There is a prohibition against misleading or deceptive conduct in trade or commerce under section 18 of the Australian Consumer Law (ACL) (the provision which replaces section 52 of the Trade Practices Act).

Silence or non-disclosure of information in commercial negotiations is capable of amounting to misleading conduct in breach of the ACL.

However, it is rarely, if ever, beneficial or good commercial tactics to divulge every secret and advantage to the other party during commercial negotiations.

So when will silence be misleading or deceptive?

Silence in commercial negotiations

The High Court in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) (Miller) provides guidance on the circumstances in which silence or non-disclosure in a commercial context may amount to misleading or deceptive conduct

Miller was the broker for Consolidated Timber Holdings Ltd which negotiated a $3.957 million loan with BMW Australia Finance (BMW) to fund an insurance premium BMW believed to be cancellable.

Cancellable policies constitute a form of security for lenders, as they allow the lender to cancel the policy and recover the unused premium in the event of default by the borrower. The insurance policy however was not cancellable.

Ultimately, Consolidated Timber Holdings defaulted and BMW sought redress from Miller, claiming that Miller engaged in misleading and deceptive conduct on the basis that Miller did not disclose to BMW that the policy was not cancellable.

The High Court held that the parties were “commercially sophisticated” and concluded that, in the context of commercial negotiations, there is no obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interest, of another party of relatively equal bargaining power and competence.

The High Court was critical of BMW for not making reasonable enquiries about the policy and for failing to consider the policy document from which it was clear it was not cancellable.

What this case means for you

In a commercial context full disclosure may not have to be made to the other party in a negotiation, even when the information not disclosed is important to the other party.

Commercial knowledge, sophistication and the resources of a party is critical in deciding what is reasonable.

Some context

The issue is not new. In Henjo Investments & Ors v Collins Marrickville (1988) 79 ALR it was made clear that silence may be relied on to show there was misleading and deceptive conduct when the circumstances give rise to an obligation to disclose relevant facts. In that case the “obligation” to disclose was said to exist when a restaurant, which was for sale, was operating (and was shown in that state to the buyer) with 128 seats, but did not have approval for that number of seats.

By contrast in Kabwand Pty Ltd v NAB (1989) ASC 55-718, a bank manager was held not to have engaged in misleading or deceptive conduct by remaining silent during the loan approval process with a buyer of a strawberry farm when the vendor of the farm was also the bank’s customer and was “struggling” financially.


The decision in Miller provides the best current guidance to parties to commercial negotiations on what can be left unsaid and when parties must make their own inquiries to protect their interests.

Miller highlights that commercial parties cannot rely on Section 18 ACL to shift their due diligence and normal assessment obligations to another party.