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How do the changes to penalty rates affect you?

February 24th, 2017

Yesterday the Fair Work Commission handed down a decision to vary the current Sunday and public holiday penalty rates for employees in the retail, hospitality, fast food, restaurant and pharmacy industries.

At this point in time, no changes have been made to the Restaurant Award in relation to weekend penalty rates and no changes to any rates in the Registered and Licensed Clubs Award.  However the Commission has stated that it will be reviewing these awards into the future, and has invited submissions from these industries.

The changes to the public holiday rates will take effect from 1 July 2017.  At this stage the Commission has not stated a date for when the Sunday penalty rate reduction will take place.

The proposed changes are as follows:

Retail Award

Changes to Sunday rates:
 

Full-time and part-time employees

Casual employees

 

Change from 200% to 150%

Change from 200% to 175%

Changes to public holiday rates:
 

Full-time and part-time employees

Casual employees

 

Change from 250% to 225%

Change from 275/250% to 250%

Hospitality Award

Changes to Sunday rates:
 

Full-time and part-time employees

No change to casual employees

 

Change from 175% to 150%

 

Changes to public holiday rates:
 

Full-time and part-time employees

Casual employees

 

Change from 250% to 225%

Change from 275% to 250%

Fast Food Award

Changes to Sunday rates:
 

Level 1 full-time and part-time employees

Casual employees

 

Change from 150% to 125%

Change from 175% to 150%

Changes to public holiday rates:
 

Full-time and part-time employees

Casual employees

 

Change from 250% to 225%

Change from 275% to 250%

Restaurant Award

Changes to Sunday rates:No changes
 

Changes to public holiday rates:

 

Full-time and part-time employees

No change to casual employees

 

Change from 250% to 225%

 

Pharmacy Award

Changes to Sunday rates:
Only affects employees working between 7:00 am  and 9:00 pm
 

Full-time and part-time employees

Casual employees

 

Change from 200% to 150%

Change from 200% to 175%

Changes to public holiday rates:
 

Full-time and part-time employees

Casual  employees

 

Change from 250% to 225%

Change from 275% to 250%

The Commission has stated that the changes are aimed at creating jobs and boosting economic growth.  However, since the release of the decision, there has been significant backlash from the community, state governments, including the Queensland Government and unions.  This backlash is likely to lead to the lobbying of the Federal Government to pass laws protecting penalty rates.

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What not to do in family leasing arrangements – Doueihi v Constructions Technologies Australia

February 22nd, 2017

This recent case is another costly lesson on the importance of formalising leasing and other legal arrangements even if they are between family or friends.  The case particularly considers the principles of estoppel by encouragement.

Estoppel by encouragement

Where a contract is found not to be legally enforceable at common law, equity may remedy the defects in the contract and grant relief.  Estoppel by encouragement requires the claimant to show that they:

  • assumed that a particular legal relationship existed between the parties; or
  • expected that a particular legal relationship would exist between them and the other party would not be free to withdraw from that relationship.

The facts

Construction Technologies Australia (“CTA”) was controlled by Mr Hogan.  Mr Hogan had family ties with the company Marble Plus (by marriage with one of the shareholders).  The shareholders and controllers of Marble Plus were Ms Hogan (Mr Hogan’s spouse), Mrs Vatselias (Ms Hogan’s mother), Mr Doueihi and Ms Scott (Ms Hogan’s sister).

Marble Plus had been renting the premises it operated from for some time on an informal basis (as it was the practice of the family to not enter into formal leases).  Mr Hogan proposed (in consultation with Mr Doueihi) that the shareholders of Marble Plus acquire land on which a purpose built facility could be constructed to accommodate both Marble Plus and CTA.  Each company was to pay rent to the land owners (being the individual shareholders of Marble Plus).  This proposal was later put into action and in 2008 Mr Doueihi, Ms Hogan, Mrs Vatselias and Ms Scott (“the owners”) acquired a property at Seven Hills for $2.9 million.

