As a wave of obsession with ChatGPT crashes, SMEs to multinational corporations are scrambling to gauge the level of exposure of a cyber-security breach occurring within their business.
With the recent enactment of the Fair Work Amendments, the benefits of conducting a workplace audit to revamp workplace policies and engage in an active compliance culture seem endless. Cutting-edge artificial intelligence and machine learning applications require employers to turn their attention to protecting their goodwill from cyber threats, including the negative implications of ChatGPT.
Let’s talk about it.
What is ChatGPT?
ChatGPT is an Open AI chatbot powered by voluminous amounts of data and computing techniques that predict the formulation of words in a meaningful way. Beyond the strategic sequence of words, ChatGPT responds to a criteria or context and mimics speech patterns that correspond to that plugged-in data.
For example, a user can request ChatGPT to write a marketing article emphasising the data and cyber security risks of machine learning artificial intelligence in the workplace.*
The program evaluates human prompts and generates sophisticated responses on a public user interface accessible to any individual with access to the world wide web.
Public Discourse
Major tech-giants including Microsoft have announced plans to incorporate the cutting-edge technology into its products including Bing and Office applications. Professional services firms and organisations nation-wide have diverse views, with some firms embracing the technology insofar that sensitive information is not disclosed. Others have built a firewall in fear that the technology presents greater harm than good.
What’s the harm in cyber-chat?
Leak of Confidential and Sensitive Data
Employees of organisations, irrespective of size, are bound by confidentiality obligations to their employer. Depending on the terms of employment, confidentiality often survives termination of employment or requires an employee to sign a separate non-disclosure agreement.
Employees using ChatGPT can inadvertently share confidential corporate information, or sensitive client information that feeds into the chatbot to ask for tips or advice on how to improve their work. This human input acts as an internal software code that ChatGPT uses as a machine learning mechanism to train, evolve and improve. As a result, ChatGPT can potentially share versions of the confidential or sensitive information in future exchanges with other users.
To add a level of complexity, if your employees are bound by professional privilege to their clients and customers, the consequences of a data-breach could be far greater.
Trade Secrets and Intellectual Property
A few weeks after the launch of ChatGPT, a group of Amazon employees asked an internal Slack channel whether they could use the chatbot for work-related purposes. It was noted that ChatGPT was permitted insofar that any Amazon information, including the Code that was being developed could not be shared because the “input may be used as training data for a further iteration of ChatGPT…which closely matches existing material”.
Employees plugging in trade secrets that form the intellectual property and goodwill of the company to generate and improve their content may find that ChatGPT uses and reproduces that input, thereby disseminating your company’s commercial information to the public.
New Tech calls for New Workplace Policies
We often see SMEs demonstrate a heavy reliance on technology but lack the internal governance to properly manage its use and protect the business from data and privacy breaches.
Regardless of the industry, any business must protect its best assets including confidential information and intellectual property. We recommend employers introduce a Cyber Policy in their organisation to address:
At Chamberlains Law Firm, we provide wholistic solutions to clients affected by rapid developments in the tech-space. Contact us for a Workplace Audit to assess the operational needs of your business, risks of cyber-attacks and introducing an iron-clad Cyber Policy that brings your business in line with industry standards.
This article was prepared with the assistance of Jasmin Mantoufeh.
*No AI chatbots were used in the drafting of this article.
Have you engaged in a creative endeavour that you want to see continue after your death?
Have you been given control of someone’s creative works after their death?
What happens if you write a best-selling novel and then die?
Probate law deals with property. Most people accept that it will cover real estate, money, shares, investments of various kinds, even superannuation in the right circumstances. What about the fruits of your creative labours in your lifetime – artistic works, a best-selling novel, sculptures, letters between you and your muse? Often, the creator of the works wants to see their work promoted and their legacy maintained after their death – but wants to exert control about how that is done, who can exploit their works for profit and who shares in the profits that flow.
In this first part we look at drafting a will that captures your creative work, or transfers control of works that you have been given custody of during your lifetime. In further parts we will look at how to administer an estate that includes a “literary estate” component and what kinds of issues and disputes car arise.
Literary estates, literary executors, creative works, oh my!
