ByLawyers News and Updates

Conveyancing QLD

by

Conveyancing

OCTOBER
  • Costs Agreements
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
    • Clause on recovery of fees added when purchaser not proceeding.
AUGUST
  • Purchase and Sale of Real Property commentaries – further content on Foreign Resident Capital Gains Withholding Payments added.
  • Sale of Real Property – commentary updated to include discussion of how co-ownership may be brought to an end via partitioning.
JUNE
  • Update First Home Owners’ Grants for 1 July 2016 changes.
MAY
  • Foreign resident capital gains withholding payments amendments made to Commentaries and Retainer instructions.
  • Include foreign resident capital gains withholding payments when over $2 million to all necessary precedents and to do lists.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • New section included in the commentary on powers of attorney for land transactions to accompany power of attorney precedents.
FEBRUARY 
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Magistrates’ Court Civil SA

by

Magistrates’ Court Civil 

OCTOBER
  • Costs Agreements – Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
AUGUST
  • From 1 August 2016 Small Claims reduce from $25,000 to $12,000 or less. Edit scale of costs – Third schedule.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Motor Vehicle Accident QLD

by

Motor Vehicle Accident

OCTOBER
  • Costs Agreements – Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
AUGUST
  • Added commentary on the National Injury Insurance Scheme Queensland
  • Initial letter to client and Retainer Instructions – information added concerning eligibility for the NIIS scheme after award of damages.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
FEBRUARY
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Personal Injury QLD

by

Personal Injury 

August 
  • Additional commentary added on NIIS – updated to ensure compliance with the National Injury Insurance Scheme (Queensland) Act 2016. The act applies to individuals who may eligible to receive necessary and reasonable lifetime treatment care and support for a serious personal injury resulting from a motor vehicle accident.
  • LINKS TO – National Injury Insurance Scheme (QLD) – Notification form
    LINKS TO – National Injury Insurance Scheme (QLD) – Application form – Interim participation
    LINKS TO – National Injury Insurance Scheme (QLD) – Application form – Insurer
April 
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
February 
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.

Mortgage Stress

by

Whilst there is considerable consistency between the property laws of Victoria and New South Wales, there are also significant differences.

Some differences in practice are:

  • nomination in New South Wales is virtually unheard of as it creates a second duty, but is common in Victoria as it does not; and
  • deposit release is prohibited in New South Wales but common in Victoria.

Some differences in the law are:

  • acquiring an easement by prescription is banned in New South Wales but still available in Victoria; and
  • there is no equivalent in New South Wales to Victoria’s statutory right to clawback fraudulent transactions s 172 Property Law Act 1958.

Perhaps the best known example of the difference was the view previously held in New South Wales that the existence of an illegal structure on land constituted a defect in title and allowed a purchaser to avoid the contract. This was in contrast with the Victorian view that such a defect was merely a quality defect and that the vendor was protected by the principle of caveat emptor. The New South Wales view was ‘corrected’ (that is; brought in line with Victoria) by the Court of Appeal in Carpenter v McGrath 40 NSWLR 39 and consistency has reigned since.

In recent years a significant difference has again occurred with New South Wales taking a ‘radical’ view of the impact of fraud in certain mortgage transactions. In both jurisdictions it is accepted that whilst fraud is an exception to indefeasibility, nevertheless registration of a fraudulent instrument by a party who was not party to the fraud will be indefeasible. Mortgagees have therefore been able to rely on mortgages that have been fraudulently signed provided that the mortgage was registered and the mortgagee was not itself a party to the fraud. However in New South Wales an argument was accepted that it was possible to look ‘behind’ the mortgage at the document that constituted the agreement to repay as it was that document that created the obligation that justified the mortgagee’s security interest and the extent of the mortgagor’s covenant to repay was to be determined by a consideration of the contractual agreement between the parties.

If that contract (loan agreement) created an obligation to repay a specific amount then the covenant to pay protected by the indefeasible mortgage was enforceable. However if the loan agreement referred to an ‘all monies’ mortgage relating to past and future advances then it was said that the mortgagor’s covenant to pay arose contractually from the ancillary documents that related to the actual advances and that if those documents were fraudulent then the covenant to repay arose outside of the protection of the indefeasible mortgage. Essentially, it was said, no money was advanced pursuant to an ‘all monies’ mortgage as the money was advanced pursuant to forged documents.

