Chamberlains, Author at Chamberlains

Introduction

The Building and Construction Industry (Security of Payment) Act 2009 (ACT) (“the Act”) is a piece of legislation designed to facilitate the speedy recovery of payments under contracts in the building and construction industry. The Act aims to ensure people are able to recover payments related to construction work and related goods and services under certain construction contracts.

This regime provides an informal, inexpensive and quick process by which an authorised nominating authority can appoint an adjudicator, and parties can resolve their dispute over payment more quickly, and without the stress and cost of litigation.

Whom does the Act apply to?

Under the Act any person who undertakes to carry out construction work or supply related goods and services in the ACT under certain contracts can make a claim under the Act including:

(a) Contractors against principals/developers;
(b) Subcontractors against contractors;
(c) Suppliers against customers;
(d) Plant and equipment hirers against clients; and
(e) Consultants against clients.

The types of costs that can be claimed under the Act are wide ranging, and include:

(a) Construction work you have done;
(b) Construction materials or plant you have provided;
(c) Consulting services you have provided;
(d) Interest on overdue progress payments;
(e) Your losses and additional expenses due to work being deleted from your contract while you suspended work under the protection of the Act; and
(f) Cash security and retention monies if allowed for in the contract; At the end of a contract, a claim under the Act can be made for the final payment.

How do you make a claim for payment under the Act?

The process for making a payment claim under the Act is to issue a claim for payment in writing to the respondent (the party responsible for paying your work, typically a head contractor). The claim must contain the following information:

(a) A description of the work or related goods and services for which you are claiming;
(b) The amount you claim is payable; and
(c) The words “This is a payment claim pursuant to the Building and Construction Industry Security of Payment Act (2009) ACT”.

Unlike the Building and Construction Industry Security of Payment Act 1999 (NSW), the ACT legislation requires a payment claim to explicitly state that it is being made under the Act for it to be valid.

Any payment claim that fails to meet the above criteria would be an invalid claim. An invalid payment claim means you cannot access the benefits of the Act to seek payment of overdue debts, such as being able to file an adjudication application or suing under the statutory debt.

Conclusion

The Security of Payment Act provides a powerful tool for contractors experiencing delayed or disputed payments in the ACT. It not only provides an alternative to litigation for debt recovery, but it is also a useful supplement to formal proceedings. It is important to be fully aware of your rights under the Act as well as the formal requirements contained within it, including strict compliance with certain time periods.

It is that time of year again where a light dip in your backyard swimming pool is a welcome relief from the warm summer days. The swimming pool is a feature of many Australian homes, so chances are if you are looking to purchase a property, you may be purchasing one with a swimming pool. But how do you know if the swimming pool in your property complies with the current legislation in the ACT?

The first question to ask is whether the structure on the property is classified as being a swimming pool and subject to the relevant rules and regulations. The Building (General) Regulation 2008 provides that any structure that can be filled with water to a depth of greater than 300mm and used principally for swimming, wading, paddling or any other human aquatic activity will be deemed a swimming pool. While the bath in your bathroom also fits this description, rest assured it is not classified as a swimming pool and will not require a barrier, but a bathing or wading pool or a spa will.

The second question to ask is: when was the swimming pool built? The ACT does not have a standardised set of rules and requirements relating to swimming pools because the laws in place do not apply retrospectively. For example, if you are purchasing a property where the swimming pool was built prior to 1970, it is unlikely that there would be a fence or barrier in place as there were no requirements to do so. If a property is purchased where the swimming pool was installed after this date a fence/barrier will be required, however such barriers will not be required to be constructed to a standard that meets the current rules and regulations. There are also currently no rules or requirements for the owner of a property to upgrade their swimming pool to comply with the current legislation unless they make a substantial change to the structure (i.e. if you wanted to replace or erect a swimming pool fence, the new fence must comply with the current legislation).

