In a recent decision (Wilh. Wilhelmsen Investments Pty Ltd v SSS Holdings Pty Ltd [2019] NSWCA 32) the NSW Court of Appeal held that where an employee, on 14 separate occasions, fraudulently ordered a total of 197 phones for a total value of $189,103.00 the employer was liable.  The employer had to pay the supplier of the phones even though the employee did not in fact have authority to order the phones.  The employer was said to have clothed the employee with ostensible authority to place such orders on behalf of the employer.

 

 

What is ostensible authority?

Running a business is difficult and you can't be expected to make every decision yourself.  For instance, you probably have someone authorised to purchase your stationery for you.

You have given this person ostensible authority to spend money or enter into a contract where your business owes money to a third party.

Ostensible authority is apparent authority to do something on behalf of, or represent another person or entity.  When you give someone ostensible authority to do something on your behalf they can then (within certain bounds) do things as though they were you.

 

 

What should I do?

It would appear from the case note that the employer in this instance was not monitoring the invoices, and also was copied in on some of the fraudulent emails.

Running a business is a tricky thing.  You can't do everything yourself.  However if you outsource too many responsibilities then that could be a very costly mistake.

Your time costs money but your money costs money too.  Read your invoices.  Understand your expenses.  Look at those emails.  You can't read everything but actually in this case it would appear that even if the employer had read some things, or looked closely at his business's expenses, he would have saved himself a world of pain.

Make sure that you keep on top of who is ordering what or doing what on behalf of your business.  This is incredibly time consuming, but failing to do it can be costly.

 

 

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