In this edition of the FSR GPS, we explore key principles for
financial services businesses to consider when considering the use
of a disclaimer to mitigate false, misleading or deceptive
conduct.
As noted in our previous article about where an unintentional error may not constitute misleading
or deceptive conduct, the key test for misleading or deceptive
conduct is whether the conduct, viewed as a whole, has a sufficient
tendency (i.e. a real and not remote probability) to lead the
relevant person into error.
Recent cases have given room for disclaimers to be taken into
consideration in applying this test.
This is a very important development for those in the financial
services sector, as it potentially provides an important
counterargument to inaccurate (particularly inadvertently
inaccurate) material being misleading or deceptive.
The effect of a disclaimer
In ASIC v NAB,1 the Court
considered the effect of customer account statements which had
showed fees being charged by NAB where it had no entitlement to do
so. Similarly, ASIC v CBA considered customer account
statements showing fees charged by CBA where such fees had been
contractually waived.2
In each case, ASIC alleged that the bank made an implied
representation that it was contractually entitled to charge the
relevant fee, which was misleading. In each case, the Court found
that the account statements did not create that implied
representation and were not misleading. As observed by Downes
J:3
While the customer expects that the bank will adhere
to the terms of the contract, the ordinary and reasonable customer
(as described above) does not expect perfection from a bank in the
performance of its contract.
The account statements in each scenario contained a note to the
effect that the customer should check their statement and notify
the bank of any errors. For example:4
…First, a passage at the foot
of each account statement (although it did not appear in passbook
accounts) tended to negate any suggestion that the information
contained in it was warranted to be accurate or that it accorded
with the contract terms. It read as follows:
Explanatory
Notes
Please check all entries and
report any apparent error or possible unauthorised transaction
immediately.
We may subsequently adjust
debits and credits, which may result in a change to your account
balance to accurately reflect the obligations between us.
For information on resolving
problems or disputes, contact us on 1800 152 015, or ask at any NAB
branch.
These notes were also supported by the relevant terms and
conditions in each case, which contained wording with a similar
effect. CBA’s terms also went on further to expressly disclaim
the accuracy of its statements:5
This is especially as, except for the period between
1 June 2010 and 29 May 2011, the Terms and Conditions also
contained an express statement to the effect that CBA
“accept[s] that sometimes we can get things wrong, and when
this happens we’re determined to make them right again”
(emphasis added). By that express acceptance, CBA disclaimed any
guarantee of perfect accuracy as regards the account statements or
entries in the passbook.
The cases demonstrate that the effect of the disclaimers will be
relevant in determining whether relevant representations are
misleading. This suggests that it could be prudent for financial
service providers to include a disclaimer to reflect that the
relevant provider does not always get it right.
Where could a disclaimer be used?
A disclaimer could be used for regulated disclosure documents
(such as an FSG, PDS, Cash Settlement Fact Sheet or Statement of
Advice) (though noting that the effectiveness will also depend on
the content vis-a-vis the prescribed content requirements for such
documents), as well as for other documents such as fee account
statements, records of transactions, or marketing collateral.
Limitations of using a disclaimer
A disclaimer is not a ‘Get Out of Jail Free card’.
Providers will need to strike the right balance in framing the
disclaimer. In doing so, the following limitations of using
disclaimer should be considered:
- General obligations: A financial service
provider will still have duties to take reasonable care and act
efficiently, honestly and fairly in the provision of its financial
services. A provider cannot rely on the disclaimer to do things
incorrectly or negligently. - Context of the document: The misleading or
deceptive test is applied in relation to the context of document as
a whole. We note that both the NAB and CBA cases were in the
context of customer account statements. Downes J considered
that:6
…the ordinary and
reasonable customer would not view a customer account statement as
an invoice, but as a record of transactions that have occurred on
the account. The ordinary and reasonable customer understands that
a customer account statement is sent to customers so that they may
acquaint themselves with those transactions and satisfy themselves
that no disputed transactions have occurred, either by error of the
bank, or mistake or malfeasance by third parties.
In some contexts, ASIC or the Court could potentially take the
view that a disclaimer is not sufficient to negate the overall
context and dominant message of a particular document or statement.
When thinking about the context, some questions to ask may
include:
- What is the purpose of the document or statement? Would the
ordinary and reasonable reader view the document or statement as
accurate and binding? - Is there any demand for the reader to perform any obligation
(e.g. pay a potentially incorrect fee which is due
imminently)? - Are there any representations that the provider warrants the
accuracy of the document or statement?
- Unfair contract terms: In a contract, care
should be taken to ensure that the effect of the disclaimer does
not cause a significant imbalance in the parties rights and
obligations. This could arise, for example, if the misstatement
gives the provider an advantage (to the detriment of the customer)
and the disclaimer allows the provider to retain the
advantage.
What might a disclaimer look like?
We set out below an example of a disclaimer, although the
relevant disclaimer will vary depending on the context in each
case:
We use reasonable efforts to provide accurate and up to
date information. However, mistakes may still occur from time to
time and we cannot guarantee that this document is free from any
errors, inaccuracies or omissions.
If the document is also a form of statement or record of
account, the disclaimer may also state:
You should check this [statement] and let us know of any
errors or omissions as soon as practicable.
or
You should check this statement against your records
and/or your understanding and let us know if you suspect that there
may be any error or inaccuracy.
The disclaimer should be reasonably prominent, rather than
obscured in fine text. For example, the disclaimer in the customer
account statements considered in CBA case “enjoyed a
prominent position at the top of the first page of the account
statements”.7
Footnotes
1. Australian Securities and Investments Commission v
National Australia Bank Limited [2022] FCA 1324 (ASIC
v NAB).
2. Australian Securities and Investments Commission v
Commonwealth Bank of Australia [2022] FCA 1422 (ASIC v
CBA).
3. ASIC v CBA [2022] FCA 1422, [92].
4. ASIC v NAB [2022] FCA 1324,
[260].
5. ASIC v CBA [2022] FCA 1422,
[101].
6. ASIC v CBA [2022] FCA 1422, [89].
7. ASIC v CBA [2022] FCA 1422, [97].
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
#FSR #GPS #Misleading #Deceptive #Conduct #Disclaimer #Antidote #Financial #Services
