There are hosts of options for Patent funding, however when seeking funding there are a couple things that should be considered;
Funding Types:
A recent decision handed down by the Supreme Court of Western Australian has highlighted the weak findings in the qualification of directors, creditors and companies’ solvency in the absence of evidence.
In the matter of Barboutis v The Kart Centre Pty Ltd [No 2] [2020] WASCA 41, the Supreme Court of Western Australia considered the deadlock in the management of affairs of a Company and the solvency of a company, looking to the official status of a director and payments made to the company.
Background
The facts of the case revolve around the management of the affairs of The Kart Centre Pty Ltd (the Company). Mr Colin Barboutis and Mr Andrew Freeman formed the Company, The Kart Centre Pty Ltd, which was incorporated in September 2016.
On incorporation, the directors of the Company were Mr Freeman and Mr Barboutis’s son, Nicholas Barboutis, however a form lodged to the ASIC shortly afterwards recorded that Mr Barboutis had replaced Nicholas Barboutis’s position as director. The initial shareholders of the Company were Bullsbrook (associated with Mr Barboutis) and Rilyla (associated with Mr Freeman).
Eventually the relationship between Mr Barboutis and Mr Freeman broke down and there were disputes of various amounts and contributions paid to the Company.
In 2016, Bullsbrook and Rilyla entered into a Share Sale Agreement, whereby Rilyla agreed to purchase all of Bullsbrook’s shares in the Company. Bullsbrook issued a letter of demand for an amount said to be an outstanding loan amount due by the Company to Bullsbrook. The Company did not pay the amount claimed.
On 5 April 2019 the appellants made an application for the Company to be wound up on the ground of insolvency or alternatively, on the ground that it was just and equitable to wind-up the Company on the proposition that there was a deadlock in the management of the affairs of the Company. The appellants had standing to seek an order on the grounds that (a) Mr Barboutis was a director of the Company and that (b) Bullsbrook was a creditor of the Company.
Valid appointment as a director
There was no written evidence to suggest the resignation of Nicholas Barboutis as a director, and the subsequent appointment of Mr Barboutis as a director, except for the registered change in the ASIC records. The Courts emphasised s 1274B(2) of the Corporations Act which provides that ASIC records are admissible as prima facie evidence in the absence of evidence to the contrary. The appellants failed to provide any evidence such as a signed letter of resignation, notice of resignation, signed and written consent to act as a director and records of appointment.
The Court found that the absence of relevant documents constituted evidence to the contrary, thus the appellants could not rely on the ASIC records. In addition to the absence of evidentiary support by the appellants, their submissions that Nicholas Barboutis had resigned to be a director and that Mr Barboutis had been validly appointed as a director were dismissed, consistent with the master of the previous court’s findings.
Bullsbrook as a creditor and debt due and payable
The issue of whether Bullsbrook was a creditor with a debt owed by the Company depended on the characterisation of the funds paid by Bullsbrook as a loan or a capital contribution.
The evidence supported Bullsbrook’s contributions being made and received as a loan. Despite Mr Freeman’s evidence disputing the character of the contributions as a form of capital, he signed off on the Company’s financial statements which recorded the contributions as a loan, thereby unequivocally accepting the Company’s financial position. The terminology used of the funds received as a ‘capital asset’ in the broader sense is not determinative of the proper legal characterisation of the transaction.
Therefore, the Court upheld the ground of appeal finding that Bullsbrook was a creditor of the Company.
The appellants did not however establish that Bullsbrook’s loan to the Company was repayable on demand and presently due and payable, thus the winding-up application was to proceed.
Solvency of the Company
The appellant’s argued that the Company’s insolvency was dependent on the contention that the Company was unable to pay the Bullsbrook loan. Since the debt could not be established as due and payable, this was a weak case. There was no further detailed examination by the appellants of the Company’s financial position (i.e. projected cash flows or aged creditor analyses). In conclusion, having assessed the Company’s available assets and financial position, the Company was not found to be insolvent.
Wound up on just and equitable grounds
The order of winding up on just and equitable grounds considered the question of whether or not there a deadlock in the management of the affairs of the Company. This was dismissed upon the failed contention that Mr Barboutis was a director of the Company. Mr Freeman’s decisions for the Company without the knowledge, consent or approval of Mr Barboutis as co-director, were not sufficient as he was not a director of the Company.
Since that ground of appeal failed, so too must the winding up on just and equitable grounds.
Decision
The appeal was dismissed and the parties were to be heard on costs.
