You’re deep into negotiations. Everything looks solid. Then, after you sign, you discover the other side left out a crucial fact. A failing contract. A regulatory problem. A known defect. Something that changes everything.
Was that misleading conduct? Or just tough commercial negotiation?
This question sits at the heart of countless business disputes in Australia. And the answer is rarely black and white.
Key Takeaways
- Misleading or deceptive conduct does not require intent, the test is whether the conduct was likely to mislead a reasonable person in the circumstances, not whether someone meant to deceive.
- Silence and omissions can be misleading, staying quiet when context creates an expectation of disclosure can be just as actionable as an outright lie.
- The Australian Consumer Law (ACL) applies to business-to-business dealings, you do not have to be a consumer to bring a claim, just engaged in trade or commerce.
- Context determines everything, courts look at the whole commercial picture, including what was said, what was left out, what documents were exchanged, and what assumptions the parties shared.
- Preserve evidence early, contemporaneous emails, meeting notes, pitch decks, tender documents, and version histories matter enormously if you need to prove reliance or loss.
- Remedies can include damages, rescission, or injunctions, if you can prove misleading conduct caused you loss, the court has broad powers to put things right.
What Misleading or Deceptive Conduct Actually Means
Misleading or deceptive conduct in a commercial dispute is usually about whether one party said, implied, or failed to disclose something that caused the other side to form a wrong impression and act on it.
In Australia, the rule is found in section 18 of the Australian Consumer Law. The provision is simple: you cannot engage in conduct that is misleading or deceptive, or likely to mislead or deceive, in trade or commerce.
Notice what it does not say. It does not require proof of intent. It does not require an outright lie. And it does not require a written statement.
The question is objective: would a reasonable person in the position of the other party have been misled by what was said, shown, or left unsaid?
If the answer is yes, and that person relied on it and suffered loss, you have the foundation of a claim.
This applies whether you are negotiating a major acquisition, responding to a tender, pitching to investors, or buying equipment for your business. It applies in business-to-business dealings, not just consumer transactions. And it operates alongside contract law, which means you can have a valid contract and still have a misleading conduct problem.
Misleading conduct is not about catching someone in a lie. It is about whether the commercial picture presented to you was materially incomplete or inaccurate in a way that mattered.
Why Context Matters More Than Wording Alone
You cannot assess whether conduct was misleading by isolating one sentence from an email or one slide from a pitch deck.
Courts look at the whole commercial context. What was said. What was left out. What documents were exchanged. What assumptions the parties shared. What questions were asked and not answered. What the parties knew about each other’s position.
A statement that would be harmless in one setting can be misleading in another.
Take a simple example. A seller tells you “revenue has been stable”. Technically true if you measure it year-on-year. But misleading if the seller knows a major customer just terminated their contract and that loss has not yet flowed through the numbers.
Or a contractor says “the site conditions are typical for this location”. Also technically defensible. But misleading if the contractor has surveys showing unexpected contamination and does not disclose them when the statement creates an impression that no unusual risks exist.
The test is not whether the words themselves are false. The test is whether the overall impression created by the conduct, in context, was likely to mislead.
This is why discovery matters so much in these disputes. The other side’s internal emails, board papers, feasibility studies, and draft documents often reveal what they knew and when they knew it. If they presented one picture externally while discussing material risks internally, that gap becomes powerful evidence.
If you are facing a misleading conduct claim, or considering bringing one, ask yourself: what would a reasonable person have understood from the complete set of communications and circumstances? Not just the contract. Not just the final pitch. The whole commercial exchange.
If you are negotiating a deal and something feels incomplete or qualified in a way that matters, ask direct questions in writing. You create a record, and you force the other side to clarify or stay silent in a way that may support a later claim.
When Silence Becomes Misleading
One of the hardest concepts for business owners to grasp is this: saying nothing can be just as misleading as saying something false.
Australian law recognises that silence can be misleading or deceptive conduct when the circumstances create an expectation that you will speak up.
The test comes down to context. If you stay silent and the other party reasonably expects disclosure because of the nature of the transaction, the relationship, or what has already been said, your silence can mislead.
This plays out constantly in commercial disputes.
You are selling a business. The buyer asks about key contracts. You confirm they are in place. You do not mention that one major contract is up for renewal in three months and the customer has already indicated they are looking elsewhere. That omission can be misleading, even if no one asked the specific question.
You are a contractor pricing a job. The client shares design drawings. You spot an issue that will add significant cost, but you price on the assumption the client already knows. You stay silent because you think it is obvious. It is not obvious to them. You win the tender, the issue emerges, and the cost blows out. The client argues you had a duty to flag it. Depending on the circumstances, they may be right.
