The scope of the prohibition of misleading and deceptive conduct
Section 18 Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) has been interpreted expansively by the Courts and
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The scope of the prohibition of misleading and deceptive conduct
Section 18 Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) has been interpreted expansively by the Courts and has thus moved into many fields of law that were not generally foreseen by its framers.
Section 18(1) states:
“A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
Although most section 18 actions will consist of misrepresentations, it is erroneous to limit section 18 claims exclusively to circumstances that constitute some form of representation. Section 18 claims have been successfully made against exaggerated sales puffs (see General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164, 178 (Davies & Einfield JJ) and mere silence - Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [No.1] (1988) 39 FCR 546 and are actionable as misleading conduct.
The breadth of Section 18, can be seen from the following interpretations that have been given to it:
1. Intention is Irrelevant - Section 18 is concerned with the impact of the conduct, not upon the state of mind of the person engaging in the conduct.
2. Actual Deceptions is not Required - It is not necessary to prove that anyone is actually misled or deceived. All that is necessary is to establish that someone in the target would be likely to be misled or deceived.
3. A Part Truth is Misleading - A statement that contains some truth, but is incorrect in other respects, or those which are literally true but produce a false impression, can amount to misleading and deceptive conduct. For example:
“To announce an opera in which a named and famous prima-donna will appear and then to produce an unknown young lady bearing by chance the same name, would clearly be to mislead and deceive. The announcement would be literally true, but nonetheless, deceptive, and this is because it conveyed to others something more than the literal meaning which the words spelled out.” (This example was given in Hornsby Building Information Centre v Sydney Building Information Centre 1978] 35 FLR 372).
4. Silence can be Misleading or Deceptive - If an overall impression is created, and the person making the advertising statements knows that to say something or provide some further information may fix a false impression, then not to do so amounts to misleading and deceptive conduct.
The case law on whether silence is actionable has been inconsistent. Differing approaches have been taken. In Rhone – Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 the court held that failure to disclose certain information was not misleading and deceptive conduct. Whereas in the Henjo case the failure to disclose details was held to be misleading and deceptive conduct.
To demonstrate a breach of section 18 or section 29, it is not necessary that the impinged conduct actually lead a person into error; to engage in conduct that is likely to lead into error is sufficient. (See Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.) However, in contract related actions it has still been held necessary that there has to be a cause or nexus between conduct and loss in order to claim remedies under the Trade Practices Act. (See Brown v Jam Factory Pty Ltd (1981) 53 FLR 340). Consequently, it is irrelevant whether ….. intended to mislead the Jacob Interests or that ……’s actions were neither dishonest nor negligent. Nevertheless, the conduct may still amount to misleading and deceptive conduct.
In deciding whether or not conduct is misleading, especially in establishing whether there was a cause or nexus between conduct and loss, the courts have had to grapple with the question of how much intelligence should be accorded to the subject of any impinged conduct. In the case of contractual representations, the capacity of the conduct to deceive or mislead is determined with reference to the characteristics of the actual recipient.
Principles Appliable to applying s 18
Yolarno Pty Ltd v TransGlobal Capital Pty Ltd & Ors (No 2) [2003] NSWSC 1004 (19 November 2003) Gzell J
42 The principles applicable to the operation of the Trade Practices Act 1974 (Cth), (s 18) are usefully set out by Hill J in Equity Access Pty Ltd v Westpac Banking Corporation (1989) 16 IPR 431 at 440-441.
43 First, in order for impugned conduct to be misleading or deceptive it must convey, in all the circumstances, a misrepresentation. That what was said at the September 1999 meeting amounted to a misrepresentation is established by the subsequent conduct of Mr Taylor and the difficulty TransGlobal experienced in obtaining anyone to underwrite the issue.
44 Secondly, there is no contravention of the Trade Practices Act 1974 (Cth), s 18(1) unless error or misconception results from the conduct of the corporation and not from other circumstances for which the corporation is not responsible. That requirement is satisfied in the instant circumstances. Mr Taylor was the managing director of TransGlobal.
45 Thirdly, conduct is likely to mislead or deceive if there is a real or not remote chance or possibility of misleading or deception regardless of whether that is more or less than 50%. The question whether conduct is misleading or deceptive or is likely to be so, is an objective one to be determined by the court itself. Evidence that persons of the relevant class were misled, although admissible, is not determinative although in some cases it may be highly persuasive. In light of the clear dichotomy between the representation and the fact, there can be no doubt that the conduct of Mr Taylor on behalf of TransGlobal was misleading or deceptive.
46 Fourthly, conduct of a corporation causing mere confusion or uncertainty in the sense that the public may be caused to wonder whether two products may have come from the same source is not necessarily co-extensive with misleading or deceptive conduct. That aspect has no application in the instant circumstances.
47 Fifthly, in certain cases the applicant must establish that it has acquired a relevant reputation in a name that has become distinctive of its business in a particular country or geographical area. That aspect, also, has no application in the instant circumstances.
48 Finally, the Trade Practices Act 1974 (Cth), s 18 is not confined to conduct that is intended to mislead or deceive and a corporation that acts honestly and reasonably may, nonetheless, engage in conduct that is likely to mislead or deceive. That aspect is also inapplicable in the instant circumstances.
