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Cautious advice


Cautious advice

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									 14        L AW

      Employees can be sued for giving advice,
      following a High Court ruling.


           ll employees who make represen-                   as principal defendants under Section 9 of        those who make representations while in
           tations to clients—especially direc-              the Fair Trading Act, effectively meaning         trade or commerce will be held accountable
           tors and senior managers—need                     that the employees were sued as if they were      for them. The courts will continue to protect
           to note a recent High Court                       the employer.                                     employees who are merely passing on infor-
decision that has the potential to erode                       The burden of proof for a principle             mation from their employer to clients, but
protections provided to employees under                      defendant is lower than for an accessory          may hold employees liable where they have
the doctrine of vicarious liability.                         because an accessory must act with an intent      knowledge of facts that could be misleading
  The respondent in the High Court appeal,                   to mislead while a principle need only            or deceptive.
a Mr Arms, established an online wine distri-                engage in conduct which is ‘likely’ to              As a result of this decision, it is important
bution business in 1999. Its viability relied                mislead, regardless of intent.                    that employees, especially senior employees
on the ability to provide a single point of                                                                    and managers, check their firm’s directors’
transaction for a number of wineries to sell
their goods at sales tax-exempt cellar door
                                                             Principally liable                                and officers’ liability insurance policies to see
                                                             In December the High Court supported the          if they extend cover to a claim for mislead-
prices. Arms sought the advice of WSA                                                                          ing and deceptive conduct in the course of
                                                             decision of the Full Federal Court which
Online Limited in establishing the business.                                                                   employment. They should also review their
                                                             found that, in the absence of any accessorial
  Two WSA employees, James Houghton                                                                            employment agreements to determine
                                                             liability provisions in the Victorian Fair
and James Student, advised him that he                                                                         whether the company should indemnify
                                                             Trading Act, it was open for the court to
could use eGate, a transaction system                                                                          them against any claims for misleading or
available through ANZ, which needed                                                                            deceptive conduct.
only minimal administration. Shortly before                  The courts…may hold employees
Arms began trading, it became apparent                       liable where they have knowledge
that eGate was not sufficient to allow Arms
                                                                                                               APESMA’s view
to trade in a way that would provide an
                                                             of facts that could be misleading                 APESMA’s view is that the principle of vicari-
exemption from sales tax. Consequently                       or deceptive.                                     ous liability, where employers take responsi-
he was forced to trade for almost 12 months                                                                    bility for the acts of their employees, should
at a loss until he was able to install a new                 decide that the Act intended that individual      underpin the employment relationship.
online system. Arms lost more than $50,000                   employees, as well as their employers, could        Decisions such as the matter described
due to the advice of WSA and its employees.                  be principally liable when employees              above tend to progressively water down this
He sued the company, Houghton and                            engaged in misleading or deceptive conduct        provision, and legislation, such as for OHS,
Student for breaches of the                                  in the course of trade and commerce. On           places increasing personal responsibility on
Commonwealth’s Trades Practices Act                          the facts, the court found that the two           employee professionals and managers for
and Victoria’s Fair Trading Act.                             employees had engaged in conduct which            their own acts. The Association is closely
  At the time of suing, the Fair Trading Act                 was likely to mislead.                            monitoring these developments and
did not contain any clauses that would allow                   The Victorian Act has been amended since        strengthening its legal capability to support
an employee to be held liable as an accessory                the matter commenced, to reinstate accesso-       members as part of its response. ●
to the misrepresentations of the employer.                   rial liability. However, the decision indicates   Joseph Kelly is APESMA’s National
Arms therefore sued Houghton and Student                     that the courts are taking a firm view that       Legal Officer.

P R O F E S S I O N A L N E T W O R K A P R I L / M AY 0 7

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