You are negotiating a joint venture. The other side asks if there are any material disputes affecting your business. You say no, because the dispute you are managing has not yet been litigated. But it is a known risk that affects the value of what you are bringing to the venture. Silence on that point can be misleading.
The question is always: given what has been said and the nature of the relationship, would a reasonable person in the other party’s position expect you to disclose this information?
If the answer is yes, and you stay silent, you are taking a risk.
Silence is not neutral. In a negotiation where the other side is clearly relying on the completeness of what you present, leaving out material facts can expose you to a claim, even if no one asked the exact question.
Half-Truths and Qualified Statements
Misleading conduct is not always about what you hide. Sometimes it is about what you emphasise while downplaying the qualifications.
A half-truth is a statement that is technically accurate but misleading because it omits critical context.
You tell a potential buyer that your business has “secured long-term supply agreements”. True. What you do not mention is that those agreements are subject to annual pricing reviews and the supplier has already flagged a significant increase. The statement is not false. But it creates an impression that may be misleading.
Or you present financial projections showing strong growth, based on assumptions that are buried in fine print or not disclosed at all. The numbers themselves may be mathematically correct. But if the assumptions are unrealistic or depend on factors you know are uncertain, the overall picture can be misleading.
Qualified statements present a different problem. If you make a representation and then qualify it in a way that negates the misleading effect, you may be safe. But the qualification has to be clear, prominent, and actually communicated.
Burying a disclaimer in the back of a 50-page document does not necessarily cure a misleading headline claim on page one. Courts look at whether the overall impression, as a reasonable person would receive it, was misleading. If the qualification is technical, obscure, or contradicted by the emphasis you place elsewhere, it may not save you.
Commercial disputes often turn on this tension. One side says “we made the position clear in the contract terms”. The other side says “you emphasised the benefits in every pitch meeting and never mentioned the limitations”. If the court finds that the overall conduct, not just the final contract, was likely to mislead, the claim can succeed even if the contract itself contains protective wording.
Can you articulate, in plain terms, what impression your conduct would create in the mind of a reasonable person receiving it? If the answer is uncomfortable, you have a problem.
If you are qualifying a statement, make the qualification as prominent as the claim. If you are relying on someone else’s statement, read the fine print and ask whether the headline claim holds up when you factor in the limitations.
How Misleading Conduct Differs From Breach of Contract
This distinction confuses many business owners. You signed a contract. The other side did not deliver what you expected. Is that breach of contract, or misleading conduct, or both?
Breach of contract is about what happens after you enter into an agreement. One party fails to perform an obligation the contract imposes. The remedy is usually damages for the loss caused by that failure.
Misleading conduct is about what happens before or during the formation of the contract. One party makes representations, by words or conduct, that cause the other party to enter into the contract or take some other action. The misleading conduct claim does not depend on whether the contract was breached. It depends on whether you were misled into entering the contract in the first place.
You can have both. A party misleads you about the condition of an asset, you buy it, and then they also fail to deliver it on time. That is misleading conduct and breach of contract. But you can also have misleading conduct with no breach. The contract is performed exactly as written, but you were misled about something material before you signed, and that caused you loss.
The remedies are different too. For breach of contract, you are generally limited to damages that put you in the position you would have been in if the contract had been performed. For misleading conduct, the court can award compensation for the loss you suffered as a result of being misled. That can include damages that put you back in the position you would have been in if you had never entered into the contract at all. The court can also order rescission, setting the contract aside, or injunctions to prevent further misleading conduct.
This matters tactically. If you sue only for breach of contract, you may be limited to contractual damages and bound by exclusion clauses or limitation periods in the contract. If you can prove misleading conduct, you may have access to broader remedies and different limitation periods.
The flip side: just because a deal went badly does not mean you were misled. If the other side performed exactly what the contract promised, and you are disappointed because your own assumptions did not pan out, that is not misleading conduct. That is a bad commercial outcome.
The question is: did the other side’s conduct, before or at the time you entered the contract, create a false impression that caused you to proceed when you otherwise would not have?
Misleading conduct is not a second bite at the apple when a contract goes wrong. It is a separate claim that focuses on whether you were induced into the contract by conduct that misled you about something material.
Where the Australian Consumer Law Applies in Business Dealings
Many business owners assume the Australian Consumer Law only protects consumers. That is not correct.
