An interesting legal point arose recently in a case that I conducted in the Local Court. The question centred around the damages that a landlord is entitled to recover from a commercial tenant that breaches a lease.
Six months into the lease the tenant stopped making rental payments. Nine months into the lease, the tenant surrendered the keys to the premises and moved out.
Court proceedings were brought by the landlord and when the matter came before the Tamworth Local Court, about six months of the original lease term remained yet to expire.
The court had to consider whether the landlord was able to recover from the tenant, rental payments for three separate periods:
the time between the tenant ceasing to make rental payments and surrendering the keys;
the time between the tenant surrendering the keys and the date the matter was brought before the court; and
the time between the court date and the end of the lease which was not due to expire for a further six months.
Leases are contracts. There are two general contractual principles which have relevance.
Firstly, where a contract is unlawfully terminated by one party, the other party is entitled to recover damages so as to place him or her in the position that he or she would have been in, if the contract had been completed .
Secondly, the aggrieved party must take reasonable steps to mitigate his/her loss. You cannot claim for a loss that you have not attempted to avoid.
In respect to the first period of time, the application of the law is relatively simple. The tenant owes the landlord money just like a debt. The landlord cannot mitigate their loss because the tenant was still in the premises.
Establishing the landlord’s rights to damages in the second and third periods is a little more complex and requires further explanation which will be explored in an article next week.
If you have any questions regarding commercial leases, please do not hesitate to contact Everingham Solomons because, Helping You is Our Business.
Fiduciary relationships are common in day to day life and especially common in the world of business. However, they are the result of a legal principal that is not well understood.
If you are an employer, a partner in business, a company director, a beneficiary under a trust, or someone that engages a real estate, property, insurance, finance or any other kind of agent, chances are that you have the benefit of a fiduciary relationship, without even knowing it.
A fiduciary relationship is a bond between parties which is imposed by the law of equity. It does not require the parties to agree that such a relationship exists or for the parties to do anything at all.
Broadly, a fiduciary relationship is where one person, the principal, places the utmost faith and trust in another, the fiduciary, such that the fiduciary is to act, not for his own benefit, but for the benefit of the principal.
A fiduciary must not profit from his position as a fiduciary without obtaining the fully informed consent of the principal. In the event that a fiduciary acts in such a way that they obtain a benefit at the expense of their principal, the principal is entitled to sue the fiduciary for the breach of the fiduciary duty.
If you have employed someone, and in that employment, you trust them with the information that is at the root of the goodwill of your business, for example, client lists, service schedules or trade secrets and that employee leaves you and then uses that information to their own benefit, you may have a right to redeem the employee’s profits, relying on the breach of a fiduciary relationship.
Another situation in which a fiduciary relationship will often exists is between business partners acting together. In the event that they jointly formulate a business plan and then one partner abandons the other and uses the ‘partnership knowledge’ to their own exclusive benefit, usually by starting their own business, then the abandoned partner is likely to have a right against the other for breach of the fiduciary relationship.
If you employ an agent to act on your behalf, in matters that require their specialized skill and expertise, and you subsequently find that they placed the interests of another person higher than your own interests, then it is likely that a fiduciary relationship has been breached.
Where two people come together, on equal footing, to reach a business agreement, that association will not normally cause a fiduciary relationship to arise. What is generally required is some sense of vulnerability on behalf of the principal, such that the principal is relying on the skill of the fiduciary, or trusts the fiduciary to act for the principals benefit.
Mere commercial transactions such as those between a lessor & lessee, manufacturer & distributor, or banker & customer, will not normally cause a fiduciary relationship to arise because there is no special vulnerability of one party.
To discuss fiduciary relationships and their role in business further, please contact Everingham Solomons, because Helping You is Our Business.
Borrowing by Self Managed Superannuation Funds (“SMSFs”) has been allowed under strictly controlled circumstances for over five years. Over that time the “grey areas” have gradually become a little clearer both through legislative change and the issue of very detailed rulings by the ATO.
In May this year the ATO issued a new major ruling. It is a very useful document and contains many examples of what the ATO considers can and can’t be done. Some of those examples are particularly relevant to farming properties.
One of the key concepts of the legislation is the concept of borrowing to acquire a “single acquirable asset”. Most farming properties will be comprised in more than one land title. If those titles can be dealt with separately, in many cases the farm will not be regarded as a single acquirable asset even if from a practical viewpoint, it would be unlikely that any part of the farm would be dealt with separately from the other.
