Restraint of trade
50The plaintiff submits that the 5.00pm rule is void as an unreasonable restraint of trade. The relevant principles may be summarised as follows.
51In New South Wales, the starting point is that a restraint of trade is valid to the extent to which it is not against public policy [(NSW) Restraints of Trade Act 1976, s 4(1)]. (For this reason, expositions of the law in other jurisdictions must be treated with some caution, especially so far as concerns the proposition that a restraint is prima facie contrary to public policy and void; cf Ashley J's summary in D'Souza v RANZCP, [219], to which, subject to the foregoing caveat, I am indebted]). A restraint is against public policy (and therefore invalid) to the extent that it is unreasonable.
52The first question is whether there is a restraint of trade [cf Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126, 134 [14]]. For this purpose, "trade" includes all forms of employment and the provision for reward of all manner of services, and extends to a profession or calling [Buckley v Tutty, 371-2; Peters v Petersville, 135 [14]]. A restraint of trade involves a restriction on the liberty of a person to engage in remunerative work. This has variously been described as a restriction on the liberty of a person to carry on trade with others in such manner as he or she chooses [Petrofina (Great Britain) Ltd v Martin [1966] Ch 146, 180 (Diplock LJ); approved in Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269, 317 (Lord Hodson)]; a restriction on the work a person may do for others, or on the arrangements he or she may make with them [Petrofina v Martin, 169 (Lord Denning MR)]; and an interference with a person's liberty of action in trading [Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company [1894] AC 535, 565 (Lord Macnaghten, restating in modern terms what had been said by Lord Macclesfield in Mitchel v Reynolds (1711) 1 P Wms 181; [1558-1774] All ER Rep 26; cited with approval by Lord Wilberforce in Pharmaceutical Society of Great Britain v Dickson [1970] AC 403, 440]. Whether a provision, rule or decision is a restraint depends on its practical effect rather than its legal form [Pharmaceutical Society v Dickson, 440; Howard F Hudson Pty Ltd v Ronayne (1972) 126 CLR 449; Peters v Petersville, 135 [14]]. The restriction need not amount to a total inhibition on activity for there to be a restraint [D'Souza v RANZCP, [222]] (a point to which it will be necessary to return).
53The doctrine applies to restraints howsoever imposed, and is not confined to contract; it can apply to rules of an organisation, and to decisions made under such rules [Buckley v Tutty, 375-6; Hughes v Western Australia Cricket Association (Inc) (1986) 19 FCR 10, 50]. Thus a decision reached by fair and correct interpretation of a rule will nonetheless be void if the rule itself is an unreasonable restraint; or a reasonable rule may be applied in the individual case in a manner which is unreasonable (for example, for denial of procedural fairness).
54The second question is whether the restraint is one to which the doctrine applies. Some species of restraint of trade - for example, covenants by a purchaser or lessee restricting the use of land - do not attract the doctrine [Peters v Petersville, 135 [14]-[15]; Esso Petroleum v Harper's Garage, 332 (Lord Wilberforce)]. In Esso Petroleum v Harper's Garage, various rationales were advanced to explain these cases, none of them entirely satisfactory [see JD Heydon, The Restraint of Trade Doctrine, pp 51-62]. Lord Wilberforce's explanation (Esso Petroleum v Harper's Garage, 335), that the transactions involved in these cases were ones that "have become part of the accepted machinery of a type of transaction which is generally found acceptable and necessary, so that instead of being regarded as restrictive they are accepted as part of the structure of a trading society", was adopted by the Full Federal Court in Australian Capital Territory v Munday (2000) 99 FCR 72, 89-93, after a full consideration of the authorities. But while the High Court noted this in Peters v Petersville (at 138 [23]), it was considered inappropriate to express any concluded view on the matter.
55The third question is whether the restraint is unreasonable, having regard to the interests of the parties and the interests of the public [Peters v Petersville, 139 [27]]. The line between improper restraint and acceptable regulation of trade is not always easily discernible, and drawing it involves a similarly subjective judgment as does whether conduct is negligent or a contract is unjust.
