Director’s Liability Under Australian Consumer Law For Misleading & Deceptive Conduct

Director’s Liability Under Australian Consumer Law For Misleading & Deceptive Conduct

Author: Zeinab Farhat, Progressive Legal

director's liability

Directors of Australian companies have a legal obligation to ensure compliance with the Australian Consumer Law (“ACL”) and prevent misleading or deceptive conduct or conduct that is likely to mislead or deceive. This article explores the potential personal liability directors may face and provides practical insights to avoid such risks. 

Key points covered in this article: 

  1. Statutory Test: Explaining the criteria in section 18 of the ACL that defines misleading or deceptive conduct. 
  2. Elements of Section 18: Breaking down the essential requirements to establish a case of misleading or deceptive conduct. 
  3. Understanding “Involved In”: Clarifying a director’s role and responsibilities concerning misleading and deceptive conduct. 
  4. Applicable Legislation: An overview of the relevant laws and regulations that apply to a director’s liability in this context. 


Statutory Test for Misleading and Deceptive Conduct under Section 18 

Section 18 of the ACL provides 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 provision applies to a wide range of commercial activities, including advertising, marketing, and selling goods and services. 

The statutory test for misleading and deceptive conduct under section 18 is an objective one. This means that the focus is on whether a reasonable person, with the relevant knowledge and experience, would be misled or deceived or be likely to be misled or deceived by the conduct. The test considers the overall impression created by the conduct, as well as any specific representations or statements made. 

Elements of Section 18 – Brief Overview  

To establish a contravention of section 18, the following elements must be established: 

  1. Person: Section 18 applies to a person as defined under the ACL (this includes corporations and partnerships)  
  2. Conduct: There must be some form of conduct on the part of the defendant, such as a representation or omission, that is capable of being misleading or deceptive or likely to mislead or deceive. 
  3. In trade or commerce: The conduct must occur in the course of trade or commerce, which typically includes the supply or acquisition of goods or services. 
  4. Misleading or deceptive: The conduct must be misleading or deceptive, or likely to mislead or deceive. This requires a comparison between the actual state of affairs and the impression created by the conduct. 
  5. Causation: The conduct (having been found to be misleading or deceptive) may have caused, or be likely to cause, some form of loss or damage to the person who has been misled or deceived. 

It is important to note, that is not always the case that the conduct will have caused loss or damage. For example, an injunction may be granted to stop conduct that is misleading or deceptive prior to it occurring, and thus, there has been no loss or damage sustained to the plaintiff. Likewise, if there is damage, it does not necessarily follow that the person who was misled or deceived is the person who suffered damage.  

Generally speaking, it is often the case in section 18 cases that the primary issue for consideration is whether the defendant’s conduct was “misleading or deceptive or likely to mislead or deceive”. This is a wide area of law and there is a plethora of case law with respect to the interpretation of these words.

As noted by the ACCC, some examples of misleading or deceptive conduct claims include: 

  • where a person does not convey details;  
  • where a consumer purchases a mobile phone in a regional area and the salesman fails to alert the consumer that the coverage is poor in that area and the mobile phone may not be of use;  
  • where an internet service provider does not clearly demonstrate, through its advertisements, the true price of a service (see for example, Australian Competition and Consumer Commission v TPG Internet Pty Ltd  [2013] HCA 54).   

Furthermore, in terms of a commercial context, misleading or deceptive conduct can arise where: 

  • Negotiations are taking place and someone has falsely represented the financial status or position of the company or business; or 
  • Regulators have not had vital information disclosed to them. 

As you can see, there is a wide scope for conduct to be found to be misleading or deceptive, For real examples, see below. 

Can representations be oral or implied?

