Latest on whether solicitors engage in trade or commerce: part I

Leong v J P Sesto & Co [2009] VCAT 99 is the latest in the on-again off-again saga of whether solicitors engage in trade or commerce, and, whether, if not, it means that VCAT does not have jurisdiction over claims involving them, and if so, which claims. Senior Member Vassie considered the question in the context of an application to set aside a costs agreement. It was heard in October 2008 and decided on 30 January 2009. The NSW Court of Appeal’s decision in Kowalczuk v Accom Finance [2008] NSWCA 343, decided on 10 December 2008 was not referred to (see Part II).

The application was made on the orthodox basis (under the predecessor of the Legal Profession Act, 2004) and supplemented by somewhat half-hearted arguments under the Fair Trading Act, 1999, the state equivalent of the Trade Practices Act, 1974. The law is quite clear that regardless of whether lawyers engaged in their core professional roles of representation and advising are engaged in in trade or commerce (the traditional view is that they are not), some aspects of their businesses are. What this decision says is that in negotiating fees, lawyers are engaging in trade or commerce, and so causes of action which seek relief in relation to costs agreements under the Fair Trading Act, 1999 and which are dependent on conduct in trade or commerce are available to clients. (It might be worth tucking away for future thought whether a lawyer who does not negotiate and seeks to recover fees only on scale or practitioners remuneration order, could be said to be engaging in trade or commerce, but it is unlikely such a costs agreement would be the subject of an application to set it aside.)

The decision also asserts that the Fair Trading Act, 1999‘s definition of ‘services’ requires that the services be in trade or commerce, contrary to an earlier considered decision of the Legal Practice List, which it seems may not have been cited to Senior Member Vassie. No argument on this point is recorded in the decision. Ironically, if this decision is followed, the result may be a narrowing of VCAT’s jurisdiction, because in those causes of action which do not specifically require conduct in trade or commerce, but require ‘services’, VCAT’s previous position was that the services did not have to be in trade or commerce to come within the definition, because though the words ‘trade or commerce’ appeared in the definition, the definition was inclusory, and only ‘included’ certain conduct in trade or commerce, rather than mandating ‘trade or commerce’ as an essential characteristic of activity falling within the meaning of ‘services’. An example of such a jurisdiction is the one to resolve ‘consumer-trader disputes’, a jurisdiction which essentially grants to VCAT common law jurisdiction enhanced by special legislative powers over all disputes arising directly out of the provision of services, regardless of their value. In those instances of lawyers’ conduct which are not engaged in in trade or commerce, Senior Member Vassie’s construction of the Act would deny VCAT jurisdiction where it would otherwise have had jurisdiction by virtue of the expansive construction of the definition of ‘services’. (Note that J P Sesto & Co v Jadewealth Pty Ltd [2009] VCAT 80 is essentially the same judgment in the same case.)

What Senior Member Vassie said was:

‘179. One head of jurisdiction available to VCAT under the Fair Trading Act is the statutory cause of action under section 159 for compensation for any loss or damage caused by a contravention of a provision of that Act. The provisions of that Act which Mr and Mrs Leong allege to have been contravened are sections 9 (misleading or deceptive conduct in trade or commerce) and section 8A (unconscionable conduct in trade or commerce in relation the supply or possible supply of goods or services by or to a business consumer). Section 158 of that Act makes consequential remedies available if the cause of action under section 159 has been made out. Under that head of jurisdiction, the Amended Application asked only for declarations that Mr Sesto’s conduct was unconscionable and hence contravened section 8A and was misleading or deceptive and hence contravened section 9, and for compensation pursuant to section 159. It did not ask for any consequential remedies under section 158. In particular, it did not ask for an order under section 158(2)(a) that a costs agreement was void.

180. The other head of jurisdiction available to VCAT under the Fair Trading Act is the jurisdiction under Part 9 to hear and determine a “consumer and trader dispute” which is defined (so far as presently relevant) in section 107(1) as a dispute or claim arising between a purchaser of services and a supplier of services in relation to a supply of services. In section 3 “services” is defined in such a way as to require [that] they are to or are to be provided, granted or conferred “in trade or commerce.” The Amended Application invoked this head of jurisdiction …, but under this head it asked only for an order for “restitution” pursuant to section 108(2)(b). It did not ask for an order under section 108(2)(g) for rescission of a costs agreement.

