by DSA LawCan a builder make changes to a domestic building contract?
Any change to building plans are usually described as ‘variations’. In Victoria, the Domestic Building Contracts Act 1995 (Vic) sets out procedures that should be followed to allow a variation to any plan or specifications set out in, or attached to, a major domestic building contract.
What is a major domestic building contract?
Simply put, a contract for the carrying out of domestic building work in which the contract price is more than $10,000.00 (or any higher amount fixed by the regulations).[1]
Can a builder request a variation to the plans?
Yes. The owner of the building, the builder, and/or the surveyor (or any other authorised person under the Building Act 1993 (Vic)) can all prepare and give notice to vary any plans or specifications set out in the contract.[2]
How can plans be varied in a major domestic building contract?
To vary plans set out in a major domestic building contract, a builder must provide to the owner a Notice or Variation Notice, which must:[3]
- describe the variation the builder wishes to make; and
- state why the builder wishes to make the variation; and
- state what effect the variation will have on the works, as a whole, that are being carried out under the contract and whether a variation to any permit will be required; and
- if the variation will result in any delays and their reasonable estimate as to how long these delays will be; and
- state the effect the cost of the variation will have on the contract price.
Is consent to a variation needed from the owner?
A builder cannot proceed with any variation without written consent from the owner, which must be attached to the Variation Notice described above.[4]
However, a builder may bypass the need for written consent from the owner, if:[5]
- a building surveyor (or other authorised person) requires the variations to be made by way of a Building Notice or Building Order pursuant to the Building Act 1993 (Vic); and
- a copy of that Building Notice or Building Order was attached to the Variation Notice provided to the owner by the builder; and
- there are circumstances beyond the builder’s control; and
- the building’s owner does not advise the builder in writing within five (5) business days of receiving the Variation Notice that they wish to dispute the Building Notice or Building Order.
Can a builder claim payment for the variation?
A builder cannot claim or recover any money from an owner in respect of a variation unless they: [6]
- complied with the above requirements; and
- can establish the variation was made necessary by circumstances that could not have been reasonably foreseeable by the builder at the time the contract was entered into.
Alternatively, a builder can apply for an order from the Victorian Civil and Administrative Tribunal that the building’s owner pay for the variation, but the Tribunal must be satisfied that:[7]
- there are either exceptional circumstances or that the builder would have suffered significant hardship if he had to comply with the above requirements; and
- that it would not otherwise be unfair to the owner.
The builder is otherwise entitled to recover the cost of carrying out the variation as well as a reasonable profit.[8]
What can’t be sought by a variation notice?
Prime cost items[9], being items that either have not been selected or whose price is unknown at the time of entering into the contract, including fixtures or fittings.[10] Instead the builder should include a reasonable allowance for these items in the contract.
Provisional sum items, being any additional work that might be required, that the builder should also allow a reasonable allowance for in the contract.
How can DSA Law help?
If you have any questions or issues in relation to building contracts, please Contact Us or one of our Construction Lawyers at DSA Law on (03) 8595 9580 and let us assist you.
[1]Domestic Building Contracts Act 1995 (Vic) s 3.
[2]For a summary, Consumer Affairs Victoria provides a quick checklist for what variations can be made to a domestic building contract: Consumer Affairs Victoria, Changing a major domestic building contract – checklist (22 April 2020) Consumer Affairs Victoria <https://www.consumer.vic.gov.au/housing/building-and-renovating/checklists/changing-a-major-domestic-building-contract>.
[4] ibid s 37(2)(a).
[5] ibid s 37(2)(b).
[6] ibid. s 37(3)(a).
[7] ibid s 37(3)(b).
by DSA LawCOVID-19: What are the safe harbour laws in Australia?
The Federal Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (“Omnibus Act”) has introduced various measures designed to assist people and businesses in dealing with the consequences of the COVID-19 outbreak and social distancing measures put in place for our protection.
One of the aims of the Omnibus Act is to prevent unnecessary insolvencies and assist businesses with managing debts. To do this, the Omnibus Act introduces temporary amendments to the Corporations Act 2001 (Cth) (“Corporations Act”) and Bankruptcy Act 1966 (Cth) in respect of insolvent trading.[1]
What is insolvency?
For the purposes of the Corporations Act, a person (which covers all manner of structures but particularly the common “private company”) is insolvent if they are unable to pay their debts as and when those debts fall due.
What is insolvent trading?
Section 588G(2) of the Corporations Act imposes a duty on a director of a company to prevent that company from incurring debts whilst insolvent i.e. to stop incurring debts when the company is insolvent or not to incur a debt that would render the company insolvent.[2]
Directors can be held personally liable to repay any debts of the company that were incurred whilst the company was insolvent. Such actions may be pursued by a liquidator or by creditors to whom those debts were incurred and remain unpaid (but is generally done by the liquidator, who is better equipped to investigate such matters).
There are defences to insolvent trading found in section 588H of the Corporations Act, which continue to apply in respect of insolvent trading.[3] Those defences are generally inconsistent with someone actively seeking to rely on ‘the safe harbour’ regime.
What are safe harbour laws?
The legislature was concerned that, commonly, directors were too quick to conclude a company suffering financial distress was a ‘lost cause’ and place it into external administration. Directors would do this to avoid being held personally liable for insolvent trading, rather than try to save the company.
Accordingly, in September 2017, additional provisions were introduced into section 588GA of the Corporations Act.[4] The amendments provided protection from insolvent trading for directors that are making legitimate efforts to turn around a struggling company. That protection is generally referred to as the ‘safe harbour’.