Takeaways
It is extremely important to have evidence such as letters of intention, written consent and financial statements, to support assertions of changes in directorship and the status of payments by creditors. Even the use of terminology is not enough for a payment to be characterised in a particular way, as it is the actual intention and subsequent handling of the payments that will characterise their status.
A recent decision handed down by the Supreme Court of the Australian Capital Territory (ACTSC) has shed light on the substance and evidence necessary for a Statement of Claim to be adequately pleaded.
In the matter of Today’s Homes and Lifestyle Pty Ltd (in liquidation) v McCoullough [2020] ACTSC 72, the ACTSC found that the weakness of the Plaintiffs’ evidence amounted to an order for security for costs. The case concerned the payment of various sums of money paid by the Plaintiffs, the company in liquidation, to the Defendants, family members of the company. The Plaintiffs claimed that these payments were loans and demanded the repayment of the monies from the Defendants.
The Defendants made an application for the Plaintiffs’ Statement of Claim to be struck out on the basis that there was no cause of action. If the application was unsuccessful, the Plaintiffs were to provide security for costs.
The Plaintiffs’ cause of action was dependent on establishing that the payments were loans, however, they provided little by way of actual evidence to prove this. They relied primarily on various transaction lists and further evidence that they anticipated may have emerged during the discovery process, to make out their claim.
Transaction lists were found to be insufficient in identifying the payments as loans as they showed no more than a list of transactions and the movement of money from the company to the defendants (Michell v Onroad Offroad Pty Ltd [2018] VSC 648).
On the evidence provided, the trial judge found that there was a cause of action, but the Plaintiffs’ claim was weak and ‘somewhat lacking in substance’. He stated that they would need a good deal more evidence before they were going to succeed.
Furthermore, the trial judge referenced the case of Jazabas Pty Ltd & Ors v Haddad & Ors [2007] NSWCA 291 at [94], emphasising that it was not enough that these transactions were only a ‘contributing factor’ to the company’s financial position. In the present case, the asserted loans were not necessarily the sole cause of the company’s financial position.
Although the claim was not struck out on the absence of a cause of action, the weak evidence favoured an order for security for costs. The Plaintiffs were accordingly ordered to provide security for the Defendants’ costs in the sum of $75,000.
This case highlights the significance of pleading adequately evidenced claims and the potential for adverse security costs orders.
Interested in learning more about Insolvency & Reconstruction?
Click on our recent articles to find out more:
Statutory Demands and Insolvency
Chamberlains’ Response to Proposed Exposure Draft of Bankruptcy Regulations 2021
Part 2 – Writ for the Levy of Property:
One of the most common forms of enforcement in the Local Court of New South Wales includes the Writ for the Levy of Property. This allows the sheriff to attend the property of a debtor and take possession of their goods which can be seized and later sold at a public auction to re-pay a debt to a creditor. The time of day which the sheriff attends can be selected and particular known items which the debtor owns, such a vehicle (noting that it must be unencumbered) can be seized.
Once filed, a Writ will stay active for execution by the sheriff for a period of 12 months.
In the circumstances where the sheriff is allowed into the property and finds goods that meet the value of the debt, the sheriff will provide the debtor with a “Notice to Custodian” (“notice“), which identifies the goods of value in the property. The only condition is that the debtor must have title to the goods before they can be seized.
If the debtor has failed to make an instalment application or repay the debt within 14 days of the sheriff issuing the notice, the sheriff will return to the property and seize the goods to be sold at a public auction. The proceeds of the sale are given to the creditor to cover the debt amount with any balance being returned to the debtor.
The creditor is responsible to pay fees for the removal of the goods which may include fees for the removal and storage of the goods. For instance, the removal of a motor vehicle may involve fees for a tow truck. There is also a further execution fee to be paid to the sheriff’s office for the second attendance to the property to seize the goods. These fees form part of the amount owed and are recouped from the funds of sale.
However, successful execution of Writs can be challenging for the following reasons:
The leasing Mandatory Code of Conduct (Code) detailed in our previous article (https://chamberlains.com.au/update-on-leasing/) is now binding in the ACT.
The Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020 became law on 12 May 2020, which gives legal effect to the code in ACT. As explained in our previous article, the purpose of the Code is to impose good faith principles for landlords and tenants to come together and negotiate an agreement.
The instrument will continue to be in force until the end of the COVID-19 emergency, or any later day notified by the Minister under the Leases (Commercial and Retail) Act 2001.
