Misleading conduct
39The parties have categorised the misleading conduct in this case as a question as to whether there was misleading conduct by silence or omission. Concentration on an issue, described in that way as a matter of shorthand expression, can distract the parties, and the Court, from the fundamental nature of the issues to be determined. The question is, and must remain, whether (assuming trade or commerce) conduct, has been engaged in by the defendant, that is misleading or deceptive, or is likely to mislead or to deceive: Fraser v NRMA Holdings Limited (1995) 55 FCR 452 at 483; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31; (2010) 84 ALJR 644 at [14], per French CJ and Kiefel J. As their Honours French CJ and Kiefel J made clear in Miller , supra, the question is whether the conduct is or is likely to be misleading or deceptive and, in that regard, conduct must be understood to include a reference to refusing to do any act, which, in turn, includes a reference to refraining otherwise than inadvertently from doing that Act: Miller , supra, at [14].
40I reiterate that, in the current proceedings, the determination not to inform the plaintiffs (and others) of the alteration in status of the land and the MSB restrictions was a deliberate act of the defendant. As a consequence, the only inference available is that the defendant refused or refrained (otherwise than inadvertently) from informing the plaintiffs of the change in status and the MSB restrictions at a time when the plaintiffs had available to them the capacity to rescind the Contract, or at all.
41In Fraser , supra, the Full Court of the Federal Court (Black CJ, von Doussa and Cooper JJ) were required to deal with an allegation that the directors of a company failed to provide information relevant to a decision to be made by shareholders. The Federal Court held that, in circumstances where information was provided that excluded the alleged information, a contravention of s 52 of the Act. The Full Court of the Federal Court said:
"Although s 52 gives rise to no duty to provide information, when information is in fact given in purported discharge of the fiduciary duty, s 52 requires that the information given is not misleading or deceptive or likely to mislead or deceive. Additionally, the section requires that the conduct of the directors in withholding certain information is not itself conduct which is misleading or deceptive or likely to mislead or deceive. It is in the area of the proper discharge of the fiduciary duty to provide relevant information that there is an overlap between discharge of the duty and the operation of s 52: a failure properly to discharge the duty may itself constitute a contravention of s 52 as well as a contravention of s 995 of the Corporations Law." (Fraser, supra, at 466.E.)
42In the present situation, there is no common law duty imposed upon the defendant to disclose all information in its possession relevant, possibly relevant, or reasonably expected to be relevant, to the motivation of the plaintiffs to elect to rescind the Contract. Further, the defendant points to the determination by the learned magistrate that the bargaining position of the plaintiffs and the defendant was relevantly equal or substantially equal. In this respect, the learned magistrate took account of the statements of the High Court in Miller , supra. The High Court said:
"[22] However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. Yet that appears to have been, in practical effect, the character of the obligation said to have rested upon Miller in this case." (Miller, supra, per French CJ and Kiefel J.)
And in the plurality judgment, the High Court said:
"[90] Putting to one side the primary judge's finding that Mr Reynolds and Mr Jones understood that the policy in the bundle was the policy underlying the HIH certificate, the differences between the two documents were capable of causing BMW not to appreciate that it was in possession of the policy to be funded. This would, as Ashley JA observed, leave BMW with the HIH certificate as the only document relating to the insurance.
[91] Was Miller's conduct in failing to inform BMW, in terms, that the policy to be funded was not cancellable, or that the policy in the bundle was the policy to be funded, misleading? That question requires close analysis of all of the circumstances of the transaction. The parties were commercially sophisticated. They were experienced in their respective fields. The transaction involved the assessment by BMW of an application to lend Miller's client $3.975 million. The only document that Miller supplied in support of the application which appeared to relate to the policy to be funded did not disclose the nature of the risks insured. But it did put BMW on notice that the underlying policy may be an unusual one. BMW made no further inquiry. BMW's failure to make reasonable inquiries would not automatically defeat its statutory claim for damages for misleading conduct. However, given the history of this transaction, it is a circumstance that is relevant to whether Miller's conduct in failing to disclose its knowledge of the policy is correctly characterised as misleading.
