Case Reports

High Court discusses misleading and deceptive conduct issues

In Campbell v Backoffice Investments Pty Ltd [2009] HCA 25 (29 July 2009), the High Court allowed an appeal against an award of damages for misleading or deceptive conduct in connection with the sale of a share representing a half interest in Healthy Water Pty Ltd (the Company). The Court concluded that the evidence did not support the finding by the New South Wales Court of Appeal that certain pleaded representations had been made or that the purchaser had relied upon misrepresentations about the financial affairs of the Company in making his decision to buy into it. The High Court upheld the Court of Appeal’s decision (5:0) that the primary judge had erred in making an order for the vendor of the share to buy it back from the purchaser.

Held: per Gummow, Hayne. Heydon and Kiefel JJ (French CJ agreeing):

(i) The respondents' TPA claims about past performance failed because the first appellant's provision of documents conveyed to a reader no more than that certain estimates of the company's financial performance had been made.

(ii) The respondents established that the first appellant had engaged in conduct that was misleading or deceptive or likely to mislead or deceive in respect of the company's expected performance. However, the respondents failed to prove that, had they known the truth, they would not have proceeded with the share purchase.

(iii)  The respondents should be permitted to argue that the failure to correct the overstating of the company's financial performance were breaches of the share sale agreement warranty that to the best of the first appellant's knowledge, all information provided material to the sale of the share was substantially accurate, complete and not misleading.

(iv) The Corporations Act s 232 should not be read narrowly. Wrongful exclusion from management may be a form of oppression.

(v) This was not a case in which there should have been an order for compulsory sale. Upon appointment of a provisional liquidator, any conduct of the company that was 'oppressive to, unfairly prejudicial to, or unfairly discriminatory against' the first respondent was brought to an end.