The impact of Streetscape ' s misleading and deceptive representations
323In Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325, the full Federal Court decided that this section is not confined to misleading statements to members of the public, but also operates with respect to private individuals in business negotiations. The test is an objective reasonable person test, considering the class of persons to which the conduct is directed, Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45.
324Mr Couper focused a significant amount of time in cross-examination to the question of whether the City truly relied or otherwise should have reasonably relied on Streetscape's representations in relation to the Adepole.
325There have been a number of cases in which the Court has considered how it should deal with the position of a person who has been misled because he or she did not take reasonable care. In Argy v Blunts & Lane Cove Real Estate Pty Ltd. (1990) 26 FCR 112 at 137, Hill J set out the principles as follows:
The Full Court of this Court in Sutton v A J Thompson Ply Ltd (In liq) (1987) 73 ALR 233 in response to a submission that the applicants in that case had failed to take reasonable care in their own interests by not investigating more closely the affairs of the business which they had purchased described as a "bold submission" the proposition: "You should not have believed me when I misled you" and after referring to the four propositions enunciated by Wilson J in Gould v Vaggelas (1985) 157 CLR 215 set out earlier, continued (at 240):
". .. the possibility that a foolish person might be misled by some misrepresentation which no normal person would take seriously, is covered by the exclusion of representations which are not 'calculated to induce' entry into the contract - the test is objective, but must take into account the respective positions of the parties, including such matters as their knowledge of each other through previous dealings and their respective familiarity with the subject-matter of the contract.
Similarly, if a person is so determined to enter into a contract that he is not in truth influenced by some false representation made to him, he clearly has no case. But there is nothing in the principles cited, or in any other authority which has been brought to our attention, to suggest that a person who has been misled into entering a contract, by false representations of a type which were likely to produce that result, and in fact did so, can be deprived of his remedy because of his failure to check the accuracy of those representations: see, to the contrary, Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302 at 309; and Collins Marrickville Pty Ltd v Henjo Investments Ply Ltd (1987) 72 ALR 601."
In Collins Marrickville Ply Ltd v Henjo Investments Ply Ltd (1987) 72 ALR 601 on appeal Henjo Investments Ply Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 96, Lockhart J with whose reasons Burchett J agreed, referred to what was said by Wilson J in Gould v Vaggelas and to the decision of Pincus J in Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302 where it had been held that the causal chain required for recovery of damages under s 82 of the Trade Practices Act had not been broken where the applicant failed to take reasonable care of his own interests by undertaking a proper investigation of the circumstances presented to it and commented:
"These decisions support the view that recovery under s 52 is founded by the applicant's actual reliance upon the misleading or deceptive conduct of the respondent although that conduct was not the only factor in the applicant's decision to enter a particular agreement, and although the applicant did not seek to verify the representations or did so inadequately and so failed to discover their falsity."
A case may perhaps be imagined where an applicant is so negligent in protecting his own interests that there will be a finding of fact that the representation complained of was not in the circumstances a real inducement to his entering into a contract. In such a case the element of causation between misrepresentation and damage will have been severed by the intervention of the negligence of the applicant. However, in my view, the present cannot be said to be that case.
A somewhat similar view was recently expressed by French J in Kewside Pty Ltd v Warman International Ltd [1990] ASC 55-964, at 58-821:
"The damages recoverable under s 82 of the Trade Practices Act for a contravention of s 52 are measured by the loss or damage suffered by reason of the contravention. The causal connection is not that of the strict logician, but is to be understood according to common sense concepts - Yorkshire Dale Steamship Co Ltd v Minister of War Transport [1942] AC 691 at 706. Selection principles influenced by policy and not merely logic operate. Concepts such as contributory negligence and mitigation have no role as such in this process but analogous notions may apply to decide whether or not a claimed loss was truly caused by the contravention in question: Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 at 712; Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 at 418-419; Pavich v Bobra Nominees Pty Ltd (1988) 84 ALR 285."
326The law is further clear that no conduct can be misleading or deceptive unless the person to whom the representation is directed labours under some error Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177.
