by DSA LawWhat is a Deed of Company Arrangement?
A voluntary administration most often involves the director(s) proposing a Deed of Company Arrangement to creditors. This happens when an administrator convenes a meeting, in which one of the three courses of action noted below is adopted:[1]
- that the company executes a Deed of Company Arrangement;
- that the administration should end; or
- that the company be wound up.
If it is resolved to enter into a DOCA, commences when the deed is signed by both the company, and the Deeds proposed administrator[2]
Defining a Deed of Company Arrangement (“DOCA”)?
A DOCA is generally a compromise offer prepared with the assistance of the voluntary administrator, and put to creditors, which they can vote to approve or reject.[3] It usually involves a sum of money being contributed either:
- by the director personally; or
- another third party who creditors would otherwise have no direct recourse to (e.g. a relative of the director or related company)
which if approved, would see creditors receive some or a better return than if the company were to be put into liquidation.
For example:
- A DOCA may provide that a relative of the director will contribute $50,000 which, when pooled with the company’s existing funds, will see creditors ultimately receive 20c in the dollar, as opposed to receiving 5c in the dollar if the company were to go into liquidation.
- Alternatively, a DOCA may include some other ‘deal’ of benefit to creditors. For instance, a company may have a number of related party creditors who, as a term of the DOCA, will agree not to participate for a dividend if the DOCA is approved, giving ordinary creditors a higher return than if the company were to go into liquidation.
There is considerable flexibility as to the terms a DOCA can incorporate. However, a DOCA should include the following:
(a) the administrator of the deed
(b) the property of the company (whether or not already owned by the company when it executes the deed) that is to be available to pay creditors’ claims;
(c) the nature and duration of any moratorium period for which the deed provides;
(d) to what extent the company is to be released from its debts;
(e) the conditions (if any) for the deed to come into operation;
(f) the conditions (if any) for the deed to continue in operation;
(g) the circumstances in which the deed terminates;
(h) the order in which proceeds of realising the property referred to in paragraph (b) are to be distributed among creditors bound by the deed;
(i) the day (not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the deed. [4]
What happens if a DOCA is approved?
A proposed DOCA is tabled at the second meeting of creditors, which generally occurs within 5 weeks of the voluntary administrator being appointed.
To be approved, the DOCA needs to be endorsed by a majority of creditors (ie. more than 50% of creditors) who collectively represent at least 50% of the total value of the unsecured debts owed by the company.
If approved, the DOCA is to be executed within 15 business days and will then bind:
- the company;
- the officers of the company;
- the unsecured creditors, even those who voted against it.
However, a DOCA will not bind a secured creditor unless the secured creditor agrees to be bound by the DOCA[5] or the Court Orders that it be bound by the DOCA.[6]
The voluntary administrator is generally then appointed as the deed administrator, to administer the DOCA.
Once the transactions contemplated by the DOCA are finalised, ordinarily the deed administrator resigns, and control of the company reverts back to the directors.
What happens if a DOCA is not approved?
However, if the DOCA is not approved, or is approved but not executed, then the company will generally go into liquidation, usually with the voluntary administrator being appointed as the liquidator. [7]
How can DSA Law help?
If you have an insolvency issue or question, please Contact Us or
one of Commercial Lawyers at DSA Law on (03) 8595 9580 so we can
assist you with your concerns .
[1] Corporations Act 2001 (Cth) s 439C.
by DSA LawWhat is an Owners Corporation Special General Meeting?
There may be numerous occasions when it may be appropriate to call a Special General Meeting of an Owners Corporation to attend to urgent business.
This may include:
- urgent repairs that have not been budgeted for
- security issues
- problems with the management of the property and
- disputes with other members of the Owners Corporation
These kinds of meetings may fail because:
- the meeting was not properly called; or
- the procedure for the conduct of the meeting was not properly followed.
What is a Special General Meeting?
Essentially, a Special General Meeting is any meeting of an Owners Corporation that is not an Annual General Meeting. [1] A Special General Meeting may be convened by:[2]
- the Chairperson of the Owners Corporation;
- the Secretary of the Owners Corporation;
- a Lot Owner nominated by lot owners whose collective lot entitlements total at least 25%;
- the manager of the Owners Corporation if the manager is acting on authority from the Committee or if nominated by lot owners whose entitlements total 25%.
What should the person convening a Special General Meeting do?
Should an Agenda be given?
The person convening a Special General Meeting must prepare an agenda.[3]
If the person convening a Special General Meeting is a lot owner, the agenda should be an agenda approved by the nominating lot owners. Practically speaking, for nominating lot owners to approve the agenda, they would generally need to be notified of the draft agenda prior to being asked to approve it.
Should Notice be given?
