LAW2480 & LAW2498 Business and Corporations Law Essay Example
Business and Corporation Law 6
Business and Corporation Law
Amazing Accountants Ltd provides financial advice to its clients. On 1 July 2012 Gavin, a newly appointed employee made a draft of accounts for the company’s client, namely, Capital Canvases Ltd. Although his report indicated substantial profits, it was subsequently realised by Boris that Gavin’s report was based on a fundamental mistake. Relying on Gavin’s report, Tom made investments, which proved to be a loss. Tom wants to raise a claim for his losses due to the wrong advice provided by the company. For assessing the possible liabilities against the company, the following issues need to be taken up for discussion.
The chief objective of the Australian Consumer Law is to safeguard the interests of consumer goods, services and land against the unfair practices of traders. The making of false representation, or declaring associations or affiliations that are not true is prohibited by state legislation, in addition to the Australian Consumer Law (Competition and Consumer Act 2010). Gavin had to keep the information provided to his clients, Capital Canvases Ltd, confidential under the conditions of his training with the company. Nevertheless, he revealed the information to Iris, thereby violating his employment terms.
The Australian Consumer Law is to be found under Schedule 2 of the Competition and Consumer Act 2010. Section 18 of the Australian Consumer Law addresses deceptive conduct.
As such, a person in commerce or trade is precluded by Section 18 of Schedule 2 of the 2010 Australian Consumer Law from engaging in deceptive or misleading conduct. In addition, there is a prohibition with regard to indulging in behaviour that has the possibility of deceiving or misleading. Furthermore, it is prohibited under the Australian Consumer Law to make declarations regarding associations or affiliations that are not true (Competition and Consumer Act 2010). Moreover, the Australian Consumer Law bars the making of false representations.
In addition, the relevant case law affirms that the conduct viewed in its entirety should tend to induce error in an individual. An erroneous assumption, in isolation, will not constitute an infringement of Section 18 of the Australian Consumer Law. It has to be established that the conduct in question had been the cause of error or should have the capacity to cause error. Moreover, Section 18 of the Australian Consumer Law is not breached if the conduct results in some uncertainty (Latimer, 2012, p. 553).
In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd, Collins bought a restaurant lease from Henjo. Collins was unaware that this restaurant was operating illegally. The Lawyer hired by Collins to scrutinise the contract document failed to make adequate inquiries. The Federal Court in its ruling held that Henjo had engaged in misleading or deceptive conduct. This was described by the Court as representations, either express or by silence, which were patently false or misleading (Goldring, 1998, p. 235). Similarly, in our problem, Iris has made a misrepresentation based on Gavin’s report, without assessing the credibility of the same, in order to induce Tom to make an investment. According to the provisions of the Australian consumer law, Iris has made a misrepresentation to Tom with respect to investment options.
Moreover, in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, it was opined by the Court that nature of the corporation being proceeded against, had to be taken into account. Thereafter, it has to be decided if this conduct was likely to deceive or mislead, or was misleading or deceiving (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd , 1982).
When a false statement is made by an employee, during the course of employment, the employer becomes vicariously liable with respect to that statement. When an individual, representing or acting on behalf of a professional, makes an unauthorised false statement, and if that individual believes it to be true, then the professional is rendered liable for deceit (Christensen, et al., 2004, p. 65). Since Gavin, provided a wrong and misleading report, during the course of his employment, the employer “Amazing Accountants Ltd” is vicariously liable for his acts.
Section 18 is breached when the plaintiff had relied upon the deceptive or misleading conduct. The conduct of the defendant should be the cause of the loss suffered by the plaintiff. In this context, it is to be noted that Section 18 does not provide any remedy for an individual who undergoes loss, on account of negligence to safeguard his interests (Latimer, 2012, p. 554).
Furthermore, there is no necessity for the presence of loss or damage, for establishing misleading or deceptive conduct. There is no defence of due diligence, under Section 18. Consequently, an honest belief in the statement does not constitute a defence, if the relevant statement is deceptive or misleading (Latimer, 2012, p. 554).
In addition, silence can be deceptive or misleading. Although there is no general duty of disclosure, conduct can be deceptive or misleading when the facts that generate a justified expectation regarding disclosure are concealed. In general, there is no compulsion under Section 18 for a party to commercial negotiations to furnish information that will facilitate the other party’s decision making. Moreover, when a party provides another party, during the pre – contractual negotiations with false information that is not disclaimed, then that will be deemed to have indulged in deceptive or misleading behaviour (Latimer, 2012, p. 554). Furthermore, when an individual is entitled to believe that a pertinent piece of information is to be communicated, then failure to do so could be conduct that is deceptive or misleading.
In Mitor Investments Pty Ltd v General Accident Fire and Life Assurance Corp Ltd, the plaintiff had instructed the agent, an insurance broker, to ensure that all damage from sea flooding was covered. Accordingly, the agent procured a storm policy that excluded damage caused by the sea (Mitor Investments Pty Ltd v General Accident Fire and Life Assurance Co Ltd , 1984). It was held that the agent in a specific profession or trade, must act with the care and skill required of those engaged in that trade or profession.
Since, Australian Securities Investment Corporation also issued a letter for investigating the supposed breaches of Consumer law by the Amazing Accountants Ltd, it could face sanctions by the ASIC, if it is proved that it had breached the Australian Consumer Law (International Monetary Fund, 2006, p. 28).
In our present problem, Tom made an investment, relying on the advice given to him by Iris. This was based on the report provided by Gavin, an employee of the company. According to the provisions of the Australian consumer law, Iris has made a false representation in order to induce Tom to make an investment. Since, Iris had provided the wrong advice, during the course of her employment, the employer is also liable for the losses caused to Tom. As such, the company Amazing Accountants Ltd is vicariously liable for the losses caused by its employees, during the course of their employment, with respect to Tom.
Christensen, S. A., Duncan, W. D. & Walsh, T., 2004. Professional Liability and Property Transactions. Annandale, NSW: Federation Press.
Competition and Consumer Act 2010. Canberra: Office of Legislative Drafting and Publishing, Attorney – General’s Department.
Goldring, J., 1998. Consumer Protection Law in Australia. 5 ed. Annandale, NSW: Federation Press.
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83.
International Monetary Fund, 2006. Australia: Financial Sector Assessment Program — Technical Note — Investor Protection, Disclosure, and Financial Literacy. Washington DC: International Monetary Fund.
Latimer, P., 2012. Australian Business Law 2012. 31 ed. North Ryde, NSW: CCH Australia Limited.
Mitor Investments Pty Ltd v General Accident Fire and Life Assurance Co Ltd (1984) WAR 365.
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.
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