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Directors’ And Employees’ Liability For Misleading And Deceptive Conduct

Directors and employees are potentially exposed to direct liability for misleading and deceptive conduct under both consumer protection and corporation legislation.

Cleary v Australian Co-operative Foods Ltd (Co-operative Foods), which was decided in 1999, is a prime example of where directors have been held personally liable for misleading and deceptive conduct.

In this case, the directors of Co-operative Foods distributed proposals from a competitor seeking to acquire control of the company and an accompanying letter suggesting that the board and management of Co-operative Foods disapproved of the proposal.

Proceedings were brought against the directors of Co-operative Foods alleging a breach of their fiduciary duties by misrepresenting certain aspects of the proposal.

It was held that the letter distributed by the company amounted to misleading and deceptive conduct by all the directors of Co-operative Foods as it did not accurately depict the proposal from the competitor.

Moreover, in the judgment of Houghton v Arms, which was decided on 13 December 2006, it was declared that employees, as well as directors, may also be held personally liable for misleading and deceptive conduct for conduct in the course of their employment.

In this case, the court held that employees could be held personally liable for misleading and deceptive conduct performed on behalf of their employer.

Directors and employees may therefore be directly liable where they engage in misleading conduct during the course of their employment.

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