Johnson's claim against AVK
223Johnson's case against AVK is based on alleged misleading or deceptive conduct. It put that case in two ways:
(1) what it called "direct reliance"; and
(2) what it called "third party reliance".
224The starting point of each of the ways in which the case was put was that AVK had engaged in misleading or deceptive conduct, because:
(1) it had represented to EPSA that the winding pitch of the existing alternators that it had supplied to EPSA was 2/3;
(2) it had represented to EPSA that the alternator that it proposed to supply was suitable for parallel operation with those existing alternators; and
(3) those representations were incorrect, and thus misleading or deceptive or likely to mislead or deceive.
225Johnson contended that AVK knew, or must have understood, that EPSA required information as to the existing alternators to enable it to prepare and submit a proposal to supply a new generator set, in circumstances where the new generator set was required to work in parallel with the existing generator sets. That was reinforced, Johnson contended, when EPSA sent AVK the draft specification for the works.
226Johnson contended that: AVK's representations were (as AVK should have known would happen) passed on to it by EPSA, and that it relied, in part, on the Technical Data Sheet supplied by EPSA, in deciding to accept EPSA's tender. It was the Technical Data Sheet (which came from AVK) that had the effect of passing on the relevant representations.
227Johnson's alternative formulation of its case was that if, for whatever reason, the direct reliance case failed, it was entitled to succeed nonetheless because AVK's misleading or deceptive conduct, directed to EPSA, caused EPSA to tender to supply an alternator which purportedly could, but in fact could not, operate in parallel with the existing alternators. In those circumstances, Johnson contended, it suffered loss as a direct result of EPSA's reliance on the representations made by the AVK.
228AVK contended that the direct reliance case must fail because it made no representation to Johnson. Further, AVK contended:
(1) it did not make the representations alleged at all;
(2) Johnson did not rely on whatever representations were made; and
(3) the representations that AVK did make were not misleading or deceptive.
The direct reliance case
What representations were made?
229Johnson's pleaded case (3FATCLS, para 86) is that AVK made the following representations to it:
(1) the winding pitch required to match the existing alternators was 2/3;
(2) the winding pitch of the existing alternators was 2/3; and
(3) the alternator that AVK offered to supply to EPSA was "suitable for parallel operation with" the existing alternators.
230Those representations are said to arise because (see the particulars to 3FATCLS, para 86):
AVK was the manufacturer of the two existing stand-by generators..., and submitted the AVK Technical Specification to EPSA on or about 28 February 2006, and the AVK Technical Data Sheet to EPSA on or about 13 March 2006, which in turn EPSA supplied to Johnson... as part of EPSA's tender submitted to Johnson... on or about 31 March 2006.
231The representations are said to have been made to Johnson because they were made to EPSA in circumstances where AVK knew, or ought to have known, that they would be repeated to, or would come to the notice of, Johnson or a class of persons including Johnson. (This again comes from the particulars to 3FATCLS, para 86.)
232AVK's primary case is that it made no representations at all to Johnson. Thus, AVK's submissions did not address directly the content of the representations alleged (as between itself and Johnson). That was however addressed in the context of EPSA's claim (or cross-claim) against AVK. What AVK says there can be translated directly to the claim against it by Johnson, because Johnson's pleading effectively picks up EPSA's pleading against AVK.
233AVK's position is that the representations do not arise, and that EPSA (and, it follows, Johnson) have "mischaracterised the relevant correspondence". AVK says that the representations pleaded are not found in the correspondence, nor can they be implied. It says that this arises, in part, because EPSA (and, again, Johnson) focused on some of the correspondence in isolation, and did not examine it in the context of the evidence as a whole.
234AVK's submissions on this point were verbose. Apart from anything else, and notwithstanding that AVK criticised EPSA and Johnson for taking some of the correspondence out of context, the general approach taken by AVK was to focus on specific items of correspondence, and to analyse them, without reference to the whole context in which, prior to submission of the tender, EPSA had dealt with AVK.
