A very large proportion of legal queries from horse people are centered around misrepresentation and the duty of disclosure during equine sale transactions. In this series of articles, we will review the most commonly asked questions raised by both buyers and sellers.
I was told the horse was sound when I bought it, and it went lame in the first week – can I get my money back?
Prevention is better than cure, as the saying goes. Buyers are always advised to get a pre-purchase examination done by an impartial veterinarian, i.e. not the seller’s normal veterinarian, before the buyer commits to purchasing the horse. Sellers may also have the horse vetted prior to advertising the horse, especially if the history of the horse is not well known. This can help prevent the situation where the seller is surprised by the results of the first pre-purchase examination conducted on the horse and is disappointed at the true value of the horse.
Sellers should also be careful when writing the advertisement for the horse. Simple phrases in the ad can be interpreted differently by buyer and seller and could be used against the seller later. Sellers should be careful to not make exaggerated or vague statements about a horse, whether it is in the ad or in a conversation about the horse. It is better to be honest, so that both buyers and sellers do not waste their time or end up in a dispute. Sellers must also be aware that they have a duty of disclosure, so they should be up front and tell the buyer about any bad characteristics, such as vices or misbehaviours, that the horse has.
But what if the transaction has already taken place and it is too late to implement the above tips? Whether or not the buyer can get his or her money back will depend on the factual circumstances. Just because the horse is now lame, does not necessarily mean that the horse was misrepresented. For example, it is possible for the horse to be injured after purchase, which would not be the fault of the seller. The cause of the lameness needs to be determined.
In order to make out misrepresentation, the buyer must show that the seller represented something about the horse, which is untrue. If for example the seller represented that the horse was not on any medications, and then the buyer discovers that the horse was receiving medication regularly and is now lame because the medication has worn off, this would be a misrepresentation.
Even if the buyer believes that the seller did misrepresent the horse, in order to achieve an outcome the buyer still needs to be able to recover from the seller. It is advisable that both buyers and sellers:
The buyer may be able to recover by way of damages or compensation, or be able to return the horse for a refund, depending on the circumstances.
This article covers workers who are employed by the Commonwealth or by a Commonwealth authority (except any military personnel).
Canberra has one of the highest employment figures in the public sector in Australia. A common tendency is for injured workers (who work in the public sector) to not be fully aware of their compensation rights under the Safety, Rehabilitation and Compensation Act 1988 (SRC Act). In this article, we will provide you a brief insight into the most important information regarding your compensation rights, including:
It is imperative to report any accident or injury to your supervisor as soon as possible, and in accordance with your employer’s policy and procedures.
What types of injuries are compensable?
It is extremely important for you to recognise what types of injuries are covered by Comcare compensation. Under the SRC Act, an injury is any type of mental or physical injury which arises out of, or in the course of, your employment (other than a disease). An injury can also mean an aggravation of an existing physical or a mental injury.
This article is relevant for you if you become injured whilst at work, or travelling during a work activity.
If you are injured at work in the Commonwealth sector, it is important to understand that the SRC Act provides a variety of structures for compensation:
The SRC Act covers many injuries, and awards different types of compensation for specific types of injuries. Helping you understand your compensation rights under the SRC Act is fundamental to obtaining the specific compensation which you may need.
If you would like to organise a complimentary first consultation with Rory Markham, Managing Director and Practice Leader – Corporate Risk & Dispute Resolution please contact our reception on 02 6215 9100.
When preparing a Will, it is important to consider what actually passes in accordance with your Will. It is not uncommon to see a Will where a testator has attempted to gift assets that they cannot legally gift in their Will.
What assets will pass in accordance with your Will is determined by the fundamental distinction between estate and non-estate assets. Importantly these different types of assets require different estate planning mechanisms to ensure that they pass in accordance with your wishes.
Estate assets are those assets that will pass in accordance with your Will. They are those assets held in your personal name or as tenants in common with another person. Examples of estate assets are property, shares or motor vehicles owned solely by you or as a tenant in common with another person.
Non-estate assets are those assets that you might exercise a degree of control over during your lifetime, but will not (or may not) pass in accordance with your Will. These include:
For assets that you hold with another person as joint tenants, where the other person survives you, the right of survivorship determines how that asset will pass when you die. If you predecease the joint owner, then your share will pass automatically to the surviving tenant. However, if the other joint tenant has predeceased you, no right of survivorship will take place and the asset will at this form part of your estate and therefore pass in accordance with your Will.
