News & Events

• 

  Uber Eats humble pie as restaurants are delivered from unfair contract terms

  Restaurants under immense pressure due to COVID-19 impacts received slight reprieve with Uber Eats being forced to remove unfair contract terms.

  Uber Eats can no longer have their cake and eat it too. The ACCC has forced the multinational company to remove “unfair contract terms” from their contracts with small restauranteurs.  It is no wonder that Uber’s contracts left a sour taste in the restauranteurs’ mouths when it included the following clauses:

  1. Restaurateurs party to the contract had to agree that Uber did not provide any delivery or logistics services. This lemon of a clause presents a pickle for contracting parties, not only does it present a legal fiction, but it is at odds with Uber’s website which is emblazoned with the words “we deliver”.
  2. The contract stated that the drivers were “agents” of the restaurant despite their workflow and pay being controlled by Uber, not the restaurant.
  3. In the event that the food became substandard, for instance if hot food became cold, Uber could demand that the restauranteur cover the customer refund.
  4. Uber Eats could unilaterally vary the contract at any time.

  Here the proof was in the pudding, as the ACCC considered that these terms were manifestly unfair and placed a disproportionate amount of risk on local restaurants.

  But what does it take for a term to be unfair?

  Section 23 of the Australian Consumer Law (“ACL”) prohibits unfair contract terms. For a contract term to be unfair it must:

  • Cause significant imbalance in the parties’ rights and obligations;
  • Not be reasonably necessary to protect the legitimate interests of the party advantaged by the term; and
  • Cause detriment to a small business (a business with 20 employees or less) if it were applied or relied upon.

  Uber’s terms outlined above from 1 – 4 contain all ingredients of unfair contract terms. For instance, consider terms two and three; here Uber essentially placed all risk associated with the standard of delivery on the restaurant. Despite the fact that these businesses have no control over delivery time, payment of delivery drivers or their workload. This is a classic example of how a ‘take it or leave it’ contract has caused a significant imbalance in the relationship between Uber and the restaurant. Uber would bear little to no risk under the contract, and restauranteurs would be liable under the agreement for issues of service outside of their control.

  Further, in instances where Uber has contracted with restaurants who employ less than 20 employees, if Uber choses to rely upon terms three and four, this could place small operators at considerable disadvantage. For example, some small restaurants reported that if Uber demanded that the restaurant refund a disgruntled customer, the restaurant had essentially provided their product for free to Uber.

  What are the consequences for an unfair contract term?

  In short, none. Including unfair contract terms in an agreement does not attract any penalty under law. Indeed, s 23 of the ACL merely enables the ACCC to challenge the offending term in court and have it declared “void”. In a nutshell, this means that the ACCC cannot obtain civil pecuniary penalties when a term of a contract is found to be unfair.

  The lack of penalties in this area of law means that small businesses are at a great disadvantage when it comes to negotiating standard form contracts, as there is very little incentive for large corporations to comply with s 23. This was certainly the case here, as Uber Eats only agreed to change the terms of the contract so that restaurants would only be responsible for matters “within their control” after the ACCC intervened.

  Even though restaurants have received a momentary reprieve from Uber’s unfair contract terms, any losses that they have incurred as a result of the unfair terms will not be reimbursed. Although the Silicon Valley giant can no longer contractually grind small restaurants to make their bread, the lack of penalties for unfair contract terms puts smaller businesses on the chopping block whilst big businesses board the gravy train free of risk and liability.

  Written by Riley Berry with the assistance of Claudia Weatherall.

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• 

  How to protect your intellectual property in unprecedented times

  COVID-19 has propelled businesses into unprecedented times.  Many businesses will be able to adapt to new lockdown measures by moving to partially or fully operate online. Businesses moving online must understand and act fast to protect intellectual property.  In the case of Hardingham v RP Data Pty Limited,[1] a photographer assumed an “implied licence”, mistakenly relying on the assumption that an implied licence restricted the use of his intellectual property.

  Two missing intellectual property ingredients

  James Hardingham, a professional photographer, who was the sole director and shareholder of Real Estate Marketing Australia Pty Ltd (‘REMA’), took photos and made floor plans for a number of real estate agencies. Those agencies then uploaded the content to realestate.com.au (‘REA’) who then shared it with corelogic.com.au (‘RP data’) (‘the websites’). The legal battle that ensued comprised of two parts:

  1. no formal ownership agreement existed between the real estate agencies, the websites and REMA in relation to the copyright of the photos and floor plans provided by Mr Hardingham; and
  2. no clear understanding that when agencies uploaded the photos and floor plans to online property listing platforms on the websites, the photos would still be used by REA and RP data even after the sale or lease of a property had been completed. [2]

  Whilst Mr Hardingham recognised that there was an implied licence for the agencies to use his photographs and floor plans for the marketing of sale and lease of the properties on REA, he argued that the implied licence did not extend to RP data nor that any such implied licence would allow his intellectual property to be used long after the sale or lease (for which the images were originally made) had been completed.[3]

  Court finds implied licence exists

  The Court found that Mr Hardingham had known that real estate agencies had been uploading his intellectual property to REA since 2014. He should have known that the REA privacy policy was freely available to him. Since 2014, Mr Hardingham had set the fees of his services with the knowledge that the images would almost certainly be uploaded to both websites.[4] These factors pointed to the existence of an implied licence for the websites to not only use the images for the purpose of the sale or lease, but that the websites could retain the photos and floor plans uploaded by real estate agents. Furthermore, the Court found that as such listing platforms were used by the overwhelming majority of Australian real estate agencies, and so Mr Hardingham would have known that agencies were going to upload his content to these platforms.[5] The Court concluded that the agencies who had commissioned REMA’s work did not “own” the copyright over the uploaded images. Rather, proving such “ownership” was unnecessary for reason that an implied licence allowed the website owners the right to retain and use those images.[6]

  Lessons

  There are two main lessons that can be drawn from the case of Hardingham:

  1. clear and written Intellectual Property Licence Terms are always preferable over assuming that another party will use or not use your intellectual property in a certain way; and
  2. knowingly “acquiescing” to use of your intellectual property can demonstrate an implied licence for third parties to take and use your intellectual property. Conversely, if a copyright owner had no actual or constructive knowledge of its intended use by third parties, they may be able to demonstrate that the initial permission to use the images was more limited.

  Put another way, if you don’t take reasonable steps to control your copyright, allowing it to be taken and used in a system with established rules of use, then you might lose your right to that control, at least within that system.

  Contact BAL Lawyers dedicated team of Business Lawyers for advice on protecting your Intellectual Property rights online.  Our lawyers will work with you to establish clear guidelines and expectations around the use of your IP, or possible infringements, in the context of Australian Copyright Law.

  Written by Riley Berry with the assistance of Claudia Weatherall.

  [1]  [2019] FCA 2075.

  [2]  Ibid 24.

  [3]  Ibid.

  [4]  Ibid 60 – 64.

  [5]  Ibid 60.

  [6]  Ibid 85.

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• Message regarding COVID-19

  The following is a message from our Managing Legal Director, John Wilson:

  

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• 

  FREE WEBINAR

  CORONAVIRUS:
  EMPLOYMENT LAW ANSWERS FOR HR MANAGERS
  

  WATCH

  

  As confirmed Coronavirus cases increase worldwide and in Australia, HR managers must consider strategies to adapt to, and deal with, the situation.  Gabrielle Sullivan, Director of BAL Lawyers Employment Law and Investigations Group and NSW accredited specialist in Employment and Industrial Relations Law, presents a free online webinar for HR Managers.

  This Webinar is provided under the banner of HR Breakfast Club.  HR Breakfast Club connects like-minded professionals in Canberra to share updates and insights on how to make businesses better places to work.  The format normally consists of a monthly live forum, bringing together HR people to benefit from the experience of their peers, our lawyers, and guest presenters, in a relaxed and open setting.

  For future clubs, participants can join our webinar using a unique link sent to them post-registration. Questions can be submitted during the session using an online messaging facility. If you wish to provide questions for  consideration in advance, please do so via your registration or by emailing events@ballawyers.com.au.

  Please keep in touch with your needs and the kinds of topics and information needed during these unprecedented times.

  WATCH
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• 

  Hey Google - I give a damn 'bout my online review

  Anyone can post a negative online review and in the blink of an eye, bring down a business’ reputation.

  Negative online reviews have the power to permanently ruin the online presence of businesses on popular platforms such as Google. In this digital age, it is a situation not unfamiliar to business owners around the globe.

  But how can companies defend their reputation from defamatory and damaging reviews when Google requires no verification from its users? Australian business owners have struggled for years to convince Google to take down negative and allegedly false reviews when unable to identify and contact anonymous authors. The recent decision of Australian Federal Court Judge, Murphy J, has tipped the scales back in favour of independent business owners.

  Following the Federal Court’s decision on 12 February 2020, Google will be compelled to provide information to Melbourne dentist, Dr Matthew Kabbabe, to help him track down anonymous author “CBsm 23” who posted an allegedly defamatory review in relation to Kabbabe’s dental practice.

  According to Murphy J, the review stated that Dr Kabbabe was “extremely awkward and uncomfortable”, that the procedure was not “done properly” and it seemed that the he “had never done the this before”, such that other patients should be warned and “STAY AWAY”.[1] In November 2019, Dr Kabbabe had asked Google to remove the review and in February 2020 asked Google to identify CBsm 23. Google refused both requests, stating that “we do not have any means to investigate where and when the ID was created.”[2]

  Despite this, Murphy J has considered that Google is likely to have or have had control of the documents or data to help Dr Kabbabe identify CBsm 23 and will be ordered to provide information including IP addresses, subscriber information, and any phone numbers associated with that account. [3]

  With anonymity as a shield against any repercussions, it is a very real possibility that online reviews provide false and misleading information about companies. As identified by Dr Kabbabe’s lawyer, the CBsm 23’s review was “malicious” and there exists a possibility that it came from a competitor or disgruntled former employee.

  The Federal Court’s decision comes after the Supreme Court of South Australia’s ruling in Cheng v Lok [2020] SASC 14 where a Barrister, Gordon Cheng, was awarded $750,000 in damages over an online review containing false information from a woman who never hired him.

  This case stands as the latest of many defamation claims raised against large digital platforms, including Google and Facebook, who refuse to take down anonymous and allegedly false reviews about businesses.

  It seems the tables are turning, and Google has some answering to do.

  Written  by Laura Scotton with the assistance of Felicity Thurgate.

  [1] Kabbabe v Google LLC [2020] FCA 126, at [15].

  [2] Kabbabe v Google LLC [2020] FCA 126, at [17].

  [3] Kabbabe v Google LLC [2020] FCA 126, at [18].

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• 

  What the ACCC’s Digital Platforms Inquiry Means for Your Business

  It is no secret that in today’s society there are a few companies that reign supreme when it comes to how we view digital content. Regulatorily speaking – erhem – keeping up with the evolution of technology is a never-ending game of fat cat and mouse. Australian Competition and Consumer Commission’s (“the ACCC”) recent inquiry into Digital Platforms (“the Inquiry”) has given us insight into how these large corporations collect, use and share our data – often without us even realising that it is happening. But the impact of the Inquiry is not limited to just those few large foreign companies, such as Facebook and Google, the findings and the resulting policy and law-making changes will no doubt have far reaching consequences that will affect small and large business alike.[1]

  Generally, the outcome of the Inquiry is that, in the field of “data collection,” there needs to be in place measures that will better protect smaller players in the market, namely by:

  • improving transparency of how data is collected, used and shared;
  • addressing the power imbalances – whether between consumer and company, or between different companies; and
  • finding ways to ensure that where large corporations do have substantial market power it is not used to lessen competition in the media and advertising services markets. [2]

  The Government Response to the Inquiry

  On 12 December 2019 the Government released ‘Regulating in the Digital Age’ – their response to how they plan to tackle issues unearthed by the Inquiry. The Government’s immediate response to the report includes investing $26.9 million in a new branch of the ACCC to monitor and report on competition and consumer protection in digital platform; its first order of business: to investigate the supply chain of online advertising and ad technology. [3]

  The opaque nature of the ad-tech supply chain means that businesses who use these services are never sure if they are getting bang for their buck, as the sum of prices charged by ad tech suppliers and the share of advertising expenditure they retain are unknown to consumers.[4] This lack of clarity is exacerbated by Google and Facebook obscuring how they rank and display their advertising. The Government’s decision to immediately allocate funds and investigate the online advertisement supply chain bodes well for smaller Australian businesses who rely on online advertisements, as they may be better placed to make more informed decisions on how to strategically enhance their online marketing strategy.

  Notably, the Government’s response to the Inquiry has remained silent on its first recommendation regarding mergers and acquisitions of digital platforms.[5] Despite the Government’s silence, the ACCC will take a tougher stance on any merger in the digital platform space that threatens potential competition.[6] This may place a spanner in the works for both tech behemoths and small digital start-ups whose aim is to be bought out by big tech companies. This could have adverse effects on small scale digital innovation, as it may make it harder to appeal to potential investors. Ultimately, this heightened regulatory scrutiny may benefit consumers through enhancing competition, as big companies may be prevented from gaining an even larger market share.

  What this Means for Your Business

  Although it is premature at this stage to gauge the full impact of the Inquiry on Australian business, it marks the dawning of a new era of regulation in the Wild West of digital platforms. Digital monoliths may face closer scrutiny when buying out their rivals and when developing their advertising services, while smaller businesses and advertisers who use these platforms stand to benefit from greater transparency around the digital advertisement supply chain. However, all digital platforms, regardless of size, will have increased obligations to protect consumers’ privacy and data if the recommendations of the Inquiry are implemented.

  Written by Anna Phillips with the assistance of Claudia Weatherall.

  [1] Australian Competition & Consumer Commission, Digital Platforms Inquiry (Final Report, June 2019) 1 – 3.

  [2] Australian Competition & Consumer Commission, Digital Platforms Inquiry (Final Report, June 2019) 3.

  [3] Department of Prime Minister and Cabinet, ‘Response to Digital Platforms Inquiry,’ (Media Release, 12 December 2019) < https://www.pm.gov.au/media/response-digital-platforms-inquiry>.

  [4] Australian Competition & Consumer Commission, Digital Platforms Inquiry (Final Report, June 2019) 12.

  [5] Department of Prime Minister and Cabinet, ‘Response to Digital Platforms Inquiry,’ (Media Release, 12 December 2019) < https://www.pm.gov.au/media/response-digital-platforms-inquiry>.

  [6] Australian Competition & Consumer Commission, Digital Platforms Inquiry (Final Report, June 2019) 10.

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• 

  How to prevent a rogue company agent – Australian Agency Law

  When you think of the word ‘agent,’ a 007 Bond type character may spring to mind. However, in the far more textured but mundane corporate world when a company agent goes rogue, the company (‘the principal’) might find themselves liable under contracts they never intended to be party to.

  What is a Company Agent?

  An “agent” for a company is someone, usually an employee, who has the authority to create legal relationships on behalf of the company with third parties.[1]  This is not to say that an agent has unlimited power to bind the company; the critical issue is “where does that limit lie?”. An agent can only bind the company when the agreement in question falls within their ambit of their ostensible authority or their actual authority.[2] An employee is not an “agent of a company” merely because they are an employee, as their “authority” flows from the role the employee is required to perform. There are several ways that an agency relationship can develop, and this includes:

  • Express agreements between the company and the employee, conferring actual authority;
  • Ratification – When the company sanctions the agent’s actions after the fact, regardless of whether the agent had authority or exceeded their actual authority;[3]
  • Estoppel – Is a common law mechanism that prevents companies from avoiding liability for legal obligations simply through denying that the ‘agent’ had the authority. In these scenarios, the company, at the time of the agreement, will have led the other contracting party to believe that the employee had the authority to bind the company in a legal agreement;[4] and
  • Necessity[5] – An agency relationship will be created when it is necessary in cases of emergency.

  Expressly stating that a person is an agent of a company does not indicate they are in fact an agent (though it does tend to imply that some authority is held), rather, the actual nature of the relationship between the alleged agent and the company will determine whether the person is truly the company’s agent. [6]

  The Nature and Scope of an Agent’s Authority
  

  A company will not usually be bound by their agent if the agent enters into an agreement on behalf of the company that is outside their authority.[7] If an agent acts outside of their authority, they may be liable to both the company for a breach of contract and, also, to the third parties of the agreement. An agent can have:

  1. Actual Authority – This is where the principal has explicitly given their written or verbal instructions to the agent. This type of authority is limited to the terms of the principal.[8]
  2. Actual Implied Authority – This is where the agent has authority to enter into agreements that are incidental to the principal’s express instruction or from the normal function of the agent’s role. For instance, where an agent has been instructed to purchase shares on behalf of the company, the agent will also be expected to hold authority to do everything in the usual course of business to carry out that transaction.[9]
  3. Apparent Authority – This is where the company either holds their agent out as having a certain amount of authority or acquiesces when an agent proports to have authority to perform certain actions. Consider the case of Panorama Developments Ltd v Fidelis Furnishing Fabrics Ltd,[10] where a company secretary hired luxury cars for his own personal use. Despite that the principal company had no knowledge of the hire agreement until they were invoiced, the company was liable for the secretary’s expenses, as it was held that a secretary would usually have the authority to hire cars in the course of ordinary business.[11]

  In conclusion, it always pays to give good instructions and to clearly set out the boundaries of your employees’ authority to minimize the risk of ‘rogue agents’.  Better still if an agent has limited authority, communicating the limitation (i.e. subject to approval by management) to the “other side” provides the best defence.

  Written by Riley Berry with assistance from Claudia Weatherall.

  [1] Clive Turner and John Trone, ‘Australian Commercial Law 31^st Edition’, (Thomson Reuters, 2016) 222.

  [2] Collins v Blantern (1767) 2 Wils 341; [1558-1774] All ER Rep 33; (1767) 95 ER 847.

  [3] Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 82.

  [4] Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd  [1964] 2 QB 480 at 498.

  [5] Sachs v Miklos [1948] 2 KB 223 at 35.

  [6] International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 at 652.

  [7] Clive Turner and John Trone, ‘Australian Commercial Law 31^st Edition’, (Thomson Reuters, 2016) 226.

  [8] Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd  [1964] 2 QB 480 at 502 – 503.

  [9] Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583.

  [10] Panorama Developments Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711 at 717 – 718.

  [11] Panorama Developments Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711 at 717 – 718.

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  Jill McSpedden and Christine Harvey join BAL Lawyers Estates and Estate Planning Team

  In January 2020, Jill McSpedden and Christine Harvey moved to BAL Lawyers in Canberra City.  They join Keith Bradley AM and Ellen Bradley in BAL Lawyers Estates and Estate Planning Team, which boasts a wealth of experience and strives to deliver an exceptional quality of service to its clients.

  Two unique careers

  Jill McSpedden ran a private legal practice in Canberra for more than 30 years, which was known as Jill McSpedden and Associates.  Prior to starting her own practice, Jill worked in various contexts including at the Insurance Commission and the Trade Practices Commission, now known as the ACCC.  Jill McSpedden and Associates was established in 1983, first operating out of Jill’s home in Canberra’s inner south.  Jill built the practice from the ground up into a flourishing business with loyal clientele in its core areas of estates, estate planning, conveyancing and business law.  As the practice grew, Jill settled in commercial premises in Yarralumla.

  Christine Harvey has had a diverse career in both private and government practice and as a special magistrate of the ACT Magistrates Court.  She has held a wide range of executive and director level positions for peak industry bodies, professional associations and has been a director on boards of several companies in the not-for-profit sector.  Christine has held positions as Director of Professional Standards of the Law Society of the ACT, Executive Director of the Law Society of the ACT, Deputy Secretary-General of the Law Council of Australia, Chief Executive Officer of the Royal Australian Institute of Architects, Junior Vice President of Professions Australia and Chief Executive Officer of The Victorian Bar.

  Joining forces as McSpeddenHarvey Lawyers in Canberra’s Yarralumla

  McSpeddenHarvey was formed in 2008 when Christine Harvey and Jill McSpedden joined forces.  Over the following decade the firm continued to prosper as a well-established boutique legal services practice, recognised for its focus on estates and estate planning.

  Jill and Christine joined BAL Lawyers in January 2020.  At BAL Lawyers, Jill, Christine and the team will work with you to put in place forward-thinking and flexible estate planning, tailored for families’ individual needs and circumstances.  BAL Lawyers has six legal teams with experience and expertise in estates and estate planning, commercial and business law including co-operatives and mutuals, real estate law, local government, planning and environment law, employment law, litigation and business succession.

  How to contact Jill McSpedden or Christine Harvey at BAL Lawyers

  Jill can be contacted on (02) 6274 0906 or by email at jill.mcspedden@ballawyers.com.au.  Christine can be contacted by phone on (02) 6274 0982 or email at christine.harvey@ballawyers.com.au.

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  The cost of doing business: A directors’ personal guarantee

  If you are a director of a small company, it is likely that you have signed a personal guarantee, perhaps several. Whether or not directors’ personal guarantees are an inevitable cost of doing business for small companies with limited assets, the effects can be serious and are often misunderstood. So how much have you put on the line for your business, and what can you do to minimise your exposure?

  What is a personal guarantee?

  The most important feature of modern companies is the idea of limited liability. By establishing a legal entity that stands between you and your business activities, the buck stops with the company, preventing shareholders and directors from personally bearing the burden of any liabilities incurred by the business (subject to a number of statutory exceptions).

  However, banks, landlords, financiers and other key business partners almost uniformly ask small companies with limited assets to ‘lift the corporate veil’ and have directors (and occasionally shareholders) promise to be personally liable if the company fails to pay its debts or perform its obligations. By signing a personal guarantee, you are therefore contractually putting your own assets on the line, including your personal finances, your material assets and even your family home.

  What are some of the risks?

  Personal guarantees can take a variety of forms, but are often more extensive than many directors may realise. In addition to the principal liability incurred by your company, the guarantee may also cover extra costs, such as interest rates, debt recovery fees and even creditors’ legal costs. Directors are often required to sign an ‘all moneys’ guarantee, rendering them personally liable for the entirety of the company’s debts and liabilities regardless of their origin and when they arise.

  One of the most onerous features of personal guarantees—and one that can lead to nasty surprises for former company directors—is that they often (and typically will) extend beyond the life of your directorship. The guarantee is a contract signed in your own name, so there is nothing that inherently makes the liability under it dependent on your position within the company. Unless the terms of the guarantee itself specify otherwise, this means that your liability will extend beyond your resignation, and potentially even after the company stops trading or winds up.

  Finally, many guarantees are given ‘jointly and severally’ by directors. This may not mean much to you, but these words can have serious implications. It means that a creditor may call on all directors to pay a company debt, but they could equally pursue any one director for the entirety of the debt.

  What can you do?

  While a personal guarantee can be often unavoidable for smaller businesses, it is not necessarily inevitable in all cases. Where your business is important to a particular creditor and you have enough negotiating power, you may be able to assure them with an alternative, such as a bank guarantee. In any case, you should always attempt to limit your liability as far as possible, including by limiting the term of the guarantee to the period of your directorship or to a particular amount.

  If the other party still refuses to extend credit without a full and largely unlimited personal guarantee, then you must ensure that you keep on top of your obligations. Maintain a comprehensive register of any personal guarantees you have given so you don’t lose track. Once your time as director is up, then you need to take active steps to withdraw your guarantee or replace it with one form a new director. This can be complex and often requires approval or confirmation by the creditor, so it is important to get independent legal advice. Sometimes it may require ending an account and opening a new account.

  If you’ve been asked to sign a personal guarantee—or don’t know how to get out of one—get in touch with our Business team.

   

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  New gift card laws

  Changes to gift card laws came into effect late in 2019 that impacted the issue and use of gift cards.  Just in time for Christmas shopping, the changes mean fewer wasted gift cards expiring before customers have a chance to use them.

  From 1 November 2019, gift card laws meant that all gift cards must comply with the following rules:

  1. gift cards must be redeemable for at least 3 years;
  2. the date of expiry must be prominently displayed on the gift card (or, if applicable, words to the effect of “no expiry date” must be included);
  3. most post-purchase fees or charges cannot be required in respect of a gift card; and
  4. a term or condition of a gift card will be void if it:
     1. allows or requires a non-authorised post-purchase fee or charge; or
     2. reduces the period for which a gift card is redeemable to earlier than 3 years from the date of issue.

  Restrictions on post-purchase fees includes a restriction on charges such as activation fees, account keeping fees and balance enquiry fees. Standard business fees, such as those charged in respect of payment processing costs and not solely in relation to gift cards, are not restricted.

  There are certain exclusions in terms of the types of gift cards that must comply with the new laws. For example, the three-year expiry period does not apply to gift cards that can be reloaded, that are issued for temporary marketing purposes or issued as a bonus under customer loyalty programs. However, all standard gift cards and vouchers will otherwise be required to comply, with strict penalties applicable for both companies and individuals in the event of non-compliance.

  Consumers will now be able to enjoy more certainty when purchasing and using gift cards, as these new requirements are applicable to all gift cards and vouchers supplied from 1 November 2019 onwards, regardless of whether or not the gift card appears to comply. Older gift cards will have the same expiry date and post-purchase fees applicable at the time of purchase.

  Businesses offering gift cards should take note to update their systems and terms and conditions so as to be compliant with the new laws.

  These amendments were made to the Competition and Consumer Act 2010, which provides various protections for Australian consumers for the purpose of promoting fair trading and competition.

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  Bushfire Underinsurance: Get it right before it's too late

  Amidst ongoing catastrophic bushfires, those who have lost their home may find themselves unable to build due to underinsurance.   Adding to the grief are forecasts of higher-than-average temperatures and predicted longer bush fire seasons. Such extreme weather conditions will have consequences over time, with more people losing their homes to a catastrophic fire event.

  The Insurance Council of Australia has warned that most households are underinsured; perhaps as high as 80% of all insured homeowners.

  Underinsurance occurs when the amount a homeowner insures their property for does not cover the actual rebuilding cost, leaving the homeowner out of pocket for the extra costs of a rebuild to new building standards.

  A new rating standard – known as the Bushfire Attack Level (BAL) – was developed after the 2003 Canberra bushfires and introduced in the wake of the 2009 ‘Black Saturday’ bushfire in Victoria.  The BAL aims to reduce the risks of a home igniting in a fire risk zone.

  Only if your home is in an area prone to bushfires do you need to consider getting a BAL assessment.

  The bushfire zoning of your property, proximity of the home to bushland, and the slope of the land are some of the factors that will determine the construction requirement for homes approved and built (or rebuilt) after 10 September 2009.  The higher a building site’s BAL, the more stringent the construction requirements which cover floors, external walls, doors and windows, roofs, verandas and attached carports.

  If your home was built before 2009 and it burns down, it may – depending on its BAL – have to be rebuilt to a higher building standard than it was originally constructed.  These higher construction standards can significantly increase the cost of rebuilding your home in a bushfire prone area.  If you do not take account of the increase in rebuild costs – which can include the extra demand for builders and building materials after a bushfire disaster in calculating the replacement cost – you risk being underinsured.

  Ensure bushfire underinsurance does not occur

  In estimating your building costs, there are a range of free-independent insurance calculators that can be used to estimate the cost of rebuilding your home in accordance with national building construction standards.  For a more accurate estimate, a builder, architect or quantity surveyor could be engaged for this task.

  Another reason for reviewing your insurance policy and checking whether you are underinsured is that a home lender, probably a bank, will want any existing mortgage to be paid out before a rebuild with the likelihood of a fresh mortgage needed for any rebuild.

  You can upgrade your insurance cover by updating the sum insured of home and contents to reflect the likely replacement cost of rebuilding to current bushfire standards.  This option – often referred to as a sum insured safeguard – can increase the nominated sum insured by up to 25%.  Insurers are only obliged to cover you up to the amount you are insured for.  Payment of an additional premium for this safeguard will provide a buffer to ensure that you are fully covered.  Note that you may not be entitled to an automatic payment of this higher sum as the insurer is only required to pay the amount of your actual loss.

  Commonly, an insurance policy for home and contents will instantly cover bushfires as an insured event:

  • immediately after another policy covering the same risk with the same level of cover ended, without any break in the period of cover; or
  • the same day you bought your home or moved to a new address.

  Otherwise, your cover for loss or damage due to bushfires will start within the first 48 or 72 hours after you buy the property depending on the wording of your particular policy.  Any delay in the operation of a policy is designed to stop people taking out cover immediately before or during a bushfire emergency and then claiming for loss of damage due to a bushfire.

  Sometimes insurers impose a “postcode embargo” on new policies for areas currently affected by bushfires.  The embargo can apply for several days and then be lifted which should permit a homeowner to obtain appropriate insurance cover.   A new policy issued during a period of high bushfire risk may include a no-claim period.  This would prevent a claim for the specific risk until the no-claim period has expired.

  Bear in mind that we are seeing bushfires in more areas and bushfire warning levels being more frequently communicated, it is important that you make your own enquiries or talk to an insurance professional to ensure you understand exactly what your insurance covers.

  When you first take out a policy and at every renewal, it is your obligation to review the amount of cover that the insurer is offering to ensure that it meets your needs and expectations.  If you are not satisfied with the amount of cover you are offered, this should be discussed with your insurer.  The aftermath of a catastrophic fire event should not be compounded by the trauma of underinsurance.  Local communities impacted by the onslaught of a bushfire are often so disrupted that families are forced to move elsewhere as the rebuild costs bear no resemblance to the sum insured on their homes.

  Written by Bill McCarthy.

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• 

  Essential Guide to Local Government Law: Rebuilding after the bushfires

  Rebuilding after the Bushfires – what approvals are required?

  Many of our Council clients will soon be faced with inquiries from people who wish to rebuild following the NSW bushfires.  This simple guide is intended to assist Councils in dealing with inquiries about the approvals needed to rebuild.

  Demolition of existing buildings

  In most cases, the demolition of a house that has been damaged or destroyed by bushfire will be complying development that can be carried out by obtaining a complying development certificate[1].

  If, however, the house is situated on land on which complying development may not be carried out[2], such as land within an environmentally sensitive area or that is listed on the State Heritage Register, the demolition of the house will require development consent[3].

  Some other buildings, such as farm buildings[4], may be exempt development. If so, the demolition of the building is also exempt development[5] if it is carried out in accordance with AS 2601—2001, The Demolition of Structures.

  Vegetation clearing

  The protections given to native vegetation in rural areas by the Local Land Services Act 2013 continue to apply even if the vegetation has been damaged or destroyed; however, there are certain types of clearing which are authorised without approval.[6] For example, the clearing of native vegetation is an “allowable activity clearing” under that Act where it is reasonably necessary to remove or reduce an imminent risk of serious personal injury or damage to property. However, the removal of fire damaged native vegetation after the fires may not fall within that exception.

  There is a specific “rural fires” exception in s.60O of the Local Land Services Act and this allows clearing which is:

  • an emergency fire fighting act or emergency bush fire hazard work within the meaning of the Rural Fires Act 1997;
  • bush fire hazard reduction work to which s.100C(4) of the Rural Fires Act applies or vegetation clearing work under s.100R of that Act.

  The vegetation clearing work authorised by s.100R of the Rural Fires Act permits limited clearing of trees and vegetation around residential accommodation on land within a ‘10/50 vegetation clearing entitlement area’ in the circumstances set out in that section.

  For land in non-rural areas, the requirement to obtain a permit to clear vegetation to which Part 3 of State Environmental Planning Policy (Vegetation in Non-Rural Areas) 2017 applies does not apply to the removal of vegetation that the Council or the Native Vegetation Panel is satisfied is dying or dead and is not required as the habitat of native animals[7].

  Unless a specific exemption applies, it will therefore generally be necessary to obtain approval prior to the removal of fire damaged vegetation.

  Rebuilding after the bushfires

  The approval pathway for the rebuilding of a house that has been damaged or destroyed by bushfire will depend on a number of things.  These include whether the owner wishes to rebuild a house of the same design as the house it will replace and also whether the erection of a house is permissible on land within the zone in which the house is situated.

  If development consent was obtained to erect the house that has been damaged or destroyed, the erection of a replacement house of the same design will not require the grant of a further development consent. The original development consent can be relied on in these circumstances, even if there has been a change of zoning in the meantime[8].

  If an owner wishes to build a new house that is substantially the same as the one that has been destroyed, but with some changes, an application can be made to modify the development consent to reflect those changes[9].

  If the replacement house will be a new design, it will require development consent or, if the requirements of the Codes SEPP or applicable local environmental plan are satisfied, a complying development certificate. Some other buildings, such as farm buildings, will be exempt from the need to obtain development consent if certain development standards are met[10].  Fencing on land within most residential and rural zones is also exempt development, subject to complying with prescribed development standards[11].

  If the zoning has changed since the original house was built and the land is now within a zone in which the erection of a  house is prohibited, the circumstances in which the original house was erected will need to be examined to determine whether it is an existing use within the meaning of s.4.65 of the Environmental Planning and Assessment Act 1979. If it is, the house may be rebuilt with development consent in accordance with reg 44 of the Environmental Planning and Assessment Regulation 2000.

  If the original house was built at a time when development consent was not required, its use as a dwelling may have been protected as a lawful continuing use right^[12].  However, the erection of a new house to replace the original house is not so protected and will require development consent (or a CDC) in the usual way.

  If relevant bush fire protection measures have changed since the original house was erected, the new standards will apply when the house is rebuilt. Relevantly, if the land is “bush fire prone land”[13], development consent can only be granted if the consent authority is satisfied that the development conforms to the prescribed version of Planning for Bushfire Protection[14].  If the rebuilding is to occur on bushfire prone land by way of complying development, the new house must comply with Planning for Bushfire Protection as well as the other bushfire related standards in cl. 3.4(2) of the Codes SEPP.

  As at the date of this Essential Guide, the prescribed version of Planning for Bushfire Protection remains the version published in December 2006[15].  Current indications are that the new 2019 version will be prescribed as the new reference on 1 March 2020.

  Where the house is being built in accordance with a development consent, it will also be necessary to obtain a construction certificate before construction can commence[16]. A construction certificate is not required for the erection of a building in accordance with a CDC[17].

  A building certifier cannot issue a construction certificate for building work unless the proposed building will comply with the relevant requirements of the Building Code of Australia as in force at the time the application for the construction certificate was made[18].

  Part 2.7.5 of the BCA states that a house, or a shed, garage or deck associated with a house, that is constructed in a designated bushfire prone area must, to the degree necessary, be designed and constructed to reduce the risk of ignition from a bushfire, appropriate to the—

  (a) potential for ignition caused by burning embers, radiant heat or flame generated by a bushfire; and

  (b) intensity of the bushfire attack on the building.

  If it is proposed to rebuild a house as complying development under the Codes SEPP, the development must meet the relevant provisions of the BCA.[19]

  Requiring compliance with the BCA when issuing a complying development certificate or construction certificate ensures that buildings comply with the most up to date construction standards possible and, in particular, with current bush fire safety requirements.

  Conclusion

  Councils will no doubt wish to facilitate the rebuilding process for those affected by the bushfires as much as possible. We hope that this brief guide will assist Councils to do so.

  If you would like advice or assistance with specific issues arising out of this Essential Guide, please contact Alan Bradbury on (02) 62740940, Alice Menyhart on (02) 62740911 or Andrew Brickhill on (02) 62740979.

  [1] State Environmental Planning Policy (Exempt and Complying Development Codes) 2008, cl. 7.1

  [2] See Codes SEPP, cll. 1.17A, 1.18 and 1.19

  [3] Standard Instrument LEP, cl.2.7

  [4] See Codes SEPP, cll. 2.31 and 2.32

  [5] See Codes SEPP, cl. 2.25 and 2.26

  [6] Local Land Services Act, s.60B(3)

  [7] Cl. 8(2)

  [8] EP&A Act, s.4.70

  [9] EP&A Act, s.4.55

  [10] Codes SEPP, cll. 2.31 and 2.32

  [11] Codes SEPP, cll. 2.33, 2.34, 2.35 and 2.36

  [12] EP&A Act, s.4.68

  [13] “Bush fire prone land” is designated by the Rural Fire Service under s.10.3 of the EP&A Act and reg 273A of the EP&A Reg

  [14] EP&A Act, s. 4.14.

  [15] EP&A Reg, reg 272

  [16] EP&A Act, s.6.7(1)

  [17] EP&A Act, s.6.7(2)(a)

  [18] EP&A Reg, regs 98 and 145

  [19] Codes SEPP, cl.1.18(c)

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• 

  Health Data and it’s Collection, Use, Protection and Disclosure

  They say that ‘an apple a day keeps the doctor away’, but ‘when your apple does fail, a doctor will prevail’.  Okay, maybe people don’t say that last part, but it’s nonetheless true.  Generally, you might take a visit to the doctors for granted (unless you live in a country without universal healthcare), however as commercial lawyers we do sometimes wonder how well our health data and privacy is protected and what our rights are in the event that these are breached.

  For health service providers and practice managers, we recommend that you stay up to date with health data protection legislation and guidelines.  This is the case not only for doctors and private hospitals but also extends to pharmacists, dentists, gyms and childcare centres.

  Health Data Help

  The Office of the Australian Information Commissioners (‘OAIC’) released their Guide to Health Privacy (‘the Guide’) earlier this year.[1]  It sets out a handy explanation for health service providers, including doctors and other health professionals, as to what their obligations under the Privacy Act 1988 (‘the Privacy Act’) are as well as tips to ensure they are able to meet those obligations.  The Guide has been introduced in the wake of high number of both privacy complaints to the OAIC and notifiable data breaches suffered by health service providers.  Since mandatory reporting was introduced in February 2018, the health service provider sector has seen the highest cases of notifiable data breaches.  Often, information that health service providers hold about individuals and families are extremely sensitive and could be misused if it falls into the wrong hands.

  The OAIC Guide

  The type of information that the Guide covers includes information about an individual’s physical or mental health, notes on their symptoms, diagnosis and any treatments given, physical or biological samples and their results, prescriptions and other pharmaceutical purchases, and any other personal information that identifies the individual (e.g. name, address, date of birth, Medicare and private health provider numbers, gender, race, sexuality or religion) that is collected for the purpose of providing a health service.

  The Guide provides an ‘eight-step plan for better privacy practice’, which includes developing and implementing a privacy management plan and a method of accountability for privacy management, creating a privacy policy, implementing a regime of recording and protecting personal information and developing a data breach response plan.  The Guide also recommends holding training sessions for staff in relation to their privacy obligations.

  The Guide covers what the privacy obligations under the Privacy Act are in relation to:

  • Collection of an individual’s personal information;
  • Consent of the patient to how the health service provider will be handling their personal information;
  • Disclosure to another health provider or individual, including de-identification of the information;
  • Use and handling of the personal information, including accessing and reading a patient’s medical file, searching patient records, and passing information from part of the organisation to another; and
  • How health service providers can set up a privacy management framework[2] and prepare a data breach response plan.[3]

  OAIC Powers

  The OAIC has various powers to regulate health service providers and how they collect, store, use and disclose personal information.  The extent to which these powers work does depend on the breach, but includes the ability to:

  1. audit privacy practices of health service providers;
  2. award compensation to individuals who have had their privacy breached by poor privacy practices; and
  3. seek penalties through the Federal Court of up to $2.1 million per privacy breach.

  So, enjoy your apples and rest assured that your personal information will be in good hands if health service providers implement these guidelines.

  If you’re a health practitioner and need help with drafting or re-drafting your privacy policy or perhaps someone who is concerned about how your health data is being protected, contact our business team for more information about your rights and obligations under the Privacy Act.

  Written by Jecinta Neumann

  [1] https://www.oaic.gov.au/privacy/guidance-and-advice/guide-to-health-privacy/

  [2] https://oaic.gov.au/privacy/guidance-and-advice/privacy-management-framework-enabling-compliance-and-encouraging-good-practice/

  [3] https://www.oaic.gov.au/privacy/guidance-and-advice/data-breach-preparation-and-response/part-2-preparing-a-data-breach-response-plan/

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• 

  The Definition of Defamation

  Defamation is not just a matter for celebrities, it can significantly affect the ‘average’ person or small business.  As the old adage goes: ‘sticks and stones may break my bones, but words will permanently damage my career prospects and affect my wellbeing’.  Okay, admittedly, this is not the precise proverb; however, in a legal context, it is an apt amendment.

  At law, defamation is defined as a loss of reputation by information being published or distributed which is harmful to a person’s reputation in either a personal or professional capacity.

  Defamatory material can take a variety of forms, including written, visual and spoken materials, such as news articles, social media posts, radio programmes and public addresses. Whether questionable material rises to the level of being defamatory, perhaps unsurprisingly, is an issue parties offering have opposing views on.

  Has defamation occurred?

  For a claim for defamation to succeed in the ACT, you or your small business will need to show that:

  • You have been identified as the subject of the statement or defamatory material;
  • The material was published or verbally communicated;
  • The material is not substantiated by facts;
  • The material caused injury or loss to your reputation; and
  • The material is not covered by any of the defences available in the ACT.

  Are there defences to defamation?

  Yes.  Valid defences to what would otherwise be defamatory material may exist, if the following applies:

  1. If the statement is true or substantially true, then a defence is that the comments were justified;
  2. If the material contains statements some of which are true, and others that are untrue but the untruthful statements are not deemed to cause further reputational harm, then the defence of contextual truth may arise;
  3. If the statement is made in court proceedings or parliament, then the statement should be covered by absolute privilege.
  4. If the statement is published by the Court ,or parliament, and is relevant to an open and transparent political and legal system then the statement is considered a publication of public documents;
  5. If the statement was published in a report on public proceedings, and may reveal private information, the statement should be a fair report of proceedings of public concern;
  6. If the statement was published for a particular recipient who had an interest in the matter then an available defence is qualified privilege for provision of certain information;
  7. If the statement is an honest opinion of public interest, rather than a statement of fact, and was based on proper material, then the defence of honest opinion may arise;
  8. If the statement was made by an employee or agent who was not aware the information was untrue, and was not due to negligence, then the defence of innocent dissemination may arise;
  9. If the statement is such that it is unlikely to cause any harm, then the defence of triviality may arise.

  You think you have suffered defamation, what next?

  There is a strict requirement in the ACT to bring any action for defamation within one year.

  You also cannot repeatedly sue.  That is, you will only have ever a single cause of action for defamation against one person or entity. This means even if someone repeatedly publishes or communicates defamatory untruths about you, you can only sue once for the totality of this conduct rather than starting a new claim for each new breach of defamation laws.

  What’s in a word? Don’t be confused over terminology: slander and libel do not have distinct meanings for the purpose of defamation.

  There are different remedies available if you have a claim for defamation. If you have concerns about whether you have been defamed, or about your organisation’s compliance with publication content, please get in touch with our dispute resolution team.

   

  Written by Laura McGee.

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• 

  Trade Marks and Tridents: IP in Corporate Groups

  Trade marks are important tools used by businesses to distinguish the origin or provenance of their goods. Successfully registering a trade mark in the name of your business affords protection, which can be enforced against others. However, if you—the registered owner—do not use the trade mark and control the qualities of the goods and services to which it attaches, then you lose it.

  Recently, the Federal Court found that where a parent company uses a trade mark owned by a subsidiary, the use will be a sufficient ‘authorised use’ to defend an application for removal of a trade mark due to non-use. This raises interesting questions for use of trade marks in corporate groups.

  Lessons in trade marks use by parent companies

  In the case of Trident Seafoods v Trident Foods Pty Ltd, Trident Foods owned two trade marks for the word ‘TRIDENT’, the first registered in 1973 and the second in 1983, both for food products. Trident Foods more recently became a wholly owned subsidiary of Manassen Foods Australia Pty Ltd. In 2014, Trident Seafoods applied to have those trade marks removed from the Register on the grounds of non-use after their own application to trade mark the logo of ‘Trident Seafoods’ was blocked.

  Section 92(4)(b) of the Trade Marks Act (the Act) provides that an application may be made to remove a trade mark from the Register if the trade mark has remained registered for a continuous period of 3 years and at no time during that period was the trade mark used by the registered owner in Australia. Here, the delegate of the Registrar was not satisfied that Trident Foods had used the ‘TRIDENT’ trade marks during the relevant 3 year period. This was despite Trident Foods arguing that Manassen as the parent company had used the trade marks before, during and after the relevant period. Neither the delegate nor the primary judge in the first instance was satisfied by this because Manassen’s activities were not ‘under the control’ or ‘actual control’ of Trident Foods. Indeed, as a parent company the opposite was true.

  On appeal, Trident Foods contended that use of the marks by Manassen was authorised by Trident Foods via an unwritten licence and consequently that it had been subject to ongoing use under the control of Trident Foods. Section 8 of the Act provides that this question turns on the meaning of control. The relevant case here is Lodestar Anstalt v Campari America LLC which held that control over the use of a trade mark means ‘actual control in relation to the trade mark from time to time’ and that this was ‘a question of fact and degree’.[1] There could be an unwritten licence where the user’s obedience to the owner was ‘so instinctive and complete that instruction was not necessary’.[2]

  The unity of purpose trade mark test

  The Full Federal Court sided with Trident Foods because at all times the directors of both Manassen and Trident Foods were the same. It was thus inferred that ‘the two companies operated with a unity of purpose’. The idea that Trident Foods acquiesced to Manassen’s use of their trade marks was a fallacy because the directors of both entities being one and the same had an obligation to ‘ensure the maintenance of the value in the marks’.[3]

  This decision may make it easier for corporate groups to establish the existence of requisite control to maintain trade mark registration. As the Full Federal Court held, ‘it is commercially unrealistic…not to infer that the owner of the marks controlled the use of the marks because the common directors’ were required to ensure they retain value.[4]   

  It remains to be seen how this ‘unity of purpose’ test will be further developed and if/how it could apply to commercially at arm’s length operations.

  By Riley Berry

  [1] [97] and [98].

  [2] Ibid.

  [3] Para [45] of the judgment.

  [4] Ibid.

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• 

  Ashley & Martin Pinged for Hairy Contract Terms

  The Australian Competition and Consumer Commission (ACCC) has successfully brought proceedings against Ashley & Martin for including standard contract terms that were unfair pursuant to provisions under the Australian Consumer Law (ACL). The proceedings against the well-known provider of medical hair regrowth products reflect the ACCC’s ongoing attempts to enforce the unfair contract provisions of the ACL.

  Unfair Contract Terms void under the ACL

  The ACL provides that a term of a consumer contract or small business contract is void if (a) the term is unfair and (b) the contract is a standard form contract. A term is unfair if three conditions are met:

  1. Meeting the term would create a significant imbalance in the parties’ rights and obligations arising under the contract;
  2. The term is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and,
  3. The term would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

  Furthermore, as per the case of Ferme & Ors v Kimberley Discover Cruises Pty unfairness will be judged at the time the contract was formed. In determining unfairness the court will also have regard to the extent to which the term is transparent, whether it was expressed in plain language, was legible, presented clearly and readily available to a party affected by the term.

  Forced growth

  From 2014 to 2017, Ashley & Martin signed up over 25,000 customers to its ‘Personal RealGROWTH Program’ using three different standard form contracts, a take-it-or-leave-it style contract where the terms are set by one of the parties with little to no room for negotiation. Customers typically signed up to a 12-month program, which involved administering a variety of shampoos, conditions, supplements and prescription only medication. Of the unfair contract terms, these included requiring customers to pay for all medical treatment before receiving medical advice and making customers incur a cost if they sought to withdraw from the program after receiving adverse medical advice. Absent receipt of medical advice, the ACCC argued that the terms of Ashley & Martin’s contracts denied customers the ability to give informed consent and were thus unfair.

  In the case of ACCC v Ashley & Martin the Federal Court found that the relevant provisions across the three different standard form contracts were unfair and thus void. Banks-Smith J found that detriment caused included foregoing hundreds and in some cases thousands of dollars for products that were medically ill-suited. They stated the terms impose “on the patient a disadvantageous burden or risk”. As a consequence the Court ordered Ashley & Martin to refund consumers over the unfair contract terms. Relief was given to patients who signed contracts prior to receiving medical advice, received medical advice that the RealGROWTH Program was not suitable, experienced side-effects, within 7 days of signing the contract expressed a desire to terminate or expressed a desire to terminate the contract because they didn’t have an opportunity to receive or consider medical advice.

  The long and short of it

  Previously, the inclusion of unfair contract terms was a low risk strategy for businesses and suppliers. If found to be unfair but not at the heart of the agreement, the term would be void and excluded from the rest of the agreement. The Federal Court’s decision demonstrates that there are additional consequences for businesses who included unfair terms. For Ashley & Martin this was a hairy decision and proved to be a costly one too.

  By Riley Berry

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• 

  OK Google...Are you illegally sharing my location data?

  The ACCC is navigating uncharted territory, as it cracks down on Google’s use of location information.

  Every day we forfeit our personal data to access digital services, be it free Wi-Fi, a virtual map or simply reading an article online. The more tech savvy among us would advise to simply amp up the privacy settings on your device to avoid the prying eyes of tech companies.  But sometimes, even this is not enough!

  The Australian Competition and Consumer Commission (ACCC) is tackling this issue, as it takes action against Google for depriving consumers of the option of keeping their location data private.

  Did Google mislead consumers?

  The ACCC asserts that Google has breached the Competition and Consumer Act 2010 (Cth) by preventing users from being able to make informed choices about how much personal information they provide to the company.

  It alleges that Google did not adequately explain to consumers that they would have to switch off two settings to prevent Google from accessing their location information. The first setting was intuitively called ‘Location History’, whereas a necessary second step was hidden away under the less obvious label, ‘Web & App Activity’. The majority of users were unaware of this second step, as it did not explicitly state that it pertained to location information.

  The ACCC alleges that had Google been clearer in relation to these settings, users may have taken steps to stop the company from obtaining and using their information without their knowledge. Understandably, many consumers are uncomfortable with Google having access to data which enables them to extrapolate a wealth of information about their lives, preferences and daily routines, and which is vulnerable to further disclosure and potential misuse.

  If the ACCC is successful, Google could face up to A$10 million in fines. As the company made US$116 billion last year in advertising alone, the fine may serve as less than a gentle slap on the wrist. Nonetheless, the proceedings may shed light on Google’s conduct and on how consumers can go about protecting privacy on digital platforms.

  What does this mean for digital privacy?

  This practice of companies obfuscating their privacy practices is commonplace and is known as ‘concealed data practices’. Deceived by Design, a report published by the Norwegian Consumer Council, stated that Google, Facebook and Microsoft Windows employ numerous tactics in order to encourage consumers toward sharing as much information as possible. The report found that privacy policies, through simple interface designs, can trick users into doing things that they might not want to do.

  If the ACCC are successful, it may pave the way for more accountable and transparent data management practices to facilitate a higher level of consumer protection.

  The ACCC has also taken this opportunity to re-emphasise its recommendations from the Digital Platforms Inquiry it conducted earlier this year. This case highlights the need to strengthen privacy laws, including an expanded definition of ‘personal information’ that includes location data and other technological identifiers, as well as stronger disclosure and consent obligations on companies to enable consumers to make informed and meaningful choices about their personal data.

  But let’s not be naïve here—many have signed our privacy away voluntarily through loyalty points and schemes, at least to some degree. We could all afford to be more vigilant.

  If you have concerns about your personal information security, or about your organisation’s compliance with its privacy obligations, please get in touch with our Business team.

  Written by Lauren Babic with the assistance of Claudia Weatherall.

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• 

  After the AGM: How to improve for next year

  Annual General Meetings, or AGMs, are a fundamental part of running a business.  As we come to the close of this AGM season, companies should take this opportunity to take stock of what went well and what didn’t, and to reflect on the value that an effective AGM might be able to add to your business beyond merely ticking boxes.

  Planning your AGM

  Although it’s easy to get caught up in the day-to-day running of your business, especially around the end of the financial year, neglecting AGM planning and scrambling to get organised often leads to things being rushed and opportunities being missed. Rather, AGM planning should be a year-round process to give your business the best opportunity to reflect on its experiences, review its progress, revise its core documents, and keep members engaged.  There are a few key milestones that should appear on your AGM planning timeline to avoid last-minute planning and to ensure you get the most out of your AGM.

  The AGM agenda

  You should begin planning for your next AGM as soon as you finish the previous one. For example, the agenda should always be informed by the experience of the previous year. It is worthwhile to have the Secretary record on the agenda any warnings or notes for the future throughout the meeting. Together with the minutes, this record will ensure that the next agenda can be shaped to ensure efficiency, avoid known issues, address ongoing matters and follow up on anything that was missed or that needs to be revisited.

  Review your constitution

  Another key planning priority should be constitutional review. Amending the constitution at an AGM must be done by special resolution, which has to be proposed in the AGM notice issued several weeks before the meeting itself. However, by the time a company starts digging into its constitution in the lead-up to an AGM—and incidentally discovering defects or room for improvement—it is often too late to do anything about it until the next year’s meeting. As such, we recommend making constitutional review a fixed feature of your strategic planning, several months in advance of your AGM.

  For the most part, nothing will need to change. However, by making this a regular part of your governance activities and giving yourself plenty of time to seek feedback from directors, members and professional advisors, any necessary amendments can be proposed with comfortable notice and in a form that is likely to be successfully passed.

  Questions from members

  Members or their proxies present at the meeting have the right to ask questions on any item of business. However, it may be worthwhile getting out there earlier to seek out their questions or concerns. In the documentation sent to members including the official notice of the meeting, or even earlier, companies should invite members to submit written questions to the board in advance of the AGM. This gives you an opportunity to reflect and to do your research, and to ensure that you aren’t caught by surprise at the meeting. That way, you can keep members engaged and can incorporate any questions or concerns in the formal addresses delivered at the meeting.

  If you have questions about what is required of your company in running an AGM or would like assistance with your planning, please get in touch with our Business team.

  Written by Riley Berry with the assistance of Bryce Robinson.

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  Getting the balance right: Further changes to the Residential Tenancies Act

  Protecting the rights of both landlord and tenant is a delicate balancing act. The Residential Tenancies Amendment Bill 2019, introduced into the Legislative Assembly on 26 September 2019, builds on the recent changes to the Residential Tenancies Act 1997 (which commenced on 1 November 2019) and provides the tenant with greater rights and protection against potentially unreasonable practices. Whilst some of these changes may be necessary, it does pose the question whether the balance between the rights of the tenant and the landlord has tipped too far.

  Residential Tenancies Act Changes

  The Bill – introduced in September – amends the Residential Tenancies Act 1997 by:

  • Introducing a right for tenants to terminate a residential tenancy agreement (even during the fixed term of the agreement) by giving 14 days written notice to the Landlord if:
    • the tenant accepts accommodation in a residential aged care facility or social housing dwelling; or
    • the landlord offers the property for sale either within 6 months of the beginning of the tenancy agreement and without the landlord giving notice of an intention to sell to the tenant prior to entering into the agreement or if two inspection requests are made more than eight weeks apart;
  • Creating an opportunity for the minister to make minimum standards for rented residential premises relating to physical accessibility, energy efficiency, safety and security for residential premises (and it appears that regulations will be made in respect of at least minimum energy efficiency ratings);
  • Requiring a landlord to show that any illegal use of premises justifies the termination of the residential tenancy agreement if the landlord seeks to terminate the agreement due to the tenant’s use of premises for an illegal purpose;
  • Limiting the number of inspections a landlord is permitted to undertake when selling a property to no more than two (2) per week; and
  • Clarifying that the standard terms applicable to periodic tenancies are those in force under the Act from time to time.

  How do changes impact landlords and tenants?

  While some changes are necessary to protect those more vulnerable tenants, other changes, like the tenant’s right to terminate due to the landlord’s failure to give notification of the sale of the property, may be considered overly restrictive and onerous by some. This overly restrictive framework is likely to lead to a rise in the number of disputes before the ACT Civil and Administrative Tribunal (ACAT) and therefore higher costs – more so for landlords – and could therefore disincentivise future investment in the residential property market. Should this occur and Canberra’s rental stock shrinks, the very changes brought about for the benefit of the tenant will be (eventually) to the tenant’s detriment.

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  Essential Guide to Local Government Law: Temporary use and clause 2.8 of the Standard Instrument LEP

  This Essential Guide will assist local councils to apply the temporary use provisions in cl. 2.8 of the Standard Instrument LEP.  Prohibited development can be approved under the Standard Instrument LEP if it will only be temporary. Understandably, however, this is only possible if the development will not adversely impact on the future development of the land or on the residents of surrounding land.

  The stated objective of clause 2.8 is to provide for the temporary use of land if the use does not “compromise future development of the land, or have detrimental economic, social, amenity or environmental effects on the land”.

  The clause applies despite any other LEP provisions and allows a consent authority to grant consent for a “temporary use”.  A temporary use is one that is carried out for no more than 52 days in any year[1].  The 52 days may be consecutive but do not have to be; for example, a temporary use for the purposes of clause 2.8 could be one that takes place once a week for every week of the year or for a 52 day period once a year.

  The 52 day limit does not apply to the temporary use of a dwelling as a sales office for a new release area or a new housing estate[2].

  A temporary use can only be approved if the consent authority is satisfied that[3]:

  (a) the temporary use will not prejudice the subsequent carrying out of development on the land in accordance with any applicable environmental planning instrument, and

  (b) the temporary use will not adversely impact on any adjoining land or the amenity of the neighbourhood, and

  (c) the temporary use and location of any structures related to the use will not adversely impact on environmental attributes or features of the land, or increase the risk of natural hazards that may affect the land, and

  (d) at the end of the temporary use period the land will, as far as is practicable, be restored to the condition it was in before the use commenced[4].

  Key aspects of Standard Instrument LEP clause 2.8

  Clause 2.8 has been the subject of consideration in several decisions of the Land and Environment Court. The principal decisions are:

  • Marshall Rural Pty Limited v Hawkesbury City Council [2015] NSWLEC 197; and
  • EMRR Pty Limited v Murray Shire Council [2016] NSWLEC 144.

  A number of key principles can be identified in these decisions:

  1. The clause applies despite any other provision of the LEP and allows the approval of a temporary use of land that would otherwise be prohibited.
  2. The temporary use may be approved for a maximum period of 52 days (whether or not consecutive days) in any period of 12 months.[5] The use can still be temporary even if it continues over a number of years or even indefinitely.
  3. The 52 day maximum[6] does not include days spent preparing for or packing up following the actual event.
  4. It is the use of the land that is temporary – the use may be carried out in permanent structures (such as stables, sheds etc).
  5. To be capable of being approved under cl.2.8, the consent authority must be satisfied of each and every matter listed in cl. 2.8(3), i.e:
     1. that the temporary use will not prejudice the future use of the land in accordance with the LEP or any other environmental planning instrument;
     2.  that the temporary use will not adversely impact on any adjoining land or the amenity of the neighbourhood;
     3. that the temporary use and location of any structures related to the use will not adversely impact on environmental attributes or features of the land, or increase the risk of natural hazards that may affect the land; and
     4. at the end of the temporary use period the land will, as far as is practicable, be restored to the condition in which it was before the commencement of the use.
  6. Clause 2.8(3)(b) imposes a different standard to that which applies in the consideration of an application to carry out development that is permissible  under the LEP. Rather than a consideration of whether the likely impacts associated with the development will be acceptable, the clause requires the    consent authority to be satisfied that there will be no adverse impact.
  7. The assessment of impact should take into account the ameliorative effect of any conditions to be imposed on the development consent; however, the effect of those conditions must be to remove any impact, not merely to render the impact acceptable.

  Marshall’s case

  In Marshall’s case, the applicant challenged the validity of development consents granting approval for the temporary use of two barns as a “function centre”.  This use was a prohibited use in the relevant rural zone under the Hawkesbury Local Environment Plan 2012. Relevantly, Moore AJ (as he then was) described the nature of the cl 2.8 tests as follows:

  [113] The nature of the activities that are capable of being permitted by an application invoking cl 2.8 are, I remind myself, activities that are otherwise prohibited in a zone.

  [114]  That any application that is sought to be approved for such a prohibited use seeks a significant indulgence for such a substantial departure from the planning controls applicable to a zone is reflected in two aspects of the clause.

  [115]  The first arises with respect to the temporal limitation mandated by the clause if such an otherwise prohibited use is to be permitted. This aspect of the clause was the subject of Marshall Rural’s first complaint, a complaint dealt with and dismissed in my rejection of Ground 1.

  [116]  The second element engaged by these proceedings is the requirement that the proposal will “not adversely impact” in the fashion specified in cl 2.8(3)(b). This test, cast in absolute terms reflecting the seriousness with which an application of this nature is required to be assessed, puts a very high hurdle in the path of any such application. The placing of such a hurdle requires that the Council must approach the consideration and determination of any such application with a marked degree of precision and caution.

  With respect to the ‘temporal limitation’ referred to above at [115] the applicant had argued that cl 2.8 permitted development consent for a maximum period of 12 months from the date of consent.  The Court, however, held that the ordinary, obvious reading of cl.2.8 does not impose a second limitation in addition to the number of days in any period of 12 months and that it was open to the consent authority to grant a consent pursuant to cl 2.8 for any nominated limiting period or indeed one that was open-ended.

  In relation to the second component, that the proposed development must not adversely impact any adjoining land or the amenity of the neighbourhood, the Court held that the Council had incorrectly proceeded on the basis that it needed to satisfied that the impact of the proposal would be ‘acceptable’ rather than that there would be no adverse impact. His Honour found that the path leading to error began with the acoustic assessment reports which assessed the application by reference to standards which envisaged merely an acceptable impact rather than an absence of adverse impact.

  The Court then said that this error had been transmitted to the Council’s own assessment report which, although it referred to cl.2.8(3)(b) on several occasions, did not display a correct understanding of the ‘absolute’ nature of the threshold test imposed by the provision.  Moore J was critical of the fact that the assessment report did not caution the councillors that the test imposed by cl.2.8(3)(b) is in absolute terms and was therefore different from the test that is conventionally applied to the assessment of an ordinary development application.  In this regard, his Honour explained that the higher threshold reflected the fact that the development for which consent was being sought was otherwise prohibited.

  The Court considered that the conditions formulated to address the impact of the proposed development also reflected the same incorrect presumption. Those conditions had sought to require compliance with the remedial acoustic measures recommended by the acoustic experts.  However, the Court pointed out that this would merely render the acoustic impact of the proposed development “acceptable” rather than resulting in the removal of any adverse impacts.

  The EMRR decision

  This was a Class 1 appeal in relation to the modification of an existing consent for a function centre to extend the period of its operation from one year to three years.  The applicant and the Council had participated in a s.34 conciliation conference, as a result of which they had resolved their differences. The owner of a neighbouring property, however, was given leave to intervene in the proceedings to argue that the Court lacked the legal power to approve the development.

  The objector argued that the proposed development was prohibited by the Murray Local Environmental Plan 2011.  In doing so, he raised 2 contentions. The first was that there was a conflict between cl.2.8 (temporary uses) and another provision which prohibited development on river front areas.  The second was that, despite compliance with the restriction on the number of days on which the development would be carried out, the use of the land, on a continuous and regular basis, for the purpose of functions over a three year period could not really be described as a ‘temporary use’.

  The Court rejected both arguments.

  In relation to the first argument, the Court held that the prohibition of certain development on river front areas was no different to a prohibition in the Land Use Table.  Both were subject to cl.2.8.  The Court held that a temporary use may occur on land where such a use may otherwise be prohibited provided it meets the requirements of cl.2.8(3). Sheahan J noted that this conclusion was ‘consistent with Moore AJ’s excellent analysis in Marshall’.

  In rejecting the second argument, the Court appears to have accepted the applicant’s argument that the prescription of a number of occasions in an identified time period means, in effect, a use which complies with the numerical controls is, by definition, to be regarded as a temporary use.  In coming to that conclusion the Court found that the requirement that the land only be used for the specified number of days did not mean that structures to facilitate that use could not be erected and remain on the land throughout the temporary use period.  The Court also found that the day limit did not include days on which ancillary activities were carried out, such as the construction and deconstruction of a marquee, inspections, bookings, deliveries and setting up. The days on which those ancillary activities were carried out, were held by the Court not to count in the calculation of the number of days on which the temporary use is carried out.

  For more information on temporary uses or the Standard Instrument LEP, contact us.

  Further Essential Guides to Local Government Law can be found here.

  The content contained in this guide is, of course, general commentary only. It is not legal advice. Readers should contact us and receive our specific advice on the particular situation that concerns them.

   

  [1] Clause 2.8(2); unless another number is adopted in the relevant local environmental plan.

  [2] Clause 2.8(4)

  [3] Clause 2.8(3)

  [4] Unless the temporary use is the use of a dwelling as a sales office for a new release area or a new housing estate see clause 2.8(5)

  [5] Provided the 52 day period is the period specified in cl. 2.8(2) and not anther period.

  [6] Ibid.

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• 

  Non-Disclosure Agreements with John Wilson and Judith Bessant

  In our latest podcast episode, we discuss non-disclosure agreements, or clauses, which are now very common when employment ends in contentious circumstances for a variety of reasons but are they fair, and reasonable? Do they prevent us from having discussions about workplace issues that might, in fact, be in everyone’s interest, and under what circumstances should you sign one?

