Misleading & Deceptive Conduct & Reliance Clauses

The High Court’s view of misleading or deceptive conduct and reliance clauses is stated in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 (“Campbell”).

Campbell is a High Court decision relating to misleading or deceptive conduct and reliance clauses and the effectiveness of non-reliance clauses in consumer disputes.

That case involved allegations of misleading or deceptive representations concerning the financial position of a company being purchased.

The case relates to whether:

1. A vendor of shares in a company provided documents prior to making of share sale agreement that did not accurately state company’s past financial performance;
2. Failed to correct some estimates of company’s expected performance when vendor knew or ought reasonably to have known, prior to making of agreement, that estimated performance not achieved; and
3. Incorporated some statements of financial performance in share sale agreement with various warranties as to their accuracy.

In Campbell the High Court said:

… of itself, neither the inclusion of an entire agreement clause in an agreement nor the inclusion of a provision expressly denying reliance upon pre-contractual representations will necessarily prevent the provision of misleading information before a contract was made constituting a contravention of the prohibition against misleading or deceptive conduct by which loss or damage was sustained. As pointed out … whether conduct is misleading or deceptive is a question of fact to be decided by reference to all of the relevant circumstances, of which the terms of the contract are but one.

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Misleading or Deceptive Conduct and Reliance Clauses

The relevant share sale agreement contained an entire agreement clause and a warranty that the information provided was substantially accurate and not misleading.

The majority of the Court was of the opinion that non-reliance clauses nor entire agreement clauses will necessarily prevent the relevant conduct from being found to be misleading or deceptive.

The majority held that the question of whether conduct is misleading or deceptive is a question of fact to be decided by reference to all of the relevant circumstances, including the terms of the contract.

In Re Lezam Pty Limited and Jlw (Nsw) Pty Limited v Seabridge Australia Pty Limited [1992] FCA 206 the Court said:

Exclusion clauses in a contract will only preclude a remedy under the Act when those clauses demonstrate that the party in question did not, in fact, rely on the conduct or where the conduct could not, as a whole, have been seen to be misleading.

Re Lezam is referred to in Mark Bain Constructions Pty Ltd v Avis; Mark Bain Constructions Pty Ltd v Barnscape Pty Ltd [2012] QCA 100 after which the Queensland Court of Appeal said:

It is a question of fact whether those clauses erased the effect of the representation in the minds of Mr and Mrs Brecht … Those clauses did not have that effect in this case. They relied on the representations made as to what would be the view from unit 7, Number One Park and their reliance induced them to enter into the … contract.

In Keeley & Ors v Horton & Anor [2016] QCA 68 the Queensland Court of Appeal again said:

[i]n Campbell … the share sale agreement contained warranties that, to the best of the vendor’s knowledge, all information given to the purchaser or its advisers was “substantially accurate and complete and not misleading”. Although the High Court remitted the issue of the breach of those warranties to the New South Wales Court of Appeal for further consideration, the plurality observed that, if a breach was then established, the purchaser would be “entitled to such damages as would put it in the position it would have been in if the contract had been performed according to its terms”.

Conclusion

The Superior Courts in Queensland have followed the High Court in stating that reliance clauses or representation clauses may not be enforceable in the matter of deceptive or misleading conduct.

Whether there has been deceptive or misleading conduct in a matter of fact, to be assessed on the representations made in context with the surrounding facts of the case.

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