Contracting out of Prospective Liability for Damages for Deceit or Misleading or Deceptive Conduct
In Viterra Malt Pty Ltd & Ors v Cargill Australia Limited & Ors [2023] VSCA 157 (23 June 2023) – in a decision which is comprehensive of the full suite of issues, and rich in authority, arising in respect of a claim for damages for statutory misleading or deceptive conduct, or in the tort of deceit. The purpose of this note is to excerpt therefrom the principles pertaining to prospective exclusion of enjoyment of such causes of action. The court (Sifris, Walker and Whelan JJA) wrote (the reader will need to refer to the decision for full citation of some of the authorities referred to as they are numerous):
INTRODUCTION
[1] By an acquisition agreement executed on 4 August 2013 (the ‘Acquisition Agreement’), the first respondent (‘Cargill Australia’) bought the entire share capital of a company named Joe White Maltings Pty Ltd (‘Joe White’) from the first applicant (‘Viterra Malt’). Joe White conducted business as a maltster. It was the largest maltster in Australia. By the Acquisition Agreement, Cargill Australia also bought certain assets used in the business from the second applicant (‘Viterra Operations’) and the third applicant (‘Viterra Ltd’). The second respondent, Cargill, Incorporated (‘Cargill, Inc’), guaranteed the obligations of Cargill Australia.
[2] Cargill Australia bought the share capital of Joe White under a staged sale process involving the fourth applicant (‘Glencore’), which was the parent company of Viterra Malt, Viterra Operations and Viterra Ltd.
[3] The trial judge referred to Cargill Australia and Cargill, Inc together as ‘Cargill’. He referred to the first, second and third applicants together as ‘Viterra’, and he referred to the four applicants together as the ‘Viterra Parties’. Save where it is necessary to refer to particular companies, the same terms are adopted here.
[4] The sale process involved two stages, referred to as ‘Phase 1’ and ‘Phase 2’. Phase 1 culminated in an ‘Indicative Bid’, and Phase 2 in a ‘Final Bid’. In each stage the Viterra Parties provided information about Joe White’s business to Cargill. Cargill used that information in formulating the Indicative Bid and the Final Bid. Under documents forming part of the staged process, the Viterra Parties disclaimed liability for any representations made, Cargill acknowledged and agreed that they could not and would not rely upon any representations made and that they would make and rely upon their own investigations and assessments, and Cargill prospectively released the Viterra Parties from any liability in relation to the provision or non-disclosure of information. An important document in this respect was a confidentiality deed entered into by Glencore and Cargill, Inc, on behalf of themselves and their related companies, bearing the date 27 May 2013, but which Cargill, Inc signed on 13 May 2013 (the ‘Confidentiality Deed’). A disclaimer, an agreement not to sue, and a release provided for in that deed were expressly said not to apply to representations or obligations set forth in separate written agreements between the parties in accordance with the terms of those written agreements.
[5] The Acquisition Agreement was a separate written agreement between the parties. It was entered into at the end of the staged sale process. It contained a schedule of warranties (the ‘Warranties’). By the terms of the agreement, Viterra (but not Glencore) represented and warranted that each Warranty was correct and not misleading at the date of the agreement, and would be correct and not misleading on the ‘Completion’ date; and acknowledged that Cargill had entered into the agreement and would complete in reliance upon the Warranties.
[6] Prior to entry into the Acquisition Agreement (and up to Completion), Joe White for some years had been engaging in three practices which formed the factual foundation for the claims made by Cargill Australia against the Viterra Parties in this proceeding.
[7] The first practice was referred to in the trial as the ‘Reporting Practice’. Various parameters of the malt produced by Joe White were tested in a laboratory before dispatch to the customer. Joe White produced a certificate of analysis which was provided to the customer. The certificate listed the parameters, and set out the ‘results’. If the results which had been obtained by laboratory testing were outside the customer’s specifications, those results were altered by Joe White personnel to bring them within those specifications, in a practice referred to as ‘pencilling’; and the altered results, not the results obtained from the laboratory, were set out on the certificate provided to the customer, without any indication that the results had been altered.
[8] The second practice was referred to in the trial as the ‘Varieties Practice’. This occurred when Joe White used barley varieties not approved by a customer, without disclosing that fact or falsely asserting that an approved variety had been used.
[9] The third practice was referred to in the trial as the ‘Gibberellic Acid Practice’. Gibberellic acid is an additive which may be used in the production process. Some customers prohibited its use. Joe White nevertheless used gibberellic acid in malt delivered to customers who had prohibited its use.
[10] Together, these three practices were referred to as the ‘Operational Practices’. Cargill Australia alleged that these practices were carried out routinely, and without informing customers. When referred to in that sense (that is, as practices carried out routinely and without informing customers) they were called the ‘Viterra Practices’. The judge found the practices were carried out routinely and without informing customers. Nevertheless, in these reasons the term ‘Operational Practices’ is generally adopted.
[11] Cargill Australia instituted this proceeding against the Viterra Parties. It alleged that by reason of the existence of the Operational Practices representations made to it had been false, and misleading or deceptive, and that the Warranties had been breached. The more significant representations in this connection were referred to as the ‘Financial and Operational Performance Representations’ and the ‘Warranty Representations’. The Viterra Parties counterclaimed against Cargill Australia, and they joined Cargill, Inc and a number of other parties as third parties.
[12] Cargill Australia claimed that it entered into, and completed, the acquisition provided for by the Acquisition Agreement in reliance upon, and because of, the conduct by the Viterra Parties of which it complained. It claimed that it would not have acquired Joe White if it had not been misled and deceived. The loss claimed was the difference between the price which it paid and the ‘true value’ of what it acquired.
[13] Before the primary judge, Cargill Australia succeeded on claims based upon misleading or deceptive conduct under sch 2 of the Competition and Consumer Act 2010 (Cth) (the ‘Australian Consumer Law’), and in deceit. It recovered damages of $168.9 million, being the difference between the price paid, $420 million, and the judge’s conclusion as to the true value of the assets acquired, $251.1 million. In a further ruling, the judge ordered damages in the nature of interest, calculated at the rates provided for under the Penalty Interest Rates Act 1983 (‘PIRA’), in a total sum of $124,229,320.30 (the ‘interest ruling’).
[14] The trial commenced on 18 June 2018 and initially concluded on 21 August 2019, after 111 sitting days. After judgment had been reserved, the Viterra Parties made two applications to re-open their case.
[15] In late 2018 and early 2019, Cargill, Inc disposed of its worldwide malt assets, including Joe White. This development was significant because under cl 15.4(b) of the Acquisition Agreement, Viterra was not liable to Cargill Australia for any claim (as defined) if Cargill, Inc ceased to control Joe White or its business. Viterra applied to re-open so as to rely upon cl 15.4(b) in November 2019. That application was successful. The trial judge concluded that the operation of cl 15.4(b) was fatal to some (but not all) of Cargill Australia’s claims.
[16] The second application to re-open was made in March 2020. The Viterra Parties sought to re-open to rely upon evidence referred to as the ‘EU Materials’. This application failed (the ‘re-opening ruling’).
[17] The primary judgment was handed down on 28 January 2022.
[18] After initially denying the existence of the Operational Practices, during the course of the trial the Viterra Parties admitted certain aspects of their existence, but they denied Cargill Australia’s allegations as to their extent and their significance. The Viterra Parties alleged that the practices were relevantly the sole responsibility of Joe White and its officers, who they joined as third parties; and they asserted that what was done was in accordance with industry practices of which Cargill was aware.
[19] More importantly for current purposes, on the issues of liability, the Viterra Parties relied upon various contractual provisions in the documents forming part of the sale process, including clauses that:
(a) stated that no representations were made by the Viterra Parties, and no responsibility was accepted as to the accuracy and completeness of information provided (‘no representation clauses’);
(b) stated that Cargill agreed not to rely, and/or had not relied, upon any representations, but would rely upon their own investigations (‘no reliance clauses’); and
(c) purported to exclude, release or limit the Viterra Parties’ liability to Cargill (‘exclusion clauses’).