The person convening a Special General Meeting should give notice in writing of the meeting to each lot owner at least 14 days before the Special General Meeting (notice can be given electronically i.e. by email).
The notice should include:[4]
(a) the date, place and time of the Special General Meeting;
(b) the agenda for the Special General Meeting;
(c) the text of any special resolution or unanimous resolution to be moved at the meeting; and
(d) a statement that the lot owner has the right to appoint a proxy.
What happens after a Notice is given?
A meeting is then called. The Meeting should be conducted in accordance with the normal procedure for conducting Owners Corporation meetings.
If the procedure is not properly followed, the resolutions of the Special General Meeting will likely not be binding.
A quorum for a general meeting (including a Special General Meeting) is at least 50% of the total votes. If 50% of the total lots are not present, the quorum is at least 50% of the total lot entitlement.
In the event a quorum is not present, then a resolution or resolutions passed at the Meeting will be interim resolutions.[5]
If there are Interim resolutions, what happens?
Notice of all interim resolutions, including minutes of the Special General Meeting, must be forwarded to all lot owners within 14 days of the Special General Meeting.[6]
If the lot owners would like to prevent any interim resolution passed at the Special General Meeting from becoming a resolution, then notice of a further Special General Meeting should be given to lot owners within the time limits prescribed with a further Special General Meeting held no earlier than 14 days (but no later than 28 days) after the date of the notice.[7]
Lot owners at that further Special General Meeting would then need to resolve to reject the interim resolution(s).
How can DSA Law help?
If you have an Owners Corporation issue or question, please Contact Us or one of Commercial Lawyers at DSA Law on (03) 8595 9580 so we can assist you with your concerns .
[1] Owners Corporations Act 2006 (Cth) s 73.
[6] ibid.
[7] Ibid.
by DSA LawWhat is a Family Violence Intervention Order?
In recent years, the Victorian judicial system has increased protection for those who fear for their safety in a domestic setting. One such protection that is in place for victims of violence is a Family Violence Intervention Order, which is commonly known as an IVO. IVO’s are imposed by the court to protect a person from violence that is inflicted on them specifically by a family member.
When can you get an IVO?
You can apply for an IVO in Victoria at a Magistrates’ Court if you are over 18. If you are between 14 and 18 you may apply for an IVO with the leave of the Children’s Court. If you are under 14 your guardian/Parent may apply on your behalf.
If you require urgent or immediate protection, the court can grant an interim IVO which will remain in place until a magistrate can review your application, the evidence and make a final decision.[1]
What type of violence does an IVO protect me from?
Family violence is defined in the Family Violence Protection Act 2008 (Vic) as behaviour that is used to control, threaten, force or dominate a family member through fear.[2] Family violence does not have to be physical violence and includes emotional manipulation as well as financial and sexual abuse.
Who can I take out an IVO against?
If you have experienced violence from someone close to you, they may constitute a ‘family member’ under the Act.
A family member includes both relatives by birth, such as parents and children, and those related by marriage or adoption. [3]
Someone that you share an intimate personal relationship with, whether you are married or de facto partners, is also considered a family member.[4] For example, you do not need to have a sexual relationship with that person to be considered in an ‘intimate’ relationship.
What can I apply for when applying for an IVO?
When filling out the application form for an IVO, you may apply to prevent your family member from committing certain conducts.[5] This includes prohibiting them from attending your residence, contacting you, approaching you, texting or emailing you.[6]
If you are concerned about your child’s safety, you may include them on an application which may prevent that family member from coming within a certain distance of the child’s school or childcare facility, or contacting them even through the medium of a third party.
What happens if the person breaches a condition of an IVO?
If you believe that the family member has breached the conditions imposed by the court, the police may charge them with a criminal offence.
The punishment of such conduct can result in a term of imprisonment and/or a fine.[7]
If you have any evidence of the person breaching the conditions, this will be helpful for the police. Try to record as much as you can about when they breached the conditions, including the date, time and incident.
How can DSA Law help?
If you have an Family Law issue or question, please Contact Us or one of our Family Lawyers at DSA Law on (03) 8595 9580 so we can assist you with your concerns .
[1] Family Violence Protection Act 2008 (Cth) s 53.
[4] ibid.
by DSA LawIs my Worker, an Employee or an Independent Contractor?
A large expense for most businesses is often its staff. When operating a business, the question that should also be asked is, “are my workers, employees or independent contractors”?
If a worker is an employee, then the Fair Work Act 2009 (Cth) (“FWA”) provides statutory rights to protect employees. This means that there are legal requirements that must be met by the employer.[1]
For example, section 61 of the FWA sets out the ten National Employment Standards (“NES”) that must be followed. These relate to:[2]
- Maximum weekly hours;
- Requests for flexible working arrangements;
- Parental leave and related entitlements;
- Annual leave;
- Personal/Carer’s Leave, Compassionate Leave and Unpaid Family and Domestic Violence Leave;
- Community service leave;
- Long service leave;
- Public holidays;
- Notice of termination and redundancy pay; and
- Fair Work Information Statement.
