The Cause of Action in Misleading or Deceptive Conduct
60 The central question for determination in the appeals so far as they relate to the cause of action for misleading or deceptive conduct in the third amended statement of claim is whether those pleas are tenable. The attack on the pleading in this respect was directed primarily to whether it alleged sufficient facts to establish, if proven, misleading or deceptive conduct by Esso. Questions of reliance, causation and loss were not in issue albeit the cause of action for damages for misleading or deceptive conduct arising under s 82 of the Trade Practices Act includes as an element loss or damage by reason of the conduct.
61 The starting point in assessing the viability of the pleading in this respect is the language of s 52 of the Trade Practices Act which provides relevantly:
"52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive."
62 The term "engage in conduct" is defined in s 4(2) of the Act thus:
"4(2) In this Act -
(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 or arrangement, the arriving at, or the giving effect to a provision of, an understanding or the requiring of the giving of, or the giving of, a covenant;
. . .
(c) a reference to refusing to do an act includes a reference to:
(i) refraining (otherwise than inadvertently) from doing that act; or
(ii) making it known that that act will not be done."
63 The touchstone of liability is the conduct by act or omission of Esso and its characterisation as misleading or deceptive. The analysis of the statement of claim must begin by identifying the conduct and the facts relied upon to give it that character. The principles governing characterisation are well established. Conduct is misleading or deceptive if it induces or is capable of inducing error - Keehn v Medical Benefits Fund of Australia Ltd (1977) 14 ALR 77; Weitmann v Katies Ltd (1977) 29 FLR 336; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 (Gibbs J); Rhone-Poulenc Agrochimie SA v UMI Chemical Services Pty Ltd (1986) 12 FCR 477. The so called "doctrine" of "erroneous assumption" referred to by the High Court in Campomar Sociedad Limitada v Nike International Ltd (2000) 169 ALR 677 at 704, is merely another way of expressing that general proposition albeit it seems to have arisen in the context of cases involving similar product names. The statement in the joint judgment of Deane and Fitzgerald JJ in Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200 that "no conduct can mislead or deceive unless the representee labours under some erroneous assumption", cited in Campomar, is another way of saying that the representee must be led into error.
64 Conduct may be misleading or deceptive because it involves an express representation which is false. In the statement of claim in such a case the representation will be pleaded as a fact as will the falsifying facts. The conduct may involve an implied representation conveyed by words or conduct or some combination thereof. Such a representation will be falsified in the same way as an express representation. But the identification of a representational element is not necessary, albeit it will be involved in most cases. Conduct is to be characterised by reference to its actual or possible consequences - Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J). This does not require demonstration that anyone has actually been misled - Annand & Thompson Pty Ltd v Trade Practices Commission (1979) 25 ALR 91 at 102 (Franki J) and 111 (Northrop J); Brock v Terrace Times Pty Ltd (1982) 56 FLR 464; Taco Co of Australia Inc v Taco Bell Pty Ltd at 202 (Deane and Fitzgerald JJ). It does require a capacity to mislead or deceive attributable to the conduct in question. There must be a logical causal connection between the conduct and some hypothesised error. But not every case involving a logical connection between conduct and alleged error will result in the conduct being regarded as misleading or deceptive for the purposes of s 52. There is an evaluative judgment involved. As the Full Court said in SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 14:
"The characterisation of conduct as "misleading or deceptive or likely to mislead or deceive" involves a judgment of a notional cause and effect relationship between the conduct and the putative consumer's state of mind. Implicit in that judgment is a selection process which can reject some causal connections, which, although theoretically open, are too tenuous or impose responsibility otherwise than in accordance with the policy of the legislation."
65 By way of example, it might be said that, strictly speaking, a causal connection exists between conduct and error where the error is based upon erroneous assumption derived from but not logically justified by the conduct. The conduct will not ordinarily be treated on that account, as misleading or deceptive in such a case. In McWilliam's Wines Pty Ltd v McDonald's System of Australia Pty Ltd (1980) 49 FLR 455 at 466, Smithers J said:
"It is difficult to think that conduct is truly misleading or deceptive if it tells the truth and is such that if it is observed by persons who have no false ideas concerning extraneous matters nobody will be misled."
Northrop and Fisher JJ who published separate reasons, generally agreed with Smithers J. The case concerned similar brand names, albeit in quite disparate product areas - hamburgers and wine respectively. While the similarity might lead to erroneous assumptions of affiliation by some consumers, it was not on that account to be regarded as misleading or deceptive. Nevertheless the High Court in Campomar approved the rejection in Taco Bell, at p 200, of:
"[Any] general proposition of law to the effect that intervention of an erroneous assumption between conduct and any misconception destroys a necessary chain of causation with the consequence that the conduct itself cannot properly be described as misleading or deceptive or as being likely to mislead or deceive."
