McCracken’s appeal to proceed following adjournment knock-back

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In an unprecedented move in the Court of Appeal last week, a Respondent (Phoenix Constructions (Qld) Pty Ltd) applied to adjourn an Appeal, in an attempt to gain time to bankrupt the Appellant (Jarrod McCracken). Interestingly the Bankruptcy proceedings related to the judgment under Appeal which is set down to be heard on 29 February 2012.

Justice Fraser heard submissions from both sides as to the prospects of the Appellant being made bankrupt and the potential costs that may be lost if bankruptcy eventuated. McCracken argued the extreme prejudice that would occur if the appeal was adjourned indefinitely allowing time for the Respondent to effect bankruptcy based on the very judgment under appeal.

In delivering his decision, Justice Fraser considered the balance between the parties and noted, in particular, the public interest of ensuring that litigation is conducted efficiently and with justice. To this end, the potential costs that may be lost to the Phoenix should McCracken be made bankrupt, could not outweigh the prejudice to McCracken in not being able to Appeal the earlier decision nor the public’s perception of a legal system that would allow a Judgment Creditor to bankrupt an Appellant based on the judgment under appeal.

 

Mirvac-Dunworth Case Finally Settled

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The well-known property developer Mirvac has failed to get special leave to appeal to the High Court of Australia against a Queensland Court of Appeal decision which allowed a buyer to rescind a contract to buy a multi-million dollar unit made uninhabitable by the January 2011 Brisbane floods.

That failure brought to a close the final chapter in a long, brawling legal saga.

In July 2007 Mrs Dunworth, the wife of former Wallaby footballer David Dunworth, agreed to buy a $2.155 million unit in a residential complex to be constructed beside the new Tennyson tennis centre, in Brisbane’s inner suburbs.  Mrs Dunworth later refused to settle the contract, citing flood levels (based on the 1974 floods) that would impact upon her unit if she bought; this phase of the litigation pre-dated the 2011 floods.  She was ordered to specifically perform the Contract and complete the settlement on 8 February 2011.

However, before that completion date, the finished unit was flooded in January 2011 – before the unit would be habitable, it was necessary to remove gyprock sheeting from the walls and to disconnect the electrical wiring and appliances to the unit.  Mirvac needed four months to complete the restoration work, which it offered on January 24 2011 to carry out.

Mrs Dunworth however rejected the offer to restore the unit, and on January 28 purported to rescind the contract on the grounds that the unit had been rendered unfit for occupation.  Her position relied on a seldom used section of the Property Law Act (“PLA”) that requires a property to be habitable at the date of completion (i.e. on 8 February 2011).

This further dispute (seen as a test case on the use of section 64 of the PLA) went to the Supreme Court in February 2011, when a judge found against Mrs Dunworth and allowed Mirvac until June to complete the restoration work.

Mrs Dunworth then appealed that decision.  In a unanimous judgment, the Court of Appeal:

  • upheld the appeal,
  • set aside the Supreme Court orders,
  • declared she had validly rescinded her contract with Mirvac on January 28, and
  • awarded costs to Mrs Dunworth.

The only and last option available to Mirvac was to seek “special leave” to appeal to the High Court of Australia.  But last Friday the High Court refused the application, bringing this long running case to a final close.

Warning – PPSR (Personal Properties Securities Register): Implications for all businesses

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The PPSR is a national register of “security interests” over assets and it has now commenced operation as from 31 January 2012.

It has been introduced to replace more than 70 pieces of legislation across Australia affecting consumer interests in assets.

It has taken a long time in the drafting.  Its intention is to be a one-stop shop for consumers to search for any “security interests” in an asset.  It replaces the Australian Securities & Investments Commission (ASIC) Register of Company Charges and also the Queensland Government Register of Encumbered Vehicles (“REVS”).

The new Act is very broad in its application and can have adverse ramifications for many businesses unknowingly caught up in its operation.

It now applies to many assets that were not previously required to be registered under any previous law.  The concept of “title” now becomes less relevant and possession and control of assets becomes far more important.