56Plainly, appointment as senior counsel is not necessary to carry on practice as a barrister. However, the plaintiff submitted that the restriction of entry into the inner bar - designated by public announcement, postnominals, a different uniform, and the traditional and historical recognition that these badges invoke - operates as a barrier to "senior work", and is thus a restraint of trade. As I have observed, there can be a restraint without there being a total inhibition on carrying on trade. In D'Souza v RANZCP, it was held that while the plaintiff was not prevented from practising as a psychiatrist, the fact that he was not a Fellow of the College practically placed a substantial restraint upon him engaging in practice as a psychiatrist, because there were many fields open to Fellows which were limited, or open only by discretion, to one who was not a Fellow (at [223]-[226]). Ashley J summarised the situation thus:
15 The circumstance that the plaintiff has not been admitted as a Fellow means that he does not have a qualification which is pertinent to some hospital appointments, to the performance of certain work pursuant to the Mental Health Act 1986, and to practise as consultant psychiatrist in private practice. It places a barrier, though not insuperable, upon him being recognised as a consultant or specialist psychiatrist for purposes of the Medicare rebate system. Of these matters, more later.
57To somewhat similar effect is a line of authority in California from which has emerged what is called "the common law right of fair procedure". In Pinsker v Pacific Coast Society of Orthodontists 460 P 2d 495 (1969) (Pinsker 1). Membership of the respondent association, which had rejected the appellant's application for membership, was not essential for a dentist desiring to specialise in orthodontics, and the appellant was carrying on a lawful orthodontics practice and generating substantial earnings from it. However, membership was the only available endorsement of specialist status, and would be economically advantageous, resulting in increased referrals, enabling him to charge substantially larger fees, and making him eligible to take certain courses restricted to members. The Supreme Court of California held that although not economically necessary in the strict sense, membership of the respondent association was a practical necessity for a dentist who wished not only to make a good living as an orthodontist but also to realise maximum potential achievement and recognition in that specialty, so that an applicant for membership had a judicially enforceable right to have his application considered in a manner that complied with the fundamentals of due process, including showing cause for rejection.
58In Pinsker v Pacific Coast Society of Orthodontists 526 P 2d 253 (1974) (Pinskter 2), the Supreme Court of California described its conclusion in Pinskter 1 in the following terms:
In Pinskter 1 we concluded that although membership in defendant orthodontic associations could not be said to be "an economic necessity," the associations still wielded monopoly power and affected sufficiently significant economic and professional concerns so as to clothe the societies with a "public interest."
59In Marin County Board of Realtors, Inc v Palsson 16 Cal.3d 920, 130 Cal.Rptr. 1, 549 P.2d 833 (1976), the Supreme Court of California stated the rule in Pinskter as being that "when membership in an association is a practical economic necessity, judicial review is available to examine bases for exclusion from membership".
60In Ezekial v Winkley 572 P 2d 32 (1977), the same court relied on Pinsker as establishing that it could intervene in the admission practices of professional societies where membership was a practical prerequisite to pursuit of a medical or dental career, and extended it to a hospital's expulsion of a resident, where completion of an approved residency was a prerequisite to practising a surgical specialty, and as a practical matter the expulsion would prevent the plaintiff's acceptance into any other surgical residency program. In Potvin v Metropolitan Life Insurance Co 997 P 2d 1153 (2000), the Court applied the doctrine to an insurance company's decision to remove a doctor from its preferred provider list, but explained that this was so only because the particular insurer possessed such substantial power that the removal significantly impaired the ability of an ordinary competent physician to practice medicine or a medical speciality in a particular geographic area, thus affecting an important and substantial economic interest.
61However, while the principle in Pinskter has not been questioned, it has been distinguished [Dougherty v Haag 165 Cal App 4th 315 (2008); Yari v Producers Guild of America, Inc 161 Cal App 4th 172 (2008); Kim v Southern Sierra Council Boy Scouts of America 117 Cal App 4th 743 (2004); King v Regents of University of California 138 Cal App 3d 812 (1982); Criminal Courts Bar Assn v State Bar 22 Cal App 3d 681 (1972); Heath v Redbud Hospital Dist 620 F 2d 207 (9th Cir 1980); Cain v Air Cargo Inc 599 F 2d 316 (9th Cir 1979); Parker v American Numismatic Ass'n 2007 Wash App LEXIS 927 (2007)], more often than it has been followed [Palm Medical Group Inc v State Comp. Insurance Fund 161 Cal App 4th 206 (2008); Golden Day Schools Inc v State Dept of Education 83 Cal App 4th 695 (2000); Conservatorship of Wendland 78 Cal App 4th 517 (2000)].
