Metcash Trading Ltd v Hourigan's IGA Umina Pty Ltd

[2003] NSWSC 683

CITATION:	Metcash Trading Ltd v Hourigan's IGA Umina Pty Ltd [2003] NSWSC 683
HEARING DATE(S):	30/06/03; 01/07/03; 02/07/03
JUDGMENT DATE:	30 July 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Cross claimants' proceedings against solicitor for negligence and related claims fail.
CATCHWORDS:	PROFESSIONS [84]- Lawyers- Solicitor's negligence- Whether solicitor for purchaser where contract contains pre-emption clause liable if solicitor does not take pains to see client remembers restriction- Whether same solicitor acting on resale must remember clause- Whether solicitor should ensure client has copy of vital documents- How far Fair Trading Act 1987 relates to solicitors' negligence cases.
LEGISLATION CITED:	Fair Trading Act 1987, ss 4(4), 42(1)
CASES CITED:	Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 Graham Barclay Oysters Pty Ltd v Ryan (2002) 77 ALJR 183 Helco Pty Ltd v O'Hare (1991) 28 FCR 230 Kyriacou v Kogarah MC (1995) 88 LGERA 110 Macindoe v Parbery (1994) 6 BPR 13,483 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 68 ALR 77 Semrani v Manoun [2001] NSWCA 337
PARTIES :	Metcash Trading Limited (P1) Jewel Food Stores Pty Limited (P2) Hourigan's IGA Umina Pty Limited (D1) Peter John Hourigan (D2) John Hourigan (D3) Mark Hourigan (D4) Bi-Lo Pty Limited (D5) Coles Myer Property Developments Limited (D6) KLVC Pty Limited (D7) Anthony Farquhar (D8)
FILE NUMBER(S):	SC 2278/03
COUNSEL:	R Dubler (D1 to D4/Cross Claimants) M Cashion SC (D8/Cross Defendant)
SOLICITORS:	Watson Mangioni (D1 to D4/Cross Claimants) Dibbs Barker Gosling (D8/Cross Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Wednesday 30 July 2003

2278/03 – METCASH TRADING LIMITED v HOURIGAN'S IGA UMINA PTY LTD

JUDGMENT

1 HIS HONOUR: On 30 June 2003, I commenced hearing two suits, of which the present suit was one, involving a contest as to whether the owners of the IGA Supermarket at Umina were bound to sell the supermarket to a subsidiary of Coles or a subsidiary of Metcash. There were a number of parties involved represented by various counsel. On the third day of the trial, the proceedings were settled between all parties other than the first to fourth defendants, for whom Mr R Dubler of counsel appeared, and the eighth defendant, for whom Mr M Cashion SC appeared. The first to fourth defendants had put on a cross claim against the eighth defendant. The issues arising under that cross claim have not been the subject of a settlement.

2 The first defendant is a company which owned and operated the supermarket. The second defendant, Peter John Hourigan, is the son of the third defendant, John Hourigan, and a brother of the fourth defendant, Mark Hourigan. The three Messrs Hourigan are the shareholders and directors of the first defendant. The eighth defendant is a solicitor. At all material times, when the first to fourth defendants needed legal advice, they retained the eighth defendant to give it to them.

3 The cross claim seeks damages from the eighth defendant in contract, tort or under the Fair Trading Act 1987.

4 The background facts, which are not in dispute, are that by a series of documents bearing date September 1999, the first defendant purchased and the second, third and fourth defendants, guaranteed, various obligations arising under a series of contracts made with Metcash then known as Davids Ltd. Mr Farquhar, the eighth defendant, acted as solicitor for at least the first defendant in these transactions.

5 The key document is "Agreement for Sale of Business Jewels Food Store Umina". Clause 21 is headed "Right of First Refusal" and contains five sub-clauses as follows:

"21.1 No Disposal of Business
The Purchaser cannot transfer the Business acquired pursuant to this agreement (" Sale Business ") except under clauses 21.2, 21.3, 21.4 or 21.5.

21.2 Notice of Sale

If the Purchaser wants to sell the Sale Business it must serve a notice of sale on the Vendor specifying:
(a) the sale price of the Sale Business;

(b) all other terms and conditions of the proposed sale; and

(c) a statement to the effect that the Vendor or its nominee has an option to purchase the Sale Business on the terms set out in the Notice of Sale if the Vendor complies with clause 21.3 (" Notice of Sale ").