To avail themselves of the safe harbour protection from insolvent trading, directors who come to suspect that their company is or may become insolvent must develop a course of action (a recovery plan) that is reasonably likely to result in a better outcome for the company (and its creditors) than if the company was placed into external administration, and to implement that recovery plan.
In commencing that plan, directors must ensure all employee entitlements are paid up to date and substantial compliance is maintained as to the company’s tax reporting obligations.
Debts incurred by the company directly or indirectly in connection with the recovery plan will not attract personal liability to the director for insolvent trading, even if the company was insolvent, but it is the director who will bear the onus of establishing that he or she is in the safe harbour. We therefore recommend that a director seeking to rely on the safe harbour provisions in section 588GA should seek appropriate expert advice and diligently document the recovery plan, the basis for its feasibility and its implementation on an ongoing basis.[5]
Safe harbour protection can be lost, if:
- the recovery plan is not followed;
- it subsequently becomes apparent that following the recovery plan would not be reasonably likely to lead to a better outcome; or
- during the period in which the director seeks protection, the company fails to continue paying all employee entitlements or fails to adhere to financial reporting obligations to the ATO on time.
What are the enhanced safe harbour provisions arising from COVID-19?
The Omnibus Act introduces a new section 588GAAA into the Corporations Act.[6] This section provides a further and enhanced safe harbour to directors from insolvent trading. This enhanced safe harbour is only temporary and has been put in place to try and keep businesses trading wherever possible (in combination with other measures).
Accordingly, from 26 March 2020 until 25 September 2020, company directors are protected from liability for insolvent trading for debts that the company incurs during this period provided that those debts are incurred in the ordinary course of business.
The phrase in the ordinary course of business takes its plain meaning (i.e. there is no definition in the Corporations Act) and is seemingly wide enough to cover all but extraordinary debt.
The explanatory memorandum provides a little guidance as to what in the ordinary course of business means by suggesting that the phrase includes debts incurred by a company to facilitate the continuation of the business during the six month period, such as a loan to cover the expenses of moving the business operations of the company online.
Unless extended, the safe harbour protection will end on 25 September 2020. If, prior to this date, a director considers that the company will be insolvent when the temporary safe harbour ends, then the director should either:
- put in place a recovery plan under section 588GA to remain in the safe harbour; or
- appoint an external administrator.
How can DSA Law help?
If you have a bankruptcy or insolvency issue, please Contact Us or one of the Commercial Lawyers at DSA Law on (03) 8595 9580 so we can assist you with your concerns.
[1] See our summary of the changes regarding statutory demands, How Coronavirus (COVID-19) affects Defaults and Statutory Demands.
[2] Corporations Act 2001 (Cth) s 588G.
by DSA LawGenuine Redundancy and the JobKeeper scheme in Australia
If an employee is made redundant, and that employee is dismissed as a result of the redundancy, the employee cannot sue their employer for unfair dismissal if the redundancy was a “genuine redundancy”.
There are a number of reasons a job within a business may become redundant. This may include:
- a downturn in work (for example, there is not sufficient work to justify the position); or
- a restructuring of the business (for example, the position is outsourced as a cost-saving measure).
What is Genuine Redundancy?
A genuine redundancy is one which meets the following criteria: [1]
1.The employer no longer requires the employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s business. [2]
First, a distinction is generally drawn between an employee’s job and an employee’s duties.
Generally, an employee’s job constitutes the collection of duties that they perform. However, the fact that the employee’s duties are still required to be performed, either by:
- other employees of the business; or
- outsourced to independent contractors,
does not mean that the employer still requires the employee’s job to be performed.
2.If a Modern Award or Enterprise Agreement applies to the employment, the employer must have complied with any obligations to consult about the redundancy. [3]
Most Modern Awards contain obligations in relation to consultation about major workplace changes.
Generally, an employer is required to:
- give notice of changes to employees;
- discuss the changes with employees; and
- provide written information to the employees about these changes.
These consultation obligations are relevant if the employer determines to make redundancies (especially where redundancies will lead to termination of employment).
3. It was not reasonable in all the circumstances for the employee to be redeployed within the employer’s business, or the business of an associated entity of the employer.[4]
In determining the reasonableness of redeployment, things to consider, include:
- the nature of other work available;
- whether the employee has the requisite qualifications; and
- whether the position is appropriate for the employee’s skills and experience.
How are Genuine Redundancies and JobKeeper Payment affected during the COVID-19 pandemic?
The current pandemic has a significant impact on the Australian economy, as governments force businesses to close their doors and people’s spending habits change. Most businesses affected by the economic impact of COVID-19 would have considered whether to make redundancies.
The principles applying to genuine redundancies remain.
Employers should, however, ensure they thoroughly consider whether redeployment is suitable, especially in circumstances where the employer is eligible to receive JobKeeper subsidies.
The JobKeeper Payment scheme is intended to support Australian businesses and employees affected by the significant economic impact caused by COVID-19, by subsidising employee wages.[5] Further, if an employer is eligible to receive subsidies under the scheme, new provisions of the Fair Work Act 2009 apply, include:
- enable employers to give employees directions in relation to standing down an employee;[6]
- reduce their hours or days of work;[7]
- change that employee’s usual duties;[8] and
- change their location of work.[9]
Our Thoughts
Employers who are eligible under the JobKeeper Payment scheme may redeploy their employees and minimise the cost of maintaining a workforce, without the need to make redundancies. It would be reasonable to expect an eligible employer to redeploy an employee rather than dismiss that employee.
