What happens when a trust or superannuation fund undergoes changes? Does this give rise to a new structure or trust? What sort of changes are we talking about? Two cases when examined jointly will show that the law remains unclear due to the contradiction between the two rulings.

A significant part of the recent changes to the unfair dismissal rights for the employees of small businesses under the Fair WorkAct 2009 (the Act) was instituting Small Business Fair Dismissal Code Checklist (the Code). This was in response tolatest decisions of Fair Work Australia (FWA).

All small business must be aware of these changes, as they will have a direct impact on the measures involving termination of employees in small business, mainly redundancies.

This new change in law is designed to give small businesses (employing less than 15employees) with an easy set of procedures for the fair termination of employees. The Code came into effect on 1 July 2009. The Code mainly gives two set of guidelines. Firstly, the minimum employment term has been doubled to 12 months; the employees cannot file a claim for unfair dismissal for this period. Secondly, if small business owners carefully follow these simple set of guidelines for the fair termination of employees from the Code, it will automatically guarantee that any dismissal of an employee is not unfair.

Key Changes                        

The focus of the changes to the Code’s checklist is mainly on redundancies and the rights of an employee. Below is the summary of the latest changes to the Code:

Complying with s 389 of the Act – One of the changes include compliance with s 389 all the employers shall comply with all the requirements of this section to make sure that the termination was a fair discharge.

The checklist also consists of another question to remind small business owners that they must follow the consultation clause which states that the before taking a finaldecision of terminating an employee, the employers must consult either the employee or his/her representative.

Earlier, the checklist asked a simple question to the employers: If the employment was dismissed because of a genuine redundancy? Now this question has been extended to “'In other words, was the dismissal because you didn't require the person's job to be done by anyone because of changes in the operational requirements of your business?'.

Another change to the Code is related to the rights of an employee. Before the final decision regarding the termination, every employee must be provided with a support person to attend the discussion relating to the redundancy issues.

Although,it is true that if the small business employers comply with the Code when dismissing an employee, the dismissal will be considered fair. But the preamble of the checklist evidently states that compliance with the Checklist does not necessarily mean compliance with the Code.

The below link from the FWA website provides the checklist of how the small business owners need toreflect on termination of any employment.

http://www.fairwork.gov.au/termination/small-business-fair-dismissal-code/pages/default.aspx

It is ironic that in an era of technology, recording devices have been banned at company meetings. Or is it?

The South Australian Supreme Court (SASC) in Alliance Craton Explorer Pty Ltd v Quasar Resources Ltd [2010] SASC 266, held that the use of recording devices can be prohibited at meetings by the Chairman. The Chairman also reserves the right to adjourn the meeting if any member defies this rule.

Quick Facts

• In the above case, a Joint Venture (JV) took place between the plaintiff and defendant.

• The plaintiff held 25 percent and the defendant held 75 percent of voting power on the management committee.

• In one of the meetings the Chairman ruled that the meeting could not be recorded by the plaintiff. In spite of this announcement, the plaintiff continued to record the meeting.

• As a result, the meeting was adjourned by the Chairman.

The JV agreement did not contain any provisions on this procedural aspect or the management committee’s powers either.

What happened next?

The plaintiff challenged the Chairman’s decision. The SASC ruled in favour of the defendant dismissing the plaintiff’s argument that the chairman did not have the right to adjourn the meeting. The court also highlighted that the Chair has innate powers to exercise its discretion on these matters, in the absence of express contractual provision.

Section 4 of The Listening Devices Act, 1972, provides that a person must not intentionally use any listening device to overhear record, monitor or listen to any private conversation whether or not the person is a party to the conversation, without the consent, express or implied, of the parties to that conversation. However, section 7 of the same Act provides for the use of recording devices for the protection of the lawful interests of a person who is a party to the conversation.

In this case, the plaintiff was a party to the meeting and wanted to record the meeting however it failed to prove that it had a lawful interest in doing so.

Lessons

There is no simple or set rule that administrates the use of recording devices in meetings. The discretion of the Chair is mainly to facilitate meetings and to preserve order. His or her role is to also ensure that proceedings are conducted in a proper manner and to prevent unruly conduct that prevents a meeting from continuing.

Ideally, it makes for good protocol and avoids any professional embarrassment if such intentions to use recording devices are announced before the meeting itself. Any possible objections can be resolved beforehand rather than invite unwanted adjournments and certainly expensive law suits.