Victorian mortgagees quaked in trepidation as an army of decisions mounted on the north bank of the Murray River set to wreck havoc on Victorian all money mortgages but Pagone J. in Solak v Bank of Western Australia [2009] VSC 82 manned the ramparts and beat off the hordes by upholding an all monies mortgage and the lenders breathed a sigh of relief. However a Trojan Horse has appeared in the form of Perpetual Trustees Victoria Limited v Xiao [2015] VSC 21. Hargrave J. has adopted the New South Wales analysis of an all monies mortgage and has described the decision in Solak as ‘plainly wrong’.

The scene is now set for a definitive decision by the Victorian Court of Appeal on what is an important point of law. According to Xiao a mortgagee of a forged all monies mortgage is not able to enforce the mortgage or undertake a mortgagee’s sale. Whether confirmation of Xiao will have retrospective repercussions is a matter for the future.

The mortgagor’s victory in Xiao was somewhat pyrrhic as Hargrave J. went on to find that Xiao in fact held the property on trust for the forger (her husband) and that the lender was entitled to judgment against the husband, who had also been joined as a defendant. Hargrave J. was obliged to overcome the presumption of advancement applying to a transfer from husband to wife but did so by finding adequate evidence that it had been the intention of the husband at the time of transfer to retain the beneficial interest in the land.

The mortgagee would therefore be faced with the need to enforce this judgment by way of a Warrant of Execution rather than a mortgagee’s sale. The mortgagee’s possession of the certificate of title would aid that exercise.

The Impact of Bamford on Trust Deeds and Trust Resolutions

by

Subscribers to our Companies, Trusts, Partnerships and Superannuation product, and LEAP Office users, will be acquainted with the content written by Greg Vale, a By Lawyers author.

Following the Bamford decision Greg circulated a letter to his clients, which is reproduced below for your information.

Our trusts take into account this decision.

Getting it right – the impact of bamford on trust deeds and trust resolutions

On 30 March 2010 the High Court handed down its much awaited decision in Commissioner of Taxation v Bamford; Bamford v Commissioner of Taxation [2010] HCA 10.

In response to Bamford on 2 June 2010 the ATO released a Decision Impact Statement (‘DIS’) and Practice Statement Law Administration PS LA 2010/1, which outlines how the ATO will treat the determination of trust income.

The High Court decision and ATO response are significant and affect every trust in Australia. In particular they affect how trust deeds and income distribution resolutions must be drafted to obtain the optimum tax outcome.

The significance of the High Court’s reasoning in Bamford is that it confirms that it is possible to define and modify ‘trust income’ through the drafting of one’s trust deed. The advantage of being able to define and modify trust income is that it can create circumstances which remove adverse tax consequences or even allow more beneficial tax outcomes to be achieved.

Articles Whilst written for Federal practitioners this article has interest and relevance for practitioners in all states.

Although the ATO accepts that Bamford means that trust deed clauses can be used to define trust income and can thus influence how the net income of a trust will be taxed, it provides a series of caveats, including the potential application of the general anti-avoidance rule or trust stripping rules in circumstances involving a deliberate mismatch between income entitlements and tax outcomes.

Great care is required in the drafting of the yearly income distribution resolutions. Following Bamford, there is a clear benefit in ensuring that one’s trust deed confers sufficient powers to allow a trustee to determine trust income in each income year. Accordingly, in relation to the 2009/2010 income year and onwards, we consider that all trustees should undertake the following steps in light of Bamford.

Step 1 – Trust deed review

Trustees should review the trust deed in conjunction with their tax and legal advisors to determine whether: 1. The trust deed defines trust income and if so, how the definition operates to determine its capacity to minimise adverse tax consequences going forward; 2. The trust deed provides the trustee with adequate powers to modify trust income, including the power to reclassify items as income or capital and vice versa and allocate expenses and losses as appropriate; 3. There are appropriate streaming provisions and whether they are adequate going forward.