However, in some instances, the dismissal of an eligible employee by an eligible employer may not amount to a case of genuine redundancy.
How can DSA Law help?
If you require legal advice about
redundancies and your rights as an employer or employee under the JobKeeper
Payment scheme, please Contact
Us or one of the Employment
Lawyers at DSA Law on
(03) 8595 9580 so we can assist you.
[1] Fair Work Act 2009 (Cth) s 389.
[2] Fair Work Act 2009 (Cth) s 389(1)(a).
[3] Fair Work Act 2009 (Cth) s 389(1)(b).
[4] Fair Work Act 2009 (Cth) s 389(2).
[5] Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No.2) 2020.
[6] Fair Work Act 2009 (Cth) s 789GF.
[7] Fair Work Act 2009 (Cth) s 789GDC.
[8] Fair Work Act 2009 (Cth) s 789GE.
[9] Fair Work Act 2009 (Cth) s 789GF.
by DSA LawWhat may happen to your assets after separation or divorce?
If you and your ex-partner cannot reach an agreement relating to the division of your property post separation, then you can apply to the court for financial orders. The court can award orders covering financial orders, orders relating to the division of property and payment of spouse or de factor partner maintenance.
There is no set formula to divide property following a separation. The decision is made by the court after all the evidence is heard and the judicial officer determines what is just and equitable based on the unique facts of the situation.
Property can include most items of value, such as: [1]
- property owned jointly or independently;
- superannuation;
- business interests;
- trust interests;
- jewelry;
- cars;
- assets acquired through inheritance; and
- money.
The general principles the court considers when deciding financial disputes after a breakdown of a marriage is set out in the Family Law Act 1975 (Cth). The general principles apply to individuals who were in a marriage[2] or in a de facto relationship[3], and are based on:
- working out what you’ve got and what you owe, that is your assets and debts and what they are worth;
- looking at the direct financial contributions by each party to the marriage or de facto relationship such as wage and salary earnings;
- looking at indirect financial contributions by each party such as gifts and inheritances from families;
- looking at the non-financial contributions to the marriage or de facto relationship such as caring for children and homemaking; and
- future requirements – a court will take into account things like age, health, financial resources, care of children and ability to earn.
The way your assets and debts will be shared between you and your ex-partner will depend on the individual circumstances of your family/relationship. Your settlement will generally vary from others you may have heard about.
However, time limits also apply:
- if you were married, applications for property related orders must be made within 12 months of your divorce becoming final;
- if you were in a de facto relationship, the application for property orders must be made within 2 years of the breakdown of the de facto relationship; and
- if you do not apply within these time limits, you will need to seek permission of the court, which may not always be granted.
How can DSA Law help?
There are many scenarios which may arise during this difficult time and the process of dealing with separation and divorce. DSA Law has the skills and expertise to help you navigate this ever changing landscape.
If you require assistance or guidance with your rights and obligations, please Contact Us or one of our Family Lawyers at DSA Law on (03) 8595 9580.
[1] Family Law Act 1978 (Cth) s 4.
[2] Family Law Act 1978 (Cth) s 79(4).
[3] Family Law Act 1978 (Cth) s 90SM(4).
by DSA LawCOVID-19: Tips to maintain positive cash flow in your business
The novel Coronavirus (COVID-19) has had a profound impact on the Australian economy and local Australian businesses. Even though we are wading through unprecedented times, businesses are still trading, and businesses need to generate cash flow in order to keep doing so.
Our article explores how you may maintain cash flow by looking into approaches for debt recovery and preserving assets from creditors during the COVID-19 pandemic in Australia.
How can I get my debtors to pay?
Ordinarily, if your debtor is not paying within ordinary business terms, you could turn to us, as your lawyers, to commence the legal recovery process. Whilst letters of demand are often effective, it is fair to say that they may not be the best tool to use during these unprecedented times. These letters are blunt, devoid of understanding, and always threaten legal action. We expect many debtors will simply see such an approach as the last straw and the actions of a business that does not wish to assist the recovery of their business in the interests of a future relationship. If they can pay you in due course, they might, but it won’t likely be as a priority.
The key to recovering debts during this time of uncertainty is to be flexible and, if possible, sympathetic. If you are willing to be flexible, solutions can be designed. For example, this may include, reaching out to your debtors by sending a special letter, which does not demand money, nor does it threaten legal action. The letter will touch on the unprecedented times we are all facing, the need for us all to support each other, and will invite your debtors to get in contact to negotiate a settlement or payment plan.
Many debtors may avoid you for fear that you will not accept any payment but the debt that is owed, in full. If debtors know that you are open to negotiation and alternative payment arrangements, it may open the lines of communication and could ultimately result in the debt being paid in a manner that suits you, your business needs and those of your debtors.
However, if you have exhausted the options available to you, then legal action may be necessary. With the various COVID-19 protocols giving debtors more time to pay, you don’t want to be last in line either.
Do you need help paying your creditors?
If you find that your business has been left with a list of creditors, and you are struggling to pay them, you are not alone. We understand that times are tough and that you need to not only pay your creditors, but also your staff.
For our clients in this situation, we have found ourselves crafting letters, to be sent to our client’s creditors. The idea behind such a letter is to redirect their focus away from you so that you can focus on alternative income streams/cash flow and/or recovery of your income streams/cash flow, and grant you extra time to pay your debts. If your creditors demand money, effective procedures can be created to negotiate settlements on your behalf so that in the end, you save money.
How can DSA Law help?