21.3 Exercise of Vendor's Option to Purchase
(a) The Vendor can exercise its option to purchase the Sale Business by giving notice to the Purchaser within 14 days after the date of service of the Notice of Sale.
(b) If the Vendor exercises its option to purchase the Sale Business then the Purchaser must sell the Sale Business to the Vendor or its nominee and the Vendor must purchase the Sale Business or procure that its nominee purchases the Sale Business on the terms set out in the Notice of Sale.
21.4 Sale Business not Purchased by Vendor
(a) Subject to this clause 21.4, if the Sale Business is not purchased by the Vendor or its nominee within 14 days after the date of service of the Notice of Sale, the Purchaser can sell the Sale Business to a third party.
(b) The Purchaser must not sell the Sale Business:
(i) for a purchase price lower than the price specified in the Notice of Sale by 10% or more; or
(ii) on terms substantially more beneficial to the buyer than those set out in the Notice of Sale.
(c) The Purchaser must give a copy of any agreement with a third party for the sale of the Sale Business to the Vendor within 3 days after execution of the agreement.
(d) If the Purchaser does not sell the Sale Business to a third party within 90 days of the date of service of the Notice of Sale it cannot sell the Sale Business without complying again with this clause.
21.5 Permitted Disposal
The Purchaser can grant a security interest to its financier with the prior written consent of the Vendor such consent not to be unreasonably withheld."

6 The second agreement was a supply agreement which required the Hourigans to purchase the bulk of their supplies from Metcash for three years from 27 October 1999 and then until one party gave the other at least three months' notice in writing that the agreement would terminate on a particular date. By deed of indemnity the directors guaranteed the company's obligation.

7 At all material times prior to 2002, the freeholder of the shopping centre was KLVC Pty Ltd. It granted a ten year lease to a Metcash subsidiary which terminated on 1 May 2006 though there was a ten year option. The lease was transferred to the first defendant by registered dealing 6307602H in October 1999.

8 The last relevant document to which I need refer is a deed of assignment of lease, the parties to which were KLVC, the Metcash subsidiary, the first defendant and the second to fourth defendants as guarantors.

9 The deed of assignment contained the following unusual clause 7:

"The Lessor [ie KLVC] covenants with the Assignor [ie Metcash] that it will, during the remainder of the term of the Lease, any options and periods of holding over:
(a) obtain the Assignor's consent, which consent cannot be unreasonably withheld, before the Lessor consents to any future assignment, sublease or variation of the Lease …".

10 During the hearing there were a number of attempts by the cross claimants to expand the case by alleging a default in the solicitor in not bringing to attention the provisions of the deed of assignment which required the lessor to consent to any further assignment of the lease.

11 These were successfully resisted by the cross defendant. However, in the end Mr Dubler said that the amendments really went no further than the original document at which time I said that there was accordingly no need to amend. Mr Dubler's riposte to that was that he did not mind that provided that was the way in which I read the cross claim. I said I would read the cross claim according to its natural meaning. In the end, the only reference to the deed of assignment was part of the Fair Trading case referred to in 30A(c) of the cross claim.

12 I do not consider that the reference to the deed of assignment takes the case any further than the reference to the pre-emption clause in the deed of asset sale. Although I do not consider that a fair reading of the cross claim would bring in reference to the deed of assignment, even if it did, the claims in contractual and tortious negligence would fail for the same reason as they failed with the deed of asset sale.

13 Turning to the amended second cross claim, the Hourigans say that on or about 4 June 1999, Mr Farquhar was retained to act for the first, second, third and fourth defendants in respect of the proposed purchase of the supermarket and to advise the Hourigans in respect thereto. This is called "the first retainer" in the amended second cross claim. It is alleged that at no time after exchange of the purchase agreement did Mr Farquhar ever provide a copy of that agreement to any of the Hourigans or give any advice to them regarding the manner in which they should or might ensure that the existence of the pre-emptive right was not overlooked on any future sale of the business. It is also alleged that Mr Farquhar should have kept an adequate record to ensure that if he was instructed to act on any future sale, he did not overlook the existence of the pre-emptive right.