But how do you know if your worker is an Employee or an Independent Contractor?
In short, the way you identify an employee or an independent contractor is answered by “case law” (these are cases that have been heard by the court and which have made findings as to how you distinguish between the two).
Two High Court decisions during the 2000s, Hollis v Vabu Pty Ltd (2001) 207 CLR 21,[3] (“Vabu”) and Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161 (“Sweeney”),[4] show that the question can sometimes be complicated.
The High Court Cases of Hollis and Sweeney
Hollis involved a bicycle courier business, and its couriers. A Vabu courier, cycling and wearing a “Crisis Couriers” uniform, crashed into Mr Hollis. Unfortunately, Mr Hollis suffered personal injuries requiring knee surgery.
Was the Vabu courier, an employee or an independent contractor?
The High Court held that the Vabu courier was an employee. In reaching this decision, the High Court looked at a number of factors:
- Control: Vabu couriers had little control to how their work was performed. [5]
- Payment: Vabu gave payment summaries to their couriers.[6]
- Insurance: Vabu gave insurance cover to their couriers.[7]
- Presentation: Vabu couriers wore uniforms with Vabu’s logo.[8]
- Skill: the labour supplied by Vabu couriers were not skilled or requiring any special qualifications.[9]
However, in the case of Sweeney, involving the services of a mechanic, the mechanic was held to be an independent contractor.
The mechanic was a director of his own company. Boylan contracted the mechanic to fix a refrigerator. Subsequently, the refrigerator’s door collapsed onto Mr Sweeney.
The question was whether the mechanic was an employee of Boylan or an independent contractor?
The mechanic was held to be an independent contractor. Here, the Court looked at a number of similar factors, including:
- Control: The mechanic supplied his own tools and equipment and controlled how his work was performed.[10]
- Finance: The mechanic invoiced Boylan for works performed.[11]
- Insurance: The mechanic maintained his own workers’ compensation and public liability insurance.[12]
- Presentation: The mechanic was not presented as an emanation or employee of Boylan.[13]
- Skill: The mechanic provided skilled labour.[14]
What should I look out for?
When determining whether a worker is an employee or an independent contractor, here are some of the questions that should be asked:
- Is there a contract in place?
- Is the labour/service provided by an individual or a company?
- Is there a requirement that a specific person provide the labour/service?
- Are there set hours and place of work?
- Is the party providing services to others?
- Who provides the tools/equipment to perform the task?
- Who is providing insurance?
- What has control of the work performed?
- What is the skill and labour provided?
- How are staff presented to the public?
- How are payments arranged/invoices issued?
- Does the person have an ABN?
What should I do now?
As a business owner you should:
- read the employment / independent contractor agreements that you have to understand your legal relationship with staff; and
- if you are still unsure about what to do next, or you do not have any contracts or agreements in place then you should consider getting professional legal advice to ensure that your employment / independent contractor agreements are correct and appropriate for your situation.
How can DSA Law help?
If you have an employment/independent contractor issue or question, please Contact Us or one of our Employment Lawyers at DSA Law on (03) 8595 9580 so we can assist you with your concerns .
[1] Fair Work Act 2001 (Cth) s 44; See also, our Article, “Do my employees need a written agreement?“
[3] Hollis v Vabu Pty Ltd (2001) 207 CLR 21.
[4] Sweeney v Boylan Nominees Pty Ltd t/as Quirks Refrigeration (2006) 226 CLR 161.
[5] Hollis v Vabu Pty Ltd (2001) 207 CLR 21 [49].
[10] Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161 [32].
[14] Ibid.
by DSA LawWhat is Voluntary Administration?
Voluntary Administration is an insolvency process available to assist a company which is in financial distress.
It generally involves the director(s) of the company appointing an independent insolvency practitioner (the Administrator) to take immediate control of the company, conduct a full investigation of its financial affairs, determine if the company is solvent and if so, whether it is possible to save the company.[1]
Why should I appoint a Voluntary Administrator?
Voluntary Administration may be effective if a company’s business is otherwise viable, but has encountered financial difficulties due to:
- poor trading periods
- significant losses due to isolated events; or
- requires momentary breathing space from creditors to either restructure, implement new processes, reduce staff and costs and resume trading profitably.
This is different to another common term heard in the news called “liquidation”, which essentially sees a liquidator appointed for the purpose of finalising a company’s affairs, selling any assets to meet claims of creditors and then closing it down.[2]
The goal of voluntary administration is to first explore the options available to save the company and allow it to continue trading, with liquidation as a last resort.[3]
How do you appoint a Voluntary Administrator?