If a swimming pool was constructed from 2010 onwards the rules noted above will not apply. The swimming pool must be constructed in accordance with the rules and regulations made under the Building Code of Australia which are as follows:

1. It must have a safety barrier in place that meets the requirements of Australian Standard 1926.1;
2. It must have a reticulation system in place that meets the requirements of Australian Standard 1926.3;
3. It must have an egress installed in the form of ladders, steps in the floor of a pool or a ramp; and
4. It must be capable of being completely emptied.

When purchasing a property, regardless of when the swimming pool was built, it is important to check that a Certificate of Occupancy and Use has been issued. As a swimming pool is classified as a class 10b structure it will not require development approval, meaning that it is not subject to strict design requirements. It will however, require building approval. To confirm that a swimming pool has building approval, a Certificate of Occupancy and Use will be issued and available for inspection on the building file. If a Certificate of Occupancy and Use is not issued, then the swimming pool will not be deemed compliant with the rules and regulations in place at the time the swimming pool was constructed. Purchasers of non-compliant swimming pools will therefore need to factor in additional costs for their purchase as there are no obligations on the Seller of a property with a swimming pool in ACT to make the swimming pool compliant.

There are current reviews of the legislation which would see all swimming pools comply with a standardised set of rules and regulations, similar to the laws in place in NSW. Such changes would put the burden on a Seller to ensure that the swimming pool was compliant at the time of sale. However, unless and until such changes are made to the legislation, no obligation on the seller exists, and buyers of property with a swimming pool must make sure that they carry out their proper due diligence.

The terms ‘joint tenancy’ and ‘tenancy in common’ are often use in situations where two or more people purchase real property together. But what do these terms actually mean?

Joint tenancy

Where two or more people own real property as joint tenants each ‘joint tenant’ owns an interest in the whole of the property. This means that each joint tenant is entitled to possession and enjoyment of the whole of the property and therefore, cannot exclude the other joint tenant/s from any part of the property.

Joint tenancies are subject to a right of survivorship, which means that upon the death of one joint tenant, the surviving joint tenant inherits the interest of the deceased joint tenant. For example, if there are two joint tenants, then upon the death of a joint tenant the surviving joint tenant would own the property in full, and the joint tenancy would cease. However, if there are three joint tenants and of the joint tenants dies, then the two remaining tenants would continue to own the property as joint tenants.

Joint tenancy is a common form of ownership among couples and people who make equal contributions to the purchase of the property.

Tenancy in common

Under a tenancy in common each ‘tenant in common’ is regarded as having a separate and undivided interest in the property, equivalent to the percentage of the property that they hold. Tenants in common may hold their shares equally or otherwise in unequal portions. A tenancy in common is not subject to a right of survivorship and it is therefore important when holding a property as a tenant in common, that your interest in that property has been dealt with in your Will.

This is a common form of ownership where the purchasers of a property make unequal contributions to the purchase price. This form of ownership is also often used to assist with estate planning where the owners do not wish their interest in the property to automatically go to the remaining owner(s) when they die.

Changing the form of ownership

The forms of tenancy outlined above can be amended or dissolved through completing the requisite Land Titles Office forms. This will typically involve obtaining the written consent of all owners and if applicable, the mortgagee.

Implications for estate planning

A joint tenant cannot dispose of their interest in the property by Will, as upon their death their interest in the property will pass to the surviving joint tenant/s. A tenant in common can however dispose of their interest by Will because their estate will retain their interest in the property upon their death.

Conclusion
The type of ownership of the property can affect the rights the owner has in relation to the property and therefore how the property can be disposed of by Will. You should consider which ownership structure best suits your personal and estate planning needs.

Introduction

Crowd-sourced funding (CSF) refers to small start-up public companies that are not listed on any stock exchange raising funds from a large number of small investors. It is very useful where a company might have difficulty with obtaining debt finance due to lack of establishment, but where traditional equity fundraising is too expensive.

You may have heard of American websites such as Kickstarter and Indiegogo that are CSF intermediaries. These intermediaries have facilitated the rise in artists, producers and entrepreneurs funding their projects with the backing of mum-and-dad investors across the country.

