What are the limits of free speech and the right to publish personal political views and opinions about your employer as an employee?
Is there an unrestricted right to freedom of speech and expression of political views?
In Comcare v Banerji, (2019) HCA 7 August 2019, the High Court ruled that a dismissal of a public servant who used a Twitter account to post some 9000 tweets, many of which were variously critical of the Department, other employees of the Department, departmental policies and administration, Government and Opposition immigration policies, and Government and Opposition members of Parliament, was justified.
The decision has been widely criticised in some circles as contrary to and an erosion of a right of freedom of speech and political opinion.
Facts: Social Media and Freedom of Speech Case Study
The employee who was employed by the Department of Immigration and Citizenship began broadcasting tweets under the name, “Lalegale”.
A complaint was received that the employee was inappropriately using social media in contravention of the APS Code of Conduct.
The departmental guidelines explained that “[p]ublic comment, in its broadest sense, includes comment made on political or social issues at public speaking engagements, during radio or television interviews, [and] on the internet”, and cautioned that it was not appropriate for a Department employee to make unofficial public comment that is, or is perceived as, compromising the employee’s ability to fulfil his or her duties professionally in an unbiased manner (particularly where comment is made about Department policy and programmes); so harsh or extreme in its criticism of the Government, a member of Parliament or other political party and their respective policies that it calls into question the employee’s ability to work professionally, efficiently or impartially; so strongly critical of departmental administration that it could disrupt the workplace; or unreasonably or harshly critical of departmental stakeholders, their clients or staff. Similar, more extensive guidance was provided in Australian Public Service Commission Circular 2012/1 (“the APS Guidelines”), which recorded that, “[a]s a rule of thumb, irrespective of the forum, anyone who posts material online should make an assumption that at some point their identity and the nature of their employment will be revealed”.
In turn, the tenor of the APS Guidelines was further reiterated for employees of the Department in a document entitled “’What is Public Comment?’ Workplace Relations and Conduct Section Fact Sheet”.
Following an investigation, which found the account, “LaLegale” to be that of the employee, the employee was terminated for breaching the Australian Public Service (APS) Code of Conduct.
The employee challenged her termination including on grounds of an implied freedom of political communication guaranteed in the Constitution.
The Public Service as an Employer
Much of the Court’s judgement revolved around the specific provisions of the Public Service Act, and the essential elements for the functioning of the APS. The majority commented:
“Regardless of the political complexion of the government of the day, or its policies, it is highly desirable if not essential to the proper functioning of the system of representative and responsible government that the government have confidence in the ability of the APS to provide high quality, impartial, professional advice, and that the APS will faithfully and professionally implement accepted government policy, irrespective of APS employees’ individual personal political beliefs and predilections. To the same end, it is most desirable if not essential that management and staffing decisions within the APS be capable of being made on a basis that is independent of the party-political system, free from political bias, and uninfluenced by individual employees’ political beliefs. The requirement imposed on employees of the APS by ss 10(1) and 13(11) of the Public Service Act at all times to behave in a way that upholds the APS Values and the integrity and good reputation of the APS represents a rational means of realising those objectives and thus of maintaining and protecting an apolitical and professional public service. The impugned provisions are suitable in the necessary sense.”
The final comments before upholding the appeal were that:
“The respondent must be taken to have accepted that her conduct in broadcasting the “anonymous” tweets was conduct which failed to uphold the APS Values and the integrity and good reputation of the APS within the meaning of s 13(11), and that, but for the implied freedom, the sanction of dismissal was warranted.”
Comment on Social Media and Freedom of Speech
It should be noted that this was not a case based upon the Fair Work Act provisions.
While this decision was based upon the particular environment of the public service in which the employee worked, and the specific regulatory framework around that environment, there are clear messages for employees in the private sector, that tweets or similar social media activity, even if anonymous, which are critical of the employer may lead to a lawful dismissal, particularly where there are clear policies prohibiting such conduct.
The publication of individual political views, and beliefs which offend the express policies of the employer, and the basic principles of the duties of fidelity owed to the employer, and go so far as to be critical of the activities of the employer and its business activities may well result in a lawful dismissal.
Social Media Policy- Message for Employers
The message for employers from this decision is to ensure that there are robust, but clear, fair and reasonable workplace policies in place, that employees are aware of and acknowledge the existence of them, and that any investigation into a breach of such policies which may result in a termination of employment is conducted with due regard to procedural fairness.
In 2018, the Queensland Government enacted the Plumbing and drainage act that would repeal the 2002 Act.
What is the new Plumbing and Drainage Legislation?
The Queensland legislature decided to repeal the former ‘Plumbing and Drainage Act 2002’ and replaced it with the ‘Plumbing and Drainage Act of 2018’ (PD Act). As a result of this change, the ‘Plumbing & Drainage Regulation of 2019 (PDR)’ replaced the ‘Standard Plumbing & Drainage Regulation 2003’.
The PD Act has revamped the industry by focusing on safety and efficiency. Undoubtedly, the Plumbing and Drainage Act 2019 seeks conformity with modern demands and conformity with National and state codes of the building industry. In addition, the PD Act sanctions individuals, that operate illegally and contravene certain provisions, more severally. These changes in laws came after concerns raised by interested parties that the former Act was enigmatic and inadequate in making the functioning of the industry easier and efficient. Perhaps this was brought by the former legislations causing confusions through vague, repetitive and unnecessary provisions. Nevertheless, representatives from relevant government agencies and other interested parties participated in a review of the outdated legislation and assisted in finding solutions to shape the new laws in Queensland, as the responses received was internalised and processed by the Department of Housing and Public Works.
What are the relevant changes to the plumbing and drainage act?
Although the Plumbing and Drainage Act 2019, preserves the majority of the provisions from the former legislation, it will transform the industry by:
• Imposing severe penalties on individuals that conduct works without a valid licence. Penalties may include a period of imprisonment;
• Improving the readability of the Act as a whole to ensure simpler interpretations of the provisions;
• Improving the readability of the Act by removing duplicated provisions;
• Establishing simpler procedures and processes to administer and manage permits;
• formulating guidelines for interested parties that is in line with National codes;
• improving and maintaining the health and safety of the public community that is involved in plumbing and drainage services;
• creating an Act that is intelligible by removing irrelevant terminology and substituting them with suitable modern terms;
• And changes time frames to ensure the efficiency.
What is the effect and purpose of the new Regulations?
The regulations objective is to assist the Plumbing and Drainage Act become transparent and simpler for relevant parties to interpret and understand. Subsequently, the regulations assist the enactment and implementation of the PD Act by:
• Approving a working framework that is in line with national plumbing and drainage codes; and
• Approving a standard that is inclusive of Queensland codes and standards; and
• Assisting transition between the former provisions and former regulation to the new ‘PD Act’; and
• To assist authorising bodies, administer certifications efficiently by changing the required timeframes; and
• Acknowledging and managing the expected consequences for the industry, local government and other interested parties.
What are other notable reforms to the legislation in the trade industry?
The trade has further minor changes in the industry that brings Individuals with contractor, nominee supervisor or site supervisor licence types cleared from paying ‘Plumbing and Drainage Occupational fees’ for renewals and new applications. In a situation where the individuals do not hold any of the above-mentioned licences, but are in the possession of Plumbing and Drainage licences only, or individuals in possession of ‘Plumbing and Drainage Licences’ that extend to associated QBCC Licences, the individual would unfortunately miss the payment waiver and be required to pay fees.
What this means for you?
The new Act will ensure efficiency and incorporate the National Codes to ensure consistency throughout the trade industry. This shall serve the Industry with cost effective functioning and bolster the industry as it becomes easier and transparent for the interested parties of the industry. Subsequently, the Act attempts to make businesses simpler with very little prejudice and frustration. In addition to the above, the Act shall improve the readability for interested parties, and assist the industry in assessing and meeting their responsibilities with great accountability and understanding.
How can we help?
If you want to know how the implications of the New Plumbing and Drainage Act will affect your business, whatever the size or scale, please contact the team at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at firstname.lastname@example.org.
Please note that this article has been prepared by Takudzwa Makusha, Law Clerk and settled by John Christian, Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.
Do you conduct Building work in Queensland and New South Wales? The interstate consequences when ventures from down South, go South…
The Implications of the QBCC Act on construction projects is broader than you might think
In light of the recent decision in Vickers v Queensland Building and Construction Commission & Ors , the insolvency of a related building company operating in New South Wales can also lead to the cancellation of a Queensland company’s builder’s licence by the Queensland Building and Construction Commission (QBCC). This short article will discuss how the liquidation of an interstate entity conducting building works in New South Wales was considered to be a “construction company” under section 56AC of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act). As a result, the director of the related entity has had his Queensland builders licence cancelled.
Michael Anthony Vickers (Vickers) was the director of two construction companies, Midson Construction (NSW) Pty Ltd (Midson NSW) and Midson Construction (Qld) Pty Ltd (Midson QLD). After Midson NSW was placed into liquidation on 3 January 2018, the QBCC proposed cancellation of Vickers’s building licence. Vickers appealed to the Queensland Court of Appeal, sought declaratory and injunctive relief and judicial review of the QBCC’s Notice of Reasons for cancellation of his builders licence in Queensland.
On appeal, the court considered the following issues:
1. Whether a New South Wales construction company was a “construction company” within the meaning of the QBCC Act; and
2. Whether section 56AC of the QBCC Act was constitutionally valid?
Was Midson NSW a “construction company” according to the QBCC?
Vickers attempted to argue that the definition of a “construction company” pursuant to section 56AC of the QBCC Act could not be extended to a construction company operating in New South Wales. Vickers argued that the definition of a construction company should be restricted to a company that undertakes building works or services on buildings in Queensland, being consistent with the scheme of the QBCC Act.
Construction failure outside of Queensland can result in the cancellation of your licence in Queensland
The Court of Appeal held that failure outside of Queensland can trigger the suspension or cancellation of a builder’s licence to operate in Queensland. The QBCC Act is not limited to the operation of a company conducting “building work or building work services” in Queensland. Even though events of insolvency occur outside of Queensland, the Court stated that it was self-evident that the QBCC Act aims to prevent the risk to Queensland consumers arising from building companies becoming insolvent.
A Queensland building licence holder or builder who is associated with a company which has failed to remain solvent within a different jurisdiction is considered to be no different than a licensee becoming insolvent within Queensland. To conclude, where a company has been liquidated, the Court held that section 56AC of the QBCC Act applies irrespective of which state in Australia the construction company undertakes building work and building work services.
Was section 56AC of the QBCC Act constitutionally valid?
Vickers also argued that the words “in this or another State” in section 56AC of the QBCC Act was too remote from the “peace, welfare and good government” of Queensland, and therefore the provision was constitutionally invalid – the Court disagreed. The Court considered that section 56AC of the QBCC Act does not regulate conduct in another State, but rather recognises the consequences within Queensland for actions or failed construction ventures within another State. Consequences being, a company or person who holds a building licence in Queensland may have it suspended or cancelled.
In essence, the QBCC Act aims to protect Queensland consumers by ensuring that a building licence is cancelled should a building company (or associated entity) have insufficient financial stability. The QBCC also requires licensees of building licences to be a fit and proper person, which may reflect the financial stability of a building company or associated entity.
How can we help as your construction lawyers?
If you are completing building works in both Queensland and New South Wales using different entities, or thinking of expanding your business operations into the southern State, please contact the team at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at email@example.com.
Please note that this article has been prepared by Jakob Mignone, Law Clerk and settled by John Christian, Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.
Personal and Corporate Insolvency
Insolvency is one of our key areas of practice. Our insolvency lawyers are experienced in all aspects of personal and corporate insolvency.
We have a close working relationship with a number of insolvency firms throughout Australia, and as such, are able to provide our clients with a ‘complete package’ of both legal and financial insolvency-related assistance.
We understand that personal or corporate insolvency financial issues are complex, and insist that all possible insolvency options are explored to ensure the best outcomes for our clients. When debt is closing in, the chance to consider multiple possible resolutions can provide peace of mind and a renewed opportunity for financial stability and avert current insolvency, or future insolvency.
We can assist with the following pre-insolvency and post-insolvency related matters:
• Administrations and Deeds of Company Arrangement;
• ASIC Investigations;
• Recovery of debts via corporate insolvency and bankruptcy mechanisms;
• Reconstruction and personal insolvency arrangements; and
Frequently asked questions on insolvency:
• Statutory Demands.
What is liquidation?
Liquidation refers to the insolvency process by which a company is brought to an end or ‘wound up’. It involves redistributing the assets and property of the company, usually to its creditors. It usually occurs when the company has become insolvent, meaning it can no longer pay its debts as they fall due. An independent person known as a ‘liquidator’ will be appointed to oversee this process to ensure that the interest of the creditors, directors and members are treated fairly. Liquidation can be either a voluntary or compulsory insolvency process. Liquidation ends when the company is dissolved by court order on the application of the liquidator or the company is struck off the register of companies by ASIC.
Voluntary liquidation is an insolvency process which occurs when the company, through a resolution of its directors and sometimes its members, chooses to enter into liquidation. This may be because it has become insolvent and the members of the company wish to bring the company to an end. In a voluntary liquidation, a liquidator is usually chosen by the company; however, the creditors have the right to change the liquidator in the course of the insolvency process. Voluntary liquidation can occur in one of two ways, being either through a creditors’ voluntary winding up or a voluntary administration.
A voluntary winding up is a type of insolvency which occurs where the directors and members decide to place the company in liquidation and a liquidator oversees the process of redistributing the assets and property of the company in order to bring it to an end.
A voluntary administration is a type of insolvency which occurs where the directors resolve to appoint a voluntary administrator to the company. The voluntary administrator will take control of the company,conduct investigations into the company’s affairs, and comment as to the solvency (or insolvency) of the company. They will then provide options for the company’s future. These options may include:
1. Entering a deed of company arrangement;
2. Placing the company in liquidation;
3. Ending the administration and handing the company back to the directors.
A deed of company arrangement is an agreement between the company and its creditors to satisfy the company’s debts.
Voluntary administration allows the company time to consider its future and options for moving forward whereas voluntary liquidation is purely aimed at bringing the company to an end.
What is a compulsory liquidation or court appointed liquidation?
Compulsory liquidation or court appointed liquidation occurs when the court orders that the company be wound up in insolvency. In this instance, one or more of the company’s creditors applies to the court for the company to be wound up. This is because the company has become insolvent. In this instance, the court usually appoints the liquidator nominated by the creditor/s.
What is the legal definition insolvency?
Pursuant to section 95A of the Corporations Act 2001 “A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.” When a person is not solvent, they are insolvent. Insolvency occurs when a company can’t pay all of its debts as and when they fall due. A company will be considered insolvent even if they have an asset surplus (an ‘asset rich, cash poor’ scenario), if they are unable to quickly liquidate those assets. A company will be deemed to be insolvent when it fails to comply with certain requirements set down in legislation, the most common of these being the failure to comply with a statutory demand from a creditor. A statutory demand is a demand in the appropriate form (Form 509H) served by a creditor on a debtor company requiring the company to satisfy the debt within 21 days.
What is insolvent trading?
Insolvent trading occurs when a director allows the company to incur debts when the company is insolvent. Directors have a duty to prevent insolvent trading and therefore can be held personally liable in certain circumstances for debts that were incurred from the date of insolvency to the date of liquidation of the company.
What does it mean to file for insolvency?
A person can file for personal insolvency (i.e. bankruptcy) by filing the following documents with the Official Receiver of the Australian Financial Security Authority (AFSA) (the regulatory body for personal insolvency in Australia):
• Statement of Affairs; and
• Debtor’s Petition.
AFSA will review the documents ensuring that all relevant sections are completed. If all the documents are in order, the insolvency process of bankruptcy begins. This is explored further below.
A company can file for insolvency through the voluntary liquidation or voluntary administration process. For a voluntary liquidation, this usually involves a meeting with its directors and members to determine that the company is to be placed into voluntary liquidation, and that a liquidator should be appointed to the company. The liquidator will then lodge the appropriate forms with the Australian Securities and Investments Commission (ASIC) (the regulatory body for corporate insolvency in Australia).
For a voluntary administration, this usually involves the directors of the company signing an instrument to appoint a voluntary administrator to the company.
How do you declare insolvency?
For corporate insolvency, a director can declare insolvency of their company through the voluntary liquidation or voluntary administration process.
For personal insolvency, a person can declare insolvency by filing their Statement of Affairs and Debtor’s Petition with the Official Receiver of the Australian Financial Security Authority.
How do you prove insolvency?
For corporate insolvency, there are two common methods to prove insolvency of a company.
The first method is the presumption of insolvency found in section 588E(4) of the Corporations Act 2001 (Cth) (Act), Directors have an obligation under section 286 of the Act to keep adequate accounting records that at the very least could “enable true and fair financial statements to be prepared and audited:” In the event that directors have not kept sufficient books and records, a liquidator is able to rely on section 588E(4) of the Act, which enables a liquidator to presume that the company was insolvent through the period in which section 286 of the Act remained breached. The burden is on the directors or creditors to prove that the company was solvent at the relevant time.
The second method is establishing the indicators of insolvency as set out in the case of ASIC v Plymin, Elliott & Harrison  VSC 123. The indicates of insolvency are:
1. The company is experiencing continuing losses;
2. The company’s liquidity ratio is below 1;
3. The company is subject to overdue Commonwealth and State taxes;
4. The company has evidence of poor relationship with its Bank, including the inability to borrow further funds from it;
5. The company does not have access to alternative finance;
6. The company has an inability to be able to raise further equity capital;
7. The company’s suppliers place the company on cancellation of debt, or otherwise demanding special payments before resuming supply;
8. The company’s creditors are unpaid outside of the trading terms;
9. Issuing of post-dated cheques by the company;
10. Issuing of dishonoured cheques by the company;
11. The company is required to enter into special arrangements with selected creditors;
12. The company becomes the recipient of solicitors’ letters, summons, judgments or warrants issued against it;
13. Payments to creditors of rounded sums which are not reconcilable to specific invoices; and
14. The company has an inability to produce timely and accurate financial information to display the company’s trading performance and financial position, and make reliable forecasts.
What are the consequences of insolvency?
The consequences of corporate insolvency can be summarised as below:
1. The directors ceased their role in the company;
2. The liquidator realises any assets of the company for the benefit of creditors;
3. The liquidator investigates the affairs of the company, and reports any breaches of duties by the directors to ASIC;
4. The liquidator makes a dividend distribution to creditors if sufficient funds have been realized in the liquidation; and
5. The liquidator deregisters the company once their duties and obligations are fulfilled.
There are also consequences for a director as a result of insolvency. This is explored further below.
The consequences of personal insolvency can be summarised as below:
1. A trustee is appointed to manage bankrupt’s estate;
2. If the bankrupt earns over a set amount, they are required to make compulsory payments to the trustee in bankruptcy;
3. Not all debts are released from bankruptcy (e.g. court imposed penalties and fines, child support & maintenance, HECS and etc);
4. A bankrupt is required to ask permission from the trustee in bankruptcy to travel overseas;
5. The bankrupt’s name will appear on the National Personal Insolvency Index;
6. If applying for credit, the bankrupt must inform the credit provider if the amount sought is over a certain limit;
7. The trustee may sell the bankrupt’s assets; and
8. The bankrupt loses the right to take or continue legal action (with some exceptions).
Is liquidation the same as insolvency?
Liquidation is a type of corporate insolvency. See the section on Court Liquidation.
What is administration in insolvency?
Administration is a type of corporate insolvency. See the section on Voluntary Administration.
How does a liquidation end?
A liquidation can end by:
1. The company being de-registered;
2. The liquidator appointing an administrator who then arranges a Deed of Company Arrangement;
3. The Court ordering the stay or termination of the winding up.
An administrator might be appointed in circumstances where the liquidator believes that creditors may be given a greater return. This means that the company may be able to continue trading where the liquidator believes the company has prospects of carrying on its business successfully.
What powers do liquidators have?
The liquidator’s powers include:
1. Investigating the affairs of the company;
2. Identifying transactions that are considered void;
3. Examine the directors and others under oath in a public examination;
4. Realizing the assets of the company;
5. Conducting and selling any business of the company;
6. Admitting debts and paying dividends.
What are my rights and options as a creditor?
Creditors are able to apply to the court for an order in relation to a court appointed liquidation in the event that the company is insolvent.
In all types of voluntary liquidation, creditors are able to appoint alternative liquidators or administrators. The creditors are able to vote to appoint an alternative at the first creditor’s meeting which is held within 8 business days of the appointment of the voluntary administrator. If a creditor is seeking to appoint an alternative liquidator, they should secure the alternative liquidator’s consent prior to the meeting. The resolution will be passed if a majority of creditor present at the meeting vote in favour of the resolution.
