MISLEADING, DECEPTIVE

CONDUCT AND
UNCONSCIONABLE
CONDUCT

CRICOS Provider Number 00103D

 Introduction
• Freedom of contract and negotiation does
not mean you can always do what you like
• Concerns arise over:
• Misleading and deceptive conduct and words
• Unconscionable conduct (conduct that is manifestly
unfair)
• Common law and statutory provisions have
some effect on controlling both of these
• First, misleading and or deceptive conduct or
words

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 Negligent Misstatement
(common law)
• An innocent but negligent misstatement
(sometimes and inaccurately called
negligent misrepresentation) can give
rise to an action where a ‘special
relationship’ can be shown to exist
between the parties. This does not have
to be contractual.
CASE: Hedley Byrne & Co Ltd v Heller &
Partners Ltd [1964]
CASE: Esso Petroleum Co Ltd v Mardon [1976]

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 In addition
• Actions in Contractual
Misrepresentation (fraudulent or
innocent) lie where the misleading
statements induce a person to enter
a contract with the person who made
those statements

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 Statutory modifications
• Both Commonwealth (Trade Practices Act 1974 [TPA])
and state and territory consumer protection legislation
have impacted on the area of
misrepresentations/misstatements by targeting
conduct/words rather than contractual situations.

• For example, relevant sections of the TPA include:

• s 52(1): misleading or deceptive conduct;
• s 51A: representations as to the future;
• s 53: false representations;
• s 53A: false representations in relation to land;
• s 53B: false representations in relation to
employment;
• s 55A: misleading conduct regarding services;
• s 59: misleading statements about home-
operated businesses.

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 Misstatement/misrepresentation

• Most actions for both are today brought

under the Trade Practices Act and the
equivalent provisions in the state Fair
Trading Acts, because breach is easier to
establish and there is a broader range of
remedies.

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 Misleading or deceptive conduct
– s 52 TPA
• Section 52 is not restricted in its usage to
consumers and can be equally enforced by
competitors or suppliers against other
competitors or suppliers.
• Breach of s 52 is not an offence resulting in a
criminal penalty.
• Remedies for breach of s 52 include injunction (s
80), or damages (s 82) but note that the misleading
or deceptive conduct must have caused the loss or
damage suffered.

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 Misleading or deceptive conduct
– s 52 TPA

• Section 52 is made up of three

elements:
• conduct by a corporation (or person who
is caught by s 6);
• the activity of trade or commerce; and
• misleading or deceptive conduct, or
conduct likely to mislead or deceive.

• Note: s 52 is a catch-all section and a

corporation in breach of a specific section
will usually also be in breach of s 52.

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 Misleading or deceptive conduct
– s 52 TPA
• The conduct complained of must have some
trading or commercial character about it
CASE: Pacific Dunlop Ltd v Hogan (1989)

• Whether conduct is misleading or deceptive is

determined by the court using an objective
test of whether a reasonable person would be
misled or deceived.
CASE: Taco Company of Australia Inc v Taco
Bell Pty Ltd (1982):
• At whom was the conduct directed?
• Would those persons have been likely to be led
into error by the conduct?

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 Misleading or deceptive conduct
– s 52 TPA
• Mere confusion does not amount to
conduct that is misleading or deceptive.
• It is enough if the conduct is likely to
deceive or mislead although mere
confusion is not enough.
CASE: McDonald’s System of Australia Pty Ltd
v McWilliams Wines Pty Ltd (1980)
CASE: Parkdale Custom Built Furniture Pty
Ltd v Puxu Pty Ltd (1982)

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 Representations as to the
future
– s 51A TPA
• Section 51A widens the scope of s 52 by
providing that future representations
without reasonable grounds for making
the representations shall be misleading.
• The onus of proof is on the person who
made the representation to show that
they had reasonable grounds for doing
so.

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 Specific false representations
- s 53
• False representations - s 53
• Unlike s 52, this section is narrowly
defined with breach of any section a
criminal offence (s 79), as well as
providing the injured party with civil
remedies.
• The section prohibits the making of false
representations in connection with the
promotion and supply of goods and
services in 11 subsections:
• that goods are of a particular standard
CASE: Hartnell v Sharp Corporation of Australia Pty
Ltd (1975)
• quality, value, grade, etc when this is not the
case: s 53(a)
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 Specific false representations
- s 53
• False representations - s 53
• that services are of a particular standard,
quality, value or grade: s 53(aa)
• that goods are new: s 53(b)
• that goods or services have been ordered:
s 53(bb)
• representations as to characteristics, uses, etc
of goods and services: s 53(c)
• representations as to sponsorships: s 53(d)
• false representations as to price: s 53(e)

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Specific false representations - s 53
• False representations - s 53
• false representations as to facilities for repair or
spare parts: s 53(ea)

• false representations as to origin of goods: s

53(eb)

• false representations concerning the need for any

goods or services: s 53(f)

• false representations as to condition, warranty etc:

s 53(g)

• Note that each representation is an

independent offence.

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 Defences, enforcement and
remedies
• Defences for breach under s 85 include:
• reasonable mistake; or
• reasonable reliance on information supplied
by another person; or
• that the breach was caused by a third party,
accident or some other cause over which
the defendant had no control; and
• in each case the defendant took reasonable
precautions and exercised due care to avoid
the breach.

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 Enforcement and remedies

• Contravention by a corporation of
Part V may result in:
• a fine (s 79) (other than for a breach of
s 52);
• the issuing of an injunction (s 80);
• disclosure of information or corrective
advertising (s 86C);
• damages (s 82) (but not for breach of
Part IVA);
• ancillary orders (s 87).

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 Powers of ACCC
• Administering the TPA
• Investigating and prosecuting breaches
of the Act
• Hearing disputes under the Act
• Conducting research
• Providing consumers and traders with
information on their respective rights
• Obtaining evidence, including
documentary evidence
• Establishing and administering
standards relevant to product safety
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 Consumer protection legislation at
state and territory level
• Why do we need state and territory consumer
laws?
• the TPA applies to corporations and not individual traders
• traders who are not legally bound by the TPA will be
subject to the state and territory Fair Trading Acts
• Fair Trading Acts
• Enacted by each state and territory
• To protect consumers not protected by the TPA
• Prohibit:
• misleading and deceptive conduct
• unconscionable conduct
• false representations regarding goods and services
• unfair trade practices.

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 Small Claims Tribunal - VCAT

• Has authority to hear consumer

claims
• Operates through hearings
• Limits imposed on its operation
• Generally no right of appeal and
no costs orders (except SA)
• Claims made by filing prescribed
form
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 Financial services
regulation
• The Financial Services Reform Act 2001
(Cth) regulates all sections of the financial
services industry.
• New Chapter 7 inserted into the
Corporations Act 2001 (Cth) requiring:
• Licensing and product disclosure.
• Person carrying on business dealing in financial
products and providing related advice must obtain
an Australian Financial Services License (AFSL)
issued by the Australian Investments and
Securities Commission (ASIC).
• Financial services provider must prepare a
statement of advice in respect to the product
and/or advice provided to clients.

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 Some last points
• S51AB only covers goods and/or services
“of a kind ordinarily acquired for personal,
domestic or household use or
consumption” but it would appear that
S51AC is wider
• Unconscionability is not just about
unfairness- it needs to be manifestly
unfair or unequal
• However, it could protect even “unworthy
litigants” (Latimer’s term) unless those
individuals had independent legal advice
before entering the contract

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