Yes, sir, puffing is of various sorts:
the principal are, the puff direct-
the puff preliminary- the puff collateral-
the puff collusive, and the puff oblique,
or puff by implication.
R.B. Sheridan – The Critic
INTRODUCTION
Historically, the common law did not attach much legal significance to mere exaggerated praise or “puffing” made by one party to another during pre-contractual negotiations.[1] An intending purchaser was “…expected to be able to judge the value of a salesman’s eulogies with a healthy scepticism.”[2]
Consequently, laudatory statements or puffs which were not statements of fact were not regarded as actionable representations – simplex commendatio non obligat.[3] The reasoning here was that puffing was generally motivated by a desire to do business, not to commit a fraudulent deception.[4] Another suggested reason is that it would “…be unfortunate (and destructive of many a salesperson’s livelihood) if legal consequences were to attach to..(flamboyant statements)”.[5]
According to Grieg and Davis[6] the common law approach arose during the course of the nineteenth century “…in the heyday of freedom of contract and the belief in the self-reliance of the individual…” but that since the middle of this century a more protective attitude emerged which was more likely to require a person to stand by what had been said. So for instance, in
Senanayake v Cheng [7] the description of a business as a “gold mine” was held to be actionable.
Statutory recognition of this development has been achieved in Australia with the passing of the Trade Practices Act 1974 (the Act). The distinction created by the Act (as opposed to the position at common law) was explained in the Full Federal Court Judgement of RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd [8] to be the following:
“…s 52 does not distinguish between representations of fact and representations as to matters
other than fact. The common law authorities respecting fraudulent and innocent
misrepresentations of fact have no necessary application to s 52. The section is concerned
with conduct which misleads or deceives or is likely to do so. If the making of the statement is, in
the circumstances of the case, misleading or deceptive or likely to be so, then it contravenes
s 52. It is the effect or likely effect of the statement which is the determining factor.”
According to Davis J therefore, at common law, in order to determine whether a laudatory statement would be actionable or not, the test would be whether it amounted to a statement of fact, whereas the test for liability under s 52 would be whether the statement in question had the effect of being misleading or deceptive or was likely to mislead or deceive.
This paper will investigate the extent to which this distinction has been applied by the cases which have had to consider whether statements in the nature of puffs were actionable under
s 52 or its State equivalents. To that end it is proposed to examine the relevant cases in chronological order followed by an analysis of whether the distinction has been uniformly applied or not.
THE CASES ANALYSED
In Pryor v Given [9] ( a decision of the Full Federal Court which did not involve s 52 but convictions on information relating to contraventions of s 53A(1)(b) of the Act) television advertisements had included the words “a wonderful place to live” and “watch it grow” as statements concerning land which was in fact zoned in such a way that houses could not be built on the land without special approval from the relevant local authority and without satisfying certain onerous conditions.
Although it was stated in the judgement of Lockhart J ( who spoke for the Court) that the statement “a wonderful place to live” was by itself mere puffing its significance was that “…it is part of the advertisement which, taken as a whole, inevitably conveys the impression that a house can be built on each of the one-quarter blocks of land. Plainly the advertisement was misleading.”
The Federal Court decision of Lockhart J in Stuart Alexander & Co (Interstate) Pty Ltd v
Blenders Pty Ltd [10] has become a leading case on the topic and has been referred to in several subsequent decisions. The case involved a television commercial placed by the respondent ( a competitor of the applicants) which made a number of comparative statements about the applicant’s product, some of which represented that the applicant’s product was twice as expensive as that of the respondents.
Although the Court found that in fact the applicant’s product was only 53.2% more expensive than the respondent’s product, the learned Judge stated (at 164/5) that:
….I think a robust approach is called for when determining whether television commercials
of this kind are false, misleading or deceptive. The public is accustomed to the puffing of
products in advertising. Although the class of persons likely to see this commercial is wide,
it is inappropriate to make distinctions that are too fine and precise.
As the commercial lasts for only 30 seconds and various things happen during its screening,
it is difficult to measure with precision the difference in price …. (I)n all the circumstances,
when looked at broadly, the commercial is not false, misleading or deceptive in respect of the
prices…. The overall impression is that Moccona is considerably more expensive than
Andronicus, and this it is.
In Pappas and Another v Soulac Pty Ltd and Another [11] the applicants claimed that the respondent’s agent had contravened s 52 and s 53A of the Act by making certain representations concerning a shopping center subsequently purchased by the applicants from the respondent.
