Business and Corporation Law

Swimmingpool Co Pty Ltd employs Martin as the manager of their Tasmanian sales division. Martin is to quote to potential customers the cost of installing the various pools that the company offers, to draw up any new contracts on behalf of the company and further to ensure that a deposit is paid by potential customers, monies which are then deposited in the company’s bank account. Martin is on a fixed salary but his contract of employment allows for the payment of a bonus if he exceeds his annual target of signing new customers.
The company is very impressed with Martin in the first month of his employment; he has signed at least 20 new customers and work has begun on at least half of the new projects signed.
After the lapse of another month the company receives a number of complaints from customers who claim that the construction of their swimming pool is substantially different to what they had contracted for. A number of customers were given wrong advice on the suitability of the placement of their new swimming pool, which means some newly constructed pools are sinking into the ground, the repair of which will cost the company considerably. It appears also that some of the deposits have not been paid into the company’s bank. Martin appears to have kept part of the money collected. The company also discovers that Martin is in the process of setting up his own business which will compete with Swimmingpool Co.
In considering the facts above make some legal observations on the following:
1. Is Swimmingpool Co liable for Martin’s actions? On what basis in law would this be the case?
2. Can the company claim they are not liable for Martin because he has not followed instructions? Explain.
3. Is Martin liable to his employer for any of his actions? On what basis in law would he be liable?
4. Has Martin breached any law if he is planning to set up his business? Explain.

Answer 1

To establish whether Swimming Pool Co Pty Ltd can be held to be responsible for the acts done by Martin in the course of his employment, we need to look at the following legal points:

Let us initially understand that what is meant by vicarious liability. This means that for the actions of one person, another person may be held liable under the applicable law. As far as employment is concerned, an employer may be held liable for the acts done by his employee in certain circumstances even if the employer had no connection with the wrongful act done by the employee in the course of his employment. Also, in these circumstances, the plea that the employer had not given the permission for the commission of an act that ultimately resulted in damage does not work in these circumstances. The liability is by default put over the employer for the acts of his employee if it was done in the course of the employment.

In the case of Lloyd v Grace, Smith & Co. (Lloyd v. Grace, Smith & Co., [1912]), it was held that an employer remains liable for the acts of the acts of his employee if he acts dishonestly and fraudulently. The requirement under the law for making the employer responsible is that the act should have been committed in the course of the employment.

Now, the question that arises is what are the actions which classify within the definition of the course of employment. We shall take the case of New South Wales v Lepore (New South Wales v. Lepore, [2003]) in this matter. In this case, it was held by the Court that all the acts which an employee does during and within the working hours fall under this category. Also, if any act is done by the employee outside his working hours exceeding his course of employment, it shall not qualify to be a reason for making the employer vicariously liable (Bevan, 2007).

In the case of Sestili v Triton Underwriting Insurance Agency Pty Ltd (Sestili v Triton Underwriting Insurance Agency Pty Ltd, [2007]), the matter of dispute was that whether for the fraudulent acts of the employee, an employer can be held to be vicariously liable or not. The Court has propounded two aspects in this context. Firstly, the matter that a particular act of the employee was fraudulent does not give immunity to the employer from his vicarious liability. Secondly, even if the acts done by the employee are against the instructions given by the employer in the matter is not reason enough to absolve the employee from taking a vicarious liability.

Thus, we can say that the following points are necessary to determine the vicarious liability of the employer for the acts of his employee:

• Firstly, there is a veil of being under the course of employment;
• Secondly, the conduct of the employee whether right or wrong while remaining under the veil;
• Thirdly, the requirement that there was proper connection between the employee and the employer under the authority of which the act was done by the former.

If we apply the above stated principles of law in the given situation, we can say that the company is responsible for the acts of Martin. Martin was under the capacity of the manger of the sales division and he was bestowed with a variety of duties. Because of his conduct, there was fault in the construction of the swimming pools. Moreover, because he was the manager, he was supposed to take due care with the funds of the company and he has misappropriated them. Thus, it can be conclusively said that the company that is Swimming Pool Co Pty Ltd is responsible for the acts of Martin as this falls under the vicarious liability of the company.

Answer 2

To establish whether Swimming Pool Co Pty Ltd can claim that they are not responsible for the acts of Martin, we need to look at the following legal principles:

Generally, when vicarious liability is imposed on any employer, they try to take certain defenses to free themselves from the liability. These defenses are as follows:

• It may be claimed by the employer that the employee has exceeded his authority and acted out of the scope of his employment.
• It may also be claimed that the employee did not show any negligence in doing the act if any action for negligence is claimed.

