The authorities on causation and compensation for cases under ss 52, 82 and 87 of the TPA
67 We set out below the legal principles on which the appeal turns. In Overton 216 CLR at 403 [31] Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ said:
the difference between price and value will often be an important element in assessing the damage suffered by a person who, by a misrepresentation, has been induced to buy an item of property. As the trial judge said, there may also be questions of consequential damage. It would be wrong, however, to assume that in every case of misrepresentation (leave aside other forms of misleading or deceptive conduct) the only kind of damage which may be suffered, and compensated or redressed by orders under Pt VI of the Act, is any difference between price and value or any consequential losses. In particular, care must be exercised before seeking to apply what it described as the "rule in Potts v Miller" [(1940) 64 CLR 282. See also Toteff v Antonas (1952) 87 CLR 647 at 650-651] to claims made for relief under Pt VI of the Act. This is especially so when it is recalled that while the only monetary remedy for the tort of deceit is damages, a far wider range of remedies is available where contravention of the Act has caused or is likely to cause loss or damage to a party to the proceeding. (emphasis added)
68 Their Honours said that it was wrong to approach the provisions in Pt VI of the TPA, such as ss 82 and 87, that dealt with remedies for contravention of that Act, "by beginning the inquiry with an attempt to draw some analogy with any particular form of claim under the general law" (216 CLR at 407 [44]). They observed that the primary task of the court in relation to a claim for a statutory remedy under Pt VI of the TPA was to construe the relevant provisions in the legislation and that (Overton at 407 [44]-[45]):
In the present case, analogies with the tort of deceit appear to have led to an assumption, at least at trial, that a person can suffer only one form of loss or damage as a result of a contravention of Pt V of the Act.
The Act's references to "loss or damage" can be given no narrow meaning. Section 4K of the Act provides that loss or damage includes a reference to injury. It follows that the loss or damage spoken of in ss 82 and 87 is not confined to economic loss [Marks (1998) 196 CLR 494 at 513 [46], per McHugh, Hayne and Callinan JJ; at 526-527 [93]-[96], per Gummow J]. What kinds of detriment constitute loss or damage, when a detriment is to be identified as occurring or likely to occur, and what remedies are to be awarded, may all raise further difficult questions. Especially is that so when it is recalled that remedies may be awarded to compensate, prevent or reduce loss or damage that has been or is likely to be suffered by conduct in contravention of the Act. (emphasis added)
69 They held that s 87 invited a court to consider whether any of that section's wide range of orders might be made to compensate, in whole or in part, for the loss or damage or to prevent or reduce the loss or damage (216 CLR at 408 [47]) and that it could not be assumed that the loss or damage that a person suffered from a contravention of Pt V "is necessarily singular" (216 CLR at 408 [49]).
70 In Overton 216 CLR at 409-410 [54]-[55], there was no evidence that the lessees had paid more for their lease of a home unit in a retirement village than the market value of the property that they had acquired and there was no misrepresentation about its nature and quality. However, there was a misrepresentation in the estimate of outgoings that the lessor had given the lessees to induce their entry into the lease. That was because that estimate did not provide for all the outgoings that were then being incurred (which the lessor, nonetheless, was entitled to seek, but was not then seeking, to recoup from the lessees). The High Court held that the representee/lessees only suffered loss or damage when the contingency eventuated (that is when the lessor eventually began including those other outgoings). The Court held that the lessees' loss or damage amounted to their continuing financial obligation to pay for the additional outgoings that had not been included in the misrepresented estimate (Overton 216 CLR at 413 [66]). And, their Honours held that after the contingency came to pass, the onus was on the lessor to raise any issue as to whether the lessees had acted reasonably in continuing to hold, rather than to sell (or assign), their lease (at 414 [70]).
71 In Astonland 217 CLR at 656-657 [35], Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ explained that while the approach of subtracting value ("sometimes described as the rule in Potts v Miller") from price was commonly employed where deceit has induced the acquisition of land, chattels, businesses or shares, it is not an inflexible approach that is universal or rigid. They held that, "provided that there is some evidence of damage, in the field of assessing damages for fraud, 'as in other fields, a tribunal of fact must do the best it can in assessing damages'" (Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 at 26 per Barwick CJ) (Astonland 217 CLR at 661 [47]). Moreover, their Honours said (at 663 [50]) that both the estimate of market value and the assessment of damages based on an estimate of true value "must be an inexact process". They also rejected the argument that there could not be an award of damages under s 82 of the TPA that equated to the amount that a plaintiff (or applicant) could recover in an action for breach of contractual warranty, saying (217 CLR at 666 [62]; and see too at 665-666 [59]-[61]):
In any event, whatever anomalies in relation to damages may be revealed by comparing liability for negligently supplied information with liability for breach of warranty, no error in assessment is demonstrated by comparing the contractual measure of damages with the s 82 measure of damages. The wide language of s 82 is compatible with a legislative desire to broaden the scope of recovery, not to keep it within the bounds of some comparison with the common law [Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at 407 [44]].
72 Moreover, their Honours held that (at 667 [65]):
The deduction of true value at the acquisition date from the price paid is no more than a guide to the assessment of damages under s 82. Section 82 does not in terms refer to that method, and the width of s 82 permits other approaches to the assessment of damages so long as they work no injustice [Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 503-504 [17], per Gaudron J; at 510 [38], 512 [41], per McHugh, Hayne and Callinan JJ; at 529 [103], per Gummow J; at 549 [152], per Kirby J; Henville v Walker (2001) 206 CLR 459 at 470 [18], per Gleeson CJ; at 501-502 [130]-[131], per McHugh J; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 124-125 [42]-[48], per Gaudron, Gummow and Hayne JJ; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at 403 [31], 407 [44], per Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ].