Step 2 – Consider amending the trust deed

Where the trust deed does not contain an adequate definition of trust income or powers to enable the trustee to stream or modify what constitutes trust income, then trustees should consider whether it is beneficial to amend the trust deed to resolve these deficiencies. Tax and legal advice should be sought prior to amending the trust deed so as to avoid any adverse tax consequences. For example, the ATO have already flagged the issue of trust resettlements in this context.

Step 3 – Review the drafting of the trustee resolutions

Trustees should review how they draft their distribution resolutions to ensure that an appropriate tax outcome will be achieved. Binetter Vale Lawyers can carry out the necessary review of your client’s trust deeds and provide advice as to the appropriate amendments in the wake of the decision in Bamford and considerations to take into account when drafting income distribution resolutions for a total of $250 (unless advised otherwise in advance). Separately, for an additional charge to be advised as part of the trust deed review, we are able draft the relevant deeds of amendment and provide tax and legal advice on the issue of resettlement as appropriate.

Further, any deeds of amendment will be accompanied with advice as to the types of resolutions appropriate for that deed.

*This article has interest and relevance for practitioners in all states.

Trading whilst insolvent

by

By O’Brien Palmer

What is insolvent trading

Directors have many duties, one of which is to prevent their company from trading whilst insolvent. Pursuant to s 588G of the Corporations Act 2001 (the Act), a director breaches that duty if they cause the company to incur a debt in circumstances where they knew, or ought to have known, that the company is insolvent, or likely to become insolvent as a result of that transaction. If proven, directors can be charged, fined and/or become personally liable for the debts incurred by the company whilst it was insolvent.

What is solvency

Definitions

Section 95A of the Act states:

  1. A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.
  2. A person who is not solvent is insolvent.

Unfortunately, the usefulness of these definitions is limited except to the extent that the wording of the legislation recognises cash availability as the primary determination of solvency. For further guidance it is necessary to refer to case law.

Assessing a company’s solvency

The importance of cash flow in determining solvency was articulated by his Honour Dodds-Streeton J in his judgment in the matter of Crema Pty Ltd v Land Mark Property Developments Pty Ltd [2006] VSC 338, where he stated that:

Section 95A of the Act enshrines the cash flow test of insolvency which, in contrast to a balance sheet test, focuses on liquidity and the viability of the business. While an excess of assets over liabilities will satisfy a balance sheet test, if the assets are not readily realisable so as to permit the payment of all debts as they fall due, the company will not be solvent. Conversely, it may be able to pay its debts as they fall due, despite a deficiency of assets.

The assessment of the solvency of a company requires an analysis of the totality of the company’s circumstances, including industry norms and available credit. This firm was involved in an often reported case known as Southern Cross Interiors Pty Ltd (In Liquidation) & Anor v The Deputy Commissioner of Taxation [2001] NSWSC 621. In his judgment, His Honour Palmer J. stated that the following propositions could be drawn from the established authorities:

  1. A company’s solvency is a question of fact to be ascertained from considering its financial position as a whole.
  2. In considering a company’s financial position as a whole, the Court must have regard to relevant commercial realities, such as what resources are available to a company to meet its liabilities as they fall due.
  3. In assessing whether a company’s position as a whole reveals surmountable temporary illiquidity or insurmountable endemic illiquidity, it is proper to have regard to the commercial reality that creditors will not always insist on payment strictly in accordance with their terms of trade but that does not constitute a cash or credit resource available to the company.
  4. The commercial reality that creditors will normally allow some latitude for payment of their debts does not warrant a conclusion that the debts are not payable at the contracted time.
  5. In assessing solvency, the Court acts upon the basis that a contract debt is payable at the time stipulated for payment in the contract.