If a farm was not regarded as a single acquirable asset, it may still be possible to proceed with a borrowing by breaking up the transaction into separate loans over each title. There will be practical problems in doing that however particularly due to the likely requirements of financiers and the duplication of borrowing expenses.
The ATO ruling also includes some useful examples of the distinction between “repairing” and “maintaining” a farm, which is allowed, and improving the farm which is not . For instance, replacing a section of existing cattle yards or fencing is a permissible repair whereas adding a further set of cattle yards or additional fencing would be an improvement.
Involving your SMSF in a farming business requires expert financial and legal advice. Borrowing is only one of a number of alternatives and there are ongoing operational issues relating to the arrangements between the entity that conducts the farming business and the SMSF.
There are many pitfalls for the inexperienced or ill advised. At Everingham Solomons we have the experience and the expertise to work with you and your financial advisors to achieve the best outcome for you because Helping You is Our Business.
Obtaining registration of trademark can be a lengthy and at times costly process. Creating an intellectual property right from the seed of an idea is however a worthwhile pursuit – provided all the hard work doesn’t go to waste by your failure to use it.
IP Australia, the government agency responsible for administering intellectual property rights and legislation, is warning holders of trademarks to use their IP or risk losing their rights – failure to utilise your intellectual property can see a person or company apply to have your trademark removed from the register.
An application for removal can be commenced if you have not utilised your trademark for a period of three years, or if you did not have an intention of using the trademark when you filed your application for approval (as evidenced by never having utilised your trademark).
Obviously competitors are the most common applicants for removal – they might be wishing to register a similar trademark and your IP is hindering their registration. And fair enough where you are effectively “sitting” on a trademark to deliberately prevent your competition from being able to utilise similar words or logos, without actually using the trademark in your own marketing or business.
An application for removal must be defended by the holder of the trademark – failure to oppose the application will see it succeed and your trademark will be deregistered. Deregistration not only means your competitor will get a foot in the door, but also that you will need to re-apply for registration which could be difficult if your competitor has since filed a similar trademark.
So the moral of the story is as simple as “use it or lose it”. If your business has gone to the effort and expense of registering a trademark, taking time to manage your IP rights by ensuring the trademark is used regularly is a worthwhile investment to maintain your market advantage.
If you are considering IP registration, contact the team at Everingham Solomons. We are well equipped to assist you with all your intellectual property enquiries becauseHelping You is Our Business.
Click here for more information on Rebecca Greenland.
<In 2009 Safe Work Australia, a national statutory body was given the job of nationalising state occupational health and safety laws. This was designed to harmonize the laws across the various jurisdictions.
On 1 July 2012, the Work Health & Safety Act (NSW) 2011 (WHS Act) commenced operation replacing the Occupation Health & Safety Act (NSW) 2000. The NSW legislation, although not identical, is very similar to the legislation across the various States in Australia.
The reason for the changes has been the change in the workforce. Over the years workplaces have become far less structured. It is becoming far more common for people to do their work from home, be employed by labour hire companies, use contractors, sub-contractors as well as volunteers. These changes to the workforce are reflected in the changes to the legislation and it attempts to encompass all workers as more broadly defined.
For NSW employers, there has been a shift away from an ‘absolute duty’ towards a duty to ensure safety ‘insofar as it is reasonably practicable’. Having said that it also requires employers to be more proactive in respect to the safety measures they implement and their obligations are far broader.
What is ‘reasonably practicable’ depends on a number of factors which include the time and expense it takes to eliminate or reduce the risk. If the steps required are disproportionate to the risk, then they may not be reasonably practicable.
The WHS Act also requires an ‘officer’ of the business to exercise due diligence to ensure the person conducting the business complies with its duties. To exercise due diligence requires positive action which is to say it cannot be passive or disinterested in its obligations.
There is also a raft of regulations that have been introduced to place further obligations on employers and require them to, in effect, self regulate themselves. This includes the introduction of health and safety representatives which will be discussed in a later advertorial.
If you should have any queries in respect to the Work Health & Safety Act, please contact the writer to discuss because Helping You is Our Business.
In a judgment handed down on 20 April 2012 in Roadshow Films v iiNet, the High Court unanimously found that iiNet did not breach copyright when its customers carried out illegal downloading via their iiNet accounts because, while iiNet may have known of the illegal downloading, it did not “authorize” that conduct by its customers. Well, of course it didn’t and the Court, which, with great respect, is made up of eminently sensible men and women with better than room temperature IQs was not fooled for a moment by the tortured arguments advanced by the copyright owners.