73 They illustrated, as an example of injustice that may occur in the assessment of damages, a scenario involving a comparison of the price paid for an asset and its true value when acquired, if this took into account losses that resulted from extraneous factors in the later history of the asset (at 667 [65]). They said that s 82 allowed a court to assess loss or damage on the basis of the loss flowing directly from the transaction without any reference to the date of the transaction or to any particular date. Thus, they held a plaintiff (or applicant) could recover under s 82 the purchase price of the asset "less whatever was 'left in its hands'" (217 CLR at 666-667 [63]-[65]). Their Honours subsequently discussed this approach to assessment as one that could be appropriate where the misrepresentation had caused the plaintiff or applicant to be "locked into" holding the asset, or where the asset was not readily marketable (217 CLR at 667-668 [64]-[67]). However, Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ did not state that the use of the 'left in hands' approach depended on the asset's lack of marketability.
74 The High Court has repeatedly denied that the loss or damage recoverable under ss 82 and 87 for a contravention of s 52 of the TPA and their analogues is constrained by analogies to remedies available under the general law. In particular, since the decision in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, in an appropriate case, a person may recover loss or damage that is causally connected to a contravention of the statutory norm of conduct expressed in s 52: see e.g. Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 at 459-461 [123]-[129] per Kirby and Callinan JJ with whom Gummow J agreed on this point at 449 [93]; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 121-122 [33] per Gleeson CJ; at 128-129 [58] per Gaudron, Gummow and Hayne JJ; at 142-144 [106]-[110] per McHugh J; 179-180 [220] per Callinan J.
75 In I & L Securities 210 CLR at 130 [62] Gaudron, Gummow and Hayne JJ said (see too at 128 [57]; and also at 121 [33] per Gleeson CJ; at 135-138 [84]-[93] per McHugh J; and at 175 [210] per Callinan J):
As was recognised in Henville v Walker [(2001) 206 CLR 459 at 474 [35], per Gleeson CJ; at 481-483 [65]-[72], per Gaudron J; at 493 [106], per McHugh J; at 507 [153], per Gummow J; at 510 [166], per Hayne J], there may be cases where it will be possible to say that some of the damage suffered by a person following contravention of the Act was not caused by the contravention. But because the relevant question is whether the contravention was a cause of (in the sense of materially contributed to) the loss, cases in which it will be necessary and appropriate to divide up the loss that has been suffered and attribute parts of the loss to particular causative events are likely to be rare. Further, it is only in a case where it is found that the alleged contravention did not materially contribute to some part of the loss claimed that it will be useful to speak of what caused that separate part of the loss as being "independent" of the contravention. (bold emphasis added)
76 Gleeson CJ identified the reason that it is sufficient to attract the remedial provisions in ss 82 and 87 if the misleading conduct in contravention of s 52 is a cause of the injured party's loss or damage in I & L Securities 210 CLR at 121-122 [33] (and see too at 129-130 [60]-[61] per Gaudron, Gummow and Hayne JJ; 138 [91]-[92] per McHugh JJ; and 179-180 [220] per Callinan J) as follows:
The relevant purpose of the statute was to proscribe misleading and deceptive conduct in circumstances which included those of the present case. In aid of that purpose, the statute provided for compensation, by an award of damages, to a victim of such conduct. The measure of damages stipulated was the loss or damage of which the conduct was a cause. It was not limited to loss or damage of which such conduct was the sole cause. In most business transactions resulting in financial loss there are multiple causes of the loss. The statutory purpose would be defeated if the remedy under s 82 were restricted to loss of which the contravening conduct was the sole cause. (emphasis added)
77 In the present case, as we have noted, the primary judge placed considerable weight on the decision of Jamieson [2016] 1 Qd R 495, where Applegarth J held that it can be relevant to inquire into the hypothetical or counterfactual position that a person, claiming to have suffered loss or damage by a wrongdoer's contravening conduct, would have been in had the person not entered into the impugned transaction but instead had entered into either some variation of it or a different transaction yet nonetheless the person would have suffered some or all of the amount of the claimed loss or damage (at 542-546 [142]-[155]).
78 In commencing his analysis, Applegarth J referred to the observation of Hobhouse LJ (with whom Butler-Sloss and Roch LJJ agreed) in Downs v Chappell [1997] 1 WLR 426 at 441B-C that it is, in general, irrelevant to inquire into what a representee would have done if a different representation had been made or what other transactions the representee might have entered into if he, she or it had not entered into the impugned transaction. Applegarth J asserted that in Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 at 283 (per Lord Steyn) the House of Lords had overruled Hobhouse LJ's observation. Applegarth J also relied on Yam Seng [2013] 1 Lloyd's Rep at 555 [204]-[207] where Leggatt J discussed the measure of damages under s 2(1) of the Misrepresentation Act 1967 (UK). Applegarth J held that it may be relevant to inquire into a counterfactual scenario about what other transaction a claimant might have entered into had the misleading misrepresentation not been made ([2016] 1 Qd R at 543 [143]). His Honour agreed with the obiter observations of Leggatt J in Yam Seng [2013] 1 Lloyd's Rep at 557 [217] that, in circumstances where a claimant can claim that he, she or it would have entered into a different, profitable transaction had a misleading misrepresentation not been made and recover loss or damages for that lost opportunity, so too must the representor be able to have the loss or damages assessed on the counterfactual that, had the impugned representation not been made, the claimant would have entered into a different transaction and suffered a loss: Jamieson [2016] 1 Qd R at 544-546 [149]-[155].
