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Beware of Misleading & Deceptive Conduct in Business

Section 18 of the Australian Consumer Law (ACL) provides that when acting in trade or commerce, you must not engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

It is important to appreciate that the terms are broad and apply to practically every type of communication within the course of business. It does not matter whether there was an intention to mislead or deceive as the section only requires that the conduct is “capable” of misleading or deceiving another party. In other words, claiming “that is not what I meant” or “it was simply an honest mistake” would not assist your defence.

Misleading conduct is very broad in its application and ranges from actually lying, through to creating a false impression. Relevantly, this includes failing to provide information or to correct mistakes, and making claims that are false or inaccurate.

Examples of misleading conduct are (and this is not an exhaustive list):

  1. Incorrect or inaccurate professional advice. That may be from a solicitor, accountant, pest controller, building consultant, financial planner, architect, or essentially anybody else who gives advice as part of their professional service to you.
  2. Silence or failing to correct an understanding relating to an element that is important to an overall impression.
  3. Statements or assertions that are literally true, but which creates a false understanding/impression by conveying a secondary meaning that is false.
  4. Statements of opinion without a rational basis or which were not genuinely held.

Where a loss can be shown as a result of the misleading and/or deceptive conduct, there may be an additional cause of action over and above the traditional breaches of contract and/or tort.

Case Studies

Samantha & Joseph

Samantha and Joseph are newly married, first time home buyers in their 20s. They are expecting their first child and recently purchased their family home relying in part on a report by ABQ Termite Inspectors about the presence of termite activity and/or damage at the property they were purchasing.

Contracts were exchanged subject to a 5 working day cooling off period in which time ABQ Termite Inspectors inspected the property and provided a report. That report identified some termite damage to one section of the subfloor area. The report included a standard clause that applied when any termite activity or damage was found, namely that before proceeding with the purchase, an invasive inspection should be conducted by a suitably qualified builder to determine the extent of the damage and probable cost relating to it.

Samantha telephoned the inspector who completed the report and asked about the termite damage in the subfloor area. During that conversation, the inspector expressed the view that the termite damage looked to be fairly old and was likely to be localised.

Relying on the report prepared by the inspector and the telephone conversation about that report, Samantha and Joseph allowed the contract to cool-off and proceeded to purchase the property. Having moved in, they discovered whilst painting one of the bedrooms that a skirting board that had been inaccessible during the inspection (it was behind a bed) was damaged by termites. They contacted ABQ Termite Inspectors for further advice and were referred to a local builder to investigate the extent of termite damage at the property.

The builder conducted an invasive inspection, which identified termite damage to the internal wall framing throughout the property, including the bathroom, the kitchen, and the laundry, and estimated the cost of repair to be approximately $170,000.00.

Samatha and Joseph wrote to ABQ Termite Inspectors demanding payment for the termite damage on the basis that the inspector’s conduct during the telephone conversation in which he led them to believe any termite damage would be “localised” was misleading and deceptive conduct in contravention of section 18 of the Australia Consumer Law. That claim was made in addition to allegations of breach of contract and breach of duty of care.

Had the inspector stuck by the written recommendation in the report that it was essential for a builder to conduct an invasive inspection to determine the extent of termite damage and the likely cost of repairs before proceeding with the purchase, the claim by Samantha and Joseph was likely to be defensible.

As the inspector undermined the initial written advice when discussing the matter with Samantha, he opened the door to a claim including the allegation of misleading and deceptive conduct.

For further advice in relation to section 18 of the Australian Consumer Law, please contact David Collins or Kristy Nunn in our Dispute, Claims and Litigation Group.

Liability limited by a scheme approved under Professional Standards Legislation

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