In dismissing the application, Fisher J, after noting (at 233) that what may be misleading to one person may not be misleading to a person with different characteristics, and after finding that the respondents had considerable commercial experience, said (at 234/5) that:
It is important to note that many of the statements….were wholly or in part statements
of opinion, not capable of being objectively proved to be true or false. They were also
essentially the type of introductory comments, in the nature of puffery, made at the start of
the negotiations for the purpose of attracting the interest of a possible purchaser. As such they
became irrelevant or of little, if any, significance when detailed information is subsequently given
a fortiori, to a potential purchaser with commercial experience. To the extent that they are
essentially puffery, it is proper to be reluctant to elevate them to the status of potentially
misleading conduct.
The decision of Dewhirst and Another v Budget Rent- A-Car Systems Pty Ltd [12] had to do with the words “the leader in the rental car market for luxury cars” which had appeared in an advertisement in an airline magazine. The Full Federal Court found that the words were not “mere puffery, of no consequence in the choice of a car rental service”. Instead, being a claim to the greatest share of a market, the words were a “specific and reasonably precise assertion of fact” which would have an influence on consumers including the class of consumers to which the magazine was directed.
In Byers and Others v Dorotea Pty Ltd [13] Pincus J in the Federal Court Found that the statement “bigger and better” used to describe certain units subsequently purchased by the applicants were not merely a puff. Whereas in other circumstances that might have been the case, in casu the statement “was intended to, and did convey, a clear and wrong impression, namely that the new building was to be on a grander scale than the old one.”
The importance of the context of a puff was stressed by Gray J in the decision of the Federal Court in Aliotta v Broadmeadows Bus Service Pty Ltd & Another (1988) ATPR 40-873. There it had been represented to the applicant, prior to the purchase of the property in question, that Cleanway Brambles would be a secure tenant in respect of the premises on the property. It subsequently transpired that Brambles could not use the premises for its purposes without a permit which was refused by the relevant local authority. The respondent maintained that it had told the applicant nothing but the truth.
This argument was rejected for two reasons, one of which was that although statements which would have the effect of persuading the applicant of the virtues of having Brambles as a tenant would normally be no more than puffs, and that care should be taken not to elevate every puff in the course of a transaction into a contravention of s 52, the question in each case as to whether a puff amounted to misleading or deceptive conduct depended upon its context. In casu, an express representation that Brambles would be a secure tenant had been made. This had conveyed the impression to the applicant that the proposed lease with Brambles would be entered into and that the premises, at least for the foreseeable future, would be occupied by a good tenant.
In Schindler Lifts Australia Pty Ltd and Another v Debelak and Others [14] the respondents had made numerous representations to customers and potential customers of the applicants, some being that since its acquisition by the first applicant, the second applicant was no longer a well regarded company or of good commercial standing and that the first applicant was not of good commercial standing.
Although the applicants succeeded on other grounds, as regards these representations Pincus J (at 285) said the following:
A claim by a trader that his goods or services are “highly regarded” would ordinarily be taken to
be mere puffery. A statement to contrary effect about a rival’s goods should not be held to
overstep the permissible limits of denigration….. It has to be conceded that a statement by a
rival trader which is universally acknowledged as pre-eminent in its field that it is “not highly
regarded” might be breach of s 52 as being simply a lie. In my opinion, however, in the
circumstances of this case, to treat statements such as that in which the words complained of are
contained as within the prohibition in s 52 would be to place unreasonable legal inhibition on
ordinary communication in Australian business. I hold that the relevant sentence is not caught by
the section.
The context of the puffery was again emphasised in Argy and Another v Blunts and Lane Cove Real Estate Pty Ltd (trading as Blunts Of Lane Cove) and Others .[15] It was there held by Hill J that whereas the words “unlimited potential” which appeared in a brochure used to describe the property in question might normally be regarded as a mere puff and unlikely to mislead or deceive anyone if used on their own, when those words were coupled with a false representation that the property was zoned in such a way as to permit almost unrestricted development, they were misleading and deceptive.
In the case of Makita (Australia) Pty Ltd v Black and Decker (Australasia) Pty Ltd [16] the word “amazing” had been used by the respondent in a televised advertisement which depicted a test meant to demonstrate that the respondent’s drill was more powerful than that of the applicants. It transpired that, for various reasons, the test was not fairly conducted as regards the applicant’s drill as it did not, in effect, amount to a comparison between apples and apples.
It was held by Wilcox J that the word “amazing” was used to convey an impression that something highly unusual and surprising, contrary to the natural order of things was taking place, when in fact what was being witnessed was only to be expected under the circumstances. Consequently, the use of the word amazing in the advertisement exceeded mere puffery.
