Re Raymond Leroy Barto v Gpr Management Services Pty Ltd and Eckard Solbrandt [1991] FCA 659; (1992) 14 Atpr 41-162 (1991) 105 ALR 339 (1991) 33 FCR 389 (20 December 1991)

FEDERAL COURT OF AUSTRALIA

Re: RAYMOND LEROY BARTO
And: GPR MANAGEMENT SERVICES PTY LTD and ECKARD SOLBRANDT
No. G710 of 1991
FED No. 834
Trade Practices
[1991] FCA 659; (1992) 14 ATPR 41-162
(1991) 105 ALR 339
(1991) 33 FCR 389

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.(1)

CATCHWORDS

Trade Practices - Alleged misleading conduct - Representations allegedly made to employee in the course of negotiations for variation of his contract of employment - Application to strike out relevant part of Statement of Claim upon basis that s.52 did not cover conduct of corporation vis a vis its employees - Application dismissed.

Trade Practices Act 1974, s.52

Concrete Constructions (NSW) Pty Limited v Nelson [1990] HCA 17; (1990) 169 CLR 594 considered.

HEARING

SYDNEY
20:12:1991

Counsel for the Applicant: R.R.I. Harper

Solicitors for the Applicant: Laurence and Laurence

Counsel for the Respondent: G.E. Underwood and M. Christie

Solicitors for the Respondent: Corrs Chambers Westgarth

ORDER

The notice of motion dated 18 December 1991 be dismissed.

The applicants on the motion (respondents in the principal proceeding) pay to the respondent on the motion (applicant in the principal proceeding) his costs of the motion.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is a motion to strike out part of a Statement of Claim. The motion depends upon the proposition that conduct engaged in by a corporate employer, vis a vis an employee, in the course of negotiating a variation of the employee's contract of employment is conduct incapable of giving rise to an action for breach of s.52 of the Trade Practices Act 1974.

2. The applicant, Raymond Leroy Barto, has brought a claim against two respondents, GPR Management Services Pty Limited ("GPR") and Eckard Solbrandt. He alleges that, on or about 22 July 1989, he entered into a contract of employment - partly written and partly oral - whereby he became the Chief Project Manager of GPR. The terms of employment included a specified annual salary together with a commission of 3% on all extension work generated by him. The writing was executed by Mr Solbrandt on behalf of GPR.

3. The applicant alleges a further agreement - apparently oral - between himself and Mr Solbrandt, on behalf of GPR, in early November 1990. According to the applicant, it was agreed that he should become General Manager from 1 December 1990 with operational responsibility for Australia and New Zealand. There was an agreed increased salary and a varied commission arrangement. The applicant claims that he entered upon his new responsibilities in December but was not paid his increased emoluments and that, in February 1991, his employment was terminated, without reasonable cause or reasonable notice.

4. As might be expected, against this background, the applicant claims that GPR breached the contract of employment. Such a case is in fact pleaded, in paragraphs 1 to 7 of the Statement of Claim. Those paragraphs create no pleading problem. The respondents make no application in relation to them.

5. However, paragraphs 8 to 10 plead an alternative case based on s.52 of the Trade Practices Act. It is said that, on or about 2 October 1990, Mr Solbrandt made representations to the applicant about GPR's desire for him to continue in its service "for many years to come". The applicant also claims that representations were made to the Department of Immigration, Local Government and Ethnic Affairs about his position. He says that the various representations were untrue, inaccurate and incomplete and were made without any intention or reasonable expectation that they would be carried into effect. Claims are made against GPR as principal and Mr Solbrandt as a person knowingly concerned in the alleged s.52 contravention.

6. Issues might arise at the trial regarding reliance upon the alleged representations and the extent to which the applicant thereby suffered damage. But these matters fall outside the present application. The respondents' submission is one of fundamental principle. They argue that the s.52 claim is bad in law because the making of a statement by or on behalf of an employer to an employee, concerning the terms of the latter's employment, is not something done "in trade or commerce". Consequently, s.52, which deals only with conduct "in trade and commerce", is inapplicable. Counsel for the respondent contend that the issue is concluded in their favour by the decision of the High Court of Australia in Concrete Constructions (NSW) Pty Limited v Nelson [1990] HCA 17; (1990) 169 CLR 594.