It is important to note that where the misleading or deceptive conduct constitutes representations, they do not need to be in writing and can be oral, or implied. However, ascertaining the nature of the representation is highly fact specific. Such analysis will be made increasingly complicated where the impugned representation is silence. Silence can be considered as misleading or deceptive, as noted in Nadinic v Cheryl Drinkwater as trustee for the Cheryl Drinkwater Trust [2020] NSWCA 2:  

“the High Court made clear the circumstances in which non-disclosure or silence can be misleading or deceptive – in essence, where, in the whole of the circumstances in which the parties are situated, a “reasonable expectation” exists that disclosure should be made or silence broken”. 

Despite this, in a commercial context, it does not necessarily follow that a failure to volunteer information will constitute misleading or deceptive conduct. For example, in Wormald v Maradaca Pty Ltd [2020] NSWCA 289 it was held that a failure of the shareholders of a seller company to provide certain facts about the business was not misleading or deceptive conduct.  

Understanding “Involved In”: Section 236 and Director’s Liability  

Section 236(1) of the ACL provides the following: 

236 Actions for damages: 

(1)  If: 

(a)  a person (the claimant) suffers loss or damage because of the conduct of another person; and 

(b)  the conduct contravened a provision of Chapter 2 or 3; 

the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. 

Section 236 essentially provides that a plaintiff is able to recover damages from a company involved in misleading or deceptive conduct, and the director(s) if they were “involved in” the conduct.  

In such instances, a director will be liable for their conduct in their individual capacity under s 18. Where the conduct of the company is under consideration, a director may be liable on the basis they were “involved” in the contravention.  

Pursuant to section 2 of the ACL, “involved” is broadly defined to mean a person that: 

  1. has aided, abetted, counselled or procured the contravention; or 
  2. has induced, whether by threats or promises or otherwise, the contravention; or 
  3. has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or 
  4. has conspired with others to effect the contravention. 

As such, a director will be “involved” in a contravention of the ACL where their conduct falls within one of the above four categories.  

Aided and Abetted

The concept of aiding and abetting can include a range of actions or omissions by the director. For example, a director may be found to have aided and abetted a contravention if they: 

  • knew that the conduct was misleading or deceptive, or was likely to mislead or deceive; 
  • were reckless as to whether the conduct was misleading or deceptive, or was likely to mislead or deceive; 
  • were in a position to influence the conduct of the company in relation to the contravention; or 
  • failed to take reasonable steps to prevent the contravention. 

Case Example Regarding the Meaning of “Involvement” – Yorke v Lucas `{`1985`}` HCA 65

Yorke v Lucas (“Yorke) sheds light on the meaning of “involvement” in the context of the Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth) (“TPA”)). Despite being decided under the TPA, the decision remains heavily cited.  

Ross Lucas was the managing director of Ross Lucas Pty Ltd (“the Lucas Company”) and acted for Treasureway Stores Pty Ltd (“the Company”) in the sale of the Company’s business to the appellant (“Yorke”).  

Yorke wished to buy the Company and during negotiations between the two parties, a piece of paper was provided to Yorke which indicated that the weekly turnover for the Company was $3,500. Ultimately, this was not the case and Yorke brought an action against Lucas for engaging in misleading or deceptive conduct.  

At trial, the trial judge found that the Company had engaged in misleading or deceptive conduct by misrepresenting the business’s turnover. It was found that Yorke was induced by this conduct to enter into the purchase contract. The Lucas Company had also contravened s 52 of the TPA on the basis it was acting as an agent for the Company. However, the trial judge dismissed the claim against Lucas himself on the basis he was insufficiently aware of the relevant facts so as to be involved in the contravention. This was in contrast to the finding that Kevin Mahoney (Director of the Company) was found to have aided, abetted or was knowingly concerned in the contravention of s 52 by the Company.  

The Full Court of the Federal Court dismissed an appeal against the judgment and found in favour of Lucas. Thus, the question for consideration for the High Court on appeal was whether Lucas was a person “involved” in the Company’s contravention of s 52 [the equivalent of the now s 18 misleading or deceptive conduct provision]”. 