We shall refer to these kinds of clauses collectively as ‘disclaimers’. As we explain later, these are not rigid categories.
[20] A provision of central importance to the Viterra Parties’ case both before the trial judge and on appeal was a ‘release’ provided for in cl 10.3 of the Confidentiality Deed. The relevant provision uses the terminology of ‘release’, but is better characterised as a contractual exclusion clause.
[21] The Viterra Parties are part of a large publicly listed corporate group. Cargill is part of a large privately held corporate group based in the United States of America. The Viterra Parties submitted at trial, and emphasise on this application, that large, well-resourced parties such as these, who negotiate and agree upon the terms of their transactions, should be held to the terms that they have agreed.
[22] This application for leave to appeal concerns conclusions reached on both liability and damages in the primary judgment, the refusal to permit re-opening in the re-opening ruling, and the quantum of interest awarded in the interest ruling. There are other separate applications for leave to appeal concerning costs rulings. The application for leave and full argument on the proposed grounds were heard together on the basis that if leave were granted the Court would forthwith determine the substantive grounds.
[23] The proposed grounds of appeal, as amended, and three ‘grounds of law … not decided’ raised by Cargill on a notice of contention, as amended, are set out in full in Annexure A.
[24] Grounds 1, 2, 3, 6, 7, 8 and 10 concern the operation and significance of the disclaimers referred to. The first ground of law not decided raised by the notice of contention (which will be referred to as contention 1) concerns the construction of the release in cl 10.3 of the Confidentiality Deed, and the third (contention 3) concerns certain of the no reliance representations.
[25] Grounds 3 and 9 concern the Warranties. The primary judge described the Cargill Australia claims based upon the Warranty Representations as the ‘most straightforward’. The claim for misleading or deceptive conduct based upon the Warranty Representations succeeded against Viterra (not Glencore), although the contractual claim for breach of the same Warranties failed because of cl 15.4(b) of the Acquisition Agreement.
[26] Grounds 4 and 5, and contention 2, concern the operation of cl 15.4(b) of the Acquisition Agreement and the judge’s conclusion that that provision did not operate so as to defeat Cargill Australia’s claims under the Australian Consumer Law and in deceit. The second ground of law not decided raised by the notice of contention (which will be referred to as contention 2) also concerns the enforceability of this provision.
[27] The legal issues raised by grounds 1–10, and the three contentions, overlap and are interrelated.
[28] Grounds 11 and 12 concern claims based on further representations alleged by Cargill Australia which were successful. These representations were referred to as the ‘Pre-Completion Representations’ and the ‘Other Bidders Representations’.
[29] Grounds 13–21 concern loss and damage.
[30] Ground 22 concerns apportionment, and ground 23 concerns interest.
[31] Ground 24 concerns the judge’s refusal of the Viterra Parties’ application to re-open their case so as to lead and rely upon the EU Materials. This evidence was contended to be relevant to the Viterra Parties’ contention that the Reporting Practice accorded with industry practices of which Cargill was aware.
[32] The primary judgment is 1,810 pages long (comprising 5,354 paragraphs, and 4,826 footnotes) without the annexures, and 1,846 pages with the annexures and schedules. Once the subsequent relevant rulings concerning the refusal of the application to re-open, the quantification of damages, the interest, and the costs are included there are approximately 2,000 pages in all. Some of the issues addressed in the primary judgment are no longer relevant, or are relevant to the issues raised in this application only by way of context. There is no application for leave to appeal from the judge’s dismissal of the third party claims, save for ground 10 which concerns both the counterclaim against Cargill Australia and the third party claim against Cargill, Inc In the context of the proposed liability grounds (grounds 1–12) the judge’s conclusions as to the nature and prevalence of the Operational Practices are not contested. Thus, substantial parts of the primary judgment do not need to be addressed or considered in detail.
…
(6) The disclaimers in this case
(a) The Confidentiality Deed
[255] The first document agreed between the parties that contained relevant disclaimers was the Confidentiality Deed. It was provided to Cargill, Inc by Merrill Lynch, on behalf of Glencore, on 1 May 2013. The Confidentiality Deed was executed by Cargill, Inc on 13 May 2013; and a further version was executed by Glencore on 22 May 2013 and by Cargill, Inc on 27 May 2013. The recitals recorded that Cargill, Inc ‘wishes to obtain access to information’ for the purpose of its ‘evaluation of whether to acquire’ Glencore’s malt business, and that Glencore had ‘agreed to disclose … certain information’ to Cargill, Inc ‘on the terms and conditions set out’ in the Confidentiality Deed.
[256] The Confidentiality Deed contained the following relevant disclaimers:
8 No reliance
8.1 Acknowledgment
The Recipient [Cargill, Inc] acknowledges and agrees that:
(a) most or all of the Confidential Information consists of data prepared in the ordinary course of business and has not been prepared with the intention that the Recipient should rely on it in connection with the Approved Purpose or the Transaction;
(b) except where expressly identified as such, the Confidential Information has not been audited or independently verified;
(c) neither the Discloser [Glencore] nor its Representatives gives any assurances as to the degree of care or diligence used in compiling or preparing the Confidential Information;
(d) the Discloser or its Representatives may not have provided all information that may be required by the Recipient to achieve the Approved Purpose or the Transaction;
(e) nothing contained in the Confidential Information constitutes an offer, recommendation or invitation by the Discloser or its Representatives to any person;
(f) this deed does not grant to the Recipient or its Representatives any licence or other right in relation to the Confidential Information except as expressly provided in this deed; and
(g) certain Confidential Information may have been disclosed with the consent of third parties and may be subject to conditions imposed by those parties.
8.2 No representations or warranties given
The Recipient acknowledges that neither the Discloser nor any of its Representatives:
(a) has made or makes any representation or warranty, express or implied, as to the accuracy, content, legality or completeness of any Confidential Information;
(b) is under any obligation:
(i) to notify the Recipient or its Representatives; or
(ii) to provide any further information to the Recipient or its Representatives,
if the Discloser or its Representatives become aware of any inaccuracy, incompleteness or change in the Confidential Information.
8.3 Recipient to make its own assessment
The Recipient agrees and acknowledges that:
(a) it must make its own assessment of all Confidential Information and satisfy itself as to the accuracy, content, legality and completeness of that information;
(b) any forecasts or estimates in the Confidential Information may not prove to be correct or be achieved; and
(c) it will rely solely on its own investigations and analysis in evaluating the Transaction.
…
10 Liability
10.1 Disclaimer by Discloser
Subject to clause 10.4 (‘Representations’) and any law to the contrary, and to the maximum extent permitted by law, the Discloser and its Representatives disclaim all liability for any Loss suffered by any person using, disclosing or acting on any Confidential Information and whether the Loss arises in relation to, in connection with or as a result of any negligence, default or lack of care on the part of the Discloser or any of its Representatives, or from any misrepresentation or any other cause.
10.2 No legal proceedings to be brought by Recipient
Subject to clause 10.4 (‘Representations’) and absent fraud or wilful misconduct by the Discloser, the Recipient agrees to:
(a) not bring or institute any legal proceedings against the Discloser or its Representatives in respect of any Confidential Information; and
(b) procure that its Representatives do not bring or institute any proceedings of the kind specified in clause 10.2(a) above.
Subject to clause 10.4 (‘Representations’) the Recipient unconditionally and irrevocably releases the Discloser and its Representatives from any liability which (notwithstanding the disclaimer in clause 10.1 (‘Disclaimer by Discloser’)) may arise, whether directly or indirectly, in relation to, in connection with, or as a result of the provision of the Confidential Information or any reliance placed by any person on any Confidential Information or the non disclosure of any Information, including any liability resulting from any negligence, default or lack of care on the part of the Discloser or any of its Representatives or from any misrepresentation or any other cause.
The Discloser and its Representatives shall be responsible for representations or obligations set forth in separate written agreements between the parties in accordance with the terms of those written agreements.