79 In our respectful view, the analysis of the cases that Applegarth J and Leggatt J engaged in was flawed. First, Lord Steyn (with whom Lords Keith of Kinkel, Mustill and Slynn of Hadley agreed) did not disapprove what Hobhouse LJ had said in Downs [1997] 1 WLR at 441B-C. However, his Lordship (along with Lord Browne-Wilkinson at 267D-F) did disapprove what Hobhouse LJ said later (at 443-444), namely, that in a case of deceit, it was appropriate "to compare the loss consequent upon entering into the transaction with what would have been the position had the represented, or supposed state of affairs, actually existed". Lord Steyn said that, on this point, Downs [1997] 1 WLR at 444B was wrongly decided: Smith New Court [1997] AC at 283D-G. Moreover, Lord Steyn held ([1997] AC at 283F-G) conformably with what Hobhouse LJ had said earlier in his reasons in Downs [1997] 1 WLR at 441B-C in the very passage that Applegarth J understood to have been overruled:
the orthodox and settled rule that the plaintiff is entitled to all losses directly flowing from the transaction caused by the deceit does not require a revision. In other words, it is not necessary in an action for deceit for the judge, after he had ascertained the loss directly flowing from the victim having entered into the transaction, to embark on a hypothetical reconstruction of what the parties would have agreed had the deceit not occurred (emphasis added)
80 Leggatt J (in Yam Seng [2013] 1 Lloyd's Rep at 556-557 [214]-[217]) sought to distinguish or qualify Lord Steyn's remarks based on what Simon Browne LJ (with whom Sedley LJ agreed) later held in Clef Aquitaine SARL v Laporte Materials (Barrow) Ltd [2001] QB 488. In the latter case the claimant argued that it would not have entered into a long term distributorship for the defendant's products had the defendant not fraudulently represented that the prices it charged were lower than any available to its other trade customers in the United Kingdom. The trial judge had assessed damages on the basis of profits that the claimant would have made had it been charged the lower prices that the defendant charged other customers of its trade.
81 Simon Brown LJ held ([2001] QB at 498E-F) that the plaintiff could recover damages in tort for the loss of a more profitable transaction with the defendant than that which the fraudulent misrepresentation induced. He said ([2001] QB at 500B-D):
…I conclude, there will be particular cases, of which this is one, where to give effect to the overriding compensatory rule it will be both possible on the facts, and appropriate in law, to hypothesise. Not every hypothesis involves irrelevant speculation.
I have, in short, reached the conclusion that there is no absolute rule requiring the person deceived to prove that the actual transaction into which he was induced to enter was itself loss-making. (Indeed that concept itself is an uncertain one: is a business which survives only by dint of the proprietor limiting himself to subsistence wages loss-making or profitable?) It will sometimes be possible, as it was here, to prove instead that a different and more favourable transaction (either with the defendant or with some third party) would have been entered into but for the fraud, and to measure and recover the plaintiffs' loss on that basis. (emphasis added)
82 Leggatt J, in obiter dicta, said ([2013] 1 Lloyd's Rep at 557 [217]) that "it must in principle be equally relevant to take account of any loss" and that:
(iv) There is no difference in principle between an alternative transaction which would have been more profitable and one which would have been less profitable than the actual transaction such that it can be relevant to take account of the former but not the latter.
(v) The evidential burden will be on the defendant, however, to show that if the misrepresentation had not been made the claimant would have incurred a loss. In seeking to discharge this burden, the defendant (unlike the claimant) does not have the benefit of the principle that if the financial outcome of the alternative transaction is uncertain the court will make reasonable assumptions in its favour (for example by allowing damages to be calculated on a loss of a chance basis) to assist in the proof of loss.
(vi) Unless the defendant can demonstrate with a reasonable degree of certainty, therefore, both the fact that the claimant would probably have suffered a loss from entering into an alternative transaction and the amount of that loss, the damages will not be reduced on that account. In this respect there is a disparity, but a principled one, between hypothetical transactions which would have made the claimant worse off and those which would have made the claimant better off.
83 And as Applegarth J noted (Jamieson [2016] 1 Qd R at 546 [154]), Beazley JA, with whom Ipp and Tobias JJA agreed, had expressly followed Hobhouse LJ's views in Downs [1997] 1 WLR at 441B-C that, in general, it is irrelevant in a proceeding seeking relief under s 82 of the TPA to inquire what the representee would have done if a different representation were made or into what other transactions the representee would have entered if a different representation were made: Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) (2006) 67 NSWLR 341 at 354-355 [59]-[63]. Her Honour held that, there, the trial judge had erred by considering an alternate hypothesis (67 NSWLR at 354 [60]). She rejected the defendant's arguments that in assessing loss under s 82 of the TPA, a comparison should be made of the plaintiff's position, had the misrepresentation not been made, with its position had it made a different contract. Beazley JA said (67 NSWLR at 353 [56]):
In order to establish its entitlement to damages, the appellant has to establish that it suffered a loss by conduct which contravenes the Act…. in any event s 82 does not operate so simplistically. As Gleeson CJ said in Travel Compensation Fund v Tambree, the question of causation is to be found in the "purpose of the statute" as "related to the circumstances of the particulars of the case". (bold emphasis added)
84 There was no reason for Jamieson [2016] 1 Qd R 495 to depart from the ratio decidendi in Abigroup 67 NSWLR 341.
85 The Marina parties also relied on the decision of the Court of Appeal of the Supreme Court of New South Wales in Leadenhall Australia Ltd v Peptech Ltd (2001) 39 ACSR 265 in support of their argument that a counterfactual scenario could be used to reduce or eliminate the loss or damage for which a contravenor will be liable under ss 82 and 87. The Marina parties contended that that decision showed that one answer to a claimant's "no transaction" case could be that the claimant would have entered into an alternate transaction and thus would not suffer any or all of the claimed loss or damage.
