The assessment of damages under the Australian Consumer Law for misleading or deceptive conduct or breach of consumer guarantees often involves comparing the price paid for an asset or good and the value of the thing purchased.
The purchase of a business by reason of misleading conduct as to its earnings or worth is an example.
When assessing loss, comparison is ordinarily made between the purchase price and the “true value”, rather than “market value”. Where the market is perfectly informed, the two values may be the same. In other circumstances, the two may differ significantly.
The purpose of this note is to identify the differences between “market value” and “true value”, how each may be assessed and circumstances in which they might be applied. While “true value” is generally applied for the assessment of loss under the ACL, it is “market value” that is relevant in the valuation of land for rating and tax purposes, and to compensation for the compulsory acquisition of land.
True value
The assessment of “true value” or “real value”1 permits reference, with one important exception, to circumstances which occurred after the time at which value is to be assessed. This is the essential distinguishing feature from the assessment of “market value”.
The issue of the evidence relevant to the assessment of “true value” arose in an acute way in Dwyer v Volkswagen Group Australia Pty Ltd [2023] NSWCA 211. Dwyer’s case was a representative proceeding. The appellant alleged that Volkswagen had supplied vehicles in which airbags fitted to them carried a risk that they would mis-deploy. The appellant claimed damages under s 271 of the ACL for breach of a consumer guarantee under s54, that the vehicles be of acceptable quality.
For reasons which are unnecessary to detail here, the Court found there had not been a breach of the statutory guarantee of acceptable quality. But there was an interesting discussion about loss.
By the time of the trial, a recall notice had been issued in respect of vehicles carrying the airbag, including Volkswagens. Volkswagen replaced the faulty airbags at no cost to the owners. The issue was whether that fact was relevant to the assessment of damages. The appellant accepted that, by reason of the replacement of the airbag, the vehicle was as valuable at trial as it would have been if supplied originally with non-defective airbags and that if the replacement airbag could be brought to account, it was fatal to his case. Instead, the appellant complained that at the time of supply his vehicle was worth less than the price he paid for it by reason of the defective airbag; and that he had still suffered loss and damage, notwithstanding the replacement of the airbag some six years after purchase. The fact of the replacement of the airbag was brought to account, and the plaintiff failed.
In Dwyer, although the time at which damages were to be assessed was at the time of the supply,2 evidence which occurred after the time of supply could be brought to account in assessing “true value”. Hence, there was no loss.
More broadly, s 272 sets out the damages that may be recovered against a manufacturer for failure to comply with a consumer guarantee. Relevantly, it provides that recoverable damages include any reduction in the value of the goods below (again, relevantly) the price paid for the goods.
In its terms, s 272 does not define the method that must be adopted to determine “the reduction in value” and it must be recognized that the approach to be taken in not inflexible.3 That said, the measure of damages under s 272(1)(a) is generally the difference between the “true value” of the good and the price paid.4 Regard may be had to subsequent events, “because they may illuminate or indicate or reflect the true value at the time of supply”.5 Such an approach is not unusual. The same approach is taken when assessing damages for deceit.6 It was also the approach commonly taken under s 82 of the Trade Practices Act 1974 (Cth) (now s 236 of the ACL) when assessing damages under the ACL for misleading and deceptive conduct.7
The proper approach is set out in Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4 at [16]:
“Nevertheless [in the assessment of damages for deceit], although the value is assessed as at the date of the acquisition, subsequent events may be looked at in so far as they illuminate the value of the thing as at that date. A distinction is drawn, however, between subsequent events that arise from the nature or use of the thing itself and subsequent events that affect the value of the thing but arise from sources supervening upon or extraneous to the fraudulent inducement. Events falling into the former category are admissible to prove the value of the thing, those falling into the latter category are inadmissible for that purpose.”
The reasoning above identifies the exception to the rule that subsequent events may be considered when assessing “true value”. Subsequent events arising from sources supervening upon or extraneous to the inducement may not be brought into account. The Court gave a useful example:
“Thus, the takings of a business subsequent to purchase are generally admissible, not only to prove that a representation concerning the takings was false but also to prove the true value of the business as at the date of purchase… But if it is established that the decline in takings has been caused by business ineptitude or unexpected competition, evidence of subsequent takings is not admissible to prove the value of the business as at that date, events such as ineptitude and unexpected competition being regarded as supervening events… All of these principles are appropriate to the assessment of damages under s 82 where a breach of s 52 of the Act has induced a person to purchase a business.”
