When a person believes they have been a victim of misleading and deceptive conduct such as misleading representations, the sensation of being deceived can give rise to the assumption that they have suffered compensable loss.

However, the case of Bartlett v Weatherill [2017] NSWSC 31 confirms that even if you have relied on misleading representations, you will not be entitled to damages unless you can show that if you could have done something different if the misleading representations had not been made which would have been of greater benefit to you than the course you took relying on the misleading representations.

Background

Bartlett v Weatherill [2017] NSWSC 31 was an appeal from a decision of the NSW Local Court. Dr Weatherill decided to upgrade his private aircraft, used for personal and professional purposes, and purchase a Cessna 400 aircraft.

The Cessna 400 was not available for purchase in Australia for less than $500,000, however it could be purchased for significantly less from the United States. Dr Weatherill sought advice from Mr Bartlett, an aircraft and maintenance engineer, to estimate the cost of bringing the Cessna 400 to Australia from the US. Mr Bartlett provided an estimate of $52,395 (excluding GST) for the transportation costs.

In reliance on Mr Bartlett’s estimate, Dr Weatherill purchased a Cessna 400 from the US for $370,000. After buying the aircraft and transporting it to Australia, Dr Weatherill ended up spending around $490,000.

The Magistrate in the NSW Local Court found that Mr Bartlett’s representation that it would cost $52,395 to transport the aircraft was misleading and deceptive, in breach of section 18 of the Australian Consumer Law, and found that a reasonable estimate would have been $86,000. These findings were not challenged on appeal.

Assessment of damages in the NSW Local Court

Dr Weatherill argued that he was entitled to the difference between what he actually spent on getting the aircraft to Australia ($130,703) and the estimate provided by Mr Bartlett, giving rise to a claim for $58,857 plus interest.

Mr Bartlett argued that, even if he had engaged in misleading or deceptive conduct, Dr Weatherill had suffered no loss as he had paid $490,000 for an aircraft that was worth at least $500,000.

The Magistrate did not accept either of these submissions. The Magistrate determined that the starting point for the damages was the difference between the amount Dr Weatherwill was willing to pay for the aircraft ($370,000 plus the cost advised by Mr Bartlett, with a margin of error built in) and the amount actually paid, resulting in a difference of $52,000. The Magistrate saw the loss as the loss of the use of that money, not the amount itself, and reduced the amount taking into account the value of the asset and the time that Dr Weatherill had been deprived of the money (3 years). The Magistrate ordered that Mr Bartlett had to pay damages of $25,000.

In the NSW Supreme Court

Mr Bartlett appealed to the NSW Supreme Court, and Dr Weatherill filed a cross-appeal asserting that the damages should not have been reduced by the Magistrate.

In allowing the appeal, setting aside the judgment for Dr Weatherill and ordering judgment in favour of Mr Bartlett, Adamson J confirmed that in order to obtain damages for misleading and deceptive conduct under section 236 of the Australian Consumer Law, a plaintiff needs to prove that they suffered actual loss as a result of their reliance on the misleading conduct.

Adamson J referred to the test in Marks v GIO Australia Holdings Limited (1998) 196 CLR 494; [1998] HCA 69 that “a party that is misled suffers no prejudice or disadvantage unless it is shown that they could have acted in some way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted.”

In Marks v GIO the High Court noted that for the assessment of damages for misleading and deceptive conduct “what is important is what that party would have done… not what it might have hoped for or expected”.

Adamson J found that the Local Court Magistrate’s approach was incorrect because it ignored the principle that a wronged party needs to establish actual loss before an award of damages can be made, and because it considered “expectation loss” by looking at what Dr Weatherill was prepared to pay.

Adamson J concluded that Dr Weatherill had “not proved any scenario which would have put him in a better position than the one he was actually in, albeit in reliance on the misleading estimate” and “although Dr Weatherill spent more than he had either hoped or expected in its acquisition, the value of the aircraft exceeded the total sum he had paid for it. Accordingly, he suffered no actual loss.”

Summary

  1. The case of Bartlett v Weatherill [2017] NSWSC 31 is a useful reminder that parties who believe they have been a victim of misleading and deceptive conduct need to carefully consider what loss they have actually suffered as a result of that conduct before deciding whether to bring proceedings.
  2. The wronged party needs to establish actual loss before an award of damages can be made.
  3. Unlike with a claim for breach of contract, damages for misleading and deceptive conduct are not awarded for “expectation” loss, or because a hoped for advantage does not materialise.