Misleading or deceptive conduct

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Misleading or deceptive conduct (often referred to as just misleading conduct) is a doctrine of Australian law.

Section 52 of 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.

Contents 1 Application of the doctrine 2 Conduct which is misleading 3 Remedies 3.1 Damages 3.2 Section 87 orders

[edit] Application of the doctrine

Section 52 is limited by its own terms 'a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive'. The Trade Practices Act (TPA) is an act of the Parliament of Australia, so section 51 of the Australian Constitution (which sets out the division of powers between the federal and state parliaments) restricts the application. Section 52 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 s52 if they are "knowingly concerned" in the breach (s75B).

Each of the States and territories of Australia have implemented fair trading legislation, which contain provisions substantially identical to the TPA including replicating the 'misleading and deceptive conduct' provision. However, the requirement that the conduct be 'in trade or commerce' remains.

[edit] Conduct which is misleading

The prohibition on misleading conduct is set out in section 52(1) of the Trade Practices Act:

"A corporation shall 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 TPA 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 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 51A of the TPA, 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 52 is usually thought of in terms of consumer protection, it is not limited to these circumstances. Section 2 applies to representations made in commercial transactions, for example during negotiations between franchisers or for the sale of a business.

[edit] Remedies

If a person has suffered loss or damage as a result of another person's misleading or deceptive conduct, then they can bring an action against that other person to recover the amount of the loss or damage under section 82, apply for other orders (such as orders to rescind or modify a contract) under section 87, or in relevant circumstances apply for an injunction under section 80.

According to section 75B, victims can bring actions not only against the direct perpetrators of the conduct, but also any person who aided or abetted the conduct, has conspired to effect the conduct, or has been in any way knowingly involved with the conduct. For example, when a corporation has engaged in misleading or deceptive conduct, a victim is often also able to bring actions against the directors of that corporation. Unlike in normal circumstances, a person needs to be knowingly or intentionally involved with the conduct in order to fall within the definition in section 75B.

The Australian Competition and Consumer Commission (ACCC) is empowered to intercede on behalf of victims of misleading and deceptive conduct, and can apply for orders under section 87 or injunctions under section 80. The ACCC will often seek orders which compel people or companies who have engaged in misleading or deceptive conduct to publish public apologies for their actions.

[edit] Damages

A victim of misleading or deceptive conduct is only entitled to damages 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), 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 negligence 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).

[edit] Section 87 orders

A victim can apply for orders under section 87 if they have suffered, or are likely to suffer, loss or damage as a result of misleading or deceptive conduct. A victim is not entitled to section 87 orders in the same way that they are entitled to damages, or in the same way that they would be entitled to equivalent orders under applicable common law doctrines, such as misrepresentation. Granting such orders is at the discretion of the court, and can only be granted if the court thinks that the order will compensate the victim for their loss or damage or prevent any (further) loss or damage. For example, a court may refuse to grant an order rescinding a contract if restitutio in integrum (restoration to original condition) is not possible.

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).