10.3 Release by Recipient
Subject to clause 10.4 (‘Representations’) the Recipient unconditionally and irrevocably releases the Discloser and its Representatives from any liability which (notwithstanding the disclaimer in clause 10.1 (‘Disclaimer by Discloser’)) may arise, whether directly or indirectly, in relation to, in connection with, or as a result of the provision of the Confidential Information or any reliance placed by any person on any Confidential Information or the non disclosure of any Information, including any liability resulting from any negligence, default or lack of care on the part of the Discloser or any of its Representatives or from any misrepresentation or any other cause.
10.4 Representations
The Discloser and its Representatives shall be responsible for representations or obligations set forth in separate written agreements between the parties in accordance with the terms of those written agreements.
[257] The term ‘Confidential Information’ was defined in the Confidentiality Deed widely, so as to mean all information disclosed in connection with the proposed acquisition of the malt business, including information disclosed orally, in writing or in electronic or machine readable form, disclosed or created before, on or after the date of the deed, and disclosed as a result of discussions between the parties. The term ‘Representatives’ was defined so as to include related companies.
[258] Clause 2.1 of the Confidentiality Deed provided that Cargill, Inc gave the undertakings on behalf of itself and its Representatives. Clause 3.3 required Cargill, Inc to procure its Representatives not to do anything which would constitute a breach of the deed.
(b) The Phase 1 Process Letter and the Information Memorandum
[259] On 14 May 2013 — that is, after Cargill, Inc had executed the first version of the Confidentiality Deed — Merrill Lynch sent the Phase 1 Process Letter to Cargill, Inc The Phase 1 Process Letter stated that Cargill, Inc was required to make and rely upon its own investigations and satisfy itself in relation to all aspects of the proposed transaction, and that the contents of the letter and all discussions, communications and information relating to the proposed transaction were confidential information and subject to the terms and conditions of the Confidentiality Deed.
[260] The Phase 1 Letter also enclosed a copy of a document entitled ‘Information Memorandum’. The Information Memorandum contained statements relied upon by Cargill in relation to its allegation that the Financial and Operational Performance Representations were made.
[261] The Information Memorandum also contained a page headed ‘Legal Disclaimer’. The heading aptly described the page’s contents. Relevantly, the document included the following:
No Responsibility for Contents of Document
To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and, to the maximum extent permitted by law, no responsibility or liability is accepted by the Discloser [Glencore] or any other person as to the adequacy, accuracy, correctness, completeness or reasonableness of this document, including any statements or information provided by third parties and reproduced or referred to in this document, or any other written or oral communications transmitted or made available to a Recipient. To the maximum extent permitted by law, no responsibility for any errors in or omissions from this document, whether arising out of negligence or otherwise, is accepted. The information contained in this document has not been independently verified. This document contains various opinions, estimates, forward-looking statements and forecasts which are based upon assumptions which may not prove to be correct or appropriate. No representation or warranty as to the fairness, adequacy, accuracy, validity, certainty or completeness of any of the assumptions, the information, opinions, estimates, forward-looking statements or forecasts contained in this document or any written or oral information made available to any interested party made by the Discloser and no liability whatsoever is accepted by any such Discloser in relation to any such information, opinion, estimates or forecasts. The information or opinions contained in this document or any written or oral information made available to any interested party does not purport to be comprehensive and has not been independently verified. The Discloser is under no obligation to correct any errors or omissions in connection with the information contained in this document.
Acknowledgments
Each Recipient acknowledges that no person has been authorized to give any information concerning the business the subject of the Proposed Transaction or the Proposed Transaction itself other than as contained in this document and, if given, that information cannot be relied upon as having been authorized by the Discloser.
Accuracy of Financial Information
In particular, no representation or warranty is given as to the accuracy, completeness, likelihood of achievement or reasonableness of any forecasts, projections or forward-looking statements contained in the document. Forecasts, projections and forward-looking statements are by their nature subject to significant uncertainties and contingencies. You should make your own independent assessment of the information and seek your own independent professional advice in relation to the information and any action taken on the basis of the information.
The information contained in this document has been prepared as at 1 May 2013. The Discloser makes no representation or warranty that the information contained in this document remains correct at, or at any time after, that date. The Discloser is under no obligation to update this document or to correct any inaccuracies contained in this document at any time after that date.
(c) The Data Room Protocol
[262] As part of the sale process, Glencore and its representatives prepared a ‘data room’, which was a virtual space by which Cargill could access documents relevant to the sale. It was given such access on or about 20 June 2013. Access to the Data Room was governed by the ‘Data Room Protocol’, which included the following statements under the heading ‘Disclaimer and Liability’:
8.1 Disclaimer
To the maximum extent permitted by law, [Glencore] and each of their respective related bodies corporate and associated entities and each of their respective officers, employees, associates, agents, contractors and advisers (together ‘associates’):
(a) do not make any representation, guarantee or warranty, express or implied, of any Material or any other information (including by [presumably intended to be ‘but’] not limited to any forecasts, projections or forward-looking statements made available to the Invitee or any Authorised Users or to any person as part of or in connection with the Proposed Transaction) made available in whatever form to the Invitee or the Authorised Users during or in connection with the Proposed Transaction; …
…
8.3 Acknowledgment
The Invitee and each Authorised User acknowledge and agree that they will rely only on their own independent assessment of any information, statements or representations contained in the Material and they do not rely on any representation, guarantee or warranty (express or implied) by [Glencore] or any of their respective associates.
[263] ‘Material’ was widely defined in the Data Room Protocol as including all information made available in the data room or otherwise in connection with the due diligence process.
[264] Schedule 2 of the Data Room Protocol set out data room procedures. It included the following provision:
Nothing obliges [Glencore] to disclose any particular information to an Invitee or Authorised User …
[265] Schedule 3 of the Protocol set out the question and answer process. It contained the following provisions:
[Glencore] will determine in its absolute discretion whether or not to answer any question. …
[Glencore] reserves its right … not to respond to any question or request for documentation [and] if a response is given, to determine the nature and extent of the response … .
(d) The Management Presentation
[266] On 26 June 2013 a management presentation took place between representatives of Cargill and representatives of the Viterra Parties. The Management Presentation included both written and oral information. The written information included legal disclaimers in substantially identical terms as those included in the Information Memorandum.
(e) The Acquisition Agreement
[267] The Acquisition Agreement also contained provisions relied upon by the Viterra Parties in this context, which were referred to together as the ‘Acquisition Agreement Liability Terms’. Of particular relevance is cl 13.4. By that provision Cargill Australia relevantly acknowledged and agreed that:
(a) In entering into the [agreement] and in proceeding to Completion, [Cargill Australia] does not rely on any statement, representation, warranty, condition, promise, forecast or other conduct which may have been made by or on behalf of [Viterra], except the Warranties;
…
(d) Irrespective of whether or not the Due Diligence was as full or exhaustive as [Cargill Australia] would have wished, it has nevertheless independently and without the benefit of any inducement, representations or warranty (other than the Warranties) from [Viterra] or any Representatives of [Viterra], determined to enter into the [agreement].
(f) The categories of disclaimers
[268] The Sale Process Disclaimers and cl 13.4 of the Acquisition Agreement contained provisions which may be characterised as follows:
No representation clauses: provisions whereby the Viterra Parties asserted that, to the maximum extent permitted by law, no representation was made and no responsibility was accepted as to the accuracy and completeness of information provided. The ‘Legal Disclaimer’ pages of the Information Memorandum and the Management Presentation, cl 10.1 of the Confidentiality Deed, and cl 8.1(a) of the Data Room Protocol fall within this category.
No reliance clauses: Provisions whereby Cargill acknowledged, and agreed to, the disclaimers, and agreed not to rely upon the information provided, but rather to rely upon their own investigations. These provisions might be categorised as ‘no reliance clauses’. The provisions of cl 8 of the Confidentiality Deed, the ‘Legal Disclaimer’ pages insofar as acceptance of the documents of which they form a part constituted agreement to the disclaimers, and cl 13.4 of the Acquisition Agreement fall within this category. It should be noted that the provisions of cl 13.4 were referred to in the primary judgment, and in the submissions on this application, by the defined term ‘No Reliance Representations’.
