Westham Dredging Company Pty Ltd v Woodside Petroleum Development Pty Ltd & Anor [1983] FCA 26

BULTENLAND Respondents ORDERS JUDGE MAKING ORDERS: ST. JOHN, J.

I hold also, that the defences raised by the second and third respondents in sub-paragraphs (ii) and (iv) of paragraph 16 of their amended defence are valid answers in law to the statement

The applicant to pay the respondents' costs of the action to date, including those incurred in the preliminary questions of law and the

damages pursuant to S.82 of the Trade Practices Act

$.52 of the Act against three respondents, firstly,

Woodside Petroleum Development Pty. Limited ("Woodside")

and also against Maunsell & Partners Pty. Limited and Stichting Nederlands Adviesbureau Voor Ingenieurs~ werken In Het Buitenland which I shall refer to as

Broadly, the cause of action is based upon the supply by Woodside of a report prepared by the consulting engineers as to the geological structure of a harbour basin which later became the subject matter of a dredging contract entered into between Westham and Woodside. Westham alleges that some of the geological data specified in that report was inaccurate and this affords them a right of action because such inaccuracies were misleading or deceptive

Both Woodside and the consulting engineers moved the court for orders that separate questions of law be decided before any further trial in the proceedings and orders pursuant to those applications were made. The questions to be decided were whether or not

It is necessary to reproduce in some detail the allegations made in the statement of claim and the defences relied upon by the respondents whose basic contention is that the allegations in the statement of claim disclose no cause of action. A large part of the statement of claim in its precise terms is reproduced hereunder, but I shali interpolate in parenthesis summaries of some allegations which need not be fully reproduced and expanding others where

incorporation of Westham and its entitlement to sue).

Paragraph 2. (This paragraph alleges that Woodside and the first of the consulting engineers are trading

Paragraph 3. (This paragraph alleges that the second

named of the consulting engineers is a company incor-

porated in the Netherlands and is a foreign corporation

"4, The first named respondent at all Material times carried on the business in trade or commerce of carrying out and arranging the carrying out of exploration for oil and the provision and construction of all necessary facilities, including the dredging

of any necessary ports or harbours, for such exploration.

5. The second and third named respondents at all material times carried on business in trade and commerce as dredging and engineering consultants in Perth, Western Australia and elsewhere."

(Paragraphs 4 and 5 above are formal in the sense that counsel for Westham has indicated to the court that no facts other than those set out subsequently in the statement of claim would be relied upon to support the allegations that the respondents were "in trade or

"6. In or about June 1980 the first named respondent invited the applicant to submit tenders for a proposed contract to carry out certain dredging and associated reclamation and £111 works at Phillip Point Supply Base at King Bay, Dampier, Western Australia("the Work").

The said invitation was by letter to the applicant dated 23 June, 1980."

"7. Prior to July 1980 the second and third named respondents at the request, and for and on behalf, of the first named respondent in the course of their businesses in trade or commerce as dredging and engineering consultants, for the specific purpose of informing dredging tenderers or prospective tenderers, including the applicant, of the type, quantities, arrangement and positioning of various materials below the surface of the site to be dredged, prepared and compiled a detailed geological and geophysical report entitled the King Bay Report including certain subsoil profiles and drawings as particularised below (hereinafter such documents being compendiously described as "the Report")."

(This paragraph is followed by particulars identifying the documents referred to. The report referred to was tendered in evidence and, on its face, appear

"8. The Report was expressed at Page I-1.2 to be the result of a comprehensive site investigation programme. Further, it was otherwise indicated in the Report that it was detailed and extensive and that it was designed for the purpose referred to in paragraph 7 above.

The Report otherwise indicated the matters referred to above by the following:

At Page I-2.3 it stated that an extensive drilling programme had been carried out in May and June, 1980;

At Page I1-2.4 it stated that a large number of samples taken from boreholes drilled prepara- tory to the preparation of the Report were tested for geotech- nical properties in a soils labaratory; and

At Page I-4.2 it stated that the investigation which preceded the said Report was specifically for the purpose of the dredging and reclamation work."

"9, On or about 14th July, 1980, the first, second and third named respondents in trade or commerce in the course of the businesses referred to in paragraphs 4 and 5 above supplied and distributed to the applicant and other tenderers or prospective tenderers copies of the Report."

