Principles of Business and Corporation Law

This document discusses the principles of business and corporation law, focusing on the breach of provisions of the Australian Consumer Law (ACL) by an airline company. It explores the enforcement actions that can be taken against the company and the remedies available to the affected individuals. The document also addresses the duty of care and negligence in a case involving professional advice. It provides an analysis of the relevant laws and their application to the situation.

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Principles of business and corporation law
Name of Student
Student’s Number
Institution Name

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Question 1
Issues
- Did the airline company (Angelwings) breach the provisions of the Australian
Consumer Law (ACL) (Schedule 2, Competition and Consumer Act 2010 (Cth), on
advertisements?
- Are there any enforcement actions that the AGCC and the courts against
Angelwings Airlines for what Fabio and Greta went through?
- What are some of the remedies that are available to Fabio and Greta under ACL?
Law
- Section 18(1) of ACL provides that a person in trade or commerce should not
engage in a practice that misleads or lies or one that is likely to cheat or mislead.
- s19 (2) declares that the special exceptions to broadcasting services (as an
information provider) under s 19(1), explicitly provides that those kinds of publications
do not apply in the case of advertisements.
- S 35 1 provides that:
“A person must not, in trade or commerce, advertise goods or services for supply at
a specified price if:
(a) there are reasonable grounds for believing that the person will not be
able to offer for supply those goods or services at that price for a period
that is, and in quantities that are, reasonable, having regard to:
(i) The nature of the market in which the person carries on business;
and
(ii) The nature of the advertisement…”

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- ACL S 29 (1) (b) of The CCA provides that, “A person must not, in trade or
commerce, in connection with the supply or possible supply of goods or services…
make a false or misleading representation that services are of a particular standard,
quality, value or grade;…”
- ACL s34- “A person must not, in trade or commerce, engage in conduct that is liable
to mislead the public as to the nature, the characteristics, the suitability for their
purpose or the quantity of any services."
Application
Relating to Section 18(1) of ACL, a standard on the market has been put in place. The
ACL is a very useful law for consumers in situations when they are convinced to buy
goods or services with statements that do not turn out to be correct at the end. The
impact of ACL section 18 of CCA has caught false advertising in order to prevent
traders of goods and services from defrauding and misleading consumers.
Fabio and Greta are dissatisfied with the Angelwings services and they strongly feel that
the advertisements about the company’s services are a scam. The conduct of
Angelwings Airline Company in this case, cannot be termed to be deceptive but
misleading. ‘Deceptive’ must be accompanied by an intention to defraud. ‘Misleading’
on the hand, does not require an intention and particular state of mind. Actually, the
proscription of misleading actions inflicts a strict liability not to tip someone into error in
commercial and consumer transactions. Therefore, even if the airline can raise a
defense of innocent (non-fraudulent and non-negligent) advertising statements, the

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might still be held culpable for misleading as was the decision in York v Ross Lucas Pty
Ltd (1983). Under s 18 of the CCA, conduct is not necessarily to be intentional.
Nonetheless, whether by deception or misleading statements, procuring services or
goods in either of the means has been expressly stated to constitute an offence under
the Competition and Consumer Act of 2010 section 18(1). The conduct is misleading by
the fact that the Airline Company advertisement was not specific as to the different
classes of their airline service. Worse still, the company charged more than other
companies for the economy class which can be seen as a strategic and misleading
move to eliminate doubt among the consumers like Fabio and Greta. From the decision
in the case of Butcher v Lachlan Elder Realty Pty Ltd (2004), the misleading conduct is
justifiable unless there is an exclusion clause stating otherwise.
In their advertisements, Angelwings Airlines showed videos of passengers on board
being served with delicious meals, including the best wines and overall great services.
The seats were spacious enough in the advertisements, and for someone like Greta
who was having back injury, he was easily convinced that the airline was her best
choice considering their slightly higher charges compared to other airlines. The
advertisement misleads Fabio and Greta by not exclusively stating that the services
being advertised were only for those boarding first class. The facts of the case are that
Fabio and Greta had not traveled overseas and they, therefore, could not predict that to
get access to the advertised services one had to pay more. This is a characteristic of
bait advertising that has been legislated against under s 35 of the Competition and
Consumer Act. The case of Google Inc v Australian Competition and Consumer