In the case of Collier Constructions Pty Ltd v Foskett Pty Ltd [17] the claim that the provisions of s 52 had been breached by the statement “ if you don’t get (the respondent) to build your new home you wont be getting the best deal” was dismissed by Gummow J who held that the statement was contingent upon so many”…variable, subjective and objective factors, including, but going beyond price and size..” that it could not be regarded as a representation of the superiority of what was offered by the respondent over that of its competitors.
It was contended by the applicant in the case of Hoover Australia Pty Ltd v Email Pty Ltd [18] that a promotional video sent by the respondent to wholesalers and retailers which compared the parties’ washing machines conveyed a representation which was misleading or deceptive.
In his judgement (at 375) Gummow J, though finding for the applicant, stated that although a comparison of goods and services may be misleading because of the omission of material necessary to make the comparison fair, nevertheless the public and the retail staff to whom the video had been sent were accustomed to puffing of products in advertising. He then sounded a warning that care was needed to “avoid an insistence by the law upon distinctions that are too fine and precise.”
In the High Court of New Zealand case of New Zealand Industrial Gases Ltd v Oxyman, [19] the defendant had represented on its business card that its product was of “high purity”. The plaintiff’s contention of that this amounted to a misrepresentation was rejected by the Court. It was said by Fisher J (at 165) that:
I would have thought that any reasonable reader of the card would draw from that the impression
that, as is customary when commercial enterprises are announcing themselves to the public, there
is an element of self-congratulation to the quality of the service to be provided – in other words
business puffery. The plaintiff seeks to elevate that expression to a more precise and technical
level…
In the Federal Court decision of Jacques & Ors v Cut Price Deli & Ors, [20] although the applicants succeeded on other grounds, Spender J, relying upon the decision of Pappas found that representations as to the respondent’s group purchasing power, advertising, rebates and the fact that there was a “Melbourne businessman” in the wings interested in purchasing the franchise in question were no more than “puffery and understood by the applicants to be in that category of the statement”. The learned judge found his view in this regard to be fortified by the lengthy negotiations which had preceded the agreement and that the representations were in any event not factors that induced the applicants to enter into the agreement.
The respondent in the Federal Court decision of Comalco Aluminium Ltd v Mogal Freight Services Ltd [21] had represented in laudatory terms that it was a competent and skilled freight forwarder. The Court found as a fact (at 692) that the applicant had relied upon that representation when it engaged the respondents services. It also found as a fact (at 694) that the respondent was incompetent, lacked the necessary skill to do the work of a freight forwarder and had engaged in actionable misleading or deceptive conduct in representing that it was competent and skilled.
In General Newspapers Pty Ltd and Others v Telstra Corporation, [22] a decision of the Full Federal Court, the applicant had been informed by the respondent that it was on the tender list after it had expressed interest in tendering for the printing of telephone directories and the respondent had inspected the applicant’s premises. After the respondent had entered into a contract with its existing printers without calling for tenders, the applicants, in proceedings seeking judicial review, alleged that the respondent’s conduct had been misleading in relation to the calling of tenders.
In a joint judgement, Davies and Gummow JJ (at642) held that s 52 does not require arms-length negotiations to be completely open or require full disclosure at all times. The facts of each case should be considered. They then went on to say:
Thus, in the ordinary course of commercial dealings, a certain degree of ‘puffing’ or exaggeration
is to be expected. Indeed, puffery is part of the ordinary stuff of commerce. So also is a certain
degree of ‘put-off’ evasion or obfuscation by commercial people seeking to resist disclosing
information which is confidential. Discussions in commerce are so understood.
The decision in Pappas was also followed by O’Loughlin J in the Federal Court judgement in Heidelberg Graphics Equipment Limited v Andrew Knox & Associates Pty Ltd & Others [23] where statements that had been made about the financial prospects of a business which was found to be puffing. There had also been a representation that an imagesetter machine was the best in the world which was also found by the learned Judge to be a puff.
In Petty v Penfold wines Pty Ltd [24] it had been represented to the appellant that he was getting the best deal available from the respondent, which was in fact not the case. The trial judge had found that this representation was mere “commercial puffery” and were not of a kind to be relied upon.
All three judges of appeal, however, disagreed with this view, Wilcox J stating
(at 289) that the representation could not be dismissed as mere puffery as it was a statement of specific fact which was either true or false, and being false, the respondent had been the victim of misleading conduct. Hill J found that the appellant was an aggressive discounter and a reasonable person in his position would not have regarded the representation as mere puffery or as clearly not intended to be relied upon. The appeal was nevertheless dismissed as two of the judges (Hill and Whitlam JJ) found that it had not been established that reliance had been placed on the representation made to the appellant.
