As governments increasingly involve themselves in commercial enterprises, it is important to be aware of the requirements of Australian consumer laws and how they apply to public and private sector entities. Section 18 of the Australian Consumer Law (ACL), contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA), prohibits misleading or deceptive conduct in trade or commerce.
The Commonwealth and the states and territories have legislated to bind the Crown in its various manifestations to the ACL so far as the Crown "carries on a business", either directly or by an authority of the jurisdiction concerned.
The Victorian Supreme Court decision in Murphy v State of Victoria and Linking Melbourne Authority provides guidance as to when governments and their agencies can be said to be carrying on a business. It also sheds light about when government's activities are taken to be in "trade or commerce".
The defendants were planning for the construction of a road in Melbourne as part of the East West Link project. The plaintiff alleged that the defendants made erroneous representations about the proposed road relating to its benefit to Victoria and the amount of traffic which would use it, and that those representations contravened the prohibition against misleading and deceptive conduct contained in s 18 of the ACL.
The decision centred on the following questions:
- Were the defendants carrying on a business?
- Were the representations made in trade or commerce?
Carrying on a business
The court summarised the leading cases relating to the phrase "carries on a business" and identified the following important principles in determining its meaning:
- the impugned conduct must be undertaken in the course of carrying on the business—it is not sufficient to establish that a Crown entity is carrying on a business, and that the conduct complained about is in some way connected with that business and therefore subject to the ACL
- it is not sufficient that the impugned conduct may be said to be connected in some way with a business to be conducted by the Crown at some time in the future, and
- the activity in the course of which the impugned conduct occurs must properly be characterised as "carrying on a business".
The Court accepted the following propositions submitted on behalf of the State concerning the meaning of "carrying on a business":
- the activities must be undertaken in a commercial enterprise or as a going concern and must constitute trade, or commercial transactions or engagements
- a business activity is an activity that takes place in a business context and which, of itself, bears a business character
- while the expression "carry on a business" signifies a course of conduct involving the performance of a succession of acts with system and regularity, not the effecting of a solitary transaction, mere repetitiveness is insufficient
- functions of government that are purely governmental or regulatory, carried out in the interests of the community, such as the performance of statutory functions, does not constitute the carrying on of a business, and
- there must be some element of commerce or trade, such as a private citizen or trader might undertake.
Applying these principles, the Court found that the defendants' conduct complained about was not conduct engaged in the course of carrying on a business.
Trade or commerce
This question was purely academic, because of the finding that the conduct did not occur in the course of the defendants' carrying on a business. Nevertheless, the Court considered the question of whether the defendants were acting in trade or commerce and affirmed three key principles:
- a narrow construction applies to the meaning of "in trade or commerce" in s 18 of the ACL, similar to the meaning described in Concrete Constructions (NSW) Pty Ltd v Nelson in relation to s 52 of the Trade Practices Act as "referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character"
- there is a temporal element, which requires that the impugned conduct coincide with the conduct of trade or commerce, and
- while it is not to be automatically excluded, political conduct may often lack the necessary commercial character to constitute trade or commerce.
Accordingly, although not determinative, the Court found that the conduct of the defendants was not conduct in trade or commerce.
Update: matter remitted to the Supreme Court
Please note that the Supreme Court decision has now been successfully appealed to the Court of Appeal, and remitted to the Supreme Court for a new trial based on findings by the Court of Appeal that the primary judge erred in the procedure adopted for the first trial (Murphy v Victoria and Another (2014) 313 ALR 546).
The Court of Appeal did not express an opinion as to the correctness of the conclusions of the primary judge regarding whether the defendants were “carrying on a business” or acting “in trade or commerce”, given that the matter has been remitted for a rehearing. The Court of Appeal examined the principles applied by the primary judge to these issues, and did not disagree with those principles. However, the Court of Appeal added the following observations:
- it is necessary to bear in mind that the word “business” is an “etymological chameleon” that takes its meaning from the context in which it appears and from the purpose of the statute in which it is found—in the context of the CCA it is a word of wide and general word (at  and )
- considerable care should be taken when drawing a line between activities preparatory to the establishment of a business and acts that may be done early in the carrying on of the business (at )
- it is important to keep in mind that, in some cases, the functions of a government that are purely governmental or regulatory may co-exist with the functions of a government which may entail the carrying on of a business (at ), and
- section 18 of the ACL remains subject to the limitations identified in Concrete Constructions (NSW) Pty Ltd v Nelson (as found by the primary judge) (at ).
We would like to acknowledge the contribution of Alice Bain to this article.