The Fortescue decision: insights from the Commercial Court seminar

As I indicated on my article yesterday, I went to the Commercial Court seminar on the Fortescue decision which was handed down by the High Court of Australia on 2 October 2012.

The insights provided were helpful and interesting.

Justice Robson of the Supreme Court of Victoria noted that the main between the majority decision and Justice Heydon's decision was whether the statement by Fortescue amounted to an opinion. The majority opined that it did not, and Heydon J opined that it did. Justice Robson observed that the majority decision is likely to be used to reject an opinion based approach to the question of whether a statement is misleading or deceptive conduct.

The majority's approach is highlighted at [33]:

33. As has already been noted, ASIC's argument in this Court hinged on the proposition that the impugned statements conveyed to their intended audience a view about the legal enforceability of the framework agreements. ASIC sought to describe what was conveyed as a matter of fact, submitting that "the words 'agreement' or 'binding agreement' convey that it is an agreement containing all of the essential elements that would constitute a contract under Australian law". While it is to be doubted that the proposition which ASIC identified is accurately, or at least sufficiently, described as a statement of "fact", it is ultimately unprofitable to attempt to classify the statement according to some taxonomy, no matter whether that taxonomy adopts as its relevant classes fact and opinion, fact and law, or some mixture of these classes. It is necessary instead to examine more closely and identify more precisely what it is that the impugned statements conveyed to their audience.

Mark Moshinsky, SC, noted the main difference between the decision of the Full Court of the Federal Court of Australia (FCFCA) and the High Court was that the FCFCA looked at the correctness of the statement as a matter of legal enforceability whereas the High Court looked at what the parties did and intended to do. This is highlighted at [37] and [38]:

37. Would they, as the Full Court assumed, ask a lawyer's question and look not only to what the parties had said and done but also to what could or would happen in a court if the parties to the agreement fell out at some future time? Or would they take what was said as a statement of what the parties to the agreements understood that they had done and intended would happen in the future? The latter understanding is to be preferred. 

38. The Full Court's conclusion hinged on the use of the word "contract" or "agreement" in each of the impugned statements. The Full Court assumed that, by using one or other of those terms, the impugned statements conveyed to their intended audience a message about the legal quality (as determined by reference to Australian law) of the contract or agreement referred to in the relevant communication. And the relevant legal quality was identified as future enforceability in the event of a dispute between the parties. That is, the Full Court assumed that the words "contract" and "agreement" necessarily conveyed a message about legal enforceability in an Australian court. But that is too broad a proposition. First, it is necessary to examine the whole of the impugned statements to see the context in which reference was made to the making of a contract or agreement. Second, it is necessary to undertake that task without assuming that what is said must be put either into a box marked "fact" (identified according to whether an Australian court would enforce the agreement) or into a box marked "opinion" (identified according to whether the speaker thoughtthat an Australian court could or would enforce the agreement).

Senior counsel noted the implications of the decision were:

• the reduced relevance of a distinction between what is a statement of fact and a statement of opinion;
• in Justice Heydon's reasons, what principles are applied when there is a statement of opinion; and
• the question of who is the intended audience.

Michael Kingston, the Chief Legal Officer of ASIC, noted that the impugned statements caused an enormous fluctuation in the Fortescue share price and induced a substantial number of share sales, bringing home the enormous effect of the statements on the market.

Mr Kingston questioned whether the standards for market disclosure were now lower than expected. Given the test for disclosure is [by way of broad summary only] what a reasonable person would have expected to have communicated to him or her, he questioned if now the market was required to 'read between the lines' when a disclosure is made, for instance, when a company enters into a 'binding contract' with a Chinese company as Fortescue did.

The Commercial Court seminar series has come to an end for 2012. Many thanks to Justice Davies for her efforts in organising and pulling together such a fantastic cast of speakers for the series.

The Fortescue decision: analysis and the Commercial Court seminar

I'm attending a seminar tonight held by the Commercial Court of the Supreme Court of Victoria on the Fortescue decision by the High Court of Australia: Forrest v Australian Securities and Investments Commission [2012] HCA 39. Here's a flyer for the seminar.