The process is straightforward – the director, or a majority of directors of a company pass a resolution appointing a voluntary administrator.[4]
This takes effect immediately once the documentation is lodged with ASIC.
Protections given by Voluntary Administration
Voluntary administration has the benefit of bringing about an immediate temporary freeze on any creditor recovery actions against the company and any recovery action under any director’s personal guarantees.
Any such legal proceedings already on foot are temporarily put on hold, and creditors are unable to start new legal proceedings for recovery against the company or pursuant to a director’s guarantee during the administration period without leave of the court. [5]
What happens next?
A first meeting of creditors is called within 8 business days of the commencement, which is largely a matter of procedure, to ratify the appointment. At the meeting the creditors can vote to remove the nominated administrator and appoint someone else. The creditors may also determine to form a committee.[6]
The administrator then works with the director(s), investigates the books and records of the company and provides an independent report to creditors. [7]
This report includes details of:
- the company’s business;
- the company’s assets and liabilities;
- the company’s net financial position; as well as
- the administrator’s recommendation as to which of the options available for the company and creditors going forward are preferable.
The administrator’s report includes an estimate of the likely dollar value return to creditors in each scenario.
Therefore, in summary, the avenues available for a company may involve that:
- the company continues trading, if for instance it is determined to be solvent and/or all creditor claims can be settled; or
- the director(s) put forward a proposed Deed of Company Arrangement (DOCA); or
- the company cannot be saved, in which case the company may go into liquidation.
When is Voluntary Administration not appropriate?
Whilst Voluntary Administration can be an invaluable tool in saving a company in financial distress, it is not always appropriate.
For example, in a situation where:
- the company is hopelessly insolvent; or
- there is no prospect of the director(s) proposing a DOCA which presents a better return than a liquidation; or
- there is no intention to save the company (e.g. it is no longer trading)
In these cases, it is worthwhile to consider whether a liquidation may be the more appropriate course of action for the company.
How can DSA Law help?
If you have a bankruptcy or insolvency issue, please Contact Us or
one of our Commercial Lawyers at DSA Law on (03) 8595 9580 so we can
assist you with the same.
[1] Corporations Act 2001 (Cth) s 438A.
by DSA LawWhat is a Section 32 Vendor’s Statement?
What is a Section 32 statement? “Section 32” is a common term used today. You hear it often used in real estate transactions. It is sometimes also referred to as a Vendor or Vendor’s Statement.
But what exactly is a Section 32? Where does it come from? And why is it so important?
If you are thinking about buying a house, you will notice, for the most part, a contract for sale of land is given to you by the real estate agent. Furthermore, you will, more often than not, have a Section 32 Vendor’s Statement attached. It is very important for you as a prospective purchaser to understand what is in the Section 32 Vendor’s Statement. as it contains information relating to the property you are about to buy.
If you don’t receive a Section 32 Vendor’s Statement when a contract for sale of land is given to you, get professional help immediately as you will not have been given very important information relating to the property you are about to buy. But let’s head back to the topic.
What is Section 32?
The term “Section 32” actually comes from a piece of legislation called the Sale of Land Act 1962 (Vic) (“Act”). The Act prescribes information that must be disclosed to prospective purchasers of land.[1] The types of disclosures are set out in sections 32A to 32I of the Act. This is important because these disclosures affect you as the prospective purchaser of the property that you are about to buy.
For example, the disclosures may include:
- Financial matters [2]
- Insurance details [3]
- Notices [4]
- Building permits [5]
- Owners Corporation [6]
- Growth Area Infrastructure Contribution Details [7]
- Non-connected services [8]
- Evidence of Title [9]
It is a requirement that the vendor also sign the Section 32 Vendors Statement when the disclosures are provided to you, and these disclosures should be made to you before you sign the contract to buy the property[10] . At the time of signing the contract, you will also sign the Section 32 Vendor’s Statement to acknowledge its contents. What you do not want to do is sign a contract to buy land and then find out there are many and/or various problems associated with the property that you didn’t realise because either you didn’t review the Section 32 Vendor’s Statement or certain things weren’t disclosed that should have been.
Why is a Section 32 Vendor’s Statement important?
A Section 32 Vendor’s Statement should provide you with prescribed Information of what is affecting the land.
These details can include:[11]
- who your Council is?
- what are the arrears on rates, if any?
- does the property have services such as gas, electricity or water?
- has there been any building permits issued for the past 7 years?
- whether there are any government notices like compulsory land acquisitions that you should be aware of?
- easements that you should know about before purchasing?
- any leases or licences that should be brought to your attention?
These questions are important. Let’s give a few examples of why.