14 The cross claim then alleges that on about 18 June 2002, Mr Farquhar was again retained to act for the Hourigans as their solicitor in respect of the proposed sale of the business. This is called "the second retainer". It is then alleged that Mr Farquhar "caused, permitted or suffered Hourigan to enter into illegally binding written heads of agreement by Bi-Lo and others … without any notice having first been given by Hourigan IGA to Metcash pursuant to the pre-emptive right." A similar allegation is made with respect to the formal sale agreement made on 29 November 2002. It is alleged that Mr Farquhar was negligent and/or in breach of his obligations under the Fair Trading Act in failing to give any adequate advice about the steps that ought to be taken to ensure that the pre-emptive right was complied with and in failing to consult his records and give any necessary advice.

15 There was no written retainer of the solicitor and there was no costs agreement ever signed on either occasion.

16 Mr Farquhar says that on about 4 June 1999 he held a conference with John and Mark Hourigan. He made notes of that conference which are in evidence. Shortly afterwards he received from Metcash the draft documents to effect the sale of the supermarket. He said on 21 June 1999 he spent two and a half hours in conference with John and Mark Hourigan and that copies of the documents supplied were provided to John and Mark Hourigan at that meeting. There was a debate as to clause 21 and the Hourigans said it should be deleted because it was not part of the deal as they understood it. There was a further conference with John and Mark Hourigan of one and a half hours on 22 July.

17 At a meeting at Metcash Ultimo on 2 August 1999 at which Mr Farquhar was in attendance with both Mark and John Hourigan and a solicitor for Metcash, Metcash made it quite clear that it would not delete clause 21.

18 There was another meeting at Mr Farquhar's office on 20 August 1999 to discuss the revised documents. Mr Farquhar says that copies of the documents were provided by him to the Hourigans for the purpose of that meeting. He recollects that this was the only meeting that was also attended by Peter Hourigan. Peter Hourigan was an accountant practising in Darwin who visited Sydney rarely.

19 The finance from the National Australia Bank was approved in September 1999 and the documents were exchanged in October.

20 I will pass over minor correspondence and telephone calls. The next significant matter that Mr Farquhar recalls is that he had no further contact with the Hourigans between 5 November 1999 and 27 January 2000 when there was a problem with respect to an enterprise agreement. He says that on 28 January 2000 he forwarded a copy of page 16 of the agreement for the sale of business to Peter Hourigan and requested a copy of the enterprise agreement, but received no response.

21 Mr Farquhar was next contacted by John Hourigan on about 11 January 2002, when John Hourigan told him that "We are looking at a possible purchase of the Umina Shopping Village". There was discussion as to purchase of the freehold of the whole Centre for some months. Mr Farquhar says on 19 April he was telephoned by Mark Hourigan who said that Coles was interested in buying Umina. Mr Hourigan says this was the first time he was made aware of the Coles' interest.

22 By e-mail bearing date 29 May 2002, Peter Hourigan advised Mr Farquhar that "Coles have in principle agreed to purchase the Umina business and assuming we can close the deal to acquire the Centre lease back from us". Mr Farquhar says that at this stage, whilst he was aware that the Hourigans were pursuing discussions, at no stage was he retained to assist them in that process or to submit legal documents.

23 On 13 June 2002, John and Mark Hourigan attended Mr Farquhar's office and provided him with a copy of a draft indicative offer from Bi-Lo. This was discussed, John Hourigan however said, "We have not agreed on price and we are not happy about the rental offered. Peter is following this up".

24 Somewhere in June/July 2002, Mr Farquhar remembers receiving a telephone call from either John or Mark Hourigan who said, "Take it slowly Tony, nothing is final yet". He then remembers receiving an e-mail of 11 July 2002 from Freehills Melbourne attaching a draft asset sale agreement, agreement for lease, and lease which he forwarded to both John and Peter Hourigan.

25 On 21 August 2002, there was a meeting with John, Betty, Peter and Mark Hourigan at Baulkham Hills, which lasted three and a half hours. During the meeting Mark Hourigan said, "We need to give Metcash notice under the supply agreement". Mr Farquhar said, "Yes, that's right you must give three months' notice". He recalls having at the meeting copies of the existing supply agreement, one for himself and one for the Hourigans. He did not have a copy of a sale of business agreement. The only copy of that which Mr Farquhar possessed was in the acquisition file which had been closed and was archived in his office.

26 There is no necessity to deal with the rest of the meetings between Mr Farquhar and the Hourigans as detailed in Mr Farquhar's affidavit. The bottom line is that documents were signed selling the business to a Coles subsidiary and that no-one directed their minds to the pre-emptive rights of Metcash in clause 21 of the 1999 sale of assets agreement.

