SMALL businesses, like those on the Gold Coast being harmed by the council and state government backed light rail project, or others in Victoria harmed by bike lanes and removal of parking spaces, should think seriously about using consumer law to get just compensation.
The fact of the matter is that councils can be found guilty of misleading or deceptive conduct, as confirmed in an article published back in 2015 by law firm Colin Biggers & Paisley, which states clearly and unambiguously that councils are not exempt from the Competition and Consumer Act (CCA).
This also supports several articles Cairns News has published stating that councils, contrary to popular opinion, can be made accountable and are liable under law for loss and injury that they incur.
The law firm says it has long been considered that local councils (like trade unions) are not engaged in trade or commerce and therefore are exempt from the operation of the Competition and Consumer Act 2010 (Cth), which replaced the well-known Trade Practices Act.
“However, that is not the case. Like individuals, partnerships and companies, councils can fall foul of the CCA, including its misleading or deceptive conduct provisions,” the lawyers noted, making reference to a NSW case where a council issued an “expression of interest” and negotiated with two supermarkets over a development proposal.
The application of the CCA to the conduct of local councils was considered in the Supreme Court of NSW case of Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726.
“In 2005 Port Macquarie-Hastings Council sought expressions of interest (EOI) for the development of council land. Coles and Woolworths both expressed interest in the project. The council initially approved Woolworths’ proposal. When those negotiations reached an impasse, the council commenced negotiations with Coles.
“Dissatisfied with the progress made, in 2007 the council again sought EOIs for the development of the land. Coles and Woolworths again expressed their interest. In 2008 the council gave in principle approval to Woolworths’ development proposal,” the lawyers wrote.
After several months of negotiations, the council and Woolworths were unable to reach agreement on the terms of the agreement, which led to the unsuccessful party suing the council for misleading and deceptive conduct.
“As a result of the impasse it had reached with Woolworths, in 2009 the council re-opened negotiations with Coles. For commercial reasons, the council deliberately refrained from informing Woolworths that it was also negotiating with Coles. Woolworths continued negotiating with council and carrying out preliminary works in the belief that it had an exclusive arrangement with the council.
“On 1 July 2009, council agreed to sell the land to Coles. Woolworths sued the council, alleging amongst other things that the council’s failure to disclose to Woolworths that it was also negotiating with Coles was misleading and deceptive.
“The court held that the council’s conduct was misleading and deceptive. Moreover, the court found that the council’s conduct fell well short of commercial fair dealing and the standards which a commercial party was entitled to expect when dealing with a council.”
The law firm stressed that councils need to act honestly in commercial dealings. “Councils and their officers need to ensure that when carrying on their commercial activities, they act with honesty and candour. Otherwise, councils, like any other person or entity involves in trade or commerce, run the risk of being found to have engaged in mileading or deceptive conduct in contravention of the Competition and Consumer Act 2010 (Cth).”
The lawyers also noted that councils found to have engaged in misleading or deceptive conduct expose themselves to:
Having damages awarded against them (e.g. a party in Woolworths’ position would in most cases be entitled to receive compensation for the expenditure it incurred in negotiating with the council)
Being injuncted from engaging in the contravening conduct
Having executed contracts set aside or varied in order to overcome the contravention
Prosecution and the imposition of penalties by the ACCC
Reputational damage due to adverse publicity
Further, officers acting as the organ of the council are also exposed to the risk of being found to have been knowingly involved in, or aiding, abetting, counselling or procuring the contravention. When an officer is found to have been a party to the contravention of the CCA, the aggrieved party would be entitled to seek damages from the officer.
“To the extent that council officers are involved in commercial negotiations or commercial decisions, officers ought to ensure that the council has appropriate directors and officers liability insurance policies in place,” the lawyers noted.