86 However, as the separate reasons of RP Meagher JA and Giles JA, with both of whom Handley JA agreed, show, that case was concerned with a challenge to the trial judge's finding that he did not accept the evidence of the witness, who was the corporate appellant's controlling mind, that he would not have entered into the impugned share purchase transactions had he been aware of the alleged misrepresentation: see 39 ACSR at 267-268 [14]-[16] per RP Meagher JA and 271-275 [38]-[47] per Giles JA. Having reached that finding of fact, the trial judge then explained that, based on his assessment of the witness' evidence, the appellant, if aware of the alleged misrepresentation, would have invested in the same shares anyway but under a modified or different agreement with the vendor, and that the appellant had not established by evidence what that other agreement would have provided or what financial difference there would have been for the appellant as a result (see 39 ACSR at 268 [16], 275-276 [52], 276 [56], 277 [59]-[60], 278 [62]-[63]). Thus, their Honours held that it was open to the trial judge, after rejecting the witness' evidence that he would not have entered into the impugned transactions at all, to find that the appellant would still have proceeded to invest in the very property (shares) in that case, but on a different basis, and that the appellant had not proved any loss or damage on this alternate evidentiary basis. Giles JA described this as a "different transaction" case (39 ACSR at 277 [59]). That was because the trial judge found that the appellant would have bought the same property even if aware of the true position.
87 In Leadenhall 39 ACSR 265, the appellant failed to prove its "no transaction" case because the trial judge found that it would have entered into a different transaction with the vendor on other terms that it did not prove. As RP Meagher JA said of the appellant's original case, namely that it would not have gone ahead with any transaction had it been aware of the true position (at 268 [15]):
But such a case is contrary to Mr Lebbon's own evidence: he said that if he had found out he would have "waited", not that he would have walked away from the transaction. He said this not once, but many times. He did not condescend to inform the court what he would have done when he finished "waiting", nor how long that process would take, not [scil: nor] what he was waiting for. Most importantly, he did not say what he would have done once he realised the fact, found by the judge, that the release of the escrowed shares had no effect on the price of the company's shares. (emphasis added)
88 In that factual context, the Court of Appeal upheld the trial judge's finding that the appellant had not proved that it had suffered any loss or damage because it had not identified what it would have done differently. Such a context is substantively different to the position of Mr and Mrs Wyzenbeek in purchasing a non-income producing vessel for use in giving them pleasure.
89 It is always open to a person who claims under s 82 of the TPA to have suffered loss or damage by a misleading representation made in contravention of s 52 to allege that, if aware of the true position, he, she or it would have either entered into a different transaction or not entered into any transaction at all. In a "no transaction" case the claimant asserts that he, she or it would not have entered into the transaction and, so, should be granted relief on the basis of being restored to the position that would have existed if there had not been any transaction. In a "different transaction" case, the claimant asserts that he, she or it would have acted differently, had the true position been revealed, and hypothesises on a factual scenario of what would have occurred on which basis the claimant seeks relief. Thus in a "different transaction" case, the claimant is not seeking to be restored to his, her or its original position, but to a hypothetical one based on the postulated difference.
90 In essence, the primary judge's investigation of a counterfactual scenario eschewed the principle that a claimant is entitled to compensation or damages if he, she or it establishes on the applicable causation principles or test for the cause of action that the wrongdoer's act or omission caused the loss or damage claimed. Ordinarily, it is irrelevant to that inquiry to speculate about whether, hypothetically, had the wrongdoer not acted in breach of the legal norm giving rise to the cause of action, the claimant would have done something else, and the claimant also would have suffered some other loss. The corollary of such a line of reasoning is that the court would have to evaluate the chance of whether, and to what extent, the claimant would have arrived at some hypothesised similar loss. This changes the analysis from examining the actual facts of the case at hand to one that compares that existing state of affairs to a chance that had the claimant acted differently, he, she or it would have had the opportunity to incur like or some other loss or damage.
91 In Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 348, Mason CJ, Dawson, Toohey and Gaudron JJ said:
Under s. 82(1), as under the common law, an applicant can only recover compensation for actual loss or damage incurred, as distinct from potential or likely damage [Wardley Australia Ltd. v Western Australia (1992) 175 CLR 514 at 526]. Loss or damage under s. 82(1) is "the gist of the action" under s. 52 [Elna Aust. Pty. Ltd. v International Computers (Aust.) Pty. Ltd. [No. 2] (1987) 16 FCR 410 at 418, per Gummow J]. The Act draws a clear distinction between loss or damage which may be recovered under the section and the likelihood of loss or damage which may be prevented or, if not prevented, reduced by one of the remedies under s. 87 [Wardley 175 CLR at 527].