27 The affidavits filed by the Messrs Hourigan take issue with some parts of Mr Farquhar's affidavit. However, the only significant parts are who was the client and whether the Hourigans ever had any copy documents.

28 As to the first issue, on the pleadings it was alleged, in respect of the first retainer, that Mr Farquhar was retained to act for Hourigan which was defined as "collectively the first, second, third and fourth defendants …". The defence was that this was admitted, though the defendant denied that the paragraph fully or accurately described the retainer. Likewise, paragraph 21 alleged that on or about 18 June 2002 Mr Farquhar was retained to act for Hourigan as defined and the defence was that this is admitted "save that he says his retainer to advise in relation to the proposed sale was restricted to those matters where his specific advice was sought".

29 The evidence disclosed that each of the Hourigans thought that Mr Farquhar was retained to act for each of them. In cross examination Mr Farquhar said, "I think my client was the company entity." He said at 78, "Formally I think my client was Hourigan's IGA Umina". Mr Dubler for the Hourigans then put:

"Q. Now do you agree with the proposition that you were advising Peter Hourigan, Mark Hourigan and Jack Hourigan as directors in respect of the purchase of the Umina supermarket?
A. Yes.
Q. And do you agree that that advice was in respect of any obligations those three people may have arising from the purchase of the Umina supermarket?
A. Broadly, yes.
Q. Do you agree that you regarded yourself as under an obligation to provide them legal advice about those matters?
A. Yes."

30 The Hourigans sue, (a) in contract; (b) in tort; and (c) under the Fair Trading Act.

31 So far as the count in contract is concerned, it is not at all clear what the retainer was, and indeed, with whom the contract was made. For the reasons which were given in Macindoe v Parbery (1994) 6 BPR 13,483, 13,484-5, Kirby P said that he rejected the argument that a solicitor's:

"obligation extended no further than to prepare the documents for the sale of the business and to explain to the clients the legal effect of the various clauses of the documents. In modern circumstances, a solicitor's duty of care to a client such as the appellant is not so confined. One of the reasons for the expansion of the solicitor's duty of care is the acceptance, in Australia at least, that a solicitor is liable to a client not only in contract (as was long the case … ) but also in the tort of negligence . …
"However, this extension of the solicitor's duty of care to the client – beyond the strict confines of the contract of retainer narrowly construed – still has its boundaries. The solicitor is not (at least ordinarily), by reason of a retainer, converted into a general investment adviser for the client. Nor is the solicitor deemed by the law to be imbued with perfect foresight. He or she is not required to foresee every conceivable business risk and to alert the client against them. Certainly, the solicitor's duty goes beyond the obligation to explain the usual perils. It will embrace, as well, the duty to explain unusual risks which are reasonably foreseeable and which the client should weigh."

32 Macindoe v Parbery was a case where the solicitor was acting for the purchaser of a boat and sailboard hire business which was dependent upon the continuation of a licence granted by the local council. The Court of Appeal, consisting of Kirby P, Priestley JA and myself, held that a solicitor was not liable in negligence for failing to make enquiries as to whether it was likely or not that the local council would renew the annual licence, the existence of which was fundamental to the value of the business being purchased by the client. However, in that case I reviewed a number of previous decisions as to the scope of a solicitor's obligation to the client in the absence of clear words in the contract of retainer.

33 Most of the cases digested were cases of solicitors acting for purchasers who were alerted to there being an unusual aspect to do with the vendor's title. I said at 13,493:

"There is no lack of authority for the proposition that the retainer of a solicitor for the purchaser on the purchase of a business ordinarily extends beyond mere documentation and includes the duty to warn the purchaser of anything that is unusual and anything that may affect the purchaser obtaining the benefit of the contract which he or she discloses to the solicitor is sought to be obtained."

The other members of the Court agreed. That passage was followed by Dunford J in Kyriacou v Kogarah MC (1995) 88 LGERA 110, 122.

34 There is no corresponding set of authorities with respect to what is expected of a vendor's solicitor.

35 In this case, unlike most others, there was no expert evidence given by experienced solicitors as to what was accepted as the standard by experienced solicitors in good standing.