So, the copyright owners continue in a terrible flap about illegal downloading. That’s perfectly understandable. Copyright is a monopoly and monopoly is the keystone of capitalism. And, work which is the product of great creative effort should not be able to be pirated as easily as it is.
The difficulty for the copyright owners is that dissemination of intellectual property in the digital world is out of control and the copyright owners are hysterical and very heavy handed about the whole thing. They continue to lobby the Australian Government. They propose one of two models. First, the Chinese model, by which websites providing information on torrent files will be completely blocked in Australia in much the same way as China blocks Facebook and Google searches of “Tiananmen Square massacre”. The other is the Stasi model under which ISPs must inform on their pirate customers as every second citizen of the old East Germany informed to Stasi on his or her neighbour.
The Government seems reluctant to do anything much in the way of legislation in response to the onslaught of lobbying from the copyright owners. It says that it wants an “industry led solution”, which is Government speak for “don’t ask us; it is all too complicated”.
The copyright owners are not making much headway in Australia nor in the USA, where the proposed SOPA legislation would have put illegal downloader’s in goal for anything up to five years. This caused a great backlash. Wikipedia went down for 24 hours and politicians and journalists starting talking about “the vibe of the thing”, gibberish really but SOPA has stalled.
Sweden is a place where one can get into terrible trouble for illegal downloading but that’s not surprising given that that country’s rape laws are as difficult as putting together a piece of IKEA furniture; something Julian Assange found recently, to his absolute horror.
If you need advice on copyright or other intellectual property, we can help because Helping You is Our Business.
What happens if you enter into a contract on the basis of some representation made by the other party, and you later find that representation to be untrue?
If the representation is included as a term of the contract, the remedy is straightforward, as an action for breach of that contractual provision will usually lie.
If the representation was not included as a term of the contract, but instead existed as a statement made prior to, and separate from, the contract document, the legal rights arising are a little more complicated.
If a false statement is made about a material fact and the purpose of that statement was to induce the other party into entering the contract, then the principal of misrepresentation arises.
The false statement must be about either a past or present fact. Generally speaking, a promise as to future events, a statement of opinion, or a statement of intention is not considered to be a statement of fact and does not constitute a misrepresentation.
Similarly, silence will not normally constitute a misrepresentation without some other special circumstances.
For a misrepresentation to occur it is also necessary to prove that the false statement was calculated to induce the aggrieved party to enter the contract and that the aggrieved party relied on the false statement in so entering the contract.
If a misrepresentation is established, it can be one of either two types; innocent or fraudulent. An innocent misrepresentation occurs where the statement was false, but the party making it did not know it to be so. A fraudulent misrepresentation occurs when the party knew that they were giving incorrect information.
If a person enters into a contract on the basis of an innocent misrepresentation, then a right arises to rescind the contract; that is to get out of the contract as though it had never existed.
If the representation which induced the party to contract was a fraudulent one, then the aggrieved party still has the right to rescind the contract, but the aggrieved party can also seek damages for any loss that they suffered by entering the contract in the first place.
If you have any further enquiries, or would like to discuss any matters of contract law further, feel free to contact Everingham Solomons Solicitors because Helping You is Our Business.
The starting point is that restraint of trade clauses are prima facie invalid because they infringe public policy, which holds, quite understandably, that a person should not be able to stand in the way of another person earning a living.
However, under the Restraints of Trade Act 1976 (NSW), a restraint clause will not be invalid if it was reasonable in all the circumstances at the time that it was made.
When deciding the validity of a restraint clause, the Court will ask whether the person seeking to impose the restraint (usually an employer or the incoming purchaser of a business) has a legitimate interest to protect and whether the restraint amounts to reasonable protection of that interest.
Legitimate interests include confidential information, client lists, secret operating procedures, formulae and the like. Legitimate interests are valuable. They can include an employer’s connection with his clients.
In a recent Victorian case, an employee had been seconded to one of his employer’s key clients. After a period, he resigned and took up a job with the client. The employer commenced proceedings to enforce the restraint clause, which prevented the employee from providing services to any former client for a period of 12 months after leaving his employment. The employer argued that its legitimate interest was the investment in their employee’s training and that the purpose of the restraint clause was to ensure that its employees did not use secondments as an opportunity to gain alternative employment. The Court found that the employer’s customer connection was capable of protection but such protection was only afforded where employees had achieved a position such that they had the practical ability to control their employer’s customers as if those customers were their own. The Court did not consider that the seconded employee fell into this category.