In the context of contraventions of s. 52(1) in the form of misleading conduct constituted by misrepresentations, acts done by the representee in reliance upon the misrepresentations amount to a sufficient connexion to satisfy the concept of causation. And, if those acts result in economic or financial loss, it will ordinarily be recoverable under s. 82(1). So, in a case such as the present, the applicant is entitled to recover "a sum representing the prejudice or disadvantage [the applicant] has suffered in consequence of his altering his position under the inducement" [Toteff v Antonas (1952) 87 CLR 647 at 650; Wardley 175 CLR at 526]. (emphasis added)
92 This makes apparent the substantive difference between the correct approach to causation and damages and the approach taken in Jamieson [2016] 1 Qd R 495 which we respectfully consider to be plainly wrong. In essence, there, Applegarth J considered that the proof of causation and damage required the court to undertake a comparison between the loss caused by the wrongdoer's act or omission that a claimant actually suffered with the evaluation of a chance that the claimant may have engaged in some other hypothetical transaction in which he, she or it would have incurred similar loss or damage. This reasoning was flawed and ignored the principle that Mason CJ, Dawson, Toohey and Gaudron JJ stated in Sellars 179 CLR at 355:
the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. (emphasis in original)
93 But, the appellants in the present case were is not required to prove, and, in our opinion, the respondents could not seek to prove, that there were other courses of action open, such as the purchase of another vessel, that, if taken, would have resulted in the claimant being in a similar position as that induced by the wrongdoer's contravention of s 52. That analytical approach is contrary to established and binding principle: I&L Securities 210 CLR at 121-122 [33], 130 [62] (see [75], [76] above); Overton 216 CLR at 403 [31], 407 [44]-[45] (see [67]-[68] above); Smith New Court [1997] AC at 283D-G (see [79] above). It involves assessing the chance that the claimant would have entered into a different commercial or other opportunity and what financial outcomes that opportunity would have resulted in for the claimant. Such an analysis would deflect the court from its task of deciding whether the claimant suffered loss or damage in accordance with the rule expressed in s 82, namely by the wrongdoer's contravention of s 52. If that contravention is a cause of the loss or damage, ordinarily, it is not necessary or appropriate to divide up that loss or damage and analyse the operation of other possible causes: I&L Securities 210 CLR at 130 [62].
94 That, in our respectful opinion, is the error in the reasoning in Jamieson [2016] 1 Qd R 495; namely, it failed to examine what the wrongdoer did that caused the claimant to suffer damage. It embarked on an irrelevant inquiry to the question posed by s 82; namely, has the claimant proved that he, she or it suffered loss or damage by the wrongdoer's contravention of s 52. As the High Court authorities show, it is sufficient for the claimant to prove that the wrongdoer's conduct is a cause of the loss claimed.
95 The key error in the primary judge's reasoning on the operation of the provisions in ss 52, 82 and 87 in respect of the assessment of damages appeared in the following passage in his reasons:
251 The applicants submitted that the Court should not apply the rule in Potts v Miller because it would leave them "under compensated". That submission may have been prompted by the absence of evidence of the vessel's true value at the date of sale (despite a strained submission to the contrary in paragraph 70(a) of the written submissions). It was submitted that even if the vessel was worth close to the purchase price that would be inadequate because the applicants did not acquire it for what it was worth, but for what they believed it would do and it cannot do those things. However, that submission misunderstands the nature of damages for misleading conduct under the Act. They are to compensate the claimant for any loss occasioned "because of" or "by" the contravention of the statutory norm. They do not apply to improve the claimant's position by putting them into a better position than if the representation was not made. The damages provision of the TPA and ACL do not permit compensating a claimant for bargained-for benefits which do not materialise in actions founded upon misleading or deceptive conduct. At the very least, they do not do so in this case.
252 The applicants also submitted that the representation had a continuing effect until the Port Macquarie incident or, even to the present because the respondents do not admit that the vessel is not suitable for trans-ocean voyaging. That submission also must be rejected. As mentioned, the question is not whether the claimant remained unaware of the falsity of the representation and oblivious to the true situation. It is whether the representation had a continuing operative effect on the claimant which prevented them from ascertaining the true position and thereupon avoiding the continuing loss. Here, the operative effect of the representation and, indeed, the only pleaded operative effect, was to induce the purchase of the vessel. There is no other pleaded reliance on it. In any event, as the evidence emerged, when the applicants became aware of the falsity of the representation after the Port Macquarie incident, they retained the vessel and continued to use it for a number of years. In a similar situation, a case might be agitated that in reliance on the representation the vessel was purchased and then used for trans-ocean crossing but, because it was not so suitable, it was lost or damaged. In that scenario, the continuing operative effect of the representation would be relevant to the method of assessing damages, but nothing of the like arises in the present case. (emphasis added)
96 The issue was not whether the Marina parties' false representations that Cadeau was suitable for trans-ocean crossing and extended passage in open ocean service had a continuing effect after the representations had induced Mr and Mrs Wyzenbeek to purchase her. It was, as s 82(1) stated, what loss or damage did they suffer by relying on the Marina parties' conduct in making that representation? That loss or damage was that they entered into and completed the purchase of the ship and assumed the ongoing burden of paying for her maintenance, running and (while at least they were ignorant of the misrepresentation) improvement in the mistaken belief that she had been constructed in such way that she could undertake ocean voyaging when, had they known the true position, they would never have agreed to buy her or spend more money on her.
97 The error in his Honour's adoption of the Marina parties' submissions is exposed by the very reasoning that the primary judge deployed to find that a counterfactual negated that Mr and Mrs Wyzenbeek had suffered any loss.