7. The applicant disputes that the present question is governed by Concrete Constructions. His counsel refers to two earlier cases which, he says, support the present claim. He refers to the well-known words of Barwick C.J. in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at p 129 and argues, rightly in my opinion, that paragraphs 8 to 10 should not be struck out unless the Court is affirmatively satisfied that the allegations which they make cannot confer upon his client a s.52 claim. In the alternative, he contends that, as a matter of discretion, the Court should not accede to a strike-out application. It is better, he says, to deal with the s.52 point after the facts are ascertained. Counsel says that the retention of the s.52 claim would make little difference to the extent or nature of the evidence adduced at the trial.

8. Having regard to the competing submissions, it is necessary to consider precisely what was decided in Concrete Constructions. The applicant in that case, like the present applicant, was employed at all relevant times by the respondent. But the circumstances giving rise to his claim were rather different. The applicant alleged that he was employed on a building site and that he was injured as a result of the respondent's foreman incorrectly informing him that certain grates were fixed by bolts. He claimed that the information given to him by the foreman was misleading and that, as it was given on behalf of the respondent, the respondent was in breach of s.52. Before the High Court the critical question was whether the supply of information by the foreman to the applicant was conduct "in trade or commerce". The Court unanimously held that it was not, but their Honours divided upon the reason.

9. Four judgments were delivered in Concrete Constructions: a joint judgment by Mason C.J., Deane, Dawson and Gaudron JJ. and separate judgments by each of Brennan, Toohey and McHugh JJ. It is clear that, if the present question fell to be determined by what was said in any of the separate judgments, the s.52 claim would fail. Although their Honours expressed themselves in slightly different language, all three of them would have confined the operation of s.52 to conduct engaged in by a corporation vis-a-vis a consumer. Mr Barto was not relevantly (if at all) a consumer of goods or services supplied by GPR.

10. But the views expressed in these judgments were minority views. The present case has to be determined by reference to the joint judgment. At pp 601-602 the joint judgment expressly rejects the notion that the prohibition of s.52 extends only to conduct affecting a consumer:
"As a matter of language, s.52 prohibits a corporation from engaging

in misleading or deceptive conduct 'in trade or commerce' regardless
of whether the conduct is misleading to, or deceptive of, a person
in the capacity of a consumer. In these circumstances, it is not
permissible to give to the heading of Pt V the effect of confining
the general words of s.52 to cases involving the protection of
consumers alone."

11. Nonetheless, their Honours said, the heading to Part V of the Act, "Consumer Protection", had significance in determining the effect in s.52 of the words "in trade or commerce".

12. When they turned to that phrase, the majority Justices commented upon the width of the words "trade" and "commerce". But they emphasised the significance of the word "in". The presence of that word made inapplicable to s.52 the authorities on what was encompassed in the plenary grant of legislative power "with respect to ... Trade and commerce" in s.51(1) of the Constitution.

13. After making the point that the phrase "in trade or commerce" has a limiting operation in s.52, their Honours considered two possible interpretations. The first possibility was that conduct "in trade or commerce" is "conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business". They cited as examples the giving of a misleading hand signal by a driver of a truck used in a company's haulage business and the alleged facts of the case at bar.

14. The alternative possibility canvassed by the majority was that the phrase referred "only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character". For reasons which they gave, their Honours favoured this interpretation. They proceeded at p 604 to explain the implications of that choice:

"What the section is concerned with is the conduct of a
corporation towards persons, be they consumers or not, with whom
it (or those whose interests it represents or is seeking to
promote) has or may have dealings in the course of those
activities or transactions which, of their nature, bear a
trading or commercial character. Such conduct includes, of
course, promotional activities in relation to, or for the
purposes of, the supply of goods or services to actual or
potential consumers, be they identified persons or merely an
unidentifiable section of the public. In some areas, the
dividing line between what is and what is not conduct 'in trade
or commerce' may be less clear and may require the
identification of what imports a trading or commercial character
to an activity which is not, without more, of that character.
The point can be illustrated by reference to the examples
mentioned above. The driving of a truck for the delivery of
goods to a consumer and the construction of a building for
another pursuant to a building contract are, no doubt, trade or
commerce in so far as the relationship between supplier and
actual or potential customer or between builder and building
owner is concerned. That being so, to drive a truck with a
competitor's name upon it in order to mislead the customer or to
conceal a defect in a building for the purpose of deceiving the
building owner may well constitute misleading or deceptive
conduct 'in trade or commerce' for the purposes of s.52. On the
other hand, the mere driving of a truck or construction of a
building is not, without more, trade or commerce and to engage
in conduct in the course of those activities which is divorced
from any relevant actual or potential trading or commercial
relationship or dealing will not, of itself, constitute conduct
'in trade or commerce' for the purposes of that section. That
being so, the giving of a misleading handsignal by the driver of
one of its trucks is not, in the relevant sense, conduct by a
corporation 'in trade or commerce'. Nor, without more, is a
misleading statement by one of a building company's own
employees to another employee in the course of their ordinary
activities. The position might well be different if the
misleading statement was made in the course of, or for the
purposes of, some trading or commercial dealing between the
corporation and the particular employee."