By way of summary Fortescue Metals Group Pty Ltd (Fortescue) signed, between 6 August 2004 and 20 October 2004, 3 4 page agreements with 3 Chinese state owned companies. It sent a letter to the ASX, together with a media release, in which Fortescue said that it had entered into a 'binding contract' with one of the companies. There were further statements made by Fortescue as and when it entered into the agreements with the other Chinese companies during that time.

The nub of ASIC's case was that the contracts weren't binding as Fortescue could not oblige the companies to abide by them, and for that reason, Fortescue engaged in misleading or deceptive conduct in relation to a financial product (being shares) in breach of s1041H Corporations Act; it breached the continuous disclosure requirements under s674 Corporations Act; and Mr Forrest had not exercised his powers or discharged his duties as a director of Fortescue with the degree of care and diligence required by s180 Corporations Act.

At first instance the matter went before Gimour J of the Federal Court of Australia who dismissed the case. The Full Court of the Federal Court allowed an appeal by ASIC, and Fortescue and Mr Forrest appealed to the High Court of Australia.

The Fortescue decision isn't particularly revolutionary as the High Court's attention is focused on what the intended audience would make of the representation that Fortescue had entered into binding contracts with Chinese state-owned companies.

The majority (French CJ, Gummow J, Hayne J and Kiefel J) identified the audience (at [36]):

36 There are at least two difficulties in the Full Court's analysis. Both stem, ultimately, from the need to identify the intended audience for the impugned statements and the message or messages conveyed to that audience. The intended audience can be sufficiently identified as investors (both present and possible future investors) and, perhaps, as some wider section of the commercial or business community. It is not necessary to identify the audience more precisely. When that audience was told that Fortescue had made binding contracts with identified Chinese state‑owned entities, what would they have understood?

The majority then went on to note that no evidence had been led by ASIC which would demonstrate that the audience would understand 'binding contracts' to mean contracts which are enforceable in a court (at [39]):

39. There was no evidence led at trial to show that investors or other members of the business or commercial community (whether in Australia or elsewhere) would have understood the references in the impugned statements to a "binding contract" as conveying not only that the parties had agreed upon what they said was a bargain intended to be binding, but also that a court (whether in Australia or elsewhere) would grant relief of some kind or another to one of the parties if, in the future, the opposite party would not carry out its part of the bargain.

The majority then went on to identify a critical problem, which was ASIC's case that the representation conveyed to the audience a larger message that the agreements were not open to challenge in an Australian Court (at [43]):

43 Once it is accepted, as it must be, that the parties genuinely intended to make a legally binding agreement, the breadth of ASIC's submission (and the Full Court's conclusion) becomes apparent. For the submission was that, although the impugned statements accurately recorded that the parties to each framework agreement had made an agreement which said that the bargain was, and was intended by the parties to be, legally binding, the impugned statements were misleading or deceptive or likely to mislead or deceive because they also conveyed to their intended audience a larger message. This was that the agreements the parties had made were not open to legal challenge in an Australian court. That broader proposition should not be accepted. The impugned statements conveyed to their intended audience what the parties to the framework agreements had done and said they had done. No further message was shown to have been conveyed to an "ordinary or reasonable" member of that audience.

The critical question about the audience was identified by the majority at [48]:

48. It is, however, necessary to bear firmly in mind that the impugned statements were made to the business and commercial community.  What would that audience make of the statement that Fortescue had made a binding contract with an entity owned and controlled by the People's Republic of China? 

This was answered by the majority at [50]:

50. Instead, the central tenet of ASIC's case was that the impugned statements conveyed a message to their intended audience (a) that, in the words of ASIC's statement of claim, it was "practicable to force" the counter‑parties to perform their part of the bargain and (b) that whether it was "practicable to force" performance was to be determined according to the same principles as would be applied to an agreement for the sale of a suburban block of land or the construction of a house in suburban Australia. ASIC established neither of those propositions. The impugned statements conveyed to their intended audience what the parties to the framework agreements said they had done — make agreements that they said were binding — and no more. ASIC did not demonstrate that members of the intended audience for the impugned statements would have taken what was said as directed in any way to what the parties to the agreements could do if the parties were later to disagree about performance. ASIC did not demonstrate that the impugned statements conveyed to that audience that such a disagreement could and would be determined by Australian law. And given that the impugned statements did accurately convey what the parties to the framework agreements had said in those agreements, it would be extreme or fanciful for the audience to understand the impugned statements as directing their attention to any question of enforcement by an Australian court if the parties later disagreed. Such an extreme or fanciful understanding should not be attributed to the ordinary or reasonable member of the audience receiving the impugned statements.