In the decision of the Federal Court in Dynamic Lifter Pty Ltd v Incitec Ltd and Others [25] the respondent complained that the words “as it had for generations” on the front page of an advertising brochure was misleading or deceptive because it meant “always” or at least a period of 60 years (a generation being 30 years). This contention was rejected by the court which held that the statement was a “classic puff” and could not possibly be read to mean always or 60 years.
In Sharp and Others v Ramage and Another [26] the defendant agent had advertised property as being “ideally suitable offices, restaurant, warehouse, display sales.” The property in question was a Crown grant which had the effect that it could not be used other than as a “hall site.” An argument by the defendant’s counsel that the words used in the advertisement were merely an expression of opinion and not a statement of fact was rejected by the Court. Ipp J in his judgment (at328) found that the words were not only statements of fact but, indeed, statements of present fact which meant that the property in question was capable of being put to the commercial uses stated.
In Gurr & Gurr v Forbes & Anor [27] the seller’s agent had represented to the purchaser of a business that “ the business ran itself”. Although the purchaser succeeded on other grounds, the Federal Court found that the statement that the business ran itself fell into the category of puffery. Carr J (at 42,131) had two reasons for his finding, firstly, because no reasonable purchaser would take the statement literally and secondly because the statement was inconsistent with other statements made by the agent concerning the time which the proprietor was obliged to work in the operation of the business.
DISCUSSION
Before analysing the consistency or otherwise of the decisions which have considered the effect of laudatory statements for the purposes of determining liability under the Trade Practices Act 1974,
it is necessary to examine why, under the common law, such statements were not as a rule treated as actionable misrepresentations.
We have seen that the rationale provided by some authors is that it would be against commercial realism to attach legal consequences to pre-contractual flamboyant descriptions which did not amount to fraud or representations of fact. Fridman favours this approach when he says[28]:
Clearly, while courts will protect an innocent party from gross fraud, they will not attempt to
protect a contracting party from all types of conduct. In accordance with the general principles of
the law of contract, a party is expected to look look out for himself, and make his own bargains. If
he has done foolishly, this is his own fault and he is left to his own devices. Only from totally
improper conduct…will he be granted protection and a remedy by the courts.
It is submitted that this approach is correct. The law should afford protection to those who have been misled by fraud or to cases where praise “has descended into fact”[29] and the facts, being untrue, amount to misrepresentations. The reckless and impulsive who have contracted for hard bargains, should, in the absence of factors such as fraud, undue influence or unconscionable conduct, be expected to abide by their transactions.
The statement by Lockhart J in Stuart Alexander [30] that the public is accustomed to the puffing of products in advertising is supported by authors such as Carter and Harland[31] who state that “such statements (puffs) are understood by all as not intended to be statements of fact.”
It is therefore submitted that there are very sound commercial reasons why laudatory statements should not, without more, amount to actionable misrepresentations. If that were not the case, not only would it be destructive of many a salesperson’s livelihood (as suggested by Cheshire and Fifooy), but it would make the advertising of products too legally hazardous to contemplate. There is clearly a limit to truth in advertising so that flamboyant and colourful hyperbole should not, in the absence of such hyperbole or flamboyance descending into misrepresentations of fact, be actionable. When watching advertisements on television, we all know that Shane Warne can’t bowl a cricket ball round the world and that rams can’t jump over the moon.
Given, then, that in RAIA Insurance[32] Davies J drew a distinction between liability for fraudulent and innocent misrepresentations of fact under the common law and the liability created by s 52 for conduct which misleads or deceives or is likely to mislead or deceive, do the decisions outlined above demonstrate that this distinction has made a material difference to the common law position in cases where the courts have been required to determine whether laudatory statements were actionable under s 52 or not?
What is noteworthy about the cases is how often various judges have not only indicated a reluctance to impose liability for laudatory statements, but have also mentioned good reasons for not doing so.
As we have already seen, examples of this are:
- In Stuart Alexander,[33] Lockhart J said not only that the public is accustomed to puffing in advertising, but that a robust approach should be taken in determining whether television commercials are false, misleading or deceptive;
- In Pappas,[34] Fisher J stated in terms that there should be reluctance to elevate puffery to the status of potentially misleading conduct:
- In Aliotta [35] Gray J said that care should be taken not to elevate every puff in the course of a transaction into a contravention of s 52.
- In Schindler [36] Pincus J warned against the placing of unreasonable legal inhibition on ordinary communication in Australian business.
- In Hoover [37] Gummow J, in the context of puffing, sounded a similar warning against the insistence by the law on distinctions that are too fine and precise.
- In the High Court of New Zealand decision of Oxyman,[38] Fisher J said that it was customary to use puffery when announcing commercial enterprises to the public.
