News & Events

  • Advertising and Promotion – Pitfalls and Risks Business Breakfast Club March Summary

    Advertising and Promotion – Pitfalls and Risks: Business Breakfast Club March 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

    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 Shaneel Parikh in our Business team.

    Written by Shaneel Parikh and Bryce Robinson.

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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 bw

    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

    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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  • Indemnity Clauses: Everyone wants them; no one wants to give them.

    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

    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.

    Written by Shaneel Parikh with the assistance of Bryce Robinson.

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  • Essential Guide to Local Government Law Development Control Orders Under the EPA Act (2)

    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

    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.

    These classifications are:

    • Real Estate Employee Level 1 (Associate Level) with a minimum weekly wage of $728.20 for the first 12 months, and $768.60 thereafter.
    • Real Estate Employee Level 2 (Representative Level) with a minimum weekly wage of $809.10.
    • Real Estate Employee Level 3 (Supervisory Level) with a minimum weekly wage of $890.60.
    • Real Estate Employee Level 4 (In-charge Level) classification which includes licensees-in-charge and agency managers with a minimum weekly wage of $930.50.

    Commission only employment

    Eligibility

    To be eligible for commission only employment, employees need to be 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) provided by the Award for their employment classification for 12 consecutive months over the previous 3 years;
    • Employees engaged after 2 April 2018, 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.

    Minimum commission only rate

    The new minimum commission-only rate is now 31.5% 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.

    Annual leave payments can now be accumulated as a debit on an employee’s account if their agreement contains a commission only rate that is higher than the new award minimum commission only rate of an employer’s gross commission.

    Given the above, 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 this area of law.

    Please contact our Employment and Industrial Law Group if you would like your employment agreements reviewed.

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  • BAL Lawyers ranked in the 2018 edition of Best Lawyers - Australia

    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.

    best lawyers

    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

    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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  • Position vacant - law graduate

    Position vacant - Law Graduate

    We are looking for a law graduate student who is considering their next step in their career.   This role will consist of you handling all the modalities of law including Litigation, Estates and Wills, Business and Corporate, Real Estate, Government and Councils, and Employment and Industrial. This role is a fantastic development opportunity to work with a successful business, professional development, and personal growth within the legal sector. This position is your next stepping stone to your path of becoming a Lawyer.

    The main duties of the role include:

    • To work alongside our professional lawyers and support them by provide general support by:
      • Providing Technical skills and matter contribution;
      • Contribute to achieving client objectives;
      • To provide support in Business Development initiatives;
      • Manage own development and support others;
      • Productivity – Deliver to set standards;
      • Pro-Bono and Community Contributions.

    The successful applicant must:

    • Completed a law degree with a strong academic record
    • Litigation experience is an advantage, but not required
    • A high standard of written and verbal communication skills
    • Strong professional presentation and ability to work autonomously with clients
    • Exceptional attention to detail
    • Excellent time management and organisational skills
    • A positive attitude and the ability to work as part of a team
    • Willingness to embrace technology and commitment to continuous improvement
    • A keen ambition to progress your career
    • Must be able to work independently
    • Self-driven- able thinking outside the box
    • Must be able to convert leads into prospective clients

    Please apply by submitting your CV and Cover letter below. Please contact Helen if you have any questions.

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  • Disproportionate Apportionment A caution to defendants involved in claims under the Building Act 2004 (ACT)

    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 … changes to the Residential Tenancies Act

    They’re here… changes to the Residential Tenancies Act

    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

    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

    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 Adjudicator decisions and non-jurisdictional errors

    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

    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.
    1. 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

    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

    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 Shaneel Parikh.

    [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

    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 Julian Pozza 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

    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

    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 GradySandy Meaney or reach out to our Real Estate Team.

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  • contract terms

    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;
    1. contact the ACCC or the relevant state or territory fair trading agency;
    1. seek legal advice;
    1. seek dispute resolution assistance; or
    1. 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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  • The Transfer Balance Cap and CSSPSS Pensions

    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

    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.
    1. 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.
    1. An extension to the cooling off period to 10 business days (currently 5 business days).
    1. 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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  • An Opal in the rough the impact of the Opal Tower calamity in the ACT

    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

    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

    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.

    Written by Shaneel Parikh with thanks to Bryce Robinson

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  • Business Breakfast Club December Summary

    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)

    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

    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 Shaneel Parikh. If you have any questions about co-operatives, please get in touch with Katie Innes.

    Written by Shaneel Parikh and Bryce Robinson.

     

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  • PPSR registration

    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

    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

    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 otp

    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

    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 Shaneel Parikh in our Business team.

    Written by Shaneel Parikh with thanks to Bryce Robinson.

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  • Residential Tenancies Amendment Bill 2018 No 2 A-CATastrophe

    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

    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

    Dying with Multiple Partners: “Playing the Field” or Poor Estate Planning?

    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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  • Competitive Neutrality for NSW Councils

    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

    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

    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

    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

    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

    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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  • Blockchain the Basics

    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

    Blockchain Basics Networksq

    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.

    Untitled Diagram (7)

    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 Shaneel Parikh in our Business team.

    Written by Shaneel Parikh and Bryce Robinson

     

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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  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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  • BAL Estates Team Listing in Doyles Guide 2018

    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 - Illegal Phoenix Activity

    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.

    For more information, please contact Shaneel Parikh. The next Business Breakfast Club will take place on 12 October 2018. If you would like to attend, please contact us.

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  • Baiting Buyers The Risks of Underquoting in the ACT

    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

    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 14th May, noting that the trial was set down a few days afterwards on 18th 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’.

    1. 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.

    1. 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

    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

    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?

    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

    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

    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

    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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  • Changes To The Corporations Act Invalidity Of Ipso Facto Clauses

    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

    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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  • Misleading and deceptive conduct in a sale of business

    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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  • Managing Contractual Non-Performance

    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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  • Make Good Disputes In Commercial Leasing

    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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  • DELEGATION OF COUNCIL FUNCTIONS

    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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  • blockchain and cryptocurrency - BBC May

    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.

    For more information, please contact Shaneel Parikh. The next Business Breakfast Club will take place on June 8 – if you would like to attend, please contact us.

    A copy of the slides is available here.

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  • The protection of Financial Agreements after death

    The protection of Financial Agreements after death

    Financial agreements are an increasingly common part of 21st 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

    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 colleagues general direction Intentional flatulence as workplace bullying

    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 strata body corporate prevent listing apartment airbnb

    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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  • Strata schemes and minimum lot sizes in the standard instrument

    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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  • salary overpayments

    Salary Overpayments And Deductions: HR Breakfast Club April Summary

    SALARY OVERPAYMENTS AND DEDUCTIONS – THE LIMITS OF THE LAW

    This month John Wilson, Managing Legal Director at Bradley Allen Love, spoke about recovering overpayments from employees.

    John Wilson is Canberra’s leading employment lawyer. He is the Managing Legal Director at Bradley Allen Love and has been a NSW Law Society accredited specialist in Industrial Relations and Employment Law for over a decade. In 2017, John became a member of the NSW Specialist Accreditation Employment and Industrial Law Advisory Committee

    How do you recover overpayments?

    Some enterprise agreements will allow employers to make deductions from wages to offset overpayments. In absence of any enterprise agreement, an employer should come to an agreement with the employee (in writing) about any future deductions from their wages.

    What can you do if the employee does not agree to pay back an overpayment?

    This can happen in two ways, (1) the employee can refuse to pay back the money or (2) the employee can withdraw their consent to have deductions made from their wages.

    In these circumstances the employer can seek to recover the overpayments by applying to the courts for an order of restitution. This is not a desirable outcome – it is much easier to come to an agreement with your employee in the first instance.

    Are there some circumstances where you cannot recover overpayments?

    You can only recover an overpayment for up to 6 years. If a person has been overpaid for 10 years you will only be able to seek repayment for the last 6 (equally, an employee can only seek to be reimbursed for underpayments for up to six years).

    Generally employers are not able to recover overpayments that arise out of a contract. If the employer accidentally gave the employee a contract with a larger bonus than intended the employer is most likely contractually bound to provide this bonus – even if it was not what they had had in mind.

    Q & A Corner

    Q: What if an overpayment happened 10 years ago but you only just discovered it today? Do you have 6 years from today to reclaim the overpayment?

    A: No, you can only recover overpayments from the last 6 years regardless of whether the parties did or did not know about it.

    The HR Breakfast Club runs on the third Friday of every month at BAL Lawyers. If you would like to be added to the invite list, please contact us. The next HR Breakfast club will be held on 18 May 2018 – for more details, please click here.

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  • shareholder activism

    Federal Court decision deals setback to rising Shareholder Activism in Australia

    Shareholder activism has been growing in popularity in Australia. It is a means by which minority shareholders can band together to pressure boards to act in certain ways (usually to the benefit of the minority shareholders with social goals, sometimes not). Advocates contend that shareholder activism is an important way of ensuring that company management remain accountable to their shareholders. Many directors and boards, on the other hand, view the actions of shareholder activists as myopic for focusing on short term earnings for shareholders or misguided for promoting goals that are extraneous to the company’s business, instead of long term growth and value creation.

    Shareholder activism is made possible by the permissive regulatory framework which governs the rights of shareholders, including the Corporations Act which:

    • allows shareholders with only 5% of issued share capital have the right to call a General Meeting; and
    • gives shareholders the right to seek relief against ‘oppressive conduct’ against them.

    The Federal Court in RBC Investor Services Australia Nominees Pty Ltd v Brickworks Ltd [2017] FCA 756 dealt an apparent blow to shareholder activism, instead preferencing board autonomy. The Court’s decision demonstrates that where directors have a basis to believe they are acting with the best interests of the Company in mind, the Court will be reluctant to intervene.

    Brickworks Ltd (Brickworks) and Washington H. Soul Pattinson & Company Ltd (Soul Pattinson) are two companies that operate under a cross-shareholding structure implemented in the 1960s, meaning that each company owned approximately 40% in the other (such arrangements cannot be implemented today due to a prohibition in the Corporations Act). Perpetual Investment Management Ltd (Perpetual) is a minority shareholder of both Brickworks and Soul Pattinson.

    Perpetual had engaged in shareholder activism against Brickworks and Soul Pattinson for many years, putting multiple proposals to the Board to have the cross-shareholding dismantled. In this case, Perpetual claimed it had been ‘oppressed’ (as a minority shareholder) due to the maintenance of the cross shareholding structure, which Perpetual argued entrenched the incumbent boards, thereby depressing the share price in each company.

    Justice Jagot dismissed Perpetual’s claim for oppressive conduct stating there was no evidence that the dismantling would yield material longer term financial benefits to the shareholders of either company. In respect of Perpetual’s many failed attempts to dismantle the cross-shareholding structure, her Honour reaffirmed the principle that it is the responsibility of the directors (not the Court) to determine what is in the best interests of the company as a whole. Her Honour found that the Board had considered the range of potential effects of the each of Perpetual’s proposals (both positive and negative) and acknowledged the Board’s decisions to preserve the structure were duly informed and considered.

    This outcome is in line with the Court’s traditional reluctance to intervene in or to punish directors for the result of ‘commercial business decisions’, lest it is unequivocally clear that irrationality, illegality, unfairness or oppression has occurred as a result.

    Despite the loss by Perpetual in this case and the Court’s tendency to favour board autonomy, the rise in shareholder activism is a warning against corporate complicity and complacency. Boards should ensure that they at all times act in the best interests of the company, communicate proactively and clearly with shareholders, think strategically about all external communication and be ready to engage in dialogue if and when activists come knocking; even if only to save the costs of expensive litigation..

    Written by Shaneel Parikh. Shaneel thanks Maxine Viertmann, Law Clerk, for her help in preparing this article. For advice on the changes to the Privacy Act or to update your privacy policies please contact us.

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  • building-1080599_1920

    Essential Guide to Local Government Law: Expert Witness Survival Guide

    Key Instruments

    • Uniform Civil Procedure Rules 2005 (the UCPR) – Part 31 Division 2 – Expert Evidence
    • Expert Witness Code of Conduct – Schedule 7 of UCPR
    • Land and Environment Court Policy – Conference of Expert Witnesses
    • Land and Environment Court Policy – Joint Expert Reports
    • Land and Environment Court Practice Notes – sections dealing with expert evidence

    Why are expert witnesses special?

    Expert witnesses are special because they are allowed to give evidence about their opinion and not only about matters of fact.

    The usual rule is that evidence given in Court must relate to matters of fact: what a witness did, saw or heard; and not matters of opinion: what the witness thought about what they did, saw or heard.

    It is the judge’s role to listen to the evidence of what people did, saw or heard (i.e. ‘facts’) and draw inferences from those facts to form an opinion about what actually happened.

    Expert opinion is an exception to the usual rule that allows a person who has specialised knowledge based on the person’s training, study or experience to give opinion evidence in Court proceedings that is based on that person’s expert knowledge.

    Admissibility of expert opinion evidence

    The Evidence Act provides that, if a person has specialised knowledge based on the person’s training, study or experience, they are allowed to give opinion evidence that is wholly or substantially based on that knowledge. However, there are some rules about when and how this will be allowed. These are:

    1. Relevance or helpfulness test

    This is fundamental – evidence in any court proceedings is only admissible if it is relevant. Unless the expert evidence is relevant and will help the Court make its decision, the evidence will not be allowed.

    2. Specialised knowledge test

    This has two elements:

    • The first is that the expert opinion must lie within a field of knowledge that the law recognises as one on which expert evidence can be called; so expert evidence will not be allowed on a topic if an ordinary person is just as capable of forming a view about it without expert assistance. For example, an ordinary person would be able to form an opinion on the colour of a building.
    • The second is that the subject must form a part of a body of knowledge which is sufficiently organised or recognised to be accepted as a reliable body of knowledge – such as engineering or town planning.

    3. Qualifications test

    The witness must be an expert in their field and must have acquired specialised knowledge on the topic based on their training, study or experience. Academic qualifications and experience usually go together – simply holding an academic qualification with no real experience would not be accepted by most of us as qualifying a person as an expert. However, sometimes people are recognised as experts even though they do not have the relevant academic qualifications if they have significant practical experience. For an example of this in a local government context, see our recent newsletter: https://ballawyers.com.au/2018/04/22/expert-witness/

    4. Basis test

    Again there are two aspects to this test:

    • First, the expert opinion must have its basis in the expert’s specialised knowledge – evidence by an expert that strays beyond the area of his or her expertise is, self-evidently, no longer expert opinion.
    • Secondly, the facts on which the expert opinion is based must be disclosed in the expert’s report – an opinion based on incorrect assumptions will not assist the Court, so it is important to know what facts were found or assumed in arriving at the expert’s opinion.

    Expert witness codes, policies and practice notes applicable in the Land and Environment Court

    The key instruments listed at the top of this Guide contain detailed requirements about the preparation and giving of expert evidence in the Land and Environment Court of NSW (the Court). The most important thing to be aware of is that the overarching duty of an expert witness is to the Court, not to any particular party.

    The Court may require ‘competing’ experts to discuss their views to try and narrow or resolve the expert issues in dispute. This is called joint conferencing. The Expert Witness Code of Conduct sets out requirements in relation to the joint conferencing of experts. The Code currently requires the experts:

    • to confer;
    • to endeavour to reach agreement on any matters in issue;
    • to prepare a joint report specifying any matters not agreed and the reasons for any disagreement.

    The Code requires each expert witness to exercise his or her independent judgment in relation to every conference in which they participate and in relation to the preparation of each expert witness report. It provides that the expert must not act on any instruction or request to withhold or avoid agreement.

    The Court’s Practice Notes provide that legal representatives are not to be involved in the preparation of expert reports and are not to attend joint conferences of experts without leave of the Court. The legal representatives should however ensure that experts are familiar with the relevant parts of the key instruments listed above.

    Where a dispute arises between the experts in the preparation of their joint report it is possible to seek directions from the Court to resolve the dispute – Landco (NSW) P/L v Camden Council [2017] NSWLEC 86.

    The Court’s Joint Expert Reports Policy provides that an expert report should:

    • generally engage with the matters the experts are required to address and any disagreement between them;
    • not be a mere ‘copy and paste’ from an individual expert report or council report;
    • only set out facts and assumptions that are relevant to the opinions expressed in the joint report;
    • where relevant, contain photos, maps and diagrams to explain the experts’ evidence, or the difference in the evidence of the experts;
    • avoid jargon;
    • prefer short sentences or ‘dot points’ to long sentences; and
    • not use excessive amounts of material directly taken from legislative sources or other reports.

    Some practical tips on giving expert evidence – ten golden rules[1]

    1. Be prepared – thorough preparation is the key to being a credible and confident expert witness:

    • Read the material you are briefed with thoroughly.
    • Think about whether there is other material that you will need access to and, if so, make arrangements to get it.
    • Read the Code of Conduct and the associated Court practice notes and policy.
    • Always inspect the site.
    • Carefully read the questions you are being asked to answer:
      — Are they within your particular area of expertise?
      –Are there other obvious questions you have not been asked?
    • Make sure you have capacity to prepare the report in the time required and that you will be available to attend the hearing, if necessary.

    2. Take care in writing your expert report:

    • A good report has two readers in mind:
      –the judge (who decides the issues and needs to understand the experts’ opinions and how they have been arrived at); and
      –the other side – both their expert and lawyers.
    • Evaluate the strength of your evidence:
      –see what can be agreed with your counterpart during joint conferencing;
      –anticipate and deal with the weak points in the argument upfront in your expert report – not doing so may result in damage to your credibility later in cross-examination.
    • Develop clear reasoning:
      –the reasons for any conclusions you reach and opinions you form must be clear;
      –link the facts and any assumptions to your opinion and ensure there is a logical flow between them.

    3. Be punctual and ready – Make yourself feel comfortable about the exercise and don’t arrive at Court feeling rushed. Talk to your party’s lawyers beforehand about how your evidence will be taken and make sure you are ready for what is coming. Even little things like being asked whether you will give your evidence on oath or affirmation can throw you if you are not expecting to be asked – especially if you are already feeling a little nervous. Have any papers you need ready to take with you into the witness box. Make sure documents are stapled, or logically organised in a folder, and paginated so you can find and refer to them easily.

    4. Prepare thoroughly – make sure you have thoroughly read your individual and any joint report. There is nothing more embarrassing than finding that the other side’s lawyer has read something to you from your own report that contradicts your argument.

    5. Make sure you understand each question before answering it – guessing what the question was can get you into trouble. There is nothing wrong with asking a lawyer to repeat a question.

    6. Answer the question that was asked as directly, concisely, honestly and courteously as you can. Don’t try to work out where the questioning is going or answer the question that you think should have been asked – but wasn’t. Take your time – If you need to refer to your papers to be able to answer a question, say so. Don’t fall into the trap of trying to appear knowledgeable by answering too quickly. If you need a moment to consider your answer – take it.

    7. Direct your answers to the judge/commissioner – they will be the one who will decide the case, not the lawyers asking you questions. Also, don’t look to your own party’s lawyer for approval when answering questions from the other side. And stay interested in what’s being said especially during ‘hot tubbing’ when questions are being directed to another expert – looking bored or distracted will not reflect well on you.

    8. Make necessary and appropriate concessions – your objectivity is essential to the credibility and reliability of your expert evidence. This will not be lost by forcefully defending your opinion but it may be compromised if you are unwilling to give genuine consideration to other points of view.

    9. Don’t lose sight of your primary obligation to assist the Court – it is very easy to fall into the trap of being an advocate for the party who engaged you. Your role is to provide an impartial opinion to assist the Court make an informed and fair decision. Don’t undermine your credibility by starting to argue for your client’s position.

    10. Finally, don’t engage in personal exchanges with the other side’s lawyer – you will nearly always come off second best!

     

    Read more Essential Guides to Local Government Lawhttps://ballawyers.com.au/local-government-guides/

    If you would like to be notified when new Essential Guides are published, sign up to our mailing list at https://ballawyers.com.au/.

    [1] We acknowledge the helpful assistance derived from the following articles in the preparation of these tips:

    ‘The Art of Giving Expert Evidence’ by Gerry Lagerberg published in The Lawyer 10 April 2000

    ‘Medical Expert Witnesses: Tips and Traps When Giving Evidence’ by Harry McCay and Dr Walid Jammal, Avant Mutual, 20 July 2017

     

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  • Expert Witness Survives Challenge

    Council Expert Witness Survives Challenge

    The acceptance of expert evidence provided by a Council employee by a Commissioner of the Land and Environment Court was unsuccessfully challenged in a recent appeal.

    The appeal arose from an application to modify a development consent for the construction of a dwelling house. The consent, which was granted in 2001, incorporated a design for a driveway to access the dwelling and the modification application involved a significant reconfiguration of the driveway. The driveway was steep and engineering evidence was called by both sides.

    The council’s evidence was given by its development engineer. He held formal academic qualifications in engineering surveying but not in engineering. He did however have extensive experience, spanning almost 40 years in local government, in domestic driveway design.

    His evidence was challenged by the applicant on two grounds. One was that he did not have appropriate qualifications to give expert engineering evidence to the Court as he had no formal engineering qualifications. The other was that, as an officer of the council, he had a conflict of interests and could not be regarded as an appropriate person to give expert evidence to the Court.

    Both grounds of challenge were rejected by the Court in a decision handed down on 10 April 2018.[1]

    On the first ground, Moore J held that the qualification for a person to give expert evidence does not necessarily require that they have a university-based qualification. Instead, they should be able to demonstrate from their specialised training, knowledge or experience that they have obtained the necessary degree of specialised knowledge or skill to be regarded able to speak authoritatively about the subject matter in question. In this case the council witness clearly had significant relevant experience and an appropriate and relevant qualification to give expert evidence on the technical aspects of the proposed driveway design. His Honour commented (at [72]) that:

    Indeed, to hold that the absence of a university-based qualification would disentitle Mr Clare from being accepted as an expert for the purposes of assessing Mr Doyle’s application would be intellectual arrogance of the highest order. It would also be bad at law!

    The Court also rejected the second ground of challenge, saying that neither the expert witness nor the council as his employer had any pecuniary interest or other direct or indirect interest in the outcome of the proceedings.

    Moore J said that a conflict of interests could arise where an expert witness might be perceived as having a direct or indirect pecuniary interest arising out of their employer’s role in particular proceedings and therefore did not meet the independence obligations imposed on expert witnesses. Excluding a potential witness in such a case may not be unreasonable, depending on the particular circumstances. However, his Honour observed that such a situation does not arise in the case of a council employee when the council’s position in the proceedings is consistent with the position adopted by the council employee. The Court noted that a contrary position arises where the position adopted by the council is inconsistent with the approach recommended by the council officer and observed that, to avoid such a conflict, it was customary for councils to engage external experts when that situation occurred.

    [1] Doyle v Hornsby Shire Council [2018] NSWLEC 45.

    For more information about this case, or on council expert witnesses, please contact Alan Bradbury.

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  • Re-wrapping Red Tape: Changes to the Treasury Act

    Re-wrapping Red Tape: Treasury Laws Amendment

    As we start down the slippery slope towards the end of the 2017-18 financial year, conveyancers, solicitors, buyers and developers alike need to come to terms with the likely impact of the Treasury Laws Amendment (2018 Measures No.1) Act 2018 (Treasury Act) on real property transactions.

    With the Treasury Act commencing on 1 April 2018, buyers (yes, buyers!) rather than the developer (or the supplier) must now withhold and pay directly to the Australian Taxation Office the GST payable on a taxable supply that is made by way of sale or long term lease of:

    1. new residential premises; or
    2. potential residential land that is included in a property subdivision plan and which does not contain any building that is in use for a commercial purpose.

    However, the withholding regime will not apply to new residential premises which have been created through substantial renovations.

    The amount to be withheld by buyers will be equal to:

    1. 1/11th of the purchase price identified in the contract for sale;
    2. where there is no purchase price, 1/11th of the GST exclusive market value; or
    3. where the margin scheme applies, 7% of the purchase price (or GST exclusive market value where there is no purchase price).

    The amount must be withheld and paid to the Australian Taxation Office on the day on which consideration is first provided. In most circumstances, this will be on the day of settlement.

    The Treasury Act applies to all contracts under which any consideration (other than the deposit) is first provided on or after 1 July 2018, though there is an exemption for those contracts entered into before 1 July 2018 and under which the consideration is first provided before 1 July 2020.

    So what are the practical implications of the Treasury Act? Well, for a developer, they will still need to account for the GST amount in its BAS and will be entitled to a credit for the GST amount once paid by the buyer to the ATO. They will also need to give buyers notice specifying whether the buyer is required to withhold payment from the supply, and if relevant, the amount to be withheld and paid to the ATO.

    It would be prudent for developers to consider a review of their existing developments and future sales to ensure both administrative processes and contract terms facilitate the requirements of the withholding regime.

    Whilst the intention of the Treasury Act is to discourage GST avoidance, we expect the changes will be somewhat detrimental to developers and likely to lead to increased transaction costs.

    For property developers who require further advice on these reforms, please contact a member of our Real Estate Development team.

    Written by Benjamin Grady, Associate, and Julian Pozza, Lawyer.

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  • Competition Consumer Act: Business Breakfast Club April Summary

    Competition Consumer Act: Business Breakfast Club April Summary

    UPDATE: On 6 November 2017, changes to the Competition and Consumer Act 2010 (Cth) took effect.

    This month at Business Breakfast Club, we discussed changes to the Competition and Consumer Act 2010 (the Act) which change the notification regime and extend the type of prohibited conduct. The changes make it easier for small businesses to obtain legal protection from potential breaches of the competition laws which usually prohibit businesses from collectively bargaining with a customer or supplier. In particular, we focused on the illegal practices of ‘concerted practice’, ‘cartel conduct’ and ‘collective bargaining’. BAL Legal Director, Mark Love shared some of his insights on the topic. Mark touched on:

    Why do you need legal protection?

    Competitors who engage in collective bargaining may be in breach of the Act. The most effective way for businesses to collectively bargain without risk of breaching the Act is to lodge a ‘notification’ with the Australian Competition and Consumer Commission (ACCC) which identifies the proposed bargaining group and the type of conduct they intend to engage in. The notification process has been available since 2007, but has historically been viewed by the business community as not providing a substantive practical benefit. This is because the notifications were interpreted narrowly by the ACCC so it was still possible to breach the Act. Now, notification can be given for a class of persons both in relation to the beneficiaries of the bargaining group and the targets (customers or suppliers). However, with the broadening of the notification regime comes a third basis for infringement: concerted practice.

    Collective bargaining

    Collective bargaining is an arrangement whereby two or more competitors come together to negotiate terms, conditions and prices with a supplier or a customer. Essentially, collective bargaining tends to benefit smaller businesses who do not have the volume (of sales or purchases) alone to give them bargaining power. Permission to collectively bargain can be obtained through the notification or authorisation procedures of the Act provided there is some ‘public interest’ in allowing the conduct.

    Cartel conduct

    Cartel conduct encompasses agreements between competitors to fix prices, divide markets, rig bids, or restrict outputs thus restricting competition. To prove “cartel conduct” the ACCC is not required to prove that there has been a lessening of competition as a result of the conduct, rather the ACCC must demonstrate that:

    1. the persons concerned are in ‘competition’ (whether for customers or suppliers);
    2. there is a relevant ‘purpose’ to the arrangement or understanding; and
    3. there is a relevant contract, agreement or understanding to that effect.

    The Court considered ‘cartel conduct’ in ACCC v Australian Egg Corporation Limited [2017] FCAFC 152. In that case, the ACCC alleged that Australian Egg Corporation Limited (AECL) and two egg producing companies, Ironside Management Services Pty Ltd (T/A Twelve Oak Poultry) and Farm Pride Foods Limited attempted to induce egg producers who were members of AECL ‘to enter into an arrangement to cull hens or otherwise dispose of eggs, for the purpose of reducing the amount of eggs available for supply to consumers and businesses in Australia’.

