Misleading or deceptive conduct
Encyclopedia
Misleading or deceptive conduct (often referred to as just misleading conduct) is a doctrine
of Australian law
.
Section 18 of the Australian Consumer Law
(ACL), which is found in schedule 2 of the Competition and Consumer Act 2010
(formerly the Trade Practices Act 1974
) prohibits conduct by corporations in trade or commerce which is misleading or deceptive or is likely to mislead or deceive. State Fair Trading Legislation contains similar provisions in relation to misleading or deceptive conduct by individuals. Section 12DA of the Australian Securities and Investment Commission Act 2001 prohibits misleading or deceptive conduct in financial services.
The doctrine aims primarily to provide consumer protection
by preventing businesses from misleading their customers. However, it extends to all situations in the course of trade or commerce. A range of remedies are available in the event of misleading or deceptive conduct.
, so section 51 of the Australian Constitution
(which sets out the division of powers between the federal and state parliaments) restricts the application. Section 18 is based on the corporations power ( s51(xx) of the Constitution
). The requirement 'in trade or commerce' creates a significant threshold issue.
Individuals may be ancillary liable for breaches of s18 if they are "knowingly concerned" in the breach (s75B of the CCA).
Each of the States and territories of Australia
have fair trading legislation, which mirrors the ACL.
Section 4(2)(a) of the CCA defines conduct as:
Whether conduct is misleading or deceptive is a question of fact determined by considering the conduct as a whole.
To be misleading or deceptive the conduct must contain a misrepresentation
capable of inducing the relevant class into error. Generally, misrepresentations will be false statements of fact. However, statements that are factually true may also be misrepresentations if they are capable of inducing consumers into error.
The relevant test is whether the conduct misleads or deceives, or is likely to mislead or deceive, the relevant class. Accordingly, it does not matter if the conduct intends to mislead or deceive, or is negligent
or reckless as to whether they mislead or deceive. However, in some circumstances it may be necessary to show that the person doing the conduct did intend to mislead or deceive, for example when the person is merely passing on information.
Silence may be misleading in limited circumstances. When there is a duty between parties at common law
to disclose facts, then a failure to do so may be misleading conduct. Furthermore, even if there is no common law duty to disclose, a person's silence, when considered in light of all the circumstances (other statements they have made, or other actions they have taken) may be misleading conduct. Generally, 'mere silence' is not misleading conduct unless there is a reasonable expectation that the person should disclose facts.
When the relevant conduct is a representation about the future (as opposed to a representation about present facts), then according to section 4 of the ACL, that conduct will be taken to be misleading if the person making it cannot show they have reasonable grounds. In these situations, representations about the future are presumed
to be misleading, and the burden of proof is on the person making the representation to produce evidence to show that they had reasonable grounds.
Although section 18 is usually thought of in terms of consumer protection
, it is not limited to these circumstances. Section 18 applies to representations made in commercial transactions, for example during negotiations between franchisers or for the sale of a business.
(ACCC) can seek pecuniary penalties of up to $1.1 million from corporations and $220,000 from individuals.
claim if the plaintiff is guilty of contributory negligence
. However, if the person engaging in the conduct intended to mislead or deceive, or was fraudulent
in their conduct, then the courts cannot reduce the damages.
There is a limitation period of six years on actions for damages, according to section 82(2).
(1) Where:
the Court may, on the application of the Minister or the Commission, make an order or orders mentioned in subsection (2) if the Court is satisfied that:
The measure of loss or damage here may be different than the measure for damages under section 82. Some cases have suggested that since section 87 is not just about recovering monetary loss, then the measure should be broader. However, other cases consider that the same measure of loss or damage should be used.
There is also a limitation period of six years on actions for section 87 orders, according to section 87(1CA).
Doctrine
Doctrine is a codification of beliefs or a body of teachings or instructions, taught principles or positions, as the body of teachings in a branch of knowledge or belief system...
of Australian law
Law of Australia
The law of Australia consists of the Australian common law , federal laws enacted by the Parliament of Australia, and laws enacted by the Parliaments of the Australian states and territories...
.