36 The cross claimants' case in contractual or tortious negligence is really twofold: (a) that in connection with the purchase in 1999, the solicitor should have ensured that the significance of clause 21 was brought to the attention of the clients and that they were given some method of making sure that its provisions came to mind when they were thinking of selling the business and; (b) that the solicitor in the second retainer should have remembered the clause or at least looked at the purchase agreement to see that there were no problems about selling the business. There is also, of course, the additional allegation that the solicitor should have given the clients copies of the documents.

37 This last question I can deal with first because it raises a simple question of fact. Although neither the Hourigans nor Mr Farquhar appeared to have any exact recollection, it seems to me that it is more likely than not that the Hourigans did have copies of the sale agreement. Mr Farquhar's reconstruction of events makes it probable that at various of the conferences with the Hourigans it would just not make sense if the Hourigans did not have copies of the documents that everyone was talking about. The clients were not novices, Mr John Hourigan was a person who had retired after being a National Australia Bank manager for 25 years, and Mr Peter Hourigan is a chartered accountant. It is more likely than not that clients of this stature would have been provided at the conferences with the documents in respect of which the conference was being held. Although there is very little in the way of evidence in the present case which one could call suspect evidence, however, I must confess I could not accept the evidence that Mr John Hourigan gave that in his 25 years as manager with the National Australia Bank he did not see contracts of various types on numerous occasions.

38 In my view, it is more likely than not that Mr Farquhar did have available copies of the various documents which the Hourigans could have taken away with them had they wished to do so and may very well have done so.

39 I return to the other two matters. In evidence Mr Farquhar said that in the light of hindsight he would agree that it would have been prudent to have done both of the things which the Hourigans say he was careless in not doing the first time. This, however, is not the test. Hindsight often leads us to views that no-one necessarily would have foreseen in the conditions that prevailed when the allegedly negligent act or omission occurred.

40 There was a little evidence to the effect that clauses like clause 21 were not common. This evidence really went both ways, first, it led to the thought that because it was not common perhaps the solicitor should have pointed out on the purchase that the pre-emption rights needed to be taken into account when the Hourigans were selling and to take precautions to see that the clause was brought to the attention of whoever was acting for them on the next occasion. On the other hand, dealing solely with a person acting for the vendor in the 2002 transaction, the fact that the clause was not common would be less likely to make the solicitor want to enquire as to whether pre-emptive rights existed.

41 In the absence of any expert evidence, it is very difficult to find that the solicitor was negligent. There is not, as far as I am aware, any general duty on a solicitor to advise clients that they should keep documents. I know it is standard practice for accountants to remind clients to retain their records for five years as required by the taxation legislation, but other than that, I know of no general practice. Of course, it might be prudent to give a warning, especially in regard to an unusual clause which may cause problems in the future, but I am not satisfied on the evidence that a reasonable and prudent solicitor would necessarily have done so.

42 So far as the second retainer is concerned, I was greatly troubled by the thought that when one resorts to the same solicitor that one has retained for the purchase of a business and knows that that solicitor has retained the documentation, that one reasonably expects the solicitor to check that documentation before drawing up the contract to on-sell the business.

43 Had Mr Farquhar had any recollection of the pre-emption clause in the contract, doubtless he would have done so. However, it is hard to criticise him for not having a recollection because the evidence shows that clause 21 was very much discussed by the clients with Mr Farquhar in 1999 and they were then fully aware of it. One would expect that clients whose actual business is being discussed would remember pre-emption provisions rather than a solicitor who might be dealing with hundreds of conveyancing transactions.

44 On the whole of the evidence, I got the distinct impression that the key aspects of the transaction of sale was being dealt with by the Hourigans personally and that Mr Farquhar was only involved where it was thought necessary. The present is not a case of clients entrusting a solicitor with the whole of a transaction.

45 On the whole I am not satisfied that the solicitor breached any contractual or tortious duty of care in the second retainer.

46 Accordingly, I would find a verdict for the cross defendant on the contract and torts count.

47 I now turn to the statutory count.

48 The amended second cross claim pleads in 30A that Mr Farquhar:

"(a) was a supplier of 'services' to Hourigan, namely legal services, within the meaning of section 4 of the Fair Trading Act 1987 of New South Wales ('the Fair Trading Act');
(b) acted in trade and commerce; and
(c) knew or ought reasonably to have been aware of the existence and effect of clause 21 of the Purchase Agreement and/or clause 7 of the Deed of Assignment and/or the 'Material Information' referred to in the Claim ('the Information').
30C. By failing to advise Hourigan of the Information in the course of carrying out work pursuant to the First Retainer and/or Second Retainer and prior to entry into the Sale Agreement by them and by failing otherwise to warn them in accordance with that duty of care Farquhar in trade or commerce engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of section 42 of the Fair Trading Act."