235I have set at [40] to [64] above the inquiries that EPSA made of AVK, and AVK's responses to those inquiries. Those inquiries and responses were followed by the matters to which I referred at [67] to [71]. I will not repeat what I said in those paragraphs, save to note that, for the reasons that I gave at [61] and [62], I think that AVK's statement as to suitability for parallel operation is to be read as a representation that the alternator which it proposed to supply was suitable for operation in parallel with the existing alternators that it had supplied.
236It follows that the third of the representations alleged by Johnson was made by EPSA.
237I set out at [242] to [259] below, the matters that AVK either knew or must be taken to have known, including as to the purposes for which Mr Morley was making inquiries.
238When one views the pre-contractual dealings between EPSA and AVK, against the background of the material in the following section of these reasons, the proper analysis is that AVK did in fact make, by implication if not expressly, the first and the second of the representations alleged. I say that because:
(1) everyone in the industry (including, I infer, AVK) knew that for one alternator to work in parallel with another or others, a number of requirements had to be satisfied, including that each of the alternators had the same winding pitch ratio;
(2) as to the first representation: AVK knew that the new alternator was required to operate in parallel with the existing alternators supplied by it some years ago. It offered to supply a new alternator with a 2/3 winding pitch ratio. Inherent in that offer is the proposition that the winding pitch ratio of the new alternator was that which was required to match the existing alternators.
(3) as to the second representation: following on from the circumstances to which I have just referred, it is also inherent in the offer that the winding pitch ratio of the existing alternators was 2/3. Otherwise, there was no point in offering to supply a new alternator, having that winding pitch ratio, to operate in parallel with the existing alternators.
To whom were those representations made?
239Johnson and AVK agreed that, for the direct reliance case to succeed, it would be necessary for Johnson to show that the relevant representations were made in circumstances calculated to lead to their being transmitted through EPSA to others, including Johnson. That agreement was based on what Brereton J said in Azzi v Volvo Cars Australia Pty Ltd [2007] NSWSC 319 at [82]:
[82] Although the representations were made to TAA, and Mr Azzi on behalf of TAA, and not (at least directly) to Harissa, compensation may be recovered under Trade Practices Act, s 82, in respect of a contravention of s 52, by a person who relies on a misrepresentation if the representation was made in circumstances that were calculated to result in its being transmitted to persons including the victim, even though the representor never dealt directly with the victim [Milner v Delita Pty Ltd (1985) 61 ALR 557 , 573-4 (Lockhart J); Accredited Aged Care Facilities Pty Ltd v Banyan Tree (Australia) Pty Ltd [2002] VSC 261, [95] (McDonald J); Emanuele v Chamber of Commerce & Industry SA Incorporated [1994] ANZ ConvR]. The originator of a misrepresentation, who does not itself convey the representation to the relevant audience, may be liable under s 52 if the intermediary was merely the convenient medium by which the misrepresentation was conveyed to the public (so that the wholesaler of goods who marks them with deceptive claims may be liable for damage suffered by members of the public who buy the goods from a retailer without ever dealing with wholesaler) [Barton v Croner Trading Pty Ltd (1984) 3 FCR 95; 54 ALR 541, 553], although that will not be so where the originator does not engage in conduct calculated to put the representation into circulation. In Milner v Delita, Lockhart J explained the basis of liability in such circumstances in terms of an implied intention of the originator that the representation be passed on to others (at ALR 573-4):
Some wives of investors who themselves invested in the project with their husbands did not see or read any of the documents but relied on discussions with their husbands. They too should succeed in this case. It is a commonplace today for investments to be made by or in the names of various members of a family or of family companies or trusts. Indeed, the brochures not only recognized but suggested this course in the present case. I am satisfied that Delita, Glasson, Lewin, Morrison and Bennett were well aware of the likelihood that the documents or their contents, and any oral representations that may be made by or on behalf of Robert Morrison & Associates, would be passed on to or come to the attention of such members of the family of clients of Robert Morrison & Associates or members of the family of those who otherwise got in touch with the firm. Indeed, they supported and adopted this course of conduct. The forms of application to join the trusts and partnership and the moneys in support of them were all received and the moneys used and applied to the knowledge of Glasson, Lewin, Delita, Morrison and Bennett.