Exclusion clauses: Provisions purporting to exclude or release legal liability in relation to the information provided. The agreement not to bring legal proceedings in cl 10.2 of the Confidentiality Deed and the release in cl 10.3 of the Confidentiality Deed are provisions of this kind. Clause 15.4(b) of the Acquisition Agreement (which provided that Viterra was not liable to Cargill Australia for any claim if Cargill, Inc ceased to control Joe White) may also be seen as falling within this category. Similarly, provisions that limit legal liability by placing a cap on the damages that may be recovered (such as cl 15.8 of the Acquisition Agreement) may be seen as falling within this category.
[269] This categorisation is not suggested to be rigid or exhaustive, and some clauses may fall into more than one category.
[270] In the context of misleading or deceptive conduct, there is a relevant distinction between:
(a) provisions that seek to ‘negate an integer’ of liability, by resulting in a conclusion that representations were not made, or were not misleading, or were not relied upon (ie no reliance clauses and no representation clauses); and
(b) provisions that seek to absolve a party from liability for misleading or deceptive conduct which has occurred, or may occur, and for which they would otherwise be liable (ie exclusion clauses).
(7) Review of the authorities on disclaimers
[271] In order to understand the operation and effect of the disclaimers in this case, it is necessary to canvass in some detail the relevant authorities concerning such provisions. We shall substantially confine our analysis to judgments at the appellate level.
…
(f) Summary of the authorities on disclaimers
[379] On the basis of this review of the authorities, in our opinion the current position is as follows:
(1) Contractual provisions cannot absolve a party from liability for the party’s own fraud (Pearson, HIH v Chase , Onley and Scarborough; and Henjo itself insofar as reference was made to misleading or deceptive conduct which was fraudulent). That is so whether the provision is contained in a contract induced by fraud, or in a separate contract not induced by fraud. Further, if we are wrong in this regard, we consider that any contractual exclusion for fraud would need to be clear and unmistakable: general words would not suffice. The language would have to be such as would alert a commercial party to the extraordinary bargain that party was invited to make.
(2) Contractual provisions might be effective to absolve a party from liability for the fraud of that party’s agent, but again general words would not suffice. The exclusion of liability for fraud would have to be clear and unmistakable. Again, the language would have to be such as would alert a commercial party to the extraordinary bargain that party was invited to make (HIH v Chase , Onley).
(3) No representation clauses and no reliance clauses and other forms of disclaimers can have an evidentiary effect that negates an integer of liability in relation to misleading or deceptive conduct. They may alter the character of a representation which was made. They may render conduct not misleading or deceptive. They may lead to a conclusion that a claimant did not rely upon the conduct or did not suffer loss because of the conduct. Such provisions, however, cannot otherwise have the effect of absolving a party from liability for misleading or deceptive conduct, even where their express terms purport to do so (Clark Equipment, Henjo, Netaf, Lezam, Butcher, Downey, Warwick Entertainment, Campbell v Backoffice , Mark Bain).
(4) The potential for no representation clauses, no reliance clauses and other disclaimers to have the effect of negating an integer of liability emphasises the importance of assessing the entirety of the relevant conduct as a whole (Butcher, Campbell v Backoffice , Ireland).
(5) Exclusion clauses which purport to absolve liability under the Australian Consumer Law for misleading or deceptive conduct which has occurred and has caused loss cannot have effect in accordance with their terms where they are contained in a contract which the claimant has been misled into entering (Henjo, Scarborough, Warwick Entertainment, Mark Bain). This principle extends to any contract which purports to absolve a misrepresentor from liability for misleading or deceptive conduct, even if the claimant was not misled into entering into the contract (IOOF).
(6) Although a person cannot contract out of liability for fraud or deceit, or out of certain statutory rights or entitlements, it generally remains possible for parties to compromise a dispute about fraud, deceit or breach of such statutory rights (Grant, MBF Investments, Wardman). The question whether a particular contractual provision is properly characterised as a compromise of a dispute or as an attempt to contract out of liability for fraud, deceit or statutory rights is a question of construction of the provision in question.
(8) Ground 1: Is cl 10.3 of the Confidentiality Deed unenforceable in relation to misleading or deceptive conduct?
[380] We now turn to ground 1, which raises the question of the correctness, extent and application of the public policy principle identified in Henjo.
[381] By ground 1, the Viterra Parties contend that the judge erred in holding that cl 10.3 of the Confidentiality Deed was unenforceable insofar as it purported to prospectively release Viterra from liability for misleading or deceptive conduct under the Australian Consumer Law.
(a) The parties’ submissions
The Viterra Parties’ submissions
[382] Beginning with the judge’s treatment of Henjo and other associated cases, the Viterra Parties submitted that the judge failed to properly analyse these authorities; and that he failed to recognise the key distinguishing feature between those cases and the instant case, being the ‘prospective’ nature of cl 10.3. They submitted that Lockhart J’s statement in Henjo that there are ‘wider objections’ to allowing contractual clauses to exclude liability for misleading or deceptive conduct needed to be read in the light of the facts of that case, and in particular the fact that the relevant contractual clauses in Henjo had been procured by the alleged misleading conduct. They submitted that Henjo does not apply to ‘prospective clauses’, like cl 10.3, which were not procured by misleading or deceptive conduct.
[383] The Viterra Parties submitted that courts have often read Henjo too widely. By way of example, the Viterra Parties quoted this Court’s comment in MBF Investments that s 52(1) of the TPA cannot be circumvented by an exclusion clause, no matter how widely drafted. The Viterra Parties submitted that there is no High Court decision supporting a proposition of that width.
[384] On the role of public policy, the Viterra Parties relied upon the High Court decision of Miller v Miller. There, French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ said that ‘the relevant principles are not … identified by asserting, without further explanation, that public policy “requires” that such a plaintiff have no claim’. The ‘principles’ to which their Honours were referring were those governing ‘whether and how the fact that a plaintiff acted illegally in the course of, or in connection with, events said to give rise to liability in negligence bears upon the liability of the defendant to the plaintiff’. The Viterra Parties submitted that Miller v Miller was apposite here, and that the primary judge had been too cursory in his public policy analysis of cl 10.3.
[385] The Viterra Parties submitted that a proper analysis of whether cl 10.3, as a clause operating ‘prospectively’ and not one agreed to as a consequence of misleading or deceptive conduct, contravened public policy required application of the principle articulated by the High Court in Westfield that ‘a person upon whom a statute confers a right may waive or renounce his or her rights unless it would be contrary to the statute to do so’. It was submitted that the ‘right’ in question was that conferred upon Cargill Australia by s 236 of the Australian Consumer Law to recover losses or damages because of conduct contravening s 18 of the Australian Consumer Law.
[386] As to whether waiving this right was contrary to the statute, the Viterra Parties submitted that s 18 of the Australian Consumer Law was a norm of conduct only and that it specified no remedy. They submitted that this is why parties cannot agree that particular conduct does not contravene the norm, and why whether the norm is contravened is always a question of fact. They submitted that a range of remedies (including those in ss 236–41, 246) are available for breach of s 18; and that exactly who has standing to exercise each of these remedies varies. Once this statutory scheme was appreciated, the Viterra Parties submitted, it followed that s 236 conferred a right that was for the benefit of claimants only; and accordingly, it was a private right capable of being renounced.
[387] The Viterra Parties submitted that the ability to renounce this right was consistent with the public policy of the Australian Consumer Law. They submitted that there was little difference between this case and Price v Spoor , where the High Court held that a party was permitted to forgo its right to raise a limitation of actions defence conferred by statute. They submitted that cl 10.3 does not impinge on the statutory norm in s 18 of the Australian Consumer Law; and that cl 10.3 also left intact the regulator’s ability to seek other remedies under pt 5–2 of the Australian Consumer Law.