    Virtually every aspect of the ACCC’s case against AECL was found by the presiding judge to be true and based on largely uncontested facts, specifically the conduct of the parties at an industry summit brought together urgently to address the very issue of the oversupply of eggs and the damage that was apt to do to egg producers and the Australian Egg industry. However, despite the findings of fact the Court found AECL was not in breach of the Act because the conduct was something ‘less than a binding contract or arrangement’.

    Concerted practice

    As a result of the AECL decision, the Act now includes a third basis of infringement which is a hybrid of the cartel and collective bargaining provisions. Concerted practice is a form of coordination between competing businesses by which, without them having entered a contract, arrangement or understanding, practical cooperation between them is substituted for the risks of competition. There must be the purpose or likely effect of substantially lessening competition which has been held to be ‘whether the effect of the arrangement was substantial in the sense of being meaningful or relevant to the competitive process’.

    Q&A Corner

    Q. What are the risks associated with lodging a notification to the ACCC?

    A. Lodging a notification to the ACCC requires businesses to disclose information regarding the proposed conduct in a sufficiently precise manner. The ACCC can then consult with interested parties and assess the notification. As part of the notification, it is important that you:

    • outline the areas of competition likely to be affected by the proposed conduct;
    • describe the likely public benefits from the proposed conduct; and
    • specify the likely public detriments (including any adverse effect on competition).

    Some businesses may be reluctant to disclose this information as it may prompt the ACCC to carefully scrutinise the conduct of the businesses engaged in exclusive dealing. Further, once notification is lodged with the ACCC, it is published on the ACCC’s public register. Businesses must determine whether the risks associated with notifying the ACCC of the proposed conduct (the publication of business information) outweighs the risks of not obtaining the ACCC’s “blessing” for the conduct. Remember, breaches of the cartel, collective bargaining (and now) concerted practice provisions can result in criminal prosecution.

    The Business Breakfast Club is held on the second Friday of each month, the next one is on 11 May. If you would like to attend, please contact us to be added to the invite list.

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  • Investigations of Staff Misconduct Complaints

    Essential Guide to Local Government Law: Investigating Staff Misconduct Complaints

    Investigations of staff misconduct complaints, including workplace bullying can be difficult. It is important to carry out your investigations in a reasonable manner: below is a guide on how to best investigate staff misconduct complaints, including workplace bullying.

    Key instruments

    1. Local Government (State) Award 2017 (‘Award’).
    2. Local Government Industry Guidelines on Workplace Investigations under section 36 of the Award (‘Guidelines’)
    3. Model Code of Conduct for Local Councils in NSW (‘the Code’)
    4. Procedures for the Administration of the Model Code of Conduct (‘the Procedures’)

    Key questions to ask when a complaint has been made

    How serious is the complaint?

    • If the complaint is minor, dated, or there are mitigating factors, then it may be best dealt with at a management level. There is discretion under both the Award (clause 36) and the Procedures (at 5.2) to handle a complaint this way.
    • What will be achieved by escalating (or not escalating) the complaint? At law, the only legitimate purpose to invoke civil disciplinary proceedings is to protect the Council (and public confidence in it). Invoking proceedings to simply ‘punish’ an employee is unnecessary and impermissible.

    What process do I need to follow?

    • Establish if the complaint is most accurately characterised as a performance issue, a conduct issue, both, or neither, and adopt the corresponding process. You may need to get more particulars to answer these questions (i.e. who, what, how, where, when etc). If you think the complaint, if substantiated, might amount to a breach of the Code, identify with precision what particular section(s) of the Code are involved.

    Remember that there may be multiple processes to follow, and ensure your process complies with all applicable processes. Key potentially applicable processes include:

    • the disciplinary process set out at cl 36 of the Award (and the Guidelines);
    • the Procedures for Administration of the Model Code of Conduct; and/or
    • the Public Interest Disclosure process.

    Key considerations once a decision has been made to Investigate:

      1. It is important to follow all applicable procedures. Make sure you know who has what role.
      2. Remember that the employee has a right to be represented in any Investigation.
      3. Most Investigations regarding staff can be dealt with ‘in-house’�, but consider whether Council needs assistance of an external body to carry out the Investigation. This is particularly advisable in cases concerning serious or complex allegations, sensitive subject matter, where an actual or perceived conflict of interest exists, or where Council doesn’t have the resources to conduct the investigation expeditiously.
      4. Any sanctions or disciplinary responses for proven misconduct must be only those necessary to ‘protect’ the Council (and public confidence in it). Disproportionate sanctions are impermissibly punitive.

    Key things to remember in all investigations:

    Procedural Fairness

    Procedural fairness is owed to the respondent, not the complainant.

    In essence, the rules of procedural fairness require:

      1. the person who may be subject to an adverse finding is ‘heard’ in a manner appropriate to the circumstances;
      2. the decision maker is able to bring an impartial mind to the question before him or her (and is seen to be able to do so); and
      3. decisions are made on the basis of logically probative evidence.

    In particular, the employee concerned has a right:

      1. to receive clear notice of all allegations and how, precisely, they might offend the Code;
      2. to receive all relevant information before responding to the allegations;
      3. to be given a fair amount of time to consider the allegations and supporting materials before being required to respond; and
      4. for their response to be received and genuinely considered before an adverse decision is made.

    Suspension

    In certain circumstances it may be appropriate to suspend an employee while an investigation is being carried out. However, suspension as a disciplinary tool should be used sparingly and only when it is necessary for the integrity of the investigation and protection of the Council.

    Work Health and Safety

    It is important to carry out your investigations in a reasonable manner so as to reduce the risk of mental health injuries to those involved.

    Need more help?

    Our Employment and Workplace Lawyers provide effective solutions to help manage your workplace and employees, while minimising your exposure to risks and issues. Where claims are made by employees, we are experienced advocates in all workplace jurisdictions, including the Fair Work Commission and the Federal Courts.

    For further advice on investigations into staff misconduct complaints, please contact Gabrielle Sullivan, Director of Employment and Workplace Relations, or Alan Bradbury, Director of Planning, Environment and Local Government.

    Read more Essential Guides to Local Government Law.

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  • BAL Lawyers ranked in the 2018 edition of Best Lawyers - Australia

    4 BAL Directors ranked in the 2018 edition of Best Lawyers - Australia

    Four BAL Directors have been recognised for their legal excellence in the 2018 edition of the Australian Financial Review’s Best Lawyers Australia list. Produced by a peer review company and published by the Australian Financial Review, the list is compiled following an extensive evaluation process. The list includes more than 3,300 lawyers from 330 law firms nationwide, up from more than 3000 last year.

    The directors have been successful in the following practice areas:

    • Alan Bradbury – Government Practice, Planning and Environment Law;
    • John Bradley – Leasing Law, Real Property Law;
    • Mark Love – Commercial Law, Insolvency and Reorganisation Law, and Corporate Law; and
    • John Wilson – Labour and Employment Law, Occupational Health and Safety Law.

    This is the ninth consecutive year the Alan Bradbury has been acknowledged for his expertise. Managing Legal Director John Wilson makes his sixth appearance in the list, while Mark Love and John Bradley were again recognised for their respective practices.

    John Wilson congratulated his fellow Legal Directors 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 three 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.

    BAL directors - best lawyers 2018

    Above: Mark Love, John Wilson, John Bradley and Alan Bradbury, – listed in The Best Lawyers in Australia 2018

    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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  • Builders beware - owners given clarity on shoddy building work in off-the-plan apartments

    Builders beware: owners given clarity on shoddy building work in off-the-plan apartments

    A building dispute running for the better half of two decades between the owners of Units Plan 1917 and the developer, Koundouris Projects, appears to have finally come to an end on 16 February 2018 with the High Court refusing Koundouris’ application for leave to appeal against the decision of the ACT Court of Appeal in Koundouris v Owners – Units Plan No 1917 [2017] ACTCA 36.

    Originally heard in 2016, the matter concerns a claim by the owners of Units Plan 1917 against the builder, Mr Koundouris, in relation to the construction of the Lagani apartment complex and the various issues in the complex following its completion, including the existence and ongoing water leaking and damage in units and the cracking of masonry and facades. The matter heard was complex, particularly due to the various changes in legislation having taken place during the construction phase, and turned on the interpretation of the statutory warranties contained in the Building Act 1972 (ACT) (now repealed) and the Building Act 2004 (ACT). Though the primary judge held that Mr Koundouris had indeed breached these statutory warranties, it was the decision of the ACT Court of Appeal that provides greater certainty to unit owners, builders and developers alike as to the application of the statutory warranties in off-the-plan contracts for sale.

    The ACT Court of Appeal largely upheld the primary judge’s decision but made the following important distinctions:

    1. It is not necessary for a builder and developer to have a written contract in place for the statutory warranties to apply;
    1. The statutory warranties extend to the defined parts of the unit titled building, being load bearing walls, columns, footings, slabs and balcony’s;
    1. The statutory warranties operate both during construction and following completion;
    1. The source of an owners rights for breaches of the statutory warranties arise as the successor in title but can also arise for successive owners as the statutory warranties are implied in the contract for sale; and
    1. Unsuccessful repair works (where there is an inherent issue with the construction of the building) throughout the statutory warranty period may lead a builder to breach the statutory warranties repeatedly allowing a claim to be brought against the builder for an extended period of time.

    Though some might suggest that the decision of the ACT Court of Appeal may discourage builders from attempting to repair building defects for fear of inadvertently extending the limitation period under the statutory warranty, the decision makes clear that the intention of the statutory warranties are to protect the consumer from shoddy building work and that the provisions of the legislation should be interpreted accordingly.

    Written by Benjamin Grady. If you require further information or advice in regards to your rights and obligations concerning building defects, please contact us.

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  • Financial Exploitation through Powers of Attorney and the Remedies

    Financial Exploitation through Powers of Attorney and the Remedies

    Thankfully, more people are becoming aware and talking more openly about Elder Abuse and its prevalence among the Australian community. The most common type of elder abuse is the financial exploitation of a close elderly family member (followed by psychological and physical abuse).

    Unfortunately, much of the financial exploitation stems from misuse by an attorney appointed pursuant to a Power of Attorney document.

    This article presents a brief summary on how financial exploitation through a Power of Attorney can take place, and the remedies available against a ‘rogue’ attorney.

    How does Financial Exploitation Take Place

    Putting in place a Power of Attorney has practical advantages – it is a relatively low cost, informal and private appointment by a donor allowing the appointment of a person or persons (the ‘attorney’) to make decisions on the donor’s behalf with regard to their financial and property matters.

    Unfortunately, it is the informal, private and unregulated nature of a Power of Attorney that makes it susceptible to misuse.

    A Financial Management Order by contrast requires a formal application to the relevant State or Territory Guardianship or Financial Management Board or Tribunal (in the ACT, this would be the ACT Civil and Administrative Tribunal or simply, ‘ACAT’). The Board or Tribunal is then responsible for ensuring a decision is arrived at having regard to all the evidence, including medical evidence, arguments and submissions by interested persons and that a decision is ultimately made in the best interests of the interested person.

    Perhaps one of the most notable cases of financial exploitation was highlighted in the case of Brennan v State of Western Australia[1]. Mr Kopec was a polish migrant living in Western Australia with very few relatives in Australia. He lived by himself on a farm and was suffering from deteriorating physical and mental health. Mr Kopec appointed Damien Brennan, a legal practitioner as his attorney pursuant to an Enduring Power of Attorney. Over the span of the next 8 years, Mr Brennan continued to misappropriate close to $900,000 of Mr Kopec’s estate including continuing to operate the Enduring Power of Attorney well after Mr Brennan had died.

    A more recent case involving the misappropriation of funds by an attorney is the case of Mezzapica v Mezzapica[2] which was handed down in November 2017. This case involved an elderly Italian mother who had appointed her two sons as her attorneys. After the mother’s death, one of the sons (Robert, the Plaintiff) questioned a number of transactions which were entered into by the other son (Renato, the Defendant) including a number of cheques which Renato had drawn from his mother’s Commonwealth Bank account in favour of himself.

    The Court held that the cheques were not actually drawn in the exercise of Renato’s power as his mother’s attorney. The Court did however find that Renato had misappropriated other funds (totalling over $62,000) from a trust account which held in his mother’s name for the benefit of her grandchildren. This misappropriation by Renato constituted a breach of trust by his mother such that the mother’s estate had to account for the loss.

    Fortunately in this case, it was held that the mother did not suffer a loss. At the date of this article it is not clear whether further action will be taken against Renato for his acts as his mother’s attorney.

    Available remedies

    The range of remedies available in circumstances of financial exploitation and misappropriation can be broadly classified into three categories:

    • statutory remedies;
    • common law remedies; and
    • criminal remedies

    A brief overview of each of these is discussed further below:

    Statutory remedies

    Victoria, Queensland, South Australia, the ACT and Tasmania have specifically legislated to impose substantial penalties or allow for compensation for the donor (or their estate) caused by the failure of an attorney to comply with their statutory duties in the exercise of their powers[3]

    The remaining States and Territory (Western Australia, Northern Territory and New South Wales) do not provide any legislative right to seek compensation or damages from an attorney where the donors assets have been misappropriated if there has been proof of financial exploitation. The only statutory remedy in Western Australia, Northern Territory and New South Wales is that an application can be made to the relevant State and Territory Court or Tribunal (or, the Court or Tribunal can make a decision on their own initiative) to revoke a Power of Attorney if they are satisfied it is in the best interests of the Donor.

    Common Law Remedies

    There are three fundamental equitable grounds upon which a Court can set aside a transaction involving financial exploitation by an attorney:

    • Breach of Fiduciary Duty – an attorney is a fiduciary and where the attorney obtains a profit as a result of a transaction that conflicts with the interests of the donor, the Court has the ability to set aside the transaction
    • Unconscionable conduct – the High Court’s decision in the case of Amadio[4] established the principles with respect to Unconscionability can be established where three elements have been satisfied:
    1. That one party has a ‘special advantage’ (the stronger party);
    2. That the disability is sufficiently evident that the stronger party knew or ought to have known of the weaker party’s special disadvantage; and
    3. the stronger party took unfair advantage of the weaker party’s special disadvantage to obtain a benefit for him/herself.
    • Undue influence – where an attorney has procured a transaction by undue influence, again the transaction can be set aside.

    Criminal Remedies

    At the present time, there is no specific criminal offence in any Australian jurisdiction that deals with financial exploitation of an elderly person, through a Power of Attorney or otherwise. Financial abuse and exploitation can be prosecuted through a variety of property offensive including misappropriation of property, theft or fraud and in some cases, domestic violence or abuse. In the ACT, there is a separate offence for dishonestly obtaining a financial advantage by deception [5]

    In reality however, there has been a noted failure by police to investigate and subsequently prosecute for criminal offences in cases where there has been financial exploitation of an older person generally. There is also typically a strong desire by older persons to maintain family privacy and as a result, financial exploitation is often unreported.

    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.

    [1] Brennan v The State of Western Australia [2010] WASCA 19

    [2] Mezzapica v Mezzapica [2017] NSWSC 1553

    [3] Powers of Attorney Act 2014 (VIC) s77, Powers of Attorney Act 2006 (ACT) s 50 – time limits apply from when the application must be made to compensate the principal or the estate, Powers of Attorney Act 1998 (Qld) s106-107, Powers of Attorney and Agency Act 1984 (SA) s 7, Powers of Attorney Act 2000(TAS) s32

    [4] Commercial Bank of Australia Ltd v Amadio [1983] HCA 14

    [5] Part 3.3 Division 3.3.2 of the Criminal Code 2002 (ACT)

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  • Has the clock really stopped time?

    Essential Guide to Local Government Law: Stopping the Clock

    Class 1 appeals dominate the Land and Environment Court’s caseload.[1] Many of these are commenced against the ‘deemed refusal’ of a development application. This occurs when the consent authority fails to determine the application within the assessment period prescribed by the Environmental Planning and Assessment Act 1979 (the Act) and the Environmental Planning and Assessment Regulation 2000 (the Regulation). It is therefore important that applicants and consent authorities understand the correct approach to calculating when a ‘deemed refusal’ will occur, and also know how to extend the development assessment period where necessary. This essential guide will look at when the development assessment clock stops and what events will restart it.

    When does the assessment period start and end?

    Under the Regulation consent authorities have 40, 60 or 90 days to determine a development application, depending on what type of application it is. This is known as the assessment period. ‘Days’ in this context means all days – not just business days. If the consent authority does not determine the application within the assessment period then the application is deemed to have been refused.[2] The applicant then has the right to seek review of that decision in the NSW Land and Environment Court within six months of that date.[3]

    When calculating the length of the assessment period, the day on which the development application is lodged, as well as the following day, are not included.[4] This is to allow the consent authority time to register and check the application for compliance with the requirements of Schedule 1 of the Regulation before the merits assessment is commenced.

    If the application does not identify all relevant integrated development approvals or concurrence requirements then the consent authority might take longer than the two days to check the application. To allow for this, for integrated development or development requiring concurrence, the assessment period starts at the earlier of 14 days after the development application is lodged or the date the application is referred to the relevant concurrence authority or approvals body.[5]

    What stops the clock?

    The assessment period ‘clock’ can be stopped by:

    1. The consent authority, concurrence authority or approvals body issuing a request for additional information in accordance with the Act and Regulation; or
    2. The applicant ‘modifying’ the development application within the assessment period, where the amended application is accepted by the consent authority.

    How these two processes operate to stop the assessment clock is set out below.

    Additional information requests

    It is common during the development assessment process for a decision maker to require additional information in order to properly consider an application. The assessment ‘clock’ can be ‘stopped’ if:

    1. the consent authority makes a request for additional information under clause 54 of the Regulation within 25 days from the start of the assessment period;[6] or
    2. a concurrence authority or approvals body makes a request for additional information, within 25 days of the date the authority received the development application from the consent authority[7].

    In practice, the relevant period in which a request for further information can be made that will have the effect of stopping the assessment clock is 27 days (because of the additional two days allowed under clause 106(c) of the Regulation) unless the application is for integrated development or development which requires concurrence or an approval from another body[8]. If the consent authority asks for additional information in this period then the assessment period clock stops on the day of the request. If a concurrence or approvals body makes the request, then the assessment clock stops on the day that the consent authority receives the request from the concurrence or approvals body. If more than one request for additional information is made while the assessment clock is stopped then the clock stays stopped until all requests have been addressed.

    The assessment clock can also be stopped if, in relation to integrated development which requires consent under the National Parks and Wildlife Act 1974, the Chief Executive of the Office of Environment and Heritage is of the opinion that it necessary to consult with an Aboriginal person, land council or other organisation before a decision concerning the general terms of approval can be made and the consultation commences within 25 days after the date on which the development application is forwarded to the Secretary of the Office of Environment and Heritage[9] In this case the clock is paused for the consultation period, provided this is not longer than 46 days from the date on which the development application was lodged with the consent authority.

    To be effective, the request for additional information must be made in writing [10], must inform the applicant that the clock has stopped[11] and must be made within the time allowed in the Regulation. It may also specify a reasonable period within which the information must be provided.[12]

    An authority can ask for additional information outside the period described above; however, this will not have the effect of ‘stopping the clock’ and will not extend the assessment period or delay the deemed refusal date.

    Amending a development application

    Amending a development application under clause 55 of the Regulation can also have the effect of resetting the ‘clock’ for the assessment period. Whilst this in itself is no longer controversial, it can be difficult to determine whether and when a particular development application has been amended.

    This issue was considered in two recent Land and Environment Court decisions: Australian Consulting Architects Pty Ltd v Liverpool City Council [2017] NSWLEC 129 and Lateral Estate Pty Ltd v The Council of the City of Sydney [2017] NSWLEC 6. In both cases the applicant argued that an exchange of correspondence between the applicant and council constituted an amendment of the development application such as to restart the assessment period and push back the deemed refusal date to a date within 6 months of the commencement of the appeal. In each case the Court found that the ‘dribs and drabs’ approach to making changes to the application was insufficient to constitute an amendment to the development application for the purpose of clause 55, and did not restart the clock for assessing the application. In Australian Consulting Architects the Court clarified that, for this to occur, it would be necessary for the applicant to put a settled, composite proposal to the consent authority and for this to be accepted by the authority for assessment and determination.

    When does the ‘clock’ restart?

    The assessment period clock restarts when the applicant:[13]

    1. gives the information requested to the consent authority, or
    2. notifies the consent authority (in writing) that the information will not be provided; or
    3. does not give the information in the reasonable period specified in the notice, or any further period of time which is allowed by the authority.

    If the request for additional information came from a concurrence authority or referral body, then the assessment clock restarts 2 days after the consent authority refers the requested information to that entity (or notifies it that the information will not be provided).

    When identifying when the assessment periods ends, it is also important to remember that s 36 of the Interpretation Act 1987 prevents any assessment period from ending on a Saturday, Sunday, or public holiday. In these cases the next working day is taken to be the last day of the assessment period.

    It may be difficult to work out whether the clocks have restarted where:

    1. the applicant has provided some, but not all of the additional information required, or the information provided is inadequate; or
    2. the consent authority informally extends the time period in which the information is required to be provided.

    When the additional information is inadequate

    If the information provided in response to a request for additional information is inadequate, or if further additional information is required, the consent authority can stop the assessment ‘clock’ again and request further information. If the new request is made within the relevant 27 day period then this subsequent request can also ‘stop the clock’. In calculating the 27 day period in which any subsequent request for additional information may be made, any days for which the assessment clock has already been stopped are not counted.

    When the period for the provision of information is deemed to have been extended

    As noted above, if an applicant does not provide the information within the time specified in the request for additional information/the stop the clock notice, then the clock will generally restart after that date has passed. However, the time for the provision of the additional information can be deemed to have been extended by the authority in certain circumstances.

    This situation arose in Corbett Constructions P/L v Wollondilly Shire Council [2017] NSWLEC-135. In that case the Council had asked the applicant to provide a substantial amount of additional information within 28 days in relation to a development application for a large medium-density residential development. After the deadline had passed an exchange of emails took place between the applicant and the Council in which the applicant indicated that the additional information would be provided ‘in the coming weeks’ and the Council acknowledged and appeared to accept the delay. The Land and Environment Court found that the Council’s actions effectively amounted to an implied extension of time for the provision of the additional information, thus delaying the restarting of the assessment clock and the date on which the 6 month appeal period started. To avoid this uncertainty, any extensions of time for the provision of the additional information should be given formally in writing by the Council and expressly state that the stop the clock provisions remain in effect.

    Conclusion

    It is important for a development applicant and consent authority to know the date when an application must be determined or will otherwise be deemed to be refused. To be able to do this it is necessary to consider whether, when and for how long the assessment clock was ‘stopped’ in accordance with the principles set out above.

    For further information about, or assistance with, a development application, please contact Alice Menyhart, Alan Bradbury or Andrew Brickhill 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.

    References:

    [1] Land and Environment Court – Class 1: Environmental Planning and Protection Appeals – Fast Facts at http://www.lec.justice.nsw.gov.au/Pages/types_of_disputes/class_1/class_1.aspx accessed at 9 March 2018

    [2] Section 8.11 of the Act

    [3] Section 8.10 of the Act.

    [4] Clause 107 of the Regulation

    [5] Clause 108 of the Regulation

    [6] Clause 109 of the Regulation

    [7] Clause 110 of the Regulation

    [8] For those applications, the assessment period starts at the earlier of 14 days after the development application is lodged or the date the application is referred to the relevant concurrence authority or approvals body: clause 108 of the Regulation

    [9] Clause 111 of the Regulation

    [10] Clause 54(2)(a) of the Regulation

    [11] Clause 112 of the Regulation

    [12] Clause 54(2)(b) of the Regulation

    [13] Clauses 54 and 109 of the Regulation

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  • wellbeing at work - hr breakfst club march summary

    Wellbeing at work: HR Breakfast Club March Summary

    DEVELOPING A WELLNESS PROGRAM BUSINESS CASE

    This month, guest speaker, Lauren Sayers – Deputy HR Manager at the ANU spoke about the importance of developing a wellbeing program for the workplace, and some tips on how to implement one successfully.

    Lauren is an ACT Australian HR Institute (AHRI) Council member & forum convenor and has 15+ years of management and HR experience across Hospitality, Telecommunications and Tertiary Education sectors. Lauren spoke about:

    What does a wellbeing program include?

    Employee health and wellness programs can include activities that promote good employee health, identify health-related risks in the employee population, and
    look to support any potential health-related problems present in the employee population.

    Why should we invest in wellbeing program?

    Employers should work to create a healthy workplace for a few broad strategic reasons:

    • To control the financial costs associated with an unhealthy workplace
    • and to gain the benefits of;
    • A healthy workforce;
    • To build the organisation’s employer of choice profile; and
    • Possible legal implications – e.g. WHS/workers compensation etc.

    A further example of reasons to invest in employee health and wellbeing and the relationship between employee healthand engagement.

    Example interventions and wellbeing program activities:

    The following examples can be used to build a workplace wellbeing program.

    • Healthy @ work- ergonomic assessments
    • Body and Mind & work
    • Winter wise- flu shots
    • Financial wellness – financial advice
    • Relaxation – complementary therapies
    • Physical Health – health assessments
    • Mental Health – R U OK Day?
    • Rest – sleep foundation
    • Summer Safe – Cancer Council
    • Stretch zone – promote workplace stretching and time away from workstation
    • Rest zone – sun lounger/sleep pod
    • Mindfulness zone- e.g. reading, colouring in, Sudoku

    You can download a copy of the slides from the presentation here.

    The HR Breakfast Club runs on the third Friday of every month at BAL Lawyers. If you would like to be added to the invite list, please contact us. The next HR Breakfast club will be held of 20 April 2018 – for more details, please click here.

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  • Privacy Act and data breaches: Business Breakfast Club March Summary

    Data Breaches and Privacy Act Changes: Business Breakfast Club March Summary

    UPDATE: On 22 February 2018 amendments to the Privacy Act 1988 (Cth) took effect to introduce a mandatory notification procedure for eligible data breaches.

    This month at Business Breakfast Club, we discussed the changes to the Privacy Act which introduced a mandatory notification procedure for eligible data breaches. BAL Director, Katie Innes shared some of her insights on the new responsibilities surrounding information and Privacy law. Katie touched on:

    What is an eligible data breach:

    An eligible data breach is either:

    • unauthorised access or disclosure of information that a reasonable person would conclude is likely to result in serious harm to any individuals to whom the information relates; or
    • information that is lost in circumstances where unauthorised access or disclosure of information is likely to occur and it can be reasonably concluded that such an outcome would result in serious harm to any of the individuals to whom the information relates.

    How and when is notification given?

    Notification relating to an eligible data breach is a written statement to the individuals affected by the breach and the Office of the Australian Information Commissioner and must include:

    • a description of what occurred;
    • the kinds of information concerned; and
    • the recommended next steps that individuals affected should take in response to the data breach.

    In certain circumstances, the Commissioner may declare that notification and a written statement about the eligible data breach is not necessary. The Commissioner may make this determination having considered factors such as the public interest, advice given to the Commissioner by an enforcement body or any other matters the Commissioner considers relevant.

    When will it not be an eligible data breach?

    1. You ‘take action’ in relation to the access or disclosure before any serious harm and, as a result of the action, a reasonable person would conclude the access or disclosure will not be likely to result in any serious harm; or
    2. You ‘take action’ in relation to any loss of information before any unauthorised access or disclosure and, as a result of the action, there is no unauthorised access or disclosure; or
    3. You ‘take action’ in relation to any loss of information after unauthorised access or disclosure but before any serious harm and, as a result of the action, a reasonable person would conclude the access or disclosure will not be likely to result in any serious harm.

    If you follow one of the above steps, then you may not be required to notify the individual affected by the data breach.

    Q&A Corner

    Q. What if the personal information is held by more than one entity?

    A. Where the breach has occurred by one or more other entities, only one entity is required to undertake the process of investigation and notification. Essentially, compliance by one is compliance by all. You will need to determine how to allocate responsibility for compliance, and establish who has the most direct relationship with the individuals at risk to take the lead in investigation.