The conclusion by the majority was that the letter which Fortescue sent to the ASX accurately recorded what the agreement provided, and that that letter did not convey to its intended audience any message about whether an Australian Court would enforce that agreement. For that reason, the appeal was allowed by the majority across the board (at [58] to [60], [65] and [67]):

58. The letter which Fortescue sent to the ASX about having made the framework agreement with CREC was not misleading or deceptive and was not likely to mislead or deceive. That letter accurately recorded what the framework agreement provided. The letter did not convey to its intended audience any message about whether an Australian court would conclude that the agreement could be enforced. It conveyed to its intended audience that the framework agreement between Fortescue and CREC was what those parties had described (and a commercial audience would describe) as a "binding contract".

59.  Having regard to the way in which ASIC presented its argument in this Court, it is not necessary to consider separately the other impugned statements to which ASIC referred in its statement of claim. It is also unnecessary to give separate consideration to the "likely to mislead or deceive" limb of s 1041H. In the Full Court, Emmett J expressly based his reasons on this ground. His Honour concluded that the statements "were, at least, likely to mislead or deceive an ordinary and reasonable member of the investing public who read the [impugned statements]". But the inquiry into how an ordinary or reasonable member of the intended audience would receive a message is of its nature hypothetical. That inquiry is therefore apt to answer both whether conduct is misleading or deceptive and whether it is likely to mislead or deceive. Separate consideration of this limb of s 1041H is therefore not necessary once it is decided that an ordinary or reasonable member of the audience would not have understood the impugned statements to have conveyed anything other than what the parties did and intended, and that the statement made about those matters was neither misleading nor deceptive.

60.  ASIC did not establish that Fortescue engaged in misleading or deceptive conduct contrary to s 1041H of the Corporations Act. 

65.  For the reasons already given, the premise for ASIC's alternative argument about the application of s 674 was not established. The impugned statements did not express any relevant opinion. The impugned statements accurately conveyed to their intended audience what the agreements provided. That is reason enough to reject ASIC's alternative argument. Fortescue's statements having described accurately what the framework agreements provided, it is not to be supposed that s 674 nonetheless required Fortescue to publish the very text of those agreements. ASIC should have special leave to cross‑appeal but its cross‑appeal should be dismissed.
70.  ASIC's allegations that Mr Forrest breached the duties imposed by s 180(1) of the Corporations Act on directors and officers depended upon it demonstrating that Fortescue had contravened s 1041H or s 674. Having failed to do that, ASIC's claim of contravention of s 180(1) also fails.

Heydon J, in separate reasons, allowed the appeal, the summary of which is set out at [85]:

85. First, leaving aside issues relating to what was "contractually binding", the agreement was an agreement calculated to ensure that CREC built and financed a railway by compelling the parties to enter further negotiations about the further detailed agreements necessary to make certain that the railway was built within the framework – what cl 7 called the "intent" – of the agreement. Secondly, even if the agreement was not a "binding contract" to build the railway, it was a "binding contract" to engage in the necessary further negotiations and enter the necessary further agreements. Thirdly, so far as Fortescue had represented that there was a "binding contract" to build the railway, the statement was one of opinion, and only fell within s 1041H if ASIC established that Fortescue did not hold that opinion, or, if it did, that it had no reasonable basis for stating it. ASIC did not establish either proposition.

The more interesting aspect of the Fortescue decision was the heavy criticism of ASIC by all members of the High Court.