I adopt as a correct statement of the law the following passage from Spencer Bower and Turner on Actionable Misrepresentation 3rd ed, para 165: "But, further, even where B is not known or believed to be, and is not in fact, the principal or partner of, or otherwise associated with A, the representor may yet either accompany his representation to A with a direct instruction or authority to repeat it to B, or make it with an implied intent that it shall come to the notice of B, and be acted on by him - such implication being made from the representor's express declarations or admissions, or from his making the representation with knowledge that A intends to pass it on to B, for him to act upon, or with knowledge subsequently acquired, but before B has acted upon it, that A has so passed it on to B for that purpose. In any such case B is deemed to be the representee, if and as soon as the representation has been so passed on to him, and he has altered his position on the faith of it, whether A is or is not also to be accounted a representee, which depends upon the question whether he was intended solely as the living medium of communication, or as a person himself to be influenced by the statement, as well as the transmitter of the influence to B, which again depends upon all the circumstances of the individual case. Whenever such intention is neither established directly by evidence, nor as an implication from the proved or admitted facts, B is not in law the representee; A, of course, is; but, in most of the cases which raise the question, he fails on the ground that he was not the person injured.
240Mr Faulkner submitted (written closing submissions, para 197) that the question was whether AVK could reasonably have foreseen, understood or expected that its representation would be communicated to Johnson, or to someone in Johnson's position. I agree.
241Put compendiously, it seems to me, Johnson must show that AVK made its representations knowing, intending, or expecting that they would be passed onto a third party principal; or in circumstances where, objectively, a reasonable person in its position and with its knowledge must have understood that this was likely.
242In this case, the information available to AVK over time included the following elements:
(1) it knew that a consultant, Webb, was preparing a specification on behalf of an unnamed principal for the supply and installation of an additional generator set to be operated as part of an end user's emergency power supply system for a data processing centre (all that comes from the draft specification which was provided to AVK, but assumes - I think reasonably - that the draft specification was substantially in the form of the final version);
(2) EPSA wanted to submit a tender, or tenders, for supply of the new generator set;
(3) the new generator set would be required to work in parallel with the existing generator sets;
(4) AVK had supplied the existing alternators (and, it is clear, had kept records of that supply); and
(5) EPSA needed to ensure that what it offered would operate in parallel with the existing generator sets; thus, EPSA needed to know, among other things, that the winding pitch ratios of the existing and new alternators would be the same.
243AVK did not call any evidence which showed the state of mind or understanding of its relevant employees, in particular Mr Vogler and Ms Spies. Its only witness of fact was Mr Dragonas, and he did not touch on this question.
244I draw the inference, in the absence of evidence to the contrary, that Ms Spies (and perhaps Mr Vogler) read the draft specification. I do so because, obviously, the draft specification was sent to AVK to enable it to understand the duty that the new generator set was to perform.
245Further, AVK must have understood that EPSA required information that would enable EPSA to submit a conforming tender. For the tender to be conforming (and in any event, as a matter of common knowledge among electrical engineers and suppliers of electrical equipment), one requirement was that the winding pitch of the new alternator should match the winding pitch of the existing alternators.
246Further, I infer, AVK must have understood that one of the reasons why Mr Morley expressly referred to the serial number of one of the existing generator sets was to enable AVK to identify it. AVK would have to identify the existing generator sets so that it could ensure that the new alternator that it was asked to supply would be capable of operating in parallel with them.