    Q. Can mailing lists be used for purposes other than what they were initially gathered for?

    A. In certain circumstances, yes. Organisations that hold personal information about an individual can only use or disclose the information for the purpose or purposes for which it was collected (known as the ‘primary purpose’ of collection). However you can use the information for a ‘secondary purpose’ if:

    (a)  the individual has consented; or

    (b)  the individual would reasonably expect you to use the information for the secondary purpose and the secondary purpose is:

    (i)  directly related to the primary purpose (if it is sensitive information); or

    (ii) related to the primary purpose (if it is any other personal information).

    (c) the use or disclosure is required by law or a Court; or

    (d) a general permitted situation exists.

    In respect of mailing lists, individuals have the right to update their preferences, by asking the organisation to correct their information or ‘opt out’ of the mailing list entirely.

    Q. Do the changes to the Privacy Act affect requests for files for workers compensation, when the injured employee�s lawyer requests personal and workers compensation files?

    A. No. The recent changes to the Privacy Act focus on the obligation to notify the OAIC or the individuals affected if there is an ‘eligible data breach’. Individuals remain entitled to access their own personal information through Australian Privacy Principle 12 (and could exercise that right through a lawyer).

    The recent changes also do not affect any disclosure obligations an organisation may have as part of workplace investigations. An organisation’s rights to disclose personal information about an affected employee will be governed by its existing privacy policy, WHS legislation and whether or not the organisation has obtained the individual’s consent to release their personal information to third party investigators or insurers as part of their terms of employment, or in managing any workplace claim.

    If the organisation disclosed information to a third party (without consent or without the legislative obligation to) then it could be considered a data breach and, depending on the potential risk to the individual affected, may be an eligible data breach.

    The Business Breakfast Club is held on the second Friday of each month, the next one is on 13 April. If you would like to attend, please contact us to be added to the invite list.

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  • Dangerous Cladding: A concern for Buyers of Residential Units

    Dangerous Cladding: A concern for Buyers of Residential Units

    Aluminium Composite Panelling, also known as cladding, fuelled the devastating Melbourne Lacrosse building fire in November 2014 and the Grenfell Tower fire in London in June 2017. Cladding can be combustible when it uses flammable aluminium composite panels with a highly flammable polyethylene core. The polyethylene core is comparable to pouring petrol on a fire – the result is the devastating spread and severity of a fire.

    Combustible cladding has been used on thousands of commercial buildings, shopping centres, government buildings and a number of residential buildings throughout Australia, including the ACT.

    What are the current regulations in place?

    Private building certifiers currently regulate builders, architects and suppliers in the ACT. They determine and regulate the safety of buildings and as such, the approval process is assessed on a case by case basis that is not regulated by the ACT Government. The result has been, at times, a failure by the building industry to self-regulate.

    New legislation to stop the use of unsafe cladding in NSW

    The Building Products (Safety) Bill 2017 was introduced in NSW to help prevent the use of dangerous building products such as dangerous cladding. This Bill delegates power to the Commissioner of Fair Trading to ban building products that may create safety risks in the event of fire. The objective of the Bill is to prohibit builders, building product suppliers, manufactures and importers from using dangerous products by imposing heavy penalties if they do not produce their records of building materials following a request by Fair Trading. The Bill also empowers Councils to order buildings be rectified if dangerous cladding is identified or if banned products have been used.

    Federal Regulation

    At the Federal level, the Customs Amendment (Safer Cladding) Bill 2017 was introduced in September 2017. It set out in its explanatory memorandum that the cladding issue is a most serious public safety issue that requires urgent action. The Bill prohibits the importation into Australia of polyethylene core aluminium composite panels. The Bill was introduced on an urgent basis due to the Federal and State failure to adequately respond to the requirement for safer cladding. Although it prevents the importation of polyethylene core aluminium panels, it does not prevent the use of polyethylene which has already been imported to Australia or is already used in buildings.

    What if my building has combustible cladding?

    Combustible cladding has been found on a number of buildings. But what does this mean for someone who has purchased a unit in one of these buildings or is a potential purchaser? Two recent cases in the High Court have shown that a builder does not owe a duty of care to the owners corporation or a subsequent buyer for a latent and previously unknown defect in a building. A latent defect is a defect in the property that could not have been discovered by a reasonably thorough inspection. The question of whether dangerous cladding is a latent defect has yet to be considered by the Courts.

    The consequences of the decision of the High Court are that if you discover your building is affected by dangerous cladding, you may not be able to make a claim against the builder, architect or suppliers for the costs of the removal or any damage caused by the dangerous cladding, such as a fire. As such, combustible cladding not only poses a serious health and safety hazard to its occupants but may also expose subsequent buyers and owners corporations to serious liability and costs.

    How can you protect yourself?

    If you are purchasing a new unit or property which uses cladding, we recommend you make an appointment with one of our specialist Real Estate lawyers. Due to the complicated nature of contract negotiation and our extensive experience representing buyers in new developments, we are able to assist you in negotiating the terms of your contract to include warranties that protect you from the risks associated with dangerous cladding.

    For more information or how to protect yourself and your property against dangerous cladding, please contact George Kordis, Special Counsel.

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  • window safety device

    ALERT: Window Safety Devices for NSW Strata Schemes: Important Update for Owners Corporations

    In order to prevent children from falling from windows, new requirements for window safety devices to be installed on windows in strata schemes are set to come into force in NSW.

    What is the deadline for installing safety devices?

    Safety devices must be installed by 13 March 2018. NSW Fair Trading advises that non-compliant Owners Corporations may face fines if safety devices are not installed on all relevant windows by the 13 March deadline.

    Who pays for the safety devices?

    Owners Corporations may be able to pass the cost onto individual unit owners for installing the safety devices. We recommend you contact BAL Lawyers for advice on applicable scenarios.

    What strata schemes does this apply to?

    The new requirements apply to any strata building containing Lots used for residential purposes.

    What windows are required to have safety devices?

    Safety devices must be installed on any openable windows where the floor inside is more than 2m above the ground outside and the lowest part of the window is less than 1.7m above the floor inside. This applies to windows in individual residential units, as well as on Common Property.

    What does the window safety device do?

    Safety devices must be capable of limiting the maximum opening of the window to be less than 12.5cm and be capable of withstanding a certain amount of force (250 Newtons).

    Can the windows still be opened?

    Yes, the safety devices can be temporarily disengaged and windows fully opened, if residents choose.

    Further information is available from the NSW Fair Trading website.

    Written by George Kordis, Special Counsel. If you require advice on your strata law matters, contact us.

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  • bitcoin - what happens to your digital assets when you die

    Bitcoin, Digital Assets, Clouds, and your internet identity: what happens to your Digital Assets when you die?

    Gone are the days when someone’s assets consisted of their house, a car and some black and white photos. A whopping 3.431 billion people are plugged into the internet worldwide as of August 2016[1]and most clients we see have some form of Digital Assets – that is, anything you own or have certain rights over that exists online or are stored on computers or other digital technology.

    Take a moment to consider your digital technology, which may include any one (or perhaps all) of the following:

    • SMS’s on your phone, or messages on instant messaging services (Messenger, Whatsapp, Telegram etc);
    • content on your smart phone handset;
    • emails;
    • social networking content, or licences;
    • e books, streaming content services, digital downloads; and
    • PC’s, laptops, tablets and other computer devices.

    Now take a moment to consider what would happen to your digital technology once you die. Specifically, consider:

    • who can access (and how do they access) your email, social media accounts, dating profiles, online passwords, online banking records, media hosting services (eg Instagram, Flickr) or professional blog when you die;
    • what happens to the documents, files and photos on your cloud Storage (for example, Google Drive, Apple iCloud, Microsoft Skydrive);
    • what happens to your online assets (for example, funds in your Paypal account, downloaded music and movies or streaming services, Airline Frequent Flyer points and cryptocurrencies);
    • what happens to the photos, messages and data stored on your phone, laptop or tablet;
    • how can you ensure your ‘digital life’ is removed from the worldwide web once you have died

    The Legal Position – How are digital assets dealt following death

    The digital estate may feature a mix of third party intellectual property, the deceased’s intellectual property and contractual rights in the form of licences and terms of use. It is rarely the case therefore that the deceased ‘owns’ the digital asset or the content, which is a mistaken belief held by many clients.

    A proper Estate Plan therefore requires a consideration of the rights to the asset and/or intellectual property as well as the policies with regard to the service or host provider.

    Let’s run through some of the most commonly used platforms and assets:

    Social Media eg Facebook , Instagram, Youtube – the basis of most social media sites is to provide free content hosting in exchange for the user granting the site a licence to use the content. The Terms of Service set out the terms of the licence.

    It is a well-known fact these days that a Facebook user for example, has no ownership in the content of the material they upload onto their social media account. The Facebook Statement of Rights and Responsibilities specifically states that ‘you grant us (Facebook) a non-exclusive, transferable, sub-licensable, royalty free, worldwide licence to use any IP content that you post on or in connection with Facebook’.

    If the user does not ‘own’ the content posted on these social media sites, neither does their executor of their estate. Using the example of Facebook, once you die, a friend, family member, or your executor can request to have your user account memorialised or permanently removed from Facebook. Even if an account is permanently deleted, Facebook is entitled to retain the rights and sublicense to everything that has ever been uploaded onto the user account.

    Apple ID Account – The Apple Media Services Terms and Conditions generally states that once media is downloaded, you do not actually own or obtain legal title to the media – you simply obtain a licence to use the media. Licences are generally not transferable to your executor or beneficiaries. Generally speaking therefore, your Apple ID account and downloaded content will not form part of the estate. There is the option however with family sharing to transfer material from one computer to the next, and therefore that might be the solution to ensuring the digital library is accessible after death.

    Google Account – your Google Account is perhaps the most important account to access after you die. Google offers a number of online services including Gmail, Google Drive, Picasa and Google Plus. The Google Terms of Service that’s that the user retains ownership in the intellectual property, but (similar to most social media sites) when content is uploaded onto any Google product, google is given a worldwide licence to use the content and that licence continues indefinitely.

    If your Executor wants access to your Google Account, they will need to contact Google administrators and seek access, which may not always be granted (as per the Terms of Service).

    Cryptocurrencies – Cryptocurrencies are not backed by any government regulator. Instead people often store their Bitcoins in an encrypted ‘digital wallet’, usually via an app on their phone or laptop. Digital wallets often use two keys to allow the owner access – a public key that anyone can see and a private key. If your Executor or Beneficiaries do not know this key, there is almost no way they can access your Bitcoin. On the other hand, providing this information to your Executors or Beneficiaries during your lifetime may compromise the security of the Cryptocurrency.

    How should I deal with my digital assets

    Once our digital assets are identified, they are treated much the same as any other asset. From a practical sense, what should you do to assist your family, next of kin or executor in dealing with or even erasing your ‘digital footprint’ once you have died?

    This question is very personal and specific to many. In some cases, it would be appropriate to leave a list of your usernames, passwords and ‘keys’ to the online assets so they can be dealt with. But perhaps not always.

    A holistic review of your Estate Plan should involve a consideration of your digital assets, Intellectual Property laws, an understanding of common platforms and a sensible approach in managing these assets after you are gone. To create or review your will and estate plan, please contact us.

    [1] www.internetlivestatts.com/internet-uses

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  • guide to assignment of lease timeframes for landlords in the ACT and NSW

    Hidden risks: A guide to assignment of lease timeframes for landlords in the ACT and NSW

    Assignments of lease are common, but even experienced landlords might be caught by surprise by the strict timeframes legislation imposes for responding to a request for assignment. The process for dealing with a request for consent to the assignment of a lease contains many potential pitfalls for a landlord, and failure to address such a request properly can have dire consequences.

    Assignments of Lease in the ACT

    A tenant wishing to assign its lease under the Leases (Commercial and Retail) Act 2001 (ACT) (LCRA) must first provide a disclosure statement to the prospective assignee and then make a request in writing for the landlord’s consent to the assignment.

    Once the tenant has requested consent, the landlord has 14 days to request further information. The LCRA limits the information that can be requested, however it includes information about the financial standing of the assignee and/or guarantor, a certificate of occupancy for the premises, information about the business skills of the prospective assignee, information about the proposed use of the premises by the assignee and references relating to the ability of the prospective assignee to operate the business on the premises.

    The landlord must respond to the tenant’s request by either providing or withholding consent within 28 days after receiving the request, or within 21 days of receiving any information requested. If the landlord does not provide a response within that timeframe, the landlord is deemed to have consented to the assignment.

    A landlord can only withhold consent to an assignment of the lease where it is reasonable in all the circumstances to do so. There are certain grounds where refusal is taken to be reasonable, such as if the proposed use of the premises is for a purpose not allowed under the lease or if the proposed use of the premises will not be compatible with other tenants in the building or if the existing tenant is in breach, but otherwise the landlord has the burden of proving it was reasonable. The reasonableness of a decision to withhold consent can be difficult to determine. Under the LCRA a landlord may recover the legal costs of making the decision about whether to consent, so it is worth seeking professional advice.

    Assignment of Leases in NSW

    In NSW the governing legislation is the Retail Leases Act 1994 (NSW) (RLA). The request for landlord consent must be made in writing and the tenant must first provide the assignee with an up to date disclosure statement.

    The tenant must also provide the landlord with such information as the landlord may reasonably require about the finances and retail skills of the assignee. Unlike the ACT however, there are not clear timeframes for seeking and providing this information.

    The landlord must deal with a request ‘expeditiously’ and if the landlord has not responded within 28 days, the landlord is deemed to have given consent.

    A landlord may, in the provisions of the lease, reserve the right to refuse to consent to the tenant assigning the lease. However, absent of any specific provision in the lease, a landlord may only withhold consent in specific circumstances, including if the assignee proposes to change the use of the premises, has inferior finances or retail skills to the tenant, or the tenant has not complied with the legislated process for assignment, including providing requested information.

    Conclusion

    Disputes often arise in the course of a request for consent to assignment of a lease, particularly over whether information has been requested in time, whether adequate information has been provided, and whether the request for information conforms to the legislation. If a landlord mistakenly believed it was waiting on further information on the proposed assignee and failed to respond to the tenant’s request within 28 days, the landlord would be deemed to have consented to the assignment. In such a situation, not only would the landlord have a new tenant it may not have wanted, but the lease will no longer be enforceable against the original tenant should any issues arise (s.103 LCRA and s.41A RLA).

    The key lesson is being aware of timeframes for responding to requests for assignment of a lease and understanding the complexity surrounding requests for further information and grounds for refusal. Correctly responding to a request for consent to assignment of a lease is a process that requires expert guidance. Failure to respond in the correct time period can result in a landlord being deemed to have consented to a transfer. In order to reduce the risk, landlords should contact their legal advisors as soon as they receive a request for assignment.

    If you require expert advice in your commercial leasing matters, contact BAL Lawyers.

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  • Agreements for lease Preparing to sell your business

    Agreements for lease: what to look out for - heads of agreement and more

    Following on from our introduction to the Agreement for Lease (AFL), there are a number of matters that prospective landlords and tenants need to watch out for when negotiating an AFL. We provide the following tips so that you can know your rights and the associated risks, to ensure your agreements reflect your interests.

    How do I protect my interests while negotiating an AFL and Lease?

    As we have noted, an AFL is often more complicated that the eventual Lease, and negotiations for both these documents can last upwards of several months, depending on the complexities. An option that parties often turn to is entering into a shorter, less formal document setting out their agreement in brief terms. This is often referred to as a Heads of Agreement (HOA).

    Is a HOA always binding?

    A distinct advantage of an AFL is that it is enforceable, including by way of specific performance. A party disadvantaged by a non-complying party can seek relief by way of Court orders that the other party perform their side of the bargain. However, does a HOA give rise to the same level of protection?

    This depends. The Court will seek to uphold the bargain reached by the parties, so the first issue it faces is to work out what the parties actually intended. The options for parties when negotiating an AFL are to enter into a HOA that will:

    1. set out the terms of the preliminary agreement, without any intention to be bound unless and until an AFL is signed;
    1. set out agreed terms, with performance conditional upon entry into a formal agreement;
    1. set out agreed terms, with the intention to be bound to continue negotiations to see if a final agreement can be reached;
    1. set out agreed terms with the intention of entering into a binding agreement encompassing those specified terms and such other terms as may be subsequently agreed; or
    1. agree certain terms and to enter into an AFL and Lease containing those terms, with the intention that the parties are immediately bound to do so.

    What is required to be agreed for a binding HOA or AFL?

    Ideally, your AFL will contain a greater amount of detail than a HOA; however, both documents may be enforceable provided agreement is reached on the following fundamental criteria:

    1. Parties – who are the parties to the agreement?
    1. Premises – what land is the subject of the agreement?
    1. Period – how long is the term of the lease?
    1. Price – what is the rent?

    Beyond the “four P’s” above, a Court may imply standard terms required to make an AFL and Lease, particularly if there is evidence as to the parties’ intentions (for example, a reference to entry into a landlord’s standard leasing documents). In this case, a detailed HOA may contain enough agreed terms to operate as an AFL.

    If the four Ps are not agreed, there is insufficient certainty for a HOA or AFL to be enforced.

    What to look out for

    Consider your needs carefully. Is the property/tenant a rare opportunity, such that you are willing to enter into an immediately binding agreement, notwithstanding the fact that your negotiations are not finalised? In circumstances where parties agree to be immediately bound, a Court will enforce that agreement by determining (where possible) additional terms required for performance.

    Alternatively, you may wish to secure the property for a period of time, without yet locking yourself into an AFL and a binding commitment to enter into a lease. In this case, you have the option of agreeing to continue negotiations in an exclusive dealing period, without a binding obligation to enter into an AFL.

    There are risks regardless of whether or not you choose to be bound at this preliminary stage. If you are unsure as to the most suitable option for you, we recommend that you seek advice. In all respects, remember that whether or not a binding agreement exists depends on the intention of the parties, as can be inferred from the agreement itself. Whether you are negotiating a HOA or an AFL, ensure that it clearly sets out what you understand to be the agreement, and what you are willing to perform.

    For advice on negotiating an Agreement for Lease, please contact Laura Scotton.

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  • beware auction contracts

    Beware Auction Contracts: Vendor fails to do agreed works in Contract for Sale of Land and Purchaser loses Deposit!

    You would assume that a Vendor who agrees to complete works on a Property prior to completion of the Contract is required to do so prior to the agreed completion date specified in the Auction Contract, especially if the Contract required them to do so. You may equally assume that, if a Vendor fails to complete such works prior to the completion date, the Purchaser would be entitled to terminate the Contract. However, as shown by the NSW Court of Appeal case of Namrood v Ebedeh-Ahvazi [2017] NSWWCA 310, nothing in the world of Contract law can be so readily assumed.

    What happened in the case?

    Mr Namrood (the Purchaser) was the successful bidder at auction to purchase a vacant residential block of land from Mr Ebedeh-Alwah (the Vendor). The Purchaser only became aware of the auction on the auction date and did not seek legal advice on the terms of the auction contract. The Contract entered into between the parties contained a special condition under which the Vendor undertook to remove loads of soil and restore the level of the Property in accordance with a Council Notice issued to the Vendor prior to ‘Completion’ (the Vendor Works). The Council Notice made non-compliance an offence open to prosecution.

    The ‘Completion Date’ in the Contract was 20 June 2015. By this date, the Vendor had not completed the Vendor Works. After protracted correspondence between the parties, the Purchaser purported to terminate the Contract due to the Vendor’s non-compliance. The Vendor did not agree that the Purchaser had validly terminated the Contract and continued to complete the Vendor Works; following which the Vendor sought to compel the Purchaser to complete the Contract. When the Purchaser refused to complete, the Vendor sought to terminate the Contract and keep the deposit.

    What did the Court rule on the Auction Contract?

    The NSW Court of Appeal determined there was a clear distinction in the Contract between the terms ‘Completion” and “Completion Date”. The Completion Date was defined as 20 June 2015. The term Completion, however, meant the date on which title to the Property was actually transferred. This date (as would be the case) was not necessarily 20 June 2015.

    As the parties had chosen ‘Completion’ and not the ‘Completion Date’ as the time by which the Vendor was required to complete the Vendor Works, the Vendor was not required to do so prior to 20 June 2015. Rather the Vendor was only required to complete the Vendor Works prior to the date on which the Contract was actually completed. This meant the Vendor was not in breach when the Purchaser purported to terminate the Contract and, as the Contract remained on foot, had later validly terminated the Contract. This Vendor was therefore entitled to retain the 10% Deposit.

    Conclusion

    The ruling in Namrood v Ebedeh-Ahvazi may seem like a strange result. However, it emphasises the importance courts place on the specific drafting of contractual clauses. Those entering into property deals must be sure to obtain legal advice on the specific terms of the Contract and should not assume that the meaning of any contract clause is clear and unambiguous.

    This is difficult with auction contracts, which are disclosed to would be purchasers a short time before the auction or even at the point of signing. Make sure you obtain a copy of the auction contract as early as possible before the auction date and seek legal advice on the terms of the Contract before bidding at auction. Otherwise you can be caught out in the most unexpected of circumstances.

    For advice on auction contracts, please contact us.

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  • Workplace Privacy Candid Camera Covert Surveillance

    Workplace Privacy - February HR Breakfast Club Summary

    The focus of Australian labour law continues to move beyond securing core industrial rights regarding wages, towards issues surrounding wellbeing, mental health, reputation and workplace privacy. Speaking on workplace privacy and surveillance, Rebecca’s presentation focused on:

    1. whatprivacy legislation applies to your organisation(noting that all employers are subject to legislation surrounding the privacy of Tax File Numbers and health information);
    2. the impending amendments to the Privacy Act 1988(Cth) regarding reporting of privacy breaches and the European General Data Protection Regulations;
    3. when, and how, you can monitor employees in the workplaceand their IT use (emphasizing the importance of making sure your ACT-based organisation has a policy in place that notifies employees of workplace surveillance).

    Workplace privacy case study video:

    Take aways:

    1. Employee medical files must be kept confidential
    2. Employees must be notified prior to the emails being monitored

    Q&A Corner

    Q: We share so much of our lives online these days, how can people expect to have privacy in the workplace? What are employers supposed to do when sensitive information is disclosed outside the workplace (for example, on Facebook) and is subsequently the topic of discussion among employees?

    A: These days a lot of individuals are willing to share their private lives on social media – but not in their workplaces. It is important that employers comply with the relevant privacy legislation when it comes to information they receive from the employee. Two employees discussing a colleague’s broken leg (after seeing a picture of it shared on Instagram) is not equivalent to an employer discussing an employee’s medical certificate at morning tea.

    Q: What constitutes a ‘health record’ for the purposes of the Health Records (Privacy and Access) Act 1997 (ACT)?

    A: A ‘health record’ is any ‘record’ which contains ‘personal health information’.

    ‘Personal health information’ is any information:

    1. relating to health, illness or disability; or
    2. (if the employer is a health service provider, such as a hospital) any information collected in relation to the health, illness or disability of a consumer.

    A Record is a record in documentary or electronic form that consists of personal health information. Examples of records are:

    1. Documents;
    2. Photographs;
    3. Emails;

    This answer is, of course, general commentary only. It is not legal advice. Readers must contact us and receive our specific advice on the particular situation that concerns them before acting or refraining from acting.

    For more information about workplace privacy, please contact Rebecca Richardson.

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  • crowd funding

    Crowd Funding: Business Breakfast Club February Summary

    UPDATE: as at 28 February 2018: Crowd-sourced equity funding for proprietary companies Bill passes the House of Representatives

    This month at Business Breakfast Club, we discussed the crowd funding regime including the current legislation that applies to public companies and the proposed bill to extend that regime to proprietary companies. BAL Director, Katie Innes shared some of her insights on the topic. Katie touched on:

    Funding Businesses

    Raising funds to kick start a business is a central concern of all business entrepreneurs. Traditionally, the two methods used to raise those funds include taking out a loan or raising capital through selling shares.

    Amendments to the Corporations Act in 2017 were designed to support innovation and entrepreneurship (by simplifying the capital raising provisions of the Act and reducing compliance costs) while balancing and protecting the interests of retail investors.

    Current Legislation

    Currently only public companies can access crowd sourced funding but they must only do so through an approved intermediary who holds a specific type of AFSL. Only seven entities are currently approved for these types of AFSLs. Like the previous capital raising provisions, there are a number of similar disclosures that must be made by a public company in its offer document, so whether the legislation actually delivers a practical reduction in compliance costs is yet to be seen.

    Proprietary companies cannot access the crowd sourced funding regime as they were intended to be ‘closely-held’, i.e. shareholders who have a direct connection to (or rights to appoint) management. Under the Corporations Act there are currently two restrictions on proprietary companies which hinders their ability to raise funds:

    1. proprietary companies must not have more than 50 non-employee shareholders; and
    2. proprietary companies cannot make public offers of equity to retail investors.

    A bill is before Parliament to amend the legislation and extend the regime to propriety companies.

    If the Bill is approved

    If the Bill is passed, proprietary companies would be able to access crowd sourced funding but their structure and reporting obligations will change. Such changes would include:

    1. a minimum of two directors with a majority of directors residing in Australia;
    2. preparation of financial reports in accordance with accounting standards;
    3. requirement that financial reports be audited if the company raises more than $3 million from crowd funding offers; and
    4. restrictions on the financial benefits that may be given to related parties including directors.

    More information about the bill is available here.

    Who benefits the most under the crowd funding regime?

    Generally, the crowd funding regime is going to benefit established companies whose products have already been tested and where there is a desire to expand those businesses.

    The regime will also benefit retail investors by providing them with access to new types of share offerings that were previously off limits under the Corporations Act, allowing them to diversify their investments in equity other than in ASX listed shares.

    Early-stage companies could access the crowd funding regime and there is the potential for higher returns for investors but with that is the potential for higher risk. Investors may be reluctant to invest where the financial statements or business plan in the offer document is lacking.

    The Business Breakfast Club is held on the second Friday of each month. If you would like to attend, please contact us to be added to the invite list.

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  • Local Government Guide: Acquisition of land by NSW councils

    Essential Guide to Local Government Law: Acquisition of land by NSW councils

    The process of acquiring land or an in interest in land, such as an easement, is underpinned by the Land Acquisition (Just Terms Compensation Act) Act 1991 (the Act). Whilst the NSW State Government has published a number of resources to guide stakeholders through the acquisition process, this brief commentary will discuss the key steps involved and provide some practical guidance for council staff.

    Private or compulsory acquisition of land

    There are two main processes by which a council may acquire land: by a private agreement (by contract or deed) or compulsory acquisition. Another method, less frequently adopted, is where the parties agree that the acquisition is to occur via the compulsory process.

    1. Private agreement

    The most common method of land acquisition is by negotiation and agreement. In this situation, the council and the landowner agree on the price to be paid for the land and the transaction takes place just as it would if the land was being purchased by an ordinary person.

    To improve fairness and transparency in the land acquisition process, NSW State government policy requires the council, when first notifying a landowner that their land is required for a public purpose, to approach the landowner in person (except in exceptional circumstances) and to appoint a designated person to coordinate all interactions between it and the affected landowner.[1] The council must also provide the landowner with a copy of the NSW Government’s “Land Acquisition Information Guide” or an equivalent document.[2]

    When contact is established with the landowner, the terms of the acquisition can then be negotiated to suit the specific needs of the parties.

    The ultimate decision to acquire land needs to be made by a resolution of the council as this is not a decision that can be delegated.[3] However, an in-principle agreement may be negotiated with a landowner prior to a council resolution provided that the ‘agreement’ is then subject to the passing of a council resolution approving the purchase. It is important for the person conducting the negotiations to ensure that the landowner understands that any offer is subject to approval by the council.

    2. Compulsory acquisition

    Except in certain specified circumstances, the Act requires councils to make genuine attempts, for at least 6 months, to acquire land by agreement before any action is taken to compulsorily acquire the land.[4]The specified circumstances include where agreement is reached before the end of the 6 month period, as well as where the affected owner refuses to negotiate, cannot be located, or agrees to a shorter timeframe. The 6 month negotiation period also does not apply to the acquisition of Crown land or land below the surface.