The High Court went on to point out that in assessing the reactions or likely reactions of ordinary or reasonable members of a class of prospective purchasers of a mass marketed product for general use, the Court may well decline to regard as controlling the application of s 52 those assumptions by persons whose reactions are extreme or fanciful. It said at p 705:
"The initial question which must be determined is whether the misconceptions, or deceptions, alleged to arise or to be likely to arise are properly to be attributed to the ordinary or reasonable members of the classes of prospective purchasers."
It is, of course, to be borne in mind that these observations are made in the context of a consumer reaction to the impugned conduct where that conduct involved the use of a trade name on one product that is similar to the trade name of another. In the present case, the assumptions which are pleaded are logically antecedent to the conduct which is complained of.
66 There is a question whether, in non-disclosure cases, the facts which are not disclosed must be known to the party failing to make disclosure. As a general proposition it is not necessary in order to show misleading or deceptive conduct for the purposes of s 52, that the contravenor intended to mislead or deceive - Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd at 228 (Stephen J, Jacobs J agreeing); 234 (Murphy J). In the case of an alleged non-disclosure it is not necessary to show that the contravenor knew of the facts not disclosed. In Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 467, the Full Court said:
"…for the purposes of s 52, if by reason of what was said and what was left unsaid the conduct of the corporation is misleading and deceptive or likely to mislead or deceive, a contravention would occur even if the corporation through its directors and officers did not have knowledge of the undisclosed facts which rendered the conduct in breach of s 52. A contravention of s 52 may occur without knowledge or fault on the part of the corporation, and notwithstanding the exercise of reasonable care: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [(1982) 149 CLR 191] at 197."
That is not to say that knowledge may not be a relevant circumstance. For in a case where disclosure would reasonably be expected of a fact if that fact were known to the corporation, failure to make disclosure may convey the implication that that fact is not known.
67 There is in Fraser a useful general statement at 467 about what it is necessary for an applicant in a non-disclosure case to establish:
"Where the contravention of s 52 alleged involves a failure to make a full and fair disclosure of information, the applicant carries the onus of establishing how or in what manner that which was said involved error or how that which was left unsaid had the potential to mislead or deceive. Errors and omissions to have that potential must be relevant to the topic about which it is said that the respondents' conduct is likely to mislead or deceive. The need for an applicant to establish materiality is of particular importance…where the proposal is complex, and involves difficult questions of commercial judgment and matters of degree and conjecture as to the future about which there is room for a range of honestly and reasonably held opinions."
Those words were written in the context of a document analogous to a prospectus which was said to be incomplete. Where the question involves disclosure of risks associated with the supply of a product or service, it cannot reasonably be expected that the supplier is to inform the public of every possible risk. That can be explained simply by the proposition that in the ordinary course of human affairs things go wrong in connection with the supply of products and services and that nobody could reasonably assume, absent disclosure, that such supply will be risk free. Moreover, where complex issues are involved the question whether non-disclosure is misleading or deceptive will have to be assessed in a "practical realistic way" - Fraser at 468.
68 The pleading of the facts to raise the cause of action in misleading or deceptive conduct is set out in eleven paragraphs of the statement of claim (paragraphs 16-26). The pleading does not deal with any conduct on the part of Esso until paragraph 25, which is set out earlier in these reasons. That conduct may be broken down into the following elements:
1. Positive acts - continuing to operate, manage and control the Longford plant and supply gas.
2. Omissions - failing to contradict the pleaded assumptions and failing to disclose the susceptibility of the gas supplies to interruption.
69 There is no basis upon which the continuation of supply itself can be regarded as misleading or deceptive or likely to mislead or deceive. It could hardly be suggested that Esso's failure to stage some informative interruption of supply was necessary to dispel any false sense of security on the part of users. The continuing involvement of Esso in the supply of gas is simply a circumstance relevant to the characterisation of the conduct otherwise relied upon which in this case is the pleaded non-disclosure set out in paragraphs 25(ii) and 25(iii). In paragraph 26 also the statement of claim seeks to incorporate the continued supply as an element of the conduct characterised by that paragraph as misleading or deceptive. That is not a tenable proposition.
70 What remains is a case of misleading or deceptive conduct by non-disclosure. The omission to do a thing is a species of conduct as defined in s 4(2) of the Trade Practices Act. And as Black CJ observed in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32:
"…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."
Gummow J in similar vein (Cooper J agreeing) said at 40:
"…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."
I respectfully differ from one aspect of the observations by the Chief Justice in Demagogue when his Honour spoke ( at 32) of silence as requiring "..to be assessed as a circumstance like any other". As appears from the balance of his Honour's judgment, silence, in the context of s 52, is conduct to be assessed by reference to context or circumstances. If a corporation fails to disclose a fact which, absent disclosure in the circumstances of the case, would reasonably be expected not to exist, then that non-disclosure may convey the misleading impression that the fact does not exist.