Superannuation is a non-estate asset and does not automatically pass in accordance with your Will. Passing of superannuation will either be determined by:
When executing a binding death benefit nomination you will need to consider whether you want your superannuation to pass directly to a beneficiary or to your legal personal representative (your estate). Where superannuation is paid to your legal personal representative (either through a binding death benefit nomination or as a result of the discretion of the trustee), it will at this time form part of your estate and will be distributed in accordance with your Will.
Although you may control a trust, family trusts are non-estate assets and do not automatically pass in accordance with your Will. Control passes by virtue of passing the powers of the Appointor. The Appointor is the person who decides who controls the trust and the terms of the family trust deed will usually provide that the Appointor may pass their powers either during their lifetime (by deed) or on death (by Will).
Understanding this distinction between estate and non-estate assets is fundamental to preparing and implementing an effective estate plan that will ensure that those you intend to benefit, actually do.
The modern law of bankruptcy essentially evolved from a social desire to keep commercial matters, of most types, separate from the developing criminal regime; essentially an alternative to “debtor’s prison”. Under the Bankruptcy Act 1966 (Cth), bankruptcy is in effect a legal status wherein, once declared bankrupt a person:
Bankruptcy is commonly defined as “a process where people who cannot pay their debts give up their assets and control of their finances, either by agreement or court order, in exchange for protection from legal action by their creditors.”
A useful way to approach bankruptcy is to view it as a temporal exchange wherein personal assets and financial control is traded for release of certain debts. A person can become bankrupt regardless of their age including if they are a minor or a foreign national. A person with mental illness or intellectual disability cannot become bankrupt as they cannot commit an act of bankruptcy, however their estate can be placed into bankruptcy by their legal personal representative. As a matter of completeness, a partnership cannot become bankrupt, however one or all of its partners, if natural persons can become bankrupt in the ordinary course. There are essentially 2 ways in which a person can become bankrupt, either:
Australia’s corporate insolvency laws have typically been swayed in favour of protecting investors and vulnerable shareholders, placing the weight of duties on company directors. Director’s responsibilities were designed to create business accountability for remaining solvent and to act in the best interest of the company. These duties can include penalties for trading whilst insolvent, personal liability for debts incurred and in extreme cases, imprisonment.
The current insolvency laws, to some extent, impede innovation and treat risk taking as reckless and uncalculated. Therefore, many directors may be inclined to prematurely wind up companies in fear of the above repercussions. Other countries have successfully designed alternative options for managing company failure, and Malcom Turnbull’s ‘Innovation Nation’ law reforms seeks to address the unnecessary stigma attached to “failure” in Australia’s corporate realm.
Unsurprisingly, hindsight for many business owners is a valuable tool for future enterprise, however the current laws are seen as so punitive that many directors of companies that have previously failed are often unwilling to give it a second try.
The Financial System Inquiry Report (FSIR) , released on 7 December 2014,[1] identified submissions from stakeholders arguing that the directors should be protected by a ‘safe harbour’, whereby a company in financial difficulty could undertake restructuring efforts without the risk of the directors being penalised for insolvent trading. It was further suggested that these ‘safe harbour’ protections should extend to expert restructuring advisers to protect them from the risk of being considered de facto directors during this restructuring period.
The same report also recognised the effect of ‘ipso facto’ clauses permitting the termination of company agreements when a bankruptcy or insolvency event occurs. These clauses can be a hindrance for companies attempting to trade out of financially unstable periods to achieve long term goals.
Following from the FSIR, the Federal Government announced in December 2015 the National Innovation and Science Agenda (NISA)[2] to improve Australia’s economy in the 21st century. The NISA objective is to direct $1.1 billion worth of funding to encourage capital growth through reformed education, promoting innovation and entrepreneurship and rewarding risk taking in certain circumstances, which is where insolvency law reform comes into play.