- In General Newspapers [39] Davies and Gummow JJ opined that, not only is puffery to be expected in commercial dealings, it is part of the ordinary stuff of commerce.
It is submitted that the approach of these judges to the question of liability under s 52 for the making of laudatory statements is correct. It is only in clear cut cases that puffery should be “elevated to the status of potentially misleading conduct.”
In five of the cases where laudatory statements were found to be misleading (Pryor, Dewhirst, Aliotta, Argy and Makita), liability arose because of the context in which the laudatory statements were placed. In four others ( Byers, Comalco, Petty and Sharp) the statements were clearly misleading. It is, for example, undoubtedly misleading to describe yourself as “competent and skilled” in certain field when in fact the opposite is true, or to state as a fact that property could be put to commercial use when it can lawfully only be used as a hall site.
It is submitted that in all these cases the statements in question, either stand alone or in their context, would have created liability at common law as well as being actionable misrepresentations.
CONCLUSION
It is submitted that the distinction made in RAIA Insurance between liability at common law for fraudulent and innocent misrepresentation and liability in terms of s 52 for statements which are misleading or deceptive, or are likely to mislead or deceive, is without practical effect as far as laudatory statements are concerned.
There are sound commercial reasons why there should be a reluctance to attach legal significance to laudatory statements and these commercial reasons have been recognised and applied by judges in determining whether there should be liability under s 52 for such statements
In those cases where, either because of their context or because they were factually misleading, laudatory statements were found to be misleading or deceptive for the purposes of s 52, there would in any event have been liability at common law for those statements.
The fact that the distinction is without practical effect is, however, a good thing. As pointed out by Grieg and Davis[40] there is no longer the tolerant approach that existed in the last century towards laudatory statements and there has been a judicial swing to require persons to stand by what they say.
It is therefore submitted that the common law provides sufficient protection against the potential misuse of laudatory statements and it would be a mistake to use the provisions of s 52 (or its State equivalents) to impose an “unreasonable legal inhibition on ordinary communication in Australian business” by widening the liability net for the use of laudatory statements.
[1] Dimmock v Hallett (1866) LR 2 Ch 21- the leading case where the description “fertile and
improvable land” was held to be a “…mere flourishing description by an auctioneer.”
[2] D.W. Grieg and J.L.R. Davis, The Law of Contract at 833.
[3] M.E. Hiscock, Law of Contract in Australia, 2nd ed, at 432.
[4] G.H.L. Fridman, The Law of Contract in Canada, 3rd ed, at 297.
[5] Cheshire and Fifoot’s Law of Contrct 7th Australian ed, para11.11.
[6] Ibid. at 833
[7] [1966] AC 63. See also Andrews v Hopkinson [1957] 1 Q.B. 229 and Brown v Sheen and
Richmond Car Sales [1950] 1 All ER1102
[8] (1993) 112 ALR 511 at 513.
Seealso Collier Construction Pty Ltd v Foskett Pty Ltd (1990) IPR 44 where (at 53) Gummow J
stated that “..it would not be correct…to decide that if a statement was…classified as a ‘mere
puff’ at general law, it necessarily did not have the character of conduct” for the purposes of s 52.
[9] (1980) 30 ALR 189.
[10] (1981) 37 ALR 161.
[11] (1983) 50 ALR 231.
[12] (1985) 8 FCR 1.
[13] (1986) 69 ALR 715.
[14] (1987) 89 ALR 275.
[15] (1990) 94 ALR 719.
[16] (1990) 18 IPR 270.
[17] (1990) 19 IPR 44
[18] (1991) 104 ALR 369.
See also Narhex Australia Pty Ltd v Sunspot Products Pty Ltd (1990) ATPR 41-036 at 51,538.
[19] 24 IPR 161
[20] (1993) ATPR 46-102
[21] (1993) 113 ALR 677
[22] (1993) 117 ALR 629
[23] (1994) ATPR 41-326
[24] (1994) 49 FCR 112
[25] (1994) 30 IPR 198
[26] (1995) 12 WAR 325
[27] (1996) ATPR 41-491
[28] The Law of Contract in Canada, 3rd Ed. at 297
[29] See Hiscock (op. cit.) at 432
[30] (1981) 37 ALR 161 at 164
[31] Contract Law in Australia (3rd Ed.) at para 1007
[32] (1993) 112 ALR 511
[33] (1981) 37 ALR 161
[34] (1983) 50 ALR 231
[35] (1988) ATPR 40-873
[37] (1991) 104 ALR 369
[38] 24 IPR 161
[39] (1993) 117 ALR 629
[40] The Law of Contract at 833
