The top 5 things to know about your contract!

Entering into a contract is often an exciting time for you or your business. However, it is important to know exactly what you are getting into. Reviewing your contract prior to signing can help you understand what is expected of both parties to avoid misunderstandings down the track. Here are our top five things you need to know and understand about your contract.

  1. Obligations under the contract

To avoid confusion, it is important for a contract to include a detailed description of the agreed work or service to be provided.  It should clearly outline what work is to be done and when, as well as the money you will be paying (or receiving). Understanding both your obligations and the obligations of the other party is a crucial step before agreeing to a contract.

  1. Termination of the contract

Most contracts include an express clause that allows for one party to end the contract even if the contract has not yet been completed. Some agreements may also be expressed to terminate automatically in certain circumstances, such as with the passage of time or a breach of duty.  Termination rights should ideally be exercised by written notice to the other party, so it is important for you to identify any specified notice periods, as well as any obligations that survive termination.

  1. Warranties

Warranties are used to describe terms of a contract, but are less significant or fundamental than the conditions of a contract. A warranty is a guarantee that a factual statement is correct.  A breach of a warranty will not entitle a party to terminate, however it can allow a party to seek damages. It is useful to note that some warranties may appear reasonable when in fact they are not.

  1. Indemnities

An indemnity is a promise by one party to compensate the other party for loss or damage suffered during the contract period.  Indemnity clauses involve allocating risk between the parties, typically from the hirer to the contractor. It is essential to carefully consider whether the risk you’re agreeing to is within your control. If not, we recommend you seek professional advice before signing.

  1. Limitations and exclusions of liability

It is common for a party to use liability and exclusion clauses to limit their legal responsibility in contracts, or to limit the other party’s rights or remedies. For example, a contractor can use a limitation clause to reduce the amount of money it would have to pay in compensation.  Prior to signing your contract, you should identify (and aim to protect yourself from) the aspects of your business or service that present risk. It is worthy to note that you cannot limit your liability entirely as the court has the power to overlook clauses that it holds unfair. 

Contact our litigation lawyers now to discuss your options in a no-obligation consultation with the experts. We will guide you, step by step and ensure the best possible outcome for your circumstances.  Call our Brisbane lawyers on (07) 3009 8444 or our Sydney lawyers on (02) 9307 8900. Alternatively, click here to get started.

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog publisher. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

 

What does litigate in litigation mean?

The term ‘litigate’ is used when a person or company resorts to legal action to settle a matter. Litigation is a method of resolving disputes, which are usually either civil or criminal.

The main purpose of your litigation lawyer in both civil and criminal matters is to assist you through all stages of your dispute, by mitigating the risks, advocating your interests and resolving your dispute cost efficiently and promptly. 

Civil Litigation

We understand that if you are in business, then you are likely to run into a dispute at some stage.  Disputes can arise in any number of circumstances, including with suppliers, customers, franchisors, other businesses, banks or third parties dealing with the business.

Accordingly, in civil matters, your lawyer represents your interests and fights for the most favourable outcome for you. This includes whether you are:

  1. The plaintiff – meaning that you have brought the claim; or

  2. The defendant – meaning that you are defending the claim.

Your lawyer will assist you in drafting and filing documents in Court (i.e. statements of claim, affidavits, defences, discovery), explaining rules of law, guiding you through the complex legal jargon, protecting your interests, representing you in Court and conducting settlement negotiations on your behalf.

We understand that litigation can be a difficult, uncertain and stressful time in a person’s life. However, by having the correct and appropriate lawyer, it will significantly assist you in making the litigation process as smooth and stress-free as possible, as well as achieving the most favourable outcome for you.

Litigation can be a costly process, however we will always tell you if the costs of litigation outweighs the potential benefits, and suggest alternative dispute resolution methods, for instance, mediation. We understand that having the correct strategy is vital in responding to the challenges which may arise in litigation proceedings.  

Contact our litigation lawyers now to discuss your options in a no-obligation consultation with the experts. We will guide you, step by step and ensure the best possible outcome for your circumstances.  Call our Brisbane lawyers on (07) 3009 8444 or our Sydney lawyers on (02) 9307 8900. Alternatively, click here to get started.

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog publisher. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

 

CONSTRUCTION LAW 101

What is construction law?

Construction law can be broadly defined as a branch of law that involves the regulation of all types of construction and building works. The body of law that deals with construction is diverse and there are a number of laws and regulations that are State or Territory specific that regulate the construction industry.

What do construction lawyers do?

Construction lawyers specialise in construction law. They are often called upon to draft, negotiate and review construction contracts, assist with the tender process, advise parties to a construction contract on various aspects either before, during, or after a project and assist with construction disputes and debt recovery.

What are the relevant statutes that regulate the construction industry?

There are a number of laws and regulations that apply to the construction industry and these can either be federal, state, and local laws.

The National Construction Code (NCC) was formally known as the Building Code of Australia. The NCC sets out the minimum requirements for safety, health, amenity, and accessibility in the design and construction of all new buildings, building work, plumbing and drainage systems, and all new building work must comply with the dictates of the NCC. All States and Territories have adopted the NCC.

