Australia: Parallel Negotiations Found to be Misleading and Deceptive

News & Publications
Last Updated: 14 September 2010
Article by Scott Alden

Parallel negotiations found to be misleading and deceptive

Undisclosed parallel dealings were found to be misleading and deceptive in a recent case involving protracted negotiations and two of Australia's retail giants, but the plaintiff's victory was pyrrhic as it lost a damages claim entirely, mostly through ill-considered use of the phrase 'deal breaker' at the negotiating table.

The facts

In November 2007, the Port Macquarie-Hastings Council (Council), for a second time, publicly invited expressions of interest (EOI) in purchasing and developing a supermarket development site. Both Woolworths and Coles responded and the Council accepted a conditional offer from Woolworths.

Negotiations between the Council and Woolworths ensued, and various drafts of a contract for sale were exchanged between solicitors.

One of the main unresolved issues was Council contribution to any contamination on Council land, with Woolworths originally requiring an indemnity over any contamination encountered. The Council was unwilling to provide the indemnity, but agreed to accept liability for removing any contaminant found up to a limit of $500,000. Woolworths agreed to this position, provided it was able to undertake further due diligence on contamination during the period between exchange and settlement, and was given a right to rescind the contract should the cost of removal or remediation be excessive. Council, however, did not agree to these provisos.

In mid 2009, while it was still negotiating with Woolworths, the Council also started negotiating with Coles as a backup plan, but deliberately did not tell Woolworths. Negotiations between Woolworths and the Council reached an impasse, and Council sold the land to Coles.

Woolworths subsequently commenced proceedings against the Council and Coles, arguing that it suffered loss by their conduct, and claiming damages. Woolworths contended that, had the Council disclosed that it was negotiating with another party, Woolworths would have agreed to proceed on the terms required by Council and would have bought the land.


At issue in the case, Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726, was: 

  • whether the Council had engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s.42 of the Fair Trading Act 1987 (NSW) (the Act);
  • if so, whether Coles was knowingly involved in the contravention;
  • whether Woolworths suffered any loss by the conduct complained of, and if so the quantum of its loss;
  • and the Council's cross-claim against Woolworths, saying that Woolworths engaged in conduct which was misleading by holding out that its position was that it would not proceed with the purchase of the land unless certain conditions were included in the contract, when its true position was otherwise. The Council argued that if Woolworths suffered loss by its conduct, it correspondingly suffered loss by Woolworths' conduct, and it claimed indemnity.  


Justice Hammerschlag of the NSW Supreme Court held that the Council's conduct was in the circumstances misleading or deceptive or likely to mislead or deceive. However, Woolworths had not established any loss by that conduct. Further, it had failed to establish that Coles knowingly participated in the contravention.

Misleading or deceptive conduct

His Honour said that the circumstances of the case were such as to give rise to the clear and reasonable expectation on Woolworths' part that the Council would inform (if it were the case) that the negotiations it was conducting with Woolworths were not, or had ceased to be, exclusive. Any reasonable person in Woolworths' position would have had such an expectation because:

  • the EOI process entailed an initial selection of one, and only one, candidate for negotiation; 
  • the significant time and money Woolworths was about to spend in seeking to realise the opportunity following the acceptance of the conditional offer; and 
  • Woolworths was under the misapprehension that the Council was negotiating with it exclusively.

Woolworths had no binding contractual exclusivity arrangement from the Council, and there was no statutory inhibition on the Council dealing with Coles. This, however, did not displace the reasonable expectation that the Council would not clandestinely conduct negotiations outside the framework of the process without telling Woolworths that the negotiating relationship was no longer exclusive. The Act imposes a norm for conduct in trade or commerce, and the Council fell far short of that norm, not inadvertently but deliberately. The deliberate silence over the fact that negotiations with Woolworths were not, or had ceased to be, exclusive was in the circumstances misleading or deceptive or likely to mislead or deceive and a contravention of s.42(1) of the Act.

Did Woolworths suffer any loss?

His Honour said that to determine whether Woolworths suffered any loss the first question to be answered was whether Woolworths would have shifted position. The second question was whether, if Woolworths would have shifted position, what the chances were that a sale to it of the land would have happened.

The repeated use of the term 'deal breaker' by Woolworths' employees left no doubt that Woolworths was prepared to walk away. His Honour was not satisfied that Woolworths would have forsaken its principles, even had it been informed that its position was no longer exclusive, or that Coles was in the wings.

Coles' knowledge

Although it was unnecessary to consider whether Coles was knowingly involved in the Council's contravention of s.42(1), his Honour nevertheless considered the matter. He found that Coles did know the Council had been negotiating with Woolworths, but that Coles was told very little and did not know the state of negotiations. Even if Coles knew or believed that at some point the Council was negotiating exclusively with Woolworths, Coles was not aware that the Council had not disclosed to Woolworths that its position was no longer exclusive.

Accordingly, Woolworths' claim against Coles failed.


His Honour then considered the amount of damages he would have assessed had Woolworths suffered any damages by the Council's conduct.

As it did not acquire the development site, Woolworths proceeded with the refurbishment of the Food for Less store it operated in Port Macquarie and the construction of a freestanding Dan Murphy's outlet next door. Accordingly, the court said that damages suffered by Woolworths would be the difference between the financial position it would have been in, had the development proceeded, and the position it was in, that is, without the development, but with the refurbishment of the Food for Less store and the new stand-alone Dan Murphy's.

Having regard to expert evidence, his Honour held that Woolworths would have been entitled to an ultimate revenue figure of 5.22%.

Council's cross-claim

His Honour held that the Council was not misled by anything said or done by Woolworths, and, if it was, it had suffered no loss. Accordingly, the cross-claim failed.


This case illustrates the importance of avoiding protracted negotiations which involve significant costs to both parties. It also serves as a warning that threats to walk away should not be bandied around without careful consideration, as this may impact on a party's ability to claim damages in the future, if the transaction were to fall through.

Finally, government bodies need to be mindful of expected norms of behaviour in a tender process and be aware that to breach them may be misleading and deceptive.

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.