247All of that suggests very strongly that AVK knew that it was likely that EPSA would rely on the information supplied by it to prepare a proposal, or tender, that would conform to the requirements stated in the draft specification. But it does not follow from this that AVK knew, or intended, or understood, that the information it supplied to EPSA would be passed onto the principal; nor that it should reasonably or objectively have expected that this would be done.
248At this point, I repeat that in fact, EPSA did not order an alternator from AVK. It ordered an alternator from one of AVK's competitors, Caterpillar. Mr Christie submitted that this was a relevant limiting factor to the use that, AVK would expect or ought reasonably to expect, would be made of information supplied by it to EPSA. I do not agree.
249In my view, having regard to the evidence of practice in the electrical industry, AVK must have understood that one of the purposes of EPSA's inquiry was to ascertain the winding pitch of the existing alternators. I say that because the experts were unanimous in their view that a common, and appropriate, way for a contractor to ascertain the winding pitch of an existing alternator was to ask the supplier.
250I do not think that AVK could have been so naïve as to think that EPSA might not seek competitive quotations for the supply of the new alternator, although I acknowledge (as Mr Christie stressed) that Mr Morley, in one of his emails, had indicated in his email of 25 January 2006 to Ms Spies that "they want to stay with AVK". AVK might be entitled to think that it had the inside running if it were able to supply a machine on terms competitive as to price and delivery time; but it must have understood that, if another supplier could beat it on either or both of those criteria, that other supplier might win the job.
251Thus, I infer, contrary to Mr Christie's submissions, AVK should reasonably have understood (if it did not in fact understand) that EPSA required information as to the winding pitch of the existing alternators not just for the purpose of deciding whether to purchase whatever AVK might offer but, more generally, for the purpose of deciding how to structure its tender.
252That is something of a diversion, but it does not seem to me to be entirely beside the point. The question is, in effect, how far should AVK have understood the information provided by it to EPSA was likely to go?
253To my mind, the answer to that question is that, if AVK did not expressly know or understand it, nonetheless it ought reasonably to have expected that the information would be relied upon by EPSA for the purpose of preparing a tender, and that this reliance might extend to preparing a tender that did not specify equipment supplied by AVK.
254What were the circumstances known to AVK when it provided information to EPSA? As they appear from the emails passing between EPSA and AVK, those circumstances include at least the following:
(1) some years ago, AVK had supplied two generator sets for what was then known as the "Cathay" building or project;
(2) a consultant, Webb, was preparing a specification for upgrading the emergency power supply in that building;
(3) that specification was being prepared on behalf of a principal who was either the owner or occupant of the building, or a contractor who would execute the project on behalf of the owner/occupant;
(4) the new alternator was required to work in parallel with, and generally to be compatible with, the existing alternators that AVK had supplied some years ago;
(5) EPSA proposed to tender to carry out the supply and installation of the new generator set.
255It must have been apparent to AVK that EPSA's tender would be based on, among other things, information supplied by AVK. To the extent that (for example) EPSA's tender offered to supply an alternator manufactured and sold by AVK, AVK must have understood that it was likely that the technical data for that alternator would be included in EPSA's tender.
256Further, an as a matter of both plain language and basic electrical engineering practice, AVK must have understood that any tender to supply a new generator set to operate in parallel with the existing generator sets would represent either expressly or by implication, that, among many other matters relating to compatibility, the new alternator would have the same winding pitch ratio as the existing alternators.
257Finally, I think, AVK must have understood that any tender submitted by EPSA would be considered by the consultant and, perhaps, by the principal for whom the consultant had been retained. If the principal were an engineering contractor, then the likelihood is that it would conduct an independent review of the tenders. If the principal were the owner/occupant of the building, it is perhaps less likely that it would carry out its own review; but in this case, the consultant's review would be carried out for the purpose of informing the principal of the elements and merits of the competing tenders.
