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Important Fair Trading Act Precedents

Issued 19 January 2000/3

Important Fair Trading Act precedents: partners can be criminally liable for each other's actions; silence can mislead

Criminal convictions of Dianne Stephanie Burton and Brian Charles Carson as the partners who ran Folio Model and Talent Management have set important precedents for all partnerships—a partner can be criminally liable under the Fair Trading Act for the actions of other partners.

The Commerce Commission prosecuted Ms Burton and Mr Carson in the Auckland District Court for breaching the Fair Trading Act by making misleading claims about the cost of modelling training by not disclosing additional costs. Judge Cecilie Rushton today imposed fines and costs totalling $6,000. "The acts of one partner, provided they are performed in the ordinary course of the firm's business, are binding on co-partners and accordingly are their joint acts," Judge Cecilie Rushton states in her reserved decision.

Commission Chairman John Belgrave said that Judge Rushton’s decision means that partners must take personal responsibility for how their business is run.

“They cannot pick a scapegoat or hide behind the partnership and say ‘nothing to do with me’,” Mr Belgrave said. “Quite rightly, partnerships bring legitimate business benefits to the individual partners, they also bring responsibilities to ensure that their business complies with the law.”

Judge Rushton also reinforced other court decisions that silence—that is, not providing information—can be a representation and can be misleading.

She stated in her decision that silence is a representation when there is a duty to disclose information or where silence makes another representation untrue.

“I am satisfied that, given the circumstances of this case, Folio had a positive duty to disclose the full cost to these women of reaching the stage where they could obtain the work they were seeking. This they did not do,” Judge Rushton states.

Ms Burton interviewed women who responded to Folio’s advertisements for a modelling course. At the interviews Ms Burton outlined the course and said that Folio would take nine photos of each woman and select the best three out of each nine to go on a composite card. The composite cards would be shown to clients wanting models.

Ms Burton said that the course would cost $450. She did not disclose that there were additional costs of $210 for the nine photos and the composite card.

In summary, Judge Rushton found in this case that: when Ms Burton was acting in the ordinary course of Folio’s business, she had not disclosed additional costs Ms Burton’s silence was a misrepresentation and breached the Fair Trading Act, and the partnership was liable for that breach.

Ends

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