Passing off? What is it?
‘Passing off’ is outlined under s18 of the Australian Consumer Law (ACL) as ‘misleading and deceptive conduct’. Misleading and deceptive conduct is illegal, and can be quite scary if an action is brought against you or your business. Read on to find out more about passing off and representations.
What is section 18 of the Australian Consumer Law and how does it relate to passing off?
Under s18 of the Australian Consumer Law, there are three essential elements to determining an action of misleading or deceptive conduct. These three elements include:
- A person;
- In trade and commerce;
- Being engaged in conduct which is ‘misleading or likely to mislead’.
It is important to note that the person who bears the onus of proving all the elements of the cause in action here is generally the applicant.
For each of the elements, the following explanations will elaborate on what is required to bring an action in passing off.
What is ‘a person’ as defined under s18 of the ACL?
A person can be either a single person or a corporation (foreign or domestic). This definition includes a trading or financial corporation, a body corporation (which has been incorporated in a territory) or a holding corporation (for any of the previous classes of corporations referred to above).
A trading corporation is one whose purpose is to provide, for reward, goods or services, however does not necessarily have to make a profit. Thus, not for profit organisations can be included within the definition of person for the purpose of this action. Most organisations will be remunerated for the work they issue, known as trading within the economy.
For financial corporations, it has been held in previous cases that there is no complicated legalistic meaning to the word ‘financial’. Therefore, the term financial corporations is taken to mean its general definition; a corporation which engages in financial activities.
How does the ACL define ‘trade and commerce’?
Trade and commerce are words pertaining to the exchange of goods and services in consideration of money, and exchange of goods and services between the parties along with activities that finalises the exchange, respectively. However, the terms trade and commerce do not apply to items such as:
- Personal transactions (such as a garage sale),
- The issue of planning certificates by local councils,
- Lectures on religious matters,
- Olympic selection, or
- Political promises.
An employee can be held liable for misleading conduct during the course of their employment. Additionally, a natural person who acts on behalf of a corporation may also be held liable independent of a corporation.
What is conduct that is ‘misleading or likely to mislead’?
The key question here is; what did the alleged person do? Conduct is defined as ‘doing or refusing to do an act’. More specifically, ‘doing an act’ includes pre-contractual misrepresentations in a commercial context, such as advertising, franchising, buying and selling property and commercial leasing. Refusing to perform an act generally refers to silence. If the person has performed (or failed to perform) an act, the next point to consider is whether the act was made with an express or implied representation.
An express representation can be as simple as a blatant lie, whilst an implied representation is more subtle and harder to determine. Silence, for example, will likely be an implied representation as the person is neither denying or saying anything on the matter. If the person making the claims states either expressly or implicitly that they are not the person making the claims, they will be held to have engaged in ‘misleading and deceptive conduct’.
The context in which the statement was made is also a key factor in determining whether a person has engaged in ‘misleading and deceptive conduct’. One must take the entirety of the surrounding context, and if the conduct has the tendency to mislead the target audience of the conduct, it may then be construed as the relevant conduct. The test used by judges is ‘whether an innocent third party would have been misled in the circumstances surrounding the conduct’.
Will the threshold for misleading and deceptive conduct change based on the audience of the conduct?
An important aspect of the test of passing off is the target audience to which the conduct was directed to. The difference in audience will alter how the test is applied and what measures are used in determining how willing an audience would be in taking on a representation. When directed at a specific person, the court will consider the nature of the dealings, specifically what they knew about each other and the result of the dealings. Further, the court will consider; the documents and the content of said documents, the relative commercial experience of the applicant, and whether professional advice was sought out by the applicant. The more knowledge and independent advice an applicant receives, the less likely it is to be a case of misleading or deceptive conduct.
When directed at the public, the rules change. The public cannot be the entire public at large, and instead it must be narrowed down to a member of the group that the conduct was targeted towards. When this is done, a court must find out the relative knowledge base of the member in question and what effect the conduct would have on this person. If it is reasonably believed that the person would have been misled by the conduct in question, it can be said to have been misleading and deceptive conduct.
Can silence be used to substantiate a claim for misleading and deceptive conduct?
Silence can be used to substantiate a cause for misleading or deceptive conduct. There are two possibilities which may result in a substantiated cause of action:
- Where the conduct viewed as a whole conveyed a representation that was false (where it was clearly a misrepresentation, for example, a lie), or
- Where in the circumstances, there was a reasonable expectation that if some fact existed, it would have been disclosed to the person who was misled.
What are the remedies available for misleading and deceptive conduct?
If you believe you have a case in misleading and deceptive conduct, the next step is to determine which remedy you would be likely to receive (or would like to recieve), should you be successful. The range of remedies you would be able to seek would be either damages (a sum of money award to you) or compensatory orders. If damages are elected, you would likely be awarded the amount of money equal to the loss suffered by the conduct in question. The money would be sourced from the person or people who were involved in the contravention of s18 of the Australian Consumer Law.
In order to receive damages, one must prove that:
- it was the conduct that caused the damage,
- the relevant section of the legislation was breached, and
- there was a logical and relevant connection between the conduct in question and the damage suffered.
If you would like clarity about passing off and misrepresentations, don’t hesitate to contact us to help clear up any confusion you may have. We offer a FREE 30 minute consultation to assist you in your legal matters.