258In those circumstances, I conclude, it is more probable than not that AVK in fact understood that information supplied by it, and representations made by it, would be passed on through EPSA to the consultant and, through the consultant, to the principal. In reaching this conclusion, I take into consideration the fact that no relevant witness from AVK was called. I accept, as was uncontroversial, that Ms Spies had left the employ of AVK and her whereabouts were not known. But she was working under the supervision of Mr Vogler, who in turn was working under the supervision of Mr Slgini. Neither of those gentlemen was called. There was no suggestion that they were unavailable (there was no evidence either way which, contrasted with the positive evidence as to Ms Spies, could lead one to think that they were available if required.)
259Even if there were no actual understanding (that is, even if what I have just said is incorrect), nonetheless, it seems to me, the circumstances that I have described lead to the inference that AVK, had it turned its mind to the question, must have understood, or appreciated, that the information it provided and the representations that it made, relevant to EPSA's tender, would be passed on through EPSA to Webb and the principal in the manner that I have outlined.
Reliance
260In fact, that is precisely what did happen. Both Webb and Johnson reviewed the tender material. Both Mr Bowers and Mr Buttifant (and others, I think, from each organisation) understood that AVK proposed to supply an alternator having a winding pitch of 2/3. Each of them understood that this meant, among other things, that AVK, which had supplied the original machines, was of the view that a new alternator with a winding pitch ratio of 2/3 was capable of operating in parallel with the existing machines. The inevitable inference from this, to anyone in the field (including Mr Bowers and Mr Buttifant), is that the existing machines included alternators with that winding pitch ratio.
261Mr Buttifant does not appear to have had this understanding from the very beginning of his involvement in the project. But he became aware, well before he considered the tender material and Webb's recommendations on it, that it was critical that the winding pitch ratios of the proposed new alternator and the existing alternators should be the same.
262The information supplied and representations made by AVK:
(1) were relied upon by EPSA, through Mr Morley, for the preparation of what it said was a conforming tender;
(2) were relied upon by Webb, through Mr Bowers, when he assessed the tender as conforming, on the basis (among other things) that it included a proposal to supply an alternator with a winding pitch ratio of 2/3; and
(3) were relied upon by Mr Buttifant in the same way when he read and assessed the tenders and Webb's summary of them.
263Mr Morley, Mr Bowers and Mr Buttifant each gave evidence to this effect, as to his part in the process. I accept that evidence. It is inherently plausible. To the extent that it was challenged, it was not shaken. And it derived strong support (in Mr Buttifant's case, in particular) from contemporaneous documents.
264To my mind, as I have said already, the inescapable inference from what AVK said and did is that the existing alternators had a winding pitch ratio of 2/3. Otherwise, it could not have offered to supply a new alternator having that winding pitch ratio: the new alternator would not have been capable of operating in parallel with the existing ones.
265In the end result, EPSA did not supply, and Johnson did not install, the alternator that was the subject of AVK's offer. AVK was unable to deliver the new alternator for a considerable period of time. IBM did not want to wait so long. Accordingly, EPSA sourced and agreed to supply, in the manner that I have outlined, a different alternator, but one having the same characteristics.
266I have no doubt that EPSA, prepared, and Webb and Johnson assessed, the proposal to supply the alternative alternator based on their understanding, justifiably gained from the information supplied and representations made by AVK, that the new alternator must have a winding pitch ratio of 2/3.
267Thus, I conclude, that information and those representations remained effective even though the equipment ultimately purchased came from a different manufacturer.
The representations were misleading or deceptive
268If (as I have concluded is the case) AVK did make the representations alleged, there can be no doubt that they were incorrect. The winding pitch ratio required to match the existing alternators was 13/15, not 2/3. The winding pitch ratio of the existing alternators was 13/15, not 2/3. And the alternator that AVK offered to supply was not suitable for operation in parallel with the existing alternators.
