Can a lender rely on silence as being misleading?

The High Court’s recent decision of Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 considered the issue of silence or non-disclosure as misleading or deceptive conduct under section 52 of the Trade Practices Act 1974 (Cth) (Act), in respect of an insurance policy and a premium funding loan relating to a plantation investment scheme.


Consolidated Timber Holdings Ltd (CTHL) made an application to BMW Australia Finance Limited (BMW) for an insurance premium funding loan.  In making the application, CTHL retained the services of an insurance broker, Miller & Associates Insurance Broking Pty Ltd (Miller).

BMW provided premium funding to CTHL in the amount of $3.975 million, relying on an insurance policy issued to CTHL (the policy) as security for the loan.  Miller allegedly misrepresented to BMW that the policy covered property and was cancellable and assignable and therefore good security for the loan.  In fact, the policy was a non-cancellable cost-of-production policy which did not constitute good security for the loan.

CTHL defaulted on the loan.  Unable to recover all amounts owing from CTHL, BMW sought damages from Miller for misleading or deceptive conduct.  BMW alleged that Miller engaged in misleading or deceptive conduct on two grounds:

  • firstly, by misrepresenting that the policy complied with BMW’s security requirements; and
  • secondly, by failing to provide information about the inability to cancel the policy where there was a reasonable expectation that such information would be provided (non-disclosure).

BMW was unsuccessful in the first instance with Byrne J finding that the documentation provided by Miller was merely unclear, not misleading or deceptive and that non-disclosure would be expected given the experience and conflicting commercial interests of Miller and BMW.

The Court of Appeal, however, held that Miller had engaged in misleading or deceptive conduct by reason of the misrepresentations regarding the policy and Miller’s omission of information requested by BMW.


On appeal, the High Court set aside the decision of the Court of Appeal and found that Miller was not liable for misleading or deceptive conduct.

The High Court held that Miller had not misled BMW, as the policy did not in fact contain the misrepresentation that it was cancellable and because BMW was an experienced premium lender which had failed to inspect the terms of the policy. 

The issue of non-disclosure was particularly emphasised by the High Court with French CJ and Kiefel J noting that:

'it is necessary to determine whether in light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive.'  

Such conduct may include refusing or refraining from doing any act.

French CJ and Kiefel J noted further that:

'as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party.  …. [I]t does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence'.

The High Court concluded that there was no reasonable expectation that Miller would disclose relevant information to BMW in light of the commercial dealings, and that BMW's expectations may have been 'unrealistic'.  Accordingly, the alleged failure of Miller to volunteer information about the policy did not constitute misleading or deceptive conduct, confirming the first instance decision of Byrne J.

Lavan Legal comment

This decision illustrates the factors the court will take into account when considering whether silence or non-disclosure will constitute misleading or deceptive conduct under section 52 of the Act.  In particular, the High Court has confirmed that the factual and surrounding circumstances are crucial in determining if there has been conduct that is misleading or deceptive. 

A duty to speak will not automatically be inferred to commercial dealings, and in a commercial context, the court will have regard to the experience and commercial interests of the parties.

Some lessons for lenders are:

  • lenders should always conduct reasonable due diligence on the nature and terms of its security to ensure it satisfies their requirements; and

  • a lender’s conduct, knowledge and experience may be relevant to determining any claims it may have for misleading or deceptive conduct on the part of other parties.

For further information please contact Kylie O'Keeffe, Special Counsel, on 08 9288 6852 or

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.