(Particulars of this paragraph describe the distribution

"10. Further, in late August and early September 1980 the first, second and third named

" respondents in trade or commerce in the course of the businesses referred to in paragraphs 4 and 5 above supplied to the applicant amended drawings and additional information relating to the quantities and materials to be dredged (such amended drawings and additional information being hereafter referred to as "the Further Information"). Such Further Information was necessitated by design changes reguired by the first named respondent in relation to the area to be dredged but was based upon the accuracy and reliability of the Report."

(Particulars of design changes and additional informa-

"11. The second and third named respondents in trade or commerce in the course of the businesses referred to in 5. above in or about late August and/or early September 1980 orally represented to

the applicant that the additional infor- mation relating to quantities and materials to be dredged referred to in 10. above was accurate."

(Particulars of this paragraph stated that the represen- tations were made at meetings held on 28th August and

3rd September 1982 at the offices of Broken Hill Proprietary Company Ltd.in Perth. Minutes of those meetings and correspondence in relation to those minutes were tendered by Woodside without objection. The minutes

requirements due to relocation of the proposed channel

quantities of rock and other materials to be dredged).

agent Broken Hill Proprietary Company Ltd. represented to the applicant in trade or commerce in the course of the business referred to in 4. above that the additional information relating to quantities and Materials to be dredged referred to in 10. above was accurate.

Such representation was contained in a letter from Broken Hill Proprietary Company Limited to the applicant dated 11September, 1980."

(The date of this letter was amended to 16 September

1980 and a copy of that letter was tendered. Omitting

"Please find enclosed a letter from Maunsell-Nedeco commenting on a copy of minutes they received from B H P (CED).

Would you please note the comments and ensure that any reference to the minutes in future also incor- porates their letter."

The enclosure, omitting formal parts, is in the following terms:-

of the meeting held with WestHam in Sydney on 3rd September, 1980. With respect to these minutes we would like to clarify

Item 4 of minutes. At no time did we indicate to WestHam that the quantities handed to them on 28th August, 1980 were inaccurate. The quantities handed to WestHam were accurate and based on the drawings which they had received prior to that date. However, the quantities could not be regarded as final as decisions had yet to be made on final channel position and the extent of wharf basin dredging required.

Item 5 of minutes. At no time did we advise WestHam that rock quantities would reduce

to 2,300m>.. Presumabley this figure in the minutes should read 3,300m +3 The reduction of rock dredging from 4,200m™ to 3,300m" was brought about by reducing the wharf basin length to 230m. The reduced length of basin avoided rock below 8.23m in the north-west corner of the basin.").

"13. On or about 7th October, 1980 the applicant, relying upon the accuracy and reliability of the information contained in the Report, the Further Information referred to in paragraph 10. above and the representations referred to in 11. and 12. above entered into an agreement in writing with the first named respondent ("the Agreement") binding itself to carry out the Work by the use of certain methods, plant and equipment as more fully described in the

named respondent making payments to the applicant in accordance with the terms

of the said contract totalling $5,498,097 and in further consideration of the first named respondent performing and complying with all requirements placed upon it by the said contract."

documents which were tendered in evidence by Woodside

without objection are hereafter referred to as "the

The Contractor shall be deemed, notwithstanding any negligence of the part of the Principal, to

examined the Drawings, Specifications, Schedules, Conditions of Tendering, Particular Conditions of Contract, Conditions of Contract, reports, maps, diagrams and other information made available by the Principal to the Contractor for the purpose of tendering; and

examined ali information which is relevant to the risks, contingencies and other circumstances which could affect his offer, and which is obtainable by the making of reasonable enquiries; and

"11.1.4 informed himself of all relevant physical conditions upon and below the surface of the Site, and the climatic conditions at and near the Site; and

11.1.5 informed himself of the nature of the work and Materials necessary for the execution of the work under the Contract, the means of access to and facilities at the Site and transport facilities for deliveries to the Site; and

bility of labour and the accommodation required; and

11.1.7 satisfied himself as to the correctness and sufficiency of his offer for the work under the Contract and that the rates and prices stated therein cover the cost of performing all his obligations under the Contract.").