    If a private agreement cannot be reached, the acquisition can occur via the compulsory process, subject to the Minister and the Governor’s approval. The decision to apply for the Minister and Governor’s approval needs to be made by a council resolution.[5] The application should then be prepared in accordance with the NSW Office of Local Government’s guidelines.[6]

    If the council’s application is approved, the compulsory acquisition can then occur in accordance with the procedures set out in the Act. This will involve the service of a ‘Proposed Acquisition Notice’ on relevant land interest holder(s),[7] notifying the NSW Registrar General,[8] and notifying the NSW Valuer-General.[9]

    After the period of notice (usually 90 days) has expired, the land is acquired by the publication of an ‘Acquisition Notice’ in the Government Gazette.[10] A copy of the Acquisition Notice must also be published in at least one newspaper circulating in the local area or on a website that the council believes is appropriate to bring the acquisition to the notice of people in the local area.[11]

    3. Compulsory acquisition by agreement

    This process involves the council and the landowner agreeing that the acquisition is to occur via the compulsory acquisition process described in (2) above. In our experience this method is preferred by the NSW Department of Crown Lands when the land to be acquired by the council is Crown land.

    Identifying relevant interest holders and third parties

    Council staff should conduct a title search of the land designated for acquisition early in the process to identify any relevant encumbrances and stakeholders. If the land is subject to a caveat, mortgage or lease, a landowner may need to procure the consent of any third parties for the acquisition to occur by agreement.

    Survey plans

    If the council is not proposing to acquire an entire lot in a deposited plan, it will need to engage a surveyor to prepare a survey plan of the land to be acquired. The type of plan required will depend on the nature of the interest being acquired and whether the land is to be acquired privately or via the compulsory process.

    If the council applies for the acquisition to occur via the compulsory process, a plan of acquisition identifying the land will need to be registered at the NSW Land Registry Service before the NSW Office of Local Government will process the council’s compulsory acquisition application on behalf of the Minister.

    Compensation

    Each landowner affected by an acquisition is entitled to be compensated ‘on just terms’ in accordance with the Act. The Act contains a statutory guarantee that the compensation will not be less than the market value of the land assessed in accordance with the Act and unaffected by the proposal for acquisition.[12]

    The Act specifies the matters which need to be taken into consideration when determining the value of the compensation payable.[13] These matters include not only the market value of the land to be acquired, but also disturbance costs of the landowner, including their reasonable legal and valuation fees, financial costs (such as fees imposed by their mortgagee), any special value of the land and any disadvantage resulting from relocating a person’s residence (if relocation is necessary).

    The matters which need to be taken into consideration when land is being acquired by compulsory acquisition must also be taken into account when land is being acquired by negotiation and agreement, unless the land is available for public sale [14]. The land is available for public sale if the landowner holds it out as being for sale.

    Briefing a qualified valuer early in the negotiation process will assist the parties to reach agreement on the compensation payable.

    If no agreement is reached and the acquisition occurs via the compulsory process, the compensation will be determined by the NSW Valuer-General,[15] at the council’s cost.

    When the compensation is determined by the Valuer-General the council must offer that amount to the landowner in a ‘compensation notice’.[16]  If the landowner objects to the amount offered they may lodge their objection with the Land and Environment Court of NSW and the Court will determine the amount of compensation.[17] If this occurs it is open to the council to argue in the Court proceedings that a lower compensation amount should be payable rather than the amount which was determined by the Valuer-General.

    Timeframes and project delivery

    The acquisition of land, or an interest in land, is often undertaken for the purposes of constructing public infrastructure that is the subject of a specific funding grant and which will be carried out by contractors. When procuring contractors and estimating project delivery timeframes, council staff should keep in mind the following matters, as they can significantly delay delivery of a public infrastructure project:

    • In most (but not all) circumstances the council is required to attempt to acquire the land by agreement for at least 6 months before serving a Proposed Acquisition Notice on the landowner under the compulsory acquisition process;[18]
    • Time needs to be allowed for the making of the council’s compulsory acquisition application to the Minister and Governor, for that application to be considered by the Minister and for approval to be given to enable the acquisition to proceed;
    • Unless approval of the Minister is obtained for a reduced time period, or the affected landowner agrees, the compulsory acquisition of the land can only occur 90 days after the council gives the affected land interest holder a Proposed Acquisition Notice.[19]

    Conclusion

    While the acquisition of land can appear to be straight forward process, there can be numerous issues that can add complications and delay. Keeping the matters outlined in this short guide in mind will assist you to plan and acquire land effectively and efficiently.

    For further information about, or assistance with, a council land acquisition, please contact Alan Bradbury or Andrew Brickhill 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] NSW Department of Finance, Services and Innovation Circular: DFSI-2017-02 � Improvements to NSW Land Acquisition Process.

    [2] NSW Treasury and Finance Circular: OFS-2015-01-Changes to Land Acquisition Processes by Acquiring Authorities.

    [3] Local Government Act 1993, section 377(1)(h).

    [4] Section 10A.

    [5] Local Government Act 1993, section 377(1)(s).

    [6] NSW Department of Local Government Circular to councils: 06-49 New Guidelines for the Compulsory Acquisition of Land by councils.

    [7] Section 11.

    [8] Section 17.

    [9] Section 18.

    [10] Sections 19(1) and 20(1).

    [11] Section 19(2).

    [12] Section 10.

    [13] Section 55.

    [14] Section 38.

    [15] Section 47.

    [16] Section 42.

    [17] Section 66.

    [18] Section 10A.

    [19] Section 13.

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  • Granny Flat arrangements - when will they be appropriate?

    Granny flat arrangements are becoming increasingly popular. Too often however a granny flat arrangement will fail to deliver what the parties were expecting. On many occasions the arrangement leads to family disputes or even to litigation.

    There are a number of key considerations that family members need to take into account when entering into a granny flat arrangement.

    This article focuses on those key considerations and includes a checklist for practitioners to follow when considering a granny flat arrangement for their clients.

    Key points/how does it affect you?

    • To confirm the key questions to be raised for you to determine whether a granny flat arrangement is appropriate in a particular client situation.
    • If a granny flat arrangement is appropriate for the specific circumstances then there are recommended aspects that an adviser should address when documenting the arrangement.
    • This article will assist advisers to develop their own checklist to use when acting for clients that want to put in place a granny flat arrangement.

    What are granny flat arrangements?

    The following article focuses on ‘granny flat arrangements’ that involve the grant of a ‘granny flat interest’ as the term is defined in the Social Security Act 1991 (Cth).[1] The elements of this definition are noted below.

    It is also relevant to note that the phrase ‘granny flat’ has its own meaning in a real estate context being a self-contained living area that is part of an existing residential dwelling.

    Although a granny flat interest will often relate to a separate living area, it does not have to. A granny flat interest can be created where there is no separate living area.

    Definition of granny flat interest

    A granny flat interest is where the person resides in a private home and acquires for valuable consideration, or has retained a right to accommodation for life, in the residence or acquires (or has retained) a life interest in the residence.

    Importantly, the payment made or the consideration provided by the person (invariably the parent) is generally an ‘exempt asset’ for social security purposes. Therefore the deprivation or gifting rules do not apply. The rationale for this approach was described by Centrelink as follows:

    We don’t use market value to work out how much a granny flat interest is worth. Instead, we value it at the same value as the assets you transferred or paid if you are:

    • transferring the title of the home you live in to someone else and keep a lifetime right to live in that home or in another home [This applies if your home was or would have been totally exempt from the asset test]
    • paying to:
      • build a granny flat on someone else’s property C convert someone else’s home to suit your needs and getting a lifetime right to live there, or
      • buying a property in someone else’s name and get a lifetime right to live there

    [Provided you pay in one of these ways and do not transfer additional assets as well, no deprivation will occur.][2]

    If an additional payment or consideration is provided, Centrelink will apply the ‘reasonableness test’. This test is based on the combined partnered rate of the annual pension and is multiplied by the age-related factor. If the payment or consideration being provided exceeds the reasonableness amount, then there will be a reduction in the pension.

    The typical situation is where the parent transfers the home to their child or where the parent pays for renovation of the house on the child’s property to create a self-contained living area.

    Where the parent is a self-funded retiree who is not reliant on the Commonwealth pension, options other than the creation of a granny flat interest would be preferred. Those options would include the parent being registered as a co-owner (either as a joint tenant or as tenants in common). This option may have stamp duty and taxation implication for the parties.

    The most common and problematical situation is where the parent is a pensioner so is subject to Centrelink rules including the deprivation (gifting) rules. As indicated above, in certain cases there is a specific exemption of those rules to the grant of a granny flat interest.

    The challenge when advising in these situations is evident, especially when acting for the parent. It will be critical for the exemption to apply and for a granny flat interest to be created. This is because the parent will need to continue to receive the pension and will need their pension to be unaffected by the gifting rules.

    To achieve that result it necessarily means that the parent is restricted to receiving a life tenancy or life interest in the property. Although this life interest can be transferred to any replacement property, the level of faith being placed by the parent in the arrangement is significant.

    Importantly the granny flat interest cannot be revoked by the child as the owner of the property just because they want to sell. The child can either transfer the life tenancy or interest to another property or compensate the parent financially for losing the granny flat interest. The property can also be sold subject to the life tenancy or life interest but such a sale will be unlikely where the purchaser is an unrelated party.

    Despite these protections, the parent transferring their property to a child for simply the grant of life interest or tenancy is taking a step that assumes that the life tenancy or interest will deliver important personal benefits for them.

    As described by one commentator, [3] there is an element of counter intuitive regulation with these rules. The situation is that there is a transfer of property by the parent for no payment and the only right obtained by the parent is a right of residence in the property. Such a situation is at odds with the well-established equitable principles in relation to constructive trusts and resulting trusts.

    An adviser for the parent must recognise the context and carefully address the risks for the parent who is making the gift in exchange for the right of residence or life tenancy.

    When is a granny flat arrangement appropriate?

    There are situations when the question of a granny flat interest will be appropriate.

    The following are circumstances that will reinforce the suitability of the arrangement:

    Ideally there would have already been a history of having recently resided in the same residence, thereby confirming such living arrangements can work for both parties.

    If the factual context is consistent with the above, then a granny flat arrangement could well be appropriate. If the situation being considered does not include the above elements, there will need to be a close assessment as to the desirability of the parties entering into a granny flat arrangement.

    What are the elements of a deed of family arrangement for a granny flat?

    If the parties proceed with the granny flat arrangement, it is critical that the arrangement be documented. To cover the required issues, the relevant deed of family arrangement will be quite detailed.

    It is also critical that each party receive independent advice, both legal and financial. Clearly financial advice for the parent will be critical but financial advice for the child will often be just as important. For instance where the child is likely to also be a pensioner or social security benefit recipient in the short term, the transfer of the parent’s home may have an impact on those benefits as a result of the assets test.

    The following aspects should be covered in some detail in the deed:

    • a detailed statement of the relevant background including why the parties are entering into the deed and what has occurred in the past
    • the background will include a statement confirming that each party has received independent advice
    • a detailed statement of the obligations of the carer or child, with this statement describing the types of care and tasks that are to be provided and undertaken
    • confirmation as to who is responsible for the payment of property outgoings and service charges
    • confirmation of the insurance obligations, including insurance of their contents by the parent
    • conditions dealing with holidays, absences and periods of respite
    • a list of the circumstances where the parties contemplate the arrangement would end including the following:
      • where there is a need for additional care for the parent above what the child can provide
      • a separation of the child from their partner
      • insolvency or death of the child (or the child’s spouse)
    • the deed should then specifically cover the consequences of termination of the arrangement. There will need to be recognition that there should be refund of the equivalent value being made to the parent
    • The child has demonstrated an ability to provide care and support for the parent including assisting with meals, shopping and travel arrangements for their parent.
    • The parent presents as being in reasonably good health and there is no apparent need for the level of care that they will require to escalate in the short term, especially with a condition that will require regular medical care.
    • The arrangement is not driven by the financial needs or objectives of the child. Instead there is a primary objective of providing suitable accommodation for the parent with their family on a long-term basis.
    • The parent and child (and preferably also the child’s spouse) have a very close relationship.

    If the parties reach the stage of finalising a deed of family arrangement one of the important additional aspects to consider is the impact that the deed will have on their estate planning. A granny flat arrangement will have significant implications on the estate planning for both parties.

    In essence, the parent is disposing of a significant asset during their lifetime which results in their estate being significantly depleted. In relation to the child, they are receiving a significant asset as part of their inheritance in advance.

    There is likely to be some interest and perhaps concerns from any siblings of the carer/child that received the benefit from their parent. The recommendation is that any other siblings be informed and consulted in relation to the option of arranging a granny flat interest.

    It is clear that the granting of a granny flat interest can also achieve the parent’s objective of providing specific and significant support for one of their children.

    It may also be that there are concerns of the parent that if the benefit was provided to the child under the will, that provision could be the subject of a claim for further provision by any other child that is not party to the deed of family arrangement. If the parties have a connection with New South Wales, the entry into a granny flat arrangement is likely to be relevant under the notional estate provisions.

    Whilst this objective of providing a benefit to a particular child may well be a sought after outcome of creating the granny flat interest, it would only be in the very rare circumstances (if at all) that this estate planning objective should be the determinative factor in entering into the arrangement. The important matters referred to above would also need to be considered.

    Conclusion

    For granny flat arrangements to be workable for both parties and for the review of the arrangement to be kept out of the courts, there will need to be some serious assessment and consideration of whether or not the arrangement is appropriate for the particular clients.

    Even where appropriate, the arrangement would need to deal with a possibility of there being a change in circumstances for the parties.

    In the right context and after thorough and careful advice, a granny flat arrangement can achieve significant and beneficial outcomes for the parties. The benefit of a parent being able to live in a family home for as long as possible has both significant financial and personal benefits. The child/carer receives a significant financial benefit but in return they have also taken on a significant care responsibility. There is also an important sense of fulfilling a common personal goal that allows their parent to receive care in the preferred place of a family home.

    To achieve these outcomes advisers will need to walk the parties carefully through a proposed granny flat arrangement to ensure that these objectives are achieved.

    To learn more about if a granny flat arrangement is right for you and your family, contact our estates team.

    Written by David Toole and Golnar Nekoee. First Published in the LexisNexis Retirement & Estate Planning Bulletin.

    [1] Section 12A.

    [2] Department of Human Services, Granny Flat Interest, 27 August 2017,www.humanservices.gov.au/individuals/enablers/granny-flat-interest

    [3] R McCullagh, The tangled web of granny flats, 22 August 2015.

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  • The Privacy Act is changing on 22 February 2018 - Privacy Policy

    The Privacy Act is changing on 22 February 2018 - This is NOT a drill!

    From 22 February 2018 amendments to the Privacy Act 1988 will take effect and introduce a mandatory notification procedure for data breaches. Currently, there are no requirements to notify individuals affected by a data breach.

    All entities which are bound by the Australian Privacy Principles will have new reporting obligations if there is an eligible data breach. Those entities will need to notify the Office of the Australian Information Commissioner (OAIC) and any parties who are at risk because of the breach.

    An eligible data breach is either:

    • unauthorised access or disclosure of information that a reasonable person would conclude is likely to result in serious harm to any individuals to whom the information relates; or
    • information that is lost in circumstances where unauthorised access or disclosure of information is likely to occur and it can be reasonably concluded that such an outcome would result in serious harm to any of the individuals to whom the information relates.

    To determine whether an individual is at risk of serious harm you will need to consider factors such as the sensitivity of the information, whether the information is protected by one or more security measures, the kind of persons who could obtain the information and the nature of the harm.

    If you suspect there has been a data breach but you are not aware of the circumstances or whether it is actually an eligible data breach then you must carry out a reasonable and expeditious assessment within 30 days of becoming aware of the breach.

    If there are reasonable grounds to believe there has been an eligible data breach then you need to notify the OAIC and the individuals whose data was affected or individuals who are at risk with:

    • a description of what occurred
    • the kinds of information concerned; and
    • the recommended next steps that individuals affected should take in response to the data breach.

    In some circumstances if you take action in response to the breach before any disclosure or serious harm occurs then the Act provides that it may not be an eligible data breach and you do not need to go through the notification steps.

    Failure to abide by the investigation and notification regime will be an interference with an individual’s privacy and therefore a breach of the Privacy Act. The OAIC may investigate, make a determination and pursue civil penalties against you for such a breach.

    So what should you be doing?

    1. Consider whether your ICT security systems are sufficient to protect against the unauthorised release or disclosure of personal information;
    2. Review and update your internal policies and protocols to ensure that:
      • you and your team can respond to actual or potential data breaches quickly; and
      • you can conduct the necessary assessments within the timeframes required by the Privacy Act;
    3. Educate your staff on the changes to the Privacy Act and what they can be doing to mitigate the risk and help you respond if a breach occurs; and
    4. Update your privacy policies to include your notification processes.

    For advice on the changes to the Privacy Act or to update your privacy policies please contact us.

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  • Psychological Injury Workers Compensation HR Breakfast Club - January Summary

    Psychological Injury Workers Compensation: HR Breakfast Club - January Summary

    This month, we discussed the impacts of Mental Health Workers Compensation.

    This month, we discussed the tricky minefield which is workplace psychological injuries, how they arise, and when they are compensable. Bill McCarthy, BAL Special Counsel who has extensive experience in workers compensation and insurance law, shared some of his insights on the topic. Bill touched on:

    The different types of workplace psychological injuries:

    • Psychological injury attributed to work-related stress may include such disorders as depression, burnout, anxiety, post-traumatic stress disorder and adjustment disorder.

    Some statistics about psychological injuries:

    • Psychological injury accounts for around 11% of accepted claims within the Comcare scheme.
    • Psychological injury accounts for approx. 30% of the cost of Comcare claims.
    • Workers with psychological injury are staying off work for longer. 55% of psychological claims that reach four weeks lost time continue on to 13 weeks of lost time.
    • The impact of mental harm is delayed recovery, slow return to work and increasing claim liabilities resulting in premium pressures.

    What is adjustment disorder, and why is it controversial

    • The specific signs and symptoms of an adjustment disorder may vary greatly from one affected person to the next. There are currently 6 recognised sub-types of adjustment disorder – Adjustment disorder with depressed mood, Adjustment disorder with anxiety, Adjustment disorder with mixed anxiety and depressed mood, Adjustment disorder with disturbance of conduct, Adjustment disorder with mixed disturbance of emotions and conduct, and Adjustment disorder unspecified. There are so many different presentations of this disorder, and sometimes it feels as though it is a ‘waste-basket diagnosis’ which is assigned to those who fail to meet the criteria for other mental disorders.

    When is a psychological injury compensable?

    A psychological injury is only compensable if it arises out of or in the course of employment. The employment must have been a significant, material, substantial or the major contributing factor to the injury. However, psychological injuries that have arisen out of ‘reasonable action’ taken by the employer are not compensable. For example, if an employee develops anxiety or depression as a result of a (fair) poor performance review, it is unlikely that that injury will be compensable.

    This answer is, of course, general commentary only. It is not legal advice. Readers must contact us and receive our specific advice on the particular situation that concerns them before acting or refraining from acting.

    If you would like to join the HR Breakfast club, it runs on the third Friday of every month, please get in contact.

     

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  • 'Over the top' discipline: rethinking bullying in the public service

    Recent cases show that bullying in the public service can take place through otherwise legitimate mechanisms, such as reassignment decisions and misconduct investigations. Employment lawyer John Wilson explains.

    The Fair Work Commission’s anti-bullying jurisdiction has been the subject of controversy since its inception in 2014.

    Legislative amendments to the Fair Work Act 2009 empowered the commission to issue ‘stop bullying orders’ to protect employees from continuing to be bullied at work. But the jurisdiction has been lambasted as ineffective, with only a handful of orders made in the past three years.

    To establish bullying under the Fair Work Act, a worker needs to show that an individual, or group of individuals, has’repeatedly’behaved’unreasonably’towards the worker, and that behaviour creates a risk to health and safety. Actions which constitute reasonable management action carried out in a reasonable manner are not bullying (regardless of the health consequences). For the commission to make a stop bullying order, they must also be satisfied that there is a risk the worker will ‘continue’ to be bullied at work.

    Bullying in the public sector can be particularly pernicious. This is because public sector employees are often inclined to remain in the public service, whereas their private sector counterparts are more likely to jump ship to escape poor workplace behaviours. Also, the kind of easily identified conduct that amounts to classic bullying (such as swearing, and physical and verbal abuse) is often absent in public sector clerical workplaces, but replaced with more subtle forms.

    If Sabrina in accounts deliberately sneezes in your lunch every Friday, it is probably relatively easy to show that you are being bullied by Sabrina. But consider the scenario where Sabrina makes a complaint that you have been ignoring her, and that you adopted a disrespectful tone in a staff meeting a few months ago. Sabrina is finding this very stressful. HR commences an investigation to determine if you have misconducted yourself. HR decides that in the meantime, you need to be removed from your usual duties. Could you be the victim of workplace bullying by HR?

    The 2017 case of Coulson raised this possibility. The applicant alleged that she had been bullied by a number of senior personnel at a federal department via:

    1. Being subjected to several unnecessary decisions to suspend or reassign her duties during a misconduct investigation; and
    2. A continuation of the reassignment decision after the misconduct investigation concluded there had been no misconduct.

    The department applied to have the stop bullying application dismissed on the grounds that it was frivolous or vexatious or had no reasonable prospects of success. In particular they argued that the initial reassignment decision was reasonable management action.

    Commissioner John Kovacic refused to accept that the claim had ‘ no reasonable prospects of success’ and permitted the case to proceed to hearing. This judgment suggests that ‘over the top’ disciplinary actions can amount to bullying. Admittedly, the bar for the commission to dismiss was a high one but the judgment does give hope to public sector employees who find themselves the subject of a string of administrative actions as part of bullying conduct.

    In another recent case, Burbeck v Alice Springs Town Council, the commission issued a stop bullying order after finding that disciplinary action was ‘retaliatory and punitive’. While commissioner Nicholas Wilson found both the employer and employee to be at fault, he wished to ‘reset the employment relationship’ and therefore made a range of orders. These required the council to arrange anti-bullying training for staff, and to review its disciplinary procedures.

    We may need to expand the stereotypical, steal-your-lunch-money concept of bullying to address the potentially more insidious forms of workplace bullying that can emerge in modern bureaucratic workplaces. There are signs the law is adapting to accommodate this reality.

    John Wilson is managing legal director at Bradley Allen Love. His firm acted for the applicant in Coulson.

    First published in the Mandarin.

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  • Assignment of a Lease by Conduct & Agreement for Lease AFL

    Agreements for Lease: Kicking goals with AFLs

    An agreement for lease (AFL) is quite simply an agreement between two parties to enter into a lease in the future. Unlike a lease, it does not create an immediate legal right to take possession of the land, however it does create enforceable rights between the parties.

    When to use an AFL

    An AFL can be vital when a landlord and potential tenant want to create a binding legal relationship for the leasing of property, but when a final lease cannot be entered into right away.

    There are many reasons why a lease might not be able to be entered into immediately:

    • the Landlord might not yet hold title to the premises;
    • there might be a previous tenant still in occupation of the premises;
    • third party approvals might be necessary before the premises can be occupied; and
    • finally, and most importantly, the premises might require substantial repairs, renovation or fitout prior to the tenant taking occupation, often purpose built for the tenant.

    Why an AFL is important

    Where both a landlord and potential tenant are relying on a lease being entered into in the future, but have no legal agreement recording that, each is exposed to risk if the other should pull out. Particularly, in circumstances involving premises being refurbished or fitted out for the specific needs of a particular tenant, both parties are taking on a significant amount of risk. The landlord may be spending a substantial amount of money on the premises and could be left out of pocket if the tenant does not end up moving in. On the other hand, a tenant may be forced to pay extra if it needs to find alternative premises in a hurry because a prospective landlord does not complete the required fitout or rents it to someone else.

    It is to mitigate these risks to both parties that it would be wise to enter into a formal AFL. An AFL provides clarity around important issues, such as time frames for completion of works and when the lease is to commence. An AFL also provides enforceable obligations on both parties in the event that the lease falls through, which can reduce the loss suffered.

    What should an AFL cover?

    An AFL needs to cover all the issues which may arise prior to a lease being entered into, as well as the form of the lease that will eventually be in place. Among the things that may need to be covered are:

    • key dates and timeframes for any events precedent to entering into the lease;
    • what works are to be carried out by the landlord or tenant;
    • who is responsible for paying for any works and any financing or loan arrangements;
    • obligations to obtain finance or development approvals by third parties;
    • the terms under which the lease will be entered;
    • lease incentives;
    • guarantees and indemnities; and
    • dispute resolution.

    Due to the wide range of issues that need to be covered, AFLs can actually be larger and more complicated than the leases that arise out of them.

    If you need an Agreement for Lease, contact our property and commercial leasing team to help you prepare an AFL to ensure that your complex leasing arrangements run with a minimum of risk.

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  • Can strata subdivision avoid minimum lot sizes in NSW

    Can strata subdivision avoid minimum lot sizes in NSW?

    Clause 4.1 of the standard instrument local environmental plan provides that the size of any lot resulting from a subdivision of land must not be less than the minimum lot size for the land shown on the Lot Size Map. Does the same minimum lot size apply if the proposed lots are to be created by the registration of a strata plan?

    This question was considered by the Land and Environment Court in a decision handed down on 11 December 2017.

    In DM & Longbow Pty Ltd v Willoughby City Council [2017] NSWLEC 173, the applicant sought development consent for the conversion of an existing dwelling to a dual occupancy and the strata subdivision of the land into 2 lots (one for each unit) and one common lot.

    The Council originally refused development consent for both developments but ultimately agreed that the dual occupancy development was acceptable. However, it maintained its opposition to the approval of the strata subdivision of the dual occupancy.

    The Council argued that the lots proposed to be created were less than the minimum lot size for the land shown on the Lot Size Map and that the development standard setting the minimum lot size for the land was specified in clause 4.6 of the LEP as one that could not be varied. The applicant argued that the minimum lot size did not apply to the subdivision because of clause 4.1(4). That clause provides that clause 4.1 does not apply to the subdivision of individual lots in a strata plan or community title scheme.

    The Council was successful before Commissioner Dixon who held that the subdivision was not capable of being approved. The applicant appealed arguing that clause 4.1(4) applied to all strata subdivisions, not only the subdivision of individual lots in an existing strata plan but also the creation of individual lots in a new strata plan, saying this was the most obvious reading of the phrase the subdivision of lots in a strata plan as that phrase is used in clause 4.1(4).

    Preston CJ, however, preferred the Council’s interpretation of the provision. The Council had argued that clause 4.1(4) applied only to the subdivision of individual lots in an existing strata plan and not the subdivision of a lot to create a new strata plan. His Honour observed that the basic rules of statutory construction required the language of clause 4.1(4) to be read in context and having regard to the objective it was designed to promote, but that the primary focus must remain upon the text. His Honour found that the text of clause 4.1(4) was clear and unambiguous and that:

    The object of the action of subdivision is the individual lots in a strata plan. The subdivision is of those lots. Those individual lots must be in a strata plan . A strata plan is a plan that is registered as a strata plan It is a strata plan that is already in existence. If there is no strata plan yet in existence, there can be no individual lots in a strata plan that can be subdivided.

    The Court held that the applicant’s proposed subdivision was not of land in an existing strata plan (it was land under the Real Property Act 1900) and that the subdivision was therefore not capable of being approved as the size of the lots to be created was less than the minimum lot size for the land specified on the Lot Size Map.

    Comment

    The information in this article is no longer current  see: https://ballawyers.com.au/2018/05/02/strata-scheme-minimum-lot-sizes/

    This decision highlights the need for Councils to consider whether different lot sizes should be specified in their local environmental plan for lots in strata plans. Not doing so will result in the general minimum lot size applying whether or not land is being subdivided by registration of a plan of subdivision or a strata plan.

    If you need advice about strata subdivision, or would like to know more, please contact Alan Bradbury.

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  • Opera stars and chorus girls The vexing tort of inducing breach of contract

    Opera stars and chorus girls - the vexing tort of inducing breach of contract

    Contracts should be kept rather than broken. Lord Justice Rix in Stocznia Gdanska SA v Latvian Shipping Co (No 3).

