Personal Liability of Employees

Monday, March 7, 2016

The case of Houghton v Arms may prove to have wide ranging implications for Australian Workers. It may set a precedent which would see employees who make a mistake at work face personal liability for their actions, separate to any claims made against their company.

In this case the respondent engaged a company to implement a website with e-commerce facilities. Two employees of the company misdescribed a bank’s e-commerce facility that they recommended for the implementation. The question before the High Court was whether the employees of the offending corporation were liable under the State Fair Trading Act for misleading and deceptive conduct.

The Court in finding the employees liable made the following important points:

  1. The employees were each a “person” and a “person involved” within the meaning of the Fair Trading Act.
  2. At the time of the misrepresentation, the Fair Trading Act contained no provision for accessorial liability akin to the Trade Practices Act, s  75B(1) and no other provision addressing a distinction between principals and persons involved akin to the Trade Practices Act, s  84(2). In the absence of such provisions, the Fair Trading Act, ss  9(1) and 159(1), fell to be construed according to its terms and to general principles. On that basis, there was no warrant for construing “a person” to mean “a person, as principal”. Such a construction would not promote and encourage fair trading practices, an object in the Fair Trading Act, s  1(a). Moreover, in the world of tort, the status of an individual as an employee does not divest that person of personal liability for wrongful acts committed while an employee.
  3. The phrase “in trade or commerce” means the same in the Fair Trading Act, s  9(1), as it does in the Trade Practices Act, s  52, encompassing conduct with the character of an aspect or element of trading or commercial activities or transactions and conduct not necessarily confined to the trade or commerce of any particular corporation. The misrepresentation clearly had the relevant character and was addressed to the respondent who was himself engaged in trade or commerce. That it was the appellants’ employer’s trade or commerce, not theirs, was not to the point.
  4. While there are similarities between the Fair Trading Act and the Trade Practices Act, there are several pertinent points of difference between the two pieces of legislation:
    1. Unlike the Trade Practices Act, s  82(1), the Fair Trading Act, s  159(1), lacks any reference to the party whose conduct contravened the statute and referred only to those involved in the contravention. This suggests a legislative assumption that involvement in a contravention includes the actor whose conduct occasioned the contravention.
    2. While the opening words of the Fair Trading Act, s  9(1), are “A person” and those of the Trade Practices Act, s 52, are “A corporation”, the latter words can in some circumstances apply immediately to an individual by virtue of the Trade Practices Act, s  6, and “A person” will ordinarily include a corporation.
    3. The Fair Trading Act contains no accessorial provision akin to the Trade Practices Act, s  75B(1), and thus lacks a statutory exegesis of the phrase “any person involved in the contravention” in the Fair Trading Act, s  159(1).

(5) Despite the overlapping operation of these two pieces of legislation, the Trade Practices Act, s  75, specifically does not “exclude or limit the concurrent operation” of the provisions of the Fair Trading Act at issue. There results a measure of concurrent and overlapping operation of the normative structure of the Federal and State laws dealing with misleading or deceptive conduct in trade or commerce and the remedies for such contraventions. This overlapping and concurrency is reflected in jurisdictional arrangements for the courts exercising federal jurisdiction in cases such as the present, where the one matter involving causes with different jurisdictional bases gives rise to “accrued jurisdiction”.

Liability limited by a scheme approved under Professional Standards Legislation.

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