You might come to an inspection of a property and see a nice comfy bungalow in the back yard.
But what you may not know is that the bungalow was built 5 years ago without a building permit. Imagine if the Council came and found out the bungalow was illegally erect in your backyard and asks you to remove it? Sounds like a nightmare already. Well they can, and they do.
Or, imagine the land is leased and you never knew about that, but you’ve already paid the vendor the purchase price for the land. You may not be able to evict the tenant because of the lease but you already have removalists booked to move you into the new home, and worse still nowhere to live.
What should I do moving forward?
The decision to purchase a new home is significant. For most people it’s the most expensive decision they will make. It is important that as a prospective purchaser you:
- check the contract to make sure that it has a Section 32 Vendor’s Statement signed by the Vendor; and
- consult a Property Lawyer to review the Section 32 Vendor’s Statement and the contract
It is always best to have the contract of sale for land reviewed by a lawyer before committing to buy the property.
How can DSA Law help?
If you have a property law issue or are buying a property, please Contact Us or one of our Property Lawyers at DSA Law on (03) 8595 9580 so we can assist you.
[1] Sale of Land Act 1962 (Vic) s 32. For general information, see Consumer Affairs Victoria, Conveyancing and Contracts for Sellers (15 December 2019) <https://www.consumer.vic.gov.au/housing/buying-and-selling-property/selling-property/conveyancing-and-contracts-for-sellers>.
by DSA LawDo my employees need a written agreement?
If you are an employer, having a written employment agreement in place between you and your employees is important to ensure that the legal obligations between you and your employees are clearly set out. For example, an employment agreement should include, at a minimum, the following:
- The Salary
- The Hours of Work
- The Commencement Date
- The Location (where an employee is required to work from)
- A detailed Job Description
This minimum framework should assist you in outlining the terms of the written agreement between you and your employee. However, you should also consider obtaining professional legal advice regarding a comprehensive and well-considered employment contract drawn for you. This will ensure you are protected if a dispute arises between you and your employees. It will also mean that any discussions and agreements you had with your employees are properly documented in the employment agreement
But what happens if I don’t have a written employment agreement?
If you do not have an employment agreement, this may spell trouble for you and your business. Unfortunately, disputes often arise between what employers and employees believe are the terms of employment, and they can be costly for your business. These can include the hours engaged or the type of job an employee was employed to do.
Even if you do not have a written agreement, you should ensure that records are recorded and maintained so that if a dispute arises, the records may be used to assist in any dispute resolution with your employees.
What kind of laws apply if there is no written agreement?
The Fair Work Act 2009 (Cth) set outs the minimum national employment standards that must be applied in an employee/employer relationship.[1] They apply, regardless of whether there is a written agreement between you and your employee as your employment agreement must provide the at least the minimum, national employment standards.
The minimum national employment standards include: [2]
- Maximum Weekly Hours
- Requests for Flexible Working Arrangements
- Parental Leave and related entitlements
- Annual Leave
- Personal / Carer’s Leave
- Community Service Leave
- Long Service Leave
- Public Holidays
- Notice of Termination and Redundancy Pay
- Fair Work Information Sheet
The National Employment Standards mean that an employer cannot negotiate terms that are less than the standards set out in the Act.[3] You should also check if an Award applies to any job advertised to make sure your agreements legally compliant. [4]
It is important to know that a contravention of the National Employment Standards will mean that an employee may be able to seek a civil remedy against you.[5] If this happens, then you should seek professional legal advice.
What should I do now?
As an Employer:
- Ensure that you have a comprehensive employment agreement to avoid potential unnecessary disputes with your employees.
- Consult a lawyer to assist you with the drafting of the terms of your employment agreement so that your intentions as an employer are clear and that your employees understand the terms of their employment.
How can DSA Law help?
If you have a employment law issue and believe you could benefit from expert legal assistance, please Contact Us on (03) 8595 9580 or speak to one of our Employment Lawyers at DSA Law.
[1] Fair Work Act 2009 (Cth) s 61.
[2] Ibid.
by DSA LawAre you a Subcontractor or Builder?
There are pitfalls that tradies working in the domestic building industry may fall into when dealing with the Domestic Building Contracts Act 1995 (Vic) (“Act”). They may sometimes get themselves strung up without knowing that they have when involved in doing renovation jobs and building gigs.
What does the law say?
Well, the Act says many things. However, we think that this part of the Act is important because it talks about major domestic building contracts and building works.
For example, Section 29(1) of the Act says:[1]
- A person must not enter into a major domestic building contract to carry out domestic building work for another person unless:
- the person is a registered building practitioner; and
- the person’s registration authorises the person to carry out the work.
