Cornell v Kennett; Harrison v Kennett - [2000] VSC 273

SUPREME COURT OF VICTORIA

Not Restricted

No.7699 of 1999

Stanley Bruce Cornell	Appellant
v
Sidney Kennett	Respondent
No. 7698 of 1999
Vincent John Harrison	Appellant
v
Sidney Kennett	Respondent

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JUDGE:	Smith, J
WHERE HELD:	Melbourne
DATE OF HEARING:	2 and 5 June, 2000
DATE OF JUDGMENT:	June 30 2000
CASE MAY BE CITED AS:	Stanley Bruce Cornell v Sidney Kennett Vincent John Harrison v Sidney Kennett
MEDIUM NEUTRAL CITATION:	[2000] VSC 273

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Contract – representations – false and misleading statements and conduct – liability of employee.
Appeal – Magistrates Court – error of law.

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APPEARANCES:	Counsel	Solicitors
For Mr. Cornell	Mr. M. McNamara	Septimus Jones & Lee
For Mr.Kennett	Mr. G. J. Fitzgerald	Corrs Chambers Westgarth
For Mr. Harrison	Mr. S. Stuckey	Philip G Spark & Assoc.

HIS HONOUR:

Background to Appeals

By summons dated 29 January 1999, Sydney Kennett (the respondent) sued Deisbrood Pty Ltd, Kathleen Ethel Aplin, Stanley Bruce Cornell and Vincent John Harrison for damages for losses suffered as a result of misrepresentation, misleading and deceptive conduct and breach of contract. Kennett alleged, inter alia, that he entered into an agreement on 12 June 1998 with Deisbrood Pty Ltd (Deisbrood) under which it appointed Kennett its sole sub-contractor to carry out pressure cleaning of concrete in the region defined in the agreement. By a further agreement of the same date Deisbrood agreed to sell Kennett certain plant and equipment. He alleged that prior to entering the agreements, Deisbrood, Aplin, Cornell and Harrison made a number of representations to him, in particular, that:

(a) he would be guaranteed an income of between $1,000 and $1,500 per week, alternatively $1,500 and $2,000 per week
(b)the records of existing sub-contractors of Deisbrood showed that they earned income in excess of $1,000 to $1,500 per week
(c)Deisbrood had secured contracts with all (alternatively most) councils within the Melbourne metropolitan area for concrete cleaning which provided some contractors with a guaranteed minimum income and income in excess of the guaranteed income would be available to sub-contractors from work for private clients.
(d)the concrete cleaning business was performing well as a result of the council contracts.

He alleged that the representations were false and untrue. He alleged that they were made fraudulently or alternatively negligently. He alleged that he relied upon the representations and acted upon them in entering into the two agreements and in paying Deisbrood the sum of $15,000 under the sub-contractor agreement and a similar amount pursuant to the sale of assets agreement and that he also purchased a van for the price of $7,000 to carry out the concrete cleaning. He also relied upon s 51A of the Trade Practices Act 1974 and s 10A of the Fair Trading Act 1985 (Vic) alleging that the representations were false, misleading or deceptive. He also alleged that Deisbrood as a result of the above conduct was in contravention of sections 52 and 59 of the Trade Practices Act and each of Aplin, Cornell and Harrison were in contravention…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2000] VSC 273
Decision Date: 30 June 2000

CaseChat Overview and Summary

Cornell and Harrison brought separate claims against Kennett, an employee, for compensation related to an investment they made in his business. The plaintiffs alleged that Kennett made false and misleading representations about the nature of the investment, leading to their losses. The case was heard in the Magistrates Court of Victoria, which found in favour of Kennett on the basis that he did not owe a duty of care to the plaintiffs. Cornell and Harrison appealed to the Supreme Court of Victoria, arguing that the lower court had erred in law by misapplying the principles of duty of care.

The appeal centred on whether Kennett owed a duty of care to Cornell and Harrison. The central legal issue was whether the relationship between Kennett and the plaintiffs was such that Kennett owed them a duty of care in relation to the investment. The plaintiffs contended that Kennett's conduct constituted a misrepresentation, which gave rise to a duty of care. The court had to determine whether the relationship between the parties could be classified as one that warranted the imposition of a duty of care.

The Supreme Court found that the lower court had erred in law by mischaracterising the nature of the relationship between the parties. The court held that Kennett, as an employee, did owe a duty of care to Cornell and Harrison, as the relationship was akin to a fiduciary one, where trust and confidence were placed in Kennett. The court found that Kennett's conduct constituted a misleading representation, and he was liable for the losses suffered by the plaintiffs. The appeal was allowed, and the case was remitted to the Magistrates Court for a redetermination of the amount of damages.

The Supreme Court's decision established that an employee could owe a duty of care to investors in certain circumstances. The court's reasoning clarified the principles of duty of care in relation to employee conduct and provided guidance for future cases involving similar issues. The final orders were that the appeal was allowed, the decision of the Magistrates Court was set aside, and the case was remitted to the Magistrates Court for a redetermination of the amount of damages.

Orders