Please do not hesitate to get in touch with one of our friendly staff to discuss your debtors and/or creditors. Alternatively, please feel free to contact our office on 03 8595 9580 or by going on our Website.
by DSA LawCOVID-19: What are the “Stay at home” laws in Victoria?
As is the case nationwide, the Victorian government has directed all Victorians to stay at home where possible to limit the spread of the coronavirus (COVID-19). The laws that govern these restrictions in Victoria are contained within state legislation, chiefly the Public Health and Wellbeing Act 2008 (Vic) (the Act)and the accompanying Public Health and Wellbeing Regulations 2019 (the Regulations), which support the operation of the Act and provide a framework for business, councils, the Department of Health and Human Services as well as individuals to adhere to. The Regulations cover a range of measures for the purpose of preventing and responding to the spread of infectious diseases generally, such as COVID-19.
The Act contains provisions which concern public health emergencies arising out of situations like the present outbreak of COVID-19, including providing for the appointment of the Chief Health Officer[1] (currently Professor Brett Sutton) who can exercise various powers conferred by the Act during such emergencies[2].
Victoria’s Minister for Health, Jenny Mikakos, exercised her power under the Act to declare a State of Emergency in Victoria[3] from 16 March 2020 until 11 May 2020[4] to manage the COVID-19, which has consequently granted the Chief Health Officer with additional emergency powers to help contain the spread of the virus. Pursuant to the Act, the Chief Health Officer is empowered to give directions[5] such as the mandatory directions, which have forced the closure of business and other premises, as well as the implementation of social distancing measures – the “Stay at home” laws.
These “Stay at home” laws are contained within the Stay at Home Directions (No 4) given by Dr Annaliese van Diemen, Deputy Chief Health Officer (Communicable Disease) pursuant to section 200(1)(b) and (d) of the Act (the Directions)[6].
In our article, we discuss how everyday Australians in Victoria may be affected by those Directions to date.
Permitted Reasons for Leaving Premises
The Directions provide under Clause 5, Part 2, that a person must not leave the premises at which they ordinarily reside[7], other than for one of the reasons specified in:
- clause 6 (necessary goods or services);
- clause 7 (care or other compassionate reasons);
- clause 8 (work and education);
- clause 9 (exercise);
- clause 10 (other specified reasons).
These clauses provide specifically as below:
Clause 6 – Necessary Goods or Services
A person may leave their premises to obtain food or drink, goods and services for health or medical purposes as well as other necessary goods or services including (without limitation) those provided by:
- a financial institution;
- a government body or agency;
- a post office;
- a pharmacy;
- a hardware store;
- a petrol station;
- a pet store or veterinary clinic;
- a retail facility[8] that is not prohibited from operating by the Restricted Activity Directions.
Consequently, any retail facility which sells or provides “necessary goods or services”, other than those which are explicitly prohibited from operating, is ostensibly still permitted to trade and have customers attend in person.
Other than the examples above, “necessary goods or services” are not specifically defined.
Clause 7 – Leaving premises for care and other compassionate reasons
A person is allowed to leave their premises:
- for a range of specified reasons in connection with the general care and support of children (where the person is a parent or guardian), including meeting shared parenting arrangements or to take the child to be minded so that the person can leave the premises for work or to obtain essential goods or services;
- to provide care and support for elderly or infirm relatives,
- to attend a funeral or wedding[9];
- to donate blood;
- to escape harm or the risk of harm, including family violence;
- to visit a person with whom they are in an intimate personal relationship;
Clause 8 – Leaving premises to attend work or education
A person is permitted to leave their premises to:
- attend work, or
- attend an educational institution; or
- do anything reasonably necessary to attend either of the above (such as taking a child to childcare, school or another person’s premises to be minded)
provided that it is not reasonably practicable for the person to work or obtain the educational services provided by the educational institution, from home.
Clause 9 – Leaving premises for exercise
A person may leave the premises to exercise, subject to maintaining a distance of 1.5 metres from all other persons and complying with the restrictions on gatherings in clause 11 (ie. a person can only exercise with 1 other person, unless the other people live at the same premises).
Clause 10 – leaving premises for other reasons
A person may leave their premises for other specified purposes, including:
- emergency purposes;
- as
required by law, including without limitation, attending:
- a police station; or
- a court or other premises for purposes relating to the justice or law enforcement system;
- if the premises in which they ordinarily live are no longer available or suitable for them to live in;
- for the purpose of moving to new premises;
- to leave the state, if the person lives outside Victoria;
- if the person usually resides at more than one premises, to move between them;
- for the purposes of national security.[10]
Clause 11 under Part 4 of the Directions specifically details the restrictions on gatherings, in addition to weddings and funerals.
Police have strong powers to enforce these directions and are able to issue ‘on the spot’ fines for contraventions, including up to $1,652 for individuals and up to $9,913 for businesses.
Deputy Police Commissioner Shane Patton has however recently stated at a press conference that he would personally review every single fine issued for contraventions of the Chief Health Officer’s directives and indicated that if they were not “properly issued or they don’t pass that common sense test, they will be withdrawn.”[11]
How can DSA Law help?
If you have an enquiry,
please Contact
Us or one of the Lawyers at DSA Law on (03) 8595 9580 so we can
assist you.
[1] Public Health and Wellbeing Act 2008 (Vic) s 20(1).
[4] This was extended for another 4 weeks on 12 April 2020, pursuant to s 198(7)(c) of the Act.
[5] Ibid s 200(1)(b) & (d).