The PPSR can apply to:

  • Charges, mortgages and pledges;
  • Conditional sale agreements (including an agreement to sell, subject to a retention of title);
  • Consignments;
  • Hire purchase agreements;
  • Leases of goods; and
  • Flawed asset arrangements.

In certain cases, the PPSR adopts a “form over substance” approach and deems some transactions, even though they do not secure anything, to be security interests.  These include:

  • Transfers of accounts (receivables for goods and services);
  • Documentation governing certain monetary obligations and security interests and goods or intellectual property – lease or hire purchase agreements;
  • A consignor’s interest in commercial consignment; and
  • A lessor or bailor’s interest in goods under a PPS lease.

A PPS lease is a lease or bailment of goods for more than one year or an indefinite term.  A PPS lease covers many operating leases as well as finance leases and would include arrangements under which the equipment or goods, (for example scaffolding, mining equipment or the like) are provided as part of the service and the customer obtains possession of the equipment.

Registration

Registration is now paramount to preserve the security interests in the event of insolvency or receivership of the party in possession.  It occurs when there is one of:

  • registration of the security interest;
  • possession of the collateral by the secured party; or
  • in the case of certain financial assets, controlled by the secured party.

Most logically and usually, parties will perfect their security interest by ensuring it is in writing and having it registered.

Impacts of Insolvency

Perfection of the security interest is paramount in the event of insolvency because on appointment of a liquidator, bankruptcy trustee or voluntary administrator, unperfected security interests are lost.  The secured creditor loses its security and becomes unsecured.

Reservation of title clauses in contracts do not necessarily have any application.  The results can be quite severe.

A similar system was introduced in New Zealand a decade ago. Experience there illustrates many of the dangers.  In one particular case, Portacom leased portable toilets to NDG Pine but did not register its lease.  Unbeknown to Portacom, NDG Pine also borrowed money from HSBC who secured a fixed and floating charge which was registered on the PPSR.  When NDG Pine then became insolvent and a receiver was appointed, the courts decided that the receiver was entitled to sell the Portacom toilets and pay the proceeds to HSBC even though everyone involved acknowledged that Portacom was the legal owner of the assets.  A very unfortunate and unfair result.

Examples that may impact upon clients

  1. An equipment leasing business owns a generator worth upwards of $100,000.  It leases the equipment to GenX under a contract for 12 months, with the usual retention of title clauses inserted into the leasing contract. It does not register its interest in the generator on the PPSR.  Subsequently GenX goes into receivership whilst still in possession of the generator. The receiver of GenX gathers all assets including the generator to realise surplus funds to repay creditors. The leasing company, because it has not registered the interest under the PPSR will be unlikely to rely upon the retention of title clauses to stop a receiver from selling the generator.  The leasing company will then be in the normal unsecured creditor’s position along with each and every other unsecured creditor.
  2. Fosters sells wine and spirits to a bottle shop.  Fosters has previously used a retention of title clause in its invoices to enable it to secure stock should the bottle shop fail to pay its invoices or be placed into receivership.  Under the new PPSR provisions, retention of title clauses by themselves will be of no benefit to Fosters.  It will have to register its interest in the stock held by the bottle shop on the PPSR and will need to implement other documentation as well.

Contract Review

Many businesses that have assets that may potentially be affected, including where assets become or are placed in the possession of others, may need to review their contracts and ensure they register a relevant interest in an asset providing secured goods to their client. Registration is not compulsory but should be strongly considered.

How to Register Security Interest

Registration is to occur online and has been indicated to involve only a nominal cost.   Similarly, searching the Register can be conducted online and will be available instantly.

It is anticipated that many banks and finance organisations which provide funding to affected businesses, will ensure that their security interests are registered. The result would be that many businesses may receive notices from these organisations in relation to existing assets or arrangements.

Group Entities and Arrangements

It would also be necessary for businesses that have multiple group entities where inter-company loans have been made, to consider arrangements between those entities to ensure their interests are suitably protected in the event of one entity being placed into receivership.

All businesses must now consider their standard terms of trade and credit terms, to ensure their operations affected by the PPSR are covered.

Summary

In many situations it will be time consuming and difficult for many businesses to work
out what PPSR means, for them and whether the PPSR applies to their operations.

