Standared of Government Conduct depends on nature of Contract

The Facts

The New South Wales Land and Housing Corporation (the Corporation), a statutory body associated with the NSW Department of Housing (the Department), entered into two largely identical contracts with Willowdene Constructions Pty Limited (Willowdene) and Transfield Services (Australia) Pty Limited (Transfield) for the provision of maintenance services on Department-owned properties (head contracts). Both Willowdene and Transfield entered into subcontracts with CPR Property Pty Ltd (CPR Property) (second applicant), a sole director company owned by the first applicant, Mr Robert Hine (Hine).

Clause 16 of the head contracts gave the Corporation the power to prohibit Transfield and Willowdene from using any subcontractor which it reasonably regarded as 'incompetent, negligent or otherwise unsuitable'. On 24 March 2004, the Corporation prohibited its contractors from using CPR Property as a subcontractor, relying on the clause. Both Willowdene and Transfield immediately ceased to use the services of the company.

The Corporation prohibited its contractors from engaging CPR Property due to allegations of an improper relationship between CPR Property and a Corporation employee, which resulted in an apparently excessive amount of work being given to it. Several investigations were conducted into this relationship. As a result of ICAC and internal investigations into the allegations of a conflict of interest, the Department terminated the employee's contract. The Department also subsequently withdrew the direction to Willowdene prohibiting it from using CPR Property as a subcontractor in March 2006.

The hearing was run on the basis that the conduct of the Corporation was treated as conduct of the Department.

Issues

The applicants claimed that, amongst other things, the Department had:

Contravened section 42 of the Fair Trading Act 1987 (NSW) ('[a] person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive'). Breached a duty of care it owed to the applicants and made a negligent misstatement to both Transfield and Willowdene. The applicants contended that, by reason of the Corporation's conduct, they had suffered loss and damage for which the Corporation and the State of New South Wales should be held liable.

Misleading and Deceptive Conduct Claim

The applicants argued that the Department had breached section 42 of the Fair Trading Act 1987 (NSW) as the written direction to...