The Proposed Insolvency Law reforms include:
Bear in mind, these reforms will have their limitations and a high standard for director duties will continue to be valued, such as acting in good faith and in the best interest of the company. The innovative aspect will involve appointing a financial adviser, not an administrator, when a company is still solvent but potentially heading into financial difficulty to “restructure” without insolvency as the trigger. With the right financial advice directors can make superior and well educated choices to prevent winding up, potentially resulting in better outcomes for creditors and potentially reducing the company’s risk of similar issues in the future. This can only really be successful if it is aided by the protection of the newly proposed safe harbour provisions.
The Federal Government is expected to release a proposal paper outlining the specific changes early this year with the intention to introduce legislation in mid-2017.[3] These proposed reforms are expected to encourage businesses to take reasonable steps to restructure and salvage value in a struggling company and reduce the stigma associated with failures.
The Federal Governments Innovation proposals to reform the insolvency laws certainly appear to be a step in the right direction for entrepreneurs. It will be interesting to see if these proposed changes will achieve the anticipated outcome of encouraging risk takers and reducing the stigma associated with business failure.
If you need advice for your business please contact our Commercial Team on
E mark.north@chamberlains.com.au
P 02 6215 9100 or
Or our Insolvency and Reconstruction Team on
E stipe.vuleta@chamberlains.com.au
P 02 6215 9100 or
[1] Financial Systems Inquiry Final Report, December 2014. http://fsi.gov.au/publications/final-report/
[2] National Innovation and Science Agenda, December 2015 http://innovation.gov.au/page/national-innovation-and-science-agenda-report
[3] Australian Government, National Innovation and Science Agenda http://www.innovation.gov.au/content/fact_sheets
The legal structure of your business will affect how the business is taxed, how your assets are protected, and the cost of operating your business. It is important to understand what your business structure is currently.
There are four common business structures:
– Sole Trader;
– Partnership;
– Company;
– Trust.
If you are not certain what type of business structure your business currently has, you can put your Australian Business Number (ABN) into the Government search page (http://abr.business.gov.au/) and it will name the current entity type. You can also search by business name, but this will also include results for other business with names similar to yours. You can also use this search to gather information on other businesses you deal with, such as your debtors.
Risky Business
While there are some benefits to using sole trader or partnership structures in your business, these business structures carry some risks.
The major risk associated with operating as a sole trader is unlimited liability for the business’s debts. These debts may be through failure to pay a supplier, tax debts to the ATO, or a compensation claim from an employee or customer. If these debts are more than the business can afford, you, as the sole trader will be personally liable for them because you are not legally separated from the business. This may mean that you lose your home or car (or any other personally held assets) to pay this debt. As such, this business structure may not be suitable for someone who has a family to support (and needs security) or personal assets that they wish to protect.
A partnership is a structure where two or more people own the business together and share the profits. All partners can act on behalf of the other partners in business decisions. Like the sole trader structure, the partnership is not distinct from the business so each partner is personally liable for the business’s debts jointly and severally. This is one of the major disadvantages of partnerships – each partner is personally liable for the debts of the other partners. This may mean that your car or house has to be sold to pay a debt incurred through another partner’s actions.
Better Business Structuring
Structuring your business to operate through a company or trust offers much greater personal asset protection.
A company is a separate legal entity. All companies are governed by the Australian Securities and Investment Commission (ASIC) which oversees the compliance of companies pursuant to the Corporations Act 2001. Companies can either be ‘public’ companies which can raise funds by listing the company’s shares for trading on the stock exchange, or ‘proprietary limited’ companies that cannot do this. One of the major benefits of the company structure is the limitation of liability. As the Company is a separate legal entity, it can enter into business and loan agreements as a legal person itself. This means that the directors of the company are not personally liable for the debts of the company. Directors should however be aware that they may have liabilities if they personally guarantee debts of the company.
Operating your business through a trust is also an effective way to protect your personal assets. A trust is not a separate legal entity and is often used when running a business for the benefit of other people (i.e. children). In this structure, a person (called the trustee) operates the trust for the benefit of others (called the beneficiaries). This is a useful structure for those who wish to run the business for family members without requiring any involvement by the beneficiaries in the running of the business. Often the trustee will actually be a company, known as a corporate trustee, as this gives another layer of asset protection. The beneficiaries of the trust are generally not liable for the debts incurred through the running of the business.
