Do I need a solicitor?

Headshot of Suzanne Hindmarsh - Conveyancer at Everingham Solomons TamworthMost people only seek legal advice for problems when they arise – when going through a divorce or after an accident for example. But what if your lawyer is like a best friend you didn’t know you needed?

If you consult a lawyer BEFORE a legal issue arises, they can help you anticipate and prevent serious legal problems, saving you a lot of money and heartache in the long run.

If you’ve never worked with a lawyer before, some common situations where getting legal advice from a lawyer may be necessary include:

• The sale or purchase of a house, property or business
• An accident involving personal injury or property damage
• A family problem such as divorce or a child custody dispute
• Workplace disputes including discrimination or harassment on the job
• When you are starting a business
• The drafting of a will, trust, or estate plan

So when should you talk to your solicitor? It is best to communicate with your conveyancer/solicitor as soon as you have decided to embark on a new venture.

For example if you plan to purchase a property – you should get your solicitor to review the contract before you sign it. Otherwise you may encounter problems of not completing the contract on time, or there may be disputes over inclusions which were not itemized on the contract prior to exchange. These and many other problems can be avoided if the purchaser consults with their conveyancer/solicitor from the very beginning.

Another example is when you are selling a property. By law you must have a contract of sale drafted BEFORE you market a property. A marketing contract is provided to your real estate agent for the purposes of advertising your property. However, if your property has been on the market for a long time or you choose to put the property up for auction. Before doing so, your marketing contract should be reviewed as there could have been legislation changes that affect the marketing contract. If the agent uses the outdated marketing contract as the auction contract and proceeds to auction. This can cause issues for the vendor allowing a purchaser to withdraw from the contract up to the time of settlement. This can have devastating consequences and costs for the vendor.

Another time that is especially critical to see your solicitor first is when purchasing a business. Once committed, it is very difficult or costly to change business entities if you have not selected the most tax-advantageous business structure. Related issues such as the transfer of employee entitlements again can be very costly if not adequately covered in the initial negotiations.

At Everingham Solomons, we have the expertise in Property Law, Business Law, Family Law, Wills and Estates to help you make the right decisions. The sooner you speak to us, the more we can help because Helping You is Our Business.

Click here for more information on Suzanne Hindmarsh.

 

Have You Met the Disclosure Requirements relating to Substantially Prejudicial Terms?

Headshot of Ya Zhang - Solicitor at Everingham Solomons TamworthFrom 1 January 2021, businesses dealing with consumers in New South Wales (NSW) are liable to penalties if they do not disclose to consumers:

  • terms of contracts that substantially prejudice the interests of the consumer;
  • if the business receives a commission or referral fee when recommending the consumer buys goods or services from another supplier.

The legislation applies to businesses (companies and individuals) whether located inside NSW or not that are dealing with “consumers” in NSW.

Disclosure of substantially prejudicial terms

Businesses caught by the new law must take reasonable steps to make customers aware of the substance and effect of terms that may ‘substantially prejudice’ the interests of consumers.

Currently there is no clear provision defining what constitutes a substantially prejudicial term.

Disclosure of substantially prejudicial terms must be made before supplying the goods or services. For example, before the consumer signs the contract or makes a payment.

Disclosure of commission or referral arrangement

Where a business acts as an intermediary receiving a financial incentive from another supplier, it must take reasonable steps to make customers aware of any commission or referral arrangements with another supplier when recommending goods or services provided by that supplier.

Disclosure must be made before acting under such commission or referral arrangement. For example, before the consumer is redirected from the intermediary to the supplier or before the consumer makes the purchase.

What constitutes “reasonable steps”?

There is no guidance in the legislation as to what constitutes “reasonable steps”.  According to the NSW Department of Fair Trading, “reasonable steps” means taking actions that “one would reasonably expect would create awareness in a consumer” and should be:

  • appropriate in the circumstances; and
  • sufficient to create awareness in the consumer.

What businesses need to do if they supply goods or services to NSW consumers

If your business supplies goods or services to NSW consumers, you should:

Step 1   Identify any terms which might “substantially prejudice” the interests of a consumer.

Step 2   Consider what “reasonable steps” you need to take to alert consumers of these terms before supplying the consumer with the relevant goods or services.

Step 3   Take those reasonable steps.

In light of the lack of guidance in the legislation, steps 1 and 2 will very much depend on the nature of your business and how you supply your goods and services.

The fines for breaching this law are substantial – up to $110,000 for corporations and $22,000 for individuals so don’t take the risk. We are here to help.

If you need assistance in reviewing your terms and conditions of supply, please contact Everingham Solomons because Helping You is Our Business.

