Australia: Solicitors Engaged In "Trade Or Commerce" – Making Sense Of The Twists And Turns In Judicial Interpretation

Introduction

The issue of whether solicitors engage in "trade or commerce", for the purposes of statutory duties as prescribed in fair trading legislation, is one that has plagued the profession for decades. Traditionally, a clear distinction existed between trades and professions. However in recent times, the distinction has become somewhat blurred. Concepts of what constitutes a "profession" have embraced a much broader scope - which has occurred against the backdrop of an economic climate that has seen greater commercialisation of the legal industry.

"'Trade or commerce"

The Trade Practices Act 1974 (Cth) (TPA) and state specific Fair Trading Acts prohibit, among other things, conduct that is misleading or deceptive. Section 42(1) of the Fair Trading Act 1987 (NSW) (FTA) prohibits a person, in "trade or commerce", from engaging in conduct that is misleading or deceptive. This provision is mirrored in the Federal jurisdiction in section 52(1) of the TPA. Both pieces of legislation offer remedial recourse following breach, however, liability only arises upon satisfaction that the defendant has acted in "trade or commerce".

In the context of solicitor defendants, there is scope for the statutory phrase in "trade or commerce" to be given a broad meaning. The High Court determined that the phrase in "trade or commerce" means "dealings in the course of those activities or transactions which of their nature bear a trading or commercial character ¹". In a similar vein, section 4(1) of the FTA defines "trade or commerce" to expressly include "any business or professional activity".

In practice however, the Courts have commonly adopted a cautious approach to bringing 'legal services' into the realm of "trade or commerce". In LT King Pty Ltd v Besser, Osborn J commented that "the essential character of core activities undertaken by the legal profession is not that of trade or commerce ²". In line with this interpretation, it has been held that statements made during the course of litigation ³, including comments made in court sponsored mediation ⁴, and the actual content of legal advice rather than representations about the advice ⁵, do not constitute conduct that falls within "trade or commerce".

Further, Young CJ in Metcash Trading Ltd v Hourigan's IGA Umina Pty Ltd (Metcash) observed that "it must be remembered that merely because a solicitor gives advice to a client which client is involved in trade or commerce, or drafts a document in connection with a lease or premises that are to be used in trade or commerce, the solicitor does not by himself or herself ergo engage in trade or commerce ⁶". Nonetheless, Young CJ acknowledged the expansive view taken by French J in Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd ⁷. French J envisaged situations where giving advice can be in "trade or commerce", concluding "...where the conduct of a profession involves the provision of services for reward, then in my opinion, even allowing for widely differing approaches to definition, there is no conceivable attribute of the aspect of professional activity which will take it outside the class of conduct falling within the description "trade or commerce" ⁸. It is important to note the reasoning in Metcash did not deal with the extended definition of "trade or commerce" contained within section 4(1) of the FTA – a failure which has acted as a catalyst for change in judicial interpretation.

Changing of the guard

Despite the traditionally common and guarded construction of the words in "trade or commerce", the Courts seem to be returning to a broad interpretation of the phrase.

In 2008, the NSW Court of Appeal handed down its decision in Kowalczuk v Accom Finance ⁹(Kowalczuk) – marking a turning point in judicial opinion on the issue. The Court unanimously resolved that the rationale enunciated in Metcash is flawed for failing to take into account the extended definition of "trade or commerce" contained in section 4(1) of the FTA. Campbell JA, with whom Hodgson and McColl JJA agreed, followed a decision of the Full Federal Court in Shahid v Australasian College of Dermatologists ¹⁰ (Shahid). In Shahid, Jessup J declined to follow an earlier decision of the NSW Supreme Court ¹¹– where a narrow interpretation of "trade or commerce" was considered preferable. In contrast to a narrow interpretation, Campbell JA concluded in Kowalczuk that a person "engaged in professional activities as a solicitor is not in itself sufficient reason why section 42 [of the FTA] cannot apply to him [or her] ¹²". The judgment further outlines a number of examples of conduct amounting to misleading and deceptive conduct in the course of a solicitor's professional duties, including:

• giving advice on the prospects of success of proposed litigation, or about how the Courts are ultimately likely to decide some presently undecided legal question
• making a specific representation of fact (including an implied representation), for example, that he or she has knowledge and skills suited to carrying out the required task
• expressing an opinion about the advantages and disadvantages involved in pursuing different proposed courses of action ¹³.

The Court foresees statutory liability arising from conduct lawyers may previously have been considered safe (of course, lawyers may have a liability for other causes of action such as breach of retainer or negligence).

Comments

As with many complex issues facing the legal profession, each case is dependent upon its individual factual matrix. However, the prevalent theme is that in today's economic climate of rapid commercialisation, the conduct in question must be viewed in the context of commerciality – that the correct approach to adopt is to establish whether the conduct engaged in is mercantile, rather than professional, in nature.

The critical point to take away from this discussion is that a narrow interpretation of "trade or commerce" no longer reigns supreme – the Courts are willing to broaden the scope of liability. As a consequence, any protection solicitors sought from their perceived exclusion from claims under fair trading legislation, is seemingly fading into the distance.

Footnotes

1 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604 per Mason CJ, Deane, Dawson and Gaudron JJ.
2 (2002) 172 FLR 140 at [24] per Osborn J.
3 Little v Law Institute of Victoria (No 3) [1990] VR 257 at 273 per Kaye and Beach JJ, at 292 per Ormiston J.
4 W J Green and Co (1984) Pty Ltd v Wilden Pty Ltd (unreported, Supreme Court of WA, 24 April 1997, Parker J).
5 Prestia v Aknar (1996) 40 NSWLR 165 at 178-191 per Santow J.
6 (2003) 11 BPR 21,129 at [54], [56].
7 (1987) 14 FCR 215.
8 (1987) 14 FCR 215 at 220.
9 [2008] NSWCA 343.
10 (2008) 168 FCR 46
11 Prestia v Aknar (1996) 40 NSWLR 165.
12 Kowalczuk v Accom Finance [2008] NSWCA 343 at [351].
13 Kowalczuk v Accom Finance [2008] NSWCA 343 at [352]–[354] per Campbell JA.

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.