62In Criminal Bar v State Bar, the Court of Appeal of California observed that the basis for intervention in Pinsker 1 was that membership of the organisation was a "practical necessity" for a dentist who wished to practice orthodontics. In Heath v Redbud Hospital, one of the grounds on which the 9th Circuit upheld summary dismissal was there was no "licensing or certification factor" (present in Pinsker 1 and Ezekial v Winkley) denial of which would make pursuit of the plaintiff's chosen trade or profession impossible. In King v University of California, the appellant non-tenured professor sought an order directing the University to conduct a full adversarial hearing on its decision to deny him tenure. The Court of Appeal distinguished Pinsker 1 on the basis that the University did not possess the requisite degree of practical control over a teacher's career; that the appellant's right to practice his profession was not foreclosed by refusal of tenure; and that the University had simply decided not to accord him the special privilege of life-time employment: "His ability to seek other employment in his profession has not been curtailed in any respect, nor has his professional status been removed or damaged". Those observations resonate in the current context.
63In Kim v Boy Scouts, the Court of Appeal said that the common law right to fair procedure protected an individual from arbitrary exclusion from membership in a private entity affecting the public interest "where the exclusion or expulsion adversely affects 'an important, substantial economic interest'", in situations where the private entity had substantial power that significantly impaired the affected individual's ability to work in a particular field or profession. Kim's case failed not only because failure to promote him to a higher scout rank had no economic consequence, but also because the doctrine did not extend to an organisation's decision whether to confer on a member a specific rank, award or leadership role.
64In Parker v American Numismatic Ass'n, the Washington Court of Appeals affirmed summary dismissal of a claim by the plaintiff member challenging his expulsion. In holding that his claim was not cognisable, the Court distinguished Ezekial v Winkley and Pinsker 1 on the basis, inter alia, that the decisions of the associations in those cases made pursuit of an individual's chosen trade or profession impossible, which was not the case in Parker v American Numismatic Ass'n as he still had his shop and, although he would no longer receive the Association journal, he could access it through a library:
Accordingly, it is clear that Parker is not threatened from permanent exclusion of practising his trade ...
65In Yari v Producers Guild, the Court of Appeal of California explained that the doctrine applies only to private decisions that can effectively deprive an individual of the ability to practice a trade or profession. That was not satisfied by allegations that the plaintiff's career as a film producer would have been enhanced had the defendant given him an Academy Award credit, and that his reputation was tarnished because he was not. Further, it was insufficient that denial of the producer credit award had economic ramifications:
No case holds that the doctrine applies to all private decisions which have economic ramifications for an individual, and it is quickly apparent that economic ramifications are not enough. Otherwise, a wide variety of awards and honours decisions would be subject to judicial scrutiny.
66Thus while Pinsker 1 establishes that economic necessity in the strict sense is not essential, the cases that follow show that the courts will intervene in such a case only where admission to the association is a practical necessity, and exclusion significantly impairs the plaintiff's ability to practice (or to specialise, or to practice in a particular geographic area) so as to affect an important and substantial economic interest. The key trigger for intervention in Pinsker 1 was that while Pinsker could practice as and call himself a specialist orthodontist regardless, membership was the only available endorsement of specialist status. A mere economic or reputational impact is insufficient, and the doctrine does not extend to decisions to grant or withhold promotion, honours and awards, or special privileges. On that analysis, the doctrine would not apply to the appointment of senior counsel under the Protocol, which is analogous to promotion or the grant of a special status or privilege.
67In this Court, in Levitch v Australian Dental Association (NSW Branch) (Supreme Court (NSW), Cohen J, 21 December 1984, unrep) an interlocutory injunction was granted restraining the association from giving effect to a resolution expelling the plaintiff and from treating him as if he were not a member, notwithstanding that it was not necessary to be a member in order to practice dentistry and that not being a member would not directly impinge on the plaintiff's earning capacity, but where there would potentially be some loss of prestige and standing. However, this was an interlocutory judgment, in which the principles were not addressed, and the matter was decided on the balance of convenience.