Section 18 of the ACL applies to conduct “in trade or commerce”. That phrase is broad. It covers business-to-business transactions, corporate acquisitions, project tenders, franchise agreements, supply contracts, and virtually any dealing that occurs in a commercial setting.
You do not need to be a consumer to bring a claim. You just need to show that the misleading conduct occurred in trade or commerce, meaning in the course of business activity.
There are some boundaries. Purely private transactions, like selling your personal car to a friend, are generally not covered. Internal corporate decisions that do not involve external trade are also outside the scope. But the threshold is low. If you are negotiating, buying, selling, or contracting in a business context, the ACL applies.
This is one of the most underutilised tools in commercial disputes. Parties often focus on breach of contract or common law misrepresentation claims and overlook the ACL. But the ACL has advantages. It does not require proof of intent. It has a broad remedial regime. And the case law is well developed, which means you can often find useful precedents for your fact pattern.
It also applies at all stages of a transaction. Pre-contractual negotiations, tender processes, pitch meetings, due diligence exchanges, and post-contract conduct can all fall within scope if they involve trade or commerce.
One practical point: the ACL is not the only source of liability for misleading conduct. Common law misrepresentation, equitable estoppel, and specific provisions in the Corporations Act or ASIC Act can also apply depending on the circumstances. But section 18 is usually the starting point because it is the most flexible and does not require proof of fraud or reliance on a false statement of fact.
If you are a supplier, developer, contractor, or corporate counterparty, assume the ACL applies to your commercial dealings. Structure your communications, disclosures, and qualifications accordingly.
Business-to-business disputes under the ACL often hinge on contemporaneous documents. If you are negotiating a significant deal, keep clean records of what was said, what was promised, and what assumptions were shared. Those documents will matter if a dispute arises.
What You Need to Prove If You Were Misled
Proving misleading conduct is not as simple as pointing to a statement you disagree with. You need to establish three things: the conduct was misleading or deceptive, you relied on it, and you suffered loss as a result.
Start with the conduct itself. Was it likely to mislead a reasonable person in your position? Notice the test is objective, not subjective. It does not matter if you personally were misled if a reasonable person in the same circumstances would not have been. Courts assess this by looking at the overall commercial context, the parties’ relative knowledge and sophistication, and the nature of the transaction.
Next, reliance. You need to show that you acted on the misleading conduct. You entered into the contract, made a payment, committed resources, or took some other step because of the impression created. If you ignored the representation or relied on something else entirely, the claim fails.
Reliance does not mean the misleading conduct has to be the only reason you acted. It just has to be a material inducement. If you would have walked away or negotiated different terms had you known the truth, that is enough.
Finally, loss. You need to quantify the damage caused by relying on the misleading conduct. This can be the difference between what you paid and what you received, the cost of rectifying a problem, lost profits, or wasted expenditure. The court will not award damages for every disappointment. You need to show a clear causal link between the misleading conduct and the financial harm.
Evidence is everything in these claims. Contemporaneous emails, meeting notes, tender submissions, pitch decks, financial models, and internal communications from the other side are often the most persuasive material. If you can show that the other side knew the true position internally but presented a different picture externally, that is powerful.
Version histories matter too. If a disclosure document or contract schedule was amended to remove a qualification or risk statement, and you can prove it, that can support an inference that the other side was deliberately shaping the impression you received.
If you think you were misled, do not wait to gather evidence. Preserve documents immediately. Request copies of anything you were shown but do not control. And do not keep relying on the misleading conduct once you know the truth, or you may struggle to prove ongoing loss.
Misleading conduct claims succeed or fail on the quality of evidence you can produce. Courts want to see what was said, when it was said, who said it, and what you did in response. If you do not have that evidence, you have a weak case.
What Remedies a Court Can Order
If you prove misleading conduct, the court has broad remedial powers. The goal is to put you back in the position you would have been in if the misleading conduct had not occurred.
Damages are the most common remedy. You can recover compensation for the loss you suffered as a result of being misled. This is not the same as damages for breach of contract, where the goal is to put you in the position you would have been in if the contract had been performed. Instead, the focus is on what you lost because you relied on the misleading conduct.
That can include the difference between what you paid and the actual value of what you received. It can include costs you incurred, such as wasted expenditure or rectification costs. And in some cases, it can include lost profit or opportunity costs, though those claims are harder to prove.
The court can also order rescission, which means setting the contract aside and unwinding the transaction. This is useful if you no longer want to be bound by the contract and can show that the misleading conduct induced you to enter into it. Rescission is an equitable remedy, so it is subject to the usual equitable principles: you need to act promptly, and you cannot seek rescission if third-party rights have intervened or if it is no longer possible to restore the parties to their original positions.
