Australia: Interpreting Loss or Damage Under the Trade Practices Act

Last Updated: 2 September 2004

Article by David Harland, Ainslee Cox and Nicole McKinnon

Key Point

  • The High Court expressly stated that it is wrong to approach the operation of the "loss and damage" provisions of Pt VI of the Act by beginning with an attempt to draw an analogy with any particular claim under the general law.

In Murphy v Overton Investments Pty Limited [2004] HCA 3 (5 February 2004) the High Court of Australia overturned the Federal Court's decision in respect of how "loss or damage" should be interpreted under Pt VI of the Trade Practices Act 1974 (Cth) ("the Act").


Mr and Mrs Murphy were considering moving into a retirement home. The respondent, the developer and then owner of the Heritage Retirement Village in Padstow Heights, Sydney, furnished the Murphys with an information brochure about the village which explained that the respondent was selling leasehold interests in units at the village and that there would be an associated "on-going management and maintenance program". The information brochure stated that "[p]resent budget figures would indicate" that, for a unit of the kind that the appellants were considering leasing, a pensioner would incur a weekly cost of $55.71. This estimated levy was calculated on a certain set of outgoings, which failed to account for all possible outgoings, which could be included in the weekly maintenance fee. This resulted in an estimated weekly cost that was significantly lower than the respondent was entitled to charge under the lease. Approximately 4 years later, the respondent unequivocally communicated to the Murphys that it would now be taking into account all expenditure in the calculation of the maintenance fee and the Murphys would, therefore, be required to pay a much higher weekly rate. By the time of the High Court appeal, it was not disputed that it was misleading for the respondent to provide an estimate to the appellants without disclosing that it did not adequately provide for all items of expenditure actually being incurred in the operation of the village. It was accepted, therefore, that the respondent had engaged in conduct in contravention of Pt V of the Act.

Summary of the proceedings in respect of the Pt VI loss or damage claim

The trial judge concluded that the appellants had not proved that they had suffered any loss or damage. The Full Court dismissed an appeal in respect of the trial judge's refusal to award damages. The appellants appealed to the High Court contending that the assessment of damages should be remitted to the trial judge. That contention was accepted by the High Court and the relevant applications were remitted to the trial judge for consideration.

Loss or Damage under the Act

Section 52 of the Act is a general prohibition against misleading and deceptive conduct. However, it is section 82 of the Act which enables damages to be recovered for loss or damage caused by the conduct of another person that is in contravention of various parts of the Act, including section 52. In addition, section 87 of the Act gives the Court a wide discretion to make a variety of orders and remedies, including orders to prevent damage as a result of a contravening act.

In the past the High Court has often looked at the issue of how damages should be assessed under the Act in light of two established, but competing, principles. These are the tort compensation principle ("TCP") and the contract compensation principle ("CCP"): see Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 and Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333. Many decisions have struggled with the difficultly and artificiality of applying these common law principles to the concept of loss and damage under the consumer protection regime of the Act. However, it would seem that - at least in the two decisions cited above - the High Court has applied an approach more in keeping with the TCP in deciding not to award damages for "loss of expectation" - a typical head of damage under the CCP. Despite making an award for damages which seems to align with the TCP, the High Court in Marks v GIO was very careful to point out that, whilst the remedies of the common law are continually referred to and remain a useful tool when assessing damages under section 82, "there is nothing in section 82 or section 87 which suggests either that the amount that may be recovered under section 82(1), or that the orders that may be made under s 87, should be limited by drawing some analogy with the law of contract, tort or equitable remedies", and to limit the Act in this way would be "wrong".

Based on the TCP analogy, a party who is induced to enter a contract by a misrepresentation that they will receive more than the contract ultimately provides will not suffer any loss or damage if they cannot show that they could have been better off acting in some other way. Therefore, in assessing loss or damage the Court would need to consider whether the person obtained less in value than they paid or whether they could have - and would have - obtained a better deal had the misrepresentation not been made. Under a CCP analysis, an individual would be able to claim the loss of their expectation of receiving the benefit promised.

For example, in Gates v CML, the appellant took out disability cover on the basis of misrepresentations that the policy would entitle him to benefits if he were totally disabled, thus preventing him continuing his occupation as a builder. Subsequently, the appellant did suffer injury preventing him from following his occupation, although he could still carry out other forms of employment. The policy, however, only entitled him to benefits if he was permanently disabled from carrying out any employment. Damages were therefore sought under section 82, for misleading conduct in contravention of section 52, seeking to recoup the benefit for total disablement under the policy, after the insurer had refused to indemnify.

It was held by the High Court that, although the conduct engaged in by the respondent was misleading, the appellant was not entitled to recover damages (other than a refund of premiums paid) on the basis that the cover provided was worth the consideration provided. In addition, evidence was not adduced that an alternative policy could have been retained by the appellant providing him with the benefits sought and misrepresented. Therefore, the court awarded damages with a view to placing the appellant in the position he would have been in had the misleading conduct not occurred, that is, in accordance with the TCP principle. Had the court awarded damages in accordance with the CCP principle, it would have ordered the respondent to pay to the appellant the benefit for total disablement under the policy, in accordance with the appellant's expectation.

