Throughout the building and property sector, many are familiar with laws which apply specifically to the industry.

In Victoria, for example, these include the Domestic Building Contracts Act and the Building Act.

Other laws, however, apply to all trade or commerce across all sectors. This includes real estate and construction.

Of these, one important one is the misleading and deceptive conduct provision the Competition and Consumer Act 2010.

Broadly speaking, the Act aims to promote consumer protection and fair practices in trade. This it achieves by providing remedies (primarily compensation) for parties who are impacted by unfair practices.

Of particular focus in this article is Section 18 in Schedule 2 of the Act, which outlaws misleading or deceptive conduct in trade or commerce.

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

This law affects a range of property and construction professionals. This includes architects, builders, engineers, trade contractors, property developers, real-estate agents and others.

Here are eleven things you need to know.

(1) The law applies to people, companies and organisations

Whilst the section above refers to a ‘person’, this includes not only natural people but also corporate entities.

As such the law applies not only to people but to companies, government agencies, not-for-profits or other forms of organisation.

(2) The conduct can be written or verbal

The ‘conduct’ referred to in the section above includes any statements or representations which are made irrespective of whether they are verbal or in writing.

This while statements which are verbal only may be difficult for a plaintiff to prove, any statement or representation which is misleading or deceptive will be an offence irrespective of whether or not it is given in writing.

(3) Statements can be past, present or future

Conduct which is captured under this law can include statements or representations which relate to future matters as well as matters which are past or present.

Say, for instance, a builder or service provider provides cost estimates for a project (a future statement relating to likely costs). Where they subsequently renege on these and charge a higher price, they may have committed an offence under this provision.

(4) Non-Disclosure can be an offence

Non-disclosure of certain matters can create an offence where one party fails to disclose matters which a reasonable person would expect to be disclosed.

Say, for example, a real-estate agent was aware of a road proposal currently under consideration by council. Should they fail to disclose this to prospective buyers, the agent may be committing an offence under the aforementioned provision.

This is the case notwithstanding that the agent had not expressly said anything which was incorrect or wrong.

(5) Conduct need not be intentional.

Conduct captured under these laws can be an offence even where the deception is not intentional.

For an offence to have occurred, the provision merely requires that the conduct is likely to mislead or deceive. There is no requirement that the deception be deliberate.

For this reason, the agent in the above example may have committed an offence under these provisions even if their omission was inadvertent.

It should be noted, however, that where the deception is intentional, the representor will have committed a ‘quasi-criminal offence’ for which they will be subject to fines or penalties.

(6) Conduct Must Reasonably Have Deceived

For an offence to be committed under this legislation, the conduct is question needs to have caused a reasonable person to be misled or deceived.

For this reason, the mere fact that a consumer has been led into error does not in itself mean that a breach has occurred – especially if their understanding is not based on reasonable grounds.

Rather, for a breach to have occurred, it must be held that a reasonable person would reasonably have been misled.

(7) The misleading/deceptive conduct must have caused the loss

Generally speaking, courts are reluctant to award remedies under this provision unless the deceived or misled party has suffered loss as a result of the conduct.

Should a property owner be misled or deceived as a result of reasonably relying upon representation from a builder, for example, they will generally not be able to receive compensation unless such a reliance caused them to incur financial damage or loss.

In addition, courts will also generally only award remedies where there has been a causal connection between the misrepresentation and the loss.

(8) Misleading conduct must be ‘in trade or commerce’.

One potentially difficult aspect of all this is that the conduct in question must have been made ‘in trade or commerce’.

In the case of Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594, the High Court held that false representations made by a foreman on a building site to a worker of a concrete construction firm about how air-conditioning shafts were affixed on the site did not fall under these provisions as they were not made in trade or commerce (the worker was injured when he fell down an air conditioning shaft which was not affixed as described by the foreman).

To be considered as having been made in trade or commerce, the court ruled that the conduct itself needed to be of a trading or commercial character.

An internal communication between a foreman and a worker, it ruled, was an incidental part of a commercial relationship but was not of a trading or commercial character in and of itself.

In addition, it should be noted that for conduct to be in trade or commerce, the person in question needs to be conducting trading or commercial activities.

Thus whilst builders, architects, engineers, trade contractors, property developers, real-estate agents and others will be covered by this provision, home owners or investors who simply buy and sell property will not.

(9) Common law may apply too

Aside from the legislation, misleading and deceptive conduct is also prohibited under common law.

Two points should be noted.

First, unlike the prohibition under the legislation, the prohibition of misleading and deceptive conduct under common law can apply even where the misrepresentations were not made in trade or commerce.

Second, the prohibition can also apply where most or all of the contract terms are set out in a written agreement such as a building contract.

For these reasons, those who make misrepresentations may still face consequences even if their conduct falls outside the scope of Act.

(10) Exclusion clauses may not be effective

Often, contracts contain clauses which specify that aforementioned laws do not apply.

In many cases, however, such clauses will not be effective as courts view them as being contradictory to public policy as expressed through legislation.

Thus protections which are afforded under this legislation will not, in most cases, be affected by any exclusion clauses which are contained in the contract.

The exception is where the clause in fact causes consumers to cease to rely upon the statement or representation.

This, however, is the exception rather than the rule. It may apply where – based on facts – a consumer would have entered into the contract irrespective or otherwise of the misrepresentation.

(11) Act Quickly

Where misleading or deceptive conduct has occurred, plaintiffs should act quickly as the law sets time limits within which claims must be instituted.

Generally, the relevant periods are six years but there are some periods of three years and even one year (for claims based on defamation).

Advice should be sought as the law has been subject to nuances which have built up over time as a result of voluminous case law.