Each State has its own respective legislation and regulations that regulate the construction industry. Typically, State legislation and regulations deal with issues such as contracting, licensing, registration, insurance of building works, and warranties.

The table below sets out some of the legislation in force in each State and Territory.

STATE/TERRITORY

LEGISLATION

New South Wales

  • Building and Construction Industry Security of Payments Act 1999
  • Home Building Act 1989/Home Building Regulation 2014
  • Environmental Planning and Assessment Act 1979

Victoria

  • Building and Construction Industry Security of Payment Act 2002

Queensland

  • Building and Construction Industry Security of Payments Act 1991 (QBCC Act)
  • Building Industry Fairness (Security of Payment) Act 2017 (BIF Act)

Australian Capital Territory

  • Building and Construction Industry (Security of Payment) Act 2004

Western Australia

  • Constructions Contracts Act 2004

South Australia

  • Building and Construction Industry Security of Payment Act 2009

Northern Territory

  • Constructions Contracts (Security of Payments) Act 2004

Tasmania

  • Building and Construction Industry Security of Payment Act 2009

The statues listed above are not an exhaustive list of the laws that may be applicable to construction matters. Other laws may very well be applicable depending on the circumstances such as employment laws and regulations, local government planning and environment laws, and even common law principles.

Do I need to be licensed to carry out building work?

Each State has its own definition of what building work is and when a license (to carry out building work) is required. The table below sets out when a license (to carry out building work) is required for the States of New South Wales, Queensland and Victoria.

STATE/TERRITORY

LICENSE REQUIREMENTS

New South Wales

You must hold an NSW building license to conduct residential building work in NSW valued at more than $5,00.00 in labour and materials.

A general builder may do any work that is residential work. Work that you need to have a license for includes:

  • Constructing or erecting a garage, carport or shed
  • Bathroom, kitchen or laundry renovations
  • Swimming pool building and structural landscaping
  • Screened, glass or pool enclosures
  • Atriums and conservations
  • House lifting
  • Removing and resitting dwellings; and
  • Saunas and steam rooms
Queensland

You must hold a QBCC license to carry out building work, where:

  • The value of the building work is over $3,300.00
  • The works involve hydraulic service design works valued at over $1,100.00
  • Works of any value where the work involves:
      • Drainage
      • Plumbing and drainage
      • Gas fitting
      • Terminate management – chemical
      • Fire protection
      • Completed residential building inspections
      • Building design – low rise, medium rise and open
      • Site classifications; and
      • Mechanical services

How can I apply for a license?

Each State has its own licensing procedures and requirements. The table below sets out the governing body for the States of New South Wales, Queensland, and Victoria. You will need to contact the relevant governing body of your State to find out the specific licensing requirements.

STATE/TERRITORY

GOVERNING BODY

New South WalesFair Trading NSW via Service NSW
VictoriaVictorian Building Association
QueenslandQueensland Building and Construction Commission (QBCC)

Are there different categories of licenses?

Yes, in Queensland licensing for building work is divided into licence types and, subsequently, licence classes. The critical element understanding is to be aware of the work you are performing, as this will dictate whether a licence is required.

The types are summarised as follows:

Type

Supervise building workBe a nominee for a building companyEnter into building contracts for building work

Contractor

Yes

Yes

Yes

Nominee Supervisor

Yes

Yes

Site Supervisor

Yes

Fire OccupationalYes

In relation to the licence classes, they are varied depending on the scope of work performed for a particular project. For example, irrigation or steel fixing. There are also varying levels of general building licences according to the type of building. These are divided into low rise, medium rise and open.

In New South Wales, there are three categories of licence:

• Contractor licence – allows you to contract and advertise to do work.

• Qualified Supervisor Certificate – allows you to supervise and do the work described on your certificate.

• Endorsed contractor licence – is issued to individuals who apply for a contractor licence and who also have the qualifications and experience needed to be a qualified supervisor.

What happens if I carry out building works without a license?

In Queensland, the QBBC Act makes it an offence to undertake to carry out building work without a license of the appropriate class. The maximum penalty:

  • for a first offence is 250 penalty units;
  • for a second offence is 300 penalty units; and
  • for a third or later offence is 350 penalty points or 1 year’s imprisonment (this offence constitutes a crime pursuant to the QBCC Act).
  • In addition, you will only be entitled to reasonable remuneration for carrying out the construction work which generally means you can only claim for the cost of supplying material and labour only and not any profit.

In New South Wales, a person who performs building works without a licence may receive a penalty:

  • for a first offence – maximum 1,000 penalty units; and
  • for a second or subsequent offence – maximum 500 penalty units or imprisonment for a term not exceeding 12 months, or both.

Do I need to have a written construction contract?

In Queensland, all:

  • domestic building work costing more than $3,300.00 must be covered by a written contract. Whilst you need not have a construction contract for works that are valued at less than $3,300.00 it is a good idea to have a contract in place or at the very least a detailed written quotation; and
  • commercial building work costing more than $10,000.00 must be covered by a written contract.