Where the company’s assets are realized and they are insufficient to pay creditors, creditors will be paid a dividend or percentage of the amount due and owing. Debts of the company are generally paid in order of priority as follows:
1. The costs and expenses of the liquidation (including the liquidators’ fees);
2. The costs of the petitioning creditor;
3. Outstanding employee entitlements;
4. Unsecured creditors; and
Each ‘class’ of creditors must be paid in full before the next class can receive a payment or dividend.
What rights do I have if I am a secured creditor?
A secured creditor’s rights include:
1. appointing a receiver to realize some or all of the secured assets (even after liquidation commences);
2. requesting that the liquidator deal with the secured assets and account for the proceeds;
3. voting at creditors’ meetings for the amount of the debt which exceeds the value of their secured assets;
4. receiving dividends for the amount of the debt which exceeds the value of their secured assets.
A secured creditor will generally need to submit a proof of debt form to the liquidator for the amount of the debt which exceeds the value of their secured assets. This will allow them to receive dividends in a similar way to unsecured creditors.
What rights do I have if I am an unsecured creditor?
An unsecured creditor’s rights include:
1. receiving dividends;
2. attending creditors’ meetings
3. receiving written reports from the liquidator;
4. inspecting certain books of the liquidator;
5. informing the liquidator of matters about the company within the unsecured creditor’s knowledge; and
6. complaining to ASIC or the court about the liquidator’s conduct.
An unsecured creditor must submit a proof of debt form to the liquidator proving their debt in order to be paid a dividend. The proof of debt form should be accompanied by supporting documentation such as invoices. The proof of debt will either be admitted by the liquidator or it will be rejected and the unsecured creditor notified within a period of 7 days. If you cannot reach a resolution with the liquidator in relation to your proof of debt, you may be able to appeal to the court. You should seek legal advice as soon as possible as an unsecured creditor will only have 14 days to appeal to the court.
What are my options as a director?
In the event that the company becomes insolvent, the director should immediately arrange for the company to enter voluntary liquidation or voluntary administration. Voluntary administration may allow for the company to get back on its feet.
Directors should be aware that there are a number of ways that directors can be held personally liable for company debts including where there was insolvent trading, unreasonable director related transactions and personal guarantees. These are the pitfalls of a company entering into insolvency.
What are my rights and options as a member?
Members have a right to receive any surplus after the company’s assets have been realized and creditors and the expenses of liquidation have been paid. This does not occur frequently in insolvency.
What is a voluntary administration and how does it work?
A voluntary administration generally occurs where the directors resolve to appoint a voluntary administrator to the company. A voluntary administrator can also be appointed by secured creditors or a liquidator in some circumstances.
The first creditors’ meeting is called by the administrator within 8 business days of appointment. At this meeting, two issues are decided. Firstly, whether the creditors wish to appoint a different administrator. Secondly, whether they wish to form a committee of creditors and who will make up the committee.
The administrator will take control of the company, conduct investigations and report to the creditors and the Australian Securities and Investment Commission. After the investigations take place, the second meeting of creditors’ will take place. The administrator will provide a report with options for the company’s future. These options may include:
1. Entering a deed of company arrangement;
2. Placing the company in liquidation;
3. Ending the administration and handing the company back to the directors.
Once the company enters voluntary administration, a moratorium comes into effect which prevents the company from being sued by creditors without the written consent of the administrator or the leave of the court, with some exceptions. During this period, guarantees given by a director of the company are unenforceable.
What is a deed of company arrangement and how does it work?
A deed of company arrangement (“DOCA’) is an agreement between the company and its creditors to satisfy the company’s debts. The terms of the DOCA are as agreed, however, generally it allows the company to continue operating and may maximize the return for creditors.
Creditors are able to vote on a DOCA at the second meeting of creditors, generally held 15 to 25 days after the appointment of the administrator. The company must execute the DOCA within 15 days of the creditors’ voting for the proposal to enter a DOCA. Failure to comply within the time period would automatically put the company into liquidation.
It is important to note that all unsecured creditors are bound by the DOCA, even in the event that they did not vote for it. Secured creditors are not bound if they did not vote for the DOCA, unless the court orders that they be bound. The deed administrator appointed under the DOCA is responsible for monitoring the company and compliance with the DOCA
What are the benefits of entering voluntary administration?
Entering voluntary administration can provide a solution for companies to:
1. avoid insolvent trading;
2. come to an arrangement with creditors in relation to the company’s debts;
3. give the company ‘breathing room’ which may allow it to get back on its feet;
4. maximize the returns to creditors.
What are my rights as an unsecured creditor?
An unsecured creditor’s rights include:
1. lodging a proof of debt;
2. attending creditors’ meetings; and
3. voting at creditors’ meetings (if a proof of debt form has been lodged).
What are my rights as a secured creditor?
A secured creditor’s rights include:
1. lodging a proof of debt;
2. attending creditor’s meetings;
3. exercising their rights over their security within 13 business days; and
4. voting at creditor’s meetings (for the full amount of the debt).
What is bankruptcy?
Bankruptcy is an insolvency process where a trustee is appointed to administer an insolvent person’s estate. A person is insolvent if they are unable to pay their debts as and when they fall due.
How long does bankruptcy last?
Generally bankruptcy lasts three years from the date that the bankrupt files their Statement of Affairs, unless the trustee objects. A Statement of Affairs is a document completed by the bankrupt which discloses the bankrupt’s personal and financial information including their assets and debts. At the end of the bankruptcy the bankrupt is ‘discharged’.
Is bankruptcy the right option for me?
Bankruptcy can provide a solution to debt problems for both the debtor and the creditors. The debtor is released from their debts at the end of the bankruptcy and can start afresh. Creditors have the benefit of an independent person (the trustee) administering the debtor’s estate and receiving some payment for the unpaid debts.
How does someone become bankrupt?
A person may make themselves bankrupt by filing a debtor’s petition and Statement of Affairs with the Official Receiver. The Official Receiver will then issue an estate number to the bankrupt.
A creditor may apply to the Federal Circuit Court to make a person bankrupt. Generally, the creditor must have obtained a judgment on their debt and have served a bankruptcy notice on the debtor. The debtor then must pay the debt before the expiry of the bankruptcy notice. If the debtor fails to pay the debt before the expiry of the bankruptcy notice the creditor may file a creditor’s petition with the Court seeking a sequestration order, which will bankrupt the debtor. It is important to note that the Statement of Affairs must be completed by the bankrupt before the three years will begin to ‘run’ so it is essential that the bankrupt files this as quickly as possible.
What are the consequences of being made bankrupt?
There are a number of restrictions and obligations placed on a bankrupt person including:
1. The bankrupt must surrender their passport and seek permission for any overseas travel;
2. The bankrupt must make all financial records available;
3. The bankrupt must make all their divisible assets available to the trustee;
4. The bankrupt can’t act as a company officer;
5. The bankrupt can’t trade under a registered business name without disclosing that they are a bankrupt;
6. The bankrupt can’t incur credit over a set amount without disclosing to the lender that they are bankrupt.
A bankrupt’s assets will be realized by the trustee. Any asset that is able to be realized and divided among creditors is referred to as divisible assets. Divisible assets include:
1. All property owned a the time of bankruptcy or acquired during the bankruptcy;
2. Any rights or powers over property that existed at the date of bankruptcy or during the bankruptcy;
3. Any rights to exercise powers over property.
Examples of divisible assets may include:
1. Real estate including the family home;
2. Contents of bank accounts;
The bankrupt’s assets which cannot be realized may include:
1. Necessary clothing and household items;
2. Tools of trade up to an indexed amount;
3. Motor vehicle up to an indexed amount;
4. Sentimental property;
5. Superannuation payments;
6. Life assurance or endowment policies;
7. Certain damages and compensation payments.
Sentimental property must have sentimental value and be an award for sporting, cultural, military or academic achievement. This does not include monetary awards. The creditors must also resolve that the property is sentimental. Engagement and wedding rings are not considered sentimental property.
A bankrupt is still able to earn an income up to a certain amount. Any income in excess of this amount must be paid into the estate.
What are the duties of the trustee?
The trustee will:
1. Find and realize the assets of the bankrupt;
2. Conduct investigations into the financial affairs of the bankrupt;
3. Make any recovery of assets necessary;
4. Report to creditors;
5. Report offences; and
6. Distribute surplus funds to creditors, usually by way of dividends.
The assets and property of the bankrupt immediately ‘vest’ in the trustee once bankruptcy occurs. This means that the trustee automatically gains rights and control over the assets and property and does not have to take any special action.
How are creditors affected when a person becomes bankrupt?
Secured and unsecured creditors of the bankrupt are affected in different ways. If a creditor is ‘secured’ it means that they have a charge over a debtor’s asset; a common example of a secured creditor is a bank with a mortgage over the family home. A creditor is ‘unsecured’ if they do not hold a right to or charge over any of the debtor’s assets; a common example of an unsecured creditor is a bank who has issued a credit card to a customer.
Unsecured creditors exchange their right to bring a claim for a right to prove their debt in the bankrupt estate in return for a dividend. This means that the unsecured creditor gives up their right to bring a claim for the full amount of the debt owed by the bankrupt for the right to be paid a dividend by the trustee once all assets of the bankrupt have been realized.
Secured creditor’s rights generally remain the same. They can enforce their rights by having their secured asset sold or realized. They are then able to prove in the estate for the shortfall or difference between the amount recovered from the security and the original amount of their debt.
Creditors are able to vote to change the trustee.
What are void transactions and preferential payments?
Void transactions include undervalued transactions, transfers which were intended to defeat the debtor’s creditors and transfers where the consideration was paid to a third party within five years of the commencement of the bankruptcy. There are some exemptions including maintenance agreements or orders made in the Family Court or payment of tax pursuant to Commonwealth or State law. The trustee is able to void these transactions and recover the asset. It will then be available for distribution among the creditors.
Preferential payments are when a creditor of the bankrupt received an advantage over other creditors when compared to what they would have received in the bankruptcy. The payment has to have occurred when the bankrupt was insolvent and within a certain timeframe of the bankruptcy. The trustee is able to void these preferential payments and recover the payment in order to make a more fair and equitable distribution among the creditors.
Is there an alternative to bankruptcy?
Yes. A personal insolvency agreement (also known as a Part X agreement) allows a debtor to come to an agreement with their creditors in relation to their debts without being made bankrupt. In this process, a trustee is appointed by the debtor signing an authority under section 188, a Statement of Affairs is prepared by the debtor and a draft personal insolvency agreement must be provided to the trustee. A meeting of creditors is then held to decide whether the creditors will accept the proposal. Debtors should be aware that signing a section 188 authority is an act of bankruptcy and creditors may choose not to accept the proposal and bankrupt the debtor instead.
What is a section 73 proposal?
A section 73 proposal can be used to annul a bankruptcy. The bankrupt proposes an alternative arrangement for paying the debts to creditors.
An annulment has the effect of voiding the bankruptcy from the beginning. It is as if it never occurred.
What is a Part IX debt agreement?
A Part IX debt agreement is an agreement between the debtor and their creditor’s which provides for a sustainable plan for the debtor to pay off their debts.
Creditor’s Statutory Demands
What is a statutory demand?
A statutory demand is a demand in the appropriate form served by a creditor on a debtor requiring the debtor to satisfy or secure the debt within 21 days.
How do I issue a statutory demand?
A statutory demand must be made in the correct form pursuant to section 459C of the Corporations Act.
A statutory demand must:
1. Be in the prescribed form (Form 509H);
2. Be for a debt that is due and payable;
3. Be for an amount which is no less than $2,000.00 (the current statutory minimum);
4. State the debtor company name and its registered office; and
5. Specify where the debt can be paid.
A statutory demand must be accompanied by an affidavit in support of the debt or a judgment of the Court.
What should I do if I am served with a statutory demand?
It is important to note that the debt is required to be paid within 21 days of being served with the statutory demand; otherwise the creditor gains the presumption that the company is insolvent and can apply for a winding up order. Accordingly, the debt should be paid immediately in accordance with the statutory demand.
There is also the option to resist the statutory demand. This involves filing an application with a supporting affidavit to the court within the 21 day period.
A statutory demand may be set aside on the basis that:
1. The amount owed is less than the statutory minimum;
2. Where there is a defect in the statutory demand that would cause substantial injustice to the debtor;
3. Some other reason which may include the debt being for an inflated or incorrect amount.
What happens if the debtor doesn’t comply with a statutory demand?
The creditor can apply to the court for a winding up order on the presumption that the company is insolvent. However, this presumption of insolvency applies only where the winding up order is made within 3 months.
If you would like further information regarding the voluntary liquidation insolvency process, please contact the Insolvency Lawyers at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at firstname.lastname@example.org.
In commercial lease transactions a lessee will usually, before taking possession of the premises, sign and return the lease to the lessor who then countersigns, registers (if necessary) and returns the signed and registered lease to the lessee. Because of this, it can sometimes be difficult to ascertain when a lease becomes binding, as demonstrated by the following recent decisions.
Case study lessee fails to establish a binding lease
In the recent case of Darzi Group Pty Ltd v Nolde Pty Ltd  NSWSC 335, the lessee had failed to establish that a binding lease had come into effect after signing and returning it to the lessor. The parties had signed a heads of agreement, the lessee took possession of the premises and started to fit out of the premises before a formal lease had been signed. The lessee was expecting the formal lease to reflect the heads of agreement, however the terms of the lease provided by the lessor varied substantially.
As a result, the parties negotiated the lease terms through their solicitors for 2 years, which resulted in the lessee executing the lease and returning it to the lessor. However, despite the passing of another 2 years, the lessor never signed the lease and attempted to renegotiate the terms. The lessee then commenced legal proceedings to enforce the lease it had signed. The Court found in favour of the lessor and held that the parties did not intend to be bound by the lease as it was reasonable to presume that where parties are acting through legal advice, no binding agreement arises until formal execution and exchange.
Case study contrast Court finds lease to be binding
However, this is to be contrasted with another recent case of Realm Resources Ltd v Aurora Place Investments Pty Ltd  NSWSC 379, where a dispute arose as to whether the sublessee was bound after signing and returning the sublease to the sublessor. After returning the sublease, the sublessee attempted to withdraw from the transaction, before the sublessor’s countersignature. The sublessee then commenced proceedings, contending that the sublease was not intended to be binding before both parties had signed and that it had been validly withdrawn. The Court found in favour of the sublessor and held that:
• the sublease was intended to take effect as a deed as evidenced by a clause in the sublease which stated that it was “a deed, even if it is not registered”;
• the sublessee had properly executed the deed in accordance with section 127 of the Corporations Act 2001 (Cth);
• the sublessee delivered the deed with the intention to be bound immediately, subject only to the sublessor’s execution, and once the deed is delivered it cannot be withdrawn.
The above cases illustrate that when it comes to ascertaining when a lease is binding, the court will consider the conduct between both parties in detail. Where parties do not wish to be bound by the terms of an agreement until such agreement has been executed and exchanged, this should be expressly stated.
If you have any questions about drafting and negotiating your commercial lease or need assistance in ascertaining whether a binding lease is in place, please contact our Property and Commercial Litigation Teams and we will be happy to assist.
In the matter of Substance Technologies Pty Ltd  NSWSC 612, the Court considered a liquidator’s application with respect to whether a director is personally liable to pay the sum of $170,000 for debts incurred whilst the company was insolvent, largely on the basis that the director failed to keep / produce financial records.
If a company fails to keep, and retain for 7 years, suitable financial records, it can be assumed to be insolvent for the purposes of an insolvent trading claim.
Director Personal liability case study- Facts
• Since its incorporation until late 2013, Substance Technologies Pty Ltd (In Liquidation) (Company) traded a scrap metal yard.
• From at least 2009, the Company rarely made a profit. By 30 June 2013, the Company had accumulated losses of $374,373 and taxation debt in the sum of $13,929.36.
• In early 2014, the Company purchased scrap metal from Ausgrid for the sum of $78,463, to which the Company failed to pay.
• On 2 January 2015, Christopher Thaler resigned as sole director of the Company, and Andrew Thaler (his son), replaced him as sole director.
• During Andrew’s directorship of the Company, Ausgrid entered judgment for the debt and the Company was subsequently placed into liquidation on 27 June 2016.
• The liquidator issued 3 demands to Andrew for the Company’s books and records, to which he did not comply.
Defendant’s arguments concerning personal liability case
The Court considered a number of arguments put forward by the Defendant, summarised as follows:
Defendant’s argument The Court’s findings
1. The debts no longer exist as they were written off If a bad debt proves to be recoverable, in whole or in part, then the creditor remains entitled to payment and to adjust its accounts to reverse the write-off and recognise the income. This is consistent with accounting standards.
2. Taxes are not debts incurred Taxes are debts incurred by the taxpayer for the purposes of insolvent trading.
3. The obligation to keep financial records was satisfied The obligation to keep financial records…is twofold: firstly, to keep records which record the company’s transactions and financial performance sufficient to enable financial statements to be prepared; and, secondly, to retain those records for seven years.
4. The financial records were not produced relying on the privilege against self-incrimination The directors’ privilege against self-incrimination has been abrogated by section 530A of the Corporations Act, requiring officers to help a liquidator carrying out their duties.
5. The company was not insolvent – the ATO debt could be paid and tax losses were an asset Christopher alleged that funds could have been loaned from his spouse – no such loan was made. Further, it was held that accumulated tax losses were not an asset of the Company as it could not be sold to pay off liabilities of the Company.
6. Both directors said they did not suspect insolvency Upon review the Company’s bank statements, the outstanding tax liabilities and financial statements, a “a director would have been left in no doubt that the company was insolvent
7. The company would pay the Ausgrid debt from profits on sale of the scrap metal There is no evidence that the company expected to earn such profits before the invoices were due for payment, nor that the company had other means of paying the invoices.
Outcome- Director personal liability
Both the former director (Christopher Thaler) and the current director (Andrew Thaler) were liable for the debts incurred by the Company, whilst it was trading insolvent, during the times they held directorship of the Company.
It is an important lesson for all directors of a company that you are required to keep financial records of a company for 7 years to comply with section 286(2) of the Corporations Act 2001 (Cth) (Act). A director may be held personally liable for failure to produce financial records to a liquidator, as section 588E(4) of the Act makes clear that the presumption of insolvency arises from the failure to keep records.
If you are a director of a company, or know someone who is, and want to know more, please contact the Insolvency Lawyers at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at email@example.com.
Frequently, an employee or prospective employee will want to take legal advice about the terms of an employment contract before signing. The termination of an offer of employment, or of employment itself as a result of an employee wishing to take such legal advice, has been found to constitute adverse action.
Employment Contract Case Study
In Tran v Kodari Securities Pty Ltd (29 FCA 968), Mr Tran’s employment was terminated when he wished to obtain legal advice in respect of a new employment contract that his employer wished him to execute.
Dismissal from employment-adverse action
The Court found that the dismissal amounted to adverse action by Kodari Securities Pty Ltd via the actions of a director Mr Kodari. It found that the dismissal took place because Mr Tran had earlier on the evening on which his employment was terminated, proposed to exercise a workplace right to seek legal advice, and thereby constituted adverse action and thereby contravention of section 340(1)(a)(iii) of the Fair Work Act. That contravention was by the employer, Kodari Securities, and by its director, Mr Kodari by reason of his conduct giving rise simultaneously to the conduct by the company and the necessary involvement by him.
It was notable in this case that the parties had in fact had a long history together, and that the particular employment contract to be signed contained a provision actually stating that the employee had already received independent legal advice about the terms and effect of the Contract.
This meant that if the Contract had been signed without having had the benefit of independent legal advice about its terms and effect, the employee would have executed the Contract containing a material falsehood.
Threats and coercion
It was further found that the threat by the company director, Mr Kodari to terminate his employment if he did not sign the new Contract was made with the intent to coerce Mr Tran in the sense of intending to negate his choice to exercise that workplace right, and to instead sign a new Contract.
Company failed to discharge the onus
The bare denial in the affidavits of the company directors did not suffice to rebut the presumption in section 361. Their bare denial was found to be unconvincing and ultimately, was rejected by the Court. In effect, they failed to discharge the onus upon them by failing to produce any evidence of the nature or quality adverted to by the High Court in Board of Bendigo Regional Institute of Technical and Further Education v Barclay 2012 HCA 32.
Adverse Action -Civil Penalties
The measure of the civil penalty to be applied required a consideration of the factors relating to the objective seriousness of the contravention and included: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the defendant is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention.
