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Statutory Prohibition NZ is not the only jurisdiction who has this prohibition adopted from Australia from the Trade Practices Act 1974 NZ mirrors the Australian legislation Most important provision = s 9 based on s 52 of the Australian Act Applies to contracts  especially misrepresentation

Breach of s 9 in many commercial disputes

FTA 1986 A companion of the Commerce Act 1986  Object of the CA 1986? Aim to promote competition for the benefit of consumers. When there is competing danger that they will engage in unfair practices - FTA counter the ill effects of strong competition  FTA to counter ill effects of that Act 1A Purpose (1) The purpose of this Act is to contribute to a trading environment in which— (a) the interests of consumers are protected; and (b) businesses compete effectively; and (c) consumers and businesses participate confidently. (2) To this end, the Act— (a) prohibits certain unfair conduct and practices in relation to trade; and (b) promotes fair conduct and practices in relation to trade; and (c) provides for the disclosure of consumer information relating to the supply of goods and services; and (d) promotes safety in respect of goods and services. 9 Misleading and deceptive conduct generally No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. "a simple clear two line long universal norm of conduct" Wingecarrobee v Lehman Bros [summary p 2] The "section is directed to promoting fair dealing in trade" Red Eagle at [28] To "promote… informed commercial activity.. Based on accurate information" Bullabidgee v McLeary at [69] Specific prohibitions on misleading or deceptive conduct ss 10- 12 10 Misleading conduct in relation to goods No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, manufacturing process, characteristics, suitability for a pur- pose, or quantity of goods. Phrased in more precise and definite terms than s 9 Is conduct that is "liable to mislead the public as to the nature" of goods (s10) conduct that is "likely to mislead or deceive" (s 9)?

Because of the broad wording of s 9, anything caught by s 10 will be caught by section 9. Words must be caught in the ambient of s 9. What is the purpose of ss10-12 breach of s 9 is not an offence. Breach of the specific sections is an offence 40 Contraventions of provisions of Parts 1 to 4A an offence (1) Every person who contravenes a provision of Part 1 (except sections 9, 14(2), 23, or 24), Part 3, or Part 4 commits an offence and is liable on conviction,— (a) in the case of an individual, to a fine not exceeding $200,000; and (b) in the case of a body corporate, to a fine not exceeding $600,000. There are penalties attached for the breach of specific sections The real reason for general + some specific - s 9 was too broad and wide and too ill defined in order to create an offence of a breach of it. Our focus is on s 9 Commerce commission brings the most cases. Mainly resorts to the specific provisions. Competitors worry the most about s 9 as there doesn’t need to be much proof Our Focus 25 Provisions of this Part not limited by reference to other provisions of this Part No provision of this Part limits or affects any other provision of this Part. Not limited to conduct that is not caught by the more specific provisions Not just consumer protection provision The allegers are not just consumers: they include trade competitors A high percentage of commercial disputes include claims based on s 9. Most consumers cannot afford to litigate Consumers can complain to the commerce commission - who can take the matter up on behalf of the consumers S9: a broad prohibition unconcerned with liability “… a comprehensive provision of wide impact, which does not adopt the language of any common law cause of action. It does not purport to create liability at all; rather does it establish a norm of conduct, failure to observe which has consequences provided for elsewhere in the same statute” Fox J in Brown v The Jam Factory Pty Ltd (1981) 53 FLR 340 at 348 , speaking of the equivalent Australian provision

Protean in character "courts have allowed the statute to float like oil across water" Hammond J in Crump v Wala [1994] Often provides an alternative to a claim in: Contract - circumvent exemption clauses - pre-contract misrepresentation passing-off - unrestricted by common law limitations the tort of negligence S 50: FTA does not limit or affect other laws

May provide alternative remedies in litigation concerning companies and their officers

The Australian analogues “A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive”: s 52 Trade Practices Act 1974 “A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”: State and Territory FT Acts “A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”: s 18 Australian Consumer Law (ACL) Australian cases: relevant and persuasive

Corporation vs people = AUS vs NZ Both provisions are concerned with trade Australians have a federal system = to do with the law making confidence No person shall S2(1) "person" includes a local authority and any association of persons whether incorporated or not So a company is prohibited from engaging in modc, but so are the directors, servants or agents of a company - the prohibition applied to any person The in trade requirement Prerequisite for s 9 to operate Why is there an in trade requirement Never intended that this prohibition had universal application Promotes fair trading and to have ethical conduct - disclosure etc - for people involved in trade, not private individuals Contributing to a trade environment Trade: s 2(1) A restriction on the operation of s 9 Means any trade, business, industry, profession, occupation, activity of commerce No definition of the phrase "in trade" Or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest Very broad definitions Business s 2(1) means any undertaking(a) that is carried on whether for gain or reward or not; or (b) in the course of which(i) goods or services are acquired or supplied; or (ii) any interest in land is acquired or disposed of whether free of charge or not

Making a profit isn't critical Non-profit organisations might fall within the definition of business Goods, services, acquire, supply Also broadly defined in s 2(1) “services includes any rights … benefits, privileges, or facilities that are to be provided, granted or conferred …”

So what is an eg of an undertaking in the course of which services are supplied?

