Misleading and Deceptive Conduct: A Summary

As part of our debt-recovery service, we often receive correspondence from debtors claiming they have been misled and/or deceived in some way, and therefore, should not be liable for the debt they incurred.

It is surprising how often these allegations are made in response to a letter of demand for payment.  Many of these allegations do not correctly apply the Australian Consumer Law (“ACL”) surrounding misleading and deceptive conduct. 

On the surface, section 18 of the ACL is quite simple:

“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. 

Within this short sentence are many specific qualifications that must be met before such a claim can succeed. 

First, are the obvious elements:

  1. A person must not’ – Both individuals and corporations can be liable for misleading and deceptive conduct (so long as all elements are met).  Whereas, prior to 2010 when the Trade Practices Act 1974 applied, the provision only applied to corporations. 
  2. In trade or commerce’ – Simply put, the conduct being complained of must have occurred as part of some commercial activity. 
  3. Misleading or deceptive conduct or is likely to mislead or deceive’ – So, what is misleading or deceptive conduct? Well, the ACL doesn’t provide a definition, but case law suggests we should just use the literal meaning.  In Weitmann v Katies Ltd (1977) 29 FLR 336, Franki J used the dictionary definition as follows:

Deceive: “to cause to believe what is false, to mislead as to a matter of fact, to lead into error, to impose upon, delude or take in”. 

Mislead: “to lead astray in action or conduct, to lead into error or to cause to err”.

Is it Misleading or Deceptive Conduct?

There are two steps to determining whether conduct was misleading or deceptive. 

Firstly, there must have been representations made that were relied upon by the claimant.  For example, where an agreement is made following a sales pitch.  Secondly, those representations must have been false, misleading or deceptive or likely to mislead or deceive.  There must have been a misrepresentation. 

Where there were no express representations or promises, or where the representations are directed to the general public, such as an item purchased off the shelf, the court will take the following approach (as per Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177):

The relevant section of the public is identified as to whom is a likely or potential victim of the alleged misleading or deceptive conduct. 

  1. Once the relevant section of the public is identified, it must be established who falls within that section.  Example – If the conduct complained of relates to a certain cat food, the relevant section of the public would be cat owners.  It is a very broad category and includes many different types of people.  Generally, the test is whether or not a reasonable person within the relevant section would be likely to be misled or deceived by the conduct.
  2. Lastly, the court will consider why or how the misconception arose so it can be determined whether there was actual misleading or deceptive conduct or if the claimant was merely confused.  Representations that cause confusion or uncertainty will not amount to misleading or deceptive conduct. 


The most common situation we see is where a person, usually a business-owner, enters into an agreement and provides a director’s guarantee.  When the business owner defaults on payment, the creditor relies on the guarantee to obtain payment from the business owner personally.  The business owner may then claim they were misled or deceived into signing the guarantee and that they did not understand what they were signing or its effect. 

In such circumstances, we would demonstrate that the debtor was not misled or deceived.  They had a responsibility to understand and consider the agreement put before them prior to signing.  A business owner, whatever its expertise, should understand that agreements are binding and non-performance has consequences.  As such, the terms and conditions of any agreement should be considered and understood before being agreed to.

Phone Instagram LinkedIn