Walsh Halligan Douglas can assist in undertaking an evaluation for your business of its standard contract terms and conditions to determine what, if any, priority interests may need to be addressed and, if necessary, registered.

For further information contact us at business@whd.com.au, 07 3232 5700 or visit our website.

Business Partners: Are they holding up their end of the bargain?

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It is not uncommon when starting or purchasing a business to want to share responsibilities and the risks of the venture. Different structures can achieve this, eg. incorporated companies, trusts and partnerships.

Each structure carries its own list of pros and cons.

One common structure is where several individuals elect to buy or take over a business together, and govern their conduct by way of a partnership agreement. Partnerships do not carry the same tax benefits as incorporated companies, but they can avoid the rigid organisation and rules provided by a company constitution and/or contained within the Corporations Act.

It is therefore important, if going into business with a partner, that the partnership deed is as comprehensive as possible – taking into account as many contingencies as can be foreseen – and that it fully addresses both the rights and obligations of all partners. An exit strategy, if the worst should happen, is also important.

It is all too common, however, for parties to dive in to a venture with gusto and enthusiasm without fully considering what may happen down the track. Often, partnership deeds are rushed or simply do not cover all the possible (likely or unlikely) scenarios that might affect the partnership venture.

When things go wrong with partnerships, and it is sad that it happens all too frequently, there is still hope even in circumstances where partnership deeds simply do not measure up.

The safety net lies in the nature of the partnership relationship. Justice Dixon in Birtchnell v Equity Trustees, Executors and Agency Co Limited (1929) 42 CLR 384, explained that the relationship between partners is a fiduciary one. The mutual confidence of partners, he said, was the lifeblood of the concern and it is only through trust between the partners that the business may go on.

Dixon J outlined a number of fiduciary duties that partners owe to each other. Firstly and primarily is that the parties must act in ‘good faith’ and honesty. This is a broad duty, and often encompasses a range of ill deeds perpetrated by less than scrupulous partners.

Next is the duty to provide full accounts of all information and assets in a partner’s possession or control that are material to the partnership business. No one partner can seize control of all the books and records of a business and seek to exclude the other partners from gaining access. To allow this, invites all manner of underhanded deeds.

Partners must also avoid conflicts of interest. By this, the Courts mean that a partner cannot set up a business under a partnership agreement and then simply turn around and set up a business in conflict or assist a business in conflict with that partnership business. When partners enter a business venture, it has been determined that they must, in furtherance of the trust between the parties, pour all reasonable focus and effort into that business.

Partners must avoid making personal profit from partnership opportunities and information, and must account for personal benefits obtained from the partnership business. A partnership venture is one of mutual gain or mutual loss, not necessarily in equal proportions but certainly to the same ends. For one partner to derive a benefit, without disclosing it to his fellow partners, is a direct breach of the implied duty of full disclosure within the partnership.

In cases where breaches of these duties occur, one partner may look to the Courts to determine the future of the partnership. If dispute in the partnership venture cannot be resolved between the parties, then a receiver can be appointed to wind up the business and send the parties, possibly sadder and wiser, on their way.

In short, while implied business obligations cover a wide range of behaviour, it is simply more practical, cost efficient and safe to take the time and legal fees at the start of the venture to ensure you have a proper, comprehensive and fully structured partnership agreement in place before rushing head first into the ‘next big thing’.

For further information contact business@whd.com.au or call 07 3232 5700.

Is your insurance cover as good as it should be?

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Insurance is seen by most as a necessary evil. Most businesses probably discuss the scope of their insurance cover with their broker, let the broker decide on (and arrange) the required policies, pay the premiums annually, and then forget about it. But if someone makes a claim against you, and you call upon an insurance policy for protection, things could get complicated.

Our insurance law expertise has been sought by clients to deal with a variety of issues when a claim is made against a business. Sometimes it is as simple as asking the insurer to indemnify the client against that claim, and stalling the claimant’s lawyers while the insurer considers its position. At the other extreme, what do you do in response to an outright refusal by the insurer to indemnify against a claim?

In this blog, we consider a recent case of ours involving a refusal of indemnity by two workers’ compensation insurers in two different states.