The Australian analogue S 18 ACL: “A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

Does the difference matter Answer will affect whether we can rely on Australian Case law Definition of trade includes an activity of commerce - doesn’t matter The early approach “the terms ‘trade’ and ‘commerce’ … are clearly of the widest import … [and] are not restricted to dealings … which can properly be described as being at arms length in the sense that they are within open markets or between strangers or have a dominant objective of profit making.” Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) Conduct must occur “in trade” Initially “in” was taken to mean ‘in connection with’ or ‘in relation to trade’ rather than ‘within or as part of’ trade Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 marked a new direction

All conduct in the course of trade If the conduct has a link with trade is it caught? Concrete Constructions (NSW) Pty Ltd v Nelson  Hope was he would get a higher award  Limits to conduct associated with trade - trading activity of dealing with external parties vs this in house conversation  Internal matter     

"The phrase 'in trade or commerce' in s 52 has a restrictive operation."[14] "What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it...has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character."[15] "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."[16] "On the other hand...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."[17] Trading with conduct of a commercial activity

Possible interpretations All “conduct in the course of the myriad of activities … which are undertaken in the course of, or as incidental to, the carrying on of … business” or is “in trade” limited to the “central conception of trade”, consisting of “conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character”?

High court didn’t think the conversation was associated with activity which bore a trading conduct Falls in the 2nd of the 2 interpretations Important limit on the scope of the act

Concrete Constructions: the majority “… it is plain that s 52 was not intended to extend to all conduct … in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business.”

The result in Concrete Constructions Was the statement by the foreman to the worker conduct in trade or commerce? What of a failure by a driver to give the correct signal when driving a truck in the course of a company’s haulage business?

The company is in trade Would not be covered by s9 - focuses on consumers If you apply the decision in concrete constructions = NO Driving a truck is incidental to the haulage business - doesn’t bear a trading or commercial character Concrete Constructions in NZ The narrow construction favoured by the majority in Concrete Constructions has been followed here

Whose trade? S 9 does not require conduct to occur in the defendant’s trade (the usual case) May the conduct occur in connection with trade by another person? for eg the defendant’s employer? the applicant?

Conduct of the defendant that has to be in trade? Or something else The weight of authority supports that the conduct is what has to be in trade The in trade requirement applies to the conduct = defendant has to of engaged in conduct that is in trade Concrete Constructions [1990] The section does not refer to the trade of any particular person Thus statements made by a person not himself or herself engaged in trade may answer the statutory expression, if, for eg, they are designed to encourage others to invest in a particular trading entity

Statements are a form of conduct

"in trade" relates to the conduct Specialised Livestock Imports Ltd v Borrie CA72/01, 28th March 2002 In Specialised Livestock Imports and Ors v Borrie and Ors, CA72/01, 28 March 2002, the appellants were shareholders and directors of a family owned company which had contracted to sell ostriches to the respondents. The Court had to consider whether the appellants were in “trade” at the time they were alleged to have made the representations said to be in breach of ss9 and 13 of the Fair Trading Act 1986. It was not disputed in the appeal that the company was “in trade” and liable for misleading conduct of its agents. The Court held the confinement of the prohibitions in ss9 and 13 to conduct “in trade” is not intended to focus on the general trading status of those acting contrary to its terms and that status is not of itself determinative of whether persons are “in trade” in terms of ss9 and 13 in the course of their activities on behalf of a company. Each of the shareholders and directors was held to be “in trade” in their dealings on behalf of the company.

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In the later decision in the same appeal of Specialised Livestock Imports & Ors v Borrie & Ors, CA72/01, 20 September 2002, the Court had to consider, under s43(1)(b) and (d) of the Fair Trading Act 1986, when accessories are liable for breaches of s9 and the degree of influence that is required on affected persons where the misrepresentation was not sole factor causing loss. The issue here was whether the appellants were “aiding, abetting, counselling or procuring” the contravention of s9 by the company. The Court held that s43(1)(b) and (d) imports the requirements of criminal law and as such accessories will only be liable under that provision for their “intentional help” in the contravening acts – that is they must know of the contraventions and intentionally participate in them. 2 of the 3 shareholders = directors and shareholders Conduct in trade Bendalls engaged in conduct - made statements = associated with trade Negotiated contracts between the company and the buyers - amounted to conduct in trade The defendant doesn’t have to be in trade on their own account In trade qualification is directed to the conduct that has to be in trade

Company law and contract law do not restrict the application of s 9 Houghton v Arms (2006) 225 CLR 553 HCA It is the conduct that needs to be in trade Company is insolvent - insolvent defendant is not helpful - no money WSA is in trade Student and Houghton were not in trade on their own account - was there conduct in trade - yes in the trade of WSA Successfully pursued as it was in WSA's trade of commerce Can be liable for engaging in misleading or deceptive conduct Remedy is discretionary Breach of s 9 doesn’t entitled anyone to a remedy - it is discretionary “It is not to the point that Mr Houghton and Mr Student themselves were not business proprietors or that their activities were an aspect or element of the trade or commerce of WSA (and of [A]) but not of “their” trade or commerce. Mr Houghton and Mr Student nevertheless engaged in conduct in the course of trade or commerce and were thus within the ambit of the FTA.”