A word first on the use of the phrase ‘literary’ – this concept is not limited to writers, novelists or essayists. It comes from a time prior to the advent of computers and the digital age of many and varied forms of art and creative work – think the works of Charles Dickens, the letters to and from Sigmund Freud.
A literary estate is a division made by a will maker to separate and specially govern certain property – the ‘literary estate’ – and to give that power to a person or company whose role is to administer, promote and potentially generate profit from the literary estate – ‘literary executor’. It is not a phrase with an accepted legal definition – the scope and the role will depend on the terms of the will itself.
It is essential that you obtain competent legal advice on the drafting the appointment of your literary executor – Court’s have been required to interpret poorly drafted clauses with results that are not particularly helpful for the people left behind.
Who can do it?
It almost goes without saying that anyone you appoint as executor needs to be someone you trust – this is just as true for a literary executor. You need to be confident that the person who you select will follow your directions, and will abide by limitations or restrictions you place on them. We suggest you discuss the various reasons for your choice with your solicitor to ensure that it is drafted to meet your wishes. If you have an agent who works with you in your endeavours, they may need to be involved. There might be questions of multiple jurisdictions if your works are distributed around the world.
What if the person dies themselves, or resigns?
No-one lives forever, even if they structure their affairs very carefully and so your will must also deal with what happens to the role if your chosen person or people no longer can, or wish to, act in that role. It is essential you get competent legal advice about this aspect as it can be one of the most problematic aspects of the appointment of a literary executor, and one which may not come to head many years after you have passed, and indeed may come up after your chosen person has themselves died!
What does a literary estate cover?
The scope must be clearly identified in a properly drafted will. Literary works, artistic works, associated intellectual property will need to be identified with precision and clarity. In days gone by the tasks of the literary executor may have included revieing the private papers, drafts and notes of a deceased person to see what falls into the category. These days it will include a review of the contents of hard drives, computers, cloud storage, mobile devices.
The role can include directions as to the care, maintenance, preservation and commercial exploitation (or not) of the works. The Australian artist Martin Sharp – a cartoonist, songwriter and film-maker – appointed literary and artistic directors whose job was to work alongside his ‘general’ executors in order to arrange for licencing, reproductions and sales of his works after his death.
Does the literary executor get paid?
As with so many questions in law, the answer is ‘it depends’ – in this case it depends on what you want. You might wish for the beneficiary of the profits of your literary estate to also be the person who you give control to. You might wish for the person to be paid a certain stipend or sum, or perhaps a percentage of the gross or net profits that their labours generate. It is a matter for proper advice and you weighing up the options available as to what you want in this regard.
What to do next?
There are clear needs to deal with your literary estate and we encourage anyone who is thinking of how to structure the protection, promotion and potential commercial exploitation of their creative works to get in touch with our expert solicitors to discuss their wishes further so that it can be put into clear and effective drafting.
Navigating the waters of a blended family can be difficult at the best of times. When it comes to Will disputes with these elements, the seas can get even rougher.
The most common form of estate challenge is what is known as a family provision claim. Stepchildren can make these types of claims against the estate of their stepparent in certain circumstances. The New South Wales Supreme Court has recently handed down a decision in Plummer & Anor v Montgomery [2023] NSWSC (‘the Plummer case’) which deals with this kind of estate dispute.
A Court will consider making a family provision order where an eligible person is contesting a Will on the basis that what has been provided for them in the deceased’s Will (or lack thereof) is not adequate and proper in the circumstances. That is, the Will does not adequately provide for their maintenance, education, or advancement in life.
For stepchildren considering a claim to their stepparents’ estates, there are two main questions to consider: eligibility and adequate provision.
Only “eligible persons” may apply to the Court for these types of order. In certain jurisdictions in Australia, stepchildren may fall under distinct category allowing them to bring a family provision claim. In New South Wales, this is not the case. Stepchildren typically seek to rely on being a dependent under section 57(1)(e) of the Succession Act 2006 (NSW), arguing they were wholly or partly dependent on the deceased and a member of their household at the relevant time, usually as children.
The next step is evidencing adequate and proper provision has not been made in the circumstances. This is a discretionary matter, which requires consideration of various elements including financial needs of the persons claiming and any competing claims.