The distinction is not always easy to make, but in Potts v Miller (1940) 64 CLR 282 Dixon J put it this way (at 298):
“If the cause in inherent in the thing itself, then its existence should be taken into account in arriving at the real value of the shares or other things at the time of the purchase. If the cause be ‘independent’, ‘extrinsic’, ‘supervening’ or ‘accidental’, then the additional loss is not the consequence of the inducement”.8
Market value
“Market value”, on the other hand, is generally not used in the assessment of loss caused by deceit, misrepresentation, misleading conduct or breach of consumer guarantee. That is so for a number of reasons. Fundamentally, the assessment of price against market value may not truly identify the plaintiff’s loss. The market may be mistaken at the time of acquisition (it may overvalue shares, for example). It may have been manipulated by the conduct of which complaint is made, or other conduct. Finally, the assessment of market value presupposes a sale when, in fact, the plaintiff is not bound to sell and may not have sold.9
Market value is, however, the value used when assessing compensation for the compulsory acquisition of land, or in the assessment of land value for the purposes of land tax or rates.10 Both the Acquisition of Land Act 1967 (Qld) and the Land Valuation Act 2010 (Qld) contain their own statutory formulae, but the statutes essentially follow the long-established common-law position.
The leading case is Spencer v Commonwealth (1907) 5 CLR 418, which concerned the compulsory acquisition of land. In Spencer, Isaacs J said at 441:
“To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.”11
There are a number of features of “market value” worth noting. First, it assumes a hypothetical sale of (the land) between a vendor and purchaser, neither of whom so anxious to buy or sell as would compel them to overlook any ordinary business consideration. Secondly, it assumes that each is fully acquainted with the land, cognizant of all circumstances which may affect its value, including all those matters which may cause a rise or fall in its value. Finally, and importantly in the context of this discussion, the buyer and seller are assumed only to have access to the information available at the time of the hypothetical sale.12
Although it is relevant to take into account future possibilities, such as would at the time of assessment have been known to the hypothetical parties, future events which are unexpected, or unanticipated, cannot be taken into account: Brisbane City Council v Mio Art Pty Ltd [2011] QCA 234, Fryberg J (with whom the others agreed) at [33]. There used to be some authority for the proposition that regard could be had to information subsequent to the date of assessment “to confirm a foresight”. If ever that was the law, it is no longer.13
Note that reference to sales on dates subsequent to the date of assessment are nonetheless admissible and may be relevant, they being evidence of market value at the time at which it is to be assessed (see Mio Art at [79]).
In summary, “real value” and “market value” are different. The assessment of real value permits reference to events after the date at which is to be assessed, save where those events are extrinsic, supervening, or accidental. In that way, when the Court assesses loss, it may have regard to all available material at trial. The assessment of market value permits reference only to evidence reasonably available to the hypothetical parties at the time at which value is to be assessed. Real value is ordinarily used in the assessment of damages for misleading or deceptive conduct, or for breach of consumer warranties under the ACL. Market value is generally used in the valuation of land for rating and tax purposes, and (recognising it is ultimately the value of the property acquired to the owner, see footnote 10) for the assessment of compensation for the compulsory acquisition of land.
Footnotes
1 “True value” may also be described as, for example, “real value”, or “intrinsic value” or “what the asset was “truly worth”: see HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] 217 CLR 640 at [36]
2 Dwyer v Volkswagen Group Australia Pty Ltd [2023] NSWCA 211 at [215]; cf Toyota Motor Corporation Australia Ltd v Williams [2023] FCAFC 50 at [98].
3 Cf HTW Valuers v Astonland Pty Ltd [2004] 217 CLR 640 at [35]
4 Dwyer v Volkswagen Group Australia Pty Ltd [2023] NSWCA 211 at [230].
5 Ibid at [230]
6 Gould v Vaggelas (1985) 157 CLR 215 at 220, 255, 265
7 HTW Valuers v Astonland Pty Ltd [2004] 217 CLR 640 at [35]; Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4 at [16], a case concerning s 82 of the Trade Practices Act 1974 (Cth), but which applies equally to s 236 of the ACL
8 See also Gould v Vaggelas (1985) 157 CLR 215 at 220 per Gibbs J
9 See HTW Valuers v Astonland Pty Ltd [2004] 217 CLR 640 at [37]
10 Note that in the assessment of compensation for compulsory acquisition, it is the “value to the owner” which technically is to be assessed. Generally, this will be the market value of the land, to be assessed generally in accordance with Spencer v The Commonwealth (1907) 5 CLR 418. In exceptional cases, land may be more valuable to an owner than it is to the market generally: see Pastoral Finance Association Ltd v The Minister [1914] AC 1083 at p1088: “Probably the most practical form in which the matters can be put is that they were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it”.
11 See also Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 59 at [51] per McHugh J
12 See Mio Art at [78]; Kenny & Good Pty Ltd v MGICA (1992) (Ltd) (1999) 199 CLR 413 at 436
13 Mio Art at [78]. “For direct proof of market value [that[ was an aphorism best forgotten” (Mio Art at [78], citing the discussion by Murray CJ under the heading “Hindsight Bias” in Shire of Gingin v Coombe [2009] WASCA 92 at [43].
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