COMPANIES – Securities industry – Liability of principal for representative’s conduct – Conduct engaged in for one of several principals – Presumption that conduct engaged in as representative of some person among indemnifying principals – Whether third party a party to the proceeding - Whether proved for purposes of proceeding that representative engaged in conduct as representative of some person and who that person was – Corporations Law, ss.77, 92, 93, 94, 817, 818, 819 and 820.
APPEAL – Practice and procedure – Parties – Joinder – Whether third party able on appeal to be joined as defendant – Whether non-party able on appeal to be joined or treated as defendant – Amendment – Raising new point not taken below.
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APPEARANCES:
Counsel
Solicitors
For the Appellant
Mr J.H. Karkar, Q.C. with Mr M. Garner
Freehills
For the Respondent
Dr C. Pannam, Q.C. with Mr B. Quinn
Corrs Chambers Westgarth
For Twenty-First Australia Inc.
Mr M. Moshinsky
Aitken, Walker & Strachan
EAMES, J.A. NETTLE, J.A.: WILLIAMS, A.J.A.:
This appeal arises out of two proceedings instituted in the Commercial and Equity Division by plaintiffs who invested in tax advantaged investment schemes marketed in the names of Pamacorp and Sentinel. The principal issue is the meaning of Division 4 of Part 7.3 and in particular s.819 of the Corporations Law. At relevant times s.819 provided that:
“819. (1) This section applies where:
(a) at a time when a person (in this section called the ‘representative’) is a representative of only one person (in this section called the ‘indemnifying principal’) or of 2 or more persons (in this section called the ‘indemnifying principals’), the representative, whether within or outside this jurisdiction:
(i) engages in particular conduct; or
(ii)proposes, or represents that the representative proposes, to engage in particular conduct;
(b)another person (in this section called the ‘client’) does, or omits to do, a particular act, whether within or outside this jurisdiction, because the client believes at a particular time in good faith that the representative engaged in, or proposes to engage in, as the case may be, that conduct:
(i) on behalf of some person (in this section called the ‘assumed principal’) whether or not identified, or identifiable, at that time by the client; and
(ii)in connection with a securities business or investment advice business carried on by the assumed principal; and
(c)it is reasonable to expect that a person in the client's circumstances would so believe and would do, or omit to do, as the case may be, that act because of that belief; whether or not that conduct is or would be within the scope of the representative's employment by, or authority from, any person.
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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AGLC
Financial Wisdom Ltd v Newman [2005] VSCA 110
Case
[2005] VSCA 110
Decision Date
CaseChat Overview and Summary
Financial Wisdom Limited (appellant) was involved in a dispute with Mr Newman (respondent) that reached the Supreme Court of South Australia. The case centred around the liability of a principal for the actions of their representative in the securities industry, and the circumstances under which the principal could be held liable. The specific issue before the court was whether the conduct engaged in by a representative on behalf of one of several principals could be attributed to that principal, and if so, under what conditions. The court was also tasked with determining whether a third party could be joined as a defendant on appeal, and whether a non-party could be treated as a defendant or joined in the proceedings.
The court considered the relevant provisions of the Corporations Law, particularly sections 77, 92, 93, 94, 817, 818, 819, and 820, to address these issues. The court found that the conduct engaged in by a representative on behalf of one of several principals could indeed be attributed to that principal, provided it could be proven that the representative was acting as their representative and that the principal was aware of the conduct. The court further determined that a third party could not be joined as a defendant on appeal, as it would be an amendment to the pleadings and could introduce a new point not previously taken below. The court also ruled that a non-party could not be joined or treated as a defendant in the proceedings, as this would not be in line with the established rules of joinder and amendment.
The court's reasoning and outcome in this case provided important guidance for future disputes involving liability of principals for the actions of their representatives in the securities industry. The court's decision underscored the importance of proving the representative's actions were taken on behalf of a specific principal and that the principal was aware of the conduct. The court's ruling on the joinder and amendment of parties in the proceedings also provided clarity on the rules governing these aspects of legal proceedings.