Section 18 of the Australian Consumer Law
Australian Consumer Law
The Australian Consumer Law is uniform legislation for consumer protection, applying as a law of the Commonwealth of Australia and of each of Australia's states and territories. The law commenced on 1 January 2011, replacing 20 different consumer laws across the Commonwealth and the states and...
(ACL), which is found in schedule 2 of the Competition and Consumer Act 2010
Competition and Consumer Act 2010
The Competition and Consumer Act 2010 is an act of the Parliament of Australia. On 1 January 2011 the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010. The act provides for protection of consumers and prevents some restrictive trade practices of companies. It is the key...
(formerly the Trade Practices Act 1974
Trade Practices Act 1974
The Competition and Consumer Act 2010 is an act of the Parliament of Australia. On 1 January 2011 the Trade Practices Act 1974 was renamed the Competition and Consumer Act 2010. The act provides for protection of consumers and prevents some restrictive trade practices of companies. It is the key...
) prohibits conduct by corporations in trade or commerce which is misleading or deceptive or is likely to mislead or deceive. State Fair Trading Legislation contains similar provisions in relation to misleading or deceptive conduct by individuals. Section 12DA of the Australian Securities and Investment Commission Act 2001 prohibits misleading or deceptive conduct in financial services.
The doctrine aims primarily to provide consumer protection
Consumer protection
Consumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
by preventing businesses from misleading their customers. However, it extends to all situations in the course of trade or commerce. A range of remedies are available in the event of misleading or deceptive conduct.
Application of the doctrine
Section 18 appears unrestricted in its words 'A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive'. However, the Compeitition and Consumer Act (CCA) is an act of the Parliament of AustraliaParliament of Australia
The Parliament of Australia, also known as the Commonwealth Parliament or Federal Parliament, is the legislative branch of the government of Australia. It is bicameral, largely modelled in the Westminster tradition, but with some influences from the United States Congress...
, so section 51 of the Australian Constitution
Section 51 of the Australian Constitution
Section 51 of the Constitution of Australia grants legislative powers to the Australian Parliament only when subject to the constitution. When the six Australian colonies joined together in Federation in 1901, they became the original States and ceded some of their powers to the new Commonwealth...
(which sets out the division of powers between the federal and state parliaments) restricts the application. Section 18 is based on the corporations power ( s51(xx) of the Constitution
Section 51(xx) of the Australian Constitution
Section 51 of the Australian Constitution, is a subsection of Section 51 of the Australian Constitution that gives the Commonwealth Parliament the right to legislate with respect to "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth"...
). The requirement 'in trade or commerce' creates a significant threshold issue.
Individuals may be ancillary liable for breaches of s18 if they are "knowingly concerned" in the breach (s75B of the CCA).
Each of the States and territories of Australia
States and territories of Australia
The Commonwealth of Australia is a union of six states and various territories. The Australian mainland is made up of five states and three territories, with the sixth state of Tasmania being made up of islands. In addition there are six island territories, known as external territories, and a...
have fair trading legislation, which mirrors the ACL.
Conduct which is misleading
The prohibition on misleading conduct is set out in section 18(1) of the Australian Consumer Law:- "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
Section 4(2)(a) of the CCA defines conduct as:
- "...doing or refusing to do any act, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or the giving effect to a provision of, and understanding or the requiring of the giving of, or the giving of, a covenant;"
Whether conduct is misleading or deceptive is a question of fact determined by considering the conduct as a whole.
To be misleading or deceptive the conduct must contain a misrepresentation
Misrepresentation
Misrepresentation is a contract law concept. It means a false statement of fact made by one party to another party, which has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality...
capable of inducing the relevant class into error. Generally, misrepresentations will be false statements of fact. However, statements that are factually true may also be misrepresentations if they are capable of inducing consumers into error.
The relevant test is whether the conduct misleads or deceives, or is likely to mislead or deceive, the relevant class. Accordingly, it does not matter if the conduct intends to mislead or deceive, or is negligent
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
or reckless as to whether they mislead or deceive. However, in some circumstances it may be necessary to show that the person doing the conduct did intend to mislead or deceive, for example when the person is merely passing on information.