The majority took ASIC to task in the way it appeared to conflate a pleading on misleading or deceptive conduct with a pleading of fraud, and when this was explained by ASIC, took ASIC to task even further (at [24] and [25]):

24. ASIC sought to explain and justify the inclusion in its statement of claim of a plea that Fortescue had no genuine or reasonable basis for making the statements as a plea that anticipated Fortescue alleging that the impugned statements were expressions of opinion not fact. But it was neither necessary nor appropriate for ASIC to attempt to use its statement of claim to meet an answer that had not been made.

25. This is no pleader's quibble. It is a point that reflects fundamental requirements for the fair trial of allegations of contravention of law. It is for the party making those allegations (in this case ASIC) to identify the case which it seeks to make and to do that clearly and distinctly. The statement of claim in these matters did not do that.

Further, Heydon J at [89] agreed with D Jackson QC's submission that ASIC's pleaded characterisation of the agreement was 'absolute nonsense', describing it as 'false':

89 The above reasoning renders false the allegations in par 28(a)-(c) that the agreement "did not state that CREC would … build and finance the railway", or "construct it on a 'Build and Transfer' basis", or "complete any works". It also renders false the allegations in par 20(a) and (b) that the agreement "did not by its terms oblige CREC" either to "build or transfer a railway facility" or "to finance the construction of a railway facility". Mr D F Jackson QC submitted that leaving aside the question of contractual effect, "with respect, the contention that that is not the effect of the agreement is absolute nonsense." This submission was entirely correct in content, style and tone.

I'm interested in the insights which will come from the seminar, particularly since it is being presented by Michael Kingston, the Chief Legal Officer of ASIC and Mark Moshinsky SC, who appeared as one of the senior counsel for ASIC.

ACCC v Google [2012] FCAFC 49 - the appeal to the Full Court (FCA)

The matter of Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49 was an appeal from the decision of Nicholas J. I gave a summary and analysis of the decision of Nicholas J in my previous post here.

The matter was heard before Keane CJ, Jacobson and Lander JJ, and concerned part of the matter before Nicholas J. Specifically, it concerned four advertisements, or 'sponsored links' which appeared on the Google search page. The 'sponsored links' were triggered by the insertion of key words concerning their competitors. By way of summary, the appeal concerned the following (at [5] to [8]):

5. The other aspect of the ACCC’s case at trial raised what is now the principal issue on the appeal. The primary judge held that in four instances relied on by the ACCC an advertiser had engaged in misleading and deceptive conduct by falsely representing that there was a commercial association or affiliation with its competitor, and that information regarding the competitor could be found by clicking on to what was, in fact, the advertiser’s web address. These instances concerned sponsored links triggered by the insertion of key words relating to “Harvey World Travel”, “Honda.com.au”, “Alpha Dog Training”, and “Just 4x4s Magazine”.
6. His Honour held, however, that Google did not make the representations contained in these sponsored links. His Honour held that Google did not endorse or adopt the advertisement but did no more than represent that the advertisements were advertisements.
7. The ACCC contends in its appeal to this Court that, given Google’s involvement in the process of displaying the sponsored links in response to a user’s search, the primary judge should have held that Google had engaged in misleading conduct.
8. Google supports the decision of the primary judge. It also contends that it was entitled to succeed on other grounds not accepted by his Honour. In this latter regard, it contends that each of the advertisements in question either was not misleading or that Google was entitled to rely upon the defence afforded by s 85(3) of the Act.

The Full Court upheld the appeal and held that Google had engaged in misleading or deceptive conduct. In doing so, the Full Court analysed what conduct was said to be misleading or deceptive and held that Google was more than a 'mere conduit' of information from the advertiser (at [88] to [90]): 

88. It is necessary to be clear as to what it is about Google’s conduct that is said to be misleading or deceptive on its part. Google’s conduct consists relevantly of the display of the sponsored link in response to the entry of the user’s search term in collocation with the advertiser’s URL. The display of the sponsored link is effected by Google’s engine as Google’s response to a user’s search. That which is displayed by Google is called up by Google’s facility as Google’s response to the user’s search. The clickable link, when clicked, takes the user directly to the advertiser’s URL.
89. An ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in collocation with the sponsor’s URL in response to the user’s search. Even if all these circumstances would not be apparent to ordinary and reasonable users, so that Google could not be “seen” by them to be more than a mere conduit, these circumstances show that Google is, in fact, much more than a mere conduit. The reaction of the ordinary and reasonable member of the class is not solely determinative of the issue. As Gummow J said in ACCC v Channel Seven the question is whether the “carrier is and is seen to be a mere conduit”; and as the primary judge acknowledged, the fact that a representation is not understood by the audience to be an advertisement for another person will not necessarily exclude Google from the scope of s 52 of the Act. His Honour said at [186]:

