The Australian Consumer Law (ACL) provides further avenues in which corporations can be vicariously liable by expanding the range of circumstances in which an agent is deemed to have been “at the direction” of a company officer.
In Bennett v Elysium Noosa Pty Ltd (in liq)1 an unincorporated joint venture involving several corporate entities was sued over the alleged misrepresentations of two marketing agents (the Burkes) who were employed by PRD Nationwide and appointed by Elysium Noosa to market a community title scheme development.
Bennett entered into a contract for the purchase of a house in the development upon the basis of oral representations from the Burkes in relation to a community centre being completed in stage 1 of the development.
The Court found that the Burkes had no reasonable grounds for making the representation as the developer did not hold approval for the construction of the community centre, nor were there plans, cost estimates or other construction documents relating to the community centre. The developer was placed into receivership in 2009.
Bennett alleged misleading or deceptive conduct by the joint venture pursuant to s 52 of the Trade Practices Act 1974 (TPA)(now ACL, s 18) in relation to a representation with respect to a future matter under s 51A(1) of the TPA (s 4(1) ACL) by the joint venture’s agents, the Burkes. In particular the representations of the Burkes, as marketing agents in the employ of the joint venture were found to be misleading.
Justice Reeves concluded that the Burkes intended to act on behalf of the joint venture and that the development was a main part of its business, which meant it satisfied the elements in s 84(2) of the TPA (s 139B(b) of the Competition and Consumer Act 2010) to establish liability of the joint venture for the misleading conduct of the Burkes.
The Court also found that Pearson, the person in charge of marketing and PR, had directed the Burkes in their marketing of the development lots on behalf of the joint venture.
Damages were awarded to Bennett in the sum of $500,000 being the contract price minus the market value at acquisition.
This case serves as a warning to joint ventures / corporations, as they can be vicariously liable for activities of an agent not directly appointed by them, where the agent has acted in a misleading or deceptive way at what is considered to be their direction.