15 August, 2018
Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246
What you need to know
The Victorian Supreme Court has departed from a series of decisions of the New South Wales Supreme Court that suggested parties may be able to impose temporal limits on misleading or deceptive conduct claims under the Australian Consumer Law.
Whether clauses imposing temporal and/or monetary limits on misleading or deceptive conduct claims are enforceable remains unclear.
In light of this uncertainty, parties should not rely solely on temporal or monetary limits but should also consider other contractual and practical ways to manage the risk of misleading or deceptive conduct claims.
Background
The Australian Consumer Law (ACL) prohibits parties from engaging in conduct that is misleading or deceptive (or is likely to mislead or deceive) in trade or commerce. Misleading or deceptive conduct claims are commonly brought as standalone actions or as alternative claims in commercial disputes in Australia.
Under the ACL:
- a misleading or deceptive conduct claim may be made within six years of the cause of action accruing; and
- there is no monetary limit for such a claim.
It was previously understood that parties could not "contract out" of the prohibition against misleading or deceptive conduct because the provisions of the ACL (and the equivalent provisions of its predecessor, the Trade Practices Act 1974) were to be given full effect in accordance with the "no exclusion principle".
This meant that parties were not thought to be able to impose limits on the operation of those provisions.
That understanding was widely held until a series of first instance decisions of the New South Wales Supreme Court cast doubt on it. Those decision suggest that such limitations can be imposed, subject to the "reasonableness" of the limitations, and so long as they do not have the effect of ousting the provisions of the ACL altogether.
In contrast, the recent decision of the Victorian Supreme Court in Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246 (Brighton v Multiplex) marks a return to the "no exclusion" understanding. The result is that whether clauses imposing temporal and/or monetary limits on misleading or deceptive conduct claims are enforceable is unclear.
New South Wales Supreme Court decisions
There are three first instance decisions of the New South Wales Supreme Court that suggest that temporal and monetary limits may be imposed on misleading or deceptive conduct claims:
- Owners Strata Plan 62930 v Kell & Rigby Pty Ltd [2009] NSWSC 1342 (Kell & Rigby);
- Lane Cove Council v Michael Davies & Associates Pty Ltd & Ors [2012] NSWSC 727 (Lane Cove); and
- Firstmac Fiduciary Services Pty Limited & Anor v HSBC [2012] NSWSC 1122 (Firstmac).
In Kell & Rigby, McDougall J found that the drafting of a limitation of liability clause was broad enough to capture statutory claims for misleading or deceptive conduct. However, his Honour was not required to consider the "no exclusion principle" or determine whether the relevant clause was effective in imposing a temporal limit on the right to bring a statutory claim for misleading or deceptive conduct as:
…there was no submission to the effect that the apparent operation of [the limitation of liability clause] (as I have construed it) conflicted with or should be read down by reference to, the limitation period of six years provided in [the statute].
In Lane Cove and Firstmac, Sackar J found temporal limits to the right to bring a misleading or deceptive conduct claim to be enforceable. His Honour considered the limitation period contained in the ACL to be a "procedural" rather than a "substantive" provision such that it could be waived:
In my opinion a distinction clearly needs to be drawn between a contractual term purporting for example to bar a statutory remedy altogether and one that purports to impose a monetary or temporal limit on the extent of that remedy.
Together the decisions of McDougall and Sackar JJ have been relied on to suggest that temporal or monetary limits to statutory claims for misleading or deceptive conduct could be enforceable, provided those limits were not so unreasonable as to effectively exclude the operation of the ACL.
That is not to say that all New South Wales decisions are supportive of contractual limitations on misleading or deceptive conduct claims. Relevantly, in a fourth first instance decision of the New South Wales Supreme Court, Ball J expressed his opinion that it was reasonably arguable that parties could not contract out of the six year limitation under the ACL: Omega Air Inc v CAE Australia Pty Ltd [2015] NSWSC 802.
As such, the position in New South Wales remains far from clear, albeit that the decisions in Kell & Rigby, Lane Cove and First Mac have continued to be referred to as supporting the proposition that a private agreement can place temporal and monetary limits on statutory claims for misleading or deceptive conduct.
Victorian Supreme Court decision
The decision in Brighton v Multiplex concerned a subcontract for the fit out of offices at Docklands in Melbourne. Brighton alleged misleading and deceptive conduct against Multiplex on the basis of a series of representations said to be implied from the tender information.
Clause 46.1 of the subcontract between Brighton and Multiplex was an ordinary notice provision of a kind commonly included in construction contracts. It required Brighton to give a prescribed notice of any claim within seven days of the earlier of:
(a) when [Brighton] was or could reasonably have been aware of the conduct, circumstance, event, act, default, omission, direction, fact, matter or thing upon which the Claim is or will be based ('Claim Event'); and
(b) when [Brighton] could reasonably have been aware of the entitlement to make the claim;
Clause 46.3 "absolutely barred" any claim that was not notified in accordance with the subcontract.