269In those circumstances, I conclude, the representations were indeed misleading or deceptive. Although AVK put this in issue, I really do not understand how it can be said that they were not.
Other answers to the direct reliance case
270AVK raised other answers to Johnson's direct reliance claim. First, it submitted, in considering the question of damage, it was necessary for Johnson to show what its position would have been but for the contravening conduct (Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at [42] (McHugh, Hayne and Callinan JJ); Gates v City Mutual Life Assurance Limited (1986) 160 CLR 1 at 13 (Mason, Wilson and Dawson JJ)). But in this case, Mr Christie submitted, Johnson had not shown what it would have done had it not been for the alleged misleading or deceptive conduct; it had not advanced a "no transaction" or "different transaction" case.
271Next, Mr Christie submitted, any consideration of the question of causation must take into account the purpose for which the question is being considered. Where the purpose is to see if causation is demonstrated for the purpose of vindicating the consequences of breach of some legal norm, the policy or rationale underlying that norm must be taken into account. (See, for example, Henville v Walker (2001) 206 CLR 459 at [98]-[103] (McHugh J); Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568 at [96], [99], [100] (Gummow, Hayne and Heydon JJ).
272These two issues are related, because it is clear that, for the purposes of attributing liability for misleading or deceptive conduct and assessing damages under legislation such as the Trade Practices Act 1974 (Cth), questions of causation and damages are closely linked. See the joint judgment in Marks at [43]; and see Gummow J in Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 at 419: in particular, his Honour's well known and oft-cited reference to the "apparent telescoping of what to the common law would be issues of causation, remoteness and measure of damages".
Causation
273I start with the second submission. In support of that submission, Mr Christie referred to what McHugh J said in Henville at [103]: "if the conduct merely provides the reason why the person acted, it will not be sufficient to establish a causal connection unless the purpose of the legal norm that the defendant has breached is to prevent persons suffering detriment in circumstances of the kind that occurred".
274McHugh J gave the example of a broker who negligently advised a client to retain shares, because they were a good investment. His Honour said that the broker would be liable for any loss incurred by retaining those shares in reliance on the advice. However, his Honour said, if the client, again relying on that advice, decided to buy more shares, the broker would not be liable for further losses unless the retainer imposed a duty to advise in respect of purchases.
275To my mind, the example given by McHugh J highlights the need to analyse in detail the conduct said to be misleading or deceptive, the context in which it occurred, and the acts said to have been done (or omitted to be done) in reliance upon it.
276Mr Christie submitted that to the extent that AVK had supplied information and made representations, it had done so for the purpose of inducing EPSA to purchase the alternator that AVK offered to supply. He accepted that if EPSA had relied on the information and representations to do so, and had suffered loss as a result, vindication of the statutory purpose found in ss 52 and 82 of the Trade Practices Act would require that AVK be responsible for that loss.
277However, Mr Christie submitted, AVK was in fact in the position of the broker whose client relied on the advice to purchase more shares. In this case, he submitted, EPSA relied on the advice (to the extent that it did) in deciding to purchase an alternator supplied by a competitor to AVK. That is undoubtedly correct, as a matter of fact. But AVK either knew in fact, or must have understood had it turned its mind to the question, that:
(1) as the manufacturer of the original alternators, it was the ultimate and reliable source of information as to the technical characteristics of those alternators, including their winding pitch ratio;
(2) anyone who wanted access to that information was likely to contact AVK for that purpose;
(3) EPSA wanted a quotation for a new alternator to work in parallel with the existing ones;
(4) it was important that the new alternator have the same winding pitch ratio as the existing ones, and that it be compatible (for want of a better word) in all other material respects;
(5) by offering to supply a new alternator with a winding pitch ratio of 2/3, AVK was effectively representing (because it was required to work in parallel with the existing ones) that the existing alternators had the same winding pitch ratio;
(6) EPSA would be likely to rely on this and other information supplied, and other representations made, by AVK, for the purpose of formulating its tender;
(7) in the event that, for whatever reason, AVK's offer was unacceptable, it was likely that EPSA would look to a competitor;
(8) in doing so, it was likely (indeed, I would have thought, inevitable) that EPSA would continue to rely on the information supplied, and representations made, by AVK.
