Introduction
1 This case concerns the sale of land at Hamilton Hill upon which there is erected a service station. The sale was found, by a Judge of this Court, to have been induced by misleading and deceptive conduct on the part of the owners and their agents who had contravened s 52 of the Trade Practices Act 1974 (Cth) by reason of that conduct. His Honour found, however, that the loss suffered by the purchasers was small, the sum of $10,000 representing the difference between the purchase price and the value of the land as he found it. He held also that the purchasers had given only a qualified notice of their intention to rescind the contract upon discovering the misleading or deceptive conduct and that they had remained in possession without making arrangements to account to the vendors for rents derived from the land during the occupation of it.
2 His Honour declined the purchasers' claim for relief under s 87 of the Trade Practices Act. They had sought an order that the contract be declared void ab initio. They have appealed against that aspect of his Honour's decision and against the failure to find certain other misleading or deceptive conduct which they had alleged relating to the failure of the agent to disclose to them the presence of an easement over the land and the inadequacy of the fuel tanks constructed on the land to meet the requirements of the station.
3 Subject to my own observations about s 87 of the Trade Practices Act I agree with Carr J, for the reasons which his Honour has set out, that this appeal should be allowed.
4 It is not necessary here to repeat the factual background, the summary of the reasons for judgment below and the grounds of appeal which are set out in his Honour's reasons. My remarks are directed principally to the application of s 87 of the Trade Practices Act and orders under s 87(2)(a).
Section 87 Trade Practices Act 1974
5 The relevant parts of s 87 of the Trade Practices Act are as follows:
"87(1) Without limiting the generality of section 80, where, in a proceeding instituted under, or for an offence against, this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IV, IVA, IVB or V, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 80A or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.
(1A) Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IVA, IVB or V or on the application of the Commission in accordance with subsection (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person.
(1B) [Relates to representative actions by the Commission]
(1C) An application may be made under subsection (1A) in relation to a contravention of Part IVA, IVB or V notwithstanding that a proceeding has not been instituted under another provision of this Part in relation to that contravention.
(1CA) [Relates to time limits for commencement of applications under subsection (1A)].
(1D) For the purpose of determining whether to make an order under this section in relation to a contravention of Part IVA, the Court may have regard to the conduct of parties to the proceedings since the contravention occurred.
(1E) [Repealed in 1994]
(2) The orders referred to in subsections (1) and (1A) are:
(a) an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date before the date on which the order is made as is specified in the order;
(b) an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after such date before the date on which the order is made as is so specified;
(ba) an order refusing to enforce any or all of the provisions of such a contract;
(c) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage;
(d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage;
(e) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his own expense, to repair, or provide parts for, goods that had been supplied by the person who engaged in the conduct to the person who suffered, or is likely to suffer, the loss or damage;
(f) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at his own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage; and
(g) an order, in relation to an instrument creating or transferring an interest in land, directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to execute an instrument that:
(i) varies, or has the effect of varying, the first-mentioned instrument; or
(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first-mentioned instrument.
(3) Where:
(a) a provision of a contract made, or a covenant given, whether before or after the commencement of the Trade Practices Amendment Act 1977:
(i) in the case of a provision of a contract, is unenforceable by reason of section 45 in so far as it confers rights or benefits or imposes duties or obligations on a corporation; or
(ii) in the case of a covenant, is unenforceable by reason of section 45B in so far as it confers rights or benefits or imposes duties or obligations on a corporation or on a person associated with a corporation; or
(b) the engaging in conduct by a corporation in pursuance of or in accordance with a contract made before the commencement of the Trade Practices Amendment Act 1977 would constitute a contravention of section 47;
the Court may, on the application of a party to the contract or of a person who would, but for subsection 45B(1), be bound by, or entitled to the benefit of, the covenant, as the case may be, make an order:
(c) varying the contract or covenant, or a collateral arrangement relating to the contract or covenant, in such manner as the Court considers just and equitable; or
(d) directing another party to the contract, or another person who would, but for subsection 45B(1), be bound by, or entitled to the benefit of, the covenant, to do any act in relation to the first-mentioned party or person that the Court considers just and equitable.