68Unlike D'Souza v RANZCP, there is barely any field of practice for a barrister that is open only to senior counsel: the only one of which I have been able to think is that of providing an advice or opinion where the contract stipulates for "the opinion of senior counsel". The plaintiff's application for silk itself demonstrates that he appears in cases as leading counsel with a junior, and against senior counsel. The plaintiff's evidence and submissions addressed the supposed "competitive advantage" that silk was said to confer, but a competitive advantage falls far short of a barrier to areas of practice. Unlike in D'Souza v RANZCP, there is no impediment to a barrister engaging in virtually every aspect of practice open to a barrister without being appointed senior counsel. Unlike in Pinskter 1, there are no professional opportunities that are restricted to senior counsel. It may be accepted that appointment as senior counsel is likely to result in an increase in the complexity and importance of briefs, and the ability to charge higher fees, but even under the Californian line of authority that would be insufficient to warrant intervention. There is no impediment to junior counsel engaging in any aspect of a barrister's practice - save for the de minimis field of providing advices where "the opinion of senior counsel" is stipulated for. Exclusion from the inner bar does not restrict a barrister's liberty to carry on trade in such manner as her or she chooses, or restrict him or her in the work he or she may do for others, or the arrangements he or she may make with others. It does not interfere with a barrister's liberty of action in carrying on practice. In this respect the case is quite different from D'Souza v RANZCP, in which exclusion from the College meant as a practical matter exclusion from significant fields of practice. The plaintiff submitted that exclusion of barristers from "the senior rank" is a matter of adverse notice; but I do not accept that there is any stigma associated with not being appointed senior counsel. At worst, it involves a judgment that an applicant does not meet the stringent standard of eminence and excellence in several domains required to justify appointment. The very fact that appointment is for the eminent, and not the long-serving, demands that there will be many very competent barristers of considerable experience who fall short of sufficient eminence to attract appointment. Stories of unsuccessful applications for silk by barristers who have later succeeded, and/or been appointed to the bench, abound.
69I conclude that a policy governing admission to the inner bar does not impose a substantial restraint upon engaging in practice as a barrister. Nor is admission to the inner bar a practical necessity for a barrister who wishes to practice in all fields of a barrister's work. If that conclusion be correct, then the doctrine of restraint of trade would not invalidate any aspect of that policy. But lest it be incorrect, I will consider the 5.00pm rule.
70Even if a policy that governs the admission of barristers to the inner bar amounts to a restraint of trade, in my opinion the 5.00pm rule does not, because the connection between the "rule" and the supposed economic prejudice is too remote. In D'Souza v RANZCP, Ashley J put this in terms of causation: his Honour explained that it could not be concluded that the examiners' decision to fail Dr D'Souza effected a restraint on him comprehensively practising his profession because it was certain, or nearly so, that the Council would not have admitted him to Fellowship then, or at any time while investigations were continuing. His Honour proceeded to assume, without deciding, that had the examiners not failed him, he would have been admitted as a Fellow sometime later, and thus that a causal link between the examiners' decision and the economic detriment was established. In the present case, however, the evidence does not begin to demonstrate that, had the plaintiff's application not been rejected as late, it would have succeeded. His eight previous applications had not. The decision would have been made after an extensive consultative process. The ultimate decision involves a judgment by a professional selection committee based on the professional qualities and standing of the applicant. Only a minority fraction of applicants are successful in any one year.
71And even if the 5.00pm deadline were a restraint, it would be invalid only to the extent that it is unreasonable. It could not sensibly be said that, in the context of a process by which applications are considered on an annual basis, it is unreasonable to appoint a time by which applications must be received - as I think Mr Oakes SC, who appeared for the plaintiff, accepted [T11.34], in reformulating the submission to the effect that an inflexible deadline was contrary to the public interest because it constrained the pool of candidates who might be considered. The necessity for such a "deadline" is apparent from the wide range of somewhat analogous fields, mentioned earlier, in which similar deadlines operate. If there were no such time, then those charged with considering the applications and overseeing the consultative process could never know when the field was closed. Moreover - unlike many of those other areas - the result is not permanent, as another opportunity to apply will present itself the following year. The plaintiff submitted that the imposition of the sanction of loss of a right to be fairly considered, for failure to comply strictly with the 5.00pm deadline, was a penalty (and presumably, void) in accordance with Andrews v ANZ Banking Group Limited (2012) 247 CLR 205. But the consequence of failure to comply with the deadline was no more than the ordinary consequences of missing a deadline, namely the loss of the opportunity that was available until the deadline. No penalty is incurred; the opportunity to which the deadline applied simply ceases to be available, and only until the next annual cycle of applications. In any event, the doctrine of penalties remains confined to the context of contract [Andrews v ANZ, 216; it has no application here.
72In my view, the imposition of a deadline in these circumstances is far from unreasonable, but necessary. Having regard to the ample notice and widespread publicity given to it, an inflexible deadline would not have been unreasonable, although in this case it is further mitigated by the discretion to accept a late application in case of accident or special circumstances.