278Those circumstances go far beyond the simple case of limited advice postulated by McHugh J in Henville. The superficial analogy between the facts his Honour postulated and the facts of this case does not justify the weight that Mr Christie sought to put on his Honour's observations. That is because, in my view, it is inherent in the factors I have summarised and the conclusions that I have expressed that the purpose for which the information was given, and the representations made, was wider than the limited one that Mr Christie put.
279As Gleeson CJ pointed out in Travel Compensation Fund v Tambree (2005) 224 CLR 627 at [30], when one asks whether a person suffered loss or damage by misleading or deceptive conduct, and one assesses the loss so characterised, it is the purpose of the statute, considered against the facts of the particular case, that gives the answer to the question of causation. And as Gummow J said (although in a different context), the reason for answering a question of causation is to attribute responsibility under some rule of law; and one cannot do that without knowing the purpose and scope of the rule (Chappell v Hart (1998) 195 CLR 232 at [63]).
280Accordingly, I conclude, this is a case where vindication of the policy underlying ss 52 and 82 of the Trade Practices Act requires, in the circumstances of this case, that AVK be held liable for the consequences of its misleading or deceptive conduct.
Damages
281Returning to the first submission, as to the related question of damages, I do not think that there is some inflexible principle that in each case of misleading or deceptive conduct, proof of damages requires proof of either a "no transaction" or "different transaction" outcome. As McHugh J said in Henville at [131], in particular cases, "general principles for assessing damages may have to give way... to solutions best adapted to give the injured claimant an amount which will most fairly compensate for the wrong suffered".
282McHugh J amplified that at [133] to [135] by analogy to the law of deceit. In such a case, his Honour said, damages consider how much worse off the plaintiff is as a result of the fraud.
283At [135], his Honour said that vindication of the statutory purposes would be achieved "by ensuring that consumers recover the actual losses they have suffered as a result of contraventions of the Act". Where conduct in contravention of the Act induces a person to act in a way that results in loss, "an award of damages that compensates for the actual losses incurred in embarking in that course of conduct best serves the purposes of the Act and should ordinarily be awarded".
284In Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) (2006) 67 NSWLR 341, the Court of Appeal of this State was concerned with misleading or deceptive conduct that induced a contractor to enter into a contract on certain terms. The principal represented that there were no plans available of a certain outlet pipe. The contractor calculated the amount to be allowed for excavation on the basis that the ground level could be inferred from surveys and other information that the principal did supply. There was in fact a plan of the outlet pipe, and that plan, if disclosed to the contractor, would have told it that far more excavation was required.
285The Court of Appeal held that the contractor's loss was the actual cost to it of carrying out the additional excavation (see Beazley JA, with whom Ipp and Tobias JJA agreed, at [114]). Beazley JA said at [114] that the "additional cost is a loss recoverable by way of damages under s 82 because it is the "prejudice or disadvantage" that the appellant suffered by entering into the contract on the basis that it did".
286In this case, the loss suffered by Johnson (and, on my findings, by EPSA) is the cost of providing three alternators that could operate in parallel. For reasons that require a little further elaboration, that involved replacing, not the new alternator, but, rather, the two existing ones. But in principle, what Johnson did was ensure that the works were completed in the way that they should have been completed had AVK supplied correct information about the existing alternators.
287Adapting the language of McHugh J in Henville at [135], the actual loss suffered by Johnson as a result of AVK's misleading or deceptive conduct was the cost of making good the consequences of that conduct, by ensuring that the new and the old alternators were compatible.
288It follows, in my view, that Johnson has made good its primary case, of direct reliance, against AVK.