(4) The orders that may be made under subsection (3) include an order directing the termination of a lease or the increase or reduction of any rent or premium payable under a lease.
(5) The powers conferred on the Court under this section in relation to a contract or covenant do not affect any powers that any other court may have in relation to the contract or covenant in proceedings instituted in that other court in respect of the contract or covenant.
(6) In subsection (2), "interest", in relation to land, has the same meaning as in section 53A."
6 In its earliest incarnation in 1974, the power to make orders under s 87 was conditioned upon a finding that there had been a contravention of Part IV or Part V of the Act and upon the imposition of a penalty under s 79 or the grant of relief under ss 80 or 82. The orders that could be made were "such other orders as [the court] thinks fit to redress injury to persons caused by any conduct to which the proceeding relates or any like conduct engaged in by the defendant". Subsection 2 allowed then, as it does now, for orders avoiding or varying contracts to be made.
7 The orders that could be made under s 87 were described in early commentary as "sui generis" - Donald and Heydon, Trade Practices Law, Law Book Company(1978) p 851 and as bearing "some similarity to the unlimited power given to the [US Federal Trade Commission] under s 11(b) of the Clayton Act to issue cease and desist orders for the purpose of ensuring the cessation of unfair trading practices" - Donald and Heydon at 852. The section did not offer a stand-alone remedy. It was conditional upon the grant of primary relief under ss 79, 80 or 82. Subsections 87(1) and (2) were described by Bowen CJ in Trade Practices Commission v Milreis Pty Ltd (1977) 29 FLR 144 at 155 as "…ancillary provisions, which would only occasionally be found appropriate to be applied", see also Brennan J at 157 and Deane J at 167. The Swanson Committee's discussion of the section in its 1976 report appeared under the heading "Ancillary Orders". The Committee did however recommend the decoupling of s 87 relief from the grant of primary relief under other provisions of the Act - Trade Practices Review Committee - Report to the Minister for Business and Consumer Affairs, August 1976, pars 9.158-9.159.
8 The recommendation of the Swanson Committee was reflected in the Trade Practices Act Amendment Act 1977, (No 81 of 1977). Subsections (1), (2) and (3) were replaced by new subsections bearing those numbers. Subsection (1A) was also introduced by the amendment. The general power under subs 87(1) to make orders was conditioned upon a finding by the Court that a party to proceedings under Part VI of the Act had suffered or was likely to suffer loss by the conduct of another person engaged in a contravention of a provision of Part IV or Part V of the Act. The power was expressly stated not to depend upon whether an order had been made under s 80 or s 82. The requirement was also introduced, in lieu of the reference to "redress", that the Court consider that the order or orders concerned would compensate the party suffering loss or damage in whole or in part for that loss or damage.
9 Subsection (1A) allowed orders under s 87 to be made, in proceedings in which a contravention was established, on the application of a person not a party, who had suffered or was likely to suffer loss or damage by conduct of another person in contravention of Part V. Paragraphs (a) and (b) of subs (2) as enacted in 1977 were in the same terms as at present. Paragraphs (ba) and (g) were introduced by later amendment. The words "without limiting the generality of section 80" were inserted at the beginning of subss (1) and (1A) by the Statute Law (Miscellaneous Provisions) (No 1) Act 1983), (No 39 of 1983), see Schedule 1. The decoupling of the right to relief under s 87 from the grant of primary relief under ss 79, 80 and 82 did not transform the section into a source of stand-alone remedies. Section 87(1) and (1A) provided respectively for the discretionary grant of compensatory relief for parties and others applying in proceedings for primary relief under a provision of Part VI of the Act other than s 87 - Sent v Jet Corporation of Australia Pty Ltd (1986) 160 CLR 540 at 545, disapproving the decision of the Full Court of the Federal Court in Fenech v Sterling (1984) 4 FCR 372 in so far as it suggested that s 87(1A) was a stand-alone remedial provision.