Click here for more information on Ya Zhang.

How did companies first begin?  A historical look at the Company

Headshot of Clint Coles - Director at Everingham Solomons TamworthUp to the late middle ages, business was pretty steady – one family owned a cow, another some cabbages, there was mutual jealousy and so they swapped.  In time, money was used to facilitate more complex exchanges but, all in all, relatively few people were involved and there wasn’t a huge need for capital.

Around the 1600s though, people started exploring the world. Trade followed exploration and trade was very profitable so naturally the great families of the era liked to keep it to themselves.  Notwithstanding, there were two major problems:

  1. firstly, intercontinental explorers were thin on the ground and trade required the wealthy to give some brash upstart a great deal of money and send him to some remote corner of the globe; and
  2. secondly, trade exploration required tonnes of capital, and given the risks, often more capital than one family was willing to contribute on their own, so there was a need for joint investment from unrelated parties.

A system was needed to record who was trustworthy and who had whose money and because everyone knew they could trust their King, the monarch assumed the right to allow these early joint stock companies to operate.

One of the earlier companies to receive a Royal Charter was the British East India Company.  Regrettably, it developed a reputation for oppressing and pillaging India over a few centuries, so they changed their name to the Honourable East India Company and, obviously, that cleared things right up.

Through the colonial period, trade increased Gross Domestic Products which even royal families saw as a good thing, so seizing the opportunity to do less and get more, the regulation of companies was lowered and stock certificates came to be traded amongst progressively more common people.

The industrial revolution increased business size and technicality to unprecedented levels and the essential problems were heightened:

  1. investors didn’t have the foggiest understanding of Carnegie’s Steel or Rockefeller’s oil, and while they didn’t like these risks, they didn’t want to forgo their profits either; and
  2. companies had become so big, that they required continual diversified funding from a large number of investors to continue expansion and operation.

Thus emerged the concept of limited liability. To get people to invest it was necessary to create a law that separated the shareholders from the company itself, and limited their liability for the company’s risks up to the amount they had paid for the share capital.

That remains the essence of a limited liability company today and explains why a right to sue a company does not include a right to sue its directors or shareholders.  Without the rule, which sometimes seems harsh, our economy could not have developed as it has.

If you have any commercial law enquiries, contact Everingham Solomons because Helping You is Our Business.

Click here for more information on Clint Coles

Restraints in the Context of an Employee, Director and Shareholder

Headshot of George Hoddle - Director at Everingham Solomons TamworthIt is not uncommon in businesses that an employee can also simultaneously be a Shareholder and Director of a company. The matter of Agha v Devine Real Estate Concord & ORS [2021] NSW CA 29 dealt with this situation.

This case considered restraints in circumstances where there was a Shareholders Agreement and an Employee Agreement for Mr Agha. Both of the documents contained clauses in relation to Restraint of Trade as well as clauses protecting confidentiality. An issue that needed to be considered was which restraint applied out of the two documents as they provided different periods and overlapping areas of restraint.

The post-employment restraint period under the Employment Contract was for a maximum of twelve months whereby the restraint in the Shareholders Agreements was for a period of three years.

The brief facts of this case were as follows:

Mr Agha gave notice to Devine Real Estate that he was going to resign from his employment, sell his shares and resign as a Director.

Devine Real Estate discovered shortly thereafter that Mr Agha had sent confidential information to his personal email address and entered into an Employment Agreement with a competitor, Bell Property.

Devine Real Estate then brought proceedings in the Supreme Court which were later put on appeal by Mr Agha.

Both the primary judgment and the Court of Appeal agreed that the more extensive restraint in the Shareholders Agreement was valid and enforceable. Given Mr Agha’s seniority and position as a past shareholder it was reasonable.

Further, Mr Agha was in breach of soliciting existing clients within a restraint area whilst working for a direct competitor.

The case of Agha v Devine Real Estate Concord highlights the need for properly drafted Employment Agreements but also Shareholders Agreements. It is important that employees, Shareholders and Directors are aware of the post-employment obligations as an employee as well as any restraints contained in relevant Shareholders Agreements and the duties owed by a Director to a company.

Should you need assistance in relation to these issues, Everingham Solomons has the expertise to assist, because Helping You is Our Business.

Click here for more information on George Hoddle.

Resolving Shareholder Disputes – the benefit of Shareholders Agreements

Headshot of David Southwood - Solicitor at Everingham Solomons TamworthPeople commonly operate a business through a private company. A typical structure involves the business participants as being both directors and equal shareholders of the company.