Following construction, CTA entered into possession of the premises in 2010 and installed its plant and equipment in the new premises at a cost of around $1 million.  There was never any formal lease or agreement to lease between the land owners and CTA.  CTA moved into the premises on the basis of an understanding between Mr Hogan and Mr Doueihi that CTA would be given a lease of five years with a further five year option and to pay rent of $120,000.00 per annum.  Once CTA entered into possession of the premises it began paying rent to the owners.

This arrangement was in place until Mr Hogan’s separation with Ms Hogan in 2011.  Following this, CTA sought to formalise the leasing arrangement due to the change in the family relationship.  Eventually, the owners offered CTA a formal lease, however it was for a significantly shorter term and included a 40% increase in rent.

When this offer was rejected by CTA, the owners issued CTA with a notice to quit the premises.  CTA commenced proceedings seeking to enforce the lease.

Issues before the court

CTA argued that a binding lease or agreement to lease had been entered into or in the alternative that the land owners were estopped from denying a binding lease on the basis of equitable estoppel.

Decision

The court found on appeal (upholding the first instance decision) that:

  • There was no binding lease or agreement to lease as the parties had no intention to be bound. The practice of the owners not formalising leasing arrangements and the subsequent conduct of the parties following Mr Hogan’s separation with Ms Hogan supported the finding that the parties did not consider that a legally binding agreement was in place.
  • The claim of equitable estoppel by encouragement was successful. The court found that:
    • the owners had encouraged Mr Hogan (and accordingly CTA) to assume that they would grant a lease interest to CTA. This was based particularly on the discussions between Mr Hogan and Mr Doueihi regarding CTA’s lease requirements;
    • although the owners did not authorise Mr Doueihi to enter into any binding contracts on their behalf, the other owners allowed (and authorised) Mr Doueihi to engage in negotiations with CTA on their behalf. Accordingly, Mr Doueihi’s knowledge was also that of the other owners;
    • the owners knew that CTA relied on the assumption (that it would have a right of occupation in the premises) through Mr Hogan’s involvement in the construction of the premises and installing CTA’s plant and equipment at a significant cost; and
    • it would be unconscionable for the owners to depart from the assumption because they had taken advantage of Mr Hogan’s efforts. They knew of CTA’s expenditure and they accepted CTA as tenant by accepting rent.  Accordingly, it was reasonable for CTA to assume that they would occupy the premises for a long term.

In this case CTA did not make an assumption that a ‘particular legal relationship existed’ instead CTA (through Mr Hogan) assumed that it would be entitled to an ‘interest’.  Despite this, CTA was successful and the owners were estopped from denying the lease interest.  The court made this finding based on the family ties between CTA and the owners.

Conclusion

While CTA was ultimately successful in enforcing its leasehold interest, the litigation, expense and time could have been saved if CTA entered into a lease agreement with the land owners.  This case is a good example of how family arrangements can change and the importance of formalising arrangements even with family and friends.

Additionally, Mr Hogan was not the sole shareholder of CTA and arguably was in significant breach of his duties as director to the company by expending such a significant amount of money in installing plant and equipment without having a binding agreement in place.

For more information about this issue, please contact our property law department on 07 4036 9700.

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Queensland Body Corporate Law Reform: Could you be forced to sell?

February 20th, 2017

The Queensland Government is considering law reform to the Body Corporate Community Management Act (“the Act”) that could force unit owners to sell their homes against their will if 75% of the owners in the scheme agree.

Under the current laws, termination of a community title scheme requires consent of all the owners in the scheme.  The rationale for the proposed changes is the problem that community titles schemes can face where the majority of owners want to sell (terminating the scheme), but one or two hold out preventing the entire sale.

A body corporate scheme might consider termination of the community title scheme where buildings have become old or are in disrepair and the cost to unit owners to fix the issues are not worth it considering the value of the lots.  It may also be the case that a scheme is approached by developers wishing to demolish the current buildings and redevelop the property.

