• About
  • Contact

Belinda Ryan

Shareholders’​ Agreement – why do I need one?

by

It’s always a question of priority when running a private business – every dollar is precious. If a dollar is to be re-invested, it needs to be well invested.

We often hear business owners wondering why they should invest in a Shareholders’ Agreement – “we get along really well”, “we’ve known each other a long time”, “I trust him or her” or “if we have a problem, we’ll just work it out commercially”. And that might well be right. But like any relationship breakdown, the circumstances and timing are often unpredictable and so is the response. Plus, money is involved (often a lot of money) so the stakes are high.

A good Shareholders’ Agreement sets out a map for running the business in the good times and resolving issues when things aren’t so rosy. Which decisions require unanimous or majority approval? What happens if the business needs additional capital for expansion? If the business owners can’t agree on the direction of the business, then what? If one business owner can’t work for an extended period, what will we do?

Agreeing a Shareholders’ Agreement when the parties have a good working relationship is much, much easier than at any other time!

So, why spend money on a Shareholders’ Agreement when you can buy one online or just use one that you’ve seen before or used in another business?

A good Shareholders’ Agreement for your business will never be exactly the same as one for any other business. Whilst all Shareholders’ Agreements have some level of similarity, the particular options for each of the issues are nearly endless. Your Shareholders’ Agreement needs to be carefully prepared to accommodate the needs of the particular business and the business owners.

The skill is not just reading what’s in the agreement, it’s the experience of knowing what is not in the agreement. Sometimes leaving something out is to your advantage. Sometimes it’s not. It’s also knowing what the other options might be.

As well as setting out mechanisms for resolving disputes between business owners whilst preserving business value, a Shareholders’ Agreement should also facilitate investment by new owners and exit by the current owners.

We have prepared many Shareholders’ Agreements and can offer a fixed price for preparation of your business’ Shareholders’ Agreement. If you want to have a confidential discussion about preparing a Shareholders’ Agreement or your business generally, we’d love to hear from you.

Bushfire Recovery and How We Can Help

by

The principals and staff at Hunt & Hunt are deeply saddened by the bushfires that have caused massive destruction across parts of our country.  Our thoughts are with those who live and work in the devastated areas, and with the selfless volunteers who have been battling the fires and providing assistance to the communities affected.

Things you need to consider if you have been affected by the bushfires

Many legal issues can arise due to the impact of the bushfires.  Those issues can include:

  • the loss of identity documents, such as passports, drivers licences, Medicare cards, birth certificates and marriage certificates;
  • Wills, Powers of Attorney, Appointments of Medical Treatment Decision Maker and may have been destroyed;
  • the need to deal with the affairs of a person who has died during the bushfires;
  • Certificates of Title to property may have been destroyed;
  • trust deeds for family trusts or superannuation funds may have been destroyed;
  • insurance claims and disputes resulting from the loss of property;
  • tenancy issues, whether you are a landlord or a tenant; and
  • financial hardship from loss of income (whether due to unemployment or your business being damaged), debt, relocation and the cost of re-establishing yourself after the fires.

How we can help

Hunt & Hunt are able to provide pro bono legal assistance in some cases.

Our team are experienced in many areas and are able to provide advice concerning the majority of the above issues.

In particular, our wills and estates team and our property team are able to provide extensive advice and assistance in:

  • preparing replacement Wills, Powers of Attorney and Appointments of Medical Treatment Decision Maker;
  • the replacement of other identity documents;
  • dealing with state Civil and Administrative Tribunals for a person who no longer has the capacity to make their own decisions (if no Power of Attorney is in place or if it has been destroyed);
  • estate administration including Applications for Probate or Letters of Administration including obtaining Probate of a copy of a Will if necessary;
  • making an application to the Supreme Court for a court-ordered Will where a person no longer has capacity to make their own will and it has been destroyed;
  • issues relating to the loss of trust deeds and self-managed superannuation funds deeds, and if need be, an application to the Court for a new deed;
  • arranging for the replacement of Certificates of Title for land; and
  • all other general issues relating to real estate.

Every person’s circumstances will be different and the advice given here is of a general nature.  Please contact us to discuss how we can help and to obtain specific advice relevant to your circumstances.