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Commission [2013] reflects this case of Fabio and Greta as it involved misleading and
deceptive conduct.
In a way, the airline company advertised services and knowing with reasonable grounds
that they were not representing the economy class, and still did not disclose to the
public that it was not the case, therefore, infringing the s35 (a) (i) & (ii). By the same
conduct, the provisions of S 29 (1) (b) and s34 of CCA were infringed by Angelwings
Airlines in that the company made misrepresentative general information that their
services were of a particularly high standard but did not break down the fact that each
class had its service levels. The case of McFarlane v John Martin & Co Ltd (1977) and
ACCC v Cadbury Schweppes Pty Ltd (2004) was one of false representation
contravening s 29 CCA. In addition, the company misleads the public (advertisements
are meant for the public) as to nature, the characteristics, the suitability for their purpose
or the quantity of their services. Angelwings Airlines was inconsiderate to consumers
like Greta who had health complications by the bait advertising.
Certainly, there are several enforcement that ACCC and the courts can put in place
against Angelwings Airlines. The first intervention that ACCC or the courts can do is to
stop the false advertisement. This can be issuing an injunction to the airline company to
pull down the ad. Anyone can sue the airline company for damages under s 29 of the
CCA and it may be prosecuted for performing a criminal offence under s 151 of the
CCA. Therefore, the Australian Competition and Consumer Commission can institute a
prosecution for an offence of misleading in advertisements against the airline company.
The Federal Court of Australia can make orders of civil pecuniary penalties of up to $1.1
million under s 224 of CCA because of the company’s breach of s29 CCA. Otherwise,

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the court can order fines of up to 1.1$ million under s 151 of the CCA. Angelwings
Airlines for false representation of services as in the case of Hartnell v Sharp
Corporation of Australia Pty Ltd (1975) who were fined a total of $100,000 for false
representation of their microwaves to be approved by the Standards Association of
Australia.
There are possible available remedies to Fabio and Greta under ACL. One remedy
available to the couple is an action for damages under s 236 of CCA. Fabio and Greta
suffered damages because of the misleading statement by the airline company. Greta
who was with an injured back was subjected to non-spacious conditions in what she
particularly described as ‘what you would expect in a cattle truck’. Considering her
health condition, she could have opted for better airline services (class) had she known
that Angelwings was not offering special seating facilities. The other remedy they can
seek is compensatory orders under s 237. The couple can seek compensation for being
subjected to services they did not expect despite having to pay more than what other
economy class passengers were paying using other airlines. The couple could also be
refunded their money under the provisions of section 243 of the Competition &
Consumer Act.
Conclusion
1. Angelwings Airlines indeed breached the provisions of the ACL by advertising
misleading information
2. The airline company can have certain enforcements instituted by ACCC and the
courts like an injunction to stop broadcasting the advertisement until it is corrected

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the misleading information, can be sued for damages, prosecuted for a criminal
offence and be subjected to fines and penalties.
3. Under ACL, Fabio and Greta have available remedies like damages, compensation
and or refunds.

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Question 2
Issues
Did Alex owe Denise a duty of care?
Was Alex a professional?
Did Alex act negligently in advising Denise thus breaching his duty as outlined in section
9 (1) of the Civil Liability Act of 2003?
Were Alex’s actions appropriate and approvable by peer practitioners?
Did Denise suffer harm on account of Alex’s negligence?
Is Alex liable to pay Denise damages for negligent misstatement?
Law
Sections 9 (1) (a) (b) and (c) of the CLA provide that a person breaches his duty of care
if he fails to take preventive measures against a reasonably foreseeable risk, if the risk
is significant and if a reasonable person, being faced with the same situation, would
take precaution to prevent the occurrence of harm.
Sections 9(2) (a) (b) (c) and (d) of the CLA provide the criteria for determining whether a
reasonable man would have taken precaution. The issues considered are: the likelihood
of harm taking place if the precaution is not exercised as was in the case of Bolton v
Stone (1951) , the impact the harm will have as was applied in the case of Paris v
Stepney Borough Council (1950) , the forbearance resulting from taking preventive
measures which was considered in determination of the proceedings of Wyong Shire
Council v Shirt (1979) and the importance of the event that is causing the risk of harm
as was in the proceedings of Roads and Traffic Authority of New South Wales v

