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Essay assignment question:

What are the differences between the (i) tort of passing off, (ii) tort of deceit, (iii)
misrepresentation in contract law and (iv) s 18 of the Australian Consumer Law? Are
there any advantages of commencing an action under s 18 of the Australian
Consumer Law instead of commencing an action under the tort law of passing, tort of
deceit or misrepresentation in contract law and vice versa?

INTRODUCTION

Transactions take place in all areas of our daily lives, yet almost always

transactions occur as a result of the conduct of the parties prior to the

transaction occasioning. Whether it be through the representation of facts,

statements of laws, statements of future projections, or whether it is due to the

reputation or goodwill associated with the transaction of the goods or services,

the conduct of parties determine the success of a transaction. However the

conduct of the parties may not always reflect reality. It is therefore quite

common, especially in the context of trade or commerce that traders may

engage in conduct which may mislead or deceive or ought to mislead or deceive

the consumer. Throughout this essay, the differences and the advantages of the

avenues available to consumers will be analysed. Some key avenues of action

include the tort of passing off, the tort of deceit, misrepresentation in contract

law and s18 of the Australian Consumer Law (ACL).

TORT OF PASSING OFF

The central element of the tort of passing off concerns the reputation or goodwill

of companies. It provides protection to companies that have gained a reputation

or goodwill through their products or services. The tort of passing off attempts to

protect against any misrepresentations made by companies that sell their

products to customers while representing it to be the product of another

company with a recognised reputation or goodwill. Lord Diplock has outlined five
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requisite elements in the tort of passing off. 1 The elements outlined by Lord

Diplock were condensed into three elements known as the classical trinity by

Lord Oliver.2 The classical trinity focused on the key elements addressed by Lord

Diplock and is now considered as the criteria in establishing an action under the

tort of passing off. The elements outlined all circulated around the existence of a

reputation or goodwill attached to the plaintiffs company or product. In

establishing an action for misrepresentation under the tort of passing off it was

addressed by Lord Oliver that the representation must have been made by the

defendant to mislead the public or ought to lead the public in believing that the

product or service provided by the defendant is the product of the plaintiff or is

associated with the plaintiffs business or product. 3 Passing off does not require

that fraud be established,4 however it must be calculated to deceive or likely to

deceive.5 The tort of passing off is not actionable where representations are

made by third parties or where the misrepresentation has resulted due to

intervening circumstances.6 Misrepresentations in passing off must have caused

1 Erven BV v J Townsend & Sons (Hull) Ltd (Advocaat case) [1979] 2 All ER 927,
932-3 (Lord Diplock).

2 Reckitt & Colman Products Ltd v Borden Inc [1990] 1 All ER 873, [7] (Lord
Oliver of Aylmerton).

3 Ibid

4 ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 106 ALR 465, 495 (Lockhart
J).

5 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354,
[57] (Weinberg and Dowsett JJ).

6 Telstra Corp Ltd v Royal & Sun Alliance Insurance Australia Ltd (2003) 57 IPR
453, [82] (Merkel J).
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actual damage to the reputation or the goodwill of the plaintiff for it to be

actionable.7

TORT OF DECEIT

The tort of deceit differs from the tort of passing off as the detriment to the

plaintiffs reputation or goodwill does not act as a central criterion in the tort of

deceit. The tort of deceit considers the intention of the plaintiff while the tort of

passing off does not. However, the tort of deceit has a common element with the

tort of passing off in that a false representation must have been made. 8 The tort

of deceit and its elements were concisely outlined in Magill v Magill (2006)9 by

Gummow, Kirby and Crennan JJ. The tort of deceit can only be actionable where it

can be proven in evidence that a false representation was made, with either the

knowledge that the representation was made on false facts or the defendant was

either reckless to the false representation or where the defendant carelessly

disregarded the false facts. 10 It must also be established that the

misrepresentation was made with the intent that it would be relied upon to the

detriment of the plaintiff.11The damages that can be granted by the courts in a

tort of deceit action are categorised into three types of damages and they can be

7 Erven BV v J Townsend & Sons (Hull) Ltd (Advocaat case) [1979] 2 All ER 927,
932-3 (Lord Diplock).

8 Erven BV v J Townsend & Sons (Hull) Ltd (Advocaat case) [1979] 2 All ER 927,
932-3 (Lord Diplock); ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 106 ALR
465, 495 (Lockhart J); Magill v Magill (2006) 231 ALR 277.

9 231 ALR 277, [59] (Gummow, Kirby and Crennan JJ).

10 Ibid.

11 Ibid.
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compensatory, aggravated12 or exemplary damages.13 The tort of deceit has

been actionable in the context of domestic 14, personal injury15 and even in cases

of harm to property16. However, it is commonly actionable in circumstances of

commercial transactions. In domestic or personal injury matters the tort of

deceit is unlikely to satisfy the elements of misrepresentation as required in

actions of the tort of deceit.