  What is a non-disclosure agreement?

  Whether a matter such as sexual harassment or workplace bullying goes to trial or not, there is always a process whereby parties attempt to settle the dispute between themselves.  A deed of release is the instrument in which the proceedings are settled, which contains a non-disclosure or a confidentiality clause, which simply says that the parties are required to keep the terms of the settlement confidential.  There may be exceptions enabling a party to disclose the details to family members, their accountant or legal representative but otherwise, the effect of the clause is that neither party is allowed to tell anybody the terms of the settlement.

  Over the past 30 years, little has changed in relation to the presence of such clauses in settlements.  They contain confidentiality clauses essentially because one or both parties want to keep the circumstances that led to the controversy confidential.  Either or both parties may also wish to keep terms of settlement, including what money might be paid, and other arrangements confidential.

  Can non-disclosure agreements hinder justice for victims?

  Judith Bessant argues that non-disclosure clauses, because they prevent people within and outside the organisation from knowing what happened, can act as an anti-learning mechanism.  They can prevent any corrective action being taken on the part of managers within an organisation. Secondary victimisation and intimidation can result for people who have been subject to sexual harassment, or other kinds of harmful workplace behaviour, if required to sign off on such clauses.

  Non-disclosure clauses can enable bad behaviour, Bessant argues.  Significant power imbalances often exist between the employee and the employer, and if employees refuse to sign a non-disclosure agreement, they likely forego a satisfactory agreement. Within the organisation, executive and managers need to know what happened and be accountable. These clauses can protect managers by allowing them to deny liability because they didn’t know.

  It is in the public interest, and that of the victim, that things like this are “aired”. In many circumstances such clauses encourage a form of contrived ignorance and diminish any prospect for remedial action.

  Episode 12 is an enlightening look around the practical realities of non-disclosure agreements and what HR managers can do to prevent the need for them in the first place.

  For further information about dealing with workplace issues, please get in touch with our Employment Law & Investigations Group today.

  Listen to the full podcast episode now.

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• 

  Unfair Contract Terms: What’s there to ‘Wine’ about?

  The Australian Consumer and Competition Commission (ACCC) has recently released a report following their inquiry into wine grape sector contracts – and it’s not looking ‘grape’ (read: “great”).  The inquiry has found that there is a substantial bargaining power imbalance that exists between the grape growers and winemakers, which has led to harmful market practices.

  Unfair contract terms examples found by the ACCC include lengthy payment terms (sometimes grape growers would be waiting between nine to 12 months for payment from winemakers), unilateral rights for the winemakers to vary agreements, and other sub-optimal terms that winemakers relied on to the detriment of the growers.  This stems (no pun intended) from the winemakers having significantly greater bargaining powers due to having the benefit of information asymmetries, ability for winemakers to access a relatively homogenous product from various sources, and the fact that grapes are perishable and have a historical oversupply.

  The ACCC will follow the progress of the industry to see whether winemakers adopt their recommendations to ensure fairer contracts for grape growers, however it may make a recommendation to the Federal Government to implement a code of conduct for the wine industry.  Note that unfair contract terms are not illegal (although this idea was floated by the Labor party in early 2019), and therefore ACCC cannot impose penalties to prevent businesses from including these terms in the first place.

  While this particular inquiry targets the warm-climate wine region, this is a reminder for all business that it’s a good idea to revise your contracts and ensure they they’re still appropriate.  Take a look at whether there is a term in there that may be perceived to be too “one-sided”, to avoid disputes arising in relation to that contract.  This is particularly the case if the goods or services you’re supplying or purchasing are continually changing.

  What are unfair contract terms?

  The laws governing Unfair Contract Terms are contained in the Australian Consumer Law s 23 Australian Consumer Law (ACL).

  Unfair contract terms in consumer law apply in relation to standard form contracts for consumers as well as small businesses.   A standard form contract is a contract that has been prepared by one party and the other party has limited or no opportunity to negotiate the terms of that contract.  A small business contract is one where at least one party to that contract employs fewer than 20 people (not including casual employees) and the upfront price payable is less than $300,000, or if the contract has a duration of more than 12 months, $1 million.

  A term is considered unfair under section 24 of the ACL if the term:

  1. Would cause a significant imbalance in the rights and obligations of the parties under the contract, for example all the risks fall to one party, one party has unilateral rights to vary or terminate the contract or determine if a breach has occurred, or if one party has unilateral rights to determine quality;
  2. Is not reasonably necessary to protect the interests of the party who is advantaged by the term, the ACL presumes that a term in a standard form contract will not be reasonably necessary to protect legitimate interests and the onus falls on the party who wrote the contract to prove otherwise;
  3. Would cause detriment (financial or otherwise) to a party if it were relied on, for example lose a sale, not receiving payments for months, or have to re-do work due to a term being unilaterally changed.

  Key Takeaways

  If a term is considered unfair, the courts can declare the term void, although the remainder of the contract will be continue to be binding and enforceable, unless the contract is incapable of operating without the unfair term.  So in essence, including unfair contract terms within your standard form contracts, while not illegal and will not incur any penalties, could have the effect of completely de-railing your contract.

  The moral of the story: if your standard form contract terms aren’t fair for the party you’re contracting with, they’re probably not ‘vine’ (read: “fine”) and it’s probably time to review and revise your contracts.

  If you have any concerns about how these recent updates might affect your contracts or you’re concerned about unfair contract terms in your agreements, please contact our business team to see how we can help.

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• 

  Chorley not! – High Court will no longer award costs to self-represented solicitors under the Chorley exception

  As the saying goes, “a man who represents himself has a fool for a client.”[1] This sentiment has been confirmed in the recent High Court ruling in Bell Lawyers Pty Ltd v Janet Pentelow & Anor [2019] HCA 29 (‘Bell’), which provides that self-represented solicitors will no longer be able to be awarded costs under the Chorley exception.

  What is the Chorley exception?

  It is well-settled law that a self-represented litigant may not obtain any recompense for the value of his or her time spent in litigation.[2] Until Bell, an exception to this rule applied if that self-represented litigant happens to be a solicitor. This exception is known as the Chorley exception and, up until recently, it was assumed that Australian common law had inherited this anomaly from our English forebears. The underlying rationale for the exception, as set out in the old English authority of London Scottish Benefit Society v Chorley,[3] was that it promoted time and cost efficiency through encouraging solicitors to represent themselves in their own personal matters rather than engaging an independent solicitor to act on their behalf. It was posited that this would minimise the impact of an adverse cost order for the other side.

  Background to Bell

  Janet Pentelow, a barrister, was engaged by Bell Lawyers to appear in a matter before the Supreme Court of New South Wales.  At the conclusion of the matter, a dispute arose between the two parties as to the payment of Ms Pentelow’s fees, leading to recovery proceedings.  Initially, Ms Pentelow was unsuccessful in the Local New South Wales Court, however, later succeeded on appeal to the New South Wales Supreme Court. Additionally, the New South Wales Supreme Court ordered that Bell Lawyers pay Ms Pentelow’s professional costs for the Local and Supreme Court proceedings. On further appeal to the District Court of Appeal of New South Wales, the majority there held that Ms Pentelow was entitled to costs per the Chorley principle, regardless of the fact that she was a barrister and not a solicitor.  By grant of special leave, Bell Lawyers appealed to the High Court.[4]

  The Findings

  The High Court ultimately found that the Chorley exception does not form part of Australian common law and, therefore, neither solicitors nor barristers may rely on this rule in order to reclaim costs in litigious proceedings. The High Court stated that the Chorley exception ‘was an affront to the fundamental value of equality of all persons before the law’.[5] This criticism stemmed from an underpinning belief that all parties to litigious proceedings, regardless of their profession, should seek independent legal advice. Furthermore, the High Court found that self-represented solicitors may not provide themselves with impartial and independent advice that the court expects of its officers. This, in turn, may affect a solicitor’s objectivity due to their own self-interest. Indeed, this self-interest may cause a solicitor to pass on higher legal costs, in the event of an advantageous cost order.[6] This finding contradicts one of the fundamental justifications for the existence of the Chorley principle, as the High Court found that it is not self-evidently true that the costs to the other party will be minimised when a barrister or solicitor represents themselves.[7]

  The lesson

  In the aftermath of Bell, solicitors or barristers who elect to represent themselves in their own personal cases will no longer be able to recover professional fees through cost orders. The resounding rejection of the historic Chorley exception marks an historic departure from the English jurisprudence and highlights the High Court’s unwillingness to discriminate on the basis of profession in relation to cost orders.

  Written by Kate Meller with the assistance of Claudia Weatherall.

  [1] Abraham Lincoln.

  [2] Cachia v Hanes (1994) 179 CLR 403 at 410 – 411; Guss v Veenhuizen {No 2} (1976) 136 CLR 47 at 51.

  [3] (1884) 13 QBD 872.

  [4] Bell Lawyers Pty Ltd v Janet Pentelow & Anor [2019] HCA 29, at paragraphs 4 – 12.

  [5] Bell Lawyers Pty Ltd v Janet Pentelow & Anor [2019] HCA 29, paragraph 2.

  [6] Bell Lawyers Pty Ltd v Janet Pentelow & Anor [2019] HCA 29, paragraphs 18 – 19.

  [7] Bell Lawyers Pty Ltd v Janet Pentelow & Anor [2019] HCA 29, paragraph 18.

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• 

  IP no longer spared from competition law: Is your business at risk?

  The laws that regulate the conduct of Australian business reflect a community expectation of fair play. Indeed, the Competition and Consumer Act 2010 (Cth) (CCA) seeks to prohibit conduct which lessens competition in the relevant market. Such prohibited conduct might include price fixing, bid rigging or restrictions on outputs, but also extends to practices where competing businesses agree—expressly or implicitly—to act in a way that can be seen as ‘anti-competitive’.

  However, until now, there has been an exemption for certain dealings relating to intellectual property (IP). Section 51(3) of the CCA previously granted immunity to certain assignments or licences of IP rights that would otherwise constitute anti-competitive behaviour.

  Having reviewed IP and competition policy, the Australian Parliament has now abolished the exception. Businesses were given six months to bring their agreements into line. That grace period has now ended, and the exemption was officially removed from the statute books as of 13 September 2019.

  Scope of the changes

  The exemption initially provided protection for conditional licences or assignments of certain IP rights, including patents, trade marks, copyright, registered designs or eligible circuit layouts. Eligible provisions or dealings would be spared from prohibitions on cartel conduct, exclusive dealing and other concerted practices, although not from laws forbidding resale price maintenance or misuse of market power.

  With these protections now gone, all new and pre-existing licences, assignments, contracts, arrangements or understandings must be made compliant with the CCA by businesses.

  Risks, impact and moving forward

  Because the scope of the exemption was itself narrow, its removal is not expected to cause any great disruption. All businesses that licence or assign their IP may be affected by the changes, although technology-based industries will be more exposed.

  The consequences of non-compliance include penalties as great as $10 million (or greater, in some circumstances).[1]  The Australian Competition and Consumer Commission (ACCC) is an active regulator and there is a very real risk that it will pursue significant instances of breach.

  Common IP arrangements that will often carry a risk of breach include:

  • Conditional licences that restrict the use of IP to certain geographical areas, uses, customers or market sectors;
  • Obligations requiring a licensee to transfer or licence any changes or improvements to the subject of the IP back to the initial licensor;
  • Paying a competitor to delay their entry into the market; or
  • Restrictions or requirements regarding output quantity, quality or price.

  Businesses may avoid liability by applying to the ACCC for authorisation where it can show that proposed arrangements will result in a public benefit that outweighs any likely public detriment.

  The Business Team at BAL Lawyers have extensive experience in regularly preparing and reviewing IP assignment and licensing agreements, as well as providing advice on the application of competition law. Please get in touch with us if you are concerned about whether you might be affected by these changes or if you are interested in knowing more.

  Written by Lauren Babic with the assistance of Bryce Robinson.

  [1] Competition and Consumer Act 2010 (Cth), Part IV, Subdivision B.

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• 

  Contract Fundamentals: October Business Breakfast Club Summary

  On Friday 11 October 2019, Mark Love presented  a “taster” for a series that we are running for our Business Breakfast Club commencing in early 2020 regarding contracts.  Friday’s talk covered contract fundamentals – often the biggest mistakes and the reason people walk into our office is because they’ve made a mess of things, which could have all been avoided if they had the benefit of really understanding contract “first principles”.

  We discussed the dos and don’ts of contracting by way of a case study, which was based on an actual dispute one of our clients had faced.  The key takeaways from October’s Business Breakfast Club were:

  1. When making an agreement with another party, you should consider questions like what could go wrong, how you can stop it from going wrong, and if an outsider had to look at this agreement (i.e. a judge who may have the final say on matters in the event of a dispute), what will they make of the agreement?
  2. We cannot say that you didn’t get what you bargained for if we do not understand the bargain itself or how it came about.
  3. Put your agreement in writing. Even if you don’t formally document the specific terms of the agreement, at least document your understanding of the agreement by way of email (or even a text message).  This serves a dual purpose – you’ve written down what you think the agreement is and it also gives the other party the opportunity to either agree or refute the terms and offer their understanding of the agreement.  But of course, we will always recommend that you save yourself some trouble later down the track and put your agreement down in a formal document.
  4. Don’t start actioning your part of the agreement until you and the contracting party have agreed to what it is exactly that you are to do. This for a number of reasons, but primarily because:
     • a counter-offer is not acceptance;
     • past consideration is not good consideration for future representations (i.e. I buy a horse from you and after the transaction is finished you tell me the horse is good-natured, but later I find out the horse is quite vicious, the money that I paid when purchasing the horse could not support consideration for the subsequent promise[1]);
     • while silence does not equal acquiescence, conduct might; and
     • what is central to traditional contract principles is the notion of consensus ad idem (or ”meeting of the minds” for those who aren’t familiar with Latin), which basically means that both parties must be aware of the terms of the offer and agree to them.

  While we are running a series on contracts, each Business Breakfast Club will be a self-contained talk on a different element within the subject of contracts – we encourage you to attend all the sessions, but you are more than welcome to come to just the particular ones you are interested in.

  Our next Business Breakfast Club will be on Friday 8 November 2019.  We will be discussing current issues regarding licensing and leasing in hospitality.

  [1] Roscorla v Thomas [1842] EWHC J74.

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• 

  Recognition of Indigenous Peoples' rights and culture

  Originally presented by Mark Love, Legal Director and Accredited Business Law Specialist, BAL Lawyers, to the SIETAR Australasia International Conference on 2 October 2019.

  A positive contribution to law and governance

  In assessing the evidence in the Wik Case it becomes apparent that the historical and political climate was critical to determining “parliamentary intention”; did “pastoral leases” deliver something that was intended to give rise to all incidents of a “lease” or was such a grant something different? If it was different, was the grant to be of a kind and character that would, by necessity, be inconsistent with the enjoyment of the rights, obligations and privileges that were formed through the systems of governance that attached to the land though Aboriginal Law?

  Owing to the original tenures that characterised “pastoral leases”, the legal system was looking at the system of rights granted from the late 1840’s. The answer to that question drew heavily from the excellent works of Professor Henry Reynolds.

  What was apparent from Prof Reynolds work was that the Australian Administration, under direction by the British Home Office was out of step with the British Home Office’s policies for the implementation of the Parliament’s policy. At the time the British Parliament was the source of the power for the pastoral leasehold grant.

  The correspondence flowing between the Governor of the day for NSW (and there were several through the relevant period) and the Home Office showed that the Home Office in London was acting off reports which included the likes of G A Robinson, Chief Protector of Aborigines, to shield and protect the Indigenous population from the excesses of settlement, but importantly to see that such settlement proceed according to the requirements of the Law. Now, whilst that second part sounds uncontroversial, it proved determinative in my view in the outcome of the Wik Case.

  The laws of Settlement and Conquest had been laid out in Blackstone’s Commentaries Volume 1, pp.104-5, so these were not novel to the Select Committee of the House of Commons on Aborigines in 1837 (when they were considering John Batman’s attempt to acquire land from the Port Phillip Aborigines).  And the legality was all dependent on a question of fact (possibly being one of two tests), was the land cultivated or was it inhabited?

  From 1837, the British Parliament saw the rise of Robert Peel’s conservatives, yet the Whigs , who represented new money and urban dwellers remained in control for much of the period to the 1850’s, becoming increasingly the  force of reform.   In a way, what was being played was a reflection of the larger drama unfolding across Europe. England had taken the lead in throwing off the feudal influence with the emergence of the Bourgeoisie, the increasingly urbanised and concerns for the increasingly large and soon to be emergent political force of the working class and Australia was following suit.

  The context here is important and it is also important in understanding how it was that colonising nations ended up overlooking the responsibilities to the First Nations for so long and why the recognition of the debt was left to later generations. And this consequence is important to us right now.

  The role, power and influence of Parliament as the paramount influence of society was something which evolved. The ascendancy of Cromwell’s Parliamentary Army didn’t simply deliver the pervasive influence of Parliament as we know it today. The 1840s in Europe gave rise to the Spring of Nations – when Europe and the UK were turning away from feudal control, towards Parliamentary control. It was no accident that this was occurring through the dawn of industrialisation.

  With the dawn of industrialisation, came urbanisation and the adverse symptoms of an amassed society living in close proximity; this was all new.

  The means of production depended on significant supply of labour. It is a fact of history that the more unscrupulous Industrialists and agricultural producers simply took labour, through slave traders. And possibly because of that, and possibly because of the normalisation of the urbanised classes, a power shift gained force whilst Industrialisation took hold.  Represented by the Whigs the new urban wealthy began to assert political influence, and in so doing started to gain ascendancy over the “old” landowning gentry class (the country squires) and defenders of privilege.

  The British Parliament through the 1840’s was influenced by humanitarian ideas though this is not to suggest there was were strong countervailing forces, as not all Industrialists were liberal. However, the slave trade invited a reaction that gave rise to the recognition of Human Rights. And ultimately, because the value of labour and the value of a healthy work force was recognised, steps were taken and policies asserted towards these notions.

  Yet with the absence of the kinds of levers of control and sources of information that we now take for granted, the growth of the industrial machinery and the competition between Nations would soon leave policies giving priorities of Humanism to take a back seat. The focus of government was drawn into addressing the issues that arose through mass population and the raging competition for “success” over rival Nations. Mankind’s benefit at large would rise through the forces of supply and demand.

  For the indigenous populations, whose lands were being taken, whose resources were being funnelled towards the wealth of the new Nations that sprang to serve these exploding, industrial populations, this was the worst conceivable time for the so called “civilised” world to foster their accommodation within this new world.  Governments remained focused on notions of “the economy”, at a time during the peak of laisse faire and caveat emptor, which drove the industrialists forward. The industrial world’s needs and focus lay in labour, resources, land and exploitable produce. Those things such as understanding:

  • different systems of governance;
  • difference systems of resource allocation;
  • different systems of belief; and
  • different systems of crime and punishment,

  simply didn’t have obvious answers to the questions that the overlords of the 1850 to 1950’s were asking.

  It can be contended that these builders of our world were in their own minds Nietzsche’s Ubermensch, grasping labour and resources with zeal and building the world according to their own visions; yet they were more infant supermen, than those Nietzsche had described, as they lacked the gratitude and appreciation for the world that they were consuming, as they took the world and moulded it, using money and industrial might to acquire power and influence.

  There were the exceptions; whilst this was the birth of industrialisation, science and studies of society and social systems was a toddler beginning to walk. Those like Darwin, Banks and GA Robinson became determined to record, and then attempted to understand. Part of what was recorded was how the intrusion of the colonising supermen often accidentally, but far too often deliberately, set out to destroy.

  As aforementioned, this large drama of the world’s political and social development was being played out in its own way in Australia. There was, in the 1840’s UK, a Home Office driven by a Humanitarian outlook, then determined, at least to paying lip service to the policies expressed, to see that appropriate steps might be taken to ‘shelter’ the Australian indigenous population from the excesses of “settlement”. However, what interrupted these initiatives was mass migration.

  Driven by the “Gold Rush” and by the Industrial Revolution’s desire for wealth, wool, wheat and meat, the convenience of Terra Nullius was all too tempting. The Governments of Victoria, New South Wales and Queensland had no capacity to cope with the flood of people and the Humanitarian influencers in the UK were swept aside by the now tremendously wealthy merchant and industrial classes, who eyed potential of the vast country they had claimed for themselves.  By the time the Local Assemblies had caught-up with that had happened, we were heading to the “War to End All War’s (aka WWI) and then some short respite before WWII and the Cold War.

  So what does all this have to do with indigenous culture’s contribution to Law and Governance? In a previous article I published shortly after the Wik Case, I observed that winning the Wik Case might prove adverse to the Parliament’s attitude to the newly rediscovered rights, loosely called “Native Title”. I argued that, on seeing the extent to which the legal rights of Aboriginal People had been swept away, Parliament could only have responded by recognising and addressing the terrible loss inflicted.

  In some respects, this expectation of a reaction that would address past, wrongful dispossession was founded on the same reasoned and responsible reaction to a society enslaving people from generations past.

  But with recognition that Native Title could survive in the gaps left by grants to Pastoralist of rights to manage and control of the land, with that “victory” came the conservative response; John Howard holding up of “that map” showing the extent of land that was subject to potential claim – appealing directly to the rural land dependent voting populations of Queensland, WA, Northern NSW and SA. This contrived fight for control of rangeland Australia could not have been more perfect for Howard’s electoral prospects, and it is not stretching matters to say that this issue allowed his government maintain support whilst it implemented policies unpopular within that constituency, reforms such as the Gun Buy Back.

  But such a “negative contribution” is not really the message I have: the positive legacy here is threefold, in my opinion, namely:

  1. That land systems of interaction over common resources do not have to have a single purpose. It has been demonstrated that resource use and consumption have many stakeholders and parallel interests that can amount to actual rights can exist. Arrangements can exist to allow the costs incurred through the consumption of resource to be identified and allocated; and
  2. That systems of ownership and governance can take diverse forms. This includes the rights existing inter se between holders of rights within, say, “native title”, but also the means by which commercial users of land and resources can exploit such resources whilst being required to respect that system.

  These will inform the third point.

  It was the Mining Industry who embraced the common use and costs allocation most easily. The Mining Industry had greater experience than the Graziers in addressing such complex issues. In securing access to resource rich lands of Africa, South America and Asia they had already worked within systems that accommodated layers of stakeholders. Australia was sadly a slow adopter of these systems. But the Australia Mining industry recognised early if they were to be too cynical, defying the newly declared recognition of actual rights, that such an approach  would cause them not just considerable political issues domestically, but bodies such as the ANC would could move against them and deny access to resources overseas. Treatment of the First Nations Population became an indication of an aspect of the quality a company had, which could result in the actual denial of rights to mine resources. The triple bottom-line of People Planet and Profit was becoming “real”.

  The Mining industry was not alone in taking these steps; even before the term “Indigenous Land Use Agreements (ILUA)” was coined, the Cape York Pastoralist had proposed a Pastoralist Code of Conduct  to be settled with the Wik Peoples (the document from which the phrase Indigenous Land Use Agreement was drawn). Many of the very same people had promoted and signed off on the Cape York Heads of Agreement, which drew an alliance between the Cape York Pastoralist, the Traditional Owners of the Cape (through the Cape York Land Council) and the environmental movement in the form of the Australian Conservation Foundation.

  Of course, and once again, it was economic force of the need to access the resources, in the strive for wealth that was the great evener here. However the political and social landscape was shifting, with Ethical Investment rating becoming an actual influencer of institutional investment.

  Engagement with the “asset” that was “native title”, according to our systems of law, required some recognisable entity or entities and a prescription of the way the owners might manage their entitlements. Further, there was need for a vessel to hold and distribute the spoils of those who were (indeed are) lucky enough to receive reward through agreements (ILUAs) that allow for the exploitation of resources.

  The 1998 Amendment spawned the Native Title Representative Body (NTRB), which would become the bodies, by default that would hold and deploy whatever might result from such rights. The 1999 Love-Rashid Report[1] commissioned by ATSIC to review the performance and resourcing of NTRBs, made the critical observation that these bodies were intended not only to represent the Native Title Holders, but to be representative of them. That gave rise to the question of what these bodies should look like.

  This was, in my view, the second legacy of the recognition of Native Title and the cultural contribution which our First Nations have given to the corporate structure. The richness of this opportunity gave life to an important book, written from the viewpoint of the Anthropologist in the Wik Case, Dr David Martin and a Barrister, Christos Mantziaris. The book, “Native Title Corporations: a legal and anthropological analysis: represents an important exploration into how diverse interest can coalesce into a single functioning decision making entity. It is not just a book for Indigenous Corporations.

  In the Industrial Age, “market price” was allowed to determine the success or failure of a given enterprise. Such a market assumes all costs are brought to account, and consequently acts on imperfect information. More and more, as our knowledge of cost and consequence improves, we bring to account (perhaps often only politically) the external costs which the market overlooks.  Faced with the imminent closure of their local service station, failing for the reason that the profits are insufficient to support the owner’s family, a small tourist town buys the service station, as a defensive strategy to the town’s failure. Without that amenity, the town as a destination fails and along with it, the café’s and shops, and the benefit to the surrounding primary producers and residents.

  That pattern is being repeated across the commercial world, as the “interests of the company” are being replaced by “the interests of the members[2]”.

  Is this a direct result of Indigenous Culture? Probably not, but it is a shift in mindset and we have seen and been given examples of models of governance that address the shared ownership, use and exploitation of resources.

  Finally, the third and most important positive influence: recognition of the intrinsic rights of the First Nation’s People and the wrongful dispossession of their lands is a barometer by which we can measure health of society. Whilst the reaction to the slave trade might not have been driven solely by the recognition of Human Rights, it was driven by a recognition that our long term needs are best served by a healthy and engaged population. A core aspect of such health and engagement is to recognise and address past wrongs and to embrace those who are or have been dispossessed by the conduct of our society that gives us the fruits we enjoy.

  Whilst Australian Society may point to long periods where its priorities were drawn away from addressing issues of First Nations dispossession, we now stand in a society that has had 70 odd years of relative “Peace”, with a generation or more of only occasionally interrupted economic growth.  The reasons for not addressing the past have never been excuses, merely reasons.

  What is our barometer saying of us now?

  [1] Senatore Brennan Rashid, Review of Native Title Representative Bodies, March 1999.

  [2] The “Co-operative” is becoming an increasingly popular choice, noting the adoption of the CNL by all States and Territories bar Qld.

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• 

  Captain of a sinking ship: Warning to directors who make personal sacrifices for the company’s sake

  It seems only logical: your company is in severe financial trouble, so you and your co-directors agree to reduce or even forego your wages payable by the company, to assist its financial position for the time being. But be warned that this logic comes at a cost – it is unlikely that you will be repaid those foregone wages. This is because your employment contract may be deemed to be varied by reason of the doctrine of ‘practical benefits’, which is explored in the case of Hill v Forteng Pty Ltd [2019] FCAFC 105, below.

  The Facts

  Mr Hill was an employee, director and shareholder of the company, Forteng Pty Ltd (“Forteng”), which was experiencing ongoing financial difficulties. As a result, between the period of January 2013 and December 2013, Mr Hill along with the other directors of Forteng agreed that they would receive reduced or no remuneration as employees, in order to improve the financial position of the company.

  A few years later, Mr Hill resigned as a director of Forteng and well after that, Mr Hill brought proceedings against Forteng, seeking to be repaid the amount of his salary withheld between January and December 2013 and unpaid superannuation totalling $154,876.63. Mr Hill argued that Forteng’s failure to repay him amounted to a breach of his employment contract and oppressive conduct, such that he was entitled to relief under section 233 of the Corporations Act 2001 (Cth).

  The Decision

  The judge at first instance found in favour of Forteng, which was upheld on appeal by the Full Bench of the Federal Court. Ultimately it was held that there was sufficient consideration in the form of a ‘practical benefit’ in order to vary the contract, such that Mr Hill was not entitled to relief or repayment by Forteng.

  The Court held that Mr Hill received consideration for his remuneration foregone by way of ‘practical benefits’. This is because his reduced or foregone salary was invested back into the company, thereby:

  • Improving Forteng’s financial position and preventing the company from being wound up;
  • Allowing Mr Hill to maintain his employment with Forteng (as Forteng would have been unable to pay employees, creditors and full director salaries had the directors not agreed to take reduced salaries);
  • Improving Mr Hill’s business investment (by allowing Forteng to retain employees and pay creditors); and
  • Increasing Mr Hill’s chances of being paid dividends in the future.

  As such, Mr Hill’s decision to reduce or forego remuneration was to ‘ensure the survival, future growth and enhanced value of Forteng,’[1] for which Mr Hill stood to benefit from indirectly.

  The Lessons

  1. Remember that a binding contract or contractual variation can only occur if there is consideration from each of the parties to the contract.
  2. Courts will look to the benefit gained or the detriment avoided when determining the ‘practical benefit’ as consideration.
  3. Courts appear reluctant to invalidate contracts on the basis of insufficient consideration if one party to the contract has made a promise to the other which is of “some substance”.[2]
  4. Whilst a ‘practical benefit’ is more likely to be found where the contract is executory, it is not to say that ‘practical benefits’ will not be found to exist in contracts of a different kind.
     (An executory contract is one where the parties to the contract still have continuing or future obligations to perform such as contracts for goods and services)

  If you are seeking advice on any contractual matters, or advice on corporate governance issues, talk to our Business Team today.

  Join our upcoming Business Breakfast Club on contracts to learn more about how to form legally binding agreements.

  [1] Hill v Forteng Pty Ltd [2019] FCAFC 105 [39].

  [2] Ibid [38].

  Written by Riley Berry with the assistance of Maxine Viertmann.

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• 

  Conditional clauses cause contractual chaos

  It is no secret that contractual drafting can be a nightmare: even the smallest grammatical error can change the meaning and effect of a contractual clause, and one ill-considered word could jeopardise the validity of the entire contract. Some contracts contain ‘conditional clauses’, which mandate that certain events must occur or conditions be fulfilled before the contract is binding or enforceable. These clauses can have significant impacts upon the effect and enforceability of a contract, which was at issue in a recent decision of the Federal Court in ACME Properties Pty Ltd v Perpetual Corporate Trust Limited as trustee for Braeside Trust [2019] FCA 1189 (ACME Properties v Perpetual).

  The Facts

  The applicant, ACME, leased commercial premises from the registered proprietor of the premises, Perpetual, from 2016 to 30 June 2019. Towards the end of the lease term, the parties entered into negotiations regarding a new lease, in which Perpetual was represented by its agent, ARAM Australia Pty Ltd trading as ARA Australia (ARA).

  As a result of these negotiations, ARA provided ACME with a document entitled ‘Offer to Lease’ on 25 March 2019. This ‘Offer to Lease’ document contained two leases, the first lasting a year from 1 July 2019, and the second lease commencing on 1 July 2020 for four years.

  The Offer to Lease contained a clear stipulation that it was subject to ‘formal approval of the Landlord to be given or withheld in its absolute discretion; and execution of all legal documentation by the Landlord and Tenant’.[1] On 27 March 2019, ACME signed the Offer to Lease, which was subsequently signed by ARA “for an on behalf of the landlord”, Perpetual.

  A little over a month passed before ARA notified ACME that Perpetual would be accepting an offer from a third party to lease the premises instead of proceeding with its previous offer to ACME. While the formal legal documentation had been prepared (in part) it had not been executed by either party. ACME commenced proceedings against Perpetual to enforce the Offer to Lease.

  ACME submitted that the Offer to Lease (as signed by both parties) constituted a binding agreement to lease. Perpetual, on the other hand, argued that the Offer to Lease was not binding because the agreement was subject to all the legal documentation for the proposed leases having been executed, which had not yet occurred, and was subject to the Landlord’s formal approval (which had not been given despite ARA signing the Offer to Lease on Perpetual’s behalf).

  The Decision

  The Federal Court found in favour of the landlord, Perpetual, deciding that the Offer to Lease did not constitute a binding agreement to lease. His Honour emphasised the significance of the contractual words “subject to execution of all legal documentation by the Landlord and Tenant”, which had the effect of making the contract binding upon fulfilment of that condition.  His Honour said that the effect of those words was such that no contract was to come into existence independently of the legal documentation, which had not been executed.

  A key distinction was drawn between the facts of this case and the case of RTS Flexible Systems,[2] which had similar facts albeit with a crucial difference. In RTS, unexecuted draft contractual documentation, which contained a ‘subject to contract’ clause, was found to constitute a binding contract because there was substantial subsequent conduct by both parties which indicated the parties had reached a binding agreement, thereby waiving the conditional clause.

  The Lessons

  This case serves as an important warning to potential contracting parties to read the contract carefully before signing, keeping an eye out for any ‘conditional’ or ‘subject to’ clauses. It is also important to be cognisant of the effect of these clauses, as courts are likely to give full effect to the ordinary language, which may render the contract unenforceable until such conditions are fulfilled.

  If you are seeking advice on any contractual matters, or advice on agreements to lease, talk to our Business Team or Real Estate Team today.

  [1] ACME Properties Pty Ltd v Perpetual Corporate Trust Limited as trustee for Braeside Trust [2019] FCA 1189 [6].

  [2] RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (UK Production) [2010] 1 WSLR 753.

  Written by Katie Innes & Ben Grady with the assistance of Maxine Viertmann.

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• 

  Legal Challenges of Dealing with a Hoarding Neighbour

  Hoarding programs such as Hoarders and The Hoarder Next Door have become popular in recent times. This helps the average citizen understand that living with or near a hoarder can be difficult (Dante himself depicted hoarders in his fourth circle of Hell). Hoarding is a disorder describing a person’s persistent difficulty to discard possessions. It affects the person suffering the disorder and those living around them. It is not difficult to imagine the hygiene and safety issues, both for occupants and for neighbours, which arise due to the over accumulation of property. So, what can you do if you live next to a hoarder? Unfortunately, there is no straight forward answer and there are few effective options available to neighbours affected by hoarding.

  Hoarding Relief

  In NSW, relief can be sought under the Local Government Act 1993. The Act permits council, if land or premises are not kept in a safe or healthy condition, to make an order requiring the owner or occupier to refrain from doing certain things to ensure that the safe and healthy condition is maintained. However, council action may not be enough to have any lasting effect.

  Clean, litigate and repeat

  A good example of the difficulties faced by neighbours and councils is the notorious case of Bobolas v Waverley Council [2006] NSWLEC 442. In this case, the Bobolas family and Waverley Council have been in dispute for decades over the continuing accumulation of garbage on the property. At the centre of this dispute are the neighbours who are dealing with the smell of garbage, and the rats that are attracted to the garbage, on the property. In this matter, Council have forcibly cleaned the property 13 times and have made four attempts to sell the home to pay for the cleaning and legal costs resulting from litigation and the forced clean-up of the property. In each instance Council has been unsuccessful as the Bobolas’ pay the outstanding clean-up costs upon Council commencing litigation. The matter has been a continuing cycle of forced clean-up and litigation, all while the neighbours surrounding the property continue to suffer.

  Another option to combat hoarding that exists in some jurisdictions is for the council to seek a zoning declaration that a property is being used for an unlawful purpose such as a “junk yard”.[1] This still provides the challenge of prevention of the refuse from accumulation and only provides a method to force the clean-up. Once the property has been cleaned, the fact remains that despite the nuisance and risk to health and property values of the surrounding neighbours, people are often entitled to do as they please with their own property.

  For further information on dealing with a hoarding neighbour, see our previous article.  To find out more about seeking resolution regarding a hoarder in your local area, speak with someone in our Litigation & Dispute Resolution Team today.

  [1] See Baulkham Hills Shire Council v Stankovic [2005] NSWLEC 110.

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• 

  Legal incapacity and the impact on your business: September Business Breakfast Club summary

  This month at the Business Breakfast Club, Golnar Nekoee and Lauren Babic of BAL Lawyers discussed legal incapacity and the impact on your business, voidable transactions and advisors’ responsibilities.

  How do you determine legal incapacity?

  Generally, people think of legal incapacity to include the elderly or those with cognitive decline. Legal incapacity is not just limited to those instances.

  Golnar Nekoee explored the three commonly recurring categories of legal incapacity we face in business:

  1. Persons under the age of 18 years (legal minors);
  2. Persons whose estates are under administration; and
  3. Persons with limited or no capacity to understand the nature and effect of the transaction.

  It is important to examine the ability of the decision maker as compared to the task or transaction at hand.

  What are some signs of limited capacity to understand the nature and effect of a transaction?

  The following are some red flags that you may consider when dealing with a client that you suspect lacks the requisite capacity to contract:

  • your client demonstrates difficulty with recall or memory loss;
  • your client has ongoing difficulty with communication or is disoriented;
  • your client is accompanied by friends or family who speak on their behalf;
  • there is a sense that something about your client has changed; and
  • your client has changed advisors several times over a short period.

  What is your role in the transaction?

  The key point arising from the case law on this issue is that there is no ‘fixed standard of sanity’ or test that can be applied to determine capacity. Rather, you should ensure that the contracting party has such soundness of mind as to be capable of understanding the general nature, purpose, effect and risks of the contract or transaction which they wish to enter into.

  If you enter into a transaction with someone who is later found to not have the requisite legal capacity, an interested person can seek to have the contract declared void or voidable.

  The concept and consequences of incapacity have been explored in a variety of cases. Many of these cases show that if one party to a contract did not know, or should not reasonably ought to have known of the particular vulnerabilities that creates the incapacity, that party will have a sound defence.

  What you can do if you doubt a person’s capacity?

  It is always difficult for a professional who has concerns regarding a client’s capacity to contract or transact, given it is a sensitive topic to navigate.

  Firstly, you should make a preliminary assessment as to capacity. If doubt arises, you should seek a clinical consultant or formal evaluation by a clinician with expertise in cognitive capacity assessments (if it is appropriate to do so). It is then important to make a final judgment as to whether to continue with the transaction or not.

  When making your final assessment of a client:

  • Observe your client and/or the other party. Do they repeat themselves frequently? Do they appear to understand? Are they agitated?
  • Ask open ended questions of your client and/or the other party.
  • Take detailed notes.
  • Ask your client and/or the other side why they are undertaking the transaction and do they understand the benefit and risks to them.
  • Enquire as to whether they have sought legal and financial advice.

  Legal capacity has far reaching implications for contracting parties and beyond. If you are concerned about this issue or require advice in relation to a topic that arose in this seminar, please contact the Business Team at BAL Lawyers.

  Join us at our October Business Breakfast Club addressing Licencing and Leasing in Hospitality on Friday 11 October 2019.

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• 

  OPENING THE CAR DOOR TO TROUBLE

  With more cyclists on the road, colliding with an open car door as you ride blissfully down a road, is a recognised hazard of cycling in an urban setting.  This is often referred to as “dooring”.  Injuries can range from being shaken up, to a broken collar bone, to more serious and life threatening injuries.

  So whose fault is it when a cyclist gets “doored”?

  Cyclists are usually required to ride in bike lanes or to the left of traffic, which places them close to parked cars.  Before opening a car door, a driver and passenger are required to check not just for oncoming cyclists but, in case another car or pedestrian is approaching behind them.

  In most cases, the person who opens a door is responsible, if a cyclist gets doored.  It is possible for the person who opens the door to argue that the cyclist should have avoided the door.  Usually, there is very little a cyclist can do to avoid these accidents.  A cyclist may have sufficient time to swerve to avoid a car door but, in a worst case, result in the cyclist end up being struck by an oncoming car.  As scary as getting doored is, a cyclist hitting the car door rather than swerving into oncoming traffic could be the better (and less painful) option, avoiding a potential fatal outcome.

  When a cyclist makes a personal injury claim against a driver or passenger, the cyclist must prove that the driver or passenger failed to act in a reasonable manner before opening their door.  The driver or passenger is required to make sure that no cyclist is approaching or riding by before opening their door.

  Legislation exists in the Territory which provides “a person must not cause a hazard to any person or vehicle by opening a door of a vehicle, leaving a door of a vehicle open, or getting off, or out of, a vehicle”.  Violators of this law can be subject to a maximum fine of $3,200.  However, this fine is minimal compared to the financial costs as well as the pain and suffering that a victim of a dooring accident may incur.

  A tricky issue arises when a child opens the door. In this instance, the responsible adult driver or the parent could be held responsible for the child’s actions.  This will depend on a close examination of the control that the driver or parent has over the child at the time, and what could be reasonably expected of a child as to their capacity to judge and appreciate the risk of opening the door.  The standard of care will vary according to the age of the particular child.  Judged by this standard, the closer the age of the child to the age of majority (18 years), the less the standard of care will be expected of the adult.

  With the increasing awareness of the dangers of doors, many cyclist-friendly countries have introduced a simple technique that drivers and passengers can adopt to help reduce the danger of opening a door in the path of a cyclist.  This is, simply open the car door using the hand furtherest away from the door.  Specifically, use your left hand on the driver side, and right hand on the passenger side to open the door.  This technique involves the motorist naturally rotating their body and checking over their shoulder for approaching traffic when opening a car door.

  Raising awareness that serious injuries can be caused from poor timing when you open a car door as a cyclist approaches or rides by will reduce the potential for injury to cyclists.

  If you have been injured in a bike accident, contact us to speak with an experienced injury lawyer.

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• 

  Modern Couples’ Guide to Joint Tenancy

  Joint tenancy has long been the norm for couples owning assets together. But many are unaware that another form of ownership – tenancy in common – may better suit their needs. This article explores the benefits and possible drawbacks of this lesser known form of ownership.  For the modern couple more closely resembling the Brady Bunch than the Flintstones, tenancy in common may be the answer.

  What’s the main difference between joint tenancy and tenancy in common?

  Joint tenancy and tenancy in common are forms of asset co-ownership, typically written into legal contracts pertaining to home ownership. The key difference between the two is their effect on the distribution of assets at the death of one of the partners. Joint tenancy is governed by the rule of survivorship. This means that at a partner’s death, their share of any joint assets become the sole property of the surviving partner.  Tenancy in common, on the other hand, sees asset shares distributed according to the terms of each partner’s will.

  In what situations is tenancy in common preferable?

  Tenancy in common may be preferable where couples wish to bequeath their share of assets in different ways.  In a recent example, Re Wilson[1], a husband (Leonard) and wife (Austral) initially owned their assets as joint tenants. Austral’s will set out her wishes for the distribution of her assets, but she was subsequently diagnosed with dementia and sadly lost the capacity to alter her will. Leonard, assuming on the basis of her diagnosis that she would predecease him, severed their joint tenancy in favour of tenancy in common to ensure his wife’s wishes would come to fruition.  Without this action, Austral’s assets on her passing would move to her surviving partner and hence not be distributed according to how she hoped.  It was a twist of fate that Leonard passed away first, however his actions ensured both partners’ dying wishes were taken care of.

  When may joint tenancy be preferable?

  Where tenancy in common provides flexibility, joint tenancy provides simplicity.  If both partners have identical wishes for the distribution of their assets, then joint tenancy is likely to simplify administration of the estate. No matter who passes first, the assets will be distributed in exactly the same way (provided, of course, that the surviving partner does not then change the terms of their will).

  Ensuring your tenancy arrangements are in order

  Ensuring your affairs are in order can be as simple as considering these two questions:

  1. Do you and your partner have identical wishes regarding the distribution of your assets?
  2. Will your assets be distributed in accordance with your wishes if you die before your partner?

  If you answered no to either or both of the above then it may be worth getting in touch with one of our estates lawyers to discuss severing your joint tenancy in favour of tenancy in common.

  Adapted by Reuben Owusu from the original article titled Severing joint tenancies: Getting it right can make all the difference by David Toole, Legal Director, Estates & Business Succession.

  [1] [2019] VSC 211; BC201902441

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• 

  Legal Challenges of Dealing with a Hoarding Neighbour

  Hoarding programs such as Hoarders and The Hoarder Next Door have become quite popular in recent times, helping the average citizen understand that living with or near a hoarder can be difficult (Dante himself depicted hoarders in his fourth circle of Hell). Hoarding, a disorder which describes a person’s persistent difficulty to discard possessions, not only affects the person suffering the disorder but also those living around them. It is not difficult to imagine the hygiene and safety issues, both for occupants and for neighbours, which arise due to the over accumulation of property. So, what can you do if you live next to a hoarder? Unfortunately, there is no straight forward answer and there are few effective options available to neighbours affected by hoarding.

  Hoarding Relief

  In NSW, relief can be sought under the Local Government Act 1993 which permits council, if land or premises are not kept in a safe or healthy condition, to make an order requiring the owner or occupier to refrain from doing certain things to ensure that the safe and healthy condition is maintained. However, council action may not be enough to have any lasting effect.

  Clean, litigate and repeat

  A good example of the difficulties faced by neighbours and councils is the notorious case of Bobolas v Waverley Council [2006] NSWLEC 442. In this case, the Bobolas family and Waverley Council have been in dispute for decades over the continuing accumulation of garbage on the property. At the centre of this dispute are the neighbours who are dealing with the smell of garbage, and the rats that are attracted to the garbage, on the property. In this matter, Council have forcibly cleaned the property 13 times and have made four attempts to sell the home to pay for the cleaning and legal costs resulting from litigation and the forced clean-up of the property. In each instance Council has been unsuccessful as the Bobolas’ pay the outstanding clean-up costs upon Council commencing litigation. The matter has been a continuing cycle of forced clean-up and litigation, all while the neighbours surrounding the property continue to suffer.

  Another option to combat hoarding that exists in some jurisdictions is for the council to seek a zoning declaration that a property is being used for an unlawful purpose such as a “junk yard”.[1] This still provides the challenge of prevention of the refuse from accumulation and only provides a method to force the clean-up. Once the property has been cleaned, the fact remains that despite the nuisance and risk to health and property values of the surrounding neighbours, people are often entitled to do as they please with their own property.

  For further information on dealing with a hoarding neighbour, see our previous article.  To find out more about seeking resolution regarding a hoarder in your local area, speak with someone in our Litigation & Dispute Resolution Team today.

  [1] See Baulkham Hills Shire Council v Stankovic [2005] NSWLEC 110.

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• 

  Kicked out of your own company? Federal Court finds in favour of oppressively and unfairly treated director

  It is every director’s worst nightmare: a rogue co-director locks you out of your business, removes your directorship, reduces your shareholding to nil and absconds with company profits: all without your knowledge or consent. Unfortunately, this nightmare was the reality for the plaintiff in the recent Federal Court case of Miao v I Need A Massage Pty Ltd, in the matter of I Need A Massage Pty Ltd [2019] FCA 1199

  The Facts

  The plaintiff, Ms Miao and the defendant, Mr Luo were both directors and shareholders of the company, I Need A Massage Pty Ltd, which was used to purchase and operate a massage business in Brisbane. As part of this arrangement, the parties agreed to contribute equally to the purchase price of the business, thereby taking equal shares in its income and expenses. Approximately one year passed before Ms Miao and Mr Luo had a serious personal dispute which caused their business relationship to break down irretrievably. Following this dispute, Mr Luo took steps to lock Ms Miao out of the business, and subsequently removed her as a director of the company. A month later, Mr Luo altered the company’s share register to reduce Ms Miao’s shareholding to nothing. Finally, Mr Luo sold the company’s business and retained the proceeds of sale for himself. All steps were taken without Ms Miao’s knowledge or consent. Ms Miao claimed this conduct was “oppressive” under ss.232 and 233 of the Corporations Act 2001 (Cth).

  Ms Miao applied to the Federal Court seeking orders that she be given access to financial records of the company, company meeting minutes, that the ASIC register be rectified and an order that the company be wound up.

  The Decision

  The Federal Court found in favour of Ms Miao, finding that Mr Luo acted without proper authority and in an oppressive manner.

  Justice Reeves decided to exercise his discretion to order a winding up of the company under section 233(1)(a) of the Corporations Act 2001 (Cth), due to the fact that the conduct of the company’s affairs, namely Mr Luo’s act of removing Ms Miao as director, reducing her shareholding to zero and excluding her from the operation of the business was oppressive or unfairly prejudicial to Ms Miao as director and member of the company.

  His Honour considered the fact that the winding up of a successful and prosperous company is not taken lightly, but instead requires a ‘strong case’. Nevertheless, His Honour found that winding up was justified because there were no other remedies available to Ms Miao for the unfairly prejudicial manner in which Mr Luo had acted and the company was not one which could be said to be “successful and prosperous”; the appointment of a liquidator was the only relief available to Ms Miao.

  The Lessons

  1. A director of a proprietary company cannot remove another director unless there is a resolution of the shareholders;
  2. A director cannot reduce a shareholder’s shareholding without their knowledge, consent or proper authority to do so;
  3. Judges have demonstrated their reluctance to exercise their discretion to order the winding up of a ‘successful and prosperous’ company. However, if winding up is the only remaining and suitable avenue of relief for an aggrieved plaintiff, they are more inclined to exercise their discretion to do so; and
  4. The court is more likely to exercise its discretion to wind up a company if:
     • There is continuing animosity between the shareholders/directors, that would make continued operation of the company difficult if not impossible;
     • If there is a ‘real risk’ of further oppression; and
     • If the company’s present activities are very limited.[1]

  If you are seeking advice on any disputes between directors or shareholders, contact our Business Team today.

  [1] Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478 at 494.

  Written by Riley Berry and Maxine Viertmann

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• 

  Dropping the gavel and donning the microscope: Court ordered inquiries into liquidator conduct

  What are Court ordered inquiries into liquidator conduct?

  Courts have a range of powers in relation to liquidators, including the power to order an inquiry into the external administration of a company and thus, the conduct of liquidators under sections 90-5 to 90-20 of Schedule 2 to the Corporations Act 2001 (Cth), previously, section 536 of the Corporations Act 2001.

  These provisions give Courts the ability to make such orders either on its own initiative or in response to an application made by ‘a person with a financial interest in the external administration of the company, an officer of the company, a creditor or ASIC’. The Court also has a broad power to ‘make such orders as it thinks fit in relation to the external administration of a company’, including an order that a person cease to be the external administrator of the company or an order requiring a person to repay to the company remuneration paid to the person in the course of external administration.

  When will a court order an inquiry into the conduct of liquidators?

  Courts may order an inquiry into the external administration of a company either on their own initiative or on application by creditors. In both cases, Courts have full discretion as to whether or not to order an inquiry or not.

  Courts are likely to order an inquiry if:

  • There is criticism regarding to the conduct of a liquidator connected to performance of the liquidator’s duties; and
  • There is a well based suspicion indicating a need for further investigation, which involves a “positive feeling of actual apprehension or mistrust, as distinct from mere wondering.”[1]

  When Courts are considering whether or not to exercise their discretion to conduct an inquiry, it may take into consideration the following factors:

  • the nature and gravity of the alleged misconduct;
  • the strength of the evidence of such misconduct;
  • any explanation offered by the liquidator;
  • the existence of other available remedies;
  • the extent to which the liquidation has progressed;
  • the amount of money likely to be involved;
  • the availability of funds to pay for any inquiry;
  • the likely benefit from the inquiry;
  • the applicant’s legitimate interest in the outcome; and
  • whether there has been delay in making the application.

  To put this into context, we will look at a recent case: Australian Securities and Investments Commission v Wily & Hurst [2019] NSWSC 521

  The Facts

  In 2016, ASIC made an application to the New South Wales Supreme Court pursuant to the then section 536 of the Corporations Act 2001, seeking an order for an inquiry into the conduct of two liquidators during their involvement in the liquidation of a number of companies linked to Crystal Carwash chain. ASIC alleged that the liquidators were potentially liable for a range of breaches, including failing to disclose potential conflicts of interest, failing to disclose to ASIC suspected shadow directorships and failing to disclose potential conflicts of interest, particularly as many of the liquidated companies in question shared common directors and registered addresses. 

  The Result  

  In May 2019, the NSW Supreme Court dismissed ASIC’s application with costs. Justice Brereton was not satisfied that there was a “well-based suspicion” indicating a need for further investigation into the liquidators’ conduct, more specifically:

  • ASIC was unable to substantiate its claims of a conflict of interest as they were unable to prove that the companies had common referrers in regards to the external administrations in question;
  • ASIC did not identify any actual conflicts of interest for the liquidators and the Court held that a potential conflict does not preclude liquidators from acting;
  • ASIC failed to prove that the liquidated companies’ directors were shadow directors of each other company;
  • ASIC failed to prove that the companies’ directors were engaged in phoenixing activity for which the liquidators failed to disclose. His Honour stated that just because one company “goes into liquidation, another with the same ownership and directors commences to provide the same services to the same customers does not amount to illegal phoenixing”[2]; and
  • ASIC claimed that the liquidators failed to report matters to ASIC according to s 533 of the Corporations Act 2001,[3] but His Honour found that s 533 did not require liquidators to report to ASIC that a company may have shadow directors.

  Key Takeaways

  There are two main things to take away from this case.

  First, ASIC’s application and involvement in this case demonstrates its increasing willingness to actively investigate and pursue allegations against liquidators.

  Second, this case illustrates the Court’s reluctance to make orders granting an inquiry into the conduct of liquidators unless there is a ‘well-based suspicion’ warranting a further investigation, which involves a “positive feeling of actual apprehension or mistrust, as distinct from mere wondering”.[4] Thus, allegations against liquidators must be substantial enough to justify the exercise of the Court’s discretion on this matter. That being said, Courts have shown their willingness to intervene where liquidators are proven to have fallen short of their duties so as to cause or threaten to cause substantial injustice in some way. For more information, see this article.

  Written by Katie Innes with the assistance of Maxine Viertmann.

  If you have questions about a liquidator’s conduct, or the investigative provisions, talk to our Business Team or Litigation Team.

  [1] Australian Securities and Investments Commission v Wily & Hurst [2019] NSWSC 521 [36].

  [2] Ibid [77].

  [3] S 533 of the Corporations Act 2001 (Cth) requires a liquidator of a company to make certain disclosures to ASIC regarding certain offences that may have occurred prior to the liquidation by officers of the company or others.

  [4] Ibid [36].

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• 

  Hyperlinking defamatory material a no-go-zone

  Hyperlinking defamatory material on your Facebook page, benign as it may sound, could see you charged with defamation. A recent decision of the ACT Supreme Court in Bailey v Bottrill (No 2) [2019] ACTSC 167 warns that we all may only be a few inadvertent clicks away from defamation at any point in time.

  In Bailey, the ACT Supreme Court heard an appeal from the ACT Civil and Administrative Tribunal, in which the respondent had brought a claim against the appellant for “sharing” a functioning hyperlink and associated text to her Facebook page that redirected to a YouTube clip containing defamatory material regarding the respondent. The nature of the YouTube clip was clearly defamatory.  It imputed that the respondent was a member of a paedophile group, who used his employment to facilitate paedophilic activities. The appellant argued (unsuccessfully) that she was not liable in defamation as she made no contribution to the hyperlink and associated text, as neither were authored by her.  Accordingly, she argued that her role was no more than “passive” in sharing the link itself.

  The Court did not accept the appellant’s submission, and held that the appellant had participated in the publication of the defamatory content on her Facebook page, by providing the hyperlink.  In coming to this decision, Associate Justice McWilliam had regard to the nature of the appellant’s Facebook page, which was likened to a personal ‘noticeboard’, which was always under her control. By extension, Her Honour reasoned that it was the appellant’s conduct, and her conduct alone, that caused the link to appear on the page, such that in providing the link she ‘facilitated direct access to the defamatory material’.[1] Although the appellant did not author the text which appeared under the hyperlink, the combination of the hyperlink and the associated text appearing on her personal page, ‘bespeaks a willingness on the appellant’s part to transport the enticed searcher immediately to the relevant web page on YouTube for more information’,[2] which was deemed to amount to publication of the defamatory content, in and of itself.

  This judgment has far reaching consequences for social media users, further extending the ever-growing ambit of defamation law. It is important to realise that the mere act of providing a functioning hyperlink to defamatory content may constitute ‘publication’ in defamation, even if one’s intentions are innocent, as doing so may facilitate direct access to the defamatory material. This decision serves as a grave warning for all social media users to take care when deciding what to share and distribute on their personal social media accounts. Exercise caution and discretion when sharing content on social media, noting that the World Wide Web is only a few clicks away from becoming a world of woe.

  If you have run into trouble with social media in your organisation, see this previous article or this one or contact our Litigation and Dispute Resolution Team.

  Written by Ian Meagher and Maxine Viertmann.

  [1] Bailey v Bottrill (No 2) [2019] ACTSC 167 at [50].

  [2] Ibid at [52].

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• 

  The Drone Wars

  Google’s drone delivery service, “Wing” [1], has been rolled out in the north of Canberra after successful trial runs in Bonython and Royalla. Wing is apparently the world’s first permanent delivery drone service,[2] now serving eligible homes in Crace, Palmerston and Franklin. No longer in a galaxy far, far, away, the introduction of drone delivery has pushed the ACT to the forefront of the Drone Wars, with residents divided on whether the noise and the risks to safety and privacy are worth the convenience.

  In July 2018 when the drone trial first began in Bonython, opponents of the program had concerns regarding privacy, noise, and the danger of having someone’s hot coffee (or the drone itself) dropped on them from above.

  So who regulates the drones?

  The ACT Government has very limited scope to regulate drones as most incidents of “fly machines” falls to the Federal Government. The Civil Aviation Safety Authority (CASA) has oversight of drones and approves certified operators, but does not regulate noise or privacy. Airservices Australia can also regulate drone operators where engaged in certain commercial operations within controlled aerodromes, but their primary responsibility at this stage is to monitor aircraft (including drones’) noise. Privacy issues must be raised with the drone operator first, then may be referred to the Office of the Australian Information Commissioner (assuming the drone operator is bound by the Privacy Act). Yet finding out who is the owner of a particular pesky drone is a problem of its own. As a result of this multi-agency regulation, drone delivery currently operates in a regulatory grey area in Australia.

  So what are some of the legal issues associated with drones?

  Injuries

  The issues surrounding liability for injury are largely the same issues that arise in other methods of delivery. For a delivery driver that causes injury or damage, the company they work for is still liable through “vicarious liability”. For injury or damage caused by a drone, the drone company would be vicariously liable for the actions of the drone pilot, which would include the operator of the drone’s base computer. However if a person (in accepting a delivery) violated the terms of the agreement and was injured, say, by trying to take the delivered item prior to it being released by the drone or getting too close to the drone, then there may be contributory negligence and the drone company’s liability for damages may be reduced or possibly eliminated.

  Noise

  While Airservices Australia regulates the noise levels of drones, it was originally stated by an Airservices Australia spokesperson that drones of the size and weight used by Wing are currently exempt from the Airservices noise restrictions. Airservices Australia has since retracted this position and will now conduct a review to create noise regulations for drones.  When approving Wing, CASA advised that they considered the possible environmental impacts (including noise pollution) and imposed limited hours of operation and the requirement to use “quieter” drones. The drones that Wing uses are measured at 55 decibels at 25 meters which in terms of noise is somewhere between a washing machine (50dB) and a vacuum cleaner (60dB). Despite no current drone specific noise restrictions, the rules of nuisance still apply, yet noting few drones are likely to reach the noise of a lawnmower (70 dB), food blender (90 dB) or diesel truck (100dB) which can be used daily from 7 am to 10 pm.

  Privacy

  The other main issue is the cameras that the drones use to navigate while they fly. There is currently no ‘detect and avoid’ technology which means that the drones must be piloted remotely by video. According to Wings’ Privacy Policy[3] the aircraft use cameras to assist in the delivery process and that the cameras may capture images of the user during the delivery process. The user consents for these images to be kept and associated with the users Wing account as part of the Terms and Conditions of Service. However someone living close to the delivery may not have consented to these photos and may also be viewed in the images. There would be little more than company policy preventing a pilot from viewing through nearby windows or into a “private” backyard during delivery, even if the images were not captured. It will come down to each individual drone operator as to how they manage privacy. ACT legislation does not restrict photos being taken from a public area, and several cases confirm that taking photographs of people on private property from public property (which includes form the air) is permissible.[4]

  Are drones the future?

  Research has predicted that delivery drones could inject up to $40 million to the ACT economy by 2030 so we suspect they are here to stay.

  If you need advice on personal injuries or breaches of privacy, in relation to drones or generally, contact our Litigation or Business teams.

  [1] Wing Aviation Pty Ltd has been approved by CASA as a ‘licensed and certified drone operator’.

  [2] https://www.canberratimes.com.au/story/6018894/how-canberra-became-the-drone-capital/

  [3] https://wing.com/intl/en_au/privacy-au/

  [4] See, e.g. Victoria Park Racing and Recreation Grounds Co Ltd v Taylor  (1937) 58 CLR 479.

   Original Article published by Riley Berry on The RiotACT.

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• 

  Australia Starts to Move on Modern Slavery

  Human trafficking, slavery, forced labour, child labour, and slavery-like practices are not typically associated with the likes of first world countries such as Australia.  However, modern slavery is rampant in global supply chains, with the International Labour Organisation having estimated that there are over 40 million people trapped in slave-like conditions, with as many as 30 million or so of those being held in slavery and slave-like conditions across the Asia-Pacific region.[1]

  In light of this phenomenon, the Parliament of Australia passed the Modern Slavery Act 2018 (Cth) (MS Act) in November last year. The Act, which came into effect 1 January 2019, imposes requirements on entities based, or operating, in Australia, which have an annual consolidated revenue of more than $100 million. Essentially, these entities are required to report annually on the risks of modern slavery in their operations and supply chains, and on actions taken to address those risks. The report will be made to the Minister for Home Affairs and will be listed on the Modern Slavery Statements Register, which will be publicly available. It is envisaged that those who fail to report will be subjected to a ‘name and shame’ regime.

  What is modern slavery?

  Although there is no universally agreed definition of ‘modern slavery’, under the MS Act, modern slavery means conduct which would constitute an offence under Division 270 or 271 of the Criminal Code (including debt bondage, forced labour, servitude, deceptive recruiting for labour or services, and forced marriage), trafficking in persons,[2] or the worst forms of child labour.[3]

  Who has to comply with the requirements in the MS Act?

  The following are deemed ‘reporting entities’ under the MS Act:

  • Entities (both based and operating in Australia) with at least an ‘annual consolidated revenue of more than $100 million’ for the 12 month reporting period of each financial year;
  • The Commonwealth (reporting on behalf of non-corporate Commonwealth entities);
  • Commonwealth corporate entities with at least an ‘annual consolidated revenue of more than $100 million’ for the reporting period; and
  • An entity which has volunteered to comply with the requirements of the Act for that period.

  What has to be reported?

  There are slightly different requirements for single reporting entities, joint statements and Commonwealth statements, but all ‘modern slavery statements’ must:

  • identify the reporting entity;
  • describe the structure, operations and supply chains of the reporting entity;
  • describe the risks of modern slavery practices in the operations and supply chains of the reporting entity, and any entities that the reporting entity owns or controls;
  • describe the actions taken by the reporting entity and any entity that the reporting entity owns or controls, to assess and address those risks, including due diligence and remediation processes;
  • describe how the reporting entity assesses the effectiveness of such actions;
  • describe the process of consultation with any entities that the reporting entity owns or controls; (and in the case of a reporting entity covered by a joint modern slavery statement, the entity jointly giving the statement); and
  • include any other information that the reporting entity, or the entity giving the statement, considers relevant.

  What are the consequences of non-compliance?

  The MS Act does not impose monetary penalties for non-compliance. However, if a reporting entity fails to lodge a modern slavery statement, the entity may be requested to provide an explanation for the failure to comply; and/or

  • undertake specific remedial action in accordance with the above request;
  • the entity may face ‘public shaming’ by having its name and failure to comply publicised.

  These mechanisms rely on ‘reputation risk’ to incentivise compliance and drive self-enforcement.  While the MS Act has faced criticism for being “toothless” in the absence of penalties for non-compliance, such a regime is not dissimilar to the approach taken by the Commonwealth for gender equity reporting in the Workplace Gender Equality Act 2012 (Cth) (and the antecedent Affirmative Action (EEO for Women) Act 1986 (Cth).   

  Reporting: who, when, how?

  Who do you report to?

  Reporting is done through a ‘Modern Slavery Statement,’ basically a document that identifies the reporting entity and gives an overview of their structure, operations and supply chain/s, and most crucially describes the risks of modern slavery within the operations and supply chain/s and actions taken to ‘assess and address’ the risks.

  This must be submitted to the Minister for Home Affairs, who keeps these statements in the modern Slavery Statements Register.

  When is the report due?

  The statements cover a reporting period, defined as a financial year. As this section of the Act only came into force 1 January 2019, the reporting period will cover the financial year of 2019/2020.

  The statement must be given to the Minister within 6 months after the reporting period has ended. This means entities have until 31^st December of that year to lodge their statements (as the financial year ends 30^th June). So, for this year (which is the first reporting period for any entity), the reporting entity will have until 31^st December 2020 to submit their statement.

  How do you lodge a statement?

  Before the statement can be submitted to the Minister, it must be approved by the entity’s principal governing body and signed by ‘responsible member of the entity,’ such as the CEO, a director, a trustee (if the entity is a trust administered by a sole trustee) or the administrator if the company is under administration.

