Misleading conduct

Overview

Pre-contractual misrepresentations may provide contractual remedies at common law or statutory remedies pursuant to the Competition and Consumer Act 2010 (Cth) (previously the Trade Practices Act 1974 (Cth) (TPA)).

The statutory remedy is more commonly used as it operates in a wider range of circumstances and generally provides better remedies.

Statute

The statutory prohibition of misleading and deceptive conduct can now be found in s 18 of the Australian Consumer Law (contained in schedule 2 of the Competition and Consumer Act 2010 (Cth)). This was previously contained in s 52 of the Trade Practices Act with the result that many of the cases relevant to this provision refer to s 52.

18 Misleading or deceptive conduct
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
…

Where a breach of section 18 is established a range of remedies are available including damages and contractual avoidance or variation.

Trade or commerce

To be captured by s 18, misleading conduct must occur in trade or commerce. The reference to 'trade or commerce' excludes purely private sales but captures most commercial activity.

Misleading or deceptive conduct

Section 18 prohibits a person (including a corporation), acting in trade or commerce, from engaging in conduct that is misleading or deceptive or is likely to mislead or deceive. This is a positive obligation; ignorance about the truthfulness of statements made is not a defence.

The test generally applied to assess whether conduct breaches this obligation is whether it leads, or is capable of leading, a person into error.

Where comments are made to the public at large (such as in mass advertising) whether something is misleading or deceptive is judged by reference to whether the conduct would have misled or deceived a reasonable person. Similarly, where directed to a class of persons then reference will be made to a reasonable member of that class.

Where comments are made to individuals then conduct is usually assessed by reference to the particular individual.

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 (High Court)
(Misleading or deceptive conduct - passing on information - reasonable potential purchasers)

Silence as misleading or deceptive conduct

Silence can be misleading or deceptive, depending on the circumstances

Australian Consumer Law (s 2(2))
(Silence as misleading conduct)

 Demagogue Pty Ltd v Ramensky (Federal Court (Full Court) 1992)
(Silence as misleading conduct)

Miller & Associates Insurance Broking Pty Ltd v BMW Australia (High Court 2010)
(Misleading or deceptive conduct - non-disclosure)

Statements about the future

Statements about the future are not misleading simply because they turn out to be false - an important queston will be whether or not the party had reasonable grounds for making the representation.

Australian Consumer Law (s 4)
(Statements about the future)

Key principles

In ACCC v Dukemaster Pty Ltd [2009] FCA 682 Justice Gordon set out (at para 10) the following key principles [emphasis added]:

1. A contravention of s 52(1) of the TPA is established by "conduct" which is misleading or deceptive or likely to mislead or deceive ... The "conduct", in the circumstances, must lead, or be capable of leading, a person into error ... and the error or misconception must result from "conduct" of the corporation and not from other circumstances for which the corporation is not responsible ... "Conduct" is likely to mislead or deceive if there is a "real or not remote chance or possibility regardless of whether it is less or more than fifty per cent" ...

2. Section 52(1) is concerned with the effect or likely effect of "conduct" upon the minds of that person or those persons in relation to whom the question of whether the "conduct" is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself .... Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests: ... Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context: ....

3. "Conduct" can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive: ...

4. By making a statement of past or present fact, a corporation's state of mind is irrelevant unless the statement involved the state of the corporation’s mind: ... Contravention of s 52(1) does not depend upon the corporation's intention or its belief concerning the accuracy of the statement of fact but upon whether the statement conveys a meaning which is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false.

5. Precisely the same principles control the operation of s 52(1) to statements involving the state of mind of the maker when the statement was made (e.g. promises, predictions and opinions). A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or impliedly) that the maker of the statement had a particular state of mind when the statement was made and, commonly, that there was a basis for that state of mind: ...

6. A statement of opinion will not be misleading or deceptive or likely to mislead or deceive merely because it turns out to be incorrect, misinforms or is likely to do so: ... An incorrect opinion does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any or any adequate foundation: .... An expression of an opinion which is identifiable as an expression of opinion conveys no more than that the opinion is held and perhaps that there is a basis for the opinion. If that is so, an expression of opinion however erroneous misrepresents nothing: ...