A family business in the Granite Belt region of Queensland operated farms on both sides of the border, but the owners’ principal farm, where they lived, was in Queensland. The business hired a worker (also resident in Queensland), but his employment was performed principally on a farm in NSW. He later alleged a back injury at work, lodged a WorkCover Queensland application for compensation (which was accepted) and WorkCover paid him statutory benefits. When benefits were ceased, the worker engaged solicitors to pursue a common law claim for damages against his employer.

In the pre-litigation phase, the worker’s solicitors served the claim on both the employer and WorkCover Queensland. WorkCover then informed the employer and the worker’s solicitors that because the worker was injured in NSW, it was not liable to indemnify the employer; the worker’s claim should be dealt with by the employer’s NSW insurer (the employer held workers’ compensation insurance policies in both states). The employer gave notice to the NSW insurer but, since the worker was still insisting that WorkCover Queensland was the relevant insurer (after all, WorkCover had paid him statutory benefits for his injury), it was not surprising that the NSW insurer equally refused an indemnity to the employer.

The employer was then served by the worker’s solicitors with a District Court Claim for damages well in excess of $100,000. Their attitude seemed to be that it was irrelevant whether the employer’s pockets were deep enough to pay the damages sought; the worker would take what he could get from the business if an insurer did not step in.

That was where things stood when we were instructed to act for the defendant employer. Informal approaches were quickly made to both insurers (to try and persuade one of them to indemnify), but were unsuccessful – each maintained its initial position. However, the employer could not be uninsured against the claim; one of the two would eventually have to indemnify the employer, but how to achieve that result before the employer had incurred significant legal costs (possibly all the way to a trial) in defending the plaintiff’s claim and also fighting the two insurers?

We recommended that the employer issue third party proceedings against both insurers, at the same time as the employer filed a defence to the worker’s claim – the two insurers were forced into formal litigation (with its accompanying legal costs) from the very beginning.  Both insurers then knew that the District Court, after a trial, would order that one of them was required to indemnify the employer – which would involve the losing insurer paying the plaintiff’s damages (and possibly also his legal costs), the legal costs of the employer and the other insurer, and also its own legal costs. Commercial commonsense from insurers means that, if they know the fight will be far more expensive than granting an indemnity – especially if, at the end of the day, the insured must succeed – then they will grant indemnity rather than engage in litigation. Within four months of the commencement of litigation, the NSW insurer agreed to indemnify the defendant employer and take over its defence of the worker’s claim – and also agreed to pay the employer’s legal costs of having to litigate against the insurer to get that result.

The moral of the story is that, if two potential insurers each refuse to indemnify a policy holder against a claim, mere talk will almost certainly get you nowhere. If commercial commonsense prevails, the prospect of litigation at the earliest opportunity should see insurers re-evaluate their positions – and usually sooner rather than later – to avoid even higher legal costs. In our client’s case, it did incur its own legal expenses up front, but only over a short period, and most of those costs were then recovered from its insurer.

A far more serious question is what would happen if the employer only held one workers’ compensation insurance policy (perhaps the broker was not fully aware of the cross-border nature of the employer’s business, or the business originally operated only in one state but slowly expanded into the other state, and no one thought about the changing implications for its insurance cover)? In that event, Murphy’s Law would probably apply – the policy you needed was the one you didn’t have, and the damages claimed might be large enough to force the business into liquidation or bankruptcy.

This tale does not apply just to farmers on the Granite Belt. Interstate transport and courier delivery businesses, and any business on the Gold Coast that uses its own staff to collect/deliver goods and services across the border, are just two examples of employers who could find themselves in the same predicament we have just discussed. Proper risk management says the employer must investigate the need for workers’ compensation policies in all states where its employees might find themselves working.

For further information contact insurance@whd.com.au or call 07 3232 5700.

Nominal Defendant’s right to recover costs is strengthened

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The Queensland Supreme Court has again reaffirmed the test of “reasonableness” in settling a personal injury claim (rather than litigating it to trial) when the Nominal Defendant later seeks to recover the damages it has paid out under section 60 of the Motor Accident Insurance Act.