  Once executed, the statement must be provided to the Department of Home Affairs for publication in the Statements Register (an online central register). However, the Department of Home Affairs has confirmed that they have not yet created this online register, so stay tuned for more information about how to submit the slavery statement.

  Are there any developments in other states?

  In June 2018, the NSW Government passed the Modern Slavery Act 2018 (NSW) which has received assent but has not yet commenced. The NSW MS Act seeks to go further than the Commonwealth MS Act by extending its application to ‘businesses with $50 million in turnover (though only if they have employees in NSW)’, imposing penalties for non-compliance and establishing an Anti-slavery Commissioner who will, among other things, provide assistance and support for victims of modern slavery and make recommendations to prevent and prosecute offences of modern slavery.

  Since being passed, the NSW MS Act has been sent to the NSW Legislative Council’s standing committee on social issues, “to determine whether the Commonwealth’s comparable legislation renders part or possibly all of the New South Wales Act unnecessary”.

  Who can I get assistance from?

  The Department of Home Affairs has published guidelines, entitled Modern Slavery Act 2018: Draft Guidance for Reporting Entities. This draft guidance contains detailed explanations of the Act’s requirements and provides useful examples.

  For anyone who needs help with drafting a modern slavery statement, is aiming to improve supply chain practices, or suspects their business or a business they deal with is non-compliant with the Act, BAL lawyers offers commercially sound advice,  and can work with you to resolve these concerns.

  This article was written by Gabrielle Sullivan with grateful acknowledgement of the preparatory work of Maxine Viertmann and Sarah-Graham Higgs.

  [1] https://uploads.guim.co.uk/2017/05/31/Sub_91.pdf

  [2] As defined in Article 3 of the Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children, supplementing the United Nations Convention against Transnational Organized Crime, done at New York on 15 November 2000 ([2005] ATS 27)

  [3] As defined in Article 3 of the ILO Convention (No. 182) concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour,  Geneva on 17 June 1999 ([2007] ATS 38)

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• 

  Supreme Court Avails “Unavailable” Plaintiff

  If you tell the truth, you don’t have to remember anything.

  – Mark Twain

  It is common in popular TV culture for court room dramas to include terrified witnesses facing a barrage of questions from unrelenting counsel donning robes and wigs. In keeping with this popular conception, evidence in court hearings is typically given in person (albeit the case that how this plays out in practice is often less dramatic). In some instances, witnesses can give evidence by written affidavits, though even then a witness is often required to be available in person to have the fullness of their evidence tested in the witness box.  The basis for requiring witnesses to give evidence in person is founded in hearsay rules within (almost) uniform evidence legislation across Australia – here, being our Evidence Act 2011 (ACT).  Put simply, in the absence of a primary witness giving first hand evidence of what they saw or heard, the hearsay rule prevents another person, or document, giving evidence of what the primary witness would say, if they were available and present in court (“the hearsay rule”).

  Of course, like all good laws, there are exceptions to this general starting point.   For instance, in civil proceedings, the hearsay rule does not prevent evidence being adduced of earlier representations made by the primary witness, or documents containing the primary witness’ representations, if the primary witness is “not available to give evidence about an asserted fact”.

  But what then constitutes the unavailability of a witness?  Certainly death is an obvious black and white example, though anything short of that can fall into a grey area.  For example, is a witness that is physically “available” to attend a court hearing, but mentally incapable of assisting the court, captured by the hearsay exception?

  Justice Mossop of the ACT Supreme Court recently considered the issue in Hughes v Sangster [2019] ACTSC 178.   His Honour was asked to consider whether an Alzheimer’s sufferer, who was:

  1. physically available to attend the hearing;
  2. capable of understanding questions;  but 
  3. incapable of repeating the questions or remembering their context;

  was truly unavailable for the purposes of the hearsay exception.  In the unique circumstances in the Hughes case, His Honour ruled that that the particular witness (“Mrs Hughes”), being the plaintiff in the case, was unavailable.  That had the effect of allowing a number of documents – in the form of notes and legal instructions – containing previous representations of Mrs Hughes into evidence, notwithstanding she could not be cross-examined on them.  

  What were the facts? 

  Mrs Hughes and the defendant, are mother and daughter; sadly with a difficult history. In 1999, Mrs Hughes and the defendant purchased a block of land in Nicholls as joint tenants (”the Property”).  Mrs Hughes financed the land purchase and construction costs, totalling $380,000.  It was Mrs Hughes’ position that the agreement with the defendant required the defendant’s 50% contribution (that is, $190,000) to be paid over time in consideration for her respective interest in the Property.  

  The defendant did not disagree with this starting position.  However, she held that, when calculating the $190,000, Mrs Hughes had also agreed to “take into account” an amount of $125,000 which was previously offered to the defendant by Mrs Hughes but never paid. The defendant also maintained that she had paid for a number of household contributions over the years she resided with Mrs Hughes, which should be applied as contributions towards discharging the $190,000 owed by her.  Beyond these contributions, it was common ground that the defendant also made various payments totalling $20,000, prior to moving out of the Property in 2007.

  The alleged $125,000 contribution came about from a letter written by Mrs Hughes to the defendant in 1997, two years prior to the Property being purchased.  In her 1997 letter, Mrs Hughes expressed a desire to discharge the defendant’s mortgage to the tune of $125,000, “should [she] be able to”. As events transpired, Mrs Hughes did not settle the defendant’s mortgage.  Equally, a liability of Mrs Hughes to the defendant in the sum of $125,000 was not documented in any way in relation to the purchase of the Property when that transaction took place in 1999.  To the contrary, as the defendant made her various payments towards the purchase, Mrs Hughes wrote receipts which noted the running tally of what was left owing on the defendant’s $190,000 contribution.  On one occasion, these receipts were confirmed by a counter-note of the defendant which read “$183,000 owing”.

  Despite this, a dispute ensued between Mrs Hughes and the defendant from 2007 onwards, when the defendant moved out of the Property and refused to make any further contribution towards it or its upkeep.  Mrs Hughes instructed solicitors to negotiate a buy out of the defendant’s share, though the negotiations were unsuccessful. Due to a combination of financial and health reasons, Mrs Hughes was then unable to pursue the matter.

  Eventually, in December 2016, Mrs Hughes was diagnosed with moderate to severe Alzheimer’s dementia.  In January 2017, her husband, Mr Hughes, was appointed by the ACT Civil and Administrative Tribunal as guardian and manager of Mrs Hughes’ finances and property.  Upon his appointment, Mr Hughes sought to downsize Mrs Hughes to a smaller, more maintainable home, in the south coast. However, the unresolved title issue at the Property meant that he could not do so without the defendant’s consent, which was only given conditional upon her 50% interest on the title being recognised.

  Left with little alternative, Mr Hughes commenced proceedings in the ACT Supreme Court seeking the Property be sold, with the beneficial interests of Mrs Hughes and the defendant to be adjusted to reflect their respective contributions to the Property’s purchase.  As Mr Hughes was not privy to any of the discussions between Mrs Hughes and the defendant which led to the Property being purchased, Mr Hughes relied almost solely on handwritten and typed instructions of Mrs Hughes to her former lawyers, prior to her losing capacity – arguing that the documents were admissible evidence as Mrs Hughes was otherwise not “not available” for the purposes of the hearsay rule.  

  What was the issue?  

  Evidence was taken at the hearing from Mrs Hughes’ treating geriatrician, Dr Selvadurai, who confirmed the nature of Mrs Hughes’ Alzheimer’s condition.  Relevantly, Dr Selvadurai gave evidence that Mrs Hughes’ condition, despite being in a quite advanced form, did not prevent her from understanding a question.  Rather, the difficulty lay in Mrs Hughes inability to retain the question in her mind for long enough to answer it in a reliable way. This medical evidence was relevant in the face of the following nuances to the hearsay rule in the Evidence Act 2011.

  Firstly, section 63 of the Evidence Act provides an exception to the hearsay rule, if a person who made a previous representation (here, Mrs Hughes) is not available to give evidence about an asserted fact (here, being what happened in 1999 when the Property was purchased).

  Secondly, section 4 to the Dictionary to the Evidence Act defines the ‘Unavailability’ of a person to include, amongst other reasons, if:

  … (b) the person is…  not competent to give evidence; or

  (c) the person is mentally or physically unable to give evidence and it is not reasonably practicable to overcome that difficulty.

  Section 13 of the Evidence Act provides guidance as to when a witness may be not competent (for the purposes of the section 4(b) definition above).  In the face of section 13, the distinction between the section 4(1)(b) and 4(1)(c) definitions in the Dictionary may often be one with little difference, as section 13 says:

  1. 1. 1. A person is not competent to give evidence about a fact if, for any reason (including a mental, intellectual or physical disability);
           1. the person does not have the capacity to understand a question about the fact; or
           2. he person does not have the capacity to give an answer that can be understood to a question about the fact;

     and that incapacity cannot be overcome.

     In the context of the evidence given by Mrs Hughes’ geriatrician, the first limb of the section 13 test of competency did not excuse Mrs Hughes from having to give her evidence first hand.  If asked a question, her doctor’s evidence was that Mrs Hughes could understand it. However, the argument the followed was whether Mrs Hughes had “the capacity to give an answer that [could] be understood to a question about the fact”.  Relevant to that question, the defendant’s submission was that Mrs Hughes’ inability to give a cogent or reliable answer is a distinct issue to whether her answers could be understood.  After all, to answer “I don’t remember”, is a response to a question which makes sense.  Ultimately though, this is where the broader exclusion at the definition at section 4(1)(c) of the Dictionary was applied by Justice Mossop to find that Mrs Hughes’ Alzheimer’s condition was a mental condition which rendered it ‘not reasonably practicable’ for her to give evidence in person.  This permitted her previous instructions to her former lawyers being admitted into evidence, notwithstanding Mrs Hughes was not able to be cross-examined on them.

     Of course, just because Mrs Hughes’ notes were capable of being taken into evidence, the question of what weight should be applied to them was a further issue to be considered.  In this respect, even in the absence of Mrs Hughes being available to be cross-examined, Justice Mossop considered Mrs Hughes’ notes to be more reliable than the evidence of the defendant, whose evidence on central issues His Honour found to have involved ‘forensically targeted reconstruction’.  In particular, His Honour rejected answers provided by the defendant which attempted to avoid the probative value of the receipt signed by the defendant which acknowledged “$183,000 owing”. 

     What was the outcome?

     Notwithstanding Mrs Hughes was not available at the hearing to give evidence (either to advance her case, or to rebut the defendant’s counter argument), Justice Mossop rejected the defendant’s contention that the amount of $125,000 was to be deducted from the defendant’s contribution.  His Honour also rejected the defendant’s ancillary arguments that other day-to-day household contributions were “taken into account”. 

     The Property was thus ordered to be sold, with the defendant’s interests in the Property adjusted to reflect her contributions towards its purchase.  As the evidence showed the defendant contributed $20,000 towards the $380,000 purchase price, the defendant’s interest was, in effect, reduced to only 5.26%. 

     The lesson

     Exceptions to the hearsay rule can be technical.  Whilst the breadth of documentary hearsay evidence admitted in the Hughes case may have been an exception to the norm, it equally is true that a party should not assume that their first-hand evidence will be preferred by the court solely on the basis that their opponent is unavailable to give their evidence in the usual way.  

     Whilst Mrs Hughes is still alive, many elements of her case were analogous to litigation involving a deceased estate where family members have conflicting evidence as to what promises have been made by a deceased (that is, ‘unavailable’) person.  In such situations, the courts have held that:

     … in a claim based on communications with a deceased person, the court will treat uncorroborated evidence of such communications with considerable caution.

     In the case of Hughes, the court applied such caution in rejecting the evidence of the defendant that went to the critical issues of the case.  In doing so, Justice Mossop was left finding in favour of Mrs Hughes, notwithstanding she was unavailable for the entirety of the proceeding.  Whilst Mrs Hughes may never fully comprehend the ramifications of the outcome in her favour, she may at least now downsize with her husband, as she had sought to do for several years prior to the court proceedings becoming necessary.

     To speak with a lawyer from our Estates or Litigation team, contact us today.

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• 

  Phoenix activity and director identification numbers: August Business Breakfast Club summary

  This month at the Business Breakfast Club, BAL Lawyer Riley Berry spoke about new developments in combatting illegal phoenix activity and the potential implementation of Director Identification Numbers.

  Illegal Phoenix Activity

  Illegal phoenix activity is a term that is often used when a new company is created to continue the business of a company that will be deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements. The Australian Government is making the prevention and punishment of illegal phoenix activity one of its top priorities.

  A primary tool in this fight is the Phoenix Taskforce which is a joint effort comprised of 35 agencies including the ATO and ASIC. We discussed recent prosecutions of phoenix activity that have occurred as a result of the increased scrutiny of the taskforce.

  We also canvassed the legislative reform the Government has been undertaking in this space:

  1. Introduction of the Insolvency Law Reform Act 2016 which changed the law relating to the registration and discipline of liquidators and the conduct of external administrations;
  2. Introduction of the Treasury Laws Amendment (2017 Enterprise Incentive No. 2) Act 2017 which focussed on honest business restructuring. This legislation creates a safe harbour for company directors from personal liability for insolvent trading if the company is undertaking a restructure outside formal insolvency; and
  3. Introduction of the Treasury Laws Amendment (Combatting Illegal Phoenixing) Bill 2019 on 4 July 2019 which introduces a suite of new criminal offences and civil penalty provisions for company directors and other persons that facilitate ‘creditor-defeating dispositions’.

  Combatting Illegal Phoenixing Bill

  This proposed Bill sets out a new term, ‘creditor-defeating dispositions’ which, if passed, will be inserted into the Corporations Act 2001.  A ‘creditor-defeating disposition’ is ‘a disposition of company property for less than its market value (or the best price reasonably obtainable) that has the effect of preventing, hindering or significantly delaying the property becoming available to meet the demands of the company’s creditors in winding-up’.

  The Bill also proposes to set up new powers, including:

  • Allowing liquidators to apply for a court order to make creditor-defeating dispositions voidable in certain situations;
  • Allowing ASIC to recover company property disposed of or benefits received under a voidable creditor-defeating disposition for the benefit of the company’s creditors; and
  • Preventing directors from improperly backdating resignations or ceasing to be a director where that would leave the company with no directors.

  Director Identification Numbers

  The reintroduction of the Treasury Laws Amendment (Combatting Illegal Phoenixing) Bill also foreshadows the likely reintroduction of proposed changes to amend the Corporations Act 2001 to introduce director identification numbers. This would see that each person who consents to being a director being assigned a unique identifier that they will retain even if their directorship ceases or they become a director of another company.  It will allow traceability of a director’s relationships across companies and prevent the use of fictitious identities, whether accidental or intentional. It aims to monitor and deter phoenix activity as well as control and flag any repeated unsavoury behaviours of a director across different companies.

  We recommend that all directors keep an eye on this space to see what changes are introduced.

  If you are concerned or have questions about how these changes might affect you, please contact BAL Lawyers Business Team.

  We hope you can attend our next Business Breakfast Club, which will be held on Friday 13 September 2019.  Please RVSP here.

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• 

  ASIC v Vocation - Advances in stepping stone liability

  On 31 May 2019 the Federal Court of Australia handed down its judgment in the case of ASIC v Vocation Limited (in liquidation) [2019] FCA 807, providing important insights into the expanded ambit of stepping stone liability. Stepping stone liability refers to the process of finding a director liable for permitting a primary breach of the law (usually the Corporations Act) by the company. More information on stepping stone liability can be found in our previous article here.

  Facts:

  Vocation Ltd (Vocation) was a listed entity which provided vocational education, training and assessment services and operated under a series of contracts with the Victorian Department of Education and Early Childhood Development (the Department).

  In July 2014 the Department notified Vocation of various concerns regarding the way Vocation was managing its contracts with the Department. The Department subsequently withheld payments to Vocation pursuant to the contracts. Vocation made an announcement in August 2014 stating that the contracts with the Department had not been suspended and that any actions taken by the Department would not have a material impact on the company.

  In 2016 ASIC commenced proceedings against Vocation as well as Vocation’s former Chief Executive Officer, former Chair, and former Chief Financial Officer (and Secretary), alleging that Vocation had breached its continuous disclosure obligations under s674(2) of the Corporations Act 2001 (Cth) (the Corporations Act). Specifically, that Vocation had failed to make full and proper disclosure of the nature and extent of the Department’s concerns and the withholding of payments, as this information could materially impact the company’s share price. Hence, the announcement made by Vocation in August 2014 was allegedly misleading.

  Finding:

  Justice Nicholas found that:

  1. Vocation contravened its continuous disclosure obligations under s674 of the Corporations Act; and
  2. Vocation engaged in misleading or deceptive conduct in contravention of s1041H of the Corporations Act through its August announcement, in which the company stated that actions by the Department would not have a material impact on the company, when it would (in fact) have a considerable impact on the company’s share price.

  His Honour also found that:

  3. the former CEO and Chair of Vocation contravened s180 of the Corporations Act which obliges directors to act with due care and diligence as they caused or permitted Vocation’s contravention of its continuous disclosure obligation; and
  4. the former CEO and CFO contravened s180 of the Corporations Act by causing Vocation’s contravention through its misleading announcement.

  Key Takeaways:

  1. Vocation’s contraventions of the Corporations Act were used as the stepping stones to draw liability back to the company directors, for ‘causing or permitting’ Vocation to breach these provisions.
  2. Decisions relating to continuous disclosure are not business judgements and so the business judgement rule is not a defence to a failure to comply with continuous disclosure obligations.
  3. Directors will not be permitted to rely on the advice of management and advisers when the directors know or should know any facts that would deny reliance.
  4. Directors must adequately inform themselves as to the nature and scope of the relevant business issues, and boards must analyse information that is provided to them, in a critical manner.

  If you have any questions about stepping stone liability or director duties more generally, contact our Business and Corporate Team.

  Written by Lauren Babic and Maxine Viertmann.

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• 

  Remuneration reprimand: Liquidator remuneration under scrutiny

  In February 2019 the Federal Court delivered its decision in Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 2).[1] The proceedings were commenced by the liquidators of three companies, SK Foods Australia Pty Ltd (in liquidation), Cedenco JV Australia Pty Ltd (in liquidation) and SS Farms Australia Pty Ltd (in liquidation). The liquidators were seeking an order from the Court[2] to validate the defects in the liquidators’ remuneration reports and hence get an order approving their remuneration. Orders can be granted if:

  • the defect is of a procedural nature;
  • the liquidators acted honestly; or
  • it is just and equitable to make such an order.

  ASIC intervened in the proceedings alleging that the liquidators had failed to comply with their duties under the then sections 449E and 499(7) of the Corporations Act 2001, on the basis that the remuneration reports were inadequate and insufficient.

  The Result

  The Federal Court rejected the liquidators’ application to validate the creditors’ resolutions which purported to support the liquidators’ charge of $5m in remuneration fees.  Justice Besanko took issue with the liquidators’ charge out rates of $700 per hour, finding that the hourly charges were “excessive,”[3] and beyond the realm of reasonable remuneration. His Honour also found that the remuneration reports provided to the creditors were inadequate as they described the work done with such a ‘high level of generality’ such that it could not be said that the creditors were given sufficient information to make an informed assessment about the reasonableness of the proposed remuneration. This, he reasoned, would have caused, or would likely cause, substantial injustice to the creditors of the liquidated companies. Ultimately, Justice Besanko held that these failures amounted to contraventions of the then sections 449E and 499(7) of the Corporations Act 2001.

  The Federal Court dealt its final blow to the liquidators in June this year, when it ordered that the liquidators repay approximately $1.9 million (or 30% of the remuneration they were paid) as administrators of the three companies.[4] Justice Besanko ordered that the liquidators also pay interest on the repayment sum, in addition to paying ASIC’s costs as intervener.

  Key Takeaways

  The outcome of this case yields important lessons for liquidators, including that:

  • Courts are likely to take issue with overly general and scantily detailed remuneration reports, as it may lead to substantial injustice for creditors;
  • Liquidators should be able to justify their hourly rates and should take care not to charge excessive remuneration fees, as the rendering of excessive hourly fees is unlikely to go unchecked by Courts;
  • Courts have wide powers to make orders in relation to liquidator conduct. As in this case, Courts may undertake, what is in effect, an inquiry into a liquidators’ conduct without the parties having made an application for such an inquiry to be conducted; and
  • Practitioners should note that ASIC is taking an increasingly active role in investigating and intervening in financial misconduct proceedings.

  If you are a liquidator seeking advice on remuneration, or a creditor who is concerned about the remuneration being claimed by a liquidator, contact our Business Team.

  [1] [2019] FCA 93

  [2] Pursuant to section 1322 of the Corporations Act 2001 (Cth)

  [3] [313].

  [4] Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 3) [2019] FCA 879

  Written by Kaite Innes and Maxine Viertmann.

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• 

  Whistleblowing and Grievance Handling: July Business Breakfast Club Summary

  This month at Business Breakfast Club, BAL Lawyers Senior Associate, Anca Costin spoke on the topic of Whistleblowing and Grievance Handling.

  Widespread changes to Australia’s whistleblower protection regime have now come into force. On 19 February 2019, the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill was passed by Parliament. This bill amended the Corporations Act, with these reforms operative from 1 July 2019.

  These amendments are set to create a much more expansive and strengthened whistleblower protection framework.

  Anca’s presentation focused on the key changes to the whistleblowing regime that all employers and HR managers need to be aware of, namely that:

  • The categories of people who can qualify as a protected whistleblower have been expanded. It is no longer the case that active employees, officers and contractors are the only groups of people covered by whistleblower protections, with former employees, officers and contractors as well as associates of the company now being offered protection.
  • The topics that a person may “blow the whistle” about have been broadened. Formerly, a whistleblower was only protected from disclosing conduct in contravention of the Corporations Act. However, whistleblowers will now receive protection for disclosing information relating to misconduct and general “improper” circumstances.
  • Whistleblowers can now elect to remain anonymous.

  A key emphasis of the presentation was that after these changes take effect, there is a real need for businesses to consider having a whistleblower policy in place.

  The following video on Whistleblowing was also shown:

   

  After 1 January 2020, all public and private companies will be required to implement a compliant whistleblower policy (with it being highly unlikely that any existing whistleblower policies will be compliant).

  If you require any assistance with drafting a compliant policy, please contact BAL Lawyers Employment Law & Investigations Group, or purchase our Whistleblower Policy.

  Our next Business Breakfast Club will be held on Friday 9 August 2019. Riley Berry of BAL Lawyers will be presenting on ‘Directors’ duties and the Director Identification Number’.

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• 

  GIPA Act and ‘out of scope’ information

  In a decision handed down on 10 July 2019, the NSW Civil and Administrative Tribunal has ruled that decisions about whether documents are outside the scope of a GIPA application are not reviewable by the Tribunal: Miskelly v Roads and Maritime Services [2019] NSWCATAD 133.

  This issue has not been squarely addressed in previous decisions of the Tribunal. By excluding review of a decision as to whether a document is within or outside the scope of a request altogether, the decision in Miskelly goes further than previous decisions, which have simply acknowledged that an agency has no obligation to provide material that has not been requested by an applicant[1].

  Background

  Mr Miskelly sought review of a decision by RMS to refuse him access to specified information concerning the costs and budget estimates for the Sydney Gateway Project.  He argued that there was a ‘manifestly overwhelming public interest’ in the disclosure of the information so that members of the public could know the estimated cost of this major infrastructure project.

  Many of the documents for which the RMS refused to allow access were Cabinet documents and much of the decision deals with whether RMS had reasonable grounds for not releasing those documents.  (In dealing with a Cabinet information claim under the GIPA Act, the Tribunal is limited to reviewing whether ‘reasonable grounds’ for the claim exist rather than, as is usually the case, deciding for itself what is the correct and preferable decision in relation to the request for access.)

  Out of scope documents

  Of more interest to local government, the Tribunal also dealt with a request by Mr Miskelly to review the decision by RMS that a number of documents initially identified during its search for the information requested by the applicant were not within the scope of his request.

  In coming to its decision, the Tribunal observed that every Government agency today has some form of computerised records management system (eg TRIM) that captures and manages both paper and electronic information held by the agency.

  The GIPA Act requires an agency to undertake reasonable searches to find any Government information held by the agency when the application was received[2] and this obligation expressly extends to carrying out searches using any available electronic information management system[3].  The Tribunal noted that it is not unusual, when conducting an initial search for relevant documents using a computerised document management system, that the search will locate documents which, on closer examination, are found not to contain information relevant to the access request. These records are commonly described as being ‘out of scope’.

  This is what happened when the RMS responded to the applicant’s GIPA request. A search was carried out using its computerised document management system and this identified a number of documents as being relevant which, on further review, were determined not to fall within the scope of the applicant’s request. The applicant asked the Tribunal to review that determination. The RMS argued that the Tribunal had no jurisdiction to do so.

  The Tribunal’s decision

  The Tribunal agreed with the contention made by the RMS that the Tribunal had no jurisdiction to review a decision that a document is ‘out of scope’. The Tribunal’s reasoning was as follows:

  • Under the Administrative Decisions Review Act 1997, the Tribunal is given jurisdiction to review a decision when the enabling legislation (i.e. legislation other than that Act) provides for applications to be made to the Tribunal for review of decisions of that kind[4].
  • The GIPA Act provides for the review by the Tribunal of a ‘reviewable decision’ by an agency.
  • Section 80 of the GIPA Act lists the decisions that are ‘reviewable decisions’. Some thirteen different kinds of decision are the listed in that section including, for example, a decision to refuse to provide access to information, a decision that the information is not held by the agency and a decision that information is already available to the applicant.
  • The list of reviewable decisions in s.80, which is quite specific and detailed, does not include a decision that the information requested is ‘out of scope’.
  • Hence the Tribunal does not have jurisdiction to review a decision that information requested by an applicant is ‘out of scope’.

  Implications for local councils

  The effect of the Tribunal’s decision Miskelly is that decisions made by councils as to whether documents are outside the scope of a GIPA application are not reviewable by the Tribunal.

  In drafting decisions under the GIPA Act, councils should therefore take care to distinguish any information which is determined to be out of scope from the information to which a council decides to refuse access under s.58(1) of the Act.

  For more information about this decision or its implications please contact Alan Bradbury.

  [1] See, for example, Ormonde v NSW National Parks and Wildlife Service (No.2) [2004] NSWADT 253 (at [58] to [66]

  [2] GIPA Act, s.53(2)

  [3] GIPA Act, s.53(3)

  [4] Administrative Decisions Review Act 1997, s.9

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• 

  Essential Guide to Local Government Law: Lapsing of a Development Consent

  A development consent can add significant value to land and can be costly to obtain. It is therefore important to understand when it will lapse. This guide will assist you in determining when this will occur.

  The statutory lapsing period

  The lapsing of a development consent is dealt with in the statutory provisions in s.4.53 (formerly s.95) of the Environmental Planning and Assessment Act 1979 (the Act). These provisions fix a period of time at the expiry of which the consent will lapse unless certain action has been undertaken.

  The starting point is s.4.53(1) of the Act. That subsection provides that a development consent will lapse 5 years after the date from which it operates.  However, the 5 year period can be reduced or extended under the subsequent subsections.  You also need to consider whether there is a deferred commencement condition. Both of these situations are explained below

  When can the 5 year lapsing period be reduced?

  Any reduction in the ‘default’ 5-year lapsing period is imposed at the discretion of the consent authority when it determines a development application.  However, there are 2 constraints on a consent authority’s ability to do so.  These are:

  • If a proposed development involves the erection or demolition of a building or the subdivision of land, the consent authority cannot reduce the lapsing period to less than 2 years from the date that the consent becomes operative;^[1] and
  • If the consent authority issues a development consent for a concept development application which requires the making of a subsequent development application and consent, the lapsing period cannot be reduced at all.^[2]

  When can the lapsing period be extended?

  If the 5 year lapsing period is reduced by the consent authority, the consent authority may extend the lapsing period by 1 year if the applicant for the consent (or any person otherwise entitled to act on it) applies, under s.4.54 of the Act, to the consent authority for a 1 year extension. Such an application must be made prior to the consent lapsing.^[3] The lapsing period cannot be extended by a modification application.^[4]

  The Act also provides that any reduction to the 5 year lapsing period imposed by the consent authority is to be disregarded if the consent falls into specific categories. ^[5] These categories were inserted into the Act in 2010 to due to difficulties in obtaining developer finance at that time, and also as a means of providing the Minister with the ability to the extend the lapsing period by regulation in the event of an economic downturn in the future.^[6] The categories are:

  1. If the development consent operated before, and lapses after, 26 May 2010;^[7]
  2. If the development consent lapsed between 22 April 2010 and 26 May 2010;
  3. If the development consent operated before, and lapses after, a date after 1 July 2011 which is prescribed by the regulations. At the time of writing no date has been prescribed by the regulations (but it may be future).

  If a development consent falls within any of these categories, the lapsing period will default to the period which is 5 years from the date from which the consent operates.

  What must be done to prevent a consent from lapsing?

  The action that must occur to prevent a development consent from lapsing depends upon what type of development has been approved.  It also depends on whether the consent has a deferred commencement condition.

  A. Deferred Commencement Consent

  A development consent may be granted subject to a condition that specifies that the consent does not operate until the applicant satisfies the consent authority as to any matter specified in the condition.[8]  In such a situation the consent will lapse if the applicant fails to satisfy the consent authority as to the matter specified within 5 years from the grant of the consent or, if a shorter period is specified by the consent authority, within the period specified.[9] This can occur regardless of whether or not physical works have been undertaken in attempt to satisfy the consent authority of a particular matter.  

  B. Development involving the erection of a building, subdivision or the carrying out of a work

  A development consent for the erection of a building, the subdivision of land or the carrying out of a work will lapse on the lapsing date unless the following three things occur:

  • ‘building, engineering or construction work’ is undertaken on the land which is the subject of the consent;
  • the work was ‘physically commenced’ before the date on which the consent would otherwise lapse; and
  • the work ‘relates to’ the approved development.^[10]

  A significant body of case law has developed in relation to these three elements and will be summarised below.

  1.  ‘Building, engineering or construction work’

  Under the Act, ‘building work’ is broadly defined as ‘any physical activity involved in the erection of a building’.^[11] Neither ‘engineering’ nor ‘construction’ work is specifically defined in the Act but the meaning of these terms has been considered by the Courts.

  In Hunter Development Brokerage v Cessnock City Council^[12] the definition of ‘engineering work’ in the context of a subdivision consent was found to include all activities associated with and forming a necessary part of, the discipline of engineering, survey work and geotechnical investigation applicable to the subdivision. These principles have also been applied to ‘works’ generally (i.e. not just subdivision).^[13]

  Examples of works which have been held by the Court to constitute ’building, engineering or construction work’ include:

  1. 1. extracting samples of water from the site for offsite quality testing;^[14]
     2. obtaining an acoustical engineering report relating to the noise made by trucks entering and exiting the site;^[15]
     3. the removal and testing of soil for the purposes of obtaining a remediation and validation report;^[16]
     4. digging boreholes for testing soil conditions;^[17]
     5. survey work.^[18]

  Care needs to be taken in relying on these examples, however, as the circumstances of each development will need to be considered to determine whether the work relied on in fact ‘relates to’ the development the subject of the development consent.

  2.         ‘Physically commenced’

  The statutory requirement that work is ‘physically commenced’ necessitates that work is commenced upon the land in a physical sense, as opposed to off-site work such as design and planning work.

  There does not need to be a material change to the physical nature of the land as a result of the physical work.

  3.         ‘Relating to’ the development

  The use of the term ‘relating to’ means that there must be some real relationship or connection between the work and the development in respect of which the consent has been granted.^[19] The requisite link between the work and the consent will be satisfied if the work is a necessary step in, or part of, the process required for the carrying out of the development. If the work serves more than one purpose, it is sufficient that one of those purposes bears a real relationship to the development.^[20]

  Importantly, for any work to constitute commencement so as to prevent the consent from lapsing, that work must be undertaken lawfully. Any work which is not lawful, for example, if it is not undertaken in accordance with the conditions of consent or is in breach of the Act, will not ‘relate to’ the development.^[21]

  C. Development other than development involving the erection of a building, subdivision or the carrying out of a work

  A development consent for any other type of development will not lapse if the use of the land, building or work, the subject of the consent, actually commences before the date on which the consent would otherwise lapse.

  For further information or assistance with orders, please contact Alan Bradbury and the Local Government & Planning team on (02) 6274 0999.

  Further Essential Guides to Local Government Law can be found here.

  The content contained in this guide is, of course, general commentary only. It is not legal advice. Readers should contact us and receive our specific advice on the particular situation that concerns them.

   

  [1] Environmental Planning and Assessment Act 1979 (NSW), s.4.53(2).

  [2] Ibid, s.4.53(2).

  [3] Ibid, s.4.54.

  [4] Kinder Investments Pty Ltd v Sydney City Council (2005) 143 LGERA 237; [2005] NSWLEC 737.

  [5] Environmental Planning and Assessment Act 1979,  s.4.53(3A).

  [6] New South Wales, Parliamentary Debates, Legislative Assembly, 22 April 2010, 22150 (David Harris, Parliamentary Secretary) and  New South Wales, Parliamentary Debates, Legislative Council, 18 May 2010.22828 (Penny Shape, Parliamentary Secretary) : second reading speeches  of the Environmental Planning and Assessment Amendment (Development Consents) Bill 2010.

  [7] Being the date that s.4.54 (formerly s.95(3A)) commenced.

  [8] EPA Act, s.4.16(3).

  [9] Ibid, s.4.53(6).

  [10] Above n 1, s.4.53(4). These three questions are referred to in Hunter Development Brokerage v Cessnock City Council (2005) 140 LGERA 201.

  [11] Above n 1,  s.1.4 and s.6.1

  [12] (2005) 140 LGERA 201.

  [13] Benedict Industries Pty Ltd v Minister for Planning; Liverpool City Council v Moorebank Recyclers Pty Ltd [2016] NSWLEC 122 at 61.

  [14] Norlex Holdings Pty Ltd v Wingecarribee Shire Council (2010) 177 LGERA 261.

  [15] Ibid.

  [16] Zaymill Pty Ltd v Ryde City Council [2009] NSWLEC 86.

  [17] Rowlane Investments Pty Ltd v Leichhardt Council (2013) 195 LGERA 9.

  [18] JMS Capital Pty Ltd v Tweed Shire Council [2006] NSWLEC 535.

  [19] Hunter Development Brokerage v Cessnock City Council (2005) 140 LGERA 201; Tovedale Pty Ltd v Shoalhaven City Council (2005) 140 LGERA 201 at 104.

  [20] Ibid.

  [21] K & M Prodanovski Pty Ltd v Wollongong City Council (2013) 195 LGERA 23.

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• 

  WHEN FACEBOOK IS NO LONGER YOUR BUSINESS’ FRIEND

  In June this year, the New South Wales Supreme Court handed down an important judgment of Voller v Nationwide News Pty Ltd; Voller v Fairfax Media Publications Pty Ltd; Voller v Australian New Channel Pty Ltd [2019] NSWSC 766. This case may have significant implications for organisations using public social media pages particularly around their liability for posts made by third parties.

  Mr Voller brought proceedings against three media organisations for defamation, alleging that the media organisations were liable for the defamatory comments made by members of the public on news stories or links that were published about Mr Voller on the media organisations’ public Facebook pages. The Court was required to consider whether the defense of innocent dissemination would apply to protect the media organisations (the defendants) from liability. Innocent dissemination is intended to protect people such as newsagents, booksellers, and internet service providers who unwittingly publish defamatory material without any negligence on their part.

  Ultimately, the Court found that organisations with public Facebook pages can be the “primary publishers” of the material and therefore liable for the defamatory posts made by the public.

  In coming to his decision, Judge Rothman drew a significant distinction between a public Facebook page and the operation of a public website. His Honour reasoned that on a public Facebook page, the administrator has the ability to prevent and vet comments made by others. By way of contrast the administrator of a public website has no capacity to prevent the publication of negative comments by members of the public, but is only able to remove the comments once made. This comparison led His Honour to find that the media organisations were primary publishers of the third party comments on their public Facebook pages, and the defense of innocent dissemination did not apply.

  Key Takeaways

  This case serves as an important warning to organisations that have public Facebook pages. Owners and administrators of these pages should be warned of their potential liability for the comments posted by the public on these pages. In light of the above decision, public Facebook page users should note the following:

  1. Courts are more likely to hold owners of social media accounts liable for the posts made by third parties, particularly so if the owner/administrator has the ability to prevent the publication of defamatory material – such as by pre-approval, comment hiding or vetting processes;
  2. The Court in this case clarified that organisations who utilise public Facebook pages for commercial purposes, assume the risks that certain comments may render them liable;
  3. If you have a public Facebook page to promote your business, consider:
  • • hiding comments made by members of the public until you have pre-approved or checked them;
    • utilising the Facebook list of banned words, which will hide or delete public comments which contain such words; and
    • blocking users who may make unacceptable, threatening or defamatory comments.

  If you have any questions or would like to discuss please feel free to get in touch with our Business team at BAL Lawyers.

  Written by Lauren Babic and Maxine Viertmann.

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• 

  What a drag! – Intoxicated Passenger takes on Taxi Driver

  In the recent ACT Supreme Court decision of Hargrave v Singh [2019] ACTSC 139, the court considered the culpability of an intoxicated passenger, who was struck by a taxi which had dropped him home at the end of an evening, after the passenger had chased down the taxi to dispute the fare.

  Background

  The plaintiff’s allegation was that, on 24 May 2014, he (a then 21 year old male) was struck by a taxi, causing him to suffer a myriad of bodily injuries, as well as associated psychological trauma, in the aftermath of the accident. In most accidents of this nature, the legal liability that flows is relatively straightforward; the driver of the vehicle owes a duty of care to the pedestrian to not drive the vehicle in a way that may cause injury to another.

  In this case though, the facts leading up to the incident were pivotal.  Specifically, the plaintiff and his friends had attended the Mooseheads Pub in Civic, where alcohol was consumed. At trial, the plaintiff gave evidence of having pre-drinks at a friend’s home prior to arriving at the Pub at around 11pm. He then consumed five to six schooners of beer between 11pm and 3am.

  At around 3am, the plaintiff, his girlfriend and other friends, shared a maxi-taxi home.  After the plaintiff’s friends were dropped off at various locations, an argument arose between the plaintiff and the driver in relation to the total of the ultimate fare. In the end, the plaintiff’s girlfriend paid the fare by using the plaintiff’s credit card, and was given a receipt. When the plaintiff and his girlfriend alighted from the taxi, the driver commenced to take off.  However, when the plaintiff viewed the receipt given by the driver, he proceeded to flag down the departing taxi to further dispute the charge to his credit card. In the course of doing so, the plaintiff was struck by the taxi, ending up being dragged into in the gutter.  The taxi driver did not stop, and kept going on into the night.

  Having suffered personal injuries, the plaintiff sued the driver in negligence in the ACT Supreme Court, with the claim ultimately heard and decided by the Honourable Justice Burns.

  The Findings

  The driver denied his driving of the taxi was carried out negligently, arguing the collision was caused by the taxi being chased down by the plaintiff (not vice versa).  The driver further defended the claim on the basis that the court ought to presume the plaintiff was contributorily negligent for his own injuries, due to his intoxication, pursuant to section 95(1) of the Civil Law (Wrongs) Act 2002 (ACT) (the Wrongs Act).

  That section of the Wrongs Act provides that “contributory negligence must be presumed if an injured person was intoxicated at the time of an accident giving rise to a claim for damages for personal injury and the defendant alleges contributory negligence”.  That is to say, the court’s starting point must be that the intoxicated party was negligent, and work backwards from there to determine whether that presumption should be rebutted. Subsection 95(2)(a) gives guidance on this, by clarifying that the injured person needs to establish, on the balance of probabilities, that the intoxication did not contribute to the accident; or the intoxication was not self-induced.

  Here, after consideration of medical, expert and lay witness evidence from both sides, Justice Burns was not satisfied that the accident was caused by the plaintiff’s chasing down of the taxi, and that a reasonable person in the driver’s position could have avoided the accident.  Judgment was thus entered in the plaintiff’s favour for just over $275,000.

  However, in arriving at that judgment sum, His Honour did accept that the plaintiff’s intoxication had to be taken into account.  In doing so, the effect of His Honour’s findings was that, but for the plaintiff’s intoxication and conduct, the damages awarded to him would have been 10% higher.

  Key Lessons

  The onus to rebut the effect of intoxication in a personal injury case falls on the intoxicated party.  In the event an injured intoxicated person is unable to rebut the statutory presumption of contributory negligence, then the damages that injured person may be entitled to, apart from the contributory negligence, must be reduced to the degree that the court considers just and equitable.

  In the present case, the plaintiff was lucky to have escaped without sustaining more serious injuries.  Arguably though, he was also lucky to have his damages reduced by only 10 per cent, given the starting point under section 95(1) of the Wrongs Act is for the courts to presume contributory negligence exists in cases involving intoxicated plaintiffs, unless the plaintiff can satisfy the court of a good reason why that should not be the case.  The legislative effect of section 95(1) may, of course, be a drag for plaintiffs to comply with, though it nevertheless is reflective of public policy that plaintiffs need be aware of when bringing such personal injury claims.

  Injured in a motor vehicle accident? Call our team at BAL Lawyers.

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• 

  Whose right to payment? ACT Building Contract protects homeowners from claims for payment by a subcontractor

  Is a homeowner legally required to pay a subcontractor a fair and reasonable sum for work performed and materials supplied when the building contract exists with the head contractor only?  The ACT Court of Appeal recently considered this question in its decision of Liu v A&A Martins Pty Limited [2019] ACTCA 8.

  The purchasers of an ACT block of land (“the Owners”) entered into a written contract with a head contractor, Maples Winterview Pty Ltd (“the Builder”) to build their family home.  A dispute arose when the Owners alleged defects in the building works of the Builder.  A separate dispute also arise where a sub-contractor to the Builder, A&A Martins Pty Limited (“the Subcontractor”), claimed monies from the Owners for work completed and materials supplied by the Subcontractor to the Owners’ benefit.  The Subcontractor ultimately brought an action against the Owners in the ACT Supreme Court, seeking restitution for unjust enrichment enjoyed by the Owners in receiving the benefit of the Subcontractor’s works.  Notably, the Subcontractor and Builder were related companies with common directors.  In the primary proceedings, the Supreme Court found in favour of the Subcontractor, and ordered a six figure judgment in its favour against the Owners.

  This decision was appealed on the basis that the Owner’s contract was with the Builder, such that the Subcontractor was not entitled to recover against the Owners in the absence of a request by them for the Subcontractor to have provided the services which it did (whether to the Builder, or otherwise).

  Background

  The building contract in question was a staged building contract whereby payment was due at the completion of each stage.  The Owners paid the Builder for stage 1, but argued the Builder failed to install insulation, being a requirement under stage 2.  The Owners withheld payment on the basis that the Builder had no entitlement to its progress payments for stage 2 until its requirements were met.  The Builder, by its Subcontractor, nevertheless continued work on the house until around 6 March 2012 when building work was suspended – leaving the house unfinished.

  The Maples Proceedings

  On 10 October 2012, the Builder purported to terminate the contract and commenced proceedings in the ACT Supreme Court to recover the cost of the building works.

  The Owners defended the claim on the basis that stage 2 was defective, such that the trigger for payment for subsequent stages never arose and the house was incomplete.

  The Owners were self-represented in these proceedings, though their defence in this regard was entirely successful.

  In obiter, the presiding judge (Mossop J) said that it would have been open to the Builder to complete the contract without insisting on the making of progress payments and then claim payment for the entire cost of the works at the conclusion of the project, at which point it could claim for practical completion once the certificate of occupancy could be obtained.  However, the contract was never completed by the Builder, which left the Owners to complete the works themselves.

  The A & A Martins Proceedings

  Following the decision in Maples, the Subcontractor, who was not a party in the Maples proceedings, brought separate proceedings against the Owners seeking quantum meruit or restitution based on unjust enrichment.

  Unjust enrichment is an equitable claim that arises where three circumstances are satisfied:

  • A party is enriched or benefited;
  • The enrichment has come at the expense of another party; and
  • The enrichment, or its retention, is unjust.

  ‘Unjustness’ is determined with regard to, amongst other things, lack of consideration and unconscionability.

  In these circumstances the Subcontractor argued the Owners had received a benefit at the Subcontractor’s expense which was unconscionable for them to accept without payment.  The Owners, meanwhile, denied receiving a benefit at all; having been left, they said, with defective building work that they had to complete without the Builder.

  McWilliam AJ recognised that there were intercompany arrangements between the Builder and Subcontractor which made them difficult, at times, to distinguish and further found that:

  In the absence of a contract it is clear enough that the work was carried out by A & A Martins at the request of the plaintiff and that there would be an entitlement to reasonable remuneration. That remuneration would be assessed on the basis of the market value of the services provided.

  On that basis, Her Honour entered judgment in favour of the Subcontractor in the sum of $198,484.20 plus interest.  The Owners were again self-represented during these proceedings.

  The Appeal

  The Owners appealed the judgment against them, this time represented by Bradley Allen Love Lawyers.  The judgment against the Owners was appealed on the basis that the Owners had entered into a written contract expressly with the Builder (that is, not the Subcontractor).  Any work done by the Subcontractor thus was not done “at the request of [the Owners].”  Rather, to the extent the Subcontractor did work, it must have done so as the request of the Builder – being the party who engaged the Subcontractor.

  The Court of Appeal found that it was not open to the primary judge to resolve the proceeding on the basis that the Owners knew, or ought to have known, that the Subcontractor was undertaking the works in some capacity other than as a subcontractor.  In the appeal, Justice Elkaim drew an analogy to a subcontracted painter asking a homeowner (whose arrangements are with their builder) what colour they wanted their walls painted.  If a homeowner, in that example, were to answer ‘blue’, that would not constitute a direction to undertake the work by the homeowner.  Rather, the painter would nevertheless still be on the site at the request of the builder.

  It followed that the Court of Appeal found that an essential step in considering a claim in quantum meruit is to ask whether, and how, that claim fits within a particular contract the parties have made. Here, the Owners contracted with the Builder who then chose to undertake the works as a separate corporate entity.  Where a company is afforded the advantage of arranging its business in a certain way, they will also bear the risk of the structure and the allocation of resources and risk under the arrangement.  Where the Builder was then disentitled to any monies under its contract with the Owners, the Subcontractor was not entitled to claim the same monies, in a roundabout fashion, by arguing quantum meruit principles.

  If you are involved in a building dispute, and if you are unsure of your legal rights and obligations under such agreements, this decision highlights the utility of  seeking early legal advice.  A failure to do so may be complicated and costly.

  If you have any questions about a potential breach in your building contract or guidance on entitlements to payment under a contract generally, please get in touch with Laura McGee and Ian Meagher.

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  Stamp duty changes in the ACT from 1 July 2019

  You may be aware that the ACT Government is introducing changes to the payment of stamp duty in the ACT from 1 July this year. But, what exactly will be changing from the current stamp duty regime?

  Home Buyer Concession Scheme

  The current Home Buyer Concession Scheme will be amended from 1 July 2019 so that the concession will be available to both new and established dwellings and there will be no property value threshold.

  This means that eligible first home buyers will no longer be required to purchase a new dwelling or vacant land for the concession to apply and will obtain the concession regardless of the value of the property. This will apply to Contracts exchanged after 1 July 2019.

  First home buyers will, however, still be required to meet all of the following eligibility criteria:

  1. The buyer must be over 18 years of age (or a lower age if approved in individual circumstances at the Commissioner for Revenue’s discretion).
  2. The total gross income of the all buyers and their domestic partners (if any) in the financial year prior to the transaction date (the Contract date) must be under the total gross income threshold amount. The threshold amount is based on a sliding scale beginning at $160,000 for single people or couples with no dependent children.
  3. All buyers and their domestic partners must satisfy the current and previous property home ownership test. This means that they must not have held a legal or equitable interest in land within the two years prior to the contract date.
  4. At least one buyer must occupy the property as their principal place of residence for a continuous period of at least one year beginning within twelve months of settlement of the transaction.

  As the relevant duty determination has not yet been released, some of the detail of the above may change between now and 1 July 2019.

  The change to stamp duty coincides with the ACT Government abolishing the first home owners grant. This means that first home buyers purchasing a new dwelling or vacant land below the existing thresholds (and who otherwise satisfy the eligibility requirements) will be able to obtain the first home owners grant only if the Contract is exchanged on or before 30 June 2019.

  Changes to the rate of stamp duty

  The ACT government has also released the Taxation Administration (Amounts Payable – Duty) Determination 2019 (No 1) (the Determination). The Determination sets the amounts payable for stamp duty (where no concession applies) from 1 July 2019 for residential and commercial property in the ACT.

  The rate of duty payable for residential property has decreased across the board, meaning that all those who are not eligible for a stamp duty concession will pay less duty for contracts exchanged after 1 July 2019. The size of the duty reduction will depend upon the purchase price of the particular property in question.

  There has been no change to the rates of duty payable for commercial property, where no duty is payable for property with a dutiable value less than or equal to $1.5 million and $5.00 per $100 is payable for property with a dutiable value greater than $1.5 million.

  If you would like more information on the changes to stamp duty in Canberra, please contact Benjamin Grady or the Commercial Real Estate Section at BAL Lawyers.

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  The Ins & Outs of Intellectual Property: Business Breakfast Club June Summary

  This month at Business Breakfast Club, Lauren Babic of BAL Lawyers discussed all things intellectual property—how to define your organisation’s intellectual property, how to protect it, how to share it with partners for the purpose of co-development and the rights of joint owners.

  Intellectual Property

  Intellectual Property, or “IP”, is a broad umbrella term that encompasses a range of proprietary and related rights over intangible things. It exists in various forms, such as inventions, brands, designs or artistic creations.

  How do I define my company’s IP?

  “Ideas” are not capable of legal protection, unless you can fit the communication of the idea into one of the categories that allow protection. The communication or expression of the idea usually has to have a certain amount of originality to it.

  The key forms of IP (though not exhaustive) are:

  1. Copyright, protecting the original expression of ideas in works of art, literature, music, and drama, as well as films, broadcasts, recordings, compilations, computer programs, and so on.
  2. Designs, protecting the overall appearance of a product resulting from one or more visual features of the product (although not the product itself).
  3. Trade Marks, protecting ‘signs’ used to distinguish goods or services from your competitors in the course of trade. ‘Signs’ can include letters, numbers, words, phrases, sounds, smells, logos, shapes, pictures, movements, aspects of packaging or any combination of these.
  4. Patents, protecting inventions that are new, inventive and useful, including devices, substances, methods or processes.
  5. Confidential information, protecting ‘trade secrets’ and other information imparted in confidential circumstances from further disclosure (although this is a bit of a special breed and is not a proprietary right, per se).

  How do I protect my company’s IP?

  Copyright protection is automatic, and springs to life upon the creation of the work (presuming it meets the relevant legal criteria). However, there are several practical things you can do to protect your work, including copyright notices, attributions, keeping work confidential unless you need to publish it, and carefully documenting any rights you assign or licence to third parties.

  Trademarks and designs are different from copyright. These rights are not automatic, and depend on successful registration with IP Australia. There are extensive requirements that must be met when submitting such applications, including proof of things such as originality, distinctiveness, novelty, and other requirements. Similar practical considerations also apply – keep the work confidential unless you need to publish it, and document any third party rights.

  Joint ownership rights

  Joint ownership may arise on the basis of a verbal or written agreement between parties to that effect (apportioning ownership) or where multiple parties simply contribute to the creation of the IP.

  Where documented, it is critical that the agreement covers areas such as who has ownership, when ownership will be transferred, whether consents are required, who will cover the costs, the granting of licences, and confidentiality.

  Without a written agreement, the law will step in to provide a default position on critical factors concerning interests in the IP, exploitation and licencing. Usually, joint owners will be restrained from exercising their rights without the consent of the other and neither joint owner can realise any economic benefits without doing so together.

  For more information, please contact Lauren Babic. The next Business Breakfast Club will be held on 12 July 2019. If you would like to attend, please click here.

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  Canberra Home owner’s building insurance: are you covered?

  With concerns about building construction quality in the ACT becoming more prevalent, those buying a new dwelling or constructing their own may increasingly look to statutory warranties and insurance schemes for protection. However, the recent case of The Owners – Units Plan No. 3115 v The Trustees of the Master Builders Fidelity Fund Scheme [2019] FCA 115 (The Owners – Units Plan 3315) should serve as a cautionary tale, as these protections may not be a robust as they first seem.

  Insurance requirements under the Building Act

  The Building Act 2004 (ACT) (the Building Act) requires a builder to obtain one of the following prior to commencing certain residential building work:

  1. A residential building insurance policy for the work;
  2. A certificate issued by an approved insurer stating that the insurer has insured the work under a residential building insurance policy; or
  3. A fidelity fund certificate from an approved fidelity fund scheme.

  The insurance requirements of the Building Act apply to residential building work of no more than three storeys. The requirements are aimed at protecting home owners from the negligence or a breach of statutory warranties by the builder which causes the owner loss. In practice, in the ACT this will often be done by obtaining a fidelity fund certificate from the Master Builders Fidelity Fund scheme (the Scheme).

  The background of the case

  The Owners – Units Plan No. 3115 involved a claim made by the Owners Corporation of the Elara Apartments. Completed in 2007, the Elara Apartments have been beset by a long list of defects, with owners claiming flaws in the common property, structural load bearing walls, balconies and the provision of services.

  The Owners Corporation commenced proceedings against the Developer for breach of the statutory building warranties, however, these were discontinued when the Developer entered liquidation. The Owners Corporation then made a claim against the Fidelity Fund certificates issued by the Scheme in respect of each Unit (the Certificates). The Scheme refused to consider the claim due as it was made outside of the timeframe contained in the Certificates.

  The decision

  In The Owners – Units Plan No. 3115, the Court found:

  1. A claim under a fidelity fund certificate in the ACT does not arise until the builder becomes insolvent, disappears or dies and the owner suffers loss from breach of a statutory warranty or the builder’s negligence;
  2. The basis of the claim must arise within the period set out under the Building Act and the fidelity fund certificates (in these circumstances, this was five years after the issue of the Certificate of Occupancy for each unit); and
  3. As the Builder did not enter insolvency until after this period had expired, the claim did not arise within the period of cover and the Scheme was not required to consider the claim.

  As a result of the above, the Scheme was entitled to refuse to consider the Owners Corporation’s claim and the Owners Corporation was unable to obtain any relief from the Certificates.

  It is clear that when purchasing a new dwelling or constructing your own dwelling, there are important and complex considerations to take into account. The relevant insurance or fidelity fund protection is only one such aspect. Prudent buyers and home owners will conduct their own due diligence into matters concerning the construction of the dwelling (including the insurance cover) to ensure their investment is protected.

  If you need advice on building insurance, please contact Julian Pozza or the Commercial Real Estate Section at BAL Lawyers.

  Original Article published by Julian Pozza on The RiotACT.

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  Doing Business Better - Blockchain in Transport & Logistics

  If you take a look around you, the likelihood is that you are surrounded by all sorts of goods that have sailed oceans, crossed plains, and its title traded through many hands all before ending up in your home or workplace. It is estimated that around 90% of global trade annually is carried out by shipping. Yet, despite the enormous scale of the transport and logistics industry, and our immense dependence on it, the sector continues to grapple with—and tolerate—some serious inefficiencies.

  Each year, businesses involved in global trade absorb significant losses to account for uncertainty in their systems and records. One simple shipment can be subject to around 200 different transactions or communications, between up to 30 organisations.[1] With so many parties—often with different systems and with competing interests—the margin of error can swell considerably. Add to this the commercial incentives to retrospectively tinker at the edges of the data to cover over delays or damage, for example, and the problem grows larger still. To account for these inaccuracies, businesses often include extra inventory in their consignments, representing a significant ongoing cost over time.

  Earlier , we made the case for the incorporation of Blockchain technology in supply chain management. In this article, we explore the need for an innovative solution to data management in the transport and logistics industry, and how Blockchain may be just the right fit.

  Covered from end to end: the benefits of Blockchain in logistics

  One of the inevitable downfalls of the current machinery of international trade is that, despite process digitisation on a grand scale, there are still ‘analogue gaps’ that arise whenever goods and accompanying information are transmitted from one party or system to another.[2]

  When you multiply this across the entire supply chain, a significant margin of error and uncertainty emerges, leaving open the possibility that any given piece of inventory may be recorded as being in two places at once, or not being anywhere at all.

  Blockchain represents a well-matched solution to this problem. As we explained in our first article on the basics of Blockchain, the fundamental premise of the technology is the existence of a real-time, permanent and unchangeable record of information distributed across the entire network of users.

  By using Blockchain technology to track the unique identifier of any given item of stock, the status of that item can be ascertained by any party at any given moment, and can be traced right back to the start. Retrospective data manipulation is impossible, as is the existence of the same piece of inventory in two places at once.

  These gains in accuracy, certainty and accountability may leave businesses significantly better off in the long run, allowing for more accurate projections to be made and eliminating the need for deliberate oversupply to account for uncertainty.

  Doing business better: embedding transactions into the Blockchain

  Not only do ‘analogue gaps’ render the records held by parties along the supply chain somewhat unreliable, they also give rise to one of the most excruciating challenges of modern commerce: debtor management.

  One would be hard-pressed to find a business that doesn’t know all too well the pain of preparing and sending invoices, only to have them missed, processed at a glacial pace, or conveniently ‘lost’ altogether. Herein lies a further layer of promise: not only can Blockchain trace transactions, it can be the framework through which the transactions are carried out.

  As we explained in one of our earlier articles, smart contracts are self-executing contracts in the form of a set of encoded instructions that self-perform when certain pre-set criteria are met. In this context, Blockchain may be able to alleviate the hair-pulling associated with traditional invoicing. By tracing inventory throughout the supply chain, smart contracts can be used to trigger automatic and instantaneous payment upon confirmed receipt of goods by a consignee.

  Not only does this enhance certainty, reduce risk and eliminate delays in payment, it may also significantly reduce administrative costs and personnel requirements. Whatever the outlay of introducing Blockchain throughout the global supply chain, it is certain to pale into comparison to the long-term savings that can be expected.

  Looking ahead

  The promise of Blockchain in the international movement of goods seems, perhaps, obvious. This opportunity hasn’t gone unnoticed; indeed, IBM, Maersk, Accenture and several other companies have all been making headway. Yet still, why haven’t we moved further?

  There are some important barriers to be overcome. The fragmentation of the global supply chain across a vast group of players, though making it a natural target for Blockchain-based rationalisation, also makes it uniquely difficult to get everyone to adopt a common system. Commercial incentives, regulatory barriers, limited trust, and the sheer scale of the challenge may all inhibit progress.

  The starting point, then, must be a cultural shift. There is a need to convince organisations, and the people within them, of the benefits of collaboration, as well as building up knowledge and understanding of Blockchain and what it might represent for the sector.

  If you are interested to know more or have questions about how changing supply chains or Blockchain might affect your business, please get in touch with Mark Love in our Business team.

  [1] https://www.ibm.com/downloads/cas/VOAPQGWX

  [2] https://www.ey.com/Publication/vwLUAssets/ey-blockchain-and-the-supply-chain-three/$FILE/ey-blockchain-and-the-supply-chain-three.pdf

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  Catastrophic Injuries - A Cautionary Tale

  Background

  In 2009, a (then) 15 year old boy ran across a road after his two friends in Richardson, when he was tragically struck by a passing vehicle.  The impact caused the infant plaintiff to suffer catastrophic injuries. When the two friends ran across the road, the driver of the vehicle looked across the road, took her foot off the accelerator.  The driver’s foot hovered over the brake pedal in the fear the two would run back onto the road. In looking in the direction of those two boys, the driver did not see the plaintiff then step onto the road.  By then it was too late.

  The plaintiff commenced an action in negligence against the driver in the ACT Supreme Court, which was heard before Elkaim J in June of 2018.  The plaintiff was ultimately unsuccessful in his action, which led to an appeal being hearing this year in the ACT Court of Appeal.

  First Instance Findings

  The first instance judge found that the plaintiff failed to prove that the driver was negligent, essentially because she acted reasonably in the (albeit unfortunate) circumstances.  In particular, it was found that the plaintiff himself was more negligent than the driver for stepping onto road when it was not safe to do so.  The driver, in the court’s view, was not acting unreasonably by having her attention on the two other boys.

  In case his decision on liability was appealed, Elkeim J went on to assess the plaintiff’s damages (notwithstanding he would not received any sum with an unsuccessful verdict against him).  Had he won though, Elkaim J assessed the plaintiff’s damages quite highly; in excess of $8 million, though held that sum should be reduced by 75% for the plaintiff’s own contributory negligence.  As it turns out His Honour’s liability decision was appealed.

  The Appeal – Lee v McGrath [2019] ACTCA 6

  On appeal, the ACT Court of Appeal upheld the first instance judge’s findings, concluding that the driver was not liable in negligence. The plaintiff argued that the driver should have looked back across the road to the plaintiff’s direction faster than she did, as to do so may have allowed her to slow down faster to prevent the collision. However, the Court of Appeal accepted that the driver’s distraction by the two boys running across the road was a reasonable response to their emergence. The Court of Appeal also did not find that plaintiff was necessarily visible to the defendant when the first two ran across the road, meaning there was no reason for his presence to have been anticipated.  Whilst the outcome of the accident, and the litigation, was tragic for the plaintiff, the duty of care owed by the defendant driver was high, as motor vehicle drivers owe a higher standard of care to pedestrians, due to the level of harm that can be caused. The courts generally look at the circumstances of each case in determining, whether or not, a standard of care has been met. Section 45(1) of the Civil Law (Wrongs) Act 2002 (ACT) (the CL Act) establishes a ‘but for test’ for causation, whereas, section 46 of the CL Act addresses the burden of proof. In determining liability for negligence, the plaintiff always bears the burden of providing, on the balance of probabilities, any fact relevant to the issue of causation.  That the driver “may” have done things differently to have avoided the accident, is a distinct question to whether she was acting reasonably – which the courts accepted she was.

  Key Lessons

  This case demonstrates the harsh reality of negligence law, which can leave an individual that is injured in a motor accident without an award of damages if they are unable to prove that the driver was negligent or at fault.

  Although such an injured individual may be unable to claim compensation through the courts, they may be eligible for care, support, treatment and rehabilitation under the ACT Lifetime Care and Support Scheme. Individuals that have been catastrophically injured in motor accidents in the ACT, regardless of fault, may be eligible for the scheme. The scheme covers pedestrians, cyclists, motor bikes and motor vehicles as long as one vehicle involved in the motor accident had compulsory third party cover. Catastrophic injuries include:

  • traumatic brain injury
  • spinal cord injury
  • amputations
  • burns
  • permanent blindness.

  For more information on the scheme please visit: https://apps.treasury.act.gov.au/ltcss/home

  If you need advice about being injured in a motor vehicle accident, please contact the Litigation team at BAL Lawyers.

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  Principals with Professional Principles Seminar

  At the heart of Australia, the Canberra local community encompasses a diverse range of professions, all united by initiative, ambition and drive. Such traits have recently been seen in a meeting of the minds between the ACT Public School Principals, and Canberra’s largest local law firm, Bradley Allen Love Lawyers (BAL), in an initiative created to exchange knowledge between the managers of legal practice and the manager of schools. 

  

  Although at first glance it may seem odd for lawyers and teachers to come together – the world of corporate law seems poles apart from primary and secondary school educators – reflection on the role of principals reveals some areas of intersection. School principals are managers (amongst many other things). They need to make peace and order through setting standards and resolving disputes. When you think about, this is not so different from what lawyers do every day.

  The professional learning program of the ACT Principal’s Association acknowledges the increasingly complex and diverse role of principals. It aims to engage principals with other non-teaching professionals, to broaden their horizons and learn how the work practices of non-teaching professionals may strengthen their own work.  

  On a cold winter’s afternoon this week, Gabrielle Sullivan, lawyer and Director in BAL’s Employment and Investigations Group, volunteered her time to welcome the ACT Principals to BAL’s city boardroom. Over wine and hors d’oeuvres, Gabrielle initially noted the ‘unusual gathering’, and commented that such a meeting is ‘potentially highly constructive – when we realise that we all have something to offer to others and to learn’

  Gabrielle shared her insights as to how lawyers ‘get the facts straight’, how they negotiate, and how they manage time, staff, documents and emails.  Acknowledging that that how  principals relate to their staff, students and parents is critical to inspiring Australia’s next generation of leaders, she concluded with tips for persuasive personal and virtual presentation.

  The Principals were very engaged in the presentation, and honest and lively exchanges were had. BAL Lawyers was delighted to provide their offices and event coordinator on a pro bono basis for this community –building event.

  

  Mr Jason Holmes, principal of Harrison School, who initiated the venture with BAL, was delighted with the event. He and the ACT Principals Association are looking forward to continuing to explore more professional linkages with the Canberra community.