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
To put it colloquially, in the bankruptcy context, preference payments are payments made by a bankrupt debtor in favour of an unsecured creditor at the expense of other ordinary creditors of a bankrupt estate. The payment received by the creditor must be more than that creditor would have received if the debtor had been declared bankrupt and they had proved for their debt along with all the other creditors in the estate without receipt of the payment. Preference payments to creditors are voidable against a Trustee in Bankruptcy if they are within the period stipulated by section 122(1)(b) of the Bankruptcy Act.
This law has been developed to try to ensure that all creditors are treated equally by not allowing debtors to ‘pick favourites’. Once a Trustee in Bankruptcy can establish that an unsecured creditor has been paid in preference to others, they can seek to void that transaction and recover the proceeds or other assets for the benefit of all unsecured creditors.
Features of a preference claim
The following elements must be established by the Trustee to recover a preference:
Unsecured vs. Secured creditors
Only unsecured creditors can receive a preference under this regime. Secured creditors have a security over some asset of the debtor and give this up on payment of the debt in full. However, if the value of the security does not cover the full amount of the debt, a transfer of the difference between the security and the full amount may be preferential.
Defences available
There is a statutory defence that may be available to creditors. The three elements that need to be established are:
If you are concerned about a trustee claiming a preference payment against you or your company, contact our Dispute Resolution, Insolvency & Reconstruction Team on
P 02 6215 9100 or E stipe.vuleta@chamberlains.com.au OR sayward.brest@chamberlains.com.au
Social media facilitates global communication by providing its users with a playground of online platforms to create and exchange user-generated content.
With this privilege of communication comes responsibility, as laws have continued to grow and develop to regulate the social media phenomenon. There are no uniform social media laws for the global community, the domestic laws of each country still apply to the users of social media.
Whether you intend to actively participate on a personal level, or are planning to incorporate social media into your business marketing mix, you need to be wary of the legal and social risks that generally apply to all social media channels. The following are some examples:
Defamation and Injurious falsehood: Defamation is essentially the act of damaging the reputation of someone else and lowering them in the eyes of the public. Only an individual can be defamed, a company cannot. Injurious falsehood is essentially a sub-category of defamation and can apply to a company, and occurs when a person makes malicious and false statements about a third party which damages their commercial and economic interests (such as causing a loss of profit).
An Example Case: Headlined by the Sydney Morning Herald as “The tweet that cost $105,000” the Mickle v Farley [2013] NSWDC 295 case made Australian legal history as the first Twitter defamation battle to go to a full trial. In this case a former high school student was ordered to pay $105,000.00 in damages to a teacher at a local school in Orange NSW, because of defamatory content he had written about her on the social media platform, Twitter.
Privacy, confidential information and security: exposing restricted information has never been so easy given our constant access to social media. This can be as simple as taking a picture and uploading the content or discussing workplace practices on a public forum. Always remain cautious and think before posting information that might be protected for privacy, security or confidentiality reasons.
Discrimination and offensive content: many users of social media publish content from the protection of their living rooms, while at the pub or surrounded by friends without thinking of the global audience their post will be accessible to. Be conscious of what you publish to ensure it isn’t discriminatory or offensive to the wider public.
Employment: Employers have been known to scan social media pages to review prospective employees. There are many loop holes to profile security settings due to ‘friends’ and associated connections. Also online servers don’t always delete the uploaded content immediately on request. Further, employee violations of company social media policies are increasingly being used as grounds for dismissal in some workplaces.
Intellectual Property Law: Copyright infringement, exposure of Trade Secrets and unauthorised use of Trade Marks can readily occur through cut, paste and publish methods used on social media platforms without appropriately acknowledging the source or passing-off someone else’s content as your own. Exceptions can apply such as for the purpose of satire, news reporting and education purposes, but you should still credit the initial creator or source.
Consumer Laws: If you are a business engaging in trade and commerce, consumer laws extend to online content. This means misleading and deceptive conduct can easily occur on social media. It is your responsibility to monitor the content published on your social media websites to ensure your customers aren’t being misled or deceived about your goods or services. This is inclusive of the content you publish and what others publish on your page, if you suspect it is misleading or deceptive content, remove it from your page immediately.
An Example Case
In Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd (No 2) [2001] FCA 74 the Federal Court held that one does not need to be the original author of the publications. Allergy Pathway was found liable for misleading and deceptive testimonials posted by their clients, because the company was aware of the statements but failed to remove them from their page.
