Misleading or Deceptive Conduct in Commercial Dealings: How Claims Arise and How to Respond

Misleading or deceptive conduct claims sit at the centre of Australian commercial litigation. They appear in negotiations, business sales, restructures, shareholder dealings and everyday commercial conversations. What makes these claims so powerful is that they don’t require intent. A party can be liable even if they genuinely believed what they were saying at the time.

For businesses, directors and shareholders, the real risk is the gap between what is said and what is true. That gap is where disputes form, and once a deal underperforms or a relationship breaks down, the narrative is reconstructed with the benefit of hindsight. If the commercial story doesn’t align with the underlying reality, a claim is already taking shape.

Where Misleading Conduct Claims Commonly Arise

Although every dispute has its own texture, misleading conduct claims tend to emerge in the same commercial moments — situations where expectations, assumptions and pressure collide.

One of the most common settings is pre‑contractual negotiation. Parties often speak with confidence about forecasts, customer demand, financial performance or operational capability. Optimism is not the problem; certainty is. When statements are expressed as facts rather than expectations, and the underlying information doesn’t support them, exposure grows.

Business sales are another fertile ground for disputes. Buyers rely heavily on financial statements, customer information, operational representations and the overall narrative presented during the sale process. If the internal documents tell a different story — even subtly — the buyer will argue they were misled. Earn‑outs, in particular, create tension because they depend on assumptions that are often more aspirational than grounded.

Capital raises and investor communications also attract scrutiny. Investors expect accuracy about financial position, growth prospects, risks and major contracts. If the external messaging is more optimistic than the internal reality, claims follow quickly once performance falters.

Restructures and refinancing negotiations create their own risks. When a business is under pressure, the temptation to present a more stable position than the internal documents support is strong. Creditors and financiers rely on what they are told. If the information is incomplete or overly optimistic, misleading conduct becomes a central allegation in any later dispute.

And then there are the everyday commercial interactions — statements about product capability, delivery timeframes, compliance, approvals or performance. These are often made casually, but they can become the foundation of a claim if the outcome diverges from the expectation created.

How Misleading Conduct Is Proven

Unlike fraud, misleading conduct does not require dishonesty. The test is objective: would the representation have misled a reasonable person in the circumstances. Courts look closely at what was said, what was known internally, and whether the two aligned.

Internal documents often become decisive. Emails, board papers, financial models and risk reports are compared against external statements. If the internal material shows uncertainty, risk or doubt, but the external messaging was confident, plaintiffs argue the representation was misleading. Reliance is usually inferred from the circumstances, and loss is assessed by comparing the position the plaintiff is in with the position they would have been in had the representation been accurate.

The simplicity of the test is what makes these claims so potent. A party can be liable even if they believed the representation was true at the time. The question is not what they intended, but what effect the representation had.

Patterns That Increase Litigation Risk

Certain patterns appear repeatedly in misleading conduct disputes. One is the use of optimistic language that is not grounded in evidence. Statements about strong pipelines, robust demand or stable financial performance become problematic when internal documents show uncertainty or concern.

Another is silence about known risks. Silence can be misleading if it creates a false impression or if the other party would reasonably expect disclosure. This is one of the most misunderstood aspects of the law. Many disputes arise not from what was said, but from what was not said.

Inconsistent messaging is also a red flag. If different parts of the business say different things, or if internal and external narratives diverge, plaintiffs argue the company lacked a coherent, truthful position.

And finally, pressure‑driven negotiations often lead to imprecise statements. When deals are rushed, representations become less considered. Those moments are where exposure tends to crystallise.

Reducing Exposure in Commercial Dealings

Businesses can significantly reduce risk by adopting a more disciplined approach to representations. The most important step is ensuring internal and external narratives align. Before making any statement — particularly in negotiations, investor communications or sale processes — it is worth asking whether the statement matches what is known internally. If there is any inconsistency, it should be resolved before the representation is made.

Another practical step is avoiding certainty where there is uncertainty. Small changes in language make a significant difference. Framing statements as expectations rather than guarantees reduces the risk of creating a misleading impression.

Documenting the basis for key statements is also valuable. If a forecast or representation is made, recording the assumptions and data behind it creates a defensible position if a dispute arises.

Escalating concerns early is equally important. If someone in the organisation is uncomfortable with a representation, that discomfort is a signal that something needs to be revisited.

And in high‑stakes situations — business sales, capital raises, restructures or distressed negotiations — seeking advice before making representations can prevent disputes that would otherwise be difficult to unwind.

How These Claims Escalate Into Litigation

Most misleading conduct disputes follow a predictable pattern. A deal underperforms or collapses. The disappointed party reviews what they were told. They compare it to what actually happened. They request documents. They find inconsistencies. A claim forms.

Once a plaintiff sees a narrative of “we were told X, but the truth was Y”, the dispute becomes difficult to contain. Misleading conduct claims often sit alongside breach of contract, negligence, breach of duty and, in distressed scenarios, insolvency‑related allegations. They are rarely standalone. They are part of a broader story about expectations, reliance and commercial reality.

How We Can Assist

If you’re facing allegations of misleading or deceptive conduct — or you’re concerned that a negotiation, transaction or communication may give rise to a claim — early advice is critical. We act in complex commercial litigation, shareholder disputes, urgent applications and misleading or deceptive conduct claims. We help clients assess their exposure, manage risk and respond strategically before issues escalate.

If you need guidance on a potential dispute or want to understand your position, contact us directly. Early intervention often determines the outcome.

Explore our related areas of practice:

• Commercial Litigation

• Shareholder & Director Disputes

• Misleading or Deceptive Conduct

• Urgent Applications & Injunctions

• Insolvency‑Related Disputes

Disclaimer

This publication provides general information only and may not reflect the most recent legal developments. It is not legal advice and should not be relied upon as such. You should obtain specific advice tailored to your circumstances before taking or refraining from any action.