Case: Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119
Outcome: considered
Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 (' Arktos Pty Ltd v Idyllic Nominees Pty Ltd ') was a case in the Full Court of the Federal Court mainly concerned with practice and procedure. However, the case is instructive in relation to the ambit of s 10 of the Fair Trading Act . In that case, the appellant had purchased a business from the first respondent. The primary judge found that the third respondent, who was a director of the first respondent, made misleading precontract representations and held, as a result, that the first respondent had thereby engaged in misleading conduct in trade or commerce contrary to s 52 of the Trade Practices Act . The misleading representation related to profitability and value of the business. The primary judge considered the third respondent's liability but dismissed the action against him on the ground that, whilst it was pleaded the third respondent had acted within the scope of his actual or apparent authority as a director or agent of the first respondent, the pleading did not allege that the third respondent engaged in conduct in trade or commerce on his own account. He also found that there was no plea that the third respondent was knowingly concerned in the contravention as defined in s 75B of the Trade Practices Act or s 68 of the Fair Trading Act . He concluded at [77] that therefore no 'derivative liability under the Act or the Fair Trading Act , was made out against [the third respondent] in respect of conduct by Idyllic held to contravene s 52 of the Act or s 10 of the Fair Trading Act '. The appeal was against the primary judge's failure to grant the appellants relief against the third respondent. 291 The primary judge said at [107] that the researches of Counsel 'have not revealed a single authority where an employee has been held personally liable for statements made in the course of his or her employment by an employer who, or which, was concededly engaged in trade or commerce'. He then went on to say: ' 109 The consideration just indicated together with my own analysis in the light of the authorities of the common basis on which liability for deceptive or misleading conduct "in trade or commerce" is erected by both the TPA and the Fair Trading Act has led me to conclude that it does not extend to the conduct of Student or Houghton in the present case. That is not to say that a director or sole shareholder of a company may not attract liability for statements made in the course of the company's business if their making can be characterised as tending to promote the director's or shareholders own trading or commercial interests. See eg Arktos v Idyllic Nominees Pty Ltd [2004] FCAFC 119 ; (2004) ATPR 42-005. However, no independent trading or commercial interest can be imputed to Student or Houghton in the present case. The application against those respondents must therefore be dismissed.' 292 That matter went on appeal. The Full Court of the Federal Court in Arms v Houghton [2006] FCAFC 46 discussed the decisions in Arktos Pty Ltd v Idyllic Nominees Pty Ltd, Citibank Ltd v Liu , and Wong v Citibank and concluded at [38] that there was authority both in the Full Court of this Court and in the Court of Appeal in New South Wales that 'an employee can be found to have engaged in misleading or deceptive conduct for actions taken within the scope of his actual authority; that is, not independently of such authority'. 295 It will be convenient to address the claim under s 10 of the Fair Trading Act first. The third respondent was a director of the first respondent. It was submitted that, in those circumstances, he also contravened s 10 of the Fair Trading Act and he is liable to the applicant: Arktos Pty Ltd v Idyllic Nominees Pty Ltd . 296 In my opinion, that submission cannot be accepted. The critical fact in Arktos Pty Ltd v Idyllic Nominees Pty Ltd which made that director liable under the Fair Trading Act was that the director had acted on behalf of the corporation and made misleading pre-contractual representations within the scope of his authority as a director to the purchaser. In those circumstances, the Full Court concluded that he was liable for the reasons it gave at [13] cited above at [284]. 297 It is not enough for an applicant to merely establish that a corporation has contravened s 52 of the Trade Practices Act and thereby claim that any director of that corporation is liable under s 10 of the Fair Trading Act . There must be a contravention by the director himself or herself. That was made clear by Nicholson J in Caple v All Fasteners (WA) (A Firm) [2005] FCA 1558. In that case, it was alleged that a corporation had contravened s 52 of the Trade Practices Act . It was pleaded that the appellant, who was a director of the corporation but who had not been party to any of the representations which had been made, was accessorily liable under s 75B of the Trade Practices Act and, in the alternative, primary liable under s 10 of the Fair Trading Act . The Federal Magistrate found the appellant was accessorily liable under s 75B of the Trade Practices Act , even though the representations were not made by the appellant. He did not find her liable under s 10 of the Fair Trading Act . On appeal, the respondent filed a notice of contention contending that 'in addition, or in the alternative, to the grounds for liability of the appellant contained in the reasons of his Honour, the appellant is liable to the respondent in relation to her breach (sic) of s 10 of the Fair Trading Act 1985 (WA) as pleaded in the respondent's re-amended statement of claim': at [77]. The respondent relied on this Court's decision in Arktos Pty Ltd v Idyllic Nominees Pty Ltd to support the submission.