This case concerned two stepdaughters who brought a claim against their step-mother’s estate. The step-mother made no provision for them in her Will. The stepdaughters applied to the Court for a family provision order seeking to contest her Will.
The stepdaughters were found to be eligible to make a claim, as they had lived with their father and their stepmother for a time as children. As minors, it was accepted that they had been partly dependent upon their stepmother, as well as their father, for basic needs. This was found notwithstanding that they had been primarily cared for by their mother following their parent’s divorce. The stepdaughters also had low incomes and demonstrated financial need.
However, the stepdaughters were ultimately unsuccessful due to the remoteness of their relationship with their stepmother. The Court found there were no close familial bonds between the deceased and her stepdaughters. This was not a case of a stepmother assuming a “close maternal role” or acting “like a surrogate mother”.
Rather, there had been barely any contact between them for over fifteen year’s prior to the deceased stepmother’s death, and none at all following their father’s death. The deceased made it clear in documents accompanying her Will that she did not wish for her stepdaughters to benefit from her estate in any way, describing “intolerable behaviour” they directed towards her as their father’s health diminished. In their judgement, the Court stated:
“Although there are cases in which the relationship of a stepparent and stepchild may develop into a relationship which gives rise to the making of provision, this is not such a case.”
Despite the unsuccessful claim in the Plummer case, it leaves the door open for stepchildren considering a claim in their stepparent’s estate.
You might be eligible to make a family provision claim to challenge a Will if you are a stepchild who had a close relationship with your stepparent and have not been adequately provided for in their Will. Our estate dispute specialists in the Private Wealth Law team at Chamberlains can assist you.
We often receive queries from clients who have received a payment from the National Redress Scheme (‘the scheme’).
Unfortunately there is a perception that a survivor of institutional childhood sexual abuse can seek more compensation after accepting a payment from the scheme.
However, this is not the case.
The National Redress Scheme for Institutional Child Sexual Abuse Act 2018 (Cth)(‘Redress legislation’) established the scheme following The Royal Commission into Institutional Responses to Child Sexual Abuse.
The Royal Commission investigated institutions responsible for children abused in their care and the scheme is designed to support abuse survivors by providing them with a redress payment which acknowledges the harm done to them whilst in care.
Importantly, s. 43 of the redress legislation excludes a person from seeking compensation through legal action in the courts when they have received a National redress payment.
Sadly, the abuse team at Chamberlains has encountered an alarming number of enquiries from survivors seeking compensation after having accepted a redress payment.
This has been a disheartening experience for the team because it means when survivors of institutional child sexual abuse accept a redress payment they have missed out on the potential to receive significantly higher awards of compensation by taking civil action in the courts.
For those survivors receiving offers of payment from the scheme it is very important to seek independent legal advice before deciding to accept a redress payment.
In many cases survivors can be more appropriately compensated through civil action.
If you or someone you know has been offered a payment through the National Redress Scheme please make sure to contact our team for legal advice to explore your options before accepting any payments.
Have you been asked to sign a “Deed of Family Arrangement”?
Are you and your family members trying to keep an estate out of Court?
Do you want to head off a dispute over an estate before it starts?
There are many ways that a dispute over a deceased estate or a family provision claim or an invalid will can be resolved by agreement. In fact it is possible to reach an agreement without a Court case. However, any agreement like this requires careful consideration and quality legal advice to ensure they have the effect you want them to – and do not create more problems than they solve.
Family provision claims
As a brief reminder, claims that are brought by an eligible person against the estate of a deceased person are often called “family provision claims”. They are perhaps more properly called “claims for further provision pursuant to [a relevant statute].” For example, in New South Wales, they are a claim for ‘further provision’ under Chapter 3 of the Succession Act 2006.
They require that someone either be one of the classes of eligible person who can claim as of right (usually children, spouses) or the broader classes of persons who can satisfy the Court that their relationship was sufficiently close to merit being considered by the deceased in their will.
Whether the Court will make a family provision order is based on an assessment of whether or not the will of the deceased person (or the laws of intestacy if they died without a will) made:
“adequate provision for the proper maintenance, education or advancement in life of the person in whose favour the order is to be made”[1]
and in the case of people who have to show the status of their relationship, whether:
“having regard to all the circumstances of the case (whether past or present) there are factors which warrant the making of the application”[2]
Can you contract out of family provision?