  If you would like more information about this seminar, or have a speaking request, please contact our Employment and Industrial Law Group or call 02 6274 0999.

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  We're Recruiting: Law Graduate – Business and Corporate

  This role will consist of you handling all the intricacies of Business and Corporate law and a fantastic development opportunity to work with a successful business, gain professional development, and the opportunity for personal growth within the legal sector. 

  The successful applicant must have:

  • A completed Bachelor of Laws;
  • Some experience working in some capacity within a law firm (i.e. as a Paralegal, Law Clerk, Legal Assistant, Law Graduate);  
  • Experience working in a commercial environment;
  • A solutions focused attitude, with commitment to delivering an exceptional standard;
  • A proactive and enthusiastic approach to seeing tasks through to completion;
  • A collaborative attitude and approach in all aspects of working life; 
  • Commitment to providing exceptional client service at all times;
  • Excellent interpersonal and communication skills, both written and verbal;
  • High levels of attention to detail;
  • Strong IT, computer and research skills and willing and able to adapt to new technologies quickly; and
  • Motivation for continuous learning.

  If you think that this role would suit you and you have the relevant experience, please email helen.parrett@ballawyers.com.au with your CV and a covering letter outlining what experience you have that would make you an ideal candidate for the role.

  Applications that do not have a covering letter WILL NOT be considered.

  If you have any questions please do not hesitate to contact Helen Parrett on helen.parrett@ballawyers.com.au. 

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  Appointing a Testamentary Guardian for your Minor Children in the ACT – 5 points you should know

  1. The Legislation

  Every State and Territory in Australia has legislation which gives each parent the right to appoint a guardian by Will to take effect after his or her death.

  In the ACT the relevant legislation is the Testamentary Guardianship Act 1984 (“the Act”). Section 8 of the Act states that:

  “Each parent and each guardian of a child may, by Will or codicil, appoint a person to be a guardian of the child or persons to be guardians of the child”

  The State and Territory Acts are similar but in no way identical – there are differences and intricacies among the States and Territories.

  You should seek advice on which legislation applies to you.

  2. Changing Times and Changing Lingo

  Times have changed – the State and Territory legislation across the Australian jurisdictions refer to the older concepts of “guardianship” and “custody”. These concepts and terminology were removed from the Family Law Act 1975 in 1996.

  Part VII Div 2 of the Family Law Act  1975 introduces the concept of “parental responsibility” and defines the term in Section 61B as meaning “all the duties, powers, responsibilities and authority which, by law, parents have in relation to children”.

  “Custody” and “Guardianship” Orders have been replaced with “Parenting Orders” that can govern the long term or day to day care, welfare and development of the child.

  3. The interplay between the State and Territory legislation and the Family Law Act 1975

  The appointment of a testamentary guardian may be affected by the provisions of the Family Law Act 1975.

  Section 51(xxi) of the Australian Constitution empowers the Commonwealth to make laws with respect to marriage and Section (xxii) empowers the Commonwealth to make laws with respect to “divorce and matrimonial causes; and in relation thereto, parental rights and the custody and guardianship of infants”.

  In all Australian jurisdictions therefore, the Commonwealth can make laws with respect to guardianship of the child of the marriage.  However, without a referral of power from the States, the Commonwealth could not legislate in respect of a child who was not a child of the marriage.

  Changing familial values over the years and the increase in more and more people having ex-nuptial children meant that between 1986 and 1990, all Australian States (with the exception of Western Australia) referred their powers with respect to guardianship, custody, maintenance and access in relation to ex-nuptial children to the Commonwealth.

  A referral of power to the Commonwealth is not required from the ACT, the Northern Territory and Norfolk Island because s 122 of the Australian Constitution assigns to the Commonwealth plenary power to “make laws for the government” of the Territories.

  What this means is that each State and Territory legislation regarding the appointment of testamentary guardians must be read in the context of the Family Law Act 1975. It is said that the Family Law Act 1975 is intended to completely “cover the field” with regard to the parental responsibility of children and notwithstanding that Part VII of the Family Law Act 1975 does not deal with the appointment of  testamentary guardians it is intended to comprehensively cover parental responsibility.

  4. Appointing a Testamentary Guardian in the ACT

  In the ACT, where there is a no surviving parent of the child and no relevant Parenting Order on foot then the appointment of a testamentary guardian allows the appointed guardian to have daily care and control of the child and the rights and responsibilities to make decisions concerning the child.

  But, where there is a surviving parent and/or relevant Parenting Order in place, then the appointment of a testamentary guardian might require a joint guardianship arrangement, or might not take effect at all.

  As a general rule of thumb therefore, it is good practice for a parent to appoint a testamentary guardian in their Will to take effect:

  a. immediately where they are the sole surviving parent or

  b. if the other parent has predeceased the appointing parent.

  In all cases, the appointment of a testamentary guardian should be done with the knowledge and acceptance that the Family Law Act 1975 may ultimately take priority and precedence. In all cases, a Court will of course have regard to the best interests of the child at the time of their parent’s death.

  5. Things you should consider when appointing a Testamentary Guardian

  Though not an exhaustive list, the following is a list of some of the matters you should consider when deciding who to appoint as at testamentary guardian for your child or children:

  • Do I trust my testamentary guardian to always act in the best interests of my child or children?
  • Where does my testamentary guardian live and will my child or children need to relocate after my death?
  • Does my testamentary guardian have children of their own and can they assume the responsibility of my child or children?
  • What is my testamentary guardians religious and political views and position in respect to disciplining my child?
  • What is my testamentary guardian’s view on education?
  • Can (and will) my testamentary guardian ensure my child or children maintain ongoing contact with my extended family after my death?
  • Is my testamentary guardian likely to survive me?
  • What does the mother/father of my child or children think about the testamentary guardian I have appointed? What does my child or children think about them (a question to ask your child or children if they are old enough);
  • Should I make some financial provision for my testamentary guardian? A gift in my Will or perhaps just allow for reimbursement of the costs associated with the guardianship of my child or children?

  If you need advice on appointing a Testamentary Guardian please contact Golnar Nekoee  from our Wills and Estate Planning Team for more information.
  

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• 

  Outgoing, going, gone – Recovery of outgoing costs in leases

  It is common knowledge that commercial rates have increased substantially since the commencement of the Territory’s tax reform in 2012. For many owners, the increase in commercial rates now poses the question of affordability and viability. Whether an existing owner or a potential buyer, it is now essential that the terms of the lease and the information contained in the disclosure statement are scrutinised to determine whether the recovery of outgoing costs is valid.

  If you are a landlord of a commercial or retail lease that falls within the parameters of the Leases (Commercial and Retail) Act 2001 (the Act), Part 9 is worth a read.

  So what are outgoings? And how can they be recovered?

  In summary:

  An outgoing includes:

  • an expense directly related to the operation, repair or maintenance of the building that contains the premises or, if located in a retail area of a shopping centre, an area used in connection with the retail area;
  • rates, taxes, levies and other statutory charges; and
  • for premises located in the retail area of a shopping centre, the cost of promoting the premises or centre.

  To be recoverable:

  • the nature of the outgoing must be stated in the disclosure statement; and
  • the lease must state the outgoings that may be recovered, how the amount is to be calculated or apportioned and how the outgoings may be recovered.

  The above seems relatively simple, right? Surprisingly, it is not uncommon for a landlord to fall short of the above requirements and for a dispute to then arise between the parties. To reduce the likelihood of a dispute arising, consider the following tips:

  • The nature of the outgoings not being properly stated in the disclosure statement.
    
    Pay particular attention to the type or nature of the outgoing being recovered. For example, the City Centre Marketing and Improvements Levy (applies to commercial properties in the City and some area of Braddon) is a separate charge to general rates. To be recoverable, the Levy should not be lumped under ‘general rates’ but should be specifically stated in the disclosure statement.
  • The lease failing to clearly state the outgoings to be recovered.
    
    Though many leases will contain a broad definition of outgoings, it is important to revisit this definition to ensure consistency between the lease and the disclosure statement. If not stated in the lease, the outgoing will not be recoverable.
  • The lease failing to clearly state how the amount is to be calculated. 
    
    This is particularly important for commercial building that contains a number of tenancies but is not unit titled. In that particular circumstance, care should be given to the proportion payable by each tenant. For instance, where one tenant is liable to pay 100% of the general rates amount and another is liable for increases in the general rates amount over a base year, the landlord will not be able to validly recover the full general rates amount from the first tenant as it will likely have recovered part of the rates from the second tenant. This then leaves the provisions of the lease (for the first tenant) unclear as to what proportion the first tenant remains liable and is open to interpretation.

  If you have any queries relating to commercial leasing in the ACT or NSW, please contact our Real Estate Team.

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  A PPSA Priority Reminder

  In O’Keeffe Heneghan Pty Ltd (in liquidation); Aus Life Pty Ltd (in liquidation); Rocky Neill Construction Pty Ltd (in liquidation) trading as KNF Group (a firm) (No 2) [2018] NSWSC 1958, the NSW Supreme Court strongly reminded us of the superior priority that an authorised deposit-taking institute’s unregistered security interest (perfected by control) has over the interests of secured creditors perfected under the personal property securities regime. The proceedings involved three companies in liquidation (together known as KNF Group).

  The Important Facts

  In mid-2016 the KNF Group entered into a loan arrangement with IFG Network Australia Pty Ltd (IFG) that was secured by a General Security Deed which extended IFG’s interest over all present and future acquired property of the KNF Group. On 25 July 2016, IFG registered and perfected this security interest on the PPSR.

  KNF Group also held two bank accounts with the Commonwealth Bank of Australia (the Bank). KNF Group’s obligations to the Bank were secured by a general security interest over KNF property but the Bank failed to register its security interest. On the 12, 13 and 15 March 2017 KNF transferred money out of one of their accounts with the Bank to an offshore bank account held by OzForex Ltd for the purpose of acquiring property in Ireland.

  On 16 March 2017, KNF Group directors resolved to place each of the three companies into voluntary administration. The OzForex transfer failed and the administrators of the KNF Group were paid $224,409.

  The Bank and IFG then started a battle over which party had better security over (and therefore priority to) the $224,409.

  The Priority Battle

  The Court upheld that under section 21(1) of the Personal Property Securities Act 2009 (Cth) (the PPSA), a bank with an ADI security interest perfected by control, has automatic priority over any other security interest.

  The NSW Supreme Court made the following important findings regarding the priority of creditors under the PPSA regime:

  • The Bank successfully argued that the account held with the Bank was “collateral” to which its security interest attached;
  • The transfer of money out of the ADI account in the lead up to the voluntary administration did not prevent the Bank from asserting control over that money. Importantly, the Court held that the PPSA allowed for a secured creditor to follow collateral into the hands of a third party. As such, the proceeds of collateral were identified as traceable property; and
  • The Court held that it would be irrational to prioritise IFG’s security over an ADI’s security simply because the money was wrongly transferred out of the account.

  The Court concluded that the Bank (as an ADI), successfully perfected its security interest by control under the PPSA. Therefore, the Bank had priority ahead of IFG’s perfected registered secured interest.

  This case is a reminder to registered secured creditors that perfecting your interest under the PPSA regime may not protect their interests against ADI’s.

  If you have any questions regarding the priority of your secured interest under the PPSR regime, contact Katie Innes.

  Written by Katie Innes with the assistance of Felicity Thurgate

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• 

  Do your Due Diligence - Buying Property in the ACT

  Purchasing real estate is a significant investment for most people. It stands to reason then that a prudent buyer will want to know as much about a property as is possible before proceeding with the purchase. Though it is a common misconception that the contract contains all information pertaining to the property,  the cornerstone of property law in Australia rests in the concept of buyer beware and due diligence in relation to any real estate purchase is a serious consideration. Where possible, buyers should make all relevant enquiries of the property prior to entering into a contract.

  In respect of residential property in the Territory, buyers are afforded some protection under the Civil Law (Sale of Residential Property) Act 2003 and the Unit Titles Act 2001. Under the legislative regime, obligations are imposed on the seller to attach a set of ‘required documents’ (a defined term) to a Contract for Sale before a property is marketed.

  These Required Documents include copies of all interests and encumbrances registered against the title, an extract of the title, the Crown Lease or Units Plan and the Deposited Plan. Also included is an extract noting any notices or breaches of the Crown Lease and any relevant notifications pertaining to development applications lodged over the site and adjacent land, heritage status, and contamination. The seller is also required to attach a current building, compliance and pest report (for town houses and stand-alone dwellings) and an energy efficiency rating. If the property is a unit, the seller must also include a report (called a Section 119 Certificate) detailing the relevant fees, charges and administrative information of the Owners Corporation.

  The disclosures required for a residential sale contract offer buyers a considerable understanding of the title and condition of the property and to an extent, negates the need for further investigations of the property. It should be understood, however, that the building, compliance and pest reports are not conclusive evidence of the state or repair of the property. These reports are based on a visual inspection of the property only and, particularly where the property is furnished, may not identify all defects. For this reason, buyers should always undertake their own inspection of the property and, where deemed prudent, obtain their own building, compliance and pest report from a trusted contractor.

  The above situation is distinctly different if the property does not fall under the ‘residential’ regime, that is, if the property is classed as commercial, industrial or rural premises. For these types of premises, the disclosure obligations of the seller are limited to information concerning dangerous substances such as the provision of an asbestos report, register or management plan (if any) as is required under the Work Health and Safety Act 2011 and Work Health and Safety Regulation 2011. Beyond such instances, however, the obligation for disclosure is largely a commercial decision for the seller and the onus rests squarely on the buyer to undertake its own investigations. This can often be an expensive and timely exercise but the risks, both monetary and legal, which can arise from a failure to undertake proper due diligence far outweigh such costs and the costs of obtaining appropriate legal advice.

  Our property team have extensive experience dealing with contracts for all types of properties. Get in touch with a member of our Real Estate team and do your due diligence before you sign.

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  One Year of Mandatory Data Breach Reporting: Insights and Lessons

  The strength of the global economy is inextricably tied to data. Information has never before been created, stored, used and shared on so large a scale, underpinning trade and commerce, government and public services across the world. The corollary of our total data-dependence is that concerns about information security are at an all-time high. Australia is now just one of many countries to have introduced a mandatory data breach reporting regime, with the EU, Canada and New Zealand following soon after.

  The Notifiable Data Breaches (NDB) scheme came into effect in February 2018, requiring Australian Government agencies and private organisations that are subject to privacy obligations under the Privacy Act 1988 (Cth) to report data breaches where personal information they hold has been lost or subject to unauthorised access or disclosure. If that event is likely to cause ‘serious harm’, the entity has to alert both the individual(s) concerned and the Office of the Australian Information Commissioner (OAIC).

  One year on, the OAIC has released a 12-month Insights Report to mark the recently held Privacy Awareness Week, in addition to the four Quarterly Statistics Reports it has published since the introduction of the NDB scheme.

  One important—if expected—result to note was the substantial increase in reported data breaches. Compared to the previous 12 months under the earlier voluntary scheme, the OAIC has seen a 712% increase in notifications. It seems that entities understand their obligations, bringing to light the scale of the challenges we face as a nation in the field of information security.

  So, what else have we learned?

  Key Findings

  Of the 964 eligible data breaches reported in the 12 months leading up to 31 March 2019, a disquieting 60% of those were related to malicious or criminal attacks. The most common method among these was phishing, with many attackers succeeding in obtaining credentials like usernames and passwords to gain access to protected systems and information.

  Also concerning was human error as a significant cause of data breach. Over a third of all reported breaches were occasioned by human error, such as unintended disclosures (accidentally mis-sending an email, anyone?), lost devices, and so on.

  Another interesting finding was to do with affected sectors. In this regard, health service providers took first place by a long shot, with over 200 eligible data breaches reported. A startling 55% of these were due to human error, putting in stark relief the need to have robust policies, procedures and training in the health sector. This is particularly so with the advent of My Health Records, rendering the potential scale and impact of a breach much larger as the health data ecosystem continues to grow.

  Lessons

  Whether or not your organisation is regulated by the NDB scheme, the OAIC’s Report serves as an important reminder of what can go wrong and the need to take steps to better protect the information you hold.

  One key take-away arising out of the staggering proportion of malicious attacks and human errors is the need for comprehensive and regular staff training. All personnel within your organisation should be alert to the ways in which they may unwittingly facilitate access to—and misuse of—personal and sensitive information, and should be reminded that everyone has a role to play in the maintenance of information security.

  The NDB scheme has played an important role in highlighting the importance of swift and proactive management of data breaches. As put by the Australian Information Commissioner and Privacy Commissioner, Angelene Falk:

  “The requirement to notify individuals of eligible data breaches goes to the core of what should underpin good privacy practice for any entity—transparency and accountability.”

  “It’s also an opportunity for organisations to earn back trust by supporting consumers effectively to prevent or manage any potential harm that may result from a breach.”

  Even if your organisation is not caught by the obligations, or in cases where you determine that a given data breach does not meet the eligibility threshold, working with affected individuals to minimise the consequences of data breaches promptly and openly represents a positive change in the privacy landscape.

  If you have any questions about your privacy risks or obligations, feel free to get in touch with our Business team.

  Written by Katie Innes with the assistance of Bryce Robinson. 

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  How much is enough for a Widow? Recent Guidance from the NSW Court of Appeal

  The New South Wales Court of Appeal has overturned a decision of the New South Wales Supreme Court after it deemed that an indexed annuity of $52,000 per annum was inadequate for a widow and instead awarded the widow a legacy of $1.75 million.

  The judgement in the matter of Steinmetz v Shannon [2019] NSWCA 114 can be found here.

  The facts of the case were as follows:

  • the widow (the Appellant in this case) was the second wife of the deceased. The widow and the deceased had been in a relationship for about 28 years;
  • the deceased left his widow an indexed annuity of $52,000 for the remainder of her life, to be paid in quarterly instalments. The remainder of the estate was left to the deceased’s two children from his first marriage;
  • the Estate was valued at approximately $6.8 million;
  • the deceased and his widow were financial independent of each other. Their assets were kept largely separate, they resided in separate homes, though, the deceased would spend his funds on mutual expenses, entrainment and holidays;
  • at the time of the appeal, the widow’s assets (including the value of her home) were just over $700,000. She declared her income as just over $70,000 and expenses just under $40,000 per annum;

  The Supreme Court Trial Judge dismissed the widow’s application for further provision on the basis that the annuity was adequate provision to the widow’s proper maintenance.

  The Trial Judge further mentioned that the annuity would enable the widow to continue living in the same house as she did during her relationship with the deceased, and to maintain the same lifestyle. In concluding that the annuity was adequate, the Trial Judge stated the following:

  She will not be in a position to live extravagantly, but she did not do so when married. She will not have the benefits, the security, the holidays, the comforts and the additional financial advantages that she enjoyed during her relationship with the deceased. But as a matter of law, should she be entitled to expect more?”.

  The widow appealed to the Court of Appeal. The Court of Appeal held:

  1. that an indexed annuity of $52,000 for the remainder of the widow’s was not considered to be adequate provision.
  2. that insofar as it is necessary to resort to concepts of “moral duty” or “community standards” as a measure of proper provision, the former is preferable.
  3. that “to leave a 65 year old widow reliant for the rest of her life on quarterly payments by the children of her deceased husband’s first marriage, rather than placing her in control of her own resources, is in this day and age not an appropriate form of provision for a widow who is well and truly capable of managing her own affairs and when there have historically been tensions between her and at least the first respondent. However reliable the respondents might be, this form of provision effectively obliges her to have an ongoing relationship with them, and to trust them to perform the obligation, and does not afford her the independence and self-reliance which, according to today’s community standards, a widow should have. It is not only rigid and paternalistic, but demeaning and controlling” [emphasis added]

  The Court of Appeal allowed the appeal, set aside the orders of the Trial Judge made in the previous year and awarded the widow a legacy of $1.75 million.

  The Respondents (the children of the deceased’s first marriage who opposed the application) were ordered to pay the widow’s costs of both the appeal and the proceedings in the first instance.

  The “Take away points” from this case

  Whilst not a ground-breaking decision, this case serves as an important warning and a reminder to both Willmakers and litigants as to considerations the Court takes into account when reviewing the adequacy of provision for a widow/widower.

  The following two points should be taken into consideration:

  1. viability of an ongoing relationship – the Court of Appeal held that the present value of the $52,000 per annum annuity was $880,000.

  In awarding a legacy of $1.75 million to the widow, the Court almost doubled her entitlement but was primarily motivated by ensuring that the widow was not left at the “mercy” of the respondents (the children from the first marriage).

  The Court was very much conscious that an ongoing relationship between the widow and the respondents would not be appropriate.

  2. “moral duty” is preferable to “community standards” – as a measure of proper provision, the Court held that that an emphasis should be placed on what a testator is morally obliged to do as opposed to what the community would expect a testator to do.

  Whether you are considering your Estate Plan, or are a litigant in Court proceedings, it is important to consider the interplay between the parties left behind, in addition to whether provision is adequate to each party. Please contact Golnar Nekoee for more information.

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  Do tenants need to seek consent in commercial leases?

  The nature of business often means that a tenant will sometimes seek to make changes to their leasing arrangements. The most common are requests for consent to assign their lease to another party or underlease part or all of their premises to another party. Sometimes a tenant may seek a variation to its lease to accommodate an assignment to an incoming tenant or simply as a result of a change in financial circumstances and business downturn.

  In most circumstances, a lease will require a tenant to seek the landlord’s written consent to any such arrangements. In the case of an assignment or an underlease, the tenant’s request will likely need to include information to allow the landlord to properly consider the request such as the financial resources and business acumen of the proposed assignee or underlessee. Where the lease falls under the jurisdiction of the Leases (Commercial and Retail) Act 2001 (ACT), a landlord cannot unreasonably withhold its consent where such information is provided. It is common practice for a landlord to require a tenant (and the prospective third party) to enter into a deed to document the agreement and formally provide the consent of the landlord.

  Tenants occasionally forget to inform the landlord that they have sold/assigned their lease or allowed an underlessee to take occupation of the premises. Unsurprisingly this puts them in a difficult legal position when the landlord becomes aware of the transition, however, at this point a third party is usually in possession of the premises and the tenant has vacated. The tenant will be deemed to have breached its lease obligations in failing to obtain landlord consent in accordance with the terms of the lease and the consequences can be quite serious as the landlord may purport to terminate the lease on the grounds that the tenant has abandoned the premises or repudiated the lease.

  Both landlords and tenants need to be properly advised as to how a lease operates in such circumstances so that they are aware of when landlord consent is a requirement and avoid the risk (and the mess) of neglecting this critical process in leasing arrangements.

  The bottom line is for a tenant to seek consent rather than forgiveness; it can save a lot of aggravation in the long run.

  If you would like to discuss a commercial leasing issue, please contact our Property team.

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  Essential Guide to Local Government Law: Hoarding

  Hoarding involves the collection of an excessive number of items of (often) low value, as well as an inability to throw such items away.  Hoarding often results in squalor. Hoarding and squalor can have a significant adverse impact on neighbourhood health and amenity and can be a difficult issue for local councils to resolve.

  This Essential Guide provides guidance to councils on the options which are available to them under the Local Government Act 1993 (LG Act) to address hoarding in their communities.

  Options under the Local Government Act 1993

  Section 124 of the LG Act contains a range of orders which may be appropriate to address a hoarding situation. These include:

  1. Where articles or matter are being kept on premises in the immediate vicinity of a public place (such as a road or park) and in a manner that creates “unsightly conditions”, a council can give an order under item 10 of s.124 of the LG Act requiring the owner or occupier to remove or stack those articles or matter, to cover those articles or matter, to erect fences or screens, or to plant trees.
  2. Where birds or animals are being kept on premises that are of an inappropriate kind or number, or are being kept inappropriately, a council can give an order under item 18 of s.124 of the LG Act to the occupier of the premises requiring that they not keep birds or animals on the premises other than birds or animals of such kinds, in such numbers or in such a manner as specified in the order. The relevant standards for keeping birds or animals are in Part 5 of Schedule 2 of the LG Regulations.
  3. Where the land or premises are not in a safe or healthy condition, a council can give an order under item 21 of s.124 of the LG Act requiring the owner or occupier to do or refrain from doing such things as are specified in the order to ensure that land is, or premises are, placed or kept in a safe or healthy condition.
  4. Where waste is present or generated on the land or premises and is not being dealt with satisfactorily, and is not regulated by the Protection of the Environment Operations Act 1997, a council can give an order under item 22 of s.124 of the LG Act to the owner, occupier or person responsible for the waste (or waste receptacle) requiring them to store, treat, process, collect, remove, dispose of or destroy the waste in the manner specified in the order.
  5. Where waste on residential premises is causing or is likely to cause a threat to public health or the health of any individual, a council can give an order under item 22A of s.124 of the LG Act to the owner or occupier of the premises requiring them to remove or dispose of the waste or to refrain from keeping waste on those premises.

  A council can issue a combined order for a number of Items in the Table to s.124 of the LG Act under s.143, but an order under Item 22A cannot be included in a combined order.

  Evidence and inspections

  To support the giving of an order, a qualified and authorised council officer or contractor will first need to inspect the land or premises to identify the type, volume and location of the hoarded material and assess what order (or combination of orders) is appropriate in the circumstances.  As part of this process we recommend that the investigating officer:

  • take photographs of the property, including from nearby public places;
  • draft a detailed file note of the type and volume of materials being hoarded;
  • identify the location of those materials on the property, potentially by creating a map or sketch plan showing the different areas on which the material is located; and
  • look for evidence of the presence of vermin or feral animals.

  The investigating officer will then need to prepare a report indicating whether and why, in their view, the circumstances warrant the giving of an order. We also recommend that the investigating officer makes a record of any complaints received from the neighbours about the hoarding and obtains a written signed statement from the closest neighbours detailing the impacts they experience as a result of the hoarding.

  An authorised person can only inspect residential premises (including the curtilage of those premises) with the consent of the occupier[1]. Where the occupier does not give their consent, then it may necessary to consider other options such as inspecting the land from adjacent public land or neighbouring private land (with the consent of the owners of that land).  If that is not practicable, it may be necessary to obtain a search warrant.

  Giving notice of the Council’s intention to give an order

  There is a strict process under Part 2 of Chapter 7 of the LG Act for the issuing of orders. Except in the case of an emergency, or an order to be issued under item 22A, the Council must first give written notice of its intention to issue the order.  In drafting the notice, the council should ensure that the terms of the proposed order are realistic, are appropriate to the circumstances and are supported by the evidence gathered by the council. The terms of the proposed order will also need to be as precise as possible to ensure the recipient understands exactly what they are required to do. For example, adopting a general description of the materials as ’waste’ or ‘junk’  can be problematic, especially where the hoarder considers that the items have value. We recommend that an order include a detailed description of the hoarded items where possible, as well as a sketch plan showing the location of those materials. Proposing a staggered approach to disposing of hoarded items can be a good method to achieve a gradual but measurable clean-up process.

  Giving an order

  After the date specified in the notice of intention for the recipient to make representations has passed the council will need to do another inspection of the site to determine whether the circumstances necessitating the issue of the order are still present. If they are, the council will need to consider any representations which have been made in deciding whether to give the order (or an amended order)^[2].

  If, after giving proper consideration to any representations received from the person to whom the notice of intention was given, the council decides to issue the order then it should make sure that the order includes the reasons why the council has decided to exercise its discretion to give the order in the circumstances^[3]. These reasons should not simply restate the circumstances in which an order may be given that are mentioned in the table to s.124 of the LG Act and should clearly explain why the order is being given.

  The order will need to be served using one of the methods listed in s.710 of the LG Act, and a file note kept of the method of service.

  Review, appeal and enforcement options

  The recipient of an order under s.124 of the LG Act (other than an order under item 22A) can seek review of the order by the NSW Land and Environment Court (the Court).^[4] Any application for review must be commenced within 28 days of the date the order is given. In such an appeal the Court will review the circumstances and decide for itself whether an order should be made and, if so, in what terms. The legal validity of an order can also be challenged under s.674 of the LG Act.

  After the period of time for compliance with the order has passed, the council will need to do a further inspection to see if the order has been complied with (in part or at all) or whether it is necessary to take additional steps to enforce compliance.

  If the work required by an order is not done within the specified time, a council can do ‘all such things as are necessary or convenient to give effect to the terms of the order, including the carrying out of any work required by the order’.^[5]  While this seems like a broad power, we do not recommend that this power be exercised without an order from the Court authorising that work to be done, as a council may otherwise be found to be trespassing or unable to recover the costs it incurred in having done the necessary work.

  The failure to comply with an order is also a breach of the LG Act which a council can seek to remedy or restrain by bringing Class 4 civil enforcement proceedings in the NSW Land and Environment Court.^[6]   Civil enforcement proceedings are directed to remedying an existing breach, but can also be forward looking in the sense that they seek to prevent future breaches of the law (eg by ordering that a person not keep specified waste on their property).  In such proceedings, the Court has a wide discretion to make such orders as it considers appropriate, including an order enabling the council to take the necessary clean up action and recover the reasonable costs it incurs in doing so.

  Alternative options under the Environmental Planning and Assessment Act 1979

  In some circumstances a council may be able to take action under the Environmental Planning and Assessment Act (EPA Act) in response to a hoarding situation. For example, the hoarding of material may sometimes constitute prohibited development or development for which consent is required but has not been obtained, amounting to a breach of the EPA Act. Further details on the issue and enforcement of development control orders given under the EPA Act can be found in our two-part Essential Guide series on EPA Act orders, found here.

  Questions?

  For further information or assistance on how the Local Government Act 1993 can assist you to manage hoarding in your community, please contact Alan Bradbury and the Local Government & Planning team on (02) 6274 0999.

  The content contained in this guide is, of course, general commentary only. It is not legal advice. Readers should contact us and receive our specific advice on the particular situation that concerns them.

  [1] Local Government Act 1993 s.200. The wide and beneficial construction of the power to give an order under Item 21 does not authorise a trespass or other infringement of another’s property rights: Mailey v Sutherland Shire Council [2017] NSWCA 343.

  [2] Local Government Act 1993  s.134 and s135. The Council must also consider criteria in any local policy adopted under Part 3 (s.131)

  [3] Local Government Act 1993 s..136

  [4] Local Government Act 1993 s.180

  [5] Local Government Act 1993 s.678

  [6] Local Government Act 1993 s.673

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  Legal professional privilege: Sword or shield?

  Legal professional privilege is a venerable principle. With antecedents in 16th century Elizabethan England, the concept — that there can be no compelled disclosure of communications between a client and their lawyer — remains a fundamental tenet of common law legal systems the world over. Nor is the principle unique to the Anglosphere: although the exact nature and tenor of the rule varies widely, almost every jurisdiction globally recognises some form of confidentiality in lawyer-client communication.

  Truth, like all other good things, may be loved unwisely — may be pursued too keenly — may cost too much. -Vice-Chancellor Knight Bruce

  …Which makes it somewhat surprising that the principle is under attack. Despite its august lineage, influential international institutions including the World Bank and United Nations Office on Drugs and Crime (UNODC) have recently suggested that privilege is facilitating corruption and illicit asset flows. Prosecutors are increasingly asserting that professional secrecy is being misused, while advocacy group Global Witness secretly filmed eminent American lawyers offering advice on how to move suspicious funds for a (fake) prospective client. In the courts, attempts have been made to narrow the application of privilege — with mixed effect.

  In a 2005 article, Stephen Argument asked ‘is legal professional privilege an endangered principle?’ It seems his concerns were prescient. Proponents of privilege watch on with growing concern. Courts in this country and elsewhere have consistently hailed privilege’s significance. The comments of Gummow J are representative: privilege is ‘not a mere rule of evidence but a substantive and fundamental common law doctrine, a rule of law, the best explanation of which is that it affords a practical guarantee of fundamental rights’. Others believe privilege’s importance is overstated. In the same year but in a different case, Gummow’s colleague Toohey J remarked: ‘Important, indeed entrenched as legal professional privilege is, it exists to serve a purpose, that is to promote the public interest by assisting and enhancing the administration of justice. It is not an end in itself.’

  Mason J had earlier observed: ‘[I]t is impossible to assess how significantly the privilege advances the policy which it is supposed to serve. The strength of the public interest is open to question.’ All of which makes a case shortly to come before the High Court of Australia, Glencore International AG v Federal Commissioner of Taxation, all the more interesting. In 2014, mining giant Glencore sought advice from Appleby, a law firm now notorious for its offshore restructuring practice. In 2017, documents relating to that advice became publicly available following the Paradise Papers leak. Those documents subsequently came to the attention of the Australian Taxation Office.

  Keep reading.

  Written by John Wilson and Kieran Pender. First published in Ethos.

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  Good Debtor Management and Enforce Recoveries - May Business Breakfast Club Summary

  This month at Business Breakfast Club, Laura Scotton of BAL Lawyers discussed debtor management trends, how to set up good debtor management techniques and strategies, and what the next steps are for debtors who still do not pay. The breakfast ended with Katie Innes introducing BAL Lawyers’ new Debt Recovery Partner Site: Enforce Recoveries.

  Good Debtor Management

  Getting debtor management right is imperative for the sustained financial health of any business. If poorly managed, the consequences for cash flow and growth can put a business at greater risk of insolvency, which may increase the exposure of your personal assets.

  Principles of good debtor management should underpin the entire creditor–debtor relationship, right from the inception of all new contracts. The drafting of terms relating to credit and repayments should be specific and unambiguous, with clear obligations and consequences built into every arrangement.

  Amongst other things, businesses should have trading terms (in writing) that stipulate the maximum payment time and any specific terms attaching to late payments, such as accrual of interest. Of course, these trading terms must be communicated to your customers and clients before you commence work; preferably they should be signed as well.

  Good debtor management also relies on robust internal systems. Your organisation should be set up so that invoicing occurs regularly and that the terms of the invoicing are clear. You should also ensure that you create and maintain comprehensive records; not only is this essential for meeting your legal requirements, it will help your business render invoices quickly and avoid any uncertainty.

  Once things are underway, there are five key steps you can take to ensure you set up good debtor management practices within your business:

  1. Be prompt: Invoice as quickly and as often as possible
  2. Be protective: Ensure invoice meets regulatory requirements
  3. Be participatory: Follow up with clients and send reminders for unpaid invoices
  4. Be proactive: Action payment disputes as quickly as possible
  5. Be prepared: Consider payment plans and consider if you should take security

  What happens when debtors refuse to pay?

  When Debtors refuse to pay, even after you have followed up with them, sometimes you need to take it further to get action. While communication and relationships are important, you should be proactive about enforcing your rights to avoid getting deeper into the hole. There are several debt recovery tools available including:

  1. Letters of Demand;
  2. Debt Collection Agencies;
  3. Statutory Demands (for corporate debtors); and
  4. Litigation and Enforcement.

  Here in the ACT, many businesses can face unique challenges associated with contracting for the provision of goods or services to the Federal or Territory Governments, including late payment. However, changes will soon be coming into effect to ensure that small to medium businesses don’t have to wait as long. From 1 July 2019, the Commonwealth has committed to paying invoices under $1 million within 20 days, and is requiring large businesses seeking to secure government contracts to make the same commitments.

  Enforce Recoveries:

  Chasing unpaid invoices isn’t fun, or an effective use of time for any business. Yet cash flow is king for businesses to grow and be sustainable.

  BAL Lawyers is the legal partner of a new debt recovery website, Enforce Recoveries, to help businesses get fast payment from debtors. Once you’re logged in, you submit the details of your debtors and outstanding amounts. We then check the debtor details, perform a conflict check and send a letter of demand straight to the debtor.

  Read the RiotACT Article on Enforce Recoveries here.

  For more information, please contact Laura Scotton or Katie Innes. The next Business Breakfast Club will be held on 14 June 2019. If you would like to attend, please click here.

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  Can your Landlord terminate the Lease under a demolition clause to refit the Premises for a larger tenant?

  Entering into a retail lease can seem like a risky business. Leases are often drafted in favour of the Landlord. One common example is the ability of a Landlord to terminate the lease to demolish or renovate the leased premises. But what is to prevent a landlord using a demolition clause to terminate the lease purely because a more commercially advantageous tenant is found?

  The Act

  The Retail Leases Act 1994 (NSW) (‘the Act’) provides some protection for tenants when a landlord seeks to exercise its rights under a demolition clause. Section 35 of the Act limits the operation of demolition clauses to provide security against an invalid termination.

  Section 35 relevantly provides that:

  • the Landlord must provide the Tenant with detail of the demolition proposal sufficient to indicate it is a genuine proposal;
  • the lease cannot be terminated unless the demolition cannot be carried out without vacant possession of the premises; and
  • the lease cannot be terminated without at least 6 months written notice being provided to the Tenant.

  Wynne Avenue Property Pty Ltd v MJHQ Pty Ltd

  Despite the protections provided by the Act, disputes often arise where Landlords seek to terminate a lease due to an impending demolition of the premises. This occurred in the recent NSW case of Wynne Avenue Property Pty Ltd v MJHQ Pty Ltd [2019] NSWCATAP 41 where the Landlord sought to create larger premises to be leased to a tenant with more commercial potential. Indeed, the Landlord had signed a Heads of Agreement in respect of the larger premises with the prospective tenant prior to serving a demolition notice on the Tenant.

  The case turned on whether the Landlord had provided a genuine proposal and is indicative of how similar circumstances will be dealt with in the ACT. In the ACT, Section 78(a) of the Leases (Retail and Commercial) Act 2001 (ACT) also provides that a Landlord is unable to terminate a lease under a demolition clause unless the Landlord gives the Tenant notice of a genuine proposal to demolish the building within a reasonable time after the lease is terminated.

  In Wynne Avenue Property, the Tenant argued that the notice was not valid as there was no genuine proposal to demolish the premises. Rather the motive behind the demolition was to accommodate a more commercial advantageous tenant. On appeal, the Tribunal ruled that in accordance with Blackler v Felpure Pty Ltd [1999] NSWSC 958, the motivation of the Landlord is mostly irrelevant when determining whether a genuine proposal exists (unless it shows that there is no genuine proposal).

  Conclusion

  While the Act safeguards tenants from arbitrary termination, these protections only extend so far. As Wynne Avenue Property Pty Ltd v MJHQ Pty Ltd shows, tenants can find themselves at a disadvantage due to the drafting terms of the lease. Tenants in any Australian jurisdiction should seek legal advice on the terms of any lease prior to entering into the Lease, particularly when a demolition clause is contained within the lease terms.

  If you have any questions about your rights under a demolition clause, please contact the Real Estate Team at BAL Lawyers.

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  Three (Very Expensive) Words: Federal Court finds Kraft liable for misleading and deceptive conduct

  In many Australian households, nestled somewhere in the pantry between the Vegemite and the Nescafé, there will be an unmistakable jar of semi-liquid gold: Kraft Peanut Butter. Or at least, it was Kraft Peanut Butter. The more observant among us may have noticed that two years ago the Kraft logo at the top of the iconic yellow label was quietly replaced by that of Bega, the Australian dairy powerhouse.

  In 2017, Mondelez-the company managing Kraft’s Australian operations-sold its market-dominating peanut butter product to Bega for $460 million, including its Port Melbourne production facility, the recipe, and the associated assets and goodwill.

  Despite a voluntary changing of the guard, an ugly legal battle between the food giants soon erupted when Kraft (perhaps realising that it had given up on a good thing) attempted to re-enter the Australian market by pairing up with Sanitarium to develop a peanut butter product with the same taste and feel as the product now made by Bega, clothed in virtually indistinguishable packaging.

  On 1 May 2019, the Federal Court handed down its judgment, finding that all rights in the ‘peanut butter trade dress’-comprising the distinctive visual elements of the jar, lid and label-had passed to Bega for their exclusive use when they purchased the iconic product.

  In his damning judgment, Justice David O’Callaghan found that Kraft’s new product had misled consumers with three little words.

  “Loved since 1935”

  Although in relatively fine print under the main logo, the emblazoning of that phrase on the labels of Kraft’s peanut butter proved fatal for the US monolith. Justice O’Callaghan found that this, as well as a press release stating that “Kraft Peanut Butter will … be back on Australian supermarket shelves in 2018”, was designed to mislead consumers.

  He agreed with the submissions of Bega that this conduct constituted an “obvious attempt by Kraft to create an association to the product which had been produced by the business owned, first, by Kraft Foods Limited, and then by Bega continuously since 1935” and that, in doing so, they were “seeking to attach themselves to a product that they had never produced and give the impression as though they had”.[1]

  Justice O’Callaghan held that the suggestion that Kraft would be bringing its peanut butter “back” also constituted misleading and deceptive conduct under the Australian Consumer Law as “[t]hat peanut butter is surely the very peanut butter product that Bega acquired, along with all the other assets. It was thus not [Kraft’s] to bring “back”.”[2]

  While the orders flowing from the Court’s findings have yet to be handed down, Kraft is unlikely to escape lightly given the scope of the wrongdoing identified by Justice O’Callaghan in his 182-page judgment. This case serves as a useful reminder of the immense value in intangible assets in the sale of business, including unregistered trademarks, as well as the need to tread carefully when attempt to piggy-back off the goodwill of popular products.

  If you have questions about navigating the ins-and-outs of the Australian Consumer Law and/or peanut butter choices, please feel free to get in touch with the Business team at BAL Lawyers.

  [1] Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8) [2019] FCA 593, [461].

  [2] Kraft Foods Group Brands LLC v Bega Cheese Limited (No 8) [2019] FCA 593, [468].

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  Diversifying Revenue and Assets for Clubs

  Earlier this year the ACT Government announced financial and non-financial incentives for gaming machine licensees that take up the option to voluntarily surrender Gaming Machine Authorisations and Authorisation Certificates.  These incentives are offered to support clubs’ ongoing operations and to assist in reducing clubs’ reliance on Gaming Machine revenue. The ACT Government wanted to reduce the number of machines in the territory to 4000 by 2020. As part of the voluntary surrender regime in January and February this year ACT clubs and hotels had voluntarily surrendered 934 machine authorisations, leading to a total of 4012 machine authorisations left in the territory.

  Given the numbers, it is clear that most (if not all) Clubs took part in that voluntary surrender regime and have received a range of benefits including cash incentives and offset amounts for fees, charges and other amounts that are usually imposed by the ACT Government. Offset amounts can be claimed to reduce or eliminate fees owing for Lease Variation Charges, deconcessionalisation payout amounts, and other Government land, lease and planning and development fees and charges; these offsets can be claimed anytime up to 31 March 2026.

  It is these offset amounts that present a significant opportunity for clubs to repurpose and redevelop their land; allowing clubs to create a strong, sustainable, and diverse income streams (and one which is not heavily reliant on gaming machine revenue).

  Land redevelopment presents a great opportunity for clubs to fully maximise the potential of their assets and better engage with current community needs. While the development application and consequent use of the offset would still be contingent on normal Government planning approval processes being completed, with the offset amounts clubs now have new strategies available to them to create a strong community focused sector.

  The windfall granted to many clubs who surrendered licences, in the form of either direct financial incentives or future offsets, may allow them to pursue redevelopment on their own account, rather than through ground leases to third party developers. Obtaining financing represents an (often insurmountable) hurdle for many clubs, which may become more difficult still in light of the more stringent lending policies being pursued by financial institutions in light of last year’s Banking Royal Commission. This may be ameliorated to some extent by the significant planning offsets granted to licence-forfeiting clubs over the coming years, as well as the immediate incentive payments.

  Not only would such redevelopment generate new and ongoing revenue for clubs shifting away from a reliance on gaming, it may allow those who have retained gaming machines to more easily meet their obligations under the revised Gaming Machine Regulation 2004, due to come into force on 1 July 2019. The amended Regulations make clear that clubs can fulfil their compulsory ‘community purpose contributions’ through the maintenance of recreation and sporting facilities available to the public.

  Of course, there’s no one size fits all approach to land redevelopment, nor is it going to be feasible or appropriate for all clubs. Clubs should think carefully and seek proper financial and legal advice before jumping headlong into what can be a very significant undertaking. However, given the opportunity presented by the incentives provided to the clubs by the ACT Government, as well as a renewed emphasis on the principles underpinning the community-based gaming model, it is certainly worth considering whether now might be the right time to pursue a new direction.

  If you or your club are thinking about pursuing development of its assets or want to know more about current developments in the regulation of the gaming industry, please feel free to get in contact with the Business team.

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• 

  Swing, sling and that Liability thing

  Pole and aerial sling gymnastics has become a mainstream form of fitness practiced by many gym enthusiasts. It requires significant muscular endurance and coordination. Proficiency is achieved after proper instruction and rigorous training. It should come as no surprise that this past time is no stranger to injury leading to claims against pole studio owners.

  The liability of one particular pole studio owner was recently considered in the ACT Supreme Court. Specifically, in Cornwall v Jenkins atf the iSpin Family Trust [2019] ACTSC 34, the court found that an owner and operator of an aerial sling and pole fitness studio did not breach its duty of care to a participant who sustained injuries as a result of a fall in the aerial sling class, which the court found had an obvious element of risk to it.

  Facts:

  Whilst participating in aerial sling classes, the plaintiff was using a fabric sling attached to the ceiling to perform fitness manoeuvres. She had been attending such classes for about a year when she fell from the sling and broke both her wrists. The plaintiff brought an action in negligence against the owner of the fitness business, and as occupier of the premises. Although the circumstances surrounding the accident were contested, the plaintiff claimed that the owner had breached its duty of care as no explicit warning was given about the risks of falling from the sling. It was also alleged that thick crash mats, and directions to use spotters, were not provided.

  Findings:

  The Supreme Court did not accept that the owner acted negligently or breached its duty of care.

  There had been very few instances of people injuring themselves whilst undertaking the manoeuvre at the studio. The judge found that it was reasonably foreseeable that someone undertaking this above ground manoeuvre would suffer an injury if they fell. However, the judge concluded that a reasonable person would have been able to identify the risk of falling from the sling and the owner’s failure to warn the participant would not have prevented the accident from occurring.

  The court accepted evidence that the instructor directed that a spotter should be used for sling manoeuvres. The instructor’s alleged failure to supervise the participant would not have prevented the harm because it was not the instructor’s responsibility to prevent participants from acting against her instructions.

  In relation to the issue regarding the mats, both yoga mats and thick crash mats were available for participants to use. Although the instructor did not urge participants to use the thicker mats, the court found that a reasonable person in the owner’s position would not necessarily have insisted upon the use of the crash mats due to the fact that the instructor had never witnessed a fall from the sling or injury during years of involvement with the business.

  Although the plaintiff’s injuries were clearly suffered by the fall from the sling, the plaintiff failed to prove that they were causally connected to any breach of the owner’s duty to exercise due care.  The court’s verdict thus swung in favour of the studio owner.

  Key Lessons:

  • This case shows that negligence claims are heavily dependent on the factual and evidentiary matrix to prove matters alleged. A dangerous activity involving an injury may not necessarily result in a finding that the activity was carried out negligently.
  • If you owe a duty of care to certain individuals, you should take precautions to warn them of any risks associated with their activities within your care, so that they are able to make their own decision as to whether or not to engage, and how to act.
  • A court will assess the reasonableness of measures taken by the owner in a prospective manner, meaning that they will not reason with the benefit of hindsight.[1]
  • Although you might not have seen any injury or issue eventuate before, if a certain risk of harm is foreseeable, you should still provide those persons within your scope of duty of care with sufficient protective measures.
  • Finding the right insurance coverage to respond to any such disasters to your business is crucial. In the event that an injured person brings legal proceedings against you, damages in the ACT courts can be generous, and you will be well placed to be properly protected from that exposure.

  [1] Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422, [126] – [129].

  If you have any questions regarding personal injury or liability, please contact the Litigation group at BAL Lawyers.

  Written by Bill McCarthy and Maxine Viertmann.

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  Locked out: at what cost to Landlords?

  Bradley Allen Love recently obtained a six figure judgment debt for a tenant who had been locked out of his Fyshwick premises, unlawfully, for failing to pay rent. The proceedings involved a number of claims, including a claim for damages for conversion and detinue of goods – being the wrongful dealing with and detention of another’s goods. The claim was defended by the landlord on the basis that the lease had been properly terminated and so the lockout was lawful.

  The ACT Magistrates Court decision, Biedrzycki v Bird & Smith [2019] ACTMC 8, contains a number of important lessons for both tenants and landlords of commercial leases.

  Payment of Rent

  During the term of the lease, the tenant withheld rent payments on the basis that he was unable to conduct his business due to flooding and an inoperable door to the premises. The non-payment of rent gave rise to a purported notice of termination. Although the tenant contested the termination, the Court held that the landlord was entitled to terminate the lease by reason of the failure to pay rent – a fundamental breach.

  Importantly, under ACT tenancy laws, a tenant must not refuse to pay rent if they are able to fully or partially use the leased premises for their normal purpose. Instead, tenants may make an application to the Court to seek relief, if it is necessary to do so.  Put more directly, tenants do not have the power to self-assess what discount they should be entitled to.  Absent agreement from the landlord, the court should be applied to for a determination of the dispute.

  Conversion and Detinue Claim

  After lockout, the landlord did not allow sufficient access for the tenant to recover his goods and equipment from the property. When the tenant was later granted access once more, some 85 items were missing. During the lockout period, the landlord was the only party with access to the premises.

  The Court found that there must be a balanced approach in considering the reasonableness of access to recover property. For the majority of the goods, the court held that conversion was not upheld, as access was ultimately provided by the landlord.   However, the 85 missing items were another matter.

  The Court found the landlord liable for the replacement cost of the 85 missing items, stating that the landlord was reckless in failing to keep the premises secure, and therefore assumed liability for those losses. While the evidence did not reveal what happened to the missing items, as the only party with access to the premises, the landlord assumed some responsibility to keep the premises secure and act reasonably to allow the tenant access to recover the goods. By failing to do so, the landlord was ordered to pay the tenant $150,000 – albeit the case that the quantum of this award has been appealed to the Supreme Court, with further judicial consideration to follow.

  Key Takeaways

  A lease, like any other contract, must be performed according to its terms. The ordinary principles of contract law apply to leases, including principles of termination for breach of contract. However, even if a lease is properly terminated, the relationship between the landlord and tenant may not yet be. Landlords should take care to ensure that they do not assume liability for unrecovered goods when locking tenants out of premises. Where this may occur, ensure you act reasonably by:

  • properly securing the premises;
  • negotiating appropriate access to minimise the risk of property loss; and
  • surrendering goods upon lawful and reasonable demand.

  What is reasonable will depend on the circumstances. If you are unsure, we recommend you seek legal advice. A failure to do so may be costly.

  If you have any questions about failure to pay rent, or what your options are, please get in touch with our Litigation team.

  Disclaimer: Please note this case is currently subject to appeal. Further updates will be provided as they become available.

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  Recovering costs in a cost-free jurisdiction

  The ACT Civil and Administrative Tribunal (“the ACAT”) is well known as a ‘no costs’ jurisdiction. This epitomizes the intended purposes of ACAT, to be simple, quick, inexpensive and informal.  As such, parties to a matter in the ACAT are intended to bear their own costs unless the ACAT orders otherwise, which the ACAT may do if, for example, one party has caused unreasonable delay or obstruction.

  However, the cases below demonstrate that, if the parties to the proceedings were parties to a contract that provided for payment of costs incurred in recovering any moneys owed, the ACAT may still enforce the contract and award “costs” in keeping with the contractual terms, notwithstanding the usual rule that each party should bear their own costs of ACAT proceedings.

  Trustees of the Roman Catholic Church for the Archdiocese of Canberra and Goulburn as Trustees for St Mary Mackillop College Canberra v Kenningham [2017] ACAT 97

  Facts

  In 2017, the applicant, St Mary Mackillop College, commenced ACAT proceedings to claim unpaid school fees from the respondent who sent her children to the College. The College also claimed legal and other costs incurred by them in seeking to recover the unpaid school fees in accordance with a recovery clause in the signed enrolment form, which entitled the school to recover any expenses incurred by them as a result of late or no payment.

  Findings

  The Tribunal ordered the respondent to pay the applicant the amount of unpaid school fees owing, as well as the expenses properly incurred by the school in taking action to recover the debt.  The ACAT did so without entering a “costs order” in the usual way, but instead ordered the expenses incurred in the proceedings were able to be recovered as a contractual debt in accordance with the contract between the parties in the form of the signed enrolment form.  In doing so, the ACAT found it was not being asked to exercise any discretion regarding costs, instead it was required only to apply established principles of contract law.

  Key Lessons:

  • In the event that a party to the contract seeks to recover any monies owing under an agreement, a recovery clause in a contract will entitle that party to recover its costs in doing so from the other party.
  • Although ACAT is a ‘no-cost jurisdiction’ where parties are to bear their own costs, the ACAT has shown reluctance in denying the effect of a contractual agreement.
  • Although costs are always a matter for the court or at the ACAT’s discretion, there may be a additional contractual basis for recovering costs.
  • Another instance in which ACAT may make an order for costs is where one party has caused unreasonable delay or obstruction before or while the ACAT is dealing with a matter. Note that this is distinct to a case simply being poor, unsubstantiated or disorganised.[1]
  • However, the ACAT has made clear that a contractual recovery clause will not automatically result in recovery of the costs of recovering amounts, as this is still upon discretion of the court or Tribunal.
  • Contracting parties should take caution in reviewing all contractual terms before signing, so as to not be taken by surprise at a later stage.

  [1] Bell & de Castella and Rob de Castella’s Smartstart for Kids Ltd [2013] ACAT 66

  If you have any questions regarding ACAT or costs jurisdiction, please contact the Litigation group at BAL Lawyers.

  Written by Kate Meller and Maxine Viertmann.

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• 

  Advertising and Promotion - Pitfalls and Risks: Business Breakfast Club April Summary

  This month at Business Breakfast Club Katie Innes of BAL Lawyers discussed the pitfalls and risks of advertising and promotion for businesses. While there is significant breadth to this area of the law, the focus lay on discussing cases which dealt with misleading and deceptive conduct, the concept of puffery, and the impact of using social media and managing online reviews.

  Misleading and deceptive or mere puffery?

  The power of advertising and the societal need to protect the consumer are real, despite most of us having a fair amount of cynicism when reading or watching advertisements. Under the Australian Consumer Law a person must not (in trade or commerce) engage in conduct which is misleading and deceptive or likely to mislead and deceive. This establishes a norm of conduct for businesses to ensure they are truthful in all their advertising. This doesn’t prevent traders from being able to reflect their products or services in a favourable light. Instances where your claims are so wildly exaggerated are “puffery” and are not illegal – such advertising statements are not considered misleading and deceptive because the reasonable person could not possibly treat the statement as being serious as to lead them into confusion.

  Comparative Advertising

  Comparative advertising is allowed, and encouraged as it enables better informed choices which can assist consumers. It would be inconsistent with public policy and the Australian Consumer Law to restrict an advertiser from publicising, truthfully, a feature of its product that is superior to the same feature of a competitor’s product. That said, Courts are likely to consider this type of advertising more closely and more likely to mislead or deceive if the comparisons are inaccurate.

  Remember:

  1. any factual assertions made by an advertiser must be true and accurate;
  2. comparative advertising should be between actual competitors and competing products; and
  3. comparisons should be ‘appropriate comparisons’ to enable better informed choices.

  Does the fine print mean anything?

  Yes, but you need to be mindful to use these carefully. Advertisers can use fine print (or those fast talking disclaimers) to alert the consumer to any terms or conditions governing the principal message. However the information in the fine print must not contradict the overall message of the advertisement. The fine print also needs to be sufficiently prominent to ensure that, taken overall, the advertisement is not misleading. Consumers don’t look at advertisements in isolation; it is the overall impression left so don’t use “Terms and Conditions apply” in tiny font which can barely be seen in a full page ad (for example).

  For more information, please contact Katie Innes. The next Business Breakfast Club will be held on 10 May 2019. If you would like to attend, please click here.

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  It's all about trust

  There has been a string of convictions against real estate agents in Western Australia, Victoria and New South Wales over the last 12 months, with many of those convictions resulting from the misuse of trust money. Given the trust and faith placed in a real estate agent to hold monies on behalf of another party, it is no surprise that the use of trust monies continues to be heavily regulated.

  The Agents Act 2003 (ACT) defines ‘trust money’ as money that is received by a licensed agent (in the course of conducting business) on behalf of someone else and on the basis that the money is to be paid to the other person or as the other person directs. The definition is broad and will include the deposit paid in relation to the sale of a property, rental bonds and monies withheld from the sale of a property (for instance, where the parties have agreed for some obligation to be satisfied after settlement and the monies are held as security for performance of that obligation).

  Part 7 of the Agents Act 2003 (ACT) sets out the regulatory framework surrounding trust accounting and requires that a licensed agent:

  • upon receiving trust money, ensures that the money is paid it into the agents trust account (which must be an account of an Authorised Deposit Taking Institution) by the next business day;
  • only deals with trust money as directed by the person for whom the money is held on trust;
  • (though it may seem obvious) does not use trust money to pay any debts or other expenses of the agent’s business; and
  • upon becoming aware that the trust account has become overdrawn, notifies the Commissioner (within 5 business days) and provides the Commissioner with details of the account, the amount by which the account was overdrawn and the reason for the account being overdrawn.

  There are various other requirements under Part 7 regulating the use of trust money, the opening and closing of the trust account and the auditing of trust accounts. A failure to comply with these requirements can lead an agent liable for penalties, loss or suspension of license and even jail time. For a license holder, these liabilities may even arise for failing to properly supervise the proper accounting procedures of the business.

  Due to the requirement for a licensed agent to record the material details of every transaction and to keep those records for 5 years, agents should be particularly mindful that any audit of the agent’s records by the Commissioner will likely identify any discrepancy or misuse of trust monies, including a failure to keep proper records.

  If you have any questions regarding trust account procedures, please do not hesitate to contact the BAL Real Estate Team.

  Written by Benjamin Grady and Riley Berry.

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  Supply Chain Management in the 21st Century-The Case for Blockchain

  When we purchase goods, from food to clothes to cars, we often forget that our transaction represents one small final step at the end of a long and complex supply chain. Effective supply chain management is a crucial and demanding commercial exercise. Yet, the supply chains of today have evolved far beyond their relatively static and linear character of several decades ago, and new approaches are needed.

  This is where Blockchain comes in. We explained the basics of Blockchain in an earlier article. Although the applications of Blockchain are numerous, there are few as compelling as its use in supply chain management. It isn’t purely a matter of theory either; global powerhouses such as BHP Billiton, Walmart, Maersk and IBM have all made moves to utilise Blockchain in their own supply chains.

  The changing nature of supply chains

  Whichever way you look at it, supply chains are evolving are much more dynamic than they once were. Supply chains are now constituted in much more expansive and complex networks, comprising multiple parties dealing with particular variants, components or stages of a product.

  Despite the great pace of change the core frameworks underlying supply chains have not necessarily been adapting. Businesses have been relying on the same technologies for years, some of which are becoming outdated and ill-suited.

  The promise of Blockchain

  Blockchain technology presents a unique opportunity for businesses to rethink the way they manage their dealings with suppliers and manufacturers. The potential applications of Blockchain in this regard are virtually boundless, but the key uses essentially revolve around tracing products throughout their lifecycle.

  Blockchain can be used to keep real-time and essentially ‘gapless’ records of a product’s movements, tracking its unique identifier through every assembly, modification, process, transit, and transfer. By ensuring an instantaneous and immutable record is created every time a product changes hands-all of which is recorded in the one place-the scope for the errors, costs and delays associated with intermediaries radically diminishes. Not only does this have commercial benefits for the parties involved, it can lend itself to other functions, such as verifying product certifications (e.g. fair trade, organic).

  The benefits of using Blockchain in this way are inherent in the technology itself. Reliance by all parties on a common, tamper-proof and real-time record of a product’s lifecycle not only eases administrative burden and reduces the need for audits, it promotes transparency. The requirement for ‘consensus’ between the different parties in the distributed network means that every transaction is validated, so disputes should arise less often.  Consumers will be able to have confidence in the provenance of the products they buy.

  In theory, Blockchain is an ideal solution to the changing needs of supply chains. However, it is not quite that simple-Blockchain is, after all, still an emerging technology. Though the potential benefits are enormous, there are some key challenges that must be considered.

  Challenges on the horizon

  Implementing a new technological framework underpinning large and complex supply chains will require time and money, not only in terms of system overhauls, but in terms of retraining staff, hiring new personnel, developing outsourcing relationships, and so on. Exactly what the costs will be isn’t yet clear, as we don’t have a many examples of relevant scale. Given the recent uptake by larger organisations it will certainly be a space to keep an eye on.

  If you are interested to know more or have questions about how changing supply chains or Blockchain might affect your business, please get in touch with Mark Love  in our Business team.

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  Changes to Retirement Village Legislation: How will it affect you?

  On 29 November 2018, the ACT Government introduced the Retirement Village Legislation Amendment Bill 2018 (the Bill) to the Legislative Assembly. According to the Explanatory Statement, the Bill introduced the second set of amendments to be made as a result of the Government’s 2015/16 review of the Retirement Village Legislation. The amendments brought in will affect those currently living in and seeking to live in a retirement village in the ACT.

  Retirement Village Legislation Changes

  The major changes to be aware of are as follows:

  • Contract for Sale requirements – the Bill creates two classes of required documents when selling retirement village premises within a registered Units Plan (a Retirement Village Unit). These are the initial required documents (the Crown Lease, title search, deposited plan, Units Plan and any asbestos report) and the later required documents (copies of encumbrances noted on title, the Lease Conveyancing Enquiry, the Owners Corporation Information certificate (section 119 certificate), the EER and the Building and Pest Report). The initial required documents are to be made available at all times the Retirement Village Unit is marketed for sale. The later required documents will not need to be provided to a Buyer until either 14 days prior to exchange of Contracts (unless the Buyer agrees otherwise) or within 14 days of the Buyer making a request.
  • One vote one Unit – where two or more residents occupy the same residential premises within a retirement village, only one will be permitted to cast a vote. Currently, each resident is entitled to vote at a residents meeting. All residents may, however, by special resolution resolve that each resident within the retirement village will be permitted to vote (even where they live with another resident).
  • Capital maintenance and capital replacement – the Bill expands the definition of capital replacement to extend to replacement of a part of a capital item. This will ensure that recurrent charges paid by residents are not used by the operator to replace any part of a capital item, which is the responsibility of the Operator. The ACT Government may also make guidelines specifying a particular item falls under the definition of capital replacement.
  • Optional Conciliation – Retirement village residents will now have the option of requiring the Operator to conciliate any dispute under the Retirement Villages Act 2012 (ACT). Once finalised, the conciliated agreement will have the same effect as an order of the ACT Civil and Administrative Tribunal.

  Conclusion

  While many of the amendments may be considered relatively minor they do reflect the detailed complexities of Retirement Village Contracts. Any person entering into a Retirement Village Contract will often be faced with considerations and risks which they are often not made aware of until they receive formal legal advice. Should you require further information on the Retirement Villages Act 2012 (ACT), please contact a member of our Real Estate team.

  Written by Julian Pozza.

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• 

  Bank Guarantees - It Pays To Be Pedantic

  It is common practice for a landlord to require that a bond be provided by a tenant to secure its obligations under the lease. Rather than a cash bond (which brings with it additional administrative requirements for a landlord), this security is commonly provided by way of a bank guarantee.

  A bank guarantee is an unconditional undertaking, provided by a bank, to pay the amount secured to the favouree on written demand, without reference to the customer or tenant. The bank issuing the bank guarantee will require that the funds are ‘held’ by the tenant, ensuring that they are always available in the event that a claim is made against the bank guarantee. A landlord may only claim against a bank guarantee if the tenant is in default under the lease.

  There are several matters that a landlord should consider when reviewing or accepting the form of a bank guarantee. These include:

  • Whether the bank guarantee has been issued from a bank trading in Australia (that holds an Australian banking licence).
  • If there is an expiry date, if the expiry date allows for an appropriate period after the expiry date of the lease to ensure that the landlord is still able to claim against the bank guarantee for any existing breaches of the lease or any rental or make good obligations.
  • The terms of the bank guarantee to ensure that they do not contain any restrictions.

  Many landlords prefer that the bank guarantee does not contain an expiry date at all so that if the tenant remains in the premises beyond the expiry date of the bank guarantee, the landlord still holds security for any potential loss or damages arising out of a default under the lease by the tenant. Some banks will not issue a bank guarantee without an expiry date and, in those circumstances, it is common practice to select an expiry date that is several months after the lease expiry date.

  To ensure the bank guarantee is valid and can actually be used as security for the tenant’s obligations under the lease, the following should be stated on the bank guarantee:

  • The names of the parties. They should appear exactly as they do on the lease.
  • The address of the premises. It is good practice for the bank guarantee to also state the title details for the property.
  • A statement to the effect that the bank guarantee is given in favour of the landlord as security for the tenants obligations under the lease.
  • The secured amount (inclusive of GST).