In New South Wales, all:

  • residential building work over the price for labour and materials of $5,000 (GST incl.) must be documented by written contract. There are two classes of residential building contracts for NSW: Small Jobs Contract which are between a value of $5,000 and $20,000 and Contracts (other than Small Jobs) above $20,000; and
  • commercial building works over $20,000 must be covered by a written contract.

Are there any laws that regulate how much deposit is to be paid pursuant to a construction contract?

In Queensland, the maximum deposits permitted are:

  • 5% of the total contract price for domestic building work costing $20,000.00 or more; or
  • 10% for work costing more than $3,300 but less than $20,000.00.

In New South Wales, the maximum deposit is 10% of the contract price.

What should I do if I get involved in a construction dispute?

Your building contract is an important document. It sets out the rights and responsibilities of each party to the building contract. It therefore follows that you must first check the building contract to determine your legal position.

The relevant laws and regulation of your State or Territory also set out your rights and the course of action you can take if you find yourself in a situation where you are faced with a building dispute. In addition, the course of action you take to resolve the building dispute will depend on whether you have a domestic construction contract or a commercial construction contract. It is a good idea to seek legal advice at the outset of the first signs of a dispute.

How do I protect my payment rights if I’ve entered into a commercial construction contract?

The Security of Payment legislation has the primary purpose of facilitating cash flow for commercial construction projects in each respective State and Territory. It achieves this objective by regulating commercial construction contracts and establishing a regime of strict payment terms that exist in each transaction.
Accordingly, protecting payment rights occurs by adopting the provisions of the legislation and implementing procedures that coincide with the process.

This includes the issuance of payment claims on and from reference dates, in addition to responding with payment schedules. When disputes arise, these documents will be critical to adjudication and other mechanisms under the relevant statute. Each State and Territory has its own legislation that deals with security of payment.

For further details on the security of payment legislation in Queensland and New South Wales please click here. [insert hyperlink to packages]

What do I do if I discover defective building work to my home?

In Queensland, you may lodge a complaint at the QBCC. If the QBCC determines that they have the power to take further steps with respect to your complaint, a QBCC inspector will carry out a site inspection.

The QBCC inspector will then issue a decision either directing that the works complained of are not defective or directing that the Builder is to rectify the defects. If the Builder fails to rectify the defects, the QBCC may commence disciplinary action against the Builder and the defective work may also be rectified pursuant to a claim under the QBCC home warranty insurance scheme.

In New South Wales, you will need to raise a complaint either through Fair Trading or bring proceedings through a court of competent jurisdiction. Defective residential building work may be covered by the iCare Home Building Insurance, but is only paid after the liability has been established. This is because unlike Queensland with the QBCC, the NSW system is an insurance of last resort.

Is it necessary to get a standard form construction contract reviewed?
Yes, we would recommend that you have a standard form construction contract reviewed. Contrary to popular belief, standard form construction contracts can be amended. We would recommend that you have your standard form construction contract reviewed to:

  • Ensure that the clauses are compliant with existing legislation. This is a common issue, considering frequent changes in legislation.
  • Ensure that your rights and interests are adequately protected.
  • Simplify, where appropriate, contractual mechanisms to coincide with the nature of the project and development.
  • Modify the payment terms.
  • Have standardised processes and documentation that complement the contract that may not be immediately apparent, such as variation and extension of time forms.
  • Create awareness regarding rights and obligations, particularly with respect to payment obligations, resolving disputes, termination clauses and default of payment.

At Rostron Carlyle Rojas lawyers we have low fixed fees for the review of home building contracts starting from as little as $450.00. You can find further details click here.

Instalment Contracts and Forfeiture of Deposits

Business Due Diligence

A recent matter reminds us all that in a hot real estate market and rising prices, any delays in settlement can be a fundamental breach. However-not all may be lost if there is an instalment contract.

We recently acted for a buyer of an off the plan property on the Gold Coast who initially signed a contract for $2,000,000 in 2017.

A deposit was paid of 10% of the purchase price at the time of signing.

4 years later when the developer called for settlement, the buyer’s financier was not ready to settle and sought a short extension to settle.

The developer refused to grant the extension, and purported to terminate and forfeit the deposit of $200,000 on the basis that the contract expressly provided time was of the essence and the failure to settle on the due date was a fundamental breach of the terms of the contract. The developer then offered to re-sell the property to the buyer at what it considered to be the current market value of $2,500,000-an increase of $500,000 ! Clearly, the developer had simply sought to take advantage of the market conditions and the increased value.

Naturally the Buyer was less than impressed and sought our advice.

Upon further investigation, it transpired that some months before the settlement was due, the developer’s had offered to build an additional storage area for the buyer attached to its basement carpark for $3,500. This additional storage area was offered on the basis that it would be “on title” and that the buyer would have exclusive use, and the CMS would reflect the additional space.

This offer was accepted and the additional storage area fee was paid.

Instalment Contracts definition

Was the additional storage space fee payment a payment “other than a deposit”?

In our view, this additional storage fee triggered the instalment provisions of the Property Law Act.