49 Section 42(1) of the Fair Trading Act provides:

"A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive".

50 Mr Cashion who appears for Mr Farquhar put that whatever Mr Farquhar did or did not do, it was (a) not in trade or commerce; and (b) was not conduct within the meaning of the Act. Mr Dubler, however, put that cases such as Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; Helco Pty Ltd v O'Hare (1991) 28 FCR 230 and Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575, clearly showed that a solicitor who is negligent about his or her clients' affairs may well also have breached the duty not to commit misleading or deceptive conduct.

51 It seems to have been assumed that actions under s 42 and also under s 52 of the Trade Practices Act 1976 (Comm) can lie as alternative counts to solicitors' negligence. That proposition needs to be carefully examined. I do not consider the present case is one where I need to do that, but people who resort to that assumption may well be in trouble.

52 A further complication is the doctrine of statutory pre-emption might mean that where such an action lies there is no longer any common law action in negligence; see Kirby J on the doctrine of statutory pre-emption in Graham Barclay Oysters Pty Ltd v Ryan (2002) 77 ALJR 183, 226 [227-228] and per Gaudron J in Boland v Yates supra at [105] at p 602.

53 As Callinan J in Boland's case pointed out at [239] p 638, it is a very real question as to whether solicitors are engaged in trade or commerce.

54 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 of premises that are to be used in trade or commerce, the solicitor does not by himself or herself ergo engage in trade or commerce: Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 604. Of course, there can be situations where giving advice can be in trade and commerce: Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215, but the giving of advice by a solicitor in respect of a purchase or sale of a business is, ordinarily at least, not one of them.

55 This is to be contrasted with the situation of an estate agent who is in trade and commerce in selling parcels of realty and cases like Argy fall into this category.

56 Boland's case tells us that the oft told myth that one can always sue a solicitor in a count under the Trade Practices Act or Fair Trading Act as an alternative to negligence is indeed a myth. If a solicitor is acting in trade or commerce it may be that he or she has committed false and misleading conduct, but one ascertains that not by applying the negligence tests but by looking at the words of the statute and measuring the conduct of the solicitor against those words.

57 Has there been false and misleading conduct in the instant case?

58 The principal allegation against the solicitor is that he failed to warn as part of the debriefing of the transaction covered by the first retainer that the Hourigans should keep handy the sale documents and remember at least the pre-emption clause if not also clause 7 of the deed of assignment of lease. So far as the second retainer is concerned, again an omission is relied on, namely, the omission to remember the clause or to get out the file and look at it.

59 Section 4(4) of the Fair Trading Act so far as is relevant, provides as follows:

"In this Act:

(a) a reference to conduct is a reference to an act or a refusal to act …

(b) a reference to refusing to do an act includes:

(i) a reference to refraining (otherwise than inadvertently) from doing the act …".

Thus omissions can constitute conduct, but not if the omission is inadvertent.

60 In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 68 ALR 77, 84, Bowen CJ said of the corresponding section in the Trade Practices Act that although the section:

"recognises that an omission to do an act may constitute 'engaging in conduct', that will only be so where there has been a refusal to do, or a deliberate refraining from doing, an act."

See also Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 [58] per Hodgson JA and Semrani v Manoun [2001] NSWCA 337, where at [62] Beazley JA with whom Mason P and Ipp JA agreed, said:

"The combined effect of the Act and the authorities therefore, is that for Williams' silence to be actionable, he must have had actual knowledge of a matter which he intentionally refrained from telling Manoun in circumstances where there was either a duty to disclose or where Manoun had a reasonable expectation that such information would be disclosed to him."

61 The cross claimants' case being merely in the realm of inadvertence it does not amount to conduct within the meaning of the Act.

62 Accordingly, in my view the cross claimants' claim must be dismissed with costs. I still hold the exhibits, some of which are of a confidential nature. The order must be that they be returned and I think that it would be appropriate that the bundles be returned to Landerer & Company, the solicitors for Coles who seem to own most of the confidential documents.

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Last Modified: 07/31/2003