    An economic tort is a curious beast. The field is infrequently litigated, partly because these common law actions have had their utility curtailed by legislation, and beset by jurisprudential uncertainty. The situation is not improved by the patchwork quilt of distinct claims within this category, ongoing disagreement about unifying threads and the divergent approaches taken by courts in Australia, New Zealand and the United Kingdom.

    While a practitioner might therefore approach this topic with hesitancy, it is imperative that lawyers – particularly those in employment and commercial practices – have a firm grasp of the topic.

    At their essence, the torts permit a loss-suffering party to seek damages from the true wrongdoer, even where a third party stands in the middle and is seemingly responsible for the loss. Since the tort of inducing breach of contract was first promulgated in Britain in 1853, the action and its siblings have arisen in a diverse range of contexts. Opera impresarios, milkmen and the organisation behind World Series Cricket have all sought to take advantage of these torts, with mixed success. Their utility ranges from a helpful adjunct alongside other claims to a useful measure of last resort, and the spectre of these actions can also help ensure contractual relations are respected.

    It has been suggested that these separate torts  among them inducement to breach contract, unlawful interference with trade, intimidation and conspiracy may flow from a common source. The prospect of a general tort of causing economic loss by unlawful means has been mooted; Lord Denning MR suggested that if one person, without just cause or excuse, deliberately interferes with the trade or business of another, and does so by unlawful means – then he is acting unlawfully.

    The High Court of Australia has similarly proposed that independently of trespass, negligence or nuisance, but by an action for damages upon the case, a person who suffers harm or loss as the inevitable consequence of the unlawful, intentional and positive acts of another, is entitled to recover damages from that other.

    This article will focus on the tort of inducing breach of contract, given its foremost relevancy in the employment law context. David Howarth has estimated that 40 per cent of British cases involving the tort concern industrial relations (predominantly strikes), 20 per cent arising in other employment disputes and the remainder in commercial settings. The article will begin with a discussion of the seminal case of Lumley v Gye, before outlining each element of the tort’s modern incarnation and the relevant remedies. The article will conclude with a brief discussion of the reformoriented criticisms levelled against the action.

    A German opera singer’s lasting legal legacy

    165 years after it escalated into the British courts, a competition between two rival London theatres for the services of a star German opera singer has enduring relevance for private law across the common law world.

    A much sought-after singer in the early 1850s, Johanna Wagner, was lured to London by Benjamin Lumley of Her Majesty’s Theatre in Haymarket on an exclusive singing contract. Before she arrived in Britain, Wagner’s services were poached by Frederick Gye of the Royal Italian Opera in Covent Garden. The day before her much anticipated debut for Gye, Lumley secured an ex-parte
    injunction to prevent her performance.

    The ensuing litigation had two strands; the first, Lumley v Wagner, remains the starting point today for equitable injunctions enforcing negative covenants – Wagner was prevented from performing for a short period in London other than for Lumley’s company. The second, Lumley v Gye, gave birth to the tort of inducing breach of contract.

    In the end, Wagner sang for neither theatre and Lumley’s victory against Gye was pyrrhic – he won the legal claim on demurrer but lost an action for damages. As one legal historian observes, in the end Lumley, Gye, Wagner and the opera-going public – everyone in fact except the lawyers were all losers.

    To understand the outcome in Lumley v Gye and its ramifications, it is necessary to briefly backtrack to an earlier opera-related case.

    In 1847, another famous singer of the era broke her contract with Drury Lane Theatre to sing for Lumley at Her Majesty’s Theatre. The resulting litigation between Drury Lane and the singer, Jenny Lind, ultimately settled for $2,000. Despite indemnifying Ms Lind and paying her handsomely, Lumley was still able to recoup a considerable profit from his new singer. SM Waddams thus suggests that Lind’s case, which demonstrated that the ordinary remedy – was ineffective – and that the real dispute was between the rival employers, must almost certainly have been in the minds of the judges when they came to deal with Lumley’s cases against Wagner and Gye.

    And so, with the shoe on the other foot, Lumley brought proceedings against Gye for $30,000. In a creatively-framed claim, Lumley argued that his rival had wrongfully and maliciously enticed and procured Lumley’s breach of contract. Standing against Lumley was the contractual principle of privity – counsel for Gye responded that the breach of contract is a wrong between the plaintiff and Johanna Wagner alone, and against her he may maintain an action on the contract, but not of tort.

    By a 3:1 majority, the Court of Queen’s Bench held for Lumley and thereby established a new tort that endures today. The comments of Crompton J are particularly illuminating. [T]he servant or
    contractor, he wrote, may be utterly unable to pay anything like the amount of the damages sustained entirely from the wrongful act of the defendant: and it would seem unjust, and contrary to the general principles of law, if such wrongdoer were not’responsible for the damage caused by his wrongful and malicious acts.

    Lumley v Gye was not entirely novel. Since the 1500s, it had been accepted that an action arose where a master’s servant was enticed or harboured by another. But this tort was grounded on a master’s proprietary right to the servant (a concept which seems unthinkable today), and was distinguished by Coleridge J in dissent. His Honour chastised: I should be glad to know how any treatise on the law of contract could be complete without a chapter on this [tort], or how it happens that we have no decisions upon it.  Yet while Lumley v Gye would go untouched for almost three
    decades, the tort it created has since become firmly established across the common law world.

    The tort of inducing breach of contract

    Despite one commentator suggesting that the tort today is almost unrecognisable as a descendant of its ancestor, Lumley v Gye still provides the essential foundation for the modern action. A helpful statement of the tort was offered in Crofter Hand-Woven Harris Tweed v Veitch:

    [I]f A has an existing contract with B and C and is aware of it, and if C persuades or induces A to break the contract with resulting damage to B, this is generally speaking, a tortious act for which C will be liable to B for the injury he has done him. In some cases, C may be able to justify his procuring of the breach of contract.

    The elements of 1) a contract between A and B; 2) C’s knowledge thereof; 3) C’s persuasion or inducement for A to breach the contract with B; 4) resulting damage; and 5) the defence of justification will be considered in turn.

    Contract between A and B

    There must be a contract on foot; inducing someone not to enter into a contract is not actionable. The contract must be valid, enforceable and not voidable or otherwise defective – cases involving mistake, a lack of capacity and contracts invalid for being contrary to public policy did not give rise to the tort.

    Continue Reading…

    First published in Ethos. Written by John Wilson, Managing Legal Director, and Kieran Pender.

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  • Mental health - a clients capacity to provide lawful proper and competent instructions

    Mental Health - a client's capacity to provide lawful, proper and competent instructions

    Rule 8 of the Legal Profession (Solicitors) Conduct Rules 2015 (ACT) provides that a solicitor must follow a client’s lawful, proper and competent instructions. Implicit in this is the requirement that a solicitor be confident that their client has the capacity to give those instructions.

    Some areas of the profession are likely more attuned to these requirements. Certainly, practitioners acting in wills and estates will very familiar with the requirements surrounding capacity and issues that may arise in respect of same. However, it is incumbent upon every solicitor to ensure that, when taking instructions, they can be reasonably satisfied that their client has the requisite mental capacity to give and understand the instructions that they are intending to convey. If not so satisfied, the solicitor must not act for or represent the client. As has been found recently, a failure to be alert to issues of incapacity has the potential to generate liability in negligence on the part of solicitors.[1]

    Presumption of mental capacity

    As a starting point, it is a presumption at common law that every adult person is competent to make their own decisions and, accordingly, has the capacity to provide proper instructions. This is the basis on which the majority of solicitors act for their clients, as questions regarding mental capacity and fitness to give instructions will not ordinarily arise (aside from in particular areas such as practitioners working in with persons under the age of eighteen or suffering from obvious or know mental health diseases).

    However, importantly this presumption can be displaced. Characteristics such as old age, incapacity, mental infirmity, suspicion of undue influence or fraud or the inability to communicate are stated as those which can displace the presumption.[2] In the first instance, it is for the solicitor to determine whether there is some question regarding the client’s capacity to give proper instructions. If they consider that there is, an obligation arises for the solicitor to carry out further investigation before they may act for the client.

    Understandably, in the rush of receiving client instructions and ensuring that the work gets done, it can often be difficult to take the proper time to consider whether a client has capacity to give instructions. Solicitors also are not, or at least not by virtue of that legal ramification, medical practitioners, which can be an understandable point of unease for (particularly junior) solicitors in purporting to evaluate their client’s mental capacity. In relation to these issues, the ACT Solicitors Conduct Rules refer to a guide drafted by the Law Society of NSW When a Client’s Mental Capacity is in Doubt: A Practical Guide for Solicitors, which contains practical advice for solicitors to refer to when their client’s capacity is in doubt. It also includes a list of red flags, which if present ought to at least raise further investigation on the part of the solicitor before commencing to act.

    Some red flags include:

    • difficulty with recall or memory loss
    • lack of mental flexibility
    • the client is in hospital or aged care
    • deterioration in personal presentation, mood or social withdrawal
    • difficulty with communications
    • disorientation
    • a limited ability to interact, including if others interact on the client’s behalf

    Standard of capacity

    The standard of capacity has been stipulated in Gibbons v Wright.[3] This case emphasises that there is no fixed standard of capacity that will be applicable in all interactions. Rather, the determination of capacity is whether a party can understand the nature of the legal consequence of their actions and decisions.

    The English authority of Masterman-Lister v Brutton and Co, Jewell and Home Counties Dairies,[4] which has been widely followed in Australia, puts forward two propositions: the mental capacity required is capacity in relation to the transaction to be effected, and what is required is the capacity to understand the nature of that transaction.

    The position is quite clear: the client must understand the nature of any instructions they give in relation to the transaction, including an understanding of the legal consequences of those instructions. Capacity is directly referable to the particular transaction concerned. What is important to note is that the ultimate decision reached, even if it is a poor one (in the opinion of the practitioner), is almost irrelevant. What is important is that the client fully understands the decision-making process and, accordingly, the decision and its consequences.

    Steps you should take

    Where a client’s mental capacity is in any doubt whatsoever, it is crucial that the solicitor take thorough and contemporaneous file notes of any interactions with the client. This becomes especially important in circumstances where proceedings may be commenced at a later date when the question of mental capacity may be raised. One example of this is where the validity of a will is later challenged. A contemporaneous record of events can help to resolve this argument.

    While solicitors may be in some position to determine whether a client can adequately give instructions, they are generally not experts when it comes to determining the mental health or otherwise of a person. As stated above, the concern is with the client’s capacity to understand and make the legal decisions which will affect them, and consequently receiving the opinions of qualified medical and psychiatric experts can be of great assistance in reinforcing, or alternatively changing, a solicitor’s preliminary view regarding capacity.

    Raising this matter with the client can be a delicate affair, and questions regarding proper capacity have the potential to lead to distress. However, framing it in terms of a legal need to ensure that the client can give proper instructions so that the decisions they make will stand up under future scrutiny can make this an easier process.

    No matter how necessary a solicitor may consider an expert assessment, it should only occur where the client has given fully informed consent. In order to give informed consent, the client must understand the benefits and risks, likely outcomes, and the potential impacts on the client’s control over other aspects of their lives (financial and business affairs) of undertaking the expert assessment. Where a client does not give their consent but their solicitor remains in doubt as to their capacity to give instructions, the solicitor must be cautious in how to proceed. In the event the solicitor is not confident the client has the capacity to provide instructions, the assessment should be recommended again. Without this, the solicitor may not be able to continue acting.

    In the realities of a busy practice, there will undoubtedly be occasions where it does not seem as if a solicitor has time to properly consider questions regarding a client’s capacity, for instance in litigationwhere the hearing of a matter is unfolding before the court in real time. However, and in spite of the protections offered by the advocate’s immunity (touched on below), where an issue regarding capacity is raised about a party to court proceedings, the proper course is for the proceedings to be adjourned so that the question of that party’s capacity can be determined by the court, one way or the other.

    While this may seem an inconvenience and contrary to the intention of a swift resolution of court proceedings, it is critically important to resolve any issue regarding capacity before proceedings can be continued. Where a person is found to not possess capacity, it would be an abuse of process, and likely negligence by the solicitor acting, for proceedings to continue. Indeed, were the issue to be raised by the solicitors for the other party, and it was found that the first party lacked proper mental capacity, proceedings would likely be stayed on that basis. Questions of costs may also arise (including against solicitors personally) if an opposing side later objects to the incurring of costs where a client without mental capacity is unable to meet a costs order but, in all likelihood, never understood the consequences of being involved in litigation.

    Protection offered by advocate’s immunity – a case study

    A case which examines the legal principles surrounding mental capacity and also the consequences for what Bell J termed ‘capacity negligence’ is Goddard Elliott (a firm) v Fritsch [2012] VSC 87. The case goes into great detail regarding the standard of capacity required, and the consequences where a solicitor acts on the instructions of a client which are invalid.

    In this case, Mr Fritsch was sued by his solicitors, Goddard Elliott, for outstanding legal fees owed for work done in settling a Family Court matter regarding the property settlement resulting from his divorce. He counter-claimed against the firm, his argument being that he would never have settled his case had he been in proper mental health and that Goddard Elliott were negligent in acting on his instructions when he did not have the capacity to give them, a fact of which they ought to have been aware.

    Bell J went to great lengths to discuss the principles surrounding the area of a client’s capacity to give instructions, including the responsibilities of a solicitor and how proceedings in those circumstances should be managed. Many of those principles are those discussed above. His Honour found that Goddard Elliott had been negligent in acting on Mr Fritsch’s instructions to settle the case in circumstances where they should have been aware that he did not have the mental capacity to give those instructions.

    Despite Bell J’s findings regarding the negligence of Goddard Elliott, His Honour ultimately held that Goddard Elliott was not liable to Mr Fritsch, despite the finding of negligence, due to the advocate’s immunity. The firm was not held liable to Mr Fritsch because the instructions to settle was work which was intimately connected with the conduct of a case in court and thereby protected by the advocate’s immunity.

    His Honour found this conclusion ‘deeply troubling’, yet felt forced to it by authority. While in this instance the advocate’s immunity did protect the negligent solicitors, there is clearly a risk that the concerns raised by His Honour will ultimately lead to a situation in which solicitors cannot rely on the advocate’s immunity where they take instructions from clients who do not have the capacity to give them. Furthermore, solicitors taking instructions in non-litigious matters will not be afforded the protection of advocate’s immunity.

    It is thus fundamentally important that practitioners in all areas are aware of their requirements and duties regarding a client’s capacity and take all appropriate steps that are required to ascertain whether a client can competently give instructions. Not only does this serve the client’s best interests, but where it is subsequently found that a client lacks capacity and their solicitor continued acting regardless (and Goddard Elliott v Fritsch makes clear that this is a matter for determination by a court), the solicitor may well be exposed to personal liability.

    Consequences

    The consequences for breach of these principles can be severe, even where there has been no impropriety. From a financial standpoint, the solicitor may be liable to have indemnity costs awarded against them (if in the conduct of proceedings), and may also be liable for any damages caused by the negligence. Depending on the damage caused, this could be significant, with the solicitors in Goddard Elliott v Fritsch facing a claimed sum of near $1,000,000.

    From a professional standpoint, negligence such as this could well lead to findings of unsatisfactory professional conduct or professional misconduct. In the most serious of situations, it is easy to see an occasion where a solicitor could be struck off the roll for their negligence. The warning is clear: the matter of a client’s capacity is not something to be taken lightly.

    Because the question of a client’s mental health is undoubtedly a serious topic, it is a topic with which all practitioners should be very familiar. Where you hold concerns in a particular situation, remember that there are a wide range of resources you may turn to, including our Law Society, the NSW Law Society guide mentioned above, as well as fellow and more senior practitioners and/or medical experts.

    With today’s advances in mental health awareness, practitioners should ensure that their clients are capable of providing instructions at all times. With ever-present obligations and an often stressful work life, solicitors should also be encouraged to take steps maintain their own personal mental health as well. The support systems identified above are available for you personally as well, should you require. By protecting your own mental health, you assist not only yourself but your clients and the wider community.

    [1] Goddard Elliott (a firm) v Fritsch [2012] VSC 87

    [2] Kantor v Vosahlo [2004] VSCA 235.

    [3] (1954) 91 CLR 423.

    [4] [2003] 1 WLR 1511.

    First published in Ethos. Written by Laura Scotton.

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  • HR Breakfast Club Christmas

    Christmas: HR Breakfast Club - December Summary

    This month, we discussed 6 scenarios that have happened during the Christmas period, and the lessons that can be learnt from them.

    This month at HR Breakfast Club, we had a Christmas themed discussion around some of the notable Employment Law cases that have occurred recently at this time of year.

    One of the most notable was that of Keenan v Leighton Boral Amey NSW Pty Ltd [2015] FWC 3156.

    A work Christmas function took place in a hotel where employees had unlimited access to alcohol.

    The employee consumed 10 beers at the function. During the function, he told a member of the board to f*#! off and asked a female colleague who the f*#! are you? The employee also tried to obtain a female colleague’s phone number.

    After the function ended at 10pm, a group of employees moved to a public bar where they purchased their own drinks. At this stage of the evening, the employees touched a female colleague’s chin, said to another I used to think you were a stuck up b*+#! , kissed a third on the mouth without warning and told her I’m going to go home and dream about you tonight.

    This behaviour continued while en route to another venue with colleagues, where he told a fourth female colleague that it was his mission that night to find out the colour of her undergarments.

    Subsequent to the employee’s behaviour that night, a number of complaints were made, there was an investigation and the employee was dismissed. He then commenced a claim for unfair dismissal.

    Lessons for employers:

    • Make it clear when the Christmas function has finished. The fact the Commission held that the employee’s behaviour after the work function has ended was not connected to his employment means this distinction must be clear. Consider, for example, clearing the employees out of a particular function room, ensuring they all know that after a particular time the work function has ended and they are on their own time.
    • Make specific, not general, allegations of misconduct. In this decision the employer did not articulate specific allegation of misconduct; only general allegations were made. This was to the employer’s detriment – the Commission found this constituted a lack of procedural fairness.
    • Consider having a type of alcohol manager at the function who has the power to cut off intoxicated employees. Vice President Hatcher made an important observation in considering the role of alcohol at the function. He considered the employee’s ability to continue drinking notwithstanding his visible intoxication was ultimately a result of the fact that [the employer] did not place anyone with managerial authority in charge of the conduct of the function, but essentially let it run itself. Consequently, Vice President Hatcher held that the role of alcohol at the function weighed at least in a limited way, in favour of a conclusion that the dismissal was harsh. The take-home message here is that it is advantageous for an employer to have a managerial authority present at the function whose role includes monitoring for intoxication and having the power to cut intoxicated employees’ supply to alcohol.

    Q&A CORNER

    Q: Who still gets annual leave loading? Why does it still exist?
    A:
    Today, annual leave loading still applies to a number of modern awards and workplace agreements. Employees across a wide range of industries benefit from the standard 17.5% prescription, although this percentage can vary (e.g. Clerks (17.5%), banking sector (17.5%), fast food industry (17.5%), hair and beauty industry (17.5%), architects (17.5%), aged care (17.5%), building/construction (17.5%), teachers (17.5%), ACT public sector (17.5%) Australian Government Industry Award (no annual leave loading, paid at the employee’s ordinary hourly rate).)

    The key arguments in favour of annual leave loading are firstly that a holiday bonus is necessary in order to allow the employee to meet the additional expenses involved in travelling to a holiday location and enjoying a break from ordinary lifestyle.” Secondly, it is argued that a loading would compensate for the lack of earnings above the award rate which many employees would regularly receive, such as overtime payments, shift allowances and other disability payments and other opportunities to earn additional income. Logically, the annual leave loading attempts to address the problem of people trying to fund a (potentially family) holiday on wages substantially lower than usual or at a minimum wage level.

    This answer is, of course, general commentary only. It is not legal advice. Readers must contact us and receive our specific advice on the particular situation that concerns them before acting or refraining from acting.

    If you have a question about behaviour at your office Christmas party, or would like to attend HR Breakfast Club, please contact us.

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  • Public Servants: Fair Work Commission gives government a helping hand while shackling its staff

    Fair Work Commission gives government a helping hand while shackling its staff

    ”It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.” So wrote Charles Dickens in 1859 in his novel A Tale of Two Cities.These words might equally have been uttered by a perplexed employment lawyer today, with the Fair Work Commission perpetuating an inconsistent approach to legal representation in disputes. The upshot for public servants is that the government gains an unfair advantage, while other participants before the commission are forced to make do without legal help.

    I first wrote about this issue earlier this year, in a column titled “Government hypocrisy on display again in the Fair Work Commission“. In response, Public Service Commissioner John Lloyd emailed me to say my article was “potentially misleading” and that the commission’s decision I had discussed was “correct”. Lloyd invited me to approach his commission “before publishing future articles about matters within the remit of this agency”. Respectfully, I have no intention of doing so – although I [and the Informant‘s editor] invite him to publish a response if he wishes.

    To recap: the Fair Work Act, which governs almost all employment arrangements in this country, prevents lawyers from appearing for parties in disputes unless they receive permission from the Fair Work Commission. The policy intent was, according to the act’s explanatory memorandum, because the commission is “intended to operate efficiently and informally and, where appropriate, in a non-adversarial manner”.

    This rationale has strength and, while experienced lawyers are more often than not invaluable in resolving workplace disputes efficiently, I can nonetheless accept that, in certain cases, there can be merit to keeping lawyers at a distance.

    This year, the commission issued several decisions concerning when permission will be granted and the scope of exceptions to the act’s limitation. The jurisprudence has diverged considerably, to the benefit of the federal government and to the disadvantage of everyone else.

    Until recently, it was common practice for AGS lawyers to seek permission to appear. However, earlier this year, lawyers at the Attorney-General’s Department offshoot took the contrary view that, because they are government employees, they satisfy the in-house exception in the Fair Work Act. This interpretation of the AGS’s position was upheld in Gibbens v Commonwealth of Australia.

    Whatever one’s legal view of the decision, there can be little denying that it has considerably tilted the playing field in the government’s favour. Despite:

    1. the AGS acting in effect as a private law firm within government,
    2. the AGS competing with private firms to provide legal services to government, and
    3. almost all government departments having their own in-house lawyers already,

    the Fair Work Commission has permitted the AGS to bypass the considered policy judgment of the act. Given the manifold benefits that the public service already enjoys in disputes against its employees, the desirability of this development is dubious.

    While Gibbens and Woolworths involve distinct legal points, they are logically inconsistent. The former allowed more government lawyers to appear before the commission, while the latter and its progeny make it far harder for employers to be represented or otherwise receive legal aid. Much has been written about the potentially negative effects of Woolworths, while far less has been said about Gibbens. But the adverse consequences for public servants of allowing the government unfettered access to experienced legal representation in employment disputes are considerable, and deserve attention  possibility in the form of legislative clarification.

    Gibbens also presents, at least in theory, a considerable challenge for private law firms in obtaining permission to represent government clients before the commission. Why would the commission ever grant a private firm permission to represent a government agency when there are plenty of individuals experienced in workplace-relations advocacy among the hundreds of AGS lawyers who can appear as of right? This is especially the case one criterion for granting permission is that “it would be unfair not to allow the person [here, the government] to be represented because the person is unable to represent … itself effectively”.

    The issues raised above may seem trivial to some. But the level of representation involved in employment disputes, when emotions are high and jobs are on the line, requires a delicate policy decision. Until change eventuates, public servants can only hope they don’t find themselves legally outgunned before the commission. Surely that is the real access-to-justice concern here.

    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 Kieran Pender for his help in preparing this article.

    First published in The Canberra Times.

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  • A poorly thought-out federal ICAC could be a band-aid on a bullet wound

    A poorly thought-out federal ICAC could be a band-aid on a bullet wound

    Momentum is gathering for the establishment of a federal anti-corruption commission. What structure and powers would it need to be effective? Public sector law expert John Wilson says the wrong kind of federal ICAC could be counterproductive.

    Amid numerous recent findings of corruption and misconduct by public officials, the public service and federal politicians are under increasing pressure to maintain the confidence of the public they collectively serve. It is not surprising, then, that the call for a federal anti-corruption commission (ICAC) is becoming louder and louder. The tone of an event organised by The Australia Institute earlier this year was telling – the question was no longer whether, but how.

    That does not mean there is consensus. Professor Adam Graycar told a parliamentary committee last year that the proponents of a federal ICAC were not even sure of the problems they were trying to solve, let alone how to solve them. What, then, is necessary to ensure such an institution can effectively curb corruption in the political and bureaucratic spheres?

    Three main areas of concern have been identified, which will be considered here in turn:

    1. The incompatibility of a federal ICAC with existing regulatory bodies;
    2. the likely misuse of a misconduct register to discriminate against prospective employees; and
    3. fairness and justice considerations.

    Scope of jurisdiction

    Firstly, the boundaries of the federal ICAC’s jurisdiction must be clear to ensure the definition of corruption is not brought into question. In the 2015 case of ICAC v Cunneen, NSW Deputy Senior Crown Prosecutor Margaret Cunneen was accused of perverting the course of justice. The High Court ruled that her actions did not constitute ‘corrupt conduct’, nor did it adversely affect the police investigators’ ability to exercise their official functions, as those terms are defined in the NSW legislation. The bench concluded that applying this narrow interpretation would allow the ICAC Act to operate as it was intended to, and avoid overtly criminal acts falling within the scope of the NSW ICAC’s investigative powers.

    However, a narrow interpretation may prove more problematic in a federal setting, where crimes such as tax evasion may not be construed as an attempt to pervert the course of justice, and would therefore not fall within reach of the federal ICAC. Establishing such an institution without causing conflict with already-existing regulatory bodies would require a genius in legislative artistry.

    A misconduct register

    Secondly, it has been proposed that the federal ICAC would be supplemented by a misconduct register, modelled on the one being established in South Australia. In that state, the register forms a repository for the findings of the SA ICAC, with a database on public officers who have been dismissed from public employment. The repository will also include allegations that never advanced to investigation, to ensure that records are created on those who resign before investigations commence.

    But there are concerns about misuse of such a register. Misconduct findings are administrative, not judicial decisions, and for a range of reasons many never proceed beyond the initial decision. The 2016/17 APSC Annual Report indicated that only 93 of the 223 cases brought to the Merit Protection Commissioner as a second tier of review ended up being reconsidered. It may be, therefore, that these findings are ultimately given unjustifiable weight in future employment decisions as a result of the register.

    Former Senator Zhenya Wang, prior Chair of the Select Committee into the Establishment of a National Integrity Commission, has voiced similar concerns. A dedicated [federal ICAC] would threaten the legal rights of individuals, as well as potentially unfairly tarnish the reputation of individuals investigated, even when they are later found not to have engaged in corrupt conduct, said Wang. Elevating the weight of an internal administrative finding to a permanent stain on someone’s record has troubling implications.

    Fairness

    Finally, the Rule of Law Institute of Australia has argued that introducing a federal ICAC may create a new system of justice without the legal safeguards entrenched in the existing one. The risk has been articulated as that of a parallel system of justice to the traditional criminal court system initially with all the credibility of a court, but without any of the protections that have been built up around the court system over many generations. Principles such as the presumption of innocence, the standard of proof beyond reasonable doubt and the privilege against self-incrimination may not be embedded in this new system.

    Yet none of these flaws are fatal. With proper design and a nuanced appreciation of need to balance institutional concerns with personal liberty issues, a federal ICAC can effectively address corruption and misfeasance at the Commonwealth level without unduly imposing on the rights of affected individuals. That is not to understate the challenging task facing the creators of such a body; rather, it is to accept that these concerns are real and deserve consideration, but do not represent overwhelming obstacles.

    A band-aid?

    It may be, as detractors are quick to point out, that the risk of corruption is already lowered at the federal level. There are more pre-existing mechanisms for transparency and accountability, and the spheres administered by federal public servants are potentially less susceptible to the development-related corruption exposed in NSW.