"14. Between October 1980 and December 1981 the applicant performed the Works as specified in the Agreement."

"15. In so supplying and distributing the Report as mentioned in paragraph 9 above and in supplying the Further Information referred to in paragraph 10 above, the first, second and third named respondents engaged in conduct in trade or commerce which was misleading or deceptive or likely to mislead or deceive in that the information con- tained therein was materially inaccurate and materially unreliable in the following respects:

" (a) notwithstanding that it was an express and implied objective of the Report to identify granophyre boulders, the Report failed to identify such material as being present in the area to be dredged. Such granophyre boulders were so present and were distributed at intervals throughout the said area."

(Particulars specify alleged inaccuracies as to description of rock types, gravel and other materials

"16. Further, the first, second and third named respondents in making the representations referred to in 11. and 12. above engaged in conduct in trade or commerce which was misleading or deceptive or likely to mislead or deceive in that the said additional information relating to quantities and materials to be dredged was inaccurate."

"17. On the basis of the accuracy of the quantities in the Report referred to in paragraph 15(g) above and upon the accuracy of the additional quantity information as part of the Further Information referred to above, the quantities of materials to be dredged in the said harbour basin area were agreed between the representatives of the first named respondent and the applicant'on or about 16th September,

(Tables A and B consisted of quantities of the various

1980 and such agreed quantities formed a substantial basis upon which the Agreement referred to in paragraph 13 above was entered and upon which the consideration referred to therein was agreed to by the applicant. Such agreed quantities are set out in Table A below. In fact, the quantities of materials present in the said harbour

named respondents in supplying the Report to the applicant on the basis that it was a comprehensive site report engaged in conduct in trade or

or likely to mislead or deceive in that they had available to them at the time of the supply of said Report other information which was relevant to the future performance of the work and the submission of tenders and they failed to make such information available to the applicant."

Paragraph 18 above was that contained in an investigation for the Phillip Point Supply Base and Supply Base Wharf prepared by Soil and'Rock Engineering

" Pty. Ltd. ("the Soil and Rock Report") and preliminary drilling information obtained in March 1979 covering an area near Phillip Point, the results of which were documented in a document numbered A2100R-001 ("the March report")."

"20. Such information was different in material respects from, and inconsistent with the information within the Report in that:"

(Particulars of the differences and inconsistencies

"21. By reason of the conduct referred to in 15 and/or 16 and/or 18 above the applicant has suffered loss and damage in that the costs of performing the Work have far exceeded the considera- tions provided for and paid under the Agreement and the applicant has lost the profit which it would otherwise have made."

The question of law raised by Woodside is whether the statement of claim alleges facts which, if proved, are capable of establishing a contravention by Woodside of S.52 of the Act. Counsel for Woodside

presented a written document in which the following

points of law were suggested for consideration in the resolution of the question of law previously

"1. The conduct with which section 52 is concerned is conduct which misleads or deceives or 1s likely to mislead or deceive members of the public in their capacity as consumers of goods or services.

2. Where one person, acting in good faith and without negligence, and without himself making any promise as to its correctness or completeness, communicates to a second person information he has obtained from a third person, describing it as such, then the first person does not "engage in conduct that is misleading or deceptive" even though the information be incorrect or incomplete.

3. Alternatively to 2, the proposition there set forth applies where:

b) the first person himself professes no expertise or special knowledge in the Matter;

da) the information is supplied on the express basis that the recipient must rely on his

4. Failure to provide information, in circumstances where there is no allegation

of a refusal to provide it, does not constitute "conduct" within the meaning of section 52

5. For conduct to constitute a contravention of section 52 it must be engaged in by a corporation in the course of its trade or commerce. It is not sufficient that it occur in the context of a business transaction."

of Claim the first-named respondent says that as a matter of law:

The facts alleged in the Statement of Claim do not disclose a cause of action against the first-named respondent;

The conduct on the part of the first- named respondent referred to in the Statement of Claim is not conduct;

(11) that was misleading or deceptive or likely to mislead or deceive."

were not engaged in trade or commerce, being at all material times engaged in the conduct of the profession of con- sulting engineers through and by virtue of the endeavours of their directors and persons employed under the supervision of their directors, such directors being at the times aforesdid duly qualified pro- fessional consulting engineers and the conduct complained of arising in the course of carrying out professional engineering work undertaken pursuant to the first respondent's retainer.

