Misleading or Deceptive Conduct

Section 1041H of the Corporation Act 2001 prohibits misleading or deceptive conduct or conduct that is likely to mislead or deceive.

(1) A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.

(2) The reference in subsection (1) to engaging in conduct in relation to a financial product includes (but is not limited to) any of the following:

(vi) a trustee of a superannuation entity (within the meaning of the Superannuation Industry (Supervision) Act 1993 ) dealing with a beneficiary of that entity as such a beneficiary;

Misleading or deceptive conduct was considered by the Supreme Court of New South Wales in Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 SCSR 642.

The Court held:

Where there is a duty to speak and their is a failure to comply with that duty, whether that be in consequence of the advertence or inadvertence, (although assuming that there is knowledge), there may be misleading and deceptive conduct.

Warner v Elders Rural Finance Ltd [1993] FCA 117; (1993) 41 FCR 399; 113 ALR 517; [1993] ATPR 41-238, followed

In Warner v Elders Rural Finance Ltd [1993] FCA 117; (1993) 41 FCR 399; 113 ALR 517; [1993] ATPR 41-238, the Federal Court of Australia cited Gummow J’s statements in Demagogue Pty. Ltd. v. Nicholas Ramensky [1992] FCA 557; (1992) 110 ALR 608, stating at [12]:

12. The circumstances in which silence can found a common law action for deceit are more narrowly confined than those in which it can provide the basis for an action under the Trade Practices Act in respect of conduct that infringes s. 52. Fleming, in The Law of Torts, 8th Ed., summarises the position at common law at pages 630-631 as follows:

“Ordinarily mere silence or passive failure to disclose the truth are not actionable, however deceptive in fact … Several qualifications are in any event recognised. In the first place, a half-truth may just as much be a false representation as a complete lie: for example, setting out favourable passages of a report without the qualifications. Secondly, one who makes a false statement honestly believing it to be true but later discovers it was false, or one who makes a true statement which later events falsify, must correct it at any time before the deal is actually closed. Finally a duty of disclosure is demanded when the parties stand in some fiduciary relation to each other, like principal and agent or trustee and beneficiary or where a special need for public protection has been recognised by legislation, as under company law which now requires directors to include specified information in a prospectus.” (pages 630-631)

Therefore a trustee of a regulated superannuation fund who fails to advise a beneficiary of their entitlement under the terms of the trust as properly construed or who misrepresents the entitlement would be engaging in misleading or deceptive conduct.

Where the trustee is a corporate Trustee the High Court held in Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121; 82 ALR 626; (1988) 63 ALJR 80; [1989] ATPR 40-923; 7 ACLC 34; 14 ACLR 493 held that where a person who had knowledge of all the material circumstances and whose conduct constituted the commission by the company of an offence may be convicted as an accessory, of being knowingly concerned in that offence.

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This tab updated on 22 March 2015