The civil penalties imposed were:
1. In relation to the adverse action claim against the Company and ultimately the director only:
(a) a penalty of $35,000 payable by the Company;
(b) a penalty of $7,000 payable by the director;
(c) compensation payable by the Company and the director, upon a joint and several basis, for economic loss of $75,000; and
(d) compensation payable by the Company and the director , upon a joint and several basis, for hurt, distress and humiliation, which would have been present to some limited degree, of $10,000.
2. In relation to the coercion action claim against the Company and ultimately, the director only:
(a) a penalty of $20,000 payable by the Company;
(b) a penalty of $4,000 against the director.
In addition, the Court ordered payment of contract compensation of six months salary.
In awarding 6 months, the court considered Mr Tran’s indefinite employment, the highly trusted role he had occupied and the apparently still highly trusted role that he had been earmarked to fill, his age and the time that it should have taken him to find alternative equivalent employment.
Warning to Employers about employment contracts
The decision serves as a warning to employers that failing to afford prospective employees the right to obtain legal advice in respect of employment contracts is a denial of a workplace right that may give rise to significant and costly liability for penalties and compensation for adverse action against both the company as well as directors who are “involved “under the Fair Work Act.
This is especially so where the contracts contain provisions of acknowledgement that the employee has received independent advice prior to signing, and where there is express or implied coercion used to try to have the employee sign with a companying threats that an offer of employment will be withdrawn or, existing employment terminated if the new agreements are not signed.
Michael Sing | Partner
Telephone 3009 8472
The Australian Government introduced an Entrepreneur Visa in September 2016, adding it to the suite of existing Business Migration and Investor Visas.
The visa is for people who are able to undertake a complying entrepreneur activity in Australia in conjunction with an acceptable partner listed below. It is in some ways a smaller version of the Venture Capital Entrepreneur Visa. This visa provides a pathway to permanent residence.
Conceivably bright international students in Australia researching in innovative, science, engineering, and technological industries may be eligible if they can find eligible partners who could assist with funding for the entrepreneur activity.
Who is eligible for the entrepreneur visa to Australia?
Applicants have to be less than 55 years old, and must be nominated by a State or Territory Government. This requirement can be waived by the nominating government if the proposed activity “is or will be of exceptional economic benefit” to the nominating government.
Unlike the other Business Innovation & Investment visas, the applicant must have Competent English (equivalent to IELTS 6).
And the applicant must undertake, or propose to undertake, a complying entrepreneur activity in Australia, and has a genuine intention to continue this activity.
Furthermore, the nominating government must be satisfied that the net value of the business and personal assets of the applicant is sufficient to allow them to settle in Australia. This net value may vary depending on the nominating government.
The criteria also include the mandatory elements of the entrepreneur activity listed below.
Unlike the Business Innovation (subclass 188a) Visa and the Investor (Subclass 188b) Visa, this Entrepreneur Visa is not subject to the Points Test.
What is Complying Entrepreneur Activity?
A Complying Entrepreneur Activity is an activity that relates to an innovative idea that will lead to either the commercialisation of a product or service in Australia, or the development of an enterprise or business in Australia.
The applicant will need to find a Partner with whom it will have a funding agreement of at least AUD$200,000 to undertake the complying entrepreneur activity. This Partner can be one of the following entities:
• Commonwealth Government agency;
• State or Territory Government;
• Publicly Funded Research or Innovation Organisation;
• Investor registered as an Australian Venture Capital Limited Partnership or Early Stage Venture Capital Limited Partnership; and
• Higher Education Provider.
The entrepreneur activity must comprise the following elements:
• There is one or more legally enforceable agreements to provide funding for at least AUD$200 000 for the entrepreneur activity;
• At least 10 per cent of the funding must be payable to the entrepreneurial entity within 12 months from the day the activity commences in Australia;
• The applicant holds at least 30 per cent interest in the entrepreneurial entity;
• There is a business plan for the entrepreneurial entity showing how the innovative idea will lead to the commercialisation of a product or service in Australia, or the development of an enterprise or business in Australia.
What are my obligations for the entrepreneur visa?
It is expected that the Entrepreneur Activity will maintain an ongoing relationship with the nominating State or Territory government; and the funding party must pay the entrepreneurial entity, as described above, at least 10 per cent of AUD$200,000 within 12 months from the day the entrepreneurial activity in Australia commences.
On 14 March 2019, the Parliamentary Joint Committee on Corporations and Financial Services (Committee) released its 369-page report detailing its findings into the franchising sector, with regards to the franchising code of conduct .
The Committee has stated that comprehensive and broad reform is required to resolve issues within the sector which are systemic. They have also noted that the current regulatory framework is not addressing the power disparity between franchisors and franchisees. To address the issues identified and rebalance the power disparity the Committee has made 71 recommendations most of which are to be referred for further investigation by a Franchising Taskforce (Taskforce). The major recommendations are provided below:
Franchising code of conduct major recommendations
The Committee has recommended that the Taskforce be formed to further investigate potential regulatory amendments including:
1. the implementation of a public franchise register to be updated annually, with updated disclosure documents and template franchise agreements, by franchisors;
2. a requirement that the franchisor (and master franchisor) make disclosure to franchisees regarding the purchase of products below cost pricing, the margin on products and the rebates the franchisor receives for the purchase of such products;
3. investigating the conflict of interests associated with supplier rebates and third line forcing and whether the ACCC should be investigating these issues;
4. whether the Australian Consumer Law should be amended to expressly extend the unfair contract terms regime to franchises by deeming franchise agreements to be standard form documents and making breaches of this regime subject to civil penalties;
5. whether the Franchising Code of Conduct (Code) should be amended to prevent unilateral variations in documents such as manuals and policies unless the majority of franchisees (or their representatives) agree to the variation;
6. an amendment to the Code requiring rental amounts paid to the franchisor under a head lease to be held on trust solely for the purpose of paying rent to the landlord;
7. whether amendments are required to deal with franchisees’ rights in relation to goodwill when the franchise agreement ends or is transferred as part of a sale contract; and
8. whether the extent to which franchise systems involve sufficient co-investment and risk sharing such that they should be regulated similarly to financial products.
Additional recommendations to the franchising code of conduct
In addition to those matters to be referred to the Taskforce, the Committee has recommended that:
1. unilateral variations of franchise agreements be prohibited unless the majority of franchisees (or their representatives) agree to the variation;
2. mandatory quarterly reporting on marketing funds be required and civil penalties be introduced for failing to adhere to the reporting requirements. An additional recommendation is that legislation is amended to clarify how marketing funds are to be distributed in the event a franchisor is wound up;
3. extensive additional disclosure be required including:
a. provision of disclosures in both hard copy and digital copy formats;
b. for existing sites – the disclosure of financial information in the context of sales, including the previous 2 years’ Business Activity Statements;
c. for greenfield sites – the disclosure of financial information in the context of sales including the previous 2 years’ Business Activity Statements for a comparable franchise site;
d. provision of a copy of mandatory guidance on employment matters and overseas workforce issues as prepared by the Fair Work Ombudsman;
e. the disclosure of all rebates, commissions or other payments in relation to the supply of goods and services to franchisees as a percentage of the full purchase price on each transaction;
f. the disclosure of the reasonable personal workload to be undertaken in running and operating the franchise business; and
g. provision of a copy of the ACCC’s Franchisee Manual as part of disclosure.
4. existing whistle-blower protections be extended to cover franchisees reporting franchisors who are breaching the Code;
5. numerous changes to the cooling off provisions be made, including:
a. that the cooling off period commence on the later date of:
i. the franchise agreement being executed;
ii. an upfront payment being made to the franchisor;
iii. the disclosure documents being received by the franchisee;
iv. a copy of the lease being received by the franchisee.
b. clarification that the 14-day disclosure period must commence 14 days before the franchise agreement is executed; and
c. making the cooling off period applicable to transfers, renewals and extensions of the franchise agreement;
6. franchisees be able to terminate franchise agreements in circumstances where:
a. they are suffering hardship;
b. they are being exploited by the franchisor; or
c. the business has failed;
7. franchisor rights of immediate termination be limited to special circumstances such as fraud and public health and safety and require 7 days’ notice to be given to franchisees during which period the franchisee can lodge a dispute which causes suspension of the termination process until the dispute is resolved;
8. a class exemption be created to make it lawful for franchisees to collectively bargain with their franchisor;
9. arbitration be provided as an option if mediation is unsuccessful and multiple franchisees be able to take part in mediation or arbitration with Franchisors;
10. the ACCC be given power to identify and act on instances of systemic churning and burning (i.e., the repeated sale of a franchise site that is known to perform poorly or fail in order to make money from franchisees paying franchise fees).
Whilst the Committee’s recommendations are numerous and substantive, the report is part of a greater legislative process which will involve:
• the Government considering which recommendations to implement; and
• the formation of the Taskforce to provide further recommendations,
before Parliament will consider any legislative changes proposed by the Government.
Additionally given the recent joint media release by the Hon Stuart Robert, MP and the Hon Michaelia Cash which confirmed the Government is looking at strengthening the unfair contract terms regime, it is expected that the amendments proposed by the Committee will be considered as part of the Government’s review of the unfair contract terms regime.
If you would like us to prepare new franchise documents for you, review your existing franchising documents or would like to obtain further advice in respect of the Franchising Code of Conduct, please don’t hesitate to contact us.
Changes to the tax laws commencing the 2018 financial year were introduced to provide tax relief to smaller companies. Instead of the blanket 30% corporate tax rate across all companies, the following rates apply:
A base rate entity is a company for which:
- no more than 80% of its assessable income for the financial year is passive income; and
- aggregated turnover does not exceed:
- $25 million for the 2018 financial year;
- $50 million for any of the 2019 financial years onwards.
Included in the definition of passive income are corporate distributions (excluding non-portfolio dividends) and franking credits on those distributions, and any amount received from a trust to the extent that it is referable to passive income.
While the reduction in corporate tax rate provides welcome relief to small businesses operating out of corporate structures, there may be serious implications to franking accounts where a trading company was previously taxed at 30% but is subsequently regarded as a base rate entity.
It is common to structure ownership and operation of a business via a trading company in which the shares are held by a discretionary trust. One of the beneficiaries of the trust is a bucket company that receives income from the trust so that trust income is not taxed in the hands of the trustee at the highest marginal rate but at the lower corporate tax rate. If the bucket company has been receiving income franked to 30% and has accumulated significant franking credits at this rate but it then becomes a base rate entity, it can only frank dividends to the lower tax rate which may lead to an excess of unusable franking credits.
More seriously, the bucket company may be liable to pay top-up tax in the following scenario: The trading company is a base rate entity and pays a dividend to the trust franked at the lower rate. The trust distributes the dividend to the bucket company, but because the distribution came from a trust (and therefore the bucket company does not have at least a 10% voting interest in the trading company excluding it from the definition of “non-portfolio dividend”) the income will be deemed to be passive income and the bucket company will not be regarded as a base rate entity. As a result, the bucket company must pay tax at 30%.
It remains to be seen if the Department of the Treasury will address the indirect effects of the change to corporate tax rates on company franking accounts. In the short term, anyone using a bucket company to retain profits should carefully consider the effectiveness of the strategy in light of these changes.
Company phoenixing or ‘phoenixing’ occurs where, the primary controllers of a failed company conducts the same type of business while using some or all of the former company’s assets.
When is Company Phoenixing illegal?
Despite the adverse stigma that is most commonly associated with ‘Phoenixing’, there are circumstances in which it can be legal. There are many examples and success stories where a person has revived the business previously conducted after the financially distressed company enters liquidation and its remaining assets are distributed to creditors.
However, such activity is illegal when this attempted resurrection comes before creditors are paid and where the use of the former company’s assets was uncommercial.
For example, John realizes that ‘John’s Farms Pty Ltd’ cannot pay its debts as and when they fall due. John therefore decides to transfer the company’s assets to the newly-incorporated ‘Johnno’s Farming Pty Ltd’ for little to no value before putting John’s Farms Pty Ltd into liquidation. In this way, John has avoided paying the creditors of John’s Farms Pty Ltd, and has not legally “phoenixed” from the old entity to the new entity.
The Impact of Company Phoenixing
Company phoenixing affects many trades and industries, and sadly, appears to be on the rise.
In 2012, phoenix activity was estimated by Price Waterhouse Coopers and the Fair Work Ombudsman to have costed the Australian Economy between $1.8 to $3.2 billion annually. A second report in July 2018 indicated that this figure could now be as high as $5.13 billion per year.
Unpaid trade creditors seem to suffer the most, making up approximately 61.8% of this figure, whereas unpaid employee entitlements are approximately 5.8% and unpaid taxes and compliance costs are approximately 32.3%.
What is being done about company phoenixing it?
Early in 2019, the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was introduced (but had not been passed into law prior to the Federal Election in May 2019). In summary, the Bill purports to:
amend the Corporations Act 2001 (Cth) by introducing new criminal offences and civil penalty provisions for officers who fail to prevent a company from making ‘creditor-defeating dispositions’;
Empower Liquidators in allowing them to apply for court orders in relation to voidable, creditor-defeating dispositions;
Enable ASIC to make orders for the recovery of company property disposed of under such a disposition; and
Improve the accountability of resigning directors so as to prevent companies being left rudderless.
Further, individuals who engage in “illegal phoenixing” can expect to receive a fine of up to $945,000.00 or imprisonment of 10 years for contravening these provisions whereas body corporates can expect to receive penalties of either $9.45 million or 10% of the entity’s annual turnover.
What you can do about phoenixing
Even if these measures are implemented, it is important for you to proactively assess a company’s circumstance.
As an employee, it is important to look for warning signs such as late payment or non-payment of wages, unpaid superannuation and entitlements.
As a creditor, one should be aware of late payment or non-payment of invoices which may indicate financial distress, as well as changes to company details.
Noting that officers of the company have certain duties under the Corporations Act 2001 (Cth), it is important to monitor the financial health of the corporation and ensure that decisions are made in accordance with key duties.
Often, the best way to ensure that your rights and obligations are being met is to seek advice.
How can we help?
Rostron Carlyle Rojas Lawyers are well appraised in the field of corporate law and are able to assist companies, company officers, creditors and employees in ensuring the discharge of their duties and protection of their rights. If you or someone you know requires further assistance, please do not hesitate to contact our Corporate Lawyers on (07) 3009 8444 or email us at firstname.lastname@example.org.
Please note that this article has been prepared by Kishen Bhoola, Lawyer and settled by Sarina Mari Alwi, Senior Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.
With effect from 19 September 2017, the safe harbour reform came into effect, reflected in Section 588GA of the Corporations Act 2001 (Cth) (the Act). The practical effect of the reform was to encourage the turnaround culture of companies through innovation and strategic management instead of companies prematurely appointing a voluntary administrator.
What is a Safe Harbour?
The Act now provides an avenue for company directors to take steps against being held personally liable for a company’s inability to comply with their financial commitments. Section 588GA of the Act (the Safe Harbour Reform) provides that a director is not subject to an insolvent trading claim provided that upon suspecting that the company may become or is insolvent, they develop and implement one or more courses of action that are reasonably likely to lead to a better outcome for the company.
What are the requirements for the Safe Harbour Reform?
To determine what an appropriate course of action is, the Act provides a number of examples a Court is to consider in determining whether a director has in fact, complied with the Safe Harbour Reforms, such as, whether the director:
- is properly informing himself or herself of the company’s financial position; or
- is taking appropriate steps to prevent any misconduct by officers or employees of the company that could adversely affect the company’s ability to pay all its debts; or
- is taking appropriate steps to ensure that the company is keeping appropriate financial records consistent with the size and nature of the company; or
- is obtaining advice from an appropriately qualified entity who was given sufficient information to give appropriate advice; or
- is developing or implementing a plan for restructuring the company to improve its financial position.
When do the Safe Harbour Reform provisions apply?
The Safe Harbour Reform provisions only apply to debts incurred (whether directly or indirectly) in connection with the course of action until such time that:
- a ‘reasonable time period’ has passed; or
- the course of action has ceased; or
- the course of action is no longer reasonably likely to lead to a better outcome; or
- the appointment of an administrator, or liquidator, of the company.
The phrase a ‘better outcome’ is defined in the Act as to mean “an outcome that is better for the company than the immediate appointment of an administrator, or liquidator, of the company.”
Debts incurred after the above circumstances may be subject to insolvent trading claims against directors.
What does this mean for directors?
Whilst the Safe Harbour Reform is intended for companies to strategically become more solvent, there is still a risk in relying on the Safe Harbour Reform as a defence to insolvent trading claims as the onus of proof is on the director should the matter escalate. So, while a director may think they are pursuing a course of action that is reasonably likely to lead to a better outcome, they need to be able to prove this. Due to this, many directors may decide to avoid the risk of not being able to successfully prove that their actions were in accordance with the Safe Harbour Reform and simply appoint voluntary administrators.
How can we help?
Our insolvency and commercial litigation team has extensive experience acting on behalf of companies and directors to reach positive outcomes. If you or someone you know requires further assistance with regard to directors’ duties or the Safe Harbour Reform, please do not hesitate to contact Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at email@example.com.
Please note that this article has been prepared by Krishna Ramji, Law Clerk and settled by Sarina Mari Alwi, Senior Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.
Australian Consumer Law: Warranty against defects and the mandatory statement to be provided to consumers
Are you a service business and do you guarantee that if the goods or services your supply are defective you will repair or replace the goods, provide again or rectify the services, or compensate the consumer? If so, from 9 June 2019 you will be required to include, in all documents containing your warranty such as your terms and conditions, marketing material, receipts, product packaging or consumer contracts (Warranty Document), one of the following statements which best suits your business:
Even if you only supply goods to consumers you are required to provide the following statement to your consumers in a Warranty Document:
Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.
Businesses that do not comply with the requirements of the Australian Consumer Law risk fines of up to $50,000 for companies and $10,000 for individuals per breach. Given the upcoming changes it is a timely reminder that you should ensure that your warranties should be documented:
2. to concisely note:
a. what the consumer must do to claim the warranty
b. what you will do to honour your warranty;
c. who will bear the expenses of the warranty and if relevant how the consumer can claim such expenses from your business;
3. to prominently state your business’ name, address, telephone number and email address;
4. to clearly state the length of the warranty and the time frame in which a consumer may claim the warranty.
Businesses are not required to display the mandatory statements noted above in relation to:
- the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored;
- services supplied under a contract of insurance; or
- supplies of gas, electricity or a telecommunications service.
In addition to the exceptions noted above, Parliament may amend the Competition and Consumer Regulations 2010 (Cth) to exclude the supply of certain goods from the operation of the Consumer guarantees in the Australian Consumer Law; however, as at the date of this article no additional exceptions have been provided.
If you would like us to prepare new terms and conditions for you or review your existing warranties, or if you would like to obtain further advice in respect of the Australian Consumer Law please don’t hesitate to contact us.
Last week we advised on the threats facing discretionary trusts as a structuring tool, particularly in light of the Australian Labor Party’s (ALP) plans should they win power at the federal election on 18 May 2019. As we now know, the Liberal-National Coalition defied all expectations not only to retain power but to be able to form government in its own right. The incumbent Morrison government campaigned against the ALP’s policies of abolishing negative gearing, reducing surplus franking credits to low income earners, reducing the CGT discount from 50% to 25% and taxing distributions to beneficiaries of discretionary trusts at 30%.
With the government not having stated plans to introduce any of the ALP’s policies, the tax effectiveness of the discretionary trust is safe – at least for the next few years – by allowing the splitting of passive income amongst beneficiaries to achieve the most beneficial tax outcome for the trust beneficiaries as a whole. Coupled with the benefits of asset protection and access to a CGT discount which looks like remaining at 50% for the foreseeable future, the discretionary trust remains a highly recommended structuring vehicle.
I’m a director of a company being sued – I won’t be liable for cost ordered against the company, right?
It is not often that the Court orders a non-party, such as a director, personally liable to pay costs of a legal proceeding. However, in the recent decision in Murphy v Mackay Labour Hire Pty Ltd  QCA 90 (Murphy), the Court held that a director who was not a party to the litigation could be made liable to pay costs, as the Court considered that the interests of justice required it.
On appeal, the Court found that Murphy as the director of the insolvent company (despite not being party to the litigation) and in defending the company, had played an active part in the conduct of the litigation.
The facts in Murphy satisfied the three criteria set out by the High Court in Knight v FP Special Assets (1992) 174 CLU 178, where the award of non-party cost order was considered just and appropriate, as follows:
- the party to a litigation is an insolvent person/entity or ‘a man of straw’;
- the non-party has played an active part in the conduct of the litigation; or
- the non-party has an interest in the litigation.