In his judgment of 30 November 2011 in Nominal Defendant v Buchan [2011] QSC 364, the Chief Justice re-affirmed the 1998 decision in Nominal Defendant v Langman [1988] 2 Qd R 569 that the court “…should [not] be too astute to make microscopic examinations of compromise arrangements which save costs and which avoid the perils of litigation and which prima facie seem sensible”.

That meant, in deciding whether the Nominal Defendant acted reasonably in settling the personal injury claim, the court had to ask itself whether it was reasonable for the Nominal Defendant to rely on its legal advice, which anticipated a finding, on the balance of probabilities, that the defendant Buchan was the driver of an unregistered motorcycle and that he was carrying (as a pillion passenger) a person who died when an accident occurred.

In Buchan, the issue of whether the Nominal Defendant acted reasonably was not clear cut. There was no independent witness to the accident, Buchan had no memory of it because of his own injuries, it occurred on a remote stretch of road, the investigating police officers had not named a driver and the Coroner was unable to make a finding on the identity of driver.

However, even though the evidence in the case was mainly circumstantial, the Chief Justice concluded it was sufficient to exclude Buchan from only being the passenger, and not the driver of the motorcycle.  He then asked himself whether, if the initial claim had been taken to trial, the trial judge would, on the balance of probabilities, have concluded that Buchan was the driver.  The answer to that question was yes, and the judgment against Buchan was the original payout ($769,863), interest on that amount ($257,904) and costs.

This case highlights one of the lesser known aspects of Insurance Law in Queensland. If a claim for personal injuries arises out of a motor vehicle accident and the vehicle at fault is not insured for CTP, the Nominal Defendant (i.e. Queensland Government) acts as the insurer to investigate and settle (or defend) the claim.  If the Nominal Defendant incurs costs (which it always does), under section 60 of the Act, it has a right to recover “as a debt” those costs that are reasonably incurred. The Nominal Defendant can recover against the owner of the car, or its driver, or both.

For claims officers and their lawyers it is another reminder that, in contested Section 60 recovery claims, the legal advice in the CTP claim file (and the instructions given to the lawyers) will come under scrutiny.  Proper documentation on the file is essential.

We have been undertaking section 60 recovery actions for the Nominal Defendant for over 20 years, and it never ceases to amaze that, for the sake of avoiding payment of registration fees measured in hundreds of dollars, people like Mr Buchan accept the risk of driving accidents that could cost them more than a million dollars in a judgment against them.

Click here to read the full decision.

For further information contact us at litigation@whd.com.au or call 07 3232 5700.

‘Love thy neighbour’ made easier by new laws

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Relations between neighbours are often strained over fence and tree disputes. These disputes can become costly and consume valuable court resources.

On 1 November 2011 The Neighbourhood Disputes Act 2011 (QLD) came in to force and broadly speaking the Act has attempted to clarify respective neighbours’ positions for these two issues.

The Act also confers jurisdiction on the Queensland Civil and Administrative Tribunal (QCAT) in an attempt to keep legal costs at a minimum for neighbours that find themselves the centre of such a dispute.

Set out below is a brief overview of the changes.

Dividing Fences

Definition of a Dividing Fence

A dividing fence is constructed on the common boundary line of adjoining land. Sometimes a dividing fence can be built off the common boundary line when it is impractical due to the physical features of the land.

There should be a sufficient dividing fence between two parcels of land if an adjoining owner requests one. Generally neighbours must contribute equally to the cost of building and maintaining a sufficient dividing fence.

For the first time, the definition of a fence includes hedges and vegetative barriers.

A residential dividing fence must be between 0.5 metres and 1.8 metres in height and constructed substantially of prescribed materials such as timber or masonry.

That does not mean that fences being any shorter need to be replaced. If an existing fence is sufficient to divide and is serving this purpose well, it should be retained.

Who has to pay for fencing work?

Adjoining neighbours are each liable for half the cost of a sufficient dividing fence. However, if one neighbour wants to have more work done than is necessary then
that neighbour will be liable for the extra expense.

However, there are exceptions. For instance, if an adjoining owner attaches things to a dividing fence (a carport, a shade sail), the other owner can contact QCAT and apply for an order restoring the fence to a reasonable standard in regard to its state before the attachment.