...
[96] The requirement of the provision of 'full policy information', contained in BMW's quotation dated 8 December 2000, did not make Miller's failure to advise BMW that the policy was not a cancellable property policy misleading. Miller had supplied BMW with a copy of the policy. BMW was an experienced premium lender. The policy was not a lengthy document. It was apparent that it did not insure the holders against loss or damage to property. It did not contain a cancellation clause. Miller's failure to draw to BMW's attention a circumstance that the document itself disclosed was not misleading or deceptive." (Miller, supra, per Heydon, Crennan and Bell JJ.)
43Thus, the learned magistrate first looked at the question as to whether or not the parties were in an equal bargaining position. The learned magistrate found that they were. The plaintiffs, on appeal, challenge that finding. They challenge it on the basis that the incontrovertible evidence gives rise to an inference that there was an inequality in bargaining position based upon the proposition that the plaintiffs were consumers with no relevant business experience in the purchase of property and the defendant was a business engaged in that undertaking. The reliance placed by the defendant on solicitors' advice, and on which the learned magistrate in part depended for his assessment of lack of sophistication, is not, according to the plaintiffs, a proper basis for the magistrate's finding. I tend to agree with the plaintiffs. But the issue is one of fact. There is evidence upon which the learned magistrate could have determined that there was relevantly no inequality in bargaining position and the learned magistrate so found. This ground does not raise a question of law; nor does it raise a question of mixed law and fact. Whether I agree or disagree with the learned magistrate is irrelevant. The finding was a question of fact, open to the learned magistrate, and ought not, and cannot, be the subject of interference on appeal, because, under the Local Court Act, no appeal may be taken on such a ground.
44The next issue to which attention is required is the status of the leaflet. Her Honour, below, determined that the leaflet was "a marketing flyer only". Her Honour decided that the plaintiffs could not properly rely on the document because, in essence, it was mere "puffery".
45The term "puffery" is a term drawn from the common law. It has no express reference in the provisions of the Act. Nevertheless, a degree of exaggeration or "puffing" is accepted as part of ordinary business relations and, particularly, as part of advertising. Generally, it refers to statements made to induce interest that is later subsumed within the formal documents of contract or proper and appropriate information: see General Newspapers Pty Ltd v Telstra Corporation (1993) 40 FCR 98; Pappas v Soulac Pty Ltd (1983) 50 ALR 231. It is likely, so the courts have determined, to reflect the enthusiasm of the advertiser to place products in a favourable light: Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307, per Lockhart J, who referred to the appropriate approach being a "robust" one. His Honour said:
"The public is accustomed to the puffing of products in advertising. Although the class of persons likely to see this commercial is wide, it is inappropriate to make distinctions that are too fine and precise."
46Similar comments were made by Gyles J in Australian Competition and Consumer Commission v Telstra Corporation Limited [2004] FCA 987; (2004) 208 ALR 459. In this Court, Hunt J dealt with the issues in Farquhar v Bottom [1980] 2 NSWLR 380, in the context of defamation proceedings, in which his Honour said:
"In deciding whether the matter complained of is capable of conveying to the ordinary reasonable reader the imputations relied upon by the plaintiff, I must be guided and directed by the test of reasonableness. I must reject any strained, or forced, or utterly unreasonable interpretation. I must proceed upon the basis that the ordinary reasonable reader is a person of fair, average intelligence, who is neither perverse, nor morbid or suspicious of mind, nor avid for scandal.
This ordinary reasonable reader does not, we are told, live in an ivory tower. He can, and does, read between the lines, in the light of his general knowledge and experience of worldy affairs. It is important to bear in mind that the ordinary reasonable reader is a layman, not a lawyer, and that his capacity for implication is much greater than that of the lawyer." (Citations omitted.) ( Farquhar , supra, at 385-386, per Hunt J.)