In determining whether restraint clauses are reasonable, the Court will consider various matters including the negotiation process, the bargaining position of the parties, the nature of the employer’s business, whether consideration was given for the restraint and the duration of the restraint and geographical area.
Legal proceedings should never be commenced without a great deal of analysis and consideration. In the case of restraint clauses, analysis of the legitimacy of the interest being protected and the reasonableness of the restraint will be critical. The employment team at Everingham Solomons can help with that analysis because Helping You is Our Business.
Have you developed a great product, logo, brand, design or process? Are you a wannabe “inventor”? Do you have a unique target market?
If this description fits you or your business, you should be considering intellectual property (IP) protection.
IP protection comes in various forms, depending on what you are wanting to protect:
Trademark: a valuable marketing tool which identifies your “brand”. Commonly used to protect a word, logo, letter, number, phrase, picture or shape (but can extend to sound and smell too!). By registering a trademark, you have a legally enforceable right to exclusive use of the trademarked item.
Patent: a right that is registered for new, inventive and/or useful devices, substances, methods or processes to provide the owner with a legally enforceable exclusive ability to exploit the invention.
Design: registration protects new and distinctive designs (that is, shapes, patterns, configurations) that have a commercial use. Registration of a design gives the owner exclusive rights of licence and sale.
Plant Breeder’s Rights: protects new varieties of plants to enable the owner to exclusively cultivate, sell and distribute. The owner of a Plant Breeder’s Right is entitled to receive royalties from the sale of the plant.
Copyright: protection of original expression of ideas (not the ideas themselves) is automatically protected in Australia. Examples include books, music, films, artwork and computer programs.
Registration of your Intellectual Property is required in order to obtain the protections offered by trademarks, patents, designs and Plant Breeder’s Rights. Failure to register your idea or product could lead to other people imitating your IP or worse still, claiming a registration so that you will not be entitled to use your own invention!
Online registration is now available to make the application process more timely and cost effective. There is no excuse for putting off your IP registration any longer.
If you are considering IP registration, contact the team at Everingham Solomons. We are well equipped to assist you with all your intellectual property enquiries Because Helping You is Our Business.
Click here for more information on Rebecca Greenland.
Many business owners involve their self managed superannuation funds (“SMSF”) in their business as owner of or part owner of their business premises.
There can be benefits in doing this but there are also costs associated particularly with –
transferring the asset into the SMSF; and
the complex ongoing compliance regime for SMSFs
In the past month I have come across good examples of both points.
A client had heard of the benefits of transferring his business premises into his SMSF and better still, that it could be done for only $50 stamp duty. As usual, the devil is in the detail. A short discussion revealed that-
For various reasons, the stamp duty concession would not apply taking the potential stamp duty cost from $50 to approximately $60,000.00;
The transfer would trigger a significant capital gains tax cost; and
He was unaware that if the business premises were transferred to the SMSF , they could no longer be used for financing his business.
The other example involved a lease of business premises already owned by a SMSF to the operating company of the business owner.
This client was aware in general terms of what are sometimes referred to as the “arms length” rules. These rules provide that a related party transaction (in this case the lease ) cannot be on less favourable terms to the SMSF than would be the case if the SMSF was dealing with an unassociated party.
He did not wish to pay less than a market rent . He had reached the stage in life when he was trying to maximize his retirement income and get every cent he could into his SMSF. He wanted to pay a rental that was vastly more than the market rental.
From a superannuation law viewpoint, the danger was that the excess rental component would be regarded by the ATO as a contribution to the SMSF on his behalf rather than a rental receipt . As the client was already contributing all he was able to into superannuation, excess contributions tax would have been payable at an effective tax rate of 46.5% on part of the excess rental and 93% on another part.
In summary, any proposal involving the transfer of assets into an SMSF or a dealing between a SMSF and a related party needs to be carefully considered before it takes place. Expert legal, tax and financial advice should be taken.
At Everingham Solomons we have the expertise in superannuation, tax and business laws to help you because Helping You is Our Business.
An interesting legal point arose recently in a case that I conducted in the Local Court. The question centred around the damages that a landlord is entitled to recover from a commercial tenant that breaches a lease.