Silence may be misleading in limited circumstances. When there is a duty between parties at common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
to disclose facts, then a failure to do so may be misleading conduct. Furthermore, even if there is no common law duty to disclose, a person's silence, when considered in light of all the circumstances (other statements they have made, or other actions they have taken) may be misleading conduct. Generally, 'mere silence' is not misleading conduct unless there is a reasonable expectation that the person should disclose facts.
When the relevant conduct is a representation about the future (as opposed to a representation about present facts), then according to section 4 of the ACL, that conduct will be taken to be misleading if the person making it cannot show they have reasonable grounds. In these situations, representations about the future are presumed
Rebuttable presumption
Both in common law and in civil law, a rebuttable presumption is an assumption made by a court, one that is taken to be true unless someone comes forward to contest it and prove otherwise. For example, a defendant in a criminal case is presumed innocent until proved guilty...
to be misleading, and the burden of proof is on the person making the representation to produce evidence to show that they had reasonable grounds.
Although section 18 is usually thought of in terms of consumer protection
Consumer protection
Consumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
, it is not limited to these circumstances. Section 18 applies to representations made in commercial transactions, for example during negotiations between franchisers or for the sale of a business.
Fines
There are no pecuniary penalties available for a breach of section 18. However, for a breach of many of the related provisions in the Australian Consumer Law, the Australian Competition and Consumer CommissionAustralian Competition and Consumer Commission
The Australian Competition and Consumer Commission is an independent authority of the Australia government. It was established in 1995 with the amalgamation of the Australian Trade Practices Commission and the Prices Surveillance Authority to administer the Trade Practices Act 1974...
(ACCC) can seek pecuniary penalties of up to $1.1 million from corporations and $220,000 from individuals.
Damages
A victim of misleading or deceptive conduct is only entitled to damages (i.e., monetary compensation) if they have suffered loss or damage as a result of the conduct. The measure of loss or damage here is generally the same as it is in contract law or tort law. According to section 82(1B) of the CCA, which was introduced in 2004, if a victim contributed to the loss or damage that they suffered, then the court can reduce the amount of damages that they are awarded, in a similar fashion to the reduction of damages in a negligenceNegligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
claim if the plaintiff is guilty of contributory negligence
Contributory negligence
Contributory negligence in common-law jurisdictions is defense to a claim based on negligence, an action in tort. It applies to cases where a plaintiff/claimant has, through his own negligence, contributed to the harm he suffered...
. However, if the person engaging in the conduct intended to mislead or deceive, or was fraudulent
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
in their conduct, then the courts cannot reduce the damages.
There is a limitation period of six years on actions for damages, according to section 82(2).
Section 87 orders
Power of Court to prohibit payment or transfer of moneys or other property(1) Where:
- (a) proceedings have been commenced against a person for an offence against a provision of Part VC; or
- (b) an application has been made under section 80 for an injunction against a person in relation to a contravention of a provision of Part IVA, V or VC; or
- (c) an action has been commenced under subsection 82(1) against a person in relation to a contravention of a provision of Part V; or
- (d) an application for an order under subsection 87(1A) or (1B) has been or may be made against a person in relation to a contravention of a provision of Part IVA, V or VC;
the Court may, on the application of the Minister or the Commission, make an order or orders mentioned in subsection (2) if the Court is satisfied that:
- (e) it is necessary or desirable to do so for the purpose of preserving money or other property held by or on behalf of a person referred to in paragraph (a), (b), (c) or (d), as the case may be (in this section referred to as the relevant person), where the relevant person is liable or may become liable under this Act to pay moneys by way of a fine, damages, compensation, refund or otherwise or to transfer, sell or refund other property; and
- (f) it will not unduly prejudice the rights and interests of any other person.
The measure of loss or damage here may be different than the measure for damages under section 82. Some cases have suggested that since section 87 is not just about recovering monetary loss, then the measure should be broader. However, other cases consider that the same measure of loss or damage should be used.
There is also a limitation period of six years on actions for section 87 orders, according to section 87(1CA).