Times like these are ripe for starting up a charity.

This is thebrighter side of a financial crisis where redundancy and not-so-voluntaryretirement are becoming commonplace and demands for charitable services areincreasing.

Establishing a charity can be quite straightforward as long as thedominant purpose of the charity is for the benefit of the community and ischaritable in nature.  Education,health, science, religion, environment, social and community welfare are someexamples of well-accepted charitable purposes.

Eligibility

How does an organisation qualify for formal recognition as a charity? Inaddition to showing a dominant charitable purpose, the other eligibilitycriteria include:

·       being an appropriately formed institution,fund, foundation, trust or association. The organisation’s rules can be ofvital importance.

·       being non-profit. If the charity ispermitted to pay or make available any portion of its property or fundraising forthe benefit of any trustee or member, it will not qualify.

·       obtaining an ABN.

·       fulfilling the criteria forobtaining Tax Concession, Income Tax Exempt or Deductible Gift Recipient statusfrom the Australian Taxation Office (ATO).

Benefits 

Obtaining Deductible Gift Recipient status is one of the most popularbenefits. This essentially means that a donation to the charity will entitlethe donor to an equivalent tax deduction. Clearly, this is a significantinducement for fundraising.  Once acharitable  organisation has IncomeTax Exempt status, it will be relieved of liability for tax or GST on theincome it raises and generates.

Additionally, reduced start-up fees are charged for companiesestablished for a charitable purpose. Charities can also take advantage ofexceptions to the company naming provisions under corporate laws.

Ultimately, it is up to the law to decide whether a charity is eligiblefor the benefits. Assessing what structure best suits the organisation’sobjectives, choosing trustees or directors, settling rules of engagement, fundraisingand other legal formalities all need to be addressed within the overarchingregulatory framework.  Reconcilingthe initial noble motivation for forming the charity with the laws that governcharities can often be a challenge.

You will no doubt have at least a passing familiarity with the broader effects of the Bankruptcy Act 1966 and the insolvency provisions of the Corporations Act 2001. 

You may also be familiar with the effect of bankruptcy or liquidation upon an individual’s right to hold a builders licence under the Queensland Building Services Authority Act. 

More than likely you have had a client or two that has had the unfortunate situation where they have fallen victim to insolvency (and seen the consequences for them and their families). 

In essence, any individual who holds a building licence that also becomes bankrupt or is a ‘person of influence’ in a company placed into liquidation will be deemed an ‘excluded individual’ by the QBSA. 

They will no longer be entitled to hold a builders licence or be director of a company with a building license. This naturally places an awful burden on those in the building trade. 

Most business people are able to avail themselves of the benefits of the various insolvency regimes and then carry on business in some modified form (often for the benefit of creditors). 

Many often reinvigorate their business and prospects through a Deed of Company Arrangement or a Part X Personal Insolvency Arrangement. 

However, subject to a few exceptions, builders are unable to effectively utilise these benefits of the statutory regime.

Their ability to ‘trade on’, often the most effective resolution of a cash flow crisis is severely limited by these provisions in the QBSA Act.

We have recently been involved in the Scheme of Arrangement approved by the creditors of Opes Prime Stockbroking Ltd. 

Of particular interest in that process is the decision of Justice Finkelstein in the Federal Court which gave final approval to the Scheme. 

The decision in effectvalidated arrangements between debtors and their creditors that had a bindingeffect on third parties. 

Previously there had been doubt over whether any such arrangements couldbind third parties – much court authority suggested it could not (basedprimarily on ‘privity of contract’ arguments). 

However the Court held in this case that the Scheme couldbind third parties to the arrangements.

The advantage of the decisionis that previously many arrangements between debtors and their creditors often fell down due to third party guarantees and the inability to bind third parties to the arrangements. 

This difficulty can now be overcome with a suitably drafted Deed of Arrangement.

At Sajen legal we have had recent good results with informal arrangements.  

These are designed specifically to assist those in the building trade and for whom the retention of their licence is vital to their business future is vital. 

In particular we have utilised a ‘creditors’ trust’ as a substitute for a Deed of Arrangement.

This has the benefit of all parties beingable to give effect to an agreement to permit the debtor company/individual to trade on.

It also helps ensure a return to creditors without the detrimental effect of the builder being classified an ‘excluded individual’ by the QBSA.