Under the Property Law Act 1974 (Qld) (PLA), section 71 defines:

a “deposit” as follows:

deposit” means a sum—

(a) not exceeding the prescribed percentage of the purchase price payable under an instalment contract; and

(b) paid or payable in 1 or more amounts; and

(c) liable to be forfeited and retained by the vendor in the event of a breach of contract by the purchaser.”

an “instalment contract” as follows:

“instalment contract” means an executory contract for the sale of land in terms of which the purchaser is bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange for the payment or payments.

a “prescribed percentage” as:

“prescribed percentage” means—

(a) for a contract for the sale of a proposed lot—20%; or

(b) otherwise—10%. 

30 days notice to terminate required

The effect of this was that the Developer had failed to terminate in accordance with S 72 which provides:

S71 (1) An instalment contract shall not be determinable or determined because of default on the part of the purchaser in payment of any instalment or sum of money (other than a deposit or any part of a deposit) due and payable under the contract until the expiration of a period of 30 days after service upon the purchaser of a notice in the approved form.

Following our robust representations to the developer’s legal representatives and threats of court action, the developer relented it position and offered to re-sell the unit at the original contracted price and credit the forfeited deposit to the new contract.

Our client buyer refused this kind offer and sought an immediate refund of the deposit, storage fee and interest. This was agreed upon and paid.

But for the fact that the additional storage fee made the contract an instalment contract, the developer was entitled to terminate and forfeit the deposit.

The matter was a timely and stark reminder that in a rising market with property values rapidly escalating, buyers must have their finance in order to settle on time or face the possible termination and loss of their deposits. However-in certain circumstances, and with the benefit of good legal advice, it may be possible to avoid the drastic consequences of a purported termination. It also emphasises the need for developers to  be aware of the consequences of accepting additional payments “other than” deposit monies before deciding to terminate.

If you have any queries on these matters-please contact us;

QLD: 07 3009 8444
NSW: 02 9307 8900
Email: [email protected]

 

Small Business Restructuring Reforms Now in Effect

On 1 January 2021, a number of amendments to Chapter 5 of the Corporations Act (2001) (Cth) came into effect, establishing a new framework of Australian insolvency law to better serve small businesses as they try to cope with the economic impact of COVID-19. 

Takeaways

  • Businesses with liabilities of less than $1 million will be entitled to a new debt restructuring and liquidation process, aimed at providing faster and lower cost pathways for businesses in financial distress. 
  • The reforms introduce a debt restructuring process that allows business owners to retain control of their company while a restructuring practitioner develops a debt restructuring proposal. 
  • The small business insolvency reforms are aimed at increasing the rate of successful restructures as well as reducing the number of financially distressed businesses entering voluntary administration and liquidation. 

Overview

Small businesses experiencing financial distress should note three key reforms to the Australian insolvency law that might be available to them:

  1. A new debt restructuring process to provide small businesses with a faster and less complex mechanism for financially distressed, but viable, companies to restructure their existing debts;
  2. A new simplified liquidation process for small businesses to allow faster and lower-cost liquidation, increasing returns for creditors and employees; 
  3. Complementary measures to ensure the insolvency sector can respond effectively both in the short and long term to increased demand and to the needs of small business. 

Small Business Debt Restructuring Process

The most significant insolvency law reform is the introduction of a new debt restructuring process for small businesses (Restructuring Process). Under the new debt restructuring model, eligible companies are able to approach a registered small business restructuring practitioner (Restructuring Practitioner) to assist in reviewing the business’ financial affairs and developing a restructuring plan to be put forward to the creditors within 20 days of their appointment. 

Once the plan is put forward, creditors are given 15 days to vote on the plan, after which the plan is either implemented and distributions are made according to the plan’s terms, or the company may resolve to go into some other form of external administrations (voluntary administration or the small business liquidation process, as discussed below). 

Eligibility

A company will be eligible for the Restructuring Process where:

  • Its liabilities are than less than $1 million (any liability that is not contingent)
  • It has not been the subject of a separate Restructuring Process in the past 7 years
  • It is not currently the subject of other forms of external administration. 

Additionally, before a Restructuring Practitioner may propose a restructuring plan to the company’s creditors, they must ensure the company:

  • Has paid its employee entitlements due (including its employees’ superannuation); and 
  • Has its tax lodgements up to date (this includes returns, statements applications and any other documents required under the taxation law, but this does not require all tax debts to be paid where the lodgements are up to date). 

Who May Act as a Restructuring Practitioner?

As the law currently stands only registered liquidators are permitted to consent to an appointment as a Restructuring Practitioner. However, it is the intention of the legislation to create a new class of registered small business Restructuring Practitioner, under the Insolvency Practice Rules, that solely focuses on small business restructuring.

Additionally, certain classes of persons are excluded from acting as a Restructuring Practitioner, including creditors of the company over the value of $5,000, related entities or auditors of the company. 

