SPEL Environmental Pty Ltd v IES Stormwater Pty Ltd [2022] FCA 891

Andrew Hales  |  Laura-Rose Lynch  |  Naomi Graham

Key takeout

Conduct will only be misleading or deceptive when, viewed as a whole and in context, it has sufficient tendency to cause a person to form an incorrect assumption or conclusion about a fact or matter.

Where representations are characterised as opinions for which there is a basis, an objective person will not consider them to be statements of fact and there will be no contravention of misleading and deceptive conduct provisions.

Facts

SPEL Environmental Pty Ltd (applicant) produces, installs and maintains stormwater filtration systems. IES Stormwater Pty Ltd (respondent) is a competing business, which sells and maintains stormwater quality improvement devices.

The respondent was required to attend a Queensland site to provide a quote for maintenance of the stormwater filtration systems previously installed by the applicant. Upon observation, the respondent discovered that the filters installed (NSC Filters) appeared to be different to the model which was known to be sold by the applicant, approved by the Brisbane City Council (Council) for use at the site and deemed to be a pre-approved model acceptable for inclusion in development applications by the Council (OBC Filters).

The respondent conducted investigations, identifying physical differences in the construction of the NSC and OBC Filters, and undertook research to determine whether there was any available data on the NSC Filter, which there was not. The respondent prepared a report explaining its discovery of the NSC Filters at the site. This included a description of investigations and assessments undertaken and opinions formed based upon these (Report). The Report was issued to seven industry participants including Council, the certifying engineer and the property manager of the site at which the filters had been installed, but was not published more generally.

Issues

The applicant claimed that the Report gave rise to five representations (express, or otherwise by implication) which were misleading or deceptive, or likely to mislead or deceive, in contravention of ss 18 and 29 of the Australian Consumer Law (ACL). In particular, identified parts of the Report alleged that:

1. Performance –the NSC Filter’s performance was inferior to the OBC filter.
   
2. Not interchangeable – because of the difference in performance, the filters were not interchangeable and should not be marketed, sold or installed as substitutes.
   
3. Unsuitability – the NSC Filter was, unlike the OBC Filter, untested, unproven and not suitable or acceptable for use in development applications.
   
4. Misleading and deceptive – the applicant was attempting to mislead and deceive customers by selling or installing the NSC Filter as an equivalent substitute.
   
5. Scientific Method –the comparison made between the filters was based on adequate and appropriate research and investigation.

The court was required to determine whether the alleged representations were made, and to the extent that they were, whether they were misleading or deceptive, or likely to mislead or deceive at the time they were made.

Decision

The court dismissed the application, holding that no breach of ss 18 or 29 of the ACL had been established for any of the alleged representations.

The court undertook the widely endorsed two-step analysis of the alleged representations to determine whether there was a breach of the ACL, as follows:

• Step 1: ask whether any of the pleaded representations is conveyed by the particular events complained of; and

• Step 2: ask whether the pleaded representations conveyed are false, misleading or deceptive or likely to mislead or deceive. This is a question of fact.

To undertake Step 1, the court was required to characterise the statement as one of belief or opinion or of fact. The case law requires that the characterisation of a statement is to be viewed from the perspective of the person or ‘ordinary’ or ‘reasonable’ audience to whom the statement or representation is directed (as opposed to from the perspective of the maker of the statement). The court examined the context of the representation noting that it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context.

For Step 2,  the central question was whether the impugned conduct (under s 18) or alleged representations (under s 29), viewed as a whole and in context, had sufficient tendency to lead a person exposed to the conduct to form an erroneous assumption or conclusion about some fact or matter.

The court emphasised that a statement of opinion will not be misleading or deceptive merely because it is incorrect or misinforms, where there is a basis for the opinion and it is validly held. However, if the evidence shows that the opinion was not held or that it lacked an adequate (or any) foundation, a statement of opinion may contravene s 18 of the ACL.

The court held that:

1. In relation to the first four alleged representations, the phrases relied upon by the applicant, when viewed in context, are not misleading and would be interpreted by an objective reader as being opinions involving the interpretation of data. This is supported by the inclusion of phrases in the Report such as ‘the results indicate’, ‘this is clearly evident from’, ‘[the respondent] considers’ and ‘to the best of [the respondent’s] knowledge’.
   
2. Statements in the Report are properly characterised by the respondent as being representative of its state of mind or opinion held, and that there was a basis for that state of mind or opinion. Accordingly, they would not be interpreted as representations of fact to an objective reader.
   
3. The applicant failed to establish that the respondent did not hold the concerns or opinions expressed in the Report, or that there was not adequate foundation for them. In particular, the Report identified the circumstances in which field inspections were undertaken, identified that the filters were subject to comparison to verify differences, identified that a literature review was undertaken and the methodology adopted during investigations.
   
4. An objective reader would not have understood references to ‘performance’ of the filters only to refer to its ability to remove three particular items – being total suspended solids, total nitrogen and total phosphorus. This is supported by references to other subspecies of these elements in the report and expert evidence that performance of filters is not limited to these three items but also its ability to remove gross pollutants, its maintenance requirements and longevity of the device.
   
5. The fifth (implied) representation, ‘that the comparison of the OBC Filter and the NSC Filter was based on adequate and appropriate research and investigation’ did not satisfy Step 1. The Report would be interpreted by an objective reader as a preliminary expert report only, as it was prepared by the respondent based on limited assessments and investigations undertaken during a short period of time. The Report did not assert that any other research or investigation was undertaken, contain assertions about the adequacy of research conducted, and was not (in form or content) a detailed scientific report. This is consistent with the limited distribution of the Report to stormwater industry participants only.
   
6. More broadly, the applicant failed to establish that at the date of the Report, that:
   • the NSC Filter was not inferior, that it was interchangeable with the OBC Filter, and was properly tested and of proven performance for use in development applications. The court did not accept that testing reports provided by the applicant were sufficient, as they compared different filters (model and age) using different testing conditions and stormwater concentrations and were not independently produced; and
   • the applicant was not attempting to mislead or deceive customers by selling the NSC Filter as a substitute for the OBC Filter. The court considered evidence including installation documents provided by the applicant which incorrectly referred to the OBC Filter being used at the site, correspondence stating the applicant offered two years additional free service based on installation of the incorrect NSC Filter and the lack of information about the NSC Filter on the applicant’s website (including no research or test results).

Accordingly, no breach of the ACL was established for any of the alleged representations.