[6] Dr Annaliese van Diemen, Directions from Deputy Chief Health officer (Communicable Disease) in accordance with emergency powers arising from declared state of emergency – Stay at Home Directions (No 4) (13 April 2020) Department of Health and Human Services Victoria <https://www.dhhs.vic.gov.au/sites/default/files/documents/202004/b4%20-%20stay%20at%20home%20direction%20%28no%204%29%20%28signed%29.pdf>
[7] A person is however permitted to freely move between ordinary places of residence if they have more than one, pursuant to subclause 5 of clause 5 and clause 10(1)(g).
[8] As defined in the Restricted Activity Directions (No 4), as “any facility that is used wholly or predominantly for the sale or hire of goods by retail; or the retail provision of services“.
[9] Subject to the requirements of Clause 11 of the Directions.
[10] “Security” being as defined by the Australian Security Intelligence Organisation Act 1979 (Cth).
[11] ABC News, Victoria expands coronavirus testing criteria to be ‘widest in Australia’ (14 April 2020)ABC News <https://www.abc.net.au/news/2020-04-14/victoria-expands-coronavirus-testing-criteria/12146166>.
by DSA LawCOVID-19 Omnibus Regulations 2020 and Leases in Victoria
Under section 15 of the COVID-19 Omnibus (Emergency Measures) Act 2020 (“the Act”), the Minister for Small Business in Victoria is empowered to pass regulations with respect to measures regarding eligible leases, leasing negotiations and rental reliefs in Victoria. The COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (“Omnibus Regulations”) have now been passed by the Minister, effective 1 May 2020.[1]
One would be forgiven for not recognising the content of the Mandatory Code of Conduct (“Code”) within the Omnibus Regulations however, upon closer legal analysis they do appear to cover off on the fundamental principles conveyed by the Code.[2] Therefore, the key operations of the Code are also in place in Victoria.[3]
What we propose to focus on here are the parts of the Omnibus Regulations that confirm or otherwise clarify some of the doubts we had when the Act was passed and otherwise provide some key considerations for landlords and tenants alike.
What we know about the Omnibus Regulations
1. What is the “Relevant Period” for relief measures?
The Omnibus Regulations are said to be effective as if in place from 29 March 2020 until 29 September 2020 to start with.
- Therefore, rent relief is backdated to 29 March 2020, if a rent relief request is made and approved. It applies for the full 6 months, which provides clarification as to the Code’s period of operation, referred to as “the COVID-19 pandemic and the reasonable recovery period”.
- An answer to a rent relief request needs to come within 14 days unless otherwise agreed.
If one lot of rent relief is granted and then the business experiences further decline in finances prior to 29 September 2020, then they can make a subsequent request. No such option exists for the landlord to trigger reconsideration where revenue of a tenant begins to recover, and they come out of Jobkeeper eligibility (which is consistent with JobKeeper’s once in, you’re in until 27 September 2020).
2. What is the “sufficient information” requirement?
The rent relief request needs to annexe financials to support the application (though Jobkeeper eligibility paperwork will likely suffice). If a second lot of rent relief is to be requested, it is treated as a fresh application and further supported by updated financials (again, JobKeeper declaration paperwork would seem the most sensible starting point).
3. What is the definition of “Group”?
The “Group” definition of the Omnibus Regulations uses sections 328-125 and 328-130 of the Income Tax Assessment Act 1997 (Cth) (“ITAA”). These tests revolve around control of a business entity and whether it can be deemed to belong to another entity based on factors including shareholdings, directorships, and historical profit distributions. Needless to say, it’s quite complex and we anticipate many queries as to whether a tenant is a member of a ‘group’ or not.
Furthermore, the Code’s carve out of franchisees from the ‘group’ concept has not been made clear. While any genuine franchisees will likely not fail the test and therefore remain eligible (subject to other criteria), if they fit into the definitions required under the ITAA to be exempted it doesn’t actually matter if they’re a franchise on face value.
4. What are the terms of the Omnibus Regulations?
Parties can agree to not incorporate the following elements of the Omnibus Regulations, but such agreement will need to be clear and in writing:
- Rent increase prohibition;
- Extension for deferral period; and
- Amortisation of deferred rent repayment.
Therefore, you can’t opt out of eligibility under the Code, though a tenant needs to make the application to trigger their rights so there is an ‘opt-in’ element that, with appropriate negotiation, may never need to be exercised.
5. What does “non-eligible” leases mean?
The Act and Omnibus Regulations also provide clarity with respect to non-eligible leases:
- New leases are not eligible leases, i.e. if they’re entered into after 1 May 2020;
- A lease signed but not commencing does fall into eligibility though on first reading of the Act and the Omnibus Regulations together;
- Many leases relating to farming and agricultural activities are carved out specifically under the Omnibus Regulations on the basis there already exists a Farm Debt Mediation program under legislation in each State.
- All eligible leases are taken to have a new cooperation clause as per Reg 8.
6. Victorian Small Business Commissioner and Mediation
The Victorian Small Business Commission (“VSBC”) has been granted, as we suspected, power to mediate over all eligible leases and not just Retail Leases as had been the case in the past.
These mediations by the VSBC are optional but are a precondition to taking any matter to VCAT, Magistrates or County Courts aside from an injunction. The Victorian Supreme Court can grant leave to dispense with VSBC mediation, though in what circumstances is unclear.
Key tips regarding the Omnibus Regulations
When considering deferral versus waiver of rent, landlords will need to consider whether the deferral will force an extension of the lease term under Regulation 13 for the equivalent period
For example, if deferring 3 months’ rent out of 6, and the lease was to end at the end of the 6th month, it is automatically extended another 3 months on the original terms. The deferred rent can be claimed over no less than 24 months as well. If 12 months is left in the lease, it automatically extends to 15 months.