    But there are many benefits to restoring public confidence in the federal bureaucracy through a nationwide anti-corruption commission. Like the common response to climate-change deniers (what is the detriment of a cleaner planet in any event?), if politics and administration at a federal-level are indeed free from corruption, then what harm would the added-level of accountability brought by a federal ICAC do?

    Yet the creation of such an institution is attended by risks. The establishment and subsequent failure of a federal ICAC may even prove counterproductive in the fight against corruption. Unless its implementation is carefully considered and thoughtfully executed, we may end up patching a bullet wound with a band-aid.

    John Wilson is the managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law. His colleague Zoe Zhang assisted in preparing this article.

    First published in The Mandarin.

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  • Can you disinherit an estranged child?

    Can you disinherit an estranged child?

    In every Australian State and Territory, Family Provision legislation exists to allow a natural child to bring a claim for provision (or further provision) from the estate of their deceased parent. At the very core of the Family Provision legislation is the recognition of a moral duty that a parent owes to their child.

    Whilst the Law recognises that a parent owes a moral duty to their child, it also recognises that the moral duty will be impacted based on the nature of the relationship between the parent and the child. This moral factor must be weighed against the Applicant child’s financial need for provision from an estate.

    But what if the relationship between the parent and child had been a strained one? Perhaps for a few years, or a few decades? What if the child or the parent had done something (or failed to do something) which caused a breakdown in the relationship? There is a vast array of case law which looks at the character and conduct of applicants, at disentitling conduct and estrangement between parent and child, and unfortunately, the case law can often be ad hoc and sometimes inconsistent.

    What is consistent among the case law however is that the nature of the relationship between a child and their deceased parent is always taken into account by the Court and may serve to reduce or even deny a claim for provision in circumstances that may otherwise have presented a compelling case.

    Let’s focus just on estrangement between a parent and their child.

    We know from the case law that the cause of the estrangement is relevant. Estrangement that is caused entirely by a deceased parent’s unreasonable conduct or beliefs alone cannot amount to disentitling conduct on the part of an Applicant child. The Court therefore engages in a forensic analysis of the conduct and attitude of the deceased judged by prevailing community standards. As we know, moral standards are always changing and what was considered reasonable 30 years ago, may not be considered reasonable today.

    Nonetheless, the cause of the estrangement is one factor. The period of estrangement is another factor – naturally, a longer period of estrangement may justify a lesser moral duty on behalf of the parent towards their child. Of course, moral duty needs to be weighed against other competing claims (e.g. the moral claim of a testator’s children may lose priority to those of the testator’s spouse (for example, the case of Temple v Cowell [2011]SASC 20).

    It should be noted however that issues of fault within family relationships are inherently complex, and often relationship breakdowns have causes that are not exclusive to one party (as recognised by Young J in Walker v Walker)

    More recently, in the case of Larkin v Leech-Larkin (judgement being delivered in October 2017), the NSW Supreme Court came across yet another case involving the estrangement between a mother and her son, Julian.

    The mother had 4 sons and had left her entire estate to her second son Lucien. Two of her other sons had not made a claim against their mother’s estate. One son however ( Julian) decided to make a claim.

    The Court recognised that Julian had a strained relationship with his mother caused predominantly by (a) Julian continuing to have a relationship with his father following his mother and father’s divorce and (b) Julian failing to have any meaningful contact with his mother over the past 40 years of her life, and no contact within the last 8 years of her life.

    The Court also recognised that the other son, Lucien, who was the sole beneficiary of his mother’s estate, had a much closer relationship. They had a shared common interest (being their property in the Blue Mountains), and the Court also found that Lucien had spent a great deal of his own wealth towards this property.

    The estate was worth approximately $680,000 and the Court ultimately dismissed the application by the estranged some Julian.

    Does this case add anything further to the case law on estrangement and moral duty (and the principles in Keep v Bourke and Andrew v Andrew)? The short answer is ‘not really’.

    The take-away point from this case is that we consistently see the Courts at the very least, having regard to the following:

    1. the family history and dynamic between family members, the parent and the Applicant child
    1. the nature and conduct of the Applicant child and his or her parent, and any dis-entitling conduct on part of the Applicant child;
    1. what is considered to be ‘prevailing community standards’; and
    1. weighing the above factors with against the applicant child’s financial need for provision from an estate.

    Please contact our Estate Planning team if you need to carefully structure your estate plan, or if you believe you have been unfairly treated in the distribution of an estate.

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  • In bed with Embedded Networks Are Embedded Networks the answer to rising utility prices?

    In bed with Embedded Networks

    Are Embedded Networks the answer to rising utility prices?

    The costs of electricity for households in Australia rose 72% over the ten years preceding 2013. This only slightly outpaced the rising cost of gas, which rose 54% during the period.[1] Prices have only been rising since. This led to the Federal Coalition Party releasing a new energy policy and closer to home, the ACT Government passing the Utilities Legislation Amendment Bill 2017 (the Bill). The Bill aims to remove unnecessary regulation of energy utilities in the ACT. In part, the Bill aims to reduce rising energy costs by promoting the use of Embedded Networks.

    What is an Embedded Network?

    An Embedded Network is a distribution system within a building development, typically for water, gas or electricity, connected at a parent connection point to the national or regional grid, where the delivery infrastructure to multiple users is owned, controlled and operated by a person who is not a network provider[2] and is typically not the Owners’ corporation. Operating an Embedded Network within a residential or commercial building allows the Embedded Network operator to control the provision of utility services to each unit or part of the building. The argument runs that this allows the Embedded Network operator to reduce the cost of utility services by negotiating with energy retailers for the provision of utilities to the building in bulk.

    How do these amendments affect Embedded Networks in the Territory?

    The Bill, scheduled to come into effect on 1 December 2017, creates an exemption for Embedded Networks from the Utilities Act 2000 and the Utilities (Technical Regulation) Act 2014. This means that those operating an Embedded Network will not need to obtain a licence under the Utilities Act 2000 and thus they will be exempt from compliance with the technical codes and regulations of the Utilities (Technical Regulation) Act 2014. By removing these requirements, it is now easier to establish and operate an Embedded Network in the ACT.

    Problems with Embedded Networks

    Despite the removal of some red tape, there are foreseeable problems for Developers seeking to establish an Embedded Network in new or existing Developments, as well as for Buyers or occupiers within a complex serviced by an Embedded Network. These include:

    1. The commencement of the Scheme coincides with the commencement of the Australian Energy Market Commission ‘rule determination’ on Embedded Networks. This Rule Determination creates an additional level of regulations and obligations for those operating Embedded Networks;
    1. The Electrical Safety Act 1971 continues to apply to Embedded Networks, imposing safety standards for the installation of electrical equipment and wiring work, hence leading to certification and maintenance compliance;
    1. The ability of a Developer of a new Unit Title complex to install an Embedded Network, who must address the ongoing commitment to the Embedded Network operator in accordance with the Developer obligations under the Unit Titles (Management) Act 2011;
    1. The legislative changes do not directly cater for mixed used buildings, where different management groups may have to engage with the operator of the Embedded Network; and
    1. The management (and hence cost) of delivery of the utility through the Embedded Network will be governed through the terms of the contracts that will be offered to the Owners Corporation and to the end user, that represents a cost risk to the buyer and a disclosure risk to the seller.

    Conclusion

    Ultimately, without further change (in particular to Unit Titles and mixed use development legislation) the current legislative changes do little to resolve a number of key issues associated with what should be an innovative way for Developers to defray construction costs or to remove the maze of legislation and regulation surrounding the establishment and delivery of Embedded Networks in the ACT. Until further change is brought about, the terms of utility supply will become and remain a critical aspect of ‘cost’. This highlights the good sense in securing legal advice when looking to install an Embedded Network or when purchasing in a complex with an Embedded Network.

    Should you require legal advice on these issues, please contact a member of our experienced Property and Real Estate team.

     

    [1]Both figures from: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook44p/EnergyPrices

    [2] National Electricity Rules Chapter 10 (Glossary).

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  • Workplace Policies

    If in doubt, leave it out: Making workplace policies work

    It’s only natural (for some) to try to pin things down in writing (workplace policies). This is particularly true for those in the people management business, and especially for those among them who are exposed to bureaucracy. That way everyone knows where they stand – right?

    And so the drafting of the HR policy manual begins. Cutting and pasting from here and there while adding their lashings of common sense, the drafters of an HR policy manual do their best to spell out all manner of things relating to work. What is the social media policy? What is the organisational policy on the Christmas shutdown? Where are the tea towels kept? Then the CEO and the Board add in a few of their pet peccadillos, and a HR policy manual is born.

    Sooner or later the original drafters leave the organisation. Eventually, the new policy person gets around to looking at the HR policy manual. They notice a gap in coverage, and add a few more policies, drawing from their previous workplace experience and their own brand of common sense. The new CEO and Board members do likewise. The cycle repeats itself.

    Within a few years, the manual has grown to 5 times its original size. The policies overlap. Inconsistencies emerge between the ‘grievance policy’, the ‘dispute resolution policy’ and the ‘Code of Conduct’ and nobody knows which policies to apply when an intra-staff spat breaks out. In fact, the CEO isn’t even sure if the staff concerned know of the existence of the updated policies, since the version published on the intranet isn’t the version that was included in the employee induction pack. Plus one of the staff members involved in the spat is out in the field and doesn’t have access to the intranet anyway.

    Does all this sound familiar?

    Policies are just that – policies. That is: a document drafted by the organisation for the benefit of that organisation. Unless a policy is serving that purpose, it should be ditched.

    For a start, this means policies should be clear, and internally consistent. If they aren’t, the organisation should change them so that they are. Make sure all your staff know where to find the policies, and make sure any updated versions are clearly published to everyone.

    Secondly, policies should not duplicate or, worse, be inconsistent with employee entitlements located elsewhere (for example, in the employee’s contract, the relevant Modern Award, the Enterprise Agreement or the Fair Work Act). This just asks for trouble. While this all sounds terribly obvious, in my practice it is routine to see (for both NFP’s and FP’s alike) HR policy manuals including substantive entitlements (to, say, redundancy and termination of employment) that are different to the entitlements in the employee’s contract or Award. This can have unintended consequences for everyone and is particularly hard to watch given it was a wholly avoidable situation in the first place.

    Thirdly, the promises (if any) made in the HR manual must be achievable. Courts will not allow clear policy statements to act as a ‘cruel hoax’ on employees.[1] Also, on a common sense level, it just upsets staff when their employer doesn’t follow its own rules. So, if the policies proclaim that the organisation ‘will investigate all grievances within 48 hours’, the organisation must be able to deliver on that – in all cases. If it can’t (and, let’s face it, who wants to be pinned down to that anyway?) then the policy should be recast in more aspirational terms. For example: where appropriate, the organisation will investigate grievances within the earliest practicable timeframe. Workers are people, and no two people (or situations) are exactly alike. Policies must be drafted to give your organisation the ‘wiggle room’ it is going to need to respond fairly and reasonably to every workplace situation.

    Finally, give some thought to whether the policy should even exist at all by asking yourself ‘do we really need to write this down?’ Remember, the only HR policies that should exist are the ones that are necessary. Specifically, the ones that:

    • avoid legal liability (e.g.: include policies on sexual harassment, workplace surveillance, and work safety);
    • provide necessary workplace directions to employees that, if breached, can be treated as a disciplinary issue (e.g.: regarding the use of electronic communications and social media in relation to work);
    • give information to employees about basic workplace operations (e.g.: this is how to apply for annual leave); or
    • contain statements of aspiration about the organisation (e.g.: ‘we strive to be a family friendly workplace’).

    HR policies that seek to go beyond this list need to be carefully contained and justified. While NFP’s have some compliance obligations they cannot avoid, they are not the public service. This means that if you look carefully at HR policies, you may well find that less is more.

    [1] Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784, [223].

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  • Children on site – a heightened duty of care

    Children on site - a heightened duty of care

    Risk to Children

    Young children are at higher risk of injuries as they are often incapable of having the necessary foresight of the consequences of their conduct and need to be protected from injuring themselves.

    The purpose of this paper is to show how the law of negligence operates within a school environment.

    General principles

    A child is to be judged, not by the standards of an adult, but according to what could be reasonably expected of a child of their age.

    The cases establish that the law employs a sliding scale of responsibility where the safety and well being of children is involved, sliding down according to their age:

    “It is obvious that a child is less capable of taking care of its own safety than a normal adult and the younger the child the less the capacity until a stage is reached at which there is none.” [1]

    The relationship between the school authority, teachers and students give rise to a duty of care of general supervision to the students concerning their physical safety. The High Court of Australia has summarised the extent of teachers’ duty of care to students:

    “Children stand in need of care and supervision and this their parents cannot effectively provide when children are attending school; instead it is those then in charge of them, their teachers, who must provide it.”[2]

    The duty of the school authority to its students is a duty to ensure that reasonable care is taken of them whilst they are on school premises during hours when the school is open for attendance. The duty was expressed by the High Court as follows:

    “…the duty is not discharged by merely appointing competent teaching staff and leaving it to the staff to take appropriate steps for the care of the children. It is a duty to ensure that reasonable steps are taken for the safety of the children, a duty the performance of which cannot be delegated.”[3]

    Negligence

    To be successful in a negligence claim, it must be established, on the balance of probabilities, that:

    • a duty of care was owed to the person at the time of the injury;
    • the risk of injury was reasonably foreseeable;
    • the likelihood of the injury occurring was more than insignificant;
    • there was a breach of the duty of care or a failure to observe a reasonable standard of care; and
    • this breach or failure caused or contributed to the injury, loss or damage suffered.

    The fact that a duty of care exists does not mean that a school authority will be liable for an injury sustained by a student. In order for the student to succeed in a negligence claim, all of these elements must be established.

    Foreseeability of risk

    To establish a duty of care, the student must prove that the school authority or teacher ought to have foreseen that the negligent act or omission of the school authority or teacher might endanger the student. It is not enough to establish that the school authority or teacher knew or ought to have known of the potential hazard. It must be shown that a reasonable person in the position of the school authority or teacher would have foreseen that the situation constituted a real risk to the student.

    This duty of care is not absolute and only extends to protection from harm where the risk of injury is reasonably foreseeable. The higher the risk or potential for harm, the greater the duty imposed on the school authority and the teacher.

    In many cases where a student has failed to prove their case, the school authority or teacher have acted reasonably in the circumstances rather than the injury not being foreseeable.

    Breach of duty

    In the Australian Capital Territory for a student to establish a breach of duty of care, three elements need to be satisfied:

    • the school authority or teacher knew or ought to have known of the risk – sometimes called ‘reasonable foreseeability’;
    • the risk was not insignificant; and
    • a reasonable person in the person’s position would have taken precautions against the risk.[4]

    The court in determining the liability of a school or teacher establishes whether the risk of injury was foreseeable, what the school or teacher could have done to reduce that risk being mindful of factors such as the magnitude of the risk, the age and experience of the student, and the cost of eliminating the risk.

    Causation

    To establish negligence, you must show that the act or omission caused the injury. The High Court has noted:

    “…it is of course necessary that the breach of duty of care must be causally related to the injury received [students] have often failed because they have been unable to prove that the exercise of an appropriate degree of supervision would have prevented the particular injury in question.”[5]

    Once the breach of duty of care has been established, it is often relatively easy to find that the breach caused the injury suffered by the student so long as the risk of injury is ‘not insignificant’.

    The student may suffer physical, psychological (nervous shock or other recognisable psychiatric disorder) injury or financial damage.

    Conclusion

    Teachers and school authorities need to recognise their legal responsibilities to students. Whether as a teacher in the classroom, on the playing field or on a school excursion, a duty of care is owed to students. This manifests itself as a duty to protect students from injuries that are reasonably foreseeable. To avoid injuries that are reasonably foreseeable, teachers and school authorities should at all times maintain an acceptable standard of care given the circumstances. The consequences for failing to meet this standard and in the event a student suffers injury, the teacher and/or school authority could face an action in negligence.

    [1] Cotton v Commissioner for Road Transport (1942) 43 SR (NSW) 66; Jordan CJ at 69

    [2] Geyer v Downs (1977) 138 CLR 91 at 93;

    [3] Commonwealth v Introvigne (1981) 150 CLR 258; at 270

    [4] Section 43, Civil Law (Wrongs) Act 2002 (ACT)

    [5] Geyer v Downs (1977) at p102

    For more information about negligence and duty of care with children on site, please contact Bill McCarthy.

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  • An unholy trinity? Religion, employees and the workplace

    An unholy trinity? Religion, employees and the workplace

    Australia is, by and large, a secular country. Australians have a constitutionally-entrenched freedom of religion, and anti-discrimination laws prohibit discrimination based on religion in a range of spheres. Yet as the furore surrounding the marriage equality survey demonstrated, religious issues sometimes intrude into the workplace. Companies large and small took vocal positions for and against marriage equality; in September a contractor in Canberra was terminated for expressing her religiously-motivated intention to vote no.

    The intersection between religion and employment is vexed. Drawing the boundaries between private and public life, determining reasonable concessions for religious observance in the workplace and exempting religious organisations from general law require delicate judicial and legislative policy judgments. This topic is also inevitably a controversial one. What to an atheist might represent a reasonable compromise between religion and employment would likely be entirely different for a devoutly religious person.

    Religion and the contract of employment

    Religion has tended to intrude on the contract of employment in two distinct contexts. Firstly, spiritual motives may prevent a contract existing due to the absence of an intention to create legal relations. Alternatively, where a contract is on foot, religious law may be incorporated within that relationship.

    Intention to create legal relations

    The mutual intention to create legal relations is an essential requirement in the formation of a contract (Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424, 457). Traditionally, it was considered that family, religious and community settings gave rise to a presumption against the existence of such intentions.

    The Australian position was altered in the seminal case of Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 (Ermogenous) in which the High Court highlighted the dangers of such presumptions. The Court held that the proper inquiry requires an objective assessment of the state of affairs between the parties (at 105). Accordingly, to say that a minister of religion serves God and those to whom he or she ministers may be right, but that is a description of the minister’s spiritual duties. It leaves open the possibility that the minister has been engaged to do this under a contract of employment (at 110).

    Of course, Ermogenous did not say that a religious worker necessarily has a contract of employment with the relevant religious organisation. While in that case the question was remitted to a lower court, which upheld the existence of a valid contract (2002) 223 LSJS 459), subsequent judgments have retained the view that typically no legal relationship arises in the religious context. In Redeemer Baptist School Ltd v Glossop [2006] NSWSC 1201, for example, the Supreme Court of NSW held that teachers at a particular religious school provided their services as volunteers in response to a calling to serve God (at [59]).

    As these varied outcomes demonstrate, whether or not an intention to create legal relations exists will be a fact-dependent inquiry. In some religious contexts, the manner of appointment and on- going relationship will support the existence of an enforceable agreement; in others it will remain in the realm of a consensual compact … based on religious, spiritual and mystical ideas (Scandrett v Dowling(1992) 27 NSWLR 483, 513).

    Continue Reading.

    Written by John Wilson, managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law, and Kieran Pender. First published in the Law Society Journal.

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  • Court of Appeal drains Pasminco’s pipe dream

    Court of Appeal drains Pasminco's pipe dream

    A dispute between developers and a council concerning the construction of a stormwater pipe has given the Court of Appeal another opportunity to consider how to resolve inconsistencies between development consents and construction certificates and the principles to apply when interpreting an uncertain condition of development consent.

    An uncertain condition of development consent can be a nightmare for developers, councils and prospective purchasers when trying to understand what the condition requires. While the starting point must always be the text of the condition, what do you do when the text is itself unclear? What if someone suggests that a document, not in existence at the time the consent was issued, changes the way the condition should be understood? What effect do the plans and specifications approved by a construction certificate have on the plans approved by the development consent?

    These questions were answered recently by the Court of Appeal in Bunderra Holdings Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd (subject to Deed of Company Arrangement) [2017] NSWCA 263.

    Background facts of the case

    The dispute between (our client) Bunderra Holdings Pty Ltd (Bunderra) and Pasminco Cockle Creek Smelter Pty Ltd (subject to a Deed of Company Arrangement) (Pasminco) concerned the ultimate responsibility to construct a stormwater pipe due to an awkwardly drafted condition of a development consent issued by Lake Macquarie City Council (the Council).

    The land the subject of the development consent, known as the Tripad site, originally formed part of a larger holding of land owned by Pasminco. Pasminco sold the Tripad site to Bunderra after the Council had granted Pasminco development consent for a residential subdivision on the Tripad land. The Tripad site was below the Pasminco site.

    The consent required the subdivision to occur in accordance with stormwater strategies which had been prepared on behalf of Pasminco. These contemplated the construction of a pipe under a road that divided the two sites to carry stormwater from the Pasminco site through the Tripad site. A condition of consent required the applicant to demonstrate that stormwater could safely flow from the Pasminco land through the Tripad site and required plans and calculations for these stormwater controls to be submitted to the Council prior to the issue of a construction certificate for the residential subdivision.

    After the consent was issued, Pasminco submitted a further stormwater strategy to the Council. This was said to be in response to the consent condition referred to above, and expressly required the pipe to be built as part of the Tripad site subdivision works, ie, by Bunderra.

    Bunderra obtained construction certificates from the Council for all required civil works and carried out those works. The Council issued certificates of practical completion for all of those works. The plans approved by the construction certificates did not provide for the construction of the pipe.

    A dispute then arose between Pasminco and Bunderra over who was responsible for the construction of the pipe. This culminated in Pasminco bringing class 4 proceedings in the Land and Environment Court to restrain the Council from granting a subdivision certificate for the development until after the pipe had been constructed.

    Pasminco succeeded at first instance. Robson J held that:

    1. Pasminco’s further stormwater strategy, which expressly provided for the construction of the pipe as part of the Tripad subdivision, was impliedly (and retrospectively) incorporated into the consent; and
    2. the issue of the construction certificate, which made no provision for the construction of the pipe, did not alter the applicant’s obligations under the development consent.

    Bunderra appealed.

    The Court of Appeal’s decision

    The Court of Appeal reversed Robson J’s decision and, in doing so, gave some important guidance on the interpretation of development consents.

    Development consents are to be construed to achieve practical results

    The Court reaffirmed the principle that development consents are to be interpreted to achieve practical results. In doing so, it pointed out that development consents are drafted by planners and not lawyers, and should therefore be given a liberal construction.

    The retrospective incorporation of the later stormwater strategy.

    The Court found that the stormwater strategy given to the Council after the development consent had been granted could not be retrospectively incorporated into the consent for the purpose of interpreting the consent conditions. In doing so, the Court reinforced the principle that, because a development consent enures for the benefit of subsequent land owners, it is of fundamental importance that people are able to determine with precision what the consent requires by reference to the text of the consent and any documents incorporated into the consent either expressly or by necessary implication. A document that does not come into existence until after the consent has been granted cannot be used to determine the meaning of the conditions of consent.

    The effect of the construction certificate

    The Court confirmed that the plans and specifications approved by a construction certificate prevail over the plans and specifications the subject of development consent to the extent of any inconsistency between them.

    In Bunderra’s case, the Court concluded that the construction certificates issued by the Council imposed no requirement to construct the pipe and held that these must prevail over any inconsistent provisions of the development consent plans.

    Lessons learned

    There are two key lessons to be learned from this case:

    1. A development consent must be interpreted by reference to the text of the consent itself and any documents incorporated by necessary implication. A document that is not in existence when a development consent is granted cannot be used to interpret the meaning of the conditions of consent.
    2. In the event of any inconsistency between development consent plans and the plans the subject of a construction certificate, the construction certificate plans will prevail to the extent of any inconsistency.

    To learn more about this case, please contact Andrew Brickhill.

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  • Employment matters: can there be a bias-free dispute?

    Employment matters: can there be a bias-free dispute?

    Bias can arise at several stages when public servants make decisions. Be wary to avoid it.

    The rule against bias has a storied history. Australian academic Simon Young recently cited the 800-year-old Magna Carta as providing a basis for the principle, which he described as having “a uniquely long pedigree in Western legal thinking”. The rule is simultaneously simple and plagued by complexity. At its essence, a decision-maker must bring a fair and open mind to any decision.

    Of course, complainants do not need to be aware of this legal history to cry bias. The law is dense, in a state of flux and can deliver harsh outcomes from time to time. It is unsurprising, then, that affected individuals often mistake a dislikeable decision for one tainted by bias. But bias does occur, and distinguishing between unsupported complaints and legitimate grievances is not always easy.

    Particularly in the employment law context, where emotions run high and personal relationships are firmly relevant, there can be a considerable risk of bias. In the public service, employment disputes typically tread a well-worn path. First, an investigator will investigate the disputed conduct. Second, a decision-maker will decide whether the allegations were substantiated and whether the wrongdoer should be sanctioned. Finally, a distressed public servant has avenues for appeal – whether internally, through industrial tribunals or in court. At all three stages, issues of bias can arise.

    Before considering each in turn, a more elaborate definition is required. The Macquarie Dictionary defines bias as “a particular tendency or inclination, especially one which prevents unprejudiced consideration of a question”. Essentially, bias occurs when a factor influences a decision where that factor has no reasonable and rational connection with the decision. If I have an irrational dislike of people with red hair, and I fire an employee because they have red hair, my decision-making would be tainted by my bias against redheads.

    But the law is concerned not just with this actual bias; it extends to what can be described as an apprehension of bias. If my dislike of red-headed people is well-known, and I sanction an employee who happens to have red hair for misconduct, there is a risk that bystanders may apprehend I was biased in my decision-making regardless of whether the sanction was in fact influenced by bias. This is because our justice system is concerned not only with justice being done, but also with justice being seen to be done.

    Investigation bias

    One of the most common complaints in employment disputes is that a workplace investigation was tainted by biased. In Francis v Patrick Stevedores Holdings, Fair Work Commission Deputy President Peter Sams found an investigation “was biased, incomplete and totally one-sided” because the investigator chose not to investigate counter-allegations of harassment. In another case, the commission found an apprehension of bias where an investigator was required to investigate his own conduct.

    However, a finding of bias in the investigation will not necessarily result in compensation for the affected employee, nor reinstatement if they have been terminated. In Dent v Halliburton AustraliaDent v Halliburton Australia, the commissioner, Susan Booth, held that an investigation did not need to be “flawless” provided the ultimate decision is reasonable. This places the focus on the final decision, rather than the investigation process, when determining possible remedies in unfair dismissal cases. That said, any finding of bias in the investigation will certainly help an employee in their attempt to overturn the decision or its consequences.

    Decision-maker bias

    After the investigation, a decision-maker typically makes a finding of fact (for example, whether the allegations were proven) and determines the appropriate sanction. Here, the decision-maker can find themselves between a rock and a hard place. If they simply adopt the investigation report without independently assessing the evidence presented, their decision may be infected by bias  as was the case in Francis. But if they take the inverse approach and disagree with the (typically independent) investigator, they may also be labelled as biased and accused of harbouring ulterior motives.

    The Fair Work Commission comes to the aid of decision-makers here, with several decisions accepting that reasonable minds can differ and therefore a decision-maker is not obliged to follow an investigator’s conclusions. The test remains whether the decision was reached reasonably and without bias.

    Judicial bias

    Finally, there are typically avenues for appeal once a decision is made. Two forms of bias are sometimes alleged against courts and industrial tribunals. The first occurs where one party has communicated with the institution without informing the other party. In CFMEU v LCR Group, a union applied for Senior Deputy President Peter Richards to recuse himself on the basis of his private emails with the other party’s legal representatives. The full bench acknowledged that unilateral communications could give rise to a reasonable apprehension of bias, but held that there was no logical connection between the procedural discussions in the email chain and Richards’ ability to bring an impartial mind to the particular case. Accordingly, the application was refused.

    Allegations of bias have also arisen (unsuccessfully) where a decision-maker has previously expressed an opinion on the legal question to arise in the case. The High Court’s comments in a 1986 case are apt: “[bias] flows from a reasonable apprehension that the judge might not decide the case impartially, rather than that [they] will decide the case adversely to a party”.