There will also be occasions in which it is necessary to undertake fencing work urgently (e.g. catastrophic events like floods or fires) without notice to the other owner. When that occurs the owner may recover the costs of carrying out the fencing work by giving a notice to contribute to the expenses.

If a fence is damaged by a negligent or deliberate act, the owner of the land must restore the dividing fence to a reasonable standard taking into account the state of
the fence before the damage occurred.

How to I give notice to contribute to (urgent) fencing work?

For the first, time there will be an approved form for the notice an owner can give to an adjoining owner. Unlike the 1953 Act, it is only necessary to attach one written quotation to the notice.

A copy of all relevant forms can be obtained from the Attorney General’s website at: http://www.justice.qld.gov.au/justice-services/justice-initiatives/neighbourhood-disputes-resolution-act-2011

If adjoining owners do not agree to the proposed fencing work or their contributions to it within one month, then either owner may apply to QCAT. This application has to be submitted within two months of the notice being provided. Unless there is a need for urgent fencing work, neither adjoining owner can undertake fencing work until agreement is reached about the proposed fencing work or until QCAT has made an order.

Trees

Compared to the 1953 Act, the Neighbourhood Disputes Resolution Act 2010 provides greater choices for neighbours about trees affecting their property.  Generally, neighbours are encouraged to resolve the issue about the tree informally. If that is not feasible, the affected neighbour may exercise the common law right of abatement or apply to QCAT for resolution of the dispute.

Is my property affected by a tree?

Land is affected by a tree if branches from the tree overhang the land, or the tree causes serious injury to a person on the land, serious damage to the land or any property on the land, or there is substantial, ongoing and unreasonable interference with the neighbour’s use and enjoyment of the land.

Which rights do I have as an affected neighbour?

The right of a landowner to exercise the common law right of abatement (e.g. by looping branches and roots to the boundary) is not affected by this Act except to the extent that there is no obligation under this Act to return the removed part of the tree to the
tree-keeper. Under the common law adjoining owners must return the cut branches, roots or fruits to the tree-keeper. Under the new Act, the neighbour can choose to either return the removed parts or dispose of the parts themselves.

If a neighbour wants the tree-keeper to take responsibility for looping branches, they can serve a written notice upon the tree-keeper. This notice can be used for branches which are more than 5 m over the boundary and less than 2.5 m above the ground.

The notice must ask the tree-keeper to carry out the work on the tree within 30 days of the day the notice is given. It must be accompanied by at least one written quotation from a contractor specifying the estimated cost. If the tree-keeper does not respond, the neighbour can proceed to have the looping done and recover from the tree-keeper a maximum of $300.00 annually.

How can I apply to the Queensland Civil and Administrative Tribunal (QCAT)?

Before an application is made to QCAT a neighbour should undertake alternative administrative processes for resolution of a dispute about a tree (e.g. notice to the tree-keeper).

A QCAT application should be considered in the following cases:

  • if a neighbour cannot resolve the issue by giving notice to the tree-keeper;
  • if the neighbour’s land is affected by roots of a tree which are blocking underground pipes;
  • if the tree has grown to such height or thickness that it is blocking light to the windows;
  • if the neighbour is afraid of potential poisoning of water supply by the dropping of leaves into a water tank.

Normal tree litter such as leaves, flowers, fruit or seeds would ordinarily not provide the basis for ordering removal of or intervention with a tree.

Need advice?

For further information or advice about dividing fences and trees or anything else related to your property, contact our Property law team on 07 3232 5700 or email property@whd.com.au.

Road rules: Not the infallible shield you think

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Many of us as drivers like to believe that if we are involved in an accident as a result of someone else entering an intersection without stopping at a stop sign or give way sign, the law is on our side. It is important to note that this is not strictly the case. Case law tells us that even if the other driver breaks the law, we may find ourselves, even if just in part, liable for the accident.

Motorists should be aware of the potential for liability and what is required of us to satisfy the fault. A review of the recent decision of Schimkev Clements v Suncorp Metway Insurance Limited and a general discussion of driver obligations is important to put us squarely in the picture of responsibility.