When it comes to family provision claims being made on the estate of a deceased person the Courts have been jealous to guard against individuals taking the matter into their own hands and “contracting out” of the jurisdiction of the Supreme Court of the relevant state.
It is not lawful to make a will that is contingent on a person ‘not making a claim’ or that they only get their inheritance if they do not contest the will.
Can you agree with the (potential) claimant?
It is possible to reach agreement with the various family members or potential claimants without the need for a Court case. However, the question is how effective is that agreement?
It is highly desirable that the agreement is documented and that the agreement is written by a lawyer specialising in deceased estate and contested wills. This is especially true with family provision claims – because it is at least possible that the agreement will not be endorsed by a Court if it is later challenged. Any potential claimant on an estate, or an executor/administrator seeking to compromise a claim, should get competent advice before signing an agreement.
For example, in the case of The Estate of Wilson [2020] NTSC 29, the late Mr Wilson was survived by his second wife, two children (of his relationship with his late first wife) and two step-children (the children of his first wife’s prior relationship). Mr Wilson died without a will, and so one of his daughters sought letters of administration from the Northern Territory Supreme Court over his estate – worth just under $400,000 – and she also entered an agreement between herself and the other children, step-children and second wife.
The Court did not grant her letters of administration because it took the view she would not distribute the estate according to law (that is, the bulk passing to the surviving wife) and instead would do so under the agreement. The Court declined to make the grant saying that a Deed of Family Arrangement is only as good as it’s endorsement by the Court – and that the Court may well not endorse an agreement if it is not satisfied the parties understood what they were giving up by signing, or that the parties are simply trying to circumvent the deceased’s intentions or the law of intestacy and vary the distribution of the estate.
[1] Section 59(1)(c) of the Succession Act 2006 (NSW)
[2] Section 59(1)(b) of the Succession Act 2006 (NSW)
Australia’s sexual harassment regime has seen significant changes with the introduction of the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (Cth) (Respect@Work Act) and the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022. These Acts have introduced a raft of legislative amendments and call on employers to take action or otherwise find themselves subject to liability with severe penalties.
Both Acts work hand in hand with each other and have amended several pieces of legislation including:
As of 6 March 2023, all employers and persons conducting a business or undertaking will be subject to a positive duty to take “reasonable and proportionate measures” to eliminate unlawful sex discrimination, including sexual harassment, as far as possible. Importantly, the prohibition relates to “workers” which not only includes employees, but also includes contractors, subcontractors, outworkers, apprentices, trainees, work experience students, and volunteers, as well as persons seeking to become a worker. People who are eligible to make a claim also includes customers, clients and suppliers.
What does this mean for your business?
If a staff member is subjected to sexual harassment, your business can be held liable for this conduct, if you fail to show that you or the business has taken reasonable and proportionate measures to eliminate and prevent this conduct. The introduction of vicarious liability can now see employers directly responsible for non-compliance.
Employers should be aware that a key change is the ability for joint applications to be made, meaning that unions or a group of employees can make an application together.
Workers will also be able to seek orders from the FWC for compensation payments including payments for lost renumeration, and orders which require employers or relevant persons to perform acts to rectify the loss of damages suffered by the applicant.
In addition to the impacts of your business’ reputation, employers and other persons conducting a business or undertaking, need to be aware that significant penalties apply to contraventions. The amount of compensation which can be claimed by an applicant is unlimited. Additionally, from March 2023, civil penalties of up to $16,500 for individuals and $82,500 for companies can be applied.
How do I protect my business?
The yardstick for ‘reasonable and proportionate measures’ is discretionary, meaning it will vary depending on the circumstances of each business and each incident. However, as the onus now sits on employers to take action to reduce and eliminate sexual harassment and discrimination in the workplace; the Fair Work Commission is likely to give considerable weight to what resources, training and education has been provided to both workers and employers.
As such, it is essential that employers are proactively implementing measures to prevent and mitigate any occurrences of sexual harassment in their workplace.
At Chamberlains Law Firm, we recommend prioritising this responsibility and taking minimally onerous steps to protect your business from potential overly onerous penalties down the track. This includes the following:
How can Chamberlains help you?