Other ways to seek help

Victoria

In Victoria, assistance is available via Disaster Legal Help, whose partners are Victoria Legal Aid, the Federation of Community Legal Centres, Justice Connect, the Victoria Bar and the Law Institute of Victoria.

Many lawyers, including members of Hunt & Hunt, have registered to participate in the program.

You can access Disaster Legal Help by telephoning 1800 113 432 or by accessing their website:  www.disasterlegalhelp.org.au

New South Wales

In New South Wales, legal assistance is available via the Disaster Response Legal Service NSW, a partnership between Legal Aid NSW, community legal centres, the Law Society of NSW and the NSW Bar Association.

You can contact the Disaster Response Legal Service NSW hotline on 1800 801 529.

Lost identification documents can be replaced through Service NSW. Service NSW will have mobile centres servicing bushfire affected communities. Please check service.nsw.gov.au/campaign/mobile-service-centres for locations.

South Australia

Contact the Legal Services Commission of South Australia on 1300 366 424 or the Law Society of South Australia on 08 8229 0200.

Queensland

Legal Aid Queensland has set up a Bushfire Legal Help line. Contact them on 1300 004 924 for support.

Western Australia

Contact Law Access WA on 08 6488 6813 or Legal Aid WA via their website.

Modern Award annualised salary changes will go live from March 2020

by

From 1 March 2020, new annualised salary clauses will be introduced into a number of modern awards.  These changes come about as part of the Fair Work Commission’s four-yearly review of the modern award regime.

There will be three model annualised salary clauses which replace the existing clauses that already appear in many modern awards or which will be inserted into other awards which did not previously have annualised salary clauses.

The new annualised salary model clauses will introduce new notification, record-keeping and wage reconciliation obligations on employers whose employees are covered by the relevant modern awards and who may choose to utilise these arrangements.

Common awards affected include the Clerks – Private Sector Award 2010, the Manufacturing and Associated Industries and Occupations Award 2010 and the Hospitality Award 2010.

Analysis

Since the new clauses are quite prescriptive, on a practical level, they may prove to be too unwieldy and too risky for employers to meaningfully utilise.

It is therefore reassuring that the Fair Work Commission has clearly stated that employers and employees are not obliged to rely on award annualised salary clauses and can continue to utilise common law contracts with “set-off” clauses.

The Commission stated:

[22]…an employer is able to pay an employee to whom an award applies an annualised salary arrangement that compensates for or “buys out” various identified award entitlements without engaging with any annualised wage arrangement clause in that award and without there needing to be an annualised wage arrangement clause in that award… The model clauses do not seek to invalidate or regulate any such contractual arrangement.

Common law contracts with “set-off” clauses allow employers to set flat salary arrangements which can reduce the administrative burden of reconciling complex hourly rates, overtime and penalty rates, allowances, leave loading and other obligations in modern awards.

These contracts with “set-off” clauses work by providing a rate of pay which is higher than the award base rate and including a term that allows the “over award” salary component to be applied against any other award entitlements which may be payable, such as overtime rates and allowances. The “over award” component must obviously be sufficient to do so. The clause must be carefully drafted to clearly identify relevant entitlements which can be “set off”.

Whilst “set-off” arrangements are useful, they are not “set and forget” clauses.  Awards commonly require that entitlements must be paid within the corresponding pay period or roster cycle.  So contractual salaries must be set at a level to account for variations in penalties and allowances, or else top up payments must be paid, when they are earned, to ensure award compliance.  As well as that, employers must consider how and whether it is necessary to make and keep records of working patterns to enable meaningful reconciliation each pay period.

The New Model Clauses

Employer Obligations Common to All Awards

Employers must:

  • record the award provisions which are satisfied by the annualised salary.
  • record the method by which the annualised salary has been calculated, including specification of each separate component of the annualised salary and any overtime or penalty assumptions used.
  • record the “outer limits” of ordinary hours which attract penalty rates and overtime hours which the employee may be required to work in a pay period or roster cycle without being entitled to an amount in excess of the annualised salary.
  • in any pay period or roster cycle, pay  an employee for any hours in excess of the identified outer limits.
  • each 12 months, or on termination of employment, calculate the remuneration payable under the award and compare it to the amount paid as an annualised salary, and make good any shortfall within 14 days.
  • keep a record of the start and finish times of work and any unpaid meal breaks.  Employees must sign or acknowledge the record as correct in writing each pay period or roster cycle.