Third party reliance
289The issue dividing Johnson and AVK was whether this was a true case of "third party reliance", or whether it was a case of "indirect causation". An example of the former may be found in the decision of Lockhart J in Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526. In that case, the applicant and the respondent were competitors in the market for veterinary products. The applicant claimed that misleading or deceptive conduct by the respondent, as to its products that competed with the applicant's products, caused consumers to buy the respondent's products in preference to the applicant's, thus causing loss to the applicant. It was consumers who relied on the misrepresentations made by the respondent, not the applicant. As the Court of Appeal said of that case, in Digi-Tech (Australia) Limited v Brand (2004) 62 IPR 184 at [155]:
... the chain of causation was as follows: first, misleading conduct by the defendant; second, an innocent party is induced by the misleading conduct to act in some way; third, the innocent party's act, by its very nature, causes the plaintiff loss. On this basis, no act of the plaintiff contributes to the loss. The chain of causation is complete without there needing to be any act or omission on the part of the plaintiff.
290Hampic v Adams [1999] NSWCA 455 provides another example. In that case, the plaintiff's supervisor was induced, by a label that was misleading or deceptive, to direct the plaintiff to use the defendant's product (which carried the label) in an unsafe way. The plaintiff was injured. The Court of Appeal held that the plaintiff should recover damage from the defendant under s 82 of the Trade Practices Act. See Mason P and Davies AJA (with whom, on this point, Giles JA agreed) at, in particular, [35] - [36]:
[35] S82 of the Trade Practices Act gives a cause of action for damages to "a person who suffers loss or damage by the conduct of another person" that was done in contravention of s52 and certain other provisions of the Act. The section does not stipulate any particular manner in which the loss or damage must be suffered. The requirement of causation is not a stringent one (see generally Kenny & Good Pty Ltd v MGICA (1992) Ltd [1999] HCA 25). In Jansen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 Lockhart J held that there is no requirement that damages can be recovered only where the applicant relies directly upon the conduct of the party constituting contravention of the relevant provision. This decision has been followed in several later cases and the reasoning was expressly approved by Gummow J in Marks v GIO Australia Holdings Ltd (1998) 73 ALJR 12 at 30-31.
[36] There is a point of distinction between this case and Glendale. The present respondent never saw the label. Nevertheless, we would not regard this as precluding reliance upon s82 on the basis of the claim for damages. Mr Ling read the misleading label and his response was to distribute the product in an undiluted state and without adding warnings of his own that might have offset, at least in part, the absence of repeating such warnings as there were on the label.
291The "indirect causation" class of cases is exemplified in decisions such as Digi-Tech (Australia) Limited v Brand and Ingot Capital Investment Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653.
292In Ingot, Ipp JA described the "indirect causation" approach at [615], by reference to Digi-Tech:
... persons who claim damage on the ground of misleading or deceptive conduct in contravention of s 52, and who allege that they incurred those damages by acquiring something in consequence of such conduct, must prove that they were misled by that conduct. If that is not proved, the plaintiffs failed to establish that the damages claimed were suffered "by" that conduct.
293At [617] of Ipp JA's reasons, his Honour explained the distinction between the two classes of case:
.... In the [Janssen-Cilag] category of case the plaintiff is a passive victim of misleading conduct. No action or omission by the plaintiff affects the loss it suffers. By contrast, in the [Digi-Tech] category of case, the plaintiff acts or refrains from acting to his or her prejudice by reason of conduct of a third-party brought about by the defendant's misleading conduct; the plaintiff's conduct is a necessary link of the chain of causation.
294Because the question is entirely moot, it does not seem to me to be necessary, let alone desirable, to lengthen these reasons by speculating on what the outcome might be if Johnson were forced back onto its third party reliance case. To the extent that the relevant facts are in dispute, I have found them; and the question of characterisation of those facts, in terms of third party reliance, can be dealt with if it arises without the need to make any further findings of fact.