These propositions, whilst informative, are somewhat broad. A further and useful commentary on solvency was given by his Honour Mandie J in a judgment delivered in the high profile case of ASIC v Plymin & Anor [2003] VSC 123 (otherwise known as the Waterwheel Case). Justice Mandie adopted 14 indicia of insolvency which are now often utilised in assessing the solvency of a company. However, this list is not exhaustive. The Australian Securities & Investments Commission (ASIC) has published a guide on the warning signs of insolvency. You are also referred to a newsletter previously issued by O’Brien Palmer entitled Practical warning signs of insolvency for small business.

Temporary or endemic cash flow insolvency

A company is insolvent where the available resources are insufficient to meet the debts that are due and payable at that specific point in time. These resources do not necessarily have to be assets of the company, which is why the balance sheet can be irrelevant to the assessment of solvency. The ability of a company to draw on available credit resources is also relevant to any determination of solvency.

It is relevant to distinguish between a company that is insolvent and a company that is experiencing temporary cash flow issues. In the judgment of his Honour Jacobs J in the matter of Hymix Concrete Pty Ltd v Garrity (1977) 13 ALR 321, it was acknowledged that:

…a temporary lack of liquidity is to be distinguished from an endemic shortage of working capital where liquidity can only be restored by a successful outcome of business ventures in which the existing working capital has been deployed.

An endemic shortage of working capital will be apparent where the company is utilising credit funds on terms that it cannot comply with or at debt levels beyond that which it can service. It would also be evident in circumstances where a company is otherwise displaying numerous signs of insolvency.

How a liquidator proves insolvency

Steps to prove the date of insolvency

In order to determine the date on which a company is deemed to have become insolvent, an insolvency practitioner will review the available books and records of a company, as well as records obtained from third party sources such as creditors, banks and statutory authorities. In conducting this review, the practitioner is looking for evidence of indicia of insolvency. The key indicia of insolvency include the following:

  1. overdue trade creditors;
  2. overdue taxation liabilities;
  3. recovery action being initiated by creditors;
  4. no access to alternate finance;
  5. Payment of debts by way of instalments.

As a result of this review, it can become apparent that at a certain point in time, sufficient indicia of insolvency are present to justify a conclusion that the company was insolvent at that time.

Section 588E(3) of the Act provides that where the evidence supports a determination that a company became insolvent at a time within 12 months prior the company being wound up, it is presumed that the company was insolvent throughout the period between that time and the date that the company is wound up.

If the company has not maintained adequate books and records in compliance with s 286 of the Act, then a presumption of insolvency arises for the period in which the books and records have not been properly maintained. Section 588E(4) of the Act states that if a company does not keep comprehensive and correct records of its accounts and financial position, or if it does not keep records of a transaction for seven years after its completion, then that company will be presumed to be insolvent during the period to which the records relate.

Not only is the inability to maintain financial records an indicator of insolvency, but failure to maintain proper books and records may render a company legally insolvent from a date which is earlier than it actually became insolvent.

Debts incurred

After a date of insolvency is established, the liquidator will then assess the debts incurred after that date, in order to determine the quantum of the personal liability of a director for trading whilst insolvent.

Claim for trading whilst insolvent

Where it is determined that a company has traded whilst insolvent, then an insolvency practitioner will in the ordinary course report this alleged contravention to ASIC in accordance with either ss 422, 438D or 533 of the Act.

A liquidator appointed may also take steps to seek compensation from the director(s) for the quantum of the debts incurred by the company after it became insolvent. These steps usually involve the issuance of a letter of demand to the director(s) for repayment of a fixed sum of money. The liquidator may also instruct a solicitor to further pursue the claim where the initial demand is ignored or commercial settlement cannot be reached. The liquidator may be required to commence proceedings against the director(s) to seek compensation orders.

In circumstances where there are multiple directors, the liquidator is entitled to recover from whichever of the directors is most commercial to pursue. That director has a right of indemnity against their fellow directors to recover an equitable share of the amount recovered by the liquidator.

Defences available to directors

Directors may have defences to a claim made for insolvent trading. Section 588H of the Act states that a director can claim a defence where he or she:

  1. had reasonable grounds to believe that the company was solvent at the time it incurred the debt, and that it would remain solvent even after incurring the debt;
  2. can prove that the person in charge of providing accurate information concerning the company’s financial status and solvency was performing this task, and led the director to believe that the company was solvent and would remain to be so even after incurring the debt;
  3. had good reasons not to be involved in the management of the company when it incurred the new debt, such as a result of a serious illness;
  4. can prove that they took all reasonable steps to prevent the company from incurring the debt.