In that case two drivers in opposite directions were approaching a single lane bridge one party approaching the bridge had a give way sign the other party approaching the bridge was travelling in excess of the speed limit. The driver faced with the give way sign past straight through it without stopping and entered the single lane bridge before the other vehicle reached it.  At the trial the speeding driver stated his belief that the other vehicle would stop at the give way sign and therefore believed it would be safe to enter the bridge.

Upon seeing the “give way” car enter the bridge the speeding vehicle applied his breaks causing a trailer he was dragging to jack knife across the breadth of the bridge which the “give way” driver collided with, causing his death.

In this decision the Judge stated that the “give way” driver had seen the speeding vehicle approaching the bridge and believing that he would reach the bridge first elected to drive through the give way sign without stopping and as such was negligent in not stopping at the give way sign. The Court however did condemn the driving of the speeding driver, in quoting the decision of Sibley v Kais for the speeding drivers excessive speed and lack of control of his vehicle in entering a fairly dangerous situation.

The Court in its decision found contributor negligence on both drivers part and apportioned the damage and liability as 35% to the speeding vehicle and 65% to the give way driver.

Schimkev is a specific example of the downfall that results from assuming a car will give way at a give way sign, but long established principals go even further to requiring motorist to ensure all care is taken on the roads.

A High Court of Australia Decision of Sibley v Kais defined what is required to satisfy ‘reasonable care’ each driver must display when approaching an intersection:

“What amounts to “reasonable care” is, of course, a question of fact to our mind, generally speaking, reasonable care requires each driver as he approaches the intersection to have his vehicle so far in hand that he can bring his vehicle to a halt or otherwise avoid an impact should he find another vehicle approaching from his right or from his left in such a fashion that, both vehicle continue, a collision may reasonably be expected.”

This means that regardless of signage at an intersection it is a requirement of all drivers approaching any intersection, to take reasonable care and control their vehicle in such a way that even if another driver disobeys a traffic sign they are capable of bringing their vehicle to a halt or steering it in such a manner as to avoid the collision.

This tells us as motorists that simply hiding behind the shield of “But they ran the red light!” or “They failed to give way!” is absolutely not a total defence in the event of an accident.

As noted from the case of Schimkev courts can apportion 35% and upwards of liability for an accident to driver who does not control his vehicle in a way that ensures he is ready for anything from other motorists.

This principal has serious implications for each motorist and their insurance, keeping in mind that your insurer will be forced to wear a percentage of the damages in the event you are found to be in part liable and this can have very serious consequences for your premiums, as well as overheads for the insurers.

We must let go of the assumption “That everyone is going to obey all road rules, driving carefully at all times”, only to be disappointed when they don’t. Rather we must always “assume that all drivers WILL break the rules, run red lights, cruise through a give way sign and thrash their machines to beat the yellow light”, and simply be grateful when they don’t.

It is important to keep in mind that every time we get behind the wheel of a car, we take control of a 1 tonne wrecking ball and it is our responsibility to ensure we are in full control of that tonne of steel and combustion and be ready for any and all eventualities on the road.

For further information contact our Litigation team on 07 3232 5700 or litigation@whd.com.au

Directors’ personal liability for company debts

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The 2011 Budget introduced proposed changes to strengthen the operation of penalising directors’ personally for actions in respect of their corporate entities.   These changes were intended to protect worker’s entitlements to compulsory superannuation contributions and to address the situation where directors emerge in “phoenix” companies after having previous corporate entities liquidated.

It appears that these changes extend further than originally anticipated and create an increased liability risk personally for all directors.

These changes may expose directors to personal liability where a company has under-reported PAYG or SG withholding amounts due to it adopting a course of engaging a person as a contractor as opposed to being an employee.

Significant Aspects of the Changes

  • Directors are now to be personally liable for their company’s unpaid SG amounts (which will be in addition to PAYG withholding amounts);
  • The ATO will be allowed to immediately commence recovery action if the company’s liability remains unpaid and unreported 3 months after the due date;
  • Should a company’s liability remain unpaid and unreported for more than 3 months, then a director’s personal liability can only be extinguished by payment of the debt or penalty (i.e. placing the company into liquidation will not be      sufficient);
  • The ATO will have the discretion to prevent directors and their associates from      accessing the PAYG withholding credits on their own salaries if the company has an outstanding PAYG liability;
  • In addition, a new director can become personally liable for the company’s outstanding PAYG and SG liabilities after 14 days from the time they commence as a director of the company; and
  • Directors will be personally liable for their company’s unpaid SG amounts (which will be in addition to PAYG withholding amounts).