The mere fact that the relevant class may not have understood the representations to have been made by Google cannot be determinative of the question:Cassidy v Saatchi & Saatchi [2004] FCAFC 34; (2004) 134 FCR 585 per Moore and Mansfield JJ at [28].

90. Critical to this conclusion is the fact that the sponsored link is displayed on the screen in response to the user’s query which is made by the entry of selected key words. Thus, the user asks a question of Google and obtains Google’s response. Several features of the overall process indicate that Google engages in misleading conduct.

The misleading conduct was said to be Google's conduct because it responded to a query using search terms and informed the user that the content of the 'sponsored link' is responsive to the user's query (at [92]):

92. The conduct is Google’s because Google is responding to the query and providing the URL. It is not merely passing on the URL as a statement made by the advertiser for what the statement is worth. Rather, Google informs the user, by its response to the query, that the content of the sponsored link is responsive to the user’s query about the subject matter of the keyword.

The Australian Financial Review has reported that Google is considering an appeal to the High Court. The article is here.

Are Google ads misleading - ACCC v Trading Post [2011] FCA 1086

The matter of Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd [2011] FCA 1086 (ACCC v Trading Post) was a hearing before Nicholas J in the Federal Court of Australia in which the ACCC alleged that both Google and the Trading Post had engaged in misleading or deceptive conduct by advertising.

The ACCC published a helpful press release on its site concerning the outcome of this hearing, as follows:

Court decision on Google clarifies misleading advertisements 

The Federal Court has dismissed allegations by the Australian Competition and Consumer Commission that internet search engine Google engaged in practices likely to mislead consumers. 

The ACCC alleged that by failing to adequately distinguish advertisements from search results, Google had engaged in misleading or deceptive conduct. 

Justice Nicholas found that the use of the word “advertisement” or an abbreviation of that word, rather than “sponsored links”, might eliminate or reduce confusion in the minds of some users. 

However he held that the presentation of Google’s search results did not breach consumer law as most users would have appreciated that “sponsored links” were in fact advertisements. 

Since the ACCC instituted these proceedings, Google has changed the description of its advertisements on its search results pages from “Sponsored Links” to “Ads”. 

The ACCC was the first regulatory body to seek legal clarification of Google’s conduct from a trade practices perspective. However Google has been scrutinised over trademark use in the United States, France and Belgium. Google has also faced scrutiny overseas, particularly in the EU, in relation to competition issues concerning its search results business. 

The ACCC also alleged, and Justice Nicholas found, that the publication of a number of advertisements on Google’s search results page in which the headline of the advertisement comprised the business name, product name or web address of a business not sponsored, affiliated or associated with the advertiser was misleading or deceptive. Trading Post, as responsible for some of the advertisements, was found to have made false or misleading representations and engaged in misleading or deceptive conduct. 

The ACCC alleged that as a result of Google’s significant input into advertisements which appear on its search results pages, it was not only the advertiser but also Google which made the representations found to have breached the Act. However, Justice Nicholas found that Google was “merely communicating” the representations without adopting or endorsing any of them. 

“This case is important in relation to clarifying advertising practices in the internet age,” ACCC Chairman Rod Sims said. 

“All businesses involved in placing advertisements on search engines must take care not to mislead or deceive consumers.” 

The ACCC also notes that on the first day of the hearing, 8 March 2010, Google released a “Business Names Policy” which prohibited advertisers’ use of unrelated business names in the first line of ad text, when they are using that name to imply a special relationship with any unrelated third party. This policy was initially applied by Google in Australia and New Zealand only and was expanded to apply to all countries in mid-July 2010.