Brighton made its claim outside of the seven day period imposed by clause 46.1 of the subcontract but inside the six year limitation period imposed by the ACL.
Brighton argued, relying on the "no exclusion principle", that it would be contrary to public policy to allow commercial parties to oust statutory consumer law remedies (such as damages for misleading or deceptive conduct). The "no exclusion principle" is an application of the policy of the common law that where: (a) a statute embraces public rather than private rights; and (b) the legislative purpose will not be fulfilled if the court enforces private contractual arrangements, the court will refuse to enforce the private contractual arrangements on the grounds of public policy.
Multiplex relied on the findings in Kell & Rigby, Lane Cove and Firstmac to argue that clause 46 did not exclude the operation of the ACL, but merely "regulated" it.
Riordan J found that temporal restrictions on a right to claim within the six year period imposed by the ACL is contrary to the "no exclusion principle" on public policy grounds. His Honour cited Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546:
There are wider objections to allowing effect to such clauses. Otherwise the operation of the Act, a public policy statute, could be ousted by private agreement. Parliament passed the Act to stamp out unfair or improper conduct in trade or in commerce; it would be contrary to public policy for special conditions such as those with which this contract was concerned to deny or prohibit a statutory remedy for offending conduct under the Act.
Riordon J agreed with Sackar J's characterisation of the statutory limitation as "procedural" and capable of waiver, but considered that characterisation to be "by no means determinative". His Honour concluded that the "proper inquiry remains whether policy dictates that the right be preserved". His Honour also considered it to be inconsistent with the public purpose of the ACL to leave claimants uncertain as to whether any temporal limits would be found to be unenforceable.
Riordan J also found that in the event Brighton's "no transaction case" was successful (that is, that Brighton would not have entered into the subcontract absent the misleading or deceptive conduct), Multiplex would not have been entitled to rely on the terms of the subcontract to defeat Brighton's claim even if they were found enforceable.
In the result, however, Brighton's claim failed because His Honour found that there was no misleading or deceptive conduct on the part of Multiplex.
Comment
Given the commonplace factual and legal issues that arise in Brighton v Multiplex it is likely that the decision will have broad relevance for parties engaged in trade or commerce in Australia. As a further first instance decision, however, Brighton v Multiplex does little to resolve the uncertainty in this area.
Following Brighton v Multiplex there now appears to be a divergence between the first instance authorities in New South Wales and Victoria. Whether clauses imposing temporal and/or monetary limits on misleading or deceptive conduct claims are enforceable will remain unclear until an intermediate appellate court determines the issue one way or another or, otherwise, until the High Court does.
Until then, parties seeking to manage the risks associated with misleading or deceptive conduct claims need not abandon temporal or monetary limits, but should also consider the other contractual and practical ways to manage those risks, instead of relying solely on temporal or monetary limits.
Analysis – managing the risk contractually
Commercial parties can mitigate the risk of misleading or deceptive conduct claims contractually by including appropriate "no reliance" clauses in their contracts. These clauses are now often considered boilerplate and typically provide for an acknowledgment that neither party has relied on any representation in entering into the contract. However, a bespoke and detailed "no reliance" clause, that expressly refers to defined categories of information that ought not be relied on by a contractual counterparty, is likely to provide greater protection.
While "no reliance" clauses do not operate to bar a claim for misleading or deceptive conduct under the ACL, they may assist a party in defending a claim for misleading or deceptive conduct as a court may take the "no reliance" clause into account when considering whether in fact the representation was misleading and deceptive and in considering issues of causation.
However, there are increasingly fewer cases in which courts have found "no reliance" clauses to be an effective protection against a claim for misleading or deceptive conduct. For example, in the High Court decision of Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, the majority agreed that the fact of inducement cannot be negated merely by a statement in a contract to the contrary. It should also be noted that a "no reliance" clause will not offer any protection against an alleged representation made after entry into the contract.
Further discussion of recent cases considering "no reliance" clauses in the context of a misleading or deceptive conduct claims can be found here.
Analysis – managing the risk practically
Given the uncertainty as to whether temporal and monetary limitations on misleading or deceptive conduct claims are enforceable, and the limited protection offered by "no reliance" clauses, managing the risks associated with those claims is principally a practical matter. In that regard, the decision in Brighton vMultiplex demonstrates the need to ensure that parties have a clear and comprehensive understanding of their rights and obligations when entering into their contracts.
Commercial parties can mitigate the risk of misleading or deceptive conduct claims practically by ensuring that their commercial discussions are forthright and that their contracts accurately reflect the agreement that has been made between them. This requires well-structured communication protocols, the use of appropriate disclaimers, appropriate risk allocation, provision of opportunities to manage and understand risk, and an efficient interface between the commercial and legal teams working to document the relevant contract. If those matters are front of mind when parties are contracting, then the risks and the uncertain legal positions associated with misleading or deceptive conduct claims may be avoided.
For further information, please contact:
Georgia Quick, Partner, Ashurst
georgia.quick@ashurst.com