Injunctions are another option. If the misleading conduct is ongoing, or if there is a risk it will continue, the court can order the other party to stop. This is particularly relevant in cases involving misleading advertising, trade mark disputes, or ongoing business relationships where future conduct is at issue.
Corrective advertising or disclosure orders can also be made, requiring the other party to publish corrections or notify affected parties. These are less common in pure commercial disputes but can be relevant where the misleading conduct affects a broader market or group of stakeholders.
One practical advantage of the ACL: the court’s remedial powers are not constrained by contractual exclusion clauses. Even if your contract contains a clause limiting liability or excluding consequential damages, that clause does not necessarily protect against a claim for misleading conduct under the ACL. This is a key tactical point if you are bringing or defending a claim.
Limitation periods matter too. The usual period for bringing a claim under the ACL is six years from the date the cause of action accrued. But if the misleading conduct involves fraud or if you were unaware of the conduct until later, different rules may apply. Get advice early if you think you have been misled, because delay can weaken your position or close off remedies.
If you are considering a misleading conduct claim, map out the loss you can prove before you start. Courts will not award damages for speculative losses or hurt feelings. You need to show real financial harm with clear evidence.
What to Do If You Think You’ve Been Misled in a Deal
If you suspect you were misled during a negotiation or transaction, time is your enemy. Misleading conduct claims are won or lost on the evidence you preserve and the decisions you make early.
First, stop relying on the misleading conduct. If you now know the true position, and you continue to act as if the original representation was accurate, you undermine your own claim. Courts will limit damages to the point at which you knew or should have known the truth.
Second, preserve all evidence. Emails, meeting notes, pitch decks, tender documents, financial models, brochures, text messages, and any other material that shows what was said, when it was said, and what impression it created. Do not delete anything. Do not allow document retention policies to destroy material that may be relevant. If you were shown documents during due diligence or negotiations, request copies immediately if you do not control them.
Third, document your reliance and loss. Write down what you understood, what decisions you made based on that understanding, and what financial harm you have suffered as a result. This is not a formal legal pleading, but it helps clarify your thinking and will be useful when you instruct lawyers.
Fourth, get legal advice quickly. Misleading conduct claims are technical. You need to understand whether you have a viable claim, what evidence you need, what remedies are available, and what risks you face if you proceed. You also need to understand limitation periods and whether you should be taking immediate steps to protect your position, such as stopping payments, issuing notices, or seeking interlocutory relief.
Finally, be realistic about what you want to achieve. Do you want to unwind the transaction and get your money back? Do you want compensation for the loss you suffered but are willing to continue the commercial relationship? Do you want to renegotiate the deal on terms that reflect the true position? The answer shapes the strategy.
Misleading conduct claims can be expensive and slow. They often involve contested evidence, expert reports, and multiple interlocutory applications. If you can resolve the dispute commercially, and the outcome is acceptable, that may be better than years of litigation. But if the loss is significant and the other side is not willing to engage, litigation may be the only option.
One final point: do not assume the other side will settle because they know they were in the wrong. Misleading conduct claims are defended vigorously, often on the basis that the conduct was not misleading, or that you did not rely on it, or that your loss was caused by something else. Be prepared for a fight.
If you think you were misled, act immediately. Preserve evidence, stop relying, quantify loss, and get advice. Waiting weakens your position and may close off remedies.
Final Thoughts
Misleading conduct in a commercial dispute is rarely about catching someone in an outright lie. It is about whether the commercial picture presented to you was materially incomplete, inaccurate, or shaped in a way that caused you to make a decision you would not otherwise have made.
Context determines everything. What was said. What was left out? What assumptions were shared? What documents were exchanged? What the parties knew and when they knew it.
If you are facing a misleading conduct claim or are considering bringing one, you need to answer four questions. Can you prove the conduct was likely to mislead? Can you prove you relied on it? Can you prove you suffered a loss? And do you have the evidence to back it up?
If you can answer yes to all four, you have the foundation of a claim. If you cannot, think carefully before you start.
Aptum Legal advises and acts in misleading conduct disputes across Australia. We help clients assess whether they have a claim, gather the evidence that matters, and rigorously execute the strategy that gives them the best chance of success. If you think you were misled in a commercial deal, contact us for a clear-eyed assessment of your position.
Disclaimer: This article is for general information only and does not constitute legal advice. The law is complex and fact-specific. You should obtain professional advice about your particular circumstances before taking any action.