These changes are undoubtedly significant and can be difficult for employers to navigate. To help you take the step towards active compliance with the new legal framework, we are offering employers a package to address these issues, which includes the following:
Package cost: $990 including GST. Contact the Chamberlains Workplace Law Team for further information.
This article was prepared with the assistance of Isabella Turner.
When you make a Will, you appoint a person to deal with and administer your estate. This person is known as an executor. Sometimes people appoint more than one person, such as multiple adult children. Executors have many duties they need to uphold, and are charged with the responsibility of managing the estate of the deceased Will-maker and distributing the assets in accordance with the Will. They also often act as trustees of the estate, which is a slightly different but interwoven role.
Acting as an executor and trustee of an estate is not a role that should be taken lightly. It is very important to appoint people that you trust to do the job correctly and, where you appointment more than one person, that they will get along and work well together. Generally speaking, their basic duties for a deceased estate include the following –
(a) to manage funeral arrangements and pay the expenses;
(b) to pay other testamentary expenses and debts of the estate, including any tax;
(c) to identify the assets of the estate, and apply for a Grant of Probate (if needed);
(d) to administer the estate and/or trust fairly and effectively;
(e) to avoid conflicts of interest and act in the best interests of beneficiaries;
(f) to consider how powers and discretions will be exercised;
(g) to preserve, insure and invest any trust property; and
(h) to keep accounts and supply information to beneficiaries.
Where multiple executors are appointed and there is a dispute or disagreement between them, this can cause lengthy delays and unintended costs. If an executor breaches their obligations, it can potentially result in their removal and, at worst, personal liability and costs for them.
Case Summary: Jortikka v Haukka [2023] VSC 20
This case concerns the conduct and ultimate removal of a co-executor. The executors were sisters, being the daughters of the deceased. Their mother died in August 2017. The daughter who was removed was also living in the deceased’s property for 2 years and had insisted on the estate paying outgoings (e.g. rates) for the property.
She was found unfit to act the Court, emphasising that the paramount consideration is the welfare of the beneficiaries of the estate (i.e. the people who inherit) and her removal was in the best interests of the estate and beneficiaries. The Court stated at [46]- [48] as follows –
…the court book evidences Ms Haukka’s irresponsible and cavalier approach to her duties as executor, turning what should have been a straightforward administration of a simple estate into a protracted and complicated affair. More than five years has elapsed since the death of the deceased, and the administration of the estate has not been finalised….
Ms Haukka was clearly in a position of conflict of interest, and she was told as such, bluntly, by the estate’s solicitor. But the mere existence of a conflict of interest does not disqualify an executor. What matters is how they manage that conflict of interest. However, Ms Haukka’s conduct during the negotiation period, and her refusal to vacate the property until a court order was made to that effect indicated that she simply does not appreciate the duties and responsibilities of an executor.
The removed executor was ordered to pay costs for removal of her belongings from the estate property and their storage and for utilities during her occupation of the estate property. It was also ordered that land tax for the property should be paid from her share of the estate. The Court also ordered that the other sister and executor, who had been attempting to do everything right, would be awarded additional funds for her pains and troubles in acting in the role (known as executors commission). This is clearly an example of the idea that it pays to do the right thing.
If you require assistance with acting as an executor of an estate, or if you are a beneficiary or co-executor of an estate and have concerns about how an executor’s behaviour and conduct, you should seek legal advice. Our team of qualified estate lawyers at Chamberlains Law Firm can assist you with these issues to ensure that the estate is managed correctly.
Contact our Private Wealth Team for any queries regarding the removal of executors from a will.
“Standard” Will contrasted with a “Discretionary Testamentary Trust” Will
A will is a legal document which records what you want to happen to your possessions and assets after you die. You appoint an executor, who carries out your wishes. You and also include other wishes, for example, what you want for your funeral and who you would like to look after any children under the age of 18. There are two broad categories of wills:
Both kinds set out the wishes of the will-maker, the difference is how much flexibility they give to the beneficiaries and potential benefits that a trust gives that a ‘standard’ will does not have.
Discretionary testamentary trusts allow for a greater flexibility in how your estate can be managed: they give enhanced asset protection for your beneficiaries and allow your beneficiaries to obtain favourable tax treatment in the right circumstances.