  It is important to understand that the original bank guarantee must be presented at the bank in order to make a claim against it. Due to this requirement, a landlord should only release the original bank guarantee in very limited circumstances, for instance, following the expiry of the lease (and within 30 days in the ACT). The original bank guarantee should otherwise be kept in a safe and secure storage space.

  Many people underestimate the importance of the bank guarantee and more so, its form. It is not just a piece of paper but an effective and tangible form of security that can be claimed upon with relative ease, if prepared correctly. Often this is the only form of security called upon by the landlord to properly compensate the landlord for any damages or loss arising from a breach of the lease by the tenant.

  If you have any questions about bank guarantees, please get in touch with our Real Estate Team.

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• 

  Conditional Gifts in Wills

  Tim Winton’s seminal novel Cloudstreet begins with the inheritance of a large house, with a covenant that it cannot be sold for twenty years. So begins a decade’s long saga that never questioned the legality of such a condition that potentially comes close to being invalid. While conditional gifts in Wills are not usually contentious, their impact can be significant. This article provides a summary of the present law surrounding conditional gifting in Wills.

  What are Conditional Gifts?

  As the name suggests a conditional gift is a gift that has some condition attached to it in a Will. The condition can be framed in one of two ways:

  1. a condition precedent – where an event must occur before the beneficiary can receive the gift; or
  2. a condition subsequent – where a beneficiary loses a gift they have already received if a later event occurs.

  The laws surrounding conditional gifting are entirely based on the common law (judge made law). Over the decades, the Courts have attempted to strike a compromise between the freedom of testation and imposing certain restrictions which, if not adhered to, would find the condition void.

  The distinction between a condition precedent and a condition subsequent is important if the condition is held to be void:

  • in the case of a condition precedent – If the condition is held to be void then the gift fails entirely;
  • in the case of a condition subsequent – if the condition is held to be void, the gift takes effect as an unconditional gift.

  Over the years the Courts have seen conditions placed with respect to marriage, relationships, religion and preservation of property.

  In 2014, the case of Carolyn Margaret Hicken v Robyn Patricia Carroll & Ors (No 2) [2014] NSWSC 1059 (“Hicken v Carroll“) saw the Supreme Court of New South Wales uphold the validity of conditional gifts that required the children of the deceased to adopt a particular religion prior to becoming entitled to their inheritance. This case presented the New South Wales Supreme Court with the perfect opportunity to lay the groundwork for the common law surrounding condition precedents in Wills.

  In this particular case, Patrick Carroll was survived by 4 children when he died. He bequeathed gifts to them in his Will on the following condition:

  “subject to and dependent upon them becoming baptised in the Catholic Church within a period of 3 months from the date of my death and such gifts are also subject to and dependent (sic) my children attending my funeral”.

  Two conditions were present – (1) the children had to become baptised in a Catholic Church within 3 months of their father’s death and (2) the children were required to attend their father’s funeral.

  Each child attended the funeral but was deeply opposed to being baptised in a Catholic Church (they were practicing Jehovah’s Witnesses). After 3 months lapsed, one of the children sought a declaration from the Supreme Court that the conditions were “void and of no effect”.

  The Supreme Court of New South Wales set down the following principles:

  1. Uncertainty

  A condition precedent or condition subsequent can be held to be void if it is uncertain (but not merely because it is not completely clear).

  The children in Hicken v Carroll argued that the relevant clause did not specify a particular Catholic denomination and the concept of “baptism” was open to interpretation.

  The Court held that a clear interpretation of the words in the Will were required. The term “baptised in the Catholic Church” meant “being ritually initiated into the Roman Catholic Church”.  The Court therefore held that the condition was sufficiently certain.

  2. Impossibility

  If a condition is impossible to fulfil, it can be held to be void. Impossibility requires more than the condition being simply “difficult” or “improbable”.

  In this case, the Court held that it would not be impossible for the children to arrange for a baptism within a 3 month window.

  3. Public Policy

  A condition against public policy will be held to be void.

  This was the strongest argument run by the children – all four children submitted that in modern Australia (2014 as it was then), a clause containing the baptism condition was against public policy.

  In what seemed to be a bizarre move, the New South Wales Supreme Court opted for a narrow interpretation of the High Court’s decision in Re Cuming; Nicholls v Public Trustee[1]. The Court in Hicken v Carroll held that a condition with regard to religion would be void for uncertainty if there was an “interference with the parental right to bringing up a child in a particular faith“. To include a condition that required a beneficiary to be baptised was therefore not held to be against public policy.

  The Court went on to say:

  “I am unable to discern from the legislation, treaties and other considerations referred to by the Children a public policy of the kind for which they contend that would overcome the longstanding significance which the law has accorded to freedom of testation.

  Insofar as they invoke religious discrimination, the various anti-discrimination statutes to which they referred do not prevent discrimination on the grounds of religion generally…. The conditions, in particular the Baptism Condition, do not impinge upon whatever right to the free exercise of their religion the law now accords the Children. The Gifts do not compel the Children to do anything. If they had chosen to do so, they could have complied with the Baptism Condition. They have maintained their adherence to the Jehovah’s Witness faith. That choice is to be accorded every respect but does not relieve them from the consequences of that choice on their eligibility under the Gifts”

  Ultimately the Court held the baptism condition was neither uncertain, impossible nor contrary to public policy. The gifts to the children were valid but failed because the children failed to satisfy the (valid) conditions.

  One final principle regarding conditional gifts that was not explored in the above case (it did not need to be) is the principle that conditional gifts cannot prevent future generations from being able to sell or otherwise dispose of property left to them.

  With all this being considered perhaps it is best that no one questioned the legality of the covenant in Cloudstreet as a great novel might have been reduced to merely a few pages. If you are considering attaching conditions to gifts in your will or are subject to conditions that appear unfair then you should seek legal advice from our Wills and Estate Planning Team.

  Written by Golnar Nekoee and James Connolly.

  [1] Re Cuming; Nicholls v Public Trustee (South Australia) [1945] HCA 32

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• 

  Indemnities: Everyone wants them; no one wants to give them

  Indemnity clauses can play an important role in managing the risks associated with commercial transactions. The tendency is to seek an indemnity which will protect a party to the greatest possible extent against all liabilities arising from the actions of another. Yet, too often, the indemnity is based on a boilerplate clause perhaps obtained from a precedent, so the drafting doesn’t reflect the inherent or underlying risk of a particular business relationship and the parties end up fighting over who is giving an indemnity and to what extent. But is an indemnity really necessary?

  At common law, the right to damages is implied by law and does not need to be stated in the contract. It follows that once you have established that a primary obligation has been breached the law implies a secondary obligation to pay damages. A contract can, and usually does, provide for its own regime for breach of contract – here is where an indemnity comes in to play.

  An indemnity is a promise made by one party (“the indemnifier”) to cover loss or damage suffered by another party (“the principal”) which may be suffered as a result of a specified event. Indemnities are frequently used to expand the range of losses that a principal could otherwise recover at common law, can alter the contractual rules of interpretation, and can deliver procedural advantages when it comes time to enforce.

  So what can indemnities actually do? Indemnities can:

  1. Alter the test for causation, remoteness of damage and foreseeability: In certain circumstances and depending on the form of words used, it may not be necessary for the innocent party to demonstrate that the indemnifier caused the loss claimed, simply that the event has occurred. Similarly you can remove the tests of foreseeability and remoteness and replace them with other criterion for assessing what loss is recoverable. If this occurs, then the principal can essentially pick and choose what it will be protected from and may no longer be confined in its recovery by how far the loss extends;
  2. Modify the common law duty of the principal to mitigate its loss (thus increasing the losses to be paid for by the indemnifier);
  3. Protect the principal from damage suffered by the conduct of strangers to the contract (i.e. third party actions or claims); and
  4. Extend the statutory limitation period. In the ACT, section 11 of the Limitations Act 1985 limits the time period within which a claim may be brought for breach of contract. Normally, that period is 6 years calculated from the date of the breach.  However, the limitation period in relation to an indemnity commences from the date on which the indemnifier refuses to honour the indemnity. The principal has a period of 6 years from that date within which to bring legal proceedings to enforce the indemnity.

  Depending on how the indemnity is drafted, an indemnity can turn what would otherwise be a claim for compensatory damages (subject to the principal proving breach of contract, damages suffered, and an assessment of those damages) into a straight claim for debt. The principal may only need to establish that the event triggering the obligation to pay has occurred.

  There can be many benefits to getting an indemnity in your favour but these all assume the indemnity is drafted properly and clearly. Courts will construe indemnities narrowly and if there are any ambiguities Courts will construe indemnities in favour of the indemnifier (because a party should know what liability they are agreeing to).

  Indemnities can be useful and provide peace of mind, but not necessarily at the expense of achieving the commercial transaction or maintaining an ongoing working relationship. There are always rights to common law damages if something does go wrong.

  If you have any questions about indemnities (or how to enforce them), please get in touch with our Business team.

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• 

  Risks and Rewards for Start-Ups seeking Venture Capital

  For start-up businesses, venture capital (VC) investment represents an opportunity to obtain financing, strategic advice and access to potential markets at the outset of their business venture. Funding of this nature is becoming increasingly popular, and often necessary for start-ups who lack access to loans, capital markets or other traditional sources of finance.

  Investments in start-ups are high-risk, high-reward. VC firms are poised to win big if their investment pays off but, because of the inherently precarious nature of many new businesses, they will often be eager to have a hand in controlling the decisions and activities of the new enterprise.

  We look at some of the risks and rewards of VC for start-ups, as well as issues to bear in mind if you decide that VC is the right option for you.

  The rewards

  The most obvious benefit of venture capital is precisely that: capital. VC can represent a significant injection of money that can often be decisive in a start-up’s capacity to enter the market as a genuine competitor. This can help start-ups realise their goals much faster, and potentially beat other competitors to the market. What’s more, the money is yours. You are not bound to repay them (as you would be with a lender) which can court

  educe the immediate cash-flow pressure.

  Other benefits include access to a wealth of business experience, mentoring and networks. The expertise of a large and sophisticated VC firm can be immeasurably valuable as you start out on your new venture. The investors have a vested interest in the growth of your business, and will be able to assist you wpith managing your business and developing your skills as an entrepreneur.  It will also often mean access to additional resources to assist with your business’ growth, with the VC firm often willing to provide-or at the very least facilitate access to-legal, advisory, tax and other support.  Start-ups are often able to leverage the well-established connections that their investors have within the industry, including with other potential investors, potential clients and others key stakeholders that can help push your business ahead within the market.

  The risks

  The key risk is the loss of control over the business. Naturally, investors with a lot to lose will want to have a hand in the decisions of the business they’re backing. A corollary of seeking VC investment is that start-ups will usually have to relinquish a significant degree of control in their companies. VC firms will often negotiate seats on the board, priority shareholding, and significant stakes in the business that allow them to influence, veto or even make key decisions. You may even be relegated to minority ownership status. This shift in the ownership dynamic can be problematic where your goals, priorities and values are misaligned with those of your investor.

  A related problem is the counter intuitive issue of ‘growing too fast’. Starting with a bang may mean that your business may quickly become too big for you to manage without further investment and significant resources. This can be problematic if your VC investor, contrary to the micro-managing kind described above, is more “hands off” in their approach and does not provide you with the guidance, connections and support that you need.

  Things to consider

  The choice about whether to seek VC will be one that is unique to your business and to you.

  Before making your decision it is important that you do your research. Be clear on what potential VC firms might expect out of your relationship, and whether they are more ‘hands on’ or ‘hands off’ in their approach. Also investigate other financing possibilities, as there may be other sources of capital that align more closely to your values and the needs of your business.

  Take the time to reflect on what you want to get out of your business. Think about your business’ core goals and values, and whether you’re willing to compromise on any of them (or on any decision at all) if it means allowing the business to grow. Think about whether the additional expertise, connections and resources would outweigh losing a degree of ownership or control.

  All of these factors are important and none of them will be decisive by themselves. If you think that VC might be the best option for your start-up ensure that you consult professional advisors to help you understand what it will mean for you and your business.

  If you are considering pursuing VC funding or want to understand how it might affect your start-up, please feel free to get in touch with our Business team.

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• 

  GIPA and copyright

  In a decision handed down on 28 March 2019, the NSW Civil and Administrative Tribunal has upheld[1] a Council’s decision to provide ‘view only’ access to copyright documents the subject of an access application under the Government Information (Public Access) Act 2009. BAL Lawyers acted for the Council in the proceedings.

  The application

  The applicant applied for access to information held by the Council relating to a development application for an abattoir adjacent to the applicant’s property. The Council provided a copy of some information to the applicant but decided that other information was protected by copyright.  The Council decided that this information should not be copied but instead made available for inspection only.  The copyright information consisted of reports prepared by consultants engaged by the proponent such as surveys, stormwater drainage designs and building plans.

  The applicant’s contentions

  The applicant contended that he required copies of the documents to be able to obtain legal advice about whether the development was ‘designated development’ for the purpose of deciding whether to commence legal proceedings regarding the development. He said this was not practicable if he could not provide his lawyers with copies of the information. He disputed that the documents were subject to copyright and argued that the Council had the onus of establishing that:

  1. the information was protected by copyright (including that the information comprised ‘original works’ and that their authors were ‘qualified persons’ within the meaning of the Copyright Act);
  2. copying the documents would amount to ‘reproduction’ for the purposes of the Copyright Act;
  3. the owner of the copyright had not granted an express or implied licence to the Council allowing copying of the information; and
  4. copying the documents did not fall within any of the exceptions to infringement in the Copyright Act.

  The Tribunal’s decision

  1. The information was protected by copyright

  The Tribunal observed that, under the Copyright Act, the definition of ‘artistic work’ includes ‘drawings’ which in turn is defined to include a diagram, map, chart or plan and that a ‘literary work’ need not have literary merit but must provide information, instruction or literary enjoyment. To be protected by copyright the work must be original but need not be ‘novel’ – it is sufficient if the work was produced by the application of some independent intellectual effort.  It cannot simply be a copy of someone else’s work.

  While the applicant argued that there was no evidence that the works were original, the Tribunal found that the reports themselves indicated they were the product of independent effort in that they stated who prepared them and the methodology used in their preparation such as site visits, test results and analysis.  The Tribunal accepted the Council’s submission that the likelihood that the reports were mere copies was remote given that they had been brought into existence to address aspects of a particular development application lodged with the Council. In those circumstances the Tribunal found that the works were ‘original’.

  The applicant then argued that there was no evidence of the authorship of the documents sufficient to establish that their author was a ‘qualified person’ within the meaning of the Copyright Act. The Tribunal noted that a ‘qualified person’ is, for relevant purposes, an Australian citizen or a person resident in Australia. The Tribunal referred to evidence tendered by the Council at the hearing which included a list of the businesses and companies to which the various reports and plans were attributed which showed that in each case their business address was in Australia. The Tribunal observed that the addresses of the authors and/or owners on the reports were also shown as being located in Australia and that the content of the reports and drawings also indicated that they had been created in Australia. On that basis the Tribunal found that it was more likely than not that the authors of the documents were resident in Australia.

  The Tribunal concluded that the information comprised original literary and artistic works within the meaning of the Copyright Act and was therefore subject to copyright protection.

  2. Copying the documents would infringe copyright

  The Tribunal observed that copyright is infringed by a person, who is not the owner of the copyright, doing or authorising the doing of an act comprised in the copyright. Reproducing a work in a material form is an act comprised in the copyright.  Therefore reproducing or copying the work or authorising such an act will infringe the copyright unless an exception applies. The Tribunal found that the Council would authorise such an act if it gave express or implied permission to the applicant to reproduce the information, including providing copying facilities to enable the applicant to make his own copies[2].

  3. No licence to allow copying

  The applicant argued that the Council must establish that the owner of copyright had not granted an express or implied licence to copy the document. The Council said that no such licence had been granted.  While the applicant gave evidence that he had approached the businesses associated with the reports seeking permission to make copies of the information, no such permission had been forthcoming.  The Tribunal pointed out that this did not support the applicant’s argument that a licence may have been granted.

  The Tribunal then considered the applicant’s argument that a licence to copy the documents should be implied because, in order for the development application to be processed, third parties would need to reproduce the documents.  The Tribunal pointed out that s.10.14 of the Environmental Planning and Assessment Act 1979 provides an indemnity for the copying of documents during the development application process but that this does not extend to licensing the copying of documents for the purposes of the GIPA Act.

  The applicant also relied on s.83 of the Local Government Act 1993, which provides that one copy of any plans and specifications accompanying an application for approval becomes the property of the Council. The Tribunal found that this did not include the assignment of copyright in the documents.

  The Tribunal concluded that, in the absence of any evidence of any express licence having been granted or facts from which it could be implied, the applicant’s argument could not succeed.

  4. None of the exceptions to infringement in the Copyright Act applied

  The applicant relied on two exceptions in the Copyright Act, s.41 (fair dealing for the purposes of criticism or review) and s.43 (reproduction for purposes of judicial proceedings or professional advice).

  In relation to s.41, the Tribunal followed an earlier decision of the Tribunal[3] in which Senior Member Lucy had held that ‘criticism’ meant the act of analysing and judging the quality of a literary or artistic work. The stated purpose of the applicant in this matter was to provide the information to his legal advisors for the purpose of deciding whether to commence legal proceedings. The Tribunal concluded that this was not consistent with wishing to comment on the quality or merits of the information.  The Tribunal added that it was the Council’s purpose in copying the documents which was relevant, not the applicant’s, and that the Council’s purpose would be to fulfil its obligations under the GIPA Act.  This also did not fall within s.41.

  The Tribunal then went on to consider s.43(1) of the Copyright Act which provides an exception in connection with legal proceedings.  The Tribunal observed that there were no legal proceedings currently on foot and that the applicant had stated that he wished to obtain legal advice to determine whether to commence proceedings in the Land and Environment Court.  This exception therefore did not apply.

  The Tribunal referred to s.43(2) of the Copyright Act, which provides that fair dealing with a literary or artistic work does not constitute an infringement of the copyright in the work if it is done for the purpose of the giving of professional advice by a legal practitioner. The Tribunal held, relying on a decision of the Federal Court[4], that this provision applied only to dealings done for the purpose of giving legal advice and did not extend to dealings for the purpose of seeking legal advice. The exception therefore also did not apply here.

  The Tribunal concluded that the Council would infringe copyright if it reproduced, or authorised the applicant to reproduce, the information in question.  In those circumstances the Tribunal found that the Council’s decision should be affirmed.

  Comment

  The Tribunal’s decision highlights the complexities that can arise in deciding GIPA applications involving documents subject to copyright.

  Of particular interest is the Tribunal’s finding that the Council would infringe copyright if it permitted the applicant to make his own copies of the copyright material.  This aspect of the decision means that Councils should be careful in how they apply the advice contained in section 7 of the Knowledge Update published by the Information and Privacy Commission, “Copyright and the GIPA Act: Frequently asked questions for councils” (July 2014) particularly what is said in relation to the use of photocopiers in areas where people access development applications.

  For further information please contact Alan Bradbury.

  [1] Sandy v Kiama Municipal Council [2019] NSWCATAD 49

  [2] University of NSW v Moorehouse (1974) 133 CLR 1

  [3] Amos v Central Coast Council [2018] NSWCATAD 101

  [4] Volunteer Eco Students Abroad P/L v Reach Out Volunteers P/L [2013] FCA 731

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• 

  Essential Guide to Local Government Law: Enforcement of Development Control Orders under the EPA Act

  Our essential guide to development control orders addressed when local councils can give development control orders under the Environmental Planning and Assessment Act 1979 and when development control orders are likely to be an appropriate tool to deal with a compliance issue. This Essential Guide outlines the options available to councils to enforce compliance with a development control order, and the advantages and risks of the different enforcement options available.

  When is it appropriate to take steps to enforce compliance with an order?

  After the time specified in an order for compliance has passed the Council will need to determine whether or not the order has been complied with (at all or in part). Where an order contains multiple requirements which must be satisfied at different times then a Council can choose whether to monitor compliance progressively or after the last date for compliance has passed. Where the time frame for compliance is relatively long, it can be helpful to send a reminder letter prior to the end of the compliance period, as some recipients may mistakenly assume that an absence of correspondence from a council means that the issue has simply gone away. However, even after the date for compliance has passed, the order continues to have effect.[1]

  The following matters may be relevant in deciding how to proceed where a development control order has not been complied with:

  1. the nature and amount of work required to comply with the order;
  2. the likely costs of doing the outstanding works;
  3. whether there have been any factors out of the recipient’s control which have contributed to them failing to comply with the order such as bad weather, illness, limited contractor availability etc.
  4. any public interest considerations, such as impacts on third parties arising from ongoing noncompliance; and
  5. the attitude of the recipient towards compliance.

  In some circumstances it may be appropriate for the council to grant an extension of time for the recipient to comply with the order before taking enforcement action. In this situation, any extension of time which is allowed should be recorded in writing as a modification of the order.[2]

  If the Council considers that enforcement action is appropriate then, in order to afford procedural fairness to the recipient, it should first send a letter before action putting the recipient on notice of how it proposes to proceed.

  Options for a council to enforce compliance with an order:

  1. Mediation

  In some situations it may be appropriate to consider mediation, prior to taking other enforcement steps. Factors relevant to whether mediation is likely to succeed include whether there are a variety of ways to achieve compliance with the order, the relationship between the parties, whether immediate action is required, whether there is scope for flexibility, the impact of the non-compliance etc. Mediation can be done on its own or as part of court proceedings.  If mediation is successful it is usually more time and cost effective than proceeding to a contested court hearing.

  2. Council giving effect to the order

  If the recipient has failed to comply with an order given by the council then, under cl.33 of Schedule 5 of the Act, a council may do ‘all such things as are necessary or convenient to give effect to the terms of the order (including the carrying out of any work required by the order)’.  That section also states that a council may issue a compliance costs notice to recover ‘all or any reasonable costs and expenses incurred in connection with the following things:

  1. monitoring action under the order;
  2. ensuring that the order is complied with;
  3. any costs or expenses relating to an investigation that leads to the giving of the order;[3]
  4. any costs or expenses relating to the preparation or serving of the notice of the intention to give the order;[4] and
  5. any other matters associated with the order.

  The council can then recover any unpaid amounts specified in a notice as a debt in a court of competent jurisdiction (the choice of court will depend on how much is owed to the council).

  While this seems like a convenient option, it can be risky for a council to give effect to an order without first obtaining an order from the Court allowing this. This is because giving effect to order will often involve accessing and, in some cases damaging or interfering with, another person’s property. If the order is subsequently found to be invalid a council can be liable to the land owner for damages arising from the work involved in giving effect to the order.[5]  As a matter of practicality, it can also be difficult to recover costs after work has been done, especially from individuals who may have limited capacity to pay.

  3. Civil enforcement proceedings

  A council can commence civil enforcement proceedings in Class 4 of the NSW Land and Environment Court under s.9.45 of the Act to remedy or restrain a breach of the Act, including the failure to comply with a development control order.[6]  Class 4 proceedings enable a council to seek a range of orders, including a declaration from the Court that the development control order has not been complied with, a court order that the recipient to comply with the outstanding order requirements as well as an order for costs.  To be successful in the proceedings the council will need to establish that the recipient has not complied with the order ‘on the balance of probabilities’. However, even where the Court finds that a breach of the Act has occurred or is likely to occur, it has discretion as to whether or not to enforce compliance.[7] Factors such as the nature of the breach, including the environmental impacts associated with the breach, whether the breach is a purely technical breach, and excessive delay in taking the proceedings, can all be considered by the Court in deciding whether to make orders requiring compliance.

  4. Criminal proceedings

  Under s.9.37 of the Act, non-compliance with a development control order is also an offence under the Act for which a council can commence criminal proceedings in the Local Court or the NSW Land and Environment Court[8]. It is also possible to give a penalty notice for the offence of failing to comply with a development control order[9].

  Criminal proceedings do not directly bring about compliance with an order (unless compliance is achieved as the result of the prosecution having a deterrence effect), and this option is therefore usually appropriate where the intention of an order has been frustrated or compliance is no longer possible.

  To be successful in criminal proceedings a council will need to prove its case ‘beyond reasonable doubt’. This requires the Council to be able to exclude any possibility that the development could have been lawfully carried out without the need for development consent (e.g as exempt development). Any such proceedings must also be brought within the statutory time frame (within 2 years of the offence occurring, or within 2 years of the offence coming to the attention of the relevant council investigating officer).

  It is also not possible to prosecute for an offence where the same conduct is already the subject of orders made by the LEC in civil enforcement proceedings[10].

  For further information or assistance, please contact  Alan Bradbury and the Local Government & Planning team on (02) 6274 0999.

  More Essential Guides to Local Government Law are available here.

  The content contained in this guide is, of course, general commentary only. It is not legal advice. Readers should contact us and receive our specific advice on the particular situation that concerns them.

   

  [1] Clause 28 of Schedule 5 of the Act.

  [2] Clause 22 of Schedule 5 of the Act.

  [3] The amount which may be claimed for the costs relating to an investigation is capped under 281C of the Regulation.

  [4] The amount which may be claimed for the costs relating to the preparation and giving of a notice of intention is capped under 281C of the Regulation.

  [5] Grant v Brewarrina Shire Council [No. 2] [2003] NSWLEC 54

  [6] s.9.44(b)(v) of the Act.

  [7] Warringah Shire Council v Sedevcic (1987) 10 NSWLR 335

  [8] s.9.57 of the Act.

  [9] Environmental Planning and Assessment Regulation 2000, Schedule5,

  [10] 9.57(7) of the Act

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• 

  Important Changes to the Real Estate Award

  Several important changes to the Real Estate Industry Award came into effect on 2 April 2018 which have and will impact the employment of many in the real estate industry.

  Classifications and weekly wages

  The new classifications and wage rates cover employees previously classified as property sales, management and strata/community title management associates. Given these changes, there no longer is a distinction and a remuneration difference between property lease and sale agents, and strata and community title management employees. An employee can perform all these duties concurrently during their employment.

  The new classifications and pay levels are:

  • Real Estate Employee Level 1 (Associate Level)—first 12 months of employment at this level – $753.70
  • Real Estate Employee Level 1 (Associate Level)—after first 12 months of employment at this level – $795.50
  • Real Estate Employee Level 2 (Representative Level) – $837.40
  • Real Estate Employee Level 3 (Supervisory Level) – $921.20
  • Real Estate Employee Level 4 (In-Charge Level) – $963.10

  Commission only employment

  Eligibility

  In order to be eligible for commission only employment, employees must meet all of the following requirements:

  • Employed as a Real Estate Employee Level 2 or above;
  • Need to have worked in property sales or commercial, industrial or retail leasing or as a licensed real estate agent for at least 12 consecutive months over the previous 3 years;
  • Must meet the Minimum Income Threshold Amount (MITA) which is 125% of their minimum wage (excluding superannuation and allowances) provided by the Award for their employment classification for 12 consecutive months over the previous 3 years;
  • Employees engaged after 2 April 2018 also need to meet the MITA requirements;
  • Employees engaged before 2 April 2018, can continue to be remunerate based on a commission-only arrangement provided that their arrangement is reviewed yearly and meets the MITA requirements;
  • Must be above 21 years old.

  The commission-only employees must be reviewed every 12 months to ensure they meet the MITA requirements. If MITA requirements are not met, they can no longer be engaged on a commission-only arrangement as that arrangement would breach the Award’s provisions which may trigger financial penalties to the employer. However, these employees would be eligible to be reassessed the following 12 months in order to establish whether they requalify under the MITA requirements. If they do, they can be paid again as commission-only employees.

  Minimum commission only rate

  The new minimum commission-only rate is now 31.5% (excluding GST and conjunctional agent fees) of an employer’s gross commission.

  Annual leave for commission only employees 

  Commission-only employees are still not entitled under the changed to the Award to annual leave loading, however annual leave must be paid at the employee’s base pay rate for their classification at the time of taking leave. Given that, the employers can no longer have arrangements with commission-only employees where they agree that the commission made by the employee will cover all their statutory entitlements like annual leave, sick leave or long service leave. Such arrangements are now unlawful and they must be reconsidered.

  If you do have commission-only arrangements with some of your employees, or you are considering employing real estate agents on such arrangements, it would be best practice to have the agreements reviewed by a solicitor with expertise in employment and industrial law. Our team at BAL Lawyers has the expertise to assist with any employment law matters you may have concerning your employment or your business.

  Please contact our Employment and Industrial Law Group if you would like your employment agreements reviewed.

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• 

  7 BAL Lawyers staff ranked in the 2019 edition of Best Lawyers - Australia

  Bradley Allen Love is pleased to announce that 7 lawyers from our Canberra office including 4 Legal Directors and 2 Directors, have been named in The Best Lawyers in Australia: 2019.

  The following Bradley Allen Love lawyers are included among the Best Lawyers in Australia for 2019:

  • Alan Bradbury – Canberra, Government Practice, Planning and Environment Law;
  • John Bradley – Canberra, Leasing Law, Real Property Law;
  • Mark Love – Canberra, Commercial Law, Insolvency and Reorganisation Law, and Corporate Law;
  • John Wilson – Canberra, Labour and Employment Law, Occupational Health and Safety Law;
  • David Toole – Canberra,  Commercial Law, Trusts and Estates;
  • Ian Meagher – Canberra, Insurance Law, Litigation; and
  • Bill McCarthy – Canberra, Insurance Law.

  This is the tenth consecutive year the Alan Bradbury has been acknowledged for his expertise. Managing Legal Director John Wilson makes his seventh appearance in the list, and Mark Love and John Bradley were recognised for their respective practices for the fifth year. This year, David Toole, Ian Meagher and Bill McCarthy have also been recognised for the first time in Best Lawyers.

  John Wilson congratulated his colleagues on their achievements.

  “A listing in Best Lawyers is a considerable honour, reflecting as it does the praise of fellow practitioners in each speciality,” he said. “For six of my colleagues and I to be included speaks highly to the calibre of our team at Bradley Allen Love.”

  Best Lawyers is the oldest and most respected peer-review publication in the legal profession. A listing in Best Lawyers is widely regarded by both clients and legal professionals as a significant honour, conferred on a lawyer by his or her peers. For more than three decades, Best Lawyers lists have earned the respect of the profession, the media, and the public, as the most reliable, unbiased source of legal referrals anywhere.

  The full list is available here.

  

  Above: David Toole, Mark Love, John Wilson, Alan Bradbury, John Bradley, Ian Meagher and Bill McCarthy- listed in The Best Lawyers in Australia 2019

  ABOUT BEST LAWYERS

  Best Lawyers is the oldest and most respected attorney ranking service in the world. Since it was first published in 1983, Best Lawyers has become universally regarded as the definitive guide to legal excellence. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation. 83,000 industry leading attorneys are eligible to vote from around the world, and Best Lawyers received almost 10 million evaluations on the legal abilities of other lawyers based on their specific practice areas. Lawyers are not required or allowed to pay a fee to be listed; therefore inclusion in Best Lawyers is considered a singular honour.

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• 

  Managing performance with an ace procurement contract

  When forming “the deal” considerable focus is often given to “the price”, yet the theory goes: “price” trades off against “certainty” and “timing”; each of “certainty” and “timing” apply pressure to the margins of “price”. Placing pressure on “timing” and “certainty” increases the risk of “non-performance”.

  The most critical aspect of contract preparation is to address the risk of “non-performance” and so as a procurement contract unfolds, the “risk of non-performance” relies on the purchaser knowing how well the contractor has been performing and, in turn, help the purchaser predict how well the contractor will continue to perform. These tools are:

  • “Performance Indicators”: “what has been done”, typically used to demonstrate that a party has satisfied the criteria to become entitled to a payment; and
  • “Lead Indicators”: which provide information on future performance and should demonstrate whether the desired results will be achieved within the agreed timeframe and cost, providing an early warning of any problems in the delivery of the contract.

  A core skill in contract preparation is to determine what performance or lead indicators might exist to help manage contract performance. Having a good contract structure will give you options (whether through re-performance, damages or termination rights) to get the goods or services you bargained for; and critical in that is the delivery of the purpose for which the contract exists.

  The foreword to the “Better Practice Guide on Developing and Managing Contracts” published by the Australian National Audit Office in 2012 urges: –

  “[C]ontract management is not an end in itself, and it is important that all contracting decisions and actions focus on the outcomes that entities are seeking to achieve and cost-effective delivery approaches”[1]

  In the event of a contract breach and in the choices and timing of performance and lead indicators, it is paramount that the parties do not lose sight of what it is they committed to do. In order to effectively manage contract performance, the parties must keep that “goal” in mind.

  Where the Commonwealth is a party, it is important to note its obligations under with the Public Governance, Performance and Accountability Act 2013 (PGPA Act). Section 15 requires the “accountable authority” of a Commonwealth entity to promote the “proper” use of public resources i.e. uses which are efficient, effective, economical and ethical. All businesses should keep these principles in mind.

  Structuring a contract to address non-performance

  Performance and lead indicators exist to support the decisions you might wish to make in the course of contract management.

  Identifying what the deliverable is, the means by which the deliverable will be delivered (the steps that need to be in place in that pathway) and the matters that put that delivery pathway at risk, can be used to efficiently and effectively manage the contract by delivering information on a contractors performance in meeting existing contractual requirements and, where appropriate, ensuring that future requirements will also be met.

  Performance measures should be designed to alert the contract manager to potential problems so that remedial action can be taken if needed. Identifying areas for potential dispute early can help you guide compliance with the contract or effectively resolve the potential dispute (without that dispute ever arising).

  Characterising damages and loss from breach

  Further, timing your performance and lead indicators to critical stages of contract delivery should coincide with those points when it becomes most convenient to “cut your losses” and run, if you can. There are many considerations in that decision:

  • Is the deliverable contractor easily substituted?
  • Even if the deliverable can be substituted, what is the consequential cost of delay?

  It is important to be cognisant that a given procurement may simply be a building block embedded within a broader purpose or design. In those circumstances, the possible consequence of terminating the contract is that there may be a greater impact on the procuring party as opposed to the losses which flow naturally from the breach of “that contract”.

  Rectifiable defaults clauses typically deal with issues such as:

  • the deficiency represented by the breach – will you engage a new contractor to rectify the breach? and
  • addressing the consequence to the balance of the performance, particularly in terms of delay.

  While such clauses should be geared towards repairing the relevant default, when partnered with delay clauses, they are often seen as a procedural step towards “termination”, rather than as a contract management tool to keep the contract alive and address the consequences of loss flowing from the works needed to keep the contract on foot.

  Managing Performance

  Complex procurement must rely on the skill, judgement and expertise of the contract party to identify and deal with issues arising not only from the environment into which a deliverable will be put, but issues arising from the development of the delivery and then the way in which the resulting output (or absence of it) will affect the moving environment into which the outcome will be placed.

  While much of the assessment and performance risk can and should be controlled through relationship management and good communication, a good procurement contract should be structured so that there is an action plan for performance, clear milestones and deliverables, along with subsequent action that would result from underperformance.

  If you have any questions about procurement or contract management, please get in touch with our Business team.

  [1] Developing and Managing Contracts, Better Practice Guide; ANAO (www.anao.gov.au), forward by Ian McPhee, Auditor General. The ANAO website states that post PGPA, “Substantially the content of this Guide, in particular the underlying concepts and principles of better practice, remain relevant.”

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• 

  Disproportionate Apportionment? A caution to defendants involved in claims under the Building Act 2004 (ACT)

  Earlier this month, the ACT Supreme Court released the judgment of Hyblewski v Bellerive Homes Pty Ltd [2019] ACTSC 44. This decision has serious implications for defendants involved in actions over defective building works under the Building Act 2004 (ACT) as it raises serious questions regarding the apportionment of liability in the context of building cases in the ACT.

  Facts

  The plaintiff purchased land in the ACT to build a residential property. She sued the first defendant, the builder of the house and the second defendant, the building certifier, for various defects in building works. During the course of the hearing, the plaintiff settled with the builder, so the case proceeded against the certifier only.

  The plaintiff claimed damages against the certifier for a number of defects in the construction of the building, including poor brickwork, the failure to provide an adequate foundation for the building works, the failure to install a moisture barrier between slabs and the failure to build nib walls in accordance with the approved plans.

  The certifier denied his responsibility for the defects, arguing that the standard of care required by the certifier is lessened by the fact that the builder has to provide statutory warranties. He also argued that issues relating to aesthetic appearance and quality of building work were not the certifier’s responsibility, and that it was not his role to second guess variations from the approved plans. Both of these arguments were rejected by the Court.

  Decision

  The certifier was found to be liable for the defects in the building works. The Court held that if the certifier had performed his statutory and contractual duties with reasonable care and skill, he would have identified the defects and notified the builder such that the builder would have remedied them. Whilst the certifier was not required to detect and rectify every defect in the works, the judge found that these particular defects were such that the certifier should have caused them to be remedied. As such, the certifier’s breaches were found to cause the whole of the loss suffered.

  With regards to apportioning liability, the Building Act 2004 (ACT) only permits apportionment of liability where each defendant was found to be liable. In this case, the certifier was the only defendant who was found to be liable, since the other previous defendant (the builder) had settled with the plaintiff before judgment. Therefore, apportionment of liability to the builder was not available, and the certifier had to bear all liability for the damage suffered.

  Key Messages

  1. Where a plaintiff sues two or more parties for defective building work, but there is only one party that is found to be liable (because for example, the other parties had settled with the plaintiff prior to judgment), no apportionment of liability will be available under the Building Act 2004 (ACT), and the relevant defendant will be liable for the totality of damages.
  2. Building certifiers will not be able to shirk liability by claiming that issues of aesthetic appearance and quality of work are not their responsibility.
  3. Certifiers will not be able to escape liability by deferring their responsibilities to a builder. For example, a certifier will not be able to argue that it was not their responsibility to check whether departures from approved plans were agreed upon before allowing a variation to go ahead.

  If you need advice or further clarification on the decision, please do not hesitate to contact the Litigation Team.

  Written by Kate Meller and Maxine Viertmann.

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• 

  They're here

  On 21 February 2019, the Residential Tenancies Amendment Bill 2018 (No 2) (ACT) passed in nearly identical form as was originally presented in the Legislative Assembly on 1 November 2018. With a default commencement date of 5 March 2020 (and unless an earlier commencement date is fixed by notice) agents have plenty of time to educate themselves and seek guidance on the changes. Though these changes appear to be a conscious push to move the ACT to a more tenant friendly jurisdiction, it does also bring with it the risk of an increase in disputes and other applications before the ACAT. It is important that agents recognise this risk and integrate procedures to properly accommodate the changes to ensure both their business and the rights of the landlord remain adequately protected and (as far as is possible) uninterrupted.

  Modifications

  One of the major changes introduced by the Bill is the restriction on a landlord’s right to refuse a tenant’s application to renovate or modify the premises. The grounds for refusal depend on the type of modification requested:

  • for special modifications, a landlord may only refuse the tenant’s request if the landlord first obtains the ACAT’s prior approval. These types of modifications include:
  • minor modifications, which are those alterations that can be removed so that the premises are restored to substantially the same condition as at the commencement of the agreement; or
  • alterations undertaken:
    • for the safety of the tenant (e.g. furniture anchors, child safety gates or fittings);
    • on written recommendation of a health practitioner (e.g. safety ramps or safety rails);
    • to improve the energy efficiency of the premises;
    • for the security of the premises (e.g. deadlocks, security doors and alarms); or
    • to allow access to telecommunication services,
  • for any other alterations or modifications, a landlord must not unreasonably refuse the tenant’s application.

  For a request to undertake a special modification, the landlord’s consent will be taken to have been granted if the landlord fails to make an application to the ACAT (for an order to refuse the modification) within 14 days of the tenant making the request. It is imperative then that an agent, upon receiving a modification application from a tenant, passes the tenant’s request onto the landlord as soon as possible.

  The modification, whether special or otherwise, is not at the complete discretion of the tenant, however, as a landlord may impose reasonable conditions on the tenant’s modifications. Such conditions might include that the tenant:

  • provide the landlord with a copy of the plans and specifications before works are carried out;
  • undertake the modifications in accordance with all laws, regulations and the requirements of any relevant authority;
  • uses suitably qualified tradespersons;
  • takes out policies of insurance (noting the interest of the landlord) relevant for the type of works; or
  • obtains and provides copies of all approvals and certificates evidencing proper completion of the works.

  If the modifications improve the premises, landlords should also consider including a condition that the modifications are to remain in the premises on expiry of the agreement, though in such circumstances the tenant is likely to expect reasonable compensation or a contribution from the landlord.

  Pets

  Another change introduced by the Bill is the restriction on a landlord’s right to decline a tenant’s application for the keeping of pets on the premises where there is provision in the tenancy agreement allowing the landlord to do so. Like modifications, a landlord may impose conditions, but these conditions may only relate to the number of animals or the cleaning or maintenance of the premises. For any other conditions or for a landlord to validly refuse the tenant’s request, the landlord must apply to the ACAT for approval.

  Where an agent receives such a request from a tenant the agent should carefully consider the conditions to be imposed so as to provide the landlord with appropriate options. These might include that the carpet is professionally cleaned (perhaps even on a number of occasions) during the term of the tenant’s occupation or that the premises is fumigated on expiry of the tenant’s occupation.

  Break Lease Clause

  Another major change introduced by the Bill is the limitation on the fee payable by the tenant under a ‘break lease clause’.

  Though a break lease clause is optional, under the new changes, if the tenant terminates the tenancy under a break lease clause during the first half of the fixed term (subject to the fixed term being 3 years or less), the tenant will be liable for:

  • where less than half the fixed term has expired, 6 weeks rent; or
  • where half the fixed term has expired, 4 weeks rent,

  but where the landlord enters into a new tenancy agreement for the premises prior to the expiry of the above periods (6 weeks or 4 weeks) the liability of the tenant will be reduced by an amount equal to the rent paid by the new tenant during that period. Essentially, the liability of the tenant is capped to the actual loss (in terms of rent at least) suffered by the landlord.

  In relation to the tenant’s potential liability to the landlord, other than for rent, under the Bill this is now limited to:

  • where half or more of the fixed term has expired, an amount equivalent to 2/3 of 1 weeks’ rent; or
  • where less than half of the fixed term has expired, an amount equivalent to 1 weeks’ rent,

  but only where the tenant vacates the premises more than 4 weeks before the end of the fixed term.

  It should be noted, however, that these limitations only apply where the landlord enters into a new tenancy agreement within the defined period.

  By capping the landlord’s right to recover from the tenant the actual loss suffered, particularly in relation to having to advertise and re-let the premises, this change is likely to lead landlords to refuse to include a break lease clause in the agreement and to instead rely on the provisions of the Act and their rights under contract law.

  Though the changes introduced by the Bill do bring with them an inherent risk of encouraging the parties, whether in dispute or simply seeking clarification or approval, to seek an order from the ACAT and thereby overburden the services of the ACAT, the managing agent remains in a unique position to guide the parties to a mutual and commercial resolution within the framework of the Act and the prescribed tenancy terms. Agents then, should take the opportunity now to consider the repercussions of the changes and to start the education process with their landlord clients before the changes take effect.

  If you need advice or further clarification on the changes, please do not hesitate to contact the BAL Real Estate Team.

  Written by Benjamin Grady and Riley Berry.

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• 

  Unconscionable Conduct and Undue Influence: Business Breakfast Club March Summary

  This month at Business Breakfast Club Riley Berry of BAL Lawyers discussed unconscionable conduct and undue influence with a focus on the Australian Consumer Law and what these factors mean for commercial contracts.

  Unconscionable Conduct and Undue Influence

  There are several instances where a Court will overturn a contract based on the conduct of one of the parties prior to making the contract. Two of the most prevalent are unconscionable conduct and undue influence. Unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgement as to the [the innocent party’s] own self-interest”. The other party must also unconscientiously take advantage of that special disadvantage. There are two types of undue influence: Actual undue influence where it can be proven that one person exerted influence over another to have them enter into the contract, and presumed undue influence which is a deemed relationship of influence were one party is antecedent to the other party. The spheres of undue influence and unconscionable conduct overlap and the line between the two is often blurred.

  Remedies Available

  Only a Court can make a determination if there has been unconscionable conduct or undue influence. As a result if you feel that you have been a victim of this, there are few options except to litigate or to file a complaint with ACCC. Alternately if you are in a position of greater bargaining power and entering into an agreement it is important to ensure that none of your actions risk being viewed as unconscionable or the contract may be undermined by a Court. The best option is to be aware of what actions a Court might consider unconscionable, and avoid engaging in those actions, or avoid entering into contracts with a party engaging in conduct that may be considered unconscionable.

  To avoid being a victim of unconscionable conduct:

  • ensure all commercial agreements are in writing (and both parties have the contract)
  • make sure you fully understand all the terms of the transaction
  • do not sign any agreements without reading them carefully
  • ask for plain language explanations and obtain independent professional legal or financial advice if unsure
  • do not allow yourself to be talked into a deal that is wrong for you by high pressure sales tactics. Be wary of tight decision deadlines

  To avoid engaging in unconscionable conduct:

  • consider the characteristics and vulnerabilities of your customers. For example, use plain English when dealing with customers from a non-English speaking background
  • make sure your contracts are thorough, easy to understand, not too lengthy and do not include harsh, unfair or oppressive terms
  • ensure you have clearly disclosed important or unusual terms or conditions of an agreement
  • give customers the opportunity to seek advice about the contract before they sign it
  • do not reward your staff for unfair, pressure-based selling

  For more information, please contact Riley Berry. The next Business Breakfast Club will be held on 12 April 2019 on “Advertising and Promotion – Pitfalls and Risks”. If you would like to attend, please click here to go to the event listing.

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• 

  Being a political player: Risks to navigate in electoral advertising requirements

  With 2019 being an election year there will be a significant increase in political donations being made to candidates, political parties and special interest groups. The recent changes to the Commonwealth Electoral Act 1918 (the CEA) have manifestly changed the definition of “electoral matter”, and since this phrase is the legislative “hook” for obligations and disclosures required by the CEA, it is important to be aware of how these changes affect your potential involvement in political advocacy.

  Political Campaigner Registration

  The CEA has amended the definition of “electoral matter” to matter which has a “dominant purpose of influencing the way voters vote”. The risks associated with the subjectivity of the dominant purpose test, and the fine distinction between a publication being “public education” and an “electoral matter”, should prompt entities to consider whether they need to register as a political campaigner under the CEA. If the electoral expenditure of an entity has:

  • exceeded $500,000 in any one of the previous three financial years; or
  • exceeds over $100,000 during the current financial year,

  the entity must register as a “political campaigner” within 90 days of exceeding the threshold or risk civil penalties of $42,000 and in some circumstances up to three times that amount.

  Foreign Interest Electoral Reform

  Parliament has tightened the rules regarding foreign donations and entities should be conscious of these rules particularly where their cash flow includes international revenue streams. Entities that:

  • were incorporated in Australia; or
  • have their head office in Australia; or
  • have their principal place of activity in Australia,
  • do not qualify as foreign donors.

  It is highly unlikely that an Australian entity will face any issues where their cash flow includes international revenue streams. Indeed subsidiaries of foreign companies directly fall within the scope of the exceptions to what is a “foreign donor” under the CEA. However an issue can arise where the foreign entity “gives” to its Australian entity a sum which is:

  • for the purposes of incurring electoral expenditure; or
  • for the dominant purpose of creating or communicating electoral matter; or
  • a political “gift”.

  Further, where a “scheme” was thought to exist for the purpose of avoiding CEA restrictions, then the receipt of the “gift” or “expenditure” will have infringed the prohibition against foreign donations. Therefore an Australian subsidiary that funded a political gift or electoral expenditure would be well advised to ensure that it did so from its own profits (where those profits were derived from Australian activities or activities that had Australia as its head/principal office).

  Other salient changes to be aware of:

  1. The reworking of existing advertising material will be treated as new. Material for each variation must be separately authorised and a “paper trail’ must be kept for each authorisation.
  2. There also is a dominant purpose test for reportable “expenditure”. This test, if managed, will make the distinction between “research” and the creation or publication of the advertisement clearer.

  The new regime is intended to be protective of the public putting the onus of a pro-disclosure regime on entities incurring expenses that may be related to electoral matters. Entities interested in making donations or publishing views should explore and consider their legal liabilities before doing so.

  If you have any questions or concerns about your obligations under the CEA, get in touch with our Business law team.

  Written by Mark Love with the assistance of James Connolly and Riley Berry.

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• 

  Decisions, Decisions: Adjudicator decisions and non-jurisdictional errors

  In early 2018, the High Court of Australia handed down the landmark cases of Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4.  The case regarded the reviewability of adjudicator determinations under the Building and Construction Industry Security of Payment Act 1999 (NSW), which has comparable counterparts in other states and territories in Australia, including the ACT (the SOP Legislation).  The decision has serious ramifications for those making payment claims under SOP Legislation. Ultimately, the High Court decided that errors of fact (as opposed to errors of law) made by an adjudicator under the security of payment regime are not reviewable or capable of being quashed by courts.

  Jurisdictional Errors & Non-Jurisdictional Errors

  Non-jurisdictional errors are commonly known as ‘errors of fact’. As the colloquial description suggests, they are errors that do not involve a question of law, but rather as simply factual points which an adjudicator may decide upon, albeit wrongly.  If an adjudicator makes an ‘error of fact’ it will not affect their power or authority to make a decision.

  However, if an adjudicator makes a jurisdictional error (that is, an ‘error of law’), it means that he or she may lack the power or authority to have made the determination in the first place. Given this, and notwithstanding the intended binding effect of the SOP Legislation, jurisdictional errors can be quashed by the courts.

  This said, the distinction between non-jurisdictional error and jurisdictional error is not always clear cut. Much turns on the body making the determination, and the legislative framework underpinning the decision and empowering the decision maker. This difficult distinction has plagued judges for many years.

  The facts of Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd:

  Probuild Constructions subcontracted Shade Systems to supply and install external louvres for an apartment development. Shade served on Probuild a ‘payment claim’ under the NSW SOP Legislation.  In response Probuild provided a ‘payment schedule’ which denied liability on the basis that a higher amount of liquidated damages was payable in Probuild’s favour in relation to delays of Shade in its works.

  The adjudicator rejected Probuild’s liquidated damages claim on the basis that liquidated damages could not be calculated until either practical completion (of the works) or termination of the subcontract, and concluded that Probuild was to pay Shade under the claim.

  Probuild sought to quash the determination of the adjudicator on the basis of non-jurisdictional errors, meaning that they contained errors of fact, namely that the adjudicator mistakenly considered that:

  • there was no entitlement to liquidated damages arose until practical completion or termination of the subcontract; and
  • that Probuild needed to demonstrate that Shade was at fault for the delay for which it claimed liquidated damages.

  The question for the High Court in this case was this: Are errors of fact/non-jurisdictional errors in decisions under the SOP Legislation reviewable by the courts?

  The court’s findings

  Ultimately, the High Court held that adjudicator determinations under the SOP Legislation are not reviewable by courts, even if such determinations do contain errors of fact.

  The majority held that although the SOP Legislation does not expressly prohibit courts from reviewing non-jurisdictional error, the Act does not intend to permit such review either.  Thus, to allow the courts to intervene over factual arguments would conflict with the overarching objectives of the SOP Legislation.

  In reaching this conclusion, the High Court specifically took into account:

  1. the overarching objectives of the SOP Legislation are expediency and efficiency in dispute resolution, and does not encourage ‘lengthy consideration by an adjudicator of detailed submissions on all questions of law’[1];
  2. the SOP Legislation provides for informal procedures to determine an adjudication application[2];
  3. there is no intended right of appeal from the determination of an adjudicator under the SOP Legislation; and
  4. the SOP Legislation nevertheless preserves parties’ abilities to enforce contractual rights and defers final determination of these rights to alternative forums.

  The consequences

  • Courts are still able to review or quash determinations affected by jurisdictional errors of law, such as those where the decision maker does not have authority to decide the matter or where ‘basic and essential requirements which are preconditions to a valid adjudicator’s determination’[3] are absent. Logically this makes sense: an adjudicator ruling on an issue not intended to be adjudicated under the SOP Legislation, cannot be protected by the binding intentions of the SOP Legislation.
  • This finding makes it harder for those dissatisfied with an adjudicator’s determination, to challenge and review it. Those who are dissatisfied with the determination of an adjudicator under the SOP Legislation should seek to identify a jurisdictional error in the determination in order to seek review, instead of taking issue with a mistake of fact by the adjudicator.
  • However, the SOP Legislation does not diminish the ability of the parties to enforce their contractual rights, including where an adjudicator has erred in determining the amount of a progress payment.[4] As such, an aggrieved party will be able to seek recourse from the courts by bringing a separate proceeding under contract. Though whilst that slower legal process turns its wheels, any amount awarded by an adjudicator generally can be called upon by a winner in the security of payments regime.

  If you have any questions or concerns about adjudicator decisions or non-jurisdictional error, get in touch with our Litigation team.

  Written by Kate Meller with assistance from Maxine Viertmann.

  [1] [41]

  [2] [42]

  [3] Fifty Property Investments Pty Ltd v O’Mara [2006] NSWSC 428, [53] citing Brodyn

  [4] [46]

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• 

  Landlord Deemed to have Repudiated Lease for not replacing Air-Conditioning

  A dispute between a commercial tenant and its landlord over the air-conditioning (AC) performance in the leased premises has resulted in the tenant abandoning its lease, and the landlord, in attempting to enforce its rights under the lease, being held to have repudiated the lease by the Victorian Civil and Administrative Tribunal (Tribunal). Given the frequent tensions that arise between landlords and tenants over this repeatedly temperamental item of plant in buildings, the Victorian decision sounds a warning to all landlords of commercial property.

  The decision made in October 2018 was in the case of S 3 Sth Melb Pty Ltd v Red Pepper Property Group Pty Ltd. The facts of the case were of particular interest as they involved a series of agreements in relation to the AC made between the parties, the details of which were sequentially altered and revised verbally prior to the final lease documentation being executed. This will feel as familiar territory for those involved in commercial leasing. Minor details are often not compensated for in the initial agreement, or are subject to change due to other circumstances. What tends to remain consistent however through the negotiating process is the fundamental commercial agreement which stipulates who has responsibility or liability.

  The fundamental agreement was a key consideration in this case as well. The AC special condition in the lease ended up being fairly typical. It made the tenant responsible for maintenance and servicing of the AC, however, the landlord was responsible for capital repairs. This is a very common arrangement in self-contained premises where the AC services a single tenant. The AC in this premises unit was old and, despite being refurbished by the landlord at the start of the lease, it performed so poorly that the tenant who was operating a fitness centre eventually lost customers to other competitors. The dispute between the parties dragged on for over 12 months with frequent periods of non-communication. As expected, the tenant relied on the provision of the lease that required the landlord to address repairs of a capital nature whilst the landlord in return argued that the problem fell within the tenant’s maintenance obligations. The Tribunal considered various arguments as to specific repairs and whether they constituted a tenant or landlord responsibility, but ultimately the Tribunal focused on what it deemed a fundamental term of the lease.

  Although the parties eventually agreed to continue with the old (refurbished) AC system, the original agreement, as actually drafted in the Lease, was that the landlord had agreed to install AC to service the premises. This agreement was consistent from the outset and was also documented in a Heads of Agreement, which the Tribunal recognised to be a fundamental agreement between the parties. Therefore by failing to carry out repairs (even disputed repairs) or failing to replace the AC, the landlord was, in the opinion of the Tribunal, actually failing in its contractual duty to provide an AC system which could service the premises and this responsibility was given priority over any failure to maintain by the tenant. It was that failure of a fundamental term of the lease that constituted a repudiation by the landlord. The result was that the tenant could legally walk away from the lease.

  What does all this mean? Even though this was a Victorian decision, the reasoning given by that Tribunal could have implications in the ACT where similar cases are examined. Landlords and agents acting on behalf of landlords will need to exercise caution on how commercial agreements between the parties are represented between parties. Needless to say, standard conditions drafted in leases should not be taken for granted as to their effect and care should be taken to record the specifics of the agreement between the parties. Of equal importance is the conduct of the parties in dealing with any disputes. In most cases a tenant will be of the view that AC is a fundamental component of its ability to conduct its business in a leased premises. Similarly a landlord will expect that the AC will function adequately forever if the tenant maintains it as agreed. The potential for disagreement when a problem occurs is high. Landlords should therefore be explicit as to the extent of their commitment towards AC plant from the outset. Upgrading, replacing or repairing the AC should be treated as a specific consideration with care to identify that the cost of such commitment has been contemplated in the final commercial terms of the lease agreement. Otherwise, the risk should be clearly earmarked as resting with the tenant to accept the AC (or any other specific item or service) in the condition as at the commencement of the lease.

  Further, given the outcome of this case, it would be prudent to obtain legal advice immediately once a dispute arises. The circumstances of each case will always be different and sometimes the drafting in the lease will not always be accommodating. Seeking advice from an experienced lawyer could influence the strategy on how a party approaches and responds to a dispute. It is reasonable to imagine that the landlord in this case envisaged positive prospects of success or a worst case scenario where the AC had to be replaced at its cost. The likelihood of the Tribunal making a finding of repudiation against the landlord for failure to replace the AC system in its entirety and the subsequent loss of the value of the lease probably did not enter into the equation and was undoubtedly unexpected. Therefore, to reduce the risk of the unexpected it may be wiser for affected parties to contact their legal advisers before committing to a course of action.

  Update: On appeal, the Supreme Court of Victoria overturned the Tribunal’s decision.

  The Landlord in this case has been successful in appealing the earlier decision of the Tribunal.  The Supreme Court of Victoria has held that the Tribunal wrongly construed the Landlords obligations under the Lease, specifically the obligation to install an AC unit to service the Premises.  Further, the Supreme Court ruled that the doctrine of repudiation has been misapplied by the Tribunal.

  The Supreme Court’s reasoning again focused on the facts and the drafting in the Lease, highlighting some important points:

  1. The Landlords obligation to install AC to service the Premises was held not to be a continuing obligation.
  2. The Landlords repair obligation (capital repairs) was held not to be an essential term of the Lease.

  The drafting and the manner in which the obligations were expressed were relevant in the Supreme Court’s reasoning.

  Importantly, the Supreme Court’s decision commented on the application of the principles of repudiation, emphasising that a Contract cannot be terminated by a party not willing or able to perform its own obligations under the Contract.  In this case, the Tenant was also in breach for failing to enter into the requisite maintenance contract for the AC.

  If you would like to know more about your obligations and responsibilities as a landlord, please get in touch with George Kordis or reach out to our Real Estate Team.

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  Stepping Stone Liability: When Business Gets Personal

  Companies are traditionally chosen as the vehicle of choice for operating a business; it is a separate legal entity, with the same rights as a natural person and can incur debt, sue and be sued. It has a ‘corporate veil’ that is designed to limit a shareholder’s and director’s liability – the people are not generally liable for the company’s debts.

  Despite the ‘corporate veil’ enabling people to pursue social and commercial ventures without significant fear of personal liability, company directors nonetheless remain subject to a vast array of duties in their individual capacities; these duties tend to expose the director to a form of personal liability.  The Corporations Act 2001 (Cth) requires directors to comply with fundamental duties of care, and at all times to act in the best interests of their companies.

  Breaches of these directors’ duties can arise in the context of breaches of the law by the company itself giving rise to the notion of ‘stepping stone’ liability where a company contravention leads to the establishment of a director’s individual liability for failing to prevent that contravention.

  Stepping stone liability in practice

  The earlier approaches to stepping stone liability were dealt with in a series of proceedings brought by ASIC against the directors of the James Hardie group of companies (JHIL) where those directors approved the separation of two subsidiaries facing asbestos related liabilities from the group. As part of the separation, JHIL announced on the ASX that there would be funds available to meet present and future asbestos related claims made against the separated companies.

  It was subsequently discovered that this ASX announcement contained misleading statements about the sufficiency of the funds available, thus breaching the ongoing disclosure requirements of the ASX and constituting the first stepping stone. ASIC argued (and the Court subsequently found) that it followed that the directors had breached their duty to act with care and diligence by approving the announcement.

  While this is a straightforward example of stepping stone liability, it is not always this simple.

  Skipping steps: shedding light on the nuances of stepping stone liability

  As the recent case of ASIC v Cassimatis (No 8) [2016] FCA 1023 made clear, it is entirely possible to have one step without the other. For example:

  • the company does not need to have been found to have breached a provision of the Corporations Act or any other law in order for directors to be found liable for a breach of their duties; and
  • even if the company has breached the law, a breach of duty is not presumed. Rather, it requires a consideration as to whether the director has exercised reasonable care, to “prevent a foreseeable risk of harm to the interests of the company”.

  The Cassimatis case concerned the directors of a financial advice company (the defunct Storm Financial Ltd) who had allowed the company to provide inappropriate financial advice to clients without having a reasonable basis to do so in breach of the Corporations Act.

  The Federal Court found Mr and Mrs Cassimatis breached their directors’ duties by permitting, or failing to prevent Storm from providing inappropriate investment advice. In particular the Court found that a reasonable director with the responsibilities of the Cassimatises would have been aware of a strong likelihood of contravention of the law and would have taken precautions to prevent it.

  Then what is required of directors?

  Cassimatis established a ‘balancing act’. Justice Edelman confirmed that the relevant test of whether a director has exercised their duties will require ‘balancing the foreseeable risk of harm against the potential benefits that could reasonably have been expected to accrue to the company from the conduct in question’.[1] Edelman J further clarified that harm encompassed ‘any of the interests of the corporation’ and that the task of risk-benefit balancing required consideration of what a reasonable person would have done in response to the risk in light of the particular circumstances.[2]

  The Cassimatis case is a helpful reminder to company directors that strict compliance with a company’s legal obligations may not always be enough to shield themselves from personal liability, and that they must always exercise their duties honestly, and in the bests interests of the company.

  If you have any questions or concerns about your obligations as a company director, get in touch with our Business law team.

  Written by Lauren Babic with thanks to Bryce Robinson

   

  [1] ASIC v Cassimatis (No 8) [2016] FCA 1023, [465]-[486].

  [2] ASIC v Cassimatis (No 8) [2016] FCA 1023, [480]-[483].

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  Protecting National Security or Enabling National Intrusion?

  Since its passing on 9 December 2018, controversy has tainted the Telecommunications and Other Legislation Amendment (Assistance and Access) Act 2018, primarily centring on the need to balance national security concerns and the right to privacy. Put forward by the Department of Home Affairs, the bill was proposed to keep pace with the increasing use of encrypted communications. It was designed to aid law enforcement and intelligence agencies to combat serious crimes, with an emphasis on “terrorism”. In fulfilling its design, it amends several statutes, all with the aim of empowering these agencies to access encrypted electronic devices that would be considered “private”. The amendments further seek to protect law enforcement and intelligence agencies, and providers from legal action. For the agencies, this is done through amending the Administrative Decisions (Judicial Review) Act 1977 to ensure that the actions carried out under the new legislation are not subject to judicial review. For those assisting law enforcement agencies, the Criminal Code Act 1995 is amended to offer protection from criminal liability, provided the conduct is consistent with the requests.

  While the effect of this legislation has the potential to ripple outwards, it primarily concerns ‘designated communications providers’,[1] which include carriers, carriage service providers, device manufacturers, and software and application providers. Thus, virtually all electronic communications will be open to scrutiny as there won’t appear to be a reason to exclude device or carriage service suppliers.

  The core purpose of this legislation is to create a new scheme that regulates communication providers while allowing them to voluntarily assist intelligence and law enforcement agencies. Yet the legislation empowers these agencies to compel providers to grant them access to encrypted data. There are three mechanisms by which this can occur:

  • Technical assistance requests;
  • Technical assistance notices; or
  • Technical capability notices.

  While the former is a voluntarily action, the latter two are mandatory notices; if a communication provider does not comply with a notice, civil penalty provisions apply (with penalties up to $9,999,990).[2]

  Both technical assistance requests and technical assistance notices involve law enforcement and intelligence agencies asking or compelling communications providers to assist them in accessing encrypted data where they are already capable of such assistance. Technical capability notices, however, involve these agencies compelling communications providers to create a new capability that gives the law enforcement and intelligence agencies access. The latter is the most controversial, and as such involves a few caveats, one being that the notice cannot require the provider to construct a capability that removes electronic protection.[3] In other words, law enforcement and intelligence agencies cannot compel companies to create a built-in ‘backdoor’ to their system.

  Additionally, technical assistance notices and technical capability notices can only be issued if:

  • it is in the interests of national security or
  • it is in the enforcement of criminal law for serious Australian or foreign offences.[4]

  Technical assistance requests can be issued for these reasons and to protect Australia’s national economic wellbeing.

  Moreover, any request or notice can only be issued if:

  • the requirements proposed are reasonable and proportionate;
  • it is practicable to comply; and
  • it is technically feasible to comply.[5]

  Even with the accountability mechanisms described above, concerns still exist about the powers granted to government officials. Scattered throughout the legislation are provisions that enable law enforcement and intelligence agencies to bypass the restrictions “if not practicable”. For example, before issuing technical capability notices it is necessary to provide a written consultation notice to the communication provider, informing them of the proposed notice and inviting them to make submissions to alter the notice.[6] This period must run for at least 28 days.[7] However, section 317W(3) allows this period of consultation to be ignored if it is impractical or if the Attorney-General is ‘satisfied that the technical capability notice should be given as a matter of urgency’.[8]

  Ultimately, this newly passed legislation alters the landscape of Australian cyber security. With more changes potentially on the horizon, it would be prudent for those specifically targeted by these changes to understand their obligations.