327Under cross-examination Ms Hobbs maintained that she relied and believed Mr Obeid's representations that the Adepole was not a Smartpole. However, Ms Hobbs was unable to explain why, if she held this belief, did she not agree in the First Deed of Variation that Streetscape owed no royalties on the Adepole:
Q. Dealing with the Adepole, by 30 March 2007, you understood that Streetscape's position was this, did you not, that the Adepole was not a Smartpole and that it was a pole which had been designed for and installed in Adelaide?
A. Yes Mr Couper.
Q. Now notwithstanding that that's what Streetscape's position had been - I'll start again, I'll retract that. In the first deed of variation the Adepole went into the TBD category, correct?
A. Yes.
Q. That is, you were not prepared to accept that the Adepole was not a Smartpole, correct?
A. I - could you repeat the question please?
Q. You were not prepared to accept that the Adepole was not a Smartpole were you?
A. I did accept that that was Mr Obeid's comment to me that the Adepole was not a Smartpole.
Q. If you had accepted that, the Adepole would have gone into the no column rather than the TBD column, correct?
A. I don't recall.
Q. No it's not a question of recalling, it's a question of logic Ms Hobbs. If you accepted the Adepole was not a Smartpole, the inevitable consequence would have been that the Adepole would have been placed in the no column in the first deed of variation, correct?
A. I don't recall Mr Couper.
Q. Do you recall anything about how the Adepole came to be placed in the TBD column in the first deed of variation?
A. It was the same as the other poles which were mentioned at that time, and that was the hybrid pole and the RTA pole and the explanation for the hybrid pole and the RTA pole seemed logical but what we had first been informed of through the audit report and the book which had identified that there were sales to Adelaide city council which was called the Adepole, and that was the first that we - I believe we were aware of that.
...
Q. Now what I'm asking you, why did you agree that TBD should be written beside that item in that column on 30 March 2007?
A. I'm sorry Mr Couper I can't recall.
Q. Is it the case is it not, that you received no new information from Streetscape about the Smartpole between - sorry about the Adepole, between 30 March 2007 and the date of the execution of the second deed of variation, correct?
A. I'm sorry Mr Couper I can't recall.
Q. Is it the case is it not, that you received no new information from Streetscape about the Smartpole between - sorry about the Adepole, between 30 March 2007 and the date of the execution of the second deed of variation, correct?
A. Yes.
Q. You and Mr Harding decided that you would use the Adepole as a bargaining chip to reach agreement with Streetscape that the low impact pole would be treated as a Smartpole, correct?
A. The low impact pole was a Smartpole.
Q. Can I ask you to come please to your fifth affidavit, page 530 of the Court book?
A. I'm sorry what paragraph Mr Couper.
Q. At paragraph 77. You were there recording the content of discussion between you and Mr Harding on 24 July 2007, correct?
A. Yes Mr Couper.
Q. Where you say "I think we can agree that no royalties are payable in relation to the Adepole. Streetscape has said they are only sold the Adelaide City Council and sales are limited." I stop there. What you record in the second sentence, "Streetscape has said they are only sold to the Adelaide City Council and sales are limited" was something said on behalf of Streetscape before 30 March 2007, correct?
A. Yes Mr Couper.
Q. If you go over the page to paragraph 77 you record Mr Harding as saying, "I agree. Maybe we can agree on a trade off between the Adepole and the low impact poles." Is that what was said by Mr Harding?
A. Yes.
Q. You and he decided to use the Adepole as a bargaining chip to reach agreement that the intellectual property in the low impact pole would be agreed as the city's, correct?
A. Yes.
Q. You had heard nothing different from Streetscape about the Adepole since before 30 March 2007 at the time you decided to use the Adepole as a bargaining chip, correct?
A. Sorry can you repeat the question?
Q. Yes. You had heard nothing different from Streetscape about the Adepole since before 30 March 2007 at the time you and Mr Harding decided to use the Adepole as a bargaining chip, correct?
A. Yes.
Q. You and he made a commercial decision that that is the way in which you would proceed to negotiate the agreement, correct?
