In recent years, small and large businesses have encountered allegations of misleading and deceptive conduct. In Australia, this is governed by the Australian Consumer Law (“ACL”), which serves to provides penalties and to discourage such acts. This blog is to help business owners get a sense of what constitutes misleading and deceptive conduct.

The relevant section regulating misleading and deceptive conduct in the ACL is found in Section 18:

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

When does misleading and deceptive conduct occur?

To determine whether misleading and deceptive conduct has occurred, the facts and circumstances of the case will be taken into consideration. This is determined through an objective test, which asks the question – would a reasonable person in the same facts and circumstances have been misled or deceived? A ‘reasonable person’ will match the profile and class of customer that you would ordinarily target with your business. It is also crucial to note that it is irrelevant to determine whether a person was actually deceived.

What kind of conduct would be considered?

Conduct can be in the form of statements made, representations or even silence.

Making statements

When making statements and representations during the course of conducting business, common sense would dictate that you should not deliberately make any misleading or false statements. However, where you make a false statement and are unaware it is false, a court will determine whether you had reasonable grounds to believe the falsity. The trickier aspect of making statements is the ease at which statements can have multiple interpretations and meanings. If one interpretation of a statement could be considered misleading, the entire statement itself will be considered misleading.

To prevent this, it is crucial to ensure that you make clear and concise statements instead of broad general statements. This does not mean you are not allowed to embellish or add ‘puffery’ to your statements (e.g. “we make the best burgers in the world!”) – the courts have recognised that the public is accustomed to such statements and will not take them at face value. There is also the expectation that a reasonable consumer will take more care when making more significant purchasing decisions.

Silence

Silence can be considered misleading or deceptive where it misleads a consumer to believe an untrue state of facts. The most common example of silence is the omission of a crucial fact – where if the consumer had known of the fact earlier, they would not have entered into the transaction.

However, there are exceptions to this principle. In Swindells v Victoria, the Victorian government did not disclose the fact that a particular job advertised could be subject to review and abolished. In this case, the unfortunate plaintiff had moved his family from Western Australia to Victoria for a government role, which was abolished after a review. The court found that the government was under no obligation to disclose the possibility of abolishing the role, as a review could have many possible outcomes and that the abolition of the role was a sophisticated process (it required passing legislation) – which was something the unfortunate plaintiff could have known.

What are the consequences of misleading and deceptive conduct?

There are three consequences that can arise from a claim against misleading and deceptive conduct: damages; compensatory orders; or an injunction.

Damages – a party may seek damages for misleading and deceptive conduct, provided they can prove that they have suffered a loss or damage as a result of relying on it.

Compensatory orders – a party may seek a compensatory order from the court, if they have suffered or are likely to suffer loss or damage arising from misleading and deceptive conduct. The court may order compensation for a full or partial amount of the loss or damage.

Injunction – a party may seek an injunction against somebody who has committed a misleading or deceptive act. An injunction means that the person accused will not be allowed to do certain things. This injunction may also be sought against somebody who is aiding somebody else in committing misleading and deceptive conduct.

If you have any queries, please do not hesitate to contact us.

(Posted by Jeremy Chow, Articled Clerk – This message cannot be used as legal advice).