  What it means for us, is that we have more reason to remain vigilant as to what, politically, passes for our “national interest”, and also that we have a means of monitoring potential corrupt access and use of not only these powers but the information that is revealed.

  For more information on the Telecommunications and Other Legislation Amendment (Assistance and Access) Act 2018, or any questions relating to this article, please contact Mark Love.

  [1] Telecommunications and other Legislation Amendment (Assistance and Access) Act 2018, s 317C.

  [2] Ibid, s 317ZA(3) and 317ZB(1): 47,619 penalty units for a body corporate; 238 penalty units for any other person or entity.

  [3] Ibid, s 317ZGA(1).

  [4] Ibid, s 317A,.317A and s317B. A serious Australian offence is one which carries a penalty of a minimum 3 year imprisonment.

  [5] s 317P (for technical assistance requests); and s 317V (for technical capability notices).

  [6] Ibid, s 317W(1).

  [7] Ibid.

  [8] Ibid, s 317W3(a)and (b).

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  Safety first: last chance to comply with NSW cladding regulations

  With the fire to the Melbourne building, Neo200, on 4 February 2019, combustible cladding has again been thrust into focus as a continuing safety risk. Fortunately, no one was injured in the blaze however it is a timely reminder for owners of their responsibilities under the Environmental Planning and Assessment Amendment (Identification of Buildings with External Combustible Cladding) Regulation 2018 (NSW) (the Regulation).

  What buildings does the Regulation apply to?

  The Regulation applies to:

  • residential apartment buildings;
  • other residential buildings, such as hotels, boarding houses, backpacker accommodation and aged care buildings;
  • public buildings, such as cinemas, child care centres and schools; and
  • mixed used buildings, part of which are used for residential purposes or accommodation, which have external combustible cladding.

  External combustible cladding is defined in the Regulation as:

  • any cladding or cladding system comprising metal composite panels, including aluminium, zinc and copper, that is applied to any of the building’s external walls or to any other external area of the building, or
  • any insulated cladding system…that is applied to any of the building’s external walls or to any other external area of the building.

  The Regulation does not apply to buildings which are solely used for retail or commercial purposes or houses.

  What do owners need to do?

  The owner or Owners Corporation must register the building on the NSW Cladding Registration Portal.

  For existing buildings, registration is required by 22 February 2019. For newly constructed buildings, registration must occur within 4 weeks after the building is first occupied. A failure to register will incur a $1,500 fine for individuals or a $3,000 fine for corporations.

  If an owner or Owners Corporation is unsure whether combustible cladding has been applied to the building, they should seek advice from an appropriately qualified building professional.

  Seeking legal advice will ensure that you are aware of your obligations and understand the importance of the cladding regulations. If you have any questions about cladding regulations, please get in touch with Benjamin Grady or reach out to our Real Estate Team.

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  Essential Guide to Local Government Law: Development Control Orders Under the EPA Act

  Development control orders (orders) are powerful tools for a council to use to deal with compliance issues. Orders are given in accordance with s.9.34 and Schedule 5 of the Environmental Planning and Assessment Act 1979 (the Act), and failure to comply with an order can have significant financial and legal consequences for the recipient.

  This Essential Guide will assist local councils to determine when it is appropriate to give an order, how to give a valid order, and what to do in an emergency.

  When can a council give an order?

  A council has the power to give any order identified in the Table in Schedule 5 of the Act in the circumstances described in that Table. Column 1 of the Table identifies the types of orders a council can give; Column 2 outlines the circumstances in which the various kinds of order can be given; and Column 3 identifies who the order can be given to.

  When should a council give an order?

  A council must determine whether in the individual circumstances of each case it is appropriate to give an order. Some of the things to be considered are:

  • The seriousness and continuing nature of the breach;
  • The impacts of the breach on adjoining owners/occupiers, the general public or the environment;
  • Any hardship to the recipient, including expense and inconvenience – an order must not cause injustice disproportionate to the ends secured by the order;
  • Whether there has been excessive delay by the Council in responding to the breach;
  • The time for compliance with an order, balancing the public interest in bringing about compliance and any hardship for the recipient;
  • Whether an order will, or is likely to, make the recipient or other persons homeless – if so, the council must consider availability of satisfactory alternative accommodation in the locality;
  • Whether the order will affect the heritage significance of the item (if an order is for a heritage item on the State Heritage Register or under order by s.136 of the Heritage Act 1977); and
  • Whether more than one order is to be given to the same recipient, and whether they should be given in the same instrument.

  It is appropriate for a council to give an order – what next?

  The council (or an employee with the appropriate delegation) must first give notice to the person to whom the proposed order is directed of the following:

  1. the intention to give the order
  2. the terms of the proposed order
  3. the proposed time for compliance; and
  4. that the recipient may make representations to the council as to as to why the order should not be given or as to the terms of or period for compliance with the order.

  If the Council ultimately decides to give the order, the terms of the order will need to closely follow the terms of the proposed order set out in this notice. Some care should therefore be taken when drafting the notice to ensure the terms of the proposed order are clear and able to be readily understood by the person to whom it is given.

  The language used and information contained in a notice is very important and will affect the clarity, validity, and enforceability of the proposed order – language used in the notice should be consistent. It is also important that the notice correctly identifies the recipient (making sure that the recipient is a legal person and not, for example, simply a business name), their relationship to the land, why they are being given the notice), and the premises (lot/DP reference and street address).

  The following checklist can assist to ensure a notice (and therefore an order) is drafted correctly:

  1. Explicitly state the intention of the council to give an order to the recipient. Detailed characterisation of how a breach has arisen will often be of assistance for the recipient to understand why a notice is being given:
     • Identify the relevant legislation and, if relevant, environmental planning instrument).
     • What are the relevant statutory provisions giving rise to the alleged breach?
     • How do those provisions apply in the particular circumstances?
     • Clearly identify the actual breach being alleged.
     • If the breach of a consent condition is alleged, clearly identify the actual condition and describe the way in which it is alleged that the condition is not being complied with.
  2. Be specific when drafting the terms of the proposed order:
     • State exactly what it is that the recipient is to do, or refrain from doing, to remedy the breach.
     • Ensure that the recipient will be able to understand what is expected of them to avoid further compliance action.
  3. The proposed time for compliance must be reasonable and clear. Immediate compliance may be required where there is a serious risk to health or safety, or in an emergency. However, if immediate compliance is unnecessary, give real consideration to what will need to be done to comply with the order and how long that is likely to take.
  4. Inform the recipient of their right to make representations, including:
     • what the recipient may make a representation to the council about – i.e. why the order should not be given, the terms of the proposed order or the period for compliance with it;
     • to whom representations might be made – this may be the Council itself, a Council committee or a nominated person at the Council;
     • the date by which any representation is to be made (this needs to be a date that is reasonable in the circumstances); and
     • that a legal practitioner or agent may make the representations on their behalf.

  For certain kinds of orders, notice must also be given to other people:

  1. If a heritage item will be affected by the proposed order, the council must give notice of the proposed order to the Heritage Council and consider any submissions it makes before deciding whether to give the order.
  2. If a council proposes to give an order in relation to development for which another person is the consent authority, the council must give the other person notice of its intention to give the order.
  3. If a council proposes to give an order in relation to building work or subdivision work for which the council is not the certifier, the council must give the principal certifier notice of its intention to give the order.

  How is a notice served on the recipient?

  A notice, and any subsequent order, must be served using one of the methods prescribed in s.10.11 of the Act. Service must be effected correctly for the notice and any subsequent order to be enforceable.

  Giving an order

  When a council gives a notice expressing its intention to give an order, sometimes the recipient will remedy the breach of their own accord. If the breach has been remedied, it would be inappropriate and possibly unlawful for the Council to proceed to give the order.

  If the recipient of the notice makes representations to the council or nominated person during the time period detailed in the notice, the council must consider those representations before determining whether to give the proposed order.  A failure to consider any such representations may invalidate a subsequent order, so it is important to make sure a record is made of how the representations have been taken into account. It is also good practice to set out the consideration of the representations in the body of any subsequent order. Having considered any representations, the council may proceed to give the recipient an order if it is still appropriate to do so (either in the terms proposed in the notice, or amended), or not give an order.

  If given, an order must state that the recipient has the right to appeal against the order to the Land and Environment Court of NSW (the LEC) within 28 days of the date of service of the order.

  Reasons for giving the order must also be provided to the recipient at the same time (either within the order itself or in an accompanying document), except in an emergency. A council should ensure that the reasons are not a mere restatement of the circumstances specified in the Table in Schedule 5 in which the order may be given. The reasons should be sufficient to enable the recipient to be able to understand why the order has been given and to decide whether to accept the order or to appeal.

  An order takes effect from the time of service, or a later time if it is specified in the order itself. Methods of service are set out in s.10.11 of the Act.

  The situation is an emergency – what can be done?

  A council may proceed straight to giving an order when it is expressed to be given in an emergency. A number of requirements are dispensed with or are different in an emergency:

  • no requirement to give a notice;
  • no requirement for a council to hear or consider representations;
  • the time for compliance in the order can be “immediate”; and
  • reasons may be given the next working day.

  There is no definition of an “emergency” under the Act. While a council has some discretion to decide whether an emergency exists, its decision needs to be justifiable.  To be an emergency, there will usually be harm of some kind if the order is not given.

  For further information or assistance with orders, please contact Alan Bradbury and the Local Government & Planning team.

  The content contained in this guide is, of course, general commentary only. It is not legal advice. Readers should contact us and receive our specific advice on the particular situation that concerns them.

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  Stating the obvious, why you need an ACT Disclosure Statement

  The Leases (Commercial and Retail) Act 2001 (ACT) states that a Disclosure Statement must be issued to a tenant but by who, when and what information needs to be included?

  Who?

  For a new lease, the landlord must give the tenant a Disclosure Statement. Where there is an assignment of lease, the tenant must provide a copy of the Disclosure Statement (issued by the landlord) to the assignee.

  Where the tenant intends to exercise an option to renew and the tenant requests a Disclosure Statement, the landlord must give the tenant a Disclosure Statement. If the tenant can’t find their copy, they can ask the landlord for a copy to give to the potential assignee or subtenant.

  What is it?

  A summary of the terms of the lease and a statement as to the outgoings to be recovered from the tenant (if any).

  It is important to note that the Leases Act doesn’t just apply to a ‘lease’, it also applies to some licences meaning that a landlord may be required to provide a Disclosure Statement to a licensee.

  When?

  A landlord must provide the Disclosure Statement at least 14 days prior to the lease being entered into. That is, upon execution of the lease by the parties or the tenant entering into possession of the premises (whichever is earlier).

  If a tenant exercises an option to renew a lease and requests a Disclosure Statement, a landlord must provide the Disclosure Statement within 14 days of the tenant’s request.

  What information should it include?

  A Disclosure Statement must be in the prescribed form, state the landlord’s accounting period (if not a financial year) and contain a written estimate of the outgoings to be recovered from the tenant. It is particularly important for the nature of all outgoings to be stated as they may not otherwise be recoverable from the tenant.

  Where the landlord becomes aware of a significant change to the information contained in the Disclosure Statement, the landlord must tell the tenant as soon as possible in writing.

  What happens if a Disclosure Statement is not provided?

  If the landlord is required to provide a Disclosure Statement and fails to do so within the required timeframes, the tenant may terminate the lease within the first three (3) months of the term. In some circumstances though, the landlord may not be able to meet those time frames and in those cases the landlord should request that the tenant waive the time limits. This requires the tenant to obtain independent legal advice and have a “Section 30 Certificate” signed by a solicitor.

  In summary

  The Disclosure Statement is an important part of the lease agreement and the landlord should consider the information to be included in the Disclosure Statement carefully. A failure to state certain information (such as the nature of the outgoings) or state information correctly can lead to serious financial consequences.

  Seeking legal advice will ensure that you are aware of your obligations and understand the importance of the Disclosure Statement. If you have any questions about leasing, please get in touch with Benjamin Grady, Sandy Meaney or reach out to our Real Estate Team.

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  Unfair Contract Terms and the Banking Royal Commission: Business Breakfast Club February Summary

  This month at Business Breakfast Club, Lauren Babic of BAL Lawyers discussed unfair contract terms with a specific focus on the remedies available for small businesses and consumers, and the Australian Competition and Consumer Commission’s (ACCC) approach to unfair contract terms. We also had a roundtable discussion about the recent report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

  Unfair Contract Terms and Remedies Available

  Terms that allow one party to unilaterally change the contract without the consent of the other party should be a warning sign that the terms may be unfair. We looked at the case of Australian Competition and Consumer Commission v Servcorp Limited [2018] FCA 1044 and specifically the contracts in that case to identify any unfair terms. The clauses the Court considered unfair related to limiting the performance of the contract, no reciprocal indemnity clauses, automatic renewal clauses, and terminating the contract for convenience without giving the other party any equal rights which might balance the relationship.

  Once a term is deemed to be unfair, that term becomes void and is no longer binding on the parties. The rest of the contract will continue to operate without the unfair term. A party who seeks to impose or enforce an unfair term may be held to be engaging in unconscionable conduct or misleading and deceptive conduct.

  ACCC’s Approach

  In 2016, the ACCC conducted a review of standard form contracts in a number of industries. Of the contracts reviewed, the most commonly occurring problems were terms that allowed the contract provider to unilaterally vary all terms, broad and unreasonable power to protect themselves against loss or damage, and an unreasonable ability to terminate the contract.

  If you find an unfair term in a contract to which you are a party, the ACCC recommends that you:

  1. negotiate with the contract provider to amend the unfair term;
  2. contact the ACCC or the relevant state or territory fair trading agency;
  3. seek legal advice;
  4. seek dispute resolution assistance; or
  5. seek a ruling from a court or tribunal that the term is unfair.

  For more information, please contact Lauren Babic. The next Business Breakfast Club will be held on 8 March 2019 on Undue Influence and Unconscionable Conduct: What Thorne v Kennedy means for business contracts. If you would like to attend, please contact us.

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  Start-Ups and Intellectual Property

  The issue of how to approach the protection of intellectual property (sometimes referred to as “IP“) can often be a source of difficulty for start-ups. Around 67% of businesses with 0 to 4 employees use no form of IP protection,[1] which can put a start-up at risk of reverse engineering or replication of ideas. We have set out below a brief overview of the main protection methods-copyright, trademarks, patents and trade secrets-as well as some top tips for start-ups.

  Copyright

  Copyright is a form of IP that protects the original expression of ideas, and gives the creator the right to determine when and how their work can be used. Protection is free and applies automatically when material is created. It doesn’t protect the ideas themselves, information, styles, techniques, names or phrases. Copyright protects the work itself, be it textual material, computer programs or an artistic work. In practical terms, the capacity to rely on this “right” is founded in proof that the “copier” had access to a version that has been copied without authorisation.

  Trade marks

  A trade mark protects your brand, and can be licensed or sold. It is not merely a business name, nor is it simply a design. Trade marks are commonly used to protect logos, pictures, particular words or phrases, movements, packaging, or some combination of these things. A trade mark must meet the conditions of the Trade Marks Act 1995 and must distinguish your goods and services from the goods and services of other traders. To gain protection, the trade mark must be registered with IP Australia. You must continue to actively use the mark in the course of business, otherwise it may be removed.

  Patents

  A patent is a legally enforceable right for a device, substance, method or process. It effectively grants the owner a monopoly for a designated period of time as it allows an owner to stop others from manufacturing, using or selling their invention in Australia without permission. The invention or process must be new, useful and either inventive or innovative. In Australia, patent applications must be filed with IP Australia. Patents afford a very strong form of protection for many years, but can often involve a lot of time, effort and money. The decision to patent or not will therefore involve a balancing act between these factors and the potential commercial returns.

  Trade secrets

  Trade secrets are not registered. It is proprietary knowledge that is kept out of competitors’ hands by other means, such as requiring that employees and distributors sign confidentiality agreements. Iconic recipes are protected in this manne, for example.

  Top tips

  1. Keep your invention a secret: It is important, particularly with patenting, to keep your invention a secret until you’re ready to apply. Demonstrating, selling or discussing it prior can inhibit your capacity to patent an invention. You can maintain this secrecy through confidentiality agreements.
  2. Don’t patent too early: The details of a patents are publicly available once published, so you should only patent an invention if you’re comfortable with the world knowing the details. Patents can also be time consuming and expensive to maintain, so a start-up should consider whether it is ready to undertake such an investment.
  3. Trade mark brands with images: It is typically a lot easier to trade mark brand images rather than straight text because those marks are more distinguishable of your goods and services.
  4. Create Intellectual Property Agreements: Ensure that your start-up itself owns the intellectual property (rather than have the individuals involved). Having employee or contractor agreements in place that assign the IP to the start-up will make it easier to ensure that you have a record of ownership of the IP from creation.

  IP protection can be a difficult area to navigate for start-ups. Ensuring your ideas are protected is critical for future success, and so the most important tip is to seek professional advice on how best to protect your IP. If you need advice on how to protect and manage IP within your organisation, get in contact with our Business team.

   

  [1] Australian Bureau of Statistics 2012

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  The Transfer Balance Cap and CSS/PSS Pensions

  It has been almost 18 months (from 1 July 2017) since the Federal Government imposed a $1.6 million cap on the total amount that a member can transfer into the tax-free pension phase (known as the “Transfer Balance Cap”).

  Now that some time has passed, certain irregularities have been brought to light with regard to the treatment of reversionary Commonwealth Superannuation Scheme (CSS) and Public Sector Superannuation Scheme (PSS) pensions and the Transfer Balance Cap.

  This article looks at the current law regarding the Transfer Balance Cap generally and how the Transfer Balance Cap is affected when a “reversionary pensioner” is in receipt of a reversionary CSS or PSS pension. Some of the principles raised in this article will also apply to other defined benefit pension but for this article, we will examine only the CSS and PSS scheme.

  The Transfer Balance Cap System – a Recap

  The Transfer Balance Cap system operates via a “credits and debits” system – a credit is an assessment against the cap and a debit arises to reduce the assessment against the cap.

  The following “ledger” provides some examples of credits and debits against the Transfer Balance Cap:

  Transfer Balance Cap Ledger – $1.6 Million
  Credit (assessment against cap)	Debit (reduction of assessment against cap)
  When an income stream commences (from 1 July 2017) The value of super interest supporting income streams on 30 June 2017 When person has other types of superannuation income streams (eg Transition to Retirement income stream) and they either reach 65 years or notify the fund trustee that they have satisfied another condition of release	Commutations (or lump sums) taken from income stream Adjustments to meet family law settlements “Replenishment debits” approved by the ATO. Replenishment debits apply in limited circumstances where the value of an income stream has been impacted by bankruptcy, fraud or dishonest

   

  Division 294 of the Income Tax Assessment Act 1997 (“The Act“) deals with the calculation of Transfer Balance Caps and section 294-25 of the Act provides the general rule for credits to the Transfer Balance Account.

  It is important to note that investment gains and losses do not alter the transfer balance cap. Income stream payments also will not change the transfer balance cap either.

  Defined Benefit Pensions

  CSS and PSS pensions are both examples of defined benefit pensions – that is, a type of pension plan based on a predetermined formula.

  Defined benefit pensions have special rules which recognise their non-commutable nature. These types of pensions receive a credit to the Transfer Balance Cap by their “Special Value, which is determined by multiplying the “annual entitlement” by a factor of 16.

  An example

  Consider the case of Joseph and Mary. Joseph becomes entitled to a CSS pension of $100,000 per annum as at 1 July 2018 when he permanently retires from the Public Service and claims his benefits.

  Joseph will have reached his Transfer Balance Cap limit ($100,000 x 16 = $1.6 million).  One of the great benefits of the CSS is that Joseph’s pension is indexed and will increase every 6 months. In January 2019, the CSS/PSS indexed pension increase was set at 0.8%[1]. Fortunately for Joseph, any subsequent increases to his defined benefit pension will not affect his Transfer Balance Cap.

  Reversionary Pension Recipient – Mary

  In the example above, what happens to Mary and her Transfer Balance Cap if Joseph subsequently dies?

  The rules of the CSS entitle Mary to a reversionary pension equating to 67% of Joseph’s indexed pension at the time of his death if she satisfies the definition of an “eligible spouse”.  Let us assume at the time of Joseph’s death, his CSS pension has been indexed such that the pension as at the date of his death is valued at $110,000 per annum. As we saw above, the subsequent indexation to Joseph’s pension would not affect his Transfer Balance Cap.

  Assuming Mary is entitled to receive 67% of Joseph’s CSS pension value as at the date of his death, what would be the credit to Mary’s Transfer Balance Cap. Would it be (a) or (b) below:

  1. a credit of $1,179,200 (being 16 x (67% of $110,000) – keeping Mary is within her Transfer Balanced Cap allowance
  2. a credit of $1,760,000 (being 16 x 110,000) – meaning Mary has exceeded her Transfer Balance Cap allowance

  From a logical point of view, one would assume the answer is (a) – the credit to Mary’s Transfer Balance Cap would be based on the value of the reversionary pension she receives.

  Reversionary Benefits paid to a Spouse

  Unfortunately the torturous and arcane provisions of the Superannuation Act 1976 (and in particular, section 94) make more than one interpretation of the Special Value possible in the above example. The Commonwealth Superannuation Corporation have adopted an interpretation which severely prejudices Reversionary Pension recipients.

  That view is as follows – based on section 94, the spouse of a deceased pensioner is entitled to receive the first 7 pension payments at the original pension rate (that is, at the same rate the deceased pensioner was receiving). As we saw above, the “Special Value” of a superannuation interest is determined by multiplying the “annual entitlement by a factor of 16. The annual entitlement is worked out taking the “first superannuation income stream” to which the recipient is entitled.

  The first superannuation income stream the spouse is entitled to receive is at the original pension rate and as a result, the spouse’s Transfer Balance Cap is assessed as if the spouse was in receipt of the original pension rate. No allowance is made for the fact that after the after 7 pension payments, the spouse’s pension is deceased.

  In the above example, Mary’s Transfer Balance Cap would be assessed on her receiving a pension of $110,000 per annum, meaning she would have exceeded her Transfer Balance Cap allowance.

  Due to increased queries from the public and financial advisors alike, the Commonwealth Superannuation Corporation has released a Fact Sheet which outlines the interpretation of the current rules regarding reversionary pensions and their Special Value. The Fact Sheet can be found here (document CSF33).

  Recent Media Release

  Thankfully, the Federal Government has recognised the unintended consequence arising from the introduction of the Transfer Balance Cap on reversionary defined benefit pensions.

  On 31 October 2018 Assistant Treasurer Stuart Robert issued a Media Release titled “Retirement income covenant and ensuring a fair and effective superannuation system”  which can be found here. Among other things, the Media Release mentioned the following:

  “Finally, the valuation of defined benefit pensions under the transfer balance cap will be amended to reflect when pensions are permanently reduced following an initial higher payment, such as for some public sector defined benefit reversionary pensions or reclassification of invalidity pensions. This will ensure that holders of these pensions are not disadvantaged when reductions occur”

  While the Media Release is a promising step in the right direction, until legislative changes are drafted and come into force, the current law stands to assess reversionary pensioners unfairly.

  Written by Golnar Nekoee, Director, Wills and Estate Planning

   

  [1] (following the Australian Bureau of Statistics release of the CPI data for the Section 2018 quarter)

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  Striking a balance - changes to off-the-plan contracts in NSW

  Following the discussion paper “Off-the-plan contracts for residential property” released by the NSW Office of the Registrar General in November 2017, the NSW Government has introduced and assented to the Conveyancing Legislation Amendment Bill 2018. The (now) Conveyancing Legislation Amendment Act 2018 No 75 (NSW) introduces new protections for purchasers buying off-the-plan and brings the legal framework up to speed with the shift to electronic conveyancing. The commencement date of the Act is still to be set by proclamation.

  The changes introduced by the Conveyancing Legislation Amendment Act 2018 No 75 (NSW) include: 

  1. A new vendor disclosure regime, which includes the requirement for vendors to attach a disclosure statement to the contract. Aside from a copy of a draft plan prepared by a registered surveyor, the information and documents which are to be detailed or attached to the disclosure statement are not yet known as they are yet to be prescribed by the regulations but are expected to include the proposed by-laws and a schedule of finishes. The regulations will also determine the remedies and relief available to purchasers where a vendor fails or refuses to comply with the requirement.

     
     Vendors will also be required to:

     1. Notify purchasers upon becoming aware that the disclosure statement was inaccurate (at the time of signing) or has become inaccurate to a material particular. This might include a change to the draft plan or a change to the schedule of finishes that is likely to adversely affect the use or enjoyment of the lot.

        The purchaser must be informed of the change at least 21 days before completion. In some instances this change will give the purchaser a right to rescind.

     2. Serve purchasers with a copy of the registered plan and any other document registered with the plan. Purchasers will not be required to complete the contract earlier than 21 days of receipt of the documents.
  2. The tightening of regulations surrounding the vendor’s right to rescind under sunset clauses. Vendors will soon be required to obtain the consent of each purchaser under the contract in order to rescind following the expiry of the date by which the strata plan (and creation of the lot) and issue of the occupation certificate are to issue (the sunset date). If the purchaser refuses to provide its consent, the vendor will be required (unless the regulations stipulate otherwise) to obtain an order of the Supreme Court permitting the vendor to rescind.
  3. An extension to the cooling off period to 10 business days (currently 5 business days).
  4. Modernising the conveyancing process to allow for contracts, instruments and deeds to be formed and signed electronically.

  It is not surprising that the NSW Government has introduced such protectionist changes, particularly given the media attention surrounding the use of sunset clauses by vendors. Hopefully these changes will also lead to greater confidence and growth in the industry.

  If you have any questions about purchasing off-the-plan, please get in touch with our Property Team.

   

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  Copyright Act amendments to unveil our hidden history

  On 1 January 2019 amendments to the Copyright Act 1968 (‘the Act’) took effect. The amendments cover a range of issues, including a new definition of a person with a disability, consolidating the copyright exceptions libraries and archives are privy to and, more significantly, abolishing the previous unlimited copyright term for unpublished works (i.e. works that had not been made public). While mention of the Act may cause people to gloss over, these amendments are far more than purely academic: it essentially allows us to discover a previously veiled cove of original works. Previously unpublished work satisfying the criteria will now enter the public domain, allowing us all to discover hidden parts of our history and connect with those that came before us.

  Before these amendments, the Act really only set limitation periods on copyright ownership for works which had been “made public” (for example, written works published, performances or broadcasts in public). In effect, copyright in works which had not been “made public” (unpublished materials) could potentially exist indefinitely.

  The copyright term is not identical for all works, but generally where there is a known author the duration of copyright is contingent upon their life (and lasts around 70 years).

  So what is the position on copyright duration now?

  • If the author is generally known (or becomes generally known) for any work, be it published or unpublished, copyright subsists for 70 years after their death.

  For works first made public before 1 January 2019[1]:

  • If the author is unknown copyright continues for 70 years after the calendar year in which the work was first made public; and
  • If the author is generally known, but died before the work was made public, copyright will subsist until 70 years after the calendar year in which work first made public.

  For works that have either never been made public or have first been made public after 1 January 2019[2]:

  • If the author remains unknown and the work has not made public for at least 50 years since its creation, the copyright endures for 70 years after the creation;
  • If the author remains unknown and the work is made public within 50 years of its creation, the copyright continues for 70 years from the date it was first made public.

  So why is copyright important?

  The basic premise of copyright is to protect an person’s intellectual property, by granting them exclusive rights to reproduction of the material including the right to sell or licence their works, allowing the public to view or reproduce these works while protecting their own financial and creative interests. Copyright therefore ensures works can be made public, and the interests of the copyright owner protected.

  While the scope of these amendments touches upon published works, it is the changes to unpublished works that will create the most excitement. All of us, but particularly authors and educational institutions, should be aware of these new regulations, as it means that previously held material will now, and in the near future, be more readily accessible.

  If you have any questions about your copyright, please get in touch with our Business team.

  Written by Katie Innes with the assistance of Sarah Graham-Higgs

   

  [1] Section 33(2) of the Act.

  [2] Section 33(3) of the Act.

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  An Opal in the rough: the impact of the Opal Tower calamity in the ACT

  Residents of Opal Tower were recently given a rude shock when forced to vacate their apartments on Christmas Eve. Cracks appeared on several levels of the 36 storey mixed use building in Sydney only completed in August 2018. The ongoing saga involving residents, builder Icon and developer Ecove is a cautionary tale for anyone buying an off-the-plan unit or involved in the construction process. However, what steps can you take to avoid a similar situation and remedy structural defects if you are a buyer and conversely, what should you consider if a buyer subsequently claims that the building or renovation you have constructed is defective?

  Defect liability period

  Most contracts in the ACT for the purchase of an off-the-plan unit or construction of a single dwelling contain a defect liability period. This permits the buyer to submit a list of defects to the builder (or developer) which the builder will be required to repair. Defects are generally considered to be flaws in construction due to improper materials or faulty workmanship. However, it is important to be aware of the particular defects liability provisions as these can be drafted to limit the defects required to be repaired. Often this is reasonable, for example by excluding defects covered by manufacturer’s warranties. However, these provisions can also include unreasonable exemptions, for example, ‘settlement cracks’. The defect liability period will also set a defined period for the buyer to submit the defect list. A builder will not be required to rectify any defect notified outside of this period.

  Statutory Building Warranties

  Where a defect is revealed after the end of the defect liability period, often the only recourse available for defective building work is for breach of a statutory warranty (found in the Building Act 2004 (the Act). The Act implies important warranties into contracts with respect to carrying out residential building work or for the sale of a residential building, that provides the work will be carried out in accordance with the Act and the approved plans, in a proper and skilful manner and good and proper materials were used.
  These warranties exist for a period of 6 years in respect of structural defects and 2 years in respect of non-structural defects. Although considering the case Koundouris v The Owners – Units Plan No 1917 (2017) ACTCA 36 a buyer may be able to make a claim after the end of the six year period if the builder was in breach of the warranty at the end of the warranty period or if further building work is undertaken.

  Conclusion

  While the ACT has not experienced its own Opal Tower yet, issues with defect building work nonetheless remains topical and the ACT courts have generally adopted a pro-buyer approach. Regardless, those buying off-the-plan should conduct due diligence to ensure that the contract protects their interest and that they seek legal advice on options available if a defect is revealed after the end of the defect liability period. Builders and developers should ensure their contracts are adequately drafted so that only reasonable defects are required to be repaired and seek legal advice if a buyer claims breach of a statutory warranty.

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  Tripping Up: Maintaining Footpaths from a Duty of Care Perspective

  On 18 December 2018, the NSW Court of Appeal handed down a decision that will impact the way a commercial occupier’s duty of care is measured in regards to accidents that may occur on their premises.

  In Bruce v Apex Software Pty Limited t/as Lark Ellen Aged Care [2018] NSWCA 330, Mrs Bruce, a retired 70 year old, tripped outside the entrance of an aged care facility where her elderly father resided, causing her to suffer injury. The path on which she tripped was relatively standard, consisting of concrete slabs boarded by rows of red bricks. At the heart of the dispute, there was a height discrepancy of 10-20mm where the edge of the concrete met the red bricks, creating a “lip”. Predictably, Mrs Bruce tripped on the said lip.

  The NSW legislation on which the Bruce case was decided is comparable to the ACT’s (and other jurisdiction’s) civil liability legislation, making the NSW Court of Appeal’s decision a cautionary tale for business owners regardless of their location. In the case of each of NSW and the ACT, the general statutory principles for the court to consider are that:

  1. A person is not negligent in failing to take precautions against a risk of harm unless:
     1. the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and
     2. the risk was not insignificant, and
     3. in the circumstances, a reasonable person in the person’s position would have taken those precautions
  2.  In determining whether a reasonable person would have taken precautions against a risk of harm, the court must consider the following (among other relevant things):
     1. the probability that the harm would occur if care were not taken;
     2. the likely seriousness of the harm;
     3. the burden of taking precautions to avoid the risk of harm;
     4. the social utility of the activity that creates the risk of harm.

  In relation to this, in Bruce, Meagher JA held:

  1. The defendant was not negligent in allowing the concrete lip to remain as it was, as the risk of tripping on it was insignificant.
  2. This was based on the obviousness of the path transitioning from concrete to red brick, which pedestrians on the path would observe and accommodate for. Interestingly, the fact that the path was outside of an aged care facility did not hinder the threshold of this duty.
  3. The obviousness of the risk discharged the obligation which the defendant otherwise may have had to warn of the presence of the lip.
  4. A reasonable person in the defendant’s position would not have taken action to reduce the unevenness in the path. The burden in doing so was not warranted in light of regular inspections of the area being undertaken, and the longstanding use of the path in a high thoroughfare area without incident established the risk to be insignificant

  This decision reaffirms the standard required by law for commercial occupants in conducting repairs and their due diligence in mitigating risk of injury on the premises. Specifically in this case, based on several different factors, the defendant was not liable for the injuries sustained by Mrs Bruce. Helpfully for defendants (and not so for plaintiffs), Bruce is a reminder that the presence of a risk that “could” be fixed by some forethought of the occupier does not equate to their being an obligation that the risk “must” be fixed.

  All cases will, of course, turn on their own facts. Where safety risks are identified by an occupier that reasonably can be attended to without any great burden arising, taking whatever reasonable steps that are available to prevent an incident from occurring is always the preferable path to follow.

  For more information about duty of care please contact our litigation team.

  Written by Ian Meagher and Zoe Zhang.

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  Protecting Intellectual Property with Blockchain

  In recent articles in this series, we have explored the basics of blockchain and some of the associated legal challenges that can arise from the proliferation of this technology across various industries. Despite the challenges, however, there are a number of exciting legal applications on the horizon. In particular, there are few areas of law that could benefit quite as much from the real-time, distributed and immutable nature of blockchain as intellectual property (commonly referred to as “IP”).

  Streamlining the IP life cycle

  When it comes to IP, it’s the nature of the beast that effective enforcement of rights will be predicated on keeping robust and comprehensive records regarding applications, registration, licencing, assignment, use and so on. For certain IP rights, much of this is centrally managed by IP Australia, but the burden is shared across all those who create or use valuable IP.

  These processes could be streamlined and strengthened with the use of blockchain. By incorporating the central IP registries onto a blockchain platform, this information could be fed into the system in real time, creating an immutable and time-stamped record of the IP ‘life cycle’. This would not only be of enormous benefit in terms of record keeping and rights management, but may be critically important to certain disputes where evidence of creation, use or goodwill plays a determinative role.

  Excitingly, this opportunity is one that has been recognised by IP Australia, which is undertaking trials of a ‘smart’ trademark that can be traced throughout the supply chain using a blockchain platform.

  Creation and proof: protecting unregistered IP rights

  In Australia, as with many jurisdictions, copyright is unregistered and comes into existence automatically on creation of an original work. As such, disputes can arise about creatorship where evidence of conception, originality or use is incomplete or uncertain. By using a blockchain platform as a registry of original works, copyright authors, owners and users can rely on tamper-proof and time-stamped evidence of ownership to give them peace of mind in protecting their IP rights.

  Managing IP rights

  Not only can blockchain enhance the establishment and protection of IP rights, it presents a unique opportunity for businesses to improve the management of those rights in everyday governance, dealings and transactions.

  For example, IP audits may be greatly simplified if businesses have access to a comprehensive, time-stamped and unchangeable record of all IP generated by or within the business, as well as all third party IP that it uses. This provides an important safeguard against liability for infringement of the IP rights of others due to poor governance or oversight, as well as an enhanced capacity to recognise and protect the value of the IP created within the business.

  The use of blockchain in this way may also reduce a lot of the ‘grunt work’ associated with the assignment of IP rights, such as in mergers and acquisitions, for which due diligence must be undertaken.

  In a more day-to-day sense, blockchain technology could also be employed in the form of smart contracts to streamline the execution and enforcement of IP licences. The self-executing nature of smart contracts means that IP owners can receive payment automatically and in real-time wherever their IP is used by third parties.

  Limitless opportunities

  By this point, it should be clear that the potential legal uses of blockchain are endless-and we’ve only just scratched the surface. The protection of IP rights can be enhanced in multiple other ways with the use of this technology, such as tracking and authenticating the provenance of products to tell a genuine from a fake, or helping to keep track of compliance with regulatory requirements.

  Stay tuned for our future articles on the potential uses of blockchain. In the meantime, if you have any questions about the protection and management of your IP rights, and how this may be impacted by the rise of blockchain, feel free to get in touch with our Business team.

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  Business Breakfast Club December Summary: Looking Forward, Looking Back - The Year That Was

  This month at Business Breakfast Club, we had a roundtable discussion on the standout issues of 2018 and the impact these issues will have in 2019. In particular, we discussed the changes to the Privacy Act, the introduction of the General Data Protections Regulation (GDPR), the proposed changes to bankruptcy legislation, the impacts of the recent Royal Commissions and changes in financial markets (to name a few).

  Privacy Law

  We revisited the changes to the Privacy Act in February of this year, which introduced a mandatory notification procedure for eligible data breaches. All entities bound by the Australian Privacy Principles (APPs) have new reporting obligations if there is an eligible data breach, namely, to notify the Office of the Australian Information Commissioner (OAIC) and any parties at risk because of the breach.

  We explored the type of harm individuals have suffered as a result of eligible data breaches and how these breaches have led to an increase in identity theft and online hacking. We discussed a real life experience of scam activity in Canberra that illustrated the high level of sophisticated online hacking that exists in the digital age. Eligible data breaches and instances of scam activity and identity theft must be kept in the forefront of a business’ risk management policies as it can undoubtedly have serious consequences such as loss of personal savings.

  The European Union also passed similar privacy legislation (the GDPR) regulating how companies protect citizens’ personal data. The GDPR is designed to give EU citizens’ control of their personal data and simplify the regulatory environment for international businesses by unifying the regulation within the EU. If you are engaging an overseas entity that is bound by the GDPR and that entity is collecting and storing personal information provided by you (or for your benefit), we recommend you seek legal advice about whether the overseas entity’s privacy policy is compliant with the GDPR.

  Bankruptcy Legislative Changes

  We also discussed the proposed changes to insolvency laws, currently before Parliament, which could see the bankruptcy discharge period in Australia reduced from three years to one. The proposals are contained in the Bankruptcy Amendment (Enterprise Incentives) Bill 2017. It’s unlikely the Bill will be enacted before the Federal election next year. Many suggested that the current debt arrangements mean that individuals are paying more to their creditors and are locked in for longer than three years but if the Bill is enacted such arrangements would end altogether.

  For more information on any of the above, please contact Lauren Babic. The next Business Breakfast Club will take place on 15 February 2019. If you would like to attend, please contact us.

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  To sell, or not to sell? That is the question (in deceased estates)

  Rare are the circumstances where “The Tax Man” offers any dispensation from our tax-paying duties. Death is one of those circumstances.

  Deceased estates enjoy roll over relief from the payment of capital gains tax.[1]  One power of an executor (or administrator, where there is no will) is to decide how assets within an estate are dealt with. Subject to any specific direction in a will, an executor will ordinarily have the power to sell assets. They will also have the power to appropriate certain assets in-specie, and apply them towards a beneficiary’s share of the estate.

  For example, an estate may have two equal residuary beneficiaries with the assets comprising $200,000.00 cash and shares Medibank Private Limited also valued at $200,000.00. In discharging their duties, the executor could give beneficiary 1 $200,000.00 and could transfer the shares to beneficiary 2.  While these types of decisions are often made in consultation with the beneficiaries, the executor generally does not require the consent of the beneficiaries to make these decisions.

  Where there are multiple beneficiaries of an estate, from a practical point of view, often the easiest thing for an executor to do is say “show me the money”. That is, an executor elects to sell an asset within the estate. It is then easy to divide the sale proceeds among the various beneficiaries with little argument. Executors are often pressured by beneficiaries who have large debts and would prefer to receive “liquid” funds. However, from a tax perspective, often it is not prudent for an executor to engage their powers of sale.

  The sale of assets within an estate will often attract the payment of capital gains tax liabilities. However, where assets are transferred to beneficiaries of an estate, there are no immediate tax consequences.[2] On transfer, The Tax Man allows you to “roll over” or defer the tax consequences until some later time or event.

  The general rule of thumb is that if the deceased person would have been entitled to reduce or disregard a capital gain while they were alive, that right continues in the estate. The right continues for a two year period beyond the date of the deceased’s death.[3]

  For example, let’s say that at the date of Lucy’s death, she:

  • owned 500 Commonwealth Bank shares in her sole name, valued at $36,650.00. Lucy purchased the shares in 2005 for $20,000.00 (at $40.00 per share);
  • owned 500 National Australia Bank shares in her sole name, valued at $12,240.00. Lucy purchased the shares in 1984 for $7,500.00 (at $15.00 per share); and
  • was the sole Registered Proprietor of her home, where she lived until she died.

  Lucy left a will appointing Matthew her as her sole executor and nominating James as her sole beneficiary.

  On Lucy’s death, if Matthew transferred the Commonwealth Bank shares to James, there would be a capital gains tax rollover. No tax is payable on the transfer. James would enjoy the assets with the benefit of regular dividend payments. For calculating any future capital gains tax, James would acquire Lucy’s cost base when she initially purchased the shares ($40.00 per share).

  If James later sold the shares for $40,000.00 ($80.00 per share), he would have to pay capital gains tax on $60,000.00 (the difference between the ultimate sale price and Lucy’s purchase price). James may be entitled to a reduction in the tax depending on how long he retained the shares.[4]

  If Matthew, as the executor, elected to sell the Commonwealth Bank shares within the estate, there would be a capital gains tax event and the estate would be liable to pay tax on the gain. This would reduce the overall “value” of the inheritance being received by James.

  The National Australia Bank shares were acquired by Lucy in 1984, before capital gains tax was introduced. If Matthew sells these shares, there will be no tax payable. If Matthew transfers these shares to James, there will also be no capital gains tax payable. James would acquire the shares at their value on Lucy’s death.

  In relation to the main residence of the deceased person, there is an exemption from paying capital gains tax.[5]  While it is a complicated area of law, if an executor sells the deceased’s main residence, provided settlement is effect within two years of deceased’s death, the sale proceeds will be exempt from capital gains tax.

  Any income earned beyond the date of the deceased’s death (by way of dividend payments, share sales etc.) must be declared in a separate tax return filed on behalf of the estate. This is another obligation of an executor. The estate requires its own tax file number because it is a separate tax paying entity. The estate is treated like an individual for tax purposes and can take advantage of the tax free threshold for three years. Because of this, if assets within an estate are to be sold, there is merit in spanning the sales out over several financial years.

  While selling assets within an estate may seem like an easy and efficient way to approach the estate administration, executors should seek legal and accounting advice before relying on the powers of sale bestowed upon them.

   

  [1] Income Tax Assessment Act 1997 (Cth) Division 128.

  [2] Provided those transfers are consistent with the terms of the will or the applicable intestacy laws.

  [3] Income Tax Assessment Act 1997 (Cth) Section 152.80.

  [4] Income Tax Assessment Act 1997 (Cth) Division 115.

  [5] Income Tax Assessment Act 1997 (Cth) Division 118.

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  Co-operatives and the Power of Blockchain

  In our first article in this series, we stepped through the basics of blockchain and how it might influence the way we transact with one another. Blockchain is rapidly finding its way into all sorts of enterprises, presenting exciting opportunities for businesses to optimise their business operations. It might be surprising to consider that there are few pairings that are more natural-and perhaps less expected-than blockchain and co-operatives.

  Co-operatives and blockchain share a theme of mutual benefit: they exist to serve their members. At their core, the members are a group of people working together towards achieving shared social, cultural or economic goals. Importantly, this form of organisation is distinct from many typical corporate structures where the ultimate purpose for directors is always to serve their shareholders.

  In simple terms, a co-operative is a legal entity owned and democratically controlled by its members, who typically have a close association with the business of the co-operative. Common and historically successful co-operatives are those in the agricultural sector, including those in the dairy, grain, and meat export industries. The co-operative model shares risk and reward amongst its members. They are also “decentralised” in that there is no one member in a position of power or control above the others. This element of democratic control is a core element of the co-operative structure. Coincidentally, this decentralised notion of power and democratic control is also a core element of blockchain.

  Blockchain is the technology that allows, for example, crypto-currency such as Bitcoin to exist without a central bank. It provides a secure, decentralised and un-editable record of all transactions.

  So, think of a co-operative as the corporate structure and blockchain as the technological vehicle.

  Governance

  Blockchain may be of particular use to co-operatives in relation to their governance. For example, it can enable co-operatives to operate on a system in which by-laws, amendments, terms of membership and voting rosters are all written into a blockchain, providing an irrefutable history of all legal and administrative procedures.

  Blockchain can provide a trusted mechanism for operational activities such as decision-making, finance and record-keeping without the need for physical proximity. That is, with blockchain, a co-operative can be governed remotely, without the need for members to physically meet or even align schedules (possibly in different time zones) for teleconferences. It can be coded to action and deal with common business matters like voting functions, for example, which could be “built-in” to the chain to record (and action) acceptance or rejection of by-laws, amendments, membership and other matters requiring a vote.

  Provenance

  Beyond these legal and administrative functions, co-operative entities around the world are utilising blockchain technology in various ways to support their activities. For example, one of the world’s largest consumer co-operatives, Co-Operative Group Ltd (UK), is working with an organisation called Provenance to use blockchain to trace the journey of fresh produce from ‘paddock to plate’ in real-time. By referring to this immutable and time-stamped record of a product’s processing, final purchasers can be assured of the origin and quality of the product, as well as environmental and social impacts of the business.

  Blockchain undoubtedly has the ability to enhance trust and efficiency to the operational activities of a co-operative. We look forward to seeing the benefits of this technology become a reality in Australia.

  If you have any questions about how blockchain might benefit you or your business, please get in touch with Mark Love. If you have any questions about co-operatives, please get in touch with Katie Innes.

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  PPSR: Your registrations may be expiring soon!

  The Personal Property Securities Register is turning seven! The PPSR came into effect on 30 January 2012 so a number of security interests first registered in 2012 will be due to expire in the coming year. As we have said time and time again, the Personal Property Securities Act and the PPSR are about registration; it is no longer about ownership rights. So maintaining and protecting your registration is essential.

  Security interests can be registered for seven years or less, more than seven years but less than 25 years, or with no stated end time. A number of businesses may have chosen to register a security interest for seven years or less for two reasons:

  1. it is the cheapest available registration; or
  2. it is the maximum timeframe you can register an interest over ‘serial numbered goods’ – think motor vehicles, aircrafts, and intellectual property.

  To maintain your security interests (and protect your priority against other creditors who may have registered subsequently) you need to ensure that your registration doesn’t expire. Renewing and extending the registration is simple; the same fees apply to extending a registration as creating a new registration. The PPSR also allows secured parties to generate reports on which registrations are due to expire so you can manage your interests.

  The risk to you – once your security interest has expired, is that you cannot extend or renew it. Instead you will have to re-register your security interest and potentially lose your priority to other creditors who have registered earlier.

  If you have any questions about when your security interests may expire or security interests generally, please get in touch with our Business team.

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  GST Withholding Tax

  We have now had the best part of 5 months to ‘wrap our minds’ around the new GST withholding law in action. The new law broadly means that when new residential premises or potential residential land is sold, it is now the buyer who must account to the ATO for any GST payable. With the exception of the withholding notice that is to be provided to the buyer, the administration of GST in respect of the sale of second-hand residential property has not changed (in most cases), it is still GST exempt as an input-taxed supply.

  The result of this law[1] change is nothing new- GST has always been payable on sales of new residential premises and potential residential land. The change means that instead of asking the seller to make sure the GST is paid to the ATO upon the sale of the property, the buyer is now tasked with the job. This change effectively means that the buyer gets to play the role of both compliance officer and tax collector (which, let’s face it, is a bonus for all those buyers out there). But we shouldn’t ‘scoff’; according to the Explanatory Memorandum of the Bill that introduces the change, the GST debt in respect of insolvent entities was at almost $2 billion as of November 2017.

  Obligations of Note

  The obligations initiated by the changes are not overly onerous but they are important for anyone looking to either sell or buy one of the qualifying properties. Primarily, the reason for this is the penalties that can be imposed. For instance, if a buyer forgets or fails to withhold and pay to the ATO the required GST amount, then the buyer can be liable for a penalty that matches the GST amount that they should have remitted. Similarly, if the seller forgets or fails to notify the buyer of the need to withhold GST, harsh financial penalties can also be imposed on them as well ($21,000 for individuals and $105,000 for companies).[2] With this in mind, we urge anyone looking to buy or sell to seek advice in relation to these obligations prior to exchanging contracts.

  Issues of Interest

  The ACT and NSW Law Societies have adjusted the standard legal provisions used within contracts of sale to reflect these changes; however, we have found that many legal firms are including their own specific clauses to deal directly with the changes. It is important that any potential buyer or seller ensures that they understand these provisions as they won’t always be uniform from firm to firm. If these clauses are drafted incorrectly and do not mirror the law’s requirements they can potentially expose both parties to the onerous penalties outlined above.

  Something else to keep in mind here is the actual payment of the GST. For instance, many sellers require that the GST amount is provided to them at settlement to ensure expediency of payment and to allow them to claim the requisite credits in their correct BAS. Buyers on the other hand, need to be wary of this arrangement as it does not (arguably) extinguish their obligations under the law, potentially opening them up to the penalties mentioned above.

  Arguably one of the more confusing aspects of the new regime for sellers relates to which entity is actually responsible for the payment of GST. Under the new regime the seller is required to notify the buyer of certain information so that the buyer can make the appropriate payment to the ATO. This information includes the supplier’s name (and other details like ABN etc.). Normally, the supplier is the seller, however in practice this is not always the case. This could be due to the seller acting as trustee of a trust- in this situation the trust itself may be the entity liable for the GST, or there may be a number of sellers which make up a partnership and that partnership may be the entity registered for GST and liable for the GST on the sale. The seller could also belong to a closely held group of entities and another member of that group is in fact the one responsible for the GST.

  What this all means is that if the incorrect entity is noted as the supplier and therefore liable for the GST, the associated input tax credits will not be assigned to the correct entity (that is, the one actually registered for GST and liable for it).

  On its face this law seems relatively simple to grasp and in most respects it is. The administrative obligations of the new regime (some of which are identified above) are ‘necessary evils’ to facilitate compliance with the law. They are important and both sellers and buyers alike need to be aware of them and the consequences associated with failure to comply.

  If you require assistance with GST withholding issues, please contact Benjamin Grady.

  [1] Treasury Laws Amendment (2018 Measures No. 1) Bill 2018

  [2] Paragraph 5.42 of the Explanatory Memorandum to the Bill

   

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  ACT Supreme Court 2018 Year in Review - Estates, Probate and Family Provision

  This year did not see a great deal of activity in the ACT Supreme Court with regard to Estates, Probate and Family Provision.

  There were three ex-parte applications before the ACT Supreme Court (each before Associate Justice McWilliam) concerning section 11A Wills (‘informal Wills’). The cases of In the Estate of Kay Maureen Leighton[1], In the Estate of Socrates Paschalidis[2] and In the Estate of Peter Ronald Wiseman[3]coincidentally each had very similar facts. Each case involved an informal Will that had not been correctly executed. Each ‘Will’ had been signed by only one witness or no witnesses at all.

  There was one ‘extension of time’ Application which was considered in the case of Buckman v Lindbeck[4]. This case involved an Application made by the child of the deceased to extend the time to file with the Court a Family Provision Application to receive greater provision from his father’s estate. In the ACT, the time limit within which a Family Provision Application must be made is 6 months of the Grant of Probate being made by the Court.

  In this particular case, Probate was granted on 7 December 2016 which would have meant the Family Provision Application was required to be filed on or before 7 June 2017. The Family Provision Application was filed on 28 August 2018, almost 1 year and 3 months out of time.

  The Deceased’s Will gave his two sons Paul (the Applicant in this case) and Anthony the sum of $25,000 with the residue of the estate being divided between the deceased’s three other children, who were also the executors and defendants in this case. Each residuary beneficiary received at least $220,000 from the division.

  The Deceased acknowledged in his Will that the reason for the differing gifts between his children was due to the ‘lack of support [I] received from, and contact I have had with, either son over a significant period of time’.

  On the same date the Application for the extension of time was filed with the Court, the executors made an interim distribution to themselves following the sale of a major asset in the estate. Despite probably not having been served with the Application on the date it was filed, the executors had notice of the Applicant’s intended Family Provision Application due to correspondence between both parties’ solicitors prior to the Application being filed.

  In deciding whether an extension of time was warranted, the Court (Associate Justice McWilliam) was guided by the case of Smith v Public Trustee of the Australian Capital Territory[5]and had regard to three considerations which must be considered in an Extension of time application

  • explanation for the delay;
  • the strength of the Applicants case if an extension of time was granted;
  • the prejudice to other beneficiaries that might arise; and
  • a forth category was added in the case of Warren v McKnight[6] – whether there has been any unconscionable conduct by the Applicant.

  The relevance of the above factors to the present case was as follows:

  1. The prejudice to other beneficiaries that might arise the executors argued that the prejudice to them in granting an extension of time was significant as the majority of the estate had been already distribution. The Court however held that the prejudice was of the executors own making, having made a distribution with notice of an impending Application, and not having filed a Notice of Intended Distribution.
  2. Explanation for the delay the Applicant’s explanation for the delay was that he was never given a copy of the Will by the executors and did not know Probate was granted. The Court recognised there had been some delay on part of the Applicant from the time he received a copy of the Grant of Probate until formally filing his Application, but ultimately held significant delay arose due to the executors failing to give the Applicant a copy of the Will.
  3. The strength of the Applicants case if an extension of time was granted– the Court recognised that the Applicant was in a dire financial position. He was a truck driver with no real property and significant debts. His partner was unemployed and the Court therefore held the Applicant hat reasonable prospects of a successful claim if an extension of time was granted.
  4. Unconscionable conduct by the Applicantthe Court found no evidence of unconscionable conduct by the Applicant.

  The Court granted the extension of time. At the date of this article, there has been no reported judgement on the Family Provision Application by the Applicant in the present case (and there may not be a reported judgment if the case is ultimately settled between the parties). All parties, including the executors and the other interested beneficiary (Anthony) will of course need to be party to any Family Provision proceedings filed by the applicant and subsequent out of Court settlement (if any).

  Other notable matters to be aware of in the  Estate space  that do affect us in the ACT include:

  • The replacement of the Superannuation Complaints Tribunal with the new Australian Financial Complaints Authority (AFCA) from 1 November 2018;
  • The NSW Law Reform Commission is in the process of examining and reporting to the NSW Attorney General on laws that affect access to a person’s social media accounts and other digital assets in the event of death or incapacity. The report by the Commission will provide some useful guidance to practitioners in the ACT (and Australia wide) when advising their clients on their digital assets; and
  • The changes announce in the 2018 Federal Budget with regard to Testamentary Trusts, Estates and Elder Abuse.

  Written by Golnar Nekoee, Director, Wills and Estate Planning

   

  [1] [2018] ACTSC 75

  [2] [2018] ACTSC 122

  [3] [2018] ACTSC 292

  [4] [2018] ACTSC 313

  [5] [2012] ACTSC 4

  [6] (1960) 40 NSWLR 390

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  Sunsets, no guarantee of a sunrise in your new unit - the importance of a sunset date when buying off-the-plan

  With the tightening of lending conditions, confidence in the housing market falling and a large number of developments in the pipeline, there poses great opportunity but also risk when buying a unit off-the-plan. Whilst there is of course the attractiveness of living in something ‘new’, with modern appliances and furnishings and living close to shops, cafes and other amenities, how long would you be willing to wait for your unit to be built?

  For many developments, banks (as part of their lending conditions) require the developer to obtain a certain number of pre-sales. This means that part of the development will need to be sold before construction commences. Whilst this may not be an initial concern for most buyers there lies an obvious risk in that the developer may have difficulties obtaining the requisite number of pre-sales and the construction of the development is delayed as a result.

  To accommodate the risk of a delay, whether due to funding or the construction itself, developers will include a provision in the contract to allow for the developer to extend the anticipated date of completion (usually tied to the registration of the units plan) at its discretion. The obvious consequence for buyers then is that they may be bound to a contract under which the construction of their unit may not commence or be completed for a number of years, despite there being initial timeframes stated in the contract.

  To be able to ‘opt out’ of the contract in such circumstances, buyers should ensure a sunset date is included in the contract. A sunset date gives both parties the right to rescind the contract (and for the return of the deposit) where construction of the development has not been completed by the date specified in the contract. In our experience, such a request is generally accommodated if the sunset date provides the developer a reasonable time to complete the development.

  The use of a sunset date though is a double edged sword. It poses another issue: what happens if the value of the unit increases and the sunset date passes, should the developer be entitled to rescind the contract to take advantage of the price increase?

  This practice has occurred in Victoria and New South Wales, leading to the introduction of legislative restrictions. In NSW, the Conveyancing Amendment (Sunset Clauses) Act 2015 requires developers to seek the buyer’s consent prior to bringing the contract to an end once the sunset date has passed. Where the buyer does not consent, the developer must seek an order from the Supreme Court allowing the developer to rescind the Contract with such orders only being granted if the Court considers it just and equitable to do so. Similar restrictions will be introduced in Victoria under the Sale of Land Amendment Bill 2018 (if passed)

  So, will the ACT follow the lead of NSW and Victoria? Or will the ACT follow Queensland and introduce mandatory sunset dates? Whatever the path, clearly the introduction of any such legislative amendments will have a significant impact on both buyers and developers and each should watch this space.

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  The Problem With Smart Contracts

  Smart contracts-computer-encoded sets of instructions that ‘self-perform’ when certain pre-determined criteria are met-are poised to revolutionise the legal landscape in years to come.

  In our first article in this series, we explained the basics of blockchain technology and its application in smart contracts. Far more than a fleeting or niche innovation, smart contracts may have applications in sectors as far reaching as financial services, supply chains, car sales importation, real estate and insurance. However, although they pose exciting opportunities for a great range of businesses, there may be some significant legal challenges on the horizon.

  A square peg in a round hole: difficulties in applying the law

  One issue, yet to be considered by the courts, is the extent to which these smart contracts are valid and enforceable under contract law. Parties to a smart contract effectively cede control over an aspect of performance of a contractual obligation to a digitised process, which (once enlivened) cannot be reasoned with or influenced.

  Utilising the more ‘pure’ types of smart contract, consisting only in machine-readable code, means that the identity of the party is unknown; as such, there is no way to assess their capacity to enter the contract. Moreover, certain contractual principles such as frustration, duress, undue influence, unconscionable dealings or force majeure, by their very nature, require subjective interpretation of judgement on a case-by-case basis-something not countenanced by self-executing instructions.

  It will be necessary for lawyers to keep their finger on the pulse in this regard; although certain dealings could render a smart contract void at law, the activated contract may be unstoppable in the digital world. It will be interesting to see how the law develops and adapts to this problem, noting that practically speaking most modern remedies could be swept away, leaving mere damages.

  Another issue will be determining how rights and entitlements recorded ‘on the chain’ accommodate rights and entitlements that arise ‘off the chain’. For example, what happens if share ownership is recorded on a blockchain as vesting in one entity, but surrounding circumstances place equitable ownership in another? Or if a transfer of ownership of property is recorded on a blockchain but is sought to be set aside under the Corporations Act as a voidable transaction? The immutability of a blockchain system raises some interesting questions in this regard.

  Challenges in litigation

  The nature of the blockchain system means that the players involved will most likely be ‘distributed’ around the globe. Parties intending to implement or utilise a blockchain system should therefore give advanced thought to which laws should apply and what type of forum is most appropriate to resolve disputes. It might be beneficial to have an arbitration dispute resolution cluses rather than relying on the enforcement of a court award from a local court system.

  The governance position of public blockchain systems also poses an interesting challenge from a litigation perspective. While terms of use can be communicated to users of a public blockchain, such terms may be difficult to enforce as no single entity controls the system. The question also remains as to who will bear the liability for any faults in the technical code and who has the right to enforce against them.

  Interestingly, there have been several suggestions applications such as “JUR” and “Jury.Online” which offer a ‘decentralised’ dispute resolution mechanism. In such systems, members can open a dispute and the blockchain community effectively vote on the issues in question. While these dispute resolution mechanisms sit outside the current legal framework, it will be interesting to see whether such mechanisms gain traction amongst blockchain users or whether users will rely upon traditional legal dispute resolution mechanisms.

  It is clear that the explosive uptake of blockchain technology has the potential to disrupt centuries of settled legal principles. While this may create a headache for lawyers, it is an exciting opportunity to rethink the way we transact in an increasingly globalised and digitised economy. “It will be an ill-wind that blows no lawyer no good”; so watch this space.

  If you’d like to discuss how distributive ledger technologies might impact your business, feel free to get in contact with Mark Love in our Business team.

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  Residential Tenancies Amendment Bill 2018 (No 2) - A-CATastrophe?

  We certainly hope not, but residential investors are likely to consider that it is, with tenants perhaps ultimately wearing the cost.

  Introduced in the Legislative Assembly on 1 November 2018, the Residential Tenancies Amendment Bill 2018 (No 2) seeks to amend the Residential Tenancies Act 1997 to improve protections for tenants while enabling lessors to be consulted on issues that will affect the properties they own.[1] In summary, the changes:

  1. Restrict a lessor’s right to decline an application for the keeping of pets on the premises. If a lessor wishes to refuse consent or impose conditions on that consent (that do not relate to the number of animals or the cleaning/maintenance of the premises), the lessor must apply to the ACAT for its prior approval.The proposed changes do not allow for the lessor to hold additional security for damage caused to the premises, even where it is predicated that a pet will cause deterioration.
  2. Restrict a lessor’s right to decline an application to modify the premises. Where a tenant makes an application to renovate/alter the premises for the purpose of assisting the tenant in relation to:
     1. the tenant’s disability (on written advice of a health practitioner);
     2. the safety of the tenant;
     3. improving the energy efficiency of the premises; or
     4. the security of the tenant, to be known as ‘special modifications’, the lessor will only be able to decline the application if the lessor obtains the ACAT’s prior approval. For any other modification, the lessor must not unreasonably decline the application.It is important to note that the (currently proposed) grounds on which the ACAT may make orders in favour of the refusal are non-prescriptive, the obvious being that:
     5. the lessor would suffer significant hardship; or
     6. the special modification would result in additional maintenance cost for the lessor.Such grounds, without further clarification, do not provide either tenant or lessor with any certainty and may lead to inconsistent decisions by the ACAT and could prove significant barriers to obtaining consent.

        The proposed changes do not allow for the lessor to hold additional security for damage caused to the premises or to return the premises to its original condition (subject to fair wear and tear) in the event the tenant fails to comply with the lessors conditions of consent (which presumably will require the premises to be restored).

  3. Introduce capped rental increases. If a lessor wishes to increase the rent by a rental rate above that specified by regulations (10% greater than the rents component of the housing group of the CPI for Canberra), the lessor will need to obtain either the tenant’s consent or the ACAT’s prior approval.
  4. Cap the break fee payable by a tenant under a ‘break lease clause’. Where a tenancy agreement is entered into with a new tenant before the expiry of the 4 week period (if more than half of the fixed term period has expired) or 6 week period (if less than half of the fixed term period has expired) following the tenant vacating the premises, the break fee will be reduced by the amount of rent payable by the new tenant during that period.If the tenant vacates the premises more than 4 weeks before the end of the fixed term, the break fee will be increased to include the lessor’s reasonable costs of advertising the premises for lease and providing vacant possession but limited to:
     1. If more than half of the fixed term has expires – an amount equal to 2/3 of 1 weeks rent; or
     2. If less than half of the fixed term has expires – an amount equal to 1 week’s rent.

  The conscious ‘push’ to move the ACT to a more tenant friendly jurisdiction, perhaps which to a degree may be necessary, without incentive, a more amicable resolution process or the substitution of additional security (at least for the lessor) brings about an obvious risk of an increase to the already overburdened number of applications before the ACAT, which obviously increases the cost and risk of owning and renting land.

  The question then is who is ultimately going to bear these costs? Based on the proposed reforms this clearly lays cost and risk at the feet of the lessor, but does it? One observation is that lessors will demand higher rent to cover their risk and mitigate their potential losses and if these changes are too burdensome, to invest elsewhere, reducing available rental supply.

  [1] Residential Tenancies Amendment Bill 2018 (No 2), Explanatory Statement

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  Business Breakfast Club November Summary - Business Succession Planning, Buy-Sell Agreements And Personal Insurances

  This month at Business Breakfast Club, Golnar Nekoee of BAL Lawyers and Sam Elliot of Macquarie Wealth Management discussed the importance of business succession planning and how to finance the plan. An effective succession plan will ensure that the time and effort invested in building up a business is not jeopardised when a business owner leaves.