Following suit, the Australian federal government has recently passed an amendment to the Corporations Act 2001 (Cth) (Act) which allows for private companies (i.e. a corporation with the suffix ‘Pty Ltd’) to access CSF. Previously, a private company that desired to enter into a CSF scheme was required to convert to a public company. This imposed significant regulatory burden on company directors, even with access to some temporary corporate governance concessions.

The Corporations Amendment (Crowd-sourced Funding) for Proprietary Companies Act 2017 (Amendment) has been designed to balance the protection of investors with reducing compliance costs and unduly burdensome corporate governance requirements.

Effects of the Amendment

For a private company to be eligible to access CSF, they must:

(a) have less than $25 million in gross assets and annual revenue;
(b) not be an investment company (i.e. does not manage shares for clients); and
(c) have its principal place of business in Australia.

The obligations imposed on a private company that accesses the CSF regime include requirements to:

(a) maintain a minimum of two directors for transparency and certainty of succession planning and decision making;
(b) prepare annual and directors’ reports as required by accounting standards (private companies are not generally required to do this);
(c) undertake a compulsory audit once $3 million is raised from CSF sources (not generally required, and increased from $1 million that was applicable to public companies accessing CSF); and
(d) comply with related party transaction rules under Chapter 2E of the Act (not required by private companies otherwise).

The overall effect is that private companies must conform to some of the requirements that apply to public companies. This is because private companies using CSF will be accessing public funding, and this carries associated risks for investors, especially where there is a lack of information about an issuing company.

It is also worth noting that private companies are limited to having 50 shareholders in total per section 113(1) of the Act. However, the new Amendment stipulates that CSF shareholders do not count towards this limit. It will remain to be seen how this would operate if a market for secondary trading of CSF shares develops.

Conclusion

Access to capital is crucial for any young business and finding ways to connect with prospective investors is important. In the internet age, making this connection is significantly easier. However, the new obligations imposed on any private company seeking CSF under the regime should be accounted for and carefully considered by its directors before making any decision.

The new Amendment falls in line with promoting the expansion of small businesses through alternative means of funding. It will be very interesting to see how private Australian companies take advantage of the new CSF rules and kickstart their business.

Interested in learning more about Corporate & Commercial Law?

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ASIC’s Corporate Governance Taskforce

Introduction

FIFA, the peak governing body for Association Football, has recently caused a stir by removing references to corruption from their latest version of their code of ethics (Code).
FIFA has been frequently criticised in the past for unethical behaviour and has been the subject of numerous scandals, such as that involving the financial misconduct of its former president, Mr Sepp Blatter.

As shown by FIFA, the alteration or failure to uphold the Code has serious effects on external perceptions of its already maligned corporate governance methods.

Why a Code of Conduct Matters

Codes of conduct are formal documents that outline:

(a) the values and principles that the company operates under;
(b) the general professional standards that all employees must observe; and
(c) the processes and mechanisms for ensuring the values and standards are followed.

Putting to paper the principles that the company stands for and linking them to the people involved in their operation is crucial for the understanding of its members and directors. It can then be used as a reference for decision making by all members of the organisation.

A code of conduct also signals to external parties that the organisation has given thought to its behaviour and risk management strategy.

FIFA’s New Code

The most notable amendment to the Code has been the removal of the word ‘corruption’ from a clause previously relating to bribery and corruption. American authorities had previously prosecuted several senior FIFA board members in connection with racketeering, wire fraud and money laundering (among others) in 2015. Corruption is not limited to bribery.

Another significant change is the introduction of defamation-based infringements for any public statements of a defamatory nature against FIFA, with bans ranging from two to five years from any football related activities. With no examples provided and no scope indicated, it may be used as a powerful threat against members that criticise FIFA.