Powers of the Restructuring Practitioner and the Company

The small business restructuring process allows the company to continue trading in the ordinary course of business under the control of its owners, which is overseen by the Restructuring Practitioner while a debt restructuring plan is developed and proposed to the Company’s creditors. Any trading outside the company’s ordinary course of business requires the prior approval of the Restructuring Practitioner. 

The role and function of the Restructuring Practitioner include: 

  • Examining the company’s financial records and determining if the business is viable;
  • Assisting the company in developing a debt restructuring plan to restructure its debts; 
  • Proposing the plan to the company’s creditors; and 
  • Managing the disbursements if the plan is approved. 

It is the Restructuring Practitioner’s responsibility to remain as an independent third party and to ensure that the creditor’s rights are represented and protected, this includes preserving the rights of secured creditors and treating similarly ranking creditors consistently. 

Only creditors who are not related entities may vote on the restructuring plan, and in order for it to be approved, the plan requires the majority of value of the creditors to vote in favour. If the proposal is successful it binds all creditors. 

Once the plan is approved, the practitioner remains in his position and administers the plan according to its terms. If the plan is voted down, the process ends and the company may proceed in an alternative form of external administration – this may include the simplified liquidation process set out below. 

New Small Business Simplified Liquidation Process

The second key reform which came in effect on 1 January 2021 is the new small business simplified liquidation process, which gives eligible companies access to a faster and cheaper alternative to the standard large scale, complex liquidation process. 

Details of the Simplified Liquidation Process

Where a liquidator has been appointed pursuant to a creditor’s voluntary liquidation and they consider on reasonable grounds that the company meets the eligibility criteria, the liquidator may choose to adopt the small business liquidation process rather than the standard creditor’s voluntary liquidation process. 

The simplified liquidation process is faster and simpler than the standard process, with the aim of a greater return to the company’s creditors and employees. Under the new process:

  • the liquidator is not required to submit a section 533 report to ASIC on potential misconduct unless there are reasonable grounds that misconduct has occurred. 
  • the liquidator is not required to hold formal creditor’s meetings and can instead distribute information to creditors, and proposals for voting, electronically. 
  • The unfair preference voidable transaction provisions are restricted to prevent the liquidator pursuing claims against unrelated entities.
  • The system of dividend distribution and proof of debt submission is simplified. 

Eligibility

In order for a company to be eligible for the simplified liquidation it must satisfy a number of requirements under the legislation including:

  • The company must already be in liquidation pursuant to a creditor’s voluntary liquidation.
  • The company must have liabilities less than $1 million.
  • The company must have its tax lodgements up to date (returns, notices, statements and applications as required by taxation laws). 

Creditors may also request in writing that the liquidator not follow the simplified liquidation process within 20 days of the event triggering the simplified liquidation process, and the liquidator must cease the simplified liquidation process if the eligibility criteria are no longer met. 

Complementary Provisions to Support the Insolvency Reforms

In addition to the debt restructuring process and the simplified liquidation process, a number of other amendments have been made to the Corporations Act to assist insolvency practitioners and distressed companies to transition into these reforms. 

Temporary Relief for Companies Seeking a Restructuring Practitioner

To assist in the transition into the small business reforms and as insolvency practitioners become more familiar with the processes, from 1 January 2021 until 31 March 2021 eligible companies are able to declare their intention to utilize the small business restructuring process through ASIC’s published notices website. 

If a company declares their intention to access the Restructuring Process with ASIC, the insolvency relief that applied in 2020 (extended compliance period for statutory demands and temporary protection from insolvent trading liability) will continue to apply until they are able to engage an eligible Restructuring Practitioner before 31 March 2021.

New Small Business Restructuring Practitioner

As the law currently stands, only registered liquidators are eligible to act as Restructuring Practitioners, however, under the insolvency practice rules a new classification of insolvency practitioner will be created that will solely focus on small business restructures.

To streamline the small business restructuring process, the new classification of practitioner will have their practice limited to small business restructurings only and will be offered to registered chartered accountants, in addition to insolvency professionals. It would seem the aim of this new classification is to try to increase accessibility and supply of available practitioners to meet potentially higher demand for small business debt restructuring. 

More Reforms

Other complementary provisions include:

  • Key sections of Chapter 5 of the Corporations Act have been made “technology neutral” so to allow external administrations to be carried out without a formal meeting of creditors.
  • Fees associated with registration as a registered liquidator are waived until 30 June 2022.

Speak with one of Rostron Carlyle Rojas Lawyers’ qualified restructuring and insolvency lawyers today, at:

QLD: 07 3009 8444
NSW: 02 9307 8900
Email: [email protected]

 

Update to Ending of COVID-19 Relief Measures

 

Overview

On 22 March 2020 the Government announced temporary insolvency relief for financially distressed companies, to help businesses get to the other side of the Coronavirus crisis. 

The temporary insolvency relief increased the thresholds at which creditors could issue a statutory demand (or a bankruptcy notice) and the compliance time for debtors to respond to statutory demands and bankruptcy notices. 

