Australia: An Introduction to Commercial Risk

One unique feature of Australian law which can significantly disrupt contractual risk allocations and conventional common law-derived assumptions is the Australian Consumer Law.

Despite its title, this legislation is not confined to consumer protection. It applies to almost all conduct in trade or commerce, including professional services and large procurements and projects. In some circumstances it can apply to state actors. It is not confined to litigation; ie, it is arbitrable. And it is not limited by domicile, provided the conduct has a relevant connection with Australia.

Four features of the Australian Consumer Law are particularly unusual and frequently catch international firms by surprise, particularly given the sanctity of formal contracts.

First, the Australian Consumer Law covers misleading and deceptive conduct in trade or commerce, regardless of intent.

Secondly, it covers unconscionable conduct in trade or commerce, applying a much broader test than equity.

Thirdly, it provides for related remedies and relief which go far beyond common law and equitable remedies.

Fourthly, in the context of the supply of consumer goods, it applies strict obligations on the supplier regardless of value or use.

This article provides an introduction to the first topic, misleading and deceptive conduct. Two overarching observations are important. 

First, on the current state of the authorities, it is not possible to contract out of claims (although there is reason to think this is possible and can certainly be ameliorated by appropriate drafting). 

Secondly, the relevant inquiry is heavily fact dependent. These points are particularly important to recognise because both liability and entitlement is not simply a matter of looking at a contractual document (although that is of course necessary where there is one as part of the course of conduct).

The statutory concept of misleading or deceptive conduct picks up actions, omissions and words (and silence). If in context they are objectively likely to mislead, then the gateway to relief is potentially opened.  It is worth restating that no intent to mislead is required, the inquiry is purely factual. The misled may be individuals or firms in a commercial context, or the public at large.

Contravening conduct can include statements of opinion, including in some circumstances restatements of opinions attributed to others. Contravening conduct can be (and is frequently alleged to be) conduct in the course of pre-contractual negotiations.

Contravening conduct has been found in the context of advertising, agriculture, art, automotive vehicles, aviation, banking and finance, boats, building and construction, business, consumer goods, employment, energy, franchises, gambling, industrial products and services, insurance and investment, personal and professional services, real estate, telecommunications, tenders and warranties. This is not an exhaustive list.

Where loss is caused by contravening conduct, direct and accessorial liability may follow. It is sufficient that the conduct was a sufficient cause in the sense of materially contributing to loss and damage. It is not therefore simply the familiar common law “but for” test. Accessorial liability captures anyone involved in aiding, abetting counselling or procuring the contravention.

The civil remedies available are exceptionally powerful. Damages is a complex topic, but in this context, it is important to note that with the object of compensation, damages may include indirect and economic loss actually incurred by reason of the contravening conduct. One essential aspect of proof is the identification of a counterfactual involving lesser detriment. The measure does not therefore always coincide with the measure for deceit or negligent misrepresentation.

Other remedies may include a declaration that a contract is wholly or partly void, varying a contract, and refusal of enforcement. These remedies are not constrained by common law or equitable analogues and involve an exercise of discretion by the tribunal. Nor are they confined by a strict causal connection. It is a matter of evaluation by reference to the facts, the policy of the legislation and an evaluative assessment of the relief appropriate to compensate for the consequences of the contravening conduct.