First Model Clause

Applies to awards:

  • Banking, Finance and Insurance Award 2010
  • Clerks – Private Sector Award 2010
  • Contract Call Centres Award 2010
  • Hydrocarbons Industry (Upstream) Award 2010
  • Legal Services Award 2010
  • Mining Industry Award 2010
  • Oil Refining and Manufacturing Award 2010 (clerical employees only)
  • Salt Industry Award 2010
  • Telecommunications Services Award 2010
  • Water Industry Award 2010
  • Wool Storage, Sampling and Testing Award 2010

Effects:

This category includes modern awards for employees who work relatively stable hours.

They do not require an employee’s agreement to the introduction of an annualised salary arrangement.

Employers may calculate the annualised salary, but must do so with reference to specified assumptions about overtime/penalty rates.

Second Model Clause

Applies to awards:

  • Broadcasting and Recorded Entertainment Award 2010
  • Health Professionals Award 2010 (supervisory and managerial staff only)
  • Horticulture Award 2010
  • Local Government Industry Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010
  • Oil refining and Manufacturing Award 2010 (non-clerical employees)
  • Pastoral Award 2010
  • Pharmacy Industry Award 2010
  • Rail Industry Award 2010

Effects:

This category includes modern awards for employees who work highly variable hours and/or significant ordinary hours of work attracting penalty rates.

They require that an employer and an employee agree to the introduction of an annualised salary arrangement.

The agreement may be terminated on 12 months’ notice or at any time by written agreement.

Third Model Clause

Applies to awards:

  • Hospitality Award 2010 (non-managerial staff)
  • Marine Towage Award 2010 (non-managerial staff)
  • Restaurant Award 2010 (non-managerial staff)

Effects:

This category includes modern awards which provide that the annualised salary be an amount not less than a specified percentage above the minimum weekly wage set out in the modern award.

They will require that an employer and an employee agree to the introduction of an annualised salary arrangement.

The agreement may be terminated on 12 months’ notice or at any time by written agreement.

For more information about the changes being introduced in March 2020, or if this article has raised questions about the employment contracts that you utilise in your business, please contact David Thompson or Richard Scougall in our Employment Law team on 03 8602 9252.

Australian loses WTO dumping dispute – implications for a range of Australian dumping duties

by

Indonesia was last week successful in its World Trade Organisation (WTO) appeal against dumping duties imposed by Australia on Indonesian A4 copy paper.  Australia was found to have imposed dumping duties that were inconsistent with its obligations as a WTO member.  The outcome flowed from the approach adopted by the Anti-Dumping Commission (ADC) – importantly, it is the same approach adopted in respect of most dumping duties imposed on Chinese steel and aluminium products.  This means that the decision could result in Australia having to alter or re-investigate a wide range of duties.

What is dumping and why is the WTO involved?
Dumping is said to occur when an exporter exports products to Australia at prices that are lower than the “normal value”.  The “normal value” is usually the sale price of the same good in the exporter’s domestic market.  Dumping is not illegal.  However, where dumping causes material injury to an Australian industry, Australia is permitted under the rules of the WTO to impose dumping duties.

It is important that the requirements of the WTO are met as otherwise the imposition of dumping duties is in breach of the basic WTO principle that all WTO members are afforded the same duty rates (with the main exception being free trade agreements).

Australia has been a very active user of the anti-dumping system to impose dumping duties on a range of products, with the largest category being steel and aluminium products from China.  Those duties can exceed 100% of the value of the goods.

The WTO becomes involved where a country that is the target of dumping duties complains that the duties were imposed outside of the WTO rules.

How did Australia breach the WTO rules?
General approach by the ADC
When calculating dumping duties, the normal comparison is between domestic sale prices and export prices.  The idea is to identify international price discrimination.  However, where there is a “particular market situation” in the exporter’s country, the Australian Anti-Dumping Commission (ADC) adopts a different approach.  An example of a “particular market situation” is Government interference in the market for the goods, or materials used to produce the goods.  In respect to Indonesia, the ADC found that the A4 copy paper prices in Indonesia were artificially low due to Government influence on raw materials (pulp) and the provision of subsidies.