The conduct of the second and thirdnamed respondents complained of was not conduct of the nature or character to which Section 52 of the Trade Practices Act is directed, namely conduct misleading or deceptive to members of the public in their capacity as consumers, whether of goods, services or otherwise.

"(iii) Section 52 of the Act is not concerned with the inaccuracy or unreliability of information furnished, or information negligently furnished, by a corporation engaged in conducting the profession of consulting engineering, that is to say, information furnished to a client in pursuance of a professional engineering retainer.

(iv) Section 52 does not give to the Federal Court jurisdiction to entertain what is in substance as between the applicant and the second and third named respondents a claim in tort for damages for alleged negligent statements based upon the Hedley Byrne v. Heller (1964) AC 465, doctrine.

(v) Upon the facts postulated in the Statement of Claim, the Applicant was not a consumer for the purposes of Part V of the Act, that is to say, not

a consumer of the professional work, the subject of the Statement of Claim."

The contentions of all counsel naturally centred around the interpretation of s.52 of the Act and the starting point was the decision in the High Court of

Hornsby Building Information Centre Proprietary Limited

and Anor v. Sydney Building Information Centre Limited (1977

~78) 140 C.L.R. 216, ("the Hornsby Building Information Centre case"), where the now well-known judgment of Stephen, J. was adopted by Barwick, C. J. as to such reasons as supported the conclusions he reached and

by Jacobs, J. as to both reasons and judgment. Aickin, J. agreed with the reasons for judgment of the Chief Justice

and Murphy, J. delivered a judgment of his own without

reference to that of Stephen, J. The facts to he considered need not be reproduced in detail. The Australian Industrial Court had held that an interim injunction prohibiting the name Hornsby Building Information Centre should go at the suit of Sydney Building Information Centre. Stephen, J. held that words descriptive of the nature of the business could not be held to be misleading within the meaning of

8.52. Barwick, C.J. and Murphy, J. held to the same

On a narrow view that was the ratio decidendi and all other expressions of opinion were obiter dicta. However, a less narrow view would include in the ratio the rejection of an argument that S.52 only applied to conduct as between a supplier of goods or services and a recipient of those goods or services. I use the word "recipient" as a neutral term to avoid the use of the word "consumer". Much of the reasoning in that case revolved around the definition of "consumer" in section 4(3) of the Act,as it then was, and its relevance in the interpretation of S.52 of the Act. The motivation of the moving party for injunction or other relief was held to be irrelevant and that benefit to the applicant does not destroy the right

I find difficulty in understanding the reasoning of Stephen, J. (and I say so, of course, with the greatest respect), particularly the learned judge's comments on the relevance and nature of the definition of "consumer" in S.4(3) of the Act, as it then was, and the irrelevance of the heading "Consumer Protection" in the interpretation of s.52. The definition in S.4(3) was described as a "quasi-definition" and the words of $.52 described as "unambiguous" and which should not be given some "unnaturally confined meaning" because of the heading to Part V. His Honour then went on to adopt

what was said by Latham, C. J. in Silk Bros Pty. Ltd.

v. State Electricity Commission (Victoria) (1943) 67

C.L.R. 1 at p. 16. That case was concerned with the effect of a clear section that certain specifically identified regulations were repealed. One of the

decisions cited by Latham, C. J. in Silk Bros. case (supra)

namely, In re Commercial Bank of Australia Ltd. (1893)

provision ..." Although the words of s.52 are "unambiguous", it appears to me that the scope of their application is left unclear unless some regard is had to the mischief sought to be

remedied by the Act. At p. 226, Stephen, J. adverted

to the novelty of the jurisdiction of State courts to hear passing-off actions being conferred on the Australian Industrial Court and went on to say:-

It is not clear who are the consumers being referred to, but having regard to what was previously said in the judgment, I assume that the consumers there referred to are of a wider class than those referred to in s.4(3). The use of the phrase "unfair practices" reproduces a sub-heading in Part V, but no

direct reference is made to that sub-heading giving

There have been a number of expressions of opinion by members of the High Court and this court which bear upon what is aimed at by the legislature in $.52 of

the Act. In The Queen v. Federal Court of Australia

ex parte Pilkington A.C.I. (Operations) Pty. Limited

(1978) 142 C.L.R. 113, the jurisdiction of this court to hear proceedings instituted by competitors who were not

consumers was challenged and such challenge rejected.