10 Subsection (1A) was amended in 1986 to include provision for representative applications for relief to be made by the Commission on behalf of persons who had suffered loss or damage or were likely to suffer loss or damage by conduct of another in contravention of Part V. Subsections (1B) to (1E) inclusive were introduced at that time as were paragraphs (ba) and (g) of subsection (2) - Trade Practices Revision Act 1986 (No 17 of 1987), s 55. The insertion of pars (ba) and (g) in to subs 87(2) of the Act was referred to in par 191 of the Explanatory Memorandum for the 1986 Bill thus:
"191. Sub-s (2) is being amended to further specify the remedial powers of the Court, in regard to orders refusing to enforce any or all of the provisions of a contract, or orders directing the person who engaged in the offending conduct to vary, terminate or otherwise affect an instrument creating or transferring an interest in land by executing another instrument. The first order is being inserted because para (2)(a) only refers to the Court's power to declare contracts or parts of contracts void, rather than just declaring the contract or parts of the contract unenforceable. The second order specifies that the Court has power to undo transactions involving land where it considers it appropriate to do so."
Paragraph 191 appears to have been written on the assumption that s 87(2)(a) is remedial rather than merely declaratory.
11 The effect of the decision in Sent v Jet Corporation in so far as it prevented non-parties from seeking relief under s 87(1A) as a stand-alone remedy was overcome by substitution of a new subs 87(1C) by the Statute Law (Miscellaneous Provisions) (No 2) Act 1986, (No 168 of 1986). The subsection inserted by that amendment is substantially in the terms of the subsection as it stands today, amended only to broaden it to actions based on contraventions of Parts IVA and IVB. With the enactment of Part IVA, relating to unconscionable conduct, consequential amendments were made to s 87 by the Trade Practices Legislation Amendment Act 1992 (No 222 of 1992), Schedule 1. As a result s 87 relief is able to be granted in relation to contraventions of Part IVA. Similar insertions occurred in 1998 consequential upon the enactment of Part IVB of the Act relating to Industry Codes - Trade Practices Amendment (Fair Trading) Act 1998 (No 36 of 1998).
12 It may be observed generally of s 87 in its current form that it provides a variety of remedial orders which cover the large range of circumstances which may conceivably attach to contraventions of Parts IV, IVA, IVB and V of the Trade Practices Act. It has been described in the High Court as conferring a wide discretionary power on courts to make remedial orders in appropriate cases to ensure a fair result - Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 at 298. The scope of the orders it authorises is not to be constrained because, in particular cases, they may resemble common law or equitable remedies - Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 510 (McHugh, Hayne and Callinan JJ) and see also at 505 (Gaudron J) and 545-546 (Kirby J). Gummow J, at 535, described the paragraphs of s 87(2) as creating "new remedies which have an affinity to the equitable remedies of rescission and rectification". His Honour went on to observe that:
"The principles regulating the administration of equitable remedies afford guidance for, but do not dictate, the exercise of the statutory discretion conferred by s 87. Orders under provisions of s 87(2) which vary the contracts or declare them void ab initio may be granted on terms. Such remedies, like their equitable analogues, are not directed to providing a measure of damage by way of monetary compensation."
They are nevertheless, by virtue of s 87(1) conditioned upon loss (actual or potential) causally linked to a contravention.
13 The power of the Court under s 87(2)(a), in its earliest manifestation, to declare a contract void or void ab initio was narrowly construed by the Full Court of the Federal Court as limited to declarations of invalidity derived from some other rule of law or statutory provision - Trade Practices Commission v Milreis at 161 (Brennan J) and 168 (Deane J). That view might be thought to have been linked to the parasitic character of the remedies available under s 87, dependent as they were upon the grant of primary relief. Nevertheless it was endorsed in respect of what was, for present purposes, the current form of s 87(2)(a) in Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15. There, the holders of non-withdrawable shares in a building society being wound up claimed to have been misled, by the Society, as to the character of the shares. The liquidator applied to the Supreme Court of Victoria for directions as to the position of the non-withdrawable shareholders. The Court was asked to assume that there had been deceit or misleading or deceptive conduct within the meaning of s 52 of the Trade Practices Act. In the High Court the majority (Mason CJ, Deane, Dawson and Toohey JJ, McHugh J dissenting at 37) held that the Trade Practices Act:
"…is not to be seen as eliminating "by a side wind" the detailed provisions established for more than a hundred years to govern the winding up of a company." (37)
Their Honours added, immediately following the preceding passage:
"Furthermore, in Trade Practices Commission v Milreis Pty Ltd …Brennan J and Deane J, as members of the Federal Court, made it clear that s 87(2)(a) is not to be understood as conferring a power to declare void a contract which was valid at its inception, other than through the operation of some other provision of the Trade Practices Act or by reason of some alteration in circumstances.