98 His Honour reasoned, as the Marina parties had suggested he should, that had Mr and Mrs Wyzenbeek not acquired Cadeau (which the primary judge found was not constructed to any international standard to undertake the ocean voyaging for which they had purchased her), Mr and Mrs Wyzenbeek would have acquired another vessel, probably a Marlow (that was constructed to undertake ocean voyages) for a similar price and with, he assumed, similar if not the same ongoing burdens to pay for her maintenance, running and improvement. The primary judge found (at [286]-[287]) that the depreciation in value of Cadeau over time would be similar to that of the hypothetical Marlow. He said:
287 On that basis, if the depreciation in the value of Cadeau was loss suffered by Mr and Mrs Wyzenbeek, any assessment of damages to put the applicants into the economic position which they would have been had the representations not been made, would necessarily take into account that the vessel which they would otherwise have acquired in 2011 (which was suitable for trans-ocean travel) would had [scil: have] aged and depreciated in value as had Cadeau. There is nothing to suggest the Wyzenbeeks would not have used any such vessel less extensively than they have used Cadeau over the past seven years and, therefore, it too would have depreciated at generally the same rate. This demonstrates the fallacy of the applicants' attempt to secure as damages an amount equivalent to Cadeau's depreciation over time. (emphasis added)
99 Rather than demonstrating what his Honour found was the fallacy of the appellants' submission, the example demonstrated that Mr and Mrs Wyzenbeek were using Cadeau differently to what they wanted from her and had been told she could do, namely undertake ocean voyaging. That was a substantive difference that his Honour had found, based on his findings (at [177]) that there was no suggestion that Cadeau was built (or promoted by its Chinese shipyard manufacturer) to comply with any standard or protocol for trans-ocean crossings or extended passage in the open ocean and (at [147]) that other manufacturers, such as Marlow, advertised vessels that were built so as to comply with such a standard or protocol.
100 His Honour's analysis left out of account two critical factors of the case: first, the misrepresentations had caused Mr and Mrs Wyzenbeek to buy and maintain Cadeau for their pleasure, when she was not capable and (as his Honour found) had not been constructed to a standard where she could or, as they wished did, undertake ocean voyaging, and, secondly, the incapability of Cadeau to do what the Marina parties represented, had a financial value to Mr and Mrs Wyzenbeek.
101 Suppose a salesperson (not the owner) at a wine store misrepresented to a customer that a 1983 vintage branded bottle of wine that sells for $100 less than a 1982 vintage of a different branded bottle of wine that the customer was interested to buy for the pleasure of consuming it, are as good as each other and the customer acted on the representation, bought and consumed the 1983 bottle. On consuming the 1983 bottle's contents, the customer discovers that it is vastly inferior to the quality of the 1982 bottle that he or she wanted. It cannot be correct that the customer has not suffered loss or damage by the misleading conduct of the salesperson. Yes, in either case, the customer would open the bottle and consume its contents, thus demonstrating that the asset he or she had acquired for consumption (or use) lost value (as would always be the case after drinking the contents), because after drinking the contents, the residuum of that purchase would be the empty bottle, which would be of equal value to other empty bottles. But it defies common sense to say that the customer has not suffered any loss or damage by the salesperson's misrepresentation that caused him or her to make a purchase and consume something that the customer bought for pleasure that he or she did not receive. The customer, in such a case, would never have bought the 1983 bottle had the misrepresentation not been made.
102 Similarly, to adopt an example Dixon CJ, Webb and Taylor JJ gave in Bellgrove v Eldridge (1954) 90 CLR 613 at 617, if a property owner asks a builder to paint a house white, and the builder engages a painter, instructing the painter to do so, but he paints the house black, it is no answer to say that owner has no remedy because the house has been freshly painted with paint of the quality (but not the colour) specified. The builder will have breached a contract with the owner (as their Honours found) but the painter will have acted negligently in failing to carry out the instruction in circumstances where he knew that the owner wanted the house to be painted white.
103 There is an obvious difference in substance between what the customer or property owner sought and what was provided in each of those examples, as there was between the capabilities of Cadeau and those of a vessel constructed to comply with a standard or protocol for undertaking ocean voyages. In each case the purchaser gets a ship, a bottle of wine, or a painted house, but not the one the purchaser required or was misled into thinking, that the characteristics that he or she wanted or could use or consume in the way that purchaser sought. The discrepancy in each case is substantive. The task of the court under ss 82 and 87 in such a case is to ascribe a value, as best money can do, or provide another remedy to compensate the purchaser for the loss or damage caused by the contravention of s 52.
104 Mr and Mrs Wyzenbeek own Cadeau which cannot undertake ocean voyages. Had they purchased another ship instead of her, that vessel would have been capable of doing so. They are not in the same position as they would have been if the Marina parties had not made the misrepresentations. Instead they have a ship that they would never have purchased and that is not capable of sailing over oceans as and where they want. To place them in the position that they would have been in had the misrepresentations been accurate, the Marina parties must compensate them with a sum of money that will restore them today with money or money's worth equivalent to what they paid for Cadeau and for the improvements and other expenditures. We address below the measure of compensation appropriate in the present case, having regard to the way in which it was conducted at trial and on appeal.
105 In a "no transaction" case, the purchaser will have discovered, some time after becoming aware of the true position, that what he, she or it bought is not what the representor had asserted. In most cases, the asset purchased will have become impaired or less valuable because some event has revealed a flaw in it. But there can be cases where, after a time, the purchaser, having used the asset, realises that it is not what it was represented to be, even though it has retained its market value. Here, for example, if Mr and Mrs Wyzenbeek had realised a week after taking delivery of Cadeau that she could not undertake ocean voyages, but AMI had gone into liquidation, it could not be an answer to a claim under ss 82 or 87 for the other Marina parties to say that Mr and Mrs Wyzenbeek had suffered no loss or damage. They held an asset that they did not want because it was not what the Marina parties had represented her to be. Had they sold Cadeau immediately and sustained a loss, that would have been recoverable from the other Marina parties together with all the costs incurred in the acquisition and sale.
106 A "no transaction" case is a legal construct to accommodate the position of a person who claims to have been injured by entering into a contract by, or induced by, conduct or a representation of someone, including by a person who was not a party to the contract. The construct would be unnecessary in a case between contracting parties where rescission of the transaction with restitutio in integrum is still possible, including if the Court can make allowances for deterioration of the subject-matter of the transaction which, in some instances, can also include a claim for damages: cf: Alati v Kruger (1955) 94 CLR 216 at 222-225 per Dixon CJ, Webb, Kitto and Taylor JJ. It is not necessary for present purposes to discuss the juridical requirements and constraints governing the making and resolution of claims to rescind based on innocent, negligent or fraudulent misrepresentations.