[388] The Viterra Parties relied upon the importance of freedom of contract. They submitted that to impede cl 10.3’s full operation would amount to undue judicial intervention, and that this would be inconsistent with the courts’ role of fostering certainty of contract.
[389] Finally, the Viterra Parties submitted that if Henjo did in fact foreclose the Viterra Parties’ arguments as advanced above, then Henjo was ‘plainly wrong’ to that extent and should be overruled. In that connection, the Viterra Parties relied upon the Scruby and Heydon articles and in effect incorporated them as part of their submissions.
Cargill’s submissions
[390] Cargill framed the Henjo doctrine as one which sits within the pre-existing framework of illegal contracts, as set out by Jacobs J in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (‘Yango’). There, his Honour set out three situations where an agreement may be unenforceable for illegality.
(a) The first is where an agreement is expressly prohibited by statute.
(b) The second is where the agreement is impliedly prohibited by statute.
(c) The third is where the agreement is ‘associated with or in the furtherance of illegal purposes’.
[391] Cargill submitted that the third Yango category takes into account the public policies that are reflected in statutes. They submitted that this has led to a class of illegal contracts known as ‘contracts that are contrary to the policy of a statute’. Cargill submitted that where a statute prescribes a norm of conduct or a duty to be performed in the public interest, it cannot be circumvented by private agreement. They submitted that a person may only forgo a right conferred solely for their private benefit.
[392] Cargill relied upon authorities which described the relevant provisions of the Australian Consumer Law as involving matters of ‘high public policy’; ‘concerned primarily with the protection of the public interest in the prevention of anti-competitive conduct in markets within Australia … and the fair treatment of consumers’; and constituting a ‘fundamental piece of remedial and protective legislation’. In this context, Cargill also quoted Lockhart J’s observation in Henjo that there were ‘wider objections to allowing effect to … special conditions … which … deny or prohibit a statutory remedy for offending conduct under the [TPA]’, because the TPA is a ‘public policy statute … passed … to stamp out unfair or improper conduct’.
[393] Cargill submitted that Lockhart J’s analysis in Henjo has been endorsed by state and federal intermediate appellate courts, and by a justice of the High Court (a reference to Callinan J in Burke).
[394] In response to the Viterra Parties’ submission that the Henjo doctrine applied only to clauses procured by misleading or deceptive conduct, Cargill relied upon IOOF where, they submitted, the Full Court of the Federal Court had said that the public policy which lies behind the court’s refusal to allow a party to contract out of liability under s 52 of the TPA was not limited to clauses in documents whose execution had been procured by misrepresentation; but rather, it ‘extend[s] to any document which purports to excuse a misrepresentor’ from liability under s 52.
[395] Cargill submitted that the right in issue here was relevantly analogous to the voting rights under s 601NB of the Corporations Act 2001 (Cth) that the High Court had held could not be contracted out of in Westfield, and was not analogous to the right to plead a limitation period which the High Court had held could be contracted out of in Price v Spoor .
[396] Cargill submitted that the statutory scheme of the Australian Consumer Law is such that litigants vindicate their private rights concurrently with the public interest, in order to fulfil Parliament’s objective of stamping out bad behaviour.
[397] Finally, Cargill submitted that as a matter of precedent, Henjo stated a general statement of principle which was capable of applying to facts other than those of Henjo. They submitted that to distinguish Henjo on the basis that cl 10.3 was a prospective clause would be unprincipled, and that the relevant public policy considerations apply irrespective of whether the contractual clause is prospective.
(b) Is this court required to follow Henjo unless it is ‘plainly wrong’?
[398] It is necessary to consider a preliminary question as to the nature of the task confronting this court in relation to ground 1, namely: are we required to follow the Full Court’s articulation of the public policy principle in Henjo unless we are persuaded it is ‘plainly wrong’?
[399] We note that the Viterra Parties do not, at least in the first instance, invite this Court to decline to follow Henjo. Instead, they contend that the principles in Henjo are to be confined to a circumstance where the contractual clause relied upon is in a contract which the claimant has been misled into entering. In the alternative they suggest that if the principles are not so confined, then Henjo is plainly wrong. In our opinion, however, to accept the contention that the public policy analysis in Henjo is so confined would be inconsistent with the analysis in Henjo, because it would ignore the ‘wider objections’ there articulated. It would, in effect, remove from consideration the public policy issue. Further, the Viterra Parties’ contention in that regard is directly inconsistent with the decision of the Full Court of the Federal Court in IOOF (which itself rested upon the articulation of the public policy principle in Henjo). We do not consider that the Court’s conclusion in IOOF that the deed in that case was unenforceable for reasons of public policy is appropriately regarded as dicta. It is thus necessary to consider whether IOOF was plainly wrong (although the answer to that question will be informed by whether we consider Henjo to be wrong).
[400] Henjo is a decision of the Full Court of the Federal Court. It has been adopted and applied in the Full Court of the Federal Court (Netaf, Lezam, IOOF) and by Courts of Appeal in New South Wales and Queensland (Scarborough, JM & PM, Downey, Mark Bain). It has also been cited with approval in this Court (MBF Investments). The applicable principles were applied without citing Henjo in Warwick Entertainment by the Court of Appeal in Western Australia.
[401] The public policy principle identified in Henjo has not been the subject of express consideration in the High Court. The case was cited with apparent approval by Callinan J in Burke and McHugh J in Butcher. Although McHugh J was in dissent in Butcher, he did not differ from the majority on the relevant legal principles; rather, he differed on the application of the principles to the facts. McHugh J’s identification of the legal principles was adopted by the plurality and by French CJ in Campbell v Backoffice , which may be seen as an implicit endorsement of the Henjo approach. Nonetheless, we do not consider that the public policy principle identified in Henjo and applied to the Australian Consumer Law has been endorsed by the High Court such that we are required to follow it for that reason.
[402] This Court is required to follow decisions of other intermediate appellate courts unless satisfied that they are plainly wrong. However, this Court is not bound to follow obiter dicta of other intermediate appellate courts, although we would ordinarily be expected to give ‘great weight’ to them. The parties differed as to whether the public policy reasoning in Henjo was part of the ratio, or obiter dicta.
[403] As discussed earlier, the Full Court’s analysis in Henjo advances two reasons why the clauses in issue in that case could not be effective to defeat claims for misleading or deceptive conduct.
(a) The first, based on the Full Court’s endorsement of Wilcox J’s analysis at first instance, is, at least in part, based on the fact that the clauses relied upon were in an agreement which the claimant had been misled into entering.
(b) The second was what the Full Court identified as ‘wider objections’. It was in relation to those ‘wider objections’ that the public policy principle that liability for misleading or deceptive conduct cannot be ousted by private agreement was articulated.
[404] However, before reaching that conclusion the Full Court had concluded that the contractual clauses in issue there did not, as a matter of construction, cover claims for misleading or deceptive conduct. For that reason, the better view is that the subsequent analysis was obiter dicta, even though that subsequent analysis was expressly said to be ‘irrespective’ of the construction issue. That it was obiter dicta is further supported by the absence of detailed reasoning underpinning the court’s conclusion, a matter that has been the subject of comment in the Scruby article and the Heydon article. But, even accepting that this aspect of the Court’s reasoning was obiter, we must of course give it great weight. That, together with the observation that this aspect of Henjo has been followed by several intermediate appellate courts, is our starting point.
[405] We note that Henjo has been subject to recent academic criticism in the Scruby article and the Heydon article. But, as the review of the authorities reveals, it has been extensively cited, relied upon and applied in intermediate appellate courts, both state and federal. The High Court has not addressed the issue in any detailed way, but references have been made to Henjo without criticism or qualification, and the analyses of the plurality and of French CJ in Campbell v Backoffice in characterising the relevance of such clauses as being relevant to issues of fact is consistent with the approach adopted in Henjo and might be seen as an implicit endorsement.
