News & Events

  • Swing, sling and that liability thing

    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

    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 March Summary

    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 (1)

    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

    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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