A. Yes.
Q. You had undertaken no investigation about what the Adepole was or was not between 30 March 2007 and the date of execution of the second deed of variation, correct?
A. No.
Q. You're agreeing with me?
A. No I'm not agreeing with you.
Q. So what investigation do you say you did between 30 March 2007 and the date of the execution of the second deed of variation about what the Adepole was or was not?
A. The city relied on Mr Obeid's assurances.
Q. By that do you mean that Mr Obeid said again, the same things he had said before 30 March 2007?
A. Yes.
Q. Was that the full extent of your investigation?
A. Well there was no reason to doubt Mr Obeid.
Q. You had doubted Mr Obeid on 30 March when you refused to accept his statement the Adepole was not a Smartpole, correct?
A. No I - when the Adepole was identified in the Deloitte's report, Mr Obeid was asked about it and the assurance that he gave the city, myself and Mr Harding, was that the Adepole was not a Smartpole, it was produced for the City of Adelaide in limited quantities. That was repeated on numerous occasions. There was no reason for the city to doubt that assurance by Mr Obeid.
Q. I'll ask one more time, I don't wish to be tedious about this. Why then was the Adepole not included in the no column in the first deed of variation?
A. And I'm sorry Mr Couper I'm unable to recall.
328Ms McRae gave further evidence that Ms Hobbs was very sceptical of Mr Obeid's assertions that the Adepole was not a Smartpole:
Q. Was it your view that the Adelaide pole was likely to be a Smartpole sold pursuant to the licence agreement?
A. Yes.
Q. Was that a view you discussed with Ms Hobbs?
A. Well according to my affidavit, yes, I did.
Q. Did Ms Hobbs agree with that view, that the starting point position was the Adepole was likely to be a pole sold pursuant to the licence agreement?
A. I believe so, yes.
Q. And is it right to say - let's go back to the S2 pole for a moment, it's pretty plain that Ms Hobbs was not prepared to accept Mr Obeid's view that the S2 pole was not a Smartpole, correct?
A. That would be correct.
Q. Would Ms Hobbs approached from your observation of her that she wouldn't accept Mr Obeid's position about whether poles were or were not Smartpoles without some sort of further objective proof?
A. I'm sorry, can you rephrase the question, I'm not clear on what you're asking.
Q. I'll put it in these terms. From your observation of Ms Hobbs in her dealings with the Streetscape people she was no prepared to take Mr Obeid's word for anything about whether a pole was or was not a Smartpole, correct?
A. No, I would not say that's correct.
Q. All right, well how would you put her attitude to Mr Obeid's position about whether particular poles were or--
A. In the meetings that I was present at, and I can only comment on those, there was significant discussions about specifically that.
Q. When you say "discussions" do you mean disagreements?
A. I would call them robust discussions.
Q. Robust discussions where the parties took and maintained contrary views, correct?
A. That would be fair to say.
Q. Did the parties take and maintain contrary views about Adepoles at the meetings you attended?
A. To the best of my recollection Adepoles were subject to far less discussion than the Smartpole 2.
Q. Well whether they were subject to less discussion or more discussion, was there discussion to your recollection at which the parties took contrary views that the Adepole was or was not a Smartpole?
A. Yes.
Q. And that involved the notion that Mr Obeid ascertained at the Adepole was not a Smartpole and Ms Hobbs disagreed, correct?
A. I believe so.
Q. And it's right to say isn't it that at no time in any discussion with you did Ms Hobbs say that she was prepared to accept Mr Obeid's contention that the Adepole was not a Smartpole?
A. I don't recall that.
Q. Is it your understanding that the result of those competing contentions in the meetings you attended was that the Adepole was put into a to be determined category when it came to the Deed of Variation?
A. Yes.
Q. That is the parties had exchanged their views, were in disagreement and that's how it remained?
A. Yes.
329Mr Harding gave evidence as to the City's views of Streetscape leading up to the first deed of variation:
Q. Streetscape Projects up to and including 30 March asserted that the low impact pole was not a Smartpole, correct?
A. That's correct.
Q. The city was not prepared to accept that assertion was it?
A. At that time I wanted more information about the Smartpole and that's what we decided with the first deed of variation. That why it was to be determined, there needed to be further discussion about the low impact pole.