MISREPRESENTATION IN CONTRACT LAW

Misrepresentations in contract law must be established through the aid of four

elements. For there to be present an action under contract law for the conduct of

misrepresentation it is a fundamental element that the misrepresentations are

made by the contracting parties. This is a trait shared with the tort of passing off

and the tort of deceit, as representations made by third parties are not to be

considered as conduct which would warrant an action under these torts. In

contract law this is pursuant to the doctrine of privity. However contract law

allows for certain exceptions to the doctrine of privity.

Misrepresentations in contract law can be established with the aid of evidence.

This is a common requirement necessary for actions under both contract law and

tort laws, as mentioned above. However contract law goes one step further in

mandating the need for evidence that would affirm the defendants intention to

12 Archer v Brown [1984] 2 All ER 267.

13 Musca v Astle Cork Pty Ltd (1988) 80 ALR 251.

14 Magill v Magill (2006) 231 ALR 277, [115] (Gummow, Kirby and Crennan JJ).

15 Professor J Flemming, The Law of Torts, 9th ed, LBC Information Services.
Sydney, 1998, p. 695.

16 Ibid.
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induce the plaintiff. This is in contrast to the tort of passing off because passing

off does not require evidence that the plaintiff was induced. This parallels the tort

of deceit as the element of inducement and reliance are similar. Contract law

requires there to be proof that the defendant had the intention of making the

representation of false facts for the purpose of inducing the plaintiff to enter into

the contract.17 It must also be established that the plaintiff was in fact induced.

The elements required in actions of misrepresentation in contract law are

inexorably outlined, however when remedies are sought, the court may grant

remedies pursuant upon the type of the misrepresentation. Misrepresentations in

contract law have been categorised in three types including fraudulent, negligent

or innocent misrepresentations. The categorisation of the type of

misrepresentation is determined by the facts of the case. Fraudulent

misrepresentations are based upon the defendants knowledge of the falsity of

the representation. In fraudulent misrepresentation cases the courts will take

into consideration the defendants state of mind at the time the representation

was made. If the defendant has a duty of care towards the plaintiff to ensure

representations made are of true facts, yet the defendant has failed to comply

with their duty the court may make categorise this as negligent

misrepresentation. However the plaintiff bares the onus of proving the defendant

had a duty of care in ensuring that representations made were not false.

Innocent misrepresentations are where the representations made by the

defendant were not made fraudulently or negligently. The onus of proof again

rests on the plaintiff to prove that the defendant had made an innocent

statement upon which the plaintiff relied upon when entering into the contract.

17 Gould v Vaggelas (1984) 56 ALR 31.

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SECTION 18 OF THE AUSTRALIAN CONSUMER LAW MISLEADING OR

DECEPTIVE CONDUCT

The Australian Consumer Law is governed by the Australian Competition and

Consumer Commission Act 2012 (ACCC) to provide protection for general

consumers in Australia. Amongst its wide areas of protection, section 18

prohibits misleading or deceptive conduct by a corporation in the course of trade

or commerce or where the conduct would likely mislead or deceive. Section 18

focuses on conduct in the course of trade or commerce making it inapplicable in

purely private or domestic dealings.18

Section 18 has replaced the existing s52 of the Trade Practices Act 1974 (Cth)

with very minor alterations. The elements that were addressed in s52 as

requisites in determining conduct as misleading or deceptive are similar to the

elements required under s18 of the ACL. The elements outlined under s52 have

been itemised into four parts which are considered as requisites in determining

what constitutes misleading or deceptive conduct. Firstly for s18 to be applicable

the conduct must have occasioned in the course of trade or commerce. Secondly

the conduct must be misleading or deceptive regardless of the circumstances.

Thirdly the conduct of the defendant is to have been relied upon by the plaintiff.

Lastly, there must be evidence that the plaintiff has suffered loss due to the

conduct of the defendant.

By requiring the conduct to have occasioned in the course of trade and

commerce, the application of section 18 is not limited to transactions between

corporations and consumers.19 The application and the provisions of s18 of the

18 RE Paul Smolonogov and Adian Lapardin v Raymond Lawrence OBrien and

Barbara Annette OBrien (1982) 67 FLR 311.

19 Concrete constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594.
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ACL are applicable in all transactions where the parties as consumers and traders

are present. Section 18 of the ACL does not rely on the requirement that the

conduct that has misled or deceived the consumer was a representation. For s18

to be applicable all conducts are considered. 20 This is one of the key differentials

between s18 and the actionable torts of deceit, passing off and

misrepresentations in contract law. As in tort and contract law, it is a

fundamental element in establishing a representation was made by the

defendant based on false facts. The likelihood of misleading or deceiving is also

considered when actions are commenced under s18 even if the likely hood of

such an event occurring is less than 50 percent. 21 This is a fundamental

difference between s18 and actions under tort or contract law. S18 does not

negate conducts other than representation. The mere fact that the conduct of

the defendant is not restricted to mere representation means s18 would warrant

an action where the conduct of the defendant was misleading or deceptive

however it is not necessary that the conduct be a representation.