Evidentially, the non-party cost order in Murphy was justified because Murphy was effectively the real party to the litigation and the company was unable to pay the costs. Consequently, Murphy’s appeal to have the order requiring him to pay costs, was dismissed.
Additionally, Murphy’s case demonstrates the responsibility on directors, for transparency if the company is in financial hardship. On appeal, the Court agreed with the findings of the primary judge in the original proceedings that Murphy allowed the trial to run without disclosure of the company’s financial hardship to the opposing party. Murphy’s omission of this fact, had allowed the defendant to expend further legal costs on a claim which would be unenforceable. As a result, failure to disclose information about financial difficulty resulted in an adverse non-party costs order against Murphy.
The Supreme Court’s power to award a costs order
In Queensland, the Supreme Court’s power to award costs against non-parties is contained in rule 681 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) which provides that:
‘costs of a proceeding are in the discretion of the court but follow the event, unless the court orders otherwise’
The decision in Murphy illustrates that in particular cases, the Courts may be prepared to lift the corporate veil and use their discretion conferred by rule 681 of the UCPR to order costs against directors who are non-parties to the litigation.
Costs Order: Do you require assistance regarding
If you are a director of a company the subject of current legal proceedings, or know someone who is, and want to know more, please contact the Commercial and Corporate Lawyers at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at firstname.lastname@example.org.
Please note that this article has been prepared by Daryl Hamley, Law Clerk and settled by Sarina Mari Alwi, Senior Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.
An individual owes you a debt (which is unsecured), such as a debt for non-payment of goods purchased.
- The individual enters into bankruptcy.
- You have not been notified of the individual’s bankruptcy but have a “provable” debt.
- 3 years later, you are now aware that the individual is a discharged bankrupt (the Discharged Bankrupt).
Can you demand payment if it was an unsecured debt?
Generally, ‘No’ – the Discharged Bankrupt will no longer be liable to pay debts that are deemed to be covered under the bankruptcy rules for certain debts. Usually after three years a bankrupt will ultimately be discharged from bankruptcy and released from their liabilities owed as at the date of bankruptcy.
On this basis, you will not be able to demand payment of the debt, and the individual is not liable to repay the debt (if the bankrupt failed to disclose a debt owed at the time of bankruptcy, they may be liable to prosecution by Australian Financial Security Authority, but that would not recover the debt).
Debts included and not included in Bankruptcy
Debts included in bankruptcy include unsecured debts (being, tangible debts), examples of which may include, but not limited to:
- Credit and store cards;
- Unsecured personal loans;
- Unsecured business loans;
- Utility bills (ie electricity, phone etc); and
- Medical, legal and accounting fees.
Conversely, debts not included in bankruptcy include, but not limited to:
- Debts incurred after the bankruptcy begins;
- Unliquidated debts (these are debts where the amount of debt is yet to be determined, not arising from contract, promise or breach of trust, which is quite rate); and
- Child support and maintenance debts.
Below is a comparison table of examples of debts that may and may not be recoverable post-bankruptcy.
How do I recover an unsecured debt in this scenario?
Generally, the only way to recover an unsecured debt is if you are a named creditor with a provable debt that came about before the start of the bankruptcy. Provable debts are debts and liabilities, present and future, certain or contingent to which a bankrupt was subject at the date of the bankruptcy, or to which they may become subject before their discharge by reason of an obligation incurred before the date of the bankruptcy.1
If your debt is a “provable debt”, you would be able to participate in the bankruptcy and be entitled to repayment of your debt, in whole or part.
However, in this Scenario, you are not a named creditor that have not been notified of the bankruptcy, you may be hindered in recovering the debt. Conversely, if you are able to prove that the debt was incurred after the bankruptcy, the individual will be liable, and you would be able to pursue the individual for payment.
Accordingly, the best avenue in which to recover an unsecured debt is to stay informed with respect to the financial position of the individual who owes you the debt.
How can we help?
If you are unsure of whether you can make a claim for an unsecured debt against a discharged bankrupt, please contact the Corporate and Commercial Lawyers at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at email@example.com.
Please note the contents of this article are for general purposes only and does not by any means constitute legal advice, or should it be relied upon.
Bullying in the workplace is verbal, physical, social or psychological abuse (usually) by an employer (or manager), another person or group of people (other employees) at work. It can often be associated with a general toxic work culture. Often it is a symptom of poor, unethical or negligent leadership. It poses a significant, but avoidable risk. (more…)
As it has almost been seven years since the start of the Personal Property Securities Register (PPSR), this article will discuss the implications of lapsing personal and business security interests. We highlight key implications about not having your security interests protected and how the team at Rostron Carlyle Rojas Lawyers can assist.
What is a PPSR security interest?
The Personal Property Securities Act 2009 (Cth) (PPSA) came into effect on 30 January 2012, incorporating a national online register of security interests for personal property known as the Personal Property Securities Register (PPSR). The PPSR allows banks, financial institutions, businesses and individuals to register a security interest against personal property. The federally administered register was the first of its kind, and became a critical mechanism in protecting personal and business assets by allowing a priority charge to be held over a specific asset.
Which security interest registrations are affected?
PPS registrations against consumer property with serial numbers (such as your motor vehicles, boats or business machinery equipment) only allows such items to be registered on the Personal Property Securities Register (PPSR) for a period of seven years. As the PPSR this year celebrates its 7th birthday, it will be a short-lived celebration if those security interests registered at the commencement of the PPSR, have not been amended or re-registered.
As at 30 January 2019, over 120,000 registered security interests were set to expire.
To save these registrations from expiring, the secured party, being the party whose interest is being secured, must amend or create a new registration before the expiry of the original registration.
Consequences of a lapsing PPSR security interest?
If a PPS registration is not renewed, the security interest will expire, and the secured party will lose its status as a secured creditor.
PPS registrations are designed to protect personal and/or business interests, to allow recovery of property or valuable assets should the other side in the transaction being the grantor, become a bankrupt or enter into liquidation.
Accordingly, allowing your PPS registration to lapse or expire could have significant consequences. Regardless of when your security interests were registered on the PPSR, now is the time to ensure your rights are protected. To avoid losing your security interests and priority, we encourage you to check the status of your registration by generating a ‘registrations due to expire report’ using the PPSR website: https://www.ppsr.gov.au/registrations-due-expire-report.
How can we help?
Find this area of personal and/or business security interests confusing? If you have questions about a potential expired registration or want to know whether your personal and/or business security interests are still protected, please contact the team at Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at firstname.lastname@example.org.
Please note that this article has been prepared by Jakob Mignone, Law Clerk and settled by Sarina Mari Alwi, Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.
On May 4, 2019, Rostron Carlyle Rojas Lawyers were the co-hosts of an Investment and business migration seminar in Ho Chi Minh City, Vietnam.
The partnership between RCR Law, TP Immigration, Investment, and Consultancy attracted Vietnamese business people from near and far and was a great success for all involved.
Presenters included our Founding Partner Greg Rostron and Special Counsel Peter Kuek-Kong Lee. Alongside, Greg McKean, Manager at Business and Skilled Migration QLD, Australia and Brendan Goulding, Director in International Services at Bentleys QLD, our very own Peter Kuek-Kong Lee presented on visa options for businessmen and women looking to bring their business and investment to Australia.
Legal and financial advisors have long advised clients on the advantages of structuring their affairs using discretionary trusts, the two most notable of which are asset protection and income splitting. Assets held in a discretionary trust cannot be said to be owned by any specific beneficiary as no beneficiary is absolutely entitled to any such asset, and passive trust income can be split amongst beneficiaries to achieve the most beneficial tax outcome for the trust as a whole.
In the last 15 years the asset protection benefits of a discretionary trust have been eroded by the powers of the Family Court in family law matters, and since the decision of the Federal Court in the Richstar decision1 in 2006 there has been an argument that such erosion should also apply to matters involving the insolvency of trustees of discretionary trusts, by equating effective control of a trustee to a proprietary interest in the assets of the trust.
More topically, the income splitting benefits of discretionary trusts have come under attack from the Australian Labour Party, which is seeking to ameliorate the advantage should they win power at the Federal election to be held on 18 May 2019. The ALP’s plan is to tax all distributions from discretionary trusts to adult beneficiaries at 30%, regardless of the marginal tax rate of the beneficiary, from 1 July 2019. This policy targets the ability of the trustee to direct passive trust income to adult beneficiaries who currently earn less than $38,370 per year (taking into account the low-income tax offset) and whose income is therefore subject to a maximum 19% marginal tax rate. The ALP cites the independent Parliamentary Budget Office in claiming that these changes will lead to an additional $4.1 billion in taxes raised by the end of the 2022 financial year.
So where does this leave the discretionary trust if the ALP wins power at the election? It should be noted that the income splitting benefits of such trusts would only be reduced rather than entirely abolished. In taxing distributions to individual beneficiaries at 30% the ATO would be bringing all beneficiaries under a discretionary trust into line with “bucket companies” the income of which is taxed at a flat 30%. This means that a distribution of $139,000 or more to a beneficiary who has no assessable income in a given financial year will not be affected by the changes. Below this level of distribution, however, the changes will be felt.
Regardless of whether the ALP wins the election, discretionary trusts will remain an important structuring tool from as asset protection perspective. The fact that no one beneficiary can be said to have an entitlement to an asset of a discretionary trust allows risk of individual beneficiaries to be quarantined. In this context it is important to acknowledge that the Richstar decision has not been followed subsequently by courts, has been confined to the particular statutory context in which that case was decided and has been subjected to significant academic criticism. The flexibility of a trustee to distribute income and assets to beneficiaries will remain and, while the ALP has suggested in a separate policy a reduction in the percentage of the capital gains tax discount, there is no suggestion that it will restrict access of discretionary trusts to the discount. Moreover, where allowed by the succession legislation of the relevant jurisdiction, discretionary trusts will continue to be effective in estate planning.
Rostron Carlyle Rojas Lawyers is a full service law firm with expert Lawyers in Brisbane and Sydney. We offer our services globally, in wide array of legal areas including: Corporate and Commercial Law, Insolvency Law, Construction Law as well as Family Law to mention a few.
Don’t hesitate to contact us if you would like to discuss the use of discretionary trusts or structuring in general.
There have been some recent changes in the way the Titles Registry deals with paper certificates of title (paper CTs) in Queensland, which aims to streamline and facilitates electronic conveyancing.
What is a certificate of title?
A paper Certificate of Title (paper CT), or a title deed, is a paper record showing the current owner and title particulars of a property. Before 1994, a paper CT existed for every property in Queensland and the paper CT was required in order to deal with the property, by sale, transfer, mortgage or otherwise.
However, from 1994 the Titles Registry converted to an electronic titles register and has not automatically issued paper Certificates of Title for property since then. A paper CT could only be obtained from the Titles Registry on request from a property owner. Currently only about 11% of properties in Queensland still have a paper CT in existence.
The main reason associated with obtaining a paper Certificate of Title was to ensure that further dealings with the property were not lodged (e.g. transfer of title, registration of mortgages, leases etc) unless the paper CT was deposited with that dealing. Paper CTs are also sometimes used as a form of security held by a lender to secure repayment of a loan or facility.
What is the change?
On 29 March 2019, The Land, Explosives and Other Legislation Amendment Act 2019 was passed in Parliament and amended a number of Acts, including the Land Title Act 1994. The amendments mean that from 1 October 2019, property owners will not be able to request a paper Certicate of Title from the Titles Registry and paper CTs will no longer have any legal effect.
Until 1 October 2019, the current laws that govern paper CTs remain in place. This means any property transactions where there is a paper CT, will still need that paper CT to be deposited.
If you have a paper Certificate of Title, you should store this in a safe place until the changes take place on 1 October 2019, after which the paper CT will become an item of sentimental value only and will no longer need to be deposited when a property dealing is lodged.
Where a paper CT is currently held as a form of security, we recommend that you make other arrangements as soon as possible before the changes take place. We can assist you with reviewing and amending your current finance agreements and seek alternative security such as mortgages, security interests and/or personal guarantees.
Can a creditor vote and prove for a debt in an external administration, for a debt that it bought from another creditor?
This question frequently arises in an administrator’s or liquidator’s adjudication of claims for voting or dividend purposes. Often this happens where the business of the company in administration was continuing to trade and a related party has paid debts owed by the company to maintain a working relationship with suppliers. However, the admissibility of such a claim will depend on the circumstances under which the payment was made.
Assignments, Guarantor, Security and Subrogated claims
If a legal or equitable assignment of the debt took place, then the creditor can claim as an assignee of the debt. If no assignment took place, then it is possible that a right of subrogation will apply, but this will not apply in all circumstances.
If a guarantor pays a debt of a company in administration or liquidation, the guarantor can usually make a subrogated claim for the amount paid under the guarantee (but this may be subject to certain limitations in the terms of the guarantee). In this regard, a ‘subrogated’ claim puts the guarantor in the shoes of the creditor they had to pay and the guarantor can seek reimbursement from the company, as the company was primarily liable for that debt.
Where the debt paid on behalf of the company was secured, the payor may have a subrogation claim in the place of the secured creditor they paid out.
However, where a third party has spontaneously paid an unsecured debt of the company without any request by the company for that payment to be made, then that third party may not be able to claim reimbursement from the company by way of a subrogated claim in the liquidation or administration.
Case study Subrogated Claims
We recently had to consider this issue, where a company went into voluntary administration and then was subject to a deed of company arrangement, and certain trading debts of the company were paid by a related party (to maintain a working relationship with suppliers for that related party). There was no evidence that the company had requested the related party to pay those debts.
In that matter, the claim of the related party for the amount of the company debts it paid were not admitted for voting purposes at a meeting of creditors.
This was also the outcome in the case of re Dalma No 1 Pty Limited (In Liquidation) and Anor  NSWSC 1335. In that case, a related party paid wages directly to the staff and sought the Liquidators consent to subrogate them into the priority position of the employees’ claims for unpaid wages (which have priority above other certain other claims in a liquidation). As the related party paid the employees directly (rather than funding the company to pay the employees), section 560 of the Corporations Act 2001 allowing a priority claim to the related party did not apply. Relevantly in respect of subrogation, Justice Brereton in that case held that:
At : While the common law restitutionary claim for moneys paid might avail a third party who discharges a debt at the express or implied request of the debtor, its availability is contingent on an express or implied request; there is no such remedy for a third party who spontaneously pays off a debtor’s unsecured liability.
At : In my view, the only context in which a spontaneous voluntary payment by a third party may found a claim for subrogation is in the exceptional category of the payment off of existing securities. There is no authority for extending that exceptional case to unsecured debts.
Takeaways for creditors and related parties
If you intend to make a payment on behalf of another party (in particular if it is, or may soon be, in administration or liquidation), it is important to consider whether security, subrogation or assignment may be available to maintain rights for making such payment. This may require a request by the debtor for you to make such payment, or for security or assignment documentation to be prepared and signed before making such payment.
Rostron Carlyle Rojas Lawyers are available to advise you and to prepare documentation to maintain your rights when funding or making payments for another party’s debts. Contact our Insolvency Lawyers for assistance on subrogated claims or any matters to do with insolvency or commercial litigation.
You have finally decided to turn your idea into action. After a long time of thinking, planning and organising you have decided to stop procrastinating and immerse yourself in your idea by bringing a new business to life. Whilst you have been thinking about every aspect of your new and exciting business, you may have inadvertently forgotten about (or maybe you did not even think about) the legalities of your startup. Without the proper legal protections in place, you may not only lose your advantage, but someone may actually pinch your idea and beat you to the punch. In fact, without the proper legal documents, you may find yourself in a position whereby you are spending most of your time fighting a legal battle instead of working on and perfecting your new startup venture.
So, what are some of the main things you should think about when starting a new business?
Protecting your idea
No doubt, when you are looking at creating a startup, much of your advantage depends on the novelty and uniqueness of your idea. If you think you have the next great idea in your locker, you ought to make sure that you protect this idea. This means not only being selective with whom you share your idea, but making sure that they in turn are also selective with whom they share your idea.
This is where a Confidentiality Deed or a Non-Disclosure Agreement becomes important. This agreement essentially prevents a disclosee (the party you intend to disclose information to) from sharing your idea with anyone and simply limits their disclosure to what is necessary to aid you in the service you are engaging them in.
Before actually embarking on establishing your new startup, you should carefully consider your business structure. Will you operate as a sole trader (and save costs) or will you choose to run your business as a company (and limit your liability)? Perhaps a partnership or a joint venture is a good middle ground.
“Your business structure should be carefully determined, and this will largely depend on how or if responsibilities are to be shared and who will be in control. If you are working on the startup with someone, you will need to carefully discuss your business structure and make sure your interests are protected.”
If you are creating a startup with the assistance of partner, it becomes extremely important to document how your relationship will be managed. An agreement between all partners (whether this is shareholders agreement or other agreement to document the start of the relationship) is highly recommended. This prevents any issues down the road and dictates how the business will be run (i.e who calls the shots, procedure for buying each other out in case things go pear shaped, first rights of refusal etc).
If your startup relies on Intellectual Property, this should be protected prior to official launch. If you have not patented/copyrighted your Intellectual Property as of yet, you should be very careful as to who you discuss your idea with.
If you already own intellectual property which you intend to utilise in your new startup, you should carefully think about what is to happen to such property. Is it the case that the intellectual property will become part of the business structure that you have decided on above (i.e. will it belong to the company) or will you continue to own the intellectual property and merely licence this to the business structure? This should be clearly and unequivocally documented in your agreement with the other partners.
You may engage different entities whilst your startup is kicking off. You may be liaising with a lot of different people who will be providing you a variety of services. In addition to making sure that your idea is protected and that such parties execute the right confidentiality agreements, you will need to clearly set out how your relationship with such parties will be governed.
For example, if you are engaging someone (or a company) to design and develop a website for you, you may need a contractor agreement which clearly sets out the work to be performed and how this party will be paid for their services.
If you are engaging staff, appropriate employment agreements will need to be put in place. You should consider clearly setting out that some people ought not to be considered to be partners in your new startup but that they are simply providing a service. This limits the potential for an ex-employee/contractor claiming that they co-founded your startup (a familiar scenario in successful startups).
Without the above documents, you may find yourself in a situation where work has not been performed (or has been performed below standard) and you may not have a clear leg to stand on in your attempts to force the other party to finish their work or to redo their work to an acceptable standard.
Whilst the above may seem costly and time consuming (or you may not consider it worthwhile to think about it at this time), rest assured that having the appropriate legal documents in place is a lot less expensive and time consuming than dealing with issues if/when issues do inevitably arise.
Just like you wouldn’t start a business without a business plan, we strongly recommend you don’t jump into a startup without thinking about the appropriate legal protections. Having the above-mentioned documents in place prior to launching (or even discussing) your idea, may be the difference between you being the next Steve Jobs or the next John Doe.
At Rostron Carlyle Rojas Lawyers, we can assist with all legal aspects of your startup. We work with multiple startup clients in ensuring that they have the right legal foundations before kicking their idea off the ground.
Contact James Hatzopoulos or Klevis Kllogjri on 02 9307 8900 for a confidential discussion regarding your new business idea and to check that you have all the relevant legal documents in place to ensure your new startup does not fail before it kicks off and to ensure that you avoid/minimise the potential for any disputes.
Here’s how to prevent it.
The way you handle a security interest can determine whether you record huge loss in your books or a healthy account of your business. One company Onesteel Manufacturing Pty Limited lost $23 million because of an over-sight in their security interest! While another, Psyche Holdings Pty Limited was able to avert the situation. Anything that potentially lose your business such huge amounts of money should be taken seriously. But what is a security interest?
Definition of a security interest
A security is “Enforceable claim or lien created by a security agreement, or by the operation of law, that secures the fulfillment of a pledge. A lender or obligee has a security interest in the collateral provided by a borrower or obligor to guaranty timely payment of a debt or performance of an obligation. See also perfected security interest.” Source: Business Dictionary
Security Interests- Why you should care?
Under s 166 of the Personal Property Securities Act 2009 (Cth) (PPSA), even if a security interest is registered correctly at the time of lodgement, there is an ongoing requirement to amend the registration within 5 business days of you acquiring actual or constructive knowledge of a defect in the registration. A failure to amend the registration within this time frame will result in the registration becoming defective. A defective registration can result in substantial losses such as was the case in OneSteel Manufacturing Pty Limited (administrators appointed)  NSWSC 21, in which a registration incorrectly made reference to an ABN (where an ACN should have been used), effectively resulting in a $23 million loss.
