News & Events

  • 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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  • 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.

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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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  • Who’s right to payment? ACT Building Contract protects homeowners from claims for payment by a subcontractor

    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

    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 Julian Pozza or the Commercial Real Estate Section at BAL Lawyers.

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  • Canberra Home Owner's Building Insurance Are you covered bw

    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

    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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