When a company is created, there are basic rules that govern its affairs, however these rules do not address commercial decisions a company must make. For so long as everyone gets along, this type of basic company arrangement works well.

However, if there is a breakdown in the relationship between the business participants, problems can emerge. For example, the business participants may be unable to reach agreement about the future of the business. This type of situation is commonly called a “deadlock”.

If a deadlock emerges, people are often surprised to hear that there are limited options to resolve a deadlock. For example, there is no mechanism by which one shareholder can require another to sell their shares to them. Further, the Courts are reluctant to involve themselves in commercial disagreements between shareholders.

However, there is a solution – it is called a “Shareholders Agreement”. A Shareholders Agreement is a contract between shareholders in a company and its purpose is to provide greater detail about the operation of a company and resolution of deadlocks. For example, a Shareholders Agreement can contain mechanisms that require shareholders to sell their shares or buy those of another shareholder.

The key takeaway is this: if you a starting a company with others, you should enter into a Shareholders Agreement. It will provide certainty and assist in resolving deadlocks, which allows you to focus on your business. If you would like further information regarding a Shareholders Agreement, Everingham Solomons would be pleased to assist as Helping You is Our Business.

Click here for more information on David Southwood.

Understand the “Permitted Use” in your Commercial or Retail Lease

Headshot of Ya Zhang - Solicitor at Everingham Solomons Tamworth

If you are a tenant, you need to understand how you can use the leased premises when entering into a commercial or retail lease. For example, you may intend to use the premises as a restaurant or as a bookstore in Tamworth. How you can use the lease premises is negotiated and agreed before you enter into the lease and is provided in the “permitted use” clause of the commercial or retail lease.

The permitted use clause should accurately describe how you intend to use the premises during the lease term, including what you will be doing on the premises now and in the future, and any products or services you will manufacture or sell on the premises. The permitted use clause, even just a few words, is an important commercial term in the lease.

First of all, the permitted use has an impact on the future of the tenant’s business. A broader description of the permitted use is preferred as it will allow a range of activities to be carried out. A narrow description may restrict the tenant’s ability to expand the business. Therefore, tenants need to consider if the permitted use is broad enough to adequately cover their core business and any ancillary activities.

Secondly, tenants should consider the ability to transfer the lease to a third party. A highly restrictive permitted use may affect the tenant’s ability to assign the lease if the landlord is not willing to consent to a change to the permitted use. This is particularly relevant if the tenant intends to sell the business. A broad description of permitted use in the lease would make it easier to find a purchaser of the business.

Lastly, permitted use is closely related to the development approval. Before entering into the lease, tenants should research and enquire about whether the premises are suitable for their intended use and ascertain whether their intended use is permitted on the premises. If the intended use of the premises has not been approved by the council, the tenant will need to lodge an application and obtain the development approval from the council.

If you have any inquiries in respect of your commercial or retail lease, please contact Everingham Solomons because Helping You is Our Business.

Click here for more information on Ya Zhang.

Covid retail leasing update

Headshot of Clint Coles - Director at Everingham Solomons TamworthWith the recent and unfortunate resurgence of retail lockdowns it’s timely to revisit landlord and tenant obligations in the retail leasing landscape.

On 13 July 2021, the Covid Retail and Other Commercial Leases (Covid 19) Regulation 2021 enacted.

In its original form, it did not require that tenants and landlords renegotiate rent as they were required to through 2020, but instead provided simply that landlords could not take ‘prescribed action’ against tenants unless they had first attempted mediation.

That situation was altered, however, on 13 August 2021 as lockdowns continued and became more widespread across the state. From that date, sections 6C & 6D were added to the regulation which, in effect re-instated the obligation of landlords to renegotiate leases under the National Code of Conduct.

The code of conduct remains unchanged from 2020 and essentially provides that the leasing parties should negotiate rental reductions proportionate to the lessee’s downturn in revenue, with half of the reduction to be effected as a waiver and the remaining half as a deferral.

The most obvious difference between the 2020 and 2021 versions of the retail leasing relief is in the qualifying criteria. Under the 2021 regulation, a tenant will only qualify as an ‘impacted lessee’ if they are in receipt of either the Microbusiness Grant, Business Grant or JobSaver payments and have an annual turnover of less than $50m.

The current regulation runs to 13 January 2022, but does not apply to leases entered into after 26 June 2021.

If you have any inquiries in respect of retail leasing, please contact Everingham Solomons because Helping You is Our Business.

Click here for more information on Clint Coles

How to get what you deserve – ensure you get paid

Headshot of David Southwood - Solicitor at Everingham Solomons TamworthWhen you do a job, you rightly expect to be paid. Sadly, we often see clients that are chasing money for work they have done.