The Treasurer of Australia has issued a legislative instrument modifying certain provisions of the Corporations Act 2001 (Cth) (the Act). The modifications have been implemented in response to several practical restrictions that have arisen in complying with public health requirements for social distancing during the Coronavirus pandemic.
The enactment of the Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 (the Determination) deals with provisions about meetings, communication and the signing of documents facilitating the use of technology.
The changes come into effect 6 May 2020 and will remain in place for a period of 6 months.
Meetings via technology
The changes allow for the use of technology in the operation of meetings, allowing participation without having to be physically present.
Several changes outlined in s 5 of the Determination include:
Execution of Documents
Documents, which include documents in electronic form, may execute a document without using a common seal (s 6 of the Determination) if:
either:
These changes allow for documents to be signed electronically by directors and company secretaries.
Insolvency appointments
The changes apply to meeting provisions of the Act, the regulations and the Insolvency Practice rules that:
The changes to the Act therefore apply to creditors’ meetings in corporate insolvency appointments.
On 16 April 2020 the Chief Justice of the Family Court and Federal Circuit Court of Australia announced the establishment of a new specialist list in each Court, to be known as the National Arbitration List.
Arbitration has been possible in property cases under the under the Family Law Act for over two decades. However the use of this alternative dispute resolution process has historically been almost non existent. In 2016 the Family Law Amendment (Arbitration and Other Measures) Rules 2015 and an amendment to the Family Law Rules 2004 were introduced to encourage consideration of arbitration, but again, the process gained little popularity.
There are now long delays to obtain a final hearing date for property matters in the Family Law Courts. Prior to COVID -19 it could take twelve months to three years to obtain hearing dates. As matters take longer, they generally become more costly. The limitations with litigation arising from COVID-19 can only exacerbate this issue. Arbitration, with the consequence of obtaining a binding outcome, must now be considered as a viable alternative to going to trial through the Family Law Courts if mediation and negotiation cannot resolve a dispute.
Arbitration, as defined by s10L of the Family Law Act 1975, refers to the process where parties present their matters to an independent arbitrator. The process is voluntary and the arbitrator and process agreed upon by all involved. The process is designed to afford parties more control over obtaining a binding decision outside of court. If your matter is already being litigated, you can still access the process in relation to some or all issues outstanding. Pursuant to section 13 H of the Family Law Act, once registered, an arbitral decision takes effect as if it were a decree of the court. Review of the decision is on a point of law only.
The new National List will operate as an electronic list in each Court with specific Judges designated to manage the lists and applications arising therein.
As a firm where Arbitration has traditionally been used in our Commercial litigation matters, Chamberlains supports the wider use of arbitration in family law for property matters to achieve cost effective and expeditious outcomes for our clients.
Interested in learning more about Family Law?
Click our articles below to find out more;
Arbitration in Family Law Matters
Family Law Courts, Family Violence and COVID-19 Response
Timeframes for Family Law Appeals
The Fair Work Commission is responsible for applying provisions of the Fair Work Act 2009, Fair Work (Registered Organisations) Act 2009, and includes powers to deal with some disputes about the JobKeeper payment scheme.
About the scheme
An eligible business will be reimbursed $1,500 per fortnight per eligible employee. These payments are available fortnightly between 30 March 2020 and 27 September 2020. The Coronavirus Economic Response Package Omnibus (Measures No.2) Act 2020 introduces new Part 6-4C into the Fair Work Act which allows employers to give certain directions to employees and make certain requests of them. It also allows the Commission to deal with disputes about the operation of the new Part.
JobKeeper enabling directions
Part 6-4C allows an employer who qualifies for the JobKeeper scheme and becomes entitled to the JobKeeper payments to give the relevant employee three kinds of directions:
1. A JobKeeper enabling stand down direction
This is a ‘flexible stand down’ where an employer can require an employee to work on a day that they don’t usually work; work for a shorter amount of time on a day they usually work or a day they do not usually work; or work reduced hours overall (which can be nil).
This stand down direction can only be given if the employee cannot be usefully employed for their normal days or hours due to changes to the business that are because of the COVID-19 pandemic or because of government initiatives that have been implemented to slow down the spread.
Stand downs that are not JobKeeper enabling stand downs include those listed in the Fair Work Act, and an employer need not qualify for the JobKeeper scheme to stand down employees under those circumstances and need not pay them during the period of stand down either. Some examples of non-JobKeeper enabling stand downs include when an employee cannot be usefully employed due to industrial action, when machinery or equipment necessary for work has broken down and the employer is not responsible for this breakdown, and any other stoppage of work for any cause which the employer is not responsible.
