Misleading promises about the future: the shifting sands of the onus of proof

Most Australians are broadly familiar with the Australian Consumer Law (ACL), which is a statutory regime that creates rights and obligations for trade and commerce throughout Australia. One of the most famous products of the ACL is the prohibition on “misleading and deceptive conduct”. As one might expect, the ACL also restricts misleading and deceptive conduct as to “future matters”. That is, if (in trade and commerce) you say that something will happen in the future, then this can, if it is misleading or deceptive, fall afoul of the ACL.

 

This of course, begs the question: “how does the Court determine if a representation as to a future matter is misleading?” For the most part, this is done retrospectively. For example, the plaintiff discovers after the fact that a representation is misleading because something that should have happened, did not (or vice versa). However, this is not entirely fair. Sometimes, there are real grounds for somebody making a representation as to a future matter that ultimately does not come to fruition.

Accordingly, the law provides a carve out: if a person has “reasonable grounds” for making the representation then it will not be a breach of the ACL. But who has to prove that there were reasonable grounds? The answer to this question is not so simple.

Is the plaintiff put to proof?

Generally speaking, the legal burden of proof lies with the plaintiff. That is, the person that makes the claim needs to satisfy the Court that the facts support it. This of course, is subject to exceptions where the onus of proof is reversed.

Historically, there were different regimes concerning misleading and deceptive conduct at the federal and state level. Before the ACL, misleading and deceptive conduct was governed at the federal level by the Trade Practices Act 1974 (Cth) (TPA). In New South Wales, it was governed by the Fair Trading Act 1987 (NSW) (FTA).

Both the NSW and Commonwealth regimes provided that representations as to future matters can be misleading or deceptive, subject to the carve out if they were made on reasonable grounds. Where they differed, however, was on the language used on the question of the onus of proof.

The devil is in the detail

Both pieces of legislation contained provisions that appeared, at least on the surface, to reverse the onus of proof. That is, it was the defendant who had to establish that the representation was reasonable.

This does make some sense from a policy perspective, as the plaintiff (who has suffered some loss on the basis of the representations) will often not have the evidence available to them to prove that the representation was unreasonable. Essentially, a simplified version of the proposition made by the plaintiff is:

I have suffered loss as a result of something you said would happen (or would not happen), and it did not (or did happen). You should compensate me for that loss unless you can prove you had reasonable grounds for saying what you said.

The way that this proposition was given effect in NSW was through section 41 of the FTA. This section simply stated that the party defending a claim for misleading and deceptive conduct with respect to a future matter had the “onus of establishing” they had reasonable grounds for making the representation. There is no doubt as to what this means: the onus is clearly reversed onto the defendant.

At the Commonwealth level, the language that was used in section 51A of the TPA was slightly different. Here, the party defending a claim for misleading and deceptive conduct with respect to a future matter “shall, unless it adduces evidence to the contrary, be deemed not have had reasonable grounds for making the representation”. That is, rather than expressly requiring the defendant to prove that what they did was reasonable, they will be “deemed” to have acted unreasonably unless they adduce contrary evidence.

Does this distinction matter?

In a word: yes. Federal and NSW courts took different approaches to the question of onus because of the different language used. In NSW, the position was unequivocal: the defendant had the legal onus. If they could not put enough evidence before the court to prove they acted reasonably, then they were taken to be engaging in misleading and deceptive conduct.

The Commonwealth courts, on the other hand, took a mixed approach because of the different language in section 51A. The position that ultimately gained traction was that the evidentiary onus was shifted, but not the legal onus. That is, to avoid being deemed to be acting unreasonably, all the defendant had to do was adduce evidence to the contrary.

That is, a defendant does not need to actually prove they acted reasonably, they just need to rebut the deeming provision. This does not mean that the mere adducing of contrary evidence means there are reasonable grounds. The defendant simply needs to adduce evidence, the plaintiff can also put on their own in response, and the Court will consider it all in determining whether they acted reasonably.

Where are we now?

The relevant law is now contained in the ACL, which applies in NSW as well as at the Commonwealth level. There is now only one provision to consider on this question. The language of section 4 of the ACL picked up that contained in section 51A of the TPA, but provided a further clarification that section 4 does not “have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation”.

Accordingly, the position is now that a defendant does not bear the onus of proving they acted reasonably, however if they fail to adduce evidence that they did not act unreasonably the will be deemed to have acted so. Whilst this is not quite a true reversal of the legal onus, the defendant bears an evidentiary onus to rebut the prejudicial deeming effect of section 4 of the ACL.

McCabe Curwood has experience in advising its clients on the Competition and Consumer Act and the Australian Consumer Law, and in resolving commercial disputes concerning misleading and deceptive conduct.

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