In Murphy v Overton the lower courts refused to award loss or damage as there was no evidence that the value of the appellants' leasehold was of less value than they had paid and no evidence that they would have obtained a better deal had the misrepresentation not been made. The High Court, having found that the appellants did suffer loss or damage, remitted the matter to the trial judge for that loss or damage to be quantified.

The Decision

The High Court acknowledged that "the difference between price and value will often be an important element in assessing the damage suffered by a person who, by a misrepresentation, has been induced to buy an item of property...there may also be questions of consequential damage. It went on to say that "it would be wrong, however, to assume that in every case of misrepresentation...the only kind of damage which may be suffered, and compensated or redressed by orders under Pt VI of the Act, is any difference between price and value or any consequential losses."

The High Court agreed with the trial judge's findings that there was no evidence that the appellants did not receive value for the fees paid. However, the High Court said that this was not conclusive of the fact that the appellants had not suffered any loss.

The High Court noted the Full Court's focus on whether the appellants had proved an entitlement to damages. Due to the lack of evidence as to whether the appellants would have obtained a more attractive deal with another retirement home the majority in the Full Court confined its attention to whether the appellants had paid too much for the lease. The High Court referred to this as the "capital consequences" of the misleading and deceptive conduct. The High Court understood Gyles J in his dissenting judgment to be directing attention to a more general inquiry about whether, and how, the appellants were worse off as a result of the respondent's contravention.

Guiding Principles from the High Court

In its decision, the High Court set out a number principles to be applied when assessments of loss or damage are to be made under the Act. Although these principles may be useful they do not establish a logical test or formula for the assessment of loss or damage under the Act. These principles include:

  1. The Act's references to "loss or damage" is not to be given a narrow meaning. The loss or damage spoken of in sections 82 and 87 is not confined to economic loss.
  2. It is necessary to identify the detriment which is said to be the loss or damage which has occurred (or, when considering the application of section 87, has occurred or is likely to occur).
  3. Risk of loss is not itself a category of loss, however, once the risk of loss has crystalised, this will amount to a category of loss for the purpose of the Act.
  4. Loss is not necessarily a "one off" event and may require more than one remedy.
  5. Remedies other than an award of damages may be made under the Act to compensate for, prevent or reduce those future losses. For example, the terms of contracts could be varied.
  6. Whether damages are to be awarded in compensation may depend upon what other forms of relief are to be granted. In particular it will be much affected by what orders to prevent or reduce the loss or damage are made under section 87. During the course of the various proceedings the retirement home was sold to new owners. If the home had not been sold it may have been open to the Court to vary the lease so that it reflected the representation originally made.

The orders sought by the appellants were confined to orders remitting the matter to the trial judge to determine damages. No orders under section 87 were sought.

What had to be shown was that the appellants had suffered or were likely to suffer loss or damage by conduct engaged in by the respondent in contravention of a relevant provision of the Act. That was established in this case as the appellants did establish that they had undertaken an obligation which, in the events that happened, proved to be more significant than the respondent's misleading conduct led them believe. The High Court held in principle that the appellants had suffered loss or damage. However, it also said that ultimately the appellants may fail to quantify any loss or damage.

The High Court said the Full Court's reasoning used to conclude that the appellants proved no loss or damage was wrong The High Court rejected the appellants' claim to damages assessed by reference to an asserted difference in the value of their lease, caused by the increased payments. It is difficult to understand the basis on which the High Court found the appellants to have suffered loss. On one view, the only possible head of loss that could be identified is "expectation loss". That is, the appellants were told that the levies would be calculated on certain factors and instead the levies were to be calculated on additional factors leading to significantly higher levies than were expected.

The High Court identified 3 main areas of potential difficulty in the eventual quantification of the appellants' loss:

  1. When they took the lease, the appellants knew, or at least must be taken to have known, that the outgoings might increase. They knew unexpected outgoings could occur in the future. It would be wrong to compensate them for their incurring outgoings of that kind, but how was proper account to be taken of that fact?
  2. Issues of mitigation may arise - should the appellants have moved out?
  3. Quantification would have to take into account the number of years the appellants would be paying these higher levies. Therefore life expectancy evidence would probably be required.


The High Court has expressly rejected the analysis of damages under the Act in terms of the TCP versus the CCP. In Murphy v Overton the Hight Court stated that it is wrong to approach the operation of the "loss and damage" provisions of Pt VI of the Act by beginning with an attempt to draw an analogy with any particular claim under the general law. Although the High Court listed a number of factors that would have the effect of reducing any amount ultimately awarded by the trial judge, the High Court's decision seems to lend some indirect support to a concept which has been previously rejected by most judges who have considered the point, that is the concept that damages for "loss of expectation" are recoverable under the Act. Whilst the High Court's decision does not provide for any clear cut formula as to the most appropriate method of assessing damages under the Act, it does highlight the importance that each case must be considered in light of its own individual facts and circumstances, using a unique measure of loss or damage obtained through a careful consideration of the particular facts at hand. That is, in each case the relevant loss must be particularised as being caused by conduct in contravention of the Act, and then the nature of such loss must be examined. It seems that the High Court is very reluctant to prescribe any set formula for fear that it might exclude a class of plaintiffs from the operation of the Act, and interfere with the underlying purpose of the Act, namely, consumer protection. It will be interesting to see how the lower Courts handle this authority. It may be that Gates v CML would be decided differently today.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific 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)
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.