Consequences of insolvent trading

A director who has been charged with insolvent trading faces several consequences.

Civil penalties

Company directors may face fines of up to $200,000 in circumstances where their breach was not dishonest.

Criminal penalties

If trading whilst insolvent is proven to be of a dishonest nature, then directors can face criminal convictions for this breach. A criminal charge carries a maximum penalty of $220,000 and five years imprisonment. A person may also be disqualified from managing corporations.

Compensation orders

If a liquidator suspects a person may have breached their duty in preventing the company from trading whilst insolvent, then he or she, a creditor, or ASIC can take action against the director pursuant to s 588M of the Act. A Court may order that the director repay the company to the value of the debts incurred from trading whilst insolvent.

It should be noted that a creditor can only take this action with the permission of the liquidator or leave of the court, and may only pursue the director for the value of its debt.

Holding company liability

Section 588V of the Act provides that a holding company may be liable for the insolvent trading of its subsidiary in circumstances where the directors of the holding company were aware, or should have been aware, of the insolvency of the subsidiary company.

The impact of repayment arrangements on solvency

Smith v Boné, in the matter of ACN 002 864 002 Pty Ltd (in liq) [2015] FCA 319

Background

Mr Barry Boné was the sole company director of Petrolink Pty Ltd (Petrolink). In December 2011, Mr Smith was appointed as liquidator of the company.

The liquidator brought an action against the director seeking compensation for insolvent trading pursuant to s 588G of the Act for the losses suffered by Petrolink’s creditors.

In this dispute, the liquidator claimed that Petrolink was insolvent from 30 June 2009 until the date on which the winding up commenced and that Petrolink continued to trade and incur debt throughout this period. However, the director argued that his company was only insolvent from July 2011.

Relevant to the outcome of the case was the fact that Petrolink had entered into a payment arrangement with the Australian Tax Office (ATO), its main creditor, in order to discharge its outstanding debts.

The director’s defence

The director argued that any reasonable person would have believed that the company was solvent based on the payment arrangement he had established with ATO, which he argued deferred the debts of the company such that they were no longer due and payable. He also stated the company was generating significant revenue throughout the period.

The ruling

His Honour, Gleeson J, found that any reasonable person in the position of the director would have grounds to believe that the company was insolvent and that despite the revenue being generated by the company, its debts remained unpaid. In regard to the payment arrangement, the Court found that the payment arrangements negotiated with the ATO did not have a material effect on the solvency of Petrolink because of the shortness of their duration and the fact that none of them had the effect that Petrolink was not required to pay its outstanding tax liability imminently. The payment arrangements in fact demonstrated that Petrolink was continuing to experience common features of insolvency.

Ultimately, His Honour determined that Petrolink was insolvent from 12 May 2010 and the director was found to be liable to the liquidator for an amount of $669,582.86.

In addition, while the Court did not find that the director had acted or conducted himself dishonestly, it did not exempt him from being held personally liable for insolvent trading. The Court ruled that the director did not seek professional advice about the company’s financial position despite being advised in June 2010 that if Petrolink continued to trade, it may be trading whilst insolvent.

The principle

Directors should be aware that entering into payment arrangements does not provide relief from the debt being due and payable, and may simply be an assistance measure for companies requiring short-term relief. Director’s should be aware that in entering into repayment arrangements with the ATO, they may be providing evidence to a subsequently appointed liquidator that the company was insolvent and that the director was aware of the insolvency. As such, caution should be exercised by directors when entering into repayment arrangements that they only take on repayment commitments that the company can comply with else they risk incurring a personal liability for insolvent trading.