In the case of R F Brown and Co Ltd v Harrison (R F Brown and Co Ltd v Harrison, [1927]), there was misappropriation of property done by the employee. The court held that the employee was responsible for making good the loss and also for providing indemnity. The reasoning behind the judgment was that the employee was acting under the course of his employment and the dishonest act was also done during his employment tenure (Fisher, Wiseman and Anderson, 2001).

If we apply the above mentioned legal points and the case laws in the present situation, we can say that the act of misappropriation of funds was committed by the employee while he was under the employment scheme. Hence, the act of Martin actually falls under the ambit of law and the fraud can be made accountable on him as well as the company.

Regarding the faulty construction of the swimming pool, we can say that neither can the company claim that there was no negligence on part of Martin nor can the company claim that Martin was not under the course of the employment while the contracts for the swimming pools were entered into.

Also the case of Sestili as discussed above, clearly indicates that the mere fact an employee had indulged in fraudulent act intentionally does not make him free from all encumbrances (Harris, 2009).

The defense that the employee was acting against the directions of the employer cannot be taken by Swimming Pool Pty Ltd on this matter as all qualified within the factual description and the law. Hence, it can be concluded that the Swimming Pool Co Pty Ltd cannot claim that Martin was not following the instructions and hence they were not to be held responsible.

Answer 3

The factual background indicates certain issues with Martin and his employer company. We can follow certain legal principle to in this regard.

The renowned principle is that for the loss of third party for the action of the employee, the company or the employer can be liable vicariously (Kobs, 1974). The right to recovery of the damage can be raise to the employer if the employee conducts any fraud or negligence. When the worker did the fraud or misappropriates the fund of the company that indicates that the employee violates the fiduciary duty (Wiffen, 1994). Fiduciary relationship actually deals with the matter of trust. When someone entrusted the other person to some extent in regarding work, it can be treated as fiduciary relationship. Any employee entrusted to transfer the money belongs to the employer and he misappropriates it. That situation will be considered as violation of fiduciary responsibilities.

Next issue can be dealt as the provision of negligence. The provision of negligence arises when a authorized person forgot to perform the duty or fails to take proper care regarding work. It is expected by every employer that the employee must act diligently (Charlesworth and Percy, 1983). Otherwise that will be treated as negligence.

After application of the law in the context of the given fact we can state that the employer company can apply for reimbursement. Martin was authorized to make pools. But the necessary diligence was not taken from his part. The company faces loss monetarily and as well as in regards to its reputation of the company. The manager Martin can be held liable for the under the Corporation act because he failed to perform his duty and misappropriate the fund of the company.

In conclusion it can be confirmed that Martin can be held liable for the act of breaching fiduciary duty. He need to reimburse all the profits which he collected by the misappropriation of funds.

Answer 4

The question was arises in this matter that whether Martin was guilty under any law or not. In this regard we need to consider certain fact and laws.

Common understanding indicates the fact that an employee cannot engage in competition with the employer. The restriction can be imposed till the tenure of employment of after that. The service contract itself sometime carries those kinds of clauses. It can consider being unlawful for the employee so setting up any competing business practices. GlaxoSmithKline Australia Pty. Ltd. v. Ritchie (GlaxoSmithKline Australia Pty. Ltd. v. Ritchie, [2008]) case is an important case in this context. The employee utilizes the secret information of the company and set up the identical business practice (Edlin, 2007). That will consider as unethical practice. The employer company deals with the poppy extracts. Mr. Richie, an employee of the company got all the information and misused them. The employer has the trust on his employee (Arnheim, 2004). But in this case the employee breaches that duty. But court provides the decision in favor of Richie and states that the action was not amounts to set up any identical comparative business.

The rule can be applied to the factual background to ascertain the liability of the employee. The clause of contract of employment contains the matter of restriction on the similar kind of business practices. Though mere setting up any business similar business is not amounts to violation. The decided case laws indicate that kind of facts. If , the employer face any financial or reputational loss that will amounts to the loss on the part of the business. The use of confidential data must be used to establish that business. Martin set up the business by his own diligence and skill. So, there is no ground to hold Martin liable for the act. If the company wants to prove the loss, they need to state the fact that Martin utilizes their trade secrets. The employer need to prove the martin violates the duty of trust and for that reason, company suffered loss to succeed in the case.

In conclusion it can be claimed that, Martin contravene the clause of contract. Though mere setting up any similar business is not amounts to violation of law. The swimming pool company needs to prove that Martine violates the fiduciary duty and utilize their trade secret to capture the business. Otherwise, mere setting up a identical company will not be a sufficient ground to make Marin liable.