47Reference should also be made to the comments of the Industrial Commission in Court Session in CRW Pty Ltd v Sneddon [1972] A.R. (NSW) 17 at 28 (per Sheldon and Sheppard JJ), in dealing with a contravention of s 32 of the Consumer Protection Act 1969. These cases have been referred to and relied upon in many subsequent judgments.
48In this case, the leaflet is not relied upon as misleading or deceptive conduct. Plainly, as held by her Honour below, the statement in the leaflet relating to the attitude of the MSB is wrong. It was wrong at the time that it was distributed to the plaintiffs. It was distributed by the real estate agent of the defendant, named in the contract for sale.
49It is unnecessary for the defendant to be knowingly misleading or deceptive. The learned magistrate relied upon the terms of the leaflet as disclosing an intention to induce persons to be interested in purchase. Plainly, and incontrovertibly, at the time that this leaflet was distributed to the plaintiffs, that cannot have been its purpose in relation to the plaintiffs. The plaintiffs had already entered into the Contract. Moreover, the plaintiffs do not rely upon the statements in the leaflet as misleading or deceptive. They rely upon the total context of the relationship between the plaintiffs and the defendant, including the publication and distribution to the plaintiffs of this leaflet, and the publication and distribution to the plaintiffs of the Updates, to found an allegation of misleading and/or deceptive conduct in not informing the plaintiffs of the change in status of the land.
50It would seem to me that the leaflet, even if it were analysed without any surrounding circumstances, would not be mere puffery. The leaflet contains, in its relevantly misleading aspect, a statement of fact, which, at the time, was known by the defendant to be wrong. When taken with the other aspects, and the context of the whole relationship between the plaintiffs and the defendant, the deliberate refusal to publish the information, known only to the MSB and the defendant, to the plaintiffs takes on a fundamentally different character.
51Accepting, as I must (see previous discussion), that the plaintiffs, on the one hand, and the defendant, on the other hand, were in a substantially equal bargaining position, this is not a case where the defendant has done nothing. Nor is it a case where the plaintiffs have not made appropriate searches, prior to entering into the Contract. This is a situation where the defendant was aware that the plaintiffs were capable of rescinding the Contract. The defendant became aware, as a result of its conduct, that additional restrictions were placed on the capacity to build on the properties that were being and had been sold. The defendant, through its agent, published a leaflet which asserted a continuation of the previously identified condition and not the MSB restrictions. Further, the defendant, through its solicitors, published updates of the progress of the subdivision and development. Those updates deliberately did not include the knowledge gained by the defendant that new conditions were in place, namely, the MSB restrictions.
52The plaintiffs had made proper enquiries prior to entering into the contract and were informed by the leaflet that the conditions on building remained the same and were otherwise informed of matters affecting the development of the site, but not the change in conditions and/or the imposition of the MSB restrictions. In my view, the failure, in those circumstances, to advise of the MSB restrictions or the change in status, when publishing a leaflet asserting a different status and different conditions, and when publishing updates, was conduct that was misleading or deceptive.
53The foregoing does not deal with the fundamental question as to whether the finding of her Honour below to the opposite effect was an error of law or an error of mixed law and fact. Her Honour relied upon the High Court in Miller, supra. It is not apparent that her Honour misunderstood the principles adumbrated by the High Court in that judgment. The parties have concentrated on the existence of a duty in the defendant to disclose. As earlier stated, that is a misunderstanding of the issue. The issue is and remains whether there has been misleading or deceptive conduct. It is a difficult issue to discern whether the conclusion of the learned magistrate is vitiated by an error on a ground that involves a mixed question of law and fact.
54The ultimate question of fact, namely, whether the conduct was misleading or deceptive, involved the application of law as to what is involved in misleading or deceptive conduct and her Honour's conclusion manifests a misunderstanding of that principle or a misapplication of that principle: Kostas v HIA Insurance Services Pty Limited t/as Home Owners Warranty [2010] HCA 32; (2010) 84 ALJR 663.