In Houghton v Arms [2006] HCA 59, the High Court of Australia has held that two website designers who misled an internet wine business about the operation of a bank’s financial transactions facility were liable for misleading and deceptive conduct under the Victorian Fair Trading Act 1999 even though they were employees. The representations were fundamental to the wine merchant’s decision to structure his business in a particular way.
Mr Arms traded under the name "Australian Cellar Door" and formulated a proposal for the provision by means of an internet web site, www.auscellardoor.com.au, of a service for the direct marketing of the products of small to medium independent wineries. The expectation was that direct "cellar door" sales would attract sales tax at a much lower rate and would avoid the need for the payment by the wineries of the margin, usually in the order of 30 per cent, required by agents or distributors when sales were effected by retail outlets. However the promised payment mechanism could not achieve that result.
The trial judge had accepted that representations had been made to their client Mr Arms, the
substance of which was that, in order to run his business effectively
and operate the auscellardoor web site, Mr Arms was not required to
obtain any documentation from the wineries other than a form, with
provision for banking details; WSA (the employer)had engaged in that conduct when it
was incumbent upon it to alert Mr Arms to the existence of the
additional requirements of the ANZ Bank, or to ascertain that there
were no such additional requirements in order for a winery to become an
ANZ e-Gate merchant. Ryan J found that, had Mr Arms known the true
position, he would have changed the auscellardoor web site to a
profitable method of trading by November 2000, not June 2001, and would
not have lost the sum of $58,331 from the seven month "set back".
While the trial judge gave judgment against the employer but refused judgment against the employees, the Federal Court of Appeal allowed the action and the High Court upheld the Appeal Court decision.