  What is a business succession plan?

  A succession plan outlines who will take over a business when a business owner leaves. An owner might ‘leave’ for a number of reasons and might be voluntary or involuntary. This might be due to retirement, death, disability, a sale of the business, or a falling out between business partners. Creating a plan ensures that you have a strategy in place for the orderly and smooth transfer of business, aiding to maintain economic stability and preserve family and business relationships. The business succession plan can be built into your establishment and ownership documents or can come later separately but it does need to be discussed with the intended beneficiaries and documented so that it can be implemented in a practical and meaningful way.

  Types of succession plans

  A succession plan can come in many forms and will depend on the legal model of business ownership you have chosen. Strategies can include Enduring Powers of Attorney, Wills and Statements of Intent for sole traders, Partnership Agreements, Shareholders Agreements and Buy-Sell Agreements where there are multiple owners. It is important to ensure that the succession plan is funded, whether through a loan or an insurance payout, otherwise the plan cannot be implemented.

  Q&A Corner

  How can Enduring Powers of Attorney and Corporate Powers of Attorney be used?

  An Enduring Power of Attorney (EPA) is a legal document under which an individual (‘the principal’) appoints another to make decisions on their behalf (‘the attorney’). Decisions can include managing an individual’s property, financial and health affairs. An EPA is a simple but powerful document as it continues to operate after the principal loses the ability or capacity to make decisions. This can be a useful tool in the case of a sole trader, allowing the attorney to make not only personal decisions but business decisions to either manage the business until the principal regains capacity, or to sell the business or conduct an orderly winding down in the event the principal no longer has capacity.

  Directors however cannot give an EPA in respect of their role as a director; hence a company power of attorney might be appropriate for sole director / shareholder entities.

  If a sole director and shareholder of a company is incapacitated or has passed away, there is a period of time in which no one can exercise the rights attached to the shares (to appoint an interim director) and the company will be without appropriate management and oversight. The company will be unable to operate effectively (or perhaps at all). In order to allow the company to continue to operate (for instance use bank accounts to pay wages or debts, enter into contracts to preserve the business) a sole director might consider, as part of their succession plan, implement a company power of attorney. The company power of attorney can grant a third party the right to exercise the powers of the company – allowing that third party to step in and manage the business at a critical time.

  For more information, please contact Golnar Nekoee. The next Business Breakfast Club will take place on 14 December 2018. For more details click here. If you would like to attend, please contact us.

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  Dying with Multiple Partners: "Playing the Fieldâ€

  To die with multiple partners- what does that mean? In a social context, the meaning is quite obvious. The deceased person was “playing the field”, so to speak. He or she was in an active relationship with at least two individuals at the date of their death. In a legal context, the phrase “dying with multiple partners” has a more obscure meaning.

  When people ask us “why do I need a Will?”, we often find the best way to respond is to highlight what happens if they die without a Will. A person who dies without a Will is said to have died intestate. In each Australian State and Territory, there is intestacy legislation which determines to whom assets are distributed on death.

  The statutory framework is rigid and wholly dependent on the circumstances of the deceased person at death. These “circumstances” are whether the deceased had a spouse or partner at death, and what is the composition of the deceased’s family (both immediate family members and more distant relatives).

  The intestacy legislation varies across jurisdictions, but generally speaking, the order of entitlement is (1) Partner, (2) Children, (3) Parents, (4) Siblings, followed by Nieces and Nephews, Grandparents, Uncles and Aunts, and Cousins. If there are no members of any of those classes, then the deceased person’s estate reverts to the Territory or State Government.[1]

  In relation to the deceased’s family, the categories of eligible beneficiaries are relatively easy to establish. But what is the definition of a “partner” for the purposes of intestacy? In the Australian Capital Territory, a partner is any of the following: the deceased’s spouse (wife or husband), civil union partner, civil partner or “eligible partner”.

  An eligible partner is someone who was in a domestic relationship with the deceased at their death and fulfils one of the following two criteria:

  1. He or she had been the domestic partner of the deceased for a continuous two year period immediately prior to the deceased’s death; or
  2. Is the other parent of the deceased’s child (provided the child was a minor when the deceased died).[2]

  A person is a “spouse” as long as they remain married. Separation, without actual divorce (decree nisi), will not change how the intestacy legislation is applied. The (unfortunate) fact is that a deceased person is unlikely to want someone who they have separated from to benefit from their assets. It is easy to see how the application of the framework can result in inheritances that are unjust.

  Let’s look at an example. Say Bridget and John were married in 1990. They did not have children and separated in 1998. Neither of them thought that the formal process of getting a divorce was worth the time and expense. Bridget and John have not spoken since 1998. Bridget was jaded by the relationship and never re-partnered. Bridget dies in 2018 with an estate valued at $4,000,000.00. Who gets it? John. John is entitled to the whole of Bridget’s estate. It does not matter that they have not spoken in over twenty years. They were legally still married when Bridget died, and John is therefore Bridget’s spouse for the purposes of the intestacy legislation.

  Now let’s retain that example, but change one fact. Say Bridget re-partnered with Luke in 2014. They have been in a continuous (and exclusive) domestic relationship since that date. In 2017, they got engaged. Bridget was not “playing the field”, but the law says she died with multiple partners. She was survived by her husband, John, and her eligible partner, Luke. What happens to Bridget’s assets in these circumstances? John receives $2,000,000.00 and her fiancé, Luke, receives $2,000,000.00.[3]

  Remember that mere separation without divorce has no impact on the intestacy legislation, despite the fact that the person’s testamentary intentions are likely to have changed. What can you do to avoid these arbitrary and unintended results?  You should ensure that you obtain proper estate planning advice and have a Will that reflects your current circumstances and testamentary intentions.

  If you require assistance in relation to your estate planning arrangements, please contact the Estates Team at BAL Lawyers.

   

  [1] Administration and Probate Act 1929 (ACT) s 49 and Schedule 6.

  [2] Administration and Probate Act 1929 (ACT) s 44.

  [3] Administration and Probate Act 1929 (ACT) s 45A.

   

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  Essential Guide to Local Government Law: Competitive Neutrality for NSW Councils

  What is competitive neutrality and why is it important?

  Competitive neutrality is about creating a level playing field between in-house and external tenderers in a tender process. It aims to eliminate resource allocation distortions which can arise when public entities participate in significant business activities[1]. Competitive neutrality principles are therefore relevant when councils are undertaking a tender process and also wish to submit an in-house bid for the service. Applying competitive neutrality principles can encourage participation in a tender process. More competition generally increases the prospect of a council achieving a good value for money outcome and reduces the likelihood of a challenge to the outcome of a tender process. It is also appropriate for councils to consider the principles of competitive neutrality when they use internal cost data as a tender evaluation benchmark to ensure they are comparing like with like.

  The Competition Principles Agreement underpins the National Competition Principles. Local councils are bound by this Agreement even though they are not a party to that document[2]. The NSW Government has published three key guidance documents on competitive neutrality which are relevant to local councils:

  1. the Policy Statement on the Application of Competitive Neutrality: Policy and Guidelines Paper January 2002 (the Policy Statement);
  2. Competitive Tendering Guidelines January 1997 (the Guidelines); and
  3. Pricing & Costing for Council Businesses: A Guide to Competitive NeutralityJuly 1997 (the Neutrality Guide).

  The Policy Statement sets out the broad requirements of competitive neutrality as they apply to all government businesses at the State and Local level. The Guidelines are intended to assist local councils to decide when to engage in competitive tendering and outline the processes involved generally[3]. The Neutrality Guide is designed to assist Local Councils to apply the requirements contained in the Policy Statement to their business activities.[4]

  When should a council consider participating in a competitive tender process?

  Councils often participate in a competitive tender process to assist them to decide whether to transition from a model of public service provision to private service provision under contract. The Guidelines list a number of procurement areas in which councils regularly participate in competitive tendering. This includes waste and recycling collection, maintenance of council properties, roadworks and management of public facilities such as swimming pools, caravan parks and libraries. However, this list is not exhaustive. Depending on the in-house capabilities of the council, there may be other services for which it is appropriate that a council participate in a competitive tender process.

  When is a council required to maintain competitive neutrality?

  Under the Policy Statement, councils have an obligation to maintain competitive neutrality during a tender process for a business activity of a council in which the council also intends to submit an in-house bid.[5]

  When determining whether an activity is a business activity the Neutrality Guide requires a council to consider the nature of the activity, whether it is, or is likely to be, subject to competition from other providers and its importance to the council’s customers. Matters which indicate that an activity is not a business activity include where it is a small-scale activity included within a larger function of a council, or where it forms part of a community service function of the council. The Policy Statement identifies activities such as water supply, sewerage services, abattoirs and gas production and reticulation as business activities.

  The competitive neutrality obligations which apply to a council will also depend on the income generated (or proposed to be generated) from the business activity which is being tendered for. The Neutrality Guide imposes different obligations depending on whether or not the annual sales turnover/annual gross operating income of the business activity is over or under $2 million. The competitive neutrality obligations imposed on a procurement for a Category 1 business activity ($2 million or over) are greater than those which apply for Category 2 business procurement (under $2 million). For Category 1 business activities it is expected that the benefits of applying competitive neutrality will outweigh the costs of doing so[6]. For the procurement of a Category 2 business activity a council must still compete on the basis that they do not use their public sector position to gain an unfair advantage in the tender process, but they have flexibility in how they apply the Neutrality Guide. For example, councils have discretion to determine the extent to which the activity is separated from the other operations of the council, and need only adopt a full cost attribution where practicable.[7] For Category 2 business activities, applying the principles of competitive neutrality on this flexible basis may still be helpful to encourage competition and reduce the likelihood of a challenge to a council’s decision to award the contract to any particular tenderer.

  Implementation of competitive neutrality

  The first step is to consider when your council needs a new service, or an existing contract is coming to an end, is whether the Council may wish to participate in the tender process. It is important to identify this early in the process so that the Council can ensure that the in-house business unit is separated from the team running the tender process and that the relevant systems (such as the complaints handling system) are put in place prior to the release of the tender documents

  Where a council is participating in a tender process then steps a council can take to implement the competitive neutrality principles include:

  1. Separating the operations of the business activity from the general operations of the council. This does not mean that the council needs to establish a separate legal entity for the business, but the parameters of the business within the council need to be able to be identified. This means there needs to be an accounting and reporting framework for the business which is separate to the other activities of council and, for probity reasons, the council must be able to restrict access to tender material and documents by members of the business unit.Separating the business activity from the general operations of the council will also assist councils to identify and protect access to information under the Government Information (Public Access) Act 2009 (GIPA Act) which could prejudice the competitiveness of the business unit. Section 14 item 4 of the GIPA Act provides that there is a public interest consideration against disclosure of information if disclosure could reasonably be expected to undermine competitive neutrality in connection with any functions of an agency in respect of which it competes with any person, or otherwise places an agency at a competitive advantage or disadvantage in any market.
  2. Establishing a complaints handling system for competitive neutrality issues. Your council’s existing complaints management process may already be adequate for this purpose.
  3. Adopting a full cost attributionto the council’s provision of the service. For example, adjusting the price of the good or service in question to make allowance for taxes, the cost of capital, and any other material costs not borne by a government business purely as a result of its public ownership status for the purpose of tender evaluation. This principle is also relevant where councils use internal costing information as a benchmark to inform tender evaluation.
  4. Where the council decides that the social benefit of subsidising a good or service outweighs passing on full costs to consumers, making those subsidies an explicit transaction; and
  5. Complying with the same regulatory requirements as the private sector (which in most cases local councils are already required to do).
  6. Identifying the possibility that an in-house business unit will tender for the services in the request for tender documentation and will be taken to be a complying tender (notwithstanding that the council will not be able to comply with the contract and conflict of interest declaration requirements etc).

  Additional detail on some of these steps is set out in the Neutrality Guide. For step by step guidance to assist with your council’s next procurement, please contact Alan Bradbury or Alice Menyhart.

   

  [1]  Competition Policy Agreement 11 April 1995

  [2] Clause 7 of the Competition Policy Agreement

  [3] Competitive Tendering Guidelines January 1997 p.5

  [4] Pricing & Costing for Council Businesses: A Guide to Competitive Neutrality (July 1997) p1.

  [5]  Policy Statement on the Application of Competitive Neutrality: Policy and Guidelines Paper (June 1996 and amended January 2002) p6.

  [6]  Pricing & Costing for Council Businesses: A Guide to Competitive Neutrality (July 1997) p3.

  [7]  Policy Statement on the Application of Competitive Neutrality: Policy and Guidelines Paper (June 1996 and amended January 2002) p4.

   

   

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• 

  Capital Raising - things are about to get Mutually friendly!

  Co-operative and mutual enterprises account for approximately 8.3% of Australia’s GDP when including the member-owned super funds, and eight in ten Australians are a member of at least one co-operative or mutual business. Operating across the economy from health care to motoring services, in banking and finance and insurance services, social services to retailing, these businesses are a staple in the Australian economy.

  Historically mutuals have had difficulties in raising capital without jeopardising their mutual status. Mutual enterprises are incorporated as public companies under the Corporations Act 2001 which must have a special constitution that imports the co-operative principles and provides for one member-one vote, democratic governance and a community driven ethic. The members of mutual enterprises are its customers.

  In July 2017 the Report on Reforms for Cooperatives, Mutuals and Member-owned Firms (commonly known as the Hammond Report) was handed down. The report set out eleven recommendations which aimed to improve access to capital, remove uncertainties facing the mutual sector and reduce barriers to enable cooperative and mutual enterprises to grow.

  On 4 October 2018 the Government released draft legislation for consultation to give effect to two of the eleven recommendations by:

  1. introducing a definition of a ‘mutual entity’ into a new section 51M of the Corporations Act 2001; and
  2. amending what the trigger event is which requires a company to disclose a proposed demutualisation in Schedule 4 of the Corporations Act 2001.

  The amendments will address the lack of recognition and understanding of the mutual sector, make it easier to determine when an entity has or is intending to “demutualise”, and to allow mutual entities to raise capital without risk of demutualisation or the risks associated with a failure to adhere to the disclosure provisions (which are civil penalty provisions).

  To date, mutual enterprises have been restricted in the ways they could raise capital to avoid triggering the demutualisation provisions. The Corporations Act 2001 currently provides that if there is a proposed constitutional change or share issue, which may vary or cancel a member’s rights in respect of shares, then the company must disclose ‘the proposed demutualisation’ (even if that may not be the intention of the company).

  The proposed legislative amendments would make it clear that the disclosure provisions are only triggered if a constitutional change would result in a mutual entity no longer being a ‘mutual entity’. Provided the mutual entity retains its “one member-one vote” requirements, it remains a mutual entity.

  While there are still restrictions on the process of capital raising, as Melina Morrison, chief executive of the Business Council of Co-operatives & Mutuals has said, “this will ensure there is genuine competition for member-owned business to compete with the big corporates and create real competition to benefit all Australians”.

  If you have any questions about the proposed changes or mutual enterprises, please get in touch with our Business team.

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• 

  Significant Focus on Digital Assets & Estate Planning in Australia

  The increasing importance of digital assets to an individual’s estate planning has been recognised by the NSW State Government. The NSW Attorney General has asked the NSW Law Reform Commission to review and report on the laws that effect who can access a person’s digital assets after they die or when they become incapacitated, and in what circumstances. The purpose of the Commission’s report is to consider whether NSW needs new laws in this area and if it does, what should be included in those new laws.

  It is evident from this development that the significance of considering digital assets as part of an individual’s estate planning continues to be an issue that is front of stage.

  After requesting preliminary submissions from interested parties, the Law Reform Commission has published a Consultation Paper[1]. This paper, in addition to outlining how the Commission intends to conduct the review, also describes the current laws that impact access to digital assets in circumstances where a person is incapacitated or is deceased. The very apparent and extraordinary increase in the use of digital assets by many of us has clearly motivated these questions being referred to the Law Reform Commission.

  The paper also outlines the approaches that have been taken in other jurisdictions including the United States, Canada, the European Union and the Council of Europe.

  The Commissioners have noted that their preliminary view is that there are substantial policy grounds for legislative reform to govern when third parties can access a person’s digital assets upon death or incapacity.

  The timing of the comparable legislative reforms in other jurisdictions is relatively recent. For example, the Uniform Law Commission in the US adopted the Uniform Fiduciary Access to Digital Assets Act in 2014. It is encouraging that an Australian jurisdiction is now embarking on a review of the relevant laws in Australia.

  In response to the suggestion that it is an area of reform that should be conducted on a national level rather than by a State Government, the Consultation Paper notes that national coverage can be achieved where one State or Territory enacts model provisions that are adopted elsewhere. The approach of each jurisdiction following suit may take significant time and national coverage is not guaranteed.

  Digital Assets

  The Consultation Paper also includes an overview of what is included in the term digital assets.[2] The overview is not intended to be exhaustive but confirms the concept of digital assets includes the following:

  • Personal assets such as email accounts, text messages, social media profiles and accounts and similar accounts;
  • Financial assets such as online bank accounts and cryptocurrency;
  • Business assets such as online store accounts (such as eBay);
  • Intellectual property rights that are attached to assets such as domain names and images;
  • Loyalty program benefits such as frequent flyer points;
  • Sports gambling accounts; and
  • Online gaming accounts.

  In addition to being a useful reminder of the extensive nature of the term digital assets, the overview in the Consultation Paper confirms the proposed reforms should extend to all categories of digital assets.

  The focus on Access to Digital Assets

  It is clear from the above that the question being asked is in relation to access of those digital assets upon death or incapacity. The Consultation Paper also identifies the importance for this right of access for the relevant people including executors, attorneys, financial managers and personal representatives generally. The paper confirms these reasons[3] as follows:

  • Financial value. For example, the deceased person may have significant funds in a bank account or a bitcoin account, or there may be other social media accounts which generate value. There may even be a valuable copyright interest in a literary work that only exists online;
  • Sentimental value. This reason will be relevant where a deceased person has family members that have an attachment to electronic photos or messages on social media such as Facebook;
  • Loss of paper trails. Access to certain account statements will be important for personal representatives to manage business accounts or personal banking accounts of the deceased or incapacitated person;
  • Protecting privacy and confidentiality. Often online accounts will contain personal information which a personal representative will look to protect by either closing or deleting the relevant account; and
  • Reducing the risk of identity fraud. Where the relevant individual is not monitoring their online accounts, it clearly will be more open to hacking by others.

  Guidelines for current practice

  The Consultation Paper notes the growth in the creating of digital asset registers[4] and digital asset inventories especially as part of the estate planning process.

  As the Commissioners note in the Consultation paper, there are currently some significant limitations with how individuals can successfully deal with their digital assets as part of their estate plan. This point is important for estate planning practitioners and their clients.

  The existing laws effecting third party access to digital assets (including for the nominated representatives) as noted in the Consultation Paper[5] include the following:

  1. The definition of property in succession laws may not extend to the rights that are commonly referred to as digital assets;
  2. The legislation dealing with the administration of an estate does not specifically cover access by the executor to digital assets of the deceased. Without the required access to these assets there is a real problem for an executor or administrator being able to demonstrate that they have fully discharged their responsibilities in respect of the administration of the estate;
  3. The service agreements of internet and social media platform providers often maintain the intellectual property rights to material that form part of the digital asset. In particular, on the death of the owner of the account, there is no right to transfer any rights to the material to another party (the rights are often non-transferable);
  4. Existing criminal law legislation makes it an offence for a person to cause any unauthorised access to or modification of restricted data held in a computer.[6]As a result, an executor who accesses a computer upon death or incapacity of a person when they should know that they do not have clear authorisation, is at risk of having committed a criminal offence. As indicated in the Consultation Paper, the scope of the offence is quite broad as there is no requirement for intention to commit or facilitate the commission of the offence. There is no defence of lawful excuse in these circumstances. It is quite likely that the executor or administrator will know, or should know that the access to or modification of the material on the computer is unauthorised. The phrase ‘unauthorised access’ is defined in the legislation in broad terms.

  Preliminary suggestions for reform

  The Law Reform Commission also identifies some difficult situations for the State Government to address. For instance, in relation to the service agreements where the service provider is a foreign entity, the agreement will often nominate the foreign law as the proper law for dispute resolution rather than a law of Australia even if the client signing the service agreement is in Australia.

  The paper foreshadows that the final report may include a legislative approach that tries to address some of the issues referred to above. As part of that suggestion, it identifies some examples of what has been done overseas and potential approaches.

  As the paper is a preliminary report with a final report to follow after further consultation, at this stage these suggestions are only preliminary ideas.

  Importantly, in respect to the definition of a digital asset, the paper makes the following comment:

  The definition of digital asset should be defined in a way that is sufficiently broad to cover the types of assets currently in existence, but also flexible enough to encompass relevant classes or types of assets that may come into existence in the future.[7]

  At the end of the paper, there are a number of suggestions in relation to potential reforms. The following suggestions by the Commissioners are particularly relevant to the area of estate planning:

  • To determine which third parties should have access rights to the assets;
  • Who should have the authority to decide what happens to a person’s digital assets;
  • What should happen if the relevant parties disagree;
  • To clarify how the wishes of a person should be taken into account when deciding about their digital assets where upon death or incapacity; and
  • To be able to freeze or suspend a person’s digital assets after their death or incapacity to avoid issues of identity theft.

  The Consultation Paper produced by the NSW Law Reform Commission is an excellent summary of the issues and makes some thought provoking suggestions as to the reform.

  There is already eager anticipation by many for the release of the final report by the Law Reform Commission and the discussion that will follow the release of the final report.

  Written by David Toole, Legal Director and Ellen Bradley, Senior Associate. To create or review your will and estate plan, please contact our Estate & Business Succession team

   

  [1] Consultation Paper 20 New South Wales Law Reform Commission Access to digital assets upon death or incapacity

  [2] Consultation Paper 20 New South Wales Law Reform Commission Access to digital assets upon death or incapacity , August 2018 (the Consultation Paper) at page 4

  [3] Consultation Paper at page 4

  [4] Consultation Paper at page 9

  [5] Consultation Paper from pages 11 to 24.

  [6] Criminal Code ((Cth) s478.1 and Crimes Act 1900 (NSW) s308H

  [7] Consultation Paper at page 35

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• 

  Assignment of Lease: Dealing with an initial request

  A lease grants a tenant exclusive use to a premises for a period of time. Often circumstances change within that period of time and lead to the tenant seeking an assignment of the lease to a new party. This is often as a result of the sale of the tenant’s business.

  Assignments of lease are not at all uncommon, however there are a few things to remember to ensure that they run smoothly and both parties comply with their obligations under the lease and the relevant legislation.

  From a tenant’s perspective, it is important to be aware of what you are required to do under your lease when seeking the consent of your landlord to an assignment. The Leases (Commercial and Retail) Act 2001 states that, before requesting the landlord’s consent to an assignment of lease, a tenant must give any proposed new tenant a copy of the disclosure statement (if any) that was given to them in relation to the lease.

  It shouldn’t be taken for granted that a landlord will consent to an assignment, here in the ACT the legislation allows a landlord to request particular information on a proposed new tenant and, if that information is not satisfactory to the landlord, they are able to refuse to provide consent. Further information that the landlord can request may include (but is not limited to):

  • the financial position of the prospective tenant;
  • information in respect of the tenant’s prospective ability to conduct the nominated business; and
  • information about what the tenant intends to use the premises for.

  Once the landlord obtains this further information they are able to make an informed decision and provide their consent, or not. However, it should be noted that a landlord is not able to unreasonably withhold consent. The refusal of consent can often cause dispute between the parties which may be drawn out and costly to both parties, so it is important to obtain the appropriate legal advice early on in the process.

  From a landlord’s perspective, arguably the most important factor when dealing with assignments are the time frames stipulated under the Leases (Commercial and Retail) Act 2001. If a tenant requests an assignment of lease, the landlord must either consent or refuse within 28 days of receiving the request – or within 21 days of receiving further information or documents (the request for which must be made within 14 days of receiving the request for assignment).  If a landlord does not comply with these strict timeframes they can be deemed to have consented to the assignment of lease.

  In order to ensure compliance with the legislation and your obligations under a lease, we recommend that you contact our office as soon as an assignment of lease is considered. We can assist in managing the strict timeframes and help you achieve a smooth transaction, resulting in a positive outcome for all involved.

  For more information, please contact our Leasing Team.

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• 

  The Current Law regarding Death, Organs, Bodies, Burials and Sperm

  What better time to write about organs, bodies and burials than now as we approach Halloween. In June last year I wrote an article which looked at the then recent case of Darcy v Duckett – a case which examined the Common Law principles regarding the right to dispose of a body as well as Court’s regard to traditional Aboriginal Law.

  In this article I wanted to give a quick summary of the law as it stands today with regard to death, organs, bodies, burials and tissue transplantation (in light of the recent landmark Queensland case of Re Creswell [2018] QSC 142)

  Basic principle

  The basic principle that there is no property in a body (Doodeward v Spence (1908) 6 CLR 408) means that there can be no ownership in a corpse. As such, one cannot ‘dispose’ or direct what will occur with their body after death.

  The Exception

  There is an exception to the basic rule (outlined by Griffith CJ in Doodeward) – where a person has, by the lawful exercise of work and skill, dealt with a human body (or body part) in such a way that it has acquired some attributes differentiating it from a mere corpse awaiting burial and the body (or body part) is displayed in the public interest, then the body (or body part) can be considered property capable of being disposed of.

  In the case of Doodeward, a stillborn baby with two heads was preserved by a doctor who displayed it in his office (this was a 1908 case). The Doodeward exception would apply to say, a mummy that is displayed in a museum.

  Burial and Funeral Instructions

  Given the basic principle above, a person’s wishes with respect to the disposal of their body is not legally binding (Smith v Tamworth City Council (1997) 41 NSWLR 680)). Whatever funeral and burial instructions you communicate via your Will, personal documents or verbally can be disregarded at law.

  Who has the right to dispose of a person’s body after death?

  Where there is a Will, the executor (and if there is more than one, then the executors jointly unless contrary intention is expressed in the Will) has the right and responsibility to arrange for the disposal of the deceased person’s body.

  Where there is no Will, then the person with the highest rank to apply for a Grant of Representation in that jurisdiction has the same rights as an executor.

  (references contained in previous article)

  The person with the right to dispose may do so in any manner they choose provided it is not unlawful or unreasonable (Leeburn v Derndorfer (2004) 14 VR 100, 104), or exercised in a way that prevents family and friends from reasonably and appropriately expressing affection for the deceased (Smith v Tamworth City Council (1997) 41 NSWLR 680, 694.)

  Where more than one person has an equal right to dispose of the body

  The Court will generally decide a conflict between them in a ‘practical way paying due regard to the need to have a dead body disposed of without unreasonable delay, but with all proper respect and decency‘ (Calma v Sesar (1992) 106 FLR 446 at [14])

  The practicalities of burial without unreasonable delay will prevail.

  Cremation

  A person can be cremated in any outfit but pacemakers and other such devices must be removed from the body before cremation. The body must be contained in a coffin, casket or some other container and must be cremated one body at a time.

  Cremation can take one to two hours. Once cooled, the ashes are packed into a plastic container and a name plate is attached before being stored ahead of collection.

  In the ACT, the operator of the crematorium must give the ashes to the person who applied for the cremation (which may be at odds with the common law) (Cemeteries and Crematoria Regulation (ACT) 2003 Reg 10).

  In the ACT, a statement by a person that his or her body is not to be cremated is legally binding. An injunction or other relief can be obtained against the operator of the crematorium if necessary (Reg 8).

  Do Burials have to be at the Cemetery (and Cremations at the Crematorium)?

  We have three cemeteries in the ACT – Woden, Hall and Gungahlin Cemeteries.

  It is an offence (which can be punishably by imprisonment) to bury human remains other than at a cemetery unless the Minister’s prior written permission has been obtained (Cemeteries and Crematoria Act (ACT) 2003 Section 24)

  Cremations can only occur within the crematorium (Section 25 of the Act).

  What can you do with the ashes once they are collected?

  Ashes can be:

  • Buried in a cemetery in a small plot, or placement in columbarium or niche wall;
  • Preserved in an urn or kept at home in some other favourite spot; or
  • Scattered on private land, beach, river, public park, at sea or some other place that is significant to the deceased person or their family.

  If ashes are scatted on private land, permission must be obtained by the owners of the private land.

  If the ashes are scattered in a public park or other public place, permission may need to be obtained from the local council or park. Councils and local government may set a place and time when these activities can be undertaken and can impose other restrictions.

  You may want to carefully consider where you scatter the ashes and in particular, to scatter them at a place that you can revisit later (e.g. if ashes are buried in your backyard and you later move, you may not be able to visit the site in the future).

  Ashes can be scattered at sea if permission of the vessel operator is obtained.

  Taking ashes overseas

  Ashes can be taken overseas but it is good practice to:

  • contact the consulate of the country the ashes are being taken to in order to comply with the local requirements; and
  • Carry the ashes in a sealed contained and have a copy of the death certificate of the deceased person along with a copy of a statement from the crematorium identifying the deceased person and where the body was cremated (in case you get picked on by customs!)

  Can you bury a body in a vault or tomb?

  The short answer – yes! But the operator of the cemetery must not bury human remains in a vault or tomb unless the body has been embalmed and is in a selected corrosion resistant mental container (Reg 10)

  Removal of tissue, organs and sperm from the body

  In the case of Re Creswell which was handed down earlier this year in Queensland, an application made by a de facto partner to access the deceased sperm the day following his death was granted by the Queensland Supreme Court. His sperm was removed at the Toowoomba Hospital by medical staff and preserved at the Queensland Facility Group Laboratory.

  Subsequent to the application for removal of the sperm, Ms Creswell applied to the Queensland Supreme Court seeking a declaration that she be entitled to possession and use off the sperm in assisted reproductive treatment.

  The Respondent to the Application, the Attorney-General for the State of Queensland, neither opposed nor consented to Ms Creswell’s application.

  It was held that:

  1. The removal of sperm for use in assisted reproductive technology was for a medical purpose – pursuant to section 22 of the Transplant and Anatomy Act 1979 (Qld) (note that section requires the deceased not to have expressed an object to the removal of his sperm)
  2. Once removed, the sperm was property capable of possession given that work and skill was exercised in relation to its removal, separation and preservation (note the case of Doodeward above); and
  3. Discretionary factors including best interest of the child, whether Ms Creswell’s decision was a rational one and community standards, weighed in favour of making the declarations sought by Ms Creswell and the declarations sought were granted.

  In the ACT, a distinction is made in the legislation (Transplantation and Anatomy Act 1978) with regard to the removal of tissue during lifetime as opposed to after death.

  In both cases, tissue can be removed where the person expressed their consent for the removal of the tissue for the purposes of donation to the body of another living person, or for the purposes of other therapeutic or medical or scientific purposes.

  However, the definition of ‘Tissue’ in the legislation does not include spermatozoa (sperm).

  In the ACT case of Roblin v the Public Trustee for the Australian Capital Territory and Labservices Pty Limited [2015] ACTSC 100, the deceased had consented to the removal of his sperm during his lifetime. His sperm was collected and stored cryogenically during his lifetime.

  He subsequently died intestate (without a Will) and his wife brought an Application seeking a declaration from the ACT Supreme Court to have the sperm form part of his estate where it would be received by his wife. The Court held that the sperm constituted property of the estate where it was passed to the wife in accordance with the intestacy laws.

  Written by Golnar Nekoee, Director, Wills and Estate Planning

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• 

  Technology and Witnessing Documents

  As advancements in communication technologies are increasingly bringing people on the other side of the world into our living rooms or office spaces, there is new uncertainty about the extent to which the law is adaptable. One example is the witnessing of documents through electronic means such as Skype or FaceTime. Generally, legislation refers to the need for ‘presence’ without necessarily providing whether virtual presence is sufficient for witnessing purposes. While, for all intents and purposes, Skyping or FaceTiming someone signing a document has the same effect as being physically present, the law generally looks upon both situations differently.

  The rationale for the witnessing requirements of certain documents is to reduce the risk of people entering into fraudulent agreements without consent. Ensuring that a document is appropriately witnessed is important for both the signor and witness. The signor may end up with an invalid legal agreement and the witness may be subject to a fine if they fail to comply with his or her obligations. For the most part, witnesses need only be over 18, of sound mind, and not subject to a conflict of interest. In some instances, however, the witness will need to be authorised person who is listed under the Statutory Declarations Regulations 2018 (Cth) such as a doctor, pharmacist or bank officer.

  In keeping with the rationale of witnessing requirements, the Attorney-General’s Department provides that a document cannot be witnessed via webcam or Skype on the grounds that the person witnessing the signing must be able to authorise and validate the identity of the declarant. This may seem out of step with modern technology that would enable a witness to identify the signor as they sign the relevant document. However, the New South Wales Law Reform Commission, when considering the joint signing of wills, stressed that physical presence allows for witnesses to pick up on facts relevant to issues of the testator’s capacity, understanding or freedom from pressure. The only jurisdiction that has shown any movement toward accepting witnessing via electronic means is the United Kingdom where, in the case of Re ML (Use of Skype Technology) [2013] EWHC 2091, the Court allowed the signing of adoption consent forms to be witnessed via Skype. However, it is important to note this ruling was specific to the facts of the case and has not yet been heavily relied on.

  Although it may seem that the law is lagging behind the realities and opportunities presented by modern technology, it remains the case that in Australia documents must be witnessed physically rather than virtually for the time being.

  If you require legal advice regarding contracts or witnessing documents, please contact us.

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• 

  Essential Guide to Local Government Law: Drafting conditions of development consent

  This edition of our Essential Guide addresses how to draft conditions of development consent that are clear, valid and enforceable under the Environmental Planning and Assessment Act 1979 (the Act).

  Background

  Section 4.17 of the Act sets out the types of conditions that may be imposed by a consent authority.

  A condition can be imposed under s.4.17 if it:

  • relates to any matter referred to in section s.4.15(1) of the Act of relevance to the development the subject of the consent;
  • requires the carrying out of works relating to any matter referred to in section 4.15(1) applicable to the development (whether or not on land to which the application relates)
  • requires the modification or surrender of an existing development consent or existing use right;
  • requires the modification or cessation of development (including the removal of buildings and works) regardless of whether it is on the land to which the development application relates
  • limits the period during which development may be carried out;
  • modifies details of the development, the subject of the consent;
  • is authorised to be imposed under a contributions plan.

  How to ensure conditions are valid

  The first step is to ask whether the condition is of a kind that may be imposed by s.4.17 of the Act. If it is not, the condition should not be imposed.

  If the condition is a condition which falls within the scope of s.4.17, the condition also needs to satisfy the ‘Newbury test’. This test was developed by the House of Lords in England in Newbury District Council v Secretary of State for the Environment (Newbury).[1] The Newbury test is regularly applied by the Court when deciding whether a consent condition has been validly imposed. It has three limbs:

  1. Will the condition be imposed for a planning purpose?
     • ‘Planning purpose’ is generally given a wide interpretation, having regard the matters listed in s.4.15 of the Act. If a condition can’t be related to one or more of the matters for consideration in s.4.15, it may not be a condition that can validly be imposed.
     • For example, in Hutchison 3G Australia Pty Ltd v Waverley Council,[2]the Council imposed a condition requiring the consent holder to provide an indemnity to Council. This condition was determined not to be for a planning purpose.
  2. Does the condition fairly and reasonably relate to the proposed development?
     • A condition will ‘fairly and reasonably relate’ to the proposed development if the condition is not simply justifiable as one which a reasonable planning authority could impose but one which is fair and reasonable in the circumstances of the case[3];
     • For example, in Dogild P/L v Warringah Council[4]the Council had imposed a condition on a development consent for the construction of a four-storey mixed residential and commercial development requiring the creation of a right of way to provide rear access to the development site and seven other adjoining and adjacent properties. The condition was in accordance with a long standing policy of the Council to create rear lane access to the properties to provide improved access for garbage and delivery vehicles. The Court held that, while the condition had a clearly identifiable planning purpose, it did not fairly and reasonably relate to the development for which consent had been sought but was imposed to further the Council’s policy of providing rear access to properties in the vicinity of the development site;
  3. Is the condition so unreasonable that no reasonable planning authority could impose it?
     • This is sometimes described as ‘manifest unreasonableness’ and is a very high threshold. Only rarely is it met.
     • One example is the Dogild decision referred to above. In that case the Court had already found that the condition did not fairly and reasonably relate to the proposed development. It went on to say, however, that despite the stringent and exceptional nature of the ‘manifest unreasonableness’ test, it thought the burden imposed by the condition requiring creation of the right of way was so great that the condition failed this test too.
     • This test goes to the legal validity of the condition – not whether, as a matter of planning merit, the condition is reasonable.

  If the answer to the first or second limb of the Newbury test questions is ‘no’, or the answer to the third limb is ‘yes’, the condition will be liable to be set aside, if challenged.

  Conditions should be clear, certain and unambiguous

  A condition that is vague or uncertain will be difficult to enforce and may be invalid. Issues also arise when a condition requires a further discretionary decision of the consent authority to be made when the condition does not express an outcome or objective which needs to be achieved and clear criteria against which achievement of the outcome or objective is to be assessed.

  To avoid these situations, a condition should, where possible, identify the following:

  • what action must be carried out;
  • who is responsible for carrying out that action;
  • when the action must be done; and
  • how the action is to be done (e.g., to what standard?).

  Deferred commencement conditions

  Under s.4.16(3), a consent authority can impose a condition that defers the operation of the development consent until the applicant has satisfied the authority of certain things. If a condition purports to do so, it must clearly be labelled as a ‘deferred commencement’ condition.

  When imposing a deferred commencement condition requiring the submission of further information, the condition should make it clear not only that the further information must be provided within the specified timeframe, but also that the information must be determined by the consent authority to be satisfactory.

  A deferred commencement condition should not be imposed as a means to obtain additional information from an applicant about the likely impacts of the development. The likely impacts of the development need to be considered prior to the granting of consent. A failure of the consent authority to properly consider a likely impact of the development at the time the consent is granted will render the whole consent liable to be set aside, if challenged.

  For further information about, or assistance with, drafting conditions of development consent, please contact Alan Bradbury or Andrew Brickhill

  The content contained in this guide is, of course, general commentary only. It is not legal advice. Readers should contact us and receive our specific advice on the particular situation that concerns them.

   

  [1] [1981] AC 578.

  [2] [2002] NSWLEC 151.

  [3] Western Australian Planning Commission v Temwood Holdings P/L (2004) 221 CLR 30 [155] per Callinan J.

  [4] [2008] NSWLEC 53.

   

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• 

  Blockchain: The Basics

  If we had a Bitcoin for every time we heard the word “blockchain’, we’d be (virtually) rolling in it.

  Distributed Ledger Technology, or DLT, has taken the commercial world by storm, but what is it? And what legal issues might arise from a technology that is poised to completely revolutionise the way we transact with one another?

  Blockchain

  

  To keep it relatively simple, ‘blockchain’ refers to a list of records or transactions that are linked and secured in ‘blocks’. Each new piece of information is added to the end of the list (producing a continuously growing chain) in a way that is instantaneous, permanent and irreversible.

  The information is stored on a ‘distributed ledger’, which means that it is shared across the entire network of participants, rather than in a centralised place managed by a single administrator. This method of storage ensures the quality and security of the data, as any update to the ledger requires the consensus of the majority of participants (or ‘nodes’). If consensus is reached, the latest, agreed-upon version is saved on every node, instantaneously and simultaneously.

  

  As per the image on the left, each new block of information is added to the chain of previous transactions, containing a unique encoded fingerprint, as well as the fingerprint of the previous block.

  The benefits of this ever-growing chain are that each block is an accurate, instantaneous and time-stamped record of a transaction. Since every participant in the network verifies a transaction, there is an immutable record that can’t be tampered with later on. Moreover, public blockchains (think Bitcoin) are easily and widely accessible to anyone with a computer.

  Smart Contracts

  For our purposes, one of the most interesting uses of blockchain technology is the smart contract. Although these contain a set of rules and consequences, just like a traditional contract, it consists of a set of coded instructions that self-perform when certain pre-set criteria are met. In other words, the contract executes itself. Like any blockchain, actions cannot be completed until validated by other participants in the network.

  As an example of how smart contracts work in practice, the Commonwealth Bank of Australia and Wells Fargo completed the first cross-border transaction between banks using blockchain technology in 2016. An Australian cotton-trader purchased a shipment of cotton from Texas on a blockchain platform. Ordinarily, this trade would have relied on an import letter of credit between banks to guarantee payment on arrival, which would have taken weeks. However, a smart contract embedded into the blockchain automatically triggered instantaneous payments when the cargo reached certain geographic locations.

  Keeping the law on its toes

  Whilst blockchain and smart contracts are exciting developments for the efficiency of commercial dealings, there may be some significant legal consequences. For example, the uptake of blockchain technology may pose new challenges for companies in complying with applicable data protection laws, with the distributed nature of blockchain making some kinds of data breaches harder to predict, detect and manage.

  More fundamentally, however, the use of smart contracts sits somewhat uncomfortably with some well-established and highly subjective doctrines of contract law, posing novel challenges for lawyers and businesses alike.

  Over the coming months, our blockchain article series will address some of the various legal implications and considerations arising from blockchain use. Although there are some complex challenges ahead, the use of blockchain technology presents some unique and exciting opportunities for businesses, which we will also explore in our upcoming articles.

  If you’d like to discuss how distributed ledger technologies may impact your business, feel free to get in contact with Mark Love in our Business team.

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• 

  Business Breakfast Club October Summary - Discharging your Director's Duties: Keeping it Legal

  This month at Business Breakfast Club, we discussed the types of matters directors should be contemplating when making decisions, and we explored some recent cases around how far directors’ duties may extend including where a failure to fulfil duties becomes criminal. Katie Innes and Shaneel Parikh shared some of their insights on the topic.

  Directors Duties Generally

  Directors are held accountable to a number of duties under the Corporations Act 2001 or, if you are a director of a charitable organisation, duties under the Australian Charities & Not-for-Profit Commission Act 2012. Principally among these duties is the requirement that directors exercise their powers and discharge their duties with the degree of care and diligence a reasonable person would exercise in their position. Directors must actively inform themselves about the subject matter of the decision, must not have a material personal interest, and must make the decision in good faith and for a proper purpose.

  When inviting people to become directors of a company, the Board should comprise of individuals who have appropriate skills and knowledge relevant to the company and those invited individuals should inform themselves about the company and its business and whether they can contribute meaningfully to the decision making process. It is not enough to delegate the decision making power or to rely on external advisors without question once you are appointed. By making uninformed decisions about the affairs of a company, directors are exposing themselves to serious risk and personal liability.

  Stepping Stone Liability

  The ‘stepping stone’ approach to director’s liability is, on its face, simple. The first stepping stone involves a company breaching the Corporations Act or another law. The establishment of corporate fault then leads to the second stepping stone: a finding that the director has breached their duty of care for failing to prevent the company’s contravention.

  To date, most cases involving stepping stone liability have been in relation to breaches of the ASX continuous disclosure regime by public companies. ASIC have used the stepping stone approach to find liability where company conduct has fallen below acceptable community standards, despite not necessarily causing loss to investors. An example of this is the proceedings brought against James Hardie Industries that concluded in 2012.

  Interestingly, what recent case law has suggested is that a company does not need to have been found to have breached a provision of the Corporations Act or any other law in order for directors to be found liable for a breach of their duties under stepping stone liability; it may be enough that the director has unreasonably or intentionally committed acts which are extremely likely to involve a serious breach of the law. It is also important to understand that where a company has breached the law, a breach of duty is not presumed. It requires a consideration of whether the director has exercised reasonable care, to ‘prevent a foreseeable risk of harm to the interests of the company‘.

  For more information, please contact either Katie Innes. The next Business Breakfast Club will be on Business Succession Planning and will take place on 9 November 2018. If you would like to attend, please contact us.

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• 

  Potato, Potahto; Tomato, Tomahto: an assignment and a novation, the same thing - right?

  Okay, you’ve become a party to a contract and that contract requires you to pay money; but then you sell your business (or whatever) and you ‘assign’ the contract â†’ you are free and clear, right? Wrong!

  There are a number of reasons why you might want to transfer part or all of an existing contract to another party; it could be part of a sale of business, the contract might be valuable or you might not be able to perform the work anymore. As part of that process, the terms ‘assignment’ and ‘novation’ are often bandied about interchangeably. Unfortunately, they do not mean the same thing, and it is actually important to understand the difference so you get the outcome you are bargaining for.

  At the most basic level:

  • an ‘assignment’ transfers the rights and benefits of the contract, but does not free you from the obligations; in that respect the original agreement remains unchanged; and
  • a ‘novation’ is where you want to transfer both the rights and obligations under an agreement; it ends both your benefit and your burden (unless the ‘new’ contract (ie; ‘novation’) states otherwise).

  Looking at some of the important differences between the two:

  Assignment

  If you want to keep performing your obligations under the agreement but give away some rights, you should seek an assignment. In simple terms, you cannot ‘assign’ your obligations or liabilities. The original agreement will otherwise remain unchanged and will remain enforceable against you.

  With an assignment, you will remain a party to the agreement and liable for performance under the contract. Even if you have contracted with some other person to perform the contract on your behalf, unless the terms of the original contract require it (including through some implied term that you had been engaged to perform the contract personally), there is typically no requirement to obtain consent of the other parties to achieve an assignment. But there is a requirement to give the other party ‘notice’ of the assignment, so practically speaking most people either seek consent or there are terms drafted into the contract that set out when an assignment is allowed and on what conditions.

  Assignments must be documented in writing to clearly identify what rights are being transferred; they must be unconditional and the assignment, to be effective, must be ‘notified’ to the other contract parties.

  Novation

  If you want to transfer all of your rights and be relieved of all your obligations under a contract (essentially removing yourself from the contract, then you must do so through a ‘novation’. A novation ends the original contract between the original parties, and creates a new contract; this is usually achieved through a single deed of novation. The novation has the effect of substituting one party for another without necessarily changing the rights and obligations under the original contract (although such changes might be agreed).

  For a novation, given you are trying to remove yourself from a contract, consent is an essential element. All parties (new and old) must consent.

  Unlike an assignment, a novation can be in writing or can be oral.

  A court will take into account what the parties have said to each other, their conduct and course of dealings in determining whether there was an agreement to novate or simply and attempt to assign or something altogether different (perhaps a subcontract? or an agency?).

  Proving any form of contract requires clear proof of terms and intention. Proving that there was an oral agreement to ‘novate’ can be a lengthy and expensive process, as the reason you might need such proof will be for reason that the other party refuses to acknowledge that is had agreed to what you are asserting, thus claiming you are still bound by the contract. Proving terms and intention is best done through a written document.

  Similarities

  Both an assignment and a novation will ‘transfer’ rights under a contract. A document might be called ‘an assignment’ but if it seeks to transfer all rights and obligations of a party, to effectively substitute one party for another and if all parties have consented to that substitution, then, despite the name, it may actually be a ‘novation’.

  As you can see, despite the similarities, there are fundamental differences between assigning and novating. Arm yourself with this knowledge before you start the process of ‘assigning’ or ‘novating’ to ensure you are not giving away too little or too much.

  A short example: I have used finance to buy my six tractors; I sell the tractors and assign the finance with the consent of the financier. If the assignment is in not writing, then there is no ‘assignment’ at all. If there is an ‘assignment’, I am still liable to the financier, but now so is the assignee.

  If you have any questions about how an assignment or novation works, please get in touch with our Business team.

   

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  Launch of ACT Law Handbook & Legal Aid ACT Chat Line

  On the 10^th October, John Wilson, Managing Legal Director in our Employment section, and James Connolly, Law Clerk, attended the launch of the ACT Law Handbook and the Legal Aid ACT Chat Line. Both initiatives reflect ongoing attempts to make legal services and legal terminology more accessible to the general public as the rate of people seeking legal advice continues to increase. These initiatives complement the in-person services that Legal Aid ACT already provides noting that there are some who will be unable to readily access either initiative and will rely on in-person services.

  

  The event was hosted by Legal Aid ACT and launched by the ACT Attorney-General, Gordon Ramsey MLA. In the Attorney-General’s remarks he thanked all those who had contributed to the ACT Law Handbook, many of whom were present. BAL Lawyers for its part contributed the employment section of the Handbook which is now accessible through Austlii and the Legal Aid ACT website. BAL Lawyers’ contribution in this space reflects the high calibre of employment legal work that the firm provides to the community.

  The handbook is available at Legal Aid ACT

   

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  BAL Estates Team Listings in Doyles Guide 2018

  The 2018 Doyles Guide listing of leading Wills & Estates Litigation and Wills, Estates and Succession Planning lawyers and law firms has just been released and details solicitors and law firms practising within those areas who have been identified by their peers for their expertise and abilities.

  Congratulations to our Estates Team for their 2018 Doyles Guide listings.

  Keith Bradley AM

  • Preeminent, Wills & Estates Litigation Lawyers – Canberra
  • Leading, Wills, Estates & Succession Planning Lawyers – Canberra
  • Recommended, Wills & Estates Litigation lawyers – Australia

  David Toole

  • Recommended, Wills & Estates Litigation Lawyers – Canberra
  • Recommended, Wills, Estates & Succession Planning Lawyers – Canberra

  Golnar Nekoee

  • Recommended, Wills & Estates Litigation Lawyers – Canberra
  • Recommended, Wills, Estates & Succession Planning Lawyers – Canberra

  Ellen Bradley

  • Rising Star, Wills, Estates & Succession Planning – Australia

  BAL Lawyers has been listed as a First Tier Firm in Wills & Estates Litigation Law Firms and Wills, Estates & Succession Planning Firms – Canberra.

  Full listings for all categories can be found here.

  Our Estates Team take a holistic approach to estate planning, considering your broader personal, family and financial circumstances to ensure your wealth is passed onto the people you wish to benefit in an efficient and tax-effective way.

  If we can assist you with a making a will, appointing a power of attorney, estate litigation or helping you set up a business succession plan, please contact us.

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  Business Breakfast Club September Summary - The Phoenix and the Regulators: A Liquidators Perspective

  This month at Business Breakfast Club, Lachlan Abbott and Fergus McFarlane of Ernst & Young provided the liquidator’s perspective on legal and illegal phoenix activity. Owing to growing concerns around phoenix activity there has been an increase in regulatory attempts to deter and disrupt illegal phoenix activity.

  What is Phoenix Activity?

  Phoenix activity involves registering a new company to take over the failed or insolvent business of a predecessor company. This is legitimate where there is genuine company failure and liquidation. Directors may responsibly manage a company, but the company may be unable to pay its debts. If the directors then hand the insolvent company over to a liquidator and register a new company after liquidation to continue the previous business, this will constitute legal phoenix activity.

  What is Illegal Phoenix Activity?

  Phoenix activity involves registering a new company to take over the failed or insolvent business of a predecessor company. This may constitute a legitimate business restructure where there is genuine company failure and the assets are sold at market value and in the best interests of creditors

  Directors may responsibly manage a company, but the company may still be unable to pay its debts. If the directors then hand the insolvent company over to a reputable liquidator and the assets are sold at or above market value (before or after liquidation) this would normally constitute legal phoenix activity, even if the assets are sold to a related party.

  Regulatory Approaches for Reform

  In the 2018-19 Budget, the Government announced several proposed reforms to corporations and tax laws to deter and disrupt illegal phoenix activity. The draft legislation includes reforms to:

  • make it an offence for directors to engage in transfers of company assets that prevent, hinder or significantly delay creditors’ access to those assets;
  • make it an offence for pre-insolvency advisers and other facilitators of illegal phoenix activity to incite, induce or encourage a company to make these creditor-defeating transfers of company assets;
  • prevent directors from backdating their resignations to avoid personal liability;
  • prevent sole directors resigning and leaving a company with no director;
  • extend the director penalty provisions to make directors personally liable for their company’s GST and related liabilities;
  • expand the ATO’s powers to retain refunds where there are outstanding tax lodgements;
  • introduce a Director Identification Number (DIN) to allow enforcement agencies to verify and track the current and historical relationships between directors and the entities they are associated with; and
  • restrict the voting rights of related creditors of the phoenix operator at meetings regarding the appointment or removal and replacement of an external administrator.
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  Baiting Buyers: The Risks of Underquoting in the ACT

  You’d be hard pressed to find a real estate agent who is unfamiliar with the term ‘underquoting’. Indeed the practice of underquoting has become a significant problem in NSW and Victoria, where the average difference between the sale price and the agent’s quote in some suburbs can be as much as 30%.[1] Thankfully, the practice of agents deliberately undervaluing the selling price of a property to ‘bait’ buyers has been relatively infrequent in the ACT, although not without precedent.[2] It is in such a climate of high scrutiny being placed on agents however that you must be aware of the potential penalties of underquoting.

  The current law in the ACT

  Real estate agents in the ACT who underquote the likely sale price of a residential property face liability under two statutory regimes: the Agents Act 2003 (ACT) and the Australian Consumer Law, found in Schedule 2 of the Competition and Consumer Act 2010 (Cth). Interestingly, these statutory regimes could also apply to an agent over quoting the sale price of a Property.

  The Agents Act 2003 makes it an offence for an agent to make a statement about the agent’s business which is false or misleading or to make a dishonest representation (to the Seller or the Buyer) about the agent’s estimate of the selling price of the property. These offences apply to any advertisement published by an agent and cast a wide net in capturing potential dishonest conduct. There are also significant penalties for a breach, being 100 penalty units ($15,000 for an individual or $75,000 for a corporation).

  This is supplemented by the misleading and deceptive conduct provisions of the Australian Consumer Law, which make it an offence to engage in misleading and deceptive conduct in the course of trade and commerce (including a specific offence which applies this to conduct in connection with the sale of an interest in land). The potential penalties for being found to have engaged in misleading and deceptive conduct include fines of up to $220,000 for an individual and $1.1 million for a corporation.

  In addition to this, agents face a potential disqualification under the Agents Act 2003 should the offence be sufficiently serious.

  Cracking down – the response to underquoting in NSW and Victoria

  Despite similar penalties being present, in recent years NSW and Victoria have introduced legislative reforms imposing more comprehensive obligations on agents when estimating selling prices and harsher penalties for those who make misrepresentations. Although these types of reforms have not yet been introduced in the ACT, they may be on the agenda of the Legislative Assembly.

  In NSW, agents are now required to keep records substantiating selling price estimates and are prohibited from publishing an indication of the sale price less than the estimated selling price for the property (this even extends to advertisements that indicate a sale price of ‘offers above’ or use similar words or symbols). Similar restrictions apply in Victoria, where agents are also required to prepare a statement of information (taking into account at least three properties considered most comparable) available for inspection by prospective buyers.

  Conclusion

  While the current ACT regime provides for significant penalties should agents be found to have made false or dishonest representations in underquoting the selling price of a property, legislative amendments in other Australia jurisdictions pose the possibility that a more direct and stricter regime may be legislated in the ACT in the near future. Property agents should ensure that they are aware of these implications.

  [1] https://news.realas.com/underquoting-frustrating-home-buyers/

  [2] See http://www.canberratimes.com.au/act-news/canberra-real-estate-agent-investigated-for-underquoting-20180412-p4z94y.html

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• 

  Procedural Fairness in Estate Law - Recent High Court of Australia Case - Nobarani v Mariconte

  It has been some time since there was a High Court decision concerning estates and succession law. Earlier this month the High Court of Australia considered whether procedural fairness was afforded to a self-represented litigant, Mr Nobarani during a trial in the New South Wales Supreme Court.

  Background

  Mr Nobarani was a friend of the late Iris McLaren (‘the deceased’). In December 2013, the deceased made her last Will which named her friend Ms Mariconte as her executrix and sole beneficiary of her estate.

  Mr Nobarani was named as a beneficiary of an earlier Will of the deceased. He claimed that the deceased’s 2013 Will was invalid for a number of reasons – he claimed that the deceased’s signature was forged at the time of making her Will, that she lacked testamentary capacity and that she had been under the influence of medication.

  Mr Nobarani proceeded to file 2 caveats against a Grant of Probate for the 2013 Will. The executrix then brought proceedings seeking orders that the caveats cease to be in force. The executrix also sought probate of the 2013 Will and also filed a Statement of Claim in which Mr Nobarani was not named as the defendant (and therefore, was not party to the case concerning the validity of the 2013 Will).

  NSW Supreme Court decision

  Less than a week before the trial concerning the validity of the caveats, Justice Slattery was called upon to determine an issue raised by the executrix, which was to point out that the caveats filed by Mr Nobarani had in fact expired.

  The executrix sought that the trial be held as a final probate hearing and the Court accepted. It should be noted that:

  • the Court made the decision to change the nature of the proceedings on the 14^th May, noting that the trial was set down a few days afterwards on 18^th May;
  • throughout the matter, Mr Nobarani was not a defendant in the executrix’s Statement of Claim concerning the validity of the 2013 Will, and as such, had only filed evidence in relation to the opposition of the caveat motion. The preparation of his case was limited therefore only to the caveat motion and nothing else; and
  • at the Trial, the executrix was represented by solicitors, junior counsel and senior counsel while Mr Nobarani remained unrepresented.

  At the trial Mr Nobarani advised the Court that he required more time to prepare for the hearing, that he had been denied an opportunity to issue subpoenas, cross examine witnesses and prepare an adequate defence.

  Ultimately, the Supreme Court held that the 2013 Will was valid, granted probate to the named executrix and ordered Mr Nobarani to pay costs.

  Court of Appeal

  Mr Nobarani appealed to the Court of Appeal on the basis that he had been denied procedural fairness.

  The Court of Appeal unanimously held that Mr Nobarani had been denied procedural fairness, but what happens next was important.

  Justice Ward and acting Justice Emmett held that although Mr Nobarani had been denied procedural fairness, that the miscarriage of justice was not so substantial to warrant a retrial, and that the denial of procedural fairness did not deprive Mr Nobarani of the possibility of a successful outcome.

  Justice Simpson had a different opinion and found that there was a possibility that retrial would have resulted in a different outcome and therefore there had been a miscarriage of justice.

  As the Court was divided, the majority decision took precedence and Mr Nobarani’s appeal was dismissed. A retrial was not ordered.

  High Court of Australia

  Mr Nobarani then appealed to the High Court of Australia.

  The High Court unanimously allowed Mr Nobarani’s appeal from the Court of Appeal and held that a new trial should be granted on the basis that Mr Nobarani was denied procedural fairness.

  Some of the notable points made by the High Court included the following:

  1. Denial of Procedural Fairness

  Citing Stead v State Government Insurance Commission, the High Court stated that ‘[a]ll the Appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome’.[1] The High Court confirmed that there were several denials of procedural fairness through the course of the trial however they mostly arose from the last minute change of the issue to be decided during the hearing. Ultimately, this was determined to be sufficient enough to deny the appellant ‘the possibility a successful outcome’.

  2. Insufficient Time for the Appellant to Prepare a Defence

  The High Court held that contrary to the assertions of the trial judge, the appellant did not have sufficient time to prepare for his matter.

  Mr Nobarani only had 3 clear business days to:

  • consider the statement of claim;
  • prepare and serve a defence;
  • issue any subpoenas with an abbreviated return date before trial; and
  • locate any witness and secure them for the trial.

  The trial judge had made this assertion of the basis that the matter had been set down for some time. However, the trial judge had not taken into account that the trial date was set for the issues surrounding the appellant’s caveats and not the substantive Will challenge. In fact, no directions had been given in relation to the substantive Will challenge.

  3. Issues surrounding self-represented litigants generally

  Mr Nobarani had a limited understanding of court procedure and evidence rules. In addition, his command of the English language was lacking.

  The High Court found it unsurprising therefore that his case was vague and disordered but was careful not to give the appellant a privileged status as a self-represented litigant. The fact that Mr Nobarani was a self-represented litigant did play a factor in the High Court’s decision.

  Unfortunately for the parties involved, due to the procedural irregularity, the matter remains unresolved and is now set for a new trial at the New South Wales Supreme Court. Interestingly, Mr Nobarani does not stand to benefit significantly under the earlier Will of the deceased, and receives only some specific items of the deceased jewellery. Given the matter has now spanned over 2 years, one wonders whether the parties (and particularly Mr Nobarani who may continue to be unrepresented and is due to receive little from the earlier Will) still have the ‘stamina’ to continue with the re-trial.

  This case will serve as a warning to all practitioners (and judges alike) of the importance of affording sufficient time to both sides of a case in order to allow adequate case preparation and therefore afford each party procedural fairness.

  Written by Golnar Nekoee, Director, Wills and Estate Planning

   

  [1] (1986) 161 CLR 141 at 147.

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• 

  Business Breakfast Club August Summary - Asset Protection and Voidable Transactions: Controlling Risks

  This month at Business Breakfast Club, we discussed asset protection strategies and transactions which are voidable by a Trustee in Bankruptcy. There are a number of asset protection strategies to consider, particularly when carrying on a business, and there is no one perfect strategy. BAL Director, Katie Innes shared some of her insights on the topic. In addition to discussing some of the more common asset protection strategies Katie touched on:

  Voidable Transactions

  There are a number of transactions that are voidable by a Court where companies are in administration or liquidation, and when individuals become bankrupt. In particular, we focused on three types of voidable transactions under the Bankruptcy Act 1966 (Cth).

  Undervalued Transactions – s 120 Where a transfer of property may be void if the transfer took place in the period of 5 years before the commencement of the bankruptcy and the transferee gave no consideration (or less than market value) for the transfer.

  Intention to Defeat Creditors – s 121 Where a transfer of property may be void if the property ‘would probably have’ become part of the bankrupt’s estate or ‘would probably have’ been available to creditors if the property had not been transferred. The transferor’s main purpose in making the transfer must be to either to prevent the property from becoming divisible amongst their creditors or to delay the process of making the property available. This purpose can be reasonably inferred from the circumstances, particularly if the transferor was, or was about to become, insolvent at the time of the transaction.

  Avoidance of preferences – s122 A transfer of property by a person in favour of a creditor can be void if the transfer had the effect of giving the creditor a preference, priority, or advantage over other creditors and was made within certain time periods.

  Cases & Practical Lessons

  Case studies help demonstrate how transactions can be scrutinised in practice. We looked at the seminal case of Cummins v Cummins[1] and whether quarantining assets against possible future liabilities can be for the purpose of defeating creditors, and Silvia v Williams[2] which reiterates the benefits of documenting loans contemporaneously and seeking professional advice on protection of assets (to show the intention behind certain transfers).

  For more information, please contact Katie Innes. The next Business Breakfast Club will take place on 14 September 2018. If you would like to attend, please contact us.

  [1] The Trustees of the Property of John Daniel Cummins, a Bankrupt, v Cummins [2006] 227 CLR 278.

  [2] Silvia (Trustee) v Williams, in the matter of Williams (Bankrupt) [2018] FCA 189

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• 

  Country Of Origin Labelling Changes - Greater Certainty For Consumers

  We all know and recognise the green triangle with the yellow kangaroo, a mark of products that are proudly Australian. Due to changes in the rules governing its use, we may be about to see a lot more of it.

  The Country of Origin Food Labelling Information Standard 2016 (the Standard) has been in place since 1 July 2016 but in a voluntary capacity only. As of 1 July 2018 Country of Origin (COO) labelling under this Standard is now mandatory, which means greater certainty for consumers who want to know whether their food is Australian made and grown. So what does this mean for you?

  The Standard provides for mandatory COO labelling requirements for food that is sold (including offered or displayed for sale) in Australia. It is designed to regulate country of origin food claims by prohibiting businesses and individuals from:

  1. supplying or manufacturing food that does not comply with the Standard; and
  2. making false, misleading or deceptive representations about a food product’s place of origin.

  Scope of the rules

  The Standard applies to most foods offered or suitable for ‘retail sale’ in Australia. The net is cast widely capturing anything used or represented as being for human consumption, as well as any ingredients, additives or substances used for preparing those things. There are a number of exceptions, including certain unpackaged products, products for export, those made and packaged on the premises where it is sold, and food or products sold in facilities such as schools, restaurants, prisons, hospitals and fundraisers. ‘Therapeutic goods’ under the Therapeutic Goods Act 1989 also escape the reach of the Standard.

  The new law establishes different labelling requirements depending on whether an item is classified as a priority or non-priority food. Non-priority food categories include seasonings, confectionery, biscuits and snack foods, soft drinks and sports drinks, alcoholic drinks, tea, coffee and bottled water. Everything else is a priority food. While all foods must include a statement of origin and the minimum proportion of Australian ingredients in a bar chart, the kangaroo symbol is only mandatory for priority foods.

  Grown, produced, made and packed

  It is important that businesses understand the concepts that apply under the Standard to ensure that accurate claims are made about their products. ‘Grown’, ‘produced’ and ‘made’ all have very particular meanings under the Standard, referring to the provenance of the food and its ingredients, as well as changes in their size, substance, identity and character. The Australian Competition & Consumer Commission (ACCC) has released useful guidance for businesses to help them better understand these terms and their obligations under the Standard.[1]

  It is important to note that a food cannot be considered as being grown, produced, or made in Australia unless it has also been packed in Australia.