Defects of the kind covered by s 166 of the PPSA can arise where security interests are registered in respect of:
(a) an individual who changes their name after registration of the security interest;
(b) patent, plant breeder’s right, trade mark or design applications using a reference to a serial number (e.g. a patent application number) which changes upon the registration of the patent, plant breeder’s right, trade mark, or design (e.g. a patent number);
(c) a trust where the trust does not initially have an ABN and subsequently obtains one; or
a trust which has an ABN (and the security interest is registered against that ABN) but subsequently cancels the ABN;
(d) partnerships where partners leave or have ABNs cancelled or new ABNs are issued;
(f) secured property which is transferred to another party by the Grantor subject to the security interest;
(g) body corporates which after registration obtain an ARSN or have their ARSN cancelled.
The above list is not exhaustive, and the exact details required to be recorded for a particular entity are prescribed in the Personal Property Securities Regulations 2010 (Cth) (PPS Regulations).
Issues that can rise after a security interest has been registered
A case has recently highlighted the issues that can arise where a trust obtains an ABN after a security interest has been registered. In the matter of Psyche Holdings Pty Limited  NSWSC 1254:
(a) A general security deed was entered into between Ridgeway Finance Pty Ltd (Secured Party) and Psyche Holdings Pty Ltd as trustee for the LH Equity Trust (Grantor) in June 2013 relating to a loan between the two parties.
(b) Pursuant to the general security deed, a security interest was registered; however, at the time of registration the trust did not have an ABN and accordingly the ACN of the trustee was used in accordance with the registration requirements of the PPS Regulations.
(c) It is important to note that in relation to trusts, the PPS Regulations require that security interests are registered as follows:
- If the trustee of the trust has been included on the transitional register, reference must be made to those details as recorded on the transitional register;
- If not recorded on the transitional register and the trust has an ABN, reference must be made to that ABN;
- If not recorded on the transitional register and if the trust does not have an ABN, then:
- If the trustee is a company, reference must be made to the company’s ACN; or
- If the trustee is an individual, the security interest must be registered against the individual.
(d) After registration of the security interest, the trust was assigned an ABN, the registration date of which was backdated to 20 June 2013.
(e) Over 5 years later a director of the Secured Party was advised of the ABN of the Grantor and became aware that the security interest would need to be updated to reference the Grantor using the Trust’s ABN.
(f) Unfortunately, the Secured Party did not amend the security interest to refer to the Grantor using the ABN within the 5 sdays provided for in s 166 of the PPSA resulting in the security interest becoming defective.
(g) Once the Secured Party realised their error, they registered a new security interest on 6 July 2018 using the Trust’s ABN details and then applied to the Court under section 588FM of the Corporations Act 2001 (Cth) (Act) to fix a later time for the registration of its interest. The basis for their application was that the failure to register the interest earlier was accidental or due to inadvertence.
(h) The Court action was necessitated due to s 588FL of the Act which would have the effect that should the Grantor become insolvent within 6 months of the date the second security interest was registered, the secured property would vest in the company for the benefit of creditors generally and the Secured Party would lose the benefit of the security interest unless the Court extended the date for registration under 588FM of the Act.
(i) Fortunately for the Secured Party, the Court was satisfied in this case, that such inadvertence had been established and granted the extension of time to register the security interest.
This case shows that secured parties need to be particularly diligent when dealing with trusts to ensure that their security interests are registered correctly and that, if it becomes aware of changes to the trust’s ABN status, amendments are made to correct the registration within the 5 days allowed for in s 166 of the PPSA. Doing so will avoid the costs incurred in lodging a new security interest and going to Court to obtain a similar order as granted in this case.
How to avoid a loss: security interests
One solution to above problem is for a secured party to register multiple security interests against both the trustee and the trust to attempt to ensure that there is at least one security interest which is valid at any point in time. Another benefit to this approach is that, if Parliament ever legislates the recommendation contained in the Whittaker Report (published in 2015) that security interests granted by trusts should always be registered against the trustee, the Secured Party will not have to amend any of its security interests. The main risk with registering multiple security interests, however, is that such registrations are potentially unjustified and may expose the secured party to civil penalties under section 151(1) of the PPSA. It is for this reason that we recommend that a clause is included in the relevant agreement providing that the trustee is acting in its own right and as trustee in order to justify the lodgement of the security interests.
The general rule is that serving a company at their registered office will be deemed effective service. However, what happens when you “serve” court documents at a company’s registered address, and it is returned to sender? The Courts have made it clear that if there is proof that a document has not been delivered, service will not be deemed to have taken place.
The Common Law Position on return to sender
While the Court’s position on documents marked “returned to sender” appears to take a “common sense” approach, this position may change depending on the individual circumstances of the matter. For example, in the case of CGU Workers’ Compensation (Victoria) Ltd v Carousel Bar Pty Ltd (1999) 17 ACLC 1, service of a Creditor’s Statutory Demand was deemed ineffective because the envelope was returned and marked ‘return to sender’. The Court considered this to be sufficient proof of non-delivery. Whilst this case emphasizes that unless the creditor has taken all reasonable steps to bring the demand to the attention of the Company after it has been served, there are circumstances, and case law to suggest that it really does come down to the individual circumstances of each case.
On the contrary, in the case of Dennis v Fodare Pty Ltd  NSWSC 180, the plaintiff sent an originating process along with an accompanying affidavit to the Defendant’s registered office. The envelope was returned and marked ‘Return to sender’ followed by the word ‘refused’ by way of explanation. In contrast to the above case, the Court inferred that the document had in fact come to the attention of a relevant person at the Defendant’s address but they declined to accept delivery. As such, the court was prepared to hold that service was effective.
What Section 109X says about Return to Sender
Section 109X of the Corporations Act 2001 (Cth) presumes that documents which have been delivered to the registered office of a company have been served. It is up to the party seeking to maintain that the documents were not served, usually the defendant, whom will be required to rebut this presumption, which has a high threshold of proof.
The above highlights that despite there being a general presumption for the service of documents on companies, each case will be decided on its own individual facts and circumstances.
How can we help?
Having difficulty effecting service? Our commercial litigation team has extensive experience in all facets of litigation, including service. If you or someone you know requires further assistance, please do not hesitate to contact Rostron Carlyle Rojas Lawyers on (07) 3009 8444 or email us at email@example.com.
Please note that this article has been prepared by Ellen Nowland, Lawyer and settled by Sarina Mari Alwi, Associate of Rostron Carlyle Rojas Lawyers. Its contents are for general information purposes only and does not by any means constitute legal advice, nor should it be relied upon.
Key Things To Know About Business Sales Contracts and Sellers Warranties
Business sales contracts usually contain warranties by a Seller on a wide range of matters concerning the business sold, including as clear title to all of the assets sold and to the truth and accuracy of financial records. It is frequently the case that buyers and sellers will negotiate on the terms of such warranties. A buyer will want all encompassing broad warranties, while a seller will want to confine and narrow the warranty terms to matters that they absolutely know to be true and correct.
Careful drafting of business sales contracts reduces risk
Careful consideration must be given to the drafting of a sale of business agreement. For vendors in particular, there are a number of contractual terms and conditions by which potential liability can be reduced, (but not fully eliminated) including:
• Avoiding representations about the future performance of the business;
• Limiting warranties to matters that the vendor knows to be true and correct and can control;
• Capping any amount that can be claimed as damages;
• Providing a minimum threshold of damages before a warranty claim can proceed;
• Impose responsibility on the buyer to do their own feasibility on future performance;
• If there is a due diligence period, the buyer should confirm full satisfaction with their enquiries on giving notice to proceed.
For a buyer, any clauses which try to restrict or reduce the Seller’s liability are undesirable. Care should be taken to ensure that there will be appropriate recourse against the vendor for undisclosed issues arising post-completion.
A buyer has a number of remedies available to them if they subsequently find that the warranties are breached, including an action for breach of warranty and action under the Australian Consumer Law (ACL).
Usually, an action for damages will rely on both causes of action, and the making of misleading and deceptive representations which is prohibited by s18 of the Australian Consumer Law (ACL), cannot be excluded by contract. Vendors should be aware that s4(2) of the ACL deems a representation about any future matter to be misleading, where there were no reasonable grounds for making the representation.
Sellers should also be aware that failing to disclose any significant facts or information may well be in itself misleading and deceptive conduct, even in a due diligence process where the buyer will conduct its own investigations. Silence on any material issue can give rise to a liability in damages, or allow a rescission of the contract.
A recent example of these issues was in the decision of Evolution Traffic Control v Skerratt
 NSWSC 49 (ETC).
The key facts of that case were:
• The buyer entered into a share purchase agreement for business for $10 million.
• The price was based on a multiple of 5 times the EBIT of the business.
• The seller provided future financial forecasts upon which the buyer relied in
determining the price paid.
• In calculating the EBIT, reliance was placed by the purchaser on financial forecasts
provided by the vendors.
• The financial forecasts relied upon a specific government funding program, which was
provided based upon the achievement of conditions which were in fact, unachievable
in the future.
• The sellers did not disclose that specific condition during negotiations.
On discovery of the conditions of funding, after completion, the purchaser issued proceedings
to recover the difference between the purchase price and the actual value of the business at
the time of the sale, and pleaded a case based on:
1. misleading and deceptive conduct under the ACL, and
2. for breach of the warranties.
The share purchase agreement contained two specific broad warranties:
(i) the accuracy and completeness of all information disclosed in due diligence
materials during the course of negotiations leading up to the sale; and
(ii) that all information that would be material for disclosure to a prudent purchaser had
The vendors failed to show that they had a reasonable basis for making representations about the business’ future financial performance. The Court ordered damages of around $4 million representing the loss suffered on a re-sale of the business for $6 million.
The key facts of the ETC case are not unusual in the sale and purchase of businesses, and illustrates the risk of a seller making representations about the business sold based on inaccurate and incomplete information.
Selling a business can be a rewarding and profitable experience, and the reward for many years of hard work, capital and effort. Don’t risk losing that with a poorly drafted or inappropriate contract.
Consult an experienced and knowledgeable lawyer on the terms and conditions of a contract before signing. It can make a huge difference to the outcome.
For further information and assistance on any matters relating to the sale and purchase of a business, call us. Our knowledge and experience will help you make good decisions.
Selling a business can be a complex, exhausting and difficult process. Preparation for a sale can minimise if not avoid many of those frustrations.
Getting your records in Order
Any serious buyer will want to conduct a due diligence of the business and see:
- Full financial records and trading history over say 3-5 years;
- any necessary documents such as leases, employment contracts, supplier agreements, sales contracts, contractor agreements;
- any relevant and necessary government consents and approval required;
- intellectual property records such as patents, trademarks, registered designs.
Any shortcomings in being able to provide these will lead to suspicion and price discounting or rejection of the transaction.
Take the time to consult with your accountant and lawyer to get these in order so that a complete and accurate set of records can be disclosed at the right time. Gaps or omissions and inaccuracies can at best result in delays or a lost sale, and at worst, an action for damages if the sale proceeds, and the buyer is not happy.
Of course, some of these records should only be disclosed in detail upon a confidential basis once a contract is signed. Information which is commercially valuable must be protected by a confidentiality and non-disclosure agreement which also requires the return of all copies if the sale does not proceed.
Formalising key arrangements
Some key agreements and contracts which should be reviewed to determine currency include property leases, contractor agreements and supplier agreements. If these have expired or are close to an expiration date, these should be re-negotiated or renewed. Selling a business in leased premises where the lease has expired or is close to expiry will only diminish the value of the business. Similarly, if there are key staff or contractors on agreements which have expired or are due to expire, these should be identified, and renewed. Loss of a key member of staff can also have a detrimental effect on value of a business. Consider the need to have robust post-employment restraints in any key staff contracts to protect the buyer’s goodwill value, and your purchase price.
Identify the actual assets being sold
A sale contract must identify with detail exactly what is being sold. Take the time to identify those assets which are owned and can be sold. Separate out those which are not owned and cannot be sold, but which may be assigned/transferred with third party consent. Ensure that you know and can comply with such consents. For example, leased premises or leased plant and equipment cannot be sold, and will require landlord or financier consent, on specific terms and conditions. Knowing what those conditions and terms are in advance can save time and money.
The nature of what is included in a sale is very important. It must be documented precisely and exactly. The usual items and assets sold in a business sale will expressly include the following:
- plant and equipment;
- key contracts;
- intellectual property;
- communication services/rights (for example, telephone numbers and email addresses);
- property leases and equipment leases; and
- customer deposits and work in progress.
Post- Sale elements
Consideration needs to be given to important post-sale issues. Some of these will include:
- Restraint of trade: reasonableness;
- Debtors-collection and benefit;
- Release of any securities over any of the assets sold,
- employee entitlements-should be calculated and adjusted on settlement; and
- any credit guarantees to be revoked-to avoid unforeseen liability.
Obviously, you need some idea of price range. Most businesses sell on a multiple of net earnings. The multiple applied will depend upon many factors. Addressing some of those factors before the sale, identifying and eliminating the negative ones, can result in a higher multiplier and so a better price. For example, renewing a lease or locking in key employees to robust employment contracts, can be 2 simple steps to take to add value to a business. Similarly, locking or renewing any sales contracts, especially with terms covering future supply and pricing of goods or services can have a strong and positive effect upon the price paid.
A seller should also understand the way that the sale price will be dealt with from a tax perspective. This can determine the timing of the sale, what the sale price of the business and individual components or assets should be, and the impact any resultant tax will have on estate and retirement planning. These factors can significantly effect and determine how to structure the transaction.
The impact of:
2. CGT – applies to assets such as goodwill and intellectual property and special concessions and rule may apply;
3. income tax – payable in respect of the sale of trading stock and plant and equipment;
can all be critical in setting the price of the business. Here, advice should be sought from a good tax accountant preferably one familiar with the business history, and also one able to advise on future estate planning if a retirement is to follow the sale.
Stamp duty is usually, by express contractual terms, generally an issue for the buyer. Any avoidance of these obligations may however, become a seller’s liability.
Getting a contract prepared.
Consulting with your lawyer to discuss the sale and the terms of the contract at an early stage can result in a more streamlined sale process and afford you the best protection. Reviewing all aspects of a sale before actually going to contract can help minimise or eliminate any likely obstacles or impediments to a sale. A pre-sale audit of legal issues including some of the key documents for instance will identify areas of concern for a buyer, give you time to rectify and correct those issues and may end up saving you a lot of money in the long run.
We are experienced and expert in business sales and acquisitions. Contact us if you want any help or assistance.
Signed an option to buy a property? Make sure you exercise it on time and in the correct manner or risk losing it!
It is commonplace for a property purchase to be commenced with an option to purchase the land for various reasons, such as to allow time for a due diligence, to secure finance or a joint venture partner.
An option is usually formally exercised in accordance with its terms by the grantee giving a formal notice and the parties executing a formal document and signing a formal contract to purchase. In many instances, the terms of the option permit the assignment or novation of the right to exercise the option to a third party. For such a novation of the option to be valid, the option needs to be properly exercised.
In Kai Ling (Australia) Pty Ltd v Rosengreen  NSWCA 3, the court examined the requirements for effective novation of contract by the substitution of party, and whether on the facts of that matter, an option to purchase land was properly novated in favour of the substituted grantee.
On 30 April 2015, Mr Rosengreen granted to Saadie Group Pty Ltd (“Saadie Group”), by deed, an option to purchase certain land.
On 3 May 2015, Mr Michael Saadie presented to Mr Rosengreen a single sheet of paper in the same form as the execution page of the deed of option, save that the grantee was named as Kai Ling (Australia) Pty Ltd (“Kai Ling”) instead of Saadie Group. The sheet already bore the signatures of two persons on behalf of Kai Ling. Mr Michael Saadie (who was the father of the sole director of Saadie Group and was not an officer of Kai Ling) asked Mr Rosengreen to sign the sheet, saying that “we may need to change the name of the grantee but it does not change anything”. Mr Rosengreen signed as requested and gave the sheet back to Mr Michael Saadie. Kai Ling contended that the events of 3 May 2015 had brought about a novation of the option contract so that Kai Ling was the holder of the option in the place of Saadie Group. The primary judge dismissed the proceedings. Kai Ling appealed.
The Court held, dismissing the appeal with costs that:
(1) The evidence did not establish that Mr Michael Saadie acted with the authority of Kai Ling in dealing with Mr Rosengreen on 3 May 2015.
(2) There was no basis for a finding that there had been created among Mr Rosengreen, Saadie Group and Kai Ling the tripartite agreement necessary to effect novation.
(3) Mr Rosengreen and Saadie Group had, in any event, conducted themselves subsequently on the basis that they remained the parties to the option contract.
The Court approved the description of the nature of novation and of the elements that constitute it as found in ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2012) 245 CLR 338;  HCA 6:
“A novation, in its simplest sense, refers to a circumstance where a new contract takes the place of the old. It is not correct to describe novation as involving the succession of a third party to the rights of the purchaser under the original contract. Under the common law such a description comes closer to the effect of a transfer of rights by way of assignment. Nor is it correct to describe a third party undertaking the obligations of the purchaser under the original contract as a novation. The effect of a novation is upon the obligations of both parties to the original, executory, contract. The enquiry in determining whether there has been a novation is whether it has been agreed that a new contract is to be substituted for the old and the obligations of the parties under the old agreement are to be discharged.”
Further, the element of intention was important: In Vickery v Woods (1952) 85 CLR 336;  HCA 7, Dixon J said that “the crux of novation is intention” in the form of consent by way of tripartite agreement; and that the intention may be express or, importantly for a case such as the present, may be implied from conduct and circumstances.
Kai Ling’s case was that the events of 3 May 2015 gave rise to a tripartite agreement among Mr Rosengreen, Saadie Group and Kai Ling by which Mr Rosengreen accepted undertakings from Kai Ling in place of those originally given to him by Saadie Group and released Saadie Group; Kai Ling gave those undertakings to Mr Rosengreen who in turn renewed in favour of Kai Ling the undertakings he had originally given to Saadie Group; and Saadie Group consented to its release by Mr Rosengreen and in turn released him from the original contract. Kai Ling maintained that all those elements, in immediately operative contractual form, can and should be found to have resulted from the events of 3 May 2015.
The appeal was dismissed as the Court agreed with the primary judge who held that Kai Ling had not established that, on 3 May 2015, all of Mr Rosengreen, Saadie Group and Kai Ling agreed that a new contract between Mr Rosengreen and Kai Ling was substituted for the old contract between Mr Rosengreen and Saadie Group and that the obligations of Mr Rosengreen and Saadie Group created on 30 April 2015 were discharged. His Honour’s’ conclusion was correct for three basic reasons:
1. In the absence of proof that Mr Michael Saadie had acted on 3 May 2015 with the authority of Kai Ling, it was not shown that Mr Rosengreen and Kai Ling had engaged in any conduct of a contractual kind towards one another on that day.
2. Even if there had been contractual conduct as between Mr Rosengreen and Kai Ling on 3 May 2015, the purpose of the contractual conduct was to deal with an apparently foreseen possible future need to “change the name” of the grantee of the option, as distinct from immediately substituting a new grantee.
3. As at 27 November 2015, two of the three relevant parties (Mr Rosengreen and Saadie Group) acted on a clear footing that they alone remained the parties to the option agreement made between them on 30 April 2015.
The case illustrates that the exercise of options where an interest is to be novated is a technical and a formal process that should be treated with care to ensure it is effective to novate the rights granted.
Getting this process and documentation wrong can be costly.
We are experts in property transactions. If you wish to discuss or seek advice on any aspects of options to buy property, or matters arising from this article, please contact us.
Trade Marking is the process of creating an identifying aspect of a product or service that distinguishes it from other similar products or services within the marketplace. A trade mark may include a word, phrase, letter, sound, number, shape, smell, logo, picture or aspect of packaging or a combination of these.
Upon Registration the trade mark covers all areas of Australia. It gives the registered owner the legal right to use the name, logo and picture, for the goods and services under which it is registered.
While you are not required to register your trade mark, it is prudent to do so as common law action may arise if you use a trade mark that is not registered.
Why would you trade mark?
A trade mark is commercially recognised as being a vital element in developing and maintaining a brand and viability of a business. The development of a recognised trade mark is an integral part of an effective marketing strategy for goods or services and a business in general.
A recognised trade mark quickly becomes an identifying element for a customer base. Trade marking becomes pivotal in building your goodwill and reputation, and will ultimately contribute to the overall success of a business.
Is your mark registrable?
In order to register a trade mark it needs to meet the requirements of the Trade Marks Act 1995 (Cth). The applicant must have legal personality and is to be classified as either:
- an individual;
- Incorporated association; or
- a combination of these.