    The resounding message from both cases is that proving bias against a judicial or quasi-judicial officer is extremely difficult. This is for obvious reasons: the overwhelming majority of judges are highly professional and take their responsibility of impartiality seriously. Yet this has not stopped such allegations, even from within their own ranks. In February, Fair Work Commission Vice-President Graeme Watson sensationally resigned over his concerns that the institution was biased towards employees in unfair-dismissal cases.

    Bias is a common complaint during workplace investigations and the processes that follow. When emotions run high, it can be an allegation which is easy to hurl yet difficult to substantiate. To avoid the risk of bias grounding a successful appeal, public servants should adhere to proper processes, manage conflicts of interest and utilise independent decision-makers wherever possible.

    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 colleagues Robert Allen and Kieran Pender for their help in preparing this article. First published in the Canberra Times.

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  • Are your trees safe

    Are your trees safe?

    The State Environmental Planning Policy (Vegetation in Non-Rural Areas) 2017 commenced on 25 August 2017. The SEPP is part of an extensive overhaul of native vegetation clearing laws in NSW and requires a Council permit to clear any vegetation below the Biodiversity Offset Scheme threshold, to which Part 3 of the SEPP applies. The SEPP also provides for an appeal to the Land and Environment Court against a Council’s refusal to grant such a permit.

    The SEPP applies to vegetation in ‘non-rural’ areas. Non-rural areas are defined as being land in the local government areas in metropolitan Sydney and Newcastle and land within a wide range of specified ‘urban’ zones.

    However, Part 3 of the SEPP applies only to vegetation that is declared by a development control plan to be vegetation to which the SEPP applies. Where a development control plan doesn’t contain such a declaration, urban trees in the Council’s area may be unprotected.

    There is a savings provisions in clause 26 of the SEPP. This saves the application of vegetation removal provisions in development control plans which were in force at the time the vegetation SEPP commenced.

    But there is a catch. If a Council’s development control plan did not prescribe the vegetation to be protected under the former clause 5.9 of the Standard Instrument (and this may be more common that you might think), Part 3 of the new SEPP will simply not apply.

    The Department of Planning and Environment is developing a model development control plan. However, this is not yet available. All Councils should therefore check that their development control plan contains a list of vegetation to be protected by the SEPP. Any existing list prepared under the former clause 5.9 of the Standard Instrument will carry over to the SEPP but, if your development control plan doesn’t contain such a list, the trees in your urban areas may be without any legal protection. It goes without saying that, if this is the case, your development control plan should be amended urgently to include a declaration of the vegetation to which the SEPP will apply.

    For more information, please contact us.

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  • Lodging a Caveat Against an Estate Proceed with Caution

    Lodging a Caveat Against an Estate? Proceed with Caution

    In all Australian States and Territories, a person with an interest in the estate has the ability to lodge a Caveat seeking to halt proceedings in respect of a Grant of Probate. In some jurisdictions (including the Australian Capital Territory) a Caveat can even be lodged to prevent the distribution of assets in an estate (assuming the whole estate has not been distributed).

    Lodging a Caveat can be critical in giving a Caveator (the person who lodged the Caveat) time to make further enquiries to determine and ultimately establish their grounds of challenge.

    Each State and Territory has different requirements that a Caveator must be aware of. For example, in the Australian Capital Territory, a caveat may be:

    1. against a grant of probate or letters of administration for the estate;
    2. a caveat requiring proof in solemn form of the Will of the deceased person; or
    3. a caveat against the distribution of an estate.

    All jurisdictions however (in some form or another) require that a caveator have sufficient grounds in order to lodge a valid Caveat and often, ‘sufficient grounds’ is held to be present if the Caveator has a material interest that is affected by the application to prove the last Will of the testator (Re Seymour[1934] VLR 136 and Poulos v Pellicer [2004] NSWSC 504).

    Sufficient grounds for objection might include where the Caveator has reasonable grounds to believe:

    • there is a later Will of the Deceased;
    • that the Deceased lacked testamentary capacity at the time of execution of the Will;
    • that the Deceased executed the Will under some undue influence; or
    • where the person seeking the Grant of Representation does not have the relevant capacity or is disqualified from applying for some reason.

    In the ACT, once the Caveat is prepared and lodged with the Court, it must be served as soon as practicable (but no later than 7 days from the date of filing) on the relevant person, which could be the person applying for the Grant or the Administrator or Executor seeking to distribute the estate. The Caveat will then remain in force for 6 months unless it is set aside or withdrawn.

    Lodging a Caveat against a Grant or requiring proof of the Will in Solemn Form would often mean the propounder of the Will (the person proving the Will) has the burden of proving the validity of the Will that they are seeking a Grant be issued by the Court.

    Of course the evidence necessary to successfully challenge a Will will vary in each case. For example, challenging a Will on the basis that the testator lacked testamentary capacity could require a series of affidavits from the solicitor or the person who prepared the Will, the attesting witnesses, the testator’s treating medical specialists, expert medical witnesses, people who knew the deceased – the list could go on.

    Lodging a Caveat should not be taken lightly. A Caveat which is lodged without sufficient grounds could present a cost risk to a Caveator if it is not withdrawn. In some instances, once lodged it cannot be withdrawn without the leave of the Court, potentially presenting further costs to the Caveator or the estate.

    While the registration costs of lodging a Caveat may be relatively inexpensive (actually, it does not cost anything in the ACT), the subsequent costs implications could mean that a Caveator without sufficient grounds suffers hefty penalties for prematurely acting to prevent a Grant of Probate or Letters of Administration being issued by the court.

    The key point to remember when you are considering lodging a Caveat is to be very careful, always seek legal advice as to the strengths of your case and consider the possible implications.

    If you are considering lodging a Caveat, contact us to speak to one of our specialist estates lawyers.

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  • Electronic Signatures can they be used in the ACT - REIACT Magazine

    Electronic Signatures: can they be used in the ACT?

    With the rapid advances of technology come equally rapid changes in the way we interact and communicate with one another. Where once correspondence was sent by post and negotiations were drawn out over a number of weeks or months, it is now often resolved by email in a matter of days. The acceptance or agreement of contract terms by signature used on an electronic document (electronic signatures) is no exception and will often be considered binding.

    Though the concept of electronic signatures is not new and the preference (at least amongst the legal profession) appears to remain with wet ink signatures, the trend and popularity towards an electronic form of execution seems to be growing.

    The legal framework for the electronic signature has been in place for some time under the Electronic Transactions Act 1999 (Cth) which has been adopted generally in the Australian Capital Territory under the Electronic Transactions Act 2001 (ACT) (Act).

    Where an electronic signature is to be used, Section 9 requires that:

    1. the method of signing identifies the person and indicates that person’s intention in relation to the document being signed;
    2. the method was reliable in the circumstances; and
    3. the recipient consents to the document being signed electronically.

    Subject to the electronic signature complying with the above, the validity of the document cannot be denied on the basis it had been signed electronically.

    It should be noted however, that the requirements set out under Section 9 are intentionally non-specific and have the obvious downfall of allowing for the method of electronic signature to be legally challenged. There is further uncertainty in that the validity or reliability of the method of electronic signature will also depend upon the type of document or the circumstances in which the document is being signed. The Explanatory Memorandum to the Act states that the intention was to resolve the Act having to be revised to take into account technological changes.

    Caution should also be taken when signing electronically as there are specific Territory laws which may prevent this method of execution. For instance, Section 219 of the Civil Law (Property Act) 2006 (ACT)
    requires that there be at least one witness to the execution of a deed. Due to the very nature of an electronic signature (there is no witness), such provisions cannot be satisfied electronically.

    First published in the REIACT newsletter, available here. Written by Benjamin Grady.

    If you would like more information about using electronic signatures within the ACT, please contact us.

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  • Free speech denied in the High Court of Australia in Bernard Gaynor case

    Opportunity missed in the High Court on the free speech of public servants

    The High Court has refused to hear an appeal from Bernard Gaynor, who was terminated from the Army Reserves for his controversial public views, leaving public servants in an invidious position. Can they be fired for expressing their political opinion? Maybe.

    Before the High Court in August, distinguished barrister Jeremy Kirk SC addressed the elephant in the room. No doubt there are some interesting issues over the horizon here, he said, interesting issues about social media and members of the public service and so forth, but this is a really extreme case.

    The extreme case was this: Army reservist Bernard Gaynor had commenced legal proceedings after having his commission terminated for publicly expressing homophobic and Islamophobic views. He won in the Federal Court on free speech grounds, but lost in the Full Federal Court. Following Kirk’s suggestion (he appeared for the Defence Force), the High Court elected not to hear the appeal.

    For all public servants, the High Court’s failure to review the case is a great pity. While those interesting issues linger over the horizon, the ability of APS employees to speak their mind on political matters out-of-hours remains uncertain. With the Australian Public Service Commission continuing a crackdown on social media usage by public servants, this is no mere legal nicety but a pressing issue of public importance.

    Public servants and free speech

    Public servants are equal members of the Australian community and, ordinarily, enjoy the same rights and freedoms as any other citizen. However, the government has long sought to regulate the political expression of its employees – in 1902 a regulation was passed forbidding public servants from making any political comment. While the law has long since changed, the APS Code of Conduct is still regularly invoked against public servants who express disagreement with prevailing policy.

    The real difficulty in this context is striking the right balance. Few would argue that public servants have an unrestrained right to criticise government policy. In the GaynorHigh Court hearing, judge Patrick Keane posed a hypothetical: If a minister of the Crown – were to make comments disparaging of the government policy and the Governor-General, on the advice of the Prime Minister, were to terminate the commission, would that be unconstitutional?

    The answer is obviously no, and similarly a department head could hardly use the constitution as a shield against dismissal for publicly criticising his or her minister. But when a departmental receptionist expresses their views at home and out-of-hours, the pertinent considerations are entirely different. In Gaynor, the appellant was not in uniform, not on duty and not an active member of the Reserves.

    Read More.

    John Wilson is managing legal director at Bradley Allen Love and acted for the public servant plaintiff in Bennett. He acknowledges the assistance of his colleague Kieran Pender in the preparation of this article. For more information about this case, please contact us.

    Article first published in the Mandarin.

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  • Workplace Privacy Candid Camera Covert Surveillance

    Candid Camera: Covert Surveillance in the Workplace

    If covert surveillance is used in a workplace, employers had better be sure it’s done with the agreement of staff.

    It is not uncommon for organisations to keep an eye on their employees via video cameras or internet monitoring. But beware the legal pitfalls. The vexing topic of covert surveillance recently reared its ugly head in the Fair Work Commission. Nursing home provider Bupa had commenced an investigation into an employee after a colleague secretly recorded footage allegedly showing misconduct. Bupa claimed that Shahin Tavassoli had laughed during a conversation about the death of a resident and ignored residents’ calls for assistance. The latter is a serious breach of Bupa’s duty of care.

    These allegations were put to Tavassoli who immediately resigned. Two days later, she sought to rescind her resignation, but Bupa refused. Tavassoli then commenced unfair dismissal proceedings, arguing that she had been constructively dismissed. The Fair Work Commission recently found in her favour, ordering that Tavassoli be reinstated. The decision raises three important issues, which we will consider in turn.

    Procedural fairness

    Firstly, commissioner Bernie Riordan found that Bupa’s approach to the alleged misconduct was lacking in procedural fairness. The allegations were first put to Tavassoli orally and she was not given a copy of relevant written correspondence. Nor was the video recording, the only evidence for the alleged misconduct, shown to Tavassoli. Even several months after she had commenced unfair dismissal proceedings, Bupa had still not disclosed either.

    This, the commissioner held, fell considerably short of the standards required. I struggle to see how the principles of procedural fairness can be satisfied, the judgment reads.

    Employees have a right to know the case that they have to answer. Bupa had an obligation to show Tavassoli the video footage, particularly when it forms the sole foundation of the allegations. Simply making generalised accusations when specific information was available is a form of entrapment. The decision to terminate an employee should not be based on a memory test but rather the employee’s considered response to specific accusations.

    This passage is highly instructive. Employers must put particularised allegations to employees: you were rude to clients should be on 1 October, you were disrespectful to John Smith by. When the employer has evidence to substantiate these claims  email logs, video footage, witness statements  they must also be provided to the employee (redacting names to protect privacy, where necessary). Anything less, and an organisation may fail to satisfy the Fair Work Act’s procedural fairness requirements.

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    First published HR Monthly. Written by John Wilson, Managing Legal Director, and Kieran Pender, Law Clerk.

    If you have any questions about surveillance in the workplace, please contact us.

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  • Has the clock really stopped time?

    Planning Law Update: Has the clock really stopped?

    In certain circumstances, a request for additional information will ‘stop the clock’: that is, the time for lodging an appeal ceases to run until either the information is provided within the time specified by the Council or the applicant tells the Council that it doesn’t intend to provide the information.

    However, failing to provide the information within the time specified by the Council may not result in the clock restarting.

    In a decision handed down earlier this week, the Land and Environment Court held that a Council’s actions following the end of the period within which the additional information was required to be provided effectively amounted to an extension of time for the provision of the information: Corbett Constructions P/L v Wollondilly Shire Council [2017] NSWLEC 135 (9 October 2017).

    In that case the Council had requested a substantial amount of additional information in relation to a development application for a large medium-density residential development. The additional information included a residential flat building architectural design verification; a new BASIX statement; a phase 1 contaminated site assessment; a flood impact assessment and various other pieces of information. The request for information was made 10 days after the DA was lodged and therefore complied with the requirement that such requests be made within 25 days from the date of lodgement of the DA: reg 109(2). The request required that this information be made available within 28 days and indicated that if the information was not received, the application may be determined on the basis of the current information.

    The deadline for the provision of the additional information passed, and sometime later, an exchange of emails took place between the applicant and the Council in which the applicant indicated that the additional information would be provided in the coming weeks. This was followed by a letter from the Council noting that the requested information had not been provided and warning that if the information was not provided within the following 7 days, it would be assumed that the applicant wished to have the DA determined on the information previously submitted. When the additional information had still not been provided, the assessing officer emailed the applicant noting that I have previously provided until 18 October for the provision of the outstanding information and indicating that if the information was not provided by the end of the week, the assessment report would be prepared without it. The requested information was provided that day.

    When the DA remained undetermined some months later, the applicant lodged an appeal to the Land and Environment Court against the deemed refusal of the application. The Council applied to strike out the appeal on the basis that the appeal was required to be commenced within 6 months from the date on which the application was deemed to be refused (ss. 82 and 97(1)(b)), and that this period had already expired.

    The issue for the Court was whether the Council’s request for additional information had stopped the clock only for the 28 day period specified in the Council’s letter requesting the information, or until the ultimate deadline nominated in the assessment officer’s email of 18 October. The appeal was only within time if the clock had been stopped until 18 October.

    The Council argued that, because there had been no information provided in answer to the Council’s letter within the 28 day period specified, time began to run again once the 28 day period had expired. This meant that the appeal had commenced more than 6 months after the date on which it was deemed to have been refused.

    The Applicant referred to the requirement in reg 54(2)(b) that the request for additional information specify a reasonable period for the provision of the additional information and argued that the 28 day period specified by the Council was, having regard to the nature of the additional information requested, unreasonable. In fact, the Applicant described the task of providing the information to the Council in the specified timeframe as so onerous that it was mission impossible. In any event, the Applicant argued that the Council had extended the time for the provision of the information, and the information had been provided prior to the expiration of the extended deadline.

    As indicated above, the Court accepted the Applicant’s argument that the Council had in fact extended the time for the provision of the additional information, the information was provided within that extended period and the clock had been stopped until that time. In coming to this conclusion the Court found that a consent authority was not restricted to allowing a further period of time for the provision of additional information only before the expiry of any period specified in the request for further information. Rather, it is open to the consent authority, after the expiry of that period, to re-assess the situation and provide the applicant with further time to provide the information requested.

    These findings meant that it was unnecessary for the Court to determine whether the initial 28 day period specified by the Council was reasonable in the circumstances of the development application. Nevertheless the Court went on the make some useful comments on what the requirement for the specification of a reasonable period entails. Those comments may be summarised as follows:

    1. The inclusion of the word reasonable in reg 54(1)(b) is intended to ensure that consent authorities prescribe reasonable periods within which responses are to be prepared and provided when additional information is requested.
    2. The provision of additional information will often require careful, and sometimes time consuming, preparation.
    3. To be reasonable , logic demands that the period specified is sufficiently workable or feasible so as to provide enough time for the information to be assembled and then provided to the consent authority.
    4. What period of time will be reasonable will depend on the nature of the proposed development and the varying sophistication or complexity of the analysis required to provide the further information sought.
    5. It follows that a pro forma specification of a specified period within which information must be provided will often be inappropriate.
    6. Consent authorities should carefully tailor their requests under reg 54 after making their own assessment of what time would be necessary, and therefore reasonable, to enable an applicant to respond appropriately.

    For more information about this decision, please contact us.

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  • ACT's First Wills Rectification Case - In the Estate of Rummer

    The ACT Supreme Court has recently delivered judgement in a case involving Section 12A (Rectification) of the Wills Act 1968. This was the first time Section 12A was considered by the ACT Supreme Court, so pracititioners have finally been provided with judicial guidance on the application of the rectification provisions in the Wills Act.

    The case involved a Will executed by Mr Rummer on 20 August 2015. Mr Rummer’s Will made provision for his half-sister, a close friend and gave the residue of his estate to his friend Judith, who was also the defendant in the proceedings.

    Mr Rummer subsequently dictated some amendments to his 2015 Will to his nominated executor, who was the Plaintiff in the proceedings, while the executor was at his bedside. Handwritten amendments were made to the 2015 Will which were signed by Mr Rummer in the presence of a registered nurse. The handwritten amendments constituted a Codicil to the 2015 Will.

    Among the changes were the following:

    • The deletion of the gift to Mr Rummer’s close friend (Roy);
    • An amendment to give most of the rest and residue of his estate to the defendant; and
    • Inserting the words after the gift of the residue to the Defendant of amounts as directed to my Executor to my friends Pat  and Peter

    Sadly, Mr Rummer died on the same day he signed the Codicil.

    The Plaintiff sought rectification of Codicil seeking an order that the residue clause be amended to replace the words most of the rest and residue with one-half of the rest and residue. Based on conversations that the Plaintiff had with Mr Rummer, the Plaintiff’s position was that Mr Rummer meant to give the Defendant only one-half of the residue of his estate and that the other half was meant to be divided between friends Pat and Peter.

    The task before the Court was to consider the proper construction of the following words, and to consider the application for rectification by the Plaintiff:

    • Most of the rest and residue and
    • amounts as directed to my executor.

    The Judgement

    The Court ultimately held that:

    • notwithstanding the insertion of the words most of the rest and residue the testator did not intend the defendant to only receive one-half of the residue. Rather, the testator intended that the defendant should receive the rest and residue of the estate in full after payment of two monetary gifts to Pat and Peter of $35,000 each; and
    • The Court also found that the gift to Pat and Peter of amounts as directed failed for uncertainty, however, the testator’s intention was that Pat and Peter at least receive some money and that having regard to the submissions by the parties, the testator probable intention was that Pat and Peter receive an amount of $35,000 each.

    Most of the rest and residue

    With regard to the words most of the rest and residue, the Court stated the following:

    I reject the plaintiff’s submission that the word most should be construed to mean half, for a number of reasons.

    First, the express words of the Codicil dictated by the testator are most of the residue. The ordinary meaning of that word is in the greatest quantity, amount, measure, degree, or number (Macquarie Dictionary, 7th ed). It denotes a quantity greater than more. The plain meaning of the word is not half.

     

    The word most, in my view, reflects the non-legal thinking of a dying man that he needed to replace the word ALL in the Will (that had been drafted by a solicitor) with a different word, as he was now allocating some of the money that would previously have formed part of the residue to two other people

    Amounts as directed to my Executor

    With regard to the words amounts as directed to my executor to my friends Pat.and Peter, the Court’s reasoning was interesting.

    The Court disagreed with comments in Charles Rowlands publication The Construction or Rectification of Wills which state that It would not be enough that the testator’s actual or probable intentions are known exclusively from external sources.

    The Court disagreed with the above comment, indeed drawing from external sources and saying that had the testator known the lack of stipulation of an amount or a mechanism for calculation of an amount would have the effect of the gifts to his two friends failing for uncertainty, he would have stated a sum for each.

    In determining the amount to award each of Pat and Peter, the Court had regard to a range of factors and principles, including the armchair principle rule of construction.

    This case sets the precedent for cases involving section 12A in the ACT and sheds light on the legislative of probable intention. It is a well written and seemingly well-reasoned judgement highlighting key principles of construction and rectification of Wills.

    If you are involved in a will dispute, or have any questions about rectification provisions, please contact us.

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  • Does Comcare allow the Commonwealth to discriminate with impunity

    Does Comcare allow the Commonwealth to discriminate with impunity?

    A legislative ambiguity may be wrongly crimping public servants’ discrimination claims.

    Before the Safety, Rehabilitation and Compensation Act (the “Comcare Act”) commenced, if a federal public servant was injured at work, they could either file a general workers’ compensation claim or sue the Commonwealth in negligence. To succeed with the latter, the employee needed to establish fault on the part of the Australian Public Service, which made proceedings invariably costly and inefficient.

    To address this mischief, Parliament passed the Comcare Act in 1988, which extinguished the right to sue the Commonwealth in negligence and replaced it with a more generous workers’ compensation scheme administered by a government authority.

    his substitution of rights is enshrined in section 44 of the act, which relevantly reads: “an action or other proceeding for damages does not lie against the Commonwealth in respect of an injury sustained by an employee in the course of their employment”. In effect, it precludes a public servant from suing the Commonwealth following a workplace injury and, in return, they receive the right to ample compensation granted by the remainder of the act. However, the section’s wording does not restrict its application to negligence claims alone, but rather any action for damages “in respect of an injury”.

    This brings us to the four federal discrimination acts (the Racial Discrimination Act, Sex Discrimination Act, Disability Discrimination Act and Age Discrimination Act), which are intended to eliminate discrimination against vulnerable members of society. They expressly apply to the Commonwealth as an employer.

    Under these discrimination acts, an aggrieved public servant can sue the Commonwealth for unlawful discrimination and, if they succeed, the court can make “any order it thinks fit”, which would generally include damages. There are two broad heads of damages: compensation for economic loss (such as lost wages) and compensation for non-economic loss, known as “general damages”. The latter takes the form of a sum of money the court determines would adequately compensate for the hurt, humiliation, distress and loss of enjoyment of life caused by the person’s experience of unlawful discrimination.

    In the landmark 2014 decision of Richardson v Oracle, the full Federal Court flexed its muscle by substantially increasing the general damages that could be awarded under the discrimination acts. Rebecca Richardson had been sexually harassed by a colleague, causing her to develop anxiety and depression. At first instance, Richardson was awarded just $18,000 in general damages; on appeal, the full Federal Court increased this to $100,000. Richardson was hailed as the start of a new era, giving teeth to discrimination law.

    However, if she had worked for the Commonwealth, the outcome of her claim might have been different: her employer might have claimed that section 44 of the Comcare Act precluded her from maintaining an action against it “in respect of an injury sustained by her in the course of her employment”.

    I have seen firsthand the Commonwealth raise this defence on several recent occasions, and it is unknown how many other claims it has sought to quash on this basis. Without a court decision or legislative clarification, the Commonwealth can continue to raise section 44 to rebuff claims of unlawful discrimination that result in injury, and for which it would otherwise be liable. This persisting uncertainty compromises public servants’ bargaining position.

    It would, in my opinion, be absurd for the Comcare Act to override the discrimination acts in this way, because it would mean public servants could only sue for unlawful discrimination if it either caused them permanent impairment (for which the Comcare Act provides an exception to section 44), or no injury at all – but not for anything in between. One can easily imagine some obscene outcomes if this interpretation was applied in practice: for instance, a public servant is raped at work by their boss and suffers a psychological injury because of it, but because they are not permanently impaired, they are precluded from recovering any compensation from the Commonwealth for their pain and suffering, despite the Commonwealth’s clear liability otherwise.

    My view is that the section 44 defence should fail, because a claim brought under the discrimination acts is a claim brought in respect of unlawful discrimination, not “in respect of injury”. The claim would be a complete cause of action whether the claimant had been harmed by way of injury or not. The injury is not the focus or subject of the claim. The claim is not one in respect of injury.

    This conclusion is supported by the Comcare Act’s second reading speech, which says section 44 was specifically directed towards common law negligence claims, and several High Court decisions to the effect that an implied repeal of another statute, particularly one that confers an individual right, requires “very strong grounds” and “clear words”, neither of which are found in the Comcare Act.

    Until the matter is resolved, the Commonwealth may unlawfully discriminate against any one of its roughly 250,000 employees, and then raise section 44 in its own defence to settle claims for much less than what they are worth. There is also a real question, in my opinion, whether reliance on such a defence is consistent with the Commonwealth’s model-litigant guidelines. Accordingly, I implore government lawyers to think carefully before arguing this defence in the future.

    Unless Parliament acts or the Commonwealth’s lawyers desist from this tactic, it will be left to a brave victim to run the matter to a court hearing and have the issue decided. But when there is a significant risk of having to pay tens of thousands of dollars to cover the Commonwealth’s costs if unsuccessful, most victims would prefer to simply settle for a much smaller sum and put the traumatic matter to rest. Who could blame them.

    First published in the Canberra Times.

    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 colleagues Ian Brettell and Kieran Pender, and barrister James Macken of Henry Parkes Chambers, for their help in preparing this article.

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  • Sweatworking-2017

    Sweatworking 2017

    Sweatworking – BAL’s Corporate Physical Challenge Event

    On September 21, teams from Canberra businesses came together for an evening of Sweatworking to raise money with each team registering with a minimum $250 donation to Communities@Work.

    The sixth annual Sweatworking event saw 22 teams of 4, rotate through 10 stations completing a variety of exercises including the gruelling burpee and jump!

    Thank you to everyone for participating in our Sweatworking event last night. We cannot thank everyone enough for the donations that totalled $6,500! We were very proud to hand over the cheque to Communities@Work.

    After the first round was completed, there was a quick break for a sausage sizzle and some networking, before the finals began. The teams that made it to the finals were

    1. Don’t Stop BALieving
    2. Netier Red
    3. Deloitte Sweat Warriors
    4. Much Fit.

    Special thank you to:

    • Tina Barac and her team from Ignite Nutrition for organising the circuit program and motivating everyone through the challenge
    • Our Charity Partner, Communities@Work for cooking the BBQ on the night
    • BAL Staff for scoring
    • AIS for an amazing venue

    Sweatworking is an annual networking event organised by Bradley Allen Love Lawyers which pits teams from a variety of Canberra organisations against each other in a physical challenge.

    Bradley Allen Love hold the annual Sweatworking challenge to facilitate being able to network and staying active at the same time.

    Managing Legal Director, John Wilson was very proud to present Communtiies@Work with a cheque for $6,500.  It is really great to see all these Canberra teams come out to support Communities@Work said John.

    Bradley Allen Love are excited about the partnership with Communities@Work, raising funds to assist them in the vital role they play in our community.

    Sweatworking cheque

    The list of organisations that participated in Sweatworking 2017 and donated are;

    • Netier
    • Addvantage Financial Freedom
    • Much More Than Money
    • RSM
    • Global School Partners
    • Colliers International
    • Xact Project Consulting
    • SPA Accounting
    • Nexia Canberra
    • LJ Hooker
    • Ernst & Young
    • Deloitte
    • Communities@Work

    OUR 2017 CHARITY PARTNER – Communities@Work

    logo

    Communities@Work is a broad-based social enterprise serving the community in the ACT and wider capital region. Offering choice and flexibility across numerous centres and sites, we are a leading provider of children’s services. We are a Registered Training Organisation (RTO 88148) offering qualifications and professional development in early education and care. Our surplus for purpose philosophy enables us to provide valuable community support services to seniors, people with a disability and the most vulnerable and disadvantaged members of our community. With a rich heritage spanning 40 years, we truly understand the needs of our local community. We balance sound business acumen with empathy for those in need and adopt a client-centered approach to the delivery of services:While some community services are provided on a fee-for-service basis or funded through government contracts, our charitable programs rely on strong corporate, philanthropic and community support. We are endorsed to receive tax deductible donations.

    www.commsatwork.org

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  • Free speech denied in the High Court of Australia in Bernard Gaynor case

    Bernard Gaynor case - Free speech denied in the High Court of Australia

    Last month, Australia’s highest court refused to hear an appeal brought by conservative activist Bernard Gaynor. The reservist had his commission with the army terminated in 2013 for provocative public comments, and has since been engaged in a legal battle with the Australian Defence Force. Gaynor won in the Federal Court, lost in the Full Federal Court, and with the High Court declining special leave to appeal, the one-time Senate candidate’s litigious crusade is now over.