I have included below a sample page of a Google search to demonstrate what the Federal Court is referring to in its decision, together with explanatory arrows and titles.

The ACCC case against Google is set out succinctly at [12] and [13]:

12. Thus, there are two parts to the ACCC’s case against Google. The first part of the case is concerned with the overall layout and appearance of the results page which, it is said, fails to distinguish sufficiently between organic search results and advertisements. This part of the ACCC’s case extends to both advertisements which might appear on the left hand side of the results page immediately above the organic search results and to those advertisements which appear to their right, on the right hand side of the results page. The second part of the case is concerned with the use of what are said to be misleading keywords in the headlines of particular advertisements which may also appear on the left or right hand side of the results page.
13. The second part of the ACCC’s case is based upon eleven distinct claims involving various advertisers and sponsored links which Google is alleged to have published on its results pages. In particular, it is the ACCC’s case that these sponsored links were misleading or deceptive or likely to mislead or deceive because in each instance they included a headline consisting of a trading name, a product name or a website address of the advertiser’s competitor but which also serves as a clickable link to the advertiser’s website.

The allegation at [13] is more specifically explained at [10] as follows:

10. Sometimes the headline to an advertisement will consist of keywords selected by a user of the Google search engine that corresponds with keywords selected by the advertiser which may, according to the ACCC, also be a business or product name of the advertiser’s competitor. The ACCC alleges that when the user clicks on the headline consisting of such keywords, he or she is likely to be taken to a website that has no association with the keywords selected.

The advertiser referred to is the Trading Post. One of the allegations made by the ACCC is that the Trading Post engaged in misleading or deceptive conduct by advertising its business on Google with a headline 'Kloster Ford', a competitor of the Trading Post.

A summary of Google's response to these allegations is set out at [15] and [16]:

15. As to the first part of the ACCC’s case, Google simply says that there is nothing that is misleading or deceptive or likely to mislead or deceive in the way in which it presented advertisements on its results pages. It says that the expression “sponsored links” and the overall design and layout of its search page sufficiently distinguished such advertisements from organic search results.
16. As to the second part of the ACCC’s case, Google raises various answers. First, Google says that to the extent that any of the twenty sponsored links that are the subject of the second part of the ACCC’s case might be found to convey a representation that is misleading or deceptive or likely to mislead or deceive then any such representation was made by the advertiser and not by Google. Secondly, Google says that it has not in any event been established that any of the twenty sponsored links the subject of the second part of the ACCC’s case conveyed any representation that was misleading or deceptive or likely to mislead or deceive. Thirdly, Google says that if it is established that Google has by publishing a particular advertisement made any representation that is misleading or deceptive or likely to mislead or deceive, then it has a defence under s 85(3)of the Act.

The proceeding is brought under s52 and s53 of the Trade Practices Act 1974 (Cth) as the alleged conduct occurred prior to 1 January 2011. The Federal Court found that Google did not engage in misleading or deceptive conduct in relation to the sponsored links in the yellow box (at [166]):

It seems to me that the inference which ordinary and reasonable members of the class would draw from the appearance on the results page of the caption “sponsored links” when it is used to describe top left sponsored links is that the entries in the coloured box so described are links for which businesses seeking to promote their goods or services made payments to Google. They would therefore understand that these top left sponsored links are in the nature of advertisements.

The Federal Court also found that Google did not engage in misleading or deceptive conduct in relation to the advertiser's links on the right hand side (at [167]):

Similarly, in the case of the right side sponsored links, it seems to me that users would appreciate that they were also in the nature of advertisements. In particular, I do not accept the ACCC’s argument that the absence of the coloured background in the area of the results page where the right side sponsored links appear is likely to mislead or deceive users into thinking that the right side links are not advertisements. My own impression is that right side sponsored links are clearly distinguishable from the organic search results appearing to their left.

