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Paying the price for misrepresentations by others – principals and agents

The NSW Court of Appeal recently considered the “fallout” from a dishonest representation by an agent.  Very briefly, Mr P sold a house at Seaforth to Mrs C for $8.55M.  A special condition in the contract provided that a supplementary deposit would be paid if Mr P provided evidence that there was home warranty insurance in place; and that the building complied with local council requirements.  Mr P had left arrangements for the sale in the hands of Mr N (his son-in-law).  Perhaps relevantly, much of the sale proceeds were to go to Mr P’s daughter, the wife of Mr N.

As events unfolded, it became apparent that Mr N had obtained a Certificate of Home Owners Warranty Insurance (ostensibly for the benefit of the property owner and the eventual purchaser) by falsely representing to the insurer, that a particular builder, a Mr Thomas, had carried out work on the property.  Evidence showed that was not the case.  The trial Judge found that, by providing the HOW Certificate to Mrs C, Mr N expressly and impliedly represented that the building work had been carried out by Mr Thomas, a licensed builder when that was untrue (and known by Mr N to be untrue); and Mrs C would not have proceeded with the purchase if the true position was known.

Mr P appealed against the decision.  Although he had some success in overturning another basis on which the trial Judge found he was liable; the Court of Appeal upheld the trial Judge’s decision in relation to the false representation.

Importantly, the appeal bench made it explicitly clear there was no suggestion that Mr P himself was involved in the deception.  However he was vicariously responsible for the conduct of his agent, Mr N.  Thus, not only did he lose the case, he had to pay the costs of both the initial hearing and the appeal.

Although the substance of the case was about whether there had been a deception and what its consequences may have been; it neatly illustrates the legal principle that in many circumstances a principal will be liable for the conduct of his or her agent, even though the principal personally was not responsible for any misconduct.  It is perhaps a salutary lesson to principals in many walks of life that, if they leave their affairs wholly in the hands of an agent, they may be burdened with the consequences of decisions that the agent makes in their name:  Pascali v Carr [2019] NSWCA 151.

Liability limited by a scheme approved under the Professional Standard Legislation

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