[406] We were invited by the parties to undertake our own detailed analysis of the public policy issue in the context of the Australian Consumer Law, in particular by reference to the decisions of the High Court in Westfield and Price v Spoor and by reference to the Scruby and Heydon articles. One criticism of Henjo, levelled in the Scruby and Heydon articles, is that the Court there failed to undertake a careful, detailed analysis as required by the High Court in Miller v Miller. Heydon also suggests that later cases that have followed Henjo have done so ‘routinely, incuriously, perfunctorily and without fresh analysis’. Whether or not that is so, we consider it appropriate to undertake a detailed analysis of the operation of the public policy principle in the context of attempts to contract out of the Australian Consumer Law.
(c) Is cl 10.3 unenforceable as a matter of public policy?
The starting point
[407] We take as our starting point the accepted proposition that a contractual provision may be unenforceable in three circumstances:
(a) if it is expressly prohibited by statute;
(b) if it is impliedly prohibited by statute; or
(c) if it is ‘associated with or in furtherance of an illegal purpose’.
[408] There was no dispute between the parties that neither the first nor the second category is presently relevant. Rather, the question is whether the third category is engaged.
[409] The third category was explained by French CJ, Crennan and Kiefel JJ in Equuscorp Pty Ltd v Haxton (‘Equuscorp’) as follows:
In the third category of case, the court acts to uphold the policy of the law, which may make the agreement unenforceable. That policy does not impose the sanction of unenforceability on every agreement associated with or made in furtherance of illegal purposes. The court must discern from the scope and purpose of the relevant statute ‘whether the legislative purpose will be fulfilled without regarding the contract or the trust as void and unenforceable’. As in the case when a plaintiff sues another for damages sustained in the course of or as a result of illegal conduct of the plaintiff, ‘the central policy consideration at stake is the coherence of the law’.
[410] Similarly, French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ explained in Miller v Miller , adopting what had been said in Yango, that ‘in addition to, and distinct from, cases where a statute expressly or impliedly prohibits the making or performance of a contract, are cases “where the policy of the law renders contractual arrangements ineffective or void”’. In such cases, the refusal to enforce the contract stems from public policy, but nonetheless, the scope and purpose of the statute are central to the question of whether the legislative purpose is such as to require such a conclusion.
[411] The third category includes contractual provisions that are contrary to the policy or purpose of a statute. As French CJ, Crennan, Kiefel and Bell JJ explained in Westfield, it is the ‘policy of the law’ that a contractual provision will not be enforced where it operates ‘to defeat or circumvent a statutory purpose or policy according to which statutory rights are conferred in the public interest, rather than for the benefit of an individual alone’. Such provisions are ‘ineffective or void, even in the absence of a breach of a norm of conduct or other requirement expressed or necessarily implicit in the statutory text’.
[412] It is also necessary to observe that, as the Scruby and Heydon articles point out, the High Court has, from time to time, emphasised the importance of freedom of contract. Nonetheless, it is plain that the importance of freedom of contract does not displace the common law principle that the three categories of contractual provision identified above are void or unenforceable. The very point of those categories is that they provide exceptions to freedom of contract. It is also important not to gather a selection of statements concerning freedom of contract from varying contexts, and to conclude from such statements that freedom of contract is an overarching principle that requires the conclusion that parties may contract out of s 236. That would be to fail to undertake the analysis required by Miller and Equuscorp.
[413] In the light of the above, the question in the present case is whether the Australian Consumer Law confers statutory rights — in particular, the right to sue for damages in s 236 — in the public interest, rather than for the benefit of the individual alone, so as to invoke the public policy principle articulated above. In answering that question it is appropriate to consider the following matters:
(a) the relevant express terms of the Australian Consumer Law;
(b) the purpose (or ‘policy’) of the relevant provisions and of the Act as a whole; and
(c) the nature of the right conferred by s 236 of the Australian Consumer Law.
[414] We note at this point that the Viterra Parties did not contend that it was permissible to ‘contract out’ of s 18 of the Australian Consumer Law; rather, they contended that a person could ‘contract out’ of s 236 by, in effect, agreeing to waive or forgo the personal right to seek relief conferred by that section.
…
Price v Spoor
[430] Price v Spoor concerned a mortgage, cl 24 of which purported to exclude the provisions of all statutes that ‘curtailed, suspended, postponed, defeated or extinguished’ the mortgagee’s powers and rights ‘insofar as this can lawfully be done’. Following default by the mortgagors, the mortgagee’s successors in title sought to recover the monies owed and possession of the land. The mortgagors pleaded that the claims were statute-barred by ss 10(1) and 13 of the Limitation of Actions Act 1974 (Qld) (‘Limitations Act’). In response, the mortgagees’ successors relied upon cl 24 of the mortgages. The mortgagors contended that cl 24 was void or unenforceable because it was contrary to the public policy manifested in the Limitations Act against the contracting out of its terms, or the public policy of the common law itself.
[431] The High Court rejected that contention, in three separate judgments with somewhat different emphases. In summary:
(a) Kiefel CJ and Edelman J held that a policy of finality of litigation underpins statutory limitation periods, and that such provisions ‘are conducive to the orderly administration of justice and are in the public interest, as it may be expected many statutes are’. However, they observed that the issue is not whether the provisions are ‘beneficial to the public’, but whether the benefit ‘is personal or private or whether it rests upon public policy or expediency’. They concluded that a limitation provision is not ‘dictated by public policy to the exclusion of individual rights’ and that ‘the benefit conferred by statute on a defendant was of a nature that it can be given up’.
(b) Gageler and Gordon JJ ‘substantially agreed’ with Kiefel CJ and Edelman J, but added their own reasons. They observed that the Limitation Actcontained no express prohibition on contracting out, and held that, read as a whole, the Act did not compel any different conclusion. They said this:
The way that ss 10 and 13 of the Limitation Act give effect to the Act’s legislative purpose of ensuring finality in litigation — a legitimate public policy objective — is by conferring a right on an individual defendant in a particular case to elect to plead a limitation period. Once this is properly understood, enforcing a contractual agreement not to plead a limitation period is entirely compatible with the terms of the Limitation Act and the policy underpinning it: because it is always left to an individual to choose whether to forgo the right conferred by statute.
(c) Steward J ‘substantially’ agreed with Kiefel CJ and Edelman J and with Gageler and Gordon JJ, but also added his own reasons. He held that, once it is accepted that the policy of finality in litigation is one that is statutorily entrusted to each defendant, it follows that the limitation defences may be waived. It also follows, as a matter of logic and principle, that a party may agree to promise not to invoke those defences as part of the contractual bargain. In response to the public policy argument, he said this:
The proposition that because the Limitation Act serves, in part, a public policy — viz finality in litigation — the effect of its provisions cannot be adjusted or disturbed by contract, is not correct. The contention ignores the legislative choice made to implement that policy, which is to confer, effectively, an option on defendants either to invoke or not to invoke the benefits of the Limitation Act. In other words, the legislature has chosen to serve the public policy through the conferral of purely private benefits. In that sense, the benefits of the Limitation Act can correctly be seen as purely private in nature.
[432] The Viterra Parties contended that the reasoning in each of these judgments was applicable to s 236 of the Australian Consumer Law.
[433] It is true that, if considered in isolation, it might appear that s 236 is on all fours with the limitation provisions concerned in Price v Spoor . Thus, to adapt Steward J’s language, it could be said that the legislature has chosen to implement the policy in question by conferring on a party an option to invoke or not to invoke the remedy for which the section provides. Or, to adapt the language of Gageler and Gordon JJ, the way that s 236 gives effect to the Australian Consumer Law’s legislative purpose of prohibiting misleading or deceptive conduct — a legitimate public policy objective — is by conferring a right on an individual person in a particular case to choose to make a claim for damages. So understood, enforcing a contractual agreement not to make such a claim could be said to be compatible with the terms of the Australian Consumer Law and the policy underpinning it, because it is always left to an individual to choose whether to exercise or to forgo the right conferred by statute.
[434] However, we consider that, properly analysed by reference to its place in the statutory scheme effected by the Australian Consumer Law, s 236 of the Australian Consumer Law is fundamentally different from the provision considered by the High Court in Price v Spoor .