The government property law review report, recommends that the Act include a prescribed procedure for schemes considering termination.  A 4­‑step process is proposed:

  1. Where a body corporate wishes to terminate the scheme for economic reasons (i.e. the building is old and in disrepair and requires costly repairs or upgrades) it will be required to collect ‘relevant information’ and give lot owners 90 days to consider this information.  The relevant information is to include expert reports and valuations for the property.
  2. The body corporate can then resolve (by majority) that there are economic reasons for scheme termination.
  3. The body corporate appoints a ‘facilitator’ (e.g. a property developer) to prepare a ‘termination plan’ which may include a collective sales agreement or a proposal for redevelopment.
  4. The termination plan is submitted to owners for consideration.  After 120 days, owners can vote at a general meeting of the body corporate whether to proceed with the termination of the scheme.  If 75% of the owners agree, the scheme will be terminated.

If the proposal to terminate the scheme is not for economic reasons (for example the termination of the scheme is based solely on the redevelopment potential of the land) all of the lot owners in a scheme will still be required to consent.  Additionally, it is proposed that there also be a mechanism to appeal the decision of the body corporate to terminate the scheme to the District Court.

Consultation on the proposed amendments is open to the public until 5 May 2017.

Download a copy of the Queensland University of Technology’s report on the matter here.

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PPSA Update

February 15th, 2017

In the Matter of OneSteel Manufacturing Pty Ltd (Administrators Appointed) [2017] NSWSC 21

The recent decision of the New South Wales Supreme Court in OneSteel Manufacturing Pty Ltd illustrates (once again) the importance of strictly complying with the technical rules around the perfection of security interests through registration.

The case concerned a six year lease agreement entered into between Alleasing Pty Ltd (“Alleasing”) and OneSteel Manufacturing Pty Ltd (“OneSteel”) for mining plant and equipment valued in excess of $23 million dollars.  It was common ground that the lease was a Security Agreement, and was capable of being registered as a Purchase Monies Security Interest (“PMSI”).  If properly perfected, the security would have entitled Alleasing to “super priority” in recovery of its plant and equipment.

Alleasing registered its security interest by reference to OneSteel’s ABN.  The administrators contended that the security was one which was required to be registered by reference to OneSteel’s ACN, and that the defect was a seriously misleading defect in terms of section 165(b) of the Personal Property Securities Act 2009 (“PPSA”).

Section 153 of the PPSA requires financing statements to contain details prescribed by the regulations.  In the case of OneSteel, one such requirement was that the charge be registered by reference to OneSteel’s ACN.

A defect in registration will only render a registration ineffective where:

  1. the defect is seriously misleading; or
  2. the defect is one of the defects mentioned in section 165 of the Act.

In applying this test, it is the capacity to mislead which is crucial.  It is not necessary for the applicant to demonstrate that it (or anyone) was actually misled as a result of the defect.

Brereton J concluded that the defect was both:

  1. seriously misleading (for failure to comply with the regulations); and
  2. in breach of section 165(b) the Act in that a person searching the register by reference to the authorised search parameter (the ACN) would be misled into thinking that there was no interest lodged against the company.

As a result, the court concluded that the registration was ineffective.  As the security interest had not been perfected, Alleasing’s interest in the assets vested in OneSteel as a result of the operation of section 267 of the PPSA.

The court further concluded that there was no opportunity for Alleasing to make application to extend time for registration (in order to correct their mistake) once vesting under section 267 had occurred.

Conclusion

This decision reinforces the technical nature of the registration requirements under the PPSA.

The comments are equally relevant to the situation of (for example) trading trusts.  Under the regulation trust registrations must be recorded by reference to the trust ABN (rather than the ACN of the trustee company).

These issues of identification, together with strict time limits for registration for varying classes of collateral, suggest that insolvency practitioners will be justified in closely scrutinising PPSA registrations for the foreseeable future.