This represents a slight adaptation of the Code’s principle in this respect, which referred to a tenant opting into this rather than it being mandated. The same effect is obtained by the ability mentioned (see point 4 above) for the parties to agree to not extend the lease.
Summation
The Omnibus Regulations are a welcome sight but, as with any new laws, the implementation and interpretation to be given by the courts is always required to crystallise that understanding and clarity. Unlike many other legislative instruments however, the limited timeframe these Omnibus Regulations have to operate might mean that often essential clarity comes too late for some and leaves many operating with a level of uncertainty that might never be remedied. This is not intended as a criticism, given most legislative instruments take months, if not years, to be developed and then subsequently are moulded and chiselled away over many years thereafter until the right mix is found.
What is clear is that legal analysis and advice is going to be the best option for either tenants or landlords to obtain as much clarity as is possible in this environment. That’s why we at DSA Law have a committed team working regularly with landlords and tenants to assist understandings and provide up-to-date and timely advice as and when needed.
How can DSA Law help?
If you have a leasing query arising from COVID-19, the Code, the Omnibus Regulations or just as part of your regular business activities, please don’t hesitate to Contact Us or one of DSA Law’s dedicated commercial leasing team on 03 8595 9580.
[1] COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (“Omnibus Regulation“); For further information regarding the predecessor, Mandatory Code of Conduct for Commercial and Retail Leases, and how it was implemented in Australia, read our article on 9 April 2020, Mandatory Code of Conduct for Commercial and Retail Leases during the COVID-19 pandemic.
[2] ibid.
[3] For a summary of those principles, read our article on 9 April 2020, Mandatory Code of Conduct for Commercial and Retail Leases during the COVID-19 pandemic.
by DSA LawCOVID-19: What are the changes to insolvency laws in Australia
In late March 2020 the Government enacted the Coronavirus Economic Response Package Omnibus Act 2020 (the Act) to provide an economic response, and deal with matters relating to COVID-19. This article summarises some of the changes introduced by the Act relating to personal bankruptcy, corporate insolvency and directors’ duties relating to insolvent trading.
Personal Bankruptcy
The Act amends the Bankruptcy Act 1966 (Cth) and Bankruptcy Regulations 1996 to provide temporary relief for individuals at risk of bankruptcy by providing temporarily for:
1. an increase in the minimum amount of debt required to be owed before a creditor can initiate bankruptcy proceedings against an individual from $5,000 to $20,000; and
2. an increase in the time to respond to a bankruptcy notice from 21 days to six months.
The changes affect bankruptcy notices issued on or after 25 March 2020. If the bankruptcy notice was issued before 25 March 2020, the old regime applies, and the debtor has 21 days to comply with the bankruptcy notice.
Corporate Insolvency
The Act amends the Corporations Act 2001 (Cth) and Corporations Regulations 2001 to provide temporary relief for business at risk of insolvency by providing temporarily for:
1. an increase to the statutory minimum for a creditor to issue a statutory demand to a debtor from $2,000 to $20,000; and
2. an increase in the time to respond to a statutory demand from 21 days to six months.
The amendments only apply to statutory demands served after 25 March 2020 and will only apply for six months unless that period is extended.
Insolvent trading
The Act amends the Corporations Act 2001 (Cth) to provide temporary relief for directors from their personal duty to prevent insolvent trading. This is achieved by introducing a new temporary safe harbour from the duty to prevent insolvent trading. The changes provide that a director may rely on the temporary safe harbour in relation to a debt incurred by the company if:
1. the debt is incurred in the ordinary course of the company’s business;
2. the debt is incurred during the six month period starting on 25 March 2020, or a longer period as prescribed by the regulations; and
3. the debt is incurred before any appointment of an administrator or liquidator of the company during the temporary safe harbour application period.
Directors will be taken to incur a debt in the ordinary course of business if they can show that the debt is necessary to facilitate the continuation of the business during the six month period. The explanatory memorandum for the Bill provides examples of debts incurred in the ordinary course of business such as:
• loans to move some business operations online; or
• debts incurred through continuing to pay employees during the Coronavirus pandemic.
Any debts incurred by the company will still be payable by the company.
It is important to note that the Act does not provide for any change in regards to directors’ duties, voidable transactions (inc. preference payments) or voluntary administration/liquidation appointments
How can DSA Law help?
If you have a commercial or insolvency enquiry, please Contact Us via our Website or Call us on (03) 8595 9580 and one of our team will be able to assist you.
by DSA LawCOVID-19: What are the changes to foreign investments in Australia?
Effective from 29 March 2020, the Federal Treasurer announced temporary changes to the foreign investment review framework and how foreign investments in Australia will be affected, in light of the COVID-19 pandemic.
These measures have been supported by the Foreign Investment Review Board (FIRB), who are an advisory body to the Government in relation to foreign investment policy and act as the examining body for proposals by foreign interests to undertake investment in Australia.
What are the key changes?
1.Reduction of monetary screening threshold
All proposed foreign investments into Australia subject to the Foreign Acquisitions and Takeovers Act 1975 will require approval, regardless of the value or nature of the foreign investor.
Some of the key changes can be summarised as follows:[1]
The Foreign Acquisitions and Takeovers Regulations 2015[3] provides that a business is sensitive if the business is carried on wholly or partly in:
- the media, telecommunications or transport sectors;
- the supply of military goods, equipment or technology for a military purpose; or
- the extraction of uranium or plutonium or operation of a nuclear facility.