Trade Mark needs to be distinctive in nature
Your trade mark needs to be distinctive in nature and is not something that is used in the everyday vernacular. The name cannot be descriptive in nature and can not impose any connotations that would be perceived to be unfair or unequitable to others operating within the marketplace.
In terms of registering the name, it is important to ensure that you do not have a combination of commonly used initials or surnames. There is also to be no confusion between other goods or services currently within the marketplace. Provided that you comply with the above requirements, there is a higher chance of successfully achieving registration.
Trade Mark needs to not be used in normal course of trade
The trade mark needs to be a new addition to the market place, in order to avoid confusion. It is crucial to ensure that customers are not confused between trade marks as the repercussions of this could be potential legal action.
It is prudent to conduct a search for any registered or pending trade marks which may already be in existence. It may be possible for similar trade marks to co-exist and be registered provided that the goods and services offered are in different classes or classifications.
Identification of classes
Trade marks are divided into groups of goods or services, these two categories are then divided into a further 45 classes. The classes can be located at the link below:
It is crucial that you clearly outline a clear, concise description of your services which you wish to trade mark.
Does a trade mark expire?
The registration of a trade mark lasts for 10 years. Upon expiry you may renew your registration for an addition 10 years and pay the prescribed fee. There is significant business value that can be placed upon registration and renewal of trade marking and ultimately the decision to obtain a trade mark will need to commercially assessed on an individual basis.
The Application process
Applications for trade marks are to be filed with the Trade Marks Office of Intellectual Property Australia.
Upon submitting your trade mark for application you will be allocated a filing number which enables you to easily track your application. Should your trade mark be accepted for registration, the details pertaining to your application will need to be advertised in the official Journal of Trade Marks.
From this point onwards anyone may lodge an objection to your trade mark application within three months of the advertisement date. If no objection is lodged against your trade mark application, your trade mark becomes registrable upon payment of the registration fee.
You will then be required to pay the registration fee no later than 6 months from the date the acceptance is advertised.
Upon registration IP Australia will issue you with a Certificate of Registration and record the details pertaining to your trade mark in the Register of Trade Marks.
Time frame of the application process
The estimated time frame for a trade mark application is approximately 5 months if no issues arise during the
application. Upon being granted a trade mark your rights will accrue from the date of filing the application rather than the date you are notified of successfully obtaining the trade mark.
Trade marking a Logo (colours)
Trade mark may be registered:
- with limitations as to colour;
- with limitations in respect to whole or part of the trade mark; or
- in the capacity that the trade mark is registered without any limitations as to colour.
However, if your trade mark is registered without colour limitations, your trade mark is taken to be registered to cover all colours.
For more information on trade marking and other areas of intellectual property law, please contact our Intellectual Property experts.
We were recently successful for a client in a fierce contest in the Supreme Court in enforcing a 12 month restraint on a shareholder working for a direct competitor contrary to the provisions in a shareholders agreement (LCR Group v Bell (2016) QSC 130).
It is commonly the case that shareholders in a company enter into written agreements which set out their rights and obligations. Shareholders agreements of this nature are designed to achieve a harmonious and profitable business operational environment with cooperation between the shareholders.
A well drafted shareholders agreement should, particularly where the shareholders are of a management or executive level contain restraints of trade, drafted to strike a balance between achieving a harmonious and profitable business operational environment with cooperation between the shareholders, protection of the company interests, and protection of individual rights.
Recent decisions on the enforcement of restraints of trade in shareholders agreements point to a more commercial and contractual approach rather than the approach generally accepted by the courts when considering restraint of trade in an employment contract.
Restraints of trade in employment contracts are said to be void being contrary to public policy.
A well drafted restraint clause in an employment agreement will typically contain non-competition provisions, geographical and temporal restrictions.
The starting point as observed by McMurdo J in AGA Assistance Australia Pty Ltd v Tokody  QSC 176 at 25 is that:
“A restraint of trade is void as contrary to public policy unless it is reasonable in the interests of the parties and by reference to the interest of the public: see Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd, Amaco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd. As to the interests of the public, the onus is on the party which is subject to the restraint to establish that the restraint is harmful to the public: Herbert Morris Ltd v Saxelby.”
Restraints on post-employment activity contained in shareholders agreements indicate a different approach. Issues such as mutuality of obligations, legitimate business interests of the company, acknowledgements of independent legal and accounting advice, the risk of loss of client and customer connections and relationship, confidential information and reasonableness of the restraints are all relevant considerations.
In BDO Group Holdings (Qld) Limited & Anor v Sully  QSC 166, Flanagan J considered and enforced a restraint imposed upon an accountant who became a party to a shareholders agreement and a party to an employment agreement when he sold his business into the applicants.
The restraint of trade in the shareholders agreement provided a non-competition restraint of trade which purported to restrain the respondent from engaging in any activity during the restraint period and within the restraint area which essentially competed with the business activity of the company, provision of similar services, inducing, soliciting staff or clients.
In dealing with the shareholders agreement, and Flanagan J observed that the respondent agreed to:-
- Diligently and faithfully devote…attention to the business
- To cooperate and use…best endeavours to ensure that the group successfully conducted the business
- To give approval to make decisions that were required of it in good faith and in the best interests of the group and the conduct of the business as a commercial venture
Relevantly, the shareholders agreement contained an acknowledgment that the terms of the restraint were reasonable considering the interests of each party and went no further than was reasonably necessary to protect the interests of the other shareholders, the group and the business.
In the decision of Seven Network (Operations) Limited & Ors v Warburton (No 2)  NSWSC 386, Pembroke J dealt with a restraint of trade involving a senior executive of the Seven Network in the context of restraints imposed under an employment contract and a management equity participation deed.
In a decision notable for its clarity and analysis of both factual and legal issues, Pembroke J found that the restraints imposed in the management equity participation deed should be enforced. In analysing the circumstances relating to entry into the management equity participation deed, the commercial background and experience was detailed exhaustively. In that case Mr Warburton was a person of considerable commercial experience, knowledge and acumen. His Honour also considered that the entry into the management equity participation deed by senior executives such as the respondent was an important factor in the venture capital company’s decision to invest in the company (an investment of approximately $690 million for a 50% economic interest). The transaction involved, through an equity participation plan, senior management being given a financial incentive to strive to maximise the value of the business. By this means, the interest of the investors and senior management were aligned. In an effective practical sense, they became “owners of the enterprise”.
The commercial rationale for the deed was also analysed and His Honour commented:
“It resulted in the participating executives becoming the holders of shares and options in SMG. By this means, they acquired a shared financial interest in the enterprise with KKR and Seven Network Limited. The MEP Deed was designed, amongst other things, to enhance the prospect of senior management staying together as a team. It provided each of them with an opportunity to achieve a generous return on investment that was disproportionate to the risk being undertaken. From the perspective of KKR and Seven Network Limited, the restraints on competition served to protect their investment. But they also served to ensure that the investment of each of the senior management participants was not undermined or devalued. The object of the restraints on competition was to reduce the risk of devaluation of the business by the departure of any executives to work for competitors: to reduce the risk of the misuse of confidential information by its provision to competitors: and to reduce the risk of dissipation or reduction in the customer connection of the business”.
His Honour found that on the facts of the case, there was no logical reason for denying the existence of a legitimate financial interest to support the restraints imposed.
His Honour also dealt with the provisions in the MEP Deed which contained an acknowledgement of reasonableness of the restraints imposed. His Honour said “this is possibly the most important single factor in determining whether the restraint period was reasonable at the time it was entered into. It does not of course absolve the court from reaching its own conclusion, but as Emmett J observed in Synavant Australia Pty Ltd v Harris (2001) FCA 1517 at 85:
“The matter involves the exercise of business judgment. For that reason, considerable weight should be attached to the period the parties themselves have selected.”
His Honour further pointed to the fact that in this case, Mr Warburton had obtained legal and taxation advice at the time of entry into the deed, had been to a presentation at which attention was drawn to it and the commercial rationale and purpose behind the restraint was explained to him and he obtained written legal advice which specifically addressed the clause. Those factors reinforced the appropriateness of placing weight on his agreement as to the reasonableness of the restraint.
In LCR Group v Bell (2016) QSC 130, Byrne J enforced a 12 months restraint on a manager and shareholder, after analysing the scope of duties of the shareholder and the business interests of the company, finding that the restraint was reasonable and valid where the company and the prospective employer were direct competitors, and “there was a significant risk of appreciable detriment to LCR’s commercial interests through misuse of LCR’s confidential information.”
Enforcing restraints of trade, whether in employment contracts, business sale agreements or Shareholders Agreements is never simple and usually involves complex and contested, factual and legal issues. Where there are significant risks of serious loss and damage occurring if the restraints are not enforced ,protective and urgent injunctions are well warranted.
If you have any reason to consider action on a restraint of trade, and require urgent advice, contact us for assistance.
Answer: Not very hard!
A party who is claiming a debt from a company will often want to consider the quickest and most cost-effective way for recovery. A drawn out court case over many months can often lead to a very unsatisfactory result, including lost time and legal fees. For these reasons, many will consider the use of a Statutory Demand under Section 459 of the Corporations Act 2001 which basically entails making a demand in a prescribed form and which allows 21 days to resolve the matter of the debt, or face a winding up on the grounds of insolvency. Properly used, it can be a fast and effective way to recover debts.
However, this process is often misused by parties particularly where the issue is not solvency of the company, but a genuine dispute as to the existence of the debt claimed.
The recent decision of ABC Constructions No 1 Pty Ltd v. Bonelli Constructions Pty Ltd  QSC 35 (4 March 2016) is an illustration of this point.
Bonelli issued a statutory demand against ABC for monies it claimed were due and payable as a consequence of a payment claim made under a building contract. ABC applied to the Court to set the Demand aside. At issue was whether there was a genuine dispute about the existence or amount of the debt that was the subject of the demand, and whether there was a genuine off-setting claim.
ABC claimed that the debt claimed under the statutory demand was genuinely in dispute. Bonelli had failed to submit documentary evidence supporting its progress claim; the debt has been the subject of a Principal’s Notice to Show Cause with a subsequent termination of the building contract by the applicant; and there are differences between separate progress claims issued by the respondent, at a relevant point in time.
ABC also contended that under the building contract it had a right to claim delay costs subject to a specified procedure, which had not been followed by ABC. ABC expressly disputed Bonelli’s right to make any claim for delay costs prior to service of the statutory demand.
Finally, ABC claimed that the statutory demand was issued in circumstances where there was a pre-existing dispute between the parties resulting in a termination of the contract by it.
On all of its arguments, ABC asserted a genuine dispute existed and that the Statutory Demand should be set aside with costs.
The Court agreed and set aside the Statutory Demand and ordered that Bonelli pay the costs of the application.
In reviewing the well-established principles and cases, the Court had no hesitation in finding a genuine dispute existed. Importantly, the court emphasised the relatively low threshold required to show a “genuine dispute”:
“No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the “ultimate question” of the existence of the debt should not be compromised.”
The Court quoted with approval the decision of TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd in which Dodds-Stretton J said:
“As the terms of s 459H of the Corporations Act 2001 and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile… it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something “between mere assertion and the proof that would be necessary in a court of law” may suffice. A selective focus on a part of the formulation in South Australia v Wall, divorced from its overall context, may obscure the flexibility of judicial approach appropriate in the present context if it suggests that the company must formally or comprehensively evidence the basis of its dispute or off-setting claim. The legislation requires something less.”
In other words, a party does not need to actually prove their case to show that a “genuine dispute” exists, but it should show the basis or grounds do actually exist. This usually requires the presentation of an affidavit that exhibits relevant correspondence and documents, and setting out of relevant facts to show a credible basis for a genuine dispute.
This recent decision is another of many examples where a party has been punished with a costs order for issuance of a statutory demand where a clear genuine dispute existed.
It illustrates the need to have good legal advice and to choose an appropriate way to resolve disputes, and particularly those which may involve the Court having to decide questions of fact and the meaning and effect of contracts and credit of witnesses. Such disputes are clearly not able to be decided under a Statutory Demand process.
If you have any reason to consider recovery of a debt or have received a statutory demand, and require urgent advice, contact us for assistance.
If you have been the victim of defective or incomplete domestic building work then you may be eligible to claim from the QBCC insurance scheme to allow rectification of the defects and completion of the works.
Queensland Building and Construction Commission (QBCC) administers a compulsory domestic building insurance scheme- the QBCC Insurance Scheme. When you sign a building contract for the construction or additions to a domestic building, the insurance is paid by the builder.
When is QBCC Insurance Required (or Applicable)?
The insurance scheme applies where there is defective building work or where the contract with the builder has been lawfully terminated or the building company has become insolvent (liquidated or bankrupt).
Once a claim has been made to the Queensland Building and Construction Commission, an inspector will assess the defective or incomplete work and issue a notice to the builder to rectify or complete the work within (usually) 14 days. If the original builder refuses or is unable to rectify the work, the QBCC will ask you to obtain quotations from other contractors.
Assuming these are in order, the QBCC will approve and insurance payment for the lowest quotation and then you may choose any contractor to rectify the problems. (You might be interested in viewing the qbcc insurance table 2018, link to pdf supplied below)
Insurance is usually available for minor defects up to 6 months from the date of practical completion and for structural or major defects up to 6 years.
The Early Dispute Resolution also offers mediation services and may be able to assist you with general inquiries with respect to builders prior to commencement of building works.
Prior to entering into a contract with a builder, we recommend that you make inquiries of your builder’s qualifications, seek references from past clients and consult with your solicitor.
If you would like any information on the QBCC or your entitlement to claim under the Insurance scheme, contact us today.
For more information you can contact Queens Building and Construction Commission. Contact Number: 139 333 business hours: 7am – 5pm, Monday to Friday, Overseas callers: +61 7 3447 2160. Or email them, Email
In this construction law blog, Paul Rojas discusses a recent case where the validity of a charge issued pursuant to the Subcontractors’ Charges Act 1974 (Qld) (“the SCA”) was considered.
Our client issued tax invoices in respect of its work. Unfortunately, the builder soon entered into Administration so our client issued a subcontractors’ charge pursuant to the SCA for the unpaid tax invoices to the developer. Several other subcontractors also lodged charges. The developer paid the funds into Court and the builder proceeded to issue a notice under the SCA certifying the full amount claimed by our client as owing.
Several of the parties commenced proceedings to secure their charges within the one-month time limit. Our client did not. These parties then successfully applied to have the proceedings combined and the funds paid out of Court. The Court retained an amount for our client’s claim.
Our client proceeded to obtain legal advice that his subcontractors’ charge had expired because he had not commenced proceedings within one month after the charge had been served.
We were subsequently engaged by our client to recover the funds paid into Court.
We were required to consider whether our client’s failure to commence proceedings within one month after service of the charge had caused the charge to become invalid.
Our client was fortunate in that the period the builder was in Administration stopped the one-month period from running. This period restarted once the builder entered into a deed of company arrangement.
During the period of the Builder’s Administration, several other subcontractors had also commenced proceedings to enforce their charges under the SCA. The effect of this was that:
- those proceedings were brought on behalf of every other subcontractor who had issued a charge under the SCA; and
- where the one-month period our client had to commence proceedings had not expired, our client was entitled to “piggy-back” onto those charges by joining the proceedings commenced by the other subcontractors.
However, our client was not able to simply commence fresh proceedings and apply to have them joined. It needed to identify which proceedings had been commenced within the one-month period and seek to be joined to them as a Plaintiff. Fortunately, those proceedings were the proceedings in which the developer had paid money into Court.
Rostron Carlyle Rojas Lawyer, Madison Lodder, appeared and successfully obtained orders for payment of our client’s charge.
The above illustrates the importance of engaging lawyers who understand the complexities of construction law and the operation of the SCA.
The RCR Construction team are able to assist in providing advice and strategies for recovery of claims made pursuant to the SCA. Contact our Construction team, please call us on (07) 3009 8444 or email us at firstname.lastname@example.org.
The above information is intended only as general information and should not be interpreted or relied upon for legal advice.
If your company has been served with a creditors statutory demand for payment you must act with urgency, as allowing it to expire can cause irrevocable harm.
The most simple way that a company can be wound up and liquidators appointed is when an application is brought after the expiry of a statutory demand. The statutory demand allows 21 days from service within which the recipient company must satisfy the creditor of the amount contained therein, or otherwise bring an application before the Court to have the demand set aside on grounds of the demand being defective or that there is a genuine dispute in relation to the debt.
Should the company fail to comply with the demand, by making full payment of the demand within 21 days or by applying to have the demand set aside, a company is deemed to be insolvent and a creditor may make an application to the Court to wind up the company. No further evidence is required to prove insolvency.
For a company that may be asset rich but suffering from a temporary lack of liquidity, 21 days to comply with a statutory demand will often not be enough time in which to realise some of its assets and to make good on the demand.
Companies can attempt to oppose a winding up application on the basis that the company is in fact solvent. This is a complex application to bring before the Court as it involves, amongst other things, overturning the presumption of insolvency. A more effective approach is to deal with creditor who issued the statutory demand within the 21 day period to ensure that the presumption of insolvency does not arise at all.
If a company has been served with a demand and it does not consider that it owes the debt or that there is an irregularity in the document it may apply to the Court have the demand set aside. However, this application must be made within 21 days and there is a large volume of case law that indicates the Court treats the 21 days in the strictest of terms.
Alternatively, if your company does owe the debt raised in the statutory demand, it is often beneficial to seek advice with a view to formally approaching the creditor’s legal representatives on a ‘without prejudice’ basis to attempt to negotiate payment terms, allowing for further time outside of the 21 day limit.
If your company has been served with a statutory demand, contact us for advice in relation to the most appropriate response for your circumstances.
In recent years, there has been a significant upward trend in the demand for service station businesses and fuel re-selling operations across New South Wales. This demand by investors has, amongst a host of reasons, been driven by attractive yields and long-term lease covenants.
However, those looking to invest in service station and fuel re-selling operations in New South Wales must not overlook the complex legal considerations involved in this niche and intricate area.
In addition to the usual considerations involved in the purchase of any business, there exist a number of matters which must be taken into account when investing in service stations or fuel re-selling businesses, including:
Environmental Site Assessment and Tank / Line Testing
Whilst landowners and lessors of service station sites are generally responsible for site contamination, lessees are usually required to remediate any contamination beyond that which existed at the commencement of a lease.
Given that there are significant costs associated which the remediation of contamination, an Environmental Site Assessment (‘ESA’) Report should be obtained prior to any acquisition to ascertain the extent of contamination (if any) in the soil and groundwater of a service station freehold. An ESA Report will not only provide a baseline for any future remediation but will also ensure investors are not forced to remediate contamination they have not themselves caused.
Whilst an ESA Report will indicate the extent of any contamination, it will not pinpoint a cause. As such, the integrity of the fuel tanks, pumps and lines at or under a service station site should also be investigated prior to any acquisition, either with a vendor directly or by obtaining an independent tank and line test.
Potential for development within proximity of the Business
Traffic flow, visibility and site accessibility are key components of the profitability of a service station business. Accordingly, investors should make enquiries with local council and particularly Roads and Maritime Services to ascertain whether there are any road or development proposals in the vicinity of a site which may affect these components and profitability as a result.
Notwithstanding that such enquiries may not reveal any proposals for development, careful consideration must be given to the terms and provisions of leases to protect investors against future developments and ensure adequate rent abatement rights are available.
Those looking to acquire a service station business or fuel re-selling operation should ensure the terms and provisions of any lease are carefully reviewed by a legal professional with a solid understanding of service station leases. A matter of particular significance for such businesses are the maintenance and repair responsibilities for above and below ground equipment and property, as this will include fuel tanks, pumps and lines and accordingly carry a heavy financial burden in terms of ongoing maintenance, upkeep and even replacement.
Some of the key operational considerations for service station and fuel re-selling operations include:
Branding / Supply / Fuel Re-Selling Agreements
In order to assist with competition, brand exposure, and know-how, many service station operators elect to enter into contractual arrangements with larger and notable independent and nationally branded oil companies as part of their business operations. Having the benefit of this brand exposure is intended to assist the operator with marketing of their business generally. However, as part of these contractual arrangements, careful consideration must be given to the terms and conditions of such branding / supply / fuel re-selling agreements, as often operators will be imposed with various key performance indicators, restraints in terms of trade as well as for supply of stock, as well as potentially royalty style payments dependent upon the oil company contracted with.
Licences and permits
In many cases, service station and fuel re-selling businesses do not operate in isolation, and it is not uncommon for a restaurant or café to run in conjunction with a fuel re-selling operation. As such, investors should make enquiries as to what, if any, licenses affect a business premises which is the subject of a proposed acquisition that will require transfer or assignment, such liquor, food, cigarette and dangerous goods licences.