Penalty: 500 penalty units, in the case of a natural person
2500 penalty units, in the case of a body corporate
How much is a penalty unit? As of FY 2019, a penalty unit is $165.22.[2] This doesn’t sound very much but can get expensive, very fast. This fine can go up to $82,610 and, if you run a company, then it can go up to $413,050.[3] While the law sounds simple, and almost common sense to know what domestic building works and what major domestic building contracts are, it is very important to know the consequences if they are not complied with.
The mysterious case of Owusu
The case ofOwusu-Afriyie v Panoramic Structures and Pools Pty Ltd (Building and Property) [2016] VCAT 485(“Owusu”) shows that understanding the law about domestic buildings might be more difficult than what we might first think.
In Owusu, this case involved a concreter working for an owner-builder. The hearing itself went for a lengthy five days.[4] Here, the concreter was held by the Tribunal to be a “builder”, even though the concreter was just doing concreting work and the owner was the owner-builder.
What should I look out for?
If you are in the construction trade, always make sure to know what kind of agreement you are getting yourself into. Double check if you are following the laws properly when signing up construction works for more than $10,000.[5]
Owusu provided two questions to ask in these kinds of situations.
First:
- is there a contractual intermediary;[6] and
Second:
- did you enter into a contract with a builder and was your engagement part of the works under a domestic building contract?[7]
If you answered no to both questions, this may class you as engaging in a major domestic building contract if you are dealing directly with an owner.
What should I do now?
As a tradie:
- If you are engaging in any kind of works more than $10,000, think carefully who is your customer? Is it the builder or the owner?
- Speak to the VBA and discuss your situation.
- If you are still unsure about what to do next, then you should consider getting legal professional help to ensure that you are complying with your legal obligation in the construction industry.
How can DSA Law help?
If you have a construction law issue and believe you could benefit expert legal assistance, please Contact Us or one of our Commercial Lawyers at DSA Law on (03) 8595 9580.
[1] Domestic Building Contracts Act 1995 (Vic) s 29(1).
[2] Victorian Government Gazette, No. G 14 (4 April 2019) <http://www.gazette.vic.gov.au/gazette/Gazettes2019/GG2019G014.pdf>
[3] Domestic Building Contracts Act 1995 (Vic) s 29(1).
[4] Owusu-Afriyie v Panoramic Structures and Pools Pty Ltd (Building and Property) [2016] VCAT 485 at [16].
[5] Domestic Building Contracts Regulation 2017 (Vic), reg 6; see also Consumer Affairs Victoria, building contracts (2 January 2020) < https://www.consumer.vic.gov.au/housing/building-and-renovating/plan-and-manage-your-building-project/contracts>.
by DSA LawWhat is a Restraint of Trade?
Very broadly, restraint of trade is a term that encapsulates any clauses in any contract that prevents one party to the contract from engaging in certain conduct that the other party considers to be in competition. Such clauses may also be referred to as restrictive covenants.
It is common to find a restraint of trade clause in partnership agreements, contracts for the sale of a business, subcontractor agreements and employment agreements.
What conduct can be subject to a restraint?
There is no limit on what conduct could, in theory, be the subject to a restraint of trade clause in a contract. In practice, the restraint of trade clauses used will depend on the contract in contemplation.
We are commonly asked about restraints of trade in employment agreements. Restraints of trade in employment agreements often lead to controversy due to the stronger bargaining position of the employer and the effect such clauses can have on an employee’s future ability to earn an income.
Restraints in employment agreements usually cover the following conduct:
- Commencing work in competition with or for a competitor of your former employer;
- Inducing or attempting to induce clients of your former employer to become clients of your new business or for your new employer;
- Inducing or attempting to induce former colleagues to come and work in your new business or for your new employer.
Is the restraint enforceable?
The starting position is that there is a presumption, as a matter of public policy, that restraints of trade clauses are not enforceable.
However, this presumption can be rebutted by the party seeking to enforce the restraint by demonstrating that the restraint is reasonable, by reference to the interest it is seeking to protect, and that the restraint does not impose a restraint more onerous than is necessary to protect that interest.
For this reason, a restraint of trade clause ought to be constrained, at the very least, by a defined geographical area and by a defined period, and may have a cascading effect; for example:
“(1) The employee agrees and undertakes that they will not, during the term of their employment and after their employment has ended, provide services to or be engaged by any business, or carry out any activity, that is competitive with the business of the employee.
(2) The undertakings in clause (1) cover the period of (a) 12 months; or (b) 6 months; or (c) 3 months after the end of the employee’s employment.
(3) The undertakings in clause (1) cover the distance of (a) 30 kilometres; or (b) 10 Kilometres or (c) 5 kilometres from the business location of the employer.”