The use of discretionary testamentary trusts allows for the splitting of income and capital gains generated among the potential beneficiaries of the trust that is created.
They also allow the trustee to make distributions to future generations that may not even exist at the time of the will’s creation, for example grandchildren, even great-grandchildren.
So, if you have gone through the process of having your will drafted, what happens after you die? Are the terms of the will fixed from that point? Not necessarily. In addition to the commonly talked about “family provision claims” where people seek more from an estate, there are also ways to agree to a change or variation:
What is a deed of variation?
A deed is a legal document which records an interest or right between two or more people.
A deed of variation specifically is used to change the details of an existing agreement. A deed of variation usually includes a restatement or summary of the original terms of agreement and acknowledges that the purpose of the further document is to vary those terms in the new agreement.
From time to time during the administration of an estate, a deed of variation (or sometimes referred to as a deed of family arrangement) is used to vary or alter the terms of a will after the will-maker has passed.
Some examples of circumstances where a deed of variation might be used include to:
Case note example: Re O’Hara-Tucker
Re O’Hara-Tucker [2022] VSC 572 is a case that was heard by Justice McMillan of the Supreme Court of Victoria to determine whether to approve a deed of variation changing a distribution of an estate.
Patricia O’Hara-Tucker (Patsy O’Hara, a “pioneering woman and popular member of the Victorian Bar”) died leaving a will that gave her estate to her siblings – Maeve, Vivien and Eva. Vivien lives in the United Kingdom, suffers from dementia with a poor life expectancy. Her share of the estate was about $3,150,000 under the terms of the will. Viven had appointed powers of attorney in the UK, as she was not able to manage her own affairs.
Vivene’s family sought that her inheritance be split into 8 newly created separate trusts that would pass to her eight adult children, but during her lifetime have the intent to support Vivene’s expenses and meet her needs. This, in turn, would avoid inheritance tax, which the applicants estimated to be in excess of £450,000, levied in the United Kingdom.
One of her children, Siobhan, applied to VCAT to be permitted to manage her mother’s estate (ie. the inheritance) in Victoria, which was granted, including a power to act in what might otherwise be a “conflict transaction”. On that basis Siobhan entered into the deed with the executors of Patsy’s estate.
The Court held, dismissing the application:
The difficulty in this case was that unless the Court approved the deed Siobhan signed, it was not effective, and the Court could not approve this deed (as the executor’s did not have the power to enter it) and VCAT did not give Siobhan enough power to assign Viven’s interest as the parties intended, to avoid the inheritance tax issue.
What to do then?
Though it might be possible for your beneficiaries to change your will – including to change it to account for circumstances that you did not foresee – it is essential that all the parties get specialist advice about the potentially very complex questions of who has the power to achieve that end.
Media release 2 March 2023
Creditors and construction companies facing cashflow challenges are set to be the ‘big winners’, following a recent ground-breaking Supreme Court decision that makes the NSW Security of Payment (SOP) Act* available to entities in Administration – regardless of their solvency. The action** was brought by Chamberlains Law Firm on behalf of insolvency specialist Jirsch Sutherland, to recover debts owed to a subcontractor, Kennedy Civil Contracting (KCC), which had entered Voluntary Administration. The ruling is the first reported decision testing the ambit and scope of Section 32B of the SOP Act.
The matter involved executing a ‘Holding DOCA’ for the purpose of pursuing the debtors, including Richard Crookes Construction Pty Ltd, under the SOP Act. Creditors voted to execute the DOCA rather than placing KCC into liquidation. While it was acknowledged by KCC’s creditors that the company would inevitably be placed into liquidation in the future, the action was being done to ‘get around’ Section 32B of the Act. The Court, which handed down its judgement on February 10, 2023, held that the Holding DOCA was entered into to maximise returns to creditors and, as such, was entered into for a proper purpose and that KCC organising its affairs carefully to avoid operation of Section 32B was not an abuse of process.
Jirsch Sutherland Partner Trent Devine calls the judgement “a game-changer”. “It will allow Administrators to take advantage of the SOP Act when companies are insolvent (not in liquidation) via a DOCA,” he says. “This will allow collection of debts for the benefit of creditors and it will help protect subcontractors. It’s a significant development for insolvency in the construction industry, particularly in NSW, but might also have ramifications in other States, as other security of payment regimes are based on the NSW SOP Act.”