107 The Trade Practices Act and its analogues contemplate the ability of the court to give a similar remedy in an appropriate case. However, where the innocent party seeks relief against a person who is not the contractual counterparty, ordinarily, damages or statutory compensation is the only available remedy because the innocent party cannot hand back, or restore, to the third party the property or subject matter of the contract as might be ordered in a claim for rescission. The point to be made is that in a "no transaction" case, where restitutio in integrum is not possible, if the Court finds for the injured party it must then calculate a monetary sum, as damages, to put him, her or it in the position that the party would have been in had the transaction not occurred. In cases of a contract induced by fraud, as Dixon CJ, Webb, Kitto and Taylor JJ explained in Alati 94 CLR at 223-224:
equity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo: Erlanger v. New Sombrero Phosphate Co. [(1878) 3 App Cas 1218, at 1278, 1279]; Brown v. Smitt [(1924) 34 CLR 160, at 165, 169]; Spence v. Crawford [[1939] 3 All ER 271, at 279, 280]. It is not that equity asserts a power by its decree to avoid a contract which the defrauded party himself has no right to disaffirm, and to revest property the title to which the party cannot affect. Rescission for misrepresentation is always the act of the party himself: Reese River Silver Mining Co. v. Smith [(1869) LR 4 HL 64, at 73]. The function of a court in which proceedings for rescission are taken is to adjudicate upon the validity of a purported disaffirmance as an act avoiding the transaction ab initio, and, if it is valid, to give effect to it and make appropriate consequential orders: see Abram Steamship Co. Ltd. v. Westville Shipping Co. Ltd. [[1923] AC 773]. (emphasis added)
108 Likewise, in a no transaction case, if the court finds that the injured party would not have entered into the transaction, this enables the court to use its remedial powers available under ss 80, 82 and 87. Those powers are extensive enough to make orders appropriate to place that party in the position where, although he, she or it may still hold property the subject of the impugned transaction, the wrongdoer will be ordered to pay compensation or damages in a sum that, together with the value of what the innocent party still holds (or is "left in hand"), will "do what is practically just between the parties" so as to, in effect, restore him, her or it to the position that he, she or it would now obtain had the transaction not occurred: cf: Alati 94 CLR at 223-224.
109 Here, the question is whether, and if so what, damages can be awarded in respect of a "no transaction" case for a non-income producing chattel, such as Cadeau. Well over a century ago, the House of Lords resolved some of the difficulties in estimating damages for loss of use of a non-income producing ship during the period in which the damage to her caused by the wrongdoer is being repaired. In Owners of Steamship 'Mediana' v Owners, Master and Crew of Lightship 'Comet' (The 'Mediana') [1900] AC 113 at 116, the Earl of Halsbury LC said that the principle is that "where by the wrongful act of one man something belonging to another is either itself so injured as to not be capable of being used or is taken away so that it cannot be used at all, that of itself is a ground for damages". He went on to explain that the damages were to be assessed like other common law general damages, such as for pain and suffering. And the Lord Chancellor made the pertinent observation that despite the difficulty in calculating a monetary award for pain and suffering, the law had long recognised that the injured party is entitled to substantial damages under this head.
110 In cases heard and decided at the same time by the same appellate committee, Admiralty Commissioners v S.S. Chekiang [1926] AC 637 (at 646 per Lord Sumner; at 652-653 per Lord Phillimore) and Admiralty Commissioners v S.S. Susquehanna (The Susquehanna) [1926] AC 655, the House of Lords held that the injured party is entitled, in addition to the cost of the repairs, to general damages for loss of use. In an entertaining speech in Chekiang [1926] AC at 642-643 that he gave with "lively satisfaction", Lord Sumner explained that the damages in such a case were at large and, in essence, were a "jury question". He said that such a calculation could, but need not necessarily, be based on a rate of depreciation of the vessel and interest on the written down purchase price. And in the Susquehanna [1926] AC at 659-660, Viscount Dunedin reasoned that when a warship was rendered useless by a collision caused by a wrongdoing ship, the Admiralty Commissioners as her owners were entitled to damages "fixed by your Lordships much as a jury would fix it": see too: McGregor on Damages (20th ed: 2018) at [19-024]; [37-047]; Owners of No 7 Steam Sand Pump Dredger v Owners of S. S. Greta Holme (The Greta Holme) [1897] AC 596 at 605 per Lord Herschell. In Consort Express Lines Ltd v J-Mac Pty Ltd (2006) 232 ALR 341 at 356-357 [87]-[88], Rares J applied those principles, which Hebridean Coast [1961] AC 545 at 576-578 per Lord Reid, 580 per Lords Morton of Henryton and Tucker, 583 per Lord Morris of Borth-y-Gest had reaffirmed: see too Anthanasopoulos v Moseley (2001) 52 NSWLR 262 at 273-274 [58] per Beazley JA, with whom Handley JA agreed.
111 In addition, the Marina parties' argument that Mr and Mrs Wyzenbeek had to give credit for the benefit they derived from the use of the vessel must be rejected in the context of a "no transaction" case in light of the following passage from Lord Sumner's speech in Chekiang [1926] AC 646-647:
That a tort-sufferer is not to go short of compensation for damage at a tortfeasor's hands, merely because he does not trade for profit, is well settled. … The only principle as to this measure that I can find there stated is in Lord Herschell's words:
"How can they the less be entitled to damages because, instead of hiring a dredger, they invested their money in its purchase? The money so invested was out of their pockets, and they were deprived of the use of the dredger, to obtain which they had sacrificed the interest on the money spent on its purchase. A sum equivalent to this, at least, they must surely be entitled to." (emphasis added)
112 The amount of depreciation of a non-income producing chattel not able to be used because of the wrongdoer's conduct is another measure of damages during the period of unavailability for use instead of an amount based on interest on the purchase price.