However, there are many things that can be done when you initially engage a client to reduce the risk that they will not pay you in the future. Similarly, in the event you are not paid, there are early steps that can be taken that will make pursuing the debt easier. Some things to consider when engaging a new client include the following:

  • Client Details: Make sure you correctly identify who your client is and ensure you have accurate details for the client. For example, are you dealing with a person or their company? Doing this will avoid a debate as to who is liable to pay you in the future and make pursuing them easier.
  • Security: If you have standard terms and conditions, you should include a clause whereby the client grants you security over their assets to secure payments due to you. If a client is concerned you can access their assets, this will increase the chance of them paying you to avoid this from happening.
  • Guarantors: Getting multiple people or entities to guarantee a debt will allow you to pursue them in the event that your client fails to pay you. In particular, if you are dealing with a company, it is wise to have another person, such as a director of the company, to personally guarantee payments due to you. This is because a company may not have any assets. Accordingly, if a company fails to pay you, when you pursue the company they may not have any assets to repay the debt to you. In comparison, a person will often have assets in their own name, such as houses, vehicles and other personal property.

At Everingham Solomons Solicitors, we can assist with ensuring your client intake process and contracting terms provide you with maximum protection. And, in the event you are still not paid, we have deep experience in debt recovery, as Helping You is Our Business.

Click here for more information on David Southwood.

Will your business be impacted by the change to the definition of “consumer” under ACL?

Recent amendments to regulations expand the applicability of the consumer guarantees regime under the Australian Consumer Law (ACL).

Under the current definition in section 3 of the ACL, a person is a “consumer” if the person acquires:

– goods or services that are priced at $40,000 or less;
– goods or services that are of a kind ordinarily acquired for personal, domestic or household use (regardless of the price of the goods or services); or
– a vehicle or trailer acquired for use principally in the transport of goods on public roads.

The consumer guarantees do not apply to goods acquired:

– for the purpose of re-supply;
– for using them or transforming them through processing, production or manufacture; or
– for repairing or treating other goods or fixtures on land.

From 1 July 2021, the definition of “consumer” under the ACL will be the same except that the monetary threshold of $40,000 will increase to $100,000.

Increasing the monetary threshold to $100,000 means many large commercial transactions that were previously not subject to the ACL will be subject to the consumer guarantees regime from 1 July 2021.

If you are a supplier who may be impacted by the change, you should immediately ascertain the price of your goods or services and find out whether your customers fall under the new definition of “consumer”. If your customers are considered “consumers” under the ACL, you should:

– seek advice on what consumer guarantees will be implied into your transactions and ensure that your goods or services comply with these guarantees;
– review your contracts and terms & conditions to ensure they are up to date and capture the requirements of the ACL;
– provide trainings to your employees so that they understand what rights and remedies consumers are entitled to under the ACL and ensure your employees do not accidently    mislead or misinform customers in a manner that contradicts the ACL;

Everingham Solomons have experienced Solicitors who can advise you on the Australian Consumer Law. Please do not hesitate to contact us for any legal advice you may need because Helping You is Our Business.

Click here for more information on Ya Zhang.

More Help for Small Business

COVID-19 is continuing to have an enormous social and business cost in Australia and governments both State and Federal have been doing their best to provide assistance.

Currently many small businesses are relying upon government wage subsidies for ongoing viability. A leading economics research firm has projected that almost 1/4 of a million small businesses are at risk of failure.

The Federal Government recently announced new insolvency laws aimed at assisting small businesses to regain viability. These laws are modelled on legislation that has been in place in the US for many years commonly known as “Chapter 11”. The objective is to provide a process that potentially allows stressed businesses to take action to restructure before it becomes too late to save the business.

The key points of the new laws are –

• They are intended to commence on 1 January 2021 following the lifting of various temporary COVID-19 insolvency relief measures;
• They will be available to “small companies” which is defined as any incorporated business with liabilities of less than $1 million;
• A company wishing to access the provisions will have 20 business days to propose a debt restructuring plan during which the company can continue to trade;
• A new category of insolvency practitioner will be introduced specifically to assist companies with restructuring plans; and most importantly
• Unlike current insolvency procedures, during the initial part of the restructuring process, the company will remain under the control of its directors.

It is hoped that these new processes will be less costly to implement and more tailored to individual circumstances than existing measures.

The full details of the provisions are yet to be announced. The Business Law Team at Everingham Solomons will follow the developments closely because, Helping You is Our Business.

Click here for more information on Ken Sorrenson