The High Court dismissed the appeal in favour of Lucas noting, among other things: 

Knowledge and intent re. accessorial involvement for misleading and deceptive conduct

The appellant’s argument proceeded on the basis that Lucas was a person “involved” for the purposes of the TPA. The appellants argued there was no requirement of intent on part of Lucas.

In response to this, the Court noted that “aided, abetted, counselled or procured” are terms derived from criminal law and cited the decision in Giorgianni v the Queen (1985) 59 ALR 461 which held that to have aided and abetted, or counselled and procured the offence of culpable driving, there must have been an intentional participation in the offence and the defendant must have knowledge of the essential matters which went to makeup the offence.

At trial it was the case that, whilst Lucas was aware of the representations being made, he had no knowledge of their falsity and could not for that reason be said to have intentionally participated in the contravention. 

Effectively, the appellants tried to argue that s 75B(a) (now s 2 of the ACL) should not be understood in the context of the criminal law. However, the Court noted: 

the nature of the prohibition imposed by s.52 [s 18] is, however, governed by the terms in which it is created and the context in which it is found. Section 75B, on the other hand, in speaking of aiding, abetting, counselling or procuring, makes use of an existing concept drawn from the criminal law and unless the context requires otherwise, there is every reason to suppose that it was intended to carry with it the settled meaning which it already bore” at [12]. 


Notwithstanding that s.75B operates as an adjunct to the imposition of civil liability, its derivation is to be found in the criminal law and there is nothing to support the view that the concepts which it introduces should be given a new or special meaning” at [14].  

Directly or indirectly, knowingly concerned in, or party to, the contravention

Here the Court stated that: 

  1. a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention” at [16]; and  
  2. the proper construction of par.(c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention” at [17].  

Takeaway for Directors

Ultimately, Yorke serves as authority for the proposition that to be “involved” in a contravention of the ACL for the purposes of s 2, there must be some element of intent and knowledge vis-a-vis the essential facts which make up the contravention. As a result, if a director is aware of a contravention of the ACL as it pertains to misleading or deceptive conduct, they may be liable for damages in their personal capacity as director depending on the nature of such knowledge

Applicable Legislation – Director’s Liability

In addition to the ACL, there are various other pieces of legislation that regulate misleading or deceptive conduct in specific industries. For example: 

  • the Australian Securities and Investments Commission Act 2001 (Cth) regulates misleading or deceptive conduct in relation to financial products and services; 
  • the Competition and Consumer Act 2010 (Cth) regulates misleading or deceptive conduct in relation to the supply of goods and services, and also prohibits anti-competitive conduct;
  • the Therapeutic Goods Act 1989 (Cth) regulates misleading or deceptive conduct in relation to the advertising and promotion of therapeutic goods. 

Directors of companies operating in these industries must be aware of the specific obligations and requirements under these pieces of legislation, in addition to the general obligations under the ACL. 

For example, the Australian Securities and Investments Commission Act 2001 (Cth) provides that a person must not engage in conduct that is misleading or deceptive, or is likely to mislead or deceive, in relation to a financial product or a financial service. This provision applies to a wide range of financial products and services, including insurance, superannuation, and investment advice. 

Similarly, the Therapeutic Goods Act 1989 (Cth) (“TGA“) regulates the advertising and promotion of therapeutic goods, including medicines, medical devices, and biologicals. The TGA provides that advertising must not be false, misleading, or deceptive, or likely to mislead or deceive, and must comply with the requirements set out in the TGA and its associated regulations. 


Directors of companies in Australia have a legal obligation to ensure that their company complies with the ACL and other relevant legislation and does not engage in misleading or deceptive conduct. If a company contravenes the law, directors can be held personally liable for the contravention if they were involved in the conduct or aided and abetted the conduct. 

To avoid liability, directors should: 

  1. take active steps to ensure that their company complies with the law, including implementing compliance programs and training staff;  
  2. if they become aware of any commercial transactions that appear to be potentially misleading or deceptive, take steps to prevent such conduct from further occurring; and 
  3. seek legal advice where necessary. 