Conclusion

Directors need to be aware of the serious consequences of trading whilst insolvent, and the importance of seeking early professional advice about their company’s status and financial position. Taking the appropriate steps and action is not only a defence to any proceedings, but may be essential to the survival of the company. Where directors are not adequately informed or fail to deal with the potential insolvency of their companies in accordance with their duties as a company director, then they have a greater risk of becoming personally liable for the debts of their companies.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Owner-builder insurance

by

By Russell Cocks, Solicitor

First published in the Law Institute Journal

The current domestic building warranty insurance regime came into force 20 years ago and it remains largely a mystery to most property lawyers.

Donald Rumsfeld was referring to weapons of mass destruction when he made his infamous comment about ‘knowns, known unknowns and unknown unknowns’ but he may just as well have been referring to the owner builder warranty insurance scheme that has plagued Victorian conveyancing lawyers for 20 years. Whilst insurance is generally a matter relating to the quality of a property and not a matter going to title, it is the draconian consequences of getting the insurance situation wrong that makes this issue one of the great disasters of conveyancing. Quality issues do not generally create a right of avoidance but failure by the vendor to comply with the owner builder insurance obligations does allow the purchaser to avoid, an outcome that can have disastrous consequences for the vendor’s adviser.

KNOWN

What is known about the scheme is that an owner builder who performed building works in the 6.5 years prior to the sale is required to include a Condition Report in relation to those works in the contract and (if the works exceeded $16,000) obtain warranty insurance. It is important to note that the obligation to provide the Condition Report is absolute and does not depend upon the cost of the works.

KNOWN UNKNOWN – what works?

But knowing that the scheme applies to building works creates the first unknown – what building works trigger the obligation?

Section 137B(2) Building Act creates the requirement if a vendor ‘constructs’ a building and the definition of ‘construct’ (s 137B(7)) includes repair or alteration of the building. Clearly adding a room, for instance, would be construction and the requirement arises. But what about essentially cosmetic works that might involve work that could be described as ‘home handyman work’, such as retiling a bathroom or moving a doorway? Where do we draw the line?

A convenient threshold might be to differentiate between works that require a building permit and works that do not, although that arbitrary line is itself somewhat problematic. Essentially, substantial works require a permit and cosmetic works do not. But the Act, by contemplating an obligation even when a building permit has NOT issued, makes it clear that the requirement does relate to non-permit works and so we must presume that this unknown is in fact any and all works undertaken on the home – any repairs or alterations no matter how minor.

UNKNOWN UNKNOWNS – when?

Harder still is the problem of determining when the works were performed.

By s 137B(7) the Act provides a series of alternatives for determining when the 6.5 year period, known as the ‘prescribed period’, commenced. Starting from the contract date, the vendor must look back either:

  1. 6.5 years and see whether an occupancy permit or certificate of final inspection was issued; or
  2. if not, then look back 7 years to see whether a building permit was issued; or
  3. if neither of the above, then look back 6.5 years to see whether the owner has certified that construction had commenced.

Works performed during any of those periods trigger the requirements. The first two alternatives are based on an objectively determined event but the third is a very subjective basis for determining the prescribed period and adds to the prevailing sense of unreality that surrounds the vendor’s obligations in relation to owner builder insurance.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

Owner Builder works may require a Condition Report and warranty insurance

Even cosmetic works may trigger requirement

For works in preceding 6.5 years

Beware the trap of the disgruntled employee – Part 2

by

By Brad Petley

Principal of Acumen Lawyers, and the By Lawyers employment law specialist.

A takeover of an established business can be fraught with anxiety for a new employer and the remaining employees.

The previous trusted employer-employee relationship is gone.

New relationships take time to build.

Changes to pre-existing arrangements may not go over well with the remaining employees.

A disgruntled employee who takes to Facebook requires a careful response – as today’s article shows.

Case 2 – How not to handle a disgruntled worker

Vosper v Solibrooke Pty Ltd [2016] FWC 1168 (1 March 2016)

The employee in question, Ms Vosper, was employed by a cake making business from 24 October 2012 in a permanent part-time capacity.

Ms Vosper’s employment spanned the sale of the business on 3 July 2015 until it ended with her dismissal in September 2015.

The Beginnings of a Workplace Dispute

Late on 21 September 2015, at the completion of her workday, Ms Vosper was issued with one week’s notice of termination from her part-time employment.