That brief but important, and in my respectful opinion, obiter dictum, has been the subject of some critical academic reflection - Harland, The Statutory Prohibition of Misleading or Deceptive Conduct in Australia and its Impact on the Law of Contract (1995) 111 LQR 100 at 124 and Skapinker, 'Other Remedies' under the Trade Practices Act - The Rise and Rise of Section 87 (1995) 21 Mon Univ Law Rev 188 at pp 203-212.
14 In the sixteen years that elapsed between Milreis and Webb there was legislative activity which resulted in the amendments to s 87 outlined earlier and which have substantially enhanced its importance as a remedial provision. There was also a number of decisions expounding and applying it in various ways. A number of the cases proceeded on the assumption, without ever directly confronting Milreis, that s 87(2)(a) provided a remedy which could be granted having regard to, but not limited to, the circumstances relevant to the grant of the equitable remedy of rescission. Northrop J appears to have so regarded s 87(2)(a) in Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 at 60, as did the Full Court in Fenech v Sterling (1984) 4 FCR 372 at 378 where reference was made to avoidance and variation of contracts under s 87(2) as though both were remedies provided by that subsection.In Collier v Electrum Acceptance Pty Ltd (1986) 69 ALR 355, Woodward J declined to make an order declaring an aircraft lease to be void ab initio under s 87(2)(a). That refusal was discretionary and not based on any view of want of power to make a remedial declaration. The Full Court in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 made observations about the operation of s 87 in circumstances in which it was held not to be appropriate to grant rescission on any basis, statutory or equitable. Lockhart J, with whom Burchett J agreed, said:
"In granting a remedy under s 87, the court is not restricted by the limitations under the general law of a party's right to rescind for breach of contract or misrepresentation." (564)
In Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700, the Full Court characterised the role of s 87 as providing its own statutory remedies. Referring to Henjo, Fisher, Gummow and Lee JJ in their joint judgment saw that case as seeming to emphasise:
"…that in the exercise of the discretion in these matters given the court by s 87, the equitable principles concerning rescission give safe, if not necessarily exclusive, guidance." (714)
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 2) (1991) 27 FCR 492 involved agreements made for the supply of information concerning financial transactions on the Melbourne and Sydney Stock Exchanges. The agreements were held on appeal to involve contraventions of s 46(1)(c) of the Trade Practices Act. The trial judge made orders under s 87 varying the agreements. The Full Court, which upheld the trial judge's findings of a contravention of s 46(1)(c), albeit it allowed the appeal in other respects, observed that the agreements were "the product of … contravention of the statute… and, in their very inception were tainted by it." The respondent could be compensated at least partly for its consequential loss and damage if the agreements were to be declared void ab initio on terms. The Court said at 503:
"In that regard, relief may be granted under s 87 on terms dealing with allowances and payment of moneys as part of a process of rescission ab initio; the equitable principles concerning rescission give some guidance here, in a general sense: see Munchies Management Pty Ltd v Belperio …"
The Court made a declaration that two agreements were void ab initio but on terms requiring payments by the respondent to the first appellant. A further direction was made that the declaration as to invalidity not commence to operate until the filing of a written undertaking by the respondent. The Court could be seen here to have been applying s 87(2)(a) as an operational remedy and not as a declaration of some independently occurring invalidity deriving from a finding of illegality. See also the observations about s 87 in Meagher, Gummow and Lehane - Equity, Doctrines and Remedies (3rd Edition Butterworths 1992) at par 1324, consistent with an operational rather than declaratory role for s 87(2)(a). In my respectful opinion, the apparently obiter observation of the majority in Webb Distributors, referring to Milreis, must be regarded as having been overtaken by the width of operation attributed to s 87 in Marks v GIO, although neither Milreis nor Webb was mentioned in the judgments in the latter case.