accounting matters were in the same plight. However, being bored by matters of administration is no excuse for being slack in administration. There was nothing to suggest that the terms of trade with a major supplier had somehow or other slipped out of Mr Dwyer's mind and there was no evidence that it did, indeed what evidence there was suggested that Mr Dwyer did remember signing a guarantee but placed little significance on that fact as he never contemplated the activation of the guarantee.
65 The primary judge determined at [33] that, having regard to the surrounding circumstances, there was a clear "rational expectation" of disclosure by the appellant of the true facts and failure to do so resulted in the respondent being misled and deceived. He found at [35] the post liquidation debt as the damage caused by this misleading and deceptive conduct.
66 In my view, he was fully entitled to find that fact.
67 Because the primary judge found misleading and deceptive conduct, he did not spend much time on the alternate claim of unconscionable conduct pursuant to s 51AC of the Trade Practices Act: indeed his Honour merely announced his conclusion that the appellant was in breach (see [37]).
68 The notice of appeal complained of inadequacy of reasons. The appellant's submissions put forward two other complaints: (1) that the transaction impugned was not between buyer and seller; and (2) that, on the facts, the appellant's conduct could not be unconscionable. The first of these was later abandoned.
69 The submissions on the latter ground were that as Mr Dwyer, on the facts as he genuinely supposed them, did not act unfairly, he could not be said to be acting unconscionably.
70 Mr Greenwood's riposte was that Mr Dwyer acted with a wanton disregard towards the respondent. He had information which any person of business would realise was vital to his or her trading partner and he deliberately withheld it. This is particularly so because the account with the respondent was seriously in default during most of the post liquidation period.
71 Mr Greenwood further commented that there was no argument put on the inadequacy of reasons point and that, in any event, when one reads the judgment as a whole, the reasons were sufficient.
72 In reply, Mr Coles put that there were no reasons as to how the primary judge came to the conclusion that there was unconscionable conduct in connection with the supply of goods to Comsta or Paul's Retail.
73 The primary judge did note at [37] that it was in connection with the matters listed in s 51AC(4)(i) and (k) that he found liability, but he did not set out the constituent facts as to why he considered that the failure to disclose was "unreasonable" (ie unconscionable) in the light of Mr Dwyer's assumptions.
74 I consider that these criticisms are valid. However, there is no purpose in remitting the matter in the light of my upholding the primary judge's decision on misleading and deceptive conduct