By drafting the restraint clause in such a way, the employer can seek to enforce the maximum restraint, whilst mitigating the risk that the restraint will fail altogether because if the Court determines that 12 months is longer than necessary to protect the employer, it will then go on to consider whether 6 months is reasonable and so on.
Further reading
The case of Birdanco Nominees Pty Ltd v Money (2012) VSCA 65 provides an excellent summary of the development of the law in this area and serves to show how the Courts will view restraints of trade clauses. In Birdanco, the Court upheld a restraint of 3 years in circumstances where an employee accountant left his accounting firm to take up employment with a client of that firm to perform and to provide those same services.[1]
The Birdanco decision can be contrasted to the decision in Wallis Nominees (Computing) Pty Ltd v Pickett (2013) VSCA 24, where the Court found that a restraint of 12 months was unreasonable. [2]
The above cases demonstrate that each case will turn on its own facts and circumstances.
We recommend that you seek legal advice if you are entering into a contract that contains a restraint of trade clause, or if you are concerned about whether you may be in breach of a restraint of trade clause.
How can DSA Law help?
If you have a restraint
of trade issue and believe you could benefit expert legal assistance, please Contact
Us or one of our Commercial
Lawyers at DSA Law on
(03) 8595 9580.
[1] See generally, Birdanco Nominees Pty Ltd v Money(2012)VSCA 65. The full case can be read here.
[2] See generally, Wallis Nominees (Computing) Pty Ltd v Pickett (2013)VSCA 24. The full case can be read here.
by DSA LawWhat happens when you declare Bankruptcy?
Are people chasing you for debts you cannot pay? Are you considering declaring bankruptcy?
Firstly, what is Bankruptcy?
It is a process which, when followed correctly, could release you from most debts and allow you to essentially start again.[1]
Bankruptcy can begin by the following two methods:
- you make a voluntary declaration that you are unable to pay your debts; or
- by way of Court Order, usually sought by a creditor to whom you at least $5,000.[2]
To voluntarily apply for bankruptcy, you must meet the following requirements:
- you are unable to pay your debts when they fall due (which we call insolvent); and
- you are currently in, or have a business or residential connection to, Australia.
This means you can still be declared bankrupt even if the equity in your assets exceeds the debts you owe.
To apply for bankruptcy, you will need to complete a Bankruptcy Form and submit it to the Australian Financial Security Authority (AFSA).[3]
Once you are declared so, bankruptcy lasts for the next three years and a day[4] but can be extended if your trustee objects to its discharge[5].
What is a Trustee?
A person, usually an official from AFSA or a suitably qualified accountant, who is appointed to you during the course of your bankruptcy. They work closely with both you and your creditor to reach a fair and reasonable outcome for everyone.
What do Trustees do?
Usually the first thing they do is notify your creditors that you have become bankrupt so that, in most cases, they stop contacting you directly.
Whilst they are your trustee, you have an obligation to fully disclose information regarding your assets, income and liabilities. If requested, you must deliver any bank statements, tax returns and other sensitive documents. If you are considering bankruptcy, you should know that any failure to comply with these obligations can result in serious penalties, including imprisonment.[6]
Any property or assets obtained before becoming bankrupt, that are not subject to any exclusions, are controlled by the trustee.[7] Depending on the circumstances, they may decide to sell certain assets, or require you to make scheduled payments if your income exceeds a certain amount.[8]
What steps a trustee takes to pay outstanding creditors will depend largely on your financial position. The key point is that trustees have numerous and varied powers in relation to your assets and affairs.
So, what happens when you declare bankruptcy?
Along with the appointment of a trustee bankruptcy could affect you in the following ways:
- You will be disqualified from being the director and/or manager of a company.[9]
- Certain professional and/or licencing bodies may withdraw or prohibit you from holding certain professional qualifications or licences. We suggest you make your own enquiries as to whether this affects you.
- You will not be able to travel overseas without the express written permission of the appointed trustee. In some cases, the bankrupt person’s passport is surrendered.
- You must disclose your bankruptcy when obtaining credit of $5,882 (as of the date of this article) or more during the bankruptcy period.[10]
- Your name will be on the National Public Insolvency Index forever, although it will state whether the bankruptcy is current or discharged. Credit agencies usually maintain a record for up to 5 years (sometimes long) so your ability to obtain credit could be affected until then.
- You will be unable to maintain any current Court proceeding claims without the support of the trustee.[11]
Are there alternatives to bankruptcy?
In short, yes there are but each of them has their own serious consequences. [12]
How can DSA Law help?
If you need help deciding whether bankruptcy is right for you, or if your current asset structure is preventing you from paying your debts when they fall due, please Contact Us or one of our Insolvency Lawyers at DSA Law on (03) 8595 9580.
[1]See here for general information regarding what debts bankruptcy covers. Australian Financial Security Authority, What happens to my debts, AFSA.
