Under section 18 of the Australian Consumer Law (ACL), a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. Section 236 of the ACL provides that a claimant can only recover loss or damage for a person’s breach of section 18 if the claimant suffered such loss or damage because of the person’s misleading or deceptive conduct. These two (2) provisions of the ACL are some of the most relied upon statutory provisions in Australian civil law,[1] and have frequently been scrutinised by the courts. In this Knowledge Centre article, we analyse the extent to which a claimant’s loss or damage must be connected to misleading or deceptive conduct to satisfy the causative element of section 236.
Looking to the Trade Practices Act
Before the advent of the ACL in 2010, competition and consumer law was largely governed by the Trade Practices Act 1974 (Cth) (TPA). The TPA, which has since been repealed, contained very similar provisions to the ACL about misleading or deceptive conduct;[2] however, when it comes to causation, the acts differ slightly in their language:
Section 82 TPA: Actions for damages
(1) A person who suffers loss or damage by conduct of another person…
Section 236 ACL: Actions for damages
(1)(a) … a person (the claimant) suffers loss or damage because of the conduct of another person…
The expression “by” in section 82 of the TPA and the expression “because” in section 236 of the ACL have been accepted by the courts as invoking the same common law practical or common-sense concept of causation having regard to the terms and objects of the ACL.[3] Therefore, the Courts have shown a preparedness to consider pre-ACL judgments about causation under section 82 of the TPA when interpreting section 236 of the ACL.[4] A substantial amount of case law surrounding causation in misleading or deceptive conduct is derived from past interpretations of the TPA.
Establishing causation
It is not necessary that the contravention be the sole cause of the loss or damage; it is sufficient if it is a cause of the loss or damage.[5] The court must be satisfied that there was a causal link between the misleading or deceptive conduct and the loss or damage which was suffered.[6] There will be a sufficient causal link if the misleading or deceptive conduct has “materially contributed” to the claimant’s loss or damage.[7] If a person enters into a transaction, and would not have entered into it if they knew the truth about the matter they were misled or deceived about, causation will generally be established.[8]
By way of example, the courts have established causation when:
- a person was told he would receive $16,000 per week in revenue from owning a Subway franchise, proceeded to purchase the franchise partially on that basis, and only received $12,000 per week;[9]
- a building contractor entered into a lump sum contract but later discovered it was required to do substantial extra work because the client had misrepresented that scope of works. The contractor gave evidence it would have entered into the contract on a provisional sum basis only if it had known of the extra works;[10]
- a lender provided a loan to a customer based on an overvaluation of the customer’s mortgaged property, and would not have provided the loan had the customer supplied an accurate valuation of the property;[11]
- a couple entered into a contract for a catamaran to be built on the basis of the builder’s representation that his company could build the catamaran within an agreed time. The couple gave evidence that they would not have entered into the contract if they knew the builder was unable to build the boat within the agreed time;[12]
- a company suffered loss and damage because a competitor ran a misleading and deceptive advertising campaign which indirectly diverted customers away from the complainant company. Even though the complainant company had not itself been misled by the competitor, by misleading members of the public, the competitor had engaged in misleading or deceptive conduct which indirectly caused the complainant company loss.[13]
In ascertaining whether misleading or deceptive conduct “materially contributed” to the loss or damage suffered, the court may look to the intention behind the conduct. If a representation is made which is purposefully calculated to induce a person to perform act, and the person in fact does perform such act, there arises a fair inference of fact that the person was induced to perform the act because of the representation.[14] As observed by McHugh J in Henville v Walker:[15]
“If the defendant intended the person suffering a detriment to act in the general way that he or she did, the common law will invariably hold that a causal connection existed between the conduct and the detriment.”
Causation under section 236 of the ACL can often be more complicated than meets the eye. Our firm has extensive experience in litigation involving the Australian Consumer Law.
If you are the subject of an ACL claim, or believe you have suffered loss or damage as a result of misleading or deceptive conduct, you can contact our office for an obligation free consultation.
[1] French J, A Lawyer’s Guide to Misleading and Deceptive Conduct (1989) 63 ALJ 250.
[2] Trade Practices Act 1974 (Cth) ss 52, 82; cf Australian Consumer Law ss 18, 236.
[3] Henville v Walker (2001) 206 CLR 459, 489 [95]
[4] See, for example, Haddad v Allianz Australia Insurance Ltd (No 2) (2014) 19 DCLR (NSW) 314 [19] (Cogswell SC DCJ).
[5] I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109, 128 [57]
[6] Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, 525 (Mason CJ, Dawson, Gaudron and McHugh JJ).
[7] Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 [106] (McHugh J).
[8] See, for example, Shah v Hagemrad [2018] FCA 91.
[9] Ibid.
[10] Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) (2006) 67 NSWLR 341; [2006] NSWCA 282.
[11] La Trobe Capital & Mortgage Corporation v Hay Property Consultants (2011) 190 FCR 299.
[12] Fendley & Anor v Owen [2022] QDC 249.
[13] Janssen-Glag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526; see also In the matter of HIH Insurance Limited (in liquidation) & Ors [2016] NSWSC 482.
[14] Gould v Vaggelas (1984) 157 CLR 215; ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640, 657 [55].
[15] (2001) 206 CLR 494; [2001] HCA 52 at [103] (McHugh J).