Case Number

CFH 5712/01

Date Decided

8-11-2003

Decision Type

Appellate

Document Type

Full Opinion

Abstract

Facts: Respondent 1 (hereinafter: Bezeq) advertised an international dialing service (hereinafter: the Service), and represented that a customer would be charged only for the exact amount of time that he used Service. In practice, it turned out that the method that Bezeq used for its calculations resulted in overcharging the users of the Service relative to what was expected according to the advertisement.

The Petitioner, who used the Service supplied by Bezeq, but who had not seen the said advertisement, initiated a suit in the District Court for pecuniary damages against Bezeq. He claimed that the advertisement was one “liable to mislead a consumer” under sec. 2 (a) o the Consumer Protection Law, 5741-1981 (hereinafter: the Law), in regard to the actual cost of international calls. He also requested that the suit be certified as a class action.

The District Court certified the suit as a class action. However, on appeal, the Supreme Court reversed that decision, based upon the provisions of sec. 31 (a) of the Law, according to which an act or omission in contravention of sec. 2 of the Law “shall be treated as a tort under the Civil Wrongs Ordinance [New Version]”. Therefore, and despite the finding that the advertisement was one that was “liable to mislead a consumer”, the Court applied the causal-link test established by the Civil Wrongs Ordinance [New Version] (hereinafter: the Ordinance), and found that since the Petitioner had not been exposed to Bezeq’s misleading advertisement, a causal link was not established between the advertisement and the damage putatively caused him. That being so, the Court held that the Petitioner did not have a personal cause of action against Bezeq under sec. 2 (a) of the Law, and in any case, was not a proper plaintiff in a class action.

The Further Hearing focused upon the question whether or not the prohibition of misleading under sec. 2 (a) of the Law constitutes a “regular tort” like every tort in the Ordinance, subject to the doctrines established under the Ordinance, among them the causal-link doctrine.

Held: The Supreme Court held:

A. (1) The provisions of sec. 2 (a) of the Law, prohibiting deceit, create a prohibition upon conduct. A “dealer” contravenes that prohibition even if the thing that he does by act or omission is “liable to mislead”, that is, whether or not a person was actually misled by that thing that he did. The standard of conduct required by the provisions of this section is one that is higher than that required by many statutes, which require a direct causal link between an act and a result – the harm caused the victim – whereas sec. 2 (a) prohibits conduct, as such, even if it does not lead to harm. That requirement is intended to protect consumers and ensure that they receive reliable information about the goods or services being offered, so that they can make informed choices about whether or not to make the transaction.

(2) Under sec. 31 (a) of the Law, an act or omission proscribed by sec. 2(a) shall be treated as a tort under the Ordinance. Nothing in the language of sec. 31(a) of the Law would show that the tort under sec. 2 (a) removes it from the fundamental principles or the doctrines of the Ordinance, and nothing therein might show that a consumer is entitled to compensation merely because a dealer contravened a provision of the Law. On the contrary, the Law unconditionally refers to the provisions of the Ordinance.

(3) In addition to the clear language of the Law, expediency also argues that the sec. 2 (a) of the Law establishes a tort like any other tort under the Ordinance, for if those same acts and omissions external to the Ordinance are tortious in nature, it is but natural that we should employ the same traditional, familiar doctrines that tort law created and developed over so many years such that they have become foundational to the legal system, subject, of course, to special, exceptional cases

(4) Nevertheless, there is a difference between the native torts of the Ordinance and those external to it that are treated as torts under the Ordinance. A tort external to the Ordinance should be scrutinized carefully in order to determine whether or not a particular doctrine of the Ordinance is compatible with the elements, nature and construction of the external tort.

B. (1) In accordance with the causal-link doctrine in sec. 64 of the Ordinance, there must be a causal connection between a person’s act or omission – an act or omission that constitutes a tort – and the harm caused to the victim, for which he demands compensation. In the instant case, there was no causal connection between the advertisement and the “harm” caused to the Appellant, inasmuch as the Appellant did not read that advertisement, and in any case, was not influenced by it and did not rely upon it. While Bezeq perpetrated a tort by publishing that advertisement to the public, the existence of a tort is insufficient to entitle a person to compensation. Rather, that person must show that he was harmed as a result of that tort, and that precondition was not met in regard to the Appellant.

(2) Similarly, the compensation doctrine, enunciated in sec. 76 of the Ordinance, states that a person is not entitled to compensation except in regard to damage that arose from a tort. In regard to compensatory relief, the Law requires that the plaintiff prove the damage arising from the misrepresentation, that is, the existence of actual deceit, and an act arising from that deceit. In the circumstances of this case, the publication of something that might tend to mislead – the advertisement itself – is not sufficient to for a consumer to acquire a right to compensation if he suffered no actual damage. The rule is that damages will not be awarded unless harm was caused, and damages will be awarded only to the extent of the harm caused. In the absence of an express, unequivocal provision granting a person damages for virtual harm without the proof of actual harm, it is difficult to imagine that a court will award damages. Such significant creativity is intended for the legislature, and not the courts.