Courts will have regard to the impact of a reasonable person Maybe that a reasonable person might have been more careful etc Reliance is not an element of breach - no one has to rely on a statement or conduct to show there is a breach Reliance is relevant to the s 43 inquiry - principal remedy section Can get remedy without proving loss e.g. injunctions

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Body Corporate 202254 v Taylor [2009] 2 NZLR 17 CA Taylor was a director and agent for these companies Information he had supplied about the apartments was put in the brochure for sale Building ended up being leaky Was the in trade requirement satisfied? - Taylor said no, his argument fails as the conduct is misleading

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CA was divided on the issue - by majority said it couldn’t be struck out Minority wanted to interpret the section as the defendant being in trade. Minority did accept that it should go to trail Defendant needs to be in trade as well as the conduct Wellington City Council v Dallas Only the conduct has to be in trade - not the defendant 2 possibilities S 9 is not confined to the conduct of a person who is trading on his or her own account: the broad approach As Mr T was not trading on his own account, he cannot have been engaged in trade: the narrow approach The majority view “Although both… approaches are tenable, we see no reason why we should depart from the broad approach given its congruity with the words of the statute, the most recent and authoritative Australian decision [Houghton v Arms] … and, most significantly, the pattern of NZ authority” William Young P & Arnold J (Chambers J agreeing on this point) The minority view “… the narrow approach follows as a matter of interpretation of the relevant definitions taking into account the scheme and purpose of the Act.” Glazebrook & Ellen France JJ The result A definitive determination not required The FTA claim against Taylor was tenable and thus not struck out The issue was left for further argument at trial

Categories of conduct to illustrate Categories illustrative, not definitive Not a matter of fitting a new case within a category Each new case determined by application of the words of s 9 to the facts

Shouldn’t be regarded as water tight categories Transactions by businesses: Almost all external transactions or communications to further commercial interests are likely to be “in trade”  supplying customers?  dealings with suppliers?  extraordinary transactions, eg one-off sales?

Almost always satisfy the in trade requirement Furthering commercial interests To do with an activity of a commercial nature Bevonere v Lubidineuse Not in the trade of selling beauty clinics - in the trade of services of beauty clinic Cant exclude obvious commercial transaction

“… we see no sound reason for excluding an obviously commercial transaction from a corporation’s conduct in trade or commerce merely because the transaction is the sale of the corporation’s principal, or sole, business undertaking.” Extraordinary transactions caught if connected with a business, i.e. not just transactions in ordinary course of business

Private transactions Not conduct in trade Eg, sale by an individual of a personal asset like house or car?

Prestia v Aknar In trade requirement was intended to exclude from its reach those who were acting not in a business capacity but those in private “It is well accepted that this language [in trade or commerce] was intended to exclude from its reach those who were acting not in a business capacity but in a purely private capacity concerning domestic transactions; for example, the sale by an individual of a non-business asset like the family home in contrast, say, to a hotel.” Santow J

Hill v Juzwa & Rabinska No commercial aspect = in trade requirement not satisfied If there was no commercial aspect = any sale is of a commercial character Land agents are often sued for alleged breach of s 9 Vendor of the family home can engage in misleading conduct and not get in trouble. If the agent engages in the conduct can be sued and often are Conduit principle Any commercial aspect? “Although a one-off sale of land could constitute a transaction that is ‘in trade’ there must be some commercial aspect to the transaction for that to happen.” Courtney J in Hill v Juzwa & Rabinska [2005] What about real estate agents selling family home? What of conduct of a vendor of … Trade associated with an activity of a trading or commercial nature. commercial premises intended, but never used to operate a business? Commercial not private = held to be in trade - links with trade apartment block that had been rented out? Has to be conduct in trade as it is an asset a farming property ‘as a going concern on a walk-in walk-out basis’? Held to be conduct in trade Conduct of professionals Is conduct of professionals, for eg lawyers, accountants, Drs, conduct in trade? - Yes S 2(1) definitions: all are conduct in trade “trade” “business” “services” – includes “the performance of work (including work of a professional nature)” Conduct of professionals Conduct of professionals may be “in trade” Whether it is falls to be determined by the general principles, ie the impugned conduct must be an aspect of professional activity that bears a trading or commercial character

Fall back on the general principles here Conduct of religious, charitable and community organisations Will conduct associated with the core functions of such bodies likely be in trade? No the core functions will not be activities associated with trade or commerce E v Australian Red Cross Society (1991) The society supplied...