However, not all foreign investments are impacted by the changes. It will remain business as usual for all foreign government investment and investment in residential land, which have always been subject to a $0 threshold
2. Extended deadline for case processing
Given the expected increase in the number of proposed foreign investments requiring approval, the FIRB is extending timeframes for reviewing new applications from 30 days to up to six months. This extension will apply to new and existing applications alike.
3. Applications supporting Australian businesses and jobs prioritised
Notwithstanding the extension of timeframes for reviewing new applications, the Government has stated its intention to prioritise urgent applications for investments that protect and support Australian businesses and jobs.
Will I be affected by these changes?
The changes will directly affect all foreign persons, entities and government investors, regardless of their country of origin.
Failure to adhere to the temporary changes can have significant consequences, including, but not limited to, civil and criminal penalties, so it is essential that all foreign investors pay attention to the current changes.
How can DSA Law help?
If you are a party to a proposed transaction that will require FIRB approval, or are simply seeking advice regarding the temporary changes to the foreign investment review framework and how your individual circumstances and how your interests may be effected please Contact Us or one of our Lawyers at DSA Law on (03) 8595 9580.
1.Agreement country or region investors are those from: the United States of America, New Zealand, Chile, Japan, the Republic of Korea, China, Singapore, a country (other than Australia) for which the Comprehensive and Progressive Agreement for Trans‑Pacific Partnership, done at Santiago on 8 March 2018, is in force (CPTPP) (as at 1 January 2020, the CPTPP is in force for: Canada, Japan, Mexico, New Zealand, Singapore and Vietnam), and the region of Hong Kong, China; Examples of Agribusiness
2.For Chile, New Zealand and United States of America only.
3.Foreign Acquisitions and Takeovers Regulations (Cth) 2015, r 22
4.For Chile, New Zealand and United States of America only.
5.For Chile, New Zealand and United States of America only.
by DSA LawCOVID-19: Modern awards and recent changes you should know
In response to the declaration of COVID-19 as a pandemic and subsequent state government mandated shut-downs, the Fair Work Commission approved various amendments to a number of modern awards. In this article, we summarise the most widely applicable variation, being pandemic leave, before exploring more specific amendments to the Hospitality Industry (General) Award 2010, the Restaurant Industry Award 2010, and finally, the Clerks – Private Sector Award 2010.
The intent of the amendments is to provide greater workforce flexibility in the face of substantial changes to industries as a result of COVID-19.
Interestingly, these amendments appeared to have been largely supported by both business and employee groups, including unions, marking a welcome change from usual adversarial approach that accompanies Modern Award amendments.
Pandemic Leave
On 8 April 2020, the Fair Work Commission varied 99 modern awards (there are 122 in total) to include two weeks of unpaid pandemic leave (or more by agreement between the employer and employee), if the employee is prevented from working:
- as a result if being required to self-isolate by government or medical authorities, or acting on the advice of a medical practitioner; or
- by measures taken by government or medical authorities in response to the pandemic (for example, an enforceable government direction restricting non-essential business).
Importantly, pandemic leave is available in full immediately to full-time, part-time and casual employees. In other words, employees do not need to accrue it and it is not pro-rated for employees who do not work full-time.
In addition, employees do not have to use all their accrued paid leave before accessing pandemic leave.
Finally, employees need to commence their pandemic leave before 30 June 2020, but can finish it after that date.
Hospitality Industry (General) Award 2010
The amendments to the Hospitality Industry (General) Award 2010 commenced in late March 2020 and were approved following an application to the Fair Work Commission by the Australian Hotels Association. The amendments are temporary and will remain in place until 30 June 2020.[1]
In summary, the amendments are as follows:
Employee Duties
An employer may direct employees to perform any duties within their skill and competency levels, regardless of the employee’s usual classification under the Modern Award, provided that those additional duties are safe and the employee is qualified to perform them.
In the event an employee is directed to perform duties that carry a higher rate of pay than the employee’s ordinary classification, the employer must pay the employee the higher applicable rate.
Hours of Work
Employers can now direct full-time employees to work an average of between 22.8 to 38 ordinary hours per week (with employees to be paid on a pro-rata basis). However, the employer must first consult the affected employee, prior to implementing such a change.
With respect to part-time employees, employers can now direct that they work an average of between 60% to 100% of their guaranteed (i.e. as per their contract of employment) hours of work per week. As with full-time employees, the employer must first consult with affected part-time employees.
Annual Leave
Employers can now direct employees to take annual leave with 24 hours’ notice, subject to the employee’s personal circumstances.
In addition, employees can now take twice the amount of annual leave at half pay.
Close Down
The notice period for an enforced close down in operations, during which an employer can request that an employee take annual leave, has been reduced to one weeks’ notice, or shorter (if mutually agreed). If the employee does not have enough accrued annual leave to cover the close down period, the employee may take unpaid leave.
Restaurant Industry Award 2010
These amendments have also been largely incorporated into the Restaurant Industry Award 2010.[2] As with the Hospitality Industry (General) Award 2010, variations to the Restaurant Industry Award 2010 are temporary and will remain in place until 30 June 2020.
Clerks – Private Sector Award 2010
Amendments to the Clerks – Private Sector Award 2010 were approved in late March 2020 following an application by the Australian Chamber of Commerce and Industry, with support from the Australian Services Union. Amendments to this Modern Award are temporary and will remain in place until 30 June 2020. [3]
In summary, the amendments are as follows:
Employee Duties
An employer may direct employees to perform any duties within their skill and competency levels, regardless of the employee’s usual classification under the Modern Award, provided that those duties are safe and the employee is qualified to perform them. Employees must not suffer a loss in pay if directed to perform alternative duties.