Ms Vosper was told that her part-time role was “not in line with the business staffing needs”.

In the same meeting (21 September), Ms Vosper was offered new employment but as a casual and on a lower base pay rate (excluding casual loading).

Ms Vosper advised the employer that she did not wish to accept the offer of casual employment.

Facebook message 1– a storm brews

On the morning of the next day (22 September) Ms Vosper sent a Facebook message to her sister (Ms King) – the prior owner of the business.

Ms Vosper advised of termination of her permanent employment and the corresponding offer of a casual position.

During the ensuing Facebook communication exchange, the former owner, Ms King, expressed her displeasure at what had occurred.

Facebook message 2– a not so happy goodbye

On the same day (22 September) Ms Vosper published a private Facebook message as follows:

“I just wanted to let you know that I am finishing up at Angie’s at the end of the week. Time to move on with a new focus. Thanks for all the hard work you have given Karen and I.”

In reply to a “what happened” response Ms Vosper said:

“Angie and Lloyd did my 3 months review and explained that they no longer want to have the part time position and gave me a weeks notice. They offer me casual however I have decided to move on.”

Facebook message 3 – the former owner weighs in

On the same day (22 September) Ms King (the former owner), sent the following message to another employee of the business:

“Hey do you mind if I ask if everything is ok at work!?? Robyn isn’t being treated very well at all. And I was just hoping you were doing ok!”

Dismissal

The employer did not take kindly to the release of information.

Late that night (22 September), the employer sent a dismissal letter by email to Ms Vosper.

The letter advised Ms Vosper that she was dismissed without notice as of 21 September 2015.

In part, the letter stated:

“… you have left us with no alternative but to terminate your employment with immediate effective due to you breaching our request for Confidentiality less than 24 hours after specifically discussing this with you during your review yesterday evening. …”

“… we made it clear that any discussion with anyone about anything to do with the business that could be seen as derogatory, in particular your sister with whom we were experiencing difficulties at present with but we were doing everything we can to not involve with you.”

Unfair dismissal claim

The dismissed employee challenged the termination of her employment by way of an unfair dismissal application to the Fair Work Commission (FWC).

The verdict

The FWC ultimately found the dismissal to have been unjust and unreasonable and thus – unfair.

During the hearing of the matter, the employer put forward a number of arguments to justify the dismissal including:

  • alleging redundancy of the employee’s position
  • performance concerns
  • misconduct arising out of an alleged breach of confidential information
No Redundancy

The FWC rejected the employer’s assertion that Ms Vosper was made redundant.

The FWC found that restructuring changes were not so substantial as to render Ms Vosper’s position no longer being required to be performed by anyone.

No unsatisfactory performance

The employer raised performance concerns during the hearing including alleged lateness, and inadequacy of cake making and decorating skills.

In finding that there was no basis for finding the dismissal was due to performance, the FWC recognised that:

  • the alleged lateness incident was not raised with the employee
  • no warning had been issued about poor performance
  • the employee was not provided with any opportunity to improve in response to cake making concerns
  • the employer’s offer of further training only occurred at the time of the dismissal
What about the Facebook communications?

The FWC summarised the employee’s communications to others (via her Facebook page) as follows:

  • Ms Vosper had been dismissed from her employment because the new owners had told her that they no longer want to have the part-time position and she was being forced to casual employment.
  • She had rejected casual employment and had decided to move on.
  • She had been given her one week’s notice.

The FWC was scathing of the employer’s arguments that the Facebook communications were derogatory and breached confidentiality.

“There is nothing derogatory in these statements. There is no confidential business information in these statements. No reasonable person could believe that this information was either derogatory or confidential business information. An employee has a right to complain about their employment rights and their treatment at work. We do not live in a society where employees are prohibited from discussing their employment status or their treatment at work with others.” [underlining added]

The FWC commented disapprovingly that the employer did not discuss its concerns with the employee about perceived derogatory remarks or an inappropriate release of confidential business information.

The FWC considered that there did not appear to have been any reasonable basis for the employer’s concern of a breach of confidentiality.