Rostron Carlyle Rojas Lawyers are experts in service station and fuel re-selling transactions, including fuel re-selling franchise and commission agency arrangements. For further information or assistance in this regard, please contact Commercial and Property Partner James Hatzopoulos on (02) 9307 8900 or by email at email@example.com.
An Employer’s Liability as an accessory for misuse of confidential information by its own employees.
It is commonly the case that executives and senior managers seeking to jump ship from one employer to another either by themselves or through recruitment agents, actively promote themselves with promises that they can bring significant business with them thereby adding to their value and increasing their worth to a prospective employer.
The recent decision of Lifeplan Australia Friendly Society Limited v Ancient Order of Foresters in Victoria Friendly Society Limited  FCAFC 74 is a stark reminder of the risk to not just those employees who take and purport to misuse confidential information of former employers but also to the new employer.
In the Foresters decision, the court ordered that the new employer (Forester) should account for profits generated by business developed and managed by two former employees of Lifeplan.
The former employees of Lifeplan that joined Foresters in senior roles implemented business plans and drew clients away from their former employer. The court found that they did so whilst still employed by Lifeplan and had used and misused highly confidential information to do so.
On appeal, the court found that there was a causal relationship between the breach of the employee’s duties and the profits generated in their new employer. Further, the court found that Forrester’s as the second employer had knowingly acted upon the information, were implicated in the steps taken by the employees before jumping ship to join their company. As a consequence, the profits made by Forrester’s relied entirely upon the employees misusing the confidential information taken from their former employer and with the assistance and complacency of the new employer. Accordingly, the court ordered that Forrester’s pay damages in the sum of $6,200,000.00 representing profits made from the breaches of their employees against the former employer.
The court also discussed the provisions of section 79 of the Corporations Act 2001 (Cth) (“the Corporations Act”) which provides that a person may be involved in a contravention if and only if the person:
a) has aided, abetted, counselled or procured the contravention; or
b) has induced, whether by threats or promises or otherwise, the contravention; or
c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or
d) has conspired with others to effect the contravention.
The importance of this section lies in the fact that the former employees were claimed to have breached various provisions of the Corporations Act as officers of their former employer and they had been obliged in their capacity to exercise their powers and discharge their duties with a reasonable degree of care and diligence in good faith and in the best interests of the corporation and for proper purposes without improperly using their position to gain advantage or cause the corporation detriment and as officers they had obtained information that they were obliged not to use improperly or to gain advantage or to cause the corporation detriment. Those were civil penalty provisions of the Corporations Act section 180, 181, 182 and 183 and by section 79 of the Corporations Act, accessorial liability was established.
In fact, the court found that on the facts before it, “there was no doubt that the board of Forrester’s was actually aware, had actual knowledge, of the taking and using in breach of duty of confidential information. The board was not a passive observer of this; it did not prepare it but it used it in its decision-making process and after employing FPA in the governance process of checking performance. Likewise, Mr … knew of the clearly wrongful solicitations of funeral directors as the business venture was being agreed”. The court found that given the actual knowledge of the Forrester’s board in its participation of breached of the Corporations Act by the former employees, it would “not draw back from a conclusion that Forrester’s was knowingly concerned in those breaches”.
The decision is a stark and practical reminder of the risk in taking on new employees who promise to bring business and work from their former employer. Often, the promise of such new work proves irresistible to the new prospective employer, and the risks are either overlooked or ignored. The decision dealt with above clearly shows that the risk of damages are real.
If you have any queries in respect of these matters please do not hesitate to contact us for timely advice which may save expensive and troublesome litigation.
The recent decision of the Federal Court by the ACCC in its case against Servcorp a large serviced office provider is a timely reminder for all businesses to review their terms of trade and to remove any terms which may go beyond protection of legitimate business interests-especially in dealing with a smaller business interest. The consumer law as applies to unfair contracts was extended to cover B2B contracts in 2016.
The Court declared by consent that 12 terms in contracts used by Servcorp subsidiaries are unfair and therefore void.
The specific contract terms declared unfair included those:
- that had the effect of automatically renewing a customer’s contract;
- allowing Servcorp to increase the contract price;
- permitting Servcorp to unilaterally terminate contracts;
- unreasonably limiting Servcorp’s liability; and
- permitting Servcorp to keep a customer’s security deposit if a customer failed to request its return.
ACCC deputy chair Mick Keogh said “Businesses can no longer impose contract terms that create a significant power imbalance between parties, are not necessary to protect their legitimate interests, and which would cause significant financial detriment to a small business.”
“While penalties do not apply for unfair contract terms, the ACCC will continue to take matters to court to ensure these terms are declared void and protect businesses.”
Following the Court’s declaration, Servcorp was required to pay the ACCC’s costs and establish an unfair contract terms compliance program.
If you have any concerns about the fairness of any of the terms of any contract affecting your business interests, please contact us for advice.
The terms and conditions of a business are often the foundation of the agreement between a business and its customers for the provision of goods or services and in some instances may be the only documentary proof of the agreement.
Given the importance of a terms and conditions document, businesses must ensure that it is robust, accurate and up to date, particularly given the changes that have occurred to key pieces of legislation in recent years. A small investment in a review of terms and conditions can have a large return in the form of protecting the business’s rights and potentially recouping outstanding monies.
The commercial terms and conditions should be clear:
Including price, method of payment, delivery, and dimensions, plans and specifications. Beyond these fundamental commercial provisions, the terms and conditions should also include reference to the nature of a quotation and how such a quotation can be accepted. Even though acceptance at law may differ from the general meaning of acceptance, specifying in the terms and conditions the circumstances giving rise to acceptance will provide prima facie agreement by the parties as to when the contract is entered into. Similarly, the terms should cover the time of risk passing in goods supplied, and the granting of access to premises of the customer where services are to be provided at the customer’s location.
Many terms and conditions lack provisions that strengthen the business’s rights particularly in the instance of default of the purchaser. Notwithstanding the impact of the Personal Property Securities Act 2009 (Cth) (PPSA) (discussed below), it is useful for terms and conditions to contain a provision defining when title to goods passes and when it is retained by the supplier – again, this might be sufficient at first instance to provide protection to the supplier. Stronger protections can be found in charging clauses pursuant to which the supplier may take a mortgage over real or security interest over personal property of the customer. Such provisions should be coupled with a power of the supplier to appoint a receiver or receiver and manager in the event of default by the customer, under which the receiver has the power to do anything that either the customer or supplier can do, including to sell property of the customer to satisfy debts to the supplier. Suppliers should also seek to obtain a personal guarantee from a director of a corporate or trustee customer; this provides a strong disincentive for a customer to default as the guarantor will face the risk of bankruptcy should the debts of the customer not be paid. Another form of protection for a business, at least at first instance, is a clause under which the parties agree to limit the supplier’s liability and to define the manner in which defective goods or services are dealt with. While such clauses must expressly be subject to statutory warranties and guarantees (discussed below) they may generally serve as a first level of protection against potential claims by customers and can also expressly exclude liability for indirect or consequential loss and loss caused by the actions of the customer. The terms and conditions should also contain clauses relating to the circumstances under which the supplier is entitled to cease supply and when the agreement may be terminated so as to reduce or avoid uncertainty.
It can often be a commercial decision as to which of these protective provisions to include in terms and conditions as a supplier does not want to scare away potential customers. Alternatively, it may be the case that the provision is always included but the supplier’s actions can mitigate the effect of the provision. One example of this is the creation of a security interest under the PPSA and subsequent registration on the Personal Property Securities Register (PPSR). The elements required to give rise to a security interest that may be registered on the PPSR – attachment, the type of collateral used as security, whether the interest is a purchase money security interest (if applicable) – should always be expressed in the terms and conditions; however, a supplier may choose not to register the security interest on the PPSR to keep the customer onside. Strictly speaking, security interests should be registered on the PPSR within 20 business days of entry into the agreement in order to give the supplier protection should the customer go into liquidation within 6 months, so by not registering its security interest the supplier is risking the loss of its products or its right to claim priority over the personal property of the customer in the event of default. Unfortunately, this is a risk that a supplier who is just starting out and who has little bargaining power may be forced to take.
Certain types of clauses should not appear in terms and conditions due to the impact of legislation. Under the Australian Consumer Law (ACL), suppliers of goods and services are taken to give certain consumer guarantees that cannot be contracted out of, including guarantees as to:
- acceptable quality
- fitness for any disclosed purpose
- due care and skill
- reasonable time for supply
Not only will any provision in terms and conditions that purports to exclude, restrict or modify such guarantees be deemed void, the supplier will have committed an offence of having made a false or misleading representation in respect of the guarantee, exposing a corporate supplier to a pecuniary penalty of up to $1,100,000 and an individual supplier to a pecuniary penalty of up to $220,000. The supplier will be equally exposed if its terms and conditions contain a provision seeking to avoid all liability for defective or damaged goods, as the ACL provides for minimum thresholds for repair or replacement of goods and supplying services again.
Other types of clauses will be impacted by legislation regardless of what is written in the terms and conditions. For example, the ACL also provides that if a supplier uses a standard form consumer or small business contract which contains an unfair term, the term will be considered void. A business’s terms and conditions will usually be considered a standard form contract as they will be prepared in advance and not be subject to negotiation. The ACL provides examples of unfair terms, which include provisions that allow one party but not the other to:
- avoid or limit performance
- terminate the contract
- vary the terms of the contract
- vary the price without giving the other party the right to terminate
- renew or not renew the contract
- assign the contract
While potentially impractical, one means of avoiding the imposition of the unfair contracts regime is to allow customers the right to negotiate terms and conditions; another is to clearly notify the customer of which terms in the contract give unilateral rights to the supplier. A more practical approach, however, is to have the terms and conditions reviewed and updated to ensure that no such unfair terms exist.
Our experienced commercial lawyers can provide you with peace of mind by reviewing and updating your business’s terms and conditions. Please don’t hesitate to contact us.
It is not uncommon in closely held private companies for there to be shareholder disputes which result in a company winding up. In such cases-what can the shareholders do to resolve the dispute?
Case study- Grounds for winding up
In Van Wijk (Trustee) ,in the matter of Power Infrastructure Services Pty Ltd, (214) FCA 1430, (12th December 2014) the shareholders could not resolve their differences and applied to the Court for orders appointing a liquidator and winding up.
The Court granted the orders sought under the “just and equitable” provisions of the Corporations Act:
Under S 461 (1) (k) the Corporations Act 2001, the Court may order a winding up if “the Court is of opinion that it is just and equitable that the company be wound up.”
In this regard, the Applicant relied on s 467(4) of the Act as raising relevant considerations.
That subsection provides where the application is made by members on the ground that it is just and equitable that the company should be wound up, the court, if it is of the opinion that:
(a) the applicants are entitled to relief either by winding up the company or by some other means; and
(b) in the absence of any other remedy it would be just and equitable that the company should be wound up,
must make a winding up order unless it is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
In the case, the company was solvent and trading. The dispute was acrimonious and the mutual co operation and trust between the competing shareholders had broken down completely. The Court reviewed the authorities and cited with approval authorities where the disputes led to a frustration of the commercially sensible operations of the company in accordance with the incorporator’s expectations and a loss of confidence was justified.
In the circumstances-while acknowledging the consequences of such a drastic option-the Court appointed a provisional liquidator.
The decision highlights the grounds for winding up under the just and equitable grounds where there is a shareholders dispute which results in a breakdown of mutual trust and confidence such that it will frustrate the commercial operations of the company.
It is important that in establishing companies that in the first instance-there is a proper means of resolving disputes in shareholder agreements and that efforts are made to exhaust alternative dispute resolution.
In the absence of a resolution however-those shareholders affected may rely on the Courts for an ultimate solution.
For assistance and advice on winding up and shareholder disputes, contact us.
In the decision of 470 St Kilda Road Pty Ltd v Robinson  FCA 597, the Federal Court of Australia found that a Chief Operating Officer of a building and construction company was personally liable for falsely declaring in a statutory declaration that all subcontractors had been paid.
In October 2010, 470 St Kilda Road Pty Ltd (“the Principal”) engaged Reed Constructions Pty Ltd (“the Builder”) for the redevelopment of an office building at 470 St Kilda Road, Melbourne (“the Contract”). The Contract required the Builder to provide a statutory declaration prior to delivering a payment claim which affirmed all monies owing to subcontractors and suppliers had been paid.
Mr Glenn Robinson (“Mr Robinson”), as the Chief Operating Officer of the Builder, sent to the Principal a statutory declaration (“the Declaration”) confirming all subcontractors and suppliers have been paid in full. The Builder then submitted a payment claim seeking payment.
The Principal relied upon the Declaration and made payment $1,426,641.70 to the Builder.
The Declaration was later discovered to be false after the Builder entered into liquidation owing $132 million to unsecured creditors.
Mr Robinson argued that the Declaration was merely a statement of his mind and one as to the enquires that had been made to inform that state of mind.
The Court held that the Declaration of Mr Robinson was not merely a statement of his state of mind, but rather a solemn promise acknowledging that the contents are true and correct, which, if falsified, amounts to perjury.
Mr Robinson was held to have engaged in misleading and deceptive conduct as he knew the Declaration was untrue and had the Principal known the true position of the Builder, it would not have made payment of the payment claim.
The Court held Mr Robinson personally liable to pay the Principal the sum of $1,426,641.70, being the total of the claim previously submitted by the Builder to the Principal.
The requirement for statutory declarations certifying payment of all outstanding subcontractors and suppliers is commonplace in the construction industry. The practical effect of the decision highlights the importance of ensuring that all reasonable steps are taken to warrant the truth of the statutory declarations at the time it is signed. It also highlights the consequences of failing to take these steps or for signing an untrue statutory declaration.
Additionally, directors need to be aware of the possible implications of this conduct on director’s liability insurance which may limit or void the director’s coverage.
The RCR Construction team are market leaders in construction litigation and dispute resolution. Contact us or visit our dedicated Construction website for more information on your rights and obligations.
The above information is intended only as general information and should not be interpreted or relied upon for legal advice.
In March 2018, the Australian Government announced a new visa scheme, the Global Talent Scheme Pilot, targeted at highly skilled global talent. The trial of this new visa scheme will commence on 1 July 2018 and last for 12 months.
The purpose of the Global Talent Scheme is to recognize global talent in high demand for the benefit of Australian workers and Australian businesses. It will allow eligible Australian businesses to sponsor highly skilled overseas applicants for up to 4 years on the existing Temporary Skill Shortage (TSS) Visa.
The scheme comes at a time of large cuts to the occupations available under Australia’s skilled migration program. It is a proposed solution to address skill shortages in Australia, particularly in the Innovation sector, where many evolving tech-based job positions do not fit in the strict occupation moulds of the current Skilled Occupation Lists.
The new visa scheme will involve two streams: the Established Business Stream and the Start-up Stream.
The Established Business Stream
This stream is available to Australian employers who are publicly listed or have an annual turnover of more than $4 million.
The Australian business will need to meet the following key requirements:
1. That their recruitment policy provides first preference to Australian workers;
2. That they have tried to find an Australian to fill the role;
3. That the position will have minimum annual earnings of $180,000; and
4. That the sponsorship will result in a skills transfer to Australian workers.
This stream will allow businesses to nominate up to 20 positions per year.
The Start-up Stream
The Start-up steam is aimed at newly-established companies in STEM-related fields (science, technology, engineering, and math).
The stream will require businesses to show the following:
1. That their recruitment policy provides first preference to Australian workers;
2. That they have tried to find an Australian to fill the role;
3. That the position will provide for the market salary rate for the position (at least $53,900);
4. That a ‘start-up authority’ has endorsed the business; and
5. That the sponsorship will result in a skills transfer to Australian workers.
Start-ups will be able to sponsor up to 5 positions per year.
There will also be other visa criteria related to the visa application, such as health and character checks.
Applicants under both streams will have access to a 4-year TSS visa, with a transitional pathway to permanent residence after 3 years, if the applicant is eligible.
The Global Talent Scheme Pilot initiative is a step toward a more innovative and skilled Australian workforce. However, the practicality of the requirements is yet to be tested. Whether the scheme will appropriately address skill shortage concerns is yet to be seen, but we expect further refinements will continue to be made once it commences.
Shanalee Hayer, Rostron Carlyle Rojas Lawyers
Rostron Carlyle Rojas Lawyers migration team can provide advice to Australian businesses in need of overseas skilled workers. Contact us for a consultation today:
Peter Kuek-Kong Lee, Special Counsel and Registered Migration Agent MARN 0427478
Anna Gunning-Stevenson, Lawyer and Registered Migration Agent MARN 1797244
(07) 3009 8444
In the recent decision of Central Highlands Regional Council v Geju Pty Ltd  QCA 38, the Queensland Court of Appeal considered whether a regional council could be liable in negligence to a buyer relying on an incorrect town planning certificate issued by the council but supplied to the buyer by a third party, namely, the seller’s real estate agent.
The case involved an appeal by Central Highlands Regional Council (“Council”) against a judgment requiring Council to pay the respondent, Geju Pty Ltd (“Geju”), the sum of $852,205.50 for loss sustained by Geju when it purchased vacant land in Capella in Central Queensland (“Lot 70”) in reliance upon a negligent misrepresentation in Council’s limited planning and development certificate (“Certificate”).
Facts of the case
In March 2007, the then owners of a lot of land, Ford Property, contracted to sell that lot to Mayfair Group. The lot was in the rural zone but Ford Property had applied to subdivide the lot and for a material change of use from rural to industrial which was approved in August 2007 with conditions. Lot 70 was created upon registration of the survey plan and the material change of use would lapse if the change of use did not occur within 4 years of the approval taking effect.
Ford Property sold Lot 70 to Mayfair Group in December 2007. On the same day, Mayfair Group’s solicitors wrote to Council stating that they acted for the buyer and requested for a limited planning and development certificate. The Certificate was issued to Mayfair Group’s solicitors which incorrectly stated that Lot 70 was in the industrial zone when it should have stated that it was in the rural zone. The Certificate also contained an incorrect lot description.
If the Certificate was accurate and Lot 70 was zoned industrial, there would be greater scope to reconfigure the land into smaller lots and the ability to use the land for industrial purposes would not be limited to the 4 year timeframe under the material change of use approval.
Mayfair Group sold Lot 70 to Geju in June 2008. During the sale process before the contract was entered into, the real estate agent provided the Certificate obtained by Mayfair Group to Geju. Finance was approved based on the incorrect zoning, the lot was worth significantly less than the purchase price on application of the correct zoning.
The main issue for the court to determine was whether Council owed a duty of care to Geju, the court noted that while it was foreseeable that the Certificate would be passed to a broader class of people, there was no evidence that Council knew that the Certificate would be passed on or that a person would buy Lot 70 relying on the information in the Certificate.
Under the statutory framework any person who suffers financial loss because of an error or omission in the certificate may claim reasonable compensation from Council. However, the claim the subject of the proceedings was not made under the statutory provisions but under the common law. The Court of Appeal also noted that Geju was not the requestor of the Certificate.
Geju was not the requestor of the Certificate, nor was it a member of a limited class of people that the Council should have known would likely receive, and rely on, the Certificate. There was insufficient evidence to conclude that the Council owed Geju a duty of care and the Court of Appeal set aside the judgement against Council.
In the course of a property transaction, this case demonstrates the importance for the buyer to obtain a planning and development certificate itself or by its advisors before the contract is entered into. In this case, Geju should not have relied on the Certificate provided by the seller and should have conducted its own due diligence. Further, if a buyer was going to rely on information given to it by the seller, then the relevant warranty about its accuracy should be included.
Please do not hesitate to contact us if you would like us to assist you with your legal due diligence in a property transaction or if you would like us to review the contract before it is entered into.
In late 2017, the Queensland Government enacted the Building Industry Fairness (Security of Payment) Act 2017 (“the BIF Act”). The BIF Act brings significant changes to the security of payment regime for the Queensland building and construction industry.
When starting a business many people simply register a business name and domain but fail to realise that this does not grant them the exclusive use of that name in Australia or protect any design they use in their business.