In simple terms these trusts operate as follows:

1. a registered liquidator is appointed as trustee of a unit trust established for the purposes of carrying out the debtor’s proposal;
2. the creditors swap their debt for units in thetrust which are issued on a pro rated basis;
3. the trustee can take security for the debtor’s obligations under the trust deed (a mortgage over real property, fixed and floating charge or both); and
4. the debtor enters into an agreement with the trustee in terms that permit the debtor to trade on while at the same time requires him or her to make ongoing contributions

(whether of capital or income or both as circumstances permit). 

Given that the debt previously existing is substituted for a fresh set of obligations it makes it easier to maintain capital requirements of the QBSA and even refinance. 

This strategy can, anddoes, result in a win win for builder and creditor alike. 

Often in circumstances this is the only alternative to a liquidation with no return to creditors and the debtor being prevented from any future business operation.

Naturally an agreement of this nature requires the goodwill of a builder’s creditors. 

In circumstances wherea builder has chosen to leave creditors in the dark, or refused to meet thereality of their situation until it is too late, it is unlikely creditors willbe able to be convinced of the merits of such an arrangement. 

However, where the builder takes the matter in hand and deals with issues promptly, with a view to the best outcome for all involved the use of a creditors trust can certainly be a very effective means to that end.

If you would like to know more, or have clients that may be able to utilise anarrangement of this nature please don’t hesitate to call me for a no obligation discussion.

How often have we consumers and buyers found ourselves in negotiations for work or services at the receiving end of a quote? 'More often than not' would be a common response and observation.First time home buyers for example love shopping around for quotes before taking the plunge. After buying the perfect house, painters and contractors are brought in. These service providers will usually make a quote before offering their services. This has become the norm.

Receiving a quote is a comforting thought. It offers choice and security. It allows parties to make informed decisions based on their income. However a simple quote can turn into a contract in some situations. The recent judgment delivered by the Supreme Court of New South Wales in Megalift v Terminals [2009] NSWSC 324 warns parties to exercise care and diligence when negotiating a quote as an innocent conversation could turn into a contractually binding offer.

In the above case, Terminals had used the services of Megalift. The latter party was required to discharge a huge storage sphere from a barge on the former party’s premises. It was later discocered that the sphere could not be discharged without excavating some of the land. This miscalculation or oversight caused inconvenience, delay and added costs. Megalift, having provided an unexpected service, not initially quoted for, claimed the extra amount. Terminals on the other hand counter claimed for the excavation costs.

On 28 April 2006, Megalift had sent a revised quotation to Terminals. Subsequently, both parties entered into a contract on 1 May 2006. The Supreme Court was faced with the question of whether a contractual relationship existed prior to 1 May 2006.

The facts of this case are unique in that two agreements allegedly existed. Megalift disputed that its first letter dated 21 March 2006 was an offer capable of acceptance. According to their understanding of quotes and legally binding contracts, this was simply a ‘quotation’ or ‘budget offer’. Terminals treated this as well as the purchase order as a contract, on 4 April 2006. Based on their comprehension of legal obligations, they held Megalift responsible for breaching the first agreement.

So, which agreement was legally binding? Justice Bergin ruled in favour of the first one (4 April 2006), where an offer was made and accepted. Both parties were already in negotiation, discussing terms and details such as transportation and delivery. These conversations involved quotations and although no fixed price was agreed upon, it was nonetheless a contract which was legally binding. Moreover, her Honour disregarded the quotation for the purpose of a budget only. This did not prevent the parties from contracting.

How did the court reach this conclusion? A contract requires an offer and an acceptance. However, are price quotations offers and if they are, when do they become legally binding? Each case should be decided on the facts. The question is one of objective intention of the parties involved. "We quote you" has been held not to be an offer but "shall be happy to have an order from you to which we will give prompt attention" was held to be an offer in a Canadian case. In Canadian Dyers Association v. Burton it was further stated that - "In each case of this type, it is a question to be determined upon the language used, and in light of the circumstances in which it is used, whether what is said by the vendor is a mere quotation of price or in truth an offer to sell."

The commercial context of such negotiations as well as the circumstances in which quotations are discussed, are important considerations. A way to avoid being bound by a mere estimate is to ensure that the quotation clearly states that it is not a binding offer. The next time you make a quote or accept one, just make sure you expressly convey your intention and desire to be bound by the quote. 

Help us improve our services, answer our quick poll http://polls.linkedin.com/p/51072/iigcz .