By doing so, directors can help to protect their company’s reputation and financial position, as well as their own personal assets and reputation. For tailored legal advice with respect to your liability as a director under the ACL, contact our experienced corporate lawyers at Progressive Legal or feel free to fill out the contact form on this page. 

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Other Notable Cases for Director’s Liability

Australian Competition and Consumer Commission v Safety Compliance Pty Ltd (in liq) `{`2015`}` FCA 211

In this case, the Court affirmed Yorke noting that for the Court to be satisfied that an individual was involved in a contravention of the ACL by a corporation and: 

 “the evidence must disclose that the individual intentionally participated in the contravention and had the requisite knowledge. The Court must be persuaded that the individual had knowledge of the essential matters which go to make up the contravention whether or not he or she knows that those matters amount to a contravention” at [153]. 

Further, the Court noted that the knowledge itself must be “actual” and “not constructive” [156]. Actual knowledge of an essential matter can be established as a matter of inference from the circumstances surrounding the contravention. The Court re-iterated that it is the knowledge of the alleged accessory, and not “what might be postulated of a hypothetical person in the position of the alleged accessory” [at 156].   

Ultimately, in this case, it was found that two directors were also liable for the ACL contraventions of the company on the basis they aided and abetted in the contraventions having dealt with complaints pertaining to the company’s misrepresentation.

Australian Competition and Consumer Commission v Smart Corporation Pty Ltd (No 3) `{`2021`}` FCA 347 (15 April 2021).

In this case, the Court found that the company’s former Director Vitali Roesch and Director Maryna Kosukhina were knowingly concerned in misleading and deceptive conduct. The Court ordered that they pay $179,000 and $174,00 in penalties respectively, in addition to ordering that they both be disqualified from managing a company for 3 years. 

Essentially, this case concerned false and misleading representations made on the company website (a 4WD vehicle hire business) pertaining to the insurance of the vehicles, which were in fact, not insured.   

In short form, the ACCC noted the following regarding the extent of Roesch and Kosukhina’s knowing involvement, so as to render them both jointly and severally liable for the actions of the company. Put briefly, these included: 

  1. the “organisational diagram” provided by the company showed that corporate responsibility was vested firstly with Kosukhina, then with Roesch;  
  2. after the cessation of Roech’s position as director, he continued to hold a senior management position titled “Fleet Manager”;  
  3. evidence suggested that both were owners and operators of all the website content, insurance policies as well as setting, enforcing and managing the company policies; and 
  4. Roesch was responsible for authorising and approving the terms and conditions and he had direct knowledge of the relevant clauses. 

 Ultimately, the Court agreed with the ACCC’s submissions that these matters, and others, constituted evidence that Roesche and Kosukhina were jointly and severally liable for the conduct of the company, noting: 

“Both of those respondents have admitted knowledge of and responsibility for the making of the representations that I have found to be misleading, deceptive, and false. They knew the true position regarding insurance coverage for the hired vehicles and they knew of the Insurance Discretion Clause. They were knowingly concerned in the company’s breaches of s 18 and s 29 of the ACL. They knew of the contravening conduct and caused the company to engage in it.” at [200] 

Director’s Liability FAQs

As a Director, how can I prevent myself from being liable for misleading and deceptive conduct?

As the above cases illustrate, it is important to consider and reflect on your position within the company. If you have knowledge of particular matters which you think may amount to a contravention of the ACL, you must take immediate steps to address the issue. In such situations, it may also be best to obtain specific legal advice.  

What orders can a Court make if I am found liable for a breach of the ACL?

The discretion of the court to impose certain remedies is quite broad, and can range from pecuniary penalties payable by you personally – to a court order that you are unable to do a certain thing for a period of time (i.e. as in the Smart case which ordered that the respondents be unable to manage a company for three years).  

If I didn’t know about the misleading and deceptive conduct, will I still be held liable?

This will depend on the particular situation, however, it appears as though the law in this area suggests no. To be involved in an ACL contravention requires some element of awareness on part of the alleged contravener  

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