In addition, the minimum period of engagement for part-time and casual employees is reduced from three hours to two hours.
Hours of Work
Where an employee is working from home, the period in which ordinary hours of work may be performed is now 6:00 am through to 11:00 pm, Monday to Friday (it was previously 7:00 am through to 7:00 pm) and 7:00 am through to 12:30 pm on Saturday.
Reductions in Hours of Work
Subject to the approval of 75% of employees in the workplace (or a defined section/department of the workplace), the employer can reduce the ordinary hours of work for full-time and part-time employees. However, the reduction in ordinary hours must not exceed 75% of the full-time or part-time (i.e. as per their contract) hours.
Where a reduction in hours has been implemented, the employer cannot unreasonably refuse an employee’s request to take up alternative/secondary employment.
Annual Leave
Employers can now direct employees to take annual leave with one weeks’ notice, subject to the employee’s personal circumstances. Employees must have two weeks annual leave remaining following a period of directed leave.
Employers and employees can also agree to take up to twice as much annual leave at a proportionately reduced rate for all or part of any agreed or directed period away from work (e.g. during any shut-down).
Close Down
An employer may require an employee to take annual leave by giving at least one week’s notice as part of a close down of its operations (previously four weeks), or any shorter period of notice that may be agree
If the employee does not have enough accrued annual leave, the employee may take unpaid leave.
Are further alterations possible?
In short, yes.
In response to the large number of applications seeking variations to modern awards, the Fair Work Commission recently announced its intent to vary modern awards at its own initiative.
How can DSA Law help?
If you have an employment law enquiry, please Contact Us or one of the Employment Lawyers at DSA Law on (03) 8595 9580 so we can assist you.
For more information regarding COVID-19 and employment law, read our articles:
- Can employers stand down employees during the Coronavirus (COVID-19) outbreak?
- How does the Coronavirus (COVID-19) affect employees’ leave entitlements?
- Is my Worker, an Employee or an Independent Contractor?
- Do my employees need a written employment agreement?
[1] For a complete version of the Hospitality Industry (General) Modern Award 2010.
[2] For a complete version of the Restaurant Industry Award 2010.
[3] For a complete version of the Clerks – Private Sector Award 2010.
by DSA LawLegal Updates: DSA Law launches eMagazine, LawSight
Fresh thinking and a focus of energy. This year has already been a big year for DSA Law and we are delighted to launch our first eMagazine, LawSight. The eMagazine is designed for everyday readers, consumers and business owners in mind, with articles to help navigate during the COVID-19 pandemic.
Our launch of the first issue of LawSight tackles the commonly asked questions during this period, including:
- how can a business’s cash flow be protected;
- the importance of Intellectual Property for businesses in a digital Australian economy;
- what directors of a business should know regarding their duties; and
- what foreign investments may mean for Australia.
Over the coming months, DSA’s goal is to deepen our teams’ collaborative approach and work even closer with clients. These times have elements that challenge all of us – uncertainty, unpredictability, and economic consequences. However, as we work through these issues together, we will continue to provide a series of fact-based articles that are current and relevant, with resources to help guide you.
Download the eMagazine below
LawSight Issue No.1 : April 2020
by DSA LawCOVID-19 Omnibus (Emergency Measures) Bill 2020 and Commercial Leases
Since Scott Morrison announced and released the Mandatory Code of Conduct on 7 April 2020 with respect to commercial and retail leases, lawyers have been waiting for the State governments to pass the legislation by which it is implemented, and assess how landlords and tenants alike are affected in light of COVID-19.
On 23 April 2020, the Victorian Parliament conducted a special sitting in which over 300 pages of the COVID-19 Omnibus (Emergency Measures) Bill 2020 was passed by both houses and delivered to the Victorian Governor for Royal Assent.
Presuming Royal Assent is granted today (24 April 2020), the many and varied legislative updates will become law in Victoria.
The Act updates much more than the laws relating to leases, but we’ll focus on that for now.
In short, the Act does very little but foreshadows regulations that we are yet to see. What can be taken from the new legislation are:
- The operation of the new regulations can be made to apply as if they were in place as early as 29 March 2020;
- The Victorian legislation has limited eligibility to SMEs with turnover under $50m that are eligible for the JobKeeper supplement.
- We will have to await the regulations to better understand which ‘groups’ of companies are ineligible.
- Commercial licences are eligible notwithstanding they are not ‘leases’ in the eyes of the law.
- No compensation is claimable against the State Government for losses that are incurred due to the implementation of the new laws and regulations.
- The Small Business Commissioner has been granted powers to prosecute breaches of the new laws and regulations.
Watch this space for further updates in respect of the Regulations to come, which we anticipate will shortly follow Royal Assent of the new laws.
Update on 5 May 2020: The Bill has now become an Act, and more information can be found by reading our article dated 5 May 2020, COVID-19 Omnibus Regulations 2020 and Leases in Victoria.
How can DSA Law help?
If you have a commercial or lease enquiry, please Contact Us via our Website or Call us on (03) 8595 9580 and one of our team will be able to assist you.
For more information regarding COVID-19 and Commercial/Retail Leases, read our articles:
- Mandatory Code of Conduct for Commercial and Retail Leases during the COVID-19 pandemic?
- How does the Coronavirus (COVID-19) affect Retail Leases?
- Coronavirus (COVID-19): Legal Issues for Businesses in Australia?
- COVID-19 Omnibus Regulations 2020 and Leases in Victoria