Section 18 of the Australian Consumer Law (ACL) (which applies in each State and Territory) prohibits misleading and deceptive conduct:
“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
A “person” includes corporations and individuals.
What does “in trade or commerce” mean?
Conduct that is “in trade or commerce” means conduct that has a trading or commercial character, and is not restricted to dealings or communications at arm’s length, or between strangers, or which has a dominant objective of profit-making.
The person who makes the alleged misleading and deceptive representations need not be engaged in trade or commerce at the actual time when the representations are made. The representations may, for instance, concern the future establishment of a commercial enterprise.
To be actionable a representation does not have to be made “in trade or commerce” by a corporation. A representation may be made by an individual.
The inquiry is whether the representations were made in such a context and in such circumstances as to render them statements having a commercial character. That character will include statements directed to the undertaking of a commercial enterprise including the establishment, financing and operation of that enterprise.
The mere fact that there is a personal relationship between the parties will not lead to a finding that the conduct between them had a “private” character and was therefore not in trade or commerce.
What type of conduct is caught?
- verbal representations (eg over the telephone or face-to-face)
- written representations (eg in emails, letters and text messages)
- silence (depending on the circumstances)
- representations about existing facts, present intentions, and “future matters” ie about anything that is to occur in the future, including predictions and projections.
What does “misleading and deceptive” mean?
Conduct will be misleading or deceptive if it actually induces error, or if there is a real and not remote chance or possibility that a person is likely to be misled or deceived.
- False statements will invariably be misleading.
- A representation about a future matter (including doing, or refusing to do an act) will be deemed to be misleading if the person had no reasonable grounds for making the representation.
- It is not necessary to prove that a person intended to engage in conduct that was misleading or deceptive, or was at fault. Even a person who acts honestly and reasonably may, in the circumstances, be held to have engaged in misleading and deceptive conduct.
- Further, liability will not be avoided because the misleading and deceptive conduct could have been ascertained by proper inquiry.
The Court will examine the alleged misleading and deceptive conduct in light of the whole course of conduct between the parties. For example, an email which is alleged to contain a misleading and deceptive statement will not be considered in isolation from the surrounding facts and circumstances.
It is also relevant to consider the particular person who engaged in the alleged conduct, and the person who allegedly relied on that conduct, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, and the facts which each may be taken to have known.
Causation and remedies
Section 236 of the ACL provides that:
“If a person suffers loss or damage because of the conduct of another person, and the conduct contravened [section 18], the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.”
Invariably the following must be proved:
- that the misleading or deceptive conduct was actually relied on ie in that particular acts were done, or not done; and
- a sufficient link between such reliance and the loss or damage suffered. It is sufficient if the conduct materially contributed to the loss or damage, even if the conduct was not the sole, principal or dominant cause, and even if, by itself, it would not have caused the loss.
Damages are not recoverable if, after reliance on the misleading and deceptive conduct, the loss or damage was caused by a third party, or by an external cause.
Apart from damages the Court has a general power under section 237 of the ACL to make any orders it thinks are appropriate, to compensate for the loss or damage, or to prevent or reduce the loss or damage suffered, or likely to be suffered. This includes declaring the whole or any part of a contract void (and therefore unenforceable).
What if the claimant failed to take reasonable care?
Section 137B of the Competition and Consumer Act 2010 provides that if the loss or damage was caused partly as a result of the claimant’s failure to take reasonable care, the Court may reduce the damages payable, to the extent the Court thinks just and equitable having regard to the claimant’s share in the responsibility for the loss or damage.
Please contact me if you would like advice on misleading and deceptive conduct.
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Jacqui Brown, Lynn & Brown Lawyers, WA