181. Under each head of jurisdiction, it is necessary to show that Mr Sesto, being the person whose conduct is complained of, or being the supplier, was acting “in trade or commerce”. That is because, under one head, the provisions allegedly contravened proscribe certain conduct “in trade or commerce”, and, under the other head, whatever are supplied are not “services” as defined if they are not supplied “in trade or commerce”. See Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd [2004] VSCA 242.

182. In his final oral address Mr Twigg referred to a decision of Judge Harbison, Vice-President of VCAT, Walsh and Kane v Patrick J. Cannon, Coburn & Associates Pty Ltd … [2008] VCAT 962. In that case her Honour decided that solicitors were not engaging in conduct “in trade or commerce” when they accepted instructions from a testator and then accepted instructions from the executors of the estate when the testator died. It was not clear to me whether Mr Twigg was submitting that that decision meant that a solicitor who procures a costs agreement and does work pursuant to it does not engage in conduct “in trade or commerce” so that there is no jurisdiction under the Fair Trading Act for VCAT under either head of jurisdiction. If he was, and if I were to uphold the submission, the ironical consequence would be that proceeding no. C6430/2008, by Mr Sesto against Jadewealth, would have to be struck out for want of jurisdiction, because the jurisdiction that the proceeding had invoked was the “consumer and trader dispute” jurisdiction.

183. I think it is true to say that VCAT conducts its Civil Claims List and its Legal Practice List in accordance with an assumption that a solicitor supplies to a client “services” as defined by the Fair Trading Act because whatever the solicitor does for the client is done “in trade or commerce”. It also true to say that the decision in Walsh and Kane raises a question about the correctness of that assumption, at least in some cases. So does a decision of Osborn J. of the Supreme Court of Victoria in L.T. King Pty Ltd v Besser and White Cleland Pty Ltd [2002] VSC 354, which was cited in Walsh and Kane. Neither case, however, decides that a solicitor never engages in conduct “in trade or commerce” vis-à-vis the client. Each case merely allows for the possibility that in some circumstances a solicitor does not engage in conduct “in trade or commerce.” Indeed the decision in L.T. King was that in the circumstances of the case the defendant firm of solicitors did engage in conduct “in trade or commerce.”

184. In Naylor v Oakley Thompson & Co … [2008] VCAT 1724 Judge Ross, Vice President of VCAT, heard an application by respondent legal practitioners for an order striking out a proceeding summarily on grounds which included the proposition that VCAT had no jurisdiction because the legal practitioners had not been acting “in trade or commerce”. Judge Ross heard that application the day before Judge Harbison heard Walsh and Kane, but Judge Harbison gave her decision first. Judge Ross made no mention of Judge Harbison’s decision and may well have been unaware of it. At all events Judge Ross stated that he was not persuaded that the correctness of the proposition was so clear that the proceeding should be dismissed summarily for that reason.

185. In Naylor Judge Ross pointed out that comments of Osborn J. in L.T. King about whether conduct of solicitors was “in trade or commerce” were obiter and “did not lay down any prescriptive criteria.” Judge Ross cited well-known High Court authorities describing the hallmarks of conduct “in trade or commerce” for the purposes of section 52 of the Trade Practices Act 1974 (Commonwealth), which is the analogue of section 9 of the Fair Trading Act. Judge Ross also cited a Federal Court decision of French J. (as he then was) in 1987 which took a wide view of the expression “in trade or commerce” in the context of the conduct of a profession. Decisions of State Supreme Courts (cited in Walsh and Kane) taking a narrower view related to different legislative provisions.

186. I consider that a solicitor who procures a costs agreement with a client, performs work under that agreement and renders invoices pursuant to it, is engaging in conduct “in trade or commerce” and is providing “services” (necessarily “in trade or commerce”). I would not hold otherwise unless there were a decision of a superior court which imperatively bound me to hold otherwise. There is not. Accordingly, if Mr Twigg did submit that VCAT has no jurisdiction under either head made available by the Fair Trading Act, then I reject the submission.’

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