Why s 236 of the Australian Consumer Law is different from a limitation of actions provision
[435] We accept that an order for damages under s 236 is in the nature of a benefit to the individual who obtains the award of damages. And we accept that a person affected by misleading or deceptive conduct may choose not to pursue a remedy under that section. However, as Westfield makes clear, neither of those matters is determinative of whether a person can contract with another person not to exercise that remedy such that the other person can enforce that agreement, as a matter of contract law. In our opinion, when the provisions of the Australian Consumer Law are considered as a whole, it is apparent that the legislature has selected a range of mechanisms by which the public interest in preventing misleading or deceptive conduct is to be achieved — one such mechanism being the remedy for which s 236 provides. Adapting what was said by the Full Court of the Federal Court in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations (‘Tobacco Institute’), in a passage quoted with approval by Gummow J in Marks, what follows from the conjunction between s 18 and the remedial provisions (including s 236) is not simply the imposition of a duty upon particular persons in respect of misleading or deceptive conduct, coupled with a right to enforce that duty, vested in those persons to whom the duty is owed. The Australian Consumer Law has as a primary objective the protection of perceived public interests, and there is a ‘complex interrelation’ between s 18 and the remedial provisions of pt 5-2.
[436] In our opinion, it is not appropriate to separate out s 236 from the suite of remedies Parliament has provided in relation to a contravention of s 18. Section 236 is not divisible from the provisions that engage it; rather, it is inextricably entwined with those provisions, including s 18. In that regard, if it is the policy of the statute that s 18 (and other norms of conduct) cannot be contracted out of, which was common ground, then it is equally the case that the remedies that follow a contravention cannot be contracted away.
[437] The inextricable link between the norm found in s 18 and the remedy available under s 236 is made clear by Gleeson CJ’s observations in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd :
The relationship between conduct of a person that is in contravention of the statute, and loss or damage suffered, expressed in the word ‘by’, is one of legal responsibility. Such responsibility is vindicated by an award of damages. When a court assesses an amount of loss or damage for the purpose of making an order under s 82, it is not merely engaged in the factual, or historical, exercise of explaining, and calculating the financial consequences of, a sequence of events, of which the contravention forms part. It is attributing legal responsibility; blame. This is not done in a conceptual vacuum. It is done in order to give effect to a statute with a discernible purpose; and that purpose provides a guide as to the requirements of justice and equity in the case. Those requirements are not determined by a visceral response on the part of the judge assessing damages, but by the judge’s concept of principle and of the statutory purpose.
[438] The remedies are properly seen as a collection of mechanisms by which the Parliament has sought to make effective various norms of conduct set out in the Australian Consumer Law, including but not limited to the prohibition in s 18. In that regard, the remedies themselves play an important role in achieving the Act’s purposes. In Henville v Walker , McHugh J noted that ‘the objects of the Act indicate that a court should strive to apply s 82 [of the TPA] in a way that promotes competition and fair trading and protects consumers’. In light of this, his Honour held that an applicant’s negligence should not diminish the quantum of damages available to them, stating: ‘[The Act’s] purposes are more readily achieved by ensuring that consumers recover the actual losses they have suffered as the result of contraventions of the Act’.
[439] The remedies in the Australian Consumer Law provide for a variety of potential consequences for contravention of the various norms of conduct. The efficacy of s 18 would be undermined by removing from the collection of mechanisms one of those remedies. That is particularly so in a context where it is unlikely that the regulator would be able to step in and respond to every alleged contravention of s 18. Even where an alternative remedy, such as an injunction, may be available, including at the hands of the regulator, the recovery of actual loss by an individual ‘may render the statutory remedy even more complete’.
[440] In our opinion the legislature can be understood as having selected, as one of the enforcement mechanisms for s 18, the bringing of a private action for damages, by a person with an interest in bringing such an action. That remedy is a powerful tool for the enforcement of the norm of conduct found in s 18, and an important part of the scheme Parliament has adopted. As the Full Court of the Federal Court observed in Tobacco Institute, in relation to s 80 of the TPA (concerning injunctions):
Undoubtedly, contravention of s 52 may have an impact not only upon the public interest but upon private rights, and what the Parliament has done in s 80 is to provide the means for the vindication of the public interest at the private expense of the litigant who vindicates his private rights concurrently with the public interest … .
[emphasis in original]
[441] We observe that it might be said that an injunction ordered pursuant to s 232 is ‘in its nature, one for the protection of public interest’, whereas an award of compensatory damages is, on its face, a benefit to an individual. However, as in Westfield, the intention of the legislative scheme, considered as a whole, is that it is in the public interest that consumers are provided the right to seek damages for loss and damage suffered.
[442] That is, contrary to the Viterra parties’ submissions, an award of damages under s 236 is not solely for the private benefit of the claimant. It is also for the benefit of the community generally. The removal of the remedy found in s 236, by permitting a person to agree, by way of an enforceable contract, not to pursue an action for damages, would in our opinion undermine the efficacy of s 18 and the purposes of the Australian Consumer Law in prohibiting that form of conduct in trade and commerce.
[443] The interconnectedness of the remedy in s 236 and the norm of conduct in s 18, to the breach of which the remedy is directed, is an important difference between s 236 and the limitation provisions in issue in Price v Spoor . Limitation provisions are not inextricably linked to a particular substantive norm of conduct. They are not enacted as a statutory mechanism by which a specific statutory prohibition is to be made efficacious. Rather, they are better characterised as directed to a more general objective of finality of litigation. True it is that there is a public interest in finality of litigation; but as Kiefel CJ and Edelman J observed, many (if not all) statutes are enacted in the public interest. That public interest is quite different from the selection of a remedy, enforceable at the suit of an individual, as a mechanism to ensure the efficacy of a substantive norm of conduct, such as that found in s 18.
Two further responses to the Scruby and Heydon articles
[444] It is necessary to respond to two further matters raised in the Scruby and Heydon articles. First, we note that Scruby contends that Henjo and IOOF ‘cannot stand’ in the light of Miller v Miller , Equuscorp and (perhaps) the authorities that emphasise freedom of contract (discussed above). Miller v Miller was not, of course, a case concerning the enforcement of contractual terms, it was a case concerning whether an offender owed to a co-offender a duty to take reasonable care. However, it contained a discussion of the ‘third category’ identified in Yango, by way of analogy. The plurality’s articulation in Miller v Miller of the principles applicable in the context of the third category (to which reference is made earlier in these reasons) is, in our opinion, entirely consistent with the conclusion we have reached.
[445] Further, Cargill submitted, and we accept, that Scruby’s view is incorrect when one has regard to the reasoning of the plurality in Westfield. In that case, when explaining the third category of unenforceable contracts their Honours referred to Miller v Miller and Equuscorp in support of the proposition that such arrangements are ineffective or void ‘even in the absence of a breach of a norm of conduct or other requirement expressed or necessarily implicit in the statutory text’. Thus neither of those cases undermine Henjo. To the contrary, they support it in so far as they confirm the public policy principle (although they do not confirm that the proper analysis of either the TPA, or the Australian Consumer Law, is such as to engage the third category). And, for the reasons we have already given, we do not think that statements in disparate cases concerning the importance of freedom of contract lead to the conclusion that Henjo ‘cannot stand’.
[446] Secondly, both the Scruby and Heydon articles referred to the existence of the broad power in s 237 for a court to ‘make such … orders as the court thinks appropriate’ (including a power to vary or avoid contracts) in the event that a person has suffered loss or damage as a consequence of misleading or deceptive conduct. The argument was that, if those powers were not exercised by a court to avoid or remove an exemption clause, then ‘it is hard to see how public policy can have any further role to play’. There is, in our opinion, a significant flaw in this argument. It appears to assume that a person cannot contract out of s 237, and thus would remain able to bring a proceeding seeking to avoid or vary a contract containing an exclusion clause. But, if their approach to the public policy issues were to be adopted, it is not clear that is correct. If a person can contract out of s 237, all that remains is that the regulator can bring a proceeding to vary a contract. That would significantly weaken the enforcement regime for which Parliament has provided (for the reasons already discussed). Alternatively, if a person cannot contract out of s 237, why is that so? It must be for public policy reasons — in which case the question arises as to why s 237 is different from s 236. These issues were not addressed in the Scruby or Heydon articles.