The new Code has introduced several other new articles and concepts. These include:

(d) a specific match fixing clause, signalling a crack down on match manipulation in particular;
(e) minimum sanctions for bribery;
(f) a limitation period for bribery, match manipulation and financial misconduct, such that prosecution of breaches may not occur after 10 years following the breach, where previously there was no time limit; and
(g) decisions made by FIFA’s ethics committee regarding unscrupulous member conduct may now be appealed directly to the international Court of Arbitration for Sport.

In a recent press release, FIFA contends that anti-corruption guidelines have not been substantively removed from the Code, and that this is a slight wording change that does not impact the infringements. But it is bemusing that FIFA would decide to remove references to the word ‘corruption’ given its tumultuous history with the concept of corruption in general. The introduction of a defamation clause could also be perceived as FIFA attempting to silence dissidents, particularly if they are criticised for corruption or poor corporate governance.

Therefore, while FIFA president Mr Gianni Infantino has promised a more democratic, transparent and honest organisation, outside perceptions of the effectiveness of the Code and FIFA as a whole will likely remain negative.

Conclusion

Codes of conduct or ethics are important tools for good corporate governance for any company or incorporated association, regardless of its size.

While they aren’t mandatory and in some cases are not legally binding, they provide important guidelines that the company will use to self-regulate for compliance and risk management and external stakeholders to judge their performance and behaviour.

There’s no doubt that Australians love their pets, in fact more than 50% of us live in a household with at least one cat and/or dog. In the last year alone, Australian’s are estimated to have spent a total of $12.2 billion on pet products and services. Whilst we all want to ensure that our loved ones are taken care of once we have passed, not many of us turn our minds to what will happen to our fur-family should our pets outlive us.

In August of 2007 hotel heiress Leona Hemsley turned her back on her relatives, and decided to bequeath her Maltese Terrier “Trouble” $12 million through a trust fund, to ensure that Trouble could receive around the clock care, be transported via private jets, maintain its luxury lifestyle at the Helmsley Sandcastle hotel in Sarasota and eventually be buried in a 12,000 square foot mausoleum beside Hemsley. Whilst this amount was reduced to $2 million by the Courts following a family provision claim, trusts of this nature are not uncommon with a Chihuahua named “Conchita” recently being left a $8.3 million Miami beach mansion and a collection of Cartier diamond necklaces.

Australian law classifies pets as a form of property, leaving room for discretion for how you wish for them to be cared for under your Will. If you fail to make a provision for your pet under your Will, they will form part of the residue of your estate and left to the relevant residuary beneficiaries. Pets can be provided for under Wills in three ways: through gifting them to a friend or charity; gifting a pet and sum of money to a friend or charity; or establishing a testamentary trust under your Will for the benefit of your pet.

You may simply make a provision for your pet under a clause in your will, entrusting them to a friend or charity that will care for your pet’s wellbeing. You may also like to consider leaving a sum of money with a direction for the beneficiary as to how that money should be used. Whilst any instructions in relation to how you would like for your pet to be cared for are not legally binding, these may held guide your pet’s new owner as to your fur-baby’s standard of care. Many charities have established programs by which a bequest is made in their favour in exchange for the ongoing care of your animal. Charities such as the RSPCA have established pet legacy programs in which dedicated staff care for your pet whilst a suitable candidate is found for re-homing.

Testamentary trusts offer a more secure mechanism for caring for the ongoing needs of your pet after you have gone. This trust structure established through your Will allows you to set aside funds to accommodate the needs of your pet for the remainder of their lifetime. You will need to think about who you would like to nominate as carer of your pet, and who would act as a backup carer should they be unable to act. As animals are classified as property under the law, it is important that you nominate a trustee that is reliable and ensure the ongoing care of your pet, as maintenance of a pet cannot be enforced by a Court should a trustee not fulfil their obligations.

In September 2018, Radio broadcaster, Alan Jones and his team at 2GB and 4BC were ordered to pay a record breaking $3.7 million in damages to the well-known Wagner Family following Jones’ claim that they were responsible for the drowning of 12 Grantham locals following the Lockyer Valley Floods of 2011, causing the collapse of a wall in a quarry owned by the family, causing a “tsunami”-like wave to flood Grantham. Since October 2014, Jones made a series of 32 separate broadcasts to his audience, purporting of a higher-level cover up and corruption at play, noting “This was not an act of God. This devastation was brought about by human intervention. It could have been avoided.”