Even if there were a reasonable basis for concern, the FWC commented that it was doubtful that the concerning conduct would have amounted to serious misconduct.

Lessons for employers

  • An employee’s airing of workplace dirty laundry may not necessarily involve a release of confidential information
  • An employee is entitled to complain about their employment rights and workplace treatment
  • Employers should have a clear process for the raising of a workplace grievance and the resolution of complaints
  • An employee is entitled to be disgruntled – providing it does not manifest in misconduct or unsatisfactory performance
  • Think before acting

Death in the House

by

Death can impact on a conveyancing transaction in a number of ways, whether the death occurs prior to commencement or during the course of the transaction.

Survivorship

One common example is where one joint tenant dies after the parties have separated. The survivor claims the whole of the property by survivorship, but the beneficiaries of the deceased argue that the separation of the parties severed the joint tenancy and that survivorship does not apply. It is impossible to provide a categorical formula for resolving such disputes as each case will very much depend upon the length and circumstances of the separation.

The one thing that is certain however is that the lawyers will, as always, be regarded as the bad guys no matter how the dispute is resolved.

Sales generally

The fact that a registered proprietor has died does not necessarily mean that a proposed sale has to go ‘on hold’. There may be good reasons why an asset should be disposed of promptly after the death of the owner, but equally good reasons why the estate of the deceased may take some considerable time to be finalized.

A sale in such circumstances need not await all of the formalities of a grant of probate as an executor of a will is entitled to enter into a contract to sell an asset of the estate even though the executor has not obtained a grant of probate at the time the contract is entered into. The sale is made subject to the executor obtaining a grant of probate and the proposed settlement date takes that condition into account, for instance by specifying settlement ‘on the 1st June or 14 days after the vendor obtains probate’.

However, an executor in such circumstances cannot enter into a terms contract as the executor is not ‘presently entitled to become the registered proprietor’ as required by s 29D Sale of Land Act.

This ability to ‘intermeddle’ with estate assets is only available to an executor named in the will and is not available to a person who may intend to apply for a grant of letters of administration of a deceased estate as such an appointment is very much at the discretion of the Court.

Sensational deaths

That someone died in a house that is now for sale is a reasonably common event. To date such circumstances have not caused the common law any concern and fall within the ambit of caveat emptor – let the buyer beware, so a vendor in such circumstances has no duty to bring the death to the attention of a prospective purchaser. That someone was murdered in the house does not alter the common law’s view, but modern statutory principles of misleading and deceptive conduct may impose additional vendor disclosure obligations.

A case involving such circumstances came before the New South Wales Administrative Decisions Tribunal late last year in the context of disciplinary proceedings against an agent involved in such a sale: Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 257 and Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 299. Whilst the comments do not directly bear on the vendor’s obligations, it is noted that the vendor did in fact agree to release of the purchaser from the contract when the purchaser became aware of the circumstances of the death after entering into the contract.

A vendor proposing to sell such a property might consider including a special condition in the contract to the effect that the purchaser is aware that the former owner died whilst residing in the property and that the death occurred in unusual circumstances.

Death during the course of the contract

If a vendor dies during the course of the contract, the vendor’s lawyer should advise all parties concerned of the death and take steps to establish the ability of the legal personal representative (either executor or administrator) to complete the transaction – (1989) Law Institute Journal 1149 (December) – which may require a ‘temporary’ grant (ad colligendum bona) if settlement is imminent.

Whilst the ‘easy’ solution would appear to be to rely on existing documents (particularly if the transfer of land has been signed by the deceased in anticipation of settlement) such action is fraught with danger. The same may be said of relying on a transfer signed by an attorney under power when the donor/vendor has died.

Settlements conducted in such circumstances are liable to be challenged by the ‘prodigal son’ or other unexpected potential beneficiary of the deceased’s estate who finds that the main asset of the estate has been disposed of and distributed on the basis of a transfer which took place after the death of the deceased.

 

Whilst written for Victoria this article has interest and relevance for practitioners in all states.

By Russell Cocks

First published in the Law Institute Journal

Connect with us