    Some might view this latest development in a positive light Gaynor’s political views are deeply offensive to certain sectors of society. Prior to his termination, he tweeted: “I wouldn’t let a gay person teach my children and I am not afraid to say it”; published a press release on “Defence’s gender-bending preoccupation” and issued another entitled “Government and Defence blinded on Islam”. More recently, Gaynor lobbied to remove an ADF imam and campaigned against halal certification. His comments often evoke One Nation senator Pauline Hanson, whose position on immigration he has endorsed.

    But the High Court’s refusal to even consider an appeal from Gaynor should be deeply troubling, regardless of your political persuasion. The Full Federal Court finding that the ADF did not impermissibly encroach on Gaynor’s constitutionally protected free speech has broader ramifications. They may be well-worn to the point of clich, but the words of English writer Evelyn Beatrice Hall are apt. “I disapprove of what you say,” she mused in 1906, “but I will defend to the death your right to say it.”

    To elucidate the nuances of this topic, several preliminary observations are necessary. Firstly, Australians do not enjoy an American-style constitutional right to free speech; we have no First Amendment. But 25 years ago, the High Court “discovered” in the Constitution an implied protection for political communication. This, the judges argued, was a necessary implication from the system of representative government established by our founding document.

    Yet such judicial activism created a shield, not a sword. The implied freedom has been consistently conceptualised as a limitation on legislative power, rather than an individually enforceable right. It was on this ground that the Full Federal Court accepted the ADF’s appeal: an error from the primary judge supposedly “led his Honour to look at [Gaynor’s] constitutional argument through an incorrect prism”.

    Finally, that political communication may be deeply offensive does not lessen the protection it is afforded. “History,” a High Court judge once wrote, “teaches that abuse and invective are an inevitable part of political discourse.”

    With these points in mind, the High Court’s disinclination to involve itself in the Gaynor case becomes all the more problematic. The comments that led to Gaynor’s termination were made while he “was not on duty, not in uniform and not doing anything connected with the ADF except criticising it and certain of its members”.

    Similarities with the public sector employment context are striking. Earlier this month the Australian Public Service Commission published new guidance on social media use by public servants, continuing its attempt to limit the participation of government employees in political debate. The Full Federal Court’s decision against Gaynor buttresses these efforts.

    In both contexts, the government is prosecuting legitimate objectives. The ADF is implementing a long-overdue process of cultural change within the Australian military, reform to which Gaynor was stridently opposed; the effectiveness of public servants depends on them acting impartially, and the APSC’s guidance is aimed at protecting that impartiality. But the dangers of silencing dissenting voices, when expressed as private opinion, are self-evident in a democratic society. Striking the right balance may not be easy, but it is certainly a task within the High Court’s remit.

    The drawbacks with the status quo are demonstrated through a simple counterfactual: what if Gaynor had instead vocally praised the ADF’s approach? He would still be an army reservist. Indeed, this is what the APSC wants of public servants  its guidance stressed “this doesn’t stop you making a positive comment on social media about your agency.” But the contest of ideas the Miltonian concept underlying much of the philosophical grounding for free speech  becomes moot if only one side can speak. Such “content-based” restrictions on expression should be subject to exacting scrutiny.

    Whether we agree with their views or not, every member of Australian society should be able to engage in political debate without fear of retribution by the state. That includes public servants and those enlisted in the armed forces. In refusing to hear Gaynor’s appeal, the High Court has missed a significant opportunity to protect freedom of expression in this country. Our democracy is poorer for this omission.

    The last word should go to the first instance judge in this lengthy saga, Justice Robert Buchanan. ”[Gaynor’s] commission was terminated,” Buchanan concluded, “because of the publication of his private views about political matters.” Last month, the High Court failed to appreciate the deeply troubling implications of that fact.

    Written by John Wilson, managing legal director of Bradley Allen Love Lawyers and Kieran Pender, law clerk.

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  • Government hypocrisy on display again in the Fair Work Commission

    Government hypocrisy on display again in the Fair Work Commission

    A recent judgment has tipped the scales even further to the government’s advantage against public servants.

    The federal government, it has been said in the litigation context, is a “behemoth”. Public servants who take on the might of the bureaucracy in employment disputes have always faced an uphill battle. The government has practically unlimited resources and its pick of legal talent; employees often have neither. However, in the past this stark inequality was partially alleviated by a requirement in the Fair Work Act that parties must seek permission before they can be represented by lawyers.

    Following Gibbens v Commonwealth of Australia, public servants no longer have even this minor protection. In July, the Fair Work Commission rejected an appeal against a decision which gave lawyers at the Australian Government Solicitor the right to appear for the government without permission.

    The relevant legislation provides an automatic right of appearance for lawyers who are employees of a party. But, so appellant Gregory Gibbens argued, lawyers of the AGS hold a distinct role: the AGS is a government legal practice that works across departments, whereas the exception is aimed at in-house lawyers. The Full Bench disagreed: “AGS lawyers are employees of the respondent (that is, the Commonwealth) engaged by the Secretary of the Attorney-General’s department to work in that department.” Accordingly, post-Gibbens, the AGS can appear without leave before the Fair Work Commission, while public servants require permission to have legal representation.

    While the legislative interpretation in Gibbens may be correct on a strictly textual view, it is entirely contrary to the Fair Work Act’s policy intention. The explanatory memorandum stated that the commission would “move away from formal, adversarial processes There will also be a higher bar set for representation.” Tellingly, it continued: “Permission for representation will only be granted to parties (including the minister) where it would enable the matter to be dealt with more efficiently or fairly” (emphasis added).

    Moreover, the Gibbens precedent, which the government has since relied upon in other matters, contradicts the position departments have taken in other contexts. In a 2004 High Court case, the Department of Immigration argued that the AGS was not “the Commonwealth” for the purposes of recovering legal fees. Justice William Gummow agreed. While that judgment was made when the AGS was a Commonwealth authority, and it has since been subsumed within the Attorney General’s department, this is seemingly a distinction without a difference.

    The government’s approach to this issue continues a trend of self-serving inconsistency  some might even say hypocrisy  when it comes to workplace relations. Two other examples are instructive.

    Judges have long adopted the view that the federal government and its myriad departments form one legal entity. The High Court held in 1920 that “the Crown”, or the executive branch, “is one and indivisible”. The bench continued: “Elementary as that statement appears, it is essential to recall it, because its truth and its force have been overlooked.”

    In all but name, the government often engages in pattern bargaining during the enterprise bargaining process seeking common terms for distinct enterprise agreements across multiple agencies which is illegal under the Fair Work Act. This is permissible, they say, because the departments are not distinct employers but all part of the Commonwealth of Australia.

    But when a dismissed public servant pursues reinstatement in the Fair Work Commission, agencies invariably resist on the grounds that doing so would be disruptive to the workplace. If the Commonwealth is just one legal entity, why can’t the unfairly dismissed public servant be reinstated to another department? This issue has arisen in the Fair Work Commission on occasion, and there are no prizes for guessing the position adopted by the Commonwealth when the shoe is on the other foot.

    Former Canberra-based Fair Work Commissioner Barbara Deegan was frank about this contradiction in an interview with Workplace Reviewfollowing her retirement. “The bargaining framework does sit uncomfortably with the prohibition on pattern bargaining. Of course in a formal sense there is no inconsistency. The bargaining framework only applies to a single employer  the Commonwealth of Australia. But then in other contexts, when it is suggested that the Commonwealth is a single employer, the response is that under the Public Service Act each agency head is a separate employer or exercises all the powers of an employer. So there is a very good argument that the Commonwealth can’t have it both ways”.

    Another area of inconsistency involves the APS’ reach into the private lives of public servant. I have written repeatedly about the government’s overreach in this field, and controversy was sparked again last month when the Australian Public Service Commission sought to regulate public servants’ “liking” of Facebook posts.

    This expansive interpretation of the Code of Conduct’s scope was highlighted by one passage. The APSC instructed: “Your capacity to affect the reputation of your agency and the APS does not stop when you leave the office. The comments you make after hours can make people question your ability to be impartial, respectful and professional when you are at work. APS employees are required by law to uphold the APS Values at all times.” Political opinion is not the only area where the APS has sought to intrude into the private lives of employees.

    Yet when an employee injures themselves outside of the office (but still in a workplace context), the APS has sought to resile from its workers’ compensation obligations. Comcare famously fought all the way to the High Court (and won) in a case involving a public servant injured having sex while away from home on work travel. The comparison between Comcare v PVYW and free speech cases may be crude, but the point nevertheless remains: the government argues for an expansive definition of what falls within the scope of employment when it suits them, and a restrictive definition when it does not.

    Although so much might be expected from a private litigant, Australians are entitled to hold the Commonwealth to a higher standard. Indeed the Model Litigant Guidelines require the government to act “consistently in the handling of claims and litigation”. While it is not obliged to “fight with one hand behind its back in proceedings“, it should certainly not  to use Deegan’s language  be able to have it both ways.

    John Wilson is the managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law. He thanks Kieran Pender and James Macken for their help in preparing this article.

    First published in the Canberra Times.

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  • Loan Agreement - a Useful Tool for Asset Protection

    Loan Agreement - a Useful Tool for Asset Protection

    A properly documented loan agreement can be an effective tool to preserve family wealth.

    It is fairly common to find loans between family members and family entities, sometimes for very substantial sums of money. Often the terms of loans between family members are undocumented which can result in complications including complications arising as a result of the following:

    1) The terms of the advance being uncertain

    Funds advanced to family members that are not documented are uncertain. Questions that may arise with undocumented loans include.

    • What are the terms of repayment;
    • When are the funds repayable;
    • Is there any interest payable.

    2) Loans being construed as a gift to the recipient

    Undocumented loans can be construed as gifts to the recipient (particularly when it comes to family members, there exists a rebuttable presumption that funds advanced constitute a gift). Funds which are construed as gifts could mean they are vulnerable to attack in the event of a relationship breakdown or insolvency.

    It should be noted also that if the advance is construed as a gift that the executors do not have an inherent power to reduce a beneficiary’s share of an estate by the amount advanced.

    3) Loans being construed as one that is payable on demand

    Undocumented loans can be construed as being payable on demand.

    Loans that are payable on demand mean (i.e. continuously recoverable at all times) mean that the cause of action arise when the money is advanced. In other words, the time for recovery for the purposes of limitations law is from the time the loan is made, not from the time the demand is made. As a result, if a loan was made more than 6 years ago (the limitation period), it may be irrecoverable.

    Loan Agreement

    A properly documented Loan Agreement can prevent these complications from arising by:

    • Ensuring that the terms of the loan are made certain between the parties
    • Ensuring that there is no doubt that the advance of funds are construed as a loan and not a gift to the recipient. This will mean that the funds do not form part of the matrimonial property for the purposes of the Family Law Act, and are not within grasp of the trustee in bankruptcy or creditors and
    • That the cause of action for recovery of the debt does not expire prematurely.

    Terms of a Properly Documented Loan Agreement

    It is not enough that there is a document in place between the parties that is signed and dated. The more the loan is presented at arm’s length, the more it is likely to be construed as a ‘loan’. In other words, your loan agreement should aim to contain the following terms:

    • The amount of the loan;
    • Interest rates, if any;
    • The term of the loan.
    • How the loan is to be repaid (lump sum, instalments);
    • Method of repayment (cash, direct credit, bank cheque);
    • Security for the lender if required.

    A properly documented Loan Agreement is also a useful tool to incorporate as part of a succession plan when trying to maintain equality amongst beneficiaries. To discuss adding a loan agreement to your will, please contact us.

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  • Australia by Design - Mark Love - Kim Harvey School of Dance

    Australia by Design - ACT

    Australia by Design is an architectural show that showcases the top 10 architectural statements for the year in each state and territory in Australia.

    The show is hosted by Tim Horton, a renowned Australia Architect.

    Mark Love was chosen as a guest panelist, and had the pleasure of reviewing the Kim Harvey School of Dance by Clarke Keller Architects. This particular building also won the Art in Architecture Award at the 2016 Australian Capital Territory (ACT) Architecture Awards. The episode is available to watch below.

    Australia by Design – Episode 4

    The other episodes are available to watch here.

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  • Costs, compromise, Calderbanks

    Costs, compromise, and Calderbanks: Recent developments

    The issue of costs is central to essentially all forms of legal practice.  GE Dal Pont.

    It is a common (though perhaps dangerous) assumption that a successful party to litigation will obtain an order that the unsuccessful party pay their costs on a party/party basis.

    This is traditionally known as costs following the event, with the party/party component of a costs order usually amounting to about 70 per cent of the cost a party has actually incurred.

    However, the ACT Court of Appeal’s recent decision in Cooper v Singh provides a useful reminder that the awarding of costs is an entirely discretionary power that courts may exercise as they see fit.

    It follows that the expectations of a party (and their counsel) as cost may not align with the court’s view as to how its discretion should be exercised.

    Singh also highlights the complex relationship between Calderbank offers and Offers of Compromise, the latter a device created by the Court Procedure Rules 2006 (ACT) ( the Court Rules ).

    Singh

    In Singh, the plaintiff was injured in a motor vehicle accident leading to myriad personal injuries. Prior to the matter being heard, the defendants made an offer to settle the case for $540,000 plus costs. The offer was stated to be pursuant to the principle in Calderbank v Calderbank. The effect of the Calderbank nature of the offer was that, should it not be accepted and the plaintiff fail to obtain an outcome better than $540,000, the defendants could seek an order that the plaintiff pay their costs on an indemnity basis from the date of the offer.

    Through this regime, while a plaintiff may enjoy some success in obtaining a judgment, if a defendant can demonstrate that costs were unreasonably incurred because of a plaintiff’s rejection of an offer which would have seen him or her better off overall, a Calderbank may provide costs protection for the defendant. At first instance in Singh, the plaintiff succeeded at hearing but only for $311,603  a sum considerably less than the defendants  Calderbank offer.

    With the offer having been made shortly before the commencement of the hearing, the defendants sought an order that their costs, essentially those of the hearing days, be paid by the plaintiff on a full indemnity basis.

    Read More.

    First published in Ethos.

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  • False Positive Employment Reference

    A false positive: employment reference checking

    The humble employment reference is an indispensable part of recruitment, but HR managers should be aware of risks.

    While the vast majority of employers take the provision of references seriously and provide fair and beneficial documents, a misleading or erroneous reference can be costly. A candidate may require
    more training than their reference suggests, or may be entirely unsuited for the position. A derogatory reference, meanwhile, can considerably harm an individual’s job prospects.
    Given the vulnerability of workers and prospective employers to inaccurate references, it is perhaps surprising that employers have few legal obligations to provide honest references.

    Duty to give a reference?

    If an employer is reluctant to provide a positive reference, they may be tempted to not provide one at all. Sometimes this will be the best option: the employer does not openly criticise a former employee, the worker is not burdened by a poor report and prospective employers are free to draw their own inferences.

    However, there are limited instances where employers may be obliged to provide a reference. In Australia, there is some judicial support for the implication of a contractual term compelling employers to provide references. If it is usual practice in an industry to provide them, and the worker is unlikely to find work without one, the courts might imply such a term. This will, however, be highly context-specific and there is certainly no blanket legal duty on employers to give references.

    Defamation and negligence

    Once a reference is given, employers may be liable under defamation law if it is inaccurate and damaging. An aggrieved worker might seek damages, or injunct the employer from making further defamatory statements. Employers can avoid liability by being honest and fair in their assessment of the worker, and only making negative statements supported by objective evidence. Provided the negative reference was not given for reasons of malice, the doctrine of qualified privilege will provide a strong defence to defamation lawsuits.

    While a prospective employer has no protection under defamation law for damagecaused to them by a false-positive reference, they may be able to sue for negligence. Employers might owe a duty of care to anyone who is likely to suffer damage as a consequence of (both negative and positive) misstatements in an employment reference, which would encompass the worker and possible future employers. This is certainly the legal position in Britain where one case saw an ex-employee successfully sue a company for negligence following the provision of a damagingly inaccurate reference.
    The legal position is unsettled in Australia although some courts have endorsed the British approach, differences in underlying law means the question remains open. Until then, employers would be well-advised to ensure they are fair, honest and take reasonable care when providing employment references.

    Disagreeable agreement

    It is not uncommon for an employer and employee to agree upon a reference if the employment relationship breaks down and the employee exits by way of a settlement deed. These references are typically positive or neutral, and might not reflect the employer’s true sentiment. If Australian courts do establish a duty to provide accurate references, employers could be in breach of that duty by giving a false-positive, albeit agreed, reference.

    It is difficult to reconcile these competing concerns, and while the law remains unsettled, employers are in an uncomfortable position. As it is far harder to attach liability for omissions than positive statements, where possible, employers should only include objectively verifiable statements in an agreed reference.

    While several legal risks arise when organisations give employment references, they can be mostly mitigated through common sense. Provide accurate information, do not defame former employees and keep any negative comments to oral communication. If these precautions are followed, references need not be a risky business.

    John Wilson is the managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law.

    First published in HR Monthly.

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  • Dirty washing on the line: Nasty employment disputes can generate bad publicity. How can HR help protect the organisation?

    Dirty washing on the line: Nasty employment disputes

    Nasty employment disputes can generate bad publicity. How can HR help protect the organisation?

    Newspaper readers love scandal, and employment disputes can be particularly scandalous. As the widely-publicised litigation between Channel Seven and Amber Harrison demonstrates, the airing of workplace grievances in open court can be damaging to all. Unfortunately for media-shy employers, the principle of open justice that litigation must be open to the public is an essential feature of the Australian judicial system.

    Gagging orders

    There are exceptions to the open justice principle. Most courts and tribunals have power to issue suppression, anonymity and pseudonym orders. For example, the Fair Work Commission can de-identify (or hide the identity of) parties, order closed hearings, restrict attendance and prohibit the publication of evidence. These orders can be granted where the Commission is satisfied that it is desirable to do so because of the confidential nature of any evidence or for any other reason. The Federal Court and state courts have similar powers.

    Yet despite the scope of its powers, the Commission (and various courts) have been particularly hesitant to abrogate the open justice principle in the employment setting. The 2014 case of Corfield is illustrative. After an employee had sought an anti-bullying order, the employer applied to the Commission to conceal the identity of the parties. The employer submitted that the publication of the name of the applicant and respondents in what is essentially a private and confidential matter will not be conducive to good governance of the respondent employer.

    Given the employment relationship was ongoing, the respondent argued that a de-identification order was appropriate. Commissioner Michelle Bissett didn’t agree. The submissions of the employer were insufficient to overcome the presumption that a hearing will be conducted in public. She concluded: Mere embarrassment, distress or damage by publicity is not a sufficient basis to grant such an application. While this is not an insurmountable hurdle, it does require the employer to demonstrate compelling grounds.

    Behind closed doors

    There are other ways to minimise the likelihood of employment disputes descending into trial by media. If an employee is exiting in a situation which may turn acrimonious, ask them to execute a Deed of Release in return for a small ex-gratia payment in addition to their termination entitlements. Not only does this prevent the employee from commencing litigation (at least in theory  some disgruntled ex-employees have been known to try suing regardless), but the Deed can also include a confidentiality provision. This restrains either party from disclosing the terms of the Deed or related circumstances, and a breach entitles the affected party to sue for damages.

    Such Deeds can include non-disparagement obligations. These often require that the parties must not disparage each other, with disparage defined as any negative statement, whether written or oral, about either party. Non-disparagement provisions are common in settlement agreements between commercial disputants, but can also be used in the employment context.
    Such clauses are no panacea. Particularly aggrieved employees may not agree to a Deed of Release, preferring to chance their arm before the Fair Work Commission or a court. And if the employee breached the confidentiality or non-disparagement provisions, (public) litigation would be required to seek damages  defeating the very point of the clause. However, in our experience once a Deed is signed and the employee has left the organisation, such steps rarely become necessary.

    Judicial luminary Michael Kirby once wrote: An unfortunate incident of the open administration of justice, is that embarrassing, damaging and even dangerous facts occasionally come to light.
    This sentiment may be cold comfort for human resource professionals trying to protect their organisation’s reputation. It only underscores, though, the importance of effectively managing the termination process to ensure that an employer’s dirty laundry is not aired on the front page.

    John Wilson is the managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law. He thanks Kieran Pender for his help in preparing this article.

    First published in HR Monthly.

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  • High heels and head scarves: dress codes discrimination in the workplace

    High heels and head scarves: dress codes & discrimination in the workplace

    Discriminatory dress codes remain widespread the existing law is not yet fully effective in protecting employees from discrimination at work. Report of a British House of Commons Joint Committee.

    In 1977, the British Employment Appeal Tribunal heard an unusual complaint from an aggrieved bookseller. Austicks Bookshops in Leeds had a policy that prohibited female workers from wearing trousers. One employee, Ms Schmidt, refused to comply. She was dismissed, and subsequently brought proceedings on the basis that the employer’s policy constituted sex discrimination.

    In rejecting Ms Schmidt’s claim, Justice Nicholas Phillips recognised the expansive powers of an employer to determine appropriate dress-code in the workplace. As a general proposition, he opined, an employer is entitled to a large measure of discretion in controlling the image of his establishment, including the appearance of staff, and especially so when, as a result of their duties, they come into contact with the public.

    Read in 2017, the judgment in Schmidt seems rather antiquated. Certainly, the law has taken considerable steps over the intervening four decades to address such discrimination. Yet the dilemma faced by Ms Schmidt  comply with a sex-specific dress code or be dismissed lingers to this day. Indeed, just last year professional services firm PwC found itself at the centre of a media storm after an outsourced receptionist in London was sent home for refusing to wear high heels. The furore led to a joint committee inquiry by the House of Commons, which found that clothing related
    discrimination remained widespread in Britain and had not been adequately addressed by legislation.

    There is no evidence to suggest that the situation is any better in Australia. This is not solely a matter of sex discrimination either. An employer’s ability to regulate employee dress standards, regardless of gender, remains unsettled. Questions of religious discrimination also intrude.

    In March 2017, the European Court of Justice found that it was not discriminatory to fire a Muslim employee who insisted on wearing a head scarf contrary to a workplace policy prohibiting visible signs of religious belief. These issues are interrelated. This article will begin by discussing an employer’s power to prescribe and enforce dress codes in the workplace. It will then consider possible legal remedies available to aggrieved employees, located in discrimination legislation and the Fair Work Act 2009 (Cth). Given the paucity of Australian case law in this area, reference to foreign jurisprudence will be made where appropriate.

    Read more.

    John Wilson is the managing legal director at Bradley Allen Love Lawyers and an accredited specialist in industrial relations and employment law. He thanks Kieran Pender for his help in preparing this article.

    First published in Ethos.

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  • We need the voices of public servants in the political debate. Their free speech is in peril

    Free speech is in peril: We need the voices of public servants in the political debate.

    Praising your agency is welcome, but not criticising it – new social media guidelines continue a troubling trend of silencing public servants’ free speech.

    Another day, another attack on the ability of public servants to participate in Australian democracy.

    On Monday the Australian Public Service Commission (APSC) released revised guidance on how federal government employees should use social media. It advised that expressing disagreement with government policy, criticising the prime minister or even liking a negative social media post could land public servants in hot water. This, the APSC contended, was the case whether or not comments were made anonymously, on a private account or after hours.

    The new guidelines, whichpublic service commissioner John Lloyd insistsare not more restrictive than previous guidance, represent the latest frontier in a sustained campaign of government encroachment on the free speech of public servants. In 2013,an immigration officer was firedfor criticising department policy on Twitter using a pseudonym. Last year,Centrelink was forced to reinstatean employee who had been terminated for speaking out online. In the Australian Capital Territory meanwhile, the local Labor government recently attempted to restrict criticism from public servants and force them to dob in colleagues who disobeyed. For every case that makes the headlines, there are also many more where public servants are sanctioned behind closed doors.

    Nor is the issue straightforward. The government undoubtedly has a legitimate interest in maintaining a neutral and effective bureaucracy. The overt politicisation of the public service would have hugely deleterious consequences, from wholesale turnover following change of government to diminished societal trust in public administration.

    But that does not mean public servants should be silenced. Doing so not only disenfranchises them from proper participation in the system of Australian democracy; Australias limited free speech protections, it should be remembered, are predicated on the nexus between political communication and representative government. But it also deprives the broader community of important voices in political debate public servants are often some of the most qualified contributors to policy discussion.

    The APSCs guidance is blind to such countervailing considerations.It offers:It offers:Criticising the work, or the administration, of your agency is almost always going to be seen as a breach of the [code of conduct]. Praise is welcome, though. This doesnt stop you making a positive comment on social media about your agency, the guidelines continue, making a mockery of the stated desire for impartiality. Neutrality, it seems, does not swing both ways.

    The latest diktats from commissioner Lloyds office also raise intriguing legal questions. In 2013, amendments to the public service act sought to extend the code of conducts reach certain obligations were professed to apply at all times. Mondays guidance argued: [A public servants] capacity to affect the reputation of [their] agency and the APS does not stop when [they] leave the office APS employees are required by law to uphold the APS Values at all times.

    Except, at all times may not really mean at all times. In 2016,Fair Work Commission vice-president Adam Hatcher dismissedarguments to that effect from Centrelink. I reject completely, he wrote, the proposition that the law requires public servants to be respectful at all times outside of working hours, including in the expression of their attitude to the government of the day. Such a gross intrusion into the non-working lives and rights of public servants, Hatcher suggested, would require express and absolutely unambiguous language.

    Except, this is a half-truth at best.In 2003, customs officer Peter Bennettwas directed not to make media comment in his capacity as a union representative where doing so would disclose information gained via his official position. Bennett refused to comply and was charged with breaching a secrecy regulation made under the public service actspredecessor. Justice Paul Finn of the federal court invalidated the regulation on free speech grounds.

    It is a great shame the APSC overlooked this case while preparing new social media guidance for the public service. If its drafters had read the judgment carefully, they might have reflected on one particular line. Public servants cannot be, Finn quoted, silent members of society.

    John Wilsonis the managing legal director atBradley Allen Love Lawyersand an accredited specialist in industrial relations and employment law.

    First published in The Guardian.

    Disclosure: John Wilson acted for Peter Bennett in the federal court proceedings.

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  • What is Procedural Fairness

    'I know it when I see it': what is procedural fairness?

    It can be hard to define, but procedural fairness must underlie public service employment decisions.

    Of hardcore pornography, a United States Supreme Court judge once wrote: “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.” Putting aside the far less titillating context, much the same can be said of procedural fairness. This amorphous concept is an essential element of employment-related decision-making in the Australian Public Service. Yet procedural fairness is incredibly difficult to define in the abstract.

    It also means different things to different people: for decision-makers, it can be a frustrating restraint on the efficient exercise of their powers, while for those affected by an adverse decision the alleged absence of procedural fairness is often a catch-all for any number of grievances. For public servants charged with ensuring procedural fairness, “I know it when I see it” is hardly sufficient.

    The concept, an offshoot of natural justice, has ancient origins. A British judge once observed that “even God himself did not pass sentence upon Adam, before he was called upon to make his defence”. For the secular jurist, an early judgment of the Australian High Court drew support from a tragedy by Roman playwright Seneca. Justice Ian Callinan similarly posited: “That no man is to be judged unheard was a precept known to the Greeks.”

    Two millennia later, it remains accepted that, absent clear statutory language to the contrary, a government decision-maker intending to exercise their power in a manner that affects rights, interests or legitimate e