At p. 128, Mason, J. (with whom Jacobs, J. expressed agreement) said that, he agreed with the observations

made by Bowen, C.J. in World Series Cricket Pty. Limited

v. Parish (1977) 16 A.L.R. 181 at pp. 186-187 where the Chief Judge said this:-

"Even where the application is brought by a rival competitor seeking redress

of damage to his business caused by the allegedly unfair and illegal practices of the respondent, the application, though it vindicates or protects the private interests of the competitor, at the same time secures the public interest of consumer protection. Though, for example, the complaint under Pt V of the Act in some cases closely resembles an action for passing off or trade libel, it is nevertheless an action to protect the consuming public from being misled or misinformed. For competition between rival traders properly to be promoted, it is necessary that the relevant market is kept adequately informed about the goods or services available for purchase, and is not misled by deceptive trade practices."

Mason, J. aiso noted the observations of Franki, J. at p. 196 of that report and Brennan, J. at p. 199. The significant words, for the purposes of this case,

Motors Acceptance Corporation (1977) 137 C.L.R. 545 at

561 in dealing with the word "misleading", Mason, J.

"Its meaning therefore is apt to be influenced, indeed decisively influenced, by the context 1n which it is found.

Here the setting in which S.52(1) appears is shown by the headings 'Part V - Consumer Protection' and 'Division 1 - Unfair Practices'. In this context the prohibition contained in the sub-section emerges as an important general prohibition against a corporation in the course of trade or commerce engaged in a form of conduct, a trade practice, which is unfair."

Although Mason, J. found the heading and sub- heading of assistance in determining the meaning of "misleading", I am of the view that that heading and sub-heading is also of assistance in determining the scope of the section as a whole. Sub-section 2 of S.52 appears to me to be a direction against courts looking for similarities to conduct specified in the other sections of that Division before applying S.52(1) to

cover "unfair practices" which bear no factual similarity.

Pty. Limited v. Puxu Pty. Limited (1982) 56 A.L.J.R.

714 at p. 717, in considering whether certain conduct was misleading within the meaning of $.52 said:-

"Section 52 does not expressly state what persons or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct."

In the same case at p. 719, referring to S.52(1), Mason, J. said:-

deceive members of the public in their capacity as consumers."

These expressions of opinion afford guidance as to the ambit of S.52(1). It appears to me that it is clear that when looked at as a whole, the conduct in question must contain an element of unfairness when

Although it is clear that an intention to mislead need not be proved, there must be a degree of unfairness when the transaction is looked at, including the relative bargaining positions of the

Turning to the words "trade or commerce", it is sufficient to say that both words import regularity of activity. S. 52(1) would apply to the selling of furniture by a wholesaler, but need not apply if it sold one of its warehouses. Nice questions will no doubt arise as to what is included in the "trade or commerce" of a corporation, but the instant case

raises no problem. Regularity is absent; the subject

matter of the contract could be described as unique unless one assumes that dredging operations in

The features of the facts alleged in this case which lead me to hold that $.52 is not breached are the absolutely private nature of the negotiations leading to the contract, the lack of any circumstances which could be described as "an unfair practice" according to good business morality and the lack of any allegation of fraud, negligence or deceit. An innacurate report may be misleading or likely to

mislead, but the other elements required are lacking.