(3) The causal connection (both factual and legal) required under sec 2 (a) of the Law does not require a consumer’s explicit reliance upon the representation presented by the dealer. Unlike other legal provisions, which explicitly require a causal connection of reliance, it is possible that a consumer will not directly rely upon the dealer’s representation, and the required causal connection will, nevertheless, exist, that is, that the dealer’s representation “was the cause or one of the causes of the damage”, as stated in sec. 64 of the Ordinance. That would be the case, for example, where it can be shown that an advertisement – capable of misleading the consumer – that was published by a dealer, initiated a factual chain of events that ultimately caused damage to the consumer. In such a case, it would be appropriate to interpret the concept of reliance broadly, such that it would not be restricted exclusively to direct reliance.

(4) However, there must be an appropriate causal connection between the misleading publication and the injury that a consumer incurs. The fact that the purchase of the goods or services occurred after the publication is not, in and of itself, sufficient to show a causal connection between the potentially misleading publication and the consumer’s acquisition of the advertised goods or services. There must be an appropriate causal connection between the two occurrences, and that link will be deduced from the circumstances of each and every case with the help of the relevant evidence.

C. A class action is, in effect, an extension of the personal right to sue, and in the absence of a personal right to bring suit, there can be no class action. The import and scope of the personal suit will only be influenced marginally, if at all, by the class action. A class action does not grant a consumer an independent cause of action. It is merely a procedural tool for joining individual suits in a single proceeding. Class actions were added to the Law some thirteen years after its enactment, and its addition to the Law merely expanded the personal suit – procedurally – into many personal suits, but the principles of the personal suit remained unchanged. Therefore, sec. 2 (a) of the Law should be construed as it was prior to the addition of class actions to the Law, that is, without reference to such a class action.

D. (Justice T. Strasberg-Cohen, dissenting):

(1) The phrase “shall be treated as a tort under the Civil Wrongs Ordinance” should be construed as establishing a new cause of action that is like a tort. This cause of action is not identical to a tort, but is equivalent to a tort in the sense that it applies the same doctrines of the Ordinance to the act or omission – in the present case, the compensation and causal link doctrines. However, it is a cause of action that is unique to this Law. It is substantively independent, and must be construed in its own context, in light of the objective it was intended to serve, while taking the said doctrines into account, and which must be given content that corresponds to the objectives of the Law and its enforcement in the framework of a class action.

(2) For the purpose of establishing a cause of action for compensation for damage caused by a publication liable to mislead, it must be shown, prima facie, that the publication was liable to mislead, that damage was incurred, and that there is a factual and legal causal connection between the publication and the damage. However, even in the absence of the consumer’s reliance upon the potentially misleading publication, there may be a causal link between the publication and the damage. This is so because, first, establishing a prohibition upon conduct that is liable to mislead without recognizing the remedy of compensation for its contravention without proof of actual deception, renders the Law’s primary prohibition lacking any real civil remedy. Second, there is little possibility that a consumer will devote significant effort and money solely for the purpose of obtaining a restraining order for the benefit of the general public. Third, over the years that the Law has been in force, the criminal sanction has been applied with measured restraint, and it would seem that the criminal sanction cannot provide significant deterrence for powerful dealers that expect to garner huge profits from misleading the public, and the same is true of administrative sanctions. Fourth, an approach that would require actual deception in order to obtain compensatory relief would limit the scope of a dealer’s liability only to those consumers who could actually prove that they were indeed misled by the dealer’s representations, and would make deception worthwhile from the perspective of the dealer. Fifth, a construction that would grant relief only to those consumers who were actually deceived would create an artificial distinction between the consumer public that used the goods or services that were the subject of the misleading advertising, but who were not exposed to it, and the consumer public who were exposed to the misleading information. Sixth, in other cases in the past, the Supreme Court did not hesitate to expand the available types of relief beyond those set out in a law, in order not to eviscerate the law. Seventh, the Law establishes other prohibitions that do not require proof of reliance, the violation of which grants the consumer a broad right to compensation. There is little reason to granting an independent remedy of compensation, which includes granting broad discretion to the court, for the violation of those prohibitions, while not doing so in regard to the Law’s central prohibition – the prohibition upon misrepresentation.

(3) The tort perpetrated by publishing something liable to mislead does not require reliance in order for the consumer to be entitled to compensation for damage incurred due to the publication, and it is not tied to the demand of reliance. Had the legislature intended to limit the prohibition of deceit to one of the torts requiring reliance, one would expect that it would have done so explicitly. Reliance is not required by the language of the Law or by its objective for the purpose of the existence of a causal connection. Thus, there can be a causal connection without reliance.

