Professional Liability Guide

PROFESSIONAL LIABILITY GUIDE

BMW thought the insurance policy was cancellable (cancellable policies constitute a form of security for financiers because they allow the financier to cancel the policy and recover the unused premium if the borrower defaults). In fact, the policy was neither assignable nor cancellable. BMW lent Consolidated almost $4 million, only $1 million of which was repaid before Consolidated defaulted on its obligations. BMW claimed that Miller had engaged in misleading and deceptive conduct and sued Miller, alleging a representation that led BMW to believe that the policy was assignable and cancellable. Alternatively, BMW argued that Miller’s failure to disclose that the policy was neither assignable nor cancellable constituted misleading and deceptive conduct. The High Court found that Miller had not breached section 52 of the TPA. Miller’s silence on this issue was put under scrutiny; however, the Court considered that as the parties to the transaction were all commercially sophisticated and that BMW was an experienced premium lender, there was no duty on Miller to volunteer any additional information. BMW, an experienced industry participant, could have made reasonable inquiries about the policy and, in particular, examined the policy for a cancellation clause. It had failed to do so, so Miller was not in breach. False or misleading representations Section 29 of the ACL contains a comprehensive suite of prohibitions against making false or misleading representations about goods or services. They replace and largely mirror the prohibitions formerly in section 53 of the TPA. Some of the prohibitions are of potential application to professionals, including, most relevantly, prohibitions against making false or misleading representations about the standard, quality, value or grade of services (section 29(1)(b) of the ACL; section 53(aa) of the TPA), and the price of services (section 29(1)(i) of the ACL; section 53(e) of the TPA). Comparable provisions are found in section 12DB of the ASIC Act (in relation to financial services) and section 1041E of the Corporations Act 2001 (Cth) (in relation to financial products and services). These naturally affect the position of professionals such as financial planners and finance brokers. In ACCC v Gary Peer and Associates Pty Ltd, 149 Sundberg J described the two elements in section 53(e) of the TPA (the equivalent of section 29(1)(i) of the ACL, concerning the price of goods or services) as follows: ‘A representation may be false within the meaning of s 53(e) if it is contrary to fact, irrespective of the knowledge of the representor: Given v C V Holland (Holdings) Pty Ltd (1977) 29 FLR 212 at 217. A “price” of goods or services in s 53(e) does not have to be a precise figure. There can be a “price” even though it is stated to be within a range of a particular figure or that otherwise an element of approximation is involved: Trade Practices Commission v Penfolds Wines Pty Ltd (1992) ATPR 41-163 at 40,222. It was submitted that the relevant issue is whether the advertisements falsely or misleadingly represented the price, namely the monetary consideration for the sale of the Property: Australian Competition and Consumer Commission v Nationwide News Pty Ltd (1996) ATPR 41-519 at 42,493–4.’ ACCC v Dukemaster Pty Ltd (decided in the context of the TPA) highlighted the absence of authority, suggesting a material difference between the phrases ‘false or misleading’ and ‘misleading or deceptive’ . 150 The prohibition under section 29 is, however, of more limited scope to that under section 18, as the former applies only to representations while the latter applies more broadly to conduct (which, as noted in the preceding section, extends beyond representations).

149 (2005) 142 FCR 506 [57]–[58]. 150 [2009] FCA 682 [14].

26

www.carternewell.com