As a result of the temporary relief measures, creditor enforcement action (to recover debts) effectively graded to a halt. Businesses that would otherwise have failed (and entered External Administration) were kept alive through a combination of lack of creditor debt recovery action and other Government relief incentives. Such as JobKeeper – which was intended to give temporary support to viable businesses during a period of broader mandatory restrictions and shutdowns. 

Consequently, the number of businesses entering External Administration (liquidation or voluntary administration) dropped over 50%. This compared to the same period last year and, in the September quarter 2020, bankruptcy numbers were at their lowest level since AFSA records began in 1986. 

Temporary relief was also given to directors of companies from any personal liability for trading while insolvent, with respect to debts incurred by the company in the ordinary course of the company’s business. Provided that an external administrator was appointed to the company before the moratorium’s expiry, being before 31 December 2020.

The temporary insolvency relief measures expired on 31 December 2020 (while JobKeeper currently has a scheduled end date of 28 March 2021).

Insolvent trading moratorium ends

  • Many people appear to be operating under the misunderstanding that the insolvent trading moratorium (in effect during the March – December 2020 period) provides a complete shield from personal liability for insolvent trading. That is simply not the case.

  • Directors trading-on a business beyond 31 December 2020 will be exposed to the insolvent trading provisions of the Corporations Act 2001 throughout any period that the company was insolvent—including the March-December 2020 period—should the company later end up in liquidation.

  • Directors should be aware that they would only be afforded protection under the temporary relief measures IF they appointed an external administrator to the company before the moratorium’s expiry, i.e., before 31 December 2020.

  • For the avoidance of doubt, directors of companies who are still trading now that were trading insolvent during the March – December 2020 period, and that later end up in liquidation, will be exposed to personal liability for insolvent trading.

Where are we now?

On 1 January 2021 (following the expiration of the temporary insolvency relief measures) the Government’s insolvency reforms to support small businesses commenced. 

The reforms introduce new insolvency processes suitable for small businesses aimed at reducing the complexity, time and costs required to quickly and efficiently restructure their affairs. Where restructure is not possible, businesses can wind up faster via the simplified liquidation process, designed to enable greater returns for creditors and employees. 

The new small business insolvency reforms (see link below) include:

  • A new Debt Restructuring Process for small businesses;

  • Temporary restructuring relief; and

  • A new Simplified Liquidation Process for small businesses.

For more information about the Small Business insolvency and restructuring reforms, please access our separate article HERE

Personal Insolvency and Bankruptcy Notices

  • Changes to Bankruptcy laws:

    • In March 2020, the Australian Government announced a series of changes to bankruptcy law, as part of the wider economic response to the COVID-19 pandemic.

    • Those temporary changes included:

      • an increase in the debt threshold, which enabled creditors to apply for a bankruptcy notice;

      • an increase to the timeframe for a debtor to respond to a bankruptcy notice; and

      • an increase to the temporary debt protection period available to debtors. 

    • As of 1 January 2021, those temporary changes have ceased, however, an amendment has been made to adjust the bankruptcy threshold amount. 

    • Relevantly:

      • the minimum amount of debt that can trigger bankruptcy is now $10,000 (down from $20,000 under temporary changes). Before the temporary changes, the minimum amount of debt that could trigger a bankruptcy was prescribed at $5,000.

      • The timeframe for a debtor to respond to a bankruptcy notice has reverted to 21 days (from 6 months under temporary changes). This means if a bankruptcy notice is issued on or after 1 January 2021, the debtor will have 21 days to comply with the bankruptcy notice.

      • The period for temporary debt protection for debtors has reduced from six months (under temporary changes) to 21 days.

      • Two or more creditors can combine their judgement debts to meet that minimum amount and together apply to court to petition to have a mutual debtor declared bankrupt

    • Back on the discussion table for government is the potential permanent bankruptcy reform to reduce the default bankruptcy period from three years to one year. That potential reform had stalled previously, but it may become a reality 2021.

Statutory Demands

Effective as at 1 January 2021, for creditor’s statutory demands against companies:

  • the minimum amount of debt for a statutory demand, that can trigger a winding up application, is now $2,000 (down from $20,000 under temporary changes), which is back to the way it was before the temporary changes.

  • The timeframe for a debtor to respond to a statutory demand has reverted to 21 days (from 6 months under temporary changes). This means if a statutory demand is issued on or after 1 January 2021, the debtor will have 21 days to comply with the statutory demand.

Update on JobKeeper

  • Ends 28 March 2021.

  • According to Federal Treasurer the Hon Josh Frydenberg MP, JobKeeper has costs $77 BILLION to date and at its peak was supporting 3.6 million Australian workers and around 1 million Australian businesses.

  • JobKeeper has now entered the second phase of its extension (from 4 January 2021). 

    • In this current phase, eligible businesses receive $500 per week for each staff member working at least 20 hours per week, down from $600. Other employees attract a payment of $325 per week, down from $375.

    • The tier 1 rate applies to eligible employees who worked for 80 hours or more in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, and eligible business participants who were actively engaged in the business for 80 hours or more in February and provide a declaration to that effect.

    • The tier 2 rate applies to any other eligible employees and eligible business participants.