In a record setting judgement handed down by Justice Flanagan, he ruled that Jones’ conduct was unjustifiable on the basis of “the intrinsically vicious and spiteful wording used … [and] Mr Jones’ wilful blindness to the truth or falsity of the defamatory accusation.” The Grantham Floods Commission of Inquiry in 2015 exonerated the Wagners of any responsibility for the flooding event in Grantham, even stating that the quarry structure may have mitigated or delayed the flooding. This payout stands as the highest award for defamation following the $4 million cut to the $4.6 million payout for actress Rebel Wilson on appeal.

In calculating the damages awarded to the Wagner family, Justice Flanagan gave consideration to the damages to the family’s reputation, particularly amongst their local community. The Court also looked at the emotional hurt suffered by the Wagner’s following these broadcasts. Pursuant to Section 35 of the Defamation Act 2005 (Qld) a $389,500.00 cap is placed on non-economic damages for defamatory imputations. This can be exceeded in exceptional instances where the Court finds that the defamation is of a character that warrants an award of aggravated damages.

This case was unusual due to the significant number of individual imputations made, and the difficulty the Court faced in ascertaining where the dissemination of these imputations stopped. Courts often take into account the ‘grapevine effect’ when calculating damages, and in this instance, the spread of defamatory content did not stop with the recipients of the broadcast, and it would be impossible for a Court to actually determine the scope of the dissemination.

The introduction of payout caps for defamation claims in uniform state defamation legislation was expected to curb the award of ‘jack pot’ style payout figures. Instead, we have seen the three largest pay out figures for defamation suits be awarded in the last year alone. Whilst Jones may be the King of Talkback, $3.7 million is certainly a silencing figure.

Whilst this case highlights the risks that media companies can face by expressing opinions which are unfounded or unjustified, these decisions can also be applied to statements made by members of the public through social media platforms or other outlets. In a world where our opinions are so easy to share, this case is a timely reminder for everyone to be cautious about any statements of opinion made in public, whether orally or in writing.

Introduction

The recent case of HE v SHANAHAN AS LIQUIDATOR OF EASTERN SOURCE CONSTRUCTION PTY LTD (IN LIQ) & ANOR is another great case for lawyers, insolvency practitioners and the public alike as it clarifies the meaning of “cross-demand” in the context of sections 40(I)(g) and 41 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act).

The Law
Section 40(I) of the Bankruptcy Act provides:

s.40(1) A debtor commits an act of bankruptcy in each of the following cases: …

(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:

(i) where the notice was served in Australia–within the time specified in the notice; or,

(ii) where the notice was served elsewhere–within the time fixed for the purpose by the order giving leave to effect the service;

comply with the requirements of the notice or satisfy the Court that he or she has a counterclaim, set-off or cross-demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counterclaim, set-off or cross-demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.

Section 41(7) of the Bankruptcy states:

s.41(7) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counterclaim, set-off or cross‑demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counterclaim, set-off or cross-demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied..

The Case

The Applicant’s primary submission was that, having discharged the debt owed by the Second Respondent Company to Holcim, he was entitled to be subrogated into the position of Holcim to make a claim for that amount against the said company. In the alternative, the Applicant contended that the same facts gave rise to a set‑off against the said company.

The Respondents contended that the Applicant had no genuine claim under s.40(1)(g) ors.41(7) because his subrogated right was inchoate and contingent, i.e. at some unspecified time in the future, the Applicant might receive a payment from the First Respondent as liquidators, on an unsecured basis, which may be equal to or greater than the amount of the judgment debt. The subrogated right, therefore, could not be quantified, and, thus, could not be relied on in setting aside the Bankruptcy Notice.