7. However, an opinion may convey that there is a basis for it, that it is honestly held and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise. If the evidence shows that the opinion was not held or that it lacked any or any adequate foundation, particularly if the opinion was expressed as an expert, a statement of opinion may contravene s 52 of the TPA: ...

[although it related to s 52 of the Trade Practices Act 1974, the principles are equally applicable to the equivalent provision in s 18 of the Australian Consumer Law]

Case examples

Section 18 (previously section 52) is one of the most litigated provisions in Australia - there are literally thousands of cases referencing the prohibition. Many occur in the context of contracts, but this is not essential for purposes of the prohibition - conduct need only take place ‘in trade or commerce’. The following is a brief selection of those cases.

High Court

  • Google Inc v Australian Competition and Consumer Commission [2013] HCA 1 (6 February 2013)
    [The ACCC alleged Google had engaged in misleading or deceptive conduct in relation to its display of sponsored links. The High Court held that Google was not responsible for misleading or deceptive representations contained in the links themselves (they were the responsibility of the advertisers). In addition to the judgment itself , the High Court released a brief Press Release stating, in part:

The High Court unanimously allowed the appeal. Google did not create the sponsored links that it published or displayed. Ordinary and reasonable users of the Google search engine would have understood that the representations conveyed by the sponsored links were those of the advertisers, and would not have concluded that Google adopted or endorsed the representations. Accordingly, Google did not engage in conduct that was misleading or deceptive.

Other courts

  • Rhone-Poulenc Agrochimie AG v UIM Chemical Services Pty Ltd (1986) 12 FCR 477

  • Global Sportsman Pty Ltd [1984] FCA 180 (Full Court)
    [Statements of opinion made in newspapers ('There is no definable boundary between conduct which is misleading or deceptive or likely to mislead or deceive and material which is defamatory. Material which is defamatory does not fall outside the operation of sub-s. 52(1) of the Act merely for that reason any more than it is brought within the operation of sub-s. 52(1) by reason only that it is defamatory.' (para 11))]

See also the LawCite list for s 52 of the Trade Practices Act

Further reading

Just as there are innumerable cases there are dozens of articles discussing the breadth of this provision. This is just a brief sample.

Arlen Duke, Representations as to the Future under the Proposed Australian Consumer Law (2009) MULR 17

Jason Cornwall-Jones, 'Breach of Contract and Misleading Conduct: A Storm in A Teacup?' [2000] MelbULawRw 10; (2000) 24(2) Melbourne University Law Review 249

C E K Hampson, 'Blocked contractual arteries? try a section 52 by-pass' (1993) 1 Trade Practices Law Journal 22

 The Australian Legal Group, 'Silence as misrepresentation' (1990) 15 Australian Construction Law Newsletter 45-46

Philip H Clarke, 'The Hegemony of Misleading or Deceptive Conduct in Contract, Tort and Restitution' (1989) 5 Australian Bar Review 109

 Justice R E Cooper, 'Unconscionability in Consumer Transactions: Section 52 of the Trade Practices Act' [1989] QUTLawJl 1; (1989) 5 Queensland University of Technology Law Journal 1

Warren Pengilley, 'Section 52 of the Trade Practices Act: A plaintiff's new exocet?' (1987) 15 Australian Business Law Review 247

See also LawCite article results

Common law

Common law misrepresentation overlaps with the statutory misleading conduct provisions and in practice is only relevant where the CCA does not apply; that is, in non-commercial contexts. An actionable pre-contractual misrepresentation occurs where a party makes a 'false representation' (orally, in writing or by conduct), the representation is one of fact (rather than a statement of opinion of law or a prediction about the future), it must be made to the other contracting party and it must induce the contract.

Where established the key remedy is rescission (generally damages are not available unless the misrepresentation constitutes a tort - that is, it is also fraudulent or negligent - in which case tortious (but not contractual) damages may be available). Even where misrepresentation is established there are some limits on rescission - most significantly, if restitution is not possible the right to rescind will be lost.

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Last updated: 18 October 2019