  • We anticipate that a significant number of businesses currently being kept alive solely by JobKeeper, will enter External Administration sometime after 28 March 2021.  

Practical tips & takeaways

  • Use the correct and updated Statutory Demand and Bankruptcy Notice forms to avoid challenges relating to material deficiencies in light of the above changes effective from 1 January 2021. 

  • Directors who think their companies were trading insolvent prior to 1 January 2021 (or since) should seek professional advice urgently to consider the options for their business and their personal position. 

  • Pressure from creditor enforcement being able to resume, and from JobKeeper coming to an end, will see an increase in companies entering External Administration and personal bankruptcies, likely from about March 2021. Business owners, directors and creditors should prepare themselves for new waves of insolvency and restructuring coming soon.

If you have felt the effects of the pandemic on your business or require assistance or clarification in relation to the ending of the temporary relief for financially distressed companies and businesses, now is the time to get advice on how to structure your company’s affairs or recovery activities.

Speak with one of Rostron Carlyle Rojas Lawyers’ qualified restructuring and insolvency lawyers today, at:

QLD: 07 3009 8444
NSW: 02 9307 8900
Email: [email protected]

 

What is Litigation?

 

Litigation is when a person begins a civil lawsuit against an organisation or another individual. There are various rules under the civil procedure that govern actions that occur in state and federal court. Litigation then involved a series of steps that may lead to a court trial and ultimately result in a matter.

When does it occur?

Litigation can occur when two individuals or organisations argue against each other over a matter that may have occurred.

How does it work?

The litigation process in general will work with two sides emerging being the defendants and the plaintiffs. The plaintiffs will then argue and provide a statement of what they claim the defended is guilty of which then leaves the defendant to agree they are responsible or argue a case of their innocence.

What is the process of Litigation?

This process although sounding difficult can be easily understood through 7 steps.

  1. Investigation, where each parties legal representation will investigate the aspects of the case
  2. Pleadings, this is knowns as the initial paperwork in the lawsuit
  3. Discovery, this stage will see the gathering of all facts involved in the case where both sides can freely exchange information.
  4. Pre-Trial, this stage will involve both sides legal representation to conference and negotiate terms with one another.
  5. Trial, this stage is reserved for when a conclusion and resolution could be achieved through pre trial and then requires the matter to be resolved in court.
  6. Settlement, this stage entails a judge after careful consideration will come to an outcome and decide the fate of the matter.
  7. The final step which is often exhausted is known as appeal. This is seen when your legal representation will file an appeal on your behalf to argue the dispute and the outcome of the case. It is important to know this stage of the process can often be time consuming.

What can a Litigation lawyer help you with in this process?

Legal professionals can provide great assistance with all types of litigation cases. The specific jobs that may be required that can be completed by your representation are as follows.

  • Official complains
  • Affidavits
  • Defences
  • Discoveries
  • Interrogatories
  • Further and better Particulars
  • Arrange a barrister on your behalf

Litigation seeming a little daunting?

Anxious about your current legal situation? The whole process becoming slightly overwhelming for your? 

Contact our litigation lawyers now to discuss your options in a no-obligation consultation with the experts. We will guide you, step by step and ensure the best possible outcome for your circumstances.  Call our Brisbane lawyers on (07) 3009 8444 or our Sydney lawyers on (02) 9307 8900. Alternatively, click here to get started.

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog publisher. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

 

What is Debt Recovery?

Debt recovery is the process in which you embark on to minimise your debt and begin the process of not owing anything. 

Debt is a situation that many individuals easily slip into. It is the idea of an individual being in an obligation to pay money or any other agreed upon values item from one party to another who is owed.

What Help is Available from Solution Specialists?

Debt solution specialists can help with all aspects of this matter from all of the below:

  • Help Tailor debt recovery solutions to suit your circumstance
  • Provide financial advice to better help you manage your debt
  • Help simplify the process to help you better understand your options

What are Potential Debt Options.

  • An Informal Arrangement – This is seen when a debt solution specialist organisation helps provide you with arrangements that you are more comfortable with and can stay on top of your debt despite any unforeseen circumstances. Therefore you can renegotiate your debt repayment terms on your behalf.
  • Debt Arrangements- This is seen as the process of creating a legally binding agreement with both parties. This is when you can no longer repay your debt and will then agree upon an achievable amount to be repaid.
  • Personal Insolvency Agreements – This agreement provides a process for you to offer an arrangement to your creditors. This is to satisfy your debts based on a report being created of your current financial position.
  • Bankruptcy Assistance – Bankruptcy is often seen as a last resort and has serious consequences. There are many different solutions which can be exhausted to resolve this issue. This can then be explored with a debt and bankruptcy specialist.

What’s the First Step of Solving a Debt Issue?

Struggling with financial debt? Worrying about your debt repayments and unsure of how to better your financial situation?

Contact our debt recovery lawyers now to discuss your options in a no-obligation consultation with the experts. We will guide you, step by step through debt recovery and ensure the best possible outcome for your circumstances.  Call our Brisbane lawyers on (07) 3009 8444 or our Sydney lawyers on (02) 9307 8900. Alternatively, click here to get started.