(4) Holding that there is no requirement that the consumer rely upon the misleading publication does not obviate the need for a causal connection, and in the instant case, the representation made by the dealer should be deemed a binding promise to the consumer public that requires that it act in accordance with the promise. That promise bestows a right upon the consumer, and places the dealer under an obligation in regard to the consumer public. If the dealer does not meet the obligation it undertook by means of the advertisement, and charges more than what was promised in the advertisement, it breaches its duty, and as a consequence of that breach, the consumer incurs damage. Therefore, even if the consumer was not exposed to the misleading publication, and did not change his behavior in regard the use of the product or service, he will still be deemed harmed, since the price he was charged for the product or the service was higher than the price at which he was entitled to purchase the product or service.

(5) The consumer incurs injury in the form of a “price differential”, which is a real loss. Appropriate construction of the required causality would see this injury as connected to the breach of the proscribed misrepresentation, as due to the misleading advertisement and the difference between it and the manner in which the dealer actually acted, the consumer suffered injury. Such a construction would meet the requirement of a causal link, both factually and legally. Factually, the said injury caused to the consumer is a consequence of the fact that the dealer made a representation that it did not honor. Legally, the injury is causally related to the representation under the foreseeability test, in that when a dealer makes a false representation, it foresees that charging contrary to the representation will cause harm due to the “price differential”, under the risk test, since that harm falls within the scope of risk of the dealer’s act, and under the common-sense test, by which we examine the overall actions of the tortfeasor and their contribution to the harmful result.

E. (Justice E. Mazza, dissenting):

(1) It is possible and proper to restrict the application of traditional tort law to consumer causes of action. Such restriction is clearly required by the significant, substantive difference between the purpose of consumer torts and the purpose of regular torts.

(2) The consumer laws of deceit must contend with the requirements of reliance and causality differently than tort law. Instead of the personal reliance of each and every consumer – that of traditional tort law – we should adopt a doctrine that recognizes “constructive reliance” of the consumer public to which the advertiser directed its misleading advertisement, while instead of requiring proof of a factual causal connection between the deception and the injury caused to each of the complaining consumers, we should adopt a doctrine that recognizes a “consumer causal link” that would be inferred from the merger of the potentially misleading publication and the intention of the advertiser that the advertisement reach the consumers, mislead them, and thus influence their conduct.

(3) Consumer deception would give rise to a (personal or class) cause of action for monetary relief upon the fulfillment of three elements: an offending publication, injury, and a “consumer causal link”. As opposed to this, we should also recognize a defense that would be available to the advertiser if he can show that the plaintiff was aware of the true facts, and that the offending advertisement could not, therefore, negatively influence his situation.

(4) The reliance requirement undermines the objectives of consumer protection laws –leveling the playing field for the parties; increasing personal autonomy; the concept of consumer sovereignty; protection of the public welfare and of social rights; advancing commercial fairness; protecting the credibility of the local market and public confidence in the social regime – and it frustrates their realization. Once a potential to mislead is proved, and it is shown that the advertiser indeed intended that the misleading advertisement reach the public and influence its consumer conduct, we should properly hold that there is constructive consumer reliance upon the misleading advertisement. The question whether the dealer actually achieved its purpose, i.e., that the misleading publication actually reached its audience and actually influenced it, is of limited importance.

F. (Justice D. Dorner, dissenting):

(1) The Law, which intervenes in contracts between unequal parties, and subjects the stronger party – the supplier – to an increased duty of fairness towards the weaker party – the consumer – is firmly anchored in the established doctrines of contract law. Many consumer transactions are anchored in the accepted contractual doctrines under which if a supplier charges a higher price than the correct, advertised price, consumers are entitled to a refund of the difference. In the reality created by those doctrines, and in which consumers actually operate, consumers trust suppliers without verifying that each and every transaction conforms to the advertised price.

(2) A supplier’s advertisement of a specific price creates a consumer right not to pay a higher price. If the supplier charges a higher price, that will, in any event, constitute a breach of contract that would give rise to monetary relief even for consumers who were not exposed to the advertisement.

(3) That entitlement can be grounded at least three ways. The first deems the dealer’s publication about the price an irrevocable offer to the public, which can be accepted by the objective performance of its conditions, while the supplier is bound to the publicized price, and provides an opportunity for the public to purchase the product or service for a price that will not be higher. In accepting the offer, the parties agree to the published price, and the supplier must refund any additional amount charged. The second approach deems the contract to have an implied term under which the supplier undertakes not to charge the consumer more than the advertised price. Such a term reflects the expectations of the parties. Overcharging constitutes a breach of that term. The third approach would classify such overcharging – particularly if it targets only consumers who were not exposed to the publication – as a breach of contractual good faith.

Keywords

Torts -- Causation, Torts -- Class action, Torts -- Compensation, Torts -- Consumer fraud

Download

Included in

Torts Commons

Share

COinS