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Bodies Corporate obligation to act reasonably: Ainsworth v Albrecht

February 1st, 2017

In the recent decision of the High Court in Ainsworth v Albrecht [2016] HCA 40 the court considered a body corporate’s decision to refuse a lot owner permission to expand the balcony of his town house.

The facts

Mr Albrecht, a lot owner within a Community Titles Scheme in Noosa Heads, wished to combine two balconies that were part of his property.  His proposal required acquiring exclusive use of the airspace between the existing balconies, about five square metres.  Accordingly a resolution without dissent from the body corporate committee was required to be passed.

The motion was considered by the body corporate at an extraordinary general meeting and was defeated, with seven lot owners of the scheme opposing the motion.

Mr Albrecht referred the matter for adjudication with the Commissioner for Body Corporate and Community Management and was successful.  The dissenting lot owners asserted that combining the two balconies would affect the overall aesthetic of the buildings and would reduce the privacy the other lot owners had.  Each of the parties adduced evidence from different architects to support their arguments.

The adjudicator considered that the outcome of the vote did not achieve a reasonable balancing of the competing considerations (i.e. it was not reasonable).

This determination was overturned on appeal to the Queensland Civil and Administrative Tribunal (“QCAT”) and subsequently reinstated by the Court of Appeal.  The dissenting lot owners then appealed to the High Court of Australia.

The issues before the courts

The issue before the courts related to the relevant provisions of the Body Corporate and Community Management Act (“the Act”), the requirement in section 94(2) that the body corporate act reasonably and the powers of adjudicators to make orders regarding disputes about resolutions without dissent.

The High Court considered that the question was not whether the decision of the body corporate was reasonable.  Instead, the appropriate question to determine was whether the dissenting lot owners’ decision to refuse the motion was unreasonable in the circumstances (as outlined in section 279(1)(a) and item 10 of schedule 5 to the Act).

Decision of the High Court

Accordingly, The High Court found that the adjudicator and the Court of Appeal erred in their approach to the question to be determined and reinstated the decision of QCAT.  The result being that Mr Albrecht could not extend his balcony.

The High Court found particularly:

  1. the adjudicator and Court of Appeal focussed on the wrong sections of the legislation;
  2. the issue was not one based in section 94(2) of the Act requiring:

2.1.  the body corporate to act reasonably; and

2.2.  consequently, a reasonable balancing of competing considerations should be achieved in the decision of the body corporate.

  1. the issue should have been framed in terms of section 279(1)(a) and item 10 of schedule 5 to the Act dealing with resolutions without dissent and requiring a determination be made as to whether the opposition to the motion was unreasonable in the circumstances;
  2. it is not the function of the adjudicator to seek to strike a reasonable balance between the competing positions of lot owners; and
  3. when considering what would be unreasonable opposition to a motion:

5.1.  there is no requirement that a lot owner assist another, at least if it may reasonably be adverse to their own interest;

5.2.  opposition will not be unreasonable if for no other reason than you might expect something in return for giving up a right;

5.3.  there is no requirement that lot owners act altruistically or sympathetically at the expense of their own interest; and

5.4.  a reasonable apprehension of adverse affects to property rights is not unreasonable.

The court went on to consider that:

  • appropriating part of common property for no return;
  • altering features of common property; and
  • risk of interference with enjoyment or privacy,

are reasonable grounds for opposition to a motion.  However, opposition may be unreasonable if it could not adversely affect the material enjoyment of opposing owners’ property rights or the opposition is prompted by spite, ill will or a bid for attention.

Conclusion

This decision provides valuable insight into the requirements of a body corporate to act reasonably.  Particularly, it highlights the different approaches to decisions of the body corporate in the context of a decision requiring a resolution without dissent.

It further shows that a decision of a lot owner to oppose such a resolution may be made in self interest, particularly where an owner is not getting any benefit in return.

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