Where a particular market situation is identified, the ADC constructs a “normal value” (the comparison value) and instead of using the real cost of production, it substitutes the manufacturer’s actual material costs with what it considers to be a benchmark fair market price.  Usually this is a price based on an international index.  However, it only does this with the “normal value” and not the export price.  The export price is still the actual sale price which was naturally based on the low actual material costs.

Under this approach it is easy to find dumping, even if the real domestic sale prices and export prices are identical.  This is because half of the equation, the real domestic sale price, is replaced with a higher price based on the benchmark material costs, not the actual material costs.

Why is this in breach of WTO Rules?
Exporters are very aggrieved by this approach as they argue that if there is a Government influenced low material cost, that influence affects domestic sales and export sales identically.  As a result it is argued that it is still appropriate to compare actual sale figures and not construct an artificial, and higher, “normal value”.

The WTO held that while a low cost input can constitute a “particular market situation” and justify the use of a constructed value, this outcome is not automatic.  In each case, the ADC needs to investigate the effect of the particular market situation on the domestic price in comparison to the effect on the export price.  The WTO Panel noted that the low cost input may have a different impact in different markets.  For instance, tight competition in an export market may mean that the manufacturing saving is fully passed on, while lesser competition in the domestic market, may mean that manufacturing profits are increased.

Importantly, the WTO Panel held that if the investigating authority finds that a proper comparison between domestic and export sales is not possible, it is required to give a reasoned and adequate explanation of its conclusion.

In the Indonesian A4 paper case, the ADC didn’t even review whether a proper comparison was possible, let alone provide an explanation for its conclusion.

Implications for Indonesian A4 copy paper
The Indonesian Government has reported that Australia will not appeal the decision.  As a result, Australia now has a reasonable time to correct the dumping measures and bring them into line with the WTO Panel finding.  If Australia does not do this, Indonesia can impose retaliatory tariffs.

Implications for other dumping duties
Impact is wide
The impact of this decision will extend beyond Indonesian copy paper to all cases where the ADC has identified a particular market situation and used this finding, without further examination, to construct an inflated comparison value.  This is the case with Chinese steel and aluminium products.  Australia has for many years found that Chinese Government interference in the market for materials used for the manufacture steel and aluminium products constituted a particular market situation.  Australia has then disregarded actual Chinese domestic prices and calculated dumping margins by reference to various commodity indexes.

When doing this, the ADC has not investigated whether the low cost inputs impact Chinese domestic and export sales equally.  It may well be that the impact is equal as the competition in both markets may consist predominately of Chinese suppliers, all with access to the low cost input.  The more generic the product and the greater number of Chinese exporters, the greater the argument will be that the domestic and export prices remain comparable and dumping duties incorrectly imposed.

Existing measures
If Australia accepts the finding of the WTO Panel, and wishes to be a compliant WTO member, it should voluntarily review all past investigations that have used a constructed normal value and assess whether that approach was in accordance with WTO requirements.  This could result in the assessment of reduced dumping margins, or even the finding that there was no dumping.

China was a third party to the WTO proceeding and would be keenly aware of the outcome.  Australia will know that if China is so minded, it will have the ability to bring a successful WTO proceeding.  In this context, it is considered likely that China and Australia will reach a resolution regarding how Australia can bring its existing measures relating to Chinese exports in-line with WTO requirements.

Future reviews and investigations
Exporters and importers involved in future investigations need to fully understand the impact of this case and what is now required of the ADC.

Exporters faced with a finding of a particular market situation should, where appropriate, make a submission regarding the extent to which that situation impacts domestic sales and exports equally.  Doing this in a convincing manner could be the difference between an investigation being terminated with no duties, or the imposition of significant, supply chain ending, dumping duties.

To discuss the impact of this WTO Panel decision and any other dumping or countervailing duty matters, please contact Russell Wiese.

New Local Government Legislation introduced to Victorian Parliament set to Change CEO Policies

by

The new Local Government Bill 2019 was introduced into Victorian parliament in mid-November, with the aim of modernising local government regulation.