The Federal Court also found that Google did not engage in misleading or deceptive conduct in relation to the use of the term 'sponsored links' (now 'ads') and their position on the Google search page (at [173]):

In my view the representation conveyed by the use of the term “sponsored links” in the context in which it was used was that each of the links so described was a form of advertisement. Accordingly, I do not accept that users would have been likely to understand that sponsored links were the same as organic search results or that their position on the results page was determined by the same considerations that determined the position of organic search results. I do not intend to suggest by this that sponsored links are not “search results”. In one sense they are. What sponsored links will appear on a results page depends upon, among other things, the content of the search query. But I do not accept that in publishing “sponsored links” Google represented to users that they were organic search results, that they were the same as organic search results or that their appearance on the page was determined by the same considerations that determine when and where results which were not identified as sponsored links appeared on the page.

The Trading Post was found to have engaged in misleading or deceptive conduct by representing an association between it and Kloster Ford which did not exist (at [130] and [131]) and by representing that information relating to Kloster Ford could be found at the Trading Post Website (at [135] and [136]).

However Google was not found to have made the Trading Post representations (or any other advertiser's representations) by including these advertisements in the Google search (at [195]). The reason for this is set out by Nicholas J at [194] as follows:

Once it is accepted that the ordinary and reasonable members of the class would have understood, as was the fact, that the Kloster Ford advertisement and the Charlestown Toyota advertisement were advertisements, then it seems to me to follow that they would be most unlikely to have understood that any information conveyed by those advertisements was endorsed or adopted by Google. They would have understood that the message conveyed was a message from the advertiser which Google was passing on for what it was worth.

A summary of the findings made by Nicholas J is set out at [354] to [356] as follows:

354.  I am satisfied that there should be a declaration that Trading Post contravened s 52(1) of the Act by, in trade or commence, engaging in conduct that was misleading or deceptive or likely to mislead or deceive by publishing the Kloster Ford advertisement. This is on the basis that by publishing the Kloster Ford advertisement Trading Post made various representations which were misleading or deceptive, or likely to mislead or deceive, in the respects that I have identified. I am also satisfied that Trading Post contravened s 53(d) of the Act by representing, contrary to the fact, that it had an affiliation with Kloster Ford. I will make declarations to that effect in appropriate terms. The case brought against Trading Post based upon its publication of the Charlestown Toyota advertisement has failed due to the evidentiary deficiencies that I have previously identified.
355. I am not satisfied that Google contravened s 52 of the Act by failing to sufficiently distinguish advertisements (sponsored links) from organic search results on its search results pages. Nor am I satisfied that Google contravened s 52 of the Act by making any of the representations that the ACCC alleged Google made by the publication of the Kloster Ford advertisement, the Charlestown Toyota advertisement or any of the other advertisements about which the ACCC complained in this proceeding.

The result in ACCC v Trading Post will come as some relief to Google, which is a company under a lot of pressure at the moment concerning its market power. However the case has shifted some of Google's behaviour. For instance Google has renamed 'sponsored links' to 'ads' on its search engine to more clearly distinguish what are search results and what are advertisements.

Misleading or deceptive conduct - reasonableness of reliance

I read an interesting case summary which was linked on twitter the other day. It's the matter of Bonhomme v. St. James — N.E.2d —, 2011 WL 901966 (Ill.App. 2 Dist. March 10, 2011) (Bonhomme) in the Appellate Court of Illinois. It was a matter about fraudulent misrepresentation in creating a false identity over the internet. The Judges had some interesting comments about reasonableness of reliance which made me reflect on the Australian authories concerning reasonableness of reliance on misleading or deceptive conduct (now s18 of the Australian Consumer Law, previously s52 Trade Practices Act 1974 (Cth)).

Part IVAA Wrongs Act 1958 (Vic) and joining corporate non-parties in liquidation

Part IVAA of the Wrongs Act 1958 (Vic) (Part IVAA) is a powerful tool for defendants being sued in negligence (or for a failure to take reasonable care in general) or for misleading or deceptive conduct when there may be other parties responsible for the loss being sued for. In such matters, the defendant can reduce its liability based on the comparative responsibility of other parties, provided the other parties are parties to the proceedings (unless they are dead or 'wound up'). When a defendant wants to join, as another defendant, a corporate non-party in liquidation, the authorities are unclear as to whether or not leave of the Supreme of Federal Court is required. This is an important consideration for matters issued in inferior jurisdictions, which do not have the power to give leave.