Further, "protection" of consumers postulates some need for protection. Corporations such as Westham that can negotiate and execute contracts for a price of five and a haif million dollars do not readily spring to mind as the "possible victims" referred to by Gibbs, C.J. in the Parkdale case

There is much force in Woodside's submissions as to what the statement of claim fails to allege: counsel listed fraud, deceit and negligent mis-

statement. Additionally, no contracting party could

avoid liability for breach of S.52(1) by such clauses as clause ll set out above as an addendum to paragraph 13 of the statement of claim, however impeccable the fairness of its contract. If the law is as submitted by Westham, there is great danger in supplying a report independently made; a contractual term putting the onus of making adequate enquiries about matters in respect of which one party is inexpert or lacks basic

In any event, as between Woodside and Westham, looking at the transactions as a whole, Woodside looks more like the consumer than does Westham, in the sense that the contract basically concerns the supply

However widely "consumer"is defined, Westham's contention that it is a "consumer" because it was the recipient of a report in the circumstances alleged

As between the consulting engineers and Westham, there is no allegation of a contractual relationship; nor that they were agents of Woodside. They knew the

Py fail to see how Westham can, in the circumstances,

be alleged to become consumers of services provided

to someone else. Because of the definition of "services" in s.4 of the Act, I see no merit in the defences set out in sub-paragraphs (i), (iii) and (v) of paragraph

16 of the defences. Professional advice or service, provided the other necessary ingredients are present,

The result that S.52 has no application in the instant case, can be reached by the different route of paying regard to the legislative history of the Trade Practices Act as it now stands. The Australian

Industrial Court decided the Hornsby Building Information

Centre case (supra) in 1975. The High Court judgment on the appeal was delivered in 1978 and, therefore, could not have the attention of the draughtsmen of the 1976 amendment. Nor could the High Court take into account the 1976 amendment or any extrinsic aids to statutory interpretation which were provided to that amendment. The relevant parts of S.4B of the Act, inserted by that amendment, are in the following terms:-

"(1) For the purposes of this Act, unless the contrary intention appears --

acquired particular goods as a consumer if, and only if --

" (i) the price of the goods did not exceed the prescribed amount; or

tion, and the person did not acquire the goods, or hold himself out as acquiring the goods, for the purpose of re-supply or for the purpose of using them up or transforming them, in trade or commerce, in the course of a process of production or manufacture or of repairing or treating other goods or fixtures on land; and

(b) a person shall be taken to have acquired particular services as a consumer if, and only if --

(i) the price of the services did not exceed the prescribed amount; or

(ii) where that price exceeded the prescribed amount -- the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.

(2) For the purposes of sub-section (1) -~ (a) the prescribed amount is $15,000 or, if a greater amount is prescribed

for the purposes of this paragraph, that greater amount;

summarised in Pearce: Statutory Interpretation (1981)

The amendments to S.4(3) were the result of a report by the Trade Practices Act Review Committee (the Swanson Report) to the Minister for Business and Consumer Affairs in August of 1976 and at p.63 of that report, paragraphs 9.38 to 9.45 recommend amendment of the definition of "consumer". The amendment to the definition of "consumer" in S.4B is in line with the recommendations made by that Committee. In paragraph 9.38, the Committee states:-

This assumption as to the significance of the old definition in S.4(3) is contrary to the decision in

the Hornsby Building Information Centre case (supra). Nevertheless, taken as a basis on which to work to recommend reform of it, this assumption loses no force when the task is to seek out the mischief to be struck down. There follows, in the report, discussion of the submissions put to it, and the reasons for recommending a ceiling of $15,000 on transactions regarding goods

ox services other than those for personal, domestic

Applying the 1976 definition of " consumer" to the instant case, it clearly excludes the dealings between Woodside and Westham. Even if S.4B remains a quasi- definition, it clearly excludes certain transactions where the price of goods or services exceed $15,000.

As to the case against the consulting engineers, the definition contemplates payment by the consumer for

the services and, of course, no such allegation is made.

I am, of course, aware that there have been a number of reported decisions where advertising, equivalent conduct to passing-off and other misleading practices, or practices likely to mislead have been held to be in contravention of S.52. In those cases, the conduct relied upon was public. They involved an invitation to anyone who was prepared to, to buy or receive services. Not one was concerned with a privately negotiated contract where the offer to enter into negotiations to contract was not

publicly made or indiscriminating as to who came forward.

In the result I hold that the defences raised by the first respondent as above set out are a valid answer in law to the statement of claim. TI hold, also, that

the defences raised by the second and third respondents

in sub-paragraphs (ii) and (iv) of paragraph 16 of their amended defence are valid answers in law

T certify that this and the Twesry-nwe (rg preceding pages are a true copy of the Reasons for Judgment herein of his Honour