[2] Bankruptcy Act 1966 (Cth) s 43.
[3] See here, for general details on completing the Bankruptcy Form.
[4] Bankruptcy Act 1966 (Cth) s 149.
[8] Ibid s 139S; See here to calculate the amount you may have to contribute towards your creditor. Australian Financial Security Authority, Income Contributions Calculator, AFSA.
[9] Corporations Act 2001 (Cth) s 206B.
[10] Bankruptcy Act 1966 (Cth) s 269.
[12] See here for more information in relation to these alternatives. Australian Financial Security Authority, What are my options, AFSA.
by DSA LawHow much notice must I give an employee?
Are you seeking to terminate an employee? Do you know how much notice you must give the employee?
These are questions regularly asked of us, along with best practices to avoid being on the receiving end of an unfair dismissal claim.
What is a notice of termination?
In short, a notice period allows an employee the opportunity to search for alternative employment, while still receiving payment of wages from their outgoing employer. All employees are entitled to receive some period of notice of their termination, unless they are casual employees, or their employment has been terminated on account of serious misconduct. [1]
How much notice must I give?
The first place to check is the employee’s contract of employment or Modern Award (for a list of Modern Awards). More often than not, the employee’s contract of employment or applicable Modern Award will tell you how much notice the employee is entitled to.
In the event there is no contract of employment or an applicable Modern Award, we can advise you on the appropriate award. The Fair Work Act sets out minimum notice periods for all Australian employees, with the amount of notice an employee is to be given dependent on the employee’s length of employment.[2] Remember, if the outgoing employee is 45 years of age or older, they are entitled to an extra week on top of what is provided in that section.[3]
Importantly, the periods of notice set out in this section are the absolute minimum allowed. A notice period clause in a contract of employment that provides for less notice than that provided by the Fair Work Act will not be legally enforceable.
Does the employee have to work out their notice period in full?
In short, no. You can ask the employee to not attend the workplace at all during the notice period. However, keep in mind that you will still have to pay the employee’s wages for the entire notice period.
How can DSA Law help?
If you have an employment law issue or are being unfairly treated and believe you could benefit expert legal assistance, please Contact Us or one of our Employment Lawyers at DSA Law on (03) 8595 9580.
[1] Fair Work Act 2009 (Cth) s 123.
[3] Ibid.
by DSA LawWhat happens if you die without a Will?
Unfortunately, many people pass away without an effective Will in place. This often happens due to the mistaken belief that, for one reason or another, a Will is not necessary. [1]
In reality though, nothing could be further from the truth – everybody should have a legally valid Will that reflects their wishes.
What is intestacy?
When a person passes away without a Will, they are generally said to have died ‘intestate’.
To determine what to do with the assets of a person who passed away intestate, we must look to Part IA of the Administration and Probate Act 1958 (Vic).[2] This part sets out who will be entitled to inherit the deceased person’s assets.
Unsurprisingly, the intestacy provisions largely follow community standards and expectations as to who should be entitled to inherit, with the domestic partner of the deceased first in line, followed by the deceased’s children. Complications, however, can arise when the deceased had more than one domestic partner, or children with one domestic partner, but not another. A very careful assessment of the intestacy provisions must be made in such circumstances.
What if there is no partner or children?
In the event the deceased passed away without a surviving domestic partner or children, the intestacy provisions provide for the closest next-of-kin to inherit, in a cascading manner. [3]
Should the deceased be survived by one or more parents, then the parents are entitled to share the deceased’s assets equally.[4] Should the deceased leave no surviving parents, then the deceased’s surviving siblings will be next in line, followed by any surviving nephews and nieces, then grandparents, aunts, uncles, and finally, cousins.
If a deceased has no living parent, sibling, nieces or nephews, grandparents, aunts, uncles or cousins, then the deceased’s assets will pass to the Crown (i.e. the government).[5]
Does blood matter?
When assessing those who may be in line to inherit from an intestate estate, it is important to remember that the law will apply a strict interpretation to the various family relations.
In other words, while a deceased person may have referred to somebody as ‘uncle’, they will only be deemed an ‘uncle’ in the eyes of the law if they are, technically speaking, an ‘uncle’ (that is, a brother of one of the deceased’s parents). [6]
How Can DSA Law Help?
If you are seeking advice regarding Intestacy and believe you could benefit expert legal assistance, please Contact Us or one of our Wills & Estate Lawyers at DSA Law on (03) 8595 9580.
[1] For more information regarding Wills, see our articles, Common misconception about Wills, and What is a Will, and why it’s important to have a Will?.
[2] Administration and Probate Act 1958 (Vic) pt IA div 3-5.
[3] Ibid ss 70ZF-70ZK.