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog publisher. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

 

Construction Law – What’s it all about

With construction being Australia’s largest industry and having the highest number of operating businesses within it, it is likely that a business will require a construction lawyer at some point to assist with an upcoming project. These businesses range from building companies to design and architecture firms and considering construction is a very highly regulated industry it seems inevitable.

What is construction law?

Construction law applies to all areas in construction work. Since the process of building is complex, builders must know many things before they pour that first bit of cement or cut down a tree. There are a big number of regulations and rules that have to be followed by the builder and other parties involved in the process. These include government representatives and private entities such as individual worker and property owners in which they must have effective procedures for dispute resolution if it came to it.

Some of the areas of construction law include:

  • Contract law
  • Planning and approvals
  • Employment law
  • Worker’s compensation
  • Torts
  • Property law
  • Dispute resolution
  • Occupation safety
  • Litigation

When do you need a construction lawyer? 

You should seek a construction lawyer if you are experiencing any of the following:

  • parties being sued
  • parties suing someone else
  • parties under threat of a suit
  • unpaid bills
  • injury on the job
  • defective claims
  • terminating a contract
  • Reviewing a contract

What licensing is relevant to construction law?  

Each state within Australia has the right to their own specific regulations related to this matter. Within Queensland, you must hold a QBCC license to work on building. Licensing is also specific to the different trades so ensure that all parties working on a contraction party have the appropriate licensing. 

Do you need a written contract? 

Within Australia it is paramount that for all parties protection and to ensure their rights are meet it is imperative that you seek legal advice and guidance. This will guarantee the best outcome and expectations are set and also provide all parties ease through this process.

What happens in the case of the contract constraints not being meet? 

In this turn of events, it is important to understand your rights. A common example of this is seen when defective work is found within a property.  It is critical to seek professional help from experts immediately and also get your contract reviewed throughout the entire process to ensure every requirement is being meet.

Wondering what the next step of the process is?

Still unsure as to what your rights are in regards to construction law matters? Seeking any legal help to ensure the best outcome of the project is achieved?

Contact our construction lawyers now to discuss your options in a no-obligation consultation with the experts. We will guide you, step by step and ensure the best possible outcome for your circumstances.  Call our Brisbane lawyers on (07) 3009 8444 or our Sydney lawyers on (02) 9307 8900. Alternatively, click here to get started.

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog publisher. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.

 

What is Insolvency?

Insolvency is the inability to pay bills as they become due. While the term ‘insolvent’ can apply to both companies and individuals, personal insolvency is more commonly referred to as ‘bankruptcy’ and is a vastly different process than company insolvency.

How to know if you or your company is becoming insolvent?

As a company director/owner, it is extremely important that you understand the warning signs of insolvency and know when it is time to seek help.

In the lead up to insolvency, some problems can include:

  • Cash flow problems
  • Inability to pay creditor bills within the outlined payment terms
  • Needing to refinance in order to pay bills
  • Letters from law firms or debt collectors demanding payment for outstanding invoices

What to do if your company becomes insolvent.

Don’t panic! There are several potential outcomes if you company becomes insolvent. These include:

  • Voluntary Administration
  • Liquidation
  • Receivership

Voluntary Administration (VA)

Voluntary administration (VA) is when the director/s of a company seek assistance from an insolvency lawyer before being forced into liquidation by an unhappy creditor.

This is followed by an in-depth investigation into the company set-up, financials and operations. This is to assess the VA and make a recommendation on either going into liquidation (more on this to come) or coming to an agreement with creditors in which the payment term is extended. So as to allow the company to trade out of its insolvency.

Liquidation

Liquidation is the process of selling the physical assets of a company and turning the asset into cash in order to pay off as much of the debt as possible. A liquidator will collate your assets and ‘liquidate’ them with the conclusion of this process being that the company will be closed, or registered. This is also known as “winding up”.

Liquidation can be recommended by a voluntary administrator or forced upon a company by a liquidator, usually acting on behalf of the group of creditors as a whole. 

Receivership

Receivership is a situation where money is owed to a secured creditor (generally a bank), that creditor can appoint a ‘receiver’ to operate on their behalf. The receiver will then either liquidate the company assets or take control of the company operations so as to trade the business in the hope of repaying debts owed.

A key difference between liquidation and receivership is that a liquidator acts on behalf of all creditors, whereas a receiver acts only on behalf of the secured creditor. A receiver will first ensure that money owed to the secured creditor is paid before paying out other creditors.

What should you do now?

Alarm bells ringing? Whether you are a company director trying to avoid insolvency or have found your company to be insolvent, the worst thing you can do is to do nothing at all. 

Contact our insolvency lawyers now to discuss your options in a no-obligation consultation with the experts. We will guide you, step by step through insolvency and ensure the best possible outcome for your circumstances.  Call our Brisbane lawyers on (07) 3009 8444 or our Sydney lawyers on (02) 9307 8900. Alternatively, click here to get started.

 

The blog published by Rostron Carlyle Rojas is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the blog publisher. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.