Q. You weren't prepared to take the word of anybody from Streetscape when they said the low impact pole was not a Smartpole, correct?
A. Just repeat that again for me please.
Q. You weren't prepared to take the word of anybody from Streetscape that the low impact pole was not a Smartpole, correct?
A. That's correct at that time.
Q. Yes and that's why the low impact pole was marked TBD in the first deed of variation?
A. Correct.
Q. Because you wanted to find out for yourselves and form your own view about whether the low impact pole was a Smartpole, correct?
A. I wanted some further information, correct.
Q. Yes and you wanted information independently of what Streetscape Projects asserted, correct?
A. Correct.
Q. Now Streetscape Projects up to and including 30 March 2007 was asserting that the Adepole was not a Smartpole, correct?
A. That's correct.
Q. You weren't prepared to take their word about that either, were you?
A. No it was a - there was - the information I got on the 29th and 30th from Robyn Hobbs was that those matters were still to be resolved.
Q. Yes and you'd agree with Robyn Hobbs that you should not take the word of Streetscape's representatives that the Adepole was not a Smartpole, correct?
A. Well Streetscape had made the - not made there was a claim that the Adepole was not a Smartpole.
Q. You weren't prepared to accept that, were you?
A. Yes we were.
330I do not accept that the City would not be willing to accept Streetscape's assertions as to one set of poles but not the other. On the balance of probabilities, the City must have not accepted Streetscape's representations concerning the Adepole either.
331Mr Harding concurred with Ms Hobbs that on the date of signing the Second Deed of Variation, the City had not conducted any further investigations. As far as they were concerned the status of the Adepole was still to be determined:
Q. Did she say anything to suggest that independently of Streetscape anybody from the city had tried to work whether the Adepole was or was not a Smartpole?
A. I don't know.
Q. You don't know?
A. No.
Q. At the time of the execution of the second deed of variation, the state of your knowledge was exactly the same as it was at 30 March 2007, that is Streetscape asserted that the Adepole was not a Smartpole and the city disagreed. Correct?
A. Streetscape's position and I didn't get this from them directly but through Robyn, earlier was that the Adepole was not a Smartpole.
332Despite conducting no further enquires, on 19 October 2007, the City entered into the Second Deed of Variation and accepted that the intellectual property in the Adepole vests with Streetscape. In my view this was a commercial decision made by the City in an effort to secure its other intellectual property rights. The City did not accept Streetscape's representations as to the status of the Adepole but chose to conduct no further enquiries.
333I accept Ms Hobbs' evidence at paragraphs 102 to 107 of her 23 September 2010 affidavit that had she understood and appreciated the full extent of what clause 5(a) of the Second Deed of Variation meant she would not have entered into the agreement. However, I do not accept Ms Hobbs was misled by Streetscape's representations. On Mr Harding's evidence, the City did not believe any of the representations put to them by Streetscape. The City wished to carry out their own enquiries. The City could have carried out enquiries in relation to the Adepole but decided not to. In these circumstances the City was not misled by Streetscape's representations. Rather the City entered into a contract without properly investigating the implications of its decisions. This is not a situation of a person failing to take reasonable care to discover untruths in representations. This is a situation where Streetscape's representations were not material in the City's decision. In these circumstances, the City must bear the consequences of its bargain.
334These findings mean the Court does not need to consider the consequences of the City's failure to call Ms Barone.
335Even had the above findings been incorrect, Ms Nicholson gave evidence that she attended the meeting with Ms Barone on 23 March 2007 with Ms Hobbs and Mr Harding. This renders irrelevant the question of whether or not Ms Nicholson's notes were shown to Ms Barone. Clearly Ms Barone was informed. In these circumstances, the failure to call Ms Barone has no heinous consequences in Jones v Dunkel terms.