15. The majority concluded by noting that the communication in the instant case "consisted of an internal communication by one employee to another employee in the course of their ordinary activities in and about the construction of a building. It follows from what has been said above that that conduct was not, for relevant purposes, conduct 'in trade or commerce' and would not, if established, constitute a contravention of s.52 of the Act."

16. I admit to some difficult in discerning precisely what activities the majority would regard as being "in trade or commerce" and what activities it would not. It is clear enough, on the one extreme, that conduct which is not inherently a commercial activity, such as driving a truck or giving information about the safety of a building site, is not conduct "in trade or commerce" simply because, in the particular case, it is performed in the course of a larger activity for commercial gain. It seems equally clear, on the other extreme, that conduct which would plainly be conduct "in trade or commerce" if carried out vis-a-vis a stranger does not lose that characteristic simply because the party with whom the corporation is dealing happens to be an employee. To take an example mentioned in argument in this case: if a company which carried on business as a car dealer sold a motor car to an employee, that would be conduct "in trade or commerce", so the company could be could be made liable under s.52 in respect of any loss-causing misrepresentations. It is true that, in one sense, the transaction is an "internal" one. But the Concrete Constructions majority expressly left open the position "if the misleading statement was made in the course of, or for the purposes of, some trading or commercial dealing between the corporation and the particular employee".

17. It is easy to understand the policy reasons underlying Concrete Constructions. A contrary result would have led to s.52 being used as a vehicle for the recovery of personal injury damages in a large number of industrial and motor accident cases; even cases where the respondent was not negligent, but only if it happened to be a "corporation" as defined in s.4 of the Trade Practices Act. And this development would have occurred at the very time that some States were legislating to exclude personal injury damages claims in industrial and/or motor accident cases. These policy reasons have no application to the situation where an employee purchases goods or services from his or her employer. As a matter of policy, there would seem to be no reason why an employee who purchases a motor car from a corporation should be in a worse position than a non-employee who does the same thing.

18. The present case falls between the two extremes which I have mentioned. On the one hand, this case is not concerned with the conveying of routine information such as a truck driver's handsignal or a foreman's statement about bolt-fixing; actions which are not intrinsically commercial and which could occur in a non-commercial context. This case is concerned with information alleged to have been conveyed in the course of negotiations for the variation of a contract. On the other hand, the information was "internal", in the sense that the recipient was a person already employed by the informer. And, although the context was "commercial" in nature, the relevant conduct was not the sale of the goods or services by virtue of which the corporation endeavoured to make profits, but something related to its capacity to effect such sales.

19. Counsel for the respondents put some emphasis on this last matter so I will deal with it immediately.

20. It has long been recognised that s.52 conduct is not confined to conduct by which a corporation earns its recurring revenue. The section has frequently been applied to capital transactions such as the sale of a business. Bevanere Pty Ltd v Lubidineuse [1985] FCA 134; (1985) 7 FCR 325 was such a case; the major issue before the Full Court being whether s.52 applied to the sale by the company of its sole business activity. The Full Court held that it did, because the sale was "part and parcel of the totality of the appellant's activities in trade or commerce". Bevanere was cited to the High Court in Concrete Constructions but that citation provoked no mention of the case in the majority's reasons. Neither directly nor indirectly did their Honours suggest that it was wrongly decided. Moreover, the majority did expressly envisage the use of s.52 in relation to a transaction in which the corporation was a "consumer": see p 602. Having regard to the nature of a corporation, they must have had in mind a case where a corporation acquired goods or services in order to use them in its business or in some processing activity or to resell them. In any such case, the relevant transaction would not itself be a source of income but only a means whereby income could be earned in other transactions.