2. A direction in relation to duties to be performed by the employee
An employer may direct an employee to perform other duties that they might not usually perform in the course of their employment.
Such duties, however, must still be within the employee’s skill and competency and remain reasonably within the scope of the employer’s business operations.
3. A direction to perform duties at a place different from the employee’s normal place of work, including their home
An employer may direct an employee to work in a place that is different to their normal workplace. This may include off-site workplaces that the employer can utilise, such as disaster recovery sites, so long as the employee is not required to travel an unreasonable distance. Additionally, an employer may require employees to work from their home, provided it is a suitable place of work for the employee’s duties.
When JobKeeper enabling directions will have no effect
The JobKeeper enabling directions cannot be made retrospectively. Any directions made before Part 6-4C came into force on 9 April 2020 are not authorised by the provisions under Part 6-4C.
The directions will also have no effect if they are unreasonable or the employee was not consulted at least 3 days before such a direction was given. Consultation, particularly in relation to stand downs, redundancy and JobKeeper enabled stand downs, requires employers to genuinely consider valid alternatives, such as altering employee work arrangements. The Fair Work Commission in ASU v Auscript (2020) stated that employers have an “obligation to treat staff with dignity” during this time, and that if an employer has decided to stand down an employee, they must be prepared to justify their decision given the availability of other options.
Additionally, any JobKeeper enabling directions about duties of work and location of work will have no effect unless the employer reasonably believes they are necessary to continue the employment of one or more employees. In determining whether a direction is necessary to continue employment, it does not matter that a relevant direction could have been given to another employee in the same position as the employee in question.
Employer payment obligations
In order to be eligible for JobKeeper payments, an employer must pay amounts totalling at least the $1,500 for the fortnight to or in respect of the eligible employee (the ‘wage condition’). Failure to meet the wage condition means an employer may be liable for civil penalties.
An employer must ensure that the total amount payable to the eligible employee in respect of the fortnight is not less than the greater of:
Moreover, if the JobKeeper enabling stand down direction applies, the employer must ensure that the employee’s base rate of pay (calculated on an hourly basis) is not less than the base pay that they would have been paid if the direction had not been given.
Disputes
The Commission may deal with disputes regarding the operation of Part 6-4C. An application must be made by the employer, employee, union or employer association, and the Commission may make orders which includes any orders it considers ‘desirable’ to give effect to a direction, setting aside a direction, or substituting a different direction.
Some examples of disputes that may come before the Commission include:
The Commission, however, cannot deal with disputes about decisions of the Commissioner of Taxation as to whether the employer is entitled to the JobKeeper scheme. Additionally, the Commission cannot handle disputes regarding employers refusing to apply for JobKeeper. In regards to disputes about underpayments, the Commission can assist with disputes arising under enterprise agreements or modern awards, however it cannot assist with claims for underpayment of wages and entitlements, including payments under the JobKeeper scheme.
Applications to deal with a dispute
Who can make an application?
A national system employee, a national system employer, an employee organisation (such as a union) or an employer organisation.
Can a respondent object?
A respondent may object to a dispute if they do not believe that the Commission has jurisdiction to deal with the application, or if the applicant in question is not eligible to make the application.
A jurisdictional objection, however, does not stop the dispute application. The objection must be determined by the Commission and the respondent may be required to provide evidence and/or submissions on its objections.
An applicant may also discontinue the application whether the matter has settled or not.
Outcomes of Commission dispute resolutions
The Commission may deal with a dispute through facilitating mediation or conciliation in order to assist the parties to agree on how to resolve their dispute. The Commission may also make a recommendation or express an opinion. Finally, arbitration by a Commission Member may result in a decision being made on the matter and if necessary, a Commission Member may issue an order.
Orders that the Commission may issue include:
A person who is aggrieved by a decision of the Commission may appeal that decision by lodging an appeal within 21 days after the date that the decision in question was issued.
A respondent may appeal a decision or order of the Commission on the basis of an error of law, which concerns the correctness of the decision, or an error of fact, wherein the Commission has made a decision that conflicts with the evidence presented to it.
If an order of the Commission stands, however, if a person does not comply with it, an employee, employee organisation or an inspector may seek to enforce the Commission’s order through civil remedy proceedings in the Fair Work Division of the Federal Circuit Court, the Fair Work Division of the Federal Court, or an eligible State or Territory Court.