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Dederer and Waverley Council v Martin Ferreira (2005) and Soper v Gold Coast City
Council (2002).
According to section 11 (1) of the Civil Liability Act of 2003, there has to be a direct link
between the false or insufficient advice of the expert and the subsequent harm caused
to the person receiving and depending on the advice. This is called factual causation.
For negligent misstatement to be established, it has to be proven that had the
inaccurate advice not been given, the damage wouldn’t have occurred.
Section 22(1) of the CLA outlines that a professional will not be deemed liable if, at the
time of undertaking his duties, he acted in a manner that was acceptable among other
competent and recognised practitioners in the same field. However, peer criticisms can
be rejected in a court if the court finds that they are baseless or unjustified. Having a set
of contradictory opinions would not bar the court on relying on one of them.
Section 13 of the CLA provides- "an obvious risk to a person who experiences harm is a
risk that would have been obvious to a reasonable person on that position." These risks
are common knowledge. Risk is still obvious even though the event leading to it are not
as conspicuous.
Application
A duty of care is an obligation to exercise reasonable caution in undertaking one’s duty
in order to avoid any harm or injury to a person relying on it. The duty of care is
enforceable in law. According to Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964),
there has to a unique relationship between the plaintiff and the defendant in order for a
duty of care to be established. The defendant should have been at a position of having
special knowledge that would be relied upon by the plaintiff as was the finding in Mutual

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Life & Citizens Assurance Co Ltd v Evatt (Mutual Life) (1968). In addition, the defendant
must have been capable of ascertaining the truth and credibility of his advice. Alex ran a
company that dealt with issues of taxation, he was an expert in the area, he was
certified and had a long time of experience. This put him made his reasonably skilled
and competent to handle tax matters. Furthermore, he assured Denise that he had dealt
with many transactions which led Denise to believe that she could rely on his advice.
The proximity test reflected in the case of Esanda Finance v Peat Marwick &
Hungerford (1997) shows that Alex owed Denise a duty of care since he gave her the
advice directly there was no third party involved. Denise, indeed, acted under the
advisement of Alex. This set of facts establishes that Alex had a duty of care to Denise
seeing as she was his neighbour by law, as was established in the case of Donoghue v
Stevenson case of 1932. His actions had a high likelihood of affecting Denise directly
since she consulted him concerning her tax matters and he, in turn, gave her advice
directly without relying on an intermediary.
Alex did not take any precautionary measures to ascertain that the trust would not be in
contravention of the law. He breached his duty under section 9(1) of the Civil Liability
Act of 2003. His advice led to Denise’s decision to allow the preparation of trust for the
account of her business. This establishes a direct reliance on Denise on his advice.
Using the ‘but for test’ from the case of Barnett v Chelsea and Kensington Hospital
Management Committee (1969) it can be d that Denise would not have suffered loss
due to a penalty but for the inaccurate advice given by Alex. The statutory test is
stipulated for in section 11(1) of the CLA 2013. If Denise had decided in full knowledge
of the inefficiencies of Alex’s advice, there would not be any negligent misstatement.

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Also, there is no Novus actus interveniens, a principle reflected in the case of Yates v
Jones (1990), which would free Alex from any liability since a separate event would
have caused the financial losses suffered by Denise
The requirement that the harm shouldn’t be remote as derived from the cases of
Wagon Mound Case No 1 and Commonwealth v McLean is met. Subsequent illegality
of trust is reasonably foreseeable to Alex because he was an expert in the field of tax
management. This shows that the risk was not a farfetched and unlikely possibility thus
Alex should have exercised the due duty of care in dealing with Denise’s business
account.
Alex did not act in a manner that would be widely accepted by his peers in the tax
accounting profession since he blatantly overlooked relevant laws. The consideration of
peer approval and review was applied in the case of Dobler v Halverson (2007). He
overlooked this information even after Denise made him aware of her hesitation and
doubt about whether the trust was legal. According to the test of reasonability derived
from the case of McHale v Watson (1964), Alex failed to act as a reasonable person in
his profession and field of work would have acted. Taking his certification and
experience into consideration, a reasonable man would have been careful to investigate
any inconsistencies of the trust with the law since his client would lose a lot in the event
that the trust was deemed illegal.
In the application of the law in section 13 of the Civil Liability Act of 2003, on obvious
risks, it is clear that the risk faced by Denise was not very clear to her. This is because
she had no special knowledge in tax matters or the laws governing administration and

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management of money vis-a-vis taxation. Based on this argument, she cannot be said
to have assumed the risk voluntarily.
Conclusion
Alex owed Denise a duty of care due to the proximity of their relationship and the fact
that she relied on his advice and acted in accordance with it.
Alex was a professional since he was certified and has many years of experience in the
field of taxes and trusts rendering him reasonably believable by Denise.
Alex acted carelessly in discharging his duty towards Denise since he did not undertake
to confirm the legal validity of the trust used to reduce Denise’s tax liability
Alex’s standard of care falls below the professional standards of tax and trust specialists
thus he is liable.
Denise’s monetary loss was a direct consequence of Alex’s negligence since causation
and remoteness are proved. She suffered the loss due to illegality that was not detected
by Alex as a result of his negligence
Denise is entitled to claim compensation from Alex on the grounds that he was
negligent in performing his duty.