The ACL recognises future statements as conduct sufficient to satisfy an action

for misleading or deceptive conduct. The ACL however requires the defendant to

provide sufficient evidence that the representation was made on reasonable

grounds.22 In an action under tort law or contract law, conjectures about the

future are not considered because such actions are applicable where

representations of facts are made and such conjectures are not deemed as fact.

Therefore this is not accepted as conduct which one may rely upon to their

detriment. As opposed to contract and tort law, the reliance of the plaintiff is

20 Re Henjo Investments Pty Limited [1988] FCA40, [31].

21 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, [112]

22 Schedule 2 of the Competition and Consumer Act 2010 (Cth), s 4.

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sufficient and the intention of the defendant in inducing the plaintiff is not an

element of necessity using s 18.23

The principle of strict liability plays a key role in the operational function of

s18.24 Strict liability shifts the onus of proof from the defendant to the plaintiff to

prove that the statements of the defendant were relied upon. As stated by

Callinan J, this new approach negated the traditional principle of buyers beware

which allowed many traders to mislead consumers. 25 Unlike Contract law,

section 18 of the ACL considers clauses which purport to exclude liability for

misleading or deceptive conduct as unenforceable. However, in contract law

clauses in a contract which rid a partys liability regarding misleading or

deceptive conduct are enforceable as it is the responsibility of the parties to

ensure that the clauses are fully understood prior to the execution of the

contract.

The differences in tort, contract law and s18 are many, however the major

difference between an action in tort, contract law and section 18 include the

remedies which they provide. Remedies that are sought in an action under s18

are wide, however where the plaintiff claims pure economic loss the courts will

only provide such an order if there has been a loss accrued by the plaintiff. 26

Section 18 does not provide a remedy of account of profits whereas the remedy

23 Yorke v Lucas (1985) 158 CLR 661, [11].

24 Perre v Apand Pty Ltd 198 CLR 180 [114]-[118].

25 Ibid.

26 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640,
665-666 (Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ)
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of account of profits is one of the remedies that are provided in tort and contract

law.27

ADVANTAGES OF S18 ACL

The above avenues of commencing an action for misrepresentations share

common traits however are limited and require the satisfaction of elements to

warrant an action to be commenced. Each approach provides the plaintiff a

different errand of administration and evaluation in achieving a certain remedy.

When observing the actions available in tort law and contract law in comparison

to s18 of the ACL, s18 proves to be of greater advantage in reaching a successful

outcome. Satisfying the elements of tort law and contract law are difficult and

has proven to be limited.

The advantages of an action under s18 are a result of the overall objectives of

the ACCC and ACL. It focuses on protecting the public interest by providing

statutory remedies to consumers that have been misled or deceived. In light of

the above, characteristics of the potential actions of tort and contract law for

misrepresentation focus on an element which is considered as fundamentally

requisite in establishing and commencing an action for misrepresentation. For

example the tort of passing off focuses on the presence and existence of

reputation and goodwill. All requisite elements in commencing an action under

this tort are based on this central feature. As a result of this focus on a central

element, the scope of protection that it provides is limited by common law

principles and remedies which administer the process of such an action.

S 18 does not centralise its focus on the existence of an element such as

reputation or goodwill, or the conduct of representations, and nor is its

applicability based on the degree or the presence of evidence of knowledge,

27 Schedule 2 of the Competition and Consumer Act 2010 (Cth), s 236 (2).
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intent, reliance and actual damage. These elements may have an impact on the

administration of an action under s18 however it is not the sole determinant in

achieving an outcome. This is because s18 focuses on the overarching principle

of misleading and deceptive conduct and is applicable regardless of the nature

of the conduct or the medium of misrepresentation and consequentially its scope

of protection is wider and greater.

Conducts such as puffery, statements of law, the past, the present, the future,

silence or half-truths and the expression of opinions are all conducts actionable

under s18. For the conduct to be considered in s18 the parties conduct in

question will be considered as long as the party has some engagement in

misleading or deceiving the plaintiff, it is not necessary if the party is a direct

party of the transaction.

CONCLUSION

In light of the above, the differences between commencing an action under tort

law, contract law and s18 of the ACL are many. Each avenue of commencing an

action comes with its own set of benefits however it is quite difficult to satisfy

those elements in certain circumstances. It is fundamental to an action under

torts law that there is evidence in establishing an action for misrepresentation. To

satisfy the elements there needs to be substantial evidence of reputation or

goodwill, actual loss or damage, reliance and intention. This is not different in

contract law as requisite elements of contract law also take into consideration

elements similar to this. Tort and Contract law are different yet share

characteristics which are similar in establishing misrepresentation for an action

under the laws. S18 varies dramatically to tort law and contract law as evidence

is not always necessary. Unlike tort law and contract law, s18 takes into

consideration statements made by other third parties and does not allow for
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exclusion clauses in contract to be enforceable. It is therefore capable of

providing a wider range of remedies when the defendants conduct has been

established to have mislead or deceived. Due to the large amounts of restrictions

and harsh criteria that must be satisfied in tort and contract law, s18 is however

a better option in commencing an action where the defendant or a party of the

defendant has engaged in conduct which is or is ought to mislead and deceive

the plaintiff.