It closely reflects the reforms contained in the Local Government Bill 2018 which lapsed last year when the State election was called.

From an employment law perspective, key changes include the streamlining of the engagement of senior officers.  The red tape relating to senior officer appointments that appears in the current 1989 legislation has simply been removed.

The new legislation will require Councils to introduce CEO Employment and Remuneration Policies consistent with the Government of Victoria’s Policy on Executive Remuneration in Public Entities.  This is intended to:

  • ensure CEO salaries and allowances align with existing State Government policies for public sector executives; and
  • require Councils to obtain independent professional advice on CEO appointments.

Councils will need to adopt a CEO Employment and Remuneration Policy within six months of the commencement of the new Act.

The reforms also cover other Council functions, including the introduction of mandatory training for council election candidates and councillors.

Hunt & Hunt’s Managing Principal, Tony Raunic, routinely provides induction training for new councillors and update training for councillors and council officers on their statutory obligations relating to issues such as conflict of interests, misuse of position, gifts and hospitality.

For further information or assistance with employment law matters, please contact David Thompson or Richard Scougall on 8602 9252.

Fine print at the footer of an email – When it forms parts of the contract

by

It is common to now see wording at the footer of an email that claims all business is according to the sender’s terms and conditions of trade.  We are often asked whether this wording to mean that the sender’s terms and conditions form part of the contract between the email sender and the recipient. The County Court of Victoria ruled on this issue in a recent case involving an Australian freight forwarder and its customer.  The outcome – email footers can act to incorporate the senders terms and conditions into the contract.

Key takeaways

  • Email footers can on their own be sufficient to bind the recipient to the sender’s terms and conditions.
  • An important issue will be whether the emails were contractual documents. If they are, the whole of the email is the relevant document, including the footer
  • Email footers will be most effective where they specifically refer to limitations of liability or other onerous clauses
  • avoid the unintended operation of email footers by expressly rejecting terms and conditions by return email and/or having the agreement set out in a signed agreement

Technology Swiss Pty Ltd v Famous Pacific Shipping (Vic) Pty Ltd [2019]

The facts of the case are relatively simple.  Technology Swiss required equipment to be transported from Australia to Thailand and engaged Famous Pacific Shipping to do so.  Famous did not correctly secure the freight, it was damaged during transport and could later only be sold as scrap.  Famous was liable to Technology Swiss unless the parties had contractually agreed otherwise.

While Famous had standard terms and conditions, it had not provided these to Technology Swiss and the parties had not signed any documents relating to the services.  There was agreement between the parties that an email From Famous providing a quote (Quote Email), and the subsequent reply from Technology Swiss formed part of the written contract between the parties.  The Quote Email, and all other emails sent by Famous, included the following footer:

“All business transacted is subject to the company’s Standard Trading conditions of Contract, a copy of which is available on request and which, in certain circumstances, exclude the Company’s liability and include indemnities which benefit the Company” (Email Footer)

The body of the Quote Email also included the line:

‘The above is subject to the following:

Fps standard trading terms and conditions” (Additional Reference)

Arguments for ignoring the Email Footer

Technology Swiss argued that the Email footer should be given no weight as a reasonable business person would be unlikely to read or take any notice of the sentence because of its location, it was in all correspondence and its wording was vague and generic.

Further, Technology Swiss noted that the Email Footer did not state where the terms and conditions could be inspected or whether they were accessible via Famous’ website.  Technology Swiss submitted that there should have at least been a link to the terms and conditions in the Email Footer.

Court rules that the email footer formed part of the contract

The Court held that the wording of the Email Footer could not have been clearer and that Technology Swiss elected to take a commercial risk in contracting without reviewing those terms and conditions.  This risk could be clearly understood as the Email Footer did refer to the terms and conditions having the effect of limiting Famous’ liability.

The Court saw no justification in ignoring the Email Footer simply because of its location, especially due to the Additional Reference.  The Court also could see no reason to dismiss the Email Footer due to its “generic language”.  As for its repetition, the Court felt that this actually strengthened the position of Famous.