The Findings

After considering the facts and well known authorities on the issue such as:

Bhagat v Global Custodians Limited [2002] FCAFC 51
Guss v Johnstone (2000) 171 ALR 598
Ebert v the Union Trustee Company of Australia Limited [1960] 104 CLR 346

The Court ultimately found that the Applicant’s case was unsuccessful and found in favour of the Respondents view that the Applicant’s claim was contingent or inchoate. It was not only contingent on the outcome of litigation between the two liquidators, but even then it was contingent on sufficient funds being available to pay the Applicant, as a subrogated creditor of the Second Respondent Company, an amount equal to or greater than the debt owed by him. In this regard, it was an inchoate claim.

Intro
Changes to the Corporations Act 2001 (Cth) made last year through the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth) (Act) introduced safe harbor and ipso facto reforms. The latter of these reforms came into force on 1 July 2018, and recently passed regulations have provided scope for their effects on commercial and construction contractual relationships.

What Are Ipso Facto Clauses?
An ipso facto clause allows a party to exercise a right (usually to end a contract) by reason of an insolvency event occurring in the other party. Insolvency event is usually defined broadly in these contracts to provide the maximum scope of freedom as possible. This right is exercisable regardless of whether the other party has continued, or has capacity to continue, to fulfill their obligations under the contract.

What Have the Reforms Changed?
The stay on ipso facto clauses prevent parties from exercising their right to terminate a contract through such a clause if:

• The contract is entered after 1 July 2018; and
The reason for termination is:
• Because the other party is under voluntary administration, receivership (of the whole or substantially the whole of the corporation’s property), or is subject to a scheme of arrangement; or
• Because of the other party’s financial position, where the other party is under voluntary administration, receivership, or is subject to a scheme of arrangement.

There are some exemptions to the above restrictions, including the following which have particular relevance to the construction industry:

• Exclusion of construction contracts if the total payments for particular work, goods or services is at least $1 billion (note: this exception only applies to contracts entered into between 1 July 2018 and 1 July 2023);
• Exemption for some contracts involving a special purpose vehicle; and
• Exemption relating to critical works for governments.

The new reforms also apply to the exercise of a number of other contractual rights, such as step-in rights or self-executing provisions.

Why Did These Changes Happen?
These exclusions are designed to stop people jumping ship because a company has taken on a little water and allows some breathing room for companies undergoing formal restructures. This is in support of key statutory objectives of the voluntary administration regime, namely aiming to maximize the chances a company in administration can continue operating their business.

If companies were permitted to dissolve contractual relations with companies heading into administration or nearing insolvency, the financial stress already felt by the company would be compounded by the loss of additional business. This effect would likely be exponential, as soon as one group pulls the pin many others are likely to follow suit, resulting in a complete collapse of the business.

How May This Impact You?
These reforms have serious impacts on entities looking to enter into contracts from the 1 July 2018. People seeking to end contracts on the basis of an insolvency event will no longer be able to rely on contractual terms, creating additional factors that need to be considered when entering into a contract. There will be no way to contract around the reforms, and any such clause that falls outside the bounds of the new laws will be dealt with by regulatory powers granted to the Government.

While ipso facto clauses have been very popular in construction and commercial contracts, these changes create greater need for parties to consider due diligence on the financial position of tenderers and other parties. Purporting to terminate a contract in breach of these amendments could be held to be repudiation of a contract and can result in having to pay damages.

Conclusion
Before entering into or terminating a contract, it is important you seek legal advice to determine the financial position of the counterparty, to determine whether an exclusion under the reforms may apply, and to ensure you are not in breach of the stay on ipso facto clauses.

Introduction

Whom does the Act apply to?

Under the Act any person who undertakes to carry out construction work or supply related goods and services in the ACT under certain contracts can make a claim under the Act including:

The types of costs that can be claimed under the Act are wide ranging, and include:

How do you make a claim for payment under the Act?

Conclusion

If you have a disputed payment, you may be liable to report this to the Australian Building & Construction Commission. Read more about your possible obligations here.