Recovery Process for Directors Penalties

Based on these changes it is likely that the ATO would commence recovery and impose penalties on a director where an unpaid liability remains unreported 3 months after the due date.

It would appear that once the 3 months has lapsed the ATO would no longer be required to provide 21 days notice to the director before initiating proceedings and the directors liability can only be extinguished by in fact paying the penalty and therefore extinguishing the underlying liability.

Implications for Directors

Whilst these changes were initially drafted to target “Phoenix” companies it is likely that the provisions will extend further. Directors need to be fully aware of their company’s employee and contractor taxation obligations and the status of any outstanding debts with the ATO. We would recommend that directors review their company’s superannuation obligations in respect of contractors and employees.

Additionally, if you are looking to join a company as a director it would be essential to ascertain the current liability of the company to PAYG and SG liabilities before signing the Consent to act as a director.

For further information about this and other corporate issues, contact Steven Morris via email stevenm@whd.com.au or phone 07 3232 5700.

Changes to Queensland stamp duty explained

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On 1 August 2011 changes were made to the Duties Act 2001 (Qld) which effectively eliminated the previous ‘Home Concession’ scheme.

What is transfer duty and when does it apply?

‘Transfer duty’ is what was previously referred to as stamp duty. Transfer duty is a dollar amount that must be paid on all dutiable property transactions in Queensland[1]. Both parties to a transaction are liable to pay transfer duty, however contractually in just about most situations it is paid by the Buyer. If transfer duty has not been paid by the due date by the Buyer, the Office of State Revenue may in fact bring legal proceedings against the Seller to recover the outstanding debt.

What was the Home Concession scheme and who could claim?

The Home Concession scheme essentially provided some relief, in the form of lower transfer duty, for qualifying home-buyers. The occupancy requirements that were needed in order to claim were as follows:

  • Claimant was a person who was buying a home to live in;
  • Claimant needed to move into the property, as his/her principal place of residence, within one year of the transfer date;
  • Claimant could not rent out the property before moving in;
    • Exception: The Seller or Seller’s existing tenant may remain in possession for up to 6 months after the transfer date;
  • Claimant could not rent out the property after moving in (no exceptions);
  • Claimant must live in the property for 12 months after moving in and must not dispose of part or all of the property (e.g. by renting or selling) within that time frame.

Practical effect of the removal of section 91 Duties Act 2001 (Qld)

The following table compares the transfer duty payable before the amendments to the Duties Act 2001 (Qld) to the amounts payable on or after 1/08/2011 for a property of equal value. The difference is clearly substantial. The table was formed using the Office of State Revenue’s Transfer Duty Calculator.

Value of entire property

Transfer duty payable

before
1/08/2011

Transfer duty payable

on or after
1/08/2011

$300,000

$3,000

$8,325

$400,000

$5,250

$11,825

$500,000

$8,750

$15,525

$600,000

$12,850

$20,025

Source: http://www.mymoneycalculator.com.au/guides/stamp-duty-grants/comparison-of-stamp-duty-rates-in-queensland-qld-australia/

Land -V- Existing House

The other issue that many would-be buyers in the housing overlook, is the benefits of actually buying vacant land and building a new house.  The stamp duty on the vacant land – because it is a lot less expensive - results in a far lower amount of transfer duty.  There is no stamp duty on a building contract for the new house.  In addition, the Federal Government will provide a $10,000 grant to the buyer towards the cost of having a new house constructed. With the lower transfer duty payable on the vacant land and the $10,000 grant being paid, a buyer in these circumstances is considerably better off financially.

For further information please contact our Property team via email: property@whd.com.au, visit our website or call us on 07 3232 5700.

[1] Office of State Revenue, QLD Government, ‘Transfer Duty’, Accessed 13/9/2011,
http://www.osr.qld.gov.au/duties/transfer-duty/index.shtml