  Enforcement

  If businesses fail to comply with the Standard, they risk breaching the Australian Consumer Law. The ACCC are responsible for enforcing the new laws and will conduct market surveillance checks on over 10,000 products. ACCC Deputy Chair, Mick Keogh, noted that companies have had two years to implement the new labelling system, indicating that those who have failed to do so risk serious financial hardship.[2]  The ACCC will be scrutinising the truth in labelling so that if a company claims that its product is 100% produced or grown in Australia, the company will be required to document or provide evidence to justify that claim to the ACCC.

  If you have any questions about how the mandatory country of origin labelling laws apply to you or your business, please get in touch with our Business team.

   

  [1] Australian Competition & Consumer Commission, Country of Origin food labelling: A guide for business (24 April 2017)

  [2] Rachel Carbonell, Farmers hope new food labelling laws spur consumers to buy more Australian produce, 29 June 2018, ABC News

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• 

  Smart Contracts for Commercial Leasing: Don't Believe the Hype?

  There is plenty of hype surrounding the potential for blockchain-based smart contracts to revolutionise the real estate industry.

  Smart contracts are computerised contracts under which a party can pre-authorise its terms to be performed automatically. Though the risk of ‘computer hacking’ immediately comes to mind, these contracts use and share encryption and distributed ledgers which are designed to be resistant to manipulation. A simple example is a vending machine. The consumer and the vending machine company both trust that the machine will dispense a can of soft drink if, and only if, a coin is dropped in the coin slot.

  Supporters of smart contracts suggest the technology offers many benefits for commercial leasing, including:

  • Automatic payment of rent and outgoings;
  • Integration with the Internet-of-Things (IoT);
  • Immediate detection of breaches (such as non-payment of rent) and automatic forfeiture of security; and
  • Collection of data to allow for forecasting and analysis of market trends.

  However the technology still faces many difficulties in overcoming:

  • The legislative requirements which mandate written leases and legislative reform or variations;
  • The loss of discretion and flexibility between the parties; and
  • The loss of flexibility associated with using proprietary technological platforms.

  We can expect smart contracts to become a hotly debated topic in the real estate industry but, at least in these early stages, smart contracts for commercial leasing may be more likely to be used in standard form contracts, such as for pop-ups or co-sharing spaces. For more complicated leasing arrangements solicitors will likely stay at the forefront to ensure the proper preparation and execution of the terms of the contract (lucky for us!).

  If you require assistance with your commercial leasing arrangements, please contact us.

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  Business Breakfast Club July Summary - Sexual Harassment, Discrimination and Bullying At Work - What Your Organisation Needs To Do About It

  This month at Business Breakfast Club, we discussed sexual harassment, discrimination and bullying laws and their affect on individuals in the workplace. BAL Director, Gabrielle Sullivan gave a practical overview of these topics and explored what organisations need to do to prevent and respond to these issues as employers.

  What constitutes Discrimination, Bullying and Sexual Harassment?

  Discrimination involves unfair or unfavourable treatment of an individual because of a ‘protected attribute’, or imposing a condition or requirement with which a person with a ‘protected attribute’ cannot comply because of that attribute. Examples of attributes that are protected include things such as sexual orientation, gender identity, marital or relationship status, pregnancy or potential pregnancy, and also family responsibilities.

  Bullying is repeated unreasonable behaviour (whether intentional or unintentional) that creates a risk to an individual’s health and safety. Bullying is a work, health and safety concern and may be subject to the scrutiny of WorkSafe ACT or SafeWork NSW.

  Sexual harassment is unwelcome conduct of a sexual nature that a reasonable person would anticipate would offend, intimidate or humiliate an individual.

  Importantly, whether conduct is ‘unwelcome’ is subjective. It is based on how the recipient perceives and experiences the conduct in question. Conversely, whether the conduct is ‘offensive, intimidating or humiliating’ behaviour is objective and determined with reference to whether a reasonable person in the same situation would have anticipated that offence, intimidation or humiliation might result from the behaviour.

  Sexual harassment is both a type of discrimination and a type of bullying, but has significantly higher compensation orders available for victims.

  Prevention techniques & Responding to Complaints

  The best technique to prevent and deal with sexual harassment, discrimination and bullying is to create a respectful workplace by:

  • modelling respectful behaviour from the top of the organisation down;
  • having a policy in place that includes definitions and reporting procedures (a Work Health & Safety Act requirement);
  • increasing staff awareness of the policy; and
  • responding to complaints promptly and reasonably, and in accordance with the policy.

  The key objective in responding to complaints should always be the efficient and fair resolution of complaints for all parties. This means no reprisals or unnecessary escalation within the organisation. Employers also need to remember they must manage the interests of all parties in this process (not just the complainant).

  For more information, please contact Gabrielle Sullivan or see our HR Breakfast Club website:

  http://hrbreakfastclub.com.au/industry/employment-corner/sexual-harassment/

  http://hrbreakfastclub.com.au/industry/employment-corner/bullying-and-harassment/

  The next Business Breakfast Club will take place on 10 August 2018. If you would like to attend, please contact us.

  A copy of the slides is available here.

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  A game of snakes and ladders: restraints of trade and ladder clauses

  Ladder clauses have become an essential part of restraint of trade clauses in Australia. However, significant policy concerns with the use of these clauses bring into question their continued acceptance, particularly in contracts for employment. Recent decisions concerning restraints of trade and ladder clauses suggest that the courts’ patience with clauses of this kind may be waning.

  Restraint of trade clauses are a staple inclusion in many employment contracts, and for good reason. Employers have a legitimate interest in protecting their confidential information, maintaining customer relationships and preserving a stable and trained workforce. In fact, one academic suggests that restraint of trade clauses are so essential to the preservation of an employer’s interests that any lawyer who fails to advise on and draft an enforceable clause may well be considered negligent. However, for a clause that has such a ubiquitous presence in employment contracts, it is remarkable that their enforceability is so uncertain in any given circumstance. This is particularly true in jurisdictions, such as the ACT and Victoria, where the common law restraint of trade doctrine has remained largely unaltered by statute.

  There are a number of reasons for this uncertainty, not the least of which is that a covenant in restraint of trade is considered to be ‘contrary to public policy’ and therefore presumed to be void unless the party seeking to rely on its protection can demonstrate that it is ‘reasonable’ in the circumstances to protect the party’s legitimate interests. Specifically, the clause must be ‘framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public’. This, in turn, touches upon the second key reason for the uncertainty surrounding the enforcement of restraint of trade clauses: the unenviable drafting exercise faced by a lawyer attempting to balance these competing imperatives. Failing to properly achieve this balance either means the employer’s legitimate interests are not adequately protected or the clause is rendered void on the grounds of unreasonableness.

  The task of drafting restraint of trade clauses is in no small way comparable to a high-stakes game of snakes and ladders. The lawyer tries to climb up the board to reach a point where all of the employer’s interests are adequately protected, but if the clause is drafted too ambitiously, the lawyer risks stepping on a snake and sliding back down into unenforceability. Unsurprisingly, resourceful lawyers have sought to craft a way around the pesky problem of balancing the need to adequately protect their employer client’s interests, whilst seeking to minimise the risk of leaving the client without the protection of a restraint of trade – ladder clauses.

  Ladder Clauses

  Many practitioners will be familiar with ladder clauses, also known as cascading clauses. I will therefore keep my description of their operation brief.

  Ladder clauses are a tool used to bypass the common law rule that courts cannot restate an unenforceable contractual clause in terms that would permit its continued operation. This is achieved by harnessing the operation of the doctrine of severance. In short, ladder clauses are drafted in such a way so that the offending portion of the term can easily be severed from the contract, thereby preventing that portion of the term impugning the operation of the entire clause. Whether or not any particular restraint of trade term can successfully be severed from the contract in the event it is found to be unenforceable depends on the application of the ‘blue pencil test’ (discussed further below).

  Broadly speaking, restraint of trade ladder clauses operate in two different ways.

  The first kind of ladder clause operates by creating a cascading series of reducing obligations. Each particular obligation is only triggered when the more onerous restraint preceding it is held by the court to be unreasonable. In other words, the obligations in the clauses cascade down with ever diminishing burdens on the restrained party until the court finds that one of the clauses is reasonable and, therefore, enforceable. For reasons that I discuss below, ladder clauses of this kind run a relatively high risk of being held to be void on the grounds of uncertainty.

  The second kind of ladder clause, although on one conception they are not truly ladder clauses at all, purports to create multiple individual restraints operating simultaneously, with each restraint providing for a varying degree of burden on the restrained party. For example, one clause may create one obligation on the restrained employee to not work for a competitor for a period of three months, while another clause operates simultaneously to create a separate obligation to not work for a competitor for a period of six months.

  Clauses of the second kind have a number of advantages over the first kind. Firstly, multiple clauses of this second kind operating separately are able to cast a net of obligations on the restrained party which is far wider than any individual term could achieve without a significant risk it would be found to be unreasonable. Secondly, separate clauses of this kind are more amenable to the ‘blue pencil test’ for severance, allowing for unreasonably broad restraints to be removed from the contract with less risk of the whole clause being held to be invalid. Thirdly, courts have been more reluctant to find these sorts of clauses to be void for uncertainty. This is because, properly drafted, clauses of this kind create multiple yet fundamentally distinct restraints that are, when viewed individually, ‘tolerably clear’ in each separate instance. However, some recent decisions suggest that this second kind of restraint clause may increasingly become the subject of more critical judicial scrutiny.

  Ladder clauses are somewhat analogous to their counterparts in the game snakes and ladders. They permit a lawyer to climb quickly to the top of the board, ensuring that their client’s interests are entirely covered by the restraint of trade obligations while skipping untouched over the pitfalls of unreasonableness and unenforceability. Just like ladders in the board game, ladder clauses have becomes a legitimate and integral part of restraints of trade. However, unlike the game, the use of ladder clauses in restraint of trade provisions in employment contracts gives rise to policy questions about whether their operation is entirely fair on the restrained party.

  Continue reading…

  First published in Ethos. Written by John Wilson, Managing Legal Director, and Robert Allen.

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  Affordable housing in the ACT: How the Suburban Land Agency's new Affordable Housing Action Plan will affect developers and purchasers

  Australia has long been a country where owning a home has been an achievable reality. In recent years, however, falling home ownership rates nationwide has seen this become merely a dream for many. To counteract this, the ACT Government released a new Affordable Housing Action Plan earlier this year. The new Action Plan includes changes for those providing and purchasing affordable housing in the ACT. In particular it adds a significant degree of administrative obligations on Developers. But what do you need to know?

  The requirements imposed on Developers

  Developers purchasing multi-unit sites directly from the ACT Government will now find additional obligations regarding affordable housing in the Project Delivery Agreement (PDA). In addition to a requirement to provide a minimum number of affordable homes, the PDA requires Developers to provide the Suburban Land Agency (SLA) with a copy of the development application (including a plan showing the location of the affordable homes) upon lodging the DA and again once upon the DA being approved by ACTPLA.

  The SLA must also approve the DA and provide the Developer with a list of eligible affordable home buyers. If the SLA does not approve the DA, the Developer must within seven working days amend the DA and provide the amended DA to the SLA for review before the SLA will provide a list of buyers to the Developer.

  The Developer is then required to make reasonable efforts to sell the affordable homes to the Buyers on the list provided by the SLA. This includes contacting buyers and providing a Contract for Sale in the form required by the PDA (which must be substantially consistent with the ACT Law Society Contract for Sale, allow part payment of the deposit with the sum of 1% or $5,000 to be provided on exchange and include the Scheduled of Finishes mandated by the SLA).

  What if a Buyer refuses to exchange?

  Should any buyer not exchange a Contract within the mandated timeframe despite the reasonable efforts of the Developer, the Developer may withdraw from negotiations. In these circumstances, the Developer must request the details of another eligible buyer from the SLA and begin the negotiation process with any new buyer once such details are provided. While providing a list of eligible buyers may speed up the process of exchange, if buyers are not agreeable to exchange occurring within the timeframes or if there are delays with buyers being found, the Developer may find it difficult to sell affordable housing stock as it will be unable to put such stock on the market until all eligible buyers have been exhausted or the date 60 days after a certificate of occupancy and use has issued for the complex.

  What if a Developer does not comply?

  To secure a Developer’s obligations under the PDA, the Developer is required to provide a security deposit directly to the SLA. This will be released following compliance with the Developer’s obligations under the PDA (including providing evidence of completed sales of affordable homes to the SLA). Developers must also be aware of the right of the SLA to restrict the Developer (or any associated entity) from participating in any future release of Land in the ACT if the Developer does not comply with its affordable housing obligations. Accordingly, Developers must ensure compliance with the new obligations of the PDA or be exposed to these risks.

  Those looking to purchase affordable housing

  The process of applying to purchase an affordable home has also changed. Those who meet the eligibility criteria must now register their interest directly with the SLA. The SLA will then contact Buyers once a Developer has submitted the DA to request a formal application be submitted. This application must be submitted within 14 days of being contacted by the SLA and any further information required must be provided within 30 days of request.

  Those who have an application to become an eligible buyer accepted will enter into a ballot to purchase affordable housing and, if successful, their details will be provided to the Developer to commence negotiations to enter into a Contract for Sale.

  Once the details of the buyer have been provided to the Developer, the buyer will be required to exchange contracts within 15 working days (unless the developer is acting unreasonably). While there are restrictions on the form of Contract for Sale provided by the Developer and the Contract must include the mandated inclusions list provided by the SLA, there is a risk buyers will be pressured into exchanging a Contract in a form that is not in their best interests.

  Conclusion

  There are risks involved for both Developers and Buyers of affordable homes under the new Action Plan. We suggest that you contact our Real Estate team to discuss your particular circumstances.

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  Towards More Effective Restructuring: Changes To The Corporations Act | Invalidity Of Ipso Facto Clauses

  For many suppliers, creditors and landlords, the threat of their counterparty’s insolvency is mitigated by a right to terminate or vary their contracts if there is an ‘insolvency event’. From July 1 2018 changes to the Corporation Act 2001 (Cth) may, however, limit those rights. The amendments which make ipso facto clauses in contracts unenforceable during certain insolvency-related processes, comes as a package of two major reforms, the other part of the packing being the ‘safe harbour’ provisions for company directors in periods of financial distress which took effect in September 2017.

  These changes arose from an acknowledgment by the Australian Government that our insolvency laws disproportionately stigmatise and penalise company failure, at the expense of entrepreneurship and innovation.[1] It is hoped that these reforms will reduce instances of the premature resort to formal insolvency processes, resulting in better prospects of turnaround for companies and the preservation of value for creditors and shareholders. In turn, the Government hopes to see a cultural shift away from the stigmatisation of failure and towards reasonable risk-taking for the ultimate benefit of the companies and people involved.

  So what are the changes?

  Ipso facto clauses

  Ipso facto clauses create a contractual right to modify or terminate a contract upon the occurrence of a ‘specific event’. Relevant here is the right to terminate a contract if the company enters administration, is wound up in insolvency or a manager controller is appointed. Ipso facto clauses have been long viewed as an important self-protection mechanism for suppliers, credit providers and landlords, but they do have the effect of inhibiting the successful turnaround of struggling companies.

  By cutting off vital contractual relationships, businesses in financial distress are deprived of their capacity to continue trading while they restructure, destroying its enterprise value and potentially deterring potential investors who may have otherwise bought out the business and attempted to turn it around. This may defeat the very purpose of entering into administration or schemes of compromise or arrangement, and may prejudice creditors should the company be wound up.

  From 1 July 2018 new provisions in the Corporations Act[2] prevent a party from enforcing an ipso facto clause during a ‘stay period’. While a party can apply to have the stay lifted ‘in the interests of justice’ [3] or to seek an order that the ipso facto clause is enforceable[4], the stay period will usually end only if the company exits administration or if the compromise or arrangement period ends, otherwise it will continue until the liquidation has been completed.

  When are ipso facto clauses enforceable?

  Ipso facto clauses in contracts that were entered into prior to 30 June 2018 are still enforceable. Further, ipso facto clauses that:

  1. modify rates of interest in finance arrangements (loans, guarantees, indemnities, security);
  2. allow a party to enforce an indemnity for enforcement expenses;
  3. can terminate a forbearance arrangement;
  4. change the priority or order in which amounts are to be paid;
  5. allow a set-off or combination of accounts;
  6. allow an assignment, transfer or novation of rights; or
  7. allow circulating security interests (floating charges) to become non-circulating security interests (fixed charges)

  are also still enforceable[5].

  Despite the amendments to the Corporations Act, counterparties to a contract may still terminate or amend the contract on other grounds, such as breach. As a trade-off, the company that benefits from the ‘stay’ of the counterparty’s rights to terminate will not be able to exercise their own rights to seek further advances of money or credit under the contract, therefore minimising risk of ongoing exposure for the counterparties.

  Practical challenges

  The aim of these changes is to provide a struggling company some breathing space, allowing the company to continue operating while directors attempt to restructure the business. Not only does this improving its bargaining position when attempting to negotiate restructure options with creditors, it may preserve the value of the business for the benefit of the company, its employees and its creditors.

  That said, the amendments create further motivation on contracting parties to ensure that they are closely managing contract performance addressing underperformance early and often to minimise exposure to the other’s insolvency, and reserving their rights to terminate for breach if the default is not rectified. For more information on termination of contracts click here.

  If you have any questions about how these provisions may apply to you or your company, please get in touch with our Business team. For information on the safe harbour provisions click here.

  Written by Katie Innes with the help of Bryce Robinson.

  [1] https://www.legislation.gov.au/Details/C2017B00100/Explanatory%20Memorandum/Text, p 3

  [2] Sections 415D, 434J, 451E

  [3] Sections 415E, 434K, 451F

  [4] Sections 415F, 434L, 451G

  [5] Section 5 of Companies (Stay on Enforcing Certain Rights) Declaration 2018

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• 

  Towards More Effective Restructuring: Changes To The Corporations Act | Safe Harbour Provisons

  For company directors, the threat of personal liability for debts incurred in periods of actual or potential insolvency looms large. The creation of the ‘safe harbour’ provisions in the Corporation Act 2001 (Cth) that took effect in September 2017 may provide some welcome relief to company directors in periods of financial distress.

  These changes arose from an acknowledgement by the Australian Government that our insolvency laws disproportionately stigmatise and penalise company failure, at the expense of entrepreneurship and innovation.[1] It is hoped that these reforms will reduce instances of prematurely resorting to formal insolvency processes, resulting in better prospects of turnaround for companies and the preservation of value for creditors and shareholders. In turn, the Government hopes to see a cultural shift away from the stigmatisation of failure and towards reasonable risk-taking for the ultimate benefit of the companies and people involved.

  So what are the safe harbour provisions?

  Safe harbour

  Under the Corporations Act, a company director may be personally liable for debts incurred by the company if, at the time, they had reasonable grounds to suspect that the company was insolvent. The threat of personal liability can leads directors to liquidate companies that are in fact solvent or able to be turned around.

  From 19 September 2017 a new section 588GA allows company directors to be protected from such liability if it can be shown that they were developing or taking a course of action which was reasonably likely to lead to a better outcome for the company, rather than proceeding directly to administration or liquidation. Section 588GA(2) contains a list of considerations that may support such a finding, such as steps taken to prevent misconduct, whether appropriate financial records have been kept, whether the director is obtaining advice from qualified parties, and whether they are developing or implementing a restructuring plan to improve the financial position.

  The new provisions encourage directors to take reasonable risks aimed at turning their company around, without feeling pressure to leap straight into administration or liquidation. Whilst directors must still abide by all other duties owed to the company, the changes aim to encourage honest, diligent and competent directors to retain control of their companies and to be innovative in their recovery efforts.

  Practical challenges

  While this reform is certainly a step in the right direction, it contains some significant ambiguities and judicial interpretation will be a key determinant of its effectiveness. For example, the requirement to ‘start developing courses of action that are reasonably likely to lead to a better outcome for the company’ is riddled with uncertainties. What kinds of actions have to be taken? When is something ‘reasonably likely’ to lead to a better outcome?

  The failure to give directors specific steps they can pursue to feel confident in their protection may inhibit its effectiveness in preventing premature administration or winding up. Directors may not find out until several years down the track whether they made it into safe harbour. Coupled with the uncertainty of the provisions, these changes may do little to dissipate the spectre of personal liability hanging over the heads of company directors.

  Many of these issues may remain unresolved until directly contested in court. For now, it is crucial that directors who wish to take advantage of the safe harbour protections maintain a comprehensive record of evidence that demonstrates their compliance with the new obligations.

  If you have any questions about how these provisions may apply to you or your company, please get in touch with our Business team. For information on changes to the Corporations Act about ipso facto clauses click here.

  Written by Katie Innes with the help of Bryce Robinson.

  [1] https://www.legislation.gov.au/Details/C2017B00100/Explanatory%20Memorandum/Text, p 3

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  Planning Update: Lapsing of deferred development consents

  In a decision handed down last week, the Land and Environment Court has clarified the circumstances in which a deferred commencement consent will lapse.

  Facts

  In Dennes v Port Macquarie-Hastings Council development consent had been granted for the erection of a replacement dwelling house on flood-prone land. The development consent was granted subject to a deferred commencement condition which required the applicant to submit a flood emergency response plan for the Council’s approval, and for the response plan to be determined to be satisfactory by the Council. The consent specified a period of 12 months within which the applicant had to satisfy the deferred commencement condition.

  The applicant arranged for the preparation of a flood emergency response plan and submitted it to the Council. It did this well within the required 12 month period. However, still within the 12 month period, the Council informed the applicant that the response plan was not supported by the Council, and that the deferred commencement condition had therefore not been satisfied.

  At that point the applicant had a number of options available to him. He could have appealed against the Council’s decision that it was not satisfied with the applicant’s response plan. He could also have appealed from the Council’s deemed decision (being the failure of the Council to make a decision within 28 days after he had provided the response plan to the Council). He could also have applied for an extension of the 12 month lapsing period for a further year.

  However, the applicant did none of these things within the 12 month period required by the development consent. He did ultimately appeal against the Council’s decision that it was not satisfied with the applicant’s response plan – but not until well after the 12 month lapsing period had ended.

  Issues

  The Council argued that the Court had no jurisdiction to hear the appeal because the development consent had lapsed when the applicant had not satisfied the Council in relation to the deferred commencement condition within the required 12 month period.

  Decision

  Preston CJ accepted the Council’s argument and found that the development consent had lapsed.

  His Honour said that it was necessary, but not sufficient, for the applicant to have provided evidence to the Council to enable the Council to be satisfied with the applicant’s flood emergency response plan within the 12 month period specified in the consent. The applicant submitted a response plan to the Council which he considered to be satisfactory but, of itself, this did not satisfy the deferred commencement condition.

  The deferred commencement condition expressly required the Council to determine that the response plan was satisfactory. The condition could therefore only be satisfied if and when the Council determined that the response plan submitted by the applicant was satisfactory. This never happened. The development consent therefore lapsed at the end of the 12 month period specified.

  As the development consent had lapsed, there was no effective development consent on which the applicant could rely for the purpose of bringing an appeal in relation to the Council’s lack of satisfaction with the response plan submitted by the applicant.

  Take home lesson

  When imposing a deferred commencement condition requiring the submission of further information, Councils should make it clear not only that the further information must be provided within the specified timeframe, but also that the information must be determined by the Council to be satisfactory.

  For more information about this decision, or deferred development consents, please contact Alan Bradbury.

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  The Risks of Stretching the Truth: Misleading and deceptive conduct in a sale of business

  When we think of consumer law, we often think of dodgy goods. What we don’t often think of is the sale of a business.

  The Uni Pub, a well-known Canberra institution for many years, is currently the subject of ACT Supreme Court proceedings. In August 2016 Sapme Pty Ltd (the Seller) sold the business of The Uni Pub to Jornad Pty Ltd (the Buyer). After apparently struggling for some time, in March 2017 The Uni Pub closed its doors. The Buyer commenced proceedings against the Seller and its directors in March 2017 for misleading and deceptive conduct, a breach of section 18 of the Australian Consumer Law (ACL).

  The Buyer and its director claim that they would not have gone through with the purchase had it not been for the misleading representations by the Seller that the business was supporting itself financially, was up to date with its bills and rent, and that the fit out was serviced and working well. The Seller’s defence appears to be that the Buyer was aware the business wasn’t doing well (pointing to a sale price of $1 plus stock) and that the Buyer was obliged by the contract (and warned by the business broker) to satisfy themselves about the truth and accuracy of all information given in relation to the sale.

  This case is one worth watching – applying the ACL in a sale of business context would be a powerful tool to deter sellers and business brokers from making misleading representations when selling a business.

  We have already seen from cases concerning the sale of land that the latitude of potential misrepresentations has been cast pretty widely by the courts. Failing to disclose road widening proposals, inflated claims in advertising brochures, false answers to questions about pending litigation, and even ‘silence’ have all been held to constitute misleading and deceptive conduct entitling a buyer to rescind the sale contract.[1]  It is important to recognise section 18 of the ACL does not distinguish between fraudulent and innocent misrepresentations and there is no requirement that the conduct is intentional. This is mitigated only by whether it is ‘reasonable’ to rely on the representations and whether there has been actual reliance on the representations.

  So, what can you do to protect yourself if you are selling your business?

  To minimise risk:

  1. Don’t say anything about the business that can’t be verified by written evidence (rent payment receipts, service records of plant and equipment);
  2. Don’t exaggerate the performance of the business – while you might be proud of the performance of your business and your statements could be ‘mere puffs’ (which are self-evident exaggerations or expressions of opinion not likely to be taken seriously and importantly – not legally binding) but the worse case scenario is the exaggerations are false or misleading representations (and lead to a case like The Uni Pub);
  3. Do put the onus on the buyer to satisfy themselves about the status of the business; and
  4. Do tell your lawyer if any statements you have made need to be corrected before you sell.

  Contractual provisions excluding prior representations might not always be enough (as evidenced by this case); however, having the buyer sign a contract which declares that they have satisfied themselves about the state of the business can be a strong protection for claims such as these.

  If you require any legal advice about the sale of your business, please contact us.

   

  [1] CH Real Estate Pty Ltd v Jainran Pty Ltd; Boyana Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31.

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  Business Breakfast Club June Summary - The Terminator: Managing Contractual Non-Performance

  This month at Business Breakfast Club, we discussed how to manage contractual non-performance. In particular, we focused on performance measures, reporting requirements, breaches, rights to damages, and rights to terminate. BAL Legal Director, Mark Love shared some of his insights on the topic. Mark touched on:

  The Information Pathway

  Contract management involves contract performance which can be determined via ‘performance indicators’. These indicators demonstrate that a party has satisfied the criteria to become entitled to payment. ‘Lead indicators’ can provide information on future performance including whether the desired result will be achieved within the agreed time period. It can also provide an early warning of any potential issues that may arise in contract delivery. A well drafted contract will include the following milestones:

  • the deliverable;
  • the means by which the deliverable will come to life;
  • the matters that create barriers for the deliverable; and
  • the matters that mitigate one’s loss at each milestone point.

  Damages

  Damages for breach of contract are compensatory for the other party’s failure to perform the contract. Compensation is rooted in the notion that where a party sustains a loss by reason of a breach of contract, that party should be placed in the same position as if the contract had been performed. To address the breach, you must turn your mind to:

  • whether you will engage a new contractor to rectify the breach;
  • address the balance of performance of the contract in terms of time delays;
  • determine how to keep the contract enforceable; and
  • address the consequences of loss flowing from the works that still need to be completed to keep the contract on foot.

  Arrangements should be put in place to monitor and assess the underperformance in a contract. This may include the parties engaging in an ‘action plan’. The action plan may require the contract manager to be aware of the contractor’s capabilities, so that the acquiring entity is informed about the goods or services being provided and is able to determine whether the agreed performance standards and rectification path are capable of being met.

  Termination

  Termination of a contract leaves the parties free from any further obligations to perform the contract. Only certain breaches permit you to validly terminate the contract. These include:

  1. a breach of a fundamental term – which relies on the requirements of specific clauses;
  2. repudiation – which relies on the contracting party’s behaviour to demonstrate that the contracting party no longer regards themselves as ‘bound’ by the contract terms; and
  3. a fundamental breach of the contract – whereby the contract has been breached to such a degree that the bargain under the contract cannot be delivered as intended or has been destroyed.

  Ultimately, identifying the common intention of the parties before entering into a contract will ensure that the issues of underperformance or non-performance in a contract are minimised.

  For more information, please contact Mark Love. The next Business Breakfast Club will take place on 13 July 2018. If you would like to attend, please contact us.

  A copy of the slides is available here.

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  To resuscitate or not: the legal issues with DNR tattoos

  Due to an ageing population and the evolution of medical treatment, people are increasingly formulating and asserting their end of life decisions. A ‘Do Not Resuscitate’ directive is now common. Although most frequently seen on a physical document, there are also tattoos stating “Do Not Resuscitate” or sometimes it is simply the letters “DNR” on a person’s chest.

  People believe that these tattoos (compared to paperwork and medical bracelets) cannot be misplaced, removed or lost. Emergency responders are also unlikely to miss a tattoo on a person’s chest when attempting to resuscitate. Although a patient may see these tattoos as adding clarity to their convictions, these tattoos are presenting confusion for doctors and emergency responders.

  A valid heath care directive (such as a DNR) must be respected by health care professionals. Providing life-saving treatment contrary to a valid directive may be considered an assault. Therefore, for the person providing a DNR and for the doctors respecting it, it is essential that the directive be valid and clear.

  Clarity is made more difficult by the fact that in Australia there is inconsistency in law and terminology across all States and Territories. In the ACT, a written health direction must be signed by the maker of the direction and be witnessed by two other people at the same time and in each other’s presence.[1] The health professional must not withhold medical treatment unless they believe on reasonable grounds that the direction has complied with the above conditions and that the person has not revoked the direction.[2]

  There are various legal issues with “DNR” tattoos.

  Firstly, many of these tattoos merely state “DNR” or an alternative formulation with the same meaning. Some tattoos may have a signature below the letters but are extremely unlikely to have the signatures of two witnesses. Therefore this will not satisfy the law in the ACT as to valid written health directions. Studies have also shown that a substantial percentage of patients change their minds as to preferences for attempted resuscitation. Amending or revoking a written health directive or a medical bracelet would normally be relatively straightforward. The cost and effort of removing a tattoo is not always practical. This poses the question – how can such a ‘directive’ be confirmed as still being current?

  Secondly, the intentions and reasoning of a tattoo are not as clear as an executed legal document. A recent incident in the USA demonstrates the issues. In that case, a conscious man admitted to hospital had “DNR” tattooed on his chest as a result of losing a badly conceived drinking game and whose preference was actually for resuscitation. The man had stated that he “did not think anyone would take his tattoo seriously”.[3] If the patient is unconscious, it is impossible to determine in the available short time frame whether the tattoo was intended to be a binding directive.

  Thirdly, there are capacity issues that need to be examined for such a serious end of life directive. Advanced health care directives are usually executed in the presence of a health care professional or a lawyer who as part of the process assess the capacity of the person to make such a direction. It would be practically impossible to ascertain whether a person had capacity at the time of getting a tattoo perhaps many years later when it might become applicable. Would the alternative be having a health care professional or lawyer to sit with you at the time of the tattoo and document the procedure? That leads to the further question of how would this be subsequently confirmed in an emergency situation?

  Finally, especially if no signature is marked on the tattoo, it is difficult to confirm whether the person was influenced into making the decision to get a DNR tattoo. In a time where there is a prevalence of Elder Abuse we must ask additional questions. What are the checks to ensure the letters “DNR” was tattooed on a person without the influence of another and in circumstances where the person clearly understood the potential significance of the DNR tattoo?

  Many people who find the tattoo appealing strongly desire not be resuscitated and value the ability to direct their end of life. However, a “DNR’ tattoo in the ACT is unlikely to be a clear direction and may result in your wishes not being carried out. These tattoos can cause confusion in a time where urgency is essential no matter what your wishes are. The only way to ensure that your directives are carried out is by having an advanced care directive.

  Written by David Toole and Laura Godfrey. To speak with someone about your options and an estate plan, please contact us

  [1] Medical Treatment (Health Directions) Act 2006 (ACT) s 8.

  [2] Medical Treatment (Health Directions) Act 2006 (ACT) s 12.

  [3] Lori Cooper and Paul Aronowitz, DNR Tattoos: A Cautionary Tale (2012) 27(10) Journal of General Internal Medicine 1383, 1383.

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• 

  Make Good Disputes in Commercial Leasing

  Commercial and retail leases often contain make good clauses which require the tenant to return the premises to their previous condition at the end of the lease. Make good clauses can often be a cause of disputes when parties have different understandings of what the obligations are. This can be a serious issue, as fitouts can be very expensive to install and remove.

  Parties may be so eager for a lease to commence that they forget to give proper consideration to what will happen when the lease ends. However, it is important that make good obligations are carefully considered before a lease commences.

  Avoiding make good disputes

  The key to avoiding make good disputes is to clarify what the make good obligations are, so that each party understands what is required at the end of the lease. Issues that should be considered include:

  1. What state should the premises be returned to? Depending on the situation, this might be bare shell, the condition of the premises when the tenant took occupation or simply a clean and tidy state.
  2. What was the state of the premises when taken over? This will be especially relevant where a lease has been assigned.
  3. What fixtures and fittings does the landlord want removed, and which do they want to keep?Factors to consider include who owns the fitout and whether the tenant took over the lease with an existing fit out.

  Remedies for a failure to make good

  If a tenant fails to make good and leaves the landlord with a costly clean-up bill, the landlord’s only resort may to be take legal action. Courts will rarely make an order for specific performance of a tenant’s make good obligations. More usually courts will award damages to the landlord, which may not cover the costs of making good the premises.

  To simplify the process of litigation, landlords should ensure that the lease clearly sets out a right to recover costs of the landlord undertaking the make good works so those costs can be recovered as a contractual debt, rather than as damages.

  In addition, landlords should ensure that the tenant’s bond or bank guarantee covers any breach of make good obligations under the lease. Even if this does not cover the full cost of the landlord undertaking the make good works, it will ensure that at least some of the costs can be recovered immediately.

  An alternative to make good obligations

  As an alternative to the potential uncertainties around make good, a lease can provide for a cash payment by the tenant in return for a partial or complete release from their make good obligations. However, this requires more effort on the part of the landlord and raises its own issues:

  1. What is a fair amount for any cash payment for release from make good obligations? The amount might be fixed in advance, a reimbursement of the landlord’s costs or an amount to be determined by valuation.
  2. At whose election should the option to use a cash payment be available? This will be particularly relevant if any agreed amount differs from the actual costs of making good the premises.
  3. To what extent is the tenant released from their obligations? The tenant might be completely, or only partially, released from their make good obligations.

  Conclusion

  Make good clauses are a potential minefield for disputes, but most of these problems can be avoided if parties understand the position before entering into a lease, and the lease reflects that understanding.

  If you require expert assistance with your commercial leasing, contact us.

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• 

  The Legal Obligations of a Trustee: Proactive not Reactive

  Trustees must look forward towards the risks on the horizon. Proactive responses to emerging issues are essential to fulfil the duties of a trustee. Too often trustees are not sufficiently aware of their legal obligations and the issues they may face.

  A trustee is obliged to fulfil the terms of the trust instrument (usually a trust deed). In doing so, the trustee must determine in what proportion the capital and income of the trust will be distributed to the beneficiaries. Given the trustee holds legal title to the trust’s assets, he or she owes fiduciary duties to the beneficiaries who hold the equitable title in those assets. Fiduciary duties include:

  • the duty to act honestly and in good faith;
  • the duty to act with due care, skill and diligence in relation to the best interests of beneficiaries;
  • the duty to avoid conflicts of interests; and
  • the duty not to profit from the trust.

  A trustee who breaches one of their duties risks being liable for any loss arising from that breach.

  In 2017 there were numerous reports that sixty of the 100 largest superannuation funds in Australia were failing to comprehensively assess the impact of climate change on their investment portfolios and failed to disclose that assessment to their shareholders and members.

  Trustee directors have an implied obligation to proactively assess emerging risks including the threat of climate change to the extent that it may intersect with a beneficiary’s financial interests in a superannuation fund. Failing to consider such a material risk as climate change has left many trustee directors at risk of breaching their duty to members.

  Climate change is not just a matter of rising sea levels, but note that Local Government on the South Coast has already resolved to stop repairing roads or permit improvements in certain low lying areas.

  In some commercial arrangements, the courts are willing to allow the parties to reduce the fiduciary content of a trustee’s obligations almost entirely. However, in doing so, the arrangement may then cease to be a trust and may be re-characterised as something else. In Leerac Pty Ltd v Garrick E Fay [2008] NSWSC 1082 the NSW Court of Appeal held that other than the irreducible core of trustee obligations to act ‘honestly and in good faith’, it is not contrary to public policy to exclude a trustee’s liability even for gross negligence. But it is contrary to public policy to exclude a trustee’s liability for dishonesty or bad faith. Thus, if the trustee takes a risk in good faith with the best intentions but defaults on that action, the trustee can be protected by an exemption clause which excludes personal liability.

  How to limit your liability?

  Trustees usually seek to limit their personal liability through express written limitation clauses protecting them from personal loss, and the risk of insolvency through indemnities from the trust fund. The lack of uniformity in limitation clauses has led to differences in style, content and quality of the clauses. The courts often treat limitation clauses with caution as poor drafting of the clause can lead to unintended consequences. However, the advantages of a limitation clause usually outweigh the caution with which Courts treat them. Some of those advantages include:

  • a reimbursement right (the trustee’s right to replenish its own assets where it has discharged trust liabilities personally); and
  • an exoneration right (the trustee’s power to apply trust assets directly to discharge trust liabilities).

  Both rights are often conflated as they save trustees from the consequences of incurring trust liabilities. However, the former is for the trustee’s personal benefit while the latter forms part of a general power enabling the trustee to apply trust assets.

  Ultimately, proactive (not reactive) solutions are required by trustees to foresee the risks of emerging issues and ensure that trustees act within the scope of their legal obligations to secure the financial interests of the beneficiaries, and not simply rely upon the ‘exoneration right’ in any trust document.

  If you require legal advice regarding your options as a trustee, please contact us.

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• Essential Guide to Local Government: Delegation of Council Functions

  The delegation of Council functions is essential to the effective and efficient governance of a local Council. This guide will offer an overview of the fundamentals of delegating and sub-delegating Council functions under legislation and the common law.

  Council’s Ability to Delegate

  The Local Government Act 1993 (LGA) establishes the statutory framework for the delegation of Council’s authority. Further guidance is also given in the Interpretation Act 1987 (Interpretation Act).

  Principally, section 377 of the LGA provides the Council with the power to delegate certain functions to the General Manager or any other person or body (not including another employee of the council). However, the scope of the power to delegate is not without restrictions and Councils need to be aware of the legal principles governing delegations.

  To whom can a council delegate?

  As mentioned above, a Council may delegate functions to the General Manager and to other persons or bodies. However, a Council cannot delegate any of its functions directly to an employee of the Council, other than the General Manager.^[1]

  The delegation must be made to either a specified person or body (by name) or to a particular officer or the holder of a particular office.^[2] Where a function has been delegated to the holder of a particular office or position, the delegation does not cease to have effect merely because the person in the particular office or position ceases to hold that office or position. In that case, the person occupying the office or position is taken to be the delegate.^[3]

  A function can only be delegated to an office or position that is in existence at the time that the delegation is made.^[4]

  How does a council delegate?

  There are certain practical steps which must be taken to validly delegate Council functions. Delegation by a Council to the General Manager, or any other person or body, must be done by resolution.^[5] The delegation must also be in, or be evidenced in, writing.^[6]

  Delegations may also be limited by being made subject to conditions.^[7] Where the conditions are not met, the delegate will have no power to exercise the function and any resulting decision will be liable to be set aside.^[8] This means that Councils need to be careful when drafting conditional delegations to ensure that any conditions are clearly expressed and, preferably, do not involve subjective elements which can invite legal challenge. Some examples include delegations that are conditional on whether a conflict with a Council policy is ‘minor’, that require a determination to be made as to whether strict compliance with a Council policy would be ‘unreasonable’ or ‘unnecessary’^[9] or a condition allowing exercise of the delegation where, following public notification of an application, no ‘well founded objection’ is received.^[10]

  Scope of Delegation

  A delegation can cover a wide range of Council functions both under the LGA and also under any other Act. The General Manager may also delegate any of his or her functions, as well as sub-delegate any functions that have been delegated to the General Manager by the Council.^[11] In the exercise of a function by a delegate, the delegate may also exercise any other function that is incidental to the delegated function.^[12]

  A Council cannot delegate a function that comprises any of the matters listed in subsections 377(1)(a) to (u) of the LGA. Those matters include (but are not limited to):

  • making rates, charges and fees;
  • borrowing money;
  • voting of money for expenditure on council works, services or operations;
  • the compulsory acquisition, purchase, sale, exchange or surrender of land; and
  • any function that is specifically required to be undertaken by resolution of the council.

  Neither the Council nor the General Manager can delegate their power of delegation.^[13]

  A function cannot be delegated if the function is not in existence at the time that the delegation is made. For example, in the case of Australian Chemical Refiners Pty Ltd v Bradwell^[14] a prosecution was commenced under a delegation that had been given before the enactment of the section creating the offence. The Court of Criminal Appeal held that the delegation was ineffective.

  Where a function of the Council depends on the Council forming an opinion, belief or state of mind and the function has been delegated, the function may be exercised by the delegate on the basis of his or her own opinion, belief or state of mind.^[15]

  Where discretion is involved in the exercise of a function, a delegation of the function cannot limit or eliminate the discretion. An example of this type of function is the determination of a development application under section 4.16(1) of the Environmental Planning and Assessment Act 1979. That function involves the exercise of discretion as to whether or not to approve an application unconditionally, to approve it subject to conditions or to refuse it. A Council (or General Manager) cannot delegate the power to approve a development application without also delegating the power to impose conditions or refuse it.^[16]

  After the Delegation

  When a Council or General Manager delegates a function, the Council or the General Manager still retains the ability to exercise the function at any time before the delegate does so.^[17] A delegation may also be wholly or partly revoked by the delegator.^[18]

  Councils are also required to review all of their delegations during the first 12 months of each term of office.^[19]

  More information

  If you have a specific question about how delegations work, call Alan Bradbury on (02) 6274 0940 or Alice Menyhart on (02) 6274 0911.

  The content contained in this guide is, of course, general commentary only. It is not legal advice. Readers should contact us and receive our specific advice on the particular situation that concerns them.

  Are your delegations up to date? – RelianSys Delegations Software an automated web-based solution

  Keeping track of delegations for Council Officers and staff, when structures, titles and personnel are constantly changing, can cause major headaches. This is exacerbated when records are kept manually, using old-fashioned documents and spreadsheets. Bradley Allen Love Lawyers (BAL) has partnered with RelianSys  Australia’s leading provider of automated governance solutions, to provide a fully-integrated web-based solution for Council Delegations.

  The BAL – RelianSys Delegations Software is easy to learn, simple to use, and streamlines your delegations by automating the process saving time and improving efficiency. Because it is web-based, it can be accessed by anyone, from anywhere, at any time, on any device. More importantly, the BAL – RelianSys Delegations solution is designed specifically for the Local Government sector, by people who understand governance in Local Government, making it highly intuitive – it thinks the way you think.

  The pricing model is very cost-effective – with all set up, updates, ongoing development, telephone training and support all included in one low-cost annual subscription.

  More importantly, the solution simplifies the process, so it takes the stress and headaches out of managing delegations.

  For a personal guided tour, please start a conversation with Febin Philip, Business Development Manager at RelianSys, on 1300 793 905.

   

  [1] LGA, s.377(1).

  [2] Interpretation Act, s.49.

  [3] Interpretation Act, s.49(8). See also Martin v Minister for Mineral and Forest Resources [2010] NSWLEC 131 and [2011] NSWCA 286.

  [4] Australian Chemical Refiners Pty Ltd v Bradwell (1986) 10 ALN at N96.

  [5] LGA, s.377.

  [6] Interpretation Act, s.49(2)(b).

  [7] Interpretation Act, s.49(3).

  [8] Aldous v Greater Taree City Council [2009] NSWLEC 17.

  [9] See Kinloch v Newcastle City Council [2016] NSWLEC 109.

  [10] Lyons v Sutherland Shire Council [2001] NSWCA 430.

  [11] LGA, s.378.

  [12] Interpretation Act, s.49(4).

  [13] LGA, ss.377(1)(t) and 378(1).

  [14] (unreported) NSWCCA No. 236 of 1985 28/2/86.

  [15] Interpretation Act, s.49(7).

  [16] Belmorgan Property Development Pty Ltd v GPT Re Ltd & Anor [2007] NSWCA 171.

  [17] Interpretation Act, s.49(9).

  [18] Interpretation Act, s. 49(2)(c).

  [19] LGA, s.380.

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• Business Breakfast Club May Summary: Blockchain and Cryptocurrency

  This month at Business Breakfast Club, Shaneel Parikh and Harry Hoang of Tailored Accounts, discussed blockchain and distributed ledger technology. Whilst Bitcoin and cryptocurrency has certainly created much hype and challenged the legal and financial landscape, Blockchain is much bigger than Bitcoin. It has the potential to revolutionise multiple industries as well as alter our social and economic infrastructure.

  Some of the topics covered:

  What is Blockchain Technology?

  Blockchain is a continuously growing list of records or transactions which are linked and secured in blocks using cryptography. These blocks subsequently reside within the ledger amongst all users. Important to an understanding of blockchain is a consideration of what distributed ledger technology is as whilst every blockchain is a distributed ledger, not every distributed ledger, is a blockchain.

  What is Distributed Ledger Technology

  A distributed ledger is a database of transactions (or data) that is shared across a network of participants. It is ‘distributed’ because the record is held by each of the users of the network, and when a record is added, each user’s copy is updated with new information both instantaneously and simultaneously.

  What types of Blockchain Systems Exist and What are their Governance Structures?

  In practice, there are two key types of ‘Blockchain’ systems that exist: permissioned or private blockchain and unpermissioned or public blockchain systems. Whilst the courts are yet to consider the legal structure of either system, it is important to consider how the courts could analyse such structures and in particular, which players in such systems the court may ultimately deem liable if something goes wrong.

  Benefits of Blockchain

  • each record is near real time and therefore provides an accurate and time-stamped record of a transaction;
  • public blockchain systems are widely accessible to any individual with a computer;
  • it uses DLT, each network node verifies the transaction and holds an updated copy therefore providing an immutable record ;
  • it is censorship resistant meaning that once it a transaction is made and paid for, it cannot be subject to third party intervention; and
  • each transaction is irreversible.

  Data Protection

  With the recent changes to the Privacy Act, there are certain considerations for Privacy with blockchains. For the owners of private blockchain systems, there are concerns regarding assumption of responsibility for an eligible mandatory data breach that occurs on the private blockchain system. If you operate private blockchains and provide ‘administrator’ access to a third-party contractor for example, and that third-party contractor unlawfully discloses information, irrespective of whether you played any part in the disclosure, there is a strong chance that you will be held jointly-liable for the privacy breach as ultimately you control the system and the information within.

  A copy of the slides is available here.

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• The protection of Financial Agreements after death

  Financial agreements are an increasingly common part of 21^st century relationships. Financial Agreements may be made by those contemplating marriage (commonly referred to as a Prenuptial Agreement or ‘pre-nup’) or made during the marriage or made following separation to divide property.

  These agreements are a private determination of the parties’ rights and obligations. The terms of the Agreements deal with the couple’s assets during the relationship, at the end of the relationship and can even have an impact on the death of one of the parties.

  It is commonly held that a will-maker has a freedom of testation to determine how they would like their assets to be distributed upon their death. However, certain people who meet legislative requirements such as a spouse or former spouse who are not provided for to their satisfaction in a will may be entitled to make a Family Provision application for an order that they receive a greater share of an estate.

  When a Court determines a Family Provision application it will take into account a myriad of considerations. A Court will consider whether a Financial Agreement has been signed between the applicant and the deceased person.

  The general view taken by the High Court is that rights given by Family Provision are inalienable and it is contrary to public policy to hold a person disentitled to relief merely because they entered into an agreement with the deceased person.[1] Courts in most states have also held that you cannot contract out of making a Family Provision application by signing a Financial Agreement.[2]

  In some cases a Financial Agreement can be relevant to a Family Provision application as it explains the totality of a relationship and shows that a person may not expect to receive anything more from their partner’s estate than what the deceased decided to leave them.[3] However, a Family Provision application will still be available to someone even if there is a Financial Agreement but the Agreement can be used as evidence of the nature of the relationship.

  New South Wales is the only jurisdiction in Australia that gives parties the ability to ‘contract out’ of their rights to make a Family Provision application.[4] This is usually done with a release of rights clause in a Financial Agreement. However, the release must be approved by the Court to be valid.[5] The Court may approve the release before the deceased’s death in a Family Law property settlement or after the deceased’s death as part of the settlement of a family provision claim.

  The release will not be approved by the Court merely because both parties consented to it. The Court will consider whether the release was to the releasing person’s financial advantage or otherwise, whether the provisions of the release were fair and reasonable at the time, and whether independent legal advice was taken and considered.[6]

  In Colosi v Colosi,[7] a release clause in a Financial Agreement was not approved by the Court as the judge held that a clause warranting that legal advice was sought is valueless where the other party must have known the warranty to be untrue.

  Similarly, in Neil v Jacovou,[8] the Court did not approve a release clause as it found that the independent legal advice sought by the widow was not proper and her entitlement was not fair and reasonable as the release of the rights was not for the widow’s benefit.

  Therefore, in all States and Territories, when preparing a Financial Agreement with your partner or former partner, you must also have considerations as to how the document affects your estate plan. Signing a Financial Agreement is not always enough to ensure the intended division of assets after death or prevent a claim. Making your intentions clear and ensuring that both parties have sought appropriate independent legal advice is integral to protecting your interests.

  Written by David Toole and Laura Godfrey. If you would like advice on Estate Planning, please contact us

   

  [1] Lieberman v Morris (1944) 69 CLR 69.

  [2] Kozak v Matthews [2007] QCA 296.

  [3] Hills v Chalk & Ors [2008] QCA 159; Kozak v Matthews [2007] QCA 296.

  [4] Succession Act 2006 (NSW) s 95.

  [5] Succession Act 2006 (NSW) s 95(1).

  [6] Succession Act 2006 (NSW) s 95(4).

  [7] Colosi v Colosi [2013] NSWSC 1892

  [8] Neil v Jacovou [2011] NSWSC 87.

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• Estates Update - The 2018 Budget, Testamentary Trusts and Elder Abuse

  The 2018 Federal Budget was handed down by Treasurer Scott Morrison at 7.30pm on Tuesday 8 May 2018.

  Of particular interest to those in the Estate and Elder Law ‘space’ was the Government’s clarification on the taxation of income derived within a Testamentary Trust and the Government’s $22 million funding to protect the ageing population from elder abuse.

  Testamentary Trusts

  The Federal Government has stated that from 1 July 2019, the concessional tax rates available for minors receiving income from Testamentary Trusts will be limited to income derived from assets that are transferred from the deceased estate or the proceeds of the disposal or investment of those assets.

  Currently, income received by minors from Testamentary Trusts is taxed at normal adult rates rather than the higher tax rates that generally apply to minors.

  This measure clarifies that minors will be taxed at adult marginal tax rates only in respect of income a Testamentary Trust generates from assets of the deceased estate (or the proceeds of the disposal or investment of these assets).

  (Source – Budget Measures 2018-2019 – Part 1 Page 44)

  In other words, if a Testamentary Trust is ‘topped up’ or injected with new assets that have not derived from a deceased estate, the concessional treatment will not apply.

  Does this measure change anything?

  The short answer is “no” – we believe this has always been the case.

  Section 6AA of the Income Tax Assessment Act 1936 applies penalty tax rates to unearned income of a minor except where the income is considered ‘Excepted Trust Income’.

  Section 102AG (2) of the Income Tax Assessment Act 1936 defines ‘Excepted Trust Income’ to include (among other things) amounts which:

  • Is assessable income of a trust estate that resulted from:
  • a Will, codicil or an Order of a Court that varied or modified the provisions of a Will or codicil or
  • an intestacy or an Order of a Court that varied or modified the application, in relation to the estate of a deceased person, of the provisions of the law relating to the distribution of the estates of persons who die intestate.

  So in other words, income of a minor which derived from a deceased estate does not attract penalty tax rates but instead, is taxed at adult progressive tax rates. This is precisely one of the major reasons why Testamentary Trusts are (and continue to be) a major tax planning tool for families when drafting their Wills.

  The Budget measure simply serves to clarify and remind us that assets injected into a Testamentary Trust that have not been derived from the deceased estate will not receive the concessional tax treatment with regard to minors.

  This measure does not mean that assets which have not derived from the deceased estate cannot (or should not) be injected into a Testamentary Trust that has already been established. Assets held within a Testamentary Trust structure (provided it is drafted carefully and correctly) can be significantly safeguarded when it comes to Family Law separation or bankruptcy.

  Of course, specialist advice should always be obtained if assets are subsequently injected into a Testamentary Trust for the sole purpose of defeating a Family Law or creditors claim.

  Elder Abuse

  The 2018 Budget has also announced a $22 million commitment to protect the ageing population from elder abuse. The Government has committed to the creation of an Elder Abuse Knowledge Hub, a National Prevalence Research scoping study, and development of a National Plan.

  The Law Council of Australia has provided some comment as to the spending of these funds, but no doubt in the weeks and months that follow, we should hear more about how the Federal Government intends to use these funds towards the combat of elder abuse.

  Written by Golnar Nekoee, Director, Wills and Estate Planning. To create a power of attorney, or review your will and estate plan, please contact us.

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• I fart in my colleague's general direction: Intentional flatulence as workplace bullying

  Intentional flatulence is often cited as evidence of workplace bullying.

  Comic geniuses Monty Python were never accused of holding back from crude humour. One of their more memorable lines – “I fart in your general direction” – uttered by the Insulting Frenchman, fits this bill. Yet their scenes are often divorced from reality, skirting outside the bounds of the possible.

  However you say it – flatulence, bum sneezes, letting one rip or plain old farting – it is (usually) an involuntary act that is met with embarrassment. This is particularly true in the office, where it certainly is not met with the triumphant gloating of the Insulting Frenchman.

   
  
   

  So it may surprise some readers to learn that intentional farts are in fact frequently cited as sources of workplace grievances and evidence of bullying. Not only are accusations levelled that a colleague farted in their general direction, it is often the case that someone farted in their specific direction.

  Could it really be that fact, at least when it comes to flatulence in the workplace, is stranger even than Monty Python?

  The recent case of Hingst v Construction Engineering involved an allegation that the plaintiff’s immediate supervisor deliberately farted in his specific direction. This resulted in multiple altercations, where the plaintiff, David Hingst, sprayed his supervisor, Greg Short, with deodorant while calling him the imaginative name “Mr Stinky”. Among other allegations, Hingst alleged that Short’s actions amounted to a “complex conspiracy” to “marginalise him and terminate his employment”. This resulted, it was claimed, in Hingst suffering psychiatric injuries.

  The Victorian Supreme Court threw the case out, with Justice Rita Zammit ultimately concluding that no bullying had occurred.

  Aside from being the source of many jokes, the case raises questions about what constitutes bullying and unacceptable workplace behaviour. Indeed, it raises questions about the potential consequences of even an involuntary act for employees and employers. These consequences could be amplified further in the Australian Public Service, where the APS code of conduct is brought into play.

  It is established that a mental element, such as knowledge, intent or recklessness, is not (usually) required to establish a breach of the code. Even in circumstances where a public servant’s behaviour was not deliberate, intentional or even voluntary, it can still be harassment. This is because harassing behaviour is not measured against the perpetrator’s intentions; rather, it is based on whether a reasonable person would conclude the behaviour would humiliate, offend, intimidate or cause a person unnecessary hurt or distress. Had Hingst been an APS employee and made a code of conduct allegation against his supervisor, it is quite possible that the allegations would have been investigated – I have seen lesser allegations upheld.

  In Hingst, Zammit found it was the termination of Hingst’s employment that led him to return obsessively to the flatulence episode, which at the time had not created the alleged psychiatric harm. Rather, it was held that Hingst had “reacted in an extreme and unreasonable way to the termination of his employment, which led him to seek revenge against those whom he blames for his loss”. On Hingst’s own admission, had he not lost his job and if other incidents had not occurred, such as an alleged abusive phone call, the flatulence would “never have been a big issue”.

  From this, we can hypothesise that a reasonable person would not conclude in these circumstances that Short’s flatulence would humiliate, offend, intimidate or cause Hingst unnecessary hurt or distress. Therefore, it’s unlikely that Short, in an APS workplace, would be found to have breached the code of conduct, again in these specific circumstances.

  Having said this, there have been other instances where the act of targeted flatulence would most certainly breach the code. For example, in Bell v Boom Logistics, an act of targeted flatulence was found to “possibly attract dismissal, being an assault”. However, this incident was manifestly targeted: the perpetrator “had his hand on his bum cheek, pulled his cheeks apart and farted in my face”. Of course, Bell is a severe example, but it nevertheless illustrates that involuntary acts can meet the standard required to establish a bullying and harassment – or (as the case may be) a breach of the APS code of conduct.

  Should you find yourself in Hingst’s position (or in the shoes of the unfortunate victim in Bell), it is important to report the unwanted conduct to HR. Your employer owes you a duty of care, and in some instances farting, when it is part of a pattern of bullying or abuse, could give rise to a claim in negligence. In such cases, employees must establish that the harm was reasonably foreseeable and recognisable, and the employer failed to take reasonable steps to mitigate that risk. As Justice Robert Osborn provides in Brown v Maurice Blackburn Cashman:

  “[A] finding that a particular risk of injury is reasonably foreseeable involves a judgment of ‘fact and value’ and it is a matter of fact for the decision-maker to determine whether a defendant ought to have reasonably foreseen his or her conduct might cause psychiatric injury.”

  By contrast, in Hingst, the harm manifested from termination of employment. However, had Hingst suffered psychiatric injury directly from his supervisor’s conduct, the case might have been decided differently.

  Whenever conduct is alleged to have caused psychiatric injury, it should always be cause for pause in a workplace. However curious behaviour like alleged targeted flatulence is, even if it doesn’t amount to bullying, as Zammit concluded, it did paint “a picture of the working culture” at the workplace. Those prone to flatulence should take care to ensure their behaviour doesn’t result in messy, if unintended, consequences.

  John Wilson is the managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law. He thanks his colleague James Connolly for his help in preparing this article.

  First published in The Canberra Times.

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• Risks for property investors: Can your strata body corporate prevent you listing your apartment on Airbnb?

  As the popularity of the ‘sharing economy’ continues to grow unabated, issues can arise where regulations and commercial practices struggle to keep pace with technological change. While Airbnb hasn’t yet attracted the storm of controversy that Uber has, this may be starting to change as cities around the world, including in Australia, crack down on the home-sharing site.

  In Australia the use of property for Airbnb is subject to regulation at multiple levels. For owners of units in apartment buildings however, there is an additional layer of regulation, the strata company by-laws. Since strata units are in such close proximity to each other, conflicts between unit owners can easily arise. Some unit owners may want to use Airbnb to let their units, because of the high returns, and indeed may have purchased an investment property on the basis of those returns. Other unit owners may object to short stay holiday accommodation in their complex because of fears of noise, disruption, security, loss of amenity and insurance and repair costs.

  This situation has seen an increasing number of by-laws which purport to restrict short term letting. But are such by-laws valid?

  The Position in NSW

  The ability of strata by-laws to restrict short term letting varies between states. In NSW, the largest market for Airbnb in Australia, the position has been summarised by NSW Fair Trading’s ‘Strata Living’ fact sheet as follows:

  “Strata laws prevent an owners corporation restricting an owner from letting their lot, including short-term letting. The only way short-term letting can be restricted is by council planning regulations.”

  This is because of s.139(2) of the Strata Schemes Management Act 2015 (NSW) (SSMA) which states:

  “No by-law is capable of operating to prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to a lot”

  NSW tribunal decisions such as Estens v Owners Corporation SP 11825 [2017] NSWCATCD 63 have followed the interpretation outlined by NSW Fair Trading and struck down by-laws restricting short term letting. The position is similar in Victoria, where in Owners Corp PS 510391P v Balcombe [2016] VSC 384 the Supreme Court found that owners’ corporations did not have the power to restrict short term letting.

  Recent WA and Privy Council Decisions

  In contrast, the recent WA decision Byrne v The Owners of Ceresa River Apartments Strata Plan 55597[2017] WASCA 104 saw the Court of Appeal uphold a by-law restricting short term letting to no more than 3 months in 12. The Court of Appeal found that the by-law did not present a restriction on disposal of units in the strata scheme, but only a restriction on how the units could be used.

  The Byrne decision has been well-received in a recent UK Privy Council decision, O’Connor (Senior) and others v The Proprietors, Strata Plan No. 51 [2017] UKPC 45, dealing with by-laws in the Turks and Caicos Islands. It may seem odd that a Privy Council decision should be seen as relevant in Australia, given the Privy Council is no longer a part of the Australian legal system, however the relevant provisions in the legislation of the Turks and Caicos Island had been lifted directly from NSW legislation and was identical to s.139(2) of the SSMA.

  The Privy Council found that:

  ‘statutes prohibiting restrictions on dealing in strata lots do not prevent reasonable restrictions on the uses of the property, even though such restrictions may have the inevitable effect of restricting the potential market for the property.”

  The Impact of these Decisions

  Decisions of the Privy Council are no longer binding in Australia. However, the expectation of many is that NSW courts and tribunals will now follow WA and Privy Council decisions and determine that s.139(2) of the SSMA does not prevent by-laws from restricting short term letting.

  In fact, there is already a NSW Supreme Court decision, White v Betalli [2006] NSWSC 537, which sets out that principle. In that case it was held that a restriction on the use of part of a strata complex for boat storage was not a restriction on dealing in granting an easement for boat storage.

  Conclusions

  There is now considerable doubt over whether the SSMA actually does prevent strata company by-laws from prohibiting short term letting in NSW. The uncertainty resulting from recent case law provides an extra headache for strata unit owners wishing to let their apartment on Airbnb, in addition to complying with zoning and planning requirements. It remains to be seen whether there will be legislative changes to clarify whether a body corporate can prevent short-term letting.

  In the meantime, if you are purchasing a unit in a strata complex and you intend to use it for Airbnb, you need to pay close attention to the by-laws that exist in that complex, and be well aware that those can change over time. It is important to be involved in your strata body corporate and to be active in figuring out how to best manage any downsides associated with short term letting

  If you are considering purchasing property in the ACT and require expert advice, contact us.

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• Planning Update: Strata schemes and minimum lot sizes in the standard instrument

  In our article, ‘Can strata subdivision avoid minimum lot sizes in NSW?’ we reported on the decision of the Land and Environment Court in DM & Longbow Pty Ltd v Willoughby City Council [2017] NSWLEC 17. In that case the Court held that the minimum lot sizes specified under clause 4.1(4) of the Standard Instrument LEP applied to lots being created under a strata scheme. While no doubt legally correct, this outcome came as a great surprise to many of us and was clearly not what was intended.

  The New Amendment

  The Standard Instrument (Local Environmental Plans) Order 2006 (the Standard Instrument Order) has now been amended to clarify that lots under a strata plan or community title scheme are not required to meet the minimum lot sizes shown on the applicable Lot Size Map of a local environmental plan. This amendment effectively reverses the Court’s decision in the Longbow case.

  Where a Council has adopted clause 4.1(4) of the Standard Instrument in its LEP, following the amendment of the Order on 20 April 2018, the sub-clause should now read:

  4. This clause does not apply in relation to the subdivision of any land:

  1. by the registration of a strata plan or strata plan of subdivision under the Strata Schemes Development Act 2015, or
  2. by any kind of subdivision under the Community Land Development Act 1989.

  A sting in the tail…

  Clause 8 of the Standard Instrument Order provides that the amendments made by an amending order ‘do not apply to or in respect of any development application that was made, but not determined, before the commencement of the amending order’.

  This means that the amended provision won’t apply to any pre-existing DA and that, to take advantage of the changes brought about by the amendment, existing DA’s will need to be withdrawn and replaced with a new DA.

  Unless a further amendment is made to apply a different savings provision, Councils will need to be careful to apply the correct version of clause 4.1(4) having regard to the date on which a DA was made. Any DA lodged prior to 20 April 2018 proposing the creation of lots by registration of a strata plan will still need to comply with the relevant minimum lot size specified in the local environmental plan despite the amendment of the Standard Instrument Order.

  For more information about this decision, or Strata subdivision, please contact Alan Bradbury.

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