Michael Terry-Whitall, Chamberlain’s Legal Director, Litigation – Building and Construction, adds, “This judgement conclusively answers the question of whether the SOP Act can be used on behalf of an entity that’s insolvent. Construction companies facing cashflow difficulties and which enter into administration now have a far greater chance of pursuing and being paid by their debtors. Recoveries can also assist a construction company that enters into administration to fund a DOCA, while being able to continue to trade or return a far better result for creditors.
“The decision has far-reaching implications for construction companies as a whole, particularly during the current economic climate, which is placing further cashflow pressures on an already strained industry.”
*The Building and Construction Security of Payment Act 1999.
**Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; in the matter of Kennedy Civil Contracting Pty Ltd [2023] NSWSC 99
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About Jirsch Sutherland – jirschsutherland.com.au
Established in 1984, Jirsch Sutherland is one of Australia’s leading national independent insolvency specialists. The Jirsch Sutherland team works closely with small and mid-size accounting, finance and legal firms – and their clients – to provide a wide range of expert corporate and personal insolvency services including liquidations, voluntary administrations, receiverships and bankruptcy.
With head offices in Sydney, Melbourne, Brisbane, Newcastle and Perth, supported by a network of regional offices, Jirsch Sutherland’s national reach combined with a local presence underpins the company’s ongoing success. For almost four decades, Jirsch Sutherland has earned a well-deserved reputation for protecting and guiding clients through the insolvency process in a fair and ethical way.
In Western Australia, Jirsch Sutherland trades as WA Insolvency Solutions (WAIS).
About Chamberlains Law Firm
Chamberlains Law Firm is a full-service firm drawing on a range of industry leading experts to provide pragmatic legal solutions to any problem. The firm has specialty legal teams for insolvency, corporate & commercial, employment, construction, insurance, personal injury, property & conveyancing, commercial litigation and private wealth, estate planning and litigation. With Chamberlain’s real-world understanding, wide range of nationally-recognised expertise, and straightforward advice, it guides clients through any legal challenges. Big or small, complex or simple, start to finish.
For further information:
Lisa Llewellyn
Llewellyn Communications
0419 401 362
The Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) provides a powerful tool to construction companies to ensure that they get access to prompt and regular payments for construction work and/or related goods and services.
The Act provides construction companies with a statutory right to issue payment claims and receive payments, even if the contract has no provision for progress payments (see our article What is the Building and Construction Industry Security of Payment Act? for more details). Apart from the adjudication process implemented by the Act, in certain circumstances, a claimant is also entitled to recover the amount claimed as a debt due to the claimant in Court. This is known as a “Statutory Debt”.
When does the Statutory Debt arise?
The Statutory Debt will crystalise in 3 scenarios:
What happens once the Statutory Debt crystalises?
Firstly, a claimant may suspend works under SOPA. Secondly, they may immediately sue in Court to recover the Statutory Debt.
How is suing for the Statutory Debt in Court any different from a normal Court case?
Because the debt being claimed is one created by statute, the legislation itself limits what defences a respondent can argue to resist the law suit. Specifically, a respondent cannot bring any cross-claim or file a defence relating to matters arising under the contract. The types of defences which “arise under the contract” include that the work was defective, that the work was not approved, that the work is incomplete or that the value of the work is too high. All of these defences are statute barred.
How long does suing for the Statutory Debt take?
Given the limitation on filing cross-claim and defence, when commencing court proceedings for statutory debt, a claimant would normally file an application for summary judgment.
Summary judgement will be granted when the Court reviews a matter and is satisfied that a defendant has no arguable defence. Typically, in proceedings suing for the Statutory Debt, the process from filing in Court to obtaining summary judgement takes 8 – 12 weeks.
Practically speaking, the Act provides a fast track and low costs option for a claimant to obtain a judgment to recover construction debts. When it comes to recovery, companies undertaking construction works should take advantage of the statutory debt scheme offered under the Act.
There are statutory debt provisions similar to the NSW Act in most states and territories. If you need further assistance or have any questions, please get in touch with our building and construction team.