Key ways to prevent legal issues on social media:
Horse Industry Code of Practice
The Code of Practice for the horse industry has been developed by the Australian Horse Industry Council. The most recent revised version is from October 2009. It is not legally binding, but would be beneficial for equine related organisations in managing their activities.
The Code includes rules and procedures for the safety of participants, spectators, staff and horses with regard to facilities, health and hygiene. It does not purport to be a complete and exhaustive compilation of rules and processes for the running of all horse activities. However it does provide useful guidance in raising the minimum standard of safety within the horse industry.
Inherent Risks of Horse Activities
Horse riding is an inherently risky activity. Horses are, by their nature, flighty and unpredictable animals. To totally eliminate the risk of riders falling off, they would have to be stopped from mounting in the first place.
However, different disciplines have different levels of inherent risk. The cross-country phase of a 3* event would have significantly greater risk of injury than low level dressage. While it is not possible to eliminate all risk associated with equestrian sports, all steps should be taken to minimise the risk through due care and skill.
Preventable Risks
The following is a list of examples where risk could be reduced by the exercise of due care and skill:
Waivers & Risk Acknowledgement
A waiver is a legal document or clause in a legal document that seeks to limit the liability of an organisation in the event that a participant suffers a loss or injury. This limitation of liability can only be done within the framework of the relevant laws of the State or Territory, or they will be deemed void.
Waivers may have greater benefits in managing risk by highlighting the hazards inherent in the activity to the participant. Making the participant aware of these dangers may cause them to modify their behaviour and therefore make safer decisions. It also prevents any claims later on that the participant was not aware of the risks of the activity.
Additionally, by including a self assessment in the risk acknowledgement declaration, it provides some protection for the organisation if there is a claim arising from the incompatibility of a horse and rider. It places some liability back on the participant who overrates his or her ability to the organisation or business.
Waivers and risk acknowledgement declarations are very important for organisations, businesses and individuals in the horse industry. Whether you are a large riding school, an event organiser, a private instructor, or a potential buyer riding a horse for sale – waivers and risk acknowledgements are very important to ensuring everyone is aware of the risks involved and where the liability falls should there be an accident.
Click here to learn more about our equine legal services.
Email exchanges are increasingly being viewed by the Courts as another way of creating legally binding contracts.
This should be a worrying realisation for anyone who has casually exchanged emails with someone where a legally binding agreement has been discussed. In an increasing number of cases the Courts have deemed agreements to have been made even when the parties included expressions like “subject to contract” or “subject to formal approval”.
Many kinds of binding agreements have been made by email: sale of land agreements, lease agreements, and even settlement agreements between solicitors.
While it is legally uncertain whether some exchanges will constitute a binding agreement, the Courts have said many times that regard must be had for all the circumstances and conduct regarding the alleged agreement. No excerpt can be solely relied upon.
A Recent Case
In the recent case of Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119, a sale contract was found by the Court to exist even though the emails specified “subject to contract”.
In Stellard, the seller and the buyer had reached an agreement on the terms of the sale in previous conversations. This agreement covered many terms including purchase price, deposit, valuation of stock, due diligence period, etc. The seller also gave the buyer a draft contract.
In subsequent phone conversations, the parties agreed that the sale would largely be on the terms included in the written contract, but the buyer did not approve that it would offer any guarantee.
The seller requested that the buyers offer be in writing so the buyer wrote an email specifying that it was made ‘subject to contract’. The seller replied to the email stating “we accept the below offer” and again specified that it would be “subject to the execution of the contract provided”.
The Decision
Upon considering the emails in the context of the previous conversations and conduct, the Court held that the exchanges constituted a binding sale contract on the terms discussed and agreed upon.
The Court made its decision citing the following (among others) as relevant reasons:
What you can do to prevent your emails from being legally binding?
While this recent decision highlights the uncertainty around what will be considered legally binding, there are some actions that can be taken to reduce the risk that you will be bound inadvertently by what you think is a casual exchange.
Some actions you can take to reduce this risk:
Remember that these decisions have implications for other forms of communication that are used in a casual manner as well.
Interested in learning more about Corporate & Commercial Law?
Click our recent articles below to find out more;
Corporate Oppression – The Importance of Shareholder Agreements
Deeds and How to Execute Them – Counterpart Signatures on Behalf of a Corporation May Not Be Valid