The Henjo principle, IOOF and prospective ‘contracting out’
[447] As the Viterra Parties emphasised, the contractual clause in issue in Henjo was one found in a contract that was itself induced by misleading or deceptive conduct; and that is not this case (insofar as cl 10.3 is concerned). However, we further consider that, once the public policy analysis above is accepted, it must follow that a party cannot ‘contract out’ of s 236 in advance of any misleading or deceptive conduct having occurred. IOOF so held, and we agree with the reasoning there articulated. That is, it would be strange if a party could avoid the operation of s 236 by contracting in advance that the other party would not bring proceedings under that section. That would permit private parties to undermine the operation of s 18, by removing an important aspect of its enforcement, albeit in advance of any contravention. Thus, if accepted, the Viterra Parties’ approach would undermine the important public policy of ensuring the fair treatment of those engaged in trade and commerce.
[448] In that regard, we accept Cargill’s submission that to permit a ‘prospective’ exclusion clause would create an unprincipled distinction between waiving liability for past misleading or deceptive conduct, and waiving liability for future misleading or deceptive conduct, for which there is no sound reason in policy. The policy considerations identified above apply whether or not the contract in question was entered into before or after the occurrence of the contravening conduct.
[449] We observe that this does not mean that a party cannot compromise a claim, or potential claim, based upon a breach of s 18 of the Australian Consumer Law. A person can release another person from liability in a settlement agreement, as discussed in the review of the authorities. But that is not what cl 10.3 seeks to do. Clause 10.3 does not seek to compromise a claim, or potential claim, for misleading or deceptive conduct under the Australian Consumer Law. It seeks to prevent liability for such a claim ever arising. We consider that this is something that cannot be done for public policy reasons, as explained above.
(d) Conclusion on Ground 1
[450] In the light of the above analysis, we have concluded that the Full Court of the Federal Court was correct in Henjo to conclude that liability for misleading or deceptive conduct — including the right to an award of damages under s 236 — cannot be ousted by private agreement, and correct in IOOF to conclude that the public policy principle applies to a clause in a contract not itself induced by the misleading or deceptive conduct.
[451] Given that, we consider that cl 10.3 of the Confidentiality Deed is unenforceable to the extent that it purports, as a matter of legal operation, to preclude Cargill Australia from seeking and obtaining a remedy under s 236 of the Australian Consumer Law. Of course, in the light of the review of the authorities undertaken above, cl 10.3 retains an evidentiary role in determining whether the pleaded representations were made, whether they were misleading or deceptive, and whether Cargill relied upon them. These issues are discussed when we deal with Ground 6.
[452] Ground 1 of the appeal thus fails.
(9) Ground 2: Is cl 10.3 of the Confidentiality Deed unenforceable in relation to deceit?
[453] It was common ground that a contractual clause procured by fraud cannot be relied upon as an answer to a claim founded on that same fraud. The issue raised by ground 2 is whether, as a general proposition, a party can contract out of liability for fraud where the contract itself is not procured by fraud. Cargill accepted that cl 10.3 was not procured by fraud.
…
(b) Analysis
[464] As the authorities previously referred to demonstrate, there is a public policy prohibition on a party contracting out of liability for its own fraud: Pearson, HIH v Chase , Onley and Scarborough. The judge held that cl 10.3 was not effective in relation to deceit claims for that reason.
[465] We agree that cl 10.3 is not effective in relation to the deceit claims against Glencore or Viterra in relation to their own frauds. In our opinion that follows from the authorities discussed above. At the risk of repetition, we refer in particular to the following statements:
(a) ‘no one can escape liability for his own fraudulent statements by inserting in a contract a clause that the other party shall not rely upon them’ (Lord Loreburn LC in Pearson);
(b) ‘[t]here is no doubt that a party cannot contract that he shall not be liable for his own fraud’ (Lord Hoffman in HIH v Chase); and
(c) ‘public policy prevents contracting parties excluding liability for their own fraud’ (the Full Court of the Federal Court in Onley).
[466] The Viterra Parties submitted that there was no authority for the proposition that a contract not itself induced by fraud can be void or unenforceable on public policy grounds. That is, they sought to confine the ambit of the principle by reference to the circumstances in which it had been applied in the decided cases, which all concerned exclusion clauses in contracts induced by fraud.
[467] We reject that approach. The statements in the authorities are, in our opinion, deliberately broad in scope and capable of applying to an attempt to contract out of fraud in advance, as well as after the fraud has been committed. The public policy underpinning the law’s attitude to fraud supports that conclusion. Indeed, a prospective contracting out of fraud is, in some respects, more antithetical to that public policy than a retrospective contracting out, because a prospective provision seeks, in effect, to establish a zone of lawlessness, in which a party may defraud another party at will, without consequences (subject to any relevant statutory provisions). We do not consider that the law has, or should, countenance such a state of affairs.
[468] We observe that, for the reasons previously set out, this does not mean that a party cannot settle a claim, or potential claim, based upon fraud. As discussed above, a person may compromise a claim that cannot itself be contracted out of, by appropriately clear language in a settlement agreement. That was what the contracts in issue in the United Kingdom cases upon which the Viterra Parties relied sought to do. But that is not what cl 10.3 seeks to do. The United Kingdom authorities are thus irrelevant to the present analysis. Clause 10.3 does not seek to settle a claim, or potential claim, for fraud. It seeks to prevent liability for such a claim ever arising. On the relevant authorities, this is something that cannot be done for public policy reasons.
[469] In that regard, we do not accept the contention that Party A may release Party B from a claim in fraud before any facts have occurred giving rise to a dispute. Viterra cited Mac Developments (Gold Coast) Pty Ltd v Rams Financial Group Pty Ltd (‘Mac Developments’) as authority for that proposition.
[470] Mac Developments was a first instance decision of Margaret Wilson J in the Queensland Supreme Court concerning the construction of a deed of settlement entered into between a franchisee and a franchisor. The franchisor had engaged, and was continuing to engage, in a course of conduct which the franchisee claimed was in breach of the franchise agreement. A settlement agreement was entered into. The relevant issue was whether that agreement covered conduct in which the franchisor continued to engage after the settlement agreement. The relevant principle was stated by the trial judge as follows:
Parties to a dispute about a continuing course of conduct may enter into a compromise agreement not only with respect to past breaches, but also with respect to future breaches. The ambit of a compromise agreement necessarily turns on its proper construction.
[471] Mac Developments thus does not support the proposition advanced by the Viterra Parties on the appeal. It may be distinguished because at the time the Confidentiality Deed was executed the parties were not in a dispute about anything, and the Confidentiality Deed did not involve an agreement to compromise a dispute.
[472] We did not consider the comparative material from New Zealand, Canada and the United States, to which Cargill referred, to be of assistance. We observe that the extract from The Laws of New Zealand referred to Pearson in relation to the common law, but then considered the operation of the Contract and Commercial Law Act 2017 (NZ), which has substantially modified the common law (as Cargill accepted). The American authorities concern a set of jurisdictions that differ too greatly from each other, and from the Australian common law. And the Canadian authorities to which we were referred did no more than affirm Pearson, in relation to the effect of fraud on a clause in a contract induced by the fraud. They did not grapple with a clause that purports prospectively to release liability for fraud.
[473] One final observation is apposite. A contractual provision seeking to preclude liability for events which have not yet arisen may, in a particular context, be described as a ‘release’, but the issues of construction in such a situation are quite different to those which apply in relation to settlement agreements, where the relevant considerations are those set out in Grant.
[474] Ground 2 of the appeal thus fails.
(emphasis added)
…
A link to the case can be found here.
