“I’ve been duped!” - What is misleading and deceptive conduct?

‘Misleading or deceptive conduct’ is when a party induces another to enter a contract upon false impressions. This conduct is prohibited under the Australian Consumer Law (“ACL”). In order to establish that this conduct has occurred it is necessary to prove that:

1. The plaintiff (the disadvantaged party) was induced into believing an “erroneous assumption” as a result of the conduct in question;
   
   
2. The plaintiff relied upon the misleading or deceptive representations when entering the contract (this conduct need only form one such factor);

3. The representation must be positive. This means it must be a statement and not merely silence. There are a number of relevant exceptions to this rule where there is a duty to disclose information.

To be found to be misleading or deceptive conduct a transaction has to have occurred in the course of business, or under “trade or commerce”. In your case, purchasing a share in the business which conducted trade does fall under the relevant definition.

In order to determine whether conduct was misleading, the Court considers what the precise effect of the conduct would be on the disadvantaged individual. The Court would likely analyse the following:

• Nature of the parties;
• Nature of the transaction;
• Any level of familiarity between the parties; and
• The exact nature of the conduct itself.

If you have been disadvantaged by misleading and deceptive conduct, there are a number of remedies available, which are discussed in “Misleading and Deceptive Conduct Part II”.

If you have further questions, please contact us at frank@franklaw.com.au.

This is not legal advice.