71 The assumptions said to have been made by gas users about uninterrupted supply of gas are not based on any conduct by Esso which is said to be or could be said to be misleading or deceptive. The assumptions as pleaded are logically antecedent to the alleged failure to correct or contradict them which is at the heart of the asserted contravention of s 52. In this respect the case differs quite radically from cases of misleading or deceptive conduct where the resulting error is based in part upon an erroneous assumption which may or may not be related to the conduct in question.
72 The assumptions pleaded in paragraph 19 of the statement of claim rest upon other pleaded facts. The first of these is that set out in paragraph 6, namely the dependency of the users "on the respondents, as the sole suppliers of gas, for a supply of gas which would be uninterrupted (except in the event of circumstances which were not reasonably foreseeable and reasonably preventable by the respondents);". There is no logical connection between dependence on supply and an assumption as to its continuity. To say that somebody is dependent upon somebody else doing something does not carry with it the implication that the other person will do that thing. The dependency plea in paragraph 6 as particularised may logically demonstrate the seriousness of the consequences of an interruption of supply and it may well be relevant to the existence of a duty of care at common law on the part of the respondents but is not a basis for the assumption pleaded. Moreover the dependency pleaded is qualified to allow for interruptions of supply not reasonably foreseeable and reasonably preventable by the respondents. Those qualifications draw no bright line. The dependency is defined by reference to matters of evaluation and assessment about what is reasonably foreseeable and reasonably preventable. This pleading, with all due respect, is a logical absurdity.
73 The second of the factual bases for the assumptions pleaded is that set out in paragraph 16, namely that since about 1969 Esso has been the monopoly supplier of natural gas to gas users in Victoria. There is no logical connection apparent between that fact and the pleaded assumption and no pleading of fact to make the connection. Nor is there any such connection between the assumptions and the next pleaded fact that the supply of gas by Esso was an "essential service" in Victoria. In any event the latter "fact" is a statement of a normative kind which, as particularised, involves a revisiting of the dependency plea coupled with the allegation that interruption of supply would be likely "to have a serious adverse effect on the economy of Victoria" and "was likely to cause serious disruption, dislocation and inconvenience to persons in Victoria". The final factual basis for the assumptions asserted is that set up in paragraph 18, namely that the provision of gas by Esso to the users which was uninterrupted save for circumstances not reasonably foreseeable or preventable by Esso "… was dependent upon an infrastructure which enabled that supply". The infrastructure included gas reserves, production and processing facilities and storage and distribution facilities. Again, there is no connection apparent or pleaded between these facts and the assumptions set up in paragraph 19.
74 The assumptions which are central to the characterisation of Esso's conduct as misleading or deceptive cannot logically be derived from the factual matters identified either severally or collectively. In my respectful opinion, the pleading of the assumptions is a creation of legal drafting.
75 The focus of these reasons thus far has been upon the internal logic of the statement of claim and whether it discloses an arguable case on the critical issue of the pleaded assumptions. Such analysis is not to be informed by intuitive personal judgments about what gas users might think. But I am reinforced in the conclusion I have drawn from the pleading itself by the sense that the existence of such explicit assumptions is highly counter intuitive. It might be said that interruptions to gas supplies when they occur would be regarded by most people as unexpected. The more serious and prolonged the interruption, the more unexpected it would be. But to say that something is unexpected is not to say that there is a positive assumption or belief to the effect that it will not happen. In any event, the assumptions as pleaded are gutted of content by the qualification that the assumed supply may be subject to interruptions which were "not reasonably foreseeable and reasonably preventable by the respondents". To contradict these assumptions it would be necessary for Esso to warn the populace that it was expecting a reasonably foreseeable and preventable interruption to occur.
76 The assumptions pleaded are also framed by reference specifically to the supply of gas by Esso. Esso is, in each case, referred to in the qualification relating to foreseeable and preventable interruption. It is not in dispute that Esso was only the start point of a chain of contracts. Johnson Tiles and Mr Chalmers dealt with licensed gas retailers, Energy 21 (Gas) Pty Ltd and Kinetik (Gas) Ltd respectively. While the limitation of liability contained in clause 23.5 of the Gas Sales Agreement would not seem to have any operative effect upon the perceptions of end users, the same is not true for the Victorian Gas Customer Service Code which expressly contemplates the possibility of "unplanned interruptions" (clause 3.4.3).
77 The pleading of the assumptions being, in my opinion, fatally flawed, the conduct of failing to correct or contradict the assumptions and failing to make known the vulnerability of the gas supply could not constitute misleading or deceptive conduct. In my opinion this aspect of the statement of claim should not be permitted to go forward.