MISLEADING OR DECEPTIVE CONDUCT

Don’t be Deceived.

The Australian Consumer Law and its predecessor legislation have for 40 years served to enable victims of sharp or misleading practices in business to seek redress from the Courts. Just as often, it has made it much easier for those who have simply struck bad bargains to (bearing in mind that the vast majority of civil disputes are settled and do not proceed to formal determination) use the litigation process to negotiate a more favourable outcome, with arguable merit.  Some commentators have suggested that while in some cases actually helping real victims of misleading conduct, this has undermined the sanctity of contract and spawned an industry in challenging contractual arrangements that don’t work out as one or the other party intended or understood, thereby adding layers of risk and cost to deal making in all sectors.  It has
certainly been a boon for commercial litigation lawyers.

Policy issues aside, there is no doubt that anyone involved in the negotiation of any significant contract (which includes all front line staff in many small businesses) needs to have solid awareness of the legal risks and be thoroughly briefed on the company’s risk management strategy in negotiations.

There are many cases where complex transactions have been undone by relatively simple and naive – or just mistaken – comments being made in emails or recorded in meeting minutes, or simply in phone conversations.

Those negotiating contracts have to work to a clear and unified strategy regarding matters such as:

(a)   who will communicate to whom,

(b)   what will be disclosed, when and by whom,

(c)   how they will respond to the other side’s likely questions and probing about the transaction and its terms,

(d)   how negotiations are to be recorded and who has authority to conclude any element of a transaction.

All of this requires good legal advice and management, before negotiation begins. At HHG we prepare detailed checklists for all such negotiations and guide our clients and their advisers through all legal aspects of the process of negotiation – from non-disclosure agreements, to the timing and wording of a heads of agreement or other
document, to the content of warranties.

At times we hear it said that getting out of contracts is easy if you have been misled. Our experience is that this is the exception, not the rule (although it is always easy to make allegations and commence litigation).

The idea that it is as simple as finding something misleading in the conduct of the other party or their agents prior to the transaction in order to get out of it, is itself misleading, as is the idea that the law will always compensate you for being misled or deceived.

For example, it is not enough just to prove that someone has said or done something to cause you to be misled or deceived into acting on something that was untrue.

You also have to prove:

(a)  the person who misled you did so in connection with the purchase or sale of goods or services, or in other words,in trade or commerce;

(b)  that you relied on the misleading conduct: in other words, it caused you to do something that you would not otherwise have done, or decided not to do something that you otherwise would have done; and

(c)  that you have lost something as a result of your reliance on the conduct, or in other words, had you not relied on it, you would have been better off.

The first of these facts will generally be quite easy to prove. Proving reliance and loss may not be quite so easy, though, because itmeans having to prove:

(a)  that you were actually misled in the sense that the other party’s conduct caused you to misapprehend a certain fact;

(b)  that you had intended to act differently before being misled (that is, you would not have acted as you did if
you had not been misled); and

(c)  if you had acted differently but for the misleading conduct, then you would have avoided some loss which you have in fact suffered or made some gain which you have in fact foregone.

Matters can become more complicated where you say, for example, you were misled because of something someone did not tell you or because someone predicted some future event which did not in fact occur.

So don’t be deceived by the apparent simplicity of the law’s prohibition against misleading or deceptive conduct.  If you feel you have been the victim of misleading or deceptive conduct, obtaining proper legal advice is essential.

If you would like further details in relation to this information, please contact HHG Legal Group on 1800 609 945.

*The information provided in this website serves as a general guide and does not constitute legal advice. It is based on our research and experience at the time of publication. Please consult our knowledgeable legal team for any specific inquiries or advice relevant to your circumstances, as the content may not have been updated subsequently.  

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