21. Under these circumstances, it seems appropriate to start with the proposition that, notwithstanding Concrete Constructions, it is still good law that the range of conduct to which s.52 has potential application is not limited to the activities by virtue of which the corporation directly earns its income. Subject to one qualification, the only question is whether the conduct is part of the corporation's total activities in trade or commerce. The range of relevant activities is a broad one and it includes activities by virtue of which the corporation equips itself to earn income.

22. The one qualification to which I refer is that imposed by the decision in Concrete Constructions: the relevant particular conduct must be conduct which itself has "a trading or commercial character". Even conduct directly related to the earning of revenue may fall outside s.52 if it lacks a trading or commercial character; for example the manner of driving a truck delivering goods to a customer. Conversely, conduct which is trading or commercial in character will fall within s.52 if it is encompassed within the corporation's total activities; even though that particular conduct does not directly yield income.

23. If the above analysis is correct, it seems to me correct to hold that the conduct of a corporation in the course of negotiations for the employment of senior staff is conduct potentially falling within s.52. It is true that an employment contract does not directly produce income but the making of such a contract is part of the total activities in trade or commerce of the corporation. Critically, it is intrinsically commercial conduct. It is directed to the creation of a contractual relationship.

24. In the present case the relevant negotiation was conducted with someone who was already an employee of the company. In that sense, the transaction was "internal". But I do not think this matters. Negotiations for an initial employment contract, with a person who is not presently an employee, and negotiations for a variation of that contract, with a person who is an employee, do not differ in their intrinsic character. In each case the negotiation is commercial in nature and undertaken for the purpose of the company's overall trading activities. As I have pointed out, the Concrete Constructions majority recognised that conduct may be "in trade or commerce" notwithstanding that it occurs in a transaction with an employee.

25. The present case has some affinity with Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133, a case in which an employer made representations to two employees, and through them their wives, to induce the employees to take up positions in a new plant. In that case I took the view that s.52 was capable of applying. In Wright v TNT Australia Pty Limited (1988) 80 ALR 221 at pp 233-234 Lee J., of the Supreme Court of New South Wales, differed from my view. But that was because his Honour saw s.52 as being limited to conduct towards consumers: see p 232. In the light of the majority's rejection of such a limitation in Concrete Constructions, that basis of difference is untenable. When Wright went on appeal to the New South Wales Court of Appeal neither of the majority judges, Mahoney and Clarke J.J.A., referred to Patrick: see (1989) 15 NSWLR 679 . No doubt this was because they decided the case by reference to the question whether the employer's conduct had been misleading. But McHugh J.A., who dissented, discussed Patrick in terms indicating approval. He expressed the view, at p 695, that "making a contract of employment and negotiating to enter into a contract of employment by a transport company with an employee or potential employee in relation to loading and unloading trucks is conduct 'in' trade or commerce". (In that case, as a member of the Court of Appeal, McHugh J.A. felt it appropriate to follow the decisions in this Court which rejected the notion that s.52 was limited to consumer claims. As a member of the High Court in Concrete Constructions, he felt free to express his own view that s.52 was so limited. But there is no reason to doubt that, on the hypothesis that s.52 is not limited to consumer claims as the Concrete Constructions majority held, McHugh J. would continue to accept Patrick.)

26. Patrick has been mentioned, without disapproval, by three members of this Court, sitting at first instance: see Orison Pty Ltd v Strategic Minerals Corporation NL (1987) 77 ALR 141 at p 157 (French J.), Finucane v New South Wales Egg Corporation (1988) 80 ALR 486 at p 508 (Lockhart J.) and Merman Pty Ltd v Cockburn Cement Pty Ltd (1988) 84 ALR 521 at pp 529-530 (Lee J.). All these cases, as well as Patrick and Wright, were cited to the High Court in Concrete Constructions. Yet nothing was said by the majority to suggest that Patrick was wrongly decided.

27. Having regard to these authorities, it seems to me that the better view is that conduct of a corporation which occurs in the course of negotiations with a prospective or present employee in respect of that person's employment contract is conduct capable of falling within s.52 of the Trade Practices Act. Certainly, it cannot be said, without an investigation of the facts, that this proposition is so clearly untenable as to justify striking out a pleading which relies upon it. I need not consider the matter of discretion. The present application should be dismissed with costs.