113 After the Port Macquarie incident, Mr and Mrs Wyzenbeek had more information that tended to confirm that Cadeau could not undertake ocean voyages. But, the Marina parties falsely continued to deny that they had ever told them that she could. They also maintained those denials, until Ryan and Dean were cross examined at the trial. In that context, the Marina parties, not having alleged that Mr and Mrs Wyzenbeek unreasonably failed to sell Cadeau, can hardly complain that the damages sum necessary to compensate them are the equivalent of what Mr and Mrs Wyzenbeek outlaid in the purchase and their consequential loss expenditure (as now claimed) less the depreciated value as at today of the ship.
114 Nor should any allowance or a deduction be made for the uses to which Mr and Mrs Wyzenbeek have put Cadeau.
115 In any event, at common law no such deduction is available, for, as the Earl of Halsbury LC said (with the agreement of the other Law Lords) in The 'Mediana' [1900] AC at 117:
What right has a wrongdoer to consider what use you are going to make of your vessel? …Supposing a person took away a chair out of my room and kept it for twelve months, could anybody say you had a right to diminish the damages by shewing that I did not usually sit in that chair, or that there were plenty of other chairs in the room? The proposition so nakedly stated appears to me to be absurd; but a jury have very often a very difficult task to perform in ascertaining what should be the amount of damages of that sort.
116 The claim here has been narrowed to one only for economic loss, not for a more general concept of loss of enjoyment, or of opportunity to enjoy, a ship that could undertake ocean voyages.
117 The English cases, of course, are not decisions as to the construction or application of the TPA and, at most, can only be of persuasive force for their reasoning. Crucially, those cases are of limited assistance in construing or applying ss 82 and 87. That is because they did not consider the purpose of the remedial provisions of the TPA and, indeed, may have been informed by very different notions of causation in English law that are not the law here: Sullivan v Moody (2007) 207 CLR 562 at 579 [49] per Gleeson CJ, Gaudron, McHugh, Hayne and Callinan JJ; Tambree 224 CLR at 643 [47]-[48] per Gummow and Hayne JJ. In Tambree 224 CLR at 640 [32], Gleeson CJ (with whom, at 641 [39], Gummow and Hayne JJ, and at 653 [78] Callinan J, agreed) said:
Misrepresentation will rarely be the sole cause of loss. If, in reliance on information, a person acts, or fails to act, in a certain manner, the loss or damage may flow directly from the act or omission, and only indirectly from the making of the representation [Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 356-357; Henville v Walker (2001) 206 CLR 459 at 469 [14]]. Where the reliance involves undertaking a risk, and information is provided for the purpose of inducing such reliance, then if misleading or deceptive conduct takes the form of participating in providing false information, and the very risk against which protection is sought materialises, it is consistent with the purpose of the statute to treat the loss as resulting from the misleading conduct. (emphasis added)
118 The purpose of s 82 is to compensate a person who has suffered loss or damage by misleading conduct that contravened the TPA, where that conduct was a cause that materially contributed to the loss or damage. The statutory purpose of s 52 is to prescribe a norm of conduct (not to engage in conduct that is misleading or deceptive) and to give a person whom the representor has misled or deceived a remedy under ss 82 and 87 for the loss or damage the representee suffered by that contravening conduct. The statutory purpose is not served by an hypothetical or counterfactual exegesis into what else might have happened that the representor seeks to raise as an exculpation or mitigation of its liability under ss 82 and 87: Abigroup 67 NSWLR at 354-355 [59]-[63]. It could hardly serve the statutory purpose for a contravenor to be able to say that, despite having misled and deceived the representee, the latter is really no worse off because he would have suffered the same loss as that suffered by the misleading conduct in some other transaction that did not eventuate: cf: I & L Securities 210 CLR at 121-122 [33] and 130 [62].
119 Here the information that Mr and Mrs Wyzenbeek sought from the Marina parties before entering into the contract to purchase Cadeau was whether the proposed vessel that they were considering could undertake ocean voyages. The Marina parties gave them the false information that it could. By the time of the Port Macquarie incident that falsity became evident but, by then, Mr and Mrs Wyzenbeek had spent not only the purchase price of over $4 million but other sums on her, having been misled by the false information
120 In our respectful view, the primary judge ought to have found, consistently with the purpose of the TPA, that the expenditure of the purchase price and the sums the subject of the consequential or additional loss claim, less the current value of Cadeau, was loss resulting from or caused by the misleading conduct: Tambree 224 CLR at 640 [32]. As Callinan J pointed out (224 CLR at 655 [84]), the determination under a statute, on the one hand, and in a common law cause of action, on the other, of whether a person suffers a loss caused by conduct can proceed differently depending on the purpose for which the causation rule or criterion operates. For example, the rules for the recovery of loss under the common law of contract are different from those under various tortious causes of action which also differ among themselves.
121 A claimant does not need to prove which component of his, her or its loss or damage is referable to the contravening conduct. Indeed, s 82 permits recovery of the whole of the loss or damage suffered by a person who establishes that a contravention of s 52 was a cause of that loss or damage: Henville 206 CLR at 482-483 [68]-[70], 502 [132], 503-504 [134]-[135], 506-507 [146]-[148] per McHugh J; 508 [157], 509-510 [160]-[165], [167] per Hayne J with both of whom Gummow J agreed at 507 [153].