To obtain such protection you must register a trade mark with IP Australia. The four steps to registering a trade mark are:
- Conduct preliminary research and choose your trade mark
- Structure ownership and use of your trade mark
- Determine which class of goods and services apply to your trade mark
- Apply to register your trade mark
1. Conduct preliminary research, choose and design your trade mark
It is vital from the outset that you ensure the name or logo is chosen with a view to trade marking it. Often we find that businesses within an industry tend to use common names, descriptive words or identifiers which by themselves can adversely affect the ability of the business to trade mark its intellectual property. In deciding on a business name and logo we recommend that you:
- engage in preliminary research and conduct Google searches on similar businesses;
- Whois domain name searches to identify available urls; and
- Australian trade mark database searches,
- avoid using where possible common names used for the products or services you sell;
- descriptive words and phrases by themselves;
- geographical names;
- words which sound similar to another business;
- logos which are similar to other businesses;
- common phrases, acronyms, single letters, and numerals;
- common surnames;
- liaise with both your logo designers (if applicable) and lawyers to ensure that the logo and name you choose is unique and capable of distinguishing itself from your competitors.
Rostron Carlyle Rojas Lawyers can assist you in this process by advising you on the likelihood of potential names and logos being registered as a trade mark and whether there are any potential conflicting trade marks or issues.
2. Structure ownership and use of your trade mark
Just as important as choosing the right name and logo is structuring the ownership and use of your trade mark. Unless the person or entity named in the trade mark application as the owner is the entity which will ultimately use the trade mark, it is important to ensure that documentation is put in place providing the user with a legal right of use.
Recent case law has resulted in a trade mark owned by a director of a company being successfully opposed on the basis that whilst the trade mark was used by the company, the director as the owner did not use the trade mark. Importantly in that case there was no written licence agreement between the director and the company by which the company had a legal right of use of the trade mark, or even evidence of an intention on behalf of the director to enter into such an arrangement.
Rostron Carlyle Rojas generally advises having a trade mark and other valuable intellectual property owned by a separate holding company which then licenses that intellectual property for use by your trading entity or third parties, and is experienced in establishing and documenting such arrangements.
3. Determine which class of goods and services apply to your trade mark
The next step is to determine which class of goods or services apply to your trade mark. IP Australia uses a classification system which categorises goods and services into 45 different classes and it is important to note:
- you must actually use or intend to use the trade mark in relation to the goods and services you specify;
- IP Australia bases its fees on the number of classes claimed and these fees increase with every class you add;
- whilst a wide description of the goods and services offers greater protection a wide description also increases the risks of the trade mark conflicting with pre-existing trade marks or being challenged on the basis of non-use;
- whilst it is possible to narrow the description of the class of goods and services after a trade mark is registered it is not possible to widen that description; and
- careful drafting of the description of the class of goods and services can avoid potential conflicts with other trade marks, costly objections by third parties and increase the likelihood of a trade mark being registered.
4. Apply to Register Your Trade Mark
Once the above steps are completed the application for the trade mark can be lodged with IP Australia. Generally, your trade mark application will be examined within 3-4 months after which IP Australia will either issue an acceptance notice or an adverse report. If accepted, the trade mark will be advertised to allow third parties to view the trade mark application and make objections. If there are no objections the trade mark will be registered at the earliest 7 ½ months after the application for the trade mark was lodged. It is possible that during the application process IP Australia may issue an adverse report or a third party may oppose the trade mark application. In both cases it is important that professional advice is obtained to determine your options and to ensure that the relevant deadlines are met in a timely fashion.
Rostron Carlyle Rojas Lawyers have successfully dealt with many issues that have arisen during the trade mark application process and can advise you of your options going forward.
If you need advice or assistance in respect of trade marking or protecting your intellectual property please contact us.
 Pham Global Pty Ltd v Insight Clinical Imaging Pty Ltd  FCAFC 83.
Shareholder Disputes- Case Study
In Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd & Ors  QCA 48, a dispute had arisen between the shareholders of a company, Samgris Pty Ltd which was incorporated to undertake coal exploration in Queensland.
The minority shareholders in the company claimed that the affairs of the company had been conducted in a manner which was oppressive or unfairly prejudicial to, or unfairly discriminatory against, them as the minority and further or alternatively claimed that the company’s affairs had been conducted in a manner which was contrary to the interests of the members as a whole.
The relief sought was for an order for the winding up of the company under s461 of the Corporations Act 2001 (Cth), or, alternatively, that the majority shareholder purchase their shares at a price to be determined by the court once the court had decided that they should have that relief under s233 of the Corporations Act 2001 (Cth).
Here, the company was well and truly solvent. Its draft financial accounts for the year ended 31 December 2015 showed net assets of in excess of $18 million before having any regard to a disputed $33 million.
In the first instance, the trial judge (Bond J) held that the relationship between the appellant and the respondents, as the shareholders of the company should be characterised as a “quasi-partnership” or “a majority controlled business requiring mutual cooperation and a level of trust”. He found that the relationship between the parties had irretrievably broken down and that this had been caused by the majority shareholder’s conduct. He further held that the conduct had been oppressive and unfairly prejudicial to, or unfairly discriminatory against, the minority within the meaning of s232(e) and that the respondents had established an entitlement to a remedy also under s232(d) and ordered a winding up of the company.
He found that the company was a “quasi-partnership” and was:
“..not functioning, and cannot reasonably be expected in the future to, in the way intended and … There is no real prospect that the directors nominated by the two sides can work together sensibly to reach the necessary agreement to be able to conduct the company’s business in the future. In the circumstances of this case, in the absence of any other remedy, it would be just and equitable that Samgris should be wound up.”
In this instance, the majority shareholder appealed the decision of the trial judge, but the appeal was unanimously dismissed.
In this instance, the court of appeal also reflected that:
“the critical considerations are that not only would the valuation of the respondents’ shareholding be an extensive, expensive and time consuming process, but there is also a real uncertainty as to whether the appellant would be willing and able to pay the price which is ultimately determined.”
In the face of such uncertainty-the court could not impose a buy-out order, affirming the original decision to order a winding up.
This decision reaffirms the approach taken when a dispute between shareholders is to be characterised as a quasi- partnership and the appropriateness of a winding up order.
It further highlights that if a party involved in a shareholder dispute wishes a buy-out order to be made, then it needs to demonstrate not only the appropriate basis for such an order-but the financial capacity and willingness to meet such an order.
If you are involved in or wish to obtain advice on have any aspects of shareholder disputes, then please contact us.
Obtaining a judgment against your debtor does not mean you get paid immediately. The debtor may be unable or unwilling to satisfy the judgment debt for a variety of reasons. He or she may be having financial difficulties, other debts, or may be ignorant or careless of the circumstances.
Bankruptcy Proceedings – an outline of the process
One of the options available for enforcing a judgment against a debtor is bankruptcy proceedings.
This process is quicker than other enforcement methods and you will have more control over the process as a creditor.
The disadvantage of this alternative is that there may be other secured creditors, who rank ahead of you, and thus full payment of the debt may not be received.
To initiate the proceedings, a bankruptcy notice needs to be lodged in a proper form with the Insolvency and Trustee Service of Australia (“ITSA”). The current filing fee is $440.00.
Following personal service of the bankruptcy notice on the debtor, he or she will have 21 days, in which to comply with the notice by paying the full amount of the debt or entering into a repayment arrangement, on terms satisfactory to you.
If the debtor fails to comply with the bankruptcy notice, he or she are deemed to have committed an act of bankruptcy. Pursuant to the provisions of the Bankruptcy Act 1966 (Cth) at the time of non-compliance with the bankruptcy notice:
– the debtor must be present in Australia or have sufficient connection with Australia, and
– the debt must be over $5,000 (two or more creditors may combine their aggregate debts).
Provided the above criteria are satisfied you may be able to file for a creditor’s petition for the debtor to be declared bankrupt.
A creditor’s petition must be filed in the Federal Magistrates Court within six months of the act of bankruptcy. A court date will be allocated for hearing of the petition. Once the creditor’s petition is served on the debtor, and provided it is uncontested, a sequestration order may be made against his or her estate, vesting all of the bankrupt’s property in the appointed trustee.
The trustee collects information about the bankrupt’s assets and liabilities. Any creditors who wish to claim in the estate must lodge a proof of debt with the trustee. Any secured creditors will rank above any unsecured creditors, the latter being paid proportionately out of the pool of funds available from the bankrupt’s estate. The petitioning creditor’s costs of obtaining a sequestration order are usually taxed and paid out of the bankrupt’s estate as a priority.
Bankruptcy proceedings can be complex and strict requirements as to form as well as limitation periods apply. We can assist you with legal advice and support with your proceeding whether you are a creditor or a debtor.
Are you considering bankruptcy proceedings against your debtors? Perhaps a prior debt repayment arrangement has been dishonoured? Need to lodge a proof of debt? Confused about your options as a debtor? We can assist you with any of your questions relating to bankruptcy and insolvency. Contact us today.
Building Industry Fairness (Security of Payment) Act 2017 – Major changes for the Queensland building and construction sector are here
On 10 November 2017, the Building Industry Fairness (Security of Payment) Act 2017 received royal assent.
Although the key provisions of the Act do not come into force until a date to be proclaimed by the Queensland Government, it is anticipated that the major reform to the operations of the Queensland building and construction industry will take effect from early 2018.
The controversial changes were enacted following a six-months consultation with the industry stakeholders and an intensive advertising campaign focusing primarily on the project bank accounts as a mechanism for a ‘fair’ recovery of payments for the tradie subcontractors. 1
The Act consolidates the current Queensland security of payment legislation2 and introduces some important amendments to the Queensland Building and Construction Commission Act 1991, particularly in relation to tougher measures in prosecuting unlicensed building work and targeting insolvency in the building industry. We will be discussing the changes to the QBCC Act in a separate publication, so watch this space.
Project Bank Accounts
The mandatory use of project bank accounts will be gradually phased in over the next two years. From the early 2018, all Queensland Government construction projects of the value between $1 million and $10 million will be covered by the operation of the Act. From 1 January 2019, all of the construction projects above $1 million including the private, 3 commercial and government sector will be required to operate the compulsory project bank accounts. Separate contracts for building work at the adjacent sites for a combined value of over $1 million between the same parties will be taken to be a single contract and thus also covered by the project bank account requirements.
Although a large body of the procedural matters will be addressed by a regulation, which is yet to be drafted, we have summarised the most important provisions with respect to the project bank accounts below.
Despite the flavour of the earlier advertising campaign and the Government’s various press releases, 4 only the head contractors and tier one subcontractors 5 will be covered by the new security of payment regime through the operation of project bank accounts, leaving the end suppliers and subsequent subcontractors out.6 However, these categories of the building industry operators will still be able to recover payments from their employers through the usual channels, like the payment claims and subcontractors’ charges.
Each of the project bank accounts will be utilised to hold on trust only the following amounts:
- payments by the principal to the head contractor under the building contract;
- payments to a subcontractor from the head contractor under the first-tier subcontract;
- retention monies withheld under the first-tier subcontract; and
- monies the subject of a payment dispute.
This system will necessitate the operation of three separate trust accounts7 for each project, with the head contractor being the trustee and beneficiary of these accounts, while each of the first-tier subcontractors are to have a beneficial interest in the amounts held on trust. The accounts must be operated by a financial institution within Queensland and be generally opened within 20 business days after the head contractor enters into a first-tier subcontract.
There are strict requirements for the operation of the project bank accounts, in particular, deposits and withdrawals only by electronic transfer, withdrawals and transfers between the accounts only by using a payment instruction given to the financial institution.
The head contractor will not be entitled to pay itself unless sufficient funds are held in the trust account to cover payments due to the subcontractors and must cover any short fall in the trust funds, which is unpaid by the principal. If there are insufficient funds in the account the head contractor must pay all of the subcontractors to whom payments are due on a pro rata basis.
There is an express exclusion of the trust account funds from the creditor claims (other than the subcontractor beneficiaries), as well as a prohibition on investment of these funds other than interest earned on each of the accounts. The head contractor is unable to recover the costs of the administration including the bank fees from the funds held in the project bank accounts or from the subcontractor beneficiaries.
The Act establishes a new process for progress payments and associated dispute resolution, which is largely based on the modified provisions of the Building and Construction Industry Payments Act 2004. As opposed to the project bank account provisions, this process is applicable to all suppliers and subcontractors who contribute to a construction contract and the definitions of construction work and the related goods and services for the purposes of the payment claims are very wide.
The new procedure for submission of the payment claims is somewhat more favourable towards the claimants (similar to the old regime prior to the 2014 amendments).
The requirements for the payment claim remain unchanged, although there is currently no express prerequisite for stating that a payment claim is made under the Act (similar to the security of payment legislation in NSW). However, further requirements as to the form and content may be enacted under a regulation for both the payment claim and the payment schedule.
An additional final reference date is added for terminated contracts.
If the construction contract does not provide for a due date of a progress payment, the due date will become the 10 th business day from the date a payment claim is made.
A payment claim must generally be given within 6 months of the carrying out the work or the supply of the related goods and services, unless provided for otherwise in a construction contract. Although only one payment claim is to be made for each reference date, any amounts from previous payment claims may be included in the subsequent claims.
The payment schedule must be provided by no later than 25 business days after the day the payment claim is given or earlier if the shorter period is specified under the relevant construction contract. If the respondent fails to give the payment schedule, as prescribed, the amount in the payment claim becomes payable by the due date for the relevant progress payment, which means that if the contract is silent as to the due date, the respondent is immediately liable for the full amount of the payment claim.
Penalties, as well as disciplinary action under the QBCC Act, now apply for a failure to provide a payment schedule in response to a payment claim.
Dispute Resolution Process
If the respondent does not issue a payment schedule and fails to pay the amount of the payment claim, the claimant may elect to recover the claim as a debt through court action or to apply for adjudication.
There is a further entitlement for the claimant to suspend work with notice upon the conditions specified in the Act.
The claimant may apply for adjudication within the following time frames:
- for a failure to deliver the payment schedule: 30 business days after the later of the due date for the relevant progress claim or the last day when the respondent could give the payment schedule.
- for a failure to pay the amount stated in the payment schedule: 20 business days after the due date for the relevant progress payment; and
- for a dispute with respect to the amount stated in the payment schedule: 30 business days after the claimant receives the payment schedule.
The respondent will be unable to submit an adjudication response if no payment schedule was given with respect to the payment claim. Any adjudication response also may not include any new reasons, which were not included in the payment schedule.
The adjudication response must be given to the adjudicator within the following time frames (‘response date’):
- for a standard claim within the later of 10 business days after receiving a copy of the adjudication application or 7 business days after receiving adjudicator’s notice that the adjudication application was accepted.
- for a complex claim (over $750,000 excl GST) 15 business days after receiving a copy of the adjudication application or 12 business days after receiving adjudicator’s notice that the adjudication application was accepted. These timeframes may be further extended at the discretion of the adjudicator for up to 15 additional business days upon application (which must be made within a specified time limit).
After the adjudication response date (which will apply as specified above regardless of whether the respondent is entitled to give the adjudication response), the adjudication decision must be made within 10 business days for a standard claim and 15 business days for a complex claim respectively.
As an alternative to the adjudication process, the claimant may give a 5 business days’ warning notice to the respondent of the intention to commence court proceedings to recover the payment claim. Such notice must be given within 20 business days from the due date of the relevant progress payment. The claimant will then be able to apply for judgment provided that the court can be satisfied that the progress payment was not paid by the due date and that the payment schedule was not given (if applicable). The respondent will be unable to bring as counterclaim or any defence with respect to the matters arising out of the relevant construction contract in those proceedings (similar to the old regime prior to the 2014 amendments).
The provisions of the Subcontractors’ Charges Act 1974 appear to have been adopted with little change. The most notable variation however is the inclusion of the mandatory response period to a claim of charge within 10 business days of service of the claim. Further, a charge under Chapter 4 of the Act will not attach to the funds held in the project bank accounts, which means that from early 2018 the subcontractor’s charges are likely to be only effectively utilised by the subcontractors below the first tier under a building contract. If the claim of charge is issued, the claimant will be unable to enforce a progress claim or to initiate proceedings under Chapter 3 of the Act unless the claim of charge is withdrawn.
The Act provides the QBCC with an active role as a watchdog for compliance including, for example, audit of the project bank accounts, registration and administration of the adjudicators and processing of the various hefty fines and penalties under the Act. Strict compliance is anticipated to be enforced, given that imprisonment terms apply to the offences against several provisions of the Act. However, it is yet to be clarified by regulation as to due processes for imposing those penalties.
Curiously, the Act contains a provision for a compulsory review of the reform by the minister to be commenced no later than 1 September 2018, which indicates that the new law is in a live test mode for now.
These changes will affect every stakeholder in the building and construction industry in Queensland. The above information is intended only as a selective overview of the provisions of the Act and should not be interpreted or relied upon for legal advice.
For further information please contact our construction lawyers on (07) 3009 8444.
1 For example, TV commercial from Queensland Department of Housing and Public Works published on Youtube on 1 February 2017.
2 Repeal of the Building and Construction Industry Payments Act 2004 and the Subcontractors’ Charges Act 1974.
3 The contract for construction of three or less residential dwellings and associated structures is currently excluded from this requirement.
4 For example, Premier’s and Minister’s statement on 30 November 2016 published by the Queensland Government.
5 The relevant tiers of subcontracts are defined in s 6 of the Act.
6 With the exception of second-tier subcontractors, in the circumstances where the head contractor and the first-tier subcontractor are related entities – Part 2 Division 3 of the Act.
7 To be opened and maintained by the head contractor.
On 10 November 2017, the Building Industry Fairness (Security of Payment) Act 2017 received royal assent, affecting every stakeholder in the building and construction industry in Queensland.
On the 25th May 2017, the Minister for Housing and Public Works and Minister for Sport, Honourable Mick de Brenni, introduced into the Queensland Parliament the Building and Construction Legislation (Non-Conforming Building Products-Chain of Responsibility and Other Matters) Amendment Bill 2017 regarding the proposed new laws with respect to building product safety.
In Australia there is a ‘one size fits all’ approach to determining the definition of corporate insolvency. The absence of a clear cut definition can lead to ramifications in the practical management of companies that are in financial distress.
The introduction of the Australian Consumer Law (ACL) was meant to have the desired effect of delivering balance in the market place. To a certain extent, that may be true. However, there is one provision of the ACL in which it appeared to be the case that we found little guidance from court authorities, namely the question of re-supply under section 3(2) of the ACL. Or so we thought…
Recently this office defended a summary judgment application filed by a third party in our client’s case. The case involves the provision of managed services to customers by an IT company being our client’s company. The third party is alleged to have provided defective computer software to our client, which in turn allegedly caused problems in relation to our client’s provision of services to its customers. The third party brought its application for summary judgment on the basis that our client was not a consumer as defined in the Australian Consumer Law, and, accordingly the provisions of the ACL did not apply.
Section 2 of the Australian Consumer Law includes computer software in the definition of “goods”. To qualify as a consumer under section 3(1) of the ACL the goods have to be acquired for an amount less than $40,000.00 or alternatively the goods are acquired for personal, domestic or household use or consumption (the other provision pursuant to section 3(1)(c) of the goods consisting of a vehicle or trailer is irrelevant for the purpose of this discussion). These provisions are clear enough and on their own would not cause any confusion.
However, the difficulty of statutory interpretation of section 3 of the ACL in its application to the IT services industry arises due to the provisions of section 3(2) of the ACL, in particular section 3(2)(a) regarding the exclusion of the application of section 3 if the acquisition of the goods was for the purpose of re-supply. Our client had acquired goods from a major computer software provider for the purpose of performing its role as a managed service provider to its customers. In providing the managed services to its customer, our client would install the software but not provide the license key to the customer. The customer did not have any control over the computer software and they were never given access to the license key. Due to an alleged defect within the programming of the computer software issues allegedly arose for our client’s customers regarding their computers and eventually the business relationship was terminated causing our client loss.
The principal dispute in the proceeding lay between our client and its customer in relation to the customer repudiating the contract entered into with our client. Nevertheless, the issue regarding the alleged defect in the computer software which our client acquired from the computer software provider meant that it was necessary to bring in that software provider as a third party. In adding the third party, our client relied upon the provisions of the Australian Consumer Law (ACL). The software provider argued that the provisions of the ACL regarding consumers and the protections provided under the guarantees relating to goods did not apply to our client.
The Supreme Court of Queensland heard the third party’s application for summary judgment. As discussed herein, there was little previous court authority which applied to the question of re-supply under section 3(2) in relation to computer software. In particular, there was very little authority which applied to the unusual factual circumstances of this case. Notwithstanding the paucity of authority to guide the parties and the court, the Supreme Court of Queensland nevertheless agreed with our client’s argument there was a triable issue which necessitated our client’s case against the third party being heard, namely the fact that the exclusion under section 3(2) may not apply as the license key for the computer software was not provided by our client to its customers. The Supreme Court considered that based on the fact that the license key had not been provided the goods (in this case the computer software) had not been re-supplied.
If you wish to know about this subject matter please, contact our Commercial Litigation Lawyers for further assistance.