An argument was put forward that the terms were so onerous that no one would anticipate them to form part of the commercial contract.  The Court held that onerous exclusion clauses were standard in shipping contracts. However, it should be noted that the Court did interpret the exclusion clause in a way that favoured the shipper and had the effect that the exclusion clause was not particularly onerous.

Ultimately the Court held that the Famous terms and conditions did form part of the contract between the parties.  Unfortunately the decision does not make clear the extent to which the Additional Reference was important.

Other issues – Issuing of the house bill of lading

The email footer issue may not have been significant if Famous could have relied on the terms of its house bill of lading.  Most BOLs include terms that expressly limit liability and also act as a shipping document with the effect that liability is limited under international conventions.

In this case Famous provided Technology Swiss with the front page of its house BOL 6 days after the vessel carrying the goods had departed.  The house BOL referred to the “terms overleaf”.  However, only the front page of the BOL was provided and not the back page with the “terms overleaf”.

The Court held that the terms of the BOL did not form part of the contract for the following reasons:

  1. the actual “terms overleaf” were not provided to Technology Swiss and it was not incumbent on Technology Swiss to seek out those terms;
  2. it was reasonable for Technology Swiss to assume that the “terms overleaf” were the same as the Famous standard terms and conditions; and
  3. the house BOL was provided after the contract had already been concluded and the goods had been shipped.

An argument was put by Famous that the terms of the BOL were incorporated by operation of Famous’ standard terms and conditions which stated that any terms of a BOL issued by or on behalf of Famous would take priority over its standard term and conditions.  This argument was rejected by the Court.  One of the reasons was the that house BOL was not clearly issued by the defendant (Famous Pacific Lines (Vic) Pty Ltd).  This was because the house BOL simply described the carrier as “Famous Shipping Lines”.  The Court held that it could not be determined that “Famous Shipping Lines” was the alter ego of the defendant.  As a result, the house BOL was not taken to be a BOL issued by Famous.

Ultimately the Court held that the contract was formed in October 2014 and Famous did not have the right to unilaterally alter the terms and conditions by issuing a house BOL after the goods had been shipped in December 2014.

Application of the Famous terms and conditions

While Famous was successful in its argument that it terms and condition applied, the application of those terms and conditions did not go entirely as it would have hoped.  The terms and conditions had the expected clauses limiting liability for loss or damage to a small portion of the value of the goods.  However, the terms and conditions contained an additional clause that expressly stated that compensation shall be calculated by reference to the invoice value of the goods plus freight and insurance (Invoice Value Clause).  This clause was directly contrary to the other clauses that drastically limited Famous’ liability and the clause seems to have the purpose of calculating the value of goods, not the liability limits.

Standard exclusions of liability make “commercial nonsense”

There was much argument concerning the construction of the contract.  In finding that the Invoice Value Clause set a higher liability limit the Court noted:

  1. the contract must be interpreted so as to avoid making commercial nonsense;
  2. limiting liability as argued by Famous (about 3% of the invoice value of the goods) would make commercial nonsense.

This is a significant finding as most transport contracts seek to significantly limit liability of the service provider or carrier.  If these limitations of liability do in fact make commercial nonsense it will be crucial for the service provider to obtain written acceptance of the terms.

A Court is likely to look hard for reasons to prevent a freight forwarder escaping liability for their negligence and this can include unfavourable interpretation of any vague provisions of a contract.

Exclusion of consequential loss (loss of profit, storage, delay)

The Court was, however, prepared to accept a limitation of liability that capped loss at the value of the goods plus freight.  This effectively capped liability for pure economic loss, loss of profit, delay and deviation.    In this case the costs of related legal expenses and storage exceeded $400,000 and were effectively excluded.

Lessons for freight forwarders

  • Incorporate a standard email footer that refers to your terms and conditions and draws specific attention to limitations of liability
  • Provide the terms of the BOL before the goods have shipped
  • Make sure your house BOL correctly identifies your company and does not use the trading name of the global group
  • Have your terms and conditions accepted in writing. This will avoid arguments regarding the application of onerous exclusion clauses
  • Have your terms and conditions reviewed to ensure the limitation of liability clause effectively work together

Please contact us to discuss your use of email footers and how you contract with your customers or service providers.